TIDMRESI
RNS Number : 8721B
Residential Secure Income PLC
07 June 2023
7 June 2023
Residential Secure Income plc
("ReSI plc" or the "Company")
Interim Results to 31 March 2023
Residential Secure Income plc (ReSI plc) (LSE: RESI), which
invests in independent retirement living and shared ownership to
deliver secure, inflation-linked returns, is pleased to announce
its interim results for the six months ending 31 March 2023.
Commenting on ReSI plc's results, Robert Whiteman CBE, Chairman
of ReSI plc said:
"ReSI remains well-placed, to meet continued enormous demand for
affordable housing, enabling sustainable and growing, risk-adjusted
returns over the long term.
We have continued to support residents, balancing rent increases
and returns in a way which is sustainable for both residents and
shareholders. This focus has been rewarded with 99% rent collection
from 2,613 counterparties and resilient high-occupancy levels.
These factors drive our secure income stream which has remained
unaffected despite the impact of the macroeconomic environment on
property valuations.
We are considering selective disposal of certain non-core
assets, to reduce floating rate debt levels, and will then revisit
the appropriate level for a fully covered and progressive
dividend."
Ben Fry, Managing Director of Housing at Gresham House
added:
"Our aim remains to deliver defensive long income for investors
and meaningful social impact by providing high-quality, secure
homes for our residents - and the fundamentals for this portfolio
remain robust, with customer demand incredibly strong, given the
economic circumstances."
Key Financial Metrics
Income Six months Six months Change
to 31-Mar 23 to 31-Mar 22 in Year
---------------------------- --------------- --------------- -----------
Like-for-like rental
reviews +6.2% +4.2% +2%
Rent Collection 99% 99% -
Gross Rental Income GBP13.6mn GBP12.4mn +10%
Net Rental Income GBP8.8mn GBP8.1mn +8%
Adjusted EPRA Earnings1,2 GBP4.1mn GBP4.2mn -3%
Adjusted EPRA EPS1,2 2.2p 2.4p -8%
Dividend paid per share 2.6p 2.6p -
Dividend cover3 86% 96% -10%
Changes in fair value
of investment properties GBP(28.5)mn GBP5.0mn -570%
Capital 31-Mar 23 30-Sept 22 Change in
Period
---------------------------- --------------- --------------- -------------
IFRS net assets GBP166.6mn GBP201.4mn -17%
IFRS NAV per share 90.0p 108.8p -17%
IFRS Portfolio Valuation GBP355.3mn GBP374.8mn -5%
EPRA NTA per share1 89.0p 106.1p -16%
EPRA NTA Total Return1 (13.7)% +3.3% -10%
Loan to Value 52% 47% +5%
Financial highlights - resilient earnings with inflation linkage
of rental income, offset by increased energy costs in communal
areas and floating rate debt costs
-- GBP35m of shared ownership acquisitions compared to previous year
-- 6.2% rent review growth (includes shared ownership rent increases on 1 April 2023)
-- EPRA adjusted earnings (1) of GBP4.1 million (H1 22: GBP4.2
million) with strong rent growth offset by retirement cost
increases, due to rising energy costs, increased floating rate debt
costs and higher fund opex
-- EPRA Net Tangible Assets ("NTA") total return of (13.7)% (H1
22: 2.8%) to give 89.0p per share NTA
-- Valuations down 7.2% like-for-like with 50bps outwards yield
shift, reflecting higher gilt yields
-- LTV of 52% (H2 22: 47%) supported by 21 year average debt maturity
-- Total dividends paid for the half-year of 2.6p per share (H1
22: 2.6p) with 86% dividend cover (H1 22: 96%)
Portfolio and operational highlights
-- Diverse portfolio of 3,298 homes worth GBP355mn
o GBP73mn reversionary surplus of vacant possession value
compared to fair value (21% uplift)
-- Portfolio focused on direct leases with pensioners and part home owners
-- Rent collection of over 99% for half year (H1 22 99%)
-- Shared ownership portfolio 99% occupied or reserved
o 59 new homes acquired in period with 44 occupied and further 8
reserved
-- Record retirement occupancy of 94% (H1 22 93%)
-- Retirement net income flat due to 77% increase in energy costs for communal areas
Continuing to deliver Social and Environmental Impact
-- 96% of directly rented properties now EPC-rated C or higher
(H1 22: 94%), with the remainder on track for targeted minimum C
rating by 2025, three years ahead of government target
-- Rent caps voluntarily implemented to protect resident affordability
o Shared ownership rent increases voluntarily capped at 7%
increase in line with wage inflation
o Retirees benefiting from rent increase cap of 6%
o Further rent cap and rent freeze support provided to residents
most in need
-- 90% satisfaction levels with our in-house property management team4
Outlook
-- Acute need for more affordable homes with estimated need for
GBP34bn5 of annual investment in the UK
-- Particular shortage of affordable homes for home ownership
and suitable accommodation for independent later living for the
growing elderly population
-- Accelerating tenanted shared ownership opportunities as
housing associations look to fund increasing costs of investing in
their existing stock whilst maintaining development programmes
-- Strong rental inflation linked growth expected to continue,
underpinned by lack of supply and increasing demand which is
expected to provide some uplift to H2 2023 dividend cover
-- Market transactional evidence suggests that downward pressure
on valuations is starting to ease, however, valuations naturally
remain sensitive to movements in gilt yields which have moved out
further post period end
-- Focused on operational improvements to the retirement
portfolio and sale of non-core assets
Notes:
[1] Alternative performance measures
2 EPRA adjusted earnings is EPRA earnings adjusted for income
and costs which are not recurring and is equivalent to IFRS profit
after tax before one-offs and valuation adjustments.
3 Dividend cover measured as Adjusted EPRA earnings per share
divided by dividend per share
4 Source: ReSI Homes Customer Survey
5 British Property Federation, and Legal & General, 2022
Interim Report and investor webinar
ReSI plc will host an online webinar and Q&A session to
discuss the results this morning, 7 June 2023, at 11:00am (BST).
Registration is available at :
https://greshamhouse.zoom.us/webinar/register/WN_cQCDXpbBTtCiD5e3uub1NQ
The accompanying presentation will be made available shortly
after the webinar on the Gresham House website .
A copy of the pdf Interim Report is available on the Company's
website at
https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/
where further information on the Company can also be found. The
Interim Report has also been submitted to the National Storage
Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
For further information, please contact:
Gresham House Real Estate
Ben Fry
Sandeep Patel +44 (0) 20 7382 0900
Peel Hunt LLP
Luke Simpson
Huw Jeremy +44 (0) 20 7418 8900
gh@kl-communications.com
KL Communications +44 (0) 20 3995 6673
Charles Gorman
Charlotte Francis
About ReSI plc
Residential Secure Income plc ("ReSI plc" LSE: RESI) is a real
estate investment trust (REIT) focused on delivering secure,
inflation-linked returns with a focus on two resident sub-sectors
in UK residential - independent retirement rentals and shared
ownership - underpinned by an ageing demographic and untapped and
strong demand for affordable home ownership.
As at 31 March 2023, including committed acquisitions, ReSI
plc's portfolio comprises 3,298 properties, with an (unaudited)
IFRS fair value of GBP355mn.
ReSI plc's purpose is to deliver affordable, high-quality, safe
homes with great customer service and long-term stability of tenure
for residents. We achieve this through meeting demand from housing
developers, housing associations, local authorities, and private
developers for long-term investment partners to accelerate the
development of socially and economically beneficial affordable
housing.
ReSI plc's subsidiary, ReSI Housing Limited, is registered as a
for-profit Registered Provider of social housing, and so provides a
unique proposition to its housing developer partners, being a
long-term private sector landlord within the social housing
regulatory environment. As a Registered Provider, ReSI Housing can
acquire affordable housing subject to s106 planning restrictions
and housing funded by government grant.
About Gresham House and Gresham House Real Estate
Gresham House is a London Stock Exchange quoted specialist
alternative asset manager committed to operating responsibly and
sustainably, taking the long view in delivering sustainable
investment solutions.
Gresham House Real Estate has an unparalleled track record in
the affordable housing sector over 20 years, with senior members
having an average of c.30 years' experience.
Gresham House Real Estate offers long-term equity investments
into UK housing, through listed and unlisted housing investment
vehicles, each focused on addressing different areas of the
affordable housing problem. Each fund aims to deliver stable and
secure inflation-linked returns whilst providing social and
environmental benefits to its residents, the local community, and
the wider economy.
Further information on ReSI plc is available at
www.resi-reit.com , and further information on Gresham House is
available at www.greshamhouse.com
Purpose
Residential Secure Income plc (ReSI or the Company) (LSE: RESI)
is a real estate investment trust (REIT) focused on delivering
secure, inflation-linked returns in two sub-sectors in UK
residential housing; independent retirement rentals; and shared
ownership, which are underpinned by an aging demographic and
untapped, strong demand for affordable homes.
Our purpose is to deliver affordable, high-quality, safe homes
with great customer service and long-term stability of tenure for
residents. We achieve this through meeting demand from housing
developers (housing associations, local authorities and private
developers) for long-term investment partners to accelerate the
development of socially and economically beneficial affordable
housing.
ReSI's subsidiary, ReSI Housing Limited (ReSI Housing), is
registered as a for-profit Registered Provider of social housing,
and so provides a unique proposition to its housing developer
partners, being a long-term private sector landlord within the
social housing regulatory environment. As a Registered Provider,
ReSI Housing can acquire affordable housing subject to s106
planning restrictions and housing funded by government grant.
Strategic report
Investment case
Why ReSI?
ReSI delivers 97% inflation-linked income, which is generated
from affordable and secure rents and supported by strong market
drivers in shared ownership housing and independent retirement
living.
Secure long-term inflation-linked income
Dividends paid quarterly
ReSI's business model is:
Supported by Creating Executed by
Strong market drivers Measurable impact An expert manager
Ageing population, declining Providing affordable c.60-person housing team
home affordability, supportive high-quality, energy with over 20-year track
government policy efficient homes for life, record in UK housing
and addressing elderly
loneliness
ReSI's income is:
Diverse Asset-backed Affordable
* 3,298 households diversified across ages and stages * Underpinned by c.GBP428mn home value with 21 * Low retirement rents (in line with Local Housing
of life % uplift Allowance) paid from pensions and welfare
from reversionary surplus
* c.GBP15mn government grant supports subsidised r
* Subsidised shared ownership rents secured by ents
homebuyers' stake for shared ownership
Portfolio snapshot
We invest in UK affordable homes to deliver secure,
inflation-linked income
3,298 GBP355mn 935
Homes Value of investment Unique UK property locations
property
----------------------------- ------------------------------
30 September 2022: 3,284 30 September 2022: GBP383mn 30 September 2022: 926
including GBP9mn committed
acquisitions
See note 12 on page
43
----------------------------- ------------------------------
GBP17.2mn 4.8% 2,613
Annualised net rental Annualised net rental Counterparties
income yield*
---------------------------- --------------------------
Year to 30 September 30 September 2022: 4.4% 30 September 2022: 2,608
2022: GBP16.5mn See note 10 Supplementary
See note 10 Supplementary Financial Information
Financial Information on page 61
on page 61
---------------------------- --------------------------
* Alternative performance measure
Portfolio split by region Number of properties
East Midlands 74
East of England 840
Greater London 472
North East 19
North West 259
Scotland 5
South East 800
South West 592
Wales 53
West Midlands 91
Yorkshire and The Humber 93
Grand Total 3298
Portfolio split by valuation
Independent Retirement
Rentals GBP209mn 59%
Shared Ownership GBP125mn 35%
Local Authority GBP21mn 6%
Total GBP355mn 100%
Our portfolio focus
Residential Secure Income plc ( ReSI) has diversified, secure,
inflation-linked income streams from residential sub-sectors with
strong supply and demand imbalances and supportive property
fundamentals.
Independent Retirement Living Shared Ownership Housing
Housing (GBP125mn GAV / 769 Homes
(GBP209mn GAV / 2,240 Homes / 35% of portfolio)
/ 59% of portfolio)
Driver
* Booming and increasingly lonely older population * Huge untapped demand for affordable homeownership
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Summary
* Let to elderly residents with affordable rents and * Homebuyers acquire, from ReSI, a share in a
assured tenancies residential property and rent the remainder
* Provides fit-for-purpose homes for retired people, * Helps house buyers acquire homes they would otherwise
allowing them to maintain their independence without be unable to buy
care provision
* Capital grant funding from government drives a c.40%
living-cost discount compared to market level rents
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Rent growth
* Increase with RPI each year, generally capped at 6% * Increase contractually by RPI+ 0.5% each year
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Secure income
* Secure rental income paid from pensions and welfare * Subsidised, below-market rents
* Homebuyer equity stake
--------------- --------------------------------------------------------------- -------------------------------------------------------------
ReSI
origination * Scale: UK's largest private independent retirement * ReSI Housing - for-profit Registered Provider of
advantages rentals business Social Housing
* Specialist in-house 30-person team with over 20-year
track record
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Average * c.GBP334,000 per home(6)
vacant * c.GBP110,000 per home
possession
value
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Net yield * 3.5%(5)
* 5.4%
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Average debt * 1.1% (4)
coupon * 3.5%
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Levered yield * 8.7%(5)
* 6.7%
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Average * 249 years
customer * 6 years
stay / length
of lease (1)
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Like-for-like
rental * 5.8% * 7.0% applied on 1 April 2023
reviews
(2)
--------------- --------------------------------------------------------------- -------------------------------------------------------------
March 2023 o * 99% (3)
ccupancy * 94%
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Rent * 99%
collection * 100%
--------------- --------------------------------------------------------------- -------------------------------------------------------------
(1) Assuming no staircasing
(2) Represents the rent growth for homes that were occupied and
eligible for a rent review during the six months ended March 2023.
Including all homes that were occupied during H1 2023, Independent
Retirement Like-for-Like reviews would be 2.3%. Shared ownership
rents increased on April 1 2023, after the half-year ended March
2023
(3) Includes 8 homes reserved as at 6 June 2023
(4) 1.1% average blended coupon over the remaining loan term,
with principal increasing with RPI + 0.5% (with a 0.5% floor and
5.5% cap)
(5) Based on 1 April 2023 rents
(6) Shared ownership vacant possession value includes both the
value of ReSI's 63% average equity position, and the 37% owned by
the residents
Financial Highlights
Income
(16.2p) (13.7%) (14.9%)
IFRS Earnings Per Share Total Return (on Opening Total IFRS Return (on
NTA)* Opening NAV)
---------------------------- ----------------------------
Period ended 31 March Period ended 31 March Period ended 31 March
2022: 4.5p 2022: 2.8% 2022: 4.2%
See note 11 on page See note 11 Supplementary See note 12 Supplementary
41 Financial Information Financial Information
on page 62 on page 62
---------------------------- ----------------------------
GBP4.1mn / (3%) 2.2p 2.6p
Recurring profit before EPRA Adjusted Earnings Dividend per share
change in fair value Per Share*
and property disposals*
------------------------ -----------------------
Period ended 31 March Period ended 31 March Period ended 31 March
2022: GBP4.2mn 2022: 2.4p 2022: 2.6p
See note 11 on page See note 11 on page
41 41
------------------------ -----------------------
* Alternative performance measure
CAPITAL
90.0p / -17.3% GBP355mn 3.7%
IFRS Net Asset Value Value of investment property Of the total number of
per share shares held by the Fund
Manager, current and
founder directors of
the Fund Manager, and
directors of ReSI as
at the date of this report
------------------------------- -----------------------------
30 September 2022: 108.8p 30 September 2022: GBP383mn (30 September 2022:
See note 24 on page inc. GBP9mn committed 3.3% or 6.4mn shares)
54 acquisitions.
