TIDMCSH
RNS Number : 3659M
Civitas Social Housing PLC
11 May 2020
11 May 2020
CIVITAS SOCIAL HOUSING PLC
("Civitas" or the "Company")
Net Asset Values and Dividend Declaration
Trading and Market Update
The Board of Civitas Social Housing PLC ("Board) is pleased to
announce its quarterly net asset value as at 31 March 2020, a
dividend declaration and to provide a trading and market
update.
Highlights:
-- Robust financial performance in line with expectations
-- Annualised rent roll GBP48.4 million (31 December 2019: GBP47.2 million)
-- IFRS NAV per share 107.87p (31 December 2019: 107.55p)
-- EPRA run-rate dividend cover 100%(1) as at 31 March 2020
-- Strong rental receipts in line with expectations
-- 1.325p dividend declared and dividend policy reaffirmed
o Intention to target a dividend of 5.4 pence per Ordinary Share
for the financial year ending 31 March 2021(2)
-- 5 additional properties acquired in the period for GBP17.8 million in the fourth quarter
-- Cash balances of GBP49.3 million as at 31 March 2020
Introduction
The Company's property portfolio has continued to perform
strongly and in line with expectations. Rents have, to date, been
received as expected, unaffected by COVID-19 and the Company is
pleased to announce an increased net asset value and an uplifted
dividend target for the year to 31 March 2021.
To date, the Company's financial performance has not been
negatively impacted by COVID-19. The Company and its Investment
Adviser, Civitas Investment Management Limited ("CIM")(3) are
working closely with the Company's major counterparties to monitor
the position on the ground and should it be needed, to offer
assistance and guidance where possible. The Board believes that the
Company operates a robust and defensive business model and that
social housing and specialist healthcare are proving to be some of
the more resilient sectors within the market, given that they are
based on non-discretionary public sector expenditure and that
demand exceeds supply.
The Board, directors and staff of CIM would like to take this
opportunity to acknowledge the extraordinary work and commitment
being shown by all key workers at the present time. This includes
all the specialist care workers and the staff of the Company's
housing association and care provider partners who are dedicated to
ensuring that the tenants living in the Company's properties have a
safe and supported environment - thank you from all of us. The
Company, as ever, continues to seek ways to support their important
work in any way it can.
Net Asset Values ("NAV"):
IFRS NAV
The unaudited IFRS NAV, disclosed below, reflects an independent
RICS "Red Book" valuation prepared on an individual asset basis by
Jones Laing LaSalle ("JLL").
31 31
Mar Dec
IFRS NAV 2020 2019
Ordinary NAV (GBP'000) 670,564 668,592
------- -------
Ordinary NAV per share (pence) 107.87 107.55
------- -------
The portfolio, based on individual asset valuations, has been
valued overall at 31 March 2020 at an average Net Initial Yield of
5.26% (31 Dec 2019: 5.29%) after taking into account the initial
costs of property acquisitions incurred by the Company and the
assumed costs of a subsequent theoretical sale. The individual
valuations are determined by JLL based on a range of underlying
metrics including applicable discount rates and expected long-term
inflation.
The growth in IFRS NAV reflects the positive contribution from
the indexation of a range of leases in the period and the cost of
discretionary capital expenditure that has been incurred to enhance
further the quality of the Company's properties to reflect the
individual needs of tenants for the long term. This expenditure is
above and beyond the lessee's day-to-day maintenance
obligations.
In the period to 31 March 2020, an Ordinary Share dividend of
1.325p per share was declared and paid, amounting to GBP8.2
million.
Portfolio NAV
The unaudited Portfolio NAV, disclosed below, reflects an
independent RICS "Red Book" valuation prepared on a portfolio basis
by JLL.
31 31
Mar Dec
PORTFOLIO NAV 2020 2019
Ordinary NAV (GBP'000) 735,704 737,561
------- -------
Ordinary NAV per share (pence) 118.35 118.65
------- -------
The portfolio, as a single entity, has been valued at 31 March
2020 at 5.06% Net Initial Yield (31 Dec 2019: 5.06%) reflecting the
enhanced value from the aggregation of individual properties into a
single portfolio and the positive effects of the stamp duty
adjustment noted below.
The JLL Portfolio NAV valuation incorporates two additional
assumptions when considering Red Book valuation. First, that the
assumed theoretical sale costs (from Civitas to a subsequent buyer)
are reduced as the portfolio is assumed to be sold (with all
properties within SPVs) with stamp duty being charged at 0.5% on
the sale of shares in SPVs as opposed to 5.0% for the sale of each
underlying property.
