TIDMRESI
RNS Number : 6416V
Residential Secure Income PLC
05 December 2023
5 December 2023
Residential Secure Income plc
("ReSI" or the "Company")
Full Year Results to 30 September 2023
Residential Secure Income plc (ReSI plc) (LSE: RESI), which
invests in independent retirement living and shared ownership to
deliver secure, inflation-linked returns, is pleased to announce
its financial results for the year ended 30 September 2023.
Commenting on ReSI's results, Robert Whiteman CBE, Chairman of
ReSI plc, said:
"We announced a review of non-core assets in our interim
results, with a plan to reduce financing costs. Following this
review, our local authority portfolio is now under offer for sale
and in solicitors' hands. Completion will enable full repayment of
our existing floating rate debt. This will leave ReSI with two
portfolios focused on strong market segments - independent
retirement living and shared ownership - supported by very
long-term debt with an average drawn maturity of 23 years.
"We also announced in the interim results that in light of the
higher interest rate environment, cost inflation in retirement and
fund opex increases we would look to reset the dividend. Subsequent
progress on sale of the local authority portfolio leading to the
expected repayment of floating rate debt gives us the confidence to
reset the dividend to a fully covered and progressive 4.12p a
share.
"We are very conscious of listed sector discounts widening
significantly, and ReSI is not immune to factors also affecting our
peers. We will continue to review options to reverse this
situation. To further align the investment manager with
shareholders, and show its confidence in reducing the discount,
Gresham House has agreed to reduce its management fee to be more
closely aligned to the discount."
Ben Fry, Managing Director of Housing at Gresham House
added:
"ReSI continues to see enormous demand for affordable homes,
with record occupancy, rent collection and like-for-like rent
growth this year which has all been achieved whilst protecting
resident affordability through rent caps. There is a particular
ongoing shortage of fit-for-purpose homes for independent living
through retirement as well as a lack of routes to affordable
homeownership for young families and key workers. ReSI is well
placed to meet strong demand from both these housing segments.
"Although we are not immune to the decline in investment
valuations seen sector-wide, a sale of the local authority
portfolio would leave the balance sheet exposed to only long-term,
low interest rate debt, putting ReSI in a better position to
deliver long-term earnings growth relative to other REITs with
shorter debt maturity profiles.
"As ever, we continue to focus on driving value for
shareholders, including reviewing further disposals if they support
maximising value for investors, and delivering earnings enhancement
through improving the underlying operational performance of our
retirement portfolio."
Key financial and operational metrics
Change
Income 2023 2022 in Year
------------------------------- --------------- -------------- ----------
Like-for-like rental reviews 6.1% 4.5% +1.6%
Rent collection 99% 99% -
Gross rental income GBP27.9mn GBP25.7mn +8.6%
Net rental income GBP18.1mn GBP17.0mn +6.4%
Adjusted EPRA Earnings1,2 GBP8.7mn GBP9.0mn -3.3%
Adjusted EPRA EPS1,2 4.7p 5.0p -5.7%
Dividend paid per share
- paid 5.16p 5.16p -
Dividend cover3 91% 97% -6.0%
Changes in fair value
of investment properties GBP(38.9)mn GBP3.2mn -1,317%
Capital 30-Sept-23 30-Sept 22 Change in
Period
------------------------------- --------------- ------------- --------------
IFRS net assets GBP168.7mn GBP201.4mn -16.2%
IFRS NAV per share 91.1p 108.8p -16.2%
IFRS Portfolio Valuation4 GBP345.1mn GBP374.8mn -7.9%
EPRA NTA per share1 81.8p 106.1p -22.9%
EPRA NTA Total Return1 (18.1)% +3.3% -21.3%
Loan to Value 50% 47% 3%
Key financial metrics
-- 6.1% like-for-like rent growth
-- EPRA adjusted earnings (1) of GBP8.7 million (FY22: GBP9.0
million) with strong rent growth offset by higher retirement
portfolio energy costs, increased floating rate debt costs and
higher fund opex
-- EPRA Net Tangible Assets ("NTA") total return of (18.1)%
(FY22: 3.3%) to give 81.8p per share NTA
-- Valuations down 10% like-for-like with 80bps outwards yield
shift, reflecting higher gilt yields
-- LTV of 50% (FY22: 47%) supported by 21 year average debt maturity
-- Total dividends paid of 5.16p per share (FY22: 5.16p) with 91% dividend cover (FY22: 97%)
-- IFRS NAV benefited from a reduction in the valuation of the
USS debt adding GBP12.3 million / 6.6p to IFRS total return (not
included in EPRA NTA) caused by the c.1.2% increase in gilt yields
over the financial year
-- Management fee reduction to more closely align with
shareholder interests: from 1(st) Jan 2024, fee will be based on
average of NAV and share price, instead of solely based on NAV
(6)
Portfolio and operational highlights
-- Diverse portfolio of 3,295 homes worth GBP345 million
o GBP78 million reversionary surplus of vacant possession value
compared to fair value (22% uplift)
-- Portfolio focused on direct leases with pensioners and part home owners
-- Rent collection of over 99% for year (FY22 99%)
-- Shared ownership portfolio now full occupied with record 96%
retirement occupancy at period end
-- Shared ownership net income growth of 23%, driven by rent growth, leasing and acquisitions
-- Retirement net income growth curtailed to 1% due to 44%
increase in communal areas energy costs
Continuing to deliver Social and Environmental impact
-- 98% of directly rented properties now EPC-rated C or higher (FY 22: 96%)
-- Rent caps voluntarily implemented to balance returns with affordability for our residents
o Shared ownership rent increases voluntarily capped at 7%
increase in line with wage inflation
o Retirees benefiting from rent increase cap of 6%
o Further rent cap and rent freeze support provided to residents
most in need
-- 89% satisfaction levels with our in-house retirement property management team(5)
Advancing sale of non-core assets announced in June
-- Local Authority Portfolio now under offer and expected to complete in early 2024
-- Will allow for repayment of all floating rate debt, leaving
ReSI with only long-term drawn debt with 23 year weighted average
maturity and largest loan of GBP94 million fixed at 3.5% until
2043
-- Rising interest rates mean positive contribution from Local
Authority portfolio less floating debt has reduced from 0.9p in
FY22 to expected 0.2p in FY24
Portfolio outlook
-- Dividend target rebased to 4.12p per share for the year ended
30 September 2024, with focus on growth of covered dividend and
portfolio value
-- Continuing to review options for further disposals which
support maximising shareholder value
-- Investing in expanded Asset Management team led by Chris
Carter Keall to drive retirement portfolio operational improvements
including rationalising portfolio footprint, driving rents and
reducing leakage
-- Inflation-linked rental growth outlook underpinned by
continuing lack of supply and increasing demand
Market opportunity
-- Acute need for more affordable UK homes, estimated at GBP34billion(7) annually
-- Particular shortage of independent later living accommodation
for growing elderly population and accessible homeownership
options
-- Significant opportunities to scale platforms and drive returns:
o ReSI is the UK's largest provider of private independent
retirement rental homes
o Significant tenanted shared ownership opportunities driven by
housing associations need to invest in their existing stock and
development programmes
Annual results and investor webinar
ReSI plc will host an online webinar and Q&A session to
discuss the results this morning, 5 December 2023, at 10:30am
(GMT). Registration is available at : register here .
The accompanying presentation will be made available shortly
after the webinar on the Gresham House website .
A copy of the pdf Annual Report is available on the Company's
website at
https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/
where further information on the Company can also be found. The
Annual Report has also been submitted to the National Storage
Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
Notes:
[1]. Alternative performance measures
2. EPRA adjusted earnings is EPRA earnings adjusted for income
and costs which are not recurring and is equivalent to IFRS profit
after tax before one-offs and valuation adjustments.
3 . Dividend cover measured as Adjusted EPRA earnings per share
divided by dividend per share
4 . Note 15 of the 2023 Annual Report and Accounts
5 . Source: ReSI 2023 retirement Customer Survey
6 . To further align itself with shareholders and demonstrate
its confidence in reducing the current share price discount to Net
Asset Value ("NAV"), the Fund Manager has offered and agreed with
the Board to align its management fee more closely to the share
price. From 1st Jan 2024, the management fee will be calculated by
reference to the average of ReSI plc's market capitalisation and
NAV for the relevant quarter, rather than be applied to the
quarterly NAV only as at present. For example, based on a current
discount of around 30% across a quarter, this would result in a fee
reduction of 15% for the relevant quarter. The existing fee
percentages will apply to the average of Market Capitalisation and
NAV (i.e. at the same basis points as currently applied to the
quarterly NAV). Should the amount be greater than the prevailing
NAV for the quarter in question, the fee will be capped at the
relevant percentage of NAV, meaning that no fee increase would
result from ReSI plc's shares trading at a premium to NAV over the
quarter. "Market Capitalisation" for these purposes means the
average over the previous quarter of the mid-market price for an
ordinary share in the Company ("Ordinary Share"), as derived from
closing mid-market price published in the Daily Official List of
the London Stock Exchange for each trading day Business Day in the
relevant quarter, multiplied by the number of Ordinary Shares in
issue on the last Business Day of the relevant quarter, excluding
any Ordinary Shares held by the Company in treasury for all or such
part of the quarter in question. The NAV for the relevant quarter
shall continue to be calculated, and the management fee payable, in
the current manner.
7 . British Property Federation, and Legal & General,
2022
For further information, please contact:
Gresham House Real Estate
Ben Fry
Sandeep Patel +44 (0) 20 7382 0900
Peel Hunt LLP
Luke Simpson
Huw Jeremy +44 (0) 20 7418 8900
KL Communications gh@kl-communications.com
Charles Gorman +44 (0) 20 3995 6673
Charlotte Francis
Annual Report & Accounts 2023
Residential Secure Income plc
30 September 2023
Strategy and performance
Purpose
Residential Secure Income plc (ReSI or the Company) (LSE: RESI)
is a real estate investment trust (REIT) focused on delivering
secure, inflation-linked returns in two sub-sectors in UK
residential housing; independent retirement rentals and shared
ownership, which are underpinned by an ageing demographic and
untapped, strong demand for affordable homes.
Our purpose is to deliver affordable, high-quality, safe homes
with great customer service and long-term stability of tenure for
residents. We achieve this through meeting demand from housing
developers (housing associations, local authorities and private
developers) for long-term investment partners to accelerate the
development of socially and economically beneficial affordable
housing.
ReSI's subsidiary, ReSI Housing Limited (ReSI Housing), is
registered as a for-profit Registered Provider of social housing,
and so provides a unique proposition to its housing developer
partners, being a long-term private sector landlord within the
social housing regulatory environment. As a Registered Provider,
ReSI Housing can acquire affordable housing subject to s106
planning restrictions and housing funded by government grant.
` 1
Strategic report
Investment case
Why ReSI?
ReSI delivers 97% inflation-linked income, generated from
affordable and secure rents and supported by strong market drivers
in shared ownership housing and independent retirement living.
Secure long-term inflation-linked income
Dividends paid quarterly
ReSI's business model is:
Supported by Creating Executed by
Strong market drivers Measurable impact An expert manager
Ageing population, declining Providing affordable c.60-person housing
home affordability, high-quality, energy team with over 20-year
supportive government efficient homes for track record in UK housing
policy life, and addressing
elderly loneliness
ReSI's income is:
Diverse Asset-backed Affordable
* 3,295 households diversified across ages and stages * Underpinned by c.GBP423mn home value with 22 * Low retirement rents (in line with Local Housing
of life % uplift Allowance) paid from pensions and welfare
from reversionary surplus
* c.GBP15mn government grant supports subsidised r
* Subsidised shared ownership rents secured by ents
homebuyers' stake for shared ownership
Portfolio
We invest in UK affordable homes to deliver secure,
inflation-linked income
3,295 GBP345mn 935
Homes Value of investment Unique UK property locations
property
----------------------------- ------------------------------
30 September 2022: 3,284 30 September 2022: GBP375mn 30 September 2022: 926
See note 15 on page
119
----------------------------- ------------------------------
GBP18.0mn 5.2% 2,628
Annualised net rental Annualised net rental Counterparties
income yield*
---------------------------- --------------------------
Year to 30 September 30 September 2022: 4.4% 30 September 2022: 2,608
2022: GBP16.5mn See note 10 Supplementary
See note 10 Supplementary Financial Information
Financial Information on page 144
on page 144
---------------------------- --------------------------
* Alternative performance measure
Portfolio split by region Number of properties
============================ ======================
East Midlands 74
East of England 840
Greater London 469
North East 19
North West 259
Scotland 5
South East 799
South West 593
Wales 53
West Midlands 91
Yorkshire and The Humber 93
Total 3,295
Portfolio split by valuation
Independent Retirement
Rentals GBP202mn 58%
Shared Ownership GBP123mn 36%
----------- ------
Local Authority GBP20mn 6%
----------- ------
Total GBP345mn 100%
----------- ------
Our portfolio focus
Residential Secure Income plc ( ReSI) has diversified, secure, inflation-linked
income streams from residential sub-sectors with strong supply and
demand imbalances and supportive property fundamentals.
Independent Retirement Rental Shared Ownership Housing
Housing (GBP123mn GAV/ 766 homes
(GBP202mn GAV/ 2,240 homes / 36% of portfolio)
/ 58% of
portfolio)
Driver
* Booming and increasingly lonely older population * Huge untapped demand for affordable homeownership
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Summary
* Let to elderly residents with affordable rents and * Homebuyers acquire, from ReSI, a share in a
assured tenancies residential property and rent the remainder
* Provides fit-for-purpose homes for retired people, * Helps house buyers acquire homes they would otherwise
allowing them to maintain their independence without be unable to buy
care provision
* Capital grant funding from government drives a c.30%
living-cost discount compared to market level rents
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Rent growth
* Increase with RPI each year, generally capped at 6% * Increase contractually by RPI+ 0.5% each year
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Secure income
* Secure rental income paid from pensions and welfare * Subsidised, below-market rents
* Homebuyer equity stake
--------------- --------------------------------------------------------------- -------------------------------------------------------------
ReSI
origination * Scale: UK's largest private independent retirement * ReSI Housing: a for-profit Registered Provider of
advantages rentals business Social Housing
* Specialist in-house 40-person team with over 20-year * Investment Partner of Homes England and the Greater
track record London Authority for delivery of new affordable
housing
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Average
* c.GBP325,000 per home(6)
vacant * c.GBP110,000 per home
possession
value
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Net yield
* 3.4%(5)
* 5.5%(5)
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Average debt
coupon * 3.5% * 1.1% with principal increasing with RPI + 0.5% (with
a 0.5% floor and 5.5% cap) (4)
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Levered yield
* 6.1%(5)(7)
* 7.1%(5)(7)
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Average
* 249 years
customer * 6 years
stay / length
of lease (1)
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Like-for-like
* 6.8%
rental * 6.0%
reviews
(2)
--------------- --------------------------------------------------------------- -------------------------------------------------------------
September
* 100% (3)
2023 o * 96%
ccupancy
--------------- --------------------------------------------------------------- -------------------------------------------------------------
Rent
* 100%
collection * 99%
--------------- --------------------------------------------------------------- -------------------------------------------------------------
(1) Assuming no staircasing
(2) Represents the rent growth for homes that were occupied and eligible
for a rent review during the year ended 30 September
(3) Includes 1 home reserved as at 4 December 2023
(4) 1.1% coupon with principal increasing with RPI + 0.5% (with a
0.5% floor and 5.5% cap)
(5) Based on annualised Net Operating Income over fair value at September
2023 as measured by a independent third party valuer
(6) Shared ownership vacant possession value includes both the value
of ReSI's 63% average equity position, and the 37% owned by the residents
(7) Debt / Equity split is as per IFRS balance sheet, with properties
held at fair value at September 2023 as measured by a independent
third party valuer, and debt at amortised cost
Chairman's statement
Rob Whiteman CBE
Chairman
We have seen record occupancy and rent collection levels this
year. Demand for affordable accommodation has been strong,
particularly given pay increases generally lagging inflation. ReSI
has continued to support residents, balancing rent increases and
returns in a way which is sustainable for them, and for our
shareholders.
The immediate impact on earnings has been held back by rising
energy, overhead and floating rate debt costs. As with other
high-quality long-term income assets, our valuations have been
impacted by the rise in risk free rates over the year which has
moved out the yields.
We are pleased to announce our local authority portfolio is now
under offer. Completion will enable full repayment of our existing
floating rate debt. This will leave ReSI with two portfolios
focused on strong market segments - independent retirement living
and shared ownership - supported by very long-term debt with an
average maturity of 21 years.
We announced in the interim results that in light of the higher
interest rate environment, cost inflation in retirement and fund
opex increases we would look to reset the dividend. Subsequent
progress on sale of the local portfolio leading to the expected
repayment of floating rate debt gives us the confidence to reset
the dividend to a fully covered and progressive 4.12p a share.
We are very conscious of listed sector discounts widening
significantly, and ReSI is not immune to factors also affecting our
peers. We will continue to review options to reverse this
situation.
To further align themselves with shareholders, and show their
confidence in unwinding the discount, Gresham House have agreed to
reduce their management fee to be based on the average of share
price and NAV.
FY2023 review
ReSI's portfolio has been constructed to deliver high-quality
affordable accommodation for vastly undersupplied markets and by
doing so to deliver defensive long-term income for investors and
meaningful social impact. Our customer demand continues to be
incredibly strong, whether providing fit-for-purpose homes for
independent living in retirement or affordable homeownership for
young families and key workers through shared ownership.
ReSI is now the custodian of homes for 3,295 households, and we
will continue to balance returns with affordability for our
residents. We have aimed to support residents through a difficult
period where pay increases have generally lagged spiking inflation,
which has in turn supported record occupancy and rent collection
levels. We continue to cap our rent increases for our retirement
residents at 6.0% and voluntarily capped our inflation-linked rent
increases in shared ownership to 7.0%, as opposed to the
contractual RPI+0.5%. Furthermore, ReSI continues to invest to
improve our homes' energy efficiency helping to keep residents'
energy bills affordable.
This balance has seen ReSI deliver strong like-for-like rent
growth of 6.1% whilst increasing retirement occupancy to a record
96%, as at September 2023, and fully occupying our shared ownership
portfolio. Rent collection continues to exceed 99%, underpinned by
direct leases with a highly diversified resident base comprising
2,628 counterparties, affordable rents, and shared ownership equity
stakes averaging c.36%.
Despite this strong top-line growth, ReSI is not immune to the
continuing wider economic challenges. Specifically, higher energy
bills to heat and light communal areas have contributed to a 13%
operating cost increase in our retirement housing portfolio,
limiting retirement net income growth to 1% year on year. Together
with increased interest expenses on the 11% of our debt which is
floating rate, and increased overheads, Adjusted Earnings have
reduced by 3%.
As a result, dividend cover declined to 91% after re-achieving
full coverage in Q4 2022, which justifies the Board's decision to
keep the dividend per share flat for FY 2023 in order to absorb
extraordinary cost increases.
As with all high-quality long-term income assets, our investment
valuations have been impacted by rising gilt yields with our
portfolio valuation yield rising to 5.2% from 4.4% in September
2022. Our strong rental growth has partially mitigated this impact
leading to a 10% like-for-like valuation decline of GBP40mn to
GBP345mn, taking EPRA NTA to 81.8p per share down from 106.1p at 30
September 2022. The USS debt is held at mark to market value in
IFRS NAV [1] and so the 1.2% increase in gilt yields over the year
reduced its net present value giving an IFRS gain of 6.6p vs EPRA
NTA.
Market opportunity
The market opportunity across both retirement and shared
ownership is both enormous and growing, and ReSI has two strong
market platforms that are primed for growth. Despite recent
operational challenges and macroeconomic headwinds, the
fundamentals underpinning ReSI's business model, and our
longer-term outlook, have never been stronger. The UK has
consistently fallen short of the government's aspiration for
300,000 new homes per year [2] with an estimated need for GBP34bn
[3] of annual investment over the next decade to begin addressing
the shortfall.
ReSI is the UK's largest provider of private independent
retirement rental homes. The UK population is rapidly ageing, with
the demographic over 65 expected to increase by almost 50% by 2060
[4] . Social isolation can have a material impact on the health of
the elderly, driving demand for independent retirement
accommodation where customers can enjoy the benefits of living and
socialising with other like-minded individuals. Our customer survey
illustrates how we can and are helping with this, indicating that
81% of our residents have been equally or more socially active
since moving in, and 60% saying their mental health has improved.
We believe that our offering is the best way to allow people on
lower to average means to focus on enjoying an active and social
retirement, without the hassles of maintaining a home. There will
be huge growth in this sector of the market, and with that a great
opportunity for ReSI to take advantage of its market leadership
position.
For shared ownership, most of the population lives in areas
where home purchase is unaffordable for average earners. Continued
inflation, rising mortgage rates and the consistent demand for a
permanent home have increased demand for shared ownership as the
most affordable homeownership option (particularly in light of the
end of the Help-to-Buy programme in March 2023). Housing
associations, which have historically been the primary investors in
affordable housing, are now dealing with rent caps on their social
and affordable rental portfolios in addition to allocating
c.GBP10bn for fire safety and c.GBP25bn to upgrade the energy
efficiency of their social rented stock by 2030. These financial
pressures impact housing associations' ability to continue to fund
their 43,000 homes per year development programmes, with many now
looking to bring in partners to acquire some of their existing
200,000 shared ownership homes. This is continuing to drive demand
and opportunity for further long-term investment into the sector -
both to fund new homes and acquire existing shared ownership
portfolios providing capital to housing associations to invest back
into their social rented stock.
Financial and dividend outlook
As the UK's largest provider of private independent retirement
rental homes and the owner of a for-profit Registered Provider, and
with an experienced and capable fund management team, the Board
believes that ReSI is well positioned to deliver long-term,
inflation-linked returns to investors.
It has been a stated objective of the ReSI Board to grow the
Company, however, the public capital markets have changed
substantially over the past year, and while the Company's share
price performance is not out of line with its listed peers, we
recognise that ReSI's shares are currently trading at a significant
discount to Net Asset Value.
This is particularly disappointing given the scale of investment
opportunities now available, and the work by the Fund Manager to
date to create the investment markets in retirement rental and
shared ownership , and the ability for these to enhance returns to
shareholders over the medium term. Given current cash levels, the
Board does not consider it in shareholders' best interests to
increase leverage to support a programme of further share buy-backs
- as has previously been undertaken - however, we will continue to
review this and other options to reverse the discount that our
shares trade to Net Asset Value.
To further align itself with shareholders and show its
confidence in unwinding the share price discount to Net Asset
Value, the Fund Manager has agreed to reduce its management fee to
be based on the average of share price and Net Asset Value.
As communicated at the half year, the Fund Manager is continuing
to advance the sale of non-core assets and our local authority
housing portfolio is currently under offer and in legals with an
expectation that a sale will complete in early 2024. This will
enable full repayment of the Company's floating rate debt and leave
ReSI with only its long-term debt which has a weighted average
maturity of 21 years, with our largest loan of GBP94mn fixed at
3.5% until 2043. While these prospective assets sales reduce ReSI's
adjusted earnings, they will increase sustainability of income and
strengthen the balance sheet, given the removal of exposure to
interest rate movements.
We announced in the interim results that in light of the higher
interest rate environment, cost inflation in retirement and fund
opex increases we would look to reset the dividend. We have
subsequently progressed on sale of the local portfolio leading to
the expected repayment of floating rate debt. This allows the Board
to rebase the dividend to 4.12p per share, representing a cut of
20%, and to have confidence that we will be able to progressively
grow this dividend on a fully covered basis, whilst continuing to
invest in maximising the growth of the portfolio value. As an
illustration, if we removed the local authority portfolio and the
floating rate debt from our 2023 income, this 4.12p dividend would
have been 103% covered during the year.
ReSI remains well placed to meet continued enormous demand for
affordable housing, enabling sustainable and growing, risk-adjusted
returns over the long term.
We will continue to look at how we can deliver the best value
for shareholders, with a constant focus on driving portfolio
performance. This will include ongoing review, during 2024, of the
options for further disposals should they be supportive of
maximising shareholder value. Particular focus will also be given
to driving retirement portfolio operational improvements including
rationalising portfolio footprint, driving rents and reducing
leakage.
Board composition
Reflecting on the current economic environment and the impact
this has had on the growth of the Company, since the year end, we
have taken the decision to reduce the size of the Board, balancing
its diversity for the benefit of shareholders and to help promote
the Company's future success.
John Carleton will retire as a Director of the Company with
effect from 22 February 2024 and accordingly will not stand for
re-election at the Company's forthcoming AGM in 2024. On behalf of
the Board, we are grateful for the valuable contribution John has
made to the Company during his term.
Annual General Meeting
The AGM will be held on 19 February 2024. We hope you will join
us, raise any questions or provide any feedback. As valued
stakeholders your input is welcomed. Shareholders are encouraged to
make use of the proxy form provided in order to register your votes
in advance of the AGM through ReSI's Company Secretary,
Computershare.
As always, the Board is grateful for the support of
shareholders, including their 99% support at our continuation vote
in January 2023.
Rob Whiteman
Chairman
Residential Secure Income plc
4 December 2023
Financial highlights
as at 30 September 2023
Income
4.7p / -6% 6.1%
Adjusted Earnings Per * 12.5p Like-for-like rent
Share* growth*
EPRA Adjusted Earnings IFRS (Loss)/Earnings Year ended 30 September
Per Share Year ended Per Share 2022: 4.5%
30 September 2022:
5.0p Year ended 30 September
See note 13 on page 2022: 7.4p
118 See note 13 on page
118
-------------------------- -------------------------- --------------------------
5.16p 91% GBP8.7mn / -3%
Dividend per share Dividend coverage* Recurring profit before
- paid change in fair value
Year ended 30 September and property disposals*
Year ended 30 September 2022: 97%
2022: 5.16p See note 13 on page Year ended 30 September
118 2022: GBP9.0mn
See note 13 on page
118
-------------------------- -------------------------- --------------------------
Capital
91.1p / -16% GBP345mn 3.4% (6.3mn shares )
IFRS Net Asset Value Value of investment Of the total number
per share property of shares held by the
Fund Manager, current
30 September 2022: 108.8p 30 September 2022: GBP375 and founder directors
See note 28 on page mn of the Fund Manager,
136 See note 15 on page and directors of ReSI
119 plc as at the date of
this Annual Report
(30 September 2022:
3.4% or 6.4mn shares)
------------------------------ --------------------------------- --------------------------------
50% 21 years 81.8p / -23%
Loan-to-Value ratio Weighted average remaining EPRA Net Tangible Asset
(LTV) life of debt Value (NTA) per share*
30 September 2022: 47% 30 September 2022: 22 30 September 2022: 106.1p
See Supplementary years See note 28 on page
Information note 13 137
on page 149
------------------------------ --------------------------------- --------------------------------
-18.1% -11.5%
Total Return (on Opening Total IFRS Return (on
NTA)* Opening NAV)
Year ended 30 September Year ended 30 September
2022: 3.3% 2022: 7.1%
See Supplementary See Supplementary
Information note 11 on Information note 12 on
page 149 page 149
------------------------------------ ----------------------------------
*Alternative income measures
Investment portfolio
Independent retirement rental housing
GBP202mn Gross Asset Value / 2,240 homes / 58% of portfolio /
GBP854 average monthly rent
Retirement Map
Data
East Midlands 25
East of England 339
Greater London 186
North East 19
North West 231
Scotland 5
South East 708
South West 526
Wales 53
West Midlands 59
Yorkshire and
The Humber 89
Grand Total 2240
Independent living for retirees
Our portfolio provides an affordable rental independent living
solution for retirement with lifetime tenancies.
In summary, the portfolio:
1. is let to elderly residents with affordable rents and lifetime tenancies;
2. provides fit-for-purpose homes for retirees, allowing them to
maintain their independence without care provision;
3. frees up larger homes for families;
4. generates stable and secure rental income paid from pensions and welfare
5. rents increase with RPI (capped at 6%) each year and are
often set around Local Housing Allowance levels
6. is managed by our in-house 40-person property management and
lettings team, operating under the 'My Future Living' brand
An increasingly lonely and growing older population provides
huge and growing demand for independent retirement renting
There has been a steady upward trend in life expectancy in the
UK, and the average remaining life expectancy of a person reaching
retirement age exceeds 20 years [5] . As a result, 20% of the UK
population is expected to be over 65 by 2026 [6] .
In particular, the core market of over 75s is projected to
nearly double from 2020 to 2050 [7] .
Source: ONS
Just 1% of over 60s in the UK live in purpose-built retirement
housing, compared to 13% in Australia and 17% in the USA.
There is a very limited pipeline of retirement developments in
the UK, with only 3% of consented developments being designed
specifically for the elderly. Furthermore, t his construction
activity is primarily focused on the top end of the market and not
competitive with ReSI's relatively affordable price points.
Specialist retirement housing is accessible (e.g., with lifts)
and easy to manage, enabling people to live independently in their
own living space to a greater age, whilst still having access to
some level of day-to-day and emergency support.
According to Age UK, over one million older people say they
always or often feel lonely ([8]) . Boomer & Beyond estimates
that nearly one third of UK residents aged 70 and older identify as
'modestly satisfied' to 'not at all satisfied' with life ([9]) .
Nearly half of older people in the UK (49% of over 65s) say that
television or pets are their main form of company, with one
research report claiming that loneliness can be as harmful for our
health as smoking 15 cigarettes a day. Specialised retirement
accommodation helps to foster a sense of community by offering
shared spaces such as a residents' lounge and communal gardens.
CASE STUDY
Finding a safe haven and lifelong friendships in a coastal
retirement community
Interview with June - East Haven, Clacton-on-Sea
June, a woman in her mid-50s, has found her slice of paradise in
East Haven, a retirement development nestled in the coastal town of
Clacton-on-Sea.
Through My Future Living, June has been renting a delightful
one-bedroom apartment since February 2023, and she couldn't be
happier. Embracing the social aspects of living in a retirement
community and relishing the feeling of safety and security, June
has truly found a place she can call home.
Although June is originally from Mauritius, her heart has long
belonged to the United Kingdom. After spending most of her life in
East London and, more recently, Basildon, she decided to return to
her homeland in 2017 after the passing of her father. However, her
time in Mauritius made her realise that her true sense of belonging
lay in the UK. Yearning for the companionship and familiar
surroundings she had missed, June made the decision to return.
June reflects, "After my Dad died, I thought it was the perfect
opportunity to go back to my roots. With my health challenges, I
had to leave work in 2008, and I thought the sunny climate and
laid-back lifestyle in Mauritius would be beneficial for me.
However, life taught me that the grass isn't always greener on the
other side, and it didn't suit me as well as I had hoped. So, upon
returning to the UK, I faced the task of finding a new place to
live, and that's when East Haven came into my life. Although I had
never been to Clacton-on-Sea and had never considered renting, I
was immediately captivated by the charm of this development. In
that moment, I knew it was the ideal place for me."
Living alone with health concerns, June sought a supportive and
friendly community. The emergency cords placed in her apartment
provided an additional layer of reassurance, assuring her that help
would be readily available if the need arose.
June explains, "While I wanted to maintain my independence,
having previously owned my own home, I also longed for the sense of
community that a retirement development could provide. East Haven
has allowed me to strike this perfect balance. The apartment is
simply wonderful, and the people within the community are genuinely
friendly and welcoming. The manager, in particular, keeps a
vigilant eye out for everyone's well-being."
June enjoys several other benefits that come with renting in a
retirement development such as the fact she no longer has to worry
about maintenance and upkeep. Also, the option of assured or
lifetime tenancies provides her with long-term security and peace
of mind that she will never have to leave providing she keeps to
her tenancy agreement.
Shared ownership housing
GBP123mn Gross Asset Value / 766 homes / 36% of portfolio /
GBP483 average monthly rent
Shared Ownership
Map Data
East Midlands 49
East of England 212
Greater London 283
North West 28
South East 91
South West 67
West Midlands 32
Yorkshire and
The Humber 4
Grand Total 766
Part-buy, part-rent model makes shared ownership the affordable
homeownership solution
Shared ownership provides an affordable route to homeownership
for middle- and lower-income households through a part buy, part
rent model with subsidised rents and low deposit requirements.
In summary, the shared owner:
1. purchases an equity stake in their new home at open market
value. This is known as the "first tranche sale" and is a minimum
of 25% of the value of the property;
2. pays a subsidised rent c.30% below market rent on the
remaining part of the home, which increases annually at
RPI+0.5%;
3. has the option to incrementally purchase additional shares in
their home at the prevailing open market value (known as
"staircasing");
4. typically finances their initial stake with a 90% mortgage; and
5. is responsible for maintenance, repair and insurance, creating strong alignment of interest.
Shared ownership is required to be affordable to incoming shared
owners, which typically means no more than 40% of post-tax income
of new shared owners can be spent on total housing costs (i.e.
mortgage, rent and any service charge).
There are 252,000 shared ownership homes across England [10] ,
and around 20,000 new shared ownership homes are delivered annually
[11] , making it one of the faster growing housing tenures.
Increased affordability provides huge demand for shared
ownership
Due to lower deposit requirements and discounted rental
payments, shared ownership addresses the affordability barrier that
forces people into a lifetime of private market-rented
accommodation with no certainty of tenure, which makes it more
difficult to feel like a member of the community.
T he graph below sets out the smallest amount of deposit
required and the minimum income requirement to purchase a home
worth GBP300,000 under shared ownership and outright homeownership.
Shared ownerships part-buy part-rent model reduces both deposit and
minimum income requirements, providing an affordable route to
homeownership for a potential additional 7.9 million people [12]
across the country.
The chart below illustrates how homeownership rates have
declined across age cohorts despite the fact that 76% of
non-homeowners in Great Britain want to own a home [13] . We expect
that declining homeownership rates and outright purchase
affordability worsening will continue to drive demand for shared
ownership in 2024.
Demand for shared ownership in the current economic climate
Rising interest rates have made the ambition of homeownership
more expensive for all first-time buyers, however the impact is
less severe for shared owners compared to those who own
outright.
This is because as shared owners only initially acquire a
portion of their home, the size of the mortgage required to
purchase their equity stake is typically much lower than someone
buying a property outright.
As a result, prospective shared owners are much less exposed to
an increase in interest rates compared to typical first time
buyers, with the cost increase for new shared owners as a result of
a rise in interest rates one quarter of the increase experienced by
a first time buyer buying outright.
Whilst the 7% rent increase experienced by shared owners in 2023
is significant, it is considerably lower than the 40% increase [14]
in monthly payments that will be felt by outright owners as a
result of a 3.0% increase in mortgage rates.
With outright sale affordability having worsened and with the
Help-to-Buy scheme coming to an end in March 2023, shared ownership
has become the only affordable route onto the housing ladder for an
increasing number of people, which has been reflected by the 40-50%
increase in shared ownership mortgage assessment volumes compared
to 2022 [15] .
There will be some residents who are no longer able to afford
shared ownership in the current economic climate, however this has
been outweighed by the new market of higher income residents
keeping demand for the tenure strong, despite the worsening
affordability outlook.
Interview with Stephanie*, a shared ownership resident:
After trying to buy a home by herself, Stephanie realised that
she would not have been able to own her own home outright. Her
options were continuing to rent in the private sector or move back
in with her parents, however, through the reduced affordability
requirements of shared ownership she was able to buy her own home.
Since moving in two-years ago, Stephanie said that being able to
run her own home and the benefits of not living with others had
definitely improved her quality of life. In addition, Stephanie
said that she was greatly appreciative of the cap on rent increases
that ReSI applied, particularly in the current rental market.
Stephanie emphasised the following as key benefits of her shared
ownership home:
- Affordability - " shared ownership is more cost-effective than renting privately "
- Energy efficiency - "My energy bills are a lot cheaper than my previous residence"
- Independence - "I have enjoyed discovering how I like to run
my own home and the benefits of not living with others"
* Not her real name
Local authority housing
GBP20mn Gross Asset Value / 289 homes / 6% of portfolio
Local authority housing portfolio at a glance
Local authority housing provides homes within Luton for
households who are otherwise homeless, generally because they are
unable to afford private rented accommodation.
ReSI works as a partner with Luton Borough Council and Mears who
manage and maintain the portfolio, with the council taking void
risk.
Investment team
Gresham House has extensive experience and expertise in
affordable housing:
21-person investment team - senior members with average c.17
years' experience
With some individuals amassing over 40 years of experience,
ReSI's team has deep expertise in multiple residential sectors,
including shared ownership housing and independent retirement
living.
Ben Fry - Managing Director, Housing
Mike Adams - Managing Director, Real Estate
Sandeep Patel - Finance Director, Housing
Pete Redman, Executive Director, ReSI Housing
Chris Carter Keall - Head of Asset Management
Burak Varisili - Investment Director
Joe Thomas - Investment Director
Claire Cooper - Director of Shared Ownership
Matt Painter - Director of Development & Delivery
40-person property management team
In-house property management team allows ReSI to benefit from
scale, and helps ensure a positive resident experience
Over 20-year track record in social housing, raising
>GBP11bn
The Fund Manager's direct parent company, TradeRisks Limited,
has been active within the social housing sector for over 20 years
as a funding arranger and advisor and, over the last five years, as
an investor through ReSI.
Manage GBP 800mn of long-term institutional capital invested
into almost 6,000 homes over the last six years
Long-term capital sourced from a diversified pool of investor
types, including pension funds (primarily local government and
corporate) and wealth management companies channelling individual
SIPPS and ISAs.
Founder and manager of Registered Providers of Social
Housing
ReSI Housing Limited, ReSI's wholly-owned Registered Provider of
Social Housing, allows ReSI to invest in shared ownership housing
and receive capital grant funding from the Greater London Authority
and Homes England. Demonstrating strong expertise in the shared
ownership sector, Gresham House, the Fund Manager's parent, has
successfully set-up two Registered Providers of Social Housing
across its housing funds.
Homes England and Greater London Authority Investment
Partner
Reflecting Gresham House's strong relationships with
government-regulated institutions, the Fund Manager's investment
vehicles have been awarded GBP39mn in combined grant funding from
both institutions. Gresham House has worked with the government to
improve the shared ownership model in the 2021-2026 capital grant
funding programme, with our aim to continue lifting standards
across the shared ownership sector.
Strategic review
KPI measures
Income returns
ReSI's key performance indicators (KPIs) are aligned to our
business strategy. These measures are used by the Board and senior
management to actively monitor business performance.
