Residential Secure Income PLC · LSE:RESI
Residential Secure Income — H1 FY2021 Earnings Presentation
35 slides from Residential Secure Income's earnings presentation, May 2021
Slide 1: Residential Secure Income plc Interim Results FY 2021
Residential Secure Income plc Aiming to generate secure inflation-linked returns while accelerating the development of socially and economically beneficial new housing Interim Results FY 2021 presentation May 2021
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: Presentation Team
PRESENTATION TEAM Alex Pilato Ben Fry Mark Rogers Managing Director, Head of Housing Investment Head of Housing Origination Housing & Capital Markets 3
Slide 4: Contents
CONTENTS Introduction and overview 5-10 FY21 Interim Financials 11-15 Outlook 16-19 Sustainable investment 20-22 Outlook and conclusion 23 Q&A 24 Appendices 25-35 4
Slide 5: Sustainable Alternatives Specialists
SUSTAINABLE ALTERNATIVES SPECIALISTS A specialist alternative asset manager offering clients tailored investment solutions. New Energy & Housing Sustainable Forestry Public Equity Private Equity Infrastructure Our purpose Gresham House vs. industry average To deliver effective alternative investment
Slide 6: Introduction
INTRODUCTION ▪ UK REIT focused on delivering long term inflation-linked income from a secure and in-demand asset class ▪ Fundamental supply and demand dynamics for affordable homes Poplar Court, Lancashire provide a highly supportive background for this key residential sector ▪ Expect full 5p per sh
Slide 7: Investment Case
INVESTMENT CASE Why invest in affordable and social housing? Why invest in ReSI? 20-year track record financing and advising social Stable, long term, inflation-linked rents housing3 Increasingly diversified income stream Long-term investment grade equivalent debt Average 23-year maturity, unique £3
Slide 8: Portfolio
PORTFOLIO Retirement Portfolio split (valuation %) 2,222 homes, £212m 10% Independent living for retirees with Assured Tenancies Retirement Rentals Shared Ownership Local Authority 549 homes, £101m1 Part buy, part rent affordable homes ownership 29% Shared Ownership Quadruples access to home ownersh
Slide 9: Overview of Retirement Rental
OVERVIEW OF RETIREMENT RENTAL Retirement rental UK Population over 65 (millions) ▪ Independent living for retirees with Assured Tenancies 25 ▪ Secure rental income paid from pensions and welfare 20 ▪ Rents around Local Housing Allowance levels 15 ▪ Returns comprise: 10 - 5.3% Net Initial Yield (NIY)
Slide 10: Overview of Shared Ownership
OVERVIEW OF SHARED OWNERSHIP Getting onto the housing ladder with smaller deposits, lower income requirements and lower annual payments % each age group that are UK homeowners Shared Ownership 69% 62% ▪ Affordable home ownership 55% ▪ Part-rent, part-buy model with below market rents and 41% 32% low
Slide 11: H1 FY2021 Highlights
H1 FY2021 HIGHLIGHTS £5.1m 72% 1.8p 5.0p1 105.1p £325m Operating profit before Dividend cover Adjusted earnings Dividends NAV per share Investment property fair value (H1 FY20: 52%) (H1 FY20: 1.4p) (H1 FY20: 5.0p) (H1 FY20: 105.0p) (FY20: £302m) (H1 FY20: £4.3m) Successfully delivering on plan to re
Slide 12: H1 FY21 Income
H1 FY21 INCOME Resilient operating income during Covid-19 crisis demonstrates portfolio’s defensive characteristics H1 FY21 H1 FY20 Change Key highlights Net rental income Net rental income1 £6.1m £5.7m 7% ▪ Robust rent collection rate of 99% First tranche sales profits £0.4m £0.2m 151% ▪ 1.1% like
Slide 13: Net Asset Value - H1 FY21
NET ASSET VALUE - H1 FY21 (0.3) 1.1 (2.5) 1.8 1.2 105.0 105.1 106.3 Performance drive by improving net income ▪ £4.9m/2.9p total return before one-offs ▪ £3.1m/1.8p net income representing 72% dividend cover, of which 1.6p is recurring net rental income ▪ £1.8m/1.1p valuation gain ▪ £2.1m/1.2p EPRA
Slide 14: Robust Performance
ROBUST PERFORMANCE Robust rent collection rate through Covid Retirement voids reduced close to pre-Covid average 100% 11% 10% 98% 9% 96% 8% 94% 7% 92% 6% 90% 5% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2020 2020 2020
Slide 15: 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 H1 FY21 FY20 Leverage strategy minimises traditional risks Total debt £162m £141m Total assets £348m £32
Slide 16: Review and Outlook
REVIEW AND OUTLOOK Full cover from start of FY22. FY21 coverage of at least 4p, i.e. 80% What did we say at Driven by: year-end? ▪ Deploying remaining £32m (September 2020) ▪ Fully occupying Shared Ownership portfolio ▪ Reducing retirement voids Strong progress ahead of targets Where are we now? Div
Slide 17: Origination (Sourcing)
