Civitas Social Hsng. - Interim Results
06/12/2022 07:00
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RNS Number : 6758I Civitas Social Housing PLC 06 December 2022
6 December 2022
CIVITAS SOCIAL HOUSING PLC
INTERIM REPORT
SIX MONTHS TO 30 SEPTEMBER 2022
Consistent growth in rent roll with continued uplift in NAV
Civitas Social Housing PLC ("Civitas", "CSH" or the "Company"), the UK's
leading care-based and healthcare REIT, announces its interim results for the
six months ended 30 September 2022.
The Half Year Report and Condensed Consolidated Financial Statements can be
accessed via the Company's website at www.civitassocialhousing.com
(http://www.civitassocialhousing.com) .
Performance Highlights
Property Valuation and Performance 30 Sept 22 30 Sept 21 % Change 31 March 22
Investment property valuation(1) (£m) 999.5 946.3 +5.62 968.8
NAV per share (diluted) (p) 114.84 108.49 +5.85 110.30
Financial Performance
Annual contracted rent roll (£m) 55.0 51.9 +5.97 53.3
Net rental income (£m) 26.6 25.1 +5.98 50.7
EPRA earnings(2) (£m) 13.6 14.9 -8.72 29.8
Operating Cash Flow (£m) 20.6 21.3 -3.29 39.1
Earnings per share (p) 6.98 2.87 +143.21 7.23
EPRA earning per share (diluted) (2) (p) 2.22 2.40 -7.50 4.82
Dividends declared per share (p) 2.85 2.78 +2.70 5.55
Financing
Loan to value ratio (%) 33.7 34.6 34.4
Weighted average interest cost of debt (%) 3.0 2.5 2.5
(1) See Half Year Report 30 September 2022 (Note 10.0) for detailed commentary
(2) See Appendix 1 in the respective financial statements for supporting
workings - Notes to the calculation of EPRA and other alternative performance
measures. EPRA earnings and EPRA earnings per share reduced by one-off costs
of £1.64m relating to evaluation of strategic projects. Pro-forma EPRA
earnings per share (prior to £1.64m one-of-costs) were 2.49p in the period to
30 September 22.
Strong Financial Performance, Rent Collection and Cash Conversion
· Net rental income of £26.6 million, representing growth of 6.0%
over the comparable period (30 Sept 2021: £25.1 million)
· Net rental uplifts from indexation in the six months to 30
September 2022 of 6.0% (annualised) compared to 2.4% in the year to 31 March
2022
· Further growth in rents anticipated in the remainder of 2022 and
2023 supported by significant underlying local authority demand and reduced
supply in many care categories
· Positive cash conversion with net operating cash flow of £20.6
million
· Retained high-quality investment credit rating from Fitch Ratings
of "A" secured and "A-" unsecured
NAV per share remains robust
· Independent IFRS property valuation increased by 5.6% to £999.5
million (30 Sept 2021: £946.3 million) reflecting the effect of the
indexation of inflation adjusted leases as well as continued demand for the
asset class
· NAV per share increased by 5.8% to 114.84 pence (30 Sept 2021: 108.49
pence per share)
· Valuation average net initial yield (NIY) of 5.27%
· The independent valuation methodology set out in note "10.0
Investment Property" to the Half Year Report reflects the Company's underlying
rental income with specific discount rates applied to the rental flows
· The independent valuation also reflects the Bank of England's
long-term inflation target for CPI which remains at 2.00% per annum
NAV Bridge - 31 March 2022 to 30 September 2022
£'000 Pence per share
Opening NAV at 31 March 2022 675,547 110.30
Profit after taxation 42,638
Change in fair value of derivatives -3,555
Change in fair value of investment properties -25,510
EPRA earnings 13,573 2.24
Dividends paid -17,177 -2.83
Change in fair value of derivatives 3,555 0.59
Change in fair value of investment properties 25,510 4.21
Payment for / gain on share buy backs -4,651 0.33
Closing NAV at 30 September 2022 696,357 114.84
Dividends
· Two dividends of 1.425 pence per share each declared in the period
· Distributions in line with stated target of 5.70 pence(3) per share
for the year ending 31 March 2023
· Dividend cover on an EPRA earnings run-rate basis(4) at 30 September
2022 was 94% based on the Company's earnings and the actual cost of debt
service over the period
(3) This is a target and not a formal dividend forecast or a profit forecast
(4) Excluding one off costs of £1.64m relating to examination of strategic
projects
Bank Refinancing and Hedging
· Borrowings remain consistent at £357 million reflecting an overall
loan to value of 33.7%
· Post -period end refinancing undertaken - all debt facilities are
now at 100% fixed or capped rates
· On 1 December 2022, the Company signed a new five-year
£70.8million facility with a new bank lender. The transaction is expected to
fund in the new year subject to certain closing conditions
· Weighted average interest cost of debt (3.0% for the period to 30
September 22) increases to 3.9% (including margin) post period end based on
the annualised effect of implementing the new arrangements
· One-off cost of £8.1 million paid for the new hedging arrangements
and £3.6 million unrealised gain on existing hedging
· Weighted average length of debt 3.53 years with objective to extend
further with new facility noted above
Supportive Political Priorities Expected to Create Strong Market Tailwinds
· Strong Government affirmation of its commitment to ensure
vulnerable individuals continue to receive full support
· 17 November 2022 "Autumn Statement" confirmed increased spending on
health and social care with central message: "Protect the vulnerable, because
to be British is to be compassionate and we are a compassionate Conservative
government."
· Government aims to free up 13,500 hospital beds, allocating
additional grant funding for adult social care of £1bn next year and £1.7bn
the year after - thus re-confirming its commitment to moving people from
hospital settings and into care in the community
· Chancellor confirmed that the Government will cap general social
housing rent increases next year at 7% and not 5% as previously suggested -
demonstrating commitment to high quality social housing
· Notably, Specialist Supported Housing provided by the Company is
entirely exempt from rent caps and expected to remain so (although c.30% of
portfolio has CPI capped at 4%).
· Government's commitment to high quality social housing reflects
anticipation of further ongoing growth in rental income over the medium term
ESG & Social Impact Focus
· The latest independent Social Impact Report which is published today
and available on the Company's website demonstrates the Company's continued
commitment to tenant well-being and excellence in tenant living standards
· Further implementation of the Company's voluntary energy programme
with E.ON leading to lower energy costs for residents and a more carbon
neutral portfolio
· Obligation for compliance with Government energy standards remains
with Approved Providers under the Company's lease but with the Company taking
a supportive stance
· Phase 2 work with E.ON continues with retrofit surveys, targeting 25%
reduction in carbon emissions
Diversified portfolio of 697 properties providing homes to 4,594 people
· An actively managed portfolio with a sector-leading team of
professionals assisting and enabling high quality and longevity of homes and
income
· Dedicated specialist asset management and housing benefit team within
the investment adviser works closely on a day-to-day basis with Approved
Providers to assist in property enhancement, rental management and care
provider engagement
· The Company's portfolio provides accommodation to tenants with
learning disabilities, autism and mental health disorders with an average
tenant age of 35 years
· High level of acute care with void cover carried out by 130 care
providers with 40% of residents receiving over 50 hours of care per week - a
key differentiator and support for exempt housing rents
· Properties located across half the local authorities in England and
Wales and leased to 18 Approved Providers, with support provided by 130 care
providers
· High level of bespoke adaptation for individual tenants' needs
· Over one third of the portfolio on back-to-back 25-year leases, with
leading care providers
· Acquisition of one new property in the period for £0.6 million,
providing homes for a further two vulnerable adults
Proposed New Regulatory Clause
· Now agreed with two housing associations who together are seeking
senior level consultation with the Regulator of Social Housing
· Voluntary action on the part of the Company to assist housing
associations with regulatory compliance
· Clause will only be rolled-out with the clear understanding that its
inclusion will assist housing associations in achieving regulatory compliance.
Outlook
· Encouraging Government support for the provision of services for
vulnerable individuals despite well reported broader macro political and
economic challenges in the UK
· Clear demand for delivery of quality, sustainable accommodation at a
fair price
· Recent years have seen a reduction in the pace of delivery of adapted
care-based housing at a time of increased demand for many care conditions
across many parts of the UK
· Rental growth expected to continue to see positive trend over medium
term linked to inflation
· Financing costs have now been fixed for several years forward to
provide greater degree of certainty
· Company continues to actively explore opportunities to narrow the
discount to NAV and enhance shareholder value
Michael Wrobel, Non-Executive Chairman of the Company, commented:
"This Interim Report again demonstrates the resilience of the Company's
portfolio with six years of consistent rental growth and progressive dividend
payments since IPO. Civitas has delivered strong financial results in the
period, with a 6% increase in rental income and a further 4.1% increase in NAV
per share.
"The political landscape remains supportive of our business model and
strategy, with the Government and Opposition committed to caring for the
vulnerable within the community to free up NHS capacity and realise savings
for the taxpayer. With strain on our public services being especially
pronounced at present, it is clear that private sector involvement is vital if
care in the community is to work.
"Our housing association counterparties continue to improve their operations
and to carry out excellent work, with tenants benefiting from their highly
specialised focus on care for people with complex needs.
"The Board remains active in exploring ways to address the discount to NAV as
a priority. On behalf of the Board, we would like to thank shareholders for
their ongoing support and all the staff of the investment adviser for their
hard work in managing the UK's largest portfolio of specialist housing
dedicated to care in the community."
For further information, please contact:
Civitas Investment Management Limited
Paul
Bridge
Tel: +44 (0)20 3058 4844
Andrew
Dawber
Tel: +44 (0)20 3058 4846
Panmure Gordon
Sapna
Shah
Tel: +44 (0)20 7886 2783
Tom
Scrivens
Tel: +44 (0)20 7886 2648
Liberum Capital
Limited
Chris Clarke
Tel: +44 (0)20 3100 2000
Darren Vickers
Owen
Matthews
Buchanan
Helen Tarbet / Henry Wilson Tel:
+44 (0)20 7466 5000
Hannah Ratcliff / Verity Parker
civitas@buchanan.uk.com
Notes:
Civitas Social Housing PLC (CSH) was created in 2016 by Civitas Investment
Management Limited as the first dedicated London listed REIT to raise
long-term, sustainable, institutional capital to invest in care-based social
homes and healthcare facilities across the UK. CSH's portfolio has been
independently valued at £999.5million (30 September 2022). CSH now provides
homes for 4,594 working age adults with long-term care needs, in 697 bespoke
properties that are supported by 130 specialist care providers, 18 approved
providers and working with over 178 individual local authority partners.
Chairman's Statement
"We recently passed the sixth anniversary of the Company's listing on the
London Stock Exchange and the Board would like to thank shareholders for their
ongoing support. We have delivered strong financial results during the period
and we are very focussed on addressing the discount to NAV."
In the time since listing, our manager Civitas Investment Management Limited
has brought together the largest single portfolio of care-based properties in
the UK that is dedicated to the delivery of care for vulnerable individuals
within community settings. At a time of increasing demand for social care
across the UK we are pleased to be contributing by providing long-term housing
of high quality for more than 4,500 individuals, a number of whom have never
previously had the opportunity to live within their own home and in their own
community.
Despite the success of our portfolio and delivery of positive financial
results that I highlight below, the
Company's share price has traded at a discount to NAV for all of the period.
The discount has widened further during the recent economic turmoil, along
with other REITs and real estate shares. The Company has also been active in
examining all strategic options to create shareholder value and is actively
pursuing several initiatives. Unfortunately, two projects that did not come to
fruition have resulted in certain one-off costs that have been recognised in
the period.
In response, the Company has continued to buy back shares - over the past
twelve months it has acquired 13,825,000 shares at an average price of 85.63
pence per share for a total investment of £11.84 million. This has enhanced
the NAV by 0.49% and benefited the EPRA earnings.
The past six months have seen many economic challenges in the UK and across
the world, including the rapid growth in inflation and the Russia/Ukraine
conflict. Within our sector of Specialist Supported Housing, I am pleased to
note that our rental income has benefited from some positive inflation
linkage. At the same time, we note that inflation is causing significant cost
increases for both housing associations and care providers to which local
authorities and central Government is being asked to respond. We continue to
monitor the position closely, working with our counterparties to help them
operate as efficiently and effectively as possible. Our sector is exempt from
rent caps, due in large part to the essential nature of the services that are
delivered in the properties owned by the Company.
