Residential Secure Income PLC Corporate Update & 3Q 2021 Net Asset Value (8307G)

TIDMRESI

RNS Number : 8307G

Residential Secure Income PLC

29 July 2021

29 July 2021

Residential Secure Income plc

Net Asset Value & Corporate Update

Residential Secure Income plc ("ReSI") (LSE: RESI), which invests in affordable shared ownership, retirement and local authority housing, i s pleased to announce its unaudited third quarter net asset value ("Net Asset Value" or "NAV") as at 30 June 2021 and to update on recent corporate activity for the period.

Ongoing Earnings Growth

 
--   Net Recurring Income for the period of GBP1.9m or 1.1p a share, 
      up 10% on the quarter (31 March 2021: GBP1.7m or 1.0p a share) 
      driven by 
     --   GBP19m of income generating shared ownership acquisitions 
           in March; 
     --   Continued occupancy ramp-ups in retirement and the pre-existing 
           shared ownership portfolio; and 
     --   Like for like rental growth from ReSI's inflation linked 
           long leases 
--   Total portfolio rent collection continues to be secure, with 
      99% of rent collected in the quarter, unchanged throughout 
      the Covid-19 crisis and in line with normal performance, demonstrating 
      the secure nature of ReSI's cashflows 
--   Dividend cover of 90% for the quarter, up from 82% for the 
      second quarter and ahead of the 80% full year target (1) (calculated 
      on recurring profit before valuation movements) 
--   Full dividend cover continues to be on track to be achieved 
      for the fourth quarter, i.e. from 1 July 2021 [1] (on a look-forward 
      basis) 
--   Interim dividend maintained at 1.25 pence per Ordinary Share 
      for the quarter ended 30 June 2021, in line with the target 
      of 5.0 pence per Ordinary Share for the current financial 
      year (1) 
 

Resilient Financial Position

 
 --   IFRS NAV per share of 105.5 pence [2] (31 March 2021: 105.1 
       pence) 
 --   Total property portfolio of 3,059 homes with value of GBP348 
       million [3] up 1% or GBP3.5 million on a like-for-like fair 
       value basis 
      --    the portfolio has an average EPRA NIY of 4.5% 
      --    the valuation movement reflects a small amount of yield compression 
             driven by increased occupancy (and hence de-risking) combined 
             with like-for-like rental growth over the quarter 
 --   ReSI continues to maintain a robust balance sheet with a gross 
       loan to value ratio of 48%. Total debt was GBP169 million 
       at 30 June 2021 with a long average 23 year maturity and low 
       weighted average cost of 2.3% 
 

Delivery of 2021 occupancy and deployment targets

 
 --    Retirement voids now back to pre-pandemic average of c.7% 
 --    Shared ownership portfolio now 96% occupied, with a further 
        3% reserved 
 --    Post the quarter end, ReSI completed the first 34 of the 85 
        shared ownership homes with Brick By Brick (which are all 
        reserved with occupiers already moving in) funded by drawing 
        down on ReSI's existing Universities Superannuation Scheme 
        debt facility and existing cash reserves 
 --    The remainder of the Brick by Brick acquisitions are expected 
        to complete by the end of the calendar year 
 --    Transfer of the property management function from Girlings 
        to a subsidiary of the Investment Manager completed on schedule 
        on 1 July and expected to deliver further cost efficiencies 
        and operational improvements 
 

NAV Movement

The movement in NAV since 31 March 2021 is as follows:

 
                                           IFRS NAV             EPRA NTA 
----------------------------------- 
                                      GBP'm     Pence      GBP'm     Pence 
                                               per share            per share 
                                     ------  -----------  ------  ----------- 
 Net Asset Value at 31 March 
  2021                                179.7     105.1      181.7     106.2 
                                     ------  -----------  ------  ----------- 
 Net Income for period                 1.9       1.1        1.9       1.1 
                                     ------  -----------  ------  ----------- 
 One-off costs                        -0.4       -0.2      -0.4       -0.2 
                                     ------  -----------  ------  ----------- 
 Valuation change *                    1.4       0.8        3.2       1.9 
                                     ------  -----------  ------  ----------- 
 Dividend paid                        -2.1       -1.3      -2.1       -1.3 
                                     ------  -----------  ------  ----------- 
 Revaluation of trading properties     n/a       n/a       -0.2       -0.1 
                                     ------  -----------  ------  ----------- 
 Net Asset Value at 30 June 
  2021                                180.5     105.5      184.1     107.6 
                                     ------  -----------  ------  ----------- 
 
