Annual Report and
Accounts 2022
Measurable Social Impact
In-depth Specialist Resource
Sector Enhancing Initiatives
Responsible Economic Returns
Content Themes
We have identified four key themes which are highlighted throughout the report.
About Us
1 Our Purpose
2 Our Portfolio
2 Company Overview
3 Financial Highlights
3 How we Performed
4 Key Achievements
Group Strategic Report
6 Chairman’s Statement
7 Growth
8 Our Portfolio
10 Investment Adviser’s Report
20 Civitas Investment Management
22 Asset Management Case Studies
24 Corporate Social Responsibility Report
25 Section 172 (1) Statement and Stakeholder Engagement
34 Strategic Overview
38 Principal Risks and Risk Management
42 Going Concern and Viability Statement
Environmental, Social & Governance
45 Energy Performance/SAP Ratings
46 The Portfolio’s Carbon Footprint
47 E.ON Project Results (Phase 1) and Next Steps
48 Case Study
49 Social Impact
50 ‘A Place For Me’
52 Social Impact – Charitable Partnerships
53 Governance – Frameworks
54 United Nations Sustainable Development Goals
(“UN SDGs”) Alignment
55 Governance – Indices
Corporate Governance
57 Board of Directors
58 Report of the Directors
62 Report of the Audit and Management
Engagement Committee
66 Report of the Nomination and Remuneration
Committee
67 Corporate Governance Statement
73 Directors’ Remuneration Report
77 Statement of Directors’ Responsibilities
78 Alternative Investment Fund Managers Directive
80 Independent Auditors’ Report
Consolidated Financial Statements
89 Consolidated Statement of Comprehensive Income
90 Consolidated Statement of Financial Position
91 Consolidated Statement of Changes in Equity
92 Consolidated Statement of Cash Flows
93 Notes to the Consolidated Financial Statements
118 Company Statement of Financial Position
119 Company Statement of Changes in Equity
120 Notes to the Company Financial Statements
Additional Information
129 Appendix 1 (unaudited)
132 Five Year Financial Results
134 Shareholder Information
135 Glossary
137 Company Information
Contents
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Our Purpose
CIVITAS SOCIAL HOUSING PLC (“CSH”, “Civitas” or
the “Company”) invests across the UK in care-based
community housing and healthcare facilities for the
benefit of working age adults with long-term care needs.
Since IPO in 2016, CSH has built the largest portfolio of
its kind in the UK that has been independently valued at
£969 million.
The Company provides long-term community-based
homes for 4,592 tenants, across 178 local authority
partners that are supported by 130 specialist care
providers and 18 Approved Providers. The delivery of care
in the community is a primary government policy and
cross party policy of many decades aimed at enabling
people with long-term care needs to reside close to
family and friends and achieve more independent and
fulfilled lives. It delivers better personal outcomes and
offers value for money for the public purse that meets the
costs of the service. Residents, whose average age is c.32
years, typically reside in their adapted CSH community
home for many years and sometimes for their whole life.
As a result of making this provision available, CSH is able
to offer shareholders the potential of stable, long-term
returns with progressive dividends whilst delivering
measurable social impact on a large scale. Following
shareholder approval, the Company is now expanding
into Scotland and Northern Ireland and will work with
organisations in receipt of public funding.
About Us
Business Model
An individual with care
requirements requires a home.
The Local Authority designs a care
package, identifying a care
provider and property for the
individual.
The care provider is paid the full
amount for the care package and
pays rent to the Approved Provider,
or the Approved Provider is paid
the rent directly.
The Approved Provider pays
Civitas the rent.
What We Do
Social Housing Pioneers
CSH is a leading provider of care-based community
housing in the UK. It was established in 2016 by the
founders of its Investment Adviser, Civitas Investment
Management Limited (“CIM”), from the long-standing
conviction that private capital could play a vital and
ethical role in the delivery of homes within the social
housing sector.
CSH believes that access to a decent home is a basic
human right from which so much more can be achieved,
particularly for people who are living with a life-long
disability. With millions of people stuck on housing
waiting lists across the UK, or trapped in long stay
hospitals, CSH became the first public company to bring
large scale equity investment into the sector.
The Company has the dual objectives of achieving both
positive financial returns and large scale measurable
social impact.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
1
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
# Alternative Performance Measures. Terms are defined in the Glossary.
1 please see note 15 of the Consolidated Financial Statements for details of the valuation.
2 means Net Asset Value of the Group prepared in accordance with IFRS accounting standards.
3 means Total Assets.
4 as at 31 March 2022.
Company Overview
as at 31 March 2022
Our Portfolio
as at 31 March 2022
£969m
Investment property
independently valued
1
(March 2021: £916m)
£652m
Equity Capital Raised
87.4 pence
Share price
4
696
Properties
(March 2021: 619)
675,547
NAV £’000
2
1,037,089
GAV £’000
3
4,592
Tenants
(March 2021: 4,295)
6.3%
Dividend Yield
#
(annual)
Closed Ended
Permanent Capital
Inflation Linked
Rental Income
37.2%
Total return since inception
#
(Net Asset Value based)
5.55 pence
Dividends declared for the
year ended 31 March 2022
2
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Profit before tax
£44.8m +24.1%
£ million
2022
2021
2020
IFRS NAV
£675.5m +0.3%
£ million
2022
2021
2020
IFRS NAV per share
#
110.30p +1.9%
Pence
2022
2021
2020
Investment
property
2
£968.8m +5.8%
£ million
2022
2021
2020
Annualised rent
roll
#
£54.1m +6.5%
£ million
2022
2021
2020
Dividends declared
(Ordinary shares)
5.55p +2.8%
Pence
2022
2021
2020
EPRA EPS
#
4.82p -2.2%
Pence
2022
2021
2020
Total shareholder
return
#1
+11.6%
Percent
2022
2021
2020
IFRS NAV increase
since IPO
#
+12.6%
Percent
2022
2021
2020
£54.1m
(2021: £50.8m based upon
£915.6m real estate)
Annualised Rent Roll
#
: based upon
£969m of real estate at the end of
the reporting period
22.1 yrs
(2021: 22.6 yrs)
Weighted Average
Unexpired Lease Term
#
7.23p
(2021: 5.80p)
Basic and Diluted Earnings
per Share
Financial Highlights
for the year ended 31 March 2022
44.8
36.1
37.7
675.5
673.5
670.6
110.30
108.30
107.87
968.8
915.6
878.7
54.1
50.8
48.4
5.55
5.40
5.30
4.82
4.63
4.93
11.6
26.5
20.4
12.6
10.6
10.1
# Alternative Performance Measures. Terms are defined in the Glossary.
1 on an Ordinary share held since launch (percentage not annualised).
2 investment property independently valued. See note 15.0 of the Consolidated Financial Statements for details of the valuation.
How We Performed
Financial Highlights for the year ended 31 March 2022
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
3
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Key Achievements
Operational Highlights
60
70
100
90
110
120
130
80
18
Nov
2016
31
Mar
2017
Jun
2017
Sep
2017
Dec
2018
31
Mar
2019
31
Mar
2018
Jun
2018
Dec
2019
31
Mar
2021
Jun
2019
Dec
2017
Dec
2016
Sep
2018
Sep
2019
31
Mar
2020
Dec
2020
Jun
2020
Sep
2020
31
Mar
2022
Sep
2021
Dec
2021
Jun
2021
696 properties
acquired
1
based on
long-term
leases signed with
18 Approved
Providers
£835 million
invested
1
supported by
130 care
providers
4,592 tenants with
dependable
accommodation
across 178 Local
Authority Partners
Levered IRR* since IPO (IFRS and Portfolio Basis)
95
110
120
130
Pence
140
IFRS NAV
Portfolio NAV
IFRS NAV + cumulative dividends paid (pence per share)
Portfolio NAV + cumulative dividends paid (pence per share)
150
160
18 Nov
2016
98.00
98.00
31 Mar
2020
121.17
131.65
117.88
128.95
30 Sep
2019
115.08
127.07
31 Mar
2019
30 Jun
2018
110.08
119.28
30 Sep
2017
104.73
111.10
31 Mar
2021
126.97
137.14
30 Jun
2021
128.44
139.53
30 Sep
2021
129.90
141.15
31 Dec
2021
131.58
143.23
31 Mar
2022
134.48
147.02
119.52
130.62
31 Dec
2019
30 Sep
2020
123.98
134.35
31 Dec
2020
125.49
135.77
122.54
133.02
30 Jun
2020
30 Sep
2018
111.56
120.71
116.53
128.08
30 Jun
2019
31 Mar
2018
108.54
116.86
31 Dec
2018
113.28
121.87
(IRR 6.63%)*
(IRR 8.53%)*
Past performance is not a reliable indicator of future performance.
* Alternative Performance Measure. See Appendix 1 for the calculation.
Share price performance (pence)
The Good Economy, the social impact advisory firm, in its fourth annual
independent Social Impact Report on Civitas, noted that Civitas continues to be an
authentic ‘impact investor’ according to IFC operating principles and is proactive in
its approach to asset management, taking well defined steps to improve the quality
of existing homes, especially in terms of improving environmental performance.
1 over the life of the Company as at 31 March 2022.
4
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Group
Strategic
Report
6 Chairman’s Statement
7 Growth
8 Our Portfolio
10 Investment Adviser’s Report
20 Civitas Investment Management
22 Asset Management Case Studies
24 Corporate Social Responsibility Report
25 Section 172 (1) Statement and Stakeholder Engagement
34 Strategic Overview
38 Principal Risks and Risk Management
42 Going Concern and Viability Statement
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
5
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
From the Chairman
The need for quality housing for the most vulnerable
in society is more acute than ever. Thanks to the dedicated
efforts of our Investment Adviser and partners, the Company
has reported:
• Rents achieved as normal, adjusted for inflation indexation
• Audited IFRS NAV per share resilient at 110.30p (up 1.85%)
• Important sector initiatives to promote greater regulatory alignment
• Overall improved financial and operational performance from our partner
Approved Providers
• Active asset management to underpin long-term quality
Michael Wrobel
Chairman
Chairman’s Statement
Introduction
I am pleased to report that the Company has achieved
another year of strong financial and operational
performance. Our positive social impact is detailed in
a report from the independent specialist consultancy
The Good Economy (“TGE”).
The year presented many challenges. The pressures of
the COVID-19 pandemic on our tenants and their carers
highlights the benefits of providing community-based
care housing for vulnerable adults of working age. During
the year, the Company came under attack from a small
number of investors short-selling the Company’s shares,
one of whom published a series of criticisms that the
Board refuted in a very detailed response. The share price,
having traded at a premium to NAV early in the financial
year, dropped sharply to a discount at the year end.
One of the Board responses has been to initiate a share
buy-back programme which enhances the Net Asset Value
of the Company and confirms the Board’s confidence
in the robust nature of the Company’s cashflows and
asset values.
Our Investment Adviser, Civitas Investment Management
Limited (“CIM”), has exceptional knowledge of the industry
and continues to add to its team to enhance our portfolio.
CIM has been working on an initiative to introduce a
variation to our leases, that will not impact revenues or
asset values, but which aims to strengthen the industry
by addressing concerns expressed by the Regulator for
Social Housing.
Financial Performance
During the year under review our portfolio generated
rental income of £51.6 million, representing a 5.3%
increase over the corresponding period. This reflects
the indexation of lease rents (during a period of mostly
very low inflation) together with new rents from a small
number of properties purchased during the year.
Cash generated from operations was £37.5 million,
an increase of 3.83% over the prior year
(on a comparable basis).
IFRS net asset value of the Company increased from
108.30 pence per Ordinary share as at 31 March 2021 to
110.30 pence per share as at 31 March 2022.
The Company has met the Board’s stated dividend target
of 5.55 pence per share for the year to 31 March 2022
and the Board has set a new dividend target of at least
5.70
1
pence per share for the year to 31 March 2023.
Board Governance
The Board is currently looking to recruit a new
independent director, having regard to succession, our
breadth of skills and diversity.
The Board and the Investment Adviser continue an open
dialogue with our shareholders to further demonstrate
our commitment to provide full transparency at all times.
Continuation Vote
The Company’s articles of association require the
Board to propose a continuation vote as an ordinary
resolution at the annual general meeting following
the fifth anniversary from the initial public offering of
the Company and at every fifth AGM thereafter. This
is referred to later in more detail within the Report of
the Directors. Following discussions with a number of
shareholders and given the strength and nature of the
Company’s portfolio and long-term tenants, the Directors
are of the opinion that the continuation resolution at
the forthcoming AGM will be passed and encourage all
shareholders to vote in favour.
Outlook
The sector in which the Company invests offers many
positive attributes, in an increasingly uncertain world. We
benefit from high levels of intrinsic underlying demand for
our properties. All of our leases benefit from CPI uplift on
rents, some of which are subject to a 4% cap. Together with
our partners, we enable the delivery of high quality, value
for money care services for our tenants.
Our initiatives on new lease clauses and further projects
with E.ON to reduce our carbon footprint will deliver
further benefit to our stakeholders. We look to the future
with confidence.
Michael Wrobel
Chairman
29 June 2022
1. This is a target and not a formal dividend forecast or a profit forecast.
6
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
58
49
47
48
52
30
27
55
37
39
44
11
12
3
2
13
6
18
53
50
28
4
41
36
9
25
16
1
2
3
4
5
6
7
35
23
8
9
10
19
25
60
20
34
38
45
11
26
12
13
14
15
21
17
29
22
29
32
59
51
57
43
42
16
24
27
48
51
34
39
56
47
46
45
53
29
42
50
18
38
35
Growing base of global investors
Civitas invests on behalf of a wide range of global, national and local investors seeking exposure to
sustainable long term income together with measurable social impact and high levels of ESG delivery.
Growth
1. Amsterdam
2. Austin
3. Baltimore
4. Beijing
5. Birmingham
6. Boston
7. Bradford
8. Bristol
9. Brisbane
10. Brussels
11. Chicago
12. Columbus
13. Denver
14. Dublin
15. Edinburgh
16. Espoo
17. Exeter
18. Fort Lauderdale
19. Frankfurt
20. Geneva
21. Glasgow
22. Guernsey
23. Halifax
24. Heerlen
25. Helsinki
26. Hong Kong
27. Illinois
28. Japan
29. Jersey
30. Jersey City
31. Leeds
32. London
33. Los Angeles
34. Luxembourg
35. Manchester
36. Melbourne
37. Montreal
38. Munich
39. New Jersey
40. New York
41. New Zealand
42. Oslo
43. Paris
44. Philadelphia
45. Rotterdam
46. Richmond
47. Sacramento
48. San Francisco
49. Seattle
50. Singapore
51. Surrey
52. Smithfield
53. Sydney
54. Tokyo
55. Toronto
56. The Hague
57. Tunbridge Wells
58. Vancouver
59. Windsor
60. Zurich
Four Continents…
…over 60 Locations
Our strategy for growth
Demand for the accommodation provided by Civitas is strong and expected to remain so over the long term. The
pandemic has further evidenced the need for safe and secure homes for the most vulnerable people in society.
Civitas is a go-to partner for an increasing range of major vendors and counterparties.
Civitas is the market leader with the largest portfolio and deeply ingrained relationships with care providers, local
authorities, Approved Providers and charities across the UK.
Civitas continues to take delivery of new build higher acuity properties with more opportunities being offered and
expands into significant markets across the UK, now including Scotland and Northern Ireland.
The Company continues to work closely with The Social Housing Family CIC to enable it to expand and play a broader
role in the sector, and becoming part of critical local authority pathways, leading to many opportunities in specialist
supported living and advanced homelessness.
Civitas now works with a broader range of counterparties including charities and other not-for-profit organisations, to
expand into significant markets across the UK, now including Scotland and Northern Ireland.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
7
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
South West
London
West Midlands
Wales
Yorkshire and the
Humber
South East
North West
East Midlands
North East
East of England
26
12.8
13.2
10.5
11.0
34
15.5
120
15.5
64
5.8
7.0
10.1
9.8
101
96
10.5
10.8
8.6
8.5
58
10.1
9.9
64
3.9
32
4.0
101
11.2
11.3
696 properties
South West
Yorkshire and the
Humber
North West
West Midlands
North East
South East
Wales
London
East Midlands
East of England
7.0
8.6
9.8
10.6
10.9
11.3
3.9
15.7
12.1
£969m
10.1
374
338
462
502
607
610
759
161
364
4,592
415
Market Value (%) Tenancies
Properties
Funds invested
(Percentage)
Annualised rent roll
(Percentage)
North East 64 5.8 7.0
North West 101 10.1 9.8
Yorkshire and the Humber 96 10.8 10.5
East Midlands 58 8.6 8.5
West Midlands 101 11.3 11.2
East of England 32 4.0 3.9
South East 64 10.1 9.9
South West 120 15.5 15.5
Wales 34 11.0 10.5
London 26 12.8 13.2
Our Portfolio
By UK Region as at 31 March 2022
8
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
1.1
1.1
0.9
0.2
0.1
12.2
18.6
16.2
3.6
10
5.9
3.8
5.2
5.9
2.7
3.6
0.8
£54.1m
8.1
68
13
4
51
71
39
4,592
591
850
547
194
507
238
205
214
370
239
149
242
10
1
1
8
696
82
116
100
27
74
41
27
27
43
41
16
54
15
13
£969m
1.1
0.1
0.1
0.9
12.5
18.9
16.4
3.7
9.7
5.2
3.8
4.8
8.4
6.2
3.6
2.7
1.1
0.8
Annualised Rent Roll (%)
Market Value (%)
Properties
Tenancies
1 Auckland and Qualitas Housing are both members of the Social Housing Family C.I.C and subject to common control.
Our Portfolio
continued
By Approved Provider as at 31 March 2022
Falcon
Auckland
1
BeST
Inclusion
Qualitas Housing
1
Westmoreland
Encircle
Trinity
Pivotal
Chrysalis
Harbour Light
New Walk
My Space
IKE
Hilldale
Windrush
Lily Rose
Blue Square
Falcon
Auckland
1
Inclusion
BeST
Qualitas Housing
1
Trinity
Westmoreland
New Walk
Pivotal
Chrysalis
Harbour Light
Encircle
Hilldale
Windrush
IKE
My Space
Blue Square
Lily Rose
Falcon
BeST
Auckland
1
Inclusion
Qualitas Housing
1
Trinity
Westmoreland
Pivotal
Harbour
Encircle
New Walk
Chrysalis
My Space
IKE
Windrush
Hilldale
Lily Rose
Blue Square
Falcon
Auckland
1
BeST
Inclusion
Qualitas Housing
1
Westmoreland
Trinity
Encircle
Pivotal
Chrysalis
Harbour Light
New Walk
My Space
IKE
Hilldale
Windrush
Blue Square
Lily Rose
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
9
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Investment Adviser’s Report
In the year to March 2022 CIM, working with the CSH Board, has led the
development of a range of key initiatives to strengthen and position CSH and its
portfolio for the future.
Continuous
Improvement
Proposed New Regulatory Clause
●
Counterparties better able to achieve regulatory compliance
●
Enhanced information and step in rights (having regard to tenant welfare) in addition to
existing lease transfer and assignment rights
●
Unchanged lease and property values supported by strong underlying demand
●
Improved Governance
“A Place for Me”
●
Stories of 50 residents who live in Civitas properties
●
Fully independently compiled and written
●
Extensive number of interviews with residents, their families, friends and their carers
Phase two work with E.ON
●
Continued work across 120 properties
●
Targeting 25% reduction in carbon emissions
●
Continued access to Government grant funding sources
●
Clean Energy Strategy to achieve minimum EPC “A-C” by 2030
A growing team of specialists
●
Asset Management
●
Finance and operations
●
Transaction sourcing and execution
●
Housing Benefit
10
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Investment Adviser’s Report
continued
Paul Bridge
CEO, Social Housing
Civitas Investment
Management Limited
Civitas Social Housing PLC (CSH) is the market leader in
the delivery of ethical, care-based residential housing,
delivering sustainable returns for shareholders and
outstanding community-based homes for residents,
while offering value for money to society. This
transforms lives.
Overview of Results
CSH is the market leader in the delivery of much-needed long-term housing with care in the UK and leading the charge
for ethical investment in the sector. These full year results show a number of key achievements and themes:
Introduction
Civitas Investment Management Limited (CIM), the Investment Adviser to CSH, advises on a range of ethically based
social and healthcare real estate funds with committed capital of c.£3bn. CIM advises these funds on behalf of various
global investors together with a wide range of local authority pension funds and dedicated impact investors.
The increased scale of its operations has enabled CIM to create a large team of dedicated professionals in the specialist
healthcare sector and to make this expertise available to each of the advised funds, including CSH.
On behalf of the Investment Adviser and CSH, we would like to offer our thanks to all of our partners who have continued
to provide high-quality care, support, and housing, and to our investors who enable the provision of over 4,500 quality
homes for some of the most vulnerable people in society.
●
Approaching six years of consistent rental growth and
progressive dividend payments that have increased
from an initial 3p per share to 5.55p per share
reflecting dividend growth ahead of inflation.
●
Rents indexed in-line with the Consumer Price Index
as Approved Providers are able to claim inflation
adjustment payments from local authorities, and with
no disruption from COVID-19.
●
A high-quality investment credit rating from Fitch
Ratings of A secured and A- unsecured, that has been
maintained over time.
●
Design, negotiation and announcement of a new
market leading regulatory clause, to be implemented
over time on a retrospective basis, assisting
Approved Providers in regulatory discussions with no
diminution to lease or asset values.
●
An actively managed portfolio with a sector-leading
team of professionals assisting and enabling high
quality and longevity of homes and income.
●
Professional support to enable Approved Providers to
enhance the quality of their delivery and demonstrate
long-term financial and operational independence.
●
Ownership of properties that facilitates the delivery
of high levels of care with 40% of residents receiving
over 50 hours of care per week.
●
An active programme working with E.ON to
permanently reduce carbon emissions across the
portfolio leading to lower energy costs for residents
and a more carbon neutral portfolio.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
11
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Investment Adviser’s Report
continued
Market Commentary
As outlined in the Chairman’s Statement, CIM is pleased
to note that the sector has continued to see progress in
terms of the better delivery of the Specialist Supported
Housing (SSH) model with quality commissioning at the
heart of projects. This is essential to ensure that each
property is suitable for the needs of individuals and to
meet the objectives set by the relevant local authority.
Having dedicated considerable CIM resource to working
closely with the Company’s Approved Providers we
have seen continued progress in the quality of their
performance which has translated into greatly improved
financial results and governance.
Several Approved Providers who had previously stopped
taking on new properties to focus on strengthening their
own teams and systems have now begun to consider
new opportunities in a disciplined manner, consistent
with the objective of further performance enhancement.
At the same time it is fair to say that Approved Providers
have moved at different paces and while some have
seen rapid success, others still need to make further
operational and financial improvements. CIM is
supportive of these ambitions and having seen material
improvements in the sector, remains focused on
offering its assistance to drive forward standards for the
Company’s partners.
What is clear is that demand for quality
community-based housing remains strong and most
commentators believe that providing vulnerable people
with an opportunity to live in their own home or in
smaller facilities near to family is the best solution
for them.
While working closely with Approved Providers
and specialist care providers, CIM has continued to
focus on the core fundamentals of ensuring that the
portfolio operates at its very best, for instance ensuring
compliance for all key property metrics and collecting
rental income that is due.
The year saw modest additions to the portfolio of around
£32 million in new properties including the provision
of a number of properties for those seeking asylum.
The properties are backed by long-term government
contracts with counterparties that have strong covenants.
At the same time, the Company continues to develop
and implement high standards of social impact,
which is independently measured, as well as forging
leading relationships with key charities and other
sector bodies. The commitment to tackle the challenge
of decarbonisation continues with the further
implementation of the property retrofit programme.
Background
The sector in which the Company operates is substantially
funded by the State as part of the long-standing
commitment to provide support for vulnerable adults.
The UK is not alone in this approach and indeed the
United Nations developed polices that have been adopted
by the UK, the European Union and 183 States in total that
provide a framework for the provision of this support. The
“Convention on the Rights of Persons with Disabilities” was
signed by the then UK Government in 2007 and enacted
into law in 2008.
The Convention sets out broad rights for those considered
disabled in Article 1:
“To promote, protect and ensure full and equal enjoyment
of all human rights and fundamental freedoms by all
persons with disabilities and to promote respect for their
inherent dignity.”
Article 19 specifically covers housing, including the rights
to live independently and be included in the community,
Article 20 refers to personal mobility, Article 26 to
habilitation and rehabilitation, and Articles 29 and 30 to
the right to participate in political and public life, cultural
life, recreation and sports.
Specialist Supported Housing of the type provided by
the Company is designed to fulfill these objectives and
predates the implementation of the UN Convention. The
requirement to provide support for vulnerable people
was further enshrined into UK law by the Care Act 2014
which confirms the responsibility of authorities to provide
appropriate support and care. There is telling testimony in
the publication ‘A Place for Me’ (Sponsored by CSH and the
National Care Group), highlighted later in this report, on
the transformational effect SSH has upon people’s lives.
In terms of current legislation, the Health and Care Bill was
granted Royal Assent in April 2022, further consolidates
the trends of joining up NHS healthcare services with
social care through the formation of Integrated Care
Systems (ICSs). This is supportive of the forms of care and
community housing delivered by the Company.
12
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Investment Adviser’s Report
continued
Government Policy
The newly combined Government Department
for Levelling Up, Housing and Communities, is a
demonstration of how vital the Government believes
decent housing is to its central levelling up agenda.
Indeed, the Levelling Up white paper, published in
February 2022, makes clear that the provision of high
quality, affordable housing is a major Government priority.
Civitas was founded in the belief that private capital,
thoughtfully and responsibly invested, is a key element
to this provision, especially in the area of the Specialist
Supported Housing Sector in which CIM specialises.
This is because the large Housing Associations consider
themselves poorly suited to delivering these bespoke and
adapted properties, which are often located on brownfield
land within communities, whereas the larger Housing
Associations tend to focus on multi-unit, uniform new
developments. Civitas, therefore, fulfils a need for which
there is a clear market gap and a huge and growing
demand.
In addition, the last few years have seen a renewed focus
from the RSH on the requirement to listen carefully to
residents’ voices and take their views and needs into
account. This is something in which Civitas already
excels: CIM has close and proactive relationships with
our Approved Provider and Care partners, and, through
them, with the residents themselves. Evidence for this
can be seen in the high levels of satisfaction amongst our
residents; the high levels of health and safety compliance
and rent collection; and the low levels of COVID-19
throughout the pandemic.
Demand for Social Housing
In September 2020 the National Housing Federation
estimated that there were 8 million people in some
form of housing need, that 1.6 million households were
on official waiting lists and there were at least 129,000
children living in temporary accommodation.
Supply for new affordable housing is very low and
significantly lower than demand. In addition, supply
is further constrained by the demands placed upon
existing large developing housing providers in meeting
the costs generated by fire safety measures post Grenfell,
remediation of cladding, the cost of reducing carbon
emissions and additional consumer regulation proposed
in the White Paper on social housing “A charter for social
housing residents”.
When it comes to Specialist Supported Housing, the
long-standing and ongoing rise in working age adults
with complex physical, mental and social care needs,
requiring supported housing with care, means that the
demand for high quality SSH of the sort provided by
Civitas is expected to continue to grow.
Summary & Outlook
Civitas is the leading independent operator in a sector in
which there is enormous and growing demand and, due
to the highly specialised nature of the work being carried
out, high barriers to entry. Civitas is acknowledged to be
committed to providing safe, high quality homes with
care for its residents, with active and granular day to day
portfolio management being carried out by its large team
of sector specialists. In addition, we are working with
the relevant counterparties to introduce new contractual
provisions which we believe will better position our
Approved Provider partners to achieve compliance under
the RSH’s Governance and Financial Viability Standard.
We are continuing to evaluate further portfolio
acquisitions, not only in our core competency but also in
areas such as high quality housing with care for asylum
seekers and those affected by homelessness.
We remain committed to generating growth and
enhancing shareholder value through socially impactful
ethical investing. We are passionately committed to this
for the long term.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
13
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Investment Adviser’s Report
continued
Specialist Housing
All leading independent commentators agree that
demand continues to rise for community-based housing
(Mencap Annual Report 2021). This is driven by the
general rise in the population, better birth outcomes and
improved life expectancy, in turn stimulated by more
community-based housing of the type the Company
provides. Trends in mental health also contribute to
demand. According to the Royal College of Psychiatrists
referrals to mental health services have risen to an
all-time high of 4.3 million people during 2021.
LaingBuisson, a large healthcare consultancy, in its
Adult Specialist Care Report 5th edition published in
January 2022 estimates that in the learning disability
market for care in the community, over 90% of providers
come from the independent sector. For specific mental
health services this rises to 97% and reflects the fact that
over the past 30 years almost all specialist care has come
to be provided by the private sector and paid for by the
State, whereas it was previously provided by the NHS.
What is also clear is that the principal of community-
based housing is being extended to groups with other
care needs, beyond mental health issues. This trend was
reinforced by the Homelessness Reduction Act of 2017
which placed a statutory duty upon local authorities to
find homes for those at risk of serious harm caused by
homelessness.
Prior to the pandemic, the leading homeless charity
and campaign group Crisis estimated the cost of street
homelessness to the State was over £20,000 per person
per year, not including social losses and losses to the
state in tax revenue.
At the start of the pandemic, the ‘Everyone In’ campaign
ensured over 37,000 people sleeping rough were
housed in temporary accommodation, mostly hotels.
The challenge that now remains is how to ensure
those people are permanently housed with the support
required to overcome often complex needs. This is the
purpose of Barnet’s Homelessness Scheme supported by
CSH which will ensure a secure and stable home with
extensive support.
The clear advantages are the same as housing for
disabled groups: better social outcomes within a
community setting and reduced costs to the taxpayer.
Financial Review
As at 31 March 2022 the IFRS net asset value of the
Company was £675.5 million, being 110.30 pence per
share, a 1.85% increase on the 108.30 pence per share
at 31 March 2021. A net fair value gain on investment
properties of £12.3 million (2021: £5.5 million) was recorded
in the year. Operational cash flows of £37.5 million were
an increase on the prior year.
The portfolio was independently valued on an
individual IFRS asset basis by JLL at £968.8 million as at
31 March 2022 (2021: £915.6 million) reflecting a net initial
yield of 5.28%. This compares to an average purchase
yield of 5.90% (prior to purchase costs) and reflects
the ability of the Company to use its scale and market
position to buy well, often off-market, and generally avoid
taking part in auctions.
Net rental income of £50.7 million was generated in the
period, a 6.1% increase over the corresponding period
(31 March 2021: £47.8 million). This increase has been
generated as a result of on-track indexation of rents, the
effect of rental income on properties purchased in the
prior period being included for the full twelve months
and a small number of new investments in the period.
Strong ongoing rental collections throughout the year
supported the Company’s healthy operating cash flows.
During the reporting period, the Company paid four
dividend distributions including one dividend of
1.350p and three instalments of 1.3875p each during the
period, fully in line with the distribution target of 5.55p
announced for the year to 31 March 2022.
The Company also extended the maturity of its
£100m loan facility with HSBC Bank plc to November 2023
at SONIA plus 2.02% margin. Since the year end, the
£60m facility with Lloyds Bank plc has also been
extended to July 2024, at SONIA plus 1.67% margin.
Together, these financings continue to underpin the
strong liquidity position of the Company. The Company
has also maintained leverage at 34.43%, comfortably
within the Company’s self-imposed cap of 40% of
total assets. Finally of note, the Company retained its
premium Fitch rating from the prior year at “A” secured
and “A-“ unsecured.
14
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Investment Adviser’s Report
continued
The CSH Investment Portfolio – Overview
The Civitas portfolio is one of the largest SSH portfolios in the UK and is diverse geographically, in property size, type
of care and with multiple counterparties. The overall objective is to have a high-quality portfolio providing long-term
accommodation and stable returns. All CIM’s work with care providers and Approved Providers is collaborative, and part of
CIM’s commitment to improve the sector and assist its partners in becoming more independent.
Portfolio
Largest private portfolio in the country.
High acuity with 40% of
residents living in Civitas
properties receiving over
50 hours of care per week
130 care providers 18 approved
providers
178 local authority
partners
Team
Established team of specialists across the country.
Senior staff from the
care industry
Ensuring buildings
are meeting the
needs of care
providers
High occupancy
Housing Benefit
Ensuring rents at
appropriate level
and efficiently
collected
Rents collected and
indexation secured
ESG
Sounding Board
on governance
and sharing best
practice
Progress made
by independent
Approved Providers
in management,
governance
and financial
performance
Social Housing
Future proofing
properties
Property
enhancements,
change of use and
improvements in
quality
Legal/Financial
E.ON partnership
Reducing carbon
emissions whilst
utilising public
funds and
minimising the
financial impact on
the Company
Activities
Key activities comprise of future proofing, optimising quality for care providers, ensuring Approved Providers benefit from
economies of scale, and introduction of the new Regulatory clause.
Outcomes
Benefits derived from the combination of portfolio, team and activities.
Each year a small number of buildings require future proofing where the Company and CIM identify adaptions that
are required, or in a few instances a change of use, that will ensure longevity of occupation and that optimal resident
satisfaction is maintained.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
15
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Investment Adviser’s Report
continued
The Portfolio – Rent Roll
The annualised rent roll as at 31 March 2022 increased to
£54.1 million from £50.8 million in March 2021 and this is
expected to increase further as additional indexation is
applied (refer to chart on page 3).
Rental income is generated from leases with
18 Approved Providers (refer to page 9 for further details).
Typically, properties are located close to local community-
based facilities to support tenants, families and staff with
minimal travel requirements.
Portfolio Characteristics
The key features of the CSH portfolio can be summarised
as follows:
●
Properties are fully converted and specially adapted
for care use
●
High acuity with 40% of residents living in Civitas
properties receiving over 50 hours of care per week
●
Median rents tested/compared against market
equivalent
●
Properties always well located within the community
and with commissioner support
●
Over one third of the portfolio on back-to-back 25-year
leases with care providers mirroring the obligations in
the lease to Approved Providers
●
An ‘own front door’ policy
●
Over one third of properties bought when new,
without development or forward funding risk
The high quality of CSH portfolio reflects the Company’s
ability to source off-market transactions through its
extensive network of care provider relationships, with the
aim of achieving value growth over time.
Regulation
In October 2021 the Regulator of Social Housing published
its annual sector risk profile, which seeks to set out its view
on the sources of risk to providers’ ongoing compliance
with regulatory standards. The keys areas it highlights for
the whole sector are:
●
Increased scrutiny as set out in the Social Housing
White Paper
●
Increased costs associated with fire remediation post
Grenfell Tower and meeting the demands of the Fire
Safety Act 2021
●
The cost of meeting the zero-carbon agenda
●
Increased debt required to subsidise improvements to
existing stock
CSH always welcomes the engagement of the RSH with
our Approved Provider counterparties and we support the
work the RSH has undertaken in making recommendations
for improvements in the sector over the past five years.
The RSH continues to engage with all Approved Providers
including those with which Civitas works.
Since the last report, the RSH is now engaging with nine of
the Company’s Approved Providers, set out below:
Approved Provider Grading Type of publication Route
Auckland Home
Solutions
N/A Regulatory
judgement
Reactive
engagement
Bespoke Supportive
Tenancies
N/A Regulatory
Judgement
Reactive
engagement
Encircle Housing N/A Regulatory
Judgement
Reactive
engagement
Falcon Housing
Association
N/A Regulatory
Judgement
Reactive
engagement
Hilldale Housing
Association
N/A Regulatory
Judgement
Reactive
engagement
Inclusion Housing G3 / V3 Regulatory
judgement
IDA and
reactive
engagement
My Space Housing
Solutions
G3 / V3 Regulatory
judgement
Reactive
engagement
Pivotal Housing
Association
N/A Regulatory
Judgement
Reactive
engagement
Trinity Housing
Association
G3 / V3 Regulatory
judgement
Reactive
engagement
Westmoreland
Supported Housing
G4 / V3 Regulatory
judgement
Reactive
engagement
It is clear that the RSH will, rightly, publish information as
to the improvements it wishes to see and whenever this
occurs CSH will provide support to its partners
as appropriate.
Through CIM, CSH has been at the forefront of
addressing the RSH’s concerns about the long-term
risk planning of Approved Providers by pioneering the
implementation of the force majeure clause and caps
and collars on the indexation of rents of between 1%
and 4%. We will continue to work with the Company’s
counterparties and the RSH to ensure that the Company
fulfills its intentions as one of the largest owners of SSH
in the country to enable the sector to evolve and to
maintain the improvements already made.
16
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Investment Adviser’s Report
continued
New Regulatory Clause
During 2021 and 2022, CIM has engaged with relevant
counterparties, including several shareholders of CSH,
lending banks, valuers and the RSH and undertaken
detailed negotiations with several Housing Association
partners, to explore how the Company can assist
those organisations to be better positioned to achieve
regulatory compliance under the RSH’s Governance and
Financial Viability Standard
(the “Standard”).
The consensus result of these discussions and
negotiations is the development of an approach with a
new draft regulatory clause whose principal objectives
are to enable Housing Associations to:
●
achieve greater alignment between income receipts
and lease liabilities
●
set achievable capital solvency requirements against
lease obligations
●
demonstrate a further degree of risk sharing
Each with the objective of seeking to demonstrate
compliance with the Standard (expressed as
gradings V1 – V4 and G1 – G4).
Meanwhile, the draft regulatory clause will provide the
Company with:
●
counterparties better able to achieve regulatory
compliance
●
enhanced information and step in rights (having
regard to tenant welfare) in addition to existing lease
transfer and assignment rights
●
unchanged lease and property values supported by
strong underlying demand
The draft clause once enacted will operate on a property-
by-property basis to provide for a temporary pass through
of lease rent in certain limited circumstances when the
Housing Association is not in receipt of full payment
whilst at the same time ensuring that the Company does
not become responsible for obligations that are rightly
owed by others such as void cover by care providers.
Furthermore, this applies only after an initial period of time
during which all rents remain the responsibility of the
Vendor/Housing Association and then only if paying the
rent in full would cause the Housing Association to fail to
meet the Regulator’s standards.
The draft clause also contains provision for the
reimbursement of rental income if that is subsequently
recovered by the Housing Association.
Implementation of the clause will codify much of the
general asset management work and the Company’s
approach to sector collaboration that already takes place
on a day-to-day basis and is reflected in the Company’s
existing rent roll but which has to date not been included
within the terms of the Company’s leases and so have
not received formal recognition. It is anticipated that
the clause will only be relevant to a small number of
properties at any time and will not have any material
impact on the Company’s rent roll.
The Company has sought and obtained formal written
confirmation from valuers that the inclusion of the clause
within the Company’s new and existing leases will not of
itself cause a diminution in the value of those leases or in
the underlying assets. Indeed, the Company considers that
enhanced regulatory alignment would be consistent with
asset appreciation over the medium term.
At the present time the clause is in draft form and is
subject to further discussion and refinement with several
Housing Association boards assisted by leading sector
lawyers together with other relevant approvals.
It is intended that the clause will be incorporated
initially into a limited number of existing leases on a
retrospective basis commencing with properties that are
unencumbered.
On the assumption that it is well received by relevant
parties within the sector and has the potential to achieve
the objectives set out above it will be further rolled out
in a controlled manner over time to other Approved
Providers and in respect of new and existing leases on
a retrospective basis. The Company will provide further
updates in due course once the final form of the clause
has been settled.
Social Impact and Social Value
The Company’s latest independent report from The Good
Economy was published in June 2022 and provides details
of CSH’s portfolio and the continued success in delivering
measurable social impact. Findings include:
●
77 properties, housing up to 297 people, have been added
to the CSH portfolio within the period
●
41% of CSH’s 696 properties have been brought into the
social housing sector for the first time
●
CSH’s regular engagement with its Approved Providers
(RPs) to monitor the quality of its stock continued through
the COVID-19 pandemic
●
Improvement works have enhanced the energy efficiency
of homes, with 99.92% of homes having an EPC rating of at
least E+
●
CSH homes continue to serve vulnerable individuals and
play a significant role in improving resident wellbeing,
particularly when individuals are coming out of higher-
acuity facilities
●
Social value analysis (March 2021) revealed that, overall,
the portfolio generates £127 million of social value
per year, including fiscal savings to public budgets of
£75.9 million per year
●
87% of respondents to the resident survey in March 2021
reported that they were satisfied with the quality of their
home, 8% reported that they were neither satisfied nor
dissatisfied
●
99% statutory compliance rate by housing provider
partners is better than the wider affordable housing sector
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
17
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Investment Adviser’s Report
continued
Environmental, Social and
Governance (ESG)
The ESG Policy is located on the Company’s website.
It provides an overview of the Company’s investment
procedures and sets out the Board’s commitment to a
continuous improvement process in its approach to
ESG integration.
ESG Rating Providers
As part of this commitment, CIM engages with ESG rating
providers to set out the activities that are undertaken by
CSH and to ensure this is profiled correctly. This includes
increased disclosure by CIM in respect of various policies
that have been promoted on the CIM website. Notably,
active participation in the 2021 GRESB Public Disclosure
Assessment has resulted in CSH achieving an A score
which is an improvement from a B score in 2020, whilst
the peer group average score remains at C. GRESB is an
investor-driven global ESG framework. Meanwhile, the ESG
Risk Rating Score for CSH by Sustainalytics of 16.6 (Low Risk)
is marginally lower than was reported in March 2021.
Sustainalytics measures how well companies manage ESG
issues that are most material to their business.
Environmental: Carbon Reduction/
Energy Cost Savings
CIM has been leading the sector in improving the
environmental performance of the portfolio and is working
with E.ON (a leading UK energy and solutions company)
under a national framework agreement in partnership
with CSH tenants. The ‘fabric first’ approach to reducing
the portfolio’s carbon footprint includes the installation
of cavity wall insulation, loft insulation, external wall
insulation, air source heat pumps and solar PV and battery
storage to identified properties. The installation of these
energy efficient measures, utilising available Government
grants and other funding sources, maximise value for the
Company and for our counterparties. The collaboration
with E.ON is delivering significant environmental
enhancements without any cost to our Approved Providers.