Financial Performance
During the period under review the portfolio generated net rental income of
£26.6 million (30 September 2021: £25.1 million), representing a 6.0%
increase over the corresponding period last year. In large part this is due to
rental uplifts, and due to the acquisitions of c.£10 million of new
properties during this period.
In November 2022, the Company extended its HSBC facility, which now expires in
November 2025. As a result of the new hedging arrangements, all of our loan
facilities are now at 100% fixed rate.
Net asset value of the Company increased from 108.49 pence per Ordinary Share
as at 30 September 2021 to 114.84 pence per share as at 30 September 2022.
Continuation Vote
Shareholders representing 298,478,435 voted in favour of the continuation of
the Company at the annual general meeting on 15 September 2022, being 98.85%
of those who voted. We would like to thank shareholders for their ongoing
support.
Sector Performance
We have been at the forefront of innovating and leading improvements in the
sector since our inception six years ago. Most recently this has included the
start of the controlled roll out of a new regulatory clause intended to
demonstrate greater risk sharing which we believe will better position our
Approved Provider counterparties to become RSH compliant.
Enhancing Social Value
As an impact investor, the Company remains at the forefront of delivering and
demonstrating social value through our investments and through sector leading
partnerships with the charitable and public sector. You can read more about
these in the Investment Advisers report.
Outlook
Our sector continues to experience strong demand for quality properties that
can provide a long-term stable home for the delivery of community-based care.
This is evidenced from our direct engagement with local authorities, care
providers and housing associations who are seeking additional provision.
We expect our rental income to continue to rise correlated to inflation,
noting that c. 30% of our leases have CPI uplifts capped at 4%. We are also
mindful of the impact of the recent rises in interest rates and the drag that
will have on our EPRA earnings. Nonetheless, it remains our expectation that
we will pay dividends of 1.425p over each of the next two quarters to our
year-end.
The Company continues to implement its voluntary improvement programme with
E.ON leading to lower energy costs for residents and which alongside the
latest independent Social Impact Report demonstrates on-going commitment to
tenant well-being.
I would like to thank all our stakeholders for their continued work and
support.
Michael Wrobel
Chairman
5 December 2022
Our Portfolio
By UK Region as at 30 September 2022
Region Properties Funds invested (Percentage) Accounting rent roll (Percentage)
North East 64 5.8 6.6
North West 101 10.1 10.0
Yorkshire and the Humber 96 10.8 10.7
East Midlands 58 8.6 8.7
West Midlands 101 11.3 11.7
East of England 32 4.1 3.8
South East 65 10.1 11.4
South West 120 15.4 14.2
Wales 34 11.0 11.0
London 26 12.8 11.9
Market Value (%)
South West 14.2%
London 11.9%
West Midlands 11.7%
South East 11.4%
Wales 11.0%
Yorkshire and the Humber 10.7%
North West 10.0%
East Midlands 8.7%
North East 6.6%
East of England 3.8%
Tenancies
South West 759
Yorkshire and the Humber 610
North West 607
West Midlands 502
North East 462
South East 417
East Midlands 374
Wales 364
London 338
East of England 161
By Approved Provider as at 30 September 2022
Annual Contracted Rent Roll (%)
Approved Provider Rental Income
Falcon 19.0%
Auckland(1) 15.9%
BeST 12.8%
Inclusion 9.5%
Qualitas Housing(1) 8.6%
Westmoreland 5.8%
Trinity 5.1%
Encircle 5.1%
Pivotal 3.8%
Harbour 3.7%
Chrysalis 3.6%
New Walk 2.9%
My Space 1.3%
IKE 1.0%
Hilldale 0.9%
Windrush 0.8%
Lily Rose 0.1%
Blue Square 0.1%
Properties
Approved Provider Number of Properties
Falcon 116
Auckland(1) 100
Inclusion 82
BeST 74
Qualitas Housing(1) 54
Trinity 43
Westmoreland 41
New Walk 41
Chrysalis 28
Pivotal 27
Harbour 27
Encircle 16
Hilldale 15
Windrush 13
IKE 10
My Space 8
Blue Square 1
Lily Rose 1
Tenancies
Approved Provider Tenancies
Falcon 850
BeST 591
Auckland(1) 547
Inclusion 507
Qualitas Housing(1) 370
Trinity 242
Westmoreland 239
Pivotal 238
Harbour 214
Encircle 205
New Walk 194
Chrysalis 151
My Space 71
IKE 68
Windrush 51
Hilldale 39
Lily Rose 13
Blue Square 4
Market Value (%)
Approved Provider Market Value
Falcon 19.1%
Auckland(1) 16.1%
BeST 13.0%
Inclusion 9.2%
Qualitas Housing(1) 8.8%
Westmoreland 6.0%
Trinity 5.0%
Encircle 4.8%
Pivotal 3.7%
Harbour 3.7%
Chrysalis 3.6%
New Walk 2.9%
My Space 1.2%
IKE 1.0%
Hilldale 0.9%
Windrush 0.8%
Blue Square 0.1%
Lily Rose 0.1%
(1)Auckland and Qualitas Housing are both members of the Social Housing Family
C.I.C and subject to common control.
Investment Adviser's Report
"In its sixth year CSH has demonstrated consistent performance in its key
objectives of delivering excellent homes with care, delivering the dividend
for shareholders and providing value for money to the tax payer, delivering
social impact which changes lives for the better."
Introduction
CIM, the Investment Adviser to CSH, advises on a range of ethically based
social and healthcare real estate funds in the UK and Europe with committed
capital of c.£3 billion.
CIM advises these funds on behalf of various global investors together with a
wide range of local authority pension funds and dedicated impact investors.
CSH was the first listed fund and in many ways the pioneer in bringing
substantial equity into the specialist supported housing sector, the ability
of CIM to help provided much needed new homes.
On behalf of the Investment Adviser and CSH, we would like to offer our thanks
to all of our partners who have continued to provide high-quality care,
support, and housing, and to our investors who enable the provision of over
4,500 quality homes for some of the most vulnerable people in society. We
would like to give particular thanks at this time to our investors who passed
the recent continuation vote by a factor of more than 98% and continue to
support us in these challenging times.
CSH continues to be a market leader in the delivery of ethical, care-based
residential housing, delivering sustainable returns for shareholders and
outstanding community-based homes for residents, while offering value for
money to society. This transforms lives.
Delivery and sustained demand
In the half year to September 2022 CIM, working with the CSH Board, has
continued to lead the sector in providing high quality accommodation for those
with significant life long care needs and has delivered a consistent financial
performance with significant social outcomes.
Results Highlights
CSH is a market leader in the delivery of much-needed long-term housing with
care in the UK and is leading the charge for ethical investment in the sector.
These half year results show a number of key achievements and themes:
· Six years of consistent rental growth and progressive dividend
payments that have increased from an initial 3.00p per share to a current
target of 5.70p per share reflecting growing dividend.
· A retained high-quality investment credit rating from Fitch Ratings
of A secured and A- unsecured, that has been maintained over time and which
Civitas was the first to secure in this sector.
· Design, negotiation and announcement of a new innovative regulatory
clause, to be implemented over time, assisting Approved Providers to be better
able to become RSH compliant, with no diminution to lease or asset values.
· An actively managed portfolio with a sector-leading team of
professionals assisting and enabling high quality and longevity of homes and
income.
· Professional support to enable Approved Providers to enhance the
quality of their delivery and demonstrate long-term financial and operational
independence.
· Ownership of properties that facilitates the delivery of high levels
of care with 40% of residents receiving over 50 hours of care per week.
· An active programme working with E.ON to permanently reduce carbon
emissions across the portfolio leading to lower energy costs for residents and
a more carbon neutral portfolio.
· Sector leading partnerships with national and local charities
delivering real change and continuing to enhance Civitas's reputation as the
most experienced investor in social infrastructure in the UK.
· CIM has a highly experienced asset management team which has overseen
some £25 million of physical improvements to the portfolio since inception
paid for by the vendors of the properties. The works are also independently
scoped and verified by independent RICS qualified surveying firms.
Proposed New Regulatory Clause
This will enable Registered Providers to demonstrate to the RSH how they are
sharing risks. This has now been agreed with two housing associations who
together are seeking senior level consultation with the Regulator of Social
Housing. The key benefits are:
· Counterparties better positioned to achieve regulatory compliance.
· Enhanced information and step in rights (having regard to tenant
welfare) in addition to existing lease transfer and assignment rights (the
rights will only be exercised under stringent criteria).
· Unchanged lease and property values supported by strong underlying
demand.
The clause will only be rolled-out with the expectation of it making a
difference.
A growing team of specialists
CIM has continued to develop the most experienced team in the sector providing
senior level expertise in the following areas:
· Asset Management
· Finance and operations
· Transaction sourcing and execution
· Housing Benefit
· Social Impact
This is of value to the sector and our counterparties as the team's expertise
is available if required to offer input in matters such as property
enhancements, housing benefit claims and void management. This expertise also
provides CIM with the healthy and productive dialogue with all parts of the
sector which is a dynamic combination of national and local institutions,
private developers, charitable housing organisations and public and private
care providers.
Sector leading social outcomes
Civitas delivers social and financial benefits to society, the taxpayer and
individuals through its direct investment, its ongoing enhancement of the
portfolio and through its work with several local and national charities where
the focus is upon pro bono expertise and modest financial contributions with
the aim of delivering real and sustainable change.
We seek to operate in a fully transparent manner and to offer high quality
accommodation at a reasonable price that reflects the use and adaptations to
which the property has been designed including the availability of common
spaces and accommodation for care staff.
Continuing progress in decarbonisation of the portfolio
· Phase 2 with E.ON seeking external grants as will be required by the
whole sector.
· Clean Energy Strategy to achieve minimum EPC "A-C" prior to the
Government target of 2035.
· In addition, the continued partnership with E.ON will continue to
reduce carbon emissions and add to the environmental performance of the
portfolio. Whilst carbon reductions are not included in the valuation it would
appear possible that in the future this will become a factor in valuation
methodology.
Engagement with Shareholders
CIM continues to work with the Board as outlined in the Chairman's Statement
and to make itself available at all times to meet with existing and potential
new investors.
A rapidly changing world and a constant and increasing need
There continues to be strong Governmental and cross-party support for housing
delivery as a major policy objective and for social care which now represents
(according to provisional figures from the 2021 Census from the Office for
National Statistics (ONS)) £277 billion or nearly 12% of the Gross Domestic
Product of the UK.
The CSH portfolio is able to benefit from the following broader market
dynamics:
Demand for healthcare services keeps growing
Healthcare demand and consequently government expenditure on healthcare in the
UK and across the developed world is consistently rising even pre covid and
reflects long term demographic trends for an ageing population with longer
term health conditions and increased demand from working aged adults who
require care and support.
LaingBussion, the leading healthcare consultants, stated in their latest
report 'Investing in Healthcare and Real Estate', "The unpredictability of
markets exposed to global trade is a reminder of the underlying strength and
relative stability of demand for healthcare services".
Healthcare accounts for 10% or more of GDP across the developed world and as
shown above, 12% in the UK with considerably rising demands for the NHS. The
British Medical Association (BMA) estimates of declared demand on the waiting
list have increased from c.3 million in 2018 to 3.5 million pre covid in 2020
and to over 7 million as at September 2022. This, the BMA believes, hides
undeclared demand with GP appointments and attendance at hospital
significantly lower than pre pandemic levels.
Continued expected rise in demand for supported living
As can be seen in the graph on page 13 of the Half Year Report, the expected
demand projected by Government for categories of care, mental health support,
physical support and learning disabilities show demand increasing from 250,000
in 2023 to over 300,000 by 2038 or an increase of over 50,000 in 15 years.
However, our experience over the last two years is that the growth in supply
has slowed and, as is demonstrated by the continued housing of people with
learning disabilities in hospital, supply is failing to meet current demand
and certainly will struggle to meet future demand. In addition, the increasing
life expectancy of those with a care need means that parental care is
increasingly unavailable.
Multi decade cross party and multi country support for supported living
The UK is not alone in the approach of housing in the community and indeed the
United Nations developed polices that have been adopted by the UK, the
European Union and 183 States in total that provide a framework for the
provision of this support. The "Convention on the Rights of Persons with
Disabilities" was signed by the then UK Government in 2007 and enacted into
law in 2008.
The Convention sets out broad rights for those considered disabled in Article
1:
"To promote, protect and ensure full and equal enjoyment of all human rights
and fundamental freedoms by all persons with disabilities and to promote
respect for their inherent dignity."
