RESI Residential Secure Income Plc

22 January 2025

Residential Secure Income plc

("ReSI" or the "Company")

Full Year Results to 30 September 2024

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

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

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

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

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

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

Key financial and operational metrics

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

·      5.8% like-for-like rent growth

·      EPRA adjusted earnings¹ of £9.5 million (FY23: £8.7 million) underpinned by strong rent growth across retirement and shared ownership flowing through to adjusted earnings

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

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

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

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

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

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

Portfolio and operational highlights 

·      Diverse portfolio of 2,975 homes worth £326 million⁶

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

·      Portfolio focused on direct leases with pensioners and part homeowners

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

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

·      80% satisfaction levels with our in-house retirement property management team⁷

Post Balance Sheet and outlook

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

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

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

o  Tender for potential sales agents completed with key advisers appointed

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

Ben Fry, Fund Manager, ReSI plc added:

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

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

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

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

Annual results and investor webinar

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

The accompanying presentation will be made available shortly after the webinar on the Gresham House website.

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

Notes:

1. Alternative performance measures

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

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

4. Change in %

5. Note 14 of the 2024 Annual Report and Accounts

6. Including Local Authority portfolio sold post year end

7. Source: 2024 Retirement Customer Survey

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