Net Asset Value, Trading and Market Update

RNS Number : 2905V

Civitas Social Housing PLC

06 August 2020

 

  6 August 2020

CIVITAS SOCIAL HOUSING PLC

("Civitas" or the "Company")

Net Asset Values and Dividend Declaration

Trading and Market Update

Civitas Social Housing PLC ("Civitas" or "the Company") is pleased to announce its quarterly net asset value as at 30 June 2020, a dividend declaration and to provide a trading and market update.

Highlights:

· Robust financial performance in line with expectations

· Rents received as normal with no COVID 19 impact during the quarter

· IFRS NAV per share 107.92p (31 March 2020: 107.87p)

· 1.35p dividend declared for the quarter as planned

· RICS removes "material valuation uncertainty" condition

· Three additional properties acquired for £3.9 million

· Strong pipeline of investment opportunities  

Trading and Market Update

The Company continues to perform in line with expectations and rents have been collected as normal and unaffected by COVID-19.

Cash generation remains strong. The Company is pleased to announce a slightly increased net asset value (reflecting the current low level of CPI inflation) and an on target uplifted dividend of 1.35p consistent with the stated objective of paying a total of 5.4p for the year to 31 March 2021.

The healthcare and housing sectors in which the Company operates have continued to prove operationally resilient against the backdrop of the COVID 19 pandemic with care providers and housing associations continuing to adapt best practice for the safety of residents and staff. Whilst no part of the economy has been completely immune from the virus, the instances of COVID 19 within the Company's portfolio remains at a very low level with many properties reporting no occurrences at all. The Company continues to offer its thanks and support to its counterparties and acknowledges the excellent way in which they continue to perform.

The Board believes that the Company operates a robust and defensive business model. This is driven by meeting, in a cost-effective manner, the legitimate needs of vulnerable individuals who require the accommodation provided by the Company to enable them to reside, for the long-term, in community settings in line with stated Government policy. The COVID 19 pandemic provides a further demonstration of the merits of enabling individuals to reside either in their own dwelling or in small clusters as opposed to old style, large scale, remote residential or hospital settings. When evaluating the performance of counterparties, the Company believes it is important for all interested parties to take these broader and usually very positive personal outcomes into account.

Net Asset Values ("NAV"):

IFRS NAV

The unaudited IFRS NAV, disclosed below, reflects an independent RICS "Red Book" valuation prepared on an individual asset basis by Jones Lang LaSalle ("JLL").

IFRS NAV	30 Jun 2020	31 Mar 2020
Ordinary NAV (£'000)	670,898	670,564
Ordinary NAV per share (pence)	107.92	107.87

The portfolio, based on individual asset valuations, has been valued overall at 30 June 2020 at an average Net Initial Yield of 5.26% (31 March 2020: 5.26%) after taking into account the initial costs of property acquisitions incurred by the Company and the assumed costs of a subsequent theoretical sale. The individual valuations are determined by JLL based on a range of underlying metrics including applicable discount rates and expected long-term inflation.

The growth in IFRS NAV reflects the contribution from the indexation of leases in the period, (based on the current low level of CPI inflation) and the cost of modest discretionary capital expenditure that has been incurred to enhance further the quality of the Company's properties to reflect the individual needs of tenants for the long term. It also reflects fewer asset purchases and any associated yield compression in the period  as the Company does not presently have surplus capital (above a cash buffer and capital reserved for transactions on which exchange has taken place), notwithstanding a strong pipeline of acquisition opportunities.

In the period to 30 June 2020, an Ordinary Share dividend of 1.325p per share was declared in respect of the period ended 31 March 2020 and paid in May 2020, amounting to £8.2 million.

Portfolio NAV

The unaudited Portfolio NAV, disclosed below, reflects an independent RICS "Red Book" valuation prepared on a portfolio basis by JLL.

PORTFOLIO NAV	30 Jun 2020	31 Mar 2020
Ordinary NAV (£'000)	736,057	735,704
Ordinary NAV per share (pence)	118.40	118.35

The portfolio, as a single entity, has been valued at 30 June 2020 at 5.07% Net Initial Yield (31 March: 5.06%) reflecting the enhanced value from the aggregation of individual properties into a single portfolio company and the positive effects of the stamp duty adjustment noted below.