Article 19 specifically covers housing, including the rights to live
independently and be included in the community, Article 20 refers to personal
mobility, Article 26 to habilitation and rehabilitation, and Articles 29 and
30 to the right to participate in political and public life, cultural life,
recreation and sports.
Specialist Supported Housing ("SSH") of the type provided by the Company is
designed to fulfil these objectives and predates the implementation of the UN
Convention. The requirement to provide support for vulnerable people was
further enshrined into UK law by the Care Act 2014 which confirms the
responsibility of authorities to provide appropriate support and care. There
is telling testimony in the publication 'A Place for Me' (sponsored by CSH and
the National Care Group), highlighted later in this report, on the
transformational effect SSH has upon people's lives.
In terms of current legislation, the Health and Care Bill, which was granted
Royal Assent in April 2022, further consolidates the trends of joining up NHS
healthcare services with social care through the formation of Integrated Care
Systems (ICSs). This is supportive of the forms of care and community housing
delivered by the Company.
The sector in which the Company operates is substantially funded by the State
as part of the long-standing commitment to provide support for vulnerable
adults.
Government Policy
The Government Department for Levelling Up, Housing and Communities published
the Levelling Up white paper, in February 2022, which makes clear that the
provision of high quality, affordable housing is a major Government priority
and will continue to be at the centre of government policy.
Further demonstration of Government support for the sector is the exclusion of
exempt rent housing from the Social housing rent cap of 7% for the next two
years. This mirrors the previous restriction on social housing rents between
2016 and 2019 when exempt rents were excluded.
Value for money for the public purse is a vital component of claiming exempt
rents and each and every rent funded by housing benefit that is claimed by
Civitas counterparties has been approved by a local authority housing benefit
department. However, there continues to be concern about some providers
claiming exempt rents where minimal or no support is provided to residents and
where the property was not originally commissioned by a local authority.
The Government launched an enquiry through the Levelling Up, Housing and
Communities committee to explore the overall efficacy of exempt rents
accommodation.
This committee has been critical of poor quality delivery where there is
little care provided. The three key points are:
· The lease-based model enables access to properties for providers who
would otherwise not be able to purchase properties outright; if not exploited.
· Local authorities should be able to recover 100% housing benefit even
if counterparty is not registered with RSH.
· All providers should be registered with the RSH and RSH encouraged to
take on all small providers.
What is clear is that the focus rightly will continue to be on the value for
money of supported exempt accommodation that is not commissioned by a local
authority. Non-Commissioned exempt accommodation is housing where the provider
is claiming enhanced rents based upon providing additional care to meet
housing need but the local authority did not initiate the procurement of the
housing. It is normal for local authorities to have a mix of commissioned and
non-commissioned housing to which they pay benefit at the standard and higher
exempt rate. Clearly where a local authority has commissioned a building it
means its support is explicit. The Government also funded pilot schemes in
areas particularly affected by high levels of exempt rent claims such as
Birmingham.
Civitas specialises in forming close relationships with local authorities and
only works on schemes where care is meaningful and has been commissioned or
supported by a local authority.
The Government also reinforced its support for health and social care in its
report 'Our Plan for Patients' in September 2022 (which seeks to improve
waiting lists, access to doctors, access to dentists and ambulance service
improvements) and its confirmation in the growth plan. The proposed rise in
National Insurance of 1.5% designed by the Government to raise an additional
£13 billion for the NHS and social care has been withdrawn. The additional
expenditure will still be funded from general taxation and borrowing.
The patients plan states "…from next year (we will) rebalance funding across
health and social care". In addition promising an initial £500 million fund
will support discharge from hospital into the community. This model continues
to enjoy strong cross party support, consistent with the cross party support
for all healthcare to be carried out in the community as much as possible.
Regulation
The Social Housing White Paper clearly indicates that the RSH will become a
regulator expected to protect and measure residents perceptions of service and
ensure consumer standards are high. The housing Ombudsman has become very
active, under new leadership in finding against service failures mainly of
large providers.
Whilst the compliance of Approved Providers with which we work is subject to
further implementation of the regulatory clause, there is substantial evidence
in information reported to us that the 'consumer' outcomes experienced by
residents of SSH housing providers is very high. This is in part a function of
the model in that the division of responsibilities for asset management, care
and housing management and monitoring by local authorities of standards
encourages high performance.
In addition, SSH providers in data reported to us maintained high standards of
compliance with key statutory and health and safety rules. Our independent
monitoring by The Good Economy demonstrates high level of satisfaction
compared to general needs housing.
Major housing association sector
The ability of large housing associations to operate the provision of social
housing subsidy model whereby leverage on existing assets and profits from
developments are used to subsidise new social housing is being eroded by a
number of factors. Clearly the constraints on rental growth, the drive for
decarbonisation which will not be achieved without substantial public
investment, catch up repair, fire safety works and development costs are
already leading to major housing associations reducing their future social
housing development pipelines.
This is likely to lead to a reduction in the overall delivery of social
housing further increasing demand for all types of affordable housing.
Financial Review
The Company delivered a strong financial performance over the 6-month period
to 30 September 2022, with growth in net rental income, operating profit and
NAV per share.
Earnings per share jumped to 6.98p in this period from 2.87p for the
comparable period in 2021. Net rental income for the period increased by 6.0%
to £26.6million (September 2021: £25.1 million).
The annual contracted rent roll increased 6.0% from £51.9 million at
September 2021 to £55.0 million as at 30 September 2022. As the Company's
rent roll references historical CPI in upcoming uplifts, the rent roll is
expected to continue to benefit from indexation over the remainder of this
financial year, reflecting the recent inflationary environment. The Company
also continues to enjoy significant demand for its properties from local
authorities.
The EPRA cost ratio for the period was higher at 25.9% (September 2021:
19.7%). Excluding the two one-off costs pertaining to two strategic projects,
the EPRA cost ratio was in line with the previous period at 19.7%.
During the reporting period, the Company paid two distributions, one at
1.3875p and another at 1.425p per share. The latter distribution is consistent
with the Board's previously announced dividend target of 5.70p for the year to
March 2023.
The NAV per share at 30 September 2022 was up 4.1% at 114.84p from the 31
March 2022 NAV of 110.30p. At period end, the Company's investment property
was independently valued by JLL at £999.5 million (March 2022: £946.3
million), with an average net initial yield of 5.27%.
During the period, the Company extended its £60m debt facility with Lloyds to
now mature in July 2024. Loans drawn at period end stood at £357.1 million.
Subsequent to period end, the Company also extended the maturity of its £100m
facility with HSBC to November 2025. The Company's gearing remains
conservative with an LTV at the period end of 33.7% (September 2021: 34.6%)
and is supported by the continued strong cash conversion of rental income into
net operating cash flows of £20.6 million (September 2021: £21.3 million*).
Net financing costs for the period were £6.2 million (2021: £5.2 million).
The average interest cost of the Company's debt for the period was 3.04%
(September 2021: 2.46%), noting that benchmark SONIA rates payable on the
Company's variable rate debt increased markedly over the period. To that end,
during September 2022, the Company also purchased interest rate caps for its
variable rate debt. This allows the Company to mitigate the effect of further
interest rate increases but also benefit from any substantial falls in future
interest rates. As at 30 September 2022, 100% of the Company's debt
obligations are now either fixed or capped (2021: 55% fixed), extenuating
further increases to the Company's cost of debt.
*Cash and cash equivalents and monies held in restricted accounts and deposits
have been restated as at 30 September 2021 and 31 March 2022 following
clarification by IFRIC on classification of funds with externally imposed
restrictions.
Governance
CIM continues to engage actively with the Company's Approved Provider partners
and care providers, providing advice and shared learning. This has helped to
facilitate continued high level operational performance on occupancy rates,
property compliance matters, and health and safety.
The Board carries out an annual Board performance evaluation exercise. All of
the Company's policies and procedures are reviewed annually and, where
appropriate, updated.
Summary
The multi-decade support for providing housing in the community for the most
vulnerable and reducing the burden on acute healthcare settings continues to
be further supported by cross party consensus and clear evidence of excellent
outcomes for people and for the taxpayer.
Civitas is the market leader working at the intersection of government public
policy, with public and charitable bodies and the private sector both in
undertaking a role as significant investment manager and asset manager and as
a catalyst for improving standards end evolving best practice.
Civitas Investment Management Limited
Investment Adviser
5 December 2022
Environmental, Social and Governance (ESG)
The Company's ESG Policy is located on its website. It provides an overview of
the Company's investment procedures and sets out the Board's commitment to a
continuous improvement process in its approach to ESG integration.
Environmental: Carbon Reduction/Energy Cost Savings
CIM continues to work with E.ON (a leading UK energy and solutions company)
under a national framework agreement in partnership with CSH APs, to improve
the environmental performance of the portfolio. The 'fabric first' approach to
reducing the portfolio's carbon footprint includes the installation of cavity
wall insulation, loft insulation, external wall insulation, air source heat
pumps and solar PV and battery storage to identified properties. The
installation of these energy efficient measures, utilising available
Government grants and other funding sources, maximises value for the Company
and for its counterparties. The collaboration with E.ON is delivering
significant environmental enhancements without any cost to our Approved
Providers.
The overall energy performance of the portfolio as identified on Environmental
Performance Certificates (EPC) reports that data has improved over the last
twelve months. The proportion of properties with EPC Rating A-C is currently
c.53% and the carbon footprint (estimated from property characteristics) has
reduced by 5% per Civitas tenancy (from 2.70 tonnes of CO(2)/tenancy in
September 2021 to 2.56 tonnes of CO(2)/tenancy).
Social Impact and Social Value
The Company's latest independent report from The Good Economy was published in
November 2022 and provides details of CSH's portfolio and the continued
success in delivering measurable social impact. Findings include:
· one property, housing up to two people, has been added to the CSH
portfolio within the period
· 41% of CSH's 697 properties have been brought into the social housing
sector for the first time
· CSH's regular engagement with its Approved Providers to monitor the
quality of its stock continued through the covid pandemic
· Improvement works have enhanced the energy efficiency of homes, with
99.9% of homes having an EPC rating of at least E+
· CSH homes continue to serve vulnerable individuals and play a
significant role in improving resident wellbeing, particularly when
individuals are coming out of higher acuity facilities
· Social value analysis (March 2021) revealed that, overall, the
portfolio generates £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
· 100% statutory compliance rate by housing provider partners is better
than the wider affordable housing sector
ESG Rating Providers
As part of this commitment, CIM engages with ESG rating providers on behalf of
CSH to set out the activities that are undertaken by CSH and to ensure this is
profiled correctly. This includes increased disclosure by CIM in respect of
various policies that have been promoted on the CIM website. Notably, active
participation in the 2022 GRESB Public Disclosure Assessment has resulted in
CSH retaining an A score attained in 2021, whilst the peer group average score
has moved up to B. Civitas is up to 2(nd) position within its Comparison Group
(UK Residential). GRESB is an investor driven global ESG framework. Meanwhile,
the ESG Risk Rating Score for CSH by Sustainalytics remains at 16.6 (Low Risk)
as was reported in March 2022.
Social: Charities
Charities
The Company has supported and worked with the following Charities.
Choir with No Name (CWNN)
CWNN has been running choirs and building joyful communities with homeless and
marginalised people since 2008. They use the arts to address the most common
reasons someone might find it difficult to move on from homelessness, such as
social isolation, low confidence and lack of skills for work and life. They
currently have six choirs - in London, Liverpool, Birmingham, Brighton,
Cardiff and their most recent choir, a co-produced mixed community choir in
Coventry. They work with around 400 people impacted by homelessness a year.
Civitas supports CWNN by providing a secure source of funding.
House of St Barnabas (HoSB)
The HoSB is a social enterprise and charity that works to support people
affected by homelessness
back into long-term employment. Their vision is of a future where lasting good
work, a secure home and a supportive network are a reality for those affected
by homelessness. Civitas sponsors the mentoring programme.
Women in Social Housing (WISH)
WISH CIC is a social enterprise, a membership-based networking community for
women working across every discipline in the UK housing sector. Their aim is
to create a legacy by challenging gender inequality and the gender pay gap, by
encouraging new and existing female talent to remain in the sector and by
boosting each other through career successes. They offer encouragement and
support, championing positive outcomes through events, initiatives and
activities. Civitas promotes the work of WISH to increase inclusivity and
gender balance across the social housing sector.
