Civitas Social Hsng. - Civitas Full Year Results
30/06/2022 07:00
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RNS Number : 7280Q Civitas Social Housing PLC 30 June 2022
30 June 2022
CIVITAS SOCIAL HOUSING PLC
ANNUAL FINANCIAL REPORT
YEAR TO 31 MARCH 2022
Strong Financial Performance; NAV Increase; Dividend Target Raised
New Draft Lease Clause to Address Perceived Risk
Civitas Social Housing PLC ("Civitas" or the "Company"), the UK's leading
care-based and healthcare REIT, presents its full year results for the year
ended 31 March 2022, reporting valuation growth, financial performance in line
with expectations, a raised dividend target and ongoing positive social
impact.
The results deliver on the Company's objective to deliver returns broadly in
line with inflation over the long-term, derived from the largest portfolio of
specialist supported housing in the UK with inflation adjusted long-term
tenancies.
Performance Highlights
Property Valuation and Performance Mar 22 Mar 21 Change
Investment property (£m) 968.8 915.6 +5.8%
IFRS NAV per share (diluted) (p) 110.30 108.30 +1.9%
Financial Performance
Rent roll annualised (£m) 54.1 50.8 +6.5%
Net rental income (£m) 50.7 47.8 +6.1%
EPRA earnings (£m) 29.8 30.6 -2.6%
Operating Cash Flow( 1 ) (£m) 37.5 36.1 +3.8%
IFRS earnings per share (diluted) (p) 7.23 5.80 +24.7%
EPRA earnings per share (diluted)( 2 ) (p) 4.82 4.93 -2.2%
Dividends per share (p) 5.55 5.40 +2.8%
IFRS NAV Total return since IPO( 3 ) (%) 37.2 29.6
Total shareholder return since IPO( 4 ) (%) 11.6 26.5
Financing
Loan to value ratio (%) 34.4 34.5
Weighted average cost of debt (%) 2.5 2.4
( )
· Ongoing strong financial performance delivering high social
impact
· New regulatory clause proposed to help counterparties become
better able to achieve regulatory compliance
· 77 properties acquired during the year: 29 properties for
£21.9 million providing homes for vulnerable adults, 47 properties for
c.£8.1m to deliver asylum accommodation and 1 property in Lancashire for
£1.4 million providing a home for 13 individuals with learning disabilities
and mental health care needs
Investment Property Portfolio Enhanced
· Portfolio value increased to £968.8m from £915.6 million (IFRS)
· IFRS valuation average net initial yield (NIY) of 5.28%
· IFRS NAV increased to 110.3 pence per share reflecting ongoing
demand for investment in the asset class as well as the effect of indexation
of inflation adjusted leases
Rent Roll Up Benefiting from Indexation
· Annualised rent roll increased by 6.5% to £54.1 million
· Rents received as expected
· EPRA earnings per share (basic and diluted) 4.82 pence per share
(2021: 4.93 pence per share)
Diversified Portfolio of 696 Properties Providing Homes to 4,592 Residents
· Providing lifelong homes to working age adults with disabilities
and complex care needs with an average tenant age of c. 32 years
· High acuity care being provided, with 40% of residents living in
Civitas properties receiving over 50 hours of care per week
· Properties located across 178 Local Authority partners in England
and Wales and leased to 18 approved providers, with support provided by 130
Care Providers
· Over one third of the portfolio on back-to-back 25-year leases,
with leading Care Providers
Dividend Target Raised
· Dividend target raised to at least 5.70 pence per share( 5 ) for
the YE 31 March 2023 continuing unbroken record of dividend increases since
IPO in 2016
· Dividends of 5.55 pence per share to 31 March 2022 fully paid in
quarterly distributions
· EPRA run-rate dividend cover of 97% (actual 87%) as at 31 March
2022
Debt Facilities and Credit Rating
· Maintained a high quality investment credit rating from Fitch
Ratings of "A-" (stable) and "A" Secured, enabling access to broader long-term
funding markets
· Extended maturity of £100m loan facility with HSBC Bank plc to
November 2023 at SONIA plus 2.02% margin
· Post year end the £60m facility with Lloyds Bank plc has also
been extended to July 2024 at SONIA plus 1.67% margin
· Leverage maintained at 34.43%, comfortably within the Company's
cap of 40% GAV
Focus on Attaining Best in Class Social and Environmental Impact
· Continuing focus on delivering best in class impact delivery and
reporting including in this financial year
· Phase two of the Company's work with E.ON across 120 properties,
targeting reduction in carbon emissions
· New independent social impact report as at 31 March 2022
published on the Company's website
(https://www.civitassocialhousing.com/impact/impact-reports/#currentPage=1)
· Publication of book, 'A Place for Me', in which 50 Civitas
residents tell their own stories in their own words
· Clean Energy Strategy to achieve minimum EPC "A-C" by 2030 and
further reduction thereafter with a target of net-zero
Post Year End Highlights and Opportunities
· Acquisition of a supported living and care facility at North End,
Wisbech for a total consideration of £0.6 million on 13 May 2022
Michael Wrobel, Non-Executive Chairman of the Company, commented:
"I am pleased to report that the Company has achieved another year of strong
financial and operational performance.
Our Investment Adviser, Civitas Investment Management Limited ("CIM"), has
exceptional knowledge of the industry and continues to add to its team to
enhance our portfolio. CIM has been working on an initiative to introduce a
variation to our leases, that will not impact revenues or asset values, but
which aims to strengthen the industry by addressing concerns expressed by the
Regulator for Social Housing.
The sector in which the Company invests offers many positive attributes, in an
increasingly uncertain world. We benefit from high levels of intrinsic
underlying demand for our properties. All of our leases benefit from CPI
uplift on rents, some of which are subject to a 4% cap. Together with our
partners, we enable the delivery of high quality, value for money care
services for our tenants. Our initiatives on new lease clauses and further
projects with E.ON to reduce our carbon footprint, will deliver further
benefit to our stakeholders. We look to the future with confidence."
For further information, please contact:
Civitas Investment Management Limited
Andrew Dawber Tel: +44 (0) 20 3058 4846
Paul Bridge Tel: +44 (0) 20 3058 4844
Panmure Gordon
Sapna Shah Tel: +44 (0) 20 7886 2783
Tom Scrivens Tel: +44 (0) 20 7886 2648
Liberum Capital Limited
Chris Clarke / Darren Vickers / Owen Matthews Tel: +44 (0) 20 3100 2000
Buchanan
Helen Tarbet / Henry Wilson Tel: +44 (0) 20 7466 5000
Hannah Ratcliff / Verity Parker civitas@buchanan.uk.com (mailto:civitas@buchanan.uk.com)
Notes:
Civitas Social Housing PLC (CSH) was created in 2016 by Civitas Investment
Management Limited as the first dedicated London Stock Exchange listed
social care REIT, to raise long-term, sustainable, institutional capital to
invest in care-based community homes and healthcare facilities across the UK.
CSH has completed more than 120 individual transactions to build the largest
portfolio of its kind that has been independently valued at £968.8 million
(31 March 2022). CSH now provides homes for 4,592 working age adults with
long-term care needs, in 696 bespoke properties that are supported by 130
specialist care providers, 18 approved providers and working with over 178
individual local authority partners
Chairman's Statement
Introduction
I am pleased to report that the Company has achieved another year of strong
financial and operational performance. Our positive social impact is detailed
in a report from the independent specialist consultancy The Good Economy
("TGE").
The year presented many challenges. The pressures of the COVID-19 pandemic on
our tenants and their carers highlights the benefits of providing
community-based care housing for vulnerable adults of working age. During the
year, the Company came under attack from a small number of investors
short-selling the Company's shares, one of whom published a series of
criticisms that the Board refuted in a very detailed response. The share
price, having traded at a premium to NAV early in the financial year, dropped
sharply to a discount at the year end. One of the Board responses has been to
initiate a share buy-back programme which enhances the Net Asset Value of the
Company and confirms the Board's confidence in the robust nature of the
Company's cashflows and asset values.
Our Investment Adviser, Civitas Investment Management Limited ("CIM"), has
exceptional knowledge of the industry and continues to add to its team to
enhance our portfolio. CIM has been working on an initiative to introduce a
variation to our leases, that will not impact revenues or asset values, but
which aims to strengthen the industry by addressing concerns expressed by the
Regulator for Social Housing.
Financial Performance
During the year under review our portfolio generated rental income of £51.6
million, representing a 5.3% increase over the corresponding period. This
reflects the indexation of lease rents (during a period of mostly very low
inflation) together with new rents from a small number of properties purchased
during the year.
Cash generated from operations was £37.5 million, an increase of 3.83% over
the prior year (on a comparable basis).
IFRS net asset value of the Company increased from 108.30 pence per Ordinary
share as at 31 March 2021 to 110.30 pence per share as at 31 March 2022.
The Company has met the Board's stated dividend target of 5.55 pence per share
for the year to 31 March 2022 and the Board has set a new dividend target of
at least 5.701 pence per share for the year to 31 March 2023.
Board Governance
The Board is currently looking to recruit a new independent director, having
regard to succession, our breadth of skills and diversity.
The Board and the Investment Adviser continue an open dialogue with our
shareholders to further demonstrate our commitment to provide full
transparency at all times.
Continuation Vote
The Company's articles of association require the Board to propose a
continuation vote as an ordinary resolution at the annual general meeting
following the fifth anniversary from the initial public offering of the
Company and at every fifth AGM thereafter. This is referred to later in more
detail within the Report of the Directors. Following discussions with a number
of shareholders and given the strength and nature of the Company's portfolio
and long-term tenants, the Directors are of the opinion that the continuation
resolution at the forthcoming AGM will be passed and encourage all
shareholders to vote in favour.
Outlook
The sector in which the Company invests offers many positive attributes, in an
increasingly uncertain world. We benefit from high levels of intrinsic
underlying demand for our properties. All of our leases benefit from CPI
uplift on rents, some of which are subject to a 4% cap. Together with our
partners, we enable the delivery of high quality, value for money care
services for our tenants.
Our initiatives on new lease clauses and further projects with E.ON to reduce
our carbon footprint, will deliver further benefit to our stakeholders. We
look to the future with confidence.
Michael Wrobel
Chairman
29 June 2022
(1)This is a target and not a formal dividend forecast or a profit forecast
Growth
Growing base of global investors
Civitas invests on behalf of a wide range of global, national and local
investors seeking exposure to sustainable long-term income together with
measurable social impact and high levels of ESG delivery.
Four
Continents…
…over 60 Locations
1. Amsterdam 13. Denver 25. Helsinki 37. Montreal 49. Seattle
2. Austin 14. Dublin 26. Hong Kong 38. Munich 50. Singapore
3. Baltimore 15. Edinburgh 27. Illinois 39. New Jersey 51. Surrey
4. Beijing 16. Espoo 28. Japan 40. New York 52. Smithfield
5. Birmingham 17. Exeter 29. Jersey 41. New Zealand 53. Sydney
6. Boston 18. Fort Lauderdale 30. Jersey City 42. Oslo 54. Tokyo
7. Bradford 19. Frankfurt 31. Leeds 43. Paris 55. Toronto
8. Bristol 20. Geneva 32. London 44. Philadelphia 56. The Hague
9. Brisbane 21. Glasgow 33. Los Angeles 45. Rotterdam 57. Tunbridge Wells
10. Brussels 22. Guernsey 34. Luxembourg 46. Richmond 58. Vancouver
11. Chicago 23. Halifax 35. Manchester 47. Sacramento 59. Windsor
12. Columbus 24. Heerlen 36. Melbourne 48. San Francisco 60. Zurich
Our Strategy for Growth
Demand for the accommodation provided by Civitas is strong and expected to
remain so over the long-term. The pandemic has further evidenced the need for
safe and secure homes for the most vulnerable people in society.
Civitas is a go-to partner for an increasing range of major vendors and
counterparties.
Civitas is the market leader with the largest portfolio and deeply ingrained
relationships with care providers, local authorities, Approved Providers and
charities across the UK.
Civitas continues to take delivery of new build higher acuity properties with
more opportunities being offered and expands into significant markets across
the UK, now including Scotland and Northern Ireland.
The Company continues to work closely with The Social Housing Family CIC to
enable it to expand and play a broader role in the sector, and becoming part
of critical local authority pathways, leading to many opportunities in
specialist supported living and advanced homelessness.
Civitas now works with a broader range of counterparties including charities
and other not-for-profit organisations, to expand into significant markets
across the UK, now including Scotland and Northern Ireland.
Our Portfolio By UK Region as at 31 March 2022
Our portfolio
By UK Region
Region Properties Funds invested (percentage) Annualised rent roll (percentage)
North East 64 5.8 7.0
North West 101 10.1 9.8
Yorkshire and the Humber 96 10.8 10.5
East Midlands 58 8.6 8.5
West Midlands 101 11.3 11.2
East of England 32 4.0 3.9
South East 64 10.1 9.9
South West 120 15.5 15.5
Wales 34 11.0 10.5
London 26 12.8 13.2
Total 696
Market Value (%)
Region Market Value
South West 15.7%
London 12.1%
West Midlands 11.3%
Wales 10.9%
Yorkshire and the Humber 10.6%
South East 10.1%
North West 9.8%
East Midlands 8.6%
North East 7.0%
East of England 3.9%
Tenancies
Region Tenancies
South West 759
Yorkshire and the Humber 610
North West 607
West Midlands 502
North East 462
South East 415
Wales 364
London 338
East Midlands 374
East of England 161
Total 4,592
By Approved Provider as at 31 March 2022
Annualised rent roll (%)
Approved Provider Annualised rent roll (%)
Falcon 18.6%
Auckland(1) 16.2%
BeST 12.2%
Inclusion 10.0%
Qualitas Housing(1) 8.1%
Westmoreland 5.9%
Encircle 5.9%
Trinity 5.2%
Pivotal 3.8%
Chrysalis 3.6%
Harbour Light 3.6%
New Walk 2.7%
My Space 1.1%
IKE 1.1%
Hilldale 0.9%
Windrush 0.8%
Lily Rose 0.2%
Blue Square 0.1%
Properties
Approved Provider Properties
Falcon 116
Auckland(1) 100
Inclusion 82
BeST 74
Qualitas Housing(1) 54
Trinity 43
Westmoreland 41
New Walk 41
Pivotal 27
Chrysalis 27
Harbour Light 27
Encircle 16
Hilldale 15
Windrush 13
IKE 10
My Space 8
Blue Square 1
Lily Rose 1
Total 696
Tenancies
Approved Provider Tenancies
Falcon 850
BeST 591
Auckland(1) 547
Inclusion 507
Qualitas Housing(1) 370
Trinity 242
Westmoreland 239
Pivotal 238
Harbour Light 214
Encircle 205
New Walk 194
Chrysalis 149
My Space 71
IKE 68
Windrush 51
Hilldale 39
Lily Rose 13
Blue Square 4
Total 4,592
Market Value (%)
Approved Provider Market Value (%)
Falcon 18.9%
Auckland(1) 16.4%
BeST 12.5%
Inclusion 9.7%
Qualitas Housing(1) 8.4%
Westmoreland 6.2%
Trinity 5.2%
Encircle 4.8%
Pivotal 3.8%
Chrysalis 3.7%
Harbour Light 3.6%
New Walk 2.7%
My Space 1.1%
IKE 1.1%
Hilldale 0.9%
Windrush 0.8%
Blue Square 0.1%
Lily Rose 0.1%
(1) Auckland and Qualitas Housing are both members of the Social Housing
Family C.I.C and subject to common control.
Investment Adviser's Report
Continuous Improvement
In the year to March 2022 CIM, working with the CSH Board, has led the
development of a range of key initiatives to strengthen and position CSH and
the portfolio for the future.
Proposed New Regulatory Clause
· Counterparties better able to achieve regulatory compliance
· Enhanced information and step in rights (having regard to tenant
welfare) in addition to existing lease transfer and assignment rights
· Unchanged lease and property values supported by strong
underlying demand
· Improved Governance
"A Place for Me"
· Stories of 50 residents who live in Civitas properties
· Fully independently compiled and written
· Extensive number of interviews with residents, their families,
friends and their carers
Phase two work with E.ON
· Continued to work across 120 properties
· Targeting 25% reduction in carbon emissions
· Continued access to Government grant funding sources
· Clean Energy Strategy to achieve minimum EPC "A-C" by 2030
A growing team of specialists
· Asset Management
· Finance and operations
· Transaction sourcing and execution
· Housing Benefit
"Civitas Social Housing PLC (CSH), is the market leader in the delivery of
ethical, care-based residential housing, delivering sustainable returns for
shareholders and outstanding community-based homes for residents, while
offering value for money to society. This transforms lives."
Paul Bridge
CEO, Social Housing
Civitas Investment Management Limited
Introduction
Civitas Investment Management Limited (CIM), the Investment Adviser to CSH,
advises on a range of ethically based social and healthcare real estate funds
with committed capital of c.£3bn. CIM advises these funds on behalf of
various global investors together with a wide range of local authority pension
funds and dedicated impact investors.
The increased scale of its operations has enabled CIM to create a large team
of dedicated professionals in the specialist healthcare sector and to make
this expertise available to each of the advised funds, including CSH.
On behalf of the Investment Adviser and CSH, we would like to offer our thanks
to all of our partners who have continued to provide high-quality care,
support, and housing, and to our investors who enable the provision of over
4,500 quality homes for some of the most vulnerable people in society.
Overview of Results
CSH is the market leader in the delivery of much-needed long-term housing with
care in the UK and leading the charge for ethical investment in the sector.
These full year results show a number of key achievements and themes:
· Approaching six years of consistent rental growth and progressive
dividend payments that have increased from an initial 3p per share to 5.55p
per share reflecting dividend growth ahead of inflation.
· Rents indexed in-line with the Consumer Price Index as Approved
Providers are able to claim inflation adjustment payments from local
authorities, and with no disruption from COVID-19.
· A high-quality investment credit rating from Fitch Ratings of A
secured and A- unsecured, that has been maintained over time.
· Design, negotiation and announcement of a new market leading
regulatory clause, to be implemented over time on a retrospective basis,
assisting Approved Providers in regulatory discussions with no diminution to
lease or asset values.
· An actively managed portfolio with a sector-leading team of
professionals assisting and enabling high quality and longevity of homes and
income.
· Professional support to enable Approved Providers to enhance the
quality of their delivery and demonstrate long-term financial and operational
independence.
· Ownership of properties that facilitates the delivery of high
levels of care with 40% of residents receiving over 50 hours of care per week.
· An active programme working with E.ON to permanently reduce
carbon emissions across the portfolio leading to lower energy costs for
residents and a more carbon neutral portfolio.
Market Commentary
As outlined in the Chairman's Statement, CIM is pleased to note that the
sector has continued to see progress in terms of the better delivery of the
Specialist Supported Housing (SSH) model with quality commissioning at the
heart of projects. This is essential to ensure that each property is suitable
for the needs of individuals and to meet the objectives set by the relevant
local authority.
Having dedicated considerable CIM resource to working closely with the
Company's Approved Providers we have seen continued progress in the quality of
their performance which has translated into greatly improved financial results
and governance.
Several Approved Providers who had previously stopped taking on new properties
to focus on strengthening their own teams and systems have now begun to
consider new opportunities in a disciplined manner, consistent with the
objective of further performance enhancement.
At the same time it is fair to say that Approved Providers have moved at
different paces and while some have seen rapid success, others still need to
make further operational and financial improvements. CIM is supportive of
these ambitions and having seen material improvements in the sector, remains
focused on offering its assistance to drive forward standards for the
Company's partners.
What is clear is that demand for quality community-based housing remains
strong and most commentators believe that providing vulnerable people with an
opportunity to live in their own home or in smaller facilities near to family
is the best solution for them.
While working closely with Approved Providers and specialist care providers,
CIM has continued to focus on the core fundamentals of ensuring that the
portfolio operates at its very best, for instance ensuring compliance for all
key property metrics and collecting rental income that is due.
The year saw modest additions to the portfolio of around £32 million in new
properties including the provision of a number of properties for those seeking
asylum. The properties are backed by long-term government contracts with
counterparties that have strong covenants.
At the same time, the Company continues to develop and implement high
standards of social impact, which is independently measured, as well as
forging leading relationships with key charities and other sector bodies. The
commitment to tackle the challenge of decarbonisation continues with the
further implementation of the property retrofit programme.
Background
The sector in which the Company operates is substantially funded by the State
as part of the long-standing commitment to provide support for vulnerable
adults.
The UK is not alone in this approach and indeed the United Nations developed
polices that have been adopted by the UK, the European Union and 183 States in
total that provide a framework for the provision of this support. The
"Convention on the Rights of Persons with Disabilities" was signed by the then
UK Government in 2007 and enacted into law in 2008.
The Convention sets out broad rights for those considered disabled in Article
1:
"To promote, protect and ensure full and equal enjoyment of all human rights
and fundamental freedoms by all persons with disabilities and to promote
respect for their inherent dignity."
Article 19 specifically covers housing, including the rights to live
independently and be included in the community, Article 20 refers to personal
mobility, Article 26 to habilitation and rehabilitation, and Articles 29 and
30 to the right to participate in political and public life, cultural life,
recreation and sports.
Specialist Supported Housing of the type provided by the Company is designed
to fulfill these objectives and predates the implementation of the UN
Convention. The requirement to provide support for vulnerable people was
further enshrined into UK law by the Care Act 2014 which confirms the
responsibility of authorities to provide appropriate support and care.
There is telling testimony in the publication 'A Place for Me' (Sponsored
by CSH and the National Care Group), highlighted later in this report, on the
transformational effect SSH has upon people's lives.
In terms of current legislation, the Health and Care Bill, was granted Royal
Assent in April 2022, further consolidates the trends of joining up NHS
healthcare services with social care through the formation of Integrated
Care Systems (ICSs). This is supportive of the forms of care and
community housing delivered by the Company.
Government Policy
The newly combined Government Department for Levelling Up, Housing and
Communities, is a demonstration of how vital the Government believes decent
housing is to its central levelling up agenda. Indeed, the Levelling Up white
paper, published in February 2022, makes clear that the provision of high
quality, affordable housing is a major Government priority.
Civitas was founded in the belief that private capital, thoughtfully and
responsibly invested, is a key element to this provision, especially in the
area of the Specialist Supported Housing Sector in which CIM specialises. This
is because the large Housing Associations consider themselves poorly suited to
delivering these bespoke and adapted properties, which are often located on
brownfield land within communities, whereas the larger Housing Associations
tend to focus on multi-unit, uniform new developments. Civitas, therefore,
fulfils a need for which there is a clear market gap and a huge and growing
demand.
In addition, the last few years have seen a renewed focus from the RSH on the
requirement to listen carefully to residents' voices and take their views and
needs into account. This is something in which Civitas already excels: CIM has
close and proactive relationships with our Approved Provider and Care
partners, and, through them, with the residents themselves. Evidence for this
can be seen in the high levels of satisfaction amongst our residents; the high
levels of health and safety compliance and rent collection; and the low levels
of COVID-19 throughout the pandemic.
Demand for Social Housing
In September 2020 the National Housing Federation estimated that there were 8
million people in some form of housing need, that 1.6 million households were
on official waiting lists and there were at least 129,000 children living in
temporary accommodation.
Supply for new affordable housing is very low and significantly lower than
demand. In addition, supply is further constrained by the demands placed upon
existing large developing housing providers in meeting the costs generated by
fire safety measures post Grenfell, remediation of cladding, the cost of
reducing carbon emissions and additional consumer regulation proposed
in the White Paper on social housing "A charter for social housing residents".
When it comes to Specialist Supported Housing, the long-standing and ongoing
rise in working age adults with complex physical, mental and social care
needs, requiring supported housing with care, means that the demand for high
quality SSH of the sort provided by Civitas is expected to continue to grow.
Summary & Outlook
Civitas is the leading independent operator in a sector in which there is
enormous and growing demand and, due to the highly specialised nature of the
work being carried out, high barriers to entry. Civitas is acknowledged to be
committed to providing safe, high quality homes with care for its residents,
with active and granular day to day portfolio management being carried out by
its large team of sector specialists. In addition, we are working with the
relevant counterparties to introduce new contractual provisions which we
believe will better position our Approved Provider partners to achieve
compliance under the RSH's Governance and Financial Viability Standard.
We are continuing to evaluate further portfolio acquisitions, not only in our
core competency but also in areas such as high quality housing with care for
asylum seekers and those affected by homelessness.
We remain committed to generating growth and enhancing shareholder value
through socially impactful ethical investing. We are passionately committed to
this for the long-term.
Specialist Housing
All leading independent commentators agree that demand continues to rise for
community-based housing (Mencap Annual Report 2021). This is driven by the
general rise in the population, better birth outcomes and improved life
expectancy, in turn stimulated by more community-based housing of the type the
Company provides. Trends in mental health also contribute to demand. According
to the Royal College of Psychiatrists referrals to mental health services have
risen to an all-time high of 4.3 million people during 2021.
LaingBuisson, a large healthcare consultancy, in its Adult Specialist Care
report of 5th edition published in January 2022 estimates that in the learning
disability market for care in the community, over 90% of providers come from
the independent sector. For specific mental health services this rises to 97%
and reflects the fact that over the past 30 years almost all specialist care
has come to be provided by the private sector and paid for by the State,
whereas it was previously provided by the NHS.
What is also clear is that the principal of community-based housing is being
extended to groups with other care needs, beyond mental health issues. This
trend was reinforced by the Homelessness Reduction Act of 2017 which placed a
statutory duty upon local authorities to find homes for those at risk of
serious harm caused by homelessness.
Prior to the pandemic, the leading homeless charity and campaign group Crisis
estimated the cost of street homelessness to the State was over £20,000 per
person per year, not including social losses and losses to the state in tax
revenue.
At the start of the pandemic, the 'Everyone In' campaign ensured over 37,000
people sleeping rough were housed in temporary accommodation, mostly hotels.
The challenge that now remains is how to ensure those people are permanently
housed with the support required to overcome often complex needs. This is the
purpose of Barnet's Homelessness Scheme supported by CSH which will ensure a
secure and stable home with extensive support.
The clear advantages are the same as housing for disabled groups: better
social outcomes within a community setting and reduced costs to the taxpayer.
Financial Review
As at 31 March 2022 the IFRS net asset value of the Company was £675.5
million, being 110.30 pence per share, a 1.85% increase on the 108.30 pence
per share at 31 March 2021. A net fair value gain on investment properties of
£12.3 million (2021: £5.5 million) was recorded in the year. Operational
cash flows increased to £37.5 million were an increase on the prior year.
The portfolio was independently valued on an individual IFRS asset basis by
JLL at £968.8 million as at 31 March 2022 (2021: £915.6 million) reflecting
a net initial yield of 5.28%. This compares to an average purchase yield of
5.9% (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 generally
avoid taking part in auctions.
