Residential Secure Income plc - Maiden Annual Results Announcement

Accelerated second half activity underpins robust financial performance with £234 million deployed since IPO.

Residential Secure Income plc (“ReSI”) (LSE: RESI), which invests in residential asset classes that comprise the stock of UK social housing providers, today announces its results for the period from 12 July 2017 to 30 September 2018.  The results represent the Company’s first set of annual results since ReSI’s successful admission to the main market of the London Stock Exchange in July 2017. 

 

Financial highlights

  • IFRS Net Asset Value (“NAV”) Total Return of 9.5%, exceeding the 8%+ target set at IPO, driven by a 7.0% uplift in portfolio valuation to £225.2 million compared to acquisition cost

  • IFRS NAV of £183.6 million or 105.1 pence per share which represents a 7.3% increase since IPO

  • Earnings per share of 9.0 pence

  • Annualised net rental income of £10.5 million, representing 5.0% net yield on capital deployed

  • Total dividends declared of 3.0 pence per share, in line with the target at IPO

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

  • ReSI is targeting a dividend yield of 5% per annum (based on the issue price of 100p per Ordinary Share) for the year commencing 1 October 2018, increasing broadly in line with inflation, and a target total return of 8%+ per annum

 

The movement in NAV for the period from 12 July 2017 to 30 September 2018 is as follows:

 

£m

Pence per share

Net Asset Value as at 12th July 2017

176.4

98.0

Net Income for period

1.7

0.9

Valuation change

14.4

8.0

Dividend paid

(4.0)

(2.2)

Net capital reduction

(4.9)

(2.7)

Impact of reduction in number of shares

-

3.1

Net Asset Value as at 30th September 2018

183.6

105.1

Operational highlights

Since IPO, and including post period transactions, the Company has invested £234 million in acquiring a portfolio of 2,435 residential units serving retirement, Local Authority housing and shared ownership tenants.

 

  • Retirement Rentals: £184 million deployed, through four separate transactions, acquiring a portfolio of 2,112 residential retirement units, including licenced house manager flats, located across England, Wales and Scotland, including:

    • £100 million acquisition of the 1,341-property RHP Portfolio, operated by the UK retirement home manager subsidiary of one of the largest UK Housing Associations, of which 82% is let on RPI-linked assured tenancies offering lifetime security of tenure to residents. During the period, ReSI secured extensions to 1,003 leases to 150 years, increasing the portfolio’s average unexpired least term to 140 years and creating further shareholder value

    • £31.2 million acquisition of 277 retirement properties licensed to First Port, the UK's largest residential property management group

    • £37 million acquisition of a 421-property retirement portfolio from Places for People and exchanged contracts to acquire a further 57 units

    • Post-period £6.5 million acquisition of 39 further leased house manager flats

  • Local Authority housing: Two acquisitions, totalling £34million, of freehold Local Authority housing containing 289 self-contained flats in the centre of Luton and leased to Luton Borough Council

  • Shared Ownership: Post-period acquisition of 34 new build homes, for £16.45 million, located in the London Borough of Barnet, for conversion into Shared Ownership homes using Government grant

  • ReSI Housing Limited: in July, through its subsidiary ReSI Housing Limited, the Company became the first publicly listed investment fund to become a Registered Provider with the Regulator of Social Housing

  • Debt: £93 million of 25 year fixed rate, partially amortising, debt raised (including £40 million post period) at blended rate of 3.47%

 

Personnel developments

  • Robert Whiteman appointed as non-Executive Chairman

  • Mike Emmerich, formerly CEO of New Economy Manchester appointed as non-Executive Director

  • David Orr, former CEO of the National Housing Federation, appointed post-period as independent Chairman of ReSI Housing Limited

  • Richard Stubbs appointed as Chief Financial Officer of TradeRisks Ltd, the parent company of ReSI's Fund Manager

 

Jonathan Slater, Chief Executive of ReSI Capital Management, the Fund Manager, commented: “After a slower than expected start, the pace of investment accelerated significantly in the second half of the period and has continued since, allowing us to build a large and diverse portfolio of high quality, immediately income producing properties.  In addition to adding value to the portfolio through our asset management, we have continued to build a pipeline of investments that meet our strict investment criteria and have identified and negotiated transactions, currently undergoing detailed due diligence, which would deploy all of ReSI’s remaining capital with a predominate focus on Shared Ownership. 

 

“With the Company achieving the landmark of becoming the first publicly listed investment fund to become a Registered Provider of Social Housing, through its ReSI Housing subsidiary, ReSI is now able to acquire properties designated as affordable and which are funded by government grant.  This has significantly expanded ReSI’s pool of potential investments in a sector which offers clear potential to grow the Company’s portfolio and generate visible and sustainable income on behalf of our shareholders, while supporting the delivery of much needed affordable accommodation across the UK.”

 

Robert Whiteman, Chairman of Residential Secure Income plc, added: “There continues to be a shortage of housing in many parts of the United Kingdom, resulting in high levels of demand, and ReSI has seen strong appetite from Housing Associations, Local Authorities and private developers for new sources of capital to invest in these areas.  As a result of this demand the business is well positioned to build on the strong financial performance delivered during the period and continue growing in a disciplined manner.  

 

“Given the solid progress in building our portfolio, its performance and the outlook for the Company, the Board reaffirms its target dividend yield of 5% per annum, which we expect to increase broadly in line with inflation, and its target total return of in excess of 8% per annum.”

Sid Saldanha