1 December 2021

Residential Secure Income plc

("ReSI" or the "Company")

 

Full Year Results to 30 September 2021

 

Residential Secure Income plc (LSE: RESI), which invests in independent retirement living and shared ownership to deliver secure, inflation-linked returns, is pleased to announce its annual results for the year ended 30 September 2021.

 

 

Financial highlights - strong income and capital growth beyond underlying operational targets

·    EPRA adjusted earnings¹ up 42%, to £7.1 million (FY20: £5.0 million)

·    Net rental income up 16%, to £13.2 million (FY20: £11.3 million)

·    EPRA Net Tangible Assets total return of 7.5% (FY20: -0.1%)

·    EPRA Net Tangible Assets of £184.7 million, or 107.9p, up 2.7% (FY20: 105.1p)

·    Investment property valuation up 2.5%, or £7.7m, to £351m², driven by rental growth and shared ownership portfolio full occupancy

·    Strong capital position - weighted average debt maturity of 22 years, 46% LTV ratio

·    Average cost of debt fell to 2.3% at year end, from 2.6% a year earlier

 

	£m	per share (p)
EPRA Net Tangible Assets as at 30 September 2020	179.7	105.1
Net Income for period	7.1	4.2
Valuation change	7.7	4.5
One-off costs	(0.9)	(0.6)
Dividend paid	(8.5)	(5.0)
Revaluation of trading properties	(0.4)	(0.3)
EPRA Net Tangible Assets as at 30 September 2021	184.7	107.9

 

Deployment and operational highlights - targets exceeded

 

·    Shared ownership occupancy rose to almost 100% due to strong demand, stabilising the portfolio

·    £40m deployed into 351 shared ownership homes¹, exceeding £34m target

·    Retirement voids reduced to 7% in H2 2021, in line with pre Covid-19 average

·    Resilient rent collection of 99% for the year, in line with normal economic conditions

·    Improved performance driven by insourcing of retirement portfolio property management

·    Positive social impact with charters introduced to acquired shared ownership portfolios and resident welfare team supporting digitally excluded residents

·    Improved energy efficiency, with 100% of all directly rented properties now upgraded to a minimum EPC rating of D, and aiming to reach at least C by 2025 as we work towards minimising carbon impact

 

Dividends fully covered and increasing with inflation

·    FY22 dividend target to be increased with September CPI of 3.1% to 5.16p per share³¹

·    5p dividend paid in FY21, as targeted, fully covered by recurring income from Q4 2021, ahead of schedule

·    Future dividend growth backed by inflation linked rental income

 

Outlook

·    Inflation-linked dividend and capital growth supported by stable, resilient cash-generative assets, including shared ownership leases of over 100 years

·    Strong governance through our wholly owned Registered Provider of Social Housing

·    Ongoing serious need to expand UK's affordable housing stock, with attractive investment opportunities

·    Strongly positioned for further growth and to meet the housing market's two biggest problems:

o  Inability to access home ownership, which is getting worse; and

o  Growing elderly population requiring affordable, independent later living

 

1 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

2 Including committed acquisitions

3 This is a target and not a profit forecast. There can be no assurance that this target will be met.

 

Analyst and Investor Presentation and Annual Report

ReSI will host an online webinar and Q&A session for analysts and investors to discuss the results later today (1 December 2021) at 2:00pm.  Registration is available at this link or https://greshamhouse.zoom.us/webinar/register/WN_FtAzOA_ERSOQLVSiq0RWBQ 

 

The accompanying presentation will be made available shortly after the webinar on the Company's website at https://www.resi-reit.com/company-documents

 

A copy of the pdf Annual Report is available on the Company's website at https://www.resi-reit.com/company-documents 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.

 

 

Commenting on ReSI's results, Robert Whiteman CBE, Chairman of ReSI said:

"We are delighted to report rising income, driving a fully covered increased dividend, ahead of schedule. We have built a platform of resilient cash-generative assets and long-term debt which will continue to drive long-term, inflation-linked dividends and capital growth.

 

"Delivering high quality housing in the UK needs long-term institutional investors like ReSI. The growing institutionalisation of housing makes for more professional landlord-tenant relationships, benefiting tenants and income-seeking investors alike.

 

"Having our own for-profit Registered Provider, combined with Gresham House's investment processes and solid partnerships, means we can deliver housing that's aligned and supported by government policy, backed by robust governance."

 

 

Alex Pilato, Chief Executive of ReSI Capital Management, Managing Director of the Housing and Capital Markets Divisions of Gresham House and Investment Committee member of ReSI added:

 

"We have again demonstrated the strength of ReSI's model, delivering on our targets to fully deploy funds raised, cover our dividend and increase income in line with inflation.

 

"The UK's persistent housing shortfall and low levels of home affordability continue to drive demand for shared ownership and retirement housing. Our model helps housing associations recycle their capital and developers to deliver new affordable homes, delivering inflation-linked income to investors.

 

"Our approach is ring-fenced from other issues in the wider market, with all regulated assets held within our own Registered Provider. With the UK's largest private independent retirement rentals business, and strong demand for our shared ownership homes, ReSI is well placed for future capital, income and portfolio growth."

 

 

For further information, please contact:

 

ReSI Capital Management Limited / Gresham House Housing Ben Fry Alex Pilato	+44 (0) 20 7382 0900
Jefferies International Limited Stuart Klein Tom Yeadon	+44 (0) 20 7029 8000
KL Communications Charles Gorman Will Sanderson Millie Steyn	[email protected] +44 (0) 20 3995 6673

 

Notes to Editors

Residential Secure Income plc (LSE: RESI) is a real estate investment trust (REIT) focused on delivering secure, inflation-linked returns with a focus on two resident sub-sectors in UK residential - independent retirement rentals and shared ownership - underpinned by an ageing demographic and untapped and strong demand for affordable home ownership.

ReSI targets a secure, long-dated, inflation-linked dividend of 5.0 pence per share p.a. (paid quarterly) and a total return in excess of 8.0% per annum. Including recently committed acquisitions, ReSI's portfolio comprises 3,051 properties, with an (unaudited) IFRS fair value as at 30 September 2021 of £351m[i].

ReSI's 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, 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.

 

Acquisitions by ReSI are limited to homes with sufficient cashflows, counterparty credit quality and property security to be capable of supporting long‑term investment grade equivalent debt. ReSI does not manage or operate stock and uses experienced and credit-worthy managers.

 

ReSI is managed by ReSI Capital Management Limited, whose immediate 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 four years, as an investor through ReSI.

 

ReSI Capital Management and its parent, TradeRisks, were acquired by Gresham House in March 2020, further increasing the investment expertise available to ReSI. The housing investment team at Gresham House has 19 members and growing, with an average of 18 years' relevant experience, covering fund management, housing investment, social housing management and financial and risk expertise.

 

Gresham House plc is a London Stock Exchange quoted specialist alternative asset manager committed to operating responsibly and sustainably, taking the long view in delivering sustainable investment solutions.

 

Further information on ReSI is available at www.resi-reit.com, and further information on Gresham House is available at www.greshamhouse.com

 

[1] excluding the finance lease gross up and including committed acquisitions

 

 

 

Annual Report 2021

Residential Secure Income plc

30 September 2021

 

 

 

 

Strategy and Performance

 

 

Purpose

Residential Secure Income plc (LSE: RESI) is a real estate investment trust (REIT) focused on delivering secure, inflation-linked returns with a focus on two resident sub-sectors in UK residential - independent retirement rentals and shared ownership - underpinned by an ageing demographic and untapped, strong demand for affordable home ownership.

 

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.

 

 

 

 

Portfolio Snapshot

 

We invest in UK affordable homes to deliver secure inflation linked income

 

	30 September 2021	At 30 September 2020
Homes	3,051	2,708	See note 7 on page 111
Value of Investment Property*	£351m including £10m committed acquisitions	£302m
Unique UK property location	793	669
Net rental income for the year	£13.2m	£11.3m	See note 6 on page 107
Annualised net rental yield *	4.9%	4.7%	See note 38 on page 124
Number of counterparties	2,356	2,113

* Alternative performance measure

Portfolio By Region

East Midlands	2%
East of England	23%
Greater London	14%
North East	1%
North West	9%
Scotland	0%
South East	24%
South West	19%
Wales	2%
West Midlands	3%
Yorkshire and The Humber	3%

 

Portfolio split by Valuation

Independent Retirement Rentals	£215m	61%
Shared Ownership	£105m	30%
Local Authority	£31m	9%
Total	£351m	100%

 

 

 

 

 

 

Our Portfolio Focus

ReSI has a diversified secure inflation-linked income streams from residential sub-sectors with strong supply and demand imbalances and supportive property fundamentals.

 

	Independent Retirement Living Housing (£215m GAV / 2,218 Homes / 61% of portfolio)	Shared Ownership Housing (£105m GAV[1] / 544 Homes / 30% of portfolio)
Driver	§ Booming and increasingly lonely older population	§ Huge untapped demand for affordable home ownership
Summary	§ Let to elderly residents with affordable rents and assured tenancies § Provides fit-for-purpose homes for retired people, allowing them to maintain their independence without care provision	§ Homebuyers acquire from ReSI a share in a residential property and rent the remainder § Helps house buyers acquire homes they would otherwise be unable to buy § Capital grant funding from government allows rent to be c.30% below market levels
Rent Growth	§ Increase with RPI each year	§ Increase contractually by RPI+ 0.5% each year
Secure income	§ Secure rental income paid from pensions and welfare	§ Subsidised rents c.30% below market § Homebuyer equity stake
ReSI origination advantages	§ Scale: UK's largest private independent retirement rentals business § Specialist in-house 30-person team with over 20-year track record	§ ReSI Housing - for-profit Registered Provider of Social Housing § Unique 45-year, 0.5% coupon, RPI linked USS debt facility providing 300bps yield pick-up
Net Yield	§ 5.3%	§ 3.4%
Levered Yield	§ 6.9%	§ 7.1%
Average customer stay / length of lease[2]	§ 6 years	§ 227 years
Annualised like for like rental growth	§ 1.5%	§ 2.2%
Occupancy	§ 94%	§ 100%[3]
Rent Collection	§ 99%	§ 100%

 

 

 

 

Financial Highlights - Income

 

INCOME HIGHLIGHTS	30 September 2021	At 30 September 2020
IFRS Adjusted Earnings Per share * EPRA Adjusted Earnings Per share *	4.2p	2.9p	See note 15 on page 110
Total Return (on Opening NTA) *	7.5%	-0.1%	See note 38 on page 124
Total IFRS Return (on Opening NAV)	6.2%	13%	See note 38 on page 124
Recurring profit before change in fair value and property disposals *	£7.1m / +42%	£4.9m	See note 15 on page 110
IFRS Earnings Per Share	6.6p	1.4p	See note 15 on page 110
Dividend Per Share	5.0p	5.0p

*   Alternative performance measures

 

CAPITAL HIGHLIGHTS	30 September 2021	At 30 September 2020
IFRS Net Asset Value per Share	106.6p / +1.5%	105.0p	See note 33 on page 120
Value of investment property	£351m Including £10m committed acquisitions	£302m	See note 17 on page 111
Of the total number of Shares held by the fund manager, current and founder directors of the fund manager, and directors of ReSI plc as at the date of this report	2.4% (4.1m shares)	1.9% (3.3m shares)
Loan to Value Ratio (LTV)	46%	42%	See note 37 on page 123
Weighted Average Cost of Debt	2.3%	2.6%
Weighted Average Remaining Life of Debt	22 years	23 years
EPRA Net Tangible Asset Value (NTA) per share*	107.9p/ +2.7%	105.1p	See note 33 on page 120

 

 

 

 

Chairman's Statement

Rob Whiteman CBE

Chairman

 

"Occupation of our shared ownership portfolio and reduction in retirement voids, fully deploying our leveraged capital, has driven the growth seen in ReSI's underlying financial results for the year, resulting in full dividend coverage in Q4, three months ahead of target"

Summary

These full year results to 30 September 2021, show ReSI achieve, three months ahead of schedule, our key objective of reaching full income generation and dividend cover by the end of the financial year. The income growth in the year has been driven by reaching almost entirely full occupancy in our existing shared ownership portfolio, fully deploying our leveraged capital, and reducing voids within our retirement portfolio back to pre-COVID 19 levels. We have made this progress during the ongoing pandemic restrictions and uncertain economic climate, highlighting the importance of good quality, fit for purpose, affordable housing. ReSI's social value is demonstrated by extending affordable housing to under-served segments of the housing market: providing affordable housing to retirees to live with peers and avoid loneliness; providing high quality and spacious affordable home ownership to lower and middle-income households through shared ownership; and by providing accommodation for those who would otherwise be homeless.

 

ReSI's portfolio is defensive, positioned to weather economic stress. Unlike many areas of the real estate sector, our cashflows have remained secure, and rent collection has remained firm through the COVID-19 crisis, maintained at 99% rent collected due during the year, in line with performance during normal economic conditions

Demand for our high-quality affordable accommodation continues to be strong, whether in our existing portfolio or newly acquired homes. Our shared ownership portfolio is as at the date of this report almost 100% occupied, stabilised and de-risked, whilst voids in our established retirement portfolio are now below their pre-COVID average of around 7%.

 

The transfer of the retirement property management contract from Girlings to a subsidiary of the Fund Manager, completed in July 2021, has progressed very well with portfolio performance improving as evidenced in the void figures. This change is expected to drive further cost efficiencies and operational improvements over the next twelve months.

 

We aim to be a best-in-class provider of affordable housing and drive an improvement in standards across the sector. In shared ownership the Fund Manager has unique Customer and Environmental Charters setting out commitments to our residents and stakeholders, and we continue to invest in improving the energy efficiency of our retirement portfolio and investing in technology to make the lives of our residents easier. During the current year ReSI has focused on the least energy efficient homes within its portfolio and has at the date of this report upgraded all directly rented retirement homes to a minimum EPC of D, above the current government minimum of E. The focus now turns to upgrading our D rated directly rented properties to at least a C by 2025, as part of the ReSI's road to net zero plan.

 

Net Asset Value and Results

The occupation of our shared ownership portfolio and reduction in retirement voids has driven the growth seen in ReSI's underlying financial results for the year, resulting in full dividend coverage in Q4, three months ahead of target.

ReSI's rigorous and disciplined approach to selecting and managing investments delivered a total EPRA NTA return of 7.8 pence per share (7.5%) during the financial year. After paying a dividend of 5 pence per share, the EPRA NTA per share increased 3% to 107.9p during the year to 30 September 2021. The portfolio produced £7.1m of recurring profit before change in fair value and property disposals, up 42% from £5.0m last year. The portfolio's valuation, assessed by Savills, rose £8.4m or 2.5% on a like-for-like fair value basis, to £351m (including committed acquisitions).

 

IFRS total returns for the year were 6.6 pence per share (6.2%), leading to an increase in the IFRS NAV by 1.5% to 106.6 pence after paying out the 5 pence dividend. The difference to EPRA NTA returns is caused by an increase in the fair value of debt and trading properties of 1.4 pence (£2.3m). EPRA adjusted earnings per share were 4.2p (2020: 2.9p), in line with the adjusted IFRS earnings per share of 4.2p (2020: 2.9p) (See Note 15). A full summary of ReSI's performance and a breakdown of our returns is included in the performance section of the Fund Manager's Report.

 

Deployment and Dividend Outlook

In March 2021 ReSI reached full deployment of funds raised at IPO and leverage at our target ratio of 50%, with a £351m portfolio comprising of 3,051 homes, following approximately £40m of shared ownership acquisitions; £19m of which were acquired in March and were immediately income-generating. This included 68 homes from existing partner Metropolitan Thames Valley Housing and 275 homes from new partners, Orbit and Brick-by-Brick - as subsidiary of Croydon Council.

