TIDMRESI
RNS Number : 2831I
Residential Secure Income PLC
23 November 2018
23 November 2018
Residential Secure Income plc
MAIDEN ANNUAL RESULTS ANNOUNCEMENT
ACCELERATED SECOND HALF ACTIVITY UNDERPINS ROBUST FINANCIAL
PERFORMANCE WITH GBP234 MILLION DEPLOYED SINCE IPO
Residential Secure Income plc ("ReSI") (LSE: RESI), which
invests in residential asset classes that comprise the stock of UK
social housing providers, today announces its results for the
period from 12 July 2017 to 30 September 2018. The results
represent the Company's first set of annual results since ReSI's
successful admission to the main market of the London Stock
Exchange in July 2017.
Financial highlights
-- IFRS Net Asset Value ("NAV") Total Return of 9.5%, exceeding the
8%+ target set at IPO, driven by a 7.0% uplift in portfolio valuation
to GBP225.2 million compared to acquisition cost
-- IFRS NAV of GBP183.6 million or 105.1 pence per share which represents
a 7.3% increase since IPO
-- Earnings per share of 9.0 pence
-- Annualised net rental income of GBP10.5 million, representing 5.0%
net yield on capital deployed
-- Total dividends declared of 3.0 pence per share, in line with the
target at IPO
-- NAV accretive share buy-back programme launched in April 2018 has
resulted in 9,304,729 shares being purchased at an average price
of 92.5p
-- ReSI is targeting a dividend yield of 5% per annum (based on the
issue price of 100p per Ordinary Share) for the year commencing 1
October 2018, increasing broadly in line with inflation, and a target
total return of 8%+ per annum
The movement in NAV for the period from 12 July 2017 to 30
September 2018 is as follows:
GBPm Pence per
share
Net Asset Value as at 12(th)
July 2017 176.4 98.0
------ ----------
Net Income for period 1.7 0.9
------ ----------
Valuation change 14.4 8.0
------ ----------
Dividend paid (4.0) (2.2)
------ ----------
Net capital reduction (4.9) (2.7)
------ ----------
Impact of reduction in number
of shares - 3.1
------ ----------
Net Asset Value as at 30(th)
September 2018 183.6 105.1
------ ----------
Operational highlights
Since IPO, and including post period transactions, the Company
has invested GBP234 million in acquiring a portfolio of 2,435
residential units serving retirement, Local Authority housing and
shared ownership tenants.
-- Retirement Rentals: GBP184 million deployed, through four separate
transactions, acquiring a portfolio of 2,112 residential retirement
units, including licenced house manager flats, located across England,
Wales and Scotland, including:
o GBP100 million acquisition of the 1,341-property RHP Portfolio,
operated by the UK retirement home manager subsidiary of one of the
largest UK Housing Associations, of which 82% is let on RPI-linked
assured tenancies offering lifetime security of tenure to residents.
During the period, ReSI secured extensions to 1,003 leases to 150
years, increasing the portfolio's average unexpired least term to
140 years and creating further shareholder value
o GBP31.2 million acquisition of 277 retirement properties licensed
to First Port, the UK's largest residential property management group
o GBP37 million acquisition of a 421-property retirement portfolio
from Places for People and exchanged contracts to acquire a further
57 units
o Post-period GBP6.5 million acquisition of 39 further leased house
manager flats
-- Local Authority housing: Two acquisitions, totalling GBP34million,
of freehold Local Authority housing containing 289 self-contained
flats in the centre of Luton and leased to Luton Borough Council
-- Shared Ownership: Post-period acquisition of 34 new build homes,
for GBP16.45 million, located in the London Borough of Barnet, for
conversion into Shared Ownership homes using Government grant
-- ReSI Housing Limited: in July, through its subsidiary ReSI Housing
Limited, the Company became the first publicly listed investment
fund to become a Registered Provider with the Regulator of Social
Housing
-- Debt: GBP93 million of 25 year fixed rate, partially amortising,
debt raised (including GBP40 million post period) at blended rate
of 3.47%
Personnel developments
-- Robert Whiteman appointed as non-Executive Chairman
-- Mike Emmerich, formerly CEO of New Economy Manchester appointed as
non-Executive Director
-- David Orr, former CEO of the National Housing Federation, appointed
post-period as independent Chairman of ReSI Housing Limited
-- Richard Stubbs appointed as Chief Financial Officer of TradeRisks
Ltd, the parent company of ReSI's Fund Manager
Jonathan Slater, Chief Executive of ReSI Capital Management, the
Fund Manager, commented: "After a slower than expected start, the
pace of investment accelerated significantly in the second half of
the period and has continued since, allowing us to build a large
and diverse portfolio of high quality, immediately income producing
properties. In addition to adding value to the portfolio through
our asset management, we have continued to build a pipeline of
investments that meet our strict investment criteria and have
identified and negotiated transactions, currently undergoing
detailed due diligence, which would deploy all of ReSI's remaining
capital with a predominate focus on Shared Ownership.
"With the Company achieving the landmark of becoming the first
publicly listed investment fund to become a Registered Provider of
Social Housing, through its ReSI Housing subsidiary, ReSI is now
able to acquire properties designated as affordable and which are
funded by government grant. This has significantly expanded ReSI's
pool of potential investments in a sector which offers clear
potential to grow the Company's portfolio and generate visible and
sustainable income on behalf of our shareholders, while supporting
the delivery of much needed affordable accommodation across the
UK."
Robert Whiteman, Chairman of Residential Secure Income plc,
added: "There continues to be a shortage of housing in many parts
of the United Kingdom, resulting in high levels of demand, and ReSI
has seen strong appetite from Housing Associations, Local
Authorities and private developers for new sources of capital to
invest in these areas. As a result of this demand the business is
well positioned to build on the strong financial performance
delivered during the period and continue growing in a disciplined
manner.
"Given the solid progress in building our portfolio, its
performance and the outlook for the Company, the Board reaffirms
its target dividend yield of 5% per annum, which we expect to
increase broadly in line with inflation, and its target total
return of in excess of 8% per annum."
FOR FURTHER INFORMATION, PLEASE CONTACT:
ReSI Capital Management Limited
Jonathan Slater
Ben Fry
Mark Rogers
Alex Pilato
Richard Stubbs +44 (0) 20 7382 0900
Jefferies International Limited
Stuart Klein
Gary Gould +44 (0) 20 7029 8000
FTI Consulting +44 (0) 20 3727 1000
Richard Sunderland Email: resi@fticonsulting.com
Claire Turvey
Richard Gotla
NOTES:
Residential Secure Income plc (LSE: RESI) is listed on the
premium segment of the Official List of the UK Listing Authority
and was admitted to trading on the Main Market of the London Stock
Exchange in July 2017.
ReSI has been established to invest in portfolios of Homes
across residential asset classes that comprise the stock of Housing
Associations and Local Authorities, comprising Shared Ownership
Homes and Rental Homes (being Market Rental Homes, Functional Homes
and Sub-Market Rental Homes) throughout the UK.
ReSI is managed by ReSI Capital Management Limited, a wholly
owned subsidiary of TradeRisks Limited which has a 17 year track
record of executing transactions within the UK social housing
sector and, to date, has arranged funding of over GBP10 billion in
the social housing, care and other specialist residential property
sectors.
ReSI seeks to deliver secure, long-dated, inflation-linked
income returns through investment in UK social housing. It aims to
meet demand from Housing Associations and Local Authorities for
alternative equity-like financing sources that allows them to
recycle capital back into socially and economically beneficial new
housing, making a meaningful contribution to the UK housing
shortage.
Homes acquired by ReSI will predominantly be on a freehold or
long leasehold basis (typically 99 years or more to maturity) and
benefit from long term (typically 20 years plus) inflation-adjusted
cash flows. Acquisitions by ReSI will be limited to Homes with
sufficient cashflows, counterparty credit quality and property
security that allow the Fund Manager to arrange long-term
investment grade equivalent debt.
Further information on ReSI is available at
www.resi-reit.com
About Us
Residential Secure Income plc ("ReSI" or "the Company") is
managed by ReSI Capital Management Limited (the "Fund Manager"), a
wholly-owned and separately regulated subsidiary of TradeRisks
Limited ("TradeRisks") - a financing adviser and debt arranger with
a 17-year track record in the social housing sector.
ReSI was admitted to the premium listing segment of the Main
Market of the London Stock Exchange on 12 July 2017, raising
GBP180m in its IPO.
On 5 July 2018, the Regulator of Social Housing approved the
registration of ReSI Housing Limited (a wholly owned subsidiary of
ReSI) as a for profit Registered Provider of social housing.
ReSI is the first real estate investment trust able to invest in
all residential asset classes that comprise the stock of registered
UK social housing providers, Housing Associations and Local
Authorities across the United Kingdom.
ReSI's objective is to deliver long-term stable inflation-linked
returns to its shareholders by acquiring high quality residential
assets which comprise the stock of UK social housing providers. The
target is to deliver an inflation linked 5% p.a. dividend and total
return in excess of 8% p.a.
ReSI is required to have indicative terms of long term
investment grade equivalent debt financing in place prior to asset
acquisition, ensuring asset quality and mitigating refinancing risk
and interest rate exposure.
ReSI does not manage or operate stock and uses experienced third
party managers.
As at 30 September 2018, ReSI had acquired 2,362 units at a cost
of GBP210m, and exchanged on an additional 57 units.
Further acquisitions have been made after the period end of 73
units at a cost of GBP24m.
Including these acquisitions, ReSI has deployed around GBP234m
of the proceeds raised at its IPO and debt funding in assembling a
portfolio which now comprises 2,435 residential units, with over
80% of the portfolio invested in Southern England.
Key Highlights
Financial Highlights
105.1p /+7.3% GBP183.6m /+4.1% GBP164.9m
Net Asset Value per Net Asset Value Market Cap
share
IFRS Net Asset Value, Market Cap of equity
IFRS Net Asset Value an increase of GBP7.2m at 30 September 2018
per share, an increase (versus Net Asset Value
of 7.1p or 7.3% (versus immediately following
Net Asset Value per Admission of GBP176.4m)
share immediately following
Admission of 98.0p)
------------------------------- ----------------------------- -------------------------------
9.02p GBP225.2m /+7.0% GBP53.0m
Earnings per share Value of Investment Debt Raised
Property
Profit after tax per The debt is priced
share including revaluations Fair Value of investment at an all in fixed
based on IFRS NAV property at 30 September rate of 3.4507% , is
2018, excluding adjustment partially amortising
to fair value for the and finally repayable
finance lease asset, in 2043
an increase of 7.0%
compared to property
acquisitions at cost
------------------------------- ----------------------------- -------------------------------
3.00p GBP14.8m 22.8%
Dividend per share Valuation uplift LTV Ratio
Dividends declared Increase in fair value Ratio of total debt
for the period to 30 of investment property drawn against fair
September; targeting to 30 September value of investment
3p per share for the property (excluding
period to 30 September adjustment for finance
2018 and 5p per share lease asset)
annually thereafter
increasing in line
with inflation
------------------------------- ----------------------------- -------------------------------
9.5% 1.5% 2.3m
Total Shareholder Return Ongoing charges ratio Shares
Total return to shareholders Annualised ongoing Held by the Fund Manager,
to 30 September through charges ratio based directors of the Fund
increase in Net Asset on period end NAV, Manager, and Directors
Value and dividends including 1.0% for of ReSI plc. Equal
the Fund Manager's to 1.3% of the total
fee number of shares outstanding
as at 30 September
------------------------------- ----------------------------- -------------------------------
Operational Highlights
2,362 GBP210.3m Over 80%
Units acquired Capital deployed Of units located in
Southern England
2,362 units acquired Total consideration
spread across the UK on the acquisition Percentage of the total
as at 30 September of properties up to portfolio located in
2018 with a further 30 September 2018 Southern England, defined
73 assets acquired as the South East,
post period end South West, East Anglia
and Greater London
------------------------- ---------------------------- -----------------------------
GBP10.5m 5.0% 610
Annualised net rental Annualised net yield Locations
income
On capital deployed Number of unique locations
Net rental income (net - Annualised net rental where properties are
property income less income divided by capital owned across the United
ground rents disclosed deployed Kingdom
as finance costs) to
30 September 2018,
annualised for a full
calendar year for all
acquisitions acquired
before 30 September
2018
------------------------- ---------------------------- -----------------------------
Investment Timeline
Acquisitions Capital Other Announcements
======================= ========================= =========================
July 12 July
2017 Raised GBP180m at
IPO
========= ======================= ========================= =========================
November 24 November
2017 GBP101m acquisition
of retirement homes
portfolio
========= ======================= ========================= =========================
April 9 April
2018 Announcement of
Share buyback programme
========= ======================= ========================= =========================
May 16 May
2018 GBP32m acquisition
of licensed retirement
portfolio
========= ======================= ========================= =========================
June 21 June 29 June 18 June
2018 GBP21m acquisition Raised GBP53m 25 Extended lease term
of Local Authority year fixed debt facility on 1,003 long leasehold
Housing properties
========= ======================= ========================= =========================
July 16 July 9 July
2018 GBP13m acquisition Registration of
of Local Authority ReSI Housing Limited
Housing as a Registered Provider
with the Regulator
of Social Housing
========= ======================= ========================= =========================
August 30 August
2018 Appointment of Richard
Stubbs as CFO of
ReSI Capital Management
========= ======================= ========================= =========================
September 10 September
2018 GBP41m acquisition
of retirement homes
portfolio
========= ======================= ========================= =========================
October 19 October 26 October 3 October
2018 GBP7m acquisition Raised GBP40m 25 Appointment of David
of licensed retirement year fixed debt facility Orr as ReSI Housing
portfolio Chairman
========= ======================= ========================= =========================
26 October
GBP16m acquisition
of new build homes
for conversion into
Shared Ownership
========= ======================= ========================= =========================
Investment Strategy
ReSI seeks to provide its shareholders with income and capital
appreciation linked to inflation by acquiring and holding
residential assets which comprise the stock of UK social housing
providers. ReSI's financial model looks only to rent to make
projected dividend payments and does not rely on making returns
from trading its investments.
Investment Strategy
-- Select counterparties with strong credit covenants - larger,
well established Housing Associations, Local Authorities, leading
private operators or shared equity tenants
-- Acquire modern properties on a predominantly freehold or long
leasehold (e.g. 100 years) basis
-- Responsibility for operations and maintenance with operators or tenants
-- Target standing investments and forward funded opportunities (avoid development risk)
-- Apply long-term investment grade equivalent debt, targeting
50% leverage (debt/gross assets). ReSI aims to have indicative
terms in place prior to asset acquisition, mitigating interest rate
exposure and validating underlying asset quality
-- The investment strategy seeks to deliver an inflation-linked
target of 5% p.a. dividend and total return in excess of 8%
p.a.
Key Investment Themes
1. Reduced UK Government grant and other financial constraints
are causing Housing Associations to seek third party equity
capital
2. Similarly, government initiatives are encouraging Local
Authorities to bring in third party capital
3. UK housebuilders and developers are under pressure to
deleverage and reduce their balance sheets
4. Demographic trends and a historical undersupply are driving growing demand for UK housing
-- This environment has created a highly scalable, long-term
investment opportunity to generate secure, inflation-linked
returns
-- ReSI was created to meet demands from Housing Associations and Local Authorities for:
Alternative equity like financing routes to support their
development ambitions
Investment partners to facilitate their provision of housing
ReSI's long-term economic ReSI has a fully independent TradeRisks is a risk
objectives make it an board of experienced advisory firm and financing
attractive partner for non-executive directors arranger focused on
Housing Associations, and has appointed ReSI social housing and other
Local Authorities and Capital Management specialist residential
private developers who Limited, a wholly-owned property and social
favour partners with and separately regulated infrastructure sectors.
business models to invest subsidiary of TradeRisks TradeRisks has advised
and hold assets over Limited, to act as on and arranged funding
the long term. its alternative investment of over GBP10bn for
A highly scalable, long-term fund manager. social housing and other
investment opportunity In addition ReSI Housing, specialist residential
generating secure, inflation-linked the Group's for profit property. It has advisory
returns from a defensive Registered Provider or transactional relationships
asset class that is of social housing has with many of the larger
supported by strong its own independent UK housing associations,
demographic and structural board of experienced together representing
drivers. non-executive directors c. 1.2m units of housing.
The Company's subsidiary chaired by David Orr, TradeRisks uses its
ReSI Housing became recently retired CEO significant debt financing
a Registered Provider of the National Housing expertise to lock in
of social housing in Federation. returns on assets at
July and is now able the point of acquisition,
to acquire properties by arranging long-term
designated as affordable investment grade debt
and which are funded which matches asset
by government grant, cashflows.
expanding ReSI's pool
of potential investments.
------------------------------ ---------------------------------
Investment Portfolio
Since IPO, ReSI has assembled a portfolio of 2,435 housing
units, which includes 73 units acquired since the period end, and
comprises: 2,112 (77.1% by value) Retirement Rental homes, 289
(15.7% by value) Local Authority Housing units and 34 (7.2% by
value) Shared Ownership Homes.
Retirement Rental Portfolio
The Retirement Rental Portfolio consists of freehold and long
leasehold interests in retirement homes. This portfolio delivers
GBP8.7m of annualised rental income, and comprises two
complementary types of property:
Retirement Flats
-- Acquired UK-wide portfolio comprising 1,341 units in 250
purpose built retirement housing blocks for
GBP101m in November 2017. Extended lease term on 1,003
properties to 150 years
-- Acquired portfolio comprising 421 retirement homes across 284
purpose built retirement schemes from Places for People for GBP37m
in September 2018 and exchanged contracts to acquire a further 57
units
-- The majority of properties are let on Assured Tenancies to
retirement-aged residents, offering them lifetime security of
tenure. All tenancy rent reviews are annual and RPI linked, capped
at 6.0% per annum
-- The building fabric and services in the Retirement Rental
Portfolio are the responsibility of the freeholder and their estate
manager. ReSI uses its position as a service charge payer
(sometimes the majority payer in a development and for 3 blocks the
freeholder) to ensure high standards are maintained and that
sinking funds for future repairs are at a prudent level
Licensed Rental Homes
-- Portfolio comprising 277 units acquired by ReSI for GBP31 million in May 2018
-- Further acquisition of 39 unit property manager flats for GBP6.5m in October 2018
-- The units are licensed to First Port, the UK's largest
residential property management group, or directly to the
freeholder and used to house retirement property managers within
the schemes they manage.
-- The units provide a contractual, inflation-linked rental
income with around 80% subject to upwards only RPI reviews and the
remaining subject to upwards only market rent reviews
Debt Funding
-- Secured GBP53m of 25 year fixed rate debt at a coupon of
3.45% in June 2018 that is partially amortising and finally
repayable in 2043
-- Secured a second tranche of GBP40m fixed rate debt at coupon
of 3.49% in October 2018 that is partially amortising and finally
repayable in 2043
Local Authority Housing
ReSI's aim is to become a long term partner to Local Authorities
in providing affordable accommodation for their constituents. ReSI
currently has a portfolio of 289 units of Local Authority Housing
which delivers GBP1.8m of annualised net rental income.
Wesley House
-- Acquired freehold interest in Wesley House, comprising 134
self-contained residential flats, for GBP21m in June 2018
-- The building has recently undergone a full refurbishment, completed in 2016
-- Located in central Luton, 5 minutes' walk from the main
railway station. Used by the Council to provide housing under the
Local Authority's statutory obligations
-- Let to Luton Borough Council on leases with a weighted average remaining term of 7.0 years
-- The leases provide a CPI-linked upwards-only rent and pass to
the Local Authority the responsibility for repairs to the flats and
all letting risk
Eaton Green Court
-- Acquired freehold interest in Eaton Green Court, comprising
155 residential units in four buildings, for GBP13m in July
2018
-- The building has recently undergone a full refurbishment, completed in 2017
-- The buildings benefit from an 8.9 year lease to Luton Borough
Council (with an option for the local authority to extend by 10
years) and are used to provide housing under the Local Authority's
statutory obligations, as well as back to work and support services
to tenants.
-- Mears is responsible for repairs to the flats and providing
the support services while Luton Borough Council retain control of
letting and management
Shared Ownership
-- ReSI made its first Shared Ownership investment in October
2018 when it acquired 34 new build units at Crest Nicholson's
Totteridge Place development in the London Borough of Barnet for
GBP16.45m, which ReSI intends, using government grant funding, to
convert into Shared Ownership homes
-- ReSI will sell an initial share of between 25% and 75% of the
property to households with income up to GBP90,000 p.a. and will
receive RPI-linked rent on the remaining portion
-- The ratio of house prices to workplace earnings in Barnet has
increased from 9.18x in 2009 to 15.88x in 2017, an increase of 73%.
The conversion of these units into Shared Ownership will increase
provision of affordably priced housing in the local area
-- Managed by Metropolitan Thames Valley Housing, one of the
largest housing associations and a recognised leader in shared
ownership. Prior to their merger, Metropolitan and Thames Valley
sold a combined 537 Shared Ownership units in 2017/8. There were a
total of 8,667 Shared Ownership sales by Registered Providers/Local
Authorities in 2016/7
-- Assets are held through ReSI Housing Limited - registered as
a for profit Registered Provider of social housing on 5 July
2018.
Chairman's Statement
Rob Whiteman
Chairman
Introduction
I am pleased to present the maiden annual results of Residential
Secure Income plc ("ReSI" or the "Company") together with its
subsidiaries (the "Group") for the period from 12 July 2017 to 30
September 2018 (the "Period").
ReSI's objective is to deliver long-term inflation-linked income
and capital appreciation for its shareholders by making high
quality residential investments in asset classes owned by the UK
Statutory Registered Provider sector.
Investments are selected with the requirement that the strength
of the assets, the counterparty and the income stream can support
investment grade equivalent debt financing, emphasising the
strength of our counterparties and the quality of our assets.
Having made its first acquisition in November 2017, ReSI
achieved its IPO objective of entering the UK REIT regime.
The Property Portfolio
ReSI has made substantial progress in deploying the capital
available to it from its IPO and its borrowings, having deployed
GBP234m in acquiring a strong portfolio of 2,435 properties serving
the retirement sector, Local Authority housing needs and Shared
Ownership tenants.
After an initial GBP101m acquisition of retirement homes
announced in November 2017 ReSI has used its position in the
retirement homes market to complete three further transactions
which add scale to the portfolio and provide the opportunity for
operational synergies. A total of GBP184m has now been deployed
into retirement homes, including licenced house manager flats, with
ReSI owning 2,112 residential retirement units located across
England, Wales and Scotland. We were delighted to have completed
the acquisition of such a strong portfolio of properties serving
the retirement sector, an important and growing segment of
demand.
The retirement units are used to provide age-restricted
retirement housing and are managed by a specialised subsidiary of
one of the largest UK housing groups. The vast majority of these
units are long-leasehold properties, with a weighted average
unexpired lease term which, since acquisition, has increased to
around 125 years, after ReSI extended the term of 1,003 of the
leases to 150 years, in a value-enhancing transaction which was
announced in June 2018.
In June and July 2018, ReSI announced two transactions to
acquire freehold Local Authority housing containing 289 units let
to Luton Borough Council. The properties are used by the Local
Authority to provide housing under its statutory obligations, and
so play an important role in meeting the local need for
accommodation.
ReSI has also completed GBP93m of debt transactions (including
post-Period) as described further in the Fund Manager's report,
which provide 25 year fixed rate, partially amortising funding,
hence minimising ReSI's exposure to interest rates and refinancing
risk.
Registered Provider status
In July 2018 ReSI was pleased to announce that, through its
wholly owned subsidiary ReSI Housing Limited ("ReSI Housing"), it
had become the first publicly listed investment fund to be
authorised as a Registered Provider with the Regulator of Social
Housing.
This was a very important development as becoming a Registered
Provider allows ReSI Housing to acquire properties that are
designated as affordable accommodation under planning requirements
and those that are funded by government grant, including Shared
Ownership, thus greatly expanding the range of opportunities
available to ReSI. As described in "Progress since the end of
September 2018" ReSI has already announced its first such Shared
Ownership transaction through ReSI Housing, and expects this route
to be a key enabler for sustainable future growth.
Financial results
ReSI's financial results are strong in spite of the fact that
deployment of the IPO proceeds was initially slower than
anticipated at IPO, although the pace of investment has
significantly accelerated since then, as further described in the
Fund Manager's report. The Company maintained its highly
disciplined approach to selecting investments and was able to make
acquisitions at attractive levels. This is reflected in the
increase in ReSI's Net Asset Value, and the fact that the assets
are producing the expected income. As a result, we remain fully
confident in our overall investment strategy and our target
dividend and return expectations are unchanged from those set out
at the time of our IPO.
The assets in ReSI's portfolio have performed well. At 30
September2018, the Portfolio had produced income in line with
expectations and its valuation, as assessed by Savills, had
increased by 7.0% over its aggregate purchase price. This valuation
increase is reflected in ReSI's Net Asset Value and Earnings for
the Period.
