REG - Residential Secure - Final Results for the year ended 30 September 2024

Residential Secure IncomeAnnouncement

22/01/2025 07:00

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RNS Number : 1958U  Residential Secure Income PLC  22 January 2025

22 January 2025

 

Residential Secure Income plc

("ReSI" or the "Company")

 

Full Year Results to 30 September 2024

 

Residential Secure Income plc (ReSI plc) (LSE: RESI), which invests in
independent retirement living and shared ownership to deliver secure,
inflation-linked returns, is pleased to announce its financial results for the
year ended 30 September 2024.

 

Commenting on ReSI's results, Robert Whiteman CBE, Chairman of ReSI plc, said:

 

"ReSI continues to deliver strong operational performance, with high levels of
rent collection, occupancy, rent growth and stabilisation of operating costs.
Coupled with Gresham House agreeing to reduce fund management fees and
reducing the composition of the board from four non-executive directors to
three, this has led to adjusted earnings growing by 9%, to comfortably cover
our dividend.

 

"The underlying operational performance of the Company has been robust
throughout the year. We have successfully reduced costs, executed the sale of
the local authority portfolio (as a post balance sheet event) and reduced
exposure to floating rate debt. Despite these positive moves, the Company
faces the same challenges faced by other smaller investment trusts. The modest
market capitalisation of the Company and persistent discount to NAV undermines
the Company's ability to raise more capital and reach a sufficient scale to
efficiently manage the portfolio in the medium-term and provide sufficient
liquidity to our investors.

 

"As such, the Board concluded that it is in the best interests of shareholders
to move towards an orderly realisation of assets, a decision ratified by
shareholders at the general meeting held on 6 December 2024.

 

"On behalf of the Board, I would like to thank our shareholders for their
continued support of the Company and its portfolio, and Gresham House Asset
Management our Fund Manager for its active management of the portfolio and
paramount focus on delivering in the best interests of our shareholders."

 

Key financial and operational metrics

 

 Income                                          2024                                2023                Change in year
 Like-for-like rental reviews                    5.8%                                6.1%                -0.4%
 Rent collection                                 99%                                 99%                 -
 Gross rental income                             £29.9mn                             £27.9mn             7.2%
 Net rental income                               £18.9mn                             £18.1mn             4.4%
 Adjusted EPRA Earnings1,2                       £9.5mn                              £8.7mn              9.2%
 Adjusted EPRA EPS1,2                            5.1p                                4.7p                8.5%
 Dividend per share - paid                       4.12p                               5.16p               -20.2%
 Dividend cover3                                 124%                                91%                 +33%4
 Changes in fair value of investment properties  £(12.8)mn                           £(38.9)mn           -67.1%

 Capital                                         30-Sept-24                          30-Sept 23  Change in period
 IFRS net assets                                 £151.0mn                            £168.7mn    -10.5%
 IFRS NAV per share                                             81.6p                91.1p       -10.4%
 IFRS Portfolio Valuation5                       £310.6m                             £345.1mn    -10.0%
 EPRA NTA per share1                             74.6p                               81.8p       -8.8%
 EPRA NTA Total Return1                          (3.7)%                              (18.1)%     14.4%
 Loan to Value                                   52%                                 50%         2.0%

 

Key financial highlights - 9% growth in EPRA adjusted earnings, primarily
through inflation linkage of rental income, vigilance on fund opex and
rebasing of management fee, delivering 124% dividend coverage

 

·      5.8% like-for-like rent growth

·      EPRA adjusted earnings(1) of £9.5 million (FY23: £8.7 million)
underpinned by strong rent growth across retirement and shared ownership
flowing through to adjusted earnings

·      EPRA Net Tangible Assets ("NTA") total return of -3.7% (FY23:
minus 18.1%) to give 74.6p per share NTA

·      Increased long-term gilt yields continue to negatively impact
valuations

o  3% like-for-like with 60 bps outwards yield shift

·      LTV of 52% (FY23: 50%) supported by 20-year average debt maturity

·      Total dividends paid of 4.12p per share (FY23: 5.16p) with 124%
dividend cover (FY23: 91%)

·      IFRS NAV benefited from the valuation of the USS debt adding
£12.8 million / 6.9 p to IFRS total return (not included in EPRA NTA)

