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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Civitas Social Housing Plc | LSE:CSH | London | Ordinary Share | GB00BD8HBD32 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 79.80 | 79.70 | 80.20 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMCSH
RNS Number : 8435G
Civitas Social Housing PLC
30 November 2020
30 November 2020
CIVITAS SOCIAL HOUSING PLC
INTERIM REPORT
Strong H1 performance, with compelling opportunities for growth
SIX MONTHS TO 30 SEPTEMBER 2020
Civitas Social Housing PLC ("CSH" or the "Company"), a leading care-based social housing REIT, presents its interim results for the six months ended 30 September 2020.
The full Interim Report and Financial Statements can be accessed via the Company's website at
www.civitassocialhousing.com or by contacting the Company Secretary by telephone on 01392 477500.
Performance Highlights
Hot Features
Premium
Property Valuation and 30 Sept 30 Sept 19 Change (YOY) 31 Mar 20*
Performance 20
Investment property IFRS
(GBPm) 898.5 841.5 Up 6.77% 878.7
-------- ----------- ------------- -----------
IFRS NAV per share (diluted)
(p) 108.01 107.23 Up 0.73% 107.87
-------- ----------- ------------- -----------
Financial Performance - - - -
-------- ----------- ------------- -----------
Rent roll annualised (GBPm) 49.5 46.5 Up 6.45% 48.4
-------- ----------- ------------- -----------
Rental income (GBPm) 24.1 22.7 Up 6.17% 45.9
-------- ----------- ------------- -----------
EPRA earnings (GBPm) 15.5 14.3 Up 8.39% 28.8
-------- ----------- ------------- -----------
Operating Cash Flow (GBPm) 19.5 16.9 Up 15.38% 32.9
-------- ----------- ------------- -----------
Earnings per share (p) 2.81 2.80 Up 0.36% 6.06
-------- ----------- ------------- -----------
EPRA earning per share
(diluted) (p) 2.49 2.29 Up 8.73% 4.63
-------- ----------- ------------- -----------
Dividends per share (p) 2.68 2.65 Up 1.13% 5.30
-------- ----------- ------------- -----------
Financing - - - -
-------- ----------- ------------- -----------
Loan to value ratio 26.8% 24.0% 26.9%
-------- ----------- ------------- -----------
Weighted average cost
of debt (%) 2.46% 2.63% - 2.46%
-------- ----------- ------------- -----------
*Based on annual audited financial statements for the 12 months ended 31 March 2020
-- Ongoing strong resilience to Covid-19 -- Very low incidence of Covid-19 across portfolio -- Rents collected as planned -- Minimal operational disruption from Covid-19 -- Increase in investment property portfolio valuation -- IFRS property valuation increased to GBP898.5million
-- IFRS valuation net initial yield of 5.26% compared to average purchase yield of 5.84% (prior to purchase costs)
-- Stable IFRS NAV per share at 108.01 pence (30 Sept 19: 107.23 pence per share) -- Weighted Average Unexpired Lease Term (WAULT) of 22.9 years -- Diversified portfolio of 618 properties providing homes to 4,292 people -- Two additional properties (51 beds) acquired for GBP15.6m -- High level of acute care carried out - average over 40 hours per week across the portfolio
-- Company portfolio providing accommodation to tenants with learning disabilities, autism and mental health disorders with an average tenant age of 32 years
-- Properties located across half the Local Authorities in England and Wales and leased to 15 Housing Associations, with support provided by 118 Care Providers
-- Over one third of the portfolio on back-to-back 25 year leases
-- High level of bespoke adaptation for individual tenants' needs reflecting high acuity nature of the portfolio
-- Over one third of the properties bought when new -- Rent roll, operating cash flow and earnings up -- Annualised rental income of GBP49.5m at 30 Sept 2020 -- Operational cashflow increased strongly to GBP19.5m (30 Sept 19: GBP16.9m)
-- EPRA earnings per share of 2.49 pence compared with 2.29 pence in the corresponding period in 2019
-- Dividend payments and dividend cover -- Two dividends paid during period of 1.325 pence and 1.350 pence -- Target dividend of 5.4 pence for the year to 31 March 2021 -- EPRA run-rate dividend cover of 100% as at 30 Sept 2020 -- Positive outlook -- GBP180m pipeline identified -- Intention that further new debt facilities will soon be in place -- Existing GBP100m HSBC debt facility extended to November 2022
Social Impact Highlights
-- CSH is leading the sub-sector in measuring and reporting on social impact and social value -- Independent specialist social impact consultant The Good Economy has found:
-- GBP114m in Social Value generated on an annual basis
-- GBP64.7m of direct savings to local and national government per year
-- GBP1bn+ of direct savings to the taxpayer projected over duration of CSH leases
-- Accredited Impact Investor under IFC Principles -- Early adopter of the Sustainability Reporting Standard for Social Housing -- Founded the Social Housing Family CIC to help improve sector practices
-- Adopted an enhanced ESG Policy that aims to achieve carbon neutrality across the portfolio by 2030
Michael Wrobel, Non-Executive Chairman of the Company, commented:
"I would like to extend my heartfelt thanks to all of our partners, especially all the staff at our housing associations and care providers who have continued to provide essential care to some of the most vulnerable people in society amid the unavoidable challenges brought by Covid-19.
"During the period, CSH has continued to cement its position as the market leader in care-based housing investment and management, delivering sustainable investor returns and outstanding community-based housing whilst also protecting the public purse.
"The demand for care-based housing continues to grow, with Covid-19 having reinforced the benefits of safe, secure homes over long-term institutionalisation. We have identified an attractive pipeline of approximately GBP180m, of which we intend to take advantage and are considering options for funding these high quality properties including through a new debt facility. We are now also able to extend our counterparty relationships to such organisations as the NHS and leading charities and examples of these properties are included in the present pipeline.
"We see compelling opportunities for growth, and we look forward to the future with confidence."
For further information, please contact:
Civitas Investment Management Limited
Paul Bridge Tel: +44 (0)20 3058 4844 Andrew Dawber Tel: +44 (0)20 3058 4846
Panmure Gordon
Sapna Shah Tel: +44 (0)20 7886 2783 Tom Scrivens Tel: +44 (0) 20 7886 2648
Liberum Capital Limited
Gillian Martin / Chris Clarke Tel: +44 (0) 20 3100 2222
Buchanan
Helen Tarbet / Henry Wilson Tel: +44 (0) 20 7466 5000 Hannah Ratcliff / George Beale civitas@buchanan.uk.com
Notes:
Civitas Social Housing PLC (CSH) was created in 2016 by Civitas Investment Management Limited as the first dedicated London listed REIT, to raise long-term, sustainable, institutional capital to invest in care-based social homes across the UK. So far, CSH has completed more than 120 individual transactions to build the largest portfolio of its kind that has been independently valued on an IFRS basis at GBP898.5 million. CSH provides homes for 4,292 working age adults with long-term care needs, in 618 bespoke properties that are supported by 118 specialist care providers, 15 housing associations over 164 individual local authority areas.
Chairman's Statement
Dear Shareholder
On behalf of everyone associated with CSH, we give our heartfelt thanks to all key workers during this challenging time of the COVID-19 pandemic. We owe special recognition to those who provide care, day in and day out, to our 4,292 residents. There has been a very low level of incidence of COVID-19 cases amongst our tenants and the Care Quality Commission ("CQC") confirms a similar position across the industry (COVID-19 Insight: Issue 2 June 2020).
In accordance with Government guidelines issued in March 2020, our Investment Adviser, CIM, moved all its business operations online, with staff working from home until its offices reopened in September 2020. The Manager continued to operate effectively, maintaining dialogue and supporting our Housing Association and care provider partners.
During the six-month period under review, we invested GBP15.6 million to acquire two properties with 51 beds. Some works across our portfolio that were agreed at the time of acquisition and all paid by vendors, had to be rescheduled during the full lockdown period and are now being completed.
We continue to focus on Environmental, Social and Governance ("ESG") issues. The Board adopted an
enhanced ESG Policy that includes an objective to achieve carbon neutrality across the portfolio by 2030. We became a founding partner of The Big Exchange and having contributed to the development of the Sustainability Reporting Standard for Social Housing, we have confirmed our commitment to become an Early Adopter.
Financial Performance
Financial performance has continued to be robust. During the period, rents have been received as expected, with no COVID-19 impact. The overall continuity of rental receipts reflects the positive performance of our Housing Association partners and the commitment of Government and Local Authorities who regard supported living as the preferred means to deliver housing and care in the
community.
Rental income of GBP24.1 million was generated in the period, a 6% increase over the corresponding period (30 September 2019: GBP22.7 million) as a result of new investments made in the period, on-track indexation of rents and the effect of rental income on properties purchased prior to the period, being included for the full six months.
Net cash generated from operating activities was GBP19.5 million (30 September 2019: GBP17 million), a 15% increase on the prior year.
The IFRS NAV of the Company increased from 107.9 pence per ordinary share as at 31 March 2020 to 108.01 pence per ordinary share as at 30 September 2020.
As noted previously the Company intends to put in place additional debt facilities and is currently in discussions with potential lenders.
During the reporting period we declared and paid two dividends, one of 1.325 pence per share and one of 1.350 pence per share, in line with our target for the full year.
Improving the Industry
Our Investment Adviser is at the forefront of supporting improvements in the specialist Housing Association sector. It was instrumental in the establishment of The Social Housing Family CIC, to which it provides high level skills and resources. The first members are two of our partner Housing organisations, Auckland Home Solutions CIC and Qualitas Community Interest Company. Other Housing Associations and charities are in discussions about joining, which will expand its capabilities and shared expertise.
The RSH continues to publish notices where it considers a Housing Association needs to demonstrate improvements. Recent notices on the Rent Standard have reminded Housing Associations across the sector that in order to claim exempt rents, they need to meet the relevant criteria for Specialist Supported Housing and evidence this. We are confident that all of our properties meet the standard due to our sector-leading due diligence and the high level of care carried out in all the properties.