The Net Asset Value per share at 30 September 2018 was 105.1p
which represents a 7.3% increase from the 98.0p Net Asset Value per
share immediately after IPO. ReSI quotes Net Asset Value on a basis
that is consistent with the IFRS valuation methodology used in its
accounts.
pence per
GBPm share
===== =========
Net Asset Value as
at
12 July 2017 176.4 98.0
====================== ===== =========
Net Income for period 1.7 0.9
====================== ===== =========
Valuation change 14.4 8.1
====================== ===== =========
Dividend paid (4.0) (2.2)
====================== ===== =========
Net capital reduction (4.9) (2.7)
====================== ===== =========
Impact of reduction
in number of shares - 3.0
====================== ===== =========
Net Asset Value as
at
30th September 2018 183.6 105.1
====================== ===== =========
For the period from Admission to 30 September 2018 ReSI recorded
a net income of GBP1.7m excluding revaluations for the period.
Total profit attributable to shareholders was GBP16.1m resulting in
net earnings per share for the period of 9.0p comprising operating
income of 0.9p and valuation gain of 8.1p per share.
Dividends
For the period from the date of Admission to 30 September 2018,
ReSI has declared four equal dividends of 0.75p per share (declared
in February, May, August and November 2018) totalling 3.0p per
Ordinary Share, in line with our target at IPO.
We intend to pay dividends to shareholders on a quarterly basis
and in accordance with the REIT regime.
Given the progress in building our portfolio, its performance
and the outlook for the Company, ReSI reaffirms both its target
dividend yield of 5% per annum (based on the issue price of 100p
per Ordinary Share) starting for the year commencing 1 October 2018
and which we subsequently expect to increase broadly in line with
inflation, and its target total return of in excess of 8% per
annum.
Progress since the end of September 2018
ReSI has continued to build and execute on a strong pipeline of
investment opportunities. In particular, we were very pleased to
announce in October 2018 ReSI's first Shared Ownership transaction,
when we exchanged contracts to acquire 34 new build homes located
in the London Borough of Barnet, which ReSI intends, using
government grant funding, to convert into Shared Ownership
homes.
ReSI has also announced in October 2018 the acquisition of a
further GBP6.5m of retirement homes that are leased to the
freeholder of the relevant block and a further GBP40m long-term
debt transaction secured against part of its retirement homes
portfolio.
We are pleased that ReSI Housing announced that David Orr,
previously CEO of the National Housing Federation, had been
appointed chairman.
ReSI is making good progress to fully commit its current capital
to high quality investments. This progress is more fully described
in the Fund Manager's report.
Share Buy-Backs
On 9 April 2018 ReSI announced that it would commence a share
buyback programme in response to the discount in ReSI's share price
below Net Asset Value. The programme allowed ReSI to invest in its
own shares at attractive prices without compromising its ability to
execute on its investment pipeline. To date, ReSI has purchased
just over 9.3m shares at an average price of 92.5p which is
accretive to Net Asset Value for shareholders. These shares are
held in Treasury and are not expected to be sold except at prices
above prevailing Net Asset Value per share.
Board changes
We were all shocked by the news of the sudden death of our
Chairman, The Rt Hon Baroness Dean of
Thornton--le--Fylde, on 13 March 2018. It was a great privilege
to know Brenda personally and to work alongside her and she is very
much missed. After Brenda's death, I agreed to assume the role of
acting Chairman and have now accepted the role on a permanent
basis.
On 14 September 2018 ReSI announced that Mike Emmerich, formerly
CEO of New Economy Manchester, has joined the board.
Outlook
There continues to be a shortage of housing in many parts of the
United Kingdom, resulting in high levels of demand, and ReSI has
seen strong appetite from Housing Associations, Local Authorities
and private developers for new sources of capital to invest in
these areas.
Through ReSI Housing, our Registered Provider of social housing,
we are now able to acquire properties designated as affordable
accommodation and those that are funded by government grant,
including Shared Ownership. We expect this route to be key to
future growth.
The Fund Manager continues to build a pipeline of high quality
investments that meet our investment criteria and has identified
transactions which would deploy all of ReSI's remaining capital
(with funding across the portfolio at approximately 50%
loan-to-value). These transactions are currently in negotiation and
are undergoing detailed legal and property due diligence. We will
continue to be highly selective in choosing opportunities and apply
rigorous due diligence, consistent with requiring acquisitions to
be capable of supporting investment grade equivalent debt.
The Board is grateful for the support of ReSI's shareholders and
the contribution of its advisers.
Rob Whiteman
Chairman
Residential Secure Income plc
22 November 2018
Strategic Report
Fund Manager's Report
Jonathan Slater
After a slower than expected start, as described in the
Company's March 2018 interim report, ReSI has now made substantial
progress in deploying its available capital. Furthermore, as a
result of ReSI Housing becoming a Registered Provider on 5 July
2018, the Company now has a structural advantage in being able to
access otherwise restricted assets, which is of great significance
for future growth.
ReSI has currently, including acquisitions in October 2018,
deployed GBP234m of capital in acquiring a strong portfolio of
2,435 properties serving the retirement sector, Local Authority
Housing needs and Shared Ownership tenants. This total includes the
two transactions totalling GBP54m whose heads of terms were
referred to in the interim report, which were successfully
executed.
We have continued to generate further strong pipeline of
potential investments which are rigorously filtered before choosing
to begin execution. We have remained highly disciplined in
selecting the transactions we are prepared to undertake and believe
that this is fundamental to delivering the long term secure returns
expected by ReSI's shareholders.
As a result of this pipeline, we have identified transactions
which would deploy all of ReSI's remaining capital (with funding
across the portfolio at approximately 50% loan-to-value). These
transactions are currently in negotiation and are undergoing
detailed legal and property due diligence.
Opportunities and investment focus
ReSI can invest across the range of types of residential housing
owned by Housing Associations and Local Authorities. This allows
management to optimise the portfolio amongst the available
opportunities taking into account prospective returns, security of
those returns and diversification within the portfolio. We can
either buy existing social housing stock or, through our for-profit
Registered Provider, ReSI Housing, can buy unrestricted stock and
use government grant to convert their use to affordable housing.
The table below illustrates the sectors of the residential market
that are our focus, as well as the benefits of these sectors to
both their end-users and investors seeking long-term stable
returns:
Rental housing
======================== ===========================================================================
Market rental Sub-market rent
Sectors Shared Ownership housing Functional housing housing
============= ======================== ========================= ============================ ==================
Focus Shared ownership Solutions to Retirement rental/sheltered Affordable and
for ReSI housing temporary and housing intermediate
emergency accommodation housing
============= ======================== ========================= ============================ ==================
Purpose Allow first time Provides accommodation Provides a rental Subsidised rent
buyers onto property for those otherwise option with lifetime for key workers
ladder in temporary security of tenure and low income
or emergency for the elderly groups
accommodation or those requiring
specially adapted
homes
============= ======================== ========================= ============================ ==================
Benefits Shared Ownership Leases are direct Rental payments Properties let
to investors consists of c. with Local Authorities are delinked below market
125 year leases who are generally to economy as rent with high
paying rent increasing AA rated entities tenants pay through demand due to
annually at RPI and have a statutory pensions, housing a shortage of
+ 0.5%. Tenants duty to house benefits etc. other affordable
have a strong those who are Includes property housing options
incentive to homeless or threatened used to house
pay rent given with homelessness the property
their ownership ReSI rents around manager within
stake. Staircasing market rent to the development
terminates rental minimise downside they manage,
income but returns risk if Local with the rent
capital with Authority doesn't ultimately paid
potential upside renew lease by the service
charge of all
leaseholders
providing a very
secure income
stream
============= ======================== ========================= ============================ ==================
The safety of our tenants is our highest priority and when
making an investment we are rigorous in using the skills and
expertise of our property team to identify and mitigate all risks
to tenants, whether fire or otherwise. Our lifecycle plans for
accommodation take a conservative approach to the long term costs
of property ownership to ensure that the standard of quality, is
maintained or improved throughout the life of the property. At the
same time, we only work with well-regarded partners to ensure all
routine and other maintenance is undertaken promptly and
properly.
Shared Ownership and Sub-market rent Housing
The case for raising equity-like capital within the social
housing sector has increased since our IPO with the main Housing
Association developers responding to government calls to increase
the supply of housing. Under current arrangements this leads to
increasing indebtedness, with a number of Housing Associations
nearing their debt capacity. The annual publication by the then
Homes and Communities Agency (Global Accounts of Registered
Providers, Dec 2017) shows a slow but steady growth in debt as a
proportion of net book value of properties. A recent survey by
Savills (The Savills Housing Sector Survey June 2018 in association
with the Social Housing magazine) demonstrates that, in terms of
financing additional supply, the most quoted barrier within the
business is gearing capacity. In order to increase supply, Housing
Associations need to overcome several barriers, ranging from access
to land, financial constraints and increases in planning
obligations for affordable housing. The growing trend for
equity-like capital to fund new social housing is becoming more
prevalent and is the only way that long-term capacity to develop
can be assured.
We continue to work with the leading Housing Associations and
private developers to both invest in their existing stock and
forward-fund new properties in order to accelerate their
development programmes. These discussions are primarily around
multi-year programmes to become the equity funding partner of
developers (both private and Housing Associations) and allow
acceleration of development plans without using the developer's
capital. ReSI Housing's registration as a Registered Provider of
social housing, in particular, has opened up a new ability to
source stock directly from developers that is either required by
planning conditions to be rented below market, or which can be
converted, with subsidy from government grant, into Shared
Ownership. These partnerships will change the nature of our
origination from a focus on specific acquisitions to framework
approaches, allowing ReSI to secure investment pipeline.
Local Authority Housing
Unfortunately, many Local Authorities, especially those in South
East England, have in recent years experienced significant
increases in households presenting as homeless. This is primarily a
result of the critical shortage of both affordable and market
housing, exacerbated by reforms to the Local Housing Allowance.
Together these factors have left Local Authorities with a statutory
duty to find housing for increasing numbers of households but
without the permanent homes to do so. The recently enacted
Homelessness Reduction Act has further added to the pressure on
Local Authorities to find housing solutions in order to prevent
homelessness building upon the Housing Act 1996, as amended by the
Homelessness Act 2002, which places a duty on Local Authorities to
secure accommodation for unintentionally homeless people who are in
priority need. According to published reports, England had 79,880
households in Temporary Accommodation at the end of March 2018, and
the households included 123,130 children. Demand for Temporary
Accommodation has grown by over 70% since March 2011. Whilst the
recent announcement by the government to remove the cap on Local
Authorities borrowing through their Housing Revenue Account will
allow some Local Authorities to begin to address their housing
requirements, the depth of the problem is such that we still see
huge demand from Local Authorities.
As such, we are working with a number of Local Authorities to
provide good quality buildings as accommodation for vulnerable
single people and families without relying on expensive and
short-tenure solutions such as hotels or hostels. ReSI provides
Local Authorities with a long term institutional landlord to
replace the numerous individual landlords that Local Authorities
currently rely upon and removes the difficulties that Local
Authorities have with ensuring adequate standards across their
rented estates.
Retirement Rental Housing
The UK population continues to age, with opportunities for
downsizing for over 60's historically limited to renting sheltered
accommodation owned by charities and Local Authorities, or buying
into age-restricted accommodation blocks, which can expose the
resident to significant transaction costs on entry and on
departure. Surveys indicate that 25% of UK over 55's would like to
buy or rent in a retirement village. However, the market is faced
with a lack of supply of specialised retirement living options. We
see significant opportunity to deliver an affordable good quality
rental offering to provide accommodation that is fit for purpose
without the burdens and transaction costs of ownership.
As such, we continue to develop investment opportunities across
the four broad areas of Local Authority housing, age-restricted
retirement rental housing, sub-market rental accommodation and
Shared Ownership.
We expect ReSI's current remaining investment capacity to be
focussed predominantly on Shared Ownership.
Performance
The property portfolio has performed in line with expectations
in terms of net income generation and, as noted above, delivered a
return above expectations from increases in valuation since
purchase. These increases in valuation derive from a combination of
attractive purchase yields, especially in the retirement home space
where ReSI's existing portfolio makes it a preferred purchaser, and
asset management activity including negotiated lease extensions. As
at 30 September 2018, the Net Asset Value included a 7.0% gain in
the valuation of the portfolio above purchase price. The NAV Total
Return of 9.5% is pleasing and compensates for the unanticipated
cash drag caused by the additional time taken to deploy
capital.
ReSI's acquisitions to 30 September 2018 deliver an unlevered
yield of 5.0%. The retirement rental portfolio, where leverage is
now in place, delivers a leveraged yield of 6.8%.
ReSI's expenses ratio of 1.5% (annualised and based on closing
NAV) has been 0.2% higher than anticipated due to the legal and
other costs of setting up and registering ReSI Housing. Primarily
due to the additional structural costs involved with ReSI Housing,
we expect that the on-going expense ratio will be 1.5%. However,
this does not affect our equity return or dividend targets since
the increase in expected costs is more than offset by a
corresponding increase in investment returns due to the wider range
of opportunities available through ReSI Housing. The majority of
operating costs are fixed so we would expect this ratio to decline
as the fund grows.
Borrowing
On 28 June 2018, ReSI completed a GBP53m fixed rate debt
financing, with a term of 25 years, representing leverage of around
50% (loan/gross assets) secured against our initial retirement
acquisition. The rate on the financing was partially pre-hedged to
mitigate interest rate exposure before completion using an interest
rate swap.
Swap rates had declined at the date of exiting the swap and
fixing the rate on the loan in June 2018 and therefore ReSI
recognised a loss on exiting the swap (as shown in Net Finance
Costs). However, as is the intention of hedging, this is
compensated for by a lower future interest cost than would have
otherwise been achieved if the debt had been fixed at the time of
hedging.
On 26 October 2018, ReSI completed a further GBP40m debt
financing on similar terms to the above. This was secured on the
further additions to the retirement homes portfolio.
These debt financings form part of the strategy to target an
overall level of indebtedness of 50% loan to gross asset value and
a low cost of long-term funding, which together enhance the returns
to equity available to ReSI shareholders and minimise exposure to
interest rate and refinancing risks.
Since 30 September 2018, ReSI has continued to work with
institutional debt investors and is in discussion with debt
providers to put in place further investment grade equivalent debt
against our recent and current acquisitions and working capital
facilities to bridge the time between acquiring an investment and
putting in place long term financing.
We now look forward to reaching the point where ReSI's current
capital is fully committed.
Jon Slater
Chief Executive
ReSI Capital Management Limited
22 November 2018
Investment Strategy
Investment objective
The Investment objective of ReSI is to provide shareholders with
an attractive level of income, together with the potential for
capital growth, from acquiring portfolios of Homes across
residential asset classes that comprise the stock of Statutory
Registered Providers. Such asset classes are categorised as Shared
Ownership Homes, Market Rental Homes, Functional Homes and
Sub-Market Rental Homes and will provide secure long-term inflation
linked cashflows to the Group. The target is to deliver an
inflation linked 5% p.a. dividend and total return in excess of 8%
p.a.
Background to the sector
The background to the need for additional affordable housing
across the UK is well attested:
-- significant growth in household numbers and constrained
supply have led to poor affordability of houses; and
-- tighter financial regulation that restricts access to
mortgages is further driving demand for rental homes.
On average, people in work could expect to pay around 7.6 times
their annual earnings to purchase a home in England and Wales in
2016, up from 3.6 times in 1997. The median price paid for
residential property in England and Wales increased by 259% between
1997 and 2016, compared to a 68% increase in median individual
annual earnings in the same period. No recent government has seen
enough homes built to keep up with demand (Source: ONS, March
2017).
The housebuilding industry is producing 210,000 new homes per
year in England, more than at any time since the global financial
crisis in 2007. However, this is still less than both the
Government's own assessment, which sets the annual housing need in
England at 266,000, and the House of Lords Economic Affairs
Committee which suggests over 300,000 new homes are needed each
year to have any impact on affordability. The 2017 housing white
paper explicitly identifies slow delivery as one of the major
difficulties facing the housing market (Source: Savills Residential
Property Forecasts, Autumn 2017). This is creating demand for new
investment in housing, whether in social or private renting.
Housing Associations and Local Authorities
Housing Associations and Local Authorities are increasingly seen
as key in meeting the need to extend the supply of affordable
housing and are seeking ways to access private sector capital to
enable this supply. They are increasingly using different types of
tenancy such as Shared Ownership to address affordability and to
provide access to the housing ladder.
These factors produce demand for private sector investment into
residential housing, and provide a highly scalable, longterm
investment opportunity to generate secure, inflation-linked
returns. ReSI was created to meet demand from Housing Associations
and Local Authorities for alternative equity like financing routes
to support their development ambitions by recycling their capital;
and for investment partners to facilitate their provision of
housing.
Transaction types
ReSI can invest across the range of types of residential housing
typically owned by Housing Associations and Local Authorities and
seeks to optimise the portfolio amongst the available opportunities
taking into account prospective returns, security of those returns
and diversification within the portfolio. ReSI applies the
fundamental constraint that acquisitions should be able to support
investment-grade equivalent debt. This ensures that each
acquisition has the relevant combination of high quality
properties, strong counterparties and secure income streams, and
that it can be funded efficiently. We categorise the investment
areas as follows:
Rental Housing
-- Functional Homes
Functional Homes are properties equipped to provide elderly care
facilities, assisted living facilities, supported housing or
sheltered housing to residents.
In order to provide security of income, and to allow long-term
debt funding, of investment grade equivalent credit strength to be
put in place, ReSI enters into rental agreements in respect of
Functional Homes with Statutory Registered Providers and Reputable
Care Providers. The Statutory Registered Providers and/or Reputable
Care Providers may also be providing care services.
-- Sub-Market Rental Homes
Sub-Market Rental Homes are properties made available to
residents for rent at a level below the local market rent.
ReSI anticipates entering into rental agreements in respect of
Sub-Market Rental Homes with Statutory Registered Providers to
provide long-term income streams.
-- Market Rental Homes
Market Rental Homes are properties being made available to
Residents at a market rent.
ReSI anticipates entering into rental agreements in respect of
Market Rental Homes with Statutory Registered Providers,
Universities and Reputable Private Landlords to provide long term
income streams.
Shared Ownership Homes
Shared Ownership Homes are properties where the beneficial
interest is held in part by the Shared Owner and part held by ReSI,
and the Shared Owner has sole use of the property in return for a
rent payable to ReSI for its beneficial interest. The Shared Owner
has the right to acquire a further portion of ReSI's retained
beneficial (or heritable) interest (known as "staircasing") at
market value.
ReSI will enter into a fully repairing and insuring Shared
Ownership Lease with the Shared Owner, typically for a term of 125
years or over, and a Rent Collection and Management Agreement with
a Statutory Registered Provider acting as Rent Collector and
Manager.
ReSI can either buy existing Shared Ownership stock or, through
our Registered Provider ReSI Housing Ltd, can buy unrestricted
stock and use government grant to convert their use to Shared
Ownership.
Investment Objective, Policy and Restrictions
Investment objective
The Company's investment objective is to provide Shareholders
with an attractive level of income, together with the potential for
capital growth, from acquiring portfolios of homes across
residential asset classes that comprise the stock of Statutory
Registered Providers. Such asset classes are categorised as Shared
Ownership Homes, Market Rental Homes, Functional Homes and
Sub-Market Rental Homes and will provide secure long--term
inflation-linked cash flows to the Group.
Investment policy
The investment policy is to invest in portfolios of homes
throughout the United Kingdom.
The freehold or long leasehold (typically 100 years and longer)
interest of homes will be acquired by the Company directly or
indirectly (either through the acquisition of Home-owning vehicles
or the entry into joint venture arrangements) with the benefit of
long-term (typically 20 years and longer) inflation-linked cash
flows.
In each case, the Group will outsource the day-to-day
management, rent collection and maintenance in respect of a
home.
The Group will make use of leverage, put in place on or shortly
after the acquisition of homes, to enhance returns on equity. The
Group will only invest in Homes, and forward funding of homes, with
sufficient cashflows, counterparty credit quality and property
security that allow the Fund Manager to secure debt of a credit
strength which is equivalent to investment grade based on published
rating agency methodologies. This restriction to homes that can be
funded with investment grade equivalent debt is the fundamental
limitation on asset quality of the Company.
The Group will not undertake any direct development activity or
assume direct development risk but may enter into forward funding
arrangements without limit subject to the investment restrictions
outlined below. These are arrangements with property developing
entities (typically expected to be Statutory Registered Providers)
whereby the Group forward funds the development of homes by such
developing entities, which will be structured so that the only risk
to the Group is the credit risk of such developing entity. Homes
that are subject to a forward funding arrangement with the Group
will be subject to a rental agreement with a Counterparty or Shared
Ownership Lease with a Shared Owner contingent on completion of
construction. In such circumstances, the Group will typically seek
to negotiate the receipt of immediate income from the asset, such
that the developing entity is paying the Group a return on its
investment during the construction phase and prior to the tenant
commencing rental payments under the terms of their lease. In
addition, the Group may engage in renovating or customising
existing homes, as necessary.
The Group aims to deliver capital growth by holding the
Portfolio over the long term and therefore it is unlikely that the
Group will dispose of any part of the Portfolio. In the unlikely
event that a part of the Portfolio is disposed of, the Group
intends to reinvest proceeds from such disposals in assets in
accordance with the Investment Policy.
Investment restrictions
The Group will invest and manage the Portfolio with the
objective of delivering a high quality Portfolio, which is
fundamentally driven by the requirement that homes have sufficient
cashflows, counterparty credit quality and property security that
allow the Fund Manager to secure debt of a credit strength which is
equivalent to investment grade based on published rating agency
methodologies and which is subject to the following investment
restrictions:
-- the Group will only invest in homes located in the United Kingdom
-- the homes will comprise Shared Ownership Homes, Market Rental
Homes, Functional Homes and Sub--Market Rental Homes
-- the Group will only invest in Market Rental Homes, Functional
Homes and Sub-Market Rental Homes
-- homes in respect of which the Counterparty is a Statutory
Registered Provider, University, Reputable Private Landlord or
Reputable Care Provider
-- no home, or group of homes forming one contiguous, or largely
contiguous, block of homes (for example a building containing
multiple flats), will represent more than 20% of Gross Asset Value
calculated at the time of investment. However, during such time as
Gross Asset Value remains below GBP900 million, the maximum limit
for up to two homes may exceed 20% but will not exceed 25% of Gross
Asset Value (calculated at the time of investment) per Home in
order to facilitate the ownership of certain larger homes during
the Company's initial deployment period
-- the aggregate maximum credit exposure to any Counterparty or
Shared Owner, will not exceed 20% of Gross Asset Value, calculated
at the time of investment. However during such time as Gross Asset
Value remains below GBP900 million, the maximum credit exposure to
up to two Counterparties and/or Shared Owners may exceed 20% but
will not exceed 25% of Gross Asset Value (calculated at the time of
investment) per Counterparty and/or Shared Owner in order to
facilitate the ownership of certain larger residential assets
during the Company's initial deployment period
-- with respect to forward funded homes, the maximum exposure to
an individual property developing entity will be limited to 20% of
Gross Asset Value calculated at the time of investment. However,
during such time as Gross Asset Value remains below GBP900 million,
the maximum limit for up to two individual property developing
entities may exceed 20% but will not exceed 25% of Gross Asset
Value (calculated at the time of investment) per individual
property developing entity in order to facilitate the forward
funding of homes during the Company's initial deployment period;
and
-- the Group will not undertake any direct development or speculative development.
The Group shall be permitted to acquire any property consisting
of homes and a commercial element, provided that the Fund Manager
is satisfied that such commercial element is ancillary to the
primary function of such Home as a Shared Ownership Home, Market
Rental Home, Functional Home or Sub-Market Rental Home.
The investment limits detailed above apply at the time of the
acquisition of the relevant investment in the Portfolio. The Group
will not be required to dispose of any investment or to rebalance
its Portfolio as a result of a change in the respective valuations
of its assets or merger of Counterparties.
Joint ventures
The Group may acquire homes through joint-venture arrangements
with Statutory Registered Providers pursuant to which the Group and
the relevant Statutory Registered Provider will together
participate in a joint venture vehicle that owns (directly or
indirectly) the relevant Home.
Investments through such joint-ventures will be subject to the
same investment restrictions and leverage policy, which shall be
read to look through the joint venture vehicle and apply to the
Group's partial (through the joint venture vehicle) economic
ownership interest in the relevant Home.
Use of leverage and gearing limits
The Group will seek to use leverage to enhance equity returns of
the Portfolio. The level of borrowing will be determined by the
Fund Manager based on the characteristics of the relevant property
and asset class and the Fund Manager will seek to achieve a low
cost of funds, whilst maintaining the flexibility in the underlying
security requirements and the structure of both the Portfolio and
the Group.
The Fund Manager intends to have indicative terms of any debt
funding before completing an acquisition which will mitigate the
risk of a funding mismatch arising. When considering any funding
proposal, the Fund Manager will make use of its officers'
experience, and those of its parent, TradeRisks Limited, in
accessing long-term fixed rate and inflation-linked debt, which
will most appropriately match debt against the cashflow profile of
the investment opportunity. The Fund Manager intends to structure
the debt by assessing the operational cashflows from the target
asset and setting a Debt Service Coverage Ratio that, in
combination with the counterparty credit quality and property
security, gives efficient funding, which shall be of a credit
strength equivalent to investment grade based on published rating
agency methodologies. As such the gearing strategy for the Group is
more akin to long term project finance debt than to traditional
commercial property debt.
