TIDMCSH
RNS Number : 6758I
Civitas Social Housing PLC
06 December 2022
6 December 2022
CIVITAS SOCIAL HOUSING PLC
INTERIM REPORT
SIX MONTHS TO 30 SEPTEMBER 2022
Consistent growth in rent roll with continued uplift in NAV
Civitas Social Housing PLC ("Civitas", "CSH" or the "Company"),
the UK's leading care-based and healthcare REIT, announces its
interim results for the six months ended 30 September 2022.
The Half Year Report and Condensed Consolidated Financial
Statements can be accessed via the Company's website at
www.civitassocialhousing.com .
Performance Highlights
Property Valuation and 30 Sept 30 Sept % Change 31 March
Performance 22 21 22
Investment property valuation(1)
(GBPm) 999.5 946.3 +5.62 968.8
-------- -------- --------- ---------
NAV per share (diluted)
(p) 114.84 108.49 +5.85 110.30
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Financial Performance
-------- -------- --------- ---------
Annual contracted rent
roll (GBPm) 55.0 51.9 +5.97 53.3
-------- -------- --------- ---------
Net rental income (GBPm) 26.6 25.1 +5.98 50.7
-------- -------- --------- ---------
EPRA earnings(2) (GBPm) 13.6 14.9 -8.72 29.8
-------- -------- --------- ---------
Operating Cash Flow (GBPm) 20.6 21.3 -3.29 39.1
-------- -------- --------- ---------
Earnings per share (p) 6.98 2.87 +143.21 7.23
-------- -------- --------- ---------
EPRA earning per share
(diluted) (2) (p) 2.22 2.40 -7.50 4.82
-------- -------- --------- ---------
Dividends declared per
share (p) 2.85 2.78 +2.70 5.55
-------- -------- --------- ---------
Financing
-------- -------- --------- ---------
Loan to value ratio (%) 33.7 34.6 34.4
-------- -------- --------- ---------
Weighted average interest
cost of debt (%) 3.0 2.5 2.5
-------- -------- --------- ---------
(1) See Half Year Report 30 September 2022 (Note 10.0) for
detailed commentary
(2) See Appendix 1 in the respective financial statements for
supporting workings - Notes to the calculation of EPRA and other
alternative performance measures. EPRA earnings and EPRA earnings
per share reduced by one-off costs of GBP1.64m relating to
evaluation of strategic projects. Pro-forma EPRA earnings per share
(prior to GBP1.64m one-of-costs) were 2.49p in the period to 30
September 22.
Strong Financial Performance, Rent Collection and Cash
Conversion
-- Net rental income of GBP26.6 million, representing growth of
6.0% over the comparable period (30 Sept 2021: GBP25.1 million)
-- Net rental uplifts from indexation in the six months to 30
September 2022 of 6.0% (annualised) compared to 2.4% in the year to
31 March 2022
-- Further growth in rents anticipated in the remainder of 2022
and 2023 supported by significant underlying local authority demand
and reduced supply in many care categories
-- Positive cash conversion with net operating cash flow of GBP20.6 million
-- Retained high-quality investment credit rating from Fitch
Ratings of "A" secured and "A-" unsecured
NAV per share remains robust
-- Independent IFRS property valuation increased by 5.6% to
GBP999.5 million (30 Sept 2021: GBP946.3 million) reflecting the
effect of the indexation of inflation adjusted leases as well as
continued demand for the asset class
-- NAV per share increased by 5.8% to 114.84 pence (30 Sept 2021: 108.49 pence per share)
-- Valuation average net initial yield (NIY) of 5.27%
-- The independent valuation methodology set out in note "10.0
Investment Property" to the Half Year Report reflects the Company's
underlying rental income with specific discount rates applied to
the rental flows
-- The independent valuation also reflects the Bank of England's
long-term inflation target for CPI which remains at 2.00% per
annum
NAV Bridge - 31 March 2022 to 30 September 2022
Pence per
GBP'000 share
Opening NAV at 31 March 2022 675,547 110.30
Profit after taxation 42,638
Change in fair value of derivatives -3,555
Change in fair value of investment
properties -25,510
--------
EPRA earnings 13,573 2.24
Dividends paid -17,177 -2.83
Change in fair value of derivatives 3,555 0.59
Change in fair value of investment
properties 25,510 4.21
Payment for / gain on share
buy backs -4,651 0.33
Closing NAV at 30 September
2022 696,357 114.84
Dividends
-- Two dividends of 1.425 pence per share each declared in the period
-- Distributions in line with stated target of 5.70 pence(3) per
share for the year ending 31 March 2023
-- Dividend cover on an EPRA earnings run-rate basis(4) at 30
September 2022 was 94% based on the Company's earnings and the
actual cost of debt service over the period
(3) This is a target and not a formal dividend forecast or a
profit forecast
(4) Excluding one off costs of GBP1.64m relating to examination
of strategic projects
Bank Refinancing and Hedging
-- Borrowings remain consistent at GBP357 million reflecting an overall loan to value of 33.7%
-- Post -period end refinancing undertaken - all debt facilities
are now at 100% fixed or capped rates
-- On 1 December 2022, the Company signed a new five-year
GBP70.8million facility with a new bank lender. The transaction is
expected to fund in the new year subject to certain closing
conditions
-- Weighted average interest cost of debt (3.0% for the period
to 30 September 22) increases to 3.9% (including margin) post
period end based on the annualised effect of implementing the new
arrangements
-- One-off cost of GBP8.1 million paid for the new hedging
arrangements and GBP3.6 million unrealised gain on existing
hedging
-- Weighted average length of debt 3.53 years with objective to
extend further with new facility noted above
Supportive Political Priorities Expected to Create Strong Market
Tailwinds
-- Strong Government affirmation of its commitment to ensure
vulnerable individuals continue to receive full support
-- 17 November 2022 "Autumn Statement" confirmed increased
spending on health and social care with central message: "Protect
the vulnerable, because to be British is to be compassionate and we
are a compassionate Conservative government."
-- Government aims to free up 13,500 hospital beds, allocating
additional grant funding for adult social care of GBP1bn next year
and GBP1.7bn the year after - thus re-confirming its commitment to
moving people from hospital settings and into care in the
community
-- Chancellor confirmed that the Government will cap general
social housing rent increases next year at 7% and not 5% as
previously suggested - demonstrating commitment to high quality
social housing
-- Notably, Specialist Supported Housing provided by the Company
is entirely exempt from rent caps and expected to remain so
(although c.30% of portfolio has CPI capped at 4%).
-- Government's commitment to high quality social housing
reflects anticipation of further ongoing growth in rental income
over the medium term
ESG & Social Impact Focus
-- The latest independent Social Impact Report which is
published today and available on the Company's website demonstrates
the Company's continued commitment to tenant well-being and
excellence in tenant living standards
-- Further implementation of the Company's voluntary energy
programme with E.ON leading to lower energy costs for residents and
a more carbon neutral portfolio
-- Obligation for compliance with Government energy standards
remains with Approved Providers under the Company's lease but with
the Company taking a supportive stance
-- Phase 2 work with E.ON continues with retrofit surveys,
targeting 25% reduction in carbon emissions
Diversified portfolio of 697 properties providing homes to 4,594
people
-- An actively managed portfolio with a sector-leading team of
professionals assisting and enabling high quality and longevity of
homes and income
-- Dedicated specialist asset management and housing benefit
team within the investment adviser works closely on a day-to-day
basis with Approved Providers to assist in property enhancement,
rental management and care provider engagement
-- The Company's portfolio provides accommodation to tenants
with learning disabilities, autism and mental health disorders with
an average tenant age of 35 years
-- High level of acute care with void cover carried out by 130
care providers with 40% of residents receiving over 50 hours of
care per week - a key differentiator and support for exempt housing
rents
-- Properties located across half the local authorities in
England and Wales and leased to 18 Approved Providers, with support
provided by 130 care providers
-- High level of bespoke adaptation for individual tenants' needs
-- Over one third of the portfolio on back-to-back 25-year leases, with leading care providers
-- Acquisition of one new property in the period for GBP0.6
million, providing homes for a further two vulnerable adults
Proposed New Regulatory Clause
-- Now agreed with two housing associations who together are
seeking senior level consultation with the Regulator of Social
Housing
-- Voluntary action on the part of the Company to assist housing
associations with regulatory compliance
-- Clause will only be rolled-out with the clear understanding
that its inclusion will assist housing associations in achieving
regulatory compliance.
Outlook
-- Encouraging Government support for the provision of services
for vulnerable individuals despite well reported broader macro
political and economic challenges in the UK
-- Clear demand for delivery of quality, sustainable accommodation at a fair price
-- Recent years have seen a reduction in the pace of delivery of
adapted care-based housing at a time of increased demand for many
care conditions across many parts of the UK
-- Rental growth expected to continue to see positive trend over medium term linked to inflation
-- Financing costs have now been fixed for several years forward
to provide greater degree of certainty
-- Company continues to actively explore opportunities to narrow
the discount to NAV and enhance shareholder value
Michael Wrobel, Non-Executive Chairman of the Company,
commented:
"This Interim Report again demonstrates the resilience of the
Company's portfolio with six years of consistent rental growth and
progressive dividend payments since IPO. Civitas has delivered
strong financial results in the period, with a 6% increase in
rental income and a further 4.1% increase in NAV per share.
"The political landscape remains supportive of our business
model and strategy, with the Government and Opposition committed to
caring for the vulnerable within the community to free up NHS
capacity and realise savings for the taxpayer. With strain on our
public services being especially pronounced at present, it is clear
that private sector involvement is vital if care in the community
is to work.
"Our housing association counterparties continue to improve
their operations and to carry out excellent work, with tenants
benefiting from their highly specialised focus on care for people
with complex needs.
"The Board remains active in exploring ways to address the
discount to NAV as a priority. On behalf of the Board, we would
like to thank shareholders for their ongoing support and all the
staff of the investment adviser for their hard work in managing the
UK's largest portfolio of specialist housing dedicated to care in
the community."
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
Chris Clarke Tel: +44 (0)20 3100 2000
Darren Vickers
Owen Matthews
Buchanan
Helen Tarbet / Henry Wilson Tel: +44 (0)20 7466 5000
Hannah Ratcliff / Verity Parker 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. CSH's portfolio has been independently valued at
GBP999.5million (30 September 2022). CSH now provides homes for
4,594 working age adults with long-term care needs, in 697 bespoke
properties that are supported by 130 specialist care providers, 18
approved providers and working with over 178 individual local
authority partners.
Chairman's Statement
"We recently passed the sixth anniversary of the Company's
listing on the London Stock Exchange and the Board would like to
thank shareholders for their ongoing support. We have delivered
strong financial results during the period and we are very focussed
on addressing the discount to NAV."
In the time since listing, our manager Civitas Investment
Management Limited has brought together the largest single
portfolio of care-based properties in the UK that is dedicated to
the delivery of care for vulnerable individuals within community
settings. At a time of increasing demand for social care across the
UK we are pleased to be contributing by providing long-term housing
of high quality for more than 4,500 individuals, a number of whom
have never previously had the opportunity to live within their own
home and in their own community.
Despite the success of our portfolio and delivery of positive
financial results that I highlight below, the
Company's share price has traded at a discount to NAV for all of
the period. The discount has widened further during the recent
economic turmoil, along with other REITs and real estate shares.
The Company has also been active in examining all strategic options
to create shareholder value and is actively pursuing several
initiatives. Unfortunately, two projects that did not come to
fruition have resulted in certain one-off costs that have been
recognised in the period.
In response, the Company has continued to buy back shares - over
the past twelve months it has acquired 13,825,000 shares at an
average price of 85.63 pence per share for a total investment of
GBP11.84 million. This has enhanced the NAV by 0.49% and benefited
the EPRA earnings.
The past six months have seen many economic challenges in the UK
and across the world, including the rapid growth in inflation and
the Russia/Ukraine conflict. Within our sector of Specialist
Supported Housing, I am pleased to note that our rental income has
benefited from some positive inflation linkage. At the same time,
we note that inflation is causing significant cost increases for
both housing associations and care providers to which local
authorities and central Government is being asked to respond. We
continue to monitor the position closely, working with our
counterparties to help them operate as efficiently and effectively
as possible. Our sector is exempt from rent caps, due in large part
to the essential nature of the services that are delivered in the
properties owned by the Company.
Financial Performance
During the period under review the portfolio generated net
rental income of GBP26.6 million (30 September 2021: GBP25.1
million), representing a 6.0% increase over the corresponding
period last year. In large part this is due to rental uplifts, and
due to the acquisitions of c.GBP10 million of new properties during
this period.
In November 2022, the Company extended its HSBC facility, which
now expires in November 2025. As a result of the new hedging
arrangements, all of our loan facilities are now at 100% fixed
rate.
Net asset value of the Company increased from 108.49 pence per
Ordinary Share as at 30 September 2021 to 114.84 pence per share as
at 30 September 2022.
Continuation Vote
Shareholders representing 298,478,435 voted in favour of the
continuation of the Company at the annual general meeting on 15
September 2022, being 98.85% of those who voted. We would like to
thank shareholders for their ongoing support.
