Net Asset Value, Trading and Market Update

RNS Number : 6320N

Civitas Social Housing PLC

02 February 2021

 

2 February 2021

CIVITAS SOCIAL HOUSING PLC

("CSH" or the "Company")

Net Asset Values and Dividend Declaration

Trading and Market Update

Civitas Social Housing PLC ("CSH" or the "Company") is pleased to announce its net asset value as at 31 December 2020, a dividend declaration and to provide a trading and market update.

Highlights:

· Strong financial and operational performance in line with expectations

· IFRS NAV per share 108.17p (30 September 2020: 108.01p)

· Rents received as expected with no COVID-19 impact

· Excellent health and safety compliance reported by housing associations

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

· One additional property acquired in the quarter

· New debt facility terms agreed

· Substantial opportunities for further high-quality transactions

CSH Trading Update

CSH has continued to perform in-line with expectations with rents in the quarter having been collected as normal, unaffected by COVID-19.  As at 1 February 2021, over 99 per cent. of rents in respect of the period to 31 December 2020 had been received across CSH's 619 properties with the balance expected shortly.

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

The Company's investment portfolio has benefited from the addition of one further property in the period. This property is directly adjacent to an existing larger building already owned by the Company in Chorley, Lancashire and will allow the site to be consolidated.

The terms of the Company's new debt facility have been agreed and will be announced shortly. Following completion of certain formalities and on drawdown the Company expects to be in a position to undertake a number of additional pipeline acquisitions.

CSH continues to focus on the incorporation of ESG principles within its investment strategy with a particular attention to expanding and developing its action plan to enhance the environmental footprint of the portfolio.

In this regard the Company is pleased to note that it has now instigated several pilot projects to achieve significant energy efficiency improvements within its buildings, including installing solar photovoltaics and air source heat pumps to reduce carbon emissions. This is part of a broader engagement with potential 'turnkey' partners to deliver portfolio wide energy improvement solutions including retrofit, energy use reductions and enabling technology. 

These initiatives are by nature long-term and will depend to a degree upon Government support as part of the broader ambition for the sector to decarbonise. That should not however restrict the Company's ambition to play a leading role and to develop positive environmental initiatives. In this regard the Company is pleased to have achieved an above average ESG rating as measured by the GRESB Public Disclosure Assessment 2020 that evaluates the level of ESG disclosure for property companies and REITs.

Market Update

As the anniversary of the first COVID-19 lock-down approaches, the sector in which CSH operates continues to demonstrate strong fundamentals and robust operational characteristics that reflect the essential care services delivered within the Company's properties.

Demand for high quality homes in the community to provide lifelong housing for people with learning disabilities, mental health and autism is continuing to grow. This is the result of a number of key drivers: the closure of old remote hospitals, an increasing number of young people requiring adult care services and as parents and guardians themselves require elderly care support, the need for people to move from family homes into permanent care-based accommodation.

In addition, substantial demand exists for housing for those who have suffered homelessness and also require long term suitable housing in the community, with additional support to prevent them from returning to homelessness.

The Company's Investment Adviser, Civitas Investment Management Limited ("CIM") has continued its regular and extensive dialogue with housing associations which since the start of the pandemic includes detailed reports on pandemic responsiveness. These reports have shown a high degree of resilience to the pandemic with few serious cases of COVID-19 reported due to the quality of the buildings people live in, the attention and dedication of the one-to-one care they receive and the age profile of the residents.

With all its housing association counterparties CIM continues to be a catalyst for improvements in governance, management and sharing best practice. Since inception CIM has held quarterly seminars for all its partners and makes its staff available to work closely with housing associations in respect of the CIM portfolios.

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

Net Asset Value

IFRS NAV

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

IFRS NAV	31 Dec 2020	30 Sept 2020
Ordinary NAV (£'000)	672,463	671,412
Ordinary NAV per share (pence)	108.17	108.01

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

The growth in IFRS NAV reflects the contribution from the indexation of leases in the period (based on the current low level of CPI inflation) and the cost of modest discretionary capital expenditure that has been incurred to enhance further the quality of the Company's properties to reflect the individual needs of tenants for the long term. It also reflects the single asset purchased in the period, which reflects the fact that the Company is almost fully invested (above a cash buffer and capital reserved for transactions expected to complete shortly), notwithstanding a growing pipeline of strong acquisition opportunities.

In the period to 31 December 2020, an Ordinary Share dividend of 1.35p per share was declared in respect of the period ended 30 September 2020 and paid in December 2020, amounting to £8.4 million.

Portfolio NAV

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

PORTFOLIO NAV	31 Dec 2020	30 Sept 2020
Ordinary NAV (£'000)	736,363	735,913
Ordinary NAV per share (pence)	118.45	118.4

The portfolio, as a single entity, has been valued at 31 December 2020 at 5.09% Net Initial Yield (30 September: 5.08%) reflecting the enhanced value from the aggregation of individual properties into a single portfolio company and the positive effects of the stamp duty adjustment noted below.

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

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

Dividend Declaration

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

The dividend will be paid on or around 1 March 2021 to holders on the register as at 12 February 2021 (the record date) with the corresponding ex-dividend date being 11 February 2021. The dividend will be paid as a REIT property income distribution ("PID").

The target dividend of 5.4p per Ordinary Share for the year to 31 March 2021 reflects both the strong underlying cash generation that the Company continues to achieve and the Board's view, at the present time, of the Company's prospects in the current financial year.

Quarterly Fact Sheet

The Company has today published its Factsheet for the quarter to 31 December 2020 and this is available to view on the  Company's website .

ENDS

For further information, please contact:

Civitas Investment Management Limited

Paul Bridge  Tel: [phone]

Andrew Dawber    Tel: [phone]

Panmure Gordon

Sapna Shah  Tel: [phone]

Tom Scrivens                         Tel: [phone]

Liberum Capital Limited

Gillian Martin / Chris Clarke  Tel: [phone]

Buchanan

Helen Tarbet / Henry Wilson  Tel: [phone]

Hannah Ratcliff / George Beale  [e-mail]

Notes:

Civitas Social Housing PLC (CSH) was created in 2016 by Civitas Investment Management Limited as the first dedicated London listed REIT, to raise long-term, sustainable, institutional capital to invest in care-based social homes across the UK. So far, CSH has completed more than 120 individual transactions to build the largest portfolio of its kind that has been independently valued on an IFRS basis at £901.1million. CSH provides homes for 4,295 working age adults with long-term care needs, in 619 bespoke properties that are supported by 118 specialist care providers, 16 registered and approved providers over 164 individual local authority areas.

 

END

 

 

MSCDKDBNKBKBFBK