Debt may be secured or unsecured. If secured, it will be secured
at asset level, whether over a particular property or a holding
entity for a particular property or series of properties (without
recourse to the Company). The Fund Manager intends that all
indebtedness will be incurred on a fully or partially amortising
basis, to minimise the need to refinance on any final repayment
date, with the exception of any working capital facilities raised
at the level of the Company.
The Group will target an asset level aggregate level of
borrowings of 50% of Gross Asset value over the medium term.
Aggregate Group borrowings will always be subject to an absolute
maximum, calculated at the time of drawdown, of 67% of Gross Asset
Value.
Use of derivatives
The Fund Manager intends to match debt cashflows to those of the
underlying assets and therefore does not expect to utilise
derivatives. However, to the extent this is not possible, the Group
may utilise derivatives for full or partial inflation or interest
rate hedging or otherwise seek to mitigate the risk of inflation or
interest rate movements. The Group will closely manage any
derivatives, in particular with regard to liquidity and
counterparty risks.
The Group will only use derivatives for risk management and not
for speculative purposes.
Cash management
Until the Group is fully invested, and pending re-investment or
distribution of cash receipts, the Group will invest in cash, cash
equivalents, near cash instruments and money market
instruments.
REIT status
The Directors will at all times conduct the affairs of the
Company so as to enable it to become and remain qualified as a REIT
for the purposes of Part 12 of the CTA 2010 (and the regulations
made thereunder).
Amendments to and compliance with the Investment Policy
Material changes to the Investment Policy may only be made with
the approval of Shareholders by way of ordinary resolution and (for
so long as the Ordinary Shares are listed on the Official List) in
accordance with the Listing Rules. Non-material changes to the
Investment Policy must be approved by the Board, taking into
account advice from the Fund Manager and external advisers where
appropriate.
Key Performance Indicators
Measure Explanation Relevance to Strategy Result
========================= =========================== ======================
Capital deployed ReSI measures the ReSI's strategy is GBP210m deployed
rate at which it to invest in high by 30 September
has deployed capital quality social housing 2018, and a
since IPO since this assets; hence the further GBP24m
drives the timing total capital deployed subsequently.
of income production. into such assets Investments
reflects ReSI's ability have been identified
to source suitable which would
investments. commit ReSI's
remaining capital
(with funding
across the portfolio
and approximately
50% loan-to-value).
================ ========================= =========================== ======================
IFRS NAV per ReSI measures its A higher IFRS NAV IFRS NAV of
share IFRS Net Asset Value per share compared 105.1p per share,
per share, consistent to ReSI's opening including a
with its financial NAV of 98p per share GBP14.8m capital
statements, with immediately following appreciation
a target to achieve IPO, reflects capital gain on investments.
capital appreciation appreciation on its
in line with inflation portfolio.
without reliance
on gains from asset
sales.
================ ========================= =========================== ======================
Dividend per Targeting 3p per ReSI seeks to provide Dividends of
share share in the period stable rental income 2.25p per share
from IPO to 30 September to its investors paid to date
2018; 5p per share through regular consistent and fourth interim
per annum thereafter, dividend payments dividend for
growing in line with in line with its the period of
inflation. target. 0.75p per share
declared on
Measuring dividend 15 November
payments per share 2018, thereby
reflects ReSI's ability achieving target
to meet this target, dividend for
with performance the first financial
constrained by available period.
cash and the income
generated from ReSI's
assets.
================ ========================= =========================== ======================
Ongoing charges Ongoing charges express ReSI measures the 1.5%, from Admission
ratio the ratio of annualised ongoing charges ratio to 30 September
ongoing expenses to demonstrate that 2018, of which
to Net Asset Value the running costs 1.0% relates
at the end of the of the Company und to Fund Manager
period. are kept to a minimum fees and the
without impacting remainder being
on performance. general and
administrative
A lower ongoing charges expenses.
ratio will improve
ReSI's financial The ongoing
performance. charges ratio
has been 0.2%
higher than
anticipated
due to the additional
costs of setting
up and registering
ReSI Housing.
================ ========================= =========================== ======================
Principal Risks and Uncertainties
Risk Risk Mitigation
==================================================
Company, Investment Strategy
and Operations
==================================== ==================================================
ReSI may not meet its investment -- On-going information on investment activities
objective or return objective provided by the Fund Manager to the Board
-- Regular review of investment and return
objectives
==================================== ==================================================
ReSI may be unable to make -- ReSI has a detailed Investment Policy
acquisitions on its targeted that describes target assets and the process
timeline for acquiring such assets
-- TradeRisks has long-term relationships
with leading UK Housing Associations and
Local Authorities
-- Registration of ReSI Housing as a Registered
Provider expands the origination universe
to include acquiring newly developed properties
that are designated as affordable accommodation
under planning requirements and unrestricted
stock where ReSI can apply government grant
to convert into Shared Ownership
-- TradeRisks has extended its origination
and relationship network by bringing in
additional experienced professionals with
backgrounds working for housing associations,
Local Authorities and property developers
==================================== ==================================================
ReSI's due diligence ('DD') -- The Fund Manager engages established
may not identify all risks law firms to carry out
and liabilities in respect legal DD managed by in-house counsel
of an acquisition -- Property DD carried out by reputable
real estate surveyors and managed by in-house
property experts
-- Financial DD carried out by major accounting
firms and managed by experienced accountants
-- TradeRisks performs shadow credit ratings
utilising published credit rating methodologies
-- The Fund Manager has strengthened its
finance team through the recruitment of
a Chief Financial Officer with an extensive
real estate fund accounting and administration
background.
==================================== ==================================================
Real estate
==================================== ==================================================
Significant or material -- The aim of ReSI is to hold the assets
fall in the value of the for the long term and generate inflation
property market linked income
-- ReSI does not intend to rely on realised
revaluation gains to cover dividend payments,
which it intends to cover from income once
fully invested
-- ReSI enters into long-term management
agreements to ensure any fall in the property
market should not result in significant
impairment to the rental cashflows
-- ReSI focuses on areas of the market
with limited and ideally countercyclical
exposure to the wider property market
==================================== ==================================================
Retaining and procuring -- The Fund Manager engages third parties
appropriate tenants to provide the day-to-day management of
a home and letting and collection of underlying
rent from residents or Shared Owners
-- The Fund Manager only accepts void risk
where there is a demonstrable strong demand
or where the tenants are part owners of
the properties (as exhibited by retirement,
sub-market rental assets or Shared Ownership
properties)
==================================== ==================================================
Service providers
==================================== ==================================================
ReSI is dependent on the -- ReSI places reliance on the independent
expertise of the Fund Manager Board of Directors who have strong relevant
and TradeRisks and their experience
key personnel to evaluate -- The Fund Manager and TradeRisks interests
investment opportunities are aligned to those of ReSI's shareholders
and to assist in the implementation through a fee structure which pays 25%
of ReSI's investment objective of Fund Manager fees in equity and provides
and investment policy for no transaction-specific fees
-- The directors of the Fund Manager (or
persons connected to them) hold (in aggregate)
1,533,361 Ordinary Shares in ReSI and the
Fund Manager holds 567,952 Ordinary Shares
==================================== ==================================================
Taxation
==================================== ==================================================
If ReSI fails to remain -- ReSI intends to remain within the UK
qualified as a REIT, its REIT regime and work within its investment
rental income and gains objective and policy
will be subject to UK corporation -- The Directors will at all times conduct
tax the affairs of ReSI so as to enable it
to become and remain qualified as a REIT
for the purposes of Part 12 of the CTA
2010
-- The Board would have oversight on any
action that would result in ReSI failing
to adhere to the UK REIT regime, and ReSI
receives tax advice from professional advisers
==================================== ==================================================
Investment Management
==================================== ==================================================
Market and individual investment -- The Fund Manager rigorously analyses
risks not analysed or detected investment opportunities and undertakes
in a timely fashion leading comprehensive due diligence before acquisition
to investments with poor -- The Fund Manager does not receive a
performance or a higher performance based fee and as such is not
risk profile than stated financially incentivised to target riskier
within investment policy higher yielding assets
-- The Fund Manager receives a management
fee prior to deployment and so is not financially
incentivised to purchase assets quickly
regardless of the performance of such assets
==================================== ==================================================
Going Concern and Viability Statement
Going concern
The Board monitors the Company's ability to continue as a going
concern. The following is a summary of the Directors' assessment of
the going concern status of the Group and Company, which should be
read in conjunction with the viability statement.
The Directors have considered the Group's cash position, income
and expense flows. In addition, as at 30 September 2018 the Group's
net assets were GBP183.6m and the Group held cash and cash
equivalents of GBP11.8m. The annualised net rental income for all
acquisitions acquired before 30 September is GBP10.5m.The total
Operating expenses (excluding finance costs and taxation) for the
period ended 30 September 2018 were GBP3.35m. Therefore, the Group
has substantial Operating expenses cover.
Based on the above information, the Board has made an assessment
and are satisfied that there are no material uncertainties in
relation to the Group and the Company's ability to continue in
business for the foreseeable future and therefore has adopted the
going concern basis in the preparation of the financial
statements.
Viability statement
In accordance with the UK Corporate Governance Code, the Board
has assessed the viability of the Group over a longer period than
the 12 months required by the 'Going Concern' provision. The Board
has conducted this review for the five years to September 2023. The
Board considers that five years is the maximum period for which the
degree of uncertainty relating to factors outside of the Board's
control is low enough to make a reasonable expectation in respect
of the Group's longer term viability.
Five years was considered appropriate given the Company's long
term investment objective. The Board has considered each of the
principal risks and uncertainties set out above and the liquidity
and solvency of the Company.
Having considered the relevant matters, the Board has a
reasonable expectation that ReSI will be able to continue in
business and meet its liabilities as they fall due over the five
year period of its assessment.
The Chairman's statement and Fund Manager's Report present the
positive long term investment case for acquiring high quality
residential assets which also underpins the Group's viability for
the period.
Approval
The Strategic report was approved by the Board of Directors on
22 November 2018
Rob Whiteman
Chairman of the Board of Directors
22 November 2018
Governance
Board of Directors
Appointed
Rob Whiteman 9 June 2017
Non-executive Chairman Skills, competence and experience
Significant knowledge of public service finances
and reform and a strong background in public financial
management and governance
Previously Chief Executive of UK Border Agency
and led the Improvement and Development Agency.
Rob was Chief Executive of London Borough of Barking
and Dagenham from 2005-2010 and has held various
positions in London Borough of Lewisham from 1996-2005,
latterly as Director of Resources and Deputy Chief
Executive
Educated at the University of Essex where he gained
a BA (Hons) in Economics and Government
Other roles
Chief Executive of the Chartered Institute of Public
Finance & Accountancy (CIPFA)
Chairman of East London Health & Care Partnership
Chairman of Barking & Dagenham College
Technical adviser to the International Federation
of Accountants (IFAC) in New York
----------------------------------------------------------
Robert Gray Appointed
Non-executive Director 9 June 2017
Skills, competence and experience
Extensive business experience, including experience
in debt finance and capital markets
Robert has held roles at HSBC Markets Limited and
HSBC Investment Bank in London working initially
as Managing Director for Global Capital Markets
and subsequently as Vice Chairman for Client Development.
Robert was also Chairman, Debt Finance & Advisory
at HSBC Bank plc. As Director and Chair of the
Overseas Promotion Committee of the TheCityUK Robert
served as financial services sector adviser to
the UK Minister for Trade & Investment.
He was Chairman of the International Primary Market
Association and Vice Chairman and Chairman of the
Regulatory Police Committee of the International
Capital Market Association.
Educated at Sherborne School and St. John's College,
Cambridge University where he gained a MA (Hons)
in History
Other roles
Director and Chair of the Audit Committee of the
Arab British Chamber of Commerce
------------------------ ----------------------------------------------------------
Appointed
John Carleton 9 June 2017
Non-executive Director Skills, competence and experience
Strong operational leader with management experience
and a track record in social infrastructure and
housing
Previously John was a Partner and Head of Housing,
Regeneration and Growth at Arcadis LLP, was an
executive Director for Markets & Portfolio at
Genesis Housing Association and Managing Director
for Genesis Homes Ltd. In addition John has held
various other roles including Director of Social
Infrastructure and Housing at PricewaterhouseCoopers,
Director of the Housing Corporation (now the
Homes and Communities Agency), Property Director
at Barclays Bank, Managing Director of HRC Ltd/Lehman
Brothers and Head of the Specialist Property
Division at the Bank of Ireland
Educated at the University of Liverpool and holds
a MBA in Finance from Manchester Business School.
John is a fellow of the R.I.C.S and also holds
an IPF Investment Property Forum Diploma from
the Cambridge University Land Institute
Other roles
Executive Director of property investment at
Orbit Group
Director of Places for People Leisure Partnerships
------------------------ ----------------------------------------------------------
Mike Emmerich Appointed
Non-executive Director 13 September 2018
Skills, competence and experience
Considerable experience in urban development,
with over 20 years of experience in delivering
strategies for planning, housing, environment
and innovation
Mike is founding Director of Metro Dynamics,
a specialised consultancy for city authorities.
Mike plays a central role on many major city
projects including the devolution deals in the
West Midlands and North East which give more
local responsibility for housing and infrastructure.
He also provides support for the Metro Mayor
in Liverpool and advises the Cambridge and Peterborough
Independent Economic Review. Mike has held other
roles including Chief Executive of New Economy
Manchester, Senior Policy Adviser on social and
economic development in the Prime Minister's
Policy Unit and Policy Adviser to HM Treasury
Other roles
Director Manchester Camerata
Trustee, the Tutor Trust
------------------------ ----------------------------------------------------------
Changes to the Board
The Rt Hon Baroness Dean of Thornton-le-Fylde ceased to be Chairman
of the Company on 13 March 2018 following her death. Rob Whiteman
replaced Rt Hon Baroness Dean of Thornton-le-Fylde as non-executive
Chairman on 14 March 2018 and stepped down from his role as Chairman
of the Audit Committee, which was subsequently assumed by Robert Gray.
Rob Whiteman has now accepted the role as non-executive Chairman on
a permanent basis.
------------------------------------------------------------------------------------
Directors' Report
The Directors present their report for the period from 12 July
2017 to 30 September 2018. Business operations commenced on 12 July
2017 when the Company's Ordinary Shares were listed on the London
Stock Exchange.
The Company's previous financial statements were in respect of
the period from incorporation on 21 March 2017 to 11 July 2017. The
Company subsequently changed its year end to 30 September.
ReSI's principal objective is to deliver long-term stable
inflation-linked returns to shareholders by acquiring high quality
residential assets which comprise the stock of UK social housing
providers. The Company is targeting an inflation linked dividend
yield of 5% per annum and total return in excess of 8% per annum.
It is the Company's intention to pay dividends to shareholders on a
quarterly basis and in accordance with the REIT Regime.
Results
The Group's profit for the period was GBP16.1m and the earnings
per share were 9.02 pence.
The results for the period are shown in the financial
statements. Commentary on the results is given in the Strategic
Report.
Dividend policy
The Company is targeting, on a fully invested and geared basis,
a dividend yield of 5% per annum based on the issue price of GBP1
per Ordinary Share, which the Company expects to increase broadly
in line with inflation. It is the Company's intention to pay
dividends to Shareholders on a quarterly basis and in accordance
with the REIT Regime.
The Company has targeted a dividend yield of at least 3% for the
first financial period from Admission to 30 September 2018.
As a REIT, the Company will be required to meet a minimum
distribution test for each accounting period that it is a REIT.
This minimum distribution test requires the Company to distribute a
minimum of 90% of its Property Rental Business income profits for
each accounting period, as adjusted for tax purposes.
When the Company pays a dividend, that dividend will be a
Property Income Distribution ('PID') to the extent necessary to
satisfy the 90% distribution condition. If the dividend exceeds the
amount required to satisfy that test, then depending on all the
circumstances the REIT may determine that all or part of the
balance is a Non-PID Dividend. Subject to certain exceptions, PIDs
will be subject to withholding tax at the basic rate of income tax
(currently 20%).
If the Company ceases to be a REIT, dividends paid by the
Company may nevertheless be PIDs to the extent they are paid in
respect of profits and gains of the Property Rental Business whilst
the Company was within the REIT Regime.
Dividends paid in period
In line with the Company's dividend policy, three interim
dividends totalling 2.25 pence per Ordinary Share were paid during
the Period, of which 0.375 pence was paid as PIDs and 1.875 pence
was paid as Non-PID.
The Board declared a fourth interim dividend in respect of the
quarter to 30 September 2018 of 0.75 pence per Ordinary Share,
which will be payable on 21 December 2018 to shareholders on the
register at the close of business on 23 November 2018. The Ordinary
Shares went ex-dividend on 22 November 2018 and 0.5625 pence per
Ordinary Share will be paid as a Property Income Distribution
('PID') and 0.1875 pence per Ordinary Share will be paid as
non--PID.
Including this interim dividend, the Company will have paid 3.0
pence per Ordinary Share for the first financial period from the
date of admission to 30 September 2018, as targeted at IPO.
Management - Fund Manager
ReSI Capital Management Limited has been engaged as the
Company's alternative investment fund manager (the "Fund Manager"),
in compliance with the provisions of the AIFMD, pursuant to the
Fund Management Agreement.
To advise the Company and provide certain management services in
respect of the Portfolio. ReSI Capital Management Limited is
regulated by the Financial Conduct Authority. The Fund Manager is,
for the purposes of the AIFMD and the rules of the FCA, a 'full
scope' UK alternative investment fund manager with a Part 4A
permission for managing AIFs, such as the Company.
The Fund Manager is appointed under a contract subject to twelve
months' written notice with such notice not to expire prior to the
fifth anniversary of first admission of the Ordinary Shares to
trading on the London Stock Exchange.
The Fund Manager is entitled to remuneration calculated in
respect of each quarter, based upon the Net Asset Value, at a rate
equivalent to 1% (if under GBP250m), 0.9% (if over GBP250m), 0.8%
(if over GBP500m) or 0.7% (if over GBP1bn). The Fund Management Fee
shall be paid quarterly in advance, with 75% of the total Fund
Management Fee payable in cash and 25% of the total Fund Management
Fee (net of any applicable tax) payable in the form of Ordinary
Shares.
The Fund Manager is also entitled to a debt arrangement fee in
respect of debt arranged by the Fund Manager for ReSI or its
subsidiaries. The debt arrangement fee is equal to 0.04% p.a.
levied on the notional amount outstanding of any bond or private
placement financing. There is no debt arrangement fee payable in
respect of any bank debt financing the Fund Manager may arrange for
the Group.
Appointment of the Fund Manager
The Board has discretion to monitor the performance of the Fund
Manager and, from the date falling five years after entry into the
Fund Management agreement, to appoint a replacement Fund Manager.
Due to the recent launch of the Company and the Fund Manager's
experience in the sector, the continuing appointment of the Fund
Manager is in the best interests of shareholders as a whole.
Depositary
Thompson Taraz Depositary Limited has been appointed since 17
August 2018 as Depositary to provide cash monitoring, safekeeping
and asset verification and oversight functions as prescribed by the
AIFMD. Prior to 17 August 2018, Langham Hall UK Depositary LLP was
appointed as the Depositary.
Company Secretary
PraxisIFM Fund Services (UK) Limited has been appointed since 13
July 2018 as the Company Secretary of the Company and provides
company secretarial services and a registered office to the
Company. Prior to 13 July 2018, Langham Hall UK Services LLP was
appointed as the Company Secretary.
Administrator
MGR Weston Kay LLP has been appointed since 14 July 2018 as
Administrator to the Company. The administration of the Company is
delegated and in consultation with the Fund Manager, financial
information of the Company is prepared by the Administrator and is
reported to the Board. Prior to 14 July 2018, Langham Hall UK
Services LLP was appointed as the Administrator.
Share capital
As at 30 September 2018 the Company's issued share capital
comprised 180,324,377 Ordinary Shares, each of 1p nominal value,
including 5,651,670 Ordinary Shares held in Treasury. Each Ordinary
Share held entitles the holder to one vote. Ordinary Shares held in
Treasury do not hold voting rights. All shares, excluding those
held in Treasury, carry equal voting rights and there are no
restrictions on those voting rights. Voting deadlines are stated in
the Notice of Meeting and Form of Proxy and are in accordance with
the Companies Act 2006.
There are no restrictions on the transfer of Ordinary Shares,
nor are there any limitations or special rights associated with the
Ordinary Shares.
The forthcoming Annual General Meeting will consider the
authority given to Directors to allot further shares in the capital
of the Company under section 551 Companies Act 2006.
The authority to issue new shares granted at the AGM held on 13
December 2017 will expire at the conclusion of the forthcoming
AGM.
The Board recommends that the Company be granted a new authority
to issue up to a maximum of 10% of its Ordinary Shares for cash at
a price above prevailing Net Asset Value per share and to disapply
pre-emption rights when issuing those Ordinary Shares. Resolutions
to this effect will be put to shareholders at the AGM. The maximum
number of Ordinary Shares which can be admitted to trading on the
London Stock Exchange without the publication of a prospectus is
20% of the Ordinary Share capital on a rolling 12 month basis at
the time of admission of the shares.
Discount management
The Board makes use of its share buyback powers as a means of
correcting any imbalance between supply of and demand for the
Ordinary Shares.
In deciding whether to make any such repurchases, including the
timing, volume and price of such repurchases of Ordinary Shares,
the Directors have regard to the Company's REIT status and what
they believe to be in the best interests of Shareholders as a whole
and in compliance with the Articles, the Listing Rules, Companies
Act 2006 and all other applicable legal and regulatory
requirements.
During the period ended 30 September 2018 the Company purchased
5,651,670 of its own Ordinary Shares and since the period end a
further 3,653,056 Ordinary Shares have been bought back and held in
treasury. These shares were purchased at a discount to Net Asset
Value.
The timing, price and volume of any buybacks of Ordinary Shares
will be at the discretion of the Directors and is subject to the
working capital requirements of the Company and the Company having
sufficient surplus cash resources available.
Under the Listing Rules, the maximum price (exclusive of
expenses) which may be paid for an Ordinary Share must not be more
than the higher of: (i) 5% above the average of the mid-market
values of the Ordinary Shares for the five Business Days before the
repurchase is made; or (ii) the higher of the price of the last
independent trade and the highest current independent bid for
Ordinary Shares.
The authority for the Company to purchase its own shares granted
by the Annual General Meeting held on 13 December 2017 will expire
at the conclusion of the forthcoming Annual General Meeting. The
Directors recommend that a new authority to purchase up to 14.99%
Ordinary Shares (subject to the condition that not more than 14.99%
of the Ordinary Shares in issue, excluding Treasury Shares, at the
date of the Annual General Meeting are purchased) is granted and a
resolution to that effect will be put to the Annual General Meeting
to be held on 29 January 2019. Any Ordinary Shares purchased will
either be cancelled or, if the Directors so determine, held in
Treasury.
Treasury shares
The Company is permitted to hold Ordinary Shares acquired by way
of market purchase in treasury, rather than having to cancel them.
Such Ordinary Shares may be subsequently cancelled or sold for
cash. Holding Ordinary Shares in treasury enables the Company to
sell Ordinary Shares from Treasury quickly and in a more cost
efficient manner, and provides the Company with additional
flexibility in the management of its capital base.
Unless authorised by Shareholders, Ordinary Shares held in
treasury will not be sold at less than Net Asset Value per Share
unless they are first offered pro rata to existing Shareholders.
The Company will not hold Treasury shares in excess of 10% of the
Ordinary Share capital of the Company from time to time.
Continuation vote
The Directors are required to propose an ordinary resolution at
the Annual General Meeting following the fifth anniversary from its
Initial Public Offering that the Company should continue as
presently constituted and at every fifth Annual General Meeting
thereafter.
In the event that a continuation resolution is not passed, the
Directors would be required to formulate proposals for the
voluntary liquidation, unitisation, reorganization or
reconstruction of the Company for consideration by shareholders at
a general meeting to be convened by the Board for a date note more
than six months after the date of the meeting at which such
continuation resolution was not passed.
Significant shareholders
The Directors have been notified of, or have identified, as at
30 September 2018, the following shareholdings comprising 3% or
more of the issued share capital (excluding Treasury Shares) of the
Company:
Holding %
========== =====
Harris Allday private
clients 17,745,450 10.14
============================== ========== =====
Close Diversified Income
Portfolio Fund 13,664,000 7.81
============================== ========== =====
Aberdeen Standard Investments 11,211,000 6.41
============================== ========== =====
Tilney private clients 7,612,991 4.35
============================== ========== =====
West Yorkshire PF 7,000,000 4.00
============================== ========== =====
Rowan Dartington private
clients 6,798,748 3.89
============================== ========== =====
Schroder Special Situations
Fund 6,466,838 3.70
============================== ========== =====
Premier Multi-Asset Growth
& Income Fund 6,400,000 3.66
============================== ========== =====
Schroder & Co, London
clients 6,321,480 3.61
============================== ========== =====
Schroder & Co, Zurich
clients 5,347,812 3.06
============================== ========== =====
Capital Value Fund 5,255,000 3.00
============================== ========== =====
Capital Gearing Portfolio
Fund 5,240,000 3.00
============================== ========== =====
Since the period end, the Company has not been notified of any
changes to significant shareholdings.
