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Continuing positive returns in Q222

Civitas Social Housing 15 November 2021 Update
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Civitas Social Housing

Continuing positive returns in Q222

Q222 NAV update

Real estate

15 November 2021

Price

92p

Market cap

£573m

Net debt (£m) as at 31 March 2021

357.1

Gross LTV at 31 March 2021 (gross debt as % of gross assets)

34.5%

Shares in issue

622.5m

Free float

99%

Code

CSH

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.6

(21.4)

(15.6)

Rel (local)

(0.8)

(22.6)

(28.2)

52-week high/low

121p

87p

Business description

Civitas Social Housing invests across the UK in care-based community housing and healthcare facilities, particularly specialised supported housing, for the benefit of working age adults with long-term care needs. Its investment objective is to provide an attractive level of income, with the potential for capital growth.

Next events

Q222 DPS paid

13 December 2021

Analyst

Martyn King

+44 (0)20 3077 5745

Civitas Social Housing is a research client of Edison Investment Research Limited

Civitas Social Housing REIT’s Q122 accounting total return of 1.4% builds on its record of consistently positive quarterly returns while generating strong, externally assessed social value. The shares have begun to recover from the effects of short selling since the board’s detailed response and confirmation of its confidence in the investment manager and company performance. We make no changes to forecasts and expect Civitas to meet its FY22 DPS target (a yield of 6.0%).

Year end

Net rental income (£m)

EPRA earnings* (£m)

EPRA EPS*
(p)

EPRA NTA/ share* (p)

DPS
(p)

P/NAV
(x)

Yield
(%)

03/20

45.9

28.8

4.6

107.9

5.30

0.85

5.8

03/21

47.8

30.6

4.9

108.4

5.40

0.85

5.9

03/22e

54.0

34.3

5.5

110.4

5.55

0.83

6.0

03/23e

56.6

36.7

6.0

112.7

5.68

0.82

6.2

Note: *EPRA earnings and NAV are fully diluted.

Focus on sustained performance

Civitas recently provided a detailed 37-page response to the open letter issued by short seller ShadowFall, the cause of recent share price weakness, and has made clear that it does not intend to respond further. The board has reiterated its confidence in the company and in its investment adviser, noting that the company's assets and revenues continue to perform in line with expectations, and has reaffirmed the FY22 DPS target of 5.55p per share. In this report we focus on Civitas’s financial and operational performance in relation to the broader sector concerns raised in the ShadowFall open letter, particularly the revived debate about the sustainability of the lease-based specialised supported housing (SSH) provider model.

Positive outcomes driving demand

In our July Outlook note we provided a detailed overview of Civitas’s strategy and the SSH market. The shortage of SSH is forecast to increase yet compared with the alternatives of residential care or hospitals, it improves lives in a cost-effective manner. This is why it is government policy to offer supported housing to more people and private capital is crucial in meeting this need. For those individuals receiving SSH, rents are funded by central government and paid, via the commissioning local authorities, directly to the approved providers (APs), which lease the properties from Civitas and manage them. In some cases, APs have struggled to keep pace with the rapid growth of the sector, attracting regulatory scrutiny. We believe this is aimed at delivering sector sustainability (by improving their governance, operational performance and financial strength). This should benefit the security of contracted rents and long-term growth of the sector.

Valuation: Highly attractive yield

Dividends are backed by stable income, uncorrelated with the wider economy, with good inflation-linked growth prospects. Civitas continues to target an aggregate FY22 DPS of 5.55p, which represents an attractive 6.0% yield. Meanwhile the shares trade at a c 15% discount to net asset value (NAV).

Further details

Following an article published in The Sunday Times on 12 September, short-seller ShadowFall published an open letter to the board of Civitas, which among other matters claimed that Civitas had failed to disclose a conflict of interest in certain property transactions, to the detriment of shareholders. The letter also raised concerns about the financial viability of the specialised social housing business model in general and certain Civitas registered provider lessees in particular.

