Company Announcements

9 September 2022

Triple Point Social Housing REIT plc

(the "Company" or, together with its subsidiaries, the "Group")

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022

The Board of Triple Point Social Housing REIT plc (ticker: SOHO) is pleased to announce its unaudited results for the six months ended 30 June 2022.

 

	1 January 2022 to 30 June 2022	1 January 2021 to 30 June 2021	Year ended 31 December 2021
EPRA Net Tangible Assets per share (equal to IFRS NAV per share) EPRA Net Initial Yield (NIY) Loan to Value	111.80p   5.28% 36.8%	106.42p   5.21% 31.5%	108.27p   5.20% 37.6%
Earnings per share (basic and diluted) -      IFRS basis -      EPRA basis	6.19p 1.94p	2.60p 2.30p	7.05p 4.82p
Total annualised rental income1	£37.4m	£33.4m	£35.8m
Portfolio value -      IFRS basis	£669.6m	£596.3m	£642.0m
Weighted average unexpired lease term	25.9 yrs	25.8 yrs	26.2 yrs
Dividend paid or declared per Ordinary Share	2.73p	2.60p	5.20p

 

Financial highlights

·        EPRA Net Tangible Assets per share (equal to IFRS net asset value per share) of 111.80 pence at 30 June 2022 (31 December 2021: 108.27 pence).

·        Portfolio independently valued as at 30 June 2022 at £669.6 million on an IFRS basis (31 December 2021: £642.0 million), reflecting a valuation uplift of 12.7% against total invested funds of £594.0 million. The properties have been valued on an individual basis.

·        The portfolio's total annualised rental income was £37.4 million¹ as at 30 June 2022 (31 December 2021: £35.8 million).

·        The fair value gain on investment properties for the period ended 30 June 2022 amounted to £17.1 million (30 June 2021: £0.7 million).

·        Net profit for the period ended 30 June 2022 was £24.9 million (30 June 2021: £10.5 million).

·        Dividend cover on an EPRA earnings run-rate basis at 30 June 2022 was 1.0x.

·        Ongoing Charges Ratio of 1.57% as at 30 June 2022 (31 December 2021: 1.54%; 30 June 2021: 1.53%).

·        100% fixed-rate debt - all of the Group's drawn debt (amounting to £263.5 million) is now fixed-price (with a weighted average coupon of 2.74%) and long-term (11.1 years), offering strong protection against increasing interest rates and rising inflation.

·        During the period, the Group cancelled a portion of its existing undrawn £160 million revolving credit facility agreement ("RCF"), reducing it to £50 million, in order to reduce commitment fees payable. At the period end, the remaining £50 million of the RCF remained undrawn. The cancellation resulted in arrangement fees of £2.0 million which were incurred in association with securing the original facility being expensed.

·        Maintained an Investment Grade Issuer Default Rating from Fitch of 'A-' (Stable Outlook) with a senior secured rating of 'A'.

 

Operational highlights

·        Acquired ten properties during the period for an aggregate purchase price of £12.0 million (including acquisition costs).

·        EPRA blended net initial yield of 5.28% based on the value of the portfolio on an IFRS basis as at 30 June 2022, against the portfolio's blended net initial yield on purchase of 5.90%.

·        Diversified portfolio:

o  11 regions

o  151 local authorities

o  391 leases

o  26 Approved Providers

o  121 care providers

·        As at 30 June 2022, the weighted average unexpired lease term ("WAULT") was 25.9 years.

·        100% of contracted rental income was either CPI (92.4%) or RPI (7.6%) linked.

 

Post Balance Sheet Activity

·        The dividend to be paid on 30 September 2022 brings the total dividend per Ordinary Share paid or declared by the Company in respect of the six month period to 30 June 2022 to 2.73 pence per share, in line with the Company's stated target for the year to 31 December 2022 of 5.46 pence per share. The dividend target represents an increase of 5.0 per cent on the 5.20 pence per share paid in respect of the financial year ended 31 December 2021 ²

·        Acquired a further two Supported Housing properties (16 units in total) for an aggregate purchase price of approximately £3.4 million (including acquisition costs).

 

Notes:

1       Excluding ongoing forward funded schemes that are under an agreement for lease

2       These are targets only and not a profit forecast and there can be no assurance that they will be met

 

Chris Phillips, Chair of Triple Point Social Housing REIT plc, commented:

"When we launched the Company five years ago, our desire to do so was driven by demand, social impact and the offer of resilient inflation-linked income. These fundamental pillars are mutually reinforcing and remain the bedrock of the Company's investment strategy today.

 

Whilst it is important to prioritise managing the risks posed by the current economic environment, we remain convinced that the investment strategy remains well placed to prove its relative resistance to concerns around rising inflation and interest rates. This belief is underpinned by the growing demand for more specialised supported housing throughout the UK."

 

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

 

Triple Point Investment Management LLP (Investment Manager)	Tel: 020 7201 8989
Max Shenkman
Isobel Gunn-Brown
Akur Limited (Joint Financial Adviser)	Tel: 020 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant
Stifel Nicolaus Europe Limited (Joint Financial Adviser and Corporate Broker)	Tel: 020 7710 7600
Mark Young
Mark Bloomfield
Rajpal Padam

 

The Company's LEI is 213800BERVBS2HFTBC58.

 

Further information on the Company can be found on its website at www.triplepointreit.com.

 

IMPORTANT INFORMATION:

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014, as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented ("UK MAR") and is disclosed in accordance with the Company's obligations under UK MAR. Upon the publication of this announcement, this inside information will be considered to be in the public domain.

 

NOTES:

The Company invests in primarily newly developed social housing assets in the UK, with a particular focus on supported housing. The assets within the portfolio are subject to inflation-linked, long-term (typically from 20 years to 30 years), Fully Repairing and Insuring ("FRI") leases with Approved Providers (being Housing Associations, Local Authorities or other regulated organisations in receipt of direct payment from local government). The portfolio comprises investments into properties which are already subject to an FRI lease with an Approved Provider, as well as forward funding of pre-let developments but does not include any direct development or speculative development.

 

There is increasing political pressure and social need to increase housing supply across the UK which is creating opportunities for private sector investors to help deliver this housing. The Group's ability to provide forward funding for new developments not only enables the Company to secure fit for purpose, modern assets for its portfolio but also addresses the chronic undersupply of suitable supported housing properties in the UK at sustainable rents as well as delivering returns to investors.

 

The Company was admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 8 August 2017 and was admitted to the premium segment of the Official List of the Financial Conduct Authority and migrated to trading on the premium segment of the Main Market on 27 March 2018.  The Company operates as a UK Real Estate Investment Trust ("REIT") and is a constituent of the FTSE EPRA/NAREIT index.

 

Meeting for analysts and audio recording of results available

The Company presentation for analysts will be held at 8:30am today via live webcast. The presentation will also be accessible on-demand later in the day via the Company website: www.triplepointreit.com.

 

Those wishing to access the live webcast are kindly asked to contact the Company Secretary  at Hanway Advisory on +44 (0) 20 3909 3519 or cosec@hanwayadvisory.com.

 

The Interim Results will also be available to view and download on the Company's website at www.triplepointreit.com and hard copy will be posted to shareholders on or around 16 September 2022.

 

 

CHAIR'S STATEMENT

 

Introduction

 

We marked the five-year anniversary of the Company's IPO in August. Sitting down to write my remarks, I looked back across those five years to draw inspiration for this statement from the milestones that we have achieved.

 

We have grown the Group's portfolio to over £650 million in value with the continued support of our shareholders, and deployed our equity and debt capital into over 490 properties. We now provide over 3,400 homes working alongside our Approved Provider and care provider partners, and we have collected 99.3% of rent due since our IPO. Through achieving these milestones we have ensured that we have delivered consistent, inflation-linked financial returns to our investors - delivering a total return of over 35% over the last 5 years.

 

When we launched the Company in August 2017, our desire to do so was driven by demand, social impact and the offer of resilient inflation-linked income. These fundamental pillars are mutually reinforcing and remain the bedrock of the Company's investment strategy today:

 

•          Demand: There has been a growing public awareness of the housing crisis since we launched the Company in 2017, both in terms of the acute need for more specialised supported housing and the need for more homes across the broader social housing sector, but there is still much more that needs to be done. Ten years on from the implementation of the Transforming Care Programme we are still witnessing critical demand for Supported Housing and the homes that we deliver. Estimates predict that at least 1.7 million more adults will require social care over the next 15 years,¹ and across the wider social housing sector, year-on-year, the Government's delivery targets are not being met.

 

•          Social impact: Our properties provide specialist adapted homes with appropriate care for our residents. This continues to be recognised as contributing to improving resident outcomes by providing greater independence and placing residents within their communities, close to friends and families.

 

•          Resilient inflation-linked income: Our properties also continue to generate long-term inflation linked income for the Group, underpinned by central Government support for the rents of our residents. In May, in line with our progressive dividend policy, we announced our target dividend guidance for the year, targeting an aggregate dividend of 5.46 pence per Ordinary Share, an increase of 5% on the 5.20 pence per Ordinary Share paid during 2021.

 

Over these five years our performance has remained resilient despite the unforeseen challenge of the COVID-19 pandemic which sent shockwaves through the global economy and posed operational, and health and safety challenges to the continued operation of our homes.

 

Looking ahead, just as we emerged from the worst of the COVID-19 pandemic, geopolitical conflicts and instability began to threaten economic growth and markets around the world. The war in Ukraine has further fuelled concerning inflationary headwinds and posed new challenges to supply chains, energy prices and energy security. Central banks have been forced to re-evaluate their monetary policies and are forecast to continue increasing interest rates in response to rising inflation.

 

The Group is not immune to these challenges. Our Approved Provider lessees are reporting that significant pressure is being put on their cost base due to rising inflation. Furthermore, in August the Government launched a consultation on a proposed cap on social housing rent increases, likely to be implemented from April 2023 to 31 March 2024. If actioned this could have a negative impact on the margins generated by Registered Providers.

Financial performance is just one of the ways in which we measure our success. We know that if we deliver good homes to our residents then this impact, more than anything else is what will underpin the income we strive to deliver to our investors. We have witnessed a lot of progress across the sector since we made our first investments. Simultaneously we have iterated and refined how we report, measure and monitor the impact that the properties we own generate. We are audited by The Good Economy who have produced an interim report on our most  recent social impact performance for the period to 30 June 2022 in the Investment Manager's report.

