Interim Results

RNS Number : 3240X

Civitas Social Housing PLC

23 November 2017

 

23^rd November 2017            

Civitas Social Housing PLC

("Civitas" or the "Company")

Interim Results

Period from 18^th November 2016 (IPO) to 30^th September 2017 (the "Period")

Civitas Social Housing PLC (Lon:CSH), the first London listed REIT dedicated to investing into regulated social housing in England and Wales, is pleased to announce its interim results for the period ended 30^th September 2017.

Financial Highlights

·    Investment Portfolio independently valued at £343.3m

·    +11.8% increase in Portfolio NAV per ordinary share ("Share"): 109.6p as at 30^th September 2017¹

·    +5.3% increase in IFRS NAV per Share: 103.2p as at 30^th September 2017

·    +13.1p per Share Earnings based on Portfolio NAV: based on comprehensive income and property revaluations

·    +6.7p per Share Earnings based on IFRS NAV: based on comprehensive income and property revaluations

·    Total of 2.25p per Share of dividends declared over the Period

·    Contracted Annualised Rent Roll: £17.4m based upon £285.3m capital deployed at the end of the Period

·    Average Net Initial Yield: 6% before property purchase costs

·    Weighted Average Unexpired Lease Term:24.3 years

Operational Highlights:

·    282 properties acquired in the Period, across 83 Local Authorities, based on long-term leases signed with 10 Housing Associations, providing dependable accommodation for 1,827 tenants supported by 50 care providers

·    The Good Economy, the social advisory firm, in their first independent  Social Impact Report on Civitas noted encouraging evidence that Civitas can deliver on its social objective of increasing the provision of high quality social homes to improve the quality of life for low income and vulnerable people in social need while achieving financial returns for investors 

Post Balance Sheet Highlights

·    29 properties acquired post the Period, totalling £16.2million

·    £52.2m 10 year fixed rate term loan facility from Scottish Widows

·    £302m of equity raised through a C share issue

·    £40m 3 year floating rate revolving credit facility from Lloyds Bank

1.        This NAV has been restated from the NAV of 109.8p per Share announced on 18 October to correct a clerical error.

Michael Wrobel, Non-Executive Chairman of the Company, commented:

"The Company's financial, operational and social performance over the period has been very encouraging. Civitas continues to benefit from being a first mover and being able to invest in scale. It has achieved what it initially set out to; creating a property portfolio that offers investors the opportunity of long-term income and the potential for capital growth, whilst providing tenants with high quality stable homes. With the addition of the funds raised through the recent C share issue and debt issuance, we look forward to further capitalising on our pipeline of opportunities".

A copy of interim report is available from the Company's website (www.civitassocialhousing.com) and will be submitted to the National Storage Mechanism (http://www.morningstar.co.uk/uk/nsm) and will shortly be available for inspection.

ENDS

For further information, please contact:

Civitas Housing Advisors Limited

Paul Bridge                Tel: [phone]

Andrew Dawber       Tel: [phone]

Cenkos Securities PLC

Sapna Shah               Tel: [phone]

Tom Scrivens            Tel: [phone]

Pagefield Communications Limited

Philip Dennis          Tel: [phone]

David Leslie            Tel: [phone]

About Civitas

Civitas Social Housing PLC was the first Real Estate Investment Trust offering pure play exposure to social housing in England and Wales.  The Company is managed by Civitas Housing Advisors Limited.  The Company's Ordinary Shares are listed on the premium listing segment of the Official List of the Financial Conduct Authority and were admitted to trading on the main market for listed securities of the London Stock Exchange in November 2016. The Company's C Shares are listed on the standard segment of the Official List of the Financial Conduct Authority and were admitted to trading on the main market for listed securities on the London Stock Exchange in November 2017.

Chairman's Statement

I am pleased to present the Company's first unaudited interim results for the period from its listing on 18 November 2016 to 30 September 2017.

The Company's objective is to provide shareholders with an attractive level of income, which is expected to grow broadly in line  with inflation, together with the potential for capital growth. The Company invests in a portfolio of Social Homes, which benefit from inflation adjusted long-term leases or occupancy agreements with Housing Associations or Local Authorities.

The Company's launch via an oversubscribed Initial Public Offering (IPO) raised gross proceeds of £350 million. The Company was the first REIT to be listed on the London Stock Exchange offering a focused exposure to built Social Housing. It has since established itself as a leading owner of built Social Homes, providing a considerable number of people with high quality homes that suit their particular needs on a long-term basis.

As at 30 September 2017, the Civitas' portfolio comprised 282 properties housing 1,827 tenants, leased to 10 Registered Providers, involving 83 Local Authorities and 50 Care Providers with a focus  on Specialist Support Housing. These investments were made using the net proceeds of the IPO. The current portfolio benefits from a weighted average unexpired lease term of 24.3 years. Approximately 25% of the properties held are new  to the Social Housing sector. Since 30 September 2017 the Company has acquired a further 29 properties, housing 115 tenants and made significant further progress on which I report later.

Dividends

On 4 May 2017, the Company declared its maiden interim dividend of 0.75p per  Share, and declared a further two  quarterly dividends of 0.75p  in both July and October in respect of the three month periods to 30 June 2017 and 30 September 2017  respectively.

The target set out at launch   was to pay dividends totalling 3p per share for the period through to 31 December 2017,  targeting 5p per  annum thereafter which the Company expects to increase broadly in line with inflation over time.

Financial results

The Company's financial performance over the period has been very encouraging.

On a Portfolio Valuation basis, which assumes that properties are held within SPVs and valued as a discreet portfolio, the unaudited Portfolio Net Asset Value per  Share as at 30 September 2017  was  109.6p. This represents an increase since IPO (based on 98.0p per Ordinary Share) of 11.8%.

On an IFRS Valuation basis, which assumes that properties are  valued individually and structured without the benefit of the SPVs in which they are  actually held, the unaudited IFRS Net Asset Value per  Share as at 30 September 2017  was 103.2p. This represents an increase since launch (based on 98.0p per Ordinary Share) of 5.3%.

The Group has now reached operating profitability: the operating profit for the Group excluding revaluations for the period from 18 November 2016  to 30 September 2017  was

£2.6 million, with total comprehensive income of £45.9 million on a Portfolio Valuation

basis and £23.6  million on an IFRS Valuation basis implying Net Earnings per  Share for the period of 13.1p  and 6.7p,  respectively. Approximately 99% of the Company's income is ultimately derived from either local or central Government, which is paid directly to the Registered Providers.

Progress since the end of September

We are pleased that the Company is on course to achieve its target to be fully invested within the timescales indicated at IPO and has delivered on its stated objectives through investment in a high quality diversified portfolio of Social Homes throughout England and Wales.

C Share Issue

The Board is delighted that shareholders have supported our growth plans by subscribing for a further £302 million of equity in November 2017.  We believe that this reflects the Company's prospects and its consistent delivery against its objectives since it was listed. We believe the issue will place the Company in the best possible position to capitalise on the pipeline of potential investment opportunities over the next 12 months; thereby continuing to deliver for tenants and shareholders alike.

Loan financing

On 3 November 2017,  the Company agreed a £52.5  million term loan  facility with Scottish Widows  Limited, with a term of 10 years, an interest rate of 2.99% representing leverage of 30% (as calculated on the loan to market value  of the property portfolio). This facility is secured against certain of the Group's properties and the SPVs in which those properties are held and forms part of the programme to achieve an overall level of indebtedness in the order of c.25% loan to market value.

On 16 November 2017, the Company further agreed a £40 million revolving credit facility with Lloyds Bank plc, available for a term of three years, at a floating rate above 3-month LIBOR. This facility is secured against certain of the Group's properties and the SPVs in which those properties are held.

Negotiations are in process with additional lenders in relation to further facilities, expected to be announced in due course.

The additional financing will allow the Company to continue its strong deployment momentum and the Board considered the terms of the facilities fair and reasonable.

Outlook

There remains a chronic shortage of all forms of Social Housing in the UK, including specialist Social Housing, with estimated demand from 4.5 million people awaiting allocation of a social home. We continue to build the pipeline of quality investments that meet our investment criteria. Our Investment Advisor has identified more than £500 million of Social Homes  that may be acquired by the Group  over  the next 12 months, of which approx.  £100 million is expected to be available in the near term. Our Investment Advisor will continue to implement a disciplined policy focused on quality opportunities, whilst rejecting others on the grounds of quality, location and value for money.

The Company has strengthened its position further through additional investment. We continue to be the only listed investment company focused on this sector that is not exposed to development and forward funding.

