TIDMCSH
RNS Number : 2391V
Civitas Social Housing PLC
02 December 2019
Civitas Social Housing PLC
("Civitas," the "Company" or the "Group")
Half Year Results for the six months to 30 September 2019
Civitas Social Housing PLC, a leading supported living and
social housing REIT, presents its interim results for the six-month
period ended 30 September 2019.
The full Interim Report and Financial Statements can be accessed
via the Company's website at www.civitassocialhousing.com or by
contacting the Company Secretary by telephone on 01392 477500.
Performance Highlights
Property Valuation and Sept 19 Sept 18 Change Mar 19
Performance
Investment property (GBPm) 841.5 678.7 Up 24% 826.9
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IFRS NAV per share (diluted)
(p) 107.23 106.06 Up 1.1% 107.08
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Financial Performance - - - -
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Rent roll annualised (GBPm) 46.5 37.2 Up 25% 45.7
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Rental income (GBPm) 22.7 15.7 Up 45% 35.7
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EPRA earnings(1) (GBPm) 14.3 10.1 Up 42% 22.6
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Operating Cash Flow (GBPm) 16.9 9.1 Up 86% 23.3
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EPRA earning per share
(p) 2.29 1.05 Up 118% 3.81
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EPRA earning per share
(diluted)(2) (p) 2.29 1.63 Up 40% 3.63
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Dividend per share (p) 2.65 2.50 Up 6% 5.0
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Financing - - - -
-------- -------- -------- -------
Loan to value ratio 24 12 Up 12% 22%
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Weighted average cost
of debt 2.63% - - 2.57%
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(1) Sept 18: GBP10.1m and Mar 19: GBP22.6m - represents the
diluted EPRA earnings after adding back finance costs associated
with the C share
(2) Difference due to C Share amortisation cost
-- Increased investment property portfolio
-- Portfolio value up to GBP841.5 million (IFRS)
-- IFRS valuation net initial yield of 5.28% compared to average
purchase net initial yield of 5.6% (5.90% before initial costs)
-- IFRS NAV per share (diluted) up 1.1% to 107.23 pence
-- Weighted Average Unexpired Lease Term (WAULT) of 23.9 years
-- Diversified portfolio of 599 properties providing homes to over 4,000 people
-- GBP10.2 million of acquisitions made in the period
-- Providing accommodation to tenants with learning
disabilities, autism, mental health disorders and also for women's
refuge with an average tenant age of 33 years
-- Properties located across half the Local Authorities in
England and Wales and leased to 15 Housing Associations, with
support provided by 114 Care Providers
-- Rent roll, operating cash flow and earnings significantly up
-- Annualised rent roll increased to GBP46.5 million
-- Operating cashflow increased to GBP16.9 million
-- EPRA earnings (diluted) increased to GBP14.3 million
-- EPRA earnings per share (diluted) up to 2.29 pence
-- Dividend payments and dividend cover
-- Target dividend of 5.3 pence for the financial year ended 31 March 2020
-- Run-rate dividend cover of 96% at 30 September 2019
-- Market forecasts suggest full run-rate cover around end March 2020
-- Total NAV Return
-- Total NAV return from IPO to 31 March 2019 of 6.9% p.a. (IFRS basis)
Additional Debt Facilities
-- New GBP60 million 5-year term facility with National Westminster Bank
-- Total drawn debt of GBP228.5 million reflecting gearing of
24% (available loan facilities of GBP272.5 million)
-- Intention to secure additional GBP80 million facility to be in place Q1 2020
Working with Housing Associations and the Regulator
-- Regulator has identified specific risks that require improvement
-- Civitas is working proactively to enhance the sector
-- Practical steps being taken to improve housing associations
Post Balance Sheet Highlights
-- 4 properties acquired post period end, totalling GBP3.2 million
-- Since 30 September 2019, the Company has bought back a total
of 715,000 shares at a price ranging from 84.20p to 85.14p. These
shares are held in treasury
-- On 7 November 2019, the Board declared a quarterly dividend
for the three months to 30 September 2019 of 1.325p per share
-- Alison Hadden was appointed as an independent non-executive
Director of the Company on 21 November 2019
Michael Wrobel, Non-Executive Chairman of the Company,
commented:
"The Company is pleased to report a strong set of results with
our key performance objectives met.
We continue to operate and grow the largest portfolio of
specialist supported living accommodation which has been further
increased to 599 properties, 4,114 tenancies and with a total of
GBP764 million capital deployed since IPO.
The supply-demand imbalance in specialist supported
accommodation continues to be severe and driven by strong
demographic trends resulting in specialist supported living being
one of fastest growing sub-sectors in healthcare real estate.
This is a critical need that the expertise of the Company's
Investment Adviser is ideally placed to serve.
We also continue to play a key role in helping and supporting
the increasing professionalisation of the sector and assisting our
housing association partners as they seek to meet their regulatory
obligations."
For further information, please contact:
Civitas Housing Advisors Limited
Paul Bridge Tel: +44 (0)20 3058 4844
Andrew Dawber Tel: +44 (0)20 3058 4846
Liberum Capital Limited
Gillian Martin Tel: +44 (0)20 3100 2222
Panmure Gordon
Sapna Shah Tel: +44 (0)20 7886 2783
Tom Scrivens Tel: +44 (0) 20 7886 2648
Buchanan
Helen Tarbet/Henry Harrison-Topham Tel: +44 (0) 20 7466 5000
Henry Wilson/Hannah Ratcliff civitas@buchanan.uk.com
About Civitas
Civitas Social Housing PLC is the first Real Estate Investment
Trust offering pure play exposure to social care housing across the
UK. The Company is advised by Civitas Housing Advisors Limited, who
are authorised and regulated by the Financial Conduct Authority
under Firms Reference Number 815699. The Company is listed on the
premium listing segment of the Official List of the Financial
Conduct Authority and was admitted to trading on the main market
for listed securities of the London Stock Exchange in November
2016.
Chairman's Statement
Dear Shareholder
Introduction
Civitas has delivered another strong set of results for the six
months to 30 September 2019.
We have continued to grow our rental income, achieve enhanced
operational cash flow, met our dividend obligations and moved
closer to the near-term target of 100% dividend cover.
We have strengthened our position as the leading owner of
care-based supported housing in the UK. We have developed closer
relationships with a range of major national care providers and an
ever-greater number of local authority commissioners.
Today we are regarded as instrumental in the development of many
new high-quality schemes that meet care needs and we are in the
process of taking delivery of some of the very best facilities in
the UK.
In the six months to 30 September 2019, Civitas generated a
profit of GBP17.4 million, including GBP17.0 million of operating
cashflow and IFRS earnings of 2.80 pence per share.
We paid out target dividends of 2.65 pence per share and we
achieved EPRA dividend cover over the period of 87% (EPRA earnings
per share 2.29 pence) and a Run Rate (based on EPRA Earnings) of
96% (see Appendix 1).
IFRS net asset value increased in the period to 107.23 pence per
share (31 March 2019: 107.08 pence per share) reflecting gains on
the portfolio as a result of the indexation of leases.
Specialist Supported Housing, whilst accounting for only 0.6% of
the UK Government's Welfare Budget, continues to play a vital role
in enabling community living for people who would otherwise be
forced to reside in long stay institutional facilities or
hospitals. Demand for quality facilities is high and continues to
outstrip supply.
In October 2019, the Parliamentary Joint Committee on Human
Rights published a report ("The detention of young people with
learning disabilities and/or autism") that highlighted the plight
of young people unable to move from hospitals into an appropriate
community setting and called for urgent action. This reflects our
experience on the ground where we continue to see a shortage of
appropriate accommodation.
During the period, we worked closely with the Regulator of
Social Housing (the "RSH") and with our Housing Association and
other partners. Our hands-on approach and our strong desire to
achieve continually higher standards of delivery has, we believe,
contributed to a number of measurable operational and governance
improvements.
We are aware that the RSH remains concerned about a number of
aspects of the lease based model and we, with others are working to
address those concerns.
Our Investment Adviser has pioneered a new initiative for the
sector with the establishment of a not-for-profit community
interest company ("The Social Housing Family CIC") whose objective
is to bring greater resources, skills and support to Housing
Associations holding Group leases. This is being funded by the
sector without any cost to the Group and enables direct input to be
delivered and standards to be monitored.
Much effort has been applied to ensuring that key messages about
the strengths and benefits of our model are being heard by opinion
formers and leaders in the sector.
We are pleased that the extensive work that has been undertaken
to deliver and measure social impact and social value is being
noted and Civitas is now one of The Daily Telegraph newspaper's "10
Best Ethical Funds" and a constituent of the Bestinvest top 15
"Clean Fifteen Funds".
Financial Performance
Rental income of GBP22.7 million was generated in the period, a
45% increase over the corresponding period (30 September 2018:
GBP15.7 million) as a result of new investments made in the period,
on track indexation of rents and the effect of rental income on
properties purchased prior to the period, being included for the
full six months.
Net cash generated from operating activities was GBP17.0 million
(30 September 2018: GBP9.1 million), an 86% increase.
As at 30 September 2019, the IFRS net asset value of the Group
was 107.23 pence which together with the dividends paid gives a
total return since IPO of 6.9% on an annualised IFRS basis.
Loan Financing
On 10 September 2019, the Group announced a new GBP60 million 5
Year Term Facility with National Westminster Bank Plc ("NatWest")
that has the potential to be extended by a further GBP40
million.
The availability of these funds enabled the Group to take the
opportunity to buy back shares at a discount to net asset
value.
The facility achieved a competitive investment grade pricing,
which taken with the Group's existing debt facilities results in an
average cost of debt of 264 bps.
The Group intends to put in place additional debt facilities of
up to GBP80 million to achieve an average gearing level of 35% of
portfolio gross assets (30 September 2019: 24%) (see Appendix 1).
Discussions are progressing with a view to this being in place
during Q1 2020.
Dividends
On 7 June 2019, a dividend of 1.325p per share was paid in
respect of the three months to 31 March 2019. A further dividend of
1.325 pence per share was declared on 6 August 2019 in respect of
the three months to 30 June 2019 and paid on 6 September 2019.
The dividends declared and paid match the Company's target of a
quarterly dividend of 1.325 pence per share for each of the quarter
periods from March 2019 to 31 March 2020. The Company's ambition is
that future dividends will increase in line with inflation as
measured by the consumer price index.
The Company has worked consistently to deliver a fully covered
dividend as soon as possible. The strategy of purchasing fully
built properties and new properties at completion without
development funding assists this objective.
As at 30 September 2019, the Company achieved dividend cover
over the six-month period of 87% as measured by EPRA earnings and a
Run Rate (based on EPRA Earnings) cover at 30 September 2019 of 96%
(see Appendix 1).
