Annual Results

RNS Number : 0913D

Civitas Social Housing PLC

24 June 2019

 

24 June 2019            

CIVITAS SOCIAL HOUSING PLC

("Civitas" or the "Company")

ANNUAL FINANCIAL REPORT

YEAR TO 31 MARCH 2019

Civitas Social Housing PLC ("Civitas" or the "Company"), a leading supported living and social housing REIT, presents its full year results for the year ended 31 March 2019.

The full Annual Report and Financial Statements can be accessed via the Company's website at www.civitassocialhousing.com or by contacting the Company Secretary by telephone on 01392 477500.

Performance Highlights

Property Valuation and Performance	March 2019	March 2018	Change
Investment property (£m)	826.9	516.6	Up 60%
IFRS NAV per share (diluted) (p)	107.08	105.54	Up 1.5%
Financial Performance	March 2019	March 2018	Change
Rent roll annualised (£m)	45.7	28.4	Up 61%
Net rental income (£m)	35.7	18.6	Up 92%
EPRA earning per share (p)	3.81	1.8	Up 112%
EPRA earning per share (diluted) (p)	3.63	1.44	Up 152%
Dividend per share (p)	5.0	3.0	Up 67%
Financing	March 2019	March 2018	Change
Loan to value ratio	22%	12%	-
Weighted average cost of debt	2.57%	2.60%	-

·      Increased investment property portfolio

·      Portfolio value up 60% to £826.9 million (IFRS)

·      Valuation net initial yield of 5.27% compared to an average net initial yield on purchase of 5.67% (5.90% before costs)

·      IFRS NAV per share (diluted) up 1.5% to 107.08 pence

·      WAULT of 24.4 years

·      All equity proceeds and £208m of borrowings successfully deployed

·      Diversified portfolio of 591 properties providing homes to over 4,000 people

·      177 properties acquired during the year

·      Providing accommodation to tenants with learning disabilities, autism, mental health disorders and also for women's refuge with an average age of 32 years

·      Properties located across half the Local Authorities in England and Wales and leased to 15 Housing Associations, with support provided by 133 Care Providers

·      Rent roll and earnings up significantly

·      Annualised rent roll up 61% to £45.7 million

·      EPRA earnings (diluted) up 157% to £22.6 million

·      EPRA earnings per share (diluted) up 152% to 3.63 pence

·      Growth combined with attractive shareholder returns

·      Final dividend proposed of 1.325p per Ordinary Share - an increase of 6% over the equivalent quarter and ahead of the inflationary increase originally envisaged

·      Total declared dividends of 5.075 pence per Ordinary Share

·      Target dividend of 5.3 pence for the financial year ended 31 March 2020

·      The total NAV return from IPO to 31 March 2019 is 7.23% p.a. (on an IFRS basis)

·      Conservative funding structure and significant interest cover

·      LTV of 22% of gross assets

·      In discussions regarding new debt funding

·      Making a positive social contribution

·      Civitas' portfolio has produced £114 million of social value - including £59 million each year of direct savings to the taxpayer 

·      Cost advantage enjoyed by Local Authorities and the improved well-being of tenants and their families, compared to institutional care

·      Working with third party consultants to provide independent verification

·      Investment Adviser team strengthened with senior industry experts

·      Including two former specialist care industry CEOs

Evolving the Business Model and Sector

·      Growing demand from tenants, backed by local and central government

·      In August 2018 the Government affirmed clear long-term support to retain the existing system of funding for supported housing from Housing Benefit, part of the Welfare Budget

·      Over 20 years of unbroken commitment across various political administrations

·      Decisive move away from institutionalisation and towards community living, which is vastly preferred by tenants and their families

·      Support from local authority commissioners for each Civitas property acquired

·      Leading various initiatives designed to help the sector mature and professionalise

·      Supporting Housing Association Boards in appointing experienced, skilled individuals

·      Private seminars for Housing Association partners to help enhance best practice and professional standards

·      Greater interaction with care providers

·      Regular, positive and productive discussions with the Regulator of Social Housing (RSH)

·      RSH recognises that this is an evolving sector

·      RSH is supportive of our initiatives to help the sector grow and mature

·      Lease adaptations proposed for Housing Associations

·      That both preserve value and introduce mitigation via "force majeure" clauses and cap and collar arrangements

·      Lease length and other general lease terms remain constant

Michael Wrobel, Chairman, said:

"The Company has made considerable progress through the year. We have deployed all the equity proceeds and £204.8 million of borrowings. At the end of the year, the Company's property portfolio was valued at £820.1 million. This is generating annualised rental income of £45.7 million together with measurable positive social impact.

"The UK has a chronic shortage of supported housing, with demand expected to increase further due to a range of factors including medical advances at birth and a growing and ageing population. The Government sponsored Personal Social Services Research Unit projects a 55% growth in supported housing needs for working age adults with learning disabilities between 2015 and 2030."

"This demand-supply imbalance along with continued government commitment to fund supported accommodation provides strong fundamentals for continued investment into the supported housing sector."

"The Company will continue to build on the successful and disciplined deployment to date and to seek opportunities to further enhance the portfolio within our capital resources. The Investment Adviser has a pipeline of properties under negotiation and in various stages of due diligence. Our confidence is reflected in our intention to target a dividend of 5.3p for the current financial year to March 2020."

For further information, please contact:

Civitas Housing Advisors Limited

Paul Bridge                                                       Tel: [phone]

Andrew Dawber                                                  Tel: [phone]

Cenkos Securities PLC

Sapna Shah                                                      Tel: [phone]

Tom Scrivens                                                    Tel: [phone]

Buchanan

Helen Tarbet / Henry Harrison-Topham                Tel: [phone]

Henry Wilson / Hannah Ratcliff                           [e-mail]

Notes to Editors:

Civitas Social Housing PLC is the first Real Estate Investment Trust specialising in supported living and social housing for adults with complex care needs. Civitas enables people to live in communities with the right care to suit their needs, rather than in institutions. Its portfolio of properties houses 4,072 people across England and Wales.

Civitas works with some of the largest care providers in the UK as well as leading specialist housing providers. For the year ended 31 March 2019 Civitas reported a portfolio value of £826.9 million with EPRA NAV per share (diluted) up 1.5% to 107.08 pence and WAULT of 24.4 years.

Civitas is advised by Civitas Housing Advisors Limited, who are authorised and regulated by the Financial Conduct Authority under Firms Reference Number 815699. The Company is listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange in November 2016.  The company has an approximate market capitalisation of £480m.

Strategic Report

 

Chairman's Statement

I am pleased to present the Company's second annual shareholder report, including the audited consolidated financial statements for the year ended 31 March 2019.

The Company has made considerable progress through the year. We have deployed all the equity proceeds and £208.4 million of borrowings, the latter representing an LTV of 22% of gross assets. At the end of the year, the Company's property portfolio was valued at £820.1 million, having increased from £516.2 million and including a revaluation gain of £3.7 million. The valuation represents a net initial yield of 5.27% compared to an average net initial yield on purchase of 5.67% (after initial purchase costs).

The Company's IFRS NAV has increased by 1.5% to 107.08p per share. The total return from IPO to 31 March 2019 is 7.23% p.a. (on an IFRS basis) and 11.93% p.a. (on a Portfolio Valuation basis), incorporating profit for the period of £19.9 million.

During the period the annualised rent roll increased by 61% to £45.7 million, resulting in EPRA earnings of £22.6 million and EPRA diluted earnings per share of 3.63p. For the financial year ended 31 March 2019, the Company's ongoing charges were 1.36%.

The Company has declared total dividends of 5.075p per Ordinary share for the year ended 31 March 2019, comprised of three quarterly dividends on the Ordinary shares of 1.25p (in line with the target in the launch IPO Prospectus) and a final dividend of 1.325p per Ordinary share, an increase of 6% over the equivalent quarter and ahead of the inflationary increase originally envisaged. The Company intends to target a dividend of 5.3p per Ordinary share for the financial year ending 31 March 2020.

The Board is grateful for the support and encouragement of the Company's shareholders and the hard work of our advisers and service providers. The Company along with its Investment Adviser is delivering positive financial and social outcomes which are providing direct savings to tax payers.

Portfolio

During the year, a total of 177 properties were acquired, having met the Company's stringent due diligence requirements. At the year end the overall portfolio comprised 591 properties located across half the Local Authorities in England and Wales and leased to 15 Housing Associations, with support provided by 113 care providers. As well as representing the largest and most diversified portfolio of supported housing, the Company's reputation as a knowledgeable and reliable counterparty has materially enhanced the levels of incoming investment enquiry.

The Company now provides homes to over 4,000 tenants with learning disabilities, autism, mental health disorders and also for women's refuge. 

Following the events at First Priority Housing Association, where in May 2018 we assigned all our leases on the same terms to Falcon Housing Association, we have increased the extent of our interaction with the care providers who provide primary care services to the tenants in our properties and who support payment against voids. We have also used specialist consultants to speak directly with all Local Authority commissioners on an individual basis to confirm their full support for each property acquired.

Civitas's Social Impact and Continuing Political Commitment to the Sector

The Company's provision of supported housing continues to make a significant positive social impact. This is driven by the cost advantage enjoyed by Local Authorities and the improved well-being of tenants and their families, compared to institutional care. This is based on independent verification, using HM Treasury Green Book metrics and reports from The Social Profit Calculator and The Good Economy Partnership. Further information is available on the Company's website (http://civitassocialhousing.com/investor-relations/reports-ans-publications/). 

These benefits are also contributing to increasing long-term demand. It is most likely that this growth will need to be financed by the private sector. In this regard Laing Buisson¹ reports that none of the political parties seeks to pose any ideological threat to the independent social care sector and that, driven by lower costs and better value for money, over 93% of publicly paid adult specialist care services are now outsourced to the independent sector.

Against this background, in 2018 the government announced that it will continue to fund all supported housing rents through the welfare system (Housing Benefit) and will not subject rents to mainstream Local Housing Allowance caps.

This confirmation of the government's long-term commitment to supported housing has been reflected by the Company's experience on the ground, in direct interaction with Local Authorities, namely that properly commissioned properties will achieve long-term Local Authority commissioner support for the appropriate rent levels required to support the Company's leases.

Regulation and Improving Industry Standards

Given the specialist sector's growth, the Regulator of Social Housing ("RSH") has begun to review many of the Housing Associations with whom we work, for the first time. The RSH has also published a report on the risks facing the industry and the consequent need for risk mitigation plans. During a panel discussion at the Social Housing Finance Conference in London, the RSH referred to the industry's "growing pains" and areas that require improvement, whilst noting that there were no inherent problems with the industry model. We are aligned with this approach and our Investment Adviser offers its team's considerable social housing expertise to assist our counterparties, for example, on governance structures and adding operational skills.

The structure of the industry and inherent risks are accounted for by Jones Lang LaSalle, when undertaking the independent valuation of our properties. There have been no material impacts on our ability to collect the rental income due from our leases.

Share Price and Rating

The Board notes the recent share price performance of the Company and its peer group and the resultant move from a premium to a discount to the Net Asset Value. The Board regularly monitors the share rating and reviews options by which we can seek to improve the position. All options considered will take into account the interests of shareholders as a whole and be balanced against protecting the Company's long-term standing in the sector and its relationships with important counterparties with whom the Company is negotiating asset purchases.

AGM and AGM Resolutions

The third Annual General Meeting ("AGM") of the Company will be held at 2.00 p.m. on Thursday, 5 September 2019 at 3 More London Riverside, London, SE1 2AQ. There will be a presentation from the Investment Adviser, Civitas Housing Advisors Limited. The full AGM notice has been posted to all shareholders and also can be found on the Company's website (http://civitassocialhousing.com/investor-relations/reports-and-publications/).

Within the AGM notice, the Company has included a shareholder resolution asking for approval to amend the Company's investment policy to allow investments to be made Scotland and Wales. Both these parts of the UK have a welfare benefit system that is similar to that in England and Wales with policies that are regarded as at least as supportive of the provision of social housing as those in England and Wales. The Company's core focus will remain England and Wales.

Scotland and Northern Ireland have experienced issues of shortage in respect of affordable housing and the Company wishes to be in a position to consider investments in these parts of the UK, should any meet its criteria for investment.

In addition, the Company is also seeking shareholder approval to increase the maximum aggregate annual remuneration payable to Directors from £200,000 to £250,000 as set out in the Company's Articles of Association. The Board is currently in the process of seeking to appoint at least one additional Director to broaden the skills and diversity of the Board, and therefore this proposed change will provide headroom for future appointments and future increases in remuneration. As set out in the Directors' Remuneration Report for the year ended 31 March 2019, no increase in the current level of Directors' fees is being proposed.

Outlook

The UK has a chronic shortage of supported housing, with demand expected to increase further due to a range of factors including medical advances at birth and a growing and ageing population. The Government sponsored Personal Social Services Research Unit projects a 55% growth in supported housing needs for working age adults with learning disabilities between 2015 and 2030.

This demand-supply imbalance along with continued government commitment to fund supported accommodation provides strong fundamentals for continued investment into the supported housing sector.

The Company will continue to build on the successful and disciplined deployment to date and to seek opportunities to further enhance the portfolio within our capital resources. The Investment Adviser has a pipeline of properties under negotiation and in various stages of due diligence. Our confidence is reflected in our intention to target a dividend of 5.3p for the current financial year to 31 March 2020.

Michael Wrobel

Chairman

21 June 2019

¹ Laing Buisson Adult Specialist Care Third Edition 2019.

Analysis of property portfolio as at 31 March 2019

Geographically Diversified

Region	Properties	% of funds invested	% of rental income
North West	95	10.1%	10.1%
West Midlands	94	11.9%	11.9%
Wales	15	8.3%	8.3%
South West	112	14.7%	14.5%
North East	63	7.0%	7.0%
Yorkshire	49	10.9%	10.7%
East Midlands	58	9.6%	9.5%
East of England	18	2.8%	2.7%
London	26	14.1%	14.5%
South East	61	10.6%	10.8%

Market Value by Region¹

Region	Market Value
South West	14.7%
London	14.1%
West Midlands	11.9%
Yorkshire	10.9%
South East	10.6%
North West	10.1%
East Midlands	9.6%
Wales	8.3%
North East	7.0%
East of England	2.8%

Assets by Region ¹

Region	Assets
South West	112
North West	95
West Midlands	94
North East	63
South East	61
East Midlands	58
Yorkshire	49
London	26
East of England	18
Wales	15

¹As at 31 March 2019, including completed properties only.

Diversified by Registered Provider

Rental Income by Registered Provider¹

Registered Provider	Rental Income
Falcon	20.9%
Westmoreland	19.7%
BeST	11.4%
Auckland	11.3%
Inclusion	8.3%
Encircle	6.3%
Trinity	5.7%
Pivotal	4.1%
Chrysalis	3.4%
New Walk	3.0%
Harbour Light	2.4%
My Space	1.2%
IKE	1.2%
Hilldale	1.0%
Blue Square	0.1%

 

Assets by Registered Provider¹

 

Registered Provider	Number of Properties
Falcon	115
Westmoreland	108
BeST	71
Inclusion	60
Trinity	43
New Walk	41
Auckland	30
Pivotal	27
Harbour Light	26
Chrysalis	20
Encircle	16
Hilldale	15
IKE	10
My Space	8
Blue Square	1

Market Value by Registered Provider¹

Registered Provider	Market Value
Falcon	21.2%
Westmoreland	19.6%
BeST	11.5%
Auckland	11.4%
Inclusion	8.3%
Encircle	5.9%
Trinity	5.7%
Pivotal	4.1%
Chrysalis	3.4%
New Walk	3.0%
Harbour Light	2.4%
IKE	1.2%
My Space	1.2%
Hilldale	1.0%
Blue Square	0.1%

Tenancies by Registered Provider¹ 

Registered Provider	Tenancies
Falcon	848
Westmoreland	612
BeST	516
Inclusion	421
Auckland	296
Trinity	242
Pivotal	238
Encirle	205
New Walk	194
Harbour Light	182
Chrysalis	136
My Space	71
IKE	68
Hilldale	39
Blue Square	4

¹ As at 31 March 2019, including completed properties only.

Investment Adviser's Report 

"Civitas Housing Advisors Limited ("CHA"), the Investment Adviser to the Company, is pleased to report on the second period of operation for the Company for the period from 1 April 2018 to 31 March 2019." Paul Bridge, Chief Executive Officer, Civitas Housing Advisors Limited

Introduction

Civitas is a leading supported living and social housing property investor which is pursuing a clear growth strategy whilst spearheading the maturation and professionalisation of the sector in which it operates.

We made considerable progress through the year, firstly in implementing our strategy, and secondly in working with all stakeholders to drive the development of supported living provision in England and Wales.

Rental Income

The Company's rental income has grown substantially during the year as additional properties were acquired and existing properties enjoyed annual indexation of rents.

As at 31 March 2019, the run rate level of rental income was £45.7 million (2018: £28.4 million) and this is anticipated to grow further as additional bank finance is secured and invested into supported housing properties to achieve the target average 35% leverage based on gross assets.

The run rate rental income is supported by a broadly-based portfolio and as at 31 March 2019 the key statistics of the portfolio are set out below.

Key Statistics as at 31 March 2019

Period	31 March 2018	30 June 2018	30 September 2018	31 December 2018	31 March 2019
Investment (£m)	472	508	619	674	755
Properties	414	440	521	557	591
Tenancies	2,621	2,845	3,440	3,746	4,072
Local Authorities	109	123	140	144	157
Housing Associations	11	12	15	15	15
Care Providers	64	71	93	98	113
WAULT (years)	24.1	25.4	25.1	24.7	24.4

Investment Strategy

The Company has continued to pursue the strategy to build a high-quality and diversified portfolio of social housing with a majority focus on housing for individuals with long-term care needs.

As at 31 March 2019, the Company has built one of the largest and most diversified such portfolios in England and Wales providing long-term stable accommodation for over 4,000 underlying tenants.