The Board is grateful for the support and encouragement of the Company's shareholders and the hard work of the Investment Advisor and our other advisors.

Michael Wrobel

Chairman

23 November 2017

Portfolio

As at 30 September 2017

The Company's Portfolio is spread across England and Wales, reflecting the Company's objective of creating a coherent yet diversified portfolio.

Region	County	Properties	Tenancies
North East	Durham	57	360
York & Humber	South Yorkshire	11	81
York & Humber	West Yorkshire	7	62
North West	Lancashire	24	77
North West	Merseyside	28	191
East Midlands	Derbyshire	3	10
East Midlands	Leicestershire	3	10
East Midlands	Northamptonshire	2	8
East Midlands	Nottinghamshire	10	82
West Midlands	Staffordshire	7	50
West Midlands	Warwickshire	7	28
West Midlands	Worcestershire	2	7
East	Bedfordshire	1	19
East	Cambridgeshire	9	25
East	Lincolnshire	1	13
East	Hertfordshire	3	19
Greater London	Greater London	11	160
South East	Berkshire	4	29
South East	East Sussex	1	5
South East	Hampshire	12	66
South East	Kent	3	31
South East	Oxfordshire	2	11
South East	Surrey	5	32
South West	Cornwall	7	80
South West	Devon	2	7
South West	Dorset	35	232
South West	Glouscestershire	19	81
South West	Somerset	3	33
South West	Wiltshire	1	3
Wales	West Glamorgan Total	2 282	15 1,827

Investment Advisor's Report

"We are pleased to present our Investment Advisor's report and to reflect on a first year of substantial progress. Building on our first mover advantage we have created a diversified portfolio of high-quality Social Homes, achieved a number of important social impact gains and in doing so have invested the great majority of the capital raised at the time of IPO"

Paul Bridge, Chief Executive Officer, Civitas Housing Advisors Limited

CHA, the Investment Advisor to the Company, is pleased to report on progress in the period from IPO in November 2016 to 30 September 2017.

During this period we have acquired 282 properties, leased to 10 Registered Providers and housing 1,827 tenants across 83 Local Authorities, with care support provided by 50 Care Providers. Since the period end we have acquired a further 29 properties housing 115 tenants and, as a result when taken together with the pipeline, all capital raised at IPO is either deployed or allocated to specific acquisitions. As a result the Company is on track to meet the dividend targets set at IPO of 3p per share in aggregate for the period from IPO to 31 December 2017 and 5p per share annually thereafter.

Investment Objective

An investment in the Company enables investors to gain exposure to a diversified portfolio of Social Homes in England and Wales.

The Investment Objective is to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of Social Homes, which benefit from inflation-adjusted long-term leases and occupancy agreements with Registered Providers.

After 2017 the Company aims to deliver a targeted dividend of 5p per annum, which it expects to increase broadly in line with inflation and with the objective for that to be paid from income generated as opposed to capital growth of the portfolio.

Investment Strategy

The Group has acquired and will continue to seek to acquire existing Social Homes in locations across England and Wales where the Investment Advisor believes there to be long-term demand. As the Social Homes sector is highly fragmented, developing long-term relationships with Housing Associations, Local Authorities, Care Providers and private owners is important in acquiring suitable portfolios of Social Homes.

This is aided by the fact that the Group was the first REIT to be listed on the London Stock Exchange to offer a focused exposure to Social Housing in England and Wales and as such is seen to have a first mover advantage. It is also supported by a broadly based team within the Investment Advisor including a number of figures from within the Social Housing sector who have held senior roles and positions of responsibility.

The depth of relationships that have been established in the sector is reflected in the various long-term arrangements that the Investment Advisor has been able to enter into to secure high quality properties at attractive yields. This complements the broader array of relationships that have led to significant incoming investment opportunities and enabled the Group to acquire all properties off-market to date.

The Social Housing sector contains a variety of property types and tenures. At the time of IPO the Group stated that it would invest at least 75% in Specialist Supported Housing. That has proven to be the case and at the date of this report almost the entire portfolio is invested in Specialist Supported Housing.

As part of the due diligence programme undertaken by the Group it is frequently the case that the legal arrangements between the various parties within a Specialist Supported Housing project will be updated and revised to enable the Group to reach its target of receiving investment grade cash flows. This will be undertaken prior to the announcement of a purchase and typically contributes to any increase in value of the property reported subsequently at the quarterly valuation date.

The Group also seeks to ensure that all acquired properties are of a high standard and where necessary it will agree a schedule of works by way of improvement that will typically be undertaken by the respective Housing Association and monitored by the Group's property advisors, Jones Lang LaSalle Ltd.

The need for Social Housing

The UK Housing market continues to feature prominently on the national agenda, with all major political parties indicating the provision of housing is a priority. There is broad consensus that the UK requires up to 300,000 new homes each year to meet current and projected demand.

The Department of Communities and Local Government statistics as of March 2017 show that housing supply has been on an upward trajectory in recent years with 162,880 completed units in 2016/17 but this still falls well below the widely accepted target.

At the same time the lack of supply and funding, together with changes to how welfare is delivered, means housing options for vulnerable people remain limited. Indeed the need for

Specialist Supported Housing continues to grow (currently around 10,000 people with a learning disability are on waiting lists for housing with support) as councils struggle to rehouse vulnerable people within suitable community settings (an obligation placed on adult social services teams under the Care Act 2014).

This is further reflected by the existence and cost of NHS "bed blocking" which is estimated to be in the region of £900 million per annum. As a result, patients are left in hospital with needs that would be better and more cost-effectively served via care in the community. Lord Patrick Carter's 2016 review included an estimate of the cost of caring for all delayed transfer patients in a residential care setting at £835 million over five years to 2020/21, compared to c.£3.3 billion for acute care in hospitals; this is before considering the benefits for patients in terms of quality of care which are significant.

Encouragingly, and in line with our expectations, the Government announcement of 25 October 2017 reversed an earlier proposal to cap social rents at the local housing allowance rate, providing reassurance to existing providers; and accepting that specialist housing costs more to deliver than general needs housing. The Government has further announced on 4 October 2017 that for the five years from 2020 the general needs rent settlement will be set at CPI plus 1%.

Specialist Supported Housing

The Group has and will continue to seek to acquire Specialist Supported Housing portfolios, which includes housing for some of the most vulnerable in society. Typically, government funding for each tenant under this categorisation represents 100% of the cost. This includes housing (rent and property maintenance) as well as the cost for care (paid to the Care Provider and usually representing the largest element of the overall funding). Costs are paid from the Department for Communities and Local Government and the Department of Work and Pensions to the relevant Local Authority, which then passes funds on to the Registered Provider and Care Provider.

Net rental yields in the Specialist Supported Housing sector are typically in the region of 5.5% to 6.5% and are indexed in line with CPI or CPI+1%. Larger portfolios managed by major Housing Associations may trade below these levels.

In each instance the Local Authority is responsible for paying the Care Provider directly

for its provision of services to the tenant. The Care Provider itself comes under the regulation of the Care Quality Commission. The Registered Provider typically enters into a service level agreement with the Care Provider. The Group does not undertake responsibility for the operations of the care provider or care for the individual tenants.

Long-term leases and occupancy agreements

We expect that the Group will continue to typically enter into long-term inflation adjusted

leases or in certain instances long-term inflation adjusted occupancy agreements for periods in excess of 20 years with Registered Providers, where all management and maintenance obligations will be serviced by the Registered Providers.

The nature of the lease arrangements with the Registered Providers will be such that the Registered Providers, and not the Company, will be the landlord under applicable landlord and tenancy legislation.

Where the counterparty is a Local Authority, or where we believe it is in the Group's interest, the Group may consider unexpired leases of not less than 10 years. This may be due to the constraints on Local Authorities from entering into longer terms arrangements.

The Investment Pipeline

We have established a significant investment pipeline and identified a number of new assets which meet the Investment Objective and Investment Strategy, including off-market portfolios identified through our contacts and relationships in the sector.

These assets come from an increasingly broad range of sources reflecting the enhanced profile of the Group and CHA within the Social Housing sector. Opportunities are being sourced through Registered Providers (due to mergers, stock rationalisation and capital release), Local Authorities, Care Providers and private companies. We have strengthened the Group's relationship with particular Registered Providers, which is enabling the Company to benefit from more investment opportunities from these same Registered Providers. As part of this broadening network CHA, on behalf of the Company, has established commercial understandings with specific Registered Providers, independent owners, developers and suppliers of Social Homes including Care Providers, which are expected to deliver a significant quantity of opportunities to acquire Social Homes. Together the various sources of pipeline opportunities account for more than £500 million of Social Homes that have the potential to be delivered over the next 12 months, with approximately £100 million potentially in the near term.

