TIDMCSH
RNS Number : 4449R
Civitas Social Housing PLC
30 June 2020
30 June 2020
CIVITAS SOCIAL HOUSING PLC
("Civitas" or the "Company")
ANNUAL FINANCIAL REPORT
YEAR TO 31 MARCH 2020
Civitas Social Housing PLC ("CSH", "Civitas" or the "Company"),
a leading care-based housing and healthcare REIT, presents its full
year results for the year ended 31 March 2020.
The full Annual 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 Performance Mar 20 Mar 19 Change
Investment property (GBPm) 878.7 826.9 Up 6.3%
------- ------- ---------
IFRS NAV per share (diluted)
(p) 107.87 107.08 Up 0.7%
------- ------- ---------
Financial Performance - - -
------- ------- ---------
Rent roll annualised (GBPm) 48.4 45.7 Up 5.8%
------- ------- ---------
Rental income (GBPm) 45.9 35.7 Up 28.4%
------- ------- ---------
EPRA earnings(1) (GBPm) 28.8 22.6 Up 27.5%
------- ------- ---------
Operating Cash Flow (GBPm) 32.9 23.3 Up 41.0%
------- ------- ---------
EPRA earnings per share(1,
2) (p) 6.06 4.22 Up 43.7%
------- ------- ---------
EPRA earnings per share
(diluted)(1, 2) (p) 4.63 3.63 Up 27.5%
------- ------- ---------
Dividends per share (p) 5.30 5.00 Up 6.0%
------- ------- ---------
Total shareholder return(3)
(%) 20.4 17.5 Up 16.6%
------- ------- ---------
Financing - - -
------- ------- ---------
Loan to value ratio 27 22 Up 24.1%
------- ------- ---------
Weighted average cost of
debt (%) 2.46 2.57 -
------- ------- ---------
(1) Mar 19: EPRA Earnings, EPS, EPRA EPS figures are after
adding back finance costs associated with the C shares.
(2) See Appendix 1 - Alternative Performance Measure to these
financial statements for supporting workings.
(3) On an Ordinary share held since launch (percentage not
annualised).
-- Increased investment property portfolio
-- Portfolio value up to GBP878.7 million (IFRS)
-- IFRS valuation average net initial yield (NIY) of 5.26%
compared to average purchase NIY of 5.6% (5.9% before initial
costs)
-- IFRS NAV per share (diluted) up 0.7% to 107.87 pence
-- Weighted Average Unexpired Lease Term (WAULT) of 23.66 years
-- Diversified portfolio of 613 properties providing homes to over 4,000 people
-- GBP31 million of acquisitions made in the year to 31 March
2020 with focus on mid-to-higher acuity care
-- Providing accommodation to working age adults with learning
disabilities, autism and mental health disorders with an average
tenant age of 32 years
-- Properties located across half the Local Authorities in
England and Wales and leased to 15 Housing Associations, with
support provided by 117 Care Providers
-- Rent roll, operating cash flow and earnings significantly up
-- Annualised rent roll increased to GBP48.4 million
-- Rents continue to be received as normal, unaffected by COVID-19
-- Operating cashflow increased to GBP32.9 million
-- EPRA earnings (diluted) increased to GBP28.8 million
-- EPRA earnings per share (diluted) up to 4.63 pence
-- Dividend payments and dividend cover
-- Dividend of 5.3 pence achieved for the financial year ended 31 March 2020
-- Target dividend of 5.4 pence for the year to 31 March 2021
-- EPRA run-rate dividend cover of 100% as at 31 March 2020
-- EPRA dividend cover of 87.4% on an actual basis over the year to 31 March 2020
-- Total NAV Return
-- Total NAV return from IPO to 31 March 2020 of 6.8% p.a. (IFRS basis)
Debt Facilities
-- Fully drawn debt of GBP272.5 million reflecting gearing of 26.9% as at 31 March 2020
-- Intention to secure additional GBP80-GBP120 million facility or private placement
-- Fully compliant with terms of existing debt facilities
Housing Associations and Care Providers
-- Regular dialogue, rolling monitoring and operational support from Civitas when needed
-- Continuing good operational performance during COVID-19 with
swift adaptation to lockdown restrictions
-- Civitas continues to work proactively to enhance the sector
New Investment Opportunities
-- Existing cash resources fully allocated
-- Continuing to develop pipeline of high quality mid-to-higher acuity healthcare facilities
-- Opening discussions with additional counterparties, e.g., charities and health providers
Operational Highlights
-- Alison Hadden appointed as an independent non-executive
Director of the Company on 21 November 2019
-- During the year to 31 March 2020 the Company bought back a
total of 815,000 shares at an average price of 85.8 pence per
share. These shares are held in treasury
-- Consistent delivery of measurable social impact and increased
focus on the performance of the Company's counterparties
-- Further strengthening the strategic role that the Company can
play in delivering Government policy objectives for more community
care
-- Establishing ever more strategic relationships as a go to
partner for local authorities and major care providers
Post Balance Sheet Highlights
-- Delivery of first phase of the new state-of-the-art higher acuity facilities in Wales
-- Shareholder consent to broaden counterparties including the NHS and charities
-- Board declared a fourth quarterly dividend for the three
months to 31 March 2020 of 1.325p per share
-- Company announced the intention to target a dividend of 5.4
pence per Ordinary Share for the financial year ending 31 March
2021
Michael Wrobel, Non-Executive Chairman of the Company,
commented:
"The Company is pleased to report a strong set of results that,
to date, remains unaffected by COVID-19.
During the quarter to 31 March 2020, the Company recovered more
than 99% of the rents expected to be paid and we have continued to
enjoy good recoveries since this time.
Having received shareholder consent to broaden our
counterparties to include the NHS and charities, we see a
significant and compelling addressable market for our services. We
have the opportunity to further develop our strategic relationships
with care providers and local authorities.
Demographic trends continue to increase the number of vulnerable
adults who want and deserve a safe home in the community; and the
experience of Covid-19 has increased the urgency of helping people
move into communities and away from institutional settings.
Despite the uncertain environment caused by COVID-19, we
consider that the prospects for the Company remain positive and we
look forward to continuing to support the Government's policy
objectives to provide community settings for people with long-term
care needs."
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:
Civitas Social Housing PLC (CSH) was created in 2016 by Civitas
Investment Management Limited as the first dedicated London listed
REIT, to raise long-term, sustainable, institutional capital to
invest in care-based social homes and healthcare facilities across
the UK. So far, CSH has completed more than 120 individual
transactions to build the largest portfolio of its kind that has
been independently valued at GBP878 million. CSH provides homes for
4,216 working age adults with long-term care needs, in 613 bespoke
properties that are supported by 117 specialist care providers, 15
housing associations over 164 individual local authority areas.
Most recently CSH has extended its mandate to be able to work
directly with the NHS and other leading care-based
organisations.
Chairman's Statement
Dear Shareholder
Introduction
At this time of global crisis, the Board wishes to acknowledge
the extraordinary work and commitment
shown by all key workers, particularly those in the health and
social care sectors. These courageous individuals care for some of
the most vulnerable people in our society, enabling them to live in
community settings, many of them in homes owned by Civitas.
To date, our financial performance has not been affected by the
COVID-19 pandemic. During the most recent quarter, the Company
received more than 99% of the rents expected to be paid.
Results
During the year, the Company invested GBP31 million, excluding
purchase costs, in 22 properties with 144
tenancies and exchanged contracts on a small number of other
properties for subsequent completion. We also entered into forward
purchase agreements for the delivery on completion of a number of
newly developed higher acuity facilities in Wales, valued at
GBP12.1 million. The first of these has now been delivered.
Net rental income increased by 28.4% to GBP45.9 million and
profit before tax grew by 89.9% to GBP37.7 million. Operating cash
flow increased by 41.0% to GBP32.9 million.
The IFRS NAV per share increased during the year from 107.1p per
Ordinary share at 31 March 2019 to 107.9p per Ordinary share at 31
March 2020.
As at 31 March 2020, the Company held cash balances of GBP49.3
million (net of operating and finance amounts due) of which
approximately GBP14 million was allocated in respect of
transactions completing in 2020 - GBP1.8 million in respect of two
properties in Telford and one in Sunderland on which the Company
has conditionally exchanged, and GBP12.1 million in relation to two
properties in Wales for which the Company has entered into a
conditional sale and purchase agreement. We have allocated GBP10
million (estimated) relating to a capital payment contingent on
certain financial obligations being met at the properties in Wales.
The remaining cash balances are being held as a cash contingency in
the Company. The Company seeks to maintain a prudent approach to
the use of leverage, which stood at 27% at the year end, based on a
gross portfolio loan-to-value basis. We have a maximum limit of
40%. As at 31 March 2020, the weighted average debt to maturity was
3.4 years and this reflected the post balance sheet extension of
the GBP60 million Lloyds Bank revolving credit facility to November
2021.
The Investment Adviser continues to see a significant pipeline
of investment opportunities from a variety of sources, including
larger care providers. With limited uncommitted capital resources,
the Company is continuing to evaluate options, including raising
equity, to fund further investments to enhance shareholder
returns.
The Company's latest Social Impact Report prepared independently
by The Good Economy has been published, which confirms that we have
continued to meet our important social impact objectives.
Dividends
The Company has paid three interim dividends and declared a
fourth interim dividend of 1.325p each, which will bring the total
for the year just ended to 5.3p in line with the Board's target.
The EPRA dividend cover on an actual basis over the course of the
year to 31 March 2020 was 87.4%. The dividend cover was 100% at the
year end on an EPRA run-rate basis*.
COVID-19
The Company is the leading provider of care-based housing in the
UK for individuals who are working age adults with learning
disabilities, mental health and other significant care needs. Our
4,216 tenants have an average age of c.32 years and do not
typically fall into the categories of individuals identified by the
NHS as being at high risk for COVID-19.
The monitoring that is being undertaken by our Investment
Adviser, along with our housing association
and care provider partners, indicates that at the present time
the level of incidences of COVID-19 amongst tenants and staff
remains low. This may be in part accounted for by the age profiles
of the tenants themselves and by the configuration of the Company's
portfolio with a focus on self-contained apartments and small
housing clusters. This enables a greater degree of control over
movement and, therefore, to potential exposure than open plan
environments.
However, various changes have been made to the working practices
of both housing associations and care providers with the priority
of continuing to preserve the health, safety and well-being of
tenants and staff. These include the implementation of adapted
procedures relating to staff and tenant engagement, enhanced
hygiene, social distancing and restricting access to the Company's
properties to essential visits. Our Investment Adviser has been
able to adapt its working practices, with most staff working from
home with the necessary enabling technology. Their safety is also a
paramount concern.
On 26 March 2020, as part of the Government's COVID-19 lockdown
procedures, the Minister for Local Government and Homelessness
wrote to all local authorities identifying the "responsibility to
safeguard as many homeless people as we can from COVID-19" and to
"bring everyone in". I am pleased to report that we were able, at
short notice, to make available 29 self-contained accommodation
units for Islington Council, that had just completed a planned
refurbishment programme.
Regulation
During the year the Regulator of Social Housing ("RSH") has
continued to raise its concerns about risks and issues within the
industry and has issued notices to several of our housing
association partners where it considers that governance and
financial standing require improvement. Whilst the Company is not
itself regulated by the RSH, we take these comments seriously. Our
Investment Adviser continues to work with housing associations to
enhance their performance and standing with the RSH. It has been
instrumental in the establishment of a new not-for-profit community
interest company - The Social Housing Family CIC ("CIC") - whose
objective is to bring greater skills and resource sharing across
housing associations. We are pleased to note that the CIC has now
brought its first housing association, Auckland Home Solutions,
under its structure.
The Company's portfolio continues to evolve to encompass a
greater number of higher acuity facilities that are themselves
regulated by the Care Quality Commission ("CQC"). In this regard,
it is pleasing to note that the CQC, in its latest annual report
"State of Care 2018/19", commented in support of the provision of
community care stating that: "Too many people with a learning
disability or autism are in hospital because of a lack of local,
intensive community services".
Our Investment Adviser
Our Investment Adviser has changed its name from Civitas Housing
Advisors to Civitas Investment Management ("CIM") to better reflect
its expanding activities. This has no material impact on our
Company other than that the addition of new clients strengthens its
capabilities and enables recruitment of additional skills. The
Board acknowledges and greatly appreciates the skill and efforts of
the team, particularly at this stressful time.
After more than three years of activity within the sector and
over 120 completed transactions, our Investment Adviser is regarded
as a leading entity within the healthcare and social housing
sectors in the UK. It continues to refine and improve processes for
both new transactions and the ongoing management of our portfolio
and drive best practice within the industry. We are encouraged both
by the level of incoming enquiry and the nature and quality of
potential counterparties.
Share Price
The Board was concerned by the share price during the early part
of the financial year under review. In addition to our Investment
Adviser focusing on delivery of our investment objectives, we have
implemented a number of initiatives to improve our message to
investors, including the appointment of Liberum and Panmure Gordon
as joint brokers and Buchanan as PR adviser. In addition, during
the year the Company bought 815,000 shares at an average price of
85.8 pence, which are held in Treasury.
The share price has improved in recent months in both absolute
and relative terms compared to the general market and to many other
real estate companies and funds. In large part, this is due to
recognition of the robust characteristics of our business model and
the level of demand for specialist supported housing exceeding
supply. In addition, we deliver better personal outcomes and value
for money compared with institutional provision.
I would like to thank our shareholders for their continuing
support.
Annual General Meeting
The Company's AGM is to held on 8 September 2020 at the offices
of Buchanan, 107 Cheapside, London EC2V 6DN at 2.00 pm. The Board
looks forward to meeting shareholders. In due course, the notice of
AGM will be circulated in accordance with the requirements of the
Company's Articles of Association.
Due to the current COVID-19 outbreak, many companies have either
postponed their AGMs or made alternative arrangements for
conducting these meetings. We hope that by 8 September 2020 the
Company will be able to hold its AGM in the usual manner. However,
given the uncertain nature of this situation, should the Company
need to alter its AGM arrangements, it will communicate these
changes
to shareholders through a regulatory announcement. This
information will also be made available on the Company's website.
Shareholders are advised to check the website to ensure they have
the most up-to-date information available regarding the AGM.
Summary and Outlook
Despite the uncertain environment caused by COVID-19, we
consider that the prospects for the Company remain positive and we
look forward to continuing to be of help to those individuals with
long-term care needs.
We have announced a new target dividend of 5.4p per Ordinary
share for the current year ending 31 March 2021. This would be an
increase of 1.9% and compares to the Consumer Price Index measure
of inflation of 1.5% in March 2020.
Michael Wrobel
Chairman
29 June 2020
* Note: the calculation of run-rate dividend cover is based on
all properties that have exchanged and completed, on normalised
overheads and the further delivery of certain properties to a value
of GBP12.1m. Of this GBP12.1m, GBP2.3m completed during June 2020
with the remainder to complete shortly.
Analysis of property portfolio as at 31 March 2020
Geographically Diversified
Region Properties % of funds invested % of rental income
------------------- ----------- -------------------- -------------------
North West 99 10.2% 10.2%
West Midlands 99 11.9% 11.7%
Wales 15 8.2% 8.0%
South West 120 16.4% 16.3%
North East 63 6.9% 6.8%
Yorkshire and the
Humber 49 10.5% 10.4%
East Midlands 58 9.3% 9.1%
East of England 20 3.0% 3.0%
London 26 13.0% 14.0%
South East 64 10.6% 10.5%
Market Value by Region(1)
Region Market Value
----------------- -------------
South West 16.4%
London 13.0%
West Midlands 11.9%
South East 10.6%
Yorkshire 10.5%
North West 10.2%
East Midlands 9.3%
Wales 8.2%
North East 6.9%
East of England 3.0%
Assets by Region(1)
Region Number of Properties
----------------- ---------------------
South West 120
North West 99
West Midlands 99
South East 64
North East 63
East Midlands 58
Yorkshire 49
London 26
East of England 20
Wales 15
(1) As at 31 March 2020, including completed properties
only.
Diversified by Registered Provider
Rental Income by Registered Provider (1)
Registered Provider Rental Income
--------------------- --------------
Auckland 24.4%
Falcon 20.4%
BeST 11.0%
Inclusion 8.7%
Westmoreland 6.3%
Encircle 6.1%
Trinity 5.5%
Pivotal 4.0%
Harbour Light 3.8%
Chrysalis 3.5%
New Walk 2.9%
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 117
Auckland 103
BeST 72
Inclusion 69
Trinity 43
New Walk 41
Westmoreland 41
Harbour Light 27
Pivotal 27
Chrysalis 23
Encircle 16
Hilldale 15
IKE 10
My Space 8
Blue Square 1
Market Value by Registered Provider (1)
Registered Provider Market Value
--------------------- -------------
Auckland 24.9%
Falcon 20.9%
BeST 11.3%
Inclusion 8.7%
Westmoreland 6.2%
Trinity 5.4%
Encircle 5.1%
Pivotal 4.0%
Harbour Light 3.8%
Chrysalis 3.5%
New Walk 2.9%
IKE 1.1%
My Space 1.1%
Hilldale 1.0%
Blue Square 0.1%
Tenancies by Registered Provider (1)
Registered Provider Tenancies
--------------------- ----------
Falcon 858
Auckland 718
BeST 526
Inclusion 455
Trinity 242
Westmoreland 239
Pivotal 238
Harbour Light 214
Encircle 205
New Walk 194
Chrysalis 145
My Space 71
IKE 68
Hilldale 39
Blue Square 4
(1) As at 31 March 2020, including completed properties
only.
Investment Adviser's Report
"Today, the Company's investment portfolio offers dual exposure
to both the social housing and healthcare sectors in the UK. It
provides purpose-built and bespoke properties that support the
delivery of mid-to-higher acuity care for working age adults with
long-term care needs.
And it delivers this in local community settings supported by
government funded care providers and housing managers whose
activities are regulated by the Care Quality Commission, the
Regulator of Social Housing and overseen by local authority
commissioners." Paul Bridge, Chief Executive Officer, Social
Housing
Our Thanks and Appreciation
At the start of this report, we would like to take the
opportunity to echo the sentiments expressed by the
Chairman on behalf of the Board and to offer our sincere thanks
and appreciation to all the staff of our care providers, housing
associations and other partners who have continued to work and
provide for all the people living in the Company's properties.
Introduction
As we enter our fourth full financial year since IPO, we are
pleased to report that considerable progress has been made in
positioning the Company's investment portfolio to meet clear
long-term needs and shortages in both the social housing and
healthcare sectors in the UK.
Our strategy remains the same: to provide high-quality bespoke
properties that enable the delivery of mid-to-higher acuity care,
that is non-discretionary, that offers better personal outcomes
including lower costs and that is funded by the state.
The successful implementation of this strategy has, since IPO,
allowed investors to receive stable and progressive dividends that
have grown at a rate above inflation. In this regard we are pleased
that a new dividend target of 5.4 pence per Ordinary share has been
announced for the year to 31 March 2021.
A summary of specific outcomes and targets met in the year to 31
March 2020 is set out below:
-- 100%* EPRA run-rate dividend cover achieved
-- Dividend of 5.3 pence per Ordinary share paid/declared
-- 41% growth in net operating cash flow to GBP32.9 million
-- IFRS NAV increased to 107.87 pence per Ordinary share
-- Rents continue to be indexed at CPI and collected as planned
-- Total expense ratio of 1.36%
* Note: the calculation of run-rate dividend cover is based on
all properties that have exchanged and completed, on normalised
overheads and the further delivery of certain properties to a value
of GBP12.1m. Of this GBP12.1m, GBP2.3m completed during June 2020
with the remainder to complete shortly.
The Investment Portfolio
The investment portfolio comprises 613 individual properties
that are the long-term homes for 4,216 people each of whom benefits
from an average of 45/50 hours (and sometimes much more) of care a
week delivered by 117 specialist care providers. The properties are
located across 164 local authorities and receive property services
from 15 housing associations.
From a financial perspective the Company's portfolio was
independently valued at 31 March 2020 on the basis of an IFRS Red
Book valuation at GBP878.7 million, an increase of GBP89.6 million
(11.3%) over the funds invested of GBP789.1 million, excluding
initial purchase costs. The Valuation is 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. On 28 May 2020, RICS published an update and concluded that
the inclusion of MUCs was no longer appropriate for this asset
class.
Valuations within the portfolio vary on an individual
property-by-property basis with the lowest yields (c.5%) currently
applying to some of those properties that have the benefit of
back-to-back care provider leases.
The most recent transactions undertaken by the Company in March
2020 for GBP17.8 million are majority supported by back-to-back
care provider leases.
As the Company undertakes further investments in the future, it
remains the objective to increase the proportion of the portfolio
that benefits from such back-to-back leases and to drive up the
typical level of acuity of care delivered in the properties.
In this way the Company offers investors the opportunity of
exposure to both social housing and specialist healthcare both of
which are typically composed of local, granular assets.
When we commenced our investment activities in late 2016, we
already identified some of the opportunities that we thought would
be available in the future from working closely with specialist
care providers, the NHS and leading charities as well as with
housing associations directly.
We also noted the potential to engage directly with specialist
developers and to take a hands-on role in being involved from the
outset in the design and specification of new buildings,
particularly those suited for higher acuity care, that would then
be acquired on completion without forward financing.