Outlook
The coronavirus pandemic has reinforced the need to provide safe, high quality homes for the most vulnerable people in our society, and to bring new properties into the sector. Demand amongst those needing care-based housing continues to rise, notably amongst younger people reaching adulthood and wanting their own independence. On the 23 October 2020, the CQC published a report entitled 'Out of sight - who cares?: Restraint, segregation and seclusion review', which once again highlighted the plight of the thousands of people with learning disabilities and mental health issues who are stuck in inappropriate institutions and urgently require community-based care and supported living housing.
The drive for more community-based housing with care has full support across political parties and Local Authorities have a statutory duty to house the homeless and most vulnerable. CSH is pleased to play an important role in providing suitable accommodation. I would like to thank our shareholders, our staff and indeed all of our stakeholders, for their ongoing support.
CSH sees compelling opportunities to invest further in this sector. A pipeline of GBP180 million has now been developed which will be partly satisfied when the new debt facilities come into place and leaves open the prospect of future equity raises subject to market conditions and investors' views.
We remain committed to generating growth and shareholder value through ethical investing. We look to the future with confidence.
Michael Wrobel
Chairman
27 November 2020
Analysis of Property Portfolio(1)
as at 30 September 2020
Geographically Diversified
Region Properties Tenancies % of funds invested -------------------------- ----------- ---------- -------------------- North West 99 592 10.3 North East 64 462 6.1 Yorkshire and the Humber 49 422 10.3 West Midlands 101 502 11.8 East Midlands 58 374 8.9 East of England 20 122 2.9 Wales 17 307 10.0 South West 120 759 16.0 London 26 338 13.2 South East 64 414 10.5
Market Value by Region(1)
South West 16.4% London 12.7% West Midlands 11.9% South East 10.5% Yorkshire/Humber 10.3% North West 9.6% Wales 9.5% East Midlands 9.4% North East 6.7% East of England 3.0%
Assets by Region(1)
South West 120 West Midlands 101 North West 99 North East 64 South East 64 East Midlands 58 Yorkshire/Humber 49 London 26 East of England 20 Wales 17
Diversified by Registered Provider
Rental Income by Registered Provider(1)
Registered Provider Rental Income Auckland 24.0% Falcon 20.2% BeST 12.2% Inclusion 8.8% Westmoreland 6.2% Encircle 6.0% Trinity 5.4% Pivotal 3.9% Harbour Light 3.7% Chrysalis 3.4% New Walk 2.8% My Space 1.2% IKE 1.1% Hilldale 1.0% Blue Square 0.1%
Assets by Registered Provider(1)
Registered Provider Number of
Properties
Falcon 117
Auckland 103
BeST 74
Inclusion 72
Trinity 43
Westmoreland 41
New Walk 41
Pivotal 27
Harbour Light 27
Chrysalis 23
Encircle 16
Hilldale 15
IKE 10
My Space 8
Blue Square 1
Market Value by Registered Provider(1)
Registered Provider Market Value Auckland 24.6% Falcon 20.5% BeST 12.5% Inclusion 8.8% Westmoreland 6.1% Trinity 5.3% Encircle 5.0% Pivotal 3.9% Harbour Light 3.7% Chrysalis 3.5% New Walk 2.8% IKE 1.1% My Space 1.1% Hilldale 1.0% Blue Square 0.1%
Tenancies by Registered Provider(1)
Registered Provider Tenancies Falcon 858 Auckland 718 BeST 591 Inclusion 466 Trinity 242 Westmoreland 239 Pivotal 238 Harbour Light 214 Encirle 205 New Walk 194 Chrysalis 145 My Space 71 IKE 68 Hilldale 39 Blue Square 4
(1) As at 30 September 2020, including completed properties only.
Investment Adviser's Report
Civitas Social Housing REIT (CSH) is the market leader in care-based housing investment and management delivering sustainable returns and outstanding community-based housing to the most vulnerable people in society whilst protecting the public purse.
Thank you
To all of our partners. As the Chairman has said in this report, the work of everyone is valued but we would like, in particular, to thank all the staff who work at our care provider and Housing Association partners to ensure the most vulnerable people in society are cared for, protected and nurtured in their lives.
Overview of Results
CSH is the market leader in providing much-needed housing with care in the United Kingdom and leading the charge for ethical investment in the sector. These interim results show a number of key achievements:
-- Strong resilience to the COVID-19 pandemic, both operationally and financially; -- Rents indexed at CPI and collected as planned with no disruption from COVID-19; -- A growing, market-leading portfolio of high-quality properties; -- Two additional properties (51 beds) acquired for GBP15.6 million; -- High levels of care provided to each and every resident, on average 40 - 50 hours per week; -- Rapidly improving performance on ESG metrics;
-- A growing team with a mix of high-level skills from real estate, fund management, social housing, care and asset management, unrivalled in terms of size and breadth in the sector;
-- EPRA run rate dividend cover at c.100%, expected to increase further following the subsequent deployment of additional debt facilities;
-- The Company paid two dividends, one of 1.325 pence per share and one of 1.350 pence per share during the period fully in line with the distribution target of 5.4p announced for the year to 31 March 2021;
-- IFRS NAV increased to 108.01 pence per Ordinary share; -- Total Expense Ratio of 1.33%; and -- Further progress on new debt facilities and investment pipeline.
Introduction
This six-month period has been dominated by the COVID-19 pandemic. Against this backdrop, CSH has
focused upon the following priorities:
Ensure safety: Ensuring full support is given to our counterparties in managing their response to the
pandemic and ensuring every person continued to receive the care they need and deserve.
Ensure business continuity: Maintaining and improving the portfolio whilst ensuring the safety of our team through home working and managing a socially-distanced return to the office.
Achieve financial objectives: Grow rental income, deliver strong operational cash flow, meet dividend targets, drive dividend cover and enhance asset values.
Deliver social value: Maintain our evidenced-based approach with independent analysis of the positive impact and cost savings generated by the Company's portfolio and our broader activities in the sector, along with a particular focus on improving environmental performance.
Business continuity and safety
Although the impact of COVID-19 on CSH has been low, we were saddened to learn that Mike Doran, the Chairman of Westmoreland Housing Association, passed away in April 2020 of COVID-19 complications. CIM had formed an excellent working relationship with Mike and he will be missed by all he worked with. Our thoughts are with his family and friends.
The primary concern during the continuing pandemic has been to ensure the safety and resilience of the sector, and the ongoing maintenance and improvement of CSH's portfolio. We continue to see very low incidences of cases amongst residents. This was confirmed as a sector-wide phenomenon by the CQC in June 20201 (COVID-19 Insight: Issue 2). The type of personalised care that is being provided, the bespoke nature of the buildings adapted for care use and the focussed and efficient response from our partners has resulted in a high resilience to the virus. Coupled with this, our residents are young, with an average age of 32, living in self-contained homes and community environments. Our Housing Association partners have continued to report excellent levels of compliance with health and safety measures.
CSH took the following measures to support its partners during the pandemic:
-- Established weekly contact calls with key providers;
-- Used the Housing Association network established three years ago as a forum to share best practice on responses to COVID-19 and working practices;
-- Liaised with Local Authorities to assist them in housing homeless people who as part of the Government's response to the pandemic were required to be housed immediately under the "bring everyone in" policy. CSH continues to provide 29 bed spaces in Islington and is in discussion with a number of other Local Authorities who wish to house homeless people in longer-stay housing to ensure they receive the care they deserve.
CSH's investment manager, CIM relocated to home working with full technological support and video conferencing in March 2020. The office was made COVID-19 compliant and a phased return to working in the office was achieved in September 2020.
During the period, key Housing Associations have continued to work effectively and in partnership with CIM. Weekly calls have ensured any operational issues that have arisen through the pandemic have been addressed. All Housing Associations have been able to work from home and adopt working protocols which minimise unnecessary visits and delegate key on-site functions to care providers.
Financial Review
Rental income in the period grew to GBP24.1 million, a 6% increase over the corresponding period (30 September 2019: GBP22.7 million) with annualised rental income of GBP49.5 million at 30 September 2020.
This increase has been generated as a result of new investments made in the period, on track indexation of rents and the effect of rental income on properties purchased prior to the period, being included for the full six months.
A net fair value gain of GBP3.6 million was recorded in the period, lower than the GBP4.3 million recorded in the corresponding period reflecting less yield compression for the same period. Operational cash flow increased strongly to GBP19.5 million (30 September 2019: GBP17.0 million) adjusted for non-cash items.
Earnings per share was 2.81 pence for the six-month period compared to 6.06 pence for the full year to 31 March 2020. EPRA earnings per share was 2.49 pence over the six-month period compared to 4.63 pence for the full year to 31 March 2020 and 2.29 pence for the six months to 30 September 2019.
The Company paid two dividends, one of 1.325 pence per share and one of 1.35 pence per share during the period fully in line with the distribution target of 5.4p announced for the year to 31 March 2021. Our priority is to reach a fully covered dividend as soon as possible and we are pleased to note that the EPRA run rate dividend cover at 30 September 2020 was 100%.
As at 30 September 2020, the IFRS NAV of the Company was 108.01 pence per share, a slight increase on the 107.87 pence per share at 31 March 2020. Together with the dividends of 1.325 pence and 1.350 pence paid in the period, this gives a total return since IPO of 26.52% on an IFRS basis and 34.38% on a Portfolio basis.
The Total Expense Ratio reflecting total costs expressed as a percentage of the average NAV over the six-month period was 1.33% in the period compared to 1.36% in the year to 31 March 2020.
The portfolio was independently valued on an individual IFRS asset basis by JLL at GBP898.5 million as at 30 September 2020 reflecting a net initial yield of 5.26%. This compares to an average purchase yield of 5.84% (prior to purchase costs) and reflects the ability of the Company to use its scale and market position to buy well, often off-market, and avoid taking part in auctions.