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

It should be noted that the Company may or may not proceed with the acquisition of any such pipeline opportunities. The Company currently has no mutually binding contractual obligations with Registered Providers or other potential vendors of Social Housing for the acquisition of Social Homes, but we are confident that sufficient suitable housing portfolios will be identified, assessed and acquired to substantially invest or commit the net issue proceeds from the C Share raise and the proceeds of the debt raise within 12 months following admission. This confidence is based in part on the success that the Group has achieved in investing the net IPO proceeds and in the commercial understandings already established.

We look forward to continued progress over the forthcoming months and to deploying further capital to improve the quality and availability of Social Housing across England and Wales.

Civitas Housing Advisors Limited

Investment Advisor

23 November 2017

Key Performance Indicators (KPIs)

Measure	Explanation	Result
Capital deployed	Target of deploying the IPO proceeds by 31 December 2017 and the C Share proceeds by 31 December 2018 or earlier	£285.3 million before costs deployed by 30 September 2017
Increase in Portfolio NAV per share and IFRS NAV per share	Target to achieve capital appreciation whilst maintaining a low risk strategy from enhancing the quality of cash flows from investments, by physical improvement of properties and by creating a significant diversified, high-quality portfolio	Portfolio NAV, 11.6p per share, an increase of 11.8% from IPO IFRS NAV, 5.2p per share, an increase of 5.3% from IPO
Dividend per share	Targeting 3p per share in the period from IPO to 31 December 2017; 5p per share per annum from the second year onwards growing broadly in line with inflation	Dividends of 2.25p per share declared for the period from IPO to 30 September 2017
Number of Local Authorities, Housing Associations and Care Providers	Target risk mitigation through a diversified portfolio (once fully invested) with no more than 25% exposure to anyone Local Authority or single Housing Association and no more than 20% exposure to any single geographical area, once the capital of the Company is fully invested	As at 30 September 2017: 83 Local Authorities 10 Housing Associations 50 Care Providers

Principal risks and uncertainties

Investment Management risks	How managed/mitigated
The growth of the Company depends upon the ability of the Group to identify, select, acquire and manage investments that offer the potential for satisfactory returns, including the ability to enter into suitable lease and/or management arrangements with Registered Providers. The Group may face competition from other investors to acquire investments available in the Social Housing sector, which may restrict its ability to deploy capital effectively within a reasonable timescale.	The Investment Advisor has established strong links with the market in order to identify and execute new transactions and has established a significant pipeline of over £500 million and has deployed or allocated all of the net IPO proceeds within the envisaged timescale.
The Company and its operations are subject to laws and regulations enacted by national and local governments and government policy. Any change in the laws, regulations and/or government policy affecting the Company may have a material adverse effect on the ability of the Company to successfully pursue its investment policy and meet its investment objective and on the value of the Company and the shares.	The Group focuses on niches where it believes the regulatory framework to be robust. The Government announced on 25 October 2017 that social rents to the local housing allowance would not be capped; the Government has further announced that for the five years from 2019 the General Needs rent settlement will be set at CPI plus one. Both developments are supportive to the Civitas strategy and in line with the Group's expectations.
A sizeable proportion of investments made by the Group may comprise interests in the legal title to Social Housing and residential property assets that are not publicly traded or freely marketable and these investments are often subject to restrictions on who may own and/or operate the property assets concerned and may, therefore, be difficult to value and/or realise at the value attributed to such investments, or at all.	The long term strategy of the Company is to own Social Housing with long term inflation indexed leases in place with robust counterparties. The strategy is not therefore dependent on being able to dispose of properties, which are funded entirely by equity as at 30 September 2017 and, once the envisaged debt facilities are in place, will be conservatively leveraged thereby minimising the risk of forced sale.
Due Diligence may not reveal all facts and circumstances that may be relevant in connection with an investment and may not prevent an acquisition being materially overvalued.	The Group undertakes detailed due diligence on the properties, their condition, the proposed rental levels - benchmarking against comparable scheme using both external consultants where required and its own proprietary database - and on the Registered Providers and Care Providers involved in each property to ensure that the purchase price is robust.
The Company is reliant on the Investment Advisor and third-party service providers to identify assets, structure transactions, complete due diligence and manage the portfolio.	The Board liaises closely with the Investment Advisor to review and approve transactions and due diligence, and monitor the portfolio. The Investment Advisor has assembled a team of professionals with a broad range of experience and third-party advisors engaged by the Group are all leading firms with significant expertise in the Social Housing sector.
Strategy and competitiveness risks	How managed/mitigated
As a result of competition from other purchasers of Social Housing properties the Group's ability to deploy capital effectively within a reasonable timeframe may be restricted or the net initial yields at which the Group can acquire properties may decline such that target returns cannot be met.	The Investment Advisor has established strong links with vendors and has completed over £300 million of acquisitions to date and established a pipeline of future acquisitions such that all of the net IPO proceeds have been deployed or allocated within the envisaged timescale and all of which are at net initial yields that meet the target return criteria.
The value of the investments made by the Company may change from time to time according to a variety of factors, including movements and expected movements in interest rates and in inflation and general market pricing of similar investments. Such changes could impact the value of the Company's investment portfolio.	The Group invests in projects with stable predetermined, long term leases in place with CPI or CPI plus 1% indexation and its strategy is not focused on sale of properties.
Accounting, legal and regulatory risks	How managed/mitigated
If the Company fails to qualify, or remain qualified, as a REIT, its rental income and gains will be subject to UK corporation tax. Any change in the tax status of the Company or any of its underlying investments or in tax legislation or practice (including in relation to taxation rates and allowances) or in accounting standards could adversely affect the investment return of the Company.	The Group has been structured to be REIT compliant and continuously monitors the tax status using professional taxation advisors. The Board has ultimate responsibility for ensuring adherence to the UK REIT regime and monitors the compliance reports provided by the Investment Advisor and other third party providers.
The Company may not achieve full compliance with all applicable legislation leading to reputational or financial consequences.	The Board monitors compliance information provided by its advisors and legal counsel and thereby monitors regulatory developments in the UK as well as listing rules and FCA marketing rules.
Operational risks, including cyber crime	How managed/mitigated
Disruption to, or failure of the systems of third party providers could prevent accurate reporting and monitoring of the Company's financial position. This includes the risk of cyber crime and potential threat to security, business continuity and reputation.	The Board monitors the services provided by the Investment Advisor and other service providers and the key elements which are designed to provide effective internal control.

Directors' responsibilities for the interim financial statements

The directors confirm that to the best of their knowledge this condensed set of consolidated financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the operating and financial review on pages 4 to 14 includes 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:

• An indication of important events that have occurred during the first 11 months since admission on 18 November 2016 and their impact on the condensed consolidated financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

• Material related party transactions since admission on 18 November 2016.

For and on behalf of the Board.

Michael Wrobel

Chairman

23 November 2017

Independent review report to Civitas Social Housing PLC

Report on the interim condensed consolidated financial statements

Our conclusion

We have reviewed Civitas Social Housing PLC's condensed consolidated financial statements (the "interim financial statements") in the Interim Report of Civitas Social Housing PLC for the period 18 November 2016 to 30 September 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared,  in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·    The Condensed Consolidated Statement of Financial Position as at 30 September 2017;

·    The Condensed Consolidated Statement of Comprehensive Income for the period then ended;

·    The Condensed Consolidated Statement of Cash Flows for the period then ended;

·    The Condensed Consolidated Statement of Changes in Equity for the period then ended; and

·    The explanatory notes to the interim financial statements.

The interim financial statements  included in the Interim Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Our responsibilities and those of the directors

The Interim Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Interim Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. 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.

We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants London

23 November 2017

Condensed Consolidated statement of Comprehensive Income (unaudited)

For the period from 18 November 2016 to 30 September 2017

		From 18 November 2016 to 30 September	From 29 September 2016 to 17 November
	Note	2017 £	2016 £
Income
Rental income	5	7,032,541	-
Total income		7,032,541	-
Expenses
Directors' remuneration	6	(119,521)	(8,733)
Investment advisory fees	8	(2,981,589)	-
General and administrative expenses	9	(1,510,746)	(22,667)
Total expenses		(4,611,856)	(31,400)
Gain from fair value adjustment on investment property	13	20,979,237	-
Operating profit/(loss)		23,399,922	(31,400)
Finance income	10	183,344	-
Finance costs	11	(2,207)	-
Profit/(loss) for the period before tax		23,581,059	(31,400)
Taxation	12	-	-
Profit/(loss) being total comprehensive income/(loss) attributable to shareholders  for the period		23,581,059	(31,400)
Earnings per share - basic	30	6.7p	(68,261p)

All amounts reported in the Condensed Consolidated Statement of Comprehensive Income for the period ended 30 September 2017 relate to continuing operations. 