Today, with more than 120 individual transactions completed, we
have the benefit of being a leading presence in both the social
housing and healthcare sectors and the Company has in 2018 and 2019
won the leading healthcare industry Laing Buisson award for
Healthcare Investor of the Year.
In reflection of this, in May 2020, the Company sought and
received overwhelming approval from shareholders for the proposal
to modify the Company's investment policy to allow transactions to
be undertaken directly with other not-for-profit organisations
including the NHS as well as other entities in receipt of
government funding.
Rental Income and Trading Update
The Company enjoyed strong growth in net rental income with an
annualised rent roll of GBP48.4 million and an actual net rental
income of GBP45.9 million for the year to 31 March 2020.
This compares to actual net rental income of GBP35.7 million in
the year to 31 March 2019 with rental growth being accounted for by
properties previously acquired contributing a full year of income
and a number of additional acquisitions.
Not included in the results to 31 March 2020 is the rental
income associated with the new developments,
particularly the higher acuity facilities in Wales on which the
Company has exchanged contracts and where the first properties have
now completed.
At the same time, the Company has continued to enjoy strong
rental receipts in line with expectations and unaffected at this
time by COVID-19.
It was noted at the time of release of the Company's NAV and
Trading Update on 11 May 2020 that the Company had received more
than 99% of the rents due to be paid to it during the quarter to 31
March 2020. Since this time the Company has continued to receive
rents as expected and unaffected by COVID-19.
Net cash generated from operations has also shown a significant
increase of 41% from GBP23.3 million as at 31 March 2019 to GBP32.9
million, reflecting good cost control during the year.
IFRS NAV increased from 107.08p per Ordinary share at 31 March
2019 to 107.87p as at 31 March 2020, a modest increase of 0.7%
reflecting the indexation of leases less the costs of capital
expenditure that the Company chose to undertake for the long-term
benefit of the portfolio.
As at 31 March 2020, the Company held cash balances of GBP49.3
million (net of operating and finance amounts due) of which
approximately GBP14 million was allocated in respect of
transactions completing in 2020 - GBP1.8 million in respect of two
properties in Telford and one in Sunderland which the Company has
conditionally exchanged on, and GBP12.1 million in relation to two
properties in Wales for which the Company has entered into a
conditional sale and purchase agreement. We have allocated GBP10
million
(estimated) relating to a capital payment contingent on certain
financial obligations being met at the properties in Wales. The
remaining cash balances are being held as a cash contingency in the
Company.
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 borrowings in
due course.
Asset Management
The active management of the Company's portfolio remains an
important component of our day-to-day
activities with over 600 individual buildings.
Under the Company's leases, the obligation to undertake regular
maintenance rests with the lessees, however, the Company does make
careful capital investments where we believe that would lead to
long-term enhancement and where this is of assistance to our
housing association partners. As we know, a property that is well
adapted and well maintained will be a positive contributing asset
to the Company and to our housing association partners.
Most recently, with this in mind, we augmented our asset
management capabilities with the appointment of Tom Falconer as a
Director, Asset Management. Tom began his career as a local
authority commissioner and has worked within the care sector for
more than 10 years most recently as Group Property Manager for
Lifeways Group, a leading specialist care provider.
Tom has a particular focus within the team in his engagement
with local authority commissioners and care providers to assist our
housing association partners to achieve their lettings and to
address any void properties.
We will also be joined shortly by another senior individual in
the asset management team who has an established surveying
background and who will be focused on the physical enhancement and
betterment of properties within the portfolio. Again this will be
of assistance to our housing association partners.
During the year, as part of our active management of the
portfolio we undertook the reallocation of certain leases between
housing association partners with a view to enhancing portfolio
diversification and ensuring that the most relevant housing
association is in possession of the Company's leases. We expect to
continue to remain active in this regard in the future.
Market Update
The Company operates across the social housing and healthcare
sectors in the UK.
Today there is a structural shortage of properties that are
capable of hosting mid-to-higher acuity care within local community
settings. Such properties are not always available and so are
typically highly regarded by both care providers and local
authority health commissioners.
The drivers of demand for the Company's portfolio are very much
settled within the healthcare sector in the UK and result from long
standing government policy to seek closure of remote hospitals in
favour of community provision.
The trend for community provision has become established in the
UK over the past 25 years and reflects much broader societal change
in the manner that care is delivered for people of working age with
lifelong care needs.
What has developed more recently over the past 10 to 15 years
has been the emergence of specialist housing associations that
deliver the augmented property services and who, in turn, enter
into leases to secure available properties for their underlying
tenants without any form of public funding.
Whilst this is an important development, and one that has been
much commented upon by ourselves and others we have taken the view,
as noted earlier, that the time is now right to broaden the nature
of the Company's lease counterparties to include entities such as
the NHS and other care providers that are in receipt of government
funding as well as leading charities and other not-for-profit
entities such as community interest companies. Shareholder
permission for this was secured at the recent General Meeting on 28
May 2020.
This initiative is likely, over time, to better reflect the
increasingly mid-to-higher acuity focus of the Company's property
portfolio and also move the dialogue forward with greater focus on
the underlying care. It will also offer alternatives to entering
into leases with housing associations where that is felt
appropriate or it is required.
In the same way that housing associations are regulated by the
Regulator of Social Housing ("RSH"), health and social care in
England is independently regulated by the Care Quality Commission
("CQC"). This includes all care providers, the NHS and other
healthcare providers, facilities of which the Company owns an
increasing number to deliver mid-to-higher acuity care.
In its most recent report "State of Health 2018/19", the CQC
stated that "Most of the care that we see across England is good
quality and, overall, the quality is improving slightly".
They also commented that "Too many people with a learning
disability or autism are in hospital because of a lack of local,
intensive community services". It is exactly this gap that the
Company is seeking to fill.
Our new properties in Wales have both a dedicated rehabilitation
facility and an aquatic centre designed for people with care needs.
They are amongst the most advanced facilities of their kind in the
region.
Considering the comments from the CQC and the range of research
that we have commented on previously, there seems little doubt that
there exists long-term structural demand for the properties that
the Company provides and that there is today significant shortages
that are unlikely to be filled any time soon.
It is also apparent that, in the UK, the government is committed
to delivering and paying for these services
that are typically developed by the private sector and made
available for public use without any form of public subsidy.
At the same time, the RSH has become more vocal in commenting on
the need for improvement in the
performance of a number of housing associations within the
sector and on the lease-based model itself.
As we have noted previously, the Company has used its leading
position to bring about a number of enhancements that are now
becoming standard features in its new leases including:
-- initiating the use of a force majeure clause that offers
protection to housing associations should government policy reduce
their income on a permanent basis; and
-- adopting "caps" and "collars" typically set at "0" and "4"
per cent. that mitigate against rapid increases in inflation.
More broadly, we have led initiatives such as establishing The
Social Housing Family Community Interest Company that is designed
to offer additional support, guidance and management skills to its
member housing associations. Whilst there is no compulsion to join,
we do expect to see the CIC expand its membership over the next
year.
We continue to engage with the RSH and to work with them to
explore how we can enhance the standing of the sector and the
model. For our part, we seek to promote good and sustainable
practice in all the transactions that we undertake with a view to
increasing the robustness and reliability of our housing
association partners and the sector itself.
Our quarterly seminars for all housing association partners have
continued to be well supported throughout the year as they seek to
share best practice and tackle issues relevant to the market. Since
lockdown, these have been substituted by regular one-to-one
contact, including with our leading care provider partners.
COVID-19
Turning to the issue of COVID-19, we have sought to keep closely
in touch with the Company's counterparties to ascertain the ongoing
level of impact within the sector and the Company's portfolio.
As noted previously, we have not seen any impact from a
financial perspective and the sector and the Company's portfolio
has only seen very modest levels of coronavirus cases that are much
lower than within the elderly care sector. In many of our
properties, there have to date been no reported instances of
COVID-19 and, where they have occurred, these have been
isolated.
Working across our counterparties we have undertaken detailed
engagement and made detailed notes of the responses received. For
information, whilst preserving personal data, some of the comments
received are set out below :
Care Providers:
-- "Care providers are presently reporting very few cases of the virus"
-- "Due to the client group we are caring for whose average age
is under 30 we are finding very few cases of the virus"
-- "Care provider staff are self isolating to ensure as their
colleagues come off shift a bank of staff is available to provide
much needed care"
Housing Associations:
-- "We have many phone calls from Local Authority Commissioners
asking if we have more homes available. This has increased since
the pandemic"
-- "Our staff sickness levels have actually dropped during the
pandemic as it is clear that increased recognition for care is
benefitting morale"
Irrespective of the positive responses received to date and the
sense that the market is fully functioning at present, we remain as
vigilant as possible and are offering our assistance to our
counterparties where we can be of help.
In this regard, as part of the Company's direct response to
COVID-19, we were pleased to be able to assist Islington Council in
the provision of 29 self-contained accommodation units to help
bring in people off the streets who were homeless.
As part of this effort, we worked closely with the council, with
the care provider and the housing association attached to the
property to coordinate a response that met the urgent timetable
required.
In response to our efforts, the Head of Private Housing
Partnerships at Islington Council commented that: "Working together
with Civitas Housing, we were able to deliver 29 self-contained
units of accommodation for our most entrenched rough sleepers,
ensuring that they are no longer on the streets and exposed to the
virus. We appreciate the assistance and support provided by Civitas
Housing during this period, they have shown that the spirit of
community still exists as to actively sort to provide us options to
solve our housing needs".
Debt Facilities
The debt facilities available to the Company are set out in the
table below together with the relevant covenants and associated
ratios.
The weighted average debt to maturity is 3.4 years and this
reflects the 12-month extension of the GBP60 million Lloyds Bank
revolving credit facility that has been extended, as at the date of
signing, in the normal course to November 2021. It is anticipated
that this will be refinanced prior to that time.
Loan Notes RCF
------------------------------------- ---------------------------
Lender NatWest Scottish Widows Lloyds HSBC
Security Assets Assets Assets Assets
Facility GBP60m GBP52.5m GBP60m GBP100m
Size
Drawn GBP60m GBP52.5m GBP60m GBP100m
Term 5 years + 1 + 10 years 3 years + 3 years +
1 1 1 + 1
Cost 2.60% fixed (2.00% 2.99% fixed 1.50% margin 1.70% fixed
margin, 0.60%
swap)
------------------- ---------------- ------------- ------------
31 March 31 December
2020 2019
--------- ------------
Average cost of debt (%) 2.46 2.57
Loan to value (%) 26.9 23.3
Weighted average interest cover (times)(1) 4.5 4.6
Weighted average debt to maturity
(years)(2) 3.4 3.7
Total debt drawn down (GBPm) 272.5 228.4
Unencumbered assets (GBPm) 212.0 193.9
--------- ------------
(1) Weighted average interest cover is based on secured assets only.
(2) Weighted average debt to maturity excluding unexercised
extensions under respective facility agreements.
In terms of new facilities, the Company, as noted above, has
GBP212 million of assets that are presently unencumbered and are
available as security for additional lending.
Prior to the lockdown, discussions were commenced with certain
existing and new potential lenders in respect of the provision of
additional facilities. Whilst these discussions have been held over
for a period of time due to the pandemic, these will be picked up
and reported on in due course.
Social Impact
We are pleased to note that the latest version of the
independent social impact report was published with the Annual
Report and Accounts.
This report sets out the performance of the Company in this
important area of our work and challenges us against the targets
that have been set.
At the same time, we have committed to developing our activities
further, particularly with regard to the
implementation of ESG policies and activities.
In May 2020, we were invited to become a founder member of a
"Reference Group" brought together by the social impact
consultancy, The Good Economy, and the social impact investor, Big
Society Capital, for a new project "Towards a best practice, sector
standard approach for the management and reporting of impact in
social housing".
As the project develops, we expect to provide regular updates as
well as continuing to actively enhance the social impact and ESG
delivery within the investment portfolio managed by CIM.
Pipeline and Outlook
The past year has been characterised by the Company being
invited to engage in an ever more strategic manner within the
specialist health care sector.
As we move forward there exists already a significant pipeline
of new potential investment opportunities and we expect this to
continue to grow over coming months.
The ability to enter into agreements with a wider range of
counterparties, not just housing associations but the NHS directly,
with local NHS Trusts and leading charities and care providers will
broaden significantly the base of the Company.
We look forward to the coming year with confidence. There are
challenges, not least from COVID-19, but we believe that the
Company has a business model that is sufficiently robust and
diversified to manage those issues well.
In closing this report we would like to thank the Board for the
diligence and guidance we have received during the year and also
our colleagues who have continued to work hard to deliver the very
best outcomes that we can for our residents, shareholders and other
stakeholders.
Civitas Investment Management Limited
Investment Adviser
29 June 2020
Corporate Social Responsibility Report
Sustainability
The business model of the Company is to provide long-term
suitable homes for individuals with care needs; acting in a
sustainable manner is key to achieving this aim. The property of
the Company is tailored to meet the future needs of the tenants
and, where required, is actively asset managed to provide long-term
functionality and value to the wider community.
Environment
During the investment due diligence phase the Company looks
closely at the environmental impact of each potential acquisition,
and encourages a sustainable approach for maintenance and upgrading
properties. Through partnering with specialist developers and
vendors, the high standards the Company expects from each
investment in the care-based housing sector is adopted by other
companies in the sector.
Once within the portfolio, the properties of the Company are
actively asset managed, with opportunities to improve environmental
efficiencies factoring heavily in addition to other asset
management initiatives.
The Board has considered the requirements to disclose the annual
quantity of emissions; further detail on this is included in the
Report of the Directors in the full Annual Report.
Diversity
The Company does not have any employees or office space and as
such, the Company does not operate a diversity policy with regards
to any administrative and management functions.
Whilst recognising the importance of diversity in the boardroom,
the Company does not consider it to be in the interest of the Group
and its shareholders to set prescriptive diversity criteria or
targets. The Board has adopted a diversity policy in respect of
appointments to be made to the Board and will continue to monitor
diversity, taking such steps as it considers appropriate to
maintain its position as a meritocratic and diverse business. The
Board's objective is to maintain effective decision-making,
including the impact of succession planning. All Board appointments
will be made on merit and have regard to diversity regarding
factors such as gender, ethnicity, skills, background and
experience. See
Corporate Governance Statement in the full Annual Report.
The Board comprises three male and two female non-executive
Directors. During the year, the Board appointed Alison Hadden as a
Director. In line with the Company's diversity policy, this
appointment was made on the basis of merit as the Board believes
that Alison's skills, background and experience will complement
those of the other Board members. Alison's appointment also ensured
that the Company complied with the Hampton-Alexander Review's
target of a minimum 33% representation of women on FTSE 350
boards.
The boards of directors of the Company's subsidiaries, which are
non-operational, each comprise up to four male and no female
directors.
Human Rights
The Company is not within the scope of the Modern Slavery Act
2015 because it has not exceeded the turnover threshold and is
therefore not obliged to make a slavery and human trafficking
statement.
The Board is satisfied that, to the best of its knowledge, the
Company's principal advisers, which are listed in the Company
Information section of the full Annual Report, comply with the
provisions of the UK Modern Slavery Act 2015.
The Company's business is solely in the UK and therefore is
considered to be low risk with regards to human rights abuses.
Community and Employees
The Company's properties enable the provision of care to some of
the most vulnerable people in the community, ensuring safe and
secure accommodation, tailored to meet individual care needs. The
Company has increased the provision of care-based housing, bringing
new supply to the sector and providing homes to over 4,200 people.
All of the Company's properties enable the provision of high levels
of care, generating local jobs and helping to support local
economies.
The Company has no employees and accordingly no requirement to
separately report on this area.
The Investment Adviser is an equal opportunities employer who
respects and seeks to empower each individual and the diverse
cultures, perspectives, skills and experiences within its
workforce.
Strategic Overview
Purpose of the Company
The Company was established in 2016 with the purpose of
delivering long-term responsible, stable returns to investors and
achieving positive measurable social impact and ESG benefits on a
large scale. It should achieve this as a result of introducing
long-term equity capital into the social housing sector with a
particular focus on care-based community housing. By doing so, this
would form a bridge between equity investors and the social housing
sector and bring together aspects of healthcare with social
housing.
The Company has since developed the largest portfolio of
care-based community housing in the UK that provides long-term
homes for more than 4,200 individuals across half the local
authorities in England and Wales.
As a result of this success, the Company has recently extended
its mandate to be able to enter into transactions directly with the
NHS and with leading charities with an interest in the provision of
specialist housing that has a strong care or support element, is
consistent with public policy and whose costs are met by the public
purse for which it offers value for money.
Investment Objective
The Company's investment objective 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, which
benefits from inflation adjusted long-term leases or occupancy
agreements with Approved Providers and to deliver, on a fully
invested and geared basis, a targeted dividend yield of 5% per
annum(1) , which the Company expects to increase broadly in line
with inflation.
(1) The dividend yield is based on the original IPO price of 100
pence per Ordinary share. The target dividends are targets only and
do not represent a profit forecast. There can be no assurance that
the targets can or will be met and should not be taken as an
indication of the Company's expected or actual future results.
Accordingly, potential investors should not place any reliance on
these targets in deciding whether or not to invest in the Company
or assume that the Company will make any distributions at all and
should decide for themselves whether or not the target dividend
yields are reasonable or achievable.
Investment Policy
The Company's investment policy is to invest in a diversified
portfolio of Social Homes throughout the United Kingdom. The
Company intends to meet the Company's investment objective by
acquiring, typically indirectly via Special Purpose Vehicles,
portfolios of Social Homes and entering into long-term inflation
adjusted leases or occupancy agreements for terms primarily ranging
from 10 years to 40 years with Approved Providers, where all
management and maintenance obligations will be serviced by the
Approved Providers. The Company will not undertake any development
activity or assume any development or construction risk. However,
the Company may engage in renovating or customising existing homes,
as necessary.
The Company may make prudent use of leverage to finance the
acquisition of Social Homes and to preserve capital on a real
basis.
The Company is focused on delivering capital growth and expects
to hold its Portfolio over the long term and therefore it is
unlikely that the Company will dispose of any part of its
Portfolio. In the unlikely event that a part of the Portfolio is
disposed of, the Directors intend to reinvest proceeds from such
disposals in assets in accordance with the Company's investment
policy.
Investment restrictions
The Company invests and manages the Portfolio with the objective
of delivering a high quality, diversified Portfolio through the
following investment restrictions:
-- the Company only invests in Social Homes located in the United Kingdom;
-- the Company only invests in Social Homes where the
counterparty to the lease or occupancy agreement is an Approved
Provider;
-- no lease or occupancy agreement shall be for an unexpired
period of less than 10 years, unless the shorter leases or
occupancy agreements represent part of an acquisition of a
portfolio which the Investment Adviser intends to reorganise such
that the average term of lease or occupancy agreement is increased
to 15 years or above;
-- the aggregate maximum exposure to any single Approved
Provider is 25% of the Gross Asset Value, once the capital of the
Company is fully invested;
-- no investment by the Company in any single geographical area,
in relation to which the houses and/or apartment blocks owned by
the Company are located on a contiguous or largely contiguous
basis, exceeds 20% of the Gross Asset Value of the Company on a
Portfolio NAV basis;
-- the Company only acquires completed Social Homes and will not
forward finance any development of new Social Homes;
-- the Company does not invest in other alternative investment
funds or closed-end investment companies; and
-- the Company is not engaged in short selling.
The investment limits detailed above apply at the time of the
acquisition of the relevant investment in the Portfolio once fully
invested. The Company would not be required to dispose of any
investment or to rebalance the Portfolio as a result of a change in
the respective valuations of its assets.
Gearing limit
The Directors seek to use gearing to enhance equity returns. The
level of borrowing is set on a prudent basis for the asset class
and seeks to achieve a low cost of funds, whilst maintaining the
flexibility in the underlying security requirements and the
structure of both the Portfolio and the Company.
The Company may, following a decision of the Board, raise debt
from banks and/or the capital markets and the aggregate borrowings
of the Company is always subject to an absolute maximum, calculated
at the time of drawdown, of 40% of the Gross Asset Value.
Debt is secured at asset level, whether over a particular
property or a holding entity for a particular series of properties,
without recourse to the Company and also potentially at Company
level with or without a charge over the Portfolio (but not against
particular assets), depending on the optimal structure for the
Company and having consideration to key metrics including lender
diversity, cost of debt, debt type and maturity profiles. Otherwise
there will be no cross-financing between investments in the
Portfolio and the Company will not operate as a common treasury
function between the Company and its investments.
Use of derivatives
The Company may choose to utilise derivatives for efficient
portfolio management. In particular, the Directors may engage in
full or partial interest rate hedging or otherwise seek to mitigate
the risk of interest rate increases on borrowings incurred in
accordance with the gearing limits as part of the management of the
Portfolio.
Cash management
Until the Company is fully invested, and pending re-investment
or distribution of cash receipts, the Company invests in cash, cash
equivalents, near cash instruments and money market
instruments.
REIT status
The Directors conduct the affairs of the Company so as to enable
it to remain qualified as a REIT for the purposes of Part 12 of the
Corporation Tax Act 2010 (and the regulations made thereunder).
