Triple Point Soc.Hsg - RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022
09/09/2022 07:00
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RNS Number : 8596Y Triple Point Social Housing REIT 09 September 2022
9 September 2022
Triple Point Social Housing REIT plc
(the "Company" or, together with its subsidiaries, the "Group")
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022
The Board of Triple Point Social Housing REIT plc (ticker: SOHO) is pleased to
announce its unaudited results for the six months ended 30 June 2022.
1 January 2022 to 30 June 2022 1 January 2021 to 30 June 2021 Year ended 31 December 2021
EPRA Net Tangible Assets per share 111.80p 106.42p 108.27p
(equal to IFRS NAV per share)
EPRA Net Initial Yield (NIY) 5.28% 5.21% 5.20%
Loan to Value 36.8% 31.5% 37.6%
Earnings per share (basic and diluted)
- IFRS basis 6.19p 2.60p 7.05p
- EPRA basis 1.94p 2.30p 4.82p
Total annualised rental income(1) £37.4m £33.4m £35.8m
Portfolio value
- IFRS basis £669.6m £596.3m £642.0m
Weighted average unexpired lease term 25.9 yrs 25.8 yrs 26.2 yrs
Dividend paid or declared per Ordinary Share 2.73p 2.60p 5.20p
Financial highlights
· EPRA Net Tangible Assets per share (equal to IFRS net asset
value per share) of 111.80 pence at 30 June 2022 (31 December 2021: 108.27
pence).
· Portfolio independently valued as at 30 June 2022 at £669.6
million on an IFRS basis (31 December 2021: £642.0 million), reflecting a
valuation uplift of 12.7% against total invested funds of £594.0 million. The
properties have been valued on an individual basis.
· The portfolio's total annualised rental income was £37.4
million(1) as at 30 June 2022 (31 December 2021: £35.8 million).
· The fair value gain on investment properties for the period
ended 30 June 2022 amounted to £17.1 million (30 June 2021: £0.7 million).
· Net profit for the period ended 30 June 2022 was £24.9
million (30 June 2021: £10.5 million).
· Dividend cover on an EPRA earnings run-rate basis at 30 June
2022 was 1.0x.
· Ongoing Charges Ratio of 1.57% as at 30 June 2022 (31
December 2021: 1.54%; 30 June 2021: 1.53%).
· 100% fixed-rate debt - all of the Group's drawn debt
(amounting to £263.5 million) is now fixed-price (with a weighted average
coupon of 2.74%) and long-term (11.1 years), offering strong protection
against increasing interest rates and rising inflation.
· During the period, the Group cancelled a portion of its
existing undrawn £160 million revolving credit facility agreement ("RCF"),
reducing it to £50 million, in order to reduce commitment fees payable. At
the period end, the remaining £50 million of the RCF remained undrawn. The
cancellation resulted in arrangement fees of £2.0 million which were incurred
in association with securing the original facility being expensed.
· Maintained an Investment Grade Issuer Default Rating from
Fitch of 'A-' (Stable Outlook) with a senior secured rating of 'A'.
Operational highlights
· Acquired ten properties during the period for an aggregate
purchase price of £12.0 million (including acquisition costs).
· EPRA blended net initial yield of 5.28% based on the value of
the portfolio on an IFRS basis as at 30 June 2022, against the portfolio's
blended net initial yield on purchase of 5.90%.
· Diversified portfolio:
o 11 regions
o 151 local authorities
o 391 leases
o 26 Approved Providers
o 121 care providers
· As at 30 June 2022, the weighted average unexpired lease term
("WAULT") was 25.9 years.
· 100% of contracted rental income was either CPI (92.4%) or
RPI (7.6%) linked.
Post Balance Sheet Activity
· The dividend to be paid on 30 September 2022 brings the total
dividend per Ordinary Share paid or declared by the Company in respect of the
six month period to 30 June 2022 to 2.73 pence per share, in line with the
Company's stated target for the year to 31 December 2022 of 5.46 pence per
share. The dividend target represents an increase of 5.0 per cent on the 5.20
pence per share paid in respect of the financial year ended 31 December 2021
(2)
· Acquired a further two Supported Housing properties (16 units
in total) for an aggregate purchase price of approximately £3.4 million
(including acquisition costs).
Notes:
1 Excluding ongoing forward funded schemes that are under an
agreement for lease
2 These are targets only and not a profit forecast and there can
be no assurance that they will be met
Chris Phillips, Chair of Triple Point Social Housing REIT plc, commented:
"When we launched the Company five years ago, our desire to do so was driven
by demand, social impact and the offer of resilient inflation-linked income.
These fundamental pillars are mutually reinforcing and remain the bedrock of
the Company's investment strategy today.
Whilst it is important to prioritise managing the risks posed by the current
economic environment, we remain convinced that the investment strategy remains
well placed to prove its relative resistance to concerns around rising
inflation and interest rates. This belief is underpinned by the growing demand
for more specialised supported housing throughout the UK."
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management LLP Tel: 020 7201 8989
(Investment Manager)
Max Shenkman
Isobel Gunn-Brown
Akur Limited (Joint Financial Adviser) Tel: 020 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant
Stifel Nicolaus Europe Limited (Joint Financial Adviser and Corporate Broker) Tel: 020 7710 7600
Mark Young
Mark Bloomfield
Rajpal Padam
The Company's LEI is 213800BERVBS2HFTBC58.
Further information on the Company can be found on its website at
www.triplepointreit.com (http://www.triplepointreit.com/) .
IMPORTANT INFORMATION:
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014, as it forms part of UK Domestic Law
by virtue of the European Union (Withdrawal) Act 2018, as amended and
supplemented ("UK MAR") and is disclosed in accordance with the Company's
obligations under UK MAR. Upon the publication of this announcement, this
inside information will be considered to be in the public domain.
NOTES:
The Company invests in primarily newly developed social housing assets in the
UK, with a particular focus on supported housing. The assets within the
portfolio are subject to inflation-linked, long-term (typically from 20 years
to 30 years), Fully Repairing and Insuring ("FRI") leases with Approved
Providers (being Housing Associations, Local Authorities or other regulated
organisations in receipt of direct payment from local government). The
portfolio comprises investments into properties which are already subject to
an FRI lease with an Approved Provider, as well as forward funding of pre-let
developments but does not include any direct development or speculative
development.
There is increasing political pressure and social need to increase housing
supply across the UK which is creating opportunities for private sector
investors to help deliver this housing. The Group's ability to provide forward
funding for new developments not only enables the Company to secure fit for
purpose, modern assets for its portfolio but also addresses the chronic
undersupply of suitable supported housing properties in the UK at sustainable
rents as well as delivering returns to investors.
The Company was admitted to trading on the Specialist Fund Segment of the Main
Market of the London Stock Exchange on 8 August 2017 and was admitted to the
premium segment of the Official List of the Financial Conduct Authority and
migrated to trading on the premium segment of the Main Market on 27 March
2018. The Company operates as a UK Real Estate Investment Trust ("REIT") and
is a constituent of the FTSE EPRA/NAREIT index.
Meeting for analysts and audio recording of results available
The Company presentation for analysts will be held at 8:30am today via live
webcast. The presentation will also be accessible on-demand later in the day
via the Company website: www.triplepointreit.com
(http://www.triplepointreit.com) .
Those wishing to access the live webcast are kindly asked to contact the
Company Secretary at Hanway Advisory on +44 (0) 20 3909 3519 or
cosec@hanwayadvisory.com.
The Interim Results will also be available to view and download on the
Company's website at www.triplepointreit.com (http://www.triplepointreit.com)
and hard copy will be posted to shareholders on or around 16 September 2022.
CHAIR'S STATEMENT
Introduction
We marked the five-year anniversary of the Company's IPO in August. Sitting
down to write my remarks, I looked back across those five years to draw
inspiration for this statement from the milestones that we have achieved.
We have grown the Group's portfolio to over £650 million in value with the
continued support of our shareholders, and deployed our equity and debt
capital into over 490 properties. We now provide over 3,400 homes working
alongside our Approved Provider and care provider partners, and we have
collected 99.3% of rent due since our IPO. Through achieving these milestones
we have ensured that we have delivered consistent, inflation-linked financial
returns to our investors - delivering a total return of over 35% over the last
5 years.
When we launched the Company in August 2017, our desire to do so was driven by
demand, social impact and the offer of resilient inflation-linked income.
These fundamental pillars are mutually reinforcing and remain the bedrock of
the Company's investment strategy today:
• Demand: There has been a growing public awareness of the
housing crisis since we launched the Company in 2017, both in terms of the
acute need for more specialised supported housing and the need for more homes
across the broader social housing sector, but there is still much more that
needs to be done. Ten years on from the implementation of the Transforming
Care Programme we are still witnessing critical demand for Supported Housing
and the homes that we deliver. Estimates predict that at least 1.7 million
more adults will require social care over the next 15 years,(1) and across the
wider social housing sector, year-on-year, the Government's delivery targets
are not being met.
• Social impact: Our properties provide specialist adapted
homes with appropriate care for our residents. This continues to be recognised
as contributing to improving resident outcomes by providing greater
independence and placing residents within their communities, close to friends
and families.
• Resilient inflation-linked income: Our properties also
continue to generate long-term inflation linked income for the Group,
underpinned by central Government support for the rents of our residents. In
May, in line with our progressive dividend policy, we announced our target
dividend guidance for the year, targeting an aggregate dividend of 5.46 pence
per Ordinary Share, an increase of 5% on the 5.20 pence per Ordinary Share
paid during 2021.
Over these five years our performance has remained resilient despite the
unforeseen challenge of the COVID-19 pandemic which sent shockwaves through
the global economy and posed operational, and health and safety challenges to
the continued operation of our homes.
Looking ahead, just as we emerged from the worst of the COVID-19 pandemic,
geopolitical conflicts and instability began to threaten economic growth and
markets around the world. The war in Ukraine has further fuelled concerning
inflationary headwinds and posed new challenges to supply chains, energy
prices and energy security. Central banks have been forced to re-evaluate
their monetary policies and are forecast to continue increasing interest rates
in response to rising inflation.