Adjusted EPRA Net rental Like-for-like EPRA cost ratio (Loss)/Profit
earnings* (GBPmn) income (GBPmn) rental reviews (%)* before tax (GBPmn)
(%)
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
8.7 9.0 17.1 16.0 6.1 4.5 39% 36% (23.2) 13.3
------ ------ ------ ------ ------ ------ ------ -------- ------
KPI definition
Adjusted EPRA Net rental income Like-for-like Administrative (Loss)/Profit
earnings, excluding after deducting average growth and operating before tax is
valuation movements property operating on rent reviews costs (including a statutory
on investment expenses including across the costs of direct IFRS measure
assets and debt, ground rent portfolio. vacancy) divided as presented
and other paid. by gross rental in the Group's
adjustments, income. Consolidated
that are one-off Statement of
in nature, which Comprehensive
do not form Income.
part of the
ongoing revenue
or costs of
the business.
---------------------- ---------------------- ---------------------- ----------------------
Comment
---------------------- ---------------------- ---------------------- ----------------------
2023 earnings Increase of 6.1% like-for-like 2023 cost ratio Decreased profit
impacted by 6.4% delivered rental reviews impacted by before tax driven
a combination during the period growth achieved higher operating by GBP39.8mn
of higher finance as a result for properties costs in the property valuation
costs on floating of organic growth that were eligible retirement portfolio loss reflecting
rate debt, higher from the portfolio for rent increases because of increased market repricing
operating costs due to rent during the year energy costs due to higher
in the retirement increases and ended September in communal interest rates.
portfolio because acquisitions 2023. areas. The repricing
of increased in FY 2022. of real estate
energy costs This growth assets has been
in communal Strong like-for-like reflects the rapid and
areas and higher rental growth, 6.0% rent increase significantly
fund level expenses. of 6.1%, was caps on retirement faster than
curtailed by leases, as well in previous
Adjusted EPRA a 12% increase as the 7.0% property cycles.
Earnings covered in services cap implemented We expect the
91% of dividends charges, across for shared ownership attractive
in the year. the retirement rent increases characteristics
portfolio, reducing during the year. of residential
net income growth property assets,
in retirement in conjunction
to 1%. The increase with the supply
in service charges / demand imbalance
was driven by and lack of
a 45% increase affordable housing,
in energy costs to continue
in communal to appeal to
areas. a wide range
of property
investors resulting
in relatively
resilient yields
compared to
other property
sectors.
---------------------- ---------------------- ---------------------- ----------------------
Notes
---------------------- ---------------------- ---------------------- ----------------------
See note 13 See note 6 to See Glossary See note 7 See Consolidated
to the Financial the Financial on page 151 Supplementary Statement of
Statements Statements for definition Financial Comprehensive
and calculation Information Income on page
basis. 101
---------------------- ---------------------- ---------------------- ----------------------
* Alternative performance measures
Capital returns
The following KPIs focus on ReSI's strategic priority to
increase overall income returns and improve the resilience and
efficiency of the business model which will support increasing
dividend distributions.
EPRA NTA per IFRS NAV per Total Return Loan to Value Weighted average
share* (pence) share (pence) on NTA (%)* (LTV) (%) remaining life
of debt (years)
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
81.8 106.1 91.1 108.8 (18.1) 3.3 50 47 21 22
------- ------ ------- -------- ------ ------ ------ ------ ------
KPI definition
EPRA NTA (Net IFRS NAV (Net Return on NTA Ratio of net Average remaining
Tangible Assets) Asset Value) is total return debt to the term to loan
is the market per share at for the year, total assets maturity.
value of property the balance prior to payment less finance
assets, after sheet date. of dividends lease and cash
deducting deferred (excluding movements on a consolidated
tax on trading in valuation Group basis
assets, and of debt and
excluding intangible derivatives),
assets and expressed as
derivatives. a percentage
of opening NTA.
---------------------- ---------------------- ---------------------- ----------------------
Comment
---------------------- ---------------------- ---------------------- ----------------------
23% reduction Returns of Returns of minus Increase in 21 years remaining
in the year minus 12.8p 18.0% in the LTV reflecting life of debt
ended 30 September per share in year reflecting outward valuation reflecting
2023 driven the year reflecting 4.7p of earnings yield shift the long-term
by fair value 21p property offset by 21p as a result nature of ReSI's
through profit valuation decline, property valuation of market repricing fixed and
and loss movements. partially offset loss. due to higher inflation-linked
by 4.2p gain interest rates debt secured
Recurring Earnings in debt valuation. Property valuation and macro-economic on the retirement
of 4.7p covered loss was driven environment and shared
91% of dividends by a 80bps outward ownership
in the year. yield shift, portfolios.
leading to a
28p decline,
which was partially
offset by
inflation-linked
rent growth which
was additive
to valuations
by 7p.
---------------------- ---------------------- ---------------------- ----------------------
Notes
---------------------- ---------------------- ---------------------- ----------------------
See note 2 See Consolidated See note 11 See note 13 See note 19
Supplementary Statement of Supplementary Supplementary for information
Financial Financial Position Financial Financial on the Group's
Information on page 102 Information Information Borrowings
for reconciliation for calculation. for calculation.
from IFRS to
EPRA performance
measures
---------------------- ---------------------- ---------------------- ----------------------
* Alternative performance measures
The European Public Real Estate Association (EPRA) is the body
that represents Europe's listed property companies. The association
sets out guidelines and recommendations to facilitate consistency
in listed real estate reporting, in turn allowing stakeholders to
compare companies on a like-for-like basis. As a member of EPRA,
the Company is supportive of EPRA's initiatives and discloses
measures in relation to the EPRA Best Practices Recommendations
(EPRA BPR) guidelines. Additional detail is provided in
supplementary information on page 144.
1. EPRA Earnings per
share
----------------------------------- ------------------------------- --------------------------------
Definition Purpose Result
----------------------------------- ------------------------------- --------------------------------
EPRA Earnings per share A key measure of a company's 4.1 per share for the
excludes gains from underlying operating period 30 September
fair value adjustment results and an indication 2023. (30 September
on investment property of the extent to which 2022: 4.4p)
that are included under current dividend payments
IFRS. are supported by earnings. Adjusted EPRA Earnings
per share excluding
one off costs and including
first tranches sales
for the period were
4.7p (30 September 2022:
5.0p)
----------------------------------- ------------------------------- --------------------------------
2. EPRA Net Asset Value (NAV) metrics
-------------------------------------------------------------------- --------------------------------
Definition Purpose Result
----------------------------------- ------------------------------- --------------------------------
EPRA Net Reinstatement The EPRA NAV set of EPRA NTA GBP151.4mn
Value (NRV): metrics make adjustments or 81.8p per share at
Assumes that entities to the NAV per the IFRS 30 September 2023 (GBP196.5mn
never sell assets and financial statements or 106.1p per share
aims to represent the to provide stakeholders at 30 September 2022)
value required to rebuild with the most relevant
the entity. information on the fair
value of the assets EPRA NRV GBP151.4mn
EPRA Net Tangible Assets and liabilities of a or 81.8p per share at
(NTA): real estate investment 30 September 2023 (GBP196.5mn
Assumes that entities company, under different or 106.1p per share
buy and sell assets, scenarios. at 30 September 2022)
thereby crystallising
certain levels of unavoidable
deferred tax. EPRA NDV GBP195.3mn
or 105.5p per share
EPRA Net Disposal Value at 30 September 2023
(NDV): (GBP225.5mn or 121.8p
Represents the shareholders' per share at 30 September
value under a disposal 2022)
scenario, where deferred
tax, financial instruments
and certain other adjustments
are calculated to the
full extent of their
liability, net of any
resulting tax.
----------------------------------- ------------------------------- --------------------------------
3. EPRA Net Initial
Yield (NIY)
----------------------------------- ------------------------------- --------------------------------
Definition Purpose Result
----------------------------------- ------------------------------- --------------------------------
Annualised rental income A comparable measure 5.2% at 30 September
based on the cash rents for portfolio valuations. 2023
passing at the balance This measure should
sheet date, less non-recoverable make it easier for investors (4.1% at 30 September
property operating expenses, to judge for themselves 2022)
divided by the market how the valuation of
value of the property, a portfolio compares
increased with (estimated) with others.
purchasers' costs.
----------------------------------- ------------------------------- --------------------------------
4. EPRA 'Topped-Up'
NIY
----------------------------------- ------------------------------- --------------------------------
Definition Purpose Result
----------------------------------- ------------------------------- --------------------------------
This measure incorporates The topped-up net initial 5.2% at 30 September
an adjustment to the yield is useful in that 2023
EPRA NIY in respect it allows investors
of the expiration of to see the yield based (4.1% at 30 September
rent-free periods (or on the full rent that 2022)
other unexpired lease is contracted at the
incentives such as discounted end of the period.
rent periods and step
rents).
----------------------------------- ------------------------------- --------------------------------
5. EPRA Vacancy Rate
----------------------------------- ------------------------------- --------------------------------
Definition Purpose Result
----------------------------------- ------------------------------- --------------------------------
Estimated Market Rental A 'pure' percentage 3.5% at 30 September
Value (ERV) of vacant measure of investment 2023
space divided by ERV property space that
of the whole portfolio. is vacant, based on (5.0% at 30 September
ERV. 2022)
----------------------------------- ------------------------------- --------------------------------
6. EPRA Cost Ratio
----------------------------------- ------------------------------- --------------------------------
Definition Purpose Result
----------------------------------- ------------------------------- --------------------------------
Administrative and operating A key measure to enable EPRA Cost Ratio (including
costs (including and meaningful measurement direct vacancy costs)
excluding costs of direct of the changes in a 39% at 30 September
vacancy) divided by Company's operating 2023 (36% at 30 September
gross rental income. costs. 2022)
EPRA Cost Ratio (excluding
direct vacancy costs)
was 36% at 30 September
2023 (34% at 30 September
2022)
----------------------------------- ------------------------------- --------------------------------
7. EPRA LTV
----------------------------------- ------------------------------- --------------------------------
Definition Purpose Result
----------------------------------- ------------------------------- --------------------------------
Net debt divided by A key (shareholder-gearing) 51% at 30 September
total property value. metric to determine 2023
the percentage of debt
comparing to the appraised (46% at 30 September
value of the properties. 2022)
----------------------------------- ------------------------------- --------------------------------
Fund Manager's report
Ben Fry
Managing Director, Housing
The year ended 30 September 2023 has seen a continuation of the
challenging macroeconomic environment driven by a sharp and severe
increase in inflation, repeated interest rate increases and the
consequential impact on the cost of living. We have sought to
insulate both shareholders and residents from this environment by
balancing inflation-linked rent increases with support for those
residents experiencing difficulties affording rent or mortgage
bills.
There have been two consequences of significantly higher
inflation and interest rates for ReSI. While we have delivered
strong like-for-like rent review growth, record occupancy and
collection levels, we have also experienced higher energy bills on
communal areas within our retirement portfolio. Secondly, higher
interest rates have impacted both our debt costs, and the gilt
yields which form a key component of valuations.
We took the decision during 2023 to cap rent increases below the
level of inflation, in order to protect affordability for our
residents whose incomes are under pressures not seen in decades. We
believe this decision is the right one for all stakeholders and
will support ReSI in its objective to deliver sustainable returns
for the long term. These caps were set at 6% for our retirement
residents, and 7% for our shared owners and saw ReSI still deliver
strong rent growth of 6.1%.
This 6.1% rental growth, combined with the full impact of
previous shared ownership acquisitions, helped ReSI to increase net
rental income by 6.4%, to GBP18.1mn, despite managing 13% higher
costs within our retirement portfolio, driven by the increased
energy costs of the communal areas, which limited retirement net
income growth to just 1%.
Adjusted EPRA earnings, before valuations, reduced by 3%, to
GBP8.7mn, with the 6.4% net rental income growth offset by
increased interest expenses on our GBP21mn floating rate debt (11%
of total debt), as well as higher audit and regulatory fees.
As with many other holders of high-quality, long-term income
assets, the increase in gilt yields has directly impacted our
portfolio valuations, with our portfolio valuation yield rising to
5.2% from 4.4% in September 2022. Our strong rental growth has
partially mitigated this movement leading to a 10% like-for-like
valuation decrease for the year, and a total EPRA return of
(18.0%), taking EPRA NTA to 81.8p per share. This valuation decline
is disappointing but should be taken in light of the more than 40%
value loss in the 20-year gilt since the start of 2021 [16] .
These valuation headwinds have increased the LTV of the Company
to 50% (from 47% in FY22) in line with the Company's 50%
medium-term target. The loan balance includes GBP21mn of floating
rate debt that is no longer as accretive to the Company's returns
and is not in line with our strategy to de-risk the balance sheet
through long-term amortising debt. This debt was originally put in
place to provide flexibility to the Company ahead of an intended
fundraise, which is no longer possible due to market conditions
which have seen the Company's shares continuing to trade at a
significant discount to Net Asset Value.
As communicated at the half year, we are continuing to advance
sale of non-core assets and our local authority housing portfolio
is currently under offer and in legals with an expectation its sale
will complete in early 2024. This will enable full repayment of
floating rate debt and leave ReSI with GBP183mn of long-term debt
with a weighted average maturity of 23 years, with our largest loan
of GBP94mn fixed at 3.5% until 2043. The low cost of this facility
represents GBP27mn of value for shareholders compared to raising
new debt today and puts ReSI in a better position to deliver
long-term earnings growth relative to other REITs, which have
significantly lower weighted average debt maturity profiles.
We also announced at the half year that in light of the higher
interest rate environment, cost inflation in retirement and fund
opex increases we would work with the board to reset the dividend.
We have subsequently progressed on sale of the local portfolio
leading to the expected repayment of floating rate debt. This
allows the Board to rebase the dividend to 4.12p per share,
representing a cut of 20%, and to have confidence that we will be
able to progressively grow this dividend on a fully covered basis,
whilst continuing to invest in maximising the growth of the
portfolio value. If we removed the net impact of the local
authority portfolio from FY23 results, the new dividend of 4.12p
per share would have been 103% covered.
Rising inflation and the cost-of-living crisis continue to
impact the life of our residents, but they are relatively protected
compared to their peers. Our retirement residents typically fund
rent payments with income from an inflation-linked pension, and
benefit from tailored accommodation that helps to address
loneliness. The shared ownership model helps partially insulate
residents from cost-of-living pressures: rents are rising less than
mortgage costs; mortgage rates remain well below our portfolio
stress-test levels, and our shared owners have only 36% of the
exposure to mortgage rate increases compared to full-ownership
mortgages. Across the whole portfolio our continued efforts to
improve our homes' energy efficiency is helping to reduce our
residents' energy bills and we have capped rent increases in the
period to protect resident's affordability.
The quality of ReSI's operational business model, with
individual resident contractual relationships, very strong rent
collection of almost 100%, and record occupancy of 96% in
retirement and 100% in shared ownership, reflects our focus on the
underserved markets of affordable purpose-built retirement living
and providing affordable homeownership to young families and key
workers. This continues to give us confidence in our portfolio of
3,295 homes and our ability to deliver sustainable long-term
returns.
Financial review
Total return
Rising gilt yields through 2023, led to an increase rate in
discount rates and yields across all high-quality long-term income
assets. This drove a 10% reduction in ReSI's like-for-like
investment property values leading to an EPRA NTA total return for
the year of negative 19.1p per share (-18.0%).
This negative 19.1 pence per share EPRA NTA return, was
comprised of:
- 4.7p of Adjusted EPRA Earnings (see note 13 - adjusted
earnings per share), with recurring income of GBP8.7mn; less
- 21.0p impact of the 10% like-for-like decrease in investment
property values, as assessed by Savills, to GBP345mn as at 30
September 2023. This decrease was primarily driven by a c.80 bps
increase in the weighted average valuation yield since September
2022 to 5.2%, despite like-for-like income growth of 6.1%; and
- 2.5p impact of USS debt indexation (GBP4.5mn), reflecting the
index-linked nature of the debt which follows the increase in
shared ownership rent reviews up to a cap of 5.5%; less
- 0.3p one-off costs (GBP0.6mn) primarily attributable to
aborted fundraising in Autumn 2022, following the Company's share
price moving from a premium to substantial discount to NAV
rendering equity raising dilutive to shareholders.
The movement in the EPRA NTA position during the year, from
106.1p to 81.8p per share, is after total dividend payments of 5.2p
per share (GBP9.6mn).
Movement in EPRA NTA pence per share for the year
EPRA NTA at 30/09/22 106.1
Net income 4.7
Dividend paid -5.2
Movement in FV of Investment
Properties -21.0
One-off costs -0.3
Debt indexation -2.5
EPRA NTA at 30/09/23 81.8
A total IFRS return of -12.5p per share (-11.5%) was delivered
for the year. The difference to EPRA NTA returns reflects an
increase in the fair value of debt (IFRS) of 6.6p (GBP12.3mn)
versus the amortised cost value of debt (EPRA) caused by the c.1.2%
increase in gilt yields over the year, which reduce the mark to
market value of the USS debt. The IFRS NAV decreased by 17.7p after
dividends paid.
Movement in IFRS NAV at 30 September 2023 (pence per share)
NAV at 30/09/22 108.8
Net income 4.7
Dividend paid -5.2
Movement in FV of Investment
Properties -21.0
Debt valuation change 4.1
One off costs -0.3
NAV at 30/09/23 91.1
Movement in IFRS NAV at 30 September 2023 (pence per share)
Statement of Comprehensive Income
Adjusted Earnings reduced by 3% to GBP8.7mn with 6% net rental
income growth offset by increased interest expenses on our GBP21mn
floating rate debt (11% of total debt), as well as higher overheads
which are explained further below.
2023 2022 Variance
------------------------------------ -----------------
(GBP'000) (GBP'000)
------------------------------------ ------------- ------------ ---------------
Net rental income 18,097 17,016 6.4%
First tranche sales profits 417 510 (18.2%)
Net finance costs (6,500) (5,588) 16.3%
Management fees (1,885) (1,867) 1.0%
Overheads (1,456) (1,119) 30.1%
Adjusted Earnings / Adjusted EPRA
Earnings 8,673 8,952 (3.1%)
Adjusted EPS 4.68p 4.97p (5.8%)
------------------------------------ ------------- ------------ -----------------
Dividend coverage 91% 97% (6.2%)
Property valuation movements (38,944) 3,200 (1,317.0%)
Debt valuation movements 7,747 1,809 328.2%
Loss on property disposal (11) (24) (54.2%)
One-offs (619) (603) 2.7%
IFRS (Loss)/Earnings (23,154) 13,334 (273.6%)
IFRS EPS (12.5)p 7.4p (268.9%)
------------------------------------ ------------- ------------ -----------------
Net rental income :
Net rental income before ground rents (NRI) grew by 6.4%
year-over-year to GBP18.1mn, driven by the following underlying
factors:
- Retirement rent growth of 1% to GBP11.2mn with strong
like-for-like rent review growth of 6.0%, being largely offset by
13% cost inflation
- Shared ownership rent growth of 23% from GBP4.1mn to GBP5.0mn due to:
o GBP0.3mn from 6.8% like for like rental increases;
o GBP0.4mn from full occupancy and annualised income of our
shared ownership portfolio; and
o GBP0.2mn from GBP13mn shared ownership acquisitions completed
in the financial year.
These factors were also underpinned by:
- Consistent rent collection of over 99%
FY 2022 GBP17.0
Shared ownership - acquisitions GBP0.3
Shared ownership - leasing GBP0.4
Shared ownership - rent growth GBP0.3
Retirement - rent growth GBP0.7
Retirement - cost inflation -GBP0.6
FY 2023 GBP18.1
1. Top-line retirement growth offset by cost pressure:
- Income growth delivered: GBP0.7mn / 1% / 0.1 pence per share [17]
Retirement gross rental revenue grew 6.4% year-over-year to
GBP20.6mn, ahead of the 3.8% growth in the prior year. This was
mainly driven by 6% like-for-like rent growth, in line with an
annual cap applied to the RPI-linked rental increases, combined
with an average occupancy of 94% (FY22: 94%).
We believe our decision to cap rent increases is the right one,
to both protect our residents and support the long-term stability
of our income, and we have continued to combine this support to
residents in financial hardship with rental freezes or reduced
increases. These moves generated an annual saving for residents of
c.GBP1.1mn / c.GBP565 per resident.
Occupancy growth has continued to improve throughout the year
and reached a record level of 96% at year end, reflecting the great
customer service of ReSI's in-house property manager, My Future
Living. Revenue growth was offset by 12.9% year-over-year operating
expense growth to GBP9.4mn, which was primarily driven by 45%
increase to c.GBP1.5mn in the energy costs for common areas as well
as a 14% increase in property management fees as we restructure the
team in order to drive future net income growth.
Looking forwards, we are working closely with My Future Living
across several asset management initiatives, in order to boost
income and offset cost inflation. These include:
- restructuring the property management team to take advantage of technology;
- re-tendering repairs and maintenance contracts to increase
value-for-money on unit refurbishments;
- improving retirement re-letting timing to continue driving
occupancy growth, which involves improving start times on
refurbishment works for unit turnovers;
- completing capital works and energy efficiency improvement projects; and
- rationalising the footprint of the retirement portfolio via
selective disposals and recycling capital into core areas to drive
local economies of scale.
2. Strong and accelerating rent growth in shared ownership:
- Income growth delivered: GBP0.4mn / 0.1 pence per share [18]
Shared ownership rents within the portfolio, usually increase
annually on 1 April generally with RPI + 0.5%, and grew by 6.8%
like-for-like to GBP3.9mn compared to the prior year.
This year rents were due to increase by 12.4% on 1 April,
however we have capped this increase at 7% (by way of a rebate), a
level which reflects wage growth and the inflation rate excluding
the impact of energy bills. This cap will help to protect
affordability for our residents when their incomes are under
pressure. This decision is within our control but we have chosen to
match the cap that the government has applied to general social
housing properties.
3. Full occupancy and annualised impact of our shared ownership
portfolio:
- Income growth delivered: GBP0.3mn / 0.2 pence per share [19]
Demand for ReSI's shared ownership properties remains robust,
reflecting its position as the most affordable form of
homeownership. ReSI benefited from full-period income from Orbit,
HSPG and Brick-by-Brick units that leased during FY 2022, and
ReSI's portfolio is now fully occupied.
4. Shared ownership acquisitions:
- Income growth delivered: GBP0.3mn / 0.1 pence per share [20]
ReSI's earnings grew by c.GBP0.3mn from capital deployment in
the year into shared ownership investments and letting activity
(excluding the impact of first tranche sales).
ReSI acquired 59 new homes (GBP9mn net commitment) from Brick By
Brick that were delivered on phased basis between September 2022
and March 2023 as they reached construction completion. At the date
of this report, 58 were occupied, with the final home reserved
ahead of resident move-in, taking the portfolio to full occupancy.
This leasing activity illustrates the depth of demand for shared
ownership, which continues to play an essential role in helping
mid-to-low earners onto the housing ladder. We expect this demand
to further increase in this macroeconomic environment which is
characterised by high inflation and rising interest rates,
particularly with the Help-to-Buy programme having ended in March
2023.
These acquisitions were funded by the residual proceeds from the
GBP15mn equity raise in February 2022 and debt drawn on the USS
credit facility in March 2022 and committed to during FY2022.
- Consistent rent collection:
ReSI's cash flow is supported by a highly diversified set of
income streams from residents who pay affordable rents. Our
retirement residents typically pay their rent from pensions and
savings, and residents benefitted from a 10.1% increase in state
pensions in April 2023, compared to the 6% rental growth caps in
place across our retirement portfolio. On average, ReSI's shared
ownership residents own c.36% of their homes and generally pay
below-market rent. The remainder of ReSI's rental income comes from
local authority housing, which is leased to Luton Borough Council.
ReSI has no leases with asset-light, lease-funded, housing
associations or charities.
ReSI's rent collection rate exceeded 99% in FY 2023 and the
affordability of ReSI's rents, as well as the strength of
creditworthiness in ReSI's counterparties has helped keep rental
arrears at c.1% of rent roll in 2023. To address those arrears, we
are working with residents to find solutions that benefit both
parties, which can include buying back part of shared owners' home
equity to provide liquidity, helping retirement residents utilise
all government welfare resources and subsidies available to them,
or occasionally helping residents find local authority
accommodation if they cannot afford to remain living in their
home.
First tranche sales profits
First tranche sales profits reduced by 18% to GBP0.4mn. This
reflects the gain on cost we recognise by selling a portion of a
shared ownership home to the occupiers and is thereafter replaced
by ongoing net rental income from the shared owner. The reduction
in this line reflects the ongoing maturity of ReSI's business and
increased quality of income streams.
Net finance costs
Net finance costs increased by 16% to GBP6.5mn, caused by a 20%
increase in interest on borrowings to GBP6.5mn, with ground rent
expenses remaining at GBP1.0mn. Interest expenses have been driven
by the 400 basis points increase in SONIA year on year on ReSI's
GBP21mn of floating rate debt, as well as the fully year impact of
GBP20mn additional long-term debt drawn from USS in March 2022 to
finance shared ownership acquisitions.
ReSI continues to advance the sale of non-core assets which will
enable pay-down of floating rate debt, leaving the Company with
long-term fixed or inflation-linked debt with a weighted average
maturity of 21 years.
The GBP184mn book value of ReSI's debt has a weighted average
life of 21 years, and the value of this debt is recognised with a
mark to market value of GBP157mn, representing GBP27mn of value for
shareholders compared to raising new debt today. This puts ReSI in
a better position than other REITs, which have significantly lower
weighted average debt maturity profiles, to deliver long-term
earnings growth.
Administrative and other expenses
Recurring overheads, excluding management fee and one offs, have
increased 30% in FY 2023 to GBP1.5mn. The increase has been
attributable to higher audit and interim review fees payable to the
Group's auditors together with the costs in relation the governance
of our Registered Provider of Social Housing, ReSI Housing, as it
grows and matures. ReSI Housing is the regulated entity which holds
all of ReSI's shared ownership homes and is registered with the
Regulator of Social Housing.
Management fees were flat on the year at GBP1.9mn, and based on
the September 2023 Net Asset Value will decline by 11% next year as
a result of the decline driven by outward yield shifts.
Dividend coverage:
ReSI's dividend was 91% covered by recurring income in FY 2023,
down 6% from 97% in FY 2022.
The Adjusted Earnings 3% decline reflected strong gross rental
income growth of 9% being more than offset by increases in
retirement property expenses, increased floating rate interest cost
and an increase in fund operating expenses.
Dividends paid, while flat on a pence per share basis, increased
by 4% as a result of the GBP15mn issuance in February 2022.
FY 2022 EPRA adjusted earnings 5.0p
Share issuance dilution -0.2p
Net Shared ownership 0.5p
Retirement rent inflation 0.4p
Retirement cost inflation -0.3p
Net finance costs -0.5p
Fund expenses -0.2p
FY 2023 EPRA adjusted earnings 4.7p
Dashed Line 5.2p
Dividend coverage improved through the year, with 86% in the
first half to 95% in the second half reflecting the impact of
rental increases throughout the year, particularly in shared
ownership, which generally occur on 1 April.
Through the year, Adjusted EPRA Earnings have been bolstered by
strong growth in gross rental income but this has been more than
offset by inflationary increases in overheads, property expenses
and higher finance costs attributable to floating rate debt.
The board announced in the interim results that in light of the
higher interest rate environment, cost inflation in retirement and
fund opex increases we would look to reset the dividend. As the
Chair has outlined, ReSI is focused on increasing the
sustainability of its income stream, and paying a progressive and
covered dividend that contributes to an attractive level of total
return. The former is to be achieved firstly through the full
occupancy of our shared ownership portfolio, which replaces first
tranche sales profit with recurring rental income, and secondly
through repayment of ReSI's GBP21mn of floating rate debt.
This short-term debt was originally put in place to provide
flexibility to the Company ahead of an intended fundraise, which is
no longer possible due to market conditions which have the Company
continuing to trade at a significant discount to its Net Asset
Value. Our local authority housing portfolio is now under offer and
in legals, with an expectation that this will complete in early
2024 allowing full repayment of our floating rate debt.
The local authority portfolio provided net rental income of
around GBP1.9mn, 1.0p per share during FY 2023, but this reduced to
GBP0.9mn (0.4p per share) net of the floating rate debt costs - and
is expected to reduce to GBP0.4mn (0.2p per share) for FY 2024 with
the increase in floating rate debt costs. As previously mentioned
the disposal of this portfolio will enable full repayment of
floating rate debt and leave ReSI with only its long-term debt that
has a weighted average maturity of 23 years, with our largest loan
of GBP94mn fixed at 3.5% until 2043.
While these prospective assets sales will reduce ReSI's adjusted
earnings, they increase the sustainability of income and strengthen
the balance sheet, via the removal of exposure to interest rate
moves. Our progress in the sale of these assets gives the Board
confidence about future income levels, allowing the Board to rebase
the dividend to 4.12p per share, representing a cut of 20%, and to
have confidence that we will be able to progressively grow this
dividend on a fully covered basis, whilst continuing to invest in
maximising the growth of the portfolio value. If we removed the net
impact of the local authority portfolio from FY 2023 results, the
new dividend of 4.12p per share would have been 103% covered.
Valuations
During the year, we have seen significant disruption to the UK
property investment market due to macroeconomic and geopolitical
issues. A significant increase in interest rates has driven a sharp
increase in cost of capital and pushed property yields higher.
Valuers have been quick to reprice to this higher rate
environment, with valuation declines reported almost entirely
across the listed REIT space. The inherent inflation linkage of the
ReSI portfolio, has limited the full impact of the outward yields
shifts. We expect valuations of higher quality assets generating
stable income flows, such as the ReSI portfolio, to stabilise more
quickly and prove more resilient.
Furthermore, in addition to the stable and predictable income
generation, ReSI's portfolio naturally benefits from valuation
tailwinds, due to the chronic undersupply in affordable housing
across the demographic spectrum in the UK.
Savills Advisory Services Limited (Savills) are appointed to
value the Company's property investments, in accordance with the
Regulated Investment Company requirements, on a quarterly basis.
ReSI's property valuation, as assessed by Savills, decreased by
GBP39.6mn during the year - a 10% decrease on a like-for-like fair
value basis to a total of GBP345mn as of 30 September 2023. This
was driven by c.80 bps increase in the weighted average valuation
yield applied to the portfolio, with both shared ownership and
retirement valuation yield shifts of c.50 bps to 5.5% and 3.4%
respectively. This shift in valuation yields has been partially
negated via the rental growth of 6.1% on 2,763 properties (84% of
portfolio).
Balance Sheet
30-Sep-23 30-Sep-22 Variance
(GBP'000) (GBP'000)
Total Investments 345,138 374,785 -8%
----------------------------------------- ----------- ----------- -------------
Inventories - First tranche Shared
Ownership properties available for
sale 431 1,203 -64%
----------------------------------------- ----------- -----------
Cash and cash equivalents 8,805 15,984 -45%
----------------------------------------- ----------- -----------
Borrowings amortised cost (199,039) (194,701) 2%
----------------------------------------- ----------- -----------
Other (3,882) (787) 393%
EPRA Net Tangible Assets 151,453 196,484 -23%
EPRA NTA per share (pence) 81.8 106.1 -23%
----------------------------------------- ----------- -----------
EPRA Net Disposal Value (NDV) 195,303 225,455 -21%
EPRA NDV per share (pence) 105.2 121.8 -21%
----------------------------------------- ----------- -----------
IFRS NAV 168,679 201,388 -17%
IFRS NAV per share (pence) 91.1 108.8 -17%
----------------------------------------- ----------- -----------
Book Value of Debt 181,747 189,705 -4%
Investment valuations declined by GBP30.3mn (8%) reflecting a
GBP38.4mn (10%) like-for-like decline caused by a c.80 bps increase
in the weighted average valuation yield and the completion of
GBP9mn of new shared ownership acquisitions from Brick By
Brick.
Inventories reflect the amount of unoccupied shared ownership
properties that are expected to be sold to shared owners and are
held at cost. The 64% decrease reflects the leasing of 59 vacant
shared ownership homes between September 2022 and September 2023
with five remaining vacant on 30 September of which four have been
subsequently occupied and the final one reserved at the date of
signing the FY 2024 financial statements.
The GBP7mn decline in cash balance primarily reflected the
completion in March 2023 of GBP9mn of previously committed
acquisitions for 59 new shared ownership homes from Brick By
Brick.
Total borrowings (amortised cost) increased by GBP4mn during the
year to GBP199mn as of 30 September 2023, reflecting the indexation
on the USS credit facility. The GBP199mn amortised cost of ReSI's
debt has a weighted average life of 21 years, and the value of this
debt is recognised with a mark to market value of GBP157mn,
representing GBP42mn of value for shareholders compared to raising
new debt today. This puts ReSI in a better position to deliver
long-term earnings growth than other REITs, which have
significantly lower weighted average debt maturity profiles. This
GBP42mn of value is recognised in ReSI's NDV of 105.1p per
share.
The IFRS NAV includes the present value of the USS debt, but not
the long-term debt with Scottish Widow, and so at GBP184mn is part
way between the full amortised cost (GBP199mn) and mark to market
(GBP157mn).
The EPRA NTA and IFRS NAV measures exclude the reversionary
surplus in our portfolio which stands at GBP78mn. This represents
the difference between the market value of our assets used in our
balance sheet and the value we could realise if they became vacant.
Overall, our portfolio is valued at a 23% discount, on average, to
its reversionary value.
Financing and Capital Structure
At the 30 September 2023 balance sheet date, ReSI had c.GBP199mn
(notional value) of debt in place, of which 90% is either long-term
fixed rate or inflation linked. This represents a 2% increase in
debt since September 2022, reflecting the indexation of the
inflation-linked USS debt. LTV has increased by 3% from 47% to 50%
over the year and is in line with the 50% leverage target.
Our reversionary loan-to-value is 41% when taking into account
the GBP422mn vacant possession value of the portfolio. This GBP78mn
reversionary surplus (compared to GBP345mn of fair value)
represents the difference between the market value of our assets
used in our balance sheet and the value we could realise if they
became vacant. Overall, our portfolio is valued at a 22% discount,
on average, to its reversionary value.
FY 2023 FY 2022
========================================= =========== ==========
Total debt GBP182mn GBP190mn
----------- ----------
LTV (target 50%) 50% 47%
----------- ----------
Leverage on reversion value 44% 42%
----------- ----------
Weighted average fixed-debt coupon
(49% of ReSI's debt) 3.5% 3.5%
----------- ----------
Weighted average inflation-linked debt
coupon (41% of ReSI's debt) 1.1% [21] 0.9%
----------- ----------
Weighted average maturity 21 years 22 years
----------- ----------
Capital stack
FY 2023
Debt GBP182mn
-----------------
Equity GBP169mn
-----------------
Grant Funding GBP15mn
-----------------
Reversionary GBP78mn
Surplus
-----------------
Total GBP444mn
-----------------
The drop in property investment values and increase in debt fair
value has narrowed headroom in the Santander working capital
facility's loan-to-value covenant which is GBP21mn drawn and
represents 11% of ReSI's outstanding debt balance. As at 30
September 2023, the working capital facility's LTV level was 51%,
with c.GBP25mn of property value headroom (7%) before a covenant
breach is triggered. We estimate that ReSI's weighted average
valuation yield would need to shift outward by a further c.40bps
for this valuation loss to be realised, on top of the c.80bps
widening since September 2022.
This short-term debt was originally put in place to provide
flexibility to the Company ahead of an intended fundraise, which is
no longer possible due to market conditions which have seen the
Company's shares continuing to trade at a significant discount to
Net Asset Value. We stated in June our intention to dispose of
non-core assets and our local authority housing portfolio is now
under offer and in legals, with an expectation that the sale will
complete in early 2024, allowing us to repay the Santander facility
and extinguish our short-term floating rate debt. This would leave
the Company with long-term fixed or inflation-linked drawn debt
with a weighted average maturity of 23 years .
ReSI's other LTV covenants and ICR covenants still have ample
headroom and ReSI's USS debt on its shared ownership portfolio is
fully amortising and so does not have a loan-to-value debt
covenant.
During the year, our GBP12mn loan with NatWest matured and was
replaced by drawing down further from ReSI's working capital
facility with Santander. ReSI currently has c.GBP3mn of
unrestricted cash as well as GBP4mn of additional liquidity
available via its working capital facility.
Loan covenants by portfolio [22]
====================================================================================
Covenant Shared Ownership Retirement / Total Portfolio
/ USS Scottish Widows / Santander
------------------ ------------------ -----------------
Current debt balance GBP69mn GBP94mn GBP21mn
[23]
------------------ ------------------ -----------------
LTV - Threshold N/A <58% <55%
------------------ ------------------ -----------------
LTV - Reported N/A 45% 51%
------------------ ------------------ -----------------
Value - Headroom
(%) N/A 24% 7%
------------------ ------------------ -----------------
Value - Headroom N/A GBP50mn GBP25mn
(GBP)
------------------ ------------------ -----------------
ICR / DSCR - Threshold >0.95x >2.0x >1.5x
------------------ ------------------ -----------------
ICR / DSCR - Reported 6.4x 3.2x 3.0x
------------------ ------------------ -----------------
NOI - Headroom 85% 40% 49%
------------------ ------------------ -----------------
SONIA Interest Rate
- Breach Threshold
[24] Fixed-rate Fixed-rate 31%
------------------ ------------------ -----------------
Social and environmental:
We remain committed to delivering measurable social and
environmental impact for the benefit of our residents and the
UK.
This year shared ownership rents were due to increase by 13.1%
on 1 April, however we have voluntarily capped this increase at 7%
(by way of a rebate), in line with wage growth and the core
inflation rate excluding the impact of energy bills. This decision
is entirely in our control but matches the cap that the government
has applied to general needs social housing properties. The 7% rent
cap has saved residents GBP222k on an annualised basis.
Our retirees have benefited from ReSI's decision to apply a 6%
cap to contractual rent increases to all directly rented retirement
properties, which has generated annualised savings of GBP1.0mn for
our residents this year. In addition, further rent caps and rent
freezes have been provided to residents who are most in need,
representing GBP68k of annualised benefit as at September 2023.
The rental increase caps we offer to residents highlight ReSI's
commitment to ensuring housing remains affordable for our
residents. We believe this will help residents stay with ReSI for
longer, and increase demand for our product, which should help us
to deliver long-term, stable returns to investors.