The acquisition programme has continued with two assets acquired at an average yield of 5.5% during the period.
The pandemic slowed, temporarily, the ability of lenders to consider new facilities with their focus being applied to existing borrowers who required support and with most or all staff working remotely. More recently, lenders have been more open to consider new funding opportunities on competitive rates and the Company is now working with parties to finalise a new debt facility. A further announcement will be made in due course.
Social Impact and Social Value
The Company's latest independent report from The Good Economy was published today and provides details of CSH's portfolio and the continued success in delivering measurable social impact. Findings include:
1) Five properties, housing up to 76 people, have been added to the CSH portfolio. 33% of CSH's
618 properties have been brought into the social housing sector for the first time.
2) CSH's regular engagement with its Registered Providers to monitor the quality of its stock continued through the COVID-19 pandemic.
3) Improvement works have enhanced the energy efficiency of homes, with 99.5% of homes with an EPC rating of E+.
4) CSH's 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.
5) Social value analysis revealed that, overall, the portfolio generates GBP114 million of social value per year, including fiscal savings to public budgets of GBP64.7 million per year.
Environmental, Social and Governance
Earlier this year, the Board of CSH set out its commitment to a continuous improvement process in its approach to ESG integration. CIM is responsible for the implementation of the commitment to integrate ESG considerations in its investment strategy.
To this end, we have increased engagement with ESG Rating Agencies including GRESB (formerly known as Global Real Estate Sustainability Benchmark), MSCI (formerly known as Morgan Stanley Capital International) ESG and EPRA in recent months. We expect to receive confirmation of CSH's EPRA's BR 2020 Award, 2020 GRESB Public Disclosure Score and MSCI ESG ratings shortly. We have maintained CSH's accreditation as an impact investor under International Finance Corporation ("IFC") Principles.
We contributed to the development of the Sustainability Reporting Standard for Social Housing and have confirmed CSH's commitment to become an Early Adopter. The unified standard approach to ESG and impact reporting in social housing is aligned to the investment strategy and CIM will integrate these Standards into its processes, as appropriate.
Additionally, CIM has been engaged in a collaborative project to produce a sector standard impact measurement approach for equity investments in social and affordable housing. The project aim is to develop a framework to inform the engagement process between investors, intermediaries and investees. It will also help articulate, measure and actively manage positive social impact contributions. The project is in the final phase and will be shared for wider consultation during the autumn.
Over the last six months, we have collated all data on the environmental performance of CSH properties. This has informed proactive engagement with counterparties to assess the environmental impact of the portfolio. This has also enabled CIM to explore initiatives to achieve zero carbon across all properties by 2030 through deep retrofit programmes. These will be piloted in the next period.
In the same period, we have reduced the carbon footprint of our portfolio with 99.5% of CSH homes meeting the Government's minimum energy efficiency standard of EPC grade E (up from 98% in March 2020). Work is underway to achieve 100% compliance by the end of the year.
In terms of our counterparties, we have promoted the adoption of the Civitas Best Practice Protocol designed to safeguard the long-term financial strength and social delivery of Housing Associations and the supported housing they provide. The protocol brings a measure of consistency in standards and investor relations to the SSH sector as a whole.
The Portfolio - Asset Management and Future Proofing
We are, and always will be, an active manager of the portfolio and undertake property assessments on a regular basis with our Housing Association partners and surveyors to determine whether properties are achieving an optimal outcome. We have expanded our asset management team with senior individuals from the real estate and care sectors to ensure we have a sector leading approach to capital works and enhancements.
We continue to invest further in order to expand properties and to ensure that they are as future proofed as possible. This might include small adaptations to enable a building to function better for a Housing Association or a care provider and this modest investment is typically above and beyond the repair and maintenance obligations in the lease.
We also undertake reviews to ensure that each property is working in an optimal manner within the overall sector ecosystem in terms of interaction with the local authority as well as the Housing Association and the care provider.
To complement this work, we have upgraded our asset management software, which enables us to monitor building, investment and performance on a live basis with direct access to all key counterparties.
Now that CSH has established a substantial portfolio, we have taken opportunities to move certain properties between Housing Associations, based on lease assignments on the same lease terms.
This action is taken where a particular Housing Association has, for example, a strong relationship with
a particular local authority that facilitates engagement or where we can achieve concentrations that assist Housing Associations in undertaking maintenance and repairs and also to bring together properties that deliver high acuity care with Housing Associations that are particularly skilled in working with such residents and care providers.
We will also respond to requests from Housing Associations who might themselves want to reduce or reshape their geographic coverage so that they can become more efficient and have a business that is more easily managed and can better meet the requirements set by the RSH.
We transferred 69 properties from Westmoreland Supported Housing (Westmoreland) to Auckland Home Solutions (Auckland). Westmoreland wished to reduce the number of Local Authorities with which they worked and rightsize their business. Auckland, amongst other Housing Associations, was keen to take on the responsibilities with Local Authorities with which they have good relationships
and concentrations of management responsibilities. Auckland is also a member of The Social Housing Family CIC receiving additional support in relation to professional expertise and platform assistance.
Westmoreland has significantly improved its business since this transfer and is now trading at a small surplus with full compliance in health, safety and governance.
The Portfolio - Rental Income
The annualised rental income as at 30 September 2020 increased to GBP49.5 million and this is expected to increase further as additional indexation is applied and the balance of the existing debt is invested. The Company has advanced several positive discussions regarding the provision of additional debt facilities including with one UK institutional lender where outline commercial terms have been agreed subject to various further approvals and documentation to be completed over the coming weeks.
Rental income is generated from leases with 15 Housing Associations with the top three representing 56.4% (Falcon 20.2%, Auckland 24.0%, BeST 12.2%).
Falcon is a well-established, profitable and cash generative organisation that was formed in 2008 and has developed a strong track record of delivery. Today it provides long-term homes for more than 1,300 residents. As at 30 September 2020, it had net assets of GBP1.9 million including owned properties that Falcon has started to purchase to complement the leased properties. As at 30 September 2020, Falcon held cash balances in excess of GBP1 million. We have worked closely with Falcon and expect to continue to do so in the future.
Auckland is also a well-established, profitable and cash generative Housing Association that was formed in 2010 and recently became the first member of The Social Housing Family CIC. Today, it provides long-term homes for more than 950 residents, has net assets of GBP1 million and cash balances in excess of GBP1 million.
Portfolio Characteristics
The key features of the CSH portfolio can be summarised as follows:
-- Fully converted and specially adapted for care use; -- High number of care hours: over 40 hours a week on average; -- Median rents tested where required; -- Properties always well located within the community and with commissioner support;
-- Over one-third of the portfolio on back to back 25-year leases with care providers mirroring the obligations in the lease to Housing Associations;
-- An own front door policy; -- Over one-third of properties bought when new, without development risk; -- At least three counterparties tested for each lease.
The high quality of our portfolio reflects the ability of the Company to source off market transactions through its extensive network of care provider relationships, with the aim of achieving value growth over time.
Building characteristics
CSH has 618 properties across 164 local authority areas. The average building size comprises seven bed spaces and are either small houses or apartment blocks, typically of between 10 and 15 flats with individual front doors.
The nature of community-based housing with care is that acquiring traditional properties in traditional streets near community facilities and infrastructure is vital to providing the homes that Local Authorities, those with care needs and their families require.
As with all properties CSH acquires, a full independent condition survey is carried out prior to acquisition. As a result, over GBP500 million of transactions have been rejected as they did not meet our standards with regards to either the rent levels, building location, layout/suitability or reputation of the selling party.
Where a building proceeds to acquisition, a full condition report specifying all works that must be carried out at the vendor's cost is undertaken. This may include bespoke adaptations for the resident, health and safety works and environmental enhancements to improve thermal efficiency. These works will then be carried out and inspected by a separate independent surveying practice before final handover.
All of the portfolio is traditional construction with no system built properties or cladding and is residential property suitable for all types of residential accommodation.
Counterparties
CSH works with 15 Housing Association partners and recently, shareholders extended its mandate to work with a wider group of counterparties, such as the NHS and registered charities. The primary reason for this is that SSH is managed by a range of counterparties under different regulatory regimes. A table is provided below of the regulatory landscape for potential and existing
counterparties.
Organisation type Regulatory Body -------------------------------------- ---------------------------- Registered Housing Associations Regulator of Social Housing Unregistered Housing Associations Companies House Registered Charities Charities Commission Community Interest Companies Financial Conduct Authority Community Benefit Societies Financial Conduct Authority Local Authorities Regulator of Social Housing Arm's Length Management Organizations Regulator of Social Housing (ALMOS)
The Social Housing Family CIC ("SHF CIC")
As previously reported, Auckland Homes Solutions was the founding member of the SHF CIC in September 2019. Since then, Auckland has benefited from the additional infrastructure and skills the
SHF CIC has been able to provide to further its business, including recruiting a new executive team, growing its portfolio in an orderly way and increasing its surplus operating margin.
In August 2020, the CIC was joined by Qualitas Housing, a CIC dedicated to management of housing with care. SHF CIC members benefit from assistance and knowledge sharing in the following areas:
-- Group procurement processes -- IT and finance platforms -- Governance advice and support -- Advice regarding transfer of obligations where appropriate -- Due diligence processes -- Management upskilling
Regulation
CSH always welcomes the engagement of the RSH with our Housing Association counterparties and we support the work the RSH has undertaken in making recommendations for improvements in the sector over the last three years.
It is clear that the RSH will rightly publish information as to the improvements it wishes to see and whenever this occurs, CSH will provide support to its partners as appropriate. The SHF CIC has placed us at the heart of supporting Housing Associations to improve their organisations and management and we are glad to see that encouraging progress is being made.
CSH has been at the forefront of addressing the RSH's concerns about the long-term risk planning of Housing Associations by pioneering the implementation of the force majeure clause and caps and collars on the indexation of rents of between 1% and 4%. We will continue to work with our counterparties and the RSH to ensure that we fulfill our intentions as the largest owner of SSH in the
country to enable the sector to evolve and to maintain the improvements already made.
