TIDMCSH
RNS Number : 1762O
Civitas Social Housing PLC
30 January 2023
30 January 2023
Civitas Social Housing PLC
("CSH" or the "Company")
Trading Update
Introduction
Civitas Investment Management Limited ("CIM") the investment
adviser of Civitas Social Housing PLC ("CSH" or the "Company"), the
UK's leading care-based and healthcare REIT, is pleased to provide
a market update reaffirming the continued robust financial position
of the Company and of the Company's counterparties. Rents received
have continued to grow, with collections in line with the
expectations of the Company's lease terms and in line with relevant
CPI indexation. The recent exception of My Space Housing Solutions
(1.3% of rent roll) is referred to in more detail below.
CSH's business model and portfolio has always been directed to
supporting the delivery of high levels of care for vulnerable
individuals in bespoke, adapted care-based housing. The average
number of care hours provided in a typical CSH property is 50 hours
per week. It is for this reason that the Company's portfolio
qualifies as Specialist Supported Housing and is exempt from caps
on housing benefit.
The Company will publish its Net Asset Value as at 31 December
2022 on 8 February 2023.
Growth in Rental Income
At the time of publication of the Company's Interim Results on 6
December 2022, the Company noted that it had experienced net rental
uplifts in the six-month period to 30 September 2022 of 6.0% and
that further growth in rents was anticipated in the remainder of
2022 and 2023.
We are pleased to note that, as expected, this trend has
continued in the same manner in the three-month period to 31
December 2022 when net rental uplifts have been achieved at a
similar level to those reported previously.
This net rental outcome reflects the combination of leases that
are uncapped together with those that are capped at 4%. It also
reflects selective smaller adjustments that have been agreed to
create greater timing alignment between the date of lease
indexation and the date that the Approved Provider ("AP") itself
secures rental uplifts with local authorities. This is part of our
long-term detailed ongoing engagement with APs to act as a
constructive partner.
At a time of double-digit inflation (which is expected to
decline significantly throughout 2023) we do engage with APs to
ensure that they have the requisite information to support claims
for rental indexation. The Company will offer an element of
flexibility to ensure we maintain strong and positive relationships
with APs and with local authorities to provide long-term value for
money. Given the current level of CPI inflation, this is not
expected to change our overall view of the current trendline in the
Company's rental growth.
Our approach to managing the Company's rent roll is to utilise
our specialist teams within CIM to work closely with our AP
partners and to draw upon the extensive property data sets that we
hold with respect to the Company's properties. We work in a sector
that is very operational in nature and we believe that the correct
approach to managing the portfolio is to engage in an informed and
very granular way and for these skills and services to be
maintained and delivered in-house within CIM and at a cost to
CIM.
The delivery of active and long-term care within our adapted
properties is a key differentiator for the Company in supporting
the rent roll and we invest considerable resource in maintaining a
detailed understanding of the operations of the care sector in the
UK.
The Company's portfolio has been positioned to provide buildings
that are typically suitable for the delivery of higher acuity care.
The average number of care hours provided in a typical CSH property
is 50 hours per week. We have a very small number of properties
that are directed towards services such as accommodation for asylum
seekers leased to large national support services entities that in
turn are backed by Government contracts (around 1% of the
portfolio) and where care or support services are not needed in the
same manner. For these properties we do not seek to achieve exempt
rents and rather charge rent at a much lower level that reflects
the nature of the provision, and which is often less than GBP50 a
week.
Based on the above we consider that the model operated by the
Company is very different and distinct to other entities which
provide low levels of support or support-free accommodation, for
which it could be more difficult to achieve exempt rents.
Confidence in Current & Future Rent Roll
CIM has continued to actively manage the Company's portfolio of
697 separate properties that provide homes for 4,594 individuals
almost all of which have identified long-term, significant care
needs.
Utilising a specialist in-house asset management team together
with in-house credit control, CIM works closely with its 18 APs and
with the Company's diverse care providers in a supportive and
pro-active manner. This includes regular on-site visits to APs with
detailed, granular analysis being undertaken in support of the
Company's rent roll and the nature and quality-of-service delivery.
This, in turn, provides evidence for the appropriateness of the
Company's rents and their value for money analysis.
At a time of rising inflation, the Company seeks to ensure that
in respect of the Company's properties APs can fully represent
their claims with relevant local authorities and achieve uplifts
that reflect inflation and the level of services being delivered.