Sector Performance
We have been at the forefront of innovating and leading
improvements in the sector since our inception six years ago. Most
recently this has included the start of the controlled roll out of
a new regulatory clause intended to demonstrate greater risk
sharing which we believe will better position our Approved Provider
counterparties to become RSH compliant.
Enhancing Social Value
As an impact investor, the Company remains at the forefront of
delivering and demonstrating social value through our investments
and through sector leading partnerships with the charitable and
public sector. You can read more about these in the Investment
Advisers report.
Outlook
Our sector continues to experience strong demand for quality
properties that can provide a long-term stable home for the
delivery of community-based care. This is evidenced from our direct
engagement with local authorities, care providers and housing
associations who are seeking additional provision.
We expect our rental income to continue to rise correlated to
inflation, noting that c. 30% of our leases have CPI uplifts capped
at 4%. We are also mindful of the impact of the recent rises in
interest rates and the drag that will have on our EPRA earnings.
Nonetheless, it remains our expectation that we will pay dividends
of 1.425p over each of the next two quarters to our year-end.
The Company continues to implement its voluntary improvement
programme with E.ON leading to lower energy costs for residents and
which alongside the latest independent Social Impact Report
demonstrates on-going commitment to tenant well-being.
I would like to thank all our stakeholders for their continued
work and support.
Michael Wrobel
Chairman
5 December 2022
Our Portfolio
By UK Region as at 30 September 2022
Region Properties Funds invested (Percentage) Accounting rent roll (Percentage)
North East 64 5.8 6.6
North West 101 10.1 10.0
Yorkshire and the Humber 96 10.8 10.7
East Midlands 58 8.6 8.7
West Midlands 101 11.3 11.7
East of England 32 4.1 3.8
South East 65 10.1 11.4
South West 120 15.4 14.2
Wales 34 11.0 11.0
London 26 12.8 11.9
Market Value (%)
South West 14.2%
London 11.9%
West Midlands 11.7%
South East 11.4%
Wales 11.0%
Yorkshire and the
Humber 10.7%
North West 10.0%
East Midlands 8.7%
North East 6.6%
East of England 3.8%
Tenancies
South West 759
Yorkshire and the
Humber 610
North West 607
West Midlands 502
North East 462
South East 417
East Midlands 374
Wales 364
London 338
East of England 161
By Approved Provider as at 30 September 2022
Annual Contracted Rent Roll (%)
Approved Provider Rental Income
Falcon 19.0%
Auckland(1) 15.9%
BeST 12.8%
Inclusion 9.5%
Qualitas Housing(1) 8.6%
Westmoreland 5.8%
Trinity 5.1%
Encircle 5.1%
Pivotal 3.8%
Harbour 3.7%
Chrysalis 3.6%
New Walk 2.9%
My Space 1.3%
IKE 1.0%
Hilldale 0.9%
Windrush 0.8%
Lily Rose 0.1%
Blue Square 0.1%
Properties
Approved Provider Number of
Properties
Falcon 116
Auckland(1) 100
Inclusion 82
BeST 74
Qualitas Housing(1) 54
Trinity 43
Westmoreland 41
New Walk 41
Chrysalis 28
Pivotal 27
Harbour 27
Encircle 16
Hilldale 15
Windrush 13
IKE 10
My Space 8
Blue Square 1
Lily Rose 1
Tenancies
Approved Provider Tenancies
Falcon 850
BeST 591
Auckland(1) 547
Inclusion 507
Qualitas Housing(1) 370
Trinity 242
Westmoreland 239
Pivotal 238
Harbour 214
Encircle 205
New Walk 194
Chrysalis 151
My Space 71
IKE 68
Windrush 51
Hilldale 39
Lily Rose 13
Blue Square 4
Market Value (%)
Approved Provider Market Value
Falcon 19.1%
Auckland(1) 16.1%
BeST 13.0%
Inclusion 9.2%
Qualitas Housing(1) 8.8%
Westmoreland 6.0%
Trinity 5.0%
Encircle 4.8%
Pivotal 3.7%
Harbour 3.7%
Chrysalis 3.6%
New Walk 2.9%
My Space 1.2%
IKE 1.0%
Hilldale 0.9%
Windrush 0.8%
Blue Square 0.1%
Lily Rose 0.1%
(1) Auckland and Qualitas Housing are both members of the Social
Housing Family C.I.C and subject to common control.
Investment Adviser's Report
"In its sixth year CSH has demonstrated consistent performance
in its key objectives of delivering excellent homes with care,
delivering the dividend for shareholders and providing value for
money to the tax payer, delivering social impact which changes
lives for the better."
Introduction
CIM, the Investment Adviser to CSH, advises on a range of
ethically based social and healthcare real estate funds in the UK
and Europe with committed capital of c.GBP3 billion.
CIM advises these funds on behalf of various global investors
together with a wide range of local authority pension funds and
dedicated impact investors.
CSH was the first listed fund and in many ways the pioneer in
bringing substantial equity into the specialist supported housing
sector, the ability of CIM to help provided much needed new
homes.
On behalf of the Investment Adviser and CSH, we would like to
offer our thanks to all of our partners who have continued to
provide high-quality care, support, and housing, and to our
investors who enable the provision of over 4,500 quality homes for
some of the most vulnerable people in society. We would like to
give particular thanks at this time to our investors who passed the
recent continuation vote by a factor of more than 98% and continue
to support us in these challenging times.
CSH continues to be a market leader in the delivery of ethical,
care-based residential housing, delivering sustainable returns for
shareholders and outstanding community-based homes for residents,
while offering value for money to society. This transforms
lives.
Delivery and sustained demand
In the half year to September 2022 CIM, working with the CSH
Board, has continued to lead the sector in providing high quality
accommodation for those with significant life long care needs and
has delivered a consistent financial performance with significant
social outcomes.
Results Highlights
CSH is a market leader in the delivery of much-needed long-term
housing with care in the UK and is leading the charge for ethical
investment in the sector. These half year results show a number of
key achievements and themes:
-- Six years of consistent rental growth and progressive
dividend payments that have increased from an initial 3.00p per
share to a current target of 5.70p per share reflecting growing
dividend.
-- A retained high-quality investment credit rating from Fitch
Ratings of A secured and A- unsecured, that has been maintained
over time and which Civitas was the first to secure in this
sector.
-- Design, negotiation and announcement of a new innovative
regulatory clause, to be implemented over time, assisting Approved
Providers to be better able to become RSH compliant, with no
diminution to lease or asset values.
-- An actively managed portfolio with a sector-leading team of
professionals assisting and enabling high quality and longevity of
homes and income.
-- Professional support to enable Approved Providers to enhance
the quality of their delivery and demonstrate long-term financial
and operational independence.
-- Ownership of properties that facilitates the delivery of high
levels of care with 40% of residents receiving over 50 hours of
care per week.
-- An active programme working with E.ON to permanently reduce
carbon emissions across the portfolio leading to lower energy costs
for residents and a more carbon neutral portfolio.
-- Sector leading partnerships with national and local charities
delivering real change and continuing to enhance Civitas's
reputation as the most experienced investor in social
infrastructure in the UK.
-- CIM has a highly experienced asset management team which has
overseen some GBP25 million of physical improvements to the
portfolio since inception paid for by the vendors of the
properties. The works are also independently scoped and verified by
independent RICS qualified surveying firms.
Proposed New Regulatory Clause
This will enable Registered Providers to demonstrate to the RSH
how they are sharing risks. This has now been agreed with two
housing associations who together are seeking senior level
consultation with the Regulator of Social Housing. The key benefits
are:
-- Counterparties better positioned to achieve regulatory compliance.
-- Enhanced information and step in rights (having regard to
tenant welfare) in addition to existing lease transfer and
assignment rights (the rights will only be exercised under
stringent criteria).
-- Unchanged lease and property values supported by strong underlying demand.
The clause will only be rolled-out with the expectation of it
making a difference.
A growing team of specialists
CIM has continued to develop the most experienced team in the
sector providing senior level expertise in the following areas:
-- Asset Management
-- Finance and operations
-- Transaction sourcing and execution
-- Housing Benefit
-- Social Impact
This is of value to the sector and our counterparties as the
team's expertise is available if required to offer input in matters
such as property enhancements, housing benefit claims and void
management. This expertise also provides CIM with the healthy and
productive dialogue with all parts of the sector which is a dynamic
combination of national and local institutions, private developers,
charitable housing organisations and public and private care
providers.
Sector leading social outcomes
Civitas delivers social and financial benefits to society, the
taxpayer and individuals through its direct investment, its ongoing
enhancement of the portfolio and through its work with several
local and national charities where the focus is upon pro bono
expertise and modest financial contributions with the aim of
delivering real and sustainable change.
We seek to operate in a fully transparent manner and to offer
high quality accommodation at a reasonable price that reflects the
use and adaptations to which the property has been designed
including the availability of common spaces and accommodation for
care staff.
Continuing progress in decarbonisation of the portfolio
-- Phase 2 with E.ON seeking external grants as will be required by the whole sector.
-- Clean Energy Strategy to achieve minimum EPC "A-C" prior to the Government target of 2035.
-- In addition, the continued partnership with E.ON will
continue to reduce carbon emissions and add to the environmental
performance of the portfolio. Whilst carbon reductions are not
included in the valuation it would appear possible that in the
future this will become a factor in valuation methodology.
Engagement with Shareholders
CIM continues to work with the Board as outlined in the
Chairman's Statement and to make itself available at all times to
meet with existing and potential new investors.
A rapidly changing world and a constant and increasing need
There continues to be strong Governmental and cross-party
support for housing delivery as a major policy objective and for
social care which now represents (according to provisional figures
from the 2021 Census from the Office for National Statistics (ONS))
GBP277 billion or nearly 12% of the Gross Domestic Product of the
UK.
The CSH portfolio is able to benefit from the following broader
market dynamics:
Demand for healthcare services keeps growing
Healthcare demand and consequently government expenditure on
healthcare in the UK and across the developed world is consistently
rising even pre covid and reflects long term demographic trends for
an ageing population with longer term health conditions and
increased demand from working aged adults who require care and
support.
LaingBussion, the leading healthcare consultants, stated in
their latest report 'Investing in Healthcare and Real Estate', "The
unpredictability of markets exposed to global trade is a reminder
of the underlying strength and relative stability of demand for
healthcare services".
Healthcare accounts for 10% or more of GDP across the developed
world and as shown above, 12% in the UK with considerably rising
demands for the NHS. The British Medical Association (BMA)
estimates of declared demand on the waiting list have increased
from c.3 million in 2018 to 3.5 million pre covid in 2020 and to
over 7 million as at September 2022. This, the BMA believes, hides
undeclared demand with GP appointments and attendance at hospital
significantly lower than pre pandemic levels.
Continued expected rise in demand for supported living
As can be seen in the graph on page 13 of the Half Year Report,
the expected demand projected by Government for categories of care,
mental health support, physical support and learning disabilities
show demand increasing from 250,000 in 2023 to over 300,000 by 2038
or an increase of over 50,000 in 15 years. However, our experience
over the last two years is that the growth in supply has slowed
and, as is demonstrated by the continued housing of people with
learning disabilities in hospital, supply is failing to meet
current demand and certainly will struggle to meet future demand.
In addition, the increasing life expectancy of those with a care
need means that parental care is increasingly unavailable.
Multi decade cross party and multi country support for supported
living
The UK is not alone in the approach of housing in the community
and indeed the United Nations developed polices that have been
adopted by the UK, the European Union and 183 States in total that
provide a framework for the provision of this support. The
"Convention on the Rights of Persons with Disabilities" was signed
by the then UK Government in 2007 and enacted into law in 2008.
The Convention sets out broad rights for those considered
disabled in Article 1:
"To promote, protect and ensure full and equal enjoyment of all
human rights and fundamental freedoms by all persons with
disabilities and to promote respect for their inherent
dignity."
Article 19 specifically covers housing, including the rights to
live independently and be included in the community, Article 20
refers to personal mobility, Article 26 to habilitation and
rehabilitation, and Articles 29 and 30 to the right to participate
in political and public life, cultural life, recreation and
sports.
Specialist Supported Housing ("SSH") of the type provided by the
Company is designed to fulfil these objectives and predates the
implementation of the UN Convention. The requirement to provide
support for vulnerable people was further enshrined into UK law by
the Care Act 2014 which confirms the responsibility of authorities
to provide appropriate support and care. There is telling testimony
in the publication 'A Place for Me' (sponsored by CSH and the
National Care Group), highlighted later in this report, on the
transformational effect SSH has upon people's lives.
In terms of current legislation, the Health and Care Bill, which
was granted Royal Assent in April 2022, further consolidates the
trends of joining up NHS healthcare services with social care
through the formation of Integrated Care Systems (ICSs). This is
supportive of the forms of care and community housing delivered by
the Company.
The sector in which the Company operates is substantially funded
by the State as part of the long-standing commitment to provide
support for vulnerable adults.