Section 172 Statement and Stakeholder Engagement
Overview
The Directors' overarching duty is to act in good faith and in a
way that is most likely to promote the success of the Company as
set out in section 172 of the Companies Act 2006. In doing so,
Directors must take into consideration the interests of the various
stakeholders of the Company, the impact the Company has on the
community and the environment, take a long-term view on
consequences of the decisions they make as well as aim to maintain
a reputation for high standards of business conduct and fair
treatment between the members of the Company.
Fulfilling this duty naturally supports the Company in achieving
its investment objective and helps to ensure that all decisions are
made in a responsible and sustainable way. In accordance with the
requirements of the Companies (Miscellaneous Reporting) Regulations
2018, the Company explains how the Directors have discharged their
duties under Section 172 below.
To ensure that the Directors are aware of, and understand, their
duties, they are provided with the pertinent information when they
first join the Board as well as receiving regular and ongoing
updates and training on the relevant matters. Induction and access
to training is provided for new Directors. They also have continued
access to the advice and services of the Company Secretary, and
when deemed necessary, the Directors can seek independent
professional advice. The Schedule of Matters Reserved for the
Board, as well as the Terms of Reference of its committees, are
reviewed regularly and further describe Directors' responsibilities
and obligations and include any statutory and regulatory duties.
The Audit and Management Engagement Committee has the
responsibility for the ongoing review of the Company's risk
management systems and internal controls and, to the extent that
they are applicable, risks related to the matters set out in
Section 172 are included in the Company's risk register and are
subject to periodic and regular reviews and monitoring.
Stakeholders
A company's stakeholders are normally considered to comprise its
shareholders, its employees, its customers, its suppliers as well
as the wider community in which the company operates and impacts.
The Company is different in that as an investment trust it has no
employees and, in terms of suppliers, the Company receives
professional services from a number of different providers,
principal among them being the Investment Adviser.
During the period under review, the Board discussed which
parties should be considered as stakeholders of the Company.
Following a comprehensive review, it was concluded that, as the
Company is an externally managed investment company with no
employees, its key stakeholders comprise those set out in the table
below. The importance of stakeholders is taken into account at
every Board meeting, with discussions involving careful
consideration of the longer-term consequences of any decisions and
their implications for stakeholders. The following section explains
why these stakeholders are considered of importance to the Company
and the actions taken to ensure that their interests are taken into
account by the Board as part of their decision making.
Our Key areas of interest How we engage
stakeholders
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Shareholders The Board welcomes shareholders' views and places
Continued * Current and future financial performance great importance on communication with the shareholders
shareholder of the Company. The Board is responsible for the
support and content of communication regarding corporate issues
engagement * Strategy and business model and for communicating its views to shareholders.
are critical The Board aims to ensure that shareholders are provided
to the with sufficient information to understand the risk/reward
existence of * Corporate governance balance to which they are exposed by the holding
the business of shares in the Company. Active engagement with
and the shareholders is carried out throughout the year
delivery of * ESG performance and sustainability and regular communication is undertaken to ensure
the long-term that they understand the performance of the business.
strategy The Board is committed to maintaining open channels
of the * Dividend of communication and to engaging with shareholders
business. in a manner which they find most meaningful, in
order to gain an understanding of the views of
shareholders.
These include:
Annual General Meeting - The Company welcomes and
encourages attendance, voting and participation
from shareholders at the AGM, at which shareholders
have the opportunity to meet the Directors and Investment
Adviser and to address questions to them directly.
The Investment Adviser attends the AGM and provides
a presentation on the Group's performance and its
future outlook. The Company values any feedback
and questions it may receive from shareholders ahead
of and during the AGM and takes action, as appropriate.
Publications - The Annual Report and Half-Year Results
are made available on the Company's website and
the Annual Report is circulated to shareholders.
These reports provide shareholders with a clear
understanding of the Group's portfolio and financial
position. In addition to the Annual and Half-Year
Reports, regularly updated information is available
on the Company website, including quarterly factsheets,
key policies, the investor relations policy and
details of the investment property portfolio. Feedback
and/or questions the Company receives from the shareholders
help the Company evolve its reporting aiming to
render the reports and updates transparent and
understandable.
Shareholder meetings - Shareholders are able to
meet with the Investment Adviser and the Company's
Joint Brokers throughout the year and the Investment
Adviser provides information on the Company on the
Company's website. Feedback from all shareholder
meetings with the Investment Adviser and/or the
Joint Brokers, and shareholders' views, are shared
with the Board on a regular basis. The Chairman
and other members of the Board are available to
meet with shareholders to understand their views
on governance and the Company's performance where
they wish to do so.
Shareholder concerns - The Board gives due consideration
to any corporate governance matters raised by shareholders.
In the event shareholders wish to raise issues or
concerns with the Board or the Investment Adviser,
they are welcome to write to the Company at the
registered office address set out in the full Annual
Report. Other members of the Board are also available
to shareholders if they have concerns that have
not been addressed through the normal channels.
Investor relations updates - The Board regularly
monitors the shareholder profile of the Company.
With the majority of shareholders being a combination
of institutional investors and private client brokers,
the Board receives regular updates on investors'
views and attitudes from the Company's Brokers and
the Investment Adviser. During the year, several
investor update meetings were held between the shareholders
and one or more of the Chairman, the Investment
Adviser and the Brokers. The results of these meetings
were reported to the Board as part of the formal
reporting undertaken by both the Investment Adviser
and the Brokers. Included in the Report of the Directors
within the full Annual Report are details of substantial
shareholdings in the Company.
On a regular basis (sometimes weekly) and at Board
meetings, the Directors receive updates from the
Company's Brokers on the share trading activity,
share price performance and any shareholders' feedback,
as well as an update from the Company's Investor
Relations adviser, Buchanan, and the Investment
Adviser on any publications or comments by the press.
To gain a deeper understanding of the views of its
shareholders and potential investors, the Investment
Adviser maintains regular contact with them and
also undertakes investor roadshows. Any relevant
feedback is taken into account when Directors discuss
any possible fundraising or the future dividend
policy.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Investment The management of the Company's portfolio is delegated
Adviser * Current and future financial performance to the Investment Adviser, which manages the assets
Holding the in accordance with the Company's objectives and
Company's policies. At each Board meeting, representatives
shares offers * Shared commercial objectives with the Company from the Investment Adviser are in attendance to
investors present reports to the Directors covering the Company's
an investment current and future activities, portfolio of assets
vehicle * Operational excellence and its investment performance over the preceding
through which period.
they can Maintaining a close and constructive working relationship
obtain * Long-term development of its business and resources with the Investment Adviser is crucial as the Board
exposure to and the Investment Adviser both aim to continue
the to achieve consistent long-term returns in line
Company's * ESG performance and sustainability with the Company's investment objective. Important
portfolio components in the collaboration with the Investment
of Adviser, representative of the Company's culture
properties. are:
The
Investment * operating in a fully supportive, co-operative and
Adviser's open environment and maintaining ongoing
performance communication with the Board between formal meetings;
is critical
for the
Company to
successfully * encouraging open discussion with the Investment
deliver its Adviser, allowing time and space for original and
investment innovative thinking;
strategy and
meet its
objective to
provide * recognising that the interests of the shareholders
shareholders and the Investment Adviser are for the most part well
with an aligned, adopting a tone of constructive challenge,
attractive balanced with robust negotiation of the Investment
level of Adviser's terms of engagement if those interests
income, should not be fully congruent;
together with
the potential
for capital
growth. * drawing on Board members' individual experience and
knowledge to support the Investment Adviser in its
monitoring of and engagement with other stakeholders;
and
* willingness to make the Board members' experience
available to support the Investment Adviser in the
sound long-term development of its business and
resources, recognising that the long-term health of
the Investment Adviser is in the interests of
shareholders in the Company.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Other service The Company's main functions are delegated to a
providers * Current and future financial performance number of service providers, including the Administrator,
In order to the Company Secretary, the AIFM, the Registrar,
function the Corporate Brokers and the Depositary, each engaged
as an * Shared commercial objectives with the Company under separate contracts. The Board maintains regular
investment contact with its key external providers and receives
trust regular reporting from them, both through the Board
with a * Operational excellence and Committee meetings, as well as outside of the
premium regular meeting cycle. Their advice, as well as
listing their needs and views, are routinely taken into
on the London * Long-term development of the service providers' account. Through its Audit and Management Engagement
Stock businesses Committee, the Board formally assesses their performance,
Exchange, the fees and continuing appointment at least annually
Company to ensure that the key service providers continue
relies on a * Sustainability to function at an acceptable level and are appropriately
diverse remunerated to deliver the expected level of service.
range of The Audit and Management Engagement Committee also
reputable reviews and evaluates the control environment in
advisers place at each service provider.
for support
in meeting
all
relevant
obligations.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Housing The Company's Housing Association partners are an
Associations/ * Current and future performance important part of the investment model as the
Registered responsibility
Providers for collection of housing benefit and subsequent
* Sustainability payment of rent, the maintenance of the properties
under the full repairing and insuring leases and,
most importantly, the safeguarding of the underlying
* Compliance and property management tenants through the above means, lies with the Housing
Associations.
The Investment Adviser works closely with the Company's
* Welfare of tenants Housing Association partners to improve standards
and governance and to introduce practices and procedures
that make the Company's investment processes ever
* Lease obligations more robust.
The Investment Adviser has a constant open dialogue
with the Housing Association partners, liaising
monthly on compliance, health and safety, maintenance
and future-proofing schemes, as well as hosting
quarterly seminars to discuss current themes/trends
affecting the sector, to troubleshoot and it serves
as an opportunity to build relationships and share
best practice.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Care At the outset, it is important to note that the
providers * Current and future performance Company does not have any legal or operational
responsibility
for the delivery of care in the properties within
* Welfare of tenants the portfolio. However, the Board and the Investment
Adviser have taken the view that they wish to have
a detailed understanding of the delivery of care
* Lease obligations and the interaction with the major care providers
who deliver this care.
Accordingly, the Investment Adviser maintains an
* Void management active dialogue with many of the care providers
to build constructive and informed relationships.
At the same time, as part of transaction due diligence
at the time of acquisition of properties, the Investment
Adviser undertakes due diligence with respect to
the operational and financial performance of all
care providers who are proposed to deliver care
into the particular properties. This includes the
financial standing of the care provider, its CQC
ratings and the nature of the SLA agreement covering
voids between the care provider and the Housing
Association.
The Investment Adviser is noted as having demonstrated
considerable expertise and understanding of the
care taking place within its properties.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Tenants The Company's properties are adapted for the use
* Greater independence of individuals with long-term care needs within
a community setting with the specific aim of achieving
better personal outcomes and independence for the
* Maintaining high level of care individuals.
The sector in which the Company operates is regarded
as having achieved significant success in delivering
* Improved personal outcome these positive outcomes compared to long-term older
style remote institutional care.
On a regular basis, members of the Investment Adviser
visit properties accompanied by Housing Association
and care provider partners to see first hand the
nature of the housing and care provision that is
being delivered. This is supported by the regular
Housing Association seminars at which the wellbeing
of tenants is discussed in detail.
In addition, the Company undertakes resident case
studies through careful and considered interaction
via the care provider to assess the positive impact
our properties and associated specialised care have
had on the individual and their wellbeing.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Regulator of The Company is not itself regulated by the RSH,
Social * Financial and operational viability but it is important to maintain open and regular
Housing dialogue to ensure that the Company and the RSH
are working together to improve the sector.
* Governance The deputy CEO of the RSH was recently invited to
attend the Company's Board meeting to share thoughts
on the sector and the ways in which the Company
* Compliance with health and safety, and regulatory could further evolve in order to assist the work
standards of the RSH. This meeting was regarded by both parties
as being very useful and constructive.
Over the past 18 months, the Investment Adviser
* Safety and wellbeing of underlying tenants has arranged and hosted a number of one-on-one meetings
between the Company's shareholders and the RSH.
This has enabled shareholders to gain a better
understanding
of the approach to regulation taken by the RSH.
In addition, the Investment Adviser has a regular
and ongoing dialogue with the RSH and with the Housing
Association partners regulated by the RSH.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Other The Company regularly considers how it meets various
regulatory * Compliance with statutory and regulatory requirements regulatory and statutory obligations and follows
authorities voluntary and best practice guidance, and how any
The Company governance decisions it makes can have an impact
can only * Governance based on best practice guidance on its shareholders and wider stakeholders, both
operate with in the shorter and in the longer term.
the approval This year, the Company welcomed the results of the
of its * Better reporting to shareholders and other review of the Company's Annual Report and Accounts
regulators stakeholders for the year ended 31 March 2019, undertaken by
who the Conduct Committee of the Financial Reporting
have a Council ("FRC")*. The FRC had not raised any questions
legitimate or queries but did make a number of recommendations
interest for improvements to the existing disclosures where
in how the they believed this would benefit the users of the
Company financial statements. The Directors welcomed the
operates feedback, and wherever appropriate, the disclosures
in the market in this report have been enhanced, incorporating
and treats the FRC's suggestions. Specifically, the Company
its has taken on board the comments related to Alternative
shareholders. Performance Measures and expanded the definitions
where relevant, and removed reference to EPRA Net
Initial Yield. Note 14 "Dividends" has been updated
to include the amount of proposed dividend in addition
to the amount per share to comply with the requirements
of IAS 1 para 137.
*The FRC's review was based solely on the Company's
2019 Annual Report and Accounts and did not benefit
from detailed knowledge of the Company's business
or an understanding of the underlying transactions
entered into. The FRC provides no assurance that
the Company's 2019 Annual Report and Accounts were
correct in all material respects as the FRC's role
is not to verify information provided but to consider
compliance with reporting requirements.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Local It is important for the Company to build and maintain
authorities * Provision of safe and secure quality properties relationships with local authorities as they have
an important role in identifying areas of high demand,
agreeing rents and referrals to the Company's schemes.
* Sustainability for long-term placements The Company will engage with the local authority
commissioner either directly, or through specialist
consultants, Housing Association and care provider
partners as part of the Company's due diligence
to ensure that each property being acquired has
been commissioned by the relevant local authority
and that rent levels have been discussed and agreed.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Lenders The Company has arranged debt facilities from a
Availability * Current and future financial performance of the wide range of lenders and engages with these on
of funding business a regular basis through regular meetings and presentations
and liquidity to ensure they are informed on all relevant areas
are crucial of the business. The continual dialogue helps to
to the * Openness and Transparency support the credit relationships.
Company's
ability
to take * Proactive approach to communication
advantage of
investment
opportunities * Operational excellence
as they
arise.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Communities A key component of the Company's portfolio is that
The Company's * Acceptance of care in the community the properties within it are set within community
assets environments so that individuals are able as part
rely on a of their care plan to interact with the local community
strong, * Availability of local facilities for tenants rather than being isolated.
positive This is achieved in consultation with local authorities
connection in determining that the initial settings are appropriately
with the diversified within the respective community and
local are not clustered in a way that would lead to isolation.
communities This assists the individuals and also ensures appropriate
in integration within the community. On a day-to-day
which its basis, care providers and Housing Associations operate
business policies to ensure positive relationships with neighbours
operates. and surrounding dwellings. The activities within
the Company's properties create employment within
the local community for both housing and care workers.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
Charity The Company supports a number of organisations whose
partners * Delivering needed support to vulnerable adults objectives are to provide improved outcomes for
vulnerable adults affected by homelessness and other
care needs.
* Improved well-being of vulnerable adults The Company commits targeted financial support to
fund specific programmes which help those affected
by homelessness by teaching them skills and offering
* ESG performance and sustainability support to prevent them from being in that position
again.
The Company ensures regular calls and meetings with
our charity partners to update on progress and projects
being undertaken, as well as attending any event
in support of their work.
-------------- ------------------------------------------------------------ ------------------------------------------------------------
The above mechanisms for engaging with stakeholders are kept
under review by the Directors and will be discussed on a regular
basis at Board meetings to ensure that they remain effective.
Culture
The Directors agree that establishing and maintaining a healthy
corporate culture among the Board and in its interaction with the
Investment Adviser, shareholders and other stakeholders will
support the delivery of its purpose, values and strategy. The Board
seeks to promote a culture of openness, debate and integrity
through ongoing dialogue and engagement with its service providers,
principally the Investment Adviser.
The Board strives to ensure that its culture is in line with the
Company's purpose, values and strategy. As detailed in the
Corporate Governance Statement in the full Annual Report, the
Company has a number of policies and procedures in place to assist
with maintaining a culture of good governance including those
relating to diversity and Directors' conflicts of interest. The
Board assesses and monitors compliance with these policies as well
as the general culture of the Board through Board meetings and, in
particular, during the annual evaluation process which is
undertaken by each Director (for more information, see the
performance evaluation section in the Corporate Governance
Statement in the full Annual Report.)
Key Performance Indicators ("KPIs")
Measure Explanation Result
----------------------------- --------------------------------- ----------------------------------------------------
Increase in IFRS NAV Target to achieve capital IFRS NAV increase of 9.9p per share or 10.1%
per share appreciation whilst maintaining from IPO.
a low risk strategy from
enhancing the quality of
cash flows from investments,
by physical improvement of
properties and by creating
a significantly diversified,
high-quality portfolio.
----------------------------- --------------------------------- ----------------------------------------------------
Dividend per share Targeting 5.4p per share Dividends of 5.3p per share declared for the
per annum for the coming year to 31 March 2020.
year growing broadly in line
with inflation.
----------------------------- --------------------------------- ----------------------------------------------------
Number of Local Authorities, Target risk mitigation through As at 31 March 2020:
Housing Associations a diversified portfolio (once
and care providers fully invested) with no more -- 164 Local Authorities
than 25% exposure to any -- 15 Housing Associations
one Local Authority or single -- 117 Care Providers
Housing Association and no
more than 20% exposure to The Company's largest single exposure is to
any single geographical area, Auckland Housing Association and currently
once the capital of the Company stands at 24%. The largest geographical
is fully invested. concentration
is in the South West, being 14.1%.
----------------------------- --------------------------------- ----------------------------------------------------
Loan to Gross Assets Assets Target debt drawn Leverage as at 31 March 2020 of 26.9% of gross
of 35% of gross assets. assets.
----------------------------- --------------------------------- ----------------------------------------------------
Alternative Performance Measures
Adjusted
Performance 31 March 31 March
Measure Definition Performance Measure 2020 2019
-------------- ----------------------------------------- ------------------------- --------------- ---------------
Portfolio IFRS NAV adjusted to reflect investment Portfolio NAV GBP735,704,000 GBP741,170,000
NAV property valued on a portfolio basis
rather than on an individual asset
basis.
-------------- -----------------------------------------
Portfolio NAV per share 118.35p 119.07p
---------------------------------------------------------------------------------- --------------- ---------------
Company Company Specific Earnings Measure Adjusted Earnings GBP28,814,000 GBP22,612,000
Adjusted which adds back the finance costs
Earnings associated with the C share financial
liability.
-------------- -----------------------------------------
Adjusted Earnings per
share 4.63p 3.63p
---------------------------------------------------------------------------------- --------------- ---------------
For a reconciliation of the Portfolio NAV to the IFRS results
please see note 6 to Appendix 1 below. For detailed workings
reconciling the Company Adjusted Earnings 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:
EPRA
Performance 31 March 31 March
Measure Definition EPRA Performance Measure 2020 2019
-------------- ------------------------------------- ----------------------------- --------------- ---------------
Earnings Earnings from operational activities EPRA Earnings GBP28,814,000 GBP16,212,000
.
EPRA Earnings per share
(basic) 4.63p 3.81p
EPRA Earnings per share
(diluted) 4.63p 3.63p
EPRA NAV Net Asset Value adjusted to include EPRA Net Asset Value GBP671,042,000 GBP666,508,000
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.
-------------- -------------------------------------
EPRA NAV per share
(diluted) 107.95p 107.08p
---------------------------------------------------------------------------------- --------------- ---------------
EPRA NNNAV EPRA NAV adjusted to include the EPRA NNNAV GBP667,560,000 GBP665,858,000
fair values of (i) financial
instruments,
(ii) debt and (iii) deferred taxes.
EPRA NNNAV per share
(diluted) 107.39p 106.97p
Estimated Market Rental Value
("ERV")
EPRA Vacancy of vacancy space divided by ERV of
Rate the whole portfolio. EPRA Vacancy Rate 0% 0%
-------------- ------------------------------------- ----------------------------- --------------- ---------------
Administrative and operating costs
(including and excluding costs of
EPRA Costs direct vacancy) divided by gross
Ratio rental income. EPRA Costs Ratio 21.48% 26.95%
-------------- -------------------------------------
EPRA Costs Ratio (excluding
direct vacancy costs) 21.48% 26.98%
---------------------------------------------------------------------------------- --------------- ---------------
For detailed workings reconciling the above measures to the IFRS
results, please see Appendix 1 to these financial statements
below.
Principal Risks and Risk Management
The Board considers that the risks detailed below are the
principal risks facing the Group currently, along with the risks
detailed in note 34 to the financial statements. These are the
risks that could affect the ability of the Company to deliver its
strategy. The Board confirms that the principal risks of the
Company, including those which would threaten its future
performance, solvency or liquidity, have been robustly assessed
throughout the year ended 31 March 2020, and that processes are in
place to continue this assessment. Further details of risk
management processes that are in place can be found in the
Corporate Governance Statement in the full Annual Report. The
principal and emerging risks and uncertainties relating to the
Group are regularly reviewed by the Board along with the internal
controls and risk management processes that are used to mitigate
these risks. The principal risks and management of those risks are
described below:
Principal risks and uncertainties
1. Strategy and Impact How managed/mitigated
competitiveness
risks
-------------------------- ------------------------------------ ------------------------------------ --------------
The Company and Any change in the laws, regulations The Company focuses on niche real Impact: Very
its operations and/or government policy affecting estate sectors where it believes High
are subject to the Company and its operations the regulatory framework to be
laws and regulations may have a material adverse robust. Probability:
enacted by national effect on the ability of the Unlikely
and local governments Company to successfully pursue The Board obtains regular updates
and government its investment policy and from professional advisers to
policy. meet its investment objective monitor
and on the value of the Company developments in regulation and
and the shares. legislation.