See note 12 on page
43
------------------------------- -----------------------------
52% 21 Years 89.0p / -16.1%
------------------------------- -----------------------------
Loan-to-value Ratio Weighted Average Remaining EPRA Net Tangible Asset
(LTV) Life of Debt Value (NTA) per share*
----------------------------- ------------------------------- -----------------------------
30 September 2022: 47% 30 September 2022: 22 30 September 2022: 106.1p
See note 13 Supplementary years See note 24 on page
Financial Information 54
on page 63
------------------------------- -----------------------------
* Alternative performance measure
Chairman's Statement
Rob Whiteman CBE
Chairman
"ReSI remains well-placed, to meet continued enormous demand for
affordable housing, enabling sustainable and growing, risk-adjusted
returns over the long term.
We have continued to support residents, balancing rent increases
and returns in a way which is sustainable for both residents and
shareholders. This focus has been rewarded with 99% rent collection
from 2,613 counterparties and resilient high-occupancy levels.
These factors drive our secure income stream which has remained
unaffected despite the impact of the macroeconomic environment on
property valuations.
We are considering selective disposal of certain non-core
assets, to reduce floating rate debt levels, and will then revisit
the appropriate level of a fully covered and progressive
dividend."
ReSI's portfolio is handpicked to provide high-quality
affordable accommodation for vastly undersupplied markets and by
doing so to deliver defensive long-term income for investors and
meaningful social impact. Our customer demand continues to be
incredibly strong, whether providing affordable homeownership for
young families and key workers through shared ownership or
providing fit-for-purpose homes for independent living in
retirement.
ReSI has delivered strong like-for-like rent reviews with growth
of 6.2% whilst maintaining retirement occupancy at 94% and
virtually fully occupying our shared ownership portfolio. Rent
collection continues to exceed 99%, underpinned by direct leases
with a highly diversified resident base comprising 2,613
counterparties, affordable rents, and shared ownership equity
stakes averaging c.37%. Given the sharp and significant spike in
inflation and interest rates, we have continued to balance rent
increases with shareholder returns, in a way which is sustainable
both for our residents and for our shareholders. We have aimed to
support residents through a difficult period where pay increases
may have lagged spiking inflation, which has in turn supported
occupancy and rent collection levels.
Nevertheless, ReSI is not immune to the continuing wider
economic challenges. Specifically, higher energy bills to heat and
light communal areas have contributed to a 13% operating cost
increase in our retirement housing portfolio, keeping retirement
net income flat year on year. Together with increased interest
expenses on the 10% of our debt which is floating rate, and
increased overheads, Adjusted Earnings have reduced by 3%.
As a result, dividend cover declined to 86% after re-achieving
full coverage in Q4 2022, which justifies the Board's decision to
keep the dividend per share flat in order to absorb extraordinary
cost increases.
As with all long-term income assets, our investment valuations
have been impacted by rising gilt yields, but our strong rental
growth has partially mitigated this with a 7.2% like-for-like
decline to GBP355mn, taking EPRA NTA to 89.0p per share down from
106.1p at 31 September 2022. Market transactional evidence suggests
that downward pressure on valuations is starting to ease, however,
valuations naturally remain sensitive to movements in gilt yields
which have moved out further post period end.
ReSI is now the custodian of homes for 3,298 households, and we
will continue to balance returns with affordability for our
residents. Our retirement portfolio leases are contractually capped
at 6.0%. We have voluntarily capped our inflation-linked rent
increases in shared ownership to 7.0%, as opposed to the
contractual RPI+0.5%. Furthermore, ReSI continues to invest to
improve our homes' energy efficiency helping to keep residents'
energy bills affordable.
Market outlook
Despite recent operational challenges and macroeconomic
headwinds, the fundamentals underpinning ReSI's business model, and
our longer-term outlook, remain positive.
The UK's structural housing shortfall continues and most of the
population lives in areas where home purchase is unaffordable for
average earners, with an estimated need for GBP34bn [1] of annual
investment over the next decade to begin addressing the shortfall.
Persistent inflation, rising mortgage rates and the consistent
demand for a permanent home have increased demand for shared
ownership as the most affordable homeownership option (particularly
in light of the Help to Buy programme's end in March 2023). The UK
population demographic is rapidly aging and social isolation can
have a material impact on the health of the elderly, driving demand
for independent retirement accommodation.
Housing associations, who have historically been the primary
investors in affordable housing, are now dealing with rent caps on
their social and affordable rent portfolios in addition to
allocating c.GBP10bn for fire safety and c.GBP25bn to upgrade the
energy efficiency of their social rented stock by 2030. These
financial pressures impact their ability to continue to fund their
43,000 homes per year development programmes, with many now looking
to bring in partners to acquire some of their existing 200,000
shared ownership homes. This is continuing to drive demand and
opportunity for further long-term investment into the sector - both
to fund new homes and acquire existing shared ownership portfolios
providing capital to housing associations to invest back into their
social rented stock.
Financial outlook
As the owner of a for-profit registered provider and as the UK's
largest provider of private independent retirement rental homes,
and with an experienced and capable fund management team, the Board
believes that ReSI remains well positioned to deliver affordable
housing to residents and deliver long-term, inflation-linked
returns to investors.
It has been a stated objective of the ReSI Board to grow the
Company, however, the public capital markets have changed
substantially in a short amount of time, and while the Company's
share price has performed better than many of its listed peers, we
recognise that ReSI's shares are currently trading at a significant
discount to net asset value.
This is particularly disappointing given the scale of investment
opportunities now available, particularly in shared ownership,
given the work by the Fund Manager to create this market, and the
ability for these to enhance returns to shareholders over the
medium term. The Board has considered undertaking further share
buy-backs but given current cash levels, does not consider it in
shareholders' best interests to increase leverage to support
buy-backs.
Instead, the Fund Manager is exploring the sale of non-core
assets. This would enable repayment of floating rate debt and leave
ReSI with only its long-term debt that has a weighted average
maturity of 21 years. While assets sales would reduce ReSI's
adjusted earnings, we expect they will increase sustainability of
income given the removal of exposure to interest rate moves.
The Board continues to seek to pay a progressive dividend which
is more than covered. To ensure that ReSI can continue to grow
sustainably despite the current economic conditions, the Board will
revisit the appropriate level of dividend following any asset
sales, and in the light of the then prevailing economic and market
conditions. ReSI remains well-placed, to meet continued enormous
demand for affordable housing, enabling sustainable and growing,
risk-adjusted returns over the long term.
As always, the Board is grateful for the support of
shareholders, including their 99% support at our continuation vote
in January 2023.
Rob Whiteman
Chairman
Residential Secure Income plc
6 June 2023
KPI Measures
Income returns
ReSI's key performance indicators (KPIs) are aligned to our
business strategy. These measures are used by the Board and senior
management to actively monitor business performance.
Adjusted EPRA Net rental Like-for-like EPRA cost ratio (Loss)/Profit
earnings* (GBPmn) income (GBPmn) rental reviews (%)* before tax (GBPmn)
(%)
H1 2022 H1 2023 H1 2022 H1 2023 H1 2022 H1 2023 H1 2022 H1 2023 H1 2022 H1 2023
4.2 4.1 7.6 8.3 4.2 6.2 37% 41% 7.8 (30.0)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
KPI definition
Adjusted EPRA Gross rental Like-for-like Administrative (Loss)/Profit
earnings, excluding income after average growth and operating before tax is
valuation movements deducting property on rent reviews costs (including a statutory
on investment operating expenses across the portfolio. costs of direct IFRS measure
assets and debt, including ground vacancy) divided as presented
and other rent paid. by gross rental in the Group's
adjustments, income. Consolidated
that are one-off Statement of
in nature, which Comprehensive
do not form Income.
part of the
ongoing revenue
or costs of
the business.
--------------------- ----------------------- ---------------------- ----------------------
Comment
--------------------- ----------------------- ---------------------- ----------------------
H1 2023 earnings Increase of 6.2% like-for-like H1 2023 cost Decreased profit
impacted by 9% delivered rental reviews ratio impacted before tax driven
higher finance during the period growth achieved by higher operating by property
costs on floating as a result for properties costs in the valuation loss
rate debt and of organic growth that were eligible retirement portfolio reflecting market
higher operating from the portfolio for rent increases because of increased repricing due
costs in the due to rent during the six energy costs to higher interest
retirement portfolio increases and months ended in communal rates and increased
because of increased acquisitions March 2023, areas. valuation of
energy costs in H2 2022. adjusted for debt. The repricing
in communal shared ownership of real estate
areas. rent increases assets has been
which occurred rapid and
on 1 April 2023. significantly
faster than
This growth in previous
reflects the property cycles.
6.0% rent increase We expect the
caps on retirement attractive
leases, as well characteristics
as the 7.0% of residential
cap implemented property assets,
for shared ownership in conjunction
rent increases with the supply
which took effect / demand imbalance
on 1 April, and lack of
2023. affordable housing,
to continue
to appeal to
a wide range
of property
investors resulting
in relatively
resilient yields
compared to
other property
sectors.
--------------------- ----------------------- ---------------------- ----------------------
Notes
--------------------- ----------------------- ---------------------- ----------------------
See note 11 See note 5 to See Glossary See note 7 See Consolidated
to the financial the financial on page 65 for Supplementary Statement of
statements statements definition and Financial Comprehensive
calculation Information Income on page
basis. 31.
--------------------- ----------------------- ---------------------- ----------------------
* Alternative performance measures
Capital returns
The following KPIs focus on ReSI's strategic priority to
increase overall income returns and improve the resilience and
efficiency of the business model which will support increasing
dividend distributions.
EPRA NTA per IFRS NAV per Total Return Loan to Value Weighted Average
share* (pence) share (pence) on NTA (%)* (LTV) (%) Remaining Life
of Debt (Years)
FY 2022 H1 2023 FY 2022 H1 2023 H1 2022 H1 2023 FY 2022 H1 2023 FY 2022 H1 2023
106.1 89.0 108.8 90.0 2.8 (13.7) 47 52 22 21
--------- --------- --------- --------- --------- --------- --------- --------- ---------
KPI definition
EPRA NTA (Net IFRS NAV (Net Return on NTA Ratio of net Average remaining
Tangible Assets) Asset Value) is total return debt to the term to loan
is the market per share at for the year, total assets maturity.
value of property the balance prior to payment less finance
assets, after sheet date. of dividends lease and cash
deducting deferred (excluding movements on a consolidated
tax on trading in valuation Group basis
assets, and of debt and
excluding intangible derivatives),
assets and expressed as
derivatives. a percentage
of opening NTA.
---------------------- ---------------------- ---------------------- ----------------------
Comment
---------------------- ---------------------- ---------------------- ----------------------
16.1% reduction Returns of minus Returns of minus Increase in 21 years remaining
in the six months 17 pence per 13.7% in H123 LTV reflecting life of debt
to 31 March share in the reflecting property outward valuation reflecting the
2023 driven six-month period valuation decline yield shift long-term nature
by fair value reflecting property and debt valuation. as a result of ReSI's fixed
through profit valuation decline of market repricing and inflation-linked
and loss movements. and debt valuation. due to higher debt.
interest rates
and macro-economic
environment
---------------------- ---------------------- ---------------------- ----------------------
Notes
---------------------- ---------------------- ---------------------- ----------------------
See note 2 See Consolidated See note 11 See note 13 See note 16
Supplementary Statement of Supplementary Supplementary for information
Financial Financial Position Financial Financial on the Group's
Information Information Information Borrowings
for reconciliation for calculation. for calculation.
from IFRS to
EPRA performance
measures
---------------------- ---------------------- ---------------------- ----------------------
* Alternative performance measures
Fund Manager's Report
Ben Fry
Managing Director Housing
"Our aim remains to deliver defensive long-term income for
investors and meaningful social impact by providing high-quality,
secure homes for our residents - and the fundamentals for this
portfolio remain robust, with customer demand incredibly strong,
given the economic circumstances."
The first six months of FY23 have seen a continuation of the
challenging macroeconomic environment driven by a sharp and severe
increase in inflation, repeated interest rate increases and the
consequential impact on the cost of living. We have sought to
insulate both shareholders and residents from this environment by
balancing inflation-linked rent increases with support for those
residents with difficulties affording rent or mortgage bills.
There have been two consequences of significantly higher
inflation and interest rates for ReSI. While we have delivered
strong like-for-like rent review growth, very high occupancy and
collection levels, we have also experienced higher energy bills on
communal areas within our retirement portfolio. Secondly, higher
interest rates have impacted both our debt costs, and the gilt
yields which form a key component of valuations.
Our rent review growth has been strong at 6.2%, including 7%
rent increases on the shared ownership portfolio effective from 1
April 2023. 45% of the portfolio experienced rent reviews in the
first half, driving 2.9% like-for-like rental growth in the period.
This rent growth reflects the underlying strong demand for our
affordable homes and our decision to cap inflation-linked rental
increases in order to protect affordability for our residents when
their incomes are under pressures not seen in recent decades.
This rental growth, combined with the full impact of previous
shared ownership acquisitions, helped ReSI increase net rental
income by 8% to GBP8.3mn, despite managing 13% higher costs in our
retirement portfolio, driven by increased energy costs in the
communal areas, that kept retirement net income flat.
Adjusted EPRA earnings, before valuations, reduced by 3% to
GBP4.1mn with net rental income growth offset by increased interest
expenses on our GBP21mn floating rate debt (10% of total debt), as
well as higher professional, legal and audit fees.
As with many other REITs and investment companies, the increase
in gilt yields has directly impacted our portfolio valuations,
which are down 7.2% like-for-like for the half year to March 2023.
This valuation reduction has driven a total EPRA return of (13.7%)
taking EPRA NTA to 89.0p per share. While valuations naturally
remain sensitive to moves in gilt yields, as at period end we see
downward pressure on valuations starting to ease, with inflationary
pressures which are hopefully nearing their peak, even if they
remain stubborn.
These valuation headwinds have increased the LTV of the Company
to 52%. While this is broadly in line with the Company's 50%
medium-term target, it includes GBP21mn of floating rate debt that
is no longer as accretive to the Company's returns and is not in
line with our strategy to derisk the balance sheet through long
term amortising debt. This debt was originally put in place to
provide flexibility to the Company ahead of an intended fundraise,
which is no longer possible due to market conditions which have the
Company continuing to trade at a significant discount to its Net
Asset Value. Our proposed sale of certain non-core assets, as
referred to in the Chairman's statement, will allow ReSI to
de-leverage its more expensive floating rate debt, leaving a strong
balance sheet reinforced only by ultra-long debt with an average
maturity of 21 years.
These sales will reduce Adjusted Earnings but should reduce
volatility and increase the sustainability of our income through
the removal of exposure to interest rate moves. Following any asset
sales, we will work with the Board to rebase the dividend,
targeting a higher level of dividend cover to support a progressive
dividend that grows sustainably in line with ReSI's underlying
inflation-linked rents.
Rising inflation and the cost-of-living crisis continue to
impact the life of our residents, but they are relatively protected
compared to their peers. The shared ownership model helps partially
insulate residents from cost-of-living pressures: rents are rising
less than mortgage costs; mortgage rates remain well below our
portfolio stress-test levels, and our shared owners have only 37%
of the exposure to mortgage rate increases compared to
full-ownership mortgages. Our retirement residents typically fund
rent payments with income from an inflation-linked pension, and
benefit from tailored accommodation that helps to address
loneliness. Across the whole portfolio our continued efforts to
improve our homes' energy efficiency is helping to reduce our
residents' energy bills and we have capped rent increases in the
period to protect resident's affordability.
