TIDMSOHO
RNS Number : 6335L
Triple Point Social Housing REIT
07 September 2023
7 September 2023
Triple Point Social Housing REIT plc
(the "Company" or, together with its subsidiaries, the
"Group")
RESULTS FOR THE SIX MONTHSED 30 JUNE 2023
The Board of Triple Point Social Housing REIT plc (ticker: SOHO)
is pleased to announce its unaudited results for the six months
ended 30 June 20 23 .
Chris Phillips, Chair of Triple Point Social Housing REIT plc,
commented:
"The Company has continued to demonstrate strong rental growth
and valuation resilience during the first half of 2023, despite the
uncertain macro-economic backdrop. We were pleased to announce the
recent portfolio sale of properties principally in line with book
value, demonstrating continued liquidity and the resilience of
valuations in the sector.
The Investment Grade rating of our long-term fully fixed priced
debt was reaffirmed last month and our focus remains on the
operating performance of our portfolio. Our proactive approach to
asset management, paired with the inflation protection offered
through our rental income, and the growing demand for specialised
supported housing, means that we are well positioned to ensure the
sustainability of our investments over the long-term."
Six months Six months Year ended
to 30 June to 30 June 31 December
20 23 20 22 2022
Portfolio value
* IFRS basis GBP675.1m GBP 669.6 GBP6 69.1
m m
EPRA Net Tangible Assets ("NTA")
per share
(equal to IFRS NAV per share
) 111.31p 111.80 p 10 9.06 p
EPRA Net Initial Yield (NIY) 5.65% 5.28% 5.46%
Loan to Value 37.5% 36.8% 37.4%
Earnings per share (basic and
diluted) 3.65p 6.19 p 6.18 p
* IFRS basis 2.18p 2.43p 4 .78 p
2.21p 2.57p 5.03p
* EPRA basis
* Adjusted earnings
Total annualised rental income GBP40.5m GBP 37.4 GBP 39.0
m m
Weighted average unexpired 24.8 yrs 25.9 yrs 2 5.3 yrs
lease term
Dividend per share 2.73p 2.73 p 5.46 p
Financial highlights
-- EPRA NTA per share up 2. 1 % to 111.31 pence at 30 June 2023
(31 December 2022: 109.06 pence) , reflecting an increase in the
value of the Group's property portfolio and the accretive impact of
the GBP5 million share buyback programme over the period.
-- Portfolio valued as at 30 June 2023 at GBP675.1 million on an
IFRS basis , up from GBP669.1 million as at 31 December 2022 and
reflecting a valuation uplift of 12. 2 % against total invested
funds of GBP 601.9 million (1) . The positive impact of strong
rental growth on valuations was part i ally offset by an outward
movement in yields reflecting wider market conditions.
-- The fair value gain on investment properties for the six
months ended 30 June 2023 amounted to GBP5.9 million (30 June 2022:
GBP17.1 million). Net profit for the six months ended 30 June 2023
was GBP14.6 million (30 June 2022: GBP24.9 million). The reduction
relative to the comparable period in 2022 was principally
reflective of the impact of a lower fair value gain on investment
properties being recognised during the period. The Expected Credit
Loss adjustment made (relating to unpaid rent) also had a negative
impact on net profit.
-- The portfolio's total annualised contracted rental income was
GBP40.5 million as at 30 June 2023 (31 December 2022: GBP39.0
million). IFRS Gross Revenue for the period was GBP19.6 million
(GBP18.2 million for the six months ended 30 June 2022).
-- 100% of contracted rental income was either CPI ( 92.4 %) or
RPI ( 7.6 %) linked. 4.9% of the Group's leases are capped
(excluding the temporary rent cap of 7% applied to the Group's rent
increases for the year of 2023) .
-- Ongoing Charges Ratio of 1.63% as at 30 June 2023 (31
December 2022: 1.60%; 30 June 2022: 1.57%), with the marginal
increase primarily due the impact of inflation on the Group's cost
base .
-- A ll drawn debt is fixed (weighted average coupon of 2.74%)
and long-term (10.1 years), which continues to offer strong
protection against increasing interest rates.
-- Maintained an Investment Grade Issuer Default Rating from
Fitch of 'A-' (Stable Outlook) with a senior secured rating of
'A'.
Successful portfolio sale demonstrating the value of the Group's
assets and dividend in line with target
-- Portfolio of four properties sold for GBP7.6 million, in line
with book value of GBP7.9 million and representing an increase of
GBP0.7 million (9.6%) compared to the aggregate purchase price paid
by the Group for the properties.
-- The dividend to be paid on 30 September 2023 brings the total
dividend per share paid or declared by the Company in respect of
the six month period to 30 June 2023 to 2.73 pence per share, in
line with the Company's stated target for the year to 31 December
2023 of 5.46 pence per share. (2)
-- Dividend cover on an adjusted earnings basis at 30 June 2023
was 0.81x (31 December 2022: 0.92x). If an adjustment is made for
the portion of the Expected Credit Loss recognised in the six
months ended 30 June 2023 that relates to unpaid rent due in 2022,
dividend cover for the six months ended 30 June 2023 was 0.90x.
Operational highlights
-- 88.1% of rent due was collected during the period, and 25 out
of the Group's 27 lessees recorded no material rent arrears. Post
the period end, the Investment Manager has made progress in respect
of both Approved Providers which have material rent arrears.
o There is now a creditor agreement in place with Parasol in
respect of future rental payments.
o Similarly, a creditor agreement is being negotiated with My
Space in respect of future rental payments together with a payment
plan for arrears . Simultaneoulsy a transfer of properties to
alternative Registered Providers is being considered.
-- EPRA blended NIY of 5.65% based on the value of the portfolio
on an IFRS basis as at 30 June 2023 , against the portfolio's
blended net initial yield on purchase of 5.91%, equating to yield
compression of 26bps .
-- Diversified portfolio of 497 properties (3) :
o 11 regions
o 15 3 local authorities
o 39 4 leases
o 27 Approved Providers
o 123 care providers
-- As at 30 June 2023, the weighted average unexpired lease term (" WAULT ") was 24.8 years.
-- Agreed a new lease clause , with support from stakeholders,
which seeks to address general risks raised by the Regulator of
Social Housing in relation to long leases, to be implemented in the
Group's existing Registered Provider leases in the second half of
2023 .
-- Commenced the pilot phase of an energy efficiency improvement
initiative which entails upgrading all of the Group's properties to
an Energy Performance Certificate ("EPC") rating of C or above.
Over 70% of the Group's properties already meet this standard
(compared to a social housing sector average of c. 57%).
-- Partnership with Golden Lane, a R egistered Provider with a
regulatory compliance rating of G1 V2 and one of the leading
providers in the Specialised Supported Housing sector, on a
pipeline of projects.
Notes:
1 Including acquisition costs
2 These are targets only and not a profit forecast and there can
be no assurance that they will be met
3 Four out of these 497 properties are classified as assets held for sale at 30 June 2023
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management Tel: 020 7201 8989
LLP
(Investment Manager)
Max Shenkman
Isobel Gunn-Brown
Akur Limited (Joint Financial Tel: 020 7493 3631
Adviser)
Tom Frost
Anthony Richardson
Siobhan Sergeant
Stifel Nicolaus Europe Limited Tel: 020 7710 7600
(Joint Financial Adviser and Corporate
Broker)
Mark Young
Rajpal Padam
Madison Kominski
Brunswick Group (Financial PR Tel: 020 7404 5959
Adviser)
Nina Coad
Diana Vaughton
Mara James
The Company's LEI is 213800BERVBS2HFTBC58.
Further information on the Company can be found on its website
at www.triplepointreit.com .
IMPORTANT INFORMATION:
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014, as it
forms part of UK Domestic Law by virtue of the European Union
(Withdrawal) Act 2018, as amended and supplemented ("UK MAR") and
is disclosed in accordance with the Company's obligations under UK
MAR. Upon the publication of this announcement, this inside
information will be considered to be in the public domain.
NOTES:
The Company invests in primarily newly developed social housing
assets in the UK, with a particular focus on supported housing. The
assets within the portfolio are subject to inflation-linked,
long-term (typically from 20 years to 30 years), Fully Repairing
and Insuring ("FRI") leases with Approved Providers (being Housing
Associations, Local Authorities or other regulated organisations in
receipt of direct payment from local government). The portfolio
comprises investments into properties which are already subject to
an FRI lease with an Approved Provider, as well as forward funding
of pre-let developments but does not include any direct development
or speculative development.
The Company was admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange on 8 August
2017 and was admitted to the premium segment of the Official List
of the Financial Conduct Authority and migrated to trading on the
premium segment of the Main Market on 27 March 2018. The Company
operates as a UK Real Estate Investment Trust ("REIT") and is a
constituent of the FTSE EPRA/NAREIT index.
Meeting for analysts and audio recording of results
available
T he Company presentation for analysts will be held at 8.00 am
today via live webcast . The presentation will also be accessible
on-demand later in the day via the Company website:
www.triplepointreit.com .
Those wishing to access the live webcast are kindly asked to
contact the Company Secretary at Hanway Advisory on +44 (0) 20 3909
3519 or cosec@hanwayadvisory.com .
The Interim Results will also be available to view and download
on the Company's website at www.triplepointreit.com and hard copy
will be posted to shareholders on or around 15 September 2023 .
CHAIR'S STATEMENT
Introduction
The macroeconomic backdrop during the first half of 2023 has
remained uncertain. High interest rates and gilt yields have
impacted the wider property sector. Despite these challenges , the
Specialised Supported Housing sector has continued to demonstrate
strong rental growth and valuation resilienc e .
Last year, we took the decision to cap the Group's 2023 rent
increases at 7%, in line with the government's cap on social
housing rent increases, even though Specialised Supported Housing
was excluded from this cap. Given UK CPI has remained elevated ,
rent s have been increased in line with the cap. This rental growth
has offset general market wide yield compression and helped us to
deliver growth in the Group's portfolio value and EPRA NTA per
share in the first half of the year despite the very challenging
economic environment, differentiating us from other UK property
sectors that have suffered material reductions in value.
The relatively strong performance of the Specialised Supported
Housing sector is reassuring and in line with the sector's
fundamentals. There remains a lack of supply and all forecasts
point to growing excess demand for more independent community-based
homes for people with care and support needs. This, combined with
government financial support for the individuals that live in
Specialised Supported Housing, means that the sector is well placed
to withstand periods of economic uncertainty.
Capital Allocation
We aim to supplement our existing portfolio of properties with
forward funding projects and acquisitions over the medium term,
however all deployment is considered in the context of delivering
shareholder value and the broader market conditions. During the six
months ended 30 June 2023, the Board has viewed share buybacks as a
more attractive and appropriate use of the Group's capital, buying
back GBP5 million ( 9,322,512 shares ) between 19 April 2023 and 12
June 2023 at an average discount to the prevailing published EPRA
NTA of 52.8%, which has been accretive to dividend cover. The Group
does intend to invest into a competitively priced forward funding
project in conjunction with Golden Lane, a Registered Provider with
a regulatory compliance rating of G1 V2 and one of the leading
providers in the Specialised Supported Housing sector . Further
detail on this new partnership can be found in the Investment
Manager's Report .
As indicated in the Group's 2022 Annual Report, it has been a
priority of the Board to demonstrate the value of the Group's
assets through a sale of a portfolio of properties. Since the
period end, we have successfully concluded a portfolio disposal of
four properties for an aggregate consideration of GBP7.6 million
which is principally in line with the book value of GBP7 .9 million
as at 30 June 2023 and reflects a GBP0. 7 million gain (9.6%)
against the aggregate purchase price that the Group paid for the
properties. The portfolio of properties sold contained a mix of
property types, lessees and care providers. F ollowing consultation
with shareholders over the coming weeks , and with consideration
given to the Group's leverage position, the Board will consider
whether some of the proceeds from the sale should be used for an
additional share buyback programme. More details on the sale and
capital allocation are included in the Investment Manager's R
eport.