 

We are pleased to report another set of solid financial results for the Group, as summarised in our Key Highlights. This demonstrates not only the Group's performance to date, but also the resilience of the sector in spite of the broader economic market conditions.  You can read more about the detail of these key highlights, along with a more in-depth review of our financial performance during the period in the Investment Manager's report.

 

Outlook

 

As has been the case since the Company's IPO, we are focused on deploying our remaining capital in order to provide additional homes for people with care and support needs. As described in the Investment Manager's report, rent collection in the period slipped below 100%, and we are committed to working with two of our Approved Providers to help them address the underlying reasons for this slight dip with a view to bringing rent collection back up to historic levels. In addition, we will closely monitor the performance of our Approved Providers as they navigate the issue preoccupying so many businesses at the moment, namely the impact of rising inflation on their operating costs, as well as the likely social housing rent cap.  

 

Whilst it is important to prioritise managing the risks posed by the current economic environment, we remain convinced that the strategy remains well placed to prove its relative resistance to concerns around rising inflation and interest rates. This belief is underpinned by the growing demand for more specialised supported housing throughout the UK.

 

I would like to thank all our advisers, and the Investment Manager, for their continued hard work and dedication to our investment strategy. Our corporate broker and joint financial adviser, Stifel Nicolaus Europe Limited, and our joint financial adviser, Akur Limited, as always have provided valuable and high-quality advice during the period. Alongside the Investment Manager, they have been instrumental in enabling the Group to continue to build upon its success so far and helping us to navigate it's future trajectory.

 

Finally, I would like to thank our shareholders for their continued support, as well as my fellow Board members for their ongoing commitment and assistance during the period.

 

 

Chris Phillips

Chair

8 September 2022

 

Notes:

1  Centre for Workforce Intelligence (2011). Report. The Adult Social Care Workforce in England: Key facts

 

 

 

INVESTMENT MANAGER'S REPORT

 

Introduction

 

The last five years, the lifetime of the Group, has delivered a unique sequence of unforeseen macro events. When the Group was launched, the nature of Brexit was the unpredictable risk that we had to  account for. For the last two years, no company report has been complete without a reference to the impact of COVID-19. Today, we find ourselves worrying about the knock-on effects of interwoven growing geopolitical instability, food scarcity, a cost of living crisis and rising inflation. We will come on to discuss the impact that the risks emerging from these latest macroeconomic events are likely to have on the Group's strategy, but before we do it is worth pointing out that, against this backdrop, the Group has delivered consistent resilient performance from both a valuation and income point of view. Most recently, the Group raised its dividend target by 5% in the period and the portfolio's value has grown by 4.3%.

 

The majority of this performance is driven by the fact that year on year, demand for specialised supported housing has grown. The Personal Services Research unit has predicted growth of 30% in the demand for specialised supported housing in England by 2030. This is reinforced by data published in 2021 from the National Audit Office in its report on the adult social care market in England, which forecasted a 29% increase in adults aged 18 to 64 requiring some form of care by 2038, compared to 2018, with faster increases in demand projected for adults with learning disabilities (49%).¹

 

These latest statistics sit against the backdrop of the need for more adapted homes in communities which was enshrined in both the Care Act 2014, the Transforming Care Programme 2015 and more recently, the Department of Health's White Paper, "People at the Heart of Care" issued in 2021.

 

On the ground, we experience this every day through conversations with local authorities, commissioners, Approved Providers and care providers.

 

The Group has been investing into specialised supported housing for just over five years now. During that time we have continually evolved. The Investment Manager has grown the team to well over 20 people, bringing together expertise from a range of disciplines and backgrounds including finance, surveying, local authorities, Registered Providers, lawyers and accountants. During the period we welcomed two new specialist hires within our asset management team which further enhances our portfolio monitoring capabilities.

 

We are also constantly evolving how best we can help provide more good homes for people with care and support needs so that they can live independently in their communities. We are continually iterating and improving our due diligence and asset management process, expanding our relationships with local authorities, care providers and Approved Providers throughout the UK, and exploring new and innovative investment structures to facilitate more investment in the sector and keep us at the forefront of an evolving market.

 

During the period the Group bought ten new properties for a total investment cost of £12.0 million (including acquisition costs) funded from existing cash and debt balances. These properties provided 71 new units of accommodation to the Group's portfolio in the period.

 

In May, shareholders approved changes to the Group's investment policy and restrictions removing the Group's minimum lease term, allowing the Group to selectively take on the cost of funding planned maintenance and giving the Group the ability to enter leases which are subject to upward only adjustment, tracking either inflation or central housing benefit policy. These changes will allow the Group to offer greater alignment and proportionate risk and benefit allocation with its Approved Providers. This has proven particularly relevant in the current macroeconomic environment as organisations look to ensure they are well insulated against the challenges resulting from the current high levels of inflation. You can read more about the Group's pipeline at the end of this report.

 

Social Impact remains at the core of the Group's strategy. The independent Impact Report prepared by The Good Economy for the six-month period ended 30 June 2022 for the first time incorporates an assessment of the Group's performance against the Equity Impact Project which recently issued its first set of metrics. We have been a member of the Equity Impact working group for over three years and we are pleased that the Group is one of the first investors in the sector to publicly report its performance against the metrics. We look forward to continuing our work with the Good Economy, Big Society Capital and our fellow working group equity investors to drive forward standardised reporting for equity investors in the sector. The Impact Report prepared by the Good Economy is available separately on the Group's website.

 

The environmental performance of our properties remains at the forefront of our minds. Last year we announced our eco-retrofit programme. This programme will see the Group fund the upgrade, to a minimum Energy Performance Certificate ("EPC") rating of "C", of all properties in the Group's portfolio which currently do not meet this standard. Our initial pilot programme, focuses on 12 properties in the South East and is progressing well. This initial phase of the project has seen us evaluate the scope of works required to maximise the energy efficient upgrades to the properties. It has been a process designed with the needs of our residents at the forefront, not only during the works phase, but in selecting the materials and future technologies we utilise to ensure they are compatible and user friendly both now and in the long-run.

 

We are also focused on  to making our leases "green", which sees us commit, along with our Approved Provider tenants to maximise the energy efficiency and sustainability of our homes by, for example, installing smart meters and energy efficient white goods and commit to using local labour and sustainable materials for repairs and maintenance. The Group hopes to sign more "green" leases over the coming months with its Approved Providers.

 

While the Group itself is not regulated by the Regulator of Social Housing, it does operate in a regulated sector. The Group is aligned with, and supportive of the Regulator's mandate to promote a viable, efficient and well-governed social housing sector that is able to deliver and maintain quality homes for a range of needs. During the period, the Regulator placed Highstone Housing Association (3.7% of the Group's rent roll as at 30 June 2022) under review. The Group remains in regular contact with Highstone Housing Association during this regulatory review process, as well as its nine other Approved Providers who are deemed non-compliant by the Regulator.

 

Financial Review

 

We are pleased to present resilient financial results for the period as highlighted earlier. The Group's continued financial performance is underpinned by an increase in annualised rental income leading to a dividend cover of 1.0x on an EPRA earnings run-rate basis at the period end.

 

Touching on some of the key highlights:

 

·    The annualised rental income of the Group was £37.4 million as at 30 June 2022, compared to £35.8 million at 31 December 2021.

·    A fair value gain of £17.1 million was recognised during the period on the revaluation of the Group's properties compared to £0.7 million in the comparative period to 30 June 2021.

·    The EPRA NIY has increased from 5.20% at 31 December 2021 to 5.28% at 30 June 2022.

·    IFRS Earnings per share was 6.19 pence for the period to 30 June 2022, compared to 2.60 pence for the in the comparative period to 30 June 2021.

·    The EPRA Earnings Per Share ("EPRA EPS") excludes the fair value gain on investment property and is measured on the weighted average number of shares in issue during the period.

·    The EPRA NTA per share at 30 June 2022 was 111.80 pence per share, the same as the IFRS NAV per share.

·    At the period end, the portfolio was independently valued at £669.6 million on an IFRS basis compared to 642.0 million at 31 December 2021, reflecting a valuation uplift of 12.7% against the portfolio's aggregate purchase price of £594.0 million (including acquisition costs). This reflects an EPRA net yield of 5.28%, against the portfolio's blended net initial yield of 5.90% at the point of acquisition.

·    The Group held cash and cash equivalents of £41.6 million at 30 June 2022, compared to £52.5 million at 31 December 2021. Cash generated from operating activities was £13.4 million for the period, compared to £12.8 million for the period ended 30 June 2021.

·    The EPRA ongoing charges ratio is calculated as a percentage of the average net asset value for the period. The ongoing charges ratio for the period was 1.57% compared to 1.53% for the six months ended 30 June 2021.

 

 

Debt Financing

 

During 2021, the Group secured and fully drew £195.0 million of long-term, fixed-rate, interest only, sustainability linked loan notes through a private placement with MetLife Investment Management and Barings. In addition, the Group has a £68.5 million long-term, fixed rate facility with MetLife Investment Management. The Group has further access to liquidity through its £50 million revolving credit facility with Lloyds and NatWest.

 

This brings the value of the Group's total debt facilities to £313.5 million of which £50.0 million is undrawn at 30 June 2022.  All of the Group's drawn debt is now fixed-price (with a weighted average coupon of 2.74%) and long term. This offers the Group strong protection in the current macroeconomic environment of increasing interest rates and rising inflation.

 

During the period, the Group cancelled a portion of its existing revolving credit facility, reducing it from £160.0 million to £50.0 million in order to reduce commitment fees. The reduction resulted in the writing off of arrangement fees of £2.0 million which were incurred in association with securing the original facility. See the Bank and Other Borrowings note of the Financial Statements for further details. This facility remained undrawn during the period.

 

Last year, the Group obtained a first-time Investment Grade Long-Term Issuer Default Rating (IDR) of 'A-' with a Stable Outlook and a senior secured rating of 'A' from Fitch Ratings in respect of the loan notes held with MetLife Investment Management and Barings. The Group has recently completed its first annual review with Fitch and was delighted to have re-affirmed its existing rating of 'A-' with a Stable Outlook and a senior secured rating of 'A' from Fitch Ratings in respect of the loan notes held with MetLife Investment Management and Barings facility again this year. This is a reflection of not only the Group's continued financial resilience, but also the resilience of the sector in spite of the broader economic and market conditions.