The quality of ReSI's operational business model, with
individual resident contractual relationships, very strong rent
collection of almost 100%, and very high levels of occupancy,
reflects our focus on the under-served markets of affordable
purpose-built retirement living and providing affordable
homeownership to young families and key workers. This continues to
give us confidence in our portfolio of 3,298 homes. We believe that
the shared ownership portfolio's investment thesis will continue to
prove out as rents uplift with direct inflation-linkage and de-risk
through residents staircasing and repaying mortgages over time.
Financial review
Total Return
EPRA NTA total return was a negative 14.5p per share (-13.7%)
for the half year, driven by a reduction in like-for-like
investment property values following increases in gilt yields.
This negative 14.5 pence per share EPRA return, comprises:
- 2.2p of Adjusted EPRA earnings (see note 11 - adjusted
earnings per share), with recurring income of GBP4.1mn; less
- 15.3p reduction in valuation on investment property as
assessed by Savills representing a 7.2% decrease on a like-for-like
fair value basis to a total of GBP355mn as at 31 March 2023. This
valuation decrease was primarily driven by a c.50 bps increase
(inclusive of 1 April 23 rent reviews in shared ownership) in the
weighted average valuation yield since September 2022; and
- 1.2p impact of USS debt indexation (GBP2.2mn), reflecting the
index linked nature of the debt which follows the increase in
shared ownership rent reviews up to a cap of 5.5%; less
- 0.2p one-off costs (c.GBP400k), attributable to aborting
fundraising in Autumn 2022, following the Company's share price
moving from a premium to substantial discount in NAV rendering
equity raising dilutive to shareholders.
The movement in the NTA position during the half year, from
106.1p to 89.0p per share, is after total dividend payments of 2.6p
per share (GBP4.8mn).
Movement in NTA pence per share for the six-month period
NTA at 30/09/22 106.1
Net income 2.2
Movement in Fair Value of
Investment Properties -15.3
One-off costs -0.2
Debt indexation -1.2
Dividend paid -2.6
NTA at 31/3/23 89.0
A total IFRS return of -16.2p per share (-14.9%) was delivered
for the half year. The difference to EPRA NTA returns reflects an
increase in the fair value of debt (IFRS) of 1.6p (GBP2.9mn) versus
the amortised cost value of debt (EPRA) caused by reducing credit
spreads in the period, partly offset by an increase in revaluation
of trading properties of 0.1p (GBP0.2mn). IFRS NAV decreased by
18.8p after dividends paid.
Movement in IFRS NAV at 31 March 2023 (pence per share)
NAV at 30/09/22 108.8
Net Income 2.2
Movement in Fair Value
of Investment Properties -15.4
Movement in fair value
of debt -2.8
One-off costs -0.2
Dividend paid -2.6
NAV at 31/03/23 90.0
Statement of Comprehensive Income
Adjusted Earnings reduced by 3% to GBP4.1mn with 8% net rental
income growth offset by increased interest expenses on our GBP21mn
floating rate debt (10% of total debt), as well as higher overheads
which are explained further below in the Fund Manager's Report.
H1 2023 H1 2022 Variance
------------------------------- -------------
(GBP'000) (GBP'000)
------------------------------- ------------- ------------ -------------
Net rental income 8,768 8,096 +8%
First tranche sales profits 231 336 -31%
Net Finance Costs (3,132) (2,775) +13%
Management fees (1,051) (907) +16%
Overheads (700) (528) +33%
Adjusted Earnings / Adjusted
EPRA Earnings 4,116 4,222 -3%
Adjusted EPS 2.2p 2.4p -8%
------------------------------- ------------- ------------ -------------
Dividend Coverage 86% 96% -11%
Property Valuation movements (28,502) 4,975
Debt Valuation movements (5,187) (1,033)
One-offs (405) (328)
IFRS (Loss)/Earnings (29,974) 7,836 -483%
IFRS EPS (16.2p) 4.5p -462%
------------------------------- ------------- ------------ -------------
Net Rental Income :
Net rental income before ground rents (NRI) grew by 8%
year-over-year to GBP8.8mn, driven by four underlying factors:
- flat income in retirement of GBP5.4mn with strong rental
reviews growth of 5.8% offset by 13% cost inflation;
- shared ownership rent growth of 5.5% to GBP1.8mn;
- full occupancy and annualised income of our like-for-like shared ownership portfolio; and
- shared ownership acquisitions from the investment of our
GBP15mn fundraise in February 2022 providing GBP0.4mn
These four factors were also underpinned by:
- consistent rent collection of over 99%.
H1 2022 Net Rent GBP8.1mn
Shared ownership - acquisitions GBP0.4mn
Shared ownership - leasing GBP0.1mn
Shared ownership - rent growth GBP0.1mn
Retirement - rent growth GBP0.3mn
Retirement - cost inflation -GBP0.3mn
H1 2023 Net Rent GBP8.8mn
1. Top-line retirement growth offset by cost pressure:
- Income growth delivered: GBP0m / 0% / 0.0 pence per share [2]
Retirement rental revenue grew 5.6% year-over-year to GBP10.1mn,
up from 3.4% in the prior year. This was driven by rental caps of
6% applied to the RPI linked rental increases, combined with ReSI
supporting residents in financial hardship with rental freezes or
reduced increases. We believe our decision to cap rental increases
is the right one, to both protect our residents and support the
long-term stability of our income. These moves generated an annual
saving for residents of c.GBP0.5mn / c.GBP690 per resident.
Revenue growth was offset by 13.1% year-over-year operating
expense growth to GBP4.6mn, which was primarily driven by 77%
increase to c.GBP0.53mn in the energy costs for common areas as
well as a 15% increase in property management fees as we
restructure the team. This resulted in flat net income over the
period.
Occupancy continues to improve to a record 94%, reflecting the
great customer service of ReSI's in-house property manager, ReSI
Property Management Limited (RPML).
Looking forwards, we are working closely with RPML across
several asset management initiatives, in order to boost income and
offset cost inflation including:
- restructuring the property management team to take advantage of technology;
- re-tendering repairs and maintenance contracts to increase
value-for-money on unit refurbishments;
- improving retirement re-letting timing to continue driving
occupancy growth, which involves improving start times on
refurbishment works for unit turnovers; and
- completing capital works and energy efficiency improvement projects
2. Strong and accelerating rent growth in shared ownership:
- Income growth delivered: GBP0.1mn / 5.5% / 0.1 pence per share [3]
Shared ownership rents increase annually on 1 April generally
with RPI + 0.5%, and grew by 5.5% like-for-like to GBP1.8mn
compared to the same period last year.
This year rents were due to increase by 12.4% on 1 April,
however we have capped this increase at 7% (by way of a rebate), in
line with wage growth and the inflation rate excluding the impact
of energy bills. This cap will help to protect affordability for
our residents when their incomes are under pressure like never
before. This decision is entirely in our control but matches the
cap that the government has applied to general needs social housing
properties. The impact of this 7% rent increase will be reflected
in our income over 12 months from 1 April.
3. Full occupancy and annualised impact of our shared ownership
portfolio:
- Income growth delivered: GBP0.1mn / 0.1 pence per share[4]
Demand for ReSI's shared ownership properties remains robust,
reflecting its position as the most affordable form of
homeownership. ReSI benefited from full-period income from Clapham
Park and Auckland Rise units that leased during H1 2022, and the
same-store portfolio owned by ReSI at September 2022 is fully
leased.
4. Shared ownership acquisitions:
- Income growth delivered: GBP0.4mn / flat on pence per share basis[5]
ReSI's earnings grew by c.GBP0.4mn from recent capital
deployment into shared ownership investments and letting activity
(excluding the impact of first tranche sales).
H1 2023 results include the full impact of ReSI's GBP24mn
acquisition of 182 fully occupied homes from Orbit last March, and
21 homes from HSPG last September. Both of these acquisitions were
occupied and immediately income generating, providing immediate
earnings enhancement for ReSI.
ReSI also acquired 59 new homes (GBP11mn) from Brick by Brick
that were delivered on phased basis between September 2022 and
March 2023 as they reached construction completion. At the date of
this report, 44 were occupied, with 8 reserved ahead of resident
move-in and 7 remaining available, representing a take-up rate of
c.6 units a month. Overall, the shared ownership portfolio is 99%
sold or reserved. This leasing activity illustrates the depth of
demand for shared ownership, which continues to play an essential
role in helping mid-to-low earners onto the housing ladder. We
expect this demand to further increase in this macroeconomic
environment which is characterised by high inflation and rising
interest rates, particularly with the Help-to-Buy programme having
ended in March 2023.
These acquisitions were funded by GBP15mn of equity raised in
February 2022 and debt drawn on the USS credit facility in March
2022, and are expected to be earnings accretive to ReSI's financial
performance on a fully stabilised basis. The transactions with
Orbit Group and Brick By Brick were repeat transactions with
counterparties transacted with during FY 2021 - evidencing the
growing strength of ReSI's relationship network.
5. Consistent rent collection:
ReSI's cash flow is supported by a highly diversified set of
income streams from residents who pay affordable rents. Our
retirement residents typically pay their rent from pensions and
savings, and residents benefitted from a 10.1% increase in state
pensions in April 2023, compared to the 6% rental growth caps in
place across our retirement portfolio. On average, ReSI's shared
ownership residents own c.37% of their homes and generally pay
below-market rent. The remainder of ReSI's rental income comes from
local authority housing, which is leased to Luton Borough Council.
ReSI has no leases with asset light, lease funded, housing
associations or charities.
ReSI's rent collection rate exceed 99% in H1 2023 and the
affordability of ReSI's rents, as well as the strength of
creditworthiness in ReSI's counterparties has helped keep rental
arrears at c.1% of rent roll in H1 2023. To address those arrears,
we are working with residents to find solutions that benefit both
parties, which can include buying back part of shared owners' home
equity to provide liquidity, helping retirement residents utilise
all government welfare resources and subsidies available to them,
or occasionally helping residents find local authority
accommodation if they cannot afford to remain living in their
home.
First tranche sales profits
First tranche sales profits reduced by 31% to GBP0.2mn. This
reflects the gain on cost we recognise by selling a portion of a
shared ownership home to the occupiers and is thereafter replaced
by ongoing net rental income from the shared owner. The reduction
in this line reflects the ongoing maturity of ReSI's business and
increased quality of income streams.
Net finance costs
Net finance costs increased by 13% to GBP3.1mn, caused by a 21%
increase in interest on borrowings to GBP2.6mn, with ground rent
expenses remaining at GBP0.5mn. Interest expenses have been driven
by the 3% average increase in SONIA year on year on ReSI's GBP21mn
of floating rate debt, as well as GBP20mn long-term debt drawn from
USS in March 2022 to finance shared ownership acquisitions.
ReSI is exploring the sale of non-core assets in order to
pay-down its short-term floating rate debt and leave the Company
with long-term fixed or inflation-linked debt with a weighted
average maturity of 21 years.
Administrative and other expenses
Administrative and other expenses, including management fees and
other costs of running the Group, were GBP2.1mn (six months to 31
March 2022: GBP1.5mn). The year-on-year increase has been
predominately driven by GBP0.3mn of exceptional costs recognised in
the period in relation to an aborted equity raise. Prior to the
market dislocation, in September 2022, the Company was well
advanced with preparations for an equity raise to enable the
execution of accretive shared ownership acquisitions which were
under exclusivity.
Management fees have also increased to GBP1.0mn (six months to
31 March 2022: GBP0.9mn) year on year, reflecting the impact of
February 2022's fundraise as well as a higher NAV than 12 months
ago. The management fee is measured in advance based on the prior
quarter NAV, with an annual adjustment ensuring the fee for the
full financial year is charged in reference to an average NAV over
the full financial year. Accordingly, the management fee is
expected to reduce and for the full year ending 30 September 2023
be broadly aligned with financial year ending September 2022.
The balance of the increase, in administrative and other
expenses, is attributable to costs related to investment in the
regulation and governance of our Registered Provider of Social
Housing, ReSI Housing, as it grows and matures. ReSI Housing is the
regulated entity which holds all of ReSI's shared ownership homes
and is registered with the Regulator of Social Housing.
Dividend coverage:
ReSI's dividend was 86% covered by recurring income in H1 2023,
reflecting an 11% year-on-year decline in dividend coverage.
Dividends paid were flat on a per share basis but increased in
absolute quantum by the 8% increase in share count, reflecting the
GBP15mn share issuance in February 2022. Rental income increased by
10% year on year, but this was more than offset by inflationary
increases in retirement property expenses, increased floating rate
interest costs and increase in fund operating expenses, to leave
Adjusted Earnings down 3% and reduce dividend cover by 11%.
We anticipate some uplift in H2 2023 dividend coverage resulting
from the 7% shared ownership rent increases on 1 April 2023,
completion of lettings in the shared ownership portfolio, further
rent increases in retirement, and operational initiatives that RPML
is currently pursuing to reduce retirement operating costs.
Valuations
During the period, we have seen significant disruption to the UK
property investment market due to macroeconomic and geopolitical
issues. A significant increase in interest rates has driven a sharp
increase in cost of capital and pushed property yields higher.
Valuers have been quick to reprice, to this higher rate
environment, with valuation declines reported almost
indiscriminately across the listed REIT space. We expect that
higher quality assets generating stable income flows, such as the
ReSI portfolio, will stabilise more quickly and prove more
resilient. Furthermore, in addition to the stable income
generation, ReSI's portfolio naturally benefits from valuation
tailwinds, due to the chronic undersupply in affordable housing
across the demographic spectrum in the UK.
Savills Advisory Services Limited (Savills) are appointed to
value the Company's property investments, in accordance with the
Regulated Investment Company requirements, on a quarterly basis.
ReSI's property valuation, as assessed by Savills, decreased by
GBP28.5mn during the half year - a 7.2% decrease on a like-for-like
fair value basis to a total of GBP355mn as of 31 March 2023. This
was driven by c.50 bps increase (inclusive of 1 April 23 rent
reviews in shared ownership) in the weighted average valuation
yield applied to the portfolio, with both shared ownership and
retirement valuation yield shifts of c.50 bps to 5.4% and 3.5%
respectively. This shift in valuation yields partly reflects rental
growth of 6.2% on 1,477 properties (45% of portfolio) driving 2.9%
like-for-like growth for the six months to 1 April 2023. Valuations
of course remain sensitive to moves in gilt yields, but we see
downward pressure on valuations starting to ease.
Balance Sheet
31-Mar-23 30-Sep-22 Variance
(GBP'000) (GBP'000)
Total Investments 355,333 374,785 -5%
Inventories - First tranche Shared
Ownership properties available for
sale 1,817 1,203 +51%
Cash and cash equivalents 9,906 15,984 -38%
Borrowings amortised cost (203,107) (194,701) +4%
Other 827 (787) -205%
EPRA Net Tangible Assets 164,776 196,484 -16%
EPRA NTA per share (pence) 89.0 106.1 -16%
EPRA Net Disposal Value (NDV) 185,435 225,455 -18%
EPRA NDV per share (pence) 100.1 121.8 -18%
IFRS NAV 166,635 201,388 -17%
IFRS NAV per share (pence) 90.0 108.8 -17%
Book Value of Debt 195,664 189,705 +3%
Reversionary Surplus (excluded from
NTA) 73,190 47,971 +53%
Reversionary Surplus per share (pence) 39.5 25.9 +53%
Investment valuations declined by GBP19.5mn (6%) reflecting a
GBP28.5mn (7.2%) like-for-like decline caused by a c.50 bps
increase in the weighted average valuation yield and the completion
of GBP9mn of new shared ownership acquisitions from Brick By
Brick.