The Group is not immune to these challenges. Our Approved Provider lessees are
reporting that significant pressure is being put on their cost base due to
rising inflation. Furthermore, in August the Government launched a
consultation on a proposed cap on social housing rent increases, likely to be
implemented from April 2023 to 31 March 2024. If actioned this could have a
negative impact on the margins generated by Registered Providers.
However, we are also fortunate that we are investing into a sector which has
strong fundamentals and so is relatively well placed to withstand broader
challenging market conditions. Demand for specialised social housing remains
unmet. Our rents are underpinned by central Government support for the rents
of our residents and, whilst there might be a cap in the short term, social
housing rents have historically proven to have a strong correlation with
inflation. Finally, by completing our refinancing in 2021, the Group has
insulated itself from the cost of interest rate increases by securing all of
its debt on a fixed price and long term basis.
Financial performance is just one of the ways in which we measure our success.
We know that if we deliver good homes to our residents then this impact, more
than anything else is what will underpin the income we strive to deliver to
our investors. We have witnessed a lot of progress across the sector since we
made our first investments. Simultaneously we have iterated and refined how we
report, measure and monitor the impact that the properties we own generate. We
are audited by The Good Economy who have produced an interim report on our
most recent social impact performance for the period to 30 June 2022 in the
Investment Manager's report.
We are pleased to report another set of solid financial results for the Group,
as summarised in our Key Highlights. This demonstrates not only the Group's
performance to date, but also the resilience of the sector in spite of the
broader economic market conditions. You can read more about the detail of
these key highlights, along with a more in-depth review of our financial
performance during the period in the Investment Manager's report.
Outlook
As has been the case since the Company's IPO, we are focused on deploying our
remaining capital in order to provide additional homes for people with care
and support needs. As described in the Investment Manager's report, rent
collection in the period slipped below 100%, and we are committed to working
with two of our Approved Providers to help them address the underlying reasons
for this slight dip with a view to bringing rent collection back up to
historic levels. In addition, we will closely monitor the performance of our
Approved Providers as they navigate the issue preoccupying so many businesses
at the moment, namely the impact of rising inflation on their operating costs,
as well as the likely social housing rent cap.
Whilst it is important to prioritise managing the risks posed by the current
economic environment, we remain convinced that the strategy remains well
placed to prove its relative resistance to concerns around rising inflation
and interest rates. This belief is underpinned by the growing demand for more
specialised supported housing throughout the UK.
I would like to thank all our advisers, and the Investment Manager, for their
continued hard work and dedication to our investment strategy. Our corporate
broker and joint financial adviser, Stifel Nicolaus Europe Limited, and our
joint financial adviser, Akur Limited, as always have provided valuable and
high-quality advice during the period. Alongside the Investment Manager, they
have been instrumental in enabling the Group to continue to build upon its
success so far and helping us to navigate it's future trajectory.
Finally, I would like to thank our shareholders for their continued support,
as well as my fellow Board members for their ongoing commitment and assistance
during the period.
Chris Phillips
Chair
8 September 2022
Notes:
1 Centre for Workforce Intelligence (2011). Report. The Adult Social Care
Workforce in England: Key facts
INVESTMENT MANAGER'S REPORT
Introduction
The last five years, the lifetime of the Group, has delivered a unique
sequence of unforeseen macro events. When the Group was launched, the nature
of Brexit was the unpredictable risk that we had to account for. For the
last two years, no company report has been complete without a reference to the
impact of COVID-19. Today, we find ourselves worrying about the knock-on
effects of interwoven growing geopolitical instability, food scarcity, a cost
of living crisis and rising inflation. We will come on to discuss the impact
that the risks emerging from these latest macroeconomic events are likely to
have on the Group's strategy, but before we do it is worth pointing out that,
against this backdrop, the Group has delivered consistent resilient
performance from both a valuation and income point of view. Most recently, the
Group raised its dividend target by 5% in the period and the portfolio's value
has grown by 4.3%.
The majority of this performance is driven by the fact that year on year,
demand for specialised supported housing has grown. The Personal Services
Research unit has predicted growth of 30% in the demand for specialised
supported housing in England by 2030. This is reinforced by data published in
2021 from the National Audit Office in its report on the adult social care
market in England, which forecasted a 29% increase in adults aged 18 to 64
requiring some form of care by 2038, compared to 2018, with faster increases
in demand projected for adults with learning disabilities (49%).(1)
These latest statistics sit against the backdrop of the need for more adapted
homes in communities which was enshrined in both the Care Act 2014, the
Transforming Care Programme 2015 and more recently, the Department of Health's
White Paper, "People at the Heart of Care" issued in 2021.
On the ground, we experience this every day through conversations with local
authorities, commissioners, Approved Providers and care providers.
The Group has been investing into specialised supported housing for just over
five years now. During that time we have continually evolved. The Investment
Manager has grown the team to well over 20 people, bringing together expertise
from a range of disciplines and backgrounds including finance, surveying,
local authorities, Registered Providers, lawyers and accountants. During the
period we welcomed two new specialist hires within our asset management team
which further enhances our portfolio monitoring capabilities.
We are also constantly evolving how best we can help provide more good homes
for people with care and support needs so that they can live independently in
their communities. We are continually iterating and improving our due
diligence and asset management process, expanding our relationships with local
authorities, care providers and Approved Providers throughout the UK, and
exploring new and innovative investment structures to facilitate more
investment in the sector and keep us at the forefront of an evolving market.
During the period the Group bought ten new properties for a total investment
cost of £12.0 million (including acquisition costs) funded from existing cash
and debt balances. These properties provided 71 new units of accommodation to
the Group's portfolio in the period.
In May, shareholders approved changes to the Group's investment policy and
restrictions removing the Group's minimum lease term, allowing the Group to
selectively take on the cost of funding planned maintenance and giving the
Group the ability to enter leases which are subject to upward only adjustment,
tracking either inflation or central housing benefit policy. These changes
will allow the Group to offer greater alignment and proportionate risk and
benefit allocation with its Approved Providers. This has proven particularly
relevant in the current macroeconomic environment as organisations look to
ensure they are well insulated against the challenges resulting from the
current high levels of inflation. You can read more about the Group's pipeline
at the end of this report.
Social Impact remains at the core of the Group's strategy. The independent
Impact Report prepared by The Good Economy for the six-month period ended 30
June 2022 for the first time incorporates an assessment of the Group's
performance against the Equity Impact Project which recently issued its first
set of metrics. We have been a member of the Equity Impact working group for
over three years and we are pleased that the Group is one of the first
investors in the sector to publicly report its performance against the
metrics. We look forward to continuing our work with the Good Economy, Big
Society Capital and our fellow working group equity investors to drive forward
standardised reporting for equity investors in the sector. The Impact Report
prepared by the Good Economy is available separately on the Group's website.
The environmental performance of our properties remains at the forefront of
our minds. Last year we announced our eco-retrofit programme. This programme
will see the Group fund the upgrade, to a minimum Energy Performance
Certificate ("EPC") rating of "C", of all properties in the Group's portfolio
which currently do not meet this standard. Our initial pilot programme,
focuses on 12 properties in the South East and is progressing well. This
initial phase of the project has seen us evaluate the scope of works required
to maximise the energy efficient upgrades to the properties. It has been a
process designed with the needs of our residents at the forefront, not only
during the works phase, but in selecting the materials and future technologies
we utilise to ensure they are compatible and user friendly both now and in the
long-run.
We are also focused on to making our leases "green", which sees us commit,
along with our Approved Provider tenants to maximise the energy efficiency and
sustainability of our homes by, for example, installing smart meters and
energy efficient white goods and commit to using local labour and sustainable
materials for repairs and maintenance. The Group hopes to sign more "green"
leases over the coming months with its Approved Providers.
While the Group itself is not regulated by the Regulator of Social Housing, it
does operate in a regulated sector. The Group is aligned with, and supportive
of the Regulator's mandate to promote a viable, efficient and well-governed
social housing sector that is able to deliver and maintain quality homes for a
range of needs. During the period, the Regulator placed Highstone Housing
Association (3.7% of the Group's rent roll as at 30 June 2022) under review.
The Group remains in regular contact with Highstone Housing Association during
this regulatory review process, as well as its nine other Approved Providers
who are deemed non-compliant by the Regulator.
Financial Review
We are pleased to present resilient financial results for the period as
highlighted earlier. The Group's continued financial performance is
underpinned by an increase in annualised rental income leading to a dividend
cover of 1.0x on an EPRA earnings run-rate basis at the period end.
Touching on some of the key highlights:
· The annualised rental income of the Group was £37.4 million as at 30
June 2022, compared to £35.8 million at 31 December 2021.
· A fair value gain of £17.1 million was recognised during the period
on the revaluation of the Group's properties compared to £0.7 million in the
comparative period to 30 June 2021.
· The EPRA NIY has increased from 5.20% at 31 December 2021 to 5.28% at
30 June 2022.
· IFRS Earnings per share was 6.19 pence for the period to 30 June
2022, compared to 2.60 pence for the in the comparative period to 30 June
2021.
· The EPRA Earnings Per Share ("EPRA EPS") excludes the fair value gain
on investment property and is measured on the weighted average number of
shares in issue during the period.
· The EPRA NTA per share at 30 June 2022 was 111.80 pence per share,
the same as the IFRS NAV per share.
· At the period end, the portfolio was independently valued at £669.6
million on an IFRS basis compared to 642.0 million at 31 December 2021,
reflecting a valuation uplift of 12.7% against the portfolio's aggregate
purchase price of £594.0 million (including acquisition costs). This reflects
an EPRA net yield of 5.28%, against the portfolio's blended net initial yield
of 5.90% at the point of acquisition.
· The Group held cash and cash equivalents of £41.6 million at 30 June
2022, compared to £52.5 million at 31 December 2021. Cash generated from
operating activities was £13.4 million for the period, compared to £12.8
million for the period ended 30 June 2021.
· The EPRA ongoing charges ratio is calculated as a percentage of the
average net asset value for the period. The ongoing charges ratio for the
period was 1.57% compared to 1.53% for the six months ended 30 June 2021.
Debt Financing
During 2021, the Group secured and fully drew £195.0 million of long-term,
fixed-rate, interest only, sustainability linked loan notes through a private
placement with MetLife Investment Management and Barings. In addition, the
Group has a £68.5 million long-term, fixed rate facility with MetLife
Investment Management. The Group has further access to liquidity through its
£50 million revolving credit facility with Lloyds and NatWest.