Dividends totalling 5 pence were declared for the year, comprising equal quarterly dividends of 1.25 pence, in line with our IPO target of 5 pence per annum.

 

Reflecting the inflation linkage of the portfolio and that ReSI is now fully deployed with its portfolio stabilised and fully income generating, the dividend target for the next financial year has been increased in line with September CPI of 3.1% resulting in a new annual dividend target of 5.16 pence per Ordinary Share for the year to September 2022.

 

Outlook

ReSI is now positioned to deliver long term inflation linked dividends and capital growth.

 

ReSI has built a platform of resilient cash-generative assets and long-term debt which, when paired with the robust governance from its for-profit Registered Provider and Gresham House's investment processes and substantial partnerships, will provide a strong basis for growth moving forward.

 

The UK's structural housing shortfall continues and most of the population lives in areas where home purchase is unaffordable. These twin factors drive the fundamental need for new, long-term investment into this sector. The government continues to support Homes England's Affordable Homes Programme, with total funding of £12.2 billion for new affordable housing over 5 years. However, housing associations, the traditional investors, need to invest huge sums into their existing stock to ensure safety and energy efficiency, which reduces their ability to provide new affordable homes. We remain excited by the opportunity to help housing associations recycle their capital with developers to deliver new affordable homes, helping to meet the critical shortage of affordable homes for independent retirement living and home ownership and in turn delivering inflation-linked income to our investors.

The Board is grateful for the support of ReSI's shareholders and the contribution of its advisers.

 

Rob Whiteman
Chairman
Residential Secure Income plc

30 November 2021

 

 

Investment Case

 

Why invest in Housing ?

 

·	Stable, long term, inflation - linked rents
·	Supply/demand imbalance from historic undersupply - 2m shortfall in homes delivered 1
·	Incredibly diversified income stream from thousands of homes and residents
·	Reducing development appetite from Peers  - 94% of affordable housing delivered by not-for-profits2
·	Nationwide shortage of affordable home  ownership and independent retirement housing

 

 

Why Us?

 

·	20-year track record financing and advising social housing
·	Wholly owned Registered Provider of social housing, ReSI Housing
·	Investment Partner of Homes England and Greater London Authority
·	Unique proprietary Customer and Environmental Charters maximises social impact
·	30-strong Fund Manager's in-house property management business provides services to fund at cost
·	Long-term investment grade equivalent debt  - Average 22 year maturity, unique £300m facility with 0.5% coupon

 

1 MHCLG - shortfall in homes delivered over last 10 years vs. National Housing Federation target

2 MHCLG and English Housing Survey

 

 

 

 

Market Drivers

 

Stable, long-term, inflation linked rents

The affordable housing sector has long-term structural demand drivers, liability matching return characteristics, potential for growth and insulation from volatility, resulting in stable inflation linked income. It offers the best opportunity for social impact, for long-term investors looking for responsible investment opportunities.

ReSI's residents pay their rents from secure income sources. Retirement rentals residents pay from pensions and savings, shared owners have ownership stakes in their homes and the local authority housing portfolio is leased to Luton Borough Council. ReSI has no leases with weak credit charities or housing association. ReSI's rental income stream is therefore significantly more secure than those from the supported housing sector, the private rental sector or commercial real estate.

Rent payments rise each year, typically in line with inflation for the retirement rental portfolio and contractually linked to RPI+0.5% for the shared ownership portfolio, offering a secure income stream and potential growth in the assets' values over time, in exchange for an upfront capital amount.

 

Supply / demand imbalance from historic undersupply                                                                                                                                     

The UK has experienced a sustained period of over 30 years of undersupply of housing and more importantly affordable housing. The National Housing Federation estimate that 145,000[4] affordable homes are required each year to both clear the current backlog of people that need a home and meet future demand, but housing completions are significantly below historical averages with average delivery of only c.50,000 affordable homes per year over the last 5, 10, 20 and 30 years.

 

Across England there are only 17 local authorities in which the average earner could obtain a mortgage to buy the average-priced property, as shown in light blue on the map. This is caused by the well-documented mismatch of supply and demand for housing and a subsequent dearth of affordable areas nationwide. The maps show how the house price to earnings ratio has changed over recent decades:

                                                               

While the UK does not build enough homes to meet rising demand, the homes that are built are increasingly out of reach for ordinary owners. The 2018 Letwin review concluded that this is a result of the high price of land making it impossible to meet the need for housing through market delivery alone. In Letwin's draft analysis papers, he refers to finding that the need for social rented housing is 'virtually unlimited', concluding that the market for social rented property is separate from the price-constrained market for open market sales. The solution to this problem is to ensure that new housing provides a wider range of tenures and includes more social and affordable housing for high levels of demand that cannot be met by the market.

 

Incredibly diversified income stream from thousands of homes and residents

Affordable residential rents offer a diversified counterparty risk, through large numbers of residents and shared owners, resulting in lower overall counterparty risk compared to leases with weak credit housing associations and charities, and other real estate investments such as commercial real estate. Given the essential nature of the service being offered to residents and shared owners, the risk of rent arrears is comparatively very low. An investment in affordable residential real estate also diversifies the investor risk when combined with existing real estate investments.

 

Reducing development appetite from peers

94% of affordable housing is currently delivered by not-for-profit medium to large housing associations. As financial pressures build on these associations due to the increasing cost burden of energy efficiency initiatives, health and safety and fire safety, new sources of funding are required to deliver affordable housing. The sector needs new sources of capital, more developers and providers of good quality affordable housing. The UK has been delivering around 46,000 new affordable homes per year since 2013 but this is significantly short of need, particularly in some parts of the country. Savills analysis suggests that a further 60,000 new affordable homes are needed per year, with significant shortfalls in London and the South East (Affordable Housing - Building Through Cycles, Savills, 2018).

 

Nationwide shortage of affordable home ownership and independent retirement housing

The UK is falling well short of the UK government's goal of delivering 300,000[5] homes across the country annually, as well as the National Housing Federation's estimated 145,000 annual deliveries of affordable homes needed through 2031[6] to address un-met demand for affordable housing. According to the Ministry of Housing, Communities & Local Government, only 57,600 affordable homes were completed in the 2019/2020 fiscal year[7].

 

Furthermore, the COVID-19 pandemic has helped to drive an 8.1% year-on-year increase in the average UK housing price to a record-setting c. £270,000 in October 2021[8]. The sustained growth in the average UK housing price over the past decade highlights the need for the development of more affordable housing stock in the country. 

 

The UK is also facing a shortage of retirement housing stock, which accounted for c.658,000 units in 2020[9]. The 65+ age cohort is expected to grow from 19% of the UK population (c.12 million residents) to 26% by 2066 (over 20 million residents).

 

At the same time, life expectancy in the UK continues to trend upward. By 2025, the average remaining life expectancy of a person reaching retirement age is expected to grow to c.22 years.

 

Currently, Just 1% of UK over 60s live in purpose-built retirement housing (well below that of peer countries). The pipeline of UK retirement developments is limited, and only 3% of consented developments are designed specifically for the elderly. By 2040, a third of the 60+ age cohort may live in private rental accommodation, according to Centre for Ageing Better estimates[10].

 

ReSI's Core Drivers

20-year proven track record financing and advising social housing

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 four years, as an investor through ReSI. The acquisition of the fund manager and its parent, TradeRisks by Gresham House in March 2020 has further increased the investment expertise available to ReSI. The housing investment team at Gresham House has 19 members and is growing. The investment team has an average of 18 years of relevant experience, covering fund management, housing investment, social housing management and financial and risk expertise.

 

 

Wholly owned Group Registered Provider of social housing

ReSI's wholly owned subsidiary, ReSI Housing Limited, is authorised by the Regulator of Social Housing ("RSH") as a for-profit Registered Provider.

Investing via our for profit Registered Provider allows ReSI to hold and manage regulated affordable housing assets, such as shared ownership, including grant supported and Section 106 schemes. Section 106 properties which are c.20% of all new homes that must be rented at a rent below market (for example as shared ownership) and as such are sold for lower prices by developers.

Operating and controlling ReSI Housing enables ReSI to benefit from best-in-class governance process combining the financial rigour of the business world with the regulatory framework for Registered Providers.

 

The RSH regulatory framework ensures good governance, financial viability, minimum maintenance and environmental standards, and protection of residents' welfare, thus supporting ReSI's goal of maximising social benefit.

 

Investment Partner of Homes England and Greater London Authority

ReSI Housing's Investment Partner Status with Homes England and the Greater London Authority allows ReSI to access the £12bn capital grant funding available to subsidise the delivery of 212,000 new affordable homes over the next five years, with half of these under a new model of shared ownership.

ReSI has received government grant funding averaging £30,000 per new shared ownership home delivered which has supported ReSI to offer these homes at an average 30% discount to market rents.

Investment Partner status also allows ReSI to acquire tenanted shared ownership portfolios that have been historically funded with government grants.

 

Unique proprietary Customer and Environmental Charters maximises social impact ReSI is committed to making a material contribution to solving the housing crisis by disrupting the status quo to deliver a truly best in class product for shared owners. Our unique shared ownership Customer and Environmental Charters lays out our long-term commitments to shared owners in areas such as staircasing, lease extensions and control of ground rents and driving up environmental standards. These commitments go above and beyond the industry standard and will position ReSI as the best-in-class provider and leader in creating a new era for the shared ownership sector ensuring that shared ownership is recognised as a sustainable and socially beneficial housing tenure.

 

30-strong in-house property management business provides services to ReSI at cost

Property management for the independent retirement rental and part of the shared ownership portfolio are provided by a subsidiary of the Fund Manager at cost. This allows the team to work closely with the Fund Manager to optimise customer service and maximise performance for ReSI. The team, which we acquired from Girlings[11] on 1 July 2021, focus solely on managing homes for the Fund Manager.

 

Long-term investment grade equivalent debt

ReSI has long-term debt with a weighted average life of 22 years and a weighted average cost of this debt of 2.3%. ReSI uses this debt to provide higher leveraged returns for investors while avoiding or mitigating the traditional risks of real estate debt - i.e. refinancing, valuation covenants and interest rate exposure. This is a debt strategy most commonly used by infrastructure funds and other secure income sectors.

The £300m ultra long-term facility secured in 2020 with the Universities Superannuation Scheme (USS) is an innovative new agreement which provides a benchmark that could unlock the development of much needed shared ownership homes.

 

 

 

 

Investment Portfolio

Shared Ownership Housing

£105m GAV[12] / 544 Homes[13] / 30% of portfolio

Location
East Midlands	9%
East of England	20%
Greater London	46%
North West	5%
South West	13%
West Midlands	6%
Yorkshire and The Humber	1%
Grand Total	100%

 

Part-buy, part-rent model makes shared ownership the affordable home ownership solution

Shared ownership provides the affordable route to home ownership 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 c30% 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 its 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 202,000 shared ownership homes across England, and a total of 18,210 new shared ownership sales were made in the year to March 2020 (Ministry of Housing, Communities & Local Government, 2021), 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, making it difficult for people to become members of their community.

The graph below sets out the smallest amount of deposit required and the minimum income requirement to purchase a home worth £250,000 under shared ownership and traditional home ownership.

[graph included in pdf report]

The average shared owner has a household income of £36,000, in line with the minimum income requirement for the average home shown above, ranging from below £26,000 in the Northeast to £45,000 in London and well within the maximum limit of £80,000 per annum (£90,000 in London).

Shared ownership is more affordable than renting an equivalent property. An individual or family could buy a shared ownership home with annual housing costs at 40% of their net income, but would need to pay 50% of their net income to rent an equivalent property on the private rental market. This discount to market rent offers a tangible saving to shared owners.

Typical living costs

	Shared Ownership 25%	Help to Buy	First Homes (30%)	Outright Purchase	Rent
Mortgage Payments	£3,230	£10,768	£9,547	£12,921	0
Rent	£5,156	£0	£0	£0	£12,207
Service Charge	£1,500	£1,500	£1,500	£1,500	0
Total annual Payments	£9,886	£12,268	£11,047	£14,421	£12,207

Assumptions:

-     £250,000 home;

-     10% deposit (5% for Help to Buy with 25% Help to Buy loan);

-     25 year mortgage @ 3%;

-     4.9% market rent yield.

 

 

SHARED OWNERSHIP CASE STUDY

 

Interview with Marie *, a shared ownership resident:

 

A single parent of two children, Marie, had been renting in the local area for ten years before purchasing her shared

ownership flat. Buying on the open market was out of reach for Marie, but after inheriting some money she was able

to afford a shared ownership property. The Good Economy heard how her home gave her stability within the area

which was particularly important for her children who were at college nearby. Marie emphasised the following as

key benefits of her home:

 

-      HIGH QUALITY HOME in nice area with practical layout and good transport links

-      SAVINGS OF C.£300 PER MONTH

-      HELPFUL SALES TEAM AND CONCIERGE SERVICE

 

* Not her real name

 

Independent Retirement Rental Housing

£215m GAV / 2,218 Homes / 61% of portfolio

	Region
	East Midlands	1%
	East of England	13%
	Greater London	9%
	North East	1%
	North West	10%
	Scotland	0%
	South East	33%
	South West	23%
	Wales	3%
	West Midlands	3%
	Yorkshire and The Humber	4%
	Grand Total	100.0%

 

 

Independent Living for retirees

Our portfolio provides the 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 retired people, 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 each year and are set around Local Housing Allowance levels

6.     is managed by our in-house 30-strong property management and lettings team, operating under the 'My Future Living' brand

An increasingly lonely but booming older population provides huge and growing demand for independent retirement renting

There has been a steady upward trend in life expectancy in the UK. By 2025 the average remaining life expectancy of a person reaching retirement age is expected to reach c.22 years. As a result, 25% of the UK population is expected to be over 65 by 2025 compared to 19% in 2018.

 

 

Just 1% of UK over 60s 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.

·     Specialist retirement housing is accessible (e.g. without steep staircases) 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 1 million older people say they always or often feel lonely[14]. 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.

 

 

 

 

 

Independent retirement rental housing (continued)

RETIREMENT CASE STUDY

Lily and James  *, East Sussex

There are many things we can do to stay fit and healthy as we get older -some experts believe that one of the best ways to age gracefully is to be sociable.

 

One couple enjoying the social side of retirement living are James and Lily who found their ideal apartment through My Future Living, ReSI's inhouse retirement management team.

 

The couple, who have been married for over 40 years, decided to move from North London to Seaford in East Sussex four years ago for a quieter way of life and to be close to the sea.

 

Lily and James, rent a two-bedroom apartment at retirement development Homeshore House in Seaford on an assured tenancy and say that renting in retirement is the best decision they've ever made.

Lily says, "It was a great decision to move and now every day we enjoy stress-free living."

 

When asked about renting in retirement, Lily says: "We used to own a lovely house but maintaining it was getting harder. We also wanted to free up some money so we could help our son with a deposit for his own place. We now have a worry-free life and if something needs fixing its sorted very quickly with no stress to us."

 

Lily is active and sociable and particularly enjoys helping to organise social events for residents in the development including bingo evenings, pub lunches and golden oldies film afternoons.

 

Lily comments: "I love being part of the community. We have a communal greenhouse where we grow and share all our produce with each other. It's a lovely way to get out, keep busy and meet new people."

 

She comments, "Homeshore House is the perfect place to live, not only because the surroundings and gardens are immaculate with trees dotted everywhere but we have the Downs on one side and the sea on the other."

 

She concludes, "When we started our search we looked around and talked to many different companies but found My Future Living the most helpful and the easiest to deal with."

