Residential Secure Income plc - Full Year Results

SHARED OWNERSHIP ACQUISITIONS, INFLATION-LINKED RENTS AND ASSET MANAGEMENT INITIATIVES UNDERPIN STRONG PERFORMANCE AND POSITION REIT FOR FUTURE INCOME GROWTH

Residential Secure Income plc ("ReSI") (LSE: RESI), which invests in residential asset classes that comprise the stock of UK social housing providers, is pleased to announce its unaudited net asset value ("Net Asset Value" or "NAV") as at 31 December 2018 and to provide an update on its corporate activity since 30 September 2018.

Financial highlights

  • IFRS Net Asset Value (“NAV”) Total Return of 8.0 pence per share for the period and 17.3 pence / or 18%, since Admission, with ReSI delivering on its 8%+ p.a. target

  • Earnings per share of 7.7 pence (30 September 2018: 9p)

  • Significant growth in operating earnings per share to 2.9 pence (30 September 2018: 0.9p), reflecting ongoing ramp up of rental income

  • 3.9%, or £8.7 million, uplift in the portfolio valuation during the year, driven primarily by inflation linked rent increases (£6.6 million) and successful long-term, lease extensions in the retirement portfolio (£1.6 million)

  • 3.3% increase in IFRS NAV to 108.6 pence per share (30 September 2018: 105.1 pence per share), representing growth of 11% since Admission

  • ·Annualised net rental income increased 6.7% to £11.2 million (30 September 2018: £10.5 million), representing a 5% net yield on capital deployed to income producing assets, which will increase in 2020 with inflation and as shared ownership portfolio comes on stream

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

  • Total asset level drawn debt of £108.2 million (30 September 2018: £51.6 million) reflecting a gearing ratio of 36.3%

  • Total dividends declared for the period of 5 pence per share (in four equal quarterly instalments of 1.25 pence), in line with 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

The movement in NAV for the year to 30 September 2019 is as follows:

  £m Pence per share
Net Asset Value as at 30th September 2018 183.6 105.1
Net Income for period 4.7 2.8
Valuation change 8.5 5.0
Dividend paid (7.7) (4.5)
Net capital reduction (3.4) (2.0)
Impact of reduction in number of shares3    2.2
Net Asset Value as at 31st December 2018 185.7 108.6

High quality and diverse portfolio, delivering measurable social benefit, enhanced through acquisitions and asset management; fully invested IPO proceeds and substantially invested available debt

  • £83 million invested or committed in 332 residential units during the year, bringing the total deployed since IPO to £302 million.  The portfolio now comprises 2,677 residential units valued at £321.3 million (including £60.6 million of committed acquisitions), across 655 unique locations serving shared ownership, retirement and Local Authority housing tenants

  • Social impact from portfolio of £731 million, calculated by the Social Profit Calculator, to be delivered over 25 years, representing £4.27 per share, through subsidised rents, wellbeing improvements to tenants, fiscal savings and wider economic benefits

  • Registered Provider status facilitated entry into the shared ownership sector, with £77 million invested or committed delivering 166 homes as shared ownership using grant funding from the Greater London Authority’s “Homes for Londoners” programme: 

    • £60 million committed to acquire 132 apartments at Clapham Park from Metropolitan Thames Valley Housing in March 2019, with construction expected to complete in Q1 2020

    • Acquisition of 34 new-build homes in Barnet, London, for £16.5 million from Crest Nicholson in October 2018, of which over 80% are already sold or in progress at a sales price in line with the target at acquisition, delivering long-term rental income for ReSI

    • Execution of a £300 million Housing Investment Agreement between the ReSI fund manager ReSI Capital Management and Morgan Sindall Investments, initially targeting 1,500 new Shared Ownership homes

  • Lease terms extended to 150 years on 279 retirement properties, adding value and 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

  • 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 12 retirement properties at an average of 7% above book valuation

 

Team strengthened with senior independent 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:

“This strong set of results was underpinned by an uplift in portfolio valuation which was driven by a combination of contractual inflation-linked rental increases flowing through into valuation accretions, along and our own asset management initiatives. More recently we have focused on establishing our Shared Ownership portfolio, which will, once fully occupied, produce high-quality and sustainable income, to the benefit of our shareholders, whilst at the same time delivering significant social value.

“Our ambition remains to significantly grow the size of ReSI to be able to achieve the benefits of scale, and we continue to generate a strong pipeline of potential investments to facilitate this.  We have remained highly disciplined in selecting the transactions we are prepared to undertake and believe that this is fundamental to delivering the long-term secure returns expected by ReSI’s shareholders.”

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

“The well-documented shortage of housing in many parts of the United Kingdom continues to drive 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 housing in these areas. ReSI has clearly demonstrated its ability, through ReSI Housing, our Registered Provider of social housing, to deliver new and much needed affordable accommodation supported by government grant, including shared ownership.            

“Having now substantially committed our available equity capital, together with leverage currently at c. 36% borrowings to Gross Asset Value, we are now focussed on the delivery of ReSI’s shared ownership assets to make the portfolio fully income producing.”

Sid Saldanha