Outlook
We are still in uncertain times in relation to COVID-19 and its impact upon society in the short, medium and long term. What is absolutely certain is that the extraordinary shortage of social housing in general and SSH in particular is a challenge that society needs to address now.
The evidence is overwhelming that housing the most vulnerable individuals in our society in proper homes in the community is of paramount importance and not only transforms people's lives but also is more cost-effective for the public purse.
CSH sees compelling opportunities to invest further in this sector. A pipeline of GBP250 million has now been developed which will be partly satisfied when the new debt facilities come into place and leaves open the prospect of future equity raises subject to market conditions and investors' views.
We remain committed to generating growth and shareholder value through ethical investing. We look to the future with confidence.
Civitas Investment Management Limited
Investment Adviser
27 November 2020
Key Performance Indicators ("KPIs")
Measure Explanation Result
----------------------------- ------------------------------- ----------------------------
Increase in IFRS Target to achieve capital IFRS NAV increase of
NAV per share appreciation whilst 10.01p per share or
maintaining a low risk 10% from IPO.
strategy from enhancing
the quality of cash
flows from investments,
by physical improvement
of properties and by
creating a significantly
diversified, high-quality
portfolio.
----------------------------- ------------------------------- ----------------------------
Dividends per share Targeting 5.4p per share Dividends of 2.68p
per annum for the current per share declared
year growing broadly for the six-month
in line with inflation. period.
----------------------------- ------------------------------- ----------------------------
Number of Local Authorities, Target risk mitigation As at 30 September
Housing Associations through a diversified 2020:
and care providers portfolio (once fully
invested) with no more -- 164 Local Authorities
than 25% exposure to -- 15 Housing Associations
any one Local Authority -- 118 Care Providers
or single Housing Association
and no more than 20% The Company's largest
exposure to any single single exposure is
geographical area. to Auckland Housing
Association and currently
stands at 25%. The
largest geographical
concentration is in
the South West, being
16%.
----------------------------- ------------------------------- ----------------------------
Loan to Gross Assets Assets Target debt drawn Leverage as at 30 September
of 35% of gross assets. 2020 of 28.63% of gross
assets.
----------------------------- ------------------------------- ----------------------------
Alternative Performance Measures
Adjusted Definition Performance 30 September 30 September 31 March
Performance Measure 2020 2019 2020
Measure
------------- ----------------------- --------------- --------------- --------------- ---------------
Portfolio IFRS NAV adjusted Portfolio GBP735,913,000 GBP736,392,000 GBP735,704,000
NAV to reflect investment NAV
property valued 118.38p 118.30p 118.35p
on a portfolio Portfolio
basis rather NAV per share
than on an individual
asset basis.
------------- ----------------------- --------------- --------------- --------------- ---------------
For a reconciliation of the Portfolio NAV to the IFRS results please see note 6 to Appendix 1 below.
EPRA
The Company is a member of the 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 EPRA
Performance Performance 30 September 30 September 31 March
Measure Definition Purpose Measure 2020 2019 2020
--------------- --------------- --------------- ---------------- --------------- --------------- ---------------
EPRA Earnings Earnings from A key measure EPRA Earnings GBP15,495,000 GBP14,279,000 GBP28,814.000
operational of a company's
activities. underlying EPRA Earnings 2.49p 2.29p 4.63p
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 GBP672,798,000 GBP667,621,000 GBP671,042,000
Reinstatement metric set of metrics
Value ("NRV") which assumes make EPRA NRV 108.23p 107.26p 107.95p
that entities adjustments per share
never sell to the NAV (diluted)
assets and per the IFRS
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 GBP672,798,000 GBP667,621,000 GBP671,042,000
Tangible metric
Assets ("NTA") which assumes EPRA NTA 108.23p 107.26p 107.95p
that entities per share
buy and sell (diluted)
assets,
thereby
crystallising
certain levels
of unavoidable
deferred tax.
--------------- --------------- --------------- ---------------- --------------- --------------- ---------------
EPRA Net EPRA NAV EPRA NDV GBP667,202,000 GBP664,536,000 GBP667,560,000
Disposal metric
Value ("NDV") which EPRA NDV 107.33p 106.76p 107.39p
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
For reporting periods starting on or after 1 January 2020, EPRA NAV and EPRA NNNAV have been replaced with three specific new EPRA NAV measures. The table above shows the new metrics and the new measure most comparable to the EPRA NAV is EPRA Net Tangible Assets.
EPRA Performance EPRA Performance 30 September 30 September 31 March
Measure Definition Purpose Measure 2020 2019 2020
------------------ ----------------- ------------------ ------------------ ------------- ------------- ---------
Annualised
rental income
based on the
cash rents A comparable
passing at measure for
the balance portfolio
sheet date, valuations.
less These measures
non-recoverable should make
property it easier
operating for investors
expenses, to judge
divided themselves,
by the market how the
value of the valuation
property with of portfolio
EPRA Net (estimated) X compares
Initial purchasers' with portfolio
Yield ("NIY") costs. Y. EPRA NIY 5.26% 5.29% 5.26%
------------------ ----------------- ------------------ ------------------ ------------- ------------- ---------
This measure
incorporates
an adjustment
to the EPRA
NIY in respect
of the expiration
of rent-free
periods (or
other unexpired
lease incentives
such as discounted
rent periods
EPRA 'Topped-up' and stepped EPRA 'Topped-up'
NIY rents). NIY 5.26% 5.29% 5.26%
------------------ ------------------------------------- ----------------- ------------- ------------- ---------
Estimated Market
Rental Value
("ERV") of A 'pure' (%)
vacancy space measure of
divided by investment
ERV of the property space
EPRA Vacancy whole that is vacant, EPRA Vacancy
Rate portfolio. based on ERV. Rate 0% 0% 0%
------------------ ----------------- ------------------ ------------------ ------------- ------------- ---------
EPRA Costs Administrative A key measure EPRA Costs 19.22% 21.58% 21.48%
Ratio and operating to enable Ratio
costs meaningful
(including measurement EPRA Costs 19.22% 21.48%
and excluding of the changes Ratio (excluding 21.58%
costs of direct in a company's direct vacancy
vacancy) operating costs)
divided costs.
by gross rental
income.
------------------ ----------------- ------------------ ------------------ ------------- ------------- ---------
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 Uncertainties
The principal risks facing the Company are substantially unchanged since the date of the Annual Report for the financial year ended 31 March 2020 and continue to be as set out on pages 52 to 54 of that report. Risks faced by the Company include, but are not limited to, strategy and competitiveness risks, investment management risks, accounting, legal and regulatory risks and operational risks, including cyber crime. Financial risks include market risks in relation to investment in property and liquidity funds, interest rate risk, credit risk and liquidity risk. Details of the Company's management of these risks are set out in the 2020 Annual Report.
Statement of Directors' Responsibilities
The Directors acknowledge responsibility for the Half-Year Financial Report and confirm that, to the best of their knowledge, these condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position and profit for the period of the Group as required by DTR 4.2.4R. The Directors confirm that the Interim Management Report (including the Chairman's Statement and the Investment Manager'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 2020 and their impact on the condensed consolidated financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.
The Directors of the Company are listed below.