To find out more about renting a home in a retirement development visit: www.myfutureliving.co.uk

* Not their real names
 

 

 

Local Authority Housing

£31m GAV / 289 Homes / 9% 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

 

Increasing housing unaffordability drives demand from local authorities for partners to house those unable to afford their own home

·	The UK is facing significant demand for short-term council housing nationally - there were 95,450 households in temporary accommodation as of 31 March 2021, an increase of 3.5% from 31 March 2020[15].
·	New legislation introduced under the Homelessness Reduction Act 2017 placed additional obligations on local authorities for housing vulnerable/statutory homeless people, creating further pressures on councils looking to increase their access to emergency and temporary housing.
·	Local authorities are increasingly unable to meet demand for temporary accommodation from their own housing stock, and some authorities are seeking temporary accommodation outside their own areas. At the end of March 2021, approximately 27% of households in temporary accommodation (c. 26,000) were in accommodation in a different local authority district. London authorities make up 82% of these placements.[16]
·	There is an increasing reliance on emergency bed & breakfasts, with use by councils rising by 382%[17] in the 10 years to 31 March 2021, which are more costly than leasing from the private sector.
·	As a result, there is a shortfall between cost and support for temporary housing in London, the South East and other metropolitan areas. English local authorities spent £1.2b on temporary accommodation in 2019/20, a 55% increase in real terms from 2014/15.[18]
·	Rents at ReSI's properties are set at close to long-term market rent levels, provide a cost saving to local authorities, who often have to rely on costly pay-nightly accommodation and bed & breakfasts.
·	ReSI provides a long-term institutional landlord to replace the numerous individual landlords that local authorities currently rely upon and removes the difficulties that local authorities have with ensuring adequate standards across their rented estates.

 

Strong Financial Position

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. Reflecting the quality of the assets in ReSI's portfolio, ReSI follows the debt strategy of the infrastructure sector using long term debt with an average maturity of 22 years to lock in returns and avoid the traditional refinancing risks that real estate REITs encounter. For example, the unique 45-year USS debt facility provides 300bps yield pick-up on ReSI's shared ownership portfolio allowing ReSI to deliver its target returns through an incredible relatively low yielding asset class.

ReSI has used the experience of Fund Manager's immediate parent company, TradeRisks Limited, to secure long-term debt to support its long-term goals.

During the year ReSI secured a £10m revolving credit facility from Santander. This facility allows for efficient management of ReSI's working capital now it is fully deployed.

 

	FY21	FY20
Total debt net of issue costs	£166m	£141m
Total assets *	£350m	£316m
LTV (target 50%)	46%	42%
Leverage on reversion value	43%	39%
Weighted average cost	2.3%	2.6%
Weighted average maturity	22 years	23  years

*See Note 37

Leverage strategy minimises traditional risks:

·     Minimises refinancing risks: Amortising facilities limit exposure to bullet repayments

·     Minimises covenant risks: Debt capacity based on operational cash flows rather than traditional LTV tests

·     Minimises interest rate risks: Long-term debt matching underlying cash flows

 

 

Lender		Portfolio held against		Notional value of debt drawn less amortisation		Maturity date		Annual interest rate
								%
Universities Superannuation Scheme		Shared ownership		£57.5m		March 2065		0.513% fixed* (inflation linked)
Scottish Widows		Retirement		£93.0m		June 2043		3.46% fixed*
National Westminster Bank		Local authority		£14.3m		January 2023		1.5% + 3 month LIBOR **
Santander Bank		All assets		£1.4m		1 month rolling		2.8% + 3 month LIBOR **
Total borrowings				£166.2m

 

* weighted average cost of debt

** SONIA effective 31 December 2021

 

Capital Stack
	FY21	FY20
Debt	£168m	£141m
Equity	£182m	£180m
Grant Funding	£10m	£6m
Reversionary Surplus	£40m	£35m

 

The EPRA NTA measures exclude the reversionary surplus in our portfolio which stands at £40m. 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 10% discount, on average, to its reversionary value.

 

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 earnings/ IFRS earnings* (£m)				Net rental income (£m)				Rental growth (%)				EPRA cost ratio (%)*				Profit before tax (£m)
2019	2020	2021		2019	2020	2021		2019	2020	2021		2019	2020	2021		2019	2020	2021
£'m	£'m	£'m		£'m	£'m	£'m		%	%	%		%	%	%		£'m	£'m	£'m
4.6	5.0	7.1		11.2	11.3	13.2		2.1%	1.9%	1.5%		32%	33%	30%		13.2	2.4	11.2
KPI definition
Adjusted EPRA earnings, excluding valuation movements on investment assets and debt, and other adjustments, that are one-off in nature, which do not form part of the ongoing revenue or costs of the business.				Gross rental income after deducting property operating expenses including ground rent paid.				Like-for-like average growth of rents across the portfolio.				Administrative and operating costs (including costs of direct vacancy) divided by gross rental income.				Profit before tax is a statutory IFRS measure as presented in the Group's Consolidated Statement of Comprehensive Income.
Comment
Improved earnings driven by deployment and acquisitions				Increase of 16% delivered, including £1.5m from shared ownership investment during the year				1.5% like-for-like growth in rental income achieved in line with RPI				Improvement in cost ratio with improving performance in our retirement occupancy and further deployment in shared ownership				Improved profit before tax driven by EPRA earnings and property valuation growth somewhat offset by the increased valuation of debt
Notes
See Note 39 to the financial statements				See Note 6 to the financial statements.				See Glossary on page 136 for definition and calculation basis.				See Note 39 to the financial statements.				See Consolidated Statement of Comprehensive Income on page 98.

 

 

 

·    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 share* (pence)				IFRS NAV per share (pence)				Total Return on NTA (%)*					Loan to Value (LTV) (%)				Cost of debt (average) (%)
2019	2020	2021		2019	2020	2021		2019		2020	2021		2019	2020	2021		2019	2020	2021
110.1	105.1	107.9		108.6	105.0	106.6		8.7%	(0.1) %		7.5%		30%	42%	46%		3.3%	2.6%	2.3%
KPI definition
EPRA NTA (Net Tangible Assets) is the market value of property assets, after deducting deferred tax on trading assets, and excluding intangible assets and derivatives.				IFRS NAV (Net Asset Value) per share at the balance sheet date.				Return on NTA is total return for the year, prior to payment of dividends (excluding movements in valuation of debt and derivatives), expressed as a percentage of opening NTA.					Ratio of net debt to the market value of properties on a consolidated Group basis.				Average cost of debt for the year including costs and commitment fees.
Comment
3% growth in FY21 reflecting strong trading results and resilient valuation performance under challenging market conditions.				Returns of 1.6 pence per share in FY21 reflecting strong trading results and property valuations.				Returns of 7.5% in FY21 demonstrating resilient overall returns from our property portfolio. (Equivalent to 6.2% returns on opening IFRS NAV)					Increase in LTV as ReSI's portfolio moves towards full deployment				Average cost of debt at 2.3% following ultra-long-term funding through a secured facility, with average debt maturity now at 22 years.
Notes
See Note 39 for reconciliation from IFRS to EPRA performance measures				See Consolidated Statement of Financial Position				See Note 38 Supplemental financial information for calculation.					See Note 37 Supplemental financial information for calculation.				See Note 37 for further detail regarding capital risk management.

 

 

 

* Alternative performance measures

 

 

 

 

Fund Manager's Report

Alex Pilato

Chief Executive, ReSI Capital Management

ReSI offers a unique opportunity for investment into a highly scalable solution to the UK's acute shortage of affordable housing.

In this financial year we have achieved all the targets we set for ourselves in December 2020.

 

Our key target for the year was to cover our dividend from recurring income on a forward basis from October 2021 and to achieve a 4p IFRS Adjusted EPS / EPRA Adjusted Earnings Per Share ("EPS")[19] both of which have been exceeded. Our dividend has been covered from recurring income on a forward rolling basis from July 2021, three months ahead of target and we have achieved an IFRS Adjusted EPS and EPRA Adjusted EPS of 4.2p.

 

This outperformance has been driven by achieving and exceeding our underlying operational targets: 

 

Shared ownership occupancy:

Income growth delivered[20]: £1.9m / 1.1 pence per share

ReSI has continued to experience a strong level of demand for its shared ownership properties throughout the year, driving an increase in the occupancy rate at these schemes to almost 100% at the date of this report. ReSI's shared ownership portfolio is, at the date of this report, almost entirely occupied, stabilised and de-risked, with the final 14 out of 498 homes reserved and going through legals to completion. Our largest single investment of 132 homes at Clapham Park, is now almost fully income generating with 129 homes occupied and the final three homes reserved and going through legals to completion.

 

This demand emphasises the important role that shared ownership housing continues to play in helping mid to low earners onto a housing ladder which is otherwise increasingly out of reach to the highest earners or those without access to the "bank of mum and dad" or.

 

 

Deployment of capital:

Income growth delivered[21]: £0.9m / 0.5 pence per share

In the financial year, ReSI deployed a further £40m including committing £10m into its shared ownership portfolio, 20% higher than the £32m target. This saw ReSI acquire a further 351 homes through acquisitions from existing partner Metropolitan Thames Valley and two new partners Orbit Homes and Brick By Brick, with 266 of the homes acquired in March already occupied and immediately income generating. The remaining 85 homes are being acquired from Brick By Brick on a phased basis as the homes are built and shared owners are ready to occupy them. At the date of this report 59 of these homes have been acquired with 51 occupied, and the remaining 8 homes all reserved and going through legals to completion. The remaining 26 will be acquired once construction sign-off has been received from the local council and shared owners are ready to move in.

 

Retirement voids:

Income growth delivered[22]: £0.8m / 0.5 pence per share

The property and lettings management of the ReSI's retirement portfolio was transferred from Girlings to a subsidiary of the Fund Manager in July 2021 and is now provided at cost. The operational improvements from the transfer of ownership, combined with a more managed approach to helping residents move throughout the second and third UK lockdowns, has resulted in retirement voids returning to their pre COVID level of around 7% in the second half of the year and returning to a full year average of 7.6%.

The transfer of this property and lettings management function now allows the former Girlings team to work closely with the Fund Manager to optimise customer service and maximise performance for ReSI. From the acquisition date on 1 July 2021, this team is focused solely on managing homes for the Fund Manager.

 

ReSI's portfolio:

ReSI's portfolio consists of 3,051 homes worth £351m[23] and has been designed to help make people's housing aspirations achievable. Whether this be a retired person looking to move to tailored accommodation to combat loneliness or someone who has dreamed of purchasing a property for their family but has found it to be unaffordable, ReSI's portfolio caters for residents poorly served by the mainstream housing market. Our ability to meet the needs of these under-served groups is reflected in the resilience of our portfolio and strengthens our confidence in the assets in which we invest.

 

ReSI's residents pay their rents from secure income sources and/or have skin in the game. Retirement rentals residents pay from pensions and savings, shared owners have ownership stakes in their homes and the local authority housing portfolio is leased to Luton Borough Council. ReSI has no leases with weak credit counterparties, lease-funded housing associations or charities. ReSI's rental income stream is therefore significantly more secure than those from the supported housing sector, the private rental sector or commercial real estate. This is illustrated by the 99% of rent collected during the year, unchanged throughout the COVID-19 crisis and in line with normal performance.

 

We aim to be a best-in-class provider of affordable housing and drive an improvement in standards across the sector. For example, ReSI has developed a Shared Ownership Customer Charter and a Shared Ownership Environmental Charter that are unique in the shared ownership sector and provide benefits to both shared owners and our investors. Our aim is for these benefits to be shared by not just our residents but those in the wider c.200,000 shared ownership homes across the sector.

 

The application of our Shared Ownership Charter to already occupied portfolios has generated a significant amount of interest from our residents, particularly in our offering of 1% staircasing at a predetermined price without legal and valuation fees and offering leases extensions for those residents with short leases for £1.

 

With regards to the retirement portfolio, ReSI continues to invest in improving its energy efficiency and in technology to make the lives of the residents easier. During the current year ReSI has focused on the least energy efficient homes within this portfolio and has at the date of this report upgraded 100% of directly rented retirement homes to a minimum EPC of D, above the current Government minimum required rating of E. This has been achieved through working closely with consultants such as Vibrant Energy to improve energy efficiency and drive fuel savings for our customers through, for example, upgrading old heating systems and insulating water heaters. The focus now turns to upgrading our D-rated directly rented properties to at least a C by 2025 as part of the ReSI's road to net zero plan.

 

We have seen that the pandemic has driven technology adoption by our retirement customers and have recently introduced Fixflo to allow our residents to electronically record maintenance requirements allowing these to be actioned faster and more efficiently. Our resident welfare team continue to work with digitally excluded residents to help us access the benefits both financially and socially of an increasingly digital led world.

 

Performance

ReSI delivered a total EPRA NTA return of 7.8 pence per share (7.5%) for the year, with growth driven by the almost complete occupancy of the shared ownership portfolio, resulting in our shared ownership portfolio being fully stabilised and de-risked, and operational improvements in our retirement portfolio resulting in voids returning to pre-COVID levels.

 

This 7.8 pence per share EPRA return comprises:

• 4.2 pence of Adjusted EPRA earnings (see note 15 - adjusted earnings per share), with recurring income of £7.1m from regular recurring cash flows; plus

• 4.5 pence gain on change in valuation on investment property as assessed by Savills (£7.7m) - a 2.5% increase on a like-for-like fair value basis to a total of £351m as of 30 September 2021 driven primarily by 1.5% like for like rental growth in the year and the significant stabilisation of the shared ownership portfolio; less

• 0.6 pence one-off costs (£1.0m), relating to the legal costs of securing further drawdowns from the USS facility (0.4 pence / £0.6m) and the setup costs of the new property management arrangements for the independent retirement rental portfolio (0.2 pence / £0.3m); and

• 0.3 pence relating to revaluation of trading properties as these gains are now realised (£1.0m), being the first tranche sales profits (the gain on cost we recognise by selling c25% of a shared ownership home the occupier) driven by the substantial increase in occupancy in the shared ownership portfolio.

 

ReSI paid dividends during the period of 5 pence per share, resulting in an EPRA NTA improvement of 2.8 pence.

 

A total IFRS return of 6.6 pence per share (6.2%) was delivered for the year, with the difference to EPRA NTA returns caused by an increase in the fair value of debt of 1.5 pence (£2.7m) and decrease in revaluation of trading properties of 0.3 pence (£1m). This is an IFRS improvement of 1.6 pence after dividends paid.

 

Movement in NTA

NTA at 30/09/20	105.1
Net Income	4.2
One-off costs	-0.6
Property valuation	4.5
Revaluation of trading properties	-0.3
Dividend Paid	-5.0
NTA at 30/09/21	107.9

 

 

 

Movement in IFRS NAV at 30 September 2021

 

NAV at 30/09/20	105.0
Net Income	4.2
One-off debt set up costs	-0.6
Debt Valuation	-1.5
Dividend Paid	-5.0
NAV at 30/09/21	106.6

 

 

Statement of Comprehensive Income

 

	FY21	FY20	Variance
	(£'000)	(£'000)
Net rental income*	13,176	11,345	16%
First tranche sales profits	1,008	509	98%
Net Finance Costs*	-4,232	-3,921	8%
Management fees	-1,802	-1,837	-2%
Overheads	-1,047	-1,093	-4%
Adjusted Earnings / Adjusted EPRA Earnings	7,104	5,018	42%
Adjusted EPS	4.2p	2.9p	45%
IFRS Earnings	11,221	2,449	358%
IFRS EPS	6.6p	1.4p	371%
* Net finance costs are presented excluding ground rent expense, which are finance costs under IFRS but have been included in net rental income

 

 

Adjusted EPRA Earnings/IFRS earnings increased by 42% (£2.1m) on FY20 to £7.1m, driven by the 16% (£1.8m) increase in net rental income to £13.2m with the deployment of capital and operational improvements in shared ownership occupancy and retirement voids, whilst controlling overhead costs during the year.

 

£1.0m of net income consisted of first tranche sales profits which reflect the gain on cost we recognise by selling c.25% of a shared ownership home to the occupiers and is broadly equivalent to the ongoing annual net rental income anticipated to be received per property.