To ensure that our intended social impact outcomes are being
experienced by residents, ReSI conducted its annual survey of its
shared ownership and retirement rental residents in 2023, as well
as instructing impact consultant, The Good Economy, to perform an
impact assessment of the Company. Highlights from the survey
results are shown below and a summary of the results of The Good
Economy's report is in the Social Impact section of the
Environmental and Social Impact Report.
These positive survey results help to confirm that the outcomes
that ReSI intends to deliver are being experienced by residents. We
aim to continue delivering high-quality of service to our residents
as a best-in-class provider of affordable housing.
ReSI continued to invest in improving the energy efficiency of
its retirement portfolio and is targeting upgrading all directly
rented properties to at least a C by 2025, with 98% now at this
target. We will continue to push ahead with this target, despite
the government scrapping implementation of a minimum requirement of
C for rental homes. We believe energy efficiency will continue to
be a focus for residents and reducing energy bills will support
affordability and help drive long-term value for our portfolio. For
the whole portfolio, 86% of the properties are rated C or higher,
leaving ReSI well ahead of the average for the social sector and
the overall UK housing market [25] .
(1) English Housing Survey, 2021-2022
Investing in the energy efficiency of our properties is one
important step in our broader net zero plan for ReSI. This year, we
continued to work with the consultancy Kamma Data, who take an
innovative data-focused approach towards assessing the retrofitting
works that are required to upgrade the energy efficiency of ReSI's
properties to their full potential.
Kamma's report found that whilst improving property energy
efficiency will drive a significant reduction in carbon emissions,
it is not possible for the portfolio to reach net zero through
retrofitting alone. To reach operational net zero, ReSI will either
have to wait until the national grid is fully decarbonised, which
is expected to be in 2035, or it will have to directly procure
renewable energy sources for its properties. This is an option that
the Fund Manager is currently exploring, and will feed into ReSI's
net zero strategy to work with industry partners to achieve
complete net-zero (including embodied carbon) by 2050 at the
latest, in line with government targets.
Management team transition
Gresham House has recently hired six senior real estate
investment professionals to join me and the Housing team to bolster
resources, experience, and to help drive further growth.
Mike Adams joined in February 2023 as Managing Director of the
expanded Gresham House Real Estate business and has overall
responsibility for all Real Estate strategies. Other recent senior
hires were: Sandeep Patel in December 2022 as the division's
Finance Director, Burak Varisli in February 2023 as Investment
Director, Chris Carter Keall in August 2023 as Head of Asset
Management, Matthew Painter in October 2023 as Director of
Development & Delivery and Claire Cooper in November 2023 as
Director of Shared Ownership. The last three will be focused on
driving operational performance across our portfolio.
Alex Pilato fully retired in June 2023, completing a transition
that commenced in March 2020 with the sale of the Fund Manager to
Gresham House. Alex continues to have a very strong interest in the
success of ReSI and has significant shareholdings.
Summary and outlook:
ReSI continues to see enormous demand for affordable homes and
is well placed to meet the particular shortage of fit for purpose
homes for independent living through retirement and the lack of
affordable homeownership routes for young families and key
workers.
During FY 2023 ReSI has delivered strong like-for-like rental
growth of 6.1% whilst achieving record occupancy and with rent
collection stable at almost 100% reflecting our focus on individual
resident contractual relationships.
This positions ReSI well for the future but the short-term
positive impact above has been more than offset by inflationary
increases in retirement property expenses, increased floating rate
interest costs and an increase in fund operating expenses, leaving
Adjusted Earnings down 3% and reducing dividend cover by 6%.
From a capital perspective, it has been incredibly disappointing
to see the 10% decline in our investment valuations, and the
resulting 18% negative EPRA total return, despite strong rental
growth, but this has been market led across all high-quality assets
with a 40% value loss in the 20-year gilt since the start of 2021
[26] .
The sale of the local authority portfolio will allow ReSI to pay
down its floating rate debt leaving the Company with long-term
fixed or inflation-linked debt with an average maturity of 23
years, and our largest loan of GBP94mn fixed at 3.5% until 2043 .
This puts ReSI in a better position to deliver long-term earnings
growth relative to other REITs, which have significantly lower
weighted average debt maturity profiles.
We have worked with the Board to rebase the dividend at 4.12p,
targeting full dividend cover to support a progressive dividend
that grows sustainably in line with ReSI's underlying
inflation-linked rents and operational optimisation initiatives. As
we move into 2024, we will continue to look at how we can drive
best value for shareholders and add value to our portfolio,
including reviewing the options for further disposals should they
support our aim of maximising shareholder value and enable us to
reverse the discount to Net Asset Value at which our shares
trade.
Our immediate focus is on driving the underlying operational
performance of our retirement portfolio, working closely with My
Future Living, our dedicated in-house property management team, to
drive earnings. These operational improvements will be led by our
expanded Asset Management team, led by Chris Carter Keall and are
anticipated to be delivered via two primary channels. Firstly,
capital recycling via strategic disposals and reinvestment,
allowing rationalisation of the portfolio from a geographic
perspective, enabling cost savings and yield enhancement. Secondly,
active asset management initiatives will be employed to continue to
drive lower voids and higher rents on re-lets. Both these
initiatives will deliver yield and earnings enhancement while
providing good quality housing for retirees at a fair and
reasonable rent.
To further align ourselves with shareholders, and reflecting our
confidence in unwinding the share price discount, Gresham House is
reducing its management fee to be based on the average of share
price and NAV. This reflects our confidence in the strength of the
ReSI platform and the opportunity it can deliver.
With strong demand, inflation-linked rents, and wide support for
more investment in affordable housing the outlook for ReSI remains
strong. As always, we are very grateful for the support of our
shareholders during these challenging times.
Ben Fry
Managing Director, Housing
4 December 2023
Environmental and social impact
ReSI's approach to environmental and social impact
This section covers some of the key areas of implementation and
other ongoing social impact and environmental initiatives during
the year. There is also further detail relating to the impact of
the Company on its major stakeholders in the Section 172 statement
on page 53.
The Board and the Fund Manager believe that sustainable
investment involves the integration of Environmental, Social and
Governance (ESG) factors through all stages of the investment
process and that these factors should be considered alongside
financial and strategic issues during the initial assessment and at
all stages of the investment process. The Fund Manager incorporates
such ESG factors into the investment process through the ESG
decision tool, developed by Gresham House's dedicated Sustainable
Investment Team (see ESG Decision Tool section). Ongoing monitoring
of ESG related risks is carried out through investment reviews.
The Board and the Fund Manager recognise their responsibility to
manage and conduct business in a socially responsible way and many
of the Company's investors, residents and other counterparties have
the same values. Good governance and social responsibility require
that the Company seeks to implement a collaborative approach to
understanding and improving environmental and social performance
through engagement with counterparties on such matters.
The Fund Manager gives appropriate consideration to corporate
governance and the representation of shareholder interests. This is
applied both as a positive consideration and to exclude certain
investments where the Fund Manager does not believe the interests
of shareholders will be prioritised.
The Fund Manager's parent, Gresham House has a clear commitment
to sustainable investment as part of its business mission. Based on
its Sustainable Investment Framework, it has developed a range of
policies and processes for all asset classes which the Fund Manager
uses to integrate sustainability into its investment approach. More
details can be found in the Housing Sustainable Investment Policy
here:
https://greshamhouse.com/wp-content/uploads/2023/07/Real-Estate-UK-Housing-Sustainable-Investment-Policy-July-23.pdf
Housing Sustainable Investment Framework
At Gresham House, we break down the key environmental and social
factors of our investment strategy into six themes, which form the
Housing Sustainable Investment Framework ("the Housing Framework").
Measurable objectives and KPIs have been identified for each
theme.
Target outcome Measure of success
=============== ================================== =================================================================
Additionality Increase the supply of UK * # of new homes delivered
affordable
housing
=============== ================================== =================================================================
Affordability Construct new, high-quality
housing affordable to low and * % of affordable homes
average workers
* Affordability metrics - house price and ongoing costs
=============== ================================== =================================================================
Customer Achieve best-in-class customer
service service * Customer survey results
* Staircasing / moving home
=============== ================================== =================================================================
Resident Ensuring delivery of high
experience quality, * # of homes with access to outdoor and working space
safe homes
* Walkscore
=============== ================================== =================================================================
Environmental Ensure new builds are
benefits energy-efficient * % of homes with renewable generation on site
and manage environmental
footprint
* % EPC A+, A and B
=============== ================================== =================================================================
Community Investments that regenerate
regeneration a particular site / area * % of housing in areas of need as defined by local
authority
=============== ================================== =================================================================
This year's reporting of the Company's performance against the
measures of success has been focused on those measures that relate
to the ongoing management of the portfolio. The key measures of
success relating to ongoing management are EPC ratings and the
results of the customer survey. ReSI's performance against these
metrics is detailed in the Fund Manager's report. The Company has
not committed to any new acquisitions during the year and hence
hasn't reported on its performance against the measures of success
that relate to new acquisitions.
ESG Decision Tool
The Fund Manager has developed the ESG Decision Tool ("the
Tool"), which is used by the investment team to assess the
performance of prospective investments against six core themes in
the Housing Framework and to identify potential ESG risks and
opportunities. The Tool contains two core sections:
Initial Evaluation - An initial assessment of the investment's
performance against the six core social and environmental factors
in the Housing Framework. The investment will be assessed against
measures of success which have been developed for the six core
social and environmental factors, ensuring that outcomes can be
measured and compared to other investments.
Detailed Questionnaire - This assesses ESG risks in more detail
by guiding the Investment team through a series of potential ESG
risks. The completed questionnaire highlights specific ESG risks
that are the most relevant to the asset.
The investment team are required to mitigate the ESG risks
identified by the Tool as part of the due diligence process for the
investment to be approved.
The Tool helps to ensure that ESG risks and opportunities are
considered from the beginning of the investment process. These
risks and opportunities are then continuously tracked, monitored
and managed after the acquisition phase.
Gresham House Sustainable Investment
The Fund Manager's parent, Gresham House, has achieved top
scores in the 2020 PRI (Principles for Responsible Investment)
assessment report, the Group's first assessment since becoming a
PRI signatory in 2018. For its 2021 PRI Report, Gresham House was
awarded 4 and 5 stars, out of a maximum of 5 stars, for all modules
relevant to Gresham House plc. For Real Estate specifically,
Gresham House scored 78% versus a median for the sector of 69%.
Gresham House became a signatory to the UK Stewardship Code in
2021. In August 2023, it was announced that Gresham House had met
the expected standard of reporting for 2022 and remained a
signatory to the UK Stewardship Code 2020 for the third year in a
row. Gresham House has also been awarded the Green Economy Mark
from the London Stock Exchange.
More information on Gresham House's approach to sustainable
investment can be found in its Sustainable Investment Report .
Environmental impact
Measuring and reducing the environmental impact of ReSI's
operations, whilst addressing the risks posed by climate change, is
essential in enabling ReSI to reach its long-term financial
objectives.
It is estimated that carbon emissions produced by residential
buildings account for 20% [27] of all carbon emissions in the UK
and as a result, decarbonisation of the housing sector is a key
focus of the government's net zero strategy. ReSI recognises that
as a responsible landlord, it has a role to play in reducing the
emissions produced by its portfolio and ultimately the wider
housing sector. To this end, ReSI has partnered with the
consultancy, Kamma Data ("Kamma") to estimate the Scope 1, Scope 2
and Scope 3 carbon emissions generated by its property portfolio in
the period.
ReSI is committed to improving the energy efficiency of its
portfolio through retrofitting where possible, ensuring that it
remains ahead of government legislation. During the year, ReSI
instructed Kamma to produce a report on the retrofitting procedures
that are required to improve the energy efficiency of ReSI's
property portfolio further. The report found that whilst improving
property energy efficiency will drive a significant reduction in
carbon emissions, it is not possible for the portfolio to reach net
zero through retrofitting alone.
To reach operational net zero, ReSI will either have to wait
until the national grid is fully decarbonised, which is expected to
be in 2035, or it will have to directly procure renewable energy
sources for its properties. This is an option that the Fund Manager
is currently exploring, and will feed into ReSI's net zero strategy
to work with industry partners to achieve complete net-zero
(including embodied carbon) by 2050 at the latest, in line with
government targets.
Assessing the energy efficiency of ReSI's portfolio
ReSI monitors the energy efficiency of its portfolio using
information gathered from property level Energy Performance
Certificates (EPC). EPC ratings are a measure of a property's
energy efficiency, assigning a Standard Assessment Procedure (SAP)
rating of 1 to 100 (higher indicates a more environmentally
friendly building) and a corresponding letter grade between A and
G. EPC assessments are performed by third party assessors and
therefore provide an externally-verified method of quantifying the
energy efficiency of each home.
Government requirements and proposals
In the UK it is a legal requirement that unless exempt, all
directly-rented residential properties must have an EPC rating of
at least E.
During the year, the government withdrew its proposal to mandate
that directly rented properties have a minimum EPC of C. This would
have applied to new rental tenancies from 2025 and all rental
tenancies from 2028. This consultation would not have applied to
shared ownership which is classified as owner-occupied rather than
rented accommodation.
The change in government policy has not changed ReSI's target to
upgrade 100% of its directly rented EPC D rated units to a minimum
of C by 2025 as part of Project D, described in the Targets and
Progress section of this Annual Report. We believe energy
efficiency will continue to be a focus for residents and reducing
energy bills will support affordability and help drive long-term
value for our portfolio.
Calculating ReSI's environmental impact: energy efficiency
ratings (EPCs)
At the year end date, 86% of ReSI's portfolio was EPC rated C or
higher, up from 85% last year. This rises to 98% for ReSI's
directly-rented homes, up from 96% last year.
Less than 1% of ReSI's properties are E rated, with 100% of
directly-rented properties rated at D or above. The remaining E
rated properties are primarily shared ownership houses that were
acquired as part of the acquisition of older, tenanted properties
from Orbit.
(2) English Housing Survey, 2021-2022
The table above evidences that the efficiency of ReSI's
portfolio is well above the UK average, however whilst we are
pleased with progress in this area, we recognise that there is more
work to be done.
-- Total properties 3,295, sample of 96% assessed
-- Total directly-rented properties 1,915, 100% of properties assessed
Our targets and progress
ReSI is committed to positioning its portfolio ahead of
government requirements, not only to prevent homes with poor energy
efficiency ratings from being rented, but because we believe
improving the efficiency of our homes will increase demand from
residents. To this end, the following steps have been taken in FY
2023 as part of Project D.
Directly Rented Units: ReSI has continued to make progress on
Project D, the workstream to upgrade 100% of its non-exempt
directly rented properties to a minimum of EPC C by 2025. During
the year, a further 33 directly rented properties were upgraded
from a D to a C, with 146 (78%) of the properties that were D rated
at the beginning of Project D now having been upgraded to a C. The
remaining non-exempt directly rented D rated properties are
expected to be upgraded to a C by 2025
Housing Manager Flats (HMFs) : In addition to upgrading the
directly rented units, ReSI has continued to make progress on
upgrading the energy efficiency of the HMFs in its retirement
portfolio. The HMFs are on license to a third party who is
responsible for the maintenance of the properties, however ReSI has
worked with the counterparty to improve the efficiency of the
portfolio, evidenced by the percentage of HMFs with an EPC rating
of D or below dropping from 25% in FY 2022 to 19% in FY 2023.
Properties have been upgraded through a combination of retesting
and retrofitting works, such as replacing older heating systems and
fitting insulating heat jackets on water heaters. The energy
efficiency improvements carried out during the year came at a cost
of GBP517k, evidencing ReSI's commitment to reducing carbon
emissions across the portfolio.
The potential impact of climate change on ReSI and mitigation
methods
In addition to the regulatory risks relating to property energy
efficiency, the Board is mindful of further risks posed by climate
change, notably in the following areas:
- Overheating risk : rising average temperatures combined with a
greater quantity and quality of property insulation could result in
homes becoming too hot in the summer months. ReSI is aware of this
risk and will balance the need to insulate its homes with the risk
of 'over-insulating' them by making property-by-property
assessments as required.
- Flood risk : rising sea levels could increase the chance of
flooding in homes built near rivers and other bodies of water.
ReSI's investment criteria for new build homes requires that
acquisitions are not developed in medium / high risk flood areas
without appropriate mitigants in place.
- Demand: Our sales and letting teams continue to see higher
levels of demand for more energy efficient homes as first
identified in 2022, with this trend expected to increase further
over time. To mitigate against this risk, ReSI plans to upgrade the
energy efficiency of its portfolio such that it is ahead of its
competitors and proposed government legislation, as outlined in the
Our Targets and Progress section.
Sustainable approach to new investment
ReSI's policy for acquiring new build homes is that they must
have a minimum EPC rating of a B. Going forward, ReSI aims to
increase the proportion of new build homes that meet the Future
Homes Standard, which is expected to be implemented by the
government for all new homes by 2025.
ReSI's preference is to acquire properties developed on
brownfield sites in order to provide affordable housing while
preserving biodiversity and enhancing green spaces.
Calculating ReSI's environmental impact: carbon emissions
Kamma have estimated the carbon emissions produced by ReSI
during the period. Emissions are broken down into three categories
by the Greenhouse Gas Protocol:
Scope 1 - All direct emissions from the activities of the
Company or under its control. This includes fuel combustion on site
such as gas boilers and air-conditioning leaks.
Scope 2 - Indirect emissions from electricity purchased and used
by the Company. Emissions are created during the production of the
energy and eventually used by the Company.
Scope 3 - All other indirect emissions from activities of the
Company, occurring from sources that it does not own or
control.
ReSI's carbon emissions for the period are disclosed in line
with the recommended EPRA disclosures in the section below.
The Company invests in UK residential real estate only and hence
all emissions disclosed relate to UK residential real estate
investment.
Scope 1 and 2 emissions
EPRA sBPR Performance Measures Assessed: GHG-Dir-Abs
Where ReSI is financially responsible for the energy consumption
of communal areas and vacant properties within its property
portfolio, the emissions generated by these activities fall under
Scope 1 and 2. Where gas is the heating source for these emissions,
as is the case for some shared ownership properties that were
vacant during the year, they are classified as Scope 1. Where the
heating source is electricity, they are classified as Scope 2.
Individual property energy usage is the responsibility of the
tenants however and therefore classified under Scope 3.
ReSI doesn't have any office premises of its own and its
operations are performed by the Fund Manager, which is part of
Gresham House, and other third parties as necessary. As a result,
the Company's Scope 1 and 2 emissions are equivalent to the
landlord's emissions.
Emissions Category The Landlord's Carbon Emissions
- Tonnes Co2
--------------------- -----------------------------------
2022 2023
--------------------- ----------------- ----------------
Scope 1 1.5 11.7
----------------- ----------------
Scope 2 74.1 51.0
----------------- ----------------
Total 75.6 62.7
----------------- ----------------
Scope 1 emissions have increased due to a higher number of
shared ownership properties which use gas being vacant during the
period and Scope 2 emissions have decreased due to reduced
consumption from the vacant retirement properties.
The work performed by Kamma evidences that the Scope 1 and 2
emissions generated by ReSI are very small compared to the Scope 3
emissions generated by its properties. Nonetheless, ReSI will
continue to explore methods of reducing its Scope 1 and 2 emissions
going forward.
Scope 3 emissions - third party providers
ReSI is responsible for indirect emissions through its service
contracts with third party providers. The emissions of the Fund
Manager will be reported as part of Gresham House's 2023 annual
reporting.
None of ReSI's properties were in development during the
financial year and hence Scope 3 emissions from embodied carbon
emitted during the development process were 0 for the period. This
is compared to 1,172 tonnes Co(2) in FY 2022, driving a significant
decrease in total Scope 3 emissions for the period.
Scope 3 emissions - residents and shared owners
The carbon emissions produced by residents in ReSI's properties
are classified as Scope 3, as they are generated and paid for by
residents.
Kamma has estimated the Scope 3 operational carbon emissions
generated by ReSI's property portfolio using data extracted from
Energy Performance Certificates. ReSI's carbon emissions have been
calculated in line with the PCAF Global GHG Accounting and
Reporting Standard.
These values are presented for 3,295 properties that ReSI had
acquired at 30 September 2023 on an annualised basis, regardless of
whether ReSI owned the home for the entire period, and no
adjustment is made for property void periods.
Total Scope 3 Operational Portfolio Emissions
EPRA sBPR Performance Measures Assessed: GHG-Indir-Abs
2022 2023
Total Energy Total Energy
Number of Consumption Tonnes Co2 Number Consumption Tonnes Co2
[28] properties (GWh) emissions of properties (GWh) emissions
------------------ -------------- ------------ ---------------- -------------- ------------
ReSI plc 3,243 40 3,670 3,295 38 3,552
------------------ -------------- ------------ ---------------- -------------- ------------
Scope 3 Emissions Intensity
EPRA sBPR Performance Measures Assessed: Energy-Int, GHG-int
2022 2023
Energy Emissions Energy Emissions
Intensity Intensity Intensity Intensity
(kWh / (Kg co2 / (kWh / (Kg co2 /
Total m^2 m^2) m^2) Total m^2 m^2) m^2)
----------------------------------- ---------------------------------------------- ------------------------------------------------------------------ -------------------------------- ----------------------------------------------------- --------------------------------------------------------
ReSI
plc 158,446 254 22 162,260 239 21
----------------------------------- ---------------------------------------------- ------------------------------------------------------------------ -------------------------------- ----------------------------------------------------- --------------------------------------------------------
Total energy consumption across the portfolio has decreased by
4% and carbon emissions decreased by 2%, despite the number of
properties having increased by 2%. Energy and emissions per floor
area also reduced year on year, by 6% and 4% respectively. The
decrease in total emissions and emissions per floor area is due to
the Company completing on new build shared ownership properties in
FY 2023 with high levels of energy efficiency and due to the work
done through Project D to improve the efficiency of the retirement
portfolio.
Energy consumption by energy source [29]
EPRA sBPR Performance Measures Assessed: Elec-Abs, Fuels-Abs
2022 2023
Gas Electricity LPG Renewable Total Gas Electricity LPG Renewable Total
------ ------------- ------ ----------- ------- ------ ------------- ------ ----------- -------
ReSI plc
(GWh) 7.60 32.91 0.15 0.00 40.65 7.28 31.68 0.16 0.00 39.12
------ ------------- ------ ----------- ------- ------ ------------- ------ ----------- -------
There has not been a material change in the source of the energy
used by the Company. The energy used by the company materially
comes from gas and electricity, with consumption from both sources
decreasing during the year due to the improved energy efficiency of
the portfolio.
Total carbon emissions summary
Emissions Category EPRA Disclosure Total Carbon Emissions - Tonnes
Code Co2
2022 2023
------------------ ----------------- ----------------
Scope 1 GHG-Dir-Abs 1.5 11.7
------------------ ----------------- ----------------
Scope 2 GHG-Dir-Abs 74.1 51.0
------------------ ----------------- ----------------
Scope 3 GHG-Indir-Abs 4,643.9 3,418.4
------------------ ----------------- ----------------
Total carbon emissions 4,719.5 3,481.1
----------------- ----------------
ReSI will continue to push forward with its sustainable
investment targets in FY 2024, with the intention of reducing its
carbon emissions further.
Social Impact
ReSI seeks to provide long-term solutions to the UK's lack of
affordable housing through a focus on independent living with
retirement rentals and affordable homeownership.
Our purpose is to deliver affordable, high quality, safe homes
with great customer service and long-term stability of tenure for
residents. We achieve this through meeting demand from housing
developers (housing associations, local authorities and private
developers) for long-term investment partners to accelerate the
development of socially and economically beneficial affordable
housing.
To confirm that our intended social impact outcomes are being
experienced by residents, ReSI conducted its annual survey of its
shared ownership and retirement rental residents, as well as
instructing impact consultant, The Good Economy, to perform an
impact assessment of the Company.
The Good Economy report
The Good Economy ('TGE'), are an independent impact consultant
who have been instructed by ReSI to produce an impact report that
quantifies the impact generate by the Company during the year.
The key findings from the report are summarised below; the
entire report is available on ReSI's website
(https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/).
Social Outcomes
The Good Economy's report focused on the four key impact
objectives for ReSI.
How has ReSI performed against TGE's impact objectives?
Objective
Shared 72% of properties 99.7% of homes Room for improvement: ReSI did not
Ownership in the least are affordable S ome residents have sufficient
affordable local at the green l iving in apartments capital invest
authorities and amber levels dissatisfied in new build
with maintenance properties during
Average resident of communal FY 2023.
saves GBP44 areas and rise
per month compared in service charges
to privately
renting the
equivalent property
------------------- ---------------------- ------------------------ --------------------
Retirement 95% valued the 23% of residents 85% of residents Merge with cell
assured in receipt of satisfied would above
lifetime tenancy Housing Benefit recommend ReSI
as important to a friend
Retirement rents [31]
are below the
average lower
quartile private
rent level [30]
------------------- ---------------------- ------------------------ --------------------
Address social need
Shared ownership: House prices in England are on average eight
times greater than the average person's earnings [32] , making the
average home unaffordable to the average worker. TGE has found that
72% of ReSI's shared ownership homes are located in local
authorities with house price to earnings ratios above this average,
demonstrating ReSI's commitment to delivering affordable homes to
the areas that need them most.
Whilst affordability is most constrained in areas with an above
average price to income ratio, the average worker is unable to
afford the average property in regions where the ratio is above
five times. Any local authority with a ratio above this level has a
need for affordable housing, and 100% of ReSI's properties are
located in such locations.
Retirement: ReSI's retirement portfolio provides residents with
specialist accommodation that is well maintained, offers security
of tenure, and allows retirees to be part of a community. 95% of
residents said they valued the assured lifetime tenancy offered by
ReSI as important, with the low void rate of ReSI's properties
evidencing the demand for the tenure.
Provide affordability and value for money
Shared ownership: When assessed through TGE's person centred
affordability calculator, 99.7% of ReSI's shared ownership
properties were found to be affordable to local residents at the
green and amber level. Under TGE's definition, green affordability
and amber affordability is where the resident is spending less than
33% and 40% respectively of their net income on housing costs.
TGE found that on average, ReSI's shared ownership residents
save GBP44 per month when compared with renting an equivalent home
locally on the open market. ReSI has ensured its properties remain
affordable to residents through capping rent increases below
inflation at 7% .
Retirement: The rents charged on ReSI's retirement properties
include service charge, providing residents with, amongst other
things, an onsite warden, garden maintenance and a communal living
area. When the cost of the service charge is removed from the rent
level, the rents on ReSI's retirement properties are, on average,
less than the lower quartile market rents when compared to
equivalent properties in the same local authority.
Rents set at this level ensure that a portion of the properties
are accessible to residents on lower incomes, evidenced through 23%
of residents funding rent payments through housing benefit.
ReSI ensured that retirement rents remained affordable to
residents during the year by continuing to apply a 6% rent cap to
rent increases. The rent cap has generated annualised savings of
GBP1.0mn for residents compared to increasing rents with RPI.
In addition to applying the rent cap, ReSI works collaboratively
with residents who are in financial difficulty, offering bespoke
solutions such as checking welfare eligibility, offering residents
cheaper properties within the development and reduced rent
increases. The reduced rent increases offered by ReSI generated a
total annualised saving for residents of GBP68k, taking the total
annualised saving from ReSI capping rents to GBP1.1mn.
Build quality partnerships
Shared ownership: For the 62% of properties where ReSI owns the
freehold, it has appointed its internal property manager, ReSI
Property Management Limited (RPML), as the property manager. 77% of
residents in RPML managed buildings said they were happy or not
dissatisfied with the service provided.
For the 38% of properties where ReSI owns the long leasehold
rather than the freehold (apartments), it is unable to appoint the
property manager or the managing agent and hence is less able to
directly influence building management, in particular the
management of communal areas and setting the service charge levels.
ReSI continues to work proactively with its external property
managers and ensures that they comply with KPIs, however going
forward ReSI will target investing in properties where it is able
to own the freehold to give it greater control over management.
Retirement: RPML manages the majority of the retirement
portfolio and has continued to provide a high quality service to
residents. When asked to rate the likelihood of recommending My
Future Living to a friend, 85% said 6 or higher (with 10 being the
highest). In addition, 89% of residents said they were happy or not
dissatisfied with their property management service.
Increase supply
There have been no significant changes to either the shared
ownership or retirement rental portfolio over that last year due to
ReSI having completed its deployment and being unable to raise new
capital with its share price trading at a discount to Net Asset
Values.
Cost of living
Rising interest rates, inflation and energy bills have increased
the cost of living for everyone over the past year. Whilst it has
not been possible to insulate our residents from all cost
increases, the steps ReSI has taken alongside the protection
offered by the shared ownership model have ensured that residents
are protected from some of the cost increases that someone renting
or owning the average UK property on the open market may have
experienced.
Rent increases
ReSI took the decision to cap the April 2023 shared ownership
rent increase at 7%, below their contractual level of 13.1%, saving
residents GBP222k in annualised rent.
For the retirement portfolio, ReSI chose to apply the
contractual cap to rent increases of 6%, generating annualised
savings of GBP1.0mn for resident compared to increasing rents with
RPI.
With UK wage inflation for the period averaging 8.5% [33] , the
rent caps applied by ReSI have ensured that rent levels remain
affordable to the average resident.
Mortgage rates
2023 has seen interest rates rise significantly in the UK, with
the best widely available rate on a two-year fixed rate mortgage
currently at 5.5% [34] . With rates having been elevated since
October 2022, many of our residents will now be on mortgages with
higher rates. As shared owners only own a portion of their home
(37% on average for our residents), the impact of increased
mortgage costs is significantly reduced compared to someone who
owns outright.
Energy bills
Energy prices have reduced from their peak last winter, with the
energy price cap falling to GBP1,834 in October [35] . That said,
the cost of energy is still 61% [36] greater than its level in
2021.
ReSI's properties are considerably more energy efficient than
the UK average, with the average shared ownership property rated
EPC B and the average retirement property rated EPC C, compared to
the average for a UK property of EPC D. The energy efficiency of
ReSI's properties is saving shared ownership and retirement
residents GBP661 and GBP248 [37] per year respectively compared to
the cost of energy at an average UK property, helping to insulate
residents from the full impact of elevated energy costs. This
saving was calculated by The Good Economy, and has been scaled up
for the change in the energy price cap since The Good Economy's
calculation date.
Saving compared to
Annual cost of typical UK property
energy - EPC D
Property with efficiency
of average for ReSI shared
ownership portfolio - EPC
B GBP1,173 GBP661
---------------- ----------------------
Property with efficiency
of average for ReSI retirement
rental portfolio - EPC C GBP1,586 GBP248
---------------- ----------------------
Cost-of-living: Financial impact on our residents
To assess the impact of the rising cost of living on residents
holistically, we have quantified the different housing cost
increases experienced for a typical resident.
Shared owners
The table below shows that a typical shared ownership resident
who is refinancing their mortgage at today's rates can expect to
see an increase in their housing costs and energy bills of 12%
compared to April 2022, whilst residents with mortgage rates that
are fixed will see their costs increase by 4%. Whilst ReSI
acknowledges that a rise of up to 12% in housing costs is
significant, these cost increases are driven by mortgage rates
outside of our control, and shared ownership remains significantly
cheaper than renting the equivalent property privately or owning
outright, with a typical outright owner who is refinancing seeing a
25% increase in their housing costs this year.
We will work with residents who are struggling to afford their
housing costs and can offer them the option to reverse staircase.
In addition, we will encourage residents to reach out to their
mortgage broker to ensure they get the most appropriate mortgage
terms for their financial circumstances.
2022 2023 Increase
GBP GBP GBP %
Rent and service
charge 7,688 8,226 538 7%
--------------------------------------------- --------- --------- ---------- ----------
Mortgage Costs 3,579 4,644 1,065 30%
--------------------------------------------- --------- --------- ---------- ----------
Energy Bills
[39] 1,261 1,173 -88 -7%
--------------------------------------------- --------- --------- ---------- ----------
Typical ReSI
Shared ownership
Resident refinancing
their mortgage
at today's rates
[38] Total 12,528 14,043 1,515 12%
-------------------- --------- --------- ---------- ----------
Rent and service
charge 7,688 8,226 538 7%
--------------------------------------------- --------- --------- ---------- ----------
Mortgage Costs 3,579 3,579 -00 0%
--------------------------------------------- --------- --------- ---------- ----------
Energy Bills 1,261 1,173 -88 -7%
--------------------------------------------- --------- --------- ---------- ----------
Typical ReSI
Shared ownership
Resident with
fixed rate mortgage Total 12,528 12,978 450 4%
-------------------- --------- --------- ---------- ----------
Mortgage Costs 14,315 18,577 4,263 30%
--------------------------------------------- --------- --------- ---------- ----------
Energy Bills 1,971 1,834 -137 -7%
--------------------------------------------- --------- --------- ---------- ----------
Typical UK outright
owner [40] Total 16,286 20,411 4,126 25%
-------------------- --------- --------- ---------- ----------
Housing Costs 14,700 16,244 1,544 11% [42]
--------------------------------------------- --------- --------- ---------- ----------
Energy Bills 1,971 1,834 -137 -7%
--------------------------------------------- --------- --------- ---------- ----------
Typical UK rental
accommodation
[41] Total 16,671 18,078 1,407 8%
-------------------- --------- --------- ---------- ----------
Retirement residents
For our retirement residents, capping rent increases at 6.0% and
living in a property that is more efficient than the UK average
means that cost increases for residents is lower than for the
typical average private renter.
2022 2023 Increase %
GBP GBP GBP
ReSI Retirement
resident [43] Rent 10,200 10,812 612 6%
---------------- -------- -------- ---------- ----------
Energy Bills
[44] 1,704 1,586 -118 -7%
-------------------------------------- -------- -------- ---------- ----------
Total 11,904 12,398 494 4%
-------------------------------------- -------- -------- ---------- ----------
Equivalent average
private rental
property [45] Rent 10,200 11,271 1,071 11% [46]
---------------- -------- -------- ---------- ----------
Energy Bills 1,971 1,834 -137 -7%
-------------------------------------- -------- -------- ---------- ----------
Total 12,171 13,105 934 8%
-------------------------------------- -------- -------- ---------- ----------
The assessment shows that although retirement residents have
seen their costs increase significantly in 2023, the increase will
have been 47% less than the increase that they could have expected
to have experience if they were renting the equivalent property
(with an EPC rating of D, the UK average) on the open market.
In addition, the state pension is expected to increase in April
2024 at around 8% in line with earnings September 2023 earnings
[47] . This increase is well above the capped rent increase of
6.0%
Governance
Governance and ethics
The Directors and the Fund Manager seek to embed effective
corporate governance and a focus on ethics in all of the Company's
operations.
The Board conducts an annual evaluation of its governance and
ethics operations, covering board effectiveness, audit committee
effectiveness, effectiveness of the Chairman and review of director
self-appraisals. Alongside this annual evaluation, ReSI's
governance and ethics policies are reviewed and renewed; these
policies cover anti-money laundering, anti-bribery, conflicts of
interest, diversity, inside information, disclosure, non-audit
services, third party benefits, share dealing and whistleblowing.
Many of these policies cover, not only the Board, but also ReSI's
suppliers and contractors.
ReSI's Board is an entirely independent board and is tasked with
monitoring the Fund Manager's performance as an AIFM. The Board of
ReSI comprises four non-executive directors, each appointed for the
skillsets and experience they could bring to ReSI. Each director is
entitled to compensation that is linked to ReSI's net asset value,
ensuring a long-term alignment of interests and in accordance with
REIT best practice.
Acquisitions of regulated housing tenures, such as shared
ownership, are subject to additional governance and ethics
oversight. These assets are owned by ReSI's wholly owned
subsidiary, ReSI Housing, which is registered with the Regulator of
Social Housing (RSH) as a for-profit Registered Provider, and
subject to the oversight of the RSH and the oversight of the
independent non-executive directors on the Board of ReSI
Housing.
The RSH regulatory framework is designed to ensure good
governance, financial viability, minimum maintenance and
environmental standards, and protection of residents' welfare, thus
supporting ReSI's goal of maximising social benefit.
ReSI Housing has a suite of governance policies that are
independently reviewed annually to keep ReSI Housing abreast of
regulatory developments and changes in best practice. These
policies cover structural governance items such as conflicts of
interest, succession and independence governance, fraud, anti-money
laundering, risk management and also asset management items such as
tenancies, affordability and anti-social behaviour.
Importantly, ReSI Housing's governance policies embed a
regulatory protection that affords non-executive directors enhanced
voting powers and a veto over any action that threatens ReSI
Housing's compliance with the RSH's regulatory standards. As at the
date of this Annual Report, ReSI Housing's non-executive directors
are:
-- David Orr CBE, former Chief Executive of the National Housing
Federation;
-- Gillian Rowley, former Head of Private Finance at the Homes
& Communities Agency; and
-- Mark Rogers, former Chief Executive of Circle Anglia Housing
Group.
More information on the ReSI Housing Board can be found on page
67.
Conflicts of interest
Each of ReSI, ReSI Housing and the Fund Manager has a conflicts
of interest in policy maintained in accordance with the applicable
best practice.
All of the Directors of the Company are independent of the Fund
Manager and the enhanced voting powers of ReSI Housing
non-executive directors are noted above, both of which are designed
to enhance good governance and mitigate conflicts of intertest.
The Company's conflicts of interest policy reinforces the
obligation on each Director to avoid a situation in which he or she
has, or can have, a direct or indirect interest that conflicts, or
may conflict, with the interests of the Company and to exercise
independent judgement.
Each Director has a duty to declare an interest in a proposed
transaction and an obligation to declare an interest in an existing
transaction.
If a Director has a potential conflict of interest between his
duties to the Company and his private interests or other
obligations owed to third parties on any matter, the relevant
Director will disclose his conflict of interest to the rest of the
Board, not participate in any discussion by the Board in relation
to such matter and not vote on any resolution in respect of such
matter.
Board culture
Each year the Board conducts an annual evaluation of its
governance and ethics operations. This evaluation covers board
effectiveness, audit committee effectiveness, effectiveness of the
chairman and director self-appraisals, with the aim of setting
focus areas and key priorities for the year coming.
This discussion of board effectiveness prioritises a discussion
of the Board's role, dynamics and culture, ensuring these develop
as the Company matures.