The principal risks and uncertainties facing the Group are consistent with those outlined in the Group's most recent annual financial statements for the year ended 31 March 2020, 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
27 November 2020
Independent review report to Civitas Social Housing PLC
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed Civitas Social Housing PLC's condensed consolidated financial statements (the "interim financial statements") in the Half Year Report for the six months ended 30 September 2020 of Civitas Social Housing PLC for the 6 month period ended 30 September 2020. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Statement of Financial Position as at 30 September 2020; -- 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 for the six months ended 30 September 2020 have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Report for the six months ended 30 September 2020, 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 for the six months ended 30 September 2020 in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the Half Year Report for the six months ended 30 September 2020 based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year Report for the six months ended 30 September 2020 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 November 2020
Condensed Consolidated Statement of Comprehensive Income
For the period from 1 April 2020 to 30 September 2020
From 1 April From 1 April For the
2020 to 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ----
Revenue
Rental income 4 24,301 22,729 46,165
Less direct property expenses 4 (237) - (259)
--------------------------------------------------------- ---- ------------- ------------- -----------
Net rental income 24,064 22,729 45,906
Directors' remuneration (including Employer's NIC costs) (95) (84) (176)
Investment advisory fees 17 (3,062) (3,111) (6,183)
General and administrative expenses (1,468) (1,710) (3,501)
--------------------------------------------------------- ---- ------------- ------------- -----------
Total expenses (4,625) (4,905) (9,860)
Change in fair value of investment properties 5 2,890 3,150 9,389
--------------------------------------------------------- ---- ------------- ------------- -----------
Operating profit 22,329 20,974 45,435
Finance income (6) 56 110
Finance expense - relating to bank borrowings 6 (3,938) (3,421) (7,342)
Change in fair value of interest rate derivatives 13 (908) (180) (478)
--------------------------------------------------------- ---- ------------- ------------- -----------
Profit before tax 17,477 17,429 37,725
Taxation 7 - - -
--------------------------------------------------------- ----
Profit being total comprehensive income for the period 17,477 17,429 37,725
--------------------------------------------------------- ---- ------------- ------------- -----------
Earnings per share - basic and diluted 8 2.81p 2.80p 6.06p
--------------------------------------------------------- ---- ------------- ------------- -----------
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 2020
30 September 30 September 30 March
2020 2019 2020
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Investment property 10 887,056 833,477 867,988
Other receivables 11,491 8,022 10,755
----------------------------- ---- ------------ ------------ ---------
898,547 841,499 878,743
Current assets
Trade and other receivables 12,479 6,627 10,838
Cash and cash equivalents 11 40,901 53,043 58,374
----------------------------- ---- ------------ ------------ ---------
53,380 59,670 69,212
----------------------------- ---- ------------ ------------ ---------
Total assets 951,927 901,169 947,955
----------------------------- ---- ------------ ------------ ---------
Liabilities
Current liabilities
Trade and other payables (9,353) (8,903) (7,743)
Bank and loan borrowings 12 - -- (59,730)
----------------------------- ---- ------------ ------------ ---------
(9,353) (8,903) (67,473)
Non-current liabilities
Bank and loan borrowings 12 (269,776) (224,645) (209,440)
Interest rate derivatives 13 (1,386) (180) (478)
----------------------------- ---- ------------ ------------ ---------
(271,162) (224,825) (209,918)
----------------------------- ---- ------------ ------------ ---------
Total liabilities (280,515) (233,728) (277,391)
----------------------------- ---- ------------ ------------ ---------
Total net assets 671,412 667,441 670,564
----------------------------- ---- ------------ ------------ ---------
Equity
Share capital 14 6,225 6,225 6,225
Share premium reserve 292,405 292,405 292,405
Capital reduction reserve 330,926 331,625 330,926
Retained earnings 41,856 37,186 41,008
----------------------------- ---- ------------ ------------ ---------
Total equity 671,412 667,441 670,564
----------------------------- ---- ------------ ------------ ---------
Net assets per share - basic
and diluted 15 108.01p 107.23p 107.87p
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 2020 to 30 September 2020
Share Capital
Share premium reduction Retained Total
capital reserve reserve earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -----
Six month movements in
equity (unaudited)
Balance at 1 April 2020 6,225 292,405 330,926 41,008 670,564
Profit and total comprehensive
income for the period - - - 17,477 17,477
Dividends paid
Total interim dividends
for the period (2.675p) 9 - - - (16,629) (16,629)
-------------------------------- ----- --------- --------- ----------- ----------- ---------
Balance at 30 September
2020 6,225 292,405 330,926 41,856 671,412
-------------------------------- ----- --------- --------- ----------- ----------- ---------
Balance at 1 April 2019 6,225 292,405 331,625 36,253 666,508
Profit and total comprehensive
income for the period - - - 17,429 17,429
Dividends paid
Total interim dividends
for the period (2.65p) 9 - - - (16,496) (16,496)
-------------------------------- ----- --------- --------- ----------- ----------- --------- Balance at 30 September 2019 6,225 292,405 331,625 37,186 667,441 -------------------------------- ----- --------- --------- ----------- ----------- --------- Prior year movements in equity (audited) Balance at 1 April 2019 6,225 292,405 331,625 36,253 666,508 Profit and total comprehensive income for the period - - - 37,725 37,725 Issue of Ordinary shares Shares brought back into Treasury 14 - - (699) - (699) Dividends paid Total interim dividends for the year ended 31 March 2020 (5.30p) 9 - - - (32,970) (32,970) -------------------------------- ----- --------- --------- ----------- ----------- --------- Balance at 31 March 2020 6.225 292,405 330,926 41,008 670,564 -------------------------------- ----- --------- --------- ----------- ----------- ---------
The notes below are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statement of Cash Flows
For the period from 1 April 2020 to 30 September 2020
From 1 April From 1 April For the
2020 to 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
-------------------------------- -----
Cash flows from operating
activities
Profit for the period
before taxation 17,477 17,429 37,725
- Change in fair value
of investment properties (2,890) (3,150) (9,389)
- Change in fair value
of interest rate derivatives 908 180 478
- Rent and incentive straight
line adjustments 41 (57) (87)
Finance income 6 (56) (110)
Finance expense 3,938 3,421 7,342
Increase in trade and
other receivables (2,622) (918) (3,290)
Increase in trade and
other payables 2,638 63 126
-------------------------------- ----- -------------- -------------- ------------
Cash generated from operations 19,496 16,912 32,795
Interest received 30 56 110
-------------------------------- -----
Net cash flow generated
from operating activities 19,526 16,968 32,905
-------------------------------- ----- -------------- -------------- ------------
Investing activities
Purchase of investment
properties (17,247) (9,186) (17,986)
Acquisition costs 366 (4,888) (9,737)
Purchase of subsidiary
company - -- (19,829)
Sale proceeds on sale
of subsidiary company - -- 2,221
Lease incentives paid (349) (3,939) (6,844)
Restricted cash held as
retention money 13,849 1,630 (9,726)
-------------------------------- -----
Net cash flow used in
investing activities (3,381) (16,383) (61,901)
-------------------------------- ----- -------------- -------------- ------------
Financing activities
Cost of Shares bought
in treasury - -- (699)
Dividends paid to equity
shareholders (16,597) (16,409) (32,889)
Bank borrowings advanced 12 - 20,000 64,053
Bank borrowings issue
cost paid (122) (1,111) (1,364)
Loan interest paid (3,051) (2,739) (5,804)
-------------------------------- -----
Net cash (used in)/generated
from financing activities (19,770) (259) 23,297
-------------------------------- ----- -------------- -------------- ------------
Net (decrease)/increase
in cash and cash equivalents (3,625) 326 (5,699)
Unrestricted cash and
cash equivalents at the
start of the period 41,429 47,128 47,128
-------------------------------- ----- -------------- -------------- ------------
Unrestricted cash and
cash equivalents at the
end of the period 11 37,804 47,454 41,429
-------------------------------- ----- -------------- -------------- ------------
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 2020 to 30 September 2020
1. Corporate information
These condensed consolidated financial statements for the period from 1 April 2020 to 30 September 2020 comprise the results of the Company and its subsidiaries (together the "Group") and were approved by the Board and authorised for issue on 27 November 2020.
Civitas Social Housing PLC is incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares with company number 10402528.
The address of the registered office is Beaufort House, 51 New North Road, Exeter, EX4 4EP. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.
The principal activity of the Company is to act as the ultimate parent company of the Group, whose principal activity is to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes.
2. Basis of preparation
The financial information for the period ended 30 September 2020 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 March 2020 has been delivered to the Registrar of Companies. The Auditors' report on those accounts was not qualified, but included a reference to matters to which the Auditor drew attention by way of emphasis without qualifying the report, in relation to the material uncertainty clause attached to the valuation of investment properties as at 31 March 2020. The Auditors' report did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The Group's condensed consolidated financial statements have been prepared on a going concern basis in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority ("FCA") and with IFRS and IFRS Interpretation Committee ("IFRIC"), as issued by the IASB and as adopted by the European Union ("EU"), and in accordance with IAS 34 Interim Financial Reporting. The current period financial information presented has been reviewed, not audited.
The comparative periods represent the period from 1 April 2019 to 30 September 2019 as reported in the Group's 2019 Interim Report, and comparatives for the year ended 31 March 2020 as reported in the Company's 2020 Annual Report.
The Group's condensed consolidated financial statements should be read in conjunction with the annual financial statements for the period ended 31 March 2020, which have been prepared in accordance with IFRS as adopted by the European Union.
The same accounting policies, estimates, presentation and methods of computation are followed in the Half Year Report as applied in the Group's latest annual audited financial statements, with the exception of the following items :
-- External Valuer's Report Material Uncertainty Clause: Professional valuation firms, including JLL, the independent external valuer to the Company, adopted a "Material Valuation Uncertainty due to Novel Coronavirus (COVID-19)" clause with respect to all IFRS and Portfolio NAV valuations. This clause was contained within the 31 March 2020 External Valuer's report prepared by JLL. In accordance with RICS guidelines the Material Valuation Uncertainty that had previously been applied to the valuation of the majority of classes of real estate as a result of the COVID-19 pandemic was, from the end of May 2020, lifted from the Company's portfolio. RICS confirmed that the condition would no longer be applicable to SSH of both C2 and C3 designation let on FRI leases. This reflects the perceived stability of income associated with such arrangements. As such, this clause has not been included within their 30 September2020 valuation report.
-- Amendments to IAS1 'Presentation of Financial Statements' and IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors': These amendments clarify the definition of 'material'. The amendments make the standards more consistent but have no significant impact on the preparation of these financial statements. (effective for annual periods beginning on or after 1 January 2020).
-- Amendments to IFRS 3 Business Combinations: These amendments clarify the definition of a business and the subsequent accounting treatment applied (effective for periods beginning on or after 1 January 2020). Careful consideration is given to the accounting treatment for each acquisition. Most acquisitions made by the Group are treated as the acquisition of a group of assets, so the amendments to this standard have not had any impact on the Group financial statements.
The Group has not identified new accounting standards, interpretations and amendments, which are not yet effective and have not been early adopted in this financial information, that will or may have an effect on the Group's future financial statements.
The Group's condensed consolidated financial statements have been prepared on a historical cost basis, as modified for the Group's investment properties at fair value through profit or loss
2.1 Functional and presentation currency
The financial information is presented in Pounds Sterling which is also the functional currency of the Company, and all values are rounded to the nearest thousand (GBP'000s) pound, except where otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases with Housing Associations, which are not overly reliant on any one tenant and present a well-diversified risk. The Group's cash balances as at 30 September 2020 were GBP41 million, of which GBP3 million is held as restricted cash.
To date, the Company's financial performance has not been negatively impacted by COVID-19. The Company and its Investment Adviser, Civitas Investment Management Limited ("CIM") are working closely with the Company's major counterparties to monitor the position on the ground and, should it be needed, to offer assistance and guidance where possible. The Board of Directors believes that the Company operates a robust and defensive business model and that social housing and specialist healthcare are proving to be some of the more resilient sectors within the market, given that they are based on non-discretionary public sector expenditure and that demand exceeds supply.
On 27 November 2020, an extension was granted for the HSBC facility, which now expires in November 2022. Refer to note 19 for further details.
Further, positive discussions are progressing with Lloyds to refinance its facility by the end of the financial year. The facility has been performing throughout its term, with all covenants being comfortably met. With GBP230 million unencumbered properties, together with cash reserves, the Directors believe that the refinancing risk of the Lloyds facility not being extended before its expiry in November 2021 is extremely low and as a result, the Directors believe that the Group is well placed to manage its financial and other business risks and that the Group will remain viable, continuing to operate and meet its liabilities as they fall due.