Government Policy
The Government Department for Levelling Up, Housing and
Communities published the Levelling Up white paper, in February
2022, which makes clear that the provision of high quality,
affordable housing is a major Government priority and will continue
to be at the centre of government policy.
Further demonstration of Government support for the sector is
the exclusion of exempt rent housing from the Social housing rent
cap of 7% for the next two years. This mirrors the previous
restriction on social housing rents between 2016 and 2019 when
exempt rents were excluded.
Value for money for the public purse is a vital component of
claiming exempt rents and each and every rent funded by housing
benefit that is claimed by Civitas counterparties has been approved
by a local authority housing benefit department. However, there
continues to be concern about some providers claiming exempt rents
where minimal or no support is provided to residents and where the
property was not originally commissioned by a local authority.
The Government launched an enquiry through the Levelling Up,
Housing and Communities committee to explore the overall efficacy
of exempt rents accommodation.
This committee has been critical of poor quality delivery where
there is little care provided. The three key points are:
-- The lease-based model enables access to properties for
providers who would otherwise not be able to purchase properties
outright; if not exploited.
-- Local authorities should be able to recover 100% housing
benefit even if counterparty is not registered with RSH.
-- All providers should be registered with the RSH and RSH
encouraged to take on all small providers.
What is clear is that the focus rightly will continue to be on
the value for money of supported exempt accommodation that is not
commissioned by a local authority. Non-Commissioned exempt
accommodation is housing where the provider is claiming enhanced
rents based upon providing additional care to meet housing need but
the local authority did not initiate the procurement of the
housing. It is normal for local authorities to have a mix of
commissioned and non-commissioned housing to which they pay benefit
at the standard and higher exempt rate. Clearly where a local
authority has commissioned a building it means its support is
explicit. The Government also funded pilot schemes in areas
particularly affected by high levels of exempt rent claims such as
Birmingham.
Civitas specialises in forming close relationships with local
authorities and only works on schemes where care is meaningful and
has been commissioned or supported by a local authority.
The Government also reinforced its support for health and social
care in its report 'Our Plan for Patients' in September 2022 (which
seeks to improve waiting lists, access to doctors, access to
dentists and ambulance service improvements) and its confirmation
in the growth plan. The proposed rise in National Insurance of 1.5%
designed by the Government to raise an additional GBP13 billion for
the NHS and social care has been withdrawn. The additional
expenditure will still be funded from general taxation and
borrowing.
The patients plan states "...from next year (we will) rebalance
funding across health and social care". In addition promising an
initial GBP500 million fund will support discharge from hospital
into the community. This model continues to enjoy strong cross
party support, consistent with the cross party support for all
healthcare to be carried out in the community as much as
possible.
Regulation
The Social Housing White Paper clearly indicates that the RSH
will become a regulator expected to protect and measure residents
perceptions of service and ensure consumer standards are high. The
housing Ombudsman has become very active, under new leadership in
finding against service failures mainly of large providers.
Whilst the compliance of Approved Providers with which we work
is subject to further implementation of the regulatory clause,
there is substantial evidence in information reported to us that
the 'consumer' outcomes experienced by residents of SSH housing
providers is very high. This is in part a function of the model in
that the division of responsibilities for asset management, care
and housing management and monitoring by local authorities of
standards encourages high performance.
In addition, SSH providers in data reported to us maintained
high standards of compliance with key statutory and health and
safety rules. Our independent monitoring by The Good Economy
demonstrates high level of satisfaction compared to general needs
housing.
Major housing association sector
The ability of large housing associations to operate the
provision of social housing subsidy model whereby leverage on
existing assets and profits from developments are used to subsidise
new social housing is being eroded by a number of factors. Clearly
the constraints on rental growth, the drive for decarbonisation
which will not be achieved without substantial public investment,
catch up repair, fire safety works and development costs are
already leading to major housing associations reducing their future
social housing development pipelines.
This is likely to lead to a reduction in the overall delivery of
social housing further increasing demand for all types of
affordable housing.
Financial Review
The Company delivered a strong financial performance over the
6-month period to 30 September 2022, with growth in net rental
income, operating profit and NAV per share.
Earnings per share jumped to 6.98p in this period from 2.87p for
the comparable period in 2021. Net r ental income for the period
increased by 6.0% to GBP26.6million ( September 2021: GBP25.1
million).
The annual contracted rent roll increased 6.0% from GBP51.9
million at September 2021 to GBP55.0 million as at 30 September
2022. As the Company's rent roll references historical CPI in
upcoming uplifts, the rent roll is expected to continue to benefit
from indexation over the remainder of this financial year,
reflecting the recent inflationary environment. The Company also
continues to enjoy significant demand for its properties from local
authorities.
The EPRA cost ratio for the period was higher at 25.9%
(September 2021: 19.7%). Excluding the two one-off costs pertaining
to two strategic projects, the EPRA cost ratio was in line with the
previous period at 19.7%.
During the reporting period, the Company paid two distributions,
one at 1.3875p and another at 1.425p per share. The latter
distribution is consistent with the Board's previously announced
dividend target of 5.70p for the year to March 2023.
The NAV per share at 30 September 2022 was up 4.1% at 114.84p
from the 31 March 2022 NAV of 110.30p. At period end, the Company's
investment property was independently valued by JLL at GBP999.5
million (March 2022: GBP946.3 million), with an average net initial
yield of 5.27%.
During the period, the Company extended its GBP60m debt facility
with Lloyds to now mature in July 2024. Loans drawn at period end
stood at GBP357.1 million. Subsequent to period end, the Company
also extended the maturity of its GBP100m facility with HSBC to
November 2025. The Company's gearing remains conservative with an
LTV at the period end of 33.7% (September 2021: 34.6%) and is
supported by the continued strong cash conversion of rental income
into net operating cash flows of GBP20.6 million (September 2021:
GBP21.3 million*).
Net financing costs for the period were GBP6.2 million (2021:
GBP5.2 million). The average interest cost of the Company's debt
for the period was 3.04% (September 2021: 2.46%), noting that
benchmark SONIA rates payable on the Company's variable rate debt
increased markedly over the period. To that end, during September
2022, the Company also purchased interest rate caps for its
variable rate debt. This allows the Company to mitigate the effect
of further interest rate increases but also benefit from any
substantial falls in future interest rates. As at 30 September
2022, 100% of the Company's debt obligations are now either fixed
or capped (2021: 55% fixed), extenuating further increases to the
Company's cost of debt.
*Cash and cash equivalents and monies held in restricted
accounts and deposits have been restated as at 30 September 2021
and 31 March 2022 following clarification by IFRIC on
classification of funds with externally imposed restrictions.
Governance
CIM continues to engage actively with the Company's Approved
Provider partners and care providers, providing advice and shared
learning. This has helped to facilitate continued high level
operational performance on occupancy rates, property compliance
matters, and health and safety.
The Board carries out an annual Board performance evaluation
exercise. All of the Company's policies and procedures are reviewed
annually and, where appropriate, updated.
Summary
The multi-decade support for providing housing in the community
for the most vulnerable and reducing the burden on acute healthcare
settings continues to be further supported by cross party consensus
and clear evidence of excellent outcomes for people and for the
taxpayer.
Civitas is the market leader working at the intersection of
government public policy, with public and charitable bodies and the
private sector both in undertaking a role as significant investment
manager and asset manager and as a catalyst for improving standards
end evolving best practice.
Civitas Investment Management Limited
Investment Adviser
5 December 2022
Environmental, Social and Governance (ESG)
The Company's ESG Policy is located on its website. It provides
an overview of the Company's investment procedures and sets out the
Board's commitment to a continuous improvement process in its
approach to ESG integration.
Environmental: Carbon Reduction/Energy Cost Savings
CIM continues to work with E.ON (a leading UK energy and
solutions company) under a national framework agreement in
partnership with CSH APs, to improve the environmental performance
of the portfolio. The 'fabric first' approach to reducing the
portfolio's carbon footprint includes the installation of cavity
wall insulation, loft insulation, external wall insulation, air
source heat pumps and solar PV and battery storage to identified
properties. The installation of these energy efficient measures,
utilising available Government grants and other funding sources,
maximises value for the Company and for its counterparties. The
collaboration with E.ON is delivering significant environmental
enhancements without any cost to our Approved Providers.
The overall energy performance of the portfolio as identified on
Environmental Performance Certificates (EPC) reports that data has
improved over the last twelve months. The proportion of properties
with EPC Rating A-C is currently c.53% and the carbon footprint
(estimated from property characteristics) has reduced by 5% per
Civitas tenancy (from 2.70 tonnes of CO(2) /tenancy in September
2021 to 2.56 tonnes of CO(2) /tenancy).
Social Impact and Social Value
The Company's latest independent report from The Good Economy
was published in November 2022 and provides details of CSH's
portfolio and the continued success in delivering measurable social
impact. Findings include:
-- one property, housing up to two people, has been added to the CSH portfolio within the period
-- 41% of CSH's 697 properties have been brought into the social
housing sector for the first time
-- CSH's regular engagement with its Approved Providers to
monitor the quality of its stock continued through the covid
pandemic
-- Improvement works have enhanced the energy efficiency of
homes, with 99.9% of homes having an EPC rating of at least E+
-- CSH homes continue to serve vulnerable individuals and play a
significant role in improving resident wellbeing, particularly when
individuals are coming out of higher acuity facilities
-- Social value analysis (March 2021) revealed that, overall,
the portfolio generates GBP127 million of social value per year,
including fiscal savings to public budgets of GBP75.9 million per
year
-- 87% of respondents to the resident survey in March 2021
reported that they were satisfied with the quality of their home,
8% reported that they were neither satisfied nor dissatisfied
-- 100% statutory compliance rate by housing provider partners
is better than the wider affordable housing sector
ESG Rating Providers
As part of this commitment, CIM engages with ESG rating
providers on behalf of CSH to set out the activities that are
undertaken by CSH and to ensure this is profiled correctly. This
includes increased disclosure by CIM in respect of various policies
that have been promoted on the CIM website. Notably, active
participation in the 2022 GRESB Public Disclosure Assessment has
resulted in CSH retaining an A score attained in 2021, whilst the
peer group average score has moved up to B. Civitas is up to 2(nd)
position within its Comparison Group (UK Residential). GRESB is an
investor driven global ESG framework. Meanwhile, the ESG Risk
Rating Score for CSH by Sustainalytics remains at 16.6 (Low Risk)
as was reported in March 2022.
Social: Charities
Charities
The Company has supported and worked with the following
Charities.
Choir with No Name (CWNN)
CWNN has been running choirs and building joyful communities
with homeless and marginalised people since 2008. They use the arts
to address the most common reasons someone might find it difficult
to move on from homelessness, such as social isolation, low
confidence and lack of skills for work and life. They currently
have six choirs - in London, Liverpool, Birmingham, Brighton,
Cardiff and their most recent choir, a co-produced mixed community
choir in Coventry. They work with around 400 people impacted by
homelessness a year. Civitas supports CWNN by providing a secure
source of funding.
House of St Barnabas (HoSB)
The HoSB is a social enterprise and charity that works to
support people affected by homelessness
back into long-term employment. Their vision is of a future
where lasting good work, a secure home and a supportive network are
a reality for those affected by homelessness. Civitas sponsors the
mentoring programme.
Women in Social Housing (WISH)
WISH CIC is a social enterprise, a membership-based networking
community for women working across every discipline in the UK
housing sector. Their aim is to create a legacy by challenging
gender inequality and the gender pay gap, by encouraging new and
existing female talent to remain in the sector and by boosting each
other through career successes. They offer encouragement and
support, championing positive outcomes through events, initiatives
and activities. Civitas promotes the work of WISH to increase
inclusivity and gender balance across the social housing
sector.
Care Workers Charity (CWC)
The CWC authentically represents the social care sector's
workforce and is its safety net. It specifically advocates for the
nearly 2 million care workers that comprise one of the UK's largest
workforces. CWC delivers award-winning activities to address the
symptoms and the causes of care workers' challenging situations.
Over the past two years, CWC has provided over GBP3.3 million in
grants and supported over 5,100 care workers and influenced
national workforce policy, guidance, and research. The annual
donation from Civitas, on a 3-year commitment enables CWC to train
up Mental Health (MH) First Aiders for deployment into member
organisations.
Little Sprouts
Little Sprouts promotes the health and wellbeing of communities
through delivery of targeted cooking and food education workshops,
surplus food collection, and other activities. The charity places a
particular focus on supporting deprived communities where the
socioeconomic position - housing, employment, or education - has
had a massive contributory effect on well-being and health. It has
also provided meals for those with mental health issues affected by
the pandemic.
Governance
CIM's implementation of the Board's commitment to continuous
improvement in its approach to ESG integration remains core to the
investment strategy. Over the last year, we have engaged with ESG
Rating Agencies such as GRESB (formerly Global Real Estate
Sustainability Benchmark), MSCI (Morgan Stanley Capital
International), Sustainalytics, and EPRA sBPR.
For more details on the Company's Governance arrangements,
please refer to the 2022 Annual Report.