Net rental income of £50.7 million was generated in the period, a 6.1%
increase over the corresponding period (31 March 2021: £47.8 million). This
increase has been generated as a result of on-track indexation of rents, the
effect of rental income on properties purchased in the prior period, being
included for the full twelve months and a small number of new investments in
the period. Strong ongoing rental collections throughout the year supported
the Company's healthy operating cash flows.
During the reporting period, the Company paid four dividend distributions
including one dividend of 1.350p and three instalments of 1.3875p each during
the period, fully in line with the distribution target of 5.55p announced for
the year to 31 March 2022.
The Company also extended the maturity of its £100m loan facility with HSBC
Bank plc to November 2023 at SONIA plus 2.02% margin. Since the year end, the
£60m facility with Lloyds Bank plc has also been extended to July 2024, at
SONIA plus 1.67% margin. Together, these financings continue to underpin the
strong liquidity position of the Company. The Company has also maintained
leverage at 34.43%, comfortably within the Company's self-imposed cap of 40%
of total assets. Finally of note, the Company retained its premium Fitch
rating from the prior year at "A" secured and "A-" unsecured.
The CSH Investment Portfolio - Overview
The Civitas portfolio is one of the largest SSH portfolios in the UK and is
diverse geographically, in property size, type of care and with multiple
counterparties. The overall objective is to have a high-quality portfolio
providing long-term accommodation and stable returns. All CIM's work with care
providers and Approved Providers is collaborative, and part of CIM's
commitment to improve the sector and assist its partners in becoming more
independent.
Portfolio
Largest private portfolio in the country.
· High acuity with 40% of residents living in Civitas properties
receive over 50 hours of care per week
· 130 care providers
· 18 approved providers
· 178 local authority partners
Team
Established team of specialists across the country.
· Senior staff from the care industry
· Housing Benefit
· Social Housing
· ESG
· Legal/Financial
Activities
Key activities comprise of future proofing, optimising quality for care
providers, ensuring Approved Providers benefit from economies of scale, and
introduction of the new Regulatory clause.
· Ensuring buildings are meeting the needs of care providers
· Ensuring rents at appropriate level and efficiently collected
· Future proofing properties
· Sounding board on governance and sharing best practice
· E.ON partnership
Outcomes
Benefits derived from the combination of portfolio, team and activities.
· High Occupancy
· Rents collected and indexation secured
· Property enhancements, change of use and improvements in quality
· Progress made by independent Approved Providers in management,
governance and financial performance
· Reducing carbon emissions whilst utilising public funds and
minimising the financial impact on the Company
Each year a small number of buildings require future proofing where the
Company and CIM identify adaptions are required or in a few instances a change
of use that will ensure longevity of occupation and optimal resident
satisfaction is maintained.
The Portfolio - Rent Roll
The annualised rent roll as at 31 March 2022 increased to £54.1 million from
£50.8 million in March 2021 and this is expected to increase further as
additional indexation is applied.
Rental income is generated from leases with 18 Approved Providers.
Typically, properties are located close to local community-based facilities to
support tenants, families and staff with minimal travel requirements.
Portfolio Characteristics
The key features of the CSH portfolio can be summarised as follows:
· Properties are fully converted and specially adapted for care use
· High acuity with 40% residents living in Civitas properties
receiving over 50 hours of care per week
· Median rents tested/compared against market equivalent
· 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 Approved
Providers
· An 'own front door' policy
· Over one third of properties bought when new, without development
or forward funding risk
The high quality of CSH portfolio reflects the Company's ability of the
Company to source to off-market transactions through its extensive network of
care provider relationships, with the aim of achieving value growth over time.
Regulation
In October 2021 the Regulator of Social Housing published its annual sector
risk profile, which seeks to set out its view on the sources of risk to
providers' ongoing compliance with regulatory standards. The key areas it
highlights for the whole sector are:
· Increased scrutiny as set out in the Social Housing White Paper
· Increased costs associated with fire remediation post Grenfell
Tower and meeting the demands of the Fire Safety Act 2021
· The cost of meeting the zero-carbon agenda
· Increased debt required to subsidise improvements to existing
stock
CSH always welcomes the engagement of the RSH with our Approved Provider
counterparties and we support the work the RSH has undertaken in making
recommendations for improvements in the sector over the past five years. The
RSH continues to engage with all Approved Providers including those with which
Civitas works.
Since the last report, the RSH is now engaging with nine of the Company's
approved providers, set out below:
Approved Provider Grading Type of publication Route
Auckland Home Solutions N/A Regulatory Judgement Reactive engagement
Bespoke Supportive Tenancies N/A Regulatory Judgement Reactive engagement
Encircle Housing N/A Regulatory Judgement Reactive engagement
Falcon Housing Association N/A Regulatory Judgement Reactive engagement
Hilldale Housing Association N/A Regulatory Judgement Reactive engagement
Inclusion Housing G3/V3 Regulatory Judgement IDA and Reactive engagement
My Space Housing Solutions G3/V3 Regulatory Judgement Reactive engagement
Pivotal Housing Association N/A Regulatory Judgement Reactive engagement
Trinity Housing Association G3/V3 Regulatory Judgement Reactive engagement
Westmoreland Supported Housing G4/V3 Regulatory Judgement Reactive engagement
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.
Through CIM, CSH has been at the forefront of addressing the RSH's concerns
about the long-term risk planning of Approved Providers 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 the
Company's counterparties and the RSH to ensure that the Company fulfills its
intentions as one of the largest owners of SSH in the country to enable the
sector to evolve and to maintain the improvements already made.
New Regulatory Clause
During 2021 and 2022, the Company's Investment Adviser has engaged with
relevant counterparties, including several shareholders of CSH, lending banks,
valuers and the RSH and undertaken detailed negotiations with several Housing
Association partners, to explore how the Company can assist those
organisations to be better positioned to achieve regulatory compliance under
the RSH's Governance and Financial Viability Standard (the "Standard").
The consensus result of these discussions and negotiations is the development
of an approach with a new draft regulatory lease clause whose principal
objectives are to enable Housing Associations to:
· achieve greater alignment between income receipts and lease
liabilities
· set achievable capital solvency requirements against lease
obligations
· demonstrate a further degree of risk sharing
Each with the objective of seeking to demonstrate compliance with the Standard
(expressed as gradings V1 - V4 and G1 - G4).
Meanwhile, the draft regulatory clause will provide the Company with:
· counterparties better able to achieve regulatory compliance
· enhanced information and step in rights (having regard to tenant
welfare) in addition to existing lease transfer and assignment rights
· unchanged lease and property values supported by strong
underlying demand
The draft clause once enacted will operate on a property-by-property basis to
provide for a temporary pass through of lease rent in certain limited
circumstances when the Housing Association is not in receipt of full payment
whilst at the same time ensuring that the Company does not become responsible
for obligations that are rightly owed by others such as void cover by care
providers. Furthermore, this applies only after an initial period of time
during which all rents remain the responsibility of the Vendor/Housing
Association and then only if paying the rent in full would cause the Housing
Association to fail to meet the Regulator's standards.
The draft clause also contains provision for the reimbursement of rental
income if that is subsequently recovered by the Housing Association.
Implementation of the clause will codify much of the general asset management
work and the Company's approach to sector collaboration that already takes
place on a day-to-day basis and is reflected in the Company's existing rent
roll but which has to date not been included within the terms of the Company's
leases and so have not received formal recognition. It is anticipated that the
clause will only be relevant to a small number of properties at any time and
will not have any material impact on the Company's rent roll.
The Company has sought and obtained formal written confirmation from valuers
that the inclusion of the clause within the Company's new and existing leases
will not of itself cause a diminution in the value of those leases or in the
underlying assets. Indeed, the Company considers that enhanced regulatory
alignment would be consistent with asset appreciation over the medium term.
At the present time the clause is in draft form and is subject to further
discussion and refinement with several Housing Association boards assisted by
leading sector lawyers together with other relevant approvals.
It is intended that the clause will be incorporated initially into a limited
number of existing leases on a retrospective basis commencing with properties
that are unencumbered.
On the assumption that it is well received by relevant parties within the
sector and has the potential to achieve the objectives set out above it will
be further rolled out in a controlled manner over time to other Approved
Providers and in respect of new and existing leases on a retrospective basis.
The Company will provide further updates in due course once the final form of
the clause has been settled.
Social Impact and Social Value
The Company's latest independent report from The Good Economy was published in
June 2022 and provides details of CSH's portfolio and the continued success in
delivering measurable social impact. Findings include:
· 77 properties, housing up to 297 people, have been added to the
CSH portfolio within the period
· 41% of CSH's 696 properties have been brought into the social
housing sector for the first time
· CSH's regular engagement with its Approved Providers (RPs) to
monitor the quality of its stock continued through the COVID-19 pandemic
· Improvement works have enhanced the energy efficiency of homes,
with 99.92% of homes having an EPC rating of at least E+
· CSH homes continue to serve vulnerable individuals and play a
significant role in improving resident wellbeing, particularly when
individuals are coming out of higher acuity facilities
· Social value analysis (March 2021) revealed that, overall, the
portfolio generates £127 million of social value per year, including fiscal
savings to public budgets of £75.9 million per year
· 87% of respondents to the resident survey in March 2021 reported
that they were satisfied with the quality of their home, 8% reported that they
were neither satisfied nor dissatisfied
· 99% statutory compliance rate by housing provider partners is
better than the wider affordable housing sector
Environmental, Social and Governance (ESG)
The ESG Policy is located on the Company's website. It provides an overview of
the Company's investment procedures and sets out the Board's commitment to a
continuous improvement process in its approach to ESG integration.
ESG Rating Providers
As part of this commitment, CIM engages with ESG rating providers to set out
the activities that are undertaken by CSH and to ensure this is profiled
correctly. This includes increased disclosure by CIM in respect of various
policies that have been promoted on the CIM website. Notably, active
participation in the 2021 GRESB Public Disclosure Assessment has resulted in
CSH achieving an A score which is an improvement from a B score in 2020,
whilst the peer group average score remains at C. GRESB is an investor-driven
global ESG framework. Meanwhile, the ESG Risk Rating Score for CSH by
Sustainalytics of 16.6 (Low Risk) is marginally lower than was reported in
March 2021. Sustainalytics measures how well companies manage ESG issues that
are most material to their business.
Environmental: Carbon Reduction/Energy Cost Savings
CIM has been leading the sector in improving the environmental performance of
the portfolio and is working with E.ON (a leading UK energy and solutions
company) under a national framework agreement in partnership with CSH tenants.
The 'fabric first' approach to reducing the portfolio's carbon footprint
includes the installation of cavity wall insulation, loft insulation, external
wall insulation, air source heat pumps and solar PV and battery storage to
identified properties. The installation of these energy efficient measures,
utilising available Government grants and other funding sources, maximise
value for the Company and for our counterparties. The collaboration with E.ON
is delivering significant environmental enhancements without any cost to our
Approved Providers.
As a result of active asset management and property improvements works,
renovations and scheduled post completion works, the overall energy
performance of the portfolio, as identified on Environmental Performance
Certificates (EPC) reports data has improved over the last twelve months. The
proportion of properties with EPC Rating A-C has remained at c.52% (52% in
March 2021) and carbon footprint (estimated from property characteristics) has
reduced by 3% per Civitas tenancy (from 2.73 tonnes of CO2/tenancy to 2.65
tonnes of CO2/tenancy). The static year-on-year proportion of homes rated A-C
was due to the acquisition of a significant number of properties which were
acquired with D rating. These homes are subject to improvement works which
should improve their energy performance in coming months.
Charities
The Company has supported and worked with the following Charities since IPO.
Crisis
Civitas has supported Britain's biggest homelessness charity over the past
five years and the two organisations regularly collaborate on the emerging
knowledge required to undertake advanced homelessness schemes. These are vital
to enable people who have been at risk of or experienced homelessness to
rebuild their lives but who require considerable care and support in addition
to a safe home in the community.
Choir With No Name
Civitas is proud to support this charity that runs five choirs across the
country for people who are homeless or marginalised. Rehearsals have been
moved back indoors following the pandemic lockdown, and members, volunteers
and staff are reported to be over the moon! Alongside the choirs, the charity
runs a free online workshop to members, the wider homeless sector and anyone
who wants to attend. The charity has also provided team-building events for
the CIM team.
Impact Highlights 2021-22
· Big increase in average weekly attendance since return to indoor
meetings post COVID-19
· New Cardiff Choir launched in November 2021
· Steady progress with establishment of new community choirs in
Watford and Coventry
House of St Barnabas
A social enterprise and charity that works to support people affected by
homelessness back into long-term employment. Its vision is of a future where
lasting good work, a secure home and supportive network are a reality for
those affected by homelessness. Civitas specifically supports the
relationship-based mentoring programme focused on developing interpersonal
skills and communication. This helps to underpin its mission of 'Good Work,
Good Home' for all its graduates. The Employment Academy staff at House of St
Barnabas work with victims of homelessness who have successfully completed the
employment preparation programme into work and helps them to progress in work.
Impact Highlights 2021-22
Employment Preparation Programme:
· 17 participants successfully graduated from EPP 18 and EPP 19
· 100% of graduates were successfully matched with a mentor.
Employment and Progression:
· 33% of working graduates are earning London Living Wage
· 23% of working graduates are in good work and a good home
· 70% of mentor relationships with graduates last for at least 6
months
· HOSB has supported a total of 93 people over the year.
Women in Social Housing (WISH)
WISH promotes the benefits of being part of a networking community and equips
its members to succeed, advance and flourish in the UK housing sector. Civitas
support contributes to the championing of positive outcomes for women working
in the sector.
Care Workers Charity
CWC recognises that care workers face everyday challenges such as loss of
income, inconsistent hours, and lack of adequate resources. It helps care
workers in the UK (c.2 million workforce) through crisis using financial
support and support centres. CWC provides support through one-off crisis
grants, COVID-19 Emergency Fund and a Mental Health Support Programme.
Little Sprouts
Little Sprouts promotes the health and wellbeing of communities through
delivery of targeted cooking and food education workshops, surplus food
collection, and other activities. The charity places a particular focus on
supporting deprived communities where the socio-economic position - housing,
employment, or education - has had a massive contributory effect on well-being
and health. It has also provided meals for those with mental health issues
affected by the pandemic.
'A Place For Me'
The Company has from its inception been very keen to understand how residents
living and moving into homes owned by Civitas benefit from their environment,
the quality of care they received what benefits they and their family derive
and how society and the taxpayer benefits.
We have rigorously challenged ourselves to ensure the social impact of the
Company is maximised and measured independently through the Good Economy and
Social Profit Calculator.
We worked with a journalist and photographer who published a book 'A Place For
Me' which tells the stories of 50 residents who live in Civitas properties.
The interviews were carried out on site and in person and have also involved
families, care workers and other stakeholders. The book was published in
December 2021, and we believe it is the largest independent project ever
carried out into the lives of those with learning disabilities and mental
health issues. The book is co-sponsored by a major care provider.
Governance
CIM continues to engage actively with the Company's Approved Provider partners
and care providers, providing advice and shared learning. This has helped to
facilitate continued high level operational performance on occupancy rates,
property compliance matters, and health and safety.
The Board carries out an annual Board performance evaluation exercise. All of
the Company's policies and procedures have been reviewed and, where
appropriate, updated.
The Board has five independent non-executive Directors and has commenced a
recruitment programme to recruit a sixth director with asset management skills
to reflect the scale of the portfolio, the growth of expertise within the
Investment Adviser and to assist with succession planning in the future. Both
skills and diversity will be important considerations with this recruitment.
Summary
Care for the vulnerable being delivered in homes or small residential settings
in the community to promote independent living and better social outcomes is
clearly the long-term focus of Government policy in this sector with
considerable cross-party support. In this objective, the private sector, both
in terms of service delivery and investment, has a pivotal and essential role
to play. Civitas is at the forefront of this investment and brings the skills
and experience required to further expand the delivery of this critical
service and to be influential in enhancing the development of sector
counterparties.
We remain committed to generating growth and enhancing shareholder value
through socially impactful ethical investing. We are passionately committed to
ensuring this is maintained for the long-term.
Civitas Investment Management Limited
Investment Adviser
29 June 2022
Civitas Investment Management - A growing team of specialists
Throughout the pandemic, CIM has continued an active recruitment programme
aimed at increasing the levels of resource and expertise within the team. Of
particular focus has been the dedicated Asset Management team who are charged
with maintaining the quality of the CSH portfolio and working closely with
Approved Providers and other sector entities including care providers.
During the year to March 2022 a number of senior recruits have joined the
team. The Asset Management team is led by Tom Falconer, a former local
authority SSH commissioning officer. This has been part of a broader
recruitment programme. Selected profiles are set out below:
Asset Management
MATTHEW FILKIN
Investment Advisory Director
Previously COO at Almacantar (Property investment and development company)
Matt has over 20 years of real estate experience covering investment,
development, finance and corporate matters. At CIM, he has an active
day-to-day involvement in the operations of the existing investment strategies
working closely with the asset management team to provide a broad real estate
overview. He is also engaged with a number of specific asset management
projects.
TOM FALCONER
Head of Asset Management
Previously Group Property Manager at Lifeways (leading UK specialist care
provider)
Tom is a former local authority commissioner with over 12 years' experience in
asset management, specialist housing delivery, health and social care
integration across the UK. At CIM, Tom leads the asset management team,
working closely with local authorities and housing associations supporting
them in their requirement to meet the demand for SSH accommodation.
SEAN CORNEY
Director, Asset Management
Previously an executive within Savills' Asset Management Team
Sean is a specialist in the delivery of asset management with over 20 years'
experience within the property industry, including supported living and care
environments. He is an Associate of the Royal Institute of Chartered Surveyors
(RICS) and a member of the Institution of Residential Property Management
(IRPM). At CIM as part of the asset management team he is responsible for the
oversight of capital works that supports the enhancement of the Company's
portfolio.
Portfolio Management
CONNELL GROGAN
Senior Portfolio Manager
Previously Senior Portfolio Manager at Resonance Ltd (leading specialist
impact investor)
Connell is a Chartered Surveyor and experienced senior portfolio manager with
over 20 years' experience in real estate. He has worked previously with a
leading impact fund manager with a focus on homelessness and specialist
supported housing. At CIM, Connell works within the asset management team
focusing on delivering enhancements to the property portfolios.
CHARLES REID
Senior Portfolio Manager
Previously Lead Housing Benefit Officer at London Borough of Southwark Council
Charles is a housing benefit specialist with a 30-year track record in
assessing housing benefit claims and appeals across many of the largest London
local authorities. At CIM, he works within the asset management team to assist
property due diligence and to support the work of Approved Provider partners
in determining housing benefit claims and setting appropriate rent levels.
DARYL QUARRY
Senior Portfolio Manager
Previously Head of Change & Transformation at Falcon Housing Association
C.I.C.
Daryl has worked within the social housing sector for over 16 years in
business development and change management. Daryl works collaboratively with
the asset management team to support Approved Providers in implementing
software and developing internal processes to contribute to achieving optimal
performance as part of increased independence.
Finance and Operations
DIPESH DEVCHAND
Group CFO
Previously Managing Director, Head of Fund Finance & Operations for ICG
plc (FTSE 100 listed alternative asset manager)
Dipesh has over 20 years' experience in finance at a senior strategic level
within a financial services and investment management environment. At CIM
Dipesh leads the finance function, working closely with CIM's founders and
shareholder partners to deliver the strategic mission of the group. He brings
a wealth of experience covering financing, regulatory reporting, taxation and
operational matters.
SIU-WAI NG
Commercial Director
Previously Partner, Global Head of Product Development at BlueBay Asset
Management
Siu-Wai has over 20 years of experience in the investment management industry,
bringing products to market and building business platforms in both public and
private asset classes. At CIM, she is the Commercial Director with her remit
encompassing all aspects relating to the implementing and administering of new
fund launches, assisting in the design of new commercial strategies.
NAZLIN NAZRI
Associate Director
Previously Head of Financing Reporting at Tritax Group
Nazlin has over fifteen years of experience in real estate finance, including
financial reporting under various GAAPs, financial management, group
consolidation and fund accounting. At CIM, she works within the finance team
as an associate director on Civitas Social Housing PLC.
Asset Management Case Studies
As part of the ongoing active management of the CSH portfolio, CIM has
developed an extensive asset management resource that covers all the key
disciplines that are apparent within specialist supported housing and the
residential care sectors.
Capital works are undertaken on a rolling basis with much of the work being
undertaken around the time of initial acquisition and paid for by the original
vendors as part of the purchase agreement. This ensures that appropriate
adaptations are made to deliver a bespoke property that is suitable for the
user's needs over the long-term. Capital works are also undertaken, from time
to time, during the life of the property, with some or all of the costs being
borne by CSH, where it is deemed appropriate to undertake improvement works or
repositioning of the asset. In some cases this also leads to an immediate
uplift in rent roll and a commensurate increase in capital values.
Set out below are a number of examples of projects that have been undertaken.
Mill Lane, Weeley Heath, Clacton-On-Sea (5 beds)
Successful transformation project to support house tenants with challenging
behaviours. The property required enhancements relating to energy efficiency,
improved security, carefully constructed wet rooms, specialist furniture and
redesigned layouts to assist the care provider in supporting the new tenants.
This asset was acquired as part of a wider portfolio; plans were already in
place with the care provider and local authority commissioner to undertake
minor configuration works with some notable enhancements given that it was a
much needed service in the local authority area. The care provider contributed
to the overall cost of the works to demonstrate the long-term commitment to
the service.
Enhancements within the asset are highlighted below and notably the energy
performance improved from an E rating to a B rating for the purpose in which
it is used for C2 requirements.
· New wet rooms and a specialist spa bath
· New suitable furniture throughout
· EPC rating from an E to a B
· New stud walls and insulation
· New boiler and heating system
· Staff and security office
· Communal lounge
· New kitchens
· New flooring and decoration throughout
· Communal dining area and sensory room
Delrose House, Southampton (9 beds)
The care provider approached CSH seeking permission to undertake a
refurbishment program within specific areas of the property. Its plan was to
move tenants from one type of care service to another for long-term full
occupancy.
The works were approved by CSH and paid for in full by the care provider.
These included general redecoration and replacement flooring to enhance
appearance, works to the lift to permit disabled access, refurbishment of wet
rooms and replacement kitchens to be suitable for use by the tenants.
· Redecoration
· New flooring in the majority of the rooms and communal space
· Communal bathroom refurbishment
· New kitchen, repairs to subfloor, new flooring
· Repairing and replacing subfloors in certain bathrooms
Heathfield Apartments, Swansea (15 beds)
The property is situated close to the centre of Swansea, overlooking the city
centre towards the harbour. Given the close proximity to the city centre it
provides easy access for staff, tenants and family members.
Following the acquisition of this asset in 2019 an overhaul of the exterior
was planned to enhance the external appearance and make some minor repairs,
including the rendering and decoration. The initial stages of works were
covered by the vendor, with the care provider enhancing some of the internal
parts of the building as part of a planned internal refurbishment.
CIM on behalf of CSH completed a review of the works and undertook some
further enhancements to key areas of the higher elevations of the building
with the aim of futureproofing areas of the roof, rendering, windows and
decoration. This should prevent disruption at the property in the upcoming
years. CSH provided some additional investment into the asset as part of the
wider scope of works to allow the additional enhancements to happen and
deliver an asset of a higher standard to the care provider and tenants. This
is a prime example of positive collaborative working to achieve a desired
outcome.
· External overhaul and refurbishment
· New windows and doors installed
· Rendering replaced and redecorated
· Roof upgraded whilst scaffolding in place
· New ramp fitted externally for an additional fire escape route
· Redecoration to internal areas affected by propping equipment
Corporate Social Responsibility Report
Sustainability
The business model of the Company is to provide long--term suitable homes for
individuals with care needs; acting in a sustainable manner is key to
achieving this aim. Properties that are owned by the Company are tailored to
meet the future needs of the tenants and, where required, are actively asset
managed to provide long-term functionality and value to the wider community.
Environment
During the investment due diligence phase, the Company looks closely at the
environmental impact of each potential acquisition, and encourages a
sustainable approach for maintenance and upgrading properties. Through
collaborating with specialist developers and vendors, the high standards the
Company expects from each investment in the care-based housing sector is
adopted by other companies in the sector.
Once within the portfolio, the properties of the Company are actively asset
managed, and the Investment Adviser assesses whether there are opportunities
to improve the environmental efficiency of the properties, in addition to
other asset management initiatives factoring heavily in addition to other
asset management initiatives. Further details can be found on below.
The Board has considered the requirements to disclose the annual quantity of
emissions; further detail on this is included in the Report of the Directors
set out in the full report.
Diversity
The Company does not have any employees or office space and, as such, the
Company does not operate a diversity policy with regards to any administrative
and management functions.
Whilst recognising the importance of diversity in the boardroom, the Company
does not consider it to be in the interest of the Group and its shareholders
to set prescriptive diversity criteria or targets. The Board has adopted a
diversity policy in respect of appointments to be made to the Board and will
continue to monitor diversity, taking such steps as it considers appropriate
to maintain its position as a meritocratic and diverse business. The Board's
objective is to maintain effective decision-making, including the impact of
succession planning. All Board appointments will be made on merit and have
regard to diversity regarding factors such as gender, ethnicity, skills,
background and experience. See Corporate Governance Statement for more
information as set out in the full report.
The Board comprises three male and two female non-executive Directors.
Throughout the year, the Company complied with the Hampton-Alexander Review's
target of a minimum 33% representation of women on FTSE 350 boards.
The Board is aware of the recommendations of the Parker Review, which will be
taken into consideration as part of the Board's succession planning. See
Corporate Governance Statement for more information as set out in the full
report.
The Board of Directors of the Company's subsidiaries, which are
non-operational, each comprise one female and up to four male directors.
Human Rights
Given the Company's turnover for the year under review, it now falls within
the scope of the Modern Slavery Act 2015. The Company published its modern
slavery statement on 22 September 2021.
The Board is satisfied that, to the best of its knowledge, the Company's
principal advisers, which are listed in the Company Information section,
comply with the provisions of the UK Modern Slavery Act 2015.
The Company's business is solely in the UK and therefore is considered to be
low risk with regards to human rights abuses.
Community and Employees
The Company's properties enable the provision of care to some of the most
vulnerable people in the community, ensuring safe and secure accommodation,
tailored to meet individual care needs. The Company has increased the
provision of care-based housing, bringing new supply to the sector and
providing homes to over 4,500 people. All of the Company's properties enable
the provision of high levels of care, generating local jobs and helping to
support local economies.
The Company has no employees and accordingly no requirement to separately
report on this area.
The Investment Adviser is an equal opportunities employer who respects and
seeks to empower each individual and the diverse cultures, perspectives,
skills and experiences within its workforce.
Section 172(1) Statement and stakeholder engagement
Overview
The Directors' overarching duty is to act in good faith and in a way that is
most likely to promote the success of the Company as set out in section 172 of
the Companies Act 2006. In doing so, Directors must take into consideration
the interests of the various stakeholders of the Company, the impact the
Company has on the community and the environment, take a long-term view on
consequences of the decisions they make, as well as aim to maintain a
reputation for high standards of business conduct and fair treatment between
the members of the Company.