-------------------------- ------------------------------------ ------------------------------------ --------------
2. Strategy and Impact How managed/mitigated
competitiveness
risks
-------------------------- ------------------------------------ ------------------------------------ --------------
As a result of The rate of capital deployment The Company has strong links with Impact: High
competition from would drop, decreasing returns vendors and a robust pipeline of
other purchasers to shareholders. future acquisitions. Probability:
of social housing Unlikely
properties, the The Board regularly reviews the
Company's ability pipeline of potential acquisitions.
to deploy capital
effectively within
a reasonable timeframe
may be restricted
or the net initial
yields at which
the Company can
acquire properties
may decline such
that target returns
cannot be met.
-------------------------- ------------------------------------ ------------------------------------ --------------
3. Investment Impact How managed/mitigated
management risk
-------------------------- ------------------------------------ ------------------------------------ --------------
Tenant defaulting Loss of rental income in the The portfolio is diversified to Impact:
under the terms short term. reduce the impact of default. Medium
of a lease. Extensive
diligence is undertaken on all Probability:
assets, Likely
which is reviewed and challenged
by the Board.
The Board is provided with regular
updates on the tenants with any
concerns raised for discussion.
-------------------------- ------------------------------------ ------------------------------------ --------------
4. Investment management Impact How managed/mitigated
risk
-------------------------- ------------------------------------ ------------------------------------ --------------
The value of the The valuation of the Company's The Company invests in projects Impact:
investments made assets would fall, decreasing with stable, predetermined, High
by the Company the Net Asset Value of the long-term
may change from Company. leases in place with CPI or CPI Probability:
time to time according plus 1% indexation and its strategy Unlikely
to a variety is not focused on sale of
of factors, including properties.
movements in interest
rates, inflation, The Board receives regular updates
general market on factors that might impact
pricing of similar investment
investments, share valuations, such as the current
prices and discount. COVID-19 pandemic.
-------------------------- ------------------------------------ ------------------------------------ --------------
5. Investment management Impact How managed/mitigated
risk
-------------------------- ------------------------------------ ------------------------------------ --------------
Due diligence may The Company would overpay The Company undertakes detailed Impact:
not reveal all for assets impairing shareholder due diligence on the properties, High
facts and circumstances value, reducing rental income their condition, the proposed
that may be relevant and therefore returns. rental Probability:
in connection with levels - benchmarking against Unlikely
an investment and comparable
may not prevent schemes using both external
an acquisition consultants
being materially where required and its own
overvalued or rental proprietary
streams being at database - and on the Registered
risk. Providers and care providers
involved
in each property to ensure that
the purchase price is robust.
The Board considers the due
diligence
undertaken when approving
acquisitions.
-------------------------- ------------------------------------ ------------------------------------ --------------
6. Investment management Impact How managed/mitigated
risk
-------------------------- ------------------------------------ ------------------------------------ --------------
Loss of key staff Negative investor sentiment The Board considers the risk of Impact:
at the Investment leading to a reduction in the Investment Adviser losing key High
Adviser. share price. Reduction in staff and the succession plans the
ability to source off market Investment Adviser has in place. Probability:
and favourable deals. Unlikely
-------------------------- ------------------------------------ ------------------------------------ --------------
7. Investment management Impact How managed/mitigated
risks
-------------------------- ------------------------------------ ------------------------------------ --------------
Failure to monitor Deterioration in the underlying Contingent actions are regularly Impact:
that contingent quality, and therefore value monitored and followed up. Medium
activities are of the Company's property.
completed by the The Board is kept apprised of any Probability:
Registered Providers breach of lease obligations. Unlikely
or other parties.
-------------------------- ------------------------------------ ------------------------------------ --------------
8. Investment management Impact How managed/mitigated
risks
-------------------------- ------------------------------------ ------------------------------------ --------------
Lack of availability The rate of capital deployment The Company has strong links with Impact:
of debt financing would drop, decreasing returns a number of banks and other capital Medium
or other capital. to shareholders. sources.
Probability:
The Board closely considers any Unlikely
new loan facility proposed and
receives
regular updates on debt and capital
markets for consideration.
-------------------------- ------------------------------------ ------------------------------------ --------------
9. Operational Impact How managed/mitigated
risks, including
cyber crime
-------------------------- ------------------------------------ ------------------------------------ --------------
Counterparty failure Loss of operational capabilities, Registered Providers are themselves Impact:
(custodian, Registered potential loss of rental income. regulated by the RSH and are Medium
Providers, lenders) required
to meet those and other regulatory Probability:
and legal requirements. In Unlikely
addition,
the Company's leases include the
obligation to report levels of
compliance
with regard to health and safety.
The Company operates policies that
ensure the portfolio is diversified
in terms of counterparty risk.
Other service providers operate
procedures that seek to mitigate
risk and the Company seeks to work
with parties that have a positive
reputation and can demonstrate that
they have implemented appropriate
risk control over their activities.
Details regarding the extent of
impact of COVID-19 on the Company's
counterparties are set out above.
-------------------------- ------------------------------------ ------------------------------------ --------------
10. Operational Impact How managed/mitigated
risks, including
cyber crime
-------------------------- ------------------------------------ ------------------------------------ --------------
Disruption to, Loss of operational capabilities, The Board monitors the services Impact:
or failure, of potential regulator actions. provided by the Investment Adviser Medium
the systems or and other service providers and
general operations Alternative service providers the key elements which are designed Probability:
of third party would need to be identified to provide effective internal Unlikely
providers could and activities transferred. control.
prevent accurate All service providers are required
reporting and monitoring to have robust IT security and
of the Company's disaster
financial position. recovery contingency plans in
This includes the place.
risk of cyber crime
and potential threat
to security, business
continuity and
reputation.
-------------------------- ------------------------------------ ------------------------------------ --------------
Going Concern and Viability Statement
Going Concern
The Board regularly reviews the position of the Company and its
ability to continue as a going concern at its meetings. The
financial statements set out the current financial position of the
Company.
The Company acquires high-quality property with a particular
focus on property providing care for the long term. The properties
acquired are on long-term full repairing and insuring leases in a
sector of the market with very high levels of need. The cost base
of the Company is proportionately low compared to revenue and there
is a high level of certainty over cost to be incurred. On this
basis, the Company is expected to be viable well beyond the
five-year term considered in the Company's testing below.
As at 31 March 2020, the Company held cash balances of GBP49.3
million (net of operating and financing amounts due) of which
approximately GBP14 million was allocated in respect of
transactions completing in 2020 - GBP1.8 million in respect of two
properties in Telford and one in Sunderland which the Company has
conditionally exchanged on, and GBP12.1 million in relation to two
properties in Wales for which the Company has entered into a
conditional sale and purchase agreement. We have allocated GBP10
million
(estimated) relating to a capital payment contingent on certain
financial obligations being met at the properties in Wales. The
remaining cash balances are being held as a cash contingency that
the Company retains as a matter of financial prudence. The Board
has evaluated the financial position of the Company and is
confident in the ability to raise debt and/or equity capital in
order to fund the Company's investments for the next 12 months and
to facilitate the payment of dividends to shareholders at the
targeted rate. Based on this, the Board believes that the Company
is in a position to manage its financial risks.
The Directors believe that there are currently no material
uncertainties in relation to the Company's ability to continue in
operation for a period of at least 12 months from the date of
approval of the Company's financial statements and therefore have
adopted the going concern basis in the preparation of the financial
statements.
Viability Statement
The Directors present the Company's viability statement which
summarises the results of their assessment of the Company's current
position, its principal risks and prospects over a period to 31
March 2025. The prospects were assessed over a five-year period,
acknowledging that the Company will have its first continuation
vote in 2022, for the following reasons:
i) the Company's long-term forecast covers a five-year period;
ii) the length of service level agreements between Housing
Associations and care providers is typically five years; and
iii) the Company's leases are typically 25 years on fully
repairing and insuring leases, enabling reasonable certainty of
income over the next five years.
The Company's five-year forecast incorporates assumptions
related to the Company's investment strategy and principal risks
from which performance results, cash flows and key performance
indicators are forecast. The principal risks are set out above. Of
these risks, those which are expected to have a higher impact on
the Company's longer-term prospects are those related to future
government housing policies. The Company has considered its
strategy over a longer term and, in light of the inherent demand
for the Company's properties and the vulnerable nature of the
ultimate tenant, the risk of change in future housing policy is
considered to be limited. The principal risks are mitigated by the
Company's risk management and internal control processes which
function on an ongoing basis. The Board, via delegation to the
Audit and Management Engagement Committee, monitors the
effectiveness of the Company's risk management and internal control
processes on an ongoing basis. The monitoring activities are
described in the Report of the Audit and Management Engagement
Committee in the full Annual Report and include direct review and
challenge of the Company's documented risks, risk ratings and
controls, and review of performance and compliance reports prepared
by the Company's advisers and the independent external
auditors.
The Board of Directors has carried out a robust assessment of
the principal and emerging risks facing
the Company, including those that would threaten its business
model, future performance, solvency and liquidity. Where
appropriate, the Company's forecasts are subject to sensitivity
analysis, which involves applying severe conditions and flexing a
number of assumptions simultaneously. The sensitivities performed
were designed to provide the Directors with an understanding of the
Company's performance in the event of severe but plausible
scenarios, taking full account of mitigating actions that could be
taken to avoid or reduce the impact or occurrence of the underlying
risks outlined below:
-- reduction in availability of suitable assets for acquisition;
-- tenant defaulting under a lease;
-- lack of availability for debt financing or other capital; and
-- deterioration in economic outlook, such as any negative
impact due to Brexit, impact of COVID-19, or change in government
housing policy which could impact the fundamentals of the social
housing sector, including a negative impact on valuations and
rental uplifts.
The remaining principal risks and uncertainties, whilst having
an impact on the Company's business, are not considered by the
Directors to have a reasonable likelihood of impacting the
Company's viability over the five-year period, therefore the
scenarios outlined above are the only ones that have been
specifically tested. Based on the results of their assessment, the
Directors have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due over the five-year period of their assessment.
Approval of Strategic Report
The Group Strategic Report was approved by the Board and signed
on its behalf by:
Michael Wrobel
Chairman
29 June 2020
Board of Directors
Michael Wrobel (Chairman)
Alastair Moss (Director)
Alison Hadden (Director)
Caroline Gulliver (Chair of the Audit and Management Engagement
Committee)
Peter Baxter (Senior Independent Director)
Extracts from the Report of the Directors
Results and Dividends
The results for the year are shown below.
The following dividends were paid on the Ordinary shares during
the year:
First dividend 1.325p per share paid on 7 June
2019
---------------- -------------------------------------
Second dividend 1.325p per share paid on 6 September
2019
---------------- -------------------------------------
Third dividend 1.325p per share paid on 29 November
2019
---------------- -------------------------------------
Fourth dividend 1.325p per share paid on 28 February
2020
---------------- -------------------------------------
Since the year end, the Company has declared the following
dividend:
Quarterly dividend 1.325p per share paid on 12 June
2020
------------------- ---------------------------------
No final dividend is being recommended on the Ordinary
shares.
Capital Structure
Issue of shares
At the AGM held on 5 September 2019, the Directors were
authorised to issue equity securities up to an aggregate nominal
amount of GBP622,461 (being approximately 10% of the issued
Ordinary share capital). The Company was also authorised to
disapply pre-emption rights in respect of equity securities and to
issue equity securities for cash up to an aggregate nominal amount
equal to GBP622,461
(being approximately 10% of the issued Ordinary share
capital).
No Ordinary shares were issued under these authorities during
the year. Ordinary shares would be issued at a price of not less
than the net asset value per share at the time of issue.
Proposals for the renewal of the Directors' authority to issue
shares will be set out in the Notice of AGM.
Purchase of own shares
At the AGM held on 5 September 2019, the Directors were granted
the authority to buy back up to 93,306,960 Ordinary shares, being
14.99% of the Ordinary shares in issue at the time of the passing
of the resolution.
During the year, the Company purchased in the stock market
815,000 shares (with a nominal value of GBP8,150) to be held in
treasury, at a cost of GBP699,000. This represented 0.13% of the
issued share capital at 31 March 2019. During the year, no shares
were bought back for cancellation.
The share purchases were made with a view to reducing discount
volatility and maintaining the middle market price at which the
shares traded close to the net asset value.
The remaining authority to buy back up to 92,491,960 shares will
expire at the conclusion of the forthcoming AGM, when a resolution
for its renewal will be proposed. Further information will be
contained in the Notice of AGM, which will be circulated to
shareholders in due course.
Current share capital
As at 31 March 2020, and as at the date of this report, there
were 622,461,380 Ordinary shares in issue, of which 815,000 shares
were held in treasury. The total voting rights of the Company as at
31 March 2020 and 29 June 2020, the date of signing this report,
were 621,646,380.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have prepared the Group financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union and the Company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101
"Reduced Disclosure Framework", and applicable law). Under company
law, the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and Company and of the profit or loss of
the Group and Company for that period. In preparing the financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable IFRSs as adopted by the European
Union have been followed for the Group financial statements and
United Kingdom Accounting Standards, comprising FRS 101, have been
followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial
statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are also responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group and Company's position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed
above, confirm that, to the best of their knowledge:
-- the Company financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101
"Reduced Disclosure Framework", and applicable law), give a true
and fair view of the assets, liabilities, financial position and
loss of the Company;
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the principal
risks and uncertainties that it faces.
Approval
This Statement of Directors' Responsibilities was approved by
the Board and signed on its behalf by:
Michael Wrobel
Chairman
29 June 2020
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the year ended 31 March 2020 or
the year ended 31 March 2019 but is derived from those accounts.
Statutory accounts for the period ended 31 March 2019 have been
delivered to the Registrar of Companies and those for the year
ended 31 March 2020 will be delivered in due course. The Auditor
has reported on those accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the
Auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under Section 498 (2)
or (3) of the Companies Act 2006. The text of the Auditor's report
can be found in the Company's full Annual Report and financial
statements at www.civitassocialhousing.com .
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2020
For the For the
year ended year ended
31 March 2020 31 March 2019
Note GBP'000 GBP'000
--------------- ---------------
Revenue
Rental income 5 46,165 35,738
Less direct property expenses 5 (259) -
--------------- ---------------
Net rental income 45,906 35,738
Directors' remuneration 6 (176) (163)
Investment advisory fees 8 (6,183) (6,457)
General and administrative expenses 9 (3,501) (3,022)
--------------- ---------------
Total expenses (9,860) (9,642)
Change in fair value of investment
properties 15 9,389 3,652
--------------- ---------------
Operating profit 45,435 29,748
Finance income 10 110 491
Finance expense - relating to
bank borrowings 11 (7,342) (3,975)
Finance expense - C shares amortisation 11 - (6,400)
Change in fair value of interest
rate derivatives 21 (478)
--------------- ---------------
Profit before tax 37,725 19,864
Taxation 12 - -
--------------- ---------------
Profit being total comprehensive income
for the year 37,725 19,864
--------------- ---------------
Earnings per share - basic 13 6.06p 4.67p
Earnings per share - diluted 13 6.06p 4.22p
------ ------
All amounts reported in the Consolidated Statement of
Comprehensive Income above arise from continuing operations.
The notes below are an integral part of these consolidated
financial statements.
Consolidated Statement of Financial Position
As at 31 March 2020
31 March 2020 31 March 2019
Note GBP'000 GBP'000
Assets
Non-current assets
Investment property 15 867,988 820,094
Other receivables 17 10,755 6,824
878,743 826,918
Current assets
Trade and other receivables 17 10,838 5,723
Cash and cash equivalents 18 58,374 54,347
-------------- --------------
69,212 60,070
-------------- --------------
Total assets 947,955 886,988
-------------- --------------
Liabilities
Current liabilities
Trade and other payables 19 (7,743) (15,324)
Cash and cash equivalents 20 (59,730) -
(67,473) (15,324)
Non-current liabilities
Bank and loan borrowings 20 (209,440) (205,156)
Interest rate derivatives 21 (478) -
-------------- --------------
Total liabilities (277,391) (220,480)
-------------- --------------
Total net assets 670,564 666,508
-------------- --------------
Equity
Share capital 23 6,225 6,225
Share premium reserve 24 292,405 292,405
Capital reduction reserve 25 330,926 331,625
Retained earnings 26 41,008 36,253
-------------- --------------
Total equity 670,564 666,508
-------------- --------------
Net assets per share - basic
and diluted 27 107.87p 107.08p
-------- --------
These consolidated financial statements were approved by the
Board of Directors of Civitas Social Housing PLC and authorised for
issue and signed on its behalf by:
Michael Wrobel
Chairman and Independent Non-Executive Director
29 June 2020
Company No: 10402528
The notes below are an integral part of these consolidated
financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2020
Share Capital
Share premium reduction Retained Total
capital reserve reserve earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ---------- --------- ---------
Balance at 1 April 2018 3,500 - 331,625 34,270 369,395
Profit and total comprehensive income for
the year - - - 19,864 19,864
Issue of Ordinary shares
Issue of share capital 23 2,725 292,461 - - 295,186
Share issue costs 24 - (56) - - (56)
Dividends paid
Total interim dividends for the year ended
31 March 2019 (5.00p) 14 - - - (17,881) (17,881)
-------- -------- ---------- --------- ---------
Balance at 31 March 2019 6,225 292,405 331,625 36,253 666,508
-------- -------- ---------- --------- ---------
Profit and total comprehensive income for
the year - - - 37,725 37,725
Issue of Ordinary shares
Shares bought back into treasury 25 - - (699) - (699)
Dividends paid
Total interim dividends for the year ended
31 March 2020 (5.30p) 14 - - - (32,970) (32,970)
-------- -------- ---------- --------- ---------
Balance at 31 March 2020 6,225 292,405 330,926 41,008 670,564
-------- -------- ---------- --------- ---------
The notes below are an integral part of these consolidated
financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 March 2020
For the For the
year ended year ended
31 March 2020 31 March 2019
Note GBP'000 GBP'000
--------------- ---------------
Cash flows from operating activities
Profit for the year before taxation 37,725 19,864
- Change in fair value of investment
properties (9,389) (3,652)
- Change in fair value of interest 478 -
rate derivatives
- Rent and incentive straight
line adjustments (87) (314)
Finance income (110) (491)
Finance expense 7,342 10,375
Increase in trade and other receivables (3,290) (2,789)
Increase/(decrease) in trade and
other payables 126 (149)
--------------- ---------------
Cash generated from operations 32,795 22,844
Interest received 110 491
--------------- ---------------
Net cash flow generated from operating
activities 32,905 23,335
--------------- ---------------
Investing activities
Purchase of investment properties (17,986) (267,908)
Acquisition costs (9,737) (9,421)
Purchase of subsidiary company (19,829) (25,470)
Sale proceeds on sale of subsidiary
company 2,221 4,336
Lease incentives paid (6,844) (3,178)
Restricted cash held as retention
money (9,726) (936)
--------------- ---------------
Net cash flow used in investing
activities (61,901) (302,577)
--------------- ---------------
Financing activities
Share issue costs paid 24 - (56)
Cost of shares bought into treasury 25 (699) -
Dividends paid to equity shareholders (32,889) (17,591)
Dividends paid to C shareholders 22 - (9,966)
Bank borrowings advanced 20 64,053 115,990
Bank borrowing issue costs paid 20 (1,364) (2,374)
Loan interest paid (5,804) (2,958)
--------------- ---------------
Net cash flow generated from financing
activities 23,297 83,045
--------------- ---------------
Net decrease in cash and cash
equivalents (5,699) (196,197)
Unrestricted cash and cash equivalents
at the start of the year 18 47,128 243,325
--------------- ---------------
Unrestricted cash and cash equivalents
at the end of the year 18 41,429 47,128
--------------- ---------------
The notes below are an integral part of these consolidated
financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
1. Corporate information
Civitas Social Housing PLC (the "Company") was incorporated in
England and Wales under the Companies Act 2006 as a public company
limited by shares on 29 September 2016 with company number 10402528
under the name Civitas REIT PLC, which was subsequently changed to
the existing name on 3 October 2016.
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 Company did not begin trading until 18 November 2016 when
the shares were admitted to trading on the London Stock Exchange
("LSE").
The Company's Ordinary shares are admitted to the Official List
of the Financial Conduct Authority ("FCA") and traded on the
LSE.
The principal activity of the Company is to act as the ultimate
parent company of Civitas Social Housing PLC and its subsidiaries
(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 Group's consolidated financial statements have been prepared
on a going concern basis in accordance with the Disclosure Guidance
and Transparency Rules of the FCA and with International Financial
Reporting Standards ("IFRS") and IFRS Interpretation Committee
("IFRS IC") interpretations as issued by the IASB and as adopted by
the European Union ("EU"), and in accordance with Article 4 of the
IAS Regulation and the Companies Act 2006 as applicable to
companies using IFRS.
