REG - Civitas Social Hsng. - Civitas Full Year Results
29/06/2023 07:00
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RNS Number : 3083E Civitas Social Housing PLC 29 June 2023
29 June 2023
CIVITAS SOCIAL HOUSING PLC
ANNUAL FINANCIAL REPORT
YEAR TO 31 MARCH 2023
Civitas Social Housing PLC ("Civitas" or the "Company"), the UK's leading
care-based and healthcare REIT, presents its full year results for the year
ended 31 March 2023.
Performance Highlights
Property Valuation and Performance Mar 23 Mar 22 Change
Investment property (£m) 978.1 968.8 1.0%
NAV per share (diluted) (p) 109.16 110.30 (1.03)%
Financial Performance
Annualised contracted rent roll (£m) 56.3 53.2 5.83%
Net rental income (£m) 52.7 50.7 3.94%
EPRA earnings (£m) 26.9 29.8
Operating Cash Flow (£m) 39.5 39.1 1.02%
IFRS earnings per share (diluted) (p) 4.19 7.23
EPRA earnings per share (diluted) (p) 4.43 4.82
Dividends per share (p) 5.70 5.55 2.70%
NAV Total return since IPO (%) 41.8 37.2 +4.6 pts
Financing
Loan to value ratio (%) 35.6 34.4
Weighted average interest cost of debt (%) 3.4 2.5 +0.9 pts
( )
Full Year Highlights
· Annualised contracted rent roll increased by c.6% to
£56.3million
· Portfolio value increased to £978.1million from £968.8million
(IFRS)
· NAV decreased slightly to 109.16 pence per share as at 31 March
2023 (2022: 110.30 pence per share)
· IFRS valuation average net initial yield (NIY) of 5.55%
· EPRA earnings per share (basic and diluted) 4.43 pence per share
(2022: 4.82 pence per share)
· Dividends of 5.70 pence per share to 31 March 2023 (2022: 5.55p)
fully paid in four dividend distributions
· In December 2022 the Company signed a new five-year £70.8 million
facility with a European bank lender
· Maintained a high quality investment credit rating from Fitch
Ratings of "A-" (stable) and "A" Secured
· Continuation of share buybacks, with the Company acquiring 6,050,000
shares at an average of 76.89 pence per share for a total investment of £4.65
million, enhancing the NAV by 0.30%
Operational Highlights
· Diversified portfolio of 697 properties providing homes to 4,594
residents
· Providing lifelong homes to mostly working age adults with
disabilities and complex care needs
· High acuity focused portfolio with 40% of residents living in
Civitas properties receiving over 50 hours of care per week
· Phase two of the Company's work with E.ON continues across identified
properties, targeting a 25% reduction in carbon emissions
· CIM continues to engage actively with the Company's Approved Provider
partners and care providers, offering advice and shared learning
· CIM continues to closely and proactively asset manage the largest
portfolio of specialist care based housing in the UK
Post Year End Highlights
· On 9 May 2023 the Board announced a recommended offer for the Company
at 80p in cash, from Wellness Unity Limited, a subsidiary of CK Asset Holdings
Limited (CKA)
· On 22 May 2023 the Offer Document was made available. It is intended
that Civitas Investment Management ("CIM") is maintained as the Investment
Adviser to Civitas so that the day-to-day management of the Civitas portfolio
will continue uninterrupted, and Civitas be re‑registered as a private
limited company as soon as practicable following the cancellation of the
listing and trading of Civitas shares
· On 23 June 2023 the Offer became unconditional
Please find the full 2023 Annual Report on the Civitas Social Housing plc
website
(https://www.civitassocialhousing.com/investors/results-reports-and-presentations/#currentPage=1)
.
For further information, please contact:
Civitas Investment Management Limited
Andrew Dawber Tel: +44 (0) 20 3058 4846
Paul Bridge Tel: +44 (0) 20 3058 4844
Panmure Gordon
Sapna Shah Tel: +44 (0) 20 7886 2783
Tom Scrivens Tel: +44 (0) 20 7886 2648
Liberum Capital Limited
Chris Clarke / Darren Vickers / Owen Matthews Tel: +44 (0) 20 3100 2000
Buchanan
Helen Tarbet / Henry Wilson Tel: +44 (0) 20 7466 5000
Hannah Ratcliff / Verity Parker civitas@buchanan.uk.com (mailto:civitas@buchanan.uk.com)
Notes:
Civitas Social Housing PLC (CSH) was created in 2016 by Civitas Investment
Management Limited as the first dedicated London 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 £978.1 million (31 March 2023). CSH now provides
homes for 4,594 working age adults with long-term care needs, in 697 bespoke
properties that are supported by 131 specialist care providers, 19 approved
providers and working with over 178 individual local authority partners.
Chairman's Statement
From the Chairman:
"Since November 2016, Civitas Social Housing PLC has provided vital homes and
healthcare facilities across the UK, for those working age adults with
significant and typically life-long care needs.
I am pleased to report that, despite a difficult economic backdrop in the UK,
our portfolio has continued to
perform strongly."
This is our sixth Annual Report, covering the year to 31 March 2023. I am
pleased to report that, despite a difficult economic backdrop in the UK, our
portfolio has continued to perform strongly, delivering on average a 5%
increase in rental income derived from our inflation adjusted leases.
Our Investment Adviser, Civitas Investment Management Limited ("CIM"), has
continued to work closely with our Approved Providers to enhance further the
quality of the portfolio and to assist where needed in the process of ensuring
our rental income is received on a timely basis. The net asset value of the
Company at 31 March 2023 was 109.16 pence, a small decrease of 1.03% from
110.30 pence per share as at 31 March 2022.
The Board declared a final dividend of 1.425p, bringing the full year dividend
to 5.70p, in line with the minimum stated intention.
A difficult challenge during the year was the sharp increase in interest
rates. I am pleased that in February 2023 the Company entered into a new debt
facility for £70.9m, which was partly used to repay the loan facility with
Lloyds. In addition, we also fixed our interest rate exposure to provide
greater certainty. However, the overall re-financing was achieved at a
material increase in ongoing interest costs. Full details are included in the
Investment Adviser's Report.
Our share price has been disappointing over the year under review, reflecting
in part the broad derating of real estate investments, higher interest rates
and investor concern about our sector. The Board has been reviewing a number
of possible actions to address this position. The Company has continued to buy
back shares - over the past 12 months it has acquired 6,050,000 shares at an
average of 76.89 pence per share for a total investment of £4.65 million.
This has enhanced the NAV by 0.30% and benefited the EPRA earnings.
Continuation Vote
At the annual general meeting on 15 September 2022, 98.85% of those
shareholders who voted have voted in favour of the continuation of the
Company.
Offer for the Company
Following the year end, on 9 May 2023 the Board announced a recommended offer
for the Company at 80p per share in cash, from a subsidiary of CK Asset
Holdings Limited (CKA).
Whilst the Board believes that the Offer undervalues the long-term prospects
of Civitas as expressed by net asset value, we also recognise that Civitas,
and its sector as a whole, faces a number of challenges in sentiment which the
public markets are unlikely to overcome in the short to medium term.
The Offer provides liquidity to shareholders with the opportunity to exit in
full and in cash at a significant premium to the current share price, in a
time of macroeconomic uncertainty.
Moreover, CKA, as a current investor in the social housing sector, has a
detailed understanding of the attractive fundamentals of the real estate and
the expertise of the management team. CKA does not expect there to be any
disruption to tenants as a result of the Offer and will be focused on the
continuation of relationships with Approved Providers, care providers and the
Regulator of Social Housing following the completion of the Offer. The Board
therefore considers the terms of the Offer to be fair and reasonable and we
have recommended it to our shareholders.
Outlook
Demand for the type of properties within the Company's portfolio remains
strong with independent forecasts predicting that there will be continued
growth for many years to come in the need for additional units of adapted
accommodation. The Board remains confident in the strength of the portfolio
and its potential revenue generation.
Michael Wrobel
Chairman
28 June 2023
Growth
Growing Base of Global Investors
Civitas invests on behalf of a wide range of global, national and local
investors seeking exposure to sustainable long-term income together with
measurable social impact and high levels of ESG delivery.
Four
Continents…
…over 60 Locations
1. Amsterdam 13. Chichester 25. Heerlen 37. New Jersey 49. Smithfield
2. Bath 14. Columbus 26. Hong Kong 38. New York 50. Surrey
3. Beijing 15. Denver 27. Jersey 39. New Zealand 51. Sydney
4. Birmingham 16. Dublin 28. Leeds 40. Oslo 52. Tallinn
5. Blackpool 17. Edinburgh 29. Liverpool 41. Paris 53. Tauranga
6. Bolton 18. Espoo 30. London 42. Philadelphia 54. The Hague
7. Boston 19. Exeter 31. Los Angeles 43. Radnor 55. Tokyo
8. Bournemouth 20. Fort Lauderdale 32. Luxembourg 44. Rotterdam 56. Toronto
9. Bradford 21. Frankfurt 33. Manchester 45. Sacramento 57. Tunbridge Wells
10. Bristol 22. Geneva 34. Melbourne 46. San Francisco 58. Vancouver
11. Brussels 23. Guernsey 35. Montreal 47. Seattle 59. Windsor
12. Chicago 24. Halifax 36. Munich 48. Singapore 60. Zurich
Our Strategy for Growth
Demand for the accommodation provided by Civitas is strong and expected to
remain so over the long-term. The pandemic has further evidenced the need for
safe and secure homes for the most vulnerable people in society.
Civitas is a go-to partner for an increasing range of major vendors and
counterparties.
Civitas is the market leader with the largest portfolio and deeply ingrained
relationships with care providers, local authorities, Approved Providers and
charities across the UK.
The Company continues to work closely with The Social Housing Family CIC to
enable it to expand and play a broader role in the sector, and becoming part
of critical local authority pathways, leading to many opportunities in
specialist supported living and advanced homelessness.
Civitas now works with a broader range of counterparties including charities
and other not-for-profit organisations, to expand into significant markets
across the UK, now including Scotland and Northern Ireland.
Our Portfolio
By UK Region as at 31 March 2023
Region Properties Funds invested (percentage) Annualised rent roll (percentage)
South West 120 15.5 14.3
London 26 12.8 13.8
West Midlands 101 11.3 11.6
Yorkshire and the Humber 96 10.8 10.7
Wales 34 11.0 10.6
North West 101 10.1 10.1
South East 65 10.1 9.8
East Midlands 58 8.6 8.8
North East 64 5.8 6.4
East of England 32 4.0 3.9
Total 697
Market Value (%)
Region Market Value
South West 14.3%
London 13.3%
West Midlands 11.7%
Wales 11.3%
Yorkshire and the Humber 10.7%
North West 9.9%
South East 9.8%
East Midlands 8.8%
North East 6.3%
East of England 3.9%
Total £978.1m
Tenancies
Region 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
Total 4,594
Our Portfolio
By Approved Provider as at 31 March 2023
Annualised Contracted Rent Roll (%)
Approved Provider Annualised Contracted Rent Roll (%)
Falcon 19.1%
Auckland(1) 16.5%
BeST 12.6%
Inclusion 9.4%
Qualitas Housing(1) 8.4%
Westmoreland 5.6%
Trinity 5.2%
Encircle 5.2%
Pivotal 4.0%
Chrysalis 3.7%
New Walk 2.6%
Harbour Light 2.3%
My Space 1.3%
Other 1.1%
IKE 1.0%
Hilldale 1.0%
Windrush 0.7%
Lily Rose 0.2%
Blue Square 0.1%
Total £56.3m
Properties
Approved Provider Properties
Falcon 116
Auckland(1) 101
Inclusion 81
BeST 74
Qualitas Housing(1) 54
Trinity 42
Westmoreland 41
New Walk 41
Chrysalis 28
Pivotal 27
Harbour Light 26
Encircle 16
Hilldale 15
Windrush 13
IKE 10
My Space 9
Blue Square 1
Lily Rose 1
Other 1
Total 697
Tenancies
Approved Provider Tenancies
Falcon 850
BeST 591
Auckland(1) 547
Inclusion 507
Qualitas Housing(1) 370
Trinity 242
Westmoreland 239
Pivotal 238
Encircle 205
New Walk 194
Harbour 182
Chrysalis 151
My Space 71
IKE 68
Windrush 51
Hilldale 39
Other 32
Lily Rose 13
Blue Square 4
Total 4,594
Market Value (%)
Approved Provider Market Value (%)
Falcon 19.1%
Auckland(1) 16.4%
BeST 13.2%
Inclusion 9.1%
Qualitas Housing(1) 8.6%
Westmoreland 5.7%
Trinity 5.1%
Encircle 4.9%
Pivotal 3.9%
Chrysalis 3.8%
New Walk 2.6%
Harbour Light 2.3%
My Space 1.1%
Other 1.1%
IKE 1.1%
Hilldale 1.0%
Windrush 0.8%
Blue Square 0.1%
Lily Rose 0.1%
Total £978.1m
(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
Consistent Performance
In the year to March 2023, CIM continued to work closely with the Board to
manage a high-performing portfolio.
Portfolio
· 40% of residents living in Civitas properties receive over 50
hours of care per week.
· High acuity portfolio
· Provide homes to those who need long-term quality accommodation
· Largest portfolio of SSH in England & Wales
· Premium Fitch rating retained at "A" secured and "A-" unsecured
· Average rental growth of c.5%
Social Impact
· 4,594 high quality bed spaces
· £127.0 million savings to the public purse(1)
· 5 charitable relationships
Phase two work with E.ON
· Continued work across identified properties
· Targeting 25% reduction in carbon emissions
· Continued access to government grant funding sources
· Targeting minimum EPC "A-C" by 2030
Highly Experienced Team
The asset management team set up to work with and assist our Approved
Providers have
specialisms from:
· Local authority commissioning of specialist supported housing
· Senior level rents and housing benefit advisers
· Housing management and compliance
· Property asset management
· Commissioning of care
1. Source: The Good Economy, Civitas Social Housing PLC, Annual Impact Report
2021, June 2021.
"For over six years CIM has been working with the CSH Board to invest in
high-quality assets to deliver long-term affordable homes for life for the
most vulnerable in society.
We have developed in-depth knowledge of the sector along with extensive
relationships with Approved Providers, care providers and local authorities,
which has directly led to improvements in the sector."
Paul Bridge - CEO, Social Housing - Civitas Investment Management Limited
Introduction
Civitas Investment Management Limited ("CIM") is the Investment Adviser to
Civitas Social Housing PLC ("CSH") and is the leading provider of care-based
housing in the UK. CIM comprises a team of 39 individuals with a range of
expertise in specialist supported housing, real estate management and complex
care needs CIM has the capacity and specialist knowledge to manage the CSH
portfolio at a granular level and has cultivated strong professional
relationships across the sector over the last decade.
Overview of Results
In the UK prior to the launch of the Company, equity and private capital
played a very small part in the social housing sector. Over time, UK
demographics changed and the number of adults with long-term, complex care
needs has been steadily increasing.
This is reflected in a number of institutional investors including aspects of
social housing within their
investment strategies.
Results Highlights
· Six years of consistent rental growth and progressive dividend
payments that have increased from an initial 3.00p per share to 5.70p per
share for the year ended 31 March 2023.
· A retained high-quality investment credit rating from Fitch
Ratings of A secured and A- unsecured since March 2021, which CSH was the
first to secure in this sector.
· An actively managed portfolio of operational real estate 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.
· Targeting investments and homes which enable the delivery of
higher end care as this is where the greatest need exists and where the
applicability of exempt rents is clearly demonstrated.
· An active and continuing 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 CSH'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 largely paid for by the vendors of the properties.
Sector Leading Social Outcomes
ESG
Our ESG Policy is located at www.civitassocialhousing
(http://www.civitassocialhousing) .com. It provides an overview of the
Company's
investment procedures and sets out the Board's commitment to a continuous
improvement process in its
approach to ESG integration.
ESG Rating Providers
CIM engages with the leading ESG rating providers to set out the activities
that are undertaken by CSH and to ensure these are profiled and evaluated
correctly. Notably, active participation in the 2022 GRESB Public Disclosure
Assessment has resulted in CSH retaining an A score previously attained in
2021, whilst the peer group average score has moved up to B. CSH is up to
second position within its Comparison Group (UK Residential). Meanwhile, the
Risk Rating Score for CSH by Sustainalytics remains at 14.9 (Low Risk) as was
reported in February 2023.
The latest independent report by The Good Economy on CSH was published in
November 2022 and notes
CSH's continued progress in delivering measurable social impact. Social value
analysis by The Good Economy, carried out in March 2021, found that, overall,
the portfolio generated £127 million of social value per year, including
fiscal savings to public budgets of £75.9 million per year.
Of particular note with respect to the portfolio:
· 41% of CSH's 697 properties have been brought into the specialist
housing sector for the first time
· CSH continues regular engagement with its Approved Providers to
monitor the quality of its stock
· Improvement works have enhanced the energy efficiency of homes
· 87% of respondents to the survey of residents carried out by CIM
in March 2021 reported that they were satisfied with the quality of their home
· CSH Approved Provider partners have reported 99% statutory
compliance - considerably better than the wider affordable housing sector
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 tenants, 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 within the portfolio. The installation of these energy
efficient measures, utilising available government grants and other funding
sources, will optimise value for the Company, our counterparties and our
shareholders. The collaboration with E.ON is delivering significant
environmental enhancements without any cost to our Approved Providers.
The Phase 2 retrofit surveys will help to refine the implementation programme
and identify the best method for reducing the total carbon dioxide emissions
(and fuel costs) associated with individual properties over the medium or long
term. The overall energy performance of the portfolio, as identified on
Environmental Performance Certificates ("EPC") reports data has improved over
the last 12 months. The proportion of properties with EPC Rating A-C is
currently c.55% and the carbon footprint (estimated from property
characteristics) has reduced by 2% per Civitas tenancy (from 2.65 tonnes of
CO(2)/tenancy in March 2022 to 2.61 tonnes of CO(2)/tenancy). The whole social
housing sector, and indeed the whole housing sector, continues to require
significant public investment if it is to meet the current government
guidelines on achieving net zero carbon emissions by 2050.
Government Policy and Regulation
Reforming the Mental Health Act
Current mental health legislation results in many people with mental health
issues or learning disability needs being detained in large institutions that
are often inappropriate for the individuals. It is estimated by NHS Digital
that there was a rise in annual mental health detentions from 45,864 in
2016/2017 to over 53,239 in 2020/2021.
Once people are sectioned into an institution it becomes very difficult and
costly to move them into a supported living community setting.
As a result of these concerns, the Government commissioned an independent body
chaired by Professor Sir Simon Wessley in 2017. Currently in draft form in the
Houses of Parliament, the Mental Health Reform Act seeks to raise the
threshold for detaining people with a learning disability and/or autism unless
they have a coexisting psychiatric disorder.
We believe that this Act will drive even more demand for community housing and
care settings which are already in short supply, further securing the value
and importance of the CSH portfolio.
The CSH portfolio will further benefit from the following broader market
dynamics:
Social Housing Regulation Bill 2023
The overall regulation of social housing is under review with the main
objective of delivering transformational change for social housing residents
and fulfilling the Government's 2019 manifesto pledge to "empower residents,
provide greater redress, better regulation and improve the quality of social
housing".
The implication of this review for CSH's portfolio is expected to be positive
as it aims to bring landlords closer to their tenants and more focused on
addressing their needs quickly. Our Approved Providers are very close to their
residents' needs and work in partnership with care providers to ensure good
quality service outcomes, all supported by the granular asset management
provided by CIM every day.
Supported Housing (Regulatory Oversight) Bill
This bill, which is under review, seeks to improve the regulation and outcomes
of supported exempt accommodation. This follows reported cases, particularly
of temporary housing, that should not qualify as
exempt accommodation.
Financial Review
As at 31 March 2023 the Net Asset Value of the Company was £661.9 million,
being 109.16 pence per share, a 1.03% decrease on the 110.30 pence per share
at 31 March 2022. A net fair value gain on investment properties of £2.6
million (2022: £12.3 million) was recorded in the year.
Operational cash flows increased moderately to £39.5 million (2022: £39.1
million). Ongoing rental collections throughout the year supported the
Company's healthy operating cash flows despite further increases to the cost
of debt as all facilities were put onto a fixed basis.
Rental Growth and Dividend
The portfolio generated rental income (excluding any insurance and service
charge rechargeables) of £53.1
million, representing c.5% increase over the corresponding period last year.
The contracted rent roll now increases through indexation only as no new
equity has been raised and therefore no new investments have been made in the
period.
During the year, the Company declared and paid four dividend distributions
including one dividend of 1.3875p and three instalments of 1.4250p.
Debt Fixing and Reducing Risk
CIM arranged the following debt facilities which fixes debt on the portfolio
at an average rate of 3.92% until August 2024 as is prudent in the current
interest rate environment.
Remaining
Term at Loan
31 Mar 23 Principal
Lenders Facility (years) £'000 All in rate
Scottish Widows Fixed 4.59 52,500 2.99%
Deutsche Bank Fixed 4.85 70,875 5.69%
AG, London
Branch
HSBC Fixed by 2.67 100,000 4.60%
Interest
rate cap
NatWest Fixed by 1.38 60,000 2.60%
Interest
rate swap
M&G Fixed 4.91 84,550 3.14%
3.67 367,925 3.92%
We have received terms from lenders to refinance the NatWest facility which is
due to expire in August 2024.
Governance
CIM continues to engage actively with the Company's Approved Provider partners
and care providers, offering advice and shared learning.
The Board, comprised of five independent non-executive Directors, carries out
an annual Board performance evaluation exercise and hosts periodic strategy
sessions in addition to regular planned Board meetings.
Summary
CIM continues to closely and proactively asset manage the largest portfolio of
specialist care-based housing in the UK.
There is demonstrable demand in excess of supply and significant further
legislation that is likely to
continue to increase demand for the properties in the Company's portfolio.
We continue to undertake our work with a view to both enhancing the value of
the portfolio and protecting the interest of our underlying tenants.
Civitas Investment Management Limited
Investment Adviser
28 June 2023
Asset Management Initiatives
As part of the ongoing active management of the CSH portfolio, CIM has
developed an extensive asset management resource that covers all the key
disciplines that are apparent within specialist supported housing and the
residential care sectors.
Capital works are undertaken on a rolling basis with much of the work being
undertaken around the time of initial acquisition and paid for by the original
vendors as part of the purchase agreement. This ensures that appropriate
adaptations are made to deliver a bespoke property that is suitable for the
user's needs over the long term. Capital works are also undertaken, from time
to time, during the life of the property where it is deemed appropriate to
undertake improvement works or repositioning of the asset. In some cases this
also leads to an immediate uplift in contracted rent roll and a commensurate
increase in capital values.
Set out below are some examples of projects that have been undertaken.
The Asset Management Team understand the value of a good home. With nearly 100
years' experience between them working in the housing field, there is a lot of
knowledge we can share.
As part of our active asset management of the CSH portfolio, we work with and
support our partners tackling issues and finding solutions to help sustain the
tenancies of the most vulnerable people living in our homes.
A recent example of this was with Cole Street and Hampden Road. These
properties are managed by Trinity Housing Association and are popular
properties with long standing residents. However, Trinity had struggled to
meet its housing benefit potential. Officers from the team worked closely with
Trinity and supported them to put the information and evidence together for
tribunal. Trinity won the tribunal and the matter was resolved with a full
backdate and rent agreed. This was a great result for the team and for the
tenants at the schemes.