Investment
Total investment in the period was GBP10.2 million across eight
specialist supported housing properties. This is lower than the
previous period as we awaited the next tranche of debt becoming
available.
This is now in place and will enable the Company to honour the
commitments made to investment counterparties and to balance the
ability to buy-back shares with these commitments. This is both to
vendors of new properties and existing properties that are within
the portfolio that are presently being extended significantly to
meet the demand for places.
We continue to make use of our leading in-depth relationships at
a local level across England, Wales and now Scotland and Northern
Ireland, to create bespoke schemes where we are instrumental in
selecting properties, determining adaptations and then on-boarding
care providers and/or Housing Associations.
Share Price
The Company's share price has traded at or above IFRS net asset
value for much of the time since IPO in November 2016.
On 4 April 2019, the RSH published an addendum to their annual
sector risk report that was interpreted by some commentators as
calling into question its support for the lease-based model of
housing provision. Sentiment around this report exerted significant
downwards pressure on the share price of Civitas and its sector in
the market, widening the discount to net asset value.
Since that time, the RSH has issued an updated sector risk
report and Civitas and others are working with the RSH and with
Housing Association partners to assist them in making improvements
to address the risks identified by the RSH.
At the same time, the Company continues to deliver on its
financial and social targets.
I am confident that as we continue to deliver our strategy and
as our Housing Association partners continue to demonstrate
improvements to satisfy the RSH, this will be reflected in more
positive sentiment.
Share Buybacks
Following the NatWest facility becoming available, the Company
has undertaken several purchases of shares which are now held in
treasury.
These purchases were made post 30 September and have to date
amounted to 715,000 shares that have been acquired at prices
between 84.20 pence and 85.14 pence per share. These purchases are
accretive to the NAV and demonstrate the Board's confidence in the
portfolio valuation.
The Company will consider additional share purchases whilst
having regard to its financial capacity, existing property
commitments and to the importance of the Company maintaining an
active presence in the sector, together with the impact on the size
of the Company and associated liquidity.
Appointment of Joint Broker
The Company is pleased to announce it has today appointed
Panmure Gordon (UK) Limited as joint broker to work alongside
Liberum Capital Limited ("Liberum"), whose appointment was
announced by the Company on 17 September 2019.
We are pleased to note that recently Liberum published a
significant research note on the Company and our Investment Adviser
is working with them and meeting investors. This forms part of our
active programme of investor relations.
Board
I am delighted that Alison Hadden has joined the Board effective
from 21 November 2019, bringing our total to five non-executive
Directors. Ms Hadden brings a depth of experience of Social
Housing, most recently as a Chief Executive of several Housing
Associations and having started her career at Local Authorities.
She has worked with all stakeholders in the industry, including the
RSH, to improve delivery, financial performance and governance. Ms
Hadden is currently Chair of Housing Group Plus, an 18,000 home
group in Staffordshire and Shropshire, and a non-executive director
and member of the Audit and Risk Committee of Yorkshire Housing, a
20,000 home association operating in the Yorkshire area.
Outlook
All major political parties have previously supported
legislation to promote care being delivered in community settings
such as those provided by the Group.
The major political parties in their manifestos for the
forthcoming General Election have committed to seeking the delivery
of additional social housing for general needs.
They have also indicated additional funding for social care
which is regarded as encouraging a positive funding
environment.
Brexit is not expected to have any particular effect on the
Group's activities which are entirely UK based. The care providers
who provide primary care into the Group's properties typically draw
the majority of staff from local areas with limited EU and overseas
staff given the local nature of the provision.
The role of supported housing in enabling high quality
healthcare solutions for vulnerable adults with life-long
conditions is firmly established within the care and social housing
sectors.
It has been supported for several decades by governments of all
colours as delivering better outcomes for individuals, whilst being
more cost-effective than institutionalisation. It is also preferred
by local authorities.
We are recognised in the sector for our expertise and knowledge,
both within social housing and in care, and this is being applied
directly to assist our Housing Association partners to become
stronger, better resourced and able to address fully the issues
raised by the RSH. We take this very seriously and are taking
active steps to bring this about with continued hands-on input,
from the Investment Adviser.
We have increased our commitment to communicating with all our
stakeholders and to making available as much information on our
portfolio and our partners as reasonably possible whilst respecting
the privacy of our residents. We believe this will enable a growing
understanding and confidence in the Company's model.
I would like to take the opportunity to thank our shareholders
for their continuing support, my fellow board members for their
contribution and all our advisers, particularly our Investment
Adviser for its work and efforts for the Company and the wider
sector.
Michael Wrobel
Chairman
29 November 2019
Analysis of Property Portfolio(1)
as at 30 September 2019
Geographically Diversified
Region Properties Tenancies % of funds invested
----------------- ----------- ---------- --------------------
North West 99 592 10.8
West Midlands 96 484 12.0
Wales 15 242 8.9
South West 112 687 14.3
North East 63 460 6.3
Yorkshire 49 422 10.8
East Midlands 58 374 9.4
East of England 18 106 2.7
London 26 338 13.9
South East 63 409 10.9
Market Value by Region(1)
South West 14.5%
London 14.1%
West Midlands 11.9%
Yorkshire/Humber 10.7%
South East 10.7%
North West 10.5%
East Midlands 9.6%
Wales 8.3%
North East 7.0%
East of England 2.7%
Assets by Region(1)
South West 112
North West 99
West Midlands 96
North East 63
South East 63
East Midlands 58
Yorkshire/Humber 49
London 26
East of England 18
Wales 15
Diversified by Registered Provider
Rental Income by Registered Provider(1)
Registered Provider Rental Income
Falcon 20.8%
Auckland 20.0%
BeST 11.3%
Westmoreland 10.8%
Inclusion 8.8%
Encircle 6.2%
Trinity 5.7%
Pivotal 4.1%
Chrysalis 3.4%
New Walk 3.0%
Harbour Light 2.4%
My Space 1.2%
IKE 1.2%
Hilldale 1.0%
Blue Square 0.1%
Assets by Registered Provider(1)
Registered Provider Number of
Properties
Falcon 116
Westmoreland 76
BeST 72
Inclusion 65
Auckland 63
Trinity 43
New Walk 41
Pivotal 27
Harbour Light 26
Chrysalis 20
Encircle 16
Hilldale 15
IKE 10
My Space 8
Blue Square 1
Market Value by Registered Provider(1)
Registered Provider Market Value
Falcon 21.3%
Auckland 20.2%
BeST 11.5%
Westmoreland 10.8%
Inclusion 8.6%
Encircle 5.8%
Trinity 5.6%
Pivotal 4.1%
Chrysalis 3.3%
New Walk 3.0%
Harbour Light 2.3%
IKE 1.2%
My Space 1.2%
Hilldale 1.0%
Blue Square 0.1%
Tenancies by Registered Provider(1)
Registered Provider Tenancies
Falcon 850
BeST 526
Auckland 512
Inclusion 441
Westmoreland 406
Trinity 242
Pivotal 238
Encirle 205
New Walk 194
Harbour Light 182
Chrysalis 136
My Space 71
IKE 68
Hilldale 39
Blue Square 4
(1) As at 30 September 2019, including completed properties
only.
Investment Adviser's Report
We are working hard to deliver innovation and drive improvements
in the sector and to address the concerns expressed by RSH. By
taking a leading role, we are able to enhance the quality of the
Company's portfolio and the level of confidence in the sector
overall.
Introduction
During the six-month period, we have worked actively to achieve
a number of strategic objectives that we believe taken together
have enhanced the Company and its portfolio as well as bringing
about sustainable improvement to our sector. These are:
-- Achieve the Company's financial objectives: grow rental
income, deliver strong operational cash flow, meet dividend
targets, drive dividend cover and enhance asset values;
-- Take action on the ground: improve the business operations of
a number of the Company's counterparties, give strength to the
sector by new innovations and engage with the RSH; and
-- Promote social impact and social value: the Investment
Adviser's evidence-based approach with independent analysis to
support the positive impact and cost savings generated by the
Company's portfolio and our broader activities in the sector.
We set out below in some detail the steps that we have
undertaken to deliver on the above objectives.
We are very conscious that Civitas is the leading provider of
Specialist Supported Housing in the UK; we have the opportunity to
influence the sector directly and we are intent on doing so for the
benefit of all stakeholders, including the Company's shareholders
and the individuals who are able to call a Civitas property their
home.
Financial Review
Rental income in the period grew to GBP22.7 million, a 45%
increase over the corresponding period (30 September 2018: GBP15.7
million) with annualised rental income of GBP46.5 million at 30
September 2019.
This increase has been generated as a result of new investments
made in the period, on track indexation of rents and the effect of
rental income on properties purchased prior to the period, being
included for the full six months.
A net fair value gain on investment properties of GBP3.2 million
was recorded in the period, lower than the GBP6.9 million recorded
in the corresponding period reflecting less yield compression for
the same period. Operational cash flow increased strongly to
GBP17.0 million (30 September 2018: GBP9.1 million) adjusted for
non-cash items.
Earnings per share increased to 2.80 pence over the six-month
period compared to 4.22 pence for the full year to 31 March 2019.
EPRA earnings per share increased to 2.29 pence over the six-month
period compared to 3.63 pence (diluted) for the full year to 31
March 2019 and 1.63 pence (diluted) for the six months to 30
September 2018.
The Company paid two dividends of 1.325 pence each during the
period fully in line with the distribution target announced for the
year to 31 March 2020. The priority is to reach a fully covered
dividend as soon as possible and we are pleased to note that the
Run Rate (based on EPRA Earnings) dividend cover at 30 September
2019 was 96%. This should allow the Company to reach the target of
100% cover shortly.
As at 30 September 2019, the IFRS net asset value of the Company
was 107.23 pence per share, a slight increase on the 107.08 pence
per share at 31 March 2019. Together with the dividends of 2.65
pence paid in the period, this gives a total return since IPO of
6.9% on an annualised IFRS basis and 10.4% on a Portfolio basis
(see Appendix 1).
The Ongoing Charges reflecting total annualised recurring costs
expressed as a percentage of the average net asset value was 1.37%
in the period compared to 1.36% in the year to 31 March 2019 (see
Appendix 1).
The portfolio was independently valued on an individual IFRS
asset basis by JLL at GBP841.5 million as at 30 September 2019
reflecting a net initial yield since IPO of 5.90%. This compares to
an average purchase yield since IPO of 5.59% (prior to purchase
costs) and reflects the ability of the Company to use its scale and
market position to buy well. More recent acquisitions have however
been in the range of 5.5%-5.75% (prior to purchase costs)
reflecting modest compression.