It is the responsibility of the Chairman to set the tone and
culture of meetings of Directors. At Board meetings, ReSI promotes
a collegiate discussion involving all non-executive directors and
the Fund Manager, ensuring the skills and experience of all Board
attendees are leveraged.
This leveraging of skills and experience is also a key focus of
the ReSI Housing Board.
Board diversity
Diversity is an important consideration in ensuring that the
Board and its committees have the right balance of skills,
experience, independence and knowledge necessary to discharge their
responsibilities. The ReSI plc Board is composed solely of
non-executive Directors and has 25% female representation (three
male directors and one female director), this will move to 33%
female representation post the retirement of John Carleton with
effect from 22 February 2024.
The ReSI Housing Board contains three non-executive directors
that are independent of the Fund Manager, (with 33% female
representation), with remaining directors being Fund Manager
personnel.
The Board's approach to the appointment of non-executive
Directors is based on its belief in the benefits of having a
diverse range of experience, skills, length of service and
backgrounds. The Board therefore continues to consider that it
would be inappropriate to set a target and will always appoint the
best person for the job based on merit, and will not discriminate
on the grounds of gender, race, ethnicity, religion, sexual
orientation, age, physical ability or social background. The right
blend of perspective is critical to ensuring an effective Board and
successful company.
Information regarding the Company's Board Diversity Policy and
compliance with FCA Listing Rule 9.8.6R(9) can be found on pages
78, 79 and 80.
Board information
It is the responsibility of the Company Secretary and the Fund
Manager to ensure that the Board of ReSI is kept abreast of
developments with respect to the Company's operations and business
and receives timely, entire board packs for review at each meeting
of Directors.
Standing items at each meeting of ReSI's Directors include the
following: strategic update, review of risk register, portfolio
performance, pipeline report, management and year-end accounts,
debt covenant reporting, governance and approved minutes of ReSI's
registered provider subsidiary, ReSI Housing. In addition, reports
of the Company Secretary, Depositary and Registrar are also tabled
for discussion. Extraordinary items will include review of service
providers, updates to governance and other company policies and
such other ad hoc matters as arise from time to time.
Such materials, together with a free, open discussion with the
Fund Manager and Company Secretary, facilitate an environment in
which the directors can fulfil their duties in a manner fitting for
ReSI's governance and ethics environment.
The Fund Manager has agreed a similar approach with the
directors of ReSI Housing. Standing agenda items include the
following: strategic update, pipeline report, property performance
and compliance, management and year-end accounts, review of
business plan and stress testing, review of risk register and a
regulatory update. Extraordinary items arise for ReSI Housing and
include review of property managers, review of customer
satisfaction surveys, updates to governance and other company
policies and such other ad hoc matters as arise from time to
time.
Risk and compliance
ReSI has robust risk and compliance management policies and
procedures, as outlined in the risk management and governance
sections on pages 64 to 82.
In addition, for acquisitions of regulated housing tenures, ReSI
Housing has its own risk management framework, risk appetite and
set of governance policies.
Commitment to sustainability
ReSI is committed to investing in a sustainable manner in order
to generate long-term returns. We have this year continued to work
with The Good Economy, and Kamma Data to quantify our impact (see
pages 40 to 50).
In addition, the Fund Manager maintains a sustainability
investment framework and shared ownership investments, through ReSI
Housing, benefit from the Fund Manager's proprietary shared
ownership customer charter and environmental charter, under which
the Group seeks to offer leases of 250+ years and not charge event
fees. The Fund Manager created these charters in 2020 to formalise
its existing process and practices that go above and beyond the
requirements of the model for shared ownership lease, ultimately
benefitting the Group's shared owners and comprising part of the
Company's social impact. These charters are updated annually to
enable the Fund Manager to remain abreast of social housing
developments. The Fund Manager seeks to be a market leader in
creating a new era of aspirational shared ownership, and in turn
help expand homeownership
Section 172 Statement and Stakeholder Engagement
This section of the Annual Report covers the Board's
considerations and activities in discharging their duties under
s.172(1) of the Companies Act 2006 to promote the success of the
Company for the benefit of members as a whole.
This statement includes consideration of the likely consequences
of the decisions of the Board in the longer term and how the Board
has taken wider stakeholders' needs into account.
The Board is ultimately responsible for all stakeholder
engagement. However, as an externally managed investment company,
ReSI does not have any employees and engages third party providers
as required including for fund management, secretarial,
administration, broking, depositary and banking services. All these
service providers help the Board fulfil its responsibility to
engage with stakeholders and it should be noted are also, in-turn,
stakeholders themselves.
In addition to promoting the success of the Company for the
benefit of members as a whole, section 172 of the Companies Act
2006 requires the Board to have regard to the following:
Section 172 element ReSI comment
the long term (s.172(1)(a)) ReSI's investment objective is
to establish a residential portfolio
benefitting from inflation-linked
income for the long term. Alongside
this intention to hold for the
long-term, ReSI has used leverage
on a long-term basis across the
Group, ReSI has an average debt
maturity of 2 1 years.
---------------------------------------------
the interests of ReSI's employees As an externally managed AIF, this
(s.172(1)(b)) is not applicable to ReSI.
---------------------------------------------
relationships with suppliers, customers See the discussion regarding the
and others (s.172(1)(c)) following major stakeholders -
"Fund Manager", "Property Managers
& Developers", "Key Service Providers",
"Grant providers" and "Residents".
---------------------------------------------
the community and the environment All investment decisions taken
(s.172(1)(d)) by the Fund Manager on behalf of
ReSI are taken in accordance with
its sustainable investment framework.
Moreover, shared ownership investments,
through ReSI Housing, benefit from
the Fund Manager's proprietary
shared ownership customer charter
and environmental charter, under
which the Group seeks to offer
leases of 250+ years and not charge
event fees.
The Fund Manager created these
charters in 2020 to formalise its
existing process and practices
that go above and beyond the requirements
of the model for shared ownership
lease, ultimately benefitting the
Group's shared owners and comprising
part of the Company's social impact.
---------------------------------------------
high standards of business conduct See the section titled "Governance
(s.172(1)(e)) and ethics".
---------------------------------------------
the need to act fairly between See the discussion regarding "Shareholders"
members (s.172(1)(f)) as a major stakeholder.
---------------------------------------------
The Board has identified the following major stakeholders in the
Company's business.
On an ongoing basis the Board and Fund Manager monitor both the
potential and actual impacts of decisions made upon these major
stakeholders.
Major Stakeholder Why is it important to engage? How have the Directors and Fund
Manager engaged?
Shareholders As a public company listed The Fund Manager along with ReSI's
on the London Stock Exchange, corporate broker regularly meets
ReSI is subject to the Listing with ReSI's shareholders to provide
Rules and the Disclosure corporate updates and to foster
Guidance and Transparency regular dialogue. The Chair meets
Rules. separately with ReSI's largest
shareholders.
The Listing Rules include
a listing principle that The Board encourages shareholders
a listed company must ensure to attend and participate in ReSI's
that it treats all holders Annual General Meeting (AGM).
of the same class of shares ReSI values any feedback and questions
that are in the same position it may receive from shareholders
equally in respect of the ahead of and during the AGM.
rights attaching to such
shares. With the assistance ReSI's Annual and Interim reports
of regular discussions with are made available on ReSI's website
and the formal advice of and then are circulated to shareholders
ReSI's legal advisors, company as requested, providing shareholders
secretary and corporate broker, with an in depth understanding
the Board abides by the Listing of the Company's financial position
Rules at all times. For information and portfolio.
on shareholder engagement
please see the Governance ReSI also make available RNS and
section of this Annual Report other business and market updates
which contains further information on ReSI's website.
on shareholder engagement.
-------------------------------------- --------------------------------------------
Residents ReSI's residents are integral ReSI works with trusted partners
to the business model. The to manage its relationships with
importance of engaging with all residents on all tenures.
residents cannot be understated; ReSI's property managers are in
strong relationships have regular contact with residents,
been shown to improve tenant and residents are also provided
retention, rent collection with contact details and are able
rates, overall tenant satisfaction to contact dedicated teams to
and ReSI's impact on the discuss any problem that they
community. might have.
ReSI is committed to accelerating The Fund Manager reviews detailed
the development of socially affordability assessments before
and economically beneficial a resident is selected, and throughout
new housing to make a meaningful the lease term a close relationship
contribution to the UK housing is maintained through ongoing
shortage. ReSI's homes deliver engagement. The Fund Manager expects,
a social benefit through and monitors, the property managers
providing wellbeing improvements to encourage feedback from residents
to residents (e.g. by providing including suggestions for service
the security of a home for improvement and to learn from
life and helping retirees any complaints about service delivery.
live with likeminded peers), The safety and wellbeing of residents
fiscal savings (e.g. lower is of the highest priority and
costs for housing those at when making an investment the
risk of homelessness and Fund Manager is rigorous in using
savings to the NHS), and the skills and expertise of its
wider economic benefits (e.g. property team to provide high
by enabling people to live quality homes and identify and
and find work in otherwise mitigate all risks to residents.
unaffordable parts of the
country). The social impact In addition, the Fund Manager
delivered by ReSI is reported conducts an annual satisfaction
on page 46 survey for ReSI's retirement and
shared ownership residents, affording
these residents an opportunity
to comment on the services received.
This is supported by, in the case
of shared ownership residents,
opportunities to speak at ReSI
Housing's Service Improvement
panel, established as part of
its Customer Engagement Strategy.
The Fund Manager considers residents'
changing needs and uses their
expertise to assist them. ReSI's
lifecycle plans for accommodation
includes a conservative approach
to the long-term costs of ownership
to ensure that the standard of
quality is maintained or improved
throughout the life of the property.
At the same time, the Fund Manager
only works with well-regarded
and established partners to ensure
all routine and other maintenance
is undertaken promptly and properly.
-------------------------------------- --------------------------------------------
Fund Manager The most significant service The Board regularly monitors the
provider for ReSI's long-term Company's investment performance
success is the Fund Manager. in relation to its objectives
and investment policy and strategy.
The Fund Manager performs
investment management services The Board receives and reviews
to ReSI in accordance with regular reports and presentations
the Alternative Investment from the Fund Manager and seeks
Fund Managers Directive 2011/61/EU to maintain regular contact to
as implemented into UK law maintain a constructive working
by the Alternative Investment relationship.
Fund Managers Regulations
2013 and the F und chapter
of the FCA Handbook.
-------------------------------------- --------------------------------------------
Property ReSI's property managers ReSI always seeks to work with
Managers are experienced in managing well-regarded partners to ensure
& Developers tenants' needs to ensure that its homes are fit for purpose
a good quality of service and maintained at a high standard
and to ensure that the regulatory in order to meet the needs of
risk is minimised. lessees and occupiers, as well
as sustaining value over the long-term.
In addition, strong developer
relationships enable ReSI The Fund Manager has regular contact
to secure a pipeline of assets with property managers, estate
for investment. Experienced managers and developers and takes
development partners ensure a proactive approach to working
that ReSI has access to high with third parties.
quality homes to lease to
its residents, improving Before an acquisition, detailed
quality of life for residents. property due diligence is performed
by the Fund Manager on all acquisitions
By supporting development to minimise fire and other risks
partners, ReSI aims to benefit to residents and provide safe
local communities by increasing and secure accommodation.
the provision of affordable
housing. Through ReSI Housing, After acquisition, the Fund Manager
ReSI is able to acquire assets (with input from property managers)
within the social housing regularly reports to the Board
regulatory environment, which on ReSI's property performance
emphasises good governance and compliance with property obligations.
and financial viability.
-------------------------------------- --------------------------------------------
Key Service A list of the Company's key Before the engagement of a service
Providers service providers can be provider, the Board ensures that
found on page 1 53 of this the service provider's services
Annual Report. are appropriate and values are
aligned.
As an externally managed
real estate investment trust, On an annual basis the Board reviews
the Company conducts all the continuing appointment of
its business through third-party each service provider to continued
service providers. appointment is in the best interests
of the Company's shareholders.
Throughout the year-ended 30 September
2023, the Board had strong working
relationships with the Fund Manager,
broker, company secretary, administrator
and depositary and receives reports
on the performance of the key
service providers by the Fund
Manager and company secretary.
Separately, the Auditor is invited
to attend the Audit Committee
meeting at least once per year.
The Audit Committee Chair maintains
regular contact with the audit
partner to ensure the audit process
is undertaken effectively.
-------------------------------------- --------------------------------------------
Regulator ReSI Housing is a wholly-owned The Fund Manager and ReSI Housing's
of Social subsidiary of ReSI and is board each maintains strong lines
Housing registered with, and regulated of communication with the Regulator
by, the Regulator of Social and is transparent in all dealings.
Housing (the RSH) as a for-profit
registered provider. The Fund Manager, in conjunction
with the board of ReSI Housing,
As a regulated entity, ReSI keeps ReSI Housing's compliance
Housing is able to offer with its regulatory obligations
shared ownership properties, under constant review, with input
which are central to its from such external advisers as
future investment strategy may be necessary.
and other regulated tenures.
The board of ReSI Housing contains
independent non-executive directors
with enhanced responsibilities
for ReSI Housing's compliance
with the RSH's regulatory regime.
-------------------------------------- --------------------------------------------
Grant Providers To enable delivery of shared The Company engages the Fund Manager
ownership homes, ReSI Housing and third-party service providers
is an investment partner to assist with compliance o f
of multiple grant providers, grant requirements. Any correspondence
including the Greater London from a grant provider is responded
Authority (GLA) and Homes to promptly.
England, and has accessed
grant funding under their
standard form grant agreements.
Each of these grant providers
is a long-term investment
partner in ReSI Housing.
-------------------------------------- --------------------------------------------
HMRC If ReSI fails to remain qualified ReSI corresponds with its contacts
as a REIT, its rental income at HMRC regularly and is transparent
and gains will be subject in all dealings.
to UK corporation tax.
The Directors and the Fund Manager
at all times conduct the affairs
of ReSI so as to enable it to
remain qualified as a REIT for
the purposes of Part 12 of the
CTA 2010.
-------------------------------------- --------------------------------------------
Lenders Members of the Group have ReSI's subsidiaries report to
raised secured debt and entered their respective lenders in line
into a working capital facility. with the covenants entered into.
As is customary, each facility Proactive correspondence helps
contains representations develop the relationship and aides
and warranties the Company's ability to raise
further debt in the future.
-------------------------------------- --------------------------------------------
Principal Decisions
ReSI's Directors are cognisant of their duties under Section 172
and decisions made by and discussions of the Board take into
account the interests of all the Company's key stakeholders.
The following are examples of how the Board managed their
Section 172 obligations in the context of decisions that were
anticipated to have a material impact on ReSI and its key
stakeholders.
Discussion Stakeholders Decision and rationale
item
Rebasing of Shareholders The Board discussed and approved
dividend on 22 November the rebasing
of the dividend from 5.16
pence per share to 4.12 pence
per share
The Board's decision was based
on the impact of rising interest
rates on dividend cover, as
well as the desire to pay
a full-covered progress dividend
whilst investing to maximise
the growth of the portfolio
value.
--------------------------------- ------------------------------------
Disposal of Shareholders, Fund Manager The Board has discussed and
non-core assets approved the in principle
disposal and/or restructuring
of Eaton Green Court and Wesley
House, being the Company's
local authority portfolio
subject to end leases with
Luton Borough Council.
An in principal disposal of
the local authority portfolio
was discussed as being in
the best interest of shareholders
as it would eliminate ReSI's
floating rate debt and leave
ReSI with only its long term
debt that has a weighted average
maturity of 21 years. Further,
it would focus ReSI on retirement
and shared-ownership which
are expected to deliver superior
long-term returns.
As at the date of this Annual
Report, these assets are under
offer and in legals with an
expectation this will complete
in early 2024.
--------------------------------- ------------------------------------
Repayment Shareholders, Lenders The Board approved the repayment
of debt secured of all amounts owing to National
on non-core Westminster Bank plc.
assets
The final repayment date in
the floating rate loan provided
from National Westminster
Bank plc had been extended
and additional extensions
were no longer considered
economical and additive to
shareholders. Unencumbering
the non-core assets was also
considered beneficial ahead
of their disposal.
--------------------------------- ------------------------------------
Aborting the Shareholders The Board intended to look
Company's Residents to raise further capital in
intended equity Property Managers & Developers Autumn 2022 in order to grow
raise in Autumn Fund Manager ReSI and drive shareholder
2022 returns. This was postponed
following the market dislocation
in September 2022 and later
aborted due to the persistent
discount to net asset value,
which would have rendered
equity raising dilutive to
shareholders.
--------------------------------- ------------------------------------
Risk Management
Principal Risks and Uncertainties
The Board recognises the importance of risk management in
achieving ReSI's strategic aims.
The Fund Manager, whose services are overseen by the Board, has
responsibility for identifying potential risks at an early stage,
escalating risks (and changes to risks) and implementing
appropriate mitigations, all of which are recorded in ReSI's risk
register. Where relevant, the Company's financial model is
stress-tested to assess the potential impact of a potential risk
taking into account the likelihood of occurrence.
Risk is a standing agenda item at all meetings of the Audit
Committee and all meetings of the Board.
The Board takes a proactive view when assessing and mitigating
risks. The Board regularly reviews the risk register to ensure that
identified risks and mitigating actions remain appropriate. This
year, the Fund Manager undertook a rationalising exercise to
enhance the clarity of the risk reporting for the Board.
ReSI's risk management process is designed to identify, evaluate
and mitigate (rather than eliminate) the significant and emerging
risks that it faces and that evolve as the business and operating
environment changes. The risk management process ensures a defined
approach to decision-making but can only provide reasonable, and
not absolute, assurances.
The Board considers the following to currently be the principal
risks and uncertainties:
Risk Risk mitigation Party Party Change
responsible responsible in risk
for over last
monitoring financial
year
Company and its Operations
The Company is not managed Fund Board No Change
or promoted in a way * Ongoing review of Fund Manager's investment Manager
that generates investor performance and performance of all service providers
demand, allows it to
scale or allows the Company
to meet its investment * Engagement of corporate broker
or return objective
* Regular review of NAV and share price performance
including discount to listed REIT sector
* Fund Manager and corporate broker monitor
discount/premium and Board considers this at each
meeting
* Fund Manager monitors marketing and distribution
activity undertaken by the Company
* Appointment of a financial public relationship firm
* Leveraging of the expertise and network of the
Gresham House marketing and distribution teams
* Board monitors investment performance and risk
against investment objectives and strategy at each
meeting and as necessary
* Board monitors portfolio against investment
restrictions
* The Fund Manager has a sustainable investment policy,
which is used to inform investment decisions, and has
partnered with The Good Economy, Kamma and other
knowledgeable third parties to understand our impact
on the environment and enhance our reporting
-------------------------------------------------------------- ------------- ------------- -----------
The Company's Ongoing Fund Board Higher
Charges are too high * Future Fund Manager fee has been reduced to average Manager
of NAV and share price (previously just based on
NAV). See note 31.
* Fund Manager is not entitled to any performance
related fee or fees in connection with any sales of
assets to the Group
* Fund Manager looks to benchmark fees of third parties
where possible
* Fund Manager conducts Value Assessments under the
FCA's Consumer Duty
-------------------------------------------------------------- ------------- ------------- -----------
The Company's targeted Fund Board Higher
returns are based on * Fund Manager regularly monitors assumptions Manager
estimates and assumptions
that are inherently subject
to significant uncertainties * Legal and property due diligence performed to confirm
and contingencies, and rights and condition of stock
the actual rate of return
may be materially lower
than the targeted returns * Use of reputable third-party valuers
-------------------------------------------------------------- ------------- ------------- -----------
Investment Philosophy
Assumptions underpinning Fund Board Higher
leverage are subject * Debt has been and will typically be structured to Manager
to uncertainties and match the anticipated cash flows from the secured
contingencies assets
* Rating agency review of ReSI Housing's debt provides
independent review of this leverage
* Amortisation of ReSI Housing's debt is generally
financed out of staircasing cash flows , whose
long-term average rate is 2.5% per annum and which
typically range between 1% and 5% (where staircasing
rates are lower than expected the sales proceeds
account, containing staircasing proceeds, can be
accessed for amortisation purposes). If staircasing
rates are low, this could require net rental income
to be re-directed to funding this debt amortisation,
and will not be available for dividends
-------------------------------------------------------------- ------------- ------------- -----------
The Group's investments Fund Board No Change
will be illiquid and * The Group's aim is to hold the assets for long-term Manager
may be difficult or impossible income and the Group will not look to sell them if
to realise at a particular the market conditions are not right
time
* Returns targets are not premised on capital
appreciation and disposals
* Debt has been and will be used to match the
underlying cash flows of the asset (and the Group is
not therefore incentivised to dispose of assets that
will create a mismatch)
-------------------------------------------------------------- ------------- ------------- -----------
Significant or material Fund Board No change
fall in the value of * The aim of the Group is to hold the assets for Manager
the property market long-term inflation-linked income (typically 20 years
and longer)
* The Board will assess market forecasts on a quarterly
basis to put in place mitigations in the event of
material fall in the value of the property market
* The Group will enter into long-term management
agreements
* The Fund Manager stays abreast of market developments
and forecasts, and, where necessary, seeks to adjust
offer terms / approach accordingly
* The Company does not intend to rely on realised
revaluation gains to cover dividend payments
* The Company focuses on areas of the market with
limited and ideally countercyclical exposure to the
wider property market
-------------------------------------------------------------- ------------- ------------- -----------
Liquidity
The Group has insufficient Fund Board Higher
liquidity available to * The Fund Manager regularly reviews the Group's Manager
meet obligations as they Business Plan against the Group's recent and
fall due (including any anticipated activities to assess future liquidity
debt repayment obligations) requirements
* The Group typically uses long-term amortising debt,
reducing refinancing risk
* The Group has access to a working capital facility
with Santander of GBP25mn on which GBP20.6mn is
currently drawn (there is a scheduled clean down in
December 2024 that is expected to be met through
asset sales, which are currently in exclusivity.
Further contingency plans, including bridge financing
and raising additional secured portfolio debt, have
been reviewed and assessed)
-------------------------------------------------------------- ------------- ------------- -----------
Exposure to SONIA Fund Board Higher
* Revolving debt facility is typically used for working Manager
capital and bridging purposes only
* Liability management is kept under constant review
* Restructuring and sales efforts for the local
authority portfolio are ongoing (and are expected to
enable the paydown of revolving amounts drawn)
-------------------------------------------------------------- ------------- ------------- -----------
Breach of Loan Covenant Fund Board Higher
(particularly in light * Strong suite of covenant reporting prepared quarterly Manager
of falling property values)
* Ongoing Fund Manager review of loan performance and
covenant headroom
* Liability management under constant review
* Board is kept up-to-date
-------------------------------------------------------------- ------------- ------------- -----------
Legal, Regulatory & Taxation
Failure of Fund Board Higher
ReSI * The Fund Manager continues to develop ReSI Housing's * The Fund Manager continues to develop ReSI Housing's Manager
Housing governance and operational structure with third governance and operational structure with third
to continue parties, reflecting the maturity and growth of its parties, reflecting the maturity and growth of its
to meet the portfolio portfolio
Regulatory
Standards
-- --
----------------------------------------------------------- -------------------------------------------------------------- ------------- ------------- -----------
Failure to Fund Board Higher
remain a * The Company utilises third party legal, accounting * The Company utilises third party legal, accounting Manager
qualified and tax advisors and tax advisors
REIT,
rental
income and * The Fund Manager monitors HMRC, FCA and other public * The Fund Manager monitors HMRC, FCA and other public
gains announcements for any relevant release affecting the announcements for any relevant release affecting the
become Company Company
subject to
UK
corporation
tax
----------------------------------------------------------- -------------------------------------------------------------- ------------- ------------- -----------
Going Concern and Viability Statement
Going concern
In light of the current macroeconomic backdrop, the Directors
have placed a particular focus on the appropriateness of adopting
the going concern basis in preparing the Group's and Company's
financial statements for the year ended 30 September 2023. In
assessing the going concern basis of accounting the Directors have
had regard to the guidance issued by the Financial Reporting
Council.
Financial models have been prepared which consider liquidity at
the start of the period and key financial assumptions at the
Company level as well as at Group level. These financial
assumptions include expected cash generated and distributed by the
portfolio companies, which is then available to be distributed to
the Company. The assumptions include inflows and outflows in
relation to external debt, interest payments, expected dividends
and the ongoing administrative costs of the Company.
Liquidity
The Directors have considered the Group's cash position, income
and expense flows. As at 30 September 2023 the Group's net assets
were GBP168.7mn and the Group held cash and cash equivalents of
GBP8.8mn. Net rental income for the year ended 30 September 2023
was GBP17.1mn. The total ongoing operating expenses (excluding
finance costs, taxation and aborted acquisition and fundraising
costs) for the period ended 30 September 2023 were GBP3.3mn,
showing the Group had substantial operating expenses cover.
ReSI's portfolio provides a very secure long term income stream.
This is due to the defensive nature of ReSI's portfolio, the
diversity of ReSI's counterparties and the resilience of ReSI's
tenants' incomes. Tenants' incomes are predominantly from pensions
/ savings and are checked for affordability. The secure long-term
nature of the income is further evidenced by:
-- the Company's shared ownership portfolio is fully occupied,
and rents are typically 30% below market value;
-- the Company's stabilised retirement portfolio occupancy rates
are typically in excess of 94%, and currently at 96%, with the
empty time primarily reflecting time to refurbish properties when a
tenant vacates;
-- a rent collection level for the year of 99%;
-- the average residency period of a retirement portfolio tenant is six years;
-- Shared ownership customer leases ranging from between 130 and
999 years with annual increases generally at RPI +0.5%; and
-- local authority assets are ultimately leased to Luton Borough
Council, which is an area with one of the highest rates of housing
need in the country, to house those in the Borough who would be
otherwise homeless or threatened with homelessness.
Refinancing events
The Santander facility includes a contractual clean down
provision requiring the facility to be paid down on the 31 December
2024. It can subsequently be redrawn five business days later. The
clean down is expected to be met via the sale of the local
authority portfolio, for which the Group has received a number of
offers and which are in an advanced sales process with reputable
purchasers, with financial close expected in early 2024. In the
event sales do not complete, the Board have assessed and concluded
the following mitigants, are realisable, enabling the clean down to
be met:
-- Securing a bridge facility
-- Upsizing of the Scottish Widows facility and securing
additional debt secured on unencumbered assets
Aside from the Santander facility, the Group has a 21-year
weighted average debt maturity with the earliest refinancing
requirement of June 2043.
Covenants and stress testing
The ReSI portfolio delivers high-quality cash flows that are
resilient through economic cycles. ReSI also has headroom on its
financial covenants and, after conducting various stress tests and
sensitivity analyses, could withstand a prolonged drop in net
income of 40% without breaching any loan covenant.
As the property investment values of ReSI's retirement and local
authority portfolios are primarily calculated with reference to
future cash flows, not house prices, volatility in house prices
does not have a substantial impact on the value of its property
assets.
The Group's tightest local to value covenant is in its working
capital facility with Santander, currently 51% compared to the
covenant of 55%. Sensitivity analysis shows that a fall of more
than 7% in the value of the secured assets would result in a loan
covenant breach. We estimate that ReSI's weighted average valuation
yield would need to shift outward by a further c.40bps for this
valuation loss to be realised, on top of the c.80bps widening since
September 2022. The local authority portfolio is under offer and in
legals for sale with an expectation that these will complete in
early 2024, and allow us to repay the Santander facility. ReSI's
other LTV covenants still have ample headroom and ReSI's USS debt
on its shared ownership portfolio is fully amortising and so does
not have a loan to value debt covenant.
Based on the above information, the Board has made its
assessment and remains satisfied that there are no material
uncertainties affecting the Group's and/or Company's ability to
continue in business for the foreseeable future, being at least 12
months from the date of approval of the financial statements.
Accordingly, the Company has adopted the going concern basis in the
preparation of these financial statements.
Assessment of Viability
The principal risks and uncertainties section on pages 58 to 60
of this Annual Report summarises those principal matters that the
Directors consider could prevent ReSI the Group from delivering on
its strategy and is derived from a robust assessment of the
principal risks to our business model, future performance,
liquidity, and solvency, which is supplemented by financial
modelling and stress testing conducted by the Fund Manager. A
number of these principal risks, because of their nature or
potential impact, could also threaten the Group's ability to
continue in business in its current form if they were to occur.
The assumptions underpinning our cash flow forecasts and
covenant compliance sensitivity analysis have been tested to
explore the resilience of the Group's cash flows and profitability
to the potential impact of the Group's significant risks, or a
combination of those risks.
Considerations applied to going concern and viability
All of the sensitivity scenarios modelled use a base case
scenario comprising of the consummating of no acquisitions other
than those already committed, no further capital deployed to
support the underlying costs of the business, and no significant
changes to governmental, regulatory or taxation policies.
The remaining principal risks, while having an impact on the
Group's business model, are not considered by the Directors to have
a reasonable likelihood of impacting the Group's viability over the
next five years to 30 September 2028.
Sensitivities and mitigating actions
The sensitivity analyses performed were designed to be severe
but plausible, and to take full account of the availability of
mitigating actions that could be taken to avoid, or reduce, the
impact or occurrence of the underlying risks. Mitigating actions
that could be taken at the Group's discretion include use of funds
available under the revolving credit facility for working capital
and the reduction or suspension of dividend payments.
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 30 September 2028.
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 is also considered appropriate given the Company's
long-term investment objective. The Board has considered each of
the principal risks and uncertainties set out above together with
the liquidity and solvency of the Company.
Having considered the matters above, the Board has a reasonable
expectation that the Group will be able to continue in operation
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 5-year period.
Approval
The Strategic report was approved by the Board of Directors on 4
December 2023.
Rob Whiteman
Chairman of the Board of Directors
4 December 2023
Governance
Board of Directors
Rob Whiteman CBE
Non-executive Chairman
Appointed
9 June 2017
Skills, competence and experience:
Significant knowledge of public service finances and reform and
a strong background in public financial management and
governance.
Presently Chief Executive of the Chartered Institute of Public
Finance & Accountancy (CIPFA) and previously Chief Executive of
UK Border Agency (UKBA), Improvement and Development Agency (IDeA),
and London Borough of Barking and Dagenham. He previously held
various positions in the London Borough of Lewisham from 1996-2005,
latterly as Director of Resources and Deputy Chief Executive.
He has been a technical adviser to the board of the
International Federation of Accountants (IFAC) in New York since
2013.
Educated at the University of Essex where he gained a BA (Hons)
in Economics and Government and is a qualified Chartered Public
Finance Accountant (CPFA).
Other roles:
Director of CCAB Limited
Director of CIPFA Business Ltd
Director of the Koru Project CIC F
Director of Eagles Crest (Poole) Limited
Director of Lilliput Advisory Ltd
Chair, University Hospitals Dorset NHS Foundation Trust
Robert Gray
Senior Non-Executive Independent Director and Chairman of the
Audit Committee
Appointed
9 June 2017
Skills, competence and experience:
Extensive business experience, including experience in debt
finance and capital markets.
Robert has held roles at J.P. Morgan, and later at HSBC Markets
Limited and HSBC Investment Bank in London working initially as
Managing Director in 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 TheCityUK Robert served as
financial services sector adviser to the UK Minister for Trade
& Investment.
Robert was Chairman of the International Primary Market
Association and Vice Chairman and Chairman of the Regulatory Policy
Committee of the International Capital Market Association.
Robert was 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
Trustee of Allia Limited
Director and Company Secretary of Prospekt Medical Limited
Elaine Bailey
Non-executive Director
Appointed
27 April 2020
Skills, competence and experience:
Significant housing and construction experience, with a strong
background running complex organisations and projects.
Previously the Chief Executive of Hyde Group, the G15 Housing
Association with over 50,000 properties providing housing to
100,000 residents, a position she held for five years until 2019.
During this time Elaine oversaw the establishment of a five-year
development pipeline of 11,000 homes and the launch of several
innovative partnerships with housebuilders, contractors, local
authorities and other housing associations. Elaine also previously
worked in the construction and government services sectors; and
worked for some years at Serco.
Actively involved in the government's Building Safety Programme,
including as a member of the Industry Safety Standards Steering
Group, and a former Non-Executive Director of the Health and Safety
Executive Board.
Elaine was educated at Southampton University, where she gained
a civil engineering degree and holds an MBA from Imperial
College.
Other roles:
Director of Andium Housing Association
Director of McCarthy & Stone Shared Ownership Division
Director of MJ Gleeson plc
Trustee of Greenslade Family Foundation
John Carleton
Non-executive Director
Appointed
9 June 2017
Skills, competence and experience:
A 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 Executive Director of Property Investment at
Orbit Group, Director of Places for People Leisure Partnerships,
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.
John was educated at the University of Liverpool and holds an
MBA in Finance from Manchester Business School. He 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:
Director of Helping Change Limited
ReSI Housing Non-Executive Directors
ReSI owns ReSI Housing Limited, a for-profit registered provider
of social housing. The ReSI Housing Board contains independent
directors (who are independent of the Fund Manager and ReSI) and
Fund Manager directors. The board of ReSI Housing is comprised of
David Orr, Gilian Rowley, Ben Fry, Mark Rogers, Pete Redman and
Sandeep Patel. The independent Directors control the Board on
matters that they consider may affect ReSI Housing's compliance
with the regulatory standards of the Regulator of Social Housing.
ReSI Housing's non-executive directors are:
David Orr, CBE
Non-executive Director
Appointed
2 October 2018
Skills, competence and experience:
David is an experienced leader in both executive and
non-executive roles. He has over 30 years' experience in Chief
Executive roles, most recently at the National Housing Federation.
He is Chair of Clarion Housing Association, Chair of the Canal
& River Trust, is a previous President of Housing Europe and
previous Chair of Reall, an international development housing
charity. He is also chair of The Good Home Inquiry, co-chair of
#Housing 2030, a joint project for Housing Europe and UNECE, and a
member of the Archbishop of Canterbury's Housing, Church and
Community Commission. David frequently speaks on the challenge of
optimistic leadership and the critical importance of governance. He
has wide ranging media experience, is a well-regarded commentator
and blogger and has extensive expertise navigating the world of
politics and government. In June 2018 David was awarded a CBE.
Other roles:
Chair of Clarion Housing Association
Chair of The Canal & River Trust
Chair of The Good Home Inquiry
Co-chair of #Housing 2030
Board member of Clanmil Housing Association Trustee National
Communities Resource Centre
Gillian Rowley
Non-executive Director
Appointed
11 March 2019
Skills, competence and experience:
Gillian brings to ReSI Housing over 30 years of housing and
housing finance expertise, with a focus on policy development
within the framework of regulatory standards.
She served as the Non-Executive Director for The Housing Finance
Corporation from 2006 - 2012, where she was heavily involved in
business strategy, financial policy and governance. This overlapped
with her role as the Head of Private Finance at the former social
housing regulator, the Homes & Communities Agency, where for 13
years she was responsible for relationships with lenders,
investors, advisers, and credit rating agencies operating in the
social housing sector. She has also been an authority on all
aspects of social housing finance policy, including advising
government departments, focusing on areas of regulatory standards,
and being responsible for social housing sector guidance on
treasury management.
Mark Rogers
Non-executive Director
Appointed
31 August 2023
Mark was previously an Executive Director of ReSI Housing and
part of the team at Gresham House, having joined TradeRisks and
ReSI Capital Management in 2018 to lead the acquisitions
function.
Mark stepped down from his executive role, over the summer of
2023, but continues as a Non-execuctive director of ReSI Housing.
Prior to joining, TradeRisks and ReSI Capital Management in 2018,
Mark spent 12 years as a Chief Executive of Circle Housing Group, a
65,000 unit housing association, before merging it into the Clarion
Group, the largest housing association in the UK. Prior to that,
Mark held Chief Executive roles at Anglia Housing Group and Nene
Housing Society. He has been a member of the Chartered Institute of
Housing since 1986 and has 39 years of social housing
experience.
Directors' Report
The Directors are pleased to present their report and accounts,
together with the audited financial statements of the Company, for
the year ended 30 September 2023.
Residential Secure Income plc, company number: 10683026, (the
Company) is a Real Estate Investment Trust (REIT) listed on the
premium segment of the Main Market of the London Stock Exchange.
The Company's investment strategy focuses on, delivering secure
inflation-linked returns from investing in affordable shared
ownership, retirement and local authority housing throughout the
UK.
The Board is ultimately responsible for all aspects of the
Company's affairs, including setting the parameters for monitoring
the investment strategy and the review of investment performance
and policy. The Board also has ultimate responsibility for all
strategic policy issues, the timing, price and volume of any
buybacks of Ordinary Shares, corporate governance matters and
dividends.
Further information on the Board's role is provided in the
Corporate Governance Statement beginning on page 76, which forms
part of the Directors' Report.
Powers of the Board
The general powers of the Directors are set out in Article 100
of the Company's Articles of Association. This Article provides
that the business of the Company shall be managed by the Board,
which may exercise all the powers of the Company, subject to any
limitations imposed by applicable legislation, the Articles and any
directions given by special resolution of the shareholders of the
Company.
Results
The Group's IFRS loss for the year was GBP23.2 mn and the IFRS
earnings per share were (12.5)p. The results for the year are shown
in the financial statements. Commentary on the results, future
developments and post balance sheet events can be found in the
Strategic Report, Chairman's Statement and Fund Manager's
Report.
Investment property
A summary of the Group's investment property portfolio is
included on page 4. A full portfolio listing can be made available
on request.
Dividend policy
Following the non-core asset disposals and subsequent dividend
rebasing, the Company is targeting, to pay on a quarterly basis an
annual dividend of 4.12p, which the Company then expects to
progressively increase. It is the Company's intention to pay
dividends to shareholders on a quarterly basis and in accordance
with the REIT Regime.
The Company is targeting a total return in excess of 8% per
annum. As a REIT, the Company is required to meet a minimum
distribution test for each accounting period through which 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 is 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 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 the year ended 30 September 2023
In line with the Company's historic dividend policy and target,
four equal dividends of 1.29p per Ordinary Share were paid during
the year, totalling 5.16p per Ordinary Share, of which 5.16p was
paid as PID. These were declared in December 2022 and January, June
and July 2023 with the first being the fourth interim dividend for
the year ended 30 September 2022.