 

Further information on the Group's debt facilities is set out in note 15 of the financial statements.

 

Strategic Alignment and Asset Selection

 

During the period the Group bought 10 properties for a total investment cost of £12.0 million (including acquisition costs). These properties provide 71 new units of accommodation and saw the Group enter into leases with two new Approved Providers.

 

Property Portfolio

 

As at 30 June 2022, the portfolio comprised 493 properties with 3,421 units and showed a broad geographic diversification across the UK. The four largest concentrated areas by market value were the North West (20.0%), West Midlands (16.7%), Yorkshire (14.9%) and East Midlands (11.4%). The IFRS value of the portfolio at 30 June 2022 was £669.6 million, growth of 4.3% during the period. The table below sets out the Group's portfolio at the period end:

 

	30 June 2022	31 December 2021	Change in 2022
Number of Assets	493	488	+5
Number of Leases	391	382	+9
Number of Units	3,421	3,424	-3
Number of Approved Providers	26	24	+2
Number of completed Forward Funding Agreements	22	22	0
WAULT (years)	25.9	26.2	-0.3

 

The Group disposed of four properties during the period and exchanged on the sale of two further properties, which had been held for sale since June 2022, following the period end. The decision to sell these properties was taken due to changes in the underlying investment cases and, therefore, we believe this to have been in the best interests of shareholders.  Where occupied properties have been sold, the Group's priority has been ensuring that the sale proceeded in a way that ensured the continuous provision of the services at the property. Since IPO, the Group has sold a total of seven properties and its focus remains on securing long-term, inflation-linked income to generate sustainable financial returns. The proceeds from these sales will be reinvested into future Supported Housing property acquisitions.

 

Rental Income

 

In total, the Group had 391 leases which at the period end, generated total annualised rental income of £37.4 million.

 

During the period, the Group entered into leases with another two Approved Providers, increasing the number of Approved Providers it has leases with to 26. This enhanced the Group's counterparty diversification. The Group's three largest Approved Providers by rental income and units were Inclusion (£11.6 million and 956 units), Parasol Homes (£3.4 million and 246 units) and Falcon (£3.3 million and 301 units).

 

At the period end, the portfolio had a WAULT of 25.9 years in line with 2021, with 90.5% of the portfolio's rental income showing an unexpired lease term above 20 years. The WAULT includes the initial lease term upon completion as well as any reversionary leases and put/call options available to the Group at expiry of the initial term. Notwithstanding the Group's recent change to its investment policy to remove the minimum lease term, at present the Group's WAULT is anticipated to remain above 20 years.

 

100% of the Group's contracted income is generated under leases which are indexed against either CPI (92.4%) or RPI (7.6%). Some leases have an index "premium" under which the standard rental increase is based upon CPI or RPI plus a further percentage point, reflecting top-ups by local authorities. These account for 8.4% of the Group's leases. A small portion of the Group's leases (4.3% of rental income) contain a cap and collar on rental increases. For the purposes of the portfolio valuation, JLL assumed CPI and RPI to increase at 2% per annum and 2.5% per annum respectively over the term of the relevant leases. Despite the high levels of inflation currently experienced, and projected in the short term in the UK, JLL's inflation assumptions remain unchanged from previous periods given the Group's long-term contracted income and outlook, with a WAULT of 25.9 years.

 

Rent collection during the period was 96.13%. During the period two of the Group's Approved Providers fell behind with their rental payments in a way that is not consistent with the Group's historical rent collection rates. An expected credit loss has been recognised in the Statement of Comprehensive Income on as a result of these rent arrears.  The Group has been actively working with both of these Approved Providers to understand the reasons behind the recent drop in rental payments and where possible offer them support to address the underlying causes. The lower rent payments have principally been caused by inflationary pressure on costs, a requirement for additional maintenance work and in some instances an under-collection of housing benefit from the relevant Local Authority. We will continue to work with both of these Approved Providers to address the root causes of the issues with the aim of restoring rent levels to historical levels and, where possible, agree a repayment schedule to recover a significant portion of the outstanding rent.

 

Looking forward, and as mentioned in the Chair's statement, the Department of Levelling Up, Housing and Communities is consulting on a possible social housing rent cap in order to support individuals and families with the cost of living increases. Any cap would apply to rent increases effective in the year April 2023 and options of a cap at 3%, 5% or 7% are being considered. At the moment, it is uncertain whether the cap will be applied to specialised social housing. We await the outcome of the consultation but are conscious that it could impact on the margins generated by Registered Providers, and therefore the Group's lessees, which are already under pressure due to rising costs.

 

Outlook and Pipeline

 

The global economic climate is posing challenges in a manner not experienced in recent times. Despite the Group's inflation-linked, contracted income streams and long-term fixed-price debt, it too is not  immune from being adversely impacted by these issues. Inflationary cost increases in every day goods and services and utilities will have to be carefully managed by our Approved Providers and care providers, increasing energy prices will impact the cost of living for our residents. These are just two examples of the real time impacts already being faced.

 

Despite this, as the Chair has remarked, we believe the Group is in a strong position to weather these challenges. Our income streams are resilient and have remained so throughout the COVID-19 pandemic. We recently refinanced the Group's debt facilities, and all drawn debt is now on a fixed-price basis, insulating the Group from the risk of interest rate increases. The fundamental supply and demand imbalance in the sector remains the status quo. This has meant valuations in the social housing sector as a whole have held firm, especially when compared to other sectors within the property market.

 

Our focus will remain on deploying our remaining capital into much needed homes throughout the UK. The Group's pipeline stands at over £80 million of live investment opportunities. This pipeline will enable the Group to deploy its remaining uncommitted cash of £26.0 million in the near term. And, of course as always, we will remain focused on ensuring that our partners deliver good homes to our residents throughout the UK.

 

 

Max Shenkman

Head of Investment

8 September 2022

 

Notes:

1  https://www.nao.org.uk/wp-content/uploads/2021/03/The-adult-social-care-market-in-England.pdf

 

 

PORTFOLIO SUMMARY

 

Region	Properties	% of Funds Invested*
North West	99	20.1
West Midlands	83	16.2
Yorkshire	63	14.8
East Midlands	56	11.3
South East	62	9.6
North East	50	9.1
London	27	8.6
South West	29	4.8
East	20	4.1
Scotland	2	1.0
Wales	2	0.4
Total	493	100.0
* calculated excluding acquisition costs

 

KEY PERFORMANCE INDICATORS

 

In order to track the Group's progress the following key performance indicators are monitored:

 

KPI AND DEFINITION	RELEVANCE TO STRATEGY	PERFORMANCE		EXPLANATION
1. Dividend
Dividends paid to shareholders and declared during the year.   Further information is set out in note 17	The dividend reflects the Company's ability to deliver a low risk but growing income stream from the portfolio.	Total dividends of 2.73 pence per share were paid or declared in respect of the period 1 January 2022 to 30 June 2022.   (30 June 2021:2.60 pence)		The Company has declared a dividend of 1.365 pence per Ordinary share in respect of the period 1 April 2022 to 30 June 2022, which will be payable on or around 30 September 2022. Total dividends paid and declared for the period are in line with the Company's target.
2. Loan to Value (LTV)
A proportion of our portfolio is funded through borrowings. Our medium to long-term target LTV is 35% to 40% with a maximum of 50%.	The Company uses gearing to enhance equity returns.	36.8% LTV as at 30 June 2022.   (31 December 2021: 37.6% LTV)		Borrowings comprise two private placements of loan notes totalling £263.5 million provided by MetLife Investment Management and Barings. The £50.0 million revolving credit facility with Lloyds and NatWest was undrawn as at 30 June 2022.
3. Weighted Average Unexpired Lease Term (WAULT)
The average unexpired lease term of the investment portfolio, weighted by annual passing rents.	The WAULT is a key measure of the quality of our portfolio. Long lease terms underpin the security of our income stream.	25.9 years as at 30 June 2022 (includes put and call options).   (31 December 2021: 26.2 years)		As at 30 June 2022, the portfolio's WAULT stood at 25.9 years.
4. Exposure to Largest Approved Provider
The percentage of the Group's gross assets that are leased to the single largest Approved Provider.	The exposure to the largest Approved Provider must be monitored to ensure that we are not overly exposed to one Approved Provider in the event of a default scenario.	29.5% of Gross Asset Value as at 30 June 2022.   (31 December 2021: 28.3%)		Our maximum exposure limit is 30% of GAV.
5. Total Return
Change in EPRA NTA plus total dividends paid during the period.	The Total Return measure highlights the gross return to investors including dividends paid since the prior year.	EPRA NTA per share was 111.80 pence as at 30 June 2022. Total dividends paid during the period ended 30 June 2022 were 2.665 pence per share.   Total return was 5.71 % for the period ended 30 June 2022. (30 June 2021: 2.44%)		The EPRA NTA per share at 30 June 2022 was 111.80 pence.     The Total Return since the IPO is 37.39% at 30 June 2022.

 

 

EPRA PERFORMANCE MEASURES

 

The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA). We provide these measures to aid comparison with other European real estate businesses.

 

Full reconciliations of EPRA Earnings and NAV performance measures are included in Notes 22 and 23 of the consolidated financial statements respectively. A full reconciliation of the other EPRA performance measures are included in the Unaudited Performance Measures section.