Action on the Ground
The career experience of our team in social housing and
specialist care combined with the leading position of Civitas in
the sector is both an opportunity and a responsibility.
It enables us to play a significant hands-on role in bringing
about direct improvements to Civitas' counterparties, particularly
its Housing Association partners, to work closely with the RSH to
help address the risks they have identified and to take action to
increase confidence in the sector overall.
Since the publication by the RSH of the addendum to the Sector
Risk Report in April 2019 and the issue of various grading notices,
some questions have been raised over the lease-based model. At the
same time, Civitas and other leading funds have continued to
deliver on financial, operational and social targets.
Against this backdrop, we decided to take an active role working
in close consultation with our partners in the sector and with the
RSH to promote the delivery of as many improvements as
possible.
A summary of the key actions that we have taken are set out
below.
A New Community Interest Company to Own and Support Housing
Associations
The Investment Adviser has supported the establishment of a new
not-for-profit community interest company - The Social Housing
Family Community Interest Company ("CIC") that was incorporated in
November 2018 and which has recently become an active participant
within the social housing sector.
The CIC is governed by a board of experienced, non-executive
directors and is chaired (without remuneration) by Paul Bridge (a
director of the Investment Adviser). It is structured to be
entirely independent of the Investment Adviser and of Civitas and
is funded by the sector without any cost or recourse to
Civitas.
The CIC intends to bring together a group of regulated Housing
Associations that hold Civitas and other leases (the "CIC Group")
and to use the skills and resources that will be built up within
the CIC to enhance, where needed, the performance and delivery of
those Housing Associations who become part of the CIC Group.
Specifically, the CIC is designed to address the improvements being
sought by the RSH.
To achieve this, the CIC has the authority to appoint board
members to Housing Associations within the CIC Group and to provide
advice and, governance assistance and should it be required,
financial support.
All operational matters rest with the boards of each Housing
Association including their responsibilities owed to the RSH.
Discussions have been held with the RSH, attended by all the
non-executive directors of the CIC. It has been emphasised that the
role of the CIC is not to change the nature and level of
responsibilities that board members of Housing Associations owe to
the RSH and to their underlying residents. Rather it is intended to
provide greater advice, support and resources so that they are able
to become better and stronger organisations.
The board of Auckland Home Solutions CIC ("Auckland"), a leading
Civitas partner Housing Association (20.0% of rent roll as at 30
September 2019) voted recently to become the first member of the
CIC and accordingly it joined the CIC Group on 7 August 2019.
Since this time, the CIC has supported a programme of additional
recruitment within Auckland to enhance the skill set within the
business as part of creating a stronger and more resourced
organisation.
The presence of the CIC is being seen as attractive by potential
staff recruitment candidates with backgrounds in major Housing
Associations and has already led to additional senior appointments
being made at Auckland.
The CIC enables additional resources and benefits to be
delivered to Housing Associations whilst maintaining their separate
regulated status and their direct reporting obligations to the
RSH.
Assisting in the Recruitment of New Housing Association Board
Members and Executives
It has been reported that over recent months more than 30 senior
individuals, typically with large Housing Association experience
have become board members of specialist Housing Associations that
deliver the lease-based model. Many of these organisations hold
Civitas leases. This has made a considerable positive impact on the
skills and experience that is available.
At the same time, senior appointments have also been made at an
executive level, including CEO and CFO appointments and at an
operational level in areas such as rent collection from local
authorities and operational co-ordination of repairs and
maintenance.
Given the level of our contacts and relationships in the social
housing and care sectors, we have been asked to help with a number
of these individuals and have been pleased to do so.
For a number of others who have not been identified by us, we
have been asked to meet individuals and to provide the confidence
that as a significant partner to the relevant Housing Association,
we are both supportive and intending to be here for the long
term.
Our motivation in providing this assistance is not to seek
favour or influence but to play our part in helping to encourage
the very best individuals to become directors or executives of
small growing Housing Associations that hold Civitas leases.
The availability of highly experienced individuals, particularly
those who have previously benefited from significant engagement
with the RSH will, we believe, advance the ability of smaller
Housing Associations to achieve the operational improvements being
sought by the RSH.
Rolling Programme of Housing Association Governance and
Performance Seminars
We have taken the lead in directly hosting quarterly seminars
for our Housing Association partners, each of which is designed
around a particular topic such as governance, compliance and
engagement with the RSH.
The purpose is both to encourage dialogue and the sharing of
experiences and to promote the role of the Company as a supportive
partner and an entity seeking to encourage best practice.
The seminars have been attended by a number of senior
individuals from within the sector.
Review of Housing Association Business Planning and Stock
Condition Advice
We have assisted several Housing Associations holding Civitas
leases in their business planning and particularly the development
of their stress testing analysis of 30-year cash flows that all
Housing Associations are required to prepare. This has been
supported by the force majeure clause that we developed for new
leases.
We have also been asked to use our asset management resources
and knowledge of care to assist other landlords who have several
leases with our Housing Association partners. This work has been
undertaken without any charge by us and without any cost to Civitas
and is an example of the way in which we are making a contribution
to the sector and to Housing Associations holding Civitas
leases.
Sector Dialogue with RSH
Civitas is regarded as a significant entity in both the social
housing and care sectors and as a result the Investment Adviser is
invited frequently to host panel discussions, make key-note
presentations and sponsor talks at a number of significant sector
events.
As well as enabling us to promote the Company it provides a very
useful forum to meet with existing and new potential partners
including care providers and local authorities as well as engaging
with the RSH.
A summary of some of the leading sector conferences that we have
presented at recently in 2019 are:
-- EPRA European Public Real Estate Conference
-- HOUSING 2019 - Chartered Institute of Housing (Europe's
largest housing conference)
-- SOCIAL HOUSING Finance Conference - London
-- MIPIM UK SUMMIT - London
-- Women in Housing and 24 Housing
Social Impact and Social Value
At the time of the publication of the full year results in June
this year, the social impact consultants, The Good Economy
published their independent review of Civitas and concluded that
the Company was an "Authentic Impact Investor" under the IFC
Principles.
They also highlighted the significant financial cost savings and
the broader social value that had been created over the year to 31
March 2019. We intend to update this financial data on an annual
basis whilst The Good Economy will continue to publish their
broader independent assessment of Civitas twice a year with the
interim and full year results.
The latest independent report from The Good Economy accompanies
these half year results and provides details of the Company's
portfolio and the continued success in delivering measurable social
impact.
Highlights include:
-- GBP3.50 is created in social value for every GBP1 of
annualised investment(1)
-- 38% of properties within the portfolio are new to the social
housing sector(1)
-- 67% of properties are in the 40% most deprived local
authorities in the UK
-- Average age of a Civitas resident is 33 years
(1) As at 31 March 2019.
The Portfolio - Asset Management
We are an active manager of the Civitas portfolio and undertake
property assessments on a regular basis with our Housing
Association partners and surveyors to determine whether properties
are achieving an optimal outcome.
Where appropriate the Company will, from time to time, invest
further in order to both expand properties, such as those in South
Wales that are referred to earlier and also to ensure that
properties are as future proofed as possible. This might include
small adaptations to enable a building to function better for a
Housing Association or a care provider and this modest investment
is typically above and beyond the repair and maintenance
obligations in the lease.
We also undertake reviews to ensure that each property is
working in an optimal manner within the overall sector ecosystem in
terms of the interaction with the local authority as well as the
Housing Association and the care provider.
Now that we have established a substantial portfolio there are
clear opportunities to move certain properties between Housing
Associations, based on lease assignments on the same lease
terms.
This is where a particular Housing Association has, for example,
a strong relationship with a particular local authority that
facilitates engagement or where we can achieve concentrations that
assist Housing Associations in undertaking maintenance and
repairs.
We will also respond to requests from Housing Associations who
might themselves want to reduce down or reshape their geographic
coverage so that they can become more efficient and have a business
that is more easily managed and can better meet the requirements
set by the RSH.
The Portfolio - Rental Income
The annualised rental income as at 30 September 2019 increased
to GBP46.5 million (31 March 2019: GBP45.7 million) and this is
expected to increase further as additional indexation is applied,
the balance of the existing debt is invested and further debt is
secured to achieve the leverage target of 35% of gross assets over
the next few months.
Rental income is generated from leases with 15 Housing
Associations, with the top three representing 52.1% (Falcon 20.8%,
Auckland 20.0%, BeST 11.3%) based on the current leverage of 24% of
gross assets and the distribution of leases as at 30 September
2019.
As part of our ongoing asset management, we continue to work
closely with Westmoreland in helping to improve its governance and
operational efficiency through refocussing its geographic spread by
selective lease reassignments to other Housing Associations.
Falcon is a well-established, profitable and cash generative
Housing Association that was formed in 2008 and has developed a
strong track record of delivery. Today it provides long-term homes
for more than 863 residents. As at 30 March 2019 it had net assets
of GBP1.96 million including owned properties that Falcon has
started to purchase to complement the leased properties.
Auckland is also a well-established, profitable and cash
generate Housing Association that was formed in 2010 and which
recently became the first member of the CIC Group. Today it
provides long-term homes for more than 660 residents and has net
assets of GBP0.9 million.
Investment Pipeline
As the profile and reputation of Civitas has grown in the sector
so too have the number and range of direct approaches and
opportunities to construct bespoke transactions. We are in active
discussion with local authorities in respect of the plans they wish
to implement where the provision of care based housing and
affordable housing is a key component.
We are working directly with leading care providers and other
major sector participants who are seeking strategic discussions
regarding the manner in which they evolve their businesses and the
part that Civitas can play in that.
These discussions relate both to standing stock with residents
in place and also new developments that Civitas can acquire on
completion without taking development or funding risk.
As a result of these and other initiatives we have allocated
projects for all the available remaining debt facilities recently
arranged having taken account the need to preserve the Company's
cash buffer (including the ability to buy-back shares).
This allocation is based on the Company seeking to honour the
commitments already made to investment counterparties and local
authorities. This includes to vendors of new properties, focussed
in areas of the UK where the Company has a number of existing
properties and where the Investment Adviser has built strong
relationships with local authorities that we wish to maintain.
It is also in respect to existing properties that are within the
portfolio that have now been extended significantly to meet local
authority demand with the delivery of new state of the art adjacent
facilities that are now being acquired on completion.
We have also allocated projects for the additional up to GBP80
million of debt finance that the Company intends to secure over the
next months following a similar approach described above.
Outlook
The past six months have been both challenging and rewarding.