Fulfilling this duty naturally supports the Company in achieving its
investment objective and helps to ensure that all decisions are made in a
responsible and sustainable way. In accordance with the requirements of the
Companies (Miscellaneous Reporting) Regulations 2018, the Company explains how
the Directors have discharged their duties under section 172 below.
To ensure that the Directors are aware of, and understand, their duties, they
are provided with the pertinent information when they first join the Board as
well as receiving regular and ongoing updates and training on the relevant
matters. Induction and access to training is provided for new Directors. They
also have continued access to the advice and services of the Company
Secretary, and when deemed necessary, the Directors can seek independent
professional advice. The Schedule of Matters Reserved for the Board, as well
as the Terms of Reference of its committees, are reviewed regularly and
further describe Directors' responsibilities and obligations and include any
statutory and regulatory duties. The Audit and Management Engagement Committee
has the responsibility for the ongoing review of the Company's risk management
systems and internal controls and, to the extent that they are applicable,
risks related to the matters set out in section 172 are included in the
Company's risk register and are subject to periodic and regular reviews and
monitoring.
Long-term Success
The strategy of the Company can be found above. Any deviation from, or
amendment to, that strategy is subject to Board and, if necessary, shareholder
approval. The Company's business model which can be found above, provides that
the Board consider the long-term consequences of its investment decisions.
The Company grants long-term leases, generally 20 years in length, to its
tenants. The Company seeks to maintain lasting relationships with its tenants
and supports its tenants in adapting properties to meet their needs,
particularly improving and enhancing properties. Further details can be found
in the full report.
Stakeholders
A company's stakeholders are normally considered to comprise its shareholders,
its employees, its customers, its suppliers as well as the wider community in
which the company operates and impacts. The Company is different in that as an
investment trust it has no employees and, in terms of suppliers, the Company
receives professional services from a number of different providers, principal
among them being the Investment Adviser.
Through regular engagement with its stakeholders, the Board aims to gain a
rounded and balanced understanding of the impact of its decisions. Feedback
from stakeholders is gathered by the the Investment Adviser in the first
instance and communicated to the Board in its regular quarterly meetings and
otherwise as required.
The importance of stakeholders is taken into account at every Board meeting,
with discussions involving careful consideration of the longer-term
consequences of any decisions and their implications for stakeholders. The
following section explains why these stakeholders are considered of importance
to the Company and the actions taken to ensure that their interests are taken
into account by the Board as part of its decision making
Our stakeholders Key areas of interest How we engage
Shareholders · Current and future financial performance The Board welcomes shareholders' views and places great importance on
communication with the shareholders of the Company. The Board is responsible
Continued shareholder support and engagement are critical to the existence of · Strategy and business model for the content of communication regarding corporate issues and for
the business and the delivery of the long-term strategy of the business.
communicating its views to shareholders. The Board aims to ensure that
· Corporate governance shareholders are provided with sufficient information to understand the
risk/reward balance to which they are exposed by the holding of shares in the
· ESG performance and sustainability Company. Active engagement with shareholders is carried out throughout the
year and regular communication is undertaken to ensure that they understand
· Climate Change the performance of the business. The Board is committed to maintaining open
channels of communication and to engaging with shareholders in a manner which
· Dividend they find most meaningful, in order to gain an understanding of the views of
shareholders. These channels include:
Annual General Meeting - The Company welcomes and encourages attendance,
voting and participation from shareholders at the AGM, at which shareholders
have the opportunity to meet the Directors and Investment Adviser and to
address questions to them directly. The Investment Adviser attends the AGM and
provides a presentation on the Group's performance and its future outlook. The
Company values any feedback and questions it may receive from shareholders
ahead of and during the AGM and takes action, as appropriate.
At the Company's AGM on 22 September 2021, the Company received votes
representing 27.11% against Resolution 13, the additional 10% pre-emption
resolution. In compliance with the AIC Code of Corporate Governance, the Board
released an announcement on 16 March 2022 outlining how it, via the Company's
Brokers, had engaged with those shareholders who had voted against the
resolution. It understood that these shareholders followed PIRC's or their own
internal recommendation to vote against this resolution as when combined with
the standard 10% pre-emption disapplication resolution it would have resulted
in the Company having authority to issue up to 20% pre-emptively.
For the 2022 AGM, which will be held on 15 September 2022, the Board hopes
that shareholders will be able to attend in person. Arrangements for the AGM
will be released in August 2022 and will take account of the latest Government
guidance and advice at the time of publication of the Notice.
Publications - The Annual Report and Half-Year Results are made available on
the Company's website. These reports provide shareholders with a clear
understanding of the Group's portfolio and financial position. In addition to
the Annual and Half-Year Reports, regularly updated information is available
on the Company website, including quarterly factsheets, key policies, the
investor relations policy and details of the investment property portfolio.
Feedback and/ or questions the Company receives from the shareholders help the
Company evolve its reporting aiming to render the reports and updates
transparent and understandable.
Shareholder meetings - Shareholders are able to meet with the Investment
Adviser and the Company's Joint Brokers throughout the year and the Investment
Adviser provides information on the Company on the Company's website. Feedback
from all shareholder meetings with the Investment Adviser and/or the Joint
Brokers, and shareholders' views, are shared with the Board on a regular
basis. The Chairman and other members of the Board, including the Senior
Independent Director and Chair of the Audit and Management Committee, are
available to meet with shareholders to understand their views on governance
and the Company's performance where they wish to do so.
Shareholder concerns - The Board gives due consideration to any matters raised
by shareholders. In the event shareholders wish to raise issues or concerns
with the Board or the Investment Adviser, they are welcome to write to the
Company at the registered office address set out in the full Annual Report.
Other members of the Board are also available to shareholders if they have
concerns that have not been addressed through the normal channels.
During the year it was noted that several activist shareholders had taken a
short position in the Company's shares. In response to this, the Board sought
to engage with shareholders directly as well as through the Company's Brokers
and Investment Adviser. Following this, the Board published a paper providing
detailed responses to the questions raised by activist shareholders, as well
as specific responses to the allegations made by the short sellers.
Investor relations updates - The Board regularly monitors the shareholder
profile of the Company. With the majority of shareholders being a combination
of institutional investors and private client brokers, the Board receives
regular updates on investors' views and attitudes from the Company's Brokers
and the Investment Adviser. The results of these meetings were reported to the
Board as part of the formal reporting undertaken by both the Investment
Adviser and the Brokers.
Included in the Report of the Directors in the full report are details of
substantial shareholdings in the Company.
On a regular basis (sometimes weekly) and at Board meetings, the Directors
receive updates from the Company's Brokers on the share trading activity,
share price performance and any shareholders' feedback, as well as an update
from the Company's Investor Relations adviser, Buchanan, and the Investment
Adviser on any publications or comments by the press. To gain a deeper
understanding of the views of its shareholders and potential investors, the
Investment Adviser maintains regular contact with them and also undertakes
investor roadshows. Any relevant feedback is taken into account when Directors
discuss any possible fundraising or the future dividend policy.
Investment Adviser · Current and future financial performance The management of the Company's portfolio is delegated to the Investment
Adviser, which manages the assets in accordance with the Company's objectives
Holding the Company's shares offers investors an investment vehicle through · Shared commercial objectives with the Company and policies. At each Board meeting, representatives from the Investment
which they can obtain exposure to the Company's portfolio of properties. The
Adviser are in attendance to present reports to the Directors covering the
Investment Adviser's performance is critical for the Company to successfully · Operational excellence Company's current and future activities, portfolio of assets and its
deliver its investment strategy and meet its objective to provide shareholders
investment performance over the preceding period.
with an attractive level of income, together with the potential for capital · Long-term development of its business and resources
growth.
· ESG performance and sustainability
Maintaining a close and constructive working relationship with the Investment
Adviser is crucial as the Board and the Investment Adviser both aim to
continue to achieve consistent long-term returns in line with the Company's
investment objective. Important components in the collaboration with the
Investment Adviser, representative of the Company's culture are:
· operating in a fully supportive, co-operative and open
environment and maintaining ongoing communication with the Board between
formal meetings;
· encouraging open discussion with the Investment Adviser, allowing
time and space for original and innovative thinking;
· recognising that the interests of stakeholders and the Investment
Adviser are for the most part well aligned, adopting a tone of constructive
challenge;
· drawing on Board members' individual experience and knowledge to
support the Investment Adviser in its monitoring of and engagement with other
stakeholders; and
· willingness to make the Board members' experience available to
support the Investment Adviser in the sound long-term development of its
business and resources, recognising that the long-term health of the
Investment Adviser is in the interests of shareholders in the Company.
Other service providers · Current and future financial performance The Company's main functions are delegated to a number of service providers,
including the Administrator, the Company Secretary, the AIFM, the Registrar,
In order to function as a REIT with a premium listing on the London Stock · Shared commercial objectives with the Company the Corporate Brokers and the Depositary, each engaged under separate
Exchange, the Company relies on a diverse range of reputable advisers for
contracts. The Board maintains regular contact with its key external providers
support in meeting all · Operational excellence and receives regular reporting from them, both through the Board and Committee
meetings, as well as outside of the regular meeting cycle. Their advice, as
relevant obligations. · Long-term development of the service providers' businesses well as their needs and views, are routinely taken into account. Through its
Audit and Management Engagement Committee, the Board formally assesses their
· Sustainability performance, fees and continuing appointment at least annually to ensure that
the key service providers continue to function at an acceptable level and are
appropriately remunerated to deliver the expected level of service. The Audit
and Management Engagement Committee also reviews and evaluates the control
environment in place at each key service provider.
Care providers · Current and future performance At the outset, it is important to note that the Company does not have any
legal or operational responsibility for the delivery of care in the properties
· Welfare of tenants within the portfolio. However, the Board and the Investment Adviser have taken
the view that they wish to have a detailed understanding of the delivery of
· Lease obligations care and the interaction with the major care providers who deliver this care.
Accordingly, the Investment Adviser maintains an active dialogue with many of
· Void management the care providers to build constructive and informed relationships.
At the same time, as part of transaction due diligence at the time of
acquisition of properties, the Investment Adviser undertakes due diligence
with respect to the operational and financial performance of all care
providers who are proposed to deliver care into the particular properties.
This includes the financial standing of the care provider, its CQC rating and
the nature of the SLA agreement covering voids between the care provider and
the Approved Provider.
The Investment Adviser is noted as having demonstrated considerable expertise
and understanding of the care taking place within its properties.
Tenants · Greater independence The Company's properties are adapted for the use of individuals with long-term
care needs within a community setting with the specific aim of achieving
· Maintaining high level of care better personal outcomes and independence for the individuals.
· Improved personal outcome
The sector in which the Company operates is regarded as having achieved
significant success in delivering these positive outcomes compared to
long-term older style remote institutional care.
On a regular basis, members of the Investment Adviser visit properties
accompanied by Approved Provider and care provider partners to see first hand
the nature of the housing and care provision that is being delivered. Whilst
this process has slowed as a result of the pandemic, the Investment Advisor
has continued to engage with its tenants. This is supported by the regular
Approved Provider seminars at which the wellbeing of tenants is discussed in
detail.
In March 2022, the Board undertook a site visit to a number of the Company's
properties. The Board found this visit beneficial as it enabled it to engage
with the Company's tenants and to see first hand the impact the Company has
had on their wellbeing.
In addition, the Company undertakes resident case studies through careful and
considered interaction via the care provider to assess the positive impact our
properties and associated specialised care have had on the individual and
their wellbeing.
Approved Providers · Current and future performance The Company's Approved Provider partners are an important part of the
investment model as the responsibility for collection of housing benefit and
· Sustainability subsequent payment of rent, the maintenance of the properties under the full
repairing and insuring leases and, most importantly, the safeguarding of the
· Compliance and property management underlying tenants through the above means, lies with the Approved Providers.
· Welfare of tenants
· Lease obligations The Investment Adviser works closely with the Company's Approved Provider
partners to improve standards and governance and to introduce practices and
procedures that make the Company's investment processes ever more robust.
The Investment Adviser has a constant open dialogue with the Approved Provider
partners, liaising monthly on compliance, health and safety, maintenance and
future-proofing schemes, as well as hosting quarterly seminars to discuss
current themes/trends affecting the sector, to troubleshoot and this serves as
an opportunity to build relationships and share best practice.
The Investment Adviser has continued its regular and extensive dialogue with
Approved Providers which since the start of the pandemic includes detailed
reports on pandemic responsiveness. These reports have shown a high degree of
resilience to the pandemic with few serious cases of COVID-19 reported due to
the quality of the buildings people live in, the attention and dedication of
the one-to-one care they receive and the age profile of the residents.
The Investment Adviser supported the establishment of The Social Housing
Family CIC, a not-for-profit community interest company operated independently
of the Company whose stated aim is to enable Approved Providers holding the
Company's leases to increase skills and experience and to provide funding to
promote enhanced performance. Membership is open to any Approved Provider that
holds Civitas leases and the effect of membership is to transfer ownership of
the Approved Provider to the social housing family. Auckland Homes Solutions
was the first Approved Provider to join and has now recruited a very
experienced and senior executive team and board of management. Qualitas
community benefit society has also now joined the CIC.
Regulator of Social · Financial and operational viability The Company is not itself regulated by the RSH, but it is important to
maintain open and regular dialogue to ensure that the Company and the RSH are
Housing (RSH) · Governance working together to improve the sector.
· Compliance with health and safety, and regulatory standards
· Safety and wellbeing of underlying tenants The Investment Adviser has a regular and ongoing dialogue with the RSH and
with the Housing Association partners regulated by the RSH.
The Company also publishes responses to the regulatory judgements of the RSH
regarding the Approved Providers with the Company as part of the RSH's general
review of Approved Providers engaged in the provision of property services for
vulnerable people as announced in May 2018. This demonstrates the Company's
desire to maintain aa dialogue with the RSH and its desire to see that the
positions improve where needed.
Other regulatory authorities · Compliance with statutory and regulatory requirements The Company regularly considers how it meets various regulatory and statutory
obligations and follows voluntary and best practice guidance, and how any
The Company can only operate with the approval of its regulators who have a · Governance based on best practice guidance governance decisions it makes can have an impact on its shareholders and wider
legitimate interest in how the Company operates in the market and treats its
stakeholders, both in the shorter and in the longer term.
shareholders. · Better reporting to shareholders and other stakeholders
The Board receives quarterly regulatory compliance monitoring updates from the
Investment Adviser.
The Board receives quarterly compliance updates from the AIFM regarding the
Company's compliance with its investment policy and the Investment Adviser's
compliance with the Investment Management Agreement.
The Board also has access to the advice of the Company Secretary who provides
updates and advice on regulatory, statutory and governance matters for
consideration by the Board at its quarterly meetings and as and when required.
Local authorities · Provision of safe and secure properties of a high quality It is important for the Company to build and maintain relationships with local
authorities as they have an important role in identifying areas of high
· Sustainability for long-term placements demand, agreeing rents and referrals to the Company's schemes.
The Company will engage with the local authority commissioner either directly,
or through specialist consultants, Approved Provider and care provider
partners as part of the Company's due diligence to ensure that each property
being acquired has been commissioned by the relevant local authority and that
rent levels have been discussed and agreed.
Lenders · Current and future financial performance of the business The Company has arranged debt facilities from a wide range of lenders and
engages with these on a regular basis through regular meetings and
Availability of funding and liquidity are crucial to the Company's ability to · Openness and Transparency presentations to ensure they are informed on all relevant areas of the
take advantage of investment opportunities as they arise.
business. The continual dialogue helps to support the credit relationships.
· Proactive approach to communication
· Operational excellence
The Company has reaffirmed its Investment Grade High Credit Quality Rating
from Fitch Ratings Limited of "A" (senior secured) and a Long-Term IDR (Issuer
Default Rating) of A- with a Stable Outlook.
This will enable the Company to pursue its strategy in relation to debt
funding, in addition to continuing to work with the Company's existing
lenders, with whom the Company has built strong relationships.
Communities · Acceptance of care in the community A key component of the Company's portfolio is that the properties within it
are set within community environments so that individuals are able as part of
The Company's assets rely on a strong, positive connection with the local · Availability of local facilities for tenants their care plan to interact with the local community rather than being
communities in which its business operates.
isolated.
This is achieved in consultation with local authorities in determining that
the initial settings are appropriately diversified within the respective
community and are not clustered in a way that would lead to isolation.
This assists the individuals and also ensures appropriate integration within
the community. On a day-to-day basis, care providers and Approved Providers
operate policies to ensure positive relationships with neighbours and
surrounding dwellings. The activities within the Company's properties create
employment within the local community for both housing and care workers.
Charity Partners · Delivering needed support to vulnerable adults The Company supports a number of organisations whose objectives are to provide
improved outcomes for vulnerable adults affected by homelessness and other
· Improved well-being of vulnerable adults care needs.
· ESG performance and sustainability The Company commits targeted financial support to fund specific programmes
which help those affected by homelessness by teaching them skills and offering
support to prevent them from being in that position again.
The Company ensures regular calls and meetings with our charity partners to
update on progress and projects being undertaken, as well as attending events
in support of their work.
In 2020, the Company amended its investment objective and investment policy to
enable it to enter into long-term leases with the NHS and with registered
charities operating within areas of investment interest to the Company. The
amendments will allow the Company access to a wider range of pipeline
opportunities and will assist in providing the currently unmet demand in these
areas.
The above mechanisms for engaging with stakeholders are kept under review by
the Directors and will be discussed on a regular basis at Board meetings to
ensure that they remain effective.
Principal Decisions
Principal decisions have been defined as those that have a material impact to
the Group and its key stakeholders.
In taking these decisions, the Directors considered their duties under section
172 of the Act. Principal decisions made during the year were as follows:
New Regulatory Clause Initiative
In 2022, the Board considered and agreed a new approach to the Company's lease
model with the goal of supporting additional regulatory compliance and
addressing perceptions of risk. The new regulatory clause will enable Approved
Providers to achieve greater alignment between income receipts and lease
liabilities, set achievable capital solvency requirements against lease
obligations and demonstrate a further degree of risk sharing. This will assist
the Company's counterparties to demonstrate compliance with the Regulator of
Social Housing's Governance and Financial Viability Standard.
The new regulatory clause would operate on a property by property basis and
provide for a temporary pass through of lease rent in certain limited
circumstances when an Approved Provider is not in receipt of full payment and
would ensure that the Company does not become responsible for obligations that
are rightly owed by others such as void cover by care providers. The new
regulatory clause will provide the Company with counterparties which are
better able to achieve regulatory compliance, enhanced information, step in
rights and unchanged lease and property values.
Publication of Market Update
In response to the unfounded comments by an activist short-seller who took up
a position in the Company's shares, the Board took the decision to publish a
Market Update paper on 11 October 2021 to provide a detailed response and also
address principal areas of discussion that had been brought out in
conversations with shareholders.
The Company and CIM have continued to make themselves available to speak and
meet with both new and existing shareholders following the release of the
detailed market update. Both the Board and representatives of the Investment
Adviser continue to be available to engage with shareholders.
Buyback Programme
During the year, the Board monitored the decline in the Company's share price
which, in its view, was associated with activity from an activist short seller
and subsequent press coverage, the content of which the Board continues to
believe to be baseless, incorrect and/or misleading. In response to the
decline in the share price, the Board agreed the implementation of a share
buyback programme under certain parameters, which is being operated by the
Company's joint brokers. The impact of share buybacks continue to enhance IFRS
NAV per share by 0.26p at 31 March 2022.
Further information on the Company's buyback programme can be found in the
full report.
Agreement with E.ON to reduce carbon footprint
In June 2021, the Company entered into a national framework agreement with
energy provider E.ON to undertake environmental enhancements that would help
to reduce the carbon footprint of the Company's portfolio. The agreement was
focused on those properties with lower EPC ratings and formed part of the
Company's objective to reach carbon neutrality. The agreement built on
successful pilot projects already undertaken by the Company and E.ON. It
benefits the Company's Approved Provider and other non-for-profit partners by
reducing maintenance cost and energy bills without any costs being incurred by
them and enabling them to contribute to a reduced carbon footprint. The
project draws on the ECO3 funding scheme, and the maintenance costs benefited
from the Domestic Renewable Heat Incentive.
Strategic Overview
Purpose of the Company
The Company was established in 2016 with the purpose of delivering long-term
responsible, stable returns to investors and achieving positive measurable
social impact and ESG benefits on a large scale. It should achieve this as a
result of introducing long-term equity capital into the social housing sector
with a particular focus on care-based community housing. By doing so, this
would form a bridge between equity investors and the social housing sector and
bring together aspects of healthcare with social housing.
The Company has since developed the largest portfolio of care-based community
housing in the UK that provides long-term homes for more than 4,500
individuals across half the local authorities in England and Wales.
As a result of this success, the Company has recently extended its mandate to
be able to enter into transactions directly with the NHS and with leading
charities with an interest in the provision of specialist housing that has a
strong care or support element, is consistent with public policy and whose
costs are met by the public purse for which it offers value for money.
Investment Objective
The Company's investment objective is to provide shareholders with an
attractive level of income, together with the potential for capital growth
from investing in a portfolio of Social Homes, which benefits from inflation
adjusted long-term leases or occupancy agreements with Approved Providers and
to deliver, on a fully invested and geared basis, a targeted dividend yield of
5% per annum1, which the Company expects to increase broadly in line with
inflation.
(1)The dividend yield is based on the original IPO price of 100 pence per
Ordinary share. The target dividends are targets only and do not represent a
profit forecast.
There can be no assurance that the targets can or will be met and should not
be taken as an indication of the Company's expected or actual future results.
Accordingly, potential investors should not place any reliance on these
targets in deciding whether or not to invest in the Company or assume that the
Company will make any distributions at all, and should decide for themselves
whether or not the target dividend yields are reasonable or achievable.
Investment Policy
The Company's investment policy is to invest in a diversified portfolio of
Social Homes throughout the United Kingdom. The Company intends to meet the
Company's investment objective by acquiring, typically indirectly via Special
Purpose Vehicles, portfolios of Social Homes and entering into long-term
inflation adjusted leases or occupancy agreements for terms primarily ranging
from 10 years to 40 years with Approved Providers, where all management and
maintenance obligations will be serviced by the Approved Providers. The
Company will not undertake any development activity or assume any development
or construction risk. However, the Company may engage in renovating or
customising existing homes, as necessary.
The Company may make prudent use of leverage to finance the acquisition of
Social Homes and to preserve capital on a real basis.
The Company is focused on delivering capital growth and expects to hold its
Portfolio over the long-term and therefore it is unlikely that the Company
will dispose of any part of the Portfolio. In the unlikely event that a part
of the Portfolio is disposed of, the Directors intend to reinvest proceeds
from such disposals in assets in accordance with the Company's investment
policy.
Investment Restrictions
The Company invests and manages the Portfolio with the objective of delivering
a high quality, diversified Portfolio through the following investment
restrictions:
· The Company only invests in Social Homes located in the United
Kingdom;
· The Company only invests in Social Homes where the counterparty
to the lease or occupancy agreement is an Approved Provider;
· No lease or occupancy agreement shall be for an unexpired period
of less than 10 years, unless the shorter leases or occupancy agreements
represent part of an acquisition of a portfolio which the Investment Adviser
intends to reorganise such that the average term of lease or occupancy
agreement is increased to 15 years or above;
· The aggregate maximum exposure to any single Approved Provider is
25% of the Gross Asset Value, once the capital of the Company is fully
invested;
· No investment by the Company in any single geographical area, in
relation to which the houses and/or apartment blocks owned by the Company are
located on a contiguous or largely contiguous basis, exceeds 20% of the Gross
Asset Value of the Company;
· The Company only acquires completed Social Homes and will not
forward finance any development of new Social Homes;
· The Company does not invest in other alternative investment funds
or closed-end investment companies; and
· The Company is not engaged in short selling.
The investment limits detailed above apply at the time of the acquisition of
the relevant investment in the Portfolio once fully invested. The Company
would not be required to dispose of any investment or to rebalance the
Portfolio as a result of a change in the respective valuations of its assets.
Gearing Limit
The Directors seek to use gearing to enhance equity returns. The level of
borrowing is set on a prudent basis for the asset class and seeks to achieve a
low cost of funds, whilst maintaining the flexibility in the underlying
security requirements and the structure of both the Portfolio and the Company.
The Company may, following a decision of the Board, raise debt from banks
and/or the capital markets and the aggregate borrowings of the Company is
always subject to an absolute maximum of 40% of Gross Asset Value calculated
at the time of drawdown. Current gearing is 34.43%.
Debt is secured at asset level, whether over a particular property or a
holding entity for a particular series of properties, without recourse to the
Company and also potentially at Company level with or without a charge over
the Portfolio (but not against particular assets), depending on the optimal
structure for the Company and having consideration to key metrics including
lender diversity, cost of debt, debt type and maturity profiles. Otherwise
there will be no cross-financing between investments in the Portfolio and the
Company will not operate as a common treasury function between the Company and
its investments.
Use of Derivatives
The Company may choose to utilise derivatives for efficient portfolio
management. In particular, the Directors may engage in full or partial
interest rate hedging or otherwise seek to mitigate the risk of interest rate
increases on borrowings incurred in accordance with the gearing limits as part
of the management of the Portfolio.
Cash Management
Until the Company is fully invested, and pending re-investment or distribution
of cash receipts, the Company invests in cash, cash equivalents, near cash
instruments and money market instruments.
REIT Status
The Directors conduct the affairs of the Company so as to enable it to remain
qualified as a REIT for the purposes of Part 12 of the Corporation Tax Act
2010 (and the regulations made thereunder).
Culture
The Directors agree that establishing and maintaining a healthy corporate
culture among the Board and in its interaction with the Investment Adviser,
shareholders and other stakeholders will support the delivery of its purpose,
values and strategy. The Board seeks to promote a culture of openness, debate
and integrity through ongoing dialogue and engagement with its service
providers, principally the Investment Adviser.
As detailed in the Corporate Governance Statement, the Company has a number of
policies and procedures in place to assist with maintaining a culture of good
governance, including those relating to diversity and Directors' conflicts of
interest. The Board assesses and monitors compliance with these policies as
well as the general culture of the Board through Board meetings and, in
particular, during the annual evaluation process which is undertaken by each
Director (for more information, see the performance evaluation section as set
out in the full report.
The Board's culture itself is one of openness, collaboration and constructive
debate to ensure the effective contribution of all Directors, particularly in
respect of the Board's decision making. Consideration of our Stakeholders is
embedded in the Board's decision making process. Please see our section 172
Statement set out above.
Key Performance Indicators ("KPIs")
Measure Explanation Result
Increase in IFRS NAV per share Target to achieve capital appreciation whilst maintaining a low risk strategy IFRS NAV increase of 12.3p per share or 12.60% from IPO (2021:10.3p per share
from enhancing the quality of cash flows from investments, by physical 10.56% from IPO).
improvement of properties and by creating a significantly diversified,
high-quality portfolio.
