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Residential
Secure
Income plc
Annual Report & Accounts 2022
30 September 2022
Purpose
Residential Secure Income plc (LSE: RESI) is
a real estate investment trust (REIT) focused
on delivering secure, inflation-linked returns
with a focus on two residential sub-sectors in
the UK - independent retirement rentals and
shared ownership - underpinned by an ageing
demographic and untapped, strong demand for
affordable home ownership.
Our purpose is to deliver affordable, high quality,
safe homes with great customer service and
long-term stability of tenure for residents. We
achieve this through meeting demand from
housing developers (housing associations,
local authorities and private developers) for
long-term investment partners to accelerate
the development of socially and economically
beneficial affordable housing.
Strategic Report
Strategy & Performance
Purpose
1
Portfolio Snapshot
2
Our Portfolio Focus
4
Financial Highlights
6
Chairman’s Statement
8
Investment Case
11
Market Drivers
12
Investment Team
16
Investment Portfolio: Independent Retirement
Rental Housing
18
Independent Retirement Rental Housing Case Study
20
Investment Portfolio: Shared Ownership Housing
21
Shared ownership Case Study
25
Investment Portfolio: Local Authority Housing
26
Strategic Review
KPI Measures
28
Fund Manager’s Report
32
Financial Performance
36
Environmental and Social Impact
ReSI’s approach to Environmental and Social Impact
46
Environmental Impact
50
Case Study
54
Social Impact
58
Governance
69
Section 172 Statement and Stakeholder Engagement
72
Risk Management
Risk Management Measures
77
Principal Risks and Uncertainties
80
Going Concern and Viability Statement
87
Governance
Board of Directors
92
ReSI Housing Non-Executive Directors
94
Investment Team Detail
95
Directors’ Report
96
Corporate Governance Statement
104
Report of the Audit Committee
111
Directors’ Remuneration Implementation Report
114
Directors’ Responsibilities
118
Independent Auditors Report
120
Financials
Consolidated Statement of Comprehensive Income
130
Consolidated Statement of Financial Position
131
Consolidated Statement of Cash Flows
132
Consolidated Statement of Changes in Equity
133
Notes to the Consolidated Financial Statements
134
Company Statement of Financial Position
163
Company Statement of Changes in Equity
164
Notes to the Company Financial Statements
165
Supplementary Information
172
Other Information
Glossary
182
Company Information
185
Notice of Annual General Meeting
186
                                              
01
Strategic
Report
Portfolio Snapshot
3,284
Homes
Including 41 committed acquisitions
30 September 2021: 3,051
We invest in UK affordable homes to deliver secure
inflation linked income
£383mn
Value of Investment Property*
Including £9mn committed acquisitions
30 September 2021: £351mn
See note 17 on page 146
£16.0mn
Net rental income for the year to
30 September 2022
Year to 30 September 2021: £13.2mn
See note 6 on page 141
2,608
Number of counterparties
30 September 2021: 2,356
5.0%
Annualised net rental yield*
30 September 2021: 4.9%
See Supplementary information on page 172
926
Unique UK Property
Locations
30 September 2021: 793
* Alternative performance measure
01
Strategic Report
2
Residential Secure Income plc
Annual Report and Accounts 2022
£28mn
£137mn
£219mn
Independent Retirement Rentals
Shared Ownership
Local Authority
Portfolio
Split
By Valuation
590
93
53
19
5
90
259
74
36%
57%
7%
835
788
478
Residential Secure Income plc
Annual Report and Accounts 2022
3
01
Strategic Report - Portfolio Snapshot
Our Portfolio Focus
Driver
Booming and increasingly
lonely older population
Huge untapped demand for
affordable home ownership
Summary
Let to elderly residents
with affordable rents and
assured tenancies
Provides fit-for purpose
homes for retirees,
allowing them to maintain
their independence
without care provision
Homebuyers acquire a share
in a residential property and
rent the remainder
Helps house buyers acquire homes they
would otherwise be unable to buy
Capital grant funding from government
allows total shared ownership housing
costs to be c.40% below the level
expected for renting an equivalent
property in the private rented sector
Rent growth
Increase with RPI each
year, capped at 6.0%
Increase contractually by
RPI+ 0.5% each year
Secure income
Rental income paid from
pensions and welfare
Subsidised rents c.30% below market
Homebuyer equity stake
ReSI origination
advantages
Scale: UK’s largest private
independent retirement
rentals business
Specialist in-house 25-person
investment team with over
20-year track record
ReSI Housing – for-profit Registered
Provider of Social Housing
Unique 45-year, 0.9% coupon, RPI linked
USS debt facility
1.
Including committed acquisitions.
Independent
Retirement
Living Housing
(£219mn GAV / 2,215 Homes /
57% of portfolio)
Shared
Ownership
Housing
(£137mn GAV
1
/ 780 Homes /
36% of portfolio)
ReSI has diversified
secure inflation-
linked income
streams from
residential sub-
sectors with strong
supply and demand
imbalances and
supportive property
fundamentals
01
Strategic Report
4
Residential Secure Income plc
Annual Report and Accounts 2022
Average vacant
possession value
2
c.£110,000 per home
c.£328,000 per home
Net Yield on Cost
5.2%
3.6%
Levered Yield on Cost
6.7%
7.5%
Average customer stay /
length of lease
3
6 years
250 years
Annualised like for like
rental growth
4.6%
5.4%
September 2022
Occupancy
94%
100%
4
2.
Shared ownership vacant possession value includes both the value of ReSI’s 63% average equity position, and the 37% owned by residents.
3.
Assuming no staircasing.
4.
The shared ownership portfolio owned since September 2021 is fully occupied. Including recent untenanted acquisitions, shared ownership
occupancy is 98%.
Independent
Retirement
Living Housing
(£219mn GAV / 2,215 Homes /
57% of portfolio)
Shared
Ownership
Housing
(£137mn GAV
1
/ 780 Homes /
36% of portfolio)
01
Strategic Report - Our Portfolio Focus
Residential Secure Income plc
Annual Report and Accounts 2022
5
Financial Highlights
(as at 30 September 2022)
Income
5.0p / +19%
EPRA Adjusted
Earnings Per Share*
Adjusted Earnings Per Share Year ended
30 September 2021: 4.2p
See note 15 on page 145
3.3%
Total Return (on Opening Net
Tangible Assets)*
Year ended 30 September 2021: 7.5%
See Supplementary information on page 172
7.1%
Total IFRS Return
(on Opening NAV)
Year ended 30 September 2021: 6.2%
See Supplementary information on page 172
£9.0mn / +26%
Recurring profit before
change in fair value and
property disposals*
Year ended 30 September 2021: £7.1mn
See note 15 on page 145
5.16p
Dividend Per Share
Year ended 30 September 2021: 5.0p
97%
Dividend coverage*
Year ended 30 September 2021: 85%
See note 15 on page 145
7.4p
IFRS Earnings Per Share
Year ended 30 September 2021: 6.6p
See note 15 on page 145
4.5%
Like-for-like rent growth*
Year ended 30 September 2021: 1.5%
* Alternative performance measure
6
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
Financial Highlights
(as at 30 September 2022)
Capital
2.4%
Weighted Average Cost of Debt
30 September 2021: 2.3%
22 Years
Weighted Average
Remaining Life of Debt
30 September 2021: 22 years
47%
Loan To Value Ratio (LTV)
30 September 2021: 47%
See supplementary information on page 172
108.8p / +2.0%
IFRS Net Asset Value per share
30 September 2021: 106.6p
See note 32 on page 157
106.1p / -1.7%
EPRA Net Tangible Asset Value
(NTA) per share*
30 September 2021: 107.9p
See note 32 on page 157
3.3%
(6.4mn shares)
Of the total number of shares held by the Fund
Manager, current and founder directors of the
Fund Manager, and directors of ReSI plc as at the
date of this Annual Report
(30 September 2021: 2.4% or 4.1mn shares)
£383mn
5
Value of Investment Property*
30 September 2021: £351mn
See note 17 on page 146
* Alternative performance measure
5.
Including £9mn committed acquisitions
01
Strategic Report - Financial Highlights
Residential Secure Income plc
Annual Report and Accounts 2022
7
Rob Whiteman CBE
Chairman
“
Reduction in retirement voids, strong like
for like rental growth, full occupation of
our shared ownership portfolio as well
accretive acquisitions have driven the
growth seen in ReSI’s underlying financial
results for the year, all underpinned by
consistent rent collection – positioning
ReSI well for next year.
”
Summary
The past year has continued to
demonstrate that despite volatility in both
the economic and political environment
the need for high-quality affordable
housing continues to increase, a trend we
expect to continue through 2023.
I am pleased to report ReSI’s portfolio continues to be
defensive and positioned to weather economic stress.
Demand for our high-quality affordable accommodation
continues to be strong, whether in our existing portfolio
or our newly acquired homes. This has been illustrated
by ReSI delivering strong 4.5% like for like rental growth
whilst increasing occupancy in our retirement portfolio
to its highest ever level (averaging 94% for the year)
and fully occupying our shared ownership portfolio. All
underpinned by our consistent 99% rent collection.
ReSI
now owns a portfolio of 3,284 homes worth £383mn
(including commitments to acquire 41 homes for £9mn)
and we have grown our adjusted earnings by 26% year
on year to £9mn.
ReSI raised £15mn of equity in February to grow our
shared ownership portfolio, the proceeds of which
are fully invested in 286 shared ownership homes,
the full year impact of which will continue to drive
performance in FY 2023.
ReSI’s social value is demonstrated by extending
affordable housing to under-served segments of the
housing market: primarily providing affordable housing
to retirees to live with peers and avoid loneliness; and
providing high quality and spacious affordable home
ownership to lower and middle-income households
through shared ownership.
Importantly, the economic environment and cost of
living crisis impacts the lives of our residents, and we will
continue to balance rent increases and investing in our
portfolio with ensuring the affordability of our homes for
our residents and the long-term resilience of our income.
For example, retirement rent increases have been
capped at 6.0% during the year, generating an annual
saving of £164k p.a. for retirees. We also offer further
rent caps and rent freezes to provide financial support
to our retirement residents most in need. This support
has grown from £32k in the six months to March to a total
annualised amount for the year of £86k.
Furthermore, we continue to aim to be a best-in-class
provider of affordable housing and drive an improvement
in standards across the sector. In shared ownership, ReSI
Capital Management Limited (the “Fund Manager”) has
unique Customer and Environmental Charters setting
out commitments to our residents and stakeholders, and
we continue to invest in improving the energy efficiency
of our retirement portfolio and investing in technology to
make the lives of our residents easier. During the current
year, ReSI has focused on the least energy efficient
homes within its portfolio and has upgraded 61% of our
D rated directly-rented retirement homes to a minimum
EPC of C, marking great progress on our plan to achieve
this for all by 2025 – a key part of ReSI’s ambition of
reducing the carbon footprint of our portfolio.
Chairman’s Statement
8
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
Net Asset Value and Results
ReSI’s FY 2022 financial results build on the earnings
growth produced in FY 2021.
This growth was driven
by reducing retirement voids throughout the year, rent
increases across all three asset classes, continued
progress in occupying our shared ownership portfolio
and substantial shared ownership investments
acquisitions.
These factors and ReSI’s disciplined approach to
selecting and managing investments helped deliver
£9.0mn of EPRA adjusted earnings, up 24% from £7.1mn
last year. This is equivalent to 5.0p per share (FY 2021
4.2p) in line with EPRA adjusted earnings of 5.0p (FY
2021 4.2p) (See note 15).
The portfolio’s valuation, assessed by Savills, rose
£2mn, or 0.6% on a like-for-like fair value basis for
the year to £383mn (including £9mn committed
acquisitions). This was driven by 4.5% like-for-like rental
growth, largely offset by year-over-year increases of
35bps in the weighted average discount rates, caused
by increases in risk-free rates over the year. This
increase in discount rates was the largest drag on ReSI’s
performance in the year.
After accounting for debt indexation and one-offs, ReSI
produced a total EPRA NTA return of 3.4p per share
(3.1%) during the financial year, or 4.6p (4.3%) total return
on a recurring basis
6
. After paying a dividend of 5.16p per
share, the EPRA NTA per share decreased 2% to 106.1p
during the year to 30 September 2022 (1% decline on a
recurring basis).
IFRS earnings per share for the year were 7.4p per
share (6.8%), leading to an increase in the IFRS NAV by
2.0% to 108.8p after paying out the 5.16p dividend. The
difference to EPRA NTA returns is primarily caused by
an increase in the amortised cost value of debt (EPRA)
versus fair value of debt (IFRS) of 3.9p (£7.0mn). A full
summary of ReSI’s performance and a breakdown of our
returns is included in the performance section of the
Fund Manager’s Report.
Dividend Outlook
Dividends totalling 5.16p were declared for the year,
matching our target increase of 3.1% versus the prior
year, in line with September 2021 CPI, reflecting the
inflation-linkage of the portfolio. The dividend is paid in
equal quarterly dividends of 1.29p.
Our dividend was 97% covered by recurring income in
the year, with the drop below 100% primarily reflecting
the impact of ReSI’s capital raise in February, and the
lag on dividend coverage whilst this was deployed.
Full dividend coverage returned in Q4 once these new
investments were onboard.
We anticipate that FY 2023 will see earnings growth
from inflation-linked rents, as well as shared ownership
acquisitions and leasing activity, but this could be
offset by one-off operating expenses increasing ahead
of rent increases (driven by ReSI’s retirement rentals
operations where we are responsible for energy costs
in communal areas) and increases in floating-rate
interest expenses.
In light of these headwinds, we are currently focused
on maintaining (and growing beyond) dividend coverage
on a dividend in line with FY 2022 at 5.16p per Ordinary
Share. Any revision or adjustment to the dividend target
will require greater confidence that interest rates have
peaked, and energy costs stabilised. For FY 2024 and
beyond these one-offs could be static or potentially
reduce, allowing for higher dividends and supporting
our goal to over the longer term delivering sustained
dividend growth that broadly tracks inflation.
This approach will allow ReSI to balance long-term
inflation linked returns whilst continuing to pay
attractive dividends to shareholders.
6.
Total recurring return excludes the impact of one-off costs and a one-time debt indexation catch-up adjustment.
The Group has debt which it
elected to carry at fair value through profit and loss. In accordance with the EPRA Best Practice Recommendations, EPRA NTA should reflect
the amortised cost of the debt rather than its fair value. In the current period, an adjustment has been made for £5.2mn which represents the
difference between fair value and what amortised cost would have been had the Group carried the debt at amortised cost. No adjustment was
made in the prior year as it was immaterial. The charge would have been £1.5mn for the year ended 30 September 2021.
01
Strategic Report - Chairman’s Statement
Residential Secure Income plc
Annual Report and Accounts 2022
9
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 (AGM) following the fifth
anniversary from the initial public offering (IPO) of the
Company and at every fifth AGM thereafter. The first
resolution is expected to be presented at the AGM in
January 2023. Following discussions with a number
of shareholders and on the basis of the growth seen
since the IPO, the long term nature of its assets with
supporting debt funding and the attractiveness of the
Company’s low risk inflation linked income, the Directors
are of the opinion that the continuation resolution at the
forthcoming AGM will be passed.
Outlook
The current high inflationary environment is raising the
cost of living for citizens across the country at the same
time the UK is entering into a recession.
Now, more than
ever, the Company’s investment thesis is supported by
a growing need for affordable housing in the UK, across
the age spectrum. The country’s structural housing
shortfall continues and most of the population lives in
areas where home purchase is unaffordable.
The British Property Federation estimates a need for an
extra £34bn per annum of investment into affordable
housing over the next decade to start to tackle the
shortfall. Housing associations, who have historically
been the primary investors in affordable housing, are
now dealing with rent caps on their social and affordable
rent portfolios in addition to allocating c.£10bn for fire
safety and c.£25bn to upgrade the energy efficiency
of their stock by 2030
7,8
. These financial pressures
reduce their ability to provide new affordable homes,
and further support for new long-term investment
in the sector.
The government continues to encourage new
investment, particularly through its Homes England’s
Affordable Homes Programme, which provides total
funding of £12.2bn to help subsidise 180,000 new
affordable homes by 2026. We remain excited by the
opportunity to help housing associations recycle their
capital with developers to deliver new affordable homes,
helping to meet the critical shortage of affordable
homes for independent retirement living and home
ownership and in turn delivering inflation-linked income
to our investors.
ReSI has built a platform of resilient cash-generative
assets and low-cost, long-term debt which, when
paired with the robust governance from its for-profit
Registered Provider and Gresham House’s resources
and partnerships, provides a strong basis for future
growth. The Board remains confident that ReSI is well
positioned to help address the growing unmet demand
for affordable housing, and ReSI is also well positioned
to deliver long-term inflation-linked dividends and
capital growth.
Promotion of Ben Fry and semi-retirement of
Alex Pilato
The Board of ReSI supported the promotion of Ben Fry
to lead the housing division of Gresham House and would
like to take the opportunity to thank Alex Pilato for his
contribution to ReSI to date and continuing in his new
role as Senior Adviser.
Annual General Meeting (AGM)
The AGM will be held on 31 January 2023. We hope you will join
us, raise any questions or provide any feedback – as valued
stakeholders (among others), your input is always welcome.
Shareholders are encouraged to make use of the proxy form
provided in order to register votes in advance of the AGM
through ReSI’s Company Secretary, Computershare.
As always, the Board is grateful for the continued support of
ReSI’s shareholders and the contribution of its advisers.
Rob Whiteman
Chairman
Residential Secure Income plc
1 December 2022
7.
Inside Housing, L&G and British Property Federation, March 2022 (based on a 2020 survey by Inside Housing).
8.
Savills and National Housing Federation, Decarbonising the Housing Association Sector – Costs and Funding Options (October 2021).
10
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Chairman’s Statement
ReSI's income is:
Why ReSI?
ReSI’s business model is
9.
Retirement rents in line with Local Housing Allowance
Investment Case
ReSI’s portfolio delivers 97% inflation-linked income,
which is
generated from affordable and secure rents and supported by strong market
drivers in shared ownership housing and independent retirement living.
Secure long-term inflation-linked income
5.16p FY 2022 target, paid quarterly
Affordable
Low retirement rents
9
paid from
pensions and welfare
c.£14mn government grant supports
subsidised rents for shared ownership
Supported by
Strong market drivers
Aging population, declining
home affordability, supportive
government policy
Diverse
3,284 households diversified
across ages and stages of life
Asset-backed
Underpinned by
c.£454mn home value
with 12% uplift from
reversionary surplus
Subsidised shared ownership rents
secured by homebuyers’ stake
Executed by
Expert manager
c.60-person
housing team with over 20-year
track record in UK housing
Creating
Measurable impact
Providing affordable high-
quality, energy efficient
homes for life, and addressing
elderly loneliness
01
Strategic Report
Residential Secure Income plc
Annual Report and Accounts 2022
11
Supply / demand imbalance from historic
undersupply
The UK has a systemic problem with undersupply of
affordable housing that dates back over 30 years.
Housing deliveries across the UK have continued to fall
short of the government’s target of 300,000 homes
delivered annually, and the average UK home price
increased 9.5% year-over-year in September 2022
to £295,000
10
.
Furthermore, home ownership rates
have dramatically dropped over the last 40 years,
despite three-quarters of non-home owners in Great
Britain wanting to own their own home
11
.
Those who
cannot afford to buy typically end up in private rented
accommodation, much of which is unfit for people to
live in safely with PAC finding that 13% of rented homes
in England “pose serious threat to the health and safety
of renters,” despite record rent increases.
10.
ONS: UK House Price Index: November 2022
11.
Ministry of Housing, Communities & Local Government - English Housing Survey, 2019-20, and YouGov (May 2021)
Market Drivers
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1980
1985
1990
1995
2000
2005
2010
2015
2020
Dwellings Completed
Government Target
New Build Completions, England
01
Strategic Report
12
Residential Secure Income plc
Annual Report and Accounts 2022
1997
2021
The availability of affordable housing in the UK follows
similar trends: in 2021, over 1.1 million households
were on local authorities’ housing waiting lists across
England
12
,
reflecting the fact that the annual delivery
of affordable homes (c.50,000) consistently falls well
short of the estimated annual need (c.145,000)
13
.
Meanwhile housing associations, who are typically the
primary deliverers of affordable housing, are having to
shift investment capacity away from new development
towards portfolio investment costs associated with fire
safety and energy efficiency improvements.
The results of these trends can be seen in the following
maps, which show how median price-to-earnings ratios
at the local authority level have changed over recent
decades.
In most local authorities across England, the
median earner cannot afford to buy the median-priced
property, as shown in light blue on the map:
12.
Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities & Local Government (27 January 2022)
13.
Department for Levelling Up, Housing and Communities (2021) and House of Commons Library (2022)
14.
Department for Levelling Up, Housing and Communities (2021) and House of Commons Library (2022), British Property Federation, and Legal
& General, 2022
It is estimated that c.£34bn of additional capital funding is needed to deliver 145,000 affordable homes annually
14
, and
ReSI aims to help bridge the funding gap.
Undersupply of housing and decreasing affordability pushes home ownership out of reach
NO DATA
2-5x
8-12x
5-8x
Unaffordable
12x+
London
Manchester
Leeds
Newcastle upon Tyne
Cardiff
Birmingham
London
Manchester
Leeds
Birmingham
Newcastle upon Tyne
Cardiff
Residential Secure Income plc
Annual Report and Accounts 2022
13
01
Strategic Report - Market Drivers
Stable, long-term, inflation-linked rents
The affordable housing sector has long-term
structural demand drivers, liability matching return
characteristics, potential for growth and insulation
from volatility, all resulting in stable inflation linked
income. It offers a great opportunity for social impact
and, for long-term investors looking for responsible
investment opportunities.
ReSI’s rental income steams are diverse and/
or secure. Retirement rental residents pay from
pensions and savings, shared owners have ownership
stakes in their homes and the local authority housing
portfolio is leased to Luton Borough Council. ReSI
has no leases with weak credit charities or housing
associations. ReSI’s rental income stream is
therefore significantly more secure than those of the
supported housing sector, the private rental sector or
commercial real estate.
Rent payments rise each year, typically in line with
inflation for the retirement rental portfolio and
contractually linked to RPI+0.5% for the shared
ownership portfolio, offering a secure income stream
and potential growth in asset values over time.
01
Strategic Report - Market Drivers
14
Residential Secure Income plc
Annual Report and Accounts 2022
Reducing development appetite from peers
The UK has been delivering around 43,000 new
affordable homes annually over the last five years
15
but this falls significantly short of need. Savills analysis
suggests that a further 60,000 new affordable homes
are needed annually, and that the affordable housing
shortage is most severe in areas with the highest
housing costs, with London and the South East needing
over 50% of new affordable homes to meet demand
16
.
Meanwhile housing associations, who have historically
been the primary investors in affordable housing, are
now dealing with rent caps on their social and affordable
rent portfolios in addition to allocating c.£10bn for
fire safety and c.£25bn to upgrade energy efficiency
of their stock by 2030
17,18
. These financial pressures
reduce their ability to provide new affordable homes,
and further support for new long-term investment in
the sector. The British Property Federation estimates
a need for an extra £34bn per annum investment in
affordable housing over the next decade to begin to
address the shortfalll in affordable housing supply.
15.
Savills News, October 2022 savills.co.uk/insight-and-opinion/savills-news/334433-0/housing-associations-can-boost-economic-growth-
with-increased-affordable-housing-supplysays-new-report
16.
Savills Research & G15, Mind the Gap (Not-for-profit Housing Associations’ Role in Delivering New Affordable Homes), 2022; Savills, Affordable
Housing – Building Through Cycles, 2018.
17.
Inside Housing, L&G and British Property Federation, March 2022 (based on a 2020 survey by Inside Housing).
18.
Savills and National Housing Federation, Decarbonising the Housing Association Sector – Costs and Funding Options (October 2021).
01
Strategic Report - Market Drivers
Residential Secure Income plc
Annual Report and Accounts 2022
15
Investment Team
Gresham House has extensive experience and expertise in affordable
housing:
25-person investment team - senior members with average
c.30 years’ experience
With some individuals amassing over 40 years of experience, ReSI’s team has deep expertise in multiple residential
sectors, including shared ownership housing and independent retirement living.
Key investment team
Ben Fry
Managing Director, Housing
Brandon Holloway
Deputy Fund Manager
Alex Pilato
Senior Advisor
Narvinder Khossa
Director of New Business
Hannah Howard-Jones
Director of Property
Mark Rogers
Exec Director, ReSI Housing
Pete Redman
Exec Director, ReSI Housing
Joe Thomas
Director of Investment
30+ person property
management team
In-house property management team allows
ReSI to benefit from scale, and helps ensure a
positive resident experience.
Over 20-year track record
in social housing,
raising >£11bn
The Fund Manager’s direct parent company,
TradeRisks Limited, has been active within the
social housing sector for over 20 years as a
funding arranger and advisor and, over the last
five years, as an investor through ReSI.
Manage £800mn
of long-term
institutional capital
invested into almost 6,000
homes over last five years
Long-term capital sourced from a diversified
pool of investor types, including pension funds
(primarily local government and corporate) and
wealth management companies channelling
individual SIPPS and ISAs.
16
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
ReSI Housing Independent Board
David Orr
Independent
Non-Executive Chairman
Gillian Rowley
Independent
Non-Executive Director
Founder and manager
of Registered Providers
of Social Housing
ReSI Housing Limited, ReSI's wholly owned
Registered Provider of Social Housing, allows
ReSI to invest in shared ownership housing
and receive capital grant funding from the
Greater London Authority and Homes England.
Demonstrating strong expertise in the shared
ownership sector, Gresham House, the Fund
Manager's parent, has successfully set-up two
Registered Providers of Social Housing across
its housing funds.
Greater London Authority
Strategic Partner and Homes
England Investment Partner
Reflecting Gresham House’s strong
relationships with government-regulated
institutions, the Fund Manager's vehicles have
has been awarded nearly £34mn in combined
grant funding from both institutions. Gresham
House has worked with the government to
improve the shared ownership model in the
2021-2026 capital grant funding programme,
with our aim to continue lifting standards across
the shared ownership sector.
Residential
Secure Income plc
ReSI Housing Limited
(for-profit Registered
Provided of Social Housing)
Access to goverment grant
supports subsidised rents
100% equity
Independent oversight
Delivery of Shared
Ownership homes
ReSI plc
Board
ReSI Housing
Board
Residential Secure Income plc
Annual Report and Accounts 2022
17
01
Strategic Report - Investment Team
Investment Portfolio
Independent Retirement Rental Housing
Geographical Dispersion of retirement portfolio
£219mn GAV
|
2,215 Homes
|
57% of portfolio
Independent Living for retirees
Our portfolio provides an affordable rental independent living solution for retirement with lifetime tenancies.
In summary, the portfolio:
1
Is let to elderly
residents with
affordable rents and
lifetime tenancies
2
Provides fit-for-
purpose homes for
retirees, allowing
them to maintain
their independence
without care provision
3
Frees up larger
homes for families
4
Generates stable
and secure rental
income paid from
pensions and welfare
5
Rents increase with RPI
(capped at 6%) each
year and are often set
around Local Housing
Allowance levels
6
Is managed by our
in-house 35-strong
property management
and lettings team,
operating under the ‘My
Future Living’ brand
25
331
520
695
89
19
5
57
53
231
190
18
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
19.
ONS, Past and projected period and cohort life tables: 2020-based, UK, 1981 to 2070, January 2022.
20.
ONS, 2020-based Interim National Population Projections, January 2022.
21.
AGE UK, 2014 ageuk.org.uk/latest-news/archive/1-million-older-people-feel-lonely/#:~:text=Age%20UK%20is%20calling%20
for,loneliness%20is%20in%20the%20UK.
22.
Boomer & Beyond quantitative research study 2022.
“
An increasingly lonely and growing
older population provides huge and
growing demand for independent
retirement renting
”
There has been a steady upward trend in life expectancy
in the UK, and the average remaining life expectancy of
a person reaching retirement age exceeds 20 years
19
.
As a result, 20% of the UK population is expected to be
over 65 by 2026
20
.
In particular, the core market of over 75s is projected to
nearly double from 2020 to 2050
21
.
Just 1% of UK over 60s live in purpose-built
retirement housing, compared to 13% in Australia and
17% in the USA.
There is a very limited pipeline of retirement
developments in the UK, with only 3% of consented
developments being designed specifically for the
elderly. Furthermore, this construction activity is
primarily focused on the top end of the market and
not competitive with ReSI’s relatively affordable price
points. Specialist retirement housing is accessible
(e.g. with lifts) and easy to manage, enabling people
to live independently in their own living space to a
greater age, whilst still having access to some level of
day-to-day and emergency support.
According to Age UK, over 1 million older people say
they always or often feel lonely
22
. Boomer & Beyond
estimates that nearly one third of UK residents aged
70 and older identify as modestly satisfied to not at
all satisfied with life
22
. Nearly half of older people in
the UK (49% of “over 65s”) say that television or pets
are their main form of company, with one research
report claiming that loneliness can be as harmful for
our health as smoking 15 cigarettes a day. Specialised
retirement accommodation helps to foster a sense
of community by offering shared spaces such as a
residents’ lounge and communal gardens.
Number of UK residents over 65 years old
0
5
10
15
20
25
1966
1991
2016
2041
2066
65 to 74
75 to 84
85 and over
mn
Source: ONS
Residential Secure Income plc
Annual Report and Accounts 2022
19
01
Strategic Report - Investment Portfolio
Independent Retirement Rental Housing
Case Study
Everybody needs good neighbours
Interview with Jean –
Homeshore House, Seaford
There are many things we can do
to stay fit and healthy as we get
older including exercising regularly
and eating a healthy diet — but
some experts now believe one of
the best ways to age gracefully is
to be sociable.
One lady enjoying the social
side of retirement living is Jean
(aged 77 years) who found her
perfect apartment.
Last year, Jean sadly lost her husband
John to COVID – the couple were
married for over 40 years. Four years
ago, they sold their home in North
London and downsized to rent an
apartment in Homeshore House
retirement development in Seaford in
East Sussex for a quieter way of life
and to be close to the sea.
“We found it was a great decision to
move and renting in retirement is a
fantastic option… We used to own a
lovely house but maintaining it was
getting harder. We also wanted to free
up some money so we could help our
son with a deposit for his own place.”
“I am on an assured tenancy so I can
remain here for as long as I wish, and I
really enjoy this stress-free living…
If something needs fixing its sorted
very quickly by My Future Living
which is great.”
During her career, Jean had been
a legal secretary and is still very
active. She particularly enjoys helping
organise social events for residents
in the development including bingo
evenings, garden centre visits,
pub lunches and golden oldies
film afternoons.
Jean loves to keep busy and in
her spare time volunteers for two
charities helping people recovering
from strokes and people with
sight problems.
Jean comments: “I love being part of
the community and helping get those
who want to socialise to get out and
about. We also have a communal
greenhouse where we grow and share
all our produce with each other. It’s a
lovely way to get out, keep busy and
meet new people.”
“Homeshore House is the perfect
place to live, not only because
the surroundings and gardens
are immaculate with trees dotted
everywhere but I’ve got the beautiful
South Downs on one side and the
sea on the other. Right outside the
development is a bus stop which
means I can easily get into Brighton
and Eastbourne.”
She concludes, “When we started our
search we looked around and talked to
many different companies but found
My Future Living the most helpful and
the easiest to deal with. I would highly
recommend renting in retirement.
It’s a fantastic way of life without any
worries. What’s not to love?”
01
Strategic Report
20
Residential Secure Income plc
Annual Report and Accounts 2022
23.
Including £9m of committed acquisitions.
24.
Including 41 units of committed acquisitions.
Investment Portfolio
Shared Ownership Housing
Data for map showing geographical dispersion of SO units across the UK
49
215
70
93
4
33
28
288
£137mn GAV
23
|
780 Homes
24
|
36% of portfolio
Residential Secure Income plc
Annual Report and Accounts 2022
21
01
Strategic Report
Shared ownership overview
Part-buy, part-rent model makes
shared ownership the affordable home
ownership solution
Shared ownership provides the affordable route
to home ownership for middle- and lower-income
households through a part buy, part rent model with
subsidised rents and low deposit requirements.
In summary, the shared owner:
1
purchases an equity stake in their new home at
open market value. This is known as the “first
tranche sale” and is a minimum of 25% of the value
of the property;
2
pays a subsidised rent c.30% below market rent on
the remaining part of the home, which increases
annually at RPI+0.5%;
3
has the option to incrementally purchase additional
shares in their home at the prevailing open market
value (known as “staircasing”);
4
typically finances their initial stake with a
90% mortgage; and
5
is responsible for maintenance, repair and
insurance, creating strong alignment of interest.
Shared ownership is required to be affordable to
incoming shared owners, which typically means no
more than 40% of post-tax income of new shared
owners can be spent on total housing costs (i.e.
mortgage, rent and any service charge).
There are 202,000 shared ownership homes across
England, and around 20,000 new shared ownership
homes are delivered annually (Ministry of Housing,
Communities & Local Government, 2021), making it one
of the faster growing housing tenures.
Investment Portfolio
Shared Ownership Housing
1
2
3
4
How does shared ownership work?
The house is paid for in
full by the Fund
…typically at a discount
and subsidised by a
government grant
25
The resident buys the share
they can afford
…and pays below market
rent on the rest
But, the home is theirs
to make their own
…and they are responsible
for maintenance
26
The resident can buy more
of the home over time
…the more they buy, the
less rent they pay
25.
Based on the Affordable Homes Programme 2021 to 2026:
Affordable Homes Programme 2021 to 2026, www.gov.uk and Homes for Londoners: Affordable Homes Programme 2021-2026 |
London City Hall
26.
The Registered Provider is responsible for some repair and maintenance for the first 10 years (with internal repairs costs capped at £500 p.a.).
This ensures that the sector increasingly follows our approach of focusing on build quality of new homes and hence should only require minimal
repairs in the first 10 years. Any large repairs should be covered by warranties.
22
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
Increased affordability provides
huge demand for shared ownership
Due to lower deposit requirements and discounted
rental payments, shared ownership addresses the
affordability barrier that forces people into a lifetime
of private market-rented accommodation with no
certainty of tenure, which makes it more difficult to feel
a member of the community.
he graph below sets out the smallest amount of deposit
required and the minimum income requirement to
purchase a home worth £293,000
27
under shared
ownership and outright homeownership. Compared
to outright homeownership, shared ownership is an
affordable step onto the housing ladder that increases
the pool of potentially eligible home owners by 4.4
million people across the country.
Shared ownership affordability
27
£-
£10,000
£20,000
£30,000
£29,300
£74,202
£44,151
£7,325
£40,000
£80,000
£70,000
£60,000
£50,000
Outright Purchase
Minimum Deposit
Shared Ownership
Minimum Income
Shared ownership increases home
ownership eligibility
27
0.0mn
1.0mn
2.0mn
3.0mn
1.6mn
6.0mn
4.0mn
7.0mn
6.0mn
5.0mn
Outright Purchase
People
Shared Ownership
4.4mn
more
27.
Source: Gresham House as at November 2022. Assumptions: £293,000 house purchase; mortgage rate 5.3%; mortgage term 25 years;
deposit requirement 10%; shared ownership rent 2.75%; service charge / maintenance cost of £1,500; 1st tranche shared ownership sale 25%;
mortgage-to-income multiple requirement: 4.0x; maximum housing costs 40% of net income (after 30% deductions including tax, student
loan repayment etc.).
Residential Secure Income plc
Annual Report and Accounts 2022
23
01
Strategic Report - Investment Portfolio
Rising interest rates have made the ambition of
homeownership more expensive for all first-time
buyers, however the impact is less severe on shared
owners compared to those who own outright.
This is because as shared owners only initially acquire a
portion of their home, the size of the mortgage required
to purchase their equity stake is typically much lower
than someone buying a property outright.
As a result, prospective shared owners are much less
exposed to an increase in interest rates compared to
typical first time buyers, with the cost increase for
new shared owners, as a result of a 3% interest rate
increase, one quarter of the increase for a first time
buyer buying outright.
Annual cost increase from a 3% interest rate rise
28
£-
£1,000
£2,000
£3.000
£5,485
£1,371
£4,000
£6,000
£5,000
Typical first-time
buyers
Prospective
shared owners
The chart below illustrates how homeownership rates
have declined across age cohorts despite the fact that
76% of non-homeowners in Great Britain want to own
a home. We expect that declining homeownership
rates and outright purchase affordability worsening will
continue to drive demand for shared ownership in 2023.
Historical UK homeownership rates by age cohort
29
10%
20%
30%
40%
32%
62%
69%
41%
56%
14%
50%
90%
90%
70%
60%
1981
16-24
year olds
2020
25-34
year olds
35-44
year olds
28.
Assumptions: £293,000 house purchase; initial mortgage rate 3.0%; updated mortgage rate 6.0%; %; mortgage term 25 years; deposit
requirement 10%; 1st tranche shared ownership sale 25%;
29.
YouGov (May 2021) ‘Who does - and doesn’t - want to own a home?’
01
Strategic Report - Investment Portfolio
24
Residential Secure Income plc
Annual Report and Accounts 2022
Private balcony
“it feels really spacious”
Location
“I can walk to the station and the
town centre is really close by”
Rachel emphasised the following
as key benefits of her home:
Opportunity
to staircase
"I am absolutely planning
to increase the shares
I own over time"
Interview with
Rachel*, a shared
ownership resident
As a single buyer in London,
Rachel thought she would
be renting her old flat
until she retired. She was
then introduced to shared
ownership through a friend,
and soon realised the smaller
deposit requirements of the
tenure made her ambition of
home ownership possible.
Rachel’s monthly outgoings
under shared ownership were
more or less the same as the
rent on her old home, but now
her money is being invested
back into her own property.
* Not her real name
Shared ownership Case Study
01
Strategic Report
Residential Secure Income plc
Annual Report and Accounts 2022
25
Residential Secure Income plc
Annual Report and Accounts 2022
25
Investment Portfolio
Local Authority Housing
7%
of Portfolio
£28mn
GAV
289
Homes
Local authority housing
portfolio at a glance
Local authority housing provides
homes within Luton for households
who are otherwise homeless,
generally because they are
unable to afford private rented
accommodation.
ReSI works as a partner with Luton
Borough Council and Mears who
manage and maintain the portfolio,
with the council taking void risk.
Increasing housing unaffordability
drives demand from local authorities
for partners to house those unable to
afford their own home
The UK is facing significant demand for short-term
council housing nationally – there were 96,060
households in temporary accommodation as of
30 September 2021, an increase of 1.5% from 30
September 2020
30
.
Legislation introduced under the Homelessness
Reduction Act 2017 placed additional obligations on
local authorities for housing vulnerable/statutory
homeless people, creating further pressures
on councils looking to increase their access to
emergency and temporary housing.
Local authorities are increasingly unable to meet
demand for temporary accommodation from their
own housing stock, and some authorities are seeking
temporary accommodation outside their own
areas. At the end of September 2021, approximately
27% of households in temporary accommodation
(c.26,000) were in accommodation in a different local
authority district. London authorities make up 83% of
these placements
31
.
There is an increasing reliance on emergency bed
& breakfasts, which are more costly than leasing
from the private sector. Shelter estimate that
councils in England spent £444mn on this type of
accommodation between April 2020 and March 2021,
a 382% increase in the 10 years to 31 March 2021
32
.
As a result, there is a shortfall between cost and
support for temporary housing in London, the South
East and other metropolitan areas. English local
authorities spent at least £1.4bn on temporary
accommodation in 2020/21, a c.16% year-over-
year increase
33
.
Rents at ReSI’s properties are set at close to long-
term market rent levels, provide a cost saving to local
authorities, who often have to rely on costly pay-
nightly accommodation, and bed & breakfasts.
ReSI serves as a long-term institutional landlord to
replace the numerous individual landlords that local
authorities currently rely upon, helping to address the
difficulties that local authorities have with ensuring
adequate standards across their rented estates.
30.
researchbriefings.files.parliament.uk/documents/SN02110/SN02110.pdf
31.
commonslibrary.parliament.uk/research-briefings/sn02110/
32.
blog.shelter.org.uk/2022/02/temporary-accommodation-the-new-social-housing/
33.
commonslibrary.parliament.uk/research-briefings/sn02110/
26
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
Households in temporary accommodation
Thousands of households, England, quarterly to end of September 2021
Source: DLUHC, Statutory homelessness live table, Table TA1, 27 January 2022
0
50
100
2010
2013
2016
2019
2022
01
Strategic Report - Investment Portfolio
Residential Secure Income plc
Annual Report and Accounts 2022
27
KPI Measures
Income Returns
ReSI’s key performance indicators (KPIs) are aligned to our business strategy. These measures are used by the Board and
senior management to actively monitor business performance.
Adjusted earnings*
(£mn)
2020
2021
2022
£'mn
£'mn
£'mn
5.0
7.1
9.0
KPI definition
Adjusted EPRA
earnings, excluding
valuation movements
on investment assets
and debt, and other
adjustments, that are
one-off in nature,
which do not form part
of the ongoing
revenue or costs of
the business.
Comment
Improved earnings
primarily driven by a
reduction in
retirement voids,
like-for-like rental
growth, occupation of
the shared ownership
portfolio and
acquisitions.
Notes
See Supplementary
information on page
172
Rental growth
(%)
2020
2021
2022
%
%
%
1.9%
1.5%
4.5%
KPI definition
Like-for-like average
growth on rent reviews
across the portfolio.
Comment
4.5% like-for-like
growth in rental
income achieved
during the year ended
September 2022,
primarily driven by
inflation-linked rent
increases in the
retirement and shared
ownership portfolios.
Notes
See Glossary on page
182 for definition and
calculation basis.
Net
property rental
income (£mn)
2020
2021
2022
£'mn
£'mn
£'mn
11.3
13.2
16.0
KPI definition
Gross rental income
after deducting
property operating
expenses including
ground rent paid.
Comment
Increase of 22%
delivered primarily
from a 2.2x increase in
shared ownership net
rental income during
the year, as a result of
in £60mn investments
made in FY 2022 and
FY 2021, growing the
portfolio by 113%.
Notes
See note 6 to the
financial statements.
EPRA cost ratio
(%)*
2020
2021
2022
%
%
%
33%
43%
36%
KPI definition
Administrative and
operating costs
(including costs of
direct vacancy)
divided by gross rental
income.
Comment
Improvement in cost
ratio with improving
performance in our
retirement occupancy
and further
deployment in shared
ownership.
Notes
See Supplementary
information on page
172
Profit before tax
(£mn)
2020
2021
2022
£'mn
£'mn
£'mn
2.4
11.2
13.3
KPI definition
Profit before tax is a
statutory IFRS
measure as presented
in the Group’s
Consolidated
Statement of
Comprehensive
Income.
Comment
Improved profit before
tax driven by EPRA
earnings and
reduction in value of
debt held at mark to
market, partially offset
by diminished
year-over-year growth
in property valuation.
Notes
See Consolidated
Statement of
Comprehensive
Income on page 130.
*Alternative performance measures
28
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
Capital Returns
The following KPIs focus on ReSI's strategic priority to increase overall income returns and improve the resilience and
efficiency of the business model which will support increasing dividend distributions.
EPRA NTA per
share* (pence)
2020
2021
2022
105.1
107.9
106.1
KPI definition
EPRA NTA is the
market value of
property assets, after
deducting deferred
tax on trading assets,
and excluding
intangible assets and
derivatives.
Comment
1.7% decline in the year
to 30 September 2022
driven by a 35bps
increase in the
weighted average
property valuation
discount rate, which
muted the uplift in
investment property
valuations.
Recuring earnings of
5.0p covered 97% of
dividends in the year.
Notes
See Supplementary
information on page
172 for reconciliation
from IFRS to EPRA
performance
measures.
Total Return on NTA
(%)*
2020
2021
2022
(0.1) %
7.5%
3.3%
KPI definition
Return on NTA is total
return for the year,
prior to payment of
dividends (excluding
movements in
valuation of debt and
derivatives), expressed
as a percentage of
opening NTA.
Comment
Returns of 3.3% in FY
2022 (4.3% recurring
total return) reflecting
5.0p earnings offset
by a 35bps increase in
the weighted average
property valuation
discount rate, which
muted the uplift in
investment property
valuations.
(Equivalent to 7.1%
returns on opening
IFRS NAV).
Notes
See Note
Supplementary
information on page
172 for calculation.
IFRS NAV per share
(pence)
2020
2021
2022
105.0
106.6
108.8
KPI definition
IFRS NAV per share at
the balance sheet
date.
Comment
2.0% increase in the
year to 30 September
2022 primarily driven
by 5.0p earnings
reflecting strong
earnings results, along
with 2.6p reduction in
the mark-to-market
value of debt and
property valuation
uplifts.
Notes
See Consolidated
Statement of Financial
Position.
Loan to Value (LTV)
(%)
2020
2021
2022
42%
47%
47%
KPI definition
Ratio of net debt to
the total assets less
finance lease and cash
on a consolidated
Group basis.
Comment
LTV remained stable
at 47%, slightly below
ReSI’s 50% leverage
target.
Notes
See Supplementary
information on page
172 for calculation.
Cost of debt
(average) (%)
2020
2021
2022
2.6%
2.3%
2.4%
KPI definition
Average debt coupon
for the year including
costs and
commitment fees.
Comment
Overall low cost
ultra-long-term
funding through a
secured facility, with
average debt maturity
now at 22 years.
Reflecting ReSI’s small
10% exposure to
floating-rate interest
debt, average debt
coupon increased
c.10bps to 2.4%
following increase in
SONIA during the year.
Notes
See note 22 for
information on the
Group’s Borrowings.
*Alternative performance measures
Residential Secure Income plc
Annual Report and Accounts 2022
29
01
Strategic Report - KPI Measures
The European Public Real Estate Association (EPRA) is the body that represents Europe’s listed property companies.
The association sets out guidelines and recommendations to facilitate consistency in listed real estate reporting,
in turn allowing stakeholders to compare companies on a like-for-like basis. As a member of EPRA, the Company is
supportive of EPRA’s initiatives and discloses measures in relation to the EPRA Best Practices Recommendations
(EPRA BPR) guidelines. Additional detail is provided in supplementary information on page 172.
1. EPRA Earnings per share
Definition
Purpose
Result
EPRA Earnings per share excludes
gains from fair value adjustment
on investment property that are
included under IFRS.
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.
4.4p per share for the period 30 September
2022 (30 September 2021: 3.0p)
Adjusted EPRA Earnings per share excluding
one off costs and including first tranches
sales for the period were 5.0p
(30 September 2021: 4.2p)
2. EPRA Net Asset Value (NAV) Metrics
Definition
Purpose
Result
EPRA Net Reinstatement Value (NRV):
Assumes that entities never sell assets
and aims to represent the value required
to rebuild the entity.
EPRA Net Tangible Assets (NTA):
Assumes that entities buy and sell
assets, thereby crystallising certain
levels of unavoidable deferred tax.
EPRA Net Disposal Value (NDV):
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 NTA
£196.5mn or 106.1p per share at
30 September 2022 (£184.7mn or 107.9p per
share at 30 September 2021)
EPRA NRV
£196.5mn or 106.1p per share at
30 September 2022 (£184.7mn or 107.9p per
share at 30 September 2021)
EPRA NDV
£225.5mn or 121.8p per share at
30 September 2022 (£178.2mn or 104.1p per
share at 30 September 2021)
3. EPRA Net Initial Yield (NIY)
Definition
Purpose
Result
Annualised rental income based on the
cash rents passing at the balance sheet
date, less non-recoverable property
operating expenses, divided by the
market value of the property, increased
with (estimated) purchasers’ costs.
A comparable measure for portfolio
valuations. This measure should
make it easier for investors to judge
for themselves how the valuation of a
portfolio compares with others.
4.1% at 30 September 2022
(3.6% at 30 September 2021)
30
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - KPI Measures
4. EPRA ‘Topped-Up’ NIY
Definition
Purpose
Result
This measure incorporates an
adjustment to the EPRA NIY in respect
of the expiration of rent-free periods
(or other unexpired lease incentives
such as discounted rent periods
and step rents).
The topped-up net initial yield is useful
in that it allows investors to see the yield
based on the full rent that is contracted
at the end of the period.
4.1% at 30 September 2022
(3.6% at 30 September 2021)
5. EPRA Vacancy Rate
Definition
Purpose
Result
Estimated Market Rental Value (ERV)
of vacant space divided by ERV of the
whole portfolio.
A ‘pure’ percentage measure of
investment property space that is
vacant, based on ERV.
5% at 30 September 2022
(6% at 30 September 2021)
6. EPRA Cost Ratio
Definition
Purpose
Result
Administrative and operating costs
(including and excluding costs of direct
vacancy) divided by gross rental income.