There are no other significant changes since the period end of
which the Board is aware.
Settlement of Ordinary Share transactions
Ordinary share transactions in the Company are settled by the
CREST share settlement system.
Anti-bribery and corruption
It is the Company's policy to conduct all of its business in an
honest and ethical manner. The Company takes a zero-tolerance
approach to bribery and corruption and is committed to acting
professionally, fairly and with integrity in all its business
dealings and relationships wherever it operates. The Company's
policy and the procedures that implement it are designed to support
that commitment.
Environmental, social and governance
('ESG') matters
To fulfil our long term financial objectives it is essential
that we incorporate environmental and social considerations into
our business model. ReSI always seeks to work with well-regarded
partners to ensure that our investments are fit for purpose and
maintained at a high standard in order to meet the needs of our
lessees and occupiers as well as sustaining their value over the
long term.
We perform detailed property due diligence on all of our
acquisitions to minimise fire and other risks to our tenants and
provide safe and secure accommodation. By supporting our
development partners we aim to benefit local communities by
increasing the provision of affordable housing.
Through ReSI Housing we are able to keep assets within the
social housing regulatory environment, which emphasises good
governance and financial viability.
The Company has no greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other emissions
producing sources under the Companies Act 2006 (Strategic Report
and Directors' Reports) Regulations 2013.
Employees
The Company has no employees and no share schemes. The Board's
policy on diversity is contained in the Corporate Governance Report
(see page 33).
Social, community and human rights issues
Having no employees, the Company, as an investment company, has
no matters to report in respect of social, community, environmental
or human rights matters.
Modern slavery act
As an investment vehicle the Company does not provide goods or
services in the normal course of business, and does not have
customers. Accordingly, the Directors consider that the Company is
not required to make any slavery or human trafficking statement
under the Modern Slavery Act 2015.
Annual General Meeting
The Annual General Meeting ('AGM') of the Company will be held
on 29 January 2019 at 11 a.m. The Notice convening the AGM is
contained in this Annual Report. The Directors consider that all of
the resolutions to be proposed are in the best interests of the
Company and it is their recommendation that shareholders support
these proposals as they intend to do so in respect of their own
shareholdings.
Outlook
The outlook for the Company is discussed in the Chairman's
Statement on page 11.
Independent Auditor
BDO LLP have expressed their willingness to continue in office
as Independent Auditor and a resolution to re-appoint them will be
put to shareholders at the AGM.
Disclosure of information to the Independent Auditor
Each of the Directors at the date of the approval of this report
confirms that:
(i) so far as the Director is aware, there is no relevant audit
information of which the Company's Independent Auditor are unaware;
and
(ii) the Director has taken all steps that he ought to have
taken as Director to make himself aware of any relevant information
and to establish that the Company's Independent Auditor are aware
of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the Companies Act
2006. In accordance with Section 489 of the Companies Act 2006, a
resolution to re-appoint BDO LLP as the Company's Independent
Auditor will be put forward at the forthcoming Annual General
Meeting.
By order of the Board
Anthony Lee
For and on behalf of
PraxisIFM Fund Services (UK) Limited
Company Secretary
22 November 2018
Corporate Governance Statement
The Board of the Company has considered the principles and
recommendations of the AIC Code by reference to the AIC Guide 2016.
The AIC Code, as explained by the AIC Guide, addresses all the
principles set out in the UK Corporate Governance Code 2016, as
well as setting out additional principles and recommendations on
issues that are of specific relevance to the Company as an
investment company. A copy of the AIC Code can be viewed on the
AIC's website www.theaic.co.uk/.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide
(which incorporates all applicable principles of the UK Corporate
Governance Code), will provide more relevant information to
Shareholders than solely reporting against the UK Corporate
Governance Code.
The Financial Reporting Council ("FRC"), the UK's independent
regulator for corporate reporting and governance responsible for
the UK Corporate Governance Code, has endorsed the AIC Code and the
AIC Guide. The terms of the FRC's endorsement mean that AIC members
who report against the AIC Code and the AIC Guide meet fully their
obligations under the UK Corporate Governance Code and the related
disclosure requirements contained in the Listing Rules.
From Admission, the Company has complied with the AIC Code of
Corporate Governance, which complements the UK Corporate Governance
Code and provides a framework of best practice for listed
investment companies.
The UK Corporate Governance Code includes provisions relating
to: the role of the chief executive; executive Directors'
remuneration; and the need for an internal audit function. For the
reasons set out in the AIC Guide, the Board considers these
provisions are not relevant to the position of the Company, being
an externally managed investment company with no executive
directors, the Company does not therefore comply with them.
The Company has a robust corporate governance framework with
oversight provided by a highly experienced, fully independent
Board. The Board is currently composed of four non-executive
Directors who are collectively responsible for determining the
Investment Policy and strategy, and who have overall responsibility
for the Company's activities. A list of Directors is shown on pages
26 and 27.
The Board
Composition
At the date of this report, the Board consists of four
non-executive Directors including the Chairman. All the Directors
apart from Mike Emmerich have served during the entire period since
their appointment on 9 June 2017. Mike Emmerich has been appointed
as a Director with effect from 13 September 2018.
The Board believes that during the period ended 30 September
2018 its composition was appropriate for an investment company of
the Company's nature and size. All of the Directors are independent
of the Fund Manager. All of the Directors are able to allocate
sufficient time to the Company to discharge their responsibilities
effectively.
The Directors have a broad range of relevant experience to meet
the Company's requirements and their biographies are shown in the
Board of Directors section of this Annual Report.
The Board recognises the benefits to the Company of having
longer serving Directors together with progressive refreshment of
the Board.
In accordance with the Company's Articles of Association,
Directors may be appointed by the Company by ordinary resolution or
by the Board. If appointed by the Board, a Director shall hold
office only until the next annual general meeting and shall not be
taken into account in determining the number of Directors who are
to retire by rotation.
At each Annual General Meeting of the Company, any Director
appointed by the Board since the last Annual General Meeting shall
retire. In addition one-third of the remaining Directors shall
retire from office by rotation.
The Directors were elected at the Annual General Meeting held on
13 December 2017, therefore one third are required to retire by
rotation and be subject to re-election at the forthcoming Annual
General Meeting of the Company. Mr Whiteman will therefore retire
by rotation and will put himself forward for re-election. Mr
Emmerich, having been appointed as a Director of the Board on 13
September 2018, shall stand for re-election at the Annual General
Meeting of the Company.
The Directors recommend the re-election of Mr Whiteman and the
election of Mr Emmerich for the reasons set out in the performance
evaluation section of this document.
The Directors have appointment letters which do not provide for
any specific term. Copies of the Directors' appointment letters are
available on request from the Company Secretary. Upon joining the
Board, any new Directors receive an induction and relevant training
is available to Directors on an ongoing basis.
A policy of insurance against Directors' and officers'
liabilities is maintained by the Company.
Audit Committee
The Board delegates certain responsibilities and functions to
the Audit Committee as set out in its written terms of reference.
The Audit Committee on IPO was chaired by Rob Whiteman and on 14
March 2018 was succeeded by Robert Gray and consists of all the
Directors. The Committee meet at least twice a year to review the
interim and annual financial statements. The Committee also review
the scope and results of the external audit, its cost effectiveness
and the independence and objectivity of the external auditor,
including the provision of non-audit services. A report of the
Audit Committee is included in this Annual Report.
Other Committees
The Board additionally fulfils the responsibilities of the
nomination committee, remuneration committee and management
engagement committee. It has not been considered necessary to
establish separate nomination or remuneration committees given the
size and nature of the Company.
In addition, the Board as a whole fulfils the functions of a
Management Engagement Committee to review the actions and
judgements of management in relation to the interim and annual
financial statements and the Company's compliance with statutory
and regulatory matters. In addition, in this capacity, the Board
reviews the terms of the Fund Management Agreement and examine the
effectiveness of the Company's internal control systems and the
performance of the Fund Manager, Depositary, Administrator, Company
Secretary and the Registrar. During the financial period, following
a review of services, the Board changed the Company's
Administrator, Depositary and Company Secretary.
Meeting attendance
During the period under review, the Directors have attended the
following meetings:
Audit Quarterly
Audit Committee Quarterly Board
Committee meetings Board meetings
meetings eligible meetings eligible
Directors attended to attend attended to attend
========== ========== ========= ==========
Rob Whiteman 2 2 7 7
============================ ========== ========== ========= ==========
Robert Gray 2 2 7 7
============================ ========== ========== ========= ==========
John Carleton 2 2 6 7
============================ ========== ========== ========= ==========
Mike Emmerich - - 1 1
============================ ========== ========== ========= ==========
The Rt Hon
Baroness
Dean of Thornton--le-Fylde 1 1 5 5
============================ ========== ========== ========= ==========
There were also a number of other Board and committee meetings
to deal with administrative matters and approval of
documentation.
Board diversity
The Company's policy is that the Board should have a broad range
of skills. Consideration is given to the recommendations of the AIC
Code and other guidance on boardroom diversity.
Performance appraisal
A formal annual performance appraisal process is performed on
the Board, the committees, the individual Directors and the
Company's main service providers. The first appraisal was performed
following the period end and prior to the publication of this
Annual Report.
A programme consisting of open and closed ended questions was
used as the basis for the appraisal. The results were reviewed by
the Chairman and discussed with the Board. A separate appraisal of
the Chairman has been carried out by the other members of the Board
and the results reported back by to the Chairman. The results of
the performance evaluation were positive and demonstrated that the
Directors showed the necessary commitment and expertise for the
fulfilment of their duties.
Internal control
Prior to the Company's listing a detailed review was carried out
on the financial position, prospects and procedures applicable to
the Company.
The AIC Code requires the Board to review the effectiveness of
the Company's system of internal controls. The Board recognises its
ultimate responsibility for the Company's system of internal
controls and for monitoring its effectiveness. The system of
internal controls is designed to manage rather than eliminate the
risk of failure to achieve business objectives. It can provide only
reasonable assurance against material misstatement or loss. The
Board has undertaken a review of the Company's internal controls
framework. The Board believes that the existing arrangements
represent an appropriate framework to meet the internal control
requirements. By these procedures the Directors have kept under
review the effectiveness of the internal control system throughout
the year and up to the date of this report.
Financial aspects of internal control
The Directors are responsible for the internal financial control
systems of the Company and for reviewing their effectiveness. These
aim to ensure the maintenance of proper accounting records, the
reliability of the financial information upon which business
decisions are made and which is used for publication and that the
assets of the Company are safeguarded. As stated above, the Board
has contractually delegated to external agencies the services the
Company requires, but it is fully informed of the internal control
framework established by the Fund Manager, the Administrator and
the Company's Depositary to provide reasonable assurance on the
effectiveness of internal financial controls.
The key procedures include review of management accounts,
monitoring of performance at quarterly Board meetings, segregation
of the administrative function from investment management,
maintenance of appropriate insurance and adherence to physical and
computer security procedures.
The Statement of Directors' Responsibilities in respect of the
accounts is on page 40 and a Statement of Going Concern is on page
23. The Report of the Independent Auditor is on pages 41 to 45.
Other aspects of internal control
The Board holds quarterly meetings, plus additional meetings as
required. Between these meetings there is regular contact with the
Fund Manager and other service providers as required.
The Board has agreed policies on key operational issues. The
Company's key service providers report to the Board on operational
and compliance issues. The Fund Manager and the Depositary provide
reports to the Board, which are reviewed by the Board.
The Administrator prepares management accounts, which enable the
Board to assess the financial position of the Company. Additional
ad hoc reports are received as required and Directors have access
at all times to the advice and services of the Corporate Company
Secretary, which is responsible to the Board for ensuring that
Board procedures are followed.
This contact with the key service providers enables the Board to
monitor the Company's progress towards its objectives and
encompasses an analysis of the risks involved. The effectiveness of
the Company's risk management and internal controls systems is
monitored and a formal review has been completed. There are no
significant findings to report from the review.
The Board meet formally at least quarterly with additional ad
hoc calls when appropriate. A typical agenda of a formal Board
meeting includes a review of the financial and portfolio
performance in that period, distributable income and dividend yield
compared to forecast, an update regarding the investment pipeline,
statutory and regulatory matters and governance obligations. The
Directors are independent of the Fund Manager. The Board reviews
investment activity and performance and exercises appropriate
control and supervision to ensure acquisitions are made in
accordance with agreed investment parameters. The Fund Manager has
been given responsibility for the day-to-day management of the
Company's assets in accordance with the Investment Policy subject
to the control and directions of the Board.
Principal risks
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. The principal risks and how they are being
managed are set out in the Strategic Report.
Annual General Meeting
At least twenty-one days' notice shall be given to all the
members and to the auditor. All other general meetings shall also
be convened by not less than twenty-one days' notice to all those
members and to the auditor unless the Company offers members an
electronic voting facility and a special resolution reducing the
period of notice to not less than fourteen days has been passed, in
which case a general meeting may be convened by not less than
fourteen days' notice in writing. A special resolution will be
proposed at the Annual General Meeting to reduce the period of
notice for general meetings other than the Annual General Meeting
to not less than fourteen days.
The Notice of Meeting sets out the business of the AGM and any
item not of an entirely routine nature is explained in this Annual
Report. Separate resolutions are proposed for each substantive
issue.
Shareholder relations
The Fund Manager has a programme of meetings with major
shareholders and provides feedback to the Board from these
meetings. The Chairman has also met shareholders directly over the
period. The Chairman and the Board welcome direct feedback from
shareholders.
Stewardship code
The principles of best practice of the Stewardship Code are not
applicable to the Company's operations.
Social and environmental policy
The Company has no staff, premises, manufacturing or other
operations. Any emissions from the Company's property are the
responsibility of the tenant under the principle of operational
control. The Group has no greenhouse gas emissions to report from
its operations, nor does it have responsibility for any other
emissions producing sources under the Companies Act 2006 (Strategic
Report and Directors' Reports) Regulations 2013.
Report of the Audit Committee
Role of the Audit Committee
The AIC Code of Corporate Governance (the "Code") recommends
that Boards should establish audit committees consisting of at
least three, or in the case of smaller companies, two independent
non-executive directors. The Board is required to satisfy itself
that the audit committee has recent and relevant experience. The
main role and responsibilities of the audit committee should be set
out in written terms of reference covering certain matters
described in the Code. The Company complies with the Code.
The Audit Committee meets formally at least twice a year for the
purpose, amongst other things, of considering the appointment,
independence and objectivity, and remuneration of the auditor and
to review the annual accounts and half-yearly financial report. The
Audit Committee also reviews the Company's internal financial
controls and its internal control and risk management systems.
Where non-audit services are provided by the auditor, full
consideration of the financial and other implications on the
independence of the auditor arising from any such engagement are
considered before proceeding. The Audit Committee has considered
the non-audit work of the auditor during the period ended 30
September 2018 and does not consider that this compromises its
independence.
Composition
All of the Directors of the Company are members of the Audit
Committee. The Audit Committee has formal written terms of
reference and copies of these are available on request from the
Company Secretary. The Audit Committee as a whole has recent and
relevant financial experience. The Audit Committee has considered
the need for an internal audit function and considers that this is
not appropriate given the nature and circumstances of the Company.
The Audit Committee keeps the needs for an internal function under
periodic review. The chairman of the Company is a member of the
Audit Committee. The Board and the Audit Committee believe that
this is appropriate as he has recent and relevant financial
experience and he is independent.
Meetings
There have been two Audit Committee meetings in the period to
the Company's financial period end. Attendance is included in the
corporate governance statement.
Financial statements and significant accounting matters
The Audit Committee considered the following significant
accounting issues in relation to the Company's Financial Statements
for the period ended 30 September 2018:
Investment property valuation
The valuation of investment property is the most material matter
in the production of the financial statements and Net Asset Values.
Savills (UK) Limited has been appointed to value the Company's
property investments in accordance with the RICS requirements on a
quarterly basis. Investment properties are valued at their fair
value in accordance with IFRS 13 which recognises a variety of fair
value inputs depending upon the nature of the investment. The Audit
Committee has reviewed the assumptions underlying the property
valuations and concluded that the valuation at the Company's period
end is appropriate.
Revenue recognition
There is always a potential risk that the Group's rental income
may not be accounted for correctly in accordance with accounting
standards. The Audit Committee has reviewed the Company's
procedures in place for revenue recognition and has concluded that
revenue has been appropriately recognised.
Conclusion with respect to the Annual Report and financial
statements
The Audit Committee has concluded that the Annual Report for the
period ended 30 September 2018, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
Shareholders to assess the Company's business model, strategy and
performance. The Audit Committee has reported its conclusion to the
Board of Directors. The Audit Committee reached this conclusion
through a process of review of the document and enquiries to the
various parties involved in the production of the annual
report.
Audit tenure
BDO LLP were paid fees in respect of non-audit services in the
period ended 30 September 2018. These services were in respect of
the Company's prospectus and the interim review of the Half-yearly
Report. In the case of the work performed on the prospectus these
are non-recurring fees and interim reviews of Half-yearly Reports
are usually performed by a company's auditor. The independence of
the Auditor was considered prior to the provision of these
services.
Effectiveness of external audit
The Audit Committee is responsible for reviewing the
effectiveness of the external audit process. The Audit Committee
received a presentation of the audit plan from the external auditor
prior to the commencement of the audit and a presentation of the
results of the audit following completion of the main audit
testing. The Audit Committee performed a review of the external
auditor following the presentation of the results of the audit. The
review included a discussion of the audit process and the
effectiveness of the external auditor to fulfil its role. Following
the above review, the Audit Committee has agreed that the
re-appointment of the Auditor should be recommended to the Board
and the Shareholders of the Company.
Provision of non-audit services
The Audit Committee has put a policy in place on the supply of
any non-audit services provided by the external auditor. Such
services are considered on a case-by-case basis and may only be
provided to the Company if the provision of such services is at a
reasonable and competitive cost and does not constitute a conflict
of interest or potential conflict of interest which would prevent
the auditor from remaining objective and independent.
BDO LLP were paid fees in respect of non-audit services in the
period ended 30 September 2018. These services were in respect of
the Company's prospectus and the interim review of the Half-yearly
Report. In the case of the work performed on the prospectus these
are non-recurring fees and interim reviews of Half-yearly Reports
are usually performed by a company's auditor. The independence of
the Auditor was considered prior to the provision of these
services.
Robert Gray
Chairman of the Audit Committee
22 November 2018
Directors' Remuneration Policy
The Remuneration Policy will be put forward for approval by
shareholders at the AGM to be held on 29 January 2019 at 11 a.m.
The provisions set out in this policy apply until they are next put
forward for shareholder approval. The Remuneration Policy must be
put forward for shareholder approval at a maximum interval of three
years. In the event of any proposed material variation to the
policy, shareholder approval will be sought for the proposed new
policy prior to its implementation.
Service contracts
The Directors do not have service contracts with the Company.
The Directors have appointment letters and, following initial
election by shareholders, are subject to re-election by
shareholders at a maximum interval of three years.
Fees
The Directors' fees are determined within the limits set out in
the Company's Articles of Association and they are not eligible for
commissions or performance related payments. The Directors are
entitled to receive a fee linked to the Net Asset Value of the
Company in respect of their position as a director of the
Company.
The Chairman will be entitled to receive a fee linked to the Net
Asset Value of the Company as follows:
Net Asset Value Annual Fee
==========
Up to GBP100,000,000 GBP40,000
================================ ==========
GBP100,000,001 to GBP200,000,000 GBP50,000
================================ ==========
GBP200,000,001 to GBP350,000,000 GBP60,000
================================ ==========
thereafter GBP70,000
================================ ==========
Each of the Directors, save for the Chairman, will be entitled
to receive a fee linked to the Net Asset Value of the Company as
follows:
Net Asset Value Annual Fee
==========
Up to GBP100,000,000 GBP30,000
================================ ==========
GBP100,000,001 to GBP200,000,000 GBP35,000
================================ ==========
thereafter GBP40,000
================================ ==========
The Board may determine that additional remuneration may be
paid, from time to time, to any one or more Directors in the event
such Director or Directors are requested by the Board to perform
extra or special services on behalf of the Company.
The Directors shall also be entitled to be reimbursed for all
expenses incurred in performance of their duties. These expenses
are unlikely to be of a significant amount.
Fees are payable from the date of appointment as a Director of
the Company and cease on date of termination of appointment. The
Directors are not entitled to compensation for loss of office.
The Board will not pay any incentive fees to any person to
encourage them to become a Director of the Company. The Board may,
however, pay fees to external agencies to assist the Board in the
search and selection of Directors.
Current and future policy
Purpose
Component Director of reward Operation
=============== =================== ===============
Annual Chairman For services Determined
fee of the Board as Chairman by the Board
of a plc
========= =============== =================== ===============
Annual Other Directors For services Determined
fee as non-executive by the Board
Directors
of a plc
========= =============== =================== ===============
Expenses All Directors Reimbursement Submission
of expenses of appropriate
incurred supporting
in the performance documentation
of duties
========= =============== =================== ===============
Statement of consideration of conditions elsewhere in the
Company
The Company has no employees. Therefore the process of
consulting with employees on the setting of the Remuneration Policy
is not applicable.
Review of the Remuneration Policy
The Directors' remuneration will be reviewed on an annual basis
by the Board and any changes are subject to approval by the Board.
The remuneration payable to the Directors will take into account a
number of factors, inter alia, the experience of the Directors, the
complexity of the Company and prevailing market rates for the
sector in which the Company operates.
Effective date
This Remuneration Policy will be put forward for shareholder
approval at the Annual General Meeting to be held on 29 January
2019 and, if approved by shareholders, will be effective from that
date.
Rob Whiteman
Chairman of the Board of Directors
22 November 2018
Directors' Remuneration Implementation Report
This report has been prepared in accordance with Schedule 8 of
the Large- and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013. An ordinary resolution for
the approval of this report will be put forward at the forthcoming
Annual General Meeting.
The Directors' Remuneration Implementation Report is put forward
for approval by shareholders on an annual basis. The result of the
shareholder resolution on the Implementation Report is non-binding
on the Company, although it gives shareholders an opportunity to
express their views, which will be taken into account by the
Board.
The law requires the Company's auditor to audit certain
disclosures provided in the Directors' Remuneration Implementation
Report. Where disclosures are audited they are indicated as such.
The Independent Auditor's opinion is on page 41.
Remuneration
The Company currently has four non-executive Directors.
Directors are entitled to receive a fee linked to the Net Asset
Value of the Company in respect of their position as a director of
the Company. Fees are currently payable at the rates set out in the
remuneration policy.
The Board believes that these fees appropriately reflect
prevailing market rates for the Company's complexity and size, and
will also enable the Company to attract appropriately experienced
additional Directors in the future.
The Board reviews the fees payable to the Directors on an annual
basis.
Directors' service contracts
The Directors do not have service contracts with the Company.
The Directors are not entitled to compensation on loss of office.
The Directors have appointment letters which do not provide for any
specific term. However, they are subject to re-election by
shareholders at a maximum interval of three years. There are no
restrictions on transfers of the Company's shares held by the
Directors or any special rights attached to such shares.
Director search and selection fees
No Director search and selection fees were incurred during the
period to 30 September 2018.
Directors' emoluments for the period ended 30 September 2018
(audited)
The Directors who served during the period received the
following remuneration for qualifying services.
Fees to
30 September
2018
GBP'000
=============
Rob Whiteman 52
====================== =============
Robert Blackburn Gray 43
====================== =============
John Carleton 43
====================== =============
Rt Hon Baroness Dean
of
Thornton-le-Fylde* 47
====================== =============
Mike Emmerich** 2
====================== =============
187
====================== =============
*Ceased to be a Director on 14 March 2018
**Appointed on 13 September 2018
There are no other taxable benefits payable by the Company other
than certain expenses which may be deemed to be taxable. None of
the above fees was paid to third parties.
A non-binding ordinary resolution to approve the Directors'
Remuneration Implementation Report contained in the Annual Report
for the period ended 30 September will be put forward for approval
at the Company's 2018 Annual General Meeting to be held on 29
January 2019.
Relative importance of spend on pay
The following table sets out the total level of Directors'
remuneration compared to Net Property Income, Directors' fees,
Operating expenses, and Dividends paid and payable to
shareholders.
2018
GBP'000
========
Net Property Income 5,699
=========================== ========
Directors' fees 187
=========================== ========
Operating expenses 3,350
=========================== ========
Dividends paid and payable
to shareholders 5,286
=========================== ========
Performance
The following chart shows the performance of the Company's share
price by comparison to the principal relevant indices.
Source: Jefferies
Directors' holdings (Audited)
The Directors had the following shareholdings in the Company as
at 30 September 2018 and as at the date of this report, all of
which are beneficially owned.
Ordinary Shares
held
===============
Rob Whiteman 5,000
=========================================== ===============
Robert Blackburn Gray 75,000
=========================================== ===============
John Carleton 5,000
=========================================== ===============
Mike Emmerich -
=========================================== ===============
Rt Hon Baroness Dean of Thornton-le-Fylde* 20,000
=========================================== ===============
*Ceased to be a Director on 14 March 2018
The shareholdings of the Directors are not significant and
therefore do not compromise their independence as non-executive
Directors.