From the start, the board of Civitas has strongly disputed many of the claims made in the open letter and on 11 October, in the form of a market update, issued a detailed 37-page response to the open letter and other questions raised by its shareholders. The Civitas report can be found at www.civitassocialhousing.com/media/1955/csh-market-update-11-october-2021.pdf.

It is not our aim in this report to explore the detailed contents of both the open letter and Civitas response. In a further release from the company on 15 October 2021 the board made clear that it does not intend to respond further. However, it took the opportunity to reiterate its confidence in the company and in its investment adviser and to note that the company's assets and revenues continue to perform in line with expectations. The dividend target for FY22 of 5.55p per share was also confirmed.

In this report we focus on Civitas’s financial and operational performance in relation to the broader sector concerns raised in the ShadowFall open latter. These sector issues are covered in detail in our July Outlook note. They primarily relate to shortcomings identified by the Regulator of Social Housing (RSH)1 in relation to the governance structures, operational efficiency and financial strength of some specialist registered providers. We believe it is the aim of the RSH to work with providers and other stakeholders, including landlords such as Civitas, to improve standards and safeguard the sustainability of the sector.

  Civitas is not regulated by the RSH but its registered provider lessees are.

Consistent, income-driven returns

Civitas has consistently delivered positive total returns3F2 on both an annual and quarterly basis since its initial public offering (IPO) in November 2016. Dividends have been the main component of returns and have increased each year. Despite the pandemic, operational and financial resilience has been maintained. Rents have continued to be received in line with expectations, quarterly dividend payments have been uninterrupted, and there has been no discernible impact on portfolio valuations. This strong performance reflects the vital role of portfolio properties in the provision of an essential service; secured by long-term lease and care arrangements; providing good visibility of income with little direct correlation to the wider property market or economy; and capable of delivering stable inflation-indexed dividend growth. The impact of COVID-19 infection has been low within homes, reflecting the relatively low average age of residents (an average of 32 years), less likely to suffer from the types of underlying health conditions categorised as ‘high risk’ by the NHS, and the configuration of much of the modern housing stock, around self-contained apartments and small housing clusters, which supports infection control and management. Further insulating the approved provider lessees from the pandemic impact, the care provider generally takes responsibility for voids (unoccupied units) and pays for all of the personal healthcare equipment required by residents, for which it is reimbursed by local authorities.

  Change in IFRS NAV per share during the period with dividends paid added back (but not assuming reinvestment of dividends).

From IPO in November 2016 to 30 September 2021 (end-Q222) Civitas has generated an aggregate NAV total return of 32.6% or an annual average 6.0%. Dividends paid represent two-thirds of the total return in the period.

Exhibit 1: Total return record

Annual returns

Quarterly returns

From IPO to end-Q222

FY18

FY19

FY20

FY21

Q122

Q222

Opening NAV per share (p)

98.0

105.5

107.1

107.9

108.3

108.4

98.0

Closing NAV per share (p)

105.5

107.1

107.9

108.3

108.4

108.5

108.5

Dividends paid (p)

3.0

5.0

5.3

5.4

1.4

1.4

21.4

NAV total return

7.9%

6.2%

5.7%

5.4%

1.4%

1.3%

32.6%

Annualised total return

6.0%

Source: Civitas Social Housing data, Edison Investment Research

As Civitas has grown its portfolio since IPO, dividends have run ahead of earnings and cash flow, but as scale has grown are now fully covered by earnings on a run rate basis. We forecast full cover on a reported basis in FY22, although this may be delayed until FY23 if capital is further deployed in share repurchases rather than acquisitions.

Civitas’s investment objective is to provide an attractive level of income, with the potential for capital growth, and dividends have been set in this context. It is worth noting that had lower dividends been declared, there would be no impact on the accounting total returns shown above, with an offsetting movement in NAV (and cash flow).

Exhibit 2: Dividend cover

Source: Civitas Social Housing data, Edison Investment Research. Note: *Total EPRA earnings as a percent of total dividends paid in the period.