 * Valuation change for EPRA NTA excludes the movement in fair 
  value of financial instruments 
 

Outlook

   --    Acute need continues for further expansion of UK's affordable housing stock 

-- Continuing to see interesting investment opportunities in the share ownership space which have been introduced to ReSI via the Investment Manager's relationships with various housing associations, including from existing partners

   --    ReSI is strongly placed to meet the two biggest problems in the housing market: 

o Inability to access home ownership, which has been made worse by recent strong house price growth; and

o Growing elderly population requiring suitable accommodation for independent later living

   --    Full dividend cover on track to be achieved in July 20 21 (1) 

Ben Fry, Head of Housing Investment at Gresham House, commented:

"ReSI has had another good quarter, with income up 10%, driving increased dividend cover, and we've again collected 99% of rents, proving the security of our underlying inflation-linked tenancies.

"The secular tailwinds remain strong. A growing need for high quality affordable housing in the UK has been reinforced by recent increases in house prices and the disruption that the Covid-19 pandemic has caused to working patterns. Meanwhile the nation's ageing population continues to drive demand for affordable retirement housing. ReSI's portfolio is well positioned to meet these needs and provide shareholders with stable inflation-linked income.

"With ongoing operational efficiencies, and our dividend on track to be fully covered from this month, we are encouraged by the outlook for the rest of the year".

FOR FURTHER INFORMATION, PLEASE CONTACT:

 
  ReSI Capital Management Limited / Gresham 
   House Housing 
   Ben Fry 
   Alex Pilato                                   [phone] 
  Jefferies International Limited 
   Stuart Klein 
   Tom Yeadon                                    [phone] 
  KL Communications                              [e-mail] 
   Charles Gorman                                 [phone] 
   Will Sanderson 
   Millie Steyn 
 

Notes to Editors

Residential Secure Income plc (LSE: RESI) is a real estate investment trust (REIT) listed on the premium segment of the Main Market of the London Stock Exchange with the objective of delivering secure inflation linked returns by investing in affordable shared ownership, retirement and Local Authority housing throughout the UK.

ReSI targets a secure, long-dated, inflation-linked dividend of 5.0 pence per share p.a. (paid quarterly) and a total return in excess of 8.0% per annum. Including recent committed acquisitions, ReSI's portfolio comprises 3,059 properties, with an (unaudited) IFRS fair value of GBP348m [i] .

ReSI aims to make a meaningful contribution to alleviating the UK housing shortage by meeting demand from housing developers (Housing Associations, Local Authorities and private developers) for long-term investment partners to accelerate the development of socially and economically beneficial new affordable housing.

ReSI's subsidiary, ReSI Housing Limited, is registered as a for-profit Registered Provider of Social Housing, and so provides a unique proposition to its housing developer partners, being a long term private sector landlord within the social housing regulatory environment. As a Registered Provider, ReSI Housing can acquire affordable housing subject to s106 planning restrictions and housing funded by government grant.

Acquisitions by ReSI are limited to homes with sufficient cashflows, counterparty credit quality and property security to be capable of supporting long -- term investment grade equivalent debt. ReSI does not manage or operate stock and uses experienced and credit-worthy managers.

ReSI is managed by ReSI Capital Management Limited, whose immediate parent company, TradeRisks Limited, has been active within the social housing sector for over 20 years as a funding arranger and advisor and, over the last four years, as an investor through ReSI.

ReSI Capital Management and its parent, TradeRisks, were acquired by Gresham House in March 2020, further increasing the investment expertise available to ReSI. The housing investment team at Gresham House has 15 members and growing, with an average of 20 years' relevant experience, covering fund management, housing investment, social housing management and financial and risk expertise.

Gresham House plc is a London Stock Exchange quoted specialist alternative asset manager committed to operating responsibly and sustainably, taking the long view in delivering sustainable investment solutions.

Further information on ReSI is available at www.resi-reit.com

Further information on Gresham House is available at www.greshamhouse.com

[1] This is a target only and not a profit forecast. There can be no assurance that this target will be met.

   [2]   Reflecting an independent valuation of the property portfolio prepared on an IFRS basis 
   [3]   Excluding the finance lease gross up and including committed acquisitions 

[i] excluding the finance lease gross up and including committed acquisitions

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