Care Workers Charity (CWC)
The CWC authentically represents the social care sector's workforce and is its
safety net. It specifically advocates for the nearly 2 million care workers
that comprise one of the UK's largest workforces. CWC delivers award-winning
activities to address the symptoms and the causes of care workers' challenging
situations. Over the past two years, CWC has provided over £3.3 million in
grants and supported over 5,100 care workers and influenced national workforce
policy, guidance, and research. The annual donation from Civitas, on a 3-year
commitment enables CWC to train up Mental Health (MH) First Aiders for
deployment into member organisations.
Little Sprouts
Little Sprouts promotes the health and wellbeing of communities through
delivery of targeted cooking and food education workshops, surplus food
collection, and other activities. The charity places a particular focus on
supporting deprived communities where the socioeconomic position - housing,
employment, or education - has had a massive contributory effect on well-being
and health. It has also provided meals for those with mental health issues
affected by the pandemic.
Governance
CIM's implementation of the Board's commitment to continuous improvement in
its approach to ESG integration remains core to the investment strategy. Over
the last year, we have engaged with ESG Rating Agencies such as GRESB
(formerly Global Real Estate Sustainability Benchmark), MSCI (Morgan Stanley
Capital International), Sustainalytics, and EPRA sBPR.
For more details on the Company's Governance arrangements, please refer to the
2022 Annual Report.
Key Performance Indicators
Measure Explanation Result
Increase in NAV per share Target to achieve capital appreciation whilst maintaining a low risk strategy NAV increase of 16.9p per share or 17.2% from IPO (September 2021: 10.5p per
from enhancing the quality of cash flows from investments, by physical share or 10.8%).
improvement of properties and by creating a significantly diversified,
high-quality portfolio.
Dividends per share Targeting 5.70p per share for the current year. Dividends of 2.85p per share declared for the six-month period (September
2021: 2.78p per share).
Number of Local Authority partners, Approved Providers and Care Providers Target risk mitigation through a diversified portfolio (once fully invested) As at 30 September 2022:
with no more than 25% exposure to any one Local Authority Partner 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 Authorities
• 18 Approved Providers
• 130 care providers
The Company's largest single exposure is to Falcon Housing Association and
currently stands at 19.1% (2021: 19.5%). The largest geographical
concentration is in the South West, being 14.2% (2021: 15.6%).
Loan to Gross Assets (Leverage) Targeted total debt drawn no more than 40% of gross assets. Leverage as at 30 September 2022 of 33.69% of gross assets (September 2021:
34.55%).
Alternative Performance Measures
EPRA
The Company is a member of the European Real Estate Association ("EPRA"). EPRA
has developed and defined the following performance measures to give
transparency, comparability and relevance of financial reporting across
entities which may use different accounting standards. The Company is pleased
to disclose the following measures which are calculated in accordance with
EPRA guidance.
EPRA Performance Measure Definition Purpose Performance 30 September 2022 30 September 31 March
2021 2022
EPRA Earnings Earnings from operational activities. A key measure of a company's underlying operating results and an indication of EPRA Earnings £13,573,000 £14,908,000 £29,810,000
the extent to which current dividend payments are supported by earnings.
EPRA Earnings 2.22p 2.40p 4.82p
per share (Basic and diluted)
EPRA Net Reinstatement Value ("NRV") EPRA NAV metric which assumes that entities never sell assets and aims to The EPRA NAV set of metrics make adjustments to the NAV per the financial EPRA NRV £689,934,000 £672,742,000 £673,416,000
represent the value required to rebuild the entity. 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.
EPRA NRV per share (diluted) 113.78p 108.47p 109.96p
EPRA Net Tangible Assets ("NTA") EPRA NAV metric which assumes that entities buy and sell assets, thereby EPRA NTA £689,934,000 £672,742,000 £673,416,000
crystallising certain levels of unavoidable deferred tax.
EPRA NTA per share (diluted) 113.78p 108.47p 109.96p
EPRA Net Disposal Value ("NDV") EPRA NAV metric which represents the shareholders' value under a disposal EPRA NDV £710,809,000 £671,524,000 £678,191,000
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 NDV per 117.22p 108.27p 110.74p
share (diluted)
Past performance is not a reliable indicator of future performance.
EPRA Performance Measure Definition Purpose Performance 30 September 2022 30 September 2021 31 March 2022
EPRA Net Initial Annualised rental income based on the cash rents passing at the balance sheet A comparable measure for portfolio valuations. These measures should make it EPRA NIY 5.27% 5.19% 5.28%
date, less non-recoverable property operating expenses, divided by the market easier for investors to judge themselves, how the valuation of portfolio X
Yield ("NIY") value of the property with (estimated) purchasers' costs. compares with portfolio Y.
EPRA Topped-up Net Initial Yield ("NIY") This measure incorporates an adjustment to the EPRA NIY in respect of the EPRA 'Topped-up' NIY 5.27% 5.19% 5.28%
expiration of rent-free periods (or other unexpired lease incentives such as
discounted rent periods and stepped rents).
EPRA Costs Ratio Administrative and operating costs (including and excluding costs of direct A key measure to enable meaningful measurement of the changes in a company's EPRA Costs Ratio(1) 25.85%(2) 19.68% 20.20%
vacancy) divided by gross rental income. operating costs.
EPRA LTV Debt (including net payables but net of cash balances) divided by the market A key (shareholder gearing) metric to determine the percentage of debt EPRA LTV 31.47% 29.60% 31.24%
value of the property (including net receivables). comparing to the appraised value of the properties.
EPRA vacancy Rate Estimated Market Rental Value ("ERV") of vacancy space divided by ERV of the A 'pure' (%) measure of investment property space that is vacant, based on EPRA Vacancy Rate 0.02% 0.00% 0.00%
whole portfolio. ERV.
(1)As there are no direct vacancy costs, the EPRA Costs Ratios inclusive and
exclusive of vacancy costs remain the same ratios inclusive of vacancy costs
are the same as the ratio exclusive of vacancy costs for 2022, 2021 and 2020.
(2)This includes exceptional costs of £1.64 million.
Past performance is not a reliable indicator of future performance.
For detailed workings reconciling the above measures to the IFRS results,
please see Appendix 1 to these financial statements below.
Principal Risks and Risk Management
The principal risks facing the Company are set out on pages 38 to 41 of the
Annual Report for the financial year ended 31 March 2022. Risks faced by the
Company include, but are not limited to, strategy and competitiveness risks,
investment management risks, accounting, legal and regulatory risks and
operational risks, including cyber-crime. Financial risks include market risks
in relation to investment in property and liquidity funds, interest rate risk,
credit risk and liquidity risk. Details of the Company's management of these
risks are set out in the 2022 Annual Report.
The Board recognises that the current macroeconomic environment has increased
the level of risk around the Company's financing arrangements regarding
borrowing terms and covenants, and the Board has taken steps to address these
as set out in the Chairman's Statement and the Investment Adviser's Report. In
addition, the historic actions of short sellers and the overall repricing of
the REIT market has led to the significant discount to NAV at which the
Company's shares trade. All other principal risks facing the Company are
substantially unchanged since the date of the Annual Report for the financial
year ended 31 March 2022.
Statement of Directors' Responsibilities in respect of the financial
statements
The Directors are responsible for preparing the Half Year Report and the
financial statements in accordance with applicable law and regulation.
The Directors acknowledge responsibility for the Half Year Report and confirm
that, to the best of their knowledge, these condensed consolidated financial
statements have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting', and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the Half Year Report (including the Chairman's
Statement and the Investment Adviser's Report) includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
six-month period to 30 September 2022 and their impact on the condensed
consolidated financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
· material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
The Directors of the Company are set out in the full report.
The principal risks and uncertainties facing the Group are consistent with
those outlined in the Group's
most recent annual financial statements for the year ended 31 March 2022,
reflecting the information
required by DTR 4.2.7R.
This Half Year Report was approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
Michael Wrobel
Chairman
5 December 2022
Independent review report to Civitas Social Housing PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Civitas Social Housing PLC's condensed consolidated interim
financial statements (the "interim financial statements") in the Half Year
Report of Civitas Social Housing PLC for the 6 month period ended 30 September
2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Statement of Financial Position as at 30
September 2022;
· the Condensed Consolidated Statement of Comprehensive Income for the
period then ended;
· the Condensed Consolidated Statement of Cash Flows for the period
then ended;
· the Condensed Consolidated Statement of Changes in Equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Report of Civitas
Social Housing PLC have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial statements, is the
responsibility of, and has been
approved by the Directors. The Directors are responsible for preparing the
Half Year Report in accordance with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority. In
preparing the Half Year Report, including the interim financial statements,
the Directors are responsible for assessing the group's ability to continue as
a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
5 December 2022
Condensed Consolidated Statement of Comprehensive Income
For the period from 1 April 2022 to 30 September 2022
Note From 1 April From 1 April For the
2022 to 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue
Rental income 4.0 27,792 25,712 51,636
Less direct property expenses 4.0 (1,197) (636) (978)
Net rental income 26,595 25,076 50,658
Directors' remuneration (104) (103) (206)
Investment advisory fees 17.2 (3,110) (3,080) (6,132)
General and administrative expenses 5.0 (3,570) (1,757) (3,909)
Total expenses (6,784) (4,940) (10,247)
Change in fair value of investment properties 10.0 25,510 2,258 12,269
Operating profit 45,321 22,394 52,680
Finance income 54 - 7
Finance expense 6.0 (6,292) (5,228) (10,608)
Change in fair value of interest rate derivatives 14.0 3,555 686 2,675
Profit before tax 42,638 17,852 44,754
Taxation 7.0 - - -
Profit being total comprehensive income for the period 42,638 17,852 44,754
Earnings per share - basic and diluted 8.0 6.98p 2.87p 7.23p
All amounts reported in the Condensed Consolidated Statement of Comprehensive
Income above arise from continuing operations.
The notes below are an integral part of these condensed consolidated financial
statements.
Condensed Consolidated Statement of Financial Position
As at 30 September 2022
Note 30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Investment property 10.0 974,491 923,943 945,237
Other receivables 10.0 25,029 22,351 23,519
Interest rate derivatives 14.0 6,423 142 2,131
1,005,943 946,436 970,887
Current assets
Trade and other receivables 11,626 10,704 12,865
Cash and cash equivalents 12.0 42,227 76,494 53,337
53,853 87,198 66,202
Total assets 1,059,796 1,033,634 1,037,089
Liabilities
Current liabilities
Trade and other payables (10,889) (9,179) (9,492)
Non-current liabilities
Bank and loan borrowings 13.0 (352,550) (351,571) (352,050)
Total liabilities (363,439) (360,750) (361,542)
Total net assets 696,357 672,884 675,547
Equity
Share capital 15.0 6,225 6,225 6,225
Share premium reserve 292,626 292,626 292,626
Capital reduction reserve 317,714 329,551 322,365
Retained earnings 79,792 44,482 54,331
Total equity 696,357 672,884 675,547
Net assets per share - basic and diluted 16.0 114.84p 108.49p 110.30p
These Condensed Consolidated Financial Statements were approved by the Board
of Directors of Civitas Social Housing PLC and authorised for issue and signed
on its behalf by:
Michael Wrobel
Chairman and Independent Non-Executive Director
5 December 2022
Company no: 10402528
The notes below are an integral part of these condensed consolidated financial
statements.
Condensed Consolidated Statement of Changes in Equity
For the period from 1 April 2022 to 30 September 2022
Note Share Share Capital Total
capital premium reduction Retained equity
£'000 reserve reserve earnings £'000
£'000 £'000 £'000
Balance at 1 April 2022 6,225 292,626 322,365 54,331 675,547
Profit and total comprehensive income for the period
- - - 42,638 42,638
Shares bought back into treasury 15.0 - - (4,651) - (4,651)
Dividends paid 9.0 - - - (17,177) (17,177)
Balance at 30 September 2022 (unaudited) 6,225 292,626 317,714 79,792 696,357
Balance at 1 April 2021 6,225 292,463 331,140 43,670 673,498
Profit and total comprehensive income for the period
- - - 17,852 17,852
Shares reissued from treasury 15.0 - 163 484 - 647
Shares bought back into treasury 15.0 - - (2,073) - (2,073)
Dividends paid 9.0 - - - (17,040) (17,040)
Balance at 30 September 2021 (unaudited) 6,225 292,626 329,551 44,482 672,884
Balance at 1 April 2021 6,225 292,463 331,140 43,670 673,498
Profit and total comprehensive income for the year
- - - 44,754 44,754
Shares reissued from treasury 15.0 - 163 484 - 647
Shares bought back into treasury 15.0 - - (9,259) - (9,259)
Dividends paid 9.0 - - - (34,093) (34,093)
Balance at 31 March 2022 (audited) 6,225 292,626 322,365 54,331 675,547
The notes below are an integral part of these condensed consolidated financial
statements.