As a result of active asset management and property
improvements works, renovations and scheduled post
completion works, the overall energy performance of the
portfolio, as identified on Environmental Performance
Certificates (EPC) reports data has improved over the last
twelve months. The proportion of properties with EPC
Rating A-C has remained at c.52% (52% in March 2021) and
carbon footprint (estimated from property characteristics)
has reduced by 3% per Civitas tenancy (from 2.73 tonnes
of CO2/tenancy to 2.65 tonnes of CO2/tenancy). The static
year-on-year proportion of homes rated A-C was due to
the acquisition of a significant number of properties which
were acquired with D rating. These homes are subject to
improvement works which should improve their energy
performance in coming months.
Charities
The Company has supported and worked with the
following Charities since IPO.
Crisis
Civitas has supported Britain’s biggest homelessness
charity over the past five years and the two organisations
regularly collaborate on the emerging knowledge required
to undertake advanced homelessness schemes. These
are vital to enable people who have been at risk of or
experienced homelessness to rebuild their lives but who
require considerable care and support in addition to a safe
home in the community.
Choir With No Name
Civitas is proud to support this charity that runs five
choirs across the country for people who are homeless
or marginalised. Rehearsals have been moved back
indoors following the pandemic lockdown, and members,
volunteers and staff are reported to be over the moon!
Alongside the choirs, the charity runs a free online
workshop to members, the wider homeless sector and
anyone who wants to attend. The charity has also provided
team-building events for the CIM team.
Impact Highlights 2021-22
●
Big increase in average weekly attendance since return
to indoor meetings post COVID-19
●
New Cardiff Choir launched in November 2021
●
Steady progress with establishment of new community
choirs in Watford and Coventry
House of St Barnabas
A social enterprise and charity that works to support
people affected by homelessness back into long-term
employment. Its vision is of a future where lasting
good work, a secure home and supportive network are
a reality for those affected by homelessness. Civitas
specifically supports the relationship-based mentoring
programme focused on developing interpersonal skills and
communication.
This helps to underpin its mission of ‘Good Work, Good
Home’ for all its graduates. The Employment Academy staff
at House of St Barnabas work with victims of homelessness
who have successfully completed the employment
preparation programme into work and helps them to
progress in work.
Impact Highlights 2021-22
Employment Preparation Programme:
●
17 participants successfully graduated from EPP 18
and EPP 19
●
100% of graduates were successfully matched with
a mentor
Employment and Progression:
●
33% of working graduates are earning
London Living Wage
●
23% of working graduates are in good work and a
good home
●
70% of mentor relationships with graduates last for at
least 6 months
●
HOSB has supported a total of 93 people over the year.
18
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Investment Adviser’s Report
continued
Women in Social Housing (WISH)
WISH promotes the benefits of being part of a networking
community and equips its members to succeed, advance
and flourish in the UK housing sector. Civitas support
contributes to the championing of positive outcomes for
women working in the sector.
Care Workers Charity
CWC recognises that care workers face everyday
challenges such as loss of income, inconsistent hours, and
lack of adequate resources. It helps care workers in the
UK (c.2 million workforce) through crisis using financial
support and support centres. CWC provides support
through one-off crisis grants, COVID-19 Emergency Fund
and a Mental Health Support Programme.
Little Sprouts
Little Sprouts promotes the health and wellbeing of
communities through delivery of targeted cooking and
food education workshops, surplus food collection,
and other activities. The charity places a particular
focus on supporting deprived communities where the
socio-economic position – housing, employment, or
education – has had a massive contributory effect on
well-being and health. It has also provided meals for those
with mental health issues affected by the pandemic.
‘A Place For Me’
The Company has from its inception been very keen to
understand how residents living and moving into homes
owned by Civitas benefit from their environment, the
quality of care they received, what benefits they and their
family derive and how society and the taxpayer benefits.
We have rigorously challenged ourselves to ensure the
social impact of the Company is maximised and measured
independently through the Good Economy and Social
Profit Calculator.
We worked with a journalist and photographer who
published a book ‘A Place For Me’ which tells the stories of
50 residents who live in Civitas properties. The interviews
were carried out on site and in person and have also
involved families, care workers and other stakeholders.
The book was published in December 2021, and we believe
it is the largest independent project ever carried out into
the lives of those with learning disabilities and mental
health issues. The book is co-sponsored by a major care
provider.
Governance
CIM continues to engage actively with the Company’s
Approved Provider partners and care providers, providing
advice and shared learning. This has helped to facilitate
continued high level operational performance on
occupancy rates, property compliance matters, and health
and safety.
The Board carries out an annual Board performance
evaluation exercise. All of the Company’s policies and
procedures have been reviewed and, where appropriate,
updated.
The Board has five independent non-executive Directors
and has commenced a recruitment programme to recruit
a sixth director with asset management skills to reflect the
scale of the portfolio, the growth of expertise within the
Investment Adviser and to assist with succession planning
in the future. Both skills and diversity will be important
considerations with this recruitment.
Summary
Care for the vulnerable being delivered in homes or
small residential settings in the community to promote
independent living and better social outcomes is clearly
the long term focus of Government policy in this sector
with considerable cross-party support. In this objective,
the private sector, both in terms of service delivery and
investment, has a pivotal and essential role to play. Civitas
is at the forefront of this investment and brings the skills
and experience required to further expand the delivery of
this critical service and to be influential in enhancing the
development of sector counterparties.
We remain committed to generating growth and
enhancing shareholder value through socially impactful
ethical investing. We are passionately committed to
ensuring this is maintained for the long term.
Civitas Investment Management
Limited
Investment Adviser
29 June 2022
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
19
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Civitas Investment Management
Asset Management
Portfolio Management
Tom Falconer, Head of Asset Management
Previously Group Property Manager at Lifeways (leading UK specialist care provider)
Tom is a former local authority commissioner with over 12 years’ experience in asset
management, specialist housing delivery, together with health and social care integration
across the UK. At CIM, Tom leads the asset management team, working closely with local
authorities and housing associations supporting them in their requirement to meet the demand
for SSH and residential care accommodation.
Matthew Filkin, Investment Advisory Director
Previously COO at Almacantar (Property investment and development company)
Matt has over 20 years of real estate experience covering investment, development, finance
and corporate matters. At CIM, he has an active day-to-day involvement in the operations
of the existing investment strategies working closely with the asset management team to
provide a broad real estate overview. He is also engaged with a number of specific asset
management projects.
Connell Grogan, Senior Portfolio Manager
Previously Senior Portfolio Manager at Resonance Ltd (leading specialist impact investor)
Connell is a Chartered Surveyor and experienced senior portfolio manager with over
20 years’ experience in real estate. He has worked previously with a leading impact fund
manager with a focus on homelessness and specialist supported housing. At CIM, Connell
works within the asset management team focusing on delivering enhancements to the
property portfolios.
A Growing Team of Specialists
Throughout the pandemic, CIM has continued an active recruitment programme aimed at increasing the levels of
resource and expertise within the team. Of particular focus has been the dedicated Asset Management team which
is charged with maintaining the quality of the CSH portfolio and working closely with Approved Providers and other
sector entities including care providers.
During the year to March 2022 a number of senior recruits have joined the team. The Asset Management team is led
by Tom Falconer, a former local authority SSH commissioning officer. This has been part of a broader recruitment
programme. Selected profiles are set out below:
Sean Corney, Director, Asset Management
Previously an executive within Savills’ Asset Management Team
Sean is a specialist in the delivery of asset management with over 20 years’ experience within
the property industry, including supported living and care environments. He is an Associate of
the Royal Institute of Chartered Surveyors (RICS) and a member of the Institution of Residential
Property Management (IRPM). At CIM as part of the asset management team he is responsible for
the oversight of capital works that supports the enhancement of the Company’s portfolio.
20
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Finance and Operations
Civitas Investment Management
continued
Nazlin Nazri, Associate Director
Previously Head of Financing Reporting at Tritax Group
Nazlin has over fifteen years of experience in real estate finance, including financial reporting
under various GAAPs, financial management, group consolidation and fund accounting. At
CIM, she works within the finance team as an associate director on Civitas Social Housing PLC.
Siu-Wai Ng, Commercial Director
Previously Partner, Global Head of Product Development at BlueBay Asset Management
Siu-Wai has over 20 years of experience in the investment management industry, bringing
products to market and building business platforms in both public and private asset classes.
At CIM, she is the Commercial Director with her remit encompassing all aspects relating to
the implementing and administering of new fund launches, assisting in the design of new
commercial strategies.
Charles Reid, Partnership Officer
Previously Lead Housing Benefit Officer at London Borough of Southwark Council
Charles is a housing benefit specialist with a 30-year track record in assessing housing benefit
claims and appeals across many of the largest London local authorities. At CIM, he works
within the asset management team to assist property due diligence and to support the work
of Approved Provider partners in determining housing benefit claims and setting appropriate
rent levels.
Daryl Quarry, Senior Portfolio Manager
Previously Head of Change & Transformation at Falcon Housing Association C.I.C.
Daryl has worked within the social housing sector for over 16 years in business development and
change management. Daryl works collaboratively with the asset management team to support
Approved Providers in implementing software and developing internal processes to contribute to
achieving optimal performance as part of increased independence.
Dipesh Devchand, Group CFO
Previously Managing Director, Head of Fund Finance & Operations for ICG plc
(FTSE 100 listed alternative asset manager)
Dipesh has over 20 years’ experience in finance at a senior strategic level within a financial
services and investment management environment. At CIM Dipesh leads the finance function,
working closely with CIM’s founders and shareholder partners to deliver the strategic mission
of the group. He brings a wealth of experience covering financing, regulatory reporting,
taxation and operational matters.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
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CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Asset Management Case Studies
New wet rooms and a
specialist spa bath
Communal dining area and sensory room
EPC rating from
an E to a B
New kitchens
New stud walls
and insulation
Mill Lane, Weeley Heath, Clacton-on-Sea (5 beds)
Successful transformation project to support house tenants with challenging behaviours. The property required
enhancements relating to energy efficiency, improved security, carefully constructed wet rooms, specialist furniture
and redesigned layouts to assist the care provider in supporting the new tenants. This asset was acquired as part of a
wider portfolio; plans were already in place with the care provider and local authority commissioner to undertake minor
configuration works with some notable enhancements given that it was a much needed service in the local authority
area. The care provider contributed to the overall cost of the works to demonstrate the long term commitment to the
service.
Enhancements within the asset are highlighted below, and notably the energy performance improved from an E rating to
a B rating for the purpose in which the asset is being used for C2 requirements.
As part of the ongoing active management of the CSH portfolio, CIM has developed an extensive asset management
resource that covers all the key disciplines that are apparent within specialist supported housing and the residential
care sectors.
Capital works are undertaken on a rolling basis with much of the work being undertaken around the time of initial
acquisition and paid for by the original vendors as part of the purchase agreement. This ensures that appropriate
adaptations are made to deliver a bespoke property that is suitable for the user’s needs over the long term. Capital
works are also undertaken, from time to time, during the life of the property, with some or all of the costs being borne by
CSH, where it is deemed appropriate to undertake improvement works or repositioning of the asset. In some cases this
also leads to an immediate uplift in rent roll and a commensurate increase in capital values.
Set out below are a number of examples of projects that have been undertaken.
New flooring and
decoration throughout
Communal lounge
New suitable furniture
throughout
New boiler and
heating system
Staff and
security office
22
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
●
Redecoration
●
New flooring in the majority of the
rooms and communal space
●
Communal bathroom
refurbishment
●
New kitchen, repairs to subfloor,
new flooring
●
Repairing and replacing subfloors
in certain bathrooms
Heathfield Apartments, Swansea (15 beds)
Delrose House, Southampton (9 beds)
Asset Management Case Studies
continued
●
External overhaul and
refurbishment
●
New windows and doors installed
●
Rendering replaced and
redecorated
●
Roof upgraded whilst scaffolding
in place
●
New ramp fitted externally for an
additional fire escape route
●
Redecoration to internal areas
affected by propping equipment
The property is situated close to the centre of Swansea, overlooking the city
centre towards the harbour. Given the close proximity to the city centre it
provides easy access for staff, tenants and family members.
Following the acquisition of this asset in 2019 an overhaul of the exterior was
planned to enhance the external appearance and make some minor repairs,
including the rendering and decoration. The initial stages of works were
covered by the vendor, with the care provider enhancing some of the internal
parts of the building as part of a planned internal refurbishment.
CIM on behalf of CSH completed a review of the works and undertook some
further enhancements to key areas of the higher elevations of the building with
the aim of futureproofing areas of the roof, rendering, windows and decoration.
This should prevent disruption at the property in the upcoming years.
CSH provided some additional investment into the asset as part of the wider
scope of works to allow the additional enhancements to happen and deliver
an asset of a higher standard to the care provider and tenants. This is a prime
example of positive collaborative working to achieve a desired outcome.
The care provider approached CSH seeking permission to undertake a
refurbishment program within specific areas of the property. Its plan was to
move tenants from one type of care service to another for long-term
full occupancy.
The works were approved by CSH and paid for in full by the care provider.
These included general redecoration and replacement flooring to enhance
appearance, works to the lift to permit disabled access, refurbishment of wet
rooms and replacement kitchens to be suitable for use by the tenants.
Fully accessible bathroom
refurbished to doc M
building regulations.
New flooring and access
control system.
Internal disabled access lift.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
23
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Sustainability
The business model of the Company is to provide long-
term suitable homes for individuals with care needs;
acting in a sustainable manner is key to achieving
this aim. Properties that are owned by the Company
are tailored to meet the future needs of the tenants
and, where required, are actively asset managed
to provide long-term functionality and value to the
wider community.
Environment
During the investment due diligence phase, the Company
looks closely at the environmental impact of each
potential acquisition, and encourages a sustainable
approach for maintenance and upgrading properties.
Through collaborating with specialist developers and
vendors, the high standards the Company expects from
each investment in the care-based housing sector is
adopted by other companies in the sector.
Once within the portfolio, the properties of the Company
are actively managed, and the Investment Adviser
assesses whether there are opportunities to improve the
environmental efficiency of the properties, in addition to
other asset management initiatives. Further details can
be found on pages 45 to 55.
The Board has considered the requirements to disclose
the annual quantity of emissions; further detail on this is
included in the Report of the Directors on page 61.
Diversity
The Company does not have any employees or office
space and, as such, the Company does not operate a
diversity policy with regards to any administrative and
management functions.
Whilst recognising the importance of diversity in the
boardroom, the Company does not consider it to be
in the interest of the Group and its shareholders to set
prescriptive diversity criteria or targets. The Board has
adopted a diversity policy in respect of appointments
to be made to the Board and will continue to monitor
diversity, taking such steps as it considers appropriate
to maintain its position as a meritocratic and diverse
business. The Board’s objective is to maintain effective
decision-making, including the impact of succession
planning. All Board appointments will be made on merit
and have regard to diversity regarding factors such as
gender, ethnicity, skills, background and experience. See
Corporate Governance Statement on page 67.
The Board comprises three male and two
female non-executive Directors. Throughout the year,
the Company complied with the Hampton-Alexander
Review’s target of a minimum 33% representation of
women on FTSE 350 boards.
The Board is aware of the recommendations of the
Parker Review, which will be taken into consideration as
part of the Board’s succession planning. See Corporate
Governance Statement on page 67.
The Board of Directors of the Company’s subsidiaries,
which are non-operational, each comprise one female
and up to four male Directors.
Human Rights
Given the Company’s turnover for the year under review,
it now falls within the scope of the Modern Slavery
Act 2015. The Company published its modern slavery
statement on 22 September 2021.
The Board is satisfied that, to the best of its knowledge,
the Company’s principal advisers, which are listed in
the Company Information section, comply with the
provisions of the UK Modern Slavery Act 2015.
The Company’s business is solely in the UK and therefore
is considered to be low risk with regards to human
rights abuses.
Community and Employees
The Company’s properties enable the provision of care
to some of the most vulnerable people in the community,
ensuring safe and secure accommodation, tailored to
meet individual care needs. The Company has increased
the provision of care-based housing, bringing new
supply to the sector and providing homes to over 4,500
people. All of the Company’s properties enable the
provision of high levels of care, generating local jobs and
helping to support local economies.
The Company has no employees and accordingly no
requirement to separately report on this area.
The Investment Adviser is an equal opportunities
employer who respects and seeks to empower each
individual and the diverse cultures, perspectives, skills
and experiences within its workforce.
Corporate Social Responsibility Report
24
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Overview
The Directors’ overarching duty is to act in good faith and
in a way that is most likely to promote the success of the
Company as set out in section 172 of the Companies Act
2006. In doing so, Directors must take into consideration
the interests of the various stakeholders of the Company,
the impact the Company has on the community and the
environment, take a long-term view on consequences
of the decisions they make, as well as aim to maintain a
reputation for high standards of business conduct and
fair treatment between the members of the Company.
Fulfilling this duty naturally supports the Company
in achieving its investment objective and helps to
ensure that all decisions are made in a responsible and
sustainable way. In accordance with the requirements
of the Companies (Miscellaneous Reporting) Regulations
2018, the Company explains how the Directors have
discharged their duties under section 172 below.
To ensure that the Directors are aware of, and
understand, their duties, they are provided with the
pertinent information when they first join the Board
as well as receiving regular and ongoing updates and
training on the relevant matters. Induction and access
to training is provided for new Directors. They also
have continued access to the advice and services of the
Company Secretary, and when deemed necessary, the
Directors can seek independent professional advice. The
Schedule of Matters Reserved for the Board, as well as
the Terms of Reference of its committees, are reviewed
regularly and further describe Directors’ responsibilities
and obligations and include any statutory and regulatory
duties. The Audit and Management Engagement
Committee has the responsibility for the ongoing review
of the Company’s risk management systems and internal
controls and, to the extent that they are applicable, risks
related to the matters set out in section 172 are included
in the Company’s risk register and are subject to periodic
and regular reviews and monitoring.
Long-term Success
The strategy of the Company can be found on pages
34 to 37. Any deviation from, or amendment to, that
strategy is subject to Board and, if necessary, shareholder
approval. The Company’s business model, which can be
found on page 34, provides that the Board considers the
long-term consequences of its investment decisions.
The Company grants long-term leases, generally 20 years
in length, to its tenants. The Company seeks to maintain
lasting relationships with its tenants and supports its
tenants in adapting properties to meet their needs,
particularly improving and enhancing properties. Further
details can be found on pages 45 to 55.
Stakeholders
A company’s stakeholders are normally considered to
comprise its shareholders, its employees, its customers,
its suppliers as well as the wider community in which the
company operates and impacts. The Company is different
in that as an investment trust it has no employees and,
in terms of suppliers, the Company receives professional
services from a number of different providers, principal
among them being the Investment Adviser.
Through regular engagement with its stakeholders,
the Board aims to gain a rounded and balanced
understanding of the impact of its decisions. Feedback
from stakeholders is gathered by the Investment Adviser
in the first instance and communicated to the Board in its
regular quarterly meetings and otherwise as required.
The importance of stakeholders is taken into account
at every Board meeting, with discussions involving
careful consideration of the longer-term consequences
of any decisions and their implications for stakeholders.
The following section explains why these stakeholders
are considered of importance to the Company and the
actions taken to ensure that their interests are taken into
account by the Board as part of its decision making.
Section 172 (1) Statement and
Stakeholder Engagement
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
25
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Our stakeholders Key areas of interest How we engage
Shareholders
Continued
shareholder
support and
engagement are
critical to the
existence of the
business and the
delivery of the
long-term strategy
of the business.
●
Current and
future financial
performance
●
Strategy and
business model
●
Corporate
governance
●
ESG performance
and sustainability
●
Climate Change
●
Dividend
The Board welcomes shareholders’ views and places great importance
on communication with the shareholders of the Company. The Board is
responsible for the content of communication regarding corporate issues
and for communicating its views to shareholders. The Board aims to ensure
that shareholders are provided with sufficient information to understand
the risk/reward balance to which they are exposed by the holding of
shares in the Company. Active engagement with shareholders is carried out
throughout the year and regular communication is undertaken to ensure that
they understand the performance of the business. The Board is committed
to maintaining open channels of communication and to engaging with
shareholders in a manner which they find most meaningful, in order to gain
an understanding of the views of shareholders. These channels include:
Annual General Meeting – The Company welcomes and encourages
attendance, voting and participation from shareholders at the AGM, at which
shareholders have the opportunity to meet the Directors and Investment
Adviser and to address questions to them directly. The Investment Adviser
attends the AGM and provides a presentation on the Group’s performance and
its future outlook. The Company values any feedback and questions it may
receive from shareholders ahead of and during the AGM and takes action,
as appropriate.
At the Company’s AGM on 22 September 2021, the Company received votes
representing 27.11% against Resolution 13, the additional 10% pre-emption
resolution. In compliance with the AIC Code of Corporate Governance, the
Board released an announcement on 16 March 2022 outlining how it, via the
Company’s Brokers, had engaged with those shareholders who had voted
against the resolution. It understood that these shareholders followed PIRC’s
or their own internal recommendation to vote against this resolution as
when combined with the standard 10% pre-emption disapplication resolution
it would have resulted in the Company having authority to issue up to
20% pre-emptively.
For the 2022 AGM, which will be held on 15 September 2022, the Board hopes
that shareholders will be able to attend in person. Arrangements for the AGM
will be released in August 2022 and will take account of the latest Government
guidance and advice at the time of publication of the Notice.
Publications – The Annual Report and Half-Year Results are made available
on the Company’s website. These reports provide shareholders with a clear
understanding of the Group’s portfolio and financial position. In addition to the
Annual and Half-Year Reports, regularly updated information is available on
the Company website, including quarterly factsheets, key policies, the investor
relations policy and details of the investment property portfolio. Feedback and/
or questions the Company receives from the shareholders help the Company
evolve its reporting aiming to render the reports and updates transparent and
understandable.
Shareholder meetings – Shareholders are able to meet with the Investment
Adviser and the Company’s Joint Brokers throughout the year and the Investment
Adviser provides information on the Company on the Company’s website.
Feedback from all shareholder meetings with the Investment Adviser and/or the
Joint Brokers, and shareholders’ views, are shared with the Board on a regular
basis. The Chairman and other members of the Board, including the Senior
Independent Director and Chair of the Audit and Management Engagement
Committee, are available to meet with shareholders to understand their views on
governance and the Company’s performance where they wish to do so.
Section 172 (1) Statement and
Stakeholder Engagement
continued
26
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Section 172 (1) Statement and
Stakeholder Engagement
continued
Our stakeholders Key areas of interest How we engage
Shareholders
Continued
shareholder
support and
engagement are
critical to the
existence of the
business and the
delivery of the
long-term strategy
of the business.
●
Current and
future financial
performance
●
Strategy and
business model
●
Corporate
governance
●
ESG performance
and sustainability
●
Climate Change
●
Dividend
Shareholder concerns – The Board gives due consideration to matters
raised by shareholders. In the event shareholders wish to raise issues or
concerns with the Board or the Investment Adviser, they are welcome
to write to the Company at the registered office address set out on
page 137. Other members of the Board are also available to shareholders
if they have concerns that have not been addressed through the normal
channels.
During the year, the Board noted that several activist shareholders had
taken a short position in the Company’s shares. In response to this, the
Board sought to engage with shareholders directly as well as through
the Company’s Brokers and Investment Adviser. Following this, the Board
published a paper to provide detailed responses to the questions which
were raised by the activist shareholders as well as specific responses to
the allegations made by the short sellers.
Investor relations updates – The Board regularly monitors the
shareholder profile of the Company. With the majority of shareholders
being a combination of institutional investors and private client brokers,
the Board receives regular updates on investors’ views and attitudes
from the Company’s Brokers and the Investment Adviser. The results of
these meetings are reported to the Board as part of the formal reporting
undertaken by both the Investment Adviser and Brokers.
Included in the Report of the Directors on page 60 are details of
substantial shareholdings in the Company.
On a regular basis (sometimes weekly) and at Board meetings, the
Directors receive updates from the Company’s Brokers on the share
trading activity, share price performance and any shareholders’ feedback,
as well as an update from the Company’s Investor Relations adviser,
Buchanan, and the Investment Adviser on any publications or comments
by the press. To gain a deeper understanding of the views of its
shareholders and potential investors, the Investment Adviser maintains
regular contact with them and also undertakes investor roadshows.
Any relevant feedback is taken into account when Directors discuss any
possible fundraising or the future dividend policy.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
27
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Section 172 (1) Statement and
Stakeholder Engagement
continued
Our stakeholders Key areas of interest How we engage
Investment
Adviser
Holding the
Company’s shares
offers investors
an investment
vehicle through
which they can
obtain exposure
to the Company’s
portfolio of
properties. The
Investment
Adviser’s
performance
is critical for
the Company
to successfully
deliver its
investment
strategy and
meet its objective
to provide
shareholders
with an attractive
level of income,
together with
the potential for
capital growth.
●
Current and
future financial
performance
●
Shared
commercial
objectives with
the Company
●
Operational
excellence
●
Long-term
development of
its business and
resources
●
ESG performance
and sustainability
The management of the Company’s portfolio is delegated to the
Investment Adviser, which manages the assets in accordance with
the Company’s objectives and policies. At each Board meeting,
representatives from the Investment Adviser are in attendance to present
reports to the Directors covering the Company’s current and future
activities, portfolio of assets and its investment performance over the
preceding period.
Maintaining a close and constructive working relationship with the
Investment Adviser is crucial as the Board and the Investment Adviser
both aim to continue to achieve consistent long-term returns in line
with the Company’s investment objective. Important components of the
culture of both the Company and the Investment Adviser are:
●
operating in a fully supportive, co-operative and open environment
and maintaining ongoing communication with the Board between
formal meetings;
●
encouraging open discussion with the Investment Adviser, allowing
time and space for original and innovative thinking;
●
recognising that the interests of stakeholders and the Investment
Adviser are for the most part well aligned, adopting a tone of
constructive challenge;
●
drawing on Board members’ individual experience and knowledge to
support the Investment Adviser in its monitoring of and engagement
with other stakeholders; and
●
willingness to make the Board members’ experience available to
support the Investment Adviser in the sound long-term development
of its business and resources, recognising that the long-term health
of the Investment Adviser is in the interests of shareholders in the
Company.
Other service
providers
In order to
function as a REIT
with a premium
listing on the
London Stock
Exchange, the
Company relies on
a diverse range of
reputable advisers
for support
in meeting
all relevant
obligations.
●
Current and
future financial
performance
●
Shared
commercial
objectives with
the Company
●
Operational
excellence
●
Long-term
development
of the service
providers’
businesses
●
Sustainability
The Company’s main functions are delegated to a number of service
providers, including the Administrator, the Company Secretary, the AIFM,
the Registrar, the Corporate Brokers and the Depositary, each engaged
under separate contracts. The Board maintains regular contact with its
key external providers and receives regular reporting from them, both
through the Board and Committee meetings, as well as outside of the
regular meeting cycle. Their advice, as well as their needs and views,
are routinely taken into account. Through its Audit and Management
Engagement Committee, the Board formally assesses their performance,
fees and continuing appointment at least annually to ensure that the
key service providers continue to function at an acceptable level and
are appropriately remunerated to deliver the expected level of service.
The Audit and Management Engagement Committee also reviews and
evaluates the control environment in place at each key service provider.
28
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Section 172 (1) Statement and
Stakeholder Engagement
continued
Our stakeholders Key areas of interest How we engage
Care providers
●
Current
and future
performance
●
Welfare of
tenants
●
Lease obligations
●
Void
management
At the outset, it is important to note that the Company does not have
any legal or operational responsibility for the delivery of care in the
properties within the portfolio. However, the Board and the Investment
Adviser have taken the view that they wish to have a detailed
understanding of the delivery of care and the interaction with the major
care providers who deliver this care. Accordingly, the Investment Adviser
maintains an active dialogue with many of the care providers to build
constructive and informed relationships.
At the same time, as part of transaction due diligence at the time of
acquisition of properties, the Investment Adviser undertakes due
diligence with respect to the operational and financial performance of
all care providers who are proposed to deliver care into the particular
properties. This includes the financial standing of the care provider, its
CQC rating and the nature of the SLA agreement covering voids between
the care provider and the Approved Provider.
The Investment Adviser is noted as having demonstrated considerable
expertise and understanding of the care taking place within its
properties.
Tenants
●
Greater
independence
●
Maintaining high
level of care
●
Improved
personal
outcomes
The Company’s properties are adapted for the use of individuals with
long-term care needs within a community setting with the specific
aim of achieving better personal outcomes and independence for the
individuals.
The sector in which the Company operates is regarded as having
achieved significant success in delivering these positive outcomes
compared to long-term older style remote institutional care.
On a regular basis, members of the Investment Adviser visit properties
accompanied by Approved Provider and care provider partners to see
first hand the nature of the housing and care provision that is being
delivered. Whilst this process has slowed as a result of the pandemic,
the Investment Adviser has continued to engage with its tenants. This
is supported by the regular Approved Provider seminars at which the
wellbeing of tenants is discussed in detail.
In March 2022, the Board undertook a site visit to a number of the
Company’s properties. The Board found this visit beneficial as it enabled
it to engage with the Company’s tenants and to see first hand the impact
the Company has had on their wellbeing.
In addition, the Company undertakes resident case studies through
careful and considered interaction via the care provider to assess the
positive impact our properties and associated specialised care have had
on the individual and their wellbeing.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
29
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Section 172 (1) Statement and
Stakeholder Engagement
continued
Our stakeholders Key areas of interest How we engage
Approved
Providers
●
Current
and future
performance
●
Sustainability
●
Compliance
and property
management
●
Welfare of
tenants
●
Lease obligations
The Company’s Approved Provider partners are an important part of the
investment model as the responsibility for collection of housing benefit
and subsequent payment of rent, the maintenance of the properties
under the full repairing and insuring leases and, most importantly, the
safeguarding of the underlying tenants through the above means, lies
with the Approved Providers.
The Investment Adviser works closely with the Company’s Approved
Provider partners to improve standards and governance and to introduce
practices and procedures that make the Company’s investment processes
ever more robust.
The Investment Adviser has a regular open dialogue with the Approved
Provider partners, liaising monthly on compliance, health and safety,
maintenance and future-proofing schemes, as well as hosting quarterly
seminars to discuss current themes/ trends affecting the sector, to
troubleshoot and this serves as an opportunity to build relationships and
share best practice.
The Investment Adviser has continued its regular and extensive dialogue
with Approved Providers which since the start of the pandemic includes
detailed reports on pandemic responsiveness. These reports have shown
a high degree of resilience to the pandemic with few serious cases of
COVID-19 reported due to the quality of the buildings people live in, the
attention and dedication of the one-to-one care they receive and the age
profile of the residents.
The Investment Adviser supported the establishment of The Social
Housing Family CIC, a not-for-profit community interest company
operated independently of the Company whose stated aim is to enable
Approved Providers holding the Company’s leases to increase skills and
experience and to provide funding to promote enhanced performance.
Membership is open to any Approved Provider that holds Civitas leases
and the effect of membership is to transfer ownership of the Approved
Provider to the social housing family. Auckland Homes Solutions was the
first Approved Provider to join and has now recruited a very experienced
and senior executive team and board of management. Qualitas
community benefit society has also joined the CIC.
30
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Section 172 (1) Statement and
Stakeholder Engagement
continued
Our stakeholders Key areas of interest How we engage
Regulator of
Social Housing
(RSH)
●
Financial and
operational
viability
●
Governance
●
Compliance with
health and safety,
and regulatory
standards
●
Safety and
wellbeing of
underlying
tenants
The Company is not itself regulated by the RSH, but it is important to
maintain open and regular dialogue to ensure that the Company and the
RSH are working together to improve the sector.
The Investment Adviser has a regular and ongoing dialogue with the RSH
and with the Approved Provider partners regulated by the RSH.
The Company also publishes responses to the regulatory judgements of
the RSH regarding the Approved Providers working with the Company as
part of the RSH’s general review of Approved Providers engaged in the
provision of property services for vulnerable people as announced
in May 2018. This demonstrates the Company’s desire to maintain a
dialogue with the RSH and its desire to see that the positions improve
where needed.
Other regulatory
authorities
The Company can
only operate with
the approval of
its regulators who
have a legitimate
interest in how
the Company
operates in the
market and treats
its shareholders.
●
Compliance
with statutory
and regulatory
requirements
●
Governance
based on best
practice guidance
●
Better reporting
to shareholders
and other
stakeholders
The Company regularly considers how it meets various regulatory and
statutory obligations and follows voluntary and best practice guidance,
and how any governance decisions it makes can have an impact on
its shareholders and wider stakeholders, both in the shorter and in the
longer-term.
The Board receives quarterly regulatory compliance monitoring updates
from the Investment Adviser.
The Board receives quarterly compliance updates from the AIFM regarding
the Company’s compliance with its investment policy and the Investment
Adviser’s compliance with the Investment Management Agreement.
The Board also has access to the advice of the Company Secretary who
provides updates and advice on regulatory, statutory and governance
matters for consideration by the Board at its quarterly meetings and as
and when required.
Local authorities
●
Provision of
safe and secure
properties of a
high quality
●
Sustainability
for long-term
placements
It is important for the Company to build and maintain relationships with
local authorities as they have an important role in identifying areas of
high demand, agreeing rents and referrals to the Company’s schemes.
The Company will engage with the local authority commissioner either
directly, or through specialist consultants, Approved Provider and care
provider partners as part of the Company’s due diligence to ensure that
each property being acquired has been commissioned by the relevant
local authority and that rent levels have been discussed and agreed.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
31
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Section 172 (1) Statement and
Stakeholder Engagement
continued
Our stakeholders Key areas of interest How we engage
Lenders
Availability of
funding and
liquidity are
crucial to the
Company’s ability
to take advantage
of investment
opportunities as
they arise.
●
Current and
future financial
performance of
the business
●
Openness and
Transparency
●
Proactive
approach to
communication
●
Operational
excellence
The Company has arranged debt facilities from a wide range of lenders
and engages with these on a regular basis through regular meetings and
presentations to ensure they are informed on all relevant areas of the
business. The continual dialogue helps to support the credit relationships.
The Company has reaffirmed its Investment Grade High Credit Quality
Rating from Fitch Ratings Limited of “A” (senior secured) and a Long-Term
IDR (Issuer Default Rating) of A- with a Stable Outlook.
This will enable the Company to pursue its strategy in relation to debt
funding, in addition to continuing to work with the Company’s existing
lenders, with whom the Company has built strong relationships.
Communities
The Company’s
assets rely on a
strong, positive
connection
with the local
communities in
which its business
operates.
●
Acceptance
of care in the
community
●
Availability of
local facilities for
tenants
A key component of the Company’s portfolio is that the properties within
it are set within community environments so that individuals are able as
part of their care plan to interact with the local community rather than
being isolated.
This is achieved in consultation with local authorities in determining
that the initial settings are appropriately diversified within the respective
community and are not clustered in a way that would lead to isolation.
This assists the individuals and also ensures appropriate integration
within the community. On a day-to-day basis, care providers and
Approved Providers operate policies to ensure positive relationships
with neighbours and surrounding dwellings. The activities within the
Company’s properties create employment within the local community for
both housing and care workers.
Charity partners
●
Delivering
needed support
to vulnerable
adults
●
Improved
well-being of
vulnerable adults
●
ESG performance
and sustainability
The Company supports a number of organisations whose objectives
are to provide improved outcomes for vulnerable adults affected by
homelessness and other care needs.
The Company commits targeted financial support to fund specific
programmes which help those affected by homelessness by teaching
them skills and offering support to prevent them from being in that
position again.
The Company ensures regular calls and meetings with our charity
partners to update on progress and projects being undertaken, as well as
attending events in support of their work.
In 2020, the Company amended its investment objective and investment
policy to enable it to enter into long-term leases with the NHS and with
registered charities operating within areas of investment interest to the
Company. The amendments will allow the Company access to a wider
range of pipeline opportunities and will assist in providing the currently
unmet demand in these areas.
32
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Section 172 (1) Statement and
Stakeholder Engagement
continued
Principal Decisions
Principal decisions have been defined as those that have
a material impact to the Group and its key stakeholders.
In taking these decisions, the Directors considered their
duties under section 172 of the Act. Principal decisions
made during the year were as follows:
New Regulatory Clause Initiative
In 2022, the Board considered and agreed a new
approach to the Company’s lease model with the goal
of supporting additional regulatory compliance and
addressing perceptions of risk. The new regulatory
clause will enable Approved Providers to achieve greater
alignment between income receipts and lease liabilities,
set achievable capital solvency requirements against
lease obligations and demonstrate a further degree of
risk sharing. This will assist the Company’s counterparties
to demonstrate compliance with the Regulator of Social
Housing’s Governance and Financial Viability Standard
(refer to page 17).
The new regulatory clause would operate on a property
by property basis and provide for a temporary pass
through of lease rent in certain limited circumstances
when an Approved Provider is not in receipt of full
payment and would ensure that the Company does
not become responsible for obligations that are rightly
owed by others such as void cover by care providers.
The new regulatory clause will provide the Company
with counterparties which are better able to achieve
regulatory compliance, enhanced information, step in
rights and unchanged lease and property values.
Publication of Market Update
In response to the unfounded comments by an activist
short-seller who took up a position in the Company’s
shares, the Board took the decision to publish a Market
Update paper on 11 October 2021 to provide a detailed
response and also address principal areas of discussion
that had been brought out in conversations with
shareholders.
The Company and CIM have continued to make
themselves available to speak and meet with both new
and existing shareholders following the release of the
detailed market update.
Both the Board and representatives of the Investment
Adviser continue to be available to engage with
shareholders.
Buyback Programme
During the year, the Board monitored the decline in the
Company’s share price which, in its view, was associated
with activity from an activist short seller and subsequent
press coverage, the content of which the Board continues
to believe to be baseless, incorrect and/or misleading.
In response to the decline in the share price, the
Board agreed the implementation of a share buyback
programme under certain parameters, which is being
operated by the Company’s joint brokers. The impact of
share buybacks continue to enhance IFRS NAV per share
by 0.26p at 31 March 2022.
Further information on the Company’s buyback
programme can be found on page 59.
Agreement with E.ON to reduce
carbon footprint
In June 2021, the Company entered into a national
framework agreement with energy provider E.ON to
undertake environmental enhancements that would help
to reduce the carbon footprint of the Company’s portfolio.
The agreement was focused on those properties with
lower EPC ratings and formed part of the Company’s
objective to reach carbon neutrality. The agreement built
on successful pilot projects already undertaken by the
Company and E.ON. It benefits the Company’s Approved
Provider and other non-for-profit partners by reducing
maintenance cost and energy bills without any costs
being incurred by them and enabling them to contribute
to a reduced carbon footprint.
The project draws on the ECO3 funding scheme, and
the maintenance costs benefited from the Domestic
Renewable Heat Incentive.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
33
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Purpose of the Company
The Company was established in 2016 with the purpose
of delivering long-term responsible, stable returns to
investors and achieving positive measurable social
impact and ESG benefits on a large scale. It should
achieve this as a result of introducing long-term equity
capital into the social housing sector with a particular
focus on care-based community housing. By doing so,
this would form a bridge between equity investors and
the social housing sector and bring together aspects of
healthcare with social housing.
The Company has since developed the largest portfolio
of care-based community housing in the UK that provides
long-term homes for more than 4,500 individuals across
half the local authorities in England and Wales.
As a result of this success, the Company has recently
extended its mandate to be able to enter into
transactions directly with the NHS and with leading
charities with an interest in the provision of specialist
housing that has a strong care or support element, is
consistent with public policy and whose costs are met by
the public purse for which it offers value for money.
Investment Objective
The Company’s investment objective is to provide
shareholders with an attractive level of income, together
with the potential for capital growth from investing in a
portfolio of Social Homes, which benefits from inflation
adjusted long-term leases or occupancy agreements with
Approved Providers and to deliver, on a fully invested
and geared basis, a targeted dividend yield of 5% per
annum
1
, which the Company expects to increase broadly
in line with inflation.
Investment Policy
The Company’s investment policy is to invest in a
diversified portfolio of Social Homes throughout
the United Kingdom. The Company intends to meet
the Company’s investment objective by acquiring,
typically indirectly via Special Purpose Vehicles,
portfolios of Social Homes and entering into long-term
inflation adjusted leases or occupancy agreements
for terms primarily ranging from 10 years to 40 years
with Approved Providers, where all management
and maintenance obligations will be serviced by the
Approved Providers. The Company will not undertake
any development activity or assume any development or
construction risk. However, the Company may engage in
renovating or customising existing homes, as necessary.
The Company may make prudent use of leverage to
finance the acquisition of Social Homes and to preserve
capital on a real basis.
The Company is focused on delivering capital growth
and expects to hold its Portfolio over the long term and
therefore it is unlikely that the Company will dispose
of any part of the Portfolio. In the unlikely event that a
part of the Portfolio is disposed of, the Directors intend
to reinvest proceeds from such disposals in assets in
accordance with the Company’s investment policy.
Investment Restrictions
The Company invests and manages the Portfolio with the
objective of delivering a high quality, diversified Portfolio
through the following investment restrictions:
●
the Company only invests in Social Homes located in
the United Kingdom;
●
the Company only invests in Social Homes where the
counterparty to the lease or occupancy agreement is
an Approved Provider;
●
no lease or occupancy agreement shall be for an
unexpired period of less than 10 years, unless the
shorter leases or occupancy agreements represent
part of an acquisition of a portfolio which the
Investment Adviser intends to reorganise such that
the average term of lease or occupancy agreement is
increased to 15 years or above;
●
the aggregate maximum exposure to any single
Approved Provider is 25% of the Gross Asset Value,
once the capital of the Company is fully invested;
●
no investment by the Company in any single
geographical area, in relation to which the houses
and/or apartment blocks owned by the Company are
located on a contiguous or largely contiguous basis,
exceeds 20% of the Gross Asset Value of the Company;
●
the Company only acquires completed Social Homes
and will not forward finance any development of new
Social Homes;
●
the Company does not invest in other alternative
investment funds or closed-end investment
companies; and
●
the Company is not engaged in short selling.