Condensed Consolidated Statement of Financial Position (unaudited)

As at 30 September 2017

		At 30 September	At 17 November
	Note	2017 £	2016 £
Assets
Non-current assets
Investment property	13	321,000,000	-
Total non-current assets		321,000,000	-
Current assets
Trade and other receivables	15	1,707,256	50,001
Cash at bank	16	46,405,995	-
Total current assets		48,113,251	50,001
Total assets		369,113,251	50,001
Liabilities
Current liabilities
Trade and other payables	17	7,813,592	81,400
Total current liabilities		7,813,592	81,400
Total liabilities		7,813,592	81,400
Total net assets/(liabilities)		361,299,659	(31,399)
Equity
Share capital	18	3,500,000	1
Share premium reserve	19	-	-
Capital reduction reserve	20	334,250,000	-
Retained earnings/(accumulated losses)	21	23,549,659	(31,400)
Total equity		361,299,659	(31,399)
IFRS Net asset value per share - basic	31	103.23p	(31,399p)

Condensed Consolidated Statement of Changes in Equity (unaudited)

	Note	Share capital	Share premium reserve	Capital reduction reserve	Retained earnings/ (accumulated losses)	Total equity
		£	£	£	£	£
Balance at 29 September 2016		-	-	-	-	-
Loss being total comprehensive loss for the period		-	-	-	(31,400)	(31,400)
Issue of ordinary shares
Share capital issued in period	18	1	-	-	-	1
Balance at 17 November 2016		1	-	-	(31,400)	(31,399)
Profit being total comprehensive income for the period		-	-	-	23,581,059	23,581,059
Issue of ordinary shares
Share capital issued in the period	18,19	3,499,999	346,500,000			349,999,999
Formation and issue costs paid	19		(7,000,000)			(7,000,000)
Cancellation of share premium	19		(339,500,000)	339,500,000		-
Dividend paid
Interim dividend for the period ended 31 March 2018 (1.5p)	20			(5,250,000)		(5,250,000)
Balance at 30 September 2017		3,500,000	-	334,250,000	23,549,659	361,299,659

Condensed Consolidated Statement of Cash Flows (unaudited)

For the period from 18 November 2016 to 30 September 2017

		From 18 November 2016 to 30 September	From 29 September 2016 to 17 November
	Note	2017 £	2016 £
Cash flows from operating activities
Profit/(loss) before income tax		23,581,059	(31,400)
Adjustments for:
Less: finance income		(183,344)	-
Less: net gain from fair value adjustment on investment property	13	(20,979,237)	-
Add: interest received		181,993	-
Operating results before working capital changes		2,600,471	(31,400)
Increase in trade and other receivables		(1,556,874)	(50,000)
Increase in trade and other payables		6,668,524	81,400
Net cash flow generated from operating activities		7,712,121	-
Cash flows from investing activities
Purchase of investment properties		(285,710,409)	-
Subsequent expenditure on investment property		(13,345,717)	-
Restricted cash held as retention money	16	(6,115,226)	-
Net cash flow used in investing activities		(305,171,352)	-
Proceeds from issue of Ordinary Share capital	18,19	350,000,000	-
Cost of share issues	19	(7,000,000)	-
Dividends paid to equity shareholders	20	(5,250,000)	-
Net cash flow generated from financing activities		337,750,000	-
Net increase in cash and cash equivalents		40,290,769	-
Unrestricted cash and cash equivalents at the beginning of the period	16	-	-
Unrestricted cash and cash equivalents at the end of the period	16	40,290,769	-

Notes to the condensed consolidated financial statements (unaudited)

 1.          CORPORATE INFORMATION

Civitas Social Housing PLC (the "Company") was incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 29 September 2016 with company number 10402528 under the name Civitas REIT PLC which was subsequently changed to the existing name on 3 October 2016. The address of the registered office is 5 Old Bailey, London, EC4M 7BA, United Kingdom. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.

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

 2.          BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with the disclosure and transparency rules of the Financial Conduct Authority and with IAS 34, Interim Financial Reporting, as adopted by the European Union.

The condensed consolidated financial statements for the period ended 30 September 2017 have been reviewed by the Company's Auditor, PricewaterhouseCoopers LLP, in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Group. The condensed consolidated financial statements are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006.

The Group's annual report and accounts for the period to 17 November 2016 have been delivered to the Registrar of Companies. The Group's independent auditor's report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

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

•        IFRS 9 Financial Instruments. The standard will replace IAS 39 Financial Instruments and contains two primary measurement categories for financial assets (effective for annual periods beginning on or after 1 January 2018)

•        IFRS 15 Revenue from contracts. The standard replaces IAS 11 Construction Contracts, IAS 18 Revenue. The standard introduces a new revenue recognition model that recognises revenue either at a point in time or over time (effective for annual periods beginning on or after

1 January 2018)

•        IFRS 16 Leases: introduction of a single, on-balance sheet accounting model (effective for annual periods beginning on or after 1 January 2019). The disclosure requirements of IFRS 16 will be considered in due course

The directors have assessed the impact on the condensed consolidated financial statements of the standards listed above and at present they do not anticipate that the adoption of these standards and interpretations will have a material impact on the condensed consolidated financial statements in the period of initial application, other than on presentation and disclosure.

2.1.            Going concern

The Group benefits from a secure income stream from long leases with the Housing Associations, which are not overly reliant on any one tenant and present a well-diversified risk. The Group's cash balances as at 30 September 2017 were £46.4 million, of which £40.3 million was readily available and it had no debt borrowing.

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

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

2.2.            Statement of compliance

The Group has opted to prepare financial statements in accordance with EU endorsed International Financial Reporting Standards, IFRICs interpretations and Companies Act 2006.

2.     BASIS OF PREPARATION (continued)

2.3.            Functional and presentation currency

The functional currency of the Company is the British Pound and the presentation currency of the Group is also the British Pound. All values are rounded to the nearest pound, except where otherwise indicated.

2.4.            Reporting period

These condensed consolidated financial statements have been prepared for the period from 18 November 2016 to 30 September 2017 with the prior period statements prepared from 29 September 2016 to 17 November 2016. The periods covered by these condensed consolidated financial statements vary in length and level of activities therefore it is not entirely comparable.

Following an application to extend the accounting reference date to 31 March, the Company's next reporting will cover the period from 18 November 2016 to 31 March 2018.

 3.          SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND  ASSUMPTIONS

In the application of the Group's accounting policies, which are described in note 4, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

 3.1.            Investment properties

The Group uses the valuation carried out by its independent valuers as the fair value of its property portfolio. The valuation is based upon assumptions including future rental income and the appropriate discount rate. The valuers also make reference to market evidence of transaction prices for similar properties. Further information is provided in note 14.

The Group's properties have been independently valued by Jones Lang LaSalle Ltd. ("JLL" or the "Valuer") according to the definitions published by the Royal Institute of Chartered Surveyors' ("RICS") Valuation - Professional Standards, January 2014, Global and UK Editions (commonly known as the "Red Book"). JLL is one of the most recognised professional firms within Social Housing valuation and has sufficient current local and national knowledge of both Social Housing generally and specialist supported housing ("SSH") and has the skills and understanding to undertake the valuations competently.

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

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

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

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

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

3.2.            Business combinations

The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. Management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property.

Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

All corporate acquisitions during the period have been treated as asset purchases rather than business combinations because no integrated set of activities were acquired.

3.3.            Operating lease contracts - the Group as lessor

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

4.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

4.1.            Basis of consolidation

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

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

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

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

4.2.            Investment property

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

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

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

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

4.3.            Leases

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

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

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

4.4.            Trade and other receivables

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

Trade and other receivables are initially recognised at fair value, and subsequently where necessary re-measured at amortised cost less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence the Group will not be able to collect all amounts due according to the original terms of the receivables.

4.5.            Cash and cash equivalents

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

Cash held by lawyers is money held in escrow for expenses expected to be incurred in relation to investment properties pending completion. These funds are available immediately on demand.