The comments from the RSH in April 2019, and subsequently in
October 2019, clearly unsettled some in the investment community
and Civitas is still recovering from that in terms of share price
performance and discount to net asset value. We are at the same
time working actively to address the risks identified by the
RSH.
The Company's portfolio has over the past three years delivered
both in terms of economic and social returns and we work on a daily
basis to ensure this can continue to be the case in the future.
We have taken a very hands-on approach to bringing about
improvements in the sector and we know that this has been noted by
the RSH and other important sector participants.
Working closely with local authorities and care providers on a
daily basis we see the levels of unsatisfied demand within the
system and we appreciate the quality of the enhanced housing
service that is being delivered by the staff of our Housing
Association partners and the quality of primary care that is being
delivered by the staff of the care providers.
Both are highly dedicated to helping all the residents achieve
better outcome for lives that face daily challenges. For our part
we intend to continue to bring forward the very best accommodation
possible to assist in meeting these challenges and enabling people
to achieve the very best outcomes possible.
We would like to thank the support of the Company's
shareholders, many of whom we meet on a regular basis, the
assistance and advice from our professional advisers and the input
and guidance from the Civitas Board who are equally dedicated to
delivering the very best outcomes for shareholders, residents and
all our other stakeholders.
Civitas Housing Advisors Limited
Investment Adviser
29 November 2019
Key Performance Indicators ("KPIs")
Explanation Result
----------------------------- ------------------------------- ----------------------------------
Capital deployed Target of deploying The C share proceeds
the C share proceeds were materially deployed
by 31 December 2018 by 31 December 2018.
or earlier. Total of GBP764 million
invested to 30 September
2019, representing
Ordinary and C share
equity and debt.
----------------------------- ------------------------------- ----------------------------------
Increase in IFRS Target to achieve capital IFRS NAV increase of
and Portfolio NAV appreciation whilst 9.2p per share or 9.4%
per share maintaining a low risk from IPO.
strategy from enhancing
the quality of cash Portfolio NAV increase
flows from investments, of 20.2p per share
by physical improvement or 20.6% from IPO.
of properties and by
creating a significantly
diversified, high-quality
portfolio.
Dividend per share Targeting 5.3p per share Dividends on target
per annum. with 2.65p per share
declared for the six
month period.
----------------------------- ------------------------------- ----------------------------------
Number of Local Authorities, Target risk mitigation As at 30 September
Housing Associations through a diversified 2019:
and care providers portfolio (once fully
invested) with no more * 160 Local Authorities
than 25% exposure to
any one Local Authority
or single Housing Association * 15 Housing Associations
and no more than 20%
exposure to any single
geographical area, once * 114 care providers
the capital of the Company
is fully invested.
The Company's largest
single exposure is
to Falcon Housing Association
and currently stands
at 20.8% of total rent
roll. The largest geographical
concentration is in
the South West, being
14.5% of total rent
roll.
----------------------------- ------------------------------- ----------------------------------
Loan to Gross Assets Target debt drawn of Leverage as at 30 September
35% of gross assets. 2019 of 24% of gross
assets with facilities
in negotiation to achieve
the target in due course.
----------------------------- ------------------------------- ----------------------------------
KPIs remain the same as the prior reporting period, except for
capital deployed which is no longer relevant following the full
deployment of C share proceeds in the prior period.
Alternative Performance Measures
Alternative Performance 30 September 30 September
Measure Definition Performance Measure 2019 2018
--------------------------- -------------------------- --------------------------- --------------- ---------------
Portfolio NAV IFRS NAV adjusted to Portfolio NAV GBP736,392,000 GBP403,427,000
reflect investment
property valued on a Portfolio NAV per share 118.30p 115.21p
portfolio basis rather
than on
an individual asset
basis.
--------------------------- -------------------------- --------------------------- --------------- ---------------
Company Adjusted Earnings Company Specific Earnings Adjusted Earnings GBP14,279,000 GBP10,116,000
Measure which adds back
the finance costs Adjusted Earnings per
associated with the C share 2.29p 2.89p
share financial
liability.
--------------------------- -------------------------- --------------------------- --------------- ---------------
Annualised Total Internal rate of return IFRS NAV 6.91% 7.32%
Shareholder Return calculation from IPO
based on issuance of Portfolio NAV 10.41% 11.01%
shares, dividends paid
and
NAV.
--------------------------- -------------------------- --------------------------- --------------- ---------------
Run Rate (based on EPRA Annualised EPRA earnings Run Rate (based on EPRA 96% -
Earnings) (based on annualised rent Earnings)
roll) divided by total
dividends (at 5.3p
per share based on the
adjusted weighted average
number of shares in
issue).
--------------------------- -------------------------- --------------------------- --------------- ---------------
Total borrowings divided
by portfolio gross
Portfolio Gearing assets. Portfolio Gearing 24% 12%
--------------------------- -------------------------- --------------------------- --------------- ---------------
Annualised recurring
costs divided by average
Ongoing Charges net assets. Ongoing Charges 1.37% 1.36%
--------------------------- -------------------------- --------------------------- --------------- ---------------
For detailed workings reconciling the above measures to the IFRS
results, please see Appendix 1 to these financial statements
below.
EPRA
The Company is a member of the European Public Real Estate
Association ("EPRA"). EPRA has developed and defined the following
performance measures to give transparency, comparability and
relevant financial reporting across entities which may use
different accounting standards. The Company is pleased to disclose
the following measures which are calculated in accordance with EPRA
guidance:
30 September 30 September
EPRA Performance Measure Definition EPRA Performance Measure 2019 2018
-------------------------- --------------------------- --------------------------- --------------- ---------------
Earnings Earnings from operational EPRA Earnings GBP14,279,000 GBP3,658,000
activities.
EPRA Earnings per share 2.29p 1.05p
(basic)
EPRA Earnings per share
(diluted) 2.29p 1.63p
EPRA NAV Net Asset Value adjusted EPRA Net Asset Value GBP667,621,000 GBP670,743,000
to include properties and
other investment interest EPRA NAV per share
at fair value (diluted) 107.26p 107.81p
and to exclude certain
items not expected to
crystallise in a long-term
investment property
business model.
-------------------------- --------------------------- --------------------------- --------------- ---------------
EPRA NNNAV EPRA NAV adjusted to EPRA NNNAV GBP664,537,000 GBP672,050,000
include the fair values of
(i) financial instruments, EPRA NNNAV per share 106.76p 108.02p
(ii) debt and (iii) (diluted)
deferred taxes.
-------------------------- --------------------------- --------------------------- --------------- ---------------
Annualised rental income
based on the cash rents
passing at the balance
sheet date, less
non-recoverable
property operating
expenses, divided by the
market value of the
EPRA Net property with (estimated)
Initial Yield purchasers' costs. EPRA Net Initial Yield 5.28% 5.28%
-------------------------- --------------------------- --------------------------- --------------- ---------------
This measure incorporates
an adjustment to the EPRA
NIY in respect of the
expiration of
rent-free-periods
(or other unexpired lease
incentives such as
discounted rent periods EPRA 'Topped-up' Net
EPRA 'Topped-up' NIY and stepped rents). Initial Yield 5.28% 5.28%
-------------------------- --------------------------- --------------------------- --------------- ---------------
Estimated Market Rental
Value ("ERV") of vacancy
space divided by ERV of
EPRA Vacancy Rate the whole portfolio. EPRA Vacancy Rate 0% 0%
-------------------------- --------------------------- --------------------------- --------------- ---------------
EPRA Costs Ratio Administrative & operating EPRA Costs Ratio 21.58% 28.23%
costs (including &
excluding costs of direct EPRA Costs Ratio
vacancy) divided by (excluding direct vacancy 21.58% 28.23%
gross rental income. costs)
-------------------------- --------------------------- --------------------------- --------------- ---------------
For detailed workings reconciling the above measures to the IFRS
results, please see Appendix 1 to these financial statements
below.
Principal Risks and Uncertainties
The principal risks facing the Company are substantially
unchanged since the date of the Annual Report for the financial
year ended 31 March 2019 and continue to be as set out on pages 52
to 54 of that report.
Risks faced by the Company include, but are not limited to,
strategy and competitiveness risks, investment management risks,
accounting, legal and regulatory risks and operational risks,
including cyber crime. Financial risks include market risks in
relation to investment in property and liquidity funds, interest
rate risk, credit risk and liquidity risk.
Details of the Company's management of these risks are set out
in the 2019 Annual Report.
Statement of Directors' Responsibilities
The Directors confirm that these condensed consolidated
financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and that the Half Year
Report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed consolidated
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Directors of the Company are listed below.
The principal risks and uncertainties facing the Group are
consistent with those outlined in the Group's most recent annual
financial statements for the year ended 31 March 2019, reflecting
the information required by DTR 4.2.7R.
This Half Year Report was approved by the Board of Directors and
the above responsibility statement was signed on its behalf by:
Michael Wrobel
Chairman
29 November 2019
Independent Review Report to Civitas Social Housing PLC
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed Civitas Social Housing PLC's condensed
consolidated financial statements (the "interim financial
statements") in the Half Year Report of Civitas Social Housing PLC
for the 6 month period ended 30 September 2019. Based on our
review, nothing has come to our attention that causes us to believe
that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Statement of Financial Position as
at 30 September 2019;
-- the Condensed Consolidated Statement of Comprehensive Income
for the period then ended;
-- the Condensed Consolidated Statement of Cash Flows for the
period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for
the period then ended; and
-- the explanatory notes to the interim financial
statements.
The interim financial statements included in the Half Year
Report have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Half
Year Report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Report based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
29 November 2019
Condensed Consolidated Statement of Comprehensive Income
For the period from 1 April 2019 to 30 September 2019
From 1 April From 1 April
2019 to 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------- ------------- -----------
Revenue
Rental income 4 22,729 15,675 35,738
------------- ------------- -----------
Net rental income 22,729 15,675 35,738
Directors' remuneration (84) (78) (163)
Investment advisory fees 18 (3,111) (3,223) (6,457)
General and administrative expenses (1,710) (1,124) (3,022)
------------- ------------- -----------
Total expenses (4,905) (4,425) (9,642)
Change in fair value of investment properties 5 3,150 6,908 3,652
------------- ------------- -----------
Operating profit 20,974 18,158 29,748
Finance income 56 399 491
Finance expense - relating to bank borrowings 6 (3,421) (1,533) (3975)
Finance expense - C shares amortisation 6 - (6,458) (6,400)
Change in fair value of interest rate derivatives 14 (180) - -
------------- ------------- -----------
Profit before tax 17,429 10,566 19,864
Taxation 7 - - -
Profit being total comprehensive income for the period 17,429 10,566 19,864
============= ============= ===========
All amounts reported in the Condensed Consolidated Statement of
Comprehensive Income above arise from continuing operations.