The portfolio has been structured to date with the intention of achieving the following objectives:

·      Steady income for shareholders and capital growth

·      Properties to be within the social/government/local authority sponsored sectors in England and Wales where the requirement to provide accommodation is supported by government legislation

·      Achieve diversification from working with a wide range of Local Authorities, Housing Associations and care providers 

·      Provide accommodation for individuals with a range of long-term care-based needs and support other local authority accommodation requirements including homelessness, addiction, domestic violence and NHS step down in addition to general needs social housing

·      Rental income to be met wholly or substantially from state funds. In the case of care-based Specialist Supported Housing (almost 100% of the portfolio today), this is expected to be 100% state funded

·      Long-term leases signed with Registered Providers (Housing Associations and Local Authorities) to enable them to offer accommodation on a long-term basis to individuals often with life-long care needs

·      Leases to benefit from indexation and typically to be repairing and insuring

·      Properties whose rental income, valuation and demand profile has a low correlation to the general economy, residential or commercial property sectors

·      Measurable social impact that promotes the well-being of tenants and offers value for money for the state.

Strengthening the Team

During the year we have continued to strengthen the Investment Advisory team and to widen its skills base with expertise in social housing and social care.

Much has been written recently of the growing importance of Local Authority and individual preference for supported housing as a means of delivering high-quality care in the community that also offers value for money.

An understanding of both healthcare delivery and social housing need is firmly built into our eight-step due diligence process that governs how we assess and due diligence potential acquisitions of supported housing.

To complement our expertise in social housing we have added senior resource from the care industry both at a corporate and an operational level, including the recruitment of two former specialist care industry CEOs.

Reflecting the growing scale of the portfolio, we have also appointed a new director of asset management with 30 years' experience gained from working at a senior level in some of the largest Housing Associations in the UK and managing large portfolios of social homes and care homes.

Market Update

The supported housing sector continues to experience strong growth, and this is predicted to increase significantly into the future. The sector has recently enjoyed the most significant growth in investment (CAGR 7.8%) of all parts of adult specialist care in the UK^1.

Investors of various types have responded to the strong demand for the provision of long-term supported housing and have been encouraged in this by the clear statements of support made by the Government. In August 2018, the Government made the following announcement:

"Ministers recognise that supported housing is a vital service for some of the most vulnerable people in our communities, and last year consulted on possible alternative funding options. Having listened to views from providers, stakeholders and councils, the Government has decided housing benefit will remain in place to fund this accommodation"

Whilst there was no suggestion that state funding would not be available to meet both care and accommodation costs of vulnerable adults, the fact that the current system of provision from central Government, in the form of Housing Benefit, has been reaffirmed, was taken very positively by the sector. It is also worth noting that no political party dissented from this view and there does not appear to be any difference of opinion amongst the mainstream political parties on the principle that vulnerable people who cannot work should receive full state support for their care and accommodation.

Against this positive macro background, smaller specialist Housing Associations ("RPs") are becoming further engaged in the sector as registered providers and lessees, with a number passing the 1,000-unit milestone that brings about increased scrutiny from the Regulator of Social Housing ("RSH").

We welcome this scrutiny as evidence of the increasingly important role our sector plays in housing provision in England and Wales. We interact very regularly with the RSH and are pleased to report that we have a highly positive and productive working relationship with them. We know the RSH is actively working through the various issues that it has raised, and we are contributing via our Housing Association partners to that work where that is appropriate. We believe that the RSH is supportive of the initiatives we are undertaking to strengthen and professionalise the sector in which we operate.

During a panel discussion at the Social Housing Finance Conference in London, which Civitas co-hosted, the RSH acknowledged the industry's "growing pains" and areas for improvement, whilst noting that there was "nothing inherently wrong" with the industry model. We are actively involved in working with all our RP counterparties to help them grow and improve, providing, for example, advice on governance structures and adding operational skills.

The initiatives we are undertaking include a series of unique private seminars for all our 15 Housing Association partners (RPs).

During 2018/19, these on-going seminars have focused on the following subjects with a view to enhancing quality, best practice and professionalism:

·      March 2018 - Governance and Regulatory Health Checks

·      June 2018 - Manchester Chartered Institute of Housing Conference/Dealing with Growth

·      October 2018 - Understanding the Civitas Eight-Step Due Diligence Protocol

·      April 2019 - The Civitas Social Value Project

·      May 2019 - Sector Perceptions and Increasing Understanding of Value Add

In addition to this ongoing activity (which complements and supports our more formal due diligence and monitoring activities), at our recent Capital Markets Day (http://civitassocialhousing.com/capital-markets-day-presentation/) we set out some of the other practical ways in which we have lent our support to our RP partners.

In summary the activities we have undertaken in 2018/19 include the following:

·      Engagement with asset management reviews

·      Recommendation of new independent board members with leading sector experience

·      Review of health and safety procedures and audits

·      Comment on the structure and delivery of risk appraisals and business plans including for presentation to the RSH

·      Supporting staff recruitment

·      Assistance in the review of group and operational structures

We would anticipate that as the RPs continue to mature and improve, this will be acknowledged and reflected in the RSH's commentary on the sector.

Leases

The Company has typically entered into long-term inflation adjusted leases for periods in excess of 20 years with RPs, where management and maintenance are provided by the RPs. The Company's portfolio currently has a WAULT of 24.4 years.

In approximately a third of the Company's portfolio, the leases with the RPs are supported by agreements of the same 20-year-plus length with the underlying care provider. Through these agreements, the care provider is in effect taking responsibility for broader lease obligations around rent and occupancy. The remainder of the portfolio benefits from more standard underlying service level agreements with the care provider which would be expected to be rolled into a new service level agreement at the end of the initial period. 

Where the counterparty is a Local Authority, or where we believe it is in the Company's interest, the Company may (as noted at the time of IPO) consider unexpired leases of not less than 10 years. This would reflect common constraints on Local Authorities from entering into longer-term arrangements.

As part of our assessment of the supported housing sector we have also given active consideration to the structure of leases that are entered into with RPs by the Company and other landlords. We have used our long-standing experience of different mainstream and "alternative" real estate sectors and economic and social infrastructure investment markets to provide a form of benchmarking.

This has led to discussions with a number of our larger housing association partners, with JLL, with our lenders and also directly with the RSH who are seeking to promote better contingency planning as opposed to commenting formally on lease-length or constitution.

The principal objectives of this review have been two-fold. Firstly, to set out more formally the steps we would take in the very unlikely event that the formal action of government or local authorities reduces directly the ability of the RPs to meet their obligations under the leases with the Company even when all forms of mitigation are taken into account. This has commonly been referred to as a "Force Majeure Clause". Secondly, to ensure that where it is deemed appropriate, there should be a form of "collar" and "cap" on the growth of indexation under the leases.

Both of these are common features that are seen regularly in other real estate sectors, do not affect valuations and are acceptable to stakeholders. 

From our discussions we expect that changes such as these will be appreciated both by the RPs and by the RSH.

Working with Care Providers

The provision of care within the properties owned by the Company is a fundamental driver of both the demand for supported housing and the ability of properties to be defined as exempt Specialist Supported Housing. This in turn affects the rent and service charge levels that can be achieved and sustained.

Understanding the extent and nature of the care delivery is therefore an essential part of the overall due diligence process. We have placed considerable focus during the year on our relationships with care providers, as they are a key driver of the success of our strategy.

During the year, where we have been offered properties in which the extent of the care provision (typically measured by care hours per person per week) is in our view limited or marginal, we have declined those properties on the basis that their status as exempt Specialist Supported Housing could be open to challenge in the future.

The provision of specialist care is a fragmented sector with many small, local providers and a limited number of larger national providers. The Company has sought to focus as far as possible on the larger providers which have depth of experience and a wide network.

The Company does not enter into any agreements directly with care providers (these are between the care provider and the Local Authority, Housing Association and the tenant) and has no legal or other responsibility for the delivery or quality of care. That said, we take an active interest in the quality and amount of care that is being provided as part of our asset selection, due diligence and monitoring activities.

For-profit care providers within the top 25¹ (measured by number of beds) in the UK (as at December 2018) out of approximately 20,000 care providers are responsible for the delivery of care into 34% of the Company's portfolio. By comparison, those same care providers are responsible (as at December 2018) for 11% of the beds within the overall adult specialist healthcare sector in the UK.

This is a result of our strategy of seeking to work with these larger, more mature care providers whilst not ignoring the merits of the best of breed local organisations.

In addition, the Company also works with five out of the top 10 care providers who represent 20% of the Company's portfolio.

1. Priory Group

2. Voyage Care

3. CareTech,

4. Lifeways Group

5. Exemplar

= 20%* (of Civitas Portfolio)

* This does not include National Care Group who provide care services to approximately 12% of the Civitas properties, but who operate via a number of individual care providers that are separately represented in league tables but if taken together would likely be in the top 10.

The benefits of building long-term strategic relationships with care providers are clear:

i)          They assist with the eight-step due diligence programme and with our ongoing monitoring

ii)          They have also become a catalyst for the origination of high-quality properties both built and to be acquired on completion

iii)         Most importantly, they provide a high standard of care for our tenants.

Social Impact Investing

The Investment Adviser with its Head of Impact Investment has, since IPO, established embedded processes that evaluate the social impact that is delivered from its investment activities and portfolio, with a particular focus on helping tenants achieve improved outcomes in their lives, providing value for money, cost saving for the public purse and increasing the quality and availability of social housing.

Specialist social impact consultants, The Good Economy, have recently published an independent Annual Impact report which confirms that Civitas is "an authentic impact investor according to the IFC Principles for Impact Management".

This report has been based on extensive research undertaken by The Good Economy incorporating site visits, meetings with tenants and their families and discussions with local authority commissioners, RPs, care providers and the RSH.

This report formed the backbone for a further independent study by the Manchester-based consultants, the Social Profit Calculator, with the aim of attaching a monetary value to the social impact and value for money that are driven from the Company's portfolio. The study is based upon government metrics utilising HM Treasury's Green Book data.

The study considered a wide range of tenants in detail and measured the monetary value from improved health and wellbeing, reduced isolation and improved relationships, the benefits of independent living and in certain instances the enhanced opportunity for employment and attaining qualifications. 

They reported that Civitas' portfolio has produced £114 million of social value - including £59 million each year of direct savings to the taxpayer, and when projected over the course of our leases it equates to more than £1 billion in potential savings to the taxpayer. This reflects the fact that enabling disabled people to live in the community is not only much better for their wellbeing, but also significantly cheaper for the taxpayer than other forms of accommodation such as institutions.  

The Social Profit Calculator and The Good Economy Partnership calculated that £3.50 is created in social value for every £1 which Civitas has invested.

Further information on the social value created by the Civitas portfolio can be found in the Good Economy's latest Impact Report, available on the Company's Website (http://civitassocialhousing.com/investor-relations/reports-and-publications/)

Looking Ahead: The Investment Pipeline

The Investment Adviser has been successful in establishing strategic relationships with a wide range of property vendors including national care providers, regional and local developers, RPs and Local Authorities.

Having led the completion of over 100 transactions, the Company enjoys a leading reputation in the markets in which it operates and has demonstrated a proven ability to design and structure transactions that have led to successful acquisitions for the Company.

As we mention at the start of the report, the Investment Adviser's team has been expanded so that it now includes senior professionals with both operational care and social housing experience in addition to skills in real estate, investment funds and corporate finance.

This combination has been noted by asset owners, sector professionals and advisers and has resulted in an increase in the range and depth of projects to which we are introduced, often being the first or only party to be approached. The sources of potential property purchases, both built and in construction to be acquired on completion, is today being obtained from four main sources:

·      National and Regional Care Providers

·      Housing Associations and Local Authorities

·      Regional and Local Specialist Developers

·      National and Regional Charities

·      Other Private Sector owners of Assets

As a result of the Company's strategic relationships in the sector, the investment pipeline continues to build and today stands at £210 million of potential transactions in various stages of due diligence. These transactions, which are subject to the successful completion of the Company's due diligence process, reflect non-legally binding commitments and are representative of the Company's reputation in the sector. The first of these transactions are likely to be able to complete in the next couple of months.

As part of the Company's plans to seek further diversification within the specialist areas of the regulated social housing sector, we anticipate that, in due course, pipeline transactions will include not just homes for tenants with care needs based around learning disability and autism, but also dependency, homelessness, key worker and the desire to release hospital beds through the use of "step down" accommodation associated with the NHS. In each case, the Company intends to operate the same or similar model with a Housing Association entering into a long-term arrangement with the Company and providing on the ground property services.

We are also exploring opportunities in both Scotland and Northern Ireland.

We look forward to continued progress over the forthcoming months as we continue to implement our strategy and grow and diversify our portfolio.

Civitas Housing Advisors Limited

Investment Adviser

21 June 2019

¹ Laing Buisson Adult Specialist Care Third Edition 2019.

Corporate Social Responsibility Report

Sustainability

The business model of the Company is to provide long-term suitable homes for individuals with care needs; acting in a sustainable manner is key to achieving this aim. The property of the Company is tailored to meet the future needs of the tenants and where required is actively asset managed to provide long-term functionality and value to the wider community.  

Environment

During the investment due diligence phase the Company looks closely at the environmental impact of each potential acquisition, and encourages a sustainable approach for maintenance and upgrading properties. Through partnering with specialist developers and vendors, the high standards the Company expects from each investment in the supported housing sector is adopted by other companies in the sector.

Once within the portfolio, the properties of the Company are actively asset managed, with opportunities to improve environmental efficiencies factoring heavily in addition to other asset management initiatives.

The Board has considered the requirements to disclose the annual quantity of emissions; further detail on this is included in the Report of the Directors in the full Annual Report.

Diversity

The Company does not have any employees or office space, as such the Company does not operate a diversity policy with regards to any administrative, management and supervisory functions.

Whilst recognising the importance of diversity in the boardroom, the Company does not consider it to be in the interest of the Group and its shareholders to set prescriptive diversity criteria or targets. The Board will continue to monitor diversity, taking such steps as it considers appropriate to maintain its position as a meritocratic and diverse business.

The Board's objective is to maintain effective decision-making, including the impact of succession planning. All Board appointments will be made on merit and have regard to diversity regarding factors such as gender, ethnicity, skills, background and experience.

The Board comprises three male and one female non-executive Directors.

The boards of directors of the Company's subsidiaries each comprise up to four male and no female directors.

Human Rights

The Company is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and is therefore not obliged to make a slavery and human trafficking statement.

The Board is satisfied that, to the best of its knowledge, the Company's principal advisers, which are listed in the Company Information section of the full Annual Report, comply with the provisions of the UK Modern Slavery Act 2015.

The Company's business is solely in the UK and therefore is considered to be low risk with regards to human rights abuses.

Community and Employees

The Company's properties enable the provision of care to some of the most vulnerable people in the community, ensuring safe and secure accommodation, tailored to meet individual care needs. The Company has increased the provision of Specialist Supported Housing, bringing new supply to the sector and providing homes to over 4,000 people. All of the Company's properties enable the provision of high levels of care, generating local jobs and helping to support local economies.

The Company has no employees and accordingly no requirement to separately report on this area.

The Investment Adviser is an equal opportunities employer who respects and seeks to empower each individual and the diverse cultures, perspectives, skills and experiences within its workforce.

Investment Objective and Policy

 

Investment Objective

The Company's investment objective is to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes, which benefits from inflation adjusted long-term leases or occupancy agreements with Registered Providers and to deliver, on a fully invested and geared basis, a targeted dividend yield of 5% per annum, which the Company expects to increase broadly in line with inflation.

Investment Policy

The Company's investment policy is to invest in a diversified portfolio of social homes throughout England and Wales. The Company intends to meet the Company's investment objective by acquiring, typically indirectly via Special Purpose Vehicles ("SPVs"), portfolios of social homes and entering into long-term inflation adjusted leases or occupancy agreements for terms primarily ranging from 10 years to 40 years with Registered Providers, where all management and maintenance obligations will be serviced by the Registered Providers. The Company will not undertake any development activity or assume any development or construction risk. However, the Company may engage in renovating or customising existing homes, as necessary.

The Company may make prudent use of leverage to finance the acquisition of social homes and to preserve capital on a real basis.

The Company is focused on delivering capital growth and expects to hold its Portfolio over the long term and therefore it is unlikely that the Company will dispose of any part of its Portfolio. In the unlikely event that a part of the Portfolio is disposed of, the Directors intend to reinvest proceeds from such disposals in assets in accordance with the Company's investment policy.

Investment restrictions

The Company invests and manages the Portfolio with the objective of delivering a high quality, diversified Portfolio through the following investment restrictions:

·      the Company only invests in social homes located in England and Wales;

·      the Company only invests in social homes where the counterparty to the lease or occupancy agreement is a Housing Association or Local Authority;

·      no lease or occupancy agreement shall be for an unexpired period of less than 10 years, unless the shorter leases or occupancy agreements represent part of an acquisition of a portfolio which the Investment Adviser intends to reorganise such that the average term of lease or occupancy agreement is increased to 15 years or above;

·      the aggregate maximum exposure to any single Local Authority or single Housing Association is 25% of the Gross Asset Value, once the capital of the Company is fully invested;

·      no investment by the Company in any single geographical area, in relation to which the houses and/or apartment blocks owned by the Company are located on a contiguous or largely contiguous basis, exceeds 20% of the Gross Asset Value of the Company;

·      the Company only acquires completed social homes and will not forward finance any development of new social homes;

·      the Company does not invest in other alternative investment funds or closed-end investment companies; and

·      the Company is not engaged in short selling.

The investment limits detailed above apply at the time of the acquisition of the relevant investment in the Portfolio once fully invested. The Company would not be required to dispose of any investment or to rebalance the Portfolio as a result of a change in the respective valuations of its assets.

Gearing limit

The Directors seek to use gearing to enhance equity returns. The level of borrowing is set on a prudent basis for the asset class and seeks to achieve a low cost of funds, whilst maintaining the flexibility in the underlying security requirements and the structure of both the Portfolio and the Company.

The Company may, following a decision of the Board, raise debt from banks and/or the capital markets and the aggregate borrowings of the Company is always subject to an absolute maximum, calculated at the time of drawdown, of 40% of the Gross Asset Value.

