Net Asset Value, Trading and Market Update

RNS Number : 4470E

Civitas Social Housing PLC

06 November 2020

 

6 November 2020

CIVITAS SOCIAL HOUSING PLC

("CSH" or the "Company")

Net Asset Values and Dividend Declaration

Trading and Market Update

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

Highlights:

· Strong financial and operational performance in line with expectations

· IFRS NAV per share 108.01p (30 June 2020: 107.92p)

· Rents received as normal with no COVID 19 impact

· Excellent health and safety compliance reported by housing associations

· 1.35p quarterly dividend declared in line with full year target of 5.4p

· Two additional properties (51 beds) acquired for £10.4m in the quarter

· Further progress on new debt facilities and investment pipeline

Trading and Market Update

The Company has continued to perform in-line with expectations with rents in the quarter being collected as normal unaffected by COVID-19.  As at 5 November over 98 per cent. of rents had been received across CSH's 618 properties with the balance expected shortly.

Rental income and net cash generation have advanced positively to provide further support for the Company's aim of paying a total dividend of 5.4p for the year to 31 March 2021 and for maintaining a progressive dividend policy in-line with inflation. Revenue from the portfolio, including income contracted from new investments, delivers 100% EPRA dividend cover on a run rate basis.

Further details of the Company's financial performance will be provided at the time of publication of the half year report to 30 September 2020 in early December.

The Company's investment portfolio has benefited from the addition of two further properties in the period, leased to Inclusion Housing Community Interest Company and Bespoke Supported Tenancies Limited. The properties together comprise 51 bed spaces of which 49 are supported by a new back to back care provider lease which covers the entirety of the rental income over the 22-year period including void protection.

More broadly the sector in which the Company operates has continued to demonstrate strong fundamentals. The COVID-19 pandemic has generated further additional demand for specially adapted, high quality accommodation for vulnerable and disabled adults, to which CSH has been able to respond by making available vacant properties in the portfolio.

The Company's investment adviser, Civitas Investment Management Limited ("CIM") has extended its regular dialogue with housing associations to include detailed reports on pandemic responsiveness.

The Board is pleased to note continuing levels of the highest dedication to health and safety, resulting in excellent compliance reports together with a strong performance in the unbroken delivery of essential care for residents.

In addition to undertaking these monitoring activities CIM has continued to work closely with housing associations to assist in helping them drive forward operational and financial reporting improvements including assisting with management and board level recruitment, asset management and the interaction with local authorities and care providers. CIM is encouraged to observe that the housing association partners are continuing to evolve and to improve their systems and processes.

From an investment perspective, the Company's activities take place within a sector that has very low correlation to the broader economy or equity market movements and benefits from 100% government funding whilst offering independently evidenced value for money for the public purse and positive transformational personal outcomes for residents.

The Company continues to focus on Environmental, Social and Governance ("ESG") principles, and during the quarter has:

· Increased the Environmental Performance Certificate rating within the CSH portfolio to 99.5% (98% as at 31 March 2020) with full compliance expected by the end of the year;

· Maintained its status as an "Impact Investor" under the International Finance Corporation ("IPC") principles;

· Become an early adopter of the new Sustainability Reporting Standard developed for the social housing sector by a leading social impact consultancy; and

· Been at the forefront of improving governance in the sector.

Net Asset Value

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 Sept 2020	30 Jun 2020
Ordinary NAV (£'000)	671,412	670,898
Ordinary NAV per share (pence)	108.01	107.92

The portfolio, based on individual asset valuations, has been valued at 30 September 2020 at an average Net Initial Yield of 5.26% (30 June 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 the asset purchases in the period, which were limited in number as the Company is almost fully invested (above a cash buffer and capital reserved for transactions expected to complete shortly), notwithstanding a growing pipeline of strong acquisition opportunities.

In the period to 30 September 2020, an Ordinary Share dividend of 1.35p per share was declared in respect of the period ended 30 June 2020 and paid in September 2020, amounting to £8.4 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 Sept 2020	30 Jun 2020
Ordinary NAV (£'000)	735,913	736,057
Ordinary NAV per share (pence)	118.4	118.4

The portfolio, as a single entity, has been valued at 30 September 2020 at 5.08% Net Initial Yield (30 June: 5.07%) 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 CSH 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.

Dividend Declaration

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

The dividend will be paid on or around 4 December 2020 to holders on the register as at 20 November 2020 (the record date) with the corresponding ex-dividend date being 19 November 2020. The dividend will be paid as a REIT property income distribution ("PID").

The target dividend of 5.4p per Ordinary Share 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.

Additional Debt Facilities

The pandemic slowed, temporarily, the ability of lenders to consider new facilities with their focus being applied to existing borrowers who required support and with most or all staff working remotely. More recently lenders have been more open to consider new funding opportunities on competitive rates and the Company is now working with parties to finalise a new debt facility. A further announcement will be made in due course.

Quarterly Fact Sheet

The Company has today published its Factsheet for the quarter to 30 September 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  [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 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 on an IFRS basis at £898.5 million. CSH provides homes for 4,292 working age adults with long-term care needs, in 618 bespoke properties that are supported by 118 specialist care providers, 15 housing associations over 164 individual local authority areas.

 

END

 

 

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