Dividends per share For the year ended 31 March 2022, the Company targeted a dividend of 5.55p per Total dividend of 5.55p per share declared for the year to 31 March 2022
share. (2021:5.40p).
Number of Local Authorities, Approved Providers and care providers Target risk mitigation through a diversified portfolio (once fully invested) As at 31 March 2022:
with no more than 25% exposure to any one Local Authority or single Approved
Provider and no more than 20% exposure to any single geographical area, once
the capital of the Company is fully invested.
• 178 Local Authority partners (2021:164 Local Authority partners)
• 18 Approved Providers (2021: 16 Approved Providers)
• 130 Care Providers (2021:118 Care Providers)
The Company's largest single exposure is to Auckland Home Solutions CIC and
currently stands at 16% (2021:24%). The largest geographical concentration is
in the South West, being 16% (2021:16%).
Loan to Gross Assets (Leverage) Targeted total debt drawn no more than 40% of gross assets. Leverage as at 31 March 2022 of 34.3% of gross assets (2021: 34.48%).
EPRA
The Company is a member of the European Public Real Estate Association
("EPRA"). EPRA has developed and defined the following performance measures to
give transparency, comparability and 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. These are all Alternative Performance measures of the Company.
Definition EPRA Earnings EPRA Net Reinstatement Value ("NRV") EPRA Net Tangible Assets ("NTA") EPRA Net Disposal Value ("NDV")
Earnings from operational activities. EPRA NAV metric which EPRA NAV metric which E
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assumes that entities never assumes that entities buy R
A
sell assets and aims to and sell assets, thereby N
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represent the value required crystallising certain levels of V
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Purpose A key measure of a company's underlying operating results and an indication of The EPRA NAV set of metrics make adjustments to the NAV per the IFRS financial
the extent to which current dividend payments are supported by earnings. statements to provide stakeholders with the most relevant information on the
fair value of the assets and liabilities of a real estate investment company,
under different scenarios.
Performance EPRA Earnings EPRA NAV EPRA NTA EPRA NDV
£ £ £ £
2022: 29,810,000 2022:673,416,000 2022:673,416,000 2022:678,191,000
2021:30,630,000 2021:674,042,000 2021:674,042,000 2021:671,476,000
2020:28,814,000 2020:671,042,000 2020:671,042,000 2020:667,560,000
EPRA Earnings per share EPRA NRV per share (diluted) pence EPRA NTA per share (diluted) pence EPRA NDV per share (diluted) pence
(Basic and diluted) pence
2022:4.82 2022:109.96 2022:109.96 2022:110.74
2021:4.93 2021:108.38 2021:108.38 2021:107.97
2020:4.63 2020:107.95 2020:107.95 2020:107.39
Definition EPRA Net Initial Yield ("NIY") EPRA Topped-up Net Initial Yield ("NIY") EPRA Costs Ratio EPRA Vacancy Rate
Annualised rental income based on the cash rents passing at the balance sheet This measure incorporates an adjustment to the EPRA NIY in respect of the Administrative and operating costs (including and excluding costs of direct E
date, less nonrecoverable property operating expenses, divided by the market expiration of rent-free periods (or other unexpired lease incentives such as vacancy) divided by gross rental income. s
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Purpose A comparable measure for portfolio valuations. These measures should make it A key measure to enable meaningful measurement of the changes in a company's A 'pure' (%) measure of investment property space that is vacant, based on
easier for investors to judge themselves, how the valuation of portfolio X operating costs. ERV.
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Performance EPRA NIY EPRA Topped-up NIY EPRA Costs Ratio(1) EPRA Vacancy Rate
% % % %
2022:5.28 2022:20.20 2022:0
2022:5.28 2021:5.24 2021:20.33 2021:0
2021:5.24 2020:5.26 2020:21.48 2020:0
2020:5.26
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.
(1)The ratios inclusive of vacancy costs are the same as the ratio exclusive
of vacancy costs for 2022,2021 and 2020.
Principal Risks and Risk Management
The Board considers that the risks detailed below are the principal risks
facing the Group currently, along with the risks detailed in note 31.0 to the
financial statements. These are the risks that could affect the ability of the
Company to deliver its strategy. The Board confirms that the principal risks
of the Company, including those which would threaten its future performance,
solvency or liquidity, have been robustly assessed throughout the year ended
31 March 2022, taking into account the emerging risks such as the evolving
Ukraine-Russia conflict risk, climate change risk, cyber security risk and
recruitment of staff at counterparties risk, and that processes are in place
to continue this assessment.
The Audit and Management Engagement Committee has divided the Company's risks
into the following risk type categories:
· Strategy and Competitiveness;
· Operational, including Cyber Crime;
· Investment Management; and
· Accounting, Legal and Regulatory.
Each risk contained in each category is reviewed for its impact and
probability by the Audit and Management Engagement Committee at least twice
during the year.
The Audit and Management Engagement Committee takes responsibility for
overseeing the effectiveness of risk management and internal control systems
on behalf of the Board and advises the Board on the principal risks facing the
business.
Further details of risk management processes that are in place can be found in
the Corporate Governance Statement set out in the full report. The principal
and emerging risks and uncertainties relating to the Group are regularly
reviewed by the Board along with the internal controls and risk management
processes that are used to mitigate these risks. The Board has identified four
new principal risks during the year (as set out in the list of principal risks
and uncertainties), with the risk associated with share price disruption due
to an activist shareholder being identified as having the highest impact and
likelihood. The risk associated with the failure to monitor and ensure that
contingent activities are being completed by Approved Providers was removed as
a principal risk by the Board during the year. Further details on this and the
other principal risks and the management of those risks are described below:
Principal risks and uncertainties
1. Strategy and Competitiveness risk Impact How managed/mitigated
The Company's share price is disrupted due to an activist shareholder. The Company is targeted by a short seller or activist shareholder leading to a The Board is committed to maintaining open channels of communication with Impact: High
fall in the Company's share price and a widening of the shareholders and engaging in ways shareholders find most meaningful, in order
to gain understanding of shareholder views. Further information on the Board's
discount to NAV. engagement with shareholders can be found above.
This risk was newly identified during the year.
Probability: Likely
Significant numbers of shares may need to be repurchased leading to a fall in The Board seeks to provide full disclosure on the counterparties and the
the size of the company and liquidity implications. structure of transactions so that all stakeholders are kept reliably informed
on the Company's business dealings.
The Board regularly reviews the Company's buyback policy to ensure this is in
alignment with the interests of the Company and shareholders. The Board is
also mindful of the possibility to issue shares and regularly reviews its
policy in this area to ensure that it is consistent with the Company's
strategy. It receives regular updates from the Company's brokers to help
inform its decisions in this regard.
2. Strategy and Impact How managed/mitigated
competitiveness risks
The Company and its operations are subject to laws and regulations enacted by Any change in the laws, regulations and/or government policy affecting the The Company focuses on niche real estate sectors where it believes the Impact: Very High
national and local governments and government policy. Company and its operations may have a material adverse effect on the ability regulatory framework and underlying demand dynamics to be robust.
of the Company to successfully pursue its investment policy and meet its
investment objective and on the value of the Company and the shares.
Probability:
This risk remained at the same level as the year ended 31 March 2021. The Investment Adviser has strong industry contacts and has good knowledge on
policy opinion and direction. Unlikely
The Board obtains regular updates from professional advisers to monitor
developments in regulation and legislation.
3. Strategy and Impact How managed/mitigated
competitiveness risks
As a result of competition from other purchasers of social housing properties, The rate of capital deployment would drop, decreasing returns to shareholders. The Company has strong links with vendors and a robust pipeline of future Impact: High
the Company's ability to deploy capital effectively within a reasonable acquisitions.
timeframe may be restricted or the net initial yields at which the Company can
acquire properties may decline such that target returns cannot be met.
Probability:
The Board regularly reviews the pipeline of potential acquisitions and
monitors the market landscape. Unlikely
This risk remained at the same level as the year ended 31 March 2021.
The Board is aware of the current competitive social housing market and
recognises the impact this may have on the Company's ability to deploy capital
effectively.
4. Investment Impact How managed/mitigated
management risk
Tenant defaulting under the terms of a lease. Loss of rental income in the short term. The portfolio is highly diversified to reduce the impact of default. Extensive Impact:
diligence is undertaken on all assets, which is reviewed and challenged by the
Board. Medium
This risk remained at the same level as the year ended 31 March 2021.
The Investment Adviser works proactively with Approved Providers to address Probability: Likely
any potential concerns.
The Board is provided with regular updates on the tenants with any concerns
raised for discussion.
The Board has noted that the Company's historic level of defaults has been
immaterial.
5. Investment management risk Impact How managed/mitigated
The value of the investments made by the Company may change from time to time The valuation of the Company's assets would fall, decreasing the NAV and The Company invests in projects with stable, predetermined, long-term leases Impact:
according to a variety yields of the Company. in place with CPI or CPI plus 1% indexation and its strategy is not focused on
sale of properties. High
of factors, including movements in interest rates, inflation and general
market pricing of similar investments.
The Board receives regular updates on factors that might impact investment Probability:
valuations.
This was identified as a heightened risk during the year.
Possible
6. Investment management risk Impact How managed/mitigated
Due diligence may not reveal all facts and circumstances that may be relevant The Company would overpay for assets impairing shareholder value, reducing The Company undertakes detailed due diligence on the properties, their Impact:
in connection with an investment and may not prevent an acquisition being rental income and therefore returns. condition, the proposed rental levels - benchmarking against comparable
materially overvalued or rental streams being at risk.
schemes using both external consultants where required and its own proprietary High
database - and on the Approved Providers and care providers involved in each
property to ensure that the purchase price is robust.
This risk remained at the same level as the year ended 31 March 2021. Probability:
The Board considers the due diligence undertaken when approving acquisitions. Unlikely
7. Investment management risk Impact How managed/mitigated
Loss of key staff at the Investment Adviser. Negative investor sentiment leading to a reduction in share price. Reduction The Board considers the risk of the Investment Adviser losing key staff and Impact:
in ability to source off market and favourable deals. the succession plans the Investment Adviser has in place.
High
This risk remained at the same level as the year ended 31 March 2021.
The Board has noted the ongoing expansion of the Investment Adviser's support
team. Probability:
Unlikely
8. Strategy and competitiveness Impact How managed/mitigated
The Company fails to respond to issues related to climate change, either Decrease in the value of the Company's assets and a negative impact on the Regular review and consideration by the Board including the input of climate Impact:
directly as enhancements Company's share price. change specialists at the
High
to properties or indirectly via its climate change reporting. Investment Adviser.
Probability:
This was a newly identified risk during the year. Advice received from external professional advisers.
Unlikely
9. Operational, including cyber crime Impact How managed/mitigated
Serious accident or poor Reputational damage for the Reporting from Approved Providers and monitoring of Impact: High
management amongst Approved Providers due to staff shortages, loss of Company. Approved Providers by the Investment Adviser.
competence and vaccination uptake.
Probability: Unlikely
This was identified as a heightened risk during the year.
10. Strategy and competitiveness Impact How managed/mitigated
The Company is not promoted in a way which generates investor demand, A reduction in the Company's share price and a widening of the discount to The Board monitors the marketing and distribution activity undertaken by the Impact: Medium
especially with regard to ESG focus. NAV. Investment Adviser and the Corporate Brokers at each meeting as well as
receiving regular reports from its PR adviser Buchanan.
Probability: Unlikely
This was identified as a heightened risk during the year.
The Board utilises discount control mechanisms to support promotional
activities.
The Board engages The Good Economy and Social Profit Calculator and reports
findings to shareholders.
The Board considers ESG reporting in the Annual Report and Accounts carefully.
Emerging risks
Emerging risks are considered during the regular risk review, and would be
specifically discussed and evaluated as they arise during the year. Input from
the Investment Adviser on emerging risks is considered by the Audit and
Management Engagement Committee. Key emerging risks identified and considered
during the year include:
· Ukraine-Russia Conflict - the impact of Ukraine- Russia conflict.
Although the Company has no direct exposure to Russia or eastern European
territories, the Board continues to closely monitor this.
· Long-term Climate Change - the impact of climate change, over the
longer-term on the business. The Company is committed to understanding ESG
risk, including the particular impact of climate change on the business.
Climate change poses an indirect risk to the Company's operations, the
environment and society, and the Board is aware that appropriate action is
required to reduce its impact.
· Cyber Security - the impact of a cyber security breach within the
Company or its service providers. During the year, the Board was made aware of
a minor data breach within the Depository. The breach has had no impact on the
Company's operations and no personal data was compromised. The Board is
satisfied that the Depository has taken appropriate immediate remedial action
and has adequate safeguards in place.
The Listing Rules require premium-listed commercial companies to disclose in
their annual report whether they have reported on how climate change affects
their business in a manner consistent with the recommendations of the Task
Force on Climate-related Financial Disclosures ('TCFD'), and to provide an
explanation and other information if they are unable to do so. In addition,
the UK Government intends to introduce mandatory climate-related disclosures
to supplement the requirements under the Listing Rules. The Board has chosen
not to adopt the requirements early and expects these to be applicable to the
Company in the financial year 2024.
Going Concern and Viability Statement
Going Concern
The Board regularly reviews the position of the Company and its ability to
continue as a going concern at its meetings. The financial statements set out
the current financial position of the Company.
The Company acquires high-quality property with a particular focus on property
providing care for the long-term. The properties acquired are on long-term
full repairing and insuring leases in a sector of the market with very high
levels of need. The cost base of the Company is proportionately low compared
to revenue and there is a high level of certainty over cost to be
incurred. On this basis, the Company is expected to be viable well beyond the
five-year term considered in the Company's testing below.
As at 31 March 2022, the Company held cash balances of £53.3 million (net of
operating and financing amounts due). The Board has evaluated the financial
position of the Company and has maintained its premium investment grade rating
from Fitch Ratings Ltd - a well-established rating agency with a strong
familiarity to the alternative healthcare real estate space, which gives the
Company confidence in the ability to raise future debt and/or equity capital
in order to fund the Company's investments for the long-term and to facilitate
the payment of dividends to shareholders. Based on these, the Board believes
that the Company is in a position to manage its financial risks.
Various forms of sensitivity analysis have been performed, in particular the
financial performance of tenants and a reduction in rent. As at 31 March 2022,
the rent would have to drop by approximately 29% before its loan covenant is
breached. At the date of approval of this report, the Company has substantial
headroom within its financial loan covenants. The Company also benefits from a
secure income stream from leases with long average unexpired term leases.
Leverage is prudently maintained at a level of less than 40% of GAV.
The Company's articles of association include a requirement for the Board to
propose an ordinary
resolution at the annual general meeting following the fifth anniversary from
the initial public offering of the Company for the Company to continue in its
current form (the Continuation Resolution). This is the first continuation
vote since the Company was set up.
If the Continuation Resolution is passed, the Company will continue its
business as presently constituted and propose the same resolution at every
fifth annual general meeting thereafter. If the Continuation Resolution is not
passed, the Directors will be required, within six months after the date of
this annual general meeting, to formulate proposals for consideration by the
shareholders for the voluntary liquidation, unitisation, reorganisation, or
reconstruction of the Company. After making appropriate enquiries of the
Company's brokers and Investment Adviser, pursuant to their recent discussions
with a number of the Company's shareholders, the Directors are of the view
that the Continuation Resolution will be passed at the forthcoming annual
general meeting. This reflects the strength and nature of the Company's
portfolio, and specifically the provision of long-term accommodation for more
than 4,000 vulnerable individuals. Accordingly, the Directors expect that if
the Continuation Resolution is not passed, an event which the Directors
consider to be highly remote, formulating and implementing any such proposals
would
require the Company to continue operations for a period of at least 12 months
from the date of approval of the Company's financial statements.
The Board is, therefore, of the opinion that the going concern basis adopted
in the preparation of the consolidated financial statements is appropriate.
Viability Statement
The Directors present the Company's viability statement which summarises the
results of their assessment of the Company's current position, its principal
risks and prospects over a period to 31 March 2027.
The assumptions underpinning the forecast cashflows and covenant compliance
forecasts were sensitised to explore the resilience of the Company to the
potential impact of the Company's principal risks and uncertainties.
The prospects were assessed over a five-year period for the following reasons:
i) the Company's long-term forecast covers a five-year period;
ii) the length of service level agreements between Approved Providers and
care providers is typically five years; and
iii) the Company's leases are typically 25 years on fully repairing and
insuring leases, enabling reasonable certainty of income over the next five
years.
The Company's five-year forecast incorporates assumptions related to the
Company's investment strategy and principal risks from which performance
results, cash flows and key performance indicators are forecast. The principal
risks are set out above. Of these risks, those which are expected to have a
higher impact on the Company's longer-term prospects are those related to
future government housing policies. The Company has considered its strategy
over a longer term and, in light of the inherent demand for the Company's
properties and the vulnerable nature of the ultimate tenant, the risk of
change in future housing policy is considered to be limited. The principal
risks are mitigated by the Company's risk management and internal control
processes, which function on an ongoing basis.
The Board, via delegation to the Audit and Management Engagement Committee,
monitors the effectiveness of the Company's risk management and internal
control processes on an ongoing basis. The monitoring activities are described
in the Report of the Audit and Management Engagement Committee set out in the
full report and include direct review and challenge of the Company's
documented risks, risk ratings and controls, and review of performance and
compliance reports prepared by the Company's advisers and the independent
external auditors.
The Board of Directors has carried out a robust assessment of the principal
and emerging risks facing the Company, including those that would threaten its
business model, future performance, solvency and liquidity. Where appropriate,
the Company's forecasts are subject to sensitivity analysis, which involves
applying severe conditions and flexing a number of assumptions simultaneously.
The sensitivities performed were designed to provide the Directors with an
understanding of the Company's performance in the event of severe but
plausible scenarios, taking full account of mitigating actions that could be
taken to avoid or reduce the impact or occurrence of the underlying risks
outlined below:
· 10% of tenants defaulting under a lease. The outcome of this
scenario reduces profits on average over the five year forecast by 15% per
annum and reduces cash by £20 million. However, the Board is still
comfortable that dividends could be paid as there is still sufficient level of
cash in the business; and
· deterioration in economic outlook, change in government housing
policy which could impact the fundamentals of the social housing sector,
including a negative impact on valuations and a 5% reduction in annual rents.
The outcome of the 'severe downside scenario' was that the Company's covenant
headroom on existing debt (i.e the level at which the investment property
values would have to fall before a financial breach occurs) reduces by 13%,
prior to any mitigating actions such as asset sales, which indicates that
covenants on existing facilities would not be breached.
The Board has noted that the Company is due to hold its first continuation
vote at the AGM in September 2022. This would be an ordinary resolution
requiring approval from 50% of the shareholders voting. Further details as to
how the Company has considered the impact of the continuation vote can be
found in the Going Concern section above.
The remaining principal risks and uncertainties, whilst having an impact on
the Company's business, are not considered by the Directors to have a
reasonable likelihood of impacting the Company's viability over the five-year
period, therefore the scenarios outlined above are the only ones that have
been specifically tested. Based on the results of their assessment, the
Directors have a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due over the
five-year period of their assessment.
Approval of Strategic Report
The Group Strategic Report was approved by the Board and signed on its behalf
by:
Michael Wrobel
Chairman
29 June 2022
Further details on the Environmental, Social & Governance framework of the
Company and the Social Impact report are set out in the full Report.
Board of Directors
Michael Wrobel (Chairman)
Peter Baxter (Senior Independent Director and Chair of Nomination and
Remuneration Committee)
Caroline Gulliver (Chair of the Audit and Management Engagement Committee)
Alison Hadden (Director)
Alastair Moss (Director)
Extracts from the Report of the Directors
Results and Dividends
The results for the year are shown below.
The following dividends were paid on the Ordinary shares during the year:
Fourth Quarterly dividend 1.35p per share paid on 11 June 2021
First Quarterly dividend 1.3875p per share paid on 10 September 2021
Second Quarterly dividend 1.3875p per share paid on 13 December 2021
Third Quarterly dividend 1.3875p per share paid on 11 March 2022
Since the year end, the Company has declared the following dividend:
Fourth Quarterly dividend 1.3875p per share paid on 28 June 2022
No final dividend is being recommended on the Ordinary shares.
Capital Structure
Issue of shares
At the AGM held on 22 September 2021, the Directors were authorised to issue
equity securities up to an aggregate nominal amount of £1,244,922 (being
approximately 20% of the issued Ordinary share capital).
The Company was also authorised to disapply pre-emption rights in respect of
equity securities and to issue equity securities for cash up to an aggregate
nominal amount equal to £622,461 (being approximately 10% of the issued
Ordinary share capital).
During the year, 565,000 Ordinary shares were issued from Treasury under these
authorities. These shares were issued at a price of not less than the net
asset value per share at the time of issue plus an amount to cover the cost.
Following these transactions, the Company held no shares in treasury.
The equity issuance was made with a view to balancing the premium to NAV and
satisfying market demand for additional shares in the Company.
At the AGM held on 22 September 2021, the Company sought approval for a
resolution to disapply pre-emption rights on an additional 10% of the
Company's issued Ordinary share capital. This resolution failed as votes
representing 27.11% of the total votes cast were received against it.
Following the AGM, the Company, via its corporate brokers engaged with its
largest shareholders who had voted against this resolution. The Board
understands that these shareholders followed PIRC's or their own internal
recommendation to vote against this resolution as when combined with the
standard 10% pre-emption disapplication resolution it would have resulted in
the Company having authority to issue up to 20% of its own shares
pre-emptively.
At the AGM in 2022 the Board proposes to seek shareholder approval for a
standard 10% pre-emption disapplication resolution.
The authority to issue shares will expire at the conclusion of the forthcoming
AGM. Proposals for the renewal of the Directors' authority to issue shares
will be set out in the Notice of AGM for 2022, which will be circulated to
shareholders in due course.
Purchase of own shares
At the AGM held on 22 September 2021, the Directors were granted the authority
to buy back up to 93,306,960 Ordinary shares, being 14.99% of the Ordinary
shares in issue at the time of the passing of the resolution.
During the year, as the Company's share price fell below Net Asset Value per
share, the Board instigated a share buyback programme, under which a total of
10,025,000 shares have been purchased into treasury as at 31 March 2022.
The authority to buy back up to 93,306,960 shares will expire at the
conclusion of the forthcoming AGM, when a resolution for its renewal will be
proposed. Further information will be contained in the Notice of AGM, which
will be circulated to shareholders in due course.
Current share capital
As at 31 March 2022, there were 622,461,380 Ordinary shares in issue, of which
10,025,000 shares were held in treasury. The total voting rights of the
Company as at 31 March 2022 was 612,436,380.
Statement of Directors' Responsibilities
The directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with UK-adopted international accounting standards
and the Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 "Reduced Disclosure Framework", and applicable law).
Under Company law, Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international accounting
standards have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101 have been followed for the
Company financial statements, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the Group's and Company's transactions
and disclose with reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that the financial statements
and the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company's financial statements published on the ultimate parent Company's
website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The directors consider that the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's and Company's position and performance,
business model and strategy.
Each of the directors, whose names and functions are listed in the Board of
Directors confirm that, to the best of their knowledge:
· the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit of the
Group;
· the Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS 101, give
a true and fair view of the assets, liabilities, financial position and profit
of the Company; and
· the Group Strategic Report includes a fair review of the
development and performance of the business and the position of the Group and
Company, together with a description of the principal risks and uncertainties
that it faces.
Approval
This Statement of Directors' Responsibilities was approved by the Board and
signed on its behalf by:
Michael Wrobel
Chairman
29 June 2022
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's
statutory accounts for the year ended 31 March 2022 or the year ended 31 March
2021 but is derived from those accounts. Statutory accounts for the period
ended 31 March 2021 have been delivered to the Registrar of Companies and
those for the year ended 31 March 2022 will be delivered in due course. The
Auditor has reported on those accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the Auditor drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies Act 2006.The
text of the Auditor's report can be found in the Company's full Annual Report
and financial statements at www.civitassocialhousing.com
(https://www.civitassocialhousing.com/) .
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2022
For the For the
year ended year ended
31 March 2022 31 March 2021
Note £'000 £'000
Revenue
Rental income 5.0 51,636 49,020
Less direct property expenses 5.0 (978) (1,175)
Net rental income 50,658 47,845
Directors' remuneration 6.0 (206) (198)
Investment advisory fees 8.0 (6,132) (6,117)
General and administrative expenses 9.0 (3,909) (3,183)
Total expenses (10,247) (9,498)
Change in fair value of investment properties 15.0 12,269 5,511
Operating profit 52,680 43,858
Finance income 10.0 7 20
Finance expense 11.0 (10,608) (7,737)
Change in fair value of interest rate derivatives 21.0 2,675 (66)
Profit before tax 44,754 36,075
Taxation 12.0 - -
Profit being total comprehensive income for the year 44,754 36,075
Earnings per share - basic and diluted 13.0 7.23p 5.80p
All amounts reported in the Consolidated Statement of Comprehensive Income
above arise from continuing operations.
