Residential Secure Income plc - Interim Results Announcement

Inflation-linked rents and asset management initiatives drive total return, NAV and portfolio valuation uplifts

Residential Secure Income plc (“ReSI”) (LSE: RESI), which invests in affordable Shared Ownership, retirement and Local Authority housing, today announces its interim results for the six months to 31 March 2019.

Financial highlights

  • IFRS Net Asset Value (“NAV”) Total Return of 4.7 pence per share for the period and 14.1 pence since Admission, with ReSI on track to again exceed its 8%+ annual target

  • 3% uplift in the portfolio valuation, compared to purchase price, to £321.3 million driven primarily by inflation linked rent increases and successful lease extensions in the retirement portfolio

  • 7% increase in IFRS NAV to 107.9 pence per share (30 September 2018: 105.1 pence per share) representing growth of 10.1% since Admission

  • Earnings per share for the first half increased 145% to 4.5 pence compared to 1.8 pence for the 8.5 month period to 31 March 2018 and on an annualised basis equalled those for the full year 2018 of 9.0 pence

  • Net property income for the first half increased 211% to £6.1 million (8.5 months to 31 March 2018: £1.9 million)

  • Annualised net rental income increased 125% to £11.5 million compared to 31 March 2018 (£5.1 million) and 9.5% since the 2018 year end (£10.5 million), representing a 5.1% net yield on capital deployed to income producing assets

  • 96% of rental income is subject to contractual inflation-linked rental uplifts

  • Total drawn debt of £107.5 million (30 September: £51.6 million) reflecting a gearing ratio of 35.6%

  • Dividends of 2.5 pence per share declared for the period (in two equal quarterly instalments of 1.25 pence), in line with the 5.0 pence per share target for the current financial year

  • NAV accretive share buy-back programme launched in April 2018 has resulted in 9,304,729 shares being purchased at an average price of 92.5 pence

The movement in NAV since publication of annual results is as follows:

£m Pence per share
Net Asset Value as at 30th September 2018 183.6 105.1
Net Income for period 2.6 1.5
Valuation change 5.1 3.0
Dividend paid (3.4) (2.0)
Net capital reduction (3.4) (2.0)
Impact of reduction in number of shares - 2.2
Net Asset Value as at 31st March 2019 184.5 107.9



High quality portfolio enhanced through acquisitions and asset management

  • £83 million invested in 332 residential units during the period, bringing the total invested since IPO to £302 million.  The portfolio now comprises 2,435 residential units across 660 unique locations serving Shared Ownership, retirement and Local Authority housing tenants

  • Entry into the Shared Ownership sector with £77 million invested in the acquisition of 166 residential units for delivery as Shared Ownership using grant funding from the Greater London Authority’s “Homes for Londoners” programme: 

    • £60 million acquisition of 132 apartments at Clapham Park from Metropolitan Thames Valley Housing in March 2019

    • Acquisition of 34 new-build homes in Barnet, London, for £16.5 million from Crest Nicholson in October 2019

    • Execution of a £300 million Housing Investment Agreement with Morgan Sindall Investments, initially targeting 1,500 new Shared Ownership homes

  • Created value by extending the lease term on 279 retirement properties to 150 years, increasing the average unexpired lease term of ReSI’s retirement portfolio to 131 years

  • £6.5 million addition to the retirement portfolio completed in October 2018

  • After the period end in May 2019, ReSI agreed a new 10 year management agreement with Places for People group, rated G1/V1 by the Regulator of Social Housing, covering the day-to-day management, rent collection and maintenance of its 2,219-unit retirement housing portfolio

  • Portfolio optimization progressed through the sale of eight retirement properties at an average of 9% above book valuation

Team strengthened with senior appointments

  • David Orr, former CEO of the National Housing Federation, appointed as independent Chairman of ReSI's Registered Provider of Social Housing, ReSI Housing Limited

  • Gillian Rowley appointed as an independent non-executive director of ReSI Housing Limited

 Jonathan Slater, Chief Executive of ReSI Capital Management, the Fund Manager, commented: “During the first half we have made significant progress in the delivery of our stated strategy, having continued to add to our portfolio through a number of acquisitions and, most notably, through our entry into the Shared Ownership sector, which we have identified as the area of future growth for ReSI.  The quality of ReSI’s portfolio is clearly reflected in the results we have announced today and particularly in the valuation uplift, which was driven primarily by contractual inflation-linked rental increases flowing through into valuation accretions and our own asset management initiatives.  This puts us on track to continue to achieve the return targets set at the time of our IPO and the delivery of visible and sustainable income on behalf of our shareholders, while supporting the provision of much needed affordable accommodation across the UK.”

Robert Whiteman, Chairman of Residential Secure Income plc, added:

“ReSI has demonstrated its ability, through ReSI Housing, our Registered Provider of social housing, to acquire properties funded by government grant, including Shared Ownership.  Having now acquired our first Shared Ownership investments, we are especially enthusiastic about the opportunities this sector presents.  Shared Ownership is increasingly being seen as an effective solution to lack of affordability across a range of value points, and is an efficient way for government grant funding to be used, as the grant translates directly into a subsidised level of rent.  Shared Ownership presents a very scalable investment opportunity, and we expect to be focussing our future deployment in this area.

“Having substantially committed the capital raised at IPO, together with leverage currently at c. 36% borrowings to Gross Asset Value, the focus is now on delivering the Shared Ownership part of the portfolio to becoming fully income-producing.”

For further information please contact:

ReSI Capital Management Limited / TradeRisks Limited
+44 (0) 20 7382 0900

Ben Fry
Alex Pilato
Mark Rogers
Jonathan Slater
Richard Stubbs

Jefferies International Limited
+44 (0) 20 7029 8000

Stuart Klein
Gary Gould

FTI Consulting
+44 (0) 20 3727 1000
resi@fticonsulting.com

Richard Sunderland
Claire Turvey
Richard Gotla
Methuselah Tanyanyiwa


Sid Saldanha