The Group's consolidated financial statements have been prepared
on a historical cost basis, as modified for the Group's investment
properties and derivatives financial instruments at fair value
through profit or loss.
The Group has chosen to adopt EPRA best practice guidelines for
calculating key metrics such as net asset value and earnings per
share. These are disclosed below with supporting calculations in
Appendix 1 below.
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 pounds (GBP'000s), except where
otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases
with the Housing Associations, which are not overly reliant on any
one tenant and present a well-diversified risk. The Group's cash
balance as at 31 March 2020 were GBP58.4 million, of which GBP16.9
million is held as restricted cash. Details of this can be found in
Note 18.
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") 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 of Directors
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.
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 meet its liabilities
as they fall due.
The Board of 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 consolidated financial statements. The Board is, therefore,
of the opinion that the going concern basis adopted in the
preparation of the consolidated financial statements is
appropriate.
2.3 New standards, amendments and interpretations
The following new standards are now effective and have been
adopted for the year ended 31 March 2020.
-- IFRS 16 Leases: Introduction of a single, on-balance sheet
accounting model (effective for annual periods beginning on or
after 1 January 2019).
The Directors have assessed that the adoption of this standard
does not have a material impact on the Group's financial statements
as the Group does not hold any material operating leases as
lessee.
-- IFRIC 23 Uncertainty over Income Tax Treatments: Clarifies
the application of recognition and measurement requirements in IAS
12 Income Taxes, when there is uncertainty over income tax
treatments (effective for annual periods beginning on or after 1
January 2019).
The Directors have assessed that the adoption of this new
interpretation does not have a material impact on the Group's
financial statements.
2.4 New standards, amendments and interpretations effective for
future accounting periods
The following are new 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
Group's future financial statements:
-- Amendments to IAS 1 'Presentation of Financial Statements'
and IAS 8 'Accounting Policies, Changes in Accounting Estimates and
Errors': (effective for annual periods beginning on or after 1
January 2020) - make amendments to clarify the definition of
'material'. The amendments make IFRSs more consistent but are not
expected to have a significant impact on the preparation of the
financial statements.
-- Amendments to IFRS 3 Business Combinations: Clarifies 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 combination 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 transition since the amendments are
effective for business combinations for which the acquisition date
is on or after the transition date.
2.5 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
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. Geographical
information is provided to ensure compliance with the
diversification requirements of the Company, other than this 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.
2.6 Prior year adjustment
An adjustment has been made to the Group accounts to reflect the
reallocation of historic dividends at a Company level to the
distributable Capital Reduction Reserve. This is an accounting
adjustment to correct an historic misallocation at a Company level
and has no other effect (including no cash effect) in the Group
financial statements.
Comparative figures have been restated.
3. Significant accounting judgements, estimates and
assumptions
In the application of the Group's accounting policies, which are
described in note 4, 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 within the next financial year are outlined
below:
3.1 Significant estimate - valuation of investment property
The Group uses the valuation carried out by its independent
valuers as the fair value of its property portfolio. The valuation
is based upon assumptions including future rental income and the
appropriate discount rate. The valuers also make reference to
market evidence of transaction prices for similar properties.
Further information is provided in note 15.
The Group's properties have been independently valued by Jones
Lang LaSalle Limited ("JLL" or the "Valuer") in accordance with the
current Royal Institution of Chartered Surveyors' Valuation -
Global Standards, incorporating the IVS, and the RICS Valuation -
Global Standards 2017 UK national supplement (the RICS "Red Book").
JLL is one of the most recognised professional firms within social
housing valuation and has sufficient current local and national
knowledge of both social housing generally and Specialist Supported
Housing ("SSH") and has the skills and understanding to undertake
the valuations competently.
The Valuer has included a material valuation uncertainty clause
within their valuation report.
Material Valuation Uncertainty due to Novel Coronavirus
(COVID-19)
The outbreak of the Novel Coronavirus (COVID-19), declared by
the World Health Organisation as a "Global Pandemic" on 11 March
2020, has impacted global financial markets. Travel restrictions
have been implemented by many countries. Market activity is being
impacted in many sectors. As at the valuation date, we consider
that we can attach less weight to previous market evidence for
comparison purposes, to inform opinions of value. Indeed, the
current response to COVID-19 means that we are faced with an
unprecedented set of circumstances on which to base a
judgement.
The valuation is therefore reported on the basis of "material
valuation uncertainty" as per VPS 3 and VPGA 10 of the RICS Red
Book Global. Consequently, less certainty - and a higher degree of
caution - should be attached to our valuation than would normally
be the case. Given the unknown future impact that COVID-19 might
have on the real estate market, we recommend that you keep the
valuation of these properties under frequent review. For the
avoidance of doubt, the inclusion of the 'material valuation
uncertainty' declaration above does not mean that the valuation
cannot be relied upon. Rather, the phrase is used in order to be
clear and transparent with all parties, in a professional manner
that - in the current extraordinary circumstances - less certainty
can be attached to the valuation than would otherwise be the
case.
On 28 May 2020, RICS published an update and concluded that the
inclusion of MUCs was no longer appropriate for (inter alia):
specialist supported housing of all types, designated either C2
or C3 use class, let to Registered Providers on FRI leases, and
usually with a third-party care provider involved in providing care
and support to residents, valued on the basis of Market Value
This advice was supported by JLL because of a continuation of
activity in the specialist supported housing market and they will
be following this guidance in future valuation reports. Details of
this clause are disclosed in note 15.
With respect to the Group's consolidated financial statements,
investment properties are valued at their fair value at each
balance sheet date in accordance with IFRS 13 which recognises a
variety of fair value inputs depending upon the nature of the
investment. Specifically:
-- Level 1 - Unadjusted, quoted prices for identical assets and
liabilities in active (typically quoted) markets.
-- Level 2 - Quoted prices for similar assets and liabilities in active markets.
-- Level 3 - External inputs are "unobservable". Value is the
Directors' best estimate, based on advice from relevant
knowledgeable experts, use of recognised valuation techniques and a
determination of which assumptions should be applied in valuing
such assets and with particular focus on the specific attributes of
the investments themselves.
Given the bespoke nature of each of the Group's investments, the
particular requirements of due diligence and financial contribution
obtained from the vendors together with the recent emergence of
SSH, all of the Group's investment properties are included in Level
3.
3.2. Significant judgement - business combinations
The Group acquires subsidiaries that own investment properties.
At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the
acquisition of an asset. Management considers the substance of the
assets and activities of the acquired entity in determining whether
the acquisition represents the acquisition of a business.
The Group accounts for an acquisition as a business combination
where an integrated set of activities is acquired in addition to
the property. Where such acquisitions are not judged to be the
acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity is
allocated between the identifiable assets and liabilities of the
entity based upon their relative fair values at the acquisition
date. Accordingly, no goodwill or additional deferred tax
arises.
With the exception of one acquisition detailed below, all other
corporate acquisitions during the year have been treated as asset
purchases rather than business combinations because no integrated
set of activities was acquired.
During the year, the Group entered into a transaction to acquire
the freehold properties operated by New Directions Flexible Social
Care Solutions Ltd and Vision MH Ltd. Upon the acquisition of the
companies, investment properties were transferred into other Group
companies and the companies, along with their associated
operations, were sold to TLC Care Homes Limited. Further details
are shown in note 16 to the financial statements.
During the comparative year, the Group entered into a purchase
of TLC Care Homes Limited which carried out operational activities.
Upon acquisition, investment properties were transferred into
another Group company and the company was sold. Further details are
shown in note 16 to the financial statements.
The acquired companies met the definition of a business under
IFRS 3, and the transaction was therefore recorded as a business
combination.
Because the Group acquired the company with the intent to sell
the business, management applied the short-cut method under IFRS 5
- Subsidiaries acquired with a view to resale. Under this method,
the subsidiary is recorded at fair value less costs to sell, and
there is no requirement to fair value the subsidiary's individual
assets and liabilities.
3.3. Significant judgement - operating lease contracts - the
Group as lessor
The Group has acquired investment properties that are subject to
commercial property leases with Registered Providers. The Group has
determined, based on an evaluation of the terms and conditions of
the arrangements, particularly the duration of the lease terms and
minimum lease payments, that it retains all the significant risks
and rewards of ownership of these properties and so accounts for
the leases as operating leases.
4. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
the consolidated financial statements are set out below. The
policies have been consistently applied to all periods presented,
unless otherwise stated.
4.1. Basis of consolidation
The consolidated financial statements comprise the financial
information of the Group as at the year end date.
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to
direct the activities of the entity. All intra-group transactions,
balances, income and expenses are eliminated on consolidation. The
financial information of the subsidiaries is included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
If an equity interest in a subsidiary is transferred but a
controlling interest continues to be held after the transfer then
the change in ownership interest is accounted for as an equity
transaction.
Accounting policies of the subsidiaries are consistent with the
policies adopted by the Company.
4.2. Investment property
Investment property, which is property held to earn rentals
and/or for capital appreciation, is initially measured at cost,
being the fair value of the consideration given, including
expenditure that is directly attributable to the acquisition of the
investment property. After initial recognition, investment property
is stated at its fair value at the balance sheet date. Gains and
losses arising from changes in the fair value of investment
property are included in profit or loss for the period in which
they arise in the Consolidated Statement of Comprehensive
Income.
Subsequent expenditure is capitalised only when it is probable
that future economic benefits are associated with the expenditure.
Ongoing repairs and maintenance are expensed as incurred.
An investment property is derecognised upon disposal or when the
investment property is permanently withdrawn from use and no future
economic benefits are expected from the disposal. Any gain or loss
arising on derecognition of the property (calculated as the
difference between the net disposal proceeds and the carrying
amount of the asset) is incurred in profit or loss in the period in
which the property is derecognised.
Significant accounting judgements, estimates and assumptions
made for the valuation of investment properties are discussed in
note 3.
4.3. Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
The Company has determined that it retains all the significant
risks and rewards of ownership of the properties and accounts for
the contracts as operating leases as discussed in note 3.
Properties leased out under operating leases are included in
investment property in the Consolidated Statement of Financial
Position. Rental income from operating leases is recognised on a
straight line basis over the term of the relevant leases.
Lease incentive costs are recognised as an asset and amortised
over the life of the lease.
4.4. Financial Assets
Classification
From 1 April 2018, the Group classifies its financial assets in
the following measurement categories:
-- those to be measured subsequently at fair value (either
through other comprehensive income or through profit or loss);
and
-- those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of the cash
flows. For assets measured at fair value, gains and losses will
either be recorded in profit or loss or other comprehensive
income.
Trade and other receivables
Trade and other receivables are amounts due in the ordinary
course of business. If collection is expected in one year or less,
they are classified as current assets. If not, they are presented
as non-current assets.
Trade receivables are recognised initially at fair value and
subsequently are measured at amortised cost using the effective
interest method, less impairment provision. The Group holds the
trade receivables with the objective to collect the contractual
cash flows.
Impairment
The Group's financial assets are subject to the expected credit
loss model.
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
The expected loss rates are based on the payment profiles of
sales over a period of up to 36 months before 31 March 2020 or 1
April 2019, respectively, and the corresponding historical credit
losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the liability of the tenants to
settle the receivable. Such forward-looking information would
include: changes in economic, regulatory, technological and
environmental factors (such as industry outlook, GDP, employment
and politics); external market indicators; and tenant base.
Trade receivables are written off when there is no reasonable
expectation of recovery.
.
Indicators that there is no reasonable expectation of recovery
include, among others, the probability of insolvency or significant
financial difficulties of the debtor. Impaired debts are
derecognised when they are assessed as uncollectible.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, cash held by
lawyers and liquidity funds with a term of no more than three
months that are readily convertible to a known amount of cash and
which are subject to an insignificant risk of changes in value.
Within cash and cash equivalents is restricted cash which
represents amounts held for specific commitments and 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.
4.5. Financial liabilities
The Group recognises a financial liability when it first becomes
a party to the contractual rights and obligations in the
contract.
All financial liabilities are initially recognised at fair
value, minus (in the case of a financial liability that is not at
fair value through profit or loss) transaction costs that are
directly attributable to issuing the financial liability. Financial
liabilities are subsequently measured at amortised cost, unless the
Group opted to measure a liability at fair value through profit or
loss.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
Trade and other payables
Trade and other payables are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities. Trade and other payables are
recognised initially at their fair value and subsequently measured
at amortised cost until settled. The fair value of a non-interest
bearing liability is its discounted repayment amount. If the due
date of the liability is less than one year, discounting is
omitted.
Bank and other borrowings
All bank and other borrowings are initially recognised at fair
value less directly attributable transaction costs. After initial
recognition, all bank and other borrowings are measured at
amortised cost, using the effective interest method. Any
attributable transaction costs relating to the issue of the bank
borrowings are amortised through the Group's Statement of
Comprehensive Income over the life of the debt instrument on a
straight-line basis.
C share financial liability
C shares are convertible preference shares and under IAS 32
Financial Instruments: Presentation, meet the definition of a
financial liability. C shares are recognised on issue at fair value
less directly attributable transaction costs. After initial
recognition, C shares are subsequently measured at amortised cost
using the effective interest rate method. Amortisation is credited
to or charged to finance income or finance costs in the
Consolidated Statement of Comprehensive Income. Transaction costs
are deducted from proceeds at the time of issue.
Derivative financial instruments
Derivative financial instruments, which comprise interest rate
swaps for hedging purposes, 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.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs significant to the fair
value measurement as a whole.
4.6. Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation.
4.7. Taxation
Taxation on the profit or loss for the period not exempt under
UK REIT regulations is comprised of current and deferred tax. Tax
is recognised in the Consolidated Statement of Comprehensive Income
except to the extent that it relates to items recognised as a
direct movement in equity, in which case it is recognised as a
direct movement in equity. Current tax is expected tax payable on
any non-REIT taxable income for the period, using tax rates enacted
or substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous periods.
The current tax charge is calculated on profits arising in the
period and in accordance with legislation which has been enacted or
substantially enacted at the balance sheet date.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount of
deferred tax that is provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
4.8. Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital.
Capital assets comprise the following:
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Proceeds from the issue of Ordinary shares
and retained earnings thereon 670,564 666,508
Bank and loan borrowings 269,170 205,156
-------------- --------------
939,734 871,664
-------------- --------------
Until the Group is fully invested and pending re-investment or
distribution of cash receipts, the Group will invest in cash, cash
equivalents, near cash instruments and money market
instruments.
The Directors may use gearing to enhance equity returns. The
level of borrowing will be on a prudent basis for the asset class
and will seek to achieve a low cost of funds, whilst maintaining
the flexibility in the underlying security requirements and the
structure of the Group.
The Group may, following a decision of the Board, raise debt
from banks and/or the capital markets and the aggregate borrowings
of the Group will always be subject to an absolute maximum,
calculated at the time of drawdown, of 40% of the Gross Asset Value
on a fully invested basis.
4.9. Dividends payable to shareholders
Dividends to the Company's shareholders are recognised as a
liability in the Group's consolidated financial statements in the
period in which the dividends are approved. In the UK, interim
dividends are recognised when paid.
4.10. Rental income
Rental income from investment property is recognised on a
straight-line basis over the term of ongoing leases and is shown
gross of any UK income tax. Lease incentives are spread evenly over
the lease term.
Service charges and other similar receipts are included in net
rental and property income gross of the related costs as the
Directors consider the Group acts as principal in this respect.
4.11. Finance income
Finance income is recognised as interest accrued on cash and
cash equivalent balances held by the Group.
4.12. Finance costs
Finance costs consist of interest and other costs that the Group
incurs in connection with bank and other borrowings. Bank interest
and bank charges are recognised on an accruals basis. Borrowing
transaction costs are amortised over the period of the loan.
After initial recognition, C shares are subsequently measured at
amortised cost using the effective interest rate method.
Amortisation is credited or charged to finance income or finance
costs. Transaction costs are amortised to the earliest conversion
period.
4.13. Expenses
All expenses are recognised in the Consolidated Statement of
Comprehensive Income on an accruals basis.
4.14. Investment advisory fees
Investment advisory fees are recognised in the Consolidated
Statement of Comprehensive Income on an accruals basis.
4.15. Share issue costs
The costs of issuing or reacquiring equity instruments (other
than in a business combination) are accounted for as a deduction
from equity.
4.16 Share held in treasury
The costs, including directly attributable transactions costs,
of purchasing the Company's own shares to be held in treasury is
deducted from equity and the costs are shown in the Consolidated
Statement of Changes in Equity. Consideration received, net of
transaction costs, for the resale of these shares is also included
in equity. Whilst the Company holds shares in treasury, the
calculations for net asset value and earnings per share are
adjusted to exclude these shares.
5. Rental income
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Rental income from investment property 45,819 35,424
Rent straight line adjustments 361 459
Lease incentive adjustments (274) (145)
Rechargeable costs received 259 -
Rental income 46,165 35,738
Less direct property expenses (259) -
Net rental income 45,906 35,738
--------------- ---------------
Rechargeable costs received represent insurance costs paid by
the Group and recharged to the Registered Providers.
As per the lease agreement with the Group and Registered
Providers, the Registered Providers are responsible for the
settlement of all present and future rates, taxes and other
impositions payable in respect of the property. As a result, no
further direct property expenses were incurred.
6. Directors' remuneration
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Directors' fees 162 150
Employer's National Insurance Contributions 14 13
Total 176 163
--------------- ---------------
The Directors are remunerated for their services at such rate as
the Directors shall from time to time determine.
7. Particulars of employees
The Group had no employees during the period (31 March 2019:
nil) other than the Directors.
8. Investment advisory fees
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Advisory fee 6,131 6,457
Disbursements 52 -
--------------- ---------------
Total 6,183 6,457
--------------- ---------------
On 7 May 2020, Civitas Housing Advisors Limited changed its name
to Civitas Investment Management Limited. CIM is the appointed
Investment Adviser of the Company. Under the current Investment
Management Agreement, the Advisory Fee shall be an amount
calculated in respect of each Quarter, in each case based upon the
Net Asset Value most recently announced to the market at the
relevant time (as adjusted for issues or repurchases of shares in
the period between the date of such announcement and the date of
the relevant calculation), on the following basis:
a) on that part of the Net Asset Value up to and including
GBP250 million, an amount equal to 1% of such part of the Net Asset
Value;
b) on that part of the Net Asset Value over GBP250 million and
up to and including GBP500 million, an amount equal to 0.9% of such
part of the Net Asset Value;
c) on that part of the Net Asset Value over GBP500 million and
up to and including GBP1,000 million, an amount equal to 0.8% of
such part of the Net Asset Value;
d) on that part of the Net Asset Value over GBP1,000 million, an
amount equal to 0.7% of such part of the Net Asset Value.
The appointment of the Investment Adviser shall continue in
force unless and until terminated by either party giving to the
other not less than 12 months' written notice, such notice not to
expire earlier than 30 May 2024.
During the year, the expiry date period was extended from 30
November 2021 to 30 May 2024.
Prior to 26 April 2019, the Advisory Fee calculation was based
upon the higher Portfolio NAV which is defined in Appendix 1
below.
9. General and administrative expenses
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Legal and professional fees 1,081 1,049
Administration fees 1,070 717
Consultancy fees 148 176
Audit fees 246 211
Abortive costs 303 18
Bad debts - 421
Valuation fees 96 96
Depositary fees 71 60
Grants and donations 88 28
Insurance 49 65
Marketing 269 101
Regulatory fees 14 19
Sundry expenses 65 61
Directors' expenses 1 -
--------------- ---------------
Total 3,501 3,022
--------------- ---------------
Abortive costs represent legal and professional fees incurred in
relation to the acquisition of investment properties that were
considered but subsequently aborted.
Services provided by the Company's auditors and their
associates
The Group has obtained the following services from the Company's
auditors and their associates:
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Audit of the financial statements 195 180
Review of the half year financial
statements 51 31
Corporate services relating to the
C share conversion - 10
--------------- ---------------
Total 246 221
--------------- ---------------
10. Finance income
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Interest and dividends received on
liquidity funds 81 486
Bank interest received 29 5
--------------- ---------------
Total 110 491
--------------- ---------------
11. Finance expense
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Bank charges 2 2
Interest paid and payable on bank
borrowings 5,795 3,048
Bank borrowing commitment fees 220 207
Amortisation of loan arrangement fees 1,325 718
--------------- ---------------
Finance expenses associated with bank
borrowings 7,342 3,975
Amortisation of C share liability - 6,400
--------------- ---------------
Total 7,342 10,375
--------------- ---------------
12. 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 current period ended 31 March 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.
For the For the
year ended year ended
31 March 2020 31 March 2019
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.
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Group
Profit before taxation 37,725 19,864
--------------- ---------------
UK corporation tax rate 19.00% 19.00%
Theoretical tax at UK corporation
tax rate 7,168 3,774
Effects of:
Change in value of exempt investment
properties (1,784) (694)
Exempt REIT income (6,136) (4,702)
Amounts not deductible for tax
purposes 175 1,296
Unutilised residual current period
tax losses 577 326
--------------- ---------------
Total - -
--------------- ---------------
The standard rate of corporation tax is currently 19%. The
Government has announced that the corporation tax standard rate is
to be kept at to 19% for the foreseeable future.