Inventories reflect the amount of unoccupied shared ownership
properties that are expected to be sold to shared owners and are
held at cost. The 51% increase reflects the acquisition of 59
vacant shared ownership homes between September 2022 and March
2023, with 23 remaining vacant on 31 March of which 8 have
subsequently been occupied and a further 8 are reserved.
Total borrowings (amortised cost) increased by GBP8mn over the
six-month period to GBP203mn as of 31 March 2023, reflecting
quarterly indexation on the USS credit facility as well as an
increase in short term borrowings for committed acquisitions.
The EPRA NTA and IFRS NAV measures exclude the reversionary
surplus in our portfolio which stands at GBP73mn. This represents
the difference between the market value of our assets used in our
balance sheet and the value we could realise if they became vacant.
Overall, our portfolio is valued at a 17% discount, on average, to
its reversionary value.
Financing and Capital Structure
ReSI has c.GBP203mn (notional value) of debt in place, of which
90% is either long-term fixed rate or inflation-linked. This
represents a 3% increase in fair value of debt since September
2022, reflecting changes in fair value on the inflation-linked USS
debt resulting from recurring indexation (GBP2.2mn).
LTV has increased by 5% from 47% to 52% over the last six months
ahead of our target of 50% leverage. 4% of this LTV increase was
driven by a 7.2% decline in ReSI's property valuations since
September 2022, with 1% driven by the impact of recurring quarterly
indexation on the USS credit facility.
Our reversionary loan-to-value is 47% when taking into account
the GBP428mn vacant possession value of the portfolio. This GBP73mn
reversionary surplus (compared to GBP355mn of fair value)
represents the difference between the market value of our assets
used in our balance sheet and the value we could realise if they
became vacant. Overall, our portfolio is valued at a 17% discount,
on average, to its reversionary value.
H1 2023 FY 2022
==================================== ========== ==========
Total debt GBP196mn GBP190mn
---------- ----------
LTV (target 50%) 52% 47%
---------- ----------
Leverage on reversion
value 46% 42%
---------- ----------
Weighted average fixed-debt
coupon (49% of ReSI's
debt) 3.5% 3.5%
---------- ----------
Weighted average inflation-linked
debt coupon (41% of ReSI's
debt) 1.1% [6] 0.9%
---------- ----------
Weighted average maturity 21 years 23 years
---------- ----------
Capital stack
H1 FY 2023
Debt GBP196mn
Equity GBP141mn
Grant Funding GBP15mn
Reversionary GBP73mn
Surplus
Total GBP425mn
The drop in property investment values and increase in debt fair
value has narrowed headroom in the Santander working capital
facility's loan-to-value covenant which is GBP8mn drawn and
represents 4% of ReSI's outstanding debt balance. As at 31 March
2023, the working capital facility's LTV covenant was 53%, with
c.GBP12mn of property value headroom (3%) before a covenant breach
is triggered. We estimate that ReSI's weighted average valuation
yield would need to shift outward by a further c.20bps for this
valuation loss to be realised, on top of the c.50bps (inclusive of
1 April 23 rent reviews) widening since September 2022.
However, market transactional evidence as at period end suggests
that we may be past the worst of valuation yield movements.
Furthermore, taking into account ReSI's high-quality assets
generating stable income flows, and the speed at which valuers have
marked down portfolios across the listed REIT sector, we believe
ReSI's portfolio is well placed to provide resilience against
further material outward yield shifts.
As a wholly proactive measure, ReSI has held positive
discussions with Santander in relation to the LTV covenant.
Santander acknowledge the strong long-term and income generating
fundamentals of the ReSI property portfolio; accordingly, they are
open to relaxing the LTV covenant until yields stabilise. Execution
of the change to the LTV covenant is expected to conclude by the
end of June (subject to credit approval).Additionally, we are
actively exploring the sale of non-core assets in order to pay-down
our short-term floating rate debt. This would leave the Company
with long-term fixed or inflation-linked debt with a weighted
average maturity of 21 years .
ReSI's other LTV covenants and ICR covenants still have ample
headroom and ReSI's USS debt on its shared ownership portfolio is
fully amortising and so does not have a loan-to-value debt
covenant.
Loan Covenants by Portfolio [7]
=================== ===================================================================
Covenant Shared Retirement Local Authority Total Portfolio
Ownership / Scottish / NatWest / Santander
/ USS Widows
------------ ------------- ----------------- -----------------
Current debt GBP83mn GBP94mn GBP12mn GBP8mn
balance [8]
------------ ------------- ----------------- -----------------
LTV - Threshold N/A <59% <60% <55%
------------ ------------- ----------------- -----------------
LTV - Reported N/A 45% 42% 53%
------------ ------------- ----------------- -----------------
Value - Headroom
(%) N/A 23% 30% 3%
------------ ------------- ----------------- -----------------
Value - Headroom N/A GBP47mn GBP9mn GBP12mn
(GBP)
------------ ------------- ----------------- -----------------
ICR / DSCR >0.95x >2.0x >2.5x >1.5x
- Threshold
------------ ------------- ----------------- -----------------
ICR / DSCR
- Reported 6x 3x 3x 3x
------------ ------------- ----------------- -----------------
NOI - Headroom 85% 33% 21 % 53%
------------ ------------- ----------------- -----------------
SONIA Interest
Rate - Breach
Threshold
[9] Fixed-rate Fixed-rate >4%(3) 30%
------------ ------------- ----------------- -----------------
ReSI currently has GBP17mn of remaining liquidity available via
its working capital facility as well as GBP5mn of unrestricted
cash. Near-term debt maturities consist of GBP12.1mn of floating
rate NatWest debt, which matures in October 2023. We expect to
fully repay the loan in H2 2023 with proceeds from asset disposals,
at which point ReSI's floating-rate-debt exposure will consist of
borrowings on the revolving working credit facility.
Social and Environmental:
We remain committed to delivering measurable social and
environmental impact for the benefit of our residents and the
UK.
This year shared ownership rents were due to increase by 12.4%
on 1 April, however we have voluntarily capped this increase at 7%
(by way of a rebate), in line with wage growth and the inflation
rate excluding the impact of energy bills. This decision is
entirely in our control but matches the cap that the government has
applied to general needs social housing properties. The 7% rent cap
is projected to save residents c.GBP204,000 over the next 12
months.
Our retirees benefit from the rent increase cap of 6% being
applied to all directly rented retirement properties, which
currently generates annualised savings of c.GBP464,000 as at March
2023. In addition, further rent caps and rent freezes have been
provided to residents who are most in need, representing GBP38,000
of annualised benefit as at March 2023.
The rental increase caps we offer to residents highlight ReSI's
commitment to ensuring housing remains affordable for our
residents. We believe this will help residents stay with ReSI for
longer, which should help us to deliver long-term, stable returns
to investors.
Our in-house property manager, RPML, received resident survey
feedback indicating c.90% resident satisfaction rates across our
retirement and shared ownership portfolios. More generally, we aim
to continue delivering high-quality of service to our residents as
a best-in-class provider of affordable housing.
ReSI continued to invest in improving the energy efficiency of
its retirement portfolio and is targeting upgrading all directly
rented properties to at least a C by 2025, three years ahead of the
government target with 96% now at this target. For the whole
portfolio, 85% of the properties are rated C or higher, leaving
ReSI well ahead of the average for the social sector and the
overall UK housing market [10] .
Management Team Transition
Gresham House has recently hired three senior real estate
investment professionals to join the Housing team to bolster
resources, experience and help to drive further growth and to work
with me and the existing team.
Mike Adams is the newly appointed Managing Director of the
expanded Gresham House Real Estate business and will be ultimately
responsible for all Real Estate strategies.
Mike Adams joined with Burak Varisli in February 2023 and,
Sandeep Patel joined in December 2022 as the divisional finance
director.
Alex Pilato will fully retire on 9 June, completing a transition
that commenced in March 2020 with the sale of the Fund Manager to
Gresham House. Alex continues to have a very strong interest in the
success of ReSI with significant shareholdings.
Summary and outlook:
ReSI continues to see enormous demand for affordable homes, with
a particular shortage of affordable homeownership routes for young
families and key workers and fit for purpose homes for independent
living through retirement, demand which ReSI is well placed to
meet.
ReSI has delivered strong like-for-like rental review growth of
6.2%, inclusive of 7% rent increases on the shared ownership
portfolio effective 1 April 2023, with continued high occupancy,
rent collection stable at almost 100% and good demand for new homes
reflecting our focus on individual resident contractual
relationships.
This positions ReSI well for the future but the short-term
positive impact above has been more than offset by inflationary
increases in retirement property expenses, increased floating rate
interest costs and an increase in fund operating expenses, to leave
Adjusted Earnings down 3% and reduce dividend cover by 11%.
We are focused on operational improvements to the retirement
portfolio, working closely with RPML, our dedicated in-house
property management team, to drive earnings whilst exploring the
sale of non-core assets to allow ReSI to pay down its floating rate
debt and leave the Company with long-term fixed or inflation-linked
debt with an average maturity of 21 years. We will then work with
the Board to rebase the dividend, likely targeting a higher level
of dividend cover to support a progressive dividend that grows
sustainably in line with ReSI's underlying inflation-linked
rents.
Valuations have been impacted by rising gilt yields, and of
course remain sensitive to future moves, but we see downward
pressure on valuations starting to ease, while inflationary
pressures are hopefully nearing their peak.
With strong demand, inflation-linked rents and wide support for
more investment in affordable housing the outlook for ReSI remains
strong.
Ben Fry
Managing Director, Housing
6 June 2023
Environmental, Social and Governance
The Board and the Fund Manager believe that sustainable
investment involves the integration of Environmental, Social and
Governance (ESG) factors within the investment process and that
these factors should be considered alongside financial and
strategic issues during assessment and at all stages of the
investment process.
The Board and Fund Manager recognise their responsibility to
manage and conduct business in a socially responsible way and many
of the Company's investors, residents and other counterparties have
the same values. Good governance and social responsibility require
that the Company seeks to implement a collaborative approach to
understanding and improving environmental and social performance.
The Fund Manager is responsible for engagement on ESG matters and
dedicates a significant amount of time and resource to focusing on
the ESG characteristics of the properties in which it invests. Such
ESG factors, which were traditionally not part of financial
analysis, are incorporated and prioritised as part of the
investment and due diligence process through the ESG decision tool,
which has been developed by Gresham House's dedicated Sustainable
Investment Team. Ongoing monitoring of ESG related risks is carried
out through investment reviews.
The Fund Manager also gives appropriate consideration to
corporate governance and the representation of shareholder
interests. This is applied both as a positive consideration, and
also to exclude certain investments where the Fund Manager does not
believe the interests of shareholders will be prioritised.
Gresham House has a clear commitment to sustainable investment
as part of its business mission, exemplified by being awarded the
Green Economy Mark from the London Stock Exchange and being a
signatory to the UK Stewardship Code.
Based on its Sustainable Investment Framework, Gresham House has
developed a range of policies and processes for all asset classes
which the Fund Manager uses to integrate sustainability into its
investment approach. More details can be found in the Housing
Sustainable Investment Policy here .
Housing Sustainable Investment Framework
The Fund Manager, with support from Gresham House's dedicated
Sustainable Investment team, has developed the Housing Sustainable
Investment Framework to structure analysis, monitoring and
reporting of ESG issues and opportunities within the lifecycle of
our investments. The Housing Sustainable Investment Framework
addresses the most material themes for housing investments from the
broader Gresham House Sustainable Investment Framework.
Principal Risks and Uncertainties
The Board recognises the importance of risk management in
achieving ReSI's strategic aims.
The principal risk and uncertainties for the Group continue to
be those outlined on pages 80 to 86 of the Annual Report for the
year ended 30 September 2022 and the Board expects those to remain
valid for the remainder of the financial year.
An assessment of any changes to the risks in the six months
ending 31 March 2023 are listed below:
Risk Risk mitigation Party responsible Party responsible Change in
for monitoring risk since
2022 Annual
Report
Real estate
--------------
Significant or -- ReSI's aim is to hold the N/A Board Increased
material fall assets for the long-term and
in the value generate inflation-linked
of the property income
market -- ReSI focuses on areas of
the market with limited
exposure
to the wider property market
-- ReSI 's portfolio aims to
address chronic undersupply
therefore is underpinned by
strong valuation tailwinds
-------------------------------- ------------------- ------------------- ----------------
Increase on ReSI's -- Floating rate debt as a N/A Board New
floating rate proportion of total debt is
debt is payable 10%
based on a margin --We aim to hedge prudently
over SONIA our SONIA exposure, keeping
the hedging strategy under
review to balance the risk
of exposure to rate movements
against the cost on
implementing
hedging instruments
--ReSI is targeting the sale
of non-core assets which will
enable full repayment of
floating
rate debt
-------------------------------- ------------------- ------------------- ----------------
An adverse change -- We manage our activities N/A Board New
in our property to operate within our banking
valuations may covenants and constantly
lead to a breach monitor
of our banking our covenant headroom on Loan
covenants. A to Value and Interest cover
severe fall in
values may result
in us selling
assets to reduce
our loan commitments,
resulting in
a fall in our
NAV
-------------------------------- ------------------- ------------------- ----------------
Directors' Responsibilities in respect of the Interim
Accounts
Each of the directors, whose names are listed on page 68,
confirm that to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 as adopted by the United Kingdom; and
-- the Strategy and Performance overview on pages 8 to 11, the
Fund Manager's Report and Key Performance Measures on pages 12 to
23, Principal Risks and Uncertainties on page 25 and the Related
Party Disclosure on page 56 (note 26) include a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure
and Transparency rules of the United Kingdom's Financial Conduct
Authority namely:
(a) an indication of important events that have occurred during
the first six months since 1 October 2022 and their impact on the
condensed financial statements and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
(b) disclosure of any material related party transactions in the
period are included in note 26 to the condensed consolidated
financial statements.
The Interim Report has been reviewed by the Company's auditor
and was approved by the Board of Directors on 6 June 2023.
For and on behalf of the Board
Rob Whiteman
Chairman
6 June 2023
Independent Review Report to the members of Residential Secure
Income plc
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2023 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Financial Position, the Condensed
Consolidated Cash Flow Statement, the Condensed Consolidated
Statement of Changes in Equity, and related notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the Group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, UK
6 June 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Financials
CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME FOR THE PERIOD
1 OCTOBER 2022 TO 31 MARCH 2023 Note
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
Income 5 17,022 17,721
Cost of sales 5 (8,022) (9,290)
Net income 9,000 8,431
Administrative and other expenses 6 (2,066) (1,466)
Operating profit before property disposals
and change in fair value 6,934 6,965
Profit/ (loss) on disposal of investment
properties 3 (27)
Change in fair value of investment
properties 9 (28,502) 4,975
Change in fair value of borrowings 9 (5,187) (1,033)
Debt set up costs 8 (89) (269)
Operating (loss)/profit before finance
costs (26,841) 10,611
Finance income 8 98 1
Finance costs 8 (3,231) (2,776)
(Loss)/Profit for the period before
taxation (29,974) 7,836
Taxation 10 - -
(Loss)/Profit for the period after
taxation (29,974) 7,836
Other comprehensive (expenses)/income: - -
Total comprehensive (expenses)/income
for the period attributable to the
shareholders of the Company (29,974) 7,836
(Loss)/Earnings per share - basic
and diluted - pence 11 (16.2) 4.5
All of the activities of the Group are classified as
continuing.