A key measure to enable meaningful
measurement of the changes in a
company's operating costs.
EPRA Cost Ratio (including direct vacancy
costs) 36% at 30 September 2022 (43% at 30
September 2021)
EPRA Cost Ratio (excluding direct vacancy
costs) was 34% at 30 September 2022 (39%
at 30 September 2021)
7.
EPRA LTV
Definition
Purpose
Result
Net debt divided by total
property value.
A key (shareholder-gearing) metric
to determine the percentage of debt
comparing to the appraised value of
the properties.
46% at 30 September 2022
(47% at 30 September 2021)
Residential Secure Income plc
Annual Report and Accounts 2022
31
01
Strategic Report - KPI Measures
Fund Manager’s Report
Ben Fry
Managing Director Housing
“
ReSI offers a unique opportunity for
investment into a highly resilient, inflation
linked, scalable solution to the UK’s acute
shortage of affordable housing
”
Since I last wrote the Fund Manager’s Report for
ReSI’s FY 2022 Interims Results, the wider UK macro
environment has shifted dramatically. The themes
through the past twelve months have been rising
inflation and the cost-of-living crisis, rising interest
rates and political uncertainty. We expect that as
with the impact of the 2020 COVID-19 pandemic,
the difficult economic environment will further
evidence the resilience of our portfolio of high-quality
affordable housing.
Importantly, these changes not only affect ReSI, but
also the lives of our residents (more on this below in
the FY 2023 Outlook section), and we will continue to
balance rent increases and investing in our portfolio with
ensuring the affordability of our homes for our residents
and the long-term resilience of our income.
Looking backwards, FY 2022 was a year of strong
operational performance and financial achievements
for ReSI. During 2022, we continued to invest in and
grow our shared ownership portfolio and raised a
further £15mn of equity in February, which, with long
term debt from our facility with USS, was invested into
286 shared ownership homes worth £37mn. ReSI’s
shared ownership portfolio now comprises 780 homes
(including 41 committed and representing a 43%
increase since 2021 year-end) and represents 36% of the
portfolio mix by valuation.
Among other driving factors, a full year of impact
from FY 2021 shared ownership acquisitions helped
to generate £17.0mn of net rental income in FY 2022,
representing 20% growth compared to the previous
year. Further investment completions and inflation-
linked rent increases should drive additional recurring
income growth in FY 2023.
We increased our FY 2022 dividend to 5.16p per share
(PPS) in line with September 2021 CPI of 3.1%, reflecting
the inflation-linkage of the portfolio, as targeted twelve
months ago. 19% year-over-year growth in EPRA
Adjusted Earnings to 5.0 PPS translated to 97% dividend
coverage, with ReSI re-achieving 100% dividend
coverage in Q4 2022, as the capital from February’s
fundraise was deployed.
We have continued to focus on addressing social and
environmental factors that impact our residents in the
past year. Several examples are covered in the Social
and Environmental section below, demonstrating our
focus on providing security of tenure to our residents in
an affordable way.
We aim to be a best-in-class provider of affordable
housing and drive an improvement in standards across
the sector. For example, in 2020, ReSI developed a
Shared Ownership Customer Charter and a Shared
Ownership Environmental Charter, which are unique in
the shared ownership sector and provide benefits to
both shared owners and our investors. Our aim is for
these benefits to be shared by not just our residents
but those in the wider c.200,000 shared ownership
homes across the sector. Our next step towards being a
best-in-class provider involves exploring ways that we
can achieve net-zero-carbon without waiting until the
national grid is fully decarbonised.
ReSI’s portfolio now consists of 3,284 homes worth
£383mn - designed to help make people’s housing
aspirations achievable. Whether a
retiree looking to
move to tailored accommodation to combat loneliness,
or someone who has dreamed of purchasing a property
for their family but has found it to be unaffordable,
ReSI’s portfolio caters for residents poorly served by the
mainstream housing market. Our ability to meet these
under-served group's needs is reflected in the resilience
of our portfolio and strengthens our confidence in the
assets in which we invest.
32
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
34.
FY 2021 vs FY 2022
35.
Based on 251 respondents to a survey carried out by RPML, representing c.11% of residents.
0.00%
2.00%
4.0 0%
6.00%
8.00%
12.00%
10.00%
Sep-19
Mar-20
Sep-20
Mar-21
Sep-21
Mar-22
Sep-22
14.2
0.2
0.5
1.7
0.4
17.0
FY2021 net rent
Reducing
Retirement voids
Like for like
rent growth
Full Occupancy
SO portfolio
Accretive
Acquisitions
FY2022
net rent
13.0
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
Net rental income (£mn)
Retirement void losses trending below
pre-COVID-19 average
Operational Performance
Net rental income before ground rents grew by 20% year-
over-year to £17.0mn, driven by four underlying factors:
reducing retirement voids;
strong like-for-like rent growth;
full occupancy and annualised income of our shared
ownership portfolio; and
accretive acquisitions.
and underpinned by:
consistent rent collection.
1
. Retirement voids:
Income growth delivered
:
34
£0.2mn / 0.1p per share
Bringing ReSI’s property and lettings management in-
house in July 2021, with the formation of ReSI Property
Management Limited. (RPML), is a decision that continues
to drive returns. RPML has continued to focus on
improving resident move-in times, which has helped push
retirement void losses to average 6.2% in FY 2022, below
pre-COVID-19 levels of c.7%.
The transfer of this property and lettings management
function now allows the team to work closely with
the Fund Manager to optimise customer service and
maximise performance for ReSI.
The focus of this team and level of customer service is
evidenced through the results of our recent customer
survey
35
which show that:
84% would recommend renting in retirement
73% had made new friends
98% valued the assured lifetime tenancy as important
Residential Secure Income plc
Annual Report and Accounts 2022
33
01
Strategic Report - Fund Manager’s Report
2
. Strong like-for-like rent growth:
Income growth delivered:
36
£0.5mn / 0.3p per share
ReSI’s rental income is 97% linked to inflation which
has delivered an average 4.5% like-for-like rent
growth in the year.
Shared ownership rents increase annually in April and
in 2022, like-for-like rents grew by 5.4% (excluding
properties occupied in the previous 12 months). This
increase reflects September 2021 RPI of 4.9% +
0.5%, which drives the vast majority of ReSI’s shared
ownership rate increases.
Retirement rents increase across the year on the
anniversary of the resident move in date, with like-for-
like rental growth of 4.6% year-over-year (1.5% growth
in FY 2021).
Whilst the rental market is very strong, we
are very mindful of the financial challenges facing many
residents and are taking a responsible approach to
rental increases, capping all retirement rent increases
at 6% during the year. This represents an annual saving
of £164k p.a. for residents, and helps balance rent
increases with retention and long-term affordability.
The 4.6% like-for-like increase in retirement rental
income was partially offset by a c.3% increase in
operating expenses, largely driven by increases in repair
and maintenance costs and service charges.
3
. Full occupancy and annualised impact of
our shared ownership portfolio:
Income growth delivered:
£1.7mn/ 0.9p per share
Demand for ReSI’s shared ownership properties
remained robust in FY 2022 and the same-store
portfolio owned by ReSI at September 2021 is fully
leased. Furthermore, ReSI benefited from full year
income from acquisitions during FY 2021 of 351 homes
from Orbit Group and Metropolitan Thames Valley
housing associations as well as Brick by Brick.
4
. Accretive transactions:
Income growth delivered:
£0.4mn / 0.2p per share
During FY 2022, ReSI purchased 286 shared ownership
homes for net consideration of £37mn (including
commitments for 41 homes
for £9mn). These
acquisitions were funded by £15mn of equity raised
in February and debt drawn on the USS credit facility
in March, and are earnings-accretive to ReSI’s finan-
cial performance. The transactions with Orbit Group
and Brick by Brick were repeat transactions with
counterparties transacted with during FY 2021 and the
deal with HSPG provides a forward pipeline of at least
£50mn – evidencing the growing strength of ReSI’s
relationship network.
36.
FY 2021 vs FY 2022
£0mn
£20mn
£40mn
£60mn
£80mn
£100mn
£120mn
£140mn
£160mn
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Committed Acquisitions
Completed Acquisition post period end
Available
Reserved
Income generating
Growth of Shared Ownership Portfolio
01
Strategic Report - Fund Manager’s Report
34
Residential Secure Income plc
Annual Report and Accounts 2022
The 227 homes acquired from Orbit Group and HSPG
were occupied and immediately income generating,
whilst those 59 (£11mn) homes from Brick By Brick are
delivered on a phased basis based on construction
completion beginning in September 2022. At the date
of this Annual Report, 8 of these homes from Brick
By Brick were acquired and occupied, with a further
32 reserved ahead of completion and 19 available.
We continue to see sustained demand for shared
ownership bear out with respect to the Brick By Brick
properties, particularly as increased interest rates
mean some people who could previously have afforded
to buy outright or with Help to Buy can now only afford
their own home through shared ownership. This
demand emphasises the important role that shared
ownership housing continues to play in helping mid-
to-low-income earners onto a housing ladder which is
otherwise increasingly out of reach for most people
across the country.
5
. Consistent rent collection:
ReSI’s cash flow is supported by a highly diversified set
of income streams from residents who pay affordable
rents. Retirement rentals residents typically pay their
rent from pensions and savings, and rents are often
affordable enough to be materially or entirely covered
by welfare. On average, ReSI’s shared ownership
residents own c.37% of their homes and generally pay
below-market rent. The remainder of ReSI’s portfolio
is local authority housing, which is leased to Luton
Borough Council. ReSI has no leases with asset light,
lease funded, housing associations or charities.
The strength of creditworthiness in ReSI’s
counterparties is manifest in ReSI’s rent collection rate,
which remained at 99% in FY 2022, consistent with
historic performance.
90%
92%
94%
96%
98%
100%
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Robust Rent Collection Rate through COVID-19
01
Strategic Report - Fund Manager’s Report
Residential Secure Income plc
Annual Report and Accounts 2022
35
Financial Performance
Total Return
ReSI delivered a total EPRA NTA return of 3.4 PPS
(3.1%) for the financial year, with growth driven by
inflation-linked increases across the shared ownership
and retirement portfolios, along with operational
improvements in our retirement portfolio, including
further improvement in voids.
This 3.4 PPS EPRA return comprises:
5.0p of Adjusted EPRA earnings (see note 15 of the
financial statements - adjusted earnings per share),
with recurring income of £8.9mn from regular
recurring cash flows; plus
1.8p gain on change in valuation on investment
property as assessed by Savills (£3mn) – a 0.6%
increase on a like-for-like fair value basis to a total of
£383mn (including £9mn of committed acquisitions)
as of 30 September 2022. This was driven by 4.5%
like-for-like rental growth, partially offset by c.35
bps year-over-year increase in the weighted average
nominal discount rates – with shared ownership
increasing by c.10 bps to 6.4% and retirement
increasing by c.45 bps to 8.2%; less
2.9p impact of USS debt indexation (£5.2mn) of which
0.9p related to prior periods (£1.6mn)
*
, reflecting
the index linked nature of the debt which follows the
increase in shared ownership rental income; and
0.5p one-off costs (c.£1.0mn), relating to the legal
costs of securing further drawdowns from the USS
facility and net share issuance costs; and
Excluding the impact of the one-time USS debt
indexation adjustment and one-off costs, ReSI
delivered a total recurring EPRA NTA return of
4.6 PPS (4.3%).
In line with the FY 2022 dividend target, ReSI paid
dividends during the financial year of 5.16 PPS, resulting
in an EPRA NTA decrease of 1.8p for the year.
ReSI delivered a total IFRS return of 7.4 PPS
(6.8%)
for the year, with the difference to EPRA NTA returns
caused by an increase in the amortised cost value of
debt (EPRA) vs fair value of debt (IFRS) of 3.9p (£7.0mn),
0.9p (£1.5mn) of which related to prior periods, and
decrease in revaluation of trading properties of 0.1p
(£0.2mn). This is an IFRS improvement of 2.1p after
dividends paid.
Movement in IFRS NAV pence per share for the year
Movement in NTA pence per share for the year
Mvmt in FV
Investment
Properties
106.6
5.0
1.8
1.0
(0.5)
(5.2)
108.8
100.0
102.0
104.0
106.0
108.0
110.0
112.0
114.0
NAV at 30/09/21
Net Income
Debt Valuation
One-off Debt Set Up Costs
Dividend Paid
NAV at 31/03/22
107.9
5.0
1.8
(2.9)
(5.2)
106.1
(0.5)
103.0
105.0
107.0
109.0
111.0
113.0
115.0
NTA at 30/09/21
Net Income
Mvmt in FV
Investment
Properties
One-off Costs &
Impact of Share
Issuance
Debt Indexation
Dividend Paid
NTA at 30/09/22
*The Group elected to carry this debt at fair value through profit and loss. In accordance with the EPRA Best Practice Recommendations, EPRA
NTA should reflect the amortised cost of the debt rather than its fair value. In the current period, an adjustment has been made for £5.2mn which
represents the difference between fair value and what amortised cost would have been had the Group carried the debt at amortised cost. No
adjustment was made in the PY as it was immaterial. The charge would have been £1.5mn for the year ended 30 September 2021.
01
Strategic Report - Financial Performance
36
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
36
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Financial Performance
Residential Secure Income plc
Annual Report and Accounts 2022
37
01
Strategic Report - Financial Performance
38
Residential Secure Income plc
Annual Report and Accounts 2022
Annualised Rental Operating Profit & First Tranche
Sales (£mn)
£ -
£2.00
£4.00
£6.00
£8.00
£10.00
£12.00
H1 FY 2021
H2 FY 2021
H1 FY 2022
H2 FY 2022
Rental Income Profit (Excl. FTS)
First Tranche Sale
Dividend
Dividend Coverage
ReSI’s dividend was 97% covered by recurring income
during the year, including a return to full dividend
coverage in Q4 FY 2022. The drop below 100% primarily
reflected the impact of February’s capital raise and the
lag on dividend coverage whilst this was deployed.
The quality of the dividend coverage continues to
improve, reflecting the lease-up of ReSI’s shared
ownership portfolio with first tranche sales profits
replaced by recurring rental income. This trend is
illustrated by the robust 36% year-over-year increase
in rental operating profit more than offsetting a 49%
decrease in first tranche sales profit to increase total
operating profit by 24%.
95% of the H2 2022 dividend
was covered by rental operating profit, which we aim
to further improve in FY 2023. We see the potential for
rental dividend coverage to further improve in FY 2023,
driven by inflation-linked rent increases in the retirement
rental and shared ownership portfolios.
Statement of Comprehensive Income
FY 2022
FY 2021
Variance
£’000
£’000
Net rental income
17,016
14,165
20%
First tranche sales profits
510
1,008
-49%
Net Finance Costs
(5,588)
(5,221)
7%
Management fees
(1,867)
(1,802)
4%
Overheads
(1,119)
(1,046)
7%
Adjusted Earnings
8,952
7,104
26%
Adjusted EPS
5.0p
4.2p
20%
IFRS Earnings
13,334
11,221
19%
IFRS EPS
7.4p
6.6p
12%
Adjusted Earnings increased by 24% (£1.7mn) on FY 2021
to £9.0mn, driven by the 20% (£2.8mn) increase in net
rental income to £17.0mn with the deployment of capital;
inflation-linked increases across ReSIs three asset
types; and occupancy gains in both shared ownership
and retirement.
This earnings growth comes despite a 49% decrease
(£0.5mn) in first tranche sales profits, which reflects the
gain on cost we recognise by selling a portion of a shared
ownership home to the occupiers and is thereafter
replaced by ongoing net rental income from the shared
owner. The reduction in this line reflects the ongoing
maturity of ReSI’s business and increased quality of
income streams.
The 9% increase in net finance costs to £5.6mn reflects
a £21mn increase to £190mn in notional debt since
September 2021, including £20mn debt drawn from
USS and £5mn increase in Santander revolver facility to
finance shared ownership acquisitions use during the
year partially offset by a £3mn reduction in shorter term
floating rate debt and £1mn reduction in fixed rate debt.
01
Strategic Report - Financial Performance
Residential Secure Income plc
Annual Report and Accounts 2022
39
Despite recent market turmoil, ReSI’s property
valuation, as assessed by Savills, grew during the year
by £2mn – a 0.6% increase on a like-for-like fair value
basis to a total of £383mn (including £9mn committed
acquisitions) as of 30 September 2022.
This was driven
by 4.5% like-for-like rental growth, partially offset
by c.35 bps year-over-year increase in the weighted
average nominal discount rates applied to shared
ownership and retirement portfolios of c.10 bps to 6.4%
and c.45 bps to 8.2% respectively.
Inventories reflect the amount of unoccupied shared
ownership properties that are expected to be sold to
shared owners and are held at cost. The 68% reduction
reflects the full occupation of the opening shared
ownership portfolio made by April 2022. ReSI acquired
18 additional untenanted shared ownership properties in
September 2022, of which 8 have since been occupied.
As a result, £1.2mn of inventories remain as at
30 September 2022.
Total borrowings increased by £21mn over the twelve-
month period to £190mn as of 30 September 2022,
£20mn debt drawn from USS and £5mn increase in
Santander revolver facility to finance shared ownership
acquisitions use during the year partially offset by a
£3mn reduction in shorter term floating rate debt and
£1mn reduction in fixed rate debt.
The EPRA NTA and IFRS NAV measures exclude the
reversionary surplus in our portfolio which stands at
£48mn. This represents the difference between the
market value of our assets used in our balance sheet
and the value we could realise if they became vacant.
Overall, our portfolio is valued at a 12% discount, on
average, to its reversionary value.
30 Sep 2022
30 Sep 2021
Variance
£’000
£’000
Total Investments
374,785
341,128
10%
Inventories - First tranche shared ownership properties available for sale
1,203
3,800
-68%
Cash and cash equivalents
15,984
8,370
91%
Borrowings amortised cost
(194,701)
(168,339)
16%
Other
(787)
(278)
182%
EPRA Net Tangible Assets (NTA)
196,484
184,682
6%
EPRA NTA per share (pence)
106.1
107.9
-2%
EPRA Net Disposal Value (NDV)
225,455
178,157
27%
EPRA NDV per share (pence)
121.8
104.1
17%
IFRS NAV
201,388
182,392
10%
IFRS NAV per share (pence)
108.8
106.6
2%
Book Value of Debt
189,705
168,339
13%
Reversionary Surplus (excluded from NTA)
47,971
40,026
20%
Reversionary Surplus per share (pence)
25.9
23.4
11%
Balance Sheet
40
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Financial Performance
Financing and Capital Structure
ReSI now has in place £189mn (notional value) of fixed
rate and inflation linked debt, with a weighted average
coupon of 2.4%, the vast majority of which is long-
term partially or fully amortising debt at an average
maturity of 22 years.
These debt financings form part of ReSI’s strategy
to target an overall level of indebtedness of 50% loan
to gross asset value and a low cost of very long-term
funding, which together enhance the returns to equity
available to shareholders and minimise exposure to
refinancing, interest rate and covenant risks.
This strategy leaves ReSI’s well positioned to withstand
today’s rising interest rate environment.
With only
c.10% floating-rate debt exposure and a weighted
average maturity of 22 years, the 2.4% weighted
average coupon of our existing debt balances should
remain fairly stable for the near-to-mid-term future.
As at 30 September 2022, ReSI has c.£31mn of liquidity,
including c. £18mn of revolving credit facility capacity.
ReSI’s 47% leverage remains slightly below our 50%
target, with headroom across debt covenants to
withstand moves in income, interest rates and valuation
headwinds that may arise in the future, as shown below.
Each asset type is secured separately and individually
and there is no cross-collateralization between them.
ReSI could sustain a fall in net operating income by
c.30% and remain in compliance with interest cover
covenants. ReSI’s investment portfolio is valued on a
discounted cash flow basis on the value of its rental
stream (rather than at vacant possession / retail value)
and so has limited exposure in its valuations to house
prices. Sensitivity analysis shows that investment
values could fall by c.13% before loan to value covenants
breaches would arise. ReSI is also able to cash cure
any loan to value covenants using liquidity across the
group. ReSI’s debt on its shared ownership portfolio
is fully amortising and so does not have a loan to
value covenant.
During the year, ReSI extended its revolving credit
facility from Santander by £15mn to £25mn, whilst
reducing the interest rate margin by 55bps to 2.25%
and agreeing a one-year extension of the facility
termination date to March 2025. The expanded £25.0mn
facility capacity and reduced interest rate margin
allow for more efficient management of ReSI's working
capital and provide lower-cost bridge financing for
future investments.
FY 2022
FY 2021
Total debt
£190mn
£166mn
LTV (target 50%)
47%
46%
Leverage on reversion value
42%
43%
Weighted average cost
2.4%
2.3%
Weighted average maturity
22 years
22 years
Proportion of floating rate
debt
10%
9%
01
Strategic Report - Financial Performance
Residential Secure Income plc
Annual Report and Accounts 2022
41
Lender
Portfolio held against
Notional value of
debt drawn less
amortisation
Maturity date
Annual interest rate %
Universities Superannuation Scheme
Shared ownership
£77.7mn
May 2065
0.94% fixed* (inflation linked)
Scottish Widows
Retirement
£92.5mn
June 2043
3.5% fixed
National Westminster Bank
Local authority
£12.7mn
April 2023
1.5% + 1 month SONIA
Santander Bank
All assets
£6.8mn
March 2025
2.25% + 3 month SONIA
Total borrowings
£189.7mn
Lender
Portfolio / Lender - Most Recently Reported Covenants
37
Covenant
SO / USS
IRL / SW
LA / NW
Santander
Current debt balance
£77.5mn
£94.6mn
£12.7mn
£3.9mn
LTV – Threshold
N/A
<59%
<60%
<55%
LTV – Reported
N/A
45.7%
46.5%
47.9%
Value – Headroom (%)
N/A
22%
22%
13%
Value – Headroom (£)
N/A
£46mn
£6mn
£51mn
ICR / DSCR – Threshold
>0.95x
>2.0x
>2.5x
>1.5x
ICR / DSCR – Reported
6.2x
2.9x
6.5x
3.4x
NOI – Headroom
85%
31%
61%
55%
SONIA Interest Reate -
Breach Threshold
Fixed-rate
Fixed-rate
5.3%
30.0%
Capital Stack
Equity
Debt
Grant Funding
Reversionary Surplus
£0mn
£50mn
£100mn
£150mn
£200mn
£250mn
£300mn
£350mn
£400mn
£450mn
£460mn
FY 2022
FY 2021
37.
Figures in the loan covenants table are based on most recent quarter of lender covenant reporting.
42
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Financial Performance
Social and Environmental
We remain committed to delivering measurable
social and environmental impact for the benefit of our
residents and the UK.
Our retirees have benefitted from the rent increase cap
of 6% being applied to all directly-rented retirement
properties, generating a total annual saving of £164k. In
addition, further rent caps and rent freezes have been
provided to residents who are most in need, with this
support having grown from £32k in the six months to
March to a total annualised amount for the year of £86k.
For our shared owners, we offer several services
designed to financially benefit residents, such as
providing assignments and consent for improvements
free of charge and offering reverse staircasing to
residents who encounter financial difficulties.
Our
commitments to our shared ownership residents are
laid out in our proprietary Shared Ownership Customer
and Environmental Charters, which are available on
ReSI’s website.
During 2022 we expanded our annual retirement
customer survey to shared owners as well. The
survey results help to confirm that the positive
outcomes that ReSI intends to deliver are being
experienced by residents.
87%
of RPML residents are happy or
not dissatisfied with their property
management service
90%
of retirement residents are happy or
not dissatisfied with their property
management service
80%
of residents are satisfied that their
home is the same or better value for
money than their previous residence
73%
of residents have made new friends
since moving in
86%
of residents are satisfied that their
home is as or more energy efficient
than their previous residence
54%
of residents have experienced
improvement in their mental health
since moving in
Shared Ownership
Retirement
38.
As defined in the English Housing Survey, 2020 to 2021
ReSI continued to invest in improving the energy efficiency of its retirement portfolio in FY 2022. After upgrading
100% of the EPC E rated directly-rented properties to at least a D in FY 2021, FY 2022 saw ReSI embark on its target
to upgrade all directly-rented D rated properties to at least a C by 2025, three years ahead of the government target.
During the year 61% of the directly-rented D rated properties have been upgraded to at least a C, progress that is
well ahead of the project timetable. As a result of this progress, 96% of our directly-rented properties now have EPC
ratings of C or higher. For the whole portfolio, 85% of the properties are rated C or higher, leaving ReSI well ahead of the
average for the social sector and the overall UK housing market
38
.
Residential Secure Income plc
Annual Report and Accounts 2022
43
01
Strategic Report - Financial Performance
Investing in the energy efficiency of our properties is
one important step in our broader net zero plan for ReSI.
This year, we have been engaged with the consultancy
Kamma Data, who take an innovative data-focused
approach towards assessing the retrofitting works that
are required to upgrade the energy efficiency of ReSI’s
properties to their full potential.
Kamma’s report will form part of ReSI’s net zero
strategy, which is intended to be announced in 2023.
The strategy will include a pathway to reach operational
net zero, including scope 3 operational emissions,
followed by a pathway to reach complete net zero,
including operational and embodied scope 3 emissions,
with complete net zero being reached by 2050 at the
latest in line with government targets.
Whilst improving property energy efficiency will drive
a significant reduction in carbon emissions produced
by the portfolio, it is not possible to reach operational
net zero through retrofitting alone. As a result, to
reach operational net zero, ReSI will either have to wait
until the national grid is fully decarbonised, which is
expected to be in 2035, or it will have to directly procure
/ invest in its own renewable energy sources. This is
an option that we are currently exploring, with further
information to follow in 2023.
Management Team Transition
On 6 March 2022, Alex Pilato moved to a Senior
Advisor role as part of his transition to retirement.
Simultaneously, I was promoted to be Managing Director
of the Housing division of Gresham House.
In order to support this transition, Brandon Holloway
joined in November 2021 as Deputy Fund Manager,
following continued Gresham House investment in
growing the team with Narvinder Khossa as Director of
New Business and Hannah Howard-Jones as Director of
Property also joining in 2021, and Dominic Stead joining
in 2022 to head up our in-house property management
team. The Gresham House housing investment team
now comprises 25 people, with senior members having
an average of c.30 years’ experience.
Alex remains a member of all boards and committees
of the division and fund vehicles. This change has been
planned since the acquisition of TradeRisks by Gresham
House.
Alex continues to have a very strong interest in
the success of ReSI with significant shareholdings.
The cost of energy has risen drastically in 2022, and with further increases scheduled for 2023, the energy efficiency
improvements we are investing in generate real cost saving benefits to our residents.
Tenure
Saving compared to average UK property (EPC D)
39
£
% saving
Property with efficiency of average for ReSI shared ownership portfolio (EPC B)
1,213
40%
Property with efficiency of average for ReSI retirement portfolio (EPC C)
456
15%
Comparison to Wider Market*
3%
3%
31%
26%
43%
63%
54%
70%
43%
31%
14%
4%
11%
3%
1%
0%
20%
40%
60%
80%
100%
120%
All Tenures
Social Sector
ReSI plc - All Properties
ReSI plc - Directly Rented
B and above
C
D
E and below
*English Housing Survey, 2020-2021
39.
Correct for the scheduled increase to the energy price cap in April 2023
44
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Financial Performance
Outlook
The themes through the past twelve months have
been rising inflation and the cost-of-living crisis, rising
interest rates and political uncertainty. We expect that
as with the impact of the 2020 COVID-19 pandemic,
the difficult economic environment will further
evidence the resilience of our portfolio of high-quality
affordable housing.
Importantly, these challenges not only affect ReSI,
but also the lives of our residents. Between the
underlying strength of credit for our shared owners,
the affordability of the shared ownership compared
to renting on the open market, the financial backstop
of housing benefit and pension funds available to our
retirement residents, and the energy efficiency of
ReSI’s portfolio compared to the broader UK, ReSI’s
residents are relatively well positioned to weather the
current financial environment.
For those residents who
fall into acute financial hardship, ReSI offers a range
of financial resources to help mitigate the situation as
outlined in the Social and Environmental section above.
In addition to potential challenges, the current financial
volatility could also present opportunities in FY 2023.
We are seeing that the number of tenanted shared
ownership that will be available to acquire in FY 2023
will be substantially higher as housing associations
(who hold almost 200,000 shared ownership homes)
look to bring in partners to acquire this stock in order
to continue to fund their 43,000 homes per annum
development programmes whilst also investing £25bn
by 2030 in the energy efficiency of their homes
40
.
ReSI’s business model is well positioned to thrive in
a high-inflationary environment.
More importantly,
ReSI has a highly experienced, capable and cohesive
management team, as well as a dedicated in-house
property management team, who are focused on
navigating these uncertain times.
ReSI’s long-term amortising debt, with only c.8%
floating-rate debt exposure and a weighted average
maturity of 22 years, leaves ReSI’s well positioned to
withstand today’s rising interest rate environment. The
2.4% weighted average coupon of our existing debt
balances should remain relatively stable for the near-to-
mid-term future, and ReSI has ample headroom across
debt covenants.
In the short-term we anticipate that FY 2023 will see
earnings growth from inflation-linked rents, as well
as shared ownership acquisitions and leasing activity,
but this could be offset by one-off operating expenses
increasing ahead of rent increases (driven by ReSI’s
retirement rentals operations where we are responsible
for energy costs in communal areas) and increases in
floating-rate interest expenses.
These headwinds could make it difficult to increase
Adjusted EPRA Earnings during FY 2023, and so the
dividend target for FY 2023 is being kept constant at
5.16p per Ordinary Share.
Any revision or adjustment to
the dividend target will require greater confidence that
interest rates have peaked, and energy costs stabilised.
For FY 2024 and beyond these one-offs could be static
or potentially invert, allowing for higher earnings and a
dividend increase.
If FY 2022 was a year of profound change, two themes
that remain unchanged are the UK’s worsening
shortage of affordable housing, and how well-
positioned ReSI is to meet the two biggest problems in
the housing market:
inability to access home ownership, which has been
made worse by recent strong house price growth; and
growing elderly population requiring suitable
accommodation for independent later living.
What also remains the same is our aim to deliver secure,
inflation-linked returns over the long term to investors,
while providing measurable social and environmental
impact to our residents and the UK.
Ben Fry
Managing Director, Housing
1 December 2022
40.
Savills and National Housing Federation, Decarbonising the Housing Association Sector – Costs and Funding Options (October 2021).
Residential Secure Income plc
Annual Report and Accounts 2022
45
01
Strategic Report - Financial Performance
ReSI’s approach to Environmental and Social Impact
This section covers some of the key areas of
implementation and other ongoing social impact
and environmental initiatives during the year. There
is also further detail relating to the impact of the
Company on its major stakeholders in the Section 172
statement on page 72.
The Board and the Fund Manager believe that
sustainable investment involves the integration of
Environmental, Social and Governance (ESG) factors
through all stages of the investment process and that
these factors should be considered alongside financial
and strategic issues during the initial assessment and
at all stages of the investment process.
The Board and the Fund Manager recognise their
responsibility to manage and conduct business in a
socially responsible way and many of the Company’s
investors, residents and other counterparties have the
same values. Good governance and social responsibility
require that the Company seeks to implement a
collaborative approach to understanding and improving
environmental and social performance. The Fund
Manager is responsible for engagement on ESG
matters and dedicates a significant amount of time and
resource to focusing on the ESG characteristics of the
properties in which it invests.
Such ESG factors, which were traditionally not part
of financial analysis, are incorporated and prioritised
as part of the investment and due diligence process
through the ESG decision tool, which has been
developed by Gresham House’s dedicated Sustainable
Investment Team (see ESG Decision Tool section).
Ongoing monitoring of ESG related risks is carried out
through investment reviews.
The Fund Manager also gives appropriate consideration
to corporate governance and the representation of
shareholder interests. This is applied both as a positive
consideration, and also to exclude certain investments
where the Fund Manager does not believe the interests
of shareholders will be prioritised.
The Fund Manager's parent, Gresham House has a
clear commitment to sustainable investment as part
of its business mission. Based on its Sustainable
Investment Framework, it has developed a range of
policies and processes for all asset classes which the
Fund Manager uses to integrate sustainability into its
investment approach. More details can be found in the
Housing Sustainable Investment Policy here: https://
greshamhouse.com/wp-content/uploads/2022/04/
Real-Estate-UK-Housing-Sustainable-Investment-
Policy-April-22.pdf
01
Strategic Report
46
Residential Secure Income plc
Annual Report and Accounts 2022
Sustainable Investment Framework
The Gresham House Sustainable Investment Framework shown below is used to structure analysis, monitoring and
reporting of ESG issues and opportunities within the lifecycle of our investments.
Environmental
Climate change
and pollution
Energy-efficient housing;
renewable energy where
possible; access to public
transport where available
Natural capital
Water-saving measures where
possible; regeneration of
brownfields sites
Waste management
Where feasible, sustainable
management of waste
arising from refurbishment,
maintenance and management
of the portfolio
Social
Employment, health,
safety and well-being
Safety and well-being of
residents as a priority;
application of best practice
standards; quality employment
Marketplace responsibility
Affordability and quality in all
tenure types: widening access
to home ownership; proactive
protection of residents' interests
and customer charters
Supply chain sustainability
Sourcing policy ensures
management teams have
required knowledge of
local areas and meet
regulatory requirements
Community care and
engagement
Contributing to community
stability and environmental
quality: housing that is
accessible to jobs and amenities
Governance
Governance
and ethics
Good practice governance;
strong business ethics
management and culture
Risk and compliance
Robust risk and compliance
management; monitoring of
regulatory and policy change
Commitment to
sustainability
Clear objectives for positive
social and/or environmental
outcome delivery alongside
robust financial returns
Residential Secure Income plc
Annual Report and Accounts 2022
47
01
Strategic Report - ReSI’s approach to Environmental and Social Impact
ESG Housing Wheel
To determine the most material themes within the broader framework when profiling our prospective investments, the
ESG Housing Wheel (“the Wheel”) has been developed.
The Wheel sets out the six social and environmental factors that are most crucial to the Company’s sustainable
investment strategy, with measurable objectives identified for each factor.
01
Strategic Report - ReSI’s approach to Environmental and Social Impact
48
Residential Secure Income plc
Annual Report and Accounts 2022
ESG Decision Tool
The Fund Manager has developed the ESG Decision
Tool (“the Tool”), which is used by the investment
team to assess the performance of prospective
investments against six core themes in the Wheel and
to identify potential ESG risks. The Tool contains two
core sections:
Initial Evaluation –
An initial assessment of the
investment’s performance against the six core social
and environmental factors in the Wheel. The investment
will be assessed against measures of success which
have been developed for the six core social and
environmental factors, ensuring that outcomes can be
measured and compared to other investments.
Detailed Questionnaire -
This assesses ESG risks in
more detail by guiding the Investment Team through
a series of potential ESG risks. The completed
questionnaire highlights specific ESG risks that are the
most relevant to the asset.
The investment team are required to mitigate the ESG
risks identified by the Tool as part of the due diligence
process for the investment to be approved.
The Tool helps to ensure that ESG risks and
opportunities are considered from the beginning of the
investment process. These risks and opportunities are
then continuously tracked, monitored and managed
after the acquisition phase.
ESG KPIs
To record the social and environmental impact that
ReSI generates through its investments, the Fund
Manager has created a KPI Bank to help drive investment
decision making, engagement planning and enhance
stakeholder reporting.
The KPI Bank draws on elements of existing sustainability
frameworks, such as SFDR, while also supplementing
these with KPIs that expand upon the core measures of
success contained within the Wheel and the Tool.
The KPI Bank is designed to improve sustainability
practices within our investments and ensure sufficient
progress is being made against stated ESG ambitions.
KPIs are to be monitored to understand the strengths
and weaknesses of an investment and to subsequently
identify any actions for improvement. ReSI intends
to report against its ESG KPI Bank for the first time
in the new year.
Gresham House
Sustainable Investment
The Fund Manager's parent, Gresham House, has
achieved top scores in the 2020 PRI (Principles for
Responsible Investment) assessment report, the
Group’s first assessment since becoming a PRI
signatory in 2018. For its 2021 PRI Report, Gresham
House was awarded 4 and 5 stars, out of a maximum of
5 stars, for all modules relevant to Gresham House plc.
For Real Estate specifically, Gresham House scored
78% versus a median for the sector of 69%.
Gresham House became a signatory to the UK
Stewardship Code in 2021. In September 2022, it
was announced that Gresham House had met the
expected standard of reporting for 2021 and will
remain a signatory to the UK Stewardship Code for the
second year in a row. Gresham House has also been
awarded the Green Economy Mark from the London
Stock Exchange.
More information on Gresham House’s approach to
sustainable investment can be found in its Sustainable
Investment Report.
Alignment with UN Sustainable
Development Goals
We believe that ReSI’s investments support the following
UN SDGs by providing more affordable access to
safe, healthy, quality and energy efficient homes that
contribute to local sustainable communities and support
their occupants to enjoy economic and social inclusion.
Core SDG
Secondary SDGs
Residential Secure Income plc
Annual Report and Accounts 2022
49
01
Strategic Report - ReSI’s approach to Environmental and Social Impact
Measuring and reducing the environmental impact of
ReSI’s operations, whilst addressing the risks posed by
climate change, is essential in enabling ReSI to reach its
long-term financial objectives.
It is estimated that carbon emissions produced by
residential buildings account for 20%
41
of all carbon
emissions in the UK and as a result, decarbonisation of
the housing sector is a key focus of the government’s
net zero strategy. ReSI recognises that as a responsible
landlord, it has a role to play in reducing the emissions
produced by its portfolio and ultimately the wider
housing sector.
This year, ReSI has partnered with the consultancy,
Kamma Data (Kamma), to report on the carbon
emissions generated by its property portfolio. Kamma
have produced a report that includes an assessment
of ReSI’s Scope 1 and Scope 2 emissions, the Scope
3 operational emissions of ReSI’s property portfolio
and for the first time, an assessment of the Scope 3
embodied carbon emissions produced in developing
ReSI’s properties.
In addition, Kamma are producing a report on the
retrofitting procedures that are required to improve the
energy efficiency of ReSI’s property portfolio further.
The report sets out a choice of fully costed retrofitting
pathways that ReSI can take. The full report will be
published during 2023.
Kamma’s retrofitting report will form part of ReSI’s
net zero strategy, which is intended to be announced
in 2023. The strategy will include a pathway to reach
operational net zero, including Scope 3 operational
emissions, followed by a pathway to reach complete
net zero, including operational and embodied Scope
3 emissions, with complete net zero being reached by
2050 at the latest in line with government targets.
Whilst improving property energy efficiency will drive
a significant reduction in carbon emissions produced
by the portfolio, it is not possible to reach operational
net zero through retrofitting alone. As a result, to
reach operational net zero, ReSI will either have to wait
until the national grid is fully decarbonised, which is
expected to be in 2035, or it will have to directly procure
/ invest in its own renewable energy sources. This is
an option that the Fund Manager is currently exploring,
with further information to follow in 2023.
Assessing the energy efficiency of
ReSI’s portfolio
Currently the most effective method of measuring
and reporting a property’s environmental impact is
using information gathered from property level Energy
Performance Certificates (EPC). EPC ratings are a
measure of a property’s energy efficiency, assigning
a Standard Assessment Procedure (SAP) rating of 1 to
100 (higher indicates a more environmentally friendly
building) and a corresponding letter grade between A
and G. EPC assessments are performed by third party
assessors and therefore provide an externally verified
method of quantifying the energy efficiency of each
home. EPC ratings are obtained on a property-by-
property basis upon acquisition and are refreshed at
set intervals.
EPC Rating
SAP Score
A
92 to 100 points
B
81 to 91 points
C
69 to 80 points
D
55 to 68 points
E (current minimum
requirement for rental property)
39 to 54 points
F
21 to 38 points
G
1 to 20 points
Example Energy Performance Certificate
42
41.
Department for Business, Energy and Industrial Strategy
42.
EPC certificate for retirement rental property owned by ReSI
Environmental Impact
50
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
Government
requirements and proposals
In the UK it is a legal requirement that unless exempt, all
directly rented residential properties must have an EPC
rating of at least E. Examples of exemptions include
where it is not possible to upgrade the property to an E
due to the type of walls, the building is listed or it costs
more than £3,500 to upgrade a home to EPC E.
The government energy white paper
43
, which is not
yet law and still in consultation, proposes a minimum
EPC of C for new rental tenancies from 2025 and all
rental tenancies from 2028. This will continue to have
exemptions for certain types of property, including if it
costs more than £10,000 to upgrade a home to EPC C
and thus the government’s expectation is that only 70%
of private rented homes will reach the new proposed
minimum within the timeframe. Currently only 46%
44
of
UK homes meet the target minimum EPC of C, with 43%
D rated and 10% rated E and below.
This consultation does not apply to shared ownership
which is classified as owner-occupied rather than
rented accommodation.
ReSI is aware of the regulatory risk posed by the
Energy White Paper and has taken action to position its
portfolio to be ahead of government legislation through
the implementation of Project D, as described in the Our
targets and progress section of this Annual Report.
The potential impact of
climate change on ReSI and
mitigation methods
In addition to the regulatory risk described above,
the Board is mindful of further risks posed by climate
change, notably in the following areas:
Overheating risk:
rising average temperatures
combined with a greater quantity and quality of
property insulation could result in homes becoming
too hot in the summer months. ReSI is aware of this
risk and will balance the need to insulate its homes
with the risk of ‘over-insulating’ them by making
property-by-property assessments as required.
Flood risk:
rising sea levels could increase the chance
of flooding in homes built near rivers and other
bodies of water. ReSI’s investment criteria for new
homes requires that acquisitions are not developed
in medium / high risk flood areas without appropriate
mitigants in place. 100% of the properties acquired
during the year met this standard.
Demand:
Following the rise in energy costs over
2022, sales teams have advised anecdotally that they
are starting to see higher levels of demand for more
energy efficient homes, with this trend expected to
increase further over time. To mitigate against this
risk, ReSI plans to upgrade the energy efficiency of its
portfolio such that it is ahead of its competitors and
proposed government legislation, as outlined in the
Our targets and progress section.
43.
The Energy White Paper – Powering our Net Zero Future, December 2020
44.
English Housing Survey, 2020 to 2021
Residential Secure Income plc
Annual Report and Accounts 2022
51
01
Strategic Report - Environmental Impact
Calculating ReSI’s
environmental impact: energy
efficiency ratings (EPCs)
At the year end date, 85% of ReSI’s portfolio was EPC
rated C or higher, up from 81% last year. This rises to
96% for ReSI’s directly-rented homes.
Just 1% of ReSI’s properties are E rated, with 100% of
directly-rented properties rated at D or above.
The
remaining E rated properties are primarily shared
ownership houses that were acquired as part of the
acquisition of older, tenanted properties from Orbit, and
Housing Manager Flats within the retirement portfolio
that are on license to a third party.
Comparison to Wider Market
Social Sector
All Tenures
ReSI's plc –
Directly Rented
ReSI's plc –
All Properties
0
20
40
60
80
100
B and above
C
26%
31%
63%
3%
3%
43%
43%
11%
31%
3%
54%
14%
1%
70%
4%
D
E and below
Average EPC Score
EPC rating of ReSI’s Homes*
C
Average UK rating
45
D
Minimum rating legally required
to let out property
E
* Representative sample of all properties assessed – 96%.
The table above evidences that the efficiency of ReSI’s
portfolio is well above the UK average. However, whilst
we are pleased with progress in this area, we recognise
that there is more work to be done.
EPC Ratings: All properties
FY 2022
FY 2021
0
20
40
60
80
100
B and above
C
31%
1%
54%
14%
30%
1%
51%
18%
D
E and below
Total properties 3,284, representatitve sample
of 96% assessed
Directly Rented EPCs
FY 2022
FY 2021
0
20
40
60
80
100
B
C
26%
70%
4%
26%
64%
10%
D
Total directly-rented properties 1,887, 100% of
properties assessed
45
45
45.
English Housing Survey, 2020-2021
52
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Environmental Impact
Our targets and progress
ReSI is committed to positioning its portfolio ahead
of the government’s legislation to prevent homes with
poor energy efficiency ratings from being rented.
This is because improving the energy efficiency of
our homes will not only reduce risk exposure to the
new proposed legislation, but we believe it will also
make the properties more attractive to potential
residents. To this end, the following steps have been
taken in FY 2022.
Project D:
After successfully ensuring that 100% of
directly-rented E rated properties were upgraded
to at least a D in FY 2021, FY 2022 saw ReSI embark
on its target to upgrade all directly-rented D rated
properties to at least a C by 2025, three years ahead of
the government’s proposal for all non-exempt rental
tenancies to be upgraded to C by 2028. This workstream
is known as Project D. During the year, 113 directly-
rented properties have been upgraded to at least a
C, represent-ing 61% of the total. The progress made
this year means that we are ahead of schedule for
completing the project. Properties have been upgraded
through a combination of retesting and retrofitting
works, such as replacing older heating systems and
fitting insulating heat jackets on water heaters.
Housing Manager Flats (HMFs):
The Housing Manager
Flats in ReSI’s retirement portfolio are on licence to a
third-party, who is responsible for the maintenance of
the properties. Nevertheless, ReSI has worked with the
counterparty to improve the efficiency of the portfolio,
evidenced by the percentage of HMFs with an EPC
rating below D dropping from 34% in FY 2021 to 25%
in FY 2022. The properties have been upgraded using
the same approach as the directly-rented units, with
ReSI funding the works despite not being responsible
for the maintenance of the properties, evidencing our
commitment to reducing carbon emissions across
the portfolio.
Orbit Portfolio:
During the year, ReSI acquired
a portfolio of older, tenanted shared ownership
properties from the Housing Association group, Orbit.
At the time of acquisition in April, 138 of the properties
did not have an EPC rating. Shared owners are not
legally required to agree to an EPC assessment being
performed on their property, so ReSI wrote to residents
explaining the benefits of getting their property EPC
rated and offering them a £50 voucher to allow the
assessment to be carried out. Since ReSI acquired the
portfolio in April, 66 (48%) of the properties with no
rating have been tested. ReSI hopes to continue to test
the remaining properties with no EPC in FY 2023.
ReSI’s approach to
sustainable investing
ReSI’s policy for acquiring new build homes is that they
must have a minimum EPC rating of a B. During FY
2022, 100% of the new build homes acquired met this
standard. Going forward, ReSI aims to increase the
proportion of new build homes that meet the Future
Homes Standard, which is expected to be implemented
by the government for all new homes by 2025.
ReSI’s preference is to acquire properties developed on
brownfield sites in order to provide affordable housing
while preserving biodiversity and enhancing green
spaces. 65% of the new build properties acquired during
the year were redevelopments of brownfield sites.
Residential Secure Income plc
Annual Report and Accounts 2022
53
01
Strategic Report - Environmental Impact
Case Study
2022 shared ownership acquisition
– Brick by Brick, Malling Close
In 2022, 15 homes on Malling Close, Croydon, were
purchased through ReSI’s registered provider of
social housing, ReSI Housing, adding to ReSI’s existing
portfolio of shared ownership homes.
Social Impact
Price to earnings ratio of 11.4x
46
:
providing local residents with an
affordable route onto the housing
ladder, in an area where outright
ownership is unaffordable for many
Rentals charged at a discount of
38%
47
to market rate
:
making monthly payments
affordable to mid to low earners
Private outdoor balconies:
increasing quality of life for
residents, with sufficient space for a
table and chair
Local green spaces:
less than a five minute walk from
South Norwood Country Park
Cycle storage provided
for residents:
enabling and encouraging
shared owners to switch from
motor vehicles to cycling - a
low environmental impact
method of transport
Environmental impact
EPC ratings of B or above:
efficient homes reduce
carbon emissions and
residents' energy bills
Mechanical Ventilation and Heat
Recovery units:
provide fresh, filtered air into
residents' homes
Solar panels
installed on the roofs:
panels convert the sun’s energy
into electricity which is used
to power the communal areas
of the building
Electric vehicle charging
points available on site:
promotes alternative, green,
methods of transport
46. Ratio of house price to residence based earnings – ONS
47. Compared with average CR0 gross rental yield. Data from Realyse - Sept 2022
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Calculating ReSI’s environmental impact:
carbon emissions
FY 2022 was the first year of a long term partnership
between ReSI and Kamma, with Kamma calculating the
Scope 1, 2 and 3 carbon emissions generated by ReSI,
as well as producing the forth-coming road to net zero
report which is expected to be published in 2023. Using
one consultant across all of ReSI’s carbon reporting
streamlines the process and ensures that a consistent
methodology is used across all carbon disclosures.