 

The 8% increase in net finance costs to £4.2m is driven by the £25m increase to £166m in notional debt, to finance shared ownership acquisitions during the year.

 

 

Balance Sheet

 

	30-Sep-21	30-Sep-20	Variance
	£'000s	£'000s
Total Investments *	341,128	302,478	13%
Inventories - First tranche Shared Ownership properties available for sale	3,800	10,421	-64%
Cash and cash equivalents	8,370	10,365	-19%
Borrowings	-168,339	-141,101	19%
Other	-278	-2,455	-89%
EPRA Net Tangible Assets	184,681	179,708	3%
EPRA NTA per share (pence)	107.9	105.1	3%
Book value of debt	168,339	141,101	19%
IFRS NAV	182,392	179,612	1.5%
IFRS NAV per share (pence)	106.6	105.0	1.5%
Reversionary Surplus (excluded from NTA)	40,026	35,515	13%
Reversionary Surplus per share (pence)	23.4	20.8	13%

 

·      See note 17

 

Valuation growth as assessed by Savills during the year has been strong at £7.7m - a 2.5% increase on a like-for-like fair value basis to a total of £351m (including £10m committed acquisitions) as of 30 September 2021 driven primarily by a 1.5% like for like rental growth in the year.

 

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% reduction reflects the substantial progress in occupying the shared ownership portfolio made during the year, resulting in ReSI's shared ownership portfolio being almost entirely occupied, stabilised and de-risked.

 

Total borrowings increased by £27m over the year to £168m as of 30 September 2021, with £24m net drawdowns to fund significant growth in ReSI's shared ownership portfolio, and £3m negative mark-to-market movement.

 

 

 

The EPRA NTA and IFRS NAV measures exclude the reversionary surplus in our portfolio which stands at £40m. 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 10% discount, on average, to its reversionary value.

 

Financing and Capital Structure

ReSI now has in place £166m (notional value) of fixed rate and inflation linked debt, with a weighted average cost of 2.3%, the vast majority of which is long-term partially or fully amortising debt at an average maturity of 22 years.

These debt financings form part of ReSI's strategy to target an overall level of indebtedness of 50% loan to gross asset value and a low cost of very long-term funding, which together enhance the returns to equity available to shareholders and minimise exposure to refinancing, interest rate and covenant risks.

 

	FY21	FY20
Total debt	£166m	£141m
LTV (target 50%)	46%	42%
Leverage on reversion value	43%	39%
Weighted average cost	2.3%	2.6%
Weighted average maturity	22 years	23 years

 

Outlook

The UK continues to suffer from an acute shortage of affordable housing, which results in a huge need for long-term patient capital such as provided by ReSI, that is looking for long term inflation linked returns with impact.

ReSI is strongly placed to meet the two biggest problems in the housing market:

·    inability to access home ownership, which has been made worse by recent strong house price growth; and

·    growing elderly population requiring suitable accommodation for independent later living.

This strength is born from:

·    ReSI having the UK's largest private independent retirement rentals business;

·    our specialist in-house 30 -strong team with over 20-years track record in property and lettings management;

·    ReSI's ownership of ReSI Housing, our for-profit Registered Provider of Social Housing and investment partner of Homes England and the Greater London Authority; and

·    ReSI's unique 45-year, 0.5% coupon RPI linked debt facility with USS which provides a 300-basis point yield pick-up on our shared ownership investments thus enabling a return sufficient to support ReSI's dividend target of 5 pence per share, growing in line with inflation

 

ReSI continues to see interesting investment opportunities in the shared ownership space which have been introduced to ReSI via the Fund Manager's relationships with various housing associations, including from existing partners.

We have achieved all our year-end targets. In particular ReSI began to cover its dividend from recurring income three months ahead of schedule. ReSI now delivers a very low risk sustainable covered inflation linked income. Going forwards our focus will be on the retirement and shared ownership portfolios and growing our income with inflation reflecting the underlying leases we have in place with our residents.

Reflecting the inflation linkage of the portfolio and that ReSI is now fully deployed with its portfolio stabilised and fully income-generating, the dividend target for the next financial year has been increased in line with September CPI of 3.1% resulting in a new annual dividend target of 5.16 pence per Ordinary Share for the year to September 2022.

 

Alex Pilato
Managing Director, Housing & Capital Markets

30 November 2021

 

 

 

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 54.

 

The Board and the fund manager believe that sustainable investment involves the integration of Environmental, Social and Governance ("ESG") factors within the investment process and that these factors should be considered alongside financial and strategic issues during assessment and engagement with companies.

 

The Board and 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. The fund manager is responsible for engagement on ESG matters and dedicates a significant amount of time and resource to focusing on the ESG characteristics of the properties in which it invests. Ongoing monitoring is carried out through investment reviews.

 

Such ESG factors, which were traditionally not part of financial analysis, are incorporated and prioritised as part of the investment and due diligence process. The fund manager also gives appropriate consideration to corporate governance and the representation of shareholder interests. This is applied both as a positive consideration, and also 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 achieved top scores in the most recent PRI (Principles for Responsible Investment) assessment report for 2020, the Group's first assessment since becoming a PRI signatory in 2018.

Gresham House has a clear commitment to sustainable investment as part of its business mission and has adopted a Housing Sustainable Investment Framework to set out the manner in which its group level commitments are integrated in the housing investment strategy.

 

Sustainable Investment Framework

The ten themed Sustainable Investment Framework shown below is used to structure analysis, monitoring and reporting of ESG issues and opportunities within the lifecycle of our investments to aid more consistent integration. We are developing expert tools to profile our prospective investments to identify the most material themes within the broader framework and where we believe we should be directing our focus towards more sustainable outcomes.

 

Alignment with UN Sustainable Development Goals

We believe that ReSI's investments support the following UN Sustainable Development Goals by providing more affordable access to safe, healthy, quality and energy efficient homes that contribute to local sustainable communities and support their occupants to enjoy economic and social inclusion.

 

 

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. In order to improve our environmental understanding, ReSI partnered with consultancy Shift Environment for the second year to report on the carbon emissions generated by its properties, and to explore opportunities to reduce its environmental impact. In addition, ReSI partnered with Greengage Environmental for the first time, to report on its Scope 1 and Scope 2 carbon emissions.

 

Currently the most effective method of measuring and reporting a property's environmental impact is 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. Factors such as thermal transmittance of walls, air permeability and heating sources can influence the EPC rating assigned to a property. EPC ratings are obtained on a property-by-property basis upon acquisition and are refreshed at set intervals.

 

EPC Rating	SAP Score
A	92 to 100 points
B	81 to 91 points
C	69 to 80 points
D	55 to 68 points
E (current minimum requirement for rental property)	39 to 54 points
F	21 to 38 points
G	1 to 20 points

 

 

Example Energy Performance Certificate

Government Requirements and Proposals

In the UK it is a legal requirement that unless exempt, all rented residential properties must have an EPC rating of at least E. Examples of exemptions include where it is not possible to upgrade the property to an E due to the type of walls, the building is listed or it costs more than £3,500 to upgrade a home to EPC E.

The government energy white paper and consultation[24], which is not yet law and still in consultation, proposes a minimum EPC of C for new rental tenancies from 2025 and all rental tenancies from 2028. This will continue to have exemptions for certain types of property, including if it costs more than £10,000 to upgrade a home to EPC C and thus the governments expectation is that only 70% of private rented homes will reach the new proposed minimum within the timeframe. The government may provide financial support and advice to help facilitate upgrades of both rented and owner-occupied homes.

Currently only 40%[25] of homes meet this target minimum EPC of C, with 47% D rated and 13% rated E and below, as illustrated in the below diagram:

 

This consultation does not apply to shared ownership which is classified as owner-occupied rather than rented accommodation.

 

ReSI is aware of the regulatory risk posed by the energy white paper and has taken action to position its portfolio to be ahead of government legislation, as described in the targets and progress section of this report.

 

The potential impact of climate change on ReSI and mitigation methods

 

In addition to the regulatory risk described above, 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 homes requires that acquisitions are not built in medium / high risk flood areas without appropriate mitigants in place.

-      Demand: Whilst ReSI doesn't currently see any difference in resident demand based on the energy efficiency of properties, it is acknowledged that this is likely to change over time. To mitigate against this risk in the future, ReSI plans to upgrade the energy efficiency of its portfolio such that it is ahead of its competitors and proposed government legislation.

 

Calculating ReSI's environmental impact: energy efficiency ratings (EPCs)

 

At the report release date, 81% of ReSI's portfolio was EPC rated C or higher, up from 80% last year. This rises to 90% for ReSI's directly rented homes.

 

Just 1% of ReSI's properties are E rated, down from 2% last year, with 100% of directly rented properties rated at D or above thanks to the work done to upgrade the least efficient retirement properties, which is discussed in the targets and progress section below.  The remaining E rated properties are primarily shared ownership houses that were part of the acquisition of older, tenanted properties from Orbit during the year, and Housing Manager Flats within the retirement portfolio that are on license to a third party. This third party is responsible for the maintenance of these properties and ReSI plans to work with them in the coming year to upgrade the energy efficiency of these units. 

 

	Average EPC Score
EPC rating of ReSI's Homes*	C
Average UK rating[26]	D
Minimum rating legally required to let out property	E

* Representative sample of all properties assessed - 96%.

 

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 3,005, representatitve sample of 96% assessed

 

Total directly rented properties 1,896, representative sample of 99% assessed

 

Our targets and progress:

Residential buildings are significant carbon emitters, and to meet climate related targets the UK Government has proposed actions to prevent homes with poor energy efficiency ratings from being rented.

 

To mitigate this risk ReSI is committed to improving the EPCs of its directly rented homes to at least a C rating by 2025, demonstrating its ability to manage the significant, forthcoming changes 

 

During the current year, ReSI has focused on upgrading the least energy efficient, directly rented homes. The result of the upgrade works performed is that 100% of directly rented homes that were EPC E rated last year, which accounted for 1% of ReSI's total portfolio, are now rated at a D or better at the release date of this report, exceeding the current government minimum rating of an E. This has been achieved through working closely with consultants such as Vibrant Energy to improve energy efficiency and drive fuel savings for our customers through upgrading old heating systems and insulating water heaters, for example. Improving the energy efficiency of our homes will reduce ReSI's risk exposure to the new proposed legislation, as well as making the properties more attractive to potential residents.

 

The focus now turns to upgrading our D rated directly rented properties to at least a C by 2025 as part of the ReSI's road to net zero plan, demonstrating ReSI's ability to manage these significant, proposed changes. There are a small number of properties owned by ReSI that can't be upgraded and will be exempt (e.g. some of the retirement properties have Georgian parts where the common areas sit).

 

In some cases, the fund manager may decide to sell a property if they are unable to improve its energy efficiency to protect the long-term interests of shareholders. It recognises that in these situations, the sale of the property will improve the overall energy efficiency of the portfolio but will not contribute to wider environmental objectives of the UK, so will always first seek to make improvements before deciding to sell.

 

ReSI's approach to sustainable investing

 

ReSI's policy for acquiring new build homes is that they must have a minimum EPC rating of a B. ReSI acquired 59 new build homes during the year, all of which met this standard. Going forward, all of ReSI's new build properties will meet the Future Homes Standard and new properties purchased after 2025 will aim to be carbon neutral. Over the course of the next year, ReSI intends to further develop its plan to reach operational net zero, keeping well ahead of government proposals.

 

ReSI's preference is to acquire properties developed on brownfield sites in order to provide affordable housing while preserving biodiversity and enhancing green spaces. As previously explained, ReSI is also committed to not investing in newly developed properties in medium/high flood areas without appropriate mitigation in place. 100% of the new build homes acquired during the year were on brownfield land and in areas of low flood risk, meeting this standard.

 

Case Study: 2021 shared ownership acquisition - Brick by Brick, Auckland Rise

 

In 2021, 41 homes at Auckland Rise, Crystal Palace were purchased through ReSI's registered provider of social housing, ReSI Housing, adding to ReSI's existing portfolio of shared ownership homes.

 

Social Impact

-      Price to earnings ratio of 11.5x[27] : providing local residents with an affordable route onto the housing ladder, in an area where outright ownership is unaffordable for many a

-      Rentals charged at a discount of 34%[28] to market rate: making monthly payments affordable to mid to low earners

-      Private outdoor balconies: increasing quality of life for residents, with sufficient space for a table and chair.

-      Maintained communal gardens and play areas: dedicated green space for our shared owners to enjoy 

-      Cycle storage provided for all residents: enabling and encouraging shared owners to switch from motor vehicles to cycling - a low environmental impact method of transport.

Environmental impact

-      EPC ratings of B or above: efficient homes reduce carbon emissions and resident's energy bills

-      Mechanical Ventilation and Heat Recovery units: provide fresh, filtered air into resident's homes

-      Apartments fitted with "green roofs": improves air quality and reduces carbon emissions

-      Solar panels installed on the roofs: panels convert the sun's energy into electricity which is used to power the communal areas of the building.

-      Electric vehicle charging points available on site: promotes alternative, green, methods of transport

 

 

 

Calculating ReSI's environmental impact: carbon emissions

Shift Environment have estimated ReSI's carbon emissions using data extracted from Energy Performance Certificates. In addition, Greengage Environmental have reported specifically on ReSI's Scope 1 and Scope 2 emissions, and we will be working with them to produce our road to net zero strategy in the coming year.

 

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.

 

Scope 1 emissions

ReSI doesn't produce Scope 1 emissions as it does not directly create any carbon emissions by generating electricity for its own use. 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. 

 

Scope 2 emissions

Scope 2 emissions are associated with purchased energy used on the site of activity, with the emissions generated elsewhere. Where ReSI is financially responsible for the energy consumption of communal areas and vacant properties within its property portfolio, the emissions generated by this activity falls under Scope 2. Individual property energy usage is the responsibility of the tenants however and therefore not considered under Scope 2.

 

Greengage Environmental have calculated ReSI's Scope 1 and Scope 2 emissions using utility bills and kWh consumption data for a representative sample of communal areas and vacant properties within our portfolio.

 

Portfolio	Total (million kWh)	Tonnes CO2 Emissions
Retirement: communal Areas	0.08	17.4
Retirement: vacant Properties	0.13	26.8
Shared ownership: vacant properties	0.02	3.6
Total	0.22	47.8

 

The work performed by Greengage 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 2021 annual reporting. ReSI aims to increase the amount of information available on its third party providers' emissions in future reporting, and this will form part of our road to net zero strategy to be developed in the coming year, but for this Annual Report ReSI has concentrated on the indirect emissions generated from its property portfolio from which the majority of our emission are generated.

 

Scope 3 emissions - residents and shared owners

ReSI's operating activities are classified as Scope 3 carbon emissions, given that they are indirectly generated by residents and shared owners while occupying its properties.

 

Current emissions from ReSI's housing stock have been calculated in line with best practice standards, using DEFRA 2021 conversion factors. These values are presented for ReSI's portfolio as at 30 September 2021 on an annualised basis, regardless of whether ReSI owned the home for the entire period, and no adjustment is made for property void periods. The calculation does account for the upgrade works performed on the directly rented properties which took place after year end but prior to the report release date.

 

Emissions per annum	Electricity Usage (million kWh)	Gas Usage (million kWh)	LPG + Oil Usage (KWh)	Total (million kWh)	Tonnes CO2 Emissions (and equivalents)	Average Tonnes CO2 per property
ReSI's portfolio (3,005 homes)	36.7	3.1	0.1	39.9	9,067	3.0

 

	Total energy consumption per unit (KWh)		Tonnes CO2 Emissions per property		Average SAP
	2020	2021	2020	2021	2020	2021
Shared Ownership	6,860	10,371	1.5	2.2	83.5	80.2
Retirement	14,041	14,646	3.5	3.4	75.4[29]	75.5
Local Authority	7,440	7,465	1.9	1.7	67.4	66.9
Total	12,832	13,248	3.2	3.0	75.8	75.9

* Representative sample of all properties assessed - 96%.