Case Study
York Mews, Clacton-on-Sea
A detached two storey block of seven self-contained flats constructed around
the 1950's. Some external works were identified as being required and a review
was undertaken at the asset. Assessment reports obtained suggested that
replacing the heaters within the flats and other minor works would improve the
energy efficiency and, in most cases, improve the EPC ratings at the same
time. We therefore tendered a programme of works over two phases - the first
phase just before the previous Winter period to replace the existing heaters
with high heat retention storage heaters - the second phase during the
following Spring/Summer period was to undertake the external works to remove
the existing render, replace and
decorate to improve the exterior of the building.
Before After
Flat 1 D D
Flat 2 D C
Flat 3 D C
Flat 4 D D
Flat 5 D C
Flat 6 D C
Flat 7 E D
Corporate Social Responsibility Report
Sustainability
The business model of the Company is to provide long--term suitable homes for
individuals with care needs; acting in a sustainable manner is key to
achieving this aim. Properties that are owned by the Company are tailored to
meet the future needs of the tenants and, where required, are actively asset
managed to provide long-term functionality and value to the wider community.
Environment
During the investment due diligence phase, the Company looks closely at the
environmental impact of each potential acquisition, and encourages a
sustainable approach for maintenance and upgrading properties. Through
collaborating with specialist developers and vendors, the high standards the
Company expects from each investment in the care-based housing sector is
adopted by other companies in the sector.
Once within the portfolio, the properties of the Company are actively managed,
and the Investment Adviser assesses whether there are opportunities to improve
the environmental efficiency of the properties, in addition to other asset
management initiatives. The Company has an Environment, Social and Governance
Policy which can be found on the Company's website. This goes into further
detail about the Company's ESG approach and how it integrates with investment
strategy. Further details on the Company's ESG approach can also be found in
the full Annual Report.
The Board has considered the requirements to disclose the annual quantity of
emissions; further detail on this is included in the Report of the Directors
as set out in the full Annual Report.
Diversity
The Company does not have any employees or office space and, as such, the
Company does not operate a diversity policy with regards to any administrative
and management functions.
Whilst recognising the importance of diversity in the boardroom, the Company
does not consider it to be
in the interest of the Group and its shareholders to set prescriptive
diversity criteria or targets. The Board has adopted a diversity policy in
respect of appointments to be made to the Board and will continue to monitor
diversity, taking such steps as it considers appropriate to maintain its
position as a meritocratic and diverse business. The Board's objective is to
maintain effective decision-making, including the impact of succession
planning. All Board appointments will be made on merit and have regard to
diversity regarding factors such as gender, ethnicity, skills, background and
experience. This includes Director appointments to the Audit and Management
Engagement Committee and Nomination and Remuneration Committee. See Corporate
Governance Statement in the full Annual Report.
The Board comprises three male and two female non-executive Directors.
Throughout the year, the Company complied with the Hampton-Alexander Review's
target of a minimum 33% representation of women on FTSE 350 boards.
The Board is aware of the recommendations of the Parker Review, which will be
taken into consideration as part of the Board's succession planning. See
Corporate Governance Statement as set out in the full Annual Report
The Board of Directors of the Company's subsidiaries, which are
non-operational, each comprise one female and up to four male directors.
Human Rights
Given the Company's turnover for the year under review, it now falls within
the scope of the Modern Slavery Act 2015. The Company published its modern
slavery statement on 22 September 2021.
The Board is satisfied that, to the best of its knowledge, the Company's
principal advisers, which are listed in the Company Information section,
comply with the provisions of the UK Modern Slavery Act 2015.
The Company's business is solely in the UK and therefore is considered to be
low risk with regards to human rights abuses.
Community and Employee
The Company's properties enable the provision of care to some of the most
vulnerable people in the community, ensuring safe and secure accommodation,
tailored to meet individual care needs. The Company has increased the
provision of care-based housing, bringing new supply to the sector and
providing homes to over 4,500 people. All of the Company's properties enable
the provision of high levels of care, generating local jobs and helping to
support local economies.
The Company has no employees and accordingly no requirement to separately
report on this area.
The Investment Adviser is an equal opportunities employer who respects and
seeks to empower each individual and the diverse cultures, perspectives,
skills and experiences within its workforce.
Section 172(1) Statement and stakeholder engagement
Overview
The Directors' overarching duty is to act in good faith and in a way that is
most likely to promote the success of the Company as set out in section 172 of
the Companies Act 2006. In doing so, Directors must take into consideration
the interests of the various stakeholders of the Company, the impact the
Company has on the community and the environment, take a long-term view on
consequences of the decisions they make, as well as aim to maintain a
reputation for high standards of business conduct and fair treatment between
the members of the Company.
Fulfilling this duty naturally supports the Company in achieving its
investment objective and helps to ensure that all decisions are made in a
responsible and sustainable way. In accordance with the requirements of the
Companies (Miscellaneous Reporting) Regulations 2018, the Company explains how
the Directors have discharged their duties under section 172 below.
To ensure that the Directors are aware of, and understand, their duties, they
are provided with the pertinent information when they first join the Board as
well as receiving regular and ongoing updates and training on the relevant
matters. Induction and access to training is provided for new Directors. They
also have continued access to the advice and services of the Company Secretary
and, when deemed necessary, the Directors can seek independent professional
advice at the Company's expense. The Schedule of Matters Reserved for the
Board, as well as the Terms of Reference of its committees, are reviewed
regularly and further describe Directors' responsibilities and obligations and
include any statutory and regulatory duties. The Audit and Management
Engagement Committee has the responsibility for the ongoing review of the
Company's risk management systems and internal controls and, to the extent
that they are applicable, risks related to the matters set out in section 172
are included in the Company's risk register and are subject to periodic and
regular reviews and monitoring.
Long-term Success
The strategy of the Company can be found below. Any deviation from, or
amendment to, that strategy is subject to Board and, if necessary, shareholder
approval. The Company's business model, which can be found below, provides
that the Board considers the long-term consequences of its investment
decisions.
The Company grants long-term leases, generally 20 years in length, to its
tenants. The Company seeks to maintain lasting relationships with its tenants
and supports its tenants in adapting properties to meet their needs,
particularly improving and enhancing properties. Further details can be found
in the full Annual Report.
Stakeholders
A company's stakeholders are normally considered to comprise its shareholders,
its employees, its customers and its suppliers as well as the wider community
in which the company operates and impacts. The Company is different in that as
an investment trust it has no employees and, in terms of suppliers, the
Company receives professional services from a number of different providers,
principal among them being the Investment Adviser.
Through regular engagement with its stakeholders, the Board aims to gain a
rounded and balanced understanding of the impact of its decisions. Feedback
from stakeholders is gathered by the Investment Adviser in the first instance
and communicated to the Board in its regular quarterly meetings and otherwise
as required.
The importance of stakeholders is taken into account at every Board meeting,
with discussions involving careful consideration of the longer-term
consequences of any decisions and their implications for stakeholders. The
following section explains why these stakeholders are considered of importance
to the Company and the actions taken to ensure that their interests are taken
into account by the Board as part of its decision making.
Our stakeholders Key areas of interest How we engage
Shareholders · Current and future financial performance on both a NAV and share price The Board welcomes shareholders' views and places great importance on
basis communication with the shareholders of the Company. The Board is responsible
Continued shareholder support and engagement are critical to the existence of
for the content of communication regarding corporate issues and for
the business and the delivery of the long-term strategy of the business. · Strategy and business model communicating its views to shareholders. The Board aims to ensure that
shareholders are provided with sufficient information to understand the
· Corporate governance risk/reward balance to which they are exposed by the holding of shares in the
Company. Active engagement with shareholders is carried out throughout the
· ESG performance and sustainability year and regular communication is undertaken to ensure that they understand
the performance of the business. The Board is committed to maintaining open
· Climate Change channels of communication and to engaging with shareholders in a manner which
they find most meaningful, in order to gain an understanding of the views of
· Dividend shareholders. These channels include:
Annual General Meeting - The Company welcomes and encourages attendance,
voting and participation from shareholders at the AGM, at which shareholders
have the opportunity to meet the Directors and Investment Adviser and to
address questions to them directly. The Investment Adviser attends the AGM and
provides a presentation on the Group's performance and its future outlook. The
Company values any feedback and questions it may receive from shareholders
ahead of and during the AGM and takes action, as appropriate. The Board was
pleased to note that all resolutions proposed at the Company's AGM on 15
September 2022 were approved by shareholders.
Publications - The Annual Report and Half-Year Results are made available on
the Company's website. These reports provide shareholders with a clear
understanding of the Group's portfolio and financial position. In addition to
the Annual and Half-Year Reports, regularly updated information is available
on the Company website, including quarterly factsheets, key policies, the
investor relations policy and details of the investment property portfolio.
Feedback and/ or questions the Company receives from the shareholders help the
Company evolve its reporting aiming to render the reports and updates
transparent and understandable.
Shareholder meetings - Shareholders are able to meet with the Investment
Adviser and the Company's Joint Brokers throughout the year and the Investment
Adviser provides information on the Company on the Company's website. Feedback
from all shareholder meetings with the Investment Adviser and/or the Joint
Brokers, and shareholders' views, are shared with the Board on a regular
basis. The Chairman and other members of the Board, including the Senior
Independent Director and Chair of the Audit and Management Committee, are
available to meet with shareholders to understand their views on governance
and the Company's performance where they wish to do so.
Shareholder concerns - The Board gives due consideration to any matters raised
by shareholders. In the event shareholders wish to raise issues or concerns
with the Board or the Investment Adviser, they are welcome to write to the
Company at the registered office address set out in the full Annual Report.
In line with increasing shareholder focus on Environmental, Social and
Governance ("ESG") matters, the Board requests regular updates from the
Investment Adviser. The Board retains overall responsibility for ESG issues
and the Company's operational performance. Implementation of ESG matters are
undertaken by the Investment Adviser on behalf of the Board.
Furthermore, ESG reporting has been disclosed in the full Annual Report and
the Board is open to discussion with shareholders on this topic if requested.
Investor relations updates - The Board regularly monitors the shareholder
profile of the Company. With the majority of shareholders being a combination
of institutional investors and private client brokers, the Board receives
regular updates on investors' views and attitudes from the Company's Brokers
and the Investment Adviser. The results of these meetings were reported to the
Board as part of the formal reporting undertaken by both the Investment
Adviser and the Brokers.
Included in the Report of the Directors in the full report are details of
substantial shareholdings in the Company.
On a regular basis (sometimes weekly) and at Board meetings, the Directors
receive updates from the Company's Brokers on the share trading activity,
share price performance and any shareholders' feedback, as well as an update
from the Company's Investor Relations adviser, Buchanan, and the Investment
Adviser on any publications or comments by the press. To gain a deeper
understanding of the views of its shareholders and potential investors, the
Investment Adviser maintains regular contact with them and also undertakes
investor roadshows. Any relevant feedback is taken into account when Directors
discuss any possible fundraising or the future dividend policy.
Following the year end, the Board recommended an offer to shareholders of 80
pence for each share held in the Company from Wellness Unity Limited (a wholly
owned subsidiary of CK Asset Holdings Limited). During the Takeover process,
the Board engaged with shareholders and received their views on the Takeover.
which it took into account during its discussions. Further information on the
Board's decision in relation to the Takeover Offer can be found in the full
Annual Report.
Investment Adviser · Current and future financial performance The asset management of the Company's portfolio is delegated to the Investment
Adviser, which manages the assets in accordance with the Company's objectives
Holding the Company's shares offers investors an investment vehicle through · Shared commercial objectives with the Company and policies. At each Board meeting, representatives from the Investment
which they can obtain exposure to the Company's portfolio of properties. The
Adviser are in attendance to present reports to the Directors covering the
Investment Adviser's performance is critical for the Company to successfully · Operational excellence Company's current and future
deliver its investment strategy and meet its objective to provide shareholders
with an attractive level of income, together with the potential for capital · Long-term development of its business and resources activities, portfolio of assets and its investment performance over the
growth.
preceding period.
· ESG performance and sustainability
Maintaining a close and constructive working relationship with the Investment
Adviser is crucial as the Board and the Investment Adviser both aim to
continue to achieve consistent long-term returns in line with the Company's
investment objective. Important components in the collaboration with the
Investment Adviser, representative of the Company's culture are:
· operating in a fully supportive, co-operative and open
environment and maintaining ongoing communication with the Board between
formal meetings;
· encouraging open discussion with the Investment Adviser, allowing
time and space for original and innovative thinking;
· recognising that the interests of stakeholders and the Investment
Adviser are for the most part well aligned, adopting a tone of constructive
challenge;
· drawing on Board members' individual experience and knowledge to
support the Investment Adviser in its monitoring of and engagement with other
stakeholders; and
· willingness to make the Board members' experience available to
support the Investment Adviser in the sound long-term development of its
business and resources, recognising that the long-term health of the
Investment Adviser is in the interests of shareholders in the Company.
Other service providers · Current and future financial performance The Company's main functions are delegated to a number of service providers,
including the Administrator, the Company Secretary, the AIFM, the Registrar,
In order to function as a REIT with a premium listing on the London Stock · Shared commercial objectives with the Company the Corporate Brokers and the Depositary, each engaged under separate
Exchange, the Company relies on a diverse range of reputable advisers for
contracts. The Board maintains regular contact with its key external providers
support in meeting all · Operational excellence and receives regular reporting from them, both through the Board and Committee
meetings, as well as outside of the regular meeting cycle. Their advice, as
relevant obligations. · Long-term development of the service providers' businesses well as their needs and views, are routinely taken into account. Through its
Audit and Management Engagement Committee, the Board formally assesses their
· Sustainability performance, fees and continuing appointment at least annually to ensure that
the key service providers continue to function at an acceptable level and are
appropriately remunerated to deliver the expected level of service. The Audit
and Management Engagement Committee also reviews and evaluates the control
environment in place at each key service provider.
Care providers · Current and future performance At the outset, it is important to note that the Company does not have any
legal or operational responsibility for the delivery of care in the properties
· Welfare of tenants within the portfolio. However, the Board and the Investment Adviser have taken
the view that they wish to have a detailed understanding of the delivery of
· Lease obligations care and the interaction with the major care providers who deliver this care.
Accordingly, the Investment Adviser maintains an active dialogue with many of
· Void management the care providers to build constructive and informed relationships.
At the same time, as part of transaction due diligence at the time of
acquisition of properties, the Investment Adviser undertakes due diligence
with respect to the operational and financial performance of all care
providers who are proposed to deliver care into the particular properties.
This includes the financial standing of the care provider, its CQC rating and
the nature of the SLA agreement covering voids between the care provider and
the Approved Provider.
The Investment Adviser is noted as having demonstrated considerable expertise
and understanding of the care taking place within its properties.
Tenants · Greater independence The Company's properties are adapted for the use of individuals with long-term
care needs within a community setting with the specific aim of achieving
· Maintaining high level of care better personal outcomes and independence for the individuals.
· Improved personal outcome
The sector in which the Company operates is regarded as having achieved
significant success in delivering these positive outcomes compared to
long-term older style remote institutional care.
On a regular basis, members of the Investment Adviser visit properties
accompanied by Approved Provider and care provider partners to see first hand
the nature of the housing and care provision that is being delivered. Whilst
this process has slowed as a result of the pandemic, the Investment Advisor
has continued to engage with its tenants. This is supported by the regular
Approved Provider seminars at which the wellbeing of tenants is discussed in
detail.
In addition, the Company undertakes resident case studies and surveys through
careful and considered interaction via the care provider to assess the
positive impact our properties and associated specialised care have had on the
individual and their wellbeing.
Approved Providers · Current and future performance The Company's Approved Provider partners are an important part of the
investment model as the responsibility for collection of housing benefit and
· Sustainability subsequent payment of rent, the maintenance of the properties under the full
repairing and insuring leases and, most importantly, the safeguarding of the
· Compliance and property management underlying tenants through the above means, lies with the Approved Providers.
· Welfare of tenants
· Lease obligations The Investment Adviser works closely with the Company's Approved Provider
partners to improve standards and governance and to introduce practices and
procedures that make the Company's investment processes ever more robust.
The Investment Adviser has a constant open dialogue with the Approved Provider
partners, liaising monthly on compliance, health and safety, maintenance and
future-proofing schemes, as well as hosting quarterly seminars to discuss
current themes/trends affecting the sector, to troubleshoot. This serves as an
opportunity to build relationships and share best practice.
The Investment Adviser is supported by the establishment of The Social Housing
Family CIC, a not-for-profit community interest company operated independently
of the Company whose stated aim is to enable Approved Providers holding the
Company's leases to increase skills and experience and to provide funding to
promote enhanced performance. Membership is open to any Approved Provider that
holds Civitas leases and the effect of membership is to transfer ownership of
the Approved
Provider to the social housing family. Auckland Homes Solutions was the first
Approved Provider to join and has now recruited a very experienced and senior
executive team and board of management. Qualitas community benefit society has
also joined the CIC.
Regulator of Social · Financial and operational viability The Company is not itself regulated by the RSH, but it is important to
maintain open and regular dialogue to ensure that the Company and the RSH are
Housing (RSH) · Governance working together to improve the sector.
· Compliance with health and safety, and regulatory standards
· Safety and wellbeing of underlying tenants The Investment Adviser has a regular and ongoing dialogue with the RSH and
with the Housing Association partners regulated by the RSH.
The Company also publishes responses to the regulatory judgements of the RSH
regarding the Approved Providers with the Company as part of the RSH's general
review of Approved Providers engaged in the provision of property services for
vulnerable people as announced in May 2018. This demonstrates the Company's
desire to maintain aa dialogue with the RSH and its desire to see that the
positions improve where needed.
Other regulatory authorities · Compliance with statutory and regulatory requirements The Company regularly considers how it meets various regulatory and statutory
obligations and follows voluntary and best practice guidance, and how any
The Company can only operate with the approval of its regulators who have a · Governance based on best practice guidance governance decisions it makes can have an impact on its shareholders and wider
legitimate interest in how the Company operates in the market and treats its
stakeholders, both in the shorter and in the longer term.
shareholders. · Better reporting to shareholders and other stakeholders
The Board receives quarterly regulatory compliance monitoring updates from the
Investment Adviser.
The Board receives quarterly compliance updates from the AIFM regarding the
Company's compliance with its investment policy and the Investment Adviser's
compliance with the Investment Management Agreement.
The Board also has access to the advice of the Company Secretary who provides
updates and advice on regulatory, statutory and governance matters for
consideration by the Board at its quarterly meetings and as and when required.
Local authorities · Provision of safe and secure properties of a high quality It is important for the Company to build and maintain relationships with local
authorities as they have an important role in identifying areas of high
· Sustainability for long-term placements demand, agreeing rents and referrals to the Company's asset management
initiatives.
The Company will engage with the local authority commissioner either directly,
or through specialist consultants, Approved Provider and care provider
partners as part of the Company's due diligence to ensure that each property
being acquired has been commissioned by the relevant local authority and that
rent levels have been discussed and agreed.
Lenders · Current and future financial performance of the business The Company has arranged debt facilities from a wide range of lenders and
engages with these on a regular basis through regular meetings and
Availability of funding and liquidity are crucial to the Company's ability to · Openness and transparency presentations to ensure they are informed on all relevant areas of the
take advantage of investment opportunities as they arise.
business. The continual dialogue helps to support the credit relationships.
· Proactive approach to communication
· Operational excellence
The Company has reaffirmed its Investment Grade High Credit Quality Rating
from Fitch Ratings Limited of "A" (senior secured) and a Long-Term IDR (Issuer
Default Rating) of "A-" with a Stable Outlook.
This will enable the Company to pursue its strategy in relation to debt
funding, in addition to continuing to work with the Company's existing
lenders, with whom the Company has built strong relationships.
During the year, the Board considered and closed a five year term debt
facility with Deutsche Bank AG. Further information can be found in the full
Annual Report.
Communities · Acceptance of care in the community A key component of the Company's portfolio is that the properties within it
are set within community environments so that individuals are able as part of
The Company's assets rely on a strong, positive connection with the local · Availability of local facilities for tenants their care plan to interact with the local community rather than being
communities in which its business operates.
isolated.
This is achieved in consultation with local authorities in determining that
the initial settings are appropriately diversified within the respective
community and are not clustered in a way that would lead to isolation.
This assists the individuals and also ensures appropriate integration within
the community. On a day-to-day basis, care providers and Approved Providers
operate policies to ensure positive relationships with neighbours and
surrounding dwellings. The activities within the Company's properties create
employment within the local community for both housing and care workers.
Charity Partners · Delivering needed support to vulnerable adults The Company supports a number of organisations whose objectives are to provide
improved outcomes for vulnerable adults affected by homelessness and other
· Improved wellbeing of vulnerable adults care needs.
· ESG performance and sustainability The Company commits targeted financial support to fund specific programmes
which help those affected by homelessness by teaching them skills and offering
support to prevent them from being in that position again.
The Company ensures regular calls and meetings with our charity partners to
update on progress and projects being undertaken, as well as attending events
in support of their work.
Principal Decisions
Principal decisions have been defined as those that have a material impact to
the Group and its key stakeholders.
In taking these decisions, the Directors considered their duties under section
172 of the Act. Principal decisions made during the year were as follows:
New Regulatory Clause Initiative
In 2022, the Board considered and agreed a new approach to the Company's lease
model with the goal of supporting additional regulatory compliance and
addressing perceptions of risk. The new regulatory clause enables Approved
Providers to achieve greater alignment between income receipts and lease
liabilities, set achievable capital solvency requirements against lease
obligations and demonstrate a further degree of risk sharing.
The new lease clause has, following detailed negotiation including legal
input, received approval from the board's of two initial housing associations
with whom it had been discussed. The Company had previously sought and
obtained formal written confirmation from its valuers that the inclusion of a
clause of this type within the Company's new and existing leases will not of
itself cause a diminution in the value of those leases or in the underlying
assets.
Takeover Offer
As announced on 9 May 2023, the Board made the decision to recommend to
shareholders an all-cash offer of 80 pence for each share of the Company by
Wellness Unity Limited (a wholly owned subsidiary of CK Asset Holdings
Limited).
Although the Board believes the offer undervalues the long-term prospects of
the Company, the Board
recognises that the Company and the sector in which it operates faces a number
of challenges in light of the current macro environment and outlook. This
includes the considerable negative sentiment in the public markets towards the
Company and the social housing sector which the Board believes are unlikely to
be overcome in the short to medium term and will continue to have a material
impact on the Company's share price prospects. In addition, despite delivering
on revenue, NAV and dividend growth since IPO, the Company's shares have
traded for some time at an entrenched discount to NAV.
On 23 June 2023, the Offer became unconditional.
Updates to Debt Arrangements
During the year, the Board considered and closed a new five year term debt
facility of c.£71 million with a major European bank lender.
The facility was deployed in full to redeem the Company's existing facility
with Lloyds Bank of
£60 million as well as providing additional liquidity. As a result, all of
the Company's debt facilities are at 100% fixed or capped rates.
Buyback Programme
During the year, the Board monitored the decline in the Company's share price
and in response, the Board agreed the implementation of a share buyback
programme under certain parameters, which is being operated by the Company's
Joint Brokers.
Further information on the Company's buyback programme can be found in the
full Annual Report.
Strategic Overview
Purpose of the Company
The Company was established in 2016 with the purpose of delivering long-term
responsible, stable returns to investors and achieving positive measurable
social impact and ESG benefits on a large scale. It should achieve this as a
result of introducing long-term equity capital into the social housing sector
with a particular focus on care-based community housing. By doing so, this
would form a bridge between equity investors and the social housing sector and
bring together aspects of healthcare with social housing.