4.6.            Provisions

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

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

4.7.            Trade and other payables

Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost until settled.

4.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (continued)

4.8.            Taxation

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

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

4.9.            Capital management

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

The Group considers proceeds from share issuance and retained earnings as capital.

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

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

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

4.10.       Dividend payable to shareholders

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

4.11.       Rental income

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

4.12.       Finance income and finance costs

Finance income is recognised as interest accrues on cash balances held by the Group. Finance costs consist of interest and other costs that the Group incurs in connection with bank and other borrowings. These costs are expensed in the period in which they occur.

4.13.       Expenses

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

4.14.       Investment advisory fees

Investment advisory fees are recognised in the Condensed Consolidated Statement of Comprehensive Income on an accrual basis

4.15.       Share issue costs

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

4.16.       Impairment of financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

5.          NET RENTAL INCOME

	18 November 2016 to 30 September 2017	29 September 2016 to 17 November 2016
	£	£
Rental income from investment property	7,032,541	-
Direct property expenses	-	-
	7,032,541	-

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

 6.          DIRECTORS' REMUNERATION 

	18 November 2016 to 30 September 2017	29 September 2016 to 17 November 2016
	£	£
Directors' fees	115,017	8,733
Employer's National Insurance Contributions	4,504	-
	119,521	8,733

The directors are remunerated for their services at such rate as the directors shall from time to time determine. The aggregate remuneration and benefits in kind of the directors of the Company (in each case, solely in their capacity as such) in respect of the year ending on 31 March 2018 payable out of the assets of the Company is not expected to exceed £200,000. The Chairman received a director's fee of £35,000 per annum, and the other directors of the Board received a

fee of £30,000 per annum (with the exception of the chairman of the Audit Committee who will receive an additional fee of £2,500 per annum).

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

7.          PARTICULARS OF EMPLOYEES

The Group had no employees during the period (17 November 2016 period: nil) other than the directors

8.    INVESTMENT ADVISORY FEES 

	18 November 2016 to 30 September 2017	29 September 2016 to 17 November 2016
	£	£
Advisory fee	2,981,589	-
	2,981,589	-

Civitas Housing Advisors Limited ("CHA") is appointed as the Investment Advisor of the Company.

Under the current Investment Management Agreement, the Advisory Fee shall be an amount calculated in respect of each Quarter, in each case based upon the Portfolio Net Asset Value (further explained in note 14) most recently announced to the market at the relevant time (as adjusted for issues or repurchases of Shares in the period between the date of such announcement and the date of the relevant calculation), on the following basis:

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

b)     on that part of the Portfolio Net Asset Value over £250 million and up to and including

£500 million, an amount equal to 0.9% of such part of the Portfolio Net Asset Value;

c)      on that part of the Portfolio Net Asset Value over £500 million and up to and including

£1,000 million, an amount equal to 0.8% of such part of the Portfolio Net Asset Value;

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

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

 9.          GENERAL AND ADMINISTRATIVE EXPENSES

	18 November 2016 to 30 September 2017	29 September 2016 to 17 November 2016
	£	£
Legal and professional fees	664,612	-
Administration fees	178,327	11,167
Consutancy fees	170,175	-
Audit fees	175,000	11,500
Abortive costs	90,000	-
Valuation fees	72,000	-
Depositary fees	45,697	-
Grants and donations	35,946	-
Insurance	24,376	-
Marketing	23,975	-
Regulatory fees	20,394	-
Sundry expenses	10,042	-
Directors'expenses	402	-
	1,510,746	22,667

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

 10.       FINANCE INCOME

	18 November 2016 to 30 September 2017	29 September 2016 to 17 November 2016
	£	£
Interest on liquidity funds	183,344	-
	183,344	-

11.       FINANCE COSTS

	18 November 2016 to 30 September 2017	29 September 2016 to 17 November 2016
	£	£
Bank charges	2,207	-
	2,207	-

12.       TAXATION

As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it meets certain conditions as set out in the UK REIT regulations. For the current period ended 30 September 2017, the Group did not have any non-qualifying profits and accordingly there is no tax charge in the period. If there were any non-qualifying profits and gains, these would be subject to corporation tax.

It is assumed that the Group will continue to be a group UK REIT for the foreseeable future, such that deferred tax has not been recognised on temporary differences relating to the property rental business. No deferred tax asset has been recognised in respect of the unutilised residual current year losses as it is not anticipated that sufficient residual profits will be generated in the future.

	18 November 2016 to 30 September 2017 £	29 September 2016 to 17 November 2016 £
Current tax
Corporation tax charge/(credit) for the year	-	-
Adjustment in respect of prior years	-	-
Total current income tax charge/(credit) in the income statement	-	-

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

Profit/(loss) before tax Tax at UK corporation tax standard rate of 19%	23,581,059	(31,400)
(17 November 2016: 20%)	4,480,401	(6,280)
Change in value of exempt investment properties	(3,986,055)	-
Exempt REIT income	(779,006)	-
Amounts not deductible for tax purposes	54,364	-
Unutilised residual current year tax losses	230,296	6,280
	-	-

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

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

13.       INVESTMENT PROPERTY

	18 November 2016 to 30 September 2017	29 September 2016 to 17 November 2016
	£	£
Balance at beginning of period	-	-
Property acquisitions	300,020,763	-
Change in fair value during period	20,979,237	-
	321,000,000	-

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

JLL valued the Civitas Social Housing PLC property portfolio on the basis of each individual property and the theoretical sale of the properties without the benefit of any corporate wrapper at £321,000,000 as at 30 September 2017.

JLL has provided valuations services to the Company with regards to the properties for the past 12 months. In relation to the period ending 30 September 2017, the proportion of the total fees payable by the Company to JLL's total fee income was less than 5% and is therefore minimal.

Additionally, JLL has a rotation policy in place whereby the signatories on the valuations rotate after seven years.

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

The Company's investment policy is to invest in a diversified portfolio of Social Homes throughout England and Wales. The directors intend that the Company will meet its investment objective principally by investing in portfolios of Specialist Supported Housing, but may also acquire General Needs Housing, and entering into long-term inflation adjusted full repairing and insuring leases effectively of 25 years with Registered Providers, where all management and maintenance obligations will be serviced by the Registered Providers. The Group will not undertake any development activity or assume any development or construction risk. However, the Group may engage in renovating or customising existing homes, as necessary. The Group will make prudent use of leverage to finance the acquisition of Social Homes and to preserve capital on a real basis.

The Group will focus on delivering capital growth by holding the Portfolio over the long term and therefore it is unlikely that the Group will dispose of any part of its Portfolio. In the unlikely event that a part of the Portfolio is disposed of, the directors intend to reinvest the proceeds from such disposals in assets in accordance with the Company's investment policy. The Portfolio has to date been constructed in such a manner, utilising new SPVs to hold investments and incurring an initial SDRT charge such that any subsequent divestment can be undertaken in an efficient manner and with lower costs for the acquirer based around an expectation of SDRT or stamp duty at 0.5%.

In return this is expected to enhance the value received by the Group on a sale and so enhance the carrying value of the investments. This is not reflected in the IFRS Portfolio Valuation stated above, which assumes that properties are sold individually without the tax benefits of the SPVs in which the properties are now held.

On 1 November 2016 Civitas Housing Advisors Limited ("CHA") was appointed as the exclusive Investment Advisor of the Company by entering into the Investment Advisory Agreement with the Company.

Under this agreement, the Investment Advisor will advise the Company and provide certain management services in respect of the property portfolio.

The Investment Advisor is entitled to a quarterly fee. Please refer to note 8 for further details.

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

Key statistics

The metrics below are in relation to the total portfolio held as at 30 September 2017.

Portfolio metrics

Capital deployed*                                                                              £285.3 million

Properties                                                                                                    282

Tenancies                                                                                                    1,827

Registered Providers                                                                                     10

Local Authorities                                                                                            83

Care Providers                                                                                               50

Average Net Initial Yield*                                                                              6%

*calculated excluding purchase  costs

13.   INVESTMENT PROPERTY (continued)

Regional exposure

In line with the guidelines set out in the prospectus, once remaining capital is deployed, no exposure to any one region greater than 20% will exist.