 

By comparing the result of Shift Environment's report to the work performed last year ReSI is able to assess the progress made on reducing its scope 3 emissions during the year.

 

Total energy consumption per unit increased within the shared ownership portfolio due to the acquisition of older, tenanted housing. A greater proportion of these properties were houses, compared with the prior year portfolio which consisted largely of new build apartment blocks, increasing the CO₂ emission per property. However, the work performed to upgrade the least efficient directly rented retirement units to a minimum EPC rating of a D has driven a reduction in CO₂ Emissions per property for this portfolio, as well as an improvement in its SAP rating.

 

Overall, ReSI's CO₂ Emissions per property has decreased from last year as a result of the work performed on retirement units, the increase in properties that are electrically heated and the decarbonisation of the grid. This has driven a slight increase in ReSI's average SAP rating.

 

 

When the performance of ReSI's homes is compared to the social housing average and the average of Shift's database of landlords, ReSI is well ahead of the industry benchmark. Despite these strong results, ReSI will continue to push forward with its sustainable investment targets.

 

Gresham House

In August 2020 Gresham House published its Housing Sustainable Investment Framework (available on its website) which states how it plans to meet its sustainable investment commitments within the Housing Strategy. Gresham House is also a signatory of the Principles for Responsible Investment (PRI) and has received the Green Economy Mark from the London Stock Exchange.

 

 

Social Impact

 

ReSI seeks to provide long term solutions to the UK's lack of affordable housing through a focus on independent living through retirement and affordable home-ownership. These solutions help residents to help themselves to achieve positive outcomes.

 

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 has worked with The Good Economy to quantify its social impact. Here we summarise and provide commentary on the findings; the entire report is available on ReSI's website (https://www.resi-reit.com).

 

Social outcomes

 

By raising capital to invest in new and existing social and affordable housing, ReSI makes homes available to people who might otherwise be excluded by open market mechanisms. The Good Economy's analysis focused on five areas under the direct control or influence of ReSI. These are:

 

Shared Ownership

 

ReSI acquires shared ownership homes from developers and housing associations. These homes provide an affordable route to home ownership for people who would otherwise struggle to buy on the open market. It is a part-buy, part-rent model with subsidised rents and low deposit requirements.

 

Growing disparity between house prices and local income in many areas of the UK has created significant financial barriers to home ownership. Shared ownership aims to provide an affordable route to ownership for people who might otherwise be excluded on the open market.

 

ReSI aims to be a best-in-class provider of shared ownership housing and drive an improvement in standards across the sector. For example, ReSI has developed a Shared Ownership Customer Charter and a Shared Ownership Environmental Charter, which are unique in the shared ownership space and provide benefits to both shared owners and our investors. Our aim is for these benefits to be shared by not just our residents but those in the wider c.200,000 shared ownership homes across the sector.

 

How has ReSI performed against TGE's impact objectives?

 

	Address Social Need	Provide Affordability and Value for Money	Build Quality Partnerships	Increase Supply
Objective:	Making home ownership accessible in areas with low affordability ratios.	Addressing barriers to home ownership for low- and middle-income households.	Providing quality homes and management.	Bringing more homes into the affordable housing sector.
ReSI 2021 Results :	70% of properties in local authorities with higher-than-average levels of unaffordability	Properties Affordable to 65% of local households*	Strong partnership with MTV, with whom ReSI are now working more holistically across activities	230 (46%) of ReSI's shared ownership homes are new build

 

Address social need

 

House prices in England are on average 8 times greater than the average person's earnings, making the average house unaffordable to the average worker. The Good Economy have compared the house price to earnings ratio of the boroughs in which ReSI's properties are located to this average and found that 70% of its shared ownership homes are located in areas with price to earnings ratios above 8. This demonstrates ReSI's commitment to providing mid to low earners with access to home ownership where it would otherwise be unaffordable.

 

MTVH shared tenant demographics data with TGE for a shared ownership scheme in Clapham owned by ReSI.

 

In addition, the application of ReSI's Shared Ownership Charter to already occupied portfolios has generated a significant amount of interest from residents, particularly in the offering of 1% staircasing at a predetermined price without legal and valuation fees and offering leases extensions to those residents with short leases for a nominal fee of £1.

 

Provide affordability and value for money

 

TGE's assessment showed that 65% of ReSI's properties are affordable to local households, demonstrating that the average worker is able to afford the average ReSI shared ownership home.

This is a result of ReSI charging rent on the residual equity at 2.75%, representing an average 30% saving vs market rent.

 

90% of respondents stated that moving into their current home has made a positive difference to their living situation

 

Qualitative feedback provided by residents :

• "Peace of mind about not having to move out at short notice"

• "Our home is ours and we have more security"

• "I've had the opportunity to have my own place that I can decorate as I please and

no longer have to share with other people"

• "Means we are able to have an independent lifestyle and able to save for the future"

 

Build quality partnerships

 

Metropolitan Thames Valley Housing (MTVH), who manage ReSI's Clapham, Croydon, Brampton and Totteridge shared ownership homes, affirmed that its relationship with ReSI has strengthened over the last 12 months. This strong working relationship was exemplified by ReSI being flexible and supportive of MTVH when one of its scheme's rental collections dropped below the required contractual levels during a pandemic affected month. MTVH's rent collection has now returned towards pre-Covid levels.

 

Increase Supply

 

46% of ReSI's spend in the year was on new builds, contributing to 80% of our shared ownership portfolio being new build by spend at the year end date. By funding the development of new build properties, ReSI is bringing more homes into the affordable housing sector. The remaining 54% of ReSI's spend in the year was on acquiring tenanted shared ownerships homes from not-for-profit housing associations. Not-for-profits are required to reinvest the capital they received from ReSI into either new developments or upgrading existing developments, so ReSI is indirectly increasing housing supply through acquisitions of this type.

 

 

 

Retirement

 

ReSI acquires homes which provide rented accommodation for retired residents who do not require significant on-site care. This tenure provides many benefits for people over 55. It allows them to maintain their independence and avoid care homes, frees up equity from the sale of previous homes, and fosters a sense of community by offering shared spaces and communal activities among residents.

While residents do not require care services, they benefit from having an on-site development manager who can be contacted via an electronic emergency pull cord in each apartment, as well as an offsite tenancy welfare team provided by ReSI Property Management Ltd

 

How has ReSI performed against TGE's impact objectives?

 

	Address Social Need	Provide Affordability and Value for Money	Build Quality Partnerships	Increase Supply
Objective:	Providing specialist accommodation to allow independent living.	Providing affordable rental homes for over-55s.	Supporting residents with on-site assistance.	Offering homes to meet the needs of the demographic.
ReSI 2021 Results:	Retirement rentals survey analysis: 76% would recommend renting in retirement 81% had made new friends 67% were attracted by an assured lifetime tenancy	Rentals banded with Local Housing Authority (LHA) rates Approximately 22% of residents in receipt of Housing Benefit	Since ReSI brought the retirement rentals management team in-house, communication has improved. The quality of service delivered to residents has also improved, as increased digitalisation has sped up processes.	ReSI largely acquires existing retirement properties from other investors

 

Address social need

By providing specialist retirement accommodation where residents can live amongst their peers, ReSI's retirement properties help to reduce the levels of loneliness amongst older people, demonstrated by 81% of survey respondents saying they had made new friends since they moved into their retirement property.  Ultimately by improving residents' health and helping them live independently for longer the portfolio the portfolio helps to delay or avoid the time that residents need to move into residential care - providing both a positive individual outcome and significant saving to the state. More than 3 in 4 respondents would recommend retirement living to a friend, evidencing the positive impact that an assured lifetime tenancy and fit for purpose retirement properties has had on residents.

 

ALLEVIATION OF LONELINESS

78% OF RESPONDENTS STATED THAT HAVING A SENSE OF COMMUNITY IS IMPORTANT TO THEM IN THEIR RETIREMENT

 

Provide affordability and value for money

 

Rentals on ReSI's retirement properties are banded with Local Housing Authority rent levels. Approximately 22% of applicants are in receipt of Housing Benefit, while some residents are also in receipt of Pension Credit, evidencing that the homes are affordable to residents. When offering tenancies, adjustments can be made if an applicant has a weaker financial record - by offering shorter leases or cheaper properties, for example.

 

"I would definitely recomment living here to others. The people are all very friendly and the location is great." - Derek. Retirement rental resident

 

Build quality partnerships

 

During the year, ReSI moved the management of its retirement portfolio inhouse to a subsidiary of the Fund Manager, to drive operational improvements, benefiting staff and residents. This includes digitalisation of services, improving occupancy of the portfolio, investment in energy efficiency of the homes and improving the quality and speed of maintenance work.

 

The pandemic has increased the rate of technology adoption by our retirement residents. This has led to ReSI has introducing a system called Fixflo, which allows residents to electronically record maintenance requirements, thus improving the efficiency and speed of responses. In addition to the introduction of Fixflo, residents have commented that they are experiencing better service due to the digitalisation of payments and tenancy agreements. The resident welfare team continue to work with digitally excluded residents to help ReSI access the benefits, both financially and socially, of an increasingly digital led world.

 

Since bringing the management of the retirement rental portfolio in-house, work is also underway to scale up the Tenancy Welfare Team. This team's responsibility is to make note of any potential personal issues (such as early signs of dementia) and to communicate with families about the resident's welfare.

 

Increasing supply

 

ReSI acquired a significant majority of its portfolio of retirement rental homes from another investor. Accordingly, TGE considers that ReSI is bringing Low additionality to the sector through these homes since this type of transaction does not increase the supply of social housing. However, ReSI is ensuring that these homes continue to be used as retirement rentals for the long term and is providing additionality by improving their energy efficiency, quality of resident service and levels of occupancy.

 

 

Local Authority

 

ReSI acquires temporary accommodation and leases it to a local authority. The local authority uses these homes to house individuals and families who would otherwise be homeless.

 

Local housing authorities in England have a duty to secure accommodation for unintentionally homeless households in priority need under Part 7 of the Housing Act 1996. Temporary accommodation is provided while applications are assessed or until more suitable, long-term housing becomes available.

 

More than 236,000 people in England live in temporary accommodation arranged by local councils[30]. Between Q1 2020 and Q1 2021, the number of households assessed as being threatened with homelessness fell by 19.4%[31]. However, the easing of restrictions on Covid-related private rented sector evictions and the end of the 'Everyone In' campaign have raised concerns that the number of homeless people in the UK - roughly 0.4 million - will now rise again.

 

How has ReSI performed against TGE's impact objectives?

	Address Social Need	Provide Affordability and Value for Money	Build Quality Partnerships	Increase Supply
Objective:	Providing homes for people on housing waiting lists.	Providing Value for Money for welfare and public care budgets.	Supporting tenants into long-term accommodation.	Responding to demand for temporary housing.
ReSI 2021 Results:	Luton: 13,215 on waiting list out of 78,900 households or 16.7% (compared to national average of 5.1%)	Savings for the public purse compared to pay nightly accommodation of up to £607k	Good working relationship; disputes have been largely resolved	ReSI purchased no additional housing in 2021 and does not construct new housing, making this impact measure not applicable for the local authority portfolio.

 

Address social need

 

ReSI's portfolio of local authority temporary accommodation consists of two blocks in Luton, an area with one of the highest rates of housing need in the country. Over 16% of households are on the social housing waiting list - this is more than three times the national average. Moreover, according to a report by the charity Shelter in 2019, one in every 46 people in Luton are classed as homeless[32]. This places it in the worst 5% of local authorities nationally for homelessness.

 

During an interview with Luton Borough Council about Wesley House - one of ReSI's blocks of temporary accommodation - TGE heard that most of the households living there were families, all of whom have been homeless at some stage. Demand for the units is high, and the homes are generally filled within one week of someone moving out. Luton confirmed that it would struggle to place people, particularly larger families, if Wesley House were not available.

 

Provide affordability and value for money

 

When demand for temporary accommodation is high, local authorities are often forced to place residents in bed and breakfasts (B&Bs), which is both expensive and inadequate as a longer-term solution. TGE benchmarked the median cost of local B&Bs against the property leases, confirming that at 95% occupancy, leasing ReSI's two temporary accommodation properties would generate a saving to the public purse of £607k per annum.

"I'm a lot happier than I was before... as the years have gone by Wesley House has improved every year. It is only getting better."

 

"The staff are really good...when you call, they come."

 

Build quality partnerships

 

Luton Borough Council affirmed that it has a good working relationship with ReSI. The two organisations work closely together to ensure the buildings remain safe, and well-maintained for residents.

 

Increasing supply

 

ReSI's two blocks of temporary accommodation were acquired as a passive transfer of stock, with leases and contracts already in place. ReSI's investment has kept the buildings in the social sector. However, it has not contributed to increasing the supply of social housing.

 

Nonetheless, ReSI is bringing additionality through its spending on building safety and quality. ReSI has commissioned fire engineers to open up Wesley House to inspect the condition and material of the walls, going beyond its contractual obligations and helping to ensure a safe environment for residents. In addition, ReSI has spent in excess of £100k in the last year on upgrading the lifts at Wesley House, going beyond our contractual obligations to provide high quality service to residents.

 

 

Governance

Governance and ethics

ReSI's wholly owned subsidiary, ReSI Housing, is authorised by the Regulator of Social Housing ("RSH") as a for-profit Registered Provider.

 

Operating ReSI Housing enables ReSI to benefit from best in class governance process combining the financial rigour of the business world with the regulatory framework for Registered Providers.

 

The RSH regulatory framework ensures good governance, financial viability, minimum maintenance and environmental standards, and protection of residents' welfare, thus supporting ReSI's goal of maximising social benefit.

 

Non-executive directors of ReSI Housing have enhanced powers and can veto any action that threatens compliance with the RSH's regulatory standards.

 

ReSI Housing non-executive directors include:

• David Orr CBE, former Chief Executive of the National Housing Federation.

• Gillian Rowley, former Head of Private Finance at the Homes & Communities Agency.

More information on the ReSI Housing board can be found on page 69.

 

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).

 

ReSI plc owns ReSI Housing Limited, a for-profit registered provider of social housing. The ReSI Housing Board contains two independent directors who are independent of the fund manager, (with 50% female representation), and fund manager directors.

 

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.

 

Risk and compliance

ReSI has robust risk and compliance management policies and procedures, as outlined in the risk management and governance sections on pages 59 to 96.

 

Commitment to sustainability

ReSI is committed to investing in a sustainable manner in order to generate long-term returns. We have this year worked with The Good Economy, Shift Environment and Greengage Environmental to quantify our impact (see pages 39 to 57). By managing activities in line with Gresham House's sustainability investment framework, ReSI seeks to consider all stakeholders in its decision-making process.

 

 

 

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, in promoting 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, rather it employs external suppliers to fulfil a range of functions, including investment management, secretarial, administration, broking, depositary and banking services. All these service providers help the Board to fulfil its responsibility to engage with stakeholders and it should be noted are also, in-turn, stakeholders themselves.

 

The Board has identified the major stakeholders in the Company's business. On an ongoing basis the Board monitors both potential and actual impacts of the decisions it makes in respect of the Company upon those major stakeholders identified.