Debt is secured at asset level, whether over a particular property or a holding entity for a particular series of properties, without recourse to the Company and also potentially at Company level with or without a charge over the Portfolio (but not against particular assets), depending on the optimal structure for the Company and having consideration to key metrics including lender diversity, cost of debt, debt type and maturity profiles.  Otherwise there will be no cross-financing between investments in the Portfolio and the Company will not operate as a common treasury function between the Company and its investments.

Use of derivatives

The Company may choose to utilise derivatives for efficient portfolio management.  In particular, the Directors may engage in full or partial interest rate hedging or otherwise seek to mitigate the risk of interest rate increases on borrowings incurred in accordance with the gearing limits as part of the management of the Portfolio.

Cash management

Until the Company is fully invested, and pending re-investment or distribution of cash receipts, the Company invests in cash, cash equivalents, near cash instruments and money market instruments.

REIT status

The Directors conduct the affairs of the Company so as to enable it to remain qualified as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations made thereunder).

Key Performance Indicators ("KPIs")

Measure	Explanation	Result
Capital deployed	Target of deploying the C share proceeds by 31 December 2018 or earlier.	The C share proceeds were materially deployed by 31 December 2018. Total of £754.8 million invested to 31 March 2019, representing Ordinary and C share equity and debt.
Increase in IFRS and Portfolio NAV per share	Target to achieve capital appreciation whilst maintaining a low risk strategy from enhancing the quality of cash flows from investments, by physical improvement of properties and by creating a significantly diversified, high-quality portfolio.	IFRS NAV increase of 9.1p per share or 9.3% from IPO. Portfolio NAV increase of 21.1p per share or 21.5% from IPO.
Dividend per share	Targeting 5p per share per annum for the second year growing broadly in line with inflation.	Dividends of 5p per share declared for the calendar year to 31 December 2018.
Number of Local Authorities, Housing Associations and care providers	Target risk mitigation through a diversified portfolio (once fully invested) with no more than 25% exposure to any one Local Authority or single Housing Association and no more than 20% exposure to any single geographical area, once the capital of the Company is fully invested.	As at 31 March 2019: • 157 Local Authorities • 15 Housing Associations • 113 care providers The Company's largest single exposure is to Falcon Housing Association and currently stands at 21%. The largest geographical concentration is in the South West, being 14.7%.
Loan to Gross Assets	Target debt drawn of 35% of gross assets.	Leverage as at 31 March 2019 of 22% of gross assets with facilities in negotiation to achieve the target in due course.

Alternative Performance Measures

EPRA

The Company is a member of the European Public Real Estate Association ("EPRA"). EPRA has developed and defined the following performance measures to give transparency, comparability and relevant financial reporting across entities which may use different accounting standards. The Company is pleased to disclose the following measures which are calculated in accordance with EPRA guidance:

EPRA Performance Measure	Definition	EPRA Performance Measure	31 March  2019	31 March  2018
Earnings	Earnings from operational activities.	EPRA Earnings	£16,212,000	£6,293,000
		EPRA Earnings per share (basic)	3.81p	1.80p
		EPRA Earnings per share (diluted)	3.63p	1.44p
EPRA NAV	Net Asset Value adjusted to include properties and other investment interest at fair value and to exclude certain items not expected to crystallise in a long-term investment property business model.	EPRA Net Asset Value	£666,508,000	£668,147,000
		EPRA NAV per share (diluted)	107.08p	105.54p
EPRA NNNAV	EPRA NAV adjusted to include the fair values of (i) financial instruments, (ii) debt and (iii) deferred taxes.	EPRA NNNAV	£665,858,000	£667,435,000
		EPRA NNNAV per share (diluted)	106.97p	105.43p
EPRA Net Initial Yield	Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property with (estimated) purchasers' costs.	EPRA Net Initial Yield	5.27%	5.27%
EPRA 'Topped-up' NIY	This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free-periods (or other unexpired lease incentives such as discounted rent periods and stepped rents).	EPRA 'Topped-up' Net Initial Yield	5.27%	5.27%
EPRA Vacancy Rate	Estimated Market Rental Value ("ERV") of vacancy space divided by ERV of the whole portfolio.	EPRA Vacancy Rate	0%	0%
EPRA Costs Ratio	Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income.	EPRA Costs Ratio	26.95%	47.80%
		EPRA Costs Ratio (excluding direct vacancy costs)	26.98%	47.80%

For detailed workings reconciling the above measures to the IFRS results please see Appendix 1 to these financial statements.

Adjusted Performance Measure	Definition	Performance Measure	31 March    2019	31 March  2018
Portfolio NAV	IFRS NAV adjusted to reflect investment property valued on a portfolio basis rather than on an individual asset basis	Portfolio NAV	£741,170,000	£398,505,000
		Portfolio NAV per share	119.07p	113.86p
Company Adjusted Earnings	Company Specific Earnings Measure which adds back the finance costs associated with the C share financial liability	Adjusted Earnings	£22,612,000	£9,085,000
		Adjusted Earnings per share	3.63p	2.60p

For detailed workings reconciling the Portfolio NAV to the IFRS results please see note 16 to these financial statements. For detailed workings reconciling the Company Adjusted Earnings to the IFRS results please see Appendix 1 to these financial statements.

Principal Risks and Risk Management

The Board considers that the risks detailed below are the principal risks facing the Group currently, along with the risks detailed in note 33 to the financial statements. These are the risks that could affect the ability of the Company to deliver its strategy. The Board confirms that the principal risks of the Company, including those which would threaten its future performance, solvency or liquidity, have been robustly assessed throughout the year ended 31 March 2019, and that processes are in place to continue this assessment. Further detail of risk management processes that are in place can be found in the Corporate Governance Statement in the full Annual Report. The principal risks and uncertainties relating to the Group are regularly reviewed by the Board along with the internal controls and risk management processes that are used to mitigate these risks. The principal risks and management of those risks are described below:

Principal risks and uncertainties

1. Strategy and competitiveness risks	Impact	How managed/mitigated
The Company and its operations are subject to laws and regulations enacted by national and local governments and government policy.	Any change in the laws, regulations and/or government policy affecting the Company and its operations may have a material adverse effect on the ability of the Company to successfully pursue its investment policy and meet its investment objective and on the value of the Company and the shares.	The Company focuses on niche real estate sectors where it believes the regulatory framework to be robust. The Board obtains regular updates from professional advisers to monitor developments in regulation and legislation.	Impact: Very High Probability: Unlikely
2. Strategy and competitiveness risks	Impact	How managed/mitigated
As a result of competition from other purchasers of social housing properties the Company's ability to deploy capital effectively within a reasonable timeframe may be restricted or the net initial yields at which the Company can acquire properties may decline such that target returns cannot be met.	The rate of capital deployment would drop, decreasing returns to shareholders.	The Company has strong links with vendors and a robust pipeline of future acquisitions. The Board regularly reviews the pipeline of potential acquisitions.	Impact: High Probability: Unlikely
3. Investment management risk	Impact	How managed/mitigated
Tenant defaulting under the terms of a lease.	Loss of rental income in the short term.	The portfolio is diversified to reduce the impact of default. Extensive diligence is undertaken on all assets, which is reviewed and challenged by the Board. The Board is provided with regular updates on the tenants with any concerns raised for discussion.	Impact: Medium Probability: Likely
4. Investment management risk	Impact	How managed/mitigated
The value of the investments made by the Company may change from time to time according to a variety of factors, including movements in interest rates and in inflation and general market pricing of similar investments.	The valuation of the Company's assets would fall decreasing the Net Asset Value of the Company.	The Company invests in projects with stable predetermined, long-term leases in place with CPI or CPI plus 1% indexation and its strategy is not focused on sale of properties. The Board receives regular updates on factors that might impact investment  valuations.	Impact: High Probability: Unlikely
5. Investment management risk	Impact	How managed/mitigated
Due diligence may not reveal all facts and circumstances that may be relevant in connection with an investment and may not prevent an acquisition being materially overvalued or rental streams being at risk.	The Company would over pay for assets impairing shareholder value, reducing rental income and therefore returns.	The Company undertakes detailed due diligence on the properties, their condition, the proposed rental levels - benchmarking against comparable schemes using both external consultants where required and its own proprietary database - and on the Registered Providers and care providers involved in each property to ensure that the purchase price is robust. The Board considers the due diligence undertaken when approving acquisitions.	Impact: High Probability: Unlikely
6. Investment management risk	Impact	How managed/mitigated
Loss of key staff at the Investment Adviser.	Negative investor sentiment leading to a reduction in share price. Reduction in ability to source off market and favourable deals.	The Board considers the risk of the Investment Adviser losing key staff and the succession plans the Investment Adviser has in place.	Impact: High Probability: Unlikely
7. Investment management risks	Impact	How managed/mitigated
Failure to monitor that contingent activities are completed by the RPs or other parties.	Deterioration in the underlying quality, and therefore value of the Company's property.	Contingent actions are regularly monitored and followed up. The Board is kept appraised of any breach of lease obligations	Impact: Medium Probability: Unlikely
8. Investment management risks	Impact	How managed/mitigated
Lack of availability for debt financing or other capital.	The rate of capital deployment would drop decreasing returns to shareholders.	The Company has strong links with a number of banks and other capital sources. The Board closely considers any new loan facility proposed and receives regular updates on debt and capital markets for consideration.	Impact: Medium Probability: Unlikely
9. Accounting, legal and regulatory risks	Impact	How managed/mitigated
If the Company fails to remain qualified as a REIT, its rental income and gains will be subject to UK corporation tax.	Any change in the tax status of the Company or any of its underlying investments or in tax legislation or practice (including in relation to taxation rates and allowances) or in accounting standards could adversely affect the investment return of the Company.	The Company has been structured to be REIT compliant and continuously monitors the tax status using professional taxation advisers. The Board has ultimate responsibility for ensuing adherence to the UK REIT regime and monitors the compliance reports provided by the Investment Adviser and other third party providers.	Impact: High Probability: Very unlikely
10. Operational risks, including cyber crime	Impact	How managed/mitigated
Disruption to, or failure of the systems or general operations of third party providers could prevent accurate reporting and monitoring of the Company's financial position. This includes the risk of cyber crime and potential threat to security, business continuity and reputation.	Loss of operational capabilities, potential regulator actions. Alternative service providers would need to be identified and activities transferred.	The Board monitors the services provided by the Investment Adviser and other service providers and the key elements which are designed to provide effective internal control. All service providers are required to have robust IT security and disaster recovery contingency plans in place.	Impact: Medium Probability: Unlikely

Going Concern and Viability Statement

Going Concern

The Board regularly reviews the position of the Company and its ability to continue as a going concern in Board meetings. The financial statements set out the current financial position of the Company.

The Company acquires high-quality property with a particular focus on property providing care for the long term. The properties acquired are on long-term full repairing and insuring leases in a sector of the market with very high levels of need. The cost base of the Company is proportionately low compared to revenue and there is a high level of certainty over cost to be incurred. On this basis the Company is expected to be viable well beyond the five year terms considered in the Company's testing below.    

The cash balance of the Company at the period end was £47 million that was readily available for use. As stated in the Strategic Report, the Investment Adviser has identified a pipeline of £210 million of attractive investment opportunities for acquisition over the next twelve months. The Board has evaluated the financial position of the Company and is confident in the ability to raise debt and/or equity capital in order to fund the Company's investments for the next 12 months and to facilitate the payment of dividends to shareholders at the targeted rate. Based on this, the Board believes that the Company is in a position to manage its financial risks.

The Directors believe that there are currently no material uncertainties in relation to the Company's ability to continue in operation for a period of at least 12 months from the date of approval of the Company's financial statements and therefore have adopted the going concern basis in the preparation of the financial statements.

Viability Statement

In accordance with the UK Corporate Governance Code (2016) ("Code"), the Directors present the Company's viability statement which summarises the results of their assessment of the Company's current position, its principal risks and prospects over a period to 31 March 2024. The prospects were assessed over a five year period, acknowledging that the Company will have its first continuation vote in 2022, for the following reasons:

(i)         the Company's long-term forecast covers a five year period;

(ii)         the length of service level agreements between Housing Associations and care providers is typically five years; and

(iii)        the Company's leases are typically 25 years on fully repairing and insuring leases enabling reasonable certainty of income over the next five years.

The Company's five year forecast incorporates assumptions related to the Company's investment strategy and principal risks from which performance results, cash flows and key performance indicators are forecast. The principal risks are set out above. Of these risks, those which are expected to have a higher impact on the Company's longer-term prospects are those related to future government housing policies. The Company has considered its strategy over a longer term and, in light of the inherent demand for the Company's properties and the vulnerable nature of the ultimate tenant, the risk of change in future housing policy is considered to be limited. The principal risks are mitigated by the Company's risk management and internal control processes which function on an ongoing basis. The Board, via delegation to the Audit and Management Engagement Committee, monitors the effectiveness of the Company's risk management and internal control processes on an ongoing basis. The monitoring activities are described in the Report of the Audit and Management Engagement Committee in the full Annual Report and include direct review and challenge of the Company's documented risks, risk ratings and controls and review of performance and compliance reports prepared by the Company's advisers and the independent external auditors. 

In accordance with the Code, the Board of Directors has carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity.

Where appropriate, the Company's forecasts are subject to sensitivity analysis which involves applying severe conditions and flexing a number of assumptions simultaneously. The sensitivities performed were designed to provide the Directors with an understanding of the Company's performance in the event of severe but plausible scenarios, taking full account of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks outlined below:

·      Reduction in availability of suitable assets for acquisition

·      Tenant defaulting under a lease

·      Lack of availability for debt financing or other capital

·      Deterioration in economic outlook, such as any negative impact due to Brexit, or change in government housing policy which could impact the fundamentals of the social housing sector, including a negative impact on valuations and rental uplifts.

The remaining principal risks and uncertainties, whilst having an impact on the Company's business, are not considered by the Directors to have a reasonable likelihood of impacting the Company's viability over the five year period, therefore the scenarios outlined above are the only ones that have been specifically tested.

Based on the results of their assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of their assessment.

Approval of Strategic Report
The Group Strategic Report was approved by the Board and signed on its behalf by:

Michael Wrobel

Chairman

21 June 2019

Board of Directors

Michael Wrobel (Chairman)

Caroline Gulliver (Director and Chairman of the Audit and Management Engagement Committee)

Peter Baxter (Senior Independent Director)

Alastair Moss (Director)

 

Extracts from the Report of the Directors

 

Results and Dividends

The results for the year are shown below.

The following dividends were paid on the Ordinary shares during the year:

First dividend on the Ordinary shares	1.25p paid on 8 June 2018
Second dividend on the Ordinary shares	1.25p paid on 7 September 2018
Third dividend on the Ordinary shares	1.25p paid on 30 November 2018
Fourth dividend on the Ordinary shares	1.11p paid on 11 January 2019
Fifth dividend on the Ordinary shares	0.14p paid on 28 February 2019

The following dividends were paid on the C shares during the year:

First dividend on the C shares	1.13p paid on 8 June 2018
Second dividend on the C shares	0.75p paid on 7 September 2018
Third dividend on the C shares	0.75p paid on 30 November 2018
Fourth dividend on the C shares	0.67p paid on 11 January 2019

Since the year end, the Company has declared the following dividend:

Quarterly dividend on the Ordinary shares

1.325p paid on 7 June 2019

No final dividend is being recommended on the Ordinary shares.

 

Capital Structure

Changes to share capital

On 21 December 2018, the 302,000,000 C shares in issue were converted into Ordinary shares at the ratio of 0.902190 new ordinary shares for every C share. As a result, 272,461,380 Ordinary shares were issued.

Following the conversion, and as at 31 March 2019, the Company had 622,461,380 Ordinary shares in issue, none of which were held in treasury.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial period. Under that law, the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", and applicable law). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing the financial statements, the Directors are required to:

·           select suitable accounting policies and then apply them consistently;

·           state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed for the Company financial statements, subject to any material departures disclosed and explained in the financial statements;

·           make judgements and accounting estimates that are reasonable and prudent; and

·           prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed above, confirm that, to the best of their knowledge:

·           the Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 "Reduced Disclosure Framework", and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company;

·           the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·           the Strategic Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Approval
This Statement of Directors' Responsibilities was approved by the Board and signed on its behalf by:

Michael Wrobel

Chairman

21 June 2019
 

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 March 2019 or the period ended 31 March 2018 but is derived from those accounts. Statutory accounts for the period ended 31 March 2018 have been delivered to the Registrar of Companies and those for the year ended 31 March 2019 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and financial statements at www.civitassocialhousing.com.

Consolidated Statement of Comprehensive Income
For the year ended 31 March 2019

	Note	For the  year ended  31 March 2019  £'000	From  18 November 2016  to 31 March 2018  £'000
Revenue
Rental income	5	35,738	18,606
Net rental income		35,738	18,606
Directors' remuneration	6	(163)	(205)
Investment advisory fees	8	(6,457)	(5,773)
General and administrative expenses	9	(3,022)	(2,915)
Total expenses		(9,642)	(8,893)
Change in fair value of investment properties	15	3,652	30,633
Operating profit		29,748	40,346
Finance income	10	491	413
Finance expense - relating to bank borrowings	11	(3,975)	(1,041)
Finance expense - C shares amortisation	11	(6,400)	(2,792)
Profit before tax		19,864	36,926
Taxation	12	-	-
Profit being total comprehensive income for the period		19,864	36,926

Earnings per share - basic	13	4.67p	10.55p
Earnings per share - diluted	13	4.22p	6.27p

All amounts reported in the Consolidated Statement of Comprehensive Income above arise from continuing operations.