 

KPI AND DEFINITION	PURPOSE	PERFORMANCE
1. EPRA Earnings per share
EPRA Earnings per share excludes gains from fair value adjustment on investment properties that are included in the IFRS calculation for Earnings per share.	A measure of the Group's underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.	1.94 pence per share for the period ended 30 June 2022.   (30 June 2021: 2.30 pence) Full dividend cover on a look-through EPRA earnings run-rate basis including committed funds was 1.0x as at 30 June 2022.
2. EPRA Net Reinstatement Value (NRV) per share
The EPRA NRV adds back the purchasers' costs deducted from the IFRS valuation.	A measure that highlights the value of net assets on a long-term basis.	£491.7 million/122.07 pence per share as at 30 June 2022.   £475.6 million/118.07 pence per share as at 31 December 2021.
3. EPRA Net Tangible Assets (NTA) per share
The EPRA NTA is equal to IFRS NAV as there are no deferred tax liabilities or other adjustments applicable to the Group under the REIT regime.	A measure that assumes entities buy and sell assets, thereby crystallising certain levels of deferred tax liability.	£450.3 million/111.80 pence per share as at 30 June 2022.   £436.1 million/108.27 pence per share as at 31 December 2021.
4. EPRA Net Disposal Value (NDV)
The EPRA NDV provides a scenario where deferred tax, financial instruments, and certain other adjustments are calculated as to the full extent of their liability.	A measure that shows the shareholder value if assets and liabilities are not held until maturity.	£489.5 million/121.53 pence per share as at 30 June 2022.   £434.0 million/107.76 pence per share as at 31 December 2021.
5. EPRA Net Initial Yield (NIY)
Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.	A comparable measure for portfolio valuations. This measure should make it easier for investors to judge for themselves how the valuation of a portfolio compares with others.	5.28% at 30 June 2022.   5.20% at 31 December 2021.
6. EPRA "Topped-Up" NIY
This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).	The topped-up net initial yield is useful in that it allows investors to see the yield based on the full rent that is contracted at 31 June 2022.	5.29% at 30 June 2022.   5.27% at 31 December 2021.
7. EPRA Vacancy Rate
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio.	A "pure" percentage measure of investment property space that is vacant, based on ERV.	0.25% at 30 June 2022.   0.26% at 31 December 2021.
8. EPRA Cost Ratio
Administrative and operating costs (including and excluding costs of direct vacancy) divided by gross rental income.	A key measure to enable meaningful measurement of the changes in the Group's operating costs.	21.27% at 30 June 2022.   20.91% at 31 December 2021.

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Audit Committee, which assists the Board with its responsibilities for managing risk, considers that the majority of principal risks and uncertainties as presented on pages 63 to 67 of our 2021 Annual Report were unchanged during the period and will remain unchanged for the remaining six months of the financial year. The Audit Committee would like to draw attention to the following principal risks in the 2021 Annual Report that could be adversely impacted by events that have emerged over the first half of the year: 

 

·    Risk of changes to the social housing regulatory regime

·    Higher than projected levels of inflation may impact Approved Providers

·    Default of one or more Approved Provider lessees

 

As described in both the Chair's Statement and the Investment Manager's Report, the government is currently consulting on a possible rent cap to be applied to increases to social housing rents for the year starting in April 2023. There is a likelihood that a cap of either 3%, 5% or 7% will be implemented following the review and that this cap could be applied to specialised supported housing properties (albeit this has not yet been confirmed).

 

This emerging risk, coupled with the inflationary pressure on the cost base of the Group's Approved Provider lessees, has increased the risk of default of one or more Approved Providers, and could lead to a mismatch between the annual rent increases in leases and the corresponding increases that tenants can claim through housing benefit.  A rent cap would reflect a change to the social housing regulatory and policy regime. We will continue to monitor the impact of these emerging risks and will provide a full update of the key risks in the Annual Report.

 

The Board undertakes a formal risk review, with the assistance of the audit committee twice a year to assess the principal risks and uncertainties. The Investment Manager on an ongoing basis has responsibility for identifying potential risks and escalating these in accordance with the risk management procedures.

 

DIRECTORS' RESPONSIBILITY STATEMENT

 

The Directors confirm that to the best of their knowledge this condensed set of financial statements has been prepared in accordance with UK-adopted IAS 34 and that the operating and financial review includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority namely:

 

• an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

• material related party transactions in the first six months of the financial year as disclosed in note 18 and any material changes in the related party transactions disclosed in the 2021 Annual Report.

 

Shareholder information is as disclosed on the Triple Point Social Housing REIT plc website.

 

Approval

 

This Directors' responsibilities statement was approved by the Board of Directors and signed on its behalf by:

 

Chris Phillips

Chair

8 September 2022

 

 

GROUP FINANCIAL STATEMENTS

 

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2022

 

		Period from 1 January 2022 to 30 June 2022		Period from 1 January 2021 to 30 June 2021		Year ended 31 December 2021
		(unaudited)		(unaudited)		(audited)
	Note	£'000		£'000		£'000
Income
Rental income	4	18,208		15,931		33,117
Expected credit loss	4	(474)		-		-
Other income		110		-		-
Total income		17,844		15,931		33,117
Expenses
Directors' remuneration		(151)		(151)		(307)
General and administrative expenses		(1,361)		(1,012)		(2,067)
Management fees	5	(2,362)		(2,266)		(4,552)
Total expenses		(3,874)		(3,429)		(6,926)
Gain from fair value adjustment on investment properties	9	17,120		747		8,998
Operating profit		31,090		13,249		35,189
Finance income	6	16		15		44
Finance costs	7	(6,178)		(2,776)		(6,823)
Profit before tax		24,928		10,488		28,410
Taxation	8	-		-		-
Profit and total comprehensive income		24,928		10,488		28,410
IFRS Earnings per share - basic and diluted	22	6.19p		2.60p		7.05p

 

 

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION

As at 30 June 2022

 

		30 June 2022		30 June 2021		31 December 2021
	Note	(unaudited)		(unaudited)		(audited)
		£'000		£'000		£'000
Assets
Non-current assets
Investment properties	9	668,348		596,155		641,293
Trade and other receivables	10	2,607		-		2,311
Total non-current assets		670,955		596,155		643,604
Current assets
Assets held for sale		640		500		480
Trade and other receivables	11	3,589		6,076		3,435
Cash, cash equivalents and restricted cash	12	41,636		28,175		52,470
Total current assets		45,865		34,751		56,385
Total assets		716,820		630,906		699,989
Liabilities
Current liabilities
Trade and other payables	13	(3,944)		(5,315)		(3,651)
Total current liabilities		(3,944)		(5,315)		(3,651)
Non-current liabilities
Other payables	14	(1,518)		(1,513)		(1,523)
Bank and other borrowings	15	(261,051)		(195,414)		(258,702)
Total non-current liabilities		(262,569)		(196,927)		(260,225)
Total liabilities		(266,513)		(202,242)		(263,876)
Total net assets		450,307		428,664		436,113
Equity
Share capital		4,033		4,033		4,033
Share premium reserve		203,753		203,753		203,753
Treasury shares reserve		(378)		(378)		(378)
Capital reduction reserve	16	160,394		166,154		160,394
Retained earnings		82,505		55,102		68,311
Total Equity		450,307		428,664		436,113
IFRS Net asset value per share - basic and diluted	23	111.80p		106.42p		108.27p

 

The Condensed Group Financial Statements were approved and authorised for issue by the Board on 8 September 2022 and signed on its behalf by:

 

Chris Phillips

Chair

8 September 2022

 

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION

For the six months ended 30 June 2022

 

Period from 1 January 2022 to 30 June 2022 (unaudited)	Note	Share capital £'000	Share premium reserve £'000	Treasury shares reserve £'000	Capital reduction reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 January 2022		4,033	203,753	(378)	160,394	68,311	436,113
Profit and total comprehensive income for the period		-	-	-	-	24,928	24,928
Transactions with owners
Dividends paid	17	-	-	-	-	(10,734)	(10,734)
Balance at 30 June 2022 (unaudited)		4,033	203,753	(378)	160,394	82,505	450,307

 

 

Period from 1 January 2021 to 30 June 2021 (unaudited)	Note	Share capital £'000	Share premium reserve £'000	Treasury shares reserve £'000	Capital reduction reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 January 2021		4,033	203,776	(378)	166,154	55,066	428,651
Profit and total comprehensive income for the period		-	-	-	-	10,488	10,488
Transactions with owners
Dividends paid	17	-	-	-	-	(10,452)	(10,452)
Remaining 2020 share issue costs capitalised		-	(23)	-	-	-	(23)
Balance at 30 June 2021 (unaudited)		4,033	203,753	(378)	166,154	55,102	428,664

 

 

Year ended 31 December 2021 (audited)	Note	Share capital £'000	Share premium reserve £'000	Treasury shares reserve £'000	Capital reduction reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 January 2021		4,033	203,776	(378)	166,154	55,066	428,651
Profit and total comprehensive income for the year		-	-	-	-	28,410	28,410
Transactions with owners
Share issue costs capitalised		-	(23)	-	-	-	(23)
Dividends paid	17	-	-	-	(5,760)	(15,165)	(20,925)
Balance at 31 December 2021 (audited)		4,033	203,753	(378)	160,394	68,311	436,113

 

 

CONDENSED GROUP STATEMENT OF CASH FLOWS

For the six months ended 30 June 2022

 

		From 1 January 2022 to 30 June 2022 (unaudited)		From 1 January 2021 to 30 June 2021 (unaudited)		Year ended 31 December 2021 (audited)
	Note	£'000		£'000		£'000
Cash flows from operating activities
Profit before income tax		24,928		10,488		28,410
Adjustments for: Expected Credit Loss		474		-		-
Gain from fair value adjustment on investment properties	9	(17,120)		(747)		(8,998)
Finance income	6	(16)		(15)		(44)
Finance costs	7	6,178		2,776		6,823
Operating results before working capital changes		14,444		12,502		26,191
(Increase) / decrease in trade and other receivables		(710)		613		(1,237)
Decrease in trade and other payables		(294)		(329)		(242)
Net cash flow generated from operating activities		13,440		12,786		24,712
Cash flows from investing activities
Purchase of investment properties		(10,962)		(23,126)		(61,350)
Disposal proceeds from sale of assets		1,480		125		125
Prepaid acquisition costs paid		-		(1,968)		(18)
Restricted cash - released		-		89		279
Restricted cash - paid		-		-		(410)
Net cash flow used in investing activities		(9,482)		(24,880)		(61,374)
Cash flows from financing activities
Ordinary Share issue costs capitalised		-		(23)		(23)
Bank borrowings drawn		-		-		195,000
Bank borrowings repaid		-		-		(130,000)
Loan arrangement fees paid		(444)		(567)		(2,728)
Dividends paid	17	(10,734)		(10,452)		(20,925)
Interest paid		(3,614)		(2,275)		(5,615)
Net cash flow (used in) / generated from financing activities		(14,792)		(13,317)		35,709
Net decrease in cash and cash equivalents		(10,834)		(25,411)		(953)
Unrestricted cash and cash equivalents at the beginning of the period		51,899		52,852		52,852
Unrestricted cash and cash equivalents at the end of the period	12	41,065		27,441		51,899

 

 

NOTES TO THE GROUP CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the six months ended 30 June 2022

 

1.    CORPORATE INFORMATION

 

Triple Point Social Housing REIT plc (the "Company") is a Real Estate Investment Trust ("REIT") incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 12 June 2017. The address of the registered office is 1 King William Street, London, United Kingdom, EC4N 7AF. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.