Second, that the portfolio is sold in its entirety rather than
as individual properties (making it better suited to a wider group
of institutional buyers) and so attracting more competitive
pricing. This assumption is supported by transactional evidence
that JLL has observed in the market.
Revised EPRA Net Asset Value Measurement
On 4 November 2019, following an extensive consultation, EPRA
announced changes to "the Net Asset Value (NAV) measurement to
reflect the significant evolution of the listed real estate sector
over the last 16 years, when the Best Practices Recommendations
guidelines were first introduced".
The Company confirms that with effect from the publication of
the six-month results to 30 September 2020 that it will report NAV
under these new guidelines.
Material Valuation Uncertainty
Both the IFRS and Portfolio NAV valuations are subject to the
now standard "Material Valuation Uncertainty due to Novel
Coronavirus (COVID-19)" clause that professional valuation firms,
including JLL, are adopting across the world in respect of
valuations at this time.
In this regard the Board is pleased to note that JLL have
confirmed to the Company that the declaration "does not mean that
the valuation cannot be relied upon" and that specialist supported
housing "remains an attractive sector and arguably more so in the
current climate".
Dividend Declaration and Affirmation of Dividend Policy
The Board has declared a fourth quarterly dividend for the
period from 1 January 2020 to 31 March 2020 of 1.325p per Ordinary
Share resulting in a total payment for the year to 31 March 2020 of
5.3p per Ordinary Share. This is consistent and in line with
previous guidance provided by the Company.
The dividend will be paid on or around 12 June 2020 to holders
on the register as at 22 May 2020 (the record date) with the
corresponding ex-dividend date being 21 May 2020. The dividend will
be paid as a REIT property income distribution ("PID").
The Company has now met its stated objective of achieving
100%(1) dividend cover as at 31 March 2020 as measured on an EPRA
earnings run-rate basis.
The Board now takes the opportunity to announce that the Company
intends to target a dividend of 5.4 pence per Ordinary Share for
the financial year ending 31 March 2021(2) .
This reflects year-on-year target dividend growth of 1.9% and
compares with the Office of National Statistics' 12-month inflation
measure for the Consumer Price Index ("CPI") of 1.5% at March 2020.
Medium and longer-term predictions for CPI remain around 2% and
this is consistent with the Bank of England's target for CPI.
The target dividend for the year to 31 March 2021 reflects both
the strong underlying cash generation that the Company continues to
achieve and the Board's view, at the present time of the Company's
prospects in the current financial year.
Trading Update (Unaudited)
In the year to 31 March 2020 the Company achieved annualised
rental income of GBP48.4 million (31 December 2019: GBP47.2
million) and this is reflected in a diversified portfolio of 613
properties and 4,216 residents, supported by 117 specialist care
providers and 15 housing associations over 164 local authority
areas.
As at the date of this announcement, the Company has received
more than 99% of the rents due to be paid to it during the quarter
to 31 March 2020. This includes some rents generated in the prior
period as the Company's leases typically require the payment of
rent one month in arrears. Since the start of the current financial
year on 1 April 2020 rents have continued to be collected as
expected and, to date are unaffected by COVID-19.
As at 31 March 2020, the Company held cash balances of GBP49.3
million (net of operating and financing amounts due) of which
approximately GBP24 million is committed legally in respect of
transactions due to complete in 2020 with the balance being held as
a cash contingency that the Company retains as a matter of
financial prudence.
In addition, as at 31 March 2020, the Company owned freehold
properties with a value of GBP212 million that were entirely
unencumbered and available as security for additional borrowing in
due course.
Set out below are details of the Company's borrowings as at 31
March 2020 reflecting a gross LTV of 26.9% with interest cover of
4.5 times and a reduced average cost of borrowings of 2.46%.
The weighted average debt to maturity is 3.4 years and this
reflects the 12-month extension of the GBP60 million facility with
Lloyds Bank that was due for renewal as planned in November 2020
and that has been extended in the normal course to November 2021.
It is anticipated that this will be refinanced prior to November
2021.
31 31
Mar Dec
2020 2019
Average cost of debt (%) 2.46% 2.57%
----- -----
Loan to value (%) 26.9% 23.3%
----- -----
Weighted average interest cover (times()i 4.5 4.6
----- -----
Weighted average debt to maturity (years)(ii) 3.4 3.7
----- -----
Total debt drawn down (GBPm) 272.5 228.4
----- -----
Unencumbered assets (GBPm) 212.0 193.9
----- -----
(I) Weighted average interested cover is based on secured assets
only
(ii) Weighted average debt to maturity excluding unexercised
extensions under respective facility agreements
Market Update and COVID-19
Civitas is the leading provider of specialist supported housing
in the UK for individuals who are working age adults with learning
disabilities, autism, mental health, and other significant care
needs.