Consolidated Statement of Financial Position
As at 31 March 2022
31 March 2022 31 March 2021
Note £'000 £'000
Assets
Non-current assets
Investment property 15.0 945,237 893,684
Other receivables 17.0 23,519 21,905
Interest rate derivatives 21.0 2,131 -
970,887 915,589
Current assets
Trade and other receivables 17.0 12,865 12,821
Cash and cash equivalents 18.0 53,337 107,097
66,202 119,918
Total assets 1,037,089 1,035,507
Liabilities
Current liabilities
Trade and other payables 19.0 (9,492) (9,345)
Bank and loan borrowings 20.0 - (59,937)
(9,492) (69,282)
Non-current liabilities
Bank and loan borrowings 20.0 (352,050) (292,183)
Interest rate derivatives 21.0 - (544)
(352,050) (292,727)
Total liabilities (361,542) (362,009)
Total net assets 675,547 673,498
Equity
Share capital 22.0 6,225 6,225
Share premium reserve 23.0 292,626 292,463
Capital reduction reserve 24.0 322,365 331,140
Retained earnings 25.0 54,331 43,670
Total equity 675,547 673,498
Net assets per share - basic and diluted 26.0 110.30p 108.30p
These consolidated financial statements were approved by the Board of
Directors of Civitas Social Housing PLC and authorised for issue and signed on
its behalf by:
Michael Wrobel (Chairman and Independent Non-Executive Director)
29 June 2022
Company No: 10402528
Consolidated Statement of Changes in Equity
For the year ended 31 March 2022
Share Capital
Share premium reduction Retained Total
capital reserve reserve earnings equity
Note £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2020 6,225 292,405 330,926 41,008 670,564
Profit and total comprehensive income for the year - - - 36,075 36,075
Shares reissued from treasury - 58 214 - 272
Dividends paid 14.0 - - - (33,413) (33,413)
Balance at 31 March 2021 6,225 292,463 331,140 43,670 673,498
Profit and total comprehensive income for the year - - - 44,754 44,754
Shares reissued from treasury - 163 484 - 647
Shares bought back into treasury - - (9,259) - (9,259)
Dividends paid 14.0 - - - (34,093) (34,093)
Balance at 31 March 2022 6,225 292,626 322,365 54,331 675,547
The notes set out below are an integral part of these consolidated financial
statements
Consolidated Statement of Cash Flows
For the year ended 31 March 2022
For the For the
year ended year ended
31 March 2022 31 March 2021
Note £'000 £'000
Cash flows from operating activities
Profit for the year before taxation 44,754 36,075
- Change in fair value of investment properties (12,269) (5,511)
- Change in fair value of interest rate derivatives (2,675) 66
- Rent and incentive straight line adjustments 397 68
- Bad debt (credit)/expense 5.0 (17) 289
Finance income (7) (20)
Finance expense 10,608 7,737
Increase in lease incentive receivable (2,011) (11,217)
Increase in trade and other receivables (236) (3,150)
(Decrease)/increase in trade and other payables (1,062) 1,762
Cash generated from operations 37,482 26,099
Interest received 7 20
Net cash flow generated from operating activities 37,489 26,119
Investing activities
Purchase of investment properties (27,695) (19,462)
Acquisition costs (1,640) (938)
Purchase of subsidiary company - including property (13,559) -
Sale proceeds on sale of subsidiary company - excluding property 2,695 -
Utilisation of restricted cash held for investing activities 529 14,232
Net cash flow used in investing activities (39,670) (6,168)
Financing activities
Cost of shares bought into treasury 24.0 (9,259) -
Proceeds from shares reissued from treasury 24.0 919 -
Dividends paid to equity shareholders (33,928) (33,319)
Bank borrowings advanced 20.0 - 84,550
Bank borrowing issue costs paid (1,805) (2,811)
Interest and security fees paid on bank borrowings and derivatives (8,590) (5,981)
Net cash flow (used in)/generated from financing activities (52,663) 42,439
Net (decrease)/increase in cash and cash equivalents (54,844) 62,390
Unrestricted cash and cash equivalents at the start of the year 18.0 103,819 41,429
Unrestricted cash and cash equivalents at the end of the year 18.0 48,975 103,819
The notes set out below are an integral part of these consolidated financial
statements
Notes to the Consolidated Financial Statements For the year ended 31 March
2022
1.0 Corporate information
Civitas Social Housing PLC (the "Company") was incorporated in England and
Wales under the Companies Act 2006 as a public company limited by shares on 29
September 2016 with company number 10402528 under the name Civitas REIT PLC,
which was subsequently changed to the existing name on 3 October 2016.
The address of the registered office is Beaufort House, 51 New North Road,
Exeter, EX4 4EP. The Company is registered as an investment company under
section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.
The Company did not begin trading until 18 November 2016 when the shares were
admitted to trading on the London Stock Exchange ("LSE").
The Company's Ordinary shares are admitted to the Official List of the
Financial Conduct Authority ("FCA") and traded on the LSE.
The principal activity of the Company and its subsidiaries (the "Group") is to
provide shareholders with an attractive level of income, together with the
potential for capital growth from investing in a portfolio of social homes.
2.0 Basis of preparation
On 31 December 2020 EU-adopted International Financial Reporting Standards
'IFRS' was brought into UK law and became UK-adopted International Accounting
Standards, with future changes to IFRS being subject to endorsement by the UK
Endorsement Board. The consolidated financial statements have transitioned to
UK-adopted International Accounting Standards for the year ended 31 March
2022. This change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the year reported as
a result of the change in framework.
The financial statements are prepared in accordance with UK-adopted
International Accounting Standards and the applicable legal requirements of
the Companies Act 2006.
The Group's consolidated financial statements have been prepared on a
historical cost basis, as modified for the Group's investment properties and
derivative financial instruments at fair value through profit or loss.
The Group has chosen to adopt EPRA best practice guidelines for calculating
key alternative performance measures. These are disclosed above with
supporting calculations in Appendix 1 below.
2.1 Functional and presentation currency
The financial information is presented in Pounds Sterling which is also the
functional currency of the Company, and all values are rounded to the nearest
thousand pounds (£'000s), except where otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases with the
Approved Providers and present a well-diversified risk. The Group's cash
balances as at 31 March 2022 were £53,337,000, of which £4,362,000 was held
as restricted cash. Details of this can be found in note 18.0.
The Company and its Investment Adviser, Civitas Investment Management Limited
("CIM") continue to work closely with the Company's major counterparties to
monitor the position on the ground and should it be needed, to offer
assistance and guidance where possible. The Board of Directors believes that
the Company operates a robust and defensive business model and that social
housing and specialist healthcare are proving to be some of the more resilient
sectors within the market, given that they are based on non-discretionary
public sector expenditure and that demand exceeds supply.
In November 2021 the facility with HSBC Bank plc was extended to November
2023. In May 2022 the facility with Lloyds Bank plc was extended to July 2024.
Cash flow forecasts based on severe but plausible downside scenarios have been
run, in particular the financial performance of tenants and a reduction in
rent. As at 31 March 2022, the rent would have to drop by approximately 29%
before its loan covenant is breached. At the date of approval of this report,
the Company has substantial headroom within its financial loan covenants. The
Company also benefits from a secure income stream from leases with long
average unexpired term leases. As a result, the Directors believe that the
Group is well placed to manage its financing and other business risks and that
the Group will remain viable, continuing to operate and meet its liabilities
as they fall due.
The Company's articles of association include a requirement for the Board to
propose an ordinary resolution at the annual general meeting following the
fifth anniversary from the initial public offering of the Company for the
Company to continue in its current form (the Continuation Resolution). This is
the first continuation vote since the Company was set up.
If the Continuation Resolution is passed, the Company will continue its
business as presently constituted and propose the same resolution at every
fifth annual general meeting thereafter. If the Continuation Resolution is not
passed, the Directors will be required, within six months after the date of
this annual general meeting, to formulate proposals for consideration by the
shareholders for the voluntary liquidation, unitisation, reorganisation, or
reconstruction of the Company.
After making appropriate enquiries of the Company's brokers and Investment
Adviser, pursuant to their recent discussions with a number of the Company's
shareholders, the Directors are of the view that the Continuation Resolution
will be passed at the forthcoming annual general meeting. This reflects the
strength and nature of the Company's portfolio, and specifically the provision
of long-term accommodation for more than 4,000 vulnerable individuals.
Accordingly, the Directors expect that if the Continuation Resolution is not
passed, an event which the Directors consider to be highly remote, formulating
and implementing any such proposals would require the Company to continue
operations for(1) a period of at least 12 months from the date of approval of
the Company's financial statements.
The Board is, therefore, of the opinion that the going concern basis adopted
in the preparation of the consolidated financial statements is appropriate.
2.3 New standards, amendments and interpretations
The following new standards are now effective and have been adopted for the
year ended 31 March
2022.
· Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9
'Financial Instruments', IAS 39 'Financial Instruments; Recognition and
Measurement', IFRS 7 'Financial Instruments: Disclosures', IFRS 4 'Insurance
Contracts' and IFRS 16 'Leases' (effective for periods beginning on or after 1
January 2021). These amendments address issues that might affect financial
reporting when an existing interest rate benchmark is replaced with an
alternative benchmark interest rate. The Group's borrowings with Lloyds Bank
plc and HSBC Bank PLC and National Westminster Bank Plc have transitioned from
the London Interbank Offer Rate (LIBOR) benchmark to the Sterling Overnight
Index Average (SONIA) benchmark. The transition has not led to a material
change in overall borrowing costs.
2.4 New standards, amendments and interpretations effective for future
accounting periods
The following are new standards, interpretations and amendments, which are not
yet effective and have not been early adopted in this financial information,
that will or may have an effect on the Group's future financial statements:
· Amendments to IAS 1 'Presentation of Financial Statements
(effective for periods beginning on or after 1 January 2022) - clarifies that
liabilities are classified as either current or non-current, depending on the
rights that exist at the end of the reporting period and not expectations of
or actual events after the reporting date. The amendments also give
clarification to the definition of settlement of a liability. The amendments
are not expected to have a significant impact on the preparation of the
financial statements.
· Amendments to IFRS 3 'Business Combinations' (effective for
periods beginning on or after 1 January 2022) - gives clarification on the
recognition of contingent liabilities at acquisition and clarifies that
contingent assets should not be recognised at the acquisition date. The
amendments are not expected to have a significant impact on the preparation of
the financial statements.
· Amendments to IAS 37 'Provisions, Contingent Liabilities and
Contingent Assets' (effective for periods beginning on or after 1 January
2022) - gives clarification on costs to include in estimating the cost of
fulfilling a contract for the purpose of assessing whether that contract is
onerous. The amendments are not expected to have a significant impact on the
preparation of the financial statements.
· Amendments to IFRS 9 'Financial Instruments' (effective for
periods beginning on or after 1 January 2022) - gives clarification on the
fees an entity includes when assessing whether the terms of a new or modified
financial liability are substantially different from the terms of the original
liability. The amendments are not expected to have a significant impact on the
preparation of the financial statements.
· Amendments to IAS 1 'Presentation of Financial Statements'
(effective for periods beginning on or after 1 January 2023) - are intended to
help entities in deciding which accounting policies to disclose in their
financial statements. The amendments are not expected to have a significant
impact on the preparation of the financial statements.
· Amendments to IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors' (effective for periods beginning on or after 1 January
2023) - introduce the definition of an accounting estimate and include other
amendments to help entities distinguish changes in accounting estimates from
changes in accounting policies. The amendments are not expected to have a
significant impact on the preparation of the financial statements.
2.5 Segmental information
IFRS 8 Operating Segments requires operating segments to be identified on the
basis of internal financial reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker, which in the Group's
case is delegated to the Investment Adviser, who has formed an Executive Team,
in order to allocate resources to the segments and to assess their
performance.
The internal financial reports received by the Investment Adviser's Executive
Team contain financial information at a Group level as a whole and there are
no reconciling items between the results contained in these reports and the
amounts reported in the consolidated financial statements.
The Directors consider the Group's property portfolio represents a coherent
and diversified portfolio with similar economic characteristics and as a
result, the whole portfolio of properties represents a single operating
segment. In the view of the Directors there is accordingly one reportable
segment under the provisions of IFRS 8.
All of the Group's properties are based in the UK. Geographical information is
provided to ensure compliance with the diversification requirements of the
Company, other than this no geographical grouping is contained in any of the
internal financial reports provided to the Investment Adviser's Executive Team
and, therefore no geographical segmental analysis is required by IFRS 8.
The Directors note the requirements in IFRS 8 Paragraph 34 pertaining to
entities under common control and confirm that both Auckland Home Solutions
and Qualitas Housing (as lessees of the Company's investment real estate) are
under common control of The Social Housing Family CIC ("TSHF"). The percentage
and sum total of the Company's annual rent roll pertaining to these
counterparties as if they were considered to be a 'single customer' can be
found in note 28.0 and as set out above.
3.0 Significant accounting judgements, estimates and assumptions
In the application of the Group's accounting policies, which are described in
note 4.0, 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 judgements, estimates and associated
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are outlined below:
3.1 Significant estimate - valuation of investment propertyThe Group uses the
valuation carried out by its independent valuer as the fair value of its
property portfolio. The valuation is based upon assumptions including future
rental income and the appropriate discount rate. The valuers also make
reference to market evidence of transaction prices for similar properties.
Further information is provided in note 15.0.
The Group's properties have been independently valued by Jones Lang LaSalle
Limited ("JLL" or the "Valuer") in accordance with the current Royal
Institution of Chartered Surveyors' Valuation - Global Standards,
incorporating the IVS, and the RICS Valuation - Global Standards 2017 UK
national supplement (the RICS "Red Book"). JLL is one of the most recognised
professional firms within social housing valuation and has sufficient current
local and national knowledge of both social housing generally and Specialist
Supported Housing ("SSH") and has the skills and understanding to undertake
the valuations competently.
With respect to the Group's consolidated financial statements, investment
properties are valued at their fair value at each balance sheet date in
accordance with IFRS 13. Fair value measurements should be presented and
classified using a fair value hierarchy that reflects the significance of the
inputs used in the measurements, according to the following levels:
Level 1 Unadjusted, quoted prices for identical assets and liabilities in
active (typically quoted) markets.
Level 2 Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices)
Level 3 Inputs for the asset or liability that are not based on
observable market data (unobservable inputs). Value is the Directors' best
estimate, based on advice from relevant knowledgeable experts, use of
recognised valuation techniques and a determination of which assumptions
should be applied in valuing such assets and with particular focus on the
specific attributes of the investments themselves.
Given the bespoke nature of each of the Group's investments, the particular
requirements of due diligence and financial contribution obtained from the
vendors together with the recent emergence of SSH, all of the Group's
investment properties are included in Level 3.
3.2 Significant judgement - business combinations
The Group acquires subsidiaries that own investment properties. At the time of
acquisition, the Group considers whether each acquisition represents the
acquisition of a business or the acquisition of an asset. Management considers
the substance of the assets and activities of the acquired entity in
determining whether the acquisition represents the acquisition of a business.
The Group accounts for an acquisition as a business combination where an
integrated set of activities is acquired in addition to the property. Where
such acquisitions are not judged to be the acquisition of a business, they are
not treated as business combinations. Rather, the cost to acquire the
corporate entity is allocated between the identifiable assets and liabilities
of the entity based upon their relative fair values at the acquisition date.
Accordingly, no goodwill or additional deferred tax arises.
All corporate acquisitions made during the year have been treated as asset
purchases rather than business combinations because no integrated set of
activities was acquired.
During the year, the Group entered into a transaction to acquire the freehold
properties operated by CPI Care Limited. Upon the acquisition of the company;
the properties were transferred into other group companies and the company
acquired, along with its associated operations, was sold to Envivo Corundum
Bidco Limited. Further details are shown in note 16.0 to the financial
statements.
The acquired companies met the definition of a business under IFRS 3, and the
transaction was therefore recorded as a business combination.
Because the Group acquired the company with the intent to sell the business,
management applied the short-cut method under IFRS 5 - Subsidiaries acquired
with a view to resale. Under this method, the subsidiary is recorded at fair
value less costs to sell, and there is no requirement to fair value the
subsidiary's individual assets and liabilities.
3.3. Significant judgement - operating lease contracts - the Group as lessor
The Group has acquired investment properties that are subject to commercial
property leases with Approved Providers. The Group has determined, based on an
evaluation of the terms and conditions of the arrangements, particularly the
duration of the lease terms and minimum lease payments, that it retains all
the significant risks and rewards of ownership of these properties and so
accounts for the leases as operating leases.
3.4. Significant judgement - REIT Status
Civitas Social Housing Plc. is a Real Estate Investment Trust (REIT). The UK
REIT regime applies when entities meet certain conditions with the effect that
the income profits and capital gains of the qualifying property rental
business are exempt from tax. Within these conditions at least 90% of the
Group's property income must be distributed as dividends to Shareholders and
the Group must ensure that the property rental business represents more than
75% of total profits and assets. It is management's judgement that the Group
will continue as a REIT for the foreseeable future.
4.0 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the financial
statements are set below. The policies have been consistently applied to all
periods presented, unless otherwise stated.
4.1. Basis of consolidation
The consolidated financial statements comprise the financial information of
the Group as at the year end date.
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation. The financial information of the subsidiaries is included in
the consolidated financial statements from the date that control commences
until the date that control ceases.
If an equity interest in a subsidiary is transferred but a controlling
interest continues to be held after the transfer then the change in ownership
interest is accounted for as an equity transaction.
Accounting policies of the subsidiaries are consistent with the policies
adopted by the Company.
4.2. Investment property
Investment property, which is property held to earn rentals and/or for capital
appreciation, is initially measured at cost, being the fair value of the
consideration given, including expenditure that is directly attributable to
the acquisition of the investment property. After initial recognition,
investment property is stated at its fair value at the balance sheet date.
Gains and losses arising from changes in the fair value of investment property
are included in profit or loss for the period in which they arise in the
Consolidated Statement of Comprehensive Income.
Subsequent expenditure is capitalised only when it is probable that future
economic benefits are associated with the expenditure. Ongoing repairs and
maintenance are expensed as incurred. Overheads and operating expenses are not
capitalised.
An investment property is derecognised upon disposal or when the investment
property is permanently withdrawn from use and no future economic benefits are
expected from the disposal. Any gain or loss arising on derecognition of the
property (calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is incurred in profit or loss in the period
in which the property is derecognised.
Significant accounting judgements, estimates and assumptions made for the
valuation of investment properties are discussed in note 3.1.
4.3. Leases
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Company has determined that it retains all the significant risks and
rewards of ownership of the properties and accounts for the contracts as
operating leases as discussed in note 3.3.
Properties leased out under operating leases are included in investment
property in the Consolidated Statement of Financial Position. Rental income
from operating leases is recognised on a straight line basis over the term of
the relevant leases.
Lease incentive costs are recognised as an asset and amortised over the life
of the lease.
4.4. Financial Assets
Classification
The Group classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either through
other comprehensive income or through profit or loss); and
· those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows. For assets
measured at fair value, gains and losses will either be recorded in profit or
loss or other comprehensive income.
Trade and other receivables
Trade and other receivables are amounts due in the ordinary course of
business. If collection is expected in one year or less, they are classified
as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently are
measured at amortised cost using the effective interest method, less
impairment provision. The Group holds the trade receivables with the objective
to collect the contractual cash flows.
Impairment
The Group's financial assets are subject to the expected credit loss model.
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables.
The expected loss rates are based on the payment profiles of lease income over
a period of up to 12 months before 31 March 2022 or 1 April 2021,
respectively, and the corresponding historical credit losses experienced
within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the
liability of the tenants to settle the receivable. Such forward-looking
information would include: changes in economic, regulatory, technological and
environmental factors (such as industry outlook, GDP, employment and
politics); external market indicators; and tenant base.
Based on the assessment and the specific work that is underway around
collection of aged arrears, a provision of £239,000 (2021: £256,400) has
been reflected in the annual results.
Trade receivables are written off when there is no reasonable expectation of
recovery.
Indicators that there is no reasonable expectation of recovery include, among
others, the probability of insolvency or significant financial difficulties of
the debtor. Impaired debts are derecognised when they are assessed as
uncollectible.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, cash held by lawyers and
liquidity funds with a term of no more than three months that are readily
convertible to a known amount of cash and which are subject to an
insignificant risk of changes in value.
Restricted cash represents amounts held for specific commitments, tenant
deposits and retention money held by lawyers in relation to deferred payments
subject to achievement of certain conditions, other retentions and cash
segregated to fund repair, maintenance and improvement works to bring the
properties up to satisfactory standards for the Group and the tenants.
Derivative financial instruments
Derivative financial instruments, which comprise interest rate swaps for
hedging purposes, are initially recognised at fair value at acquisition and
are subsequently measured at fair value, being the estimated amount that the
Group would receive or pay to sell or transfer the agreement at the period end
date, taking into account current interest rate expectations and the current
credit rating of the lender and its counterparties. The instrument may be an
asset or a liability. The gain or loss at each fair value remeasurement date
is recognised in the Group's Consolidated Statement of Comprehensive Income.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data is available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs significant to the fair value measurement as a whole.
Other than derivative financial instruments which are not designated as
hedging instruments, the Group does not have any assets held for trading nor
does it voluntarily classify any financial assets as being at fair value
through profit or loss.
4.5. Financial liabilities
The Group recognises a financial liability when it first becomes a party to
the contractual rights and obligations in the contract.
All financial liabilities are initially recognised at fair value, minus (in
the case of a financial liability that is not at fair value through profit or
loss) transaction costs that are directly attributable to issuing the
financial liability. Financial liabilities are subsequently measured at
amortised cost, unless the Group opted to measure a liability at fair value
through profit or loss.
A financial liability is derecognised when the obligation under the liability
is discharged, cancelled or expires.
Trade and other payables
Trade and other payables are classified as current liabilities if payment is
due within one year or less. If not, they are presented as non-current
liabilities. Trade and other payables are recognised initially at their fair
value and subsequently measured at amortised cost until settled. The fair
value of a non-interest bearing liability is its discounted repayment amount.
If the due date of the liability is less than one year, discounting is
omitted.
Bank and other borrowings
All bank and other borrowings are initially recognised at fair value less
directly attributable transaction costs. After initial recognition, all bank
and other borrowings are measured at amortised cost, using the effective
interest method. Any attributable transaction costs relating to the issue of
the bank borrowings are amortised through the Group's Statement of
Comprehensive Income over the life of the debt instrument on a straight-line
basis.
Derivative financial instruments
Derivative financial instruments may be a financial asset or a financial
liability. Please refer to the accounting policy in note 4.4 for details.
4.6. Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the balance sheet date, taking
into account the risks and uncertainties surrounding the obligation.
4.7. Taxation
Taxation on the profit or loss for the period not exempt under UK REIT
regulations is comprised of current and deferred tax. Tax is recognised in the
Consolidated Statement of Comprehensive Income except to the extent that it
relates to items recognised as a direct movement in equity, in which case it
is recognised as a direct movement in equity. Current tax is expected tax
payable on any non-REIT taxable income for the period, using tax rates enacted
or substantively enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous periods.
The current tax charge is calculated on profits arising in the period and in
accordance with legislation which has been enacted or substantially enacted at
the balance sheet date.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The amount of deferred tax that is provided is
based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
4.8. Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and to maintain an optimal capital structure to reduce the cost
of capital.
Capital assets comprise the following:
31 March 2022 31 March 2021
£'000 £'000
Proceeds from the issue of Ordinary shares and retained earnings 675,547 673,498
Bank and loan borrowings 352,050 352,120
Total 1,027,597 1,025,618
Until the Group is fully invested and pending re-investment or distribution of
cash receipts, the Group will invest in cash, cash equivalents, near cash
instruments and money market instruments.
The Directors may use gearing to enhance equity returns. The level of
borrowing will be on a prudent basis for the asset class and will seek to
achieve a low cost of funds, whilst maintaining the flexibility in the
underlying security requirements and the structure of the Group.
The Group may, following a decision of the Board, raise debt from banks and/or
the capital markets and the aggregate borrowings of the Group will always be
subject to an absolute maximum, calculated at the time of drawdown, of below
40% of the Gross Asset Value on a fully invested basis.
4.9. Dividends payable to shareholders
Dividends are included in the financial statements in the year in which they
are paid.
4.10. Rental income
Rental income from investment property is recognised on a straight-line basis
over the term of ongoing leases and is shown gross of any UK income tax. Lease
incentives are spread evenly over the lease term.
Insurance recharges and other similar receipts are recognised under IFRS 15
'Revenue from contracts with customers', and are included in net rental and
property income gross of the related costs as the Directors consider the Group
acts as principal in this respect
4.11. Finance income
Finance income is recognised as interest, and is accrued on cash and cash
equivalent balances held by the Group.
4.12. Finance costs
Finance costs consist of interest and other costs that the Group incurs in
connection with bank and other borrowings. Bank interest and bank charges are
recognised on an accruals basis. Borrowing transaction costs are amortised
using the effective interest rate.
4.13. Expenses
All expenses, including investment advisory fees, are recognised in the
Consolidated Statement of Comprehensive Income on an accruals basis.
4.14. Share issue costs
The costs of issuing or reacquiring equity instruments (other than in a
business combination) are accounted for as a deduction from equity.
4.15 Share held in treasury
The costs, including directly attributable transactions costs, of purchasing
the Company's own shares to be held in treasury is deducted from equity and
the costs are shown in the Consolidated Statement of Changes in Equity.
Consideration received, net of transaction costs, for the resale of these
shares is also included in equity. Whilst the Company holds shares in
treasury, the calculations for net asset value and earnings per share are
adjusted to exclude these shares.
5.0 Rental income
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Rental income from investment property 51,038 48,201
Rent straight line adjustments 529 372
Lease incentive amortisation (926) (439)
Rechargeable costs received 995 886
Rental income 51,636 49,020
Less direct property expenses (978) (1,175)
Net rental income 50,658 47,845
Rechargeable costs received represent insurance and service charge costs paid
by the Group and recharged to the Approved Providers and are accounted for
under IFRS 15 'Revenue from contracts with customers'.
Direct property expenses represent insurance and service charge costs of
£995,000 (2021: £886,000) and bad debt credit of £17,000 (2021: £289,000
expense).
As per the lease agreements with the Group and Approved Providers, the
Approved Providers are responsible for the settlement of all present and
future rates, taxes and other impositions payable in respect of the property.
As a result, no further direct property expenses were incurred.
6.0 Directors' remuneration
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Directors' fees 190 182
Employer's National Insurance Contributions 16 16
Total 206 198
The Directors are remunerated for their services in accordance with the
Remuneration Policy which sets parameters within which Directors' remuneration
may be set. The Remuneration Policy is approved by shareholders.
Disclosures required by the Companies Act 2006 on Directors' remuneration,
including salaries, share options, pension contributions and pension
entitlement and those specified by the Listing Rules of the Financial Conduct
Authority are included in the Remuneration Report set out in the full Annual
Report and form part of these Financial Statements.
7.0 Particulars of employees
The Group had no employees during the period (2021: nil) other than the
Directors.
8.0 Investment advisory fees
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Advisory fee 6,132 6,117
Total 6,132 6,117
Civitas Investment Management Limited ("CIM") is the appointed Investment
Adviser of the Company. Under the current Investment Management Agreement, the
Advisory Fee shall be an amount calculated in respect of each Quarter, in each
case based upon the Net Asset Value most recently announced to the market at
the relevant time (as adjusted for issues or repurchases of shares in the
period between the date of such announcement and the date of the relevant
calculation), on the following basis:
a) on that part of the Net Asset Value up to and including £250 million,
an amount equal to 1% of such part of the Net Asset Value;
b) on that part of the Net Asset Value over £250 million and up to and
including £500 million, an amount equal to 0.9% of such part of the Net Asset
Value;
c) on that part of the Net Asset Value over £500 million and up to and
including £1 billion, an amount equal to 0.8% of such part of the Net Asset
Value;
d) on that part of the Net Asset Value over £1 billion, an amount equal
to 0.7% of such part of the Net Asset Value.
The appointment of the Investment Adviser shall continue in force unless and
until terminated by either party giving to the other not less than 12 months'
written notice, such notice not to expire earlier than 30 May 2024.
9.0 General and administrative expenses
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Legal and professional fees 1,459 1,044
Administration fees 1,037 983
Consultancy fees 136 116
Audit fees 340 361
Abortive costs 196 174
Valuation fees 100 96
Depositary fees 71 71
Grants and donations 26 19
Insurance 84 65
Marketing 343 179
Regulatory fees 25 19
Sundry expenses 92 56
Total 3,909 3,183
Abortive costs represent legal and professional fees incurred in relation to
the acquisition of investment properties and proposed share issues that were
considered but subsequently aborted.