Earnings per Ordinary share - basic 8 2.80p 3.02p 4.67p
Earnings per Ordinary share - diluted 8 2.80p 2.74p 4.22p
The notes below are an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Financial Position
As at 30 September 2019
30 September 31 March 30 September
2019 2019 2018
Unaudited Audited Unaudited
Note GBP'000 GBP'000 GBP'000
------------- ---------- -------------
Assets
Non-current assets
Investment property 10 833,477 820,094 673,872
Other receivables 8,022 6,824 4,783
------------- ---------- -------------
841,499 826,918 678,655
Current assets
Trade and other receivables 6,627 5,723 4,898
Cash and cash equivalents 11 53,043 54,347 104,349
------------- ---------- -------------
59,670 60,070 109,247
------------- ---------- -------------
Total assets 901,169 886,988 787,902
------------- ---------- -------------
Liabilities
Current liabilities
Trade and other payables (8,903) (15,324) (15,602)
C shares 12 -- -- (299,532)
------------- ---------- -------------
(8,903) (15,324) (315,134)
Non-current liabilities
Bank and loan borrowings 13 (224,645) (205,156) (101,557)
Interest rate derivatives 14 (180) -- --
------------- ---------- -------------
(224,825) (205,156) (101,557)
------------- ---------- -------------
Total liabilities (233,728) (220,480) (416,691)
------------- ---------- -------------
Total net assets 667,441 666,508 371,211
============= ========== =============
Equity
Share capital 15 6,225 6,225 3,500
Share premium reserve 292,405 292,405 -
Capital reduction reserve 331,625 331,625 331,625
Retained earnings 37,186 36,253 36,086
------------- ---------- -------------
Total equity 667,441 666,508 371,211
============= ========== =============
Net assets per Ordinary share - basic and diluted 16 107.23p 107.08p 106.06p
The notes below are an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Changes in Equity
For the period from 1 April 2019 to 30 September 2019
Share Capital
Share premium reduction Retained Total
capital reserve reserve earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ---------- --------- ---------
Six month movements in equity (unaudited)
Balance at 1 April 2019 6,225 292,405 331,625 36,253 666,508
Profit and total comprehensive income for the period - - - 17,429 17,429
Dividends paid
Total interim dividends for the period (2.65p) 9 - - - (16,496) (16,496)
-------- -------- ---------- --------- ---------
Balance at 30 September 2019 6,225 292,405 331,625 37,186 667,441
======== ======== ========== ========= =========
Balance at 1 April 2018 3,500 - 331,625 34,270 369,395
Profit and total comprehensive income for the period - - - 10,566 10,566
Dividends paid
Total interim dividends for the period (2.50p) 9 - - - (8,750) (8,750)
Balance at 30 September 2018 3,500 - 331,625 36,086 371,211
======== ======== ========== ========= =========
Prior year movements in equity (audited)
Balance at 1 April 2018 (audited) 3,500 - 331,625 34,270 369,395
Profit and total comprehensive income for the period - - - 19,864 19,864
Issue of Ordinary shares
Issue of share capital 15 2,725 292,461 - - 295,186
Share issue costs - (56) - - (56)
Dividends paid
Total interim dividends for the period (5.00p) 9 - - - (17,881) (17,881)
Balance at 31 March 2019 6,225 292,405 331,625 36,253 666,508
-------- -------- ---------- --------- ---------
The notes below are an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Cash Flows
For the period from 1 April 2019 to 30 September 2019
From 1 April From 1 April
2019 to 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------- ------------- -----------
Cash flows from operating activities
Profit for the period before taxation 17,429 10,566 19,864
- Change in fair value of investment properties (3,150) (6,908) (3,652)
- Change in fair value of interest rate derivatives 180 -- --
- Rent and incentive straight line adjustments (57) (284) (314)
Finance income (56) (399) (491)
Finance expense 3,421 7,991 10,375
Increase in trade and other receivables (918) (1,996) (2,789)
Increase/(decrease) in trade and other payables 63 (288) (149)
------------- ------------- -----------
Cash generated from operations 16,912 8,682 22,844
Interest received 56 399 491
Net cash flow generated from operating activities 16,968 9,081 23,335
------------- ------------- -----------
Investing activities
Purchase of investment properties (9,186) (144,398) (267,908)
Acquisition costs (4,888) (2,953) (9,241)
Purchase of subsidiary company -- -- (25,470)
Sale proceeds on sale of subsidiary company -- -- 4,336
Restricted cash held as retention money 1,630 (1,945) (936)
Lease incentives paid (3,939) (2,053) (3,178)
Net cash flow used in investing activities (16,383) (151,349) (302,577)
------------- ------------- -----------
Financing activities
Share issue costs paid -- - (56)
Dividends paid to equity shareholders (16,409) (8,602) (17,591)
Dividends paid to C shareholders -- (5,678) (9,966)
Bank borrowings advanced 13 20,000 10,990 115,990
Bank borrowing issue costs paid (1,111) (432) (2,374)
Loan interest paid (2,739) (1,214) (2,958)
Net cash flow (used in)/generated from financing activities (259) (4,936) 83,045
------------- ------------- -----------
Net increase/(decrease) in cash and cash equivalents 326 (147,204) (196,197)
Unrestricted cash and cash equivalents at the start of the period 47,128 243,325 243,325
Unrestricted cash and cash equivalents at the end of the period 11 47,454 96,121 47,128
============= ============= ===========
The notes below are an integral part of these condensed
consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 April 2019 to 30 September 2019
1. Corporate information
These condensed consolidated financial statements for the period
from 1 April 2019 to 30 September 2019 comprise the results of the
Company and its subsidiaries (together the "Group") and were
approved by the Board and authorised for issue on 29 November
2019.
Civitas Social Housing PLC is incorporated in England and Wales
under the Companies Act 2006 as a public company limited by shares
with company number 10402528.
The address of the registered office is Beaufort House, 51 New
North Road, Exeter, EX4 4EP. The Company is registered as an
investment company under section 833 of the Companies Act 2006 and
is domiciled in the United Kingdom.
The principal activity of the Company is to act as the ultimate
parent company of the Group, whose principal activity is to provide
shareholders with an attractive level of income, together with the
potential for capital growth from investing in a portfolio of
social homes.
2. Basis of preparation
The financial information for the period ended 30 September 2019
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts for the
year ended 31 March 2019 has been delivered to the Registrar of
Companies. The auditor's report on those accounts was not
qualified, did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying the
report, and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
The Group's condensed consolidated financial statements have
been prepared on a going concern basis in accordance with the
Disclosure Guidance and Transparency Rules of the UKLA and with
International Financial Reporting Standards ("IFRS") and IFRS
Interpretation Committee ("IFRIC") as issued by the IASB and as
adopted by the European Union ("EU") and in accordance with IAS 34
Interim Financial Reporting. The current period financial
information presented has been reviewed, not audited.
The comparative period represents the period from 1 April 2018
to 30 September 2018 as reported in the Group's 2018 Interim
Report, and comparatives for the year ended 31 March 2019 as
reported in the Company's 2019 Annual Report are also
disclosed.
The Group's condensed consolidated financial statements should
be read in conjunction with the annual financial statements for the
period ended 31 March 2019, which have been prepared in accordance
with IFRS as adopted by the European Union.
The same accounting policies, estimates, presentation and
methods of computation are followed in the Half Year Report as
applied in the Group's latest annual audited financial statements,
with the exception of the following items:
-- Derivative financial instruments. The Group has now entered
into an interest rate swap for hedging purposes. These derivative
financial instruments, are initially recognised at fair value at
acquisition and are subsequently measured at fair value being the
estimated amount that the Group would receive or pay to sell or
transfer the agreement at the period end date, taking into account
current interest rate expectations and the current credit rating of
the lender and its counterparties. The gain or loss at each fair
value remeasurement date is recognised in the Group's Consolidated
Statement of Comprehensive Income.
-- Adoption of IFRS 16 Leases. This standard introduces a
single, on-balance sheet accounting model for lessee accounting
(effective for annual periods beginning on or after 1 January
2019).
As the Group has no material operating lease arrangements where
the Group acts as lessee, there is no material impact on the
Group's financial statements.
The following are new accounting standards, interpretations and
amendments, which are not yet effective and have not been early
adopted in this financial information, that will or may have an
effect on the Company's future financial statements:
-- Amendments to IFRS 3 Business Combinations: These amendments
clarify the definition of a business. A significant change in the
amendment is the option for an entity to assess whether
substantially all of the fair value of the gross assets acquired is
concentrated in a single asset or group of similar assets. If such
a concentration exists, the transaction is not viewed as an
acquisition of a business and no further assessment of the business
guidance is required. This will be relevant where the value of the
acquired entity is concentrated in one property, or a group of
similar properties (effective for periods beginning on or after 1
January 2020 with earlier application permitted).
There will be no impact on the Group's financial statements
since the amendments are effective for new business
combinations.
The Group's condensed consolidated financial statements have
been prepared on a historical cost basis, as modified for the
Group's investment properties at fair value through profit or
loss.
2.1 Functional and presentation currency
The financial information is presented in Pounds Sterling which
is also the functional currency of the Company, and all values are
rounded to the nearest thousand (GBP'000s) pound, except where
otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases
with Housing Associations, which are not overly reliant on any one
tenant and present a well-diversified risk. The Group's cash
balances as at 30 September 2019 were GBP53 million, of which GBP47
million was readily available. The Group is geared at 24%, see note
13, with GBP187 million of investment property remaining as
unsecured.
As a result, the Directors believe that the Group is well placed
to manage its financing and other business risks and that the Group
will remain viable, continuing to operate and meets its liabilities
as they fall due.
The Directors believe that there are currently no material
uncertainties in relation to the Group's ability to continue for
the period of at least 12 months from the date of the Group's
condensed consolidated financial statements. The Board is,
therefore, of the opinion that the going concern basis adopted in
the preparation of the condensed consolidated financial statements
is appropriate.
2.3 Segmental information
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal financial reports about
components of the Group that are regularly reviewed by the Chief
Operating Decision Maker, which in the Group's case is delegated to
the Investment Adviser, who has formed an Executive Team, in order
to allocate resources to the segments and to assess their
performance.
The internal financial reports received by the Investment
Adviser's Executive Team contain financial information at a Group
level as a whole and there are no reconciling items between the
results contained in these reports and the amounts reported in the
condensed consolidated financial statements.
The Directors consider the Group's property portfolio represents
a coherent and diversified portfolio with similar economic
characteristics and as a result these individual properties have
been aggregated into a single operating segment. In the view of the
Directors there is accordingly one reportable segment under the
provisions of IFRS 8.