REIT exempt income includes property rental income that is
exempt from UK Corporation Tax in accordance with Part 12 of
Corporation Tax Act 2010.
13. IFRS Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing
profit for the year attributable to ordinary equity holders of the
Company by the weighted average number of Ordinary shares in issue
during the year.
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:
For the For the
year ended year ended
31 March 2020 31 March 2019
--------------- ---------------
Calculation of Basic Earnings per share
Net profit attributable to Ordinary
shareholders (GBP'000) 37,725 19,864
Weighted average number of Ordinary
shares 622,103,798 425,393,423
Earnings per share - basic 6.06p 4.67p
--------------- ---------------
Calculation of Diluted Earnings per
share
Net profit attributable to Ordinary
shareholders (GBP'000) 37,725 19,864
Add back finance costs associated with
the C share liability (GBP'000) - 6,400
--------------- ---------------
Total (GBP'000) 37,725 26,264
--------------- ---------------
Weighted average number of Ordinary
shares 622,103,798 425,393,423
Effects of dilution from C shares - 197,067,957
--------------- ---------------
622,103,798 622,461,380
--------------- ---------------
Earnings per share - diluted 6.06p 4.22p
--------------- ---------------
14. Dividends
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Dividend of 1.325p for the 3 months
to 31 March 2019
(1.25p 3 months to 31 March 2018) 8,248 4,375
Dividend of 1.325p for the 3 months
to 30 June 2019
(1.25p 3 months to 30 June 2018) 8,248 4,375
Dividend of 1.325p for the 3 months
to 30 September 2019
(1.25p 3 months to 30 September 2018) 8,238 4,375
Dividend of 1.325p for the 3 months
to 31 December 2019
(1.25p 3 months to 31 December 2018) 8,236 4,756
--------------- ---------------
Total 32,970 17,881
--------------- ---------------
On 8 May 2019, the Company announced a dividend of 1.325 pence
per share in respect of the period 1 January 2019 to 31 March 2019.
The dividend payment was made on 7 June 2019 to shareholders on the
register as at 17 May 2019.
On 6 August 2019, the Company announced a dividend of 1.325
pence per share in respect of the period 1 April 2019 to 30 June
2019. The dividend payment was made on 6 September 2019 to
shareholders on the register as at 16 August 2019.
On 7 November 2019, the Company announced a dividend of 1.325
pence per share in respect of the period 1 July 2019 to 30
September 2019. The dividend payment was made on 29 November 2019
to shareholders on the register as at 15 November 2019.
On 29 January 2019, the Company announced a dividend of 1.325
pence per share in respect of the period 1 October 2019 to 31
December 2019. The dividend payment was made on 28 February 2020 to
shareholders on the register as at 7 February 2020.
On 11 May 2020, the Company announced a dividend of 1.325 pence
per share in respect of the period 1 January 2020 to 31 March 2020
totalling GBP8,236,000. The dividend payment was made on 12 June
2020 to shareholders on the register as at 22 May 2020. The
financial statements do not reflect this dividend.
15. Investment property
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Balance at beginning of year 826,918 516,554
Property acquisitions 33,194 289,304
Acquisition costs 5,311 10,916
Change in fair value during the year 13,320 10,144
--------------- ---------------
Value advised by the property valuers 878,743 826,918
Adjustments for lease incentive assets
and rent straight line assets recognised (10,755) (6,824)
--------------- ---------------
Total 867,988 820,094
--------------- ---------------
For the For the
year ended year ended
Change in fair value of investment 31 March 2020 31 March 2019
properties: GBP'000 GBP'000
--------------- ---------------
Change in valuation during the year 13,320 10,144
Adjustment for lease incentives and
rent straight line
adjustments recognised in assets as:
Start of the year 6,824 332
End of the year (10,755) (6,824)
--------------- ---------------
9,389 3,652
--------------- ---------------
In accordance with "IAS 40: Investment Property", the investment
property has been independently valued at fair value by 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.
As mentioned in note 3.1, the valuer included the following
material valuation uncertainty clause within its valuation
report.
Material Valuation Uncertainty due to Novel Coronavirus
(COVID-19)
The outbreak of the Novel Coronavirus (COVID-19), declared by
the World Health Organisation as a "Global Pandemic" on 11 March
2020, has impacted global financial markets. Travel restrictions
have been implemented by many countries.
Market activity is being impacted in many sectors. As at the
valuation date, we consider that we can attach less weight to
previous market evidence for comparison purposes, to inform
opinions of value. Indeed, the current response to COVID-19 means
that we are faced with an unprecedented set of circumstances on
which to base a judgement.
The valuation is therefore reported on the basis of "material
valuation uncertainty" as per VPS 3 and VPGA 10 of the RICS Red
Book Global. Consequently, less certainty - and a higher degree of
caution - should be attached to our valuation than would normally
be the case. Given the unknown future impact that COVID-19 might
have on the real estate market, we recommend that you keep the
valuation of these properties under frequent review.
For the avoidance of doubt, the inclusion of the 'material
valuation uncertainty' declaration above does not mean that the
valuation cannot be relied upon. Rather, the phrase is used in
order to be clear and transparent with all parties, in a
professional manner that - in the current extraordinary
circumstances - less certainty can be attached to the valuation
than would otherwise be the case.
Valuation
JLL valued the Civitas Social Housing PLC property portfolio on
the basis of each individual property and the theoretical sale of
the properties without the benefit of any corporate wrapper at
GBP878,743,000 as at 31 March 2020 (2019: GBP826,918,000).
JLL has provided valuation services to the Company with regards
to the properties during the year. In relation to the year ended 31
March 2020, 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.
With the exception of the acquisition detailed in note 16, all
corporate acquisitions during the year 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:
Quoted prices Significant Significant
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:
31 March 2020 867,988 - - 867,998
---------- ---------------- ------------ --------------
31 March 2019 820,094 - - 820,094
---------- ---------------- ------------ --------------
There have been no transfers between Level 1 and Level 2 during
any of the years, nor have there been any transfers between Level 2
and Level 3 during any of the years.
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.
In this instance, the determination of the fair value of
investment property requires an examination of the specific merits
of each property that are in turn considered pertinent to the
valuation.
These include:
i) the regulated social housing sector and demand for the
facilities offered by each SSH property owned by the Group;
ii) the particular structure of the Group's transactions where
vendors, at their own expense, meet the majority of the
refurbishment costs of each property and certain purchase
costs;
iii) detailed financial analysis with discount rates supporting
the carrying value of each property;
iv) underlying rents for each property in comparison to the
market rent, with consideration given as whether a property is over
rented; and
v) a full repairing and insuring lease with annual indexation
based on CPI or CPI+1% and effectively 25 years outstanding in most
cases with a Housing Association itself regulated by the Homes and
Communities Agency.
The following descriptions and definitions relating to valuation
techniques and key unobservable inputs made in determining fair
values are as follows:
Valuation techniques: market value method
The estimated amount for which a property should exchange
between a willing buyer and a willing seller in an arm's length
transaction after proper marketing wherein the parties had acted
knowledgeably, prudently and without compulsion. Such marketing to
be structured such that the sale is undertaken in such a manner and
in a specific market with a view to maximising the value
achieved.
There are two main unobservable inputs that determine the fair
value of the Group's investment property:
i) The rate of inflation as measured by CPI; it should be noted
that all leases benefit from either CPI or CPI+1 indexation.
ii) The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include
the regulated social housing sector and demand for each SSH
property owned by the Group, costs of acquisition and refurbishment
of each property, the anticipated future underlying cash flows for
each property, benchmarking of each underlying rent for each
property (passing rent), and the fact that all of the properties
within the Group's portfolio have the benefit of full repairing and
insuring leases entered into by a Housing Association.
As at the balance sheet date, the lease lengths within the
Group's portfolio ranged from an effective 25 years to 35 years
with a weighted average unexpired lease term of 23.7 years (2019:
24.4). The greater the length then, all other metrics being equal,
the greater the value of the property.
Sensitivities of measurement of significant unobservable
inputs
As set out within significant accounting estimates and
judgements at 3.1 above, the Group's property investment valuation
is open to judgements and is inherently subjective by nature. As a
result, the following sensitivity analysis has been prepared:
Average discount rate and range
The average discount rate used in the Group's property Portfolio
Valuation is 5.3% (2019: 5.3%).
The range of discount rates used in the Group's property
Portfolio Valuation is from 4.9% to 10.7% (2019: 4.9% to 6.0%).
The table below illustrates the change to the value of
investment properties if the discount rate and CPI used for the
portfolio valuation calculations are changed:
-0.5% in +0.5% in
discount discount +0.25% in -0.25% in
rate rate CPI CPI
GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ----------
Increase/(decrease) in the
IFRS fair value of investment
properties at:
31 March 2020 34,733 (32,245) 26,918 (25,846)
---------- ---------- ---------- ----------
31 March 2019 33,203 (30,788) 25,651 (24,711)
---------- ---------- ---------- ----------
16. Subsidiary resale
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Balance at the beginning
of the year - -
Acquisition 19,829 25,470
Transfer to investment
property (17,608) (21,134)
Sale proceeds (2,221) (4,336)
--------------- ---------------
- -
--------------- ---------------
On 11 March 2020, the Group entered into a transaction to
acquire the freehold properties operated by New Directions Flexible
Social Care Solutions Ltd and Vision MH Ltd. Upon the acquisition
of the companies for GBP19,829,000, investment properties were
transferred into other Group companies and the companies, along
with their associated operations, were sold to TLC Care Homes
Limited for GBP2,221,000.
On 7 December 2018, the Group acquired a subsidiary, TLC Care
Homes Limited, for GBP25,470,000 consisting of investment property
and a care home business with the exclusive intent to sell the
subsidiary business. At acquisition, the fair value of the
investment property was GBP21,134,000 and the fair value of the
assets and liabilities less selling costs of the care home business
was GBP4,336,000. The care home business was sold immediately
following acquisition for GBP4,336,000.
17. Trade and other receivables
Amounts falling due in less than one 31 March 2020 31 March 2019
year GBP'000 GBP'000
-------------- --------------
Rent receivable 4,307 2,954
Less provision for impairment - (421)
-------------- --------------
Net rent receivable 4,307 2,533
Accrued income 4,267 2,778
Prepayments and other receivables 2,264 412
-------------- --------------
Total 10,838 5,723
-------------- --------------
Prepayments and other receivable amounts include prepaid legal
and professional fees of GBP469,000 (2019: GBP343,000) that have
been incurred in connection with acquisitions yet to be completed
and GBP1,695,000 (2019: GBPnil) in respect of uncompleted works on
the property portfolio.
The increase in accrued income relates mainly to rent accrued
for the period but not yet demanded. This is due to a number of
tenants who are invoiced in arrears.
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Amounts falling due after more than one
year
Debtor arising from straight line adjustments 1,152 791
Lease incentives 9,603 6,033
-------------- --------------
10,755 6,824
-------------- --------------
The aged analysis of trade receivables that are past due but not
impaired was as follows:
31 March 2020 31 March 2019
GBP'000 GBP'000
Current 1,594 991
< 30 days 657 353
30-60 days 319 499
> 60 days 1,737 1,111
-------------- --------------
4,307 2,954
Less provision for impairment - (421)
-------------- --------------
Total 4,307 2,533
-------------- --------------
The Directors consider the fair value of receivables equals
their carrying amount.
The table above shows the aged analysis of trade receivables
included in the table above which are past due. The provision for
impairment principally relates to First Priority Housing
Association ("First Priority").
Other categories within trade and other receivables do not
include impaired assets.
18. Cash and cash equivalents
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Cash held by solicitors 3,325 17,031
Liquidity funds 10,475 13,394
Cash held at bank 27,629 16,703
-------------- --------------
Unrestricted cash and cash equivalents 41,429 47,128
Restricted cash 16,945 7,219
-------------- --------------
Total 58,374 54,347
-------------- --------------
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 amounts held for specific commitments
and 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.
19. Trade and other payables
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Deferred income 245 14
Acquisition costs accrued 5,068 10,074
Lease incentives payable - 3,000
Finance costs 1,014 798
Dividends payable 798 717
Accruals 618 616
Income tax and corporation tax payable* - 105
-------------- --------------
Total 7,743 15,324
-------------- --------------
Acquisition costs accrued includes the balance of retention
monies of GBP4,819,000 (2019: GBP7,219,000) and acquisition
costs.
* Represents tax liabilities incurred by subsidiary companies
prior to acquisition by the Group.
20. 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 year end are offset against amounts drawn on the facilities as
shown in the table below:
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------- ---------------
Balance at start of year 208,447 92,457
Bank borrowings drawn 64,053 115,990
---------------- ---------------
Bank borrowings drawn at end of year 272,500 208,447
Balance at start of year (3,291) (1,635)
Less: loan issue costs incurred (1,364) (2,374)
Add: loan issue costs amortised 1,325 718
---------------- ---------------
Unamortised costs at end of year (3,330) (3,291)
At end of year 269,170 205,156
---------------- ---------------
Loan Balance* Loan Principle Low Principal
31 March 2020 31 March 2020 31 March 2019
GBP'000 GBP'000 GBP'000
--------------- --------------- ---------------
Maturity of bank borrowings:
Repayable within 1 year 59,730 60,000 -
Repayable between 1 to 2
years 99,004 100,000 55,947
Repayable between 2 to 5
years 58,840 60,000 100,000
Repayable after 5 years 51,596 52,500 52,500
Total 269,170 272,500 208,447
--------------- --------------- ---------------
* Loan balance net of unamortised costs.
As disclosed in note 36, after the year end the Lloyds Bank plc
GBP60 million Revolving Credit Facility, which the table shows as
repayable within 1 year, was extended in the normal course of
business to November 2021.
The Group is party to 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% per annum.
The borrowings include amounts secured on investment property to
the value of GBP170,599,000 (2019: GBP169,999,000).
A 3-year Sterling Revolving Facility Agreement dated 15 November
2017 for up to GBP40,000,000 with Lloyds Bank plc. Interest is
charged at LIBOR +1.50% margin. During the comparative year, a
GBP20,000,000 increase of this facility was agreed. This facility
was due for renewal in November 2020 but, as at the signing date,
the loan has been extended in the normal course to November
2021.
The borrowings include amounts secured on investment property to
the value of GBP147,475,000 (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 is
charged at LIBOR +1.70% margin.
The borrowings include amounts secured on investment property to
the value of GBP216,026,000 (2019: GBP208,953,000).
A 5-year loan facility with National Westminster Bank Plc, dated
15 August 2019, for up to GBP60,000,000. Interest is charged at
LIBOR +2.00% margin and has been fixed by way of a 5-year swap. The
swap fixes interest on GBP20 million at 0.7105% and GBP40,000,000
at 0.5475%. 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 GBP129,933,000 (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 ratio must not exceed
50%. At 31 March 2020, the Group is in compliance with all
covenants.
21. 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
GBP60,000,000 is currently drawn.
The swap has a notional value of GBP60,000,000 and fixes
interest at 2.60% (including the 2% margin rate on the bank
loan).
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------- ---------------
At start of year - -
Change in fair value during the year (478) -
---------------- ---------------
At end of the year (478) -
---------------- ---------------
The table below shows the fair value measurement hierarchy for
interest derivatives:
Quote prices Significant Significant
In active Observable unobservable
Markets Inputs Inputs
(Level 1) (Level 2) (Level 3)
GBP'000 GBP'000 GBP'000
------------- ------------ --------------
31 March 2020 - (478) -
31 March 2019 - - -
------------- ------------ --------------
There have been no transfers between Level 1 and Level 2 during
the year nor have there been any transfers between Level 2 and
Level 3 during the year.
22. C shares
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
----------------- ---------------
At beginning of year - 298,752
Dividends paid to C shareholders - (9,966)
Amortisation of C share liability - 6,400
Conversion to Ordinary shares - (295,186)
At end of year - -
----------------- ---------------
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 were listed on the London
Stock Exchange and dealing commenced on 14 November 2017.
Holders of C shares were 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.
23. Share capital
Share capital represents the nominal value of consideration
received by the Company for the issue of Ordinary shares.
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------- ---------------
Share capital
At beginning of year 6,225 3,500
Shares issued - 2,725
At end of year 6,225 6,225
---------------- ---------------
Number of shares issued and fully
paid
Ordinary shares of GBP0.01 each
At beginning of year 622,461,380 350,000,000
Shares issued - 272,461,380
At end of year 622,461,380 622,461,380
---------------- ---------------
On 21 December 2018, the Company issued 272,461,380 Ordinary
shares in respect of the conversion of 302,000,000 C shares. The
fair value of assets representing the C share pool at that date was
GBP295,186,000.
The Company holds 815,000 Ordinary shares in treasury. The
number of Ordinary shares used to calculate the net asset value is
621,646,380.
24. Share premium reserve
The share premium reserve represents the amounts subscribed for
Ordinary share capital in excess of nominal value less associated
issue costs of the subscriptions.
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------- ---------------
At beginning of year 292,405 -
Premium arising on shares issued - 292,461
Share issue costs - (56)
At end of year 292,405 292,405
---------------- ---------------
25. Capital reduction reserve
The capital reduction reserve is a distributable reserve to
which the value of the cancelled share premium has been
transferred. Pursuant to Article 3 of The Companies (Reduction of
Share Capital) Order 2008, the balance held in the capital
reduction reserve is to be treated for the purposes of Part 23 of
the Companies Act 2006 as a realised profit and therefore available
for distribution in accordance with section 830 of the Companies
Act. The Company has used this reserve for the costs of buying back
shares to be held in treasury.
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------- ---------------
Balance at beginning of the year 331,625 331,625
Shares bought back into treasury (699) -
At end of year 330,926 331,625
---------------- ---------------
During the year, the Company purchased 815,000 Shares for a
total cost of GBP699,000 to be held in treasury. The shares will
continue to be held in treasury until either re-issued or
cancelled.
26. Retained earnings
This reserve represents the profits and losses of the Group.
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------- ---------------
Balance at beginning of the year 36,253 34,270
Profit for the year 37,725 19,864
Dividends paid in the year (as per
note 14) (32,970) (17,881)
---------------- ---------------
At end of year 41,008 36,253
---------------- ---------------
27. Net asset value
Basic NAV per share is calculated by dividing net assets in the
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 year.
Net asset values have been calculated as follows:
31 March 2020 31 March 2019
-------------- --------------
Net assets (GBP'000) 670,564 666,508
-------------- --------------
Number of Ordinary shares in issue
at end of year 622,461,380 622,461,380
Number of Ordinary shares held in
treasury (815,000) -
-------------- --------------
Number of Ordinary shares excluding
treasury shares held by the Company 621,646,380 622,461,380
-------------- --------------
NAV - basic and diluted 107.87p 107.08p
-------------- --------------
28. Reconciliation of liabilities to cash flows from
financing
For the
C share Bank year ended
liability borrowings 31 March 2020
GBP'000 GBP'000 GBP'000
----------- ----------- --------------
Balance at the beginning of
the year - 205,156 205,156
Cash flows from financing activities
Loan draw down - 64,053 64,053
Loan arrangement costs paid - (1,364) (1,364)
Non cash movements
Amortisation of loan arrangement
costs - 1,325 1,325
----------- ----------- --------------
- 269,170 269,170
-------------------------------------------------- ----------- --------------
For the
C share Bank year ended
liability borrowings 31 March 2019
GBP'000 GBP'000 GBP'000
---------- ----------- --------------
Balance at the beginning of
the year 298,752 90,822 389,574
Cash flows from financing activities
Loan draw down - 115,990 115,990
Loan arrangement costs paid - (2,374) (2,374)
Dividends paid to C shareholders
in the year (9,966) - (9,966)
Non cash movements
Amortisation of loan arrangement
costs - 718 718
Amortisation of C shares liability 6,400 - 6,400
C share conversion (295,186) - (295,186)
- 205,156 205,156
---------- ----------- --------------
Summary of non-cash transactions
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. The
fair value of assets represented by the C share pool, being the
deemed consideration, was GBP295,186,000.
29. Operating leases
The Group is party to a number of operating leases on its
investment properties with Registered Providers. The future minimum
lease payments under non-cancellable operating leases receivable by
the Group are as follows:
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Amounts receivable
< 1 year 48,416 45,685
1-2 years 48,451 45,720
2-5 years 145,545 137,356
> 5 years 886,677 882,407
At end of year 1,129,089 1,111,168
-------------- --------------
Leases are direct-let agreements with Registered Providers for a
term between 15 to 25 years with indexed linked annual rent
reviews. All current leases are full repairing and insuring leases;
the tenants are therefore obliged to repair, maintain and renew the
properties back to the original conditions.
The following table gives details of percentage of annual rental
income per Registered Provider:
31 March 2020 31 March 2019
% %
-------------- --------------
Auckland Home Solutions* 22.73 11.26
Falcon Housing Association CIC 20.43 20.89
Bespoke Supportive Tenancies 11.05 11.37
Inclusion Housing CIC 8.74 8.34
Westmoreland Supported Housing Limited 7.97 19.66
Encircle Housing Limited 6.11 6.33
Trinity Housing Association Limited 5.50 5.74
Pivotal Housing Association 3.96 4.09
Harbour Light Assisted Living CIC 3.76 2.42
Chrysalis Supported Association Limited 3.49 3.41
New Walk Property Management CIC 2.87 2.95
My Space Housing Solutions 1.19 1.24
IKE Supported Housing Limited 1.15 1.20
Hilldale Housing Association Limited 0.98 1.03
Blue Square Limited 0.07 0.07
Total 100.0 100.00
-------------- --------------
* Includes properties reassigned from Westmoreland Supported
Housing Limited.