Condensed Consolidated Statement of Cash Flows
For the period from 1 April 2022 to 30 September 2022
Note From 1 April From 1 April For the
2022 to 2021 to Year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited *Restated *Restated
£'000 Unaudited Audited
£'000 £'000
Cash flows from operating activities
Profit for the period before taxation 42,638 17,852 44,754
- Change in fair value of investment properties (25,510) (2,258) (12,269)
- Change in fair value of interest rate derivatives (3,555) (686) (2,675)
- Rent and incentive straight line adjustments 190 149 397
- Bad debts expensed/(recovered) 122 (7) (17)
Finance income (54) - (7)
Finance expense 6,292 5,228 10,608
Increase in lease incentive receivable (1,700) (595) (2,011)
Decrease/(increase) in trade and other receivables 634 1,447 (236)
Increase in trade and other payables 1,511 172 551
Cash generated from operations 20,568 21,302 39,095
Interest received 54 - 7
Net cash flow generated from operating activities 20,622 21,302 39,102
Investing activities
Purchase of investment properties and other capital expenditure (16,491) (27,695)
(3,447)
Acquisition costs (245) (1,115) (1,640)
Purchase of subsidiary - including property (13,559) (13,559)
─
Sale proceeds on sale of subsidiary- excluding property ─ 2,695 2,695
Net cash flow used in investing activities (3,692) (28,470) (40,199)
Financing activities
Cost of shares bought into treasury (4,646) (1,665) (9,259)
Proceeds from shares released from treasury 919 919
-
Dividends paid to equity shareholders (17,254) (17,005) (33,928)
Interest rate derivative premium paid (737) - -
Bank borrowing issue costs paid (324) (1,445) (1,805)
Interest and security fees paid on bank borrowings and derivatives (4,239) (8,590)
(5,079)
Net cash flow used in financing activities (28,040) (23,435) (52,663)
Net decrease in cash and cash equivalents (11,110) (30,603) (53,760)
Cash and cash equivalents at the start of the period 53,337 107,097 107,097
Cash and cash equivalents at the end of the period 12.0 42,227 76,494 53,337
* Cash and cash equivalents and monies held in restricted accounts and
deposits have been restated as at 30 September 2021 and 31 March 2022
following clarification by IFRIC on classification of funds with externally
imposed restrictions.
The notes below are an integral part of these condensed consolidated financial
statements.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 April 2022 to 30 September 2022
1.0 Corporate information
These condensed consolidated financial statements for the period from 1 April
2022 to 30 September 2022 comprise the results of the Company and its
subsidiaries (together the "Group") and were approved by the Board and
authorised for issue on 5 December 2022.
The Company is incorporated in England and Wales under the Companies Act 2006
as a public company limited by shares with company number 10402528.
The address of the registered office is 6th Floor, 65 Gresham Street, London
EC2V 7NQ. The Company is registered as an investment company under section 833
of the Companies Act 2006 and is domiciled in the United Kingdom.
The principal activity of the Company is to act as the ultimate parent company
of the Group, whose principal activity is to provide shareholders with an
attractive level of income, together with the potential for capital growth
from investing in a portfolio of social homes.
2.0 Basis of preparation
The Group's condensed consolidated financial statements ("Financial
Statements") have been prepared on a going concern basis and in accordance
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority ("FCA") and with UK-adopted
international accounting standards 34 'Interim Financial Reporting'. The
condensed consolidated financial statements should be read in conjunction with
the Annual Report & Accounts for the year ended 31 March 2022, which have
been prepared in accordance with UK-adopted International Accounting Standards
and in conformity with the requirements of the Companies Act 2006.
The current period financial statements have been reviewed, not audited. The
financial statements for the period ended 30 September 2022 do not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A copy
of the statutory accounts for the year ended 31 March 2022 has been delivered
to the Registrar of Companies. The Auditors' report on those accounts was not
qualified. The Auditors' report did not contain statements under section
498(2) or (3) of the Companies Act 2006.
The comparative periods represent the period from 1 April 2021 to 30 September
2021 as reported in the Group's 2021 Interim Report, and for the year ended 31
March 2022 as reported in the Company's 2022 Annual Report.
The Group has chosen to adopt EPRA best practice guidelines for calculating
key alternative performance measures. These are disclosed above with
supporting calculations in Appendix 1 as set out below.
The Group's condensed consolidated financial statements have been prepared on
a historical cost basis, as modified for the Group's investment properties and
derivatives at fair value through profit or loss.
The same accounting policies, estimates, presentation and methods of
computation are followed in the Half Year Report as applied in the Group's
latest annual audited financial statements, with the exception of the
following items:
IFRIC Agenda Item: Following clarification by IFRIC on the classification of
monies held in restricted accounts, monies that are restricted by use only are
classified at 30 September 2022 as 'Cash and cash equivalents'. The
comparative balances have been restated where applicable to reflect this
change in classification.
Amendments to IFRS 3 'Business Combinations' (effective for periods beginning
on or after 1 January 2022) - gives clarification on the recognition of
contingent liabilities at acquisition and clarifies that contingent assets
should not be recognised at the acquisition date. The amendments have not had
a significant impact on the preparation of the financial statements.
Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent
Assets' (effective for periods beginning on or after 1 January 2022) - gives
clarification on costs to include in estimating the cost of fulfilling a
contract for the purpose of assessing whether that contract is onerous. The
amendments have not had a significant impact on the preparation of the
financial statements.
Amendments to IFRS 9 'Financial Instruments' (effective for periods beginning
on or after 1 January 2022) - gives clarification on the fees an entity
includes when assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the original
liability. The amendments have not had a significant impact on the preparation
of the financial statements.
2.1 Functional and presentation currency
The financial information is presented in Pounds Sterling which is also the
functional currency of the Company, and all values are rounded to the nearest
thousand (£'000s) pound, except where otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases with the
Approved Providers and presents a well-diversified risk. The Group's cash
balances as at 30 September 2022 were £42,227,000 of which £4,287,000 was
held as restricted cash. Details of this can be found in note 12.0.
The Company and its Investment Adviser, Civitas Investment Management Limited
("CIM") continue to work closely with the Company's major counterparties to
monitor the position on the ground and, should it be needed, to offer
assistance and guidance where possible. The Board of Directors believes that
the Company operates a robust and defensive business model and that social
housing and specialist healthcare are proving to be some of the more resilient
sectors within the market, given that they are based on non-discretionary
public sector expenditure and that demand exceeds supply.
In May 2022 the facility with Lloyds Bank plc was extended to July 2024.
Cash flow forecasts based on severe but plausible downside scenarios have been
run, in particular the financial performance of tenants and a reduction in
rent. As at 30 September 2022, the rent would have to drop by approximately
29% before its loan covenants are breached. At the date of approval of this
report, the Company has substantial headroom within all its financial loan
covenants. The Company also benefits from a secure income stream from leases
with long average unexpired term leases. As a result, the Directors believe
that the Group is well placed to manage its financing and other business risks
and that the Group will remain viable, continuing to operate and meet its
liabilities as they fall due.
The Company's articles of association include a requirement for the Board to
propose an ordinary resolution at the annual general meeting following the
fifth anniversary from the initial public offering of the Company for the
Company to continue in its current form (the Continuation Resolution). This
vote was passed in September 2022 so the Company will continue its business as
presently constituted and will propose the same resolution at the AGM in
September 2027 and every fifth annual general meeting thereafter.
The Directors believe that there are currently no material uncertainties in
relation to the Group's ability to continue for the period of at least 12
months from the date of approving the Group's condensed consolidated financial
statements. The Board is, therefore, of the opinion that the going concern
basis adopted in the preparation of the condensed consolidated financial
statements is appropriate.
On 17 November 2022, an extension was granted for the facility with HSBC UK
Bank plc, which now expires on 28 November 2025.
Please refer to note 19.0 for refinancing initiatives post period end.
2.3 Segmental information
IFRS 8 Operating Segments requires operating segments to be identified on the
basis of internal financial reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker, which in the Group's
case is delegated to the Investment Adviser, who has formed an Executive Team,
in order to allocate resources to the segments and to assess their
performance.
The internal financial reports received by the Investment Adviser's Executive
Team contain financial information at a Group level as a whole and there are
no reconciling items between the results contained in these reports and the
amounts reported in the condensed consolidated financial statements.
The Directors consider the Group's property portfolio represents a coherent
and diversified portfolio with similar economic characteristics and as a
result these individual properties have been aggregated into a single
operating segment. In the view of the Directors there is accordingly one
reportable segment under the provisions of IFRS 8.
All of the Group's properties are based in the UK. No geographical grouping is
contained in any of the internal financial reports provided to the Investment
Adviser's Executive Team and, therefore no geographical segmental analysis is
required by IFRS 8.
3.0 Significant accounting judgements, estimates and assumptions
In the application of the Group's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities are unchanged from those outlined in the Annual Report.
4.0 Rental income
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Rental income from investment property 26,907 25,225 51,038
Rent straight line adjustments 313 299 529
Lease incentive adjustments (503) (448) (926)
Rechargeable costs received 1,075 636 995
Rental Income 27,792 25,712 51,636
Less direct property expenses
Insurance and service charge costs (1,075) (636) (995)
Bad debt (122) - 17
Direct property expenses (1,197) (636) (978)
Net rental income 26,595 25,076 50,658
Rechargeable costs received represent insurance and service charge costs paid
by the Group and recharged to the Approved Providers and are accounted for
under IFRS 15 'Revenue from contracts with customers'.
As per the lease agreements with the Group and Approved Providers, the
Approved Providers are responsible for the settlement of all present and
future rates, taxes and other impositions payable in respect of the property.
As a result, no further direct property expenses were incurred.
5.0 General and administrative expenses
General and administrative expenses for the current period contain exceptional
professional costs of £1,636,000. These costs pertain to two strategic
projects the Company has been evaluating that did not come to fruition.
6.0 Finance expense
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Interest paid and payable on bank borrowings 5,446 4,390 8,907
and derivatives
Amortisation of loan arrangement fees 824 814 1,653
Loan security fees 18 21 42
Bank charges 4 3 6
Total 6,292 5,228 10,608
7.0 Taxation
As a UK REIT, the Group is exempt from corporation tax on the profits and
gains from its property investment business, provided it meets certain
conditions as set out in the UK REIT regulations. For the period ended 30
September 2022, the Group did not have any non-qualifying profits and
accordingly there is no tax charge in the period. If there were any
non-qualifying profits and gains, these would be subject to corporation tax.
It is assumed that the Group will continue to be a UK REIT for the foreseeable
future, such that deferred tax has not been recognised on temporary
differences relating to the property rental business.
A deferred tax asset of £2,586,000 (30 September 2021: £2,405,000; 31 March
2021: £1,268,000) calculated using the forthcoming tax rate of 25% has not
been recognised in respect of the unutilised residual current year losses as
it is not anticipated that sufficient residual profits will be generated in
the future.
From From For the
1 April 2022 to
1 April 2021 to
30 September
30 September year ended
2022
2021
Unaudited Unaudited 31 March
2022
£'000 £'000 Audited
£'000
Corporation tax charge/(credit) for the period - - -
Total - - -
The tax charge for the period is less than the standard rate of corporation
tax in the UK of 19%. The differences are explained below.
From From For the
1 April 2022 to
1 April 2021 to
30 September
30 September year ended
2022
2021
Unaudited Unaudited 31 March
2022
£'000 £'000 Audited
£'000
Group
Profit before taxation 42,638 17,852 44,754
UK corporation tax rate 19.00% 19.00% 19.00%
Theoretical tax at UK corporation tax rate 8,101 3,392 8,503
Effects of:
Change in value of exempt investment properties (4,847) (429) (2,331)
Exempt REIT income (3,342) (3,259) (6,598)
Amounts not deductible for tax purposes (251) (22) (230)
Unutilised residual current period tax losses 339 318 656
Total - - -
The standard rate of corporation tax is currently 19%. The government has
announced that the corporation tax standard rise to 25% from 1 April 2023.
REIT exempt income includes property rental income that is exempt from UK
corporation tax in accordance with Part 12 of the Corporation Tax Act 2010.
8.0 Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing profit for the
period attributable to equity holders of the Company by the weighted average
number of Ordinary shares in issue during the period.