Lease incentives have reduced cash flow in recent years, but Civitas indicates that the lower underlying level in FY21 is more representative of the likely ongoing cost. In FY21, for accounting purposes, a £10m follow-on payment for an acquisition was treated as a lease incentive. In all other respects it was in fact a property acquisition with rental income attached. Excluding this, FY21 lease incentive payments were £1.2m and over the past three years have amounted to £11.2m. The reduction in lease incentive payments will better align cash cover and earnings cover of dividends. The payments reflect:

Lease transfers of £4.8m. This reflects rebalancing of the portfolio where leases are transferred from one lessee to another, better placed to manage the asset. Payments have been by way of exit fees to the initial lessee and to the receiving lessee to cover onboarding and other costs.

Lease extensions of £4.4m. Lease extensions enhance the visibility and duration of income and have produced a £7.75m uplift in property valuations.

Future proofing/repurposing of £2.0m. Where, in a small number of cases, Civitas works with the lessee and care provider to change the designated use of a property to better meet the needs that now exist within a local authority area.

Diversified portfolio enhances income security

The Civitas portfolio provides homes to almost 4,400 vulnerable, mostly young, adults. It is well diversified, comprising 648 properties, let to 17 approved provider lessees (Windrush Housing Association became the 17th tenant earlier in FY22), working with 178 local authorities and 119 care providers (as at 30 September 2021), and is also widely spread by geography. Exhibit 3 shows the breakdown of rent roll by lessee as at 30 June 2021. Since 31 March 2021 Civitas has reassigned a number of leases, most significantly from Auckland. Reassignments are a recurring feature and generally reflect Civitas's continuing policy of driving efficiencies within the portfolio and where appropriate, seeking diversification. In so doing it enables Civitas to extend further its stated aim to work with a wider range of counterparties including established charities and community benefit societies. The most recent disclosure puts the Auckland share of rent roll at 16.9% (13 August 2021) and Falcon at 19.9% (12 November 2021).

Exhibit 3: Diversified by lessee (share of annualised rent roll as at 30 June 2021)

Exhibit 4: Diversified by region (share of market value as at 30 September 2021)

Source: Civitas Social Housing REIT. Note: *Others includes: Chysalis 3.5%; New Walk 2.8%; My Space 1.1%; IKE 1.1%; Hilldale 0.9%; Windrush 0.9%; Blue Square 0.1%.

Source: Civitas Social Housing REIT. Note:

Exhibit 3: Diversified by lessee (share of annualised rent roll as at 30 June 2021)

Source: Civitas Social Housing REIT. Note: *Others includes: Chysalis 3.5%; New Walk 2.8%; My Space 1.1%; IKE 1.1%; Hilldale 0.9%; Windrush 0.9%; Blue Square 0.1%.

Exhibit 4: Diversified by region (share of market value as at 30 September 2021)

Source: Civitas Social Housing REIT. Note:

Annualised rent roll was £50.4m at end-FY21 and will have increased since with CPI-linked rent indexation and acquisition activity. Since end-FY21, 29 properties have been acquired for an aggregate £22.0m (before costs) as Civitas begins to deploy the proceeds from the fully drawn £85m M&G seven-year fixed rate debt facility agreed in February 2021. Subsequently, in March 2021, Fitch Ratings assigned an investment grade rating to the company.3 On an IFRS basis and on a portfolio basis, the net initial yields (NIY) reflected in the end-Q222 portfolio valuation of 5.27% and 5.10% respectively have changed little over the past year.

  Fitch assigned an Investment Grade High Credit Quality rating of “A” (senior secured) and a Long-Term Issuer Default rating of A- with a Stable Outlook.

We believe that regulatory engagement will enhance sector sustainability

The RSH regulates registered providers of social housing (RPs) to promote a viable, efficient, and well-governed social housing sector able to deliver homes that meet a range of needs. Civitas’s housing association lessees are regulated by the RSH but Civitas is not, although it interacts with the RSH on a regular basis. Regulation has played an important role in providing long-term stability to the social housing sector, and while individual registered providers have from time to time faced financial difficulties, there have been no material losses suffered by funders due to RP default.