The notes below are an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position

As at 31 March 2019

	Note	31 March 2019  £'000	31 March 2018    £'000
Assets
Non-current assets
Investment property	15	820,094	516,222
Other receivables	17	6,824	-
		826,918	516,222
Current assets
Trade and other receivables	17	5,723	3,315
Cash and cash equivalents	18	54,347	249,608
		60,070	252,923
Total assets		886,988	769,145
Liabilities
Current liabilities
Trade and other payables	19	(15,324)	(10,176)
C shares	21	-	(298,752)
		(15,324)	(308,928)
Non-current liabilities
Bank and loan borrowings	20	(205,156)	(90,822)
Total liabilities		(220,480)	(399,750)
Total net assets		666,508	369,395
Equity
Share capital	22	6,225	3,500
Share premium reserve	23	292,405	-
Capital reduction reserve	24	331,625	331,625
Retained earnings	25	36,253	34,270
Total equity		666,508	369,395

Net assets per share - basic	26	107.08p	105.54p
Net assets per share - diluted	26	107.08p	105.54p

These consolidated financial statements were approved by the Board of Directors of Civitas Social Housing PLC and authorised for issue on 21 June 2019 and signed on its behalf by:

Michael Wrobel

Chairman and Independent Non-Executive Director

21 June 2019

Company No: 10402528

The notes below are an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equity

For the year ended 31 March 2019

			Share	Capital
		Share	premium	reduction	Retained	Total
		capital	reserve	reserve	earnings	equity
	Note	£'000	£'000	£'000	£'000	£'000
Balance at 18 November 2016		-	-	-	(31)	(31)
Profit and total comprehensive income for the period		-	-	-	36,926	36,926
Issue of Ordinary shares
Issue of share capital	22	3,500	346,500	-	-	350,000
Share issue costs	23	-	(7,000)	-	-	(7,000)
Cancellation of share premium reserve	23	-	(339,500)	339,500	-	-
Dividends paid
Total interim dividends for the period ended 31 March 2018 (3.00p)	14	-	-	(7,875)	(2,625)	(10,500)
Balance at 31 March 2018		3,500	-	331,625	34,270	369,395
Profit and total comprehensive income for the period		-	-	-	19,864	19,864
Issue of Ordinary shares
Issue of share capital	22	2,725	292,461	-	-	295,186
Share issue costs	23	-	(56)	-	-	(56)
Dividends paid
Total interim dividends for the period ended 31 March 2019 (5.00p)	14	-	-	-	(17,881)	(17,881)
Balance at 31 March 2019		6,225	292,405	331,625	36,253	666,508

The notes below are an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flows

For the year ended 31 March 2019

	Note	For the year ended 31 March 2019  £'000	From  18 November 2016  to 31 March 2018  £'000
Cash flows from operating activities
Profit for the period before taxation		19,864	36,926
- Change in fair value of investment properties		(3,652)	(30,633)
- Rent and incentive straight line adjustments		(314)	(332)
Finance income		(491)	(413)
Finance expense		10,375	3,833
Increase in trade and other receivables		(2,789)	(2,540)
(Decrease)/increase in trade and other payables		(149)	803
Cash generated from operations		22,844	7,644
Interest received		491	413
Net cash flow generated from operating activities		23,335	8,057
Investing activities
Purchase of investment properties		(267,098)	(458,564)
Acquisition costs		(9,421)	(19,051)
Purchase of subsidiary company		(25,470)	-
Sale proceeds on sale of subsidiary company		4,336	-
Lease incentives paid		(3,178)	-
Restricted cash held as retention money		(936)	(6,283)
Net cash flow used in investing activities		(302,577)	(483,898)
Financing activities
Proceeds from the issue of Ordinary share capital	22	-	350,000
Share issue costs paid	23	(56)	(7,000)
Dividends paid to equity shareholders		(17,591)	(10,073)
Proceeds from the issue of C shares	21	-	302,000
C share issue costs paid	21	-	(6,040)
Dividends paid to C shareholders	21	(9,966)	-
Bank borrowings advanced	20	115,990	92,457
Bank borrowing issue costs paid	20	(2,374)	(1,761)
Loan interest paid		(2,958)	(417)
Net cash flow generated from financing activities	27	83,045	719,166
Net (decrease)/increase in cash and cash equivalents		(196,197)	243,325
Unrestricted cash and cash equivalents  at the start of the period	18	243,325	-
Unrestricted cash and cash equivalents at the end of the period	18	47,128	243,325

The notes below are an integral part of these consolidated financial statements.

 

Notes to the Consolidated Financial Statements

For the year ended 31 March 2019

1.   Corporate information

Civitas Social Housing PLC (the "Company") was incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 29 September 2016 with company number 10402528 under the name Civitas REIT PLC which was subsequently changed to the existing name on 3 October 2016.

The address of the registered office is Beaufort House, 51 New North Road, Exeter, EX4 4EP. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.

The Company did not begin trading until 18 November 2016 when the shares were admitted to trading on the London Stock Exchange ("LSE").

The Company's Ordinary shares are admitted to the Official List of the Financial Conduct Authority ("FCA") and traded on the LSE.

The principal activity of the Company is to act as the ultimate parent company of Civitas Social Housing PLC and its subsidiaries (the "Group"), whose principal activity is to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes.

2.   Basis of preparation

The Group's consolidated financial statements have been prepared on a going concern basis in accordance with the Disclosure Guidance and Transparency Rules of the FCA and with International Financial Reporting Standards ("IFRS") and IFRS Interpretation Committee ("IFRS IC") interpretations as issued by the IASB and as adopted by the European Union ("EU"), and in accordance with Article 4 of the IAS Regulation and the Companies Act 2006 as applicable to companies using IFRS.

The comparative information disclosed in the consolidated financial statements relates to the period from 18 November 2016 to 31 March 2018. The period covered by the comparative information varies in length and the level of activities and therefore is not comparable to the current period.

The Group's consolidated financial statements have been prepared on a historical cost basis, as modified for the Group's investment properties at fair value through profit or loss.

The Group has chosen to adopt EPRA best practice guidelines for calculating key metrics such as net asset value and earnings per share. These are disclosed above with supporting calculations in Appendix 1 below.

2.1 Functional and presentation currency

The financial information is presented in Pounds Sterling which is also the functional currency of the Company, and all values are rounded to the nearest thousand pounds (£'000s), except where otherwise indicated.

2.2 Going concern

The Group benefits from a secure income stream from long leases with the Housing Associations, which are not overly reliant on any one tenant and present a well-diversified risk. The Group's cash balances as at 31 March 2019 were £54.3 million, of which £47.1 million was readily available and it had bank borrowings of £208.4 million.

As a result, the Directors believe that the Group is well placed to manage its financing and other business risks and that the Group will remain viable, continuing to operate and meet its liabilities as they fall due.

The Directors believe that there are currently no material uncertainties in relation to the Group's ability to continue for the period of at least 12 months from the date of the Group's consolidated financial statements. The Board is, therefore, of the opinion that the going concern basis adopted in the preparation of the consolidated financial statements is appropriate.

2.3 New standards, amendments and interpretations

The following new standards are now effective and have been adopted for the year ended 31 March 2019.

• Adoption of IFRS 9 Financial Instruments: The standard replaced IAS 39 Financial Instruments and contains two primary measurement categories for financial assets.

Management have reviewed the requirements of IFRS 9. The adoption of IFRS 9 from 1 April 2018 resulted in no adjustments to the amounts recognised in the financial statements. In accordance with the transitional provisions, comparative figures have not been restated. The Group's principal financial assets comprise trade receivables, which will continue to be measured at amortised cost. The following changes have been identified.

Under IFRS 9 the Group now applies an expected credit loss model when calculating impairment losses on its trade and other receivables and considers the probability of default occurring over the contractual life of its trade receivables and contracts. The specific situation of each tenant has been evaluated using a provision matrix as allowed under IFRS 9. This did not result in a material change in the loss allowance recognised under IFRS 9 compared to the previous impairment provision held under IAS39.

• Adoption of IFRS 15 Revenue from Contracts: The standard replaced IAS 11 Construction Contracts, IAS 18 Revenue. The standard introduces a new revenue recognition model that recognises revenue either at a point in time or over time.

As all of the Group's revenue derives from leases which are outside the scope of IFRS 15 there is no change to accounting policies arising from the adoption of IFRS 15.

• Adoption of Amendment to IAS 40, Investment Property: The amendment to IAS 40 Investment Property, clarifies when assets are transferred to, or from, investment properties.

Management have assessed the impact of the amendment to IAS 40 on the classification of existing property at 1 April 2018 and has concluded that no reclassifications are required on adoption of the amendment.

2.4 New standards, amendments and interpretations effective for future accounting periods

The following are new standards, interpretations and amendments, which are not yet effective and have not been early adopted in this financial information, that will or may have an effect on the Group's future financial statements:

• IFRS 16 Leases: Introduction of a single, on-balance sheet accounting model (effective for annual periods beginning on or after 1 January 2019).

The Directors have assessed that the adoption of this will not have a material impact on the Group's financial statements as the Group does not hold any material operating leases as lessee.

• IFRIC 23 Uncertainty over Income Tax Treatments: Clarifies the application of recognition and measurement requirements in IAS 12 Income Taxes, when there is uncertainty over income tax treatments (effective for annual periods beginning on or after 1 January 2019).

The Directors have assessed that the adoption of this new interpretation will not have a material impact on the Group's financial statements.

• Amendments to IFRS 3 Business Combinations: Clarifies the definition of a business. A significant change in the amendment is the option for an entity to assess whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If such a concentration exists, the transaction is not viewed as an acquisition of a business and no further assessment of the business combination guidance is required. This will be relevant where the value of the acquired entity is concentrated in one property, or a group of similar properties (effective for periods beginning on or after 1 January 2020 with earlier application permitted).

There will be no impact on transition since the amendments are effective for business combinations for which the acquisition date is on or after the transition date.

2.5  Segmental information

IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker, which in the Group's case is delegated to the Investment Adviser, who has formed an Executive Team, in order to allocate resources to the segments and to assess their performance.

The internal financial reports received by the Investment Adviser's Executive Team contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the consolidated financial statements.

The Directors consider the Group's property portfolio represents a coherent and diversified portfolio with similar economic characteristics and as a result these individual properties have been aggregated into a single operating segment. In the view of the Directors there is accordingly one reportable segment under the provisions of IFRS 8.

All of the Group's properties are based in the UK. Geographical information is provided to ensure compliance with the diversification requirements of the Company, other than this no geographical grouping is contained in any of the internal financial reports provided to the Investment Adviser's Executive Team and, therefore no geographical segmental analysis is required by IFRS 8.

3. Significant accounting judgements, estimates and assumptions

In the application of the Group's accounting policies, which are described in note 4, 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 within the next financial year are outlined below:

3.1 Significant estimate - Valuation of investment property

The Group uses the valuation carried out by its independent valuers as the fair value of its property portfolio. The valuation is based upon assumptions including future rental income and the appropriate discount rate. The valuers also make reference to market evidence of transaction prices for similar properties. Further information is provided in note 15.

The Group's properties have been independently valued by Jones Lang LaSalle Ltd. ("JLL" or the "Valuer") according to the definitions published by the Royal Institute of Chartered Surveyors' ("RICS") Valuation - Professional Standards, July 2017, Global and UK Editions (commonly known as the "Red Book"). JLL is one of the most recognised professional firms within social housing valuation and has sufficient current local and national knowledge of both social housing generally and Specialist Supported Housing ("SSH") and has the skills and understanding to undertake the valuations competently.

With respect to the Group's consolidated financial statements, investment properties are valued at their fair value at each balance sheet date in accordance with IFRS 13 which recognises a variety of fair value inputs depending upon the nature of the investment. Specifically:

Level 1 - Unadjusted, quoted prices for identical assets and liabilities in active (typically quoted) markets.

Level 2 - Quoted prices for similar assets and liabilities in active markets.

Level 3 - External inputs are "unobservable". Value is the director's best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and a determination of which assumptions should be applied in valuing such assets and with particular focus on the specific attributes of the investments themselves.

Given the bespoke nature of each of the Group's investments, the particular requirements of due diligence and financial contribution obtained from the vendors together with the recent emergence of SSH, all of the Group's investment properties are included in Level 3.

3.2. Significant judgement - Business combinations

The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. Management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.

The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property. Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

With the exception of one acquisition detailed below, all other corporate acquisitions during the year have been treated as asset purchases rather than business combinations because no integrated set of activities was acquired.

During the year, the Group entered into a purchase of TLC Care Homes Limited which carried out operational activities. Upon acquisition, investment properties were transferred into another Group company and the company was sold. Further details are shown in note 15.1 to the financial statements.

3.3. Significant judgement - Operating lease contracts - the Group as lessor

The Group has acquired investment properties that are subject to commercial property leases with Registered Providers. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

4. Summary of significant accounting policies

The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. The policies have been consistently applied to all periods presented, unless otherwise stated.

4.1. Basis of consolidation

The consolidated financial statements comprise the financial information of the Group as at the period end date.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The financial information of the subsidiaries is included in the consolidated financial statements from the date that control commences until the date that control ceases.

If an equity interest in a subsidiary is transferred but a controlling interest continues to be held after the transfer then the change in ownership interest is accounted for as an equity transaction.

Accounting policies of the subsidiaries are consistent with the policies adopted by the Company.

4.2. Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially measured at cost, being the fair value of the consideration given, including expenditure that is directly attributable to the acquisition of the investment property. After initial recognition, investment property is stated at its fair value at the balance sheet date. Gains and losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise in the Consolidated Statement of Comprehensive Income.

Subsequent expenditure is capitalised only when it is probable that future economic benefits are associated with the expenditure. Ongoing repairs and maintenance are expensed as incurred.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is incurred in profit or loss in the period in which the property is derecognised.

Significant accounting judgements, estimates and assumptions made for the valuation of investment properties are discussed in note 3.

4.3. Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Company has determined that it retains all the significant risks and rewards of ownership of the properties and accounts for the contracts as operating leases as discussed in note 3.

Properties leased out under operating leases are included in investment property in the Consolidated Statement of Financial Position. Rental income from operating leases is recognised on a straight line basis over the term of the relevant leases.

4.4. Financial Assets

Classification

From 1 April 2018, the Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); and

• those to be measured at amortised cost.

The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income.

Trade and other receivables

Trade and other receivables are amounts due in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently are measured at amortised cost using the effective interest method, less impairment provision. The Group holds the trade receivables with the objective to collect the contractual cash flows.

Impairment

The Group's financial assets are subject to the expected credit loss model.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

The expected loss rates are based on the payment profiles of sales over a period of up to 36 months before 31 March 2019 or 1 April 2018, respectively, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the liability of the tenants to settle the receivable. Such forward-looking information would include: changes in economic, regulatory, technological and environmental factors, (such as industry outlook, GDP, employment and politics); external market indicators; and tenant base.

Trade receivables are written off when there is no reasonable expectation of recovery.

Indicators that there is no reasonable expectation of recovery include, among others, the probability of insolvency or significant financial difficulties of the debtor. Impaired debts are derecognised when they are assessed as uncollectible.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, cash held by lawyers and liquidity funds with a term of no more than three months that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value.

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.

4.5. Financial liabilities

The Group recognises a financial liability when it first becomes a party to the contractual rights and obligations in the contract.

All financial liabilities are initially recognised at fair value, minus (in the case of a financial liability that is not at fair value through profit or loss) transaction costs that are directly attributable to issuing the financial liability. Financial liabilities are subsequently measured at amortised cost, unless the Group opted to measure a liability at fair value through profit or loss.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Trade and other payables

Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost until settled. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.

Bank and other borrowings

All bank and other borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, all bank and other borrowings are measured at amortised cost, using the effective interest method. Any attributable transaction costs relating to the issue of the bank borrowings are amortised through the Group's Statement of Comprehensive Income over the life of the debt instrument on a straight-line basis.

C share financial liability

C shares are convertible preference shares and under IAS 32 Financial Instruments: Presentation, meet the definition of a financial liability. C shares are recognised on issue at fair value less directly attributable transaction costs. After initial recognition, C shares are subsequently measured at amortised cost using the effective interest rate method. Amortisation is credited to or charged to finance income or finance costs in the Consolidated Statement of Comprehensive Income. Transaction costs are deducted from proceeds at the time of issue.

4.6. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.

4.7. Taxation

Taxation on the profit or loss for the period not exempt under UK REIT regulations is comprised of current and deferred tax. Tax is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as a direct movement in equity, in which case it is recognised as a direct movement in equity. Current tax is expected tax payable on any non REIT taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

The current tax charge is calculated on profits arising in the period and in accordance with legislation which has been enacted or substantially enacted at the balance sheet date.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax that is provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

4.8. Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.

Capital assets comprise the following:

	31 March 2019	31 March 2018
	£'000	£'000
Proceeds from the issue of Ordinary shares and retained earnings thereon	666,508	369,395
Proceeds from the issue of C shares and retained earnings thereon	-	298,752
Bank and loan borrowings	205,156	90,822
	871,664	758,969

Until the Group is fully invested and pending re-investment or distribution of cash receipts, the Group will invest in cash, cash equivalents, near cash instruments and money market instruments.

The Directors may use gearing to enhance equity returns. The level of borrowing will be on a prudent basis for the asset class and will seek to achieve a low cost of funds, whilst maintaining the flexibility in the underlying security requirements and the structure of the Group.

The Group may, following a decision of the Board, raise debt from banks and/or the capital markets and the aggregate borrowings of the Group will always be subject to an absolute maximum, calculated at the time of drawdown, of 40% of the Gross Asset Value on a fully invested basis.

4.9. Dividends payable to shareholders

Dividends to the Company's shareholders are recognised as a liability in the Group's consolidated financial statements in the period in which the dividends are approved. In the UK, interim dividends are recognised when paid.

4.10. Rental income

Rental income from investment property is recognised on a straight-line basis over the term of ongoing leases and is shown gross of any UK income tax. Lease incentives are spread evenly over the lease term.

4.11. Finance income

Finance income is recognised as interest accrues on cash and cash equivalent balances held by the Group.

4.12. Finance costs

Finance costs consist of interest and other costs that the Group incurs in connection with bank and other borrowings. Bank interest and bank charges are recognised on an accruals basis. Borrowing transaction costs are amortised over the period of the loan.

After initial recognition, C shares are subsequently measured at amortised cost using the effective interest rate method. Amortisation is credited or charged to finance income or finance costs. Transaction costs are amortised to the earliest conversion period.