The notes on pages 35 to 58 form part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
MARCH 2023
Unaudited Audited
31 March 30 September
Note 2023 2022
GBP'000 GBP'000
Non-current assets
Investment properties 12 386,910 406,127
----------- ---------------
Total non-current assets 386,910 406,127
----------- ---------------
Current assets
Inventories - properties available
for sale 1,817 1,203
Trade and other receivables 13 2,459 3,390
Deposits paid for acquisition - 827
Cash and cash equivalents 14 9,906 15,984
----------- ---------------
Total current assets 14,182 21,404
----------- ---------------
Total assets 401,092 427,531
----------- ---------------
Current liabilities
Trade and other payables 15 6,751 4,891
Borrowings 16 14,803 14,285
Lease liabilities 23 1,003 994
----------- ---------------
Total current liabilities 22,557 20,170
----------- ---------------
Non-current Liabilities
Borrowings 16 180,861 175,420
Recycled Capital Grant Fund 465 205
Lease liabilities 23 30,574 30,348
----------- ---------------
Total non-current liabilities 211,900 205,973
----------- ---------------
Total liabilities 234,457 226,143
----------- ---------------
Net assets 166,635 201,388
=========== ===============
Equity
Share capital 17 1,941 1,941
Share premium 18 14,605 14,605
Treasury shares reserve 19 (8,296) (8,293)
Retained earnings 20 158,385 193,135
----------- ---------------
Total interests 166,635 201,388
----------- ---------------
Total equity 166,635 201,388
=========== ===============
Net asset value per share - basic
and diluted (pence) 24 90.0 108.8
=========== ===============
The condensed consolidated financial statements were approved by
the Board of Directors on and signed on its behalf by:
Rob Whiteman
Chairman
Date:
The notes on pages 35 to 58 form part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 1
OCTOBER 2022 TO 31 MARCH 2023
Unaudited
Unaudited 6 months
6 months to to 31 March
31 March 2023 2022
GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit for the period (29,974) 7,836
Adjustments for items that are not
operating in nature:
Loss/(Gain) in fair value of investment
properties 9 28,502 (4,975)
Movement in rent smoothing adjustments 5 (559) (564)
Loss in fair value of borrowings 9 5,187 1,033
Loss/(profit) on disposal of investment
properties (2) 27
Shares issued in lieu of management
fees 263 227
Finance income 8 (98) (1)
Finance costs 8 3,231 2,776
Debt set up costs 8 89 269
Operating result before working
capital changes 6,639 6,628
Changes in working capital
Increase in trade and other receivables 595 476
Decrease/(increase) in inventories (614) 3,483
(Decrease)/increase in trade and
other payables 2,034 (1,002)
Net cash flow generated from operating
activities 8,654 9,585
---------------- --------------
Cash flow from investing activities
Purchase of investment properties 12 (11,292) (3,139)
Grant received 12 1,484 168
Disposal of investment properties 2,483 517
Deposits paid for acquisition - (2,056)
Interest received 8 98 1
Amounts transferred into restricted
cash deposits 14 - -
Net cash flow from investing activities (7,227) (4,509)
---------------- --------------
Cash flow from financing activities
17 /
Share issue (net of issue costs) 18 - 14,735
Purchase of own shares 19 (266) (117)
New borrowings raised (net of expenses) 16 4,733 19,731
Bank loans repaid (4,118) (2,936)
Finance costs 8 (3,078) (2,620)
Dividend paid 22 (4,776) (4,416)
Net cash flow (utilised in )/generated
from financing activities (7,505) 24,377
---------------- --------------
Net increase in cash and cash equivalents (6,078) 29,453
Reclassification of restricted cash
balances 14 - 2,684
Cash and cash equivalents at the
beginning of the period 14 15,984 5,686
Cash and cash equivalents at the
end of the period 14 9,906 37,823
---------------- --------------
The notes on pages 35 to 58 form part of these financial
statements.
Condensed Consolidated Statement of Changes in Equity
For the period 1 October 2022 to 31 March 2023
Own
Share Share shares Retained Total
capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 September
2021 1,803 108 (8,515) 188,996 182,392
----------------- ---------------- ----------------- ---------------- ----------------
Profit for the period - - - 7,836 7,836
Other comprehensive - - - - -
income
Total comprehensive
income - - - 7,836 7,836
Contributions by and distributions to shareholders
Issue of shares 138 14,862 - - 15,000
Share issue costs - (265) - - (265)
Issue of management
shares - - 227 (227) -
Share based payment
charge - - - 227 227
Purchase of own shares - - (117) - (117)
Dividends paid - - - (4,416)) (4,416)
Balance at 31 March 2022 1,941 14,705 (8,405) 192,416 200,657
----------------- ---------------- ----------------- ---------------- ----------------
Profit for the period - - - 5,498 5,498
Other comprehensive - - - - -
income
----------------- ---------------- ----------------- ---------------- ----------------
Total comprehensive
income - - - 5,498 5,498
Contributions by and distributions to shareholders
Issue of shares - - - - -
Share issue costs - (100) - - (100)
Issue of management
shares - - 240 (240) -
Share based payment
charge - - - 240 240
Purchase of own shares - - (128) - (128)
Dividends paid - - - (4,779) (4,779)
Balance at 30 September
2022 1,941 14,605 (8,293) 193,135 201,388
----------------- ---------------- ----------------- ---------------- ----------------
Loss for the period - - - (29,974) (29,974)
Other comprehensive - - - - -
expenses
----------------- ---------------- ----------------- ---------------- ----------------
Total comprehensive
expenses - - - (29,974) (29,974)
Contributions by and
distributions
to shareholders
Issue of management
shares - - 263 (263) -
Share based payment
charge - - - 263 263
Purchase of own shares - - (265) - (266)
Dividends paid - - - (4,776) (4,776)
----------------- ---------------- ----------------- ---------------- ----------------
Balance at 31 March 2023 1,941 14,605 (8,295) 158,385 166,635
----------------- ---------------- ----------------- ---------------- ----------------
The notes on pages 35 to 58 form part of these financial
statements
Condensed Notes to the Financial Statements
For the period 1 October 2022 to 31 March 2023
1. General information
The financial information set out in this report covers the six
months to 31 March 2023 and includes the results and net assets of
the Company and its subsidiaries. The comparatives presented for
the Statement of Comprehensive Income and Statement of Cash Flows
are for the six months to 31 March 2022. The comparatives presented
for the Statement of Financial Position are as at 30 September
2022.
This consolidated interim financial information has not been
audited by the Company's auditor.
Residential Secure Income plc (ReSI or the Company) was
incorporated in England and Wales under the Companies Act 2006 as a
public company limited by shares on 21 March 2017. The Company's
registration number is 10683026. The registered office of the
Company is located at The Pavilions, Bridgwater Road, Bristol,
England, BS13 8FD.
The Company achieved admission to the premium listing segment of
the main market of the London Stock Exchange on 12 July 2017.
The Company and its subsidiaries (the "Group") invests in
residential asset classes that comprise the stock of registered UK
social housing providers, Housing Associations and Local
Authorities.
2. Basis of preparation
These condensed financial statements for the period ended 31
March 2023 have been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the United Kingdom. The interim
report should be read in conjunction with the annual Financial
Statements for the year ended 30 September 2022, which were
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and in
accordance with UK adopted international financial reporting
standards.
The condensed financial statements have been prepared on a
historical cost basis, except for investment properties, derivative
financial instruments and certain bank borrowings which have been
measured at fair value.
The condensed financial statements have been rounded to the
nearest thousand and are presented in Sterling, except when
otherwise indicated.
The condensed financial statements for the period are unaudited
and do not constitute statutory accounts for the purposes of the
Companies Act 2006. The annual report and financial statements for
the year ended 30 September 2022 have been filed at Companies
House. The independent auditor's report on the annual report and
financial statements for the year ended 30 September 2022 was
unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under sections 498 (2) or
498 (3) of the Companies Act 2006.
a) Going concern
The Directors have made an assessment of the Group's ability to
continue as a going concern, and are satisfied that the Group has
the resources to continue in business for the foreseeable future.
The Group expects to refinance the NatWest facility which is due to
expire in October 2023. The drawn balance of the NatWest Facility
at the signing date was GBP12.0mn and the undrawn headroom in the
Santander RCF is GBP17.1mn. Accordingly in the event non-core asset
sales were delayed the Group has access to sufficient capital to
pay down the NatWest facility. Furthermore, the Directors are not
aware of any material uncertainties that may cast significant doubt
upon the Group's ability to continue as a going concern. Therefore,
the financial statements have been prepared on the going concern
basis.
ReSI is subject to covenants on debt secured on its shared
ownership, retirement and Local Authority portfolios (see note 16
on page 48). Sensitivity analysis has been performed, showing a
large amount of headroom on all covenants, including all debt
servicing and valuation metrics. Due to the long-term nature of the
Company's assets and strong cash flows, the Directors do not
forecast a breach of any debt covenants.
Financial models have been prepared for the going concern period
which consider liquidity at the start of the period and key
financial assumptions at the Company level as well as at level of
the subsidiaries of ReSI. These financial assumptions include
expected cash generated and distributed by the portfolio companies
available to be distributed to the Company, inflows and outflows in
relation to the external debt and interest payments expected within
the subsidiaries, the availability of new external debt facilities,
committed expenditure for investments and expected dividends as
well as the ongoing administrative costs of the Company.
b) Changes to accounting standards and interpretations
Amendments to standards adopted during the year
The IASB and IFRIC have issued or revised a number of standards.
None of these amendments have led to any material changes in the
Group's accounting policies or disclosures during the year.
Standards in issue but not yet effective
Certain amendments and interpretations to existing standards
have been published that are mandatory for the Group's accounting
periods beginning on or after 1 October 2023 and whilst the
Directors are considering these, initial indications are that these
changes will have no material impact on the Group's financial
statements.
3. Significant accounting policies
The significant accounting policies applied in the preparation
of the financial statements are consistent with those applied in
the Group's statutory accounts for the year ended 30 September 2022
and are expected to be consistently applied for the year ending 30
September 2023. The policies have been consistently applied
throughout the period.
4. Significant accounting judgements and estimates
There have been no new or material revision to the nature and
amount of judgements and reported in the Annual Report 2022, other
than changes to certain assumptions applied in the valuation of
properties and USS debt.
5. Income less cost of sales
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
First
Net property tranche
income sales Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Gross rental income 13,583 - 13,583 12,394
First tranche property
sales - 3,439 3,439 5,327
Total income 13,583 3,439 17,022 17,721
-------------- ---------- ----------- -----------
Service charge expenses (2,704) - (2,704) (2,398)
Property operating
expenses (2,081) - (2,081) (1,898)
Impairment of receivables (29) - (29) (3)
First tranche cost
of sales - (3,208) (3,208) (4,991)
Total cost of sales (4,814) (3,208) (8,022) (9,290)
-------------- ---------- ----------- -----------
Net Income before
ground rents 8,769 231 9,000 8,431
Ground rents disclosed
as finance lease
interest (478) - (478) (513)
-------------- ---------- ----------- -----------
Net Income after
ground rents disclosed
as finance lease
asset 8,291 231 8,522 7,918
-------------- ---------- ----------- -----------
'Rent straight line adjustments' represent the recognition of
lease incentives and contractual fixed annual rent increases on a
straight-line basis over the term of the underlying leases.
Included within rental income is a GBP559,000 (2022: GBP564,000)
rent smoothing adjustment that arises as a result of IFRS 16
'Leases' which require rental income in respect of leases with
rents increasing by a fixed percentage be accounted for on a
straight-line basis over the lease term. During the period this
resulted in an increase in rental income, with an offsetting entry
being recognised in profit or loss as an adjustment to the
investment property revaluation.
Gross rental income includes service charges collected from
tenants, included in rent collected but not separately invoiced, of
GBP2,654,423 during the period (2022: GBP2,234,630). Service charge
expenses, as reflected in the cost of sales, also includes amounts
paid in respect of properties which were vacant during the period
of GBP7,028 (2022: GBP163,042).
The Net Income after ground rents disclosed as finance lease
interest are presented to provide what the Board believes is a more
appropriate assessment of the Group's net property income. Ground
rent costs are an inherent cost of holding certain leasehold
properties and are taken into consideration by Savills when valuing
the Group's properties.
6. Administration and other expenses
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
Fund management fee (note 26) 1,051 907
General administration expenses 699 527
Non-recurring costs 9 32
Aborted fundraising costs 307 -
2,066 1,466
----------- -----------
7. Directors' fees and expenses
The Group has no employees in the current period. The Directors,
who are the key management personnel of the Company, are appointed
under letters of appointment for services. Directors' remuneration,
all of which are fees for services provided, was as follows:
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
Fees 78 77
Taxes 11 11
Expenses - -
89 88
----------- -----------
Fees paid to directors of subsidiaries 25 23
114 111
----------- -----------
The Chairman is entitled to receive a fee linked to the Net
Asset Value of the Group as follows:
Net asset value Annual fee
Up to GBP100,000,000 GBP40,000
GBP100,000,000 and GBP200,000,000 GBP50,000
GBP200,000,000 to GBP350,000,000 GBP60,000
Thereafter GBP70,000
Each of the Directors, save the Chairman, is entitled to receive
a fee linked to the Net Asset Value of the Group as follows:
Net asset value Annual fee
Up to GBP100,000,000 GBP30,000
GBP100,000,000 and GBP200,000,000 GBP35,000
Thereafter GBP40,000
None of the Directors received any advances or credits from any
Group entity during the period (2022: Nil).
8. Net finance costs
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
Finance income
Interest income 98 1
----------- -----------
98 1
----------- -----------
Finance expense
Interest payable on borrowings (2,555) (2,061)
Amortisation of loan costs (156) (154)
Debt programme costs (42) (48)
Lease interest (478) (513)
(3,231) (2,776)
----------- -----------
Net finance costs (3,133) (2,775)
----------- -----------
One-off shared ownership facility
costs (62) (256)
Debt one off fees (27) (13)
Debt set up costs (89) (269)
----------- -----------
The Group's interest income during the period relates cash held
on deposit with banks and to cash invested in a money market fund,
which is invested in short-term AAA rated Sterling instruments.
Ground rents paid in respect of leasehold properties have been
recognised as a finance cost in accordance with IFRS 16
"Leases".
Debt one off fees incurred in six months ended 31 March 2023
relate to the costs incurred in charging assets to the facility
with Scottish Widows Limited.
9. Change in fair value
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
(Loss)/Gain on fair value adjustment
of investment properties (27,943) 5,541
Adjustments for lease incentive assets and rent straight
line assets recognised
Start of the year 2,070 922
End of the period (2,629) (1,488)
----------- -----------
(28,502) 4,975
Loss on fair value adjustment of
borrowings (note 16) (5,187) (1,033)
Debt one off costs (62) (269)
-----------
(33,751) 3,673
----------- -----------
Loss on fair value adjustment of borrowings arises from debt
raised against the shared ownership portfolio, which the Company
has elected to fair value through Profit and Loss, in order to
address an accounting mismatch as the value of the loan is linked
to the shared ownership investment portfolio. An election has been
made to value this debt at fair value through profit or loss,
therefore all fees associated with this debt are expensed in
entirety as they occur.