This brings the value of the Group's total debt facilities to £313.5 million
of which £50.0 million is undrawn at 30 June 2022. All of the Group's drawn
debt is now fixed-price (with a weighted average coupon of 2.74%) and long
term. This offers the Group strong protection in the current macroeconomic
environment of increasing interest rates and rising inflation.
During the period, the Group cancelled a portion of its existing revolving
credit facility, reducing it from £160.0 million to £50.0 million in order
to reduce commitment fees. The reduction resulted in the writing off of
arrangement fees of £2.0 million which were incurred in association with
securing the original facility. See the Bank and Other Borrowings note of the
Financial Statements for further details. This facility remained undrawn
during the period.
Last year, the Group obtained a first-time Investment Grade Long-Term Issuer
Default Rating (IDR) of 'A-' with a Stable Outlook and a senior secured rating
of 'A' from Fitch Ratings in respect of the loan notes held with MetLife
Investment Management and Barings. The Group has recently completed its first
annual review with Fitch and was delighted to have re-affirmed its existing
rating of 'A-' with a Stable Outlook and a senior secured rating of 'A' from
Fitch Ratings in respect of the loan notes held with MetLife Investment
Management and Barings facility again this year. This is a reflection of not
only the Group's continued financial resilience, but also the resilience of
the sector in spite of the broader economic and market conditions.
Further information on the Group's debt facilities is set out in note 15 of
the financial statements.
Strategic Alignment and Asset Selection
During the period the Group bought 10 properties for a total investment cost
of £12.0 million (including acquisition costs). These properties provide 71
new units of accommodation and saw the Group enter into leases with two new
Approved Providers.
Property Portfolio
As at 30 June 2022, the portfolio comprised 493 properties with 3,421 units
and showed a broad geographic diversification across the UK. The four largest
concentrated areas by market value were the North West (20.0%), West Midlands
(16.7%), Yorkshire (14.9%) and East Midlands (11.4%). The IFRS value of the
portfolio at 30 June 2022 was £669.6 million, growth of 4.3% during the
period. The table below sets out the Group's portfolio at the period end:
30 June 2022 31 December 2021 Change in 2022
Number of Assets 493 488 +5
Number of Leases 391 382 +9
Number of Units 3,421 3,424 -3
Number of Approved Providers 26 24 +2
Number of completed Forward Funding Agreements 22 22 0
WAULT (years) 25.9 26.2 -0.3
The Group disposed of four properties during the period and exchanged on the
sale of two further properties, which had been held for sale since June 2022,
following the period end. The decision to sell these properties was taken due
to changes in the underlying investment cases and, therefore, we believe this
to have been in the best interests of shareholders. Where occupied
properties have been sold, the Group's priority has been ensuring that the
sale proceeded in a way that ensured the continuous provision of the services
at the property. Since IPO, the Group has sold a total of seven properties and
its focus remains on securing long-term, inflation-linked income to generate
sustainable financial returns. The proceeds from these sales will be
reinvested into future Supported Housing property acquisitions.
Rental Income
In total, the Group had 391 leases which at the period end, generated total
annualised rental income of £37.4 million.
During the period, the Group entered into leases with another two Approved
Providers, increasing the number of Approved Providers it has leases with to
26. This enhanced the Group's counterparty diversification. The Group's three
largest Approved Providers by rental income and units were Inclusion (£11.6
million and 956 units), Parasol Homes (£3.4 million and 246 units) and Falcon
(£3.3 million and 301 units).
At the period end, the portfolio had a WAULT of 25.9 years in line with 2021,
with 90.5% of the portfolio's rental income showing an unexpired lease term
above 20 years. The WAULT includes the initial lease term upon completion as
well as any reversionary leases and put/call options available to the Group at
expiry of the initial term. Notwithstanding the Group's recent change to its
investment policy to remove the minimum lease term, at present the Group's
WAULT is anticipated to remain above 20 years.
100% of the Group's contracted income is generated under leases which are
indexed against either CPI (92.4%) or RPI (7.6%). Some leases have an index
"premium" under which the standard rental increase is based upon CPI or RPI
plus a further percentage point, reflecting top-ups by local authorities.
These account for 8.4% of the Group's leases. A small portion of the Group's
leases (4.3% of rental income) contain a cap and collar on rental increases.
For the purposes of the portfolio valuation, JLL assumed CPI and RPI to
increase at 2% per annum and 2.5% per annum respectively over the term of the
relevant leases. Despite the high levels of inflation currently experienced,
and projected in the short term in the UK, JLL's inflation assumptions remain
unchanged from previous periods given the Group's long-term contracted income
and outlook, with a WAULT of 25.9 years.
Rent collection during the period was 96.13%. During the period two of the
Group's Approved Providers fell behind with their rental payments in a way
that is not consistent with the Group's historical rent collection rates. An
expected credit loss has been recognised in the Statement of Comprehensive
Income on as a result of these rent arrears. The Group has been actively
working with both of these Approved Providers to understand the reasons behind
the recent drop in rental payments and where possible offer them support to
address the underlying causes. The lower rent payments have principally been
caused by inflationary pressure on costs, a requirement for additional
maintenance work and in some instances an under-collection of housing benefit
from the relevant Local Authority. We will continue to work with both of these
Approved Providers to address the root causes of the issues with the aim of
restoring rent levels to historical levels and, where possible, agree a
repayment schedule to recover a significant portion of the outstanding rent.
Looking forward, and as mentioned in the Chair's statement, the Department of
Levelling Up, Housing and Communities is consulting on a possible social
housing rent cap in order to support individuals and families with the cost of
living increases. Any cap would apply to rent increases effective in the year
April 2023 and options of a cap at 3%, 5% or 7% are being considered. At the
moment, it is uncertain whether the cap will be applied to specialised social
housing. We await the outcome of the consultation but are conscious that it
could impact on the margins generated by Registered Providers, and therefore
the Group's lessees, which are already under pressure due to rising costs.
Outlook and Pipeline
The global economic climate is posing challenges in a manner not experienced
in recent times. Despite the Group's inflation-linked, contracted income
streams and long-term fixed-price debt, it too is not immune from being
adversely impacted by these issues. Inflationary cost increases in every day
goods and services and utilities will have to be carefully managed by our
Approved Providers and care providers, increasing energy prices will impact
the cost of living for our residents. These are just two examples of the real
time impacts already being faced.
Despite this, as the Chair has remarked, we believe the Group is in a strong
position to weather these challenges. Our income streams are resilient and
have remained so throughout the COVID-19 pandemic. We recently refinanced the
Group's debt facilities, and all drawn debt is now on a fixed-price basis,
insulating the Group from the risk of interest rate increases. The fundamental
supply and demand imbalance in the sector remains the status quo. This has
meant valuations in the social housing sector as a whole have held firm,
especially when compared to other sectors within the property market.
Our focus will remain on deploying our remaining capital into much needed
homes throughout the UK. The Group's pipeline stands at over £80 million of
live investment opportunities. This pipeline will enable the Group to deploy
its remaining uncommitted cash of £26.0 million in the near term. And, of
course as always, we will remain focused on ensuring that our partners deliver
good homes to our residents throughout the UK.
Max Shenkman
Head of Investment
8 September 2022
Notes:
1
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(https://www.nao.org.uk/wp-content/uploads/2021/03/The-adult-social-care-market-in-England.pdf)
PORTFOLIO SUMMARY
Region Properties % of Funds Invested*
North West 99 20.1
West Midlands 83 16.2
Yorkshire 63 14.8
East Midlands 56 11.3
South East 62 9.6
North East 50 9.1
London 27 8.6
South West 29 4.8
East 20 4.1
Scotland 2 1.0
Wales 2 0.4
Total 493 100.0
* calculated excluding acquisition costs
KEY PERFORMANCE INDICATORS
In order to track the Group's progress the following key performance
indicators are monitored:
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE EXPLANATION
1. Dividend
Dividends paid to shareholders and declared during the year. The dividend reflects the Company's ability to deliver a low risk but growing Total dividends of 2.73 pence per share were paid or declared in respect of The Company has declared a dividend of 1.365 pence per Ordinary share in
income stream from the portfolio. the period 1 January 2022 to 30 June 2022. respect of the period 1 April 2022 to 30 June 2022, which will be payable on
or around 30 September 2022. Total dividends paid and declared for the period
are in line with the Company's target.
Further information is set out in note 17
(30 June 2021:2.60 pence)
2. Loan to Value (LTV)
A proportion of our portfolio is funded through borrowings. Our medium to The Company uses gearing to enhance equity returns. 36.8% LTV as at 30 June 2022. Borrowings comprise two private placements of loan notes totalling £263.5
long-term target LTV is 35% to 40% with a maximum of 50%.
million provided by MetLife Investment Management and Barings. The £50.0
million revolving credit facility with Lloyds and NatWest was undrawn as at 30
June 2022.
(31 December 2021: 37.6% LTV)
3. Weighted Average Unexpired Lease Term (WAULT)
The average unexpired lease term of the investment portfolio, weighted by The WAULT is a key measure of the quality of our portfolio. Long lease terms 25.9 years as at 30 June 2022 (includes put and call options). As at 30 June 2022, the portfolio's WAULT stood at 25.9 years.
annual passing rents. underpin the security of our income stream.
(31 December 2021: 26.2 years)
4. Exposure to Largest Approved Provider
The percentage of the Group's gross assets that are leased to the single The exposure to the largest Approved Provider must be monitored to ensure that 29.5% of Gross Asset Value as at 30 June 2022. Our maximum exposure limit is 30% of GAV.
largest Approved Provider. we are not overly exposed to one Approved Provider in the event of a default
scenario.
(31 December 2021: 28.3%)
5. Total Return
Change in EPRA NTA plus total dividends paid during the period. The Total Return measure highlights the gross return to investors including EPRA NTA per share was 111.80 pence as at 30 June 2022. The EPRA NTA per share at 30 June 2022 was 111.80 pence.
dividends paid since the prior year.
Total dividends paid during the period ended 30 June 2022 were 2.665 pence per
share.
The Total Return since the IPO is 37.39% at 30 June 2022.