Key Performance Indicators
Measure Explanation Result
--------------------- --------------------------------- ------------------------------------
Increase in Target to achieve capital NAV increase of 16.9p
NAV per share appreciation whilst maintaining per share or 17.2% from
a low risk strategy from IPO (September 2021: 10.5p
enhancing the quality of per share or 10.8%).
cash flows from investments,
by physical improvement
of properties and by creating
a significantly diversified,
high-quality portfolio.
--------------------- --------------------------------- ------------------------------------
Dividends per Targeting 5.70p per share Dividends of 2.85p per
share for the current year. share declared for the
six-month period (September
2021: 2.78p per share).
--------------------- --------------------------------- ------------------------------------
Number of Local Target risk mitigation through As at 30 September 2022:
Authority partners, a diversified portfolio
Approved Providers (once fully invested) with * 178 Local Authorities
and Care Providers no more than 25% exposure
to any one Local Authority
Partner or single Approved * 18 Approved Providers
Provider and no more than
20% exposure to any single
geographical area, once * 130 care providers
the capital of the Company
is fully invested.
The Company's largest
single exposure is to
Falcon Housing Association
and currently stands at
19.1% (2021: 19.5%). The
largest geographical concentration
is in the South West,
being 14.2% (2021: 15.6%).
--------------------- --------------------------------- ------------------------------------
Loan to Gross Targeted total debt drawn Leverage as at 30 September
Assets (Leverage) no more than 40% of gross 2022 of 33.69% of gross
assets. assets (September 2021:
34.55%).
--------------------- --------------------------------- ------------------------------------
Alternative Performance Measures
EPRA
The Company is a member of the European Real Estate Association
("EPRA"). EPRA has developed and defined the following performance
measures to give transparency, comparability and relevance of
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 30 September 30 September 31 March
Measure Definition Purpose Performance 2022 2021 2022
--------------- --------------- --------------- ---------------- --------------- --------------- ---------------
EPRA Earnings Earnings from A key measure EPRA Earnings GBP13,573,000 GBP14,908,000 GBP29,810,000
operational of a company's
activities. underlying EPRA Earnings 2.22p 2.40p 4.82p
operating per share
results and (Basic and
an indication diluted)
of the extent
to which
current
dividend
payments
are supported
by earnings.
--------------- --------------- --------------- ---------------- --------------- --------------- ---------------
EPRA Net EPRA NAV The EPRA NAV EPRA NRV GBP689,934,000 GBP672,742,000 GBP673,416,000
Reinstatement metric set of metrics
Value ("NRV") which assumes make EPRA NRV 113.78p 108.47p 109.96p
that entities adjustments per share
never sell to the NAV (diluted)
assets and per the
aims to financial
represent statements
the value to provide
required stakeholders
to rebuild with the most
the entity. relevant
information
on the fair
value of the
assets and
liabilities
of a real
estate
investment
company, under
different
scenarios.
--------------- --------------- --------------- ---------------- --------------- --------------- ---------------
EPRA Net EPRA NAV EPRA NTA GBP689,934,000 GBP672,742,000 GBP673,416,000
Tangible metric
Assets ("NTA") which assumes EPRA NTA 113.78p 108.47p 109.96p
that entities per share
buy and sell (diluted)
assets,
thereby
crystallising
certain levels
of unavoidable
deferred tax.
--------------- --------------- --------------- ---------------- --------------- --------------- ---------------
EPRA Net EPRA NAV EPRA NDV GBP710,809,000 GBP671,524,000 GBP678,191,000
Disposal metric
Value ("NDV") which EPRA NDV 117.22p 108.27p 110.74p
represents per
the share (diluted)
shareholders'
value under
a disposal
scenario,
where
deferred tax,
financial
instruments
and certain
other
adjustments
are calculated
to the full
extent of
their
liability,
net of any
resulting tax.
--------------- --------------- --------------- ---------------- --------------- --------------- ---------------
Past performance is not a reliable indicator of future
performance.
EPRA Performance 30 September 30 September 31 March
Measure Definition Purpose Performance 2022 2021 2022
----------------- --------------------- ---------------- ----------------- ------------- ------------- ---------
A comparable
measure for
Annualised rental portfolio
income based on valuations.
the cash rents These measures
passing should make
at the balance it easier
sheet for investors
date, less to judge
non-recoverable themselves,
property operating how the
EPRA Net expenses, divided valuation
Initial by the market value of portfolio
Yield ( of the property X compares
" NIY " with (estimated) with portfolio
) purchasers' costs. Y. EPRA NIY 5.27% 5.19% 5.28%
----------------- --------------------- ---------------- ----------------- ------------- ------------- ---------
This measure incorporates
an adjustment to
the EPRA NIY in
respect of the expiration
of rent-free periods
(or other unexpired
lease incentives
EPRA Topped-up such as discounted EPRA
Net Initial rent periods and 'Topped-up'
Yield ("NIY") stepped rents). NIY 5.27% 5.19% 5.28%
----------------- --------------------------------------- ---------------- ------------- ------------- ---------
Administrative and A key measure
operating costs to enable
(including and meaningful
excluding measurement
costs of direct of the changes
vacancy) divided in a company's
EPRA Costs by gross rental operating EPRA Costs
Ratio income. costs. Ratio(1) 25.85%(2) 19.68% 20.20%
----------------- --------------------- ---------------- ----------------- ------------- ------------- ---------
A key
(shareholder
gearing)
Debt (including metric to
net payables but determine
net of cash the percentage
balances) of debt
divided by the comparing
market to the
value of the appraised
property value of
(including net the
EPRA LTV receivables). properties. EPRA LTV 31.47% 29.60% 31.24%
----------------- --------------------- ---------------- ----------------- ------------- ------------- ---------
A 'pure'
Estimated Market (%) measure
Rental Value of investment
("ERV") property
of vacancy space space that
divided by ERV of is vacant,
EPRA vacancy the whole based on EPRA Vacancy
Rate portfolio. ERV. Rate 0.02% 0.00% 0.00%
----------------- --------------------- ---------------- ----------------- ------------- ------------- ---------
(1) As there are no direct vacancy costs, the EPRA Costs Ratios
inclusive and exclusive of vacancy costs remain the same ratios
inclusive of vacancy costs are the same as the ratio exclusive of
vacancy costs for 2022, 2021 and 2020.
(2) This includes exceptional costs of GBP1.64 million.
Past performance is not a reliable indicator of future
performance.
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 principal risks facing the Company are set out on pages 38
to 41 of the Annual Report for the financial year ended 31 March
2022. Risks faced by the Company include, but are not limited to,
strategy and competitiveness risks, investment management risks,
accounting, legal and regulatory risks and operational risks,
including cyber-crime. Financial risks include market risks in
relation to investment in property and liquidity funds, interest
rate risk, credit risk and liquidity risk. Details of the Company's
management of these risks are set out in the 2022 Annual
Report.
The Board recognises that the current macroeconomic environment
has increased the level of risk around the Company's financing
arrangements regarding borrowing terms and covenants, and the Board
has taken steps to address these as set out in the Chairman's
Statement and the Investment Adviser's Report. In addition, the
historic actions of short sellers and the overall repricing of the
REIT market has led to the significant discount to NAV at which the
Company's shares trade. All other principal risks facing the
Company are substantially unchanged since the date of the Annual
Report for the financial year ended 31 March 2022.
Statement of Directors' Responsibilities in respect of the
financial statements
The Directors are responsible for preparing the Half Year Report
and the financial statements in accordance with applicable law and
regulation.
The Directors acknowledge responsibility for the Half Year
Report and confirm that, to the best of their knowledge, these
condensed consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting', and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the Half Year Report (including the
Chairman's Statement and the Investment Adviser's Report) includes
a fair review of the information required by DTR 4.2.7 and DTR
4.2.8, namely:
-- an indication of important events that have occurred during
the six-month period to 30 September 2022 and their impact on the
condensed consolidated financial statements, and a description of
the principal risks and uncertainties for the remaining six months
of the financial year; and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Directors of the Company are set out in the full report.
The principal risks and uncertainties facing the Group are
consistent with those outlined in the Group's
most recent annual financial statements for the year ended 31
March 2022, reflecting the information
required by DTR 4.2.7R.
This Half Year Report was approved by the Board of Directors and
the above responsibility statement was signed on its behalf by:
Michael Wrobel
Chairman
5 December 2022
Independent review report to Civitas Social Housing PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Civitas Social Housing PLC's condensed
consolidated interim financial statements (the "interim financial
statements") in the Half Year Report of Civitas Social Housing PLC
for the 6 month period ended 30 September 2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed Consolidated Statement of Financial Position as at 30 September 2022;
-- the Condensed Consolidated Statement of Comprehensive Income for the period then ended;
-- the Condensed Consolidated Statement of Cash Flows for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Report of Civitas Social Housing PLC have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial
statements, is the responsibility of, and has been
approved by the Directors. The Directors are responsible for
preparing the Half Year Report in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Report,
including the interim financial statements, the Directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Report based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
5 December 2022
Condensed Consolidated Statement of Comprehensive Income
For the period from 1 April 2022 to 30 September 2022
From 1 April From 1 April For the
2022 to 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------- ---- ------------- ------------- -----------
Revenue
Rental income 4.0 27,792 25,712 51,636
Less direct property expenses 4.0 (1,197) (636) (978)
------------------------------------------------------- ---- ------------- ------------- -----------
Net rental income 26,595 25,076 50,658
Directors' remuneration (104) (103) (206)
Investment advisory fees 17.2 (3,110) (3,080) (6,132)
General and administrative expenses 5.0 (3,570) (1,757) (3,909)
------------------------------------------------------- ---- ------------- ------------- -----------
Total expenses (6,784) (4,940) (10,247)
Change in fair value of investment properties 10.0 25,510 2,258 12,269
------------------------------------------------------- ---- ------------- ------------- -----------
Operating profit 45,321 22,394 52,680
Finance income 54 - 7
Finance expense 6.0 (6,292) (5,228) (10,608)
Change in fair value of interest rate derivatives 14.0 3,555 686 2,675
------------------------------------------------------- ---- ------------- ------------- -----------
Profit before tax 42,638 17,852 44,754
Taxation 7.0 - - -
------------------------------------------------------- ---- ------------- ------------- -----------
Profit being total comprehensive income for the period 42,638 17,852 44,754
------------------------------------------------------- ---- ------------- ------------- -----------
Earnings per share - basic and diluted 8.0 6.98p 2.87p 7.23p
------------------------------------------------------- ---- ------------- ------------- -----------
All amounts reported in the Condensed Consolidated Statement of
Comprehensive Income above arise from continuing operations.
The notes below are an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Financial Position
As at 30 September 2022
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
----------------------------------------- ----- ------------ ------------ ---------
Assets
Non-current assets
Investment property 10.0 974,491 923,943 945,237
Other receivables 10.0 25,029 22,351 23,519
Interest rate derivatives 14.0 6,423 142 2,131
----------------------------------------- ----- ------------ ------------ ---------
1,005,943 946,436 970,887
Current assets
Trade and other receivables 11,626 10,704 12,865
Cash and cash equivalents 12.0 42,227 76,494 53,337
----------------------------------------- ----- ------------ ------------ ---------
53,853 87,198 66,202
----------------------------------------- ----- ------------ ------------ ---------
Total assets 1,059,796 1,033,634 1,037,089
----------------------------------------- ----- ------------ ------------ ---------
Liabilities
Current liabilities
Trade and other payables (10,889) (9,179) (9,492)
Non-current liabilities
Bank and loan borrowings 13.0 (352,550) (351,571) (352,050)
Total liabilities (363,439) (360,750) (361,542)
----------------------------------------- ----- ------------ ------------ ---------
Total net assets 696,357 672,884 675,547
----------------------------------------- ----- ------------ ------------ ---------
Equity
Share capital 15.0 6,225 6,225 6,225
Share premium reserve 292,626 292,626 292,626
Capital reduction reserve 317,714 329,551 322,365
Retained earnings 79,792 44,482 54,331
----------------------------------------- ----- ------------ ------------ ---------
Total equity 696,357 672,884 675,547
----------------------------------------- ----- ------------ ------------ ---------
Net assets per share - basic and diluted 16.0 114.84p 108.49p 110.30p
----------------------------------------- ----- ------------ ------------ ---------
These Condensed 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
5 December 2022
Company no: 10402528
The notes below are an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Changes in Equity
For the period from 1 April 2022 to 30 September 2022
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 2022 6,225 292,626 322,365 54,331 675,547
Profit and total comprehensive income for the
period - - - 42,638 42,638
Shares bought back into treasury 15.0 - - (4,651) - (4,651)
Dividends paid 9.0 - - - (17,177) (17,177)
---------------------------------------------------- ----- --------- --------- ----------- ----------- ---------
Balance at 30 September 2022 (unaudited) 6,225 292,626 317,714 79,792 696,357
---------------------------------------------------- ----- --------- --------- ----------- ----------- ---------
Balance at 1 April 2021 6,225 292,463 331,140 43,670 673,498
Profit and total comprehensive income for the
period - - - 17,852 17,852
Shares reissued from treasury 15.0 - 163 484 - 647
Shares bought back into treasury 15.0 - - (2,073) - (2,073)
Dividends paid 9.0 - - - (17,040) (17,040)
---------------------------------------------------- ----- --------- --------- ----------- ----------- ---------
Balance at 30 September 2021 (unaudited) 6,225 292,626 329,551 44,482 672,884
---------------------------------------------------- ----- --------- --------- ----------- ----------- ---------
Balance at 1 April 2021 6,225 292,463 331,140 43,670 673,498
Profit and total comprehensive income for the year - - - 44,754 44,754
Shares reissued from treasury 15.0 - 163 484 - 647
Shares bought back into treasury 15.0 - - (9,259) - (9,259)
Dividends paid 9.0 - - - (34,093) (34,093)
---------------------------------------------------- ----- --------- --------- ----------- ----------- ---------
Balance at 31 March 2022 (audited) 6,225 292,626 322,365 54,331 675,547
---------------------------------------------------- ----- --------- --------- ----------- ----------- ---------
The notes below are an integral part of these condensed
consolidated financial statements.