Over the last few years private capital has played an increasingly important role in supporting the much-needed growth and sustainable development of the SSH sector, filling the gap created by the limited availability for all forms of social housing. The capital has been provided by a range of funds and other investors in SSH assets, which are then made available to housing associations on long leases, typically indexed to CPI inflation. Given its greater complexity and granularity, and the continuing strong demand for general needs social housing, SSH has not generally been the focus of the longer established RPs and sector growth has been led by newer specialist RPs that have been established in the past 10 years or so. RSH involvement with the smaller specialist RPs stepped up after the financial failure of First Priority Housing Association in 2018. Its leases, including those with Civitas, were reassigned on similar terms to other providers within a few weeks, with no material loss incurred by capital providers.4 The RSH subsequently reviewed the SSH sector and identified shortcomings at a number of other RPs, primarily in relation to governance structures, operational efficiency and financial strength. We believe these shortcomings are mainly a result of the rapid growth of the sector as it has strived to meet the growing need for SSH homes. The RSH has expressed a particular concern that providers reliant on lease-based models (ie entering into long-term commitments to pay rents at an increasing level indexed to inflation to support growth) should be able to present robust and prudent long-term business plans. These should include identifying the actions required to enable them to meet their lease obligations and maintain financial viability should there be a significant change in the operation of government housing benefits.

  First Priority leases, including those with Civitas, were reassigned to other RPs within a few weeks with minimal impact on capital providers. Civitas was owed c £0.5m by First Priority, of which £421k was written off. When reassigning the leases to Falcon, Civitas was also granted an option to extend the lease term to 40 years, which, when exercised in the first half of the year, triggered lease incentive payments of c £4.0m. The lease extension had a positive impact on the property valuation.

Across the sector, several RPs have been issued with regulatory notices and judgements.5 The shortcomings that the RSH has identified in some providers in part reflect the strong growth exhibited by the sector in recent years and the challenge this has presented for the development of management and governance structures, as well as capital resources, to keep pace. Solutions to many of the concerns raised by the RSH are clearly identifiable and the shortcomings are in no way existential. Civitas notes that with its support, the organisations affected by regulatory judgements and notices have shown tangible signs of improvement. Given the long-term nature of the sector, with long leases, reflecting the long time over which care is likely to be needed, satisfying the RSH’s need for long-term planning is perhaps more challenging. The first point to make clear is that we see no prospect of a significant change in government policy on housing benefits, based on the chronic and increasing excess demand for SSH and the wide acceptance that it provides improved outcomes at a lower cost than alternative provision. That said, the providers may be able to mitigate this risk by strengthening their balance sheets, including increasing accumulated capital surpluses and building up self-owned property assets. Additionally, Civitas has taken steps to address regulatory concerns about the long-term risk planning of providers by introducing caps and collars on rent indexation (typically of between 1% and 4%) and ‘force majeure’ clauses, setting out appropriate steps in the unlikely event of a formal change in government policy and funding.

  Regulatory judgements represent the regulator’s view on a provider’s compliance with governance and the viability requirements. For providers with less than 1,000 units the RSH may publish a regulatory notice if there is evidence that a provider is in breach of regulatory requirements.

More generally, Civitas welcomes this ongoing regulatory review, bringing as it does higher levels of accountability and transparency. As one of the leading private sector investors in the supported housing sector, working with some of the fastest-growing providers, 10 Civitas lessees (of a total of 17) are subject to regulatory judgements and notices, accounting for a significant percentage of rent roll6. It is important to stress that there has been no impact on rent collection nor any negative impact on the external valuations of the properties owned by Civitas as a result of these judgements and notices. We expect this to remain the case. In our view, regulatory interventions in the SSH segment of social housing are primarily aimed at identifying, assessing and making clear the risks, so that these may be adequately managed, to safeguard this financial resilience and maintain the operational standards of the sector. The social housing sector has traditionally had a low financial risk profile, in part due to the ongoing monitoring presence of the regulator and the fact that much of the rent is funded by central government through housing benefit and latterly universal credit, directed towards some of the most vulnerable in society. There may well be cases where some approved providers across the sector are unable to satisfy the RSH, which over time may lead to concentration among the providers (perhaps through mergers and other amalgamations), leading to a smaller number of stronger providers and enhancing covenant strength for landlords. As has been demonstrated, quality properties, in the right locations, adequately adapted and supporting an appropriate level of care, are attractive to alternative providers in their efforts to meet the strong and growing need for accommodation.