Total return was 5.71 % for the period ended 30 June 2022.
(30 June 2021: 2.44%)
EPRA PERFORMANCE MEASURES
The table below shows additional performance measures, calculated in
accordance with the Best Practices Recommendations of the European Public Real
Estate Association (EPRA). We provide these measures to aid comparison with
other European real estate businesses.
Full reconciliations of EPRA Earnings and NAV performance measures are
included in Notes 22 and 23 of the consolidated financial statements
respectively. A full reconciliation of the other EPRA performance measures are
included in the Unaudited Performance Measures section.
KPI AND DEFINITION PURPOSE PERFORMANCE
1. EPRA Earnings per share
EPRA Earnings per share excludes gains from fair value adjustment on A measure of the Group's underlying operating results and an indication of the 1.94 pence per share for the period ended 30 June 2022.
investment properties that are included in the IFRS calculation for Earnings extent to which current dividend payments are supported by earnings.
per share.
(30 June 2021: 2.30 pence)
Full dividend cover on a look-through EPRA earnings run-rate basis including
committed funds was 1.0x as at 30 June 2022.
2. EPRA Net Reinstatement Value (NRV) per share
The EPRA NRV adds back the purchasers' costs deducted from the IFRS valuation. A measure that highlights the value of net assets on a long-term basis. £491.7 million/122.07 pence per share as at 30 June 2022.
£475.6 million/118.07 pence per share as at 31 December 2021.
3. EPRA Net Tangible Assets (NTA) per share
The EPRA NTA is equal to IFRS NAV as there are no deferred tax liabilities or A measure that assumes entities buy and sell assets, thereby crystallising £450.3 million/111.80 pence per share as at 30 June 2022.
other adjustments applicable to the Group under the REIT regime. certain levels of deferred tax liability.
£436.1 million/108.27 pence per share as at 31 December 2021.
4. EPRA Net Disposal Value (NDV)
The EPRA NDV provides a scenario where deferred tax, financial instruments, A measure that shows the shareholder value if assets and liabilities are not £489.5 million/121.53 pence per share as at 30 June 2022.
and certain other adjustments are calculated as to the full extent of their held until maturity.
liability.
£434.0 million/107.76 pence per share as at 31 December 2021.
5. EPRA Net Initial Yield (NIY)
Annualised rental income based on the cash rents passing at the balance sheet A comparable measure for portfolio valuations. This measure should make it 5.28% at 30 June 2022.
date, less non-recoverable property operating expenses, divided by the market easier for investors to judge for themselves how the valuation of a portfolio
value of the property, increased with (estimated) purchasers' costs. compares with others.
5.20% at 31 December 2021.
6. EPRA "Topped-Up" NIY
This measure incorporates an adjustment to the EPRA NIY in respect of the The topped-up net initial yield is useful in that it allows investors to see 5.29% at 30 June 2022.
expiration of rent-free periods (or other unexpired lease incentives such as the yield based on the full rent that is contracted at 31 June 2022.
discounted rent periods and step rents).
5.27% at 31 December 2021.
7. EPRA Vacancy Rate
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the A "pure" percentage measure of investment property space that is vacant, based 0.25% at 30 June 2022.
whole portfolio. on ERV.
0.26% at 31 December 2021.
8. EPRA Cost Ratio
Administrative and operating costs (including and excluding costs of direct A key measure to enable meaningful measurement of the changes in the Group's 21.27% at 30 June 2022.
vacancy) divided by gross rental income. operating costs.
20.91% at 31 December 2021.
PRINCIPAL RISKS AND UNCERTAINTIES
The Audit Committee, which assists the Board with its responsibilities for
managing risk, considers that the majority of principal risks and
uncertainties as presented on pages 63 to 67 of our 2021 Annual Report were
unchanged during the period and will remain unchanged for the remaining six
months of the financial year. The Audit Committee would like to draw attention
to the following principal risks in the 2021 Annual Report that could be
adversely impacted by events that have emerged over the first half of the
year:
· Risk of changes to the social housing regulatory regime
· Higher than projected levels of inflation may impact Approved
Providers
· Default of one or more Approved Provider lessees
As described in both the Chair's Statement and the Investment Manager's
Report, the government is currently consulting on a possible rent cap to be
applied to increases to social housing rents for the year starting in April
2023. There is a likelihood that a cap of either 3%, 5% or 7% will be
implemented following the review and that this cap could be applied to
specialised supported housing properties (albeit this has not yet been
confirmed).
This emerging risk, coupled with the inflationary pressure on the cost base of
the Group's Approved Provider lessees, has increased the risk of default of
one or more Approved Providers, and could lead to a mismatch between the
annual rent increases in leases and the corresponding increases that tenants
can claim through housing benefit. A rent cap would reflect a change to the
social housing regulatory and policy regime. We will continue to monitor the
impact of these emerging risks and will provide a full update of the key risks
in the Annual Report.
The Board undertakes a formal risk review, with the assistance of the audit
committee twice a year to assess the principal risks and uncertainties. The
Investment Manager on an ongoing basis has responsibility for identifying
potential risks and escalating these in accordance with the risk management
procedures.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge this condensed set
of financial statements has been prepared in accordance with UK-adopted IAS 34
and that the operating and financial review includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority namely:
• an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed financial
statements and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
• material related party transactions in the first six months of the
financial year as disclosed in note 18 and any material changes in the related
party transactions disclosed in the 2021 Annual Report.
Shareholder information is as disclosed on the Triple Point Social Housing
REIT plc website.
Approval
This Directors' responsibilities statement was approved by the Board of
Directors and signed on its behalf by:
Chris Phillips
Chair
8 September 2022
GROUP FINANCIAL STATEMENTS
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Period from 1 January 2022 to 30 June 2022 Period from 1 January 2021 to 30 June 2021 Year ended 31 December 2021
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Income
Rental income 4 18,208 15,931 33,117
Expected credit loss 4 (474) - -
Other income 110 - -
Total income 17,844 15,931 33,117
Expenses
Directors' remuneration (151) (151) (307)
General and administrative expenses (1,361) (1,012) (2,067)
Management fees 5 (2,362) (2,266) (4,552)
Total expenses (3,874) (3,429) (6,926)
Gain from fair value adjustment on investment properties 9 17,120 747 8,998
Operating profit 31,090 13,249 35,189
Finance income 6 16 15 44
Finance costs 7 (6,178) (2,776) (6,823)
Profit before tax 24,928 10,488 28,410
Taxation 8 - - -
Profit and total comprehensive income 24,928 10,488 28,410
IFRS Earnings per share - basic and diluted 22 6.19p 2.60p 7.05p
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
30 June 2022 30 June 2021 31 December 2021
Note (unaudited) (unaudited) (audited)
£'000 £'000 £'000
Assets
Non-current assets
Investment properties 9 668,348 596,155 641,293
Trade and other receivables 10 2,607 - 2,311
Total non-current assets 670,955 596,155 643,604
Current assets
Assets held for sale 640 500 480
Trade and other receivables 11 3,589 6,076 3,435
Cash, cash equivalents and restricted cash 12 41,636 28,175 52,470
Total current assets 45,865 34,751 56,385
Total assets 716,820 630,906 699,989
Liabilities
Current liabilities
Trade and other payables 13 (3,944) (5,315) (3,651)
Total current liabilities (3,944) (5,315) (3,651)
Non-current liabilities
Other payables 14 (1,518) (1,513) (1,523)
Bank and other borrowings 15 (261,051) (195,414) (258,702)
Total non-current liabilities (262,569) (196,927) (260,225)
Total liabilities (266,513) (202,242) (263,876)
Total net assets 450,307 428,664 436,113
Equity
Share capital 4,033 4,033 4,033
Share premium reserve 203,753 203,753 203,753
Treasury shares reserve (378) (378) (378)
Capital reduction reserve 16 160,394 166,154 160,394
Retained earnings 82,505 55,102 68,311
Total Equity 450,307 428,664 436,113
IFRS Net asset value per share - basic and diluted 23 111.80p 106.42p
108.27p
The Condensed Group Financial Statements were approved and authorised for
issue by the Board on 8 September 2022 and signed on its behalf by:
Chris Phillips
Chair
8 September 2022
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
For the six months ended 30 June 2022
Period from 1 January 2022 to 30 June 2022 (unaudited) Note Share capital £'000 Share premium reserve Treasury shares reserve Capital reduction reserve £'000 Retained earnings £'000 Total equity £'000
£'000
£'000
Balance at 1 January 2022 4,033 203,753 (378) 160,394 68,311 436,113
Profit and total comprehensive income for the period - - - - 24,928 24,928
Transactions with owners
Dividends paid 17 - - - - (10,734) (10,734)
Balance at 30 June 2022 (unaudited) 4,033 203,753 (378) 160,394 82,505 450,307
Period from 1 January 2021 to 30 June 2021 (unaudited) Note Share capital £'000 Share premium reserve Treasury shares reserve Capital reduction reserve £'000 Retained earnings £'000 Total equity £'000
£'000
£'000
Balance at 1 January 2021 4,033 203,776 (378) 166,154 55,066 428,651
Profit and total comprehensive income for the period - - - - 10,488 10,488
Transactions with owners
Dividends paid 17 - - - - (10,452) (10,452)
Remaining 2020 share issue costs capitalised - (23) - - - (23)
Balance at 30 June 2021 (unaudited) 4,033 203,753 (378) 166,154 55,102 428,664
Year ended Note Share capital £'000 Share premium reserve Treasury shares reserve Capital reduction reserve £'000 Retained earnings £'000 Total equity £'000
£'000
31 December 2021 (audited) £'000
Balance at 1 January 2021 4,033 203,776 (378) 166,154 55,066 428,651
- - - - 28,410 28,410
Profit and total comprehensive income for the year
Transactions with owners
Share issue costs capitalised - (23) - - - (23)
Dividends paid 17 - - - (5,760) (15,165) (20,925)
Balance at 31 December 2021 (audited) 4,033 203,753 (378) 160,394 68,311 436,113
CONDENSED GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2022
From 1 January 2022 to 30 June 2022 From 1 January 2021 to 30 June 2021 Year ended 31 December 2021
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Cash flows from operating activities
Profit before income tax 24,928 10,488 28,410
Adjustments for: 474 - -
Expected Credit Loss
Gain from fair value adjustment on investment properties 9 (17,120) (747) (8,998)
Finance income 6 (16) (15) (44)
Finance costs 7 6,178 2,776 6,823
Operating results before working capital changes 14,444 12,502 26,191
(Increase) / decrease in trade and other receivables (710) 613 (1,237)
Decrease in trade and other payables (294) (329) (242)
Net cash flow generated from operating activities 13,440 12,786 24,712
Cash flows from investing activities
Purchase of investment properties (10,962) (23,126) (61,350)
Disposal proceeds from sale of assets 1,480 125 125
Prepaid acquisition costs paid - (1,968) (18)
Restricted cash - released - 89 279
Restricted cash - paid - - (410)
Net cash flow used in investing activities (9,482) (24,880) (61,374)
Cash flows from financing activities
Ordinary Share issue costs capitalised - (23) (23)
Bank borrowings drawn - - 195,000
Bank borrowings repaid - - (130,000)
Loan arrangement fees paid (444) (567) (2,728)
Dividends paid 17 (10,734) (10,452) (20,925)
Interest paid (3,614) (2,275) (5,615)
Net cash flow (used in) / generated from financing activities (14,792) (13,317) 35,709
Net decrease in cash and cash equivalents (10,834) (25,411) (953)
Unrestricted cash and cash equivalents at the beginning of the period 51,899 52,852 52,852
Unrestricted cash and cash equivalents at the end of the period 12 41,065 27,441 51,899
NOTES TO THE GROUP CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
For the six months ended 30 June 2022
1. CORPORATE INFORMATION
Triple Point Social Housing REIT plc (the "Company") is a Real Estate
Investment Trust ("REIT") incorporated in England and Wales under the
Companies Act 2006 as a public company limited by shares on 12 June 2017. The
address of the registered office is 1 King William Street, London, United
Kingdom, EC4N 7AF. The Company is registered as an investment company under
section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.