 

Portfolio and operational highlights

 

·      Diverse portfolio of 2,975 homes worth £326 million(6)

o  £89 million reversionary surplus of vacant possession value compared to
fair value (29% uplift)

·      Portfolio focused on direct leases with pensioners and part
homeowners

·      Rent collection of over 99% for year (FY23 99%)

·      Record average retirement occupancy of 96% (FY23: 94%)
culminating in 97% record in Sept-24, alongside fully occupied shared
ownership portfolio

·      80% satisfaction levels with our in-house retirement property
management team(7)

 

Post Balance Sheet and outlook

 

·      Local authority portfolio fully divested generating £15 million
of net proceeds, slightly ahead of FY23 book value

·      Floating rate debt repaid, leaving ReSI with only long-term drawn
debt with 23-year weighted average maturity and largest loan of £94 million
fixed at 3.5% until 2043

·      Approval from shareholders to adopt a new investment policy to
affect the realisation of the portfolio and wind down:

o  Tender for potential sales agents completed with key advisers appointed

o  Portfolios and marketing material being prepared for formal launch of sale
processes

 

Ben Fry, Fund Manager, ReSI plc added:

 

"The quality of ReSI's operational business model, demonstrated by 5.8%
like-for-like rental growth, consistently strong rent collection of over 99%,
and record occupancy of 97% in retirement and 100% in shared ownership,
continues to reflect the strength of the underserved markets of affordable
purpose-built retirement living and the provision of affordable homeownership
to young families and key workers.

 

"Completion of the £15 million sale of our local authority assets in January
2025, marginally in excess of September 2023 book value, has enabled the
repayment of floating rate debt as targeted earlier in the year.

 

"Despite higher gilt yields continuing to impact our valuations, the sector
outlook remains positive, with low housing affordability and an ageing
population driving higher demand, amid the persistent shortfall in new
housing. In this environment, the strategic investments made by the Group in
high‐impact and high‐growth sectors of the UK real estate market with
stable long-term cash flows become particularly significant.

 

"We will continue to drive earnings growth and advance the sales of the
retirement and shared ownership portfolios in an orderly manner which
prioritises shareholder returns whilst ensuring the interests of residents are
protected."

 

Annual results and investor webinar

ReSI plc will host an online webinar and Q&A session to discuss the
results this morning, 22 January 2025, at 10:00am (GMT). Registration is
available here
(https://greshamhouse.zoom.us/webinar/register/WN_P5m_a5EmTXOuco4fykvUjw#/registration)
or via
https://greshamhouse.zoom.us/webinar/register/WN_P5m_a5EmTXOuco4fykvUjw#/registration

 

The accompanying presentation will be made available shortly after the webinar
on the Gresham House website
(https://greshamhouse.com/real-assets/uk-housing/residential-secure-income-plc/)
.

 

A copy of the pdf Annual Report is available here
http://www.rns-pdf.londonstockexchange.com/rns/1958U_1-2025-1-21.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1958U_1-2025-1-21.pdf)  and
on the Company's website at
https://greshamhouse.com/real-assets/uk-housing/residential-secure-income-plc/
(https://greshamhouse.com/real-assets/uk-housing/residential-secure-income-plc/)
where further information on the Company can also be found. The Annual Report
has also been submitted to the National Storage Mechanism and will shortly be
available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .

 

Notes:

1. Alternative performance measures

2. EPRA adjusted earnings is EPRA earnings adjusted for income and costs which
are not recurring and is equivalent to IFRS profit after tax before one-offs
and valuation adjustments.

3. Dividend cover measured as Adjusted EPRA earnings per share divided by
dividend per share

4. Change in %

5. Note 14 of the 2024 Annual Report and Accounts

6. Including Local Authority portfolio sold post year end

7. Source: 2024 Retirement Customer Survey

 

For further information, please contact:

 

 Gresham House Real Estate

 Ben Fry                    +44 (0) 20 7382 0900

 Sandeep Patel

 Peel Hunt LLP

 Luke Simpson               +44 (0) 20 7418 8900

 Huw Jeremy

 KL Communications          gh@kl-communications.com (mailto:gh@kl-communications.com)

 Charles Gorman             +44 (0) 20 3882 6644

 Charlotte Francis

 

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