Residential Secure Income PLC · LSE:RESI
Residential Secure Income — FY2020 Earnings Presentation
31 slides from Residential Secure Income's earnings presentation, December 2020
Slide 1: Residential Secure Income plc FY20 Results presentation
Residential Secure Income plc Aiming to generate secure inflation-linked returns while accelerating the development of socially and economically beneficial new housing FY20 Results presentation December 2020
Slide 2: Important Legal Notice
IMPORTANT LEGAL NOTICE THIS PRESENTATION IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART DIRECTLY OR INDIRECTLY, BY ANY MEANS OR MEDIA TO US PERSONS IN OR INTO, THE UNITED STATES, AUSTRALIA, SOUTH AFRICA, CANADA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE
Slide 3: Contents & Presentation Team
CONTENTS & PRESENTATION TEAM Introduction & Overview 4-7 FY20 Financials 8-14 Outlook 14-17 Sustainable Investment 18-20 Outlook and Conclusion 21 Appendices 22-32 Alex Pilato Ben Fry Mark Rogers Managing Director, Head of Housing Investment Head of Housing Origination Housing & Capital Markets
Slide 4: Investment Case
INVESTMENT CASE Why affordable and social housing? Why ReSI? Wholly owned Group, Registered Stable, long term, inflation-linked rents Provider of social housing Supply/ demand imbalance from historic Sustainable investment approach undersupply. 2m shortfall in homes delivered1 maximises social impac
Slide 5: Introduction
INTRODUCTION ▪ Investment case has strengthened at a time when Residential has been the most utilised area of real estate in 2020 ▪ Unique platform for investment Poplar Court, Lancashire ▪ Robust performance through COVID ▪ Clear strategy over the next 12 months - deployment, occupation and reducin
Slide 6: FY2020 Highlights
FY2020 HIGHLIGHTS £9.9m 4.9p 2.9p 5.0p 105.0p £302m Operating profit Investment Recurring Income Adjusted earnings Dividends NAV per Share before fair value property (FY19: 6.7p) (FY19: 2.8p) (FY19: 5.0p) (FY19: 108.6p) (FY19: £9.0m) (FY19: £261m) Resilient performance from existing portfolio Strong
Slide 7: Portfolio
PORTFOLIO Retirement NOI by portfolio (pence per share) 2,223 Homes, £210m FY2020 Future Independent living for retirees with Assured Tenancies 13% 29% Local Authority (LA) 17% 289 Homes, £34m 59% 70% 12% Leased to local authorities for those otherwise homeless Shared Ownership (S/O) Retirement Rent
Slide 8: FY20 Income
FY20 INCOME Resilient operating income during COVID-19 crisis demonstrates portfolio’s defensive characteristics FY20 FY19 Change Key highlights Net Rental Income Net rental income* £11.3m £11.2m +1% ▪ Robust rent collection rate of 99% First tranche sales profits £0.5m - + ▪ 1.4% like for like rent
Slide 9: Robust Performance
ROBUST PERFORMANCE Robust rent collection rate through COVID Retirement voids reducing from July peak 100.0% 12.00% 99.0% 98.0% 10.00% 97.0% 96.0% 8.00% 95.0% 6.00% 94.0% 93.0% 4.00% 92.0% 2.00% 91.0% 90.0% 0.00% Jan-20 Jun-20 Oct-19 Dec-19 Apr-20 Oct-20 Feb-20 Nov-19 Mar-20 Jul-20 Aug-20 Sep-20 May
Slide 10: COVID-19 Delays Full Income Delivery
COVID-19 DELAYS FULL INCOME DELIVERY FY20 FY21 Impact Mitigation Social benefit Fewer leavers Reduced social Voids increased from 7% to Highly experienced property isolation through Retirement -£0.7m -£0.7m 11% from lower lettings specialist hired with sole focus living with peers in on retirement v
Slide 11: Net Asset Value
NET ASSET VALUE 114 2.0 ( 2.1 ) 1.4p IFRS Total Return 112 ( 1.4 ) 110 2.9 Pence per Share 108 ( 5.0 ) 106 4.9p recurring income 104 108.6 105.0 102 100 NAV at 30/09/19 Net income Valuation Change Valuation Change One off debt set up Dividend paid NAV at 30/09/20 (inflation linked) (one off) costs V
Slide 12: Capital Structure
CAPITAL STRUCTURE Investment grade debt ensures asset quality and provides access to low cost of funding, which expands investment opportunity to higher credit quality investments at lower yields FY20 FY19 Leverage Strategy minimises traditional risks Total debt £141m £108m ▪ Minimises refinancing r
Slide 13: USS Debt Facility
USS DEBT FACILITY ▪ First standalone investment grade financing of shared ownership ▪ Successfully arranged in the midst of the COVID-19 pandemic ▪ RPI linked, matching underlying shared ownership cashflows, with coupon of 0.461% ▪ Delivers 300bps yield pick-up on shared ownership ▪ £300m facility d
Slide 14: Planned Portfolio Growth
PLANNED PORTFOLIO GROWTH Clear plan to fully cover dividend from Oct 2021 following full deployment → FY20 adjusted earnings (excluding valuation FY20 Earnings 2.9 changes and one off debt set up costs) → Reduction in opex leveraging Gresham House Opex improvement 0.1 buying power Occupied SO homes
Slide 15: Review and Outlook
REVIEW AND OUTLOOK Retirement voids up What did we say in Delay in S/O portfolio becoming fully income generating and acquisitions Interims? (May 2020) Time taken to return to pre-COVID performance equal to the time taken to return to normal from the start of social distancing in mid-March 2020 Soci