 

Stakeholder	Why is it important to engage?	How have the directors and Fund Manager engaged?
Shareholders	As a public company listed on the London Stock Exchange, ReSI is subject to the Listing Rules and the Disclosure Guidance and Transparency Rules. The Listing Rules include a listing principle that a listed company must ensure that it treats all holders of the same class of shares that are in the same position equally in respect of the rights attaching to such shares. With the assistance of regular discussions with and the formal advice of ReSI's legal counsel, secretary and corporate broker, the Board abides by the Listing Rules at all times. For information on shareholder engagement please see the Governance section of this report which contains further information on shareholder engagement.	The Fund Manager along with ReSI's corporate broker regularly meets with ReSI's shareholders to provide corporate updates and to foster regular dialogue.   The Board encourages shareholders to attend and participate in ReSI's Annual General Meeting ("AGM"). ReSI values any feedback and questions it may receive from shareholders ahead of and during the AGM.   ReSI's Annual and Interim reports are made available on ReSI's website and then are circulated to shareholders as requested, providing shareholders with an in depth understanding of the Company's financial position and portfolio. ReSI also make available RNS and other business and market updates on ReSI's website.
Residents	Residents are integral to ReSI's business model. The importance of engaging with residents cannot be understated; strong relationships have been shown to improve tenant retention, rent collection rates, overall tenant satisfaction and impact on the community.   ReSI is committed to accelerating the development of socially and economically beneficial new housing to make a meaningful contribution to the UK housing shortage. ReSI's homes deliver a social benefit through providing wellbeing improvements to residents (e.g. by providing the security of a home for life), fiscal savings (e.g. lower costs for housing those at risk of homelessness and savings to the NHS), and wider economic benefits (e.g. by enabling people to live and find work in otherwise unaffordable parts of the country). The social impact delivered by ReSI is reported on page 46	ReSI works with trusted partners to manage its relationships with all residents on all tenures. ReSI's property managers are in regular contact, and residents are also provided with contact details and are able to contact dedicated teams to discuss any problem that they might have. The Fund Manager reviews detailed affordability assessments before a resident is selected, and throughout the lease term a close relationship is maintained through ongoing engagement. The Fund Manager expects, and monitors, the property managers to encourage feedback from residents including suggestions for service improvement and to learn from any complaints about service delivery. The safety and wellbeing of residents is of the highest priority and when making an investment the Fund Manager is rigorous in using the skills and expertise of its property team to provide high quality homes and identify and mitigate all risks to residents. 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 provider for ReSI's long-term success is the Fund Manager, who has been engaged as ReSI's alternative investment fund manager, in compliance with the provisions of the Alternative Investment Fund Managers Directive ("AIFMD"), since launch of ReSI. Pursuant to the Fund Management Agreement, the Fund Manager is tasked with providing investment management services to ReSI.	The Board regularly monitors the Company's investment performance in relation to its objectives and investment policy and strategy. The Board receives and reviews regular reports and presentations from the Fund Manager and seeks to maintain regular contact to maintain a constructive working relationship.
Property Managers & Developers	ReSI works with property managers who are experienced in managing tenants' needs to ensure a good quality of service and to ensure that the regulatory risk is minimised. Strong developer relationships enable ReSI to secure a pipeline of assets for investment. Experienced development partners ensure that ReSI acquires high quality homes to lease to its residents, improving quality of life for residents. By supporting development partners, ReSI aims to benefit local communities by increasing the provision of affordable housing. Through ReSI Housing, ReSI is able to acquire assets within the social housing regulatory environment, which emphasises good governance and financial viability.	ReSI always seeks to work with well-regarded partners to ensure that its homes are fit for purpose and maintained at a high standard in order to meet the needs of lessees and occupiers, as well as sustaining value over the long-term. The Fund Manager has regular contact with property managers, estate managers and developers and takes a proactive approach to working with third parties. Before an acquisition, detailed property due diligence is performed by the Fund Manager on all acquisitions to minimise fire and other risks to residents and provide safe and secure accommodation. After acquisition, the Fund Manager (with input from property managers) regularly reports to the Board on ReSI's property performance and compliance with property obligations.
Key Service Providers	A list of the Company's key service providers can be found on page 139 of this Report. As an externally managed real estate investment trust, the Company conducts all its business through key service providers.	Before the engagement of a service provider, the Board ensures that the Company's business outlook as well as values are similar. On an annual basis the Board reviews the continuing appointment of each service provider to ensure re-appointment is in the best interests of the Company's shareholders. The Board has 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 of Social Housing	ReSI Housing Limited ("ReSI Housing") is a wholly-owned subsidiary of ReSI and is registered with, and regulated by, the Regulator of Social Housing (the "Regulator") as a for-profit registered provider. As a regulated entity, ReSI Housing is able to offer shared ownership properties, which are central to its future investment strategy.	The Fund Manager and ReSI Housing's board each maintains strong lines of communication with the Regulator and is transparent in all dealings. The Fund Manager, in conjunction with the board of ReSI Housing, keeps ReSI Housing's compliance with its regulatory obligations under constant review, with input from such external advisers as may be necessary.
Grant providers	To enable delivery of shared ownership homes, ReSI Housing is an investment partner of multiple grant providers, including the Greater London Authority ("GLA") and Homes England, and has accessed grant funding under their standard form grant agreements.	To enable delivery of shared ownership homes, ReSI Housing is an investment partner of multiple grant providers, including the Greater London Authority ("GLA") and Homes England, and has accessed grant funding under their standard form grant agreements. The Company engages third parties to ensure compliance with grant requirements from all grant providers. Any correspondence from a grant provide is responded to promptly. ReSI Housing's compliance with grant requirements on Clapham B4 with the GLA has been audited by Trimmer CS Ltd on the basis of which a clean audit opinion has been issued.
HMRC	If ReSI fails to remain qualified as a REIT, its rental income and gains will be subject to UK corporation tax.	ReSI corresponds with its contacts at HMRC regularly and is transparent in all dealings. The Directors and the Fund Manager will 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 raised secured debt and entered into a working capital facility, to enable leveraged returns. Each facility entered into contains covenants that must be complied with. Proactive correspondence with the lenders helps ensure covenant compliance and aides the Company maintain its ability to raise further debt in the future.	ReSI's Subsidiaries report to their respective lenders in line with the covenants entered into. Changing market conditions (such as COVID-19) are discussed with dedicated contacts at each lender.

 

Principal Decisions

Principal decisions are defined as those that have a material impact on ReSI and its key stakeholders. In taking these decisions, the Board considered their duties under section 172 of the Act.

 

Acquisitions	Given the volatility of the property market caused by COVID-19, the Board assessed the strategy of continuing to acquire stock in the short-term. Given the demand for affordable accommodation, at a time when demand was higher than ever, it was considered to be in shareholders' best interests to proceed. The social benefit provided by new high quality affordable housing was considered and deemed to have a positive impact on the local community by providing affordable housing in an area where average house prices make home ownership unaffordable for most people.
Loan drawdowns	Acquisitions in shared ownership assets were funded by further drawdowns from the ultra-long term USS facility of £300m, as ReSI's portfolio focus shifts to greater investment in shared ownership. Consideration was given and concluded that this still represented the best way to fund new shared ownership acquisitions.
Transfer of Independent Retirement Living Property Management Agreement	The property and lettings management of the ReSI's retirement portfolio was transferred from Girlings to a subsidiary of the Fund Manager in July 2021 and is now provided at cost. A great deal of thought was given to whether to continue with Girlings, move to a third party or to a subsidiary of the Fund Manager. The transfer of this property and lettings management function now allows the former Girlings team to work closely with the Fund Manager to optimise customer service and maximise performance for ReSI. From the acquisition date on 1 July 2021, this team focuses solely on managing homes for the Fund Manager. The operational improvements from the transfer of ownership, combined with a managed approach to help residents move into blocks throughout the second and third UK lockdowns, has resulted in retirement voids returning to their pre COVID level of around 7% in the second half of the year and returning a full year average of 7.6%.
Extension of Debt on Local Authority Portfolio	The Loan facility with Natwest secured over local authority housing assets has been extended by twelve months till February 2023. This ensures liquidity for ReSI whilst it completes the stabilisation process of its portfolio.

 

In summary, the Directors are cognisant of their duties under section 172 and decisions made by the Board take into account the interests of all the Company's key stakeholders and reflect the Board's belief that the long-term sustainable success of the Company is linked directly to its key stakeholders.

.

 

 

 

Risk Management
 

 

Risk Management Measures

 

Measure	Explanation	Relevance to Strategy	Result
Percentage of shared ownership homes occupied	The number of empty shared ownership properties in ReSI's portfolio. For each empty property, ReSI is unable to collect rent, must pay service charges and council tax and is exposed to maintenance costs.	ReSI requires its shared ownership homes to be sold to shared owners to generate rental and staircasing proceeds, in order to deliver full dividend coverage.	495 of ReSI's 498 completed shared ownership homes were sold, reserved or moving to completion to shared owners as of 30 September 2021, equivalent to 99% (30 September 2020: 125 of 196 (64%). The final 3 homes were reserved post year end. This results in ReSI's shared ownership portfolio being almost entirely occupied, stabilised and de-risked
Void loss from retirement properties	The number of empty retirement properties in ReSI's portfolio. For each empty property, ReSI is unable to collect rent.	ReSI requires its retirement portfolio to perform in order to deliver full dividend coverage.	The void loss as at 30 September 2021 was 6% (30 September 2020 10%), back to pre-COVID 19 levels
Capital deployed	ReSI measures the rate at which it has deployed capital since IPO as this drives the timing of income production.	ReSI's strategy is to invest in high quality social housing assets; hence the total capital deployed into such assets reflects ReSI's ability to source suitable investments.	Since 30 September 2020 ReSI has committed approximately £40 million[33] into high-quality shared ownership schemes which is 20% higher than the £32 million target announced in December 2020. These take ReSI to full capital deployment with £351 million deployed (including £10m committed acquisitions) by 30 September 2021 (30 September 2020: £302m).
EPRA NTA per share	ReSI measures its EPRA NTA per share, consistent with its financial statements, with a target to achieve capital appreciation in line with inflation without reliance on gains from asset sales.	A higher EPRA NTA per share compared to ReSI's NTA of 98p per share immediately following IPO, reflects capital appreciation on its portfolio.	EPRA NTA of 107.9p per share (30 September 2020: 105.1p), shows growth of 10% since IPO.
Dividend per share	Targeting 5.0p per share in respect of the annual period to 30 September 2021, growing in line with inflation.	ReSI seeks to provide stable rental income to its investors through regular consistent dividend payments in line with its target.   Measuring dividend payments per share reflects ReSI's ability to meet this target, with performance constrained by available cash and the income generated from ReSI's assets.	In line with target: four equal dividends paid of 1.25p per share during the period under review (declared in December 2020 and February, May and July 2021) totalling 5.0p per Ordinary Share (FY 2020: 5.0p). Now that the dividend is fully covered, ReSI plans to increase dividends in line with inflation, to reflect ReSI's inflation linked rental income.
Dividend Cover	Dividend Cover express the ratio of annualised recurring profit before valuation movements to dividend paid over the period.	Dividend coverage of at least 100% is required to pay for the dividend over the long term	With the portfolio fully invested and the ongoing operational improvements, ReSI reached full dividend cover in the fourth quarter of the year.
Ongoing charges ratio	Ongoing charges express the ratio of annualised ongoing expenses to average Net Asset Value over the period.	ReSI measures the ongoing charges ratio to demonstrate that the running costs of the Company are kept to a minimum without impacting on performance.   A lower ongoing charges ratio will improve ReSI's financial performance.	1.6% (FY 20: 1.6%), from 1 October 2020 to 30 September 2021, of which 1.0% relates to the Fund Management fee and the remainder being general and administrative expenses. See note 8

 

 

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 or changes to risk and implementing appropriate mitigations, which are recorded in ReSI's risk register. Where relevant, the Company's financial model is stress tested to assess the potential impact of recorded risks against the likelihood of occurrence and graded suitably.

Risk is a standing agenda item at all meetings of the Audit Committee, and the Board take a proactive view when assessing and mitigating risks. The Board regularly reviews the risk register to ensure the identified risks and mitigating actions remain appropriate.

 

ReSI's risk management process is designed to identify, evaluate and mitigate (rather than eliminate) the significant and emerging risks that it faces and continues to evolve to reflect changes in the business and operating environment. The process can therefore only provide reasonable, and not absolute, assurance. It does however ensure a defined approach to decision making that decreases uncertainty surrounding anticipated outcomes, balanced against the objective of creating value for shareholders.

 

An assessment of the risks that the Board deems to be the principal risks and uncertainties are listed below:

 

Risk	Risk mitigation	Party responsible	Party responsible for monitoring	Change in risk since 2020 Annual Report
Company, Investment Strategy and Operations
ReSI may not meet its investment objective or return objective	• Due diligence performed by the Fund Manager prior to each acquisition • On-going information on investment activities provided by the Fund Manager to the Board • Regular review of investment and return objectives	Fund Manager	Board	No change
ReSI may be unable to make acquisitions within its targeted timeline	• ReSI has a detailed Investment Policy that describes target assets and the process for acquiring such assets. • The Fund Manager has long-term relationships with leading housing associations, local authorities and private developers • The authorisation of ReSI Housing as a for-profit Registered Provider expands the origination universe to include acquiring newly developed properties that are designated as affordable accommodation under planning requirements and unrestricted stock where ReSI can apply government grant to convert into shared ownership • The Fund Manager has extended its origination and relationship network by bringing in additional experienced professionals with backgrounds working for housing associations, local authorities and private developers • To mitigate the impact of COVID-19, ReSI has worked with its partners to develop a strong pipeline of assets, and has looked to develop its network further with new partners • ReSI is fully deployed as of 30 September 2021	Fund Manager	Board	Reduced
ReSI's due diligence ("DD") may not identify all risks and liabilities in respect of an acquisition	• Legal DD is carried out by established law firms and is managed by in-house counsel and housing specialists • Property DD is carried out by reputable real estate surveyors and is managed by in-house property experts • Financial DD is carried out by major accounting firms and is managed by in-house experienced accountants • The Fund Manager performs shadow credit ratings utilising published credit rating methodologies • ReSI is fully deployed as of 30 September 2021	Fund manager	Board	Reduced
Environmental
Risk of long-term impact on the portfolio from climate change	• Environmental concerns are integral to the ReSI investment analysis process, and are considered before investment in each scheme • The Fund Manager has a sustainable investment policy, which is used to inform investment decisions • We have partnered with knowledgeable third parties to understand our impact on the environment and enhance our reporting - please see the Environmental, Social and Governance section of this report • ReSI is investing in improving the environmental efficiency of its portfolio	Fund Manager	Board	No change
Real estate
Significant or material fall in the value of the property market	• ReSI's aim is to hold the assets for the long-term and generate inflation-linked income • Although the risk of volatility in valuations has increased, the risk to ReSI is low as ReSI does not intend to rely on realised revaluation gains to cover dividend payments, which it intends to cover from income now that ReSI is fully deployed • ReSI focuses on areas of the market with limited and ideally countercyclical exposure to the wider property market	N/A	Board	Decreased
Customers
Retaining and procuring appropriate residents	• The Fund Manager engages established property managers to provide the day-to-day management of home lettings and collection of underlying rent from residents or shared owners • The Fund Manager only accepts void risk where there is a demonstrable strong demand or where the residents are part owners of the properties (as exhibited by retirement, sub-market rental assets or shared ownership properties) • The shared ownership portfolio is now almost entirely occupied and de-risked, with the retirement portfolio now back to pre-COVID 19 void levels	Property managers / estate agents	Fund Manager	Decreased
Service providers
ReSI is dependent on the expertise of the Fund Manager and its key personnel to evaluate investment opportunities and to assist in the implementation of ReSI's investment objective and investment policy	• ReSI places reliance on the independent Board of Directors who have strong relevant experience • The Fund Manager's interests are aligned to those of ReSI's shareholders through a fee structure which pays 25% of Fund Manager fees in equity and provides for no transaction-specific fees • As of the date of this report, the current and founder directors of the Fund Manager (or persons connected to them) hold (in aggregate) 4,141,248 Ordinary Shares in ReSI and the fund manager holds 1,337,935 Ordinary Shares	Fund Manager	Board	No change
Taxation
If ReSI fails to remain qualified as a REIT, its rental income and gains will be subject to UK corporation tax	• ReSI intends to remain within the UK REIT regime and work within its investment objective and policy • The Fund Manager will at all times conduct the affairs of ReSI so as to enable it to become and remain qualified as a REIT for the purposes of Part 12 of the CTA 2010 • The Board would have oversight on any action that would result in ReSI failing to adhere to the UK REIT regime, and ReSI receives tax advice from professional advisers	Fund Manager	Board	No change
Investment Management
Market and individual investment risks not analysed or detected in a timely fashion leading to investments with poor performance or a higher risk profile than stated within investment policy	• The Fund Manager rigorously analyses investment opportunities and undertakes comprehensive due diligence before acquisition • The Fund Manager does not receive a performance-based fee and as such is not financially incentivised to target riskier higher yielding assets • The Fund Manager receives a management fee prior to deployment and so is not financially incentivised to purchase assets quickly regardless of the performance of such assets	Fund Manager	Board	No change

 

Information Systems and Cyber security
Financial loss and reputational damage from the inability to serve our customers, manage properties and meet obligations to key stakeholders, caused by the loss of confidential data or technology disruption either through internal or external attacks on our information systems or by internal control failures.	• The Fund Manager has increased its capacity and capability with an outsourced IT function, and the appointment of a dedicated Information Technology Manager   • The Fund Manager has made significant investment in new technology that incorporates a greater level of data security in building a secure and resilient platform which is GDPR compliant.   • The Fund Manager ensures that Property Managers and Key Service Providers contracted have a similar level of robust processes and controls around information security and systems.   • Regular systems penetration testing and vulnerability assessments are conducted by multiple independent specialists to ensure our systems are robust.   • The Fund manager ensures regular Staff training which includes awareness of IT policies, cyber threats, data protection and GDPR requirements	Fund Manager	Board	Not assessed in FY20 Annual Report, but has increased with increasing cyber attacks and legislation

 

 

Going Concern and Viability Statement

Going Concern

The Board monitors the Company's ability to continue as a going concern. The following is a summary of the Director's assessment of the going concern status of the Group and Company, which should be read in conjunction with the viability statement.

