Feedback from Civitas Capital Markets Day – Civitas held its Capital Markets Day yesterday and, as promised, here are a few comments from us. We’ll incorporate most of this, with more detail, into our next research note on the company.
First, the presentations (which were only open to professional investors) were well attended. There seems to be a lot of interest in the stock.
The Civitas team ran through the market backdrop
- a significant shortage of social housing of all kinds in the UK and of specialist supported housing of the type that Civitas focuses on;
- Civitas has an estimated 2.4% share of tenants currently and 3.3%* share of rents (4% when fully invested). They say their rents are higher because their tenants have a higher average acuity (more complex needs);
- 1996 Conservative government set rules relating to exempt specialist supported housing and agreed that rents would be uncapped for this segment of social housing reflecting customisation needed to accommodate tenants;
- voids exist because accommodation isn’t ready for occupation or because care providers are gradually taking up space (they take great care to ensure that the tenants in a building are compatible). Moving tenants is time consuming and costly; and
- as places become vacant they are filled by people from long term NHS hospitals or from families that can no longer cope.
Richard Petty from JLL explained the approach to valuing the portfolio – this will be in our next note – basically its all about the cash flows. The properties are worth much less without them.
We had a presentation from a developer (Fairhome) who explained that 90% of what they do is refurbishing pre-existing properties but they often make considerable structural alterations.
The CEO of Falcon (Civitas’s largest housing association) discussed how they are working with Civitas to prepare for their evaluation by the Regulator.
Jamil Mawji of National Care Group drew attention to the fragmentation of the care industry, the pressures it faces (particularly from staff turnover which can be 40%/50% in some firms) and the efforts they make to improve the quality of life for their patients.
Paul Bridge, CEO of Civitas Housing Advisors, reported on a conference that they had held with industry participants, including the Regulator. He says the Regulator confirmed that it has no problem with the leasing model. Although it is keen to improve governance standards and ensure that Registered Providers have planned for every eventuality.
Civitas laid out its expansion plans – it is busy deploying £170m of debt finance which will increase dividend cover. It may look at Scotland, which would require shareholder approval, and may have opportunities to buy large portfolios of supported housing.
Lastly we had a presentation from Crisis. Homelessness is a real problem in the UK, going far beyond the visible ranks of rough sleepers. Jon Sparkes, its CEO, asked us to spread the message that it needs funds and volunteers – if you want to know more visit www.crisis.org.uk
* NB: this was corrected on 15/5/19 – previously we were comparing the current tenant figure with the projected rent figure
CSH : Feedback from Civitas Capital Markets Day