Statement
On behalf of the Board and in accordance with Part 2 of Schedule
8 of the Large- and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013, I confirm that the above
Report on Remuneration Policy and Remuneration Implementation
summarises, as applicable, for the financial period to 30 September
2018.
(a) the major decisions on Directors' remuneration;
(b) any substantial changes relating to Directors' remuneration
made during the financial period to 30 September 2018; and
(c) the context in which the changes occurred and decisions have been taken.
Rob Whiteman
Chairman of the Board of Directors
22 November 2018
Directors' responsibilities
The directors are responsible for preparing the Annual Report
and the Group and parent company financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. The Group
financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union and the Company financial statements have been
prepared in accordance with Financial Reporting Standard 100
Application of Financial Reporting Requirements ("FRS 100") and
Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS
101"), subject to any material departures disclosed and explained
in the Company financial statements; and United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law).
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
Group's and Company's profit or loss for that period.
In preparing the financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently
-- make judgements and estimates that are reasonable, relevant, reliable and prudent
-- for the Group financial statements, state whether they have
been prepared in accordance with IFRSs as adopted by the EU
-- for the parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the parent
company financial state-ments; and
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that its financial statements comply with the
Companies Act 2006 and as regards the Group financial statements,
Article 4 of the IAS Regulation.
They are responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations. These can be
found on pages 14, 26 and 32 respectively.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The directors are responsible for ensuring that the Annual
report and accounts, taken as a whole, are fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group and Company's per-formance,
business model and strategy.
Directors' responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements have been prepared in accordance
with International Financial Reporting Standards ("IFRS") as
adopted by the European Union and Article 4 of the IAS Regulation
and, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the
undertakings included in the consolidation as a whole
-- the Strategic Report includes a fair review of the
development and performance of the business and the financial
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face; and
-- the Annual Report and accounts taken as a whole is fair,
balanced and understandable and provides the information necessary
for Shareholders to assess the Company's performance, business
model and strategy.
For and on behalf of the Board
Rob Whiteman
Chairman
22 November 2018
Financials
Consolidated Statement of Comprehensive Income
for the period 12 July 2017 to 30 September 2018
For the period For the period
12 July 21 March
2017 to 30 2017 to
September 11 July
2018 2017
Notes GBP000s GBP000s
======================================== ===== ============== ==============
Income
======================================== ===== ============== ==============
Gross rental income 6 10,418 -
======================================== ===== ============== ==============
Property operating expenses 6 (4,719) -
======================================== ===== ============== ==============
Net property income 5,699 -
======================================== ===== ============== ==============
Operating expenses
======================================== ===== ============== ==============
Fund management fee 7 (2,160) -
======================================== ===== ============== ==============
General and administrative expenses 8 (1,190) (28)
======================================== ===== ============== ==============
Total operating expenses (3,350) (28)
======================================== ===== ============== ==============
Operating profit/(loss) before change
in fair value 2,349 (28)
======================================== ===== ============== ==============
Change in fair value of investment
properties 14,825 -
======================================== ===== ============== ==============
Operating profit/(loss) before finance
costs 17,174 (28)
======================================== ===== ============== ==============
Finance income 11 237 -
======================================== ===== ============== ==============
Finance costs 11 (1,300) -
======================================== ===== ============== ==============
Profit/(loss) for the period before taxation 16,111 (28)
=============================================== ============== ==============
Taxation 12 - -
======================================== ===== ============== ==============
Profit/(loss) for the period after taxation 16,111 (28)
=============================================== ============== ==============
Other Comprehensive Income -
======================================== ===== ============== ==============
Cashflow hedge (383) -
======================================== ===== ============== ==============
Recycling of cashflow hedge reserve 383 -
======================================== ===== ============== ==============
- -
=============================================== ============== ==============
Total comprehensive income/(loss) for the
period attributable to the shareholders of
the Company 16,111 (28)
=============================================== ============== ==============
Earnings per share - basic and diluted 13
======================================== ===== ============== ==============
- 2018 (pence) 9.02
======================================== ===== ============== ==============
- 2017 (pounds) (280.00)
======================================== ===== ============== ==============
All of the activities of the Group are classified as
continuing.
The notes on pages 52 to 66 form part of these financial
statements.
Consolidated Statement of Financial Position
as at 30 September 2018
2018 2017
Notes GBP000s GBP000s
================================== ===== ======== ========
Non-current assets
================================== ===== ======== ========
Investment properties 14 252,875 -
================================== ===== ======== ========
Total non-current assets 252,875 -
================================== ===== ======== ========
Current assets
================================== ===== ======== ========
Trade and other receivables 15 2,747 50
================================== ===== ======== ========
Cash and cash equivalents 16 11,796 -
================================== ===== ======== ========
Total current assets 14,543 50
================================== ===== ======== ========
Total assets 267,418 50
================================== ===== ======== ========
Current liabilities
================================== ===== ======== ========
Trade and other payables 17 4,544 78
================================== ===== ======== ========
Borrowings 18 257 -
================================== ===== ======== ========
Obligations under finance leases 26 886 -
================================== ===== ======== ========
Total current liabilities 5,687 78
================================== ===== ======== ========
Non-current liabilities
================================== ===== ======== ========
Borrowings 18 51,303 -
================================== ===== ======== ========
Obligations under finance leases 26 26,829 -
================================== ===== ======== ========
Total non-current liabilities 78,132 -
================================== ===== ======== ========
Total liabilities 83,819 78
================================== ===== ======== ========
Net assets/(liabilities) 183,599 (28)
================================== ===== ======== ========
Equity
================================== ===== ======== ========
Share capital 19 1,803 -
================================== ===== ======== ========
Share premium 20 108 -
================================== ===== ======== ========
Own shares reserve 21 (5,199) -
================================== ===== ======== ========
Retained earnings 22 186,887 (28)
================================== ===== ======== ========
Total equity 183,599 (28)
================================== ===== ======== ========
Net asset value per share - basic
and diluted 27
================================== ===== ======== ========
- 2018 (pence) 105.11
================================== ===== ======== ========
- 2017 (pounds) (280.00)
================================== ===== ======== ========
The financial statements were approved by the Board of Directors
on 22 November 2018 and signed on its behalf by:
Rob Whiteman
Chairman
Date: 22 November 2018
The notes on pages 52 to 66 form part of these financial
statements.
Consolidated Statement of Cash Flows
for the period 12 July 2017 to 30 September 2018
For the period For the period
12 July 21 March
2017 to 30 2017 to
September 11 July
2018 2017
Notes GBP000s GBP000s
========================================== ===== ============== ==============
Cash flows from operating activities
========================================== ===== ============== ==============
Profit/(loss) for the period 16,111 (28)
========================================== ===== ============== ==============
Adjustments for items that are not
operating in nature:
========================================== ===== ============== ==============
Gain in fair value of investment
properties 14 (14,825) -
========================================== ===== ============== ==============
Shares issued in lieu of management
fees 540 -
========================================== ===== ============== ==============
Finance income 11 (237) -
========================================== ===== ============== ==============
Finance costs 11 1,300 -
========================================== ===== ============== ==============
Operating result before working
capital changes and non cash items 2,889 (28)
========================================== ===== ============== ==============
Changes in working capital
========================================== ===== ============== ==============
Increase in trade and other receivables (2,697) (50)
========================================== ===== ============== ==============
Increase in trade and other payables 4,466 78
========================================== ===== ============== ==============
Net cash flow generated from operating
activities 4,658 -
========================================== ===== ============== ==============
Cash flow from investing activities
========================================== ===== ============== ==============
Purchase of investment properties 14 (210,335) -
========================================== ===== ============== ==============
Interest received 11 237 -
========================================== ===== ============== ==============
Net cash flow from investing activities (210,098) -
========================================== ===== ============== ==============
Cash flow from financing activities
========================================== ===== ============== ==============
Proceeds from shares issued in the
period 19 180,000 -
========================================== ===== ============== ==============
Issue costs paid (3,600) -
========================================== ===== ============== ==============
Purchase of own shares (5,421) -
========================================== ===== ============== ==============
New borrowings raised (net of expenses) 18 51,624 -
========================================== ===== ============== ==============
Loans repaid (78) -
========================================== ===== ============== ==============
Finance costs 11 (1,286) -
========================================== ===== ============== ==============
Dividend paid 25 (4,003) -
========================================== ===== ============== ==============
Net cash flow generated from financing
activities 217,236 -
========================================== ===== ============== ==============
Net increase in cash and cash equivalents 11,796 -
========================================== ===== ============== ==============
Cash and cash equivalents at the - -
beginning of the period
========================================== ===== ============== ==============
Cash and cash equivalents at the
end of the period 11,796 -
========================================== ===== ============== ==============
The notes on pages 52 to 66 form part of these financial
statements.
Consolidated Statement of Changes in Equity
for the period 12 July 2017 to 30 September 2018
Share Share Own shares Retained Total
capital premium reserve earnings equity
GBP000s GBP000s GBP000s GBP000s GBP000s
=================================== ======== ========= ========== ========= ========
Balance at 21 March 2017 - - - - -
=================================== ======== ========= ========== ========= ========
Loss for the period - - - (28) (28)
=================================== ======== ========= ========== ========= ========
Other comprehensive income - - - - -
=================================== ======== ========= ========== ========= ========
Total comprehensive income - - - (28) (28)
=================================== ======== ========= ========== ========= ========
Contributions by and distributions
to shareholders
=================================== ======== ========= ========== ========= ========
Ordinary shares issued - - - - -
=================================== ======== ========= ========== ========= ========
Balance at 11 July 2017 - - - (28) (28)
=================================== ======== ========= ========== ========= ========
Profit for the period - - - 16,111 16,111
=================================== ======== ========= ========== ========= ========
Other comprehensive income - - - - -
=================================== ======== ========= ========== ========= ========
Total comprehensive income - - - 16,111 16,111
=================================== ======== ========= ========== ========= ========
Contributions by and distributions
to shareholders
=================================== ======== ========= ========== ========= ========
Ordinary shares issued on IPO 1,800 178,200 - - 180,000
=================================== ======== ========= ========== ========= ========
Share issue costs capitalised - (3,600) - - (3,600)
=================================== ======== ========= ========== ========= ========
Issue of management shares 3 315 222 (540) -
=================================== ======== ========= ========== ========= ========
Share based payment charge - - - 540 540
=================================== ======== ========= ========== ========= ========
Cancellation of share premium - (174,807) - 174,807 -
=================================== ======== ========= ========== ========= ========
Purchase of own shares - - (5,421) - (5,421)
=================================== ======== ========= ========== ========= ========
Dividends paid - - - (4,003) (4,003)
=================================== ======== ========= ========== ========= ========
Balance at 30 September 2018 1,803 108 (5,199) 186,887 183,599
=================================== ======== ========= ========== ========= ========
The notes on pages 52 to 66 form part of these financial
statements.
Notes to the Financial Statements
1. General information
Residential Secure Income plc ("the Company") was incorporated
in England and Wales under the Companies Act 2006 as a public
company limited by shares on 21 March 2017. The Company's
registration number is 10683026. The registered office of the
Company is located at Mermaid House, Puddle Dock, London EC4V
3DB.
The Company achieved admission to the premium listing segment of
the main market of the London Stock Exchange on 12 July 2017.
The Company and its subsidiaries (the "Group") invests in
residential asset classes that comprise the stock of registered UK
social housing providers, Housing Associations and Local
Authorities.
2. Basis of preparation
The financial information contained in this announcement has
been prepared on the basis of the accounting policies set out in
the financial statements for the period ended 30 September 2018.
Whilst the financial information included in this announcement has
been computed in accordance with IFRS, as adopted by the European
Union, the financial information does not constitute the Group's
financial statements for the periods ended 30 September 2018 or 11
July 2017, but is derived from those financial statements. Those
accounts give a true and fair view of the assets, liabilities,
financial position and results of the Group. Financial statements
for the period ended 11 July 2017 have been delivered to the
Registrar of Companies and those for the period ended 30 September
2018 will be delivered following the Company's Annual General
Meeting. The auditors' reports on both the 30 September 2018 and 11
July 2017 financial statements were unqualified; did not draw
attention to any matters by way of emphasis; and did not contain
statements under section 498 (2) or (3) of the Companies Act
2006.
These financial statements for the period ended 30 September
2018 have been prepared in accordance with International Financial
Reporting Standards ("IFRS") and interpretations issued by the
International Accounting Standards Board ("IASB") as adopted by the
European Union and in accordance with the Companies Act 2006.
The financial statements have been prepared on a historical cost
basis, except for investment properties and derivative financial
instruments which have been measured at fair value.
The comparatives presented are for the period from incorporation
21 March 2017 to 11 July 2017.
The financial statements have been rounded to the nearest
thousand and are presented in Sterling, except when otherwise
indicated.
a) Going concern
The Directors have made an assessment of the Group's ability to
continue as a going concern and are satisfied that the Group has
the resources to continue in business for the foreseeable future.
Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern. Therefore, the financial
statements have been prepared on the going concern basis.
b) Changes to accounting standards and interpretations
The following new accounting standards, interpretations and
amendments, which are not yet effective and have not been early
adopted in this financial information, that will or may have an
effect on the Group's future financial statements:
-- IFRS 9 Financial Instruments (effective from 1 October 2018)
- the standard applies to classification and measurement of
financial assets and financial liabilities, impairment provisioning
and hedge accounting. The Group has completed its impact assessment
and does not expect IFRS 9 to have a material impact on its
reported results
-- IFRS 15 Revenue From Contracts With Customers (effective from
1 October 2018) - the standard will be applicable to service charge
income, other property related income, trading property sales
proceeds and proceeds from the sale of investment properties, but
not rental income arising from the Group's leases with tenants.
Based on the transactions impacting the current financial year and
future known transactions, the Group does not expect the adoption
of IFRS 15 to have a material impact on the Group's reported
results
-- IFRS 16 Leases (effective from 1 October 2019) - the Group
continues to assess the impact of IFRS 16 Leases, effective from 1
October 2019. The Group has conducted an initial impact assessment,
considering a sample of leases and the associated accounting
treatment and disclosure. Where the Group is a lessor there will be
no material change in accounting treatment or disclosure. Where the
Group is a lessee the leases will be remeasured at each reporting
date based on an index at that date. The remeasurement will not
have any impact on the net profit as the remeasurement will affect
only the right of use assets and finance lease liabilities in the
statement of financial position
The Directors are currently assessing the impact on the
financial statements of the standards listed above; however at
present they do not anticipate that the adoption of these standards
and interpretations will have a material impact on the Group's
financial statements in the period of initial application, other
than on presentation and disclosure.
3. Significant accounting policies
The significant accounting policies applied in the preparation
of the financial statements are set out below. The policies have
been consistently applied throughout the period.
a) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and the entities controlled by the
Company (its subsidiaries) at the period end date.
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group:
-- is exposed to, or has rights to, variable returns from its involvement with the entity; and
-- has the ability to affect those returns through its power to
direct the activities of the entity.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation. The financial information of the
subsidiaries is included in the financial statements from the date
that control commences until the date that control ceases.
If an equity interest in a subsidiary is transferred but a
controlling interest continues to be held after the transfer then
the change in ownership interest is accounted for as an equity
transaction.
Accounting policies of the subsidiaries are consistent with the
policies adopted by the Company.
b) Acquisitions and business combinations
The Directors assess whether each acquisition is a business or
asset acquisition. Under IFRS 3, a business is defined as an
integrated set of activities and assets that is capable of being
conducted and managed for the purpose of providing a return in the
form of dividends, lower costs or other economic benefits directly
to investors or other owners, members or participants. A business
will usually consist of inputs, processes and outputs.
Business acquisitions are accounted for using the acquisition
method. To date the group has not acquired any businesses.
Acquisitions that do not meet the definition of a business are
accounted for as asset acquisition. Asset acquisitions are
accounted for by applying the Group's relevant accounting policy
relating to the assets being acquired.
c) Investment properties
Investment properties, which are properties held to earn rentals
and/or for capital appreciation, are initially measured at cost,
being the fair value of the consideration given, including
expenditure that is directly attributable to the acquisition of the
investment property. After initial recognition, investment property
is stated at its fair value at the Statement of Financial Position
date adjusted for the carrying value of leasehold interests. Gains
and losses arising from changes in the fair value of investment
property are included in profit or loss for the period in which
they arise in the Statement of Comprehensive Income.
Subsequent expenditure is capitalised only when it is probable
that future economic benefits are associated with the
expenditure.
An investment property is derecognised upon disposal or when the
investment property is permanently withdrawn from use and no future
economic benefits are expected to be obtained from the asset. Any
gain or loss arising on de-recognition of the property (calculated
as the difference between the net disposal proceeds and the
carrying amount of the asset) is recorded in profit or loss in the
period in which the property is derecognised.
Significant accounting judgements, estimates and assumptions
made for the valuation of investment properties are discussed in
note 14.
d) Share issue costs
The costs of issuing or reacquiring equity instruments (other
than in a business combination) are accounted for as a reduction to
share premium to the extent that share premium has arisen on the
related share issue.
e) Revenue
The Group recognises revenue on an accruals basis, and when the
amount of revenue can be reliably measured and it is probable that
future economic benefits will flow to the Group. Revenue comprises
rental income, service charges and other recoveries (such as
dilapidations) from tenants of the Group's investment
properties.
Gross rental income - Gross rental income is rental income
adjusted for tenant incentives, recognised on a straight-line basis
over the term of the underlying lease. Lease incentives granted are
recognised as an integral part of the net consideration for the use
of the property and are therefore recognised on the same,
straight-line basis.
Gross ground rental income - Gross ground rental income is
recognised on a straight-line basis over the term of the underlying
lease.
Service charge - Service charge income represents recharges of
the running costs of the properties made to the tenants.
f) Expenses
The Group recognises expenses on an accruals basis.
g) Finance income and expense
Finance income comprises interest receivable on funds invested.
Financing expenses comprise interest payable, interest charged on
head lease liabilities, amortisation of loan fees and the
reclassification of amounts to profit or loss from the cash flow
hedge.
Interest income and interest payable is recognised in profit and
loss as it accrues, using the effective interest method.
h) Taxation
Taxation on the profit or loss for the period not exempt under
UK REIT regulations comprises current and deferred tax. Tax is
recognised in the Statement of Comprehensive Income except to the
extent that it relates to items recognised as direct movement in
equity, in which case it would be recognised as a direct movement
in equity. Current tax is expected tax payable on any non-REIT
taxable income for the period, using tax rates enacted or
substantively enacted at the balance sheet date.
Deferred tax is provided in full using the balance sheet
liability method on timing differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is determined
using tax rates that have been enacted or substantively enacted by
the reporting date and are expected to apply when the asset is
realised or the liability is settled.
No provision is made for timing differences (i) arising on the
initial recognition of assets or liabilities, other than on a
business combination, that affect neither accounting nor taxable
profit and (ii) relating to investments in subsidiaries to the
extent that they will not reverse in the foreseeable future.
i) Dividend payable to shareholders
Equity dividends are recognised when they become legally payable
which for the final dividends is the date of approval by the
members. Interim dividends are recognised when paid.
j) Financial instruments
Financial assets
Recognition of financial assets
All financial assets are recognised on a trade date which is the
date when the Group becomes a party to the contractual provisions
of the instrument.
Initial measurement and classification of financial assets
Financial assets are classified into the following categories:
'financial assets at fair value through profit or loss' and 'loans
and receivables'. The classification depends on the nature and
purpose of the financial assets and is determined at the time of
initial recognition.
Financial assets are initially measured at fair value, plus
transaction costs, except for those financial assets classified as
at fair value through profit or loss, which are initially measured
at fair value.
At 30 September 2018 the Group had the following non-derivative
financial assets which are classified as loans and receivables:
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash
at bank (including investments in money-market funds) and
short-term deposits with an original maturity of three months or
less.
Trade and other receivables
Trade and other receivables are recognised at their original
invoiced value. Where the time value of money is material,
receivables are discounted and then held at amortised cost.
Impairment of financial assets
The carrying amounts of the Group's financial assets, other than
those at fair value through profit or loss, are reviewed at each
reporting date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable
amount is estimated. Any impairment loss is recognised in profit or
loss in the Statement of Comprehensive Income whenever the carrying
amount of an asset exceeds its recoverable amount. For the purposes
of assessing impairment, assets are grouped together at the lowest
levels for which there are separately identifiable cash flows.
The recoverable amount of an asset is the greater of its net
selling price and its value in use. The value in use is determined
as the net present value of the future cash flows expected to be
derived from the asset, discounted using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying
amount after the reversal does not exceed the amount that would
have been determined, net of applicable depreciation, if no
impairment loss had been recognised.
De-recognition of financial assets
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
financial asset and substantially all the risks and rewards of
ownership to another entity. If any interest in a transferred asset
is retained then the Group recognises its retained interest in the
asset and associated liabilities.
Financial liabilities
Recognition of financial liabilities
All financial liabilities are recognised on the date when the
Group becomes a party to the contractual provisions of the
instrument.
Initial measurement and classification of financial
liabilities
Financial liabilities are classified into the following
categories: 'financial liabilities at fair value through profit or
loss' and 'other financial liabilities'. The classification depends
on the nature and purpose of the financial liabilities and is
determined at the time of initial recognition.
Financial liabilities are initially measured at fair value, net
of transaction costs, except for those financial liabilities
classified as at fair value through profit or loss, which are
initially measured at fair value.
At 30 September 2018 the Group had the following non-derivative
financial liabilities which are classified as other financial
liabilities:
Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently held at amortised cost.
Borrowings
Borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
borrowing costs are stated at amortised cost with any difference
between the amount initially recognised and redemption value being
recognised in profit or loss in the Statement of Comprehensive
Income over the period of the borrowings using the effective
interest method.
De-recognition of financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
k) Derivative instrument and hedge accounting
Derivative financial instruments, comprising interest rate swaps
held for hedging purposes, are initially recognised at fair value
and are subsequently measured at fair value being the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at a
measurement date.
When a derivative is designated as the hedging instrument in a
hedge of the variability in cash flows attributable to a particular
risk associated with a recognised asset or liability or a highly
probable forecast transaction that could affect profit or loss, the
effective portion of changes in the fair value of the derivative is
recognised in other comprehensive income and presented in the
hedging reserve in equity. Any ineffective portion of changes in
the fair value of the derivative is recognised immediately in
profit or loss.
At the time the hedged item affects profit or loss, any gain or
loss previously recognised in other comprehensive income is
recycled through Other Comprehensive Income.
l) Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Leases - the Group as lessor
Rentals receivable under operating leases are recognised in the
income statement on a straight-line basis over the term of the
relevant lease. In the event that lease incentives are granted to a
lessee, such incentives are recognised as an asset. The aggregate
cost of the incentives is recognised as a reduction in rental
income on a straight-line basis over the term of the relevant
lease.
Leases - the Group as Lessee
Where a property is held under a head lease classified as a
finance lease, the head lease is initially recognised at the lower
of the fair value of the property and the present value of the
minimum lease payments, and a corresponding liability is recorded
within borrowings. Each lease payment is allocated between
repayment of the liability and a finance charge to achieve a
constant interest rate on the outstanding liability.
m) Share based payments
The fair value of payments made to the Fund Manager that are to
be settled by the issue of shares is determined on the basis of the
Net Asset Value of the Group. The estimated number of shares to be
issued in satisfaction of the services provided is calculated using
the daily closing share price of the Company at the date of
calculation.
4. Significant accounting judgements and estimates
The preparation of financial statements in accordance with the
principles of IFRS required the Directors of the Group to make
judgements, estimates and assumptions that affect the reported
amounts recognised in the financial statements. However,
uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount
of the asset or liability in the future. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Estimates:
Investment properties
The Group uses the valuation carried out by its independent
valuers as the fair value of its property portfolio. The
assumptions on which the property valuation reports have been based
include, but are not limited to, matters such as the tenure and
tenancy details for the properties, ground conditions at the
properties, the structural condition of the properties, prevailing
market yields and comparable market transactions. Further
information is provided in note 14.
The Group's properties have been independently valued by Savills
(UK) Limited ("Savills" or the "Valuer") in accordance with the
definitions published by the Royal Institute of Chartered
Surveyors' ("RICS") Valuation - Professional Standards, July 2017,
Global and UK Editions (commonly known as the "Red Book"). Savills
in one of the most recognised professional firms within residential
property valuation and has sufficient current local and national
knowledge and has the skills and understanding to undertake the
valuations competently.
If the assumptions upon which the external Valuer has based its
valuations prove to be inaccurate, this may have an impact on the
value of the Group's investment properties, which could in turn
have an effect on the Group's financial position and results.
Further information is provided in note 14.
With respect to the Group's Financial Statements, investment
properties are valued at their fair value at each Statement of
Financial Position date in accordance with IFRS 13 which recognises
a variety of fair value inputs depending upon the nature of the
investment. Specifically:
Level 1 - Unadjusted, quoted prices for identical assets and
liabilities in active (typically quoted) markets;
Level 2 - Quoted prices for similar assets and liabilities in
active markets;
Level 3 - Inputs not based on observable market data (that is,
unobservable inputs).