The Company has since developed the largest portfolio of care-based community
housing in the UK that provides long-term homes for more than 4,500
individuals across half the local authorities in England and Wales.
As a result of this success, the Company has recently extended its mandate to
be able to enter into transactions directly with the NHS and with leading
charities with an interest in the provision of specialist housing that has a
strong care or support element, is consistent with public policy and whose
costs are met by the public purse for which it offers value for money.
Investment Objective
The Company's investment objective is to provide shareholders with an
attractive level of income, together with the potential for capital growth
from investing in a portfolio of Social Homes, which benefits from inflation
adjusted long-term leases or occupancy agreements with Approved Providers and
to deliver, on a fully invested and geared basis, a targeted dividend yield of
5% per annum(1), which the Company expects to increase broadly in line with
inflation.
(1)The dividend yield is based on the original IPO price of 100 pence per
Ordinary share. The target dividends are targets only and do not represent a
profit forecast. There can be no assurance that the targets can or will be met
and should not be taken as an indication of the Company's expected or actual
future results. Accordingly, potential investors should not place any reliance
on these targets in deciding whether or not to invest in the Company or assume
that the Company will make any distributions at all, and should decide for
themselves whether or not the target dividend yields are reasonable or
achievable.
Investment Policy
The Company's investment policy is to invest in a diversified portfolio of
Social Homes throughout the United Kingdom. The Company intends to meet the
Company's investment objective by acquiring, typically indirectly via Special
Purpose Vehicles, portfolios of Social Homes and entering into long-term
inflation adjusted leases or occupancy agreements for terms primarily ranging
from 10 years to 40 years with Approved Providers, where all management and
maintenance obligations will be serviced by the Approved Providers. The
Company will not undertake any development activity or assume any development
or construction risk. However, the Company may engage in renovating or
customising existing homes, as necessary.
The Company may make prudent use of leverage to finance the acquisition of
Social Homes and to preserve capital on a real basis.
The Company is focused on delivering capital growth and expects to hold its
Portfolio over the long-term and therefore it is unlikely that the Company
will dispose of any part of the Portfolio. In the unlikely event that a part
of the Portfolio is disposed of, the Directors intend to reinvest proceeds
from such disposals in assets in accordance with the Company's investment
policy.
Investment Restrictions
The Company invests and manages the Portfolio with the objective of delivering
a high quality, diversified Portfolio through the following investment
restrictions:
· the Company only invests in Social Homes located in the United
Kingdom;
· the Company only invests in Social Homes where the counterparty
to the lease or occupancy agreement is an Approved Provider;
· no lease or occupancy agreement shall be for an unexpired period
of less than 10 years, unless the shorter leases or occupancy agreements
represent part of an acquisition of a portfolio which the Investment Adviser
intends to reorganise such that the average term of lease or occupancy
agreement is increased to 15 years or above;
· the aggregate maximum exposure to any single Approved Provider is
25% of the Gross Asset Value, once the capital of the Company is fully
invested;
· no investment by the Company in any single geographical area, in
relation to which the houses and/or apartment blocks owned by the Company are
located on a contiguous or largely contiguous basis, exceeds 20% of the Gross
Asset Value of the Company;
· the Company only acquires completed Social Homes and will not
forward finance any development of new Social Homes;
· the Company does not invest in other alternative investment funds
or closed-end investment companies; and
· the Company is not engaged in short selling.
The investment limits detailed above apply at the time of the acquisition of
the relevant investment in the Portfolio once fully invested. The Company
would not be required to dispose of any investment or to rebalance the
Portfolio as a result of a change in the respective valuations of its assets.
Gearing Limit
The Directors seek to use gearing to enhance equity returns. The level of
borrowing is set on a prudent basis for the asset class and seeks to achieve a
low cost of funds, whilst maintaining the flexibility in the underlying
security requirements and the structure of both the Portfolio and the Company.
The Company may, following a decision of the Board, raise debt from banks
and/or the capital markets and the aggregate borrowings of the Company is
always subject to an absolute maximum of 40% of Gross Asset Value calculated
at the time of drawdown. Current gearing is 35.61% (2002: 34.43%).
Debt is secured at asset level, whether over a particular property or a
holding entity for a particular series of properties, without recourse to the
Company and also potentially at Company level with or without a charge over
the Portfolio (but not against particular assets), depending on the optimal
structure for the Company and having consideration to key metrics including
lender diversity, cost of debt, debt type and maturity profiles. Otherwise
there will be no cross-financing between investments in the Portfolio and the
Company will not operate as a common treasury function between the Company and
its investments.
Use of Derivatives
The Company may choose to utilise derivatives for efficient portfolio
management. In particular, the Directors may engage in full or partial
interest rate hedging or otherwise seek to mitigate the risk of interest rate
increases on borrowings incurred in accordance with the gearing limits as part
of the management of the Portfolio.
Cash Management
The Company invests in cash, cash equivalents, near cash instruments and money
market instruments.
REIT Status
The Directors conduct the affairs of the Company so as to enable it to remain
qualified as a REIT for the purposes of Part 12 of the Corporation Tax Act
2010 (and the regulations made thereunder).
Culture
The Directors agree that establishing and maintaining a healthy corporate
culture among the Board and in its interaction with the Investment Adviser,
shareholders and other stakeholders will support the delivery of its purpose,
values and strategy. The Board seeks to promote a culture of openness, debate
and integrity through ongoing dialogue and engagement with its service
providers, principally the Investment Adviser.
As detailed in the Corporate Governance Statement, the Company has a number of
policies and procedures in place to assist with maintaining a culture of good
governance, including those relating to diversity and Directors' conflicts of
interest. The Board assesses and monitors compliance with these policies as
well as the general culture of the Board through Board meetings and, in
particular, during the annual evaluation process which is undertaken by each
Director (for more information, see the performance evaluation section in the
full Annual Report).
The Board's culture itself is one of openness, collaboration and constructive
debate to ensure the
effective contribution of all Directors, particularly in respect of the
Board's decision making. Consideration
of our Stakeholders is embedded in the Board's decision making process. Please
see our section 172 Statement above.
Key Performance Indicators ("KPIs")
Measure Explanation Result
Increase in NAV per share Target to achieve capital appreciation whilst maintaining a low risk strategy IFRS NAV increase of 11.2p per share 11.4% from IPO (2022:12.3p per share
from enhancing the quality of cash flows from investments, by physical 12.6% from IPO).
improvement of properties and by creating a significantly diversified,
high-quality portfolio.
Dividends per share For the year ended 31 March 2023, the Company targeted a dividend of 5.70p per Total dividend of 5.70p per share declared for the year to 31 March 2023
share. (2022:5.55p).
Number of local authorities, Approved Providers and care providers Target risk mitigation through a diversified As at 31 March 2023:
portfolio (once fully invested) with no more
than 25% exposure to any one Local Authority or single Approved Provider and • 178 Local Authority partners (2022:178 local authority partners)
no more than 20% exposure to any single geographical area, once the capital of
the Company is fully invested. • 19 Approved Providers (2022: 18 Approved Providers)
• 131 Care Providers (2022:130 Care Providers)
The Company's largest single exposure is to Falcon Housing Association CIC and
currently stands at 19% (2022: 19%). The largest geographical concentration is
in the South West, being 14% (2022: 16%).
Loan to Gross Assets (Leverage) Targeted total debt drawn no more than 40% of gross assets. Leverage as at 31 March 2023 of 35.61% of gross assets (2022: 34.43%).
EPRA
The Company is a member of the European Public Real Estate Association
("EPRA"). EPRA has developed and defined the following performance measures to
give transparency, comparability and relevance of financial reporting across
entities which may use different accounting standards. The Company is pleased
to disclose the following measures which are calculated in accordance with
EPRA guidance. These are all Alternative Performance measures of the Company.
Definition EPRA Earnings EPRA Net Reinstatement Value ("NRV") EPRA Net Tangible Assets ("NTA") EPRA Net Disposal Value ("NDV")
Earnings from operational activities. EPRA NAV metric which EPRA NAV metric which EPRA NAV metric which represents the shareholders' value under a disposal
scenario, where deferred tax, financial instruments and certain other
assumes that entities never sell assets and aims to represent the value assumes that entities buy and sell assets, thereby crystallising certain adjustments are calculated to the full extent of their liability, net of any
required to rebuild the entity. levels of unavoidable deferred tax. resulting tax.
Purpose A key measure of a company's underlying operating results and an indication of The EPRA NAV set of metrics make adjustments to the NAV per the financial
the extent to which current dividend payments are supported by earnings. statements to provide stakeholders with the most relevant information on the
fair value of the assets and liabilities of a real estate investment company,
under different scenarios.
Performance EPRA Earnings EPRA NRV EPRA NTA EPRA NDV
£ £ £ £
2023:26,929,000 2023:653,780,000 2023:653,780,000 2023:673,645,000
2022:29,810,000 2022:673,416,000 2022:673,416,000 2022:678,191,000
2021:30,630,000 2021:674,042,000 2021:674,042,000 2021:671,476,000
EPRA Earnings per share EPRA NRV per share (diluted) pence EPRA NTA per share (diluted) pence EPRA NDV per share (diluted) pence
(Basic and diluted) pence
2023:4.43 2023:107.82 2023:107.82 2023:111.09
2022:4.82 2022:109.96 2022:109.96 2022:110.74
2021:4.93 2021:108.38 2021:108.38 2021:107.97
Definition EPRA Net Initial EPRA Topped-up Net EPRA Costs Ratio EPRA LTV EPRA Vacancy Rate
Yield ("NIY") Initial Yield ("NIY")
Annualised rental income based on the cash rents passing at the balance sheet This measure incorporates an adjustment to the EPRA NIY in respect of the Administrative and operating costs (including and excluding costs of direct Debt (including net payables but net of cash balances) divided by the market E
date, less nonrecoverable property operating expenses, divided by the market expiration of rent-free periods (or other unexpired lease incentives such as vacancy) divided by gross rental income. value of property (including net receivables). s
value of the property with (estimated) purchasers' costs. discounted rent periods and stepped rents).
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Purpose A comparable measure for portfolio valuations. These measures should make it A key measure to enable meaningful measurement of the changes in a company's A key (shareholder gearing) metric to determine the percentage of debt A 'pure' (%) measure of investment property space that is vacant, based on
easier for investors to judge themselves, how the valuation of portfolio X operating costs. comparing to the appraised value of the properties. ERV.
compares with portfolio Y.
Performance EPRA NIY EPRA Topped-up NIY EPRA Costs Ratio(1) EPRA LTV EPRA Vacancy Rate
% % % % %
2023:5.55 2023:5.55 2022:23.07 2023:33.91 2023:0.02
2022:5.28 2022:5.28 2021:20.20 2022:31.24 2022:0
2021:5.24 2021:5.24 2020:20.33 2021:27.20 2021:0
Past performance is not a reliable indicator of future performance. For
detailed workings reconciling the above
measures to the IFRS results, please see Appendix 1 to these financial
statements below.
(1) The ratios inclusive of vacancy costs are the same as the ratio exclusive
of vacancy costs for 2022, 2021 and 2020.
Principal Risks and Risk Management
The Board considers that the risks detailed below are the principal risks
facing the Group currently, along with the risks detailed in note 31.0 to the
financial statements. These are the risks that could affect the ability of the
Company to deliver its strategy. The Board confirms that the principal risks
of the Company, including those which would threaten its future performance,
solvency or liquidity, have been robustly assessed throughout the year ended
31 March 2023, taking into account the emerging risks such as the evolving
Ukraine-Russia conflict risk, climate change risk, cyber security risk and
recruitment of staff at counterparties risk, and that processes are in place
to continue this assessment.
The Audit and Management Engagement Committee has divided the Company's risks
into the following risk type categories:
· Strategy and Competitiveness;
· Operational, including Cyber Crime;
· Investment Management; and
· Accounting, Legal and Regulatory.
Each risk contained in each category is reviewed for its impact and
probability by the Audit and Management Engagement Committee at least twice
during the year.
The Audit and Management Engagement Committee takes responsibility for
overseeing the effectiveness of risk management and internal control systems
on behalf of the Board and advises the Board on the principal risks facing the
business.
Further details of risk management processes that are in place can be found in
the Corporate Governance Statement as set out in the full report. The
principal and emerging risks and uncertainties relating to the Group are
regularly reviewed by the Board along with the internal controls and risk
management processes that are used to mitigate these risks. The Board
acknowledges that the Takeover by Wellness Unity Limited may result in
increased risk both during the transition and subsequently. Specifically, the
Directors have not had detailed visibility of the offeror's post completion
funding for the group or the detailed plans behind the intentions statements
included within the announcement. Oversight and monitoring during this period
will take on critical importance. The Board has identified one new principal
risk during the year (as set out in the list of principal risks and
uncertainties). The risk associated with a disruption to share price due to
negative sentiment in the social housing sector was identified as having the
highest impact and likelihood. The risk associated with promoting the Company
to generate investor demand was removed as a principal risk by the Board
during the year as the Takeover Offer by Wellness Unity Limited has reduced
the need for the Company to generate additional investor demand. Further
details on this and the other principal risks and the management of those
risks are described below:
Principal Risks and Uncertainties
1. Strategy and Competitiveness risk Impact How managed/mitigated
The Company's share price is disrupted due to negative sentiment towards the The Company is targeted by a short seller or activist shareholder leading to a The Board is committed to maintaining open channels of communication with Impact: High
social housing sector following a targeted attack by a short seller and fall in the Company's share price and a widening of the shareholders and engaging in ways shareholders find most meaningful, in order
pollution from other events in the sector.
to gain understanding of shareholder views. Further information on the Board's
discount to NAV. engagement with shareholders can be found above.
Probability: Likely
This risk remained at the same level as the year ended 31 March 2022
Significant numbers of shares may need to be repurchased leading to a fall in The Board seeks to provide full disclosure on the counterparties and the
the size of the Company and liquidity implications. structure of transactions so that all stakeholders are kept reliably informed
on the Company's business dealings.
The Board regularly reviews the Company's buyback policy to ensure this is in
alignment with the interests of the Company and shareholders. The Board is
also mindful of the possibility to issue shares and regularly reviews its
policy in this area to ensure that it is consistent with the Company's
strategy. It receives regular updates from the Company's brokers to help
inform its decisions in this regard.
2. Strategy and Impact How managed/mitigated
competitiveness risks
The Company and its operations are subject to laws and regulations enacted by Any change in the laws, regulations and/or government policy affecting the The Company focuses on niche real estate sectors where it believes the Impact: Very High
national and local governments and government policy. Company and its operations may have a material adverse effect on the ability regulatory framework and underlying demand dynamics to be robust.
of the Company to successfully pursue its investment policy and meet its
investment objective and on the value of the Company and the shares.
Probability:
This risk remained at the same level as the year ended 31 March 2022. The Investment Adviser has strong industry contacts and has good knowledge on
policy opinion and direction. Unlikely
The Board obtains regular updates from professional advisers to monitor
developments in regulation and legislation.
3. Strategy and Impact How managed/mitigated
competitiveness risks
As a result of competition from other purchasers of social housing properties, The rate of capital deployment would drop, decreasing returns to shareholders. The Company has strong links with vendors and a robust pipeline of future Impact: High
the Company's ability to deploy capital effectively within a reasonable acquisitions.
timeframe may be restricted or the net initial yields at which the Company can
acquire properties may decline such that target returns cannot be met.
Probability:
The Board regularly reviews the pipeline of potential acquisitions and
monitors the market landscape. Unlikely
This risk remained at the same level as the year ended 31 March 2022.
The Board is aware of the current competitive social housing market and
recognises the impact this may have on the Company's ability to deploy capital
effectively.
4. Investment Impact How managed/mitigated
management risk
Tenant defaulting under the terms of a lease. Loss of rental income in the short term. The portfolio is highly diversified to reduce the impact of default. Extensive Impact:
diligence is undertaken on all assets, which is reviewed and challenged by the
Board. Medium
This risk remained at the same level as the year ended 31 March 2022.
The Investment Adviser works proactively with Approved Providers to address Probability: Likely
any potential concerns.
The Board is provided with regular updates on the tenants with any concerns
raised for discussion.
The Board has noted that the Company's historic level of defaults has been
immaterial.
5. Investment management risk Impact How managed/mitigated
The value of the investments made by the Company may change from time to time The valuation of the Company's assets would fall, decreasing the NAV and The Company invests in projects with stable, predetermined, long-term leases Impact:
according to a variety yields of the Company. in place with CPI or CPI plus 1% indexation and its strategy is not focused on
sale of properties. High
of factors, including movements in interest rates, inflation and general
market pricing of similar investments.
The Board receives regular updates on factors that might impact investment Probability:
valuations.
This risk remained at the same level as the year ended 31 March 2022
Possible
6. Investment management risk Impact How managed/mitigated
The current macroeconomic environment has increased the level of risk around Less favourable borrowing terms increase the financing costs reducing returns The Investment Adviser, AIFM and Depositary monitor covenants in place with Impact:
the Company's financing arrangements regarding borrowing terms and covenants. to shareholders. debt providers and present to the Board on a quarterly basis.
Medium
This was identified as a new risk during the year. The Investment Adviser leverages the relationships it already has in the
market to form long term partnerships with debt providers at rates it already Probability:
has achieved on similar projects within the same macro market.
Possible
The Investment Advisers reports to the Board on discussions with banks which
will highlight at the earliest opportunity if this risk has increased.
7. Investment management risk Impact How managed/mitigated
Due diligence may not reveal all facts and circumstances that may be relevant The Company would overpay for assets The Company undertakes detailed due diligence on the properties, their Impact:
in connection with an investment and may not prevent an acquisition being
condition, the proposed rental levels - benchmarking against comparable
materially overvalued or rental streams being at risk. impairing shareholder value, reducing rental income and therefore returns. schemes using both external consultants where required and its own proprietary High
database - and on the Approved Providers and care providers involved in each
property to ensure that the purchase price is robust.
This risk remained at the same level as the year ended 31 March 2022.
Probability:
The Board considers the due diligence undertaken when approving acquisitions.
Unlikely
8. Investment management risk Impact How managed/mitigated
Loss of key staff at the Investment Adviser. Negative investor sentiment leading to a reduction in share price. Reduction The Board considers the risk of the Investment Adviser losing key staff and Impact:
in ability to source off market and favourable deals. the succession plans the Investment Adviser has in place.
High
This risk remained at the same level as the year ended 31 March 2022.
The Board has noted the ongoing expansion of the Investment Adviser's support
team.
Probability:
Unlikely
9. Strategy and Competitiveness Impact How managed/mitigated
The Company fails to respond to issues related to climate change, either Decrease in the value of the Company's asset and a negative impact on the Regular review and consideration by the Board including the input of climate Impact: High
directly as enhancements to properties or indirectly via its climate change Company's share price. change specialists at the Investment Adviser.
reporting.
Probability: Unlikely
Advice received from external professional advisers.
This risk remained at the same level as the year ended 31 March 2022.
10. Operational, including cyber crime Impact How managed/mitigated
Serious accident or poor Reputational damage for the Company. Reporting from Approved Providers and monitoring of Approved Providers by the Impact: High
investment Adviser.
management amongst Approved Providers due to staff shortages and loss of
competence.
Probability: Unlikely
This risk remained at the same level as the year ended 31 March 2022
Emerging risks
Emerging risks are considered during the regular risk review, and would be
specifically discussed and evaluated as they arise during the year. Input from
the Investment Adviser on emerging risks is considered by the Audit and
Management Engagement Committee.
Key emerging risks identified and considered during the year include:
· Long-term Climate Change - the impact of climate change, over the
longer-term on the business. The Company is committed to understanding ESG
risk, including the particular impact of climate change on the business.
Climate change poses an indirect risk to the Company's operations, the
environment and society, and the Board is aware that appropriate action is
required to reduce its impact. The Board uses the updates from the Investment
Adviser as they relate to the performance of the company and the impact of
long-term climate change to help manage/mitigate this risk.
· Cyber Security - the impact of a cyber security breach within the
Company or its service providers. The Audit and Management Engagement
Committee reviews and monitors the cyber security controls of the Company's
service providers on a regular basis to manage/mitigate this risk.
Please see the Company's ESG Report in the full Annual Report for further
details.
The Listing Rules require premium-listed commercial companies to disclose in
their annual report whether they have reported on how climate change affects
their business in a manner consistent with the recommendations of the Task
Force on Climate-related Financial Disclosures ('TCFD'), and to provide an
explanation and other information if they are unable to do so. In addition,
the UK Government intends to introduce mandatory climate-related disclosures
to supplement the requirements under the Listing Rules. The Board has chosen
not to adopt the requirements early and expects these to be applicable to the
Company in the financial year 2024.
Going Concern and Viability Statement
Going Concern
The Board regularly reviews the position of the Company and its ability to
continue as a going concern at its meetings. The financial statements set out
the current financial position of the Company.
As at 31 March 2023, the Company held cash balances of £35.6 million (net of
operating and financing amounts due). The Board has evaluated the financial
position of the Company which has maintained its premium investment grade
rating from Fitch Ratings Ltd - a well established rating agency with a strong
familiarity with the alternative healthcare real estate space, which gives the
Company confidence in the ability to raise future debt and/or equity capital
in order to fund the Company's investments for the long term and to facilitate
the payment of dividends to shareholders. Based on these, the Board believes
that the Company is in a position to manage its financial risks.
Various forms of sensitivity analysis have been performed, in particular the
financial performance of tenants and a reduction in passing rent. As at 31
March 2023, the passing rent would have to drop by approximately 11% before
any of the Company's interest cover covenants are breached. The property
values would need to fall by around 13% before breaching the loan to value
covenant.
The Company's performance in the event of severe but plausible downside
scenarios used for viability are equally applicable for going concern. At the
date of approval of this report, the Company has sufficient headroom within
its financial loan covenants. The Company also benefits from a secure income
stream from leases with long average unexpired term leases.
Leverage is prudently maintained at a level of less than 40% of Gross Asset
Value.
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). On 15
September 2022, at the Annual General Meeting, shareholders representing
298,478,435 voted in favour of the continuation of the Company being 98.85% of
those who voted.
On 9 May 2023 an announcement was made to the market for an all-cash offer of
the Company from Wellness Unity Limited, a wholly owned indirect subsidiary of
CK Asset Holdings Limited (CKA). On 23 June 2023, when the offer became
unconditional, CKA subsequently became the ultimate controlling party of the
Company, and a related party under IAS 24. The Group's existing committed debt
facilities contain a standard change of control clause which has now been
triggered due to the offer becoming unconditional. This could result in the
existing committed debt facilities being withdrawn. The Group does not have
visibility of the post completion funding for the Group at this time.
Therefore, this could create some uncertainty as to the Group's going concern
position. The Directors note the detailed intentions statement included within
the announcement on 9 May 2023 which states that CKA does not envisage making
any changes to the management team nor any disruption to any counterparties or
to the underlying tenants. The conditions outlined above indicate a material
uncertainty which may cast significant doubt upon the Group and the Company's
ability to continue as a going concern. The financial statements do not
include the adjustments that would result if the Group and the Company were
unable to continue as a going concern.
Having considered all of the above, the Board is of the opinion that the going
concern basis adopted in the preparation of the consolidated financial
statements is appropriate.
Viability Statement
The Directors present the Company's viability statement which summarises the
results of their assessment of the Company's current position, its principal
risks and prospects over a period to 31 March 2028.
The Company acquires high-quality property with a particular focus on property
providing care for the long
term. The properties acquired are on long-term full repairing and insuring
leases in a sector of the market with very high levels of need. The cost base
of the Company is proportionately low compared to revenue
and there is a high level of certainty over cost to be incurred. On this
basis, the Company is expected to beviable well beyond the five-year term
considered in the Company's testing below.