The investment limits detailed above apply at the time of
the acquisition of the relevant investment in the Portfolio
once fully invested. The Company would not be required
to dispose of any investment or to rebalance the Portfolio
as a result of a change in the respective valuations of its
assets.
Gearing Limit
The Directors seek to use gearing to enhance equity
returns. The level of borrowing is set on a prudent basis
for the asset class and seeks to achieve a low cost of
funds, whilst maintaining the flexibility in the underlying
security requirements and the structure of both the
Portfolio and the Company.
Strategic Overview
1 The dividend yield is based on the original IPO price of 100 pence per Ordinary share. The target dividends are targets only and do not represent a profit forecast.
There can be no assurance that the targets can or will be met and should not be taken as an indication of the Company’s expected or actual future results.
Accordingly, potential investors should not place any reliance on these targets in deciding whether or not to invest in the Company or assume that the Company
will make any distributions at all, and should decide for themselves whether or not the target dividend yields are reasonable or achievable.
34
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Strategic Overview
continued
Key Performance Indicators (“KPIs”)
Measure Explanation Result
Increase in IFRS
NAV per share
Target to achieve capital appreciation whilst
maintaining a low risk strategy from enhancing
the quality of cash flows from investments, by
physical improvement of properties and by
creating a significantly diversified, high-quality
portfolio.
IFRS NAV increase of 12.3p per share 12.60%
from IPO (2021: 10.3p per share 10.56% from IPO).
Dividends per
share
For the year ended 31 March 2022, the Company
targeted a dividend of 5.55p per share.
Total dividend of 5.55p per share declared for the
year to 31 March 2022 (2021: 5.40p).
Number of Local
Authorities,
Approved
Providers and
care providers
Target risk mitigation through a diversified
portfolio (once fully invested) with no more
than 25% exposure to any one Local Authority or
single Approved Provider and no more than 20%
exposure to any single geographical area, once
the capital of the Company is fully invested.
As at 31 March 2022:
●
178 Local Authority partners (2021: 164 Local
Authority partners)
●
18 Approved Providers (2021: 16 Approved Providers)
●
130 Care Providers (2021: 118 Care Providers)
The Company’s largest single exposure is to
Auckland Home Solutions CIC and currently
stands at 16% (2021: 24%). The largest geographical
concentration is in the South West, being
16% (2021: 16%).
Loan to
Gross Assets
(Leverage)
Targeted total debt drawn no more than 40% of
gross assets.
Leverage as at 31 March 2022 of 34.43% of gross
assets (2021: 34.48%).
The Company may, following a decision of the Board,
raise debt from banks and/or the capital markets and the
aggregate borrowings of the Company is always subject
to an absolute maximum of 40% of Gross Asset Value
calculated at the time of drawdown. Current gearing is
34.43%.
Debt is secured at asset level, whether over a particular
property or a holding entity for a particular series of
properties, without recourse to the Company and also
potentially at Company level with or without a charge
over the Portfolio (but not against particular assets),
depending on the optimal structure for the Company and
having consideration to key metrics including lender
diversity, cost of debt, debt type and maturity profiles.
Otherwise there will be no cross-financing between
investments in the Portfolio and the Company will not
operate as a common treasury function between the
Company and its investments.
Use of Derivatives
The Company may choose to utilise derivatives for
efficient portfolio management. In particular, the
Directors may engage in full or partial interest rate
hedging or otherwise seek to mitigate the risk of interest
rate increases on borrowings incurred in accordance
with the gearing limits as part of the management of the
Portfolio.
Cash Management
Until the Company is fully invested, and pending
re-investment or distribution of cash receipts, the
Company invests in cash, cash equivalents, near cash
instruments and money market instruments.
REIT Status
The Directors conduct the affairs of the Company so as to
enable it to remain qualified as a REIT for the purposes
of Part 12 of the Corporation Tax Act 2010 (and the
regulations made thereunder).
Culture
The Directors agree that establishing and maintaining
a healthy corporate culture among the Board and in its
interaction with the Investment Adviser, shareholders
and other stakeholders will support the delivery of its
purpose, values and strategy. The Board seeks to promote
a culture of openness, debate and integrity through
ongoing dialogue and engagement with its service
providers, principally the Investment Adviser.
As detailed in the Corporate Governance Statement,
the Company has a number of policies and procedures
in place to assist with maintaining a culture of good
governance, including those relating to diversity and
Directors’ conflicts of interest. The Board assesses and
monitors compliance with these policies as well as the
general culture of the Board through Board meetings and,
in particular, during the annual evaluation process which
is undertaken by each Director (for more information, see
the performance evaluation section on page 70).
The Board’s culture itself is one of openness,
collaboration and constructive debate to ensure the
effective contribution of all Directors, particularly in
respect of the Board’s decision making. Consideration
of our Stakeholders is embedded in the Board’s decision
making process. Please see our section 172 Statement on
page 25.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
35
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Strategic Overview
continued
EPRA
The Company is a member of the European Public Real Estate Association (“EPRA”). EPRA has developed and defined
the following performance measures to give transparency, comparability and relevance of financial reporting
across entities which may use different accounting standards. The Company is pleased to disclose the following
measures which are calculated in accordance with EPRA guidance. These are all Alternative Performance measures of
the Company.
Past performance is not a reliable indicator of future performance. For detailed workings reconciling the above
measures to the IFRS results, please see Appendix 1 to these financial statements on pages 129 to 131.
EPRA Earnings
Earnings from operational
activities.
DefinitionPurposePerformance
EPRA Net Reinstatement
Value (“NRV”)
EPRA NAV metric which
assumes that entities never
sell assets and aims to
represent the value required
to rebuild the entity.
EPRA Net Tangible Assets
(“NTA”)
EPRA NAV metric which
assumes that entities buy
and sell assets, thereby
crystallising certain levels of
unavoidable deferred tax.
EPRA Net Disposal
Value (“NDV”)
EPRA NAV metric
which represents the
shareholders’ value under
a disposal scenario,
where deferred tax,
financial instruments and
certain other adjustments
are calculated to the full
extent of their liability, net
of any resulting tax.
The EPRA NAV set of metrics make adjustments to the NAV per the IFRS financial
statements to provide stakeholders with the most relevant information on the fair
value of the assets and liabilities of a real estate investment company, under different
scenarios.
EPRA Earnings
£
2022
2021
2020
29,810,000
30,630,000
EPRA NRV per share
(diluted) pence
2022
2021
2020
109.96
108.38
107.95
EPRA NTA per share
(diluted) pence
2022
2021
2020
109.96
108.38
107.95
EPRA NDV per share
(diluted) pence
2022
2021
2020
110.74
107.97
107.39
EPRA Earnings per share
(Basic and diluted) pence
2022
2021
2020
4.82
4.63
4.93
A key measure of a
company’s underlying
operating results and an
indication of the extent to
which current dividend
payments are supported
by earnings.
28,814,000
EPRA NRV
£
2022
2021
2020
673,416,000
674,042,000
671,042,000
EPRA NTA
£
2022
2021
2020
673,416,000
674,042,000
671,042,000
EPRA NDV
£
2022
2021
2020
678,191,000
671,476,000
667,560,000
36
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Past performance is not a reliable indicator of future performance. For detailed workings reconciling the above
measures to the IFRS results, please see Appendix 1 to these financial statements on pages 129 to 131.
Strategic Overview
continued
EPRA Topped-up Net
Initial Yield (“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
stepped rents).
EPRA Vacancy Rate
Estimated Market Rental
Value (“ERV”) of vacant
space divided by ERV of
the whole portfolio.
EPRA Costs Ratio
Administrative and
operating costs (including
and excluding costs of
direct vacancy) divided
by gross rental income.
A ‘pure’ (%) measure of
investment property
space that is vacant,
based on ERV.
A key measure to enable
meaningful measurement
of the changes in a
company’s operating costs.
EPRA NIY
%
2022
2021
2020
5.28
5.24
5.26
EPRA Topped-up NIY
%
2022
2021
2020
5.28
5.24
5.26
EPRA Costs Ratio
1
%
2022
2021
2020
20.20
20.33
21.48
A comparable measure for portfolio valuations.
These measures should make it easier for investors
to judge themselves, how the valuation of portfolio
X compares with portfolio Y.
DefinitionPurposePerformance
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 with
(estimated) purchasers’
costs.
1 The ratios inclusive of vacancy costs are the same as the ratio exclusive of vacancy costs for 2022, 2021 and 2020.
EPRA Vacancy Rate
%
2022
2021
2020
0
0
0
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
37
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
GROUP STRATEGIC REPORT
Principal Risks and Risk Management
The Board considers that the risks detailed below are the principal risks facing the Group currently, along with the risks
detailed in note 31.0 to the financial statements. These are the risks that could affect the ability of the Company to deliver
its strategy. The Board confirms that the principal risks of the Company, including those which would threaten its future
performance, solvency or liquidity, have been robustly assessed throughout the year ended 31 March 2022, taking into
account the emerging risks such as the evolving Ukraine-Russia conflict risk, climate change risk, cyber security risk and
recruitment of staff at counterparties risk, and that processes are in place to continue this assessment.
The Audit and Management Engagement Committee has divided the Company’s risks into the following risk type
categories:
●
Strategy and Competitiveness;
●
Operational, including Cyber Crime;
●
Investment Management; and
●
Accounting, Legal and Regulatory.
Each risk contained in each category is reviewed for its impact and probability by the Audit and Management
Engagement Committee at least twice during the year.
The Audit and Management Engagement Committee takes responsibility for overseeing the effectiveness of risk
management and internal control systems on behalf of the Board and advises the Board on the principal risks facing
the business.
Further details of risk management processes that are in place can be found in the Corporate Governance Statement
on pages 70 and 71. The principal and emerging risks and uncertainties relating to the Group are regularly reviewed
by the Board along with the internal controls and risk management processes that are used to mitigate these
risks. The Board has identified four new principal risks during the year (as set out in the list of principal risks and
uncertainties), with the risk associated with share price disruption due to an activist shareholder being identified as
having the highest impact and likelihood. The risk associated with the failure to monitor and ensure that contingent
activities are being completed by Approved Providers was removed as a principal risk by the Board during the year.
Further details on this and the other principal risks and the management of those risks are described below:
Impact
Probability
Very High
High
Medium
Low
Very Low
Very
Likely
LikelyPossibleUnlikely
Very
unlikely
97
4
5
3 6
8
2
1
10
38
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Principal Risks and Uncertainties
1. Strategy and Competitiveness risk Impact How managed/mitigated
The Company’s share price is
disrupted due to an activist
shareholder.
This risk was newly identified
during the year.
The Company is targeted
by a short seller or activist
shareholder leading to
a fall in the Company’s
share price and a
widening of the discount
to NAV.
Significant numbers of
shares may need to be
repurchased leading to
a fall in the size of the
company and liquidity
implications.
The Board is committed to maintaining
open channels of communication with
shareholders and engaging in ways
shareholders find most meaningful, in
order to gain understanding of shareholder
views. Further information on the Board’s
engagement with shareholders can be
found on pages 25 to 33.
The Board seeks to provide full disclosure
on the counterparties and the structure of
transactions so that all stakeholders are
kept reliably informed on the Company’s
business dealings.
The Board regularly reviews the
Company’s buyback policy to ensure this
is in alignment with the interests of the
Company and shareholders. The Board
is also mindful of the possibility to issue
shares and regularly reviews its policy in
this area to ensure that it is consistent with
the Company’s strategy. It receives regular
updates from the Company’s brokers to
help inform its decisions in this regard.
Impact:
High
Probability:
Likely
2. Strategy and competitiveness risk Impact How managed/mitigated
The Company and its operations
are subject to laws and regulations
enacted by national and local
governments and government
policy.
This risk remained at the same
level as the year ended 31 March
2021.
Any change in the
laws, regulations and/
or government policy
affecting the Company
and its operations may
have a material adverse
effect on the ability of the
Company to successfully
pursue its investment
policy and meet its
investment objective
and on the value of the
Company and the shares.
The Company focuses on niche real estate
sectors where it believes the regulatory
framework and underlying demand
dynamics to be robust.
The Investment Adviser has strong industry
contacts and has good knowledge on
policy opinion and direction.
The Board obtains regular updates
from professional advisers to monitor
developments in regulation and legislation.
Impact:
Very high
Probability:
Unlikely
3. Strategy and competitiveness risk Impact How managed/mitigated
As a result of competition from
other purchasers of social housing
properties, the Company’s ability
to deploy capital effectively within
a reasonable timeframe may be
restricted or the net initial yields at
which the Company can acquire
properties may decline such that
target returns cannot be met.
This risk remained at the same
level as the year ended 31 March
2021.
The rate of capital
deployment would drop,
decreasing returns to
shareholders.
The Company has strong links with vendors
and a robust pipeline of future acquisitions.
The Board regularly reviews the pipeline
of potential acquisitions and monitors the
market landscape.
The Board is aware of the current
competitive social housing market and
recognises the impact this may have on
the Company’s ability to deploy capital
effectively.
Impact:
High
Probability:
Unlikely
Principal Risks and Risk Management
continued
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
39
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Principal Risks and Risk Management
continued
4. Investment management risk Impact How managed/mitigated
Tenant defaulting under the terms
of a lease.
This risk remained at the same
level as the year ended 31 March
2021.
Loss of rental income in
the short term.
The portfolio is highly diversified to reduce
the impact of default. Extensive diligence is
undertaken on all assets, which is reviewed
and challenged by the Board.
The Investment Adviser works proactively
with Approved Providers to address any
potential concerns.
The Board is provided with regular updates
on the tenants with any concerns raised for
discussion.
The Board has noted that the Company’s
historic level of defaults has been
immaterial.
Impact:
Medium
Probability:
Likely
5. Investment management risk Impact How managed/mitigated
The value of the investments made
by the Company may change from
time to time according to a variety
of factors, including movements
in interest rates, inflation and
general market pricing of similar
investments.
This was identified as a heightened
risk during the year.
The valuation of the
Company’s assets would
fall, decreasing the
NAV and yields of the
Company.
The Company invests in projects with
stable, predetermined, long-term leases in
place with CPI or CPI plus 1% indexation
and its strategy is not focused on sale of
properties.
The Board receives regular updates on
factors that might impact investment
valuations.
Impact:
High
Probability:
Possible
6. Investment management risk Impact How managed/mitigated
Due diligence may not reveal all
facts and circumstances that may
be relevant in connection with an
investment and may not prevent
an acquisition being materially
overvalued or rental streams being
at risk.
This risk remained at the same
level as the year ended 31 March
2021.
The Company would
overpay for assets
impairing shareholder
value, reducing rental
income and therefore
returns.
The Company undertakes detailed due
diligence on the properties, their condition,
the proposed rental levels – benchmarking
against comparable schemes using both
external consultants where required and
its own proprietary database – and on the
Approved Providers and care providers
involved in each property to ensure that the
purchase price is robust.
The Board considers the due diligence
undertaken when approving acquisitions.
Impact:
High
Probability:
Unlikely
7. Investment management risk Impact How managed/mitigated
Loss of key staff at the Investment
Adviser.
This risk remained at the same
level as the year ended 31 March
2021.
Negative investor
sentiment leading to a
reduction in share price.
Reduction in ability to
source off market and
favourable deals.
The Board considers the risk of the
Investment Adviser losing key staff and the
succession plans the Investment Adviser
has in place.
The Board has noted the ongoing
expansion of the Investment Adviser’s
support team.
Impact:
High
Probability:
Unlikely
8. Strategy and competitiveness Impact How managed/mitigated
The Company fails to respond to
issues related to climate change,
either directly as enhancements
to properties or indirectly via its
climate change reporting.
This was a newly identified risk
during the year.
Decrease in the value of
the Company’s assets and
a negative impact on the
Company’s share price.
Regular review and consideration by
the Board including the input of climate
change specialists at the Investment
Adviser.
Advice received from external professional
advisers.
Impact:
High
Probability:
Unlikely
40
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Principal Risks and Risk Management
continued
9. Operational, including cyber crime Impact How managed/mitigated
Serious accident or poor
management amongst Approved
Providers due to staff shortages,
loss of competence and
vaccination uptake.
This was identified as a heightened
risk during the year.
Reputational damage for
the Company.
Reporting from Approved Providers and
monitoring of Approved Providers by the
Investment Adviser.
Impact:
High
Probability:
Unlikely
10. Strategy and competitiveness Impact How managed/mitigated
The Company is not promoted in
a way which generates investor
demand, especially with regard to
ESG focus.
This was identified as a heightened
risk during the year.
A reduction in the
Company’s share price
and a widening of the
discount to NAV.
The Board monitors the marketing and
distribution activity undertaken by the
Investment Adviser and the Corporate
Brokers at each meeting as well as
receiving regular reports from its PR adviser
Buchanan.
The Board utilises discount control
mechanisms to support promotional
activities.
The Board engages The Good Economy and
Social Profit Calculator and reports findings
to shareholders.
The Board considers ESG reporting in the
Annual Report and Accounts carefully.
Impact:
Medium
Probability:
Unlikely
Emerging risks
Emerging risks are considered during the regular
risk review, and would be specifically discussed and
evaluated as they arise during the year. Input from the
Investment Adviser on emerging risks is considered by
the Audit and Management Engagement Committee.
Key emerging risks identified and considered during the
year include:
●
Ukraine-Russia Conflict – the impact of Ukraine-
Russia conflict. Although the Company has no direct
exposure to Russia or eastern European territories, the
Board continues to closely monitor this.
●
Long-Term Climate Change – the impact of climate
change, over the longer-term on the business. The
Company is committed to understanding ESG risk,
including the particular impact of climate change
on the business. Climate change poses an indirect
risk to the Company’s operations, the environment
and society, and the Board is aware that appropriate
action is required to reduce its impact.
●
Cyber Security – the impact of a cyber security breach
within the Company or its service providers. During the
year, the Board was made aware of a minor data breach
within the Depository. The breach has had no impact
on the Company’s operations and no personal data was
compromised. The Board is satisfied that the Depository
has taken appropriate immediate remedial action and
has adequate safeguards in place.
Please see the Company’s ESG Report on pages 45 to 55
for further details.
The Listing Rules require premium-listed commercial
companies to disclose in their annual report whether
they have reported on how climate change affects
their business in a manner consistent with the
recommendations of the Task Force on Climate-related
Financial Disclosures (‘TCFD’), and to provide an
explanation and other information if they are unable
to do so. In addition, the UK Government intends to
introduce mandatory climate-related disclosures to
supplement the requirements under the Listing Rules. The
Board has chosen not to adopt the requirements early
and expects these to be applicable to the Company in the
financial year 2024.
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
41
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Going Concern
The Board regularly reviews the position of the Company
and its ability to continue as a going concern at its
meetings. The financial statements set out the current
financial position of the Company.
The Company acquires high-quality property with a
particular focus on property providing care for the long
term. The properties acquired are on long-term full
repairing and insuring leases in a sector of the market
with very high levels of need. The cost base of the
Company is proportionately low compared to revenue
and there is a high level of certainty over cost to be
incurred. On this basis, the Company is expected to be
viable well beyond the five-year term considered in the
Company’s testing below.
As at 31 March 2022, the Company held cash balances of
£53.3 million (net of operating and financing amounts
due). The Board has evaluated the financial position
of the Company and has maintained its premium
investment grade rating from Fitch Ratings Ltd – a well
established rating agency with a strong familiarity to the
alternative healthcare real estate space, which gives the
Company confidence in the ability to raise future debt
and/or equity capital in order to fund the Company’s
investments for the long term and to facilitate the
payment of dividends to shareholders. Based on these,
the Board believes that the Company is in a position to
manage its financial risks.
Various forms of sensitivity analysis have been
performed, in particular the financial performance of
tenants and a reduction in rent. As at 31 March 2022, the
rent would have to drop by approximately 29% before its
loan covenant is breached. At the date of approval of this
report, the Company has substantial headroom within
its financial loan covenants. The Company also benefits
from a secure income stream from leases with long
average unexpired term leases.
Leverage is prudently maintained at a level of less than
40% of GAV.
The Company’s articles of association include a
requirement for the Board to propose an ordinary
resolution at the annual general meeting following the
fifth anniversary from the initial public offering of the
Company for the Company to continue in its current form
(the Continuation Resolution). This is the first continuation
vote since the Company was set up.
If the Continuation Resolution is passed, the Company will
continue its business as presently constituted and propose
the same resolution at every fifth annual general meeting
thereafter. If the Continuation Resolution is not passed, the
Directors will be required, within six months after the date
of this annual general meeting, to formulate proposals
for consideration by the shareholders for the voluntary
liquidation, unitisation, reorganisation, or reconstruction
of the Company. After making appropriate enquiries of the
Company’s brokers and Investment Adviser, pursuant to
their recent discussions with a number of the Company’s
shareholders, the Directors are of the view that the
Continuation Resolution will be passed at the forthcoming
annual general meeting. This reflects the strength and
nature of the Company’s portfolio, and specifically the
provision of long-term accommodation for more than
4,000 vulnerable individuals. Accordingly, the Directors
expect that if the Continuation Resolution is not passed,
an event which the Directors consider to be highly remote,
formulating and implementing any such proposals would
require the Company to continue operations for a period
of at least 12 months from the date of approval of the
Company’s financial statements.
The Board is, therefore, of the opinion that the going
concern basis adopted in the preparation of the
consolidated financial statements is appropriate.
Viability Statement
The Directors present the Company’s viability statement
which summarises the results of their assessment of
the Company’s current position, its principal risks and
prospects over a period to 31 March 2027.
The assumptions underpinning the forecast cashflows and
covenant compliance forecasts were sensitised to explore
the resilience of the Company to the potential impact of the
Company’s principal risks and uncertainties.
The prospects were assessed over a five-year period for
the following reasons:
i) the Company’s long-term forecast covers a five-year
period;
ii) the length of service level agreements between
Approved Providers and care providers is typically five
years; and
iii) the Company’s leases are typically 25 years on fully
repairing and insuring leases, enabling reasonable
certainty of income over the next five years.
Going Concern and Viability Statement
42
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Company’s five-year forecast incorporates
assumptions related to the Company’s investment strategy
and principal risks from which performance results, cash
flows and key performance indicators are forecast. The
principal risks are set out on pages 38 to 42. Of these risks,
those which are expected to have a higher impact on the
Company’s longer-term prospects are those related to
future government housing policies. The Company has
considered its strategy over a longer term and, in light
of the inherent demand for the Company’s properties
and the vulnerable nature of the ultimate tenant, the risk
of change in future housing policy is considered to be
limited. The principal risks are mitigated by the Company’s
risk management and internal control processes, which
function on an ongoing basis.
The Board, via delegation to the Audit and Management
Engagement Committee, monitors the effectiveness
of the Company’s risk management and internal
control processes on an ongoing basis. The monitoring
activities are described in the Report of the Audit and
Management Engagement Committee on pages 62 to 65
and include direct review and challenge of the Company’s
documented risks, risk ratings and controls, and review
of performance and compliance reports prepared by
the Company’s advisers and the independent external
auditors.
The Board of Directors has carried out a robust
assessment of the principal and emerging risks facing
the Company, including those that would threaten its
business model, future performance, solvency and
liquidity. Where appropriate, the Company’s forecasts are
subject to sensitivity analysis, which involves applying
severe conditions and flexing a number of assumptions
simultaneously.
The sensitivities performed were designed to provide
the Directors with an understanding of the Company’s
performance in the event of severe but plausible
scenarios, taking full account of mitigating actions
that could be taken to avoid or reduce the impact or
occurrence of the underlying risks outlined below:
●
10% of tenants defaulting under a lease. The outcome
of this scenario reduces profits on average over the
five year forecast by 15% per annum and reduces cash
by £20 million. However, the Board is still comfortable
that dividends could be paid as there is still sufficient
level of cash in the business; and
●
deterioration in economic outlook, change in
government housing policy which could impact the
fundamentals of the social housing sector, including
a negative impact on valuations and a 5% reduction
in annual rents. The outcome of the ‘severe downside
scenario’ was that the Company’s covenant headroom
on existing debt (i.e the level at which the investment
property values would have to fall before a financial
breach occurs) reduces by 13%, prior to any mitigating
actions such as asset sales, which indicates that
covenants on existing facilities would not be breached.
The Board has noted that the Company is due to hold
its first continuation vote at the AGM in September 22.
This would be an ordinary resolution requiring approval
from 50% of the shareholders voting. Further details as
to how the Company has considered the impact of the
continuation vote can be found in the Going Concern
section on the previous page.
The remaining principal risks and uncertainties, whilst
having an impact on the Company’s business, are
not considered by the Directors to have a reasonable
likelihood of impacting the Company’s viability over the
five-year period, therefore the scenarios outlined above
are the only ones that have been specifically tested.
Based on the results of their assessment, the Directors
have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as
they fall due over the five-year period of their assessment.
Approval of Strategic Report
The Group Strategic Report was approved by the Board
and signed on its behalf by:
Michael Wrobel
Chairman
29 June 2022
Going Concern and Viability Statement
continued
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATIONGROUP STRATEGIC REPORT
43
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Environmental,
Social &
Governance
Environmental, Social & Governance
45 Energy Performance/SAP Ratings
46 The Portfolio’s Carbon Footprint
47 E.ON Project Results (Phase 1) and Next Steps
48 Case Study
49 Social Impact
50 ‘A Place For Me’
52 Social Impact – Charitable Partnerships
53 Governance – Indices
54 United Nations Sustainable Development Goals (“UN SDGs”) Alignment
55 Governance – Frameworks
44
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Energy Performance/SAP Ratings
Carbon Reduction – EPC/SAP Ratings
Civitas Portfolio (domestic and non-domestic) Energy Performance
Certificates (EPC) – March 2022.
Alongside increasing supply of social housing for vulnerable adults, Civitas
continues to improve the overall energy performance, with a strong focus
on properties with EPC ratings D and E, through active asset management,
including property improvement works, renovations and scheduled
post-completion works.
As shown in the table below, the energy performance of Civitas portfolio compares favourably against the
performance across all housing tenures as reported in the 2020/21 English Housing Survey (EHS). Civitas SSH
properties have a larger proportion of detached and semi-detached properties compared to social rented and
private rented dwellings.
Comparable EPC/SAP Ratings
by tenure (%)
1
(domestic/homes only)
Energy Performance Certification Band
A/BA/B CC DD EE FF GG
Mean Mean
SAP SAP
RatingRating
Owner occupied 3.1 39.2 46.4 8.6 2.2 0.5 65.5
Private rented 2.4 39.4 44.3 9.6 3.4 0.9 64.7
Social rented 2.9 62.6 30.9 2.6 0.8 0.2 69.8
All tenures 2.9 43.2 43.4 7.8 2.2 0.5 66.1
Civitas domestic 11.5 38.0 37.3 13.1 0.0 0.1 66.6
1 Source: English Housing Survey, 2020 Energy efficiency rating bands by tenure (Annex Table 2.8) & Mean SAP rating by tenure (Annex Table 2.7).
Comparable EPC – Percentage distribution at 31 March 2022
A 0.2
B 13.6
C 38.4
D 35.2
E 12.5
F 0.0
G 0.1
GROUP STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
45
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Source: Civitas retained EPC data
The Portfolio’s Carbon Footprint
as at 31 March 2022
March 2022
2.65
March 2021
2.73
Tonnes (TCO
2
) per Civitas Tenancy
Domestic/Homes
These refer to dwellings, whether a house or apartment
where one heating system serves a single household. For
Civitas, these properties have specialist adaptations and
care provision but are still regarded as domestic homes.
Domestic properties typically use less energy and have
lower carbon footprints than non-domestic/higher
acuity properties.
Non-domestic/higher acuity
These are larger properties which generally have
additional specialist/communal facilities with higher
energy use. This includes industrial kitchens, back house
facilities plus extensive rehabilitation services.
Source: Civitas retained EPC data
0.0
0.2
39.1
11.3
42.6
38.0
12.2
37.3
6.1
13.1
0.0
0.0
0.0
0.1
G
F
E
D
C
B
A
Non-domestic/Higher Acuity
Domestic/Homes
Civitas EPC Distribution (Domestic/Non-Domestic) – March 2022
Energy Performance Certificates (EPCs) are detailed reports
into the energy efficiency of a property or building. It
requires trained assessors to examine the key items in the
property such as any heating and cooling systems, the
presence and levels of the insulation, the type of glazing
and material of the window frames, as well as the hot
water and lighting systems. EPCs are divided into two
further subcategories, Domestic and Non-Domestic.
Domestic EPCs illustrate the efficiency rating of
self-contained houses and apartments. Non-Domestic,
provide ratings for buildings with more extensive
communal areas that are usually served by more complex
heating and cooling systems.
The energy assessment for non-domestic buildings takes
much longer than a domestic building to inspect, evaluate
and produce. The inspection and data inputting is more
detailed than a domestic property and will include precise
lighting type, building orientation, solar gain, window
frames etc. Consequently, the resulting recommendations
are more detailed than with a domestic EPC.
46
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Following the successful environmental improvement
pilot studies, Civitas worked with E.ON to identify
55 properties across the portfolio that could benefit
from energy improvement measures including Solar PV
(Solar Photovoltaics) panels. A framework agreement was
signed with E.ON in June 2021 to deliver enhancements
at no cost to underlying Approved Provider partners and
Phase 1 commenced in August 2021 with detailed retrofit
surveys targeting initial measures including:
●
Cavity Wall Insulation
●
Loft Insulation
●
External Wall Insulation
●
Air Source Heat Pump
●
Solar PV and battery storage
The initiative offered is a great opportunity for our
residents to really benefit from longer term savings on
energy bills – at no additional cost to them. Civitas is
actively working towards a net zero target, and this is
another important milestone to lowering the portfolio
carbon footprint, but to also ensure residents are getting
the most out of these free works.
It was recognised at the onset that detailed consideration
of each individual dwelling is the key to making large,
cost-effective carbon dioxide emissions savings. For
example, suitable sites for solar panels are usually on strong
roof structures where the panels can be installed facing
south to south-east and with a good means of access.
The retrofit surveys and detailed assessments undertaken
by E.ON have helped to refine the Phase 1 implementation
programme and identify the best method for reducing
the total carbon dioxide emissions (and fuel costs)
associated with individual properties over the medium
or long term. Diagnoses has been broadened to include
consideration of:
●
future improvement opportunities, which should not
be blocked by more immediate projects
●
opportunities for integrating energy measures with
other building work as required
This has enabled E.ON to provide improvement
recommendations that are aligned with the long-term
needs of the building and of its occupants.
Despite access constraints to protect vulnerable residents
at the properties during the COVID-19 restrictions, E.ON
surveyors completed 101 retrofit surveys as at 31 March
2022. The number of surveyed properties was increased
primarily to replace properties that were either deemed
unviable for the proposed energy measures or where
the measures were already in place but had not been
captured on the Energy Performance Certificates.
The completed surveys identified limited opportunities
to cost-effectively undertake installation of External Wall
Insulation and Air Source Heat pumps during Phase 1.
The installation of solar PV and battery storage has been
completed at 14 properties with further installations
instructed at 29 properties but awaiting installation of
isolator switches. The Energy Regulator (OFGEN) stipulate
that isolator switches can only be installed by the bill
payer’s energy supplier.
Civitas’ action is helping to reduce household energy bills
to its vulnerable residents and ease financial pressures
particularly in the light of even steeper increases projected
to come into force in the Autumn when the energy price
cap is set to rise further. This is essential to help people
with rising energy costs and to mitigate against rising
prices that could leave many vulnerable people in fuel
poverty.
E.ON Project Results (Phase 1) and Next Steps
101 properties
Completed Surveys
14 properties
Confirmed adequate
CWI Insulations (post
retrofit surveys)
20 properties
Confirmed adequate
Loft Insulation (post
retrofit surveys)
43 properties
Solar PV and Battery
Storage (completed/
underway)
Environmental improvement
works underway
The detailed retrofit surveys exercise
“The delivery of the initial phase of the programme has strengthened the collaboration between E.ON and Civitas. The
learnings have built the solid foundation and road map to move forward with future deployment of energy saving
measures to achieve Civitas’ net-zero target.”
Mark Antcliff
Business Development Manager – E.ON Installation Services.
GROUP STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
47
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Case Study
Property
Hillcrest Bryn Derwen Lutterworth
Project Overview
Detached House –
5 bedrooms
Detached House –
6 x ensuite bedrooms
Detached House –
5 x ensuite bedrooms
Solar PV installation Solar PV installation following post
acquisition works
Solar PV installation
Specification
11 x 320W all black panels
Solis 3.6 inverter
9 x 330W all black panels
Giv Energy 3.6W Hybrid inverter
Giv Energy 5.2kWh battery
10 x 320W all black panels
Solis 2.5 inverter
Approved Provider
Falcon Housing Association Bespoke Supportive Tenancies Trinity Housing Association
23%
CO
2
REDUCTION
73%
CO
2
REDUCTION
25%
CO
2
REDUCTION
EPC
C (previously E) B (previously E) B (previously C)
SAP Score
70 (previously 52) 88 (previously 46) 84 (previously 77)
Phase 2 Programme
●
Commenced April 2022
●
c.120 measures across
60 properties
●
Target to reduce carbon
emissions at 60 properties
by 25%
Improvement Measures:
●
Cavity Wall Insulation
●
Loft Insulation
●
External Wall Insulation
●
Air Source Heat Pump
●
Solar PV and Battery Storage
Government Grant Funding Sources:
●
Social Housing Decarbonisation Fund
●
Energy Company Obligation (ECO) 4
●
Other Grants Anticipated
Clean Energy Strategy to achieve minimum EPC “A-C”
by 2030 – 5 years ahead of Government deadline.
2,000 TCO
2
Target Carbon
Emissions reduction
2022 2024
(Phase 4)
2026
(Phase 6)
2028
(Phase 8)
2030
(Phase 10)
Towards Net Zero
48
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Social Impact
Social Impact – Publication of The Good Economy Report – Published
June 2022
The Good Economy (TGE) – June 2022
TGE, independent social impact advisory firm, assessed Civitas’ performance against its stated
impact objective and the target outcomes to which the Company aims to contribute.
Impact Objective Outcomes
“The Fund is moving
in a positive direction
in its contribution to
increasing the supply
of social housing.”
Social Need
Provide housing
that meets an
identified social
need
Civitas have worked
with APs, signing
off on adaptions to
ensure properties
continue to meet the
changing needs of
residents
87% of respondents
reported that they
were satisfied with
the quality of their
homes
53% of respondents
reported an
improvement in
their independence
between
their previous
accommodation and
their current home
£3.51 is created
in social value
for every £1
of annualised
investment
Supply
Increase the
supply of
social housing
across the UK
particularly
for vulnerable
people
Quality
Improve the
quality of social
housing
Wellbeing
Improve the
wellbeing of
residents
Value
Offer value for
money for the
public purse
“Civitas’ portfolio provides homes
for people with an identified
need for housing and support.”
“The retrofit effort should
contribute to improving
the energy efficiency of
Civitas’ properties.”
Contribute
Towards
40% of residents
living in Civitas
properties receive
over 50 hours of
care per week.
82% of residents
aged between
20 and 49
41% of properties
new to social
housing at the point
of acquisition
69% of properties
in the 40% most
deprived local
authorities
TGE considers that
Civitas has made a
positive contribution
to meeting its impact
objectives in the past
12 months.
GROUP STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
49
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Book Launch for “A Place For Me”
‘A Place for Me’ challenges preconceptions and illustrates
how the provision of a decent home, with tailored care
and support, promotes the independence of some of the
most vulnerable people in our society. Through the lens
and words of the storytellers, it helps to highlight issues
so many could easily take for granted and hopefully
stimulate fresh ideas that contribute to solutions.
The book launched at the Wellcome Trust on Tuesday,
7 December 2021 offered the opportunity to meet and
listen to some of the families and individuals at the
heart of the stories. The event didn’t disappoint – from
the 67 year old cover woman having her first keys to
her own home to David and Lauren – childhood friends
now engaged to be married. The common thread is
the unsung heroes – the carers and their families who
believed in them and became their advocates pressing
on against all odds.
21MM SPINEBACK PANEL 226mm + 11mm BOARD HOLLOW FRONT PANEL 226mm + 11mm BOARD HOLLOWEDGE OF COVER BOARD 15MM BLEED ALL AROUND
BACK COVER FRONT COVER
150 blurb here? Oiliver is the lead horticulturalist in charge of a
large vegetable garden with poly tunnels. The most recent crops
are strawberries, pumpkins, beans, cabbages and onions. One
of his most time-consuming tasks is watering which can take up
to three hours a day. This is partly because there is no hosepipe
(this is being addressed) but also because of Oliver’s highly
focused interest.
Oliver has high functioning autism. He has a degree in creative
writing and performance acting from York College. But following
his graduation he was unable find paid work. His mother heard
about Park House Barns, and suggested he volunteer. He began
in 2015, and he was offered a job a year later. He works four days
a week and travels there on his moped.
£35.00
A Place For Me Polly Braden & Sally Williams Dewi Lewis Publishing
50 stories of finding home
A Place For Me
Polly Braden & Sally Williams
“David and Lauren chose
their engagement ring
from F. Hinds, a jeweller
in Redditch. We threw
a surprise engagement
party for them at Lyn’s
house at Christmas. David
went down on one knee in
front of friends and family
and proposed to Lauren
officially. It was lovely. If
everything goes fine, they’ll
get married in a few years.”
Lynne
“‘I love my job,’ says June, the manager of
Cornwall Court. ‘I would work seven days
a week, because this isn’t just a job, you’re
making such a difference to people.’ She is
a great believer in the ethos of supporting
people to live independently in the
community. ‘I’ve been in the world of care
for 37 years and have seen a lot of older
people put in institutions. Anyone who
was “mad” was locked up…and left under
the radar. We’ve made such a difference
to Ruth,’ June continues. ‘She was buzzing
the day she got into the bath on her own.
If things like that had happened when she
was in her late teens, she could have been
living on her own now. She might have
been married.’”
June, Ruth’s manager
50
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
An extract from “A Place for Me”:
“Stories matter. Many stories
matter. Stories have been
used to dispossess and to
malign, but stories can also
be used to empower and to
humanize. Stories can break
the dignity of a people, but
stories can also repair that
broken dignity.”
(Chimamanda Adichie ‘The danger of
a single story’, TED Global 2009)
Paul Bridge launched “A Place for Me”
at the Wellcome Foundation
Hope (a pseudonym), 33 shortly after 10am on a snowy morning in the
winter of 2012, two policemen and two doctors knocked on the door of Hope’s
home in Consett, County Durham. Hope, then 24, was instructed to get in the
car. ‘I didn’t even have time to get ready,’ she says, now. Hope was sectioned.
She was driven for an hour to a psychiatric hospital where she was detained
in a locked ward. This was to be Hope’s home for five years. Hope grew up in
Stanley, near Gateshead, in County Durham, the second of four girls.
Her father worked in a fish and chip shop and her mother was a carer for
Hope’s grandmother. When she was seven, teachers began to suspect she
had mild learning disabilities and she was moved to a special school.
At 16 she found a class for young people with learning disabilities at a
mainstream college in Consett. But the size of the college was too much for
her, and she dropped out after a year.
In 2009, aged 21, Hope left home and moved into supported accommodation
in Stanley. She was evicted after two months. A resident hit her, and she gave
him a shove. ‘He went flying. He must have not been good on his feet.’ She
lasted two days in her second home. ‘I got sexually abused by one of the lads
living there,’ she says.
The third home was happier, and Hope settled down. But after a year or so,
Hope broke down during a session with her counsellor. It transpired she was
being groomed by a member of staff who had sexually assaulted her twice.
‘I thought he was a friend,’ she says.
By now she was in a fragile condition. ‘I was a mess. Lashing out, kicking out,
just really hurting people because everyone hurt me. I was constantly getting
arrested and going to court.’
She tried to take her life. After being admitted to the psychiatric hospital in
2012, she was diagnosed with paranoid schizophrenia, emotionally unstable
personality disorder, and post traumatic stress disorder. Hope was not a
docile patient. ‘I was angry with the world, I was upset. I had no-one to turn
to.’ She saw her mother once a month, but, she says, ‘I didn’t see my dad or
sisters for nearly five years. I would just look at four walls, and think, what am
I fighting for? There was nothing, just that feeling of being sad, vulnerable
and lonely.’
In 2016, the hospital psychiatrists planned to transfer Hope to a high secure
unit in Wales. But one consultant took her aside. ‘She said, “If you take your
medication, do your counselling sessions, you could be out of here. If you
carry on, you’ll be sent away.” She changed my life.’
In 2017, only a year later, aged 29, Hope was able to move into Clark House.
She lives in a one-bedroom flat on the ground floor, surrounded by her
artwork and motivational quotes: ‘Believe in yourself. You can do it!’ ‘My social
worker said, “I’ll find a good, safe place for you” and honestly, I love it here,’
she says.
She likes drawing, making things, baking. Hope has a carer 24 hours a day.
‘Sometimes she’ll wake you in the night,’ says Michelle, her support worker,
‘because she’s having flashbacks and needs reassurance and we get up and
have a cup of tea. I don’t want people to go through what I went through, sad
with no hope,’ she says. ‘I thought there was nothing out there for me, until
I came here. Now, I want other people to know, there is a place out there for
you.’
GROUP STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
51
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Social Impact
Charitable Partnerships
Crisis
Crisis is a national charity for the homeless that works to provide vital support so that people
can rebuild their lives and are supported out of homelessness for good. Civitas has sponsored
Crisis over the last five years and the two organisations regularly collaborate on the emerging
knowledge required to undertake advanced homelessness schemes. These are vital to enable
people who have been at risk of or experienced homelessness to rebuild their lives but require
considerable care and support in addition to a safe home in the community.