Portfolio P erformance
Consolidating and optimising the performance of the Group's
portfolio has been a principal focus of the Board and the
Investment Manager.
Since early 2020 , the operating environment has been difficult
for all our Approved Providers. As the numerous challenges posed by
COVID-19 eased, they were replaced with the financial headwinds of
rising inflation and increased regulatory costs. Despite
challenging economic conditions, the majority of the Group's
Approved Providers are performing in line with expectations, and
have managed to navigate these issues successfully. Reassuringly we
are seeing signs of improvement, with a recent reduction in gas
prices, a less challenging labour market and an overall improvement
in the operational backdrop for our partners which allows us to
look forward with renewed confidence.
We believe the strength of our relationships with our partners
sets us apart in the Specialised Supported Housing sector. This
ensures that we have both the operational data and anecdotal
feedback required for a granular understanding of the performance
of the Group's portfolio of properties. All aspects of portfolio
management, including compliance, care provider performance and
local authority nominations, are monitored and assessed on an
ongoing basis. This enables us to intervene quickly if issues arise
and to help our lessees move forward through initiatives such as
the roll out of our new lease clause as described in the Investment
Manager's Report .
As previously reported, rent receipts were lower than expected
for two of the Group's lessees, My Space and Parasol. We are
pleased to report that a creditor agreement has been put in place
with Parasol which reflects the current level of rents being
received and allows for rents to increase over time. Similarly, we
hope to agree a creditor agreement with My Space shortly, and
continue to engage with alternative Registered Providers so that
the Group's properties can be moved should we deem this to be in
the best interests of residents and the sustainability of the
Group's income . The Group's Board and the Investment Manager are
focused on ensuring that My Space and Parasol perform in line with
expectations. A full update on the performance of these lessees is
included in the Investment Manager's R eport.
Alongside maintaining the performance of our portfolio , we have
evolved our investment structure to provide appropriate support to
our Registered Provider lessee partners as they look to progress
from a risk management and regulatory perspective. We have led the
sector on managing risk by rolling out a new risk sharing clause
across all our Registered Provider leases which can help boards of
Registered Providers demonstrate material progress on risk
management to the Regulator of Social Housing.
Recognising the link between value creation and the quality of
the homes we deliver, the Board is taking increased measures to
oversee the broader sustainability credentials of the Group. A
separate Sustainability Committee has been established to ensure
due consideration of a range of sustainability activities and
outcomes, which will be detailed further in the 2023 Annual
Report.
Financial Results
The Group has continued to demonstrate strong financial
resilience in challenging conditions. The EPRA NTA per share as at
30 June 2023 was 111.31 pence per share, an increase of 2.25 pence
compared to the NTA of 109.06 pence per share as at 31 December
2022. This increase was driven by growth in the value of the
Group's property portfolio and the accretive impact of the share
buybacks undertaken by the Group in the period.
In August , Fitch Ratings Ltd re affirmed the Company's existing
Investment Grade, long-term Issuer Default Rating (IDR) of 'A-'
with a stable outlook and a senior secured rating of 'A' for the
Group's existing loan notes , for the second consecutive time.
I am pleased to report that we continue to pay dividends in line
with our annual targets, as we have done consistently since IPO.
For the six months ended 30 June 2023 , dividend cover, based on
adjusted earnings, was 0.81x. Dividend cover was lower than in
previous periods due to an additional provision of GBP 1.0 million
recognised in the period, relating to the My Space and Parasol rent
arrears for the year ended 31 December 2022. Without this
additional provision , adjusted dividend cover for the six months
ended 30 June 2023 was 0.90x (1) . Through our focus on addressing
the current level of rent payments from My Space and Parasol
(details on which are provided in the Investment Manager's Report)
we will look to improve dividend cover over the course of this year
and preserve it over the longer-term.
Overall, we are proud of another set of resilient financial
results which build on our performance to date and the encouraging
operational progress made during the period. This would not have
been possible without the support of our stakeholders, all of whom
played an important role in helping deliver on our investment
strategy. You can read more about our financial performance during
the period in our Key Highlights, along with a more in-depth review
in the Investment Manager's R eport.
Social Impact
Social Impact continues to be at the forefront of our
decision-making processes and is central to our business model. The
independent Impact Report prepared by The Good Economy for the six
months ended 30 June 2023 provides an independent assessment of our
impact performance, based on an analysis of quantitative data and
evidence, as well as in-depth interviews with a range of
stakeholders. You can read more on the social value and impact that
our properties create in the Impact Report prepared by the Good
Economy, available separately on our website.
Outlook
Whilst capital markets remain challenging, our focus remains on
the operating performance of our portfolio which we expect to
demonstrate continued operational and valuation resilience . As a
responsible investor, we are proactive in managing the portfolio,
working alongside housing providers to identify and address risks
in order to ensure the sustainability of our investments over the
long term.
We are well placed to continue to deliver on our return targets
to investors. We expect further strong rental growth, which helps
to underpin the Group's property valuations and increases income.
This, combined with our long-term, fixed - price debt means that we
do not need to raise additional capital or refinance to meet return
expectations in the near term. By focusing on our operational
performance, we can ensure that over time, net assets and
distributions to investors increase whilst our gearing levels
naturally decline.
We are committed to addressing the performance of the Company's
share price, and to work to narrow the discount to prevailing Net
Asset Value. The Group continues to report strong operational and
financial performance and we are increasing our efforts to ensure
our shareholders and the wider investment community understand our
compelling fundamentals. Further, we critically consider capital
allocation, recycling capital into what we evaluate to be accretive
investments.
On behalf of the Board, I would like to thank the Investment
Manager and advisers for their continued hard work and dedication
to our investment strategy. Most importantly, I would like to thank
our shareholders and other stakeholders for their continued support
as we work to evolve and execute our strategy to deliver good homes
and long-term sustainable returns.
Chris Phillips
Chair
6 September 2023
Notes:
1 See Notes 3 and 4 for further explanation.
INVESTMENT MANAGER'S REPORT
Specialised Supported Housing Market
Since the inception of the Company, there has never been a
greater need for private capital to help deliver Specialised
Supported Housing. The government estimate s that demand for
Supported Housing is expected to increase by 125,000 by 2030. (1)
Demand continues to grow whilst Registered Providers face
challenges of high inflation and interest rates, at a time when
there is growing pressure to invest into their existing housing
stock to meet the latest energy efficiency and fire safety
standards. There is growing recognition by Registered Providers
that private capital that takes a long-term view of ownership and
that can invest on flexible terms, has a vital role to play in the
delivery of Specialised Supported Housing. Registered Providers
working with experienced and pragmatic investors can form effective
partnerships and help deliver additional homes to individuals
throughout the UK.
We are seeing an unprecedented level of demand from Registered
Providers looking for funding partners to help them deliver
development pipelines over the coming months and years. This
partnership approach is critical to addressing the undersupply of
Specialised Supported Housing, and is the primary driver behind our
partnership with Golden Lane with whom we are working on a pipeline
of projects, with the first one being in Chorley .
Leasing, A sset and P roperty M anagement
The six months ended 30 June 2023 have seen the Group deliver on
a set of initiatives that distinguish it from peers and demonstrate
its commitment to the sector. We were amongst the first within the
sector to cap 2023 rent increases in our leases at 7.0%,
irrespective of the Specialised Supported Housing rents' exclusion
from the government's rent cap. This aims to ensure that our
Registered Provider tenants and the individuals living in our
properties are not put under undue financial pressure. In June, we
commenced the roll out of our new lease clause, which will help our
Registered Provider partners demonstrate to the Regulator of Social
Housing that they have accommodated concerns with regards to risk
sharing in long leases. Finally, we have recently commissioned the
initial works in the roll-out of our Eco-Retrofit programme, which
will demonstrate a tenant-first approach in ensuring that the
Group's properties are compliant with energy efficiency
requirements, and that carbon emissions and utility bills of both
our lessees, and the individuals living in our properties, are
minimised.
As well as benefiting the sector, our lessees and the residents,
we believe that taking a long-term approach to asset management
decisions supports and enhances shareholder value. Investing in
energy efficiency will help to preserve the value of the Group's
portfolio. Rebalancing risk in existing leases should promote the
Regulatory compliance of the Group's lessees and support the
Group's portfolio performance and valuation. Capping rents helps to
ensure the long-term sustainability of the Group's rental
income.
The benefit of this long-term approach is evidenced by a
resilient set of interim results. Against a backdrop of very
challenging market conditions the EPRA NTA has increased by 2.25
pence per share. Similarly, annualised contracted rental income has
increased from GBP39.0 million in the prior year to GBP40.5 million
in the current period.
Whilst the operating environment remains challenging, the
majority of our lessee partners continue to perform in line with
expectations and we expect the performance of the Group's lessees
to demonstrate resilience in times of economic uncertainty. Our
lessees provide homes to individuals whom local authorities have a
statutory obligation to house and typically the relevant local
authority will meet the entirety of the cost of this housing.
Combined with the systemic undersupply of Specialised Supported
Housing, this underpins the income generated by our Registered
Provider partners.
Our lessees' income is resilient, however, their costs have
increased significantly over the last two years. Whilst gas prices
have calmed, our lessees remain mindful of other cost pressures
including repairs and maintenance costs which continue to increase.
It is important that the Group's lessees manage this increase in
their cost base whilst continuing to comply with their maintenance
obligations under the Group's leases.
New L ease C lause
As noted in our 2022 Annual Report, and having since received
supportive feedback from shareholders, our intention is to include
a new clause in all the Group's existing leases with Registered
Providers. The aim of this clause is to address some of the general
risks raised by the Regulator in relation to long leases and in so
doing protect Registered Providers in the event policy changes
(i.e. factors beyond their control) reduce the amount of rent that
they are able to generate from a property or properties that they
lease from the Group.
The key terms of the clause are summarised below:
-- Triggering of the clause is subject to a materiality
threshold measured against the aggregate value of the rental income
generated from the portfolio of leases that the Group has with the
relevant Registered Provider.
-- Subject to the above trigger threshold being met, the
Registered Provider can approach the Group in relation to amending
the lease rent to allow for the occurrence of either of the
circumstances below:
o A change in central government policy that negatively impacts
the level of rent that is applicable to Specialised Supported
Housing or the exempt rent status of Specialised Supported Housing;
or
o A change in local government policy that impacts the
commissioning of the relevant property or properties.
In addition, the new clause provides for an increase in the
annual rent payable to the Group amounting to the lower of UK CPI
(or RPI where applicable), or the maximum rent increase allowed
under prevailing policy to the extent that it applies to
Specialised Supported Housing rents. Using this year's rent
increases as an example of how this part of the clause would apply
in practice, under the terms of the lease, the Group would have
been able to increase its leases by CPI because the rent cap did
not apply to Specialised Supported Housing.
The clause has been approved by the Investment Manager's
Investment Committee and the Group's Board. It has been reviewed by
the Group's valuers and the valuers of the Group's lenders, both of
whom have confirmed that they do not expect the clause to have a
detrimental impact on the valuation of the Group's properties. The
clause has also been shared with the Regulator of Social Housing.
The Group's lenders are also supportive of the inclusion of the
clause, understanding the benefit it should unlock for the Group's
Registered Providers.
We feel that the clause strikes the right balance between
allowing Registered Providers to mitigate risks over which they
have limited or no control in a way that should assist with their
regulatory compliance, whilst not fundamentally undermining the
value of the Group's leases.