4.13. Expenses

All expenses are recognised in the Consolidated Statement of Comprehensive Income on an accruals basis.

4.14. Investment advisory fees

Investment advisory fees are recognised in the Consolidated Statement of Comprehensive Income on an accruals basis.

4.15. Share issue costs

The costs of issuing or reacquiring equity instruments (other than in a business combination) are accounted for as a deduction from equity.

5. Rental income

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Rental income from investment property	35,424	18,274
Rent straight line adjustments	459	332
Lease incentive adjustments	(145)	-
Total	35,738	18,606

As per the lease agreements between the Group and the Registered Providers, the Registered Providers are responsible for the settlement of all present and future rates, taxes, costs and other impositions payable in respect of the property. As a result, no direct property expenses were incurred.

6. Directors' remuneration

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Directors' fees	150	190
Employer's National Insurance Contributions	13	15
Total	163	205

The Directors are remunerated for their services at such rate as the Directors shall from time to time determine.

At IPO, the Chairman was entitled to a fee of £35,000 per annum, and the other Directors of the Board to a fee of £30,000 per annum (with the exception of the Chairman of the Audit and Management Engagement Committee who was entitled to an additional fee of £2,500 per annum).

At a Board meeting on 26 July 2017, a resolution was passed authorising an increase to the fees of the Chairman to £50,000 per annum, the Chairman of the Audit and Management Engagement Committee and the other Directors to £36,000 per annum and £32,000 per annum respectively effective from 1 August 2017.

7. Particulars of employees

The Group had no employees during the period (31 March 2018 period: nil) other than the Directors.

8. Investment advisory fees

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March  2018 £'000
Advisory fee	6,457	5,773
Total	6,457	5,773

Civitas Housing Advisors Limited ("CHA") is appointed as the Investment Adviser of the Company. Under the current Investment Management Agreement, the Advisory Fee shall be an amount calculated in respect of each Quarter, in each case based upon the Portfolio Net Asset Value (further explained in note 16) most recently announced to the market at the relevant time (as adjusted for issues or repurchases of shares in the period between the date of such announcement and the date of the relevant calculation), on the following basis:

a)   on that part of the Portfolio Net Asset Value up to and including £250 million, an amount equal to 1% of such part of the Portfolio Net Asset Value;

b)   on that part of the Portfolio Net Asset Value over £250 million and up to and including £500 million, an amount equal to 0.9% of such part of the Portfolio Net Asset Value;

c)   on that part of the Portfolio Net Asset Value over £500 million and up to and including £1,000 million, an amount equal to 0.8% of such part of the Portfolio Net Asset Value;

d)   on that part of the Portfolio Net Asset Value over £1,000 million, an amount equal to 0.7% of such part of the Portfolio Net Asset Value.

The appointment of the Investment Adviser shall continue in force unless and until terminated by either party giving to the other not less than 12 months' written notice, such notice not to expire earlier than 30 November 2021.

Changes to the Investment Advisory fee and changes to the appointment period effective from 26 April 2019 are detailed in note 35.

9. General and administrative expenses

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Legal and professional fees	1,049	1,136
Administration fees	717	581
Consultancy fees	176	274
Audit fees	211	308
Abortive costs	18	168
Bad debts	421	-
Valuation fees	96	96
Depositary fees	60	83
Grants and donations	28	79
Insurance	65	32
Marketing	101	71
Regulatory fees	19	29
Sundry expenses	61	57
Directors' expenses	-	1
Total	3,022	2,915

Abortive costs represent legal and professional fees incurred in relation to acquisition of investment properties that were considered but subsequently aborted.

Services provided by the Company's auditors and their associates

The Group has obtained the following services from the Company's auditors and their associates:

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Audit of the financial statements	180	273
Review of the half year financial statements	31	35
Corporate services relating to the C share conversion	10	-
Corporate services relating to the initial launch	-	55
Corporate services relating to the C share fund raise	-	200
Total	221	563

10. Finance income

	For the year ended 31 March 2019 £'000	From 18 November  2016 to 31 March 2018 £'000
Interest and dividends received on liquidity funds	486	413
Bank interest received	5	-
Total	491	413

11. Finance expense

	For the year ended  31 March 2019 £'000	From 18 November 2016 to 31 March  2018 £'000
Bank charges	2	4
Interest paid and payable on bank borrowings	3,048	902
Bank borrowing commitment fees	207	9
Amortisation of loan arrangement fees	718	126
Finance expenses associated with bank borrowings	3,975	1,041
Amortisation of C share liability	6,400	2,792
Total	10,375	3,833

12. Taxation

As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it meets certain conditions as set out in the UK REIT regulations. For the current period ended 31 March 2019, 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. No deferred tax asset has been recognised in respect of the unutilised residual current period losses as it is not anticipated that sufficient residual profits will be generated in the future.

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Corporation tax charge/(credit) for the period	-	-
Total	-	-

The tax charge for the period is less than the standard rate of corporation tax in the UK of 19%. The differences are explained below.

	For the  year ended  31 March  2019  £'000	From  18 November 2016 to 31 March 2018  £'000
Group
Profit/(loss) before taxation	19,864	36,926
UK corporation tax rate	19.00%	19.27%
Theoretical tax at UK corporation tax rate	3,774	7,116
Effects of:
Change in value of exempt investment properties	(694)	(5,903)
Exempt REIT income	(4,702)	(2,352)
Amounts not deductible for tax purposes	1,296	691
Unutilised residual current period tax losses	326	448
Total	-	-

The standard rate of corporation tax was reduced from 20% to 19% from 1 April 2017. The Government has announced that the corporation tax standard rate is to be reduced to 17% with effective date from 1 April 2020.

REIT exempt income includes property rental income that is exempt from UK corporation tax in accordance with Part 12 of CTA 2010.

13. IFRS 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.

Diluted EPS is calculated by adjusting earnings and the number of shares for the effects of dilutive options and other dilutive potential Ordinary shares (i.e. the C shares).

The calculation of basic and diluted earnings per share is based on the following:

	For the  year ended  31 March 2019	From 18 November 2016 to 31 March 2018
Calculation of Basic Earnings per share
Net profit attributable to Ordinary shareholders (£'000)	19,864	36,926
Weighted average number of Ordinary shares	425,393,423	350,000,000
Earnings per share - basic	4.67p	10.55p
Calculation of Diluted Earnings per share
Net profit attributable to Ordinary shareholders (£'000)	19,864	36,926
Add back finance costs associated with the C share liability (£'000)	6,400	2,792
Total (£'000)	26,264	39,718
Weighted average number of Ordinary shares	425,393,423	350,000,000
Effects of dilution from C shares	197,067,957	283,065,815
	622,461,380	633,065,815
Earnings per share - diluted	4.22p	6.27p

14. Dividends

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Dividend of 1.25p for the 3 months to 31 March 2018 (0.75p 3 months to 31 March 2017)	4,375	2,625
Dividend of 1.25p for the 3 months to 30 June 2018 (0.75p 3 months to 30 June 2017)	4,375	2,625
Dividend of 1.25p for the 3 months to 30 September 2018 (0.75p 3 months to 30 September 2017)	4,375	2,625
Dividend of 1.25p for the 3 months to 31 December 2018 (0.75p 3 months to 31 December 2017)	4,756	2,625
Total	17,881	10,500

On 10 May 2018 the Company announced a dividend of 1.25 pence per share in respect of the period 1 January 2018 to 31 March 2018. The dividend payment was made on 8 June 2018 to shareholders on the register as at 18 May 2018.

On 3 August 2018 the Company announced a dividend of 1.25 pence per share in respect of the period 1 April 2018 to 30 June 2018. The dividend payment was made on 7 September 2018 to shareholders on the register as at 17 August 2018.

On 1 November 2018 the Company announced a dividend of 1.25 pence per share in respect of the period 1 July 2018 to 30 September 2018. The dividend payment was made on 30 November 2018 to shareholders on the register as at 8 November 2018.

On 29 November 2018 the Company announced a dividend of 1.11 pence per share in respect of the period 1 October 2018 to 21 December 2018. The dividend payment was made on 11 January 2019 to shareholders on the register as at 7 December 2018.

On 31 January 2019 the Company announced a dividend of 0.14 pence per share in respect of the period 22 December 2018 to 31 December 2018. The dividend payment was made on 28 February 2019 to shareholders on the register as at 8 February 2019.

On 8 May 2019 the Company announced a dividend of 1.325 pence per share in respect of the period 1 January 2019 to 31 March 2019. The dividend payment was made on 7 June 2019 to shareholders on the register as at 17 May 2019. The financial statements do not reflect this dividend.

15. Investment property

	For the  year ended  31 March 2019  £'000	From  18 November 2016  to 31 March 2018  £'000
Balance at beginning of period	516,554	-
Property acquisitions	289,304	465,522
Acquisition costs	10,916	20,067
Change in fair value during the period	10,144	30,965
Value advised by the property valuers	826,918	516,554
Adjustments for lease incentive assets and rent straight line assets recognised	(6,824)	(332)
Total	820,094	516,222

Change in fair value of investment properties:	For the  year ended  31 March 2019  £'000	From 18 November 2016 to 31 March 2018 £'000
Change in valuation during the period	10,144	30,965
Adjustment for lease incentives and rent straight line adjustments recognised in assets as:
Start of the period	332	-
End of the period	(6,824)	(332)
	3,652	30,633

In accordance with "IAS 40: Investment Property", the investment property has been independently valued at fair value by JLL, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued, however the valuations are the ultimate responsibility of the Directors.

JLL valued the Civitas Social Housing PLC property portfolio on the basis of each individual property and the theoretical sale of the properties without the benefit of any corporate wrapper at £826,918,000 as at 31 March 2019 (31 Match 2018: £516,554,000).

JLL has provided valuation services to the Company with regards to the properties during the period. In relation to the period ended 31 March 2019, the proportion of the total fees payable by the Company to JLL's total fee income was less than 5% and is therefore minimal. Additionally, JLL has a rotation policy in place whereby the signatories on the valuations rotate after seven years.

All corporate acquisitions during the period have been treated as asset purchases rather than business combinations because they are considered to be acquisitions of properties rather than businesses.

The following table provides the fair value measurement hierarchy for investment property:

	Total £'000	Quoted prices in active markets (Level 1) £'000	Significant observable inputs (Level 2) £'000	Significant unobservable inputs (Level 3) £'000
Investment properties measured at fair value:
31 March 2019	820,094	-	-	820,094
31 March 2018	516,222	-	-	516,222

There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between Level 2 and Level 3 during any of the periods.

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards (incorporating the International Valuation Standards) by JLL, one of the leading professional firms engaged in the social housing sector.

As noted previously all of the Group's investments are reported as Level 3 in accordance with IFRS 13 where external inputs are "unobservable" and value is the Directors' best estimate, based upon advice from relevant knowledgeable experts.

In this instance, the determination of the fair value of investment property requires an examination of the specific merits of each property that are in turn considered pertinent to the valuation.

These include:

i)          the regulated social housing sector and demand for the facilities offered by each SSH property owned by the Group;

ii)          the particular structure of the Group's transactions where vendors, at their own expense, meet the majority of the refurbishment costs of each property and certain purchase costs;

iii)         detailed financial analysis with discount rates supporting the carrying value of each property;

iv)         underlying rents for each property in comparison to the market rent, with consideration given as whether a property is over rented; 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 following descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:

Valuation techniques: market value method

The estimated amount for which a property should exchange between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion. Such marketing to be structured such that the sale is undertaken in such a manner and in a specific market with a view to maximising the value achieved.

There are two main unobservable inputs that determine the fair value of the Group's investment property:

i) The rate of inflation as measured by CPI; it should be noted that all leases benefit from either CPI or CPI+1 indexation.

ii) The discount rate applied to the rental flows.

Key factors in determining the discount rates applied include the regulated social housing sector and demand for each SSH property owned by the Group, costs of acquisition and refurbishment of each property, the anticipated future underlying cash flows for each property, benchmarking of each underlying rent for each property (passing rent), and the fact that all of the properties within the Group's portfolio have the benefit of full repairing and insuring leases entered into by a Housing Association.

As at the balance sheet date the lease lengths within the Group's portfolio ranged from an effective 22 years to 25 years with a weighted average unexpired lease term of 24.4 years (2018: 24.1). The greater the length then, all other metrics being equal, the greater the value of the property.

Sensitivities of measurement of significant unobservable inputs

As set out within significant accounting estimates and judgements at 3.1 above, the Group's property investment valuation is open to judgements and is inherently subjective by nature. 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 5.3% (2018: 6.5%).

The range of discount rates used in the Group's property Portfolio Valuation is from 4.9% to 6.0% (2018: 5.6% to 9.1%).

The table below illustrates the change to the value of investment properties if the discount rate and CPI used for the portfolio valuation calculations are changed:

	-0.5% in discount rate £'000	+0.5% in discount rate £'000	+0.25% in CPI £'000	-0.25% in  CPI  £'000
Increase/(decrease) in the IFRS fair value of investment properties at:
31 March 2019	33,203	(30,788)	25,651	(24,711)
31 March 2018	20,634	(19,158)	16,062	(15,412)

15.1 Subsidiary resale

	For the	From
	year ended	18 November 2016
	31 March 2019	to 31 March 2018
	£'000	£'000
Balance at the beginning of the period	-	-
Acquisition	25,470	-
Transfer to investment property	(21,134)	-
Sale proceeds	(4,336)	-
	-	-

The table above shows the transactions concerning the purchase and sale of TLC Care Homes Limited. On 7 December 2018, the Group acquired a subsidiary, TLC Care Homes Limited, for £25,470,000 consisting of investment property and a care home business with the exclusive intent to sell the subsidiary business. At acquisition, the fair value of the investment property was £21,134,000 and the fair value of the assets and liabilities less selling costs of the care home business was £4,336,000. The care home business was sold immediately following acquisition for £4,336,000.

16. 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.

For the period from 14 November 2017 to 21 December 2018 the Company had 302,000,000 C shares in issue. During that period the results, assets and liabilities attributable to the C shares were accounted for in a separate pool to those of the Ordinary shares and thus the Company announced a quarterly Portfolio NAV for both share classes.

Under IFRS accounting rules, the C shares are recognised in the financial statements as a liability valued at amortised cost which represents the value of the assets and liabilities attributable to the C share pool (see note 21). Thus, the net assets of the Company disclosed in the financial statements are equal to the net assets attributable to the Ordinary shareholders.

On 21 December 2018 the C shares were converted to Ordinary shares as detailed in note 21.

In order to arrive at Portfolio Net Asset Value for each share class, adjustments are made to the IFRS Net Asset Value ("IFRS NAV") reported in the consolidated financial statements such that;

i)          The C share liability, equivalent to the net assets attributable to the C shareholders is added back to net assets, because under IFRS accounting rules the C shares are recognised as a liability. (Please refer to note 21 for more details).

ii)          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.

iii)         The hypothetical sale will take place in the form of a single portfolio disposal.

	31 March 2019	31 March 2018
	£'000	£'000
Net asset value per the consolidated financial statements	666,508	369,395
Add back C share liability	-	298,752
Value of asset pools	666,508	668,147
Effects of the adoption to the assumed, hypothetical sale of properties as a portfolio and on the basis of sale of a corporate vehicle	74,662	33,124
Portfolio Net Asset Value	741,170	701,271

After reflecting these amendments, the movement in net assets since inception is as follows:

	For the	From
	year ended	18 November 2016
	31 March 2019	to 31 March 2018
	£'000	£'000
Opening reserves at start of period	701,271	(31)
Net issue (costs)/proceeds	(56)	638,960
Operating profits (excluding capital appreciation)	26,096	9,713
Capital appreciation	45,190	63,757
Finance income	491	413
Finance costs	(3,975)	(1,041)
Dividends paid to Ordinary and C shareholders	(27,847)	(10,500)
Portfolio Net Assets at 31 March 2019	741,170	701,271

Value is represented by:

	31 March 2019	31 March 2018
	£'000	£'000
Investment property using the portfolio valuation method	901,580	549,346
Net current assets	44,746	242,747
Bank borrowings	(205,156)	(90,822)
Portfolio Net Assets	741,170	701,271
Shares in issue	622,461,380	See below
Portfolio Net Asset Value per share	119.07p	See below

The table below shows the figures at 31 March 2018 split between the asset pools.

Value is represented by:

	Ordinary  share  pool  £'000	C share   pool   £'000	Total   £'000
Investment property using the portfolio valuation method	471,525	77,821	549,346
Net current assets	17,802	224,945	242,747
Bank borrowings	(90,822)	-	(90,822)
Portfolio Net Assets	398,505	302,766	701,271
Shares in issue	350,000,000	302,000,000
Portfolio Net Asset Value per share	113.86p	100.25p

17. Trade and other receivables

Amounts falling due in less than one year	31 March 2019 £'000	31 March 2018 £'000
Rent receivable	2,954	175
Less provision for impairment	(421)	-
Net rent receivable	2,533	175
Accrued income	2,778	2,398
Debtor arising from rent straight line adjustments	-	332
Prepayments and other receivables	412	410
Total	5,723	3,315

Prepayments and other receivables amount above includes prepaid legal and professional fees of £343,000 (2018: £393,000) that have been incurred in connection with the acquisitions yet to be completed.

	31 March 2019	31 March 2018
	£'000	£'000
Amounts falling due after more than one year
Debtor arising from straight line adjustments	791	-
Lease incentives	6,033	-
	6,824	-

The aged analysis of trade receivables that are past due but not impaired was as follows:

	31 March 2019 £'000	31 March 2018 £'000
Current	991	-
< 30 days	353	175
30-60 days	499	-
> 60 days	1,111	-
	2,954	175
Less provision for impairment	(421)	-
Total	2,533	175

The Directors consider the fair value of receivables equals their carrying amount.

The table above shows the aged analysis of trade receivables included in the table above which are past due. The provision for impairment principally relates to First Priority Housing Association ("First Priority").

Other categories within trade and other receivables do not include impaired assets.