 

The Directors have considered the Group's cash position, income and expense flows. In addition, as at 30 September 2021 the Group's net assets were £182.4m and the Group held cash and cash equivalents of £8.4m. Net rental income for the year ended 30 September 2021 was £13.2m, which is expected to increase to reflect the Group's recently occupied and committed shared ownership investments. The total ongoing operating expenses (excluding finance costs, taxation and aborted acquisition costs) for the period ended 30 September 2021 were £3.2m. Therefore, the Group has substantial operating expenses cover.

 

Due to the resilience of ReSI's tenants' incomes (being predominantly from pensions / savings or local authorities) and shared owners' incomes (having been very recently checked for affordability and with rents below market).

ReSI's portfolio provides a very secure long term income stream as evidenced by:

·      Rental payments in the retirement housing portfolio with rental increases linked to RPI in line with increases in pensions and housing benefits on assured tenancies

·      Shared Ownership customer leases ranging from between 130 and 999 years with annual increases at RPI +0.5%, similar to large ground rent, are secured on value of the property, which would provide security for ReSI, in the event of a default by the shared owner on rent payments.

·      Local authority assets are leased to Luton Borough council, to house those in the Borough who would be otherwise homeless or threatened with homelessness, with remaining lease terms of 4-6 years.

 

ReSI has high-quality cash flows that are resilient to economic downturns. ReSI also has a great deal of headroom in its loan covenants, and could withstand a prolonged drop in net income without breaching.

 

As the property investment values of ReSI's retirement and local authority 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. Recent house price forecasts for FY22 and beyond are broadly consistent, with growth predicted in 2022 and future years. Sensitivity analysis shows that even a 15% fall in the value of ReSI's assets would not result in a loan covenant breach.

 

Based on the above information, the Board has made an assessment and are satisfied that there are no material uncertainties in relation to the Group and 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, and therefore has adopted the going concern basis in preparation of the financial statements.

 

Assessment of Viability

The principal risks and uncertainties section on pages 60 to 63 summarises those matters that could prevent the Group from delivering on its strategy and is derived from our robust assessment of the principal risks to our business model, future performance, liquidity, and solvency. 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 of no acquisitions other than those already committed, and do not rely on further deployment of capital to support the underlying costs of the business, and are made on the assumption that there are 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 2026.

 

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 to reduce debt, to avoid covenant breaches or the reduction or suspension of dividend payments.

 

Stress tests

We have considered the fall in property values that could be sustained without an impact on banking covenants including acquisitions that have exchanged but not completed. Property values could fall by over 20% from their valuation at 30 September 2021 before loan to value covenant breaches would arise. As part of this, the Group can utilise undrawn debt facilities to manage the leverage within each security pool. Each security pool is individual and there is no cross-collateralization between them.

 

Additionally, in considering the effect of a reduction in rent on interest cover covenants, the Group could sustain a fall in net operating income by c. 40% and remain in compliance with these covenants.

 

Availability of funding

A debt repayment of £1m is due (without penalty) in January 2022, which was a condition of extending the original maturity date of the £14 million Natwest facility by twelve months. This prepayment can be funded by ReSI's working capital. Final repayment of this loan is now due in February 2023 and will be the Group's first re-financing event. Generally, the Fund Manager arranges finance in advance of expected requirements and has reasonable confidence that replacement debt facilities will be in place as required.

 

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 2026. The Board considers that five years is the maximum period for which the degree of uncertainty relating to factors outside of the Board's control is low enough to make a reasonable expectation in respect of the Group's longer-term viability.

 

Five years was considered appropriate given the Company's long-term investment objective. The Board has considered each of the principal risks and uncertainties set out above and the liquidity and solvency of the Company.

 

Having considered the 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 period.

 

Approval

The Strategic report was approved by the Board of Directors on 30 November 2021.

 

 

Rob Whiteman

Chairman of the Board of Directors

30 November 2021

 

 

 

 

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 the Koru Project CIC F Director of Eagles Crest (Poole) Limited Director of CIPFA C.Co Limited Director of CIPFA Business Limited

 

Elaine Bailey Non-executive Director

Appointed 27 April 2020 Skills, competence and experience: 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 recently appointed to the HSE board by the Department for Work and Pensions (DWP) as a Non-Executive Director. 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 CHAS (Construction Health and Safety) Director of MJ Gleeson plc Trustee of Greenslade Family Foundation Health and Safety Executive Board

 

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 a 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

 

Robert Gray Senior 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, 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.

 

 

 

 

 

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 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, 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 Reall Chair of The Good Home Inquiry Co-chair of #Housing 2030 Board member of Clanmil Housing Association Member of the Archbishop of Canterbury's Housing, Church and Community Commission 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.

 

 

Investment Team

Ben Fry - Head of Housing Investment

 

Ben Fry is Head of Housing Investment at Gresham House and Managing Director for ReSI Capital Management.

Ben has led investment management for Residential Secure Income since IPO in July 2017, prior to which he led TradeRisks' debt advisory services for housing associations, local authorities, and specialist residential accommodation.

Ben has 16 years of industry experience, with ten years social housing experience since joining TradeRisks in 2011. Ben qualified as a chartered accountant with Deloitte and is a fellow of the Institute of Chartered Accountants of England and Wales. He holds a BSc in Mathematics from Imperial College London.

 

Alex Pilato - Managing Director, Housing & Capital Markets

 

Alex is Managing Director and Head of the Housing and Capital Markets divisions at Gresham House, following the acquisition of TradeRisks and ReSI Capital Management in March 2020.

Alex founded the TradeRisks group in 2000 where he was the Chairman & Chief Executive.

Alex has worked in financial services throughout his career, including 7 years at JP Morgan. He has 34 years of investment banking and fund management experience, with the last 21 years focused on the social housing and infrastructure sectors.

Alex has a first-class honours degree in Theoretical Physics from the University of London and a DPhil in Mathematics from the University of Oxford.

 

Mark Rogers - Chief Executive Officer, ReSI Housing

 

Mark is the Chief Executive Officer of ReSI Housing, ReSI's wholly owned Registered Provider of Social Housing which is authorised by the Regulator of Social Housing ("RSH"). Mark joined the investment team in 2018. Before joining, 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.

 

Pete Redman - Head of Housing Management

 

Pete is Head of Housing Management at Gresham House, joining Gresham House as part of the acquisition of TradeRisks in March 2020. He has responsibility for due diligence on residential acquisitions and operational performance by ReSI's property managers and leaseholders. He joined TradeRisks in 2013 and has 47 years of experience in residential portfolio management, having been Chief Executive of Notting Hill Housing Group and Housing Director of two London Boroughs.

Pete has been advisor to the Greater London Authority, to the Scottish Government, and was a member of the team that won the Wolfson Economics Prize in 2014 on housing supply.

Pete studied Engineering and then Philosophy at the University of Cambridge, is an Alumnus of London Business School, and is an Honorary Fellow of the Royal Institute of British Architects.

 

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 2021.

 

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, with the objective of delivering secure inflation linked returns by investing in affordable shared ownership, retirement and local authority housing throughout the UK.

 

The Board is 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 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 78, which forms part of the Directors' report.

 

Powers of the Board

The general powers of the Directors are set out in Article 99 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 profit for the year was £11.2m and the IFRS earnings per share were 6.6 pence. 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 2. A full portfolio listing can be made available on request.

 

Dividend policy

The Company is targeting, on a fully invested and geared basis, a dividend yield of 5% per annum based on the issue price of £1 per Ordinary Share, which the Company then expects to increase broadly in line with inflation. It is the Company's intention to pay dividends to shareholders on a quarterly basis and in accordance with the REIT Regime.

 

Over time, the Company expects its dividends to increase broadly in line with inflation, 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 that it is a REIT. This minimum distribution test requires the Company to distribute a minimum of 90% of its Property Rental Business income profits for each accounting period, as adjusted for tax purposes.

 

When the Company pays a dividend, that dividend 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 2021

In line with the Company's dividend policy and target, four equal dividends of 1.25 pence per Ordinary Share were paid during the year, totalling 5 pence per Ordinary Share, of which 1.80 pence was paid as PID and 3.20 pence was paid as non-PID. These were declared in December 2020 and February, May and July 2021 with the first being the fourth interim dividend for the year ended 30^th September 2020.

 

The Board declared a fourth interim dividend in respect of the quarter to 30 September 2021 of 1.29 pence per Ordinary Share, which will be payable on 21 January 2021 to shareholders on the register at the close of business on 10 December 2021. The ex-dividend date is 9 December 2021 and 0.9 pence per Ordinary Share will be paid as PID and 0.39 pence per Ordinary Share will be paid as non-PID.

 

 

Management - Fund Manager

ReSI Capital Management Limited (part of Gresham House) has been engaged as the Company's alternative investment fund manager (the "Fund Manager"), in compliance with the provisions of the Alternative Investment Fund Managers Directive ("AIFMD"), pursuant to the Fund Management Agreement, to advise the Company and provide certain management services in respect of the Portfolio. ReSI Capital Management Limited is regulated by the Financial Conduct Authority ("FCA"). The Fund Manager is, for the purposes of the AIFMD and the rules of the FCA, a 'full scope' UK alternative investment fund manager with a Part 4A permission for managing AIFs, such as the Company.

 

The Fund Manager is appointed under a contract subject to twelve months' written notice with such notice not to expire prior to the fifth anniversary of first admission of the Ordinary Shares to trading on the London Stock Exchange.

 

The Fund Manager is entitled to remuneration calculated in respect of each quarter, based upon the Net Asset Value, at a rate equivalent to 1% (if under £250m), 0.9% (if over £250m), 0.8% (if over £500m) or 0.7% (if over £1bn).

 

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, 458,957 ordinary shares were awarded to the Fund Manager as part of the Fund Management Fee, of which 106,596 ordinary shares were purchased from Treasury at an average price of 105.08 pence per share (the prevailing Net Asset Value at the time of issue).

 

The Fund Manager is also entitled to a debt arrangement fee in respect of debt arranged by the Fund Manager for ReSI or its subsidiaries. The debt arrangement fee is equal to 0.04% p.a. levied on the notional amount outstanding of any bond or private placement financing. There is no debt arrangement fee payable in respect of any bank debt financing the Fund Manager may arrange for the Group.

 

Appointment of the Fund Manager

The Board has discretion to monitor the performance of the Fund Manager and, from the date falling five years after entry into the Fund Management Agreement, to appoint a replacement Fund Manager. The continuing appointment of the Fund Manager is considered by the Board to be in the best interests of shareholders as a whole. The reason for this view is that the performance is satisfactory and the Fund Manager is well placed to continue 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.

 

Depositary

Thompson Taraz Depositary Limited has been appointed as depositary to provide cash monitoring, safekeeping and asset verification and oversight functions as prescribed by the AIFMD.

 

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

As at 30 September 2021 the Company's issued share capital comprised 180,324,377 Ordinary Shares, each of 1p nominal value, including 9,198,133 Ordinary Shares held in Treasury. Treasury shares do not hold any voting rights. The Company's total voting rights, excluding treasury shares is 171,126,244. Each Ordinary Share held entitles the holder to one vote. All shares, excluding those held in Treasury, carry equal voting rights and there are no restrictions on those voting rights. Voting deadlines are stated in the Notice of Meeting and Form of Proxy and are in accordance with the Companies Act 2006.

 

During the period, 106,596 ordinary shares were issued from Treasury at an average price of 105.08 pence per share. The average price was the prevailing Net Asset Value per share at the time of issuance. No new shares were issued during the year under review.

 

There are no restrictions on the transfer of Ordinary Shares, nor are there any limitations or special rights associated with the Ordinary Shares.

 

The authority to issue new shares granted at the AGM held on 20 January 2021 will expire at the conclusion of the forthcoming Annual General Meeting ("AGM").  The forthcoming AGM will consider the authority for to Directors to allot further shares in the capital of the Company under section 551 of the Companies Act 2006 up to 34,225,248 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 exercise the authority 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 cash up to an aggregate nominal value of £34,225,248, which is equivalent to approximately 20% of the Company's issued Ordinary Share capital as at 30 September 2021 (being the latest practicable date prior to the publication of this notice).  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 12 and 13 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. In addition, the Directors will not sell treasury shares at less than such net asset value per share.

 

 

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 2021 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 per cent 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 20 January 2021 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 14 January 2022. 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 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 37 to the financial statements.

 

Going Concern

The Directors' assessment of the longer-term viability of the Company is set out on page 64.

 

Continuation vote

Under the Articles of Association of the Company, the Directors are required to propose an ordinary resolution at the Annual General Meeting following the fifth anniversary from its initial public offering that the Company should continue as presently constituted and at every fifth AGM thereafter.

 

The first resolution is expected to be presented at the AGM in January 2023.

 

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 such continuation resolution was not passed.

 

Significant shareholdings

The Directors have been notified as at 30 September 2021 of the following shareholdings comprising 3% or more of the issued share capital (excluding treasury shares) of the Company:

 

Shareholders	Number of shares	% Holding
Close Asset Management Limited	18,818,332	11.00%
Schroders plc	16,648,405	9.73%
CG Asset Management Ltd	13,956,949	8.16%
Halb Nominees Limited	11,560,797	6.76%
Standard Life Aberdeen plc	9,060,000	5.29%
VT Gravis Funds ICVC	9,049,470	5.29%
Premier Miton Group plc	7,699,945	4.50%
City Asset Management PLC	7,394,138	4.32%

 

 

No changes in substantial shareholdings have been notified to the Company between 30 September 2021 and the date of this report.

 

Settlement of ordinary share transactions

Ordinary share transactions in the Company are settled by the CREST share settlement system.

 

Anti-bribery and corruption

It is the Company's policy to conduct all of its business in an honest and ethical manner. The Company takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships wherever it operates. The Company's policy and the procedures that implement it are designed to support that commitment. 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 2021.