The Board declared a fourth interim dividend in respect of the
quarter to 30 September 2023 of 1.03p per Ordinary Share, which
will be payable on 17 January 2024 to shareholders on the register
at the close of business on 15 December 2023. The ex-dividend date
is 14 December 2023 and the full amount will be paid as PID.
Management - Fund Manager
During the year under review, ReSI Capital Management Limited
(part of the Gresham House group) was engaged as the Company's
alternative investment fund manager (the Fund Manager), pursuant to
a Fund Management Agreement originally dated 16 June 2017 (as
amended), to advise the Company and provide certain investment and
risk management services.
ReSI Capital Management Limited is authorised and regulated by
the Financial Conduct Authority (FCA) as a 'full scope' UK
alternative investment fund manager for the purposes of the UK AIFM
Regime.
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, which was in July 2022.
Appointment of the Fund Manager
The Board has discretion to monitor the performance of the Fund
Manager and, to appoint a replacement Fund Manager.
Since year end, and with effect from 1 October 2023, the Company
agreed to novate their appointment of ReSI Capital Management
Limited as alternative investment fund manager to Gresham House
Asset Management Limited. ReSI Capital Management Limited and
Gresham House Asset Management Limited have common ultimate
beneficial owners and, accordingly, there is no substantive or
operational changes and the fund management delivery team remains
unchanged.
The change of the Fund Manager is considered by the Board to be
in the best interests of shareholders as a whole. The performance
of the current team is satisfactory and the Fund Manager is well
placed to manage the assets of the Company according to the
Company's strategy.
During the period, the Board, either directly or via its
advisors, engaged with shareholders carefully considering all
feedback. The Board explored all potential outcomes which may be in
the interest of the Company and its members as a whole.
Fund Management Fee
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 GBP250mn), 0.9% (if over GBP250mn), 0.8%
(if over GBP500mn) 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. During the period, 607,947 Ordinary
Shares were awarded to the Fund Manager as part of the Fund
Management Fee.
Since year end, as per the announcement on 3 October 2022,
157,271 Ordinary Shares were purchased in the secondary market at
an average price of 60p per share and awarded to the Fund Manager
as part of the Fund Management Fee.
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.
Related to the Fund Manager is ReSI Property Management Limited
('RPML'), a wholly owned subsidiary of the Fund Manager that
provides property management services to parts of the Group on a
cost pass through basis with no profit margin. During the year,
RPML charged fees of GBP1,978,000 (2022: GBP1,769,000) in respect
of costs incurred in providing property management services and
GBP155,000 (2022: GBP166,000) in respect of non-recurring
costs.
Depositary
During the year under review, Thompson Taraz Depositary Limited
was appointed as depositary to provide cash monitoring, safekeeping
and asset verification and oversight functions as prescribed by the
UK AIFM Regime.
Since year end and with effect from 1 October 2023, the Company
approved the replacement of Thompson Taraz Depositary Limited with
Indos Financial Limited as the Company's depositary.
Company Secretary
Computershare Company Secretarial Services Limited has been
appointed as the Company Secretary of the Company and provides
company secretarial services and a registered office to the
Company.
Administrator
MGR Weston Kay LLP has been appointed as administrator to the
Company. The administration of the Company is delegated and
performed in consultation with the AIFM and the Fund Manager.
Financial information of the Company is prepared by the
administrator and is reported to the Board.
Share capital and shareholders
As at 30 September 2023 the Company's issued share capital
comprised 194,149,261 Ordinary Shares, each of 1p nominal value,
including 8,985,980 Ordinary Shares held in Treasury. As at 30
September 2023, the Company's total shares in issue with voting
rights, excluding treasury shares, were 185,163,281. As at the date
of this Annual Report, there has been no change to the Company's
issued share capital, total voting rights or Ordinary Shares held
in Treasury.
Each Ordinary Share held entitles the holder to one vote.
Treasury shares do not hold any voting rights. All shares,
excluding those held in Treasury, carry equal voting rights and
there are no restrictions on those voting rights.
There are no restrictions on the transfer of Ordinary Shares,
nor are there any limitations or special rights associated with the
Ordinary Shares. All shareholders have the opportunity to attend
and vote, in person or by proxy, at the AGM. For further
information on the details of the forthcoming AGM and ways to
engage with the Board, and the Fund Manager, please refer to page
154. Voting deadlines are stated in the notice of meeting and form
of proxy and are in accordance with the Companies Act 2006.
Authority of Directors to allot shares
The authority to issue new shares granted at the Annual General
Meeting (AGM) held on 31 January 2023 will expire at the conclusion
of the forthcoming AGM. The forthcoming AGM will consider the
authority for Directors to allot further shares in the capital of
the Company under section 551 of the Companies Act 2006 up to
37,032,656 Ordinary Shares (excluding shares held in Treasury) in
the capital of the Company (equivalent to approximately 20% of the
Ordinary Shares in issue at the date of the notice of this
meeting).
If the Directors wish to offer shares (or sell treasury shares
which the Company may purchase and elect to hold as treasury
shares) for cash, company law requires that unless shareholders
have given specific authority for the waiver of their statutory
pre-emption rights, the new shares must be first offered to
existing shareholders in proportion to their existing holdings.
There may be occasions, however, when the Directors will need the
flexibility to allot new shares (or to grant rights over shares)
for cash or to sell treasury shares for cash without first offering
them to existing shareholders in proportion of their holdings in
order to make investments in line with the Company's investment
policies. This cannot be done unless the shareholders have first
waived their pre-emption rights.
Accordingly, the AGM will consider two separate resolutions
relating to the Director's ability to allot shares for cash or sell
treasury shares for cash up to an aggregate nominal value of GBP
3370,326.56 which is equivalent to approximately 20% of the
Company's issued Ordinary Share capital (excluding shares held in
Treasury) as at the date of the notice of this meeting. This will
allow the Company to carry out one or more tap issues, in
aggregate, up to 20% of the number of Ordinary Shares in issue at
the AGM and thus to pursue specific investment opportunities in a
timely manner in the future and without the requirement to publish
a prospectus and incur the associated costs.
The Directors are aware that the combined authority to dis-apply
pre-emption rights in respect of up to 20% of the Company's issued
Ordinary Share capital sought under resolutions 120 and 11 is
higher than the 10% typically sought by investment companies.
However, the Directors believe that a higher authority is justified
to enable the Company to fund future acquisitions in line with the
Company's investment policy and strategy for growth.
In accordance with UK Listing Rules, the Company will only issue
Ordinary Shares pursuant to this authority at a price that is not
less than the prevailing net asset value per share of the Company
calculated in accordance with its IFRS accounting policies at the
time of issue.
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 year ended 30 September
2023, the Company did not purchase any of its own Ordinary Shares
for holding in treasury.
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. Directors will only
buyback shares at a discount to the then prevailing net asset value
of the shares. 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 AGM held on 31 January 2023 will expire at the conclusion of
the forthcoming AGM. The Directors recommend that a new authority
to purchase up to 14.99% of the Ordinary Shares in issue (subject
to the condition that not more than 14.99% of the Ordinary Shares
in issue, excluding treasury shares, at the date of the AGM are
purchased) is granted and a resolution to that effect will be put
to the AGM to be held on 22 February 2024. 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 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.
Appointment and replacement of directors
In accordance with the Company's Articles of Association,
Directors may be appointed by the Board to fill a vacancy following
which they will be elected by shareholders by ordinary resolution
at an Annual General Meeting or General Meeting of the Company.
Articles of Association
The Company's Articles of Association can only be amended by
Special Resolution at a shareholders meeting.
Financial Instruments
The Company's financial instruments comprise its share
portfolio, cash balances, borrowings, debtors and creditors that
arise directly from its operations, profit or loss balances on
derivative instruments and accrued income and expenses. The
financial risk management objectives and policies arising from its
financial instruments and exposure of the Company to risk are
disclosed in note 36 to the financial statements.
Going Concern
The Directors' assessment of the going concern of the Company is
set out on pages 61 to 63.
Continuation vote
Under the Articles of Association of the Company, the Directors
were 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 AGM thereafter.
The first continuation resolution was presented and passed by
shareholders at the AGM on 31 January 2023, with 99.96% of proxy
votes cast in favour of the resolution. The next continuation vote
is scheduled to be presented to shareholders at the AGM in
2028.
In the event that a continuation resolution is not passed, the
Directors would be required to formulate proposals for the
voluntary liquidation, unitisation, reorganisation or
reconstruction of the Company for consideration by shareholders at
a general meeting to be convened by the Board for a date not more
than six months after the date of the meeting at which the
continuation resolution was not passed .
Significant shareholdings
As at 30 September 2023, the Directors have been notified of the
following shareholdings comprising 3% or more of the issued share
capital (excluding treasury shares) of the Company:
Percentage
Shareholders Holding of voting rights
--------------------------------- ------------ -------------------
Schroders plc 20,571,781 11.11%
Close Asset Management Limited 18,427,998 9.95%
CG Asset Management Ltd 13,206,949 7. 72 %
Halb Nominees Limited 11,560,797 6.76%
Gravis Capital Management 9,049,470 5.29%
City of Bradford - West
Yorkshire Pension Fund 9,750,000 5.27%
Premier Miton Group plc 7,699,945 4. 50 %
City Asset Management PLC 6,958,858 3.76%
Since 30 September 2023 and the date of this Annual Report, the
Company has been notified of the following changes to the
significant shareholdings:
Percentage
Shareholders Holding of voting rights
--------------------------------- ------------ -------------------
Schroders plc 22,296,708 12.04%
Close Asset Management Limited 4,373,477 2.36%
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 (see page 51 for a discussion on the
governance of the company). 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. The Company's policy and the procedures
that implement it are designed to support that commitment.
As a result, the Company can confirm that there were no legal
actions, fines or sanctions relating to anti-corruption,
anti-bribery, anti-competitive behaviour or anti-trust or monopoly
laws or regulations in the year to 30 September 2023.
Environmental, Social and Governance (ESG) matters
The Company, the Fund Manager and the broader Gresham House
group believe that it is essential to incorporate environmental and
social considerations into the Company's business model and
decision-making processes.
Gresham House has a clear commitment to sustainable investment
as part of its business mission and has achieved a score of 4 out
of 5 stars in its most recent PRI (Principles for Responsible
Investment) assessment report.
The Company always seeks to work with well-regarded partners to
ensure that its investments are fit for purpose and maintained at a
high standard in order to meet the needs of lessees and occupiers
as well as sustaining their value over the long term.
As a result, the Company can confirm that there were no legal
actions, fines or sanctions relating to environmental, social or
governance matters in the year to 30 September 2023.
Through ReSI Housing, the Company is able to acquire and hold
assets within the social housing regulatory environment, which
focusses on good governance and financial viability.
All of the Group's day to day operations and activities are
outsourced to third-parties. As such the Group does not have any
employees or operations of its own and does not generate any direct
greenhouse gas or other emissions or consume any energy reportable
under the Companies Act 2006 (Strategic Report and Directors'
Report) Regulations 2013 or the Companies (Directors' Report) and
Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018, implementing the UK Government's policy on
Streamlined Energy and Carbon Reporting. Information regarding the
portfolio's carbon emissions can be found on page 46.
Under Listing Rule 15.4.29(R), the Company, as a closed ended
investment fund, is currently exempt from complying with the Task
Force on Climate related Financial Disclosures.
For more information on the Company's environmental and social
impact, please see pages 40 to 50.
Employees
The Company has no employees and no share schemes. The Company
does not therefore calculate or disclose employee turnover rates,
its share of temporary staff or employee training hours. The
Board's policy on Diversity is contained in the Corporate
Governance Statement on page 78.
The Board is also not entitled to participate in any bonus
scheme, with Directors compensated according to the Company's Net
Asset Value, ensuring a long-term alignment of interests.
Modern Slavery Act 2015, Bribery Act 2010 and Criminal Finances
Act 2017
The Company is not within the scope of the UK Modern Slavery Act
2015 because it does not have employees, customers or meet the
turnover threshold, the Company is therefore not obliged to make a
slavery and human trafficking statement.
However, the Directors and Fund Manager are satisfied that, to
the best of their knowledge, the Company's principal suppliers, as
listed in the Directors' report on pages 70 to 71 comply with the
provisions of the Modern Slavery Act 2015 and maintain adequate
safeguards in keeping with the provisions of the Bribery Act 2010
and Criminal Finances Act 2017.
Annual General Meeting
The AGM of the Company will be held on 22 February 2024 at
12:45pm. The Notice convening the AGM is contained in this Annual
Report and can be found on the Company's website at
https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/
The Board is of the opinion that the passing of all resolutions
being put to the AGM would be in the best interests of the Company
and its shareholders. The Directors therefore recommend that
shareholders vote in favour of resolutions 1 to 13, as set out in
the Notice of Meeting, as they intend to do in respect of their own
shareholdings.
Political donations
The Company's policy is not to make any direct or indirect
political donations. No political donations were made during the
year under review and no political donations will be paid during
the forthcoming year (2022: nil).
Future developments
The outlook for the Company is discussed in the Chairman's
Statement on page 8.
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 Annual
Report confirms that:
i. so far as the Directors are aware, there is no relevant audit
information of which the Company's independent Auditor is unaware;
and
ii. the Directors have taken all steps that ought to have been
taken as Directors to make themselves aware of any relevant
information and to establish that the Company's Independent Auditor
is 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 AGM.
Regulatory disclosures - information to be disclosed in
accordance with Listing Rule 9.8.4:
The following table provides references to where the information
required by Listing Rule 9.8.4 is disclosed:
Listing Rule
9.8.4 (1) - Capitalised The Company has not capitalised any
Interest interest in the year under review.
-----------------------------------------------
9.8.4 (2) - Unaudited The Company publishes a quarterly NAV
Financial Information statement. The Company published its
interim report and unaudited financial
statements for the period from 1 October
2022 to 31 March 2023.
-----------------------------------------------
9.8.4 (4) - Incentive The Company has no incentive schemes
Schemes in operation.
-----------------------------------------------
9.8.4 (5) and (6) No Director of the Company has waved
- Emolument Waivers or agreed to waive any current or future
emoluments from the Company.
-----------------------------------------------
9.8.4 (7), (8) and During the period, the Company has
(9) - Share Issuance not issued or allotted any equity securities
within the meaning of LR 9.8.4 (7),
(8) and (9).
-----------------------------------------------
9.8.4 (8) and (9) Not applicable.
- Companies Part of
the Group
-----------------------------------------------
9.8.4 (10) - Significant During the period under review, there
Contracts were no contracts of significance subsisting
to which the Company is a party and
in which a Director of the Group is
or was materially interested or between
the Company and a controlling shareholder.
-----------------------------------------------
9.8.4 (11) - Controlling The Company is not party to any contracts
Shareholders for the provision of services to the
Company by a controlling shareholder.
-----------------------------------------------
9.8.4 (12) and (13) During the period under review, there
- Waiving Dividends were no arrangements under which a
shareholder has waived or agreed to
waive any dividends or future dividends.
-----------------------------------------------
9.8.4 (14) - Board Not applicable.
Statement re Significant
Shareholders
-----------------------------------------------
There are no other disclosures to be made under LR 9.8.4
By order of the Board
For and on behalf of
Computershare Company Secretarial Services Limited
Company Secretary
4 December 2024
Corporate Governance Statement
Introduction
In this statement, the Company reports on its compliance with
the principles and provisions of the Association of Investment
Companies Code of Corporate Governance (the AIC Code), as published
in February 2019 which provides a framework of best practice for
investment companies. The Board is committed to high standards of
corporate governance and the Directors are accountable to
shareholders for the governance of the Company's affairs.
Statement of Compliance
The AIC Code addresses the principles and provisions set out in
the UK Corporate Governance Code (the UK Code), as well as setting
out additional provisions on issues that are of specific relevance
to the Company.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council (FRC), provides more relevant
information to its shareholders. The FRC has confirmed that AIC
member companies, such as ReSI plc, which report against the AIC
Code will be meeting their obligations in relation to the UK Code
and the associated disclosure requirements under paragraph 9.8.6 of
the Listing Rules.
The UK Code is available on the FRC website ( www.frc.org.uk ).
The AIC Code is available on the AIC website ( www.theaic.co.uk ),
which includes an explanation of how the AIC Code adapts the
principles and provisions set out in the UK Code to make them
relevant for investment companies.
Throughout the year ended 30 September 2023, the Company has
complied with the principles of the AIC Code which incorporates the
UK Code, except as set out below:
Executive Directors - The UK Code includes provisions relating
to the role of the chief executive and executive directors'
remuneration. For the reasons as set out in the AIC Guidance, the
Board considers these provisions are not relevant to the Company.
ReSI is an externally managed company with a Board comprising
entirely of Non-Executive Directors and it does not have any
employees, therefore it does not have any executive board members
or a chief executive.
Internal audit function - The UK Code includes provisions for an
internal audit function. For reasons set out in the AIC Code, the
Board considers that these provisions are not relevant to the
Company as it is an externally managed investment company. In
particular, all of the Company's day-to-day management and
administrative functions are outsourced to third-party service
providers, all of which have their own internal audit function. As
a result, the Company has no internal operations. The Board has
therefore determined that it is not necessary for the Company to
have its own internal audit function, although this is reviewed on
an annual basis.
The Company has therefore not reported further, in respect of
these provisions.
The Board of Directors
The Company has a robust corporate governance framework with
oversight provided by a highly experienced, fully independent
board. The Board consists of four Non-Executive Directors including
the Chairman. All of the Directors have served during the entire
year. The Directors are collectively responsible for determining
the investment policy and strategy, and have overall responsibility
for the Company's activities. The names and biographical details of
the Directors, including a list of their other directorships and
significant commitments is shown on pages 65 to 66.
The Board believes that during the year ended 30 September 2023
its composition was appropriate for a REIT of the Company's nature
and size. The Directors have a broad range of relevant business and
financial knowledge, skills and experience to meet the Company's
requirements and all of the Directors are able to allocate
sufficient time to the Company to discharge their responsibilities
effectively.
Reflecting on the current economic environment and the impact
this has had on the growth of the Company, the Board has decided to
take steps to reduce the size the Board as well as balance the
diversity of the Board for the benefit of the Company's members and
to help promote the success of the Company. With this in mind,
since year end, the Board has agreed that John Carleton will retire
as a Director of the Company with effect from 22 February 2024 and
accordingly will not stand for re-election at the Company's
forthcoming AGM in 2024.
In accordance with the Listing Rules that apply to closed-ended
investment entities, and taking into consideration the AIC Code,
the Board has reviewed the status of its individual Directors and
the Board as a whole. No Director of the Company has served for
nine years or more and all Directors remain independent of the
Company's Fund Manager. Accordingly, all Directors are considered
to be independent in both character and judgement.
The Board leads the appointment process of new Directors, as and
when vacancies arise in accordance with the Directors' ongoing
succession planning. A formal process for the selection and
appointment of new Directors to the Company is followed by the
Board. New Director appointments shall be made on the basis of
merit against objective criteria as identified by the Board as
being desirable to complement the skills and experience of the
existing Directors whilst having regard for all diversity
factors.
Succession planning and Board composition has remained a focus
during the year. The Board considers it to be inappropriate to set
a specific tenure limit for any individual Director or the Chairman
of the Board. Instead, as set out in the Board tenure and
re-appointment policy (Board Tenure Policy), the Board will seek to
recruit a new Director on average every 2-4 years to regularly
bring the challenge of fresh thinking into the Board's discussions.
The Board recognises the benefits of regular refreshment and
diversity which brings new perspectives and challenge, whilst also
maintaining stability and continuity of corporate memory through
longer serving Directors. Through the Board Tenure Policy the Board
seeks to achieve a range of skills, experience, backgrounds and
lengths of services among its members. This approach will likely
result in an average tenure of 3-5 years. The Board does not
believe that length of service in itself necessarily disqualifies a
Director from seeking reappointment but, when making a
recommendation, the Board will take into account the requirements
of the AIC Code. Information in respect of the Company's Board
Diversity Policy can be found on page 78 of this Annual Report.
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 AGM and shall not be taken into account
in determining the number of Directors who are to retire by
rotation. In line with best practice and the Board Tenure Policy,
Directors will stand for annual re-election and the performance of
each Director will be appraised by the Board annually, prior to the
AGM. In light of John Carleton's planned retirement with effect
from 22 February 2024, he will not seek re-election at the
Company's forthcoming AGM in 2024. Accordingly, resolutions to
re-elect Rob Whiteman, Robert Gray and Elaine Bailey are contained
within the AGM Notice of Meeting. The Directors have appointment
letters which do not provide for any specific term. Copies of the
Directors' appointment letters are available for inspection on
request at the registered office of the Company and will be
available at the AGM. Upon joining the Board, new Directors receive
a formal induction and relevant training is available to Directors
on an ongoing basis.
Insurance and indemnity provisions
A policy of insurance against Directors' and Officers'
liabilities is maintained by the Company.
Responsibilities of the Chairman and Senior Independent
Director
The Board appointed Robert Whiteman as Chairman of the Company,
in March 2018. The Chairman is responsible for leading the Board
and for its overall effectiveness in directing the affairs of the
Company. The Chairman ensures that all Directors receive accurate,
timely and clear information and help promote a culture of openness
and debate in Board meetings by facilitating the effective
contribution of other Directors. The Chairman also takes a leading
role in ensuring effective communications with shareholders and
other stakeholders.
Robert Gray was appointed Senior Independent Director of the
Company on 16 September 2021. The Senior Independent Director
provides a channel of communication for any shareholder concerns
regarding the Chairman and leads the Chairman's annual performance
evaluation.
In accordance with the AIC Code, the Board has reviewed and
approved a policy setting out the responsibilities of the Chairman
and the Senior Independent Director.
Audit Committee
The Board delegates certain responsibilities and functions to
the Audit Committee as is clearly set out and defined in its terms
of reference, which can be inspected at the registered office of
the Company and viewed on the Company's website (
https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/).
In accordance with the AIC Code, the Audit Committee comprises the
whole Board, all of whom are independent and have relevant
financial expertise. Robert Gray who is the Chairman of the Audit
Committee has relevant financial experience and has held similar
roles at other organisations. The Committee as a whole has
competence relevant to the sector in which the Company operates.
The Committee meets at least twice a year to review the integrity
and content of the interim and annual financial statements,
including the ongoing viability of the Company. The Committee also
reviews the scope and results of the external audit, its cost
effectiveness, quality and the independence and objectivity of the
external Auditors, including the provision of non-audit services. A
report of the Audit Committee is included in this Annual Report as
set out on pages 83 to 85.
Other Committees
The fully independent Board additionally fulfils the
responsibilities of a nomination committee and remuneration
committee. Given the size of the Board and the size and nature of
the Company, which has no employees or executive directors, it has
not been considered necessary by the Board to establish separate
nomination or remuneration committees at this time.
It is the responsibility of the Board as a whole to determine
and approve the Directors' fees, following proper consideration and
having regard to the industry generally, the role that individual
Directors fulfil in respect of Board and committee
responsibilities, the time committed to the Company's affairs and
the remuneration levels generally within the sector. Detailed
information on the remuneration arrangements for the Directors can
be found in the Directors Remuneration Report on pages 86 to
89.
It is the responsibility of the Board as a whole to undertake a
formal review of the balance, effectiveness and diversity of the
Board and consider succession planning, identifying the skills and
expertise needed to meet the Companies strategic objectives. The
Board is also responsible for reviewing the appointment of a Senior
Independent Director, membership of the Board's Committees, and the
re-appointment of those Directors standing for re-election at
AGMs.
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. Furthermore, in this capacity, the Board
reviews the terms of the Fund Management Agreement and examines the
effectiveness of the Company's internal control systems and the
performance of the Fund Manager, depositary, administrator, company
secretary and the registrar.
Board and Audit Committee meeting attendance
Directors Board Audit Committee
(6 meetings held) (3 meetings held)
Rob Whiteman 6 3
-------------------- --------------------
Robert Gray 6 3
-------------------- --------------------
John Carleton 6 3
-------------------- --------------------
Elaine Bailey 6 3
-------------------- --------------------
There were six Board meetings and three Audit Committees
meetings held during the year to 30 September 2023. Additional
sub-committee meetings of the Board were also held during the year
in respect of payment of dividends, approval of NAV, approval of
financial statements and results, and other administrative matters
and approval of documentation. All Directors also attended a
Company Strategy Session in March 2023.
Board diversity
The Board Diversity Policy sets out the approach to diversity on
the Board and the process which the Board will follow when making
new appointments. All Board appointments will be made on merit and
against objective criteria, having due regard to the benefits of
diversity on the Board including of gender, ethnicity, sexual
orientation, disability or educational, professional and
socio-economic backgrounds and cognitive and personal strengths and
taking care that appointees have enough time available to devote to
the position, in the context of the overall balance of skills and
backgrounds that the Board needs to maintain in order to remain
effective.
It is the Board's ongoing intention that, to the extent that
there are any changes to the current composition of the Board, it
shall take into account the recommendations of the FTSE Women
Leaders Review, the Hampton-Alexander Review, the Parker Review and
the FCA Listing Rules and Disclosure Guidance and Transparency
Rules.
Whilst recognising the importance and benefits of diversity in
the boardroom, the Board does not consider it to be in the interest
of the Company and its shareholders to set prescriptive diversity
criteria or targets as all appointments must be made on merit.
However, diversity generally, including gender and ethnicity, will
be taken into consideration with evaluating the skills, knowledge,
and experience desirable to fill each Board vacancy. The objective
of the Board Diversity Policy is to ensure that all Board
appointments will be made on merit, in the context of the skills,
knowledge and experience that are needed for the Board to be
effective.
The Board appraises its collective set of cognitive and personal
strengths, independence and diversity on an annual basis, and
especially during the recruitment process, so as to ensure
alignment with the Company's strategic priorities and aims. The
Board is satisfied with the composition of the Board, taking into
consideration the steps being taken to reduce the size the Board as
well as balance the diversity of the Board. its current
composition. One Director (25% increased to 33% from 22 February
2024) of the ReSI Board, Elaine Bailey, is female.
The below tables set out the directors' gender or sex and ethnic
background: In accordance with Listing Rule 9 Annex 2.1, the below
tables, show the gender and ethnic background of the Directors as
at 30 September 2023.
Board gender identity or sex
Number of board Percentage of the Number of senior
members board positions on the
board
Men 3 75% Not applicable*
(2 as of 22 February (67% as of 22 February
2024) 2024)
----------------------- ------------------------- -------------------
Women 1 25%
(33% as of 22 February
2024)
----------------------- ------------------------- -------------------
Not specified/prefer - -
not to say
----------------------- ------------------------- -------------------
Board ethnic background
Number of board Percentage Number of senior
members of the board positions on
the board
White British or other
White (including minority
white groups) 4 100% Not applicable*
----------------- --------------- ------------------
Mixed/Multiple Ethnic
Groups 0 0 0
----------------- --------------- ------------------
Asian/Asian British 0 0 0
----------------- --------------- ------------------
Black/African/Caribbean/Black
British 0 0 0
----------------- --------------- ------------------
Other ethnic group, including
Arab 0 0 0
----------------- --------------- ------------------
Not specified/ prefer
not to say 0 0 0
----------------- --------------- ------------------
* This column is not applicable as the Company is an externally
managed real estate investment trust and does not have executive
management functions, specifically it does not have a chief
executive officer or chief financial officer. The chair of the
Board and the Senior Independent Director are both men. The chair
of the Audit Committee is also male.
The information presented in the above tables was collected on a
self -- reporting basis by the Directors, who were asked to
indicate which of the categories specified in the prescribed tables
were most applicable to them.
As at 30 September 2023, the Company has not met the following
targets on board diversity set out in the FCA Listing Rule
9.8.6R(9):
a. At least 40% of individuals on its board are women
b. At least one of the senior board positions is held by a women
c. At least one individual on its board is from a minority ethnic background
Although supportive of the targets, the Company has not been
able to meet the targets set by the FCA Listing Rules. For reasons
set out above, the target of at least one senior board positions
held by a women is not applicable to the Company.
As a Board of four Directors, the size of the Board and the
Company provides a challenge to achieving the FCA Listing Rules
gender and ethnicity diversity targets and it is recognised that
any change of the membership of the Board will have a significant
impact on the representation of any particular group of people.
Although as at the publication of this Annual Report, there have
been no changes to the Board that have impacted the Company's
ability to meet these targets, John Carleton will not be standing
for re-election at the 2024 AGM, which will increase the gender
diversity of the Board from 25% to 33% women.
In light of the current economic environment and the impact this
has had on the growth of the Company, the Board does not believe
that at this time it would be in the best interests of the Company
and its members to incur the expense of appointing an additional
director.
In order to take steps towards embedding the Board Diversity
Policy and the Board Tenure Policy, encouraging diversity, and
achieving the FCA Listing Rule diversity targets, the Board will
continue to review succession plans during the year ending 30
September 2024. The centrepiece of which will be the gender and
ethnic diversity of the Board. In accordance with the Company's
Board Diversity Policy, an objective of the Company when appointing
new directors to the Board shall be to have a long list of
potential non-executive directors including diverse candidates of
appropriate merit. The Board will ensure that active steps are
taken to search for, and attract, gender and ethnically diverse
candidates when recruiting new directors.
Performance evaluation
On an annual basis, the Board evaluates its own performance and
the performance of the Audit Committee, the Chairman and individual
Directors. For the period under review the evaluation was
facilitated by the Company Secretary and was carried out by way of
a detailed questionnaire.
The Chairman led the evaluation, which covered the functioning
and dynamics of the Board as a whole, composition and diversity of
the Board, the effectiveness of the Audit Committee and the
contribution made by each Director. Each Director completed a
self-evaluation questionnaire in order to reflect on their personal
commitment and contributions during the period. The results were
reviewed by the Chairman and discussed with the Board. The Board
confirmed that the results of the performance evaluation were
positive, and it was concluded that the Board continued to function
effectively and there are no significant concerns among the
Directors about the Board's effectiveness. The resulting actions
agreed by the Directors will be monitored during the year ending 30
September 2024. The Board remains satisfied that all current
Directors continue to contribute effectively and have the skills
and experience relevant to the leadership and direction of the
Company.
A separate evaluation of the Chairman was led by the Senior
Independent Director, Robert Gray. Directors completed a Chairman
evaluation questionnaire, the responses of which were reviewed by
the Senior Independent Director who then met with the Chairman to
discuss and address any points of action.
The Board monitors the performance of the Fund Manager and
believes the continuing appointment of the Fund Manager to be in
the best interests of shareholders as a whole. For further
information see page 70.
During the period, the Board reviewed and re-evaluated the need
for an externally facilitated board evaluation. Taking into
consideration the current activities of the Company, it was agreed
that undertaking an external board evaluation in the period was
not, at this time, appropriate or in the best interest of the
Company. The Board recognise the benefits of an external evaluation
and will continue to consider whether an external evaluation would
be beneficial and in the interests of the Company as a whole.
Internal control review and assessment process
The AIC Code requires the Board to review the effectiveness of
the Company's system of internal controls. The Board recognises it
has ultimate responsibility for the Company's risk management and
system of internal controls, and for reviewing and monitoring their
effectiveness. The risk management process and system of internal
controls are designed to manage, rather than eliminate, the risk of
failure to achieve the Company's objectives. It should be
recognised that such systems can only provide reasonable, rather
than absolute, internal assurance against material misstatement or
loss.
The Board has undertaken a risk assessment and review of the
Company's internal controls framework and the Company's risk
appetite in the context of the Company's overall investment
objective. The Board, through delegation to the Audit Committee,
has undertaken a robust assessment and review of the emerging and
principal risks facing the Company. A statement of the principal
risks and uncertainties faced by the Company can be found on pages
58 to 60.
The Board believes that the existing arrangements represent an
appropriate framework to meet the 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 Annual Report. The monitoring and review includes all
material controls, covering financial, operational and compliance.
Given the nature of the Company's activities and the fact that most
functions are sub-contracted, the Directors have obtained
information from key third-party service providers regarding the
controls operated by them. The Board has concluded that the
Company's risk management and internal control system, and those of
the key third-party service providers, are adequate to meet the
needs of the Company.
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 AIFM, the Fund Manager, Company
Secretary, Corporate Broker, Tax Adviser, Depositary, Public
Relations Adviser and Registrar 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 90 and the Going Concern and Viability
Statement is on pages 61 to 63 . The Independent Auditor's Report
is on pages 92 to 99.
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 key service providers. 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, Corporate Broker, Company Secretary and the
Depositary provide reports, 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 for ensuring that Board and
Committee procedures are followed and that applicable regulations
are complied with. The Company Secretary is also responsible for
ensuring the timely delivery of information and reports and for
ensuring that statutory obligations of the Company are met.
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. 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 review investment activity and performance and
exercise 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.
Matters reserved for the Board and delegated authorities
There is a clear division of responsibilities between the
Chairman, the Directors, the Fund Manager and the Company's
third-party service providers. To retain control of key decisions
and ensure there is a clear division of responsibilities between
the running of the Board and the running of the business, the Board
has identified 'reserved matters' that only it can approve. The
Board has delegated a number of responsibilities and authorities to
the Fund Manager, in accordance with the Fund Management Agreement,
which has been reviewed during the period and the Board has agreed
that it remains appropriate. These responsibilities include the
level of borrowing, which is based on the characteristics of the
relevant property and asset class and identifying new investment
opportunities for the Company, performing due diligence in relation
to potential investments, approving and executing such investments
and monitoring existing investments. The Fund Manager presents
potential transactions to the Board at regular Board meetings. The
Board and the Committee receive sufficient, reliable and timely
information in advance of meetings and are provided with or given
access to all necessary resources and expertise to enable them to
fulfil their responsibilities and undertake their duties in an
effective manner.
Principal risks
The Directors confirm that they have carried out a robust
assessment of the principal and emerging risks facing the Company,
including those that would threaten its position, business model,
future performance, solvency or liquidity. The principal risks and
how they are being managed is set out in the Strategic Report on
pages 58 to 60. As part of its risk process, the Board seeks to
identify emerging risks to ensure that they are effectively managed
as they develop and recorded in the risk matrix.
Annual General Meeting
At least twenty-one days' notice shall be given to all the
members and to the Auditors of an AGM. All other general meetings
shall also be convened by not less than twenty-one days' notice to
all those members and to the Auditors unless the Company offers
members an electronic voting facility and a special resolution
reducing the period of notice to not less than fourteen days prior
to the general meeting, 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 AGM to reduce the period
of notice for general meetings, other than the AGM, to not less
than fourteen days.
Shareholder relations
The Company encourages all shareholders to attend and vote at
the AGM and seeks to provide a minimum of twenty one working days'
notice of that meeting. The Notice of Meeting sets out the business
of the AGM and any item not of an entirely routine nature is
explained in the Directors' Report. Separate resolutions are
proposed for each substantive issue. The Board and the Fund Manager
are available to discuss issues affecting the Company, and
shareholders have the opportunity to address questions to the Fund
Manager, the Board including the Chairman and the Chairman of the
Audit Committee.
The Fund Manager has a structured programme of meetings with key
shareholders and reports back to the Board on its findings. A
detailed list of the Company's shareholders is reviewed at each
Board meeting.
The Half-Yearly and Annual reports of the Company are prepared
by the Board and its advisers to present a full and readily
understandable review of the Company's performance. Copies of which
are dispatched to shareholders by post or electronically as
requested and are also on the Company's website (
https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/).
Half year and annual investor presentations, as well has
factsheets, reports and policies are also made available on the
Company's website.
The Chairman and the Board welcome direct feedback from
shareholders.
Further details of the Company's engagement with stakeholders
and how the Board has regard to those stakeholders in the Board's
decision-making processes are set out in the Strategic Report on
pages 53 to 57.
Exercise of voting powers and stewardship code
The principles of best practice of the Stewardship Code are not
applicable to the Company's operations, being a REIT that does not
hold the shares of other companies.
Social and environmental policy
Please see the Environmental and Social Impact report on pages
40 to 50 for details.
For and on behalf of
Computershare Company Secretarial Services Limited
Company Secretary
4 December 2023
Report of the Audit Committee
Role of the Audit Committee
The AIC Code of Corporate Governance (the UK Code) recommends
that boards should establish an audit committee 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 UK Code. The terms of reference of the Audit
Committee can be found on the Company's website at
https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/.
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 Company's external Auditor, BDO LLP (the
Auditor);
-- to review the annual accounts and half-yearly financial report;
-- to review the day-to-day management of the Company by the
Fund Manager and its adherence to agreed investment parameters;
and
-- assessment of the Company's internal financial controls and risk management systems.
Composition
All of the independent Directors of the Company are members of
the Audit Committee. The Audit Committee as a whole has recent and
relevant financial experience. As endorsed by the AIC Code, the
Chairman of the Company is a member of the Audit Committee. The
Board and the Audit Committee believe that the Chairman of the
Company being a member of the Audit Committee is appropriate as he
was independent on appointment and remains independent. His
contributions are beneficial to the Audit Committee due to his
recent and relevant financial experience. Details of the Committee
members' experience can be found on page 65 to 66.
Meetings
There have been three Audit Committee meetings during the year
ended 30 September 202 3. These meetings were aligned with key
dates for financial reporting and the audit cycle of the Company.
Attendance is included in the Corporate Governance Statement page
78.
During these meetings the Audit Committee has:
-- reviewed the Company's financial statements for the half year
and year end and made formal recommendations to the Board;
-- reviewed the Company's going concern and viability statements;
-- reviewed the internal controls and risk management systems of
the Company and its third-party service providers including
cyber-security;
-- reviewed the Company's risk register reflecting the current
and emerging risks faced by the Company;
-- agreed the audit plan and fees with the Auditor, including the principal areas of focus;
-- reviewed its own performance; and reviewed its Terms of Reference.
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 year ended 30 September 2023:
A. Investment property valuation
The valuation of investment property is the most material matter
in the production of the financial statements. Savills Advisory
Services Limited has been appointed to value the Company's property
investments, in accordance with the Regulated Investment Company
requirements, on a quarterly basis. The Audit Committee reviewed a
copy of the annual valuation report once it had been completed and
has received a presentation from the valuer. Investment properties
are valued at their fair value in accordance with IFRS 13 and IAS
40, 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 as at 30 September 2023 is appropriate.
B. Fair value of debt (debt held at fair value through profit
and loss)
The Group's debt held at fair value through profit or loss is
fair-valued as of the year-end and based on the relevant gilt rate
and discounted cash flows. The Audit Committee has reviewed the
assumptions underlying the debt valuations and concluded that the
valuation at the Company's year-end is appropriate.