 

The principal activity of the Company is to act as the ultimate parent company of Triple Point Social Housing REIT plc and its subsidiaries (the "Group") and to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes.

 

2.    BASIS OF PREPARATION

 

These condensed Group interim financial statements for the six months ended 30 June 2022 have been prepared in accordance with IAS 34 "Interim Financial Reporting" and also in accordance with the measurement and recognition principles of UK-adopted international accounting standards. They do not include all of the disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2021 Annual Report.

 

The comparative figures for the financial year ended 31 December 2021 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditor (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The condensed Group interim financial statements for the six months ended 30 June 2022 have been reviewed by the Company's Auditor, BDO LLP, in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. The condensed Group interim financial statements are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006.

 

The condensed Group interim financial statements have been prepared on a historical cost basis, as modified for the Group's investment properties, which have been measured at fair value. Gains or losses arising from changes in fair values are included in profit or loss.

 

The Group has applied the same accounting policies and method of computation in these condensed Group interim financial statements as in its 2021 annual financial statements and are expected to be consistently applied during the year ending 31 December 2022.At the date of authorisation of these financial statements, there were a number of standards and interpretations which were in issue but not yet effective. The Group has assessed the impact of these amendments and has determined that the application of these amendments and interpretations in current and future periods will not have a significant impact on the financial statements.

 

2.1.    Going concern

 

The Group benefits from a secure income stream from long leases which are not overly reliant on any one tenant and present a well-diversified risk. The Directors have reviewed the Group's forecast which show the expected annualised rental income exceeds the expected operating costs of the Group.

 

Covid-19 has not impacted the Group's ability to continue as a going concern for reasons discussed below. The Directors are also aware of the global economic uncertainty caused by the war in Ukraine and the current cost of living crisis. The Group is fortunate that the investment strategy is resilient due to compelling fundamentals and has no direct exposure to Russia.

 

As a result, the Directors believe that the Group is still well placed to manage its financing and other business risks and that the Group will remain viable, continuing to operate and meet its liabilities as they fall due.

 

The Directors have performed an assessment of the ability of the Group and Parent Company to continue as a going concern, for a period of at least 12 months from the date of signing these condensed Group interim financial statements. The Directors have considered the expected obligations of the Group for the next 12 months and are confident that all will be met.

 

In considering the ability of the Group to continue as a going concern, the Directors also considered the impact of Covid-19 on their tenants. Tenants of the Group are Approved Providers who receive their housing benefit from Local Authorities, before it is passed to subsidiaries in the form of rental income. Local Authorities have confirmed they will not stop helping vulnerable people or paying for essential services during this time, and therefore the Directors do not foresee any issues in rent collection, however in the event of a downturn in revenue, variable costs would be reduced to enable the Group to meet its future liabilities. 96.1% of rental income due and payable for the six months ended 30 June 2022 has been collected.

 

The Directors have also considered the financing provided to the Group. Norland Estates Limited and TP REIT Propco 2 Limited have bank facilities with MetLife Investment Management and MetLife Investment Management and Barings respectively. TP REIT Propco 5 Limited has a Revolving Credit Facility (RCF) with Lloyds and NatWest however, this was undrawn at the year end and remains so at date of signing.

 

The loans secured by Norland Estates Limited and TP REIT Propco 2 Limited are subject to asset cover ratio covenants and interest cover ratio covenants which can be found in the table below. The Directors have considered reverse stress testing and the circumstances that would lead to a covenant breach. Given the level of headroom, the Directors are of the view that the risk of scenarios materialising that would lead to a breach of the covenants is remote.

 

	Norland Estates Limited	TP REIT Propco 2 Limited
Asset Cover
Asset Cover Ratio Covenant	x2.00	x1.67
Asset Cover Ratio 30 June 2022	x2.84	x2.10
Blended Net initial yield	5.24%	5.34%
Headroom (yield movement)	267bps	175bps
Interest Cover
Interest Cover Ratio Covenant	1.75x	1.75x
Interest Cover Ratio 30 June 2022	5.00x	4.33x
Headroom (rental income movement)	35%	41%

 

The loan secured by Norland Estates Limited asset cover ratio was amended from previous covenant of x2.25 in August 2021 to bring it more in line with the ACR covenant in the new Note Purchase Agreement with MetLife Investment Management and Barings.

 

Under the downside model the forecasts have been stressed to show the effect of Care Providers ceasing to pay their voids liability, and as a result lessees being unable to pay rent on void units. It assumes that the Approved Provider (the tenant) will not be able to pay the voids. Under the downside model the Company and its subsidiaries will be able to settle its liabilities for a period of at least 12 months from the date of signing these condensed Group interim financial statements.

 

As a result of the above, the Directors are of the opinion that the going concern basis adopted in the preparation of these condensed Group interim financial statements is appropriate.

 

2.2 Reporting period

 

The financial statements have been prepared for the period ended 30 June 2022. The comparative periods are the six-month period ended 30 June 2021 and the year ended 31 December 2021.

 

2.3 Currency

 

The Group and Company financial information is presented in Sterling which is also the Company's functional currency.

 

3.    SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

 

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are unchanged from the annual report for the year to 31 December 2021. In the Directors' view, there have been no significant changes to the extent of estimation uncertainty, key assumptions or valuation techniques relating to investment properties arising as a result of the current macroeconomic environment. Further details can be found in note 9.

 

4.    RENTAL INCOME

 

	1 January 2022 to 30 June 2022		1 January 2021 to 30 June 2021		Year ended 31 December 2021
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Rental income - freehold assets	17,131		14,949		31,071
Rental income - leasehold assets	1,077		982		2,046
	18,208		15,931		33,117
Expected credit loss	(474)		-		-

 

The lease agreements between the Group and the Approved Providers are fully repairing and insuring leases. The Approved Providers are responsible for the settlement of all present and future rates, taxes, costs and other impositions payable in respect of the properties.

 

All rental income arose within the United Kingdom.

 

The expected loss rates are based on the Group's credit losses experienced which occurred this period for the first time since IPO. The loss rates are then adjusted for current and forward-looking information affecting the Group's tenants.

 

5.    MANAGEMENT FEES

 

	1 January 2022 to 30 June 2022		1 January 2021 to 30 June 2021		Year ended 31 December 2021
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Management fees	2,362		2,266		4,552
	2,362		2,266		4,552

 

On 20 July 2017 Triple Point Investment Management LLP 'TPIM' was appointed as the delegated investment manager of the Company by entering into the property management services and delegated portfolio management agreement. Under this agreement the delegated investment manager will advise the Company and provide certain management services in respect of the property portfolio. A Deed of Variation was signed on 23 August 2018. This defined cash balances in the Net Asset Value calculation in respect of the management fee as "positive uncommitted cash balances after deducting any borrowings".

 

The management fee is an annual management fee which is calculated quarterly in arrears based upon a percentage of the last published Net Asset Value of the Group (not taking into account uncommitted cash balances after deducting borrowings) as at 31 March, 30 June, 30 September and 31 December in each year on the following basis with effect from Admission:         

                                               

(a)       on that part of the Net Asset Value up to and including £250 million, an amount equal to 1% of such part of the Net Asset Value;                                                         

(b)       on that part of the Net Asset Value over £250 million and up to and including £500 million, an amount equal to 0.9% of such part of the Net Asset Value;                                                               

(c)       on that part of the Net Asset Value over £500 million and up to and including £1billion, an amount equal to 0.8% of such part of the Net Asset Value; and                                       

(d)       on that part of the Net Asset Value over £1 billion, an amount equal to 0.7% of such part of the Net Asset Value.

 

Management fees of £2,362,000 were chargeable by TPIM during the six months ended 30 June 2022 (30 June 2021 - £2,266,000, 31 December 2021 - £4,552,000). At the period end, £1,187,000 was due to TPIM (30 June 2021 - £1,132,000, 31 December 2021 - £1,146,000).

 

By two agreements dated 30 June 2020, the Company appointed TPIM as its Alternative Investment Fund Manager by entering into an Alternative Investment Fund Management Agreement and (separately) documented TPIM's continued appointment as the provider of portfolio and property management services by entering into an Investment Management Agreement.

 

6.    FINANCE INCOME

 

	1 January 2022 to 30 June 2022		1 January 2021 to 30 June 2021		Year ended 31 December 2021
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Head lease interest income	15		15		44
Interest on liquidity funds	1		-		-
	16		15		44

 

7.    FINANCE COSTS

 

	1 January 2022 to 30 June 2022		1 January 2021 to 30 June 2021		Year ended 31 December 2021
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Interest payable on bank borrowings	3,609		2,270		5,492
Amortisation loan arrangement fees	562		487		1,279
Written off loan arrangement fees	1,986		-		-
Head lease interest expense	15		15		44
Bank charges	6		4		8
	6,178		2,776		6,823
Total finance cost for financial liabilities not held at fair value through profit or loss	6,172		2,772		6,815

 

The loan arrangement fees written off during the period relate to previously capitalised arrangement fees following the reduction in the RCF which was considered to be a substantial modification under IFRS 9. See note 15 for further details.

 

8.    TAXATION

 

As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it meets certain conditions as set out in the UK REIT regulations. For the six months ended 30 June 2022, the Group did not have any non-qualifying profits and accordingly there is no tax charge in the period. If there were any non-qualifying profits and gains, these would be subject to corporation tax.

 

It is assumed that the Group will continue to be a group UK REIT for the foreseeable future, such that deferred tax has not been recognised on temporary differences relating to the property rental business.

 

9.    INVESTMENT PROPERTIES

 

		Operational assets £'000		Properties under development £'000		Total £'000
As at 1 January 2022		641,293		-		641,293
Acquisitions and additions*		11,543		-		11,543
Fair value adjustment**		24,085		-		24,085
Movement in head lease ground rent liability		(4)		-		(4)
Disposals		(7,075)		-	-	(7,075)
Reclassified to assets held for sale		(1,494)		-		(1,494)
As at 30 June 2022 (unaudited)		668,348		-		668,348
As at 1 January 2021		565,533		6,568		572,101
Acquisitions and additions		22,259		1,567		23,826
Fair value adjustment**		1,240		-		1,240
Movement in head lease ground rent liability		(4)		-		(4)
Transfer of completed properties		8,135		(8,135)		-
Reclassified to assets held for sale		(1,008)		-		(1,008)
As at 30 June 2021 (unaudited)		596,155		-		596,155
As at 1 January 2021		565,533		6,568		572,101
Acquisitions and additions		59,114		1,568		60,682
Fair value adjustment**		9,513		-		9,513
Movement in head lease ground rent liability		5		-		5
Transfer of completed properties		8,136		(8,136)		-
Reclassified to assets held for sale		(1,008)		-		(1,008)
As at 31 December 2021 (audited)		641,293		-		641,293

 

*Additions in the table above differs to the total investment cost of new properties in the period in the front end due to retentions no longer payable which were credited to Investment Property additions.