The 4,216 tenants within the portfolio have an average age of
c.32 years and do not suffer generally from the type of underlying
health conditions that would fall under the NHS definition of
individuals who are at high risk from COVID-19.
It has been reported recently by a leading specialist care
provider active in our market that less than 3% of their service
users fell into this high-risk category. This is consistent with
the Company's general understanding from discussions with other
specialist care providers who deliver care into the Company's
properties.
With the support of local authorities, central government,
housing associations and specialist care providers, the market in
which the Company invests remains fully operational, but with many
office based staff, particularly within local authorities working
from home and with a high level of ongoing need and a continuing
significant demand/supply imbalance.
The Company's portfolio is specifically focused on properties
that are suitable for the delivery of mid-to-higher acuity care and
these services remain in high demand as usual.
In addition, the Company has responded to a number of direct
requests from local authorities and the NHS and as a result a
number of accommodation units have been made available to support
the response to COVID-19.
Our housing association and specialist care provider partners
have made various adjustments to working practices with the
priority of preserving the health, safety and wellbeing of tenants
and staff. This includes the implementation of enhanced procedures
relating to hygiene, social distancing and restricting access to
the Company's properties to essential visits only.
The ability to implement such practices is significantly
assisted by the configuration of many of the Company's properties
in the form of self-contained apartments and small housing
clusters.
Investments/ Pipeline
Civitas recently completed the acquisition of five freehold
properties comprising 63 tenancies for a total consideration of
GBP17.8 million prior to purchase costs. These properties are
situated over five local authority areas in Hertfordshire,
Shropshire and Tyne and Wear and are focused on the delivery of
mid-to-higher acuity care.
With respect to the specialist facilities in Wales that have
been highlighted previously and on which contracts have been
exchanged, the Company is pleased to note that considerable
progress has been made. The Company looks forward to taking
delivery of these facilities as soon as they are ready to be taken
into occupation for the benefit of people with higher acuity care
needs. They will then contribute to the expected growth in rental
income in the year to 31 March 2021.
The evolution of the facilities in Wales typifies the manner in
which the Company takes a proactive role in the design and delivery
of new purpose-built facilities. This relates to the Company's
focus on properties that enable the provision of mid-to-higher
acuity care and has resulted in approximately one-third of the
portfolio benefiting from long-term back-to-back under-leases
between our care providers and our housing association
partners.
In respect of additional investment opportunities, the Company
is in active discussions over the potential acquisition of a range
of high-quality existing and new build properties to be acquired at
completion without the forward financing.
The availability of these investment opportunities reflects many
of the unique strategic relationships that have been established by
the Company over recent years, in particular with leading
specialist care providers and the Company's track record in
structuring and undertaking more than 120 individual transactions.
It is evident that a number of significant additional vendors and
their advisers wish to engage with the Company as a preferred
partner and this is assisting further in the continuing development
of the Company's pipeline of potential transactions.
Quarterly Fact Sheet
The Company has today published its Factsheet for the quarter to
31 March 2020 and this is available to view on
the Company's website .
Notes
(1) The calculation of run-rate dividend cover is based on all
properties that have exchanged and completed and the further
delivery of certain properties to a value of approximately GBP12.1
million that are legally committed and expected to complete
shortly
(2) This is a target and not a formal dividend forecast or a
profit forecast
(3) On 7 May 2020 the name of the Company's investment adviser
was changed from Civitas Housing Advisors Limited to Civitas
Investment Management Limited to better reflect the range of
investment management activities now undertaken.
ENDS
For further information, please contact:
Civitas Investment Management Limited
Paul Bridge Tel: +44 (0)20 3058 4844
Andrew Dawber Tel: +44 (0)20 3058 4846
Panmure Gordon
Sapna Shah Tel: +44 (0)20 7886 2783
Tom Scrivens Tel: +44 (0) 20 7886 2648
Liberum Capital Limited
Gillian Martin Tel: +44 (0) 20 3100 2222
Buchanan
Helen Tarbet / Henry Wilson Tel: +44 (0) 20 7466 5000
Hannah Ratcliff / George Beale civitas@buchanan.uk.com
Notes:
The Company was admitted to trading on the main market for
listed securities of the London Stock Exchange in November 2016.
The Company is listed on the premium listing segment of the
Official List of the Financial Conduct Authority. The Company is
advised by Civitas Investment Management Limited, who are
authorised and regulated by the Financial Conduct Authority under
Firms Reference Number 815699.
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
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