The more involved approach used by Kamma to
determine ReSI’s emissions in FY 2022 has led to some
differences when comparing to the prior year numbers.
ReSI intends to continue to use Kamma to calculate
its carbon emissions going forward, allowing more
accurate year-on-year comparisons in future years.
Emissions are broken down into three categories by the
Greenhouse Gas Protocol:
Scope 1 –
All direct emissions from the activities
of the Company or under its control. This includes
fuel combustion on site such as gas boilers and air-
conditioning leaks.
Scope 2 –
Indirect emissions from electricity
purchased and used by the Company. Emissions
are created during the production of the energy and
eventually used by the Company.
Scope 3
– All other indirect emissions from activities
of the Company, occurring from sources that it does
not own or control.
Scope 1 and 2 emissions
ReSI doesn’t have any office premises of its own and its
operations are performed by the Fund Manager, which
is part of Gresham House, and other third parties as
necessary.
Where ReSI is financially responsible for
the energy consumption of communal areas and vacant
properties within its property portfolio, the emissions
generated by these activities fall under Scope 1 and 2.
Where gas is the heating source for these emissions,
they are classified as Scope 1.
This is the case for a
small number of properties acquired vacant to be let as
shared ownership before the resident moves in. Where
the heating source is electricity, they are classified
as Scope 2. Individual property energy usage is the
responsibility of the tenants however and therefore not
considered under Scope 2.
Kamma has calculated ReSI’s Scope 1 and Scope 2
emissions using utility bills and actual kWh consumption
data for a representative sample of communal areas
and vacant properties within its portfolio. This data has
been extrapolated across 100% of the vacant properties
and communal areas in the portfolio where emissions
fall under the definition of Scope 1 and 2.
Portfolio
Total energy
consumption
(GWh)
Tonnes
CO
2
Emissions
FY 2021
FY 2022
FY 2021
FY 2022
Retirement:
communal areas
48
0.12
0.13
23.1
22.8
Retirement: vacant
properties
49
0.13
0.32
26.8
52.4
Shared ownership:
vacant properties
0.02
0.01
3.6
0.5
Total
0.27
0.46
53.5
75.7
The work performed by Kamma evidences that the
Scope 1 and 2 emissions generated by ReSI are very
small compared to the Scope 3 emissions generated
by its properties. Nonetheless, ReSI will continue
to explore methods of reducing its Scope 1 and 2
emissions going forward.
Scope 3 emissions – third party providers
ReSI is responsible for indirect emissions through
its service contracts with third party providers. The
emissions of the Fund Manager will be reported as part
of Gresham House’s 2022 annual reporting.
In FY 2022, ReSI has assessed the embodied carbon
emissions produced by its counterparties in developing
the new build units that were acquired during the year.
It is estimated that as much as 50%
50
of the whole
lifecycle carbon emissions produced by buildings come
from embodied carbon emitted in the development
process. As a result, calculating the embodied carbon
emissions produced by the Company is a crucial part of
assessing ReSI’s carbon footprint.
Scope 3 Carbon Emissions
(Tonnes CO
2
)
Embodied carbon emissions -2022
1,172
Kamma's assessment evidences that for FY 2022,
embodied carbon emissions formed a small portion
of ReSI’s total carbon emissions. This is due to ReSI
committing to acquire a relatively small number of
properties that had been under construction for a
portion of FY 2022.
48.
FY 2021 emissions restated to include additional emissions from communal areas not considered in prior year
49.
A considerably larger sample size of vacant properties was used to calculated emissions from retirement properties in FY 2022 compared to
FY 2021. As a result, the larger FY 2022 figure is a more accurate assessment than the FY 2021 figure, rather than a genuine increase in emissions
50.
arup.com/news-and-events/arup-commits-to-whole-lifecycle-carbon-assessments-for-buildings-and-withdrawal-from-fossil-fuels
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Strategic Report - Environmental Impact
Scope 3 emissions – residents and shared owners
The carbon emissions produced by ReSI’s properties are classified as Scope 3, as they are generated and paid
for by residents.
Kamma has estimated the Scope 3 operational carbon emissions generated by ReSI’s property portfolio using data
extracted from Energy Performance Certificates.
Carbon emissions from ReSI’s housing portfolio have been calculated in line with best practice standards. Where
electricity is the source of emissions, regional conversion factors based on the Distribution Network Operator (DNO)
that the property falls within have been used to convert energy usage into carbon emissions. These conversion factors
represent a rolling 12-month average for each regional DNO. Where gas is the source of the emissions, the most recent
Department for Environment, Food and Rural Affairs (DEFRA) emissions factors are used.
The conversion factors used in the FY 2022 assessment produce a more accurate figure for ReSI’s carbon emissions
than the FY 2021 assessment, which used the DEFRA 2021 conversion factor for all sources of carbon emissions. In
addition, the DEFRA 2021 conversion factor is calculated annually and therefore lags behind more recent conversion
factors. Using a more up to date conversion factor that accurately represents the decarbonising of the National Grid
has resulted in reduced carbon emissions for ReSI in FY 2022.
In addition, the prior year energy consumption figures contained “unregulated emissions” from residents, such as
usage of electronics. These have not been included in the FY 2022 analysis on the advice of Kamma, as they cannot be
controlled by ReSI.
These values are presented for 3,243 properties that ReSI had acquired at 30 September 2022 on an annualised basis,
regardless of whether ReSI owned the home for the entire period, and no adjustment is made for property void periods.
Total Scope 3 operational portfolio emissions
Total energy
consumption (GWh)
Tonnes CO
2
emissions
Emissions per annum
2020
2021
2022
2020
2021
2022
ReSI's portfolio
34.7
39.9
40.2
8,699
9,067
3,472
Emissions per property
Total energy consumption per property (kWh)
Emissions per property (tonnes CO
2
)
Emissions per annum per property
2020
2021
2022
2020
2021
2022
SO
6,860
10,371
10,383
1.5
2.2
1.6
RHP
14,041
14,646
13,060
3.5
3.4
0.9
LA
7,440
7,465
11,585
51
1.9
1.7
1.9
Total
12,832
13,248
12,402
3.2
3.0
1.1
51.
In FY 2022, Kamma determined the energy consumption of the Local Authority Portfolio by using the EPC data from units which have a
domestic EPC and extrapolating across all Local Authority units. The FY 2021 assessment used domestic and non-domestic EPC data in its
assessment, and therefore the year-on-year comparison is not like for like. Going forward, Kamma will continue to use the FY 2022 method
56
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Strategic Report - Environmental Impact
Energy consumption by energy source
52
Electricity
Consumption
Gas
Consumption
LPG
Consumption
Renewable
energy
Consumption
Total
Consumption
Energy usage per property
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
All properties (GWh)
36.7
32.5
3.1
7.6
0.1
0.2
0.0
0.0
39.9
40.2
Per property (kWh)
12,213
10,011
1,032
2,341
33
45
0.0
0.0
13,248
12,402
Emissions intensity
Emissions
intensity
53
Energy consumption of property portfolio per £ of
Gross Rental Income (GWh / £mn)
C0
2
emissions of property portfolio per £ of Gross
Rental Income
(tC0
2
/ £mn)
2021
2022
2021
2022
ReSI's portfolio
54
1.76
1.58
400
138
Total carbon emissions summary
Carbon Emissions (Tonnes CO
2
)
2020
2021
2022
Scope 1
Not reported
0
2
Scope 2
Not reported
53
76
Scope 3
8,699
9,067
4,644
Total carbon emissions
8,699
9,120
4,722
Overall, ReSI’s estimated CO
2
emissions per property has significantly reduced from FY 2021. This is due to the more
accurate methodology used by Kamma, the continued decarbonisation of the grid and work performed to improve the
efficiency of the retirement portfolio through Project D.
Despite these strong results, ReSI will continue to push forward with its sustainable investment targets in FY 2023.
52.
In FY 2022, Kamma determined the energy consumption of the Local Authority Portfolio by using the EPC data from units which have a
domestic EPC and extrapolating across all Local Authority units. The FY 2021 assessment used domestic and non-domestic EPC data in its
assessment, and therefore the year-on-year comparison is not like for like. Going forward, Kamma will continue to use the FY 2022 method
53.
Includes Scope 1, Scope 2 and operational Scope 3 emissions. Embodied carbon excluded to allow like-for-like year-on-year comparison
54.
Gross rental income used as portfolio intensity measure as it increases in proportion with Scope 1, Scope 2 and operational Scope 3 emissions,
and it is the most reliable available metric
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Strategic Report - Environmental Impact
Social Impact
ReSI seeks to provide long-term solutions to the
UK’s lack of affordable housing through a focus
on independent living with retirement rentals and
affordable home-ownership.
Our purpose is to deliver affordable, high quality, safe
homes with great customer service and long-term
stability of tenure for residents. We achieve this through
meeting demand from housing developers (housing
associations, local authorities and private developers)
for long-term investment partners to accelerate the
development of socially and economically beneficial
affordable housing.
To confirm that our intended social impact outcomes
are being experienced by residents, ReSI conducted its
annual survey of its shared ownership and retirement
rental residents, the results of which are referenced in
this Annual Report.
The Good Economy report
100% of ReSI’s properties have been included in an
impact assessment performed by The Good Economy
(TGE), which aims to quantify ReSI’s social impact.
The key findings from the report are summarised
below; the entire report is available on ReSI’s website
(https://greshamhouse.com/real-assets/real-estate-
investment/residential-secure-income-plc/).
The report includes TGE’s assessment of ReSI against
its new framework, the Equity Impact Project (EIP),
for the first time. The EIP is helping to develop a set
of globally aligned standards for equity investments
in social and affordable housing. ReSI is one of the
first funds to report against the standard, having
contributed to the framework’s development through
participating in workshops with TGE.
Social outcomes
By raising capital to invest in new and existing social
and affordable housing, ReSI makes homes available
to people who might otherwise be excluded by open
market mechanisms. TGE's analysis focused on
five areas under the direct control or influence of
ReSI. These are:
Address Social
Need
Increase
Supply
Provide Affordability
and Value for Money
Improve Energy
Efficiency
Build Quality
Partnerships
Social Impact
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The diagram below summarises how ReSI’s activities contribute to social outcomes
The actions
that ReSI
is taking
Raising capital from
investors with aligned
interests
Building relations with
Registered Providers
(RPs) and other
strategic partners
Financing of new
affordable housing
development
Acquisition of
tenanted shared
ownership properties
from housing
associations
Providing in-house
property
management services
through
RPML
Development of a
net zero strategy
in partnership with
an environmental
consultant
The changes that
directly impact
peoples lives
Shared
Ownership Outcomes
Improved stability through
security of tenure for those
that cannot afford to buy in
the open market
Reduction in housing
expenditure caused by
below market rate rents
Retirement
Rental Outcomes
Greater independence
Alleviation of loneliness
and improvement in
resident health
Equity released
for other needs
Local Authority
Housing Outcomes
Improved tenant wellbeing
Value for money for
the public purse
Reduces Energy Usage
Reduced energy
consumption from residents
Lower energy
bills for residents
Source: The Good Economy
OUTPUTS
OUTCOMES
ACTIVITIES
The direct result
of the actions
of ReSI
Shared Ownership Outputs
Door opened
to home ownership
More affordable housing
brought into the market
Households have lifetime
security of tenure
High quality property
management service
provided by RPML
Retirement Rental Outputs
Retired households living with
peers and with onsite support
Retired households
housed with long-term
security of tenure
High quality property
management service
provided by RPML
Local Authority
Housing Outputs
Fewer people homeless
Greater stability
of accommodation
Reduction in local authority
use of emergency hotels
Improvement in EPCs
Retrofit works across all
housing types, where needed
ACTIVITIES
OUTPUT
OUTCOMES
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Strategic Report - Social Impact
Shared Ownership
ReSI acquires shared ownership homes from
developers and housing associations. Shared
ownership aims to improve access to home ownership
for households that cannot afford to purchase a home
outright through its part-buy, part-rent model, with
subsidised rents and lower deposit requirements.
As part of ReSI’s aim to be a best-in-class provider
of shared ownership housing and drive best practice
across the sector, its Shared Ownership Customer
Charter and a Shared Ownership Environmental Charter
have been developed. The charters are unique in the
shared ownership space and provide benefits to both
residents and investors.
Our aim is for these benefits to be shared by not just
our residents but those in the wider c.200,000 shared
ownership homes across the sector, and we have
been pleased to see that many of the measures in the
Charters have been incorporated by Homes England
into the new form of shared ownership lease.
Address social need
House prices in England are on average 9 times greater
than the average person’s earnings, making the average
home unaffordable to the average worker
55
. TGE has
found that 68% of ReSI’s shared ownership homes are
located in local authorities with house price to earnings
ratios above this average, demonstrating ReSI’s
commitment to delivering affordable homes to the
areas that need them most.
Whilst affordability is most constrained in areas with an
above average price to income ratio, the average worker
is unable to afford the average property in regions
where the ratio is above 5 times. Any local authority
with a ratio above this level has a need for affordable
housing, and 100% of ReSI’s properties are located in
such locations.
How has ReSI performed against TGE’s impact objectives?
Address
Social Need
Provide Affordability
and Value for Money
Build Quality
Partnerships
Increase
Supply
Objective:
Making home
ownership accessible
in areas with low
affordability ratios
Addressing barriers to
home ownership for
low- and middle-
income households
Providing quality
homes and
management
Bringing more homes
into the affordable
housing sector
ReSI 2022 Results:
100% of properties in
local authorities
where the average
worker cannot afford
the average home
96% of properties
affordable to local
households when
assessed through a
person-centred
affordability test
Increased the number
of properties
managed by ReSI’s in
house property
manager, RPML
34% of FY 2022
investment was into
new build shared
ownership homes
55.
ONS – House price to workplace-based earnings ratio, 2021
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Strategic Report - Social Impact
Provide affordability and
value for money
When assessed through TGE’s person centred
affordability calculator, 96% of ReSI’s shared ownership
properties were found to be affordable to local residents
at the green and amber level. Under TGE’s definition,
green affordability and amber affordability is where the
resident is spending less than 33% and 40% respectively
of their net income on housing costs. This level of
affordability is achieved as shared ownership rents are
charged on residual equity at 2.75%, representing a
typical saving compared to market rent of c.30%
56
.
ReSI demonstrated its commitment to improving
affordability for residents in its acquisition of tenanted
shared ownership homes from Orbit Group, where 32 of
the residents were initially on leases with a contractual
rent increase of RPI +2.0%, however ReSI took the
decision to cap the rent increase at RPI + 0.5%. This helps
to ensure that rents remain affordable for residents and
brings the properties in line with the rest of the portfolio.
In addition, the average remaining lease term for Orbit's
residents at the point of acquisition was 95 years. Short
lease terms can negatively impact the value of a shared
owner’s home, and it can become difficult to mortgage
properties on lease terms of less than 75 years. As a
result, ReSI offered all residents the opportunity to
extend their lease term to a minimum of 125 years, for a
nominal fee of £1.
“
Shared ownership is a great way to get
onto the housing ladder one step at a
time, while paying a fair rent
”
Shared Ownership -
Who benefits?
Our shared ownership residents:
previous housing tenure
3% Other
56.
Based on a typical UK rental yield of 4.0%
In addition, 78% of residents said that they would
have be en unable to buy a property had it not been
for shared ownership, evidencing the social need for
ReSI’s properties
“
It gives you the opportunity to own your
own home or part of your own home,
giving you security and peace of mind.
”
80% of shared owners
are satisfied that their home is the same or
better value than their previous residence
17% Living with family or friends
45%
Renting privately or from a Housing Association
35% (Alternative form of home ownership)
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Build quality partnerships
ReSI has increased the proportion of properties that
are managed by our in-house property manager, ReSI
Property Management Limited (RPML). Having control
over the property management services provided
has improved the experience for residents, with 87%
of residents in a property managed by RPML saying
they are happy or not dissatisfied with their property
management service.
Residents in a property managed by RPML saying
they are happy with their property
87%
Increase supply
ReSI continued to increase the supply of affordable
housing, with 34% of capital spend in the year used to
fund new build affordable housing.
ReSI invested the majority of its remaining capital
spend for the year into acquiring a portfolio of tenanted
shared ownership homes from the not-for-profit
Housing Association group, Orbit.
ReSI’s investment provided Orbit with a long-term
equity injection, which not only allows the not-for-profit
to meet rising demand for additional affordable homes,
but also to upgrade its existing housing stock. The
proposed legal requirement for landlords to ensure that
newly let rented homes have an EPC rating of C or better
by 2025 has resulted in an elevated level of demand
from Housing Associations for the long-term equity
provided through acquisitions of this type.
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How has ReSI performed against TGE’s impact objectives?
Address
Social Need
Provide Affordability
and Value for Money
Build Quality
Partnerships
Increase
Supply
Objective:
Providing
accommodation
tailored to the over 55s
to allow independent
living
Providing rental homes
that are affordable to
the over 55s
Supporting residents
with a high quality
property management
service tailored to the
over 55s
Offering homes to
meet the needs of the
demographic
ReSI 2022 Results:
Retirement rentals
survey analysis:
75% said their
retirement home is as
good or better than
their previous
residence.
73% had made new
friends since moving.
In 88% said that their
retirement home is at
least as stable as their
previous residence
Approximately 27% of
residents making
rental payments using
Housing Benefit
Rent increases for
retirees capped below
inflation at 6%
When asked on a scale
of 1-10 how likely they
would be to
recommend ReSI’s in
house retirement
property manager, My
Future Living, to a
friend, 79% of
residents responded
with 7 or higher
ReSI primarily acquired
its retirement portfolio
from other investors
between 2017-2019
Retirement
ReSI acquires homes which provide rented
accommodation for retired residents who do not require
significant on-site care. This tenure mainly provides
benefits for people over 55. It allows them to maintain
their independence and avoid care homes, frees up
equity from the sale of previous homes, and fosters
a sense of community by offering shared spaces and
communal activities among residents.
While residents do not require care services, they
benefit from having an on-site development manager
who can be contacted via an electronic emergency
pull cord in each apartment, as well as an offsite
tenancy welfare team provided by ReSI Property
Management Ltd.
Address social need
Providing specialist retirement accommodation
where residents can live amongst their peers may
have contributed to reduced levels of loneliness being
experienced by residents, demonstrated by 73% of
survey respondents saying they had made new friends
since they moved into their retirement property. The
reduced levels of loneliness, combined with stability
provided by the assured tenancies that 85% of
residents benefit from, has contributed to a reduced
mental health burden for some residents, with 54%
of residents saying their mental health has improved
since moving in.
Residents reporting improved mental health
54%
Residents who have made new friends
since moving in
73%
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Providing affordability and
value for money
The rents charged on ReSI’s retirement properties
are, on average, between the lower quartile and the
median of market rents when compared to equivalent
properties in the same local authority. Rents paid by
ReSI’s retirement residents include service charge,
providing residents with an onsite warden, garden
maintenance and a communal living area. When the
cost of the service charge is removed from the rent
level, the rents on ReSI’s retirement properties are,
on average, less than the lower quartile market rents
when compared to equivalent properties in the same
local authority.
Rents set at this level ensure that a portion of the
properties are accessible to residents on lower
incomes, with 27% of residents funding rent payments
through housing benefit and 60% funding payments
through their pension income.
Contractually, retirement rents increase at RPI, with
a cap at 6.0%. ReSI has chosen to apply this cap to
all retirement properties, despite residents not on
Assured Tenancies being eligible for higher increases.
This evidences ReSI's commitment to ensuring the
properties remain affordable to residents.
This rent cap has generated a total annualised saving of
£164k to ReSI’s retirement residents this financial year.
In addition to capping all rent increases at 6.0%, where
residents are in financial difficulty, ReSI will offer them
rent freezes or reduced rent increases where possible.
The rent freezes and reduced rent increases offered by
ReSI have generated a total annualised saving of £86k,
taking the total annualised saving from ReSI capping
rents to £250k.
Where residents approach My Future Living with
affordability concerns, their dedicated welfare team will
work with them to find a bespoke affordability solution.
This approach includes checking residents’ eligibility
for welfare, helping residents cut their spending,
capping rent increases and offering residents cheaper
properties within the development.
Build quality partnerships
ReSI’s retirement portfolio is managed in house by
ReSI Property Management Limited (trading as My
Future Living), a Gresham House owned provider. My
Future Living has continued to provide a high quality
service to residents.
My Future Living has its own in-house Tenancy Welfare
Team that has continued to delivery positive outcomes
for residents this year. It is the team’s responsibility
to make note of any potential personal issues (such
as early signs of dementia) and to communicate with
families about the residents’ welfare.
My Future Living has continued the roll out of its
new system, Fixflo, which allows residents to report
maintenance requirement electronically, with the aim of
improving efficiency and response times.
Residents who responded with 7 or above when
asked how likely they are to recommend My Future
Living to a friend*
79%
Residents who are happy or not dissatisfied with
the property management services provided by My
Future Living
90%
Increasing supply
ReSI primarily acquired its retirement portfolio from
other investors between 2017-2019. This investment
kept the homes in the retirement sector, however
as ReSI has not acquired a significant number of
new homes in the year, TGE considers that ReSI is
bringing a low level of additionality to the sector
through this tenure.
“
The tenants that TGE have spoken to have
been positive about the quality of housing
management that they have received.
”
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Local Authority
ReSI owns two sites of temporary accommodation at
Eaton Green Court and Wesley House, which are leased
to the local authority, Luton Borough Council. Luton
Borough Council uses these homes to house individuals
and families who are at risk of homelessness.
Local authorities in England have a duty to secure
accommodation for unintentionally homeless
households and provide support which facilitates them
securing long-term stable accommodation.
Luton has one of the highest levels of homelessness
in the UK, with one in every 66 people experiencing
homelessness according to a report by the charity
Shelter. As a result, Luton Borough Council is under
continual pressure to meet the housing needs of
homeless people.
Temporary accommodation is a crucial component
of Luton Borough Council’s homelessness strategy,
and the homes leased to them by ReSI form a
significant proportion of their available housing stock
under this tenure.
By providing Luton Borough Council with finance
to offer 289 temporary accommodation homes,
ReSI has helped the local authority to eliminate
the use of bed and breakfast accommodation for
homeless households.
Temporary accommodation is not only less expensive
than bed and breakfast accommodation for local
authorities, but it also more stable for residents. Luton
Borough Council offers residents additional services
such as help with CV writing and mental health support,
with the aim of helping residents escaping the viscous
cycle of homelessness.
The nature of leases on the temporary accommodation
buildings owned by ReSI are such that the management
of the building is the lessee’s responsibility. As
freeholder, ReSI’s responsibilities are restricted to
insuring the buildings and repairs and maintenance of
some communal services, such as the lifts, common
areas and smoke detectors. ReSI’s representatives visit
the buildings at least once a month, to check on the
upkeep of the areas for which it is responsible.
Although safeguarding is the responsibility of the
lessee, ReSI ensures that any safeguarding issues
picked up during site visits are reported to the relevant
property manager.
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65
Cost of living
The increases in the costs of energy, interest rates
and inflation over that past year has resulted in an
increase to the cost of living for everyone. Whilst it
has not been possible to insulate our residents from
all cost increases, the steps ReSI has taken alongside
the protection offered by the shared ownership model
have ensured that residents are protected from some
of the cost increases that someone renting or owning
the average UK property on the open market may
have experienced.
Energy bills
For many residents, the most significant cost increase
this year has been rising energy bills, with the cost
of energy having increased by 64% in the 12 months
to October 2022
57
and a further increase in the price
cap coming into force in April 2023, taking the annual
cost of energy to £3,000. However, ReSI’s properties
are considerably more energy efficient than the UK
average, with the average shared ownership property
rated EPC B and the average retirement property
rated EPC C. This energy efficiency means that whilst
the increase in energy bills has been significant for
our residents, it has been considerably less than for
someone living in the average UK property, which has an
EPC rating of D
58
.
TGE found that a resident living in a property with an
EPC rating of B would save £460 p.a. on their energy
bills compared to an EPC D rated property in March
2021, with this saving reducing to £173 p.a. for a C rated
property. When this saving is scaled up by the increase
in the energy price cap coming into force in April 2023,
it increases to £1,213 p.a. for the B rated properties and
£456 p.a. for the C rated properties
59
.
Tenure
Annual cost of
energy (£)
Increase
March
2022
April
2023
£
%
Property with
efficiency of average
for ReSI
shared
ownership
portfolio
–
EPC B
761
1,787
1,027
135%
Property with
efficiency of average
for ReSI
retirement
rental
portfolio -
EPC C
1,083
2,544
1,461
135%
Equivalent property
with UK average
efficiency –
EPC D
1,277
3,000
1,723
135%
Tenure
Saving compared
to average UK
property
(EPC D)
at the energy
price cap as of
April 2023
£
%
Property with efficiency of average for
ReSI shared ownership portfolio -
EPC B
1,213
40%
Property with efficiency of average for
ReSI retirement portfolio -
EPC C
456
15%
Rent increases
Retirement rents increase contractually with RPI, with
a cap at 6.0%. ReSI has chosen to apply this cap to all
retirement properties, and with RPI reaching 12.6% in
September
60
, residents have benefited significantly
from this. The total annualised saving generated
by ReSI capping retirement rent increases in the
year was £250k.
Shared ownership rents increased contractually by
5.4% (RPI + 0.5%) in April of this year. Rents will not
increase again until April 2023, where contractually,
they will increase by September’s RPI + 0.5%.
57.
Comparison of Price cap at October 2021 versus October 2022 - https://www.energyhelpline.com/help/the-history-of-ofgems-
energy-price-cap
58.
English Housing Survey 2020 to 2021
59.
Saving on energy bills assumes household energy consumption equal to the level used to calculate the energy price cap headline figure. Actual
saving will vary dependent on the amount of energy consumed by the resident
60.
ons.gov.uk/economy/inflationandpriceindices
66
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Social Impact
61.
bbc.co.uk/news/business-63144506
62.
Money Supermarket – 22 November 2022
63.
Shared Ownership Assumptions: OMV £293k; First Tranche Sale: 25%; Deposit: 10%; Mortgage term: 25 years; initial interest 3.0%; refinanced
interest 5.3%; Rents: 2.75%; Service charge: £1,500 p.a; EPC B
64.
2022 energy bills as of March 2022 price cap. 2023 energy bills as of April 2023 price cap
65.
Based on NHF announcement that they expect the majority of Housing Associations to be applying a 7% cap to shared ownership rent
increases in 2023: https://www.housing.org.uk/news-and-blogs/news/rent-cap-press-statement/
66.
Outright owner assumptions; OMV: £293k; Mortgage LTV 90%; initial interest 3.0%; refinanced interest 5.3%; EPC D
67.
Rental Assumptions - OMV: £293k; Rental Yield: 4.0%; EPC D
68.
Savills – Affordable rents capped, but private renters left behind – November 2022
The government announced as part of the 2022
Autumn Statement that it will apply a 7% cap to social
housing rent increases for 2023/24. Whilst there is no
requirement to cap shared ownership rents, both the
National Housing Federation (NHF) and G15, the group of
London’s largest Housing Associations, have stated that
that they expect the majority of Housing Associations
and all G15 members to be applying the 7% rent cap to
their shared ownership portfolios in 2023/24.
Mortgage costs
2022 has seen interest rates rise significantly in the UK,
with the average cost of a two-year fixed rate mortgage
to surpassing 6%
61
in October. Interest rates have come
down since then, with the best widely available rate on
an 80% LTV 2-year fixed rate mortgage currently at
5.3%
62
. The majority of our shared ownership residents
are on fixed rate mortgages and will therefore be
protected from rate rises until their fixed term expires.
For residents who’s fixed term has expired, as shared
owners only own a portion of their home, the impact
of increased mortgage costs is significantly reduced
compared to someone who owns outright.
Cost-of-living: Financial impact
on our residents
Shared owners
To assess the financial impact of these market forces
on our shared ownership residents, we have quantified
the cost increases experienced by an average shared
ownership resident. The table below shows
average
shared ownership residents who are refinancing their
mortgage at today’s rates can expect to see an increase
in their housing costs and energy bills of 21% compared
to April 2022, whilst residents with mortgage rates
that are fixed will see their costs increase by 13%. ReSI
acknowledges that whilst a rise of up to 21% in housing
costs and energy bills represents a significant financial
challenge for many of our residents, this increase is
below the increase that an average renter/outright
owner can expect to experience.
We will work with residents who are struggling to afford
their housing costs and can offer them the option
to reverse staircase. In addition, we will encourage
residents to reach out to their mortgage broker to
ensure they get the most appropriate mortgage terms
for their financial circumstances.
2022
2023
Increase
%
Typical ReSI Shared Ownership
Resident refinancing their mortgage
at today's rates
63
Rent and service charge
7,543
8,071
528
7%
Mortgage Costs
3,786
4,819
1,033
27%
Energy Bills
64
761
1,787
1,026
135%
Total
12,090
14,678
2,588
21%
Typical ReSI Shared Ownership
Resident with fixed rate mortgage
65
Rent and service charge
7,543
8,071
528
7%
66
Mortgage Costs
3,786
3,786
0
0%
Energy Bills
761
1,787
1,027
135%
Total
12,090
13,644
1,555
13%
Average UK outright owner
66
Mortgage Costs
15,144
19,277
4,133
27%
Energy Bills
1,277
3,000
1,723
135%
Total
16,421
22,277
5,856
36%
Average UK rental accommodation
67
Housing Costs
11,720
13,126
1,406
12%
68
Energy Bills
1,277
3,000
1,723
135%
Total
12,997
16,126
3,129
24%
Residential Secure Income plc
Annual Report and Accounts 2022
67
01
Strategic Report - Social Impact
Retirement residents
For our retirement residents, capping rent increases at 6.0% and living in a property that is more efficient than the UK
average means that cost increases for residents are lower than if they were renting on the open market.
The assessment shows that although retirement residents can expect to see their costs increase significantly in 2023,
the increase will be 29% less than the increase that they would experience if they were renting the equivalent property
(with an EPC rating of D, the UK average) on the open market.
In addition, the government announced as part of the 2022 Autumn statement that the state pension and all
HMRC and Department for Work and Pensions benefits will rise with CPI at 10.1%, a rise well above the capped rent
increase of 6.0%.
Demand for shared ownership in the current economic climate
Rising Interest rates across the world have made the ambition of homeownership more expensive for all first time
buyers, however the impact is less severe on shared owners compared to those who own outright.
This is because, as shared owners only own a portion of their home, the size of the mortgage required to purchase their
equity stake is typically much lower than someone buying a property outright.
Whilst the rent paid by shared owners on the portion of the property that they do not own will increase significantly
in 2023, even if the full inflationary increase of September RPI + 0.5% (13.1%) is applied, this increase is considerably
lower than the 40% increase
73
in monthly payments that will be felt by outright owners as a result of a 3.0% increase in
mortgage rates. The higher interest rates go, the more pronounced this saving under shared ownership becomes.
With outright sale affordability worsening at a faster rate than shared ownership, and with help to buy coming to an end
in 2022, it is expected that shared ownership will become the only affordable route onto the housing ladder for many
higher income residents.
In addition, demand for shared ownership housing far outstrips supply, with the tenure currently accounting for
20,000 of the 400,000 annual first time buyer sales in the UK, despite the tenure having the potential to help 4.4 million
households
74
onto the housing ladder. This supply and demand imbalance means that the tenure is likely to be able to
withstand an overall reduction in the number of first time buyers in the UK.
There will be some residents who are no longer able to afford shared ownership in the current economic climate,
however it is expected that the new market of higher income residents, and the extent to which demand for shared
ownership housing outstrips supply, will keep demand for the tenure strong, despite a worsening affordability outlook.
69.
Retirement Assumptions: Rent £800pcm; Rent increase 6%; EPC C
70.
2022 energy bills as of March 2022 price cap. 2023 energy bills as of April 2023 price cap
71.
Private Rental Assumptions: Rent £800pcm; EPC D
72.
Savills – Affordable rents capped, but private renters left behind – November 2022
73.
Metro Finance – Shared Ownership – Where are we heading?
74.
Gresham House calculation
2022
2023
Increase
%
ReSI Retirement resident
69
Rent
9,600
10,176
576
6%
Energy Bills
70
1,083
2,544
1,461
135%
Total
10,683
12,720
2,037
19%
Equivalent average private
rental property
71
Rent
9,600
10,752
1,152
12%
72
Energy Bills
1,277
3,000
1,723
135%
Total
10,877
13,752
2,875
26%
68
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Social Impact
Governance and ethics
The Directors and Fund Manager (and the broader
Gresham House group) seek to embed effective
corporate governance and a focus on ethics in all of the
Company’s operations.
The Board conducts an annual evaluation of its
governance and ethics operations, covering board
effectiveness, audit committee effectiveness,
effectiveness of the Chairman and review of director
self-appraisals. Alongside this annual evaluation,
ReSI’s governance and ethics policies are reviewed and
renewed; these policies cover anti-money laundering,
anti-bribery, conflicts of interest, diversity, inside
information, disclosure, non-audit services, third party
benefits, share dealing and whistleblowing. Many of
these policies cover, not only the Board, but also ReSI’s
suppliers and contractors.
ReSI’s Board is an entirely independent board and
is tasked with monitoring the Fund Manager’s
performance as an AIFM. The Board of ReSI comprises
four non-executive directors, each appointed for the
skillsets and experience they could bring to ReSI. Each
director is entitled to compensation that is linked to
ReSI’s net asset value, ensuring a long-term alignment
of interests and in accordance with REIT best practice.
By way of additional governance and ethics oversight,
for acquisitions of regulated housing tenures, such
as shared ownership, which are completed through
ReSI’s wholly owned subsidiary, ReSI Housing, which is
registered with the Regulator of Social Housing (RSH)
as a for-profit Registered Provider, ReSI’s activities are
subject to the oversight of the RSH and the oversight of
the independent non-executive directors on the Board
of ReSI Housing.
The RSH regulatory framework is designed to ensure
good governance, financial viability, minimum
maintenance and environmental standards, and
protection of residents’ welfare, thus supporting ReSI’s
goal of maximising social benefit.
ReSI Housing has a suite of governance policies that are
independently reviewed annually to keep ReSI Housing
abreast of regulatory developments and changes
in best practice. These policies cover structural
governance items such as conflicts of interest,
succession and independence governance, fraud, anti-
money laundering, risk management and also asset
management items such as tenancies, affordability and
anti-social behaviour.
Importantly, ReSI Housing’s governance policies
embed a regulatory protection that affords non-
executive directors enhanced voting powers and a
veto over any action that threatens ReSI Housing’s
compliance with the RSH’s regulatory standards. As at
the date of this Annual Report, ReSI Housing’s non-
executive directors are:
David Orr CBE, former Chief Executive of the National
Housing Federation, and
Gillian Rowley, former Head of Private Finance at the
Homes & Communities Agency.
More information on the ReSI Housing board can be
found on page 94.
Conflict of Interest
Each of ReSI, ReSI Housing and the Fund Manager has a
conflicts of interest in policy maintained in accordance
with the applicable best practice.
All of the Directors of the Company are independent
of the Fund Manager and the enhanced voting powers
of ReSI Housing non-executive directors are noted
above, both of which are designed to enhance good
governance and mitigate conflicts of intertest.
The Company’s conflicts of interest policy reinforces
the obligation on each Director to avoid a situation
in which he or she has, or can have, a direct or
indirect interest that conflicts, or may conflict,
with the interests of the Company and to exercise
independent judgement.
Each Director has a duty to declare an interest in a
proposed transaction and an obligation to declare an
interest in an existing transaction.
If a Director has a potential conflict of interest between
his duties to the Company and his private interests or
other obligations owed to third parties on any matter,
the relevant Director will disclose his conflict of
interest to the rest of the Board, not participate in any
discussion by the Board in relation to such matter and
not vote on any resolution in respect of such matter.
Governance
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Annual Report and Accounts 2022
69
01
Strategic Report
Board culture
Each year the Board conducts an annual evaluation of
its governance and ethics operations. This evaluation
covers board effectiveness, audit committee
effectiveness, effectiveness of the chairman and
director self-appraisals, with the aim of setting focus
areas and key priorities for the year coming.
This discussion of board effectiveness prioritises a
discussion of the Board’s role, dynamics and culture,
ensuring these develop as the Company matures.
It is the responsibility of the Chairman to set the
tone and culture of meetings of Directors. At Board
meetings, ReSI promotes a collegiate discussion
involving all non-executive directors and the Fund
Manager, ensuring the skills and experience of all Board
attendees are leveraged.
This leveraging of skills and experience is also a key
focus of the ReSI Housing Board.
Board diversity
Diversity is an important consideration in ensuring that
the Board and its committees have the right balance
of skills, experience, independence and knowledge
necessary to discharge their responsibilities. The
ReSI plc Board is composed solely of non-executive
Directors and has 25% female representation (three
male directors and one female director).
The ReSI Housing Board contains two non-executive
directors that are independent of the Fund Manager,
(with 50% female representation), with remaining
directors being fund manager personnel.
The Board’s approach to the appointment of non-
executive Directors is based on its belief in the benefits
of having a diverse range of experience, skills, length
of service and backgrounds. The Board therefore
continues to consider that it would be inappropriate
to set a target and will always appoint the best person
for the job based on merit, and will not discriminate on
the grounds of gender, race, ethnicity, religion, sexual
orientation, age, physical ability or social background.
The right blend of perspective is critical to ensuring an
effective Board and successful company.
Board information
It is the responsibility of Company Secretary and the
Fund Manager to ensure that the Board of ReSI is kept
abreast of developments with respect to the Company’s
operations and business and receives timely, entire
board packs for review at each meeting of Directors.
Standing items at each meeting of ReSI’s Directors
include the following: strategic update, review of
risk register, portfolio performance, pipeline report,
management and year-end accounts, debt covenant
reporting, governance and approved minutes of
ReSI’s registered provider subsidiary, ReSI Housing.
In addition, reports of the Company Secretary,
Depositary and Registrar are also tabled for discussion.
Extraordinary items will include review of service
providers, updates to governance and other company
policies and such other ad hoc matters as arise
from time to time.
Such materials, together with a free, open discussion
with the Fund Manager and Company Secretary,
facilitate an environment in which the directors
can fulfil their duties in a manner fitting for ReSI’s
governance and ethics environment.
The Fund Manager has agreed a similar approach with
the directors of ReSI Housing. Standing agenda items
include the following: strategic update, pipeline report,
property performance and compliance, management
and year-end accounts, review of business plan and
stress testing, review of risk register and a regulatory
update.
Extraordinary items arise for ReSI Housing
too and include review of property managers, review of
customer satisfaction surveys, updates to governance
and other company policies and such other ad hoc
matters as arise from time to time.
Risk and compliance
ReSI has robust risk and compliance management
policies and procedures, as outlined in the
risk management and governance sections on
pages 90 to 110.
In addition, for acquisitions of regulated
housing tenures, ReSI Housing has its own risk
management framework, risk appetite and set of
governance policies.
70
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Governance
Commitment to sustainability
ReSI is committed to investing in a sustainable manner
in order to generate long-term returns. We have this year
worked with The Good Economy, and Kamma Data to
quantify our impact (see pages 48 to 68).
In addition, the Fund Manager adheres to Gresham
House’s sustainability investment framework and shared
ownership investments, through ReSI Housing, benefit
from the Fund Manager’s proprietary shared ownership
customer charter and environmental charter, under
which the Group seeks to offer leases of 250+ years and
not charge event fees. The Fund Manager created these
charters in 2020 to formalise its existing processes and
practices that go above and beyond the requirements
of the model for shared ownership leases, ultimately
benefitting the Group’s shared owners and comprising
part of the Company’s social impact. These charters are
updated annually to enable the Fund Manager to remain
abreast of social housing developments. The Fund
Manager seeks to be a market leader in creating a new era
of aspirational shared ownership, and in turn help expand
home ownership.
Residential Secure Income plc
Annual Report and Accounts 2022
71
01
Strategic Report - Governance
This section of the Annual Report covers the Board’s considerations and activities in discharging their duties under
s.172(1) of the Companies Act 2006 to promote the success of the Company for the benefit of members as a whole.
This statement includes consideration of the likely consequences of the decisions of the Board in the longer term and
how the Board has taken wider stakeholders’ needs into account.
The Board is ultimately responsible for all stakeholder engagement. However, as an externally managed investment
company, ReSI does not have any employees and engages third party providers as required including for fund
management, secretarial, administration, broking, depositary and banking services. All these service providers
help the Board fulfil its responsibility to engage with stakeholders and it should be noted are also, in-turn,
stakeholders themselves.
In addition to promoting the success of the Company for the benefit of members as a whole, section 172 of the
Companies Act 2006 requires the Board to have regard to the following:
Section 172 element
ReSI comment
the long term (s.172(1)(a))
ReSI’s investment objective is to establish a residential portfolio benefitting
from inflation-linked income for the long term. Alongside this intention to
hold for the long-term, ReSI has used leverage on a long-term basis – across
the Group, ReSI has an average debt maturity of 22 years.
the interests of ReSI’s employees (s.172(1)(b))
As an externally managed AIF, this is not applicable to ReSI.
relationships with suppliers, customers
and others (s.172(1)(c))
See the discussion regarding the following major stakeholders – “Fund
Manager”, “Property Managers & Developers”, ”“Key Service Providers”, “Grant
providers” and “Residents”.
the community and the environment (s.172(1)(d))
All investment decisions taken by the Fund Manager on behalf of ReSI are
taken in accordance with its sustainable investment framework.
Moreover, shared ownership investments, through ReSI Housing, benefit
from the Fund Manager’s proprietary shared ownership customer charter and
environmental charter, under which the Group seeks to offer leases of 250+
years and not charge event fees.
The Fund Manager created these charters in 2020 to formalise its existing
process and practices that go above and beyond the requirements of the
model for shared ownership lease, ultimately benefitting the Group’s shared
owners and comprising part of the Company’s social impact.
high standards of business conduct (s.172(1)(e))
See the section titled “Governance and ethics”.
the need to act fairly between members (s.172(1)(f))
See the discussion regarding “Shareholders” as a major stakeholder.
Section 172 Statement and Stakeholder Engagement
72
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report
The Board has identified the following major stakeholders in the Company’s business.
On an ongoing basis the Board and Fund Manager monitor both the potential and actual impacts of decisions made
upon these major stakeholders.
Major Stakeholder
Why is it important to engage?
How have the Directors and Fund Manager engaged?
Shareholders
As a public company listed on the London
Stock Exchange, ReSI is subject to the
Listing Rules and the Disclosure Guidance
and Transparency Rules.
The Listing Rules include a listing principle
that a listed company must ensure that it
treats all holders of the same class of shares
that are in the same position equally in
respect of the rights attaching to such
shares. With the assistance of regular
discussions with and the formal advice of
ReSI’s legal advisors, company secretary and
corporate broker, the Board abides by the
Listing Rules at all times. For information on
shareholder engagement please see the
Governance section of this Annual Report
which contains further information on
shareholder engagement.
The Fund Manager along with ReSI’s corporate broker
regularly meets with ReSI’s shareholders to provide
corporate updates and to foster regular dialogue.
The Board encourages shareholders to attend and
participate in ReSI’s Annual General Meeting (AGM). ReSI
values any feedback and questions it may receive from
shareholders ahead of and during the AGM.
ReSI’s Annual and Interim reports are made available on
ReSI’s website and then are circulated to shareholders as
requested, providing shareholders with an in depth
understanding of the Company’s financial position and
portfolio.
ReSI also make available RNS and other business and market
updates on ReSI’s website.
Residents
ReSI’s residents are integral to the business
model. The importance of engaging with
residents cannot be understated; strong
relationships have been shown to improve
tenant retention, rent collection rates,
overall tenant satisfaction and ReSI’s impact
on the community.
ReSI is committed to accelerating the
development of socially and economically
beneficial new housing to make a
meaningful contribution to the UK housing
shortage. ReSI’s homes deliver a social
benefit through providing wellbeing
improvements to residents (e.g. by providing
the security of a home for life), fiscal savings
(e.g. lower costs for housing those at risk of
homelessness and savings to the NHS), and
wider economic benefits (e.g. by enabling
people to live and find work in otherwise
unaffordable parts of the country). The
social impact delivered by ReSI is reported
on page 58
ReSI works with trusted partners to manage its relationships
with all residents on all tenures. ReSI’s property managers are
in regular contact with residents, and residents are also
provided with contact details and are able to contact
dedicated teams to discuss any problem that they might have.
The Fund Manager reviews detailed affordability
assessments before a resident is selected, and throughout
the lease term a close relationship is maintained through
ongoing engagement. The Fund Manager expects, and
monitors, the property managers to encourage feedback
from residents including suggestions for service
improvement and to learn from any complaints about service
delivery. The safety and wellbeing of residents is of the
highest priority and when making an investment the Fund
Manager is rigorous in using the skills and expertise of its
property team to provide high quality homes and identify and
mitigate all risks to residents.
In addition, the Fund Manaer conducts an annual satisfaction
survey for its retirement and shared ownership residents,
affording these residents an opportunity to comment on the
services received.
The Fund Manager considers residents’ changing needs and
uses their expertise to assist them. ReSI’s lifecycle plans for
accommodation includes a conservative approach to the
long-term costs of ownership to ensure that the standard of
quality is maintained or improved throughout the life of the
property. At the same time, the Fund Manager only works
with well-regarded and established partners to ensure all
routine and other maintenance is undertaken promptly and
properly.
Residential Secure Income plc
Annual Report and Accounts 2022
73
01
Strategic Report - Section 172 Statement and Stakeholder Engagement
Major Stakeholder
Why is it important to engage?
How have the Directors and Fund Manager engaged?
Fund Manager
The most significant service provider for
ReSI’s long-term success is the Fund
Manager, who has been engaged as ReSI’s
alternative investment fund manager since
ReSI’s initial public offer.
The Fund Manager performs investment
management services to ReSI in accordance
with the Alternative Investment Fund
Managers Directive 2011/61/EU as
implemented into UK law by the Alternative
Investment Fund Managers Regulations 2013
and the Fund chapter of the FCA Handbook.
The Board regularly monitors the Company’s investment
performance in relation to its objectives and investment
policy and strategy.
The Board receives and reviews regular reports and
presentations from the Fund Manager and seeks to maintain
regular contact to maintain a constructive working
relationship.
Property
Managers &
Developers
ReSI’s property managers are experienced in
managing tenants’ needs to ensure a good
quality of service and to ensure that the
regulatory risk is minimised.
In addition, strong developer relationships
enable ReSI to secure a pipeline of assets
for investment. Experienced development
partners ensure that ReSI acquires high
quality homes to lease to its residents,
improving quality of life for residents.
By supporting development partners, ReSI
aims to benefit local communities by
increasing the provision of affordable
housing. Through ReSI Housing, ReSI is able
to acquire assets within the social housing
regulatory environment, which emphasises
good governance and financial viability.
ReSI always seeks to work with well-regarded partners to
ensure that its homes are fit for purpose and maintained at a
high standard in order to meet the needs of lessees and
occupiers, as well as sustaining value over the long-term.
The Fund Manager has regular contact with property
managers, estate managers and developers and takes a
proactive approach to working with third parties.
Before an acquisition, detailed property due diligence is
performed by the Fund Manager on all acquisitions to
minimise fire and other risks to residents and provide safe
and secure accommodation.
After acquisition, the Fund Manager (with input from property
managers) regularly reports to the Board on ReSI’s property
performance and compliance with property obligations.
Key Service
Providers
A list of the Company’s key service providers
can be found on page 185 of this Annual
Report.
As an externally managed real estate
investment trust, the Company conducts all
its business through third-party service
providers.
Before the engagement of a service provider, the Board
ensures that the service provider’s services are appropriate
and values are aligned.
On an annual basis the Board reviews the continuing
appointment of each service provider to ensure re-
appointment is in the best interests of the Company’s
shareholders. The Board has strong working relationships
with the Fund Manager, broker, company secretary,
administrator and depositary and receives reports on the
performance of the key service providers by the Fund
Manager and company secretary. Separately, the auditor is
invited to attend the Audit Committee meeting at least once
per year.
The Audit Committee Chair maintains regular contact with
the audit partner to ensure the audit process is undertaken
effectively.
74
Residential Secure Income plc
Annual Report and Accounts 2022
01
Strategic Report - Section 172 Statement and Stakeholder Engagement
Major Stakeholder
Why is it important to engage?
How have the Directors and Fund Manager engaged?
Regulator of
Social Housing
ReSI Housing is a wholly-owned subsidiary of
ReSI and is registered with, and regulated
by, the Regulator of Social Housing (the RSH)
as a for-profit registered provider.
As a regulated entity, ReSI Housing is able to
offer shared ownership properties, which
are central to its future investment strategy
and other regulated tenures.
The Fund Manager and ReSI Housing’s board each maintains
strong lines of communication with the Regulator and is
transparent in all dealings.