10. Taxation
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
Current tax - -
Deferred tax - -
- -
----------- -----------
The tax charge for the period varies from the standard rate of
corporation tax in the UK applied to the profit before tax. The
differences are explained below:
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
(Loss)/Profit before tax (29,974) 7,836
----------- -----------
Tax at the UK corporation tax rate
of 19% (2022: 19%) (5,695) 1,489
Tax effect of:
UK tax not payable due to REIT exemption 253 (577)
Investment property revaluation not
taxable 5,415 (945)
Expenses that are not deductible
in taxable profit (22) (1)
Unutilised residual current year
tax losses 48 34
Tax charge for the period - -
----------- -----------
As a UK REIT the Group is exempt from corporation tax on the
profits and gains from its property rental business provided it
meets certain conditions set out in the UK REIT regulations.
The government has announced that the corporation tax standard
rate is to remain at 19% until 31 March 2023. From 1 April 2023 the
rate will increase to 25%.
11. Earnings per share
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
(Loss)/Profit attributable to Ordinary
shareholders (29,974) 7,836
Deduction of fair value movement
on investment properties and borrowings 33,687 (3,942)
Add back: non-recurring costs 9 32
Add back: one-off shared ownership
facility costs 62 256
Add back: one-off costs relating
to debt 27 13
Deduction of abortive costs 307 -
Loss/(profit) on property disposals (2) 27
Adjusted earnings 4,116 4,222
----------- -----------
Weighted average number of ordinary
shares (thousands) 185,163 175,128
----------- -----------
Basic earnings per share (pence)
- 2023 (pence) (16.19)
- 2022 (pence 4.47
Adjusted earnings per share (pence)
- 2023 (pence) 2.22
- 2022 (pence 2.41
Basic earnings per share (EPS) is calculated as profit
attributable to Ordinary Shareholders of the Company divided by the
weighted average number of shares in issue throughout the relevant
period. Basic and diluted earnings per share are the same as the
Company only has Ordinary shares in issue.
The adjusted earnings are presented to provide what the Board
believes is a more appropriate assessment of the operational income
accruing to the Group's activities. Hence, the Group adjusts basic
earnings for income and costs which are not of a recurrent nature
or which may be more of a capital nature.
EPRA Earnings per share
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
(Loss)/Earnings per IFRS income statement (29,974) 7,836
Changes in value of investment properties 28,502 (4,975)
Profits/(losses) on disposal of investment
properties (2) 27
Profits on sales of trading properties incl.
impairment charges in respect of trading
properties. (232) (336)
Changes in fair value of financial instruments
and associated close-out costs 5,187 1,033
EPRA Earnings 3,481 3,585
----------- -----------
Weighted average number of ordinary shares
(thousands) 185,163 175,128
EPRA Earnings per Share (EPS) (Pence) 1.88 2.05
Adjusted EPRA Earnings per share
Unaudited Unaudited
6 months 6 months
to to
31 March 31 March
2023 2022
GBP'000 GBP'000
EPRA Earnings 3,481 3,585
Company specific adjustments:
Exclude one off costs 405 301
Include shared ownership first tranche
sales 232 336
Company specific Adjusted Earnings 4,118 4,222
----------- -----------
Company specific Adjusted EPS 2.22 2.41
EPRA earnings per share ('EPS') is calculated as EPRA earnings
attributable to Ordinary Shareholders of the Company divided by the
weighted average number of shares in issue throughout the relevant
period.
The adjusted EPRA earnings are presented to provide what the
Board believes is a more appropriate assessment of the operational
income accruing to the Group's activities. Hence, the Group adjusts
EPRA earnings for income and costs which are not of a recurrent
nature or which may be more of a capital nature.
12. Investment properties
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
At beginning of period 406,127 372,335
Property acquisitions at cost 11,460 30,827
Grant receivable (1,148) (672)
Capital expenditure 659 652
Property disposals (2,480) (1,498)
Movement in head lease gross up 235 135
Change in fair value during the
period (27,943) 4,348
At end of period 386,910 406,127
----------- ---------------
Valuation provided by Savills 355,333 374,785
Adjustment to valuation - finance
lease asset 31,577 31,342
Total investment properties 386,910 406,127
----------- ---------------
The investment properties are divided into:
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Leasehold properties 291,093 293,734
Freehold properties * 64,240 81,051
Head lease gross up 31,577 31,342
Total investment properties 386,910 406,127
----------- ---------------
*Includes Feuhold properties, the Scottish equivalent of
Freehold.
The table below shows the total value of the Group's investment
properties including committed properties with purchase contracts
exchanged at 31 March 2023. Consistent with the valuation provided
by Savills, the adjustment to fair value in respect of finance
lease assets for ground rents receivable has been excluded to show
the value of the asset net of all payments to be made (including
ground rent payments). Committed properties with purchase contracts
exchanged have been included to provide an indication of the value
of all properties to which the Group is contractually committed at
31 March 2023.
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Total investment properties 386,910 406,127
Adjustment to fair value - finance
lease asset (31,577) (31,342)
Committed properties with purchase
contracts exchanged - 8,635
Total investment properties including committed
properties with purchased contracts exchanged 355,333 383,420
----------- ---------------
Included within the carrying value of investment properties at
31 March 2023 is GBP2,629,000 (30 September 2022: GBP2,070,000) in
respect of the smoothing of fixed contractual rent uplifts as
described in note 5. The difference between rents on a
straight-line basis and rents actually receivable is included
within the carrying value of the investment properties but does not
increase that carrying value over the fair value.
The historical cost of investment properties at 31 March 2023
was GBP348,070,000 (30 September 2022: GBP339,012,000).
In accordance with "IAS 40: Investment Property", the Group's
investment properties have been independently valued at fair value
by Savills (UK) Limited ("Savills"), an accredited external valuer
with recognised and relevant professional qualifications.
The carrying values of investment property as at 31 March 2023
agree to the valuations reported by external valuers, except that
the valuations have been:
Increased by the amount of finance lease liabilities recognised
in respect of investment properties held under leases GBP31,577,000
(GBP31,342,000 at 30 September 2022), representing the present
value of ground rents payable for the properties held by the Group
under leasehold - further information is provided in note 23. This
is because the independent valuations are shown net of all payments
expected to be made. However, for financial reporting purposes in
accordance with IAS 40, "Investment Property", the carrying value
of the investment properties includes the present value of the
minimum lease payments in relation to these leases. The related
lease liabilities are presented separately on the Statement of
Financial Position.
'Rent straight line adjustments' represent the recognition of
lease incentives and contractual fixed annual rent increases on a
straight-line basis over the term of the underlying leases.
The Group's investment objective is to provide shareholders with
an attractive level of income, together with the potential for
capital growth, from acquiring portfolios of homes across
residential asset classes that comprise the stock of statutory
registered providers.
The Group intends to hold its investment property portfolio over
the long term, taking advantage of upward-only inflation-linked
leases. The Group will not be actively seeking to dispose of any of
its assets, although it may dispose of investments should an
opportunity arise that would enhance the value of the Group as a
whole.
The Group has pledged all of its investment properties
(including inventory) to secure loan facilities granted to the
Group (see note 16).
13. Trade and other receivables
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Trade debtors 127 385
Prepayments 2,227 2,623
Other debtors 105 382
2,459 3,390
----------- ---------------
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a 12-month expected loss provision for
rent receivables. To measure expected credit losses on a collective
basis, rent receivables are grouped based on similar credit risk
and aging.
There is no significant difference between the fair value and
carrying value of trade and other receivables at the Statement of
Financial Position date.
14. Cash and cash equivalents
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Cash at bank 5,245 12,739
Cash held as investment deposit 2 2
5,247 12,741
Restricted cash 4,659 3,243
9,906 15,984
----------- ---------------
Included within cash at the period end was an amount totalling
GBP4,659,000 (GBP3,243,000 at 30 September 2022) held in separate
bank accounts which the Group considers restricted cash. This
relates to cash that is subject to restrictions with a third party
where the terms of the account do not prevent the Group from
accessing the cash. This is typically where the Group has agreed to
deposit cash with a bank as part of a joint arrangement with a
tenant under a lease agreement, or to provide additional security
to a lender over loan facilities, or under an asset management
initiative.
GBP1,349,000 (GBP1,324,000 at 30 September 2022) was held by the
managing agent of the retirement portfolio in respect of tenancy
rental deposits.
Other funds were held by the management agent in an operating
account to pay service charges in respect of the RHP Portfolio due
on 1 October 2022.
GBP2,954,000 (GBP1,564,000 at 30 September 2022) was held by US
Bank in respect of funds required as a debt service reserve for the
shared ownership debt. GBP423,000 (GBP354,000 at 30 September 2022)
was held in respect of a service charge reserve fund.
Cash held as investment deposit relates to cash invested in a
money market fund, which is invested in short-term AAA rated
Sterling Investments. As the fund has a short maturity period, the
investment has a high liquidity. The fund has GBP14.8bn AUM, hence
the Group's investment deposit represents an immaterial proportion
of the fund.
15. Trade and other payables
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Trade payables 2,007 1,173
Accruals 2,923 1,238
VAT payable - 4
Deferred income 115 797
Other creditors 1,706 1,679
6,751 4,891
----------- ---------------
16. Borrowings
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Loans 197,947 192,126
Unamortised borrowing costs (2,283) (2,421)
195,664 189,705
----------- ---------------
Current liability 14,803 14,285
Non-current liability 180,861 175,420
195,664 189,705
----------- ---------------
The loans are repayable as follows:
Within one year 14,803 14,285
Between one and two years 11,450 9,851
Between three and five years 8,704 9,088
Between six and ten years 11,099 14,887
Between eleven and twenty years 26,195 29,452
Over twenty years* 123,413 112,142
195,664 189,705
----------- ---------------
*GBP77.6mn of this is due at the maturity date of the loan in
2043.
Movements in borrowings are analysed as follows:
Fair value Held at
through amortised Unaudited Audited
profit or cost 31 March 30 September
loss 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 2022 77,703 112,002 189,705 168,339
Drawdown of facility - 4,750 4,750 28,100
New borrowing costs - (17) (17) (215)
Amortisation of loan
costs - 156 156 268
Fair value movement 5,187 - 5,187 (1,809)
Repayment of borrowings - (4,117) (4,117) (4,978)
------------ ------------ ----------- ---------------
Period ended 31 March
2023 82,890 112,774 195,664 189,705
------------ ------------ ----------- ---------------
The table below lists the Group's borrowings:
Original Outstanding Maturity Annual interest
Lender facility debt date rate
Held at amortised cost GBP'000 GBP'000 %
3.5 Fixed
Scottish Widows Ltd 97,000 92,241 Jun-43 (Avg)
National Westminster Bank
Plc 14,450 12,164 Oct-23 2.0 over SONIA
2.25 over
Santander UK PLC 8,600 8,368 Mar-25 SONIA
120,050 112,773
----------- -------------
Held at fair value
Universities Superannuation
Scheme 77,500 82,891 May-65 1.2 (Avg)*
Total borrowings 197,550 195,664
----------- -------------
*The principal will increase at a rate of RPI+0.5% annually, on
a quarterly basis; RPI is capped between 0% and 5% on a pro-rated
basis.
The Group has elected to fair value through Profit and Loss the
Universities Superannuation Scheme borrowings. This is considered a
more appropriate basis of recognition than amortised cost given the
inflation-linked nature of the debt, which has been negotiated to
inflate in line with the RPI linked rent in ReSI's shared ownership
leases. The notional outstanding debt at 31 March 2023 was
GBP77.5mn (30 September 2022: GBP77.5mn) with an amortised cost of
GBP84.9mn (30 September 2022: GBP82.7mn).
The Universities Superannuation Scheme borrowings have been fair
valued by calculating the present value of future cash flows, using
the gilt curve and a credit spread reflecting the high credit
strength of the borrower at the date of valuation. The credit
spread used for the valuation as at 31 March 2022 was 1.58% (30
September 2022: 1.81%).
In accordance with IFRS 13, the Group's borrowings held at fair
value have been assigned a valuation level in the fair value
hierarchy. The fair value hierarchy gives the highest priority to
quoted prices in active markets for identical assets (Level 1) and
the lowest priority to unobservable inputs (Level 3). The Group's
borrowings held at fair value as at 31 March 2023 are categorised
as Level 2.
Everything else being equal, there is a negative relationship
between the credit spread and the borrowings valuation, such that
an increase in the credit spread (and therefore the future interest
payable) will reduce the valuation of a borrowing liability and
vice versa. A 10-basis point increase in the credit spread would
result in a reduction of the liability by GBP1.3mn.
The fair value of the GBP92.2mn of fixed rate borrowings held at
amortised cost at 31 March 2023 was GBP75.7mn (GBP70.6mn at 30
September 2022).
The Scottish Widows facility is secured by a first charge over
retirement properties with a fair value of GBP209.3mn.
The NatWest facility is secured by a first charge over Local
Authority Housing properties with a fair value of GBP23.0mn.
The Universities Superannuation Scheme facility is secured by a
first charge over shared ownership properties with a fair value
GBP124.4mn, cash of GBP2.1mn, related inventory of GBP1.8mn, and
restricted cash balances of GBP3.0mn.
The Group has a revolving capital facility of GBP25mn with
Santander UK plc. As at the period end, GBP8.6mn has been drawn
down under the facility. Each draw under the facility must be
repaid within two years of drawdown, at 31 March 2023 GBP8.6mn is
due for repayment within two years.
17. Share capital account
Number
of Ordinary
1 p GBP'000
shares
At 30 September 2022 194,149,261 1,941
Issue of shares - -
At 31 March 2023 194,149,261 1,941
-------------- ---------
The share capital account relates to amounts subscribed for
share capital.
Rights, preferences and restrictions on shares
All Ordinary Shares carry equal rights, and no privileges are
attached to any shares in the Company. All the shares are freely
transferable, except as otherwise provided by law. The holders of
Ordinary Shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share at meetings of
the Company. All shares rank equally with regard to the Company's
residual assets.
Treasury shares do not hold any voting rights.
18. Share premium account
GBP'000
At 30 September 2022 14,605
Issue of shares -
Share issue costs -
At 31 March 2023 14,605
---------
The share premium account relates to amounts subscribed for
share capital in excess of nominal value.
19. Treasury shares reserve
GBP'000
At 31 March 2022 (8,405)
Purchase of own shares (128)
Transferred as part of Fund Management
fee 240
At 30 September 2022 (8,293)
---------
Purchase of own shares (266)
Transferred as part of Fund Management
fee 263
At 31 March 2023 (8,296)
---------
The treasury shares reserve relates to the value of shares
purchased by the Company in excess of nominal value.
During the period ended 31 March 2023, the Company purchased
277,557 of its own 1p ordinary shares at a total gross cost of
GBP264,981 (GBP261,238 cost of shares and GBP3,743 associated
costs).
During the period, 227,557 1p Ordinary Shares were transferred
from its treasury shares reserve to the Fund Manager, in lieu of
the management fee in accordance with the Fund Management
Agreement.
As at 31 March 2023, 8,985,980 (30 September 2022: 8,985,980) 1p
Ordinary Shares are held by the Company.
20. Retained earnings
GBP'000
At 31 March 2022 192,416
Profit for the period 5,498
Share based payment charge 240
Issue of management shares (240)
Dividends (4,779)
At 30 September 2022 193,135
----------
Loss for the period (29,974)
Share based payment charge 263
Issue of management shares (263)
Dividends (4,776)
At 31 March 2023 159,385
----------
Retained earnings incorporate all gains and losses and
transactions with shareholders (e.g. dividends) not recognised
elsewhere.