 

**Gain from fair value adjustment on investment properties in the condensed Group statement of comprehensive income is net of the loss from fair value adjustments on assets held for sale of £0.87 million (30 June 2021- £0.49 million, 31 December 2021 - £0.51 million) and loss on disposal of three assets of £6.1m (30 June 2021- £0.515, 31 December 2021 - £nil).

 

Reconciliation to independent valuation:

 

		30 June 2022		30 June 2021		31 December 2021
		£'000		£'000		£'000
Investment property valuation		669,574		596,336		642,018
Fair value adjustment - headlease ground rent		1,458		1,453		1,462
Fair value adjustment - lease incentive debtor		(2,684)		(1,634)		(2,187)
		668,348		596,155		641,293

 

Properties under development represent contracts for the development of a pre-let property under a forward funding agreement. Where the development period is expected to be a substantial period, the borrowing costs that can be directly attributed to getting the asset ready for use are capitalised as part of the investment property value.

 

The carrying value of leasehold properties at 30 June 2022 was £36.00 million (30 June 2021 - £36.70 million, 31 December 2021 - £39.36 million).

 

In accordance with "IAS 40: Investment Property", the Group's investment properties have been independently valued at fair value by Jones Lang LaSalle Limited ("JLL"), an accredited external valuer with recognised and relevant professional qualifications. JLL provide their fair value of the Group's investment property portfolio every three months.

 

JLL were appointed as external valuer by the Board on 11 December 2017. The proportion of the total fees payable by the Company to JLL's total fee income is minimal. Additionally, JLL has a rotation policy in place whereby the signatories on the valuations rotate after seven years.

 

% Key Statistics

 

The metrics below are in relation to the total investment property portfolio held as at 30 June 2022.

 

Portfolio Metrics	30 June 2022		30 June 2021		31 December 2021
Capital Deployed (£'000)*	593,996		553,561		569,991
Number of Properties	493		458		488
Number of Tenancies***	391		355		382
Number of Approved Providers***	26		22		24
Number of Local Authorities***	151		157		156
Number of Care Providers***	121		109		114
Average NIY**	5.28%		5.28%		5.25%

 

* calculated excluding acquisition costs

**calculated using IAS 40 valuations (excluding forward funding acquisitions)

*** calculated excluding forward funding acquisitions

 

Regional exposure

 

	30 June 2022		30 June 2021		31 December 2021
Region	*Cost £'000	% of funds invested	*Cost £'000	% of funds invested	*Cost £'000	% of funds invested
North West	115,042	20.1	118,985	22.3	122,622	21.5
West Midlands	92,794	16.2	88,593	16.6	92,794	16.3
East Midlands	64,589	11.3	64,595	12.1	64,595	11.3
Yorkshire	85,021	14.8	58,077	10.9	49,526	8.7
South East	54,799	9.6	50,308	9.4	47,061	8.3
London	49,555	8.6	49,213	9.2	81,034	14.2
North East	51,988	9.1	47,061	8.8	52,196	9.2
South West	27,466	4.8	27,900	5.2	27,900	4.9
East	23,703	4.1	21,204	4.0	23,703	4.2
Scotland	5,900	1.0	5,900	1.1	5,900	1.0
Wales	2,660	0.4	2,660	0.4	2,660	0.4
Total	573,517	100.0	534,496	100	569,991	100

*excluding acquisition costs

 

Fair value hierarchy

 

	Date of valuation	Total	Quoted prices in active markets (Level 1)	Significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)
		£'000	£'000	£'000	£'000
Assets measured at fair value: Investment properties	30 June 2022	668,348	-	-	668,348
Investment properties	30 June 2021	596,155	-	-	596,155
Investment properties	31 December 2021	641,293	-	-	641,293

 

There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers between Level 2 and Level 3 during the period.

 

The valuations have been prepared in accordance with the RICS Valuation - Professional Standards (incorporating the International Valuation Standards) by JLL, one of the leading professional firms engaged in the social housing sector.

 

As noted previously all of the Group's investment properties are reported as Level 3 in accordance with IFRS 13 where external inputs are "unobservable" and value is the Directors' best estimate, based upon advice from relevant knowledgeable experts.

 

In this instance, the determination of the fair value of investment properties requires an examination of the specific merits of each property that are in turn considered pertinent to the valuation.

 

These include i) the regulated social housing sector and demand for the facilities offered by each specialised supported housing  property owned by the Group; ii) the particular structure of the Group's transactions where vendors, at their own expense,  meet  the majority of the refurbishment costs of each property and certain purchase costs; iii) detailed financial analysis with discount rates supporting the carrying value of each property; iv) underlying rents for each property being subject to independent benchmarking and adjustment where the Group considers them too high (resulting  in a price reduction for the purchase or withdrawal from the transaction); and v) a full repairing and insuring lease with annual indexation based on CPI or CPI+1% and effectively 25 years outstanding, in most cases with a Housing Association itself regulated by the Homes and Communities Agency.

 

The valuer treats the fair value for forward funded assets as work-in-progress value whereby the Company forward funds a development by committing a total sum, the Gross Development Value ("GDV") over the development period in order to receive the completed development at practical completion. The work-in-progress value of the asset increases during the construction period accordingly as payments are made by the Company which leads, in turn, to a pro-rata increase in the valuation in each quarter valuation assuming there are no material events affecting the GDV adversely. Interest accrued during construction as well as an estimation of future interest accrual prior to lease commencement will be deducted from the balancing payment which is the final payment to be drawn by the developer prior to the Company receiving the completed building.

 

Descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:

 

Valuation techniques: Discounted cash flows

 

The discounted cash flows model considers the present value of net cash flows to be generated from the properties, taking into account the expected rental growth rate and lease incentive costs such as rent-free periods. The expected net cash flows are then discounted using risk-adjusted discount rates.

 

There are two main unobservable inputs that determine the fair value of the Group's investment properties: 

 

1.    The rate of inflation as measured by CPI; it should be noted that all leases benefit from either CPI or RPI indexation; and

2.    The discount rate applied to the rental flows.

 

Key factors in determining the discount rates applied include the performance of the regulated social housing sector and demand for each specialist supported housing property owned by the Group, costs of acquisition and refurbishment of each property, the anticipated  future underlying cash flows for each property, benchmarking of each underlying rent for each property (passing rent), and the fact that all of the Group's properties have the benefit of full repairing and insuring leases entered into by a Housing Association.

 

All of the properties within the Group's portfolio benefit from leases with annual indexation based upon CPI or RPI. The fair value measurement is based on the above items, highest and best use, which does not differ from their actual use.

 

Sensitivities of measurement of significant unobservable inputs

 

The Group's property portfolio valuation is open to judgements and is inherently subjective by nature. The estimates and associated assumptions have a significant risk of causing a material adjustment to the carrying amounts of investment properties. The valuation is based upon assumptions including future rental income (with growth in relation to inflation) and the appropriate discount rate.

 

As a result, the following sensitivity analysis has been prepared:

 

Average discount rate and range:

 

The average discount rate used in the Group's property portfolio valuation is 6.63% (30 June 2021 - 6.58%, 31 December 2021 - 6.63%).

 

The range of discount rates used in the Group's property portfolio valuation is from 6.21% to 8.10%. (30 June 2021 - 6.2%-7.6%, 31 December 2021 - 6.21%-8%).

 

	-0.5% change in	+0.5% change in		+0.25% change in	-0.25% change in
	Discount Rate	Discount Rate		CPI	CPI
	£'000	£'000		£'000	£'000
Changes in the IFRS fair value of investment properties as at 30 June 2022	42,290	(38,417)		21,597	(20,635)
Changes in the IFRS fair value of investment properties as at 30 June 2021	37,654	(34,246)		19,249	(18,406)
Changes in the IFRS fair value of investment properties as at 31 December 2021	26,922		(24,663)	21,190	(20,238)

 

Given that the factors on which the valuations are based have not been adversely affected by the macroeconomic environment, there has been no direct impact to the investment property valuation at 30 June 2022. The valuations have also not been influenced by climate related factors due to there being little measurable impact on inputs at present.

 

10.  TRADE AND OTHER RECEIVABLES (non current)

 

	30 June 2022 (unaudited)		30 June 2021 (unaudited)		31 December 2021 (audited)
	£'000		£'000		£'000
Lease incentive debtor	2,430		-		2,128
Other receivables	177		-		183
	2,607		-		2,311

 

The Directors consider that the carrying value of trade and other receivables approximate their fair value. All amounts are due to be received in more than one year from the reporting date.

 

11.  TRADE AND OTHER RECEIVABLES (current)

 

	30 June 2022 (unaudited)		30 June 2021 (unaudited)		31 December 2021 (audited)
	£'000		£'000		£'000
Rent receivable	2,808		1,498		1,971
Expected credit loss	(474)		-		-
Prepayments	831		2,859		796
Lease incentive debtor	254		-		-
Other receivables	170		1,719		668
	3,589		6,076		3,435

 

Included in Prepayments are prepaid acquisition costs which include the cost of acquiring assets not completed at the period end.

 

The Directors consider that the carrying value of trade and other receivables approximate their fair value. All amounts are due to be received within one year from the reporting date.

 

The Group applies the general approach to providing for expected credit losses under IFRS 9 for other receivables. Where the credit loss relates to revenue already recognised in the Income Statement, the expected credit loss allowance is recognised in the Statement of Comprehensive Income. Expected credit losses totalling £0.47m (2021: nil) were charged to the Statement of Comprehensive Income in the period.

 

12.  CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

	30 June 2022		30 June 2021		31 December 2021
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Cash held by lawyers	43		3,513		8,459
Restricted cash	571		734		571
Ring-fenced cash	1,095		-		4,451
Cash at bank	39,927		23,928		38,989
	41,636		28,175		52,470

 

Cash held by lawyers is money held in escrow for expenses expected to be incurred in relation to investment properties pending completion. These funds are available immediately on demand.