The Fund Manager, in conjunction with the board of ReSI
Housing, keeps ReSI Housing’s compliance with its regulatory
obligations under constant review, with input from such
external advisers as may be necessary.
The board of ReSI Housing contains independent non-
executive directors with enhanced responsibilities for ReSI
Housing’s compliance with the RSH’s regulatory regime.
Grant Providers
To enable delivery of shared ownership
homes, ReSI Housing is an investment
partner of multiple grant providers, including
the Greater London Authority (“GLA”) and
Homes England, and has accessed grant
funding under their standard form grant
agreements.
Each of these grant providers is a long-term
investment partner in ReSI Housing.
The Company engages the Fund Manager and third-party
service providers to assist with compliance of grant
requirements. Any correspondence from a grant provider is
responded to promptly.
In the financial year 2022, ReSI Housing’s compliance with
grant requirements on Aukland Rise with GLA has been
audited by Trimmer CS Ltd and we are awaiting final audit
results from the GLA.
HMRC
If ReSI fails to remain qualified as a REIT, its
rental income and gains will be subject to UK
corporation tax.
ReSI corresponds with its contacts at HMRC regularly and is
transparent in all dealings.
The Directors and the Fund Manager at all times conduct the
affairs of ReSI so as to enable it to remain qualified as a REIT
for the purposes of Part 12 of the CTA 2010.
Lenders
Members of the Group have raised secured
debt and entered into a working capital
facility,
As is customary, each facility contains
representations and warranties
ReSI’s subsidiaries report to their respective lenders in line
with the covenants entered into.
Proactive correspondence helps develop the relationship and
aides the Company’s ability to raise further debt in the future.
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Strategic Report - Section 172 Statement and Stakeholder Engagement
Principal Decisions
ReSI’s Directors are cognisant of their duties under Section 172 and decisions made by and discussions of the Board
take into account the interests of all the Company’s key stakeholders.
The following are examples of how the Board managed their Section 172 obligations in the context of decisions that
were anticipated to have a material impact on ReSI and its key stakeholders.
Discussion item
Stakeholders
Decision and rationale
Equity raise in
February 2022
Shareholders
Residents
Property Managers & Developers
Fund Manager
The Board approved of the allotment of new ordinary shares,
raising £15mn (gross proceeds).
This was considered in the best interests of stakeholders
collectively for it would allow ReSI to continue deploying into
its shared ownership pipeline, through ReSI Housing, increase
Group AUM and revenues, expand the Groups’ investor base,
further diversify its exposure to inflation-linked receivables
and strengthen its pipeline relationships.
Amendments to the
Group working
capital facility
Shareholders
Residents
Property Managers & Developers
Fund Manager
The Board approved of the Fund Manager’s proposal to extend
and upsize the Group’s working capital facility, reducing the
margin and securing additional bridging and working capital
financing.
Appointment of Peel
Hunt LLP
Shareholders
Fund Manager
The Board approved the appointment of Peel Hunt LLP as
corporate broker and financial adviser, after a broker review
and tender process.
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Strategic Report - Section 172 Statement and Stakeholder Engagement
Risk management is the continual building of a framework and culture to promote a thoughtful and systematic
methodology for identifying, analysing, evaluating, treating, monitoring, and communicating risks related with any
activity that we employ to optimise gains and control potential losses.
ReSI has delegated risk management responsibility to the Fund Manager, for whom risk management is an integral part
of the Fund Manager’s culture. Risk management is also an integral part of the broader Gresham House group.
The Fund Manager has embedded risk management from the top down into its philosophy, practices and business
processes – risk management is not to be viewed or practiced as a separate activity. All Fund Manager personnel
and ReSI directors are involved to some extent in the management of risk on a daily basis as part of their usual
business activities.
The Fund Manager proactively manages risk (rather than responding reactively to it) and the Fund Manager’s activities
are also subject to scrutiny under the Gresham House risk management framework.
On behalf of ReSI, the Fund Managers maintains the following under regular review:
Measure
Explanation
Relevance to Strategy
Result
Percentage of shared
ownership homes
occupied
ReSI measures the
number of empty shared
ownership properties in
its shared ownership
portfolio.
For each empty shared
ownership property,
ReSI is unable to collect
rent, must pay service
charge and council tax,
and is exposed to
maintenance costs.
Unsold shared ownership homes that
do no generate rental income or
staircasing proceeds, and carry
operating expenses, adversely
impact ReSI’s dividend coverage.
723 of ReSI’s 739 completed shared
ownership homes were sold,
reserved or moving to completion to
shared owners as of 30 September
2022, equivalent to 98% (30
September 2021: 495 of 498 (99%).
Those that are vacant are part of the
18 homes acquired in September
2022 and are being let up through
established partners, SO ReSI. A
further 10 homes have been reserved
since 30 September and are moving
to completion.
Void loss from
retirement properties
ReSI measures the
number of empty
retirement properties in
its retirement portfolio.
For each empty
retirement property,
ReSI is unable to collect
rent.
Void retirement units impact ReSI’s
dividend coverage.
The void loss as at 30 September
2022 was 6.2% (30 September 2021
7.6%).
Capital deployed
ReSI measures the rate
at which it has deployed
capital since IPO as this
drives the timing of
income production.
ReSI’s strategy prioritises investing
in high quality retirement and social
housing assets; hence the total
capital deployed into such assets
reflects ReSI’s ability to source
suitable investments.
Since 30 September 2021, ReSI
completed an equity capital raise of
£15mn in February 2022 and
committed (net of first tranche sale
receipts) cash consideration of
£28mn into 246 additional high-
quality shared ownership homes.
ReSI’s capital is therefore again fully
deployed, with £383mn deployed
(including £9mn committed
acquisitions) by
30 September 2022
(30 September 2021: £351mn).
Risk Management Measures
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Strategic Report
Measure
Explanation
Relevance to Strategy
Result
EPRA NTA per share
ReSI measures its EPRA
NTA per share,
consistent with its
financial statements,
with a target to achieve
capital appreciation in
line with inflation
without reliance on gains
from asset sales.
A higher EPRA NTA per share
compared to ReSI’s NTA of 98p per
share immediately following IPO,
reflects capital appreciation on its
portfolio.
EPRA NTA of 106.1p per share (30
September 2021: 107.9p), shows
growth of over 8% since IPO whilst
paying out c.23p of dividends over
the same period.
Dividend per share
ReSI is targeting 5.16p
per share in respect of
the annual period to
30 September 2022,
growing in line with
inflation.
ReSI seeks to provide stable rental
income to its investors through
regular consistent dividend
payments in line with its dividend
target.
Measuring dividend payments per
share reflects ReSI’s ability to meet
this target, with performance
reflecting available cash and the
income generated from ReSI’s
assets.
ReSI increased its dividend target for
FY 2022 to 5.16p in line its target to
increase versus FY 2021 with annual
inflation to September 2021 of 3.1%.
Performance has been in line with
target: four equal dividends were
paid of 1.29p per share during the
period under review (declared in
December 2021 and January, May
and July 2022) totalling 5.16p per
Ordinary Share (FY 2021: 5.0p).
Dividend cover
Dividend cover
expresses the ratio of
annualised recurring
profits (ie excluding
asset or liability valuation
movements) to dividends
paid.
Dividend coverage of at least 100% is
required to pay for the dividend over
the long term
ReSI raised £15mn of equity during
the year which led total dividend
coverage to drop to 97% over the
year whilst this was deployed. Full
dividend coverage returned in Q4
once these new investments were
onboard.
Ongoing charges ratio
Ongoing charges ratio
compares annualised
ongoing expenses to
average Net Asset Value.
ReSI measures the ongoing charges
ratio to demonstrate that the
running costs of the Company are
kept to a minimum without
impacting performance.
A lower ongoing charges ratio is
indicative of improved financial
performance.
ReSI’s ongoing charges ratio was
1.40% (FY 2021: 1.60%) for the
period, 1 October 2021 to 30
September 2022, of which 1.0%
relates to the Fund Management fee
and the remainder being general and
administrative expenses.
(See supplementary information on
page 172)
Loan covenant stress
testing
ReSI measures the
headroom in group
financial covenants.
ReSI’s borrowing strategy is
predicated on long-term project
finance to match the cash flows of
the scheme in question.
ReSI monitors the asset and liability
matches to make sure ReSI remains
within its leverage targets and limits,
and as part of prudent treasury
management.
The Fund Managers analyses
financial covenant headroom at
quarterly meetings and, in addition,
when submitting compliance
certificates to funders. Given the
headroom the Group has in each of
its covenants, no action has to date
been necessary.
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Strategic Report - Risk Management Measures
Measure
Explanation
Relevance to Strategy
Result
Bad debts on rental
receipts
ReSI uses professional
management companies
to collect rent and
invests in SO schemes
where rent arrears are
covered by ownership
stakes and retirement
schemes where rent
arrears are traditionally
very low.
Bad debt write offs impact ReSI
dividend coverage.
Write off of rent arrears was only
£2,900 in the year, representing
0.02% of annual rental income.
In addition, for all acquisitions of regulated housing tenures (such as shared ownership), which are effected through
ReSI Housing, ReSI has an added layer of risk management embedded into its procedures. As a registered provider,
registered with the RSH, the Board of ReSI Housing has established its own risk management framework, risk
management policy and risk appetite, one of the outcomes of which is the Key Risk Map, which is discussed by the
board of ReSI Housing at every quarterly meeting as a standing item.
The following is a hypothetical Key Risk Map, illustrating the ongoing risk management conducted by the board
of ReSI Housing:
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Strategic Report - Risk Management Measures
The Board recognises the importance of risk management in achieving ReSI’s strategic aims.
The Fund Manager, whose services are overseen by the Board, has responsibility for identifying potential risks at an
early stage, escalating risks (and changes to risks) and implementing appropriate mitigations, all of which are recorded
in ReSI’s risk register. Where relevant, the Company’s financial model is stress-tested to assess the potential impact of
a potential risk taking into account the likelihood of occurrence.
Risk is a standing agenda item at all meetings of the Audit Committee and all meetings of the Board. The Board takes
a proactive view when assessing and mitigating risks. The Board regularly reviews the risk register to ensure that
identified risks and mitigating actions remain appropriate.
ReSI’s risk management process is designed to identify, evaluate and mitigate (rather than eliminate) the significant
and emerging risks that it faces and that evolve as the business and operating environment changes. The risk
management process ensures a defined approach to decision-making but can only provide reasonable, and not
absolute, assurances.
The Board considers the following to be the principal risks and uncertainties:
Risk
Risk mitigation
Party
responsible
Party
responsible for
monitoring
Change in risk
over last
financial year
Company, Investment Strategy and Operations
ReSI may not meet
its investment
objective or return
objective
Due diligence performed by the Fund Manager
prior to each acquisition
On-going information on investment activities
provided by the Fund Manager to the Board
Regular review of investment and
return objectives
Fund
Manager
Board
No change
ReSI may be unable
to make acquisitions
within its targeted
timeline
ReSI has a detailed Investment Policy that
describes target assets and the process for
acquiring such assets.
The Fund Manager has long-term relationships
with leading housing associations, local
authorities and private developers
ReSI Housing, as a for-profit Registered
Provider, expands the origination universe
available to ReSI to include acquiring newly
developed properties that are designated as
affordable accommodation under planning
requirements and unrestricted stock where ReSI
can apply for government grant to convert into
shared ownership
The Fund Manager has extended its origination
and relationship network by bringing in additional
experienced professionals with backgrounds
working for housing associations, local
authorities and private developers
Fund
Manager
Board
No change
Principal Risks and Uncertainties
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Strategic Report
Risk
Risk mitigation
Party
responsible
Party
responsible for
monitoring
Change in risk
over last
financial year
ReSI’s due diligence
(DD) may not identify
all risks and
liabilities in respect
of an acquisition
Legal DD is carried out by established law
firms and is managed by in-house counsel and
housing specialists
Property DD is carried out by reputable real
estate surveyors and is managed by in-house
property experts
Financial DD is carried out by major
accounting firms and is managed by in-house
experienced accountants
The Fund Manager performs shadow
credit ratings utilising published credit
rating methodologies
Fund
Manager
Board
No change
Failure of ReSI
Housing to continue
to meet the
Regulatory
Standards
Specialist non-executive directors have been
appointed and tasked with reviewing activities
from the perspective of the Regulatory Standards
ReSI Housing board has specialist sector
experience and a risk-based governance
structure, and activities are monitored by Board
ReSI Housing performs ongoing compliance
monitoring and annual self-assessments
Regular support and /or compliance assurance
procured from third parties
ReSI Housing
and Fund
Manager
Board
New
ReSI has insufficient
liquidity available to
meet obligations as
they fall due
(including any debt
repayment
obligations) or
liquidity is available
on more expensive
terms
The Fund Manager regularly reviews the Group’s
Business Plan against the Group’s recent
and anticipated activities to assess future
liquidity requirements
The Group typically uses long-term amortising
debt, reducing refinancing risk
The Group has access to a working capital facility
with Santander, which gives access to £25mn
liquidity, and the Fund Manager actively reviews
Group liquidity to manage cost of carry and
mitigate the impact of rising interest rates
Fund
Manager
Board
Increased
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Strategic Report - Principal Risks and Uncertainties
Risk
Risk mitigation
Party
responsible
Party
responsible for
monitoring
Change in risk
over last
financial year
Political and Event risk
Change in
government rent
policy or ability to
pass through
inflation linked rent
increases, as RPI
increases to highest
level in 30 years,
limiting level of rent
increases
The current high inflationary environment
combined is causing a cost of living crisis which
has the greatest impact on low and middle
income earners. Significant RPI increases
over the past 12 months to the highest level
in the last 30 years, may result in changes to
government policy on rent increases across
residential sectors
ReSI’s shared ownership leases are contracted
to increase annually at RPI + 0.5%. ReSI performs
stress testing and profitability analyses regularly
Rent reviews on the retirement portfolio
performed annually at RPI (capped at 6%), with
affordability taken into consideration. The
majority of retirement residents have inflation-
protected pensions
The Fund Manager engages in sector-wide
consultations to be familiar with trend within
social housing providers practices
The Fund Manager regularly reviews
market forecasts to stay abreast of
potential developments, including possible
government interventions
The embedded collar in the Group’s
shared ownership financing restricting
inflationary uplifts
ReSI, ReSI
Housing and
Fund
Manager
Board
Increased
Impact of Energy
Efficiency upgrades
on rental properties
- All properties
cannot be upgraded
to energy rating of
EPC C or higher by
2025
ReSI Property Management Limited, as property
manager, is working on updating EPC ratings on a
number of retirement properties
The majority of shared ownership properties
have an EPC rating of B or higher, with a few
properties at lower ratings or no ratings. The
Fund Manager is working towards obtaining
ratings for all properties which do not have a
rating at present (noting that this is ultimately a
responsibility of the shared ownership customer)
Government policy updates and their impacts
are constantly reviewed by the Fund Manager,
with appropriate management action pursued via
third party managers
ReSI, ReSI
Housing and
Fund
Manager
Board
No change
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Strategic Report - Principal Risks and Uncertainties
Risk
Risk mitigation
Party
responsible
Party
responsible for
monitoring
Change in risk
over last
financial year
Environmental
Risk of long-term
impact on the
portfolio from
climate change
Environmental concerns are integral to the Fund
Manager’s investment analysis process, and are
considered before investment in each scheme
The Fund Manager has a sustainable
investment policy, which is used to inform
investment decisions
The Fund Manager has partnered with The Good
Economy, Kamma Data and other knowledgeable
third parties to understand ReSI’s impact on the
environment and enhance our reporting – please
see the Environmental, Social and Governance
section of this Annual Report
ReSI is investing in improving the environmental
efficiency of its portfolio
Fund
Manager
Board
No change
Real estate
Significant or
material fall in the
value of the property
market
ReSI’s aim is to hold the assets for the long-term
and generate inflation-linked income
Although the risk of volatility in valuations has
increased, the risk to ReSI is mitigated by the fact
that ReSI is fully deployed into investments which
are primarily income generating, and therefore
the Company does not heavily rely on realised
revaluation gains to cover dividend payments.
Additionally, ReSI has significant headroom
of at least 13% in its loan-to-value covenants,
and significant headroom in its income cover
covenants (e.g. 31% for the retirement portfolio)
The Board will assess market forecasts on a
quarterly basis to put in place mitigations in
the event of a material fall in the value of the
property market
The Group will enter into long-term
management agreements
The Fund Manager stays abreast of
market developments and forecasts, and,
where necessary, seeks to adjust offer
terms accordingly
ReSI focuses on areas of the market with limited
and ideally countercyclical exposure to the wider
property market
N/A
Board
Increased
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Strategic Report - Principal Risks and Uncertainties
Risk
Risk mitigation
Party
responsible
Party
responsible for
monitoring
Change in risk
over last
financial year
Inability to secure
residents
ReSI actively manages its void risk, looking for
opportunities to acquire pre-tenanted homes
where possible
ReSI engages established property managers
to provide the day-to-day management of home
lettings and collection of underlying rent from
residents or shared owners
ReSI only accepts void risk where there is a
demonstrable strong demand or where the
residents are part owners of the properties
(as exhibited by retirement, sub-market rental
assets or shared ownership properties)
The like-for-like shared ownership portfolio is
now fully occupied, with the retirement portfolio
now averaging 6.2% void loss in FY 2022, below
pre-COVID-19 levels of c.7%
ReSI is investing in improving the environmental
efficiency of its portfolio to save residents
on their heating bills and meet increased
government requirements on the minimum
energy efficiency of rented homes
Property
managers /
estate agents
Fund
Manager
No change
Service providers
ReSI is dependent
on the expertise of
the Fund Manager
and its key
personnel to
evaluate investment
opportunities and to
assist in the
implementation of
ReSI’s investment
objective and
investment policy
ReSI’s Board of Directors and the board of ReSI
Housing have strong relevant experience and
introduce independent scrutiny
The Fund Manager’s interests are aligned to those
of ReSI’s shareholders through a fee structure
which pays 25% of Fund Manager fees in equity
and provides for no transaction-specific fees
As of the date of this Annual Report, the current
and founder directors of the Fund Manager (or
persons connected to them) hold (in aggregate)
2,359,115 Ordinary Shares in ReSI and the Fund
Manager holds 3,647,399 Ordinary Shares totalling
3.3% of shares in issue
The Fund Manager follows strict selection
processes in recruiting personnel including
psychometric testing, external verification
of qualifications and experience and KYC and
security checks
The Board formally reviews the Fund Manager’s
performance annually
Fund
Manager
Board
No change
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Strategic Report - Principal Risks and Uncertainties
Risk
Risk mitigation
Party
responsible
Party
responsible for
monitoring
Change in risk
over last
financial year
Poor performance
by service providers
leading to
reputational loss or
loss of shareholders’
assets
Service providers are either recommended
to or known to the Fund Manager in
advance of engaging
Board agrees contractual arrangements with all
key service providers
Board considers regular reporting from key
service providers
Board monitors quality of services provided by
key service providers and conducts an annual
review of such service providers
Details of disaster recovery arrangements are
obtained from key service providers
Fund
Manager
Board
New
Taxation
If ReSI fails to meet
the requirements of
the REIT regime and
remain qualified as a
REIT, its rental
income and gains
will be subject to UK
corporation tax
R
eSI has operated and intends to remain
within the UK REIT regime and work within its
investment objective and policy
The Fund Manager receives advice from
professional advisors on an on-going basis the
UK REIT regime and reports any relevant changes
to the Directors; such advice covers the UK
REIT regime, legal developments, accounting
standards and investment companies in general
The Fund Manager will at all times conduct the
affairs of ReSI so as to enable it to become and
remain qualified as a REIT for the purposes of
Part 12 of the CTA 2010
The Board would have oversight on any action
that would result in ReSI failing to adhere to the
UK REIT regime, and ReSI receives tax advice
from professional advisers who review REIT
status quarterly and submit annual tax returns in
line with HMRC requirements
The Fund Manager monitors the government and
HMRC, FCA and other public announcements for
any relevant release affecting the Company
Fund
Manager
Board
No change
Investment Management
Market and
individual
investment risks not
analysed or
detected in a timely
fashion leading to
deteriorating
investment
performance or a
higher risk profile
than anticipated
The Fund Manager rigorously analyses
investment opportunities and undertakes
comprehensive due diligence before acquisition
The Fund Manager does not receive a
performance-based fee and as such is not
financially incentivised to target riskier higher
yielding assets
The Fund Manager receives a management fee
prior to deployment and so is not financially
incentivised to purchase assets quickly
regardless of the performance of such assets
Fund
Manager
Board
No change
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Strategic Report - Principal Risks and Uncertainties
Risk
Risk mitigation
Party
responsible
Party
responsible for
monitoring
Change in risk
over last
financial year
Information Systems and Cyber security
IT systems are
compromised /
unavailable, leading
to financial loss /
data breach
The Fund Manager is part of the Gresham House
group, who have a specialist third party IT team
that are responsible for systems maintenance
and has increased its capacity and capability with
an outsourced IT function, and the appointment
of a dedicated Information Technology Manager
The Fund Manager has made significant
investment in new technology that incorporates a
greater level of data security in building a secure
and resilient platform which is GDPR compliant
Company Secretary evaluates third party
service providers to the Company to ensures
that providers have a similar level of robust
processes and controls around information
security and systems
Regular systems penetration testing and
vulnerability assessments are conducted by
multiple independent specialists to ensure our
systems are robust
Regular Staff training which includes awareness
of IT policies, cyber threats, data protection and
GDPR requirements
Fund
Manager
Board
No change
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Strategic Report - Principal Risks and Uncertainties
Going Concern
The Board monitors the Company’s ability to continue
as a going concern. The following is a summary of the
Directors’ assessment of the going concern status of
the Company and its Group, which should be read in
conjunction with the viability statement.
The Directors have considered the Group’s cash
position, income and expense flows. As at 30
September 2022 the Group’s net assets were £201.4mn
and the Group held cash and cash equivalents of
£16.0mn. Net rental income for the year ended 30
September 2022 was £16.0mn, which is expected to
increase to reflect the Group’s recently occupied and
committed shared ownership investments. The total
ongoing operating expenses (excluding finance costs,
taxation and aborted acquisition costs) for the period
ended 30 September 2022 were £3.2mn, showing the
Group had substantial operating expenses cover.
ReSI’s portfolio provides a very secure long term
income stream. This is due to the defensive nature of
ReSI’s portfolio, the diversity of ReSI’s counterparties
and the resilience of ReSI’s tenants’ incomes. Tenants’
incomes are predominantly from pensions / savings
or paid by local authorities and are checked for
affordability and compared to rents below market value.
The secure long-term nature of the income is further
evidenced by:
the Company's shared ownership portfolio
is 99% occupied;
the Company's stabilised retirement portfolio
occupancy rates are typically in excess of 94%, with
the void period primarily reflecting time to refurbish
properties when a tenant vacates;
a rent collection level for the year of 99%;
the average residency period of a retirement portfolio
tenant is six years;
Shared Ownership customer leases ranging from
between 130 and 999 years with annual increases
generally at RPI + 0.5%; and
Local authority assets are ultimately leased to Luton
Borough Council, which is an area with one of the
highest rates of housing need in the country, to
house those in the Borough who would be otherwise
homeless or threatened with homelessness.
ReSI has high-quality cash flows that are resilient
to economic downturns. ReSI also has a great deal
of headroom in its financial covenants and, after
conducting various stress tests and sensitivity
analyses, could withstand a prolonged drop in net
income without breaching any loan covenant.
As the property investment values of ReSI’s retirement
and local authority portfolios are primarily calculated
with reference to future cash flows, not house prices,
volatility in house prices does not have a substantial
impact on the value of its property assets. Sensitivity
analysis shows that a 13% fall in the value of ReSI’s
assets would not result in a loan covenant breach.
Based on the above information, the Board has
made its assessment and remains satisfied that
there are no material uncertainties affecting the
Group’s and/or Company’s ability to continue in
business for the foreseeable future, being at least
12 months from the date of approval of the financial
statements. Accordingly, the Company has adopted
the going concern basis in the preparation of these
financial statements.
Assessment of Viability
The principal risks and uncertainties section on pages
80 to 86 of this Annual Report summarises those
principal matters that the Directors consider could
prevent ReSI from delivering on its strategy and is
derived from a robust assessment of the principal risks
to our business model, future performance, liquidity,
and solvency, which is supplemented by financial
modelling and stress testing conducted by the Fund
Manager. A number of these principal risks, because of
their nature or potential impact, could also threaten the
Group’s ability to continue in business in its current form
if they were to occur.
The assumptions underpinning our cash flow forecasts
and covenant compliance sensitivity analysis have
been tested to explore the resilience of the Group’s
cash flows and profitability to the potential impact
of the Group’s significant risks, or a combination
of those risks.
Going Concern and Viability Statement
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Strategic Report
Considerations applied to going
concern and viability
All of the sensitivity scenarios modelled use a base
case scenario comprising of the consummating of
no acquisitions other than those already committed,
no further capital deployed to support the underlying
costs of the business, and no significant changes to
governmental, regulatory or taxation policies.
The remaining principal risks, while having an impact on
the Group’s business model, are not considered by the
directors to have a reasonable likelihood of impacting
the Group’s viability over the next five years to 30
September 2027.
Sensitivities and mitigating actions
The sensitivity analyses performed were designed to
be severe but plausible, and to take full account of the
availability of mitigating actions that could be taken
to avoid, or reduce, the impact or occurrence of the
underlying risks. Mitigating actions that could be taken
at the Group’s discretion include use of funds available
under the revolving credit facility to reduce debt and the
reduction or suspension of dividend payments.
Stress tests
The Directors have considered the level of the fall in
property values that could be sustained without an
impact on financial covenants and acquisitions that
have exchanged but not completed. The Discounted
Cash Flow valuation of the Group’s Investment
Properties could fall by over 13% from the valuation at
30 September 2022 before any loan to value covenant
breaches would arise.
Additionally, in considering the effect of a reduction
in rent on interest cover covenants, the Group could
sustain a fall in net operating income by over 30% and
remain in compliance with these covenants.
Availability of funding
The Santander revolving credit facility of £10mn was
increased to £25mn of which £3.9mn is currently
drawn and extended to March 2025 in September 2022.
This provides ReSI with increased access to working
capital and bridge finance. Repayment of the entire
£12.2mn NatWest loan is due in April 2023. However,
repayment of the NatWest loan could be funded from
the Santander facility if necessary and the forecasts
have been prepared on this assumption. Generally, the
Fund Manager arranges finance in advance of expected
requirements and has reasonable confidence that
replacement debt facilities will be in place as required.
Financial models have been prepared for the going
concern period which consider liquidity at the start
of the period and key financial assumptions at the
Company level as well as at Group level. These financial
assumptions include expected cash generated and
distributed by the portfolio companies, which is
then available to be distributed to the Company. The
assumptions include inflows and outflows in relation to
external debt, interest payments, expected dividends
and the ongoing administrative costs of the Company.
These models assume that the Continuation Resolution
is in January 2023.
Continuation Vote
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 established.
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 the annual general
meeting, to formulate proposals for consideration
by the shareholders for the voluntary liquidation,
unitisation, reorganisation, or reconstruction
of the Company.
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Annual Report and Accounts 2022
01
Strategic Report - Going Concern and Viability Statement
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 long-term nature of the Company’s
assets with supporting debt funding and the
attractiveness of the Company’s low risk inflation
linked income strength in the Company’s portfolio.
Accordingly, the Directors expect that the Continuation
Resolution will be passed. 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.
Viability Statement
In accordance with the UK Corporate Governance Code,
the Board has assessed the viability of the Group over
a longer period than the 12 months required by the
‘Going Concern’ provision. The Board has conducted
this review for the five years to 30 September 2027.
The Board considers that five years is the maximum
period for which the degree of uncertainty relating to
factors outside of the Board’s control is low enough to
make a reasonable expectation in respect of the Group’s
longer-term viability.
Five years was also considered appropriate given
the Company’s long-term investment objective. The
Board has considered each of the principal risks and
uncertainties set out above together with the liquidity
and solvency of the Company.
Having considered the matters above, the Board has a
reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall
due over the five-year period of its assessment.
The Chairman’s Statement and Fund Manager’s Report
present the positive long-term investment case for
acquiring high quality residential assets which also
underpins the Group’s viability for the 5-year period.
Approval
The Strategic Report was approved by the Board of
Directors on 1 December 2022.
Rob Whiteman
Chairman of the Board of Directors
1 December 2022
Residential Secure Income plc
Annual Report and Accounts 2022
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01
Strategic Report - Going Concern and Viability Statement
02
Governance
Board of Directors
Rob Whiteman CBE
Non-executive Chairman
Appointed
9 June 2017
Skills, competence and experience:
Significant knowledge of public service finances and
reform and a strong background in public financial
management and governance.
Presently Chief Executive of the Chartered Institute
of Public Finance & Accountancy (CIPFA) and
previously Chief Executive of UK Border Agency
(UKBA), Improvement and Development Agency (IDeA),
and London Borough of Barking and Dagenham. He
previously held various positions in the London Borough
of Lewisham from 1996-2005, latterly as Director of
Resources and Deputy Chief Executive.
He has been a technical adviser to the board of the
International Federation of Accountants (IFAC) in New
York since 2013.
Educated at the University of Essex where he gained
a BA (Hons) in Economics and government and is a
qualified Chartered Public Finance Accountant (CPFA).
Robert Gray
Senior Independent Director
and Chairman of the
Audit Committee
Appointed
9 June 2017
Skills, competence and experience:
Extensive business experience, including experience in
debt finance and capital markets.
Robert has held roles at J.P. Morgan, and later at HSBC
Markets Limited and HSBC Investment Bank in London
working initially as Managing Director in Global Capital
Markets and subsequently as Vice Chairman for Client
Development. Robert was also Chairman, Debt Finance
& Advisory at HSBC Bank plc. As Director and Chair
of the Overseas Promotion Committee of TheCityUK
Robert served as financial services sector adviser to
the UK Minister for Trade & Investment.
Robert was Chairman of the International Primary
Market Association and Vice Chairman and Chairman
of the Regulatory Policy Committee of the International
Capital Market Association.
Robert was educated at Sherborne School and
St. John’s College, Cambridge University where he
gained a MA (Hons) in History.
Other roles:
Director of CCAB Limited
Director of the Koru Project CIC F
Director of Eagles Crest (Poole) Limited
Director of CIPFA C.Co Limited
Director of CIPFA Business Limited
Director of Lilliput Advisory Ltd
Other roles:
Director and Chair of the Audit Committee of the Arab
British Chamber of Commerce.
Trustee of Allia Limited.
Director and Company Secretary of Prospekt
Medical Limited.
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Governance
Elaine Bailey
Non-executive Director
Appointed
9 June 2017
Skills, competence and experience:
Previously the Chief Executive of Hyde Group, the
G15 Housing Association with over 50,000 properties
providing housing to 100,000 residents, a position
she held for five years until 2019. During this time
Elaine oversaw the establishment of a five-year
development pipeline of 11,000 homes and the launch
of several innovative partnerships with housebuilders,
contractors, local authorities and other housing
associations. Elaine also previously worked in the
construction and government services sectors; and
worked for some years at Serco.
Actively involved in the government’s Building Safety
Programme, including as a member of the Industry
Safety Standards Steering Group, and a former
Non-Executive Director of the Health and Safety
Executive Board.
Elaine was educated at Southampton University, where
she gained a civil engineering degree and holds an MBA
from Imperial College.
John Carleton
Non-executive Director
]
Appointed
9 June 2017
Skills, competence and experience:
A strong operational leader with management
experience and a track record in social
infrastructure and housing.
Previously John was a Partner and Head of Housing,
Regeneration and Growth at Arcadis LLP, was an
Executive Director for Markets & Portfolio at Genesis
Housing Association and Managing Director for
Genesis Homes Ltd. In addition, John has held various
other roles including Executive Director of Property
Investment at Orbit Group, Director of Places for People
Leisure Partnerships, Director of Social Infrastructure
and Housing at PricewaterhouseCoopers, Director
of the Housing Corporation (now the Homes and
Communities Agency), Property Director at Barclays
Bank, Managing Director of HRC Ltd / Lehman Brothers
and Head of the Specialist Property Division at the
Bank of Ireland.
John was educated at the University of Liverpool and
holds a MBA in Finance from Manchester Business
School. He is a fellow of the R.I.C.S and also holds an
IPF Investment Property Forum Diploma from the
Cambridge University Land Institute.
Other roles:
Director of Andium Housing Association
Director of McCarthy & Stone Shared
Ownership Division
Director of CHAS (Construction Health and Safety)
Director of MJ Gleeson plc
Trustee of Greenslade Family Foundation
Other roles:
Director of Helping Change Limited
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02
Governance - Board of Directors
ReSI Housing Non-Executive Directors
ReSI owns ReSI Housing Limited, a for-profit registered provider of social housing. The ReSI Housing Board contains
independent directors (who are independent of the Fund Manager and ReSI) and Fund Manager directors. The board
of ReSI Housing is comprised of Ben Fry, David Orr, Alex Pilato, Pete Redman, Mark Rogers, and Gilian Rowley. The
independent Directors control the Board on matters that they consider may affect ReSI Housing’s compliance with the
regulatory standards of the Regulator of Social Housing. ReSI Housing’s non-executive directors are:
David Orr, CBE
Non-executive Director
Appointed
2 October 2018
Skills, competence and experience:
David is an experienced leader in both executive and
non-executive roles. He has over 30 years’ experience
in Chief Executive roles, most recently at the National
Housing Federation. He is Chair of Clarion Housing
Association, Chair of the Canal & River Trust, is a
previous President of Housing Europe and previous
Chair of Reall, an international development housing
charity. He is also chair of The Good Home Inquiry,
co-chair of #Housing 2030, a joint project for Housing
Europe and UNECE, and a member of the Archbishop
of Canterbury’s Housing, Church and Community
Commission. David frequently speaks on the challenge
of optimistic leadership and the critical importance of
governance. He has wide ranging media experience,
is a well-regarded commentator and blogger and has
extensive expertise navigating the world of politics and
government. In June 2018 David was awarded a CBE.
Gillian Rowley
Non-executive Director
Appointed
11 March 2019
Skills, competence and experience:
Gillian brings to ReSI Housing over 30 years of
housing and housing finance expertise, with a focus
on policy development within the framework of
regulatory standards.
She served as the Non-Executive Director for The
Housing Finance Corporation from 2006 – 2012, where
she was heavily involved in business strategy, financial
policy and governance. This overlapped with her role
as the Head of Private Finance at the former social
housing regulator, the Homes & Communities Agency,
where for 13 years she was responsible for relationships
with lenders, investors, advisers, and credit rating
agencies operating in the social housing sector. She
has also been an authority on all aspects of social
housing finance policy, including advising government
departments, focusing on areas of regulatory
standards, and being responsible for social housing
sector guidance on treasury management.
Other roles:
Chair of Clarion Housing Association
Chair of The Canal & River Trust
Chair of The Good Home Inquiry
Co-chair of #Housing 2030
Board member of Clanmil Housing Association Trustee
National Communities Resource Centre
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Governance
Investment Team Detail
Ben Fry
Managing Director, Housing & Investment
Committee Member, ReSI plc
Ben Fry is Managing Director of the Housing division at
Gresham House. He has led investment management
for Residential Secure Income since IPO in July 2017,
prior to which he led TradeRisks’ debt advisory services
for housing associations, local authorities, and social
infrastructure.
Ben has almost 20 years of industry experience, with
eleven years social housing experience since joining
TradeRisks in 2011. He has extensive experience across
social housing and social infrastructure. Ben qualified
as a chartered accountant with Deloitte and is a fellow
of the Institute of Chartered Accountants of England
and Wales. He holds a BSc in Mathematics from Imperial
College London.
Brandon Holloway
(Deputy Fund Manager, Housing)
Brandon joined Gresham House as Deputy Fund
Manager, Housing in November 2021.
Prior to joining Gresham House, Brandon worked at
real estate private equity firm Singerman Real Estate,
focusing primarily on seniors housing acquisitions
and asset management and investor relations. Prior
to Singerman Real Estate, he worked as a corporate
finance analyst at Ventas, Inc., a market listed
healthcare REIT based in Chicago, IL (USA).
Brandon has 11 years of experience in real estate
investing and corporate finance, and holds a BA in eco-
nomics from Williams College.
Alex Pilato
Senior Advisor, Housing & Investment
Committee Member, ReSI plc
Alex is Senior Adviser to the Housing and Capital
Markets divisions at Gresham House, following the
acquisition of TradeRisks and ReSI Capital Management
in March 2020 and his subsequent transition to
retirement. Alex remains a member of all the boards and
committees of the housing division and the Group SPVs.
This transition has been planned since the acquisition
of TradeRisks by Gresham House.
Alex founded the TradeRisks group in 2000 where he
was the Chairman & Chief Executive until the sale to
Gresham House on 5 March 2020 when he became
Managing Director and head of the housing division. Alex
has worked in financial services throughout his career,
including 7 years at JP Morgan. He has 35 years of
investment banking and fund management experience,
with the last 22 years focused on the social housing and
infrastructure sectors.
Alex has a first-class honours degree in Theoretical
Physics from the University of London and a DPhil in
Mathematics from the University of Oxford.
Mark Rogers
Executive Director, ReSI Housing & Investment
Committee Member, ReSI plc
Mark is an Executive Director of ReSI Housing and
part of the team at Gresham House, having joined
TradeRisks and ReSI Capital Management in 2018 to lead
the acquisitions function. Before joining, Mark spent
12 years as a Chief Executive of Circle Housing Group,
a 65,000 unit housing association, before merging it
into the Clarion Group, the largest housing association
in the UK. Prior to that, Mark held Chief Executive roles
at Anglia Housing Group and Nene Housing Society.
He has been a member of the Chartered Institute
of Housing since 1986 and has 39 years of social
housing experience.
Pete Redman
Executive Director, ReSI Housing & Investment
Committee Member, ReSI plc
Pete is an Executive Director of ReSI Housing, joining
Gresham House as part of the acquisition of TradeRisks
in March 2020. He has responsibility for due diligence on
residential acquisitions and operational performance by
ReSI’s property managers and leaseholders. He joined
TradeRisks in 2013 and has 47 years of experience in
residential portfolio management, having been Chief
Executive of Notting Hill Housing Group and Housing
Director of two London Boroughs.
Pete has been advisor to the Greater London Authority,
to the Scottish government, and was a member of the
team that won the Wolfson Economics Prize in 2014 on
housing supply.
Pete studied Engineering and then Philosophy at the
University of Cambridge, is an Alumnus of London
Business School, and is an Honorary Fellow of the Royal
Institute of British Architects.
Residential Secure Income plc Annual Report and Accounts 2022
95
02
Governance
The Directors are pleased to present their report
and accounts, together with the audited financial
statements of the Company, for the year ended 30
September 2022.
Residential Secure Income plc, company number:
10683026, (the “Company”) is a Real Estate Investment
Trust (“REIT”) listed on the premium segment of the Main
Market of the London Stock Exchange. The Company’s
investment strategy focuses on delivering secure
inflation linked returns from investing in affordable
shared ownership, retirement and local authority
housing throughout the UK.
The Board is ultimately responsible for all aspects of the
Company’s affairs, including setting the parameters for
monitoring the investment strategy and the review of
investment performance and policy. The Board also has
ultimate responsibility for all strategic policy issues, the
timing, price and volume of any buybacks of Ordinary
Shares, corporate governance matters and dividends.
Further information on the Board’s role is provided in
the Corporate Governance Statement beginning on
page 104, which forms part of the Directors’ Report.
Powers of the Board
The general powers of the Directors are set out in
Article 99 of the Company’s Articles of Association.
This Article provides that the business of the Company
shall be managed by the Board, which may exercise all
the powers of the Company, subject to any limitations
imposed by applicable legislation, the Articles and
any directions given by special resolution of the
shareholders of the Company.
Results
The Group’s IFRS profit for the year was £13.3mn and
the IFRS earnings per share were 7.4p. The results
for the year are shown in the financial statements.
Commentary on the results, future developments
and post balance sheet events can be found in the
Strategic Report, Chairman’s Statement and Fund
Manager’s Report.
Investment property
A summary of the Group’s investment property portfolio
is included on page 18. A full portfolio listing can be
made available on request.
Dividend policy
The Company is targeting, on a fully invested and
geared basis, a dividend yield of c.5% per annum based
on the issue price of £1 per Ordinary Share, which the
Company then expects to increase broadly in line with
inflation. It is the Company’s intention to pay dividends
to shareholders on a quarterly basis and in accordance
with the REIT Regime.
Over time, the Company expects its dividends to
increase broadly in line with inflation, targeting a
total return in excess of 8% per annum. As a REIT, the
Company is required to meet a minimum distribution
test for each accounting period through which it is
a REIT. This minimum distribution test requires the
Company to distribute a minimum of 90% of its Property
Rental Business income profits for each accounting
period, as adjusted for tax purposes.
When the Company pays a dividend, that dividend is
a Property Income Distribution (‘PID”) to the extent
necessary to satisfy the 90% distribution condition. If
the dividend exceeds the amount required to satisfy
that test, then depending on the circumstances the
REIT may determine that all or part of the balance is a
non-PID dividend. Subject to certain exceptions, PIDs
will be subject to withholding tax at the basic rate of
income tax (currently 20%).
If the Company ceases to be a REIT, dividends paid by
the Company may nevertheless be PIDs to the extent
they are paid in respect of profits and gains of the
Property Rental Business whilst the Company was
within the REIT Regime.
Directors’ Report
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Governance
Dividends paid in the year ended
30 September 2022
In line with the Company's dividend policy and target,
four equal dividends of 1.29p per Ordinary Share were
paid during the year, totalling 5.16p per Ordinary Share,
of which 4.08p was paid as PID and 1.08p was paid as
non-PID. These were declared in December 2021 and
January, May and July 2022 with the first being the
fourth interim dividend for the year ended
30th September 2021.
The Board declared a fourth interim dividend in respect
of the quarter to 30 September 2022 of 1.29p per
Ordinary Share, which will be payable on 18 January
2023 to shareholders on the register at the close of
business on 9 December 2022. The ex-dividend date is
8 December 2022 and the full amount will be paid as PID.
Management – Fund Manager
ReSI Capital Management Limited (part of the Gresham
House group) has been engaged as the Company’s
alternative investment fund manager (the “Fund
Manager”), pursuant to a Fund Management Agreement
originally dated 16 June 2017 (as amended), to advise
the Company and provide certain investment and risk
management services.
ReSI Capital Management Limited is authorised and
regulated by the Financial Conduct Authority (“FCA”) as a
‘full scope’ UK alternative investment fund manager for
the purposes of the UK AIFM Regime.
The Fund Manager is appointed under a contract subject
to twelve months’ written notice with such notice not
to expire prior to the fifth anniversary of first admission
of the Ordinary Shares to trading on the London Stock
Exchange, which was in July 2022.
The Fund Manager is entitled to remuneration
calculated in respect of each quarter, based upon the
Net Asset Value, at a rate equivalent to 1% (if under
£250mn), 0.9% (if over £250mn), 0.8% (if over £500mn)
or 0.7% (if over £1bn).
The Fund Management Fee shall be paid quarterly in
advance, with 75% of the total Fund Management Fee
payable in cash and 25% of the total Fund Management
Fee (net of any applicable tax) payable in the form of
Ordinary Shares. During the period, 444,717 Ordinary
Shares were awarded to the Fund Manager as part of
the Fund Management Fee, of which 212,153 Ordinary
Shares were purchased from Treasury at an average
price of 106.57p per share (the prevailing Net Asset
Value at the time of issue).
Since year end, as per the announcement on 3 October
2022, 130,650 Ordinary Shares were purchased in the
secondary market at an average price of 105.5p per
share and awarded to the Fund Manager as part of the
Fund Management Fee.
The Fund Manager is also entitled to a debt arrangement
fee in respect of debt arranged by the Fund Manager
for ReSI or its subsidiaries. The debt arrangement fee
is equal to 0.04% p.a. levied on the notional amount
outstanding of any bond or private placement financing.
There is no debt arrangement fee payable in respect
of any bank debt financing the Fund Manager may
arrange for the Group.
Related to the Fund Manager is ReSI Property
Management Limited (‘RPML
’), a wholly owned
subsidiary of the Fund Manager that provides property
management services to parts of the Group on a cost
pass through basis with no profit margin. During the
year, RPML charged fees of £1,738,000 (2021: £408,000)
in respect of costs incurred in providing property
management services and £166,000 (2021: £317,000) in
respect of non-recurring costs.
Continuing appointment of
the Fund Manager
The Board has discretion to monitor the performance
of the Fund Manager and, to appoint a replacement
Fund Manager. The continuing appointment of the
Fund Manager is considered by the Board to be in the
best interests of shareholders as a whole. The reason
for this view is that the performance is satisfactory
and the Fund Manager is well placed to continue to
manage the assets of the Company according to the
Company’s strategy.
During the period, the Board, either directly or via
its advisors, engaged with shareholders carefully
considering all feedback. The Board explored all
potential outcomes which may be in the interest of the
Company and its members as a whole.
Residential Secure Income plc Annual Report and Accounts 2022
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02
Governance - Directors’ Report
Depositary
Thompson Taraz Depositary Limited has been
appointed as depositary to provide cash monitoring,
safekeeping and asset verification and oversight
functions as prescribed by the UK AIFM Regime.
Company Secretary
Computershare Company Secretarial Services Limited
has been appointed as the Company Secretary of the
Company and provides company secretarial services
and a registered office to the Company.
Administrator
MGR Weston Kay LLP has been appointed as
administrator to the Company. The administration
of the Company is delegated and performed in
consultation with the AIFM and the Fund Manager.
Financial information of the Company is prepared by the
administrator and is reported to the Board.
Share capital and shareholders
As at 30 September 2022 the Company’s issued share
capital comprised 194,149,261 Ordinary Shares, each of
1p nominal value, including 8,985,980 Ordinary Shares
held in Treasury. Treasury shares do not hold any voting
rights. As at 30 September 2022, the Company’s total
shares in issue with voting rights, excluding treasury
shares, were 185,163,281. As at the date of this Annual
Report, there has been no change to the Company’s
issued share capital, total voting rights or Ordinary
Shares held in Treasury.
During the period, 212,153 Ordinary Shares were issued
from Treasury to satisfy the Fund Management Fee
at an average price of 106.57p per share. The average
price was the prevailing Net Asset Value per share at the
time of issuance.
On 7 February 2022, the Company issued a total
of 13,824,884 new Ordinary Shares of 1p nominal
value each in the capital of the Company, at an issue
price of 108.5p per share. This resulted in gross
proceeds of £15mn.
Each Ordinary Share held entitles the holder to one
vote. Treasury shares do not hold any voting rights. All
shares, excluding those held in Treasury, carry equal
voting rights and there are no restrictions on those
voting rights.
There are no restrictions on the transfer of Ordinary
Shares, nor are there any limitations or special rights
associated with the Ordinary Shares. All shareholders
have the opportunity to attend and vote, in person or
by proxy, at the AGM. For further information on the
details of the forthcoming AGM and ways to engage
with the Board, and the Fund Manager, please refer to
page 186. Voting deadlines are stated in the notice of
meeting and form of proxy and are in accordance with
the Companies Act 2006.
Authority of Directors to
allotted shares
The authority to issue new shares granted at the Annual
General Meeting (“AGM”) held on 14 January 2022 will
expire at the conclusion of the forthcoming AGM.
The forthcoming AGM will consider the authority for
Directors to allot further shares in the capital of the
Company under section 551 of the Companies Act 2006
up to 37,032,656 Ordinary Shares (excluding shares held
in Treasury) in the capital of the Company (equivalent to
approximately 20% of the Ordinary Shares in issue at
the date of the notice of this meeting).
If the Directors wish to offer shares (or sell treasury
shares which the Company may purchase and elect
to hold as treasury shares) for cash, company law
requires that unless shareholders have given specific
authority for the waiver of their statutory pre-emption
rights, the new shares must be first offered to existing
shareholders in proportion to their existing holdings.
There may be occasions, however, when the Directors
will need the flexibility to allot new shares (or to
grant rights over shares) for cash or to sell treasury
shares for cash without first offering them to existing
shareholders in proportion of their holdings in order
to make investments in line with the Company’s
investment policies. This cannot be done unless the
shareholders have first waived their pre-emption rights.
Accordingly, the AGM will consider two separate
resolutions relating to the Director’s ability to allot
shares for cash or sell treasury shares for cash up to
an aggregate nominal value of £37,032,656 which is
equivalent to approximately 20% of the Company's
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Governance - Directors’ Report
issued Ordinary Share capital (excluding shares held in
Treasury) as at the date of the notice of this meeting.