The assumptions underpinning the forecast cashflows and covenant compliance
forecasts were sensitised to explore the resilience of the Company to the
potential impact of the Company's principal risks and uncertainties.
The prospects were assessed over a five-year period for the following reasons:
i) the Company's long-term forecast covers a five-year period;
ii) the length of service level agreements between Approved Providers and care
providers is typically five years; and
iii) the Company's leases are typically 25 years on fully repairing and
insuring leases, enabling reasonable certainty of income over the next five
years.
The Company's five-year forecast incorporates assumptions related to the
Company's investment strategy and principal risks from which performance
results, cash flows and key performance indicators are forecast. The principal
risks are set out above. Of these risks, those which are expected to have a
higher impact on the Company's longer-term prospects are those related to the
current macroeconomic environment, which has increased the level of risk
around the Company's financing arrangements regarding borrowing terms and
covenants. The risk associated with a disruption to share price due to
negative sentiment in the social housing sector being identified as having the
highest impact and likelihood. The Company has considered its strategy over a
longer term and, in light of the inherent demand for the Company's properties
and the vulnerable nature of the ultimate tenant, the risk of change in future
housing policy is considered to be limited. The principal risks are mitigated
by the Company's risk management and internal control processes, which
function on an ongoing basis.
The Board, via delegation to the Audit and Management Engagement Committee,
monitors the effectiveness of the Company's risk management and internal
control processes on an ongoing basis. The monitoring activities are described
in the Report of the Audit and Management Engagement Committee as set out in
the full Annual Report and include direct review and challenge of the
Company's documented risks, risk ratings and controls, and review of
performance and compliance reports prepared by the Company's key suppliers and
the independent external auditors.
The Board of Directors has carried out a robust assessment of the principal
and emerging risks facing the Company, including those that would threaten its
business model, future performance, solvency and liquidity. Where appropriate,
the Company's forecasts are subject to sensitivity analysis, which involves
applying severe (but plausible) conditions and flexing a number of assumptions
simultaneously.
The sensitivities performed were designed to provide the Directors with an
understanding of the Company's performance in the event of severe but
plausible downside scenarios, taking full account of mitigating actions that
could be taken to avoid or reduce the impact or occurrence of the underlying
risks outlined below:
· 10% of tenants defaulting under a lease. The outcome of this
scenario reduces profits on average over the five year forecast by 18% per
annum and reduces cash by £20 million. However, the Board remains comfortable
that dividends could be paid and any liabilities could be settled as there is
still a sufficient level of cash in the business. Therefore the business
remains viable over the five year period; and
· deterioration in economic outlook, or a change in government
housing policy which could impact the fundamentals of the social housing
sector, including a negative impact on valuations and a 5% reduction in annual
rents. The outcome of the 'severe downside scenario' was that the Company's
covenant headroom on existing debt (the level at which the investment property
values would have to fall before a financial breach occurs) reduces by 13%,
prior to any mitigating actions such as asset sales, which indicates that
covenants on existing facilities would not be breached.
The remaining principal risks and uncertainties, whilst having an impact on
the Company's business, are not considered by the Directors to have a
reasonable likelihood of impacting the Company's viability over the five-year
period, therefore the scenarios outlined above are the only ones that have
been specifically tested.
Based on the results of their assessment, notwithstanding the material
uncertainty arising from the offer from CKA, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the five-year period of their
assessment.
Michael Wrobel
Chairman
28 June 2023
Further details on the Environmental, Social & Governance framework of the
Company and the Social Impact report are set out in the full Report.
Board of Directors
Michael Wrobel (Chairman)
Peter Baxter (Senior Independent Director and Chair of Nomination and
Remuneration Committee)
Caroline Gulliver (Chair of the Audit and Management Engagement Committee)
Alison Hadden (Director)
Alastair Moss (Director)
Extracts from the Report of the Directors
Results and Dividends
The following dividends were paid on the Ordinary shares during the year:
Fourth Quarterly dividend 1.3875p per share paid on 28 June 2022
First Quarterly dividend 1.425p per share paid on 9 September 2022
Second Quarterly dividend 1.425p per share paid on 9 December 2022
Third Quarterly dividend 1.425p per share paid on 10 March 2023
Since the year end, the Company has declared the following dividend:
Fourth Quarterly dividend 1.425p per share paid on 9 June 2023
No final dividend is being recommended on the Ordinary shares.
Capital Structure
Issue of shares
At the AGM held on 15 September 2022, the Directors were authorised to issue
equity securities up to an aggregate nominal amount of £610,736 (being
approximately 10% of the issued Ordinary share capital).
The Company was also authorised to disapply pre-emption rights in respect of
equity securities and
to issue equity securities for cash up to an aggregate nominal amount equal to
£610,736 (being approximately 10% of the issued Ordinary share capital).
Purchase of Own Shares
At the AGM held on 15 September 2022, the Directors were granted the authority
to buy back up to 91,549,383 Ordinary shares, being 14.99% of the Ordinary
shares in issue at the time of the passing of the resolution.
During the year, the Board maintained the Company's share buyback programme,
under which a total of
6,050,000 shares have been purchased into treasury for aggregate amount of
£4,624,947.50 (nominal value £60,500, representing 0.97%) as at 31 March
2023.
The authority to buy back up to 91,549,383 shares will expire at the
conclusion of the next AGM of the Company or on 30 September 2023, whichever
is earlier when a resolution for its renewal will be proposed. Further
information will be contained in the Notice of AGM, which will be circulated
to shareholders in due course.
Current Share Capital
As at 31 March 2023, there were 622,461,380 Ordinary shares in issue, of which
16,075,000 shares were held in treasury, representing 2.6% of the Company's
total issued share capital. The total voting rights of the Company as at 31
March 2023 was 606,386,380.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual Report and financial
statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with UK-adopted international accounting standards
and the Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 "Reduced Disclosure Framework", and applicable law).
Under Company law, Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international accounting
standards have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101 have been followed for the
Company financial statements, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the Group's and Company's transactions
and disclose with reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that the financial statements
and the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company's financial statements published on the ultimate parent Company's
website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's and Company's position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed in the Board of
Directors confirm that, to the best of their knowledge:
· the Group financial statements, which have been prepared in accordance
with UK-adopted international accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit of the Group;
· the Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS 101, give
a true and fair view of the assets, liabilities, financial position and profit
of the Company; and
· the Group Strategic Report includes a fair review of the development
and performance of the business and the position of the Group and Company,
together with a description of the principal risks and uncertainties that it
faces.
Approval
This Statement of Directors' Responsibilities was approved by the Board and
signed on its behalf by:
Michael Wrobel
Chairman
28 June 2023
Non-statutory accounts
The financial information set out below does not constitute the Company's
statutory accounts for the year ended 31 March 2023 or the year ended 31 March
2022 but is derived from those accounts. Statutory accounts for the period
ended 31 March 2022 have been delivered to the Registrar of Companies and
those for the year ended 31 March 2023 will be delivered in due course. The
Auditor has reported on those accounts; their report was (i) unqualified,
(ii) included one reference to a matter to which the Auditor drew attention
without qualifying their report and (iii) did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006.The text of the Auditor's
report can be found in the Company's full Annual Report and financial
statements at www.civitassocialhousing.com
(https://www.civitassocialhousing.com/) .
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2023
For the For the
year ended year ended
31 March 2023 31 March 2022
Note £'000 £'000
Revenue
Rental income 5.0 54,607 51,636
Less direct property expenses 5.0 (1,941) (978)
Net rental income 52,666 50,658
Directors' remuneration 6.0 (211) (206)
Investment advisory fees 8.0 (6,217) (6,132)
General and administrative expenses 9.0 (5,393) (3,909)
Total expenses (11,821) (10,247)
Change in fair value of investment properties 15.0 2,640 12,269
Operating profit 43,485 52,680
Finance income 10.0 148 7
Finance expense 11.0 (15,335) (10,608)
Change in fair value of interest rate derivatives 21.0 (2,826) 2,675
Profit before tax 25,472 44,754
Taxation 12.0 - -
Profit being total comprehensive income for the year 25,472 44,754
Earnings per share - basic and diluted 13.0 4.19p 7.23p
All amounts reported in the Consolidated Statement of Comprehensive Income
above arise from continuing operations.
Consolidated Statement of Financial Position
As at 31 March 2023
31 March 2023 31 March 2022
Note £'000 £'000
Assets
Non-current assets
Investment property 15.0 953,364 945,237
Other receivables 17.0 24,783 23,519
Interest rate derivatives 21.0 8,129 2,131
986,276 970,887
Current assets
Trade and other receivables 17.0 11,260 12,865
Cash and cash equivalents 18.0 35,588 53,337
46,848 66,202
Total assets 1,033,124 1,037,089
Liabilities
Current liabilities
Trade and other payables 19.0 (9,300) (9,492)
Non-current liabilities
Bank and loan borrowings 20.0 (361,915) (352,050)
Total liabilities (371,215) (361,542)
Total net assets 661,909 675,547
Equity
Share capital 22.0 6,225 6,225
Share premium reserve 23.0 292,626 292,626
Capital reduction reserve 24.0 317,714 322,365
Retained earnings 25.0 45,344 54,331
Total equity 661,909 675,547
Net assets per share - basic and diluted 26.0 109.16p 110.30p
These consolidated financial statements were approved by the Board of
Directors of Civitas Social Housing PLC and authorised for issue and signed on
its behalf by:
Michael Wrobel
Chairman and Independent Non-Executive Director
28 June 2023
Company No: 10402528
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
Share Capital
Share premium reduction Retained Total
capital reserve reserve earnings equity
Note £'000 £'000 £'000 £'000 £'000
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 23.0 - 163 484 - 647
Shares bought back into treasury 24.0 - - (9,259) - (9,259)
Dividends paid 14.0 - - - (34,093) (34,093)
Balance at 31 March 2022 6,225 292,626 322,365 54,331 675,547
Profit and total comprehensive income for the year - - - 25,472 25,472
Shares reissued from treasury 23.0 - - - - -
Shares bought back into treasury 24.0 - - (4,651) - (4,651)
Dividends paid 14.0 - - - (34,459) (34,459)
Balance at 31 March 2023 6,225 292,626 317,714 45,344 661,909
Consolidated Statement of Cash Flows
For the year ended 31 March 2023
For the For the
year ended year ended
31 March 2023 31 March 2022
Note £'000 *Restated
£'000
Cash flows from operating activities
Profit for the year before taxation 25,472 44,754
- Change in fair value of investment properties (2,640) (12,269)
- Change in fair value of interest rate derivatives 2,826 (2,675)
- Rent and incentive straight line adjustments 436 397
- Bad debt expense/(credit) 5.0 429 (17)
Finance income (148) (7)
Finance expense 15,335 10,608
Increase in lease incentive receivable (1,700) (2,011)
Decrease/(increase) in trade and other receivables 1,044 (236)
(Decrease)/increase in trade and other payables (1,725) 551
Cash generated from operations 39,329 39,095
Interest received 148 7
Net cash flow generated from operating activities 39,477 39,102
Investing activities
Improvements and purchases of investment properties (4,679) (27,695)
Acquisition costs (211) (1,640)
Purchase of subsidiary - including property - (13,559)
Sale proceeds on sale of subsidiary - excluding property - 2,695
Net cash flow used in investing activities (4,890) (40,199)
Financing activities
Cost of shares bought into treasury 24.0 (4,651) (9,259)
Proceeds from shares reissued from treasury 24.0 - 919
Dividends paid to equity shareholders (34,576) (33,928)
Interest rate derivative premium paid 21.0 (8,841) -
Proceeds from the disposal of interest rate derivatives 21.0 17 -
Bank borrowings advanced 20.0 70,875 -
Bank borrowings repaid 20.0 (60,000) -
Bank borrowing issue costs paid (3,148) (1,805)
Interest and security fees paid on bank borrowings and derivatives (12,012) (8,590)
Net cash flow used in financing activities (52,336) (52,663)
Net decrease in cash and cash equivalents (17,749) (53,760)
Cash and cash equivalents at the start of the year 18.0 53,337 107,097
Cash and cash equivalents at the end of the year 18.0 35,588 53,337
* Cash and cash equivalents and monies held in restricted accounts and
deposits have been restated as at 31 March 2022 following clarification by
IFRIC on classification of funds with externally imposed restrictions. Please
refer to details in note 2.4.
The notes set out below are an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements for the year ended 31 March
2023
1.0 Corporate information
Civitas Social Housing PLC (the "Company") was incorporated in England and
Wales under the Companies Act 2006 as a public company limited by shares on 29
September 2016 with company number 10402528 under the name Civitas REIT PLC,
which was subsequently changed to the existing name on 3 October 2016.
The address of the registered office is 6(th) 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 Company did not begin trading until 18 November 2016 when the shares were
admitted to trading on the London Stock Exchange ("LSE").
The Company's Ordinary shares are admitted to the Official List of the
Financial Conduct Authority ("FCA") and traded on the LSE.
The principal activity of the Company and its subsidiaries (the "Group") is to
provide shareholders with an attractive level of income, together with the
potential for capital growth from investing in a portfolio of social homes.
2.0 Basis of preparation
The financial statements have been prepared in accordance with UK-adopted
international accounting standards and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards.
The Group's consolidated financial statements have been prepared on a
historical cost basis, as modified for the Group's investment properties and
derivative financial instruments at fair value through profit or loss.
2.1 Functional and presentation currency
The financial information is presented in Pounds Sterling which is also the
functional currency of the Group, and all values are rounded to the nearest
thousand pounds (£'000s), except where otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases with the
Approved Providers. The Group's cash balances as at 31 March 2023 were
£35,588,000, of which £2,949,000 was held as restricted cash. Details of
this can be found in note 18.0.
The Company and its Investment Adviser, Civitas Investment Management Limited
("CIM") continue to work closely with the Company's major counterparties to
monitor the position on the ground and should it be needed, to offer
assistance and guidance where possible. The Board of Directors believes that
the Company operates a robust and defensive business model and that social
housing and specialist healthcare are proving to be some of the more resilient
sectors within the market, given that they are based on non-discretionary
public sector expenditure and that demand exceeds supply.
On 17 November 2022, an extension was granted for the facility with HSBC Bank
plc, which now expires on 28 November 2025.
On 13 February 2023, the Company closed a new five year term debt facility of
£70,875,000 with Deutsche Bank AG. The facility has been deployed to redeem
the Company's revolving credit facility with Lloyds Bank plc of £60,000,000
as well as providing additional liquidity. As a result, now all debt
facilities have fixed or capped rates.
On 1 December 2022, the Company signed a facility with an institutional
lender. Subsequent to this, on 21 June 2023, the Company received credit
approved terms for an additional £61.0 million fixed facility based on a
3-year SONIA rate at the date of draw down +195bps margin with a maturity date
of 3 August 2026. The eventual drawdown on the facility is subject to certain
standard closing conditions.
Cash flow forecasts based on severe but plausible downside scenarios have been
run, in particular the financial performance of tenants and a reduction in
contracted rent. As at 31 March 2023, the rent would have to drop by
approximately 10% before any of its loan covenants are breached. At the date
of approval of this report, the Company has sufficient headroom within its
financial loan covenants. The Company also benefits from a secure income
stream from leases with long weighted 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.
On 9 May 2023, an announcement was made to the market for an all-cash offer of
Civitas Social Housing PLC (CSH) from Wellness Unity Limited, a wholly owned
indirect subsidiary of CK Assets Holdings Limited (CKA). The offer became
unconditional on 23 June 2023. The Group's existing committed debt facilities
contain a standard change of control clause which has now been triggered due
to the offer becoming unconditional. This could result in the existing
committed debt facilities being withdrawn. Furthermore, the Directors do not
have visibility of the post completion funding for the Group and Company at
this time. The Directors note the detailed intentions statement included
within the announcement on 9 May 2023 which states that CKA does not envisage
making any changes to the management team nor any disruption to any
counterparties or to the underlying tenants. However, the conditions outlined
above indicate a material uncertainty which may cast significant doubt upon
the Group's and Company's ability to continue as a going concern. The
Independent Auditors' Report included within the Annual Report and Accounts
for the year ended 31 March 2023 also highlights this material uncertainty.
Therefore, notwithstanding the material uncertainty arising from the offer
from CKA, the Directors are satisfied that the going concern basis remains
appropriate for the preparation of the financial statements. The financial
statements do not include the adjustments that would result if the Group and
the Company were unable to continue as a going concern.
2.3 New standards, amendments and interpretations
The following new standards are now effective and have been adopted for the
year ended 31 March
2023.
· 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 31 March 2023 as "Cash and cash
equivalents". As detailed in note 2.4, the comparative balances have been
restated where applicable to reflect this change in classification.
· IFRIC Agenda Item: In October 2022, the IFRIC issued an agenda
decision in respect of 'Lessor forgiveness of lease payments (IFRS 9 and IFRS
16)' ('the IFRIC Decision on Concessions'). This concluded that losses
incurred on granting retrospective rent concessions should be charged to the
income statement on the date that the legal rights to income are conceded
(i.e. immediate recognition in full rather than smoothed over the life of the
lease). The clarification has not had a material impact on the financial
statements.
· Amendments to IFRS 3 'Business Combinations' (effective for
periods beginning on or after 1 January 2022) - gives clarification on the
recognition of contingent liabilities at acquisition and clarifies that
contingent assets should not be recognised at the acquisition date. The
amendments 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.
2.4 Restatement
IFRIC Agenda Decision - Recognition of restricted cash as "Cash and cash
equivalents"
In March 2022, the IFRS Interpretations Committee ("IFRIC") finalised a
decision on the classification of monies held in restricted accounts, such
that monies that are restricted by use only, are classified at 31 March 2023
as "Cash and cash equivalents".
The Group holds restricted cash for tenant deposits and retention monies 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.
As a result of the IFRIC decision, the Group has revisited its policy and
includes these monies within the classification "cash and cash equivalents".
The adjustment has no impact on the classification of the net assets of the
Group on the Statement of Financial Position, however the movements on these
balances are now reported in the Statement of Cashflows and comparative
figures have been restated.
Comparative figures for 'cash and cash equivalents' have increased by
£4,362,000 (31 March 2021: £3,278,000). This has resulted in an increase to
the comparative figure for cash generated from operations by £1,613,000
concerning movements on deposit balances and an increase to the net cash flow
used in investing activities of £529,000 concerning movements on retention
monies.
The Group has not presented revised balance sheets as at 1 April 2021 within
the financial statements, in accordance with IAS 1 Presentation of Financial
Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors.
The following table shows the impact of these adjustments in the prior year:
31 March 2022 Restatement 31 March 2022
£'000 £'000 Restated
£'000
Group cash flow statement (extract)
Net cash flow generated from operating activities 37,489 1,613 39,102
Net cash flow used in investing activities (39,670) (529) (40,199)
Cash and cash equivalents at the start of the year 103,819 3,278 107,097
Cash and cash equivalents at the end of the year 48,975 4,362 53,337
Net decrease in cash and cash equivalents (54,844) 1,084 (53,760)
2.5 New standards, amendments and interpretations effective for future
accounting periods
The following are new standards, interpretations and amendments, which are not
yet effective and have not been early adopted in this financial information,
that will or may have an effect on the Group's future financial statements:
· Amendments to IAS 12 'Income Taxes' (effective for periods
beginning on or after 1 January 2023) - clarify how companies account for
deferred tax on transactions such as leases and decommissioning obligations.
The amendments are not expected to have a significant impact on the
preparation of the financial statements.
· Amendments to IAS 1 'Presentation of Financial Statements'
(effective for periods beginning on or after 1 January 2023) - are intended to
help entities in deciding which accounting policies to disclose in their
financial statements. The amendments are not expected to have a significant
impact on the preparation of the financial statements.
· Amendments to IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors' (effective for periods beginning on or after 1 January
2023) - introduce the definition of an accounting estimate and include other
amendments to help entities distinguish changes in accounting estimates from
changes in accounting policies. The amendments are not expected to have a
significant impact on the preparation of the financial statements.
· Amendments to IAS 1 'Presentation of Financial Statements'
(effective for periods beginning on or after 1 January 2024) - clarify that
liabilities are classified as either current or non-current, depending on the
rights that exist at the end of the reporting period and not expectations of
or actual events after the reporting date. The amendments also give
clarification to the definition of settlement of a liability. The amendments
are not expected to have a significant impact on the preparation of the
financial statements.
2.6 Segmental information
IFRS 8 Operating Segments requires operating segments to be identified on the
basis of internal financial reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker, which in the Group's
case is delegated to the Investment Adviser who has formed an Executive Team,
in order to allocate resources to the segments and to assess their
performance.
The internal financial reports received by the Investment Adviser's Executive
Team contain financial information at a Group level as a whole and there are
no reconciling items between the results contained in these reports and the
amounts reported in the consolidated financial statements.
The Directors consider the Group's property portfolio represents a coherent
and diversified portfolio with similar economic characteristics and as a
result, the whole portfolio of properties represents a single operating
segment. In the view of the Directors there is accordingly one reportable
segment under the provisions of IFRS 8.
All of the Group's properties are based in the UK. Geographical information is
provided to ensure compliance with the diversification requirements of the
Company, other than this no geographical grouping is contained in any of the
internal financial reports provided to the Investment Adviser's Executive Team
and, therefore no geographical segmental analysis is required by IFRS 8.
The Directors note the requirements in IFRS 8 Paragraph 34 pertaining to
entities under common control and confirm that both Auckland Home Solutions
and Qualitas Housing (as lessees of the Company's investment real estate) are
under common control of The Social Housing Family CIC ("TSHF"). The percentage
and sum total of the Company's annual contracted rent roll pertaining to these
counterparties as if they were considered to be a "single customer" can be
found in note 28.0 and in the full Annual Report.
3.0 Significant accounting judgements, estimates and assumptions
In the application of the Group's accounting policies, which are described in
note 4.0, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The judgements, estimates and associated
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the financial year are
outlined below:
3.1 Significant estimate - valuation of investment property
The Group uses the valuation carried out by its independent valuer as the fair
value of its property portfolio. The valuation is based upon assumptions
including future rental income and the appropriate discount rate. The valuers
also make reference to market evidence of transaction prices for similar
properties. Further information is provided in note 15.0.
The Group's properties have been independently valued by Jones Lang LaSalle
Limited ("JLL" or the "Valuer") in accordance with the current Royal
Institution of Chartered Surveyors' Valuation - Global Standards,
incorporating the IVS, and the RICS Valuation - Global Standards 2017 UK
national supplement (the RICS "Red Book"). JLL is a well recognised
professional firm within social housing valuation and has sufficient current
local and national knowledge of both social housing generally and Specialist
Supported Housing ("SSH") and has the skills and understanding to undertake
the valuations competently.
With respect to the Group's consolidated financial statements, investment
properties are valued at their fair value at each balance sheet date in
accordance with IFRS 13. Fair value measurements should be presented and
classified using a fair value hierarchy that reflects the significance of the
inputs used in the measurements, according to the following levels:
Level 1 Unadjusted, quoted prices for identical assets and liabilities in
active (typically quoted) markets.
Level 2 Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).
Level 3 Inputs for the asset or liability that are not based on observable
market data (unobservable inputs). Value is the Directors' best estimate,
based on advice from relevant knowledgeable experts, use of recognised
valuation techniques and a determination of which assumptions should be
applied in valuing such assets and with particular focus on the specific
attributes of the investments themselves.
Given the bespoke nature of each of the Group's investments, the particular
requirements of due diligence and financial contribution obtained from the
vendors together with the recent emergence of SSH, all of the Group's
investment properties are included in Level 3.