C. Revenue recognition
Ensuring that the Group's rental income is accounted for in
accordance with accounting standards presents an inherent risk. The
Audit Committee has reviewed the Company's procedures in place for
revenue recognition and has concluded that revenue has been
appropriately recognised.
D. Shared ownership
Shared ownership is a form of tenure in which a long lease is
granted in respect of a property alongside payment of an initial
stake in that property (the First Tranche). Proceeds of First
Tranche sales are included within turnover and the related
proportion of the cost of the asset recognised within cost of
sales. Shared ownership properties are split proportionately
between Inventories and Investment properties based on the current
element relating to First Tranche sales. The valuations for the
investment property element are valued by Savills as part of the
investment property valuation process and the inventory element is
held at cost (defined as the lower of net realisable value or
cost). The Audit Committee has reviewed the Savills valuation
report for the relevant period, the Company's assessment of the
split of investment property and inventory, and the Company's
procedures in place for the valuation of shared ownership and has
concluded that it has been appropriately recognised.
E. Internal Controls and Risk Management
Through the powers conferred upon the Audit Committee by the
Board, the Audit Committee is responsible for ensuring that
suitable internal controls systems are implemented by the Fund
Manager and other third-party service providers, and further
ensuring that those control systems are continuously reviewed and
remain effective. The Audit Committee has reviewed the internal
controls of third-party service providers and the Fund Manager
during the period.
In addition, with the assistance of the Fund Manager and
third-party services providers, the Audit Committee identifies the
principal risks and uncertainties faced by the Company and
determines strategies to ensure that they are mitigated. Further
details on the principal risks and uncertainties that face the
Company can be found on pages 58 to 60.
External Audit
The Audit Committee monitors and reviews the effectiveness of
the external audit process for the publication of the Annual Report
and makes recommendations to the Board on the re-appointment,
remuneration and terms of engagement of the Auditor.
Audit Fees
The audit fee incurred for the audit of the 2023 Annual Report
and Accounts was GBP259,000 (30 September 2022: GBP228,000 -
including overrun fees of GBP50,000). The Audit Committee continues
to monitor the level of audit fees carefully.
Provision of non-audit services
The Audit Committee has a Non-Audit Services Policy to govern
the supply of any non-audit services provided by the 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. On 18
September 2023, the Board reviewed and approved the Non-Audit
Services Policy following a review of its ongoing effectiveness and
adequacy.
BDO LLP were paid fees of GBP45,000 in respect of non-audit
services in the year to 30 September 2023 (2022: GBP34,000). These
services were in respect of the interim review of the Interim
Report for the period ended 31 March 2022 (GBP34,000). When
reviewing the suitability of BDO LLP to carry out this service the
Audit Committee assesses a number of factors, including but not
limited to: assessing whether there are any threats to independence
and objectivity resulting from the provision of such services, the
nature of the service provided and whether the skills and
experience of BDO LLP make it the most suitable supplier. The Audit
Committee has considered the non-audit work of the Auditor during
the year ended 30 September 2023 and does not consider that this
compromises its independence. In addition, the Audit Committee has
received assurances from the Auditor that its independence is not
compromised by the supply of these services. The fees set out above
are exclusive of VAT and disbursements.
Audit tenure
BDO LLP has been appointed as the Company's Auditor since the
Company's incorporation in 2017, following a competitive process
and review of the Auditor's credentials. The appointment of the
external Auditor is reviewed annually by the Audit Committee and
the Board and is subject to approval by shareholders. Following a
review of the service provided by the Company's Auditor and
consideration of conducting an audit tender, the Audit Committee
were satisfied with the Auditors performance and have decided that
no further action would be taken. The current appointment of BDO
LLP is compliant with all existing regulations and the Board and
the Audit Committee agree that the Auditor remains independent. In
accordance with the requirements relating to the appointment of
audit firms, the Company will be required to conduct an audit
tender no later than for the financial year beginning 1 October
2027. In addition, in line with the requirement for the audit
partner to be rotated at least every five years, Richard Levy, was
appointed as the audit partner from the audit for the financial
year beginning 1 October 2021.
Effectiveness of external audit and continuing appointment of
the Auditor
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 Auditor and a
presentation of the results of the audit following completion of
the main audit testing. Following the presentation of the results
of the audit, the Audit Committee conducted a review of the Auditor
which included a discussion of the audit process and the ability of
the Auditor to fulfil its role. The feedback provided by the Fund
Manager regarding the audit team's performance on the audit was
positive. The Auditor demonstrated a good understanding of the
Group and had identified and focused on the areas of increased
financial reporting risk. Its reporting to the Audit Committee
during the period was clear and thorough. The Audit Committee is
satisfied that the Auditor has appropriately challenged the Fund
Manager's judgements.
The Audit Committee acknowledged that the audit team during the
period, including the audit partner, comprised of staff with
appropriate levels of knowledge and experience of the sector in
which the Company operates. Following the above review, the Audit
Committee concluded that the external audit process has been
effective. Taking into consideration the performance and
effectiveness of the Auditor and the confirmation of their
independence, the Audit Committee has agreed that the
re-appointment of BDO LLP should be recommended to the Board and
the shareholders of the Company at the forthcoming AGM. BDO LLP has
confirmed its willingness to continue in office.
Internal audit function
The Audit Committee has considered the need for an internal
audit function and considers that this is not appropriate given the
size, nature and circumstances of the Company. The Audit Committee
keeps the needs for an internal audit function under periodic
review.
CMA Order
Throughout the year ended 30 September 2023, the Company has
complied with the provisions of the Statutory Audit Services Order
2014, issued by the Competition and Markets Authority (CMA
Order).
Conclusion with respect to the Annual Report and financial
statements - fair, balanced and understandable financial
statements
The Audit Committee has concluded that the Annual Report for the
year ended 30 September 2023, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company's position, performance,
business model and strategy. The Audit Committee has reported its
conclusions 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.
Robert Gray
Chairman of the Audit Committee
4 December 2023
Directors' Remuneration Implementation Report
The Board has prepared this report in accordance with the
requirements of the Large and Medium Sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013.
The law requires the Company's Auditor to audit certain
disclosures provided. Where disclosures have been audited, they are
indicated as such. The Auditor's opinion is included in the
Independent Auditor's Report on pages 92 to 99.
The Board consists entirely of Non-Executive Directors and the
Company has no employees therefore the Company has not reported on
those aspects of remuneration that relate to Executive Directors.
As detailed on page 78. it is not considered appropriate for the
Company to establish a separate Remuneration Committee.
Accordingly, the Board as a whole considers and approves the
Directors' remuneration.
Remuneration Policy
The Company is required to ask shareholders to formally approve
the Directors' Remuneration Policy, on a three-yearly basis. Any
change to the Directors' Remuneration Policy requires shareholder
approval. A binding ordinary resolution to approve the Directors'
Remuneration Policy was last proposed and approved by shareholders
at the AGM of the Company held on 14 January 2022. The resolution
was passed with proxies representing 99.16% of the shares voted
being in favour of the resolution.
There are no proposed changes to the policy, and therefore it is
intended that the provisions of this policy continue for the year
ended September 202 4. A copy of the policy is included in the
Company's Annual Report for the year ended 30 September 2021. The
Directors' Remuneration Policy will next be put forward for
approval at the AGM to be held in 2025.
Directors' Remuneration Implementation Report
The Directors' Remuneration Implementation Report is presented
for approval by shareholders on an annual basis and will be put
forward as an ordinary resolution at the forthcoming AGM. 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 Auditor's opinion is on page 97.
A non-binding ordinary resolution to approve the Directors'
Remuneration Implementation Report contained in the Annual Report
for the period ended 30 September 202 2 was put forward and passed
at the AGM held on 31 January 2023.
The votes cast by proxy were as follows:
Directors' Remuneration Report
Number of votes Percentage of votes
cast
For and discretionary 109,110,051 99.61%
----------------- ---------------------
Against 425,253 0.39%
----------------- ---------------------
Votes Withheld 13,149 -
----------------- ---------------------
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 and below.
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 believes that these fees set out in the Remuneration
Policy 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.
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 but are subject to re-election by shareholders at a
maximum interval of three years. However, in line with best
practice and the Company's Tenure and Re-appointment Policy all
Directors are annually considered by the Board for re-election. Rob
Whiteman, Robert Gray and Elaine Bailey will retire and stand for
re-election on a voluntary basis at the AGM on 22 February 202
4.
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
year ended 30 September 2023.
Directors' emoluments for the year ended 30 September 2023
(audited)
The Directors who served during the year received the following
remuneration for qualifying services.
Fees from 1 October Fees from 1 October Annual percentage
2022 to 30 September 2021 to 30 September change in fees
2023 2022
GBP'000 GBP'000 %
Robert Whiteman 50 50 0
Robert Blackburn
Gray 35 35 0
John Carleton 35 35 0
Elaine Bailey 35 35 0
155 155
When reviewing any change in Directors' fees from previous
financial periods, it is important to note that the remuneration of
the Directors is linked to the Net Asset Value of the Company.
There are no other taxable benefits payable by the Company which
may be deemed to be taxable. None of the above fees were paid to
third parties.
The Directors do not receive pension benefits, long-term
incentive schemes or share options.
Performance
The following chart shows the performance of the Company's share
price by comparison to the principal relevant indices. The Board
believes that these indices are the most representative comparator
for the Company, given the Company's investment objective.
ReSI plc share price indexed performance vs. peers
Relative importance of spend on pay
The following table sets out the total level of Directors'
remuneration compared to Net Operating Income, Directors' fees,
Operating expenses, and Dividends paid and payable to
shareholders.
2023 2022 Change
GBP'000 GBP'000 GBP'000
Net Property Income 18,514 17,526 988
Directors' fees 155 155 0
Operating expenses 3,805 3,221 584
Dividends paid and payable to
shareholders 9,553 9,194 359
The management fee and expenses have been included to give
shareholders a greater understanding of the relative importance of
spend on pay. It also provides Directors Fees as percentage of
Dividends and Expenses.
Directors' holdings (audited)
There are no requirements pursuant to the Company's Articles of
Association for the Directors to own shares in the Company. As at
30 September 2023, the Directors' beneficial shareholdings were as
follows:
30 September 30 September
2023 2022
------------------------ -------------- --------------
Robert Whiteman 100,000 80,000
Robert Blackburn Gray 399,238 207,148
John Carleton 4,850 4,850
Elaine Bailey 5,000 5,000
------------------------ -------------- --------------
There have been no changes in the Director's beneficial
shareholdings between 30 September 2023 and the date of this
report.
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 year ended 30
September 2023:
(a) the major decisions on Directors' remuneration;
(b) any substantial changes relating to Directors' remuneration
made during the financial year ended 30 September 2023; and
(c) the context in which the changes occurred and decisions have
been taken.
Rob Whiteman
Chairman of the Board of Directors
4 December 2023
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
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 UK
adopted international accounting standards 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 UK adopted international
accounting standards, subject to any material departures disclosed
and explained in the financial statements;
-- 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 statements; 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.
They are responsible for such internal control as they determine
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 Implementation Report and Corporate Governance
Statement that complies with that law and those regulations. These
can be found on pages 2 to 63, 69 to 75, 86 to 89 and 76 to 82
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 provide the information necessary for
shareholders to assess the Group and Company's performance,
business model and strategy.
Website publication: The Directors are responsible for ensuring
the Annual Report and the financial statements are made available
on a website
(https://greshamhouse.com/real-assets/real-estate-investment/residential-secure-income-plc/).
Financial statements are published on the Company's website in
accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and
integrity of the Company's website is the responsibility of the
Directors. The Directors' responsibility also extends to the
ongoing integrity of the financial statements contained
therein.
Directors' responsibility statement
Each of the Directors, whose names and titles are listed on
pages 65 to 66, confirms that to the best of their knowledge:
-- the financial statements have been prepared in accordance
with UK adopted international accounting standards 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 position, performance,
business model and strategy.
For and on behalf of the Board
Rob Whiteman
Chairman
4 December 2023
Financials
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME FOR THE YEARED 30 SEPTEMBER
2023
Note 2023 2022
GBP'000 GBP'000
Income 6 33,554 31,785
Cost of sales 6 (15,040) (14,259)
----------
Net income 18,514 17,526
Fund management fee 7 (1,885) (1,867)
General and administrative expenses 7 (1,456) (1,128)
Aborted fundraising costs 7 (273) -
One-off expenses 7 (191) (225)
---------- ----------
Administrative expenses (3,805) (3,220)
Operating profit before property disposals
and change in fair value 14,709 14,306
Loss on disposal of investment properties (11) (24)
Change in fair value of investment
properties 11 (38,944) 3,200
Change in fair value of borrowings 11 7,747 1,809
Debt one-off fees 10 (155) (369)
Operating (loss)/profit before finance
costs (16,654) 18,922
Finance income 10 220 67
Finance costs 10 (6,720) (5,655)
(Loss)/profit for the period before
taxation (23,154) 13,334
---------- ----------
Taxation 12 - -
(Loss)/profit for the period after
taxation (23,154) 13,334
---------- ----------
Other comprehensive income: - -
---------- ----------
Total comprehensive income for the
period attributable to the shareholders
of the Company (23,154) 13,334
---------- ----------
(Loss)/Earnings per share - basic
and diluted - pence 13 (12.5) 7.4
All of the activities of the Group are classified as
continuing.
The notes on pages 105 to 138 form part of these financial
statements.
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION AS AT 30 SEPTEMBER
2023 Note 2023 2022
GBP'000 GBP'000
Non-current assets
Investment properties 15 376,727 406,127
Total non-current assets 376,727 406,127
Current assets
Inventori-s - shared ownership properties 14 431 1,203
Trade and other receivables 16 3,470 3,390
Deposits paid for property purchases - 827
Cash and cash equivalents 17 8,805 15,984
---------
Total current assets 12,706 21,404
Total assets 389,433 427,531
--------- ---------
Current liabilities
Trade and other payables 18 6,833 4,891
Borrowings 19 23,327 14,285
Lease liabilities 27 1,005 994
Total current liabilities 31,165 20,170
Non-current Liabilities
Borrowings 19 158,420 175,420
Recycled Capital Grant Fund 21 585 205
Lease liabilities 27 30,584 30,348
Total non-current liabilities 189,589 205,973
Total liabilities 220,754 226,143
--------- ---------
Net assets 168,679 201,388
--------- ---------
Equity
Share capital 22 1,941 1,941
Share premium 23 14,605 14,605
Treasury shares reserve 23 (8,295) (8,293)
Retained earnings 24 160,428 193,135
Total interests 168,679 201,388
Total equity 168,679 201,388
--------- ---------
Net asset value per share - basic
and diluted (pence) 28 91.1 108.8
The financial statements were approved and authorised for issue
by the Board of Directors on and signed on its behalf by:
Rob Whiteman
Chairman
4 December 2023
The notes on pages 105 to 138 form part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 SEPTEMBER 2022
Note 2023 2022
GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit for the period (23,154) 13,334
Adjustments for items that are not
operating in nature:
Loss/(gain) in fair value of investment
properties 11 38,944 (3,200)
Movement in rent smoothing adjustments 11 (1,192) (1,148)
Profit in fair value of borrowings 11 (7,747) (1,809)
Loss on disposal of investment properties 11 24
Shares issued in lieu of management
fees 30 482 467
Finance income 10 (220) (67)
Finance costs 10 6,720 5,655
Debt one-off fees 10 155 369
Operating result before working capital
changes 13,999 13,625
Changes in working capital
(Increase)/decrease in trade and other
receivables (80) 659
Decrease in inventories 772 2,597
Increase/(decrease) in trade and other
payables 2,129 (2,754)
Net cash flow generated from operating
activities 16,820 14,127
---------- ----------
Cash flow from investing activities
Purchase of investment properties 15 (11,833) (30,635)
Grant received 15 1,148 672
Disposal of investment properties 3,396 1,475
Deposits used for acquisition - (513)
Interest received 10 220 67
Net cash flow from investing activities (7,069) (28,934)
---------- ----------
Cash flow from financing activities
Share issue (net of issue costs) 22 - 14,635
Purchase of own shares (484) (245)
New borrowings raised 19 16,800 28,100
New borrowing costs 19 (18) (215)
Bank loans repaid 19 (17,281) (4,978)
Finance costs 20 (6,394) (5,681)
Dividend paid 26 (9,553) (9,195)
Net cash flow generated from financing
activities (16,930) 22,421
---------- ----------
Net increase in cash and cash equivalents (7,179) 7,614
Reclassification of restricted cash
balances 17 - 2,684
Cash and cash equivalents at the beginning
of the period 17 15,984 5,686
Cash and cash equivalents at the end
of the period 17 8,805 15,984
---------- ----------
The notes on pages 105 to 138 form part of these financial
statements.
CONSOLIDATED STATEMENT OF Treasury
CHANGES IN EQUITY FOR THE YEAR Share Share shares Retained TotalED 30 SEPTEMBER 2023 capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 September 2021 1,803 108 (8,515) 188,996 182,392
---------- ---------- ---------- ----------- ----------
Profit for the period - - - 13,334 13,334
Other comprehensive income - - - - -
Total comprehensive income - - - 13,334 13,334
Contributions by and distributions
to shareholders
Issue of shares 138 14,862 - - 15,000
Share issue costs - (365) - - (365)
Issue of management shares - - 467 (467) -
Share based payment charge - - - 467 467
Purchase of own shares - - (245) - (245)
Dividends paid - - - (9,195) (9,195)
Balance at 30 September 2022 1,941 14,605 (8,293) 193,135 201,388
---------- ---------- ---------- ----------- ----------
Loss for the period - - - (23,154) (23,154)
Other comprehensive income - - - - -
Total comprehensive income - - - (23,154) (23,154)
Contributions by and distributions
to shareholders
Issue of management shares - - 482 (482) -
Share based payment charge - - - 482 482
Purchase of own shares - - (484) - (484)
Dividends paid - - - (9,553) (9,553)
Balance at 30 September 2023 1,941 14,605 (8,295) 160,428 168,679
---------- ---------- ---------- ----------- ----------
The notes on pages 105 to 138 form part of these financial
statement.
Notes to the Consolidated Financial Statements
For the year ended 30 September 2023
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 The Pavilions, Bridgwater Road, Bristol, BS13
8FD.
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 does not constitute the Group's
financial statements for the periods ended 30 September 2023 or 30
September 2022, but is derived from those financial statements.
Financial statements for the year ended 30 September 2022 have been
delivered to the Registrar of Companies and those for the year
ended 30 September 2023 will be delivered following the Company's
Annual General Meeting. The auditor's reports on both the 30
September 2022 and 30 September 2023 financial statements are
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 consolidated financial statements cover the year to 30
September 2023, including comparative figures to the year to 30
September 2023, and include the results and net assets of the
Group.
The consolidated financial statements have been prepared in
accordance with:
-- UK-adopted international accounting standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards
-- The Disclosure and Transparency Rules of the Financial Conduct Authori ty
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 and
the Company have the resources to continue in business for the
foreseeable future, as set out in the going concern statement on
page 61 to 63.
ReSI is subject to covenants on debt secured on its shared
ownership and retirement properties (which are ringfenced to that
particular portfolio) and on its holding company working capital
facility with Santander (see note 19 on pages 124 to 125).
Sensitivity analysis has been performed, showing headroom on all
covenants (see Fund Manager Report on page 36), including all debt
servicing and valuation metrics. Due to the long-term nature of the
company's assets and their strong underlying cash flows, the
Directors do not forecast a breach of any debt covenants.
The Santander facility includes a contractual clean down
provision requiring the facility to be paid down on the 31 December
2024. It can subsequently be redrawn five business days later. The
clean down is expected to be met via the sale of the local
authority portfolio, for which the Group has received a number of
offers and which are in an advanced sales process with reputable
purchasers, with financial close expected in early 2024. In the
event sales do not complete, the Board have assessed and concluded
mitigants are in place, as described on pages 61 to 63, which will
enable the clean down to be met.
Financial models have been prepared for the going concern period
which consider liquidity at the start of the period and key
financial assumptions at the Company level as well as at the level
of the subsidiaries of the ReSI plc. These financial assumptions
include expected cash generated and distributed by the portfolio
companies available to be distributed to the Company. This includes
inflows and outflows in relation to the external debt and interest
payments expected within the subsidiaries, the availability of new
external debt facilities, committed expenditure for investments and
expected dividends as well as the ongoing administrative costs of
the Company.
b) Changes to accounting standards and interpretations
Adoption of new and revised standards
In the current financial year, the Group has adopted a number of
minor amendments to standards effective in the year issued by the
IASB as adopted by the UK Endorsement Board, none of which have had
a material impact on the Group.
There was no material effect from the adoption of other
amendments to IFRS effective in the year. They have no significant
impact on the Group as they are either not relevant to the Group's
activities or require accounting which is consistent with the
Group's current accounting policies.
Standards and interpretations in issue not yet adopted
The following are new 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:
-- Amendments to IAS 1 which are intended to clarify the
requirements that an entity applies in determining whether a
liability is classified as current or non-current. The amendments
are intended to be narrow-scope in nature and are meant to clarify
the requirements of IAS 1 rather than modify the underlying
principles (effective for periods beginning on or after 1 January
2024).
The amendments include clarifications relation to:
- How events after the of the reporting period affect liability classification
- What the rights of an entity must be in order to classify a liability as non-current
- How an entity assesses compliance with the conditions of a liability (e.g. bank covenants)
- How conversion features in liabilities affect this classification
The amendment is not expected to have an impact on the
presentation of classification of the liabilities in the Group
based on rights that are in existence at the end of the reporting
period.
-- IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information. IFRS S1 set out
general requirements for the disclosure of material information
about sustainability-related financial risks and opportunities and
other general reporting requirements (periods beginning after 1
January 2024).
-- IFRS S2 Climate-related Disclosures. IFRS S2 set out
disclosure requirements that are specific to climate-related
matters (period beginning after 1 January 2024).
The Group acknowledges the issue of these new standards by the
International Sustainability Standards Board (ISSB) and will
monitor the consultation and decision process being undertaken by
the UK Government and FCA in determining how these standards are
implemented by UK companies.
There are other new standards and amendments to standards and
interpretations which have been issued that are effective in future
accounting periods, and which the Group has decided not to adopt
early. None of these are expected to have a material impact on the
consolidated financial statements of the Group.
3. Significant accounting policies
The principal accounting policies applied in the preparation of
the consolidated financial statements are set out below.
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.
Investment property is recognised as an asset when it is
probable that the economic benefits that are associated with the
property will flow to the Group and it can measure the cost of the
investment reliably. This is usually on legal completion.
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 4.
d) Inventories
Inventories relate to properties held for delivery as shared
ownership which provides an affordable homes ownership through a
part-buy, part-rent model where Shared Owners buy a stake in the
home (with a lower deposit requirement as it is only required as a
percentage of this stake) and pay a discounted rent on the portion
of the property that the Shared Owner(s) does not own. In
accordance with IAS 2 Inventories, the part that is expected to be
sold to the Shared Owner under the First Tranche Sale are held at
the lower of cost and net realisable value.
e) Shared ownership
Shared ownership is where initially a long lease on a property
is granted through a sale to the occupier, in return for an initial
payment (the First Tranche).
First Tranche sales are included within turnover and the related
proportion of the cost of the asset recognised as cost of
sales.
Shared ownership properties are split proportionately between
Inventories and Investment properties based on the current element
relating to First Tranche sales. The assumptions on which the First
Tranche proportion has been based include, but are not limited to,
matters such as the affordability of the shared ownership
properties, local demand for shared ownership properties, and
general experience of First Tranche shared ownership sales within
ReSI Housing and the wider social housing sector.
Shared Owners have the right to acquire further tranches
('staircasing') and any surplus or deficit on such subsequent sales
are recognised in the Statement of Comprehensive Income as a part
disposal of Investment properties.
Where a grant is receivable from Government and other bodies as
a contribution towards the capital cost of shared ownership
investment property, it is recognised as a deduction in arriving at
the cost of the property. Prior to satisfying any performance
obligations related to grant, such grants are held as a liability
on the Statement of Financial Position.
In some circumstances, typically when a shared owner staircases,
there arises an obligation to recycle the grant into the purchase
of new affordable properties within three years or to repay the
grant to the relevant grant provider. Where such an obligation
exists the grant will be held as a liability on the Statement of
Financial Position.
f) 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.
g) 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 and First Tranche sales of shared ownership
properties.
Gross rental income - Gross rental income is non-contingent
rental income, recognised on a straight-line basis over the term of
the underlying lease and is included in the Group Statement of
Comprehensive Income. Any contingent element of rental income is
recognised on an as-received basis. 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 over the term of the lease. Contractual fixed
annual rent increases and lease incentives are recognised on a
straight-line basis over the term of the lease.
Amounts received from tenants to terminate leases or to
compensate for dilapidations are recognised in the Group Statement
of Comprehensive Income when the right to receive them arises.
Gross ground rental income - Gross ground rental income is
recognised on a straight-line basis over the term of the underlying
lease.
Income from property sales is recognised when performance
conditions are fulfilled which is usually at the point of legal
completion.
Property sales consist of one performance obligation - the
transfer of the property to the shared owner. The transaction price
is fixed and specific in the sales contract. Revenue is recognised
at a point in time, when control of the property passes. Control is
considered to pass on legal completion of the property sale.
h) Cost of sales
Included within First Tranches cost of sales are costs relating
to the first tranche sale portion of newly acquired shared
ownership properties. These costs include a share of expenditure
incurred for acquisition of those properties in proportion to the
First Tranche percentage sold, direct overheads and other
incidental costs incurred during the course of the sale of those
properties.
i) Expenses
The Group recognises all expenses on an accruals basis.
j) Finance income and expense
Finance income comprises interest receivable on funds invested.
Financing expenses comprise interest payable, interest charged on
head lease liabilities and amortisation of loan fees.
Interest income and interest payable are recognised in profit
and loss as they accrue, using the effective interest method.
k) 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.
l) 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.
m) Financial instruments
Financial assets
Recognition of financial assets
All fi nancial 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
'financial assets at amortised cost'. The classification depends on
the business model in which the asset is managed and on the cash
flows associated with that asset.
Financial assets are initially measured at fair value, plus
transaction costs, except for those fi nancial assets classified as
at fair value through profit or loss, which are initially measured
at fair value.
At 30 September 2023, the Group had the following non-derivative
financial assets which are held at amortised cost:
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, less
provision for expected credit loss.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring
the expected credit losses for trade and other receivables whereby
the allowance or provision for all trade receivables are based on
the lifetime expected credit losses ("ECLs").
The Group applies the general approach for initial recognition
and subsequent measurement of expected credit loss provisions for
the loan receivable and other receivables which have maturities of
12 months or more and have a significant finance component.
This approach comprises of a three-stage approach to evaluation
of expected credit losses. These stages are classified as
follows:
Stage 1
Twelve-month expected credit losses are recognised in profit or
loss at initial recognition and a loss allowance is established.
For financial instruments that have not deteriorated significantly
in credit quality since initial recognition or that have low credit
risk at the reporting date, the loss allowance for 12-month
expected credit losses is maintained and updated for changes in
amount. Interest revenue is calculated on the gross carrying amount
of the asset (i.e. without reduction for expected credit
losses).
Stage 2
If the credit risk increases significantly and the resulting
credit quality is not considered to be low credit risk, full
lifetime expected losses are recognised and includes those
financial instruments that do not have objective evidence of a
credit loss event. Interest revenue is still calculated on the
gross carrying amount of the asset.
Stage 3
If the credit risk of a financial asset increases to the point
that it is considered credit impaired (there is objective evidence
of impairment at the reporting date), lifetime expected credit
losses continue to be recognised. For financial assets in this
stage, lifetime expected credit losses will generally be
individually assessed. Interest revenue is calculated on the
amortised cost net carrying amount (amortised cost less
impairment).
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 fi nancial 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 fi nancial 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 fi nancial liabilities
classified as at fair value through profit or loss, which are
initially measured at fair value.
Fair value through profit or loss
This category comprises certain of the Group's borrowings and
out-of-the-money derivatives where the time value does not offset
the negative intrinsic value. The Group's loans with USS held at
fair value through profit and loss may be recorded at a different
value to the notional value of the borrowings due to changes in the
expected future rate of inflation versus the date the debt was
drawn, impacting gilt rates. The designation to value a loan at
fair value through profit and loss is irrevocable and was made to
correct an accounting mismatch as the value of the loan is linked
to the shared ownership investment portfolio. The decision to link
the loan to RPI was made to ensure that returns are matched to rent
proceeds received (also linked to RPI). They are carried in the
Consolidated Statement of Financial Position at fair value with
changes in fair value recognised in the Group Statement of
Comprehensive Income as either a fair value movement (note 11) or
in the finance income or expenses line (note 10), except where the
movement relates to a change in own credit risk which is recognised
in other comprehensive income.
At 30 September 2023, 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 or at fair value, with attributable
transaction costs fully expensed if an election is made to hold at
fair value through profit or loss. 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 or at fair value if elected to hold at
fair value through profit or loss.
De-recognition of financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
n) Derivative instrument and hedge accounting
Derivative financial instruments, comprising interest rate swaps
held 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.
Movements in fair value are recognised in profit and loss as part
of finance costs.
o) Leases
The group as lessor
A lease is classified as a finance lease if substantially all of
the risks and rewards of ownership transfer to the lessee. In the
case of properties where the Group has a leasehold interest, this
assessment is made by reference to the Group's right of use asset
arising under the head lease rather than by reference to the
underlying asset. If the Group substantially retains those risks, a
lease is classified as an operating lease.
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.
The group as lessee
Where an investment property is held under a head lease, the
lease liability is capitalised at the lease commencement at the
present value of the minimum lease payments. Each lease payment is
allocated between repayment of the liability and a finance charge
to achieve a constant rate on the outstanding liability. The
corresponding rental obligations, net of finance charges, are
included in liabilities. Investment properties held under head
leases are subsequently carried at their fair value. The carrying
value of lease liabilities are remeasured when the variable element
of the future lease payments dependent on a rate or index is
revised, using the same discount rate as at the lease commencement
date.
p) Share based payments
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
external 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
discount rates and comparable market transactions. Further
information is provided in note 15.
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
is one of the most recognised professional firms within residential
and social housing 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 15
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 (the 'fair value hierarchy'). 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.
Borrowings held at fair value
Some of the Group's borrowings are held at fair value.
The inputs / assumptions on which these borrowings have been
valued include the relevant inflation-linked gilt rate at the date
of valuation and the future rate of RPI inflation. Further
information is provided in note 19.
If these assumptions prove to be inaccurate, this may have an
impact on the carrying value of the Group's borrowings held at fair
value, which could in turn have an effect on the Group's financial
position and results.
In the fair value hierarchy, borrowings valued at fair value are
included in Level 2 as they are based on observable market data
(inflation-linked gilt yields).
Judgements:
Shared ownership properties
First Tranche Sales
The Group estimates the proportion of shared ownership
properties that will be sold as First Tranche sales and therefore
classified as inventory rather than investment property. The
assumptions on which the proportion has been based include, but are
not limited to, matters such as the affordability of the shared
ownership properties, local demand for shared ownership properties,
and general experience of First Tranche shared ownership sales in
the social housing sector. The First Tranche sales percentage used
is consistent with values used by the valuers. As at 30 September
2023, the average First Tranche sales percentage assumed for vacant
shared ownership properties was 25%. If there is a change in
percentage used, this will affect the proportion of inventory and
investment property recognised with a higher assumed First Tranche
sale percentage resulting in a higher inventory value and lower
investment property value.
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. Income less cost of sales
2023 2022
Net First
property tranche
income sales Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Gross Rental income 27,930 - 27,930 25,670
First tranche property
sales - 5,624 5,624 6,115
----------- ---------- ---------- ----------
Total income 27,930 5,624 33,554 31,785
----------- ---------- ---------- ----------
Service charge expenses (5,522) - (5,522) (4,927)
Property operating
expenses (4,241) - (4,241) (3,717)
Impairment of receivables (70) - (70) (10)
First tranche cost
of sales - (5,207) (5,207) (5,605)
----------
Total cost of sales (9,833) (5,207) (15,040) (14,259)
----------- ---------- ---------- ----------
Net rental income/gross
profit before ground
rents 18,097 417 18,514 17,526
Ground rents disclosed as
finance lease interest (978) - (978) (996)
----------- ---------- ---------- ----------
Net rental income/gross
profit after ground
rents disclosed
as finance lease
asset 17,119 417 17,536 16,530
----------- ---------- ---------- ----------
Included within gross rental income is a GBP1,192,000 (2022:
GBP1,148,000) rent smoothing adjustment that arises as a result of
IFRS 16 'Leases' which require rental income in respect of leases
with rents increasing by a fixed percentage being accounted for on
a straight-line basis over the lease term. During the year this
resulted in an increase in rental income, with an offsetting entry
being recognised in profit or loss as an adjustment to the
investment property revaluation (see note 11 & 15).
Gross rental income includes service charges collected from
tenants, included in rent collected but not separately invoiced, of
GBP5,518,000 during the year (2022: GBP4,622,000). Service charge
expenses, as reflected in the cost of sales, also includes amounts
paid in respect of properties which were vacant during the period
of GBP4,000 (2022: GBP305,000).
The gross profit after ground rents disclosed as finance lease
interest are presented to provide what the Board believes is a more
appropriate assessment of the Group's net property income. Ground
rent costs are an inherent cost of holding certain leasehold
properties and are taken into consideration by Savills when valuing
the Group's properties.
7. Administration Expenses
2023 2022
GBP'000 GBP'000
Fund management fee (note 30) 1,885 1,867
Administration expenses (note 8 and
note 9) 1,456 1,119
Aborted acquisition costs - 9
Aborted fundraising costs 273 -
One-off expenses 191 225
3,805 3,220
--------- ---------
Aborted fundraising costs of GBP273,000 (30 September 2022:
GBPnil) represent sunk costs incurred in relation to an aborted
equity raise in Autumn 2022 which was postponed following the
market dislocation in September 2022. During the year, due to the
persistent discount to net asset value the equity raise was aborted
with all costs incurred written off in full.
In July 2021, the property and lettings management of the ReSI's
retirement portfolio was transferred from Girlings to ReSI Property
Management Limited, a subsidiary of the Fund Manager, and now
property management services are provided at cost. The transfer has
led to improved performance on the retirement portfolio, as
evidenced in void reductions, and is expected to drive further cost
efficiencies and operational improvements.
One off expenses of GBP191,000 (30 September 2022: GBP225,000)
comprise restructuring costs of GBP165,000 (30 September 2022:
GBP166,000) to move ReSI Property Management Limited into 3
regional teams which led to redundancy costs. During FY 2022 these
charges related to residual set-up costs associated with the
transfer to ReSI Property Management Limited which straddled the
2021-year end. GBP26,000 (30 September 2022: GBP59,000) was
incurred in relation to costs associated with improving the energy
efficiency of the Group's retirement portfolio.
8. Directors' fees and expenses
2023 2022
GBP'000 GBP'000
Fees 155 155
Taxes 17 17
172 172
--------- ---------
Fees paid to directors of subsidiaries 53 48
225 220
--------- ---------
The Group had no employees during the year (2022: Nil) 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
GBP100,000,000 to GBP200,000,000 GBP50,000
GBP200,000,000 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
GBP100,000,000 to GBP200,000,000 GBP35,000
Thereafter GBP40,000
During the year ending September 2022, the Net Asset Value of
the Company increased to over GBP200mn therefore the Directors
became eligible for a fee increase under the Remuneration Policy.
However, in consideration of the macro-economic environment and
ensuing impact on the Company and wider listed investment trust
market, the Directors agreed to waive an increase in fees.
None of the Directors received any advances or credits from any
Group entity during the year (2022: Nil).
9. Fees paid to the Company's Auditor
2023 2022
GBP'000 GBP'000
Audit fees
Parent and consolidated financial statements 125 75
Audit of subsidiary undertakings 201 143
Additional fees payable to the auditors
in relation to prior year audit 62 18
---------
Total audit fees 388 236
--------- ---------
Audit related services
Review of interim report 57 42
--------- ---------
Non-audit fees
Corporate Finance Fees - 44
--------- ---------
Total fees 445 322
--------- ---------
Fees paid to the Company's Auditors are inclusive of
irrecoverable VAT. These fees have increased significantly partly
due to additional audit work now required under IAS 315.
10. Net finance costs
2023 2022
GBP'000 GBP'000
Finance income
Interest income 220 67
--------- ---------
220 67
--------- ---------
Finance expense
Interest payable on borrowings (5,365) (4,300)
Amortisation of loan costs (288) (268)
Debt programme costs (89) (91)
Lease interest (978) (996)
(6,720) (5,655)
--------- ---------
Net finance costs (6,500) (5,588)
--------- ---------
One-off shared ownership facility set
up costs - (300)
Debt one-off fees (155) (69)
Debt one-off costs (155) (369)
--------- ---------
The Group's interest income during the year relates to cash held
on deposit with banks and 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 IFRS 16
"Leases".
Debt one-off fees incurred in the year relate to costs incurred
in charging assets to the facility with Scottish Widows
Limited.
11. Change in fair value
2023 2022
GBP'000 GBP'000
(Loss)/gain on fair value adjustment
of investment properties (37,752) 4,348
Adjustments for lease incentive assets and rent
straight line assets recognised
Start of the year 2,070 922
End of the year (3,262) (2,070)
---------- ---------
(38,944) 3,200
Gain on fair value adjustment of borrowings
(note 19) 7,747 1,809
Shared ownership facility set up costs - (300)
----------
(31,197) 4,709
---------- ---------
Gain on fair value adjustment of borrowings arises from debt
raised against the shared ownership portfolio, which the Company
elected to fair value through profit and loss in order to address
an accounting mismatch as the value of the loan is linked to the
shared ownership investment portfolio. In the prior year the Group
incurred costs of GBP0.3mn (equivalent to 0.2 basis points on the
drawn balance per annum over 45 years) in relation to further
GBP20mn drawdown of debt under the shared ownership 45-year
GBP300mn facility. With the election made to value this debt at
fair value through profit or loss, all fees associated with this
debt have been expensed upfront.