This will allow the Company to carry out one or more
tap issues, in aggregate, up to 20% of the number of
Ordinary Shares in issue at the AGM and thus to pursue
specific investment opportunities in a timely manner
in the future and without the requirement to publish a
prospectus and incur the associated costs.
The Directors are aware that the combined authority
to dis-apply pre-emption rights in respect of up to 20%
of the Company's issued Ordinary Share capital sought
under resolutions 12 and 13 is higher than the 10%
typically sought by investment companies. However,
the Directors believe that a higher authority is justified
to enable the Company to fund future acquisitions
in line with the Company's investment policy and
strategy for growth.
In accordance with UK Listing Rules, the Company will
only issue Ordinary Shares pursuant to this authority
at a price that is not less than the prevailing net
asset value per share of the Company calculated in
accordance with its IFRS accounting policies at the time
of issue. In addition, the Directors will not sell treasury
shares at less than such net asset value per share.
Discount management
The Board makes use of its share buyback powers as
a means of correcting any imbalance between supply
of and demand for the Ordinary Shares. In deciding
whether to make any such repurchases, including
the timing, volume and price of such repurchases
of Ordinary Shares, the Directors have regard to the
Company’s REIT status and what they believe to be
in the best interests of shareholders as a whole and
in compliance with the Articles, the Listing Rules,
Companies Act 2006 and all other applicable legal and
regulatory requirements. During the year ended 30
September 2022, the Company did not purchase any of
its own Ordinary Shares for holding in treasury.
The timing, price and volume of any buybacks of
Ordinary Shares will be at the discretion of the Directors
and is subject to the working capital requirements
of the Company and the Company having sufficient
surplus cash resources available. Directors will only
buyback shares at a discount to the then prevailing net
asset value of the shares. Under the Listing Rules, the
maximum price (exclusive of expenses) which may be
paid for an Ordinary Share must not be more than the
higher of: (i) 5% above the average of the mid-market
values of the Ordinary Shares for the five Business Days
before the repurchase is made; or (ii) the higher of the
price of the last independent trade and the highest
current independent bid for Ordinary Shares.
The authority for the Company to purchase its own
shares granted by the AGM held on 14 January 2022 will
expire at the conclusion of the forthcoming AGM. The
Directors recommend that a new authority to purchase
up to 14.99% of the Ordinary Shares in issue (subject to
the condition that not more than 14.99% of the Ordinary
Shares in issue, excluding treasury shares, at the date
of the AGM are purchased) is granted and a resolution
to that effect will be put to the AGM to be held on 31
January 2023. Any Ordinary Shares purchased will
either be cancelled or, if the Directors so determine,
held in Treasury.
Treasury shares
The Company is permitted to hold Ordinary Shares
acquired by way of market purchase in treasury, rather
than having to cancel them. Such Ordinary Shares may
be subsequently cancelled or sold for cash. Holding
Ordinary Shares in treasury enables the Company
to sell Ordinary Shares from treasury quickly and in
a cost efficient manner and provides the Company
with additional flexibility in the management of
its capital base.
Unless authorised by shareholders, Ordinary Shares
held in treasury will not be sold at less than Net Asset
Value per Share unless they are first offered pro rata
to existing shareholders. The Company will not hold
treasury shares in excess of 10% of the Ordinary Share
capital of the Company from time to time.
Appointment and
replacement of directors
In accordance with the Company’s Articles of
Association, Directors may be appointed by the Board
to fill a vacancy following which they will be elected
by shareholders by ordinary resolution at an Annual
General Meeting or General Meeting of the Company.
Articles of Association
The Company’s Articles of Association can
only be amended by Special Resolution at a
shareholders meeting.
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Financial Instruments
The Company’s financial instruments comprise its
share portfolio, cash balances, borrowings, debtors and
creditors that arise directly from its operations, profit
or loss balances on derivative instruments and accrued
income and expenses. The financial risk management
objectives and policies arising from its financial
instruments and exposure of the Company to risk are
disclosed in note 36 to the financial statements.
Going Concern
The Directors’ assessment of the longer-term viability
of the Company is set out on page 87.
Continuation vote
Under the Articles of Association of the Company,
the Directors are required to propose an ordinary
resolution at the Annual General Meeting following the
fifth anniversary from its initial public offering that the
Company should continue as presently constituted and
at every fifth AGM thereafter.
Accordingly, the first continuation resolution
will be presented to shareholders at the AGM on
31 January 2023.
In the event that a continuation resolution is not passed,
the Directors would be required to formulate proposals
for the voluntary liquidation, unitisation, reorganisation
or reconstruction of the Company for consideration by
shareholders at a general meeting 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 Directors do not believe that there is a material
uncertainty as to whether the Company will continue
as a going concern from the continuation vote, taking
into account the growth seen since IPO, the successful
equity fund raise in February 2022, the long-term
nature of the Company’s assets with supporting debt
funding and the attractiveness of the Company’s low
risk inflation linked income.
Financial models have been prepared for the going
concern period which consider liquidity at the start
of the period and key financial assumptions at the
Company level as well as at Group level. These financial
assumptions include expected cash generated and
distributed by the portfolio companies, which is
then available to be distributed to the Company. The
assumptions include inflows and outflows in relation to
external debt, interest payments, expected dividends
and the ongoing administrative costs of the Company.
These models assume that there is no vote to terminate
the Company in 2023.
Significant shareholdings
As at 30 September 2022, the Directors have been
notified of the following shareholdings comprising 3%
or more of the issued share capital (excluding treasury
shares) of the Company:
Shareholders
Holding
Percentage of
voting rights
Close Asset Management
Limited
18,818,332
11.00%
Schroders plc
16,648,405
9.73%
CG Asset Management Ltd
13,206,949
7.72%
Halb Nominees Limited
11,560,797
6.76%
VT Gravis Funds ICVC
9,049,470
5.29%
Premier Miton Group plc
7,699,945
4.50%
City Asset Management plc
7,394,138
4.32%
abrdn plc
6,975,722
3.77%
City of Bradford – West
Yorkshire Pension Fund
9,750,000
5.27%
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Since the 30 September 2022 and the date of this
Annual Report, the Company has been notified of the
following changes to the significant shareholdings:
Shareholders
Holding
Percentage of
voting rights
Close Asset Management
Limited
20,231,855
10.93%
Settlement of ordinary
share transactions
Ordinary share transactions in the Company are settled
by the CREST share settlement system.
Anti-bribery and corruption
It is the Company’s policy to conduct all of its business
in an honest and ethical manner (see page 101 for
a discussion on the Governance of the company).
The Company takes a zero-tolerance approach to
bribery and corruption and is committed to acting
professionally, fairly and with integrity in all its business
dealings and relationships. The Company’s policy and
the procedures that implement it are designed to
support that commitment.
As a result, the Company can confirm that there were
no legal actions, fines or sanctions relating to anti-
corruption, anti-bribery, anti-competitive behaviour or
anti-trust or monopoly laws or regulations in the year to
30 September 2022.
Environmental, Social and
Governance (‘ESG’) matters
The Company, the Fund Manager and the broader
Gresham House group believe that it is essential to
incorporate environmental and social considerations
into the Company’s business model and decision-
making processes.
Gresham House has a clear commitment to sustainable
investment as part of its business mission and
has achieved a score of 4 out of 5 stars in its most
recent PRI
(Principles for Responsible Investment)
assessment report.
The Company always seeks to work with well-regarded
partners to ensure that its investments are fit for
purpose and maintained at a high standard in order to
meet the needs of lessees and occupiers as well as
sustaining their value over the long-term.
As a result, the Company can confirm that there
were no legal actions, fines or sanctions relating to
environmental, social or governance matters in the year
to 30 September 2022.
Through ReSI Housing, the Company is able to acquire
and hold assets within the social housing regulatory
environment, which focusses on good governance and
financial viability.
All of the Group’s day to day operations and activities
are outsourced to third-parties. As such the Group does
not have any employees or operations of its own and
does not generate any direct greenhouse gas or other
emissions or consume any energy reportable under the
Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 or the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018, implementing the UK
government’s policy on Streamlined Energy and Carbon
Reporting. Information regarding the portfolio’s carbon
emissions can be found on page 55.
Under Listing Rule 15.4.29(R), the Company, as a
closed ended investment fund, is currently exempt
from complying with the Task Force on Climate related
Financial Disclosures.
For more information on the Company’s environmental
and social impact, please see pages 46 to 68.
Employees
The Company has no employees and no share schemes.
The Company does not therefore calculate or disclose
employee turnover rates, its share of temporary staff
or employee training hours. The Board’s policy on
Diversity is contained in the Corporate Governance
Statement on page 104.
The Board is also not entitled to participate in any bonus
scheme, with Directors compensated according to
the Company’s Net Asset Value, ensuring a long-term
alignment of interests.
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Modern Slavery Act 2015, Bribery Act
2010 and Criminal Finances Act 2017
The Company is not within the scope of the UK Modern
Slavery Act 2015 because it does not have employees,
customers or meet the turnover threshold, the
Company is therefore not obliged to make a slavery and
human trafficking statement.
However, the Directors and Fund Manager are satisfied
that, to the best of their knowledge, the Company’s
principal suppliers, as listed in the Directors' report
on pages 96 to 103, comply with the provisions of
the Modern Slavery Act 2015 and maintain adequate
safeguards in keeping with the provisions of the Bribery
Act 2010 and Criminal Finances Act 2017.
Annual General Meeting
The AGM of the Company will be held on 31 January
2023 at 12:45pm. The Notice convening the AGM is
contained in this Annual Report and can be found on
the Company’s website at https://greshamhouse.
com/real-assets/real-estate-investment/residential-
secure-income-plc/
The Board is of the opinion that the passing of all
resolutions being put to the AGM would be in the best
interests of the Company and its shareholders. The
Directors therefore recommend that shareholders vote
in favour of resolutions 1 to 15, as set out in the Notice
of Meeting, as they intend to do in respect of their own
shareholdings.
Political donations
The Company’s policy is not to make any direct or
indirect political donations. No political donations
were made during the year under review and no
political donations will be paid during the forthcoming
year (2021: nil).
Future developments
The outlook for the Company is discussed in the
Chairman’s Statement on page 8.
Independent Auditor
BDO LLP have expressed their willingness to continue
in office as Independent Auditor and a resolution to re-
appoint them will be put to shareholders at the AGM.
Disclosure of information to the
Independent Auditor
Each of the Directors at the date of the approval of this
Annual Report confirms that:
1
so far as the Directors are aware, there is no
relevant audit information of which the Company’s
Independent Auditor is unaware; and
2
the Directors have taken all steps that ought to
have been taken as Directors to make themselves
aware of any relevant information and to establish
that the Company’s Independent Auditor is aware of
that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006. In accordance with Section 489 of
the Companies Act 2006, a resolution to re-appoint BDO
LLP as the Company’s Independent Auditor will be put
forward at the forthcoming AGM.
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Regulatory disclosures – information to be disclosed in accordance with
Listing Rule 9.8.4:
The following table provides references to where the information required by Listing Rule 9.8.4 is disclosed:
Listing Rule
9.8.4 (1) –
Capitalised Interest
The Company has not capitalised any interest in the year under review.
9.8.4 (2) –
Unaudited Financial Information
The Company publishes a quarterly NAV statement. The Company published its interim report
and unaudited financial statements for the period from 1 October 2021 to 31 March 2022.
9.8.4 (4) – Incentive Schemes
The Company has no incentive schemes in operation.
9.8.4 (5) and (6) –
Emolument Waivers
No Director of the Company has waved or agreed to waive any current or future emoluments from
the Company.
9.8.4 (7), (8) and (9) –
Share Issuance
Included in the Director’s report.
9.8.4 (8) and (9) –
Companies Part of the Group
Not applicable.
9.8.4 (10) –
Significant Contracts
During the period under review, there were no contracts of significance subsisting to which the
Company is a party and in which a Director of the Group is or was materially interested or between
the Company and a controlling shareholder.
9.8.4 (11) –
Controlling Shareholders
The Company is not party to any contracts for the provision of services to the Company by a
controlling shareholder.
9.8.4 (12) and (13) –
Waiving Dividends
During the period under review, there were no arrangements under which a shareholder has
waived or agreed to waive any dividends or future dividends.
9.8.4 (14) –
Board Statement re Significant
Shareholders
Not applicable.
There are no other disclosures to be made under LR 9.8.4
By order of the Board
For and on behalf of
Computershare Company Secretarial Services Limited
Company Secretary
1 December 2022
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Introduction
In this statement, the Company reports
on its compliance with the principles
and provisions of the Association of
Investment Companies Code of Corporate
Governance (the “AIC Code”), as published
in February 2019 which provides a
framework of best practice for investment
companies. The Board is committed to
high standards of corporate governance
and the Directors are accountable to
shareholders for the governance of the
Company’s affairs.
Statement of Compliance
The AIC Code addresses the principles and provisions
set out in the UK Corporate Governance Code (the “UK
Code”), as well as setting out additional provisions on
issues that are of specific relevance to the Company.
The Board considers that reporting against the
principles and provisions of the AIC Code, which has
been endorsed by the Financial Reporting Council
(“FRC”), provides more relevant information to its
shareholders. The FRC has confirmed that AIC member
companies, such as ReSI plc, who report against the AIC
Code will be meeting their obligations in relation to the
UK Code and the associated disclosure requirements
under paragraph 9.8.6 of the Listing Rules.
The UK Code is available on the FRC website
(www.frc.
org.uk)
. The AIC Code is available on the AIC website
(www.theaic.co.uk)
, which includes an explanation of
how the AIC Code adapts the principles and provisions
set out in the UK Code to make them relevant for
investment companies.
Throughout the year ended 30 September 2022, the
Company has complied with the principles of the
AIC Code which incorporates the UK Code, except
as set out below:
Executive Directors
- The UK Code includes provisions
relating to the role of the chief executive and executive
directors’ remuneration. For the reasons as set out in
the AIC Guidance, the Board considers these provisions
are not relevant to the Company.
ReSI plc is an
externally managed company with a Board comprising
entirely of Non-Executive Directors and it does not have
any employees, therefore it does not have any executive
board members or a chief executive.
Internal audit function
– The UK Code includes
provisions for an internal audit function. For reasons
set out in the AIC Code, the Board considers that
these provisions are not relevant to the Company
as it is an externally managed investment company.
In particular, all of the Company’s day-to-day
management and administrative functions are
outsourced to third-party service providers, all of
which have their own internal audit function. As a
result, the Company has no internal operations.
The Board has therefore determined that it is
not necessary for the Company to have its own
internal audit function, although this is reviewed on
an annual basis.
The Company has therefore not reported further in
respect of these provisions.
The Board of Directors
The Company has a robust corporate governance
framework with oversight provided by a highly
experienced, fully independent board. The Board
consists of four Non-Executive Directors including the
Chairman. All of the Directors have served during the
entire year. The Directors are collectively responsible
for determining the investment policy and strategy, and
have overall responsibility for the Company’s activities.
The names and biographical details of the Directors,
including a list of their other directorships and
significant commitments is shown on pages 92 to 94.
The Board believes that during the year ended
30 September 2022 its composition was appropriate
for a REIT of the Company’s nature and size. The
Directors have a broad range of relevant business and
financial knowledge, skills and experience to meet
the Company’s requirements and all of the Directors
are able to allocate sufficient time to the Company to
discharge their responsibilities effectively.
In accordance with the Listing Rules that apply to
closed-ended investment entities, and taking into
consideration the AIC Code, the Board has reviewed
the status of its individual Directors and the Board as a
whole. No Director of the Company has served for nine
years or more and all Directors remain independent of
the Company’s Fund Manager. Accordingly, all Directors
are considered to be independent in both character
and judgement.
Corporate Governance Statement
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The Board leads the appointment process of new
Directors, as and when vacancies arise in accordance
with the Directors’ ongoing succession planning.
A
formal process for the selection and appointment of
new Directors to the Company is followed by the Board.
New Director appointments shall be made on the basis
of merit against objective criteria as identified by the
Board as being desirable to complement the skills
and experience of the existing Directors whilst having
regard for all diversity factors.
Succession planning and Board composition has been
a focus during the year, particularly in the context of
Board tenure and diversity policies. On 21 September
2022, the Board approved and adopted a Board tenure
and re-appointment policy (”Board Tenure Policy”).
The Board considers it to be inappropriate to set a
specific tenure limit for any individual Director or
the Chairman of the Board. Instead, as set out in the
Board Tenure Policy, the Board will seek to recruit a
new Director on average every 2-4 years to regularly
bring the challenge of fresh thinking into the Board’s
discussions. The Board recognises the benefits of
regular refreshment and diversity which brings new
perspectives and challenge, whilst also maintaining
stability and continuity of corporate memory through
longer serving Directors. Through the Board Tenure
Policy the Board seeks to achieve a range of skills,
experience, backgrounds and lengths of services
among its members. This approach will likely result in an
average tenure of 3-5 years. The Board does not believe
that length of service in itself necessarily disqualifies a
Director from seeking reappointment but, when making
a recommendation, the Board will take into account the
requirements of the AIC Code. Information in respect of
the Company’s Board Diversity Policy can be found on
page 106 of this Annual Report.
In accordance with the Company’s Articles of
Association, Directors may be appointed by the
Company by ordinary resolution or by the Board. If
appointed by the Board, a Director shall hold office only
until the next AGM and shall not be taken into account in
determining the number of Directors who are to retire
by rotation. In line with best practice and the Board
Tenure Policy, all the Directors will stand for annual
re-election and the performance of each Director will
be appraised by the Board annually, prior to the AGM.
Accordingly, resolutions to re-elect all applicable
Directors are contained within the AGM Notice of
Meeting. The Directors have appointment letters
which do not provide for any specific term. Copies of
the Directors’ appointment letters are available for
inspection on request at the registered office of the
Company and will be available at the AGM. Upon joining
the Board, new Directors receive a formal induction
and relevant training is available to Directors on an
ongoing basis.
Insurance and indemnity provisions
A policy of insurance against Directors’ and Officers’
liabilities is maintained by the Company.
Responsibilities of the Chairman and
Senior Independent Director
The Board appointed Robert Whiteman as Chairman
of the Company, in March 2018.
The Chairman is
responsible for leading the Board and for its overall
effectiveness in directing the affairs of the Company.
The Chairman ensures that all Directors receive
accurate, timely and clear information and help promote
a culture of openness and debate in Board meetings by
facilitating the effective contribution of other Directors.
The Chairman also takes a leading role in ensuring
effective communications with shareholders and other
stakeholders.
Robert Gray was appointed Senior Independent
Director of the Company on 16 September 2021. The
Senior Independent Director provides a channel of
communication for any shareholder concerns regarding
the Chairman and leads the Chairman’s annual
performance evaluation.
In accordance with the AIC Code, the Board has
reviewed and approved a policy setting out the
responsibilities of the Chairman and the Senior
Independent Director.
Audit Committee
The Board delegates certain responsibilities and
functions to the Audit Committee as is clearly set
out and defined in its terms of reference, which
can be inspected at the registered office of the
Company and viewed on the Company’s website
(https://greshamhouse.com/real-assets/real-estate-
investment/residential-secure-income-plc/). The
Audit Committee comprises the whole Board, all of
whom are independent and have relevant financial
expertise. Robert Gray who is the Chairman of the Audit
Committee has relevant financial experience and holds
similar roles at other organisations.
The Committee as
a whole has competence relevant to the sector in which
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Governance - Corporate Governance Statement
the Company operates. The Committee meets at least
twice a year to review the integrity and content of the
interim and annual financial statements, including the
ongoing viability of the Company. The Committee also
reviews the scope and results of the external audit,
its cost effectiveness, quality and the independence
and objectivity of the external auditors, including the
provision of non-audit services. A report of the Audit
Committee is included in this Annual Report as set
out on page 111.
Other Committees
The fully independent Board additionally fulfils the
responsibilities of a nomination committee and
remuneration committee. Given the size of the
Board and the size and nature of the Company,
which has no employees or executive directors, it
has not been considered necessary by the Board
to establish separate nomination or remuneration
committees at this time.
It is the responsibility of the Board as a whole to
determine and approve the Directors’ fees, following
proper consideration and having regard to the industry
generally, the role that individual Directors fulfil in
respect of Board and committee responsibilities,
the time committed to the Company’s affairs and the
remuneration levels generally within the sector. Detailed
information on the remuneration arrangements for the
Directors can be found in the Directors Remuneration
Report on pages 114 to 115.
It is the responsibility of the Board as a whole to
undertake a formal review of the balance, effectiveness
and diversity of the Board and consider succession
planning, identifying the skills and expertise needed to
meet the Companies strategic objectives. The Board
is also responsible for reviewing the appointment of
a Senior Independent Director, membership of the
Board’s Committees, and the re-appointment of those
Directors standing for re-election at AGMs.
In addition, the Board as a whole fulfils the functions
of a management engagement committee to review
the actions and judgements of management in relation
to the interim and annual financial statements and the
Company’s compliance with statutory and regulatory
matters. Furthermore, in this capacity, the Board
reviews the terms of the Fund Management Agreement
and examines the effectiveness of the Company’s
internal control systems and the performance of the
Fund Manager, depositary, administrator, company
secretary and the registrar.
Board and Audit Committee
meeting attendance
Directors
Board Meeting
(7 meetings held)
Audit Committee
(3 meetings held)
Rob Whiteman
7
3
Robert Gray
7
3
John Carleton
6
2
Elaine Bailey
7
3
There were seven board meetings and
three Audit
Committees during the year to 30 September 2022.
Additional sub-committee meetings of the Board were
also held during the year in respect of the Company’s
share issuance, payment of dividends, approval of NAV,
approval of financial statements and results, and other
administrative matters and approval of documentation.
Due to an unforeseen natural event, and despite his
best efforts, John Carleton was unfortunately unable
to attend, either in person or virtually, the Audit
Committee and Board meetings held in November
2021. John had access to all relevant Board and Audit
Committee meeting materials prior to the meetings
and provided comments and questions prior to and
after the meetings.
Board diversity
During the period, the Board approved and adopted a
new Board Diversity Policy, which was updated in line
with the FCA Policy Statement 22/3 on diversity and
inclusion published 1 April 2022. The board Diversity
Policy sets out the approach to diversity on the Board
and the process which the Board will follow when
making new appointments. All Board appointments
will be made on merit and against objective criteria,
having due regard to the benefits of diversity on the
Board including of gender, ethnicity, sexual orientation,
disability or educational, professional and socio-
economic backgrounds and cognitive and personal
strengths
and taking care that appointees have enough
time available to devote to the position, in the context
of the overall balance of skills and backgrounds that the
Board needs to maintain in order to remain effective.
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It is the Board’s ongoing intention that, to the
extent that there are any changes to the current
composition of the Board, it shall take into account the
recommendations of the Hampton-Alexander Review
on gender diversity (published 2016) and the Parker
Review on ethnic diversity (published 2017).
Whilst recognising the importance and benefits
of diversity in the boardroom, the Board does not
consider it to be in the interest of the Company and
its shareholders to set prescriptive diversity criteria
or targets as all appointments must be made on
merit. However, diversity generally, including gender
and ethnicity, will be taken into consideration with
evaluating the skills, knowledge, and experience
desirable to fill each Board vacancy. The objective of
the Board Diversity Policy is to ensure that all Board
appointments will be made on merit, in the context of
the skills, knowledge and experience that are needed
for the Board to be effective.
The Board appraises its collective set of cognitive and
personal strengths, independence and diversity on an
annual basis, and especially during the recruitment
process, so as to ensure alignment with the Company’s
strategic priorities and aims. The Board is satisfied with
its current composition. One Director (25%) of the ReSI
plc Board, Elaine Bailey, is female.
The below tables set out the directors’ gender or sex
and ethnic background:
Board gender identity or sex
Number of
board
members
Percentage
of the board
Number of senior
positions on the board
Men
3
75%
N/A*
Women
1
25%
N/A*
Board ethnic background
Number of
board
members
Percentage
of the board
Number of senior
positions on the board
White**
British or
other
White
4
100%
N/A*
* This column is not applicable as the Company is an externally
managed real estate investment trust and does not have executive
management functions, including the roles of a chief executive
officer or chief financial officer.
**
Including minority white groups
The Company is voluntarily reporting on the diversity
targets set out in Listing Rule 9.8.6R(9). As at 30
September 2022, the Company has not met the
following targets on board diversity:
a.
At least 40% of individuals on its board are women
b.
At least one of the senior board positions is
held by a women
c.
At least one individual on its board is from a minority
ethnic background
As at the publication of this Annual Report, there have
been no changes to the Board that have impacted the
Company’s ability to meet these targets.
As a Board of four Directors, the size of the Board
provides a challenge to achieving the diversity targets
and it is recognised that any change of the membership
of the Board will have a significant impact on the
representation of any particular group of people.
Succession planning and review of the composition of
the Board has been a key focus during the year as can
be seen though the adoption of the new Board Diversity
Policy and the Board Tenure Policy. In order to take
steps towards embedding the Board Diversity Policy
and the Board Tenure Policy, encouraging diversity, and
achieving the diversity targets stated above, the Board
aims to start implementing its succession plans during
the year ending 30 September 2023. The centrepiece
of which will be the gender and ethnic diversity of the
Board. In accordance with the new Board Diversity
Policy, an objective of the Company when appointing
new Directors to the Board shall be to have a long list
of potential non-executive directors including diverse
candidates of appropriate merit.
Performance evaluation
On an annual basis, the Board evaluates its own
performance and the performance of the Audit
Committee, the Chairman and individual Directors. For
the period under review the evaluation was facilitated
by the Company Secretary and was carried out by way
of a detailed questionnaire.
The Chairman led the evaluation, which covered
the functioning and dynamics of the Board as a
whole, composition and diversity of the Board,
the effectiveness of the Audit Committee and the
contribution made by each Director. Each Director
completed a self-evaluation questionnaire in order to
reflect on their personal commitment and contributions
during the period. The results were reviewed by
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the Chairman and discussed with the Board.
The
Board confirmed that the results of the performance
evaluation were positive, and it was concluded that the
Board continued to function effectively and there are
no significant concerns among the Directors about the
Board’s effectiveness. The resulting actions agreed by
the Directors will be monitored during the year ending
30 September 2023. The Board is satisfied that all
current Directors continue to contribute effectively and
have the skills and experience relevant to the leadership
and direction of the Company.
A separate evaluation of the Chairman was led by the
Senior Independent Director, Robert Gray. Directors
completed a Chairman evaluation questionnaire, the
responses of which were reviewed by the Senior
Independent Director who then met with the Chairman
to discuss and address any points of action.
The Board monitors the performance of the
Fund Manager and believes the continuing
appointment of the Fund Manager to be in the best
interests of shareholders as a whole. For further
information see page 81.
During the period, the Board reviewed and re-evaluated
the need for an externally facilitated board evaluation.
Taking into consideration the current activities of the
Company, it was agreed that undertaking an external
board evaluation in the period was not, at this time,
appropriate or in the best interest of the Company. The
Board recognise the benefits of an external evaluation
and will continue to consider whether an external
evaluation would be beneficial and in the interests of the
Company as a whole.
Internal control review and
assessment process
The AIC Code requires the Board to review the
effectiveness of the Company’s system of internal
controls. The Board recognises it has ultimate
responsibility for the Company’s risk management
and system of internal controls, and for reviewing and
monitoring their effectiveness. The risk management
process and system of internal controls are designed
to manage, rather than eliminate, the risk of failure
to achieve the Company’s objectives. It should be
recognised that such systems can only provide
reasonable, rather than absolute, internal assurance
against material misstatement or loss.
The Board has undertaken a risk assessment and
review of the Company’s internal controls framework
and the Company’s risk appetite in the context of the
Company’s overall investment objective. The Board,
through delegation to the Audit Committee, has
undertaken a robust assessment and review of the
emerging and principal risks facing the Company. A
statement of the principal risks and uncertainties faced
by the Company can be found on pages 80 to 86.
The Board believes that the existing arrangements
represent an appropriate framework to meet the
control requirements. By these procedures the
Directors have kept under review the effectiveness of
the internal control system throughout the year and up
to the date of this Annual Report. The monitoring and
review includes all material controls, covering financial,
operational and compliance. Given the nature of the
Company’s activities and the fact that most functions
are sub-contracted, the Directors have obtained
information from key third-party service providers
regarding the controls operated by them. The Board has
concluded that the Company’s risk management and
internal control system, and those of the key third-party
service providers, are adequate to meet the needs
of the Company.
Financial aspects of internal control
The Directors are responsible for the internal financial
control systems of the Company and for reviewing their
effectiveness. These aim to ensure the maintenance
of proper accounting records, the reliability of the
financial information upon which business decisions
are made and which is used for publication and that
the assets of the Company are safeguarded. As stated
above, the Board has contractually delegated to
external agencies the services the Company requires,
but it is fully informed of the internal control framework
established by the AIFM, the Fund Manager, Company
Secretary, Corporate Broker, Tax Adviser, Depositary,
Public Relations Adviser and Registrar to provide
reasonable assurance on the effectiveness of internal
financial controls. The key procedures include review
of management accounts, monitoring of performance
at quarterly Board meetings, segregation of the
administrative function from investment management,
maintenance of appropriate insurance and adherence
to physical and computer security procedures.
The Statement of Directors’ Responsibilities in respect
of the accounts is on page 118 and the Going Concern
and Viability Statement is on page 87. The Independent
Auditor’s Report is on pages 120 to 126.
108
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Governance - Corporate Governance Statement
Other aspects of internal control
The Board holds quarterly meetings, plus additional
meetings as required. Between these meetings there
is regular contact with the Fund Manager and other
key service providers. The Board has agreed policies
on key operational issues. The Company’s key service
providers report to the Board on operational and
compliance issues. The Fund Manager, Corporate
Broker, Company Secretary and the Depositary
provide reports, which are reviewed by the Board. The
Administrator prepares management accounts, which
enable the Board to assess the financial position of
the Company. Additional ad hoc reports are received
as required and Directors have access at all times to
the advice and services of the corporate Company
Secretary, which is responsible for ensuring that Board
and Committee procedures are followed and that
applicable regulation are complied with.
The Company
Secretary is also responsible for ensuring the timely
delivery of information and reports and for ensuring
that statutory obligations of the Company are met.
This contact with the key service providers enables
the Board to monitor the Company’s progress towards
its objectives and encompasses an analysis of the
risks involved. The effectiveness of the Company’s
risk management and internal controls systems is
monitored and a formal review has been completed.
There are no significant findings to report from the
review. A typical agenda of a formal Board meeting
includes a review of the financial and portfolio
performance in that period, distributable income
and dividend yield compared to forecast, an update
regarding the investment pipeline, statutory and
regulatory matters and governance obligations. The
Directors are independent of the Fund Manager. The
Board review investment activity and performance
and exercise appropriate control and supervision to
ensure acquisitions are made in accordance with
agreed investment parameters. The Fund Manager
has been given responsibility for the day-to-day
management of the Company’s assets in accordance
with the investment policy subject to the control and
directions of the Board.
Matters reserved for the Board and
delegated authorities
There is a clear division of responsibilities between
the Chairman, the Directors, the Fund Manager and
the Company’s third-party service providers.
To retain
control of key decisions and ensure there is a clear
division of responsibilities between the running of the
Board and the running of the business, the Board has
identified ‘reserved matters’ that only it can approve.
The Board has delegated a number of responsibilities
and authorities to the Fund Manager. In accordance
with the Fund Management Agreement, which has been
reviewed during the period and the Board has agreed
that it remains appropriate. These responsibilities
include the level of borrowing, which is based on the
characteristics of the relevant property and asset
class and identifying new investment opportunities for
the Company, performing due diligence in relation to
potential investments, approving and executing such
investments and monitoring existing investments.
The Fund Manager presents potential transactions to
the Board at regular Board meetings. The Board and
the Committee receive sufficient, reliable and timely
information in advance of meetings and are provided
with or given access to all necessary resources and
expertise to enable them to fulfil their responsibilities
and undertake their duties in an effective manner.
Principal risks
The Directors confirm that they have carried out a
robust assessment of the principal and emerging
risks facing the Company, including those that
would threaten its position, business model, future
performance, solvency or liquidity. The principal risks
and how they are being managed is set out in the
Strategic Report on pages 80 to 86. As part of its risk
process, the Board seeks to identify emerging risks
to ensure that they are effectively managed as they
develop and recorded in the risk matrix.
Annual General Meeting
At least twenty-one days’ notice shall be given to all
the members and to the auditors of an AGM. All other
general meetings shall also be convened by not less
than twenty-one days’ notice to all those members and
to the auditors unless the Company offers members
an electronic voting facility and a special resolution
reducing the period of notice to not less than fourteen
days prior to the general meeting, in which case a
general meeting may be convened by not less than
fourteen days’ notice in writing. A special resolution will
be proposed at the AGM to reduce the period of notice
for general meetings, other than the AGM, to not less
than fourteen days.
Residential Secure Income plc Annual Report and Accounts 2022
109
02
Governance - Corporate Governance Statement
Shareholder relations
The Company encourages all shareholders to attend
and vote at the AGM and seeks to provide a minimum
of twenty one working days’ notice of that meeting.
The Notice of Meeting sets out the business of the
AGM and any item not of an entirely routine nature is
explained in the Directors’ Report. Separate resolutions
are proposed for each substantive issue. The Board
and the Fund Manager are available to discuss issues
affecting the Company, and shareholders have the
opportunity to address questions to the Fund Manager,
the Board including the Chairman and the Chairman of
the Audit Committee.
The Fund Manager has a structured programme of
meetings with key shareholders and reports back to the
Board on its findings. A detailed list of the Company’s
shareholders is reviewed at each Board meeting.
The Interim and Annual reports of the Company are
prepared by the Board and its advisers to present a full
and readily understandable review of the Company’s
performance. Copies of which are dispatched to
shareholders by post or electronically as requested
and are also on the Company’s website (https://
greshamhouse.com/real-assets/real-estate-
investment/residential-secure-income-plc/). Half
year and annual investor presentations, as well has
factsheets, reports and policies are also made available
on the Company’s website.
The Chairman and the Board welcome direct feedback
from shareholders.
Further details of the Company’s engagement with of
stakeholders and how the Board has regard to those
stakeholders in the Board’s decision-making processes
are set out in the Strategic Report on pages 72 to 76.
Exercise of voting powers and
stewardship code
The principles of best practice of the Stewardship Code
are not applicable to the Company’s operations, being a
REIT that does not hold the shares of other companies.
Social and environmental policy
Please see the Environmental and Social Impact report
on pages 46 to 68 for details.
For and on behalf of
Computershare Company Secretarial Services Limited
Company Secretary
1 December 2022
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Governance - Corporate Governance Statement
Role of the Audit Committee
The AIC Code of Corporate Governance (the UK Code)
recommends that boards should establish an audit
committee consisting of at least three, or in the case
of smaller companies, two independent non-executive
directors. The Board is required to satisfy itself
that the Audit Committee has recent and relevant
experience. The main role and responsibilities of the
Audit Committee should be set out in written terms
of reference covering certain matters described in
the UK Code. The terms of reference of the Audit
Committee can be found on the Company’s website at
https://greshamhouse.com/real-assets/real-estate-
investment/residential-secure-income-plc/.
The Audit Committee meets formally at least twice a
year for the purpose, amongst other things, of:
considering the appointment, independence and
objectivity, and remuneration of the Company’s
external auditor, BDO LLP (the “Auditor”);
to review the annual accounts and interim
financial report;
to review the day-to-day management of the
Company by the Fund Manager and its adherence to
agreed investment parameters; and
assessment of the Company’s internal financial
controls and risk management systems.
Composition
All of the independent Directors of the Company are
members of the Audit Committee. The Audit Committee
as a whole has recent and relevant financial experience.
The Chairman of the Company is a member of the Audit
Committee. The Board and the Audit Committee believe
that the Chairman of the Company being a member of
the Audit Committee is appropriate and beneficial to
the Company due to his contributions as a result of his
recent and relevant financial experience and as a result
of him being independent on appointment. Details of
the Committee members’ experience can be found
on page 92 to 94.
Meetings
There have been three Audit Committee meetings
during the year ended 30 September 2022. These
meetings were aligned with key dates for financial
reporting and the audit cycle of the Company.
Attendance is included in the Corporate Governance
Statement page 104.
During these meetings the Audit Committee has:
reviewed the Company’s financial statements
for the half year and year end and made formal
recommendations to the Board;
reviewed the Company’s going concern and
viability statements;
reviewed the internal controls and risk management
systems of the Company and its third-party service
providers including cyber-security;
reviewed the Company’s risk register reflecting the
current and emerging risks faced by the Company;
agreed the audit plan and fees with the Auditor,
including the principal areas of focus;
reviewed its own performance; and
reviewed its Terms of Reference.
Financial statements and significant
accounting matters
The Audit Committee considered the following
significant accounting issues in relation to the
Company’s Financial Statements for the year ended 30
September 2022:
A. Investment property valuation
The valuation of investment property is the most
material matter in the production of the financial
statements. Savills Advisory Services Limited has
been appointed to value the Company’s property
investments, in accordance with the Regulated
Investment Company requirements, on a quarterly
basis. The Audit Committee reviewed a copy of the
valuation report once it had been completed and has
received a presentation from the valuer. Investment
properties are valued at their fair value in accordance
with IFRS 13 and IAS 40, which recognises a variety
of fair value inputs depending upon the nature of the
investment. The Audit Committee has reviewed the
assumptions underlying the property valuations and
concluded that the valuation as at 30 September 2022
is appropriate.
Report of the Audit Committee
Residential Secure Income plc Annual Report and Accounts 2022
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02
Governance
B. Fair value of debt (debt held at fair
value through profit and loss)
The Group’s debt held at fair value through profit or
loss is fair-valued as of the year-end and based on the
relevant gilt rate and discounted cash flows. The Audit
Committee has reviewed the assumptions underlying
the debt valuations and concluded that the valuation at
the Company’s year-end is appropriate.
C. Revenue recognition
Ensuring that the Group’s rental income is accounted
for in accordance with accounting standards presents
an inherent risk. The Audit Committee has reviewed
the Company’s procedures in place for revenue
recognition and has concluded that revenue has been
appropriately recognised.
D. Shared ownership
Shared ownership is a form of tenure in which a long
lease is granted in respect of a property alongside
payment of an initial stake in that property (the First
Tranche). Proceeds of First Tranche sales are included
within turnover and the related proportion of the cost
of the asset recognised within cost of sales. Shared
ownership properties are split proportionately between
Inventories and Investment properties based on the
current element relating to First Tranche sales. The
valuations for the investment property element are
valued by Savills as part of the investment property
valuation process and the inventory element is held
at cost (defined as the lower of net realisable value or
cost). The Audit Committee has reviewed the Savills
valuation report for the relevant period, the Company’s
assessment of the split of investment property and
inventory, and the Company’s procedures in place for
the valuation of shared ownership and has concluded
that it has been appropriately recognised.
E. Internal Controls and
Risk Management
Through the powers conferred upon the Audit
Committee by the Board, the Audit Committee is
responsible for ensuring that suitable internal controls
systems are implemented by the Fund Manager and
other third-party service providers, and further
ensuring that those control systems are continuously
reviewed and remain effective. The Audit Committee
has reviewed the internal controls of third-party service
providers and the Fund Manager during the period.
In addition, with the assistance of the Fund Manager and
third-party services providers, the Audit Committee
identifies the principal risks and uncertainties faced by
the Company and determines strategies to ensure that
they are mitigated. Further details on the principal risks
and uncertainties that face the Company can be found
on pages 80 to 86.
External Audit
The Audit Committee monitors and reviews the
effectiveness of the external audit process for
the publication of the Annual Report and makes
recommendations to the Board on the re-appointment,
remuneration and terms of engagement of the Auditor.
Audit Fees
The audit fee incurred for the review of the 2022 Annual
Report and Accounts was £178,000 (30 September
2021: £145,000). The Audit Committee continues to
monitor the level of audit fees carefully.
Provision of non-audit services
The Audit Committee has a Non-Audit Services
Policy to govern the supply of any non-audit services
provided by the Auditor. Such services are considered
on a case-by-case basis and may only be provided
to the Company if the provision of such services is
at a reasonable and competitive cost and does not
constitute a conflict of interest or potential conflict
of interest which would prevent the Auditor from
remaining objective and independent. On 21 September
2022, the Board reviewed and approved the Non-
Audit Services Policy following a review of its ongoing
effectiveness and adequacy.
BDO LLP were paid fees of £61,000 in respect of non-
audit services in the year to 30 September 2022 (2021:
£34,000). These services were in respect of the interim
review of the Interim Report for the period ended
31 March 2022 (£34,000) and reporting accountant
services (£37,000). When reviewing the suitability of
BDO LLP to carry out this service the Audit Committee
assesses a number of factors, including but not
limited to: assessing whether there are any threats to
112
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Governance - Report of the Audit Committee
independence and objectivity resulting from the provi-
sion of such services, the nature of the service provided
and whether the skills and experience of BDO LLP make
it the most suitable supplier. The Audit Committee has
considered the non-audit work of the Auditor during the
year ended 30 September 2022 and does not consider
that this compromises its independence. In addition,
the Audit Committee has received assurances from
the Auditor that its independence is not compromised
by the supply of these services and appropriate
safeguards have been implemented where required
including a separate team undertaking the work of the
reporting accountant.
Audit tenure
BDO LLP has been appointed as the Company’s auditor
since the Company’s incorporation in 2017, following
a competitive process and review of the Auditor’s
credentials. The appointment of the external auditor
is reviewed annually by the Audit Committee and the
Board and is subject to approval by shareholders.
Following a review of the service provided by the
Company’s auditor and consideration of conducting an
audit tender, the Audit Committee were satisfied with
the Auditors performance and have decided that no
further action would be taken. The current appointment
of BDO LLP is compliant with all existing regulations
and the Board and the Audit Committee agree that the
Auditor remains independent. In accordance with the
requirements relating to the appointment of audit firms,
the Company will be required to conduct an audit tender
no later than for the financial year beginning
1 October 2027. In addition, in line with the requirement
for the audit partner to be rotated at least every five
years, a new lead audit partner, Richard Levy, was
appointed for the audit for the financial year beginning
1 October 2021.
Effectiveness of external
audit and continuing
appointment of the auditor
The Audit Committee is responsible for reviewing the
effectiveness of the external audit process. The Audit
Committee received a presentation of the audit plan from
the Auditor and a presentation of the results of the audit
following completion of the main audit testing. Following
the presentation of the results of the audit, the Audit
Committee conducted a review of the Auditor which
included a discussion of the audit process and the ability
of the Auditor to fulfil its role. The feedback provided by
the Fund Manager regarding the audit team’s performance
on the audit was positive. The Auditor demonstrated a
good understanding of the Group and had identified and
focused on the areas of increased financial reporting risk.
Its reporting to the Audit Committee during the period
was clear and thorough. The Audit Committee is satisfied
that the Auditor has appropriately challenged the Fund
Manager’s judgements.
The Audit Committee acknowledged that the audit
team during the period, including the new lead audit
part-ner, comprised of staff with appropriate levels of
knowledge and experience of the sector in which the
Company operates. Following the above review, the Audit
Committee concluded that the external audit process has
been effective. Taking into consideration the performance
and effectiveness of the Auditor and the confirmation of
their independence, the Audit Committee has agreed that
the re-appointment of BDO LLP should be recommended
to the Board and the shareholders of the Company at the
forthcoming AGM. BDO LLP has confirmed its willingness
to continue in office.
Internal audit function
The Audit Committee has considered the need for an
internal audit function and considers that this is not
appropriate given the size, nature and circumstances of
the Company. The Audit Committee keeps the needs for
an internal audit function under periodic review.
Conclusion with respect to the
Annual Report and financial
statements - fair, balanced and
understandable financial statements
The Audit Committee has concluded that the Annual
Report for the year ended 30 September 2022, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the Company’s position, performance, business
model and strategy. The Audit Committee has reported
its conclusions to the Board of Directors. The Audit
Committee reached this conclusion through a process
of review of the document and enquiries to the various
parties involved in the production of the Annual Report.
Robert Gray
Chairman of the Audit Committee
1 December 2022
Residential Secure Income plc Annual Report and Accounts 2022
113
02
Governance - Report of the Audit Committee
The Board has prepared this report in accordance
with the requirements of the Large and Medium
Sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The law requires the Company’s Auditor to audit certain
disclosures provided. Where disclosures have been
audited, they are indicated as such. The Auditor’s
opinion is included in the Independent Auditor’s Report
on pages 120 to 126.
The Board consists entirely of Non-Executive Directors
and the Company has no employees therefore the
Company has not reported on those aspects of
remuneration that relate to Executive Directors. As
detailed on page 94, it is not considered appropriate
for the Company to establish a separate Remuneration
Committee. Accordingly, the Board as a whole
considers and approves the Directors’ remuneration.
Remuneration Policy
The Company is required to ask shareholders to formally
approve the Directors’ Remuneration Policy,
on a three-
yearly basis. Any change to the Directors’ Remuneration
Policy requires shareholder approval. A binding ordinary
resolution to approve the Directors’ Remuneration
Policy was last proposed and approved by shareholders
at the AGM of the Company held on 14 January 2022.
There are no proposed changes to the policy, and
therefore it is intended that the provisions of this
policy continue for the year ended September 2023
and subsequent years. A copy of the policy is included
in the Company’s Annual Report for the year ended 30
September 2021. The Directors’ Remuneration Policy
will next be put forward for approval at the AGM to
be held in 2025.
Directors’ Remuneration
Implementation Report
The Directors’ Remuneration Implementation Report
is presented for approval by shareholders on an annual
basis and will be put forward as an ordinary resolution
at the forthcoming AGM. The result of the shareholder
resolution on the Implementation Report is non-binding
on the Company, although it gives shareholders an
opportunity to express their views, which will be taken
into account by the Board.
The law requires the Company’s auditor to audit certain
disclosures provided in the Directors’ Remuneration
Implementation Report. Where disclosures are audited,
they are indicated as such. The auditor’s opinion
is on page 120.
A non-binding ordinary resolution to approve the
Directors’ Remuneration Implementation Report
contained in the Annual Report for the period ended
30 September 2021 was put forward and passed at the
AGM held on 14 January 2022.
The votes cast by proxy were as follows:
Directors’ Remuneration Policy
Number of
votes
Percentage of
votes cast
For
95,493,606
99.16%
Against
809,958
0.84%
Votes Withheld
3
Directors’ Remuneration Report
Number of
votes
Percentage of
votes cast
For
95,492,606
99.17%
Against
800,731
0.83%
Votes Withheld
3
Remuneration
The Company currently has four Non-Executive
Directors.
Directors are entitled to receive a fee linked to the Net
Asset Value of the Company in respect of their position
as a Director of the Company. Fees are currently
payable at the rates set out in the Remuneration
Policy and below.
The Chairman, will be entitled to receive a fee linked to
the Net Asset Value of the Company as follows:
Net Asset Value
Annual Fee
Up to £100,000,000
£40,000
£100,000,001 to £200,000,000
£50,000
£200,000,001 to £350,000,000
£60,000
thereafter
£70,000
Directors’ Remuneration Implementation Report
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Residential Secure Income plc Annual Report and Accounts 2022
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Governance - Directors’ Remuneration Implementation Report
Each of the Directors, save for the Chairman, will be
entitled to receive a fee linked to the Net Asset Value of
the Company as follows:
Net Asset Value
Annual Fee
Up to £100,000,000
£30,000
£100,000,001 to £200,000,000
£35,000
thereafter
£40,000
The Board believes that these fees set out in the
Remuneration Policy appropriately reflect prevailing
market rates for the Company’s complexity and
size, and will also enable the Company to attract
appropriately experienced additional Directors
in the future.
The Board reviews the fees payable to the Directors on
an annual basis. During the year, the Net Asset Value
of the Company increased to such that the Directors
became eligible for a fee increase under the Re-
muneration Policy. However, taking into consideration
current ongoing activities within the Company, the
Board agreed to waive an increase of fees for the year
ended 30 September 2022. The Board will meet to
review the Directors’ Remuneration during the course
of the year ending 30 September 2023 and consider a
potential increase per the remuneration policy.
Directors’ service contracts
The Directors do not have service contracts with
the Company. The Directors are not entitled to
compensation on loss of office. The Directors
have appointment letters which do not provide for
any specific term but are subject to re-election by
shareholders at a maximum interval of three years.
However, in line with best practice and the Company’s
Tenure and Re-appointment Policy all Directors have
agreed to retire and stand for re-election on a voluntary
basis at the AGM in January 2023.
There are no restrictions on transfers of the Company’s
shares held by the Directors, or any special rights
attached to such shares.