3.2 Significant estimate - valuation of interest rate derivatives
The fair value of Group's interest rate derivatives is recorded in the Group
Statement of Financial Position and is determined by the respective
counterparties. The counterparties use a number of assumptions in determining
the fair values, including estimations over future interest rates and future
cash flows using observable yield curves.
3.3 Significant judgement - business combinations
The Group acquires subsidiaries that own investment properties. At the time of
acquisition, the Group considers whether each acquisition represents the
acquisition of a business or the acquisition of an asset. Management considers
the substance of the assets and activities of the acquired entity in
determining whether the acquisition represents the acquisition of a business.
The Group accounts for an acquisition as a business combination where an
integrated set of activities is acquired in addition to the property. Where
such acquisitions are not judged to be the acquisition of a business, they are
not treated as business combinations. Rather, the cost to acquire the
corporate entity is allocated between the identifiable assets and liabilities
of the entity based upon their relative fair values at the acquisition date.
Accordingly, no goodwill or additional deferred tax arises.
There were no corporate acquisitions made in the year.
During the year, the Group entered into a transaction to acquire the freehold
properties operated by CPI Care Limited. Upon the acquisition of the company;
the properties were transferred into other group companies and the company
acquired, along with its associated operations, was sold to Envivo Corundum
Bidco Limited. Further details are shown in note 16.0 to the financial
statements.
The acquired companies met the definition of a business under IFRS 3, and the
transaction was therefore recorded as a business combination.
Because the Group acquired the company with the intent to sell the business,
management applied the short-cut method under IFRS 5 - Subsidiaries acquired
with a view to resale. Under this method, the subsidiary is recorded at fair
value less costs to sell, and there is no requirement to fair value the
subsidiary's individual assets and liabilities.
3.4. Significant judgement - operating lease contracts - the Group as lessor
The Group has acquired investment properties that are subject to commercial
property leases with Approved Providers. The Group has determined, based on an
evaluation of the terms and conditions of the arrangements, particularly the
duration of the lease terms and minimum lease payments, that it retains all
the significant risks and rewards of ownership of these properties and so
accounts for the leases as operating leases.
3.5. Significant judgement - REIT Status
Civitas Social Housing PLC is a Real Estate Investment Trust (REIT). The UK
REIT regime applies when entities meet certain conditions with the effect that
the income profits and capital gains of the qualifying property rental
business are exempt from tax. Within these conditions at least 90% of the
Group's property income must be distributed as dividends to shareholders and
the Group must ensure that the property rental business represents more than
75% of total profits and assets.
Following the completion of the offer, there is a level of uncertainty that
the Group will remain in the REIT regime.
4.0 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the
consolidated financial statements are set below. The policies have been
consistently applied to all periods presented, unless otherwise stated.
4.1. Basis of consolidation
The consolidated financial statements comprise the financial information of
the Group as at the year end date.
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation. The financial information of the subsidiaries is included in
the consolidated financial statements from the date that control commences
until the date that control ceases.
If an equity interest in a subsidiary is transferred but a controlling
interest continues to be held after the transfer then the change in ownership
interest is accounted for as an equity transaction.
Accounting policies of the subsidiaries are consistent with the policies
adopted by the Company.
4.2. Investment property
Investment property, which is property held to earn rentals and/or for capital
appreciation, is initially measured at cost, being the fair value of the
consideration given, including expenditure that is directly attributable to
the acquisition of the investment property. After initial recognition,
investment property is stated at its fair value at the balance sheet date.
Gains and losses arising from changes in the fair value of investment property
are included in profit or loss for the period in which they arise in the
Consolidated Statement of Comprehensive Income.
Subsequent expenditure is capitalised only when it is probable that future
economic benefits are associated with the expenditure. Ongoing repairs and
maintenance are expensed as incurred. Overheads and operating expenses are not
capitalised.
An investment property is derecognised upon disposal or when the investment
property is permanently withdrawn from use and no future economic benefits are
expected from the disposal. Any gain or loss arising on derecognition of the
property (calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is incurred in profit or loss in the period
in which the property is derecognised.
Significant accounting judgements, estimates and assumptions made for the
valuation of investment properties are discussed in note 3.1.
4.3. Leases
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Company has determined that it retains all the significant risks and
rewards of ownership of the properties and accounts for the contracts as
operating leases as discussed in note 3.4.
Properties leased out under operating leases are included in investment
property in the Consolidated Statement of Financial Position. Rental income
from operating leases is recognised on a straight line basis over the term of
the relevant leases.
Lease incentive costs are recognised as an asset and amortised over the life
of the lease.
4.4. Financial Assets
Classification
The Group classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either through
other comprehensive income or through profit or loss); and
· those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows. For assets
measured at fair value, gains and losses will either be recorded in profit or
loss or other comprehensive income.
Trade and other receivables
Trade and other receivables are amounts due in the ordinary course of
business. If collection is expected in one year or less, they are classified
as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently are
measured at amortised cost using the effective interest method, less
impairment provision. The Group holds the trade receivables with the objective
to collect the contractual cash flows.
Impairment
The Group's financial assets are subject to the expected credit loss model.
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables.
The expected loss rates are based on the payment profiles of lease income over
a period of up to 12 months before 31 March 2022 or 1 April 2022,
respectively, and the corresponding historical credit losses experienced
within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the
liability of the tenants to settle the receivable. Such forward-looking
information would include: changes in economic, regulatory, technological and
environmental factors (such as industry outlook, GDP, employment and
politics); external market indicators; and tenant base.
Based on the assessment and the specific work that is underway around
collection of aged arrears, a provision of £459,000 (2022: £239,000) has
been reflected in the annual results.
Trade receivables are written off when there is no reasonable expectation of
recovery.
Indicators that there is no reasonable expectation of recovery include, among
others, the probability of insolvency or significant financial difficulties of
the debtor. Impaired debts are derecognised when they are assessed as
uncollectible.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, cash held by lawyers and
liquidity funds with a term of no more than three months that are readily
convertible to a known amount of cash and which are subject to an
insignificant risk of changes in value.
Restricted cash represents amounts held for specific commitments, tenant
deposits and retention money held by lawyers in relation to deferred payments
subject to achievement of certain conditions, other retentions and cash
segregated to fund repair, maintenance and improvement works to bring the
properties up to satisfactory standards for the Group and the tenants.
Derivative financial instruments
Derivative financial instruments, which comprise interest rate swaps for
hedging purposes, are initially recognised at fair value at acquisition and
are subsequently measured at fair value, being the estimated amount that the
Group would receive or pay to sell or transfer the agreement at the period end
date, taking into account current interest rate expectations and the current
credit rating of the lender and its counterparties. The instrument may be an
asset or a liability. The gain or loss at each fair value remeasurement date
is recognised in the Group's Consolidated Statement of Comprehensive Income.
Derivative financial instruments are derecognised when the rights to receive
cash flows from the agreement have expired or have been transferred, and the
Group has transferred substantially all the risks and rewards of ownership.
The difference between the carrying amount and consideration received is
recognised as a gain or loss in the Group's Consolidated Statement of
Comprehensive Income.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data is available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs significant to the fair value measurement as a whole.
Other than derivative financial instruments which are not designated as
hedging instruments, the Group does not have any assets held for trading nor
does it voluntarily classify any financial assets as being at fair value
through profit or loss.
4.5. Financial liabilities
The Group recognises a financial liability when it first becomes a party to
the contractual rights and obligations in the contract.
All financial liabilities are initially recognised at fair value, minus (in
the case of a financial liability that is not at fair value through profit or
loss) transaction costs that are directly attributable to issuing the
financial liability. Financial liabilities are subsequently measured at
amortised cost, unless the Group opted to measure a liability at fair value
through profit or loss.
A financial liability is derecognised when the obligation under the liability
is discharged, cancelled or expires.
Trade and other payables
Trade and other payables are classified as current liabilities if payment is
due within one year or less. If not, they are presented as non-current
liabilities. Trade and other payables are recognised initially at their fair
value and subsequently measured at amortised cost until settled. The fair
value of a non-interest bearing liability is its discounted repayment amount.
If the due date of the liability is less than one year, discounting is
omitted.
Bank and other borrowings
All bank and other borrowings are initially recognised at fair value less
directly attributable transaction costs. After initial recognition, all bank
and other borrowings are measured at amortised cost, using the effective
interest method. Any attributable transaction costs relating to the issue of
the bank borrowings are amortised through the Group's Statement of
Comprehensive Income over the life of the debt instrument on a straight-line
basis.
Borrowings are removed from the consolidated statement of financial position
when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability
that has been extinguished and the consideration paid is recognised in profit
or loss as a finance cost.
4.6. Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the balance sheet date, taking
into account the risks and uncertainties surrounding the obligation.
4.7. Taxation
Taxation on the profit or loss for the period not exempt under UK REIT
regulations is comprised of current and deferred tax. Tax is recognised in the
Consolidated Statement of Comprehensive Income except to the extent that it
relates to items recognised as a direct movement in equity, in which case it
is recognised as a direct movement in equity. Current tax is expected tax
payable on any non-REIT taxable income for the period, using tax rates enacted
or substantively enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous periods.
The current tax charge is calculated on profits arising in the period and in
accordance with legislation which has been enacted or substantially enacted at
the balance sheet date.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The amount of deferred tax that is provided is
based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
4.8. Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and to maintain an optimal capital structure to reduce the cost
of capital.
Capital assets comprise the following:
31 March 2023 31 March 2022
£'000 £'000
Proceeds from the issue of Ordinary shares and retained earnings 661,909 675,547
Bank and loan borrowings 361,915 352,050
Total 1,023,824 1,027,597
The Directors may use gearing to enhance equity returns. The level of
borrowing will be on a prudent basis for the asset class and will seek to
achieve a low cost of funds, whilst maintaining the flexibility in the
underlying security requirements and the structure of the Group.
The Group may, following a decision of the Board, raise debt from banks and/or
the capital markets and the aggregate borrowings of the Group will always be
subject to an absolute maximum, calculated at the time of drawdown, of below
40% of the Gross Asset Value on a fully invested basis.
4.9. Dividends payable to shareholders
Dividends are included in the financial statements in the year in which they
are paid.
4.10. Rental income
Rental income from investment property is recognised on a straight-line basis
over the term of ongoing leases and is shown gross of any UK income tax. Lease
incentives are spread evenly over the lease term. Losses incurred on granting
retrospective rent concessions are charged to the income statement on the date
that the legal rights to income are conceded (i.e. immediate recognition in
full rather than smoothed over the life of the lease).
Insurance recharges and other similar receipts are recognised under IFRS 15
'Revenue from contracts with customers', and are included in net rental and
property income gross of the related costs as the Directors consider the Group
acts as principal in this respect.
4.11. Finance income
Finance income is recognised as interest, and is accrued on cash and cash
equivalent balances held by the Group.
4.12. Finance costs
Finance costs consist of interest and other costs that the Group incurs in
connection with bank and other borrowings. Bank interest and bank charges are
recognised on an accruals basis. Borrowing transaction costs are amortised
using the effective interest rate.
4.13. Expenses
All expenses, including Investment Advisory fees, are recognised in the
Consolidated Statement of Comprehensive Income on an accruals basis.
4.14. Share issue costs
The costs of issuing or reacquiring equity instruments (other than in a
business combination) are accounted for as a deduction from equity.
4.15 Exceptional items
Exceptional items relate to amounts which do not normally occur in the normal
course of business.
Exceptional professional costs for two major projects have been disclosed
separately. These relate to costs associated with the offer for the purchase
of the entire share capital of the Company by a subsidiary of CK Asset
Holdings Limited (CKA) and costs associated with a planned bond issue which
was postponed.
4.16 Share held in treasury
The costs, including directly attributable transactions costs, of purchasing
the Company's own shares to be held in treasury are deducted from equity and
the costs are shown in the Consolidated Statement of Changes in Equity.
Consideration received, net of transaction costs, for the resale of these
shares is also included in equity. Whilst the Company holds shares in
treasury, the calculations for net asset value and earnings per share are
adjusted to exclude these shares.
5.0 Rental income
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Rental income from investment property 53,531 51,038
Rent straight line adjustments 586 529
Lease incentive amortisation (1,022) (926)
Rechargeable costs received 1,512 995
Rental income 54,607 51,636
Less direct property expenses
Insurance and service charge costs (1,512) (995)
Bad debt (429) 17
Direct property expenses (1,941) (978)
Net rental income 52,666 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.
6.0 Directors' remuneration
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Directors' fees 194 190
Employer's National Insurance Contributions 17 16
Total 211 206
The Directors are remunerated for their services in accordance with the
Remuneration Policy which sets parameters within which Directors' remuneration
may be set. The Remuneration Policy is approved by shareholders.
Disclosures required by the Companies Act 2006 on Directors' remuneration,
including salaries, share options, pension contributions and pension
entitlement and those specified by the Listing Rules of the Financial Conduct
Authority are included in the Remuneration Report set out in the full Annual
Report and form part of these Financial Statements.
7.0 Particulars of employees
The Group had no employees during the period (2022: nil) other than the
Directors.
8.0 Investment advisory fees
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Advisory fee 6,206 6,132
Disbursements 11 -
Total 6,217 6,132
Civitas Investment Management Limited ("CIM") is the appointed Investment
Adviser of the Company. Under the current Investment Management Agreement, the
Advisory Fee shall be an amount calculated in respect of each quarter, in each
case based upon the Net Asset Value most recently announced to the market at
the relevant time (as adjusted for issues or repurchases of shares in the
period between the date of such announcement and the date of the relevant
calculation), on the following basis:
a) on that part of the Net Asset Value up to and including £250,000,000,
an amount equal to 1% of such part of the Net Asset Value;
b) on that part of the Net Asset Value over £250,000,000 and up to and
including £500,000,000, an amount equal to 0.9% of such part of the Net Asset
Value;
c) on that part of the Net Asset Value over £500,000,000 and up to and
including £1,000,000, an amount equal to 0.8% of such part of the Net Asset
Value;
d) on that part of the Net Asset Value over £1,000,0000, an amount equal
to 0.7% of such part of the Net Asset Value.
The appointment of the Investment Adviser shall continue in force unless and
until terminated by either party giving to the other not less than 12 months'
written notice, such notice not to expire earlier than 30 May 2025.
9.0 General and administrative expenses
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Legal and professional fees 1,250 1,459
Exceptional professional costs 1,816 -
Administration fees 1,044 1,037
Consultancy fees 143 136
Audit fees 441 340
Abortive costs 48 196
Valuation fees 96 100
Depositary fees 71 71
Grants and donations 65 26
Insurance 97 84
Marketing 225 343
Regulatory fees 21 25
Sundry expenses 76 92
Total 5,393 3,909
Abortive costs represent legal and professional fees incurred in relation to
the acquisition of investment properties and proposed share issues that were
considered but subsequently aborted.
General and administrative expenses for the current year contain exceptional
professional costs of £1,816,000 (2022: £Nil). These costs pertain to two
strategic projects the Company has been evaluating and comprise of £1,294,000
(2022: £nil) associated with the offer for the purchase of the entire share
capital of the Company by a subsidiary of CK Asset Holdings Limited (CKA) and
£522,000 (2022: £Nil) associated planned bond issue which was postponed.
Services provided by the Company's auditors and their associates
The Group has obtained the following services from the Group's auditors and
their associates:
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Fees payable to the Group's auditor and its associates for auditing financial
statements:
Audit of the Group's financial statements(1) 358 296
Total fees payable for audit services: 358 296
Fees payable to the Group's auditor and its associates for other services:
Audit related services - review of the half year financial statements 83 44
Other services(2) - 62
Total fees payable to the Group's auditors and their associates 441 402
(1) Includes £64,000 (2022: £18,000) cost in relation to the previous year
audit.
(2) This amount was recognised within exceptional legal and professional costs
in the year ended 31 March 2022.
10.0 Finance income
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Interest and dividends received on liquidity funds 148 4
Bank interest received - 3
Total 148 7
11.0 Finance expense
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Bank charges 8 6
Interest paid and payable on bank borrowings and derivatives 12,151 8,907
Amortisation of loan arrangement fees 1,869 1,653
Costs of early repayment of debt 1,271 -
Loan security fees 36 42
Total 15,335 10,608
During the year the Lloyds Bank plc £60,000,000 revolving credit facility was
repaid. Costs of early repayment of debt include break costs and the write off
of the remaining unamortised loan issue costs.
12.0 Taxation
As a UK REIT, the Group is exempt from corporation tax on the profits and
gains from its property investment business, provided it meets certain
conditions as set out in the UK REIT regulations. For the current year ended
31 March 2023, the Group did not have any non-qualifying profits and
accordingly there is no tax charge in the year. If there were any
non-qualifying profits and gains, these would be subject to corporation tax.
Deferred tax has not been recognised on temporary differences relating to the
property rental business. No deferred tax asset has been recognised in respect
of the unutilised residual current year losses as it is not anticipated that
sufficient residual profits will be generated in the future. In the event that
Civitas' property portfolio was to be sold at valuation, any gains realised on
such disposals may be subject to taxation in the UK. Generally, disposals by a
REIT of assets held for the purpose of a property rental business should be
exempt from UK corporation tax. The Directors do not believe that any
properties within the Civitas property portfolio meet the conditions for
assets held as part of the property rental business being subject to
corporation tax on disposal. Accordingly, if the Civitas property portfolio
was to be sold at valuation, the Directors estimate that no corporation tax
liability would arise on that sale.
Following the completion of the offer, there is a level of uncertainty that
the Group will remain in the REIT regime.
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Corporation tax charge for the year - -
Total - -
The tax charge for the period is less than the standard rate of corporation
tax in the UK of 19%. The differences are explained below.
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Group
Profit before taxation 25,472 44,754
UK corporation tax rate 19% 19%
Theoretical tax at UK corporation tax rate 4,840 8,503
Effects of:
Change in value of exempt investment properties (502) (2,331)
Exempt REIT income (6,019) (6,598)
Amounts not deductible for tax purposes 1,081 (230)
Unutilised residual current period tax losses 600 656
Total - -
A deferred tax asset of £2,877,000 (2022: £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.
The standard rate of corporation tax is currently 19%. The standard rate of
corporation tax increased to 25% with effect from 1 April 2023.
REIT exempt income includes property rental income that is exempt from UK
Corporation Tax in accordance with Part 12 of Corporation Tax Act 2010.
13.0 Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing profit for the
year attributable to Ordinary equity holders of the Company by the weighted
average number of Ordinary shares in issue during the year.
The calculation of basic and diluted earnings per share is based on the
following:
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Calculation of earnings per share
Net profit attributable to Ordinary shareholders (£'000) 25,472 44,754
Weighted average number of Ordinary shares (excluding shares held in treasury) 608,552,681 618,797,942
Earnings per share - basic and diluted 4.19p 7.23p
14.0 Dividends
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Dividend of 1.3875p for the 3 months to 31 March 2022 8,474 8,403
(1.3500p 3 months to 31 March 2021)
Dividend of 1.4250p for the 3 months to 30 June 2022 8,703 8,637
(1.3875p 3 months to 30 June 2021)
Dividend of 1.4250p for the 3 months to 30 September 2022 (1.3875p 3 months to 8,641 8,555
30 September 2021)
Dividend of 1.4250p for the 3 months to 31 December 2022 (1.3875p 3 months to 8,641 8,498
31 December 2021)
Total 34,459 34,093
On 9 May 2023, the Company announced a dividend of 1.425 pence per share in
respect of the period 1 January 2023 to 31 March 2023 totalling £8,641,000.
The dividend payment was made on 9 June 2023 to shareholders on the register
as at 19 May 2023. The financial statements do not reflect this dividend. The
dividend was paid as a REIT property income distribution ("PID").
15.0 Investment property
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Balance at beginning of year 968,756 915,589
Property acquisitions 543 33,466
Improvements to investment properties 4,944 5,818
Lease incentives and rent straight line adjustments recognised 1,264 1,614
Change in fair value 2,640 12,269
Value advised by the property valuers 978,147 968,756
Less lease incentive assets and rent straight line assets (24,783) (23,519)
Total 953,364 945,237
Improvements to investment properties includes capital expenditure incurred of
£128,000 (2022: £12,000) in respect of climate change initiatives.
During the previous year, the Group acquired a property holding company from
Herleva Properties Limited which held assets totalling £8,611,000. These are
included within Property Acquisitions in the note above. Herleva Properties
Limited is a subsidiary of Specialist Healthcare Operations Limited ("SHO").
Andrew Dawber and Tom Pridmore (both directors of the Investment Adviser), are
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.
Valuation
In accordance with "IAS 40: Investment Property", the investment property has
been independently valued at fair value by JLL, an accredited external valuer
with recognised and relevant professional qualifications and recent experience
of the location and category of the investment property being valued, however,
the valuations are the ultimate responsibility of the Directors.
JLL valued the Civitas Social Housing PLC property portfolio on the basis of
each individual property and the theoretical sale of the properties without
the benefit of any corporate wrapper at £978,147,000 as at 31 March 2023
(2022: £968,756,000).
JLL has provided valuation services to the Company with regards to the
properties during the year. JLL has provided additional valuation services on
the acquisition of investment property by the Company during the year. The
Directors have ensured that JLL has appropriate procedures in place to ensure
there are no independence conflicts with the services provided to the Company.
In relation to the year ended 31 March 2023, the proportion of the total fees
payable by the Company to JLL's total fee income was less than 5% and is
therefore minimal. Additionally, JLL has a rotation policy in place whereby
the signatories on the valuations rotate after seven years.
With the exception of the acquisition detailed in note 16.0, all corporate
acquisitions during the year and the comparative year have been treated as
asset purchases rather than business combinations because following review of
the IFRS 3 concentration test, they are considered to be acquisitions of
properties rather than businesses (note 3.3).
The following table provides the fair value measurement hierarchy for
investment property:
Significant Significant
Quoted prices observable unobservable
in active inputs inputs
Investment properties measured at fair value Total markets (Level 2) (Level 3)
£'000 (Level 1) £'000 £'000
£'000
31 March 2023 953,364 - - 953,364
31 March 2022 945,237 - - 945,237
There have been no transfers between Level 1 and Level 2 during any of the
years, nor have there been any transfers between Level 2 and Level 3 during
any of the years.
The valuations have been prepared in accordance with the RICS Valuation -
Professional Standards (incorporating the International Valuation Standards)
by JLL, one of the leading professional firms engaged in the social housing
sector.
As noted previously all of the Group's investments are reported as Level 3 in
accordance with IFRS 13 where inputs are not based on observable market data
and the value is based upon advice from relevant knowledgeable experts.
In this instance, the determination of the fair value of investment property
requires an examination of the specific merits of each property that are in
turn considered pertinent to the valuation.
These include:
i. the regulated social housing sector and demand for the facilities
offered by each SSH property owned by the Group;
ii. the particular structure of the Group's transactions where vendors, at
their own expense, meet the majority of the refurbishment costs of each
property and certain purchase costs;
iii. detailed financial analysis with discount rates supporting the carrying
value of each property;
iv. a full repairing and insuring lease with annual indexation based on CPI
or CPI+1%.
The following descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as follows:
Valuation techniques: income approach
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date (i.e. an exit price).
The valuation methodology used by the valuers follows the income approach.
This approach considers the rental income currently payable; the next uplift
due on that income on review; the likelihood of a continuation of that rental
income - with growth in accordance with the leases - over the remaining terms;
and then a long-term reversion which considers the likely ability of the
properties to continue to generate rent through supported housing occupation,
as distinct from a reversion to vacant possession value.