The Group's investment properties are included in Level 3 as the
inputs to the valuation are not based on observable market
data.
Judgements:
Asset Acquisition
During the year the group acquired a 100% interest in the
Retirement Housing Partnership ('RHP'). At acquisition RHP held a
portfolio of 1,341 requirement properties concentrated in Southern
England. Total consideration of approximately GBP100m was paid in
relation to the acquisition.
On acquisition, the Directors assessed whether the purchase of
RHP should be accounted for as a business combination or an asset
acquisition.
In the context of the RHP acquisition, both inputs (properties)
and outputs (rental income) are present. The Directors key
consideration has therefore been whether processes were acquired
and, if so, whether those processes were administrative in nature
(indicating an asset acquisition) or substantive in nature
(indicating a business combination).
As part of the acquisition, a property management agreement was
novated to RHP Holdings Limited from the vendor. The Directors have
critically reviewed the management agreement and have concluded
that the property manager's activities are solely administrative in
nature. All substantive processes are managed by the owner and are
not part of the property management agreement.
The acquisition has therefore been accounted for as an asset
acquisition and the investment properties acquired were recognised
at cost on the acquisition date.
5. Operating segments
IFRS 8, Operating Segments, requires operating segments to be
identified on the basis of internal financial reports about
components of the Group that are regularly reviewed by the chief
operating decision maker (which in the Group's case is the Board of
Directors) in order to allocate resources to the segments and to
assess their performance.
The Group's reporting to the chief operating decision maker does
not differentiate by property type or location as the Group is
considered to be operating in a single segment of business and in
one geographical area.
No customers have revenue that is greater than 10% of the total
Group revenue.
The internal financial reports received by the Board of
Directors contain financial information at a Group level and there
are no reconciling items between the results contained in these
reports and the amounts reported in the Financial Statements.
6. Gross rental income and net property income
12 July
2017 to 21 March
30 Sept to 11 July
2018 2017
GBP000s GBP000s
======== ===========
Gross rental income 10,418 -
========================== ======== ===========
Service charge expenses (2,575) -
========================== ======== ===========
Property operating
expenses (2,127) -
========================== ======== ===========
Impairment of receivables (17) -
========================== ======== ===========
(4,719) -
========================== ======== ===========
Net property income 5,699 -
========================== ======== ===========
7. Fund management fee
12 July
2017 to 21 March
30 Sept to 11 July
2018 2017
GBP000s GBP000s
======== ===========
Cash portion 1,620 -
============= ======== ===========
Equity 540 -
============= ======== ===========
2,160 -
============= ======== ===========
On 16 June 2017 the Board appointed ReSI Capital Management
Limited to act as alternative investment fund manager (the "Fund
Manager"), in compliance with the provisions of the AIFMD, pursuant
to the Fund Management Agreement.
The Fund Manager is entitled to an annual management fee (the
"Fund Manager Fee") under the Fund Management Agreement with effect
from the date of Admission, as follows:
a) On that part of the Net Asset Value up to and including
GBP250 million, an amount equal to 1% p.a. of such part of the Net
Asset Value;
b) on that part of the Net Asset Value over GBP250m and
including GBP500m, an amount equal to 0.9% p.a. of such part of the
Net Asset Value;
c) on that part of the Net Asset Value over GBP500m and up to
and including GBP1,000m, an amount equal to 0.8% p.a. of such part
of the Net Asset Value;
d) on that part of the Net Asset Value over GBP1,000m, an amount
equal to 0.7% p.a. of such part of the Net Asset Value.
The Fund Management Fee is paid quarterly in advance. 75% of the
total Fund Management Fee is payable in cash and 25% of the total
Fund Management Fee (net of any applicable tax) is payable in the
form of Ordinary Shares rather than cash.
8. General and administrative expenses
12 July
2017 to 21 March
30 Sept to 11 July
2018 2017
GBP000s GBP000s
======== ===========
Professional fees 679 8
=========================== ======== ===========
Directors' fees and
expenses 262 11
=========================== ======== ===========
Fees paid to the Company's
auditor (note 10) 217 9
=========================== ======== ===========
Other expenses 32 -
=========================== ======== ===========
1,190 28
=========================== ======== ===========
9. Directors' fees and expenses
GBP000s GBP000s
======= =======
Fees 187 11
========= ======= =======
Taxes 19 -
========= ======= =======
Expenses 9 -
========= ======= =======
215 11
========= ======= =======
The Group had no employees during the period other than the
Directors and Directors of subsidiaries.
The Chairman is entitled to receive a fee linked to the Net
Asset Value of the Group as follows:
Net Asset Value Annual Fee
==========
Up to GBP100,000,000 GBP40,000
================================ ==========
GBP100,000,001 to GBP200,000,000 GBP50,000
================================ ==========
GBP200,000,001 to GBP350,000,000 GBP60,000
================================ ==========
thereafter GBP70,000
================================ ==========
Each of the Directors, save the Chairman, is entitled to receive
a fee linked to the Net Asset Value of the Group as follows:
Net Asset Value Annual Fee
==========
Up to GBP100,000,000 GBP30,000
================================ ==========
GBP100,000,001 to GBP200,000,000 GBP35,000
================================ ==========
thereafter GBP40,000
================================ ==========
None of the Directors received any advances or credits from any
Group entity during the period.
10. Fees paid to the Company's auditor
12 July
2017 to 21 March
30 Sept to 11 July
2018 2017
GBP000s GBP000s
======== ===========
Audit fees
======================== ======== ===========
Parent and consolidated
financial statements 34 9
======================== ======== ===========
Audit of subsidiary
undertakings 98 -
======================== ======== ===========
Total audit fees 132 9
======================== ======== ===========
Audit related services
======================== ======== ===========
Review of interim
report 25 -
======================== ======== ===========
Non-audit services
======================== ======== ===========
Reporting accountant
services 60 -
======================== ======== ===========
Total audit related
and
non-audit services 85 -
======================== ======== ===========
Total fees 217 9
======================== ======== ===========
11. Net finance costs
GBP000s GBP000s
======= =======
Finance income
===================== ======= =======
Interest income 237 -
===================== ======= =======
237 -
===================== ======= =======
Finance expense
===================== ======= =======
Interest payable on
borrowings (471) -
===================== ======= =======
Amortisation of loan
costs (14) -
===================== ======= =======
Loss on cash flow
hedge (383) -
===================== ======= =======
Finance lease (432) -
===================== ======= =======
(1,300) -
===================== ======= =======
Net finance costs (1,063) -
===================== ======= =======
The Group's interest income during the period relates to cash
invested in a money market fund, which is invested in short-term
AAA rated Sterling instruments.
Ground rents paid in respect of leasehold properties have been
recognised as a finance cost in accordance with IAS 17
"Leases".
The Group partially hedged the RHP Portfolio's interest rate
risk exposure by entering into an interest rate swap to
economically pre-hedge the risk of interest rate increases prior to
locking in the fixed rate on investment grade equivalent debt
secured against the RHP Portfolio. If the fair value of the
interest rate swap was negative at the pricing date, then the Group
would benefit from a lower cost of debt and vice versa; if the fair
value of the interest rate swap was positive at the pricing date,
then the Group would be compensated through a cash receipt that
would partially offset a higher cost of debt.
At the pricing date of the debt, the Group locked the fixed
interest rate on the debt secured against the RHP Portfolio for the
term of the facility and unwound the interest rate swap at fair
value crystallising a loss of GBP383,000. This loss was due to a
fall in the fixed rate of the loan from the inception of the
hedge.
12. Taxation
GBP000s GBP000s
======= =======
Current tax - -
============ ======= =======
Deferred tax - -
============ ======= =======
- -
============ ======= =======
The tax charge for the period varies from the standard rate of
corporation tax in the UK applied to the profit before tax. The
differences are explained below:
GBP000s GBP000s
======= =======
Profit/(loss) before
tax 16,111 (28)
========================== ======= =======
Tax at the UK corporation
tax rate of 19% (2017:
19%) 3,061 (5)
========================== ======= =======
Tax effect of:
========================== ======= =======
UK tax not payable
due to REIT exemption (778) -
========================== ======= =======
Investment property
revaluation not taxable (2,817) -
========================== ======= =======
Expenses that are
not deductible in
taxable profit 534 5
========================== ======= =======
Tax charge for the - -
period
========================== ======= =======
As a UK REIT the Group is exempt from corporation tax on the
profits and gains from its property rental business provided it
meets certain conditions set out in the UK REIT regulations.
The Government has announced that the corporation tax standard
rate is to be reduced from 19% to 17% with effective date from 1
April 2020.
13. Earnings per share
Basic earnings per share ('EPS') is calculated as profit
attributable to Ordinary Shareholders of the Company divided by the
weighted average number of shares in issue throughout the relevant
period.
12 July
2017 to 21 March
30 Sept to 11 July
2018 2017
GBP000s GBP000s
=========== ===========
Profit/(loss) attributable
to Ordinary shareholders 16,111 (28)
=========================== =========== ===========
Deduction of fair
value movement on
investment properties
and interest rate
swap unwinding cost (14,442) -
=========================== =========== ===========
Adjusted earnings 1,669 (28)
=========================== =========== ===========
Weighted average number
of Ordinary Shares 178,542,456 100
=========================== =========== ===========
Basic and diluted
earnings per share
=========================== =========== ===========
- 2018 (pence) 9.02
=========================== =========== ===========
- 2017 (pounds) (280.00)
=========================== =========== ===========
Adjusted earnings
per share (basic and
diluted)
=========================== =========== ===========
- 2018 (pence) 0.93
=========================== =========== ===========
- 2017 (pounds) (280.00)
=========================== =========== ===========
The adjusted earnings are presented to provide what the Board
believes is a more appropriate assessment of the operational income
accruing to the Group's activities. Hence, the Group adjusts basic
earnings for income and costs which are not of a recurrent nature
or which may be more of a capital nature.
14. Investment properties
2018 2017
GBP000s GBP000s
======== ========
At beginning of period - -
============================ ======== ========
Property acquisitions
at cost 210,335 -
============================ ======== ========
Finance lease asset 27,715 -
============================ ======== ========
Change in fair value
during the period 14,825 -
============================ ======== ========
At end of period 252,875 -
============================ ======== ========
Valuation provided
by Savills 225,160 -
============================ ======== ========
Adjustment to fair
value
- finance lease asset 27,715 -
============================ ======== ========
Total investment properties 252,875 -
============================ ======== ========
The investment properties are divided into:
2018 2017
GBP000s GBP000s
======== ========
Leasehold properties 182,628 -
============================ ======== ========
Freehold properties* 42,532 -
============================ ======== ========
Finance lease asset 27,715 -
============================ ======== ========
Total investment properties 252,875 -
============================ ======== ========
* Includes Feuhold properties, the Scottish equivalent of
Freehold.
The historical cost of investment properties at 30 September
2018 was GBP210,334,835 (2017: GBPnil).
In accordance with "IAS 40: Investment Property", the Group's
investment properties have been independently valued at fair value
by Savills (UK) Limited ("Savills"), an accredited external valuer
with recognised and relevant professional qualifications.
The carrying values of investment property as at 30 September
2018 agree to the valuations reported by external valuers, except
that the valuations have been increased by the amount of finance
lease liabilities recognised in respect of investment properties
held under leases (GBP27,715,195 at 30 September 2018),
representing the present value of ground rents payable for the
properties held by the Group under leasehold - further information
is provided in note 26. This is because the independent valuations
are shown net of all payments expected to be made. However, for
financial reporting purposes in accordance with IAS 40, "Investment
Property", the carrying value of the investment properties includes
the present value of the minimum lease payments in relation to
these finance leases. The related finance lease liabilities are
presented separately on the Statement of Financial Position.
The Group's investment objective is to provide shareholders with
an attractive level of income, together with the potential for
capital growth, from acquiring portfolios of homes across
residential asset classes that comprise the stock of statutory
registered providers.
The Group intends to hold its investment property portfolio over
the long term, taking advantage of upward-only inflation linked
leases. The Group will not be actively seeking to dispose of any of
its assets, although it may dispose of investments should an
opportunity arise that would enhance the value of the Group as a
whole.
The Group has pledged certain of its investment properties to
secure loan facilities granted to the Group (see note 18).
In accordance with IFRS 13, the Group's investment property has
been assigned a valuation level in the fair value hierarchy. The
fair value hierarchy gives the highest priority to quoted prices in
active markets for identical assets (Level 1) and the lowest
priority to unobservable inputs (Level 3). The Group's investment
property as at 30 September 2018 is categorised as Level 3.
Investment properties are valued by Savills using a
capitalisation methodology applying a yield to current and
estimated rental income. Yields and rental values are considered to
be unobservable inputs.
Everything else being equal, there is a positive relationship
between rental values and the property valuation, such that an
increase in rental values will increase the valuation of a property
and vice versa. However, the relationship between capitalisation
yields and the property valuation is negative; therefore an
increase in capitalisation yields will reduce the valuation of a
property and vice versa. There are interrelationships between these
inputs as they are determined by market conditions, and the
valuation movement in any one period depends on the balance between
them. If these inputs move in opposite directions (i.e. rental
values increase and yields decrease) valuation movements can be
amplified, whereas if they move in the same direction they may be
offset, reducing the overall net valuation movement. The valuation
movement is materially sensitive to changes in yields and rental
values however it is impractical to quantify these changes.
15. Trade and other receivables
2018 2017
GBP000s GBP000s
======== ========
Rent receivable 86 -
============================== ======== ========
Prepayments 1,821 -
============================== ======== ========
Other debtors 840 -
============================== ======== ========
Amounts due from shareholders - 50
============================== ======== ========
2,747 50
============================== ======== ========
The Group has provided fully for those receivable balances that
it does not expect to recover. This assessment has been undertaken
by reviewing the status of all significant balances that are past
due and involves assessing both the reason for non-payment and the
creditworthiness of the counterparty.
Trade receivables include GBP80,417 (2017: GBPnil) which are
past due as at 30 September 2018 for which no provision has been
made because the amounts are considered recoverable.
There is no significant difference between the fair value and
carrying value of trade and other receivables at the Statement of
Financial Position date.
16. Cash and cash equivalents
2018 2017
GBP000s GBP000s
======== ========
Cash at bank 11,795 -
======================== ======== ========
Cash held as investment
deposit 1 -
======================== ======== ========
11,796 -
======================== ======== ========
Included within cash at bank at the period end was an amount
totalling GBP1,233,352 held by the managing agent of the RHP
Portfolio, of which GBP1,110,033 is in respect of tenancy rental
deposits with the remainder held in an operating account to pay
service charges in respect of the RHP Portfolio due on 1 October
2018. The cash was placed in separate bank accounts to which the
Group has restricted access.
Cash held as investment deposit relates to cash invested in a
money market fund, which is invested in short-term AAA rated
Sterling Investments. As the fund has a short maturity period, the
investment has a high liquidity.
17. Trade and other payables
2018 2017
GBP000s GBP000s
======== ========
Trade Payables 1,489 -
======================== ======== ========
Accruals 1,277 28
======================== ======== ========
VAT payable 3 -
======================== ======== ========
Corporation tax payable 185 -
======================== ======== ========
Redeemable preference
shares - 50
======================== ======== ========
Deferred income 454 -
======================== ======== ========
Deferred consideration 26 -
======================== ======== ========
Other creditors 1,110 -
======================== ======== ========
4,544 78
======================== ======== ========
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. For most
suppliers interest is charged if payment is not made within the
required terms. Thereafter, interest is chargeable on the
outstanding balances at various rates. The Company has financial
risk management policies in place to control that all payables are
paid within the agreed credit timescale.
There is no significant difference between the fair value and
carrying value of trade and other payables at the Statement of
Financial Position date.
Corporation tax payables relate to liabilities in respect of pre
acquisition accounting periods of entities acquired in the course
of an acquisition accounted for as an asset acquisition.
18. Borrowings
GBP000s GBP000s
======= =======
Loans 52,922 -
======================== ======= =======
Unamortised borrowing
costs (1,362) -
======================== ======= =======
51,560 -
======================== ======= =======
Current liability 257 -
======================== ======= =======
Non-current liability 51,303 -
======================== ======= =======
51,560 -
======================== ======= =======
The loans are repayable
as follows:
======================== ======= =======
Within one year 257 -
======================== ======= =======
Between one and two
years 265 -
======================== ======= =======
Between three and
five years 844 -
======================== ======= =======
Over five years 50,194 -
======================== ======= =======
51,560 -
======================== ======= =======
Movements in borrowings is analysed as follows:
2018 2017
GBP000s GBP000s
======== ========
At beginning of period - -
======================== ======== ========
Drawdown of facility 53,000 -
======================== ======== ========
Loan costs (1,376) -
======================== ======== ========
Amortisation of loan
costs 14 -
======================== ======== ========
Repayment of borrowings (78) -
======================== ======== ========
At end of period 51,560 -
======================== ======== ========
The loan is for a period of 25 years, at a fixed interest rate
of 3.4507% and is secured by charges on property with an aggregate
carrying value of GBP108,000,000.
There is no significant difference between the fair value and
book value of the Group's borrowings.
19. Share capital account
Number
of Ordinary
1p shares GBP000s
============ =======
At 11 July 2017 100 -
====================== ============ =======
Issued on Admission
to trading on London
Stock Exchange on
12 July 2017 180,000,000 1,800
====================== ============ =======
Issue of shares to
fund manager 324,277 3
====================== ============ =======
At 30 September 2018 180,324,377 1,803
====================== ============ =======
The share capital account relates to amounts subscribed for
share capital.
The Company achieved Admission to the premium segment of the
main market of the London Stock Exchange on 12 July 2017, raising
GBP180m. As a result of the IPO, 180,000,000 shares at 1p each were
issued and fully paid.
The Company has also issued, at market value, 324,277 new
Ordinary Shares of 1p each to the Fund Manager.
Rights, preferences and restrictions on shares
All Ordinary Shares carry equal rights, and no privileges are
attached to any shares in the Company. All the shares are freely
transferable, except as otherwise provided by law. The holders of
Ordinary Shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share at meetings of
the Company. All shares rank equally with regard to the Company's
residual assets.
Treasury shares do not hold any voting rights.
20. Share premium account
GBP000s
=========
At 11 July 2017 -
=============================== =========
Issued on Admission to trading
on London Stock Exchange
on 12 July 2017 178,200
=============================== =========
Share issue costs (3,600)
=============================== =========
Issue of new shares in lieu
of management fees 315
=============================== =========
Share Premium cancellation (174,807)
=============================== =========
At 30 September 2018 108
=============================== =========
The share premium account relates to amounts subscribed for
share capital in excess of nominal value.
In the General Meeting on 31 May 2017, a resolution was passed
authorising, conditional on Admission, the amount standing to the
credit of the share premium account of the Company (less any issue
expenses set off against the share premium account) to be cancelled
and the amount of the share premium account so cancelled be
credited to Retained earnings.
In order to cancel the share premium account, the Company needed
to obtain a court order, which was received on 29 November 2017.
The SH19 form was registered to Companies House with a copy of the
court order on 30 November 2017.
Following the cancellation of the share premium account, the
Company subsequently issued further shares to ReSI Capital
Management Limited as part of the Fund Management Fee payable,
which resulted in further share premium being created.
21. Own shares reserve
GBP000s
=======
At 11 July 2017 -
========================== =======
Purchase of own shares (5,421)
========================== =======
Issued to management (see
note 19) 222
========================== =======
At 30 September 2018 (5,199)
========================== =======
The own shares reserve relates to the value of shares purchased
by the Company in excess of nominal value.
During the period ended 30 September 2018, the Company purchased
5,895,251 of its own 1p Ordinary Shares at a total gross cost of
GBP5,421,105 (GBP5,395,265 cost of shares and GBP33,962 associated
costs).
During the period, 243,581 1p Ordinary Shares were transferred
from its own shares reserve to the Fund Manager, in lieu of the
management fee in accordance with the Fund Management
Agreement.
As at 30 September 2018, 5,651,670 1p Ordinary Shares are held
by the Company.
22. Retained earnings
GBP000s
=======
At 11 July 2017 (28)
============================ =======
Profit for the period 16,111
============================ =======
Transfer from share premium
account 174,807
============================ =======
Share based payment charge 540
============================ =======
Issue of management shares (540)
============================ =======
Dividends (4,003)
============================ =======
At 30 September 2018 186,887
============================ =======
Retained earnings incorporate all gains and losses and
transactions with shareholders (e.g. dividends) not recognised
elsewhere.
Further information regarding the transfer from the share
premium account can be found in note 20.
23. Group entities
The Group entities which are owned either directly by the
Company or indirectly through a subsidiary undertaking are:
Principal
Name of Percent-age Country place Principal
Entity of Ownership of Incorp-oration of business Activity
================ ============= ================== ============ ==============
RHP Holdings 100% UK UK Holding
Limited company
================ ============= ================== ============ ==============
The Retirement 100% UK UK Property
Housing Limited investment
Partnership
================ ============= ================== ============ ==============
ReSI Retirement 100% UK UK Property
Rentals Limited investment
================ ============= ================== ============ ==============
ReSI Housing 100% UK UK Social
Limited housing
registered
provider
================ ============= ================== ============ ==============
Wesley House 100% UK UK Property
(Freehold) investment
Limited
================ ============= ================== ============ ==============
Eaton Green 100% UK UK Property
(Freehold) investment
Limited
================ ============= ================== ============ ==============
Gaynes Hill 100% BVI UK In liquidation
Holdings
Limited
================ ============= ================== ============ ==============
Rayleigh 100% BVI UK In liquidation
Park Limited
================ ============= ================== ============ ==============
All group entities are UK tax resident.
24. Notes to the cash flow statement
All group entities are UK tax resident.
The liabilities arising from financing activities are reconciled
below:
Interest
Borrowings payable
Borrowings due in and loss
due within more than on cashflow Lease
one year one year hedge liabilities
(note (note (note (note
18) 18) 11) 26) Total
GBP000s GBP000s GBP000s GBP000s GBP000s
===================================== =========== ========== ============ ============ ========
At the start of the period - - - - -
===================================== =========== ========== ============ ============ ========
Cash flows
===================================== =========== ========== ============ ============ ========
Borrowings advanced 390 52,610 - - 53,000
===================================== =========== ========== ============ ============ ========
Borrowings repaid (78) - - - (78)
===================================== =========== ========== ============ ============ ========
Loan arrangement fees paid (55) (1,321) - - (1,376)
===================================== =========== ========== ============ ============ ========
Ground rent paid - - - (432) (432)
===================================== =========== ========== ============ ============ ========
Interest paid and loss on cashflow
hedge - - (854) - (854)
===================================== =========== ========== ============ ============ ========
Non-cash flows
===================================== =========== ========== ============ ============ ========
Amortisation of loan arrangement
fees - 14 (14) - -
===================================== =========== ========== ============ ============ ========
Recgonition of headlease liabilities
acquired - - - 28,147 28,147
===================================== =========== ========== ============ ============ ========
At the end of the period 257 51,303 (868) 27,715 78,407
===================================== =========== ========== ============ ============ ========
25. Dividends
12 July
2017 to 21 March
30 Sept to 11 July
2018 2017
GBP000s GBP000s
======== ===========
Amounts recognised as distributions to shareholders
in the period:
======================================================== ======== ===========
1st interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,352 -
======================================================== ======== ===========
2nd interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,329 -
======================================================== ======== ===========
3rd interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,322 -
======================================================== ======== ===========
4,003 -
======================================================== ======== ===========
Amounts not recognised as distributions to shareholders
in the period:
======================================================== ======== ===========
4th interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,283 -
======================================================== ======== ===========
Categorisation of dividends for UK tax purposes:
======================================================== ======== ===========
Amounts recognised as distributions to shareholders
in the period:
======================================================== ======== ===========
Property Income Distribution (PID) 661 -
======================================================== ======== ===========
Non-PID 3,342 -
======================================================== ======== ===========
4,003 -
======================================================== ======== ===========
On 8 February 2018, the Company declared its first interim
dividend of 0.75 pence per share for the initial period from the
date of Admission to 31 December 2017.
On 9 May 2018, the Company declared its second interim dividend
of 0.75 pence per share for the period 1 January 2018 to 31 March
2018.
On 14 August 2018, the Company declared its third interim
dividend of 0.75 pence per share for the period 1 April 2018 to 30
June 2018.
On 15 November 2018, the Company announced the declaration of a
fourth interim dividend of 0.75 pence per share for the period 1
July 2018 to 30 September 2018 which will be payable on 21 December
2018 to Shareholders on the register on 23 November 2018.
The Company intends to continue to pay dividends to shareholders
on a quarterly basis in accordance with the REIT regime.
Dividends are not payable in respect of its Treasury shares
held.
26. Lease arrangements
The Group as lessee
At 30 September 2018, the Group had outstanding commitments for
future minimum lease payments under non-cancellable finance leases,
which fall due as follows:
Less More
than Two than
one to five five
year years years Total
GBP000s GBP000s GBP000s GBP000s
======== ======== ======== ========
Minimum lease
payments 886 3,542 110,757 115,185
================= ======== ======== ======== ========
Interest - (258) (87,212) (87,470)
================= ======== ======== ======== ========
Present value
at 30 September
2018 886 3,284 23,545 27,715
================= ======== ======== ======== ========
The above commitment is in respect of ground rents payable for
properties held by the Group under leasehold. There are 1,979
properties held under leasehold with an average unexpired lease
term of 126 years.