18. Cash and cash equivalents

	31 March 2019 £'000	31 March 2018 £'000
Cash held by solicitors	17,031	12,262
Liquidity funds	13,394	210,969
Cash held at bank	16,703	20,094
Unrestricted cash and cash equivalents	47,128	243,325
Restricted cash	7,219	6,283
Total	54,347	249,608

Liquidity funds refer to money placed in money market funds. These are highly liquid funds with accessibility within 24 hours and subject to insignificant risk of changes in value.

Cash held by 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 in relation to deferred payments subject to achievement of certain conditions, other retentions and cash segregated to fund repair, maintenance and improvement works to bring the properties up to satisfactory standards for the Group and the tenants. Currently that amount of cash is held in escrow.

19. Trade and other payables

	31 March 2019 £'000	31 March 2018 £'000
Deferred income	14	225
Acquisition costs accrued	10,074	8,366
Lease incentives payable	3,000	-
Finance costs	798	498
Dividends payable	717	427
Accruals	616	660
Income tax and corporation tax payable*	105	-
Total	15,324	10,176

Acquisition costs accrued includes the balance of retention monies (as represented by £7,219,000 (2018: 6,283,000), restricted cash as per note 18) and acquisition costs capitalised.

* Represents tax liabilities incurred by subsidiary companies prior to acquisition by the Group.

20. Bank and loan borrowings

Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. The banks also hold charges over the shares of certain subsidiaries and any intermediary holding companies of those subsidiaries. Any associated fees in arranging the bank borrowings unamortised as at the period end are offset against amounts drawn on the facilities as shown in the table below:

	For the  year ended  31 March 2019  £'000	From 18 November 2016 to 31 March 2018 £'000
Balance at start of period	92,457	-
Bank borrowings drawn	115,990	92,457
Bank borrowings drawn at end of period	208,447	92,457
Balance at start of period	(1,635)	-
Less: loan issue costs incurred	(2,374)	(1,761)
Add: loan issue costs amortised	718	126
Unamortised costs at end of period	(3,291)	(1,635)
At end of period	205,156	90,822

	31 March 2019	31 March 2018
	£'000	£'000
Maturity of bank borrowings:
Repayable within 1 year	-	-
Repayable between 1 to 2 years	55,947	-
Repayable between 2 to 5 years	100,000	39,957
Repayable after 5 years	52,500	52,500
Total	208,447	92,457

The Group is party to the following loan facility agreements:

A 10-year Sterling Term Facility Agreement dated 2 November 2017 for up to £52,500,000 with Scottish Widows Limited. Interest is fixed at a total of 2.9936% per annum.

The borrowings include amounts secured on investment property to the value of £169,999,000 (2018: £163,812,000).

A 3-year Sterling Revolving Facility Agreement dated 15 November 2017 for up to £40,000,000 with Lloyds Bank plc. Interest is charged at LIBOR +1.50% margin. During the year a £20,000,000 increase of this facility was agreed.

The borrowings include amounts secured on investment property to the value of £144,166,000 (2018: £97,400,000).

A 3-year Revolving Credit Facility Agreement dated 28 November 2018 for up to £100,000,000 with HSBC Bank PLC. Interest charged at LIBOR +1.70% margin.

The borrowings include amounts secured on investment property to the value of £208,953,000.

A number of covenants are in place under the three agreements. Under the 10-year facility, historical and projected interest cover must be at least 325% and the loan to value ratio must not exceed 40%. Under the Lloyds Bank plc 3-year revolving credit facility, historical and projected interest cover must be at least 250% and the loan to value ratio must not exceed 55%. Under the HSBC Bank PLC 3-year facility, historical and projected interest cover must be at least 250% and the loan to value ratio must not exceed 60%.

21. C shares

	For the  year ended  31 March 2019  £'000	From 18 November 2016 to 31 March 2018 £'000
At beginning of period	298,752	-
Proceeds from issue of C shares	-	302,000
C share issue costs	-	(6,040)
Dividends paid to C shareholders	(9,966)	-
Amortisation of C share liability	6,400	2,792
Conversion to Ordinary shares	(295,186)	-
At end of period	-	298,752

On 10 November 2017 the Company announced the issue of 302,000,000 C shares, issued at £1 per share. The C shares are convertible preference shares. The shares were listed on the London Stock Exchange and dealing commenced on 14 November 2017. 

Holders of C shares are not entitled to receive notice of, attend, speak or vote at general meetings of the Company.

Under IAS 32 Financial Instruments: Presentation, the C shares meet the definition of a financial liability rather than equity and are presented in the financial statements as a liability of the Company carried at amortised cost.

The funds were raised in order to finance a number of property acquisitions and C shares were issued rather than Ordinary shares so that the issue costs associated with the fund raise and the costs associated with the property acquisitions did not dilute the Ordinary share NAV.

In order to calculate the net assets attributable to each share class, the results, assets and liabilities attributable to the C shares are identified in a separate pool to the results, assets and liabilities of the Ordinary shares. A share of fund level expenses for the period is allocated to the C shares based on the net assets of each share class pool.

It should be noted that these financial statements include all results, assets and liabilities of both share class pools, however, as the C shares are classified as a liability, net assets are reduced by the value of the C shares liability which is also equivalent to the net assets of the C share pool.

On 21 December 2018 the C shares were converted to Ordinary shares in the ratio 0.902190 new Ordinary shares for every 1 C share held. The conversion ratio was calculated with reference to the respective portfolio net asset values of the C shares and Ordinary shares at close of business on the calculation date.

Accordingly, 272,461,380 Ordinary shares were issued.

22. Share capital

Share capital represents the nominal value of consideration received by the Company for the issue of Ordinary shares.

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Share capital
At beginning of period	3,500	-
Shares issued	2,725	3,500
At end of period	6,225	3,500
Number of shares issued and fully paid Ordinary shares of £0.01 each
At beginning of period	350,000,000	100
Shares issued	272,461,380	349,999,900
At end of period	622,461,380	350,000,000

The Company's Ordinary shares were admitted to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange on 18 November 2016, raising £350 million. As a result of the IPO, on 18 November 2016, 349,999,900 shares at £0.01 per share were issued, fully paid.

On 21 December 2018 the Company issued 272,461,380 Ordinary shares in respect of the conversion of 302,000,000 C shares. The fair value of assets representing the C share pool at that date was £295,186,000.

23. Share premium reserve

The share premium reserve represents the amounts subscribed for Ordinary share capital in excess of nominal value less associated issue costs of the subscriptions. 

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
At beginning of period	-	-
Premium arising on shares issued	292,461	346,500
Share issue costs	(56)	(7,000)
Transfer to capital reduction reserve	-	(339,500)
At end of period	292,405	-

At a Board meeting on 15 November 2016, a resolution was passed authorising the cancellation of the share premium account and it was conditional upon the three following terms:

• admission of the Ordinary shares to listing on the UK Listing Authority's Official List;

• trading on London Stock Exchange's Main Market for listed securities; and

• approval of the Court for the reduction of share capital.

In order to cancel the share premium account the Company needed to obtain a court order, which was received on 1 February 2017. An SH19 form was sent to Companies House with a copy of the court order on 1 February 2017 and the certificate of cancellation was issued by Companies House on 13 February 2017.

Upon cancellation of the share premium account, the funds were transferred to the capital reduction reserve and these funds are classified as amounts available for distribution.

24. Capital reduction reserve

The capital reduction reserve is a distributable reserve to which the value of the cancelled share premium has been transferred. Dividends can be paid from this reserve.

	For the  year ended  31 March 2019  £'000	From  18 November 2016  to 31 March 2018  £'000
At beginning of period	331,625	-
Transfer from the share premium reserve	-	339,500
Dividends paid in the period (as per note 14)	-	(7,875)
At end of period	331,625	331,625

25. Retained earnings

This reserve represents the profits and losses of the Group.

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
At beginning of period	34,270	(31)
Profit for the period	19,864	36,926
Dividends paid in the period (as per note 14)	(17,881)	(2,625)
At end of period	36,253	34,270

26. Net asset value

Basic NAV per share is calculated by dividing net assets in the Consolidated Statement of Financial Position attributable to ordinary equity holders of the parent by the number of Ordinary shares outstanding at the end of the period.

Diluted NAV per share is calculated by adjusting net assets for the conversion of the C shares.

Net asset values have been calculated as follows:

	31 March 2019	31 March 2018
Net assets (£'000)	666,508	369,395
Number of Ordinary shares in issue at end of period	622,461,380	350,000,000
NAV - basic	107.08p	105.54p
Net assets (£'000)	666,508	369,395
Adjust for the effect of the C shares converting (£'000)	-	298,752
Adjusted net assets (£'000)	666,508	668,147
Number of Ordinary shares in issue at end of period	622,461,380	350,000,000
Number of Ordinary shares that would be issued on the conversion of C shares	-	283,065,815
Total	622,461,380	633,065,815
NAV - diluted	107.08p	105.54p

27. Reconciliation of liabilities to cash flows from financing

			For the
	C share	Bank	year ended
	liability	borrowings	31 March 2019
	£'000	£'000	£'000
Balance at the beginning of the period	298,752	90,822	389,574
Cash flows from financing activities
Loan draw down	-	115,990	115,990
Loan arrangement costs paid	-	(2,374)	(2,374)
Dividends paid to C shareholders in the period	(9,966)	-	(9,966)
Non cash movements
Amortisation of loan arrangement costs	-	718	718
Amortisation of C shares liability	6,400	-	6,400
C share conversion	(295,186)	-	(295,186)
	-	205,156	205,156

Summary of non-cash transactions

On 21 December 2018 the C shares were converted to Ordinary shares in the ratio 0.902190 new Ordinary shares for every 1 C share held. The conversion ratio was calculated with reference to the respective portfolio net asset values of the C shares and Ordinary shares at close of business on the calculation date. The fair value of assets represented by the C share pool, being the deemed consideration, was £295,186,000.

28. Operating leases

The Group is party to a number of operating leases on its investment properties with Registered Providers. The future minimum lease payments under non-cancellable operating leases receivable by the Group are as follows:

	31 March 2019 £'000	31 March 2018 £'000
Amounts receivable
< 1 year	45,685	28,203
1-2 years	45,720	28,801
2-5 years	137,356	86,399
> 5 years	882,407	554,050
At end of period	1,111,168	697,453

Leases are direct-let agreements with Registered Providers for a term between 15 to 25 years with indexed linked annual rent reviews. All current leases are full repairing and insuring ("FRI") leases, the tenants are therefore obliged to repair, maintain and renew the properties back to the original conditions.

The following table gives details of percentage of annual rental income per Registered Provider:

	31 March 2019	31 March 2018
	%	%
Westmoreland Supported Housing Limited	19.66	35.02
Falcon Housing Association CIC	20.89	14.44
First Priority Housing Association*	-	10.66
Bespoke Supportive Tenancies	11.37	-
Auckland Home Solutions	11.26	-
Inclusion Housing CIC	8.34	8.70
Encircle Housing Limited	6.33	-
Trinity Housing Association Limited	5.74	9.04
PAS Housing Association	4.09	6.04
Chrysalis Supported Association Limited	3.41	4.43
New Walk Property Management CIC	2.95	4.59
Harbour Light Assisted Living CIC	2.42	3.76
My Space Housing Solutions	1.24	-
IKE Supported Housing Limited	1.20	1.89
Hilldale Housing Association Limited	1.03	1.43
Blue Square Limited	0.07	-
Total	100.00	100.00

* Leases transferred to Falcon Housing Association CIC in the year.

The Group is also party to a number of operating leases on its long leasehold properties. The ground rent payment commitments under these operating leases are negligible so the future minimum lease payments under these leases have not been disclosed in these financial statements.

29. Controlling parties

As at 31 March 2019 there is no ultimate controlling party.

30. Related party disclosures

The Directors are remunerated for their services at such rate as the Directors shall from time to time determine. The aggregate remuneration and benefits in kind of the Directors of the Company (in each case, solely in their capacity as such) in respect of the period ended 31 March 2019 payable out of the assets of the Company is not expected to exceed £200,000. At IPO, the Chairman was entitled to a Director's fee of £35,000 per annum, and the other Directors of the Board to a fee of £30,000 per annum (with the exception of the chairman of the Audit and Management Engagement Committee who was entitled to an additional fee of £2,500 per annum).

At the Board meeting on 26 July 2017, a resolution was passed authorising an increase to the fees of the Chairman to £50,000 per annum, the Chairman of the Audit and Management Engagement Committee and the other Directors to £36,000 per annum and £32,000 per annum respectively effective from 1 August 2017.

Fees of £150,000 (period 31 March 2018: £190,000) were incurred and paid to the Directors.

As at 31 March 2019, the Directors held the following number of shares:

		31 March 2019	31 March 2018
Director		Ordinary shares	Ordinary shares	C shares
Michael Wrobel	Chairman	100,598	30,000	45,000
Peter Baxter	Director	47,065	20,000	30,000
Caroline Gulliver	Audit and Management Engagement Committee Chair	58,382	25,000	37,500
Alastair Moss	Director	11,766	5,000	7,500

The Company and CHA (collectively the "Members") entered into a limited liability partnership agreement with Civitas Social Housing UK LLP ("LLP") on 1 November 2016 to govern the mutual rights and duties of the LLP and the Members of the LLP. Under the terms of the Limited Liability Partnership Agreement, the Investment Adviser was entitled to an amount of £980,000 as Priority Profit Share from the date of the IPO to 31 March 2017, which is included in the Investment Advisory fees of £5,773,000 mentioned in note 8. There was no consideration paid or due from the Members of the LLP. The limited liability partnership agreement and the original Investment Advisory Agreement were terminated on 1 April 2017 and were replaced by the current Investment Management Agreement.

Remuneration

The Investment Manager has reviewed its remuneration policies and procedures to ensure incentives are aligned with the requirements of AIFMD. It includes measures to avoid conflicts of interest such as providing staff with a fixed monthly salary and determining discretionary payments by the performance of the Investment Manager as a whole and not linked to any one AIF in particular. The AIFM and its staff receive no remuneration through profit share, carried interest, co-investment or other schemes related to the Company's performance.

31. Transactions with the Investment Adviser

On 1 November 2016 Civitas Housing Advisors Limited was appointed as the Investment Adviser of the Company.

Fees of £6,457,000 (period to 31 March 2018: £5,773,000) were incurred and paid to CHA.

As at 31 March 2019, no amounts (31 March 2018: £nil) were due to/from CHA.

At 31 March 2019, CHA held 50,000 Ordinary shares in the Company.

32. Consolidated entities

The Company has provided a guarantee under s479C of the Companies Act 2006 in respect of the financial year ended 31 March 2019 for a number of its subsidiary companies (as indicated in the table on the following pages). The guarantee is over all outstanding liabilities to which the subsidiary companies are subject at 31 March 2019 until they are satisfied in full.

The Group consists of a parent company, Civitas Social Housing PLC, incorporated in England and Wales and a number of subsidiaries held directly by Civitas Social Housing PLC, which operate and are incorporated in the UK and Jersey.

The Group owns 100% equity shares of all subsidiaries listed below and has the power to appoint and remove the majority of the board of directors of those subsidiaries. The relevant activities of the below subsidiaries are determined by the board of directors based on the purpose of each company.

Therefore the Directors concluded that the Group has control over all these entities and all these entities have been consolidated within the consolidated financial statements.

A list of all related undertakings included within these consolidated financial statements are noted below. Indirectly held subsidiary companies are marked by an indentation in the table below.