Eco-Retrofit
By 2030 all socially rented properties need to have an Energy
Performance Certificate ("EPC") rating of C or above. Currently
28.8% of the Group's properties have an EPC rating of lower than C
which compares favourably to the social housing sector average of
43.1%. We are committed to protecting the value of the Group's
properties, reducing carbon emissions, and supporting our lessees
and the individuals living in the Group's properties.
We have started the pilot phase of an energy efficiency
improvement initiative which entails upgrading all of the Group's
properties. Over the next 12 months we will undertake works on 11
of the Group's properties that previously had EPC ratings ranging
from D to E and look to upgrade these to C or above. The pilot
project will enable us to learn how to conduct the works
efficiently, cost-effectively and in a way that causes minimum
disruption to tenants. It will enable us to form strong
relationships with our key contractors and help ensure the
successful rollout of the wider project.
Housing creates a large carbon footprint when not managed and
homes are at increasing risk of impacts from climate change. Taking
steps to manage these challenges is a strategic commitment for the
Group. We will continue to publish our approach to managing climate
risk and opportunity through the framework of the Taskforce on
Climate-related Financial Disclosure (TCFD), as first provided in
our 2022 Annual Report.
Portfolio Sale
As well as investing in the long-term value of the Group's
portfolio, we have also sought to evidence the portfolio's current
valuation by selling a portfolio of properties. Our objectives were
to achieve a sale price that is supportive of the Group's Net Asset
Value, and demonstrate that there is liquidity in the Specialised
Supported Housing market. To achieve these aims, we believed it was
important not only to attain a good price, but that the portfolio
of properties sold was representative of the Group's wider
portfolio.
We are pleased to report that we have sold four properties post
the period end, for GBP7 .6 million which is in line with the book
value of the properties of GBP7.9 million as at 30 June 2023. The
sale price is reflective of a GBP0. 7 million gain against the
aggregate purchase price the Group paid for the properties
(excluding transaction costs) . The portfolio properties were
located across four Local Authorities, leased to Inclusion Housing
CIC and Chrysalis Supported Association Ltd, and care was provided
by four separate care providers. The portfolio contained a mixture
of adapted and new build properties as well as individual and
shared homes. Below, we have provided a table comparing some of the
key metrics of the portfolio of properties sold to the Group's
wider portfolio:
Sale Portfolio Group Portfolio
Properties 4 497
--------------- -----------------
Residents 38 3,455
--------------- -----------------
Average residents
per property 9.5 7.0
--------------- -----------------
Fair Market Value GBP7.9 million GBP675.1 million
--------------- -----------------
Blended valuation
yield 5.75% 5.69%
--------------- -----------------
WAULT 19.3 years 24.8 years
--------------- -----------------
We feel that the successful portfolio sale is supportive of the
Group's Net Asset Value, whilst also evidencing the continued
investor demand for Specialised Supported Housing properties. As
noted in the Chair's Statement, following consultation with
shareholders over the coming weeks and with consideration given to
the Group's leverage position, the Board will determine whether to
return to shareholders a portion of these proceeds by way of
further share buybacks.
Registered Provider Update
There have been no material rent arrears in the period in the
Group's portfolio other than those that relate to My Space and
Parasol as previously reported. Progress has been made with both
organisations since our last update.
In August we agreed a creditor agreement with Parasol (9.2% of
our Group revenues) which sets a minimum level for monthly rent
payments over the next six months post the current interim period ,
with the stated intention that payments will increase above this
minimum level over time. At the end of the six-month agreement,
full rent becomes due again. If rent payments are not in line with
the terms of the creditor agreement, we have the ability to move
leases to a different Registered Provider and we have had
constructive discussions with potential alternative partners. We
have informed the Group's valuer, JLL, of the nature of this
agreement and they have confirmed that it will not have a material
impact on the value of the Group's properties leased to Parasol. We
have a constructive relationship with the C hair and the CEO of
Parasol and will continue to engage with them and support them as
they move the organisation forward.
Similarly, we hope to agree a creditor agreement with My Space
(7.7% of our Group revenues) shortly . Th is agreement is required
to enable My Space to address its solvency position, and we expect
it to cover both rent due going forward and arrears. My Space has
recently hired a new CEO and CFO and is in the process of
recruiting a COO. Simultaneously, new trustees are in the process
of being identified for the board, with a view to bolstering the
level of audit, financial and legal expertise. We are working with
the new management team as they look to put in place the creditor
agreement and consider options for the organisation including a
possible business combination or merger. Concurrently, we continue
to engage with alternative Registered Providers so that the Group's
properties can be moved to an alternative lessee should we be of
the view that this is in the best interests of residents and the
sustainability of the Group's rental income. My Space continues to
engage with the Regulator of Social Housing in relation to the
Enforcement Notice issued earlier this year. My Space has
undertaken a range of actions as prescribed by the Regulator of
Social Housing and provided an initial response to all points
raised in the notice.
The Regulator of Social Housing remains active in the sector. It
continues to monitor the Group's Registered Provider partners and
in the first six months of this year they issued Enforcement
Notices in relation to My Space and Auckland Home Solutions who
account for 7.7% and 4.7% of the Group's rent roll, respectively.
Both notices were noted and commented on by the Group. With regards
to Auckland Home Solutions, the Regulator of Social Housing's
Enforcement Notice stated that three board members had been
appointed to Auckland's board and that Auckland must commission an
independent review focused on appraising governance, business
planning, risk management and compliance with the Rent Standard.
Through our ongoing engagement with Auckland Home Solutions we
understand that the new board members have already delivered
improvements in governance and that the independent review has been
commissioned and is underway.
Financial Review
We are pleased to present resilient financial results for the
six months ended 30 June 2023 as highlighted earlier . The Group's
financial performance is underpinned by increases in annualised
rental income from its CPI and RPI - linked lea ses. (2) We expect
dividend cover to increase during the second half of the year now
that a creditor agreement is in place with Parasol , and we
similarly hope to agree a creditor agreement with My Space
shortly.
Key highlights:
-- The annualised contracted rental income of the Group was
GBP40.5 million as at 30 June 2023, compared to GBP39.0 million on
31 December 2022. IFRS Gross Revenue for the period was GBP19.6
million compared to GBP18.2 million for the six months ended 30
June 2022.
-- A fair value gain of GBP5.9 million was recognised during the
period on the revaluation of the Group's properties compared to
GBP17.1 million for the same period in 2022.
-- The EPRA NIY has increased from 5.46% at 31 December 2022 to
5.65% at 30 June 2023 following the rental uplifts in the
period.
-- IFRS Earnings per S hare was 3.65 pence for the period,
compared to 6.19 pence for the same period in 2022. The reduction
was largely driven by a lower gain from fair value adjustment on
investment properties being recognised than in the prior year. The
ECL adjustment in the six months ended 30 June 2023 also had a
negative impact on net profit.
-- The EPRA Earnings p er Share ("EPRA EPS") excludes the fair
value gain on investment propert ies and is measured on the
weighted average number of shares in issue during the period. EPRA
EPS was 2.18 pence for the period compared to 2.43 pence for the
same period in 2022.
-- The Adjusted Earnings per Share ("Adjusted EPS") includes
adjustment for non-cash items and is measured on the weighted
average number of shares in issue during the year. Adjusted EPS was
2.21 pence per share for the six months to 30 June 2023, compared
to 2.57 pence for the same period in 2022.
-- The EPRA NTA per share at 30 June 2023 was 111.31 pence per
share, the same as the IFRS NAV per share, compared to 109.06 pence
as at 31 December 2022.
-- At the period end, the portfolio was valued at GBP675.1
million on an IFRS basis compared to GBP669. 1 million at 31
December 2022, reflecting a valuation uplift of 12. 2 % against the
portfolio's aggregate purchase price (including acquisition costs).
This reflects an EPRA net initial yield of 5.65%, against the
portfolio's blended net initial yield of 5.91% at the point of
acquisition. This equates to a yield compression of 26 basis
points, reflecting the quality of the Group's asset selection and
off-market acquisition process.
-- The EPRA ongoing charges ratio is calculated as a percentage
of the average net asset value for the period under review. The
ongoing charges ratio for the period was 1.63% compared to 1. 60 %
for the year ended 31 December 2022. The increase is primarily due
to the impact of inflation on the Group's cost base .
-- The Group held cash and cash equivalents of GBP23.8 million
as at 30 June 2023 , of which GBP0.4 million was restricted or
ring-fenced, compared to GBP30.1 million as at 31 December 2022, of
which GBP0.4 million was restricted or ring fenced, leaving
available cash of GBP23.4 million as at 30 June 2023.
Property Portfolio
As at 30 June 2023, the portfolio comprised 497 properties with
3,455 units and represented a broad geographic diversification
across the UK. The four largest concentrated areas by market value
were the North West (19.8%), West Midlands (16.9%), Yorkshire
(14.6%) and East Midlands (12.0%). The IFRS value of the portfolio
at 30 June 2023 was GBP675.1 million compared to GBP669.1 million
at 31 December 2022, growth of 0.9% during the period.
Rental Income
In total, the Group had 39 4 leases which at the period end,
generated total annualised contracted rental income of GBP40.5
million. During the period IFRS Revenue was GBP19.6 million
compared to GBP18.2 million for the same period in 2022 .
At the period end, the Group's three largest Approved Providers
by rental income and units were Inclusion (GBP12.2 million and 944
units), Parasol Homes (GBP3.7 million and 246 units) and Falcon
(GBP3.5 million and 304 units).
As at 30 June 2023, t he portfolio had a WAULT of 24.8 years.
The WAULT includes the initial lease term upon completion as well
as any reversionary leases and put/call options available to the
Group at expiry of the initial term. Notwithstanding the Group's
recent change to its investment policy to remove the minimum lease
term, at present the Group's WAULT is anticipated to remain above
20 years.
100% of the Group's contracted income is generated under leases
which are indexed against either CPI (92.4%) or RPI (7.6%). These
inflation linkages provide the Group and its investors with the
comfort that the rental income will generally increase in line with
inflation.
Some leases have an index 'premium' under which the standard
rental increase is based upon CPI or RPI plus a further percentage
point, reflecting top-ups by local authorities. These account for
7.9% of the Group's leases. A small portion of the Group's leases
(4.9% of rental income) contain a cap and collar on rental
increases. For the purposes of the portfolio valuation, JLL assumed
CPI and RPI to increase at 2 .0 % per annum and 2.5% per annum ,
respectively , over the term of the relevant leases. Despite the
high levels of inflation that are currently being experienced and
are projected in the short term in the UK, JLL's inflation
assumptions remain unchanged from previous periods given the
Group's long-term outlook, with a WAULT and contracted income
streams of 24.8 years.
Rent collection during the period was 88.1% and a full update on
rent arrears is included in the Registered Provider Update section
above.
Outlook
We expect to commenc e our first forward funding project since
the completion of our last development in March 2021. This should
see the Group fund the development of 12 adapted flats for people
with learning disabilities in Chorley. The property will be leased
on flexible lease terms to Golden Lane, a Registered Provider with
a regulatory compliance rating of G1 V2 and one of the leading
providers in the Specialised Supported Housing sector. We are
pleased to have been chosen by Golden Lane as their partner on this
project which is testament to the approach we take to investment in
the Specialised Supported Housing sector.
We expect the majority of our lessees to continue to operate in
line with historical performance. Our Housing Team takes a granular
and proactive approach to asset management, focused on the
underlying operational performance of the Group's 49 3 properties.
In addition, at an organisational level, our team will support our
Approved Provider management teams as they continue to tackle the
challenges posed by inflation. We will actively monitor performance
at My Space and Parasol to support progress on rent collection and
planned organisational improvements.