The principal activity of the Company is to act as the ultimate parent company
of Triple Point Social Housing REIT plc and 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. BASIS OF PREPARATION
These condensed Group interim financial statements for the six months ended 30
June 2022 have been prepared in accordance with IAS 34 "Interim Financial
Reporting" and also in accordance with the measurement and recognition
principles of UK-adopted international accounting standards. They do not
include all of the disclosures that would otherwise be required in a complete
set of financial statements and should be read in conjunction with the 2021
Annual Report.
The comparative figures for the financial year ended 31 December 2021 are not
the Group's statutory accounts for that financial year. Those accounts have
been reported on by the Group's auditors and delivered to the registrar of
companies. The report of the auditor (i) was unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
The condensed Group interim financial statements for the six months ended 30
June 2022 have been reviewed by the Company's Auditor, BDO LLP, in accordance
with International Standard on Review Engagements 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity. The
condensed Group interim financial statements are unaudited and do not
constitute statutory accounts for the purposes of the Companies Act 2006.
The condensed Group interim financial statements have been prepared on a
historical cost basis, as modified for the Group's investment properties,
which have been measured at fair value. Gains or losses arising from changes
in fair values are included in profit or loss.
The Group has applied the same accounting policies and method of computation
in these condensed Group interim financial statements as in its 2021 annual
financial statements and are expected to be consistently applied during the
year ending 31 December 2022.At the date of authorisation of these financial
statements, there were a number of standards and interpretations which were in
issue but not yet effective. The Group has assessed the impact of these
amendments and has determined that the application of these amendments and
interpretations in current and future periods will not have a significant
impact on the financial statements.
2.1. Going concern
The Group benefits from a secure income stream from long leases which are not
overly reliant on any one tenant and present a well-diversified risk. The
Directors have reviewed the Group's forecast which show the expected
annualised rental income exceeds the expected operating costs of the Group.
Covid-19 has not impacted the Group's ability to continue as a going concern
for reasons discussed below. The Directors are also aware of the global
economic uncertainty caused by the war in Ukraine and the current cost of
living crisis. The Group is fortunate that the investment strategy is
resilient due to compelling fundamentals and has no direct exposure to Russia.
As a result, the Directors believe that the Group is still 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 Directors have performed an assessment of the ability of the Group and
Parent Company to continue as a going concern, for a period of at least 12
months from the date of signing these condensed Group interim financial
statements. The Directors have considered the expected obligations of the
Group for the next 12 months and are confident that all will be met.
In considering the ability of the Group to continue as a going concern, the
Directors also considered the impact of Covid-19 on their tenants. Tenants of
the Group are Approved Providers who receive their housing benefit from Local
Authorities, before it is passed to subsidiaries in the form of rental income.
Local Authorities have confirmed they will not stop helping vulnerable people
or paying for essential services during this time, and therefore the Directors
do not foresee any issues in rent collection, however in the event of a
downturn in revenue, variable costs would be reduced to enable the Group to
meet its future liabilities. 96.1% of rental income due and payable for the
six months ended 30 June 2022 has been collected.
The Directors have also considered the financing provided to the Group.
Norland Estates Limited and TP REIT Propco 2 Limited have bank facilities with
MetLife Investment Management and MetLife Investment Management and Barings
respectively. TP REIT Propco 5 Limited has a Revolving Credit Facility (RCF)
with Lloyds and NatWest however, this was undrawn at the year end and remains
so at date of signing.
The loans secured by Norland Estates Limited and TP REIT Propco 2 Limited are
subject to asset cover ratio covenants and interest cover ratio covenants
which can be found in the table below. The Directors have considered reverse
stress testing and the circumstances that would lead to a covenant breach.
Given the level of headroom, the Directors are of the view that the risk of
scenarios materialising that would lead to a breach of the covenants is
remote.
Norland Estates Limited TP REIT Propco 2 Limited
Asset Cover
Asset Cover Ratio Covenant x2.00 x1.67
Asset Cover Ratio 30 June 2022 x2.84 x2.10
Blended Net initial yield 5.24% 5.34%
Headroom (yield movement) 267bps 175bps
Interest Cover
Interest Cover Ratio Covenant 1.75x 1.75x
Interest Cover Ratio 30 June 2022 5.00x 4.33x
Headroom (rental income movement) 35% 41%
The loan secured by Norland Estates Limited asset cover ratio was amended from
previous covenant of x2.25 in August 2021 to bring it more in line with the
ACR covenant in the new Note Purchase Agreement with MetLife Investment
Management and Barings.
Under the downside model the forecasts have been stressed to show the effect
of Care Providers ceasing to pay their voids liability, and as a result
lessees being unable to pay rent on void units. It assumes that the Approved
Provider (the tenant) will not be able to pay the voids. Under the downside
model the Company and its subsidiaries will be able to settle its liabilities
for a period of at least 12 months from the date of signing these condensed
Group interim financial statements.
As a result of the above, the Directors are of the opinion that the going
concern basis adopted in the preparation of these condensed Group interim
financial statements is appropriate.
2.2 Reporting period
The financial statements have been prepared for the period ended 30 June 2022.
The comparative periods are the six-month period ended 30 June 2021 and the
year ended 31 December 2021.
2.3 Currency
The Group and Company financial information is presented in Sterling which is
also the Company's functional currency.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Group's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities are unchanged from the annual report for the year to 31 December
2021. In the Directors' view, there have been no significant changes to the
extent of estimation uncertainty, key assumptions or valuation techniques
relating to investment properties arising as a result of the current
macroeconomic environment. Further details can be found in note 9.
4. RENTAL INCOME
1 January 2022 to 30 June 2022 1 January 2021 to 30 June 2021 Year ended 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Rental income - freehold assets 17,131 14,949 31,071
Rental income - leasehold assets 1,077 982 2,046
18,208 15,931 33,117
Expected credit loss (474) - -
The lease agreements between the Group and the Approved Providers are fully
repairing and insuring leases. The Approved Providers are responsible for the
settlement of all present and future rates, taxes, costs and other impositions
payable in respect of the properties.
All rental income arose within the United Kingdom.
The expected loss rates are based on the Group's credit losses experienced
which occurred this period for the first time since IPO. The loss rates are
then adjusted for current and forward-looking information affecting the
Group's tenants.
5. MANAGEMENT FEES
1 January 2022 to 30 June 2022 1 January 2021 to 30 June 2021 Year ended 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Management fees 2,362 2,266 4,552
2,362 2,266 4,552
On 20 July 2017 Triple Point Investment Management LLP 'TPIM' was appointed as
the delegated investment manager of the Company by entering into the property
management services and delegated portfolio management agreement. Under this
agreement the delegated investment manager will advise the Company and provide
certain management services in respect of the property portfolio. A Deed of
Variation was signed on 23 August 2018. This defined cash balances in the Net
Asset Value calculation in respect of the management fee as "positive
uncommitted cash balances after deducting any borrowings".
The management fee is an annual management fee which is calculated quarterly
in arrears based upon a percentage of the last published Net Asset Value of
the Group (not taking into account uncommitted cash balances after deducting
borrowings) as at 31 March, 30 June, 30 September and 31 December in each year
on the following basis with effect from Admission:
(a) on that part of the Net Asset Value up to and including £250
million, an amount equal to 1% of such part of the Net Asset
Value;
(b) on that part of the Net Asset Value over £250 million and up
to and including £500 million, an amount equal to 0.9% of such part of the
Net Asset
Value;
(c) on that part of the Net Asset Value over £500 million and up
to and including £1billion, an amount equal to 0.8% of such part of the Net
Asset Value;
and
(d) on that part of the Net Asset Value over £1 billion, an
amount equal to 0.7% of such part of the Net Asset Value.
Management fees of £2,362,000 were chargeable by TPIM during the six months
ended 30 June 2022 (30 June 2021 - £2,266,000, 31 December 2021 -
£4,552,000). At the period end, £1,187,000 was due to TPIM (30 June 2021 -
£1,132,000, 31 December 2021 - £1,146,000).
By two agreements dated 30 June 2020, the Company appointed TPIM as its
Alternative Investment Fund Manager by entering into an Alternative Investment
Fund Management Agreement and (separately) documented TPIM's continued
appointment as the provider of portfolio and property management services by
entering into an Investment Management Agreement.