  Falcon (19.9%), Auckland (16.9%), BeST (12.1%), Encircle (6.0%), Hilldale (1.0%), Inclusion (8.8%), MySpace (1.2%), Pivotal (3.9%), Trinity (5.4%), and Westmoreland (6.2%).

Actively managing the discount to NAV

Since IPO in November 2016 the average discount to net asset value has been around 3% (Exhibit 5) but this includes three periods of periods of weakness. The first of these occurred from late-2018 to mid-2019, reflecting initial investor caution in response to increased regulatory intervention in the sector. As the issues became better understood, the share price began to move higher. Widespread COVID-19 fears at the beginning of the lockdown again created weakness, which also proved temporary. An appreciation of the critical role that the sector performs, the factors that mitigate the operational risks of COVID-19 and the robustness of rent payments have contributed to a quick recovery in the share price. There are significant similarities between the current share price weakness and the position in late 2018. While the short seller raised specific questions in relation to Civitas, to which the company has responded in detail, it has also revived debate about the sustainability of the lease-based provider model and this has been reflected across the sector. The recent de-rating has been sharp but less deep than the earlier bouts of weakness and the shares have begun to respond positively to the company’s active engagement with shareholders and supportive share repurchases, accretive to NAV.

Exhibit 5: Civitas price to net asset value

Source: Civitas NAV data, Refinitiv pries as at 9 November 2021

Share repurchases

In September 2021, the board recommenced share repurchases to manage the share price discount to NAV and underline its confidence in the company’s prospects and its firm belief that the issues raised by the short sellers were incorrect and misleading. Similar action was taken in the third quarter of 2019 when 85,000 shares were repurchased at an average c 85p (a discount to the 107.2p NAV per share at the time) and subsequently re-issued at an average price of c 109p.

Since 21 September 2021 Civitas has repurchased c 5.4m shares at an average c 90p, which are held in treasury. The repurchases were c 0.06p accretive to Q222 NAV per share and although repurchases have recently trailed off as the shares have begun to recover, the Q322 accretion should be greater (we estimate c 0.1p per share).

Investor engagement

Civitas and its investment adviser Civitas Asset Management (CIM) have been active in engaging with existing and new shareholders since it published its detailed market update in October. As a result, it has gained a number of new and significant institutional shareholders, including several leading European institutions.

To provide further insight into the company's strategy and the social housing sector, Civitas plans to hold a capital markets day in the first quarter of 2022. A similar event held in May 2019 provided considerable detail on the workings of the specialised social housing market and marked the commencement of a strong re-rating in the shares. The presentation is available on the Civitas website, including an audio recording. (www.civitassocialhousing.com/media/1412/cmd-presentation-13-may-final-1.pdf).

Unchanged forecasts and valuation update

We have made no change to our forecasts other than to factor in the share repurchases and have not at this stage assumed any impact on the quantum and timing of capital deployment. Our forecasts assume an additional £50m of capital commitment as existing capital is deployed and we will review these with the interim results in a few weeks.

Despite a strong record of low volatility and consistently positive accounting returns, based on the targeted 5.55p aggregate FY22 DPS, the prospective yield is 6.0% while the shares are trading at a 15% discount to end-Q222 NAV per share.

In Exhibit 6 we show a share price performance and valuation comparison with a group of companies that we would consider to be the closest peers to Civitas, investing in housing and healthcare properties. The table shows the dividend yield based on trailing 12-month DPS declared and on the current financial DPS targeted by each company. We also show P/NAV based on the last reported EPRA NAV/NTA. The Civitas yield is well above the peer average and P/NAV well below. Performance during the pandemic has been robust, with rents collected in full as expected and with no impact on valuations. Following the recent weakness in the share price the Civitas valuation indicates significant potential while also delivering a material social benefit.