The Choir with No Name
The Choir with No Name is an organisation that runs choirs for people who have experienced
homelessness and other forms of marginalisation.
• Big increase in average weekly attendance since return to indoor meetings post COVID-19
• New Cardiff Choir launched in November 2021
• Steady progress with establishment of new community choirs in Watford and Coventry.
The House of St. Barnabas
The House of St. Barnabas is a social enterprise member’s club that helps London’s homeless
people back into work, through its Employment Academy.
Employment Preparation Programme:
• 17 participants successfully graduated from EPP 18 and EPP 19
• 100% of graduates were successfully matched with a mentor
• Employment and Progression
• 33% of working graduates are earning London Living Wage
• 23% of working graduates are in good work and a good home
• 70% of mentor relationships with graduates last for at least 6 months
• HOSB have supported a total of 93 people over the year.
WISH
WISH is a membership-based network for women working across every discipline of UK housing,
with a focus on championing positive outcomes for women working in the sector. Civitas support
contributes to the championing of positive outcomes for women working in the sector.
Little Sprouts Health and Wellbeing Charity
Little Sprouts Health and Wellbeing Charity are dedicated to improving the health and
wellbeing of our community through cooking workshops, recipe bags, community food shops,
“check and chatter” programmes and surplus food collection and distribution. Civitas supports
little sprouts with the operational costs of the charity, particularly during COVID-19. The funds
were used to open a further community shop which uses food as an engagement tool to help
address physical, social, mental and financial issues.
The Care Workers’ Charity
The Care Workers’ Charity (CWC) exists to help care and support workers through crisis using
financial support and support centres. Civitas support funds training of up to 20 mental health
‘first aiders’ to provide one to each CWC member company, providing them with the training and
tools to provide better mental health support to the care workers.
The Company has supported and worked with the following charities since IPO:
52
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Governance
Frameworks
Impact Management
Project
The Impact Management Project
is a:
• Global forum for building
consensus on how to measure,
manage and report impact
• Practitioner Community of
over 3,000 organisations and
investors
• Provides a set of norms
and a shared and holistic
understanding of impact
• Five core dimensions of impact:
What? Who? How much?
Contribution and Risk.
The Operating
Principles for Impact
Management
The Operating Principles are a
framework for investors for the
design and implementation
of their impact management
systems:
• Global forum for building
consensus on how to measure,
manage and report impact
• Provides a set of norms
and a shared and holistic
understanding of impact
• Five core dimensions of impact:
What? Who? How much?
Contribution and Risk.
United Nations
Sustainable
Development Goals
In 2015, UN countries adopted
the 2030 Agenda for Sustainable
Development and its 17
Sustainable Development Goals
(‘SDGs’):
• The SDGs call for worldwide
action among governments,
business and civil society to end
poverty
• Create a life of dignity and
opportunity for all, within the
boundaries of the planet
• No official process for
supporting the SDGs
• Companies are encouraged to
select which goals are aligned
with their business activities
and report on how they are
working to achieve them.
Sector Specific
CSH is an early adopter of the Sustainability Reporting Standard for Social Housing (the Standard). The Standard,
developed through a collaboration between housing associations, banks, lenders and investors, has over 100
signed up early adopters and endorsers.
• Over 190 signed up adopters and 20 endorsers
• 12 themes and 48 criteria for ESG reporting by housing associations
• Qualitative and quantitative and are identified as core and enhanced requirements to demonstrate
strong ESG performance
• Will help the sector establish a credible, meaningful, and consistent approach to reporting its environmental,
social and governance (ESG) performance
• Aligned to international frameworks and standards including the United Nations Sustainable Development Goals
(UNSDGs), Global Reporting Initiative (GRI), SASB (Sustainability Accounting Standards Board), ICMA (International
Capital Market Association) and LMA (Loan Market Association) Principles
In addition to the ESG indices, Civitas participates in the following frameworks
which don’t issue a grading.
GROUP STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
53
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Impact Objectives UN SDGs
Acquire High
Quality-Homes
Providing high quality, energy efficient homes
incorporating adaptations for people with
lifelong care needs
Satisfy Social Need
Target properties which address the needs,
and improve health and wellbeing of
vulnerable individuals requiring a high level
of care
Local job creation during construction
Employment via Approved Providers/
refurbishments and care providers on
responsible employment terms, including
living wage
Offer local apprenticeships and contribute to
local community events
Provide Value for Money
Providing Value for Money for public care
and housing budgets by enabling vulnerable
individuals to move out to institutional and
residential settings
Increase Supply
Buy and convert existing and newly
completed properties from private to social
housing sector in perpetuity
Build Quality Partnerships
Ensure Approved Providers and Care
Providers have the capability and capacity
to deliver high-quality service and outcomes
for residents over the long-term
Green lease terms to be agreed with the
counterparties
Adopt sustainability policy at governance level
United Nations Sustainable Development
Goals (“UN SDGs”) Alignment
Governance
Counterparty Governance
Monthly
CIM has continued to undertake monthly governance
and health and safety monitoring across the portfolio.
Approved Providers have demonstrated resilience
and continued high levels of compliance with health
& safety standards.
Seminars
CIM hosts quarterly Approved Provider seminars on a
regular basis. The next seminar is expected to be held
in Q4 2022.
CIM, the Company’s Investment Adviser, has engaged actively with its Approved Provider partners throughout the last
year providing shared advice and learning through:
Weekly meetings with
key operational staff
Monthly compliance
monitoring
Monthly and quarterly
meetings to review
strategic priorities
and key performance
indicators
Regular seminars
This counterparty engagement has ensured that CIM are able to proactively work with its Approved Providers with
any matters arising to support a continued high level of operational performance. This support builds on our
long-term relationship with the senior management and helping to build resilience within the organisations.
54
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Governance
Indices
What is it?
GRESB is the leading
sustainability benchmark
for the global real estate
sector. Assessments take
place annually and are
guided by factors that
investors and the industry
consider to be material
issues in the sustainability
performance of real
asset investments. The
benchmark assessment
covers more than 850
property companies,
REITs, fund and
developers, are covered
within GRESB Public
Disclosure.
How is CSH
rated?
• CSH achieved A score
following the GRESB
Public Disclosure
Assessment 2021.
• Peer Group Average
score of C.
• Improvement from B
score in previous year.
• CSH is in 3rd position
within its Comparison
Group (UK Residential).
What is it?
MSCI ESG Ratings
provide insight into ESG
risks and opportunities
within multi-asset class
portfolios. MSCI rate 7,000
companies according to
their exposure to industry
significant ESG risks and
their ability to manage
those risks relative to
industry peers.
How is CSH
rated?
• CSH MSCI ESG rating of
BB.
• CIM has made relevant
policies available to
MSCI and other rating
agencies through
hosting on the CIM
website.
• This should be reflected
in future rating
assessment.
What is it?
Sustainalytics measure
how well companies
proactively manage the
environmental, social
and governance issues
that are most material
to their business. It is
based on a structured,
objective and transparent
methodology. The ESG
ratings provide an
assessment on companies’
ability to mitigate
risks and capitalise on
opportunities.
How is CSH
rated?
• CSH has an ESG Risk
Rating score of
16.6 (Low Risk) on
Sustainalytics.
What is it?
EPRA sBPR Guidelines
provide a consistent
way of measuring
sustainability
performance. The EPRA
sBPR are raising the
standards and consistency
of sustainability reporting
for listed real estate
companies across Europe.
In recognition of property
companies that have
successfully adopted the
EPRA BPR Guidelines and
which have submitted for
an assessment of their
performance against the
guidelines, EPRA hold
annual EPRA BPR Awards.
The surveyed companies
are awarded either a Gold,
Silver, or Bronze Award.
How is CSH
rated?
• CSH submission to EPRA
for assessment under
the guidelines remains
under consideration.
CIM’s implementation of the Board’s commitment to continuous improvement in its
approach to ESG integration remains core to the investment strategy. Over the last
year, we have engaged with ESG Rating Agencies such as GRESB (formerly Global
Real Estate Sustainability Benchmark), MSCI (Morgan Stanley Capital International),
Sustainalytics, and EPRA sBPR.
GROUP STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
55
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Corporate
Governance
Corporate Governance
57 Board of Directors
58 Report of the Directors
62 Report of the Audit and Management Engagement Committee
66 Report of the Nomination and Remuneration Committee
67 Corporate Governance Statement
73 Directors’ Remuneration Report
77 Statement of Directors’ Responsibilities
78 Alternative Investment Fund Managers Directive
80 Independent Auditors’ Report
56
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Directors of the Company who were in office during the period and up to the
date of signing the financial statements were:
Michael Wrobel, Chairman
Michael has over 40 years’ experience in the investment
industry as a portfolio manager and running institutional
businesses and retail businesses at Fidelity and Gartmore. He
serves as a trustee director of the BAT UK Pension Fund, the
Deutsche Bank UK pension schemes and as a trustee of the
Cooper Gay (Holdings) Limited Retirement Benefits Scheme.
Michael has previously served as a Non-Executive Director of
several investment trusts and a number of industry associations.
Michael has an M.A. in Economics from Cambridge University.
Michael was appointed to the Board on 24 October 2016 and has
served as Chairman since his appointment.
Caroline Gulliver, Director
Caroline is a chartered accountant with over 25 years’ experience at Ernst & Young LLP, latterly as an
executive director before leaving in 2012. During that time, she specialised in the asset management
sector and developed extensive experience of investment trusts. She was a member of various technical
committees of the Association of Investment Companies. She is also a non-executive director and audit
committee chair for JP Morgan Global Emerging Markets Income Trust plc, International Biotechnology
Trust plc and abrdn European Logistics Income plc.
Caroline was appointed to the Board on 24 October 2016 and has served as Audit and Management
Engagement Committee Chairman since her appointment.
Board of Directors
Peter Baxter, Director
Peter has over 30 years’ experience in the investment management industry. He is a director of Snowball
Impact Management Ltd, a social impact investment organisation, and a trustee of Trust for London, a
charitable foundation. He is also a non-executive director of BlackRock Greater European Investment
Trust plc. Previously, he served as Chief Executive of Old Mutual Asset Managers (UK) Ltd, and has
worked for Schroders and Hill Samuel in a variety of investment roles. He holds an MBA from London
Business School and is an associate of the Society of Investment Professionals.
Peter was appointed to the Board on 24 October 2016 and is the Senior Independent Director.
Alastair Moss, Director
Alastair is a property development lawyer with over 20 years’ experience and is Co-Head of Real Estate
at Memery Crystal. He was a non-executive director of Notting Hill Genesis Trust. He is also a former
Chairman of the Investment Committee of the City of London Corporation, its Property Investment Board
and its Planning and Transportation Committee. He is a Trustee of Marshall’s Charity. He has also been
a board member of Soho Housing Association and was a member of the Area Board of CityWest Homes.
He was a Councillor at Westminster City Council for 12 years, including his tenure as Chairman of the
Planning & City Development Committee.
Alastair was appointed to the Board on 24 October 2016.
Alison Hadden, Director
Alison has over 30 years’ experience in the housing industry and has held a number of Executive
positions at several major housing associations, including CEO at Paradigm Housing. In these roles, she
has worked with many of the stakeholders in the industry, including the Regulator of Social Housing.
She is currently a non-executive director and Vice Chair of Yorkshire Housing, a 20,000-home housing
association operating in the Yorkshire area, Vice Chair and a member of the Governance Committee of
Peaks and Plains Housing and Chair of Heyford Regeneration a for-profit Housing Association operating
in the Cherwell area.
Alison was appointed to the Board on 21 November 2019.
Male 60%
Female 40%
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
57
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Directors present their Report and the audited consolidated financial statements
for the year ended 31 March 2022.
Principal Activities
The Company is a closed-ended investment company
and is a REIT which was incorporated in England and
Wales on 29 September 2016. The Company is the holding
company of a number of subsidiaries and its Ordinary
shares were admitted to trading on the Main Market
of the London Stock Exchange on 18 November 2016.
The Company invests in properties or property-holding
SPVs, either directly or via a wholly-owned subsidiary,
in accordance with the Company’s investment objective
and policy.
Business Review
A review of the business and future developments is
contained in the Chairman’s Statement and Investment
Adviser’s Report. The principal risks and uncertainties are
detailed on pages 38 to 42. See note 33.0 for a summary of
the post balance sheet events.
Results and Dividends
The results for the year are shown on page 3.
The following dividends were paid on the Ordinary
shares during the year:
Fourth Quarterly
dividend
1.35p per share
paid on 11 June 2021
First Quarterly
dividend
1.3875p per share
paid on 10 September 2021
Second Quarterly
dividend
1.3875p per share
paid on 13 December 2021
Third Quarterly
dividend
1.3875p per share
paid on 11 March 2022
Since the year end, the Company has declared the
following dividend:
Fourth Quarterly
dividend
1.3875p per share
paid on 28 June 2022
No final dividend is being recommended on the Ordinary
shares.
Directors
The members of the Board are listed on page 57.
All Directors served throughout the period under review.
The Board consists solely of non-executive Directors,
each of whom is independent of the Investment Adviser.
The Company has no executive directors or employees.
In accordance with Board policy, all Directors will retire
and, being eligible, will stand for re-election at the AGM.
Performance evaluation of the Board, its Committees and
individual Directors is carried out in accordance with the
procedure set out on page 70.
No Director is under a contract of service with the
Company and no Director or any persons connected
with them had a material interest in the transactions
and arrangements of the Company. Details of Directors’
remuneration are set out in the Directors’ Remuneration
Report on pages 73 to 76.
The beneficial interests of the Directors in the securities
of the Company are set out in the Directors’ Remuneration
Report on page 76.
Through their Letters of Appointment, the Company
has provided indemnities to the Directors, to the extent
permitted by law and the Company’s Articles, in respect
of liabilities which may arise in connection with claims
relating to their performance or the performance of the
Company whilst they are Directors. There are no other
qualifying third party indemnities in force.
The general powers of the Directors are contained
within the relevant UK legislation and the Company’s
Articles of Association. The Directors are entitled to
exercise all powers of the Company, subject to any
limitations imposed by the Articles of Association or
applicable legislation. As set out on page 59, the Articles
of Association may only be amended by way of a special
resolution of shareholders.
Capital Structure
Issue of shares
At the AGM held on 22 September 2021, the Directors were
authorised to issue equity securities up to an aggregate
nominal amount of £1,244,922 (being approximately 20% of
the issued Ordinary share capital).
The Company was also authorised to disapply
pre-emption rights in respect of equity securities and
to issue equity securities for cash up to an aggregate
nominal amount equal to £622,461 (being approximately
10% of the issued Ordinary share capital).
During the year, 565,000 Ordinary shares were issued
from Treasury under these authorities. These shares were
issued at a price of not less than the net asset value per
share at the time of issue plus an amount to cover the
cost. Following these transactions, the Company held no
shares in treasury.
The equity issuance was made with a view to balancing
the premium to NAV and satisfying market demand for
additional shares in the Company.
At the AGM held on 22 September 2021, the Company
sought approval for a resolution to disapply pre-emption
rights on an additional 10% of the Company’s issued
Ordinary share capital. This resolution failed as votes
representing 27.11% of the total votes cast were received
against it.
Following the AGM, the Company, via its corporate
brokers engaged with its largest shareholders who had
voted against this resolution.
Report of the Directors
58
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Board understands that these shareholders followed
PIRC’s or their own internal recommendation to vote
against this resolution as when combined with the
standard 10% pre-emption disapplication resolution it
would have resulted in the Company having authority to
issue up to 20% of its own shares pre-emptively.
At the AGM in 2022 the Board proposes to seek
shareholder approval for a standard 10% pre-emption
disapplication resolution.
The authority to issue shares will expire at the conclusion
of the forthcoming AGM. Proposals for the renewal of
the Directors’ authority to issue shares will be set out in
the Notice of AGM for 2022, which will be circulated to
shareholders in due course.
Purchase of own shares
At the AGM held on 22 September 2021, the Directors
were granted the authority to buy back up to 93,306,960
Ordinary shares, being 14.99% of the Ordinary shares in
issue at the time of the passing of the resolution.
During the year, as the Company’s share price fell
below Net Asset Value per share, the Board instigated
a share buyback programme, under which a total of
10,025,000 shares have been purchased into treasury as at
31 March 2022.
The authority to buy back up to 93,306,960 shares will
expire at the conclusion of the forthcoming AGM, when
a resolution for its renewal will be proposed. Further
information will be contained in the Notice of AGM,
which will be circulated to shareholders in due course.
Current share capital
As at 31 March 2022, there were 622,461,380 Ordinary
shares in issue, of which 10,025,000 shares were held in
treasury. The total voting rights of the Company as at
31 March 2022 was 612,436,380.
Shareholder Rights
Ordinary shares
Each Ordinary shareholder is entitled to one vote on a
show of hands and, on a poll, to one vote for every Ordinary
share held. The right to attend and vote at general meetings
of the Company may be restricted where a shareholder has
failed to provide information pursuant to a notice served
under section 793 of the Companies Act 2006. The Ordinary
shares carry the right to receive dividends declared by
the Company. Provided the Company has satisfied all of its
liabilities, during a winding-up of the Company, the holders
of Ordinary shares are entitled to all of the surplus assets of
the Company.
Transfers of shares
There is no restriction on the transfer of the Company’s
shares other than transfers to more than four joint
transferees and transfers of shares which are not fully
paid up or where the transferor or any other person
whom the Company reasonably believes to be interested
in the transferor’s shares has been duly served with a
notice pursuant to section 793 of the Companies Act 2006.
There are no special rights with regard to control
attached to securities; no agreements between holders
of securities regarding their transfer known to the
Company; and no agreements which the Company
is party to that might affect its control following a
successful takeover bid.
Articles of Association
The Company’s Articles of Association may only be
amended by a special resolution at a general meeting of
the shareholders.
As at the date of signing this Report, the total voting
rights of the Company was 610,736,380.
Management Arrangements
Investment Adviser
The Board has appointed the Investment Adviser, Civitas
Investment Management Limited, to provide investment
advice and to asset manage the property portfolio
and the associated day-to-day activities, including
management of tenanted properties and marketing
activities. CIM is a specialist investor in social housing
property, with a focus on specialist social housing and
has extensive experience in social housing and real
estate investment.
The duties of CIM include the sourcing of investment
opportunities that meet the investment criteria of the
Company, controlling the acquisition of approved
properties, asset management of all properties within
the portfolio, ongoing monitoring of the properties and
tenants, maintaining compliance with all relevant rules
and regulations, and providing marketing and investor
relations services to the Company.
Details of the fees payable to the Investment Adviser are
described in note 8.0 of the financial statements. The
basis for the calculation of the Investment Adviser’s fees
is based upon the IFRS NAV.
The agreement with CIM is terminable on not less than 12
months’ notice by either party, such notice not to expire
earlier than 30 May 2024.
The performance of the Investment Adviser has
been reviewed on an ongoing basis throughout the
period by the Board at its quarterly meetings. A formal
annual evaluation is also carried out by the Audit and
Management Engagement Committee.
Report of the Directors
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
59
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Board considers a number of factors including
investment performance, the quality and quantity of
investment opportunities presented, the skills and
experience of key staff and the capability and resources
of the Investment Adviser to deliver satisfactory
performance for the Company. The Board is satisfied with
the performance of the Investment Adviser and considers
its continued appointment to be in the best interests of
the Company and its shareholders.
AIFM
G10 Capital Limited (“G10” or the “AIFM”) has been
appointed as the Company’s AIFM with effect from
24 August 2017. The AIFM currently receives a monthly
fee of 2.7 basis points of the total Company NAV for
its services and the agreement is terminable on three
months’ notice by either party.
Depositary
Indos Financial Limited was appointed as the Company’s
Depositary with effect from 1 June 2018. The Depositary
provides cash monitoring, safekeeping and asset
verification and oversight functions as prescribed by the
Alternative Investment Fund Managers Directive. The
Depositary receives an annual fee of £59,000, net of VAT,
plus 0.006% of the first £350 million of any new equity
capital raised per annum and 0.003% of further equity
raised per annum, subject to a maximum fee of £150,000
per annum. The agreement is terminable on six months’
notice by either party.
Administrator
The Company has appointed Link Alternative Fund
Administrators Limited (“Link”) as the Administrator
of the Company and its subsidiaries, with effect from
28 February 2018, to undertake the accountancy and other
administrative duties of the Company. Link is a specialist
administrator for investment funds, providing support
functions and expertise tailored for this industry.
The Administrator receives a fixed base fee for the
provision of its services to the Company as well as an
entitlement to additional variable fees for duties relating
to corporate activities. The agreement is terminable on at
least six months’ notice by either party.
The duties of the Administrator include the maintenance
of all Company and subsidiary books and records,
excluding those maintained by the Investment Adviser,
monitoring compliance with applicable relevant rules
and regulations and other administrative duties as
required.
Company Secretary
Link Company Matters Limited was appointed as the
Company Secretary to the Company with effect from
28 March 2018. The Secretary receives a fixed fee for the
provision of its services to the Company. The agreement
was for an initial period of one year and thereafter
automatically renews for successive periods of 12 months,
unless terminated by either party on at least six months’
notice.
Review of Service Providers
The performance of the service providers is reviewed
on an ongoing basis throughout the period by the
Audit and Management Engagement Committee and
formally once a year. The Committee considers a number
of factors including performance of duties, the skills
and experience of key staff, and the capability and
resources of the service provider to deliver satisfactory
performance for the Company. The Board is satisfied with
the performance of the service providers appointed by
the Company and considers their continued appointment
to be in the best interests of the Company and its
shareholders.
Substantial Shareholdings
At 31 March 2022, the Company had been informed of
the following disclosable interests in the share capital of
the Company:
Number of
Ordinary
shares
Percentage of
Total Voting
Rights
Investec Wealth & Investment Limited 62,135,615 10.15
Skandinaviska Enskilda Banken AB 56,483,034 9.22
Standard Life Aberdeen plc 30,492,544 4.98
Massachusetts Financial
Services Company
30,300,144 4.95
BlackRock Inc. 21,299,476 3.48
Continuation Vote
In accordance with its Articles, the Board will propose an
ordinary resolution that the Company should continue in
its current form to shareholders at the AGM to be held on
15 September 2022, and at the AGM held every five years
thereafter. If the resolution is not passed, the Directors are
required to formulate proposals to be put to shareholders
within six months of such resolution being defeated for
the voluntary liquidation, unitisation, reorganisation or
reconstruction of the Company.
Listing Rule 9.8.4
The listing rule 9.8.4 outlines a series of requirements for
listed companies to disclose certain items. The Directors
confirm that there are no disclosures required in relation
to Listing Rule 9.8.4.
Report of the Directors
continued
60
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Financial Instruments
The Company utilises financial instruments in its
operations. The financial instruments of the Company at
31 March 2022 comprised trade receivables and payables,
other debtors, cash and cash equivalents, non-current
borrowings, current borrowings and derivatives.
Other than its fixed interest rate debt facilities, it is the
Directors’ opinion that the carrying value of all financial
instruments on the Consolidated Statement of Financial
Position is equal to their fair value.
For a more detailed analysis of the Company’s financial
risk management, please refer to note 31.0 of the financial
statements.
Greenhouse Gas Emissions
The Board has considered the requirements to disclose
the annual quantity of emissions in tonnes of carbon
dioxide equivalent for activities for which the Company
is responsible. The Board believes that the Company
has, from a formal reporting perspective, no reportable
emissions as this reporting falls under the lessees’
responsibility as part of the terms of their fully repairing
and insuring leases; emissions produced from either
the registered office of the Company or from the offices
of other service providers are deemed to fall under the
responsibility of other parties; and the Company has not
leased or owned any vehicles which fall inside the scope
of the GHG Protocol Corporate Standard. In relation to
the Streamlined Energy and Carbon Reporting (SECR),
implemented by The Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018, for the year ended 31 March 2022 the
Group is considered to be a low energy user.
Regardless of the obligations of other parties, the
Company takes the issue of environmental enhancement
and emissions seriously as part of its overall ESG strategy
and is evaluating the portfolio, working with housing
managers, to consider where it can bring about further
enhancements and improvements.
Further details can be found in the Environmental, Social
and Governance report on pages 45 to 55.
Charitable Donations
In addition to its direct investments, the Company plays
a broader part within the communities in which it
works. Whilst recognising the practical limitations that
all financial investors face, Civitas supports voluntary
organisations that are active within the broader housing
and homelessness environment. Civitas also intends, as
part of its broader financial and operational reporting, to
provide a commentary on the positive social change
and impact that results from the investments that have
been made.
The following charitable donations were agreed during
the year:
Charity Donation
Choir with No Name £15,000
Little Sprouts £5,000
WISH £6,000
Total £26,000
Independent Auditors
In the case of each Director in office at the date the
Report of the Directors is approved:
●
so far as the Director is aware, there is no relevant
audit information of which the Group and Company’s
auditor is unaware; and
●
they have taken all the steps that they ought to have
taken as a Director in order to make themselves aware
of any relevant audit information and to establish that
the Group and Company’s auditors are aware of that
information.
PricewaterhouseCoopers LLP has expressed its
willingness to continue to act as auditor of the Company
and a resolution for its re-appointment will be proposed
at the 2022 Annual General Meeting.
Corporate Governance
The Corporate Governance Statement, the Report of the
Audit and Management Engagement Committee and the
Directors’ Remuneration Report form part of the Report of
the Directors.
Approval
The Report of the Directors has been approved by the
Board.
By order of the Board
Link Company Matters Limited
Company Secretary
29 June 2022
Report of the Directors
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
61
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Introduction
The Audit and Management Engagement Committee (the
“Committee”) oversees the financial reporting process for
the Company, with consideration of the internal controls
and risk management of the Company, and oversight of
the Company’s compliance with accounting standards
and regulatory requirements. It also oversees the
performance of the Investment Adviser and the Company’s
administrative and company secretarial support.
Composition and role of the Audit and
Management Engagement Committee
The Committee is chaired by Caroline Gulliver and
comprises all the Directors. The Committee operates within
written terms of reference which are available on the
Company’s website as determined by the Board.
The principal functions of the Committee are to:
●
oversee the financial reporting process for the
Company and monitor the integrity of the financial
statements of the Company and the Group, including
their compliance with accounting standards and
regulatory requirements;
●
to advise the Board, where requested, on whether
the Annual Report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy;
●
review and monitor the internal financial control and
risk management systems of the Company;
●
monitor and review annually whether an internal
audit function is required;
●
review the Investment Adviser’s whistleblowing
arrangements;
●
approve the appointment, re-appointment or
removal of the external auditor, and approve their
remuneration and terms of engagement;
●
manage the relationship between the Company
and the external auditor, including reviewing their
independence and objectivity and the effectiveness of
the audit process;
●
develop and implement a policy on the engagement
of the external auditor to supply non-audit services;
and
●
review and monitor the performance of, and
contractual arrangements with, the Investment
Adviser, the AIFM and other service providers.
It is within the Committee’s terms of reference for its
members to seek independent professional advice, at the
Company’s expense, as required in the furtherance of its
duties.
Meetings
The Committee meets twice a year; on both occasions,
part of the meeting is held with the external auditor
without the Investment Adviser present. The Committee
met twice in the financial year and the meetings were
attended by each member as set out on page 69.
Performance Evaluation
The process for the evaluation of the performance of the
Committee is disclosed on page 70.
Risk Management and Internal Control
The Company has an ongoing process for identifying,
evaluating and managing the principal and emerging risks
faced by the Group. Further details can be found on pages
70 and 71.
The principal risks and uncertainties identified from the risk
register and a description of the Group’s risk management
procedures can be found on pages 38 to 42.
Activities during the year
The Committee considered the annual report, interim
report, any other formal financial performance
announcements and any other matters as specified
under the Committee’s terms of reference and reported to
the Board on how it discharged its responsibilities.
The Committee discussed and considered the external
audit performance, objectivity and independence, the
external auditor re-appointment, accounting policies and
Alternative Performance Measures, significant accounting
judgements and estimates, the need for an internal audit
function and the risk register.
The Committee concluded that an internal audit
function would provide minimal additional comfort at
considerable extra cost to the Company. The existing
system of monitoring and reporting by third parties
remains appropriate and adequate.
During the year, the Committee also conducted a
comprehensive review of the key agreements with
its service providers, and a detailed review of the
performance, composition, personnel, processes and
internal control systems of the AIFM, a review of all of
the Group’s other corporate advisers and key service
providers. The discussion included an assessment of
performance and suitability of the services provided
in the context of the fees paid to each provider, and a
review of the termination period of each agreement.
The Committee considered the terms of the Investment
Management Agreement, to ensure it continues to reflect
the commercial arrangements agreed between the
Company and the Investment Adviser and was satisfied
that this was the case.
Report of the Audit and Management
Engagement Committee
62
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Report of the Audit and Management
Engagement Committee
continued
Letter from the Financial Reporting Council
During the year, the Company received a letter from
the Financial Reporting Council (“FRC”) requesting
information following a limited scope review of
the Company’s 2021 Annual Report and Accounts in
accordance with Part 2 of the FRC Corporate Reporting
Review Operating Procedures. The letter primarily
focused on the accounting treatment of lease incentives,
related party disclosures and IFRS 8 ‘Operating Segments’.
The Company provided the information and explanations
to the FRC as requested to its satisfaction. The FRC
subsequently advised that its review had been brought
to a satisfactory conclusion.
The Group has made additional enhancements to the
disclosures in this annual report on the matters raised by
the FRC. The Company had also published a
Market Update on 11 October 2021 addressing these, and
other, points.
The FRC’s review was based on the 2021 Annual Report
and does not benefit from detailed knowledge of
our business, or an understanding of the underlying
transactions entered into. Its correspondence provides
no assurance that the report and accounts are correct
in all material respects; the FRC’s role is not to verify the
information provided but to consider compliance with
reporting requirements.
The FRC accepts no liability for reliance on its letters by
the Company or any third party, including but not limited
to investors and shareholders.
Significant Issues Considered by the
Committee
The Committee considered the key accounting estimates
and judgements underlying the preparation of the
financial statements focusing specifically on:
Significant Financial Reporting Issue – Valuation of
Investment Property
The valuation of the property portfolio is crucial to the
statement of financial position and reported results.
After discussion with the Investment Adviser, the
Committee has determined that the key risks of
misstatement of the Company financial statements relate
to the valuation of investment property.
The valuations of the investment properties at the end of
the financial period were independently performed by
Jones Lang LaSalle (“JLL”), whom the Committee considers
to have sufficient expertise, experience and local and
national knowledge of social housing and supported
housing to undertake the valuations.
JLL also conducts initial valuations of properties on
acquisition. The Directors have ensured that JLL has
appropriate procedures in place to ensure there are no
independence conflicts with the services provided to
the Company.
The Investment Adviser confirmed to the Committee that
the method of valuation has been applied consistently
during the year. It further confirmed that, during the
course of the period, JLL was regularly challenged by
the Investment Adviser on the assumptions used in the
valuation of the Company’s investment properties to
ensure robust and appropriate methods were being
applied. The Investment Adviser discusses these areas of
challenge with the Committee.
The Auditor met separately with JLL and reported back
to the Committee on its challenge of the valuations
and assumptions. The Auditor was satisfied that the
valuations had been prepared using appropriate
methods and assumptions, and had been prepared in
accordance with RICS Valuation – Professional Standards.
As explained in note 15.0 to the financial statements,
the approach adopted by the Company is to recognise
investment properties at fair value, with the fair value of
the property being based on valuations performed by JLL.
The revaluation of the investment properties gave rise to
a revaluation gain of £12.3 million in the period.
Continuation Resolution
The Company’s articles of association include a
requirement for the Board to propose an ordinary
resolution at the annual general meeting following the
fifth anniversary from the initial public offering of the
Company for the Company to continue in its current form
(the Continuation Resolution). This is the first continuation
vote since IPO.
The Committee has considered the effect the
Continuation Resolution would have and has agreed
that it is a significant accounting issue for the Company,
given its impact on the preparation of the consolidated
financial statements on a going concern basis. If the
Continuation Resolution is passed, the Company will
continue its business as presently constituted and
propose the same resolution at every fifth annual general
meeting thereafter. If the Continuation Resolution is not
passed, the Directors will be required, within six months
after the date of this annual general meeting, to formulate
proposals for consideration by the shareholders for the
voluntary liquidation, unitisation, reorganisation, or
reconstruction of the Company.
After making appropriate enquiries of the Company’s
brokers and Investment Adviser, pursuant to their
recent discussions with a number of the Company’s
shareholders, the Committee is of the view that
the Continuation Resolution will be passed at the
forthcoming annual general meeting.
The Committee is, therefore, of the opinion that the
going concern basis adopted in the preparation of the
consolidated financial statements is appropriate.
Further information can be found in note 2.2 of the
Consolidated Financial Statements.
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
63
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Maintenance of REIT status.
There are a number of conditions that a company (or
principal company of a group REIT) needs to satisfy in
order to become a REIT and remain within the regime.
The UK REIT regime affords the Group a beneficial tax
treatment for income and capital gains, provided certain
criteria are met. There is a risk that these REIT conditions
may not be met and additional tax becomes payable by
the Company. The Board regularly reviews the REIT tests
that are performed by the Administrator.
The Board is satisfied that the Company has maintained
its REIT status throughout the year.
Misstatements
The Investment Adviser confirmed to the Committee that it
was not aware of any material or immaterial misstatements
made intentionally to achieve a particular presentation.
Conclusion in respect of the Annual
Report and Financial Statements
Having reviewed the presentations and reports from the
Investment Adviser, the Committee is satisfied that the
financial statements appropriately address the critical
judgements and key estimates, both in respect of the
amounts reported and the disclosures.
The Committee is also satisfied that the significant
assumptions used for determining the value of assets
and liabilities have been appropriately scrutinised and
challenged and are sufficiently robust. Accordingly, the
Committee has concluded that the Annual Report and
financial statements, taken as a whole, are fair, balanced
and understandable, and has recommended their
approval to the Board on that basis.
Auditor Appointment and Tenure
As a result of the UK’s implementation of the EU’s
mandatory audit firm rotation requirements, the
Company is required to ensure that the external auditor’s
contract is put out to tender at least every 10 years,
with the proviso that no single firm may serve as the
Company’s external auditor for a period exceeding
20 years. PwC was first appointed as the Company’s
auditor with effect from March 2017. It is intended that the
external audit will be put out to tender no later than for
the financial year commencing 1 April 2026, which is
10 years after the Company’s initial listing.
Saira Choudhry is the audit partner allocated to the
Company by PwC. The audit of the financial statements
for the year ended 31 March 2022 are her first as senior
statutory auditor of the Company.
Assessment of the Effectiveness
of the External Audit Process and
Auditor Independence
As part of its annual review of the effectiveness of
the external audit process, the Committee obtained
assurance on the quality of the external audit from its
own evaluation, the audit feedback documentation and
from correspondence and discussions with the audit
partner, Investment Adviser and the Administrator. The
Auditor demonstrated a good understanding of the
Group, and had identified and focused on the areas
of greatest financial reporting risk. Its reporting to the
Committee was clear, open and thorough. The Committee
has assessed the professional scepticism and challenge
of management judgement by the Auditor and is satisfied
that the Auditor has demonstrated these. The Committee
considered the advice included in the FRC Practice Aid
on Audit Quality when making this judgement.
The FRC’s Audit Quality Inspections Report on the audits
carried out by PricewaterhouseCoopers LLP was also
considered by the Committee. On the basis of these
factors and assessments, the Committee has concluded
that the external audit process has been effective.
The Committee assessed the external auditor’s
independence, qualifications, relevant experience, and
effectiveness of audit procedures. In advance of each
audit, the Committee obtains confirmation from the
external auditor that it remains independent and that the
level of non-audit fees are not an independence threat.
Report of the Audit and Management
Engagement Committee
continued
64
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Non-audit Services
The Committee has put into place a policy for the
provision of non-audit services to the Company by the
auditor. The general intention of the Committee is to
avoid the provision of non-audit services by the auditor,
other than the review of the half-yearly report, as these
have the potential to compromise the independence of
the auditor. The Committee acknowledges that in certain
situations it may be appropriate for the external auditor
to provide such services to the Company for a variety of
reasons including cost effectiveness, depth of knowledge
and the ongoing relationship between the Board and
the external auditor. All non-audit fees are approved by
the Committee in advance. Where non-audit fee levels
are considered significant, the Committee considers the
appropriateness of the independence safeguards put in
place by the auditor.
The total fees paid to PricewaterhouseCoopers LLP
during the period, net of VAT, totalled £402,000
(2021: £361,000) of which £44,000 (2021: £57,000) was
concerning non-audit services for the review of the half
yearly report and £62,000 (£nil) for non-audit services
concerning a planned Bond Issue which was postponed.
The auditor was selected for the non-audit services
relating to the postponed Bond Issue following careful
consideration by the Committee. The Committee believed
that the ability for the auditor to audit the Company’s
financial statements independently would not be
impacted by this work. It is standard practice for a
Company’s external auditor to undertake this task.
Note 9.0 to the consolidated financial statements
details all services provided and total fees paid to
PricewaterhouseCoopers LLP for the financial year
ended 31 March 2022. The Committee considers
PricewaterhouseCoopers LLP to be independent of the
Company.
Re-appointment of the Auditor
Taking into account the performance and effectiveness of
the Auditor and the confirmation of their independence,
the Committee has recommended to the Board that a
resolution to re-appoint PricewaterhouseCoopers LLP as
the Company’s auditor be put to the shareholders at the
forthcoming AGM.
Caroline Gulliver
Chairman, Audit and Management Engagement
Committee
29 June 2022
Report of the Audit and Management
Engagement Committee
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
65
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Introduction
The Nomination and Remuneration Committee presents the
Report for the year ended 31 March 2022.
Composition and role of the Nomination
and Remuneration Committee
The Nomination and Remuneration Committee comprises
Peter Baxter, as Chairman, and the entire Board, all of
whom are Non-Executive Directors. Terms of Reference
have been established by the Board and are available on
the Company’s website.
The Nomination and Remuneration Committee’s principal
duties are as follows:
Nomination
●
to review the structure, size and composition of the
Board, including its skills, knowledge, experience and
diversity, including gender and ethnicity;
●
to consider the succession planning of Directors,
taking into account the challenges and opportunities
facing the Company and the skills and expertise
needed on the Board in the future;
●
to be responsible for identifying and nominating
candidates to fill Board vacancies as and when
they arise;
●
to review annually the time required from
Non-Executive Directors;
●
to review the results of the Board performance
evaluation as it relates to Board composition and
succession planning;
●
to review annually potential conflicts of interests of
directors as disclosed to the Company and develop
appropriate processes for managing such conflicts; and
●
to receive and consider updates from the Investment
Advisor on its own succession planning activities.
Remuneration
●
to determine and agree with the Board, a formal
and transparent procedure for developing policy
on the remuneration of the Company’s Chair, Audit
and Management Engagement Committee chair
and Non-Executive Directors;
●
to take into account all factors when considering
the Remuneration Policy which it deems necessary,
including relevant legal and regulatory requirements,
the provisions and recommendations of the AIC Code
of Corporate Governance and associated guidance;
●
to review the ongoing appropriateness and relevance
of the Remuneration Policy;
●
to obtain reliable, up-to-date information about
remuneration in other companies of comparable
scale and complexity and market practice generally;
●
to be responsible for establishing the selection
criteria, selecting, appointing and setting the terms
of reference for any remuneration consultants who
advise the Committee; and
●
to ensure that contractual terms on termination, and
any payments made, are fair to the individual, and the
Company, that failure is not rewarded and that the
duty to mitigate loss is fully recognised.
Activities during the year
The Committee meets at least once per year. During the
year, the Committee has:
●
considered the Board’s remuneration in view of the
responsibilities and time commitments for overseeing
the affairs of the Company, in light of the Articles of
Association as well as the level of dividend paid to
shareholders during the year;
●
reviewed the Director’s skill matrix;
●
considered the Board’s current succession plan, and
agreed that it would be prudent for the Board to
phase the recruitment of additional Directors going
forward to allow progressive rotation of directors and
facilitate effective succession planning;
●
appointed a Sub-Committee to be responsible for
conducting the recruitment process to identify a new
candidate for appointment to the Board;
●
engaged a recruitment agency to assist with the
search for a candidate;
●
reviewed the results of the Board’s 2022 performance
evaluation process, the details of which can be found
on page 70; and
●
satisfied itself that each Non-Executive Director
serving at the end of the year remains independent
and continues to have sufficient time to discharge
their responsibilities to the Company.
The Company is supportive of the new Listing Rules
being issued by the Financial Conduct Authority
on diversity and inclusion on company boards. The
Committee is considering a range of candidates from
diverse backgrounds. The Company’s diversity policy can
be found on page 69.
The Directors’ fees were considered by the Committee
in February 2022. Please see the Directors’ Remuneration
Report on pages 73 to 76 for details on Director
remuneration.
Peter Baxter
Chairman, Nomination and Remuneration Committee
29 June 2022
Report of the Nomination and
Remuneration Committee
66
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Background
The FCA Listing Rules and Disclosure Guidance and
Transparency Rules require listed companies to disclose
how they have applied the principles and complied
with the provisions of the corporate governance code
to which the issuer is subject. The provisions of the UK
Corporate Governance Code (“UK Code”), as issued by the
FRC in July 2018, are applicable to the year under review
and can be viewed at www.frc.org.uk.
The Board has considered the principles and
recommendations of the AIC Code of Corporate
Governance (“AIC Code”) as issued by the AIC in February
2019. The AIC Code addresses all the principles set out in
the UK Code, as well as setting out additional principles
and recommendations on issues that are of specific
relevance to the Company as an investment company.
The FRC has confirmed that AIC member companies
who report against the AIC Code will be meeting their
obligations in relation to the UK Code and the associated
disclosure requirements of the FCA. The AIC Code can be
viewed at www.theaic.co.uk.