Slide 16: Shared Ownership Track Record
SHARED OWNERSHIP TRACK RECORD Mulberry Park (Step Forward), Clapham Park, Lambeth Macclesfield Brampton Park, Huntingdon Totteridge Place Clapham Park Step Forward Brampton Park Date January 2019 January/July 2020 July 2020 September 2020 Size £16.5m/ 34 homes £60.6m/ 132 homes £2.2m/ 24 homes £1.6m
Slide 17: Future of Shared Ownership
FUTURE OF SHARED OWNERSHIP ▪ Strong demand: 25,0001 new shared ownership homes / £2.7bn required each year2 ▪ Government support: shared ownership will comprise 50% of the new homes delivered under the £12bn affordable housing programme for 2021-26 ▪ Improving standards: ReSI aims to be a best in cl
Slide 18: Sustainable Investment Highlights
SUSTAINABLE INVESTMENT HIGHLIGHTS Industry contribution ▪ Set the Shared Ownership Customer and Environmental Charters, aiming to drive best practice in the shared ownership sector ▪ Early adopters of The Good Economy’s (TGE) Sustainable Reporting Standard for Social Housing1 - encouraging best prac
Slide 19: ESG – Some Examples
ESG – SOME EXAMPLES ReSI has a diversified portfolio providing support to multiple groups of beneficiaries with a range of positive outcomes, including security of tenure for residents, improved wellbeing, and financial savings. Environmental Social Governance ▪ ReSI’s portfolio is more ▪ Reduced so
Slide 20: Measuring Social Impact
MEASURING SOCIAL IMPACT Four key areas used to measure progress towards the social outcomes of ReSI’s portfolio Sample Outputs: Social Need Shared Ownership Local Authority Retirement Rentals Affordability ratio (average Property Manager’s survey Impact Number of households on house price to average
Slide 21: Summary
SUMMARY ▪ Robust performance despite COVID ‒ Operating Profit before fair value movements up 10% ‒ 99% rent collection ‒ Average retirement occupancy 91% from 93% ‒ Shared ownership delayed but now 64% occupied with further 21% reserved ▪ Benefits of Gresham House robust central platform ▪ Sustainab
Slide 22: Appendices
APPENDICES
Slide 23: Portfolio Overview
PORTFOLIO OVERVIEW Retirement Rental Shared Ownership Local Authority ▪ Independent living for retirees ▪ Affordable home ownership ▪ Homes leased to local with Assured Tenancies authorities and used to house ▪ Part-rent, Part-buy model with those who would otherwise be ▪ Secure rental income paid f
Slide 24: Portfolio Returns
Portfolio Overview PORTFOLIO RETURNS Retirement Local authority Shared ownership Total Value £210m £34m £58m £302m Homes 2,223 289 196 2,708 Lease term Lifetime 6 years remaining 130 year lease term Lease turnover 17% p.a. N/A 2.5% staircasing p.a. Lease type Assured Tenancy Almost FRI FRI Inflation
Slide 25: Overview of Shared Ownership
OVERVIEW OF SHARED OWNERSHIP Getting onto the housing ladder with smaller deposits, lower income requirements and lower annual payments. ▪ The Shared Owner: ‒ Purchases an equity share in their new home at open market value. This is known as the “first tranche sale”, Shared Owner stake typically 25%
Slide 26: A Systemic Market Problem
A SYSTEMIC MARKET PROBLEM Source: ONS House price to earnings ratios No data 2-5x 5-8x 8-12x 12x+ Unaffordable 26
Slide 27: Structural Drivers Underpin Returns
STRUCTURAL DRIVERS UNDERPIN RETURNS UK population over 65 % each age group that are UK homeowners 25 (millions) 280,000 20 62% 69% 55% People in the UK are 15 41% homeless – one in every 200 32% people (one in every 24 people 10 in the worst affected areas) 5 9% 0 1966 1991 2016 2041 2066 16-24 year
Slide 28: Rent Profile
RENT PROFILE Rent per Calendar Month (as a % of units) Average rent per calendar month: £740 Over £1100 2.6% 2.6% 46.4% £700 - £1100 71.9% 64.8% 53.6% £300 - £700 15.8% 32.3% Under £300 9.7% 0.4% L.A S.O Retirement Net Rent by counterparty type (full deployment) Shared owners Individual retirees Lic
Slide 29: Statement of Comprehensive Income
STATEMENT OF COMPREHENSIVE INCOME FY20 FY19 Variance (£’000) (£’000) Retirement 9,141 9,409 (3)% Shared Ownership 391 (16) (2508)% Local Authority 1,813 1,841 (2)% Net rental income* 11,345 11,234 +1% First tranche sales profits 509 (58) (976)% Management fees (1,837) (1,843) - Overheads (1,093) (1,
Slide 30: Reconciliation to IFRS Profit
RECONCILIATION TO IFRS PROFIT FY20 FY19 Variance (£’000) (£’000) Operating profit before abort costs, property disposals, and 9,959 9,186 +8.4% changes in fair value Finance Costs (excluding one-off debt set up costs) (4,956) (4,435) +11.7% Recurring Operating Profit before change in fair value 5,00
Slide 31: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION 30 September 2020 30 September 2019 Variance £’m £’m Retirement Rentals 210 215 (2)% Shared Ownership 58 11 +81% Local Authority 34 35 (2)% Total Investments 302 261 +16% Inventories - properties available for sale 10 3 +296% Cash and cash equivalents 10 26 (60)% Borr
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