Region				*Cost (£'000s)		% of portfolio
East Midlands				20.2		7%
East of England				10.3		4%
Greater London				52.4		18%
North East				38.2		13%
North West				30.9		11%
South East				35.5		12%
South West				64.5		23%
Wales				1.9		1%
West Midlands				14.2		5%
Yorkshire and the Humber				17.2		6%
Total				285.3		100%
*excluding  purchase costs Fair Value Hierarchy
	Date of valuation	Total £	Quoted prices in active markets (level 1)	Significant unobservable inputs (Level 2)	Significant unobservable inputs (Level 3)
Assets measured at fair value:
Investment properties	30 September 2017	321,000,000			321,000,000
Investment properties	17 November 2016	-	-

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

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

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

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

These include i) the regulated Social Housing sector and demand for the facilities offered by each Specialist Supported Housing property owned by the Group; ii) the particular structure of the Group's transactions where vendors, at their own expense, meet the majority of the refurbishment costs of each property and certain purchase costs; iii) detailed financial analysis with discount rates supporting the carrying value of each property; iv) underlying rents for each property being subject to independent benchmarking and adjustment where the Group considers them too high (resulting in a price reduction for the purchase or withdrawal from the transaction); and v) a full repairing and insuring lease with annual indexation based on CPI or CPI+1% and effectively 25 years outstanding in most cases with a Housing Association itself regulated by the Homes and Communities Agency.

The following descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:

Valuation techniques: market value method

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

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

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

2)       The discount rate applied to the rental flows.

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

As at the balance sheet date the lease lengths within the Group's portfolio ranged from an effective 22 years to 25 years with a weighted average unexpired lease term of 24.3 years. The greater the length then all other metrics being equal the greater the value of the property.

All of the properties within the Group's portfolio benefit from leases with annual indexation based upon CPI or CPI+1. 

13.       INVESTMENT  PROPERTY (continued)

Sensitivities of measurement of significant unobservable inputs

As set out within significant accounting estimates and judgements above, the Group's property Portfolio Valuation is open to judgements and is inherently subjective by nature.

As a result the following sensitivity analysis has been prepared:

Average discount rate and range

The average discount rate used in the Group's property Portfolio Valuation is 6.5%.

The range of discount rates used in the Group's property Portfolio Valuation is from 6% to 7%.

	-0.5% in Discount rate £'000	+0.5% in Discount rate £'000	+0.25% in CPI (2%) £'000	-0.25% in CPI (2%) £'000
(Decrease)/increase in the IFRS fair value of investment properties as at 30 September 2017	18,674	(19,245)	9,613	(10,303)
(Decrease)/increase in the IFRS fair value of investment properties as at 17 November 2016	n/a	n/a	n/a	n/a

14.         PORTFOLIO NET ASSET VALUE

The objective of the Portfolio Net Asset Value "Portfolio NAV" measure is to highlight the fair value of the net assets on an ongoing, long term basis, which aligns with the Group's business strategy as an ongoing REIT with a long-term investment outlook. This Portfolio NAV is made available on a quarterly basis on the Company's website and announced via RIS.

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

i)            The hypothetical sale of properties will take place on the basis of a sale of a corporate vehicle rather than a sale of underlying property assets. This assumption reflects the basis upon which the Company's assets have been assembled within specific SPVs.

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

NAV (£)

Net Asset Value per the condensed consolidated financial statements: 361,299,659

Effect of the adoption of the assumed, hypothetical sale of the properties

as a portfolio and on the basis of sale of a corporate vehicle/s: 22,300,000

Portfolio Net Asset Value as at 30 September 2017: 383,599,659

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

Net issue proceeds	343,000,000
Operating profits	2,570,422
Capital appreciation	43,279,237
Dividend paid	(5,250,000)
Portfolio Net Asset Value as at 30 September 2017	383,599,659
Property Assets	343,300,000
Net cash1	40,299,659

1 adjusted for net current assets

The Portfolio Net Asset Value as at 30 September 2017 of £383.6 million equates to a Portfolio Net Asset Value of 109.6p per Ordinary Share in the capital of the Company based upon an issued share capital of 350,000,000 Ordinary Shares.

Stated below is the Consolidated Statement of Comprehensive Income for the period from

18 November 2016 to 30 September 2017, reflecting the application of the above two assumptions.

SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - PORTFOLIO NAV BASIS

For the period from 18 November 2016 to the 30 September 2017

	18 November 2016 to 30 September 2017 £	29 September 2016 to 17 November 2016 £
Rental income	7,032,541	-
Expenses	(4,611,856)	(31,400)
Gain from fair value adjustment on investment property	43,279,237	-
Net finance income	181,137	-
Profit/(loss) being total comprehensive income/(loss) attributable to shareholders for the period	45,881,059	(31,400)
Adjusted Earnings per share - basic	13.1p	(68,261p)

15.       TRADE AND OTHER RECEIVABLES

	As at 30 September 2017	As at 17 November 2016
	£	£
Rent receivable	1,166,417	-
Recoverable from tenants	332,156	-
Prepayments and other receivables	208,683	-
Amounts due from shareholders	-	50,001
	1,707,256	50,001

The prepayments and other receivables amount above includes prepaid legal and professional fees of £99,030 that have been incurred in connection with the acquisitions yet to be completed.

16.       CASH AND CASH EQUIVALENTS

	As at 30 September 2017	As at 17 November 2016
	£	£
Cash held by lawyers	21,817,448	-
Liquidity funds	13,173,365	-
Restricted cash	6,115,226	-
Cash at bank	5,299,956	-
	46,405,995	-

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

Cash held by lawyers is money held in escrow for expenses expected to be incurred in relation to investment properties pending completion. These funds are available immediately on demand.

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

Cash and cash equivalents reported in the Condensed Consolidated Statement of Cash Flows totalled £40,290,769 (17 November 2016: £nil) as at the period end, which excludes the amounts held as retention money totalling £6,115,226. Total cash held at bank as reported in the Condensed Consolidated Statement of Financial Position is £46,405,995 (17 November 2016: £nil). 

17.       TRADE AND OTHER PAYABLES

	As at 30 September 2017	As at 17 November 2016
	£	£
Trade and other payables	6,150,651	-
Acquisition costs accruals	1,063,665	-
Accruals	599,276	31,400
Amounts due to shareholders	-	50,000
	7,813,592	81,400

18.       SHARE CAPITAL

	As at 30 September 2017	As at 17 November 2016
	£	£
Authorised:		-
350 million Ordinary Shares (2016: 100 shares) of £0.01 each	3,500,000	1
Issued and fully paid:
350 million Ordinary Shares (2016: 100 shares) of £0.01 each	3,500,000	-

The Company achieved admission to the premium listing segment of the Official List of the London Stock Exchange on 18 November 2016, raising £350 million. As a result of the IPO, at 18 November 2016, 349,999,900 shares at £0.01 per share have been issued and fully paid.

19.       SHARE PREMIUM RESERVE

The share premium relates to amounts subscribed for share capital in excess of nominal value.

	As at 30 September 2017	As at 17 November 2016
	£	£
Balance at beginning of period	-	-
Share premium arising on Ordinary Shares issued in relation to equity issuance	346,500,000	(31,400)
Share issue costs	(7,000,000)
Transfer to capital reduction reserve	(339,500,000)
Balance at end of period	-	(31,400)

19.       SHARE PREMIUM RESERVE (continued)

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

•        Admission of the Ordinary Shares to listing on the UK Listing Authority's Official List

•        Trading on London Stock Exchange's Main Market for listed securities

•        Approval of the Court for the reduction of share capital 

The amount standing to the credit of the share premium account of the Company following completion of the Issue (less any issue expenses set off against the share premium account) was, as a result, credited as a distributable reserve to be established in the Company's books of account which shall be capable of being applied in any manner in which the Company's profits available for distribution (as determined in accordance with the CA 2006) are able to be applied.

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

20.       CAPITAL REDUCTION RESERVE 

	As at 30 September 2017	As at 17 November 2016
	£	£
Balance at beginning of period	-	-
Transfer from share premium reserve	339,500,000	-
Interim dividend for the period	(5,250,000)	-
Balance at end of period	334,250,000	-

On 4 May 2017 the Company declared an interim dividend in respect of the period ending

31 March 2018. The dividend paid was of 0.75p per Ordinary Share and was paid as an ordinary UK dividend on 31 May 2017.

On 27 July 2017 the Company declared an interim dividend in respect of the period ending

31 March 2018. The dividend paid was of 0.75p per Ordinary Share and was paid as an ordinary UK dividend on 31 August 2017.