6. FINANCE INCOME
1 January 2022 to 30 June 2022 1 January 2021 to 30 June 2021 Year ended 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Head lease interest income 15 15 44
Interest on liquidity funds 1 - -
16 15 44
7. FINANCE COSTS
1 January 2022 to 30 June 2022 1 January 2021 to 30 June 2021 Year ended 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest payable on bank borrowings 3,609 2,270 5,492
Amortisation loan arrangement fees 562 487 1,279
Written off loan arrangement fees 1,986 - -
Head lease interest expense 15 15 44
Bank charges 6 4 8
6,178 2,776 6,823
Total finance cost for financial liabilities not held at fair value through 6,172 2,772 6,815
profit or loss
The loan arrangement fees written off during the period relate to previously
capitalised arrangement fees following the reduction in the RCF which was
considered to be a substantial modification under IFRS 9. See note 15 for
further details.
8. 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 six months ended 30
June 2022, the Group did not have any non-qualifying profits and accordingly
there is no tax charge in the period. If there were any non-qualifying profits
and gains, these would be subject to corporation tax.
It is assumed that the Group will continue to be a group UK REIT for the
foreseeable future, such that deferred tax has not been recognised on
temporary differences relating to the property rental business.
9. INVESTMENT PROPERTIES
Operational assets Properties under development Total
£'000 £'000 £'000
As at 1 January 2022 641,293 - 641,293
Acquisitions and additions* 11,543 - 11,543
Fair value adjustment** 24,085 - 24,085
Movement in head lease ground rent liability (4) - (4)
Disposals (7,075) - - (7,075)
Reclassified to assets held for sale (1,494) - (1,494)
As at 30 June 2022 (unaudited) 668,348 - 668,348
As at 1 January 2021 565,533 6,568 572,101
Acquisitions and additions 22,259 1,567 23,826
Fair value adjustment** 1,240 - 1,240
Movement in head lease ground rent liability (4) - (4)
Transfer of completed properties 8,135 (8,135) -
Reclassified to assets held for sale (1,008) - (1,008)
As at 30 June 2021 (unaudited) 596,155 - 596,155
As at 1 January 2021 565,533 6,568 572,101
Acquisitions and additions 59,114 1,568 60,682
Fair value adjustment** 9,513 - 9,513
Movement in head lease ground rent liability 5 - 5
Transfer of completed properties 8,136 (8,136) -
Reclassified to assets held for sale (1,008) - (1,008)
As at 31 December 2021 641,293 - 641,293
(audited)
*Additions in the table above differs to the total investment cost of new
properties in the period in the front end due to retentions no longer payable
which were credited to Investment Property additions.
**Gain from fair value adjustment on investment properties in the condensed
Group statement of comprehensive income is net of the loss from fair value
adjustments on assets held for sale of £0.87 million (30 June 2021- £0.49
million, 31 December 2021 - £0.51 million) and loss on disposal of three
assets of £6.1m (30 June 2021- £0.515, 31 December 2021 - £nil).
Reconciliation to independent valuation:
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Investment property valuation 669,574 596,336 642,018
Fair value adjustment - headlease ground rent 1,458 1,453 1,462
Fair value adjustment - lease incentive debtor (2,684) (1,634) (2,187)
668,348 596,155 641,293
Properties under development represent contracts for the development of a
pre-let property under a forward funding agreement. Where the development
period is expected to be a substantial period, the borrowing costs that can be
directly attributed to getting the asset ready for use are capitalised as part
of the investment property value.
The carrying value of leasehold properties at 30 June 2022 was £36.00 million
(30 June 2021 - £36.70 million, 31 December 2021 - £39.36 million).
In accordance with "IAS 40: Investment Property", the Group's investment
properties have been independently valued at fair value by Jones Lang LaSalle
Limited ("JLL"), an accredited external valuer with recognised and relevant
professional qualifications. JLL provide their fair value of the Group's
investment property portfolio every three months.
JLL were appointed as external valuer by the Board on 11 December 2017. The
proportion of the total fees payable by the Company to JLL's total fee income
is minimal. Additionally, JLL has a rotation policy in place whereby the
signatories on the valuations rotate after seven years.
% Key Statistics
The metrics below are in relation to the total investment property portfolio
held as at 30 June 2022.
Portfolio Metrics 30 June 2022 30 June 2021 31 December 2021
Capital Deployed (£'000)* 593,996 553,561 569,991
Number of Properties 493 458 488
Number of Tenancies*** 391 355 382
Number of Approved Providers*** 26 22 24
Number of Local Authorities*** 151 157 156
Number of Care Providers*** 121 109 114
Average NIY** 5.28% 5.28% 5.25%
* calculated excluding acquisition costs
**calculated using IAS 40 valuations (excluding forward funding acquisitions)
*** calculated excluding forward funding acquisitions
Regional exposure
30 June 2022 30 June 2021 31 December 2021
Region *Cost £'000 % of funds invested *Cost £'000 % of funds invested *Cost £'000 % of funds invested
North West 115,042 20.1 118,985 22.3 122,622 21.5
West Midlands 92,794 16.2 88,593 16.6 92,794 16.3
East Midlands 64,589 11.3 64,595 12.1 64,595 11.3
Yorkshire 85,021 14.8 58,077 10.9 49,526 8.7
South East 54,799 9.6 50,308 9.4 47,061 8.3
London 49,555 8.6 49,213 9.2 81,034 14.2
North East 51,988 9.1 47,061 8.8 52,196 9.2
South West 27,466 4.8 27,900 5.2 27,900 4.9
East 23,703 4.1 21,204 4.0 23,703 4.2
Scotland 5,900 1.0 5,900 1.1 5,900 1.0
Wales 2,660 0.4 2,660 0.4 2,660 0.4
Total 573,517 100.0 534,496 100 569,991 100
*excluding acquisition costs
Fair value hierarchy
Date of valuation Total Quoted prices in active markets Significant observable inputs Significant unobservable inputs
(Level 1) (Level 2) (Level 3)
£'000 £'000 £'000 £'000
Assets measured at fair value: 30 June 2022 668,348 - - 668,348
Investment properties
Investment properties 30 June 2021 596,155 - - 596,155
Investment properties 31 December 2021 641,293 - - 641,293
There have been no transfers between Level 1 and Level 2 during the period,
nor have there been any transfers between Level 2 and Level 3 during the
period.
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 investment properties are reported as
Level 3 in accordance with IFRS 13 where external inputs are "unobservable"
and value is the Directors' best estimate, based upon advice from relevant
knowledgeable experts.
In this instance, the determination of the fair value of investment properties
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 specialised supported housing 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) underlying rents for each property being subject to independent
benchmarking and adjustment where the Group considers them too high
(resulting in a price reduction for the purchase or withdrawal from the
transaction); and v) a full repairing and insuring lease with annual
indexation based on CPI or CPI+1% and effectively 25 years outstanding, in
most cases with a Housing Association itself regulated by the Homes and
Communities Agency.
The valuer treats the fair value for forward funded assets as work-in-progress
value whereby the Company forward funds a development by committing a total
sum, the Gross Development Value ("GDV") over the development period in order
to receive the completed development at practical completion. The
work-in-progress value of the asset increases during the construction period
accordingly as payments are made by the Company which leads, in turn, to a
pro-rata increase in the valuation in each quarter valuation assuming there
are no material events affecting the GDV adversely. Interest accrued during
construction as well as an estimation of future interest accrual prior to
lease commencement will be deducted from the balancing payment which is the
final payment to be drawn by the developer prior to the Company receiving the
completed building.
Descriptions and definitions relating to valuation techniques and key
unobservable inputs made in determining fair values are as follows:
Valuation techniques: Discounted cash flows
The discounted cash flows model considers the present value of net cash flows
to be generated from the properties, taking into account the expected rental
growth rate and lease incentive costs such as rent-free periods. The expected
net cash flows are then discounted using risk-adjusted discount rates.
There are two main unobservable inputs that determine the fair value of the
Group's investment properties:
1. The rate of inflation as measured by CPI; it should be noted that all
leases benefit from either CPI or RPI indexation; and
2. The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include the performance
of the regulated social housing sector and demand for each specialist
supported housing 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), and the fact that all of the Group's properties have the
benefit of full repairing and insuring leases entered into by a Housing
Association.
All of the properties within the Group's portfolio benefit from leases with
annual indexation based upon CPI or RPI. The fair value measurement is based
on the above items, highest and best use, which does not differ from their
actual use.
Sensitivities of measurement of significant unobservable inputs
The Group's property portfolio valuation is open to judgements and is
inherently subjective by nature. The estimates and associated assumptions have
a significant risk of causing a material adjustment to the carrying amounts of
investment properties. The valuation is based upon assumptions including
future rental income (with growth in relation to inflation) and the
appropriate discount rate.
As a result, the following sensitivity analysis has been prepared:
Average discount rate and range:
The average discount rate used in the Group's property portfolio valuation is
6.63% (30 June 2021 - 6.58%, 31 December 2021 - 6.63%).
The range of discount rates used in the Group's property portfolio valuation
is from 6.21% to 8.10%. (30 June 2021 - 6.2%-7.6%, 31 December 2021 -
6.21%-8%).
-0.5% change in +0.5% change in +0.25% change in -0.25% change in
Discount Rate Discount Rate CPI CPI
£'000 £'000 £'000 £'000
Changes in the IFRS fair value of investment properties as at 30 June 2022 42,290 (38,417) 21,597 (20,635)
Changes in the IFRS fair value of investment properties as at 30 June 2021 37,654 (34,246) 19,249 (18,406)
Changes in the IFRS fair value of investment properties as at 31 December 2021 26,922 (24,663) 21,190 (20,238)
Given that the factors on which the valuations are based have not been
adversely affected by the macroeconomic environment, there has been no direct
impact to the investment property valuation at 30 June 2022. The valuations
have also not been influenced by climate related factors due to there being
little measurable impact on inputs at present.
10. TRADE AND OTHER RECEIVABLES (non current)
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
£'000 £'000 £'000
Lease incentive debtor 2,430 - 2,128
Other receivables 177 - 183
2,607 - 2,311
The Directors consider that the carrying value of trade and other receivables
approximate their fair value. All amounts are due to be received in more than
one year from the reporting date.