The Directors believe that there are currently no material uncertainties in relation to the Group's ability to continue for the period of at least 12 months from the date of the Group's condensed consolidated financial statements. The Board is, therefore, of the opinion that the going concern basis adopted in the preparation of the condensed consolidated financial statements is appropriate.
The Directors have considered the changing political and economic environment in light of Brexit and do not consider there to be any material impacts or risks relevant to the Group.
2.3 Segmental information
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker, which in the Group's case is delegated to the Investment Adviser, who has formed an Executive Team, in order to allocate resources to the segments and to assess their performance.
The internal financial reports received by the Investment Adviser's Executive Team contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the condensed consolidated financial statements.
The Directors consider the Group's property portfolio represents a coherent and diversified portfolio with similar economic characteristics and as a result these individual properties have been aggregated into a single operating segment. In the view of the Directors there is accordingly one reportable segment under the provisions of IFRS 8.
All of the Group's properties are based in the UK. No geographical grouping is contained in any of the internal financial reports provided to the Investment Adviser's Executive Team and, therefore no geographical segmental analysis is required by IFRS 8.
3. Significant accounting judgements, estimates and assumptions
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are unchanged from those outlined in the Annual Report.
In accordance with RICS guidelines the Material Valuation Uncertainty that had previously been applied to the valuation of the majority of classes of real estate as a result of the COVID-19 pandemic had, from the end of May 2020, been lifted from the Company's portfolio. RICS confirmed that the condition would no longer be applied to specialist supported housing of both C2 and C3 designations let on FRI leases.
4. Rental income
From From For the
1 April 2020 to 1 April 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Rental income from investment property 24,105 22,672 45,819
Rent straight line adjustments 174 155 361
Lease incentive adjustments (215) (98) (274)
Rechargeable costs received 237 - 259
--------------------------------------- ---------------- ---------------- -----------
Rental Income 24,301 22,729 46,165
Less direct property expenses (237) - (259)
--------------------------------------- ---------------- ---------------- -----------
Net rental income 24,064 22,729 45,906
--------------------------------------- ---------------- ---------------- -----------
5. Change in fair value of investment properties
From From For the
1 April 2020 to 1 April 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ---------------- ---------------- -----------
Change in valuation during the period 3,626 4,348 13,320
Adjustment for lease incentives and rent straight line adjustments
recognised in assets at:
- start of the period 10,755 6,824 6,824
- end of the period (11,491) (8,022) (10,755)
--------------------------------------------------------------------- ---------------- ---------------- -----------
Change in fair value of investment properties 2,890 3,150 9,389
--------------------------------------------------------------------- ---------------- ---------------- -----------
6. Finance expense
From From For the
1 April 2020 to 1 April 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Bank charges 2 2 2
Interest paid and payable on bank borrowings 3,208 2,759 5,795
Bank borrowing commitment fees - 60 220
Amortisation of loan arrangement fees 728 600 1,325
--------------------------------------------- ---------------- ---------------- -----------
Total 3,938 3,421 7,342 --------------------------------------------- ---------------- ---------------- ----------- 7. Taxation
As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it meets certain conditions as set out in the UK REIT regulations. For the period ended 30 September 2020, 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. No deferred tax asset has been recognised in respect of the unutilised residual current period losses as it is not anticipated that sufficient residual profits will be generated in the future.
From From For the
1 April 2020 1 April 2019 year ended
to to 31 March
30 September 30 September 2020
2020 2019 Audited
Unaudited Unaudited 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 1 April year ended
2020 to 2019 to 31 March
30 September 30 September 2020
2020 2019 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
-------------------------------------- -------------- -------------- ------------
Group
Profit before taxation 17,477 17,429 37,725
-------------------------------------- -------------- -------------- ------------
UK corporation tax rate 19.00% 19.00% 19.00%
Theoretical tax at UK corporation
tax rate 3,321 3,312 7,168
Effects of:
Change in value of exempt investment
properties (549) (599) (1,784)
Exempt REIT income (3,263) (3,020) (6,136)
Amounts not deductible for tax
purposes 255 67 175
Unutilised residual current period
tax losses 236 240 577
-------------------------------------- -------------- -------------- ------------
Total - - -
-------------------------------------- -------------- -------------- ------------
The standard of corporation tax is currently 19% The Government has announced that the corporation tax standard rate is to be kept at 19% for the foreseeable future.
REIT exempt income includes property rental income that is exempt from UK corporation tax in accordance with Part 12 of the Corporation Tax Act 2010.
8. IFRS Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing profit for the period attributable to 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 From For the
1 April 2020 to 1 April 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
----------------------------------------------------------- ---------------- ---------------- -----------
Calculation of Basic EPS
Net profit attributable to Ordinary shareholders (GBP'000) 17,477 17,429 37,725
Weighted average number of Ordinary shares 621,646,380 622,461,380 622,103,798
EPS - basic & diluted 2.81p 2.80p 6.06p
----------------------------------------------------------- ---------------- ---------------- -----------
9. Dividends
From From
1 April 2020 1 April 2019 For the
to to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------
Dividend of 1.325p for the three
months to
31 March 2019 - 8,248 8,248
Dividend of 1.325p for the three
months to
30 June 2019 - 8,248 8,248
Dividend of 1.325p for the three
months to
30 September 2019 - - 8,237
Dividend of 1.325p for the three
months to
31 December 2019 - - 8,237
Dividend of 1.325p for the three
months to
31 March 2020 8,237 - -
Dividend of 1.35p for the three
months to
30 June 2020 8,392 - -
--------------------------------- ------------- ------------- -----------
Total 16,629 16,496 32,970
--------------------------------- ------------- ------------- -----------
On 6 November 2020, the Company announced a dividend of 1.35 pence per share in respect of the period 1 July 2020 to 30 September 2020 totalling GBP8,392,000. The dividend payment will be paid on or around 4 December 2020 to shareholders on the register as at 19 November 2020. The financial statements do not reflect this dividend.
10. Investment property
From From
1 April 2020 1 April 2019 For the
to to year ended
30 September 30 September 31 March
2020 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- -----------
Balance at beginning of period 878,743 826,918 826,918
Property acquisitions 15,612 7,555 33,194
Acquisition costs 566 2,678 5,311
Change in fair value during the
period 3,626 4,348 13,320
-------------------------------------- ------------- ------------- -----------
Value advised by the property valuers 898,547 841,499 878,743
Adjustments for lease incentive
assets and rent straight line assets
recognised (11,491) (8,022) (10,755)
-------------------------------------- ------------- ------------- -----------
Total 887,056 833,477 867,988
-------------------------------------- ------------- ------------- -----------
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 GBP898,547,000 as at 30 September 2020 (31 March 2020: GBP878,743,000 and 30 September 2019: GBP841,499,000).
JLL has provided additional valuation services to the Company during the period.
In relation to the period ended 30 September 2020, the proportion of the total fees payable by the Company to JLL's total fee income was less than 5% and is therefore minimal. Additionally, JLL has a rotation policy in place whereby the signatories on the valuations rotate after seven years.
All corporate acquisitions during the period have been treated as asset purchases rather than business combinations because they are considered to be acquisitions of properties rather than businesses.
The following table provides the fair value measurement hierarchy for investment property:
Significant Significant
Quoted prices in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- ------------------------ ------------ --------------
Investment properties measured at fair value
30 September 2020 887,056 - - 887,056
31 March 2020 867,988 - - 867,988
30 September 2019 833,477 - - 833,477
---------------------------------------------- --------- ------------------------ ------------ --------------
There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between Level 2 and Level 3 during any of the periods.
The valuations have been prepared in accordance with the RICS Valuation - Professional Standards (incorporating the International Valuation Standards) by JLL, one of the leading professional firms engaged in the Social Housing sector.
As noted previously, all of the Group's investments are reported as Level 3 in accordance with IFRS 13 where external inputs are "unobservable" and value is the Directors' best estimate, based upon advice from relevant knowledgeable experts.
11. Cash and cash equivalents
From 1 April From 1 April For the
2020 to 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Audited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------- ------------- -----------
Cash held by solicitors 1,204 17,564 3,325
Liquidity funds 10,485 10,440 10,475
Cash held at bank 26,115 19,450 27,629
--------------------------------------- ------------- ------------- -----------
Unrestricted cash and cash equivalents 37,804 47,454 41,429
Restricted cash 3,097 5,589 16,945
--------------------------------------- ------------- ------------- -----------
Total 40,901 53,043 58,374
--------------------------------------- ------------- ------------- -----------
Liquidity funds refer to money placed in money market funds. These are highly liquid funds with accessibility within 24 hours and subject to insignificant risk of changes in value.
Cash held by lawyers is money held in escrow for expenses expected to be incurred in relation to investment properties pending completion. These funds are available immediately on demand.
Restricted cash represents retention money held by lawyers in relation to deferred payments subject to achievement of certain conditions, other retentions and cash segregated to fund repair, maintenance and improvement works to bring the properties up to satisfactory standards for the Group and the tenants.
12. 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
2020 to 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-----------------------------------
Balance at start of period 272,500 208,447 208,447
Bank borrowings drawn - 20,000 64,053
----------------------------------- ------------- ------------- -----------
Bank borrowings drawn at end
of period 272,500 228,447 272,500
Balance at the start of the period (3,330) (3,291) (3,291)
Less: loan issue costs incurred (122) (1,111) (1,364)
Add: loan issue costs amortised 728 600 1,325
----------------------------------- ------------- ------------- -----------
Unamortised costs at end of period (2,724) (3,802) (3,330)
----------------------------------- ------------- ------------- -----------
At end of period 269,776 224,645 269,170
----------------------------------- ------------- ------------- -----------
Maturity of bank borrowings:
Repayable within 1 year - - 59,730
Repayable between 1 to 2 years 159,150 55,462 99,004
Repayable between 2 to 5 years 58,970 117,647 58,840
Repayable after 5 years 51,656 51,536 51,596
----------------------------------- ------------- ------------- -----------
Total 269,776 224,645 269,170
----------------------------------- ------------- ------------- -----------
The Group has entered into the following loan facility agreements
A 10-year Sterling Term Facility Agreement dated 2 November 2017 for up to GBP52,500,000 with Scottish Widows Limited. Interest is fixed at a total of 2.9936% per annum.
