Scenarios and Sensitivities
General Sensitivity Analysis
This is not an additional piece of analysis but a vehicle
for re-running the package of projections and analysis already established
and discussed on earlier pages.
Once a forecast plan has been created it can be modified by changing any single
assumption or combination of assumptions to test the sensitivity impact on
the plan. There are approximately 25 general assumptions, 40 for each relevant
housing-based business stream and 3 or 4 for each non-housing based business
streams plus Homebuy, many of which can be flexed throughout the 30-year period.
Associations or other users are therefore able to carry out detailed changes
to the full set of input assumptions and assess the sensitivity effect on all
the outputs of the model.
Minor Balance Sheet and Income and Expenditure items, not included in the assumption
input screens cannot be flexed when CAPACITY is used to generate an original
forecast. When used in reconciliation mode these sundry items can be
changed via the projected Business Plan Accounting Data input screen.
It is possible to save as many different versions of the whole of the model
as required by the user under different file names.
Using the Scenarios and Sensitivities Tool
This facilitates analysis of sensitivity to detailed changes
in a limited number of pre-selected input variables, essentially concerned
with macro-economic factors and levels of development activity. It
also presents a summary of pre-selected key output variables concerned
with financial solvency and balance sheet capacity.
Up to three different scenarios, each based on a different set of input assumptions,
can be saved, in addition to the base-case scenario, under the names association
case, base case, best case or worst case.
As discussed above there is the facility for saving three additional scenarios
besides the "base case", in "short-form", or any number
of permutations can be saved as "long form" under different file
names.
The designated input variables which can be flexed are as follows:
General assumptions
| Inflation: | RPI Management cost inflation Service cost inflation Care and support cost inflation Building cost inflation Major repairs and maintenance cost inflation Ongoing repairs and maintenance cost inflation |
| Interest rates: | Average interest rate
on fixed rate debt Average interest rate on floating rate debt |
Business Stream Assumptions (for each relevant business stream)
| Development: | Number of units completed during the year Build cost per unit SHG received % capital expenditure |
The designated output variables are as
follows:
21 - Operating Margin
22 - SBIT % Total Assets
44 - Total Debt per Unit
45 - Cash Interest Cover
47 - Net Debt/EBITDA
52 - Adjusted Net Leverage
The Scenario Manager is an input “wizard” which further facilitates
a more automated flexing of each input variable across the whole forecast period
by given percentages or absolute amounts.