Risks are involved in both assessing the value of the indexed rental income
over the remaining terms of the leases and in also predicting that income will
continue beyond the end of the existing leases. This is a balanced judgment,
which can properly be reflected in the exit yield applied to the final year's
income and in the overall return to a purchaser.
Appropriate taxation calculations are adopted for every property based on its
value and on the assumption of the sale of the property assets directly as
opposed to shares of a subsidiary company holding the property and have
considered the individual characteristics of the properties.
There are two main unobservable inputs that determine the fair value of the
Group's investment property:
i) The rate of 2% per annum has been used for CPI over the term of the subject
properties' leases in line with the Bank of England's long-term inflation
targets for CPI. It should be noted that all leases benefit from either CPI or
CPI+1 indexation.
ii) The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include the regulated
social housing sector and demand for each SSH property owned by the Group,
costs of acquisition and refurbishment of each property, the anticipated
future underlying cash flows for each property, benchmarking of each
underlying rent for each property (passing rent), impact of climate change,
and the fact that all of the properties within the Group's portfolio have the
benefit of full repairing and insuring leases entered into by an Approved
Provider.
As at the balance sheet date, the lease lengths within the Group's portfolio
ranged from an effective 14 years to 35 years (2022:a 15 years to 36 years)
with a weighted average unexpired lease term of 21.5 years (2022: 22.1). The
greater the length of the lease, then, all other metrics being equal, the
greater the value of the property.
Sensitivities of measurement of significant unobservable inputs
As set out within significant accounting estimates at 3.1 above, the Group's
property investment valuation is open to inherent uncertainties in the inputs
that determine fair value. Management has re-considered the sensitivity ranges
and widened them for the current year as a result of macroeconomic
uncertainty. 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 6.38% (2022: 5.5%). In setting the discount rates adopted in the
valuation, the valuers have considered market standard and anticipated returns
to set a benchmark for the portfolio as a whole. They have then considered the
various characteristics of the individual properties in order to adjust those
rates for each property. 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 11.7% (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 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
£'000 £'000 £'000 CPI
£'000
Increase/(decrease) in the IFRS fair value of investment properties at:
31 March 2023 71,929 (62,507) 56,676 (52,583)
31 March 2022 73,955 (64,020) 58,150 (53,815)
16.0 Subsidiary resale
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Acquisition of subsidiary companies (including intercompany loan) - 13,559
Acquisition costs - 765
Transfer to investment property - (11,629)
Sale proceeds - (2,695)
Total - -
During the previous 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.
17.0 Trade and other receivables
31 March 2023 31 March 2022
Amounts falling due in less than one year £'000 £'000
Trade receivables 6,676 4,960
Less provision for impairment of trade receivables (459) (239)
Accrued income 3,313 4,982
Prepayments and other receivables 1,730 3,162
Total 11,260 12,865
Prepayments and other receivable amounts include prepaid legal and
professional fees of £Nil (2022: £34,000) that have been incurred in
connection with acquisitions yet to be completed and £286,000 (2022:
£1,046,000) in respect of ongoing works on the property portfolio.
Accrued income relates mainly to rent accrued for the year but not yet
demanded.
31 March 2023 31 March 2022
£'000 £'000
Amounts falling due after more than one year
Straight line adjustments 2,639 2,053
Lease incentives 22,144 21,466
Total 24,783 23,519
The aged analysis of trade receivables was as follows:
31 March 2023 31 March 2022
£'000 £'000
Debtors past due
Current 2,518 1,777
< 30 days 862 355
30-60 days 275 105
> 60 days 3,021 2,723
6,676 4,960
Debtors past due
Less provision for impairment (459) (239)
Total 6,217 4,721
The Directors consider the fair value of receivables equals their carrying
amount.
Other categories within trade and other receivables do not include impaired
assets
The provision for impairment movement was as follows:
31 March 2023 31 March 2022
£'000 £'000
Balance at beginning of year 239 256
Impairment provision made 306 109
Amounts recovered (67) (126)
Amounts written off (19) -
Balance at end of year 459 239
18.0 Cash and cash equivalents
31 March 2023 31 March 2022
£'000 £'000
Cash held by solicitors 64 376
Liquidity funds 15,636 10,489
Cash held at bank 16,939 38,110
Unrestricted cash and cash equivalents 32,639 48,975
Restricted cash 2,949 4,362
Total 35,588 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.
Cash held by solicitors is money held in escrow for expenses expected to be
incurred in relation to investment properties pending completion. These funds
are available immediately on demand.
Restricted cash represents amounts held for specific commitments, tenant
deposits and retention money held in relation to deferred payments subject to
achievement of certain conditions, other retentions and cash segregated to
fund repair, maintenance and improvement works to bring the properties up to
satisfactory standards for the Group and the tenants.
19.0 Trade and other payables
31 March 2023 31 March 2022 (Restated*)
£'000 £'000
Deferred income 761 860
Acquisition costs accrued 600 960
Finance costs 3,688 1,840
Dividends withholding tax payable 940 1,057
Accruals and other creditors 773 2,202
Tenant deposits 2,538 2,573
Total 9,300 9,492
Acquisition costs accrued also include monies retained at the point of
acquisition to be paid at a later date totalling £383,000 (2022: £262,000).
* Comparatives have been restated to correct the analysis of £1,896,000 of
tenant deposits which had previously been included in acquisition costs
accrued.
20.0 Bank and loan borrowings
Bank borrowings are secured by charges over individual investment properties
held by certain asset-holding subsidiaries. The banks also hold charges over
the shares of certain subsidiaries and any intermediary holding companies of
those subsidiaries. Any associated fees in arranging the bank borrowings
unamortised as at the year end are offset against amounts drawn on the
facilities as shown in the table below:
For the
For the year ended
year ended 31 March 2022
31 March 2023 £'000
£'000
Bank borrowings drawn at start of year 357,050 357,050
Bank borrowings advanced 70,875 -
Bank borrowings repaid (60,000) -
Bank borrowings drawn at end of year 367,925 357,050
Unamortised costs at start of year (5,000) (4,930)
Less: loan issue costs incurred (3,544) (1,723)
Add: loan issue costs amortised upon repayment of bank loan 665 -
Add: loan issue costs amortisation 1,869 1,653
Unamortised costs at end of year (6,010) (5,000)
At end of year 361,915 352,050
Loan Balance(1) Loan Balance Loan Principle(1) Loan Principle
31 March 2023 31 March 2022 31 March 2023 31 March 2022
£'000 £'000 £'000 £'000
Maturity of bank borrowings:
Repayable within 1 year - - - -
Repayable between 1 to 2 years 59,600 60,000 160,000
158,746
Repayable between 2 to 5 years 302,315 307,925 60,000
59,365
Repayable after 5 years - 133,939 - 137,050
Total 361,915 352,050 367,925 357,050
1 Loan balance net of unamortised costs.
The Group has been party to the following loan facility agreements in the
year:
Expiry Date
Loan Principal
Facility £'000 Interest rate
Summary of Borrowings
Scottish Widows Limited 10-year facility Term loan 52,500 02/11/2027 2.9936% fixed
Lloyds Bank plc Revolving credit facility - - SONIA + 1.67%(1)
Deutsche Bank AG Loan Notes 70,875 03/02/2028 5.69% fixed
HSBC Bank plc Revolving credit facility 100,000 28/11/2025 SONIA + 2.15%(1)
National Westminster Bank Plc 5-year facility Revolving credit facility 60,000 14/08/2024 SONIA + 2.00%(2)
M&G Investment Management Limited 7-year facility Term loan 84,550 24/02/2028 3.137% fixed
367,925
Borrowings are secured on investment properties to the value:
31 March 2023 31 March 2022
£'000 £'000
Scottish Widows Limited 10-year facility principal £52,500,000 173,510 173,777
Deutsche Bank AG Loan Notes principal £70,875,000 168,610 -
HSBC Bank plc facility principal £100,000,000 231,116 222,745
National Westminster Bank Plc 5-year facility principal £60,000,000 137,827 135,330
M&G Investment Management Limited 7-year facility principal £84,550,000 230,279 230,487
At 31 March 2023, 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%
Deutsche Bank AG Loan Notes At least 175% Must not exceed 50%
HSBC Bank PLC facility At least 250% Must not exceed 50%
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%
1 Interest rate caps have been purchased to cap interest costs on this
facility as per details in notes 21.0 and 31.3.
2 Fixed by way of an interest rate swap as detailed in note 21.0.
21.0 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 £60,000,000 and fixes interest at 2.60% (including the 2%
margin on the bank loan).
During the year, the Group has entered into three new interest rate cap
arrangements for a total cost of £8,841,000:
An interest rate cap that capped the £60,000,000 Lloyds Bank plc facility at
3.92% (including the 1.67% margin on the loan facility) for the period from 16
September 2022 to 20 February 2023. This arrangement was sold upon the
repayment of the loan with proceeds of £17,000.
An interest rate cap that capped the SONIA interest rate on the £100,000,000
HSBC Bank plc facility at 2.60% for the period from 21 September 2022 to 17
April 2023.
An interest rate cap transaction to mitigate the risk of the SONIA interest
rate exceeding 2.45% p.a. on the principal of £100,000,000 HSBC Bank plc
facility for the period 17 April 2023 to 28 November 2025. This instrument
covers the remaining term of the revolving credit facility with HSBC Bank plc
and its extension to November 2025.
For the
For the year ended
year ended 31 March 2022
31 March 2023 £'000
£'000
Interest rate derivative assets/(liabilities)
At start of year 2,131 (544)
Interest rate cap premiums paid 8,841 -
Disposal proceeds (17) -
Realised loss on disposal (187) -
Change in fair value during the year (2,639) 2,675
At end of the year 8,129 2,131
The table below shows the fair value measurement hierarchy for interest
derivatives:
Quote prices Significant Significant
in Active Observable Unobservable
Markets Inputs Inputs
(Level 1) (Level 2) (Level 3)
£'000 £'000 £'000
31 March 2023 - 8,129 -
31 March 2022 - 2,131 -
The fair value of Group's interest rate derivatives is recorded in the Group
Statement of Financial Position and is determined by the respective
counterparties. The counterparties use a number of assumptions in determining
the fair values, including estimations over future interest rates and future
cash flows using observable yield curves. The fair value represents the net
present value of the difference between the cash flows produced by the
contracted rate and the valuation rate. This valuation technique falls within
Level 2 of the fair value hierarchy as defined by IFRS 13.
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.
22.0 Share capital
Share capital represents the nominal value of consideration received by the
Company for the issue of Ordinary shares.
For the
For the year ended
year ended 31 March 2022
31 March 2023 £'000
£'000
Share capital
At beginning and end of year 6,225 6,225
Number of shares issued and fully paid
Ordinary shares of £0.01 each
At beginning and end of year 622,461,380 622,461,380
During the year, the Company purchased 6,050,000 Ordinary shares to be held in
treasury at a cost of £4,651,000 (31 March 2022: 10,025,000 Ordinary shares
for £9,259,000).
During the previous 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 31 March 2023, the Company held 16,075,000 (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 31 March 2023, the number of Ordinary shares used to calculate the net
asset value per share is 606,386,380 (31 March 2022: 612,436,380) which
excludes the shares held in treasury.
23.0 Share premium reserve
The share premium reserve represents the amounts subscribed for Ordinary share
capital in excess of nominal value less associated issue costs of the
subscriptions.
For the
For the year ended
year ended 31 March 2022
31 March 2023 £'000
£'000
At beginning of year 292,626 292,463
Premium arising on shares reissued from treasury - 163
At end of year 292,626 292,626
For movements in the year, please see details in note 22.0.
24.0 Capital reduction reserve
The capital reduction reserve is a distributable reserve to which the value of
the cancelled share premium was transferred. Pursuant to Article 3 of The
Companies (Reduction of Share Capital) Order 2008, the balance held in the
capital reduction reserve is to be treated for the purposes of Part 23 of the
Companies Act 2006 as a realised profit and therefore available for
distribution in accordance with section 830 of the Companies Act. The Company
has used this reserve for the costs of buying back shares to be held in
treasury and payment of dividends.
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
At beginning of year 322,365 331,140
Shares reissued from treasury - 484
Shares bought back into treasury (4,651) (9,259)
At end of year 317,714 322,365
For movements in the year, please see details in note 22.0.
25.0 Retained earnings
This reserve represents the profits and losses of the Group.
For the
For the year ended
year ended 31 March 2022
31 March 2023 £'000
£'000
At beginning of year 54,331 43,670
Profit for the year 25,472 44,754
Dividends paid (34,459) (34,093)
At end of year 45,344 54,331
26.0 Net asset value
Basic NAV per share is calculated by dividing net assets in the Consolidated
Statement of Financial Position attributable to Ordinary equity holders of the
parent by the number of Ordinary shares outstanding at the end of the year.
Net asset values have been calculated as follows:
31 March 2023 31 March 2022
Net assets (£'000) 661,909 675,547
Number of Ordinary shares in issue at end of year 622,461,380 622,461,380
Number of Ordinary shares held in treasury (16,075,000) (10,025,000)
Number of Ordinary shares excluding treasury shares held by the Company 606,386,380 612,436,380
109.16p 110.30p
NAV per share - basic and diluted
27.0 Analysis of financial liabilities and assets arising from financing
activities
For the
Interest rate Bank year ended
derivatives borrowings 31 March 2023
£'000 £'000 £'000
At beginning of year (2,131) 352,050 349,919
Cash flows from financing activities
Loan issue costs paid - (3,148) (3,148)
Interest rate derivative premiums paid (8,841) - (8,841)
Proceeds from the sale of Interest rate derivatives 17 - 17
Bank borrowings advanced - 70,875 70,875
Bank borrowings repaid - (60,000) (60,000)
Non cash movements
Loan issue fees accrued - (396) (396)
Amortisation of loan arrangement costs - 1,869 1,869
Unamortised loan arrangement fees written off 665 665
-
Change in fair value of interest rate derivatives 2,826 - 2,826
At end of year (8,129) 361,915 353,786
For the
Interest rate Bank year ended
derivatives borrowings 31 March 2022
£'000 £'000 £'000
At beginning of year 544 352,120 352,664
Cash flows from financing activities
Loan draw down - (1,805) (1,805)
Non cash movements
Loan issue fees payable - 82 82
Amortisation of loan issue costs - 1,653 1,653
Change in fair value of interest rate derivatives (2,675) - (2,675)
At end of year (2,131) 352,050 349,919
28.0 Operating leases
The Group is party to a number of operating leases on its investment
properties with Approved Providers. The future minimum lease payments under
non-cancellable operating leases receivable by the Group are as follows:
31 March 2023 31 March 2022
£'000 £'000
Amounts receivable
< 1 year 57,262 53,821
1-2 years 57,352 53,879
2-5 years 172,536 161,940
> 5 years 958,286 928,210
At end of year 1,245,436 1,197,850
Leases are direct-let agreements with Approved Providers for a term between
20-40 years with indexed linked annual rent reviews. All current leases are
full repairing and insuring leases; the tenants are therefore obliged to
repair, maintain and renew the properties back to the original conditions.
The following table gives details of percentage of annual rental income per
Approved Provider:
31 March 2023 31 March 2022
% %
Auckland Home Solutions and Qualitas Housing 24.9 24.4
Falcon Housing Association CIC 19.1 18.7
Bespoke Supportive Tenancies 12.5 12.6
Inclusion Housing CIC 9.4 9.3
Westmoreland Supported Housing Limited 5.6 5.9
Encircle Housing Limited 5.2 5.9
Trinity Housing Association Limited 5.2 5.1
Pivotal Housing Association 4.0 3.8
Chrysalis Supported Association Limited 3.7 3.6
New Walk Property Management CIC 2.7 2.8
Harbour Light Assisted Living CIC 2.3 3.6
My Space Housing Solutions 1.3 1.3
Elysium Healthcare Limited 1.1 -
IKE Supported Housing Limited 1.0 1.1
Hilldale Housing Association Limited 1.0 1.0
Windrush Alliance UK CIC 0.7 0.7
Lilly Rose Supported Housing 0.2 0.1
Blue Square Residential Ltd 0.1 0.1
Total 100.0 100.0
Auckland Home Solutions and Qualitas Housing are both members of the Social
Housing Family CIC and subject to common control. Their annual rent figures
have therefore been aggregated in the table above. The percentage relating to
Auckland Home Solutions and Qualitas Housing was 16.5% and 8.4% (2022: 16.3%
and 8.1%) respectively. The annual rent at 31 March 2023 for Auckland Home
Solutions and Qualitas Housing was £9,266,000 and £4,730,000 (2022:
£8,679,000 and £4,334,000) respectively.
The Group is also party to a number of operating leases on its long leasehold
properties. The ground rent payment commitments under these operating leases
are negligible so the future minimum lease payments under these leases have
not been disclosed in these financial statements.
29.0 Controlling parties
As at 31 March 2023, there is no ultimate controlling party.
30.0 Related party disclosures
A list of all subsidiary undertakings including the address of the registered
office is detailed in note 8.0 to the Company accounts below.
30.1 Transactions with Directors
The Directors are remunerated for their services at such rate as the Directors
shall from time to time determine. The aggregate remuneration and benefits in
kind of the Directors of the Company (in each case, solely in their capacity
as such) in respect of the year ended 31 March 2023 payable out of the assets
of the Company is not expected to exceed £250,000.
Fees of £194,000 (2022: £190,000) were incurred and paid to the Directors.
As at 31 March 2023 and 2022, the Directors held the following number of
shares:
31 March 2023 31 March 2022
Director Ordinary shares Ordinary
shares
Michael Wrobel Chairman 200,000 120,598
Alastair Moss Director 11,766 11,766
Alison Hadden Director 31,937 -
Caroline Gulliver Audit and Management Engagement Committee Chair 58,832 58,832
Peter Baxter Director 82,065 82,065
Remuneration
The Investment Adviser has reviewed its remuneration policies and procedures
to ensure incentives are aligned with the requirements of AIFMD. It includes
measures to avoid conflicts of interest such as providing staff with a fixed
monthly salary and determining discretionary payments by the performance of
the Investment Adviser as a whole and not linked to any one AIF in particular.
The Investment Adviser and its staff receive no remuneration through profit
share, carried interest, co-investment or other schemes related to the
Company's performance.
30.2 Transactions with the Investment Adviser
On 1 November 2016, Civitas Investment Management Limited ("CIM") was
appointed as the Investment Adviser of the Company. Its address is shown
below.
Fees of £6,206,000 (2022: £6,132,000) were incurred and paid to CIM. In
addition £11,000 (2022: £nil) disbursements were paid in the year.
The Investment Adviser agreed to contribute £nil (2022: £100,000) towards
legal and professional fees incurred. This amount was offset against legal and
professional fees in note 9.0.
As at 31 March 2023, a net amount of £48,000 (2022: £151,000) was due from
CIM, which has since been received.
As at 31 March 2023, CIM held 167,664 (2022: 50,000) Ordinary shares in the
Company.
31.0 Financial risk management
31.1 Financial instruments
The Group's principal financial assets and liabilities are those that arise
directly from its operations: trade and other receivables, trade and other
payables and cash and cash equivalents. The Group's other principal financial
liabilities are bank borrowings, the main purpose of which is to finance the
acquisition and development of the Group's investment property portfolio, and
interest rate derivatives as detailed in notes 20.0 and 21.0.
All financial liabilities are measured at amortised cost, except interest rate
derivatives, which are measured at fair value. All financial instruments were
designated in their current categories upon initial recognition.
Set out below is a comparison by class of the carrying amounts and fair value
of the Group's financial instruments that are carried in the financial
statements:
Book value 31 March 2023 Fair value 31 March 2023 Book value 31 March 2022 Fair value 31 March 2022 £'000
£'000 £'000 £'000
Financial assets
Interest rate derivatives 8,129 8,129 2,131 2,131
Trade and other receivables(1) 34,949 34,949 34,580 34,580
Cash and cash equivalents 35,588 35,588 53,337 53,337
Financial liabilities
Trade and other payables(2) 7,599 7,599 8,632 8,632
Bank borrowings 361,915 350,179 352,050 349,406
(1) Excludes prepayments
(2) Excludes deferred income and dividend withholding tax payable
The Group has five bank loans as detailed in note 20.0. The fair value of the
fixed rate loan is determined by comparing the discounted future cash flows.
Financial risk management
The Group is exposed to market risk, interest rate risk, credit risk and
liquidity risk in the current and future years. The Board of Directors
oversees the management of these risks. The Board of Directors reviews and
agrees policies for managing each of these risks that are summarised below.
31.2 Market risk
The Group's activities will expose it primarily to the market risks associated
with changes in property values and changes in interest rates.
Risk relating to investment in property
Investment in property is subject to varying degrees of risk. Some factors
that affect the value of the investment in property include:
· changes in the general economic climate;
· competition for available properties;
· obsolescence; and
· government regulations, including planning, environmental and tax
laws.
Variations in the above factors can affect the valuation of assets held by the
Group and as a result can influence the financial performance of the Group.
Risk relating to liquidity funds classified as cash and cash equivalents
The Group holds positions in two AAA rated liquidity funds that invest in a
diversified range of government and non-government money market securities,
which are subject to varying degrees of risk. Some factors that affect the
value of the liquidity funds include:
· the performance of the underlying government and non-government
money market securities; and
· interest rates.
Variations in the above factors can affect the valuation of assets held by the
Group and as a result can influence the financial performance of the Group.
31.3 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
At 31 March 2023 all long-term borrowings are either at fixed rate or have an
interest rate cap or interest rate swap in place which has mitigated the risk
of rising interest rate. Interest rate derivative instruments are in place to
the loan maturity date on the variable rate loans.
The table below shows the bank loans, derivative instruments and interest
rates:
Loan Principal Expiry Date Interest rate Derivative instrument Maximum
Summary of Borrowings £'000 in place interest rate
payable
Scottish Widows Limited 10-year facility 52,500 02/11/2027 2.9936% fixed 2.99%
Deutsche Bank AG 70,875 03/02/2028 5.69% fixed 5.69%
HSBC Bank plc 100,000 28/11/2025 SONIA + 2.15% Interest rate cap(1) 4.75%
National Westminster Bank Plc 5-year facility 60,000 14/08/2024 SONIA + 2.00% Interest rate swap 2.60%
M&G Investment Management Limited 7-year facility 84,550 24/02/2028 3.137% fixed 3.14%
367,925
(1) Maximum interest rate reduces to 4.6% from 18 April 2023.
The exposure of the Group to variable rates of interest is considered upon
drawing of any new loan facilities, to ensure that the Group's exposure to
interest rate fluctuations is within acceptable levels.
The Investment Adviser monitors the Group's exposure to any changes in
interest rate on an ongoing basis, with the Board updated on a quarterly basis
of the current exposure of the Group's loan facilities.
As at 31 March 2023, if interest rates had been 100 basis points
higher/(lower) with all other variables held constant the impact on profits
after taxation for the year would be as below. The Investment Adviser
anticipates these levels are reasonably possible based on the observation of
current market conditions that interest rates would not fluctuate more than
1%.
31 March 2023 31 March 2022
£'000 £'000
Increase/(decrease) in profits due to interest rates
100 basis points higher 256 (1,066)
100 basis points lower (210) 1,572
The average effective interest rates of financial instruments at 31 March 2023
and 2022 were as follows:
31 March 2023 31 March 2022
% %
Bank borrowings - fixed rate 2.65 2.94
Bank borrowings - variable rate(1) 6.07 2.23
Cash and cash equivalents 0.82 0.05
(1) Variable rate borrowings are subject to a maximum interest rate of 4.75%
due to an interest rate cap. The maximum interest rate reduces to 4.6% from 18
April 2023.