21. Group entities
The Group entities which are owned either directly by the
Company or indirectly through a subsidiary undertaking are:
Principal
Percentage Country place
Name of entity of ownership of incorporation of business Principal activity
RHP Holdings Limited 100% UK UK Holding company
ReSI Portfolio Holdings
Limited 100% UK UK Holding company
The Retirement Housing
Limited Partnership 100% UK UK Property investment
Social housing
ReSI Housing Limited 100% UK UK Registered Provider
Wesley House (Freehold)
Limited 100% UK UK Property investment
Eaton Green (Freehold)
Limited 100% UK UK Property investment
Name of entity Registered address
RHP Holdings Limited 5 New Street Square, London, EC4A 3TW
ReSI Portfolio Holdings
Limited 5 New Street Square, London, EC4A 3TW
The Retirement Housing Glanville House, Frobisher Way, Taunton,
Limited Partnership Somerset, TA2 6BB
ReSI Housing Limited 5 New Street Square, London, EC4A 3TW
Wesley House (Freehold)
Limited 5 New Street Square, London, EC4A 3TW
Eaton Green (Freehold)
Limited 5 New Street Square, London, EC4A 3TW
All Group entities are UK tax resident.
22. Dividends
Unaudited Unaudited Unaudited
6 months 6 months 6 months
to to to
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
Amounts recognised as distributions to shareholders
in the period to 31 March 2023:
4(th) interim dividend for the year ended
30 September 2022 of 1.29p per share (2021:
1.29p) 2,388 2,208 -
1(st) interim dividend for the year ended
30 September 2023 of 1.29p per share (2022:
1.29p) 2,388 2,208 -
4,776 4,416
----------- ----------- ---------------
Categorisation of dividends
for UK tax purposes:
Amounts recognised as distributions
to shareholders in the period:
Property Income Distribution
(PID) 4,776 2,568
Non-PID - 1,848
4,776 4,416
----------- ----------- ---------------
Amounts not recognised as distributions
to shareholders in the period:
2(nd) interim dividend for the year ended
30 September 2022 of 1.29p per share (2021:
1.25p) 2,388
3(rd) interim dividend for the year ended
30 September 2022 of 1.29p per share (2021:
1.25p) 2,388
4,776
---------------
On 9 December 2022, the Company declared its fourth interim
dividend of 1.29 pence per share for the period 1 July 2022 to 30
September 2022.
On 10 February 2023, the Company declared its first interim
dividend of 1.29 pence per share for the period 1 October 2022 to
31 December 2022.
The Company intends to continue to pay dividends to shareholders
on a quarterly basis in accordance with the REIT regime.
Dividends are not payable in respect of its Treasury shares
held.
23. Lease arrangements
The Group as lessee
The interest expense in respect of lease liabilities for the
period was GBP478,000 (31 March 2022: GBP513,000).
There was no expense relating to variable lease payments in the
period (31 March 2022: Nil).
The Group did not have any short-term leases or leases for low
value assets accounted for under IFRS 16 paragraph 6, nor any sale
and leaseback transactions.
The total cash outflow in respect of leases was GBP478,000 (31
March 2022: GBP513,000).
At 31 March 2023, the Group had outstanding commitments for
future minimum lease payments under non-cancellable leases, which
fall due as follows:
As at 31 March Less Two to 6-10 10-20 More than Total
2023 than one five years years years 20 years
year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Minimum lease
payments 1,003 4,012 5,014 10,029 112,540 132,598
Interest - (294) (435) (1,519) (98,773) (101,021)
Present value
at 31 March
2023 1,003 3,718 4,579 8,510 13,767 31,577
----------- ------------- --------- --------- ----------- ------------
As at 30 September Less Two to 6-10 10-20 More than Total
2022 than one five years years years 20 years
year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Minimum lease
payments 994 3,976 4,970 9,920 113,062 132,922
(1,485
Interest - (291 ) (432 ) ) (99,372) (101,580)
Present value
at 30 September
2022 994 3,685 4,538 8,435 13,690 31,342
----------- ------------- --------- --------- ----------- ------------
The above commitment is in respect of ground rents payable for
properties held by the Group under leasehold. There are 2,207
properties (30 September 2022: 2,182) held under leasehold with an
average unexpired lease term of 154 years (30 September 2022: 155
years).
The majority of restrictions imposed are the covenants in place
limiting tenancies to people of retirement age.
The Group as lessor
The Group leases some of its investment properties under
operating leases. At the balance sheet date, the Group had
contracted with tenants for the following future aggregate minimum
rentals receivable under non-cancellable operating leases:
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Receivable within 1 year 8,445 7,987
Receivable between 1-2 years 6,260 5,817
Receivable between 2-3 years 5,586 5,723
Receivable between 3-4 years 5,039 4,728
Receivable between 4-5 years 4,581 4,530
Receivable between 5-10 years 21,237 19,039
Receivable between 10-20 years 42,411 37,978
Receivable after 20 years 417,544 373,736
511,103 459,538
----------- ---------------
The total of contingent rents recognised as income during the
period was GBPnil (31 March 2022: GBPnil).
The majority of leases are assured tenancy or assured shorthold
tenancy agreements. The table above shows the minimum lease
payments receivable under the assumption that all tenants terminate
their leases at the earliest opportunity. However, assured
tenancies are long-term agreements providing lifetime security of
tenure to residents.
The leases in the licensed retirement homes portfolio are
indefinite and would only be terminated in the event that the
leaseholders of the relevant retirement development vote to no
longer have a resident house manager living at their
development.
The Group's shared ownership properties are let to Shared Owners
on leases with initial lease terms of between 130 to 999 years.
Two of the Group's properties are let out on more traditional
leases which account for approximately 8% of total rental
income.
The table below shows our expected lease receivables, excluding
future rent reviews, from existing leases based on historical
turnover rates consistent with our assumptions for valuing the
properties:
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Receivable within 1 year 28,338 25,099
Receivable between 1-2 years 24,500 21,547
Receivable between 2-3 years 20,714 18,590
Receivable between 3-4 years 17,640 15,286
Receivable between 4-5 years 15,126 13,221
Receivable between 5-10 years 54,089 44,784
Receivable between 10-20 years 66,697 54,455
Receivable after 20 years 432,803 382,089
659,907 575,071
----------- ---------------
24. Net asset value per share
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
Net assets 166,635 201,388
166,635 201,388
------------- -------------------
Ordinary shares in issue at period end (excluding
shares held in treasury) 185,163,281 185,163,281
------------- ---------------
Basic NAV per share (pence) 90.0 108.8
------------- -------------------
The net asset value ('NAV') per share is calculated as the net
assets of the Group attributable to shareholders divided by the
number of Ordinary Shares in issue at the period end.
EPRA Net Tangible Assets (NTA) and EPRA Net Reinstatement Value
(NRV) per share
Unaudited Audited
31 March 30 September
2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 166,635 201,388
Revaluation of trading properties 194 93
Fair value of financial instruments (2,053) (4,997)
Real estate transfer tax - -
EPRA NTA 164,776 196,484
----------- ---------------
Fully diluted number of shares (thousands) 185,163 185,163
EPRA NTA per share (pence) 89.0 106.1
----------- ---------------
The Group has debt which it has elected to carry at fair value
through profit and loss. In accordance with the EPRA Best Practice
Recommendations, EPRA NTA should reflect the amortised cost of the
debt rather than its fair value. In the current period, an
adjustment has been made for GBP2.1mn which represents the
difference between fair value and what amortised cost would have
been had the Group carried the debt at amortised cost (30 September
2022: GBP5.0mn).
The EPRA Net Tangible Assets (EPRA NTA) per share calculated as
the EPRA NTA of the Group attributable to shareholders divided by
the number of Ordinary Shares in issue at the period end.
25. Contingent liabilities and commitments
ReSI's shared ownership portfolio has been supported by GBP15mn
government grant funding. In some circumstances, typically when a
Shared Owner staircases, ReSI will be required to recycle the grant
into the purchase of new properties within three years or to repay
it to the grant providing body. On disposal/staircasing of a grant
funded property, the Group initially recognises a liability in the
Recycled Capital Grant fund. If the disposal receipts are not
subsequently recycled, the grant will be repaid. The balance at 31
March 2023 was GBP465,000 (30 September 2022: GBP205,000).
There are no provisions for fines and settlements specified for
ESG (Environmental, Social or Governance) or any other issues.
26. Related party disclosure
As defined by IAS 24 Related Party Disclosures, parties are
considered to be related if one party has the ability to control
the other party or exercise significant influence over the other
party in making financial or operational decisions.
For the period ended 31 March 2023, the Directors of the Group
are considered to be the key management personnel. Details of
amounts paid to Directors for their services can be found within
note 7, Directors' fees and expenses.
ReSI Capital Management Limited acts as alternative investment
fund manager (the Fund Manager), in compliance with the provisions
of the AIFMD, pursuant to the Fund Management Agreement. The Fund
Manager has responsibility for the day-to-day management of the
Company's assets in accordance with the Investment policy subject
to the control and directions of the Board. The Fund Management
agreement is terminable on not less than 12 months' notice
The Fund Manager is entitled to an annual management fee (the
"Fund Manager Fee") under the Fund Management Agreement with effect
from the date of Admission, as follows:
a) on that part of the Net Asset Value up to and including
GBP250mn, an amount equal to 1% p.a. of such part of the Net Asset
Value;
b) on that part of the Net Asset Value over GBP250mn and
including GBP500mn, an amount equal to 0.9% p.a. of such part of
the Net Asset Value;
c) on that part of the Net Asset Value over GBP500mn and up to
and including GBP1,000mn, an amount equal to 0.8% p.a. of such part
of the Net Asset Value; or
d) on that part of the Net Asset Value over GBP1,000mn, an
amount equal to 0.7% p.a. of such part of the Net Asset Value.
The Fund Management Fee is paid quarterly in advance. 75% of the
total Fund Management Fee is payable in cash and 25% of the total
Fund Management Fee (net of any applicable tax) is payable in the
form of Ordinary Shares rather than cash.
For the period ended 31 March 2023, the Company incurred
GBP1,050,681 (period ended 31 March 2022: GBP907,048) in respect of
fund management fees of which GBP372,432 was outstanding as at 31
March 2023 (31 March 2022: GBP337,300). The above fee was split
between cash and equity as per the Fund Management Agreement with
the cash equating to GBP762,339 (31 March 2022: GBP680,286) and the
equity fee of GBP254,446 (31 March 2022: GBP226,621) being paid as
277,556 Ordinary Shares (31 March 2022: 214,713) at an average
price of GBP0.96 per share (31 March 2022: GBP1.06 per share).
In addition, the Fund Manager was paid a fee, pursuant to the
Fund Management Agreement, of GBPnil (31 March 2022: GBP143,271) in
respect of its arrangement of borrowings for the Group. The amount
was outstanding at 31 March 2023 was GBPnil (31 March 2022:
GBP143,271)
During the period the Directors and the Fund Manager received
dividends from the Company of GBP68,201 (31 March 2022: GBP7,018)
and GBP50,335 (31 March 2022: GBP38,616) respectively.
ReSI Property Management Limited (RPML) is a wholly owned
subsidiary of ReSI Capital Management Limited and provides property
management services to the Group on a cost pass through basis with
no profit margin. During the period, RPML charged fees of
GBP910,924 (31 March 2022: GBP804,059) in respect of property
management services.
27. Post balance sheet events
There have been no significant events that require disclosure
to, or adjustment in the financial statements as at 31 March
2023
Supplementary Financial Information
For the period 1 October 2022 to 31 March 2023
1) EPRA Earnings Recurring earnings from core operational activities
H1 2023 H1 2022
GBP'000 GBP'000
(Loss)/Earnings per IFRS income statement (29,974) 7,836
Changes in value of investment properties 28,502 (4,975)
Profits or losses on disposal of investment properties (2) 27
Profits or losses on sales of trading properties
incl. impairment charges in respect of trading properties. (232) (336)
Changes in fair value of financial instruments
and associated close-out costs 5,187 1,033
EPRA Earnings 3,481 3,585
---------- ---------
Basic number of shares 185,163 175,128
EPRA Earnings per share (EPS) ( pence ) 1.9 2.0
Adjusted EPRA Earnings per share
H1 2023 H1 2022
GBP'000 GBP'000
Company specific adjustments:
Exclude one off costs 405 301
Include shared ownership first tranche sales 232 336
Company specific Adjusted Earnings 4,118 4,222
--------- ---------
Company specific Adjusted EPRA Earnings per share
(pence) 2.2 2.4
2) EPRA Net Tangible Assets (NTA)
H1 2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 166,635 201,388
Revaluation of trading properties 194 93
Fair value of financial instruments (2,053) (4,997)
Real estate transfer tax - -
EPRA NTA 164,776 196,484
--------- ---------
Fully diluted number of shares 185,163 185,163
EPRA NTA per share (pence) 89.0 106.1
--------- ---------
The Group has debt which it elected to carry at fair value
through profit and loss. In accordance with the EPRA Best Practice
Recommendations, EPRA NTA should reflect the amortised cost of the
debt rather than its fair value. In the current period, an
adjustment has been made for GBP2.1mn which represents the
difference between fair value and what amortised cost would have
been had the Group carried the debt at amortised cost.
The fair value of financial instruments removes the effect of
mark-to-market adjustments, arising from the movement in gilt
yields and credit spreads, to include the value of debt at
amortised cost which will be crystallised through holding debt in
normal circumstances.
3) EPRA Net Reinstatement Value (NRV)
H1 2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 166,635 201,388
Revaluation of trading properties 194 93
Fair value of financial instruments (2,053) (4,997)
Revaluation of intangibles to fair value - -
Real estate transfer tax - -
EPRA NRV 164,776 196,484
----------
Fully diluted number of shares 185,163 185,163
EPRA NRV per share (pence) 89.0 106.1
----------
The Group has debt which it elected to carry at fair value
through profit and loss. In accordance with the EPRA Best Practice
Recommendations, EPRA NRV should reflect the amortised cost of the
debt rather than its fair value. In the current period, an
adjustment has been made for GBP2.1mn which represents the
difference between fair value and what amortised cost would have
been had the Group carried the debt at amortised cost.
The fair value of financial instruments removes the effect of
mark-to-market adjustments, arising from the movement in gilt
yields and credit spreads, to include the value of debt at
amortised cost which will be crystallised through holding debt in
normal circumstances.