The Board considers that reporting against the principles
and recommendations of the AIC Code provides
shareholders with full details about the Company’s
corporate governance compliance.
Statement of Compliance
Except as set out below, the Company has complied
with the provisions of the AIC Code throughout the year
ended 31 March 2022.
Provision 23: Directors are not appointed for a specified
term, as all Directors are non-executive and the Board
believes that a Director’s performance and their
continued contribution to the running of the Company
is of greater importance and relevance to Shareholders
than the length of time for which they have served as a
Director of the Company. Each Director is subject to the
election and re-election provisions set out in the Articles
which provide that a Director appointed during the year
is required to retire and seek election by Shareholders
at the next Annual General Meeting following their
appointment. Thereafter the Directors intend to offer
themselves for re-election annually and will aim to not be
on the Board for more than nine years.
The UK Code includes provisions relating to:
●
the role of the chief executive; and
●
executive directors’ remuneration.
The Board considers that these provisions are not relevant
to the position of the Company, being an externally
managed investment company. In particular, all of the
Company’s day-to-day management and administrative
functions are outsourced to third parties. As a result,
the Company has no executive Directors, employees
or internal operations. The Company has therefore not
reported further in respect of these provisions.
The Board
Under the leadership of the Chairman, the Board
is responsible for the effective stewardship of the
Company’s affairs, including corporate strategy,
corporate governance, risk assessment and overall
investment policy. The Directors have overall
responsibility for the review of investment activity and
performance, and the supervision of the Investment
Adviser which is responsible for the day-to-day asset
management of the Company’s portfolio.
The Board consists of five non-executive Directors. It
seeks to ensure that it has an appropriate balance of
skills and experience, and considers that, collectively, it
has substantial recent and relevant experience of public
company management, the UK real estate sector, social
housing and investment companies. All the Directors are
independent of the Investment Adviser and the AIFM.
The Board has adopted a schedule of matters reserved
for decision by the Board, including inter alia,
determining the Company’s investment objective and
policy, and gearing and dividend policies. This schedule
of matters reserved for the Board is available on the
Company’s website.
The Directors ensure that risks are effectively managed
through robust policies and procedures, supported by
the right values and culture. The Board’s primary focus
is the sustainable long-term success of the Group to
deliver value for shareholders, taking into account other
stakeholders.
The Board is responsible for investment decisions, other
than to the extent delegated to the AIFM and/or the
Investment Adviser, and the appointment, supervision
and monitoring of the Company’s service providers,
including amongst others, the AIFM and the Investment
Adviser. The Board is responsible for the interim and
annual financial statements of the Company and, in
conjunction with the AIFM, also approves the periodic
calculation of the Net Asset Value.
Corporate Governance Statement
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
67
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Chairman, Michael Wrobel, was independent of
the Investment Adviser at the time of his appointment
and is deemed by his fellow Directors to continue to be
independent in character and judgement and free of
any conflicting relationships. He leads the Board and
is responsible for its overall effectiveness in directing
the Company. In liaison with the Company Secretary, he
ensures that the Directors receive accurate, timely and
clear information. Mr Wrobel considers himself to have
sufficient time to commit to the Group’s affairs. He has no
significant commitments other than those disclosed in
his biography on page 57. The role and responsibilities of
the Chairman are clearly defined and set out in writing, a
copy of which is available on the Company’s website.
Peter Baxter is the Senior Independent Director of
the Company. He provides a sounding board for
the Chairman and serves as an intermediary for the
other Directors and shareholders. He also provides a
channel for any shareholder concerns regarding the
Chairman and takes the lead in the annual evaluation
of the Chairman by the other Directors. The role and
responsibilities of the Senior Independent Director are
clearly defined and set out in writing, a copy of which is
available on the Company’s website.
The Board has no set policy for the length of tenure of
Directors although it keeps in mind the recommendations
of the AIC Code during succession planning. It is the
Board’s policy for all Directors to stand for re-election
annually. Recommendations for election/re-election of
Directors are made on an individual basis following
rigorous review. Directors are appointed under letters of
appointment, copies of which are available for inspection
at the registered office of the Company and at the AGM.
Board Operation and Culture
The Board meets formally at least quarterly, but also
meets on an ad hoc basis for the purpose of considering
potential transactions and associated due diligence.
The Board will meet to consider and, if appropriate,
approve the acquisition of properties recommended
by the Investment Adviser. The Investment Adviser
prepares an Investment Proposal Paper (“IPP”) in respect
of the proposed acquisitions which includes details
of the transaction and due diligence reports. Upon
review of the IPP, the Board contemplates the structure
of the transaction, any risks attached to the proposed
transaction and how these would be mitigated/managed,
and the impact of the transaction on the value of the
Group’s property portfolio, following advice from
the valuers.
For the purpose of monitoring the portfolio, the Board
receives periodic reports from the AIFM and the
Investment Adviser, detailing the performance of the
Company. The Board delegates certain responsibilities
and functions to the Audit and Management Engagement
Committee, which has written terms of reference.
To assist the Board in the day-to-day operations of the
Company, arrangements have been put in place to
delegate authority for performing certain operations to
the AIFM, the Investment Adviser and other third-party
service providers, such as the Administrator and the
Company Secretary.
The Chairman demonstrates objective judgement,
promotes a culture of openness and debate, and
facilitates effective contributions by all Directors. The
Directors are required to act with integrity, lead by
example and promote this culture within the Company.
The Board seeks to ensure the alignment of the
Company’s purpose, values and strategy with the culture
of openness, debate and integrity through ongoing
dialogue, and engagement with the Investment Adviser
and the Company’s other service providers. The Board
and the Investment Adviser operate in a supportive,
co-operative and open environment.
The Board schedules yearly meetings with the board of
the Investment Adviser, one of the purposes of which is
to receive an insight into the culture of the Investment
Adviser.
The culture of the Board is considered as part of
the annual performance evaluation process which
is undertaken by each Director. The culture of the
Company’s service providers is also considered by the
Audit and Management Engagement Committee during
the annual review of their performance and while
considering their continuing appointment.
The Company maintains Directors’ and Officers’ liability
insurance on behalf of the Directors at the expense of the
Company. The Board has agreed arrangements whereby
Directors may take independent professional advice
in the furtherance of their duties. The Company has
also indemnified the Directors in accordance with the
provisions of the Articles of Association.
Independence of Directors
The independence of all Directors is reviewed as part of
the annual assessment of the Board.
The Board has determined that each Director remains
independent in character and judgement and is free of
any relationships or circumstances that threaten their
independence of the Company or its Investment Adviser.
In particular, none of the Directors have ever been
executives of the Company or the Investment Adviser,
have had a material direct or indirect relationship
with the Company or its stakeholders, have received
disproportionate fees, have close family relationships
with stakeholders or represent significant shareholders.
Corporate Governance Statement
continued
68
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Board Meetings
A formal agenda is approved by the Chairman and
circulated by the Company Secretary in advance of
each meeting to the non-executive Directors and other
attendees. A typical agenda includes: an analysis of
portfolio performance and exposure; an update on
the investment pipeline; the Company’s financial
performance; updates on investor relations; statutory and
regulatory compliance; and any corporate governance
matters. Relevant papers on the items included on the
agenda are circulated in good time to the members of
the Board, in advance of the meeting.
The Investment Adviser attends the Board meetings
together with representatives from the AIFM and
Company Secretary. Representatives of the Company’s
other advisers are also invited to attend Board meetings
from time to time.
The number of Board, Audit and Management
Engagement Committee and Nomination and
Remuneration Committee meetings held during the year
ended 31 March 2022 along with the attendance of the
Directors is set out below:
Quarterly Board
Meetings
Audit and
Management
Engagement
Committee
Nomination and
Remuneration
Committee
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
Number
entitled to
attend
Number
attended
Michael
Wrobel 4 4 3 3 1 1
Alastair
Moss 4 4 3 3 1 1
Alison
Hadden 4 4 3 3 1 1
Caroline
Gulliver 4 4 3 3 1 1
Peter
Baxter 4 4 3 3 1 1
The Board is scheduled to meet on a quarterly basis.
In addition to these meetings the Board also met on
3 occasions to approve the NAV and dividend declarations
and on a further 8 occasions on an ad hoc basis.
Committee
The Company operates through the Board and its two
Board committees, namely the Audit and Management
Engagement Committee and the Nomination and
Remuneration Committee (the “Committees”). The Board
evaluates the membership of the Committees on an
annual basis.
Audit and Management Engagement
Committee
The Audit and Management Engagement Committee
comprises of all Directors. Caroline Gulliver, the Chair
of the Audit and Management Engagement Committee,
is a Chartered Accountant and is considered to have
recent and relevant financial experience. The Audit
and Management Engagement Committee as a whole
has competence relevant to the real estate investment
company sector.
The Chairman is a member of the Audit and Management
Engagement Committee. but does not chair it. His
membership of the Audit and Management Engagement
Committee is considered appropriate given the small
size of the Board and the Chairman’s knowledge of
the financial services industry. A copy of the terms of
reference of the Audit and Management Engagement
Committee is available from the Secretary and on the
Company’s website.
The Committee meets at least twice a year and reviews
the scope and results of the external audit, its cost
effectiveness and the independence and objectivity
of the external auditors, including the provision of
non-audit services.
The Committee also reviews the terms of the AIFM
agreement and the Investment Adviser Agreement, and
examines the effectiveness of the Company’s internal
control systems and the performance of the AIFM,
Investment Adviser, Administrator, Depositary, Company
Secretary and Registrar, and other service providers.
The Report of the Audit and Management Engagement
Committee is set out on pages 62 to 65.
Nomination and Remuneration
Committee
The Nomination and Remuneration Committee is
comprised of all Directors and the Chairman is the Senior
Independent Director, Peter Baxter. The Nomination
and Remuneration Committee meets as required for the
purpose of considering recruitment to and removals from
the Board; levels of remuneration paid to the Directors;
and review of the Directors’ Remuneration Report and
Remuneration Policy. A copy of the terms of reference
of the Remuneration and Nomination Committee is
available on the Company’s website and is available by
request from the Company Secretary.
Diversity
The Board recognises the benefits of diversity and has
adopted a diversity policy. All Board appointments will be
made on merit and against an objective criteria and have
regard to diversity in relation to factors such as gender,
ethnicity, skills, background and experience. The Board
does not consider it to be in the interests of the Company
and its shareholders to set prescriptive diversity criteria
or targets, but will continue to monitor diversity and take
such steps as it considers appropriate to maintain its
position as a meritocratic and diverse business. See also
the Strategic Report on page 35.
Corporate Governance Statement
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
69
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Induction of New Directors
A procedure for the induction of new Directors has been
established, including the provision of an induction pack
containing relevant information about the Company,
its processes and procedures and meetings with the
Chairman and relevant persons at the Investment Adviser.
Performance Evaluation
For the year under review, the Board undertook
an internal performance evaluation by way of
questionnaires designed to assess the strengths and
independence of the Board and the Chairman, individual
Directors and the performance of the Board’s Committees.
The areas considered are:
●
the frequency and effectiveness of Board and
Committee meetings;
●
the size, composition and relevant experience of the
Board;
●
the independence and performance of the Directors
and the Board; and
●
the training requirements of each Director.
The evaluation process is conducted by the Chairman.
Peter Baxter, as the Senior Independent Director,
leads the appraisal of the Chairman. The Board is
cognisant of the advantages of an external performance
evaluation and will keep this option under regular
review. In the prior year, the Board undertook an
externally facilitated performance evaluation. The
Board noted the recommendations from the external
performance evaluation, one of which was to hold
an additional Audit and Management Engagement
Committee in the year with the purpose of focusing on
management engagement matters. An additional Audit
and Management Engagement Committee was held in
June 2022 and a further additional meeting will be held
on an annual basis going forward.
The Company seeks to ensure that the Board has a
balance of skills and experience that are complementary
and enable the Board to operate efficiently.
All of the Directors have assessed their other ongoing
commitments and are satisfied that they can commit the
time necessary to execute their duties to the Company.
No significant issues were identified during the
evaluation process. The Nomination and Remuneration
Committee considers that all of the current Directors
make an effective contribution and have the requisite
skills and experience to continue to provide able
leadership and direction for the Company. It was
agreed that all Directors should be recommended for
election/re-election at the forthcoming AGM.
The Board concluded that each Director brings
considerable expertise and experience to the Board and
the Board operates with good independent thought and
challenge.
All Board members have assessed their ongoing
commitments and are satisfied that they can commit the
time necessary to execute their duties to the Company.
Conflicts of Interest
All Directors have a statutory responsibility to avoid
situations where a conflict of interest exists, or may exist,
between the Company and an entity that the Director is
either directly or indirectly involved with. The Board has
procedures in place to identify potential conflicts and
resolve any that should arise. In the case of a conflict
of interest, the nature and extent of the conflict are
assessed against the existing internal control structure,
and the results of this assessment and actions taken
to resolve the conflict are documented in the minutes
of the relevant Board meeting. No conflicts of interest
arose during the period.
Health and Safety
Health and safety is of prime importance to the
Company and is considered equally with all other
business management activities to ensure protection of
stakeholders, be they tenants, advisers, suppliers, visitors
or others. The Board regularly discusses health and safety
issues with the Investment Adviser.
The Company is committed to fostering the highest
standards in health and safety as it believes that all
unsafe acts and unsafe conditions are preventable. All
our stakeholders have a responsibility to support the aim
of ensuring a secure and safe environment, and all our
stakeholders are tasked with responsibility for achieving
this commitment.
Risk Management and Internal Control
The Directors are responsible for the systems of internal
control relating to the Company and its subsidiaries,
and the reliability of the financial reporting process and
for reviewing their effectiveness, ensuring that the risk
management and control processes are embedded in
day-to-day operations.
An ongoing formal process, in accordance with the FRC
Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting, has been
established for identifying, evaluating and managing
the principal and other risks most likely to impact
the Group. This process, which is regularly reviewed,
together with key procedures established with a view to
providing effective financial control, has been in place
throughout the year ended 31 March 2022 and up to the
date of this Report.
Corporate Governance Statement
continued
70
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Audit and Management Engagement Committee has
in place a formal procedure for performing an ongoing
robust assessment of the Group’s risk management and
internal control systems. A risk matrix has been established
against which the risks identified and the controls in place
to mitigate those risks can be monitored. The risks are
assessed on the basis of the likelihood of them happening,
the impact on the business if they were to occur and the
effectiveness of the controls in place to mitigate them. In
arriving at its judgement of what risks the Company faces,
the Board has considered the Company’s operations in the
light of the following factors:
●
the nature and extent of risks which it regards as
acceptable for the Company to bear within its overall
business objective;
●
the threat of such risks becoming reality;
●
the Company’s ability to reduce the incidence and
impact of risk on its performance; and
●
the cost to the Company and benefits related to the
Company and third parties operating the relevant
controls.
The risk matrix is reviewed twice a year by the
Committee and at other times as necessary. The principal
risks facing the Company are set out on pages 38 to 42 of
this Annual Report, together with the processes applied
to mitigate those risks.
On an annual basis, the Committee reviews the control
reports of its key service providers and the Auditor notes
any deficiencies in internal controls and processes that
have been identified during the course of the audit.
The Audit and Management Engagement Committee is
mindful of these key risks as well as considering evolving
and emerging risks such as the impact of the Ukraine-
Russia conflict, long-term climate change and cyber
security which have the potential to affect the Group.
The Committee ensures that the Board takes appropriate
advice and debates the issues facing the Group.
At each Board meeting, the Board receives reports from
the Investment Adviser, the Administrator, the AIFM and
the Broker in respect of compliance activities, Company
financial performance and financial position.
The controls, which are regularly reviewed, aim to
ensure that the assets of the Company are safeguarded,
proper accounting records are maintained, and the
financial information used within the business and for
publication is reliable. The risk management process
and Company systems of internal controls are designed
to manage rather than eliminate the risk of failure to
achieve the Company’s objectives and can only provide
reasonable, but not absolute, assurance against material
misstatement or loss.
The Directors have carried out a review of the effectiveness
of the Company’s risk management and internal control
systems as they have operated over the period and up to
the date of approval of the Annual Report. During the course
of the review, the Board has not identified nor been advised
of any failings or weaknesses which it has determined to be
significant.
The Directors have considered the appropriateness of
establishing an internal audit function and, having regard
to the structure and nature of the Company’s activities,
has concluded that the function is unnecessary. The Audit
and Management Engagement Committee will review
on an annual basis the need for this function and make
appropriate recommendations to the Board.
Financial Reporting
The Board operates the following key controls in relation
to financial reporting:
●
the Board and Committee members review quarterly
management reports and supporting documents that
are provided by the Investment Adviser;
●
the Board has procedures in place for the approval
of expenses and payments to third parties; and
●
the Committee members and Board review all
financial information and announcements prior
to publication.
Corporate Responsibility
The Company regards corporate responsibility as
integral to how it conducts its business. It is committed to
being a good corporate citizen and behaving responsibly
with a demonstrated transparency of approach.
To achieve this goal, the Company applies the following
principles to its operations:
Business conduct
The Company’s investment decisions are made on the
basis of generating shareholder value and ensuring
the long-term success of the business. The selection of
suppliers will be made independently by the Company’s
Directors upon advice from the Investment Adviser
and in the best interests of the Company. The Board
will ensure that appropriate controls are in place to
guarantee independence from the supply chain.
All customers and suppliers will be treated fairly and
responsibly.
The Company will not provide financial support to
political parties or politicians.
Corporate Governance Statement
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
71
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Company is resolutely opposed to bribery and
corruption. The Company will not use any illegal or
improper means to further its business interests, nor will
it accept any forms of inducements intended to influence
its investment decisions.
Governance
The Company will protect the interests of its shareholders
and other stakeholders through compliance with relevant
legal and regulatory environments, and through effective
management of business risk and opportunity.
The Board will ensure that its members are truly
independent, are competent and have the resources and
support required to perform their duties optimally, and
that the Board’s decisions are made in the best interests
of the Company and its shareholders. The performance
of the Board will be regularly reviewed, and Directors will
retire as and when deemed appropriate by the Board in
accordance with best practice.
Socially responsible investment
The Board aims to be a socially responsible investor
and believes that it is important to invest in specialist
social housing properties in a responsible manner in
respect of environmental, ethical and social issues. The
Investment Adviser’s evaluation procedure and analysis
of the properties within the portfolio includes research
and appraisal of such matters, and takes into account
environmental and social policies and other business
issues.
Further details on the social impact of the Company’s
investments are included in the Social Impact report
from the The Good Economy, a summary of which can be
found on page 49.
The Company recognises that environmental protection,
resource efficiency and sustainable development are
necessary to ensure that environmental damage is
limited and furthermore that where relevant, positive
actions should be taken to improve the existing
environment for future generations.
Transparency
The Company aims to be transparent, and to ensure
that it communicates with its shareholders and
other stakeholders in a manner that enhances their
understanding of its business.
The Company maintains accounting documentation
that clearly identifies the true nature of all business
transactions, assets and liabilities, in line with the
relevant regulatory, accounting, and legal requirements.
No record or entry is knowingly false, distorted,
incomplete, or suppressed.
All reporting is materially accurate and complete and
in compliance in all material respects with stated
accounting policies and procedures. The Company does
not knowingly misstate or misrepresent management
information for any reason, and the Company expects the
same to apply to its suppliers.
The Company may be required to make statements
or provide reports to regulatory bodies, government
agencies or other government departments, as well as to
the media. The Company ensures that such statements or
reports are correct, timely, and not misleading, and that
they are delivered through the appropriate channels.
The Company provides through its website, its
Annual Report and other statements with appropriate
information to enable shareholders and stakeholders to
assess the performance of its business. It complies with
the applicable laws and regulations concerning the
disclosure of information relating to the Company.
Communities
The Company aims to ensure that its properties which
are associated with the provision of health services
provide significant value-adding facilities in the
communities where it invests.
Relations with Stakeholders
Details regarding the Company’s engagement with its
stakeholders are set out within the Strategic Report on
pages 25 to 33.
Approval
The Corporate Governance Statement has been approved
by the Board.
By order of the Board
Link Company Matters Limited
Company Secretary
29 June 2022
Corporate Governance Statement
continued
72
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Directors’ Remuneration Policy
Introduction
The Remuneration Policy of the Company is set by
the Board. A resolution to approve the Remuneration
Policy was passed at the AGM of the Company held
on 5 September 2019. The policy provisions set out
below will apply until the Remuneration Policy is put to
shareholders for approval at the forthcoming AGM of the
Company on 15 September 2022. There are no changes
proposed to the Remuneration Policy. The Remuneration
Policy is binding and sets the parameters within which
Directors’ remuneration may be set.
Policy
The Remuneration Policy of the Company is to pay its
non-executive Directors fees that are appropriate for
the role and the amount of time spent in discharging
their duties, that are broadly in line with those of
comparable real estate investment companies and that
are sufficient to attract and retain suitably qualified and
experienced individuals.
The fees paid will be reviewed on an annual basis and
may also be reviewed when new non-executive Directors
are recruited to the Board. The Directors of the Company
are entitled to such rates of annual fees as the Board
at its discretion shall from time to time determine. The
Chairman of the Board and the Audit and Management
Engagement Committee Chairman are entitled to receive
fees at a higher level than those of the other Directors,
reflecting their additional duties and responsibilities.
Annual fees are pro-rated where a change takes place
during the financial year.
In addition to the annual fee, under the Company’s
Articles of Association, if any Director is requested to
perform any special duties or services outside their
ordinary duties as a Director, they may be paid such
reasonable additional remuneration as the Board may
from time to time determine.
Directors’ Remuneration Components
Component Director Rate at 1 April 2022 Purpose of Remuneration
Annual fee Chairman £53,000 Commitment as Chairman of a public
company
1
Annual fee Non-executive Directors £34,000 Commitment as non-executive Directors of
a public company
2
Additional fee Chair of the Audit and Management
Engagement Committee
£5,000 For additional responsibilities and time
commitment
3
Additional fee All Directors Discretionary For extra or special services performed in
their role as a Director
4
Expenses All Directors n/a Reimbursement of expenses incurred in the
performance of duties as a Director
5
1 The Company’s policy is for the Chairman of the Board to be paid a higher fee than the other Directors to reflect the more onerous role.
2 The Company’s Articles of Association limit the aggregate fees payable to the Board of Directors to £250,000 per annum.
3 The Company’s policy is for the Chair of the Audit and Management Engagement Committee to be paid a higher fee than the other Directors to reflect the more
onerous role.
4 This is a provision of the Company’s Articles. Additional fees would only be paid in exceptional circumstances in relation to the performance of extra or special
services.
5 Directors are entitled to claim expenses in respect of duties undertaken in connection with their role as a Director.
The Company has no employees. Accordingly, there are no differences in policy on the remuneration of Directors and the remuneration of employees.
No Director is entitled to receive any remuneration which is performance-related. As a result, there are no performance conditions in relation to any elements of the
Directors’ remuneration in existence to set out in this Remuneration Policy.
Directors’ and Officers’ liability insurance cover is
maintained by the Company on behalf of the Directors.
Directors are entitled to be paid all expenses properly
incurred in attending Board or shareholder meetings or
otherwise in or with a view to the performance of their
duties.
As all Directors are non-executive and there are no
employees, the Company does not operate any share
option or other long-term incentive schemes and the
Directors’ fees are not subject to any performance criteria.
No pension or other retirement benefit schemes are
operated by the Company for any of its Directors.
Director’s Remuneration Report
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
73
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Service Contracts
No Director has a service contract with the Company. The
Directors are appointed under letters of appointment.
Their appointment and any subsequent termination or
retirement is subject to the Articles of Association. The
Directors’ letters of appointment provide that, upon the
termination of a Director’s appointment, that Director
must resign in writing and all records remain the
property of the Company. The Director’s appointment
can be terminated in accordance with the Articles of
Association and without compensation. There is no
notice period specified in the Articles of Association for
the removal of Directors and all Directors are subject to
annual re-election by shareholders.
Approach to Recruitment Remuneration
The remuneration package for any new Chairman or
non-executive Director will be the same as the prevailing
rates determined on the bases set out above. The Board
will not pay any introductory fee or incentive to any
person to encourage them to become a Director, but
may pay the fees of search and recruitment specialists
in connection with the appointment of any new
non-executive Director.
Views of Shareholders
Any views expressed by shareholders on the fees being
paid to Directors would be taken into consideration by
the Board when reviewing levels of remuneration.
Remuneration Report
The Board presents its Directors’ Remuneration Report
in respect of the year ended 31 March 2022. The Board
has prepared this report in accordance with the Large
and Medium-Sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2013. An ordinary
resolution for the approval of the Directors’ Remuneration
Report will be put to shareholders at the forthcoming
AGM of the Company.
The law requires the Company’s auditor to audit certain
required disclosures. Where disclosures have been
audited, they are indicated as such. The auditor’s opinion
is included in the auditor’s report on pages 80 to 87.
Annual Statement from the Chairman
I am pleased to present the Directors’ Remuneration
Report for the year ended 31 March 2022.
During the year under review, the Board has established a
separate Nomination and Remuneration Committee with
responsibility for setting the Company’s Remuneration
Policy and Directors’ fees.
The report from Nomination and Remuneration
Committee can be found on page 6.
The Directors are remunerated for their services at such
rate as the Directors shall from time to time determine.
The Board has set three levels of fees: one for the
Chairman, one for other Directors, and an additional
fee that is paid to the Director who chairs the Audit
and Management Engagement Committee. Fees are
reviewed annually in accordance with the Remuneration
Policy. The fee for any new Director appointed will be
determined on the same basis.
Directors’ fees for the year ended 31 March 2022 were
at a level of £52,000 per annum for the Chairman
and £33,280 per annum for other non-executive
Directors. The Chairman of the Audit and Management
Engagement Committee received an additional fee of
£5,000 per annum. During the year, the Nomination and
Remuneration Committee agreed to uplift the Chairman’s
fee by 1.9% to £53,000 and the Directors base fee by 2.2%
to £34,000 to better reflect the responsibilities and time
commitments for overseeing the affairs of the Company
and to align with those of the Company’s peer group.
There were no other payments for extra or special
services in the year ended 31 March 2022.
At the AGM held on 5 September 2019, shareholders
approved the amendment to the Company’s Articles of
Association which increased the maximum aggregate
annual remuneration payable to Directors from £200,000
to £250,000.
The Directors’ Remuneration Policy was approved
at the AGM held on 5 September 2019. There will be
no significant change in the way the Remuneration
Policy will be implemented in the course of the next
financial year.
The Directors’ Remuneration Policy will next be presented
to shareholders for approval at the Company’s AGM in
September 2022.
Director’s Remuneration Report
continued
74
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Directors’ Fees for the Period (audited)
The Directors who served during the year received the following emoluments:
Year ended 31 March 2022 Year ended 31 March 2021
Director Fees
Taxable
benefits Total Fees
Taxable
benefits Total
Michael Wrobel (Chairman) £52,000 – £52,000 £50,000 – £50,000
Alastair Moss £33,280 – £33,280 £32,000 – £32,000
Alison Hadden £33,280 – £33,280 £32,000 – £32,000
Caroline Gulliver £38,280 – £38,280 £36,000 – £36,000
Peter Baxter £33,280 – £33,280 £32,000 – £32,000
Total £190,120 – £190,120 £182,000 – £182,000
The amounts paid to the Directors were for services as
non-executive Directors. Taxable benefits included in the
above table are in respect of the amounts reimbursed to
Directors as travel and other expenses properly incurred
by them in the performance of their duties. There are no
variable elements in the remuneration payable to the
Directors.
Under the Company’s Articles of Association, the total
aggregate remuneration and benefits in kind of the
Directors of the Company is subject to a maximum of
£250,000 in any financial year. Any change to this would
require shareholder approval.
Loss of Office (audited)
The Directors do not have service contracts with the
Company but are engaged under letters of appointment
under which there is no entitlement to compensation for
loss of office. Directors are subject to annual re-election
by shareholders.
Company Performance
The following graph compares the performance for the
period from IPO on 18 November 2016 to 31 March 2022,
the total shareholder return of the Company’s Ordinary
shares relative to the FTSE All-Share Index and FTSE
Real Estate Index. Although the Company has no formal
benchmark, these indices have been selected as the
FTSE All-Share represents all companies of a similar
capital size, and the constituents of the FTSE 350 Real
Estate Index are UK-based real estate companies and are
therefore considered to represent the most appropriate
comparative.
50
70
Pence
90
110
130
150
170
Civitas
FTSE All-Share
FTSE 350 Real Estate Index
18 Nov
2016
31 Mar
2019
31 Mar
2020
31 Mar
2022
31 Mar
2021
31 Mar
2018
31 Mar
2017
Director’s Remuneration Report
continued
Total Shareholder Return (rebased)
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
75
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Relative Importance of Spend on Pay
The table below sets out, in respect of the year ended
31 March 2022:
a) the remuneration paid to the Directors; and
b) the distributions made to shareholders by way of
dividend.
Year ended
31 March 2022
£’000
Year ended
31 March 2021
£’000
Directors’ remuneration 190 182
Dividends paid to Ordinary
shareholders 34,093 33,413
Directors’ Interests (audited)
There is no requirement under the Company’s Articles
of Association or the terms of their appointment for
Directors to hold shares in the Company.
As at 31 March 2022, the Directors (including their
connected persons) had beneficial interests in the
following number of shares in the Company:
31 March 2022
Ordinary
shares
31 March 2021
Ordinary
shares
Michael Wrobel 120,598 100,598
Alastair Moss 11,766 11,766
Alison Hadden – –
Caroline Gulliver 58,832 58,832
Peter Baxter 82,065 47,065
There have been no changes to Directors’ share interests
between 31 March 2022 and the date of this Report.
None of the Directors or any persons connected
with them had a material interest in the Company’s
transactions, arrangements or agreements during
the year.
Voting at AGM
The Directors’ Remuneration Policy was approved at
the AGM held on 5 September 2019 and the Directors’
Remuneration Report for the year ended 31 March 2021
was approved at the AGM held on 22 September 2021. The
votes cast by proxy on these resolutions were:
Resolution
Votes for
1
% of votes
cast
Votes against
% of votes
cast
Votes
withheld
Total
votes cast
To approve
the Directors’
Remuneration
Report 99.91 0.09 43,214 277,654,337
To approve
the Directors’
Remuneration
Policy 99.99 0.01 – 320,495,728
1 Votes ‘for’ include discretionary proxy votes granted to the Chairman by
shareholders.
Consideration of Shareholder Views
The Company is committed to ongoing shareholder
dialogue and takes an active interest in voting outcomes.
Where there are substantial votes against resolutions
in relation to Directors’ remuneration, the Company will
seek the reasons for any such vote and will detail any
resulting actions in the Directors’ Remuneration Report.
Approval
The Directors’ Remuneration Report was approved by the
Board and signed on its behalf by:
Michael Wrobel
Chairman
29 June 2022
Director’s Remuneration Report
continued
76
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with UK-adopted international accounting
standards and the Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law).
Under Company law, Directors must not approve the
financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss of
the Group for that period. In preparing the financial
statements, the Directors are required to:
●
select suitable accounting policies and then apply
them consistently;
●
state whether applicable UK-adopted international
accounting standards have been followed for the
Group financial statements and United Kingdom
Accounting Standards, comprising FRS 101 have been
followed for the Company financial statements, subject
to any material departures disclosed and explained in
the financial statements;
●
make judgements and accounting estimates that are
reasonable and prudent; and
●
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Company will continue in business.
The Directors are responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group’s and Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Group and Company and
enable them to ensure that the financial statements and
the Directors’ Remuneration Report comply with the
Companies Act 2006.
The Directors are responsible for the maintenance and
integrity of the Company’s financial statements published
on the ultimate parent Company’s website. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ Confirmations
The Directors consider that the Annual Report and
accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s and Company’s
position and performance, business model and strategy.
Each of the Directors, whose names and functions are
listed in the Board of Directors confirm that, to the best of
their knowledge:
●
the Group financial statements, which have been
prepared in accordance with UK-adopted international
accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the
Group;
●
the Company financial statements, which have
been prepared in accordance with United Kingdom
Accounting Standards, comprising FRS 101, give a true
and fair view of the assets, liabilities and financial
position of the Company; and
●
the Group Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and Company, together with a
description of the principal risks and uncertainties that
it faces.
Approval
This Statement of Directors’ Responsibilities was
approved by the Board and signed on its behalf by:
Michael Wrobel
Chairman
29 June 2022
Statement of Directors’ Responsibilities
in respect of the financial statements
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
77
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
As the Company and the Alternative Investment Fund
Manager (the “AIFM”) are each domiciled in the United
Kingdom, the FCA Handbook rules require that, among
other things, the AIFM makes available the following
information to shareholders of the Company under the
AIFMD (as implemented in the UK) and to notify them of
any material change to information previously provided.
These disclosures can also be found on the Company’s
website: civitassocialhousing.com
Investment Policy, Leverage and
Liquidity (AIFMD 23(1)(a)(b)(h))
The investment strategy and objectives of the Company,
the types of assets it may invest in and the investment
techniques it may employ, associated risks and any
investment restrictions are laid out in the investment
objectives and policy and other sections of the
Annual Report.
For information about the circumstances in which
the Company may use leverage, the types of sources
permitted and the associated risks and any restrictions
on the use of leverage and any collateral and asset
re-use arrangements, shareholders are directed to the
disclosures contained in the investment objectives and
policy section of these financial statements as well as
specific AIFMD related disclosures further below.
Under the FCA’s Listing Rules to which the Company is
subject it needs the prior approval of its shareholders to
make a material change to its investment policy.
Since the Company is closed-ended without redemption
rights, liquidity risk management is limited to the
liquidity required to meet the Company’s obligations in
relation to its financing arrangements. The AIFM utilises
various risk assessment methods to measure the risk of
portfolio illiquidity to meet the Company’s obligations.
This measurement enables the provision of management
information to the AIFM and the Board of the Company to
enable these risks to be monitored and managed.
Legal Relationship with Investors (AIFMD
23(1)(c))
The Company is a public limited company listed on the
London Stock Exchange. The Company is incorporated
under the laws of England and Wales. The constitutional
document of the Company is its articles of association
which may only be amended by way of a special
resolution of its shareholders. Upon the purchase
of shares, an investor becomes a shareholder of the
Company. A shareholder’s liability to the Company will
be limited to the amount uncalled on their shares.
As the Company is incorporated under the laws
of England and Wales, it may not be possible for a
shareholder located outside that jurisdiction to effect
service of process within the local jurisdiction in which
that shareholder resides upon the Company. All or
a substantial portion of the assets of the Company
may be located outside a local jurisdiction in which
a shareholder resides and, as a result, it may not be
possible to satisfy a judgement against the Company
in such local jurisdiction or to enforce a judgement
obtained in the local jurisdiction’s courts against
the Company.
AIFM and its Delegates (AIFMD 23(1)(d),
(e) and (f))
The AIFM (G10 Capital Limited) is a private limited
company with its registered office at 3 More London
Riverside, London SE1 2AQ. G10 Capital Limited is
authorised and regulated by the Financial Conduct
Authority (FRN 648953). It has been appointed by the
Company to manage the Company under an AIFM
Agreement with effect from 24 August 2017.
The AIFM is responsible for portfolio management
and risk management and monitoring of the assets of
the Company and has discretionary authority over the
acquisition and disposition of the Company’s assets,
with power to give guarantees and undertake other
transactions on behalf of the Company subject to the
provisions of the AIFM Agreement. The AIFM is also
responsible for ensuring compliance with the AIFMD.
The AIFM’s duties under the AIFM Agreement are owed
to the Company as a whole rather than directly to the
shareholders, whether individually or in groups. The
Board of the Company is responsible under the AIFM
Agreement for representing the Company in its dealings
with the AIFM.
In order to comply with its regulatory obligations, the
AIFM holds professional indemnity insurance.
Depositary and its Delegates (AIFMD 23(1)
(d) and (f))
Indos Financial Limited (the “Depositary”) has been
appointed as the Depositary of the Company under
a Depositary Agreement in accordance with AIFMD
requirements. The Depositary is a company incorporated
in England (registered number 08255973) whose
registered office is at 54 Fenchurch Street, London EC3M
3JY. It is authorised to act as a Depositary by the FCA (FRN
602528). The Depositary is responsible for safekeeping
of the Company’s investments, including holding in
custody those investments which are required to be
held in custody and verifying ownership and keeping
records of the Company’s other investments, and for cash
monitoring.
Alternative Investment
Fund Managers Directive
78
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The Depositary’s duties under the Depositary Agreement
are owed to the Company as a whole and not directly to
shareholders, whether individually or in groups.
The investments of the Company are not of a kind
required to be held in custody by the Depositary.
Independent Auditor (AIFMD 23(1)(d))
The independent auditor of the Company for the year
ended 31 March 2022 was PricewaterhouseCoopers LLP.
The auditor’s duties, which are set out on pages 86 and
87, are owed to the Company as a whole. They have a
statutory responsibility to report to the members of the
Company as a whole in relation to the truth and fairness
of the Company’s state of affairs and profit or loss.
Valuation (AIFMD 23(1)(g))
The assets of the Company are valued in accordance
with the provisions set out in the Valuation Policy. The
Investment Committee which has been set up by the
AIFM in respect of the Company and it’s assets adds
a further level of oversight to the valuation process as
set out on in the Corporate Governance section of the
Annual Report.
Fees and Expenses (AIFMD 23(1)(i))
The Company incurs costs in the form of depositary fees,
custodian fees, bank fees and charges, marketing fees,
auditors’ fees, lawyers’ fees, fund administration fees,
company secretarial fees and other fees.
Fair Treatment of Investors and
Preferential Treatment (AIFMD 23(1)(j))
No preferential rights have been granted to any
existing shareholder.
The Company and the AIFM are committed to ensuring
that all shareholders are treated fairly and in accordance
with UK company law. They have not and will not enter
into any arrangement with one shareholder which
could result in any overall material disadvantage to the
other shareholders.
Issue and Redemption of Shareholder
Interests in the Company ((AIFMD 23(1)(l))
The Company is closed-ended and does not provide for
redemption or repurchase of the interests of ordinary
shareholders at their request.
Reporting and Performance (AIFMD 23(1)
(k), 23(1)(m) and 23(1)(n))
The historic performance of the Company, to the extent
available, has been disclosed to shareholders in the
Company’s Annual and Half Yearly Reports, which will be
sent to shareholders and are available from
http://civitassocialhousing.com/.
The latest NAV of the Company is published in the
latest Annual or Half Yearly Report or quarterly
NAV announcement.
Prime Broker (AIFMD 23(1)(o))
The Company does not have a prime broker.
Method of Making Ongoing/Periodic
Disclosures (AIFMD 23(1)(p),23(4),23(5))
Information about the Company’s risk profile and risk
management, total leverage and any material change to
the arrangements for managing the Company’s liquidity,
the proportion of assets (if any) subject to special
arrangements arising from liquidity, the maximum
permitted leverage or the grant of rights of re-use of
collateral or guarantees in relation to leverage will be
provided in the Company’s Annual Reports or on the
Company’s website http://civitassocialhousing.com/.
Risk Profile and Risk Management
(AIFMD 23(4)(c))
The appointment of the AIFM as the AIFM of the
Company under the AIFMD means that it is responsible
for risk management and the ongoing process of
identifying, evaluating, monitoring and managing
the risks facing the Company in accordance with the
requirements of the AIFMD. The Board keeps the AIFM’s
performance of these responsibilities under review as
part of its overall responsibility for the Company’s risk
management and internal controls.
The principal risks of the Company are set out in the risk
management section in the Annual Report. The AIFM’s
risk management system incorporates regular review
of these risks and the establishment of appropriate risk
limits and internal control processes to mitigate the
risks. The sensitivity of the Company to relevant risks is
further detailed in the risk management section in the
Annual Report.
Restrictions on the Use of Leverage and
Maximum Leverage (AIFMD 23(5))
As specified in the Investment objectives and policy in
the Annual Report, The Company has the ability to put up
to a maximum leverage of 40% of the Company’s Gross
Asset Value and the AIFM oversees the use of leverage to
ensure that the use of borrowing is consistent with this
requirement. Leverage is calculated using gross assets,
with various adjustments, divided by net assets.
Under AIFMD, the Company is required to calculate
leverage under the two methodologies specified by
the Directive, the ‘Gross Method’ and the ‘Commitment
Method,’ the difference being that the Commitment
Method allows certain exposures to be offset or netted.
Disclosures are made on the website of the Company.
Alternative Investment
Fund Managers Directive
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
79
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Opinion
In our opinion:
●
Civitas Social Housing PLC’s Group financial
statements and Company financial statements (the
“financial statements”) give a true and fair view of
the state of the Group’s and of the Company’s affairs
as at 31 March 2022 and of the Group’s profit and the
Group’s cash flows for the year then ended;
●
the Group financial statements have been
properly prepared in accordance with UK-adopted
international accounting standards;
●
the Company financial statements have been properly
prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law);
and
●
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements, included within
the Annual Report and Accounts (the “Annual Report”),
which comprise: the Consolidated and Company
Statements of Financial Position as at 31 March 2022;
the Consolidated Statement of Comprehensive Income,
the Consolidated Statement of Cash Flows, and the
Consolidated and Company Statements of Changes
in Equity for the year then ended; and the notes to the
financial statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the
Audit and Management Engagement Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes
the FRC’s Ethical Standard, as applicable to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare
that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
Other than those disclosed in Note 9.0, we have provided
no non-audit services to the Company or its controlled
undertakings in the period under audit.
Our audit approach
Overview
Audit scope
●
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion
on the financial statements as a whole, taking into
account the structure of the Group and the Company,
the accounting processes and controls, and the
industry in which they operate. The Group consists of a
single reportable segment.
Key audit matters
●
Valuation of investment property (Group).
●
Ability to continue as a going concern (Continuation
Resolution) (Group and parent Company).
Materiality
●
Overall Group materiality: £10.4 million
(2021: £10.4 million) based on 1% of total assets.