Whilst dividend cover was lower than historical levels in the
first six months of the year, we expect cover to improve in the
latter half of the year given the plan that is now in place with
Parasol and the plan we hope to shortly agree with My Space , and
as annual rent increases partially offset previously reported
reductions in rent collection. Over the medium to long-term we
expect there to be a high level of dividend cover due to the
inflation -linked nature of the Group's income streams and
advantageous capital structure which includes GBP263.5 million of
long-term , fixed - price debt with a blended cost of 2.74%.
By the end of the year, we plan to have included our new lease
clause in all the Group's existing Registered Provider leases,
thereby enabling the Boards of our lessees to demonstrate to the
Regulator of Social Housing that they have made tangible progress
in terms of addressing some of the Regulator's stated concerns
around the balance of risk sharing in long-term leases. Similarly,
we expect to have made good progress on our Eco-Retrofit pilot
programme, with a view to gaining invaluable learnings in relation
to the wider project whilst beginning to improve the energy
efficiency of the Group's portfolio.
Through these initiatives the Group is well positioned for
resilient operational and financial performance, whilst
demonstrating how, as a landlord, the Group can help to move the
sector forward by addressing historic regulatory concerns, getting
ahead of future requirements around energy efficiency and
delivering new, much needed homes to people with care and support
needs in partnership with leading Registered Providers.
Max Shenkman
Head of Investment
6 September 2023
Notes:
1 Department of Health and Social Care policy paper, People at
the Heart of Care: adult social care reform, March 2022.
2 4.9% of our leases are capped (excluding the temporary rent
cap at 7% applied to the Group's rent increases for the year of
2023).
PORTFOLIO SUMMARY
By Location
Properties % of Funds Invested*
Region * *
------------------------------------- ----------- ---------------------
North West 99 19.8
West Midlands 84 16.3
Yorkshire 64 14.8
East Midlands 58 11.9
South East 62 9.4
North East 50 9.0
London 27 8.5
South West 29 4.7
East 20 4.1
Scotland 2 1.0
Wales 2 0.5
------------------------------------- ----------- ---------------------
Total 497 100.0
------------------------------------- ----------- ---------------------
* including assets held
for sale
**calculated excluding acquisition
costs
KEY PERFORMANCE INDICATORS
In order to track the Group's progress the following key
performance indicators are monitored:
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
1. Dividend
-------------------------------------------------------- ----------------------------- ---------------------------
Dividends paid to The dividend reflects the Total dividends of 2.73 The Company has declared a
shareholders and declared Company's ability to pence per share were paid or dividend of 1.365 pence
during the year. deliver a low risk but declared in respect of the per Ordinary share in
growing income stream period 1 January respect of the period
Further information is set from the portfolio. 2023 to 30 June 2023. 1 April 2023 to 30 June
out in Note 16. 2023, which will be
(30 June 2022: 2.73 pence) payable on or around 29
September 2023. Total
dividends paid and
declared for the period
are in line with the
Company's target.
--------------------------- ----------------------------- ---------------------------
2 . EPRA Net Tangible Assets (NTA)
The EPRA NTA is equal to EPRA NTA measure that 111.31 pence per share as at The EPRA NTA (equivalent
IFRS NAV as there are no assumes entities buy and 30 June 2023. to IFRS NAV ) per share at
deferred tax liabilities sell assets, thereby IPO was 98 pence.
or other adjustments crystallising certain (31 December 2022: 109.06
applicable to the Group levels of deferred tax pence per share) This represents an
under the REIT regime. liability. increase of 13.6% since
IPO driven primarily by
Further information is set yield compression at
out in Note 3 of the acquisition
Unaudited Performance and subsequent annual
Measures. rental uplifts.
3 . Loan to Value (LTV)
A proportion of our The Company uses gearing 37.5% LTV as at 30 June Borrowings comprise two
portfolio is funded to enhance equity returns. 2023. private placements of loan
through borrowings. Our notes totalling GBP263.5
medium to long-term target (31 December 2022: 37.4% million provided
LTV is 35% to 40% with a LTV) by MetLife Investment
maximum of 50%. Management and Barings.
Further information is set
out in Note 14.
4 . EPRA Earnings per Share
EPRA Earnings per share A measure of a Group's 2.18 pence per share for the EPRA EPS reduced slightly
(EPRA EPS) excludes gains underlying operating six months ended 30 June reflecting the increase in
from fair value adjustment results and an indication 2023, based on earnings ECL in the current period.
on investment of the extent to which excluding the
properties that are current dividend payments fair value gain on
included in the are supported by earnings. investment properties and
calculation of the IFRS the write off of arrangement
Earnings per share. fees relating to
the cancelled RCF,
Further information is set calculated on the weighted
out in Note 21 . average number of shares in
issue during the
period.
(30 June 2022: 2.43 pence)
5 . Adjusted Earnings per Share
Adjusted earnings per A key measure which 2.21 pence per share for the This demonstrates the
share includes adjustment reflects actual cash flows six months ended 30 June Company's ability to meet
for non-cash items. The supporting dividend 2023, based on earnings dividend payments from net
calculation is shown payments. after deducting cash inflows. It
in Note 21 . the fair value gain on represents a dividend
properties, and amortisation cover for the six months
and write-off of loan ended 30 June 2023 of
arrangement fees; 0.81x.
calculated on the weighted
average number of shares in
issue during the year.
(30 June 2022: 2.57 pence)
6 . Weighted Average Unexpired Lease Term (WAULT)
-------------------------------------------------------- ----------------------------- ---------------------------
The average unexpired The WAULT is a key measure 2 4.8 years as at 30 June As at 30 June 2023, the
lease term of the of the quality of our 2023 (includes put and call portfolio's WAULT stood at
investment portfolio, portfolio. Long lease options). 24.8 years.
weighted by annual passing terms underpin the
rents. security of our income (31 December 2022: 25.3
stream. years)
Further information is set
out in the Investment
Manager's Report.
--------------------------- ----------------------------- ---------------------------
7 . Exposure to Largest Approved Provider
--------------------------------------------------------------------------------------------------------------------
The percentage of the The exposure to the 30.1% of Gross Asset Value Our maximum exposure limit
Group's gross assets that largest Approved Provider as at 30 June 2023. is 30% of GAV.
are leased to the single must be monitored to
largest Approved ensure that we are not (31 December 2022: 29.5%) This represents the
Provider. overly exposed to one Group's aggregate exposure
Approved Provider in the to both Inclusion Housing
event of a default CIC and Inclusion
scenario. Homes CIC which is
expected to reduce below
the 30% limit following
the completion of the
portfolio sale.
--------------------------- ----------------------------- ---------------------------
8 . Total Return
--------------------------------------------------------------------------------------------------------------------
Change in EPRA NTA plus The Total Return measure EPRA NTA per share was The EPRA NTA per share at
total dividends paid highlights the gross 111.31 pence as at 30 June 30 June 2023 was 111.31
during the period. return to investors 2023. pence. Adding back
including dividends paid dividends paid during
since the prior year. Total dividends paid during the period of 2.73 pence
the period ended 30 June per Ordinary Share to the
2023 were 2.73 pence per EPRA NTA at 30 June 2023
share. results in an
increase of 4.57%.
Total return was 4.57% for
the six months ended 30 June The Total Return since the
2023. IPO is 42.47% at 30 June
2023.
(30 June 2022: 5.71%)
--------------------------- ----------------------------- ---------------------------
EPRA PERFORMANCE MEASURES
The table below shows additional performance measures,
calculated in accordance with the Best Practices Recommendations of
the European Public Real Estate Association (EPRA). We provide
these measures to aid comparison with other European real estate
businesses.
Full reconciliations of EPRA Earnings and NAV performance
measures are included in Note 21 of the condensed Group interim
financial statements and Notes 1 and 3 of the Unaudited Performance
Measures, respectively. A full reconciliation of the other EPRA
performance measures are included in the Unaudited Performance
Measures section.
KPI AND DEFINITION PURPOSE PERFORMANCE
1. EPRA Earnings per share
----------------------------------------------------------------------------------------------------------------------
EPRA Earnings per share excludes A measure of the Group's underlying 2.18 pence per share for the six
gains from fair value adjustment on operating results and an indication months ended 30 June 2023.
investment properties of the extent to which
that are included in the IFRS current dividend payments are (30 June 2022: 2.43 pence)
calculation for Earnings per share. supported by earnings.
-------------------------------------- --------------------------------------
2. EPRA Net Reinstatement Value (NRV) per share
----------------------------------------------------------------------------------------------------------------------
The EPRA NRV adds back the A measure that highlights the value GBP479.6 million / 121.90 pence per
purchasers' costs deducted from the of net assets on a long-term basis. share as at 30 June 2023.
IFRS valuation.
GBP480.6 million / 119.31 pence per
share as at 31 December 2022.
-------------------------------------- --------------------------------------
3. EPRA Net Tangible Assets (NTA)
----------------------------------------------------------------------------------------------------------------------
The EPRA NTA is equal to IFRS NAV as A measure that assumes entities buy GBP438.0 million / 111.31 pence per
there are no deferred tax liabilities and sell assets, thereby share as at 30 June 2023.
or other adjustments crystallising certain levels
applicable to the Group under the of deferred tax liability. GBP439.3 million / 109.06 pence per
REIT regime. share as at 31 December 2022.
-------------------------------------- --------------------------------------
4. EPRA Net Disposal Value (NDV)
----------------------------------------------------------------------------------------------------------------------
The EPRA NDV provides a scenario A measure that shows the shareholder GBP514.6 million / 130.79 pence per
where deferred tax, financial value if assets and liabilities are share as at 30 June 2023.
instruments, and certain other not held until maturity.
adjustments are calculated as to the GBP510.1 million / 126.63 pence per
full extent of their liability. share as at 31 December 2022.
-------------------------------------- --------------------------------------
5. EPRA Net Initial Yield (NIY)
----------------------------------------------------------------------------------------------------------------------
Annualised rental income based on the A comparable measure for portfolio 5.65% at 30 June 2023.
cash rents passing at the statement valuations. This measure should make
of financial position it easier for investors 5.46% at 31 December 2022.
date, less non-recoverable property to judge for themselves how the
operating expenses, divided by the valuation of a portfolio compares
market value of the with others.
property, increased with (estimated)
purchasers' costs.
-------------------------------------- --------------------------------------
6. EPRA "Topped-Up" NIY
----------------------------------------------------------------------------------------------------------------------
This measure incorporates an The topped-up net initial yield is 5.68% at 30 June 2023.
adjustment to the EPRA NIY in respect useful in that it allows investors to
of the expiration of rent-free see the yield based 5.51% at 31 December 2022.
periods (or other unexpired lease on the full rent that is contracted
incentives such as discounted rent at 30 June 2023.
periods and step rents).
-------------------------------------- --------------------------------------
7. EPRA Vacancy Rate
----------------------------------------------------------------------------------------------------------------------
Estimated Market Rental Value (ERV) A "pure" percentage measure of 0.34% at 30 June 2023.
of vacant space divided by ERV of the investment property space that is
whole portfolio. vacant, based on ERV. 0.00% at 31 December 2022.
-------------------------------------- --------------------------------------
8. EPRA Cost Ratio
----------------------------------------------------------------------------------------------------------------------
Administrative and operating costs A key measure to enable meaningful 20.13% at 30 June 2023.
(including and excluding costs of measurement of the changes in the
direct vacancy) divided Group's operating costs. 21.09% at 31 December 2022.
by gross rental income.
-------------------------------------- --------------------------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Audit Committee, which assists the Board with its
responsibilities for managing risk, considers that the principal
risks and uncertainties as presented on pages 67 to 71 of our 2022
Annual Report were unchanged during the period and will remain
unchanged for the remaining six months of the financial year.