The borrowings include amounts secured on investment property to the value of GBP169,366,000 (30 September 2019: GBP171,443,000; 31 March 2020: GBP170,599,000).
A 3-year Sterling Revolving Facility Agreement dated 15 November 2017 for up to GBP40 million with Lloyds Bank plc. Interest is charged at LIBOR +1.50% margin. The facility was subsequently increased to GBP60 million and extended in the normal course to November 2021.
The borrowings include amounts secured on investment property to the value of GBP148,096,000 (30 September 2019: GBP145,503,000; 31 March 2020: GBP147,475,000).
A 3-year Revolving Credit Facility Agreement dated 28 November 2018 for up to GBP100 million with HSBC Bank PLC. Interest is charged at LIBOR +1.70% margin.
The borrowings include amounts secured on investment property to the value of GBP218,014,000 (30 September 2019: GBP210,304,000; 31 March 2020: GBP216,026,000).
A 5-year loan facility with National Westminster Bank Plc, dated 15 August 2019, for up to GBP60 million. Interest is charged at LIBOR +2.00% margin and has been fixed by way of a 5-year swap. The swap fixes interest on GBP20 million at 0.7105% and GBP40 million at 0.5475%. The loan can be extended for an additional 2 years and there is the option of a further GBP40 million accordion.
The borrowings include amounts secured on investment property to the value of GBP131,322,000 (30 September 2019: GBP126,772,000; 31 March 2020: GBP129,933,000).
A number of covenants are in place under the four agreements. Under the Scottish Widows Limited 10-year facility, historical and projected interest cover must be at least 325% and the loan to value ratio must not exceed 40%. Under the Lloyds Bank plc 3-year revolving credit facility, historical and projected interest cover must be at least 250% and the loan to value ratio must not exceed 60%. Under the HSBC Bank PLC 3-year facility, historical and projected interest cover must be at least 250% and the loan to value ratio must not exceed 60%. Under the National Westminster Bank Plc 5-year facility, historical and projected interest cover must be at least 250% and the loan to value ratio must not exceed 50%. At 30 September 2020, the Group is in compliance with all covenants.
13. 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).
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------
At start of the period (478) - -
Change in fair value during
the period (908) (180) (478)
---------------------------- ------------ ------------ --------
At the end of the period (1,386) (180) (478)
---------------------------- ============ ============ ========
The table below shows the fair value measurement hierarchy for interest rate derivatives:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3)
GBP'000 GBP'000 GBP'000
------------------
30 September 2020 - (1,386) -
31 March 2020 - (478) -
30 September 2019 - (180) -
------------------ ------------- ----------- -------------
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.
14. 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 For the
2020 to 2019 to year ended
30 September 30 September 31 March
2020 2019 2020
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
The Company holds 815,000 Ordinary shares in treasury. The number of Ordinary shares used to calculate the NAV is 621,646,380 (30 September 2019: 622,461,380; 31 March 2020: 621,646,380) which excludes the shares held in treasury.
15. Net asset value
Basic NAV per share is calculated by dividing net assets in the Condensed Consolidated Statement of Financial Position attributable to ordinary equity holders of the parent by the number of Ordinary shares outstanding at the end of the period.
NAVs have been calculated as follows:
30 September 30 September 31 March
2020 2019 2020
Unaudited Unaudited Audited
------------------------------------- ------------ ------------ -----------
Net assets (GBP'000) 671,412 667,441 670,564
------------------------------------- ------------ ------------ -----------
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 (815,000) - (815,000)
------------------------------------- ------------ ------------ -----------
Number of ordinary shares excluding
treasury shares held by the Company 621,646,380 622,461,380 621,646,380
------------------------------------- ------------ ------------ -----------
NAV - basic and diluted 108.01p 107.23p 107.87p
------------------------------------- ------------ ------------ -----------
16. Related party disclosures
The Directors are remunerated for their services at such rate as the Directors shall from time to time determine. The aggregate remuneration and benefits in kind of the Directors of the Company (in each case, solely in their capacity as such) in respect of the year ending 31 March 2021 payable out of the assets of the Company is not expected to exceed GBP200,000.
As at 30 September 2020, the Directors (including their connected persons) had beneficial interests in the following number of shares in the Company:
31 September 30 September 31 March
2020 2019 2020
Director Ordinary shares Ordinary shares Ordinary shares
------------------ ---------------------- ---------------- ---------------- ----------------
Michael Wrobel Chairman 100,598 100,598 100,598
Alastair Moss Director 11,766 11,766 11,766
Alison Hadden Director - - -
Audit and Management
Engagement Committee
Caroline Gulliver Chair 58,832 58,832 58,832
Peter Baxter Director 47,065 47,065 47,065
------------------ ---------------------- ---------------- ---------------- ----------------
For the period from 1 April 2020 to 30 September 2020, fees of GBP95,000 (1 April 2019 to 30 September 2019: GBP75,000; year ending 31 March 2020: GBP162,000) were incurred and paid to the Directors.
17. 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 2020 to 30 September 2020, fees of GBP3,062,000 (1 April 2019 to 30 September 2019: GBP3,111,000; year ended 31 March 2020: GBP6,183,000 (which includes GBP52,000 of disbursements) were incurred and paid to CIM.
As at 30 September 2020, no amounts (2019: GBPnil) were due to/from CIM.
At 30 September 2020, CIM held 50,000 Ordinary shares in the Company.
18. Capital commitments
Amounts totalling GBP430,000 have been allocated for capital works expenditure on properties subject to future proofing activities to ensure the longevity of occupation by residents.
19. Post balance sheet events
Dividends
On 6 November 2020, the Board declared a quarterly dividend in respect of the Ordinary shares for the three months to 30 September 2020 of 1.35 pence per Ordinary share totalling GBP8,392,000. The dividend will be paid on or around 4 December 2020 to holders of Ordinary shares on the register at 19 November 2020. The dividend will be paid as a REIT property income distribution ("PID").
Debt Facilities
On 27 November 2020, the Group secured an extension on its 3-year Revolving Credit Facility of GBP100,000,000 with HSBC Bank PLC. The term has been extended until November 2022. There have been no changes to the assets over which the facility is secured as at 30 September 2020, being investment property to the value of GBP218,014,000 (30 September 2019: GBP210,304,000).
Appendix I - Notes to the Calculation of EPRA and Other Alternative Performance Measures (unaudited)
1. EPRA Earnings
30 September 30 September 31 March
2020 2019 2020
------------------------------------- ------------ ------------ -----------
Earnings from operational activities
Profit after taxation (GBP'000) 17,477 17,429 37,725
Changes in fair value of derivative
financial instruments (GBP'000) 908 - 478
Changes in value of investment
properties (GBP'000) (2,890) (3,150) (9,389)
------------------------------------- ------------ ------------ -----------
EPRA Earnings (GBP'000) 15,495 14,279 28,814
------------------------------------- ------------ ------------ -----------
Weighted average number of shares
in issue (adjusted for shares
held in treasury) 621,646,380 622,461,380 622,103,798
------------------------------------- ------------ ------------ -----------
EPRA EPS - basic & diluted 2.49p 2.29p 4.63p
2. New EPRA NAV Metrics
EPRA has advised three new NAV measures to replace the EPRA NAV & EPRA NNNAV
2.1 - EPRA Net Reinstatement Value
EPRA NAV metric which assumes that entities never sell assets and aims to represent the value required to rebuild the entity.
30 September 30 September 31 March
2020 2019 2020
--------------------------------------- ------------ ------------- -----------
Net assets (GBP'000) 671,412 667,441 670,564
Fair value of derivative financial
instruments (GBP'000) 1,386 180 478
--------------------------------------- ------------ ------------- -----------
EPRA Net Reinstatement Value (GBP'000) 672,798 667,621 671,042
--------------------------------------- ------------ ------------- -----------
Dilutive number of shares 621,646,380 622,461,380 622,646,380
EPRA Net Reinstatement Value per
share 108.23p 107.26p 107.95p
2.2 - EPRA Net Tangible Assets
EPRA NAV metric which assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax.
30 September 30 September 31 March
2020 2019 2020
------------------------------------ ------------- -------------- ------------
Net assets (GBP'000) 671,412 667,441 670,564
Fair value of derivative financial
instruments (GBP'000) 1,386 180 478
------------------------------------ ------------- -------------- ------------
EPRA Net Tangible Assets (GBP'000) 672,798 667,621 671,042
------------------------------------ ------------- -------------- ------------
Dilutive number of shares 621,646,380 622,461,380 621,646,380
EPRA Net Tangible Asset per
share 108.23p 107.26p 107.95p
2.3 - EPRA Net Disposal Value
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.
30 September 30 September 31 March
2020 2019 2020
---------------------------------- ------------ ------------- -----------
Net assets (GBP'000) 671,412 667,441 670,564
Fair value of bank borrowings
(GBP'000) (4,210) (2,905) (3,004)
---------------------------------- ------------ ------------- -----------
EPRA Net Disposal Value (GBP'000) 667,202 664,536 667,560
---------------------------------- ------------ ------------- -----------
Dilutive number of shares 621,646,380 622,461,380 621,646,380
EPRA Net Disposal Value per share 107.33p 106.76p 107.39p
3. EPRA Net Initial Yield
30 September 30 September 31 March
2020 2019 2020
-------------------------------------- ------------ ------------- --------
Investment property (GBP'000) 898,547 841,499 878,743
Allowance for estimated purchasers'
costs (GBP'000) 52,604 48,893 51,182
-------------------------------------- ------------ ------------- --------
Gross up completed property portfolio
(GBP'000) 951,151 890,392 929,925
-------------------------------------- ------------ ------------- --------
Annualised net rents (GBP'000) 50,029 47,069 48,891
Add: notional rent expiration
of rent free periods or other
lease incentives (GBP'000) - - -
-------------------------------------- ------------ ------------- --------
Topped-up net annualised rent 50,029 47,069 48,891
-------------------------------------- ------------ ------------- --------
EPRA NIY 5.26% 5.29% 5.26%
EPRA "topped-up" NIY 5.26% 5.29% 5.26%
4. EPRA Vacancy Rate
ERV of vacancy space divided by ERV of the whole portfolio.