Director search and selection fees
No Director search and selection fees were incurred
during the year ended 30 September 2022.
Directors’ emoluments for the year ended
30 September 2022 (audited)
The Directors who served during the year received the
following remuneration for qualifying services.
Fees from
1 October 2021
to
30 September
2022
£’000
Fees from
1 October 2020
to
30 September
2021
£’000
Annual
percentage
change in
fees
b
%
Robert
Whiteman
50
50
0
Robert
Blackburn Gray
35
35
0
John Carleton
35
35
0
Elaine Bailey
35
35
0
155
155
When reviewing any change in Directors’ fees from
previous financial periods, it is important to note that
the remuneration of the Directors is linked to the Net
Asset Value of the Company.
There are no other taxable benefits payable by the
Company which may be deemed to be taxable.
None of
the above fees were paid to third parties.
The Directors do not receive pension benefits, long-
term incentive schemes or share options.
Residential Secure Income plc Annual Report and Accounts 2022
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02
Governance - Directors’ Remuneration Implementation Report
Performance
The following chart shows the performance of the Company’s share price by comparison to the principal relevant
indices. The Board believes that these indices are the most representative comparator for the Company, given the
Company’s investment objective.
ReSI Share Price vs. Peers
60
70
80
90
100
110
120
130
ReSI plc
EPRA residential index
31/03/2021
30/04/2021
31/05/2021
30/06/2021
31/07/2021
31/08/2021
30/09/2021
31/10/2021
30/11/2021
31/12/2021
31/01/2022
28/02/2022
31/03/2022
30/04/2022
31/05/2022
30/06/2022
31/07/2022
31/08/2022
30/09/2022
Relative importance of spend on pay
The following table sets out the total level of Directors’
remuneration compared to Net Operating Income,
Directors’ fees, Operating expenses, and Dividends paid
and payable to shareholders.
2022
£’000
2021
£’000
Change
£’000
Net Property Income
17,526
15,173
2,354
Directors’ fees
155
155
0
Operating expenses
3,221
3,217
5
Dividends paid and
payable to shareholders
9,194
8,552
642
The management fee and expenses have been included
to give Shareholders a greater understanding of the
relative importance of spend on pay.
Directors’ holdings (audited)
There are no requirements pursuant to the Company’s
Articles of Association for the Directors to own
shares in the Company. As at 30 September 2022, the
Directors’ beneficial shareholdings were as follows:
30 September
2022
30 September
2021
Robert Whiteman
80,000
80,000
Robert Blackburn Gray
207,148
157,148
John Carleton
4,850
4,850
Elaine Bailey
5,000
5,000
The changes in the Director’s beneficial shareholdings
between 30 September 2022 and the date of this report
were as follows:
30 November
2022
30 September
2022
Robert Whiteman
100,000
100,000
Robert Blackburn Gray
262,315
207,148
John Carleton
4,850
4,850
Elaine Bailey
5,000
5,000
The shareholdings of the Directors are not significant
and therefore do not compromise their independence
as Non-Executive Directors.
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Residential Secure Income plc Annual Report and Accounts 2022
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Governance - Directors’ Remuneration Implementation Report
Statement
On behalf of the Board and in accordance with Part 2 of
Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations 2013, I confirm that the above Report on
Remuneration Policy and Remuneration Implementation
summarises, as applicable, for the financial year ended 30
September 2022:
(a)
the major decisions on Directors’ remuneration;
(b)
any substantial changes relating to Directors’
remuneration made during the financial year ended
30 September 2022; and
(c)
the context in which the changes occurred and
decisions have been taken.
Rob Whiteman
Chairman of the Board of Directors
1 December 2022
Residential Secure Income plc Annual Report and Accounts 2022
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Governance - Directors’ Remuneration Implementation Report
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare
Group and parent Company financial statements for
each financial year. The Group financial statements
have been prepared in accordance with UK adopted
international accounting standards and the Company
financial statements have been prepared in accordance
with Financial Reporting Standard 100 Application
of Financial Reporting Requirements (“FRS 100”) and
Financial Reporting Standard 101 Reduced Disclosure
Framework (“FRS 101”),
subject to any material
departures disclosed and explained in the Company
financial
statements; and United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and Company and of the Group’s and Company’s
profit or loss for that period.
In preparing the financial statements, the Directors
are required to:
select suitable accounting policies and then apply
them consistently;
make judgements and estimates that are reasonable,
relevant, reliable and prudent;
for the Group financial statements, state whether
they have been prepared in accordance with UK
adopted international accounting standards, subject
to any material departures disclosed and explained
in the financial statements;for the parent Company
financial statements, state whether applicable UK
accounting standards have been followed, subject to
any material departures disclosed and explained in
the parent company financial statements;
for the parent Company financial statements, state
whether applicable UK accounting standards have
been followed, subject to any material departures
disclosed and explained in the parent company
financial statements; and
prepare the financial statements on a going concern
basis unless it is inappropriate to presume that the
Group and the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable
them to ensure that its financial statements comply
with the Companies Act 2006.
They are responsible for such internal control as
they determine necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of
the Group and to prevent and detect fraud and other
irregularities. Under applicable law and regulations, the
Directors are also responsible for preparing a Strategic
Report, Directors’ Report, Directors’ Remuneration
Implementation Report and Corporate Governance
Statement that complies with that law and those
regulations. These can be found on pages 1 to 89, 96 to
103, 114 to 117 and 104 to 110 respectively. The Directors
are responsible for the maintenance and integrity of
the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors are responsible for ensuring that the
Annual Report and accounts, taken as a whole, are
fair, balanced and understandable and provide the
information necessary for shareholders to assess
the Group and Company’s performance, business
model and strategy.
Website publication: The Directors are responsible
for ensuring the Annual Report and the financial
statements are made available on a website (https://
greshamhouse.com/real-assets/real-estate-
investment/residential-secure-income-plc/). Financial
statements are published on the Company’s website
in accordance with legislation in the United Kingdom
governing the preparation and dissemination of
financial statements, which may vary from legislation
in other jurisdictions. The maintenance and integrity
of the Company’s website is the responsibility of the
Directors. The Directors’ responsibility also extends
to the ongoing integrity of the financial statements
contained therein.
Directors’ Responsibilities
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Governance
Directors’ responsibility statement
Each of the Directors, whose names and titles are
listed on pages 92 to 94, confirms that to the best of
their knowledge:
the financial statements have been prepared in
accordance with prepared in accordance with UK
adopted international accounting standards and, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the
undertakings included in the consolidation as a whole;
The Strategic Report includes a fair review of the
development and performance of the business and the
financial position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
the Annual Report and accounts taken as a whole is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s performance, business model and strategy.
For and on behalf of the Board
Rob Whiteman
Chairman
1 December 2022
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Independent Auditors Report
Opinion on the financial statements
In our opinion:
the financial statements give a true and fair view of
the state of the Group’s and of the Parent Company’s
affairs as at 30 September 2022 and of the Group’s
profit for the year then ended;
the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of
Residential Secure Income plc (the ‘Parent
Company’) and its subsidiaries (the ‘Group’) for the
year ended 30 September 2022 which comprise
the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Financial
Position, the Consolidated
Statement of Changes in
Equity, the Consolidated Statement of Cash Flows,
the Company Statement of Financial Position, the
Company Statement of Changes in Equity and notes
to the financial statements, including a summary of
significant accounting policies. The financial reporting
framework that has been applied in the preparation of
the Group financial statements is applicable law and
UK adopted international accounting standards. The
financial reporting framework that has been applied
in the preparation of the Parent Company financial
statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting
Standard 101 Reduced Disclosure Framework (United
Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the Auditor’s
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. Our audit
opinion is consistent with the additional report to the
Audit Committee.
Independence
Following the recommendation of the Audit Committee,
we were appointed by the Directors on 20 September
2017 to audit the financial statements for the period
ended 11 July 2017 and subsequent financial periods.
The period of total uninterrupted engagement is 6
years, covering the period ended 11 July 2017 and the
periods ended 30 September 2018 to 2022.
We remain independent of the Group and the Parent
Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance
with these requirements. The non-audit services
prohibited by that standard were not provided to the
Group or the Parent Company.
Conclusions relating
to going concern
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.
Our evaluation of the
Directors’ assessment of the Group and Parent
Company’s ability to continue to adopt the going
concern basis of accounting included:
We used our knowledge of the Group and its market
sector together with the general economy to identify
the inherent risks to the Group’s business and
considered how those might impact the Group’s ability
to remain a going concern for a period of at least
twelve months from when the financial statements
are authorised for issue.
We reviewed the forecasts that support the going
concern statement and also the long term viability
statement.
Our review work included agreeing the
Group’s available borrowing facilities and the related
covenants, assessing the forecasted cash flows with
reference to budgeted and historic performance
and considering the covenant compliance
headroom for sensitivity to both future changes in
property valuations and the Group’s future financial
performance, including checking the reverse stress
testing performed by management.
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Governance
We discussed the Continuation Vote due to be put to
the AGM in January 2023 with the Directors and with
the Company’s brokers. We considered the basis on
which the Directors concluded that the outcome of
the Vote will be positive and assessed the adequacy of
the disclosures about this in the annual report.
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 Parent
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 relation to the Parent Company’s reporting on how
it has 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 Annual Report.
Overview
Coverage
75
100% (2021: 100%) of Group revenue
100% (2021: 100%)
of Group profit/(loss) before tax
100% (2021: 100%)
of Group investment property
100% (2021: 100%) of Group total assets
Key audit matter
2022
2021
KAM 1
Valuation of
property
portfolio
Valuation of
property
portfolio
Materiality
Group financial statements as a whole
We determined materiality for the
Group financial statements as a whole
to be £4,275,000 (2021:
£3,900,000),
which was set at 1% of Group total
assets (2021: 1%).
An overview of the scope of our audit
Our Group audit was scoped by obtaining an
understanding of the Group and its environment,
including the Group’s system of internal control, and
assessing the risks of material misstatement in the
financial statements.
We also addressed the risk of
management override of internal controls, including
assessing whether there was evidence of bias by
the Directors that may have represented a risk of
material misstatement.
The Group operates solely in the United Kingdom and
through one segment, investment property. The Group
audit team carried out full scope audits each of the
six significant components of the Group using the
materiality level set out below and audit procedures
at a Group level on the insignificant components. The
Group audit team performed all the work necessary
to issue the Group and Parent Company audit opinion,
including undertaking all of the audit work on the risks
of material misstatement identified in the key audit
matters section below.
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance
in our 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) that we identified, 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 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
matter.
75.
These are areas which have been subject to a full scope audit by the Group engagement team
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Key audit matter
How the scope of our audit addressed the key audit matter
Valuation of
investment properties
Refer to
note
4
(significant
accounting
judgements and
estimates) and
note 17 investment
property) to the Group
financial statements.
Investment properties are held at
fair value in the Group’s financial
statements.
The valuation of the
Group’s investment property is
the key component of net asset
value and underpins the Group’s
result for the year.
The valuation of investment
property requires significant
judgement and estimates by
management with the involvement
of their independent valuer,
including discount rates used and
staircasing rates for the shared
ownership properties.
There is also a risk that
management may influence
the significant judgements and
estimates in respect of property
valuations in order to achieve
performance targets to meet
market expectations.
The property valuations should also
be disclosed appropriately in the
financial statements in accordance
with UK adopted international
accounting standards.
It is for these reasons that
we consider this to be a
key audit matter.
Experience of Valuer and relevance of their work
We read the Valuer’s report and agreed that
the approaches used were consistent with the
requirements of accounting standards.
We
assessed the Valuer’s competence and capabilities
and read their terms of engagement with the Group,
and considered if there were any matters that
affected their independence and objectivity, or
imposed scope limitations upon them.
Data provided to the Valuer
We checked the data provided to the Valuer by
management including inputs such as current rent
and lease term (which we have agreed on a sample
basis to executed lease agreements as part of our
audit work), future costs, void rates and bad debts
(which we have assessed based on past experience
of the portfolio).
Assumptions and estimates used by the Valuer
We met with the Valuer and gained an understanding
of the valuation methods and assumptions used.
We benchmarked the valuation to our expectations
developed using independently obtained data
in relation to discount rates and capitalisation
yields.
With the assistance of our own property
valuation specialist we considered the methodology
applied and challenged the assumptions utilised
by the Valuer, corroborating their explanations
where relevant.
We checked the accuracy of the
valuation models by reperforming the discounted
cash flow calculations using the same inputs
and assumptions.
We considered if there was
any evidence of management bias in relation to
the valuations.
Financial statement disclosures
We checked that the property valuations have
been properly included in the financial statements.
We also assessed whether the disclosures in
the financial statements are appropriate and in
accordance with relevant accounting standards
Key observation
Based on the procedures performed, we noted
no exceptions and found the estimates and
assumptions used appropriate in the context of the
Group’s property portfolio.
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Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature
of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
Group financial statements
Parent company financial statements
2022
2021
2022
2021
Materiality
£4,275,000
£3,900,000
£1,898,000
£1,770,000
Basis for determining
materiality
1% of total assets
1% of total assets
1% of total assets
1% of total assets
Rationale for the
benchmark applied
We determined that total assets would be the most
appropriate basis for determining overall
materiality as we consider it to be one of the
principal considerations for users of the financial
statements in assessing the financial performance
of the Group.
We determined that total assets would be the most
appropriate basis for determining overall
materiality as we consider it to be one of the
principal considerations for users of the financial
statements in assessing the financial performance
of the Parent Company.
Performance materiality
£3,206,000
£2,925,000
£1,423,500
£1,327,500
Basis for determining
performance materiality
75% of materiality – it is set at an amount to reduce
to an appropriately low level the probability that the
aggregate of uncorrected and undetected
misstatements exceeds materiality.
75% of materiality – it is set at an amount to reduce
to an appropriately low level the probability that the
aggregate of uncorrected and undetected
misstatements exceeds materiality.
Specific materiality
We determined that for other account balances, classes of transactions and disclosures that impact adjusted earnings
(as defined in note 15 of the Group financial statements) a misstatement of less than materiality for the financial
statements as a whole could influence the economic decisions of users.
We concluded that a specific materiality
for these areas should be £447,000 (2021 - £355,000), which was set at 5% of adjusted earnings.
Adjusted earnings
excludes the impact of fair value movements and one-off debt arrangement costs.
The specific materiality applied to the Parent Company was £130,000 (2021 - £167,000) respectively, calculated as a
proportion of the Group materiality.
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Component materiality
We set materiality for each component of the Group
based on a percentage of between 2% and 60% of
Group materiality dependent on the size and our
assessment of the risk of material misstatement of
that component.
Component materiality ranged from
£92,000 to £2,546,000. In the audit of each component,
we further applied performance materiality levels of
75% of the component materiality to our testing to
ensure that the risk of errors exceeding component
materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would
report to them all individual audit differences in excess
of £85,000 (2021: £76,000) for items audited to financial
statement materiality, and £25,000 (2021: £25,000) for
items audited to specific materiality. We also agreed to
report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
We determined that the same measure as the Group
was appropriate for the Parent Company and the areas
subject to specific materiality. Accordingly, the Parent
Company reporting threshold was £37,000 (2021:
£35,000) and specific reporting threshold applied was
£25,000 (2021 - £25,000).
Other information
The Directors are responsible for the other information.
The other information comprises the information
included in the Annual Report and Accounts, other
than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does
not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
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 course of the audit,
or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement in the
financial statements themselves. 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 in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’
statement in relation to going concern, longer-term
viability and that part of the Corporate Governance
Statement relating to the Parent company’s compliance
with the provisions of the UK Corporate Governance
Code specified for our review.
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 or our
knowledge obtained during the audit.
Going concern
and longer-term
viability
The Directors' statement with
regards the appropriateness of
adopting the going concern basis
of accounting and any material
uncertainties identified set out on
pages 87 to 89; and
The Directors’ explanation as to
its assessment of the entity’s
prospects, the period this
assessment covers and why
they period is appropriate set
out on page 89.
Other Code
provisions
Directors' statement is fair,
balanced and understandable set
out on page 113;
Board’s confirmation that it has
carried out a robust assessment
of the emerging and principal risks
set out on page 109;
The section of the annual report
that describes the review of
effectiveness of risk management
and internal control systems set
out on page 108; and
The section describing the work
of the audit committee set out on
pages 111 to 113.
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Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required
by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for the financial
year for which the financial statements are prepared is consistent with the financial
statements; and
the Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and
its environment obtained in the course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
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.
Matters on which
we are required
to report by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ remuneration
report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the Directors 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 Parent
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 Parent Company
or to cease operations, or have no realistic alternative but to do so.
Auditor’s 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 auditor’s 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.
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Extent to which the audit was capable of
detecting irregularities, including fraud
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:
Through our knowledge of the Group and its sector
we used our understanding of the legal and regulatory
framework applicable to the Group and the industry in
which it operates, and considered the risk of acts by
the Group that were contrary to applicable laws and
regulations, including fraud. We performed our own
checks of compliance with relevant requirements
including, but not limited to, the Companies Act 2006,
the UK Listing Rules, the REIT tax regime requirements
and legislation relevant to the rental of properties.
We
considered the Group’s own control environment for
monitoring its compliance with laws and regulation
and obtained their papers on compliance, in addition to
performing our own review.
These matters were discussed with the entire audit
team at both planning and throughout the audit.
We addressed the risk of management override of
internal controls, including sample testing journals
processed during and subsequent to the year and
evaluating whether there was evidence of bias in
management judgements that represented a risk of
material misstatement due to fraud. This included
evaluating any management bias within the valuation of
investment property, as mentioned under the key audit
matters subheading, which we consider is the greatest
risk of management manipulation.
The fraud risk around revenue recognition was
addressed by inspecting signed lease agreements to
recalculate the annual turnover, and agreeing cash
receipts to bank statement to check customers exist
and that the management information did agree for a
sample of tenants.
We agreed all bank balances and loans to direct bank
confirmations and agreements.
Our tests included agreeing the financial statement
disclosures to underlying supporting documentation
where relevant, review of Board and Committee
meeting minutes, and enquiries with management and
the Audit Committee as to their identification of any
non-compliance with laws and regulations.
The engagement partner has assessed and confirmed
that the engagement team collectively had the
appropriate competence and capabilities to identify or
recognise non-compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to respond to risks
of material misstatement in the financial statements,
recognising that 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,
misrepresentations or through collusion. There are
inherent limitations in the audit procedures performed
and the further removed non-compliance with laws
and regulations is from the events and transactions
reflected in the financial statements, the less likely we
are to become aware of it.
A further description of our responsibilities is available
on the Financial Reporting Council’s website at: www.
frc.org.uk/auditorsresponsibilities.
This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s
members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006.
Our audit work has
been undertaken so that we might state to the Parent
Company’s members those matters we are required
to state to them in an auditor’s report and for no other
purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other
than the Parent Company and the Parent Company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
Richard Levy (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
1 December 2022
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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03
Financials
 
Consolidated Statement of Comprehensive Income
For the year ended
30 September 2022
Note
2022
£’000
2021
£’000
Income
6
31,785
39,596
Cost of sales
6
(14,259)
(24,423)
Net income
17,526
15,173
Administrative expenses
Fund management fee
7
(1,867)
(1,802)
General and administrative expenses
8
(1,128)
(1,047)
Non-recurring operating
costs
9
(225)
(368)
Total Administrative expenses
(3,220)
(3,217)
Operating profit before property disposals and change in fair value
14,306
11,956
Loss on disposal of investment properties
(24)
(12)
Change in fair value of investment properties
13
3,200
7,731
Change in fair value of borrowings
13
1,809
(2,731)
Debt set up costs
12
(369)
(606)
Operating profit
18,922
16,338
Finance income
12
67
–
Finance costs
12
(5,655)
(5,221)
Change in fair value of interest rate swap derivative contracts
12
–
104
Profit for the year before taxation
13,334
11,221
Taxation
14
–
–
Profit for the year after taxation
13,334
11,221
Other comprehensive income:
–
–
Total comprehensive income for the period attributable to the
shareholders of the Company
13,334
11,221
Earnings per share - basic and diluted - pence
15
7.4
6.6
All of the activities of the Group are classified as continuing.
The notes on pages 134 to 162 form part of these financial statements.
130
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials
 
Consolidated Statement of Financial Position
As at 30 September 2022
Note
2022
£’000
2021
£’000
Non-current assets
Investment properties
17
406,127
372,335
Total non-current assets
406,127
372,335
Current assets
Inventories shared ownership properties
16
1,203
3,800
Trade and other receivables
18
3,390
4,051
Deposits paid for property purchases
19
827
1,158
Cash and cash equivalents
20
15,984
8,370
Total current assets
21,404
17,379
Total assets
427,531
389,714
Current liabilities
Trade and other payables
21
4,891
7,738
Borrowings
22
14,285
2,984
Lease liabilities
31
994
989
Total current liabilities
20,170
11,711
Non-current Liabilities
Borrowings
22
175,420
165,355
Recycled Capital Grant Fund
23
205
38
Lease liabilities
31
30,348
30,218
Total non-current liabilities
205,973
195,611
Total liabilities
226,143
207,322
Net assets
201,388
182,392
Equity
Share capital
24
1,941
1,803
Share premium
25
14,605
108
Treasury shares reserve
26
(8,293)
(8,515)
Retained earnings
27
193,135
188,996
Total interests
201,388
182,392
Total equity
201,388
182,392
Net asset value per share - basic and diluted (pence)
32
108.8
106.6
The financial statements were approved and authorised for issue by the Board of Directors on and signed
on its behalf by:
Rob Whiteman
Chairman
1 December 2022
The notes on pages 134 to 162 form part of these financial statements.
Residential Secure Income plc
Annual Report and Accounts 2022
131
03
Financials
 
Consolidated Statement of Cash Flows
For the year ended 30 September 2022
Note
2022
£’000
2021
£’000
Cash flows from operating activities
Profit for the year
13,334
11,221
Adjustments for non-cash items:
(Gain) in fair value of investment properties
13
(3,200)
(7,731)
Movement in rent smoothing adjustment
13
(1,148)
(650)
(Gain) in fair value of interest rate swap
12
–
(104)
Loss/(profit) in fair value of borrowings
13
(1,809)
2,731
Loss on disposal of investment properties
24
12
Shares issued in lieu of management fees
7
467
449
Finance income
12
(67)
–
Finance costs
12
5,655
5,221
Debt set up costs
12
369
606
Cash generated from operations before working capital changes
13,625
11,755
Changes in working capital
Decrease/(Increase) in trade and other receivables
659
(288)
Decrease in inventories
2,597
6,621
(Decrease)/increase in trade and other payables
(2,754)
1,876
Net cash flow generated from operating activities
14,127
19,964
Cash flow from investing activities
Purchase of investment properties
17
(30,635)
(33,526)
Grant received
17
672
1,204
Disposal of investment properties
1,475
1,719
Deposits paid for acquisitions
19
(513)
(1,158)
Interest received
12
67
–
Amounts transferred into restricted cash deposits
20
–
(851)
Net cash flow used in investing activities
(28,934)
(32,612)
Cash flow from financing activities
Share issue (net of issue costs)
24
14,635
–
Purchase of own shares
26
(245)
(338)
New borrowings raised
22
28,100
24,853
New borrowing costs
22
(215)
(275)
Bank loans repaid
(4,978)
(605)
Finance costs
12
(5,681)
(5,556)
Dividend paid
30
(9,195)
(8,552)
Net cash flow generated from financing activities
22,421
9,802
Net increase/(decrease) in cash and cash equivalents
7,614
(2,846)
Reclassification of restricted cash balances
20
2,684
–
Cash and cash equivalents at the beginning of the year
20
5,686
8,532
Cash and cash equivalents at the end of the year
20
15,984
5,686
The notes on pages 134 to 162 form part of these financial statements.
132
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Annual Report and Accounts 2022
03
Financials
 
Consolidated Statement of Changes in Equity
For the year ended 30 September 2022
Share
capital
£'000
Share
premium
£'000
Treasury
shares
reserve
£'000
Retained
earnings
£'000
Total
equity
£'000
Balance at 30 September 2020
1,803
108
(8,626)
186,327
179,612
Profit for the year
–
–
–
11,221
11,221
Other comprehensive income
–
–
–
–
–
Total comprehensive income
-
-
-
11,221
11,221
Contributions by and distributions to shareholders
Issue of management shares
–
–
449
(449)
–
Share based payment charge
–
–
–
449
449
Purchase of own shares
–
–
(338)
–
(338)
Dividends paid
–
–
–
(8,552)
(8,552)
Balance at 30 September 2021
1,803
108
(8,515)
188,996
182,392
Profit for the year
–
–
–
13,334
13,334
Other comprehensive income
–
–
–
–
–
Total comprehensive income
–
–
–
13,334
13,334
Contributions by and distributions to shareholders
Issue of shares
138
14,862
–
–
15,000
Share issue costs
–
(365)
–
–
(365)
Issue of management shares
–
-
467
(467)
–
Share based payment charge
-
-
–
467
467
Purchase of own shares
-
-
(245)
–
(245)
Dividends paid
-
-
–
(9,195)
(9,195)
Balance at 30 September 2022
1,941
14,605
(8,293)
193,135
201,388
The notes on pages 134 to 162 form part of these financial statements.
Residential Secure Income plc
Annual Report and Accounts 2022
133
03
Financials
 
Notes to the Consolidated Financial Statements
For the year to 30 September 2022
1
General information
Residential Secure Income plc (“the Company”)
was incorporated in England and Wales under the
Companies Act 2006 as a public company limited by
shares on 21 March 2017. The Company’s registration
number is 10683026. The registered office of the
Company is located at The Pavilions, Bridgwater Road,
Bristol, BS13 8FD.
The Company achieved admission to the premium
listing segment of the main market of the London Stock
Exchange on 12 July 2017.
The Company and its subsidiaries (the “Group”) invests
in residential asset classes that comprise the stock
of registered UK social housing providers, Housing
Associations and Local Authorities.
2
Basis of preparation
These financial statements for the year ended 30
September 2022 have been prepared in accordance
with UK adopted international accounting standards.
The financial statements have been prepared on a
historical cost basis, except for investment properties,
derivative financial instruments and certain borrowings
which have been measured at fair value.
The comparatives presented are for the year ended 30
September 2021.
The financial statements have been rounded to the
nearest thousand and are presented in Sterling, except
when otherwise indicated.
a)
Going concern
The Directors have made an assessment of the Group’s
ability to continue as a going concern and are satisfied
that the Group and the Company have the resources
to continue in business for the foreseeable future, as
set out in the going concern statement on pages 87
to 89.
The Group expects to refinance the NatWest
facility which is due to expire in April 2023. The Group
has access to a revolving credit facility of £25mn
with Santander which could be used if necessary.
Furthermore, the Directors are not aware of any
material uncertainties that may cast significant doubt
upon the Group and the Company’s ability to continue
as a going concern. Therefore, the financial statements
have been prepared on the going concern basis.
ReSI is subject to covenants on debt secured on its
shared ownership, retirement and Local Authority
portfolios (which are ringfenced to that particular
portfolio) and on its holding company working capital
facility with Santander (see note 22 on page 150).
Sensitivity analysis has been performed, showing
a large amount of headroom on all covenants (see
Fund Manager Report on page 32), including all debt
servicing and valuation metrics. Due to the long-
term nature of the company’s assets and strong cash
flow, the Directors do not forecast a breach of any
debt covenants.
Financial models have been prepared for the going
concern period which consider liquidity at the start
of the period and key financial assumptions at the
Company level as well as at the level of the subsidiaries
of the ReSI plc. These financial assumptions include
expected cash generated and distributed by the
portfolio companies available to be distributed to the
Company. This includes inflows and outflows in relation
to the external debt and interest payments expected
within the subsidiaries, the availability of new external
debt facilities, committed expenditure for investments
and expected dividends as well as the ongoing
administrative costs of the Company.
Continuation vote
Under the Articles of Association of the Company
the Directors are required to propose an ordinary
resolution at the Annual General Meeting following the
fifth anniversary from its initial public offering that the
Group and the Company should continue as presently
constituted and at every fifth AGM thereafter. The
first resolution is expected to be presented at the
AGM in January 2023 at which the continuation vote
will be proposed.
If the Continuation Resolution is passed, the Group and
the Company will continue its business as presently
constituted and propose the same resolution at every
fifth annual general meeting thereafter.
After making appropriate enquiries of the Group and the
Company’s brokers and Investment Adviser, pursuant
to their recent discussions with a number of the Group
and 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 long-term nature of the Group and the
Company’s assets with supporting debt funding and the
attractiveness of the Group and the Company’s low risk
inflation linked Income strength in the portfolio.
134
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Annual Report and Accounts 2022
03
Financials
The Board is, therefore, of the opinion that the going
concern basis adopted in the preparation of the
consolidated financial statements is appropriate having
reviewed the next 12 month period.
b)
Changes to accounting standards and
interpretations
Amendments to standards adopted during the year
The IASB and IFRIC have revised a number of
standards. None of these amendments have led to any
material changes in the Group’s accounting policies or
disclosures during the year.
Standards in issue but not yet effective
Certain new standards, amendments and
interpretations to existing standards have been
published that are mandatory for the Group’s
accounting periods beginning on or after 1 October 2022
and whilst the Directors are considering these, initial
indications are that these changes, will have no material
impact on the Group’s financial statements.
3
Significant accounting policies
The accounting policies applied in the preparation of the
financial statements are set out below. On 31 December
2020, IFRS as adopted by the European Union at that
date was brought into the UK law and became UK-
adopted international accounting standards, with
future changes being subject to endorsement by the
UK Endorsement Board. Residential Secure Income Plc
transitioned to UK-adopted international accounting
standards in its consolidated financial statements on
1 October 2021. There was no impact or changes in
accounting policies from the transition.
a)
Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and the entities
controlled by the Company (its subsidiaries) at the
period 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 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.
b)
Acquisitions and business combinations
The Directors assess whether each acquisition is a
business or asset acquisition. Under IFRS 3, a business
is defined as an integrated set of activities and assets
that is capable of being conducted and managed
for the purpose of providing a return in the form of
dividends, lower costs or other economic benefits
directly to investors or other owners, members or
participants. A business will usually consist of inputs,
processes and outputs.
Business acquisitions are accounted for using the
acquisition method. To date the group has not acquired
any businesses. Acquisitions that do not meet the
definition of a business are accounted for as asset
acquisition. Asset acquisitions are accounted for by
applying the Group’s relevant accounting policy relating
to the assets being acquired.
c)
Investment properties
Investment properties, which are properties held
to earn rentals and/or for capital appreciation, are
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 Statement of Financial
Position date adjusted for the carrying value of
leasehold interests. 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 Statement of Comprehensive Income.
Investment property is recognised as an asset when
it is probable that the economic benefits that are
associated with the property will flow to the Group and it
can measure the cost of the investment reliably. This is
usually on legal completion.
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03
Financials - Notes to the Consolidated Financial Statements
Subsequent expenditure is capitalised only when it is
probable that future economic benefits are associated
with the expenditure.
An investment property is derecognised upon disposal
or when the investment property is permanently
withdrawn from use and no future economic benefits
are expected to be obtained from the asset. Any gain
or loss arising on de-recognition of the property
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is
recorded 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 4.
d)
Inventories
Inventories relate to properties held for delivery
as shared ownership which provides an affordable
homes ownership through a part-buy, part-rent model
where Shared Owners buy a stake in the home (with a
lower deposit requirement as it is only required as a
percentage of this stake) and pay a discounted rent on
the portion of the property that the Shared Owner(s)
does not own. In accordance with IAS 2 Inventories, the
part that is expected to be sold to the Shared owner
under the First Tranche Sale are held at the lower of
cost and net realisable value.
e)
Shared ownership
Shared ownership is where initially a long lease on a
property is granted through a sale to the occupier, in
return for an initial payment (the First Tranche).
First Tranche sales are included within turnover and the
related proportion of the cost of the asset recognised
as cost of sales.
Shared ownership properties are split proportionately
between Inventories and Investment properties based
on the current element relating to First Tranche sales.
The assumptions on which the First Tranche proportion
has been based include, but are not limited to, matters
such as the affordability of the shared ownership
properties, local demand for shared ownership
properties, and general experience of First Tranche
shared ownership sales within ReSI Housing and the
wider the social housing sector.
Shared Owners have the right to acquire further
tranches (‘staircasing’) and any surplus or deficit on
such subsequent sales are recognised in the Statement
of Comprehensive Income as a part disposal of
Investment properties.
Where a grant is receivable from government and other
bodies as a contribution towards the capital cost of
shared ownership investment property, it is recognised
as a deduction in arriving at the cost of the property.
Prior to satisfying any performance obligations related
to grant, such grants are held as a liability on the
Statement of Financial Position.
In some circumstances, typically when a shared owner
staircases, there arises an obligation to recycle the
grant into the purchase of new affordable properties
within three years or to repay the grant to the relevant
grant provider. Where such an obligation exists the
grant will be held as a liability on the Statement of
Financial Position.
f)
Share issue costs
The costs of issuing or reacquiring equity instruments
(other than in a business combination) are accounted
for as a reduction to share premium to the extent that
share premium has arisen on the related share issue.
g)
Revenue
The Group recognises revenue on an accruals basis, and
when the amount of revenue can be reliably measured
and it is probable that future economic benefits will flow
to the Group. Revenue comprises rental income and
First Tranche sales of shared ownership properties.
Gross rental income – Gross rental income is non-
contingent rental income, recognised on a straight-
line basis over the term of the underlying lease and is
included in the Group Statement of Comprehensive
Income. Any contingent element of rental income is
recognised on an as-received basis. Lease incentives
granted are recognised as an integral part of the net
consideration for the use of the property and are
therefore recognised on the same, straight-line basis
over the term of the lease. Contractual fixed annual
rent increases and lease incentives are recognised on a
straight-line basis over the term of the lease.
Amounts received from tenants to terminate leases or
to compensate for dilapidations are recognised in the
Group Statement of Comprehensive Income when the
right to receive them arises.
Gross ground rental income - Gross ground rental
income is recognised on a straight-line basis over the
term of the underlying lease.
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03
Financials - Notes to the Consolidated Financial Statements
Income from property sales is recognised when
performance conditions are fulfilled which is usually at
the point of legal completion.
Property sales consist of one performance obligation
- the transfer of the property to the shared owner.
The transaction price is fixed and specific in the sales
contract. Revenue is recognised at a point in time, when
control of the property passes. Control is considered to
pass on legal completion of the property sale.
h)
Cost of sales
Included within First Tranches cost of sales are costs
relating to the first tranche sale portion of newly
acquired shared ownership properties. These costs
include a share of expenditure incurred for acquisition
of those properties in proportion to the First Tranche
percentage sold, direct overheads and other incidental
costs incurred during the course of the sale of
those properties.
i)
Expenses
The Group recognises all expenses on an accruals basis.
j)
Finance income and expense
Finance income comprises interest receivable on
funds invested. Financing expenses comprise interest
payable, interest charged on head lease liabilities and
amortisation of loan fees.
Interest income and interest payable are recognised
in profit and loss as they accrue, using the effective
interest method.
k)
Taxation
Taxation on the profit or loss for the period not exempt
under UK REIT regulations comprises current and
deferred tax. Tax is recognised in the Statement of
Comprehensive Income except to the extent that it
relates to items recognised as direct movement in
equity, in which case it would be 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.
Deferred tax is provided in full using the balance sheet
liability method on timing differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes. Deferred tax is determined using tax rates
that have been enacted or substantively enacted by the
reporting date and are expected to apply when the asset
is realised or the liability is settled.
No provision is made for timing differences (i) arising
on the initial recognition of assets or liabilities, other
than on a business combination, that affect neither
accounting nor taxable profit and (ii) relating to
investments in subsidiaries to the extent that they will
not reverse in the foreseeable future.
l)
Dividend payable to shareholders
Equity dividends are recognised when they become
legally payable which for the final dividends is the date
of approval by the members. Interim dividends are
recognised when paid.
m) Financial instruments
Financial assets
Recognition of financial assets
All financial assets are recognised on a trade date which
is the date when the Group becomes a party to the
contractual provisions of the instrument.
Initial measurement and classification of
financial assets
Financial assets are classified into the following
categories: ‘financial assets at fair value through profit
or loss’ and ‘financial assets at amortised cost’. The
classification depends on the business model in which
the asset is managed and on the cash flows associated
with that asset.
Financial assets are initially measured at fair value, plus
transaction costs, except for those financial assets
classified as at fair value through profit or loss, which
are initially measured at fair value.
At 30 September 2022, the Group had the following
non-derivative financial assets which are held at
amortised cost:
Cash and cash equivalents
Cash and short-term deposits in the balance sheet
comprise cash at bank (including investments in money-
market funds) and short-term deposits with an original
maturity of three months or less.
Residential Secure Income plc
Annual Report and Accounts 2022
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03
Financials - Notes to the Consolidated Financial Statements
Trade and other receivables
Trade and other receivables are recognised at their
original invoiced value. Where the time value of money
is material, receivables are discounted and then held at
amortised cost, less provision for expected credit loss.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to
measuring the expected credit losses for trade and
other receivables whereby the allowance or provision
for all trade receivables are based on the lifetime
expected credit losses (“ECLs”).
The Group applies the general approach for initial
recognition and subsequent measurement of expected
credit loss provisions for the loan receivable and other
receivables which have maturities of 12 months or more
and have a significant finance component.
This approach comprises of a three-stage approach to
evaluation of expected credit losses. These stages are
classified as follows:
Stage 1
Twelve-month expected credit losses are recognised in
profit or loss at initial recognition and a loss allowance
is established. For financial instruments that have not
deteriorated significantly in credit quality since initial
recognition or that have low credit risk at the reporting
date, the loss allowance for 12-month expected credit
losses is maintained and updated for changes in
amount. Interest revenue is calculated on the gross
carrying amount of the asset (i.e. without reduction for
expected credit losses).
Stage 2
If the credit risk increases significantly and the resulting
credit quality is not considered to be low credit risk, full
lifetime expected losses are recognised and includes
those financial instruments that do not have objective
evidence of a credit loss event. Interest revenue is still
calculated on the gross carrying amount of the asset.
Stage 3
If the credit risk of a financial asset increases to the
point that it is considered credit impaired (there is
objective evidence of impairment at the reporting
date), lifetime expected credit losses continue to be
recognised. For financial assets in this stage, lifetime
expected credit losses will generally be individually
assessed. Interest revenue is calculated on the
amortised cost net carrying amount (amortised cost
less impairment).
De-recognition of financial assets
The Group derecognises a financial asset when
the contractual rights to the cash flows from the
asset expire, or it transfers the financial asset and
substantially all the risks and rewards of ownership
to another entity. If any interest in a transferred asset
is retained, then the Group recognises its retained
interest in the asset and associated liabilities.
Financial liabilities
Recognition of financial liabilities
All financial liabilities are recognised on the date
when the Group becomes a party to the contractual
provisions of the instrument.
Initial measurement and classification of
financial liabilities
Financial liabilities are classified into the following
categories: ‘financial liabilities at fair value through
profit or loss’ and ‘other financial liabilities’. The
classification depends on the nature and purpose of
the financial liabilities and is determined at the time of
initial recognition.
Financial liabilities are initially measured at fair value,
net of transaction costs, except for those financial
liabilities classified as at fair value through profit or loss,
which are initially measured at fair value.
Fair value through profit or loss
This category comprises certain of the Group’s
borrowings and out-of-the-money derivatives where
the time value does not offset the negative intrinsic
value. The Group’s loans with USS held at fair value
through profit and loss may be recorded at a different
value to the notional value of the borrowings due
to changes in the expected future rate of inflation
versus the date the debt was drawn, impacting gilt
rates. The designation to value a loan at fair value
through profit and loss is irrevocable and was made
to correct an accounting mismatch as the value of
the loan is linked to the shared ownership investment
portfolio. The decision to link the loan to RPI was
made to ensure that returns are matched to rent
proceeds received (also linked to RPI). They are carried
in the Consolidated Statement of Financial Position
at fair value with changes in fair value recognised in
the Group Statement of Comprehensive Income as
either a fair value movement (note 13) or in the finance
income or expenses line (note 12), except where the
movement relates to a change in own credit risk which
is recognised in other comprehensive income.
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Financials - Notes to the Consolidated Financial Statements
At 30 September 2022, the Group had the following
non-derivative financial liabilities which are classified
as other financial liabilities:
Trade and other payables
Trade and other payables are initially recognised at fair
value and subsequently held at amortised cost.
Borrowings
Borrowings are recognised initially at fair value less
attributable transaction costs or at fair value, with
attributable transaction costs fully expensed if an
election is made to hold at fair value through profit
or loss. Subsequent to initial recognition, borrowing
costs are stated at amortised cost with any difference
between the amount initially recognised and
redemption value being recognised in profit or loss
in the Statement of Comprehensive Income over the
period of the borrowings using the effective interest
method or at fair value if elected to hold at fair value
through profit or loss.
De-recognition of financial liabilities
The Group derecognises a financial liability
when its contractual obligations are discharged,
cancelled or expire.
n)
Derivative instrument and hedge accounting
Derivative financial instruments, comprising interest
rate swaps held are initially recognised at fair value
and are subsequently measured at fair value being
the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction
between market participants at a measurement date.
Movements in fair value are recognised in profit and loss
as part of finance costs.
o)
Leases
The group as lessor
A lease is classified as a finance lease if substantially
all of the risks and rewards of ownership transfer to
the lessee. In the case of properties where the Group
has a leasehold interest, this assessment is made
by reference to the Group’s right of use asset arising
under the head lease rather than by reference to the
underlying asset. If the Group substantially retains
those risks, a lease is classified as an operating lease.
Rentals receivable under operating leases are
recognised in the income statement on a straight-line
basis over the term of the relevant lease. In the event
that lease incentives are granted to a lessee, such
incentives are recognised as an asset. The aggregate
cost of the incentives is recognised as a reduction in
rental income on a straight-line basis over the term of
the relevant lease.
The group as lessee
Where an investment property is held under a head
lease, the lease liability is capitalised at the lease
commencement at the present value of the minimum
lease payments. Each lease payment is allocated
between repayment of the liability and a finance
charge to achieve a constant rate on the outstanding
liability. The corresponding rental obligations, net of
finance charges, are included in liabilities. Investment
properties held under head leases are subsequently
carried at their fair value. The carrying value of lease
liabilities are remeasured when the variable element of
the future lease payments dependent on a rate or index
is revised, using the same discount rate as at the lease
commencement date.
p)
Share based payments
Payments made to the Fund Manager that are to be
settled by the issue of shares is determined on the basis
of the Net Asset Value of the Group. The estimated
number of shares to be issued in satisfaction of the
services provided is calculated using the daily closing
share price of the Company at the date of calculation.
4
Significant accounting judgements
and estimates
The preparation of financial statements in accordance
with the principles of IFRS required the Directors of the
Group to make judgements, estimates and assumptions
that affect the reported amounts recognised in the
financial statements. However, uncertainty about
these assumptions and estimates could result in
outcomes that require a material adjustment to the
carrying amount of the asset or liability in the future.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are
revised and in any future periods affected.
Residential Secure Income plc
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03
Financials - Notes to the Consolidated Financial Statements
Estimates:
Investment properties
The Group uses the valuation carried out by its independent
external valuers as the fair value of its property portfolio.
The assumptions on which the property valuation reports
have been based include, but are not limited to, matters
such as the tenure and tenancy details for the properties,
ground conditions at the properties, the structural
condition of the properties, prevailing market yields and
comparable market transactions. Further information is
provided in note 17.
The Group’s properties have been independently valued by
Savills (UK) Limited (“Savills” or the “Valuer”) in accordance
with the definitions published by the Royal Institute of
Chartered Surveyors’ (“RICS”) Valuation – Professional
Standards, July 2017, Global and UK Editions (commonly
known as the “Red Book”). Savills is one of the most
recognised professional firms within residential and
social housing property valuation and has sufficient
current local and national knowledge and has the skills and
understanding to undertake the valuations competently.
If the assumptions upon which the external valuer has
based its valuations prove to be inaccurate, this may
have an impact on the value of the Group’s investment
properties, which could in turn have an effect on the
Group’s financial position and results. Further information is
provided in note 17.
With respect to the Group’s Financial Statements,
investment properties are valued at their fair value at
each Statement of Financial Position date in accordance
with IFRS 13 which recognises a variety of fair value inputs
depending upon the nature of the investment (the ‘fair value
hierarchy’). Specifically:
Level 1 – Unadjusted, quoted prices for identical assets and
liabilities in active (typically quoted) markets;
Level 2 – Quoted prices for similar assets and liabilities in
active markets;
Level 3 – Inputs not based on observable market data (that
is, unobservable inputs).
The Group’s investment properties are included in
Level 3 as the inputs to the valuation are not based on
observable market data.
Borrowings held at fair value
Some of the Group’s borrowings are held at fair value.
The inputs / assumptions on which these borrowings have
been valued include the relevant inflation linked gilt rate
at the date of valuation and the future rate of RPI inflation.
Further information is provided in note 22.
If these assumptions prove to be inaccurate, this may have
an impact on the carrying value of the Group’s borrowings
held at fair value, which could in turn have an effect on the
Group’s financial position and results.
In the fair value hierarchy, borrowings valued at fair value are
included in Level 2 as they are based on observable market
data (inflation linked gilt yields).
Shared Ownership Properties
First Tranche Sales
The Group estimates the proportion of shared ownership
properties that will be sold as First Tranche sales and
therefore classified as inventory rather than investment
property. The assumptions on which the proportion has
been based include, but are not limited to, matters such
as the affordability of the shared ownership properties,
local demand for shared ownership properties, and general
experience of First Tranche shared ownership sales in the
social housing sector. The first tranche sales percentage
used is consistent with values used by the valuers. As at 30
September 2022 the average first tranche sales percentage
assumed for vacant shared ownership properties was
25%. If there is a change in percentage used, this will
affect the proportion of inventory and investment property
recognised with a higher assumed first tranche sale
percentage resulting in a higher inventory value and lower
investment property value.
140
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
5
Operating segments
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 the Board of Directors) in order to allocate resources to the segments and to assess their performance.
The Group’s reporting to the chief operating decision maker does not differentiate by property type or location as the
Group is considered to be operating in a single segment of business and in one geographical area.
No customers have revenue that is greater than 10% of the total Group revenue.
The internal financial reports received by the Board of Directors contain financial information at a Group level and
there are no reconciling items between the results contained in these reports and the amounts reported in the
Financial Statements.
6
Income less cost of sales
Net property
income
£'000
First tranche
sales
£'000
2022
Total
£'000
2021
Total
£'000
Gross Rental income
25,670
–
25,670
22,826
First tranche property sales
–
6,115
6,115
16,770
Total income
25,670
6,115
31,785
39,596
Service charge expenses
(4,927)
–
(4,927)
(4,701)
Property operating expenses
(3,717)
–
(3,717)
(3,958)
Impairment of receivables
(10)
–
(10)
(2)
First tranche cost of sales
–
(5,605)
(5,605)
(15,762)
Total cost of sales
(8,654)
(5,605)
(14,259)
(24,423)
Net rental income/gross profit before ground rents
17,016
510
17,526
15,173
Ground rents disclosed as finance lease interest
(996)
–
(996)
(989)
Net rental income/gross profit after ground rents disclosed as
finance lease asset
16,020
510
16,530
14,184
Included within gross rental income is a £1,148,000 (2021: £650,000) rent smoothing adjustment that arises as a result
of IFRS 16 ‘Leases’ which require rental income in respect of leases with rents increasing by a fixed percentage being
accounted for on a straight-line basis over the lease term. During the year this resulted in an increase in rental income,
with an offsetting entry being recognised in profit or loss as an adjustment to the investment property
re-valuation (see note 17).
Gross rental income includes service charges collected from tenants, included in rent collected but not separately
invoiced, of £4,622,000 during the year (2021: £4,344,000). Service charge expenses, as reflected in the cost of sales,
also includes amounts paid in respect of properties which were vacant during the period of £305,000 (2021: £357,000).
The gross profit after ground rents disclosed as finance lease interest are presented to provide what the Board
believes is a more appropriate assessment of the Group’s net property income. Ground rent costs are an inherent cost
of holding certain leasehold properties and are taken into consideration by Savills when valuing the Group’s properties.
Residential Secure Income plc
Annual Report and Accounts 2022
141
03
Financials - Notes to the Consolidated Financial Statements
7
Fund management fee
2022
£’000
2021
£’000
Cash portion
1,400
1,353
Equity
467
449
1,867
1,802
ReSI Capital Management Limited acts as alternative
investment fund manager (the “Fund Manager”) pursuant
to the Fund Management Agreement.