The calculation of basic and diluted EPS is based on the following:
From From For the
1 April 2022 to 1 April 2021 to 30 September year ended 31 March
30 September 2021 2022
2022 Unaudited Audited
Unaudited £'000 £'000
£'000
Calculation of Basic EPS
Net profit attributable to Ordinary shareholders (£'000) 42,638 17,852 44,754
Weighted average number of Ordinary shares (excluding shares held in treasury) 610,707,145 622,260,670 618,797,942
EPS - basic & diluted 6.98p 2.87p 7.23p
9.0 Dividends
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Dividend of 1.3500p for the three months to
31 March 2021
- 8,403 8,403
Dividend of 1.3875p for the three months to
30 June 2021 - 8,637 8,637
Dividend of 1.3875p for the three months to
30 September 2021 - - 8,555
Dividend of 1.3875p for the three months to
31 December 2021 - - 8,498
Dividend of 1.3875p for the three months to
31 March 2022 8,474 - -
Dividend of 1.4250p for the three months to
30 June 2022 8,703 - -
Total 17,177 17,040 34,093
On 9 November 2022, the Company announced a dividend of 1.425 pence per share
in respect of the period 1 July 2022 to 30 September 2022 totalling
£8,641,000. The dividend payment will be paid on or around 9 December 2022 to
shareholders on the register as at 18 November 2022. The financial statements
do not reflect this dividend.
10.0 Investment property
From From For the
1 April 2022 to 1 April 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Balance at beginning of period 968,756 915,589 915,589
Property acquisitions 562 23,061 33,466
Improvements to investment properties 3,182 4,940 5,818
Lease incentives and rent straight line adjustments recognised 1,510 446 1,614
Change in fair value during the period 25,510 2,258 12,269
Value advised by the property valuers 999,520 946,294 968,756
Less lease incentive assets and rent straight line assets (25,029) (22,351) (23,519)
Total 974,491 923,943 945,237
During the period, the Group acquired a property holding company from Herleva
Properties Limited which held assets totalling £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 14.99%
shareholders in SHO. They are not directors of SHO, and have no operational
role in that business. SHO does not meet the definition of a related party
under IAS 24.
Improvements to investment properties includes capital expenditure incurred to
date in respect of climate change initiatives.
Valuation
In accordance with "IAS 40: Investment Property", the investment property has
been independently valued at fair value by Jones Lang LaSalle Ltd ("JLL"), an
accredited external valuer with recognised and relevant professional
qualifications and recent experience of the location and category of the
investment property being valued. However, the valuations are the ultimate
responsibility of the Directors.
JLL valued the Group's properties if they were each sold in independent
transactions in accordance with IFRS, at £999,520,000 as at 30 September 2022
(30 September 2021: £946,294,000; 31 March 2022: £968,756,000).
JLL has provided additional valuation services on the acquisition of
investment property to the Company during the period. In relation to the
period ended 30 September 2022, the proportion of the total fees payable by
the Company to JLL's total fee income was less than 5% and is therefore
minimal. Additionally, JLL has a rotation policy in place whereby the
signatories on the valuations rotate after seven years.
With the exception of the transaction detailed in note 11.0, which occurred in
the prior period, all other corporate acquisitions occurring during the
periods disclosed have been treated as asset purchases rather than business
combinations because, following review of the IFRS 3 concentration test, they
are considered to be acquisitions of properties rather than businesses.
The following table provides the fair value measurement hierarchy for
investment property:
Total Quoted prices in active Significant Significant
£'000
markets
observable
observable
(Level 1)
inputs
inputs
£'000
(Level 2)
(Level 3)
£'000
£'000
Investment properties measured at fair value:
30 September 2022 974,491 - - 974,491
31 March 2022 945,237 - - 945,237
30 September 2021 923,943 - - 923,943
There have been no transfers between Level 1 and Level 2 during any of the
periods, nor have there been any transfers between Level 2 and Level 3 during
any of the periods.
The valuations have been prepared in accordance with the RICS Valuation -
Professional Standards (incorporating the International Valuation Standards)
by JLL, one of the leading professional firms engaged in the Social Housing
sector.
As noted previously, all of the Group's investments are reported as Level 3 in
accordance with IFRS 13 where external inputs are "unobservable" and value is
the Directors' best estimate, based upon advice from relevant knowledgeable
experts.
The determination of the fair value of investment property requires an
examination of the specific merits of each property that are in turn
considered pertinent to the valuation.
These include:
1. the regulated social housing sector and demand for the facilities
offered by each SSH property owned by the Group;
2. the particular structure of the Group's transactions where vendors,
at their own expense, meet the majority of the refurbishment costs of each
property and certain purchase costs;
3. detailed financial analysis with discount rates supporting the
carrying value of each property;
4. a full repairing and insuring lease with annual indexation based on
CPI or CPI+1.
The following descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as follows:
Valuation techniques: income approach
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date (i.e. an exit price).
The valuation methodology used by the valuers follows the income approach.
This approach considers the rental income currently payable; the next uplift
for that income under review; the likelihood of a continuation of that rental
income - with growth in accordance with the leases - over the remaining terms;
and then a long-term reversion which considers the likely ability of the
properties to continue to generate rent through supported housing occupation,
as distinct from a reversion to vacant possession value.
Risks are involved in both assessing the value of the rental income over the
remaining terms of the leases and also in predicting that income will continue
beyond the end of the existing leases. This is a balanced judgement which can
properly reflected in the exit yield applied to the final year's income and in
the overall return to a purchaser.
Appropriate taxation calculations are adopted for every property based on its
value and on the assumption of the sale of the property assets directly as
opposed to shares of a subsidiary company holding the property and have
considered the individual characteristics of the properties.
The material unobservable inputs that determine the fair value of the Group's
investment property:
1. The rate of 2.00% per annum has been used for CPI over the term of
the subject properties' leases in line with the Bank of England's long-term
inflation targets for CPI. It should be noted that all leases benefit from
either CPI or CPI+1 indexation.
2. The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include the regulated
social housing sector and demand for each SSH property owned by the Group,
costs of acquisition and refurbishment of each property, the anticipated
future underlying cash flows for each property, benchmarking of each
underlying rent for each property (passing rent), impact of climate change,
and the fact that all of the properties within the Group's portfolio have the
benefit of full repairing and insuring leases entered into by an Approved
Provider. As at the balance sheet date, the lease lengths within the Group's
portfolio ranged from an effective 5 years to 35 years with a weighted average
unexpired lease term of 21.9 years. The greater the length of the lease, then,
all other metrics being equal, the greater the value of the property.
Sensitivities of measurement of significant unobservable inputs
The Group's property investment valuation is open to inherent uncertainties in
the inputs that determine fair value. As a result, the following sensitivity
analysis has been prepared:
Average discount rate and range
The average discount rate used by the valuer in the Group's property Portfolio
Valuation is 6.0% ( 30 September 2021: 6.0%; 31 March 2022: 5.5%). The valuer
took the view that at 30 September 2022, the immediate volatility in the
financial markets had not translated into any evidential movement in yields in
the SSH sector, which is generally underpinned by long, index-linked leases.
Hence, they held their term average discount rate at 6.0%, although there was
(as in all previous valuations) some variation across the portfolio due to
individual property factors. JLL will keep yields, and therefore discount
rates, under regular review.
The range of discount rates used by the valuer in the Group's property
Portfolio Valuation is from 4.6% to 11.4% (30 September 2021: 4.7% to 10.7%;
31 March 2022: 4.6% to 11.5%). In assessing the range of discounts, the valuer
considers the likely net initial yield which would be sought by the investment
market and builds in additional discounts to reflect added risk into the
discount rate of the term and, in some cases, the discount rate for the
reversion. For example where larger rental growth is allowed during the lease,
an additional discount is built into the reversion because of the greater risk
of a fall in the rent at the end of the lease.
Similarly additional discounts are considered where properties are in the
process of being re-purposed and premiums are considered where residential
care assets are funded by back-to-back leases with care providers. The table
below illustrates the change to the value of investment properties if the
discount rate and CPI used for the portfolio valuation calculations are
changed:
-1.0% in discount rate +1.0% in discount rate +0.5% in CPI -0.5% in CPI
unaudited unaudited unaudited unaudited
£'000 £'000 £'000 £'000
Increase/(decrease) in the IFRS fair value of investment properties at
30 September 2022 75,790 (65,656) 60,120 (55,656)
30 September 2021 74,580 (64,304) 58,488 (53,948)
31 March 2022 73,955 (64,020) 58,150 (53,815)
11.0 Subsidiary resale
From 1 April 2022 to From 1 April For the
30 September 2022 2021 to year ended
Unaudited
£'000 30 September 2021 31 March
Unaudited
£'000 2022
Audited
£'000
Acquisition of subsidiary companies (including intercompany loan) 13,559 13,559
-
Acquisition costs - 753 765
Transfer to investment property - (11,617) (11,629)
Sale proceeds - (2,695) (2,695)
Total - - -
During the prior year, the Group entered into a transaction to acquire the
freehold properties operated by CPI Care Limited. Upon the acquisition of the
companies for £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 14.99%
shareholders in SHO. They are not directors of SHO, and have no operational
role. SHO does not meet the definition of a related party under IAS 24.
12.0 Cash and cash equivalents
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash held by solicitors 85 3,456 376
Liquidity funds 10,542 10,485 10,489
Cash held at bank 27,313 58,040 38,110
Unrestricted cash and cash equivalents 37,940 71,981 48,975
Restricted cash 4,287 4,513 4,362
Total 42,227 76,494 53,337
Liquidity funds refer to money placed in money market funds. These are highly
liquid funds with accessibility within 24 hours and subject to insignificant
risk of changes in value.
Restricted cash represents amounts held for specific commitments, tenant
deposits and retention money held in relation to deferred payments subject to
achievement of certain conditions, other retentions and cash segregated to
fund repair, maintenance and improvement works to bring the properties up to
satisfactory standards for the Group and the tenants.
Cash held by solicitors is money held in escrow for expenses expected to be
incurred in relation to investment properties pending completion. These funds
are available immediately on demand.
13.0 Bank and loan borrowings
Bank borrowings are secured by charges over individual investment properties
held by certain asset-holding subsidiaries. The banks also hold charges over
the shares of certain subsidiaries and any intermediary holding companies of
those subsidiaries. Any associated fees in arranging the bank borrowings
unamortised as at the period end are offset against amounts drawn on the
facilities as shown in the table below:
From 1 April From 1 April For the
2022 to 2021 to year ended
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank borrowings at start of period 357,050 357,050 357,050
Bank borrowings drawn - - -
Bank borrowings drawn at end of period 357,050 357,050 357,050
Unamortised loan issue costs at start of period (5,000) (4,930) (4,930)
Less: loan issue costs incurred (324) (1,363) (1,723)
Add: loan issue costs amortised 824 814 1,653
Unamortised loan issue costs at the end of period (4,500) (5,479) (5,000)
At end of period 352,550 351,571 352,050
30 September 2022 30 September 31 March
Unaudited 2021 2022
£'000 Unaudited Audited
£'000 £'000
Maturity of bank borrowings(1)
Repayable within 1 year - - -
Repayable between 1 to 2 years 99,493 158,660 158,746
Repayable between 2 to 5 years 118,853 59,236 59,365
Repayable after 5 years 134,204 133,675 133,939
Total 352,550 351,571 352,050
(1)Loan balance net of unamortised costs.
The Group is party to the following loan facility agreements:
Summary of Borrowings Facility Loan Principal Expiry Date Interest rate
£'000
Scottish Widows limited 10-year facility Term loan 52,500 02/11/2027 2.9936% fixed
Lloyds Bank plc Revolving credit facility 60,000 15/07/2024 SONIA + 1.67%(2)
HSBC Bank plc(4) Revolving credit facility 100,000 27/11/2023 SONIA + 2.02%(2)
National Westminster Bank Plc 5-year facility Revolving credit facility 60,000 14/08/2024 SONIA + 2.00%(3)
M&G Investment Management Limited 7-year facility Term loan 84,550 24/02/2028 3.137% fixed
357,050
(2) Interest rate caps have been purchased to cap interest costs on this
facility as per the details in notes 14.0 and 19.0.
(3) Fixed by way of an interest rate swap as detailed in note 14.0.
(4) On 17 November 2022, an extension was granted for the facility with HSBC
UK Bank plc, which now expires on 28 November 2025.