All of the Group's properties are based in the UK. No
geographical grouping is contained in any of the internal financial
reports provided to the Investment Adviser's Executive Team and,
therefore no geographical segmental analysis is required by IFRS
8.
3. Significant accounting judgements, estimates and assumptions
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities are unchanged from those outlined in the Annual
Report.
4. Rental income
From From
1 April 2019 to 1 April 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------- --------------- ----------
Rental income from investment properties 22,672 15,391 35,424
Rent straight line adjustments 155 327 459
Lease incentives (98) (43) (145)
Total 22,729 15,675 35,738
========================================= =============== =============== ==========
5. Change in fair value of investment properties
From From
1 April 2019 1 April 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------ --------------- ----------
Change in valuation during the period 4,348 11,359 10,144
Adjustment for lease incentives and rent straight line adjustments
recognised in assets at:
- start of the period 6,824 332 332
- end of the period (8,022) (4,783) (6,824)
Total 3,150 6,908 3,652
============ =============== ==========
6. Finance expense
From From
1 April 2019 1 April 2018 Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------ ------------ ----------
Bank charges 2 2 2
Interest paid and payable on bank borrowings 2,759 1,278 3,048
Bank borrowing commitment fees 60 25 207
Amortisation of loan arrangement fees 600 228 718
------------ ------------ ----------
Finance expenses associated with bank borrowings 3,421 1,533 3,975
Amortisation of C share liability - 6,458 6,400
------------ ------------ ----------
Total 3,421 7,991 10,375
============ ============ ==========
7. Taxation
As a UK REIT, the Group is exempt from corporation tax on the
profits and gains from its property investment business, provided
it meets certain conditions as set out in the UK REIT regulations.
For the period ended 30 September 2019, the Group did not have any
non-qualifying profits and accordingly there is no tax charge in
the period. If there were any non-qualifying profits and gains,
these would be subject to corporation tax.
It is assumed that the Group will continue to be a group UK REIT
for the foreseeable future, such that deferred tax has not been
recognised on temporary differences relating to the property rental
business. No deferred tax asset has been recognised in respect of
the unutilised residual current period losses as it is not
anticipated that sufficient residual profits will be generated in
the future.
From From
1 April 2019 to 1 April 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------- ---------------- ------------
Corporation tax charge/(credit) for the period - - -
---------------- ---------------- ------------
Total - - -
================ ================ ============
The tax charge for the period is less than the standard rate of
corporation tax in the UK of 19%. The differences are explained
below.
From From
1 April 2019 to 1 April 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------- ----------------- -------------
Group
Profit before taxation 17,429 10,566 19,864
----------------- ----------------- -------------
UK corporation tax rate 19.00% 19.00% 19.00%
Theoretical tax at UK corporation tax rate 3,312 2,008 3,774
Effects of:
Change in value of exempt investment properties (599) (1,313) (694)
Exempt REIT income (3,020) (2,128) (4.702)
Amounts not deductible for tax purposes 67 1,259 1,296
Unutilised residual current period tax losses 240 174 326
Total - - -
================= ================= =============
The Government has announced that the corporation tax standard
rate is to be reduced to 17% with effect from 1 April 2020.
REIT exempt income includes property rental income that is
exempt from UK corporation tax in accordance with Part 12 of the
Corporation Tax Act 2010.
8. IFRS Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Company by the weighted average number of Ordinary shares in
issue during the period.
Diluted EPS is calculated by adjusting earnings and the number
of shares for the effects of dilutive options and other dilutive
potential Ordinary shares (i.e. the C shares).
The calculation of basic and diluted earnings per share is based
on the following:
From From
1 April 2019 to 30 April 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------- ---------------- -----------
Calculation of Basic Earnings per share
Net profit attributable to Ordinary shareholders 17,429 10,566 19,864
Weighted average number of Ordinary shares 622,461,380 350,000,000 425,393,423
Earnings per Ordinary share - basic 2.80p 3.02p 4.67p
--------------- ---------------- -----------
Calculation of Diluted Earnings per share
Net profit attributable to Ordinary shareholders 17,429 10,566 19,864
Add back finance costs associated with the C share liability - 6,458 6,400
17,429 17,024 26,264
--------------- ---------------- -----------
Weighted average number of Ordinary shares 622,461,380 350,000,000 425,393,423
Effects of dilution from C shares - 272,140,052 197,067,957
622,461,380 622,140,052 622,461,380
--------------- ---------------- -----------
Earnings per Ordinary share - diluted 2.80p 2.74p 4.22p
9. Dividends
From From
1 April 2019 to 1 April 2018 to Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------- --------------- ----------
Dividend of 1.25p for the three months to
31 March 2018 - 4,375 4,375
Dividend of 1.25p for the three months to
30 June 2018 - 4,375 4,375
Dividend of 1.25p for the three months to
30 September 2018 - - 4,375
Dividend of 1.25p for the three months to
31 December 2018 - - 4,756
Dividend of 1.325p for the three months to
31 March 2019 8,248 - -
Dividend of 1.325p for the three months to
30 June 2019 8,248 - -
16,496 8,750 17,881
=============== =============== ==========
On 7 November 2019 the Company announced a dividend of 1.325p
per Ordinary share in respect of the period 1 July 2019 to 30
September 2019. The dividend will be paid on or around 30 November
2019 to shareholders on the register as at 15 November 2019. The
financial statements do not reflect this dividend.
10. Investment property
From From
1 April 2019 1 April 2018
to Year ended to
30 September 31 March 30 September
2019 2019 2018
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
------------- ----------- -------------
Balance at beginning of period 826,918 516,554 516,554
Property acquisitions 7,555 289,304 148,165
Acquisition costs 2,678 10,916 2,577
Change in fair value during
the period (Note 5) 4,348 10,144 11,359
------------- ----------- -------------
Value advised by the property
valuers 841,499 826,918 678,655
Adjustments for lease incentive
assets and rent straight line
assets recognised (8,022) (6,824) (4,783)
Balance at the end of period 833,477 820,094 673,872
============= =========== =============
In accordance with "IAS 40: Investment Property", the investment
property has been independently valued at fair value by Jones Lang
LaSalle Ltd ("JLL"), an accredited external valuer with recognised
and relevant professional qualifications and recent experience of
the location and category of the investment property being valued.
However the valuations are the ultimate responsibility of the
Directors.
JLL valued the Group's properties if they were each sold in
independent transactions in accordance with IFRS, at GBP841,499,000
as at 30 September 2019 (31 March 2019: GBP826,918,000 and 30
September 2018: GBP678,655,000).
JLL has provided additional valuation services to the Company
during the period.
In relation to the period ended 30 September 2019, the
proportion of the total fees payable by the Company to JLL's total
fee income was less than 5% and is therefore minimal. Additionally,
JLL has a rotation policy in place whereby the signatories on the
valuations rotate after seven years.
All corporate acquisitions during the period have been treated
as asset purchases rather than business combinations because they
are considered to be acquisitions of properties rather than
businesses.
The following table provides the fair value measurement
hierarchy for investment property:
Significant Significant
Quoted prices in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------------------ ------------ --------------
Investment properties measured at fair value
30 September 2019 833,477 - - 833,477
31 March 2019 820,094 - - 820,094
30 September 2018 673,872 - - 673,872
========= ======================== ============ ==============
There have been no transfers between Level 1 and Level 2 during
any of the periods, nor have there been any transfers between Level
2 and Level 3 during any of the periods.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards (incorporating the International
Valuation Standards) by JLL, one of the leading professional firms
engaged in the Social Housing sector.
As noted previously, all of the Group's investments are reported
as Level 3 in accordance with IFRS 13 where external inputs are
"unobservable" and value is the Directors' best estimate, based
upon advice from relevant knowledgeable experts.
11. Cash and cash equivalents
30 September 31 March 30 September
2019 2019 2018
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
------------- --------- -------------
Cash held by solicitors 17,564 17,031 31,437
Liquidity funds 10,440 13,394 53,309
Cash held by banks 19,450 16,703 11,375
------------- --------- -------------
Unrestricted cash and cash equivalents 47,454 47,128 96,121
Restricted cash 5,589 7,219 8,228
Total 53,043 54,347 104,349
============= ========= =============
Liquidity funds refer to money placed in money market funds.
These are highly liquid funds with accessibility within 24 hours
and subject to insignificant risk of changes in value.
Cash held by lawyers is money held in escrow for expenses
expected to be incurred in relation to investment properties
pending completion. These funds are available immediately on
demand.
Restricted cash represents retention money held by lawyers in
relation to deferred payments subject to achievement of certain
conditions, other retentions and cash segregated to fund repair,
maintenance and improvement works to bring the properties up to
satisfactory standards for the Group and the tenants. Currently
that amount of cash is held in escrow.
12. C shares
From From
1 April 2019 to Year ended 1 April 2018 to
30 September 31 March 30 September
2019 2019 2018
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
------------------ ------------- -----------------
At start of period - 298,752 298,752
Dividends paid to C share holders - (9,966) (5,678)
Amortisation of C share liability - 6,400 6,458
Conversion to Ordinary shares - (295,186) -
At end of period - - 299,532
================== ============= =================
On 10 November 2017 the Company announced the issue of
302,000,000 C shares, issued at GBP1 per share. The C shares are
convertible preference shares. The shares are listed on the London
Stock Exchange and dealing commenced on 14 November 2017.
Holders of C shares are not entitled to receive notice of,
attend, speak or vote at general meetings of the Company.
Under IAS 32 Financial Instruments Presentation, the C shares
meet the definition of a financial liability rather than equity and
are presented in the financial statements as a liability of the
Company carried at amortised cost.
The funds were raised in order to finance a number of property
acquisitions and C shares were issued rather than Ordinary shares
so that the issue costs associated with the fund raise and the
costs associated with the property acquisitions did not dilute the
Ordinary share NAV.
In order to calculate the net assets attributable to each share
class, the results, assets and liabilities attributable to the C
shares are identified in a separate pool to the results, assets and
liabilities of the Ordinary shares. A share of fund level expenses
for the period is allocated to the C shares based on the net assets
of each share class pool.
It should be noted that these financial statements include all
results, assets and liabilities of both share class pools however
as the C shares are classified as a liability, net assets are
reduced by the value of the C shares liability which is also
equivalent to the net assets of the C share pool.
On 21 December 2018 the C shares were converted to Ordinary
shares in the ratio 0.902190 new Ordinary shares for every 1 C
share held. The conversion ratio was calculated with reference to
the respective portfolio net asset values of the C shares and
Ordinary shares at close of business on the calculation date.