●
Overall Company materiality: £8.2 million
(2021: £7.4 million) based on 1% of total assets.
●
Performance materiality: £7.8 million
(2021: £7.8 million) (Group) and £6.2 million
(2021: £5.6 million) (Company).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance
in the audit of the financial statements of the current
period and include the most significant assessed risks
of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any
comments we make on the results of our procedures
thereon, were addressed in the context of our audit
of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
This is not a complete list of all risks identified by our
audit.
Ability to continue as a going concern (Continuation
Resolution) is a new key audit matter this year. COVID-19,
which was a key audit matter last year, is no longer
included because of the limited impact it has had on
the Group and Company’s business and operations.
Otherwise, the key audit matters below are consistent
with last year.
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
Report on the audit of the financial statements
80
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Key audit matter How our audit addressed the key audit matter
Valuation of investment property (Group)
Refer to the Report of the Audit and Management
Engagement Committee, Note 3.1, Significant estimate –
valuation of investment property and Note 15.0, Investment
property.
Investment properties are held at a fair value of £945.2 million
as at 31 March 2022 in the Consolidated Statement of
Financial Position. The valuation of the Group’s investment
property is the key component of the net asset value and
underpins the Group’s result for the year. The result of the
revaluation this year was a gain of £12.3 million, which is
accounted for within ‘Change in fair value of investment
properties’ in the Consolidated Statement of Comprehensive
Income. The Group’s investment property portfolio consists
of specialist social housing properties located in England
and Wales which are let to Registered Providers of social
housing on long-term leases.
Investment property valuations were carried out by a third
party valuer, Jones Lang LaSalle (‘JLL’ or the ‘Valuer’). The
Valuer was engaged by the Directors and performed their
work in accordance with the Royal Institute of Chartered
Surveyors (‘RICS’) RICS Valuation – Professional Standards
and the requirements of International Accounting Standard
40 ‘Investment Property’.
In determining the value of a property, the Valuer has
taken into account property-specific information including
the lease term and rental income payable. They applied
assumptions to arrive at the discount rate which is another
key input to the valuation. This has reference to net initial
yield and CPI growth rate which are influenced by prevailing
market conditions and comparable transactions.
The valuation of the Group’s investment property portfolio
was identified as a key audit matter given the valuation
is inherently subjective due to, among other factors, the
individual nature of each property, its location and the
expected future rental streams for that particular property.
The significance of the estimates and judgements involved,
coupled with the fact that only a small percentage difference
in individual property valuations, when aggregated, could
result in a material misstatement, warranted specific audit
focus in this area.
Given the inherent subjectivity involved in the valuation
of the property portfolio, and therefore the need for deep
market knowledge when determining the most appropriate
assumptions and the technicalities of valuation methodology,
we engaged our internal valuation experts (qualified
chartered surveyors) to assist us in our audit of this area.
Assessing the valuers’ expertise and objectivity
We read the Valuer’s report and confirmed that the approach
used was consistent with the RICS guidelines. We assessed
the Valuer’s qualifications and expertise and read their terms
of engagement with the Group, determining that there were
no matters that affected their independence and objectivity
or imposed scope limitations upon them. We also considered
fees and other contractual arrangements that might exist
between the Group and the Valuer. We found no evidence to
suggest that the objectivity of the Valuer was compromised.
Assumptions and estimates used by the Valuer
In our testing, which involved the use of our internal real
estate valuation experts, we considered the assumptions
utilised by the Valuer within the valuation, including
understanding how these assumptions were developed.
We also performed benchmarking where observable
market evidence was available. We challenged the Valuer
regarding the impact of the regulatory environment on
investor sentiment and asset values. We attended meetings
with management and the Valuer, at which the valuation
methodology and the key assumptions were discussed.
We challenged their approach to the valuations, and the
rationale behind the more significant valuation assumptions
adopted. Where assumptions were outside the expected
range, we undertook further investigations, held further
discussions with the Valuer and obtained evidence to
support explanations received. We also challenged the
Valuers as to the extent they have taken into account the
impact of climate change and related ESG considerations
within the Valuations. The responses provided by the
Valuer and supporting evidence, enabled us to consider
the property specific factors that may have had an impact
on value, including recent comparable transactions
where appropriate. We concluded that the assumptions
used by the Valuer were consistent with our expectations
and comparable benchmarking and market transaction
information for the asset type.
Data used by the Valuer and legal title
We validated the data used by the Valuer and found that it
was consistent with the information we audited. This data
included inputs such as current rent, rent indexation (CPI or
CPI+1%) and lease term, which we have agreed on a sample
basis to executed lease agreements as part of our audit
work. We verified legal ownership of properties through
independent title deed confirmations on a sample basis.
We concluded that the assumptions used in the valuations
by the Valuers were supportable in light of the evidence
obtained and the disclosures within the Annual Report are
sufficient and appropriate. We have no issues to report in
respect of this work.
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
81
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Key audit matter How our audit addressed the key audit matter
Ability to continue as a going concern (Continuation
Resolution) (Group and Company)
Refer to the Going Concern and Viability Statement,
the Report of the Audit and Management Engagement
Committee, Note 2.2, Going concern in the Group Financial
Statements and Note 2.0, Basis of preparation in the Company
Financial Statements.
The Company’s articles of association include a requirement
for the Board to propose an ordinary resolution at the annual
general meeting following the fifth anniversary from the
initial public offering of the Company for the Company to
continue in its current form (the Continuation Resolution).
If the Continuation Resolution is passed, the Company will
continue its business as presently constituted and propose
the same resolution at every fifth annual general meeting
thereafter. If the Continuation Resolution is not passed, the
Directors will be required, within six months after the date
of this annual general meeting, to formulate proposals
for consideration by the shareholders for the voluntary
liquidation, unitisation, reorganisation or reconstruction of
the Company.
A Continuation Resolution is due to take place at the next
Annual General Meeting on 15 September 2022, which is
within the going concern assessment period. As such, the
Directors have considered and assessed the likelihood
of the Continuation Resolution passing and the potential
impact on the ability of the Company to continue as a going
concern. The Directors are of the view that the Continuation
Resolution will be passed at the forthcoming annual
general meeting. Additionally, the Directors expect that if
the Continuation Resolution is not passed, an event which
the Directors consider to be highly remote, formulating
and implementing any such proposals would require the
Company to continue operations for a period of at least
12 months from the date of approval of the Company’s
financial statements.
The ability to continue as a going concern was identified
as a key audit matter given that this is the first Continuation
Resolution since the formation of the Company and there
is judgement involved in management’s assessment in the
likelihood of the Continuation Resolution passing.
We evaluated the Directors’ assessment of going concern
including the impact of the Continuation Resolution on this
assessment. We considered the Directors’ assessment of
the likelihood of the Continuation Resolution passing. As
part of our analysis we also considered the impact if the
Continuation Resolution did not pass on the going concern
assessment. As part of this evaluation, we performed the
following procedures:
●
We considered the composition of the shareholder
register;
●
We held discussions with management, the
Company’s main broker, and members of the board to
understand their communications with shareholders
in the Company;
●
We challenged management’s assessment of the
shareholder base and share price performance;
●
We read the articles of association to understand the
process and timing of events in the situation where
the Continuation Resolution were not to pass. This
included challenging management’s assessment that
the Company would remain a going concern even
in the event where the Continuation Resolution were
not to pass, taking into account the likely timescale
necessary for proposals to be formulated and
implemented.
In addition to the procedures above, we assessed the
disclosures presented in the Annual Report in relation to
going concern and the Continuation Resolution and consider
these to be adequate to explain the results of the Directors’
assessment.
Further audit procedures and our findings in respect of
going concern are set out in the “Conclusions relating to
Going Concern” section below.
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
continued
82
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Group and the Company, the accounting
processes and controls, and the industry in which they operate.
The Group’s properties are spread across 158 statutory entities with the Group financial statements being a
consolidation of these entities. All work was carried out by the Group audit team with additional procedures
performed on the consolidation to ensure sufficient coverage and appropriate audit evidence for our opinion on the
Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group Financial statements – Company
Overall
materiality
£10.4 million (2021: £10.4 million) £8.2 million (2021: £7.4 million)
How we
determined it
1% of total assets 1% of total assets
Rationale for
benchmark
applied
The key measure of the Group’s performance is the
valuation of investment properties and the balance
sheet as a whole. Given this, we set an overall
Group materiality level based on total assets.
The Company’s main activity is the holding of
investments in subsidiaries. On this basis, we set
an overall Company materiality level based on
total assets.
In addition to overall Group materiality, a specific materiality was also applied to income statement line
items that impact Adjusted Profit Before Tax (‘APBT’), which is based on profit before tax, adjusted to exclude
fair value gains/(losses) on investment property and derivatives. We set a specific overall materiality level
of £1.5 million (2021: £1.5 million), equating to 5% of APBT. In arriving at this judgement, we considered the fact
that APBT is a secondary financial indicator of the Group which is disclosed as EPRA Earnings in the Annual Report
(refer to the Group Strategic Report where the term is defined in full).
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality
in determining the scope of our audit and the nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75%
(2021: 75%) of overall materiality, amounting to £7.8 million (2021: £7.8 million) for the Group financial statements and
£6.2 million (2021: £5.6 million) for the Company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end
of our normal range was appropriate.
We agreed with the Audit and Management Engagement Committee that we would report to them misstatements
identified during our audit above £519,000 (Group audit) (2021: £518,000) and £411,000 (Company audit) (2021: £372,000) as
well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
In addition, we agreed with the Audit and Management Engagement Committee we would report to them
misstatements identified during our Group audit above £75,000 (2021: £77,000) for misstatements related to financial
statement line items impacting APBT within the financial statements, as well as misstatements below that amount that,
in our view, warranted reporting for qualitative reasons.
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
83
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Group’s
and the Company’s ability to continue to adopt the going
concern basis of accounting included:
●
Corroborated key assumptions (eg liquidity forecasts
and financing arrangements) to underlying
documentation and ensured this was consistent with
our audit work in these areas;
●
Considered management’s forecasting accuracy by
comparing how the forecasts made in the prior year
compare to the actual results of the current year;
●
Understood and assessed the appropriateness of the
key assumptions used both in the base case and in
the severe but plausible downside scenario, including
assessing whether we considered the downside
sensitivities to be appropriately severe;
●
Tested the integrity of the underlying formulas and
calculations within the going concern and cash flow
models;
●
Considered the appropriateness of the mitigating
actions available to management in the event of the
downside scenario materialising. Specifically, we
focused on whether these actions are within the Group’s
control and are achievable;
●
Reviewed the debt covenant calculations agreeing
the inputs to the audited results. Additionally, we have
reviewed management’s stress tests on the covenants;
●
Reviewed the disclosures provided relating to the going
concern basis of preparation and found that these
provided an explanation of the Directors’ assessment
that was consistent with the evidence we obtained; and
●
We have performed procedures over the Continuation
Resolution as detailed in the Key Audit Matter.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s and the Company’s
ability to continue as a going concern for a period of at
least twelve months from when the financial statements
are authorised for issue.
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate.
However, because not all future events or conditions can
be predicted, this conclusion is not a guarantee as to the
Group’s and the Company’s ability to continue as a going
concern.
In relation to the Directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the Directors’ statement in the financial statements about
whether the Directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the
Directors with respect to going concern are described in
the relevant sections of this report.
Reporting on other information
The other information comprises all of the information
in the Annual Report other than the financial statements
and our Auditors’ report thereon. The Directors are
responsible for the other information. Our opinion on the
financial statements does not cover the other information
and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify
an apparent material inconsistency or material
misstatement, we are required to perform procedures
to conclude whether there is a material misstatement
of the financial statements or a material misstatement
of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are required
to report that fact. We have nothing to report based on
these responsibilities.
With respect to the Group Strategic Report and Report of
the Directors, we also considered whether the disclosures
required by the UK Companies Act 2006 have been
included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
continued
84
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Group Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Group Strategic
Report and Report of the Directors for the year ended
31 March 2022 is consistent with the financial statements
and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the
Group and Company and their environment obtained in
the course of the audit, we did not identify any material
misstatements in the Group Strategic Report and Report of
the Directors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the Directors’
statements in relation to going concern, longer-term
viability and that part of the corporate governance
statement relating to the Company’s compliance with
the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities
with respect to the corporate governance statement as
other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
corporate governance statement is materially consistent
with the financial statements and our knowledge obtained
during the audit, and we have nothing material to add or
draw attention to in relation to:
●
The Directors’ confirmation that they have carried out
a robust assessment of the emerging and principal
risks;
●
The disclosures in the Annual Report that describe
those principal risks, what procedures are in place to
identify emerging risks and an explanation of how
these are being managed or mitigated;
●
The Directors’ statement in the financial statements
about whether they considered it appropriate to
adopt the going concern basis of accounting in
preparing them, and their identification of any
material uncertainties to the Group’s and Company’s
ability to continue to do so over a period of at least
twelve months from the date of approval of the
financial statements;
●
The Directors’ explanation as to their assessment of
the Group’s and Company’s prospects, the period this
assessment covers and why the period is appropriate;
and
●
The Directors’ statement as to whether they have a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including
any related disclosures drawing attention to any
necessary qualifications or assumptions.
Our review of the Directors’ statement regarding the
longer-term viability of the Group was substantially
less in scope than an audit and only consisted of
making inquiries and considering the Directors’ process
supporting their statement; checking that the statement
is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether
the statement is consistent with the financial statements
and our knowledge and understanding of the Group and
Company and their environment obtained in the course
of the audit.
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is
materially consistent with the financial statements and
our knowledge obtained during the audit:
●
The Directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced
and understandable, and provides the information
necessary for the members to assess the Group’s and
Company’s position, performance, business model
and strategy;
●
The section of the Annual Report that describes the
review of effectiveness of risk management and
internal control systems; and
●
The section of the Annual Report describing the
work of the Audit and Management Engagement
Committee.
We have nothing to report in respect of our responsibility
to report when the Directors’ statement relating to the
Company’s compliance with the Code does not properly
disclose a departure from a relevant provision of the
Code specified under the Listing Rules for review by the
Auditors.
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
85
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Responsibilities for the financial
statements and the audit
Responsibilities of the Directors for the
financial statements
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the
preparation of the financial statements in accordance
with the applicable framework and for being satisfied
that they give a true and fair view. The Directors are also
responsible for such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and
using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or the
Company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of
these financial statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the Group and industry,
we identified that the principal risks of non-compliance
with laws and regulations related to compliance with
the Real Estate Investment Trust (REIT) status Part 12 of
the Corporation Tax Act 2010 and the UK regulatory
principles, such as those governed by the Financial
Conduct Authority, and we considered the extent to
which non-compliance might have a material effect on
the financial statements. We also considered those laws
and regulations that have a direct impact on the financial
statements such as the Companies Act 2006.
We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls),
and determined that the principal risks were related
to posting inappropriate journal entries to increase
revenue or reduce expenditure, and management bias
in accounting estimates, in particular the valuation of
investment properties. Audit procedures performed by the
engagement team included:
●
Discussions with management, including
consideration of known or suspected instances of
non-compliance with laws and regulations and fraud,
and review of the reports made by management;
●
Understanding of management’s internal controls
designed to prevent and detect irregularities;
●
Assessment of matters, if any, reported to the Audit
and Management Engagement Committee;
●
Reviewing relevant meeting minutes, including
those of the Board of Directors and the Audit and
Management Engagement Committee;
●
Review of tax compliance with the involvement of our
tax specialists in the audit;
●
Designing audit procedures to incorporate
unpredictability over the nature, timing and extent of
our testing of expenses;
●
Procedures relating to the valuation of investment
properties described in the related key audit matter
above; and
●
Identifying and testing journal entries, in particular
any journal entries posted with unusual account
combinations and words.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations
that are not closely related to events and transactions
reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or
through collusion.
Our audit testing might include testing complete
populations of certain transactions and balances,
possibly using data auditing techniques. However, it
typically involves selecting a limited number of items for
testing, rather than testing complete populations. We will
often seek to target particular items for testing based on
their size or risk characteristics. In other cases, we will
use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the
audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditors’ report.
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
continued
86
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Independent Auditors’ Report to the members
of Civitas Social Housing PLC
continued
Use of this report
This report, including the opinions, has been prepared
for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report
is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
●
we have not obtained all the information and
explanations we require for our audit; or
●
adequate accounting records have not been kept by
the Company, or returns adequate for our audit have
not been received from branches not visited by us; or
●
certain disclosures of Directors’ remuneration
specified by law are not made; or
●
the Company financial statements and the part of
the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit and
Management Engagement Committee, we were
appointed by the members on 31 March 2017 to audit the
financial statements for the period ended 17 November
2016 and subsequent financial periods. The period of
total uninterrupted engagement is 6 years, covering the
periods ended 17 November 2016 to 31 March 2022.
Other matter
In due course, as required by the Financial Conduct
Authority Disclosure Guidance and Transparency Rule
4.1.14R, these financial statements will form part of the
ESEF-prepared annual financial report filed on the
National Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory
Technical Standard (‘ESEF RTS’). This Auditors’ report
provides no assurance over whether the annual financial
report will be prepared using the single electronic format
specified in the ESEF RTS.
Saira Choudhry (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
29 June 2022
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
FINANCIAL STATEMENTS ADDITIONAL INFORMATIONCORPORATE GOVERNANCE
87
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Consolidated
Financial
Statements
Consolidated Financial Statements
89 Consolidated Statement of Comprehensive Income
90 Consolidated Statement of Financial Position
91 Consolidated Statement of Changes in Equity
92 Consolidated Statement of Cash Flows
93 Notes to the Consolidated Financial Statements
118 Company Statement of Financial Position
119 Company Statement of Changes in Equity
120 Notes to the Company Financial Statements
88
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Note
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Revenue
Rental income 5.0 51,636 49,020
Less direct property expenses 5.0 (978 ) (1,175 )
Net rental income 50,658 47,845
Directors’ remuneration 6.0 (206 ) (198 )
Investment advisory fees 8.0 (6,132 ) (6,117 )
General and administrative expenses 9.0 (3,909 ) (3,183 )
Total expenses (10,247 ) (9,498 )
Change in fair value of investment properties 15.0 12,269 5,511
Operating profit 52,680 43,858
Finance income 10.0 7 20
Finance expense 11.0 (10,608 ) (7,737 )
Change in fair value of interest rate derivatives 21.0 2,675 (66 )
Profit before tax 44,754 36,075
Taxation 12.0 – –
Profit being total comprehensive income for the year 44,754 36,075
Earnings per share – basic and diluted 13.0 7.23 p 5.80 p
All amounts reported in the Consolidated Statement of Comprehensive Income above arise from continuing operations.
The notes on pages 93 to 117 are an integral part of these consolidated financial statements.
Consolidated Statement of
Comprehensive Income
For the year ended 31 March 2022
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
89
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Note
31 March 2022
£’000
31 March 2021
£’000
Assets
Non-current assets
Investment property 15.0 945,237 893,684
Other receivables 17.0 23,519 21,905
Interest rate derivatives 21.0 2,131 –
Current assets
Trade and other receivables 17.0 12,865 12,821
Cash and cash equivalents 18.0 53,337 107,097
Total assets 1,037,089 1,035,507
Liabilities
Current liabilities
Trade and other payables 19.0 (9,492 ) (9,345 )
Bank and loan borrowings 20.0 – (59,937 )
(9,492 ) (69,282 )
Non-current liabilities
Bank and loan borrowings 20.0 (352,050 ) (292,183 )
Interest rate derivatives 21.0 – (544 )
(352,050 ) (292,727 )
Total liabilities (361,542 ) (362,009 )
Total net assets 675,547 673,498
Equity
Share capital 22.0 6,225 6,225
Share premium reserve 23.0 292,626 292,463
Capital reduction reserve 24.0 322,365 331,140
Retained earnings 25.0 54,331 43,670
Total equity 675,547 673,498
Net assets per share – basic and diluted 26.0 110.30 p 108.30 p
These consolidated financial statements on pages 89 to 117 were approved by the Board of Directors of Civitas Social Housing
PLC and authorised for issue and signed on its behalf by:
The notes on pages 93 to 117 are an integral part of these consolidated financial statements.
Michael Wrobel
Chairman and Independent Non-Executive Director
29 June 2022
Company No: 10402528
Consolidated Statement of Financial Position
As at 31 March 2022
90
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Note
Share
capital
£’000
Share
premium
reserve
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 April 2020 6,225 292,405 330,926 41,008 670,564
Profit and total comprehensive income for the year – – – 36,075 36,075
Shares reissued from treasury – 58 214 – 272
Dividends paid 14.0 – – – (33,413 ) (33,413 )
Balance at 31 March 2021 6,225 292,463 331,140 43,670 673,498
Profit and total comprehensive income for the year – – – 44,754 44,754
Shares reissued from treasury – 163 484 – 647
Shares bought back into treasury – – (9,259 ) – (9,259 )
Dividends paid 14.0 – – – (34,093 ) (34,093 )
Balance at 31 March 2022 6,225 292,626 322,365 54,331 675,547
The notes on pages 93 to 117 are an integral part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2022
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
91
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Note
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Cash flows from operating activities
Profit for the year before taxation 44,754 36,075
– Change in fair value of investment properties (12,269 ) (5,511 )
– Change in fair value of interest rate derivatives (2,675 ) 66
– Rent and incentive straight line adjustments 397 68
– Bad debt (credit)/expense 5.0 (17 ) 289
Finance income (7 ) (20 )
Finance expense 10,608 7,737
Increase in lease incentive receivable (2,011 ) (11,217 )
Increase in trade and other receivables (236 ) (3,150 )
(Decrease)/increase in trade and other payables (1,062 ) 1,762
Cash generated from operations 37,482 26,099
Interest received 7 20
Net cash flow generated from operating activities 37,489 26,119
Investing activities
Purchase of investment properties (27,695 ) (19,462 )
Acquisition costs (1,640 ) (938 )
Purchase of subsidiary – including property (13,559 ) –
Sale proceeds on sale of subsidiary – excluding property 2,695 –
Utilisation of restricted cash held for investing activities 529 14,232
Net cash flow used in investing activities (39,670 ) (6,168 )
Financing activities
Cost of shares bought into treasury 24.0 (9,259 ) –
Proceeds from shares reissued from treasury 24.0 919 –
Dividends paid to equity shareholders (33,928 ) (33,319 )
Bank borrowings advanced 20.0 – 84,550
Bank borrowing issue costs paid (1,805 ) (2,811 )
Interest and security fees paid on bank borrowings and derivatives (8,590 ) (5,981 )
Net cash flow (used in)/generated from financing activities (52,663 ) 42,439
Net (decrease)/increase in cash and cash equivalents (54,844 ) 62,390
Unrestricted cash and cash equivalents at the start of the year 18.0 103,819 41,429
Unrestricted cash and cash equivalents at the end of the year 18.0 48,975 103,819
The notes on pages 93 to 117 are an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 March 2022
92
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
1.0 Corporate information
subsequently changed to the existing name on 3 October 2016.
The address of the registered office is Beaufort House, 51 New North Road, Exeter, Devon, EX4 4EP . The Company is registered as an
investment company under section 833 of the Companies Act 2006 in England and Wales and is domiciled in the United Kingdom .
The Company did not begin trading until 18 November 2016 when the shares were admitted to trading on the London Stock
Exchange (“LSE”).
The Company’s Ordinary shares are admitted to the Official List of the Financial Conduct Authority (“FCA”) and traded on
the LSE.
2.0 Basis of preparation
On 31 December 2020 EU-adopted International Financial Reporting Standards ‘IFRS’ was brought into UK law and became
UK-adopted International Accounting Standards, with future changes to IFRS being subject to endorsement by the UK
Endorsement Board. The consolidated financial statements have transitioned to UK-adopted International Accounting
Standards for the year ended 31 March 2022. This change constitutes a change in accounting framework. However, there is no
impact on recognition, measurement or disclosure in the year reported as a result of the change in framework.
The financial statements are prepared in accordance with UK-adopted International Accounting Standards and the applicable
legal requirements of the Companies Act 2006.
The Group’s consolidated financial statements have been prepared on a historical cost basis, as modified for the Group’s
investment properties and derivative financial instruments at fair value through profit or loss.
The Group has chosen to adopt EPRA best practice guidelines for calculating key alternative performance measures. These are
disclosed on page 36 with supporting calculations in Appendix 1 on pages 129 to 131.
2.1 Functional and presentation currency
The financial information is presented in Pounds Sterling which is also the functional currency of the Company, and all values
are rounded to the nearest thousand pounds (£’000s), except where otherwise indicated.
2.2 Going concern
The Group benefits from a secure income stream from long leases with the Approved Providers and present a well-diversified
risk. The Group’s cash balances as at 31 March 2022 were £53,337,000, of which £4,362,000 was held as restricted cash. Details of
this can be found in note 18.0.
The Company and its Investment Adviser, Civitas Investment Management Limited (“CIM”) continue to work closely with
the Company’s major counterparties to monitor the position on the ground and should it be needed, to offer assistance and
guidance where possible. The Board of Directors believes that the Company operates a robust and defensive business model
and that social housing and specialist healthcare are proving to be some of the more resilient sectors within the market, given
that they are based on non-discretionary public sector expenditure and that demand exceeds supply.
In November 2021 the facility with HSBC Bank plc was extended to November 2023. In May 2022 the facility with Lloyds Bank plc
was extended to July 2024.
Cash flow forecasts based on severe but plausible downside scenarios have been run, in particular the financial performance
of tenants and a reduction in rent. As at 31 March 2022, the rent would have to drop by approximately 29% before its loan
covenant is breached. At the date of approval of this report, the Company has substantial headroom within its financial loan
covenants. The Company also benefits from a secure income stream from leases with long average unexpired term leases. As
a result, the Directors believe that the Group is 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 Company’s articles of association include a requirement for the Board to propose an ordinary resolution at the annual
general meeting following the fifth anniversary from the initial public offering of the Company for the Company to continue in
its current form (the Continuation Resolution). This is the first continuation vote since the Company was set up.
If the Continuation Resolution is passed, the Company will continue its business as presently constituted and propose the
same resolution at every fifth annual general meeting thereafter. If the Continuation Resolution is not passed, the Directors will
be required, within six months after the date of this annual general meeting, to formulate proposals for consideration by the
shareholders for the voluntary liquidation, unitisation, reorganisation, or reconstruction of the Company.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2022
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
93
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
After making appropriate enquiries of the Company’s brokers and Investment Adviser, pursuant to their recent discussions
with a number of the Company’s shareholders, the Directors are of the view that the Continuation Resolution will be passed
at the forthcoming annual general meeting. This reflects the strength and nature of the Company’s portfolio, and specifically
the provision of long-term accommodation for more than 4,000 vulnerable individuals. Accordingly, the Directors expect
that if the Continuation Resolution is not passed, an event which the Directors consider to be highly remote, formulating and
implementing any such proposals would require the Company to continue operations for a period of at least 12 months from
the date of approval of the Company’s financial statements.
The Board is, therefore, of the opinion that the going concern basis adopted in the preparation of the consolidated financial
statements is appropriate.
2.3 New standards, amendments and interpretations
The following new standards are now effective and have been adopted for the year ended 31 March 2022.
●
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial
Instruments; Recognition and Measurement’, IFRS 7 ‘Financial Instruments: Disclosures’, IFRS 4 ‘Insurance Contracts’
and IFRS 16 ‘Leases’ (effective for periods beginning on or after 1 January 2021). These amendments address issues that
might affect financial reporting when an existing interest rate benchmark is replaced with an alternative benchmark
interest rate. The Group’s borrowings with Lloyds Bank plc and HSBC Bank PLC and National Westminster Bank Plc have
transitioned from the London Interbank Offer Rate (LIBOR) benchmark to the Sterling Overnight Index Average (SONIA)
benchmark. The transition has not led to a material change in overall borrowing costs.
2.4 New standards, amendments and interpretations effective for future accounting periods
The following are new standards, interpretations and amendments, which are not yet effective and have not been early
adopted in this financial information, that will or may have an effect on the Group’s future financial statements:
●
Amendments to IAS 1 ‘Presentation of Financial Statements (effective for periods beginning on or after 1 January 2022)
– clarifies that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the
reporting period and not expectations of or actual events after the reporting date. The amendments also give clarification
to the definition of settlement of a liability. The amendments are not expected to have a significant impact on the
preparation of the financial statements.
●
Amendments to IFRS 3 ‘Business Combinations’ (effective for periods beginning on or after 1 January 2022) – gives
clarification on the recognition of contingent liabilities at acquisition and clarifies that contingent assets should not be
recognised at the acquisition date. The amendments are not expected to have a significant impact on the preparation of
the financial statements.
●
Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ (effective for periods beginning on
or after 1 January 2022) – gives clarification on costs to include in estimating the cost of fulfilling a contract for the purpose
of assessing whether that contract is onerous. The amendments are not expected to have a significant impact on the
preparation of the financial statements.
●
Amendments to IFRS 9 ‘Financial Instruments’ (effective for periods beginning on or after 1 January 2022) – gives
clarification on the fees an entity includes when assessing whether the terms of a new or modified financial liability are
substantially different from the terms of the original liability. The amendments are not expected to have a significant
impact on the preparation of the financial statements.
●
Amendments to IAS 1 ‘Presentation of Financial Statements’ (effective for periods beginning on or after 1 January
2023) – are intended to help entities in deciding which accounting policies to disclose in their financial statements. The
amendments are not expected to have a significant impact on the preparation of the financial statements.
●
Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ (effective for periods
beginning on or after 1 January 2023) – introduce the definition of an accounting estimate and include other amendments
to help entities distinguish changes in accounting estimates from changes in accounting policies. The amendments are
not expected to have a significant impact on the preparation of the financial statements.
2.5 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 Adviser, who has formed an Executive Team, in order to allocate resources to the segments and to
assess their performance.
The internal financial reports received by the Investment Adviser’s Executive Team 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 consolidated financial statements.
Notes to the Consolidated Financial Statements
Continued
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The Directors consider the Group’s property portfolio represents a coherent and diversified portfolio with similar economic
characteristics and as a result, the whole portfolio of properties represents 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 based in the UK. Geographical information is provided to ensure compliance with the
diversification requirements of the Company, other than this no geographical grouping is contained in any of the internal
financial reports provided to the Investment Adviser’s Executive Team and, therefore no geographical segmental analysis is
required by IFRS 8.
The Directors note the requirements in IFRS 8 Paragraph 34 pertaining to entities under common control and confirm that
both Auckland Home Solutions and Qualitas Housing (as lessees of the Company’s investment real estate) are under common
control of The Social Housing Family CIC (“TSHF”). The percentage and sum total of the Company’s annual rent roll pertaining
to these counterparties as if they were considered to be a ‘single customer’ can be found in note 28.0 and on page 16 of the
Annual Report.
3.0 Significant accounting judgements, estimates and assumptions
In the application of the Group’s accounting policies, which are described in note 4.0, 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 judgements, estimates and associated assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the financial year are outlined below:
3.1 Significant estimate – valuation of investment property
The Group uses the valuation carried out by its independent valuer as the fair value of its property portfolio. The valuation is
based upon assumptions including future rental income and the appropriate discount rate. The valuers also make reference to
market evidence of transaction prices for similar properties. Further information is provided in note 15.0.
The Group’s properties have been independently valued by Jones Lang LaSalle Limited (“JLL” or the “Valuer”) in accordance
with the current Royal Institution of Chartered Surveyors’ Valuation – Global Standards, incorporating the IVS, and the RICS
Valuation – Global Standards 2017 UK national supplement (the RICS “Red Book”). JLL is one of the most recognised professional
firms within social housing valuation and has sufficient current local and national knowledge of both social housing generally
and Specialist Supported Housing (“SSH”) and has the skills and understanding to undertake the valuations competently.
With respect to the Group’s consolidated financial statements, investment properties are valued at their fair value at each
balance sheet date in accordance with IFRS 13. Fair value measurements should be presented and classified using a fair value
hierarchy that reflects the significance of the inputs used in the measurements, according to the following levels:
Level 1 Unadjusted, quoted prices for identical assets and liabilities in active (typically quoted) markets.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices)
Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Value is the
Directors’ best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation
techniques and a determination of which assumptions should be applied in valuing such assets and with
particular focus on the specific attributes of the investments themselves.
Given the bespoke nature of each of the Group’s investments, the particular requirements of due diligence and financial
contribution obtained from the vendors together with the recent emergence of SSH, all of the Group’s investment properties
are included in Level 3.
3.2 Significant judgement – business combinations
The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the acquisition of an asset. Management considers the substance of the
assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.
The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition
to the property. Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the
entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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REPORT AND ACCOUNTS 2022
All corporate acquisitions made during the year have been treated as asset purchases rather than business combinations
because no integrated set of activities was acquired.
During the year, the Group entered into a transaction to acquire the freehold properties operated by CPI Care Limited. Upon
the acquisition of the company; the properties were transferred into other group companies and the company acquired,
along with its associated operations, was sold to Envivo Corundum Bidco Limited. Further details are shown in note 16.0 to the
financial statements.
The acquired companies met the definition of a business under IFRS 3, and the transaction was therefore recorded as a
business combination.
Because the Group acquired the company with the intent to sell the business, management applied the short-cut method
under IFRS 5 – Subsidiaries acquired with a view to resale. Under this method, the subsidiary is recorded at fair value less costs
to sell, and there is no requirement to fair value the subsidiary’s individual assets and liabilities.
3.3 Significant judgement – operating lease contracts – the Group as lessor
The Group has acquired investment properties that are subject to commercial property leases with Approved Providers. The
Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration
of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these
properties and so accounts for the leases as operating leases.
3.4 Significant judgement – REIT Status
Civitas Social Housing PLC is a Real Estate Investment Trust (REIT). The UK REIT regime applies when entities meet certain
conditions with the effect that the income profits and capital gains of the qualifying property rental business are exempt from
tax. Within these conditions at least 90% of the Group’s property income must be distributed as dividends to Shareholders
and the Group must ensure that the property rental business represents more than 75% of total profits and assets. It is
management’s judgement that the Group will continue to qualify as a REIT for the foreseeable future.
4.0 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. The
policies have been consistently applied to all periods presented, unless otherwise stated.
4.1 Basis of consolidation
The consolidated financial statements comprise the financial information of the Group as at the year end date.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. All intra-group transactions, balances, income and expenses are eliminated on
consolidation. The financial information of the subsidiaries is included in the consolidated financial statements from the date
that control commences until the date that control ceases.
If an equity interest in a subsidiary is transferred but a controlling interest continues to be held after the transfer then the
change in ownership interest is accounted for as an equity transaction.
Accounting policies of the subsidiaries are consistent with the policies adopted by the Company.
4.2 Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is initially measured at cost, being
the fair value of the consideration given, including expenditure that is directly attributable to the acquisition of the investment
property. After initial recognition, investment property is stated at its fair value at the balance sheet date. Gains and losses
arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise in
the Consolidated Statement of Comprehensive Income.
Subsequent expenditure is capitalised only when it is probable that future economic benefits are associated with the expenditure.
Ongoing repairs and maintenance are expensed as incurred. Overheads and operating expenses are not capitalised.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use
and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is incurred in profit or
loss in the period in which the property is derecognised.
Significant accounting judgements, estimates and assumptions made for the valuation of investment properties are discussed
in note 3.1.
Notes to the Consolidated Financial Statements
Continued
96
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
4.3 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
The Company has determined that it retains all the significant risks and rewards of ownership of the properties and accounts
for the contracts as operating leases as discussed in note 3.3.
Properties leased out under operating leases are included in investment property in the Consolidated Statement of Financial
Position. Rental income from operating leases is recognised on a straight line basis over the term of the relevant leases.
Lease incentive costs are recognised as an asset and amortised over the life of the lease.
4.4 Financial Assets
Classification
The Group classifies its financial assets in the following measurement categories:
●
those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); and
●
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the
cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income.
Trade and other receivables
Trade and other receivables are amounts due in the ordinary course of business. If collection is expected in one year or less,
they are classified as current assets. If not, they are presented as non–current assets.
Trade receivables are recognised initially at fair value and subsequently are measured at amortised cost using the effective
interest method, less impairment provision. The Group holds the trade receivables with the objective to collect the contractual
cash flows.
Impairment
The Group’s financial assets are subject to the expected credit loss model.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses
to be recognised from initial recognition of the receivables.
The expected loss rates are based on the payment profiles of lease income over a period of up to 12 months before 31 March
2022 or 1 April 2021, respectively, and the corresponding historical credit losses experienced within this period. The historical
loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the liability
of the tenants to settle the receivable. Such forward-looking information would include: changes in economic, regulatory,
technological and environmental factors (such as industry outlook, GDP, employment and politics); external market indicators;
and tenant base.
Based on the assessment and the specific work that is underway around collection of aged arrears, a provision of
£239,000 (2021: £256,400) has been reflected in the annual results.
Trade receivables are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, among others, the probability of insolvency or
significant financial difficulties of the debtor. Impaired debts are derecognised when they are assessed as uncollectible.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, cash held by lawyers and liquidity funds with a term of no more than three
months that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value.
Restricted cash represents amounts held for specific commitments, tenant deposits and retention money held by lawyers in
relation to deferred payments subject to achievement of certain conditions, other retentions and cash segregated to fund
repair, maintenance and improvement works to bring the properties up to satisfactory standards for the Group and the tenants.
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
97
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Derivative financial instruments
Derivative financial instruments, which comprise interest rate swaps for hedging purposes, are initially recognised at fair value
at acquisition and are subsequently measured at fair value, being the estimated amount that the Group would receive or pay
to sell or transfer the agreement at the period end date, taking into account current interest rate expectations and the current
credit rating of the lender and its counterparties. The instrument may be an asset or a liability. The gain or loss at each fair
value remeasurement date is recognised in the Group’s Consolidated Statement of Comprehensive Income.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs
significant to the fair value measurement as a whole.
Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any
assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.
4.5 Financial liabilities
The Group recognises a financial liability when it first becomes a party to the contractual rights and obligations in the
contract.
All financial liabilities are initially recognised at fair value, minus (in the case of a financial liability that is not at fair value
through profit or loss) transaction costs that are directly attributable to issuing the financial liability. Financial liabilities are
subsequently measured at amortised cost, unless the Group opted to measure a liability at fair value through profit or loss.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
Trade and other payables
Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented
as non-current liabilities. Trade and other payables are recognised initially at their fair value and subsequently measured at
amortised cost until settled. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due
date of the liability is less than one year, discounting is omitted.
Bank and other borrowings
All bank and other borrowings are initially recognised at fair value less directly attributable transaction costs. After initial
recognition, all bank and other borrowings are measured at amortised cost, using the effective interest method. Any
attributable transaction costs relating to the issue of the bank borrowings are amortised through the Group’s Statement of
Comprehensive Income over the life of the debt instrument on a straight-line basis.
Derivative financial instruments
Derivative financial instruments may be a financial asset or a financial liability. Please refer to the accounting policy in note 4.4
for details.
4.6 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties surrounding the obligation.
4.7 Taxation
Taxation on the profit or loss for the period not exempt under UK REIT regulations is comprised of current and deferred tax. Tax
is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised
as a direct movement in equity, in which case it is recognised as a direct movement in equity. Current tax is expected tax
payable on any non-REIT taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet
date, and any adjustment to tax payable in respect of previous periods.
The current tax charge is calculated on profits arising in the period and in accordance with legislation which has been
enacted or substantially enacted at the balance sheet date.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The amount of deferred tax that is provided is based on
the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
Notes to the Consolidated Financial Statements
Continued
98
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
4.8 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.
Capital assets comprise the following:
31 March 2022
£’000
31 March 2021
£’000
Proceeds from the issue of Ordinary shares and retained earnings 675,547 673,498
Bank and loan borrowings 352,050 352,120
Total 1,027,597 1,025,618
Until the Group is fully invested and pending re-investment or distribution of cash receipts, the Group will invest in cash, cash
equivalents, near cash instruments and money market instruments.
The Directors may use gearing to enhance equity returns. The level of borrowing will be on a prudent basis for the asset class
and will seek to achieve a low cost of funds, whilst maintaining the flexibility in the underlying security requirements and the
structure of the Group.
The Group may, following a decision of the Board, raise debt from banks and/or the capital markets and the aggregate
borrowings of the Group will always be subject to an absolute maximum, calculated at the time of drawdown, of below 40% of
the Gross Asset Value on a fully invested basis.
4.9 Dividends payable to shareholders
Dividends are included in the financial statements in the year in which they are paid.
4.10 Rental income
Rental income from investment property is recognised on a straight-line basis over the term of ongoing leases and is shown
gross of any UK income tax. Lease incentives are spread evenly over the lease term.
Insurance recharges and other similar receipts are recognised under IFRS 15 ‘Revenue from contracts with customers’, and are
included in net rental and property income gross of the related costs as the Directors consider the Group acts as principal in
this respect.
4.11 Finance income
Finance income is recognised as interest, and is accrued on cash and cash equivalent balances held by the Group.
4.12 Finance costs
Finance costs consist of interest and other costs that the Group incurs in connection with bank and other borrowings. Bank
interest and bank charges are recognised on an accruals basis. Borrowing transaction costs are amortised using the effective
interest rate.
4.13 Expenses
All expenses, including investment advisory fees, are recognised in the Consolidated Statement of Comprehensive Income on
an accruals basis.
4.14 Share issue costs
The costs of issuing or reacquiring equity instruments (other than in a business combination) are accounted for as a deduction
from equity.
4.15 Share held in treasury
The costs, including directly attributable transactions costs, of purchasing the Company’s own shares to be held in treasury is
deducted from equity and the costs are shown in the Consolidated Statement of Changes in Equity. Consideration received,
net of transaction costs, for the resale of these shares is also included in equity. Whilst the Company holds shares in treasury,
the calculations for net asset value and earnings per share are adjusted to exclude these shares.