Name		Registered number	Principal activity	Country of incorporation	Ownership %
Civitas Social Housing Finance Company 1 Limited	‡	10997707	Finance company	England & Wales	100.00%
Civitas Social Housing Jersey 1 Limited		124129	Holding company	Jersey	100.00%
Civitas SPV1 Limited	‡	10518729	Property investment	England & Wales	100.00%
Civitas SPV2 Limited	‡	10114251	Property investment	England & Wales	100.00%
Civitas SPV11 Limited	‡	10546749	Property investment	England & Wales	100.00%
Civitas SPV15 Limited	‡	09777380	Property investment	England & Wales	100.00%
Civitas SPV25 Limited	‡	10791473	Property investment	England & Wales	100.00%
Civitas SPV27 Limited	‡	10883112	Property investment	England & Wales	100.00%
Civitas SPV33 Limited	‡	10546407	Property investment	England & Wales	100.00%
Civitas SPV35 Limited	‡	10588530	Property investment	England & Wales	100.00%
Civitas SPV38 Limited	‡	10738318	Property investment	England & Wales	100.00%
Civitas SPV39 Limited	‡	10547333	Property investment	England & Wales	100.00%
Civitas SPV40 Limited	‡	10738510	Property investment	England & Wales	100.00%
Civitas SPV41 Limited	‡	10738542	Property investment	England & Wales	100.00%
Civitas SPV50 Limited	‡	10775419	Property investment	England & Wales	100.00%
Civitas Social Housing Finance Company 2 Limited	‡	10997698	Finance company	England & Wales	100.00%
Civitas Social Housing Jersey 2 Limited		124876	Holding company	Jersey	100.00%
Civitas SPV3 Limited	‡	10156529	Property investment	England & Wales	100.00%
Civitas SPV4 Limited	‡	10433744	Property investment	England & Wales	100.00%
Civitas SPV5 Limited	‡	10479104	Property investment	England & Wales	100.00%
Civitas SPV6 Limited	‡	10674493	Property investment	England & Wales	100.00%
Civitas SPV9 Limited	‡	10536388	Property investment	England & Wales	100.00%
Civitas SPV10 Limited	‡	10535243	Property investment	England & Wales	100.00%
Civitas SPV12 Limited	‡	10546753	Property investment	England & Wales	100.00%
Civitas SPV17 Limited	‡	10479036	Property investment	England & Wales	100.00%
Civitas SPV18 Limited	‡	10546651	Property investment	England & Wales	100.00%
Civitas SPV19 Limited	‡	10548932	Property investment	England & Wales	100.00%
Civitas SPV20 Limited	‡	10588735	Property investment	England & Wales	100.00%
Civitas SPV22 Limited	‡	10743958	Property investment	England & Wales	100.00%
Civitas SPV24 Limited	‡	10751512	Property investment	England & Wales	100.00%
Civitas SPV26 Limited	‡	10864336	Property investment	England & Wales	100.00%
Civitas SPV29 Limited	‡	10911565	Property investment	England & Wales	100.00%
Civitas SPV30 Limited	‡	10956025	Property investment	England & Wales	100.00%
Civitas SPV31 Limited	‡	10974889	Property investment	England & Wales	100.00%
Civitas SPV32 Limited	‡	11007173	Property investment	England & Wales	100.00%
Civitas SPV34 Limited	‡	10738381	Property investment	England & Wales	100.00%
Civitas SPV36 Limited	‡	10588792	Property investment	England & Wales	100.00%
Civitas SPV42 Limited	‡	10738556	Property investment	England & Wales	100.00%
Civitas SPV43 Limited	‡	10534877	Property investment	England & Wales	100.00%
Civitas SPV45 Limited	‡	10871854	Property investment	England & Wales	100.00%
Civitas SPV46 Limited	‡	10871910	Property investment	England & Wales	100.00%
Civitas SPV47 Limited	‡	10873270	Property investment	England & Wales	100.00%
Civitas SPV48 Limited	‡	10873295	Property investment	England & Wales	100.00%
Civitas SPV51 Limited	‡	10826693	Property investment	England & Wales	100.00%
Civitas SPV52 Limited	‡	10827006	Property investment	England & Wales	100.00%
Civitas SPV63 Limited	‡	10937805	Property investment	England & Wales	100.00%
Civitas SPV64 Limited	‡	10938411	Property investment	England & Wales	100.00%
Civitas SPV70 Limited	‡	10770201	Property investment	England & Wales	100.00%
Civitas SPV71 Limited (previously FPI CO 151 Ltd)	‡	10888639	Property investment	England & Wales	100.00%
Civitas SPV72 Limited (previously FPI CO 171 Ltd)	‡	10938022	Property investment	England & Wales	100.00%
Civitas SPV74 Limited (previously FPI CO 192 Ltd)	‡	11001855	Property investment	England & Wales	100.00%
Civitas SPV75 Limited (previously FPI CO 193 Ltd)	‡	11001834	Property investment	England & Wales	100.00%
Civitas SPV80 Limited (previously FPI CO 195 Ltd)	‡	11001998	Property investment	England & Wales	100.00%
Civitas Social Housing Finance Company 3 Limited	‡	10997714	Finance Company	England & Wales	100.00%
Civitas SPV8 Limited	‡	10536157	Property investment	England & Wales	100.00%
Civitas SPV28 Limited	‡	10895228	Property investment	England & Wales	100.00%
Civitas SPV53 Limited	‡	11021625	Property investment	England & Wales	100.00%
Civitas SPV55 Limited	‡	11056455	Property investment	England & Wales	100.00%
Civitas SPV57 Limited	‡	11091444	Property investment	England & Wales	100.00%
Civitas SPV60 Limited	‡	11111908	Property investment	England & Wales	100.00%
Civitas SPV61 Limited	‡	10937662	Property investment	England & Wales	100.00%
Civitas SPV66 Limited	‡	10937898	Property investment	England & Wales	100.00%
Civitas SPV77 Limited	‡	11166491	Property investment	England & Wales	100.00%
Civitas SPV78 Limited	‡	11170099	Property investment	England & Wales	100.00%
Civitas SPV79 Limited	‡	11236544	Property investment	England & Wales	100.00%
Civitas SPV81 Limited	‡	11192811	Property investment	England & Wales	100.00%
Civitas SPV82 Limited	‡	11380796	Property investment	England & Wales	100.00%
Civitas SPV83 Limited	‡	11371128	Property investment	England & Wales	100.00%
Civitas SPV85 Limited	‡	11300749	Property investment	England & Wales	100.00%
Civitas SPV95 Limited	‡	11208184	Property investment	England & Wales	100.00%
Civitas SPV97 Limited	‡	11463890	Property investment	England & Wales	100.00%
Civitas SPV103 Limited	‡	11500596	Property investment	England & Wales	100.00%
Civitas SPV105 Limited	‡	11532177	Property investment	England & Wales	100.00%
Civitas SPV106 Limited	‡	11532179	Property investment	England & Wales	100.00%
Civitas SPV107 Limited	‡	11532182	Property investment	England & Wales	100.00%
Civitas SPV116 Limited	‡	11504399	Property investment	England & Wales	100.00%
Civitas SPV117 Limited	‡	11504445	Property investment	England & Wales	100.00%
Civitas Social Housing Jersey 3 Ltd		124877	Holding company	Jersey	100.00%
Civitas SPV7 Limited	‡	10536368	Property investment	England & Wales	100.00%
Civitas SPV13 Limited	‡	09517692	Property investment	England & Wales	100.00%
Civitas SPV14 Limited	‡	10479041	Property investment	England & Wales	100.00%
Civitas SPV16 Limited	‡	09917557	Property investment	England & Wales	100.00%
Civitas SPV21 Limited	‡	10631541	Property investment	England & Wales	100.00%
Civitas SPV23 Limited	‡	10746881	Property investment	England & Wales	100.00%
Civitas SPV37 Limited	‡	10738450	Property investment	England & Wales	100.00%
Civitas SPV44 Limited	‡	10588783	Property investment	England & Wales	100.00%
Civitas SPV49 Limited	‡	11031349	Property investment	England & Wales	100.00%
Civitas SPV54 Limited	‡	11039750	Property investment	England & Wales	100.00%
Civitas SPV56 Limited	‡	11056465	Property investment	England & Wales	100.00%
Civitas SPV59 Limited	‡	11111912	Property investment	England & Wales	100.00%
Civitas SPV62 Limited	‡	10937528	Property investment	England & Wales	100.00%
Civitas SPV65 Limited	‡	10938467	Property investment	England & Wales	100.00%
Civitas SPV67 Limited	‡	10937929	Property investment	England & Wales	100.00%
Civitas SPV68 Limited	‡	10938269	Property investment	England & Wales	100.00%
Civitas SPV69 Limited	‡	11142372	Property investment	England & Wales	100.00%
Civitas SPV73 Limited (previously FPI CO 177 Ltd)	‡	10939075	Property investment	England & Wales	100.00%
Civitas SPV84 Limited	‡	11381455	Property investment	England & Wales	100.00%
Civitas SPV86 Limited	‡	11418432	Property investment	England & Wales	100.00%
Civitas SPV87 Limited (previously FPI CO 157 Ltd)	‡	10888903	Property investment	England & Wales	100.00%
Civitas SPV88 Limited (previously FPI CO 176 Ltd)	‡	10939044	Property investment	England & Wales	100.00%
Civitas SPV90 Limited (previously FPI CO 178 Ltd)	‡	10939131	Property investment	England & Wales	100.00%
Civitas SPV91 Limited (previously FPI CO 184 Ltd)	‡	10941377	Property investment	England & Wales	100.00%
Civitas SPV92 Limited	‡	11449913	Property investment	England & Wales	100.00%
Civitas SPV93 Limited	‡	11043111	Property investment	England & Wales	100.00%
Civitas SPV94 Limited	‡	11208105	Property investment	England & Wales	100.00%
Civitas SPV96 Limited	‡	11270786	Property investment	England & Wales	100.00%
Civitas SPV98 Limited	‡	11478695	Holding company	England & Wales	100.00%
Snapco Limited		008603V	Property investment	Isle of Man	100.00%
Snapco 2 Limited		009143V	Property investment	Isle of Man	100.00%
Snapco 3 Limited		009144V	Property investment	Isle of Man	100.00%
Snapco 4 Limited		011660V	Property investment	Isle of Man	100.00%
Snapco 5 Limited		012111V	Property investment	Isle of Man	100.00%
Civitas SPV99 Limited	‡	11478707	Holding  company	England & Wales	100.00%
Snapco 6 Limited		012112V	Property investment	Isle of Man	100.00%
Civitas SPV100 Limited	‡	11069703	Property investment	England & Wales	100.00%
Civitas SPV101 Limited	‡	09978282	Property investment	England & Wales	100.00%
Civitas SPV102 Limited	‡	11521555	Property investment	England & Wales	100.00%
Civitas SPV104 Limited	‡	11532174	Property investment	England & Wales	100.00%
Civitas SPV108 Limited	‡	11532135	Dormant	England & Wales	100.00%
Civitas SPV109 Limited	‡	11532120	Property investment	England & Wales	100.00%
Civitas SPV112 Limited	‡	11579750	Property investment	England & Wales	100.00%
Civitas SPV113 Limited	‡	11580068	Property investment	England & Wales	100.00%
Civitas SPV114 Limited	‡	11579733	Property investment	England & Wales	100.00%
Civitas SPV115 Limited	‡	11522178	Property investment	England & Wales	100.00%
Civitas SPV118 Limited	‡	11411498	Property investment	England & Wales	100.00%
Civitas SPV119 Limited		11751515	Dormant	England & Wales	100.00%
Civitas SPV120 Limited		11801922	Dormant	England & Wales	100.00%
Civitas SPV121 Limited	‡	11099917	Property investment	England & Wales	100.00%
Civitas SPV122 Limited	‡	11482646	Property investment	England & Wales	100.00%
Civitas SPV123 Limited	‡	08253452	Property investment	England & Wales	100.00%
Civitas SPV126 Limited	‡	11459821	Property investment	England & Wales	100.00%
Civitas SPV127 Limited		10941401	Property investment	England & Wales	100.00%
Civitas SPV129 Limited		11664994	Property investment	England & Wales	100.00%
Civitas SPV130 Limited		11705074	Property investment	England & Wales	100.00%
Civitas SPV131 Limited		11675132	Property investment	England & Wales	100.00%
Civitas SPV132 Limited	‡	11473735	Property investment	England & Wales	100.00%
Civitas SPV135 Limited	‡	11579880	Property investment	England & Wales	100.00%
Civitas SPV143 Limited	‡	11546808	Property investment	England & Wales	100.00%
Civitas SPV144 Limited	‡	11546696	Property investment	England & Wales	100.00%
Civitas SPV145 Limited		11842306	Holding company	England & Wales	100.00%
Fieldbay Limited	‡	05219012	Property investment	England & Wales	100.00%
Civitas SPV146 Limited		11861500	Dormant	England & Wales	100.00%
Civitas SPV147 Limited		11861974	Dormant	England & Wales	100.00%
Civitas SPV148 Limited		11632633	Property investment	England & Wales	100.00%
Civitas SPV149 Limited	‡	11462691	Property investment	England & Wales	100.00%
Civitas SPV150 Limited	‡	11462555	Property investment	England & Wales	100.00%
Civitas SPV151 Limited		11913037	Property investment	England & Wales	100.00%
FPI CO 324 Ltd		11633019	Property investment	England & Wales	100.00%
Civitas Social Housing Finance Company 4 Limited		11906660	Dormant	England & Wales	100.00%

‡ These entities are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act. These are all entities that have a year end prior to 31 March 2020.

The registered addresses for the subsidiaries are consistent based on their country of incorporation and are as follows:

• England & Wales entities: Beaufort House, 51 New North Road, Exeter, United Kingdom, EX4 4EP

• Jersey entities: 12 Castle Street, St Helier, Jersey, JE2 3RT

• Isle of Man entities: Knox House, 16-18 Finch Road, Douglas IM1 2PT

33. Financial risk management

33.1. Financial instruments

The Group's principal financial assets and liabilities are those that arise directly from its operations: trade and other receivables, trade and other payables and cash and cash equivalents. The Group's other principal financial liabilities are bank borrowings, the main purpose of which is to finance the acquisition and development of the Group's investment property portfolio. The C share financial liability is also considered to be a financial instrument, the main purposes of which is to finance new acquisitions.

Financial assets are classified as loans and receivables and all financial liabilities are measured at amortised cost. All financial instruments were designated in their current categories upon initial recognition.

Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments that are carried in the financial statements:

	Book value 31 March 2019 £'000	Fair value 31 March 2019 £'000	Book value 31 March 2018 £'000	Fair value 31 March 2018 £'000
Financial assets
Trade and other receivables1	5,353	5,353	2,573	2,573
Cash and cash equivalents	54,347	54,347	249,608	249,608
Financial liabilities
Trade and other payables2	15,205	15,205	9,951	9,951
Bank borrowings	205,156	205,806	90,822	92,350
C share liability	-	-	298,752	294,148

¹ Excludes prepayments and debtors arising on rent smoothing.

² Excludes deferred income and tax liabilities.

The Group has three bank loans. One is a 10-year fixed rate loan of £52.5 million, provided by Scottish Widows Limited and there is also a 3-year revolving credit facility variable rate loan of £60 million provided by Lloyds Bank plc and a 3-year revolving credit facility variable rate loan of £100 million provided by HSBC Bank PLC. The fair value of the fixed rate loan is determined by comparing the discounted future cash flows.

The C share liability fair value comparative is based on the quoted bid-market price at 31 March 2018 multiplied by the number of C shares in issue.

Financial risk management

The Group is exposed to market risk, interest rate risk, credit risk and liquidity risk in the current and future periods. The Board of Directors oversees the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks that are summarised below.

33.2. Market risk

The Group's activities will expose it primarily to the market risks associated with changes in property values and changes in interest rates.

Risk relating to investment in property

Investment in property is subject to varying degrees of risk. Some factors that affect the value of the investment in property include:

• changes in the general economic climate;

• competition for available properties;

• obsolescence; and

• Government regulations, including planning, environmental and tax laws.

Variations in the above factors can affect the valuation of assets held by the Group and as a result can influence the financial performance of the Group.

Risk relating to liquidity funds classified as cash and cash equivalents

The Group holds positions in two AAA rated liquidity funds that invest in a diversified range of government and non-government money market securities, which are subject to varying degrees of risk. Some factors that affect the value of the liquidity funds include:

• the performance of the underlying government and non-government money market securities; and

• interest rates.

Variations in the above factors can affect the valuation of assets held by the Group and as a result can influence the financial performance of the Group.

33.3. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Group's interest rate risk principally arises from long-term borrowings. To manage this, the Group has entered into a fixed rate bank loan and two variable rate bank loans. At 31 March 2019, 25% (2018: 57%) of the Group's borrowings are at a fixed rate of interest.

The exposure of the Group to variable rates of interest is considered upon drawing of any new loan facilities, to ensure that the Group's exposure to interest rate fluctuations is within acceptable levels.

The Investment Adviser monitors the Group's exposure to any changes in interest rate on an ongoing basis, with the Board updated on a quarterly basis of the current exposure of the Group's loan facilities.

As at 31 March 2019, if interest rates had been 200 basis points higher/(lower) with all other variables held constant the impact on profits after taxation for the period would be as follows:

	31 March 2019 £'000	31 March 2018  £'000
(Decrease)/increase in profits due to interest rates
200 basis points higher	(2,032)	(3,429)
200 basis points lower	1,271	7

The average effective interest rates of financial instruments at 31 March 2019 were as follows:

	31 March 2019 %	31 March 2018 %
Bank borrowings - fixed rate	2.99360	2.99360
Bank borrowings - variable rate	2.50180	2.02125
Cash and cash equivalents	0.16795	0.38205

33.4. Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risks from both its leasing activities and financing activities, including deposits with banks and financial institutions.

Debtors and accrued income represent rent due or accrued, these amounts due are diversified between a number of different Housing Associations of differing financial strength, see note 28 for details of the different counterparties. None of the Housing Associations have listed debt and as such do not have a credit rating, however, the diversified nature of this asset supports the credit quality.

The Group has policies in place to ensure that rental contracts are entered into only with lessees with an appropriate credit and operational history, and limits exposure to any one tenant. The credit risk is considered to be further reduced as the source of the rents received by the Group is ultimately provided by the government, by way of housing benefit and care provision, via a diverse range of Local Authorities.

For details of provisions for impairment please refer to note 17.

Credit risk related to financial instruments and cash deposits

One of the principal credit risks of the Group will arise with the banks and financial institutions. The Board of Directors believes that the credit risk on short-term deposits and current account cash balances is limited because the counterparties are banks considered to be of good credit quality. In the case of cash deposits held with lawyers, the credit risk is limited because the cash is held by the lawyers within client accounts at banks with high credit quality.

33.5. Liquidity risk

The Group manages its liquidity and funding risks by considering cash flow forecasts and ensuring sufficient cash balances are held within the Group to meet future needs. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of financing through appropriate and adequate credit lines, and the ability of customers to settle obligations within normal terms of credit. The Group ensures, through forecasting of capital requirements, that adequate cash is available.

The following table details the Group's maturity profile in respect of its financial instrument liabilities based on contractual undiscounted payments:

	On demand £'000	<1 year £'000	1-5 years £'000	> 5 years £'000	Total £'000
31 March 2019
Trade and other payables	15,205	-	-	-	15,205
Bank borrowings	-	5,473	168,877	56,573	230,923
	15,205	5,473	168,877	56,573	246,128
31 March 2018
Trade and other payables	9,951	-	-	-	9,951
Bank borrowings	-	2,371	49,483	58,145	109,999
C share liability	-	-	-	-	-
	9,951	2,371	49,483	58,145	119,950

The profile above assumes that the revolving credit facility loan will be rolled over and held to term. Included within the contracted payments is £22,476,000 (31 March 2018: £17,971,000) of loan interest payable up to the point of maturity.

The C share liability and any interest accruing to the C shareholders at 31 March 2018 was settled by the issue of Ordinary shares.

34. Capital commitments

At 31 March 2019, the Company had funds committed totalling £12,000,000 (2018: £4,902,000) concerning two properties (currently under development) for which the Company has entered into a conditional sale and purchase agreement conditional on the completion of development.

35. Post balance sheet events

Acquisitions

On 23 April 2019 two properties in Lancashire were acquired for a £1.7 million and £0.34 million respectively.

Dividends

On 8 May 2019 the Board declared a quarterly dividend in respect of the Ordinary shares for the three months to 31 March 2019 of 1.325 pence per Ordinary share. The dividend was paid on 7 June 2019 to holders of Ordinary shares on the register as at 17 May 2019. The dividend was paid as a REIT property income distribution ("PID").