The Group is also party to a number of operating leases on its
long leasehold properties. The ground rent payment
commitments under these operating leases are negligible so the
future minimum lease payments under these leases have not been
disclosed in these financial statements.
30. Controlling parties
As at 31 March 2020, there is no ultimate controlling party.
31. Related party disclosures
The Directors are remunerated for their services at such rate as
the Directors shall from time to time determine. The aggregate
remuneration and benefits in kind of the Directors of the Company
(in each case, solely in their capacity as such) in respect of the
year ended 31 March 2020 payable out of the assets of the Company
is not expected to exceed GBP200,000.
Fees of GBP162,000 (2019: GBP150,000) were incurred and paid to
the Directors.
As at 31 March 2020, the Directors held the following number of
shares:
31 March 2020 31 March 2019
Director Ordinary shares Ordinary shares
---------------- ------------------
Michael Wrobel Chairman 100,598 100,598
Alastair Moss Director 11,766 11,766
Alison Hadden Director - -
Audit and Management
Engagement Committee
Caroline Gulliver Chair 58,832 58,832
Peter Baxter Director 47,065 47,065
------------------- ----------------------- ---------------- ------------------
Remuneration
The Investment Adviser has reviewed its remuneration policies
and procedures to ensure incentives are aligned with the
requirements of AIFMD. It includes measures to avoid conflicts of
interest such as providing staff with a fixed monthly salary and
determining discretionary payments by the performance of the
Investment Adviser as a whole and not linked to any one AIF in
particular. The Investment Adviser and its staff receive no
remuneration through profit share, carried interest, co-investment
or other schemes related to the Company's performance.
32. Transactions with the Investment Adviser
On 1 November 2016, Civitas Investment Management Limited was
appointed as the Investment Adviser of the Company.
Fees of GBP6,131,000 (2019: GBP6,457,000) were incurred and paid
to CIM. In addition, disbursements of GBP52,000 were also paid in
the year.
As at 31 March 2020, no amounts (2019: GBPnil) were due to/from
CIM.
At 31 March 2020, CIM held 50,000 Ordinary shares in the
Company.
33. Consolidated entities
The Company has provided a guarantee under s479C of the
Companies Act 2006 in respect of the financial year ended 31 March
2020 for a number of its subsidiary companies (as indicated in the
table on the following pages). The guarantee is over all
outstanding liabilities to which the subsidiary companies are
subject at 31 March 2020 until they are satisfied in full.
The Group consists of a parent company, Civitas Social Housing
PLC, incorporated in England and Wales and a number of subsidiaries
held directly by Civitas Social Housing PLC, which operate and are
incorporated in the UK, Jersey and the Isle of Man.
The Group owns 100% equity shares of all subsidiaries listed
below and has the power to appoint and remove the majority of the
board of directors of those subsidiaries. The relevant activities
of the below subsidiaries are determined by the Board of Directors
based on the purpose of each company.
Therefore, the Directors concluded that the Group has control
over all these entities and all these entities have been
consolidated within the consolidated financial statements.
A list of all related undertakings included within these
consolidated financial statements are noted below. Indirectly held
subsidiary companies are marked by an indentation in the table
below.
Registered Principal Country of Ownership
Name number activity incorporation %
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas Social Housing Finance Finance England &
Company 1 Limited ++ 10997707 company Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas Social Housing Jersey Holding
1 Limited 124129 company Jersey 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property England &
Civitas SPV1 Limited ++ 10518729 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV2 Limited ++ 10114251 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV11 Limited ++ 10546749 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV15 Limited ++ 09777380 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV25 Limited ++ 10791473 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV27 Limited ++ 10883112 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV33 Limited ++ 10546407 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV35 Limited ++ 10588530 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV38 Limited ++ 10738318 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV39 Limited ++ 10547333 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV40 Limited ++ 10738510 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV41 Limited ++ 10738542 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV50 Limited ++ 10775419 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas Social Housing Finance Finance England &
Company 2 Limited ++ 10997698 company Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas Social Housing Jersey Holding
2 Limited 124876 company Jersey 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property England &
Civitas SPV3 Limited ++ 10156529 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV4 Limited ++ 10433744 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV5 Limited ++ 10479104 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV6 Limited ++ 10674493 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV9 Limited ++ 10536388 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV10 Limited ++ 10535243 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV12 Limited ++ 10546753 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV17 Limited ++ 10479036 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV18 Limited ++ 10546651 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV19 Limited ++ 10548932 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV20 Limited ++ 10588735 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV22 Limited ++ 10743958 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV24 Limited ++ 10751512 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV26 Limited ++ 10864336 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV29 Limited ++ 10911565 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV30 Limited ++ 10956025 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV31 Limited ++ 10974889 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV32 Limited ++ 11007173 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV34 Limited ++ 10738381 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV36 Limited ++ 10588792 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV42 Limited ++ 10738556 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV43 Limited ++ 10534877 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV45 Limited ++ 10871854 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV46 Limited ++ 10871910 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV47 Limited ++ 10873270 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV48 Limited ++ 10873295 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV51 Limited ++ 10826693 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV52 Limited ++ 10827006 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV63 Limited ++ 10937805 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV64 Limited ++ 10938411 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV70 Limited ++ 10770201 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV71 Limited ++ 10888639 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV72 Limited ++ 10938022 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV74 Limited ++ 11001855 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV75 Limited ++ 11001834 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV80 Limited ++ 11001998 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas Social Housing Finance Finance England &
Company 3 Limited ++ 10997714 Company Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV8 Limited ++ 10536157 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV28 Limited ++ 10895228 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV53 Limited ++ 11021625 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV55 Limited ++ 11056455 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV57 Limited ++ 11091444 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV60 Limited ++ 11111908 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV61 Limited ++ 10937662 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV66 Limited ++ 10937898 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV77 Limited ++ 11166491 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV78 Limited ++ 11170099 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV79 Limited ++ 11236544 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV81 Limited ++ 11192811 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV82 Limited ++ 11380796 investment Wales 100.00%
Property England &
Civitas SPV83 Limited ++ 11371128 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV85 Limited ++ 11300749 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV95 Limited ++ 11208184 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV97 Limited ++ 11463890 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV103 Limited ++ 11500596 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV105 Limited ++ 11532177 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV106 Limited ++ 11532179 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV107 Limited ++ 11532182 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV116 Limited ++ 11504399 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV117 Limited ++ 11504445 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas Social Housing Jersey Holding
3 Ltd 124877 company Jersey 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property England &
Civitas SPV7 Limited ++ 10536368 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV13 Limited ++ 9517692 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV14 Limited ++ 10479041 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV16 Limited ++ 09917557 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV21 Limited ++ 10631541 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV37 Limited ++ 10738450 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV44 Limited ++ 10588783 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV49 Limited ++ 11031349 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas Social Housing Finance Finance England &
Company 4 Limited ++ 11906660 Company Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV23 Limited ++ 10746881 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV54 Limited ++ 11039750 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV59 Limited ++ 11111912 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV69 Limited ++ 11142372 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV73 Limited ++ 10939075 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV84 Limited ++ 11381455 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV86 Limited ++ 11418432 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV87 Limited ++ 10888903 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV88 Limited ++ 10939044 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV90 Limited ++ 10939131 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV91 Limited ++ 10941377 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV92 Limited ++ 11449913 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV93 Limited ++ 11043111 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV94 Limited ++ 11208105 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV96 Limited ++ 11270786 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV100 Limited ++ 11069703 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV101 Limited ++ 09978282 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV102 Limited ++ 11521555 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV109 Limited ++ 11532120 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV112 Limited ++ 11579750 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV114 Limited ++ 11579733 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV115 Limited ++ 11522178 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV118 Limited ++ 11411498 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV121 Limited ++ 11099917 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV122 Limited ++ 11482646 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV127 Limited ++ 10941401 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV129 Limited ++ 11664994 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV130 Limited ++ 11705074 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV131 Limited ++ 11675132 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV132 Limited ++ 11473735 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Holding England &
Civitas SPV145 Limited ++ 11842306 company Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Fieldbay Limited ++ 05219012 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV148 Limited ++ 11632633 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV149 Limited ++ 11462691 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV150 Limited ++ 11462555 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
FPI CO 324 Ltd ++ 11633019 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV56 Limited ++ 11056465 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV62 Limited ++ 10937528 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV65 Limited ++ 10938467 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV67 Limited ++ 10937929 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV68 Limited ++ 10938269 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Holding England &
Civitas SPV98 Limited ++ 11478695 Company Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property
Snapco Limited 008603V investment Isle of Man 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property
Snapco 2 Limited 009143V investment Isle of Man 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property
Snapco 3 Limited 009144V investment Isle of Man 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property
Snapco 4 Limited 011660V investment Isle of Man 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property
Snapco 5 Limited 012111V investment Isle of Man 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Holding England &
Civitas SPV99 Limited ++ 11478707 Company Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property
Snapco 6 Limited 012112V investment Isle of Man 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property England &
Civitas SPV104 Limited ++ 11532174 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
England &
Civitas SPV108 Limited ++ 11532135 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV113 Limited ++ 11580068 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
* England &
Civitas SPV119 Limited ++ 11751515 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
* England &
Civitas SPV120 Limited ++ 11801922 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV123 Limited ++ 8253452 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV135 Limited ++ 11579880 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV143 Limited ++ 11546808 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV144 Limited ++ 11546696 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
England &
Civitas SPV146 Limited ++ 11861500 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
England &
Civitas SPV147 Limited ++ 11861974 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
* England &
Civitas SPV151 Limited ++ 11913037 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Bedford SPV1 Limited (previously Property England &
Pitsea SPV1 Limited) 12315518 investment Wales 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Civitas SPV133 Limited (previously Property England &
Carislease 6 Limited) ++ 11698972 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas SPV134 Limited (previously Property England &
Carislease 3 Limited) ++ 11689461 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Civitas SPV136 Limited (previously Property England &
NCG PB SPV Limited) ++ 11579760 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV152 Limited ++ 11955719 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV155 Limited ++ 12044281 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV156 Limited ++ 12081093 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV157 Limited ++ 12188610 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV158 Limited ++ 12202674 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Civitas SPV159 Limited 12258313 investment Wales 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property England &
Civitas SPV160 Limited 12272906 investment Wales 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
England &
Civitas SPV161 Limited * 12289935 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
England &
Civitas SPV162 Limited * 12289907 Dormant Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
FPI Co 294 Ltd ++ 11519226 investment Wales 100.00%
------------------------------------ ----- ----------- ------------ --------------- ----------
Property England &
Bridge Property Herts Limited 12435985 investment Wales 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
Property England &
Bridge Propco Limited 12445439 investment Wales 100.00%
------------------------------------------- ----------- ------------ --------------- ----------
++ These entities are exempt from the requirements of the
Companies Act 2006 relating to the audit of individual financial
statements by virtue of Section 479A of that Act. These are all
entities that have a year end prior to 31 March 2020.
* These entities have applied to the Registrar of Companies to
be struck off.
The registered addresses for the subsidiaries are consistent
based on their country of incorporation and are as follows:
-- England & Wales entities: Beaufort House, 51 New North
Road, Exeter, United Kingdom, EX4 4EP
-- Jersey entities: 12 Castle Street, St Helier, Jersey, JE2
3RT
-- Isle of Man entities: Knox House, 16-18 Finch Road, Douglas
IM1 2PT
34. Financial risk management
34.1. Financial instruments
The Group's principal financial assets and liabilities are those
that arise directly from its operations: trade and other
receivables, trade and other payables and cash and cash
equivalents. The Group's other principal financial liabilities are
bank borrowings, the main purpose of which is to finance the
acquisition and development of the Group's investment property
portfolio, and interest rate derivatives as detailed in notes 20
and 21.
Financial assets are classified as loans and receivables and all
financial liabilities are measured at amortised cost, except
interest rate derivatives, which are measured at fair value. All
financial instruments were designated in their current categories
upon initial recognition.
Set out below is a comparison by class of the carrying amounts
and fair value of the Group's financial instruments that are
carried in the financial statements:
Book value Book value Fair value
31 March Fair value 31 March 31 March
2020 31 March 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------- --------------- ----------- -----------
Financial assets
Trade and other receivables(1) 8,595 8,595 5,353 5,353
Cash and cash equivalents 58,374 58,374 54,347 54,347
----------- --------------- ----------- -----------
Financial liabilities
Trade and other payables(2) 7,498 7,498 15,205 15,205
Bank borrowings 269,170 269,174 205,156 205,806
Interest rate derivatives 478 478 - -
----------- --------------- ----------- -----------
(1) Excludes prepayments and debtors arising on rent
smoothing.
(2) Excludes deferred income and tax liabilities.
The Group has four bank loans: a 10-year fixed rate loan of
GBP52.5 million provided by Scottish Widows Limited; a 3-year
revolving credit facility variable rate loan of GBP60 million
provided by Lloyds Bank plc; a 3-year revolving credit facility
variable rate loan of GBP100 million provided by HSBC Bank PLC; and
a 5-year revolving credit facility variable rate loan of GBP60
million provided by National Westminster Bank Plc. The fair value
of the fixed rate loan is determined by comparing the discounted
future cash flows.
Financial risk management
The Group is exposed to market risk, interest rate risk, credit
risk and liquidity risk in the current and future periods. The
Board of Directors oversees the management of these risks. The
Board of Directors reviews and agrees policies for managing each of
these risks that are summarised below.
34.2. Market risk
The Group's activities will expose it primarily to the market
risks associated with changes in property values and changes in
interest rates.
Risk relating to investment in property
Investment in property is subject to varying degrees of risk.
Some factors that affect the value of the investment in property
include:
-- changes in the general economic climate;
-- competition for available properties;
-- obsolescence; and
-- Government regulations, including planning, environmental and
tax laws.
Variations in the above factors can affect the valuation of
assets held by the Group and as a result can influence the
financial performance of the Group.
Risk relating to liquidity funds classified as cash and cash
equivalents
The Group holds positions in two AAA rated liquidity funds that
invest in a diversified range of government and non-government
money market securities, which are subject to varying degrees of
risk. Some factors that affect the value of the liquidity funds
include:
-- the performance of the underlying government and
non-government money market securities; and
-- interest rates.
Variations in the above factors can affect the valuation of
assets held by the Group and as a result can influence the
financial performance of the Group.
34.3. Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Group's interest rate risk principally arises from long-term
borrowings. To manage this, the Group has entered into a fixed rate
bank loan and three variable rate bank loans. The Group has entered
into an interest rate swap on the 5-year loan facility with
National Westminster Bank Plc in order to mitigate the risk of
rising interest rates.
At 31 March 2020, 41% (2019: 25%) of the Group's borrowings are
subject to a fixed rate of interest.
The exposure of the Group to variable rates of interest is
considered upon drawing of any new loan facilities, to ensure that
the Group's exposure to interest rate fluctuations is within
acceptable levels.
The Investment Adviser monitors the Group's exposure to any
changes in interest rate on an ongoing basis, with the Board
updated on a quarterly basis of the current exposure of the Group's
loan facilities.
As at 31 March 2020, if interest rates had been 200 basis points
higher/(lower) with all other variables held constant the impact on
profits after taxation for the year would be as follows:
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
(Decrease)/increase in profits due to
interest rates
200 basis points higher (8,830) (2,032)
200 basis points lower 3,662 1,271
-------------- --------------
The average effective interest rates of financial instruments at
31 March 2020 were as follows:
31 March 2020 31 March 2019
% %
-------------- --------------
Bank borrowings - fixed rate 2.31950 2.99360
Bank borrowings - variable rate 2.80046 2.50180
Cash and cash equivalents 0.11048 0.16795
-------------- --------------
34.4. Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risks
from both its leasing activities and financing activities,
including deposits with banks and financial institutions.
Debtors and accrued income represent rent due or accrued, these
amounts due are diversified between a number of different Housing
Associations of differing financial strength, see note 29 for
details of the different counterparties. None of the Housing
Associations have listed debt and as such do not have a credit
rating, however, the diversified nature of this asset supports the
credit quality.
The Group has policies in place to ensure that rental contracts
are entered into only with lessees with an appropriate credit and
operational history, and limits exposure to any one tenant. The
credit risk is considered to be further reduced as the source of
the rents received by the Group is ultimately provided by the
government, by way of housing benefit and care provision, via a
diverse range of Local Authorities.
For details of provisions for impairment please refer to note
17.
Credit risk related to financial instruments and cash
deposits
One of the principal credit risks of the Group will arise with
the banks and financial institutions. The Board of Directors
believes that the credit risk on short-term deposits and current
account cash balances is limited because the counterparties are
banks considered to be of good credit quality. In the case of cash
deposits held with lawyers, the credit risk is limited because the
cash is held by the lawyers within client accounts at banks with
high credit quality.
34.5. Liquidity risk
The Group manages its liquidity and funding risks by considering
cash flow forecasts and ensuring sufficient cash balances are held
within the Group to meet future needs. Prudent liquidity risk
management implies maintaining sufficient cash and marketable
securities, the availability of financing through appropriate and
adequate credit lines, and the ability of customers to settle
obligations within normal terms of credit. The Group ensures,
through forecasting of capital requirements, that adequate cash is
available.
The following table details the Group's maturity profile in
respect of its financial instrument liabilities based on
contractual undiscounted payments:
On demand <1 year 1-5 years > 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ---------- ---------- ---------
31 March 2020
Trade and other
payables 7,498 - - - 7,498
Bank borrowings - 66,896 174,785 55,002 296,683
7,498 66,896 174,785 55,002 304,181
---------- --------- ---------- ---------- ---------
31 March 2019
Trade and other
payables 15,205 - - - 15,205
Bank borrowings - 5,473 168,877 56,573 230,923
15,205 5,473 168,877 56,573 246,128
---------- --------- ---------- ---------- ---------
The profile above shows the maturity profile at 31 March 2020
and included within the contracted payments is GBP24,183,000 (2019:
GBP22,476,000) of loan interest payable up to the point of
maturity. As disclosed in note 36, after the year end, the
revolving credit facility of GBP60,000,000 was extended for one
year and now matures in November 2021.
35. Capital commitments
At 31 March 2020, the Company had funds committed totalling
GBP22,100,000 (2019: GBP12,000,000). GBP12,100,000 relates to two
properties (currently under development) for which the Company has
entered into a conditional sale and purchase agreement contingent
on the completion of development. GBP10,000,000 (estimated) relates
to a capital payment for the same properties contingent on the
operators achieving certain financial obligations.
Amounts totalling GBP850,000 have been allocated for capital
works expenditure on properties, subject to future proofing
activities to ensure the longevity of occupation by residents.
In addition to the above, as at 31 March 2020, the Company had
conditionally exchanged on two properties in Telford and one in
Sunderland totalling GBP1,800,000. One of these properties
completed in April 2020 with the remaining two expected to complete
over the coming months.
36. Post balance sheet events
Acquisitions
On 20 April 2020, a property in Telford was acquired for
GBP0.6m. On 11 June 2020, the Company completed on the forward
purchase agreement of a development in Wales for GBP2.3m.
Dividends
On 11 May 2020, the Board declared a quarterly dividend in
respect of the Ordinary shares for the three months to 31 March
2020 of 1.325 pence per Ordinary share totalling GBP8,236,000. The
dividend was paid on 12 June 2020 to holders of Ordinary shares on
the register as at 22 May 2020. The dividend was paid as a REIT
property income distribution ("PID").
Other announcements
The Lloyds Bank plc GBP60m Revolving Credit Facility has been
extended in the normal course of business to November 2021.
Company Statement of Financial Position
As at 31 March 2020
31 March 2019
Note 31 March 2020 (restated)
GBP'000 GBP'000
-------------- --------------
Assets
Non-current assets
Investment in subsidiaries 8 706,920 676,496
-------------- --------------
Current assets
Trade and other receivables 9 4,727 371
Cash and cash equivalents 10 29,011 45,905
-------------- --------------
33,738 46,276
-------------- --------------
Total assets 740,658 722,772
-------------- --------------
Liabilities
Current liabilities
Trade and other payables 11 (191,942) (131,277)
-------------- --------------
(191,942) (131,277)
-------------- --------------
Total liabilities (191,942) (131,277)
-------------- --------------
Total net assets 548,716 591,495
-------------- --------------
Equity
Share capital 12 6,225 6,225
Share premium reserve 292,405 292,405
Capital reduction reserve 330,926 331,625
Retained earnings/(accumulated
losses) 13 (80,840) (38,760)
-------------- --------------
Total equity 548,716 591,495
-------------- --------------
The Company has taken advantage of the provisions of Companies
Act 2006 s408 and does not disclose the Company's individual profit
and loss account. Losses for the year were GBP9,110,000 (2019: loss
of GBP14,937,000).
The Company financial statements above were approved by the
Board of Directors of Civitas Social Housing PLC and authorised for
issue and signed on its behalf by:
Michael Wrobel
Chairman and Independent Non-Executive Director
29 June 2020
Company No: 10402528
The notes below are an integral part of these financial
statements.