Accordingly 272,461,380 Ordinary shares were issued.
13. Bank and loan borrowings
Bank borrowings are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
The banks also hold charges over the shares of certain subsidiaries
and any intermediary holding companies of those subsidiaries. Any
associated fees in arranging the bank borrowings unamortised as at
the period end are offset against amounts drawn on the facilities
as shown in the table below:
From Year ended From
1 April 2019 1 April 2018
to 31 March to
30 September 30 September
2019 2019 2018
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
------------- ----------- -------------
At start of period 208,447 92,457 92,457
Bank borrowings drawn 20,000 115,990 10,990
------------- ----------- -------------
Bank borrowings drawn
at end of period 228,447 208,447 103,447
Unamortised loan
issue costs at start
of period (3,291) (1,635) (1,635)
Less: loan issue
costs incurred (1,111) (2,374) (483)
Add: loan issue costs
amortised 600 718 228
------------- ----------- -------------
Unamortised costs
at end of period (3,802) (3,291) (1,890)
------------- ----------- -------------
At end of period 224,645 205,156 101,557
------------- ----------- -------------
Maturity of bank
borrowings:
Repayable within
1 year - - -
Repayable between
1 to 2 years 55,947 55,947 -
Repayable between
2 to 5 years 120,000 100,000 50,947
Repayable after 5
years 52,500 52,500 52,500
228,447 208,447 103,447
============= =========== =============
The Group has entered into the following loan facility
agreements:
A 10 year Sterling Term Facility Agreement dated 2 November 2017
for up to GBP52,500,000 with Scottish Widows Limited. Interest is
fixed at a total of 2.9936%. These borrowings include amounts
secured on investment property to the value of GBP171,443,000 (30
September 2018: GBP168,998,000; 31 March 2019: 169,999,000).
A 3 year Sterling Revolving Facility Agreement dated 15 November
2017 for up to GBP60,000,000 with Lloyds Bank plc. Interest is
charged at LIBOR + 1.50% margin. These borrowings include amounts
secured on investment property to the value of GBP145,503,000 (30
September 2018: GBP143,265,000; 31 March 2019: GBP144,166,000).
A 3-year Revolving Credit Facility Agreement dated 28 November
2018 for up to GBP100,000,000 with HSBC Bank PLC. Interest charged
at LIBOR + 1.70% margin.
The borrowings include amounts secured on investment property to
the value of GBP210,304,000 (30 September 2019: GBPnil; 31 March
2019: GBP208,953,000).
A 5-year loan facility with National Westminster Bank Plc for up
to GBP60,000,000. Interest is charged at LIBOR + 2.00% margin and
has been fixed by way of a five-year swap. The loan can be extended
for an additional 2 years and there is the option of a further
GBP40 million accordion.
The borrowings include amounts secured on investment property to
the value of GBP126,772,000 (30 September 2018: GBPnil; 31 March
2019: GBPnil)
A number of covenants are in place under the four agreements.
Under the Scottish Widows Limited 10 year facility, historical and
projected interest cover must be at least 325% and the loan to
value ratio must not exceed 40%. Under the Lloyds Bank plc 3 year
revolving credit facility, historical and projected interest cover
must be at least 250% and the loan to value ratio must not exceed
55%. Under the HSBC Bank PLC 3-year facility, historical and
projected interest cover must be at least 250% and the loan to
value ratio must not exceed 60%. Under the National Westminster
Bank Plc 5-year facility, historical and projected interest cover
must be at least 250% and the loan to value must not exceed 50%. At
30 September 2019, the Group is in compliance with all
covenants.
14. Interest rate derivatives
The Group has entered into an interest rate swap with NatWest
Markets in order to mitigate the risk of changes in interest rates
on its loan with National Westminster Bank plc under which
GBP20,000,000 is currently drawn.
The swap has a notional value of GBP20,000,000 and fixes
interest at 0.7105%.
30 September 31 March 30 September
2019 2019 2018
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
------------- --------- -------------
At start of the period - - -
Change in fair value during
the period (180) - -
------------- --------- -------------
At the end of the period (180) - -
============= ========= =============
The table below shows the fair value measurement hierarchy for
interest rate derivatives:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3)
GBP'000 GBP'000 GBP'000
-------------- ------------ -------------
30 September 2019 - (180) -
31 March 2019 - - -
30 September 2018 - - -
There have been no transfers between Level 1 and Level 2 during
any of the periods nor have there been any transfers between Level
2 and Level 3 during any of the periods.
15. Share capital
Share capital represents the nominal value of consideration
received by the Company for the issue of Ordinary shares.
From Year ended From
1 April 2019
to 31 March 1 April 2018 to
30 September
2019 2019 30 September 2018
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
------------- ------------ ------------------
Share capital
At start of period 6,225 3,500 3,500
Shares issued - 2,725 -
At end of period 6,225 6,225 3,500
------------- ------------ ------------------
Number of shares
authorised issued
and
fully paid
Ordinary shares of
GBP0.01 each
At beginning of period 622,461,380 350,000,000 350,000,000
Shares issued - 272,461,380 -
At end of period 622,461,380 622,461,380 350,000,000
============= ============ ==================
On 21 December 2018, the Company issued 272,461,380 Ordinary
share in respect of the conversion of 302,000,000 C shares. The
fair value of assets representing the C shares pool at that date
was GBP295,186,000.
16. Net asset value
Basic NAV per share is calculated by dividing net assets in the
Condensed Consolidated Statement of Financial Position attributable
to ordinary equity holders of the parent by the number of Ordinary
shares outstanding at the end of the period.
It has been determined that the conversion of the C shares will
not produce a dilutive effect on the Ordinary share NAV.
Net asset values have been calculated as follows:
30 September 31 March 30 September
2019 2019 2018
Unaudited Audited Unaudited
GBP'000 GBP'000 GBP'000
------------- ------------ -------------
Net assets 667,441 666,508 371,211
Number of Ordinary shares in issue at end of period 622,461,380 622,461,380 350,000,000
NAV - basic and diluted 107.23p 107.08p 106.06p
------------- ------------ -------------
17. Related party disclosures
The Directors are remunerated for their services at such rate as
the Directors shall from time to time determine. The Chairman
receives a Director's fee of GBP50,000 per annum, and the other
Directors of the Board receive a fee of GBP32,000 per annum (with
the exception of the chairman of the Audit and Management
Engagement Committee who receives a fee of GBP36,000 per
annum).
As at 30 September 2019, the Directors (including their
connected persons) had beneficial interests in the following number
of shares in the Company:
Director Ordinary shares
------------------- ----------------
Michael Wrobel 100,598
Peter Baxter 47,065
Caroline Gulliver 58,832
Alastair Moss 11,766
For the period from 1 April 2019 to 30 September 2019, fees of
GBP75,000 (1 April 2018 to 30 September 2018: GBP75,000) were
incurred and paid to the Directors.
18. Transactions with the Investment Adviser
On 1 November 2016 Civitas Housing Advisors Limited was
appointed as the Investment Adviser of the Company.
For the period from 1 April 2019 to 30 September 2019, fees of
GBP3,111,000 (1 April 2018 to 30 September 2018: GBP3,223,000) were
incurred and paid to Civitas Housing Advisors Limited.
As at 30 September 2019, no amounts (31 March 2019: GBPnil) were
due to/from Civitas Housing Advisors Limited.
As from 26 April 2019, the Investment Advisory fee paid is
calculated based on the IFRS NAV instead of the Portfolio NAV.
Further details of the fee calculation can be seen in the Company's
Annual Report.
The Board also agreed with the Investment Adviser to extend the
initial notice period term within the Investment Management
Agreement from 30 November 2021 to 30 May 2024.
At 30 September 2019, CHA held 50,000 Ordinary shares in the
Company.
19. Capital commitments
At 30 September 2019, the Group had funds committed (forward
purchase) totalling GBP12,000,000 concerning two properties,
currently under development for which the Group has interest into a
conditional sale and purchase agreement, conditional on the
completion of development.
20. Post balance sheet events
Acquisitions
On 4 October 2019, a property in Surrey was acquired for GBP1.05
million and a property in Worcestershire was acquired for GBP0.35
million.
On 14 November 2019, a property in Warwickshire was acquired for
GBP0.50 million.
On 19 November 2019, a property in Essex was acquired for
GBP1.30 million
Dividends
On 7 November 2019 the Board declared a quarterly dividend in
respect of the Ordinary shares for the three months to 30 September
2019 of 1.325 pence per Ordinary share. The dividend will be paid
on or around 29 November 2019 to holders of Ordinary shares on the
register as at 15 November 2019. The dividend will be paid as a
REIT property income distribution ("PID").
Share Buy-Backs
On 3 October 2019, the Company bought into treasury 150,000
Ordinary shares at a price of 85.1400p per Ordinary share.
On 4 October 2019, the Company bought into treasury 40,000
Ordinary shares at a price of 85.0250p per Ordinary share.
On 9 October 2019, the Company bought into treasury 150,000
Ordinary shares at a price of 84.5267p per Ordinary share.
On 10 October 2019, the Company bought into treasury 100,000
Ordinary shares at a price of 84.2000p per Ordinary share.
On 1 November 2019, the Company bought into treasury 250,000
Ordinary shares at a price of 84.8196p per Ordinary share.
On 6 November 2019, the Company bought into treasury 25,000
Ordinary shares at a price of 84.9000p per Ordinary share.
Following these transactions the Company's issued share capital
is 622,461,380 and the Company holds a total of 715,000 Ordinary
shares in treasury which do not carry any voting rights.
Other Announcements
On 22 November 2019, the Board announced the appointment of
Alison Hadden as an independent non-executive Director of the
Company on 21 November 2019.
Appendix I - Notes to the Calculation of EPRA and Other
Alternative Performance Measures (unaudited)
1. EPRA Earnings
Earnings from operational activities
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Profit after taxation 17,429 10,566
Changes in value of investment properties (3,150) (6,908)
------------- -------------
EPRA Earnings 14,279 3,658
Finance costs associated with the C share
financial liability - 6,458
Diluted EPRA Earnings 14,279 10,116
------------- -------------
Weighted average number of shares in
issue 622,461,380 350,000,000
Dilutive elements - 272,140,052
------------- -------------
Adjusted weighted average number of shares
in issue 622,461,380 622,140,052
------------- -------------
EPRA Earnings per share (EPS) - basic 2.29p 1.05p
------------- -------------
EPRA Earnings per share (EPS) - diluted 2.29p 1.63p
------------- -------------
2. EPRA NAV
Net asset value adjusted to include properties and other
investment interest at fair value and to exclude certain items not
expected to crystallise in a long-term investment property business
model.