This includes drawing on the specialist housing benefit experts
that have been hired into CIM over recent years and provide a
framework to work through any specific issues that may arise on any
particular property or with a particular local authority in a
constructive and informed manner. This is intended to be supportive
without affecting the primary role and independence of the APs.
From our activity across the specialist supported housing
sector, it is evident that demand for quality adapted accommodation
within a community environment remains strong whilst availability
of suitable accommodation has reduced. The decline in supply in
part reflects the current effects of inflation on the cost of
building and adaptation works and the ability of specialist
developers to deliver highly adapted properties within a tight
rental framework.
Independent research further confirms the long-term demand
trends that exist in the sector in which the Company is a market
leader and which provides confidence over the Company's future rent
roll.
Rent Collections
The CIM finance/credit control teams work closely with the fund
administrator LINK Group in the active monitoring and management of
rent collection.
In respect of the three-months ended 31 December 2022 rent
collections have taken place in the ordinary course and the Company
has not experienced any material changes to its rent collection of
the nature that has recently been reported elsewhere in the
homeless accommodation sector which is not a service generally
provided by the Company.
As at 31 December 2022, trade debtor days averaged 39 days;
however, this reduced to 20 days as a result of significant
receipts made in the period following Christmas. This compares to
28 days for the period ended 30 September 2022 and 26 days for the
twelve months ended 31 March 2022.
Within these averages there will as usual be a range of
individual debtor days, including some payments in advance. Where
debtor balances have been outstanding for a longer period of time,
the CIM finance/credit control teams and asset management teams
will work with the respective AP to understand the specific issues
and to agree a plan to bring those balances back into line. This
represents a regular form of detailed engagement for the CIM teams
that has been evolved with success over several years.
Improving Performance of Our Approved Providers
The APs with whom the Company works are separate independent
entities that are well established within a regional or national
framework and who typically specialise in the management of
care-based housing for vulnerable adults.
Other than My Space Housing Solutions (see below) they do not
themselves provide direct care services but in the case of the
Company's portfolio, work with 130 dedicated care providers to
support the delivery of those services.
The APs have each progressed at different paces, reflecting
their individual histories and ambitions with the largest now
demonstrating substantial turnover above GBP50 million with
significant profits and cash reserves. The majority are reporting
growing profits whilst a small number still report deficits in part
relating to provisioning for the costs of maintenance and
repairs.
At the time of publication of the Company's interim results to
30 September 2022 CIM set out a schedule demonstrating the
financial performance of APs and it is intended that this will be
updated at the time of the annual results to 31 March 2023.
My Space Housing Solutions
My Space Housing Solutions ("My Space") is the only AP that the
Company works with that is both a housing association and an
integrated care provider.
As noted previously My Space represents 1.3% of the Company's
rent roll and this relates to nine properties that were acquired in
2017 and 2018 and which have enjoyed strong occupation and rental
delivery until recent months when My Space stopped passing through
rental income that is being generated.
On 19 December 2022 and 17 January 2023, the Company provided
updates with respect to My Space that followed on from various
forms of regulatory intervention.
As previously announced, CIM is engaging with My Space to
monitor the position and is considering whether it is appropriate
to take steps to reassign leases over the nine properties so that
the Company can continue to receive the rental income that is being
generated by these assets.
New Debt Facilities Secured
In December 2022, the Company signed a new five-year GBP70.8
million facility with a new major bank lender in the UK with the
intention that this new facility will be utilised to redeem the
existing facility with Lloyds Bank as well as providing additional
liquidity for the Company.
Our work in this regard remains on-track and it is intended that
this will be drawn mid-February 2023 as planned and a further
announcement will be made at that time.
Progress Regarding New Lease Clause
CIM seeks to support housing associations in their desire to
achieve regulatory compliance with the Regulator of Social
Housing.
Following the adoption of the new regulatory clause by two
leading housing associations discussions are being held with the
Regulator of Social Housing to ascertain if this can form the basis
upon which Approved Providers can move further towards
compliance.
Conclusion
CIM manages the largest portfolio of specialist care-based
housing in the UK and has built a dedicated, in-house, well-staffed
resource to provide active management and engagement across the
sector and specifically with APs, care providers and local
authorities.
The Company's business model and portfolio has always been
directed to support the delivery of high levels of care for
vulnerable individuals in bespoke, adapted care-based housing. We
do this in a granular manner, drawing on the in-house expertise of
managers experienced in housing benefits, property management and
care management.
The Board has noted the recent share price weakness and along
with Civitas Investment Management continues to actively explore
opportunities to preserve and enhance value to shareholders.
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.
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END
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