In line with the wider real estate sector, Residential Secure Income’s annual results were impacted by the higher interest rate environment.
EPRA net tangible assets (NTA) was 81.8p per share, delivering a total return of -18.1%. Portfolio value was down 10% on a like-for-like basis with an 80 basis points (0.8%) outwards yield shift, reflecting higher gilt yields.
Other key financial metrics
- 6.1% like-for-like rent growth
- EPRA adjusted earnings of £8.7m (FY22: £9.0m) with strong rent growth offset by higher retirement portfolio energy costs and increased floating rate debt costs
- LTV of 50% (FY22: 47%) supported by 21 year average debt maturity
- Total dividends paid of 5.16p per share (FY22: 5.16p) with 91% dividend cover (FY22: 97%)
- Dividend target rebased to 4.12p per share for the year ended 30 September 2024
Portfolio and operational highlights
- Portfolio of 3,295 homes (focused on direct leases with pensioners and part home owners) worth £345m
- Rent collection of over 99% for year (FY22 99%)
- Shared ownership portfolio now full occupied with record 96% retirement occupancy at period end
- Shared ownership net income growth of 23%, driven by rent growth, leasing and acquisitions
- Retirement net income growth curtailed to 1% due to 44% increase in communal areas energy costs
Rent caps were voluntarily implemented across the portfolio to balance returns with affordability for residents. Shared ownership rent increases voluntarily capped at 7%, while retirees rent increase capped at 6%
Non-core assets sales
Local Authority Portfolio now under offer and expected to complete in early 2024. This will allow for the repayment of all floating rate debt, leaving the company with only long-term drawn debt with 23 year weighted average maturity and largest loan of £94m fixed at 3.5% until 2043.
Robert Whiteman, CBE, chairman, said:
“We announced a review of non-core assets in our interim results, with a plan to reduce financing costs. Following this review, our local authority portfolio is now under offer for sale and in solicitors’ hands. Completion will enable full repayment of our existing floating rate debt. This will leave ReSI with two portfolios focused on strong market segments – independent retirement living and shared ownership – supported by very long-term debt with an average drawn maturity of 23 years.
“We also announced in the interim results that in light of the higher interest rate environment, cost inflation in retirement and fund opex increases we would look to reset the dividend. Subsequent progress on sale of the local authority portfolio leading to the expected repayment of floating rate debt gives us the confidence to reset the dividend to a fully covered and progressive 4.12p a share.
“We are very conscious of listed sector discounts widening significantly, and ReSI is not immune to factors also affecting our peers. We will continue to review options to reverse this situation. To further align the investment manager with shareholders, and show its confidence in reducing the discount, Gresham House has agreed to reduce its management fee to be more closely aligned to the discount.”
RESI : Residential Secure Income reduces dividend target