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
99
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
5.0 Rental income
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Rental income from investment property 51,038 48,201
Rent straight line adjustments 529 372
Lease incentive amortisation (926) (439)
Rechargeable costs received 995 886
Rental income 51,636 49,020
Less direct property expenses (978) (1,175)
Net rental income 50,658 47,845
Rechargeable costs received represent insurance and service charge costs paid by the Group and recharged to the
Approved Providers and are accounted for under IFRS 15 ‘Revenue from contracts with customers’.
Direct property expenses represent insurance and service charge costs of £995,000 (2021: £886,000) and bad debt credit of
£17,000 (2021: £289,000 expense).
As per the lease agreements with the Group and Approved Providers, the Approved Providers are responsible for the
settlement of all present and future rates, taxes and other impositions payable in respect of the property. As a result, no further
direct property expenses were incurred.
6.0 Directors’ remuneration
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Directors’ fees 190 182
Employer’s National Insurance Contributions 16 16
Total 206 198
The Directors are remunerated for their services in accordance with the Remuneration Policy which sets parameters within
which Directors’ remuneration may be set. The Remuneration Policy is approved by shareholders.
Disclosures required by the Companies Act 2006 on Directors’ remuneration, including salaries, share options, pension
contributions and pension entitlement and those specified by the Listing Rules of the Financial Conduct Authority are included
on pages 73 to 76 in the Remuneration Report and form part of these Financial Statements.
7.0 Particulars of employees
The Group had no employees during the year (2021: nil) other than the Directors.
8.0 Investment advisory fees
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Advisory fee 6,132 6,117
Total 6,132 6,117
Civitas Investment Management Limited (“CIM”) is the appointed Investment Adviser of the Company. Under the current
Investment Management Agreement, the Advisory Fee shall be an amount calculated in respect of each Quarter, in each
case based upon the Net Asset Value most recently announced to the market at the relevant time (as adjusted for issues or
repurchases of shares in the period between the date of such announcement and the date of the relevant calculation), on the
following basis:
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;
Notes to the Consolidated Financial Statements
Continued
100
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
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 £1 billion, an amount equal to 0.8% of such
part of the Net Asset Value;
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.
The appointment of the Investment Adviser shall continue in force unless and until terminated by either party giving to the
other not less than 12 months’ written notice, such notice not to expire earlier than 30 May 2024.
9.0 General and administrative expenses
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Legal and professional fees 1,459 1,044
Administration fees 1,037 983
Consultancy fees 136 116
Audit fees 340 361
Abortive costs 196 174
Valuation fees 100 96
Depositary fees 71 71
Grants and donations 26 19
Insurance 84 65
Marketing 343 179
Regulatory fees 25 19
Sundry expenses 92 56
Total 3,909 3,183
Abortive costs represent legal and professional fees incurred in relation to the acquisition of investment properties and
proposed share issues that were considered but subsequently aborted.
Services provided by the Group’s auditors and their associates
The Group has obtained the following services from the Group’s auditors and their associates:
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Fees payable to the group's auditors and their associates for auditing financial statements:
Audit of the Group's financial statements
1
296 272
Audit of subsidiary companies
2
– 32
Total fees payable for audit services 296 304
Fees payable to the group's auditors and their associates for other services:
Audit related services – review of the half year financial statements 44 57
Other services
3
62 –
Total fees payable to the group's auditors and their associates 402 361
1 Includes £18,000 (2021: £50,000) cost in relation to the prior year audit.
2 Most subsidiary companies are exempt from audit as detailed on page 126.
3 This amount is included within prepayments and other receivables at 31 March 2022.
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
101
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
10.0 Finance income
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Interest and dividends received on liquidity funds 4 11
Bank interest received 3 9
Total 7 20
11.0 Finance expense
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Bank charges 6 3
Interest paid and payable on bank borrowings and derivatives 8,907 6,416
Amortisation of loan arrangement fees 1,653 1,293
Loan security fees 42 –
Other interest – 25
Total 10,608 7,737
12.0 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 current year ended 31 March 2022, the Group
did not have any non-qualifying profits and accordingly there is no tax charge in the year. 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 UK REIT for the foreseeable future, such that deferred tax has not been
recognised on temporary differences relating to the property rental business.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Corporation tax charge for the year – –
Total – –
The tax charge for the year is less than the standard rate of corporation tax in the UK of 19%. The differences are explained below.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Group
Profit before taxation 44,754 36,075
UK corporation tax rate 19.00% 19.00%
Theoretical tax at UK corporation tax rate 8,503 6,854
Effects of:
Change in value of exempt investment properties (2,331) (1,047)
Exempt REIT income (6,598) (6,511)
Amounts not deductible for tax purposes (230) 171
Unutilised residual current year tax losses 656 533
Total – –
Notes to the Consolidated Financial Statements
Continued
102
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
A deferred tax asset of £1,268,000 (2021: £1,508,000) has not been recognised in respect of the unutilised residual current year
losses as it is not anticipated that sufficient residual profits will be generated in the future.
The standard rate of corporation tax is currently 19%. In the Spring Budget 2021, the UK Government announced that from
1 April 2023 the corporation tax rate will increase to 25% (rather than remaining at 19%, as previously enacted). This new law was
substantively enacted on 24 May 2021.
REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with Part 12 of
Corporation Tax Act 2010.
13.0 IFRS Earnings per share
Earnings per share (“EPS”) amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the
Company by the weighted average number of Ordinary shares in issue during the year.
The calculation of basic and diluted earnings per share is based on the following:
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Calculation of Earnings per share
Net profit attributable to Ordinary shareholders (£’000) 44,754 36,075
Weighted average number of Ordinary shares (excluding shares held in treasury) 618,797,942 621,651,859
Earnings per share – basic and diluted 7.23p 5.80p
14.0 Dividends
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Dividend of 1.3500p for the 3 months to 31 March 2021
(1.325p 3 months to 31 March 2020) 8,403 8,237
Dividend of 1.3875p for the 3 months to 30 June 2021
(1.350p 3 months to 30 June 2020) 8,637 8,392
Dividend of 1.3875p for the 3 months to 30 September 2021
(1.350p 3 months to 30 September 2020) 8,555 8,392
Dividend of 1.3875p for the 3 months to 31 December 2021
(1.350p 3 months to 31 December 2021) 8,498 8,392
Total 34,093 33,413
On 11 May 2022, the Company announced a dividend of 1.3875 pence per share in respect of the period 1 January 2022 to
31 March 2022 totalling £8,474,000. The dividend payment was made on 28 June 2022 to shareholders on the register as at 20 May
2022. The financial statements do not reflect this dividend. The dividend was paid as a REIT property income distribution (“PID”).
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
103
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
15.0 Investment property
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Balance at beginning of year 915,589 878,743
Property acquisitions 37,198 19,129
Acquisition costs 2,086 1,056
Lease incentives and rent straight line adjustments recognised 1,614 11,150
Change in fair value 12,269 5,511
Value advised by the property valuers 968,756 915,589
Less lease incentive assets and rent straight line assets (23,519) (21,905)
Total 945,237 893,684
Acquisitions include capital expenditure to enhance lettable space of £5,818,000 (2021: £4,077,000).
During the year the Group acquired a property holding company from Herleva Properties Limited which held assets totalling
£8,611,000. These are included within Property Acquisitions in the note above.
Herleva Properties Limited is a subsidiary of Specialist Healthcare Operations Limited (“SHO”). Andrew Dawber and Tom Pridmore
(both directors of the Investment Adviser), are each 14.99% shareholders in SHO. They are not directors of SHO, and have no
operational role in that business. SHO does not meet the definition of a related party under IAS 24.
In accordance with “IAS 40: Investment Property”, the investment property has been independently valued at fair value by JLL,
an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location
and category of the investment property being valued, however, the valuations are the ultimate responsibility of the Directors.
Valuation
JLL valued the Civitas Social Housing PLC property portfolio on the basis of each individual property and the theoretical sale of
the properties without the benefit of any corporate wrapper at £968,756,000 as at 31 March 2022 (2021: £915,589,000).
JLL has provided valuation services to the Company with regards to the properties during the year. JLL has provided additional
valuation services on the acquisition of investment property to the Company during the period. The Directors have ensured
that JLL has appropriate procedures in place to ensure there are no independence conflicts with the services provided to the
Company. In relation to the year ended 31 March 2022, the proportion of the total fees payable by the Company to JLL’s total fee
income was less than 5% and is therefore minimal. Additionally, JLL has a rotation policy in place whereby the signatories on
the valuations rotate after seven years.
With the exception of the acquisition detailed in note 16.0, all corporate acquisitions during the year and the comparative year
have been treated as asset purchases rather than business combinations because following review of the IFRS 3 concentration
test, they are considered to be acquisitions of properties rather than businesses (note 3.2).
The following table provides the fair value measurement hierarchy for investment property:
Total
£’000
Quoted prices
in active
markets (Level
1)
£’000
Significant
observable
inputs (Level
2)
£’000
Significant
unobservable
inputs (Level
3)
£’000
Investment properties measured at fair value:
31 March 2022 945,237 – – 945,237
31 March 2021 893,684 – – 893,684
There have been no transfers between Level 1 and Level 2 during any of the years, nor have there been any transfers between
Level 2 and Level 3 during any of the years.
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 investments are reported as Level 3 in accordance with IFRS 13 where inputs are not
based on observable market data and the value is based upon advice from relevant knowledgeable experts.
Notes to the Consolidated Financial Statements
Continued
104
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
In this instance, the determination of the fair value of investment property 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 SSH 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) a full repairing and insuring lease with annual indexation based on CPI or CPI+1%.
The following descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining
fair values are as follows:
Valuation techniques: income approach
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (i.e. an exit price).
The valuation methodology used by the valuers follows the income approach. This approach considers the rental income
currently payable; the next uplift due on that income on review; the likelihood of a continuation of that rental income – with
growth in accordance with the leases – over the remaining terms; and then a long-term reversion which considers the likely
ability of the properties to continue to generate rent through supported housing occupation, as distinct from a reversion to
vacant possession value.
Risks are involved in both assessing the value of the rental income over the remaining terms of the leases and in also
predicting that income will continue beyond the end of the existing leases. This is a balanced judgment, which can properly
be reflected in the exit yield applied to the final year’s income and in the overall return to a purchaser.
Appropriate taxation calculations are adopted for every property based on its value and on the assumption of the sale of
the property assets directly as opposed to shares of a subsidiary company holding the property and have considered the
individual characteristics of the properties.
There are two main unobservable inputs that determine the fair value of the Group’s investment property:
i) The rate of 2% per annum has been used for CPI over the term of the subject properties’ leases in line with the Bank of
England’s long-term inflation targets for CPI. It should be noted that all leases benefit from either CPI or CPI+1 indexation.
ii) The discount rate applied to the rental flows.
Key factors in determining the discount rates applied include the regulated social housing sector and demand for each SSH
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), impact of climate change, and
the fact that all of the properties within the Group’s portfolio have the benefit of full repairing and insuring leases entered into
by an Approved Provider.
As at the balance sheet date, the lease lengths within the Group’s portfolio ranged from an effective 15 years to 36 years with a
weighted average unexpired lease term of 22.1 years (2021: 22.6). The greater the length of the lease, then, all other metrics being
equal, the greater the value of the property.
Sensitivities of measurement of significant unobservable inputs
As set out within significant accounting estimates at 3.1 above, the Group’s property investment valuation is open to inherent
uncertainties in the inputs that determine fair value. As a result, the following sensitivity analysis has been prepared:
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
105
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Average discount rate and range
The average discount rate used by the valuer in the Group’s property Portfolio Valuation is 5.5% (2021: 6.0%).
The range of discount rates used by the valuer in the Group’s property Portfolio Valuation is from 4.6% to 11.5% (2021: 4.7% to
10.7%). In assessing the range of discounts, the valuer considers the likely net initial yield which would be sought by the
investment market and builds in additional discounts to reflect added risk into the discount rate of the term and, in some
cases, the discount rate for the reversion. For example where larger rental growth is allowed during the lease, an additional
discount is built into the reversion because of the greater risk of a fall in the rent at the end of the lease.
Similarly additional discounts are considered where properties are in the process of being re-purposed and premiums are
considered where residential care assets are funded by back-to-back leases with care providers.
The table below illustrates the change to the value of investment properties if the discount rate and CPI used for the portfolio
valuation calculations are changed:
-0.5% in
discount rate
£’000
+0.5% in
discount rate
£’000
+0.25% in CPI
£’000
-0.25% in CPI
£’000
Increase/(decrease) in the IFRS fair value of investment properties at:
31 March 2022 35,620 (33,142) 28,509 (27,426)
31 March 2021 34,131 (31,776) 27,211 (26,175)
16.0 Subsidiary resale
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Acquisition of subsidiary companies (including intercompany loan) 13,559 –
Acquisition costs 765 –
Transfer to investment property (11,629) –
Sale proceeds (2,695) –
Total – –
On 23 April 2021, the Group entered into a transaction to acquire the freehold properties operated by CPI Care Limited.
Upon the acquisition of the companies for £13,559,000 plus transaction costs; the properties were transferred into other
group companies and the company acquired, along with its associated operations, was sold to Envivo Corundum Bidco
Limited for £2,695,000.
Envivo Corundum Bidco Limited is a subsidiary of Specialist Healthcare Operations Limited (“SHO”). Andrew Dawber and Tom
Pridmore (both directors of the Investment Adviser), are each 14.99% shareholders in SHO. They are not directors of SHO, and
have no operational role. SHO does not meet the definition of a related party under IAS 24.
17.0 Trade and other receivables
31 March 2022
£’000
31 March 2021
£’000
Amounts falling due in less than one year
Trade receivables 4,960 4,869
Less provision for impairment of trade receivables (239) (256)
Accrued income 4,982 5,264
Prepayments and other receivables 3,162 2,944
Total 12,865 12,821
Prepayments and other receivable amounts include prepaid legal and professional fees of £34,000 (2021: £200,000) that have
been incurred in connection with acquisitions yet to be completed and £1,046,000 (2021: £817,000) in respect of ongoing works
on the property portfolio.
Accrued income relates mainly to rent accrued for the year but not yet demanded.
Notes to the Consolidated Financial Statements
Continued
106
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
31 March 2022
£’000
31 March 2021
£’000
Amounts falling due after more than one year
Debtor arising from straight line adjustments 2,053 1,524
Lease incentives 21,466 20,381
Total 23,519 21,905
The aged analysis of trade receivables was as follows:
31 March 2022
£’000
31 March 2021
£’000
Debtors past due
Current 1,777 2,128
< 30 days 355 817
30-60 days 105 322
> 60 days 2,723 1,602
4,960 4,869
Debtors past due
Less provision for impairment (239) (256)
Total 4,721 4,613
The Directors consider the fair value of receivables equals their carrying amount.
Other categories within trade and other receivables do not include impaired assets.
The provision for impairment movement was as follows:
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Balance at beginning of year 256 –
Impairment provision made 109 289
Amount recovered (126) –
Amounts written off – (33)
Balance at end of year 239 256
18.0 Cash and cash equivalents
31 March 2022
£’000
31 March 2021
£’000
Cash held by solicitors 376 721
Liquidity funds 10,489 10,485
Cash held at bank 38,110 92,613
Unrestricted cash and cash equivalents 48,975 103,819
Restricted cash 4,362 3,278
Total 53,337 107,097
Liquidity funds refer to money placed in money market funds. These are highly liquid funds with accessibility within 24 hours
and subject to insignificant risk of changes in value.
Cash held by solicitors 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.
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
107
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Restricted cash represents amounts held for specific commitments, tenant deposits and retention money held in relation
to deferred payments subject to achievement of certain conditions, other retentions and cash segregated to fund repair,
maintenance and improvement works to bring the properties up to satisfactory standards for the Group and the tenants.
19.0 Trade and other payables
31 March 2022
£’000
31 March 2021
£’000
Deferred income 860 646
Acquisition costs accrued 2,856 3,706
Finance costs 1,840 1,557
Dividend withholding tax payable 1,057 892
Accruals and other creditors 2,202 1,979
Tenant deposits 677 565
Total 9,492 9,345
Acquisition costs accrued also include monies retained at the point of acquisition to be paid at a later date totalling £2,158,000
(2021: £2,508,000).
20.0 Bank and loan borrowings
Bank borrowings are secured by charges over individual investment properties held by certain asset-holding subsidiaries. The
banks also hold charges over the shares of certain subsidiaries and any intermediary holding companies of those subsidiaries.
Any associated fees in arranging the bank borrowings unamortised as at the year end are offset against amounts drawn on
the facilities as shown in the table below:
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Bank borrowings drawn at start of year 357,050 272,500
Bank borrowings drawn – 84,550
Bank borrowings drawn at end of year 357,050 357,050
Unamortised costs at start of year (4,930) (3,330)
Less: loan issue costs incurred (1,723) (2,893)
Add: loan issue costs amortised 1,653 1,293
Unamortised costs at end of year (5,000) (4,930)
At end of year 352,050 352,120
Loan Balance¹
31 March 2022
£’000
Loan Balance¹
31 March 2021
£’000
Loan Principal
31 March 2022
£’000
Loan Principal
31 March 2021
£’000
Maturity of bank borrowings
Repayable within 1 year – 59,937 – 60,000
Repayable between 1 to 2 years 158,746 99,256 160,000 100,000
Repayable between 2 to 5 years 59,365 59,102 60,000 60,000
Repayable after 5 years 133,939 133,825 137,050 137,050
Total 352,050 352,120 357,050 357,050
1 Loan balance net of unamortised costs.
The Group is party to the following loan facility agreements:
A 10-year Sterling Term Facility Agreement dated 2 November 2017 for up to £52,500,000 with Scottish Widows Limited. Interest
is fixed at a total of 2.9936% per annum.
The borrowings include amounts secured on investment property to the value of £173,777,000 (2021: 170,831,000).
Notes to the Consolidated Financial Statements
Continued
108
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
A Sterling Revolving Facility Agreement for £60,000,000 with Lloyds Bank plc. The facility has been extended to 15 July 2024,
interest is charged at SONIA + 1.67% margin.
The borrowings include amounts secured on investment property to the value of £153,340,000 (2021: £149,728,000).
A Revolving Credit Facility Agreement for up to £100,000,000 with HSBC Bank PLC. Interest is charged at SONIA + 2.02% margin.
The facility maturity has been extended to November 2023.
The borrowings include amounts secured on investment property to the value of £222,745,000 (2021: £219,606,000).
A 5-year loan facility with National Westminster Bank Plc, dated 15 August 2019, for up to £60,000,000. Interest is charged
at SONIA +2.00% margin and has been fixed by way of a 5-year swap. The swap fixes interest on £20,000,000 at 2.7105%
and £40,000,000 at 2.5475%. The loan can be extended for an additional 2 years and there is the option of a further
£40,000,000 accordion.
The borrowings include amounts secured on investment property to the value of £135,330,000 (2021: £131,283,000).
A 7-year loan facility with M&G Investment Management Limited, dated 22 January 2021, for up to £84,550,000. Interest is fixed at
a total of 3.137% per annum.
The borrowings include amounts secured on investment property to the value of £230,487,000 (2021: £225,221,000).
At 31 March 2022, the Group is in compliance with all covenants.
The covenants in place under the five agreements are summarised in the table below:
Loan Historical and projected interest cover Loan to Value ratio
Scottish Widows Limited 10-year facility At least 325% Must not exceed 40%
Lloyds Bank plc revolving credit facility At least 550% Must not exceed 52.5%
HSBC Bank PLC facility At least 250% Must not exceed 55%
National Westminster Bank Plc 5-year facility At least 250% Must not exceed 50%
M&G Investment Management Limited 7-year facility At least 250% Must not exceed 55%
The Group’s borrowings with Lloyds Bank plc, HSBC Bank PLC and National Westminster Bank Plc have transitioned from the
London Interbank Offer Rate (LIBOR) benchmark to Sterling Overnight Index Average (SONIA) benchmark during the year.
There was negligible cost involved in the borrowing facility transition and the respective hedge instrument amendments.
21.0 Interest rate derivatives
The Group has entered into interest rate swap agreements with NatWest Markets in order to mitigate the risk of changes in
interest rates on its loan with National Westminster Bank Plc under which £60,000,000 is currently drawn.
The swaps have a notional value of £60,000,000 and fix interest at 2.60% (including the 2% margin rate on the bank loan) and
have a maturity date of 15 August 2024.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
At start of year (544) (478)
Change in fair value during the year 2,675 (66)
Asset/(liability) at end of year 2,131 (544)
The table below shows the fair value measurement hierarchy for interest derivatives:
Quote prices In
active Markets
(Level 1) £’000
Significant
Observable
Inputs (Level 2)
£’000
Significant
unobservable
Inputs (Level 3)
£’000
31 March 2022 – 2,131 –
31 March 2021 – (544) –
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
109
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
There have been no transfers between Level 1 and Level 2 during the year nor have there been any transfers between Level 2
and Level 3 during the year.
22.0 Share capital
Share capital represents the nominal value of consideration received by the Company for the issue of Ordinary shares.
For the
year ended
31 March 2022
£’000
For the year
ended
31 March 2021
£’000
Share capital
At beginning and end of year 6,225 6,225
Number of shares issued and fully paid Ordinary shares of £0.01 each
At beginning and end of year 622,461,380 622,461,380
During the year, the Company reissued the 565,000 (2001: 250,000) Ordinary shares held in treasury at 31 March 2021 for £647,000
(2021: £272,000).
Later in the year the Company purchased 10,025,000 Ordinary shares to be held in treasury at a cost of £9,259,000. Further
purchases were made after the year end as detailed in note 23.0.
At 31 March 2022 the Company holds 10,025,000 (2021: 565,000) Ordinary shares in treasury. The shares will continue to be held
in treasury until either reissued or cancelled.
The number of Ordinary shares used to calculate the net asset value per share is 612,436,380 (2021: 621,896,380) which excludes
the shares held in treasury.
23.0 Share premium reserve
The share premium reserve represents the amounts subscribed for Ordinary share capital in excess of nominal value less
associated issue costs of the subscriptions.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
At beginning of year 292,463 292,405
Premium arising on shares reissued from treasury 163 58
At end of year 292,626 292,463
During the year, the Company reissued 565,000 (2021: 250,000) Ordinary shares held in treasury for £647,000 (2021: £272,000) a
gain of £163,000 (2021: £58,000) arose which is recognised in the share premium reserve.
24.0 Capital reduction reserve
The capital reduction reserve is a distributable reserve to which the value of the cancelled share premium has been
transferred. Pursuant to Article 3 of The Companies (Reduction of Share Capital) Order 2008, the balance held in the capital
reduction reserve is to be treated for the purposes of Part 23 of the Companies Act 2006 as a realised profit and therefore
available for distribution in accordance with section 830 of the Companies Act. The Company has used this reserve for the
costs of buying back shares to be held in treasury.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
At beginning of year 331,140 330,926
Shares reissued from treasury 484 214
Shares bought back into treasury (9,259) –
At end of year 322,365 331,140
Notes to the Consolidated Financial Statements
Continued
110
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
During the year, the Company reissued 565,000 (2021: 250,000) Ordinary shares held in treasury for £647,000 (2021: £272,000). The
cost of purchasing these shares into treasury of £484,000 (2021: £214,000) has been credited to the capital reduction reserve with
the gain credited to the Share premium reserve.
Later in the year the Company purchased 10,025,000 Ordinary shares to be held in treasury at a cost of £9,259,000. Further
purchases were made after the year end as detailed in note 23.0.
At 31 March 2022 the Company holds 10,025,000 (2021: 565,000) Ordinary shares in treasury.
25.0 Retained earnings
This reserve represents the profits and losses of the Group.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
At beginning of year 43,670 41,008
Profit for the year 44,754 36,075
Dividends paid in the year (as per note 14.0) (34,093) (33,413)
At end of year 54,331 43,670
26.0 Net asset value
Basic NAV per share is calculated by dividing net assets in the Consolidated Statement of Financial Position attributable to
ordinary equity holders of the parent by the number of Ordinary shares outstanding at the end of the year.
Net asset values have been calculated as follows:
31 March 2022 31 March 2021
Net assets (£’000) 675,547 673,498
Number of Ordinary shares in issue at end of year 622,461,380 622,461,380
Number of Ordinary shares held in treasury (10,025,000) (565,000)
Number of Ordinary shares excluding treasury shares held by the Company 612,436,380 621,896,380
NAV – basic and diluted 110.30p 108.30p
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
111
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
27.0 Analysis of financial liabilities and assets arising from financing activities
Interest rate
derivatives
£’000
Bank
borrowings
£’000
For the
year ended
31 March 2022
£’000
At beginning of year 544 352,120 352,664
Cash flows from financing activities
Loan arrangement costs paid – (1,805) (1,805)
Non cash movements
Loan arrangement fees payable – 82 82
Amortisation of loan arrangement costs – 1,653 1,653
Change in fair value of interest rate derivatives (2,675) – (2,675)
At end of year (2,131) 352,050 349,919
Interest rate
derivatives
£’000
Bank
borrowings
£’000
For the
year ended
31 March 2021
£’000
At beginning of year 478 269,170 269,648
Cash flows from financing activities
Loan draw down – 84,550 84,550
Loan arrangement costs paid – (2,811) (2,811)
Non cash movements
Loan arrangement fees payable – (82) (82)
Amortisation of loan arrangement costs – 1,293 1,293
Change in fair value of interest rate derivatives 66 – 66
At end of year 544 352,120 352,664
28.0 Operating leases
The Group is party to a number of operating leases on its investment properties with Approved Providers. The future minimum
lease payments under non-cancellable operating leases receivable by the Group are as follows:
31 March 2022
£’000
31 March 2021
£’000
Amounts receivable
< 1 year 53,821 50,367
1-2 years 53,879 50,410
2-5 years 161,940 151,511
> 5 years 928,210 873,826
At end of year 1,197,850 1,126,114
Leases are direct-let agreements with Approved Providers for a term between 15-36 years with indexed linked annual rent
reviews. All current leases are full repairing and insuring leases; the tenants are therefore obliged to repair, maintain and
renew the properties back to the original conditions.
Notes to the Consolidated Financial Statements
Continued
112
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
The following table gives details of percentage of annual rental income per Approved Provider:
31 March 2022
%
31 March 2021
%
Auckland Home Solutions and Qualitas Housing 24.4 23.9
Falcon Housing Association CIC 18.7 19.7
Bespoke Supportive Tenancies 12.6 13.2
Inclusion Housing CIC 9.3 8.7
Westmoreland Supported Housing Limited 5.9 6.1
Encircle Housing Limited 5.9 6.0
Trinity Housing Association Limited 5.1 5.3
Pivotal Housing Association 3.8 3.9
Harbour Light Assisted Living CIC 3.6 3.7
Chrysalis Supported Association Limited 3.6 3.4
New Walk Property Management CIC 2.8 2.8
My Space Housing Solutions 1.3 1.2
IKE Supported Housing Limited 1.1 1.1
Hilldale Housing Association Limited 1.0 0.9
Windrush Alliance UK CIC 0.7 –
Lilly Rose Supported Housing 0.1 –
Blue Square Residential Ltd 0.1 0.1
Total 100.0 100.0
Auckland Home Solutions and Qualitas Housing are both members of the Social Housing Family C.I.C. and subject to common
control. Their annual rent figures have therefore been aggregated in the table above. The percentage relating to Auckland Home
Solutions and Qualitas Housing was 16.28% and 8.13% (2021: 23.88% and 0.02%) respectively. The annual rent at 31 March 2022 for
Auckland Home Solutions and Qualitas Housing was £8,679,000 and £4,334,000 (2021: £12,028,000 and £8,000) respectively.
The Group is also party to a number of operating leases on its long leasehold properties. The ground rent payment
commitments under these operating leases are negligible so the future minimum lease payments under these leases have not
been disclosed in these financial statements.
29.0 Controlling parties
As at 31 March 2022, there is no ultimate controlling party.
30.0 Related party disclosures
30.1 Transactions with Directors
The Directors are remunerated for their services at such rate as the Directors shall from time to time determine. The aggregate
remuneration and benefits in kind of the Directors of the Company (in each case, solely in their capacity as such) in respect of
the year ended 31 March 2022 payable out of the assets of the Company is not expected to exceed £250,000.
Fees of £190,000 (2021: £182,000) were incurred and paid to the Directors.
As at 31 March 2022 and 2021, the Directors held the following number of shares:
31 March 2022
Ordinary
shares
31 March 2021
Ordinary
shares
Director
Michael Wrobel Chairman 120,598 100,598
Alastair Moss Director 11,766 11,766
Alison Hadden Director – –
Caroline Gulliver Audit and Management Engagement Committee Chair 58,832 58,832
Peter Baxter Director 82,065 47,065
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
113
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Remuneration
The Investment Adviser has reviewed its remuneration policies and procedures to ensure incentives are aligned with the
requirements of AIFMD. It includes measures to avoid conflicts of interest such as providing staff with a fixed monthly
salary and determining discretionary payments by the performance of the Investment Adviser as a whole and not linked
to any one AIF in particular. The Investment Adviser and its staff receive no remuneration through profit share, carried
interest, co-investment or other schemes related to the Company’s performance.
30.2 Transactions with the Investment Adviser
On 1 November 2016, Civitas Investment Management Limited (“CIM”) was appointed as the Investment Adviser of the Company.
Fees of £6,132,000 (2021: £6,117,000) were incurred and paid to CIM. In addition £nil (2021: £nil) disbursements were paid in the year.
The Investment Adviser has agreed to contribute £100,000 (2021: £nil) towards legal and professional fees incurred in the year.
This amount has been offset against legal and professional fees in note 9.0. This amount is outstanding at the end of the year.
As at 31 March 2022, a net amount of £151,000 (2021: £13,000) was due from CIM, which has since been received.
As at 31 March 2022, CIM held 50,000 (2021: 50,000) Ordinary shares in the Company.
31.0 Financial risk management
31.1 Financial instruments
The Group’s principal financial assets and liabilities are those that arise directly from its operations: trade and other
receivables, trade and other payables and cash and cash equivalents. The Group’s other principal financial liabilities are bank
borrowings, the main purpose of which is to finance the acquisition and development of the Group’s investment property
portfolio, and interest rate derivatives as detailed in notes 20.0 and 21.0.
All financial liabilities are measured at amortised cost, except interest rate derivatives, which are measured at fair value. All
financial instruments were designated in their current categories upon initial recognition.
Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are
carried in the financial statements:
Book value
31 March 2022
£’000
Fair value
31 March 2022
£’000
Book value
31 March 2021
£’000
Fair value
31 March 2021
£’000
Financial assets
Interest rate derivatives 2,131 2,131 – –
Trade and other receivables
1
34,580 34,580 33,572 33,572
Cash and cash equivalents 53,337 53,337 107,097 107,097
Financial liabilities
Trade and other payables
2
8,632 8,632 8,699 8,699
Bank borrowings 352,050 349,406 352,120 354,142
Interest rate derivatives – – 544 544
1 Excludes prepayments.
2 Excludes deferred income.
The Group has five bank loans: a 10-year fixed rate loan of £52,500,000 provided by Scottish Widows Limited; a 3-year revolving
credit facility variable rate loan of £60,000,000 provided by Lloyds Bank plc; a 3-year revolving credit facility variable rate loan
of £100,000,000 provided by HSBC Bank PLC; a 5-year revolving credit facility variable rate loan of £60,000,000 provided by
National Westminster Bank Plc; and a 7-year fixed rate loan of £84,550,000 with M&G Investment Management Limited. The fair
value of the fixed rate loan is determined by comparing the discounted future cash flows.
Notes to the Consolidated Financial Statements
Continued
114
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Financial risk management
The Group is exposed to market risk, interest rate risk, credit risk and liquidity risk in the current and future years. The Board of
Directors oversees the management of these risks. The Board of Directors reviews and agrees policies for managing each of
these risks that are summarised below.
31.2 Market risk
The Group’s activities will expose it primarily to the market risks associated with changes in property values and changes in
interest rates.
Risk relating to investment in property
Investment in property is subject to varying degrees of risk. Some factors that affect the value of the investment in property
include:
●
changes in the general economic climate;
●
competition for available properties;
●
obsolescence; and
●
government regulations, including planning, environmental and tax laws.
Variations in the above factors can affect the valuation of assets held by the Group and as a result can influence the financial
performance of the Group.
Risk relating to liquidity funds classified as cash and cash equivalents
The Group holds positions in two AAA rated liquidity funds that invest in a diversified range of government and
non-government money market securities, which are subject to varying degrees of risk. Some factors that affect the value of
the liquidity funds include:
●
the performance of the underlying government and non-government money market securities; and
●
interest rates.
Variations in the above factors can affect the valuation of assets held by the Group and as a result can influence the financial
performance of the Group.
31.3 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates.
The Group’s interest rate risk principally arises from long-term borrowings. To manage this, the Group has entered into a fixed
rate bank loan and three variable rate bank loans. The Group has entered into an interest rate swap on the 5-year loan facility
with National Westminster Bank Plc in order to mitigate the risk of rising interest rates.
At 31 March 2022, 55% (2021: 55%) of the Group’s borrowings are subject to a fixed rate of interest.
The exposure of the Group to variable rates of interest is considered upon drawing of any new loan facilities, to ensure that the
Group’s exposure to interest rate fluctuations is within acceptable levels.
The Investment Adviser monitors the Group’s exposure to any changes in interest rate on an ongoing basis, with the Board
updated on a quarterly basis of the current exposure of the Group’s loan facilities.
As at 31 March 2022, if interest rates had been 100 basis points higher/(lower) with all other variables held constant the impact
on profits after taxation for the year would be as below. The Investment Adviser anticipates these levels are reasonably
possible based on the observation of current market conditions that interest rates would not fluctuate more than 1%.
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
115
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
31 March 2022
£’000
31 March 2021
£’000
(Decrease)/increase in profits due to interest rates
100 basis points higher (1,066) (529)
100 basis points lower 1,572 1,600
The average effective interest rates of financial instruments at 31 March 2022 and 2021 were as follows:
31 March 2022
%
31 March 2021
%
Bank borrowings – fixed rate 2.94 2.94
Bank borrowings – variable rate 2.23 1.76
Cash and cash equivalents 0.05 –
The Group’s borrowings with Lloyds Bank plc, HSBC Bank PLC and National Westminster Bank Plc will be transitioning from
the London Interbank Offer Rate (LIBOR) benchmark to Sterling Overnight Index Average (SONIA) benchmark in due course.
There is expected to be negligible cost involved in the borrowing facility transition and the respective hedge instrument
amendments.
31.4 Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risks from both its leasing activities and financing activities,
including deposits with banks and financial institutions.
Debtors and accrued income represent rent due or accrued, these amounts due are diversified between a number of
different Approved Providers of differing financial strength, see note 28.0 for details of the different counterparties. None of
the Approved Providers have listed debt and as such do not have a credit rating, however, the diversified nature of this asset
supports the credit quality.
The Group has policies in place to ensure that rental contracts are entered into only with lessees with an appropriate credit
and operational history, and limits exposure to any one tenant. The credit risk is considered to be further reduced as the
source of the rents received by the Group is ultimately provided by the Government, by way of housing benefit and care
provision, via a diverse range of Local Authorities.
For details of provisions for impairment please refer to note 17.0.
Credit risk related to financial instruments and cash deposits
One of the principal credit risks of the Group will arise with the banks and financial institutions. The Board of Directors believes
that the credit risk on short–term deposits and current account cash balances is limited because the counterparties are banks
considered to be of good credit quality. In the case of cash deposits held with lawyers, the credit risk is limited because the
cash is held by the lawyers within client accounts at banks with high credit quality.
The credit ratings for banks where balances are held by the Group are as follows:
Lloyds Bank plc A+/F1
HSBC Bank plc AA-/F1+
RBS International Limited A/FI
National Westminster Bank plc A+/F1
Ratings advised by Fitch
Notes to the Consolidated Financial Statements
Continued
116
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
31.5 Liquidity risk
The Group manages its liquidity and funding risks by considering cash flow forecasts and ensuring sufficient cash balances
are held within the Group to meet future needs. Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities, the availability of financing through appropriate and adequate credit lines, and the ability of customers
to settle obligations within normal terms of credit. The Group ensures, through forecasting of capital requirements, that
adequate cash is available.
The following table details the Group’s maturity profile in respect of its financial instrument liabilities based on contractual
undiscounted payments:
On demand
£’000
<1 year
£’000
1-5 years
£’000
> 5 years
£’000
Total
£’000
31 March 2022
Trade and other payables 8,632 – – – 8,632
Bank borrowings – 9,336 245,974 144,602 399,912
8,632 9,336 245,974 144,602 408,544
31 March 2021
Trade and other payables 8,699 – – – 8,699
Bank borrowings – 67,909 181,048 144,602 393,559
8,699 67,909 181,048 144,602 402,258
The profile above shows the maturity profile at 31 March 2022 and included within the contracted payments is £42,862,000
(2021: £36,509,000) of loan interest payable up to the point of maturity.
32.0 Capital commitments
At 31 March 2022, the Company had funds committed totalling £92,000 (2021: £nil) concerning capital expenditure for a property
in Surrey.
33.0 Post balance sheet events
Acquisitions
On 13 May 2022, the Company completed an acquisition at North End, Wisbech for £600,000.
Dividends
On 11 May 2022, the Company announced a dividend of 1.3875 pence per share in respect of the period 1 January 2022 to
31 March 2022 totalling £8,474,000. The dividend payment was made on 28 June 2022 to shareholders on the register as at 20 May
2022. The financial statements do not reflect this dividend. The dividend was paid as a REIT property income distribution (“PID”).
Remuneration
From 1 April 2022, the remuneration of the Directors, Audit and Management Engagement Committee Chairman and Chairman’s
annual fee will increase. The Chairman’s annual fee increased by 1.9% to £53,000; the Director’s annual fee increased by 2.2% to
£34,000; however the additional fee for the Audit and Management Engagement Committee Chair remains at £5,000.
Financing
On 18 May 2022, an extension was granted for the facility with Lloyds Bank plc, which now expires in July 2024.
Treasury shares
Since 31 March 2022, the Company has made purchases of 1,700,000 Ordinary shares into treasury at an average price of 87.8p
per Ordinary share. The total cost to the Company including commission and stamp duty is £1,492,000 and following these
transactions, at 23 June 2022 the Company held 11,725,000 Ordinary shares in treasury.
Notes to the Consolidated Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
117
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Note
31 March 2022
£’000
31 March 2021
£’000
Assets
Fixed assets
Investment in subsidiaries 7.0 793,284 720,918
Current assets
Trade and other receivables 9.0 4,310 3,644
Cash and cash equivalents 10.0 23,438 15,447
27,748 19,091
Total assets 821,032 740,009
Liabilities
Creditors – amounts falling due within one year
Trade and other payables 11.0 (274,020) (171,655)
(274,020) (171,655)
Total liabilities (274,020) (171,655)
Total net assets 547,012 568,354
Equity
Share capital 12.0 6,225 6,225
Share premium reserve 292,626 292,462
Capital reduction reserve 322,365 331,140
Accumulated losses 13.0 (74,204) (61,473)
Total equity 547,012 568,354
The Company has taken advantage of the provisions of Companies Act 2006 s408 and does not disclose the Company’s
individual profit and loss account. Profit for the year was £21,362,000 (2021: £52,780,000).
The Company financial statements on pages 118 to 127 were approved by the Board of Directors of Civitas Social
Housing PLC and authorised for issue and signed on its behalf by:
Michael Wrobel
Chairman and Independent Non-Executive Director
29 June 2022
Company No: 10402528
The notes on pages 120 to 127 are an integral part of these financial statements.
Company Statement of Financial Position
As at 31 March 2022
118
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Share
capital
£’000
Share
premium
reserve
£’000
Capital
reduction
reserve
£’000
Accumulated
losses
£’000
Total
equity
£’000
Balance at 1 April 2020 6,225 292,405 330,926 (80,840) 548,716
Profit and total comprehensive income for the year – – – 52,780 52,780
Issue of Ordinary shares
Shares reissued from treasury – 57 214 – 271
Dividends paid
Total interim dividends for the year ended
31 March 2021 (5.375p)
– – – (33,413) (33,413)
Balance at 31 March 2021 6,225 292,462 331,140 (61,473) 568,354
Profit and total comprehensive income for the year – – – 21,362 21,362
Issue of Ordinary shares
Shares reissued from treasury – 164 484 – 648
Shares bought back into treasury – – (9,259) – (9,259)
Dividends paid
Total interim dividends for the year ended
31 March 2022 (5.5125p)
– – – (34,093) (34,093)
Balance at 31 March 2022 6,225 292,626 322,365 (74,204) 547,012
The notes on pages 120 to 127 are an integral part of these financial statements.
Company Statement of Changes in Equity
For the year ended 31 March 2022
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
119
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
1.0 Corporate information
Civitas Social Housing PLC (“the Company”) was incorporated in England and Wales under the Companies Act 2006 as a public
company limited by shares on 29 September 2016 with company number 10402528 under the name Civitas REIT PLC, which was
subsequently changed to the existing name on 3 October 2016.
The address of the registered office is Beaufort House, 51 New North Road, Exeter, Devon EX4 4EP. The Company is registered
as an investment company under section 833 of the Companies Act 2006 in England and Wales and is domiciled in the
United Kingdom.
The Company did not begin trading until 18 November 2016 when the shares were admitted to trading on the London Stock
Exchange (“LSE”).
The Company’s Ordinary shares have been admitted to the Official List of the Financial Conduct Authority (“FCA”), and are
traded on the LSE.
The principal activity of the Company is to act as the ultimate parent company of 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.
2.0 Basis of preparation
The financial statements have been prepared on a historical cost basis and in accordance with Financial Reporting Standard
101 Reduced Disclosure Framework (“FRS 101”) and the Companies Act 2006 as applicable to companies using FRS 101.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
International Financial Reporting Standards (“Adopted IFRSs”), but makes amendments where necessary in order to comply
with the Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore, these financial statements do not include:
●
certain comparative information as otherwise required by IFRS;
●
certain disclosures regarding the Company’s capital management;
●
certain disclosures in relation to IFRS 15 Revenue Contracts with Customers;
●
a statement of cash flows;
●
the effect of future accounting standards not yet adopted;
●
the disclosure of the remuneration of key management personnel; and
●
disclosure of related party transactions with other wholly owned members of Civitas Social Housing PLC.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures
are included in the Company’s consolidated financial statements. These financial statements do not include certain
disclosures in respect of:
●
share based payments;
●
financial instruments; and
●
fair value measurement other than certain disclosures required as a result of recording financial instruments at fair value.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own income
statement or statement of comprehensive income.