4) EPRA Net Disposable Value (NDV)
H1 2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 166,635 201,388
Revaluation of trading properties 194 93
Fair value of fixed interest rate debt 18,606 23,974
EPRA NDV 185,435 225,455
--------- ---------
Fully diluted number of shares 185,163 185,163
EPRA NDV per share (pence) 100.1 121.8
--------- ---------
5) EPRA Net Initial Yield (NIY) and EPRA "Topped Up" NIY
H1 2023 2022
GBP'000 GBP'000
Investment property - wholly owned 355,333 374,785
Trading property (including share of JVs) 1,817 1,203
Completed property portfolio 357,150 375,988
Allowance for estimated purchasers' costs
estimated as 6% of property portfolio 21,429 22,560
Gross up completed property portfolio valuation 378,579 398,548
--------- ---------
Annualised cash passing rental income 25,145 24,809
Property outgoings (9,629) (8,653)
Annualised net rents 15,516 16,156
--------- ---------
Add: notional rent expiration of rent-free
periods or other lease incentives - -
Topped-up net annualised rent 15,516 16,156
--------- ---------
EPRA NIY 4.1% 4.1%
EPRA Topped up NIY 4.1% 4.1%
6) EPRA Vacancy Rate
H1 2023 2022
GBP'000 GBP'000
Estimated Rental Value of vacant space 1,449 1,368
Estimated rental value of the whole portfolio 26,907 27,292
EPRA Vacancy Rate 5% 5%
7) EPRA Cost Ratios
H1 2023 H1 2022
GBP'000 GBP'000
Administrative/operating expense line per
IFRS income statement 2,067 1,466
Net service charge costs/fees 2,704 2,398
Management fees less actual/estimated profit
element 1,006 973
Other property operating expenses 1,104 928
Service charge costs recovered through rents
but not separately invoiced (2,537) (2,235)
EPRA Costs (including direct vacancy costs) 4,344 3,530
Direct vacancy costs (317) (273)
EPRA Costs (excluding direct vacancy costs) 4,027 3,257
--------- ---------
Gross Rental Income less ground rents - per
IFRS 13,105 11,881
Less: service fee and service charge costs
components of Gross Rental Income (2,537) (2,235)
Gross Rental Income 10,568 9,646
--------- ---------
EPRA Cost Ratio (including direct vacancy
costs) 41% 37%
EPRA Cost Ratio (excluding direct vacancy
costs) 38% 34%
In accordance with the EPRA Best Practice Recommendations, EPRA
Costs should exclude service charges recovered through rents but
not separately invoiced and include all property operating
expenses. The prior period costs have been updated to reflect
this.
Gross rental income includes service charges collected from
tenants, included in rent collected but not separately invoiced, of
GBP2,537,000 during the period (H1 2022: GBP2,235,000). Service
charge expenses, as reflected in the cost of sales, also includes
amounts paid in respect of properties which were vacant during the
period of GBP167,000 (H1 2022: GBP63,000).
Management fees less actual/estimated profit element is made up
of property management fees paid during the period.
8) EPRA LTV
H1 2023 2022
GBP'000 GBP'000
Borrowings 195,664 189,705
Net payables 2,940 -
Less cash (9,906) (15,984)
Net debt 188,698 173,721
Investment properties at fair value 355,333 374,785
Net receivables - 325
Total property value 355,333 375,110
--------- ----------
EPRA LTV 53% 46%
9) AIC Ongoing Ratio
H1 2023 2022
Total expenses ratio GBP'000 GBP'000
Management fee 1,051 1,867
Fund operating expenses* 441 742
1,492 2,609
--------- ---------
Annualised total expenses 2,984 2,609
--------- ---------
Average Net Asset Valuation ** 183,484 191,890
--------- ---------
Annualised total expenses ratio 1.6% 1.4%
--------- ---------
* Fund operating expenses has been revised to only include the
direct costs at the fund level and not subsidiary level. No
adjustment was made in the prior year.
** The average Net Asset Valuation is calculated as the average
of the opening and closing NAV for the financial year.
10) Net rental yield
The net yield on the Group's historical cost of investment
property represents the unlevered rental income return on the
Group's capital deployed into acquisition of investment
properties.
H1 2023 2022
GBP'm GBP'm
Annualised net rental income at balance
sheet date 17.2 16.5
--------- -------
Fair value of investment properties 355.3 374.8
--------- -------
Net yield 4.8% 4.4%
11) Total Return on NTA
A performance measure which represents the total return for the
year, excluding movements in valuation of debt and derivatives,
expressed as a percentage of opening NTA.
H1 2023 H1 2022
GBP'mn GBP'mn
Operating profit before property
disposals and change in fair value 6.9 7.0
Valuation movement of investment
properties (28.5) 4.9
Finance costs (3.2) (3.0)
Debt Indexation* (2.1) (3.1)
Revaluation of trading properties (0.1) (0.3)
Property return (27.0) 5.2
--------- ---------
IFRS NAV at beginning of the prior
year 201.4 182.4
Revaluation of trading properties 0.1 0.3
Fair value of financial instruments (5.0) 2.0
Real estate transfer tax - -
Opening EPRA NTA 196.5 184.7
--------- ---------
Movement in share capital - 14.9
Increase/(decrease) in the year (31.7) 1.0
--------- ---------
Closing EPRA NTA 164.8 200.6
--------- ---------
Total return on opening NTA (%) (13.7)% 2.8%
--------- ------
* The Group elected to carry this debt at fair value through
profit and loss. In accordance with the EPRA Best Practice
Recommendations, EPRA NTA should reflect the amortised cost of the
debt rather than its fair value. In the current period, an
adjustment has been made for GBP2.1mn which represents the
difference between fair value and what amortised cost would have
been had the Group carried the debt at amortised cost.
12) Total Return on IFRS NAV
A performance measure which represents the total IFRS return for
the year as a percentage of opening IFRS NAV.
H1 2023 H1 2022
GBPmn GBPmn
Net (expenses)/income (30.0) 7.8
Share issuance costs - (0.2)
------------------------------- ----------------------------
Total Return (30.0) 7.6
Net Asset Value at the beginning of the year 201.4 182.4
Total IFRS return on opening NAV (%) (14.9)% 4.2%
------------------------------- ----------------------------
13) Loan to Value Ratio
The LTV leverage ratio has been presented to enable a comparison
of the Group's borrowings as a proportion of Gross Assets as at 31
March 2023 to its medium target LTV leverage ratio of 0.50.
H1 2023 2022
GBP'000 GBP'000
Borrowings excluding lease liability 195,664 189,705
Available cash (8,135) (12,675)
----------------------------- -----------------------------
Net debt excluding lease liability and cash
increase/(decrease) in year 187,529 177,030
Total assets less finance lease gross up and
cash 359,608 380,206
Loan to Value ("LTV") leverage ratio 0.52 0.47
----------------------------- -----------------------------
Glossary
Administrator The Company's administrator from time to time, the
current such administrator being MGR Weston Kay LLP.
AIC Association of Investment Companies.
--------------------------------------------------------------
Alternative Investment An investment vehicle under AIFMD. Under AIFMD (see
Fund below) the Company is classified as an AIF.
or "AIF"
--------------------------------------------------------------
Alternative Investment A European Union directive which came into force
Fund Managers Directive on 22 July 2013 and has been implemented in the UK.
or "AIFMD"
--------------------------------------------------------------
Annual General A meeting held once a year which shareholders can
Meeting or "AGM" attend and where they can vote on resolutions to
be put forward at the meeting and ask directors questions
about the company in which they are invested.
--------------------------------------------------------------
Articles or Articles Means the articles of association of the Company.
of Association
--------------------------------------------------------------
Company Secretary The Company's company secretary from time to time,
the current such company secretary being Computershare
Company Secretarial Services Limited.
--------------------------------------------------------------
Discount The amount, expressed as a percentage, by which the
share price is less than the net asset value per
share.
--------------------------------------------------------------
Depositary Certain AIFs must appoint depositaries under the
requirements of AIFMD. A depositary's duties include,
inter alia, safekeeping of assets, oversight and
cash monitoring. The Company's current depositary
is Thompson Taraz Depositary Limited.
--------------------------------------------------------------
Dividend Income receivable from an investment in shares.
--------------------------------------------------------------
Ex-dividend date The date from which you are not entitled to receive
a dividend which has been declared and is due to
be paid to shareholders.
--------------------------------------------------------------
Financial Conduct The independent body that regulates the financial
Authority or "FCA" services industry in the UK.
--------------------------------------------------------------
Functional Home Means both a Unit and an aggregation of multiple
Units offering elderly care facilities, assisted
living facilities, sheltered housing or supported
housing that are made available, by a Tenant, Occupant
or Nominator (as the case may be) to a Resident/Residents.
--------------------------------------------------------------
Fund Manager Means ReSI Capital Management Limited, a subsidiary
of Gresham House plc, a company incorporated in England
and Wales with company number 07588964 in its capacity
as Fund Manager to the Company.
--------------------------------------------------------------
Gearing A way to magnify income and capital returns, but
which can also magnify losses. A bank loan is a common
method of gearing.
--------------------------------------------------------------
Housing Association Means a regulated independent society, body of trustees
or company established for the purpose of providing
social housing.
--------------------------------------------------------------
HMRC HM Revenue & Customs
--------------------------------------------------------------
Investment company A company formed to invest in a diversified portfolio
of assets.
--------------------------------------------------------------
Leverage An alternative word for "Gearing".
Under AIFMD, leverage is any method by which the
exposure of an AIF is increased through borrowing
of cash or securities or leverage embedded in derivative
positions.
Under AIFMD, leverage is broadly similar to gearing,
but is expressed as a ratio between the assets (excluding
borrowings) and the net assets (after taking account
of borrowing). Under the gross method, exposure represents
the sum of the Company's positions after deduction
of cash balances, without taking account of any hedging
or netting arrangements. Under the commitment method,
exposure is calculated without the deduction of cash
balances and after certain hedging and netting positions
are offset against each other.
--------------------------------------------------------------
Like-for-like rental The change in gross rental income in a period for
review homes that were occupied and eligible for a rent
review during the period under review. Applies to
changes in gross rents on a comparable basis and
excludes the impact of acquisitions, disposals and
resident turnover.
--------------------------------------------------------------
Liquidity The extent to which investments can be sold at short
notice.
--------------------------------------------------------------
Loan to Value Ratio of total debt outstanding, excluding the finance
(LTV) Ratio lease liability, against the total assets excluding
the adjustment for finance lease gross up.
--------------------------------------------------------------
Market Rental Home Means both a Unit of residential accommodation and
an accommodation block comprising multiple Units
facilities that is/are made available, by a Tenant,
Occupant or Nominator, to a resident/residents at
a market rent.
--------------------------------------------------------------
Net assets Means the net asset value of the Company as a whole
on the relevant date calculated in accordance with
the Company's normal accounting policies.
--------------------------------------------------------------
Net asset value Means the net asset value of the Company on the relevant
(NAV) per Ordinary date calculated in accordance with the Company's
Share normal accounting policies divided by the total number
of Ordinary Shares then in issue.
--------------------------------------------------------------
Non PID dividend Means a dividend paid by the Company that is not
a PID.
--------------------------------------------------------------
Ongoing charges A measure, expressed as a percentage of average net
assets, of the regular, recurring annual costs of
running an investment company.
--------------------------------------------------------------
Ordinary Shares The Company's Ordinary Shares of 1p each.
--------------------------------------------------------------
PID Means a distribution referred to in section 548(1)
or 548(3) of the CTA 2010, being a dividend or distribution
paid by the Company in respect of profits or gains
of the Property Rental Business of the Group (other
than gains arising to non-UK resident Group companies)
arising at a time when the Group is a REIT insofar
as they derive from the Group's Property Rental Business.
--------------------------------------------------------------
Portfolio A collection of different investments held in order
to deliver returns to shareholders and to spread
risk.
--------------------------------------------------------------
Premium The amount, expressed as a percentage, by which the
share price is more than the net asset value per
share.
--------------------------------------------------------------
Property Rental Means a Property Rental Business fulfilling the conditions
Business in section 529 of the CTA 2010.
--------------------------------------------------------------
REIT Real estate investment trust.
--------------------------------------------------------------
Rental Agreement Comprise Leases, Occupancy Agreements and Nominations
Agreements.
--------------------------------------------------------------
Rental growth The change in gross rental income in a period as
a result of rent increases, tenant renewals or a
change in tenants. Applies to changes in gross rents
on a comparable basis and excludes the impact of
acquisitions, disposals and changes resulting from
refurbishments.
--------------------------------------------------------------
Reputable Care Means a Statutory Registered Provider or other private
Provider entity in the business of building, managing and/or
operating Functional Homes in the United Kingdom
that the Fund Manager considers reputable in light
of its investment grade equivalent debt strategy.
--------------------------------------------------------------
Reversionary Surplus The increase in valuation if the portfolio is valued
on a vacant possession basis compared to the IFRS
fair value.
--------------------------------------------------------------
RPI The Retail Price Index (RPI) is a measure of inflation,
which in turn is the rate at which
prices for goods and services are rising.
--------------------------------------------------------------
Share buyback A purchase of a company's own shares. Shares can
either be bought back for cancellation or held in
treasury.
--------------------------------------------------------------
Share price The price of a share as determined by a relevant
stock market.
--------------------------------------------------------------
Shared Owner Means the part owner of a shared ownership home that
occupies such shared ownership home in return for
the payment of rent to the co-owner.
--------------------------------------------------------------
Social impact per The social, economic and environmental impact and
share value of investments calculated using two key analysis
frameworks, Social Return on Investment (SROI) and
Economic Impact, divided by the number of shares
outstanding.
--------------------------------------------------------------
Sub-Market Rental Means a Unit of residential accommodation that is
Home made available, by a Tenant, Occupant or Nominator,
to a resident to rent at a level below the local
market rent.
--------------------------------------------------------------
Total return A measure of performance that takes into account
both income and capital returns.
--------------------------------------------------------------
Treasury shares A company's own shares which are available to be
sold by a company to raise funds.
--------------------------------------------------------------
UK AIFM Regime Together, The Alternative Investment Fund Managers
Regulations 2013 (as amended by
The Alternative Investment Fund Managers (Amendment
etc.) (EU Exit) Regulations 2019)
and the Investment Funds Sourcebook forming part
of the FCA Handbook, in each case
as amended from time to time.
--------------------------------------------------------------
Company Information
Directors
Robert Whiteman
(Non-executive Chairman)
Robert Gray
(Senior Independent Director)
John Carleton
(Non-executive Director)
Elaine Bailey
(Non-executive Director)
Registered Office
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
Company Information
Company Registration Number: 10683026
Incorporated in the United Kingdom
Fund Manager
ReSI Capital Management Limited
5 New Street Square
London
EC4A 3TW
Corporate Broker
Peel Hunt LLP
7(th) Floor, 100 Liverpool Street
London
EC2M 2AT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Tax Adviser
Evelyn Partners Group Limited
(formerly Smith & Williamson)
45 Gresham Street
London
EC2V 7BG
Depositary
Thompson Taraz LLP
4th Floor, Stanhope House
47 Park Lane
Mayfair
London
W1K 1PR
Administrator
MGR Weston Kay LLP
55 Loudoun Road
St John's Wood
London
NW8 0DL
Company Secretary
Computershare Governance Service, UK
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
Registrar
Computershare Governance Service, UK
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Public Relations Adviser
KL Communications
40 Queen Street
London
EC4R 1DD
Valuers
Savills (UK) Limited
33 Margaret Street
London
W1G 0JD
[1] Department for Levelling Up, Housing and Communities (2021)
and House of Commons Library (2022), British Property Federation,
and Legal & General, 2022
[2] H1 2022 versus H1 2023
[3] H1 2022 vs H1 2023
[4] H1 2022 vs H1 2023
[5] H1 2022 vs H1 2023
[6] 1.1% average blended coupon over the remaining loan term,
with principal increasing with RPI + 0.5% (with a 0.5% floor and
5.5% cap).
[7] Based on lender covenant reporting. The covenants presented
do not represent a comprehensive set of debt covenants. This is not
a performance forecast and there can be no guarantee that ReSI will
continue to meet its debt covenants in the future.
[8] As at 31 March 2023. USS debt balance shown at fair value,
reflecting the impact of recurring quarterly indexation and
movements in gilt yields and credit spreads.
[9] Interest rate breach threshold based on last-twelve-month
net rental income of c.GBP1.8mn.
[10] As defined in the English Housing Survey, 2020 to 2021
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END
IR FFMLTMTIMBBJ
(END) Dow Jones Newswires
June 07, 2023 02:00 ET (06:00 GMT)
Residential Secure Income (LSE:RESI)
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Residential Secure Income (LSE:RESI)
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