ORIGINATION (SOURCING) What we buy Prudent approach to asset selection ▪ Low-rise properties Local Private Acquisition process Housing Association Authorities housebuilders summary ▪ Simple to operate ▪ Investment opportunities sourced from Housing ▪ Secure and subsidised rents Associations, Local A
Slide 18: Shared Ownership Track Record
SHARED OWNERSHIP TRACK RECORD ReSI plc has delivered 549 Shared Ownership homes across 10 schemes through ReSI Housing Clapham Park, Lambeth Mulberry Park (Step Forward), Cheshire Brampton Park, Huntingdon Totteridge Place Clapham Park phase 1 Clapham Park phase 2 Step Forward Brampton Park Date: Ja
Slide 19: 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 £12.0bn affordable housing programme for 2021-26 ▪ Improving standards: ReSI aims to be a best-in-
Slide 20: 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 21: 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 energy effic
Slide 22: Measuring Social Impact
MEASURING SOCIAL IMPACT Four key areas used to measure progress towards the social outcomes of ReSI’s portfolio Social need Affordability & Quality partnerships Increasing supply value for money Sample outputs: Social need Shared Ownership Local Authority Retirement Impact Affordability ratio (avera
Slide 23: Summary
SUMMARY ▪ Successfully delivering on plan to reach full dividend cover ‒ Fully deployed capital with £19m invested in income-producing SO and further £21m committed ‒ Operating profit before fair value movements up 19% ‒ Dividend cover of 72% for H1 FY21 compared with 52% in H1 FY201 ‒ Full dividend
Slide 24: Q&A
Q&A
Slide 25: Appendix
APPENDIX
Slide 26: Portfolio Returns
Portfolio Overview PORTFOLIO RETURNS Retirement Local Authority Shared Ownership Total Value £212m £33m £101m1 £346m Homes 2,222 289 549 3,060 Lease term Lifetime 5 years remaining 115 year lease term Poplar Court, Lancashire Lease turnover 18% p.a. N/A 2.5% staircasing p.a. Lease type Assured Tenan
Slide 27: Rent Profile
RENT PROFILE Rent per week (as a % of units) Net rent by counterparty type Average rent per calendar month: £740 0% £200-300 15% 21% 46% £100-200 30% 76% 54% Under £100 55% Shared Owners 3% Individual Retirees Licensed Retirement Flats Local Authorities Local Authority Shared Ownership Retirement Gr
Slide 28: Local Authority Overview
LOCAL AUTHORITY OVERVIEW Local Authority ▪ Homes leased to local authorities and used to house those 280,000 who would otherwise be homeless People in the UK are homeless - ▪ Strong counterparty (Luton Borough Council) one in every 200 people (one in ▪ Void risk with Luton Borough Council every 24 p
Slide 29: Overview of Shared Ownership
OVERVIEW OF SHARED OWNERSHIP Getting onto the housing ladder with smaller deposits, lower income requirements and lower annual payments Part-buy, part-rent model The shared owner: accessed only via Registered Provider ▪ Purchases an equity share in their new home at open market value. This is known
Slide 30: USS Debt Facility
USS DEBT FACILITY ▪ First standalone investment grade financing of Universities superannuation scheme facility Shared Ownership Outstanding debt £54m Facility Size £300m ▪ Successfully arranged in the midst of the Covid-19 Amortising/bullet Fully amortising pandemic Term 45 year Cost 0.5% ▪ RPI link
Slide 31: A Systemic Problem
A SYSTEMIC PROBLEM House price to earnings ratio No 2-5x 5-8x 8-12x 12x+ data Unaffordable 31
Slide 32: Statement of Comprehensive Income
STATEMENT OF COMPREHENSIVE INCOME H1 FY21 H1 FY20 Variance (£’000) (£’000) Retirement 4,559 4,742 (4)% Shared Ownership 593 78 660% Local Authority 911 859 6% Net rental income1 6,063 5,679 7% First tranche sales profits 391 156 151% Management fees (911) (927) (2)% Overheads (491) (605) (19)% Net f
Slide 33: Reconciliation to IFRS Profit
RECONCILIATION TO IFRS PROFIT H1 FY21 H1 FY20 Variance (£’000) (£’000) Operating profit before abort costs, property disposals, and changes in fair value 5,563 4,792 16% Finance Costs (excluding one-off debt set up costs) (2,489) (2,415) 3% Recurring Operating Profit before change in fair value 3,07
Slide 34: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION 31 March 2021 30 September 2020 Variance £’m £’m Retirement 212 211 1% Shared Ownership 80 58 38% Local Authority 33 34 (2)% Total investments 325 302 37% Inventories - properties available for sale 6 10 (41)% Cash and cash equivalents 11 10 4% Borrowings (162) (141)
Slide 35: EPRA Performance Measures
EPRA PERFORMANCE MEASURES 31 March 2021 30 September 2020 Variance Earnings per share 1.8 p 1.4 p1 28.6% Net reinstatement value £181.8 m £181.0 m 0.1% Net Tangible Assets 106.3 p 105.8 p 0.1% Net Disposal Value £174.2 m £163.7 m 6.4% Net Initial Yield 4.5% 4.7% (4)% ‘Topped-Up’ Net Initial Yield 4.
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