Exhibit 6: Peer valuation and performance comparison

Price

Market cap.

P/NAV*

Yield**

Share price performance

(p)

(£m)

(x)

(%)

1 month

3 months

12 months

From 12M high

Assura

70

1,878

1.23

4.1

-4%

-10%

-8%

-13%

Home REIT

116

648

1.10

2.2

3%

1%

N/A

-1%

Impact Healthcare

119

380

1.07

5.4

1%

1%

14%

-2%

Primary Health Properties

151

2,134

1.31

4.1

-2%

-10%

1%

-11%

Residential secure Income

98

168

0.93

5.1

0%

-8%

8%

-13%

Triple Point Social Housing

96

387

0.90

5.4

-4%

-14%

-11%

-16%

Target Healthcare

118

606

1.06

5.7

2%

-4%

4%

-6%

Average

1.09

4.6

-1%

-6%

1%

-9%

Civitas Social Housing

92

573

0.85

6.0

5%

-21%

-15%

-24%

UK property sector index

1,925

3%

-1%

21%

-3%

UK equity market index

4,195

2%

1%

18%

-1%

Source: Company data, Refinitiv prices as at 15 November 2021. Note: *Based on last reported EPRA NAV. **Based on trailing 12-month DPS declared. ***Based on current fiscal year company targeted DPS.

Exhibit 7: Financial summary

Period ending 31 March (£m)

2018

2019

2020

2021

2022e

2023e

INCOME STATEMENT

Net rental income

18.6

35.7

45.9

47.8

54.0

56.6

Directors' remuneration

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

Investment advisory fees

(5.8)

(6.5)

(6.2)

(6.1)

(6.2)

(6.3)

General & administrative expenses

(2.9)

(3.0)

(3.5)

(3.2)

(3.2)

(3.3)

Total expenses

(8.9)

(9.6)

(9.9)

(9.5)

(9.6)

(9.8)

EPRA cost ratio

47.8%

27.0%

21.5%

20.3%

17.7%

17.3%

Operating profit/(loss) before revaluation of properties

9.7

26.1

36.0

38.3

44.4

46.8

Change in fair value of investment properties

30.6

3.7

9.4

5.5

8.6

14.8

Operating profit/(loss)

40.3

29.7

45.4

43.9

53.0

61.6

Net finance expense

(0.6)

(3.5)

(7.2)

(7.7)

(10.1)

(10.1)

Change in fair value of interest rate derivatives

0.000

0.000

(0.5)

(0.1)

0.0

0.0

C share amortisation

(2.8)

(6.4)

0.0

0.0

0.0

0.0

PBT/Net profit

36.9

19.9

37.7

36.1

42.9

51.5

Adjusted for:

Change in fair value of investment properties

(30.6)

(3.7)

(9.4)

(5.5)

(8.6)

(14.8)

Fair value change in interest rate derivatives

0.0

0.0

0.5

0.1

0.0

0.0

C share amortisation

2.8

6.4

0.0

0.0

0.0

0.0

EPRA earnings

9.1

22.6

28.8

30.6

34.3

36.7

Average number of shares (m)

350.0

425.4

622.1

621.7

620.4

616.9

Average diluted shares (m)

633.1

622.5

622.1

621.7

620.4

616.9

Basic IFRS EPS (p)

10.6

4.7

6.1

5.8

6.9

8.4

Diluted EPRA EPS (p)

1.4

3.6

4.6

4.9

5.5

6.0

DPS declared (p)

4.25

5.08

5.30

5.40

5.55

5.68

DPS paid (p)

3.00

5.00

5.30

5.38

5.51

5.65

Dividend cover (x)

0.87

0.91

0.87

0.92

1.00

1.05

BALANCE SHEET

Investment properties

516.2

820.1

868.0

893.7

980.4

999.7

Other non-current assets

0.0

6.8

10.8

21.9

21.9

21.8

Total non-current assets

516.2

826.9

878.7

915.6

1,002.3

1,021.5

Cash & equivalents

249.6

54.3

58.4

107.1

29.9

25.8

Other current assets

3.3

5.7

10.8

12.8

13.9

14.2

Total current assets

252.9

60.1

69.2

119.9

43.8

40.0

Bank loan & borrowings

0.0

0.0

(59.7)