30 September 30 September 31 March
2020 2019 2020
--------------------------------- ------------ ------------ --------
ERV of vacant spaces (GBP'000) - - -
ERV of whole portfolio (GBP'000) 49,481 46,451 48,416
--------------------------------- ------------ ------------ --------
EPRA Vacancy Rate 0.00% 0.00% 0.00%
5. EPRA Costs Ratio
Administrative and operating costs divided by gross rental income.
30 September 30 September 31 March
2020 2019 2020
------------------------------------ ------------- ------------- ---------
Total administrative and operating
costs (GBP'000) 4,625 4,905 9,860
Gross rental income (GBP'000) 24,064 22,729 45,906
------------------------------------ ------------- ------------- ---------
EPRA cost ratio 19.22% 21.58% 21.48%
6. Portfolio NAV
IFRS NAV adjusted to reflect investment property valued on a portfolio basis rather than individual asset basis.
30 September 30 September 31 March
2020 2019 2020
---------------------------------------- ------------ ------------ -----------
Net assets (GBP'000) 671,412 667,441 670,564
Adjustments for change to property
valuation (GBP'000) 64,501 68,951 65,140
---------------------------------------- ------------ ------------ -----------
Portfolio net assets (GBP'000) 735,913 736,392 735,704
---------------------------------------- ------------ ------------ -----------
Number of Ordinary shares in issue
(adjusted for shares help in treasury) 621,646,380 622,461,380 621,646,380
Portfolio Net Assets per share 118.38p 118.30p 118.35p
7. Leveraged Internal rate of return (IRR)
30 30 31 March
September September 2020
2020 2019
----------------------- ----------------------- ---------------------- ---------------------- --------------------
IFRS NAV per share 108.01p 107.23p 107.87p
Interim
31 May 2017 dividend 0.75p 0.75p 0.75p
31 August Interim
2017 dividend 0.75p 0.75p 0.75p
30 November Interim
2017 dividend 0.75p 0.75p 0.75p
9 March Interim
2018 dividend 0.75p 0.75p 0.75p
Interim
8 June 2018 dividend 1.25p 1.25p 1.25p
7 September Interim
2018 dividend 1.25p 1.25p 1.25p
30 November Interim
2018 dividend 1.25p 1.25p 1.25p
11 January Interim
2019 dividend 1.11p 1.11p 1.11p
28 February Interim
2019 dividend 0.14p 0.14p 0.14p
Interim
7 June 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
28 February Interim
2020 dividend 1.325p - 1.325p
12 June Interim 1.325p - -
2020 dividend
7 September Interim 1.35p - -
2020 dividend
----------------------- ----------------------- ---------------------- ---------------------- --------------------
123.99p 117.88p 121.17p
IFRS NAV per share at launch 98.00p 98.00p 98.00p
Levered IRR 6.64% 6.91% 6.82%
------------------------------------------------ ---------------------- ---------------------- --------------------
8. Annualised Shareholder Return
30 September 30 September 31 March
2020 2019 2020
------------------------------------------ ------------ ------------ --------
IFRS NAV per share 108.01p 107.23p 107.87p
Dividends per share received since launch
on Ordinary shares 15.98p 10.65p 13.30p
------------------------------------------ ------------ ------------ --------
123.99p 117.88p 121.17p
IFRS NAV per share at launch 98.00p 98.00p 98.00p
Annualised shareholder return 6.27% 6.90% 5.66%
------------------------------------------ ------------ ------------ --------
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
SEDOL number BD8HBD3 ISIN GB00BD8HBD32 Ticker/TIDM CSH LEI 213800PGBG84J8GM6F95
Frequency of NAV Publication
The Company's NAV is released to the London Stock Exchange on a quarterly basis and published on the Company's website
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 Asset Services. 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 to 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 Asset Services, Shareholder Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
Key dates
June Annual results announced
Payment of first dividend
September Company's half-year end
Annual general meeting
Payment of second dividend
December Half-yearly results announced
Payment of third dividend
February Payment of fourth dividend
March Company's year end
Association of Investment Companies
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, visit www.signalshares.com. To register, you will need your investor code, which can be found on your share certificate or your dividend tax voucher.
Alternatively, you can contact Link's Customer Support Centre which is available to answer any queries you have in relation to your shareholding:
-- by phone: from the UK, call 0871 664 0300, from overseas call +44 (0) 371 664 0300 (calls cost 12 pence per minute plus your phone company's access charge. Calls outside the UK will be charged at the applicable international rate. Link is open between 9:00am - 5:30pm, Monday to Friday excluding public holidays in England and Wales);
-- by email: enquiries@linkgroup.co.uk; or -- by post: Link Market Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
Glossary
ALMO means an arm's length management organisation, a not-for-profit company that provides housing services on behalf of a Local Authority.
Approved Provider means Housing Associations, Local Authorities, ALMOs, Community Interest Companies, Registered Charities and other regulated organisations directly or indirectly in receipt of payment from local or central government including the NHS.
Care Provider means a provider of care services to the occupants of Specialist Supported Housing, registered with the Care Quality Commission.
CIM means Civitas Investment Management Limited or CIM (formerly known as Civitas Housing Advisors Limited until its change of name on 7 May 2020).
Community Interest Company or CIC means a company approved by the Office of the Regulator of Community Interest Companies as a community interest company and registered as such with Companies House.
Company means Civitas Social Housing PLC, a company incorporated in England and Wales with company number 10402528.
CPI means the Consumer Prices Index.
CQC means the Care Quality Commission.
EPC means Energy Performance Certificate.
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 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 a new 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.
ESG means Environmental, Social and Governance.
Gross Asset Value ("GAV") means total assets plus the portfolio premium derived from the portfolio valuation.
Group means the Company and its subsidiaries.
Housing Association or HA means an independent society, body of trustees or company established for the purpose of providing low-cost social housing for people in housing need generally on a non-profit-making basis. Any trading surplus is typically used to maintain existing homes and to help finance new ones. Housing Associations are regulated by the Homes and Communities Agency.
IFRS Net Asset Value or IFRS NAV means the net asset value of the Group on the relevant date, prepared in accordance with IFRS accounting principles.
Investment Adviser means Civitas Investment Management Limited, 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 means the administrative bodies for the local government in England comprising of 326 authorities (including 32 London boroughs).
NAV means net asset value.
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.
Portfolio means the Group's portfolio of assets.
Portfolio Net Asset Value or Portfolio NAV means the net asset value of the Company, as at the relevant date, calculated on the basis of an independent Portfolio Valuation. See note 6 in Appendix 1 for a reconciliation to IFRS NAV.
Portfolio Valuation means an independent valuation of the Portfolio by Jones Lang LaSalle or such other property adviser as the Directors may select from time to time, based upon the portfolio being held, directly or indirectly, within a corporate vehicle or equivalent entity which is a wholly owned subsidiary of the Company and otherwise prepared in accordance with RICS "Red Book" guidelines.
REIT means a qualifying real estate investment trust in accordance with the UK REIT Regime introduced by the UK Finance Act 2006 and subsequently re-written into Part 12 of the Corporation Tax Act 2010.
Registered Providers means Housing Associations, Local Authorities and arm's length management organisations, a not-for-profit company that provides housing services on behalf of a Local Authority.
RICS means Royal Institution of Chartered Surveyors.
RSH means Regulator of Social Housing, the executive non-departmental public body, sponsored by the Ministry of Housing, Communities and Local Government, which is the regulator for Social Homes providers in England and Wales.
Social Homes or Social Housing means social rented homes and other accommodation that are offered at rents subsidised below market level or are constituents of other appropriate rent regimes such as exempt rents or are subject to bespoke agreement with entities such as NHS Trusts and are provided by Approved Providers.
Specialist Supported Housing or SSH means social housing which incorporates some form of care or other ancillary service on the premises.
SPV means special purpose vehicle, a corporate vehicle in which the Group's properties are held.
Valuation means an independent valuation of the Portfolio by Jones Lang LaSalle 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.
Company Information
Non-executive Directors
Michael Wrobel Chairman
Alastair Moss
Alison Hadden
Caroline Gulliver Chair of the Audit and Management Engagement Committee
Peter Baxter
Registered Office
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Registered no: 10402528
www.civitassocialhousing.com
Alternative Investment Fund Manager
G10 Capital Limited
136 Buckingham Palace Road
London SW1W 9SA
Investment Adviser
Civitas Investment Management Limited
13 Berkeley Street
London W1J 8DU
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
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Depositary
INDOS Financial Limited
5th Floor
54 Fenchurch Street
London EC3M 3JY
Registrar
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Independent Auditors and Reporting Accountants
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
7 More London Riverside
London SE1 2RT
Public Relations Adviser
Buchanan
107 Cheapside
London EC2V 6DN
Tax Adviser
BDO LLP
55 Baker Street
London W1U 7EU
NATIONAL STORAGE MECHANISM
A copy of the Half Year Report will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at www.morningstar.co.uk/uk/NSM.
LEI: 213800PGBG84J8GM6F95
ENDS
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the website (or any website) is incorporated into, or forms part of, this announcement.
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END
IR FFFVFLDLAFII
(END) Dow Jones Newswires
November 30, 2020 02:00 ET (07:00 GMT)
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