QuotedData attends Civitas annual results – Civitas Social Housing (CSH) presented its annual results, to 31 March 2019, at an analyst briefing earlier this morning. The company says the portfolio has been independently judged to have produced £114m worth of social value to date, including £59m annual direct savings to the taxpayer. We will discuss this in our summary.
Performance highlights for the year
| wdt_ID | Property Valuation and Performance | Mar-19 | Mar-18 | Change |
|---|---|---|---|---|
| 1 | Investment property (£m) | 826.90 | 516.60 | Up 60% |
| 2 | IFRS NAV per share (diluted) (p) | 107.08 | 105.54 | Up 1.5% |
| 3 | Rent roll annualised (£m) | 45.70 | 28.40 | Up 61% |
| 4 | Net rental income (£m) | 35.70 | 18.60 | Up 92% |
| 5 | EPRA earning per share (p) | 3.81 | 1.80 | Up 112% |
| 6 | EPRA earning per share (diluted) (p) | 3.63 | 1.44 | Up 152% |
| 7 | Dividend per share (p) | 5.00 | 3.00 | Up 67% |
| 8 | Loan to value ratio | 22.00 | 12.00 | - |
| 9 | Weighted average cost of debt | 2.57 | 2.60 | - |
Here are a few comments from us.
The CSH team began by overviewing the year:
- The company used all of its equity proceeds and debt of £204.8m to grow the portfolio by 60%. It ended the year with 591 properties, compared to 414 last year, and now provides homes to over 4,000 tenants with learning disabilities, autism, mental health disorders and women in need of refuge;
- The rent roll increase of 61% was driven by these acquisitions as well as rent reviews. It was interesting to note that the team believe average acquisition yields, which were 5.9% at year-end, are likely to decline going forward as competition for supported housing properties grows further.
The team went on to discuss CSH’s diversification into homelessness and NHS step down homes:
- Shelter estimates that there are 35k people regularly sleeping rough and over 100k families living in temporary accommodation of sub-standard quality. Local authorities have an increased responsibility to this population following the passing of the Homelessness Reduction Act in 2017. CSH is negotiating with local authorities to provide leases, which will generate further long-term secure income for the company and improve social outcomes for these people;
- On NHS step down homes, which involve providing facilities for those with care needs currently being accommodated in hospitals, the company says it has had several conversations with NHS trusts and other providers to provide housing capacity. CHS said it typically costs the NHS around £5k a week to house a social care patient, compared to only £200-300 a week in social housing;
- The NHS is looking to for 40-year leases, which is much higher than the CSH’s average unexpired lease term of about 25 years, which for the NHS’ purposes would be like owning the assets. Any leases structure would not be with the NHS as a lessee though, the team said, as that would mean the properties would be categorised as healthcare and not social care assets.
On the subject of CSH’s interactions with the Regulator for Social Housing, we note:
- The Regulator has been reviewing many of the housing associations the company works with. CSH says the Regulator has said that there are no inherent problems with the industry’s lease-based model. CSH is working with its housing association partners to support contingency planning and measures around the stability of its own income. CSH said it will not be reviewing exists lease agreements as this would not be operationally feasible. Finally, the team said the Regulator found no correlation between the industry model and adverse health and safety outcomes for tenants;
- CSH believe there continues to be positive political support for social housing and re-affirmed that there has been 23 years of unbroken government support. In their view, there has been no indication the state will stop covering 100% of local authority costs.
The £114m in social value created by CSH was judged by The Good Economy, a specialist social impact consultancy. Its study considered a wide range of tenants in detail and measured the monetary value from improved health and wellbeing, reduced isolation and improved relationships.
Over the lifetime of CSH’s 25-year lease term, the value figure grows to £1bn. CSH said the average age of the tenants its properties house is 32, so these are potentially multi-decade care solutions. It is argued that proving the means for social housing candidates to live in supported housing can provide much better social outcomes and is much cheaper than other accommodation, such as hospitals or specialised institutions.
Finally, we’ve included a geographical breakdown of the CHS portfolio at year-end below:
| wdt_ID | Region | Properties | % of funds invested | % of rental income |
|---|---|---|---|---|
| 1 | North West | 95 | 10.10% | 10.10% |
| 2 | West Midlands | 94 | 11.90% | 11.90% |
| 3 | Wales | 15 | 8.30% | 8.30% |
| 4 | South West | 112 | 14.70% | 14.50% |
| 5 | North East | 63 | 7.00% | 7.00% |
| 6 | Yorkshire | 49 | 10.90% | 10.70% |
| 7 | East Midlands | 58 | 9.60% | 9.50% |
| 8 | East of England | 18 | 2.80% | 2.70% |
| 9 | London | 26 | 14.10% | 14.50% |
| 10 | South East | 61 | 10.60% | 10.80% |
CHS: QuotedData attends Civitas annual results