(59.9)

0.0

0.0

Other current liabilities

(308.9)

(15.3)

(7.7)

(9.3)

(11.1)

(11.4)

Total current liabilities

(308.9)

(15.3)

(67.5)

(69.3)

(11.1)

(11.4)

Bank loan & borrowings

(90.8)

(205.2)

(209.4)

(292.2)

(353.6)

(355.1)

Other non-current liabilities

0.0

0.0

(0.5)

(0.5)

(0.5)

(0.5)

Total non-current liabilities

(90.8)

(205.2)

(209.9)

(292.7)

(354.2)

(355.7)

Net assets

369.4

666.5

670.6

673.5

680.8

694.5

Adjust for:

C shares

298.8

0.0

0.0

0.0

0.0

0.0

Fair value of interest rate derivatives

0.0

0.0

0.5

0.5

0.5

0.5

Diluted EPRA NTA

668.1

666.5

671.0

674.0

681.3

695.1

Period-end basic number of shares (m)

350.0

622.5

621.6

621.9

616.9

616.9

Period end diluted number of shares (m)

633.1

622.5

621.6

621.9

616.9

616.9

Basic IFRS NAV per share (p)

105.5

107.1

107.9

108.3

110.4

112.6

Diluted EPRA NTA per share (p)

105.5

107.1

107.9

108.4

110.4

112.7

CASH FLOW

Net cash flow from operating activity

8.1

23.3

32.9

26.1

45.2

46.8

Cash flow from investing activity

(483.9)

(302.6)

(61.9)

(6.2)

(78.2)

(4.5)

Net proceeds from equity issuance

343.0

(0.1)

0.0

0.0

0.0

0.0

Net proceeds from C share issuance

296.0

0.0

0.0

0.0

0.0

0.0

Loan interest paid

(0.4)

(3.0)

(5.8)

(6.0)

(8.6)

(8.6)

Bank borrowings drawn/(repaid)

92.5

116.0

64.1

84.6

0.0

0.0

Share repurchase/reissue

0.0

0.0

(0.7)

0.0

(1.4)

(3.0)

Dividends paid

(10.1)

(27.6)

(32.9)

(33.3)

(34.2)

(34.8)

Other cash flow from financing activity

(2.2)

(5.3)

(7.9)

(8.8)

(10.0)

(11.5)

Cash flow from financing activity

719.2

83.0

23.3

42.4

(44.2)

(46.4)

Change in cash

243.3

(196.2)

(5.7)

62.4

(77.2)

(4.1)

Opening cash

0.0

243.3

47.1

41.4

103.8

26.6

Closing cash (excluding restricted cash)

243.3

47.1

41.4

103.8

26.6

22.5

Restricted cash

6.3

7.2

16.9

3.3

3.3

3.3

Cash as per balance sheet

249.6

54.3

58.4

107.1

29.9

25.8

Debt as per balance sheet

(90.8)

(205.2)

(269.2)

(352.1)

(353.6)

(355.1)

Unamortised loan arrangement costs

(1.6)

(3.3)

(3.3)

(4.9)

(3.4)

(1.9)

Total debt

(92.5)

(208.4)

(272.5)

(357.1)

(357.1)

(357.1)

Net (debt)/cash excluding restricted cash

150.9

(161.3)

(231.1)

(253.2)

(330.4)

(334.5)

Gross LTV (gross debt/gross assets)

12.0%

23.5%

28.7%

34.5%

34.1%

33.6%

Source: Civitas Social Housing REIT historical data, Edison Investment Research forecasts


General disclaimer and copyright

This report has been commissioned by Civitas Social Housing and prepared and issued by Edison, in consideration of a fee payable by Civitas Social Housing. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

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United States of America

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Civitas Social Housing and prepared and issued by Edison, in consideration of a fee payable by Civitas Social Housing. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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