Condensed Consolidated Statement of Cash Flows
For the period from 1 April 2022 to 30 September 2022
From 1 April For the
From 1 April 2021 to Year ended
2022 to 30 September 31 March
30 September 2021 2022
2022 *Restated *Restated
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Cash flows from operating activities
Profit for the period before taxation 42,638 17,852 44,754
- Change in fair value of investment properties (25,510) (2,258) (12,269)
- Change in fair value of interest rate derivatives (3,555) (686) (2,675)
- Rent and incentive straight line adjustments 190 149 397
- Bad debts expensed/(recovered) 122 (7) (17)
Finance income (54) - (7)
Finance expense 6,292 5,228 10,608
Increase in lease incentive receivable (1,700) (595) (2,011)
Decrease/(increase) in trade and other receivables 634 1,447 (236)
Increase in trade and other payables 1,511 172 551
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Cash generated from operations 20,568 21,302 39,095
Interest received 54 - 7
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Net cash flow generated from operating activities 20,622 21,302 39,102
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Investing activities
Purchase of investment properties and other capital
expenditure (3,447) (16,491) (27,695)
Acquisition costs (245) (1,115) (1,640)
Purchase of subsidiary - including property -- (13,559) (13,559)
Sale proceeds on sale of subsidiary- excluding property -- 2,695 2,695
Net cash flow used in investing activities (3,692) (28,470) (40,199)
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Financing activities
Cost of shares bought into treasury (4,646) (1,665) (9,259)
Proceeds from shares released from treasury - 919 919
Dividends paid to equity shareholders (17,254) (17,005) (33,928)
Interest rate derivative premium paid (737) - -
Bank borrowing issue costs paid (324) (1,445) (1,805)
Interest and security fees paid on bank borrowings and
derivatives (5,079) (4,239) (8,590)
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Net cash flow used in financing activities (28,040) (23,435) (52,663)
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Net decrease in cash and cash equivalents (11,110) (30,603) (53,760)
Cash and cash equivalents at the start of the period 53,337 107,097 107,097
-------------------------------------------------------------- ----- ----------------- -------------- ------------
Cash and cash equivalents at the end of the period 12.0 42,227 76,494 53,337
-------------------------------------------------------------- ----- ----------------- -------------- ------------
* Cash and cash equivalents and monies held in restricted
accounts and deposits have been restated as at 30 September 2021
and 31 March 2022 following clarification by IFRIC on
classification of funds with externally imposed restrictions.
The notes below are an integral part of these condensed
consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 April 2022 to 30 September 2022
1.0 Corporate information
These condensed consolidated financial statements for the period
from 1 April 2022 to 30 September 2022 comprise the results of the
Company and its subsidiaries (together the "Group") and were
approved by the Board and authorised for issue on 5 December
2022.
The Company is incorporated in England and Wales under the
Companies Act 2006 as a public company limited by shares with
company number 10402528.
The address of the registered office is 6th Floor, 65 Gresham
Street, London EC2V 7NQ. The Company is registered as an investment
company under section 833 of the Companies Act 2006 and is
domiciled in the United Kingdom.
The principal activity of the Company is to act as the ultimate
parent company of the Group, whose principal activity is to provide
shareholders with an attractive level of income, together with the
potential for capital growth from investing in a portfolio of
social homes.
2.0 Basis of preparation
The Group's condensed consolidated financial statements
("Financial Statements") have been prepared on a going concern
basis and in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority ("FCA") and with UK-adopted international
accounting standards 34 'Interim Financial Reporting'. The
condensed consolidated financial statements should be read in
conjunction with the Annual Report & Accounts for the year
ended 31 March 2022, which have been prepared in accordance with
UK-adopted International Accounting Standards and in conformity
with the requirements of the Companies Act 2006.
The current period financial statements have been reviewed, not
audited. The financial statements for the period ended 30 September
2022 do not constitute statutory accounts as defined in section 434
of the Companies Act 2006. A copy of the statutory accounts for the
year ended 31 March 2022 has been delivered to the Registrar of
Companies. The Auditors' report on those accounts was not
qualified. The Auditors' report did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
The comparative periods represent the period from 1 April 2021
to 30 September 2021 as reported in the Group's 2021 Interim
Report, and for the year ended 31 March 2022 as reported in the
Company's 2022 Annual Report.
The Group has chosen to adopt EPRA best practice guidelines for
calculating key alternative performance measures. These are
disclosed above with supporting calculations in Appendix 1 as set
out below.
The Group's condensed consolidated financial statements have
been prepared on a historical cost basis, as modified for the
Group's investment properties and derivatives at fair value through
profit or loss.
The same accounting policies, estimates, presentation and
methods of computation are followed in the Half Year Report as
applied in the Group's latest annual audited financial statements,
with the exception of the following items:
IFRIC Agenda Item: Following clarification by IFRIC on the
classification of monies held in restricted accounts, monies that
are restricted by use only are classified at 30 September 2022 as
'Cash and cash equivalents'. The comparative balances have been
restated where applicable to reflect this change in
classification.
Amendments to IFRS 3 'Business Combinations' (effective for
periods beginning on or after 1 January 2022) - gives clarification
on the recognition of contingent liabilities at acquisition and
clarifies that contingent assets should not be recognised at the
acquisition date. The amendments have not had a significant impact
on the preparation of the financial statements.
Amendments to IAS 37 'Provisions, Contingent Liabilities and
Contingent Assets' (effective for periods beginning on or after 1
January 2022) - gives clarification on costs to include in
estimating the cost of fulfilling a contract for the purpose of
assessing whether that contract is onerous. The amendments have not
had a significant impact on the preparation of the financial
statements.
Amendments to IFRS 9 'Financial Instruments' (effective for
periods beginning on or after 1 January 2022) - gives clarification
on the fees an entity includes when assessing whether the terms of
a new or modified financial liability are substantially different
from the terms of the original liability. The amendments have not
had a significant impact on the preparation of the financial
statements.
2.1 Functional and presentation currency
The financial information is presented in Pounds Sterling which
is also the functional currency of the Company, and all values are
rounded to the nearest thousand (GBP'000s) pound, except where
otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases
with the Approved Providers and presents a well-diversified risk.
The Group's cash balances as at 30 September 2022 were
GBP42,227,000 of which GBP4,287,000 was held as restricted cash.
Details of this can be found in note 12.0.
The Company and its Investment Adviser, Civitas Investment
Management Limited ("CIM") continue to work 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.
In May 2022 the facility with Lloyds Bank plc was extended to
July 2024.
Cash flow forecasts based on severe but plausible downside
scenarios have been run, in particular the financial performance of
tenants and a reduction in rent. As at 30 September 2022, the rent
would have to drop by approximately 29% before its loan covenants
are breached. At the date of approval of this report, the Company
has substantial headroom within all its financial loan covenants.
The Company also benefits from a secure income stream from leases
with long average unexpired term leases. 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 Company's articles of association include a requirement for
the Board to propose an ordinary resolution at the annual general
meeting following the fifth anniversary from the initial public
offering of the Company for the Company to continue in its current
form (the Continuation Resolution). This vote was passed in
September 2022 so the Company will continue its business as
presently constituted and will propose the same resolution at the
AGM in September 2027 and every fifth annual general meeting
thereafter.
The Directors believe that there are currently no material
uncertainties in relation to the Group's ability to continue for
the period of at least 12 months from the date of approving the
Group's condensed consolidated financial statements. The Board is,
therefore, of the opinion that the going concern basis adopted in
the preparation of the condensed consolidated financial statements
is appropriate.
On 17 November 2022, an extension was granted for the facility
with HSBC UK Bank plc, which now expires on 28 November 2025.
Please refer to note 19.0 for refinancing initiatives post
period end.
2.3 Segmental information
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal financial reports about
components of the Group that are regularly reviewed by the Chief
Operating Decision Maker, which in the Group's case is delegated to
the Investment Adviser, who has formed an Executive Team, in order
to allocate resources to the segments and to assess their
performance.
The internal financial reports received by the Investment
Adviser's Executive Team contain financial information at a Group
level as a whole and there are no reconciling items between the
results contained in these reports and the amounts reported in the
condensed consolidated financial statements.
The Directors consider the Group's property portfolio represents
a coherent and diversified portfolio with similar economic
characteristics and as a result these individual properties have
been aggregated into a single operating segment. In the view of the
Directors there is accordingly one reportable segment under the
provisions of IFRS 8.
All of the Group's properties are based in the UK. No
geographical grouping is contained in any of the internal financial
reports provided to the Investment Adviser's Executive Team and,
therefore no geographical segmental analysis is required by IFRS
8.
3.0 Significant accounting judgements, estimates and assumptions
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities are unchanged from those outlined in the Annual
Report.
4.0 Rental income
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ---------------- ---------------- -----------
Rental income from investment property 26,907 25,225 51,038
Rent straight line adjustments 313 299 529
Lease incentive adjustments (503) (448) (926)
Rechargeable costs received 1,075 636 995
--------------------------------------- ---------------- ---------------- -----------
Rental Income 27,792 25,712 51,636
Less direct property expenses
Insurance and service charge costs (1,075) (636) (995)
Bad debt (122) - 17
--------------------------------------- ---------------- ---------------- -----------
Direct property expenses (1,197) (636) (978)
--------------------------------------- ---------------- ---------------- -----------
Net rental income 26,595 25,076 50,658
--------------------------------------- ---------------- ---------------- -----------
Rechargeable costs received represent insurance and service
charge costs paid by the Group and recharged to the Approved
Providers and are accounted for under IFRS 15 'Revenue from
contracts with customers'.
As per the lease agreements with the Group and Approved
Providers, the Approved 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.
5.0 General and administrative expenses
General and administrative expenses for the current period
contain exceptional professional costs of GBP1,636,000. These costs
pertain to two strategic projects the Company has been evaluating
that did not come to fruition.
6.0 Finance expense
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------- ---------------- ---------------- -----------
Interest paid and payable on bank borrowings
and derivatives 5,446 4,390 8,907
Amortisation of loan arrangement fees 824 814 1,653
Loan security fees 18 21 42
Bank charges 4 3 6
--------------------------------------------- ---------------- ---------------- -----------
Total 6,292 5,228 10,608
--------------------------------------------- ---------------- ---------------- -----------
7.0 Taxation
As a UK REIT, the Group is exempt from corporation tax on the
profits and gains from its property investment business, provided
it meets certain conditions as set out in the UK REIT regulations.
For the period ended 30 September 2022, 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 UK REIT for
the foreseeable future, such that deferred tax has not been
recognised on temporary differences relating to the property rental
business.
A deferred tax asset of GBP2,586,000 (30 September 2021:
GBP2,405,000; 31 March 2021: GBP1,268,000) calculated using the
forthcoming tax rate of 25% has not been recognised in respect of
the unutilised residual current year losses as it is not
anticipated that sufficient residual profits will be generated in
the future.
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------------------- ---------------- ---------------- -----------
Corporation tax charge/(credit) for the period - - -
---------------------------------------------- ---------------- ---------------- -----------
Total - - -
---------------------------------------------- ---------------- ---------------- -----------
The tax charge for the period is less than the standard rate of
corporation tax in the UK of 19%. The differences are explained
below.
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------------- ----------------- ----------------- -------------
Group
Profit before taxation 42,638 17,852 44,754
------------------------------------------------- ----------------- ----------------- -------------
UK corporation tax rate 19.00% 19.00% 19.00%
Theoretical tax at UK corporation tax rate 8,101 3,392 8,503
Effects of:
Change in value of exempt investment properties (4,847) (429) (2,331)
Exempt REIT income (3,342) (3,259) (6,598)
Amounts not deductible for tax purposes (251) (22) (230)
Unutilised residual current period tax losses 339 318 656
------------------------------------------------- ----------------- ----------------- -------------
Total - - -
------------------------------------------------- ----------------- ----------------- -------------
The standard rate of corporation tax is currently 19%. The
government has announced that the corporation tax standard rise to
25% from 1 April 2023.
REIT exempt income includes property rental income that is
exempt from UK corporation tax in accordance with Part 12 of the
Corporation Tax Act 2010.