11. TRADE AND OTHER RECEIVABLES (current)
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
£'000 £'000 £'000
Rent receivable 2,808 1,498 1,971
Expected credit loss (474) - -
Prepayments 831 2,859 796
Lease incentive debtor 254 - -
Other receivables 170 1,719 668
3,589 6,076 3,435
Included in Prepayments are prepaid acquisition costs which include the cost
of acquiring assets not completed at the period end.
The Directors consider that the carrying value of trade and other receivables
approximate their fair value. All amounts are due to be received within one
year from the reporting date.
The Group applies the general approach to providing for expected credit losses
under IFRS 9 for other receivables. Where the credit loss relates to revenue
already recognised in the Income Statement, the expected credit loss allowance
is recognised in the Statement of Comprehensive Income. Expected credit losses
totalling £0.47m (2021: nil) were charged to the Statement of Comprehensive
Income in the period.
12. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash held by lawyers 43 3,513 8,459
Restricted cash 571 734 571
Ring-fenced cash 1,095 - 4,451
Cash at bank 39,927 23,928 38,989
41,636 28,175 52,470
Cash held by lawyers is money held in escrow for expenses expected to be
incurred in relation to investment properties pending completion. These funds
are available immediately on demand.
Restricted cash represents retention money (held by lawyers only) in relation
to repair, maintenance and improvement works by the vendors to bring the
properties up to satisfactory standards for the Group and the tenants. The
cash is committed on the acquisition of the properties. It also includes funds
held in an escrow account in relation to the lease transferred in 2020.
Ring-fenced cash includes retention monies held by Coutts in a "charged"
account which requires lender's permission to release, and funds held in a
separate bank account for upcoming commitment fees on the Lloyds RCF.
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total cash, cash equivalents and restricted cash 41,636 28,175 52,470
Restricted cash (571) (734) (571)
Cash reported on Statement of Cash Flows 41,065 27,441 51,899
13. TRADE AND OTHER PAYABLES
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
£'000 £'000 £'000
Trade payables 25 80 48
Accruals 1,930 2,697 2,373
Head lease ground rent 40 40 39
Other creditors 1,949 2,498 1,191
3,944 5,315 3,651
The Other Creditors balance consists of retentions due on completion of
outstanding works. The directors consider that the carrying value of trade and
other payables approximate their fair value. All amounts are due for payment
within one year from the reporting date.
14. OTHER PAYABLES
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
£'000 £'000 £'000
Head lease ground rent 1,418 1,413 1,423
Rent deposit 100 100 100
1,518 1,513 1,523
15. BANK AND OTHER BORROWINGS
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
£'000 £'000 £'000
Bank and other borrowings drawn at period end 263,500 198,500 263,500
Unamortised costs at beginning of period (4,798) (3,573) (3,573)
Less: loan issue costs incurred (30) - (2,390)
Add: loan issue costs written off 2,085 - -
Add: loan issue costs amortised 294 487 1,165
Unamortised costs at period end (2,449) (3,086) (4,798)
Balance at period end 261,051 195,414 258,702
The amount of loan arrangement fees written off and amortised in note 7
differs to the amounts in the table above as this excludes amounts in relation
to the undrawn RCF which are included within Prepayments.
At 30 June 2022 there were undrawn bank borrowings of £50 million. (30 June
2021 - £30 million, 31 December 2021 - £160 million).
As at 30 June 2022, the Group's borrowings comprised two debt facilities:
• a long-dated, fixed-rate, interest-only financing
arrangement in the form of a private placement of loan notes in an amount of
£68.5 million with MetLife Investment Management (and affiliated funds).
• £195 million long-dated, fixed-rate, interest-only
sustainability-linked loan notes through a private placement with MetLife
Investment Management clients and Barings.
The Group also have access to £50 million RCF with Lloyds and NatWest which
was undrawn at the reporting date.
Loan Notes
The Loan Notes of £68.5 million are secured against a portfolio of specialist
supported living assets throughout the UK, worth approximately £193 million
(30 June 2021 - £185million, 31 December 2021 - £188 million). The Loan
Notes represent a loan-to-value of 40% of the value of the secured pool of
assets and are split into two tranches: Tranche-A, is an amount of £41.5
million, has a term of 10 years from utilisation and is priced at an all-in
coupon of 2.924% pa; and Tranche-B, is an amount of £27.0 million, has a term
of 15 years from utilisation and is priced at an all-in coupon of 3.215% pa.
On a blended basis, the weighted average term is 12 years carrying a weighted
average fixed-rate coupon of 3.04% pa. At 30 June 2022, the Loan Notes have
been independently valued at £63 million which has been used to calculate the
Group's EPRA Net Disposal Value in note 4 of the Unaudited Performance
Measures. The fair value is determined by comparing the discounted future cash
flows using the contracted yields with the reference gilts plus the margin
implied. The reference gilts used were the Treasury 0.569% 2028 Gilt (Tranche
A) and Treasury 0.838% 2033 Gilt (Tranche B), with an implied margin that is
unchanged since the date of fixing.
In August 2021, the Group put in place Loan Notes of £195 million which
enabled the Group to refinance the full £130 million previously drawn under
its £160 million RCF with Lloyds and NatWest. The Loan Notes are secured
against a portfolio of specialist supported living assets throughout the UK,
worth approximately £410 million. The Loan Notes represent a loan-to-value of
40% of the value of the secured pool of assets and are split into two
tranches: Tranche-A, is an amount of £77.5 million, has a term of 10 years
from utilisation and is priced at an all-in coupon of 2.403% pa; and
Tranche-B, is an amount of £117.5 million, has a term of 15 years from
utilisation and is priced at an all-in coupon of 2.786% pa. On a blended
basis, the weighted average term is 13 years carrying a weighted average fixed
rate coupon of 2.634% pa. At 30 June 2022, the Loan Notes have been
independently valued at £154 million which has been used to calculate the
Group's EPRA Net Disposal Value in note 4 of the Unaudited Performance
Measures. The fair value is determined by comparing the discounted future cash
flows using the contracted yields with the reference gilts plus the margin
implied. The reference gilts used were the Treasury 0.560% 2031 Gilt (Tranche
A) and Treasury 0.846% 2036 Gilt (Tranche B), with an implied margin that is
unchanged since the date of fixing. The loans are considered to be a Level 2
fair value measurement.
RCF
The RCF was fully refinanced on 26 August 2021 and as a result, was novated
from TP REIT Propco 2 Limited to TP REIT Propco 5 Limited. This was not
considered to be a substantial modification under IFRS 9 in the Group
accounts, as there is no change to the borrower at Group level. On 21 February
2022, the facility was reduced from £160 million to £50 million, this led to
the writing off of £2.0 million arrangement fees. Otherwise, the terms remain
unchanged and at 30 June 2022 the facility remained undrawn. The originally
agreed four-year term was previously extended in 2020 by one further year
expiring on 20 December 2023. This may be extended by a further year, to 20
December 2024 (subject to the consent of the lenders). Originally, the
interest rate for drawn amounts was 1.85% per annum over three-month LIBOR.
Under the amended and restated facility agreement in place pre the refinance,
the Group negotiated and agreed provisions setting pre-agreed terms for the
transition of LIBOR to the new benchmark rate SONIA from 1 July 2021. For
undrawn loan amounts the Group pays a commitment fee in the amount of 40% of
the margin. When fully drawn, the RCF will represent a loan-to-value of 40%
secured against a defined portfolio of the Group's specialist supported
housing assets located throughout the UK and held in a wholly-owned Group
subsidiary. For the RCF there is considered no other difference between fair
value and carrying value.
The Group has met all compliance with its financial covenants on the above
loans throughout the year.
Total < 1 year 1 to 2 3 to 5 > 5
years years years
£'000 £'000 £'000 £'000 £'000
At 30 June 2022 50,000 - 50,000 - -
At 30 June 2021 30,000 - - 30,000 -
At 31 December 2021 160,000 - 160,000 - -
Undrawn committed bank facilities - maturity profile
16. CAPITAL REDUCTION RESERVE
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
£'000 £'000 £'000
Balance at beginning of period 160,394 166,154 166,154
Dividends paid - - (5,760)
Balance at end of period 160,394 166,154 160,394
The capital reduction reserve relates to the distributable reserve established
on cancellation of the share premium reserve. Dividends have been distributed
out of Retained Earnings in the current period and out of Retained Earnings
and the Capital Reduction Reserve in the year ended 31 December 2021.
17. DIVIDENDS
1 January 2022 to 30 June 2022 (unaudited) 1 January to 30 June 2021 (unaudited) Year ended 31 December 2021 (audited)
£'000 £'000 £'000
1.295p for the 3 months to 31 December 2020 paid on 26 March 2021 - 5,217 5,217
1.3p for the 3 months to 31 March 2021 paid on 25 June 2021 - 5,236 5,236
1.3p for the 3 months to 30 June 2021 paid on 30 September 2021 - - 5,236
1.3p for the 3 months to 30 September 2021 paid on 17 December 2021 - - 5,236
1.3p for the 3 months to 31 December 2021 paid on 11 March 2022 5,236 - -
1.365p for the 3 months to 31 March 2022 paid on 24 June 2022 5,498 - -
10,734 10,453 20,925
On 8 September 2022 the Company declared an interim dividend of £1.365 pence
per Ordinary Share for the period 1 April 2022 to 30 June 2022. The total
dividend of £5.5 million will be paid on 30 September 2022 to Ordinary
shareholders on the register on 16 September 2022.
The Company intends to pay dividends to shareholders on a quarterly basis and
in accordance with the REIT regime. Dividends are not payable in respect of
its Treasury shares held.
18. 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 Manager, TPIM). The internal financial
reports received by TPIM 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 financial statements.
The Group's property portfolio comprised 493 (30 June 2021 - 458, 31 December
2021 - 488) Social Housing properties as at 30 June 2022 in England and Wales.
The Directors consider that these properties represent a coherent and
diversified portfolio with similar economic characteristics and, as a result,
these individual properties have been aggregated into a single operating
segment. In the view of the Directors there is accordingly one reportable
segment under the provisions of IFRS 8.
All of the Group's properties are engaged in a single segment business with
all revenue, assets and liabilities arose in the UK, therefore, no
geographical segmental analysis is required by IFRS 8.