 

Environmental, social and governance ('ESG') matters

To fulfil the Company's long-term financial objectives, it is essential to incorporate environmental and social considerations into the Company's business model. 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.

 

There were no legal actions, fines or sanctions relating to environmental, social or governance matters in the year to 30 September 2021.

 

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 Company's activities are outsourced to third-parties. As such it does not have any physical assets, property, 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 43.

 

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 39 to 52.

 

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.

 

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. The Directors are satisfied that, to the best of their knowledge, the Company's principal suppliers, as listed in the Directors' report on pages 72 to 73, comply with the provisions of 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 ("AGM")

The AGM of the Company will be held on 14 January 2022 at 12:15pm. The Notice convening the AGM is contained in this Annual Report and can be found on the Company's website at https://www.resi-reit.com/

 

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 15, 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 (2020:nil).

 

Outlook

The outlook for the Company is discussed in the Chairman's Statement on page 5.

 

Independent auditor

BDO LLP have expressed their willingness to continue in office as Independent Auditor and a resolution to re-appoint them will be put to shareholders at the AGM.

 

Disclosure of information to the independent auditor

Each of the Directors at the date of the approval of this report confirms that:

i.      so far as the 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 Interest	The Company has not capitalised any interest in the year under review.
9.8.4 (2) - Unaudited Financial Information	The Company publishes a quarterly NAV statement. The Company also published its interim report and unaudited financial statements for the period from 1 October 2020 to 31 March 2021.
9.8.4 (4) - Incentive Schemes	The Company has no incentive schemes in operation.
9.8.4 (5) and (6) - Emolument Waivers	No Director of the Company has waved or agreed to waive any current or future emoluments from the Company.
9.8.4 (7), (8) and (9) - Share Issuance	During the period, the Company has not issued or allotted and equity securities within the meaning of LR 9.8.4 (7), (8) and (9).
9.8.4 (8) and (9) - Companies Part of the Group	Not applicable.
9.8.4 (10) - Significant Contracts	During the period under review, there 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 Shareholders	The Company is not party to any contracts for the provision of services to the Company by a controlling shareholder.
9.8.4 (12) and (13) - Waiving Dividends	During the period under review, there were no arrangements under which a shareholder has waived or agreed to waive any dividends or future dividends.
9.8.4 (14) - Board Statement re Significant Shareholders	Not applicable.

 

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

30 November 2021

 

 

 

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, who 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 2021, 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 plc 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, of whom three (75%) are male and one (25%) is female. 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. Biographical details of the Directors, including a list of their other directorships and significant commitments is shown on pages 67 to 68.

 

The Board believes that during the year ended 30 September 2021 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.

 

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. 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. The Board seeks to achieve a range of skills, experience, backgrounds and lengths of services among its members. 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.

 

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, all the Directors will stand for annual re-election and the performance of each Director will be appraised by the Board annually, prior to the AGM. Accordingly, resolutions to re-elect all applicable Directors 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 held 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. 

 

During the period, Mr Robert Gray was appointed Senior Independent Director of the Company with effect from 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.

 

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://www.resi-reit.com/). The Audit Committee comprises the whole Board, all of whom are independent and have relevant financial expertise.  Mr Robert Gray who is the Chairman of the Audit Committee has relevant financial experience and holds 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 page 83.

 

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 87. 

 

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 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. In addition, 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 Meeting (5 meetings held)	Audit Committee (2 meetings held)
Rob Whiteman	5	2
Robert Gray	5	2
John Carleton	5	2
Elaine Bailey	5	2

 

There were five board meetings, two audit committees and also a number of other Board sub-committee meetings to deal with administrative matters and approval of documentation.

 

Board diversity

The Company has a Diversity Policy, which sets out the process that the Board will follow when making new appointments. All Board appointments will be made on merit to ensure that vacancies are fulfilled by the most qualified candidates. When considering future appointments, the Board shall have regard to the level of diversity in the boardroom, taking into account relevant skills, gender, social and ethnic backgrounds, cognitive and personal strengths which will aid effective decision-making. In addition, consideration is given to the recommendations of the AIC Code and recommendations of the Hampton-Alexander Review and the Parker review which are supported by the Company. 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.

 

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 it is aligned with the Company's strategic priorities and aims. The overriding aim of the Diversity Policy is to ensure that the Board is composed of a combination of people with a range of business, financial or asset management skills and experience relevant to the direction and control of the Company for ensuring effective oversight of the Company and constructive support and challenge to the Fund Manager. The Board is satisfied with its current composition. However, should the strategic priorities change, the Board will review and adjust its composition. One Director (25%) of the ReSI plc Board, Elaine Bailey, is female. One Non-Executive Director (50%) of the ReSI Housing Board, Gillian Rowley, is female.

 

Performance evaluation

On an annual basis, the Board evaluates its own performance and that of its Committees and Chairman. 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 2022. The Board is 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, Mr 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 72.

 

During the period, the Board reviewed and discussed the need for an externally facilitated board evaluation, taking into consideration the size and nature of the Company. The Board recognise the benefits of an external evaluation and have agreed that an external evaluation will be undertaken for the year ending 30 September 2022. 

 

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 60 to 63. 

 

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 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-contacted, 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, the administrator and the Company's depositary to provide reasonable assurance on the effectiveness of internal financial controls. The key procedures include review of management accounts, monitoring of performance at quarterly Board meetings, segregation of the administrative function from investment management, maintenance of appropriate insurance and adherence to physical and computer security procedures.

 

The Statement of Directors' Responsibilities in respect of the accounts is on page 89 and the Going Concern and Viability Statement is on page 64. The Independent Auditor's Report is on pages 91 to 96.

 

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 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 regulation 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. 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 1 to 65. 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 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 and the Chair 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 of electronically as requested and are also on the Company's website (https://www.resi-reit.com/). Half year and annual investor presentations are also made available on the Company' website

 

The Chairman and the Board welcome direct feedback from shareholders.

 

Further details of the Company's engagement with of 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 1 to 65

 

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 39 to 57 for details.

 

 

For and on behalf of

Computershare Company Secretarial Services Limited

Company Secretary

30 November 2021

 

.

 

 

 

Report of the Audit Committee

Role of the Audit Committee

The AIC Code of Corporate Governance (the "Code") recommends that Boards should establish audit committees consisting of at least three, or in the case of smaller companies, two independent non-executive directors. The Board is required to satisfy itself that the Audit Committee has recent and relevant experience. The main role and responsibilities of the Audit Committee should be set out in written terms of reference covering certain matters described in the UK Code. The terms of reference of the Audit Committee can be found on the Company's website at https://www.resi-reit.com/.

 

The Audit Committee meets formally at least twice a year for the purpose, amongst other things, of:

·      considering the appointment, independence and objectivity, and remuneration of the auditor;

·      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. The Chairman of the Company is a member of the Audit Committee. The Board and the Audit Committee believe that this is appropriate and beneficial to the Company due to his contributions as a result of his recent and relevant financial experience and as a result of him being independent on appointment. Details of the Committee members' experience can be found on page 67 to 68.

 

Terms of Reference

During the year the Audit Committee recommended updates to its terms of reference which was subsequently approved by the Board on 15 September 2021. These updates were implemented to ensure that the Audit Committee has adequate scope to fulfil its duties and complied with the AIC Code of Corporate Governance.

 

Meetings

There have been two Audit Committee meetings during the year ended 30 September 2021. 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.

 

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 2021:

 

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 RICS requirements, on a quarterly basis. The Audit Committee reviewed a copy of the 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 at the Company's year-end 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.

 

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 60 to 63.

 

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 review of the 2021 Annual Report and Accounts was £145,000 (30 September 2020: £110,000). 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 external auditor. Such services are considered on a case-by-case basis and may only be provided to the Company if the provision of such services is at a reasonable and competitive cost and does not constitute a conflict of interest or potential conflict of interest which would prevent the auditor from remaining objective and independent. On 15 September 2021, 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 £34,000 in respect of non-audit services in the year to 30 September 2021 (2020: £31,000). These services were in respect of the interim review of the Interim Report for the period ended 31 March 2021. When reviewing the suitability of BDO LLP to carry out this service the 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 2021 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.

 

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, the audit for the financial year beginning 1 October 2021 will be led by a new audit partner.

 

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 external 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 external auditor which included a discussion of the audit process and the ability of the external 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 Committee is satisfied that the Auditor has appropriately challenged management's judgements. The 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 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.

 

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 2021, 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

30 November 2021

 

 

 

 

Directors' Remuneration Implementation Report

 

Remuneration Policy

The Remuneration Policy, which is to be put forward for shareholder approval at the AGM on 14 January 2022, has been included on page 88.

 

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 91.

 

Remuneration

The Company currently has four Non-Executive Directors.

 

Directors are entitled to receive a fee linked to the Net Asset Value of the Company in respect of their position as a Director of the Company. Fees are currently payable at the rates set out in the Remuneration Policy.

 

The Board believes that these fees appropriately reflect prevailing market rates for the Company's complexity and size, and will also enable the Company to attract appropriately experienced additional Directors in the future.

 

The Board reviews the fees payable to the Directors on an annual basis. 

 

Directors' service contracts

The Directors do not have service contracts with the Company. The Directors are not entitled to compensation on loss of office. The Directors have appointment letters which do not provide for any specific term but are subject to re-election by shareholders at a maximum interval of three years. However, in line with best practice, all Directors have agreed to retire and stand for re-election on a voluntary basis at the AGM in January 2022.

 

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 2021.

 

 

Directors' emoluments for the year ended 30 September 2021 (audited)

The Directors who served during the year received the following remuneration for qualifying services.

 

	Fees from 1 October 2020 to 30 September 2021	Fees from 1 October 2019 to 30 September 2020	Annual percentage change in feesb
	£'000	£'000	%
Robert Whiteman	50	50	0
Robert Blackburn Gray	35	35	0
John Carleton	35	35	0
Elaine Baileya	35	15	0
	155	156c

 

^aAppointed on 27 April 2020

^bWhen 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.

^cThe total fees paid for the period from 1 October 2019 to 30 September 2020 include fees paid to Mike Emmerich, Non-Executive Director, who stepped down from the Board on 28 April 2020.

 

During the year expenses paid to Directors in connection with the attendance at board meetings amounted to £152.

 

There are no other taxable benefits payable by the Company other than certain expenses which may be deemed to be taxable.  None of the above fees were paid to third parties.

 

A non-binding ordinary resolution to approve the Directors' Remuneration Implementation Report contained in the Annual Report for the period ended 30 September 2020 was put forward at the Annual General Meeting held on 20 January 2021. The resolution was passed with proxies representing 99% of the shares voting in favour of the resolution.

 

Relative importance of spend on pay

The following table sets out the total level of Directors' remuneration compared to Net Property Income, Directors' fees, Operating expenses, and Dividends paid and payable to shareholders.

	2021	2020	Change
	£'000	£'000	£'000
Net Property Income	15,173	12,889	2,884
Directors' fees	155	156	(1)
Operating expenses	3,217	3,009	208
Dividends paid and payable to shareholders	8,552	8,547	5

 

 

 

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.

 

[chart included in pdf Annual Report]

 

Directors' holdings (audited)

There are no requirements pursuant to the Company's Articles of Association for the Directors to own shares in the Company. The Directors' beneficial shareholdings are detailed below:

 

	2021	2020
Robert Whiteman	80,000	50,000
Robert Blackburn Gray	157,148	108,552
John Carleton	4,850	4,850
Elaine Bailey	5,000	5,000

 

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 2021:

 

(a) the major decisions on Directors' remuneration;

 

(b) any substantial changes relating to Directors' remuneration made during the financial year ended 30 September 2021; and

 

(c) the context in which the changes occurred and decisions have been taken.

 

 

Rob Whiteman

Chairman of the Board of Directors

30 November 2021

 

 

Remuneration Policy

 

The Remuneration Policy will be put forward for approval by shareholders at the AGM to be held on 14 January 2022 at 12.15 pm The provisions set out in this policy apply until they are next put forward for shareholder approval. The Remuneration Policy must be put forward for shareholder approval at a maximum interval of three years. In the event of any proposed material variation to the policy, shareholder approval will be sought for the proposed new policy prior to its implementation.

 

Shareholders have the opportunity to express their views in respect of Directors' remuneration at the Company's AGM. The Company has not sought shareholder views on its remuneration policy. Any comment volunteered by shareholders on the Remuneration Policy will be carefully considered and appropriate action taken. No communications have been received from shareholders on the Company's Remuneration Policy.

 

Service contracts

The Directors do not have service contracts with the Company. The Directors have appointment letters and, following initial election by shareholders, are subject to re-election by shareholders at a maximum interval of three years.

 

Fees

The Directors' fees are determined within the limits set out in the Company's Articles of Association and they are not eligible for commissions or performance related payments. The Directors are entitled to receive a fee linked to the Net Asset Value of the Company in respect of their position as a Director of the Company.

 

The Chairman will be entitled to receive a fee linked to the Net Asset Value of the Company as follows:

Net Asset Value	Annual Fee
Up to £100,000,000	£40,000
£100,000,001 to £200,000,000	£50,000
£200,000,001 to £350,000,000	£60,000
thereafter	£70,000

 

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 £100,000,000	£30,000
£100,000,001 to £200,000,000	£35,000
thereafter	£40,000

 

The Board may determine that additional remuneration may be paid, from time to time, to any one or more Directors in the event such Director or Directors are requested by the Board to perform extra or special services on behalf of the Company.

 

The Directors shall also be entitled to be reimbursed for all expenses incurred in performance of their duties. These expenses are unlikely to be of a significant amount.

 

Fees are payable from the date of appointment as a Director of the Company and cease on date of termination of appointment. The Directors are not entitled to compensation for loss of office.

 

The Board will not pay any incentive fees to any person to encourage them to become a Director of the Company. The Board may, however, pay fees to external agencies to assist the Board in the search and selection of Directors.

 

Current and future policy

Component	Director	Purposes of reward	Operation
Annual fee	Chairman of the Board	For services as Chairman of a plc	Determined by the Board
Annual fee	Other Directors	For services as non-executive Directors of a plc	Determined by the Board
Expenses	All Directors	Reimbursement of expenses incurred in the performance of duties	Submission of appropriate supporting documentation

 

Statement of consideration of conditions elsewhere in the Company

The Company has no employees. Therefore the process of consulting with employees on the setting of the Remuneration Policy is not applicable.

 

Review of the Remuneration Policy

The Directors' remuneration will be reviewed on an annual basis by the Board and any changes are subject to approval by the Board. The remuneration payable to the Directors will take into account a number of factors, inter alia, the experience of the Directors, the complexity of the Company and prevailing market rates for the sector in which the Company operates.

 

Effective date

This Remuneration Policy will be put forward for shareholder approval at the AGM to be held on 14 January 2022 and, if approved by shareholders, will be effective from that date.

 

Rob Whiteman

Chairman of the Board of Directors

30 November 2021

 

 

 

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 International Financial Reporting Standards ("IFRSs") as adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union and the Company financial statements have been prepared in accordance with Financial Reporting Standard 100 Application of Financial Reporting Requirements ("FRS 100") and Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101"),  subject to any material departures disclosed and explained in the Company financial  statements; and United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the Group's and Company's profit or loss for that period.

 

In preparing the financial statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable, relevant, reliable and prudent;

·      for the Group financial statements, state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union,, 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 and as regards the Group financial statements, Article 4 of the IAS Regulation.

 

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 1 to 65, 72 to 77, 86 to 87 and 78 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. 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

 

We confirm that to the best of our knowledge:

·      the financial statements have been prepared in accordance with prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union and Article 4 of the IAS Regulation and, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation as a wholethe Strategic Report includes a fair review of the development and performance of the business and the financial position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

·      the Annual Report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

For and on behalf of the Board

 

 

Rob Whiteman

Chairman

30 November 2021
 

Financials