The JLL Portfolio NAV valuation incorporates two additional assumptions when considering Red Book valuation. Firstly, that the assumed theoretical sale costs (from Civitas to a subsequent buyer) are reduced as the portfolio is assumed to be sold (with all properties within SPVs) with stamp duty being charged at 0.5% on the sale of shares in SPVs as opposed to 5.0% for the sale of each underlying property.

Secondly, that the portfolio is sold in its entirety rather than as individual properties (making it better suited to a wider group of institutional buyers) and so attracting more competitive pricing. This assumption is supported by transactional evidence that JLL has observed in the market.

Material Valuation Uncertainty

In accordance with RICS guidelines the Material Valuation Uncertainty that has been applied to the valuation of the majority of classes of real estate as a result of the COVID 19 pandemic has, from the end of May 2020, been lifted from the Company's portfolio. RICS confirmed that the condition would no longer be applied to specialist supported housing of both C2 and C3 designations let on FRI leases. This reflects the perceived stability of income associated with such arrangements.

Dividend Declaration

The Board has today declared a first quarterly dividend for the period from 1 April 2020 to 30 June 2020 of 1.35p per Ordinary Share as part of the stated target of 5.4p per Ordinary Share for the year to 31 March 2021.

The dividend will be paid on or around 7 September 2020 to holders on the register as at 14 August 2020 (the record date) with the corresponding ex-dividend date being 13 August 2020. The dividend will be paid as a REIT property income distribution ("PID").

The target dividend for the year to 31 March 2021 reflects both the strong underlying cash generation that the Company continues to achieve and the Board's view, at the present time, of the Company's prospects in the current financial year.

Investments/ Pipeline

During the quarter to 30 June 2020, the Company completed the acquisition of three freehold properties comprising 25 tenancies for a total consideration of £3.9 million prior to purchase costs. This includes the purchase on completion of the first smaller phase of the Company's new state of the art healthcare facilities in Wales.

The purchase consideration has been reserved by the Company for this phase together with the final phase which will provide accommodation for 49 individuals and is due for completion and delivery over the coming weeks.

In respect of additional investment opportunities, the Company is in active discussions over the potential acquisition of a range of high-quality existing and new build properties to be acquired at completion without the need for forward financing.

The availability of these investment opportunities reflects many of the unique strategic relationships that have been established by the Company over recent years, in particular with leading specialist care providers as well as with several new counterparties based on the recent shareholder approval for a broadening of the Company's investment policy.

Additional Debt Facilities

As noted previously the Company is in active discussions regarding the provision of additional debt facilities and expects to provide an update in this regard in due course and for new facilities to be made available over the next few months.

Activity within the lending markets for new facilities is beginning to move forward again after delays noted at the beginning of the COVID 19 pandemic when lenders' focus was very much directed towards borrowers impacted by the virus.

 As noted above, at the present time the Company's cash resources are fully allocated to the projects that are expected to complete this year on which exchange has taken place and to maintaining an appropriate and prudent cash reserve. The Board is currently considering options for raising additional capital to enable the Company to continue to acquire further assets within its pipeline of attractive investment opportunities.

Quarterly Fact Sheet

The Company has today published its Factsheet for the quarter to 30 June 2020 and this is available to view on the   Company's website .

ENDS

For further information, please contact:

Civitas Investment Management Limited

Paul Bridge  Tel: [phone]

Andrew Dawber    Tel: [phone]

Panmure Gordon

Sapna Shah  Tel: [phone]

Tom Scrivens                         Tel: [phone]

Liberum Capital Limited

Gillian Martin / Chris Clarke              Tel: [phone]

Buchanan

Helen Tarbet / Henry Wilson  Tel: [phone]

Hannah Ratcliff / George Beale  Tel: [phone]

[e-mail]

Notes:

Civitas Social Housing PLC (CSH) was created in 2016 by Civitas Investment Management Limited as the first dedicated London listed REIT, to raise long-term, sustainable, institutional capital to invest in care-based social homes and healthcare facilities across the UK. So far, CSH has completed more than 120 individual transactions to build the largest portfolio of its kind that has been independently valued at £885 million. CSH provides homes for 4,241 working age adults with long-term care needs, in 616 bespoke properties that are supported by 118 specialist care providers, 15 housing associations over 164 individual local authority areas. Most recently, CSH has extended its mandate to be able to work directly with the NHS and other leading care-based organisations.

 

END

 

 

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