19. RELATED PARTY DISCLOSURE
Directors
Directors are remunerated for their services at such rate as the Directors
shall from time to time determine. The Chair receives a director's fee of
£75,000 per annum (30 June 2021 - £75,000, 31 December 2021 - £75,000), and
the other Directors of the Board receive a fee of £50,000 (30 June 2021 -
£50,000, 31 December 2021 - £50,000) per annum. The Directors are also
entitled to an additional fee of £7,500 in connection with the production of
every prospectus by the Company. This was received by the Directors in 2020
but not in 2021 or the current year as no prospectus was produced.
Dividends of the following amounts were paid to the Directors during the
period:
Chris Phillips: £1,462 (30 June 2021- £1,423, 31 December 2021 -£2,850)
Peter Coward: £2,103 (30 June 2021- £1,984, 31 December 2021 -£4,031)
Paul Oliver: £2,078 (30 June 2021 - £2,023, 31 December 2021 -£4,050)
Tracey Fletcher-Ray: £1,006 (30 June 2021- £979, 31 December 2021 -£1,960)
No shares were held by Ian Reeves as at 30 June 2022 (31 December 2021 and 30
June 2021: nil).
20. POST BALANCE SHEET EVENTS
Property acquisitions
Subsequent to the end of the period, the Group has acquired portfolios of 2
supported Social Housing properties deploying £3.4 million (including
acquisition costs).
Dividends
On 8 September 2022, the Company declared an interim dividend of £1.365 pence
per Ordinary Share for the period 1 April 2022 to 30 June 2022. The total
dividend of £5.5 million will be paid on 30 September 2022 to Ordinary
shareholders on the register on 16 September 2022.
21. CAPITAL COMMITMENTS
The Group has capital commitments of £nil (30 June 2021 - £1.0 million, 31
December 2021 - £4.2 million) in relation to the cost to complete its forward
funded pre-let development assets and on properties exchanged but not
completed at 30 June 2022.
22. EARNINGS PER SHARE
Earnings per share ("EPS") amounts are calculated by dividing profit for the
period attributable to ordinary equity holders of the Company by the weighted
average number of Ordinary Shares in issue during the period. As there are no
dilutive instruments outstanding, both basic and diluted earnings per share
are the same.
The calculation of basic, diluted and EPRA earnings per share is based on the
following:
1 January 2022 1 January 2021 Year ended
to 30 June 2022 to 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Calculation of Basic Earnings per share
Net profit attributable to ordinary shareholders (£'000) 24,928 10,488 28,410
Weighted average number of ordinary shares (including treasury shares) 402,789,002 402,789,002 402,789,002
IFRS Earnings per share - basic and diluted 6.19p 2.60p 7.05p
EPRA Earnings per share
1 January 2022 to 30 June 2022 1 January 2021 to 30 June 2021 (unaudited) Year ended 31 December 2021 (audited)
(unaudited) £'000 £'000
£'000
Net profit attributable to ordinary shareholders (£'000) 24,928 10,488 28,410
Changes in value of fair value of investment property (£'000) (17,120) (1,240) (8,998)
EPRA earnings (£'000) 7,808 9,248 19,412
Non cash adjustments to include:
Amortisation of loan arrangement fees (£'000) 562 487 1,279
Written off loan arrangement fees (£'000) 1,986 - -
Adjusted EPRA earnings (£'000) 10,356 9,735 20,691
Weighted average number of ordinary shares (including treasury shares) 402,789,002 402,789,002 402,789,002
Earnings per share - EPRA 1.94p 2.30p 4.82p
Adjusted EPRA earnings per share 2.57p 2.42p 5.14p
Adjusted earnings is a performance measure used by the Board to assess the
Group's dividend payments. The metric adjusts EPRA earnings for interest paid
to service debt that was capitalised, and the amortisation of loan arrangement
fees. The Board sees these adjustments as a reflection of actual cashflows
which are supportive of dividend payments. The Board compares the adjusted
earnings to the available distributable reserves when considering the level of
dividend to pay.
For this EPRA measure and preceding EPRA measures, please refer to
explanations and definitions of the EPRA performance measures that can be
found below.
23. NET ASSET VALUE PER SHARE
Net Asset Value per share is calculated by dividing net assets in the
Condensed Group Statement of Financial Position attributable to Ordinary
equity holders of the Company by the number of Ordinary Shares outstanding at
the end of the period. Although there are no dilutive instruments outstanding,
both basic and diluted NAV per share are disclosed below.
Net asset values have been calculated as follows:
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Net assets at end of period (£'000) 450,307 428,664 436,113
Shares in issue at end of period (excluding shares held in treasury) 402,789,002 402,789,002 402,789,002
IFRS NAV per share - basic and dilutive 111.80p 106.42p 108.27p
24. UNAUDITED PERFORMANCE MEASURES
1. PORTFOLIO NET ASSET VALUE
The objective of the Portfolio Net Asset Value "Portfolio NAV" measure is to
highlight the fair value of the net assets on an ongoing, long term basis,
which aligns with the Group's business strategy as an ongoing REIT with a
long-term investment outlook. This Portfolio NAV is made available on a
quarterly basis on the Company's website and announced via RNS.
In order to arrive at Portfolio NAV, two adjustments are made to the IFRS Net
Asset Value ("IFRS NAV") reported in the consolidated financial statements
such that:
i. The hypothetical sale of properties will take place on the basis
of a sale of a corporate vehicle rather than a sale of underlying property
assets. This assumption reflects the basis upon which the Company's assets
have been assembled within specific SPVs; and
ii. The hypothetical sale will take place in the form of a single
portfolio disposal.
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Net asset value per the consolidated financial statements 450,307 428,664 436,113
Value of asset pools 450,307 428,664 436,113
Effects of the adoption to the assumed, hypothetical sale of properties as a 57,829 43,639 49,974
portfolio and on the basis of sale of a corporate vehicle
Portfolio NAV 508,136 472,303 486,087
After reflecting these amendments, the movement in net assets is as follows:
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Opening reserves 486,088 468,788 468,788
Remaining share issue costs - (23) (23)
Operating profits 13,970 12,502 26,191
Capital appreciation 25,847 4,741 19,350
Loss on fair value adjustment on assets held for sale (873) (493) (515)
Finance income 16 15 44
Finance costs (6,178) (2,776) (6,823)
Dividends paid (10,734) (10,452) (20,925)
Portfolio Net Assets 508,136 472,302 486,087
Number of shares in issue at the period end 402,789,002 402,789,002 402,789,002
Portfolio NAV per share 126.16p 117.26p 120.68p
2. ADJUSTED EARNINGS PER SHARE - PORTFOLIO NAV BASIS
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Net rental income 17,734 15,931 33,117
Other income 110 - -
Expenses (3,874) (3,429) (6,926)
Fair value gains on investment properties 75,822 44,879 58,973
Loss on fair value adjustment on assets held for sale (873) (493) (515)
Finance income 16 15 44
Finance costs (6,178) (2,776) (6,823)
Value of each pool 82,757 54,127 77,870
Weighted average number of shares 402,789,002 402,789,002 402,789,002
Adjusted earnings per share - basic 20.55p 13.44p 19.46p
3. EPRA Net Reinstatement Value
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
IFRS NAV/EPRA NAV (£'000) 450,307 428,664 436,113
Include:
Real Estate Transfer Tax* (£'000) 41,361 36,672 39,492
EPRA Net Reinstatement Value (£'000) 491,668 465,336 475,605
Fully diluted number of shares 402,789,002 402,789,002 402,789,002
EPRA Net Reinstatement value per share 122.07p 115.53p 118.07p
* Purchaser's costs
4. EPRA Net Disposal Value
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
IFRS NAV/EPRA NAV (£'000) 450,307 428,664 436,113
Include:
Fair value of debt* (£'000) 39,192 (4,978) (2,059)
EPRA Net Disposal Value (£'000) 489,499 423,686 434,054
Fully diluted number of shares 402,789,002 402,789,002 402,789,002
EPRA Net Disposal Value** 121.53p 105.19p 107.76p
* Difference between interest-bearing loans and borrowings included in balance
sheet at amortised cost, and the fair value of interest-bearing loans and
borrowings.
**equal to the EPRA NNNAV disclosed in previous reporting periods
5. EPRA Net Tangible Assets
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
IFRS NAV/EPRA NAV (£'000) 450,307 428,664 436,113
EPRA Net Tangible Assets (£'000) 450,307 428,664 436,113
Fully diluted number of shares 402,789,002 402,789,002 402,789,002
EPRA Net Tangible Assets * 111.80p 106.42p 108.27p
*equal to IFRS NAV and previous EPRA NAV metric
6. EPRA net initial yield (NIY) and EPRA "topped up" NIY
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Investment Property - wholly owned 666,890 594,702 639,831
Less: development properties - - -
Completed property portfolio 666,890 594,702 639,831
Allowance for estimated purchasers' costs 41,361 36,672 39,492
Gross up completed property portfolio valuation 708,251 631,374 679,323
Annualised passing rental income 37,416 32,901 35,343
Property outgoings - - -
Annualised net rents 37,416 32,901 35,343
Contractual increases for lease incentives 79 523 443
Topped up annualised net rents 37,495 33,424 35,786
EPRA NIY 5.28% 5.21% 5.20%
EPRA Topped Up NIY 5.29% 5.29% 5.27%
7. ONGOING CHARGES RATIO
30 June 2022 30 June 2021 31 December 2021
£'000
£'000
£'000
Annualised ongoing charges 6,960 6,542 6,671
Average undiluted net assets 443,210 428,657 432,382
Ongoing charges 1.57% 1.53% 1.54%
8. EPRA VACANCY RATE
30 June 2022 30 June 2021 31 December 2021
£'000
£'000
£'000
Estimated Market Rental Value (ERV) of vacant spaces 93 92 93
Estimated Market Rental Value (ERV) of whole portfolio 37,416 33,424 35,785
EPRA Vacancy Rate 0.25% 0.28% 0.26%
9. EPRA COST RATIO
30 June 2022 30 June 2021 31 December 2021
£'000
£'000
£'000
Total administrative and operating costs 3,874 3,429 6,926
Gross rental income 18,208 15,931 33,117
EPRA cost ratio 21.27% 21.52% 20.91%
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