31.4. Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risks from both its leasing activities
and financing activities, including deposits with banks and financial
institutions.
Debtors and accrued income represent rent due or accrued. These amounts due
are diversified between a number of different Approved Providers of differing
financial strength, see note 28.0 for details of the different counterparties.
None of the Approved Providers have a credit rating, however, the diversified
nature of this asset supports the credit quality.
The Group has policies in place to ensure that rental contracts are entered
into only with lessees with an appropriate credit and operational history, and
limits exposure to any one tenant. The credit risk is considered to be further
reduced as the source of the rents received by the Group is ultimately
provided by the Government, by way of housing benefit and care provision, via
a diverse range of local authorities.
For details of provisions for impairment please refer to note 17.0.
Credit risk related to financial instruments and cash deposits
One of the principal credit risks of the Group will arise with the banks and
financial institutions. The Board of Directors believes that the credit risk
on short-term deposits and current account cash balances is limited because
the counterparties are banks considered to be of good credit quality. In the
case of cash deposits held with lawyers, the credit risk is limited because
the cash is held by the lawyers within client accounts at banks with high
credit quality.
The credit ratings for banks where balances are held by the Group are as
follows:
Lloyds Bank plc A+/F1
HSBC Bank plc AA-/F1+
RBS International Limited A/FI
National Westminster Bank plc A/F1
Ratings advised by Fitch.
No balances are held with Deutsche Bank AG.
31.5. Liquidity risk
The Group manages its liquidity and funding risks by considering cash flow
forecasts and ensuring sufficient cash balances are held within the Group to
meet future needs. Prudent liquidity risk management implies maintaining
sufficient cash and marketable securities, the availability of financing
through appropriate and adequate credit lines, and the ability of customers to
settle obligations within normal terms of credit. The Group ensures, through
forecasting of capital requirements, that adequate cash is available.
The following table details the Group's maturity profile in respect of its
financial instrument liabilities based on contractual undiscounted payments:
On demand <1 year 1-5 years > 5 years Total
£'000 £'000 £'000 £'000 £'000
31 March 2023
Trade and other payables 7,599 - - - 7,599
Bank borrowings - 14,482 407,770 - 422,252
7,599 14,482 407,770 - 429,851
31 March 2022
Trade and other payables 8,632 - - - 8,632
Bank borrowings - 9,336 245,974 144,602 399,912
8,632 9,336 245,974 144,602 408,544
The profile above shows the maturity profile at 31 March 2023 and included
within the contracted payments is £54,327,000 (2022: £42,862,000) of loan
interest payable up to the point of maturity.
32.0 Capital Commitments
At 31 March 2023, the Company had funds committed totalling £Nil (2022:
£92,000 concerning capital expenditure for a property in Surrey).
33.0 Post balance sheet events
Dividends
On 9 May 2023, the Company announced a dividend of 1.425 pence per share in
respect of the period 1 January 2023 to 31 March 2023 totalling £8,641,000.
The dividend payment was made on 9 June 2023 to shareholders on the register
as at 19 May 2023. The financial statements do not reflect this dividend. The
dividend was paid as a REIT property income distribution ("PID").
Financing
On 1 December 2022, the Company signed a facility with an institutional
lender. Subsequent to this, on 21 June 2023, the Company received credit
approved terms for an additional £61.0 million fixed facility based on a
3-year SONIA rate at the date of draw down +195bps margin with a maturity date
of 3 August 2026. The eventual drawdown on the facility is subject to certain
standard closing conditions.
Recommended cash offer for the Group
On 9 May 2023 an announcement was made to the market for an all-cash offer of
Civitas Social Housing PLC (Civitas) from Wellness Unity Limited, a wholly
owned indirect subsidiary of CK Asset Holdings Limited (CKA). The offer of 80
pence per share received values the entire issued share capital (excluding
treasury shares) of CSH at approximately £485 million. This represents a
44.4% premium to the share price of 55.4 pence per share on 5 May 2023 (the
last trading day prior to announcement of the offer), and 26.7% discount to 31
March 2023 NAV of 109.16p. This provides shareholders the opportunity to exit
in full and in cash at a significant premium to the current share price. The
offer will be implemented by way of a takeover offer within the meaning of
Part 28 of the Companies Act.
On 22 May 2023, the Offer Document was made available. The offer became
unconditional on 23 June 2023. Payment of consideration due to shareholders
who have submitted valid acceptances will be made no later than 14 calendar
days after the date the Offer becomes or is declared unconditional, or, in
relation to valid acceptances received after such date, within 14 calendar
days of receipt of that acceptance. According to the Offer Document, it is
intended that Civitas Investment Management Limited ("CIM") is maintained as
the Investment Adviser to Civitas so that the day-to-day management of the
Civitas portfolio will continue uninterrupted, and Civitas be re-registered as
a private limited company as soon as practicable following the cancellation of
the listing and trading of Civitas shares. At the balance sheet date, CKA, as
an indirect investor in CIM, was not a related party to the Group as per IAS
24. On 23 June 2023, when the offer became unconditional, CKA subsequently
became the ultimate controlling party of the Company, and a related party
under IAS 24.
Company Statement of Financial Position
As at 31 March 2023
31 March 2023 31 March 2022
Note £'000 £'000
Assets
Fixed assets
Investment in subsidiaries 7.0 794,733 793,284
Current assets
Trade and other receivables 9.0 2,599 4,310
Cash and cash equivalents 10.0 26,193 23,438
28,792 27,748
Total assets 823,525 821,032
Liabilities
Creditors - amounts falling due within one year
Trade and other payables 11.0 (318,414) (274,020)
(318,414) (274,020)
Total liabilities (318,414) (274,020)
Total net assets 505,111 547,012
Equity
Share capital 12.0 6,225 6,225
Share premium reserve 13.0 292,626 292,626
Capital reduction reserve 14.0 317,714 322,365
Accumulated losses 15.0 (111,454) (74,204)
Total equity 505,111 547,012
The Company has taken advantage of the provisions of Companies Act 2006 s408
and does not disclose the Company's individual profit and loss account. Loss
for the year was £2,791,000 (2022: profit £21,362,000).
The Company 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
28 June 2023
Company No: 10402528
Company Statement of Changes in Equity
For the year ended 31 March 2023
Share Capital
Share premium reduction Accumulated Total
Capital reserve reserve losses equity
£'000 £'000 £'000 £'000 £'000
Note
Balance at 1 April 2021 6,225 292,462 331,140 (61,473) 568,354
Profit and total comprehensive income for the year - - - 21,362 21,362
Shares reissued from treasury 13.0 - 164 484 - 648
Shares bought back into treasury 14.0 - - (9,259) - (9,259)
Dividends paid 15.0 - - - (34,093) (34,093)
Balance at 31 March 2022 6,225 292,626 322,365 (74,204) 547,012
Loss and total comprehensive loss for the year - - - (2,791) (2,791)
Shares reissued from treasury 13.0 - - - -
Shares bought back into treasury 14.0 - - (4,651) - (4,651)
Dividends paid 15.0 - - - (34,459) (34,459)
Balance at 31 March 2023 6,225 292,626 317,714 (111,454) 505,111
The Company's distributable reserves comprise retained earnings/(accumulated
losses) and the capital reduction reserve. These in aggregate had sufficient
realised distributable reserves to support dividends paid to date.
The notes below are an integral part of these financial statements.
Notes to the Company Financial Statements
As at 31 March 2023
1.0 Corporate information
Civitas Social Housing PLC ("the Company") was incorporated in England and
Wales under the Companies Act 2006 as a public company limited by shares on 29
September 2016 with company number 10402528 under the name Civitas REIT PLC,
which was subsequently changed to the existing name on 3 October 2016.
The address of the registered office is 6th Floor, 65 Gresham Street, London
EC2V 7NQ. The Company is registered as an investment company under section 833
of the Companies Act 2006 in England and Wales and is domiciled in the United
Kingdom.
The Company did not begin trading until 18 November 2016 when the shares were
admitted to trading on the London Stock Exchange ("LSE").
The Company's Ordinary shares have been admitted to the Official List of the
Financial Conduct Authority ("FCA"), and are traded on the LSE.
The principal activity of the Company is to act as the ultimate parent company
of its subsidiaries (the "Group") and to provide shareholders with an
attractive level of income, together with the potential for capital growth
from investing in a portfolio of social homes.
2.0 Basis of preparation
The financial statements have been prepared on a historical cost basis and in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework
("FRS 101") and the Companies Act 2006 as applicable to companies using FRS
101.
In preparing these financial statements, the Company applies the recognition,
measurement and disclosure requirements of International Financial Reporting
Standards ("Adopted IFRSs"), but makes amendments where necessary in order to
comply with the Companies Act 2006 and has set out below where advantage of
the FRS 101 disclosure exemptions has been taken.
In preparing these financial statements the Company has taken advantage of all
disclosure exemptions conferred by FRS 101.
Therefore, these financial statements do not include:
· certain comparative information as otherwise required by IFRS;
· certain disclosures regarding the Company's capital management;
· certain disclosures in relation to IFRS 15 Revenue Contracts with
Customers;
· a statement of cash flows;
· the effect of future accounting standards not yet adopted;
· the disclosure of the remuneration of key management personnel;
and
· disclosure of related party transactions with other wholly owned
members of Civitas Social Housing PLC.
In addition, and in accordance with FRS 101, further disclosure exemptions
have been adopted because equivalent disclosures are included in the Company's
consolidated financial statements. These financial statements do not include
certain disclosures in respect of:
· financial instruments; and
· fair value measurement other than certain disclosures required as
a result of recording financial instruments at fair value.
The Company has taken advantage of the exemption in section 408 of the
Companies Act 2006 not to present its own income statement or statement of
comprehensive income.
New standards, amendments and interpretations
After a review of new accounting standards which are now effective, none are
relevant to be adopted in the preparation of the Company's financial
statements for the year ended 31 March 2023.
Going concern
The financial statements have been prepared on a going concern basis.
As discussed in the Group financial statements above, the underlying assets of
the Company benefit from a secure income stream.
The Company financial statements show an accumulated loss, however this is due
to a time-lag on profits from subsidiary companies being moved up the
structure in the form of dividends.
The Company has net current liabilities of £289,622,000 (2022:
£246,272,000). This balance arises due to the intercompany balances totalling
£316,128,000 (2022: £271,632,000) with the Company's subsidiary companies.
The amounts principally relate to bank loans drawn in the Company's subsidiary
companies in order to finance the purchase of new acquisitions in accordance
with the Group's business model. The directors of the subsidiary companies
have provided a letter of comfort that they will not seek repayment of these
balances within 12 months from the date of approval of the Company's financial
statements.
The Company's articles of association include a requirement for the Board to
propose an ordinary resolution at the annual general meeting following the
fifth anniversary from the initial public offering of the Company for the
Company to continue in its current form (the Continuation Resolution). This
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.
On 9 May 2023, an announcement was made to the market for an all-cash offer of
Civitas Social Housing PLC (CSH) from Wellness Unity Limited, a wholly owned
indirect subsidiary of CK Assets Holdings Limited (CKA). The offer became
unconditional on 23 June 2023. The Group's existing committed debt facilities
contain a standard change of control clause has now been triggered due to the
offer becoming unconditional. This could result in the existing committed debt
facilities being withdrawn. Furthermore, the Directors do not have visibility
of the post completion funding for the Group and Company at this time. The
Directors note the detailed intentions statement included within the
announcement on 9 May 2023, which states that CKA does not envisage making any
changes to the management team nor any disruption to any counterparties or to
the underlying tenants. However, the conditions outlined above indicate a
material uncertainty which may cast significant doubt upon the Group's and
Company's ability to continue as a going concern. The Independent Auditors'
Report included within the Annual Report and Accounts for the year ended 31
March 2023 also highlights this material uncertainty. Therefore,
notwithstanding the material uncertainty arising from the offer from CKA, the
Directors are satisfied that the going concern basis remains appropriate for
the preparation of the financial statements. The financial statements do not
include the adjustments that would result if the Group and the Company were
unable to continue as a going concern.
Significant judgements and sources of estimation uncertainty
The key source of estimation uncertainty relates to the Company's investment
in Group companies, and is stated in the Company's separate financial
statements at cost less impairment losses, if any. Impairment losses are
determined with reference to the investment's fair value less estimated costs
of disposal. Investment properties held by the subsidiary companies are
supported by independent valuation. Judgements and assumptions associated with
the property values of the investments held by the subsidiary companies are
detailed in the Group financial statements.
3.0 Accounting Policies
The financial statements of the Company follow the accounting policies laid
out in the Group's consolidated financial statements along with the following
accounting policies which have been consistently applied:
Investments in subsidiaries
The investments in subsidiary companies are included in the Company's
Statement of Financial Position at cost less provision for impairment.
Impairment losses are determined with reference to the investment's fair value
less estimated selling costs. On disposal, the difference between the net
disposal proceeds and its carrying amount is included in the income statement.
The investment in a subsidiary company may include both the purchase of shares
and an intercompany loan which is subsequently capitalised in return for
shares in the subsidiary company. The intercompany loan capitalised is
disclosed in note 7.0 as a transfer between the shares and loan columns.
Loans to subsidiaries
Loans made to subsidiary companies which arise as part of the transactions for
the acquisition of investments and are subsequently capitalised by the issue
of shares are recognised as investment in subsidiaries at cost. At the point
the loan is capitalised, this transaction is recognised as a transfer within
the table in note 7.0.
Amounts due to subsidiary companies
Balances arising with subsidiary companies of a temporary nature are initially
recognised at fair value and subsequently measured at amortised cost.
4.0 Dividends
Dividends are included in the financial statements in the year in which they
are paid. Details of dividends paid and proposed are included in note 14.0 of
the Group's consolidated financial statements.
5.0 Employee information
Details of Directors' remuneration are included in note 6.0 of the
consolidated financial statements. The Company had no employees during the
year (2022: nil).
6.0 Audit fees
Audit fees in relation to the Company's financial statements total £358,000
(2022: £296,000). For further details, please refer to note 9.0 of the Group
financial statements.
7.0 Investments in subsidiaries
Shares in
Year ended 31 March 2023 subsidiaries For the
£'000 Loans to subsidiaries year ended
£'000 31 March 2023
£'000
Balance at the beginning of the year 768,075 25,209 793,284
Increase in investments 1,090 600 1,690
Loans transferred 7,727 (7,727) -
Impairment (241) - (241)
At the end of the year 776,651 18,082 794,733
Year ended 31 March 2022
For the
Shares in Loans to subsidiaries year ended
subsidiaries £'000 31 March 2022
£'000 £'000
Balance at the beginning of the year 703,435 17,483 720,918
Increase in investments 41,712 31,013 72,725
Loans transferred 23,287 (23,287) -
Impairment (359) - (359)
At the end of the year 768,075 25,209 793,284
Following a review comparing cost of investments to the underlying net assets
of subsidiary companies, an impairment provision has been made of £241,000
(2022: £359,000).
8.0 Subsidiary entities
The Company has provided a guarantee under s479C of the Companies Act 2006 in
respect of the financial year ended 31 March 2023 for a number of its
subsidiary companies (as indicated in the table below). The guarantee is over
all outstanding liabilities to which the subsidiary companies are subject at
31 March 2023 until they are satisfied in full.
The Group consists of a parent company, Civitas Social Housing PLC,
incorporated in England and Wales (company number 10402528) and a number of
subsidiaries held directly by Civitas Social Housing PLC, which operate and
are incorporated in England and Wales or Jersey.
The Group owns 100% equity shares of all subsidiaries listed below and has the
power to appoint and remove the majority of the board of directors of those
subsidiaries. The relevant activities of the below subsidiaries are determined
by the Board of Directors based on the purpose of each company.
Therefore, the Directors concluded that the Group has control over all these
entities and all these entities have been consolidated within the consolidated
financial statements.
A list of all related undertakings included within these consolidated
financial statements are noted below. Indirectly held subsidiary companies are
marked by an indentation in the table below:
Name Registered number Principal activity Country of incorporation
Civitas Social Housing Finance Company 1 Limited* 10997707 Finance company England & Wales
Civitas Social Housing Jersey 1 Limited 124129 Holding company Jersey
Civitas SPV1 Limited* 10518729 Property investment England & Wales
Civitas SPV2 Limited* 10114251 Property investment England & Wales
Civitas SPV11 Limited* 10546749 Property investment England & Wales
Civitas SPV15 Limited* 09777380 Property investment England & Wales
Civitas SPV25 Limited* 10791473 Property investment England & Wales
Civitas SPV27 Limited* 10883112 Property investment England & Wales
Civitas SPV33 Limited* 10546407 Property investment England & Wales
Civitas SPV35 Limited* 10588530 Property investment England & Wales
Civitas SPV38 Limited* 10738318 Property investment England & Wales
Civitas SPV39 Limited* 10547333 Property investment England & Wales
Civitas SPV40 Limited* 10738510 Property investment England & Wales
Civitas SPV41 Limited* 10738542 Property investment England & Wales
Civitas SPV50 Limited* 10775419 Property investment England & Wales
Civitas Social Housing Finance Company 2 Limited* 10997698 Finance company England & Wales
Civitas Social Housing Jersey 2 Limited 124876 Holding company Jersey
Civitas SPV3 Limited* 10156529 Property investment England & Wales
Civitas SPV4 Limited* 10433744 Property investment England & Wales
Civitas SPV5 Limited* 10479104 Property investment England & Wales
Civitas SPV6 Limited* 10674493 Property investment England & Wales
Civitas SPV9 Limited* 10536388 Property investment England & Wales
Civitas SPV10 Limited* 10535243 Property investment England & Wales
Civitas SPV12 Limited* 10546753 Property investment England & Wales
Civitas SPV17 Limited* 10479036 Property investment England & Wales
Civitas SPV18 Limited* 10546651 Property investment England & Wales
Civitas SPV19 Limited* 10548932 Property investment England & Wales
Civitas SPV20 Limited* 10588735 Property investment England & Wales
Civitas SPV22 Limited* 10743958 Property investment England & Wales
Civitas SPV24 Limited* 10751512 Property investment England & Wales
Civitas SPV26 Limited* 10864336 Property investment England & Wales
Civitas SPV29 Limited* 10911565 Property investment England & Wales
Civitas SPV30 Limited* 10956025 Property investment England & Wales
Civitas SPV31 Limited* 10974889 Property investment England & Wales
Civitas SPV32 Limited* 11007173 Property investment England & Wales
Civitas SPV34 Limited* 10738381 Property investment England & Wales
Civitas SPV36 Limited* 10588792 Property investment England & Wales
Civitas SPV42 Limited* 10738556 Property investment England & Wales
Civitas SPV43 Limited* 10534877 Property investment England & Wales
Civitas SPV45 Limited* 10871854 Property investment England & Wales
Civitas SPV46 Limited* 10871910 Property investment England & Wales
Civitas SPV47 Limited* 10873270 Property investment England & Wales
Civitas SPV48 Limited* 10873295 Property investment England & Wales
Civitas SPV51 Limited* 10826693 Property investment England & Wales
Civitas SPV52 Limited* 10827006 Property investment England & Wales
Civitas SPV63 Limited* 10937805 Property investment England & Wales
Civitas SPV64 Limited* 10938411 Property investment England & Wales
Civitas SPV70 Limited* 10770201 Property investment England & Wales
Civitas SPV71 Limited * 10888639 Property investment England & Wales
Civitas SPV72 Limited* 10938022 Property investment England & Wales
Civitas SPV74 Limited* 11001855 Property investment England & Wales
Civitas SPV75 Limited* 11001834 Property investment England & Wales
Civitas SPV80 Limited* 11001998 Property investment England & Wales
Civitas SPV163 Limited* 14527873 Property investment England & Wales
Civitas Social Housing Finance Company 3 Limited* 10997714 Finance Company England & Wales
Civitas SPV8 Limited* 10536157 Property investment England & Wales
Civitas SPV28 Limited* 10895228 Property investment England & Wales
Civitas SPV53 Limited* 11021625 Property investment England & Wales
Civitas SPV55 Limited* 11056455 Property investment England & Wales
Civitas SPV57 Limited* 11091444 Property investment England & Wales
Civitas SPV60 Limited* 11111908 Property investment England & Wales
Civitas SPV61 Limited* 10937662 Property investment England & Wales
Civitas SPV66 Limited* 10937898 Property investment England & Wales
Civitas SPV77 Limited* 11166491 Property investment England & Wales
Civitas SPV78 Limited* 11170099 Property investment England & Wales
Civitas SPV79 Limited* 11236544 Property investment England & Wales
Civitas SPV81 Limited* 11192811 Property investment England & Wales
Civitas SPV82 Limited* 11380796 Property investment England & Wales
Civitas SPV83 Limited* 11371128 Property investment England & Wales
Civitas SPV85 Limited* 11300749 Property investment England & Wales
Civitas SPV95 Limited* 11208184 Property investment England & Wales
Civitas SPV97 Limited* 11463890 Property investment England & Wales
Civitas SPV103 Limited* 11500596 Property investment England & Wales
Civitas SPV105 Limited* 11532177 Property investment England & Wales
Civitas SPV106 Limited* 11532179 Property investment England & Wales
Civitas SPV107 Limited* 11532182 Property investment England & Wales
Civitas SPV116 Limited* 11504399 Property investment England & Wales
Civitas SPV117 Limited* 11504445 Property investment England & Wales
Civitas Social Housing Finance Company 4 Limited* 11906660 Finance Company England & Wales
Civitas SPV23 Limited* 10746881 Property investment England & Wales
Civitas SPV54 Limited* 11039750 Property investment England & Wales
Civitas SPV59 Limited* 11111912 Property investment England & Wales
Civitas SPV69 Limited* 11142372 Property investment England & Wales
Civitas SPV73 Limited* 10939075 Property investment England & Wales
Civitas SPV84 Limited* 11381455 Property investment England & Wales
Civitas SPV86 Limited* 11418432 Property investment England & Wales
Civitas SPV87 Limited* 10888903 Property investment England & Wales
Civitas SPV88 Limited* 10939044 Property investment England & Wales
Civitas SPV90 Limited* 10939131 Property investment England & Wales
Civitas SPV91 Limited * 10941377 Property investment England & Wales
Civitas SPV92 Limited* 11449913 Property investment England & Wales
Civitas SPV93 Limited* 11043111 Property investment England & Wales
Civitas SPV94 Limited* 11208105 Property investment England & Wales
Civitas SPV96 Limited* 11270786 Property investment England & Wales
Civitas SPV100 Limited* 11069703 Property investment England & Wales
Civitas SPV101 Limited* 09978282 Property investment England & Wales
Civitas SPV102 Limited* 11521555 Property investment England & Wales
Civitas SPV109 Limited* 11532120 Property investment England & Wales
Civitas SPV112 Limited* 11579750 Property investment England & Wales
Civitas SPV114 Limited* 11579733 Property investment England & Wales
Civitas SPV115 Limited* 11522178 Property investment England & Wales
Civitas SPV118 Limited* 11411498 Property investment England & Wales
Civitas SPV121 Limited* 11099917 Property investment England & Wales
Civitas SPV122 Limited* 11482646 Property investment England & Wales
Civitas SPV126 Limited* 11459821 Property investment England & Wales
Civitas SPV127 Limited* 10941401 Property investment England & Wales
Civitas SPV129 Limited* 11664994 Property investment England & Wales
Civitas SPV130 Limited* 11705074 Property investment England & Wales
Civitas SPV131 Limited* 11675132 Property investment England & Wales
Civitas SPV132 Limited* 11473735 Property investment England & Wales
Civitas SPV145 Limited* 11842306 Holding company England & Wales
SPV153 Limited (previously Fieldbay Limited) * 5219012 Property investment England & Wales
Civitas SPV148 Limited* 11632633 Property investment England & Wales
Civitas SPV149 Limited* 11462691 Property investment England & Wales
Civitas SPV150 Limited* 11462555 Property investment England & Wales
FPI CO 324 Ltd* 11633019 Property investment England & Wales
Civitas Social Housing Finance Company 5 Limited* 13083077 Finance Company England & Wales
Civitas SPV7 Limited* 10536368 Property investment England & Wales
Civitas SPV13 Limited* 09517692 Property investment England & Wales
Civitas SPV37 Limited* 10738450 Property investment England & Wales
Civitas SPV44 Limited* 10588783 Property investment England & Wales
Civitas SPV49 Limited* 11031349 Property investment England & Wales
Civitas SPV56 Limited* 11056465 Property investment England & Wales
Civitas SPV62 Limited* 10937528 Property investment England & Wales
Civitas SPV65 Limited* 10938467 Property investment England & Wales
Civitas SPV67 Limited* 10937929 Property investment England & Wales
Civitas SPV68 Limited* 10938269 Property investment England & Wales
Civitas SPV98 Limited* 11478695 Property investment England & Wales
Civitas SPV99 Limited* 11478707 Property investment England & Wales
Civitas SPV104 Limited* 11532174 Property investment England & Wales
Civitas SPV108 Limited* 11532135 Property investment England & Wales
Civitas SPV113 Limited* 11580068 Property investment England & Wales
Civitas SPV123 Limited* 08253452 Property investment England & Wales
Civitas SPV133 Limited* 11698972 Property investment England & Wales
Civitas SPV134 Limited* 11689461 Property investment England & Wales
Civitas SPV135 Limited* 11579880 Property investment England & Wales
Civitas SPV136 Limited* 11579760 Property investment England & Wales
Civitas SPV143 Limited* 11546808 Property investment England & Wales
Civitas SPV144 Limited* 11546696 Property investment England & Wales
Civitas SPV146 Limited* 11861500 Holding Company England & Wales
Bryn Eithin (2019) Limited* 11844898 Property investment England & Wales
Civitas SPV147 Limited* 11861974 Holding Company England & Wales
Mynydd Mawr (2019) Limited* 11844917 Property investment England & Wales
Civitas SPV152 Limited* 11955719 Property investment England & Wales
Civitas SPV155 Limited* 12044281 Property investment England & Wales
Civitas SPV156 Limited* 12081093 Property investment England & Wales
Civitas SPV157 Limited* 12188610 Property investment England & Wales
Civitas SPV158 Limited* 12202674 Property investment England & Wales
Civitas SPV160 Limited* 12272906 Property investment England & Wales
Bedford SPV1 Limited* 12315518 Property investment England & Wales
Bridge Property Herts Limited* 12435985 Property investment England & Wales
Bridge Propco Limited* 12445439 Property investment England & Wales
FPI Co 294 Ltd* 11519226 Property investment England & Wales
Civitas SPV14 Limited* 10479041 Property investment England & Wales
Civitas SPV HP Ltd* 12784895 Property investment England & Wales
Civitas SPV16 Limited* 09917557 Property investment England & Wales
Civitas SPV21 Limited* 10631541 Property investment England & Wales
Civitas SPV159 Limited* 12258313 Property investment England & Wales
Civitas Financing PLC* 13546154 Holding Company England & Wales
* These entities are exempt from the requirements of the Companies Act 2006
relating to the audit of individual financial statements by virtue of Section
479A of that Act. These are all entities that have a year end of 31 March
2023.