The Board undertakes a formal risk review, with the assistance
of the Audit Committee twice a year to assess the principal risks
and uncertainties. The Investment Manager on an ongoing basis has
responsibility for identifying potential risks and escalating these
in accordance with the risk management procedures.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with UK-adopted International Accounting Standard ( IAS
) 34 and that the operating and financial review includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8 of
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed financial statements and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
of the financial year as disclosed in N ote 18 and any material
changes in the related party transactions disclosed in the 2022
Annual Report.
Shareholder information is as disclosed on the Triple Point
Social Housing REIT plc website.
Approval
This Directors' responsibilities statement was approved by the
Board of Directors and signed on its behalf by:
Chris Phillips
Chai r
6 September 2023
GROUP FINANCIAL STATEMENTS
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
For the For the For the
six months six months y ear ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- ------------ ------------------------ -------------
Income
Rental income 4 19,576 18,208 37,300
Expected credit loss 4 (3,157) (474) (2,073)
Other income - 110 110
------------ ------------------------ -------------
Total income 16,419 17,844 35,337
Expenses
Directors' remuneration (156) (151) (308)
General and administrative
expenses (1,446) (1,361) (2,854)
Management fees 5 (2,339) (2,362) (4,704)
------------ ------------------------ -------------
Total expenses (3,941) (3,874) (7,866)
Gain from fair value
adjustment on investment
propert ies 8 5,886 17,120 8,264
------------
Operating profit 18,364 31,090 35,735
------------ ------------------------ -------------
Finance income 29 16 56
Finance costs 6 (3,777) (6,178) (10,889)
------------
Profit before tax 14,616 24,928 24,902
------------ ------------------------ -------------
Taxation 7 - - -
Profit and total comprehensive
income 14,616 24,928 24,902
============ ======================== =============
IFRS Earnings per share
- basic and diluted 2 1 3.65p 6.19p 6.18p
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
------------------------------- -----
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------ ------------ ------------
Assets
Non-current assets
Investment properties 8 665,422 668,348 667,713
Trade and other receivables 9 3,042 2,607 2,889
------------ ------------ ------------
Total non-current assets 668,464 670,955 670,602
Current assets
Assets held for sale 7,871 640 -
Trade and other receivables 10 3,063 3,589 4,272
Cash, cash equivalents
and restricted cash 11 23,843 41,636 30,139
------------ ------------ ------------
Total current assets 34,777 45,865 34,411
Total assets 703,241 716,820 705,013
============ ============ ============
Liabilities
Current liabilities
Trade and other payables 12 2,556 3,944 3,120
------------
Total current liabilities 2,556 3,944 3,120
Non-current liabilities
Other payables 13 1,522 1,518 1,520
Bank and other borrowings 14 261,178 261,051 261,088
------------ ------------ ------------
Total non-current liabilities 262,700 262,569 262,608
Total liabilities 265,256 266,513 265,728
============ ============ ============
Total net assets 437,985 450,307 439,285
============ ============ ============
Equity
Share capital 15 3,940 4,033 4,033
Share premium reserve 203,753 203,753 203,753
Treasury shares reserve (378) (378) (378)
Capital redemption reserve 15 93 - -
Capital reduction reserve 15 155,359 160,394 160,394
Retained earnings 75,218 82,505 71,483
------------ ------------ ------------
Total Equity 437,985 450,307 439,285
============ ============ ============
IFRS Net asset value
per share - basic and
diluted 2 2 111.31p 111.80p 109.06p
The Condensed Group Financial Statements were approved and
authorised for issue by the Board on 6 September 2023 and signed on
its behalf by:
Chris Phillips
Chair
6 September 2023
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
For the six Share Treasury Capital Capital
months ended Share premium shares redemption reduction Retained Total
30 June 2023 capital reserve reserve reserve reserve earnings equity
(unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- --------- --------- --------- ------------ ----------- ---------- ---------
Balance at 1
January 2023 4,033 203,753 (378) - 160,394 71,483 439,285
Profit and total
comprehensive
income for the
period - - - - - 14,616 14,616
Transactions
with owners
Dividends paid 16 - - - - - (10,881) (10,881)
Shares repurchased 15 (93) - - 93 (5,035) - (5,035)
Balance at 30
June 2023 (unaudited) 3,940 203,753 (378) 93 155,359 75,218 437,985
========= ========= ========= ============ =========== ========== =========
For the six Share Treasury Capital Capital
months ended Share premium shares redemption reduction Retained Total
30 June 2022 capital reserve reserve reserve reserve earnings equity
(unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- --------- --------- --------- ------------ ----------- ----------- ---------
Balance at 1
January 2022 4,033 203,753 (378) - 160,394 68,311 436,113
Profit and total
comprehensive
income for the
period - - - - - 24,928 24,928
Transactions
with owners
Dividends paid 16 - - - - - (10,734) (10,734)
Balance at 30
June 2022 (unaudited) 4,033 203,753 (378) - 160,394 82,505 450,307
========= ========= ========= ============ =========== =========== =========
Share Treasury Capital Capital
For the year Share premium shares redemption reduction Retained Total
ended 31 December capital reserve reserve reserve reserve earnings equity
2022 (audited) Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ----- --------- --------- --------- ------------ ----------- ---------- ---------
Balance at 1
January 2022 4,033 203,753 (378) - 160,394 68,311 436,113
Profit and total
comprehensive
income for the
period - - - - - 24,902 24,902
Transactions
with owners
Dividends paid 16 - - - - - (21,730) (21,730)
Balance at 31
December 2022
(audited) 4,033 203,753 (378) - 160,394 71,483 439,285
========= ========= ========= ============ =========== ========== =========
CONDENSED GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2023
For the For the For the
six months six months y ear ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
--------------------------------- ----- -------------- --- -------------- -------------
Note GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Profit before income tax 14,616 24,928 24,902
Adjustments for:
Expected Credit Loss 3,157 474 2,073
Gain from fair value adjustment
on investment propert ies 8 (5,886) (17,120) (8,264)
Finance income (29) (16) (56)
Finance costs 6 3,777 6,178 10,889
--------------
Operating results before
working capital changes 15,635 14,444 29,544
Increase in trade and other
receivables (2,101) (710) (4,127)
(Decrease)/increase in
trade and other payables (402) (294) 280
-------------- -------------- -------------
Net cash generated from
operating activities 13,132 13,440 25,697
-------------- -------------- -------------
Cash flows from investing
activities
Purchase of investment
properties 147 (10,962) (20,611)
Disposal proceeds from
sale of assets - 1,480 2,120
Restricted cash - released - - 133
Restricted cash - paid - - (5)
Interest received 7 - 18
Net cash generated from/(
used in ) investing activities 154 (9,482) (18,345)
-------------- -------------- -------------
Cash flows from financing
activities
Ordinary Share s repurchased (5,035) - -
Loan arrangement fees paid (52) (444) (599)
Dividends paid 1 6 (10,881) (10,734) (21,730)
Interest paid (3,614) (3,614) (7,226)
-------------- -------------- -------------
Net cash used in financing
activities (19,582) (14,792) (29,555)
-------------- -------------- -------------
Net decrease in cash and
cash equivalents (6,296) (10,834) (22,203)
C ash and cash equivalents
at the beginning of the
period 29,696 51,899 51,899
--------------
C ash and cash equivalents
at the end of the period 11 23,400 41,065 29,696
============== ============== =============
NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
For the six months ended 30 June 2023
1. CORPORATE INFORMATION
Triple Point Social Housing REIT plc (the "Company") is a Real
Estate Investment Trust ("REIT") incorporated in England and Wales
under the Companies Act 2006 as a public company limited by shares
on 12 June 2017. The address of the registered office is 1 King
William Street, London, United Kingdom, EC4N 7AF. The Company is
registered as an investment company under section 833 of the
Companies Act 2006 and is domiciled in the United Kingdom.
The principal activity of the Company is to act as the ultimate
parent company of Triple Point Social Housing REIT plc and its
subsidiaries (the "Group") and to provide shareholders with an
attractive level of income, together with the potential for capital
growth from investing in a portfolio of social homes.
2. BASIS OF PREPARATION
These condensed Group interim financial statements for the six
months ended 30 June 2023 have been prepared in accordance with IAS
34 "Interim Financial Reporting" and also in accordance with the
measurement and recognition principles of UK-adopted international
accounting standards. They do not include all of the disclosures
that would otherwise be required in a complete set of financial
statements and should be read in conjunction with the 2022 Annual
Report.
The comparative figures for the financial year ended 31 December
2022 presented herein do not constitute the full statutory accounts
within the meaning of section 434 of the Companies Act 2006. Those
accounts have been reported on by the Group's auditors and
delivered to the registrar of companies. The report of the auditor
(i) was unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The condensed Group interim financial statements for the six
months ended 30 June 2023 have been reviewed by the Company's
Auditor, BDO LLP, in accordance with International Standard on
Review Engagements 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity. The condensed
Group interim financial statements are unaudited and do not
constitute statutory accounts for the purposes of the Companies Act
2006.
The condensed Group interim financial statements have been
prepared on a historical cost basis, as modified for the Group's
investment properties, which have been measured at fair value.
Gains or losses arising from changes in fair values are included in
profit or loss.
The Group has applied the same accounting policies and method of
computation in these condensed Group interim financial statements
as in its 2022 annual financial statements and are expected to be
consistently applied during the year ending 31 December 2023. At
the date of authorisation of these financial statements, there were
a number of standards and interpretations which were in issue but
not yet effective. The Group has assessed the impact of these
amendments and has determined that the application of these
amendments and interpretations in current and future periods will
not have a significant impact on the financial statements.
2.1. Going concern
The Group benefits from a secure income stream from long leases
which are not overly reliant on any one tenant and present a
well-diversified risk. The Directors have reviewed the Group's
forecast which show the expected annualised rental income exceeds
the expected operating costs of the Group. 88.1% of rental income
due and payable for the six months ended 30 June 2023 has been
collected, rent arrears are predominantly attributable to two
Approved Providers, My Space Housing Solutions and Parasol
Homes.
The Directors believe that the Group is still well placed to
manage its financing and other business risks and that the Group
will remain viable, continuing to operate and meet its liabilities
as they fall due. During the period, Fitch Ratings Limited assigned
the Company an investment Long-Term Issuer Default Rating 'A-' with
a stable outlook and a senior secured rating of 'A' for the Group's
existing loan notes.
The Directors have performed an assessment of the ability of the
Group to continue as going concern, for a period of at least 12
months from the date these condensed Group interim financial
statements have been authorised for issue. The Directors have
considered the expected obligations of the Group for the next 12
months and are confident that all will be met.
The Directors have also considered the financing provided to the
Group. Norland Estates Limited and TP REIT Propco 2 Limited have
bank facilities with MetLife and MetLife and Barings respectively.
TP REIT Propco 5 Limited's Revolving Credit Facility (RCF) with
Lloyds and Natwest was cancelled in December 2022. Prior to
cancellation the facility was undrawn.
The loans secured by Norland Estates Limited and TP REIT Propco
2 Limited are subject to asset cover ratio covenants and interest
cover ratio covenants which can be found in the table below. The
Directors have also considered reverse stress testing and the
circumstances that would lead to a covenant breach. Given the level
of headroom, the Directors are of the view that the risk of
scenarios materialising that would lead to a breach of the
covenants is remote.