21.       RETAINED EARNINGS/(ACCUMULATED LOSSES)

	As at 30 September 2017	As at 17 November 2016
	£	£
Balance at beginning of period	(31,400)	-
Profit/(loss) for the period	23,581,059	(31,400)
Balance at end of period	23,549,659	(31,400)

22.       OPERATING LEASES

The future minimum lease payments under non-cancellable operating leases receivable by the Group are as follows:

< 1 year         2-5 years        > 5 years            Total

£                     £                     £                     £

30 September 2017            17,397,062     69,635,911    229,483,944   316,516,917

17,397,062     69,635,911   229,483,944   316,516,917

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

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

Registered Provider	% of total annual rent
Westmoreland Supported Housing Limited	31%
First Priority Housing Association	14%
Inclusion Housing CIC	13%
PAS Housing Association	9%
Kindstream Housing CIC	8%
New Walk Property Management CIC	8%
Trinity Housing Association Limited	6%
Harbour Light Assisted Living CIC	6%
IKE Supported Housing Limited	3%
Hilldale Housing Associates Limited	2%
	100%

23.       CONTROLLING PARTIES

As at 30 September 2017 there is no ultimate controlling party.

  24.       SEGMENTAL INFORMATION

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

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

The Group's property portfolio comprised 282 Social Housing properties as at 30 September 2017 in England and Wales. The directors consider that these properties represent a coherent and diversified portfolio with similar economic characteristics and, as a result, these individual properties have been aggregated into a single operating segment. In the view of the directors there is accordingly one reportable segment under the provisions of IFRS 8.

All of the Group's properties are based in the UK. No geographical grouping is contained in any of the internal financial reports provided to the CHA Executive Team and, therefore, no geographical segmental analysis is required by IFRS 8.

25.       RELATED PARTY DISCLOSURE

The directors are remunerated for their services at such rate as the directors shall from time to time determine. The aggregate remuneration and benefits in kind of the directors of the Company (in each case, solely in their capacity as such) in respect of the year ending on 31 March 2018 payable out of the assets of the Company is not expected to exceed £200,000. The Chairman received a director's fee of £35,000 per annum, and the other directors of the Board received a fee of £30,000 per annum (with the exception of the chairman of the Audit Committee who will receive an additional fee of £2,500 per annum).

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

Following the admission of the Company to the premium segment of the London Stock Exchange on 18 November 2016, the directors purchased the following number of £0.01 nominal Ordinary Shares of £1.00 each: 

Michael Wrobel	Chairman	30,000 Ordinary Shares
Peter Baxter	Director	20,000 Ordinary Shares
Caroline Gulliver	Audit Committee	25,000 Ordinary Shares
Alastair Moss	Director	5,000 Ordinary Shares

For the period from 18 November 2017 to 30 September 2017, fees of £115,017 were incurred and paid to the directors.

Civitas Social Housing UK LLP (the "LLP") - a limited liability partnership incorporated in England and Wales with registered number OC414370 whose registered office is at 5 Old Bailey, London EC4M 7BA.

The Company and CHA (collectively the "Members") entered into a limited liability partnership agreement with the LLP on 1 November 2016 to govern the mutual rights and duties of the LLP and the Members of the LLP. Under the terms of the Limited Liability Partnership Agreement, the Investment Advisor was entitled to an amount of £980,072 as Priority Profit Share from the date of admission to 31 March 2017, which is included in the Investment advisory fees of £2,981,589 mentioned above and in note 8. There was no consideration paid or due from the Members of the LLP. The limited liability partnership agreement and the original Investment Advisory Agreement were terminated on

1 April 2017 and were replaced by the current Investment Management Agreement.

As at 30 September 2017 an amount of £2,145 (17 November 2016: £nil) was due from the LLP.

26.       TRANSACTIONS WITH INVESTMENT ADVISOR

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

For the period from 18 November 2017 to 30 September 2017, fees of £2,981,589 were incurred and paid to CHA.

As at 30 September 2017, no amounts (17 November 2016: £50,001) were due from CHA.

Following the admission of the Company to the premium segment of the London Stock Exchange on 18 November 2016, CHA purchased 50,000 Ordinary Shares.

 27.       CONSOLIDATED ENTITIES

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

The Group owns 100% equity shares of all subsidiaries listed below and has the power to appoint and remove the majority of the Board of Directors of those subsidiaries. The relevant activities of the below subsidiaries are determined by the Board of Directors based on simple majority votes. Therefore the directors of the Group concluded that the Group has control over all these entities and all these entities have been consolidated within the condensed consolidated financial statements.

The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act.

27.       CONSOLIDATED ENTITIES (continued)

Ownership                                                                            Country of

Name of Entity	Principal activity	Incorporation	%
Civitas Social Housing UK LLP	Investment Holding Company	UK	100%
Civitas SPV1 Ltd	Property Investment	UK	100%
FPI CO 73 Ltd	Property Investment	UK	100%
FPI CO 74 Ltd	Property Investment	UK	100%
FPI CO 78 Ltd	Property Investment	UK	100%
FPI CO 84 Ltd	Property Investment	UK	100%
Civitas SPV6 Ltd	Property Investment	UK	100%
FPI CO 88 Ltd	Property Investment	UK	100%
FPI CO 90 Ltd	Property Investment	UK	100%
FPI CO 89 Ltd	Property Investment	UK	100%
FPICO 87 Ltd	Property Investment	UK	100%
FPI CO 94 Ltd	Property Investment	UK	100%
FPI Co 96 Ltd	Property Investment	UK	100%
FPI CO 29 Ltd	Property Investment	UK	100%
FPI CO 82 Ltd	Property Investment	UK	100%
FPI CO 54 Ltd	Property Investment	UK	100%
FPI CO 63 Ltd	Property Investment	UK	100%
FPI CO 85 Ltd	Property Investment	UK	100%
FPI CO 93 Ltd	Property Investment	UK	100%
FPI CO 98 Ltd	Property Investment	UK	100%
FPI CO 101 Ltd	Property Investment	UK	100%
Civitas SPV22 Ltd	Property Investment	UK	100%
Civitas SPV23 Ltd	Property Investment	UK	100%
Civitas SPV25 Ltd	Property Investment	UK	100%
FPI Co 95 Ltd	Property Investment	UK	100%
FPI Co 121 Ltd	Property Investment	UK	100%
FPI Co 105 Ltd	Property Investment	UK	100%
FPI Co 103 Ltd	Property Investment	UK	100%
FPI Co 123 Ltd	Property Investment	UK	100%
FPI Co 122 Ltd	Property Investment	UK	100%
FPI Co 97 Ltd	Property Investment	UK	100%
FPI Co 124 Ltd	Property Investment	UK	100%
FPI Co 86 Ltd	Property Investment	UK	100%
FPI Co 125 Ltd	Property Investment	UK	100%
FPI Co 102 Ltd	Property Investment	UK	100%
FPI Co 126 Ltd	Property Investment	UK	100%
MSL (17) Limited	Property Investment	UK	100%
Civitas SPV24 Ltd	Property Investment	UK	100%
Civitas SPV27 Ltd	Property Investment	UK	100%
Civitas SPV28 Ltd	Property Investment	UK	100%
Civitas SPV29 Ltd	Property Investment	UK	100%
BCP 1 Ltd	Property Investment	UK	100%
SPV BCP 3 Ltd	Property Investment	UK	100%
FPI Co 142 Ltd	Property Investment	UK	100%
FPI Co 145 Ltd	Property Investment	UK	100%
Civitas Social Housing Jersey 1 Limited	Investment Holding Company	Jersey	100%

The registered address for the subsidiaries across the Group is 5 Old Bailey, London, United Kingdom EC4M 7BA, except for the following:

•        Civitas Social Housing Jersey 1 Limited where its registered address is 3rd Floor, Liberation House, Castle Street, St. Helier, Jersey JE1 1BL.

•        BCP 1 Ltd and SPV BCP 3 Ltd where their registered address is 43 Berkeley Square, London, United Kingdom W1J 5FJ.

•        FPI Co 142 Ltd and FPI Co 145 Ltd where their registered address is Barton Hall Hardy Street, Eccles, Manchester, United Kingdom M30 7NB.

28.       FINANCIAL RISK MANAGEMENT

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

28.1. Market risk

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

Risk relating to investment in property

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

•        changes in the general economic climate;

•        competition from available properties;

•        obsolescence; and

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

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

28.2. Interest rate risk

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

The Group will reduce the interest rate risk on its external borrowing by fixing the rate of interest payable.