The registered addresses for the subsidiaries are consistent based on their
country of incorporation and are as follows:
• England & Wales entities: Link Company Matters Limited, 6th Floor, 65
Gresham Street, London EC2V 7NQ
• Jersey entities: 12 Castle Street, St Helier, Jersey, JE2 3RT
9.0 Trade and other receivables
31 March 2023 31 March 2022
£'000 £'000
Trade receivables 1,544 1,150
Prepayments and other receivables 420 1,902
Accrued income 635 1,258
Total 2,599 4,310
Prepayments and other receivable amounts include prepaid legal and
professional fees of £Nil (2022: £34,000) that have been incurred in
connection with acquisitions yet to be completed and £286,000 (2022:
£1,046,000) in respect of uncompleted works on the property portfolio.
10.0 Cash and cash equivalents
31 March 2023 31 March 2022
£'000 £'000
Cash held by solicitors 64 376
Liquidity funds 15,636 10,489
Cash held at bank 10,239 12,258
Cash and cash equivalents 25,939 23,123
Restricted cash 254 315
Total cash held at bank 26,193 23,438
Liquidity funds refer to money placed in money market funds. These are highly
liquid funds with accessibility within 24 hours and subject to insignificant
risk of changes in value.
Cash held by solicitors is money held in escrow for expenses expected to be
incurred in relation to investment properties pending completion. These funds
are available immediately on demand.
Restricted cash represents amounts held for specific commitments, tenant
deposits and retention money held by lawyers in relation to deferred payments
subject to achievement of certain conditions, other retentions and cash
segregated to fund repair, maintenance and improvement works to bring the
properties up to satisfactory standards for the Group and the tenants.
11.0 Trade and other payables
31 March 2023 31 March 2022
£'000 Restated
£'000
Retentions* 20 60
Accruals 745 685
Dividends withholding tax payable 940 1,057
Deferred income 374 358
Amounts due to subsidiary companies 316,128 271,632
Tenant deposits held* 207 228
Total 318,414 274,020
* Comparatives have been re-analysed to correct the analysis of £228,000 of
tenant deposits which had previously been included in retentions.
12.0 Share capital
Share capital represents the nominal value of consideration received by the
Company for the issue of Ordinary shares.
For the For the
year ended year ended
31 March 2023 31 March
2022
£'000
£'000
Share capital
At beginning and end of year 6,225 6,225
Number of shares authorised, issued and fully paid
For the For the
year ended year ended
31 March 2023 31 March 2022
Ordinary shares of £0.01 each
At beginning and end of year 622,461,380 622,461,380
During the year, the Company purchased 6,050,000 Ordinary shares to be held in
treasury at a cost of £4,651,000 (31 March 2022: 10,025,000 Ordinary shares
for £9,259,000).
During the previous 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 31 March 2023, the Company held 16,075,000 (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 31 March 2023, the number of Ordinary shares used to calculate the net
asset value per share is 606,386,380 (31 March 2022: 612,436,380) which
excludes the shares held in treasury.
13.0 Share premium reserve
The share premium reserve represents the amounts subscribed for Ordinary share
capital in excess of nominal value less associated issue costs of the
subscriptions.
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
At the beginning of the year 292,626 292,462
Premium arising on shares reissued from treasury - 164
At end of year 292,626 292,626
For movements in the year, please see details in note 12.0.
14.0 Capital reduction reserve
The capital reduction reserve is a distributable reserve to which the value of
the cancelled share premium was transferred. Pursuant to Article 3 of The
Companies (Reduction of Share Capital) Order 2008, the balance held in the
capital reduction reserve is to be treated for the purposes of Part 23 of the
Companies Act 2006 as a realised profit and therefore available for
distribution in accordance with section 830 of the Companies Act. The Company
has used this reserve for the costs of buying back shares to be held in
treasury.
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
At the beginning of year 322,365 331,140
Shares reissued from treasury - 484
Shares bought back into treasury (4,651) (9,259)
At end of year 317,714 322,365
For movements in the year, please see details in note 12.0.
15.0 Accumulated losses
This reserve represents the profits and losses of the Company.
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
At the beginning of year (74,204) (61,473)
(Loss)/profit for the year (2,791) 21,362
Dividends paid (34,459) (34,093)
At end of year (111,454) (74,204)
16.0 Controlling parties
As at 31 March 2023, there is no ultimate controlling party.
17.0 Related party transactions
For all related party transactions and transactions with the Investment
Adviser please make reference to notes 30.1 and 30.2 of the Group's
consolidated financial statements and amounts due to subsidiary companies in
note 11.0 above.
18.0 Post balance sheet events
Please refer to note 33.0 of the Group Consolidated financial statements above
in relation to the cash offer for the Group.
Since the year end, Civitas Social Housing Jersey 1 Limited and Civitas Social
Housing Jersey 2 Limited have issued dividends to the Company totalling
£10,246,000.
Appendix 1 (unaudited): Notes to the calculation of EPRA and other alternative
performance measures
The Group has chosen to adopt EPRA best practice guidelines for calculating
key alternative performance measures. Notes 1.0 to 7.0 support the EPRA
metrics disclosed where the definition and purpose of each metric are
outlined.
For the For the
1.0 EPRA Earnings year ended year ended
31 March 2023 31 March 2022
Earnings from operational activities
Profit after taxation (£'000) 25,472 44,754
Change in fair value of derivative financial instruments (£'000) 2,826 (2,675)
Changes in value of investment properties (£'000) (2,640) (12,269)
Costs of early repayment of debt (£'000) 1,271 -
EPRA Earnings (£'000) 26,929 29,810
Weighted average number of shares in issue 608,552,681 618,797,942
(adjusted for shares held in treasury)
EPRA Earnings per share (EPS) - basic & diluted 4.43p 4.82p
2.0 EPRA NAV Metrics
EPRA Net Reinstatement Value EPRA Net Tangible Assets EPRA Net Disposal Value
31 March 2023
Net assets (£'000) 661,909 661,909 661,909
Fair value of derivative financial instruments (£'000) (8,129) (8,129) -
Adjustment to fair value for bank borrowings (£'000) - - 11,736
NAV (£'000) 653,780 653,780 673,645
Number of shares in issue (adjusted for shared held in treasury) 606,386,380 606,386,380 606,386,380
NAV per share 107.82p 107.82p 111.09p
EPRA Net Reinstatement Value EPRA Net Tangible Assets EPRA Net Disposal Value
31 March 2022
Net assets (£'000) 675,547 675,547 675,547
Fair value of derivative financial instruments (£'000) (2,131) (2,131) -
Adjustment to fair value for bank borrowings (£'000) - - 2,644
NAV (£'000) 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
For the year ended For the year ended
31 March 31 March
2022
2023
Investment property (£'000) 978,147 968,756
Allowance for estimated purchasers' costs (£'000) 59,973 56,412
Gross up completed property portfolio (£'000) 1,038,120 1,025,168
Annualised net rents (£'000) 57,654 54,091
Add: notional rent expiration of rent free periods or other lease incentives - -
(£'000)
Topped-up net annualised rent (£'000) 57,654 54,091
EPRA NIY 5.55% 5.28%
EPRA Topped-up NIY 5.55% 5.28%
4.0 EPRA Vacancy Rate
For the year ended 31 March 2023 For the year ended 31 March 2022
Estimated Market Rental Value (ERV) of vacant spaces (£'000) 10 -
Estimated Market Rental Value (ERV) of whole portfolio (£'000) 57,654 54,091
EPRA Vacancy Rate 0.02% 0.00%
5.0 EPRA Costs Ratio
For the year For the year
ended 31 ended 31 March 2022
March 2023
Total administrative and operating expenses 11,821 10,247
Direct property expenses 1,941 978
Less property expenses recovered through rents (1,512) (995)
EPRA Costs (including direct vacancy costs) 12,250 10,230
Direct vacancy costs - -
EPRA Costs (excluding direct vacancy costs) 12,250 10,230
Rental income 54,607 51,636
Less rechargeable costs received (1,512) (995)
Gross rental income 53,095 50,641
EPRA Cost Ratio (including direct vacancy costs) 23.07% 20.20%
EPRA Cost Ratio (excluding direct vacancy costs) 23.07% 20.20%
The Group has not incurred any direct vacancy costs.
6.0 EPRA LTV
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Net Debt
Borrowings from financial institutions (£'000) 367,925 357,050
Cash and cash equivalents (£'000) (35,588) (53,337)
332,337 303,713
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Total Property Value
Investment properties at fair value (£'000) 953,364 945,237
Net receivables (£'000) 26,743 26,892
980,107 972,129
EPRA LTV 33.91% 31.24%
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Net receivables comprises
Other receivables 24,783 23,519
Trade and other receivables 11,260 12,865
Less trade and other payables (9,300) (9,492)
Total 26,743 26,892
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Components of Net Assets used in EPRA LTV calculation
Investment properties at fair value 953,364 945,237
Net receivables 26,743 26,892
Cash and cash equivalents 35,588 53,337
Less borrowings from financial institutions (367,925) (357,050)
Net assets used in the EPRA LTV calculation 647,770 668,416
Less amounts excluded from the calculation
Interest rate derivatives 8,129 2,131
Unamortised loan issue costs 6,010 5,000
Net assets 661,909 675,547
7.0 EPRA Table of Capital Expenditure
For the For the
year ended year ended
31 March 2023 31 March 2022
£'000 £'000
Acquisitions including incidental costs of purchase 543 33,466
Development - -
Investment properties
Incremental lettable space - -
Enhancing lettable space 4,944 5,818
Tenant incentives 1,700 1,614
Other material non-allocated types of expenditure - -
Capitalised interest - -
Total Capital Expenditure 7,187 40,898
Conversion from accruals to cash basis (597) 1,312
Total Capital Expenditure on a cash basis 6,590 42,210
The Group has not capitalised any overhead or operating expenses.
The Group has no Joint Ventures so there is no joint venture property to
disclose in the above table.
8.0 Leveraged Internal Rate of Return (IRR)
This is the annual growth rate, based on growth in net asset value per share
since launch and dividends paid to Ordinary shareholders.
31 March 31 March
2023 2022
NAV per share 109.1600p 110.3000p
31 May 2017 Interim dividend 0.7500p 0.7500p
31 August 2017 Interim dividend 0.7500p 0.7500p
30 November 2017 Interim dividend 0.7500p 0.7500p
9 March 2018 Interim dividend 0.7500p 0.7500p
8 June 2018 Interim dividend 1.2500p 1.2500p
7 September 2018 Interim dividend 1.2500p 1.2500p
30 November 2018 Interim dividend 1.2500p 1.2500p
11 January 2019 Interim dividend 1.1100p 1.1100p
28 February 2019 Interim dividend 0.1400p 0.1400p
7 June 2019 Interim dividend 1.3250p 1.3250p
6 September 2019 Interim dividend 1.3250p 1.3250p
29 November 2019 Interim dividend 1.3250p 1.3250p
28 February 2020 Interim dividend 1.3250p 1.3250p
12 June 2020 Interim dividend 1.3250p 1.3250p
7 September 2020 Interim dividend 1.3500p 1.3500p
4 December 2020 Interim dividend 1.3500p 1.3500p
1 March 2021 Interim dividend 1.3500p 1.3500p
11 June 2021 Interim dividend 1.3500p 1.3500p
10 September 2021 Interim dividend 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 -
9 December 2022 Interim dividend 1.4250p -
11 March 2023 Interim dividend 1.4250p -
139.0100p 134.4875p
NAV per share at launch 98.0000p 98.0000p
Levered IRR 6.29% 6.63%
Five Year Financial Results
Group Statement of Comprehensive Income
Revenue For the For the For the For the For the
year ended year ended year ended year ended year ended
31 March 2023 31 March 2022 31 March 2021 31 March 2020 31 March 2019
£'000 £'000 £'000 £'000 £'000
Rental income 54,607 51,636 49,020 46,165 35,738
Less direct property expenses (1,941) (978) (1,175) (259) -
Net rental income 52,666 50,658 47,845 45,906 35,738
Directors' remuneration (211) (206) (198) (176) (163)
Investment advisory fees (6,217) (6,132) (6,117) (6,183) (6,457)
General and administrative expenses (5,393) (3,909) (3,183) (3,501) (3,022)
Total expenses (11,821) (10,247) (9,498) (9,860) (9,642)
Change in fair value of investment properties 2,640 12,269 5,511 9,389 3,652
Operating Profit 43,485 52,680 43,858 45,435 29,748
Finance income 148 7 20 110
491
Finance expenses - relating to bank borrowings (15,335) (10,608) (7,737) (7,342) (3,975)
Finance expenses - relating to C share amortisation - - - - (6,400)
Change in fair value of interest rate derivatives (2,826) 2,675 (66) (478) -
Profit before tax 25,472 44,754 36,075 37,725 19,864
Taxation - - - - -
Profit being total comprehensive income 25,472 44,754 36,075 37,725 19,864
Earnings per share - basic 4.19p 7.23p 5.80p 6.06p 4.67p
Earnings per share - diluted 4.19p 7.23p 5.80p 6.06p 4.22p
Dividend declared (per share) 5.70p 5.55p 5.40p 5.30p 5.00p
Group Statement of Financial Position
31 March 2023 31 March 2022 31 March 2021 31 March 2020 31 March 2019
£'000 £'000 £'000 £'000 £'000
Assets
Non-current assets
Investment property 953,364 945,237 893,684 867,988 820,094
Other receivables 24,783 23,519 21,905 10,755 6,824
Interest rate derivatives 8,129 2,131 - - -
986,276 970,887 915,589 878,743 826,918
Non-current assets
Trade and other receivables 11,260 12,865 12,821 10,838 5,723
Cash and cash equivalents 35,588 53,337 107,097 58,374 54,347
46,848 66,202 119,918 69,212 60,070
Total assets 1,033,124 1,037,089 1,035,507 947,955 886,988
Liabilities
Current liabilities
Trade and other payables (9,300) (9,492) (9,345) (7,743) (15,324)
Bank and loan borrowings - - (59,937) (59,730) -
(9,300) (9,492) (69,282) (67,473) (15,324)
Non-current liabilities
Bank and loan borrowings (361,915) (352,050) (292,183) (209,440) (205,156)
Interest rate derivatives - - (544) (478) -
(361,915) (352,050) (292,727) (209,918) (205,156)
Total liabilities (371,215) (361,542) (362,009) (277,391) (220,480)
Total net assets 661,909 675,547 673,498 670,564 666,508
Assets
Share capital 6,225 6,225 6,225 6,225 6,225
Share premium reserve 292,626 292,626 292,463 292,405 292,405
Capital reduction reserve 317,714 322,365 331,140 330,926 331,625
Retained earnings 45,344 54,331 43,670 41,008 36,253
Total equity 661,909 675,547 673,498 670,564 666,508
Net assets per share - basic 109.16p 110.30p 107.87p
108.30p 107.08p
Net assets per share - diluted 109.16p 110.30p 108.30p 107.87p 107.08p
Share price 53.70p 87.40p 107.80p 96.40p 96.00p
Total shareholder return (on a NAV basis 41.84% 37.23% 29.56% 23.64% 17.45%
Leverage 35.61% 34.43% 34.48% 26.90% 22.00%
Shareholder Information
The Company's Ordinary shares of 1p each are quoted on the Official List of
the FCA and traded on the premium segment of the Main Market of the London
Stock Exchange (LSE).
SEDOL number BD8HBD3
ISIN GB00BD8HBD32
Ticker/TIDM CSH
LEI 213800PGBG84J8GM6F95
Frequency of NAV Publication
The Company's NAV is released to the LSE on a quarterly basis and published on
the Company's website: www.civitassocialhousing.com.
Sources of Further Information
Copies of the Company's Annual and Half-Yearly Reports, Stock Exchange
announcements and further information on the Company can be obtained from its
website: www.civitassocialhousing.com.
Share Register Enquiries
The register for the Company's Ordinary shares is maintained by Link Group. In
the event of queries regarding your holding, please contact the Registrar on
0371 664 0300 (calls are charged at the standard geographic rate and will vary
by provider; calls outside the UK will be charged at the applicable
international rate). Lines are open between 9.00am and 5.30pm, Monday to
Friday, excluding public holidays in England and Wales. You can also email
enquiries@linkgroup.co.uk.
Changes of name and/or address must be notified in writing to the Registrar:
Link Group, Central Square, 29 Wellington Street, Leeds LS1 4DL
Key Dates
June
Annual results announced
Payment of fourth interim dividend
September
Company's half-year end
Annual General Meeting
Payment of first interim dividend
December
Half-yearly results announced
Payment of second interim dividend
February
Payment of third interim dividend
March
Company's year end
Association of Investment Companies
The Company is a member of the AIC, which publishes statistical information in
respect of member companies. The AIC can be contacted on 020 7282 5555,
enquiries@theaic.co.uk or visit the website: www.theaic.co.uk.
Electronic Communications from the Company
Shareholders now have the opportunity to be notified by email when the
Company's Annual Report, Half Yearly Report and other formal communications
are available on the Company's website, instead of receiving printed copies by
post. This has environmental benefits in the reduction of paper, printing,
energy and water usage, as well as reducing costs to the Company.
If you have not already elected to receive electronic communications from the
Company and wish to do so, 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 drawn
over total assets.
Dividend Yield means the ratio of the total annual dividend declared for the
financial year over market price per share.
EPRA means the European Public Real Estate Association.
EPRA EPS is the EPRA earnings divided by the weighted average number of shares
in issue in the period.
EPRA LTV is the EPRA loan to value ratio calculated as debt 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 an EPRA NAV metric which assumes
that entities never sell assets and aims to represent the value required to
rebuild the entity.
EPRA Net Tangible Assets ("EPRA NTA") is an EPRA NAV metric which assumes that
entities buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax.
EPRA Net Disposal Value ("EPRA NDV") is an EPRA NAV metric which represents
the shareholders' value under a disposal scenario, where deferred tax,
financial instruments and certain other adjustments are calculated to the full
extent of their liability, net of any resulting tax.
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 means internal rate of return.
Levered IRR means the internal rate of return including the impact of debt.
Local Authority or LA means the administrative bodies for the local government
in England comprising 326 authorities (including 32 London boroughs).
Net 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 Net Asset Value or Portfolio NAV means the net asset value of the
Company, with assets aggregated rather than valued on an asset by asset basis,
as at the relevant date, calculated on the basis of an independent Portfolio
Valuation. See note 7.0 to Appendix 1 for a reconciliation to IFRS NAV.
Portfolio Basis means the Portfolio NAV (as defined above)
Portfolio Valuation means an independent valuation of the Portfolio by Jones
Lang LaSalle Limited or such other property adviser as the Directors may
select from time to time, based upon the Portfolio being held, directly or
indirectly, within a corporate vehicle or equivalent entity which is a wholly
owned subsidiary of the Company and otherwise prepared in accordance with RICS
"Red Book" guidelines.
REIT means a qualifying real estate investment trust in accordance with the UK
REIT Regime introduced by the UK Finance Act 2006 and subsequently re-written
into Part 12 of the Corporation Tax Act 2010.
RICS means Royal Institution of Chartered Surveyors.
RSH means the Regulator of Social Housing, the executive non-departmental
public body, sponsored by the Ministry of Housing, Communities and Local
Government, which is the regulator for Social Homes providers in England and
Wales.
Social homes or social housing means social rented homes and other
accommodation that are offered at rents subsidised below market level or are
constituents of other appropriate rent regimes such as exempt rents or are
subject to bespoke agreement with entities such as NHS Trusts and are provided
by Approved Providers.
Specialist Supported Housing or SSH means social housing which incorporates
some form of care or other ancillary service on the premises.
SPV means special purpose vehicle, a corporate vehicle in which the Group's
properties are held.
Target Return means the target return on investment.
Total Return means Net Total Return, being the change in 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
Link Company Matters Limited
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
Broadwalk House
Southernhay West
Exeter EX1 1TS
Depositary
INDOS Financial Limited
5th Floor
54 Fenchurch Street
London EC3M 3JY
Registrar
Link Group
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
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