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Net assets 667,441 371,211
Effect of the exercise of C shares - 299,532
------------- -------------
Diluted net assets 667,441 670,743
Adjustments to exclude fair value of
interest rate derivatives 180 -
EPRA Net Assets 667,621 670,743
------------- -------------
Number of Ordinary shares in issue 662,461,380 350,000,000
Number of Ordinary shares that would
be issued on
the conversion of C shares - 272,140,052
------------- -------------
Adjusted number of shares to calculated
diluted NAV 622,461,380 622,140,052
------------- -------------
EPRA Net Assets per share 107.26p 107.81p
============= =============
3. EPRA NNNAV
EPRA NAV adjusted to include the fair values of (i) financial
instruments, (ii) debt and (iii) deferred taxes.
30 September 30 September
2019 2018
GBP'000 GBP'000
------------- --------------
EPRA Net assets (per above) 667,621 670,743
Adjustment to value bank borrowings and derivatives at fair value (3,084) 1,307
------------- --------------
EPRA NNNAV 664,537 672,050
------------- --------------
Number of Ordinary shares in issue 622,461,380 350,000,000
Number of Ordinary shares that would be issued on the
conversion of C shares - 272,140,052
------------- --------------
Adjusted number of shares to calculated diluted NAV 622,461,380 622,140,052
------------- --------------
EPRA NNNAV per share 106.76p 108.02p
============= ==============
4. EPRA Vacancy Rate
Estimated Market Rental Value (ERV) of vacancy space divided by
ERV of the whole portfolio.
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Estimated Market Rental Value (ERV) of
vacant spaces - -
Estimated Market Rental Value of whole
portfolio 46,451 37,286
EPRA Vacancy Rate 0% 0%
============= =============
5. EPRA Costs Ratio
Administrative and operating costs divided by gross rental
income.
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Total administrative and operating costs 4,905 4,425
Gross rental income 22,729 15,675
EPRA cost ratio 21.58% 28.23%
============= =============
6. Portfolio NAV
IFRS NAV adjusted to reflect investment property valued on a
portfolio basis rather than individual asset basis.
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Net assets 667,441 371,211
Adjustment for change to property valuation 68,951 32,036
------------- -------------
Portfolio net assets 736,392 403,247
------------- -------------
Number of Ordinary shares in issue 622,461,380 350,000,000
------------- -------------
EPRA Net Assets per share 118.30p 115.21p
============= =============
7. Company Adjusted Earnings
Company Specific Earnings Measure which adds back finance costs
associated with the C share financial liability.
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Profit after taxation 17,429 10,566
Changes in value of investment properties (3,150) (6,908)
------------- -------------
EPRA Earnings 14,279 3,658
Finance costs associated with the C share
financial liability - 6,458
Company Adjusted Earnings 14,279 10,116
------------- -------------
Weighted average number of shares in
issue 622,461,380 350,000,000
------------- -------------
EPRA Earnings per share (EPS) - basic 2.29p 2.89p
============= =============
8. Annualised Total Shareholder Return
The annualised total shareholder return for the period from
launch to 30 September 2019 based on IFRS NAV and Portfolio NAV is
calculated using dividend cash flows data as follows:
IFRS NAV Portfolio
NAV
basis basis
pence per GBP'000
share
------------------- -------------------- ---------- ----------
Investment (net of
18 November 2016 issue costs) 98.00 98.00
31 May 2017 Interim dividend 0.75 0.75
31 August 2017 Interim dividend 0.75 0.75
30 November 2017 Interim dividend 0.75 0.75
9 March 2018 Interim dividend 0.75 0.75
8 June 2018 Interim dividend 1.25 1.25
7 September 2018 Interim dividend 1.25 1.25
30 November 2018 Interim dividend 1.25 1.25
11 January 2019 Interim dividend 1.11 1.11
28 February 2019 Interim dividend 0.14 0.14
7 June 2019 Interim dividend 1.33 1.33
6 September 2019 Interim dividend 1.33 1.33
30 September 2019 NAV 107.23 118.30
---------- ----------
IRR 6.91% 10.41%
========== ==========
9. Run Rate (based on EPRA Earnings)
Annualised EPRA earnings divided by total dividends (at 5.3p per
share based on the adjusted weighted average number of shares in
issue).
30 September
2019
GBP'000
-------------
Annualised rent roll(1) 46,547
Annualised EPRA Earnings 31,553
Target dividends per share for 12 months 5.3p
Adjusted weighted average number of shares
in issue 622,461,380
Target dividends for 12 months 32,990
Run Rate (based on EPRA Earnings) 96%
=============
(1) Annualised rent roll based upon GBP841.5 million of real
estate at 30 September 2019.
10. EPRA Dividend Cover
Diluted EPRA earnings divided by total dividends (at 2.65p per
share based on the adjusted weighted average number of shares in
issue).
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Target dividends per share for 6 months 2.65p 2.65p
Adjusted weighted average number of shares
in issue 622,461,380 622,140,052
Target dividends for 6 months 16,495 16,487
EPRA Earnings (diluted) 14,279 10,116
EPRA Cover 87% 61%
============= =============
11. Portfolio Gearing
Total borrowings divided by portfolio gross assets.
30 September 31 September
2019 2018
GBP'000 GBP'000
------------- -------------
Portfolio valuation 910,450 724,700
Other assets 59,670 109,257
------------- -------------
Total Portfolio Gross Assets 970,120 833,947
Borrowings 228,447 103,447
Portfolio Gearing 24% 12%
============= =============
12. Ongoing Charges
Annualised recurring costs divided by the average net
assets.
30 September 31 March
2019 2019
GBP'000 GBP'000
------------- ------------
Total costs 4,905 9,642
Less non recurring costs (332) (559)
------------- ------------
Recurring costs for the period 4,573 9,083
Annualised recurring costs 9,146 9,083
Average net assets 667,089,135 667,217,437
Ongoing Charges 1.37% 1.36%
============= ============
Glossary
Acuity means higher degree of care.
Annualised Rent Roll means annual rent roll based on investment
properties held at a reporting date.
Average Net Yield means the average yield on an investment or a
portfolio that results from adding all interest, dividends or other
income generated from the investment, divided by the average of the
valuation of investments for the period.
CHA means Civitas Housing Advisors Limited, the Investment
Adviser to the Company.
Care Provider means a provider of care services to the occupants
of Specialist Supported Housing, registered with the Care Quality
Commission.
Company means Civitas Social Housing PLC, a company incorporated
in England and Wales with company number 10402528.
EPRA means European Public Real Estate Association.
ESG means Environmental, Social and Governance.
Group means the Company and its subsidiaries.
Housing Association means an independent society, body of
trustees or company established for the purpose of providing
low-cost social housing for people in housing need generally on a
non-profit-making basis. Any trading surplus is typically used to
maintain existing homes and to help finance new ones. Housing
Associations are regulated by the Homes and Communities Agency.
IFRS Net Asset Value or IFRS NAV means the net asset value of
the Group on the relevant date, prepared in accordance with IFRS
accounting principles.
IFRS Valuation means an independent valuation of the Portfolio
by Jones Lang LaSalle or such other property adviser as the
Directors may select from time to time, prepared in accordance with
RICS "Red Book" guidelines and based upon a valuation of each
underlying investment property rather than the value ascribed to
the portfolio and on the assumption of a theoretical sale of each
property rather than the corporate entities in which all of the
Company's investment properties are held.
Investment Adviser means Civitas Housing Advisors Limited, a
company incorporated in England and Wales with company number
10278444, in its capacity as investment adviser to the Company.
Local Authority means the administrative bodies for the local
government in England comprising of 326 authorities (including 32
London boroughs).
Portfolio Net Asset Value or Portfolio NAV means the net asset
value of the Company, as at the relevant date, calculated on the
basis of an independent Portfolio Valuation. See note 16 for a
reconciliation to IFRS NAV. See note 6 in Appendix 1.
Portfolio Valuation means an independent valuation of the
Portfolio by Jones Lang LaSalle or such other property adviser as
the Directors may select from time to time, based upon the
portfolio being held, directly or indirectly, within a corporate
vehicle or equivalent entity which is a wholly owned subsidiary of
the Company and otherwise prepared in accordance with RICS "Red
Book" guidelines.
REIT means a qualifying real estate investment trust in
accordance with the UK REIT Regime introduced by the UK Finance Act
2006 and subsequently re-written into Part 12 of the Corporation
Tax Act 2010.
Registered Providers means Housing Associations, Local
Authorities and arm's length management organisations, a
not-for-profit company that provides housing services on behalf of
a Local Authority.
RICS means Royal Institution of Chartered Surveyors.
RSH means Regulator of Social Housing.
Social Family Community Interest Company - 'CIC' means a
not-for-profit community interest company incorporated in England
and Wales with company number 11667993.
Social homes or social housing means homes which are social
rented, affordable rented, other homes managed by Registered
Providers or Low Cost Home Ownership homes.
SLA means a service level agreement between Care Provider and
Registered Provider.
Specialist Supported Housing or SSH means social housing which
incorporates some form of care or other ancillary service on the
premises.
SPV means special purpose vehicle, a corporate vehicle in which
the Group's properties are held.
WAULT means weighted average unexpired lease term.
Company Information
Non-executive Directors
Michael Wrobel Chairman
Alastair Moss
Caroline Gulliver Chair of the Audit and Management Engagement
Committee
Peter Baxter
Alison Hadden (date of appointment: 21 November 2019)
Registered Office
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Registered no: 10402528
www.civitassocialhousing.com
Alternative Investment Fund Manager
G10 Capital Limited
136 Buckingham Palace Road
London SW1W 9SA
Investment Adviser
Civitas Housing Advisors Limited
13 Berkeley Street
London W1J 8DU
Financial Advisers
Panmure Gordon (UK) Limited
One New Change
London EC4M 9AF
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Company Secretary
Link Company Matters Limited
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Depositary
INDOS Financial Limited
5th Floor
54 Fenchurch Street
London EC3M 3JY
Registrar
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Legal and Tax Adviser
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
Public Relations Adviser
Buchanan
107 Cheapside
London EC2V 6DN
Tax Adviser
BDO LLP
55 Baker Street
London W1U 7EU
NATIONAL STORAGE MECHANISM
A copy of the Half Year Report will be submitted shortly to the
National Storage Mechanism ("NSM") and will be available for
inspection at the NSM, which is situated at
www.morningstar.co.uk/uk/NSM.
LEI: 213800PGBG84J8GM6F95
ENDS
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the website (or any
website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UGGCCPUPBGBG
(END) Dow Jones Newswires
December 02, 2019 02:00 ET (07:00 GMT)
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