Company Statement of Changes in Equity
For the year ended 31 March 2020
Retained
Share Capital earnings/
Share premium reduction (accumulated Total
Capital reserve reserve losses)* equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ---------- ------------- ---------
Balance at 1 April 2018 3,500 - 331,625 85,479 420,604
Prior year adjustment (note 3) (91,421) (91,421)
Balance at 1 April 2018 (as restated) 3,500 - 331,625 (5,942) 329,183
Loss and total comprehensive expense for
the year - - - (14,937) (14,937)
Issue of Ordinary shares
Issue of share capital 2,725 292,461 - - 295,186
Share issue costs - (56) - - (56)
Dividends paid
Total interim dividends for the year ended
31 March 2019 (5.00p) - - - (17,881) (17,881)
Balance at 31 March 2019 6,225 292,405 331,625 (38,760) 591,495
-------- -------- ---------- ------------- ---------
Loss and total comprehensive expense for
the year - - - (9,110) (9,110)
Issue of Ordinary shares
Share bought back into treasury - - (699) - (699)
Dividends paid
Total interim dividends for the year ended
31 March 2020 (5.30p) - - - (32,970) (32,970)
Balance at 31 March 2020 6,225 292,405 330,926 (80,840) 548,716
-------- -------- ---------- ------------- ---------
* The Company's distributable reserves comprise retained
earnings and capital reduction reserve. These in aggregate had
sufficient realised distributable reserves to support the dividends
paid.
The notes below are an integral part of these financial
statements.
Notes to the Company Financial Statements
For the year ended 31 March 2020
1. Corporate information
Civitas Social Housing PLC ("the Company") was incorporated in
England and Wales under the Companies Act 2006 as a public company
limited by shares on 29 September 2016 with company number 10402528
under the name Civitas REIT PLC, which was subsequently changed to
the existing name on 3 October 2016.
The address of the registered office is Beaufort House, 51 New
North Road, Exeter, Devon 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 Company did not begin trading until 18 November 2016 when
the shares were admitted to trading on the London Stock Exchange
("LSE").
The Company's Ordinary shares have been admitted to the Official
List of the Financial Conduct Authority ("FCA"), and are traded on
the LSE.
The principal activity of the Company is to act as the ultimate
parent company of Civitas Social Housing PLC and its subsidiaries
(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 statements have been prepared on a historical cost
basis and in accordance with Financial Reporting Standard 100
Application of Financial Reporting Requirements ("FRS 100"),
Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS
101") and the Companies Act 2006 as applicable to companies using
FRS 101.
In preparing these financial statements, the Company applies the
recognition, measurement and disclosure requirements of
International Financial Reporting Standards as adopted by the EU
("Adopted IFRSs"), but makes amendments where necessary in order to
comply with the Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken.
In preparing these financial statements the Company has taken
advantage of all disclosure exemptions conferred by FRS 101.
Therefore, these financial statements do not include:
-- certain comparative information as otherwise required by EU endorsed IFRS;
-- certain disclosures regarding the Company's capital;
-- a statement of cash flows;
-- the effect of future accounting standards not yet adopted;
-- the disclosure of the remuneration of key management personnel; and
-- disclosure of related party transactions with other wholly
owned members of Civitas Social Housing PLC.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been adopted because equivalent disclosures are
included in the Company's consolidated financial statements. These
financial statements do not include certain disclosures in respect
of:
-- share based payments;
-- financial instruments; and
-- fair value measurement other than certain disclosures
required as a result of recording financial instruments at fair
value.
In addition, the Company is taking advantage of the exemption of
presenting a third balance sheet as a result of the prior year
adjustment.
The Company has taken advantage of the exemption in section 408
of the Companies Act 2006 not to present its own income statement
or statement of comprehensive income.
New standards, amendments and interpretations
The following new standards are now effective and have been
adopted for the year ended 31 March 2020.
-- IFRS 16 Leases: Introduction of a single, on-balance sheet
accounting model (effective for annual periods beginning on or
after 1 January 2019).
The Directors have assessed that the adoption of this does not
have a material impact on the Company's financial
statements as the Company does not hold any material operating
leases as lessee.
-- IFRIC 23 Uncertainty over Income Tax Treatments: Clarifies
the application of recognition and measurement requirements in IAS
12 Income Taxes, when there is uncertainty over income tax
treatments (effective for annual periods beginning on or after 1
January 2019).
The Directors have assessed that the adoption of this new
interpretation does not have a material impact on the Company's
financial statements.
Going concern
The financial statements have been prepared on a going concern
basis.
As discussed in the Group financial statements above, the
underlying assets of the Company benefit from a secure income
stream and to date performance has not been negatively impacted by
COVID-19.
The Company accounts show an accumulated loss, however this is
due to a time-lag on profits from subsidiary companies being moved
up the structure in the form of dividends.
The Company has a net current liability position of
GBP158,204,000 (2019: GBP85,372,000). This balance arises due to
the intercompany balances totalling GBP187,911,000 (2019:
GBP125,232,000) with the Company's subsidiary companies. The
amounts principally relate to bank loans drawn in the Company's
subsidiary companies in order to finance the purchase of new
acquisitions in accordance with the Group's business model. The
directors of the subsidiary companies have provided a letter of
comfort that they will not seek repayment of these balances within
the next 12 months.
After review of these items, the Directors believe there are
currently no material uncertainties in relation to the Company's
ability to continue for a period of at least 12 months from the
date of the Company's financial statements. And therefore it is
appropriate that the financial statements have been prepared on a
going concern basis.
Significant judgements and sources of estimation uncertainty
The key source of estimation uncertainty relates to the
Company's investments in subsidiaries and joint ventures. In
estimating the requirement for impairment of these investments,
management make assumptions and judgements on the value of these
investments using inherently subjective underlying asset
valuations, supported by independent valuers.
As disclosed in note 3.1 to the Group financial statements
above, the underlying assets of the Company have been valued by an
external valuer. The Valuation is 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. On the 28 May 2020, RICS published an update and concluded
that the inclusion of MUCs was no longer appropriate for this asset
class.
There is currently no indication of impairment in the assets of
the Company.
3. Prior year adjustment
A prior year adjustment has been made in the Company accounts
relating to the year ended 31 March 2018, specifically, dividends
amounting to GBP91.4m, a return of capital, which was incorrectly
treated as equity and has now been adjusted by way of a reduction
in investments in subsidiaries. The effect of this correction is to
reduce the retained earnings reserve by GBP91.4m with a
corresponding reduction of investments in subsidiaries of the same
amount. This adjustment has no effect (including no cash effect) in
the Group financial statements and does not affect in any way the
treatment of dividends paid to shareholders of the Group, all of
which have been paid correctly and with the appropriate tax
treatment nor does it have any implications at all for the payment
of future dividends.
Following the correction of this historic accounting
mistreatment, there are no further adjustments that are required in
the future.
Comparative figures have been restated.
4. Accounting policies
The financial statements of the Company follow the accounting
policies laid out in the Group's consolidated financial statements
along with the following accounting policies which have been
consistently applied:
Investments in subsidiaries
The investments in subsidiary companies are included in the
Company's Statement of Financial Position at cost less provision
for impairment.
The investment in a subsidiary company may include both the
purchase of shares and an intercompany loan which is subsequently
capitalised in return for shares in the subsidiary company. The
intercompany loan capitalised is disclosed in note 8 as a transfer
between the shares and loan columns.
Loans to subsidiaries
Loans made to subsidiary companies which arise as part of the
transactions for the acquisition of investments and are
subsequently capitalised by the issue of shares are recognised as
investment in subsidiaries at cost. At the point the loan is
capitalised, this transaction is recognised as a transfer within
the table in note 8.
Amounts due to subsidiary companies
Balances arising with subsidiary companies of a temporary nature
are initially recognised at fair value and subsequently measured at
amortised cost.
5. Dividends
Details of dividends paid and proposed are included in note 14
of the Group's consolidated financial statements.
6. Employee information
Details of Directors' remuneration are included in note 6 of the
consolidated financial statements. The Company had no further
employees during the year (2019: nil) other than the Directors.
7. Audit fees
Audit fees in relation to the Company's financial statements
total GBP195,000 (31 March 2019: GBP180,000). For further details,
please refer to note 9 of the Group financial statements.
8. Investments in subsidiaries
For the
Shares in Loans to year ended
subsidiaries subsidiaries 31 March 2020
GBP'000 GBP'000 GBP'000
--------------- --------------- ----------------
Balance at the beginning of the
year (as restated) 590,208 86,288 676,496
Increase in investments 4,015 28,232 32,247
Loans transferred 84,024 (84,024) -
Additions due to internal group
restructure 93,289 - 93,289
Disposals due to internal group
restructure (93,289) (1,823) (95,112)
--------------- --------------- ----------------
At the end of the year 678,247 28,673 706,920
--------------- --------------- ----------------
For the
Shares in Loans to year ended
subsidiaries subsidiaries 31 March 2019
GBP'000 GBP'000 GBP'000
--------------- --------------- ---------------
Balance at the beginning of the
year (as previously stated) 446,954 32,180 479,134
Prior year adjustment (note 3) (91,421) - (91,421)
--------------- --------------- ---------------
Balance at the beginning of the
year (as restated) 355,533 32,180 387,713
Increase in investments 31,576 257,207 288,783
Loans transferred 198,245 (198,245) -
Additions due to internal group
restructure 186,294 - 186,294
Disposals due to internal group
restructure (181,440) (4,854) (186,294)
--------------- --------------- ---------------
At the end of the year (as restated) 590,208 86,288 676,496
--------------- --------------- ---------------
Internal group restructures have taken place in the year in
order to facilitate borrowings. As part of the restructures, a
number of subsidiary companies where the assets are used as
security for bank loans are now directly held by other Group
companies.
9. Trade and other receivables
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Prepayments and other receivables 3,357 371
Accrued income 1,370 -
-------------- --------------
Total 4,727 371
-------------- --------------
Prepayments and other receivable amounts include prepaid legal
and professional fees of GBP469,000 (2019: GBP343,000) that have
been incurred in connection with acquisitions yet to be completed
and GBP1,695,000 (2019: GBPnil) in respect of uncompleted works on
the property portfolio.
10. Cash and cash equivalents
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Cash held by solicitors 3,419 17,031
Liquidity funds 10,475 13,394
Cash held at bank 338 10,931
-------------- --------------
Cash and cash equivalents 14,232 41,356
Restricted cash 14,779 4,549
-------------- --------------
Total cash held at bank 29,011 45,905
-------------- --------------
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 amounts held for specific commitments
and 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.
11. Trade and other payables
31 March 2020 31 March 2019
GBP'000 GBP'000
-------------- --------------
Acquisition costs accrued - 303
Retentions 2,653 4,489
Accruals 580 536
Dividends payable 798 717
Amounts due to subsidiary companies 187,911 125,232
Total 191,942 131,277
-------------- --------------
12. Share capital
Share capital represents the nominal value of consideration
received by the Company for the issue of Ordinary shares.
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Share capital
At beginning of year 6,225 3,500
Shares issued - 2,725
At end of year 6,225 6,225
--------------- ---------------
Number of shares issued and fully paid
For the For the
year ended year ended
31 March 2020 31 March 2019
---------------- ---------------
Ordinary shares of GBP0.01 each
At beginning of year 622,461,380 350,000,000
Shares issued - 272,461,380
At end of year 622,461,380 622,461,380
---------------- ---------------
On 21 December 2018, the Company issued 272,461,380 Ordinary
shares in respect of the conversion of 302,000,000 C shares. The
fair value of assets representing the C share pool at the date of
conversion was GBP295,186,000.
The Company holds 815,000 Ordinary shares in treasury. The
number of Ordinary shares used to calculate the net asset value is
621,646,380.
13. Retained earnings/(accumulated losses)
This reserve represents the profits and losses of the
Company
For the For the
year ended year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
--------------- ---------------
Balance at the beginning of the year
(as previously stated) - 85,479
Prior year adjustment (note 3) - (91,421)
Balance at the beginning of the year
(as restated) (38,760) (5,942)
Loss for the year (9,110) (14,937)
Dividends paid in the year (32,970) (17,881)
--------------- ---------------
At end of year (80,840) (38,760)
--------------- ---------------
14. Controlling parties
As at 31 March 2020, there is no ultimate controlling party.
15. Related party transactions
For all related party transactions and transactions with the
Investment Adviser please make reference to notes 31 and 32 of the
Group's consolidated financial statements.
Glossary
ALMO means an arm's length management organisation, a
not-for-profit company that provides housing services
on behalf of a Local Authority.
Approved Provider means Housing Associations, Local Authorities,
ALMOs, Community Interest Companies, Registered Charities and other
regulated organisations directly or indirectly in receipt of
payment from local or central government including the NHS.
Care Provider means a provider of care services to the occupants
of Specialist Supported Housing, registered with the Care Quality
Commission.
CIM means Civitas Investment Management Limited or CIM (formerly
known as Civitas Housing Advisors Limited until its change of name
on 7 May 2020).
Community Interest Company or CIC means a company approved by
the Office of the Regulator of Community
Interest Companies as a community interest company and
registered as such with Companies House.
Company means Civitas Social Housing PLC, a company incorporated
in England and Wales with company number 10402528.
Company Adjusted Earnings means EPRA earnings adjusted to add
back the finance cost associated with the C share financial
liability.
CMA Order means the Statutory Audit Services Order 2014, issued
by the Competition and Markets Authority.
EPRA means the European Public Real Estate Association.
EPRA EPS is the EPRA earnings divided by the weighted average
number of shares in issue in the period.
EPRA net asset value (EPRA NAV ) is the IFRS net assets
excluding the mark-to-market on derivatives and related debt
adjustments, the mark-to-market on the convertible bonds as well as
deferred taxation on property and derivative valuations. A
reconciliation between IFRS net assets and EPRA NAV is included in
Appendix 1.
EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of
debt and derivatives and to include deferred taxation on
revaluations.
Gross Asset Value means total assets plus the portfolio premium
derived from the portfolio valuation.
Group means the Company and its subsidiaries.
Housing Association or HA 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.
Investment Adviser means Civitas Investment Management Limited
("CIM"), a company incorporated in England and Wales with company
number 10278444, in its capacity as investment adviser to the
Company.
IPO means Initial Public Offering.
IRR means internal rate of return.
Levered IRR means the internal rate of return including the
impact of debt.
Local Authority or LA means the administrative bodies for the
local government in England comprising of 326 authorities
(including 32 London boroughs).
Net Initial Yield means the ratio of net rental income and gross
purchase price of a property.
MUC means material uncertainty clause
NHS means the publicly funded healthcare system of the United
Kingdom comprising The National Health Service in England, NHS
Scotland, NHS Wales and Health and Social Care in Northern Ireland,
including, for the
avoidance of doubt, NHS Trusts.
NHS Trust means a legal entity, set up by order of the Secretary
of State under section 25 of, and Schedule 4 to, the National
Health Service Act 2006, to provide goods and services for the
purposes of the health service.
Portfolio means the Group's portfolio of assets.
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 6 to Appendix
1 for a reconciliation to IFRS NAV.
Portfolio Valuation means an independent valuation of the
Portfolio by Jones Lang LaSalle Limited 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 or RP 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 the Regulator of Social Housing , the executive
non-departmental public body, sponsored by the Ministry of Housing,
Communities and Local Government, which is the regulator for Social
Homes providers in England and Wales.
Social homes or social housing means social rented homes and
other accommodation that are offered at rents subsidised below
market level or are constituents of other appropriate rent regimes
such as exempt rents or are subject to bespoke agreement with
entities such as NHS Trusts and are provided by Approved
Providers.
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.
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.
Appendix 1 (unaudited)
Notes to the calculation of EPRA and other alternative
performance measures
1. EPRA Earnings
For the For the
year ended year ended
31 March 2020 31 March 2019
--------------- ---------------
Earnings from operational activities
Profit after taxation (GBP'000) 37,725 19,864
Change in fair value of derivative financial
instruments (GBP'000) 478 -
Changes in value of investment properties
(GBP'000) (9,389) (3,652)
EPRA Earnings (GBP'000) 28,814 16,212
Finance costs associated with the C share
financial liability (GBP'000) - 6,400
--------------- ---------------
Diluted EPRA earnings (GBP'000) 28,814 22,612
--------------- ---------------
Weighted average number of shares in issue
(adjusted for shares held in treasury) 622,103,798 425,393,423
Dilutive elements - 197,067,957
--------------- ---------------
Adjusted weighted average number of shares
in issue (adjusted for shares held in treasury) 622,103,798 622,461,380
--------------- ---------------
EPRA Earnings per share (EPS) - basic 4.63p 3.81p
EPRA Earnings per share (EPS) - diluted 4.63p 3.63p
--------------- ---------------
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.
31 March 2020 31 March 2019
-------------- --------------
Net assets (GBP'000) 670,564 666,508
Fair value of derivative financial instruments
(GBP'000) 478 -
-------------- --------------
EPRA Net assets (GBP'000) 671,042 666,508
-------------- --------------
Number of Ordinary shares in issue (adjusted
for shares held in treasury) 621,646,380 622,461,380
-------------- --------------
EPRA Net Assets per share 107.95p 107.08p
-------------- --------------
3. EPRA NNNAV
EPRA NAV adjusted to include the fair values of (i) financial
instruments, (ii) debt and (iii) deferred taxes.
31 March 2020 31 March 2019
-------------- --------------
EPRA Net Assets (per above) (GBP'000) 671,042 666,508
Fair value of derivative financial instruments
(GBP'000) (478) -
Adjustment to value bank borrowings at
fair value (GBP'000) (3,004) (650)
-------------- --------------
EPRA NNNAV (GBP'000) 667,560 665,858
-------------- --------------
Number of Ordinary shares in issue (adjusted
for shares held in treasury) 621,646,380 622,461,380
-------------- --------------
EPRA NNNAV per share 107.39p 106.97p
-------------- --------------
4. EPRA Vacancy Rate
Estimated Market Rental Value ("ERV") of vacancy space divided
by ERV of the whole portfolio.
31 March 2020 31 March 2019
-------------- --------------
Estimated Market Rental Value (ERV) of
vacant spaces (GBP'000) - -
Estimated Market Rental Value (ERV) of
whole portfolio (GBP'000) 48,416 45,685
-------------- --------------
EPRA Vacancy Rate 0% 0%
-------------- --------------
5. EPRA Costs Ratio
Administrative and operating costs divided by gross rental
income.
For the For the
year ended year ended
31 March 2020 31 March 2019
--------------- ---------------
Total administrative and operating costs
(GBP'000) 9,860 9,642
Gross rental income (GBP'000) 45,906 35,738
--------------- ---------------
EPRA cost ratio 21.48% 26.98%
--------------- ---------------
6. Portfolio NAV
IFRS NAV adjusted to reflect investment property valued on a
portfolio basis rather than individual asset basis.
31 March 2020 31 March 2019
-------------- ---------------
Net assets (GBP'000) 670,564 666,508
Adjustment for change to property valuation
(GBP'000) 65,140 74,662
-------------- ---------------
Portfolio net assets (GBP'000) 735,704 741,170
-------------- ---------------
Number of Ordinary shares in issue (adjusted
for shares held in treasury) 621,646,380 622,461,380
Portfolio Net Assets per share 118.35p 119.07p
-------------- ---------------
7. Company Adjusted Earnings
Company specific earnings measure which adds back finance costs
associated with the C share financial liability.
For the For the
year ended year ended
31 March 2020 31 March 2019
--------------- ---------------
Profit after taxation (GBP'000) 37,725 19,864
Changes in fair value in derivative
financial instruments (GBP'000) 478 -
Changes in value of investment properties
(GBP'000) (9,389) (3,652)
--------------- ---------------
EPRA Earnings (GBP'000) 28,814 16,212
Finance costs associated with the C
share financial liability (GBP'000) - 6,400
--------------- ---------------
Company Adjusted Earnings (GBP'000) 28,814 22,612
--------------- ---------------
Weighted average number of shares in
issue (adjusted for shares held in treasury) 621,646,380 622,461,380
Company Adjusted Earnings per share
(EPS) - basic 4.63p 3.63p
--------------- ---------------
8. IRR
The Internal Rate of Return ("IRR") for the period from launch
to 31 March 2020 based on IFRS NAV and portfolio NAV is calculated
using dividend cash flows data as follows:
Portfolio NAV
IFRS NAV basis basis
pence per
share pence per 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
29 November 2019 Interim dividend 1.33 1.33
28 February 2020 Interim dividend 1.33 1.33
31 March 2020 NAV 107.87 118.35
--------------- ----------------
IRR 6.82% 9.58%
ANNUAL GENERAL MEETING
The AGM of the Company will be held at 2.00 p.m. on 8 September
2020 at the offices of Buchanan, 107 Cheapside, London EC2V 6DN.
The Notice of AGM will be circulated to shareholders in due
course.
NATIONAL STORAGE MECHANISM
A copy of the Annual Report and Financial Statements will be
submitted shortly to the National Storage Mechanism ("NSM") and
will be available for inspection at the NSM, which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
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
FR FLFIARFIAFII
(END) Dow Jones Newswires
June 30, 2020 02:00 ET (06:00 GMT)
Civitas Social Housing (LSE:CSH)
Historical Stock Chart
From Jun 2024 to Jul 2024
Civitas Social Housing (LSE:CSH)
Historical Stock Chart
From Jul 2023 to Jul 2024