8.0 Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing
profit for the period attributable to equity holders of the Company
by the weighted average number of Ordinary shares in issue during
the period.
The calculation of basic and diluted EPS is based on the
following:
From
1 April 2022 to From For the
30 September 1 April 2021 to 30 September year ended 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ---------------- ----------------------------- --------------------
Calculation of Basic EPS
Net profit attributable to Ordinary
shareholders (GBP'000) 42,638 17,852 44,754
Weighted average number of Ordinary shares
(excluding shares held in treasury) 610,707,145 622,260,670 618,797,942
EPS - basic & diluted 6.98p 2.87p 7.23p
----------------------------------------------- ---------------- ----------------------------- --------------------
9.0 Dividends
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------------- ---------------- -----------
Dividend of 1.3500p for the three months to
31 March 2021 - 8,403 8,403
Dividend of 1.3875p for the three months to
30 June 2021 - 8,637 8,637
Dividend of 1.3875p for the three months to
30 September 2021 - - 8,555
Dividend of 1.3875p for the three months to
31 December 2021 - - 8,498
Dividend of 1.3875p for the three months to
31 March 2022 8,474 - -
Dividend of 1.4250p for the three months to
30 June 2022 8,703 - -
-------------------------------------------- ---------------- ---------------- -----------
T otal 17,177 17,040 34,093
-------------------------------------------- ---------------- ---------------- -----------
On 9 November 2022, the Company announced a dividend of 1.425
pence per share in respect of the period 1 July 2022 to 30
September 2022 totalling GBP8,641,000. The dividend payment will be
paid on or around 9 December 2022 to shareholders on the register
as at 18 November 2022. The financial statements do not reflect
this dividend.
10.0 Investment property
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------------------------- ---------------- ---------------- -----------
Balance at beginning of period 968,756 915,589 915,589
Property acquisitions 562 23,061 33,466
Improvements to investment properties 3,182 4,940 5,818
Lease incentives and rent straight line adjustments recognised 1,510 446 1,614
Change in fair value during the period 25,510 2,258 12,269
--------------------------------------------------------------- ---------------- ---------------- -----------
Value advised by the property valuers 999,520 946,294 968,756
Less lease incentive assets and rent straight line assets (25,029) (22,351) (23,519)
--------------------------------------------------------------- ---------------- ---------------- -----------
Total 974,491 923,943 945,237
--------------------------------------------------------------- ---------------- ---------------- -----------
During the period, the Group acquired a property holding company
from Herleva Properties Limited which held assets totalling
GBP8,611,000. These are included within Property Acquisitions in
the note above. Herleva Properties Limited is a subsidiary of
Specialist Healthcare Operations Limited ("SHO"). Andrew Dawber and
Tom Pridmore (both directors of the Investment Adviser), are 14.99%
shareholders in SHO. They are not directors of SHO, and have no
operational role in that business. SHO does not meet the definition
of a related party under IAS 24.
Improvements to investment properties includes capital
expenditure incurred to date in respect of climate change
initiatives.
Valuation
In accordance with "IAS 40: Investment Property", the investment
property has been independently valued at fair value by Jones Lang
LaSalle Ltd ("JLL"), an accredited external valuer with recognised
and relevant professional qualifications and recent experience of
the location and category of the investment property being valued.
However, the valuations are the ultimate responsibility of the
Directors.
JLL valued the Group's properties if they were each sold in
independent transactions in accordance with IFRS, at GBP999,520,000
as at 30 September 2022 (30 September 2021: GBP946,294,000; 31
March 2022: GBP968,756,000).
JLL has provided additional valuation services on the
acquisition of investment property to the Company during the
period. In relation to the period ended 30 September 2022, 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 transaction detailed in note 11.0,
which occurred in the prior period, all other corporate
acquisitions occurring during the periods disclosed have been
treated as asset purchases rather than business combinations
because, following review of the IFRS 3 concentration test, they
are considered to be acquisitions of properties rather than
businesses.
The following table provides the fair value measurement
hierarchy for investment property:
Significant Significant
Quoted prices in active observable observable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- --------- ------------------------ ------------ ------------
Investment properties measured at fair value:
30 September 2022 974,491 - - 974,491
31 March 2022 945,237 - - 945,237
30 September 2021 923,943 - - 923,943
----------------------------------------------- --------- ------------------------ ------------ ------------
There have been no transfers between Level 1 and Level 2 during
any of the periods, nor have there been any transfers between Level
2 and Level 3 during any of the periods.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards (incorporating the International
Valuation Standards) by JLL, one of the leading professional firms
engaged in the Social Housing sector.
As noted previously, all of the Group's investments are reported
as Level 3 in accordance with IFRS 13 where external inputs are
"unobservable" and value is the Directors' best estimate, based
upon advice from relevant knowledgeable experts.
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:
1. the regulated social housing sector and demand for the
facilities offered by each SSH property owned by the Group;
2. 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;
3. detailed financial analysis with discount rates supporting
the carrying value of each property;
4. a full repairing and insuring lease with annual indexation based on CPI or CPI+1.
The following descriptions and definitions relating to valuation
techniques and key unobservable inputs made in determining fair
values are as follows:
Valuation techniques: income approach
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date
(i.e. an exit price).
The valuation methodology used by the valuers follows the income
approach. This approach considers the rental income currently
payable; the next uplift for that income under review; the
likelihood of a continuation of that rental income - with growth in
accordance with the leases - over the remaining terms; and then a
long-term reversion which considers the likely ability of the
properties to continue to generate rent through supported housing
occupation, as distinct from a reversion to vacant possession
value.
Risks are involved in both assessing the value of the rental
income over the remaining terms of the leases and also in
predicting that income will continue beyond the end of the existing
leases. This is a balanced judgement which can properly reflected
in the exit yield applied to the final year's income and in the
overall return to a purchaser.
Appropriate taxation calculations are adopted for every property
based on its value and on the assumption of the sale of the
property assets directly as opposed to shares of a subsidiary
company holding the property and have considered the individual
characteristics of the properties.
The material unobservable inputs that determine the fair value
of the Group's investment property:
1. The rate of 2.00% per annum has been used for CPI over the
term of the subject properties' leases in line with the Bank of
England's long-term inflation targets for CPI. It should be noted
that all leases benefit from either CPI or CPI+1 indexation.
2. 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), impact of climate change, 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 an
Approved Provider. As at the balance sheet date, the lease lengths
within the Group's portfolio ranged from an effective 5 years to 35
years with a weighted average unexpired lease term of 21.9 years.
The greater the length of the lease, then, all other metrics being
equal, the greater the value of the property.
Sensitivities of measurement of significant unobservable
inputs
The Group's property investment valuation is open to inherent
uncertainties in the inputs that determine fair value. As a result,
the following sensitivity analysis has been prepared:
Average discount rate and range
The average discount rate used by the valuer in the Group's
property Portfolio Valuation is 6.0% ( 30 September 2021: 6.0%; 31
March 2022: 5.5%). The valuer took the view that at 30 September
2022, the immediate volatility in the financial markets had not
translated into any evidential movement in yields in the SSH
sector, which is generally underpinned by long, index-linked
leases. Hence, they held their term average discount rate at 6.0%,
although there was (as in all previous valuations) some variation
across the portfolio due to individual property factors. JLL will
keep yields, and therefore discount rates, under regular
review.
The range of discount rates used by the valuer in the Group's
property Portfolio Valuation is from 4.6% to 11.4% (30 September
2021: 4.7% to 10.7%; 31 March 2022: 4.6% to 11.5%). In assessing
the range of discounts, the valuer considers the likely net initial
yield which would be sought by the investment market and builds in
additional discounts to reflect added risk into the discount rate
of the term and, in some cases, the discount rate for the
reversion. For example where larger rental growth is allowed during
the lease, an additional discount is built into the reversion
because of the greater risk of a fall in the rent at the end of the
lease.
Similarly additional discounts are considered where properties
are in the process of being re-purposed and premiums are considered
where residential care assets are funded by back-to-back leases
with care providers. 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:
-1.0% in discount rate +1.0% in discount rate +0.5% in CPI -0.5% in CPI
unaudited unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ---------------------- ---------------------- ------------ ------------
Increase/(decrease) in the IFRS fair value
of investment properties at
30 September 2022 75,790 (65,656) 60,120 (55,656)
30 September 2021 74,580 (64,304) 58,488 (53,948)
31 March 2022 73,955 (64,020) 58,150 (53,815)
------------------------------------------ ---------------------- ---------------------- ------------ ------------
11.0 Subsidiary resale
For the
From 1 April year ended
From 1 April 2022 to 2021 to 31 March
30 September 2022 30 September 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------- --------------------------------------------------- ------------------ -----------
Acquisition of subsidiary
companies (including
intercompany loan) - 13,559 13,559
Acquisition costs - 753 765
Transfer to investment property - (11,617) (11,629)
Sale proceeds - (2,695) (2,695)
-------------------------------- --------------------------------------------------- ------------------ -----------
Total - - -
-------------------------------- --------------------------------------------------- ------------------ -----------
During the prior year, the Group entered into a transaction to
acquire the freehold properties operated by CPI Care Limited. Upon
the acquisition of the companies for GBP13,559,000 plus transaction
costs; the properties were transferred into other group companies
and the company acquired, along with its associated operations, was
sold to Envivo Corundum Bidco Limited for GBP2,695,000. Envivo
Corundum Bidco Limited is a subsidiary of Specialist Healthcare
Operations Limited ("SHO"). Andrew
Dawber and Tom Pridmore (both directors of the Investment
Adviser), are 14.99% shareholders in SHO. They are not directors of
SHO, and have no operational role. SHO does not meet the definition
of a related party under IAS 24.
12.0 Cash and cash equivalents
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------------
Cash held by solicitors 85 3,456 376
Liquidity funds 10,542 10,485 10,489
Cash held at bank 27,313 58,040 38,110
--------------------------------------- ------------ ------------ --------
Unrestricted cash and cash equivalents 37,940 71,981 48,975
Restricted cash 4,287 4,513 4,362
Total 42,227 76,494 53,337
--------------------------------------- ------------ ------------ --------
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.
Restricted cash represents amounts held for specific
commitments, tenant deposits and retention money held 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.
Cash held by solicitors 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.
13.0 Bank and loan borrowings
Bank borrowings are secured by charges over individual
investment properties held by certain asset-holding subsidiaries.
The banks also hold charges over the shares of certain subsidiaries
and any intermediary holding companies of those subsidiaries. Any
associated fees in arranging the bank borrowings unamortised as at
the period end are offset against amounts drawn on the facilities
as shown in the table below:
From 1 April From 1 April For the
2022 to 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------------- ------------- -----------
Bank borrowings at start of period 357,050 357,050 357,050
Bank borrowings drawn - - -
-------------------------------------------------- ------------- ------------- -----------
Bank borrowings drawn at end of period 357,050 357,050 357,050
-------------------------------------------------- ------------- ------------- -----------
Unamortised loan issue costs at start of period (5,000) (4,930) (4,930)
Less: loan issue costs incurred (324) (1,363) (1,723)
Add: loan issue costs amortised 824 814 1,653
-------------------------------------------------- ------------- ------------- -----------
Unamortised loan issue costs at the end of period (4,500) (5,479) (5,000)
-------------------------------------------------- ------------- ------------- -----------
At end of period 352,550 351,571 352,050
-------------------------------------------------- ------------- ------------- -----------
30 September 31 March
30 September 2022 2021 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------- ----------------- ------------ --------
Maturity of bank borrowings(1)
Repayable within 1 year - - -
Repayable between 1 to 2 years 99,493 158,660 158,746
Repayable between 2 to 5 years 118,853 59,236 59,365
Repayable after 5 years 134,204 133,675 133,939
------------------------------- ----------------- ------------ --------
Total 352,550 351,571 352,050
------------------------------- ----------------- ------------ --------
(1) Loan balance net of unamortised costs.
The Group is party to the following loan facility
agreements:
Loan Principal
Summary of Borrowings Facility GBP'000 Expiry Date Interest rate
-------------------------------------------
Scottish Widows limited 10-year facility Term loan 52,500 02/11/2027 2.9936% fixed
Lloyds Bank plc Revolving credit facility 60,000 15/07/2024 SONIA + 1.67%(2)
HSBC Bank plc(4) Revolving credit facility 100,000 27/11/2023 SONIA + 2.02%(2)
National Westminster Bank Plc 5-year Revolving credit facility 60,000 14/08/2024 SONIA + 2.00%(3)
facility
M&G Investment Management Limited 7-year Term loan 84,550 24/02/2028 3.137% fixed
facility
------------------------------------------- -------------------------- -------------- ----------- ----------------
357,050
---------------------------------------------------------------------- -------------- ----------- ----------------
(2) Interest rate caps have been purchased to cap interest costs
on this facility as per the details in notes 14.0 and 19.0.
(3) Fixed by way of an interest rate swap as detailed in note
14.0.
(4) On 17 November 2022, an extension was granted for the
facility with HSBC UK Bank plc, which now expires on 28 November
2025.