The majority of restrictions imposed are the covenants in place
limiting tenancies to people of retirement age.
The Group as lessor
The Group leases some of its investment properties under
operating leases. At the balance sheet date, the Group had
contracted with tenants for the following future aggregate minimum
rentals receivable under non-cancellable operating leases:
GBP000s
=======
Within one year 3,584
=========================== =======
Between one and five years 7,604
=========================== =======
More than five years 5,485
=========================== =======
16,673
=========================== =======
The total of contingent rents recognised as income during the
period was GBPnil (2017: GBPnil).
The majority of leases are assured tenancy or assured shorthold
tenancy agreements. The table above shows the minimum lease
payments receivable under the assumption that all tenants terminate
their leases at the earliest opportunity. However, assured
tenancies are long-term agreements providing lifetime security of
tenure to residents.
The leases in the licensed retirement homes portfolio are
indefinite and would only be terminated in the event that the
leaseholders of the relevant retirement development vote to no
longer have a resident house manager living at their
development.
Two of the Group's properties are let out on more traditional
leases which account for approximately 10% of total rental
income.
The table below shows our expected lease receivables, excluding
future rent reviews, from existing leases based on historical
turnover rates consistent with our assumptions for valuing the
properties:
GBP000s
=======
Within one year 16,851
=========================== =======
Between one and five years 44,680
=========================== =======
More than five years 44,532
=========================== =======
106,063
=========================== =======
27. Net asset value per share
The net asset value ('NAV') per share is calculated as the net
assets of the Group attributable to shareholders divided by the
number of Ordinary Shares in issue at the period end.
2018 2017
GBP000s GBP000s
=========== ========
Net assets 183,599 (28)
===================== =========== ========
183,599 (28)
===================== =========== ========
Ordinary shares in
issue at period end
(excluding shares
held in treasury) 174,672,707 100
===================== =========== ========
Basic and diluted
NAV per share
===================== =========== ========
- 2018 (pence) 105.11 -
===================== =========== ========
- 2017 (pounds) - (280.00)
===================== =========== ========
28. Contingent liabilities and commitments
There were no known material contingent liabilities or
commitments at 30 September 2018.
29. Related party disclosure
As defined by IAS 24 Related Party Disclosures, parties are
considered to be related if one party has the ability to control
the other party or exercise significant influence over the other
party in making financial or operational decisions.
For the period ended 30 September 2018, the Directors of the
Group are considered to be the key management personnel. Details of
amounts paid to Directors for their services can be found within
note 9, Directors' fees and expenses.
Following the Admission of the Company on the premium segment of
the London Stock Exchange on 12 July 2017, the Directors purchased
the following number of GBP0.01 nominal Ordinary Shares of GBP1.00
each:
-- Rt Hon Baroness Dean of Thornton-le-Flyde (Chairman)
- 20,000 Ordinary Shares
-- Rob Whiteman (Audit Committee Chair)
- 5,000 Ordinary Shares
-- Robert Gray (Director)
- 75,000 Ordinary Shares
-- John Carleton (Director)
- 5,000 Ordinary Shares
On 16 June 2017 the Board appointed ReSI Capital Management
Limited to act as alternative investment fund manager (the "Fund
Manager"), in compliance with the provisions of the AIFMD, pursuant
to the Fund Management Agreement. The Fund Manager has
responsibility for the day-to-day management of the Company's
assets in accordance with the Investment policy subject to the
control and directions of the Board.
The Fund Management agreement is terminable on not less than 12
months' notice, such notice not to expire earlier than 12 July 2023
(the fifth anniversary of admission to the Official List of the
UKLA and traded on the London Stock Exchange main market).
Details regarding the Fund Manger's entitlement to a management
fee are shown in note 7.
For the period ended 30 September 2018, the Company incurred
costs of GBP2,159,911 (2017: GBPnil) in respect of fund management
fees and no amount was outstanding as at 30 September 2018 (2017:
GBPnil). The above fee was split between cash and equity as per the
Fund Management Agreement with the cash equating to GBP1,619,838
and the equity fee of GBP540,074 being paid as 567,858 Ordinary
Shares at an average price of GBP0.95 per share.
In addition, the Fund Manager was paid a fee, pursuant to the
Fund Management Agreement, of GBP320,447 (2017: GBPnil) in respect
of its arrangement of borrowings for the Group.
During the period the Directors and the Fund Manager received
dividends from the Company of GBP2,063 (2017: GBPnil) and GBP10,054
(2017: GBPnil) respectively.
30. Post balance sheet events
Subsequent to the date of the financial statements ReSI
announced the appointment of David Orr as independent non-executive
Chairman of ReSI Housing Limited on 3 October 2018. David brings
over 30 years of housing expertise as an experienced leader whose
career has spanned housing and wider social enterprise. Most
recently, David was Chief Executive of the National Housing
Federation, a role he held from 2005 until his retirement on 30
September 2018.
On 19 October 2018 ReSI announced the acquisition of a 39 unit
Licensed Retirement Homes portfolio for a total consideration of
GBP6.5m. The portfolio, which is leased to the freeholder of the
relevant retirement block and used to house the property managers
under the terms of the headlease obligations, is immediately income
producing and subject to fully repairing and insuring leases that
will deliver an upwards-only marked linked rental stream.
On 25 October 2018 ReSI announced the acquisition of 34 new
build homes located in the London Borough of Barnet for
consideration of GBP16.5m, which it intends, using government grant
funding, to convert into Shared Ownership homes. ReSI will hold the
properties through ReSI Housing, which is regulated as a for-profit
Registered Provider of social housing, and will be managed by
Metropolitan Thames Valley Housing, one of the largest Housing
Associations and a recognised leader in Shared Ownership.
On 26 October 2018 ReSI announced that it had, as envisaged at
the time of its three most recent retirement rental unit
acquisitions, secured GBP40m of 25 year fixed rate debt secured
against 823 retirement units in its portfolio. The partially
amortising financing package, which has been arranged with an
insurance company, is priced at an all-in fixed rate of 3.4877%.
Recognising its strong credit metrics, the debt has been classified
as investment grade.
31. Financial instruments
The table below sets out the categorisation of the financial
instruments held by the Group as at 30 September 2018. The carrying
amount of all financial instruments approximates to their fair
value.
2018 2017
GBP000s GBP000s
======== ========
Financial assets
============================ ======== ========
Loans and receivables
============================ ======== ========
Trade and other receivables 926 50
============================ ======== ========
Cash and cash deposits 11,796 -
============================ ======== ========
12,722 50
============================ ======== ========
Financial liabilities
============================ ======== ========
At amortised cost
============================ ======== ========
Obligations under
finance leases 27,715 -
============================ ======== ========
Borrowings 51,560 -
============================ ======== ========
Trade and other payables 4,356 78
============================ ======== ========
83,631 78
============================ ======== ========
The Group's activities expose it to a variety of financial
risks: market risk, interest rate and inflation risk, credit risk,
liquidity risk and capital risk management.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate limits
and controls, and to monitor risks and adherence to limits. When
considered appropriate the Group uses derivative financial
instruments to hedge certain risk exposures.
Risk management policies and systems are reviewed regularly by
the Board and Fund Manager to reflect changes in the market
conditions and the Group's activities.
The exposure to each financial risk considered potentially
material to the Group, how it arises and the policy for managing
the risk is summarised below:
a) Market risk
Market risk is the risk that changes in market prices will
affect the Group's income or the value of its holding of financial
instruments.
The Company's activities will expose it to the market risks
associated with changes in property and rental values.
Risk relating to investment in property
Investment in property is subject to varying degrees of risk.
Some factors that affect the value of the investment in property
include:
-- changes in the general economic climate;
-- changes in the general social environment;
-- competition from available properties;
-- obsolescence; and
-- Government regulations, including planning, environmental and tax laws.
Variations in the above factors can affect the valuation of
assets held by the Company and the rental values it can achieve,
and as a result can influence the financial performance of the
Company.
The Group mitigates these risks by entering into long term
management or rental/letting agreements to ensure any fall in the
property market should not result in significant impairment to
rental cashflows. In addition, the Group focuses on areas of the
market with limited and ideally countercyclical exposure to the
wider property market.
As the Group operates only in the United Kingdom it is not
exposed to currency risk.
b) Interest rate and inflation risks
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Group has currently financed its activities with fixed rate
debt. If the Group had financed its activities via floating rate
debt and such rates were 1% higher than the fixed rate, then the
Group's finance costs for the period would have increased by
GBP136,395. Conversely, if the floating rate were 1% lower than the
fixed rate, then the Group's finance costs would have decreased by
GBP136,396.
The Group intends to finance its activities with fixed, floating
rate or inflation-linked debt. Changes in the general level of
interest rates and inflation can affect the Group's profitability
by affecting the spread between, amongst other things, the income
on its assets and the expense of its interest-bearing liabilities,
the value of its interest-earning assets and its ability to realise
gains from the sale of assets should this be desirable.
The Fund Manager intends to match debt cash flows to those of
the underlying assets and therefore does not expect to utilise
derivatives. However, to the extent this is not possible, the Group
may utilise derivatives for full or partial inflation or interest
rate hedging or otherwise seek to mitigate the risk of inflation or
interest rate movements. The Group will closely manage any
derivatives, in particular with regard to liquidity and
counterparty risks. The Group will only use derivatives for risk
management and not for speculative purposes.
c) Credit risk
Credit risk is the risk of financial loss to the Group if a
counterparty fails to meet its contractual obligations and arises
principally from the Group's tenants (in respect of trade
receivables arising under operating leases), banks and money market
funds (as holders of the Group's cash deposits).
Exposure to credit risk
2018 2017
GBP000s GBP000s
======== ========
Trade and other receivables 2,747 50
============================ ======== ========
Cash and cash equivalents 11,796 -
============================ ======== ========
14,543 50
============================ ======== ========
The Group engages third parties to provide day-to-day management
of its properties including letting and collection of underlying
rent from residents or shared owners. The Group mitigates void risk
by acquiring residential asset classes with a demonstrable strong
demand or where the tenants are part owners of the properties (as
exhibited by retirement, sub-market rental assets or shared
ownership properties).
The credit risk of cash and cash equivalents is limited due to
cash being held at banks or money market funds considered credit
worthy by the Group's fund manager, with high credit ratings
assigned by international credit rating agencies.
Note 26 details the Group's exposure as a lessor in respect of
future minimum rentals receivable.
d) Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Group manages its liquidity and funding risks by considering
cash flow forecasts and ensuring sufficient cash balances are held
within the Group to meet future needs. Prudent liquidity risk
management implies maintaining sufficient cash and marketable
securities, the availability of financing through appropriate and
adequate credit lines, and the ability of customers to settle
obligations within normal terms of credit. The Company ensures,
through forecasting of capital requirements, that adequate cash is
available.
The following table details the Group's remaining contractual
maturing for its financial liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities,
including future interest payments, based on the earliest date on
which the Group can be required to pay.
Less More
than Two than
one to five five
year years years Total
GBP000s GBP000s GBP000s GBP000s
======== ======== ======== ========
2018
======================= ======== ======== ======== ========
Borrowings 257 1,109 50,194 51,560
======================= ======== ======== ======== ========
Interest on borrowings 1,821 7,176 32,183 41,180
======================= ======== ======== ======== ========
Obligations under
finance leases 886 3,542 110,757 115,185
======================= ======== ======== ======== ========
Payables and
accruals 4,544 - - 4,544
======================= ======== ======== ======== ========
7,508 11,827 193,134 212,469
======================= ======== ======== ======== ========
2017
======================= ======== ======== ======== ========
Payables and
accruals 78 - - 78
======================= ======== ======== ======== ========
78 - - 78
======================= ======== ======== ======== ========
e) Capital risk management
The Group manages its capital to ensure the entities in the
Group will be able to continue as a going concern whilst maximising
the return to shareholders through the optimisation of the debt and
equity balance.
The capital structure of the Group consists of debt (note 18),
cash and cash equivalents (note 16) and equity attributable to the
shareholders of the Company (comprising share capital, retained
earnings and the other reserves as referred in notes 19 to 22).
The Group is not subject to externally imposed capital
requirements under the AIFMD regime.
The Group's management reviews the capital structure on a
regular basis in conjunction with the Board. As part of this review
management considers the cost of capital, risks associated with
each class of capital and debt and the amount of any dividends to
shareholders.
2018 2017
GBP000s GBP000s
======== ========
Obligations under
finance leases 27,715 -
========================== ======== ========
Borrowings 51,560 -
========================== ======== ========
Cash and cash equivalents (11,796) -
========================== ======== ========
Net debt 67,479 -
========================== ======== ========
Equity attributable
equity holders 183,599 (28)
========================== ======== ========
Net debt to equity
ratio 0.37 -
========================== ======== ========
Company Statement of Financial Position
as at 30 September 2018
2018 2017
Note GBP000s GBP000s
====================================== ==== ======== ========
Non-current assets
====================================== ==== ======== ========
Investment in subsidiary undertakings 7 133,420 -
====================================== ==== ======== ========
Total non-current assets 133,420 -
====================================== ==== ======== ========
Current assets
====================================== ==== ======== ========
Trade and other receivables 8 37,810 50
====================================== ==== ======== ========
Cash and cash equivalents 9 9,415 -
====================================== ==== ======== ========
Total current assets 47,225 50
====================================== ==== ======== ========
Total assets 180,645 50
====================================== ==== ======== ========
Current liabilities
====================================== ==== ======== ========
Trade and other payables 10 715 78
====================================== ==== ======== ========
Total current liabilities 715 78
====================================== ==== ======== ========
Net assets/(liabilities) 179,930 (28)
====================================== ==== ======== ========
Equity
====================================== ==== ======== ========
Share capital 11 1,803 -
====================================== ==== ======== ========
Share premium 12 108 -
====================================== ==== ======== ========
Own shares reserve 13 (5,199) -
====================================== ==== ======== ========
Retained earnings 183,218 (28)
====================================== ==== ======== ========
Total interests 179,930 (28)
====================================== ==== ======== ========
Total equity 179,930 (28)
====================================== ==== ======== ========
The notes on pages 69 to 73 form part of these financial
statements.
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
profit and loss account in these financial statements. The profit
attributable to the Parent Company for the period ended 30
September 2018 amounted to GBP12.4 million (11 July 2017: loss
GBP28,000).
These financial statements were approved by the Board of
Directors on 22 November 2018 and signed on its behalf by:
Rob Whiteman
Chairman
22 November 2018
Company Statement of Changes in Equity
for the period ended 30 September 2018
Share Share Own shares Retained
capital premium reserve earnings Total
GBP000s GBP000s GBP000s GBP000s GBP000s
=================================== ======== ========= ========== ========= ========
Balance at 21 March 2017 - - - - -
=================================== ======== ========= ========== ========= ========
Loss for the period - - - (28) (28)
=================================== ======== ========= ========== ========= ========
Other comprehensive income - - - - -
=================================== ======== ========= ========== ========= ========
Total comprehensive income - - - (28) (28)
=================================== ======== ========= ========== ========= ========
Contributions by and distributions
to shareholders
=================================== ======== ========= ========== ========= ========
Ordinary shares issued - - - - -
=================================== ======== ========= ========== ========= ========
Balance at 11 July 2017 - - - (28) (28)
=================================== ======== ========= ========== ========= ========
Profit for the period - - - 12,442 12,442
=================================== ======== ========= ========== ========= ========
Other comprehensive income - - - - -
=================================== ======== ========= ========== ========= ========
Total comprehensive income - - - 12,442 12,442
=================================== ======== ========= ========== ========= ========
Contributions by and distributions
to shareholders
=================================== ======== ========= ========== ========= ========
Issue of shares 1,800 178,200 - - 180,000
=================================== ======== ========= ========== ========= ========
Formation and issue costs paid - (3,600) - - (3,600)
=================================== ======== ========= ========== ========= ========
Issue of management shares 3 315 222 (540) -
=================================== ======== ========= ========== ========= ========
Share based payment charge - - - 540 540
=================================== ======== ========= ========== ========= ========
Cancellation of share premium - (174,807) - 174,807 -
=================================== ======== ========= ========== ========= ========
Purchase of own shares - - (5,421) - (5,421)
=================================== ======== ========= ========== ========= ========
Dividend paid - - - (4,003) (4,003)
=================================== ======== ========= ========== ========= ========
Balance at 30 September 2018 1,803 108 (5,199) 183,218 179,930
=================================== ======== ========= ========== ========= ========
The notes on pages 69 to 73 form part of these financial
statements.
Notes to the Company Financial Statements
1. Basis of preparation
The financial statements have been prepared in accordance with
Financial Reporting Standard 100 Application of Financial Reporting
Requirements ("FRS 100") and Financial Reporting Standard 101
Reduced Disclosure Framework ("FRS 101").
2. Disclosure exemptions adopted
In preparing these financial statements the Company has taken
advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
-- Certain comparative information as otherwise required by EU endorsed IFRS;
-- Certain disclosures regarding the Company's capital;
-- A statement of cash flows;
-- The effect of future accounting standards not yet adopted;
-- The disclosure of the remuneration of key management personnel; and
-- Disclosure of related party transactions with other wholly
owned members of Residential Secure Income plc.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been adopted because equivalent disclosures are
included in the Company's consolidated financial statements. These
financial statements do not include certain disclosures in respect
of:
-- Financial instruments;
-- Fair value measurement other than certain disclosures
required as a result of recording financial instruments at fair
value.
3. Significant accounting policies
The significant accounting policies applied in the preparation
of the financial statements are set out below. The policies have
been consistently applied throughout the period.
a) Basis of accounting
These financial statements have been presented as required by
the Companies Act 2006 and have been prepared under the historical
cost convention and in accordance with applicable Accounting
Standards and policies in the United Kingdom ("UK GAAP").
b) Currency
The Company financial information is presented in Sterling which
is also the Company's functional currency and all values are
rounded to the nearest million (GBPm), except where otherwise
indicated.
c) Investments in subsidiary undertakings in the Company
Financial Statements
Investments in subsidiary undertakings are stated at cost less
any provision for impairment in value.
d) Share issue costs
The costs of issuing or reacquiring equity instruments (other
than in a business combination) are accounted for as a reduction to
share premium to the extent that share premium has arisen on the
related share issue.
e) Finance income
Finance income comprises interest receivable on funds invested
and is recognised in profit and loss as it accrues, using the
effective interest method.
f) Taxation
Taxation on the profit or loss for the period not exempt under
UK REIT regulations would comprise of current and deferred tax. Tax
would be recognised in the Statement of Comprehensive Income except
to the extent that it relates to items recognised as direct
movement in equity, in which case it would be recognised as a
direct movement in equity. Current tax is expected tax payable on
any non-REIT taxable income for the period, using tax rates enacted
or substantively enacted at the balance sheet date. Deferred tax is
provided in full using the balance sheet liability method on timing
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is determined using tax rates that have been
enacted or substantively enacted by the reporting date and are
expected to apply when the asset is realised or the liability is
settled.
No provision is made for timing differences (i) arising on the
initial recognition of assets or liabilities, other than on a
business combination, that affect neither accounting nor taxable
profit and (ii) relating to investments in subsidiaries to the
extent that they will not reverse in the foreseeable future.
g) Dividend payable to shareholders
Equity dividends are recognised when they become legally payable
which for the final dividends is the date of approval by the
members. Interim dividends are recognised when paid.
h) Financial instruments
Financial assets
Recognition of financial assets
All financial assets are recognised on a trade date which is the
date when the Group becomes a party to the contractual provisions
of the instrument.
Initial measurement and classification of financial assets
Financial assets are classified into the following categories:
"financial assets at fair value through profit or loss" and "loans
and receivables". The classification depends on the nature and
purpose of the financial assets and is determined at the time of
initial recognition.
Financial assets are initially measured at fair value, plus
transaction costs, except for those financial assets classified as
at fair value through profit or loss, which are initially measured
at fair value.
At 30 September 2018 the Group had the following non-derivative
financial assets which are classified as loans and receivables:
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash
at bank (including investments in money-market funds) and
short-term deposits with an original maturity of three months or
less.
Trade and other receivables
Trade and other receivables are recognised at their original
invoiced value. Where the time value of money is material,
receivables are discounted and then held at amortised cost.
Impairment of financial assets
The carrying amounts of the Group's financial assets, other than
those at fair value through profit or loss, are reviewed at each
reporting date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable
amount is estimated. Any impairment loss is recognised in profit or
loss in the Statement of Comprehensive Income whenever the carrying
amount of an asset exceeds its recoverable amount. For the purposes
of assessing impairment, assets are grouped together at the lowest
levels for which there are separately identifiable cash flows.
The recoverable amount of an asset is the greater of its net
selling price and its value in use. The value in use is determined
as the net present value of the future cash flows expected to be
derived from the asset, discounted using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying
amount after the reversal does not exceed the amount that would
have been determined, net of applicable depreciation, if no
impairment loss had been recognised.
De-recognition of financial assets
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
financial asset and substantially all the risks and rewards of
ownership to another entity. If any interest in a transferred asset
is retained then the Group recognises its retained interest in the
asset and associated liabilities.
Financial liabilities
Recognition of financial liabilities
All financial liabilities are recognised on the date when the
Group becomes a party to the contractual provisions of the
instrument.
Initial measurement and classification of financial
liabilities
Financial liabilities are classified into the following
categories: "financial liabilities at fair value through profit or
loss" and "other financial liabilities". The classification depends
on the nature and purpose of the financial liabilities and is
determined at the time of initial recognition.
Financial liabilities are initially measured at fair value, net
of transaction costs, except for those financial liabilities
classified as at fair value through profit or loss, which are
initially measured at fair value.
At 30 September 2018 the Group had the following non-derivative
financial liabilities which are classified as other financial
liabilities:
Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently held at amortised cost.
De-recognition of financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
4. Significant accounting judgements and estimates
The preparation of financial statements requires the Directors
of the Company to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements.
However, uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the
carrying amount of the asset or liability in the future.
Impairment of fixed assets
The Directors are required to review the carrying amounts of its
tangible assets to determine whether there are any indicators for
impairment. After assessing the carrying amounts of the Company's
investments, it was determined that impairment indicators existed
at the year end for some of the investments and so an impairment
loss should be recognised.
5. Fees paid to the Company's auditor
2018 2017
GBP000s GBP000s
======== ========
Audit fees 34 9
======================= ======== ========
Audit related services 25 -
======================= ======== ========
Non-audit services 60 -
======================= ======== ========
Total fees 119 9
======================= ======== ========
6. Dividends paid
12 July
2017 to 21 March
30 Sept to 11 July
2018 2017
GBP000s GBP000s
======== ===========
Amounts recognised as distributions to shareholders
in the period:
======================================================== ======== ===========
1st interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,352 -
======================================================== ======== ===========
2nd interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,329 -
======================================================== ======== ===========
3rd interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,322 -
======================================================== ======== ===========
4,003 -
======================================================== ======== ===========
Amounts not recognised as distributions to shareholders
in the period:
======================================================== ======== ===========
4th interim dividend for the period ended 30 September
2018 of 0.75p per share (2017: GBPnil) 1,283 -
======================================================== ======== ===========
Categorisation of dividends for UK tax purposes:
======================================================== ======== ===========
Amounts recognised as distributions to shareholders
in the period:
======================================================== ======== ===========
Property Income Distribution (PID) 661 -
======================================================== ======== ===========
Non-PID 3,342 -
======================================================== ======== ===========
4,003 -
======================================================== ======== ===========
On 8 February 2018, the Company declared its first interim
dividend of 0.75 pence per share for the initial period from the
date of Admission to 31 December 2017.
On 9 May 2018, the Company declared its second interim dividend
of 0.75 pence per share for the period 1 January 2018 to 31 March
2018.
On 14 August 2018, the Company declared its third interim
dividend of 0.75 pence per share for the period 1 April 2018 to 30
June 2018.
On 15 November 2018, the Company announced the declaration of a
fourth interim dividend of 0.75 pence per share for the period 1
July 2018 to 30 September 2018 which will be payable on 21 December
2018 to Shareholders on the register on 23 November 2018.
The Company intends to continue to pay dividends to shareholders
on a quarterly basis in accordance with the REIT regime.
7. Investments
2018 2017
GBP000s GBP000s
======== ========
At beginning of period - -
======================= ======== ========
Additions 167,476 -
======================= ======== ========
(34,056
Reduction ) -
======================= ======== ========
At end of period 133,420 -
======================= ======== ========
During the year the Company's subsidiary RHP Holdings Limited
made distributions to the Company which resulted in the Company
reducing its cost of investment by GBP34.1 million
Investments are subject to annual impairment review.