12. Taxation
2023 2022
GBP'000 GBP'000
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:
2023 2022
GBP'000 GBP'000
(Loss)/profit before tax (23,154) 13,334
---------- ---------
Tax at the UK corporation tax rate
of 25% (2022: 19%) (5,788) 2,533
Tax effect of:
UK tax not payable due to REIT exemption (3,329) (1,995)
Investment property revaluation not
taxable 9,736 (608)
Expenses that are not deductible
in taxable profit (691) (27)
Unutilised residual current year
tax losses 72 97
Tax charge for the year - -
---------- ---------
The Company and its subsidiaries operate as UK Group REIT.
Subject to compliance with certain rules, the UK REIT regime
exempts the profits of the Group's property rental business from UK
corporation tax. To operate as a UK Group REIT a number of
conditions had to be satisfied in respect of the Company, the
Group's qualifying activity and the Group's balance of business.
All conditions have been met.
13. Earnings per share
EPRA Earnings per share 2023 2022
GBP'000 GBP'000
(Loss)/Earnings per IFRS income statement (23,154) 13,334
Changes in value of investment properties 38,944 (3,200)
Losses on disposal of investment properties 11 24
Profits on sales of trading properties (417) (510)
Changes in fair value of financial
instruments and associated close-out
costs (7,747) (1,809)
EPRA earnings 7,637 7,839
---------- ---------
Deduction of non-recurring set up costs 191 225
Deduction of debt set up costs 155 369
Deduction of aborted acquisition costs 273 9
Profits on sales of trading properties 417 510
--------- ---------
Adjusted EPRA earnings 8,673 8,952
--------- ---------
Weighted average number of ordinary
shares (thousands) 185,163 180,159
IFRS earnings per share (pence)
- 2023 (pence) (12.5)
- 2022 (pence 7.4
EPRA earnings per share (pence)
- 2023 (pence) 4.1
- 2022 (pence) 4.4
Adjusted EPRA earnings per share (pence)
- 2023 (pence) 4.7
- 2022 (pence) 5.0
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.
EPRA earnings per share ('EPS') is calculated as EPRA earnings
attributable to Ordinary Shareholders of the Company divided by the
weighted average number of shares in issue throughout the relevant
period.
The Adjusted EPRA 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
EPRA earnings for income and costs which are not of a recurrent
nature or which may be more of a capital nature.
Dividend coverage for the year ended 30 September 2023 is 91%
based on an adjusted earnings figure of GBP8.67mn and dividends
paid over the year of GBP9.55mn.
14. Inventories - finished properties available for sale
2023 2022
GBP'000 GBP'000
Shared ownership properties 431 1,203
431 1,203
--------- ---------
The costs of inventories recognised in cost of sales as an
expense in the year is GBP5,207,000 (2022: GBP5,605,000). The
amount of inventories written down to net realisable value is Nil
(2022: Nil).
15. Investment properties
2023 2022
GBP'000 GBP'000
At beginning of period 406,127 372,335
Property acquisitions at cost 11,163 30,827
Grant receivable (1,148) (672)
Capital expenditure 1,497 652
Property disposals (3,407) (1,498)
Movement in head lease gross up 247 135
Change in fair value during the period (37,752) 4,348
At end of period 376,727 406,127
---------- ---------
Valuation provided by Savills 345,138 374,785
Adjustment to fair value - finance lease
asset 31,589 31,342
Total investment properties 376,727 406,127
---------- ---------
The investment properties are divided into:
2023 2022
GBP'000 GBP'000
Leasehold properties 282,073 293,734
Freehold properties * 63,065 81,051
Head lease gross up 31,589 31,342
Total investment properties 376,727 406,127
--------- ---------
*Includes Fuehold properties, the Scottish equivalent of
Freehold.
The table below shows the total value of the Group's investment
properties including committed properties with purchase contracts
exchanged at 30 September 2023. Consistent with the valuation
provided by Savills, the adjustment to fair value in respect of
finance lease assets for ground rents receivable has been excluded
to show the value of the asset net of all payments to be made
(including ground rent payments).
2023 2022
GBP'000 GBP'000
Total investment properties 376,727 406,127
Adjustment to fair value - finance
lease asset (31,589) (31,342)
Committed properties with purchase
contracts exchanged - 8,635
Total investment properties including
committed properties with purchased
contracts exchanged 345,138 383,420
---------- ----------
Included within the carrying value of investment properties at
30 September 2023 is GBP3,262,000 (2022: GBP2,070,000) in respect
of the smoothing of fixed contractual rent uplifts as described in
note 6. The difference between rents on a straight-line basis and
rents actually receivable is included within the carrying value of
the investment properties but does not increase that carrying value
over the fair value.
The historical cost of investment properties at 30 September
2023 was GBP347,117,000 (2022: GBP339,012,000).
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
2023 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 of
GBP31,589,000 (GBP31,342,000 at 30 September 2022) representing the
present value of ground rents payable for the properties held by
the Group under leasehold - further information is provided in note
27. 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 leases.
The related 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-linkedinflation-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 substantially all of its investment
properties to secure loan facilities granted to the Group (see note
19).
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 2023 is categorised as Level 3.
ReSI's properties are valued by Savills using a discounted cash
flow ("DCF") methodology applying a discount rate to estimated
future cash flows to arrive at a net present value of the
properties.
There are multiple key unobservable inputs that play material
roles in determining the Group's fair value of investment
property:
1. The discount rates applied to projected rental cash flows
(and to staircasing cash flows for shared ownership
properties):
a. Effectively, the discount rate is representative of both the
long-term cost of borrowing and the risks implicit in the
properties concerned, as well as the risk associated with the cash
flow assumptions reflected in the valuation.
b. Everything else being equal, there is a negative relationship
between the discount rate and the property valuation, such that an
increase in the discount rate will decrease the valuation of a
property and vice versa.
c. Weighted average nominal rental discount rates applied across
the shared ownership and retirement portfolio valuations at 30
September ranged from 7.3% to 8.9%.
2. Projected rates of inflation (both CPI and RPI):
a. The majority of ReSI's leases are inflation-linked (subject
to inflation floors and, for some leases, inflation caps).
Additionally, some of ReSI's operating expenses are subject to
inflationary pressures. Changes in inflation assumptions can have a
material impact on the Group's valuations.
b. The relationship between inflation and income growth (and
resulting rental values) is generally positive, as the majority of
the Group's revenues are inflation-linked (subject to certain
inflation caps and floors in certain leases in ReSI's portfolio),
however, inflation can also increase operating expenses,
potentially offsetting some or all of inflation-linked revenue
growth, all else being equal.
c. Forecast inflation rates applied for different years across
the portfolio valuations at 30 September ranged from 2.0% to 7.0%
for CPI and 2.7% to 6.3% for RPI.
3. House price growth for shared ownership properties
a. Projected house price growth plays a significant role in
determining the prevailing open market value at which shared
ownership residents staircase.
b. Everything else being equal, there is a positive relationship
between future house price growth and the property valuation, such
that an increase in future house price growth will increase the
valuation of a property and vice versa. HPI forecasts applied for
different years to the shared ownership valuations ranged from
-12.5% to +7.5%.
4. Staircasing rates for shared ownership properties:
a. Shared ownership residents have the option to incrementally
purchase from ReSI additional shares in their homes at the
prevailing open market value. This process, known as "staircasing",
generates additional cash flow to the Group, and the rate of
staircasing partly determines the amount of cash flow from equity
purchases that the Group may receive in any given period of
time.
b. The relationship between future staircasing rates and
property valuation may be either positive or negative depending on
the discount rate and house price growth assumptions used for a
given property. If a zero rate of staircasing is assumed this would
result in an increase in the valuation of ReSI's shared ownership
properties as Savills apply a higher discount rate to staircasing
cash flows as compared to rental cash flows. Equally, if it assumed
that a property staircases immediately this would also result in
increase in the valuation of ReSI's shared ownership properties as
these properties are valued at a discount to their Open Market
Value (the price at which shared owners staircase).
c. Staircasing rates applied to shared ownership valuations ranged from 2.0% to 3.0%.
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
discount rates 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 discount rates and rental
values. The impact on valuation from the change in key factors has
been modelled below by Savills:
Key inputs Key inputs Sensitivity Valuation + -
modelled at Updated Updated Valuation
30 September Valuation GBPmn
2023 GBPmn
GBPmn
Regional Discount
Retirement Rate +/- 25bps 201,804 195,108 207,181
-------------------- -------------- --------------- ------------ --------------------
Consumer Price
Index (CPI)
[48] +/- 25bps 201,804 192,282 210,420
-------------------- ---------------------------------- --------------- ------------ --------------------
Retail Price
Index (RPI)
[49] +/- 25bps 201,804 209,717 192,794
-------------------- ---------------------------------- --------------- ------------ --------------------
Rental Discount
Shared ownership Rate +/- 25bps 123,434 121,733 125,025
-------------------- -------------- --------------- ------------ --------------------
Retail Price
Index (RPI) +/- 25bps 123,434 125,611 120,444
-------------------- ---------------------------------- --------------- ------------ --------------------
House Price
Index (HPI) +/- 25bps 123,434 124,985 121,765
-------------------- ---------------------------------- --------------- ------------ --------------------
Staircasing
Sensitivity
Analysis +/- 100bps 123,434 121,807 124,886
-------------------- ---------------------------------- --------------- ------------ --------------------
16. Trade and other receivables
2023 2022
GBP'000 GBP'000
Trade debtors 469 385
Prepayments 2,836 2,623
Other debtors 165 382
3,470 3,390
--------- ---------
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a 12-month expected loss provision for
rent receivables. To measure expected credit losses on a collective
basis, rent receivables are grouped based on similar credit risk
and ageing.
The expected loss rates are based on the Group's historical
credit losses experienced since inception to the period end. The
historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the
Group's customers. Both the expected credit loss provision and the
incurred loss provision in the current and prior years are
immaterial. No reasonably possible changes in the assumptions
underpinning the expected credit loss provision would give rise to
a material expected credit loss.
There is no significant difference between the fair value and
carrying value of trade and other receivables at the Statement of
Financial Position date.
17. Cash and cash equivalents
2023 2022
GBP'000 GBP'000
Cash at bank 3,221 12,739
Cash held as investment deposit 2 2
3,223 12,741
Restricted cash 5,582 3,243
8,805 15,984
--------- ---------
The Group has defined restricted cash as cash which is subject
to restrictions with a third party where the terms of the account
do not prevent the Group from accessing the cash. Included within
cash at the year-end was an amount totalling GBP5,582,000
(GBP3,243,000 at 30 September 2022) held in separate bank accounts
which the Group considers restricted cash. Restricted cash is cash
where there is a legal restriction to specify its type of use. This
is typically where the Group has agreed to deposit cash with a bank
as part of a joint arrangement with a tenant under a lease
agreement, or to provide additional security to a lender over loan
facilities, or under an asset management initiative.
GBP1,411,000 (2022: GBP1,324,000) was held by the managing agent
of the retirement portfolio in respect of tenancy rental deposits.
Other funds were held by the management agent in an operating
account to pay service charges in respect of the ReSI Housing due
on 1 October 2023.
GBP3,811,000 (2022: GBP1,564,000) was held by US Bank in respect
of funds required as a debt service reserve for the shared
ownership debt.
GBP360,000 (2022: GBP354,000) was held in respect of a service
charge reserve fund.
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. The fund has GBP13.7bn AUM, hence
the Group's investment deposit represents an immaterial proportion
of the fund.
18. Trade and other payables
2023 2022
GBP'000 GBP'000
Trade payables 2,328 1,173
Accruals 2,615 1,238
VAT payable 3 4
Deferred income 117 797
Other creditors 1,770 1,679
6,833 4,891
--------- ---------
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.
19. Borrowings
2023 2022
GBP'000 GBP'000
Loans 183,899 192,126
Unamortised borrowing costs (2,152) (2,421)
181,747 189,705
--------- ---------
Current liability 23,327 14,285
Non-current liability 158,420 175,420
181,747 189,705
--------- ---------
The loans are repayable as follows:
Within one year 23,327 14,285
Between one and two years 3,043 9,851
Between three and five years 8,699 9,088
Between six and ten years 14,261 14,887
Between eleven and twenty years* 105,381 29,452
Over twenty years 27,036 112,142
181,747 189,705
--------- ---------
*GBP77.6mn of this is due at the maturity date of the loan in
2043.
Movements in borrowings are analysed as follows:
Fair value
through Held
profit at amortised
or loss cost 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September
2022 77,703 112,002 189,705 168,339
Drawdown of facility - 16,800 16,800 28,100
New borrowing costs - (18) (18) (215)
Amortisation of
loan costs - 288 288 268
Fair value movement (7,747) - (7,747) (1,809)
Repayment of borrowings (676) (16,605) (17,281) (4,978)
At 30 September
2023 69,280 112,467 181,747 189,705
------------ --------------- ---------- ---------
The table below lists the Group's borrowings:
Outstanding debt Annual
Drawn on original net of unamortised Maturity interest
Lender facility issue costs date rate
2023 2022 2023 2022
Held at amortised
cost GBP'000 GBP'000 GBP'000 GBP'000 %
Scottish Widows 3.5 Fixed
Ltd 97,000 97,000 91,972 92,506 Jun-43 (average)
National Westminster 1.50% over
Bank Plc - 21,550 - 12,704 July-23 SONIA
2.25% over
Santander 20,650 7,100 20,495 6,791 May-25 SONIA
117,650 125,650 112,467 112,001
---------- --------- ----------- ----------
Held at fair
value
Universities Superannuation 0.94% (average)
Scheme 77,500 77,500 69,280 77,704 May-65 *
77,500 77,500 69,280 77,704
---------- --------- ----------- ----------
Total borrowings 195,150 203,150 181,747 189,705
---------- --------- ----------- ----------
*The principal will increase at a rate of RPI+0.5% on a
quarterly basis; RPI is capped between 0% and 5% on a pro-rated
basis.
The Group elected to fair value through profit and loss the
Universities Superannuation Scheme borrowings. The notional
outstanding debt at 30 September 2023 was GBP76.9mn (2022:
GBP77.5mn) with an amortised cost of GBP87.2mn (2022:
GBP82.7mn).
The Universities Superannuation Scheme borrowings have been fair
valued by calculating the present value of future cash flows, using
the gilt curve and a credit spread reflecting the high credit
strength of the borrower at the date of valuation. The credit
spread used for the valuation as at 30 September 2023 was 1.47%
(2022: 1.81%).
In accordance with IFRS 13, the Group's borrowings held at fair
value have 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
borrowings held at fair value as at 30 September 2023 are
categorised as Level 2.
Everything else being equal, there is a negative relationship
between the credit spread and the borrowings valuation, such that
an increase in the credit spread (and therefore the future interest
payable) will reduce the valuation of a borrowing liability and
vice versa. A 10-basis point increase in the credit spread would
result in a reduction of the liability by GBP0.9mn.
The fair value of borrowings held at amortised cost at 30
September 2023 was GBP88.1mn (GBP90.5mn at 30 September 2022). The
fair value of the long term fixed Scottish Widows facility at 30
September 2023 was GBP67.4mn (GBP70.6mn at 30 September 2022).
The Scottish Widows facility is secured by a first charge over
retirement properties with a fair value of GBP200.3mn.
The Universities Superannuation Scheme facility is secured by a
first charge over shared ownership properties with a fair value of
GBP123.4mn, cash of GBP0.6mn and restricted cash balances of
GBP3.8mn.
The revolving capital facility with Santander UK plc has a
GBP25mn limit at a margin of 2.25%. There is a commitment fee of
2.25% on 30% of the undrawn balance of the facility. As at the year
end, GBP20.7mn had been drawn down under the facility. The facility
bears interest at SONIA plus 2.25%.
20. Financial instruments
The table below sets out the categorisation of the financial
instruments held by the Group as at 30 September 2023. Borrowings
held at amortised cost have a fair value of GBP88.1mn. The carrying
amount of other financial instruments approximates to their fair
value.
2023 2022
GBP'000 GBP'000
Financial assets
Loans and receivables
Trade and other receivables 634 767
Cash and cash deposits 8,805 15,984
9,439 16,751
--------- ---------
Financial liabilities
At amortised cost
Borrowings 112,467 112,002
Trade and other payables 6,713 4,090
119,180 116,092
--------- ---------
At fair value through profit or loss
Borrowings 69,280 77,703
69,280 77,703
--------- ---------
188,460 193,795
--------- ---------
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 and rental/letting agreements to ensure any fall in the
property market should not result in significant impairment to
rental cash flows. The average unexpired length of lease in the
portfolio is 143 years (2022: 155 years). 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 residential
property market for Retirement Homes, Shared Ownership and Local
Authority housing 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 interest rate exposure profile of the Group's financial
assets and liabilities as at 30 September 2023 and 30 September
2022 were:
Nil Fixed
rate Floating Fixed rate Floating
assets rate rate Inflation-linked rate
and liabilities assets liability liability liability Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2023
Trade and
other
receivables 634 - - - - 634
Cash and cash
equivalents - 8,805 - - - 8,805
Trade and
other
payables (6,713) - - - - (6,713)
Bank
borrowings - - (91,972) (69,280) (20,495) (181,747)
Obligations
under
finance leases - - (31,589) - - (31,589)
(6,079) 8,805 (123,561) (69,280) (20,495) (210,610)
----------------- ---------- ------------ ------------------ ------------ -----------
2022
Trade and
other
receivables 767 - - - - 767
Cash and cash
equivalents - 15,984 - - - 15,984
Trade and
other
payables (4,090) - - - - (4,090)
Bank
borrowings - - (92,507) (77,703) (19,495) (189,705)
Obligations
under
finance leases - - (31,342) - - (31,342)
(3,323) 15,984 (123,849) (77,703) (19,495) (208,386)
----------------- ---------- ------------ ------------------ ------------ -----------
The Group has primarily financed its activities with fixed rate
or inflation-linked debt, which reduces the Group's exposure to
changes in market interest rates. If market interest rates
increased by 1% the Group's finance costs for existing debt
facilities would increase by GBP206,500. Conversely, if market
interest rates decreased by 1% the Group's finance costs for
existing debt facilities would decrease by GBP206,500.
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
2023 2022
GBP'000 GBP'000
Trade and other receivables 634 767
Cash and cash equivalents 8,805 15,984
9,439 16,751
--------- ---------
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 residents 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 Fund Manager, with high credit ratings assigned by
international credit rating agencies.
Note 27 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 Group has been in compliance with all financial covenants on
its external borrowings throughout the year.
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 than Two to More than
one year five years five years Total
GBP'000 GBP'000 GBP'000 GBP'000
2023
Borrowings 23,327 11,742 146,678 181,747
Interest on borrowings 5,227 15,601 49,980 70,808
Obligations under
finance leases 1,005 4,000 130,946 135,951
Payables and accruals 6,713 - - 6,713
36,272 31,343 327,604 395,219
----------- ------------- ------------- ---------
2022
Borrowings 14,285 18,456 156,964 189,705
Interest on borrowings 3,824 14,611 53,435 71,870
Obligations under
finance leases 994 3,975 127,953 132,922
Payables and accruals 4,090 - - 4,090
23,193 37,042 338,352 398,587
----------- ------------- ------------- ---------
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 19),
cash and cash equivalents (note 17) and equity attributable to the
shareholders of the Company (comprising share capital, retained
earnings and the other reserves as referred in notes 22 to 24).
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.
2023 2022
GBP'000 GBP'000
Obligations under finance leases 31,589 31,342
Borrowings (book value) 181,747 189,705
Cash and cash equivalents (8,805) (15,984)
--------- ----------
Net debt 204,531 205,063
Equity attributable equity holders 168,679 201,388
--------- ----------
Net debt to equity ratio 1.21 1.02
--------- ----------
Borrowings excluding finance lease
liability 181,747 189,705
Available cash* (6,998) (12,675)
Net debt excluding lease liability
and cash 174,749 177,030
--------- ----------
Total assets less finance lease gross
up and cash 349,040 380,205
--------- ----------
Loan to Value ("LTV") leverage ratio 0.50 0.47
--------- ----------
* Available cash includes amounts held by US Bank in respect of
funds required as a debt service reserve for the shared ownership
debt but excludes other restricted cash balances.
The LTV leverage ratio has been presented to enable a comparison
of the group's borrowings as a proportion of Gross Assets as at 30
September 2023 to its medium term target LTV leverage ratio of
0.50.
f) Reconciliation of financial liabilities to financing activities:
Borrowings
Borrowings due in Lease
due within more than liabilities
one year one year (note Interest
(note 19) (note 19) 27) payable Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2022 14,285 175,420 31,342 564 221,611
Cash flows
Borrowings advanced - 16,800 - - 16,800
Borrowings repaid (17,281) - - - (17,281)
Debt arrangement
fees paid - (18) - - (18)
Interest and commitment
fees paid - - - (6,394) (6,394)
Non-cash flows
Reclassification
of borrowings 26,323 (26,323) - - -
Amortisation of
debt set up fees - 288 - - 288
Change in fair value
of borrowings - (7,747) - - (7,747)
Recognition of headlease
liabilities acquired - - 247 - 247
Interest and commitment
charge - - - 6,586 6,586
At 30 September
2023 23,327 158,420 31,589 756 214,092
------------- ------------ -------------- ---------- ----------
Borrowings
Borrowings due in Lease
due within more than liabilities
one year one year (note Interest
(note 19) (note 19) 27) payable Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2021 2,984 165,355 31,207 489 200,035
Cash flows
Borrowings advanced - 28,100 - - 28,100
Borrowings repaid (4,978) - - - (4,978)
Debt arrangement
fees paid - (215) - - (215)
Interest and commitment
fees paid - - - (5,681) (5,681)
Non-cash flows
Reclassification
of borrowings 16,279 (16,279) - - -
Amortisation of
debt set up fees - 268 - - 268
Change in fair value
of borrowings - (1,809) - - (1,809)
Recognition of headlease
liabilities acquired - - 135 - 135
Interest and commitment
charge - - - 5,756 5,756
At 30 September
2022 14,285 175,420 31,342 564 221,611
------------- ------------ -------------- ---------- ----------
21. Recycled Capital Grant
2023 2022
GBP'000 GBP'000
Grants brought forward 205 38
Transfer on staircasing 380 167
At 30 September 2023 585 205
--------- ---------
ReSI's shared ownership portfolio has been supported by grant
funding, which is designed to facilitate the delivery of affordable
housing projects. In some circumstances, typically when a shared
owner staircases, ReSI will be required to recycle the grant into
the purchase of new properties within three years or to repay it to
the relevant grant provider.
On disposal / staircasing of a grant funded property, the Group
initially recognises a liability in the Recycled Capital Grant
fund. If the disposal receipts are not subsequently recycled, the
grant will be repaid.
The balance at 30 September 2023 was GBP585,000 (2022:
GBP205,000).
22. Share capital account
Number of Ordinary
1 p GBP'000
shares
At 30 September 2022 194,149,261 1,941
Issue of shares - -
At 30 September 2023 194,149,261 1,941
The share capital account relates to amounts subscribed for
share capital.
Rights, preferences and restrictions on shares
All Ordinary Shares carry equal rights; 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.
23. Reserves
The nature and purpose of each of the reserves included within
equity at 30 September 2023 are as follows:
-- Share premium reserve: represent the surplus of the gross
proceeds of share issues over the shares, net of the direct costs
of equity issues.
-- Treasury shares reserve: represent value of shares purchased
by the Company in excess of nominal value.
GBP'000
Share premium
At 30 September 2022 and 30 September
2023 14,605
---------
GBP'000
At 30 September 2022 (8,293)
Purchase of treasury shares (484)
Transferred as part of Fund Management
fee 482
At 30 September 2023 (8,295)
---------
The only movement in these reserves during the year are
disclosed in the statement of changes in equity.
The Company held 8,985,980 shares in treasury as at 30 September
2023 (2022: 8,985,980).
24. Retained earnings
GBP'000
At 30 September 2022 193,135
Profit for the period (23,154)
Share based payment charge 482
Issue of management shares (482)
Dividends (9,553)
At 30 September 2023 160,428
----------
Retained earnings incorporate all gains and losses and
transactions with shareholders (e.g. dividends) not recognised
elsewhere .
25. Group entities
The Group entities which are owned either directly by the
Company or indirectly through a subsidiary undertaking are:
Principal
Percentage Country place
Name of entity of ownership of incorporation of business Principal activity
RHP Holdings Limited 100% UK UK Holding company
ReSI Portfolo Holdings
Limited 100% UK UK Holding company
The Retirement Housing
Limited Partnership 100% UK UK Property investment
Registered Provider
ReSI Housing Limited 100% UK UK of Social Housing
Wesley House (Freehold)
Limited 100% UK UK Property investment
Eaton Green (Freehold)
Limited 100% UK UK Property investment
Name of entity Registered address
ReSI Portfolo Holdings
Limited 5 New Street Square, London. EC4A 3TW
5 New Street Square, London, England.
RHP Holdings Limited EC4A 3TW
The Retirement Housing First Floor 2 Tangier Central, Castle
Limited Partnership Street, Taunton, Somerset, TA1 4AS
ReSI Housing Limited 5 New Street Square, London. EC4A 3TW
Wesley House (Freehold)
Limited 5 New Street Square, London. EC4A 3TW
Eaton Green (Freehold)
Limited 5 New Street Square, London. EC4A 3TW
All group entities are UK tax resident.
26. Dividends
2023 2022
GBP'000 GBP'000
Amounts recognised as distributions to shareholders
in the period:
4th interim dividend for the year
ended 30 September 2021 of 1.29p
per share - 2,208
1st interim dividend for the year
ended 30 September 2022 of 1.29p
per share - 2,209
2nd interim dividend for the year
ended 30 September 2022 of 1.29p
per share - 2,389
3rd interim dividend for the year
ended 30 September 2022 of 1.29p
per share - 2,389
4th interim dividend for the year 2,389 -
ended 30 September 2022 of 1.29p
per share
1st interim dividend for the year 2,388 -
ended 30 September 2023 of 1.29p
per share
2nd interim dividend for the year 2,388 -
ended 30 September 2023 of 1.29p
per share
3rd interim dividend for the year 2,388 -
ended 30 September 2023 of 1.29p
per share
9,553 9,195
--------- ---------
Amounts not recognised as distributions to
shareholders in the period:
4th interim dividend for the year
ended 30 September 2022 of 1.29p
per share - 2,389
4th interim dividend for the year 1,903
ended 30 September 2023 of 1.03p
per share -
Categorisation of dividends for
UK tax purposes:
Amounts recognised as distributions
to shareholders in the period:
Property Income Distribution (PID) 9,553 7,345
Non-PID - 1,850
9,553 9,195
--------- ---------
On 18 January 2023, the Company declared its final dividend of
1.29p per share for the period 1 Jul 2022 to 30 September 2022.
On 1 February 2023, the Company declared its first interim
dividend of 1.29p per share for the period 1 January 2023 to 31
March 2023.
On 14 July 2023, the Company declared its second interim
dividend of 1.29p per share for the period 1 July 2023 to 30
September 2023.
On 11 September 2023, the Company declared its third interim
dividend of 1.29p per share for the period 1 July 2023 to 30
September 2023.
On 5 December 2023, the Company announced the declaration of a
fourth interim dividend of 1.03 pence per share for the period 1
July 2023 to 30 September 2023 which will be payable on 17 January
2024 to Shareholders on the register at the close of business on 15
December 2023.
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.
27. Lease arrangements
The Group as lessee
The interest expense in respect of lease liabilities for the
period was GBP978,000 (2022: GBP996,000).
There was no expense relating to variable lease payments in the
period (2022: Nil).
The Group did not have any short-term leases or leases for low
value assets accounted for under IFRS 16 paragraph 6, nor any sale
and leaseback transactions.
The total cash outflow in respect of leases was GBP978,000
(2022: GBP996,000).
At 30 September 2023, the Group had outstanding commitments for
future minimum lease payments under non-cancellable leases, which
fall due as follows:
As at 30 September Less More
2023 than Two Six Ten than
one to five to ten to twenty twenty
year years years years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Minimum lease
payments 1,005 4,000 5,000 10,001 115,945 135,951
Interest - (292) (433) (1,512) (102,125) (104,362)
Present value
at 30 September
2023 1,005 3,708 4,567 8,489 13,820 31,589
As at 30 September Less More
2022 than Two Six Ten than
one to five to ten to twenty twenty
year years years years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Minimum lease
payments 994 3,976 4,970 9,920 113,062 132,922
Interest - (291) (432) (1,485) (99,372) (101,580)
Present value
at 30 September
2022 994 3,685 4,538 8,435 13,690 31,342
The above commitment is in respect of ground rents payable for
properties held by the Group under leasehold. There are 2,207
properties (2022: 2,182) held under leasehold with an average
unexpired lease term of 123 years (2022: 155 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:
2023 2022
GBP'000 GBP'000
Receivable within 1 year 8,689 7,987
Receivable between 1-2 years 6,353 5,817
Receivable between 2-3 years 5,359 5,723
Receivable between 3-4 years 5,160 4,728
Receivable between 4-5 years 4,441 4,530
Receivable between 5-10 years 22,166 19,039
Receivable between 10-20 years 44,283 37,978
Receivable after 20 years 435,467 373,735
531,918 459,537
The total of contingent rents recognised as income during the
period was GBPnil (2022: 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.
The Group's shared ownership properties are let to Shared Owners
on leases with initial lease terms of between 130 to 999 years.
Two of the Group's properties are let out on more traditional
leases which account for approximately 8% 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:
2023 2022
GBP'000 GBP'000
Receivable within 1 year 29,138 25,099
Receivable between 1-2 years 25,118 21,547
Receivable between 2-3 years 20,940 18,590
Receivable between 3-4 years 18,154 15,286
Receivable between 4-5 years 15,328 13,221
Receivable between 5-10 years 56,214 44,784
Receivable between 10-20 years 69,698 54,455
Receivable after 20 years 451,628 382,089
686,218 575,071
28. Net asset value per share
2023 2022
GBP'000 GBP'000
Net assets 168,679 201,388
168,679 201,388
Ordinary shares in issue at period end (excluding
shares held in treasury) 185,163,281 185,163,281
Basic NAV per share (pence) 91.1 108.8
The net asset value ('NAV') 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.
EPRA Net Tangible Assets (NTA) per share
2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 168,679 201,388
Revaluation of trading properties 66 93
Fair value of financial instruments (17,292) (4,997)
Real estate transfer tax - -
EPRA NTA 151,453 196,484
----------
Fully diluted number of shares 185,163 185,163
EPRA NAV per share (pence) 81.8 106.1
----------
EPRA NTA is equivalent to EPRA Net Reinstatement
Value
The EPRA Net Tangible Assets ('EPRA NTA') per share calculated
as the EPRA NTA of the Group attributable to shareholders divided
by the number of Ordinary Shares in issue at the period end.
The Group has debt which it elected to carry at fair value
through profit and loss. In accordance with the EPRA Best Practice
Recommendations, EPRA NTA reflects the amortised cost of the debt
rather than its fair value
29. Contingent liabilities and commitments
ReSI's shared ownership portfolio has been supported by
GBP15.0mn of grant funding. In some circumstances, typically when a
Shared Owner staircases, ReSI will be required to recycle the grant
into the purchase of new properties within three years or to repay
it to the grant providing body (see note 21).
There are no provisions for fines and settlements specified for
ESG (Environmental, Social or Governance) or any other issues.
30. 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 year ended 30 September 2023, 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 8, Directors' fees and expenses.
For the year ended 30 September 2023, ReSI Capital Management
Limited acted as alternative investment fund manager (the "Fund
Manager") 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.
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
GBP250mn, 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 GBP250mn and
including GBP500mn, 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 GBP500mn and up to
and including GBP1,000mn, an amount equal to 0.8% p.a. of such part
of the Net Asset Value; or
d) on that part of the Net Asset Value over GBP1,000mn, 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.
For the year ended 30 September 2023, the Company incurred
GBP1,885,000 (2022: GBP1,867,000) in respect of fund management
fees of which GBP315,000 was outstanding as at 30 September 2023
(2022: GBPnil). The above fee was split between cash and equity as
per the Fund Management Agreement with the cash equating to
GBP1,414,000 (2022: GBP1,401,000) and the equity element of
GBP471,000 (2022: GBP467,000) being paid as 601,947 Ordinary Shares
(2022: 444,717) at an average price of GBP0.78 per share (2022:
GBP1.05 per share).
In addition, the Fund Manager was paid a fee, pursuant to the
Fund Management Agreement, of GBPnil (2022: GBP143,000) in respect
of its arrangement of borrowings for the Group and GBPnil was
outstanding at 30 September 2023 (September 2022: GBPnil).
On the 4 December 2023, an amendment to the Fund Management
agreement was signed in relation to the measurement of the
management fee as described in note 31.
During the period the Directors and the Fund Manager received
dividends from the Company of GBP23,000 (2022: GBP15,000) and
GBP109,000 (2022: GBP149,000) respectively.
ReSI Property Management Limited ('RPML') is a wholly owned
subsidiary of ReSI Capital Management Limited and provides property
management services to the Group on a cost pass through basis with
no profit margin. During the year, RPML charged fees of
GBP1,978,000 (2022: GBP1,738,000) in respect of costs incurred in
providing property management services and GBP155,000 (2022:
GBP166,000) in respect of non-recurring costs to cover redundancy
costs as we restructured the RPML team into 3 regional teams.
.
31. Post balance sheet event
On 1 October 2023, Residential Secure Income PLC changed its
alternative investment fund manager from ReSI Capital Management
Limited ("RCML") to Gresham House Asset Management Limited
("GHAM"). Both RCML and GHAM are wholly owned subsidiaries of
Gresham House plc. The change of AIFM arises as a result of a
rationalisation of regulatory permissions within the Gresham House
plc group and will have no impact on the day-to-day management of
ReSI plc's portfolio as the current team will continue to manage
its assets.
Alongside this change of alternative investment fund manager
Residential Secure Income PLC changed its depositary from Thompson
Taraz Depositary Limited to Indos Financial Limited.
On 4 December 2023, an amendment to the Fund Management
agreement was signed in relation to the measurement of the
management fee. To further align itself with shareholders and
demonstrate its confidence in reducing the current share price
discount to Net Asset Value ("NAV"), the Fund Manager has agreed
with the board to align its management fee more closely to the
share price. From 1st Jan 2024, the management fee will calculated
by reference to the average of ReSI plc market capitalisation and
NAV for the relevant quarter, rather than applied to the quarterly
NAV only as at present. For example, based on a current discount of
around 30% this would result in a fee reduction of 15% for the
relevant quarter.
The existing fee percentages will apply to the average of Market
Capitalisation and NAV (i.e. at the same basis points as currently
applied to the quarterly NAV). Should the amount be greater than
the prevailing NAV for the quarter in question, the fee will be
capped at the relevant percentage of NAV, meaning that no fee
increase would result from ReSI plc's shares trading at a premium
to NAV over the quarter.
"Market Capitalisation" for these purposes means the average
over the previous quarter of the mid-market price for an ordinary
share in the Company ("Ordinary Share"), as derived from closing
mid-market price published in the Daily Official List of the London
Stock Exchange for each Business Day in the relevant quarter,
multiplied by the number of Ordinary Shares in issue on the last
Business Day of the relevant quarter, excluding any Ordinary Shares
held by the Company in treasury for all or such part of the quarter
in question.
The NAV for the relevant quarter shall continue to be
calculated, and the management fee payable, in the current
manner.
There have been no other significant events that require
disclosure to, or adjustment in the financial statements as at 30
September 2023.
Company Statement of Financial Position
As at 30 September 2022 Note 2023 2022
GBP'000 GBP'000
Non-current assets
Investment in subsidiary undertakings 5 169,913 189,018
Total non-current assets 169,913 189,018
Current assets
Trade and other receivables 6 86 715
Cash and cash equivalents 80 42
Total current assets 166 757
Total assets 170,079 189,775
---------
Current liabilities
Trade and other payables 7 1,400 367
Total current liabilities 1,400 367
---------
Net assets 168,679 189,408
---------
Equity
Share capital 8 1,941 1,941
Share premium 14,605 14,605
Own shares reserve (8,295) (8,293)
Retained earnings 160,428 181,155
Total interests 168,679 189,408
Total equity 168,679 189,408
The notes on pages 141 to 143 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 (loss) /
profit attributable to the Parent Company for the year ended 30
September 2023 amounted to GBP(11.2)mn (2022: GBP6.8mn).
These financial statements were approved and authorised for
issue by the Board of Directors on 4 December 2023 and signed on
its behalf by:
Robert Whiteman
Chairman
4 December 2023
Company Statement of Changes in Equity
For the year to 30 September 2023
Own
Share Share shares Retained
capital premium reserve earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 September
2021 1,803 108 (8,515) 183,522 176,918
Profit for the period - - - 6,828 6,828
Other comprehensive income - - - - -
Total comprehensive income - - - 6,828 6,828
Contributions by and
distributions to shareholders
Issue of shares 138 14,862 - - 15,000
Share issue costs - (365) - - (365)
Issue of management shares - - 467 (467) -
Share based payment charge 467 467
Purchase of own shares - - (245) - (245)
Dividend paid - - - (9,195) (9,195)
Balance at 30 September
2022 1,941 14,605 (8,293) 181,155 189,408
Loss for the period - - - (11,174) (11,174)
Other comprehensive income - - - - -
Total comprehensive income - - - (11,174) (11,174)
Contributions by and
distributions to shareholders
Issue of shares - - - - -
Share issue costs - - - - -
Issue of management shares - - 482 (482) -
Share based payment charge - - - 482 482
Purchase of own shares - - (484) - (484)
Dividends paid - - - (9,553) (9,553)
Balance at 30 September
2023 1,941 14,605 (8,295) 160,428 168,679
The notes on pages 141 to 143 form part of these financial
statements.
Notes to 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").
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 adopted 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
2. Significant accounting judgements and estimates
In preparing the financial statements of the Company, the
Directors have made the following judgements:
-- Determine whether there are any indicators of impairment of
the investments in subsidiaries. Factors taken into consideration
in reaching such a decision include the financial position and
expected future performance of the subsidiary entities.
3. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are in line with group with the company
specific policies set out below:
Investment in subsidiaries
The investments in subsidiary companies are included in the
Company's statement of financial position at cost less provision
for impairment.
4. Fees paid to the Company's Auditor
The remuneration of the auditor in respect of the Company's
consolidated and individual financial statements for the year was
GBP180,000 (2022: GBP137,000). Fees payable for audit and non-audit
services provided to the company and the rest of the Group are
disclosed in the note 6 to the Group financial statements.