New standards, amendments and interpretations
After a review of new accounting standards which are now effective, none are relevant to be adopted in the preparation of the
Company’s accounts for the year ended 31 March 2022.
Notes to the Company Financial Statements
As at 31 March 2022
120
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Going concern
The financial statements have been prepared on a going concern basis.
As discussed in the Group financial statements above, the underlying assets of the Company benefit from a secure income stream.
The Company financial statements show an accumulated loss, however this is due to a time-lag on profits from subsidiary
companies being moved up the structure in the form of dividends.
The Company has a net current liability position of £246,272,000 (2021: £152,564,000). This balance arises due to the intercompany
balances totalling £271,632,000 (2021: £169,465,000) with the Company’s subsidiary companies. The amounts principally relate to
bank loans drawn in the Company’s subsidiary companies in order to finance the purchase of new acquisitions in accordance
with the Group’s business model. The directors of the subsidiary companies have provided a letter of comfort that they will not
seek repayment of these balances within 12 months from the date of approval of the Company’s financial statements.
The Company’s articles of association include a requirement for the Board to propose an ordinary resolution at the annual
general meeting following the fifth anniversary from the initial public offering of the Company for the Company to continue in
its current form (the Continuation Resolution). This is the first continuation vote since the Company was set up.
If the Continuation Resolution is passed, the Company will continue its business as presently constituted and propose the
same resolution at every fifth annual general meeting thereafter. If the Continuation Resolution is not passed, the Directors
will be required, within six months after the date of this annual general meeting, to formulate proposals for consideration
by the shareholders for the voluntary liquidation, unitisation, reorganisation, or reconstruction of the Company. After
making appropriate enquiries of the Company’s brokers and Investment Adviser, pursuant to their recent discussions with a
number of the Company’s shareholders, the Directors are of the view that the Continuation Resolution will be passed at the
forthcoming annual general meeting. This reflects the strength and nature of the Company’s portfolio, and specifically the
provision of long-term accommodation for more than 4,000 vulnerable individuals. Accordingly, the Directors expect that
if the Continuation Resolution is not passed, an event which the Directors consider to be highly remote, formulating and
implementing any such proposals would require the Company to continue operations for a period of at least 12 months from
the date of approval of the Company’s financial statements.
The Board is, therefore, of the opinion that the going concern basis adopted in the preparation of the consolidated financial
statements is appropriate.
Significant judgements and sources of estimation uncertainty
The key source of estimation uncertainty relates to the Company’s investment in Group companies, and is stated in the
Company’s separate financial statements at cost less impairment losses, if any. Impairment losses are determined with
reference to the investment’s fair value less estimated costs of disposal. Fair value is derived from the subsidiaries’, and their
subsidiaries’, net assets at the balance sheet date. Investment properties held by the subsidiary companies are supported
by independent valuation. Judgements and assumptions associated with the property values of the investments held by the
subsidiary companies are detailed in the Group financial statements.
3.0 Accounting policies
The financial statements of the Company follow the accounting policies laid out in the Group’s consolidated financial
statements along with the following accounting policies which have been consistently applied:
Investments in subsidiaries
The investments in subsidiary companies are included in the Company’s Statement of Financial Position at cost less provision
for impairment. Impairment losses are determined with reference to the investment’s fair value less estimated selling costs. Fair
value is derived from the subsidiaries’, and their subsidiaries’, net assets at the balance sheet date. On disposal, the difference
between the net disposal proceeds and its carrying amount is included in the income statement.
The investment in a subsidiary company may include both the purchase of shares and an intercompany loan which is
subsequently capitalised in return for shares in the subsidiary company. The intercompany loan capitalised is disclosed in
note 7.0 as a transfer between the shares and loan columns.
Loans to subsidiaries
Loans made to subsidiary companies which arise as part of the transactions for the acquisition of investments and are
subsequently capitalised by the issue of shares are recognised as investment in subsidiaries at cost. At the point the loan is
capitalised, this transaction is recognised as a transfer within the table in note 7.0.
Amounts due to subsidiary companies
Balances arising with subsidiary companies of a temporary nature are initially recognised at fair value and subsequently
measured at amortised cost.
Notes to the Company Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
121
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
4.0 Dividends
Dividends are included in the financial statements in the year in which they are paid. Details of dividends paid and proposed
are included in note 14.0 of the Group’s consolidated financial statements.
5.0 Employee information
Details of Directors’ remuneration are included in note 6.0 of the consolidated financial statements. The Company had no
employees during the year (2021: nil).
6.0 Audit fees
Audit fees in relation to the Company’s financial statements total £296,000 (2021: £272,000). For further details, please refer to
note 9.0 of the Group financial statements.
7.0 Investments in subsidiaries
Shares in
subsidiaries
£’000
Loans to
subsidiaries
£’000
For the
year ended
31 March 2022
£’000
Balance at the beginning of the year 703,435 17,483 720,918
Increase in investments 41,712 31,013 72,725
Loans transferred 23,287 (23,287) –
Impairment (359) – (359)
At the end of the year 768,075 25,209 793,284
Shares in
subsidiaries
£’000
Loans to
subsidiaries
£’000
For the year
ended
31 March 2021
£’000
Balance at the beginning of the year 678,247 28,673 706,920
Increase in investments 928 14,383 15,311
Loans transferred 25,573 (25,573) –
Impairment (1,313) – (1,313)
At the end of the year 703,435 17,483 720,918
Following a review comparing cost of investments to the underlying net assets of subsidiary companies, an impairment
provision has been made of £359,000 (2021: £1,313,000).
8.0 Subsidiary entities
The Company has provided a guarantee under s479C of the Companies Act 2006 in respect of the financial year ended
31 March 2022 for a number of its subsidiary companies (as indicated in the table on the following pages). The guarantee is
over all outstanding liabilities to which the subsidiary companies are subject at 31 March 2022 until they are satisfied in full.
The Group consists of a parent company, Civitas Social Housing PLC, incorporated in England and Wales (company number
10402528) and a number of subsidiaries held directly by Civitas Social Housing PLC, which operate and are incorporated in
England and Wales or Jersey.
The Group owns 100% equity shares of all subsidiaries listed below and has the power to appoint and remove the majority of
the board of directors of those subsidiaries. The relevant activities of the below subsidiaries are determined by the Board of
Directors based on the purpose of each company.
Therefore, the Directors concluded that the Group has control over all these entities and all these entities have been
consolidated within the consolidated financial statements.
Notes to the Company Financial Statements
Continued
122
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
A list of all related undertakings included within these consolidated financial statements are noted below. Indirectly held
subsidiary companies are marked by an indentation in the table below:
Name Registered number Principal activity Country of incorporation
Civitas Social Housing Finance Company 1 Limited* 10997707 Finance company England & Wales
Civitas Social Housing Jersey 1 Limited 124129 Holding company Jersey
Civitas SPV1 Limited* 10518729 Property investment England & Wales
Civitas SPV2 Limited* 10114251 Property investment England & Wales
Civitas SPV11 Limited* 10546749 Property investment England & Wales
Civitas SPV15 Limited* 09777380 Property investment England & Wales
Civitas SPV25 Limited* 10791473 Property investment England & Wales
Civitas SPV27 Limited* 10883112 Property investment England & Wales
Civitas SPV33 Limited* 10546407 Property investment England & Wales
Civitas SPV35 Limited* 10588530 Property investment England & Wales
Civitas SPV38 Limited* 10738318 Property investment England & Wales
Civitas SPV39 Limited* 10547333 Property investment England & Wales
Civitas SPV40 Limited* 10738510 Property investment England & Wales
Civitas SPV41 Limited* 10738542 Property investment England & Wales
Civitas SPV50 Limited* 10775419 Property investment England & Wales
Civitas Social Housing Finance Company 2 Limited* 10997698 Finance company England & Wales
Civitas Social Housing Jersey 2 Limited 124876 Holding company Jersey
Civitas SPV3 Limited* 10156529 Property investment England & Wales
Civitas SPV4 Limited* 10433744 Property investment England & Wales
Civitas SPV5 Limited* 10479104 Property investment England & Wales
Civitas SPV6 Limited* 10674493 Property investment England & Wales
Civitas SPV9 Limited* 10536388 Property investment England & Wales
Civitas SPV10 Limited* 10535243 Property investment England & Wales
Civitas SPV12 Limited* 10546753 Property investment England & Wales
Civitas SPV17 Limited* 10479036 Property investment England & Wales
Civitas SPV18 Limited* 10546651 Property investment England & Wales
Civitas SPV19 Limited* 10548932 Property investment England & Wales
Civitas SPV20 Limited* 10588735 Property investment England & Wales
Civitas SPV22 Limited* 10743958 Property investment England & Wales
Civitas SPV24 Limited* 10751512 Property investment England & Wales
Civitas SPV26 Limited* 10864336 Property investment England & Wales
Civitas SPV29 Limited* 10911565 Property investment England & Wales
Civitas SPV30 Limited* 10956025 Property investment England & Wales
Civitas SPV31 Limited* 10974889 Property investment England & Wales
Civitas SPV32 Limited* 11007173 Property investment England & Wales
Civitas SPV34 Limited* 10738381 Property investment England & Wales
Civitas SPV36 Limited* 10588792 Property investment England & Wales
Civitas SPV42 Limited* 10738556 Property investment England & Wales
Civitas SPV43 Limited* 10534877 Property investment England & Wales
Civitas SPV45 Limited* 10871854 Property investment England & Wales
Civitas SPV46 Limited* 10871910 Property investment England & Wales
Civitas SPV47 Limited* 10873270 Property investment England & Wales
Civitas SPV48 Limited* 10873295 Property investment England & Wales
Civitas SPV51 Limited* 10826693 Property investment England & Wales
Civitas SPV52 Limited* 10827006 Property investment England & Wales
Civitas SPV63 Limited* 10937805 Property investment England & Wales
Notes to the Company Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
123
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Name Registered number Principal activity Country of incorporation
Civitas SPV64 Limited* 10938411 Property investment England & Wales
Civitas SPV70 Limited* 10770201 Property investment England & Wales
Civitas SPV71 Limited* 10888639 Property investment England & Wales
Civitas SPV72 Limited* 10938022 Property investment England & Wales
Civitas SPV74 Limited* 11001855 Property investment England & Wales
Civitas SPV75 Limited* 11001834 Property investment England & Wales
Civitas SPV80 Limited* 11001998 Property investment England & Wales
Civitas Social Housing Finance Company 3 Limited* 10997714 Finance Company England & Wales
Civitas SPV8 Limited* 10536157 Property investment England & Wales
Civitas SPV28 Limited* 10895228 Property investment England & Wales
Civitas SPV53 Limited* 11021625 Property investment England & Wales
Civitas SPV55 Limited* 11056455 Property investment England & Wales
Civitas SPV57 Limited* 11091444 Property investment England & Wales
Civitas SPV60 Limited* 11111908 Property investment England & Wales
Civitas SPV61 Limited* 10937662 Property investment England & Wales
Civitas SPV66 Limited* 10937898 Property investment England & Wales
Civitas SPV77 Limited* 11166491 Property investment England & Wales
Civitas SPV78 Limited* 11170099 Property investment England & Wales
Civitas SPV79 Limited* 11236544 Property investment England & Wales
Civitas SPV81 Limited* 11192811 Property investment England & Wales
Civitas SPV82 Limited* 11380796 Property investment England & Wales
Civitas SPV83 Limited* 11371128 Property investment England & Wales
Civitas SPV85 Limited* 11300749 Property investment England & Wales
Civitas SPV95 Limited* 11208184 Property investment England & Wales
Civitas SPV97 Limited* 11463890 Property investment England & Wales
Civitas SPV103 Limited* 11500596 Property investment England & Wales
Civitas SPV105 Limited* 11532177 Property investment England & Wales
Civitas SPV106 Limited* 11532179 Property investment England & Wales
Civitas SPV107 Limited* 11532182 Property investment England & Wales
Civitas SPV116 Limited* 11504399 Property investment England & Wales
Civitas SPV117 Limited* 11504445 Property investment England & Wales
Civitas Social Housing Finance Company 4 Limited* 11906660 Finance Company England & Wales
Civitas SPV23 Limited* 10746881 Property investment England & Wales
Civitas SPV54 Limited* 11039750 Property investment England & Wales
Civitas SPV59 Limited* 11111912 Property investment England & Wales
Civitas SPV69 Limited* 11142372 Property investment England & Wales
Civitas SPV73 Limited* 10939075 Property investment England & Wales
Civitas SPV84 Limited* 11381455 Property investment England & Wales
Civitas SPV86 Limited* 11418432 Property investment England & Wales
Civitas SPV87 Limited* 10888903 Property investment England & Wales
Civitas SPV88 Limited* 10939044 Property investment England & Wales
Civitas SPV90 Limited* 10939131 Property investment England & Wales
Civitas SPV91 Limited* 10941377 Property investment England & Wales
Civitas SPV92 Limited* 11449913 Property investment England & Wales
Civitas SPV93 Limited* 11043111 Property investment England & Wales
Civitas SPV94 Limited* 11208105 Property investment England & Wales
Civitas SPV96 Limited* 11270786 Property investment England & Wales
Civitas SPV100 Limited* 11069703 Property investment England & Wales
Civitas SPV101 Limited* 09978282 Property investment England & Wales
Notes to the Company Financial Statements
Continued
124
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Name Registered number Principal activity Country of incorporation
Civitas SPV102 Limited* 11521555 Property investment England & Wales
Civitas SPV109 Limited* 11532120 Property investment England & Wales
Civitas SPV112 Limited* 11579750 Property investment England & Wales
Civitas SPV114 Limited* 11579733 Property investment England & Wales
Civitas SPV115 Limited* 11522178 Property investment England & Wales
Civitas SPV118 Limited* 11411498 Property investment England & Wales
Civitas SPV121 Limited* 11099917 Property investment England & Wales
Civitas SPV122 Limited* 11482646 Property investment England & Wales
Civitas SPV126 Limited* 11459821 Property investment England & Wales
Civitas SPV127 Limited* 10941401 Property investment England & Wales
Civitas SPV129 Limited* 11664994 Property investment England & Wales
Civitas SPV130 Limited* 11705074 Property investment England & Wales
Civitas SPV131 Limited* 11675132 Property investment England & Wales
Civitas SPV132 Limited* 11473735 Property investment England & Wales
Civitas SPV145 Limited* 11842306 Holding company England & Wales
SPV153 Limited (previously Fieldbay Limited)* 5219012 Property investment England & Wales
Civitas SPV148 Limited* 11632633 Property investment England & Wales
Civitas SPV149 Limited* 11462691 Property investment England & Wales
Civitas SPV150 Limited* 11462555 Property investment England & Wales
FPI CO 324 Ltd* 11633019 Property investment England & Wales
Civitas Social Housing Finance Company 5 Limited* 13083077 Finance Company England & Wales
Civitas SPV7 Limited* 10536368 Property investment England & Wales
Civitas SPV13 Limited* 09517692 Property investment England & Wales
Civitas SPV37 Limited* 10738450 Property investment England & Wales
Civitas SPV44 Limited* 10588783 Property investment England & Wales
Civitas SPV49 Limited* 11031349 Property investment England & Wales
Civitas SPV56 Limited* 11056465 Property investment England & Wales
Civitas SPV62 Limited* 10937528 Property investment England & Wales
Civitas SPV65 Limited* 10938467 Property investment England & Wales
Civitas SPV67 Limited* 10937929 Property investment England & Wales
Civitas SPV68 Limited* 10938269 Property investment England & Wales
Civitas SPV98 Limited* 11478695 Property investment England & Wales
Civitas SPV99 Limited* 11478707 Property investment England & Wales
Civitas SPV104 Limited* 11532174 Property investment England & Wales
Civitas SPV108 Limited* 11532135 Property investment England & Wales
Civitas SPV113 Limited* 11580068 Property investment England & Wales
Civitas SPV123 Limited* 08253452 Property investment England & Wales
Civitas SPV133 Limited* 11698972 Property investment England & Wales
Civitas SPV134 Limited* 11689461 Property investment England & Wales
Civitas SPV135 Limited* 11579880 Property investment England & Wales
Civitas SPV136 Limited* 11579760 Property investment England & Wales
Civitas SPV143 Limited* 11546808 Property investment England & Wales
Civitas SPV144 Limited* 11546696 Property investment England & Wales
Civitas SPV146 Limited* 11861500 Holding Company England & Wales
Bryn Eithin (2019) Limited* 11844898 Property investment England & Wales
Civitas SPV147 Limited* 11861974 Holding Company England & Wales
Mynydd Mawr (2019) Limited* 11844917 Property investment England & Wales
Civitas SPV152 Limited* 11955719 Property investment England & Wales
Civitas SPV155 Limited* 12044281 Property investment England & Wales
Notes to the Company Financial Statements
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
125
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Name Registered number Principal activity Country of incorporation
Civitas SPV156 Limited* 12081093 Property investment England & Wales
Civitas SPV157 Limited* 12188610 Property investment England & Wales
Civitas SPV158 Limited* 12202674 Property investment England & Wales
Civitas SPV160 Limited* 12272906 Property investment England & Wales
Bedford SPV1 Limited* 12315518 Property investment England & Wales
Bridge Property Herts Limited* 12435985 Property investment England & Wales
Bridge Propco Limited* 12445439 Property investment England & Wales
FPI Co 294 Ltd* 11519226 Property investment England & Wales
Civitas SPV14 Limited* 10479041 Property investment England & Wales
Civitas SPV HP Ltd.* 12784895 Property investment England & Wales
Civitas SPV16 Limited* 09917557 Property investment England & Wales
Civitas SPV21 Limited* 10631541 Property investment England & Wales
Civitas SPV159 Limited* 12258313 Property investment England & Wales
Civitas Financing PLC* 13546154 Holding Company England & Wales
* These entities are exempt from the requirements of the Companies Act 2006 relating to the audit of individual financial statements by virtue of Section 479A of that
Act. These are all entities that have a year end of 31 March 2022.
The registered addresses for the subsidiaries are consistent based on their country of incorporation and are as follows:
●
England & Wales entities: Beaufort House, 51 New North Road, Exeter, Devon EX4 4EP
●
Jersey entities: 12 Castle Street, St Helier, Jersey JE2 3RT
9.0 Trade and other receivables
31 March 2022
£’000
31 March 2021
£’000
Trade receivables 1,150 722
Prepayments and other receivables 1,902 1,433
Accrued income 1,258 1,489
Total 4,310 3,644
Prepayments and other receivable amounts include prepaid legal and professional fees of £34,000 (2021: £200,000) that have
been incurred in connection with acquisitions yet to be completed and £1,046,000 (2021: £817,000) in respect of uncompleted
works on the property portfolio.
10.0 Cash and cash equivalents
31 March 2022
£’000
31 March 2021
£’000
Cash held by solicitors 376 720
Liquidity funds 10,489 10,485
Cash held at bank 12,258 3,381
Cash and cash equivalents 23,123 14,586
Restricted cash 315 861
Total cash held at bank 23,438 15,447
Liquidity funds refer to money placed in money market funds. These are highly liquid funds with accessibility within 24 hours
and subject to insignificant risk of changes in value.
Cash held by solicitors 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 amounts held for specific commitments, tenant deposits and retention money held by lawyers in
relation to deferred payments subject to achievement of certain conditions, other retentions and cash segregated to fund repair,
maintenance and improvement works to bring the properties up to satisfactory standards for the Group and the tenants.
Notes to the Company Financial Statements
Continued
126
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Notes to the Company Financial Statements
Continued
11.0 Trade and other payables
31 March 2022
£’000
31 March 2021
£’000
Retentions 288 490
Accruals 685 450
Dividend withholding tax payable 1,057 892
Deferred income 358 358
Amounts due to subsidiary companies 271,632 169,465
Total 274,020 171,655
12.0 Share capital
Share capital represents the nominal value of consideration received by the Company for the issue of Ordinary shares.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Share capital
At beginning and end of year 6,225 6,225
Number of shares authorised, issued and fully paid
For the year
ended
31 March 2022
For the year
ended
31 March 2021
Ordinary shares of £0.01 each
At beginning and end of year 622,461,380 622,461,380
The Company holds 10,025,000 (2021: 565,000) Ordinary shares in treasury. The number of Ordinary shares used to calculate the
net asset value per share is 612,436,380 (2021: 621,896,380).
13.0 Accumulated losses
This reserve represents the profits and losses of the Company.
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Balance at the beginning of the year (61,473) (80,840)
Profit for the year 21,362 52,780
Dividends paid in the year (34,093) (33,413)
At end of year (74,204) (61,473)
14.0 Controlling parties
As at 31 March 2022, there is no ultimate controlling party.
15.0 Related party transactions
For all related party transactions and transactions with the Investment Adviser please make reference to notes 30.1 and 30.2 of
the Group’s consolidated financial statements and amounts due to subsidiary companies in note 17.0 above.
16.0 Post balance sheet events
Please refer to note 33.0 of the Group Consolidated financial statements on page 117.
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
127
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Additional
Information
Additional Information
129 Appendix 1 (unaudited)
132 Five Year Financial Results
134 Shareholder Information
135 Glossary
137 Company Information
128
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Appendix 1 (unaudited): Notes to the
calculation of EPRA and other alternative
performance measures
Notes 1 to 5 support the ERPA metrics disclosed on pages 36 and 37 of the Report where the definition and purpose of each
metric are outlined.
1.0 EPRA Earnings
For the year
ended
31 March 2022
For the year
ended
31 March 2021
Earnings from operational activities
Profit after taxation (£’000) 44,754 36,075
Change in fair value of derivative financial instruments (£’000) (2,675) 66
Changes in value of investment properties (£’000) (12,269) (5,511)
EPRA Earnings (£’000) 29,810 30,630
Weighted average number of shares in issue (adjusted for shares held in treasury) 618,797,942 621,651,859
EPRA Earnings per share (EPS) – basic & diluted 4.82p 4.93p
2.0 EPRA NAV Metrics
EPRA Net
Reinstatement
Value
EPRA Net
Tangible
Assets
EPRA Net
Disposal
Value
31 March 2022
Net assets (£’000) 675,547 675,547 675,547
Fair value of derivative financial instruments (£’000) (2,131) (2,131) –
Fair value of bank borrowings (£’000) – – 2,644
NAV (£’000) 673,416 673,416 678,191
Number of shares in issue (adjusted for shared held in treasury) 612,436,380 612,436,380 612,436,380
NAV per share 109.96p 109.96p 110.74p
EPRA Net
Reinstatement
Value
EPRA Net
Tangible
Assets
EPRA Net
Disposal
Value
31 March 2021
Net assets (£’000) 673,498 673,498 673,498
Fair value of derivative financial instruments (£’000) 544 544 –
Fair value of bank borrowings (£’000) – – (2,022)
NAV (£’000) 674,042 674,042 671,476
Number of shares in issue (adjusted for shared held in treasury) 621,896,380 621,896,380 621,896,380
NAV per share 108.38p 108.38p 107.97p
3.0 EPRA Net Initial Yield
For the
year ended
31 March 2022
For the
year ended
31 March 2021
Investment property (£’000) 968,756 915,589
Allowance for estimated purchasers’ costs (£’000) 56,412 53,753
Gross up completed property portfolio (£’000) 1,025,168 969,342
Annualised net rents (£’000) 54,091 50,780
Add: notional rent expiration of rent free periods or other lease incentives (£’000) – –
Topped-up net annualised rent (£’000) 54,091 50,780
EPRA NIY 5.28% 5.24%
EPRA Topped-up NIY 5.28% 5.24%
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS
129
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
ADDITIONAL INFORMATION
4.0 EPRA Vacancy Rate
For the
year ended
31 March 2022
For the
year ended
31 March 2021
Estimated Market Rental Value (ERV) of vacant spaces (£’000) – –
Estimated Market Rental Value (ERV) of whole portfolio (£’000) 54,091 50,380
EPRA Vacancy Rate 0% 0%
5.0 EPRA Costs Ratio
For the
year ended
31 March 2022
For the
year ended
31 March 2021
Total administrative and operating expenses 10,247 9,498
Direct property expenses 978 1,175
Less property expenses recovered through rents (995) (886)
EPRA Costs (including direct vacancy costs) 10,230 9,787
Direct vacancy costs – –
EPRA Costs (excluding direct vacancy costs) 10,230 9,787
Rental income 51,636 49,020
Less rechargeable costs received (995) (886)
Gross rental income 50,641 48,134
EPRA Cost Ratio (including direct vacancy costs) 20.20% 20.33%
EPRA Cost Ratio (excluding direct vacancy costs) 20.20% 20.33%
The Group has not incurred any direct vacancy costs.
6.0 EPRA Table of Capital Expenditure
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
Acquisitions including incidental costs of purchase 33,466 16,108
Development – –
Investment properties
Incremental lettable space – –
Enhancing lettable space 5,818 4,077
Tenant incentives 1,614 11,217
Other material non-allocated types of expenditure – –
Capitalised interest – –
Total Capital Expenditure 40,898 31,402
Conversion from accruals to cash basis 1,312 215
Total Capital Expenditure on a cash basis 42,210 31,617
The Group has not capitalised any overhead or operating expenses.
Appendix 1 (unaudited): Notes to the
calculation of EPRA and other alternative
performance measures
Continued
130
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
7.0 Portfolio NAV
IFRS NAV adjusted to reflect investment property valued on a portfolio basis rather than individual asset basis.
31 March 2022 31 March2021
Net assets (£’000) 675,547 673,498
Adjustment for change to property valuation (£’000) 76,784 63,270
Portfolio net assets (£’000) 752,331 736,768
Number of Ordinary shares in issue (adjusted for shares held in treasury) 612,436,380 621,896,380
Portfolio Net Assets per share 122.84p 118.47p
8.0 Leveraged Internal rate of return (IRR)
This is the annual growth rate, based on growth in net asset value per share since launch and dividends paid to
Ordinary shareholders.
31 March 2022 31 March 2021
IFRS NAV per share 110.3000p 108.300p
31 May 2017 Interim dividend 0.7500p 0.7500p
31 August 2017 Interim dividend 0.7500p 0.7500p
30 November 2017 Interim dividend 0.7500p 0.7500p
9 March 2018 Interim dividend 0.7500p 0.7500p
8 June 2018 Interim dividend 1.2500p 1.2500p
7 September 2018 Interim dividend 1.2500p 1.2500p
30 November 2018 Interim dividend 1.2500p 1.2500p
11 January 2019 Interim dividend 1.1100p 1.1100p
28 February 2019 Interim dividend 0.1400p 0.1400p
7 June 2019 Interim dividend 1.3250p 1.3250p
6 September 2019 Interim dividend 1.3250p 1.3250p
29 November 2019 Interim dividend 1.3250p 1.3250p
28 February 2020 Interim dividend 1.3250p 1.3250p
12 June 2020 Interim dividend 1.3250p 1.3250p
7 September 2020 Interim dividend 1.3500p 1.3500p
4 December 2020 Interim dividend 1.3500p 1.3500p
1 March 2021 Interim dividend 1.3500p 1.3500p
11 June 2021 Interim dividend 1.3500p –
10 September 2021 Interim dividend 1.3875p –
13 December 2021 Interim dividend 1.3875p –
11 March 2022 Interim dividend 1.3875p –
134.4875p 126.9750p
IFRS NAV per share at launch 98.0000p 98.0000p
Levered IRR 6.63% 6.54%
Appendix 1 (unaudited): Notes to the
calculation of EPRA and other alternative
performance measures
Continued
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS
131
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
ADDITIONAL INFORMATION
Five Year Financial Results
Group Statement of Comprehensive Income
For the
year ended
31 March 2022
£’000
For the
year ended
31 March 2021
£’000
For the
year ended
31 March 2020
£’000
For the
year ended
31 March 2019
£’000
For the
period from
18 November
2016 to
31 March 2018
£’000
Revenue
Rental income 51,636 49,020 46,165 35,738 18,606
Less direct property expenses (978) (1,175) (259) – –
Net rental income 50,658 47,845 45,906 35,738 18,606
Directors’ remuneration (206) (198) (176) (163) (205)
Investment advisory fees (6,132) (6,117) (6,183) (6,457) (5,773)
General and administrative expenses (3,909) (3,183) (3,501) (3,022) (2,915)
Total expenses (10,247) (9,498) (9,860) (9,642) (8,893)
Change in fair value of investment properties 12,269 5,511 9,389 3,652 30,633
Operating Profit 52,680 43,858 45,435 29,748 40,346
Finance income 7 20 110 491 413
Finance expenses – relating to bank borrowings (10,608) (7,737) (7,342) (3,975) (1,041)
Finance expenses – relating to C share amortisation – – – (6,400) (2,792)
Change in fair value of interest rate derivatives 2,675 (66) (478) – –
Profit before tax 44,754 36,075 37,725 19,864 36,926
Taxation – – – – –
Profit being total comprehensive income 44,754 36,075 37,725 19,864 36,926
Earnings per share – basic 7.23p 5.80p 6.06p 4.67p 10.55p
Earnings per share – diluted 7.23p 5.80p 6.06p 4.22p 6.27p
Dividend declared 5.55p 5.40p 5.30p 5.00p 3.00p
132
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Five Year Financial Results
Continued
Group Statement of Financial Position
31 March 2022
£’000
31 March 2021
£’000
31 March 2020
£’000
31 March 2019
£’000
31 March 2018
£’000
Assets
Non-current assets
Investment property 945,237 893,684 867,988 820,094 516,222
Other receivables 23,519 21,905 10,755 6,824 –
Interest rate derivatives 2,131 – – – –
970,887 915,589 878,743 826,918 516,222
Non-current assets
Trade and other receivables 12,865 12,821 10,838 5,723 3,315
Cash and cash equivalents 53,337 107,097 58,374 54,347 249,608
66,202 119,918 69,212 60,070 252,923
Total assets 1,037,089 1,035,507 947,955 886,988 769,145
Liabilities
Current liabilities
Trade and other payables (9,492) (9,345) (7,743) (15,324) (10,176)
Bank and loan borrowings – (59,937) (59,730) – –
C shares – – – – (298,752)
(9,492) (69,282) (67,473) (15,324) (308,928)
Non-current liabilities
Bank and loan borrowings (352,050) (292,183) (209,440) (205,156) (90,822)
Interest rate derivatives – (544) (478) – –
(352,050) (292,727) (209,918) (205,156) (90,822)
Total liabilities (361,542) (362,009) (277,391) (220,480) (399,750)
Total net assets 675,547 673,498 670,564 666,508 369,395
Assets
Share capital 6,225 6,225 6,225 6,225 3,500
Share premium reserve 292,626 292,463 292,405 292,405 –
Capital reduction reserve 322,365 331,140 330,926 331,625 331,625
Retained earnings 54,331 43,670 41,008 36,253 34,270
Total equity 675,547 673,498 670,564 666,508 369,395
Net assets per share – basic 110.30p 108.30p 107.87p 107.08p 105.54p
Net assets per share – diluted 110.30p 108.30p 107.87p 107.08p 105.54p
Portfolio NAV 122.84p 118.47p 118.35p 119.07p 113.86p
Share price 87.40p 107.80p 96.40p 96.00p 97.40p
Total shareholder return (on a NAV basis) 37.23% 29.57% 23.64% 17.43% 10.76%
Leverage 34.43% 34.48% 26.90% 22.00% 12.00%
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS
133
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
ADDITIONAL INFORMATION
Share Information
The Company’s Ordinary shares of 1p each are quoted
on the Official List of the FCA and traded on the premium
segment of the Main Market of the London Stock Exchange
(LSE).
SEDOL number BD8HBD3
ISIN GB00BD8HBD32
Ticker/TIDM CSH
LEI 213800PGBG84J8GM6F95
Frequency of NAV Publication
The Company’s NAV is released to the LSE on a quarterly
basis and published on the Company’s website:
www.civitassocialhousing.com.
Sources of Further Information
Copies of the Company’s Annual and Half-Yearly Reports,
Stock Exchange announcements and further information
on the Company can be obtained from its website:
www.civitassocialhousing.com.
Share Register Enquiries
The register for the Company’s Ordinary shares is
maintained by Link Group. In the event of queries
regarding your holding, please contact the Registrar
on 0371 664 0300 (calls are charged at the standard
geographic rate and will vary by provider; calls outside
the UK will be charged at the applicable international
rate). Lines are open between 9.00am and 5.30pm,
Monday to Friday, excluding public holidays in England
and Wales. You can also email enquiries@linkgroup.co.uk.
Changes of name and/or address must be notified in
writing to the Registrar: Link Group, 10th Floor, Central
Square, 29 Wellington Street, Leeds LS1 4DL
Key Dates
June Annual results announced
Payment of fourth final dividend
September Company’s half-year end
Annual general meeting
Payment of first interim dividend
December Half-yearly results announced
Payment of second interim dividend
February Payment of third interim dividend
March Company’s year end
Association of Investment Companies
The Company is a member of the AIC, which publishes
statistical information in respect of member companies.
The AIC can be contacted on 020 7282 5555, enquiries@
theaic.co.uk or visit the website: www.theaic.co.uk.
Electronic Communications from
the Company
Shareholders now have the opportunity to be notified by
email when the Company’s Annual Report, Half-Yearly
Report and other formal communications are available on
the Company’s website, instead of receiving printed copies
by post. This has environmental benefits in the reduction of
paper, printing, energy and water usage, as well as reducing
costs to the Company.
If you have not already elected to receive electronic
communications from the Company and wish to do so, please
contact the Registrar.
Shareholder Information
134
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
AIFM means the Alternative Investment Fund Manager.
AIFMD means the Alternative Investment Fund Managers
Regulations 2013 (as amended by The Alternative
Investment Fund Managers (Amendment etc.) (EU Exit)
Regulations 2019) and the Investment Funds Sourcebook
forming part of the FCA Handbook.
ALMO means an arm’s length management organisation,
a not-for-profit company that provides housing services
on behalf of a Local Authority.
Alternative Performance Measures (APMs) means a
financial measure of historical financial performance,
financial position, or cash flows, other than a financial
measure defined or specified in the applicable financial
reporting framework.
Annualised rent roll means the total rental income due
over the first year from the date of valuation, including an
estimated rental uplift based on a long-term inflation rate.
Approved Provider means Approved Providers, Local
Authorities, ALMOs, Community Interest Companies,
Registered Charities and other regulated organisations
directly or indirectly in receipt of payment from local or
central government including the NHS.
Care Provider means a provider of care services to the
occupants of Specialist Supported Housing, registered
with the Care Quality Commission.
CIM means Civitas Investment Management Limited or
CIM (formerly known as Civitas Housing Advisors Limited
until its change of name on 7 May 2020).
Community Interest Company or CIC means a
company approved by the Office of the Regulator of
Community Interest Companies as a community interest
company and registered as such with Companies House.
Company means Civitas Social Housing PLC, a company
incorporated in England and Wales with company
number 10402528.
CMA Order means the Statutory Audit Services Order
2014, issued by the Competition and Markets Authority.
Current Leverage means the percentage taken as total
bank borrowings drawn over total assets.
Dividend Yield means the ratio of the total annual
dividend payments over market price per share.
EPRA means the European Public Real Estate Association.
EPRA EPS is the EPRA earnings divided by the weighted
average number of shares in issue in the period.
EPRA Net Reinstatement Value (“EPRA NRV”) is an
EPRA NAV metric which assumes that entities never sell
assets and aims to represent the value required to rebuild
the entity.
EPRA Net Tangible Assets (“EPRA NTA”) is an EPRA
NAV metric which assumes that entities buy and sell
assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA Net Disposal Value (“EPRA NDV”) is an EPRA
NAV metric which represents the shareholders’ value
under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated
to the full extent of their liability, net of any resulting tax.
EPRA Run Rate means the ratio of a company’s earnings
(excluding fair value gains/losses) over dividends paid to
shareholders.
Gross Asset Value means total assets.
Group means the Company and its subsidiaries.
Housing Association or HA means an independent
society, body of trustees or company established for
the purpose of providing low-cost social housing for
people in housing need generally on a non-profit
making basis. Any trading surplus is typically used to
maintain existing homes and to help finance new ones.
Housing Associations are regulated by the Regulator of
Social Housing.
IFRS Net Asset Value or IFRS NAV means the net asset
value of the Group on the relevant date, prepared in
accordance with IFRS accounting principles.
Investment Adviser means Civitas Investment
Management Limited (“CIM”), a company incorporated in
England and Wales with company number 10278444, in its
capacity as investment adviser to the Company.
IPO means Initial Public Offering.
IRR means internal rate of return.
Levered IRR means the internal rate of return including
the impact of debt.
Local Authority or LA means the administrative bodies
for the local government in England comprising 326
authorities (including 32 London boroughs).
Net Initial Yield means the ratio of net rental income
and gross purchase price of a property.
NHS means the publicly funded healthcare system of
the United Kingdom comprising The National Health
Service in England, NHS Scotland, NHS Wales and Health
and Social Care in Northern Ireland, including, for the
avoidance of doubt, NHS Trusts.
Glossary
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
135
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
NHS Trust means a legal entity, set up by order of the
Secretary of State under section 25 of, and Schedule 4 to,
the National Health Service Act 2006, to provide goods
and services for the purposes of the health service.
Ongoing Charges (previously Total Expense Ratios
or TERs) means the figure published annually by the
Company which shows the drag on performance caused
by operational expenses. More specifically, it is the
annual percentage reduction in shareholder returns as
a result of recurring operational expenses assuming
markets remain static and the portfolio is not traded.
Although the Ongoing Charges figure is based on
historical information, it provides shareholders with an
indication of the likely level of costs that will be incurred
in managing the Company in the future.
Portfolio means the Group’s portfolio of assets.
Portfolio Net Asset Value or Portfolio NAV means the
net asset value of the Company, with assets aggregated
rather than valued on an asset by asset basis, as at the
relevant date, calculated on the basis of an independent
Portfolio Valuation. See note 7.0 to Appendix 1 for a
reconciliation to IFRS NAV.
Portfolio Basis means the Portfolio NAV (as defined
above)
Portfolio Valuation means an independent valuation of
the Portfolio by Jones Lang LaSalle Limited or such other
property adviser as the Directors may select from time
to time, based upon the Portfolio being held, directly or
indirectly, within a corporate vehicle or equivalent entity
which is a wholly owned subsidiary of the Company and
otherwise prepared in accordance with RICS “Red Book”
guidelines.
REIT means a qualifying real estate investment trust in
accordance with the UK REIT Regime introduced by the
UK Finance Act 2006 and subsequently re-written into
Part 12 of the Corporation Tax Act 2010.
RICS means Royal Institution of Chartered Surveyors.
RSH means the Regulator of Social Housing, the
executive non-departmental public body, sponsored
by the Ministry of Housing, Communities and Local
Government, which is the regulator for Social Homes
providers in England and Wales.
Social homes or social housing means social rented
homes and other accommodation that are offered at
rents subsidised below market level or are constituents
of other appropriate rent regimes such as exempt rents
or are subject to bespoke agreement with entities such as
NHS Trusts and are provided by Approved Providers.
Specialist Supported Housing or SSH means social
housing which incorporates some form of care or other
ancillary service on the premises.
SPV means special purpose vehicle, a corporate vehicle
in which the Group’s properties are held.
Target Return means the target return on investment.
Total Return means Net Total Return, being the change
in IFRS NAV over the relevant period plus dividend paid.
Total Shareholder Return means a measure of the
return based upon share price movement over the period
plus dividend paid.
Valuation means an independent valuation of the
Portfolio by Jones Lang LaSalle Limited or such other
property adviser as the Directors may select from
time to time, prepared in accordance with RICS “Red
Book” guidelines and based upon a valuation of each
underlying investment property rather than the value
ascribed to the portfolio and on the assumption of
a theoretical sale of each property rather than the
corporate entities in which all of the Company’s
investment properties are held.
WAULT or “Weighted Average Unexpired Lease Term”
is the product of annualised rent roll at period end and
the time in years to when the lease expires for each given
lease, summed across leases, and then divided by the
total annualised rent roll of the portfolio. The result is
expressed in years. WAULT is a key measure of the quality
of the Company’s portfolio. Long lease terms underpin
the security of the Company’s income stream.
Glossary
Continued
136
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Non-executive Directors
Michael Wrobel, Chairman
Peter Baxter, Senior Independent Director and Chairman of the Nomination and Remuneration Committee
Caroline Gulliver, Chair of the Audit and Management Engagement Committee
Alison Hadden
Alastair Moss
Registered Office
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Registered no: 10402528
www.civitassocialhousing.com
Alternative Investment Fund Manager
G10 Capital Limited
3 More London Riverside
London SE1 2AQ
Investment Adviser
Civitas Investment Management Limited
13 Berkeley Street
London W1J 8DU
Joint Corporate Brokers
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Panmure Gordon (UK) Limited
One New Change
London EC4M 9AF
Company Secretary
Link Company Matters Limited
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
Devon EX4 4EP
Depositary
INDOS Financial Limited
5th Floor
54 Fenchurch Street
London EC3M 3JY
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Independent Auditors and Reporting
Accountants
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Public Relations Adviser
Buchanan
107 Cheapside
London EC2V 6DN
Tax Adviser
BDO LLP
55 Baker Street
London W1U 7EU
Company Information
GROUP STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL
& GOVERNANCE
CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
137
CIVITAS SOCIAL HOUSING PLC
REPORT AND ACCOUNTS 2022
Civitas Investment Management Limited
13 Berkeley Street,
London W1J 8DU
T 020 3058 4840
E enquiries@civitasim.com
W www.civitasim.com