31 March 2022
30 September 2022 Unaudited 30 September 2021 Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------------------
Scottish Widows limited 10-year facility
principal GBP52,500,000 178,773 172,994 173,777
Lloyds Bank plc principal GBP60,000,000 159,607 152,240 153,340
HSBC Bank plc principal GBP100,000,000 234,078 220,291 222,745
National Westminster Bank Plc 5-year facility
principal GBP60,000,000 138,208 132,134 135,330
M&G Investment Management Limited 7-year
facility principal GBP84,550,000 234,864 226,353 230,487
--------------------------------------------- --------------------------- --------------------------- -------------
At 30 September 2022, the Group is in compliance with all
covenants.
The covenants in place under the five agreements are summarised
in the table below:
Loan Historical and projected interest cover Loan to value ratio
-------------------------------------------------
Scottish Widows limited 10-year facility At least 325% Must not exceed 40%
Lloyds Bank plc revolving credit facility At least 300% Must not exceed 52.5%
HSBC Bank plc facility At least 250% Must not exceed 55%
National Westminster Bank Plc 5-year facility At least 250% Must not exceed 50%
M&G Investment Management Limited 7-year facility At least 250% Must not exceed 55%
------------------------------------------------- --------------------------------------- ---------------------
14.0 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
million is currently drawn. The swap has a notional value of GBP60
million and fixes interest at 2.60% (including the 2% margin on the
bank loan).
During the period, the Group has entered into two new interest
rate cap arrangements:
An interest rate cap that caps the GBP60,000,000 Lloyds Bank plc
facility at 3.92% (including the 1.67% margin on the loan facility)
for the period from between 16 September 2022 to 20 February
2023.
An interest rate cap that caps the GBP100,000,000 HSBC Bank plc
facility at 4.62% (including the 2.02% margin on the loan facility)
for the period from 21 September 2022 to 17 April 2023. From 18
April 2023 to 28 November 2025, the interest rate cap will become
4.60% (including the 2.15% margin on the loan facility).
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
Interest rate derivative assets/(liabilities) GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------ ------------ --------
At start of the period 2,131 (544) (544)
Change in fair value during the period 3,555 686 2,675
Interest rate cap premium paid 737 - -
---------------------------------------------- ------------ ------------ --------
At end of period 6,423 142 2,131
---------------------------------------------- ------------ ------------ --------
The table below shows the fair value measurement hierarchy for
interest rate derivatives:
Quote prices In Significant Observable
active Markets Inputs (Level Significant unobservable
(Level 1) 2) Inputs (Level 3)
GBP'000 GBP'000 GBP'000
-------------- --------------- ---------------------- ------------------------
30 September - 6,423 -
2022
31 March 2022 - 2,131 -
30 September
2021 - 142 -
-------------- --------------- ---------------------- ------------------------
The fair value of Group's interest rate derivatives is recorded
in the Group Statement of Financial Position and is determined by
forming an expectation the interest rates will exceed strike rates
and discounting these future cash flows at the prevailing market
rates as at the period end. This valuation technique falls within
Level 2 of the fair value hierarchy as defined by IFRS 13. The
valuation was provided by the counterparty to the derivatives.
There have been no transfers between Level 1 and Level 2 during any
of the periods, nor have there been any transfers between Level 2
and Level 3 during any of the periods.
15.0 Share capital
Share capital represents the nominal value of consideration
received by the Company for the issue of Ordinary shares.
From 1 April From 1 April 2021 For the year
2022 to 30 September to ended
2022 30 September 2021 31 March 202
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------------------------ --------------------- ------------------ -------------
Share capital
At end of period 6,225 6,225 6,225
------------------------------------------------------------ --------------------- ------------------ -------------
Number of shares issued and fully paid Ordinary shares of
GBP0.01 each
At end of period 622,461,380 622,461,380 622,461,380
------------------------------------------------------------ --------------------- ------------------ -------------
During the period the Company purchased 6,050,000 Ordinary
shares to be held in treasury at a cost of GBP4,651,000 (period
from 1 April 2021 to 30 September 2021: 2,250,000 Ordinary shares
for GBP2,073,000; year ended 31 March 2022: 10,025,000 Ordinary
shares for GBP9,259,000).
During the prior year, the Company reissued 565,000 Ordinary
shares held in treasury for GBP647,000. The cost of purchasing
these shares into treasury of GBP484,000 has been credited to the
capital reduction reserve with the gain credited to the Share
premium reserve.
At 30 September 2022 the Company held 16,075,000 (30 September
2021: 2,250,000; 31 March 2022: 10,025,000) Ordinary shares in
treasury. The shares will continue to be held in treasury until
either reissued or cancelled.
At 30 September 2022 the number of Ordinary shares used to
calculate the net asset value per share is 606,386,380 (30
September 2021: 620,211,380; 31 March 2022: 612,436,380) which
excludes the shares held in treasury.
16.0 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:
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
------------------------------------------------------------------------ ------------- ------------- -------------
Net Assets (GBP'000) 696,357 672,884 675,547
------------------------------------------------------------------------ ------------- ------------- -------------
Number of Ordinary shares in issue at end of period 622,461,380 622,461,380 622,461,380
Number of Ordinary shares held in treasury (16,075,000) (2,250,000) (10,025,000)
------------------------------------------------------------------------ ------------- ------------- -------------
Number of Ordinary Shares excluding treasury shares held by the Company 606,386,380 620,211,380 612,436,380
------------------------------------------------------------------------ ------------- ------------- -------------
NAV per share - basic and diluted 114.84p 108.49p 110.30p
------------------------------------------------------------------------ ------------- ------------- -------------
17.0 Related party disclosures
17.1 Transactions with the Directors
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 ending 31 March 2023 payable out of the assets of the Company
is not expected to exceed GBP200,000.
As at 30 September 2022, the Directors (including their
connected persons) had beneficial interests in the following number
of shares in the Company:
30 September 30 September 31 March
2022 2021 2022
Ordinary shares Ordinary shares Ordinary shares
------------------ ---------------- ---------------- ----------------
Director
Michael Wrobel 200,000 100,598 120,598
Alastair Moss 11,766 11,766 11,766
Alison Hadden - - -
Caroline Gulliver 58,832 58,832 58,832
Peter Baxter 82,065 47,065 82,065
------------------ ---------------- ---------------- ----------------
For the period from 1 April 2021 to 30 September 2022, fees of
GBP97,000 (1 April 2021 to 30 September 2021: GBP95,000; year ended
31 March 2022: GBP190,000) were incurred and paid to the
Directors.
17.2 Transactions with the Investment Adviser
On 1 November 2016, CIM was appointed as the Investment Adviser
of the Company.
For the period from 1 April 2022 to 30 September 2022, fees and
expenses of GBP3,110,000 (1 April 2021 to 30 September 2021:
GBP3,080,000; year ended 31 March 2022: GBP6,132,000) were incurred
and paid to CIM.
In the prior year, the Investment Adviser agreed to contribute
GBP100,000 towards legal and professional fees incurred.
As at 30 September 2022, GBP16,000 was payable to CIM (30
September 2021: GBP27,000 receivable; 31 March 2022: GBP151,000
receivable).
At 30 September 2022, CIM held 167,664 (30 September 2021 and 31
March 2022: 50,000) Ordinary shares in the Company.
18.0 Capital commitments
The Company has no capital commitments in the period.
19.0 Post balance sheet events
Dividends
On 9 November 2022, the Company announced a dividend of 1.425
pence per share in respect of the period 1 July 2022 to 30
September 2022 totaling GBP8,641,000. The dividend will be paid on
or around 9 December 2022 to shareholders on the register as at 18
November 2022. The dividend will be paid as a REIT property income
distribution ("PID").
Financing
On 12 October 2022 the Group entered into an interest rate cap
transaction to mitigate the risk of the SONIA interest rate
exceeding 2.45%pa on the principal of GBP100,000,000 for the period
17 April 2023 to 28 November 2025 for the cost of GBP8,104,200.
This instrument covers the remaining term of the revolving credit
facility with HSBC Bank plc and its proposed extension to November
2025.
On 11 November 2022, the agreement between the Company and
Lloyds Bank plc has been amended. The overall loan outstanding
amount was reduced to GBP57,200,000 and the historical and
projected interest cover ratio covenants have been revised to 205%
from 300%. The Loan to value ratio also changed to 40%.
On 17 November 2022, an extension was granted for the facility
with HSBC UK Bank plc, which now expires on 28 November 2025.
On 1 December 2022, the Company signed a GBP70.875m facility
with an institutional investor. The facility comprises 5.69% fixed
coupon, Senior Secured Guaranteed Notes due February 2028. The
transaction is expected to fund in the new year subject to certain
closing conditions.
Appendix 1: Notes to the calculation of EPRA and other
alternative performance measures
Notes 1 to 6 support the EPRA metrics disclosed above where the
definition and purpose of each metric are outlined.
1.0 EPRA Earnings
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------- ------------- ------------- -------------
Earnings from operational activities
Profit after taxation 42,638 17,852 44,754
Change in fair value of derivative financial instruments (3,555) (686) (2,675)
Changes in value of investment properties (25,510) (2,258) (12,269)
------------------------------------------------------------------------- ------------- ------------- -------------
EPRA Earnings 13,573 14,908 29,810
------------------------------------------------------------------------- ------------- ------------- -------------
Weighted average number of shares in issue (adjusted for shares held in
treasury) 610,707,145 622,260,670 618,797,942
------------------------------------------------------------------------- ------------- ------------- -------------
EPRA EPS - basic and diluted 2.22p 2.40p 4.82p
------------------------------------------------------------------------- ------------- ------------- -------------
2.0 EPRA NAV Metrics
EPRA Net EPRA Net EPRA Net
Reinstatement Tangible Disposal
Value Assets Value
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- -------------- ---------------- ---------------
At 30 September 2022
Net assets 696,357 696,357 696,357
Fair value of derivative financial instruments (6,423) (6,423) -
Fair value of bank borrowings - - 14,452
----------------------------------------------------------------- -------------- ---------------- ---------------
NAV 689,934 689,934 710,809
----------------------------------------------------------------- -------------- ---------------- ---------------
Number of shares in issue (adjusted for shares held in treasury) 606,386,380 606,386,380 606,386,380
NAV per share 113.78p 113.78p 117.22p
----------------------------------------------------------------- -------------- ---------------- ---------------
EPRA Net EPRA Net EPRA Net
Reinstatement Tangible Assets Disposal Value
Value GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- -------------- ---------------- ---------------
At 30 September 2021
Net assets 672,884 672,884 672,884
Fair value of derivative financial instruments (142) (142) -
Fair value of bank borrowings - - (1,360)
----------------------------------------------------------------- -------------- ---------------- ---------------
NAV 672,742 672,742 671,524
----------------------------------------------------------------- -------------- ---------------- ---------------
Number of shares in issue (adjusted for shares held in treasury) 620,211,380 620,211,380 620,211,380
----------------------------------------------------------------- -------------- ---------------- ---------------
NAV per share 108.47p 108.47p 108.27p
----------------------------------------------------------------- -------------- ---------------- ---------------
EPRA Net EPRA Net EPRA Net
Reinstatement Tangible Assets Disposal Value
Value GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- -------------- ---------------- ---------------
At 31 March 2022
Net assets 675,547 675,547 675,547
Fair value of derivative financial instruments (2,131) (2,131) -
Fair value of bank borrowings - - 2,644
----------------------------------------------------------------- -------------- ---------------- ---------------
NAV 673,416 673,416 678,191
----------------------------------------------------------------- -------------- ---------------- ---------------
Number of shares in issue (adjusted for shares held in treasury) 612,436,380 612,436,380 612,436,380
NAV per share 109.96p 109.96p 110.74p
----------------------------------------------------------------- -------------- ---------------- ---------------
3.0 EPRA Net Initial Yield
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------- ------------ ------------- ---------
Investment property 999,520 946,294 968,756
Allowance for estimated
purchasers' costs 58,404 55,365 56,412
------------------------- ------------ ------------- ---------
Gross up completed
property portfolio 1,057,924 1,001,659 1,025,168
------------------------- ------------ ------------- ---------
Annualised net
rents 55,752 51,966 54,091
Add: notional rent
expiration of rent - - -
free periods or
other lease incentives
------------------------- ------------ ------------- ---------
Topped-up net annualised
rent 55,752 51,966 54,091
------------------------- ------------ ------------- ---------
EPRA NIY 5.27% 5.19% 5.28%
EPRA "topped-up"
NIY 5.27% 5.19% 5.28%
------------------------- ------------ ------------- ---------
4.0 EPRA Vacancy Rate
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------------ ------------ --------
Estimated Market Rental Value (ERV) of vacant spaces 10 - -
Estimated Market Rental Value (ERV) of whole portfolio 55,752 51,966 54,091
------------------------------------------------------- ------------ ------------ --------
EPRA Vacancy Rate 0.02% 0.00% 0.00%
------------------------------------------------------- ------------ ------------ --------
5.0 EPRA Costs Ratio
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------------- ------------- ---------
Total administrative and operating expenses 6,784 4,940 10,247
Direct property expenses 1,197 636 978
Less property expenses recovered through rents (1,075) (643) (995)
EPRA Costs (including direct vacancy costs) 6,906 4,933 10,230
Direct vacancy costs - - -
-------------------------------------------------- ------------- ------------- ---------
EPRA Costs (including direct vacancy costs) 6,906 4,933 10,230
-------------------------------------------------- ------------- ------------- ---------
Rental income 27,792 25,712 51,636
Less rechargeable costs received (1,075) (643) (995)
-------------------------------------------------- ------------- ------------- ---------
Gross rental income 26,717 25,069 50,641
-------------------------------------------------- ------------- ------------- ---------
EPRA cost ratio (including direct vacancy costs) 25.85% 19.68% 20.20%
EPRA cost ratio (excluding direct vacancy costs) 25.85% 19.68% 20.20%
6.0 EPRA LTV
30 September 2022 30 September 2021 31 March 2022
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------------ ------------------ --------------
Net Debt
Borrowings from financial institutions 357,050 357,050 357,050
Cash and cash equivalents (42,227) (76,494) (53,337)
---------------------------------------- ------------------ ------------------ --------------
314,823 280,556 303,713
Total Property Value
Investment properties at fair value 974,491 923,943 945,237
Net receivables 25,766 23,876 26,892
---------------------------------------- ------------------ ------------------ --------------
1,000,257 947,819 972,129
EPRA LTV 31.47% 29.60% 31.24%
---------------------------------------- ------------------ ------------------ --------------
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------------ ------------------ --------------
Net receivables comprise of:
Other receivables 25,029 22,351 23,519
Trade and other receivables 11,626 10,704 12,865
Less trade and other payables (10,889) (9,179) (9,492)
---------------------------------------- ------------------ ------------------ --------------
Total 25,766 23,876 26,892
---------------------------------------- ------------------ ------------------ --------------
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------------- ------------- ----------
Components of Net Assets used in EPRA LTV calculation
Investment properties at fair value 974,491 923,943 945,237
Net receivables 25,766 23,876 26,892
Cash and cash equivalents 42,227 76,494 53,337
Less borrowings from financial institutions (357,050) (357,050) (357,050)
------------------------------------------------------- ------------- ------------- ----------
Net assets used in the EPRA LTV calculation 685,434 667,263 668,416
Less amounts excluded from calculation
Interest rate derivatives 6,423 142 2,131
Unamortised loan issue costs 4,500 5,479 5,000
------------------------------------------------------- ------------- ------------- ----------
Net assets 696,357 672,884 675,547
------------------------------------------------------- ------------- ------------- ----------
7.0 EPRA Table of Capital Expenditure
From 1 April For the
2022 to 30 year ended
September From 1 April 2021 to 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
---------------------------------------------------- ------------ --------------------------------- -----------
Acquisitions including incidental costs of purchase 562 23,061 33,466
Development - - -
Investment properties - - -
Incremental lettable space - - -
Enhancing lettable space (refer to note 10.0) 3,182 4,940 5,818
Tenant incentives 1,700 595 1,614
Other material non-allocated types of expenditure - - -
Capitalised interest - - -
---------------------------------------------------- ------------ --------------------------------- -----------
Total Capital Expenditure 5,444 28,596 40,898
---------------------------------------------------- ------------ --------------------------------- -----------
Conversion from accrual to cash basis (52) 469 1,312
---------------------------------------------------- ------------ --------------------------------- -----------
Total Capital Expenditure on cash basis 5,392 29,065 42,210
---------------------------------------------------- ------------ --------------------------------- -----------
The Group has not capitalised any overhead or operating
expenses. The Group does not have any properties under Joint
Venture.