Services provided by the Company's auditors and their associates
The Group has obtained the following services from the Group's auditors and
their associates:
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Fees payable to the group's auditor and its associates for auditing financial
statements:
Audit of the Group's financial statements(1) 296 272
Audit of the subsidiary companies(2) - 32
Total fees payable for audit services: 296 304
Fees payable to the group's auditor and its associates for other services:
Audit related services - review of the half year financial statements 44 57
Other services(3) 62 -
Total 402 361
1 Includes £18,000 (2021: £50,000) cost in relation to the prior year audit.
2 Most subsidiary companies are exempt from audit as detailed below
3 This amount is included within prepayments and other receivables at 31 March
2022.
10.0 Finance income
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Interest and dividends received on liquidity funds 4 11
Bank interest received 3 9
Total 7 20
11.0 Finance expense
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Bank charges 6 3
Interest paid and payable on bank borrowings and derivatives 8,907 6,416
Amortisation of loan arrangement fees 1,653 1,293
Loan security fees 42 -
Other interest - 25
Total 10,608 7,737
12.0 Taxation
As a UK REIT, the Group is exempt from corporation tax on the profits and
gains from its property investment business, provided it meets certain
conditions as set out in the UK REIT regulations. For the current year ended
31 March 2022, the Group did not have any non-qualifying profits and
accordingly there is no tax charge in the year. 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.
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Corporation tax charge for the year - -
Total - -
The tax charge for the period is less than the standard rate of corporation
tax in the UK of 19%. The differences are explained below.
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Group
Profit before taxation 44,754 36,075
UK corporation tax rate 19.00% 19.00%
Theoretical tax at UK corporation tax rate 8,503 6,854
Effects of:
Change in value of exempt investment properties (2,331) (1,047)
Exempt REIT income (6,598) (6,511)
Amounts not deductible for tax purposes (230) 171
Unutilised residual current period tax losses 656 533
Total - -
A deferred tax asset of £1,268,000 (2021: £1,508,000) has not been
recognised in respect of the unutilised residual current year losses as it is
not anticipated that sufficient residual profits will be generated in the
future.
The standard rate of corporation tax is currently 19%. In the Spring Budget
2021, the UK Government announced that from 1 April 2023 the corporation tax
rate will increase to 25% (rather than remaining at 19%, as previously
enacted). This new law was substantively enacted on 24 May 2021.
REIT exempt income includes property rental income that is exempt from UK
Corporation Tax in accordance with Part 12 of Corporation Tax Act 2010.
13.0 IFRS Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing profit for the
year attributable to ordinary equity holders of the Company by the weighted
average number of Ordinary shares in issue during the year.
The calculation of basic and diluted earnings per share is based on the
following:
For the For the
year ended year ended
31 March 2022 31 March 2021
Calculation of Basic Earnings per share
Net profit attributable to Ordinary shareholders (£'000) 44,754 36,075
Weighted average number of Ordinary shares (excluding shares held in treasury) 618,797,942 621,651,859
Earnings per share - basic and diluted 7.23p 5.80p
14.0 Dividends
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Dividend of 1.3500p for the 3 months to 31 March 2021 8,403 8,237
(1.325p 3 months to 31 March 2020)
Dividend of 1.3875p for the 3 months to 30 June 2021 8,637 8,392
(1.350p 3 months to 30 June 2020)
Dividend of 1.3875p for the 3 months to 30 September 2021 (1.350p 3 months to 8,555 8,392
30 September 2020)
Dividend of 1.3875p for the 3 months to 31 December 2021 (1.350p 3 months to 8,498 8,392
31 December 2021)
Total 34,093 33,413
On 11 May 2022, the Company announced a dividend of 1.3875 pence per share in
respect of the period 1 January 2022 to 31 March 2022 totalling £8,474,000.
The dividend payment was made on 28 June 2022 to shareholders on the register
as at 20 May 2022. The financial statements do not reflect this dividend. The
dividend was paid as a REIT property income distribution ("PID").
15.0 Investment property
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Balance at beginning of year 915,589 878,743
Property acquisitions 37,198 19,129
Acquisition costs 2,086 1,056
Lease incentives and rent straight line adjustments recognised 1,614 11,150
Change in fair value 12,269 5,511
Value advised by the property valuers 968,756 915,589
Less lease incentive assets and rent straight line assets (23,519) (21,905)
Total 945,237 893,684
Acquisitions include capital expenditure to enhance lettable space of
£5,818,000 (2021: £4,077,000).
During the year the Group acquired a property holding company from Herleva
Properties Limited which held assets totalling £8,611,000. These are included
within Property Acquisitions in the note above.
Herleva Properties Limited is a subsidiary of Specialist Healthcare Operations
Limited ("SHO"). Andrew Dawber and Tom Pridmore (both directors of the
Investment Adviser), are each 14.99% shareholders in SHO. They are not
directors of SHO, and have no operational role in that business. SHO does not
meet the definition of a related party under IAS 24.
In accordance with "IAS 40: Investment Property", the investment property has
been independently valued at fair value by JLL, an accredited external valuer
with recognised and relevant professional qualifications and recent experience
of the location and category of the investment property being valued, however,
the valuations are the ultimate responsibility of the Directors.
Valuation
JLL valued the Civitas Social Housing PLC property portfolio on the basis of
each individual property and the theoretical sale of the properties without
the benefit of any corporate wrapper at £968,756,000 as at 31 March 2022
(2021: £915,589,000).
JLL has provided valuation services to the Company with regards to the
properties during the year. JLL has provided additional valuation services on
the acquisition of investment property to the Company during the period. The
Directors have ensured that JLL has appropriate procedures in place to ensure
there are no independence conflicts with the services provided to the Company.
In relation to the year ended 31 March 2022, the proportion of the total fees
payable by the Company to JLL's total fee income was less than 5% and is
therefore minimal. Additionally, JLL has a rotation policy in place whereby
the signatories on the valuations rotate after seven years.
With the exception of the acquisition detailed in note 16.0, all corporate
acquisitions during the year and the comparative year have been treated as
asset purchases rather than business combinations because following review of
the IFRS 3 concentration test, they are considered to be acquisitions of
properties rather than businesses (note 3.2).
The following table provides the fair value measurement hierarchy for
investment property:
Significant Significant
Quoted prices observable unobservable
in active inputs inputs
Investment properties measured at fair value Total markets (Level 2) (Level 3)
£'000 (Level 1) £'000 £'000
£'000
31 March 2022 945,237 - - 945,237
31 March 2021 893,684 - - 893,684
There have been no transfers between Level 1 and Level 2 during any of the
years, nor have there been any transfers between Level 2 and Level 3 during
any of the years.
The valuations have been prepared in accordance with the RICS Valuation -
Professional Standards (incorporating the International Valuation Standards)
by JLL, one of the leading professional firms engaged in the social housing
sector.
As noted previously all of the Group's investments are reported as Level 3 in
accordance with IFRS 13 where inputs are not based on observable market data
and the value is based upon advice from relevant knowledgeable experts.
In this instance, the determination of the fair value of investment property
requires an examination of the specific merits of each property that are in
turn considered pertinent to the valuation.
These include:
i. the regulated social housing sector and demand for the facilities
offered by each SSH property owned by the Group;
ii. the particular structure of the Group's transactions where vendors,
at their own expense, meet the majority of the refurbishment costs of each
property and certain purchase costs;
iii. detailed financial analysis with discount rates supporting the
carrying value of each property;
iv. a full repairing and insuring lease with annual indexation based on
CPI or CPI+1%.
The following descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as follows:
Valuation techniques: income approach
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date (i.e. an exit price).
The valuation methodology used by the valuers follows the income approach.
This approach considers the rental income currently payable; the next uplift
due on that income on review; the likelihood of a continuation of that rental
income - with growth in accordance with the leases - over the remaining terms;
and then a long-term reversion which considers the likely ability of the
properties to continue to generate rent through supported housing occupation,
as distinct from a reversion to vacant possession value.
Risks are involved in both assessing the value of the rental income over the
remaining terms of the leases and in also predicting that income will continue
beyond the end of the existing leases. This is a balanced judgment, which can
properly be reflected in the exit yield applied to the final year's income and
in the overall return to a purchaser.
Appropriate taxation calculations are adopted for every property based on its
value and on the assumption of the sale of the property assets directly as
opposed to shares of a subsidiary company holding the property and have
considered the individual characteristics of the properties.
There are two main unobservable inputs that determine the fair value of the
Group's investment property:
i) The rate of 2% per annum has been used for CPI over the term of the subject
properties' leases in line with the Bank of England's long-term inflation
targets for CPI. It should be noted that all leases benefit from either CPI or
CPI+1 indexation.
ii) The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include the regulated
social housing sector and demand for each SSH property owned by the Group,
costs of acquisition and refurbishment of each property, the anticipated
future underlying cash flows for each property, benchmarking of each
underlying rent for each property (passing rent), impact of climate change,
and the fact that all of the properties within the Group's portfolio have the
benefit of full repairing and insuring leases entered into by an Approved
Provider.
As at the balance sheet date, the lease lengths within the Group's portfolio
ranged from an effective 15 years to 36 years with a weighted average
unexpired lease term of 22.1 years (2021: 22.6). The greater the length of the
lease, then, all other metrics being equal, the greater the value of the
property.
Sensitivities of measurement of significant unobservable inputs
As set out within significant accounting estimates at 3.1 above, the Group's
property investment valuation is open to inherent uncertainties in the inputs
that determine fair value. As a result, the following sensitivity analysis has
been prepared:
Average discount rate and range
The average discount rate used by the valuer in the Group's property Portfolio
Valuation is 5.5% (2021: 6.0%).
The range of discount rates used by the valuer in the Group's property
Portfolio Valuation is from 4.6% to 11.5% (2021: 4.7% to 10.7%).
The range of discount rates used by the valuer in the Group's property
Portfolio Valuation is from 4.6% to 11.5% (2021: 4.7% to 10.7%). In assessing
the range of discounts, the valuer considers the likely net initial yield
which would be sought by the investment market and builds in additional
discounts to reflect added risk into the discount rate of the term and, in
some cases, the discount rate for the reversion. For example where larger
rental growth is allowed during the lease, an additional discount is built
into the reversion because of the greater risk of a fall in the rent at the
end of the lease.
Similarly additional discounts are considered where properties are in the
process of being re-purposed and premiums are considered where residential
care assets are funded by back-to-back leases with care providers.
The table below illustrates the change to the value of investment properties
if the discount rate and CPI used for the portfolio valuation calculations are
changed:
-0.5% in discount rate +0.5% in discount rate +0.25% in CPI -0.25% in
£'000 £'000 £'000 CPI
£'000
Increase/(decrease) in the IFRS fair value of investment properties at:
31 March 2022 35,620 (33,142) 28,509 (27,426)
31 March 2021 34,131 (31,776) 27,211 (26,175)
16.0 Subsidiary resale
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Balance at the beginning of the year 13,559 -
Acquisition 765 -
Transfer to investment property (11,629) -
Sale proceeds (2,695) -
- -
On 23 April 2021, the Group entered into a transaction to acquire the freehold
properties operated by CPI Care Limited. Upon the acquisition of the companies
for £13,559,000 plus transaction costs; the properties were transferred into
other group companies and the company acquired, along with its associated
operations, was sold to Envivo Corundum Bidco Limited for £2,695,000.
Envivo Corundum Bidco Limited is a subsidiary of Specialist Healthcare
Operations Limited ("SHO"). Andrew Dawber and Tom Pridmore (both directors of
the Investment Adviser), are each 14.99% shareholders in SHO. They are not
directors of SHO, and have no operational role. SHO does not meet the
definition of a related party under IAS 24.
17.0 Trade and other receivables
31 March 2022 31 March 2021
Amounts falling due in less than one year £'000 £'000
Trade receivables 4,960 4,869
Less provision for impairment of trade receivables (239) (256)
Accrued income 4,982 5,264
Prepayments and other receivables 3,162 2,944
Total 12,865 12,821
Prepayments and other receivable amounts include prepaid legal and
professional fees of £34,000 (2021: £200,000) that have been incurred in
connection with acquisitions yet to be completed and £1,046,000 (2021:
£817,000) in respect of ongoing works on the property portfolio.
Accrued income relates mainly to rent accrued for the year but not yet
demanded.
31 March 2022 31 March 2021
£'000 £'000
Amounts falling due after more than one year
Debtor arising from straight line adjustments 2,053 1,524
Lease incentives 21,466 20,381
Total 23,519 21,905
The aged analysis of trade receivables was as follows:
31 March 2022 31 March 2021
£'000 £'000
Current 1,777 2,128
< 30 days 355 817
30-60 days 105 322
> 60 days 2,723 1,602
4,960 4,869
Debtors past due
Less provision for impairment (239) (256)
Total 4,721 4,613
The Directors consider the fair value of receivables equals their carrying
amount.
Other categories within trade and other receivables do not include impaired
assets
The provision for impairment movement was as follows:
31 March 2022 31 March 2021
£'000 £'000
Balance at beginning of year 256 -
Impairment provision made 109 289
Amounts recovered (126) -
Amounts written off - (33)
Balance at end of year 239 256
18.0 Cash and cash equivalents
31 March 2022 31 March 2021
£'000 £'000
Cash held by solicitors 376 721
Liquidity funds 10,489 10,485
Cash held at bank 38,110 92,613
Unrestricted cash and cash equivalents 48,975 103,819
Restricted cash 4,362 3,278
Total 53,337 107,097
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 solicitors is money held in escrow for expenses expected to be
incurred in relation to investment properties pending completion. These funds
are available immediately on demand.
Restricted cash represents amounts held for specific commitments, tenant
deposits and retention money held in relation to deferred payments subject to
achievement of certain conditions, other retentions and cash segregated to
fund repair, maintenance and improvement works to bring the properties up to
satisfactory standards for the Group and the tenants.
19.0 Trade and other payables
31 March 2022 31 March 2021
£'000 £'000
Deferred income 860 646
Acquisition costs accrued 2,856 3,706
Finance costs 1,840 1,557
Dividends withholding tax payable 1,057 892
Accruals and other creditors 2,202 1,979
Tenant deposits 677 565
Total 9,492 9,345
Acquisition costs accrued also include monies retained at the point of
acquisition to be paid at a later date totalling £2,158,000 (2021:
£2,508,000).
20.0 Bank and loan borrowings
Bank borrowings are secured by charges over individual investment properties
held by certain asset-holding subsidiaries. The banks also hold charges over
the shares of certain subsidiaries and any intermediary holding companies of
those subsidiaries. Any associated fees in arranging the bank borrowings
unamortised as at the year end are offset against amounts drawn on the
facilities as shown in the table below:
For the
For the year ended
year ended 31 March 2021
31 March 2022 £'000
£'000
Bank borrowings drawn at start of year 357,050 272,500
Bank borrowings drawn - 84,550
Bank borrowings drawn at end of year 357,050 357,050
Unamortised costs at start of year (4,930) (3,330)
Less: loan issue costs incurred (1,723) (2,893)
Add: loan issue costs amortised 1,653 1,293
Unamortised costs at end of year (5,000) (4,930)
At end of year 352,050 352,120
Loan Balance(1) Loan Balance Loan Principle(1) Loan Principle
31 March 2022 31 March 2021 31 March 2022 31 March 2021
£'000 £'000 £'000 £'000
Maturity of bank borrowings:
Repayable within 1 year - 59,937 - 60,000
Repayable between 1 to 2 years 158,746 160,000 100,000
99,256
Repayable between 2 to 5 years 59,365 60,000 60,000
59,102
Repayable after 5 years 133,939 133,825 137,050 137,050
Total 352,050 352,120 357,050 357,050
(1) Loan balance net of unamortised costs.
The Group is party to the following loan facility agreements:
A 10-year Sterling Term Facility Agreement dated 2 November 2017 for up to
£52,500,000 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
£173,777,000 (2021: 170,831,000).
A Sterling Revolving Facility Agreement for £60,000,000 with Lloyds Bank plc.
The facility has been extended to 15 July 2024, interest is charged at SONIA +
1.67% margin.
The borrowings include amounts secured on investment property to the value of
£153,340,000 (2021: £149,728,000).
A Revolving Credit Facility Agreement for up to £100,000,000 with HSBC Bank
PLC. Interest is charged at SONIA + 2.02% margin. The facility maturity has
been extended to November 2023.
The borrowings include amounts secured on investment property to the value of
£222,745,000 (2021: £219,606,000).
A 5-year loan facility with National Westminster Bank Plc, dated 15 August
2019, for up to £60,000,000. Interest is charged at SONIA +2.00% margin and
has been fixed by way of a 5-year swap. The swap fixes interest on
£20,000,000 at 2.7105% and £40,000,000 at 2.5475%. The loan can be extended
for an additional 2 years and there is the option of a further £40,000,000
accordion.
The borrowings include amount is secured on investment property to the value
of £135,330,000 (2021: £131,283,000).
A 7-year loan facility with M&G Investment Management Limited, dated 22
January 2021, for up to £84,550,000. Interest is fixed at a total of 3.137%
per annum.
The borrowings include amounts secured on investment property to the value of
£230,487,000 (2021: £225,221,000).
At 31 March 2022, the Group is in compliance with all covenants.
The covenants in place under the five agreements are summarised in the table
below:
Loan Historical and projected interest cover Loan to Value Ratio
Scottish Widows Limited 10-year facility At least 325% Must not exceed 40%
Lloyds Bank plc revolving credit facility At least 550% Must not exceed 52.5%
HSBC Bank PLC facility At least 250% Must not exceed 55%
National Westminster Bank Plc 5-year facility At least 250% Must not exceed 50%
M&G Investment Management Limited 7-year facility At least 250% Must not exceed 55%
The Group's borrowings with Lloyds Bank plc, HSBC Bank PLC and National
Westminster Bank Plc have transitioned from the London Interbank Offer Rate
(LIBOR) benchmark to Sterling Overnight Index Average (SONIA) benchmark during
the year. There was negligible cost involved in the borrowing facility
transition and the respective hedge instrument amendments.
21.0 Interest rate derivatives
The Group has entered into interest rate swap agreements with NatWest Markets
in order to mitigate the risk of changes in interest rates on its loan with
National Westminster Bank Plc under which £60,000,000 is currently drawn.
The swaps have a notional value of £60,000,000 and fix interest at 2.60%
(including the 2% margin rate on the bank loan).
For the
For the year ended
year ended 31 March 2021
31 March 2022 £'000
£'000
At start of year (544) (478)
Change in fair value during the year 2,675 (66)
At end of the year 2,131 (544)
The table below shows the fair value measurement hierarchy for interest
derivatives:
Quote prices Significant Significant
In active Observable unobservable
Markets Inputs Inputs
(Level 1) (Level 2) (Level 3)
£'000 £'000 £'000
31 March 2022 - 2,131 -
31 March 2021 - (544) -
There have been no transfers between Level 1 and Level 2 during the year nor
have there been any transfers between Level 2 and Level 3 during the year.
22.0 Share capital
Share capital represents the nominal value of consideration received by the
Company for the issue of Ordinary shares.
For the
For the year ended
year ended 31 March 2021
31 March 2022 £'000
£'000
Share capital
At beginning and end of year 6,225 6,225
Number of shares issued and fully paid
Ordinary shares of £0.01 each
At beginning and end of year 622,461,380 622,461,380
During the year, the Company reissued the 565,000 (2001: 250,000) Ordinary
shares held in treasury at 31 March 2021 for £647,000 (2021: £272,000).
Later in the year the Company purchased 10,025,000 Ordinary shares to be held
in treasury at a cost of £9,259,000. Further purchases were made after the
year end as detailed in note 23.0.
At 31 March 2022 the Company holds 10,025,000 (2021: 565,000) Ordinary shares
in treasury. The shares will continue to be held in treasury until either
reissued or cancelled.
The number of Ordinary shares used to calculate the net asset value per share
is 612,436,380 (2021: 621,896,380) which excludes the shares held in treasury.
23.0 Share premium reserve
The share premium reserve represents the amounts subscribed for Ordinary share
capital in excess of nominal value less associated issue costs of the
subscriptions.
For the
For the year ended
year ended 31 March 2021
31 March 2022 £'000
£'000
At beginning of year 292,463 292,405
Premium arising on shares reissued from treasury 163 58
At end of year 292,626 292,463
During the year, the Company reissued 565,000 (2021: 250,000) Ordinary shares
held in treasury for £647,000 (2021: £272,000) a gain of £163,000 (2021:
£58,000) arose which is recognised in the share premium reserve.
24.0 Capital reduction reserve
The capital reduction reserve is a distributable reserve to which the value of
the cancelled share premium has been transferred. Pursuant to Article 3 of The
Companies (Reduction of Share Capital) Order 2008, the balance held in the
capital reduction reserve is to be treated for the purposes of Part 23 of the
Companies Act 2006 as a realised profit and therefore available for
distribution in accordance with section 830 of the Companies Act. The Company
has used this reserve for the costs of buying back shares to be held in
treasury.
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
At beginning of year 331,140 330,926
Shares reissued from treasury 484 214
Shares bought back into treasury (9,259) -
At end of year 322,365 331,140
During the year, the Company reissued 565,000 (2021: 250,000) Ordinary shares
held in treasury for £647,000 (2021: £272,000). The cost of purchasing these
shares into treasury of £484,000 (2021: £214,000 has credited the capital
reduction reserve with the gain crediting the Share premium reserve.
Later in the year the Company purchased 10,025,000 Ordinary shares to be held
in treasury at a cost of £9,259,000. Further purchases were made after the
year end as detailed in note 23.0.
At 31 March 2022 the Company holds 10,025,000 (2021: 565,000) Ordinary shares
in treasury.
25.0 Retained earnings
This reserve represents the profits and losses of the Group.
For the
For the year ended
year ended 31 March 2021
31 March 2022 £'000
£'000
At beginning of year 43,670 41,008
Profit for the year 44,754 36,075
Dividends paid in the year (as per note 14.0) (34,093) (33,413)
At end of year 54,331 43,670
26.0 Net asset value
Basic NAV per share is calculated by dividing net assets in the Consolidated
Statement of Financial Position attributable to ordinary equity holders of the
parent by the number of Ordinary shares outstanding at the end of the year.
Net asset values have been calculated as follows:
31 March 2022 31 March 2021
Net assets (£'000) 675,547 673,498
Number of Ordinary shares in issue at end of year 622,461,380 622,461,380
Number of Ordinary shares held in treasury (10,025,000) (565,000)
Number of Ordinary shares excluding treasury shares held by the Company 612,436,380 621,896,380
110.30p 108.30p
NAV - basic and diluted
27.0 Analysis of financial liabilities and assets arising from financing
activities
For the
Interest rate Bank year ended
derivatives borrowings 31 March 2022
£'000 £'000 £'000
At beginning of year 544 352,120 352,664
Cash flows from financing activities
Loan arrangement costs paid - (1,805) (1,805)
Non cash movements
Loan arrangement fees payable - 82 82
Amortisation of loan arrangement costs - 1,653 1,653
Change in fair value of interest rate derivatives (2,675) - (2,675)
At end of year (2,131) 352,050 349,919
For the
Interest rate Bank year ended
derivatives borrowings 31 March 2021
£'000 £'000 £'000
At beginning of year 478 269,170 269,648
Cash flows from financing activities
Loan draw down - 84,550 84,550
Loan arrangement costs paid - (2,811) (2,811)
Non cash movements (82) (82)
Loan arrangement fees payable
Amortisation of loan arrangement costs - 1,293 1,293
Change in fair value of interest rate derivatives 66 - 66
At end of year 544 352,120 352,664
28.0 Operating leases
The Group is party to a number of operating leases on its investment
properties with Approved Providers. The future minimum lease payments under
non-cancellable operating leases receivable by the Group are as follows:
31 March 2022 31 March 2021
£'000 £'000
Amounts receivable
< 1 year 53,821 50,367
1-2 years 53,879 50,410
2-5 years 161,940 151,511
> 5 years 928,210 873,826
At end of year 1,197,850 1,126,114
Leases are direct-let agreements with Approved Providers for a term between
15-36 years with indexed linked annual rent reviews. All current leases are
full repairing and insuring leases; the tenants are therefore obliged to
repair, maintain and renew the properties back to the original conditions.
The following table gives details of percentage of annual rental income per
Approved Provider:
31 March 2022 31 March 2021
% %
Auckland Home Solutions and Qualitas Housing 24.4 23.9
Falcon Housing Association CIC 18.7 19.7
Bespoke Supportive Tenancies 12.6 13.2
Inclusion Housing CIC 9.3 8.7
Westmoreland Supported Housing Limited 5.9 6.1
Encircle Housing Limited 5.9 6.0
Trinity Housing Association Limited 5.1 5.3
Pivotal Housing Association 3.8 3.9
Harbour Light Assisted Living CIC 3.6 3.7
Chrysalis Supported Association Limited 3.6 3.4
New Walk Property Management CIC 2.8 2.8
My Space Housing Solutions 1.3 1.2
IKE Supported Housing Limited 1.1 1.1
Hilldale Housing Association 1.0 0.9
Limited
Windrush Alliance UK CIC 0.7 -
Lily Rose Supported Housing 0.1 -
Blue Square Residential Ltd 0.1 0.1
Total 100.0 100.0
Auckland Home Solutions and Qualitas Housing are both members of the Social
Housing Family C.I.C. and subject to common control. Their annual rent figures
have therefore been aggregated in the table above. The percentage relating to
Auckland Home Solutions and Qualitas Housing was 16.28% and 8.13% (2021:
23.88% and 0.02%) respectively. The annual rent at 31 March 2022 for Auckland
Home Solutions and Qualitas Housing was £8,679,000 and £4,334,000 (2021:
£12,028,000 and £8,000) respectively.
The Group is also party to a number of operating leases on its long leasehold
properties. The ground rent payment commitments under these operating leases
are negligible so the future minimum lease payments under these leases have
not been disclosed in these financial statements.
29.0 Controlling parties
As at 31 March 2022, there is no ultimate controlling party.
30.0 Related party disclosures
30.1 Transactions with directors
The Directors are remunerated for their services at such rate as the Directors
shall from time to time determine. The aggregate remuneration and benefits in
kind of the Directors of the Company (in each case, solely in their capacity
as such) in respect of the year ended 31 March 2022 payable out of the assets
of the Company is not expected to exceed £250,000.
Fees of £190,000 (2021: £182,000) were incurred and paid to the Directors.
As at 31 March 2022 and 2021, the Directors held the following number of
shares:
31 March 2022 31 March 2021
Director Ordinary shares Ordinary shares
Michael Wrobel Chairman 120,598 100,598
Alastair Moss Director 11,766 11,766
Alison Hadden Director - -
Caroline Gulliver Audit and Management Engagement Committee Chair 58,832 58,832
Peter Baxter Director 82,065 47,065
Remuneration
The Investment Adviser has reviewed its remuneration policies and procedures
to ensure incentives are aligned with the requirements of AIFMD. It includes
measures to avoid conflicts of interest such as providing staff with a fixed
monthly salary and determining discretionary payments by the performance of
the Investment Adviser as a whole and not linked to any one AIF in particular.