 

Restricted cash represents retention money (held by lawyers only) in relation to repair, maintenance and improvement works by the vendors to bring the properties up to satisfactory standards for the Group and the tenants. The cash is committed on the acquisition of the properties. It also includes funds held in an escrow account in relation to the lease transferred in 2020.

 

Ring-fenced cash includes retention monies held by Coutts in a "charged" account which requires lender's  permission to release, and funds held in a separate bank account for upcoming commitment fees on the Lloyds RCF.

 

	30 June 2022		30 June 2021		31 December 2021
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Total cash, cash equivalents and restricted cash	41,636		28,175		52,470
Restricted cash	(571)		(734)		(571)
Cash reported on Statement of Cash Flows	41,065		27,441		51,899

 

 

13.  TRADE AND OTHER PAYABLES

 

	30 June 2022 (unaudited)		30 June 2021 (unaudited)		31 December 2021 (audited)
	£'000		£'000		£'000
Trade payables	25		80		48
Accruals	1,930		2,697		2,373
Head lease ground rent	40		40		39
Other creditors	1,949		2,498		1,191
	3,944		5,315		3,651

 

The Other Creditors balance consists of retentions due on completion of outstanding works. The directors consider that the carrying value of trade and other payables approximate their fair value. All amounts are due for payment within one year from the reporting date.

 

14.  OTHER PAYABLES

 

	30 June 2022 (unaudited)		30 June 2021 (unaudited)		31 December 2021 (audited)
	£'000		£'000		£'000
Head lease ground rent	1,418		1,413		1,423
Rent deposit	100		100		100
	1,518		1,513		1,523

 

 

15.  BANK AND OTHER BORROWINGS

 

	30 June 2022 (unaudited)		30 June 2021 (unaudited)		31 December 2021 (audited)
	£'000		£'000		£'000
Bank and other borrowings drawn at period end	263,500		198,500		263,500
Unamortised costs at beginning of period	(4,798)		(3,573)		(3,573)
Less: loan issue costs incurred	(30)		-		(2,390)
Add: loan issue costs written off	2,085		-		-
Add: loan issue costs amortised	294		487		1,165
Unamortised costs at period end	(2,449)		(3,086)		(4,798)
Balance at period end	261,051		195,414		258,702

 

The amount of loan arrangement fees written off and amortised in note 7 differs to the amounts in the table above as this excludes amounts in relation to the undrawn RCF which are included within Prepayments.

 

At 30 June 2022 there were undrawn bank borrowings of £50 million. (30 June 2021 - £30 million, 31 December 2021 - £160 million).

 

As at 30 June 2022, the Group's borrowings comprised two debt facilities:

•          a long-dated, fixed-rate, interest-only financing arrangement in the form of a private placement of loan notes in an amount of £68.5 million with MetLife Investment Management (and affiliated funds).

•          £195 million long-dated, fixed-rate, interest-only sustainability-linked loan notes through a private placement with MetLife Investment Management clients and Barings.

 

The Group also have access to £50 million RCF with Lloyds and NatWest which was undrawn at the reporting date.

 

Loan Notes

The Loan Notes of £68.5 million are secured against a portfolio of specialist supported living assets throughout the UK, worth approximately £193 million (30 June 2021 - £185million, 31 December 2021 - £188 million). The Loan Notes represent a loan-to-value of 40% of the value of the secured pool of assets and are split into two tranches: Tranche-A, is an amount of £41.5 million, has a term of 10 years from utilisation and is priced at an all-in coupon of 2.924% pa; and Tranche-B, is an amount of £27.0 million, has a term of 15 years from utilisation and is priced at an all-in coupon of 3.215% pa. On a blended basis, the weighted average term is 12 years carrying a weighted average fixed-rate coupon of 3.04% pa. At 30 June 2022, the Loan Notes have been independently valued at £63 million which has been used to calculate the Group's EPRA Net Disposal Value in note 4 of the Unaudited Performance Measures. The fair value is determined by comparing the discounted future cash flows using the contracted yields with the reference gilts plus the margin implied. The reference gilts used were the Treasury 0.569% 2028 Gilt (Tranche A) and Treasury 0.838% 2033 Gilt (Tranche B), with an implied margin that is unchanged since the date of fixing.

 

In August 2021, the Group put in place Loan Notes of £195 million which enabled the Group to refinance the full £130 million previously drawn under its £160 million RCF with Lloyds and NatWest. The Loan Notes are secured against a portfolio of specialist supported living assets throughout the UK, worth approximately £410 million. The Loan Notes represent a loan-to-value of 40% of the value of the secured pool of assets and are split into two tranches: Tranche-A, is an amount of £77.5 million, has a term of 10 years from utilisation and is priced at an all-in coupon of 2.403% pa; and Tranche-B, is an amount of £117.5 million, has a term of 15 years from utilisation and is priced at an all-in coupon of 2.786% pa. On a blended basis, the weighted average term is 13 years carrying a weighted average fixed rate coupon of 2.634% pa. At 30 June 2022, the Loan Notes have been independently valued at £154 million which has been used to calculate the Group's EPRA Net Disposal Value in note 4 of the Unaudited Performance Measures. The fair value is determined by comparing the discounted future cash flows using the contracted yields with the reference gilts plus the margin implied. The reference gilts used were the Treasury 0.560% 2031 Gilt (Tranche A) and Treasury 0.846% 2036 Gilt (Tranche B), with an implied margin that is unchanged since the date of fixing. The loans are considered to be a Level 2 fair value measurement.

 

RCF

The RCF was fully refinanced on 26 August 2021 and as a result, was novated from TP REIT Propco 2 Limited to TP REIT Propco 5 Limited. This was not considered to be a substantial modification under IFRS 9 in the Group accounts, as there is no change to the borrower at Group level. On 21 February 2022, the facility was reduced from £160 million to £50 million, this led to the writing off of £2.0 million arrangement fees. Otherwise, the terms remain unchanged and at 30 June 2022 the facility remained undrawn. The originally agreed four-year term was previously extended in 2020 by one further year expiring on 20 December 2023. This may be extended by a further year, to 20 December 2024 (subject to the consent of the lenders). Originally, the interest rate for drawn amounts was 1.85% per annum over three-month LIBOR.

 

Under the amended and restated facility agreement in place pre the refinance, the Group negotiated and agreed provisions setting pre-agreed terms for the transition of LIBOR to the new benchmark rate SONIA from 1 July 2021. For undrawn loan amounts the Group pays a commitment fee in the amount of 40% of the margin.  When fully drawn, the RCF will represent a loan-to-value of 40% secured against a defined portfolio of the Group's specialist supported housing assets located throughout the UK and held in a wholly-owned Group subsidiary. For the RCF there is considered no other difference between fair value and carrying value.

 

The Group has met all compliance with its financial covenants on the above loans throughout the year.

 

	Total		< 1 year		1 to 2 years		3 to 5 years		> 5 years
	£'000		£'000		£'000		£'000		£'000
At 30 June 2022	50,000		-		50,000		-		-
At 30 June 2021	30,000		-		-		30,000		-
At 31 December 2021	160,000		-		160,000		-		-

Undrawn committed bank facilities - maturity profile

 

16.  CAPITAL REDUCTION RESERVE

 

	30 June 2022 (unaudited)		30 June 2021 (unaudited)		31 December 2021 (audited)
	£'000		£'000		£'000
Balance at beginning of period	160,394		166,154		166,154
Dividends paid	-		-		(5,760)
Balance at end of period	160,394		166,154		160,394

 

The capital reduction reserve relates to the distributable reserve established on cancellation of the share premium reserve. Dividends have been distributed out of Retained Earnings in the current period and out of Retained Earnings and the Capital Reduction Reserve in the year ended 31 December 2021.

 

17.  DIVIDENDS

 

	1 January 2022 to 30 June 2022 (unaudited)		1 January to 30 June 2021 (unaudited)		Year ended 31 December 2021 (audited)
	£'000		£'000		£'000
1.295p for the 3 months to 31 December 2020 paid on 26 March 2021	-		5,217		5,217
1.3p for the 3 months to 31 March 2021 paid on 25 June 2021	-		5,236		5,236
1.3p for the 3 months to 30 June 2021 paid on 30 September 2021	-		-		5,236
1.3p for the 3 months to 30 September 2021 paid on 17 December 2021	-		-		5,236
1.3p for the 3 months to 31 December 2021 paid on 11 March 2022	5,236		-		-
1.365p for the 3 months to 31 March 2022 paid on 24 June 2022	5,498		-		-
	10,734		10,453		20,925

 

On 8 September 2022 the Company declared an interim dividend of £1.365 pence per Ordinary Share for the period 1 April 2022 to 30 June 2022. The total dividend of £5.5 million will be paid on 30 September 2022 to Ordinary shareholders on the register on 16 September 2022.

 

The Company intends to pay dividends to shareholders on a quarterly basis and in accordance with the REIT regime. Dividends are not payable in respect of its Treasury shares held.

 

18.  SEGMENTAL INFORMATION

 

IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker (which in the Group's case is delegated to the Investment Manager, TPIM). The internal financial reports received by TPIM contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the financial statements.

 

The Group's property portfolio comprised 493 (30 June 2021 - 458, 31 December 2021 - 488) Social Housing properties as at 30 June 2022 in England and Wales. The Directors consider that these properties represent a coherent and diversified portfolio with similar economic characteristics and, as a result, these individual properties have been aggregated into a single operating segment.  In the view of the Directors there is accordingly one reportable segment under the provisions of IFRS 8.

 

All of the Group's properties are engaged in a single segment business with all revenue, assets and liabilities arose in the UK, therefore, no geographical segmental analysis is required by IFRS 8.

 

19.  RELATED PARTY DISCLOSURE

 

Directors

 

Directors are remunerated for their services at such rate as the Directors shall from time to time determine. The Chair receives a director's fee of £75,000 per annum (30 June 2021 - £75,000, 31 December 2021 - £75,000), and the other Directors of the Board receive a fee of £50,000 (30 June 2021 - £50,000, 31 December 2021 - £50,000) per annum. The Directors are also entitled to an additional fee of £7,500 in connection with the production of every prospectus by the Company. This was received by the Directors in 2020 but not in 2021 or the current year as no prospectus was produced.