The Fund Manager is entitled to an annual management
fee (the “Fund Manager Fee”) under the Fund
Management Agreement with effect from the date of
Admission, as follows:
a)
on that part of the Net Asset Value up to and
including £250mn, an amount equal to 1% p.a. of
such part of the Net Asset Value;
b)
on that part of the Net Asset Value over £250mn
and including £500mn, an amount equal to 0.9%
p.a. of such part of the Net Asset Value;
c)
on that part of the Net Asset Value over £500mn
and up to and including £1,000mn, an amount
equal to 0.8% p.a. of such part of the Net
Asset Value; and
d)
on that part of the Net Asset Value over £1,000mn,
an amount equal to 0.7% p.a. of such part of the
Net Asset Value.
The Fund Management Fee is paid quarterly in advance.
75% of the total Fund Management Fee is payable in
cash and 25% of the total Fund Management Fee (net
of any applicable tax) is payable in the form of Ordinary
Shares rather than cash.
8
General and administrative expenses
Group
2022
£’000
Group
2021
£’000
Professional fees
579
552
Directors' fees and expenses
220
217
Fees paid to the Company's
auditor
279
224
Other expenses
41
53
Aborted acquisiiton costs
9
1
1,128
1,047
9
One-off administration costs
2022
£’000
2021
£’000
One-off adminstration costs
225
368
225
368
In July 2021, the property and lettings management
of the ReSI’s retirement portfolio was transferred
from Girlings to ReSI Property Management Limited,
a subsidiary of the Fund Manager, and now property
management services are provided at cost. The
transfer has led to improved performance on the
retirement portfolio, as evidenced in void reductions,
and is expected to drive further cost efficiencies
and operational improvements. The charges above
re-late to residual set-up costs associated with the
transfer, which straddled the 2021-year end, and is now
complete, one-off costs associated with upgrading the
energy performance of properties.
10
Directors’ fees and expenses
2022
£’000
2021
£’000
Fees
155
155
Taxes
17
17
172
172
Fees paid to directors of
subsidiaries
48
45
220
217
The Group had no employees during the year (2021: Nil)
other than the Directors and Directors of subsidiaries.
The Chairman is entitled to receive a fee linked to the
Net Asset Value of the Group as follows:
Net asset value
Annual Fee
Up to £100,000,000
£40,000
£100,000,000 to £200,000,000
£50,000
£200,000,000 to £350,000,000
£60,000
Thereafter
£70,000
142
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
Each of the Directors, save the Chairman, is entitled
to receive a fee linked to the Net Asset Value of the
Group as follows:
Net asset value
Annual Fee
Up to £100,000,000
£30,000
£100,000,000 to £200,000,000
£35,000
Thereafter
£40,000
None of the Directors received any advances or credits
from any Group entity during the year (2021: Nil).
During the year, the Net Asset Value of the Company
increased to such that the Directors became eligible for
a fee increase under the Remuneration Policy. However,
taking into consideration current ongoing activities
within the Company, the Board agreed to waive an
increase of fees for the year ended 30 September
2022. The Board will meet to review the Directors’
Remuneration during the course of the year ending 30
September 2023 and consider a potential increase per
the remuneration policy.
11
Fees paid to the Company’s auditor
2022
£’000
2021
£’000
Audit fees
Parent and consolidated financial
statements
75
60
Audit of subsidiary undertakings
143
122
Additional fees payable to the
auditors in relation to prior year
audit
18
–
Total audit fees
237
182
Audit related services
Review of interim report
42
42
Non-audit fees
Corporate Finance Fees
44
–
Total fees
318
224
Fees paid to the Company's auditors are inclusive of
irrecoverable VAT.
Non audit fees of £44,000 relating to corporate finance
services have been incurred in the year ended 30
September 2022 (2021: £nil). These costs have been
included in prepayments as they relate to a future work.
12
Net finance costs
2022
£’000
2021
£’000
Finance income
Interest income
67
–
67
–
Finance expense
Interest payable on borrowings
(4,300)
(3,946)
Amortisation of loan costs
(268)
(259)
Debt programme costs
(91)
(27)
Lease interest
(996)
(989)
(5,655)
(5,221)
Movement in fair value of
derivative contracts
Interest rate swaps
–
104
Net finance costs
(5,588)
(5,117)
One-off shared ownership facility
set-up costs
(300)
(567)
Debt set up fees
(69)
(39)
Debt set up costs
(369)
(606)
The Group’s interest income during the year relates to
cash invested in a money market fund, which is invested
in short-term AAA rated Sterling instruments.
Ground rents paid in respect of leasehold properties
have been recognised as a finance cost in accordance
with IFRS 16 “Leases”.
Movement in fair value of derivative contracts arose
from interest rate swaps entered into in February
2019 to partially fix the £14.5mn of debt secured by
the Local Authority portfolio. The swaps expired on
20 August 2021.
Debt set up fees in the current year relate to the
abortive fees of debt that was not put in place.
Residential Secure Income plc
Annual Report and Accounts 2022
143
03
Financials - Notes to the Consolidated Financial Statements
13
Change in fair value
2022
£’000
2021
£’000
Gain/(loss) on fair value adjustment
of investment properties
4,348
8,381
Adjustments for lease incentive
assets and rent straight line
assets recognised
Start of the year
922
272
End of the year
(2,070)
(922)
3,200
7,731
Gain/(loss) on fair value adjustment
of borrowings (note 22)
1,809
(2,731)
Shared ownership facility set up
costs
(300)
(567)
4,709
4,433
Gain/(loss) on fair value adjustment of borrowings
arises from debt raised against the shared ownership
portfolio, which the Company elected to fair value
through profit and loss in order to address an
accounting mismatch as the value of the loan is linked
to the shared ownership investment portfolio. During
the year the Group incurred costs of £0.3mn (equivalent
to 0.2 basis points on the drawn balance per annum over
45 years) in relation to further £20mn drawdown of debt
under the shared ownership 45-year £300mn facility.
With the election made to value this debt at fair value
through profit or loss, all fees associated with this debt
have been expensed in the current year.
14
Taxation
2022
£’000
2021
£’000
Current tax
–
–
Deferred tax
–
–
–
–
The tax charge for the period varies from the standard
rate of corporation tax in the UK applied to the profit
before tax. The differences are explained below:
2022
£’000
2021
£’000
Profit before tax
13,334
11,221
Tax at the UK corporation tax rate
of 19% (2021: 19%)
2,533
2,132
Tax effect of:
UK tax not payable due to REIT
exemption
(1,995)
(656)
Investment property revaluation
not taxable
(608)
(1,469)
Expenses that are not deductible
in taxable profit
(27)
(15)
Unutilised residual current year
tax losses
97
8
Tax charge for the year
–
–
As a UK REIT the Group is exempt from corporation
tax on the profits and gains from its property rental
business provided it meets certain conditions set out in
the UK REIT regulations.
The government has announced that the corporation
tax standard rate is to remain at 19% until 31 March
2023. From 1 April 2023 the rate will increase to 25%.
144
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
15
Earnings per share
2022
£’000
2021
£’000
Profit attributable to Ordinary
shareholders
13,334
11,221
Deduction of fair value movement on
investment properties, borrowings and
interest rate swap
(5,009)
(5,104)
Deduction of non-recurring set up
costs
225
368
Deduction of debt set up costs
369
606
Deduction of aborted acquisition costs
9
1
Loss on property disposals
24
12
Adjusted Earnings
8,952
7,104
Weighted average number of ordinary
shares (thousands)
180,159
171,071
Basic Earnings per share (pence)
- 2022 (pence)
7.4
- 2021 (pence)
6.6
Adjusted Earnings per share (pence)
- 2022 (pence)
5.0
- 2021 (pence)
4.2
Basic earnings per share (‘EPS’) is calculated as profit
attributable to Ordinary Shareholders of the Company
divided by the weighted average number of shares in
issue throughout the relevant period.
The Adjusted Earnings are presented to provide what
the Board believes is a more appropriate assessment
of the operational income accruing to the Group’s
activities. Hence, the Group adjusts basic earnings for
income and costs which are not of a recurrent nature or
which may be more of a capital nature.
EPRA Earnings per share
2022
£’000
2021
£’000
Earnings per IFRS income statement
13,334
11,221
Changes in value of investment
properties
(3,200)
(7,731)
Profits or losses on disposal of
investment properties
24
12
Profits or losses on sales of trading
properties
(510)
(1,008)
Changes in fair value of financial
instruments and associated close-out
costs
(1,809)
2,627
EPRA Earnings
7,839
5,121
Basic number of shares
180,159
171,071
EPRA Earnings per Share (EPS)
(pence)
4.4
3.0
Adjusted EPRA Earnings per share
2022
£’000
2021
£’000
Company specific adjustments:
Exclude debt set up costs
369
607
Exclude one-off administration costs
225
368
Exclude one-off aborted acquisition
costs
9
–
Include shared ownership first tranche
sales
510
1,008
Company specific Adjusted EPRA
Earnings
8,952
7,104
Company specific Adjusted EPRA
Earnings EPRA per share (pence)
5.0
4.2
EPRA earnings per share (‘EPS’) is calculated as EPRA
earnings attributable to Ordinary shareholders of the
Company divided by the weighted average number of
shares in issue throughout the relevant period.
The Adjusted EPRA Earnings are presented to
provide what the Board believes is a more appropriate
assessment of the operational income accruing
to the Group’s activities. Hence, the Group adjusts
EPRA earnings for income and costs which are not
of a recurrent nature or which may be more of a
capital nature.
Dividend coverage for the year ended 30 September
2022 is 97% based on an adjusted earnings figure of
£8.95mn and dividends paid over the year of £9.20mn.
Residential Secure Income plc
Annual Report and Accounts 2022
145
03
Financials - Notes to the Consolidated Financial Statements
16
Inventories – finished properties
available for sale
2022
£’000
2021
£’000
Shared ownership properties
1,203
3,800
1,203
3,800
The costs of inventories recognised in cost of
sales as an expense in the year is £5,605,000 (2021:
£15,762,000). The amount of inventories written down
to net realisable value is Nil (2021: Nil).
17
. Investment properties
2022
£’000
2021
£’000
At beginning of period
372,335
331,782
Property acquisitions at cost
30,827
33,113
Grant receivable
(672)
(1,652)
Capital expenditure
652
539
Property disposals
(1,498)
(1,731)
Movement in head lease gross up
135
1,631
Adjustments for lease incentive assets
and rent straight line assets
recognised
–
272
Change in fair value during the period
4,348
8,381
At end of period
406,127
372,335
Valuation provided by Savills
374,785
341,128
Adjustment to fair value - finance lease
asset
31,342
31,207
Total investment properties
406,127
372,335
The investment properties are divided into:
2022
£’000
2021
£’000
Leasehold properties
293,734
284,596
Freehold properties*
81,051
56,532
Head lease gross up
31,342
31,207
Total investment properties
406,127
372,335
*Includes Feuhold properties, the Scottish equivalent of Freehold.
The table below shows the total value of the Group’s
investment properties including committed properties
with purchase contracts exchanged at 30 September
2022. Consistent with the valuation provided by Savills,
the adjustment to fair value in respect of finance lease
assets for ground rents receivable has been excluded
to show the value of the asset net of all payments to be
made (including ground rent payments). Committed
properties with purchase contracts exchanged have
been included to provide an indication of the value of all
properties to which the Group is contractually committed at
30 September 2022.
2022
£’000
2021
£’000
Total investment properties
406,127
372,335
Adjustment to fair value - finance lease
asset
(31,342)
(31,207)
Committed properties with purchase
contracts exchanged
8,635
9,946
Total investment properties including
committed properties with purchased
contracts exchanged
383,420
351,074
Included within the carrying value of investment
properties at 30 September 2022 is £2,070,000
(2021: £922,000) in respect of the smoothing of fixed
contractual rent uplifts as described in note 6. The
difference between rents on a straight-line basis and
rents actually receivable is included within the carrying
value of the investment properties but does not
increase that carrying value over the fair value.
The historical cost of investment properties
at 30 September 2022 was £339,012,000
(2021: £309,703,000).
In accordance with “IAS 40: Investment Property”, the
Group’s investment properties have been independently
valued at fair value by Savills (UK) Limited (“Savills”), an
accredited external valuer with recognised and relevant
professional qualifications.
The carrying values of investment property as at 30
September 2022 agree to the valuations reported by
external valuers, except that the valuations have been:
Increased by the amount of finance lease liabilities
recognised in respect of investment properties
held under leases of £31,342,000 (£31,207,000
at 30 September 2021) representing the present
value of ground rents payable for the properties
held by the Group under leasehold – further
information is provided in note 31. This is because
the independent valuations are shown net of all
payments expected to be made. However, for
financial reporting purposes in accordance with IAS
40, “Investment Property”, the carrying value of the
investment properties includes the present value
of the minimum lease payments in relation to these
leases. The related lease liabilities are presented
separately on the Statement of Financial Position.
146
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Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
‘Rent straight line adjustments’ represent the
recognition of lease incentives and contractual fixed
annual rent increases on a straight-line basis over the
term of the underlying leases.
The Group’s investment objective is to provide
shareholders with an attractive level of income,
together with the potential for capital growth, from
acquiring portfolios of homes across residential
asset classes that comprise the stock of statutory
registered providers.
The Group intends to hold its investment property
portfolio over the long term, taking advantage of
upward-only inflation linked leases. The Group will
not be actively seeking to dispose of any of its assets,
although it may dispose of investments should an
opportunity arise that would enhance the value of the
Group as a whole.
The Group has pledged substantially all of its
investment properties to secure loan facilities granted
to the Group (see note 22).
In accordance with IFRS 13, the Group’s investment
property has been assigned a valuation level in
the fair value hierarchy. The fair value hierarchy
gives the highest priority to quoted prices in active
markets for identical assets (Level 1) and the lowest
priority to unobservable inputs (Level 3). The Group’s
investment property as at 30 September 2022 is
categorised as Level 3.
ReSI’s properties are valued by Savills using a
discounted cash flow (“DCF”) methodology applying a
discount rate to estimated future cash flows to arrive at
a net present value of the properties.
Historically, Savills valued ReSI’s retirement rentals
portfolio using a capitalisation methodology which
applied a yield to current and estimated rental income,
subject to certain adjustments for estimated vacant
possession value and head lease length (where yields
and rental values were considered to be unobservable
inputs).
In order to align with incoming RICS guidance
to use DCF valuation methodologies and to apply
consistent methodologies across all of ReSI’s portfolios,
Savills transitioned the retirement valuation approach
to a DCF methodology at 30 September 2022.
There are multiple key unobservable inputs that play
material roles in determining the Group’s fair value of
investment property:
1
The discount rates applied to projected rental cash
flows (and to staircasing cash flows for shared
ownership properties):
a.
Effectively, the discount rate is representative of
both the long-term cost of borrowing and the risks
implicit in the properties concerned, as well as the
risk associated with the cash flow assumptions
reflected in the valuation.
b.
Everything else being equal, there is a negative
relationship between the discount rate and the
property valuation, such that an increase in the
discount rate will decrease the valuation of a
property and vice versa.
c.
Weighted average nominal rental discount rates
applied across the shared ownership and retirement
portfolio valuations at 30 September ranged
from 5.4% to 10.2%.
2
Projected rates of inflation (both CPI and RPI):
a.
The majority of ReSI’s leases are inflation-linked
(subject to inflation floors and, for some leases,
inflation caps). Additionally, some of ReSI’s operating
expenses are subject to inflationary pressure.
Changes in inflation assumptions can have a
material impact on the Group’s valuations.
b.
The relationship between inflation and income
growth (and resulting rental values) is generally
positive, as the majority of the Group’s revenues are
inflation-linked (subject to certain inflation caps and
floors in certain leases in ReSI’s portfolio), however,
inflation can also increase operating expenses,
potentially offsetting some or all of inflation-linked
revenue growth, all else being equal.
c.
Forecast inflation rates applied for different years
across the portfolio valuations at 30 September
ranged from 2.0% to 8.5% for CPI and 2.5%
to 12.3% for RPI.
3
House price growth for shared
ownership properties
a.
Projected house price growth plays a significant role
in determining the prevailing open market value at
which shared ownership residents staircase.
b.
Everything else being equal, there is a positive
relationship between future house price growth
and the property valuation, such that an increase
in future house price growth will increase the
valuation of a property and vice versa.HPI forecasts
applied for different years to the shared ownership
valuations ranged from -1.5% to +10%.
Residential Secure Income plc
Annual Report and Accounts 2022
147
03
Financials - Notes to the Consolidated Financial Statements
4
Staircasing rates for shared ownership properties:
a.
Shared ownership residents have the option to
incrementally purchase from ReSI additional
shares in their homes at the prevailing open
market value. This process, known as “staircasing”,
generates additional cash flow to the Group, and
the rate of staircasing partly determines the
amount of cash flow from equity purchases that
the Group may receive in any given period of time.
b.
The relationship between future staircasing rates
and property valuation may be either positive
or negative depending on the discount rate and
house price growth assumptions used for a given
property. If a zero rate of staircasing is assumed
this would result in an increase in the valuation
of ReSI’s shared ownership properties as Savills
apply a higher discount rate to staircasing cash
flows as compared to rental cashflows. Equally, if
it assumed that a property staircases immediately
this would also result in increase in the valuation
of ReSI’s shared ownership properties as these
properties are valued at a discount to their
Open Market Value (the price at which shared
owners staircase).
c.
Staircasing rates applied to shared ownership
valuations ranged from 2.5% to3.0%.
There are interrelationships between these inputs as
they are determined by market conditions, and the
valuation movement in any one period depends on the
balance between them. If these inputs move in opposite
directions (i.e. rental values increase and discount
rates decrease) valuation movements can be amplified,
whereas if they move in the same direction they may be
offset, reducing the overall net valuation movement.
The valuation movement is materially sensitive to
changes in discount rates and rental values. The impact
on valuation from the change in key factors has been
modelled below by Savills:
Key inputs
Key inputs
Sensitivity
modelled
Valuation at
30 September 2022
£’mn
+
Updated Valuation
£’mn
-
Updated Valuation
£’mn
Retirement
Regional Discount Rate
+/- 25bps
218.9mn
210.4mn
228.1mn
Consumer Price Index (CPI)
76
+/- 25bps
218.9mn
208.6mn
230.1mn
Retail Price Index (RPI)
77
+/- 25bps
218.9mn
229.1mn
209.2mn
Shared
Ownership
Rental Discount Rate
+/- 25bps
128.2mn
125.5mn
131.1mn
Retail Price Index (RPI)
+/- 25bps
128.2mn
130.0mn
126.5mn
House Price Index (HPI (long-
term rate Yr 6+))
+/- 25bps
128.2mn
129.7mn
127.0mn
76.
Applied to operating expenses and rents at the end of contractual periods
77.
Applied to contractual rent increases
148
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
18
Trade and other receivables
2022
£’000
2021
£’000
Trade debtors
385
968
Prepayments
2,623
2,488
Other debtors
382
595
3,390
4,051
The Group applies the IFRS 9 simplified approach to
measuring expected credit losses using a 12-month
expected loss provision for rent receivables. To
measure expected credit losses on a collective basis,
rent receivables are grouped based on similar credit
risk and ageing.
The expected loss rates are based on the Group’s
historical credit losses experienced since inception
to the period end. The historical loss rates are then
adjusted for current and forward-looking information
on macroeconomic factors affecting the Group’s
customers. Both the expected credit loss provision
and the incurred loss provision in the current and
prior years are immaterial. No reasonably possible
changes in the assumptions underpinning the expected
credit loss provision would give rise to a material
expected credit loss.
There is no significant difference between the fair value
and carrying value of trade and other receivables at the
Statement of Financial Position date.
19
Deposits paid for property purchases
2022
£’000
2021
£’000
Deposit paid for property
purchases
827
1,158
827
1,158
The deposits paid as at 30 September 2022 relate to
the acquisition of 41 shared ownership homes from
Brick by Brick Croydon Ltd located in Croydon which are
expected to complete in the first half of FY 2023.
The deposits paid as at 30 September 2021 relate
to the acquisition of 46 shared ownership homes in
Leicestershire and Croydon, 38 of which were acquired
during the year with the rest expected to complete in
the first half of FY 2023.
20
Cash and cash equivalents
2022
£’000
2021
£’000
Cash at bank
12,739
5,684
Cash held as investment deposit
2
2
12,741
5,686
Restricted cash
3,243
2,684
15,984
8,370
During the year, the Group has reassessed the
classification of restricted cash and has included it in
cash and cash equivalents at 30 September 2022. This
relates to cash that is subject to restrictions with a third
party where the terms of the account do not prevent
the Group from the cash. In prior periods, this balance
was not included in cash and cash equivalents in the
Consolidated Statement of Cashflows. Comparatives
have not been adjusted for this reclassification on
grounds of materiality. Included within cash at the year-
end was an amount totalling £3,243,000 (£2,684,000
at 30 September 2021) held in separate bank accounts
which the Group considers restricted cash. Restricted
cash is cash where there is a legal restriction to specify
its type of use. This is typically where the Group has
agreed to deposit cash with a bank as part of a joint
arrangement with a tenant under a lease agreement,
or to provide additional security to a lender over loan
facilities, or under an asset management initiative.
£1,324,000 (2021: £1,227,000) was held by the
managing agent of the retirement portfolio in respect
of tenancy rental deposits. Other funds were held by
the management agent in an operating account to pay
service charges in respect of the RHP Portfolio due on
1 October 2022.
£1,564,000 (2021: £1,139,000) was held by US Bank in
respect of funds required as a debt service reserve for
the shared ownership debt.
£354,000 (2021: £318,000) was held in respect of a
service charge reserve fund.
Cash held as investment deposit relates to cash
invested in a money market fund, which is invested
in short-term AAA rated Sterling Investments. As the
fund has a short maturity period, the investment has
a high liquidity. The fund has £13.8bn AUM, hence the
Group’s investment deposit represents an immaterial
proportion of the fund.
Residential Secure Income plc
Annual Report and Accounts 2022
149
03
Financials - Notes to the Consolidated Financial Statements
21
Trade and other payables
2022
£’000
2021
£’000
Trade payables
1,173
3,735
Accruals
1,238
1,756
VAT payable
4
3
Deferred income
797
661
Other creditors
1,679
1,583
4,891
7,738
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. For
most suppliers interest is charged if payment is not made within the required terms. Thereafter, interest is chargeable
on the outstanding balances at various rates. The Company has financial risk management policies in place to control
that all payables are paid within the agreed credit timescale.
There is no significant difference between the fair value and carrying value of trade and other payables at the
Statement of Financial Position date.
22
Borrowings
2022
£’000
2021
£’000
Loans
192,126
170,814
Unamortised borrowing costs
(2,421)
(2,475)
189,705
168,339
Current liability
14,285
2,984
Non-current liability
175,420
165,355
189,705
168,339
The loans are repayable as follows:
2022
£’000
2021
£’000
Within one year
14,285
2,984
Between one and two years
9,851
14,792
Between three and five years
9,088
6,911
Between six and ten years
14,887
12,019
Between eleven and twenty years
29,452
23,953
Over twenty years*
112,142
107,680
189,705
168,339
*£77.6mn of this is due at the maturity date of the loan in 2043.
The maturity analysis has been expanded in the current year to provide better information. The comparatives have
been amended for consistency.
150
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
Movements in borrowings are analysed as follows:
Fair
value
through
profit or
loss
£'000
Held at
amortised
cost
£'000
2022
£’000
2021
£’000
At 30 September 2021
59,513
108,826
168,339
141,101
Drawdown of facility
20,000
8,100
28,100
25,128
New borrowing costs
–
(215)
(215)
(275)
Amortisation of loan costs
–
268
268
259
Fair value movement
(1,809)
–
(1,809)
2,731
Repayment of borrowings
–
(4,978)
(4,978)
(605)
Year ended 30 September 2022
77,704
112,001
189,705
168,339
The table below lists the Group’s borrowings:
Lender
Drawn on original facility
£'000
Outstanding debt net of
unamortised issue costs
£'000
Maturity
date
Annual interest
rate
%
2022
£’000
2021
£’000
2022
£’000
2021
£’000
Held at amortised cost
Scottish Widows Ltd
97,000
97,000
92,506
95,224
Jun-43
3.5% Fixed (Average)
National Westminster Bank Plc
21,550
14,450
12,704
14,450
Apr-23
1.50% over SONIA
Santander
7,100
1,628
6,791
1,628
Jun-25
2.25% over SONIA
125,650
113,078
112,001
111,302
Held at fair value
Universities Superannuation Scheme
77,500
57,500
77,704
59,513
May-65
0.94% (Average)*
77,500
57,500
77,704
59,513
Total borrowings
203,150
170,578
189,705
170,815
*The principal will increase at a rate of RPI+0.5% on a quarterly basis; RPI is capped between 0% and 5% on a pro-rated basis.
During the year the Group transferred all of its borrowings subject to a variable rate of interest from LIBOR to SONIA.
SONIA is an overnight rate whereas LIBOR was a term rate. SONIA is close to a risk-free measure of borrowing costs. It
is compounded over a lending period to produce a backward-looking term interest rate, It is expected that this change
in risk-free rate will not lead to a material change in overall borrowing costs.
The Group elected to fair value through profit and loss the Universities Superannuation Scheme borrowings. The
notional outstanding debt at 30 September 2022 was £77.5mn (2021: £57.5mn) with an amortised cost of £82.7mn
(2021: £59.0mn).
The Universities Superannuation Scheme borrowings have been fair valued by calculating the present value of future
cash flows, using the gilt curve and a credit spread reflecting the high credit strength of the borrower at the date of
valuation.
The credit spread used for the valuation as at 30 September 2022 was 1.81%.
In accordance with IFRS 13, the Group’s borrowings held at fair value have been assigned a valuation level in the fair
value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical
assets (Level 1) and the lowest priority to unobservable inputs (Level 3). The Group’s borrowings held at fair value as at
30 September 2022 are categorised as Level 2.
Residential Secure Income plc
Annual Report and Accounts 2022
151
03
Financials - Notes to the Consolidated Financial Statements
Everything else being equal, there is a negative
relationship between the credit spread and the
borrowings valuation, such that an increase in the credit
spread (and therefore the future interest payable) will
reduce the valuation of a borrowing liability and vice
versa. A 10-basis point increase in the credit spread
would result in a reduction of the liability by £1.2mn.
The fair value of borrowings held at amortised cost
at 30 September 2022 was £83.3mn (£114.2mn at 30
September 2021).
The Scottish Widows facility is secured by a first charge
over retirement properties with a fair value of £218.9mn.
The NatWest facility is secured by a first charge
over Local Authority Housing properties with a fair
value of £27.7mn.
The Universities Superannuation Scheme facility
is secured by a first charge over shared ownership
properties with a fair value of £128.2mn, cash of
£11.2mn, deposits of £0.8mn and restricted cash
balances of £1.6mn.
On 12 September 2022, the Group amended the terms
of the revolving capital facility with Santander UK plc
under which the facility was increased from £10mn
to £25mn at a reduced margin of 2.25%, down from
2.80%, over SONIA and extended to 12 March 2025. Each
draw under the facility must be repaid within 2 years of
drawdown. There is a commitment fee of 2.25% on 30%
of the undrawn balance of the facility. As at the year
end, £7.1mn had been drawn down under the facility.
The facility bears interest at SONIA plus 2.25%.
23
Recycled Capital Grant
ReSI’s shared ownership portfolio has been supported
by grant funding, which is designed to facilitate the
delivery of affordable housing projects. In some
circumstances, typically when a shared owner
staircases, ReSI will be required to recycle the grant
into the purchase of new properties within three years
or to repay it to the relevant grant provider.
On disposal/staircasing of a grant funded property,
the Group initially recognises a liability in the Recycled
Capital Grant fund. If the disposal receipts are not
subsequently recycled, the grant will be repaid.
The balance at 30 September 2022 was £205,000
(2021: £38,000).
24
Share capital account
Number of
Ordinary 1 p
shares
£'000
At 30 September 2021
180,324,377
1,803
Issue of shares
13,824,884
138
At 30 September 2022
194,149,261
1,941
The share capital account relates to amounts
subscribed for share capital.
Rights, preferences and restrictions on shares
All Ordinary Shares carry equal rights; no privileges are
attached to any shares in the Company. All the shares
are freely transferable, except as otherwise provided
by law. The holders of Ordinary Shares are entitled to
receive dividends as declared from time to time and
are entitled to one vote per share at meetings of the
Company. All shares rank equally with regard to the
Company’s residual assets.
During the year, 13,824,884 ordinary shares of 1p each
were issued at a premium of £1.075 per share. Costs
of £364,514 associated with the share issue have been
offset against the share premium account.
Treasury shares do not hold any voting rights.
25
Share premium account
£'000
At 30 September 2021
108
Issue of shares
14,862
Share issue costs
(365)
At 30 September 2022
14,605
The share premium account relates to amounts
subscribed for share capital in excess of nominal value.
152
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
26
Treasury shares reserve
£'000
At 30 September 2021
(8,515)
Purchase of treasury shares
(245)
Transferred as part of Fund Management fee
467
At 30 September 2022
(8,293)
The treasury shares reserve relates to the value of shares purchased by the Company in excess of nominal value.
During the year ended 30 September 2022, the Company purchased 232,564 of its own 1p ordinary shares at a total
gross cost of £240,201 (£240,400 cost of shares and £801 associated costs).
During the year, 212,153 1p Ordinary Shares were transferred from its own shares reserve to the Fund Manager, in lieu of
the management fee in accordance with the Fund Management Agreement.
As at 30 September 2022, 8,985,980 (2021: 9,198,133) 1p Ordinary Shares are held by the Company.
27
Retained earnings
£'000
At 30 September 2021
188,996
Profit for the year
13,334
Share based payment charge
467
Issue of management shares
(467)
Dividends
(9,195)
At 30 September 2022
193,135
Retained earnings incorporate all gains and losses and transactions with shareholders (e.g. dividends) not
recognised elsewhere.
28
Group entities
The Group entities which are owned either directly by the Company or indirectly through a subsidiary undertaking are:
Name of entity
Percentage
of ownership
Country of
incorporation
Principal
place of
business
Principal activity
ReSI Portfolo Holdings Limited
100%
UK
UK
Holding company
RHP Holdings Limited
100%
UK
UK
Holding company
The Retirement Housing Limited Partnership
100%
UK
UK
Property investment
ReSI Housing Limited
100%
UK
UK
Registered Provider of Social Housing
Wesley House (Freehold) Limited
100%
UK
UK
Property investment
Eaton Green (Freehold) Limited
100%
UK
UK
Property investment
Residential Secure Income plc
Annual Report and Accounts 2022
153
03
Financials - Notes to the Consolidated Financial Statements
Name of entity
Registered address
ReSI Portfolo Holdings Limited
5 New Street Square, London, England, EC4A 3TW
RHP Holdings Limited
5 New Street Square, London, England, EC4A 3TW
The Retirement Housing Limited Partnership
Glanville House, Frobisher Way, Taunton, Somerset, TA2 6BB
ReSI Housing Limited
5 New Street Square, London, EC4A 3TW
Wesley House (Freehold) Limited
5 New Street Square, London, England, EC4A 3TW
Eaton Green (Freehold) Limited
5 New Street Square, London, England, EC4A 3TW
All group entities are UK tax resident.
29
Notes to the cash flow statement
The liabilities arising from financing activities are reconciled below:
Borrowings
due within
one year
(note 22)
£'000
Borrowings
due in more
than one year
(note 22)
£'000
Fair value
of
interest
rate swaps
£'000
Lease
liabilities
(note 31)
£'000
Total
£'000
At 1 October 2021
2,984
165,355
–
31,207
199,546
Cash flows
Borrowings advanced
–
28,100
–
–
28,100
Borrowings repaid
(4,978)
–
–
–
(4,978)
Debt arrangement fees paid
–
(215)
–
–
(215)
Non-cash flows
Reclassification of borrowings
Borrowings reclassified
16,279
(16,279)
Amortisation of debt set up fees
–
268
–
–
268
Change in fair value of borrowings
–
(1,809)
–
–
(1,809)
Recognition of headlease liabilities acquired
–
–
–
135
135
At 30 September 2022
14,285
175,420
–
31,342
221,047
At 1 October 2020
388
140,713
104
29,576
170,781
Cash flows
Borrowings advanced
2,201
22,927
–
–
25,128
Borrowings repaid
(605)
–
–
–
(605)
Debt arrangement fees paid
–
(275)
–
–
(275)
Non-cash flows
Borrowings reclassified
1,000
(1,000)
Amortisation of debt set up fees
–
259
–
–
259
Change in fair value of borrowings
–
2,731
–
–
2,731
Change in fair value of interest rate swaps
–
–
(104)
–
(104)
Recognition of headlease liabilities acquired
–
–
–
1,631
1,631
At 30 September 2021
2,984
165,355
–
31,207
199,546
154
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
30
Dividends
2022
£’000
2021
£’000
Amounts recognised as distributions to shareholders in the period:
4th interim dividend for the year ended 30 September 2020 of 1.25p per share
–
2,138
1st interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
2nd interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
3rd interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
4th interim dividend for the year ended 30 September 2021 of 1.29p per share
2,208
–
1st interim dividend for the year ended 30 September 2022 of 1.29p per share
2,209
–
2nd interim dividend for the year ended 30 September 2022 of 1.29p per share
2,389
–
3rd interim dividend for the year ended 30 September 2022 of 1.29p per share
2,389
–
9,195
8,552
Amounts not recognised as distributions to shareholders in the period:
4th interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
4th interim dividend for the year ended 30 September 2022 of 1.29p per share
2,389
–
Categorisation of dividends for UK tax purposes:
Amounts recognised as distributions to shareholders in the period:
Property Income Distribution (PID)
7,345
3,078
Non-PID
1,850
5,474
9,195
8,552
On 1 December 2021, the Company declared its fourth interim dividend of 1.29p per share for the period 1 July 2021 to
30 September 2021.
On 27 January 2022, the Company declared its first interim dividend of 1.29p per share for the period 1 October 2021 to
31 December 2021.
On 24 May 2022, the Company declared its second interim dividend of 1.29p per share for the period 1 January 2022
to 31 March 2022.
On 27 July 2022, the Company declared its third interim dividend of 1.29p per share for the period 1 April 2022
to 30 June 2022.
On 1 December 2022, the Company announced the declaration of a fourth interim dividend of 1.29p per share for the
period 1 July 2022 to 30 September 2022 which will be payable on 18 January 2023 to Shareholders on the register at
the close of business on 8 December 2022.
The Company intends to continue to pay dividends to shareholders on a quarterly basis in accordance with
the REIT regime.
Dividends are not payable in respect of its Treasury shares held.
Residential Secure Income plc
Annual Report and Accounts 2022
155
03
Financials - Notes to the Consolidated Financial Statements
31
Lease arrangements
The Group as lessee
The interest expense in respect of lease liabilities for the period was £996,000 (2021: £989,000)
There was no expense relating to variable lease payments in the period (2021: Nil).
The Group did not have any short-term leases or leases for low value assets accounted for under IFRS 16 paragraph 6,
nor any sale and leaseback transactions.
The total cash outflow in respect of leases was £996,000 (2021: £989,000).
At 30 September 2022, the Group had outstanding commitments for future minimum lease payments under non-
cancellable leases, which fall due as follows:
As at 30 September 2022
Less than
one year
£'000
Two to
five years
£'000
6 to
10
years
£'000
10 to
20
years
£'000
More than
20
years
£'000
Total
£'000
Minimum lease payments
994
3,976
4,970
9,920
113,062
132,922
Interest
–
(291)
(432)
(1,485)
(99,372)
(101,580)
Present value at 30 September 2022
994
3,685
26,663
8,435
13,690
31,342
As at 30 September 2021
Less than
one year
£'000
Two to
five years
£'000
6 to
10
years
£'000
10 to
20
years
£'000
More than
20
years
£'000
Total
£'000
Minimum lease payments
989
3,955
4,944
9,888
113,600
133,377
Interest
–
(288)
(428)
(1,496)
(99,957)
(102,170)
Present value at 30 September 2021
989
3,667
4,516
8,392
13,643
31,207
The above commitment is in respect of ground rents payable for properties held by the Group under leasehold.
There are 2,182 properties (2021: 2,281) held under leasehold with an average unexpired lease term of 155 years
(2021: 157 years).
The majority of restrictions imposed are the covenants in place limiting tenancies to people of retirement age.
The Group as lessor
The Group leases some of its investment properties under operating leases. At the balance sheet date, the Group
had contracted with tenants for the following future aggregate minimum rentals receivable under non-cancellable
operating leases:
2022
£’000
2021
£’000
Receivable within 1 year
7,987
6,616
Receivable between 1-2 years
5,817
4,544
Receivable between 2-3 years
5,723
4,544
Receivable between 3-4 years
4,728
4,544
Receivable between 4-5 years
4,530
4,544
Receivable between 5-10 years
19,039
13,665
Receivable between 10-20 years
37,978
25,635
Receivable after 20 years
373,736
250,571
459,537
314,663
The total of contingent rents recognised as income during the period was £nil (2021: £nil).
The maturity analysis has been expanded in the current year to provide more information. The comparatives have been
amended for consistency.
156
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
The majority of leases are assured tenancy or assured shorthold tenancy agreements. The table above shows the
minimum lease payments receivable under the assumption that all tenants terminate their leases at the earliest
opportunity. However, assured tenancies are long-term agreements providing lifetime security of tenure to residents.
The leases in the licensed retirement homes portfolio are indefinite and would only be terminated in the event that
the leaseholders of the relevant retirement development vote to no longer have a resident house manager living at
their development.
The Group’s shared ownership properties are let to Shared Owners on leases with initial lease terms of between
130 to 999 years.
Two of the Group’s properties are let out on more traditional leases which account for approximately 8% of
total rental income.
The table below shows our expected lease receivables, excluding future rent reviews, from existing leases based on
historical turnover rates consistent with our assumptions for valuing the properties:
2022
£’000
2021
£’000
Receivable within 1 year
25,099
22,971
Receivable between 1-2 years
21,547
19,576
Receivable between 2-3 years
18,590
16,839
Receivable between 3-4 years
15,286
14,631
Receivable between 4-5 years
13,221
12,847
Receivable between 5-10 years
44,784
38,255
Receivable between 10-20 years
54,455
41,359
Receivable after 20 years
382,089
258,530
575,071
425,008
The maturity analysis has been expanded in the current year to provide more information. The comparatives have been
amended for consistency.
32
Net asset value per share
2022
£’000
2021
£’000
Net assets
201,388
182,392
201,388
182,392
Ordinary shares in issue at period end (excluding shares held in treasury)
185,163,281
171,126,244
Basic NAV per share (pence)
108.8
106.6
The net asset value (‘NAV’) is calculated as the net assets of the Group attributable to shareholders divided by the
number of Ordinary Shares in issue at the period end.
EPRA Net Tangible Assets (NTA) per share
2022
£’000
2021
£’000
IFRS NAV per the financial statements
201,388
182,392
Revaluation of trading properties
93
278
Fair value of financial instruments
(4,997)
2,012
Real estate transfer tax
-
-
EPRA NTA
196,484
184,682
Fully diluted number of shares
185,163,281
171,126,244
EPRA NTA per share (pence)
106.1
107.9
Residential Secure Income plc
Annual Report and Accounts 2022
157
03
Financials - Notes to the Consolidated Financial Statements
EPRA NTA is equivalent to EPRA Net
Reinstatement Value
The EPRA Net Tangible Assets (‘EPRA NTA’) per share
calculated as the EPRA NTA of the Group attributable to
shareholders divided by the number of Ordinary Shares
in issue at the period end.
The Group has debt which it elected to carry at fair value
through profit and loss. In accordance with the EPRA
Best Practice Recommendations, EPRA NTA should
reflect the amortised cost of the debt rather than its
fair value. In the current period, an adjustment has
been made for £5.0mn which represents the difference
between fair value and what amortised cost would
have had the Group carried the debt at amortised cost.
No adjustment was made in the prior year as it was
immaterial. The adjustment would have been £1.5mn for
the year ended 30 September 2021.
33
Contingent liabilities and commitments
ReSI’s shared ownership portfolio has been supported
by £15mn of grant funding. In some circumstances,
typically when a Shared Owner staircases, ReSI will be
required to recycle the grant into the purchase of new
properties within three years or to repay it to the grant
providing body (see note 23).
ReSI is committed to the acquisition of 41 shared
ownership units in South London which are expected
to complete within the next financial year, at a total
acquisition cost of £8.9mn.
There are no provisions for fines and settlements
specified for ESG (Environmental, Social or Governance)
or any other issues.
34
Related party disclosure
As defined by IAS 24 Related Party Disclosures, parties
are considered to be related if one party has the ability
to control the other party or exercise significant
influence over the other party in making financial or
operational decisions.
For the year ended 30 September 2022, the Directors
of the Group are considered to be the key management
personnel. Details of amounts paid to Directors for
their services can be found within note 10, Directors’
fees and expenses.
ReSI Capital Management Limited acts as alternative
investment fund manager (the “Fund Manager”)
pursuant to the Fund Management Agreement.
The
Fund Manager has responsibility for the day-to-day
management of the Company’s assets in accordance
with the Investment policy subject to the control and
directions of the Board.
The Fund Management agreement is terminable on
not less than 12 months’ notice, such notice not to
expire earlier than 12 July 2022 (the fifth anniversary of
admission to the Official List of the UKLA and traded on
the London Stock Exchange main market).
Details regarding the Fund Manger’s entitlement to a
management fee are shown in note 7.
For the year ended 30 September 2022, the Company
incurred £1,867,000 (2021: £1,802,000) in respect of
fund management fees of which £nil was outstanding
as at 30 September 2022 (2021: £nil). The above fee
was split between cash and equity as per the Fund
Management Agreement with the cash equating
to £1,401,000 (2021: £1,351,000) and the equity fee
of £467,000 (2021: £449,000) being paid as 444,717
Ordinary Shares (2021: 506,000) at an average price of
£1.05 per share (2021: £0.91 per share).
In addition, the Fund Manager was paid a fee, pursuant
to the Fund Management Agreement, of £143,000 (2021:
£186,000) in respect of its arrangement of borrowings
for the Group and £nil was outstanding at 30 September
2022 (September 2021: £nil).
During the period the Directors and the Fund Manager
received dividends from the Company of £15,000 (2021:
£10,000) and £149,000 (2021: £53,000) respectively.
ReSI Property Management Limited (‘RPML
’) is a
wholly owned subsidiary of ReSI Capital Management
Limited and provides property management services
to the Group on a cost pass through basis with no
profit margin. During the year, RPML charged fees
of £1,738,000 (2021: £408,000) in respect of costs
incurred in providing property management services
and £166,000 (2021: £317,000) in respect of non-
recurring costs.
35
Post balance sheet events
There have been no significant events that require
disclosure to, or adjustment in the financial statements
as at 30 September 2022.
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Annual Report and Accounts 2022
03
Financials - Notes to the Consolidated Financial Statements
36
Financial instruments
The table below sets out the categorisation of the
financial instruments held by the Group as at 30
September 2022. Borrowings held at amortised cost have
a fair value of £83.3mn. The carrying amount of other
financial instruments approximates to their fair value.
2022
£’000
2021
£’000
Financial assets
At amortised cost
Trade and other
receivables
767
1,563
Cash and cash deposits
15,984
8,370
16,751
9,933
Financial liabilities
At amortised cost
Obligations under leases
31,342
31,207
Borrowings
112,002
108,826
Trade and other payables
4,090
7,074
147,434
147,107
At fair value through
profit or loss
Borrowings
77,703
59,513
77,703
59,513
225,137
206,620
The Group’s activities expose it to a variety of financial
risks: market risk, interest rate and inflation risk, credit
risk, liquidity risk and capital risk management.
The Group’s risk management policies are established
to identify and analyse the risks faced by the Group, to
set appropriate limits and controls, and to monitor risks
and adherence to limits. When considered appropriate
the Group uses derivative financial instruments to hedge
certain risk exposures.
Risk management policies and systems are
reviewed regularly by the Board and Fund Manager
to reflect changes in the market conditions and the
Group’s activities.
The exposure to each financial risk considered potentially
material to the Group, how it arises and the policy for
managing the risk is summarised below:
a)
Market risk
Market risk is the risk that changes in market prices will
affect the Group’s income or the value of its holding of
financial instruments.
The Company's activities will expose it to the market risks
associated with changes in property and rental values.
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;
changes in the general social environment;
competition from 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 Company and the rental values it
can achieve, and as a result can influence the financial
performance of the Company.
The Group mitigates these risks by entering into long
term management and rental/letting agreements to
ensure any fall in the property market should not result in
significant impairment to rental cashflows. The average
unexpired length of leases in the portfolio is 155 years.
In addition, the Group focuses on areas of the market with
limited and ideally countercyclical exposure to the wider
property market.
As the Group operates only in the United Kingdom
residential property market for Retirement Homes,
Shared Ownership and Local Authority housing it is not
exposed to currency risk.
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Annual Report and Accounts 2022
159
03
Financials - Notes to the Consolidated Financial Statements
b)
Interest rate and inflation risks
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 interest rate exposure profile of the Group’s financial assets and liabilities as at 30 September 2022 and 30
September 2021 were:
Nil rate assets
and liabilities
£'000
Floating rate
assets
£'000
Fixed rate
liability
£'000
Floating rate
liability
£'000
Total
£'000
2022
Trade and other receivables
767
-
-
-
767
Cash and cash equivalents
-
15,984
-
-
15,984
Trade and other payables
(4,090)
-
-
-
(4,090)
Bank borrowings
-
-
(170,210)
(19,495)
(189,705)
Obligations under finance leases
-
-
(31,342)
-
(31,342)
(3,323)
15,984
(201,552)
(19,495)
(208,386)
2021
Trade and other receivables
1,563
-
-
-
1,563
Cash and cash equivalents
-
8,370
-
-
8,370
Trade and other payables
(7,074)
-
-
-
(7,074)
Bank borrowings
-
-
(152,538)
(15,801)
(168,339)
Obligations under finance leases
-
-
(31,207)
-
(31,207)
(5,511)
8,370
(183,745)
(15,801)
(196,687)
The Group has primarily financed its activities with fixed rate debt, which reduces the Group’s exposure to changes
in market interest rates. If market interest rates increased by 1% the Group’s finance costs for existing debt facilities
would increase by £198,040. Conversely, if market interest rates decreased by 1% the Group’s finance costs for existing
debt facilities would decrease by £198,040.
The Group intends to finance its activities with fixed, floating rate or inflation-linked debt. Changes in the general level
of interest rates and inflation can affect the Group's profitability by affecting the spread between, amongst other
things, the income on its assets and the expense of its interest-bearing liabilities, the value of its interest-earning
assets and its ability to realise gains from the sale of assets should this be desirable.
The Fund Manager intends to match debt cash flows to those of the underlying assets and therefore does not expect
to utilise derivatives. However, to the extent this is not possible, the Group may utilise derivatives for full or partial
inflation or interest rate hedging or otherwise seek to mitigate the risk of inflation or interest rate movements. The
Group will closely manage any derivatives, in particular with regard to liquidity and counterparty risks. The Group will
only use derivatives for risk management and not for speculative purposes.
160
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03
Financials - Notes to the Consolidated Financial Statements
c)
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty fails to meet its contractual obligations and arises
principally from the Group’s tenants (in respect of trade receivables arising under operating leases), banks and money
market funds (as holders of the Group’s cash deposits).
Exposure to credit risk
2022
£’000
2021
£’000
Trade and other receivables
767
1,563
Cash and cash equivalents
15,984
8,370
16,751
9,933
The Group engages third parties to provide day-to-day management of its properties including letting and collection
of underlying rent from residents or shared owners. The Group mitigates void risk by acquiring residential asset
classes with a demonstrable strong demand or where the residents are part owners of the properties (as exhibited by
retirement, sub-market rental assets or shared ownership properties).
The credit risk of cash and cash equivalents is limited due to cash being held at banks or money market funds
considered credit worthy by the Fund Manager, with high credit ratings assigned by international credit rating agencies.
Note 31 details the Group’s exposure as a lessor in respect of future minimum rentals receivable.
d)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset.
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 Company ensures, through
forecasting of capital requirements, that adequate cash is available.
The Company’s near-term debt maturities include c. £12.7mn of debt repayable in full to NatWest in April 2023.
The
Company currently has c.£31mn of liquidity on hand to address this upcoming maturity, including £18mn of available
capacity on the Santander revolving credit facility.
The Group has been in compliance with all financial covenants on its external borrowings throughout the year.
The following table details the Group’s remaining contractual maturing for its financial liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities, including future interest payments, based on the
earliest date on which the Group can be required to pay.