8.0 Leveraged Internal Rate of Return (IRR)
This is the annual growth rate, based on growth in net asset
value per share since launch and dividends paid to Ordinary
shareholders.
30 30 31 March
September September 2022
2022 2021
---------------------- ----------------------- ---------------------- ---------------------- ---------------------
NAV per share 114.837p 108.490p 110.300p
31 May Interim
2017 dividend 0.750p 0.750p 0.750p
31 August Interim
2017 dividend 0.750p 0.750p 0.750p
30
November Interim
2017 dividend 0.750p 0.750p 0.750p
9 March Interim
2018 dividend 0.750p 0.750p 0.750p
8 June Interim
2018 dividend 1.250p 1.250p 1.250p
7
September Interim
2018 dividend 1.250p 1.250p 1.250p
30
November Interim
2018 dividend 1.250p 1.250p 1.250p
11 January Interim
2019 dividend 1.110p 1.110p 1.110p
28
February Interim
2019 dividend 0.140p 0.140p 0.140p
7 June Interim
2019 dividend 1.325p 1.325p 1.325p
6
September Interim
2019 dividend 1.325p 1.325p 1.325p
29
November Interim
2019 dividend 1.325p 1.325p 1.325p
28
February Interim
2020 dividend 1.325p 1.325p 1.325p
12 June Interim
2020 dividend 1.325p 1.325p 1.325p
7
September Interim
2020 dividend 1.350p 1.350p 1.350p
4 December Interim
2020 dividend 1.350p 1.350p 1.350p
1 March Interim
2021 dividend 1.350p 1.350p 1.350p
11 June Interim
2021 dividend 1.350p 1.350p 1.350p
10
September Interim
2021 dividend 1.3875p 1.3875p 1.3875p
13
December Interim
2021 dividend 1.3875p - 1.3875p
11 March Interim
2022 dividend 1.3875p - 1.3875p
28 June Interim 1.3875p - -
2022 dividend
9 Interim 1.4250p - -
September dividend
2022
---------------------- ----------------------- ---------------------- ---------------------- ---------------------
141.8370p 129.9025p 134.4875p
NAV per share at launch 98.00p 98.00p 98.00p
Levered IRR 7.16% 6.44% 6.63%
----------------------------------------------- ---------------------- ---------------------- ---------------------
Shareholder Information
Share Information
The Company's Ordinary shares of 1p each are quoted on the
Official List of the FCA and traded on the premium segment of the
Main market of the London Stock Exchange (LSE).
SEDOL number BD8HBD3
ISIN GB00BD8HBD32
Ticker/TIDM CSH
LEI 213800PGBG84J8GM6F95
Frequency of NAV Publication
The Company's NAV is released to the LSE on a quarterly basis
and published on the Company's website :
www.civitassocialhousing.com.
Sources of Further Information
Copies of the Company's Annual and Half-Yearly Reports, Stock
Exchange announcements and further information on the Company can
be obtained from its website: www.civitassocialhousing.com .
Share Register Enquiries
The register for the Company's Ordinary shares is maintained by
Link Group. In the event of queries regarding your holding, please
contact the Registrar on 0371 664 0300 (calls are charged at the
standard geographic rate and will vary by provider; calls outside
the UK will be charged at the applicable international rate). Lines
are open between 9.00am and 5.30pm, Monday to Friday, excluding
public holidays in England and Wales. You can also email
enquiries@linkgroup.co.uk .
Changes of name/or address must be notified in writing to the
Registrar: Link Group, 10(th) Floor, Central Square, 29 Wellington
Street, Leeds, LS1 4DL.
Key dates
June Annual results announced
---------- -----------------------------------
Payment of fourth final dividend
---------- -----------------------------------
September Company's half-year end
---------- -----------------------------------
Annual general meeting
---------- -----------------------------------
Payment of first interim dividend
---------- -----------------------------------
November Half-yearly results announced
---------- -----------------------------------
December Payment of second interim dividend
---------- -----------------------------------
February Payment of third interim dividend
---------- -----------------------------------
March Company's year end
---------- -----------------------------------
Association of Investment Companies ("AIC")
The Company is a member of the AIC, which publishes statistical
information in respect of member companies. The AIC can be
contacted on 020 7282 5555, enquiries@theaic.co.uk or visit the
website: www.theaic.co.uk .
Electronic communications from the Company
Shareholders now have the opportunity to be notified by email
when the Company's Annual Report, Half Yearly Report and other
formal communications are available on the Company's website,
instead of receiving printed copies by post. This has environmental
benefits in the reduction of paper, printing, energy and water
usage, as well as reducing costs to the Company.
If you have not already elected to receive electronic
communications from the Company and wish to do so, please contact
the Registrar.
Glossary
AIFM means the Alternative Investment Fund Manager.
AIFMD means the Alternative Investment Fund Managers Regulations
2013 (as amended by The Alternative Investment Fund Managers
(Amendment etc.) (EU Exit) Regulations 2019) and the Investment
Funds Sourcebook forming part of the FCA Handbook.
ALMO means an arm's length management organisation, a
not-for-profit company that provides housing services on behalf of
a Local Authority.
Alternative Performance Measures (APMs) means a financial
measure of historical financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework.
Annual contracted rent roll means the annual contractual rental
income currently receivable on a property as at the Balance Sheet
date.
Approved Provider means Approved Providers, 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.
CMA Order means the Statutory Audit Services Order 2014, issued
by the Competition and Markets Authority.
Current Leverage means the percentage taken as total bank
borrowings over total assets.
Dividend Yield means the ratio of the total trailing annual
dividend payments over market price per share.
EPRA means 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 LTV is the EPRA loan to value ratio calculated as debt
(including net payables but net of cash balances) divided by the
market value of property (including net receivables) as defined in
the EPRA Best Practice Guidelines.
EPRA Net Initial Yield ("EPRA NIY") is calculated as the
annualised rental income based on the cash rents passing at the
balance sheet date less non-recoverable property operating
expenses, divided by the gross market value of the property.
EPRA Net Reinstatement Value ("EPRA NRV" ) is a new EPRA NAV
metric which assumes that entities never sell assets and aims to
represent the value required to rebuild the entity.
EPRA Net Tangible Assets ("EPRA NTA") is an EPRA NAV metric
which assumes that entities buy and sell assets, thereby
crystallising certain levels of unavoidable deferred tax.
EPRA Net Disposal Value ("EPRA NDV") is a new EPRA NAV metric
which represents the shareholders' value under a disposal scenario,
where deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their liability,
net of any resulting tax.
EPRA Run Rate means the ratio of a company's earnings (excluding
fair value gains/losses) over dividends paid to shareholders.
Gross Asset Value means total assets.
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 Regulator of Social Housing.
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 mean 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 Asset Value or NAV means the net asset value of the Group on
the relevant date, prepared in accordance with IFRS accounting
principles .
Net Initial Yield means the ratio of net rental income and gross
purchase price of a property.
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.
Ongoing Charges means the figure published annually by the
Company which shows the drag on performance caused by operational
expenses. More specifically, it is the annual percentage reduction
in shareholder returns as a result of recurring operational
expenses assuming markets remain static and the portfolio is not
traded. Although the Ongoing Charges figure is based on historical
information, it provides shareholders with an indication of the
likely level of costs that will be incurred in managing the Company
in the future.
Portfolio means the Group's portfolio of assets.
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.
RICS means Royal Institution of Chartered Surveyors.
RSH means 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.
Target Return means the target return on investment.
Total Return means Net Total Return, being the change in NAV
over the relevant period plus dividend paid.
Total Shareholder Return means a measure of the return based
upon share price movement over the period plus dividend paid.
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, 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.
WAULT or "Weighted Average Unexpired Lease Term" is the product
of annual contracted rent roll at period end and the time in years
to when the lease expires for each given lease, summed across
leases, and then divided by the total annual contracted rent roll
of the portfolio. The result is expressed in years. WAULT is a key
measure of the quality of the Company's portfolio. Long lease terms
underpin the security of the Company's income stream.
Company Information
Non-executive Directors
Michael Wrobel , Chairman
Peter Baxter, Senior Independent Director and Chairman of the
Nomination and Remuneration Committee
Caroline Gulliver, Chair of the Audit and Management Engagement
Committee
Alison Hadden
Alastair Moss
Registered Office
6th Floor,
65 Gresham Street,
London
EC2V 7NQ
Registered no: 10402528
www.civitassocialhousing.com
Alternative Investment Fund Manager
G10 Capital Limited
3 More London Riverside
London SE1 2AQ
Investment Adviser
Civitas Investment Management Limited
25 Maddox Street
London W1S 2QN
Joint Corporate Brokers
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Panmure Gordon (UK) Limited
One New Change
London EC4M 9AF
Company Secretary
Link Company Matters Limited
6th Floor,
65 Gresham Street,
London
EC2V 7NQ
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Depositary
INDOS Financial Limited
5(th) Floor
54 Fenchurch Street
London EC3M 3JY
Registrar
Link Group
10(th) Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Public Relations Adviser
Buchanan
107 Cheapside
London EC2V 6DN
Tax Adviser
BDO LLP
55 Baker Street
London W1U 7EU
NATIONAL STORAGE MECHANISM
A copy of the Half Year Report will be submitted shortly to the
National Storage Mechanism ("NSM") and will be available for
inspection at the NSM, which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
LEI: 213800PGBG84J8GM6F95
ENDS
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END
IR DDBDDDGGDGDU
(END) Dow Jones Newswires
December 06, 2022 02:00 ET (07:00 GMT)
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