30 September 2022 Unaudited 30 September 2021 Unaudited 31 March 2022
£'000 £'000 Audited
£'000
Scottish Widows limited 10-year facility principal £52,500,000 178,773 172,994 173,777
Lloyds Bank plc principal £60,000,000 159,607 152,240 153,340
HSBC Bank plc principal £100,000,000 234,078 220,291 222,745
National Westminster Bank Plc 5-year facility principal £60,000,000 138,208 132,134 135,330
M&G Investment Management Limited 7-year facility principal £84,550,000 234,864 226,353 230,487
At 30 September 2022, the Group is in compliance with all covenants.
The covenants in place under the five agreements are summarised in the table
below:
Loan Historical and projected interest cover Loan to value ratio
Scottish Widows limited 10-year facility At least 325% Must not exceed 40%
Lloyds Bank plc revolving credit facility At least 300% Must not exceed 52.5%
HSBC Bank plc facility At least 250% Must not exceed 55%
National Westminster Bank Plc 5-year facility At least 250% Must not exceed 50%
M&G Investment Management Limited 7-year facility At least 250% Must not exceed 55%
14.0 Interest rate derivatives
The Group has entered into an interest rate swap with NatWest Markets in order
to mitigate the risk of changes in interest rates on its loan with National
Westminster Bank Plc under which £60 million is currently drawn. The swap has
a notional value of £60 million and fixes interest at 2.60% (including the 2%
margin on the bank loan).
During the period, the Group has entered into two new interest rate cap
arrangements:
An interest rate cap that caps the £60,000,000 Lloyds Bank plc facility at
3.92% (including the 1.67% margin on the loan facility) for the period from
between 16 September 2022 to 20 February 2023.
An interest rate cap that caps the £100,000,000 HSBC Bank plc facility at
4.62% (including the 2.02% margin on the loan facility) for the period from 21
September 2022 to 17 April 2023. From 18 April 2023 to 28 November 2025, the
interest rate cap will become 4.60% (including the 2.15% margin on the loan
facility).
Interest rate derivative assets/(liabilities) 30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
At start of the period 2,131 (544) (544)
Change in fair value during the period 3,555 686 2,675
Interest rate cap premium paid 737 - -
At end of period 6,423 142 2,131
The table below shows the fair value measurement hierarchy for interest rate
derivatives:
Quote prices In active Markets (Level 1) Significant Observable Inputs (Level 2) Significant unobservable Inputs (Level 3)
£'000 £'000 £'000
30 September 2022 - 6,423 -
31 March 2022 - 2,131 -
30 September 2021 - 142 -
The fair value of Group's interest rate derivatives is recorded in the Group
Statement of Financial Position and is determined by forming an expectation
the interest rates will exceed strike rates and discounting these future cash
flows at the prevailing market rates as at the period end. This valuation
technique falls within Level 2 of the fair value hierarchy as defined by IFRS
13. The valuation was provided by the counterparty to the derivatives. There
have been no transfers between Level 1 and Level 2 during any of the periods,
nor have there been any transfers between Level 2 and Level 3 during any of
the periods.
15.0 Share capital
Share capital represents the nominal value of consideration received by the
Company for the issue of Ordinary shares.
From 1 April 2022 to 30 September 2022 From 1 April 2021 to For the year ended
Unaudited 30 September 2021 31 March 202 Audited
£'000 Unaudited £'000
£'000
Share capital
At end of period 6,225 6,225 6,225
Number of shares issued and fully paid Ordinary shares of £0.01 each
At end of period 622,461,380 622,461,380 622,461,380
During the period the Company purchased 6,050,000 Ordinary shares to be held
in treasury at a cost of £4,651,000 (period from 1 April 2021 to 30 September
2021: 2,250,000 Ordinary shares for £2,073,000; year ended 31 March 2022:
10,025,000 Ordinary shares for £9,259,000).
During the prior year, the Company reissued 565,000 Ordinary shares held in
treasury for £647,000. The cost of purchasing these shares into treasury of
£484,000 has been credited to the capital reduction reserve with the gain
credited to the Share premium reserve.
At 30 September 2022 the Company held 16,075,000 (30 September 2021:
2,250,000; 31 March 2022: 10,025,000) Ordinary shares in treasury. The shares
will continue to be held in treasury until either reissued or cancelled.
At 30 September 2022 the number of Ordinary shares used to calculate the net
asset value per share is 606,386,380 (30 September 2021: 620,211,380; 31 March
2022: 612,436,380) which excludes the shares held in treasury.
16.0 Net asset value
Basic NAV per share is calculated by dividing net assets in the Consolidated
Statement of Financial Position attributable to ordinary equity holders of the
parent by the number of Ordinary shares outstanding at the end of the year.
Net asset values have been calculated as follows:
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
Net Assets (£'000) 696,357 672,884 675,547
Number of Ordinary shares in issue at end of period
622,461,380 622,461,380 622,461,380
Number of Ordinary shares held in treasury (16,075,000) (2,250,000) (10,025,000)
Number of Ordinary Shares excluding treasury shares held by the Company
606,386,380 620,211,380 612,436,380
NAV per share - basic and diluted 114.84p 108.49p 110.30p
17.0 Related party disclosures
17.1 Transactions with the Directors
The Directors are remunerated for their services at such rate as the Directors
shall from time to time determine. The aggregate remuneration and benefits in
kind of the Directors of the Company (in each case, solely in their capacity
as such) in respect of the year ending 31 March 2023 payable out of the assets
of the Company is not expected to exceed £200,000.
As at 30 September 2022, the Directors (including their connected persons) had
beneficial interests in the following number of shares in the Company:
30 September 30 September 31 March
2022 2021 2022
Ordinary shares Ordinary shares Ordinary shares
Director
Michael Wrobel 200,000 100,598 120,598
Alastair Moss 11,766 11,766 11,766
Alison Hadden - - -
Caroline Gulliver 58,832 58,832 58,832
Peter Baxter 82,065 47,065 82,065
For the period from 1 April 2021 to 30 September 2022, fees of £97,000 (1
April 2021 to 30 September 2021: £95,000; year ended 31 March 2022:
£190,000) were incurred and paid to the Directors.
17.2 Transactions with the Investment Adviser
On 1 November 2016, CIM was appointed as the Investment Adviser of the
Company.
For the period from 1 April 2022 to 30 September 2022, fees and expenses of
£3,110,000 (1 April 2021 to 30 September 2021: £3,080,000; year ended 31
March 2022: £6,132,000) were incurred and paid to CIM.
In the prior year, the Investment Adviser agreed to contribute £100,000
towards legal and professional fees incurred.
As at 30 September 2022, £16,000 was payable to CIM (30 September 2021:
£27,000 receivable; 31 March 2022: £151,000 receivable).
At 30 September 2022, CIM held 167,664 (30 September 2021 and 31 March 2022:
50,000) Ordinary shares in the Company.
18.0 Capital commitments
The Company has no capital commitments in the period.
19.0 Post balance sheet events
Dividends
On 9 November 2022, the Company announced a dividend of 1.425 pence per share
in respect of the period 1 July 2022 to 30 September 2022 totaling
£8,641,000. The dividend will be paid on or around 9 December 2022 to
shareholders on the register as at 18 November 2022. The dividend will be paid
as a REIT property income distribution ("PID").
Financing
On 12 October 2022 the Group entered into an interest rate cap transaction to
mitigate the risk of the SONIA interest rate exceeding 2.45%pa on the
principal of £100,000,000 for the period 17 April 2023 to 28 November 2025
for the cost of £8,104,200. This instrument covers the remaining term of the
revolving credit facility with HSBC Bank plc and its proposed extension to
November 2025.
On 11 November 2022, the agreement between the Company and Lloyds Bank plc has
been amended. The overall loan outstanding amount was reduced to £57,200,000
and the historical and projected interest cover ratio covenants have been
revised to 205% from 300%. The Loan to value ratio also changed to 40%.
On 17 November 2022, an extension was granted for the facility with HSBC UK
Bank plc, which now expires on 28 November 2025.
On 1 December 2022, the Company signed a £70.875m facility with an
institutional investor. The facility comprises 5.69% fixed coupon, Senior
Secured Guaranteed Notes due February 2028. The transaction is expected to
fund in the new year subject to certain closing conditions.
Appendix 1: Notes to the calculation of EPRA and other alternative performance
measures
Notes 1 to 6 support the EPRA metrics disclosed above where the definition and
purpose of each metric are outlined.
1.0 EPRA Earnings
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Earnings from operational activities
Profit after taxation 42,638 17,852 44,754
Change in fair value of derivative financial instruments
(3,555) (686) (2,675)
Changes in value of investment properties (25,510) (2,258) (12,269)
EPRA Earnings 13,573 14,908 29,810
Weighted average number of shares in issue (adjusted for shares held in
treasury)
610,707,145 622,260,670 618,797,942
EPRA EPS - basic and diluted 2.22p 2.40p 4.82p
2.0 EPRA NAV Metrics
EPRA Net EPRA Net EPRA Net
Reinstatement Tangible Disposal
Value Assets Value
£'000 £'000 £'000
At 30 September 2022
Net assets 696,357 696,357 696,357
Fair value of derivative financial instruments (6,423) (6,423) -
Fair value of bank borrowings - - 14,452
NAV 689,934 689,934 710,809
Number of shares in issue (adjusted for shares held in treasury)
606,386,380 606,386,380 606,386,380
NAV per share 113.78p 113.78p 117.22p
EPRA Net EPRA Net EPRA Net
Reinstatement Tangible Assets Disposal Value
Value £'000 £'000 £'000
At 30 September 2021
Net assets 672,884 672,884 672,884
Fair value of derivative financial instruments (142) (142) -
Fair value of bank borrowings - - (1,360)
NAV 672,742 672,742 671,524
Number of shares in issue (adjusted for shares held in treasury)
620,211,380 620,211,380 620,211,380
NAV per share 108.47p 108.47p 108.27p
EPRA Net EPRA Net EPRA Net
Reinstatement Tangible Assets Disposal Value
Value £'000 £'000 £'000
At 31 March 2022
Net assets 675,547 675,547 675,547
Fair value of derivative financial instruments (2,131) (2,131) -
Fair value of bank borrowings - - 2,644
NAV 673,416 673,416 678,191
Number of shares in issue (adjusted for shares held in treasury)
612,436,380 612,436,380 612,436,380
NAV per share 109.96p 109.96p 110.74p
3.0 EPRA Net Initial Yield
30 September 30 September 31 March
2022
2022
2021
£'000
£'000
£'000
Investment property 999,520 946,294 968,756
Allowance for estimated purchasers' costs 58,404 55,365 56,412
Gross up completed property portfolio 1,057,924 1,001,659 1,025,168
Annualised net rents 55,752 51,966 54,091
Add: notional rent expiration of rent free periods or other lease incentives
- - -
Topped-up net annualised rent 55,752 51,966 54,091
EPRA NIY 5.27% 5.19% 5.28%
EPRA "topped-up" NIY 5.27% 5.19% 5.28%
4.0 EPRA Vacancy Rate
30 September 30 September 31 March
2022
2021
2022
£'000 £'000
£'000
Estimated Market Rental Value (ERV) of vacant spaces 10 - -
Estimated Market Rental Value (ERV) of whole portfolio 55,752 51,966 54,091
EPRA Vacancy Rate 0.02% 0.00% 0.00%
5.0 EPRA Costs Ratio
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Total administrative and operating expenses 6,784 4,940 10,247
Direct property expenses 1,197 636 978
Less property expenses recovered through rents (1,075) (643) (995)
EPRA Costs (including direct vacancy costs) 6,906 4,933 10,230
Direct vacancy costs - - -
EPRA Costs (including direct vacancy costs) 6,906 4,933 10,230
Rental income 27,792 25,712 51,636
Less rechargeable costs received (1,075) (643) (995)
Gross rental income 26,717 25,069 50,641
EPRA cost ratio (including direct vacancy costs)
25.85% 19.68% 20.20%
EPRA cost ratio (excluding direct vacancy costs)
25.85% 19.68% 20.20%
6.0 EPRA LTV
30 September 2022 30 September 2021 31 March 2022
£'000 £'000 £'000
Net Debt
Borrowings from financial institutions 357,050 357,050 357,050
Cash and cash equivalents (42,227) (76,494) (53,337)
314,823 280,556 303,713
Total Property Value
Investment properties at fair value 974,491 923,943 945,237
Net receivables 25,766 23,876 26,892
1,000,257 947,819 972,129
EPRA LTV 31.47% 29.60% 31.24%
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Net receivables comprise of:
Other receivables 25,029 22,351 23,519
Trade and other receivables 11,626 10,704 12,865
Less trade and other payables (10,889) (9,179) (9,492)
Total 25,766 23,876 26,892
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Components of Net Assets used in EPRA LTV calculation
Investment properties at fair value 974,491 923,943 945,237
Net receivables 25,766 23,876 26,892
Cash and cash equivalents 42,227 76,494 53,337
Less borrowings from financial institutions (357,050) (357,050) (357,050)
Net assets used in the EPRA LTV calculation 685,434 667,263 668,416
Less amounts excluded from calculation
Interest rate derivatives 6,423 142 2,131
Unamortised loan issue costs 4,500 5,479 5,000
Net assets 696,357 672,884 675,547
7.0 EPRA Table of Capital Expenditure
From 1 April From 1 April 2021 to 30 September For the
2022 to 30 2021 year ended
September £'000 31 March
2022 2022
£'000 £'000
Acquisitions including incidental costs of purchase 562 23,061 33,466
Development - - -
Investment properties - - -
Incremental lettable space - - -
Enhancing lettable space (refer to note 10.0) 3,182 4,940 5,818
Tenant incentives 1,700 595 1,614
Other material non-allocated types of expenditure - - -
Capitalised interest - - -
Total Capital Expenditure 5,444 28,596 40,898
Conversion from accrual to cash basis (52) 469 1,312
Total Capital Expenditure on cash basis 5,392 29,065 42,210
The Group has not capitalised any overhead or operating expenses. The Group
does not have any properties under Joint Venture.