Other announcements

On 29 April 2019, the Company announced a change to the calculation of Investment Advisory fees paid so that they are based on IFRS NAV instead of Portfolio NAV, to take effect from 26 April 2019.

The Board also agreed with the Investment Adviser to extend the initial notice period term within the Investment Management Agreement from 30 November 2021 to 30 May 2024.

 

Company Statement of Financial Position

As at 31 March 2019

	Note	31 March 2019  £'000	31 March 2018  £'000
Assets
Non-current assets
Investment in subsidiaries	7	767,917	479,134
Current assets
Trade and other receivables	8	371	2,380
Cash and cash equivalents	9	45,905	241,924
		46,276	244,304
Total assets		814,193	723,438
Liabilities
Current liabilities
Trade and other payables	10	(131,277)	(4,082)
C shares financial liability		-	(298,752)
		(131,277)	(302,834)
Total liabilities		(131,277)	(302,834)
Total net assets		682,916	420,604
Equity
Share capital	11	6,225	3,500
Share premium reserve		292,405	-
Capital reduction reserve		331,625	331,625
Retained earnings	12	52,661	85,479
Total equity		682,916	420,604

The Company has taken advantage of the provisions of Companies Act 2006 s408 and does not disclose the Company's individual profit and loss account. Losses for the year were £14,937,000 (period 31 March 2018: profit £88,135,000).

The Company financial statements were approved by the Board of Directors of Civitas Social Housing PLC and authorised for issue on 21 June 2019 and signed on its behalf by:

Michael Wrobel

Chairman and Independent Non-Executive Director

21 June 2019

Company No: 10402528

The notes below are an integral part of these financial statements.

 

Company Statement of Changes in Equity

For the year ended 31 March 2019

				Retained
		Share	Capital	earnings/
	Share	premium	reduction	(accumulated	Total
	capital	reserve	reserve	losses)	equity
	£'000	£'000	£'000	£'000	£'000
Balance at 18 November 2016	-	-	-	(31)	(31)
Profit and total comprehensive income for the period	-	-	-	88,135	88,135
Issue of Ordinary shares
Issue of share capital	3,500	346,500	-	-	350,000
Share issue costs	-	(7,000)	-	-	(7,000)
Cancellation of share premium reserve	-	(339,500)	339,500	-	-
Dividends paid
Total interim dividends for the period ended 31 March 2018 (3.00p)	-	-	(7,875)	(2,625)	(10,500)
Balance at 31 March 2018	3,500	-	331,625	85,479	420,604
Loss and total comprehensive expense for the period	-	-	-	(14,937)	(14,937)
Issue of Ordinary shares
Issue of share capital	2,725	292,461	-	-	295,186
Share issue costs	-	(56)	-	-	(56)
Dividends paid
Total interim dividends for the period ended 31 March 2019 (5.00p)	-	-	-	(17,881)	(17,881)
Balance at 31 March 2019	6,225	292,405	331,625	52,661	682,916

Distributable reserves total £384,286,000 (31 March 2018: £417,104,000)

The notes below are an integral part of these financial statements.

 

Notes to the Company Financial Statements

For the year ended 31 March 2019

1.   Corporate information

Civitas Social Housing PLC ("the Company") was incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 29 September 2016 with company number 10402528 under the name Civitas REIT PLC which was subsequently changed to the existing name on 3 October 2016.

The address of the registered office is Beaufort House, 51 New North Road, Exeter, EX4 4EP. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.

The Company did not begin trading until 18 November 2016 when the shares were admitted to trading on the London Stock Exchange ("LSE").

The Company's Ordinary shares are admitted to the Official List of the Financial Conduct Authority ("FCA"), and traded on the LSE.

The principal activity of the Company is to act as the ultimate parent company of Civitas Social Housing PLC and its subsidiaries (the "Group"), whose principal activity is to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes.

2.   Basis of preparation

The financial statements have been prepared on a historical cost basis and in accordance with Financial Reporting Standard 100 Application of Financial Reporting Requirements ("FRS 100"), Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101") and the Companies Act 2006 as applicable to companies using FRS 101.

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"), but makes amendments where necessary in order to comply with the Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101.

Therefore these financial statements do not include:

• certain comparative information as otherwise required by EU endorsed IFRS;

• certain disclosures regarding the Company's capital;

• a statement of cash flows;

• the effect of future accounting standards not yet adopted;

• the disclosure of the remuneration of key management personnel; and

• disclosure of related party transactions with other wholly owned members of Civitas Social Housing PLC.

In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures are included in the Company's consolidated financial statements. These financial statements do not include certain disclosures in respect of:

• share based payments;

• financial instruments; and

• fair value measurement other than certain disclosures required as a result of recording financial instruments at fair value.

The comparative information disclosed in the financial statements relates to the period from 18 November 2016 to 31 March 2018. The period covered by the comparative information varies in length and the level of activities and therefore is not entirely comparable to the current period.

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own income statement or statement of comprehensive income.

Going concern

The financial statements have been prepared on a going concern basis.

Significant judgements and sources of estimation uncertainty

The key source of estimation uncertainty relates to the Company's investments in subsidiaries and joint ventures. In estimating the requirement for impairment of these investments, management make assumptions and judgements on the value of these investments using inherently subjective underlying asset valuations, supported by independent valuers.

3.   Accounting policies

The financial statements of the Company follow the accounting policies laid out in the Group's consolidated financial statements along with the following accounting policies which have been consistently applied:

Investments in subsidiaries

The investments in subsidiary companies are included in the Company's Statement of Financial Position at cost less provision for impairment.

Loans to subsidiaries

Loans made to subsidiary companies are initially recognised at fair value and subsequently are measured at amortised cost.

4.   Dividends

Details of dividends paid and proposed are included in note 14 of the Group's consolidated financial statements.

5.   Employee information

Details of Directors' remuneration are included in note 6 of the consolidated financial statements. The Company had no employees during the period (31 March 2018 period: nil) other than the Directors.

6.   Audit fees

Audit fees in relation to the Company's financial statements total £180,000 (31 March 2018 period: £273,000)

7.   Investments in subsidiaries

	Shares in   subsidiaries  £'000	Loans to subsidiaries £'000	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
At the beginning of the period	446,954	32,180	479,134	-
Increase in investments	31,576	257,207	288,783	479,134
Loans transferred	198,245	(198,245)	-	-
Additions due to internal group restructure	186,294	-	186,294	296,115
Disposals due to internal group restructure	(181,440)	(4,854)	(186,294)	(296,115)
At the end of the period	681,629	86,288	767,917	479,134

Internal group restructures have taken place in the year in order to facilitate borrowings. As part of the restructures, a number of subsidiary companies where there assets are used as security for bank loans, are now directly held by other Group companies.

8. Trade and other receivables

	31 March 2019 £'000	31 March 2018 £'000
Prepayments and other receivables	371	393
Amounts due from subsidiary companies	-	1,987
Total	371	2,380

Prepayments and other receivables amount above includes prepaid legal and professional fees of £343,000 (2018: £366,000) that have been incurred in connection with the acquisitions yet to be completed.

9. Cash and cash equivalents

	31 March 2019 £'000	31 March 2018 £'000
Cash held by solicitors	17,031	12,262
Liquidity funds	13,394	210,969
Cash held at bank	10,931	12,410
Cash and cash equivalents	41,356	235,641
Restricted cash	4,549	6,283
Total cash held at bank	45,905	241,924

10. Trade and other payables

	31 March 2019 £'000	31 March 2018 £'000
Acquisition costs accrued	303	309
Retentions	4,489	2,806
Accruals	536	540
Dividends payable	717	427
Amounts due to subsidiary companies	125,232	-
Total	131,277	4,082

11. Share capital

Share capital represents the nominal value of consideration received by the Company for the issue of Ordinary shares.

	For the year ended 31 March 2019 £'000	From 18 November 2016 to 31 March 2018 £'000
Share capital
At beginning of period	3,500	-
Shares issued	2,725	3,500
At end of period	6,225	3,500

Number of shares issued and fully paid

		For the year ended 31 March 2019 Number	From 18 November 2016 to 31 March 2018 Number
Ordinary shares of £0.01 each
At beginning of period		350,000,000	100
Shares issued		272,461,380	349,999,900
At end of period		622,461,380	350,000,000

The Company's Ordinary shares were admitted to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange on 18 November 2016, raising £350 million. As a result of the IPO, on 18 November 2016, 349,999,900 shares at £0.01 per share were issued, fully paid.

On 21 December 2018, the Company issued 272,461,380 Ordinary shares in respect of the conversion of 302,000,000 C shares. The fair value of assets representing the C share pool at the date of conversion was £295,186,000.

12. Retained earnings

This reserve represents the profits and losses of the Company

	For the  year ended  31 March 2019  £'000	From  18 November 2016  to 31 March 2018  £'000
At beginning of period	85,479	(31)
(Loss)/profit for the period	(14,937)	88,135
Dividends paid in the period	(17,881)	(2,625)
At end of period	52,661	85,479

13. Controlling parties

As at 31 March 2019 there is no ultimate controlling party.

14. Related party transactions

For all related party transactions and transactions with the Investment Adviser please make reference to notes 30-32 of the Group's consolidated financial statements.

Glossary

Average Net Yield means the average yield on an investment or a portfolio that results from adding all interest, dividends or other income generated from the investment, divided by the average of the investments for the period.

GAGR means Compound Annual Growth Rate

Care Provider  means a provider of care services to the occupants of Specialist Supported Housing, registered with the Care Quality Commission.

CHA means Civitas Housing Advisors Limited, the Investment Adviser to the Company.

Company means Civitas Social Housing PLC, a company incorporated in England and Wales with company number 10402528.

Company Adjusted Earnings means EPRA earnings adjusted to add back the finance cost associated with the C share financial liability.

CMA Order means the Statutory Audit Services Order 2014, issued by the Competition and Markets Authority.

EPRA means European Public Real Estate Association.

EPRA EPS is the EPRA earnings divided by the weighted average number of shares in issue in the period.

EPRA net asset value (EPRA NAV) is the IFRS net assets excluding the mark-to-market on derivatives and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative valuations. A reconciliation between IFRS net assets and EPRA NAV is included in Appendix 1.

EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on revaluations.

Gross Asset Value means total assets plus the portfolio premium derived from the portfolio valuation.

Group means the Company and its subsidiaries.

Housing Association or HA means an independent society, body of trustees or company established for the purpose of providing low-cost social housing for people in housing need generally on a non-profit making basis. Any trading surplus is typically used to maintain existing homes and to help finance new ones. Housing Associations are regulated by the Homes and Communities Agency.

IFRS Net Asset Value or IFRS NAV means the net asset value of the Group on the relevant date, prepared in accordance with IFRS accounting principles.

IFRS Net Initial Yield means the ratio of net rental income and gross purchase price of a property.

IFRS Valuation means an independent valuation of the Portfolio by Jones Lang LaSalle or such other property adviser as the Directors may select from time to time, prepared in accordance with RICS "Red Book" guidelines and based upon a valuation of each underlying investment property rather than the value ascribed to the portfolio and on the assumption of a theoretical sale of each property rather than the corporate entities in which all of the Company's investment properties are held.

Investment Adviser means Civitas Housing Advisors Limited, a company incorporated in England and Wales with company number 10278444, in its capacity as investment adviser to the Company.

IPO means Initial Public Offering.

IRR means internal rate of return.

Levered IRR means the internal rate of return including the impact of debt.

Local Authority or LA means the administrative bodies for the local government in England comprising of 326 authorities (including 32 London boroughs).

Portfolio Net Asset Value or Portfolio NAV means the net asset value of the Company, as at the relevant date, calculated on the basis of an independent Portfolio Valuation. See note 16 for a reconciliation to IFRS NAV.

Portfolio Valuation means an independent valuation of the Portfolio by Jones Lang LaSalle or such other property adviser as the Directors may select from time to time, based upon the Portfolio being held, directly or indirectly, within a corporate vehicle or equivalent entity which is a wholly owned subsidiary of the Company and otherwise prepared in accordance with RICS "Red Book" guidelines.

REIT means a qualifying real estate investment trust in accordance with the UK REIT Regime introduced by the UK Finance Act 2006 and subsequently re-written into Part 12 of the Corporation Tax Act 2010.

Registered Providers or RP means Housing Associations, Local Authorities and arm's length management organisations, a not-for-profit company that provides housing services on behalf of a Local Authority.

RICS means Royal Institution of Chartered Surveyors.

RNS means the London Stock Exchange Regulatory News Service.

RSH means the Regulator of Social Housing.

Social homes or social housing means homes which are social rented, affordable rented, other homes managed by Registered Providers or Low Cost Home Ownership homes.

Specialist Supported Housing or SSH means social housing which incorporates some form of care or other ancillary service on the premises.

SPV means special purpose vehicle, a corporate vehicle in which the Group's properties are held.

WAULT means weighted average unexpired lease term.

Appendix 1 (unaudited)

Notes to the calculation of EPRA and other alternative performance measures

1.   EPRA Earnings

	For the year ended 31 March 2019	From 18 November 2016 to 31 March 2018
Earnings from operational activities
Profit after taxation (£'000)	19,864	36,926
Changes in value of investment properties (£'000)	(3,652)	(30,633)
EPRA Earnings (£'000)	16,212	6,293
Finance costs associated with the C share financial liability (£'000)	6,400	2,792
Diluted EPRA earnings (£'000)	22,612	9,085
Weighted average number of shares in issue	425,393,423	350,000,000
Dilutive elements	197,067,957	281,065,815
Adjusted weighted average number of shares in issue	622,461,380	633,065,815
EPRA Earnings per share (EPS) - basic	3.81p	1.80p
EPRA Earnings per share (EPS) - diluted	3.63p	1.44p

2.   EPRA NAV

Net Asset Value adjusted to include properties and other investment interest at fair value and to exclude certain items not expected to crystallise in a long-term investment property business model.

	31 March 2019	31 March 2018
Net assets (£'000)	666,508	369,395
Effect of the exercise of C shares (£'000)	-	298,752
Diluted net assets (£'000)	666,508	668,147
Other adjustments (£'000)	-	-
EPRA Net Assets (£'000)	666,508	668,147
Number of Ordinary shares in issue	622,461,380	350,000,000
Number of Ordinary shares that would be issued on the conversion of C shares	-	283,065,815
Adjusted number of shares to calculated diluted NAV	622,461,380	633,065,815
EPRA Net Assets per share	107.08p	105.54p

3.   EPRA NNNAV

EPRA NAV adjusted to include the fair values of (i) financial instruments, (ii) debt and (iii) deferred taxes.

	31 March 2019	31 March 2018
EPRA Net Assets (per above) (£'000)	666,508	668,147
Adjustment to value bank borrowings at fair value (£'000)	(650)	(712)
EPRA NNNAV (£'000)	665,858	667,435
Number of Ordinary shares in issue	622,461,380	350,000,000
Number of Ordinary shares that would be issued on the conversion of C shares	-	283,065,815
Adjusted number of shares to calculated diluted NAV	622,461,380	633,065,815
EPRA NNNAV per share	106.97p	105.43p

4.    EPRA Vacancy Rate

Estimated Market Rental Value ("ERV") of vacancy space divided by ERV of the whole portfolio.

	31 March 2019	31 March 2018
Estimated Market Rental Value (ERV) of vacant spaces	-	-
Estimated Market Rental Value (ERV) of whole portfolio	45,685	28,543
EPRA Vacancy Rate	0%	0%

5.    EPRA Costs Ratio

Administrative and operating costs divided by gross rental income.

	For the year ended 31 March 2019	From 18 November 2016 To 31 March 2018
Total administrative and operating costs	9,642	8,893
Gross rental income	35,738	18,606
EPRA cost ratio	26.98%	47.80%

6.   Portfolio NAV

IFRS NAV adjusted to reflect investment property valued on a portfolio basis rather than individual asset basis.

	31 March 2019	31 March 2018
Net assets (£'000)	666,508	369,395
Adjustment for change to property valuation (£'000)	74,662	29,110
Portfolio net assets  (£'000)	741,170	398,505
Number of Ordinary shares in issue	622,461,380	350,000,000
EPRA Net Assets per share	119.07p	113.86p

7.   Company Adjusted Earnings

Company specific earnings measure which adds back finance costs associated with the C share financial liability.

	For the   year ended   31 March 2019	From  18 November 2016  to 31 March 2018
Profit after taxation (£'000)	19,864	36,926
Changes in value of investment properties (£'000)	(3,652)	(30,633)
EPRA Earnings (£'000)	16,212	6,293
Finance costs associated with the C share financial liability (£'000)	6,400	2,792
Company Adjusted Earnings (£'000)	22,612	9,085
Weighted average number of shares in issue	622,461,380	350,000,000
EPRA Adjusted Earnings per share (EPS) - basic	3.63p	2.60p

8.   IRR

The Internal Rate of Return ("IRR") for the period from launch to 31 March 2019 based on IFRS NAV and portfolio NAV is calculated using dividend cash flows data as follows:

		IFRS NAV basis	Portfolio NAV basis
		pps	pps
18/11/2016	Investment (net of issue costs)	98.00	98.00
31/05/2017	Interim dividend	0.75	0.75
31/08/2017	Interim dividend	0.75	0.75
30/11/2017	Interim dividend	0.75	0.75
09/03/2018	Interim dividend	0.75	0.75
08/06/2018	Interim dividend	1.25	1.25
07/09/2018	Interim dividend	1.25	1.25
30/11/2018	Interim dividend	1.25	1.25
11/01/2019	Interim dividend	1.11	1.11
28/02/2019	Interim dividend	0.14	0.14
31/03/2019	NAV	107.10	119.10
IRR		7.23%	11.93%

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at 2.00 p.m. on Thursday, 5 September 2019 at 3 More London Riverside, London SE1 2AQ.

NATIONAL STORAGE MECHANISM

A copy of the Annual Report and Financial Statements and Notice of Annual General Meeting will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at www.morningstar.co.uk/uk/NSM.

LEI: 213800PGBG84J8GM6F95

ENDS

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the website (or any website) is incorporated into, or forms part of, this announcement.

 

 

END

 

 

FR LLFVERVILFIA