Norland Estates TP REIT Propco
Limited 2 Limited
Asset Cover Ratio (ACR)
---------------- ---------------
Asset Cover Ratio Covenant x2.00 x1.67
---------------- ---------------
Asset Cover Ratio at 30 June
2023 x2.77 x2.04
---------------- ---------------
Blended Net initial yield 5.60% 5.85%
---------------- ---------------
Headroom (yield movement) 201bps 120bps
---------------- ---------------
Interest Cover Ratio (ICR)
---------------- ---------------
Interest Cover Ratio Covenant 1.75x 1.75x
---------------- ---------------
Interest Cover Ratio at 30 June
2023 4.42x 4.07x
---------------- ---------------
Headroom (rental income movement) 60% 51%
---------------- ---------------
Under the downside model the forecasts have been stressed to
show the effect of some Care Providers ceasing to pay their voids
liability, and as a result Approved Providers defaulting under some
of the Group's leases. Under the downside model the Group will be
able to settle its liabilities for a period of at least 12 months
from the date these condensed Group interim financial statements
have been authorised for issue. As a result of the above, the
Directors are of the opinion that the going concern basis adopted
in the preparation of the condensed Group interim financial
statements is appropriate.
The Group has no short or medium term refinancing risk given the
10.1 year average maturity of its long term debt facilities with
MetLife and Barings, the first of which expires in June 2028, and
which are fully fixed at an all-in weighted average rate of
2.74%.
Based on the forecasts prepared and the intentions of the Group,
the Directors consider that the Group will be able to settle its
liabilities for a period of at least 12 months from the date these
condensed Group interim financial statements have been authorised
for issue and therefore has prepared these condensed Group interim
financial statements on the going concern basis.
2.2 Reporting period
These condensed Group interim financial statements have been
prepared for the six months ended 30 June 2023. The comparative
periods are the six months ended 30 June 2022 and the year ended 31
December 2022.
2.3 Currency
The Group's financial information is presented in Sterling which
is also the Group's functional currency.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. In the Directors'
view, there have been no significant changes since the annual
report for the year ended 31 December 2022, to the extent of
estimation uncertainty, key assumptions or valuation techniques
relating to investment properties as a result of the current
macroeconomic environment. Further details can be found in note
8.
3.1 Expected Credit Losses (ECL)
The Group recognised an additional ECL provision of GBP3.2
million in the current period (30 June 2022 - GBP0.5 million, 31
Dec 2022 - GBP2.1 million) resulting in a total ECL provision of
GBP5.2 million as at 30 June 2023 (30 June 2022 - GBP0.5 million,
31 Dec 2022 - GBP2.1 million) which relates to rental arrears for
two of the Group's Approved Providers. A default probability for
each of the two Approved Providers, representing the estimated
percentage likelihood of them paying outstanding rent due at 30
June 2023, was determined based on their latest known financial
position and any repayment plans that had been agreed or discussed.
For each provider the estimated percentage probability of receiving
unpaid rent has been multiplied by the rental arrears as at the
statement of financial position date. These two figures have been
aggregated to arrive at the ECL provision.
4. RENTAL INCOME
For the For the
For the six six months y ear ended
months ended ended 30 31 December
30 June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Rental income - freehold
assets 18,415 17,131 35,087
Rental income - leasehold
assets 1,161 1,077 2,213
-------------- ------------ -------------
19,576 18,208 37,300
-------------- ------------ -------------
Expected credit loss (3,157) (474) (2,073)
============== ============ =============
The lease agreements between the Group and the Approved
Providers are fully repairing and insuring leases. The Approved
Providers are responsible for the settlement of all present and
future rates, taxes, costs and other impositions payable in respect
of the properties. As a result, no direct property expenses were
incurred by the Group.
All rental income arose within the United Kingdom.
The expected loss rates are based on the Group's credit losses
which started to occur during the year ended 31 December 2022 for
the first time since IPO. The expected loss rates are then adjusted
for current and forward-looking information affecting the Group's
tenants. The ECL provision during the period of GBP3.2 million
includes GBP1.0 million relating to unpaid rent for the year ended
31 December 2022 reflecting the increase in the expected credit
loss from the continued partial non-payment of rent due by two of
the Group's tenants.
5. MANAGEMENT FEES
For the For the
For the six six months y ear ended
months ended ended 30 31 December
30 June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Management fees 2,339 2,362 4,704
------------ -------------
2,339 2,362 4,704
============== ============ =============
On 20 July 2017 Triple Point Investment Management LLP 'TPIM'
was appointed as the delegated investment manager of the Company by
entering into the property management services and delegated
portfolio management agreement. Under this agreement the delegated
investment manager will advise the Company and provide certain
management services in respect of the property portfolio. A Deed of
Variation was signed on 23 August 2018. This defined cash balances
in the Net Asset Value calculation in respect of the management fee
as "positive uncommitted cash balances after deducting any
borrowings".
The management fee is an annual management fee which is
calculated quarterly in arrears based upon a percentage of the last
published Net Asset Value of the Group (not taking into account
uncommitted cash balances after deducting borrowings) as at 31
March, 30 June, 30 September and 31 December in each year on the
following basis with effect from Admission:
(a) on that part of the Net Asset Value up to and including
GBP250 million, an amount equal to 1% of such part of the Net Asset
Value;
(b) on that part of the Net Asset Value over GBP250 million and
up to and including GBP500 million, an amount equal to 0.9% of such
part of the Net Asset Value;
(c) on that part of the Net Asset Value over GBP500 million and
up to and including GBP1 billion, an amount equal to 0.8% of such
part of the Net Asset Value; and
(d) on that part of the Net Asset Value over GBP1 billion, an
amount equal to 0.7% of such part of the Net Asset Value.
Management fees of GBP2,339,000 were chargeable by TPIM during
the six months ended 30 June 2023 (six months ended 30 June 2022 -
GBP2,362,000, year ended 31 December 2022 - GBP4,704,000). At the
period end, GBP1,156,000 was due to TPIM (30 June 2022 -
GBP1,187,000, 31 December 2022 - GBP1,159,000).
By two agreements dated 30 June 2020, the Company appointed TPIM
as its Alternative Investment Fund Manager by entering into an
Alternative Investment Fund Management Agreement and (separately)
documented TPIM's continued appointment as the provider of
portfolio and property management services by entering into an
Investment Management Agreement.
6. FINANCE COSTS
For the For the
For the six six months y ear ended
months ended ended 30 31 December
30 June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest payable on
bank borrowings 3,609 3,609 7,218
Amortisation of loan
arrangement fees 141 562 1,006
Written off loan arrangement
fees - 1,986 2,619
Head lease interest
expense 22 15 37
-------------- ------------ -------------
Total finance cost
for financial liabilities
not held at fair value
through profit or loss 3,772 6,172 10,880
-------------- ------------ -------------
Bank charges 5 6 9
-------------- ------------ -------------
Total finance costs 3,777 6,178 10,889
============== ============ =============
Written off loan arrangement fees relate to the Lloyds and
NatWest loan facility that was reduced and subsequently cancelled
during the year ended 31 December 2022, all remaining unamortised
loan arrangement fees were written off.
7. TAXATION
As a UK REIT, the Group is exempt from corporation tax on the
profits and gains from its property investment business, provided
it meets certain conditions as set out in the UK REIT regulations.
For the six months ended 30 June 2023, the Group did not have any
non-qualifying profits and accordingly there is no tax charge in
the period. If there were any non-qualifying profits and gains,
these would be subject to corporation tax.
It is assumed that the Group will continue to be a group UK REIT
for the foreseeable future, such that deferred tax has not been
recognised on temporary differences relating to the property rental
business.
8. INVESTMENT PROPERTIES
Operational
assets
GBP'000
------------
As at 1 January 2023 667,713
Acquisitions and additions* (308)
Fair value adjustment** 5,886
Movement in head lease
ground rent liability 2
Reclassified to assets
held for sale*** (7,871)
------------
As at 30 June 2023 (unaudited) 665,422
------------
As at 1 January 2022 641,293
Acquisitions and additions* 11,543
Fair value adjustment** 24,085
Movement in head lease
ground rent liability (4)
Disposals - (7,075)
Reclassified to assets
held for sale (1,494)
------------
As at 30 June 2022 (unaudited) 668,348
------------
As at 1 January 2022 641,293
Acquisitions and additions* 19,752
Fair value adjustment** 15,239
Movement in head lease
ground rent liability (2)
Disposals (8,569)
As at 31 December 2022
(audited) 667,713
------------
*Additions in the table above differs to the total investment
cost of new properties in the period in the front end due to
retentions no longer payable which were credited to Investment
Property additions.
**Gain from fair value adjustment on investment properties in
the condensed Group statement of comprehensive income is net of the
loss from fair value adjustment on assets held for sale of GBPnil
(six months ended 30 June 2022- GBP0.87 million, year ended 31
December 2022 - GBP0.88 million) and loss on disposal of assets of
GBPnil (six months ended 30 June 2022- loss of GBP6.1 million, year
ended 31 December 2022 - loss of GBP6.1 million).
***4 Assets with fair value of GBP7.87 million have been
reclassified as assets held for sale during the period. See note 19
for further details.
Reconciliation to independent valuation:
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Investment property valuation 667,237 669,574 669,077
Fair value adjustment -
head lease ground rent 1,462 1,458 1,460
Fair value adjustment -
lease incentive debtor (3,277) (2,684) (2,824)
-------- -------- ------------
665,422 668,348 667,713
-------- -------- ------------
The carrying value of leasehold properties at 30 June 2023 was
GBP40.8 million (30 June 2022 - GBP36.0 million, 31 December 2022 -
GBP40.1 million). The investment property valuation above excludes
the fair value of the assets held for sale at the end of each
reporting period.
In accordance with "IAS 40: Investment Property", the Group's
investment properties have been independently valued at fair value
by Jones Lang LaSalle Limited ("JLL"), an accredited external
valuer with recognised and relevant professional qualifications.
JLL provide their fair value of the Group's investment property
portfolio every three months.
JLL were appointed as external valuer by the Board on 11
December 2017. The proportion of the total fees payable by the
Company to JLL's total fee income is minimal. Additionally, JLL has
a rotation policy in place whereby the signatories on the
valuations rotate after seven years.
% Key Statistics
The metrics below are in relation to the total investment
property portfolio held by the Group, including assets held for
sale.
30 June 31 December
Portfolio Metrics 30 June 2023 2022 2022
Capital Deployed (GBP'000)* 581,735 573,517 581,647
Number of Properties*** 497 493 497
Number of Tenancies 394 391 395
Number of Approved Providers 27 26 27
Number of Local Authorities 153 151 153
Number of Care Providers 123 121 123
Average NIY** 5.69% 5.28% 5.49%
*calculated excluding acquisition costs
**calculated using IAS 40 valuations (excluding forward funding
acquisitions)
***4 out of these 497 properties are classified as assets held
for sale at 30 June 2023
Regional exposure
30 June 2023 30 June 2022 31 December 2022
% of % of
*Cost funds *Cost % of funds *Cost funds
Region GBP'000 invested GBP'000 invested GBP'000 invested
--------------- --------- ---------- --------- ----------- --------- ----------
North West 115,063 19.8 115,042 20.1 115,042 19.8
West Midlands 94,760 16.3 92,794 16.2 94,790 16.3
Yorkshire 86,293 14.8 85,021 14.8 86,293 14.8
East Midlands 69,429 11.9 64,589 11.3 69,429 11.9
South East 54,848 9.4 54,799 9.6 54,799 9.4
North East 51,986 9.0 51,988 9.1 51,986 9.0
London 49,626 8.5 49,555 8.6 49,579 8.5
South West 27,466 4.7 27,466 4.8 27,466 4.7
East 23,704 4.1 23,703 4.1 23,703 4.1
Scotland 5,900 1.0 5,900 1.0 5,900 1.0
Wales 2,660 0.5 2,660 0.4 2,660 0.5
Total 581,735 100.0 573,517 100.0 581,647 100.0
--------- ---------- --------- ----------- --------- ----------
*excluding acquisition costs
Fair value hierarchy
Quoted
prices Significant
in active observable Significant
markets inputs unobservable
Date of (Level (Level inputs
valuation Total 1) 2) (Level 3)
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------------- -------- ----------- ------------ --------------
Assets measured
at fair value:
Investment properties 30 June 2023 665,422 - - 665,422
------------------------ -------------- -------- ----------- ------------ --------------
Investment properties 30 June 2022 668,348 - - 668,348
------------------------ -------------- -------- ----------- ------------ --------------
31 December
Investment properties 2022 667,713 - - 667,713
------------------------ -------------- -------- ----------- ------------ --------------
There have been no transfers between Level 1 and Level 2 during
the period, nor have there been any transfers between Level 2 and
Level 3 during the period.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards (incorporating the International
Valuation Standards) by JLL, one of the leading professional firms
engaged in the social housing sector.