8.0 Leveraged Internal Rate of Return (IRR)
This is the annual growth rate, based on growth in net asset value per share
since launch and dividends paid to Ordinary shareholders.
30 September 2022 30 September 2021 31 March
2022
NAV per share 114.837p 108.490p 110.300p
31 May 2017 Interim dividend 0.750p 0.750p 0.750p
31 August 2017 Interim dividend 0.750p 0.750p 0.750p
30 November 2017 Interim dividend 0.750p 0.750p 0.750p
9 March 2018 Interim dividend 0.750p 0.750p 0.750p
8 June 2018 Interim dividend 1.250p 1.250p 1.250p
7 September 2018 Interim dividend 1.250p 1.250p 1.250p
30 November 2018 Interim dividend 1.250p 1.250p 1.250p
11 January 2019 Interim dividend 1.110p 1.110p 1.110p
28 February 2019 Interim dividend 0.140p 0.140p 0.140p
7 June 2019 Interim dividend 1.325p 1.325p 1.325p
6 September 2019 Interim dividend 1.325p 1.325p 1.325p
29 November 2019 Interim dividend 1.325p 1.325p 1.325p
28 February 2020 Interim dividend 1.325p 1.325p 1.325p
12 June 2020 Interim dividend 1.325p 1.325p 1.325p
7 September 2020 Interim dividend 1.350p 1.350p 1.350p
4 December 2020 Interim dividend 1.350p 1.350p 1.350p
1 March 2021 Interim dividend 1.350p 1.350p 1.350p
11 June 2021 Interim dividend 1.350p 1.350p 1.350p
10 September 2021 Interim dividend 1.3875p 1.3875p 1.3875p
13 December 2021 Interim dividend 1.3875p - 1.3875p
11 March 2022 Interim dividend 1.3875p - 1.3875p
28 June 2022 Interim dividend 1.3875p - -
9 September 2022 Interim dividend 1.4250p - -
141.8370p 129.9025p 134.4875p
NAV per share at launch 98.00p 98.00p 98.00p
Levered IRR 7.16% 6.44% 6.63%
Shareholder Information
Share Information
The Company's Ordinary shares of 1p each are quoted on the Official List of
the FCA and traded on the premium segment of the Main market of the London
Stock Exchange (LSE).
SEDOL number BD8HBD3
ISIN GB00BD8HBD32
Ticker/TIDM CSH
LEI 213800PGBG84J8GM6F95
Frequency of NAV Publication
The Company's NAV is released to the LSE on a quarterly basis and published on
the Company's website: www.civitassocialhousing.com.
Sources of Further Information
Copies of the Company's Annual and Half-Yearly Reports, Stock Exchange
announcements and further information on the Company can be obtained from its
website: www.civitassocialhousing.com (http://www.civitassocialhousing.com) .
Share Register Enquiries
The register for the Company's Ordinary shares is maintained by Link Group. In
the event of queries regarding your holding, please contact the Registrar on
0371 664 0300 (calls are charged at the standard geographic rate and will vary
by provider; calls outside the UK will be charged at the applicable
international rate). Lines are open between 9.00am and 5.30pm, Monday to
Friday, excluding public holidays in England and Wales. You can also email
enquiries@linkgroup.co.uk.
Changes of name/or address must be notified in writing to the Registrar: Link
Group, 10(th) Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL.
Key dates
June Annual results announced
Payment of fourth final dividend
September Company's half-year end
Annual general meeting
Payment of first interim dividend
November Half-yearly results announced
December Payment of second interim dividend
February Payment of third interim dividend
March Company's year end
Association of Investment Companies ("AIC")
The Company is a member of the AIC, which publishes statistical information in
respect of member companies. The AIC can be contacted on 020 7282 5555,
enquiries@theaic.co.uk or visit the website: www.theaic.co.uk
(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.
Annual contracted rent roll means the annual contractual rental income
currently receivable on a property as at the Balance Sheet date.
Approved Provider means Approved Providers, Local Authorities, ALMOs,
Community Interest Companies, Registered Charities and other regulated
organisations directly or indirectly in receipt of payment from local or
central government including the NHS.
Care Provider means a provider of care services to the occupants of Specialist
Supported Housing, registered with the Care Quality Commission.
CIM means Civitas Investment Management Limited or CIM (formerly known as
Civitas Housing Advisors Limited until its change of name on 7 May 2020).
Community Interest Company or CIC means a company approved by the Office of
the Regulator of Community Interest Companies as a community interest company
and registered as such with Companies House.
Company means Civitas Social Housing PLC, a company incorporated in England
and Wales with company number 10402528.
CMA Order means the Statutory Audit Services Order 2014, issued by the
Competition and Markets Authority.
Current Leverage means the percentage taken as total bank borrowings over
total assets.
Dividend Yield means the ratio of the total trailing annual dividend payments
over market price per share.
EPRA means European Public Real Estate Association.
EPRA EPS is the EPRA earnings divided by the weighted average number of shares
in issue in the period.
EPRA LTV is the EPRA loan to value ratio calculated as debt (including net
payables but net of cash balances) divided by the market value of property
(including net receivables) as defined in the EPRA Best Practice Guidelines.
EPRA Net Initial Yield (''EPRA NIY'') is calculated as the annualised rental
income based on the cash rents passing at the balance sheet date less
non-recoverable property operating expenses, divided by the gross market value
of the property.
EPRA Net Reinstatement Value ("EPRA NRV") is a new EPRA NAV metric which
assumes that entities never sell assets and aims to represent the value
required to rebuild the entity.
EPRA Net Tangible Assets ("EPRA NTA") is an EPRA NAV metric which assumes that
entities buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax.
EPRA Net Disposal Value ("EPRA NDV") is a new EPRA NAV metric which represents
the shareholders' value under a disposal scenario, where deferred tax,
financial instruments and certain other adjustments are calculated to the full
extent of their liability, net of any resulting tax.
EPRA Run Rate means the ratio of a company's earnings (excluding fair value
gains/losses) over dividends paid to shareholders.
Gross Asset Value means total assets.
Group means the Company and its subsidiaries.
Housing Association or HA means an independent society, body of trustees or
company established for the purpose of providing low-cost social housing for
people in housing need generally on a non-profit-making basis. Any trading
surplus is typically used to maintain existing homes and to help finance new
ones. Housing Associations are regulated by the Regulator of Social Housing.
Investment Adviser means Civitas Investment Management Limited ("CIM"), a
company incorporated in England and Wales with company number 10278444, in its
capacity as investment adviser to the Company.
IPO means Initial Public Offering.
IRR mean internal rate of return.
Levered IRR means the internal rate of return including the impact of debt.
Local Authority or LA means the administrative bodies for the local government
in England comprising of 326 authorities (including 32 London boroughs).
Net Asset Value or NAV means the net asset value of the Group on the relevant
date, prepared in accordance with IFRS accounting principles.
Net Initial Yield means the ratio of net rental income and gross purchase
price of a property.
NHS means the publicly funded healthcare system of the United Kingdom
comprising The National Health Service in England, NHS Scotland, NHS Wales and
Health and Social Care in Northern Ireland, including, for the avoidance of
doubt, NHS Trusts.
NHS Trust means a legal entity, set up by order of the Secretary of State
under section 25 of, and Schedule 4 to, the National Health Service Act 2006,
to provide goods and services for the purposes of the health service.
Ongoing Charges means the figure published annually by the Company which shows
the drag on performance caused by operational expenses. More specifically, it
is the annual percentage reduction in shareholder returns as a result of
recurring operational expenses assuming markets remain static and the
portfolio is not traded. Although the Ongoing Charges figure is based on
historical information, it provides shareholders with an indication of the
likely level of costs that will be incurred in managing the Company in the
future.
Portfolio means the Group's portfolio of assets.
Portfolio Valuation means an independent valuation of the Portfolio by Jones
Lang LaSalle Limited or such other property adviser as the Directors may
select from time to time, based upon the Portfolio being held, directly or
indirectly, within a corporate vehicle or equivalent entity which is a wholly
owned subsidiary of the Company and otherwise prepared in accordance with RICS
"Red Book" guidelines.
REIT means a qualifying real estate investment trust in accordance with the UK
REIT Regime introduced by the UK Finance Act 2006 and subsequently re-written
into Part 12 of the Corporation Tax Act 2010.
RICS means Royal Institution of Chartered Surveyors.
RSH means Regulator of Social Housing, the executive non-departmental public
body, sponsored by the Ministry of Housing, Communities and Local Government,
which is the regulator for Social Homes providers in England and Wales.
Social Homes or Social Housing means social rented homes and other
accommodation that are offered at rents subsidised below market level or are
constituents of other appropriate rent regimes such as exempt rents or are
subject to bespoke agreement with entities such as NHS Trusts and are provided
by Approved Providers.
Specialist Supported Housing or SSH means social housing which incorporates
some form of care or other ancillary service on the premises.
SPV means special purpose vehicle, a corporate vehicle in which the Group's
properties are held.
Target Return means the target return on investment.
Total Return means Net Total Return, being the change in NAV over the relevant
period plus dividend paid.
Total Shareholder Return means a measure of the return based upon share price
movement over the period plus dividend paid.
Valuation means an independent valuation of the Portfolio by Jones Lang
LaSalle Limited or such other property adviser as the Directors may select
from time to time, prepared in accordance with RICS "Red Book" guidelines and
based upon a valuation of each underlying investment property rather than the
value ascribed to the portfolio and on the assumption of a theoretical sale of
each property rather than the corporate entities in which all of the Company's
investment properties are held.
WAULT or "Weighted Average Unexpired Lease Term" is the product of annual
contracted rent roll at period end and the time in years to when the lease
expires for each given lease, summed across leases, and then divided by the
total annual contracted rent roll of the portfolio. The result is expressed in
years. WAULT is a key measure of the quality of the Company's portfolio. Long
lease terms underpin the security of the Company's income stream.
Company Information
Non-executive Directors
Michael Wrobel, Chairman
Peter Baxter, Senior Independent Director and Chairman of the Nomination and
Remuneration Committee
Caroline Gulliver, Chair of the Audit and Management Engagement Committee
Alison Hadden
Alastair Moss
Registered Office
6th Floor,
65 Gresham Street,
London
EC2V 7NQ
Registered no: 10402528
www.civitassocialhousing.com
Alternative Investment Fund Manager
G10 Capital Limited
3 More London Riverside
London SE1 2AQ
Investment Adviser
Civitas Investment Management Limited
25 Maddox Street
London W1S 2QN
Joint Corporate Brokers
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Panmure Gordon (UK) Limited
One New Change
London EC4M 9AF
Company Secretary
Link Company Matters Limited
6th Floor,
65 Gresham Street,
London
EC2V 7NQ
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Depositary
INDOS Financial Limited
5(th) Floor
54 Fenchurch Street
London EC3M 3JY
Registrar
Link Group
10(th) Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Public Relations Adviser
Buchanan
107 Cheapside
London EC2V 6DN
Tax Adviser
BDO LLP
55 Baker Street
London W1U 7EU
NATIONAL STORAGE MECHANISM
A copy of the Half Year Report will be submitted shortly to the National
Storage Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
LEI: 213800PGBG84J8GM6F95
ENDS
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