The Company had the following subsidiary undertakings at 30
September 2018:
Principal
Name of Percent-age Country place Principal
Entity of Ownership of Incorporation of business Activity
================ ============= ================= ============ ==============
RHP Holdings 100% UK UK Holding
Limited company
================ ============= ================= ============ ==============
The Retirement 100% UK UK Property
Housing Limited investment
Partnership
================ ============= ================= ============ ==============
ReSI Retirement 100% UK UK Property
Rentals Limited investment
================ ============= ================= ============ ==============
ReSI Housing 100% UK UK Social
Limited housing
registered
provider
================ ============= ================= ============ ==============
Wesley House 100% UK UK Property
(Freehold) investment
Limited
================ ============= ================= ============ ==============
Eaton Green 100% UK UK Property
(Freehold) investment
Limited
================ ============= ================= ============ ==============
Gaynes Hill 100% BVI UK In liquidation
Holdings
Limited
================ ============= ================= ============ ==============
Rayleigh 100% BVI UK In liquidation
Park Limited
================ ============= ================= ============ ==============
All group entities are UK tax resident.
8. Trade and other receivables
2018 2017
GBP000s GBP000s
======== ========
Amounts due from group
undertakings 37,727 -
============================== ======== ========
Prepayments 59 -
============================== ======== ========
Other debtors 24 -
============================== ======== ========
Amounts due from shareholders - 50
============================== ======== ========
37,810 50
============================== ======== ========
Amounts due from subsidiary undertakings are unsecured, interest
free and repayable on demand.
All amounts fall due for repayment within one year.
9. Cash and cash equivalents
2018 2017
GBP000s GBP000s
======== ========
Cash at bank 9,414 -
======================== ======== ========
Cash held as investment
deposit 1 -
======================== ======== ========
9,415 -
======================== ======== ========
Cash held as investment deposit relates to cash invested in a
money market fund, which is invested in short-term AAA rated
Sterling Investments. As the fund has a short maturity period, the
investment has a high liquidity.
10. Trade and other payables
2018 2017
GBP000s GBP000s
======== ========
Trade payables 198 -
====================== ======== ========
Accruals 517 28
====================== ======== ========
Redeemable preference
shares - 50
====================== ======== ========
715 78
====================== ======== ========
11. Share capital
Number
of ordinary
1p shares GBP000s
============ =======
Issued on Admission
to trading on London
Stock Exchange on
12 July 2017 180,000,000 1,800
====================== ============ =======
Issue of shares to
fund manager 324,277 3
====================== ============ =======
At 30 September 2018 180,324,377 1,803
====================== ============ =======
The share premium account relates to amounts subscribed for
share capital in excess of nominal value.
The Company achieved admission to the premium segment of the
main market of the London Stock Exchange on 12 July 2017, raising
GBP180m. As a result of the IPO, 180,000,000 shares at 1p each were
issued and fully paid.
The Company has also issued, at market value, 324,277 new
Ordinary Shares of 1p each to the Fund Manager.
12. Share premium
GBP000s
=========
At 11 July 2017 -
=============================== =========
Issued on Admission to trading
on London Stock Exchange
on 12 July 2017 178,200
=============================== =========
Share issue costs (3,600)
=============================== =========
Issue of new shares in lieu
of management fees 315
=============================== =========
Share Premium cancellation (174,807)
=============================== =========
At 30 September 2018 108
=============================== =========
The share premium account relates to amounts subscribed for
share capital in excess of nominal value.
In the General Meeting on 31 May 2017, a resolution was passed
authorising, conditional on Admission, the amount standing to the
credit of the share premium account of the Company (less any issue
expenses set off against the share premium account) to be cancelled
and the amount of the share premium account so cancelled be
credited to Retained earnings.
In order to cancel the share premium account, the Company needed
to obtain a court order, which was received on 29 November 2017.
The SH19 form was registered to Companies House with a copy of the
court order on 30 November 2017.
Following the cancellation of the share premium account, the
Company subsequently issued further shares to ReSI Capital
Management Limited as part of the Fund Management Fee payable,
which resulted in further share premium being created.
13. Own share reserve
GBP000s
=======
At 11 July 2017 -
========================== =======
Purchase of own shares (5,421)
========================== =======
Issued to management (see
note 11) 222
========================== =======
At 30 September 2018 (5,199)
========================== =======
The own shares reserve relates to the value of shares purchased
by the Company in excess of nominal value.
During the period ended 30 September 2018, the Company purchased
5,895,251 of its own 1p Ordinary Shares at a total gross cost of
GBP5,421,105 (GBP5,395,265 cost of shares and GBP33,962 associated
costs).
During the period, 243,581 1p Ordinary Shares were transferred
from its own shares reserve to the Fund Manager, in lieu of the
management fee in accordance with the Fund Management
Agreement.
As at 30 September 2018, 5,651,670 1p Ordinary Shares are held
by the Company.
14. Related party transactions
The Company has taken advantage of the exemption not to disclose
transactions with other members of the Group as the Company's own
financial statements are presented together with its consolidated
financial statements. For all other related party transactions
please make reference to note 29 of the Group accounts.
Glossary
Administrator The Company's administrator from time to time, the
current such administrator being MGR Weston Kay LLP.
AIC Association of Investment Companies.
------------------------------------------------------------
Alternative Investment An investment vehicle under AIFMD. Under AIFMD (see
Fund or "AIF" below) the Company is classified as an AIF.
------------------------------------------------------------
Alternative Investment A European Union directive which came into force
Fund Managers Directive on 22 July 2013 and has been implemented in the UK.
or "AIFMD"
------------------------------------------------------------
Annual General A meeting held once a year which shareholders can
Meeting or "AGM" attend and where they can vote on resolutions to
be put forward at the meeting and ask directors questions
about the company in which they are invested.
------------------------------------------------------------
Articles or Articles Means the articles of association of the Company.
of Association
------------------------------------------------------------
Company Secretary The Company's company secretary from time to time,
the current such company secretary being PraxisIFM
Fund Services (UK) Limited.
------------------------------------------------------------
Discount The amount, expressed as a percentage, by which the
share price is less than the net asset value per
share.
------------------------------------------------------------
Depositary Certain AIFs must appoint depositaries under the
requirements of AIFMD. A depositary's duties include,
inter alia, safekeeping of assets, oversight and
cash monitoring. The Company's current depositary
is Thompson Taraz Depositary Limited.
------------------------------------------------------------
Dividend Income receivable from an investment in shares.
------------------------------------------------------------
Ex-dividend date The date from which you are not entitled to receive
a dividend which has been declared and is due to
be paid to shareholders.
------------------------------------------------------------
Financial Conduct The independent body that regulates the financial
Authority or "FCA" services industry in the UK.
------------------------------------------------------------
Functional Home Means both a Unit and an aggregation of multiple
Units offering elderly care facilities, assisted
living facilities, sheltered housing or supported
housing that are made available, by a Tenant, Occupant
or Nominator (as the case may be) to a Resident/Residents.
------------------------------------------------------------
Fund Manager Means ReSI Capital Management Limited, a company
incorporated in England and Wales with company number
07588964 in its capacity as Fund Manager to the Company.
------------------------------------------------------------
Gearing A way to magnify income and capital returns, but
which can also magnify losses. A bank loan is a common
method of gearing.
------------------------------------------------------------
Housing Association Means a regulated independent society, body of trustees
or company established for the purpose of providing
social housing.
------------------------------------------------------------
Investment company A company formed to invest in a diversified portfolio
of assets.
------------------------------------------------------------
Issue Price Means 100 pence per Ordinary Share.
------------------------------------------------------------
Leverage An alternative word for "Gearing".
Under AIFMD, leverage is any method by which the
exposure of an AIF is increased through borrowing
of cash or securities or leverage embedded in derivative
positions.
Under AIFMD, leverage is broadly similar to gearing,
but is expressed as a ratio between the assets (excluding
borrowings) and the net assets (after taking account
of borrowing). Under the gross method, exposure represents
the sum of the Company's positions after deduction
of cash balances, without taking account of any hedging
or netting arrangements. Under the commitment method,
exposure is calculated without the deduction of cash
balances and after certain hedging and netting positions
are offset against each other.
------------------------------------------------------------
Liquidity The extent to which investments can be sold at short
notice.
------------------------------------------------------------
Market Rental Home Means both a Unit of residential accommodation and
an accommodation block comprising multiple Units
facilities that is/are made available, by a Tenant,
Occupant or Nominator, to a Resident/Residents at
a market rent.
------------------------------------------------------------
Net assets Means the net asset value of the Company as a whole
on the relevant date calculated in accordance with
the Company's normal accounting policies.
------------------------------------------------------------
Net asset value Means the net asset value of the Company on the relevant
(NAV) per Ordinary date calculated in accordance with the Company's
Share normal accounting policies divided by the total number
of Ordinary Shares then in issue.
------------------------------------------------------------
Non PID dividend Means a dividend paid by the Company that is not
a PID.
------------------------------------------------------------
Ongoing charges A measure, expressed as a percentage of average net
assets, of the regular, recurring annual costs of
running an investment company.
------------------------------------------------------------
Ordinary Shares The Company's Ordinary Shares of 1p each.
------------------------------------------------------------
PID Means a distribution referred to in section 548(1)
or 548(3) of the CTA 2010, being a dividend or distribution
paid by the Company in respect of profits or gains
of the Property Rental Business of the Group (other
than gains arising to non-UK resident Group companies)
arising at a time when the Group is a REIT insofar
as they derive from the Group's Property Rental Business.
------------------------------------------------------------
Portfolio A collection of different investments held in order
to deliver returns to shareholders and to spread
risk.
------------------------------------------------------------
Premium The amount, expressed as a percentage, by which the
share price is more than the net asset value per
share.
------------------------------------------------------------
Property Rental Means a Property Rental Business fulfilling the conditions
Business in section 529 of the CTA 2010.
------------------------------------------------------------
REIT Real estate investment trust.
------------------------------------------------------------
Rental Agreement comprise Leases, Occupancy Agreements and Nominations
Agreements.
------------------------------------------------------------
Reputable Care Means a Statutory Registered Provider or other private
Provider entity in the business of building, managing and/or
operating Functional Homes in the United Kingdom
that the Fund Manager considers reputable in light
of its investment grade equivalent debt strategy.
------------------------------------------------------------
Share buyback A purchase of a company's own shares. Shares can
either be bought back for cancellation or held in
treasury.
------------------------------------------------------------
Share price The price of a share as determined by a relevant
stock market.
------------------------------------------------------------
Shared Owner Means the part owner of a Shared Ownership Home that
occupies such Shared Ownership Home in return for
the payment of rent to the co-owner.
------------------------------------------------------------
Sub-Market Rental Means a Unit of residential accommodation that is
Home made available, by a Tenant, Occupant or Nominator,
to a Resident to rent at a level below the local
market rent.
------------------------------------------------------------
Total return A measure of performance that takes into account
both income and capital returns.
------------------------------------------------------------
Treasury shares A company's own shares which are available to be
sold by a company to raise funds.
------------------------------------------------------------
Company Information
Shareholder Information
Directors
Robert Whiteman (Non-executive Chairman)
Robert Blackburn Gray (Non-executive Director)
John Carleton (Non-executive Director)
Mike Emmerich (Non-executive Director)
(appointed 13 September 2018)
Registered Office
Mermaid House
2 Puddle Dock
London
EC4V 3DB
Company Information
Company Registration Number: 10683026
Incorporated in the United Kingdom
Fund Manager
ReSI Capital Management Limited
21 Great Winchester Street
London
EC2N 2JA
Corporate Broker
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
Legal and Tax Adviser
Norton Rose Fulbright LLP
3 More London Riverside
London
SE1 2AQ
Tax Adviser
Ernst & Young LLP
1 More London Riverside
London
SE1 2AF
Depositary
Thompson Taraz Depositary Limited
4th Floor, Stanhope House
47 Park Lane
Mayfair, London
W1K 1PR
Company Secretary
PraxisIFM Fund Services (UK) Limited
Mermaid House
2 Puddle Dock
London
EC4V 3DB
Administrator
MGR Weston Kay LLP
55 Loudoun Road,
St. John's Wood,
London
NW8 0DL
Registrar
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Public Relations Adviser
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Valuers
Savills (UK) Limited
33 Margaret Street
London
W1G 0JD
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of
Residential Secure Income PLC will be held at the offices of
TradeRisks, 21 Great Winchester Street, London, EC2N 2JA on 29
January 2019 at 11 a.m. for the following purposes:
To consider and if thought fit pass the following resolutions of
which resolutions 1 to 9 will be proposed as ordinary resolutions
and resolutions 10 to 12 will be proposed as special
resolutions.
1. To receive the Company's Annual Report and Accounts for the
period from 12 July 2017 to 30 September 2018, with the reports of
the Directors and auditors thereon.
2. To approve the Directors' Remuneration Policy included in the
Annual Report for the period from 12 July 2017 to 30 September
2018.
3. To approve the Directors' Remuneration Implementation Report
included in the Annual Report for the period from 12 July 2017 to
30 September 2018.
4. To re-elect Robert Whiteman as a Director of the Company.
5. To elect Mike Emmerich as a Director of the Company.
6. To re-appoint BDO LLP as auditors to the Company.
7. To authorise the Directors to fix the remuneration of the
auditors until the conclusion of the next Annual General Meeting of
the Company.
8. To approve the Company's policy of paying quarterly interim dividends.
9. That the Directors be and are hereby generally and
unconditionally authorised in accordance with section 551 of the
Companies Act 2006 (in substitution for all subsisting authorities
to the extent unused) to exercise all the powers of the Company to
allot up to 17,101,964 Ordinary Shares (excluding shares held in
Treasury) in the capital of the Company (equivalent to 10% of the
Ordinary Shares in issue at the date of the notice of this
meeting), such authority to expire (unless previously varied,
revoked or renewed by the Company in general meeting) at the
conclusion of the Annual General Meeting of the Company to be held
in 2020 or, if earlier, on the expiry of 15 months from the passing
of this resolution, save that the Company may, at any time prior to
the expiry of such authority, make an offer or enter into an
agreement which would or might require the allotment of shares in
pursuance of such an offer or agreement as if such authority had
not expired.
10. That, subject to the passing of resolution 9, in
substitution for any existing power under sections 570 and 573 of
the Companies Act 2006 but without prejudice to the exercise of any
such power prior to the date hereof, the Directors be and are
hereby empowered (pursuant to sections 570 and 573 of the Companies
Act 2006) to allot Ordinary Shares and to sell Ordinary Shares from
treasury for cash at a price above prevailing Net Asset Value per
share, pursuant to the authority referred to in Resolution 9 above
as if section 561 of the Act did not apply to any such allotment or
sale, such power to expire (unless previously varied, revoked or
renewed by the Company in general meeting) at the conclusion of the
Annual General Meeting of the Company to be held in 2020 or, if
earlier, on the expiry of 15 months from the passing of this
resolution, save that the Company may, at any time prior to the
expiry of such power, make an offer or enter into an agreement
which would or might require equity securities to be allotted or
sold from treasury after the expiry of such power, and the
Directors may allot or sell from treasury equity securities in
pursuance of such an offer or an agreement as if such power had not
expired;
11. That the Company be and is hereby generally and
unconditionally authorised in accordance with section 701 of the
Companies Act 2006 ("the Act") to make market purchases (within the
meaning of section 693(4) of the Act) of its Ordinary Shares of 1p
each, provided that:
(a) the maximum number of Ordinary Shares hereby authorised to
be purchased shall be 25,635,845 (representing 14.99% of the
Company's issued Ordinary Share capital (excluding shares held in
Treasury) at the date of the notice of this meeting);
(b) the minimum price (exclusive of any expenses) which may be
paid for an Ordinary Share is 1p;
(c) the maximum price (excluding expenses) which may be paid for
an Ordinary Share is not more than the higher of:
(i) 5% above the average of the middle market quotations for the
Ordinary Shares for the five business days immediately before the
day on which it purchases that share; and
(ii) the higher of the price of the last independent trade and
the highest current independent bid for the Ordinary Shares;
(d) the authority hereby conferred shall expire at the
conclusion of the Annual General Meeting of the Company in 2020 or,
if earlier, on the expiry of 15 months from the passing of this
resolution, unless such authority is renewed prior to such time;
and
(e) the Company may make a contract to purchase Ordinary Shares
under the authority hereby conferred prior to the expiry of such
authority, which will or may be executed wholly or partly after the
expiration of such authority and may make a purchase of Ordinary
Shares pursuant to any such contract.
12. That a general meeting of the Company other than an Annual
General Meeting may be called on not less than 14 clear days'
notice, provided that this authority shall expire at the conclusion
of the Company's next Annual General Meeting after the date of the
passing of this resolution.
Registered office
Mermaid House
Puddle Dock
London
EC4V 3DB
By order of the Board
Anthony Lee
For and on behalf of
PraxisIFM Fund Services (UK) Limited
Company Secretary
22 November 2018
Notes to Notice of Annual General Meeting
Website address
1. Information regarding the meeting, including the information
required by section 311A of the Companies Act 2006, is available
from https://www.resi-reit.com/.
Entitlement to attend and vote
2. Only those holders of Ordinary Shares registered on the
Company's register of members at 6.00 p.m. on 27 January 2019 or,
if this meeting is adjourned, at close of business on the day two
days prior to the adjourned meeting, shall be entitled to attend
and vote at the meeting.
Appointment of Proxies
3. Members entitled to attend, speak and vote at the meeting (in
accordance with Note 2 above) are entitled to appoint one or more
proxies to attend, speak and vote in their place. If you wish to
appoint a proxy please use the Form of Proxy enclosed with this
document or follow the instructions at note 7 below if you wish to
appoint a proxy through the CREST electronic proxy appointment
service. In the case of joint members, only one need sign the Form
of Proxy. The vote of the senior joint member will be accepted to
the exclusion of the votes of the other joint members. For this
purpose, seniority will be determined by the order in which the
names of the members appear in the register of members in respect
of the joint shareholding. The completion and return of the Form of
Proxy will not stop you attending and voting in person at the
meeting should you wish to do so. A proxy need not be a member of
the Company. You may appoint more than one proxy provided each
proxy is appointed to exercise the rights attached to a different
share or shares held by you. If you choose to appoint multiple
proxies use a separate copy of this form (which you may photocopy)
for each proxy, and indicate after the proxy's name the number of
shares in relation to which they are authorised to act (which, in
aggregate, should not exceed the number of Ordinary Shares held by
you). Please also indicate if the proxy instruction is one of
multiple instructions being given. All forms must be signed and
returned in the same envelope.
4. You can appoint the Chairman of the Meeting, or any other
person, as your proxy. If you wish to appoint someone other than
the Chairman, cross out the words "the Chairman of the Meeting" on
the Form of Proxy and insert the full name of your appointee.
5. You can instruct your proxy how to vote on each resolution by
ticking the "For" and "Against" boxes as appropriate (or entering
the number of shares which you are entitled to vote). If you wish
to abstain from voting on any resolution please tick the box which
is marked "Vote Withheld". It should be noted that a vote withheld
is not a vote in law and will not be counted in the calculation of
the proportion of votes "For" and "Against" a resolution. If you do
not indicate on the Form of Proxy how your proxy should vote,
he/she can exercise his/her discretion as to whether, and if how so
how, he/she votes on each resolution, as he/she will do in respect
of any other business (including amendments to resolutions) which
may properly be conducted at the meeting.
A company incorporated in England and Wales or Northern Ireland
should execute the Form of Proxy under its common seal or otherwise
in accordance with Section 44 of the Companies Act 2006 or by
signature on its behalf by a duly authorised officer or attorney
whose power of attorney or other authority should be enclosed with
the Form of Proxy.
Appointment of Proxy using Hard Copy Form
6. The Form of Proxy and any power of attorney (or a notarially
certified copy or office copy thereof) under which it is executed
must be received by Link Asset Services, PXS1, 34 Beckenham Road,
Beckenham, BR3 4ZF at 11.00 a.m. on 27 January 2019 in respect of
the meeting.
Any Forms of Proxy received before such time will be deemed to
have been received at such time. In the case of an adjournment, the
Form of Proxy must be received by Link Asset Services no later than
48 hours before the rescheduled meeting. On completing the Form of
Proxy, sign it and return it to Link Asset Services at the address
shown on the Form of Proxy in the envelope provided. As postage has
been pre-paid no stamp is required.
Appointment of Proxy through CREST
7. CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so for the
meeting to be held on the above date and any adjournment(s) thereof
by using the procedures described in the CREST Manual. CREST
Personal Members or other CREST sponsored members, and those CREST
members who have appointed a voting service provider(s), should
refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message (a "CREST
Proxy Instruction") must be properly authenticated in accordance
with Euroclear UK & Ireland Limited's specifications and must
contain the information required for such instructions, as
described in the CREST Manual. The message, regardless of whether
it constitutes the appointment of a proxy or an amendment to the
instruction given to a previously appointed proxy, must, in order
to be valid, be transmitted so as to be received by the Company's
agent (ID: RA10) by the latest time(s) for receipt of proxy
appointments specified in the notice of meeting. For this purpose,
the time of receipt will be taken to be the time (as determined by
the timestamp applied to the message by the CREST Applications
Host) from which the Company's agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST.
After this time any change of instructions to a proxy's appointee
through CREST should be communicated to the appointee through other
means.
CREST members and, where applicable, their CREST sponsors or
voting service providers should note that Euroclear UK &
Ireland Limited does not make available special procedures in CREST
for any particular messages. Normal system timings and limitations
will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service providers are
referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and
timings.
The Company may treat as invalid a CREST Proxy Instruction in
the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations
2001.
All messages relating to the appointment of a proxy or an
instruction to a previously appointed proxy, which are to be
transmitted through CREST, must be lodged at 11.00 a.m. on 27
January 2019 in respect of the meeting. Any such messages received
before such time will be deemed to have been received at such time.
In the case of an adjournment, all messages must be lodged with
Link Asset Services no later than 48 hours before the rescheduled
meeting.
Termination of proxy appointments
8. In order to revoke a proxy instruction you will need to
inform the Company. Please send a signed hard copy notice clearly
stating your intention to revoke your proxy appointment to Link
Asset Services, PXS1, 34 Beckenham Road, Beckenham, BR3 4ZF.
In the case of a member which is a company, the revocation
notice must be executed under its common seal or otherwise in
accordance with section 44 of the Companies Act 2006 or by
signature on its behalf by an officer or attorney whose power of
attorney or other authority should be included with the revocation
notice.
If you attempt to revoke your proxy appointment but the
revocation is received after the time specified in note 2 above
then, subject to the paragraph directly below, your proxy will
remain valid. Completion of a Form of Proxy will not preclude a
member from attending and voting in person. If you have appointed a
proxy and attend the meeting in person, your proxy appointment will
be automatically terminated.
If you submit more than one valid proxy appointment in respect
of the same Ordinary Shares, the appointment received last before
the latest time for receipt of proxies will take precedence.
Nominated Persons
9. If you are a person who has been nominated under section 146
of the Companies Act 2006 to enjoy information rights:
-- You may have a right under an agreement between you and the
member of the Company who has nominated you to have information
rights (Relevant Member) to be appointed or to have someone else
appointed as a proxy for the meeting.
-- If you either do not have such a right or if you have such a
right but do not wish to exercise it, you may have a right under an
agreement between you and the Relevant Member to give instructions
to the Relevant Member as to the exercise of voting rights.
-- Your main point of contact in terms of your investment in the
Company remains the Relevant Member (or, perhaps, your custodian or
broker) and you should continue to contact them (and not the
Company) regarding any changes or queries relating to your personal
details and your interest in the Company (including any
administrative matters). The only exception to this is where the
Company expressly requests a response from you.
If you are not a member of the Company but you have been
nominated by a member of the Company to enjoy information rights,
you do not have a right to appoint any proxies under the procedures
set out in the notes to the form of proxy.
Questions at the Meeting
10. Under section 319A of the Companies Act 2006, the Company
must answer any question you ask relating to the business being
dealt with at the meeting unless:
-- answering the question would interfere unduly with the
preparation for the meeting or involve the disclosure of
confidential information;
-- the answer has already been given on a website in the form of an answer to a question; or
-- it is undesirable in the interests of the Company or the good
order of the meeting that the question be answered.
Issued Shares and total voting rights
11. As at the date of this Notice, the total number of shares in
issue is 180,324,377 Ordinary Shares of 1p each. The total number
of Ordinary Shares with voting rights is 171,019,648. On a vote by
a show of hands, every holder of Ordinary Shares who (being an
individual) is present by a person, by proxy or (being a
corporation) is present by a duly authorised representative, not
being himself a member, shall have one vote. On a poll every holder
of Ordinary Shares who is present in person or by proxy shall have
one vote for every Ordinary Share held by him.
Communication
12. Except as provided above, members who have general queries
about the meeting should use the following means of communication
(no other methods of communication will be accepted):
-- calling Link Asset Services' shareholder helpline (lines are
open from 9.00 a.m. to 5.30 p.m. Monday to Friday, excluding public
holidays):
(i) From UK: 0871 664 0300 (calls cost 12p per minute plus network extras);
(ii) From Overseas: +44 371 664 0300 (calls from outside the UK
are charged at applicable international rates); or in writing to
Link Asset Services.
You may not use any electronic address provided either in this
notice of meeting or in any related documents (including the Form
of Proxy for this meeting) to communicate with the Company for any
purposes other than those expressly stated.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UOARRWAAAURA
(END) Dow Jones Newswires
November 23, 2018 02:00 ET (07:00 GMT)
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