The Investment Adviser and its staff receive no remuneration through profit
share, carried interest, co-investment or other schemes related to the
Company's performance.
30.2 Transactions with the Investment Adviser
On 1 November 2016, Civitas Investment Management Limited ("CIM") was
appointed as the Investment Adviser of the Company.
Fees of £6,132,000 (2021: £6,117,000) were incurred and paid to CIM. In
addition £nil (2021: £nil) disbursements were paid in the year.
The Investment Adviser has agreed to contribute £100,000 (2021: £nil)
towards legal and professional fees incurred in the year. This amount has been
offset against legal and professional fees in note 9.0. This amount is
outstanding at the end of the year.
As at 31 March 2022, a net amount of £151,000 (2021: £13,000) was due from
CIM, which has since been received.
As at 31 March 2022, CIM held 50,000 (2021: 50,000) Ordinary shares in the
Company.
31.0 Financial risk management
31.1 Financial instruments
The Group's principal financial assets and liabilities are those that arise
directly from its operations: trade and other receivables, trade and other
payables and cash and cash equivalents. The Group's other principal financial
liabilities are bank borrowings, the main purpose of which is to finance the
acquisition and development of the Group's investment property portfolio, and
interest rate derivatives as detailed in notes 20.0 and 21.0.
All financial liabilities are measured at amortised cost, except interest rate
derivatives, which are measured at fair value. All financial instruments were
designated in their current categories upon initial recognition.
Set out below is a comparison by class of the carrying amounts and fair value
of the Group's financial instruments that are carried in the financial
statements
Book value 31 March 2022 Fair value 31 March 2022 Book value 31 March 2021 Fair value 31 March 2021 £'000
£'000 £'000 £'000
Financial assets
Interest rate derivatives 2,131 2,131 - -
Trade and other receivables(1) 34,580 34,580 33,572 33,572
Cash and cash equivalents 53,337 53,337 107,097 107,097
Financial liabilities
Trade and other payables(2) 8,632 8,632 8,699 8,699
Bank borrowings 352,050 349,406 352,120 354,142
Interest rate derivatives - - 544 544
(1) Excludes prepayments
(2) Excludes deferred income
The Group has five bank loans: a 10-year fixed rate loan of £52,500,000
provided by Scottish Widows Limited; a 3-year revolving credit facility
variable rate loan of £60,000,000 provided by Lloyds Bank plc; a 3-year
revolving credit facility variable rate loan of £100,000,000 provided by HSBC
Bank PLC; a 5-year revolving credit facility variable rate loan of
£60,000,000 provided by National Westminster Bank Plc; and a 7-year fixed
rate loan of £84,550,000 with M&G Investment Management Limited. The fair
value of the fixed rate loan is determined by comparing the discounted future
cash flows.
Financial risk management
The Group is exposed to market risk, interest rate risk, credit risk and
liquidity risk in the current and future years. The Board of Directors
oversees the management of these risks. The Board of Directors reviews and
agrees policies for managing each of these risks that are summarised below.
31.2 Market risk
The Group's activities will expose it primarily to the market risks associated
with changes in property values and changes in interest rates.
Risk relating to investment in property
Investment in property is subject to varying degrees of risk. Some factors
that affect the value of the investment in property include:
· changes in the general economic climate;
· competition for available properties;
· obsolescence; and
· government regulations, including planning, environmental and tax
laws.
Variations in the above factors can affect the valuation of assets held by the
Group and as a result can influence the financial performance of the Group.
Risk relating to liquidity funds classified as cash and cash equivalents
The Group holds positions in two AAA rated liquidity funds that invest in a
diversified range of government and non-government money market securities,
which are subject to varying degrees of risk. Some factors that affect the
value of the liquidity funds include:
· the performance of the underlying government and non-government money
market securities; and
· interest rates.
Variations in the above factors can affect the valuation of assets held by the
Group and as a result can influence the financial performance of the Group.
31.3 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
The Group's interest rate risk principally arises from long-term borrowings.
To manage this, the Group has entered into a fixed rate bank loan and three
variable rate bank loans. The Group has entered into an interest rate swap on
the 5-year loan facility with National Westminster Bank Plc in order to
mitigate the risk of rising interest rates.
At 31 March 2022, 55% (2021: 55%) of the Group's borrowings are subject to a
fixed rate of interest.
The exposure of the Group to variable rates of interest is considered upon
drawing of any new loan facilities, to ensure that the Group's exposure to
interest rate fluctuations is within acceptable levels.
The Investment Adviser monitors the Group's exposure to any changes in
interest rate on an ongoing basis, with the Board updated on a quarterly basis
of the current exposure of the Group's loan facilities.
As at 31 March 2022, if interest rates had been 100 basis points
higher/(lower) with all other variables held constant the impact on profits
after taxation for the year would be as below. The Investment Adviser
anticipates these levels are reasonably possible based on the observation of
current market conditions that interest rates would not fluctuate more than
1%.
31 March 2022 31 March 2021
£'000 £'000
(Decrease)/increase in profits due to interest rates
100 basis points higher (1,066) (529)
100 basis points lower 1,572 1,600
The average effective interest rates of financial instruments at 31 March 2022
were as follows:
31 March 2022 31 March 2021
% %
Bank borrowings - fixed rate 2.94 2.94
Bank borrowings - variable rate 2.23 1.76
Cash and cash equivalents 0.05 -
The Group's borrowings with Lloyds Bank plc, HSBC Bank PLC and National
Westminster Bank Plc will be transitioning from the London Interbank Offer
Rate (LIBOR) benchmark to Sterling Overnight Index Average (SONIA) benchmark
in due course. There is expected to be negligible cost involved in the
borrowing facility transition and the respective hedge instrument amendments.
31.4. Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risks from both its leasing activities
and financing activities, including deposits with banks and financial
institutions.
Debtors and accrued income represent rent due or accrued, these amounts due
are diversified between a number of different Approved Providers of differing
financial strength, see note 28.0 for details of the different counterparties.
None of the Approved Providers have listed debt and as such do not have a
credit rating, however, the diversified nature of this asset supports the
credit quality.
The Group has policies in place to ensure that rental contracts are entered
into only with lessees with an appropriate credit and operational history, and
limits exposure to any one tenant. The credit risk is considered to be further
reduced as the source of the rents received by the Group is ultimately
provided by the Government, by way of housing benefit and care provision, via
a diverse range of Local Authorities.
For details of provisions for impairment please refer to note 17.0.
Credit risk related to financial instruments and cash deposits
One of the principal credit risks of the Group will arise with the banks and
financial institutions. The Board of Directors believes that the credit risk
on short-term deposits and current account cash balances is limited because
the counterparties are banks considered to be of good credit quality. In the
case of cash deposits held with lawyers, the credit risk is limited because
the cash is held by the lawyers within client accounts at banks with high
credit quality.
The credit ratings for banks where balances are held by the Group are as
follows:
Lloyds Bank plc A+/F1
HSBC Bank plc AA-/F1+
RBS International Limited A/FI
National Westminster Bank plc A/F1
Ratings advised by Fitch.
31.5. Liquidity risk
The Group manages its liquidity and funding risks by considering cash flow
forecasts and ensuring sufficient cash balances are held within the Group to
meet future needs. Prudent liquidity risk management implies maintaining
sufficient cash and marketable securities, the availability of financing
through appropriate and adequate credit lines, and the ability of customers to
settle obligations within normal terms of credit. The Group ensures, through
forecasting of capital requirements, that adequate cash is available.
The following table details the Group's maturity profile in respect of its
financial instrument liabilities based on contractual undiscounted payments:
On demand <1 year 1-5 years > 5 years Total
£'000 £'000 £'000 £'000 £'000
31 March 2022
Trade and other payables 8,632 - - - 8,632
Bank borrowings - 9,336 245,974 144,602 399,912
8,632 9,336 245,974 144,602 408,544
31 March 2021
Trade and other payables 8,699 - - - 8,699
Bank borrowings - 67,909 181,048 144,602 393,559
8,699 67,909 181,048 144,602 402,258
The profile above shows the maturity profile at 31 March 2022 and included
within the contracted payments is £42,862,000 (2021: £36,509,000) of loan
interest payable up to the point of maturity.
32.0 Capital Commitments
At 31 March 2022, the Company had funds committed totalling £92,000 (2021:
£nil) concerning capital expenditure for a property in Surrey.
33.0 Post balance sheet events
Acquisitions
On 13 May 2022, the Company completed an acquisition at North End, Wisbech for
£600,000.
Dividends
On 11 May 2022, the Company announced a dividend of 1.3875 pence per share in
respect of the period 1 January 2022 to 31 March 2022 totalling £8,474,000.
The dividend payment was made on 28 June 2022 to shareholders on the register
as at 20 May 2022. The financial statements do not reflect this dividend. The
dividend was paid as a REIT property income distribution ("PID").
Remuneration
From 1 April 2022, the remuneration of the Directors, Audit and Management
Engagement Committee Chairman and Chairman's annual fee will increase. The
Chairman's annual fee increased by 1.9% to £53,000; the Director's annual fee
increased by 2.2% to £34,000; however the additional fee for the Audit and
Management Engagement Committee Chair remains at £5,000.
Financing
On 18 May 2022, an extension was granted for the facility with Lloyds Bank
plc, which now expires in July 2024.
Treasury shares
Since 31 March 2022, the Company has made purchases of 1,700,000 Ordinary
shares into treasury at an average price of 87.8p per Ordinary share. The
total cost to the Company including commission and stamp duty is £1,492,000
and following these transactions, at 23 June 2022 the Company held 11,725,000
Ordinary shares in treasury.
Company Statement of Financial Position
As at 31 March 2022
31 March 2022 31 March 2021
£'000
Note £'000
Assets
Non-current assets
Investment in subsidiaries 7.0 793,284 720,918
Current assets
Trade and other receivables 9.0 4,310 3,644
Cash and cash equivalents 10.0 23,438 15,447
27,748 19,091
Total assets 821,032 740,009
Liabilities
Creditors - amounts falling due within one year
Trade and other payables 11.0 (274,020) (171,655)
(274,020) (171,655)
Total liabilities (274,020) (171,655)
Total net assets 547,012 568,354
Equity
Share capital 12.0 6,225 6,225
Share premium reserve 292,626 292,462
Capital reduction reserve 322,365 331,140
Accumulated losses 13.0 (74,204) (61,473)
Total equity 547,012 568,354
The Company has taken advantage of the provisions of Companies Act 2006 s408
and does not disclose the Company's individual profit and loss account. Profit
for the year was £21,362,000 (2021: £52,780,000).
The Company financial statements as set out below were approved by the Board
of Directors of Civitas Social Housing PLC and authorised for issue and signed
on its behalf by:
Michael Wrobel
Chairman and Independent Non-Executive Director
29 June 2022
Company No: 10402528
The notes set out below are an integral part of these financial statements
Company Statement of Changes in Equity For the year ended 31 March 2022
Share Capital
Share premium reduction Accumulated Total
Capital reserve reserve losses equity
£'000 £'000 £'000 £'000 £'000
Balance at 1 April 2020 6,225 292,405 330,926 (80,840) 548,716
Profit and total comprehensive income for the year - - - 52,780 52,780
Issue of Ordinary shares
Share reissued from treasury - 57 214 - 271
Dividends paid
Total interim dividends for the year ended 31 March 2021 (5.375p) - - - (33,413) (33,413)
Balance at 31 March 2021 6,225 292,462 331,140 (61,473) 568,354
Profit and total comprehensive income for the year - - - 21,362 21,362
Issue of Ordinary shares
Share reissued from treasury - 164 484 - 648
Shares bought back into treasury - - (9,259) - (9,259)
Dividends paid
Total interim dividends for the year ended 31 March 2022 (5.5125p) - - - (34,093) (34,093)
Balance at 31 March 2022 6,225 292,626 322,365 (74,204) 547,012
Notes to the Company Financial Statements
For the year ended 31 March 2022
1.0 Corporate information
Civitas Social Housing PLC ("the Company") was incorporated in England and
Wales under the Companies Act 2006 as a public company limited by shares on 29
September 2016 with company number 10402528 under the name Civitas REIT PLC,
which was subsequently changed to the existing name on 3 October 2016.
The address of the registered office is Beaufort House, 51 New North Road,
Exeter, Devon EX4 4EP. The Company is registered as an investment company
under section 833 of the Companies Act 2006 in England and Wales and is
domiciled in the United Kingdom.
The Company did not begin trading until 18 November 2016 when the shares were
admitted to trading on the London Stock Exchange ("LSE").
The Company's Ordinary shares have been admitted to the Official List of the
Financial Conduct Authority ("FCA"), and are traded on the LSE.
The principal activity of the Company is to act as the ultimate parent company
of its subsidiaries (the "Group") and to provide shareholders with an
attractive level of income, together with the potential for capital growth
from investing in a portfolio of social homes.
2.0 Basis of preparation
The financial statements have been prepared on a historical cost basis and in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework
("FRS 101") and the Companies Act 2006 as applicable to companies using FRS
101.
In preparing these financial statements, the Company applies the recognition,
measurement and disclosure requirements of International Financial Reporting
Standards ("Adopted IFRSs"), but makes amendments where necessary in order to
comply with the Companies Act 2006 and has set out below where advantage of
the FRS 101 disclosure exemptions has been taken.
In preparing these financial statements the Company has taken advantage of all
disclosure exemptions conferred by FRS 101.
Therefore, these financial statements do not include:
· certain comparative information as otherwise required by IFRS;
· certain disclosures regarding the Company's capital;
· certain disclosures in relation to IFRS 15 Revenue Contracts with
Customers;
· a statement of cash flows;
· the effect of future accounting standards not yet adopted;
· the disclosure of the remuneration of key management personnel;
and
· disclosure of related party transactions with other wholly owned
members of Civitas Social Housing PLC.
In addition, and in accordance with FRS 101, further disclosure exemptions
have been adopted because equivalent disclosures are included in the Company's
consolidated financial statements. These financial statements do not include
certain disclosures in respect of:
· share based payments;
· financial instruments; and
· fair value measurement other than certain disclosures required as
a result of recording financial instruments at fair value.
The Company has taken advantage of the exemption in section 408 of the
Companies Act 2006 not to present its own income statement or statement of
comprehensive income.
New standards, amendments and interpretations
After a review of new accounting standards which are now effective, none are
relevant to be adopted in the preparation of the Company's accounts for the
year ended 31 March 2022.
Going concern
The financial statements have been prepared on a going concern basis.
As discussed in the Group financial statements above, the underlying assets of
the Company benefit from a secure income stream.
The Company financial statements show an accumulated loss, however this is due
to a time-lag on profits from subsidiary companies being moved up the
structure in the form of dividends.
The Company has a net current liability position of £246,272,000 (2021:
£152,564,000). This balance arises due to the intercompany balances totalling
£271,632,000 (2021: £169,465,000) with the Company's subsidiary companies.
The amounts principally relate to bank loans drawn in the Company's subsidiary
companies in order to finance the purchase of new acquisitions in accordance
with the Group's business model. The directors of the subsidiary companies
have provided a letter of comfort that they will not seek repayment of these
balances within 12 months from the date of approval of the Company's financial
statements.
The Company's articles of association include a requirement for the Board to
propose an ordinary resolution at the annual general meeting following the
fifth anniversary from the initial public offering of the Company for the
Company to continue in its current form (the Continuation Resolution). This is
the first continuation vote since the Company was set up.
If the Continuation Resolution is passed, the Company will continue its
business as presently constituted and propose the same resolution at every
fifth annual general meeting thereafter. If the Continuation Resolution is not
passed, the Directors will be required, within six months after the date of
this annual general meeting, to formulate proposals for consideration by the
shareholders for the voluntary liquidation, unitisation, reorganisation, or
reconstruction of the Company. After making appropriate enquiries of the
Company's brokers and Investment Adviser, pursuant to their recent discussions
with a number of the Company's shareholders, the Directors are of the view
that the Continuation Resolution will be passed at the forthcoming annual
general meeting. This reflects the strength and nature of the Company's
portfolio, and specifically the provision of long-term accommodation for more
than 4,000 vulnerable individuals. Accordingly, the Directors expect that if
the Continuation Resolution is not passed, an event which the Directors
consider to be highly remote, formulating and implementing any such proposals
would require the Company to continue operations for a period of at least 12
months from the date of approval of the Company's financial statements.
The Board is, therefore, of the opinion that the going concern basis adopted
in the preparation of the consolidated financial statements is appropriate.
Significant judgements and sources of estimation uncertainty
The key source of estimation uncertainty relates to the Company's investment
in Group companies, and is stated in the Company's separate financial
statements at cost less impairment losses, if any. Impairment losses are
determined with reference to the investment's fair value less estimated costs
of disposal. Fair value is derived from the subsidiaries', and their
subsidiaries', net assets at the balance sheet date. Investment properties
held by the subsidiary companies are supported by independent valuation.
Judgements and assumptions associated with the property values of the
investments held by the subsidiary companies are detailed in the Group
financial statements.
3.0 Accounting Policies
The financial statements of the Company follow the accounting policies laid
out in the Group's consolidated financial statements along with the following
accounting policies which have been consistently applied:
Investments in subsidiaries
The investments in subsidiary companies are included in the Company's
Statement of Financial Position at cost less provision for impairment.
Impairment losses are determined with reference to the investment's fair value
less estimated selling costs. Fair value is derived from the subsidiaries',
and their subsidiaries', net assets at the balance sheet date. On disposal,
the difference between the net disposal proceeds and its carrying amount is
included in the income statement.
The investment in a subsidiary company may include both the purchase of shares
and an intercompany loan which is subsequently capitalised in return for
shares in the subsidiary company. The intercompany loan capitalised is
disclosed in note 7.0 as a transfer between the shares and loan columns.
Loans to subsidiaries
Loans made to subsidiary companies which arise as part of the transactions for
the acquisition of investments and are subsequently capitalised by the issue
of shares are recognised as investment in subsidiaries at cost. At the point
the loan is capitalised, this transaction is recognised as a transfer within
the table in note 7.0.
Amounts due to subsidiary companies
Balances arising with subsidiary companies of a temporary nature are initially
recognised at fair value and subsequently measured at amortised cost.
4.0 Dividends
Dividends are included in the financial statements in the year in which they
are paid. Details of dividends paid and proposed are included in note 14.0 of
the Group's consolidated financial statements.
5.0 Employee information
Details of Directors' remuneration are included in note 6.0 of the
consolidated financial statements. The Company had no employees during the
year (2021: nil).
6.0 Audit fees
Audit fees in relation to the Company's financial statements total £296,000
(31 March 2021: £272,000). For further details, please refer to note 9.0 of
the Group financial statements.
7.0 Investments in subsidiaries
Shares in
subsidiaries For the
£'000 Loans to subsidiaries year ended
£'000 31 March 2022
£'000
Balance at the beginning of the year 703,435 17,483 720,918
Increase in investments 41,712 31,013 72,725
Loans transferred 23,287 (23,287) -
Impairment (359) - (359)
At the end of the year 768,075 25,209 793,284
For the
Shares in Loans to subsidiaries year ended
subsidiaries £'000 31 March 202
£'000 £'000
Balance at the beginning of the year 678,247 28,673 706,920
Increase in investments 928 14,383 15,311
Loans transferred 25,573 (25,573) -
Impairment (1,313) - (1,313)
At the end of the year 703,435 17,483 720,918
Following a review comparing cost of investments to the underlying net assets
of subsidiary companies, an impairment provision has been made of £359,000
(2021: £1,313,000).
8.0 Subsidiary entities
The Company has provided a guarantee under s479C of the Companies Act 2006 in
respect of the financial year ended 31 March 2022 for a number of its
subsidiary companies (as indicated in the table below). The guarantee is over
all outstanding liabilities to which the subsidiary companies are subject at
31 March 2022 until they are satisfied in full.
The Group consists of a parent company, Civitas Social Housing PLC,
incorporated in England and Wales (company number 10402528) and a number of
subsidiaries held directly by Civitas Social Housing PLC, which operate and
are incorporated in England and Wales or Jersey.
The Group owns 100% equity shares of all subsidiaries listed below and has the
power to appoint and remove the majority of the board of directors of those
subsidiaries. The relevant activities of the below subsidiaries are determined
by the Board of Directors based on the purpose of each company.
Therefore, the Directors concluded that the Group has control over all these
entities and all these entities have been consolidated within the consolidated
financial statements.
A list of all related undertakings included within these consolidated
financial statements are noted below. Indirectly held subsidiary companies are
marked by an indentation in the table below:
Name Registered number Principal activity Country of incorporation
Civitas Social Housing Finance Company 1 Limited* 10997707 Finance company England & Wales
Civitas Social Housing Jersey 1 Limited 124129 Holding company Jersey
Civitas SPV1 Limited* 10518729 Property investment England & Wales
Civitas SPV2 Limited* 10114251 Property investment England & Wales
Civitas SPV11 Limited* 10546749 Property investment England & Wales
Civitas SPV15 Limited* 09777380 Property investment England & Wales
Civitas SPV25 Limited* 10791473 Property investment England & Wales
Civitas SPV27 Limited* 10883112 Property investment England & Wales
Civitas SPV33 Limited* 10546407 Property investment England & Wales
Civitas SPV35 Limited* 10588530 Property investment England & Wales
Civitas SPV38 Limited* 10738318 Property investment England & Wales
Civitas SPV39 Limited* 10547333 Property investment England & Wales
Civitas SPV40 Limited* 10738510 Property investment England & Wales
Civitas SPV41 Limited* 10738542 Property investment England & Wales
Civitas SPV50 Limited* 10775419 Property investment England & Wales
Civitas Social Housing Finance Company 2 Limited* 10997698 Finance company England & Wales
Civitas Social Housing Jersey 2 Limited 124876 Holding company Jersey
Civitas SPV3 Limited* 10156529 Property investment England & Wales
Civitas SPV4 Limited* 10433744 Property investment England & Wales
Civitas SPV5 Limited* 10479104 Property investment England & Wales
Civitas SPV6 Limited* 10674493 Property investment England & Wales
Civitas SPV9 Limited* 10536388 Property investment England & Wales
Civitas SPV10 Limited* 10535243 Property investment England & Wales
Civitas SPV12 Limited* 10546753 Property investment England & Wales
Civitas SPV17 Limited* 10479036 Property investment England & Wales
Civitas SPV18 Limited* 10546651 Property investment England & Wales
Civitas SPV19 Limited* 10548932 Property investment England & Wales
Civitas SPV20 Limited* 10588735 Property investment England & Wales
Civitas SPV22 Limited* 10743958 Property investment England & Wales
Civitas SPV24 Limited* 10751512 Property investment England & Wales
Civitas SPV26 Limited* 10864336 Property investment England & Wales
Civitas SPV29 Limited* 10911565 Property investment England & Wales
Civitas SPV30 Limited* 10956025 Property investment England & Wales
Civitas SPV31 Limited* 10974889 Property investment England & Wales
Civitas SPV32 Limited* 11007173 Property investment England & Wales
Civitas SPV34 Limited* 10738381 Property investment England & Wales
Civitas SPV36 Limited* 10588792 Property investment England & Wales
Civitas SPV42 Limited* 10738556 Property investment England & Wales
Civitas SPV43 Limited* 10534877 Property investment England & Wales
Civitas SPV45 Limited* 10871854 Property investment England & Wales
Civitas SPV46 Limited* 10871910 Property investment England & Wales
Civitas SPV47 Limited* 10873270 Property investment England & Wales
Civitas SPV48 Limited* 10873295 Property investment England & Wales
Civitas SPV51 Limited* 10826693 Property investment England & Wales
Civitas SPV52 Limited* 10827006 Property investment England & Wales
Civitas SPV63 Limited* 10937805 Property investment England & Wales
Civitas SPV64 Limited* 10938411 Property investment England & Wales
Civitas SPV70 Limited* 10770201 Property investment England & Wales
Civitas SPV71 Limited * 10888639 Property investment England & Wales
Civitas SPV72 Limited* 10938022 Property investment England & Wales
Civitas SPV74 Limited* 11001855 Property investment England & Wales
Civitas SPV75 Limited* 11001834 Property investment England & Wales
Civitas SPV80 Limited* 11001998 Property investment England & Wales
Civitas Social Housing Finance Company 3 Limited* 10997714 Finance Company England & Wales
Civitas SPV8 Limited* 10536157 Property investment England & Wales
Civitas SPV28 Limited* 10895228 Property investment England & Wales
Civitas SPV53 Limited* 11021625 Property investment England & Wales
Civitas SPV55 Limited* 11056455 Property investment England & Wales
Civitas SPV57 Limited* 11091444 Property investment England & Wales
Civitas SPV60 Limited* 11111908 Property investment England & Wales
Civitas SPV61 Limited* 10937662 Property investment England & Wales
Civitas SPV66 Limited* 10937898 Property investment England & Wales
Civitas SPV77 Limited* 11166491 Property investment England & Wales
Civitas SPV78 Limited* 11170099 Property investment England & Wales
Civitas SPV79 Limited* 11236544 Property investment England & Wales
Civitas SPV81 Limited* 11192811 Property investment England & Wales
Civitas SPV82 Limited* 11380796 Property investment England & Wales
Civitas SPV83 Limited* 11371128 Property investment England & Wales
Civitas SPV85 Limited* 11300749 Property investment England & Wales
Civitas SPV95 Limited* 11208184 Property investment England & Wales
Civitas SPV97 Limited* 11463890 Property investment England & Wales
Civitas SPV103 Limited* 11500596 Property investment England & Wales
Civitas SPV105 Limited* 11532177 Property investment England & Wales
Civitas SPV106 Limited* 11532179 Property investment England & Wales
Civitas SPV107 Limited* 11532182 Property investment England & Wales
Civitas SPV116 Limited* 11504399 Property investment England & Wales
Civitas SPV117 Limited* 11504445 Property investment England & Wales
Civitas Social Housing Finance Company 4 Limited* 11906660 Finance Company England & Wales
Civitas SPV23 Limited* 10746881 Property investment England & Wales
Civitas SPV54 Limited* 11039750 Property investment England & Wales
Civitas SPV59 Limited* 11111912 Property investment England & Wales
Civitas SPV69 Limited* 11142372 Property investment England & Wales
Civitas SPV73 Limited* 10939075 Property investment England & Wales
Civitas SPV84 Limited* 11381455 Property investment England & Wales
Civitas SPV86 Limited* 11418432 Property investment England & Wales
Civitas SPV87 Limited* 10888903 Property investment England & Wales
Civitas SPV88 Limited* 10939044 Property investment England & Wales
Civitas SPV90 Limited* 10939131 Property investment England & Wales
Civitas SPV91 Limited * 10941377 Property investment England & Wales
Civitas SPV92 Limited* 11449913 Property investment England & Wales
Civitas SPV93 Limited* 11043111 Property investment England & Wales
Civitas SPV94 Limited* 11208105 Property investment England & Wales
Civitas SPV96 Limited* 11270786 Property investment England & Wales
Civitas SPV100 Limited* 11069703 Property investment England & Wales
Civitas SPV101 Limited* 09978282 Property investment England & Wales
Civitas SPV102 Limited* 11521555 Property investment England & Wales
Civitas SPV109 Limited* 11532120 Property investment England & Wales
Civitas SPV112 Limited* 11579750 Property investment England & Wales
Civitas SPV114 Limited* 11579733 Property investment England & Wales
Civitas SPV115 Limited* 11522178 Property investment England & Wales
Civitas SPV118 Limited* 11411498 Property investment England & Wales
Civitas SPV121 Limited* 11099917 Property investment England & Wales
Civitas SPV122 Limited* 11482646 Property investment England & Wales
Civitas SPV126 Limited* 11459821 Property investment England & Wales
Civitas SPV127 Limited* 10941401 Property investment England & Wales
Civitas SPV129 Limited* 11664994 Property investment England & Wales
Civitas SPV130 Limited* 11705074 Property investment England & Wales
Civitas SPV131 Limited* 11675132 Property investment England & Wales
Civitas SPV132 Limited* 11473735 Property investment England & Wales
Civitas SPV145 Limited* 11842306 Holding company England & Wales
SPV153 Limited (previously Fieldbay Limited) * 5219012 Property investment England & Wales
Civitas SPV148 Limited* 11632633 Property investment England & Wales
Civitas SPV149 Limited* 11462691 Property investment England & Wales
Civitas SPV150 Limited* 11462555 Property investment England & Wales
FPI CO 324 Ltd* 11633019 Property investment England & Wales
Civitas Social Housing Finance Company 5 Limited* 13083077 Finance Company England & Wales
Civitas SPV7 Limited* 10536368 Property investment England & Wales
Civitas SPV13 Limited* 09517692 Property investment England & Wales
Civitas SPV37 Limited* 10738450 Property investment England & Wales
Civitas SPV44 Limited* 10588783 Property investment England & Wales
Civitas SPV49 Limited* 11031349 Property investment England & Wales
Civitas SPV56 Limited* 11056465 Property investment England & Wales
Civitas SPV62 Limited* 10937528 Property investment England & Wales
Civitas SPV65 Limited* 10938467 Property investment England & Wales
Civitas SPV67 Limited* 10937929 Property investment England & Wales
Civitas SPV68 Limited* 10938269 Property investment England & Wales
Civitas SPV98 Limited* 11478695 Property investment England & Wales
Civitas SPV99 Limited* 11478707 Property investment England & Wales
Civitas SPV104 Limited* 11532174 Property investment England & Wales
Civitas SPV108 Limited* 11532135 Property investment England & Wales
Civitas SPV113 Limited* 11580068 Property investment England & Wales
Civitas SPV123 Limited* 08253452 Property investment England & Wales
Civitas SPV133 Limited* 11698972 Property investment England & Wales
Civitas SPV134 Limited* 11689461 Property investment England & Wales
Civitas SPV135 Limited* 11579880 Property investment England & Wales
Civitas SPV136 Limited* 11579760 Property investment England & Wales
Civitas SPV143 Limited* 11546808 Property investment England & Wales
Civitas SPV144 Limited* 11546696 Property investment England & Wales
Civitas SPV146 Limited* 11861500 Holding Company England & Wales
Bryn Eithin (2019) Limited* 11844898 Property investment England & Wales
Civitas SPV147 Limited* 11861974 Holding Company England & Wales
Mynydd Mawr (2019) Limited* 11844917 Property investment England & Wales
Civitas SPV152 Limited* 11955719 Property investment England & Wales
Civitas SPV155 Limited* 12044281 Property investment England & Wales
Civitas SPV156 Limited* 12081093 Property investment England & Wales
Civitas SPV157 Limited* 12188610 Property investment England & Wales
Civitas SPV158 Limited* 12202674 Property investment England & Wales
Civitas SPV160 Limited* 12272906 Property investment England & Wales
Bedford SPV1 Limited* 12315518 Property investment England & Wales
Bridge Property Herts Limited* 12435985 Property investment England & Wales
Bridge Propco Limited* 12445439 Property investment England & Wales
FPI Co 294 Ltd* 11519226 Property investment England & Wales
Civitas SPV14 Limited* 10479041 Property investment England & Wales
Civitas SPV HP Ltd* 12784895 Property investment England & Wales
Civitas SPV16 Limited* 09917557 Property investment England & Wales
Civitas SPV21 Limited* 10631541 Property investment England & Wales
Civitas SPV159 Limited* 12258313 Property investment England & Wales
Civitas Financing PLC* 13546154 Holding Company England & Wales
* These entities are exempt from the requirements of the Companies Act 2006
relating to the audit of individual financial statements by virtue of Section
479A of that Act. These are all entities that have a year end of 31 March
2022.
