Decision

Previous regulatory judgement: Connexus Homes Limited (15 November 2022)

Updated 17 January 2024

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Connexus Homes Limited

• Regulatory code: LH4353

• Publication date: 15 November 2022

• Governance grade: G1

• Viability grade: V2

• Reason for publication: Viability regrade

• Regulatory route: Stability Check and Reactive Engagement

Regulatory judgement

This regulatory judgement regrades our previous published assessment of Connexus Homes Limited’s viability grade from V1 to V2 and confirms its existing G1 for governance.

The regulator has assurance that Connexus Homes Limited (Connexus) complies with the financial viability elements of the Governance and Viability Standard and that its financial plans are consistent with, and support, its financial strategy. Connexus has an adequately funded business plan, sufficient security, and is forecast to continue to meet its financial covenants.

Connexus is increasing investment in existing homes which is weakening its interest cover and reducing headroom on its covenants. Connexus also needs to obtain additional funding to deliver its plans, creating an exposure to rising interest rates. These factors, coupled with the current economic uncertainty in relation to inflation, reduce Connexus’ capacity to respond to adverse events.

The regulator’s assessment of Connexus’ compliance with the governance elements of the Governance and Financial Viability Standard remains unchanged. On the basis of the Stability Check, the regulator has concluded that there is no evidence to indicate a change to Connexus’ current governance grading.

Other providers included in the judgement

None

About the provider

Origins

Connexus is a charitable community benefit society. Its principal activities are the management and development of social housing and related services and support.

Registered Entities

Connexus is the only registered entity in the group.

Unregistered Entities

Connexus has four unregistered entities:

• Herefordshire Capital PLC, a treasury vehicle;

• Floreat Living Limited, developing homes for outright sale;

• RISE Partnership Developments Limited, providing design and build services to the group; and

• Connexus Enterprise Limited, a commercial company.

Geographic Spread and Scale

The group owns or manages around 10,000 units, the majority of which are general needs, with some affordable rent properties and housing for older people. The stock is predominantly in Shropshire and Herefordshire.

Staffing and Turnover

The group employs 509 full-time equivalent staff. Group turnover for the year ended 31 March 2022 was £65.6m.

Development

Connexus plans to develop around 1,300 homes in the next five years, for social rent, low-cost home ownership and market sale.

About our judgements

Key to Grades

Governance:

	Compliant
G1	The provider meets our governance requirements.
G2	The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.

	Non-compliant
G3	The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
G4	The provider does not meet our governance requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Viability:

	Compliant
V1	The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
V2	The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.

	Non-compliant
V3	The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
V4	The provider does not meet our viability requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Definitions of Regulatory Routes

In Depth Assessment (IDA): An IDA is a bespoke assessment of a provider’s viability and governance, including its approach to value for money. It involves on-site work and considers in detail a provider’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.

Stability Checks: Based primarily on information supplied through regulatory returns, a Stability Check is an annual review of a provider’s financial position and its latest business plan. The review is focused on determining if there is evidence to indicate a provider’s current judgements merit reconsideration.

Reactive Engagement: Reactive engagement is unplanned work which is triggered by new information or a developing situation which may have implications for a provider’s current regulatory judgement.

Stability Checks and Reactive Engagement: In some cases, we will publish narrative regulatory judgements which combine evidence gained from both Stability Checks and Reactive Engagement.

For further details about these processes, please see Regulating the Standards.