28.3. Credit risk

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

Credit risk related to financial instruments and cash deposits

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

28.4. Liquidity risk

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

The following table details the Group's liquidity analysis in respect of its trade payables:

	Carrying amount	< 3 months	3-12 months	1-5 months	> 5 months
17 November 2016	£	£	£	£	£
Trade and other payables (excluding related parties)	50,000	-	50,000	-	-
	50,000	-	50,000	-	-
30 September 2017	Carrying amount £	< 3 months £	3-12 months £	1-5 months £	> 5 months £
Trade and other payables (excluding related parties)	6,150,651	-	6,150,651	-	-
	6,150,651	-	6,150,651	-	-

29.         POST BALANCE SHEET EVENTS

Amendments to corporate structure

Incorporation of Civitas Social Housing Finance Company 1 Limited

On 5 October 2017, Civitas Social Housing Finance Company 1 Limited was incorporated in Companies House under the Companies Act 2006 with registration number 10997707 and whose registered office is at 5 Old Bailey, London, United Kingdom EC4M 7BA.

On 5 October 2017, the ownership of Civitas Social Housing Finance Company 1 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.

Incorporation of Civitas Social Housing Finance Company 2 Limited

On 5 October 2017, Civitas Social Housing Finance Company 2 Limited was incorporated in Companies House under the Companies Act 2006 with registration number 10997698 and whose registered office is at 5 Old Bailey, London, United Kingdom EC4M 7BA.

On 5 October 2017, the ownership of Civitas Social Housing Finance Company 2 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.

Incorporation of Civitas Social Housing Finance Company 3 Limited

On 5 October 2017, Civitas Social Housing Finance Company 3 Limited was incorporated in Companies House under the Companies Act 2006 with registration number 10997714 and whose registered office is at 5 Old Bailey, London, United Kingdom EC4M 7BA.

On 5 October 2017, the ownership of Civitas Social Housing Finance Company 3 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.

Incorporation of Civitas Social Housing Jersey 2 Limited

On 6 October 2017, Civitas Social Housing Jersey 2 Limited was incorporated in JFSC Companies Registry under the Companies (Jersey) Law 1991 with registration number 124876 and whose registered office is at 3rd Floor, Liberation House, Castle Street, St. Helier, Jersey JE1 1BL.

On 9 October 2017, the ownership of Civitas Social Housing Jersey 2 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.

Incorporation of Civitas Social Housing Jersey 3 Limited

On 6 October 2017, Civitas Social Housing Jersey 3 Limited was incorporated in JFSC Companies Registry under the Companies (Jersey) Law 1991 with registration number 124877 and whose registered office is at 3rd Floor, Liberation House, Castle Street, St. Helier, Jersey JE1 1BL.

On 9 October 2017, the ownership of Civitas Social Housing Jersey 3 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.

29.     POST BALANCE SHEET EVENTS (continued)

Following advice, the Company has completed the process of transferring its property assets indirectly through special purpose vehicles to Civitas Social Housing Jersey 1 Limited, Civitas Social Housing Jersey 2 Limited and Civitas Social Housing Jersey 3 Limited on 13 October 2017.

Debt Financing

On 3 November 2017, the Company agreed a £52.5 million term loan facility with Scottish Widows Limited, with a term of 10 years, an interest rate of 2.99% and gearing of 30% (as calculated on the loan to market value of the property portfolio). This facility is secured against certain of the Group's properties and the SPVs in which those properties are held.

On 16 November 2017, the Company further agreed a £40 million revolving credit facility with Lloyds Bank plc, available for a term of three years, at a floating rate above 3-month LIBOR. This facility is secured against certain of the Group's properties and the SPVs in which those properties are held.

Acquisitions

• On 4 October 2017, a property in the Greater London area was acquired for £3.9 million.
• On 6 October 2017, a portfolio of properties in the West Midlands was acquired for £3.2 million.
• On 11 October 2017, a portfolio of properties in Dorset and Cornwall was acquired for £3.9 million.
• On 23 October 2017, a portfolio of properties in the West Midlands was acquired for £3.1 million.
• On 26 October 2017, a portfolio of properties in the West Midlands was acquired for £1.9 million.

Dividend

On 31 October 2017, the Company declared a third quarterly dividend in respect of the three months to 30 September 2017 of 0.75p per Ordinary Share totalling £2,625,000, payable on or around 30 November 2017 to shareholders on the register on 10 November 2017.

C Share Placing

On 14 November 2017 the Company had raised a total of £302 million by way of a fully pre-emptive Open Offer, Placing, Offer for Subscription and Intermediaries Offer of C Shares, admitted to the Standard Listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange's main market for listed securities.

The costs related to the C Share issuance were capped at 2% of the gross proceeds and totalled

£6.04 million

30.    IFRS EARNINGS PER SHARE

Earnings per share (EPS) amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive instruments outstanding, only basic earnings per share is quoted below.

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

For the period from 18 November 2016 to 30 September 2017	Net profit/(loss) attributable to ordinary shareholders £	Weighted average number of Ordinary Shares Number	Earnings per share Pence
Basic IFRS earnings per share	23,581,059	350,000,000	6.7
For the period from inception to 17 November 2016
Basic IFRS earnings per share	(31,400)	46	(68,261p)

31.    IFRS NET ASSET VALUE PER SHARE

Basic NAV per share is calculated by dividing net assets in the Condensed Consolidated Statement of Financial Position attributable to ordinary equity holders of the parent by the number of Ordinary Shares outstanding at the end of the year. As there are no dilutive instruments outstanding, only basic

NAV per share is quoted below.

Net asset values have been calculated as follows:

	As at 30 September 2017	As at 17 November 2016
	£	£
Net asset at end of period	361,299,659	(31,399)
Shares in issue at end of period	350,000,000	100
Balance at end of period	103.23p	(31,399p)

Glossary

ALMO means an arm's length management organisation, a not-for-profit company that provides housing services on behalf of a Local Authority.

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

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

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

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

DCLG The Department of Communities and Local Government.

Group means the Company and its subsidiaries.

HCA means Homes and Communities Agency, the executive non-departmental public body, sponsored by the Department for Communities and Local Government, which is the regulator for Social  Homes providers in England and Wales.

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

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

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

Investment Advisor means Civitas Housing Advisors Limited, a company incorporated in England and Wales  with company number 10278444, both in its capacity as investment advisor to the Company and as managing member of the LLP, as the context may  require.

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

Portfolio Net Asset Value or Portfolio NAV means the net asset value of the Company, as at the relevant date, calculated on the basis of an independent Portfolio Valuation. See note 14 for a reconciliation to IFRS NAV.

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

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

Registered Providers means Housing Associations, Local Authorities and ALMOs.

RICS means Royal Institution of Chartered Surveyors.

Social Homes  or Social  Housing means homes which are  Social  Rented, Affordable Rented, other homes managed by Registered Providers or Low Cost Home  Ownership homes.

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

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

WAULT means weighted average unexpired lease term.

Company Information

Non-executive directors

Michael Aleksander Wrobel, Chairman

(appointed 24 October 2016)

Alastair Michael Moss

(appointed 24 October 2016)

Caroline Gulliver, Chair  of the Audit  and Management Engagement Committee

(appointed 24 October 2016)

Peter Baxter

(appointed 24 October 2016)

Registered Office

5 Old Bailey

London EC4M 7BA

United Kingdom

Financial Advisor

Cenkos Securities PLC

6.7.8  Tokenhouse Yard

London EC2R 7AS

United Kingdom

Alternative Investment Fund Manager

(from 24 November 2017)

G10 Capital Limited

136 Buckingham Palace Road

London SW1W 9SA

United Kingdom

Investment Advisor

Civitas  Housing Advisors Limited

29 Farm  Street

London W1J 5RL

United Kingdom

Administrator and Company Secretary

Langham Hall UK Services LLP

5 Old Bailey

London EC4M 7BA

United Kingdom

Depositary

Langham Hall UK Depositary LLP

5 Old Bailey

London EC4M 7BA

United Kingdom

Registrar

Link Market Services Limited

The Registry

34 Beckenham Road

Beckenham

Kent BR3 4TU

United Kingdom

Independent Auditors and Reporting Accountants

PricewaterhouseCoopers LLP

7 More London Riverside

London SE1 2RT

United Kingdom

Legal  and Tax advisor

Norton Rose Fulbright LLP

3 More London Riverside

London SE1 2AQ

United Kingdom

Public relations advisor

Pagefield Communications Ltd

The Courtyard Studio

18 Marshall Street

London W1F 7BE

United Kingdom

Tax advisor

BDO LLP

55 Baker Street

London W1U 7EU

United Kingdom

 

END

 

 

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