As noted previously all of the Group's investment properties are
reported as Level 3 in accordance with IFRS 13 where external
inputs are "unobservable" and value is the Directors' best
estimate, based upon advice from relevant knowledgeable
experts.
In this instance, the determination of the fair value of
investment properties requires an examination of the specific
merits of each property that are in turn considered pertinent to
the valuation.
These include i) the regulated social housing sector and demand
for the facilities offered by each Specialised Supported Housing
(SSH) property owned by the Group; ii) the particular structure of
the Group's transactions where vendors, at their own expense, meet
the majority of the refurbishment costs of each property and
certain purchase costs; iii) detailed financial analysis with
discount rates supporting the carrying value of each property; iv)
underlying rents for each property being subject to independent
benchmarking and adjustment where the Group considers them too high
(resulting in a price reduction for the purchase or withdrawal from
the transaction); and v) a full repairing and insuring lease with
annual indexation based on CPI or CPI+1% and effectively 25 years
outstanding, in most cases with a Housing Association itself
regulated by the Regulator of Social Housing.
Descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as
follows:
Valuation techniques: Discounted cash flows
The discounted cash flows model considers the present value of
net cash flows to be generated from the properties, taking into
account the expected rental growth rate and lease incentive costs
such as rent-free periods. The expected net cash flows are then
discounted using risk-adjusted discount rates.
There are two main unobservable inputs that determine the fair
value of the Group's investment properties:
1. The rate of inflation as measured by CPI; it should be noted
that all leases benefit from either CPI or RPI indexation; and
2. The discount rate applied to the rental flows.
Key factors in determining the discount rates to assess the
level of uncertainty applied include the performance of the
regulated social housing sector and demand for each specialist
supported housing property owned by the Group, costs of acquisition
and refurbishment of each property, the anticipated future
underlying cash flows for each property, benchmarking of each
underlying rent for each property (passing rent), and the fact that
all of the Group's properties have the benefit of full repairing
and insuring leases entered into by a Housing Association.
All of the properties within the Group's portfolio benefit from
leases with annual indexation based upon CPI or RPI. The fair value
measurement is based on the above items, highest and best use,
which does not differ from their actual use.
Sensitivities of measurement of significant unobservable
inputs
The Group's property portfolio valuation is open to judgements
and is inherently subjective by nature. The estimates and
associated assumptions have a significant risk of causing a
material adjustment to the carrying amounts of investment
properties. The valuation is based upon assumptions including
future rental income (with growth in relation to inflation) and the
appropriate discount rate.
As a result, the following sensitivity analysis has been
prepared:
Key unobservable inputs - discount rate and inflation:
The average discount rate used in the Group's property portfolio
valuation is 7.20% (30 June 2022 - 6.63%, 31 December 2022 -
6.82%).
The range of discount rates used in the Group's property
portfolio valuation is from 6.5% to 9.8%. (30 June 2022 - 6.2% to
8.1%, 31 December 2022 - 6.2% to 8.6%).
For the purposes of the valuation, CPI and RPI is assumed to
increase by 2% per annum and 2.5% per annum respectively over the
term of the relevant leases .
-0.5% change +0.5% change +0.25% change -0.25% change
in in in in
Discount Discount
Rate Rate CPI CPI
GBP'000 GBP'000 GBP'000 GBP'000
Changes in the IFRS
fair value of investment
properties as at 30
June 2023 39,438 (35,994) 20,296 (19,425)
Changes in the IFRS
fair value of investment
properties as at 30
June 2022 42,290 (38,417) 21,597 (20,635)
Changes in the IFRS
fair value of investment
properties as at 31
December 2022 40,552 (36,941) 21,037 (20,207)
The valuations have not been influenced by climate related
factors due to there being little measurable impact on inputs at
present.
9. TRADE AND OTHER RECEIVABLES (non-current)
30 June 2023 30 June 31 December
(unaudited) 2022 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Lease incentive debtor 2,876 2,430 2,717
Other receivables 166 177 172
----------------
3,042 2,607 2,889
============= ================== ================
The Directors consider that the carrying value of trade and
other receivables approximate their fair value. All amounts are due
to be received in more than one year from the reporting date.
10. TRADE AND OTHER RECEIVABLES (current)
30 June 2023 30 June 31 December
(unaudited) 2022 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Rent receivable 2,184 2,334 3,209
Lease incentive debtor 401 254 107
Prepayments 117 831 174
Other receivables 361 170 782
----------------
3,063 3,589 4,272
============= ================== ================
The Directors consider that the carrying value of trade and
other receivables approximate their fair value. All amounts are due
to be received within one year from the reporting date.
The Group applies the general approach in providing for expected
credit losses under IFRS 9 for other receivables. Where the credit
loss relates to revenue already recognised in the statement of
comprehensive income, the expected credit loss allowance is
recognised in the Statement of Comprehensive Income. Expected
credit losses totalling GBP3.157 million (30 June 2022 - GBP0.474
million, 31 December 2022 - GBP2.073 million) were charged to the
Statement of Comprehensive Income in the period.
11. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash at bank 23,370 39,927 29,152
Restricted cash 443 571 443
Cash held by lawyers 30 43 544
Ring-fenced cash - 1,095 -
23,843 41,636 30,139
============= ============ ============
Cash held by lawyers is money held in escrow for retention
releases and SDLT reclaimed from HMRC. These funds are available
immediately on demand.
Restricted cash represents retention money (held by lawyers
only) in relation to repair, maintenance and improvement works by
the vendors to bring the properties up to satisfactory standards
for the Group and the tenants. The cash is committed on the
acquisition of the properties. It also includes funds held in an
escrow account in relation to the lease transferred in 2020.
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Total cash, cash equivalents
and restricted cash 23,843 41,636 30,139
Restricted cash (443) (571) (443)
------------- ------------ ------------
Cash reported on Statement
of Cash Flows 23,400 41,065 29,696
============= ============ ============
12. TRADE AND OTHER PAYABLES
30 June 2023 30 June 31 December
(unaudited) 2022 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Trade payables 36 25 37
Accruals 1,982 1,930 2,014
Head lease ground rent 40 40 40
Other creditors 498 1,949 1,029
------------- ------------------ ----------------
2,556 3,944 3,120
============= ================== ================
The Other Creditors balance consists of retentions due on
completion of outstanding works and on the rebate of SDLT refunds.
The Directors consider that the carrying value of trade and other
payables approximate their fair value. All amounts are due for
payment within one year from the reporting date.
13. OTHER PAYABLES
30 June 2023 30 June 31 December
(unaudited) 2022 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Head lease ground rent 1,422 1,418 1,420
Rent deposit 100 100 100
------------------
1,522 1,518 1,520
============= ================== ================
14. BANK AND OTHER BORROWINGS
30 June 30 June 31 December
2023 (unaudited) 2022 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Bank and other borrowings
drawn at period end 263,500 263,500 263,500
------------------ ------------------ ----------------
Unamortised costs at beginning
of period (2,411) (4,798) (4,798)
Less: loan issue costs incurred (52) (30) (131)
Add: loan issue costs written
off - 2,085 2,085
Add: loan issue costs amortised 141 294 433
------------------ ------------------ ----------------
Unamortised costs at period
end (2,322) (2,449) (2,412)
------------------ ------------------ ----------------
Balance at period end 261,178 261,051 261,088
================== ================== ================
The amortisation of loan arrangement fees in note 6 differs to
the amounts in the table above as the latter excludes amounts in
relation to the undrawn cancelled RCF which amount to GBPnil (six
months ended 30 June 2022 - GBP268k, year ended 31 December 2022 -
GBP573k).
At 30 June 2023 there were undrawn bank borrowings of GBPnil (30
June 2022 - GBP50 million, 31 December 2022 - GBPnil).
As at 30 June 2023, the Group's borrowings comprised two debt
facilities:
-- a long dated, fixed rate, interest only financing arrangement
in the form of a private placement of loan notes in an amount of
GBP68.5 million with MetLife Investment Management (and affiliated
funds); and
-- GBP195 million long dated, fixed rate, interest only
sustainability-linked loan notes through a private placement with
MetLife Investment Management clients and Barings.
The Group also had access to GBP50 million Revolving Credit
Facility (RCF) with Lloyds and NatWest during the prior year which
was cancelled in December 2022. Prior to being cancelled, the
facility was undrawn.
Loan Notes
The Loan Notes of GBP68.5 million are secured against a
portfolio of specialist supported housing assets throughout the UK,
worth approximately GBP187.8 million (30 June 2022 - GBP193
million, 31 December 2022 - GBP189 million). The Loan Notes
represent a loan-to-value of 40% of the value of the secured pool
of assets on inception of the Loan Notes and are split into two
tranches: Tranche-A, is an amount of GBP41.5 million, has a term of
10 years from utilisation and is priced at an all-in coupon of
2.94% pa; and Tranche-B, is an amount of GBP27.0 million, has a
term of 15 years from utilisation and is priced at an all-in coupon
of 3.215% pa. On a blended basis, the weighted average term is 12
years carrying a weighted average fixed rate coupon of 3.04% pa. At
30 June 2023, the Loan Notes have been independently valued at
GBP54.1 million which has been used to calculate the Group's EPRA
Net Disposal Value in note 2 of the Unaudited Performance Measures.
The fair value is determined by comparing the discounted future
cash flows using the contracted yields with the reference gilts
plus the margin implied. The reference gilts used were the Treasury
4.723% 2028 Gilt (Tranche A) and Treasury 4.314% 2033 Gilt (Tranche
B), with an implied margin that is unchanged since the date of
fixing.
In August 2021, the Group put in place Loan Notes of GBP195
million which enabled the Group to refinance the full GBP130
million previously drawn under its GBP160 million RCF with Lloyds
and Natwest. The Loan Notes are secured against a portfolio of
specialist supported housing assets throughout the UK, worth
approximately GBP397.5 million. The Loan Notes represent a
loan-to-value of 40% of the value of the secured pool of assets on
inception of the Loan Notes and are split into two tranches:
Tranche-A, is an amount of GBP77.5 million, has a term of 10 years
from utilisation and is priced at an all-in coupon of 2.403% pa;
and Tranche-B, is an amount of GBP117.5 million, has a term of 15
years from utilisation and is priced at an all-in coupon of 2.786%
pa. On a blended basis, the weighted average term is 13 years
carrying a weighted average fixed rate coupon of 2.634% pa. At 30
June 2023, the Loan Notes have been independently valued at
GBP130.5 million which has been used to calculate the Group's EPRA
Net Disposal Value in note 2 of the Unaudited Performance Measures.
The fair value is determined by comparing the discounted future
cash flows using the contracted yields with the reference gilts
plus the margin implied. The reference gilts used were the Treasury
4.383% 2031 Gilt (Tranche A) and Treasury 4.425% 2036 Gilt (Tranche
B), with an implied margin that is unchanged since the date of
fixing.
The valuation of these loans are considered to be a Level 2 fair
value measurement for the purposes of the EPRA Net Disposal
Value.
The Group has complied with all the financial covenants related
to the above loans throughout the period.