 

Dividends of the following amounts were paid to the Directors during the period:

 

Chris Phillips:	£1,462 (30 June 2021- £1,423, 31 December 2021 -£2,850)
Peter Coward:	£2,103 (30 June 2021- £1,984, 31 December 2021 -£4,031)
Paul Oliver:	£2,078 (30 June 2021 - £2,023, 31 December 2021 -£4,050)
Tracey Fletcher-Ray:	£1,006 (30 June 2021- £979, 31 December 2021 -£1,960)

 

No shares were held by Ian Reeves as at 30 June 2022 (31 December 2021 and 30 June 2021: nil).

 

20.  POST BALANCE SHEET EVENTS

 

Property acquisitions

Subsequent to the end of the period, the Group has acquired portfolios of 2 supported Social Housing properties deploying £3.4 million (including acquisition costs).

 

Dividends

On 8 September 2022, the Company declared an interim dividend of £1.365 pence per Ordinary Share for the period 1 April 2022 to 30 June 2022. The total dividend of £5.5 million will be paid on 30 September 2022 to Ordinary shareholders on the register on 16 September 2022.

 

21.  CAPITAL COMMITMENTS

 

The Group has capital commitments of £nil (30 June 2021 - £1.0 million, 31 December 2021 - £4.2 million) in relation to the cost to complete its forward funded pre-let development assets and on properties exchanged but not completed at 30 June 2022.

 

22.  EARNINGS PER SHARE

 

Earnings per share ("EPS") amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive instruments outstanding, both basic and diluted earnings per share are the same.

 

The calculation of basic, diluted and EPRA earnings per share is based on the following:

 

	1 January 2022		1 January 2021		Year ended
	to 30 June 2022		to 30 June 2021		31 December 2021
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Calculation of Basic Earnings per share
Net profit attributable to ordinary shareholders (£'000)	24,928		10,488		28,410
Weighted average number of ordinary shares (including treasury shares)	402,789,002		402,789,002		402,789,002
IFRS Earnings per share - basic and diluted	6.19p		2.60p		7.05p

 

EPRA Earnings per share
	1 January 2022 to 30 June 2022 (unaudited) £'000		1 January 2021 to 30 June 2021 (unaudited) £'000		Year ended 31 December 2021 (audited) £'000
Net profit attributable to ordinary shareholders (£'000)	24,928		10,488		28,410
Changes in value of fair value of investment property (£'000)	(17,120)		(1,240)		(8,998)
EPRA earnings (£'000)	7,808		9,248		19,412
Non cash adjustments to include:
Amortisation of loan arrangement fees (£'000)	562		487		1,279
Written off loan arrangement fees (£'000)	1,986		-		-
Adjusted EPRA earnings (£'000)	10,356		9,735		20,691
Weighted average number of ordinary shares (including treasury shares)	402,789,002		402,789,002		402,789,002
Earnings per share - EPRA	1.94p		2.30p		4.82p
Adjusted EPRA earnings per share	2.57p		2.42p		5.14p

 

Adjusted earnings is a performance measure used by the Board to assess the Group's dividend payments. The metric adjusts EPRA earnings for interest paid to service debt that was capitalised, and the amortisation of loan arrangement fees. The Board sees these adjustments as a reflection of actual cashflows which are supportive of dividend payments. The Board compares the adjusted earnings to the available distributable reserves when considering the level of dividend to pay.

 

For this EPRA measure and preceding EPRA measures, please refer to explanations and definitions of the EPRA performance measures that can be found below.

 

23.  NET ASSET VALUE PER SHARE

 

Net Asset Value per share is calculated by dividing net assets in the Condensed Group Statement of Financial Position attributable to Ordinary equity holders of the Company by the number of Ordinary Shares outstanding at the end of the period. Although there are no dilutive instruments outstanding, both basic and diluted NAV per share are disclosed below.

 

Net asset values have been calculated as follows:

	30 June 2022		30 June 2021		31 December 2021
	(unaudited)		(unaudited)		(audited)
Net assets at end of period (£'000)	450,307		428,664		436,113
Shares in issue at end of period (excluding shares held in treasury)	402,789,002		402,789,002		402,789,002
IFRS NAV per share - basic and dilutive	111.80p		106.42p		108.27p

 

24.  UNAUDITED PERFORMANCE MEASURES

 

1.   PORTFOLIO NET ASSET VALUE

 

The objective of the Portfolio Net Asset Value "Portfolio NAV" measure is to highlight the fair value of the net assets on an ongoing, long term basis, which aligns with the Group's business strategy as an ongoing REIT with a long-term investment outlook. This Portfolio NAV is made available on a quarterly basis on the Company's website and announced via RNS.

 

In order to arrive at Portfolio NAV, two adjustments are made to the IFRS Net Asset Value ("IFRS NAV") reported in the consolidated financial statements such that:

 

i.      The hypothetical sale of properties will take place on the basis of a sale of a corporate vehicle rather than a sale of underlying property assets. This assumption reflects the basis upon which the Company's assets have been assembled within specific SPVs; and

 

ii.     The hypothetical sale will take place in the form of a single portfolio disposal.

 

	30 June 2022		30 June 2021		31 December 2021
	£'000		£'000		£'000
Net asset value per the consolidated financial statements	450,307		428,664		436,113
Value of asset pools	450,307		428,664		436,113
Effects of the adoption to the assumed, hypothetical sale of properties as a portfolio and on the basis of sale of a corporate vehicle	57,829		43,639		49,974
Portfolio NAV	508,136		472,303		486,087

 

After reflecting these amendments, the movement in net assets is as follows:

 

	30 June 2022		30 June 2021		31 December 2021
	£'000		£'000		£'000
Opening reserves	486,088		468,788		468,788
Remaining share issue costs	-		(23)		(23)
Operating profits	13,970		12,502		26,191
Capital appreciation	25,847		4,741		19,350
Loss on fair value adjustment on assets held for sale	(873)		(493)		(515)
Finance income	16		15		44
Finance costs	(6,178)		(2,776)		(6,823)
Dividends paid	(10,734)		(10,452)		(20,925)
Portfolio Net Assets	508,136		472,302		486,087
Number of shares in issue at the period end	402,789,002		402,789,002		402,789,002
Portfolio NAV per share	126.16p		117.26p		120.68p

 

2.   ADJUSTED EARNINGS PER SHARE - PORTFOLIO NAV BASIS

 

	30 June 2022		30 June 2021		31 December 2021
	£'000		£'000		£'000
Net rental income	17,734		15,931		33,117
Other income	110		-		-
Expenses	(3,874)		(3,429)		(6,926)
Fair value gains on investment properties	75,822		44,879		58,973
Loss on fair value adjustment on assets held for sale	(873)		(493)		(515)
Finance income	16		15		44
Finance costs	(6,178)		(2,776)		(6,823)
Value of each pool	82,757		54,127		77,870
Weighted average number of shares	402,789,002		402,789,002		402,789,002
Adjusted earnings per share - basic	20.55p		13.44p		19.46p

 

3.   EPRA Net Reinstatement Value

 

		30 June 2022		30 June 2021		31 December 2021
		£'000		£'000		£'000
IFRS NAV/EPRA NAV (£'000)		450,307		428,664		436,113
Include:
Real Estate Transfer Tax* (£'000)		41,361		36,672		39,492
EPRA Net Reinstatement Value (£'000)		491,668		465,336		475,605
Fully diluted number of shares		402,789,002		402,789,002		402,789,002
EPRA Net Reinstatement value per share		122.07p		115.53p		118.07p

 

* Purchaser's costs

 

4.   EPRA Net Disposal Value

 

		30 June 2022		30 June 2021		31 December 2021
		£'000		£'000		£'000
IFRS NAV/EPRA NAV (£'000)		450,307		428,664		436,113
Include:
Fair value of debt* (£'000)		39,192		(4,978)		(2,059)
EPRA Net Disposal Value (£'000)		489,499		423,686		434,054
Fully diluted number of shares		402,789,002		402,789,002		402,789,002
EPRA Net Disposal Value**		121.53p		105.19p		107.76p

 

* Difference between interest-bearing loans and borrowings included in balance sheet at amortised cost, and the fair value of interest-bearing loans and borrowings.

 

**equal to the EPRA NNNAV disclosed in previous reporting periods

 

5.   EPRA Net Tangible Assets

 

		30 June 2022		30 June 2021		31 December 2021
		£'000		£'000		£'000
IFRS NAV/EPRA NAV (£'000)		450,307		428,664		436,113
EPRA Net Tangible Assets (£'000)		450,307		428,664		436,113
Fully diluted number of shares		402,789,002		402,789,002		402,789,002
EPRA Net Tangible Assets *		111.80p		106.42p		108.27p

 

*equal to IFRS NAV and previous EPRA NAV metric

 

6.   EPRA net initial yield (NIY) and EPRA "topped up" NIY

 

		30 June 2022		30 June 2021		31 December 2021
		£'000		£'000		£'000
Investment Property - wholly owned		666,890		594,702		639,831
Less: development properties		-		-		-
Completed property portfolio		666,890		594,702		639,831
Allowance for estimated purchasers' costs		41,361		36,672		39,492
Gross up completed property portfolio valuation		708,251		631,374		679,323
Annualised passing rental income		37,416		32,901		35,343
Property outgoings		-		-		-
Annualised net rents		37,416		32,901		35,343
Contractual increases for lease incentives		79		523		443
Topped up annualised net rents		37,495		33,424		35,786
EPRA NIY		5.28%		5.21%		5.20%
EPRA Topped Up NIY		5.29%		5.29%		5.27%

 

7.   ONGOING CHARGES RATIO

 

		30 June 2022 £'000		30 June 2021 £'000		31 December 2021 £'000
Annualised ongoing charges		6,960		6,542		6,671
Average undiluted net assets		443,210		428,657		432,382
Ongoing charges		1.57%		1.53%		1.54%

 

 

8.   EPRA VACANCY RATE

 

		30 June 2022 £'000		30 June 2021 £'000		31 December 2021 £'000
Estimated Market Rental Value (ERV) of vacant spaces		93		92		93
Estimated Market Rental Value (ERV) of whole portfolio		37,416		33,424		35,785
EPRA Vacancy Rate		0.25%		0.28%		0.26%

 

9.   EPRA COST RATIO

 

		30 June 2022 £'000		30 June 2021 £'000		31 December 2021 £'000
Total administrative and operating costs		3,874		3,429		6,926
Gross rental income		18,208		15,931		33,117
EPRA cost ratio		21.27%		21.52%		20.91%