The registered addresses for the subsidiaries are consistent based on their
country of incorporation and are as follows:
• England & Wales entities: Beaufort House, 51 New North Road, Exeter,
Devon, EX4 4EP
• Jersey entities: 12 Castle Street, St Helier, Jersey, JE2 3RT
9.0 Trade and other receivables
31 March 2022 31 March 2021
£'000 £'000
Trade receivables 1,150 722
Prepayments and other receivables 1,902 1,433
Accrued income 1,258 1,489
Total 4,310 3,644
Prepayments and other receivable amounts include prepaid legal and
professional fees of £34,000 (2021: £200,000) that have been incurred in
connection with acquisitions yet to be completed and £1,046,000 (2021:
£817,000) in respect of uncompleted works on the property portfolio.
10.0 Cash and cash equivalents
31 March 2022 31 March 2021
£'000 £'000
Cash held by solicitors 376 720
Liquidity funds 10,489 10,485
Cash held at bank 12,258 3,381
Cash and cash equivalents 23,123 14,586
Restricted cash 315 861
Total cash held at bank 23,438 15,447
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 solicitors is money held in escrow for expenses expected to be
incurred in relation to investment properties pending completion. These funds
are available immediately on demand.
Restricted cash represents amounts held for specific commitments, tenant
deposits and retention money held by lawyers in relation to deferred payments
subject to achievement of certain conditions, other retentions and cash
segregated to fund repair, maintenance and improvement works to bring the
properties up to satisfactory standards for the Group and the tenants.
11.0 Trade and other payables
31 March 2022 31 March 2021
£'000 £'000
Retentions 288 490
Accruals 685 450
Dividends withholding tax payable 1,057 892
Deferred income 358 358
Amounts due to subsidiary companies 271,632 169,465
Total 274,020 171,655
12.0 Share capital
Share capital represents the nominal value of consideration received by the
Company for the issue of Ordinary shares.
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Share capital
At beginning and end of year 6,225 6,225
Number of shares authorised, issued and fully paid
For the For the
year ended year ended
31 March 2022 31 March 2021
Ordinary shares of £0.01 each
At beginning and end of year 622,461,380 622,461,380
The Company holds 10,025,000 (2021: 565,000) Ordinary shares in treasury. The
number of Ordinary shares used to calculate the net asset value is 612,896,380
(2021: 621,896,380).
13.0 Accumulated losses
This reserve represents the profits and losses of the Company
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Balance at the beginning of the year (61,473) (80,840)
Profit for the year 21,362 52,780
Dividends paid in the year (34,093) (33,413)
At end of year (74,204) (61,473)
14.0 Controlling parties
As at 31 March 2022, there is no ultimate controlling party.
15.0 Related party transactions
For all related party transactions and transactions with the Investment
Adviser please make reference to notes 30.1 and 30.2 of the Group's
consolidated financial statements and amounts due to subsidiary companies in
note 17.0 above.
16.0 Post balance sheet events
Please refer to note 33.0 of the Group Consolidated financial statements
above.
Appendix 1 (unaudited): Notes to the calculation of EPRA and other alternative
performance measures
For the For the
1.0 EPRA Earnings year ended year ended
31 March 2022 31 March 2021
Earnings from operational activities
Profit after taxation (£'000) 44,754 36,075
Change in fair value of derivative financial instruments (£'000) (2,675) 66
Changes in value of investment properties (£'000) (12,269) (5,511)
EPRA Earnings (£'000) 29,810 30,630
Weighted average number of shares in issue 618,797,942 621,651,859
(adjusted for shares held in treasury)
EPRA Earnings per share (EPS) - basic & diluted 4.82p 4.93p
2.0 EPRA NAV Metrics
EPRA Net Reinstatement Value EPRA Net Tangible Assets EPRA Net Disposal Value
31 March 2022
Net assets (£'000) 675,547 675,547 675,547
Fair value of derivative financial instruments (£'000) (2,131) (2,131) -
Fair value of bank borrowings (£'000) - - 2,644
NAV (£'000) 673,416 673,416 678,191
Number of shares in issue (adjusted for shared held in treasury) 612,436,380 612,436,380 612,436,380
NAV per share 109.96p 109.96p 110.74p
EPRA Net Reinstatement Value EPRA Net Tangible Assets EPRA Net Disposal Value
31 March 2021
Net assets (£'000) 673,498 673,498 673,498
Fair value of derivative financial instruments (£'000) 544 544 -
Fair value of bank borrowings (£'000) - - (2,022)
NAV(£'000) 674,042 674,042 671,476
Number of shares in issue (adjusted for shares held in treasury) 621,896,380 621,896,380 621,896,380
NAV per share £'000 108.38p 108.38p 107.97p
3.0 EPRA Net Initial Yield
For the year ended 31 March For the year ended
2022 31 March
2021
Investment property (£'000) 968,756 915,589
Allowance for estimated purchasers' costs (£'000) 56,412 53,753
Gross up completed property portfolio (£'000) 1,025,168 969,342
Annualised net rents (£'000) 54,091 50,780
Add: notional rent expiration of rent free periods or other lease incentives - -
(£'000)
Topped-up net annualised rent (£'000) 54,091 50,780
EPRA NIY 5.28% 5.24%
EPRA Topped-up NIY 5.28% 5.24%
4.0 EPRA Vacancy Rate
For the year ended 31 March 2022 For the year ended
31 March 2021
Estimated Market Rental Value (ERV) of vacant spaces (£'000) - -
Estimated Market Rental Value (ERV) of whole portfolio (£'000) 54,091 50,380
EPRA Vacancy Rate 0% 0%
5.0 EPRA Costs Ratio
For the year ended 31 March 2022 For the year ended
31 March 2021
Total administrative and operating expenses 10,247 9,498
Direct property expenses 978 1,175
Less property expenses recovered through rents (995) (886)
EPRA Costs(including direct vacancy costs) 10,230 9,787
Direct vacancy costs - -
EPRA Costs (excluding direct vacancy costs) 10,230 9,787
Rental income 51,636 49,020
Less rechargeable costs received (995) (886)
Gross rental income 50,641 48,134
EPRA Cost Ratio (including direct vacancy costs) 20.20% 20.33%
EPRA Cost Ratio (excluding direct vacancy costs) 20.20% 20.33%
The Group has not incurred any direct vacancy costs.
6.0 EPRA Table of Capital Expenditure
For the For the
year ended year ended
31 March 2022 31 March 2021
£'000 £'000
Acquisitions including incidental costs of purchase 33,466 16,108
Development - -
Investment properties
Incremental lettable space - -
Enhancing lettable space 5,818 4,077
Tenant incentives 1,614 11,217
Other material non-allocated types of expenditure - -
Capitalised interest - -
Total Capital Expenditure 40,898 31,402
Conversion from accruals to cash basis 1,312 215
Total Capital Expenditure on a cash basis 42,210 31,617
7.0 Portfolio NAV
IFRS NAV adjusted to reflect investment property valued on a portfolio basis
rather than individual asset basis.
31 March 31 March
2021
2022
Net assets (£'000) 675,547 673,498
Adjustment for change to property valuation (£'000) 76,784 63,270
Portfolio net assets (£'000) 752,331 736,768
Number of Ordinary shares in issue 612,436,380 621,896,380
(adjusted for shares held in treasury)
Portfolio Net Assets per share 122.84p 118.47p
8.0 Leveraged Internal rate of return (IRR)
This is the annual growth rate, based on growth in net asset value per share
since launch and dividends paid to Ordinary shareholders.
31 March 31 March
2022 2021
IFRS NAV per share 110.300p 108.300p
31 May 2017 Interim dividend 0.7500p 0.7500p
31 August 2017 Interim dividend 0.7500p 0.7500p
30 November 2017 Interim dividend 0.7500p 0.7500p
9 March 2018 Interim dividend 0.7500p 0.7500p
8 June 2018 Interim dividend 1.2500p 1.2500p
7 September 2018 Interim dividend 1.2500p 1.2500p
30 November 2018 Interim dividend 1.2500p 1.2500p
11 January 2019 Interim dividend 1.1100p 1.1100p
28 February 2019 Interim dividend 0.1400p 0.1400p
7 June 2019 Interim dividend 1.3250p 1.3250p
6 September 2019 Interim dividend 1.3250p 1.3250p
29 November 2019 Interim dividend 1.3250p 1.3250p
28 February 2020 Interim dividend 1.3250p 1.3250p
12 June 2020 Interim dividend 1.3250p 1.3250p
7 September 2020 Interim dividend 1.3500p 1.3500p
4 December 2020 Interim dividend 1.3500p 1.3500p
1 March 2021 Interim dividend 1.3500p 1.3500p
11 June 2021 Interim dividend 1.3500p -
10 September 2021 Interim dividend 1.3875p -
13 December 2021 Interim dividend 1.3875p -
11 March 2022 Interim dividend 1.3875p -
134.4875p 126.9750p
IFRS NAV per share at launch 98.0000p 98.0000p
Levered IRR 6.63% 6.54%
Five Year Financial Results
Group Statement of Comprehensive Income
Revenue For the year ended 31 March 2022 £'000 For the year ended 31 March 2021 £'000 For the year ended 31 March 2020 £'000 For the year ended 31 March 2019 £'000 For the period from 18 November 2016 to 31 March 2018 £'000
Rental income 51,636 49,020 46,165 35,738 18,606
Less direct property expenses (978) (1,175) (259) - -
Net rental income 50,658 47, 845 45,906 35,738 18,606
Directors' remuneration (206) (198) (176) (163) (205)
Investment advisory fees (6,132) (6,117) (6,183) (6,457) (5,773)
General and administrative expenses (3,909) (3,183) (3,501) (3,022) (2,915)
Total expenses (10,247) (9,498) (9,860) (9,642) (8,893)
Change in fair value of investment properties 12,269 5,511 9,389 3,652 30,633
Operating Profit 52,680 43,858 45,435 29,748 40,346
Finance income 7 20 110 491 413
Finance expenses - relating to bank borrowings (10,608) (7,737) (7,342) (3,975) (1,041)
Finance expenses - relating to C share amortisation - - - (6,400) (2,792)
Change in fair value of interest rate derivatives 2,675 (66) (478) - -
Profit before tax 44,754 36,075 37,725 19,864 36,926
Taxation - - - - -
Profit being total comprehensive income 44,754 36,075 37,725 19,864 36,926
Earnings per share - basic 7.23p 5.80p 6.06p 4.67p 10.55p
Earnings per share - diluted 7.23p 5.80p 6.06p 4.22p 6.27p
Dividend declared 5.55p 5.40p 5.30p 5.00p 3.00p
Group Statement of Financial Position
31 March 2022 31 March 2021 31 March 2020 31 March 2019 31 March 2018
£'000 £'000 £'000 £'000 £'000
Assets
Non-current assets
Investment property 945,237 893,684 867,988 820,094 516,222
Other receivables 23,519 21,905 10,755 6,824 -
Interest rate derivatives 2,131 - - - -
970,887 915,589 878,743 826,918 516,222
Non-current assets
Trade and other receivables 12,865 12,821 10,838 5,723 3,315
Cash and cash equivalents 53,337 107,097 58,374 54,347 249,608
66,202 119,918 69,212 60,070 252,923
Total assets 1,037,089 1,035,507 947,955 886,988 769,145
Liabilities
Current liabilities
Trade and other payables (9,492) (9,345) (7,743) (15,324) (10,176)
Bank and loan borrowings - (59,937) (59,730) - -
C shares - - - - (298,752)
(9,492) (69,282) (67,473) (15,324) (308,928)
Non-current liabilities
Bank and loan borrowings (352,050) (292,183) (209,440) (205,156) (90,822)
Interest rate derivatives - (544) (478) - -
(352,050) (292,727) (209,918) (205,156) (90,822)
Total liabilities (361,542) (362,009) (277,391) (220,480) (399,750)
Total net assets 675,547 673,498 670,564 666,508 369,395
Assets
Share capital 6,225 6,225 6,225 6,225 3,500
Share premium reserve 292,626 292,463 292,405 292,405 -
Capital reduction reserve 322,365 331,140 330,926 331,625 331,625
Retained earnings 54,331 43,670 41,008 36,253 34,270
Total equity 675,547 673,498 670,564 666,508 369,395
Net assets per share - basic 110.30p 108.30p 107.87p 107.08p 105.54p
Net assets per share - diluted 110.30p 108.30p 107.87p 107.08p 105.54p
Portfolio NAV 122.84p 118.47p 118.35p 119.07p 113.86p
Share price 87.40p 107.80p 96.40p 96.00p 97.40p
Total shareholder return (on a NAV basis 37.23% 29.57% 23.64% 17.43% 10.76%
Leverage 34.43% 34.48% 26.90% 22.00% 12.00%
Shareholder Information
Share Information
The Company's Ordinary shares of 1p each are quoted on the Official List of
the FCA and traded on the premium segment of the Main Market of the London
Stock Exchange (LSE).
SEDOL number BD8HBD3
ISIN GB00BD8HBD32
Ticker/TIDM CSH
LEI 213800PGBG84J8GM6F95
Frequency of NAV Publication
The Company's NAV is released to the LSE on a quarterly basis and published on
the Company's website: www.civitassocialhousing.com.
Sources of Further Information
Copies of the Company's Annual and Half-Yearly Reports, Stock Exchange
announcements and further information on the Company can be obtained from its
website: www.civitassocialhousing.com.
Share Register Enquiries
The register for the Company's Ordinary shares is maintained by Link Group. In
the event of queries regarding your holding, please contact the Registrar on
0371 664 0300 (calls are charged at the standard geographic rate and will vary
by provider; calls outside the UK will be charged at the applicable
international rate). Lines are open between 9.00am and 5.30pm, Monday to
Friday, excluding public holidays in England and Wales. You can also email
enquiries@linkgroup.co.uk.
Changes of name and/or address must be notified in writing to the Registrar:
Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL
Key Dates
June
Annual results announced
Payment of fourth final dividend
September
Company's half-year end
Annual General Meeting
Payment of first interim dividend
December
Half yearly results announced
Payment of second interim dividend
February
Payment of third interim 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 (http://theaic.co.uk) or visit the website:
www.theaic.co.uk (http://www.theaic.co.uk) .
Electronic Communications from the Company
Shareholders now have the opportunity to be notified by email when the
Company's Annual Report, Half Yearly Report and other formal communications
are available on the Company's website, instead of receiving printed copies by
post. This has environmental benefits in the reduction of paper, printing,
energy and water usage, as well as reducing costs to the Company.
If you have not already elected to receive electronic communications from the
Company and wish to do so, please contact the Registrar.
Glossary
AIFM means the Alternative Investment Fund Manager.
AIFMD means the Alternative Investment Fund Managers Regulations 2013 (as
amended by The Alternative Investment Fund Managers (Amendment etc.) (EU Exit)
Regulations 2019) and the Investment Funds Sourcebook forming part of the FCA
Handbook.
ALMO means an arm's length management organisation, a not-for-profit company
that provides housing services on behalf of a Local Authority.
Alternative Performance Measures (APMs) means a financial measure of
historical financial performance, financial position, or cash flows, other
than a financial measure defined or specified in the applicable financial
reporting framework.
Annualised rent roll means the total rental income due over the first year
from the date of valuation, including an estimated rental uplift based on a
long-term inflation rate.
Approved Provider means Approved Providers, Local Authorities, ALMOs,
Community Interest Companies, Registered Charities and other regulated
organisations directly or indirectly in receipt of payment from local or
central government including the NHS.
Care Provider means a provider of care services to the occupants of Specialist
Supported Housing, registered with the Care Quality Commission.
CIM means Civitas Investment Management Limited or CIM (formerly known as
Civitas Housing Advisors Limited until its change of name on 7 May 2020).
Community Interest Company or CIC means a company approved by the Office of
the Regulator of Community Interest Companies as a community interest company
and registered as such with Companies House.
Company means Civitas Social Housing PLC, a company incorporated in England
and Wales with company number 10402528.
CMA Order means the Statutory Audit Services Order 2014, issued by the
Competition and Markets Authority.
Current Leverage means the percentage taken as total bank borrowings drawn
over total assets.
Dividend Yield means the ratio of the total annual dividend payments over
market price per share.
EPRA means the European Public Real Estate Association.
EPRA EPS is the EPRA earnings divided by the weighted average number of shares
in issue in the period.
EPRA Net Reinstatement Value ("EPRA NRV") is an EPRA NAV metric which assumes
that entities never sell assets and aims to represent the value required to
rebuild the entity.
EPRA Net Tangible Assets ("EPRA NTA") is an EPRA NAV metric which assumes that
entities buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax.
EPRA Net Disposal Value ("EPRA NDV") is an EPRA NAV metric which represents
the shareholders' value under a disposal scenario, where deferred tax,
financial instruments and certain other adjustments are calculated to the full
extent of their liability, net of any resulting tax.
EPRA Run Rate means the ratio of a company's earnings (excluding fair value
gains/losses) over dividends paid to shareholders.
Gross Asset Value means total assets.
Group means the Company and its subsidiaries.
Housing Association or HA means an independent society, body of trustees or
company established for the purpose of providing low-cost social housing for
people in housing need generally on a non-profit making basis. Any trading
surplus is typically used to maintain existing homes and to help finance new
ones. Housing Associations are regulated by the Regulator of Social Housing.
IFRS Net Asset Value or IFRS NAV means the net asset value of the Group on the
relevant date, prepared in accordance with IFRS accounting principles.
Investment Adviser means Civitas Investment Management Limited ("CIM"), a
company incorporated in England and Wales with company number 10278444, in its
capacity as investment adviser to the Company.
IPO means Initial Public Offering.
IRR means internal rate of return.
Levered IRR means the internal rate of return including the impact of debt.
Local Authority or LA means the administrative bodies for the local government
in England comprising 326 authorities (including 32 London boroughs).
Net Initial Yield means the ratio of net rental income and gross purchase
price of a property.
NHS means the publicly funded healthcare system of the United Kingdom
comprising The National Health Service in England, NHS Scotland, NHS Wales and
Health and Social Care in Northern Ireland, including, for the avoidance of
doubt, NHS Trusts.
NHS Trust means a legal entity, set up by order of the Secretary of State
under section 25 of, and Schedule 4 to, the National Health Service Act 2006,
to provide goods and services for the purposes of the health service.
Ongoing Charges (previously Total Expense Ratios or TERs) means the figure
published annually by the Company which shows the drag on performance caused
by operational expenses. More specifically, it is the annual percentage
reduction in shareholder returns as a result of recurring operational expenses
assuming markets remain static and the portfolio is not traded. Although the
Ongoing Charges figure is based on historical information, it provides
shareholders with an indication of the likely level of costs that will be
incurred in managing the Company in the future.
Portfolio means the Group's portfolio of assets.
Portfolio Net Asset Value or Portfolio NAV means the net asset value of the
Company, with assets aggregated rather than valued on an asset by asset basis,
as at the relevant date, calculated on the basis of an independent Portfolio
Valuation. See note 7.0 to Appendix 1 for a reconciliation to IFRS NAV.
Portfolio Basis means the Portfolio NAV (as defined above)
Portfolio Valuation means an independent valuation of the Portfolio by Jones
Lang LaSalle Limited or such other property adviser as the Directors may
select from time to time, based upon the Portfolio being held, directly or
indirectly, within a corporate vehicle or equivalent entity which is a wholly
owned subsidiary of the Company and otherwise prepared in accordance with RICS
"Red Book" guidelines.
REIT means a qualifying real estate investment trust in accordance with the UK
REIT Regime introduced by the UK Finance Act 2006 and subsequently re-written
into Part 12 of the Corporation Tax Act 2010.
RICS means Royal Institution of Chartered Surveyors.
RSH means the Regulator of Social Housing, the executive non-departmental
public body, sponsored by the Ministry of Housing, Communities and Local
Government, which is the regulator for Social Homes providers in England and
Wales.
Social homes or social housing means social rented homes and other
accommodation that are offered at rents subsidised below market level or are
constituents of other appropriate rent regimes such as exempt rents or are
subject to bespoke agreement with entities such as NHS Trusts and are provided
by Approved Providers.
Specialist Supported Housing or SSH means social housing which incorporates
some form of care or other ancillary service on the premises.
SPV means special purpose vehicle, a corporate vehicle in which the Group's
properties are held.
Target Return means the target return on investment.
Total Return means Net Total Return, being the change in IFRS NAV over the
relevant period plus dividend paid.
Total Shareholder Return means a measure of the return based upon share price
movement over the period plus dividend paid.
Valuation means an independent valuation of the Portfolio by Jones Lang
LaSalle Limited or such other property adviser as the Directors may select
from time to time, prepared in accordance with RICS "Red Book" guidelines and
based upon a valuation of each underlying investment property rather than the
value ascribed to the portfolio and on the assumption of a theoretical sale of
each property rather than the corporate entities in which all of the Company's
investment properties are held.
WAULT or "Weighted Average Unexpired Lease Term" is the product of annualised
rent roll at period end and the time in years to when the lease expires for
each given lease, summed across leases, and then divided by the total
annualised rent roll of the portfolio. The result is expressed in years. WAULT
is a key measure of the quality of the Company's portfolio. Long lease terms
underpin the security of the Company's income stream.
Company Information
Michael Wrobel, Chairman
Peter Baxter, Senior Independent Director and Chairman of the Nomination and
Remuneration Committee
Caroline Gulliver, Chair of the Audit and Management Engagement Committee
Alison Hadden
Alastair Moss
Registered Office
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Registered no: 10402528
www.civitassocialhousing.com (http://www.civitassocialhousing.com)
Alternative Investment Fund Manager
G10 Capital Limited
3 More London Riverside
London SE1 2AQ
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
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
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 Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Independent Auditors and Reporting Accountants
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Public Relations Adviser
Buchanan
107 Cheapside
London EC2V 6DN
Tax Adviser
BDO LLP
55 Baker Street
London W1U 7EU
1 On a comparable basis
2 See Appendix 1 - Notes to the calculation of EPRA and other alternative
performance measures in these financial statements for supporting workings
3 On an Ordinary Share held since launch (percentage not annualised)
4 On an Ordinary Share held since launch (percentage not annualised)
5 The target dividend is a target only and not a profit forecast. There can
be no assurance that the target will be achieved and it should not be taken as
indication of the Company's expected or actual future results
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