Undrawn committed bank facilities - maturity profile
1 to 3 to
2 5 > 5
Total < 1 year years years years
--------------------- -------- --------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2023 - - - - -
-------- --------- -------- -------- --------
At 30 June 2022 50,000 - 50,000 - -
-------- --------- -------- -------- --------
At 31 December 2022 - - - - -
-------- --------- -------- -------- --------
15. CAPITAL REDUCTION RESERVE
30 June 30 June 31 December
2023 (unaudited) 2022 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Balance at beginning of
period 160,394 160,394 160,394
Share buybacks (5,035) - -
------------------
Balance at end of period 155,359 160,394 160,394
================== ================== ================
The capital reduction reserve is a distributable reserve that
was created on the cancellation of share premium.
Between 19 April 2023 and 12 June 2023 the Company repurchased
9,322,512 shares at an average price of 52.6 pence per share .
CAPITAL REDEMPTION RESERVE
30 June 30 June 31 December
2023 (unaudited) 2022 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Original share repurchased
& cancelled 93 - -
Balance at end of period 93 - -
================== ================== ================
The Capital Redemption Reserve is the nominal value of the
shares cancelled from the share buybacks.
16. DIVIDS
For the For the For the y
six months six months ear ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
1.3p for the 3 months to
31 December 2021 paid on
25 March 2022 - 5,236 5,236
1.365p for the 3 months to
31 March 2022 paid on 24
June 2022 - 5,498 5,498
1.365p for the 3 months to
30 June 2022 paid on 30 September
2022 - - 5,498
1.365p for the 3 months to
30 September 2022 paid on
16 December 2022 - - 5,498
1.365p for the 3 months to
31 December 2022 paid on
29 March 2023 5,498 - -
1.365p for the 3 months to
31 March 2023 paid on 30
June 2023 5,383 - -
------------
10,881 10,734 21,730
============ ============ =============
On 6 September 2023 the Company declared an interim dividend of
1.365 pence per Ordinary Share for the period 1 April 2023 to 30
June 2023. The total dividend of GBP5,370,000 will be paid on 29
September 2023 to Ordinary shareholders on the register on 15
September 2023.
The Company intends to pay dividends to shareholders on a
quarterly basis and in accordance with the requirements of the REIT
regime. Dividends are not payable in respect of the Treasury shares
held by the Company.
17. SEGMENTAL INFORMATION
All of the Group's properties are engaged in a single segment
business with all revenue, assets and liabilities arose in the UK,
therefore, no geographical segmental analysis is required by IFRS 8
for the reasons provided in the 31 December 2022 Annual Report.
18. RELATED PARTY DISCLOSURE
Directors
Cecily Davis was appointed as a new director on 23 May 2023 and
Paul Oliver resigned as a director on 30 June 2023. Directors are
remunerated for their services at such rate as the Directors shall
from time to time determine. The Chairman receives a director's fee
of GBP75,000 per annum (30 June 2022 - GBP75,000, 31 December 2022
- GBP75,000), and the other Directors of the Board receive a fee of
GBP50,000 (30 June 2022 - GBP50,000, 31 December 2022 - GBP50,000)
per annum. The Directors are also entitled to an additional fee of
GBP7,500 in connection with the production of every prospectus by
the Company. No prospectus was produced in the year ended 31
December 2022 nor in the current period.
Dividends of the following amounts were paid to the Directors
during the period:
GBP1,498 (30 June 2022 - GBP1,462, 31 December
Chris Phillips: 2022 - GBP2,960)
GBP2,186 (30 June 2022 - GBP2,103, 31 December
Peter Coward: 2022 - GBP4,266)
GBP2,129 (30 June 2022 - GBP2,078, 31 December
Paul Oliver: 2022 - GBP4,206)
GBP1,030 (30 June 2022 - GBP1,006, 31 December
Tracey Fletcher-Ray: 2022 - GBP2,036)
No shares were held by Cecily Davis & Ian Reeves as at 30
June 2023 (31 December 2022 and 30 June 2022: nil).
19. POST BALANCE SHEET EVENTS
Sale of assets held for sale
On 31 August 2023, the Company sold the assets held for sale for
consideration of GBP7,586,600, resulting in a loss of GBP284,000 on
valuation as at the financial position date.
Creditor Agreement
In August we agreed a creditor agreement with Parasol (9.2% of
our Group revenues) which sets a minimum level for monthly rent
payments over the next six months post the current interim period.
At the end of the six-month agreement, full rent becomes due
again.
Dividends
On 6 September 2023, the Company declared an interim dividend of
1.365 pence per Ordinary Share for the period 1 April 2023 to 30
June 2023. The total dividend of GBP5,370,000 will be paid on 29
September 2023 to Ordinary shareholders on the register on 15
September 2023.
20. CAPITAL COMMITMENTS
The Group does not have capital commitments in both the prior
year and the current period.
21. EARNINGS PER SHARE
Earnings per share ("EPS") amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Company by the weighted average number of Ordinary Shares in
issue during the period. As there are no dilutive instruments
outstanding, both basic and diluted earnings per share are the
same.
The calculation of basic and diluted earnings per share is based
on the following:
For the For the
six months six months For the year
ended 30 ended 30 ended 31 December
June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Calculation of Basic Earnings
per share
Net profit attributable to
ordinary shareholders (GBP'000) 14,616 24,928 24,902
Weighted average number of
ordinary shares (including
treasury shares) 400,608,159 402,789,002 402,789,002
IFRS Earnings per share
- basic and diluted 3.65p 6.19p 6.18p
------------ ------------ -------------------
Calculation of EPRA Earnings per share
For the For the For the y
six months six months ear ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net profit attributable to
ordinary shareholders (GBP'000) 14,616 24,928 24,902
Changes in value of fair
value of investment properties
(GBP'000) (5,886) (17,120) (8,264)
One-off write-off of loan
arrangement fees on cancelled
RCF (GBP'000) - 1,986 2,619
EPRA earnings (GBP'000) 8,730 9,794 19,257
Non cash adjustments to include:
Amortisation of loan arrangement
fees (GBP'000) 141 562 1,006
Adjusted earnings (GBP'000) 8,871 10,356 20,263
------------ ------------ -------------
Weighted average number of
ordinary shares (including
treasury shares) 400,608,159 402,789,002 402,789,002
------------ ------------ -------------
EPRA Earnings per share
- basic and diluted 2.18p 2.43p 4.78p
------------ ------------ -------------
Adjusted earnings per share
- basic and diluted 2.21p 2.57p 5.03p
------------ ------------ -------------
Adjusted earnings is a performance measure used by the Board to
assess the Group's dividend payments. The metric adjusts EPRA
earnings for the amortisation of loan arrangement fees. The Board
sees this adjustment as a reflection of actual cashflows which are
supportive of dividend payments. The Board compares the adjusted
earnings to the available distributable reserves when considering
the level of dividend to pay.
For this EPRA measure and proceeding EPRA measures, please refer
to explanations and definitions of the EPRA performance measures
that can be found below.
22. NET ASSET VALUE PER SHARE
Basic Net Asset Value per share is calculated by dividing net
assets in the Condensed Group Statement of Financial Position
attributable to Ordinary equity holders of the Company by the
number of Ordinary Shares outstanding at the end of the period.
Although there are no dilutive instruments outstanding, both basic
and diluted NAV per share are disclosed below.
Net asset values have been calculated as follows:
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Net assets at end of period
(GBP'000) 437,985 450,307 439,285
Shares in issue at end of
period (excluding shares
held in treasury) 393,466,490 402,789,002 402,789,002
IFRS NAV per share - basic
and dilutive 111.31p 111.80p 109.06p
------------ ------------ ------------
23. UNAUDITED PERFORMANCE MEASURES
1. EPRA Net Reinstatement Value
30 June 30 June 31 December
2023 2022 2022
IFRS NAV/EPRA NAV (GBP'000) 437,985 450,307 439,285
Include:
Real Estate Transfer Tax*
(GBP'000) 41,638 41,361 41,283
------------ ------------ ------------
EPRA Net Reinstatement Value
(GBP'000) 479,623 491,668 480,568
------------ ------------ ------------
Fully diluted number of shares 393,466,490 402,789,002 402,789,002
------------ ------------ ------------
EPRA Net Reinstatement value
per share 121.90p 122.07p 119.31p
------------ ------------ ------------
* Purchaser's costs
2. EPRA Net Disposal Value
30 June 30 June 31 December
2023 2022 2022
IFRS NAV/EPRA NAV (GBP'000) 437,985 450,307 439,285
Include:
Fair value of debt* (GBP'000) 76,635 39,192 70,774
------------ ------------ ------------
EPRA Net Disposal Value
(GBP'000) 514,620 489,499 510,059
------------ ------------ ------------
Fully diluted number of shares 393,466,490 402,789,002 402,789,002
------------ ------------ ------------
EPRA Net Disposal Value
per share** 130.79p 121.53p 126.63p
------------ ------------ ------------
* Difference between interest-bearing loans and borrowings
included in Condensed Group statement of financial position at
amortised cost, and the fair value of interest-bearing loans and
borrowings.
** Equal to the EPRA NNNAV disclosed in previous reporting
periods.
3. EPRA NTA
30 June 30 June 31 December
2023 2022 2022
IFRS NAV/EPRA NAV (GBP'000) 437,985 450,307 439,285
EPRA NTA (GBP'000) 437,985 450,307 439,285
------------ ------------ ------------
Fully diluted number of shares 393,466,490 402,789,002 402,789,002
------------ ------------ ------------
EPRA NTA per share * 111.31p 111.80p 109.06p
------------ ------------ ------------
*Equal to IFRS NAV and previous EPRA NAV metric as none of the
EPRA Net Tangible Asset adjustments are applicable as at 30 June
2022, 31 December 2022 or 30 June 2023.
4. EPRA net initial yield (NIY) and EPRA "topped up" NIY
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Investment Properties - wholly
owned (excluding head lease
ground rents) 663,960 666,890 666,253
Assets held for sale 7,871 - -
Less: development properties - - -
-------- -------- ------------
Completed property portfolio 671,831 666,890 666,253
Allowance for estimated purchasers'
costs 41,638 41,361 41,283
-------- -------- ------------
Gross up completed property
portfolio valuation 713,469 708,251 707,536
-------- -------- ------------
Annualised passing rental
income 40,299 37,416 38,626
Property outgoings - - -
-------- -------- ------------
Annualised net rents 40,299 37,416 38,626
-------- -------- ------------
Contractual increases for
lease incentives 244 79 349
-------- -------- ------------
Topped up annualised net
rents 40,543 37,495 38,975
-------- -------- ------------
EPRA NIY 5.65% 5.28% 5.46%
EPRA Topped Up NIY 5.68% 5.29% 5.51%
5. Ongoing Charges Ratio
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Annualised ongoing charges 7,151 6,960 7,018
Average undiluted net assets 438,635 443,210 437,699
-------- -------- ------------
Ongoing charges 1.63% 1.57% 1.60%
-------- -------- ------------
6. EPRA Vacancy Rate
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Estimated Market Rental Value
(ERV) of vacant spaces 138 93 -
Estimated Market Rental Value
(ERV) of whole portfolio 40,680 37,416 38,975
-------- -------- ------------
EPRA Vacancy Rate 0.34% 0.25% -
-------- -------- ------------
7. EPRA Cost Ratio
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Total administrative and
operating costs 3,941 3,874 7,866
Gross rental income 19,576 18,208 37,300
-------- -------- ------------
EPRA cost ratio 20.13% 21.27% 21.09%
-------- -------- ------------
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END
IR VQLFBXKLFBBX
(END) Dow Jones Newswires
September 07, 2023 02:00 ET (06:00 GMT)
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