5. Investments
2023 2022
GBP'000 GBP'000
At beginning of period 189,018 174,390
Additions - 14,628
Impairment reversal/(impairment) (19,105) -
At end of period 169,913 189,018
Investments represent investment in subsidiary undertakings are
subject to review for impairment indicators.
The impairment reversal is included in administrative expenses
in the Company's statement of comprehensive income.
The impairment of the Company's investments in subsidiary
undertakings has been determined by the comparing the Company's
cost of investment in each subsidiary with the fair value of each
subsidiaries' assets and liabilities. The investments are
categorised as Level 3 in the fair value hierarchy.
The Company had the following subsidiary undertakings at 30
September 2023:
Principal
Percentage Country place
Name of entity of ownership of incorporation of business Principal activity
ReSI Portfolio Holdings
Limited 100% UK UK Holding company
RHP Holdings Limited 100% UK UK Holding company
The Retirement Housing
Limited Partnership 100% UK UK Property investment
Registered Provider
ReSI Housing Limited 100% UK UK of Social Housing
Wesley House (Freehold)
Limited 100% UK UK Property investment
Eaton Green (Freehold)
Limited 100% UK UK Property investment
Name of entity Registered address
ReSI Portfolio Holdings
Limited 5 New Street Square, London, EC4A 3TW
RHP Holdings Limited 5 New Street Square, London, EC4A 3TW
The Retirement Housing First Floor 2 Tangier Central, Castle Street,
Limited Partnership Taunton, Somerset, TA1 4AS
ReSI Housing Limited 5 New Street Square, London, EC4A 3TW
Wesley House (Freehold)
Limited 5 New Street Square, London, EC4A 3TW
Eaton Green (Freehold)
Limited 5 New Street Square, London, EC4A 3TW
All group entities are UK tax resident.
6. Trade and other receivables
2023 2022
GBP'000 GBP'000
Amounts due from group
undertakings - 697
Prepayments 45 18
Other debtors 41 -
86 715
Amounts due from group undertakings are unsecured, interest free
and repayable on demand.
All amounts fall due for repayment within one year.
7. Trade and other payables
2023 2022
GBP'000 GBP'000
Amounts owed to group
undertakings 215 -
Trade payables 443 37
Accruals 742 330
1,400 367
Amounts due to group undertakings are unsecured, interest free
and repayable on demand.
8. Share capital
Details of the share capital of the Company are disclosed in
note 22 to the Group financial statements.
9. Related party transactions
Details of related party transactions are disclosed in note 30
to the Group financial statements.
Supplementary information
The Group is a member of the European Public Real Estate
Association ("EPRA"). EPRA has developed and defined performance
measures to give transparency, comparability and relevance of
financial reporting across entities which may use different
reporting standards.
The Group presents adjusted earnings per share ("EPS"), dividend
per share, total accounting return, total cost ratio, LTV ration
and EPRA Best Practice Recommendations, calculated in accordance
with EPRA guidelines, as Alternative Performance Measures ("APMs")
to assist stakeholders in assessing performance alongside the
Group's statutory results reported under IFRS. APMs are among the
key performance indicators used by the board to assess the Group's
performance.
EPRA Best Practice Recommendations have been used to facilitate
comparison with the Group's peers through consistent reporting of
key real estate specific performance measures. Certain other APMs
may not be directly comparable with other companies adjusted
measures and are not intended to be a substitute for, or superior
to, any IFRS measures of performance.
1) EPRA Earnings Recurring earnings from core operational activities
2023 2022
GBP'000 GBP'000
(Loss)/Earnings per IFRS income statement (23,154) 13,334
Changes in value of investment properties 38,944 (3,200)
Losses on disposal of investment
properties 11 24
Profits on sales of trading properties (417) (510)
Changes in fair value of financial
instruments and associated close-out
costs (7,747) (1,809)
EPRA Earnings 7,637 7,839
---------- ---------
Basic number of shares 185,163 180,159
EPRA Earnings per Share (EPS) (Pence) 4.12 4.35
Adjusted EPRA Earnings per share
2023 2022
GBP'000 GBP'000
Company specific adjustments:
Exclude debt one-off fees 155 369
Exclude one-off administration costs 191 225
Exclude one-off aborted acquisition
costs 10 9
Exclude one-off aborted fundraise
costs 263 -
Include shared ownership first tranche
sales 417 510
Company specific Adjusted EPRA Earnings 8,673 8,952
--------- ---------
Company specific Adjusted EPRA Earnings
EPRA per share (pence) 4.68 5.00
2) EPRA Net Tangible Assets (NTA)
2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 168,679 201,388
Revaluation of trading properties 66 93
Fair value of financial instruments (17,292) (4,997)
Real estate transfer tax - -
EPRA NTA 151,453 196,484
---------- ---------
Fully diluted number of shares 185,163 185,163
EPRA NTA per share (pence) 81.8 106.1
---------- ---------
The Group has debt which it elected to carry at fair value
through profit and loss. In accordance with the EPRA Best Practice
Recommendations, EPRA NTA should reflect the amortised cost of the
debt rather than its fair value. In the current period, an
adjustment has been made for GBP12.3mn which represents the
difference between fair value and what amortised cost would have
been had the Group carried the debt at amortised cost.
The fair value of financial instruments removes the effect of
mark-to-market adjustments, arising from the movement in gilt
yields and credit spreads, to include the value of debt at
amortised cost which will be crystallised through holding debt in
normal circumstances.
3) EPRA Net Reinstatement Value (NRV)
2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 168,679 201,388
Revaluation of trading properties 66 93
Fair value of financial instruments (17,292) (4,997)
Real estate transfer tax - -
EPRA NRV 151,453 196,484
---------- ---------
Fully diluted number of shares 185,163 185,163
EPRA NRV per share (pence) 81.8 106.1
---------- ---------
4) EPRA Net Disposable Value (NDV)
2023 2022
GBP'000 GBP'000
IFRS NAV per the financial statements 168,679 201,388
Revaluation of trading properties 66 93
Fair value of financial instruments 26,558 23,974
Real estate transfer tax - -
EPRA NDV 195,303 225,455
--------- ---------
Fully diluted number of shares 185,163 185,163
EPRA NDV per share (pence) 105.5 121.8
--------- ---------
5) EPRA Net Initial Yield (NIY) AND EPRA "Topped Up" NIY
2023 2022
GBP'000 GBP'000
Investment property - wholly owned 345,138 374,785
Trading property (including share of JVs) 431 1,203
Completed property portfolio 345,569 375,988
Allowance for estimated purchasers' costs estimated
as 6% of property portfolio 20,734 22,559
Gross up completed property portfolio valuation 366,303 398,547
Annualised cash passing rental income 28,836 24,809
Property outgoings (9,833) (8,653)
Annualised net rents 19,003 16,156
Add: notional rent expiration of rent-free periods
or other lease incentives - -
Topped-up net annualised rent 19,003 16,156
EPRA NIY 5.2% 4.1%
EPRA Topped up NIY 5.2% 4.1%
In accordance with the EPRA Best Practice Recommendations, EPRA
NIY should be based on net passing cash rental. The prior period
annualised rental income has been updated to reflect this.
6) EPRA Vacancy Rate
2023 2022
GBP'000 GBP'000
Estimated Rental Value of vacant space 1,060 1,368
Estimated rental value of the whole portfolio 30,114 27,292
EPRA Vacancy Rate 3.5% 5.0%
7) EPRA Cost Ratios
2023 2022
GBP'000 GBP'000
Administrative/operating expense line per IFRS
income statement 3,805 3,221
Net service charge costs/fees 5,552 4,927
Management fees less actual/estimated profit
element 2,099 1,739
Other property operating expenses 2,212 1,988
Service charge costs recovered through rents
but not separately invoiced (5,138) (4,622)
EPRA Costs (including direct vacancy costs) 8,530 7,253
Direct vacancy costs (659) (527)
EPRA Costs (excluding direct vacancy costs) 7,841 6,726
Gross Rental Income less ground rents - per IFRS 26,952 24,673
Less: service fee and service charge costs components
of Gross Rental Income (5,138) (4,622)
Gross Rental Income 21,814 20,051
EPRA Cost Ratio (including direct vacancy costs) 39% 36%
EPRA Cost Ratio (excluding direct vacancy costs) 36% 34%
In accordance with the EPRA Best Practice Recommendations, EPRA
Costs should exclude service charges recovered through rents but
not separately invoiced and include all property operating
expenses. The prior period costs have been updated to reflect
this.
Gross rental income includes service charges collected from
tenants, included in rent collected but not separately invoiced, of
GBP5,518,000 during the period (2022: GBP4,622,000 Service charge
expenses, as reflected in the cost of sales, also includes amounts
paid in respect of properties which were vacant during the period
of GBP4,000 (2022: GBP305,000).
Management fees less actual/estimated profit element is made up
of property management fees paid during the period.
8) EPRA LTV
2023 2022
GBP'000 GBP'000
Borrowings 181,747 189,705
Net payables 3,516 -
Less cash (8,805) (15,984)
Net debt 176,458 173,721
Investment properties at fair value 345,138 374,785
Net receivables - 325
Total property value 345,138 375,110
EPRA LTV 51% 46%
9) AIC Ongoing Ratio
Total expenses ratio
Management fee 1,885 1,867
Fund operating expenses 846 742
2,731 2,609
---------
Average Net Asset Valuation * 185,034 191,890
---------
Annualised total expenses ratio 1.5% 1.4%
---------
*The average Net Asset Valuation is calculated as the average of
the opening and closing NAV for the financial year.
10) Net rental yield
The net yield on the Group's fair value of investment property
represents the unlevered rental income return on the Group's
capital deployed into acquisition of investment properties. In
previous periods net yield was calculated on the Group's historic
cost of investment property.
2023 2022
GBP'mn GBP'mn
Annualised net rental income at balance
sheet date 18.0 16.5
-------- --------
Fair value of investment properties 345.1 374.8
-------- --------
Net yield 5.2% 4.4%
11) Total Return on NTA
A performance measure which represents the total return for the
year, excluding movements in valuation of debt and derivatives,
expressed as a percentage of opening NTA.
2023 2022
GBP'mn GBP'mn
Operating profit before property
disposals and change in fair value 14.7 14.3
Valuation movement of investment
properties (39.0) 3.2
Finance costs (6.7) (6.0)
Debt Indexation (4.5) (5.2)
Revaluation of trading properties - (0.2)
Property return (35.5) 6.1
IFRS NAV at beginning of the prior
year 201.4 182.4
Revaluation of trading properties 0.1 0.3
Fair value of financial instruments (5.0) 2.0
Real estate transfer tax - -
Opening EPRA NTA 196.5 184.7
Movement in share capital - 14.9
Increase/(decrease) in the year (45.0) (3.1)
Closing EPRA NTA 151.5 196.5
Total return on opening NTA (%) (18.1)% 3.3%
12) Total Return on IFRS NAV
A performance measure which represents the total IFRS return for
the year as a percentage of opening IFRS NAV.
2023 2022
GBP'mn GBP'mn
Net income (23.2) 13.3
Share issuance costs - (0.3)
Total Return (23.2) 13.0
Net Asset Value at the beginning of the year 201.4 182.4
Total IFRS return on opening NAV (%) (11.5)% 7.1%
13) Loan to Value Ratio
The LTV leverage ratio has been presented to enable a comparison
of the group's borrowings as a proportion of Gross Assets as at 30
September 2023 to its medium target LTV leverage ratio of 0.50.
2023 2022
GBP'000 GBP'000
Borrowings excluding lease liability 181,747 189,705
Available cash (6,998) (12,675)
Net debt excluding lease liability and cash increase/(decrease)
in year 174,749 177,030
Total assets less finance lease gross up and
cash 349,040 380,206
Loan to Value ("LTV") leverage ratio 0.50 0.47
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 the UK AIFM Regime.
Fund or "AIF" the Company is classified as an AIF.
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 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 Computershare
Company Secretarial Services 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 the AIFM Regime. A depositary's
duties include, inter alia, safekeeping of assets,
oversight and cash monitoring. The Company's current
depositary is Indos Financial Limited.
Dividend Income receivable from an investment in shares.
DSCR Debt service cover ratio
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.
Fund Manager Gresham House Asset Management Limited, a company
incorporated in England and Wales with company
number 09447087 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 A regulated independent society, body of trustees
or company established for the purpose of providing
social housing.
HMRC HM Revenue & Customs
ICR Interest cover ratio
Investment company A company formed to invest in a diversified portfolio
of assets.
Liquidity The extent to which investments can be sold at
short notice.
Loan to Value Ratio of total debt outstanding, excluding the
(LTV) Ratio finance lease liability, against the total assets
excluding the adjustment for finance lease gross
up.
Net assets 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 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 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 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 A Property Rental Business fulfilling the conditions
Business in section 529 of the CTA 2010.
REIT Real estate investment trust.
Rental growth The change in gross rental income in a period as
a result of rent increases, tenant renewals or
a change in tenants. Applies to changes in gross
rents on a comparable basis and excludes the impact
of acquisitions, disposals and changes resulting
from refurbishments.
Reversionary Surplus The increase in valuation if the portfolio is valued
on a vacant possession basis compared to the IFRS
fair value.
RPI The Retail Price Index (RPI) is a measure of inflation,
which in turn is the rate at which prices for goods
and services are rising.
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 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.
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.
UK AIFM Regime Together, The Alternative Investment Fund Managers
Regulations 2013 (as amended by The Alternative
Investment Fund Managers (Amendment etc.) (EU Exit)
Regulations 2019) and the Investment Funds Sourcebook
forming part of the FCA Handbook, in each case
as amended from time to time.
Directors
Robert Whiteman
(Non-executive Chairman)
Robert Gray
(Senior Independent Director)
John Carleton
(Non-executive Director)
Elaine Bailey
(Non-executive Director)
Registered Office
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
Company Information
Company Registration Number: 10683026
Incorporated in the United Kingdom
Fund Manager
Gresham House Asset Management Limited
5 New Street Square
London
EC4A 3TW
Corporate Broker
Peel Hunt LLP
7th Floor, 100 Liverpool Street
London
EC2M 2AT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
100 BishopsgateLondonEC2n 4AG
Tax Adviser
Evelyn Partners Group Limited
45 Gresham Street
London
EC2V 7BG
Depositary
Indos Financial Limited The Scalpel 18th Floor 52 Lime
Street
London
EC3M 7AF
Administrator
MGR Weston Kay LLP
55 Loudoun Road
St John's Wood
London
NW8 0DL
Company Secretary
Computershare Company Secretarial Services Limited
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Public Relations Adviser
Kaso Legg Communications Ltd
40 Queen Street
London
EC4R 1DD
Valuers
Savills (UK) Limited
33 Margaret Street
London
W1G 0JD
Notice of Annual General Meeting
Annual General Meeting 2024
In line with the requirements of the Companies Act 2006 (the
Act), the Company will hold an Annual General Meeting (AGM) of
shareholders to consider the resolutions laid out in the Notice of
Meeting below.
Shareholders are permitted to attend the AGM in person and any
shareholders wishing to do so are requested to register their
interest in attending by emailing the Company Secretary at
ReSI-CoSec@Computershare.co.uk by Monday 19 February 2024.
Should a shareholder have a question that they would like to
raise at the AGM, either of the Board or the Fund Manager, the
Board request that they either ask the question in advance of the
AGM via email to ReSI-CoSec@Computershare.co.uk by Monday 19
February 2024 or alternatively, a shareholder may attend the AGM
and ask the question at the meeting at the appropriate time. If
appropriate, the Company will publish the responses on its website
https://greshamhouse.com/real-assets/uk-housing/residential-secure-income-plc/
as soon as reasonably practicable after the conclusion of the
AGM.
AGM voting
Each of the resolutions to be considered at the AGM will be
voted on by way of a show of hands unless a poll is validly
demanded. A member present in person or by proxy shall have one
vote on a show of hands.
Details of how to vote, either electronically, by proxy form or
through CREST, can be found in the Administrative Notes to the
Notice of AGM on pages 160 to 162.
The results of the AGM will be announced to the London Stock
Exchange and placed on the Company's website, as soon as
practicable after the conclusion of the AGM.
Resolutions
Resolutions 1 to 9 will be proposed as ordinary resolutions. An
ordinary resolution requires a simple majority of votes cast,
whether in person or by proxy, to be cast in favour of the
resolution for it to be passed. Resolutions 10 to 13 will be
proposed as special resolutions. A special resolution requires a
majority of not less than 75% of the votes cast, whether in person
or by proxy, to be cast in favour of the resolution for it to be
passed.
Voting results
The results of the voting will be announced through a regulatory
information service and will be published on our website
https://greshamhouse.com/real-assets/uk-housing/residential-secure-income-plc/
as soon as reasonably practicable after the conclusion of the
AGM.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of
Residential Secure Income plc (the Company) will be held at the
offices of Computershare, the Company Secretary, Floor 3, Moor
House, 120 London Wall, London, EC2Y 5ET on 22 February 2024 at
12.45 p.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 13 will be proposed as special
resolutions.
Ordinary Resolutions
1. To receive the Company's Annual Report and Accounts for the
year ended 30 September 2023, with the reports of the Directors and
Auditor thereon.
2. To approve the Directors' Remuneration Implementation Report
included in the Annual Report for the year ended 30 September
2023.
3. To re-elect Robert Whiteman as a Director of the Company.
4. To re-elect Robert Gray as a Director of the Company.
5. To re-elect Elaine Bailey as a Director of the Company.
6. To re-appoint BDO LLP as Auditor to the Company to hold
office until the conclusion of the next general meeting at which
the Company's annual accounts are laid before the meeting.
7. To authorise the Directors to fix the remuneration of the
Auditor until the conclusion of the next Annual General Meeting of
the Company.
8. To authorise the Directors to declare and pay all dividends
of the Company as interim dividends and for the last dividend
referable to a financial year not to be categorised as a final
dividend that would ordinarily be subject to shareholder
approval.
9. That the Directors be and are hereby generally and
unconditionally authorised in accordance with section 551 of the
Act (in substitution for all subsisting authorities to the extent
unused) to exercise all the powers of the Company to allot Ordinary
Shares of one penny each in the capital of the Company up to an
aggregate nominal amount equal to GBP370,326.56 (equivalent to
approximately 20% of the Ordinary Shares in issue (excluding shares
held in Treasury) at the date of the notice of this meeting) during
the period commencing on the date of the passing of this resolution
and expiring (unless previously varied, revoked or renewed by the
Company in a general meeting) at the conclusion of the Annual
General Meeting of the Company to be held in 2025 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.
Special Resolutions
10. That, subject to the passing of resolution 9, in
substitution for all subsisting authorities to the extent unused
but without prejudice to the exercise of any such power prior to
the date hereof, the Directors be and are generally and
unconditionally authorised for the purposes of sections 570 and 573
of the Act to allot equity securities (within the meaning of
section 560 of the Act) for cash either pursuant to the authority
conferred by resolution 9 or by way of sale of treasury shares, as
if section 561(1) of the Act did not apply to any such allotment or
sale, provided this authority shall be limited to (a) the allotment
or sale of equity securities up to an aggregate nominal amount
equal to GBP185,163.28 (equivalent to approximately 10% of the
issued Ordinary Shares of the Company (excluding shares held in
Treasury) at the date of this notice); and (b) the allotment or
sale of equity securities at a price not less than the prevailing
Net Asset Value per share, and shall (unless previously varied,
revoked or renewed by the Company in general meeting) expire at the
conclusion of the Annual General Meeting of the Company to be held
in 2025 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, subject to the passing of resolution 9 and in addition
to the authority granted in resolution 10, in substitution for all
subsisting authorities to the extent unused but without prejudice
to the exercise of any such power prior to the date hereof, the
Directors be and are generally and unconditionally authorised for
the purposes of sections 570 and 573 of the Act to allot equity
securities (within the meaning of section 560 of the Act) for cash
either pursuant to the authority conferred by resolution 9 or by
way of sale of treasury shares, as if section 561(1) of the Act did
not apply to any such allotment or sale, provided this authority
shall be limited to (a) the allotment or sale of equity securities
up to an aggregate nominal amount equal to GBP185,163.28
(equivalent to approximately 10% of the issued Ordinary Shares of
the Company (excluding shares held in Treasury) at the date of this
notice); and (b) the allotment or sale of equity securities at a
price not less than the prevailing Net Asset Value per share, and
shall (unless previously varied, revoked or renewed by the Company
in general meeting) expire at the conclusion of the Annual General
Meeting of the Company to be held in 2025 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.
12. That the Company be and is hereby generally and
unconditionally authorised in accordance with section 701 of 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 27,755,975 (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 2025 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.
13. 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
The Pavilions,
Bridgwater Road,
Bristol,
England,
BS13 8FD
By order of the Board
For and on behalf of Computershare Company Secretarial
Services Limited
Company Secretary
4 December 2023
Notes to the Resolutions
Notes to resolution 1
Ordinary resolution: Annual report and accounts for the year
ended September 2023
The Directors are required to present the annual report and
accounts, which incorporate the Strategic report, Directors'
Report, the Auditor's Report and the financial statements for the
year ended 30 September 2023. These are contained in the Company's
Annual Report and Audited Financial Statements for the year ended
30 September 2023 (the Annual Report).
Notes to resolution 2
Ordinary resolution: Directors' Remuneration Implementation
Report
In accordance with the requirements of the remuneration
reporting regime which came into force on 1 October 2013, the Board
is required to give notice to shareholders of the intention to
propose an ordinary resolution to approve the Directors'
Remuneration Implementation Report for the financial year ended 30
September 2023. The Directors' Remuneration Implementation Report,
which can be found on pages 86 to 89 of the Annual Report, gives
details of the Directors' remuneration and remuneration policy for
the year ended 30 September 2023.
The Company's auditor, BDO LLP, has audited those parts of the
Directors' Remuneration Implementation Report which are required to
be audited and their report may be found in the Annual Report. The
Directors' Remuneration Implementation Report has been approved by
the Board and signed on its behalf by the Company Secretary. The
vote on the Directors' Remuneration Implementation Report is
advisory in nature and therefore not binding on the Company.
Notes to resolutions 3-5
Ordinary resolution: Re-election of directors
In line with best practice and the Board Tenure Policy, the
Board has resolved that all Directors will be submitted for
re-election on an annual basis. Robert Whiteman, Robert Gray and
Elaine Bailey will retire, and being eligible, offer themselves for
re-election. John Carleton will retire from the Board with effect
from 22 February 2024 and will not stand for re-election.
The Board has carefully considered whether each of the
Non-Executive Directors is free from any relationship that could
materially interfere with the exercise of his or her independent
judgement. It has concluded that each Non-Executive Director is
independent. The Board has also reviewed and concluded that each
Non-Executive Director standing for re-election possesses the
necessary mix of skills and experience to continue to contribute
effectively to the Company's long-term sustainable success.
Further, notwithstanding their other appointments, the Board is
satisfied that each Non-Executive Director standing for re-election
is able to commit sufficient and appropriate time to their board
responsibilities.
Full biographies for Robert Whiteman, Robert Gray and Elaine
Bailey are set out in the Company's Annual Report on pages 65 to
66.
Notes to resolution 6
Ordinary resolution: Re-appointment of auditor
The appointment of BDO LLP as auditor of the Company ends at the
conclusion of the AGM. BDO LLP have indicated their willingness to
stand for reappointment as auditor of the Company until the
conclusion of the AGM in 2025. The Audit Committee considers the
reappointment of the external auditor each year before making a
recommendation to the Board. The Board recommends the reappointment
of the auditors.
The effectiveness of the external auditor is evaluated by the
Audit Committee. The Committee assessed BDO LLP's approach to
providing audit services as it undertook this year's audit. On the
basis of such assessment, the Committee concluded that the audit
team was providing the required quality in relation to the
provision of the services. The audit team had shown the necessary
commitment and ability to provide the services, together with a
depth of knowledge, robustness, independence and objectivity as
well as an appreciation of complex issues.
The Audit Committee assesses the independence of the external
auditor on an ongoing basis and the external auditor is required to
rotate the lead audit partner every five years and other senior
audit staff every seven years. In accordance with the requirements
relating to the appointment of audit firms, the Company will be
required to conduct an audit tender no later than for the financial
year beginning 1 October 2027. The current lead partner was
appointed from the audit for the financial year beginning 1 October
2021. No partners or senior staff associated with the audit may
transfer to the Group.
Notes to resolution 7
Ordinary resolution: Remuneration of auditor
The Audit Committee reviews the fee structure, resourcing and
terms of engagement for the external auditor annually. The Board is
seeking authority for the Audit Committee to fix the auditor's
remuneration. Fees paid to the external auditor for the year were
GBP259,000 (2022: GBP228,000).
The Audit Committee is satisfied that this level of fee is
appropriate in respect of the audit services provided and that an
effective audit can be conducted for this fee. BDO LLP were paid
fees of GBP45,000 in respect of non-audit services in the year to
30 September 2022 (2022: GBP34,000). These services were in respect
of the interim review of the Interim Report for the period ended 31
March 2022 (GBP34,000). The consolidated financial statements
provides details of the remuneration of the Company's external
auditor. This can be found on page 116 of the Annual Report.
Notes to resolution 8
Ordinary resolution: Policy of paying quarterly interim
dividends.
The purpose of the renewal is to provide flexibility to the
Company to continue implementing its quarterly interim dividend
policy.
Notes to resolution 9
Ordinary resolution: Authority to allot
The purpose of this resolution is to grant the Board the
authority to allot ordinary shares in accordance with Section 551
of the Act up to up to 37,032,656 Ordinary Shares (excluding shares
held in Treasury) in the capital of the Company (equivalent to
approximately 20% of the Ordinary Shares in issue at the date of
the notice of this meeting). While the Directors have no present
intention of exercising this authority, they consider it important
to have the maximum flexibility commensurate with good corporate
governance guidelines, to raise finance to enable the Company to
respond to investment opportunities, market developments and
conditions. No ordinary shares will be issued for cash at a price
less than the prevailing net asset value per ordinary share at the
time of issue pursuant to this authority. This authority shall
expire at the conclusion of the Company's AGM to be held in 2025,
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.
Notes to resolutions 10 and 11
Special resolution: Disapplication of pre-emption rights
If the Directors wish to exercise the authority under resolution
9 and offer shares (or sell treasury shares which the Company may
purchase and elect to hold as treasury shares) for cash, company
law requires that unless shareholders have given specific authority
for the waiver of their statutory pre-emption rights, the new
shares must be first offered to existing shareholders in proportion
to their existing holdings. There may be occasions, however, when
the Directors will need the flexibility to allot new shares (or to
grant rights over shares) for cash or to sell treasury shares for
cash without first offering them to existing shareholders in
proportion of their holdings in order to make investments in line
with the Company's investment policies. This cannot be done unless
the shareholders have first waived their pre-emption rights.
These Resolutions will, if passed, authorise the Directors to do
this by allowing the Directors to allot shares for cash or sell
treasury shares for cash up to an aggregate nominal value of
GBP370,326.56, which is equivalent to approximately 20% of the
Company's issued Ordinary Share capital as the date of this Notice
(being the latest practicable date prior to the publication of this
notice).
In the event that resolution 10 is passed, but resolution 11 is
not passed, the Directors will only be authorised to issue Ordinary
Shares up to an aggregate nominal value of GBP185,163.28, which
represents approximately 10% of the Company's issued Ordinary Share
capital (excluding shares held in Treasury) as the date of this
Notice (being the latest practicable date prior to the publication
of this notice).
Resolutions 10 and 11 will allow the Company to carry out one or
more tap issues, in aggregate, up to 20% of the number of Ordinary
Shares in issue at the AGM and thus to pursue specific investment
opportunities in a timely manner in the future and without the
requirement to publish a prospectus and incur the associated
costs.
The Directors are aware that the combined authority to dis-apply
pre-emption rights in respect of up to 20% of the Company's issued
Ordinary Share capital sought under resolutions 10 and 11 is higher
than the 10% typically sought by investment companies. However, the
Directors believe that a higher authority is justified to enable
the Company to fund future acquisitions in line with the Company's
anticipated acquisition pipeline. In addition, the higher authority
is expected to broaden the Company's asset base which will increase
the diversity of the portfolio. It will also allow the Company to
broaden its investor base and enhance the size and liquidity of the
Company's share capital, and spread the fixed operating costs over
a larger capital base, thereby reducing the Company's ongoing
charges ratio.
In accordance with UK Listing Rules, the Company will only issue
Ordinary Shares pursuant to this authority at a price that is not
less than the prevailing net asset value per share of the Company
calculated in accordance with its IFRS accounting policies at the
time of issue. In addition, the Directors will not sell treasury
shares at less than such net asset value per share.
Resolutions 10 and 11 will be proposed as special resolutions to
provide the Company with the necessary authority. If given, the
authority will expire at the conclusion of the next AGM of the
Company in 2025 or, if earlier on the expiry of 15 months from the
passing of this resolution. The Directors intend to renew such
authority in respect of 10% of the Company's issued Ordinary Share
capital (excluding shares held in Treasury) at successive AGMs in
accordance with current best practice.
Notes to resolution 12
Special resolution: Purchase of own shares
The current authority of the Company to make market purchases of
up to approximately 14.99 per centum of its issued share capital
expires shortly. This resolution seeks renewal of such authority
until the next AGM, or the expiry of 15 months after the passing of
the resolution is earlier. The price paid for shares will not be
less than the nominal value nor more than the maximum amount
permitted to be paid in accordance with the rules of the Financial
Conduct Authority in force as at the date of purchase. This power
will be exercised only if, in the opinion of the Directors, a
repurchase would be in the best interests of shareholders as a
whole. Any shares repurchased under this authority will either be
cancelled or held in Treasury at the discretion of the Board for
future re-sale in appropriate market conditions.
The authority sought would replace the authority previously
given to the Directors. The maximum number of ordinary shares
authorised to be purchased pursuant to the authority represents
approximately 14.99 per centum of the total number of ordinary
shares in issue (excluding shares held in Treasury) as at the date
of this Notice.
This authority shall expire at the conclusion of the Company's
next AGM to be held in 2025.
Notes to resolution 13
Special resolution: Notice of General Meetings
Under the provisions in the Act, listed companies must call
general meetings (other than an annual general meeting) on at least
21 clear days' notice unless the company:
a. has obtained shareholder approval for the holding of general
meetings on 14 clear days' notice by passing an appropriate
resolution at its most recent annual general meeting; and
b. offers the facility for shareholders to vote by electronic
means accessible to all shareholders.
To enable the Company to utilise the shorter notice period of 14
days for calling such general meetings, shareholders are asked to
approve this resolution. The shorter notice period would not be
used as a matter of routine for such meetings, but only where the
flexibility is merited by the business of the meeting and is
thought to be to the advantage of shareholders as a whole. If
granted, this authority will be effective until the Company's next
annual general meeting.
Recommendation
The Directors consider that all the resolutions to be proposed
at the Annual General Meeting are in the best interests of the
Company and its shareholders as a whole. The Directors unanimously
recommend that shareholders vote in favour of all the resolutions,
as they intend to do in respect of their own beneficial holdings of
shares.
Administrative notes to the Notice of Annual General Meeting
Website address
1. Information regarding the meeting, including the information
required by section 311A of the Act, is available from
https://greshamhouse.com/real-assets/uk-housing/residential-secure-income-plc/
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 Tuesday, 20 February
2024 or, if this meeting is adjourned, at close of business on the
day two days prior to the adjourned meeting, shall be entitled to
vote at the meeting.
Appointment of Proxies
3. Members entitled to vote at the meeting (in accordance with
note 2 above) are entitled to appoint a proxy to vote in their
place. If you wish to appoint a proxy please use the Form of Proxy
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. Additional forms may be obtained by contacting
the Company's registrars, Computershare Investor Services PLC
helpline on 0370 889 3181. Shareholders can access their
information at www.investorcentre.co.uk.
4. You can appoint the Chairman of the Meeting, or any other
person. 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
marking the resolutions For and Against using the voting methods
stated in notes 6 and 7 below. If you wish to abstain from voting
on any resolution please mark these resolutions 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 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 Act 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
6. You can vote either:
-- by logging on to www.eproxyappointment.com and following the
instructions. Shareholders will need their shareholder reference
number, PIN and control number to submit a proxy vote this way
(which will be provided via email or on their paper form of
proxy);
-- You may request a hard copy form of proxy directly from the
registrars, Computershare Investor Services on Tel: 0370 889 3181;
or
-- in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with the
procedures set out below.
To be valid, a form of proxy should be lodged with the Company's
registrars, Computershare Investor Services PLC, The Pavilions,
Bridgewater Road, Bristol, BS99 6ZY so as to be receive not later
than 48 hours before the time appointed for the meeting or any
adjourned meeting or, in the case of a poll taken subsequent to the
date of the meeting or adjourned meeting, so as to be received no
later than 24 hours before the time appointed for taking the
poll.
Appointment of a 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: 3RA50) 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 12.45 p.m. on Tuesday, 20 February 2024 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 Computershare Investor Services
PLC 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
Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol BS99 6ZY.
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 Act 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.
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 Act 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 Act, 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 194,149,261 Ordinary Shares of 1p each. The total number
of Ordinary Shares with voting rights is 185,163,281. 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 Computershare Investor Services PLC shareholder helpline: 0370 889 3181;
-- in writing to Computershare Investor Services PLC, The
Pavilions, Bridgwater Road, Bristol BS99 6ZZ.
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.
[1] Under EPRA NTA this debt is held at amortised cost
[2] House of Commons Library, "Tackling the under-supply of
housing" from February 2022 -
https://researchbriefings.files.parliament.uk/documents/CBP-7671/CBP-7671.pdf
[3] Department for Levelling Up, Housing and Communities (2021)
and House of Commons Library (2022), British Property Federation,
and Legal & General, 2022
[4] Cushman & Wakefield -
Housing_For_An_Ageing_Population_Report_In_Association_With_The_BPF
2023
[5] ONS, Past and projected period and cohort life tables:
2020-based, UK, 1981 to 2070, January 2022
[6] ONS, 2020-based Interim National Population Projections,
January 2022
[7] ONS, 2020-based Interim National Population Projections,
January 2022
[8]
https://www.ageuk.org.uk/latest-news/archive/1-million-older-people-feel-lonely/#::text=Age%20UK%20is%20calling%20for,
loneliness%20is%20in%20the%20UK
[9] Boomer & Beyond quantitative research study 2022
[10] ONS, Registered Provider social housing stock and rents in
England 2022 to 2023
[11] ONS, Affordable Housing Supply, 2021 - 2022
[12] Gresham House and Office for National Statistics.
Assumptions: Initial Property OMV GBP300k; first tranche sale
percentage 25%; initial mortgage LTV 90%; mortgage term 30 years;
mortgage interest 5.5%; service charge GBP1,500 p.a, shared
ownership rent 2.75%; maximum housing costs as a percentage of net
income 40%; assumes 1.5x earners per home
[13] YouGov (May 2021) 'Who does - and doesn't - want to own a
home?'
[14] Assumptions: 2022 interest rate 2.5%; 2023 interest rate
5.5%
[15] Metro Finance, October 2023
[16] UK TREASURY 3.25% 20/01/2044. Price of 142 on 1/1/2022 and
81 on 13/11/2023
[17] FY 2022 versus FY 2023
[18] FY 2022 versus FY 2023
[19] FY 2022 versus FY 2023
[20] FY 2022 versus FY 2023
[21] 1.1% coupon with principle increasing with RPI + 0.5% (with
a 0.5% floor and 5.5% cap).
[22] Based on lender covenant reporting. The covenants presented
do not represent a comprehensive set of debt covenants. This is not
a performance forecast and there can be no guarantee that ReSI will
continue to meet its debt covenants in the future.
[23] As at 30 September 2023. USS debt balance shown at fair
value, reflecting the impact of recurring quarterly indexation and
movements in gilt yields and credit spreads.
[24] Interest rate breach threshold based on last-twelve-month
net rental income.
[25] As defined in the English Housing Survey, 2020 to 2021
[26] UK TREASURY 3.25% 20/01/2044. Price of 142 on 1/1/2022 and
81 on 13/11/2023
[27] Department for Business, Energy and Industrial Strategy
[28] Number of properties excludes committed investments in
2022
[29] Includes Scope 1, 2 and 3 emissions
[30] When cost of service charge, paid for by the Company, is
removed from the residents rent level
[31] Defined as percentage of residents who responded with a 6
out of 10 or above when asked how likely they were to recommend
ReSI to a friend.
[32] ONS - House price to workplace-based earnings ratio,
2022
[33] Annual growth in employees' average total pay (including
bonuses) - ONS, September 2023
[34] Money Supermarket - 80% LTV, 1 November 2023
[35]
https://www.moneysavingexpert.com/utilities/what-is-the-energy-price-cap/
[36] Energy Price cap at October 2023 vs Energy Price cap at
April 2021
[37] TGE saving for EPC B and EPC C properties vs EPC D of
GBP460 and GBP171 respectively with energy price cap at March 2021
level. Saving scaled up for October 2023 price cap
[38] Shared ownership assumptions: OMV GBP300k; First Tranche
Sale: 25%; Deposit: 10%; Mortgage term: 30 years; initial interest
3.3%; refinanced interest 5.5%; Rent level 2.75% rent increase 7%;
Service charge: GBP1,500 p.a; EPC B
[39] 2022 energy bills as of April 2022 price cap. 2023 energy
bills as of October 2023 price cap
[40] Outright owner assumptions; OMV: GBP3 00k; Mortgage LTV
90%; initial interest 3.3%; refinanced interest 5.5%; EPC D
[41] Rental Assumptions - OMV: GBP3 00k; Rental Yield: 4.9%; EPC
D
[42] Rental Market Report, Zoopla - September 2023
[43] Retirement Assumptions: Rent GBP850pcm; Rent increase 6%;
EPC C
[44] 2022 energy bills as of April 2022 price cap. 2023 energy
bills as of October 2023 price cap
[45] Private Rental Assumptions: Rent GBP850pcm; EPC D
[46] Rental Market Report, Zoopla - September 2023
[47] Annual growth in employees' average total pay - including
bonuses of 8.5% and excluding bonuses 7.8% - ONS, September
2023
[48] Applied to operating expenses and rents at the end of
contractual periods
[49] Applied to contractual rent increases
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END
FR DBBDDSUGDGXS
(END) Dow Jones Newswires
December 05, 2023 02:00 ET (07:00 GMT)
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