Residential Secure Income plc
Annual Report and Accounts 2022
161
03
Financials - Notes to the Consolidated Financial Statements
Less than one
year
£'000
Two to five
years
£'000
More than five
years
£'000
Total
£'000
2022
Borrowings
14,285
18,456
156,964
189,705
Interest on borrowings
3,824
14,611
53,435
71,870
Obligations under leases
994
3,975
127,953
132,922
Payables and accruals
4,090
-
-
4,090
23,193
37,042
338,352
398,587
2021
Borrowings
2,984
21,703
143,652
168,339
Interest on borrowings
3,805
14,108
54,009
71,922
Obligations under leases
989
3,955
128,433
133,377
Payables and accruals
7,074
-
-
7,074
14,852
39,766
326,094
380,712
e)
Capital risk management
The Group manages its capital to ensure the entities in the Group will be able to continue as a going concern whilst
maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt (note 22), cash and cash equivalents (note 20) and equity
attributable to the shareholders of the Company (comprising share capital, retained earnings and the other reserves as
referred in notes 24 to 27).
The Group is not subject to externally imposed capital requirements under the UK AIFM regime.
The Group’s management reviews the capital structure on a regular basis in conjunction with the Board. As part of this
review management considers the cost of capital, risks associated with each class of capital and debt and the amount
of any dividends to shareholders.
2022
£’000
2021
£’000
Obligations under leases
31,342
31,207
Borrowings (book value)
189,705
168,339
Cash and cash equivalents
(15,984)
(8,370)
Net debt
205,063
191,176
Equity attributable to equity holders
201,388
182,392
Net debt to equity ratio
1.02
1.05
Borrowings excluding lease liability
189,705
168,339
Available cash
(12,675)
(6,825)
Net debt excluding lease liability and cash
177,030
161,514
Total assets less finance lease gross up and cash
380,205
350,137
Loan to Value (“LTV”) leverage ratio
0.47
0.46
The LTV leverage ratio has been presented to enable a comparison of the group’s borrowings as a proportion of Gross
Assets as at 30 September 2022 to its medium term target LTV leverage ratio of 0.50.
162
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03
Financials - Notes to the Consolidated Financial Statements
Company Statement of Financial Position
As at 30 September 2022
Note
2022
£’000
2021
£’000
Non-current assets
Investment in subsidiary undertakings
8
189,018
174,390
Total non-current assets
189,018
174,390
Current assets
Trade and other receivables
9
715
1,859
Cash and cash equivalents
10
42
1,039
Total current assets
757
2,898
Total assets
189,775
177,288
Current liabilities
Trade and other payables
11
367
370
Total current liabilities
367
370
Net assets
189,408
176,918
Equity
Share capital
12
1,941
1,803
Share premium
13
14,605
108
Teasury shares reserve
14
(8,293)
(8,515)
Retained earnings
181,155
183,522
Total interests
189,408
176,918
Total equity
189,408
176,918
The notes on pages 165 to 171 form part of these financial statements.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not
presented its own profit and loss account in these financial statements. The profit attributable to the Parent Company
for the year ended 30 September 2022 amounted to £6.8mn
(2021: £8.5mn).
These financial statements were approved and authorised for issue by the Board of Directors on 1 December 2022 and
signed on its behalf by:
Rob Whiteman
Chairman
1 December 2022
Residential Secure Income plc
Annual Report and Accounts 2022
163
03
Financials
Company Statement of Changes in Equity
For the year to 30 September 2022
Share
capital
£'000
Share
premium
£'000
Treasury
shares
reserve
£'000
Retained
earnings
£'000
Total
equity
£'000
Balance at 30 September 2020
1,803
108
(8,626)
183,567
176,852
Profit for the period
-
-
-
8,507
8,507
Total comprehensive income
-
-
-
8,507
8,507
Contributions by and distributions to shareholders
Issue of management shares
-
-
449
(449)
-
Share based payment charge
-
-
-
449
449
Purchase of own shares
-
-
(338)
-
(338)
Dividends paid
-
-
-
(8,552)
(8,552)
Balance at 30 September 2021
1,803
108
(8,515)
183,522
176,918
Profit for the period
-
-
-
6,828
6,828
Total comprehensive income
-
-
-
6,828
6,828
Contributions by and distributions to shareholders
Issue of shares
138
14,862
-
-
15,000
Share issue costs
-
(365)
-
-
(365)
Issue of management shares
-
-
467
(467)
-
Share based payment charge
-
-
-
467
467
Purchase of own shares
-
-
(245)
-
(245)
Dividends paid
-
-
-
(9,195)
(9,195)
Balance at 30 September 2022
1,941
14,605
(8,293)
181,155
189,408
The notes on pages 165 to 171 form part of these financial statements.
164
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials
Notes to the Company Financial Statements
For the year to 30 September 2022
1
Basis of preparation
The financial statements have been prepared in
accordance with Financial Reporting Standard 100
Application of Financial Reporting Requirements (“FRS
100”) and Financial Reporting Standard 101 Reduced
Disclosure Framework (“FRS 101”).
2
Disclosure exemptions adopted
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 adopted IFRS;
Certain disclosures regarding the Company’s capital;
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 Residential
Secure Income 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:
Financial instruments;
Fair value measurement other than certain
disclosures required as a result of recording
financial instruments at fair value.
3
Changes to accounting standards and
interpretations
Revised standards adopted during the year
The IASB and IFRIC have revised a number of standards.
None of these amendments have led to any material
changes in the Company’s accounting policies or
disclosures during the year.
Standards in issue but not yet effective
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory
for the Company’s accounting periods beginning on or after
1 October 2022 and whilst the Directors are considering
these, initial indications are that these changes, will have no
material impact on the Company’s financial statements.
4
Significant accounting policies
The significant accounting policies applied in the
preparation of the financial statements are set out
below. The policies have been consistently applied
throughout the period.
a)
Basis of accounting
These financial statements have been presented as
required by the Companies Act 2006 and have been
prepared under the historical cost convention and in
accordance with applicable Accounting Standards and
policies in the United Kingdom (“UK GAAP”).
b)
Currency
The Company financial information is presented
in Sterling which is also the Company’s functional
currency and all values are rounded to the nearest
million (£mn), except where otherwise indicated.
c)
Investments in subsidiary undertakings in the
Company Financial Statements
Investments in subsidiary undertakings are stated at
cost less any provision for impairment in value.
d)
Share issue costs
The costs of issuing or reacquiring equity instruments
(other than in a business combination) are accounted
for as a reduction to share premium to the extent that
share premium has arisen on the related share issue.
e)
Finance income
Finance income comprises interest receivable on
funds invested and is recognised in profit and loss as it
accrues, using the effective interest method.
Residential Secure Income plc
Annual Report and Accounts 2022
165
03
Financials
f)
Taxation
Taxation on the profit or loss for the period not
exempt under UK REIT regulations would comprise
of current and deferred tax. Tax would be recognised
in the Statement of Comprehensive Income except
to the extent that it relates to items recognised as
direct movement in equity, in which case it would be
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. Deferred tax is
provided in full using the balance sheet liability method
on timing differences between the carrying amounts
of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred
tax is determined using tax rates that have been
enacted or substantively enacted by the reporting date
and are expected to apply when the asset is realised or
the liability is settled.
No provision is made for timing differences (i) arising
on the initial recognition of assets or liabilities, other
than on a business combination, that affect neither
accounting nor taxable profit and (ii) relating to
investments in subsidiaries to the extent that they will
not reverse in the foreseeable future.
g)
Dividend payable to shareholders
Equity dividends are recognised when they become
legally payable which for the final dividends is the date
of approval by the members. Interim dividends are
recognised when paid.
h)
Financial instruments
Financial assets
Recognition of financial assets
All financial assets are recognised on a trade date which
is the date when the Company becomes a party to the
contractual provisions of the instrument.
Initial measurement and classification of
financial assets
Financial assets are classified into the following
categories: ‘financial assets at fair value through profit
or loss’ and ‘financial assets at amortised cost’. The
classification depends on the business model in which
the asset is managed and on the cashflows associated
with that asset.
Financial assets are initially measured at fair value, plus
transaction costs, except for those financial assets
classified as at fair value through profit or loss, which
are initially measured at fair value.
At 30 September 2022 the Company had the following
non-derivative financial assets which are classified as
financial assets at amortised cost:
Cash and cash equivalents
Cash and short-term deposits in the balance sheet
comprise cash at bank (including investments in money-
market funds) and short-term deposits with an original
maturity of three months or less.
Trade and other receivables
Trade and other receivables are recognised at their
original invoiced value. Where the time value of money
is material, receivables are discounted and then held at
amortised cost, less provision for expected credit loss.
Impairment of financial assets
The Company applies the IFRS 9 simplified approach
to measuring the expected credit losses for trade and
other receivables whereby the allowance or provision
for all trade receivables are based on the lifetime
expected credit losses (“ECLs”).
The Company applies the general approach for initial
recognition and subsequent measurement of expected
credit loss provisions for the loan receivable and other
receivables which have maturities of 12 months or more
and have a significant finance component.
This approach comprises of a three-stage approach
to evaluation expected credit losses. These stages are
classified as follows:
Stage 1
Twelve-month expected credit losses are recognised in
profit or loss at initial recognition and a loss allowance
is established. For financial instruments that have not
deteriorated significantly in credit quality since initial
recognition or that have low credit risk at the reporting
date, the loss allowance for 12-month expected credit
losses is maintained and updated for changes in
amount. Interest revenue is calculated on the gross
carrying amount of the asset (i.e. without reduction for
expected credit losses).
166
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03
Financials - Notes to the Company Financial Statements
Stage 2
If the credit risk increases significantly and the resulting
credit quality is not considered to be low credit risk, full
lifetime expected losses are recognised and includes
those financial instruments that do not have objective
evidence of a credit loss event. Interest revenue is still
calculated on the gross carrying amount of the asset.
Stage 3
If the credit risk of a financial asset increases to the
point that it is considered credit impaired (there is
objective evidence of impairment at the reporting
date), lifetime expected credit losses continue to be
recognised. For financial assets in this stage, lifetime
expected credit losses will generally be individually
assessed. Interest revenue is calculated on the
amortised cost net carrying amount (amortised cost
less impairment).
De-recognition of financial assets
The Company derecognises a financial asset when
the contractual rights to the cash flows from the
asset expire, or it transfers the financial asset and
substantially all the risks and rewards of ownership to
another entity. If any interest in a transferred asset is
retained, then the Company recognises its retained
interest in the asset and associated liabilities.
Financial liabilities
Recognition of financial liabilities
All financial liabilities are recognised on the date when
the Company becomes a party to the contractual
provisions of the instrument.
Initial measurement and classification of
financial liabilities
Financial liabilities are classified into the following
categories: ‘financial liabilities at fair value through
profit or loss’ and ‘other financial liabilities’. The
classification depends on the nature and purpose of
the financial liabilities and is determined at the time of
initial recognition.
Financial liabilities are initially measured at fair value,
net of transaction costs, except for those financial
liabilities classified as at fair value through profit or loss,
which are initially measured at fair value.
At 30 September 2022 the Company had the following
non-derivative financial liabilities which are classified
as other financial liabilities:
Trade and other payables
Trade and other payables are initially recognised at fair
value and subsequently held at amortised cost.
De-recognition of financial liabilities
The Group derecognises a financial liability
when its contractual obligations are discharged,
cancelled or expire.
5
Significant accounting judgements
and estimates
The preparation of financial statements requires
the Directors of the Company to make judgements,
estimates and assumptions that affect the reported
amounts recognised in the financial statements.
However, uncertainty about these assumptions and
estimates could result in outcomes that require a
material adjustment to the carrying amount of the
asset or liability in the future. Estimates and underlying
assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any
future periods affected.
Impairment of fixed asset investments
The Directors are required to review the carrying
amounts of its investments to determine whether there
are any indicators for impairment. After assessing the
carrying amounts of the Company’s investments, it
was determined that impairment indicators no longer
existed for some of the investments and a reversal of
impairment loss should be recognised.
6
Fees paid to the Company’s auditor
2022
£’000
2021
£’000
Audit fees
78
60
Audit related services
15
14
Total fees
93
74
Non Audit fee
Corporate Finance Fee
44
–
Total Fee
137
74
Fees paid to the Company's auditors are inclusive of
irrecoverable VAT.
Residential Secure Income plc
Annual Report and Accounts 2022
167
03
Financials - Notes to the Company Financial Statements
7
Dividends paid
2022
£’000
2021
£’000
Amounts recognised as distributions to shareholders in the period:
4th interim dividend for the year ended 30 September 2020 of 1.25p per share
–
2,138
1st interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
2nd interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
3rd interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
4th interim dividend for the year ended 30 September 2021 of 1.29p per share
2,208
–
1st interim dividend for the year ended 30 September 2022 of 1.29p per share
2,209
–
2nd interim dividend for the year ended 30 September 2022 of 1.29p per share
2,389
–
3rd interim dividend for the year ended 30 September 2022 of 1.29p per share
2,389
–
9,195
8,552
Amounts not recognised as distributions to shareholders in the period:
4th interim dividend for the year ended 30 September 2021 of 1.25p per share
–
2,138
4th interim dividend for the year ended 30 September 2022 of 1.29p per share
2,138
–
Categorisation of dividends for UK tax purposes:
Amounts recognised as distributions to shareholders in the period:
Property Income Distribution (PID)
7,345
3,078
Non-PID
1,850
5,474
9,195
8,552
On 1 December 2021, the Company declared its fourth interim dividend of 1.29p per share for the period 1 July 2021 to
30 September 2021.
On 27 January 2022, the Company declared its first interim dividend of 1.29p per share for the period 1 October 2021 to
31 December 2021.
On 24 May 2022, the Company declared its second interim dividend of 1.29p per share for the period 1 January 2022
to 31 March 2022.
On 27 July 2022, the Company declared its third interim dividend of 1.29p per share for the period 1 April 2022
to 30 June 2022.
On 1 December 2022, the Company announced the declaration of a fourth interim dividend of 1.29p per share for the
period 1 July 2022 to 30 September 2022 which will be payable on 18 January 2023 to Shareholders on the register at
the close of business on 8 December 2022.
The Company intends to continue to pay dividends to shareholders on a quarterly basis in accordance with
the REIT regime.
Dividends are not payable in respect of its Treasury shares held
168
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Annual Report and Accounts 2022
03
Financials - Notes to the Company Financial Statements
8
Investments
2022
£’000
2021
£’000
At beginning of year
174,390
171,865
Additions
14,628
174,390
Disposals
-
(172,728)
Impairment reversal
-
863
At end of year
189,018
174,390
Investments represent investment in subsidiary undertakings are subject to review for impairment indicators.
The impairment reversal is included in administrative expenses in the Company’s statement of comprehensive income.
The impairment of the Company’s investments in subsidiary undertakings has been determined by the comparing the
Company’s cost of investment in each subsidiary with the fair value of each subsidiaries’ assets and liabilities. The
investments are categorised as Level 3 in the fair value hierarchy.
The Company had the following subsidiary undertakings at 30 September 2022:
Name of entity
Percentage
of ownership
Country of
incorporation
Principal
place of
business
Principal activity
ReSI Portfolo Holdings Limited
100%
UK
UK
Holding company
RHP Holdings Limited
100%
UK
UK
Holding company
The Retirement Housing Limited Partnership
100%
UK
UK
Property investment
ReSI Housing Limited
100%
UK
UK
Registered Provider of Social Housing
Wesley House (Freehold) Limited
100%
UK
UK
Property investment
Eaton Green (Freehold) Limited
100%
UK
UK
Property investment
Name of entity
Registered address
ReSI Portfolo Holdings Limited
5 New Street Square, London, EC4A 3TW
RHP Holdings Limited
5 New Street Square, London, England, EC4A 3TW
The Retirement Housing Limited Partnership
Glanville House, Frobisher Way, Taunton, Somerset, TA2 6BB
ReSI Housing Limited
5 New Street Square, London, EC4A 3TW
Wesley House (Freehold) Limited
5 New Street Square, London, EC4A 3TW
Eaton Green (Freehold) Limited
5 New Street Square, London, EC4A 3TW
All group entities are UK tax resident.
9
Trade and other receivables
2022
£’000
2021
£’000
Amounts due from group undertakings
697
1,806
Prepayments
18
53
715
1,859
Amounts due from group undertakings are unsecured, interest free and repayable on demand.
All amounts fall due for repayment within one year.
Residential Secure Income plc
Annual Report and Accounts 2022
169
03
Financials - Notes to the Company Financial Statements
10
Cash and cash equivalents
2022
£’000
2021
£’000
Cash at bank
40
1,037
Cash held as investment deposit
2
2
42
1,039
Cash held as investment deposit relates to cash invested in a money market fund, which is invested in short-term
AAA rated Sterling Investments. As the fund has a short maturity period, the investment has a high liquidity. The
fund has £13.8bn AUM, hence the Group’s investment deposit represents an immaterial proportion of the fund.
11
Trade and other payables
2022
£’000
2021
£’000
Trade payables
37
82
Accruals
330
288
367
370
Amounts due to group undertakings are unsecured, interest free and repayable on demand.
12
Share capital
Number of
Ordinary 1 p
shares
£’000
At 30 September 2021
180,324,377
1,803
Issue of shares
13,824,884
138
At 30 September 2022
194,149,261
1,941
The share capital account relates to amounts subscribed for share capital.
Rights, preferences and restrictions on shares
All Ordinary Shares carry equal rights, and no privileges are attached to any shares in the Company. All the shares
are freely transferable, except as otherwise provided by law. The holders of Ordinary Shares are entitled to receive
dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All
shares rank equally with regard to the Company’s residual assets.
Treasury shares do not hold any voting rights.
170
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Notes to the Company Financial Statements
13
Share premium
£’000
At 30 September 2021
108
Issue of shares
14,862
Share issue costs
(365)
At 30 September 2022
14,605
The share premium account relates to amounts subscribed for share capital in excess of nominal value.
14
Treasury Share Reserve
£’000
At 30 September 2021
(8,515)
Purchase of treasury shares
(245)
Transferred as part of Fund Management fee
467
At 30 September 2022
(8,293)
The treasury shares reserve relates to the value of shares purchased by the Company in excess of nominal value.
During the year ended 30 September 2022, the Company purchased 232,564 of its own 1p ordinary shares at a total
gross cost of £244,165 (£240,140 cost of shares and £4,025 associated costs).
During the year 444,717 1p Ordinary Shares were transferred from its own shares reserve to the Fund Manager, in lieu of
the management fee in accordance with the Fund Management Agreement.
As at 30 September 2022, 8,985,980 (2021: 9,198,133) 1p Ordinary Shares are held by the Company.
15
Related party transactions
The Company has taken advantage of the exemption not to disclose transactions with other members of the Group
as the Company’s own financial statements are presented together with its consolidated financial statements. For
all other related party transactions please make reference to note 34 of the Group accounts.
Residential Secure Income plc
Annual Report and Accounts 2022
171
03
Financials - Notes to the Company Financial Statements
1
EPRA Earnings Recurring earnings from core operational activities
2022
£’000
2021
£’000
Earnings per IFRS income statement
13,334
11,221
Changes in value of investment properties
(3,200)
(7,731)
Profits or losses on disposal of investment properties
24
12
Profits or losses on sales of trading properties incl. impairment charges in respect of trading
properties
(510)
(1,008)
Changes in fair value of financial instruments and associated close-out costs
(1,809)
2,627
EPRA Earnings
7,839
5,121
Basic number of shares
180,159
171,071
EPRA Earnings per share (EPS) (pence)
4.4
3.0
Adjusted EPRA Earnings per share
2022
£’000
2021
£’000
Company specific adjustments:
Exclude one off costs
603
975
Include shared ownership first tranche sales
510
1,008
Company specific Adjusted Earnings
8,952
7,104
Company specific Adjusted Earnings EPRA per share (pence)
5.0
4.2
2
EPRA Net Tangible Assets (NTA) and EPRA Net Reinstatement Value (NRV)
2022
£’000
2021
£’000
IFRS NAV per the financial statements
201,388
182,392
Revaluation of trading properties
93
278
Fair value of financial instruments
(4,997)
2,012
Real estate transfer tax
-
-
EPRA NTA
196,484
184,682
Fully diluted number of shares
185,163
171,126
EPRA NTA per share (pence)
106.1
107.9
The Group has debt which it has elected to carry at fair value through profit and loss. In accordance with the EPRA Best
Practice Recommendations, EPRA NTA should reflect the amortised cost of the debt rather than its fair value. In the
current period, an adjustment has been made for £5mn which represents the difference between fair value and what
amortised cost would have been had the Group carried the debt at amortised cost. No adjustment was made in the
prior year as it was immaterial. The adjustment would have been £1.5mn for the year ended 30 September 2021
The fair value of financial instruments removes the effect of mark-to-market adjustments, arising from the movement
in gilt yields and credit spreads, to include the value of debt at amortised cost which will be crystallised through holding
debt in normal circumstances.
Supplementary Information
As at 30 September 2022
172
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials
3
EPRA Net Reinstatement Value (NRV)
2022
£’000
2021
£’000
IFRS NAV per the financial statements
201,388
182,392
Revaluation of trading properties
93
278
Fair value of financial instruments
(4,997)
2,012
Revaluation of intangibles to fair value
-
-
Real estate transfer tax
-
-
EPRA NRV
196,484
184,682
Fully diluted number of shares
185,163
171,126
EPRA NRV per share (pence)
106.1
107.9
The Group has debt which it elected to carry at fair value through profit and loss. In accordance with the EPRA Best
Practice Recommendations, EPRA NRV should reflect the amortised cost of the debt rather than its fair value. In the
current period, an adjustment has been made for £5mn which represents the difference between fair value and what
amortised cost would have been had the Group carried the debt at amortised cost. No adjustment was made in the
prior year as it was immaterial. The adjustment would have been £1.5mn for the year ended 30 September 2021.
The fair value of financial instruments removes the effect of mark-to-market adjustments, arising from the movement
in gilt yields and credit spreads, to include the value of debt at amortised cost which will be crystallised through holding
debt in normal circumstances.
4
EPRA Net Disposable Value (NDV)
2022
£’000
2021
£’000
IFRS NAV per the financial statements
201,388
182,392
Revaluation of trading properties
93
278
Fair value of fixed interest rate debt
23,974
(4,511)
EPRA NDV
225,455
178,159
Fully diluted number of shares
185,163
171,126
EPRA NDV per share (pence)
121.8
104.1
Residential Secure Income plc
Annual Report and Accounts 2022
173
03
Financials - Supplementary Information
5
EPRA Net Initial Yield (NIY) AND EPRA “Topped Up” NIY
2022
£’000
2021
£’000
Restated
Investment property – wholly owned
374,785
341,128
Trading property (including share of JVs)
1,203
3,800
Completed property portfolio
375,988
344,928
Allowance for estimated purchasers’ costs estimated as 6% of property
portfolio
22,559
20,696
Gross up completed property portfolio valuation
398,548
365,624
Annualised cash passing rental income
24,809
21,805
Property outgoings
(8,653)
(8,661)
Annualised net rents
16,156
13,144
Add: notional rent expiration of rent-free periods or other lease incentives
-
-
Topped-up net annualised rent
16,156
13,144
EPRA NIY
4.1%
3.6%
EPRA Topped up NIY
4.1%
3.6%
In accordance with the EPRA Best Practice Recommendations, EPRA NIY should be based on net passing cash rental.
The prior period annualised rental income has been updated to reflect this.
6
EPRA Vacancy Rate
2022
£’000
2021
£’000
Estimated Rental Value of vacant space
1,368
1,514
Estimated rental value of the whole portfolio
27,292
25,061
EPRA Vacancy Rate
5%
6%
174
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Supplementary Information
7
EPRA Cost Ratios
2022
£’000
2021
£’000
Restated
Administrative/operating expense line per IFRS income statement
3,221
3,217
Net service charge costs/fees
4,927
4,701
Management fees less actual/estimated profit element
1,739
1,994
Other property operating expenses
1,988
1,966
Service charge costs recovered through rents but not separately invoiced
(4,622)
(4,344)
EPRA Costs (including direct vacancy costs)
7,253
7,534
Direct vacancy costs
(527)
(745)
EPRA Costs (excluding direct vacancy costs)
6,726
6,789
Gross Rental Income less ground rents – per IFRS
24,673
21,837
Less: service fee and service charge costs components of Gross Rental Income
(4,622)
(4,344)
Gross Rental Income
20,051
17,493
EPRA Cost Ratio (including direct vacancy costs)
36%
43%
EPRA Cost Ratio (excluding direct vacancy costs)
34%
39%
In accordance with the EPRA Best Practice Recommendations, EPRA Costs should exclude service charges recovered
through rents but not separately invoiced and include all property operating expenses. The prior period costs have
been updated to reflect this.
Gross rental income includes service charges collected from tenants, included in rent collected but not separately
invoiced, of £4,621,789 during the period (2021: £4,344,089). Service charge expenses, as reflected in the cost of sales,
also includes amounts paid in respect of properties which were vacant during the period of £304,966 (2021: £357,306).
Management fees less actual/estimated profit element is made up of property management fees paid
during the period.
Residential Secure Income plc
Annual Report and Accounts 2022
175
03
Financials - Supplementary Information
8
EPRA LTV
2022
£’000
2021
£’000
Borrowings
189,705
168,339
Net payables
-
-
Less cash
(15,984)
(8,370)
Net debt
173,721
159,969
Investment properties at fair value
374,785
341,128
Net receivables
325
1,233
Total property value
375,110
342,361
EPRA LTV
46%
47%
9
AIC Ongoing Ratio
Total expenses ratio
2022
£’000
2021
£’000
Management fee
1,867
1,802
Fund operating expenses*
742
1,046
2,609
2,848
Average Net Asset Valuation **
191,890
181,002
Annualised total expenses ratio
1.4%
1.6%
* Fund operating expenses has been revised to only include the direct costs at the Fund level and not subsidiary level. No adjustment was made in
the prior year.
**The average Net Asset Valuation is calculated as the average of the opening and closing NAV for the financial year.
10
Net rental yield
The net yield on the Group’s historical cost of investment property represents the unlevered rental income return on
the Group’s capital deployed into acquisition of investment properties.
2022
£'000
2021
£'000
Annualised net rental income at balance sheet date
16.5
14.3
Historical cost of investment property
339.0
309.7
Historical cost of investments not yet income producing
(7.5)
(14.8)
Historical cost of income producing investment properties
331.5
294.9
Net yield
5.0%
4.9%
176
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Supplementary Information
11
Total Return on NTA
A performance measure which represents the total return for the year, excluding movements in valuation of debt and
derivatives, expressed as a percentage of opening NTA.
2022
£'000
2021
£'000
Operating profit before property disposals and change in fair value
14.3
12.0
Valuation movement of investment properties
3.2
7.7
Finance costs
(6.0)
(5.8)
Debt Indexation*
(5.2)
-
Revaluation of trading properties
(0.2)
(0.4)
Property return
6.1
13.5
IFRS NAV at beginning of the prior year
182.4
179.6
Revaluation of trading properties
0.3
0.7
Fair value of financial instruments
2.0
(0.6)
Real estate transfer tax
-
-
Opening EPRA NTA
184.7
179.7
Movement in share capital
14.9
-
Increase/(decrease) in the year
(3.1)
5.0
Closing EPRA NTA
196.5
184.7
Total return on opening NTA (%)
3.3%
7.5%
* The Group elected to carry this debt at fair value through profit and loss. In accordance with the EPRA Best Practice Recommendations, EPRA
NTA should reflect the amortised cost of the debt rather than its fair value. In the current period, an adjustment has been made for £5.2mn which
represents the difference between fair value and what amortised cost would have been had the Group carried the debt at amortised cost. No
adjustment was made in the PY as it was immaterial. The charge would have been £1.5mn for the year ended 30 September 2021
12
Total Return on IFRS NAV
A performance measure which represents the total IFRS return for the year as a percentage of opening IFRS NAV.
2022
£'000
2021
£'000
Net income
13.3
11.2
Share issuance costs
(0.3)
-
Total Return
13.0
11.2
Net Asset Value at the beginning of the year
182.4
179.6
Total IFRS return on opening NAV (%)
7.1%
6.2%
Residential Secure Income plc
Annual Report and Accounts 2022
177
03
Financials - Supplementary Information
13
Loan to Value Ratio
The LTV leverage ratio has been presented to enable a comparison of the group’s borrowings as a proportion of Gross
Assets as at 30 September 2022 to its medium target LTV leverage ratio of 0.50.
2022
£'000
2021
£'000
Borrowings excluding lease liability
189,705
168,339
Available cash
(12,675)
(6,825)
Net debt excluding lease liability and cash increase/(decrease) in year
177,030
161,514
Total assets less finance lease gross up and cash
380,206
350,137
Loan to Value ("LTV") leverage ratio
0.47
0.46
178
Residential Secure Income plc
Annual Report and Accounts 2022
03
Financials - Supplementary Information
Other
Information
04
Glossary
Administrator
The Company’s administrator from time to time, the current such administrator being
MGR Weston Kay LLP.
AIC
Association of Investment Companies.
Alternative Investment
Fund or “AIF”
An investment vehicle under the UK AIFM Regime. the Company is classified as an AIF.
Alternative Investment
Fund Managers Directive
or “AIFMD”
A European Union directive which came into force on 22 July 2013 and has been
implemented in the UK.
Annual General
Meeting or “AGM”
A meeting held once a year which shareholders can attend and where they can vote
on resolutions to be put forward at the meeting and ask directors questions about the
company in which they are invested.
Articles or Articles of
Association
The articles of association of the Company.
Company Secretary
The Company’s company secretary from time to time, the current such company
secretary being Computershare Company Secretarial Services Limited.
Discount
The amount, expressed as a percentage, by which the share price is less than the net
asset value per share.
Depositary
Certain AIFs must appoint depositaries under the requirements of the AIFM Regime.
A depositary’s duties include, inter alia, safekeeping of assets, oversight and cash
monitoring. The Company’s current depositary is Thompson Taraz Depositary Limited.
Dividend
Income receivable from an investment in shares.
Ex-dividend date
The date from which you are not entitled to receive a dividend which has been declared
and is due to be paid to shareholders.
Financial Conduct
Authority or “FCA”
The independent body that regulates the financial services industry in the UK.
Functional Home
Both a Unit and an aggregation of multiple Units offering elderly care facilities, assisted
living facilities, sheltered housing or supported housing that are made available, by a
Tenant, Occupant or Nominator (as the case may be) to a Resident/Residents.
Fund Manager
ReSI Capital Management Limited, a company incorporated in England and Wales with
company number 07588964 in its capacity as Fund Manager to the Company.
Gearing
A way to magnify income and capital returns, but which can also magnify losses. A bank
loan is a common method of gearing.
Housing Association
A regulated independent society, body of trustees or company established for the
purpose of providing social housing.
HMRC
HM Revenue & Customs
Investment Company
A company formed to invest in a diversified portfolio of assets.
182
Residential Secure Income plc
Annual Report and Accounts 2022
04
Other Information
Leverage
An alternative word for “Gearing”.
Under AIFMD, leverage is any method by which the exposure of an AIF is increased
through borrowing of cash or securities or leverage embedded in derivative positions.
Under AIFMD, leverage is broadly similar to gearing, but is expressed as a ratio between
the assets (excluding borrowings) and the net assets (after taking account of borrowing).
Under the gross method, exposure represents the sum of the Company’s positions
after deduction of cash balances, without taking account of any hedging or netting
arrangements. Under the commitment method, exposure is calculated without the
deduction of cash balances and after certain hedging and netting positions are offset
against each other.
Liquidity
The extent to which investments can be sold at short notice.
Loan to Value (LTV) Ratio
Ratio of total debt outstanding, excluding the finance lease liability, against the total
assets excluding the adjustment for finance lease gross up.
Market Rental Home
Both a Unit of residential accommodation and an accommodation block comprising
multiple Units facilities that is/are made available, by a Tenant, Occupant or Nominator, to
a Resident/Residents at a market rent.
Net assets
The net asset value of the Company as a whole on the relevant date calculated in
accordance with the Company’s normal accounting policies.
Net asset value (NAV)
per Ordinary Share
The net asset value of the Company on the relevant date calculated in accordance
with the Company’s normal accounting policies divided by the total number of Ordinary
Shares then in issue.
Non PID dividend
A dividend paid by the Company that is not a PID.
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular, recurring
annual costs of running an investment company.
Ordinary Shares
The Company’s Ordinary Shares of 1p each.
PID
A distribution referred to in section 548(1) or 548(3) of the CTA 2010, being a dividend or
distribution paid by the Company in respect of profits or gains of the Property Rental
Business of the Group (other than gains arising to non-UK resident Group companies)
arising at a time when the Group is a REIT insofar as they derive from the Group’s
Property Rental Business.
Portfolio
A collection of different investments held in order to deliver returns to shareholders and
to spread risk.
Premium
The amount, expressed as a percentage, by which the share price is more than the net
asset value per share.
Property Rental Business
A Property Rental Business fulfilling the conditions in section 529 of the CTA 2010.
REIT
Real estate investment trust.
Rental Agreement
Comprise Leases, Occupancy Agreements and Nominations Agreements.
Residential Secure Income plc
Annual Report and Accounts 2022
183
04
Other Information - Glossary
Rental growth
The change in gross rental income in a period as a result of rent increases, tenant
renewals or a change in tenants. Applies to changes in gross rents on a comparable
basis and excludes the impact of acquisitions, disposals and changes resulting from
refurbishments.
Reputable Care Provider
A Statutory Registered Provider or other private entity in the business of building,
managing and/or operating Functional Homes in the United Kingdom that the Fund
Manager considers reputable in light of its investment grade equivalent debt strategy.
Reversionary Surplus
The increase in valuation if the portfolio is valued on a vacant possession basis compared
to the IFRS fair value.
RPI
The Retail Price Index (RPI) is a measure of inflation, which in turn is the rate at which
prices for goods and services are rising.
Share buyback
A purchase of a company’s own shares. Shares can either be bought back for
cancellation or held in treasury.
Share price
The price of a share as determined by a relevant stock market.
Shared Owner
The part owner of a shared ownership home that occupies such shared ownership home
in return for the payment of rent to the co-owner.
Social impact per share
The social, economic and environmental impact and value of investments calculated
using two key analysis frameworks, Social Return on Investment (SROI) and Economic
Impact, divided by the number of shares outstanding.
Sub-Market Rental Home
A Unit of residential accommodation that is made available, by a Tenant, Occupant or
Nominator, to a Resident to rent at a level below the local market rent.
Total return
A measure of performance that takes into account both income and capital returns.
Treasury shares
A company’s own shares which are available to be sold by a company to raise funds.
UK AIFM Regime
Together, 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, in each case
as amended from time to time.
184
Residential Secure Income plc
Annual Report and Accounts 2022
04
Other Information - Glossary
Company Information
Directors
Robert Whiteman
(Non-executive Chairman)
Robert Gray
(Senior Independent Director)
John Carleton
(Non-executive Director)
Elaine Bailey
(Non-executive Director)
Registered Office
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
Company Information
Company Registration Number: 10683026
Incorporated in the United Kingdom
Fund Manager
ReSI Capital Management Limited
5 New Street Square
London
England
EC4A 3TW
Corporate Broker
Peel Hunt LLP
7th Floor, 100 Liverpool Street
London
EC2M 2AT
Legal and Tax Adviser
Cadwalader, Wickersham & Taft LLP
Dashwood House
69 Old Broad Street
London
EC2M 1QS
Tax Adviser
Evelyn Partners Group Limited
(formerly Smith & Williamson)
45 Gresham Street
London
EC2V 7BG
Depositary
Thompson Taraz LLP
4th Floor, Stanhope House
47 Park Lane
Mayfair
London
W1K 1PR
Administrator
MGR Weston Kay LLP
55 Loudoun Road
St John’s Wood
London
NW8 0DL
Company Secretary
Computershare Governance Service, UK
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
Registrar
Computershare Governance Service, UK
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Public Relations Adviser
KL Communications
40 Queen Street
London
EC4R 1DD
Valuers
Savills (UK) Limited
33 Margaret Street
London
W1G 0JD
Residential Secure Income plc
Annual Report and Accounts 2022
185
04
Other Information
Notice of Annual General Meeting
Annual General Meeting 2023
In line with the requirements of the Companies Act 2006,
the Company will hold an Annual General Meeting (“AGM”)
of shareholders to consider the resolutions laid out in the
Notice of Meeting below.
Shareholders are permitted to attend the AGM in person
and any shareholders wishing to do so are re-quested to
register their interest in attending by emailing the Fund
Manager at [email protected] by Monday
23 January 2023.
Should a shareholder have a question that they would
like to raise at the AGM, either of the Board or the Fund
Manager, the Board request that they either ask the
question in advance of the AGM via email to resiplc@
greshamhouse.com by Monday 23 January 2023.
Alternatively, a shareholder may attend the AGM and ask
the question at the meeting at the appropriate time. If
appropriate, the Company will publish the responses
on its website https://greshamhouse.com/real-assets/
real-estate-investment/residential-secure-income-
plc/ as soon as reasonably practicable after the
conclusion of the AGM.
AGM voting
Each of the resolutions to be considered at the AGM
will be voted on by way of a show of hands unless a poll
is validly demanded. A member present in person or by
proxy shall have one vote on a show of hands.
Details of how to vote, either electronically, by proxy form
or through CREST, can be found in the Administrative
Notes to the Notice of AGM on pages 186 to 194.
The results of the AGM will be announced to the London
Stock Exchange and placed on the Company’s website, as
soon as practicable after the conclusion of the AGM.
Resolutions
Resolutions 1 to 11 will be proposed as ordinary
resolutions. An ordinary resolution requires a simple
majority of votes cast, whether in person or by proxy,
to be cast in favour of the resolution for it to be
passed. Resolutions 12 to 15 will be proposed as special
resolutions. A special resolution requires a majority of
not less than 75% of the votes cast, whether in person
or by proxy, to be cast in favour of the resolution for
it to be passed.
Voting results
The results of the voting will be announced through a
regulatory information service and will be published on
our website https://greshamhouse.com/real-assets/
real-estate-investment/residential-secure-income-
plc/ as soon as reasonably practicable after the
conclusion of the AGM.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of
Residential Secure Income plc (the “Company”) will be held
at the offices of Gresham House plc, the parent company
of the Fund Manager Resi Capital Management Ltd, 80
Cheapside, EC2V 6EE on 31 January 2023 at 12.45 p.m. for
the following purposes:
To consider and if thought fit pass the following
resolutions of which resolutions 1 to 11 will be proposed
as ordinary resolutions and resolutions 12 to 15 will be
proposed as special resolutions.
Ordinary Resolutions
1
To receive the Company’s Annual Report and
Accounts for the year ended 30 September 2022,
with the reports of the Directors and Auditor thereon.
2
To approve the Directors’ Remuneration
Implementation Report included in the Annual Report
for the year ended 30 September 2022.
3
To re-elect Robert Whiteman as a Director
of the Company.
4
To re-elect Robert Gray as a Director of the Company.
5
To re-elect John Carleton as a Director
of the Company.
6
To re-elect Elaine Bailey as a Director
of the Company.
7
To re-appoint BDO LLP as Auditor to the Company to
hold office until the conclusion of the next general
meeting at which the Company’s annual accounts are
laid before the meeting.
8
To authorise the Directors to fix the remuneration of
the Auditor until the conclusion of the next Annual
General Meeting of the Company.
9
To authorise the Directors to declare and pay all
dividends of the Company as interim dividends and
for the last dividend referable to a financial year
not to be categorised as a final dividend that would
ordinarily be subject to shareholder approval.
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10
That the continuation of the Company as
an investment trust until the AGM of the
Company falling five years after the date of this
resolution be approved.
11
That the Directors be and are hereby generally
and unconditionally authorised in accordance
with section 551 of the Companies Act 2006 (in
substitution for all subsisting authorities to the
ex-tent unused) to exercise all the powers of the
Company to allot Ordinary Shares of one penny each
in the capital of the Company up to an aggregate
nominal amount equal to £37,032,656 (equivalent
to approximately 20% of the Ordinary Shares in
issue (excluding shares held in Treasury) at the date
of the notice of this meeting) during the period
commencing on the date of the passing of this
resolution and expiring (unless previously varied,
revoked or renewed by the Company in general
meeting) at the conclusion of the Annual General
Meeting of the Company to be held in 2024 or, if
earlier, on the expiry of 15 months from the passing
of this resolution, save that the Company may, at
any time prior to the expiry of such authority, make
an offer or enter in-to an agreement which would or
might require the allotment of shares in pursuance
of such an offer or agreement as if such authority
had not expired.
Special Resolutions
12
That, subject to the passing of resolution 11, in
substitution for all subsisting authorities to the
extent unused but without prejudice to the exercise
of any such power prior to the date hereof, the
Directors be and are generally and unconditionally
authorised for the purposes of sections 570 and
573 of the Companies Act 2006 (“the Act”) to allot
equity securities (within the meaning of section 560
of the Act) for cash either pursuant to the authority
conferred by resolution 11 or by way of sale of
treasury shares, as if section 561(1) of the Act did not
apply to any such allotment or sale, provided this
authority shall be limited to (a) the allotment or sale of
equity securities up to an aggregate nominal amount
equal to £18,516,328 (equivalent to approximately
10% of the is-sued Ordinary Shares of the Company
(excluding shares held in Treasury) at the date of
this notice); and (b) the allotment or sale of equity
securities at a price not less than the prevailing Net
Asset Value per share, and shall (unless previously
varied, revoked or renewed by the Company in
general meeting) expire at the conclusion of the
Annual General Meeting of the Company to be held
in 2024 or, if earlier, on the expiry of 15 months from
the passing of this resolution, save that the Company
may, at any time prior to the expiry of such power,
make an offer or enter into an agreement which
would or might require equity securities to be allotted
or sold from treasury after the expiry of such power,
and the Directors may allot or sell from treasury
equity securities in pursuance of such an offer or an
agreement as if such power had not expired.
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13
That, subject to the passing of resolution 11 and in
addition to the authority granted in resolution 12,
in substitution for all subsisting authorities to the
extent unused but without prejudice to the exercise
of any such power prior to the date hereof, the
Directors be and are generally and unconditionally
authorised for the purposes of sections 570 and
573 of the Companies Act 2006 (“the Act”) to allot
equity securities (within the meaning of section
560 of the Act) for cash either pursuant to the
authority conferred by resolution 11 or by way of
sale of treasury shares, as if section 561(1) of the
Act did not apply to any such allotment or sale,
provided this authority shall be limited to (a) the
allotment or sale of equity securities up to an
aggregate nominal amount equal to £18,516,328
(equivalent to approximately 10% of the issued
Ordinary Shares of the Company (excluding shares
held in Treasury) at the date of this notice); and (b)
the allotment or sale of equity securities at a price
not less than the prevailing Net Asset Value per
share, and shall (unless previously varied, revoked
or renewed by the Company in general meeting)
expire at the conclusion of the Annual General
Meeting of the Company to be held in 2024 or, if
earlier,
on the expiry of 15 months from the passing
of this resolution, save that the Company may, at
any time prior to the expiry of such power, make
an offer or enter into an agreement which would
or might require equity securities to be allotted or
sold from treasury after the expiry of such power,
and the Directors may allot or sell from treasury
equity securities in pursuance of such an offer or
an agreement as if such power had not expired.
14
That the Company be and is hereby generally and
unconditionally authorised in accordance with
section 701 of the Companies Act 2006 (“the Act”)
to make market purchases (within the meaning of
section 693(4) of the Act) of its Ordinary Shares of
1p each, provided that:
(a)
the maximum number of Ordinary Shares
hereby authorised to be purchased shall
be 27,755,975 (representing 14.99% of the
Company’s issued Ordinary Share capital
(excluding shares held in Treasury) at the date
of the notice of this meeting);
(b)
the minimum price (exclusive of any expenses)
which may be paid for an Ordinary Share is 1p;
(c)
the maximum price (excluding expenses) which
may be paid for an Ordinary Share is not more
than the higher of:
(i)
5% above the average of the middle market
quotations for the Ordinary Shares for the five
business days immediately before the day on
which it purchases that share; and
(ii)
the higher of the price of the last independent
trade and the highest current in-dependent bid
for the Ordinary Shares.
(d)
the authority hereby conferred shall expire at
the conclusion of the Annual General Meeting
of the Company in 2024 or, if earlier, on the
expiry of 15 months from the passing of this
resolution, unless such authority is renewed
prior to such time; and
(e)
the Company may make a contract to purchase
Ordinary Shares under the authority hereby
conferred prior to the expiry of such authority,
which will or may be executed wholly or partly
after the expiration of such authority and may
make a purchase of Ordinary Shares pursuant
to any such contract.
15
That a general meeting of the Company other
than an Annual General Meeting may be called on
not less than 14 clear days’ notice, provided that
this authority shall expire at the conclusion of the
Company’s next Annual General Meeting after the
date of the passing of this resolution.
Registered office
The Pavilions,
Bridgwater Road,
Bristol,
England,
BS13 8FD
By order of the Board
For and on behalf of Computershare Company
Secretarial Services Limited
Company Secretary
1 December 2022
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Notes to resolution 1
Ordinary resolution: Annual report and accounts for the
year ended September 2022
The Directors are required to present the annual report
and accounts, which incorporate the Strategic report,
Directors’ Report, the Auditor’s Report and the financial
statements for the year ended 30 September 2022.
These are contained in the Company’s Annual Report
and Audited Financial Statements for the year ended 30
September 2022 (the “Annual Report”).
Notes to resolution 2
Ordinary resolution: Directors’ Remuneration
Implementation Report
In accordance with the requirements of the remuneration
reporting regime which came into force on 1 October 2013,
the Board is required to give notice to shareholders of the
intention to propose an ordinary resolution to approve the
Directors’ Remuneration Implementation Report for the
financial year ended 30 September 2022. The Directors’
Remuneration Implementation Report, which can be
found on pages 114 to 115 of the Annual Report, gives
details of the Directors’ remuneration and remuneration
policy for the year ended 30 September 2022.
The Company’s auditor, BDO LLP, has audited those parts
of the Directors’ Remuneration Implementation Report
which are required to be audited and their report may be
found in the Annual Report. The Directors’ Remuneration
Implementation Report has been approved by the Board
and signed on its behalf by the Company Secretary. The
vote on the Directors’ Remuneration Implementation
Report is advisory in nature and therefore not binding
on the Company.
Notes to resolutions 3-6
Ordinary resolution: Re-election of directors
In line with best practice, the Board has resolved that all
Directors will be submitted for re-election on an annual
basis. Therefore, Robert Whiteman, Robert Gray, John
Carleton and Elaine Bailey will retire, and being eligible,
offer themselves for re-election.
The Board has carefully considered whether each of the
Non-Executive Directors is free from any relationship
that could materially interfere with the exercise of his or
her independent judgement. It has concluded that each
Non-Executive Director is independent. The Board has
also reviewed and concluded that each Non-Executive
Director possesses the necessary mix of skills and
experience to continue to contribute effectively to the
Company’s long-term sustainable success. Further,
notwithstanding their other appointments, the Board
is satisfied that each Non-Executive Director is able to
commit sufficient and appropriate time to their board
responsibilities.
Full biographies of all the Directors are set out in the
Company’s Annual Report on pages 92 to 94.
Notes to resolution 7
Ordinary resolution: Re-appointment of auditor
The appointment of BDO LLP as auditor of the Company
ends at the conclusion of the AGM. BDO LLP have
indicated their willingness to stand for reappointment as
auditor of the Company until the conclusion of the AGM in
2024. The Audit Committee considers the reappointment
of the external auditor each year before making a
recommendation to the Board. The Board recommends
the reappointment of the auditors.
The effectiveness of the external auditor is evaluated
by the Audit Committee. The Committee assessed
BDO LLP’s approach to providing audit services as
it undertook this year’s audit. On the basis of such
assessment, the Committee concluded that the audit
team was providing the required quality in relation to
the provision of the services. The audit team had shown
the necessary commitment and ability to provide the
services, together with a depth of knowledge, robustness,
independence and objectivity as well as an appreciation of
complex issues.
The Audit Committee assesses the independence of the
external auditor on an ongoing basis and the external
auditor is required to rotate the lead audit partner
every five years and other senior audit staff ev-ry seven
years. The current lead partner has been in place since
the 2021 AGM, accordingly, the audit for the financial
year beginning 1 October 2025 will be led by a new audit
partner. No partners or senior staff associated with the
audit may transfer to the Group.
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Notes to resolution 8
Ordinary resolution: Remuneration of auditor
The Audit Committee reviews the fee structure,
resourcing and terms of engagement for the external
auditor annually. The Board is seeking authority for the
Audit Committee to fix the auditor’s remuneration. Fees
paid to the external auditor for the year were £178,000
(2021: £145,000).
The Audit Committee is satisfied that this level of fee
is appropriate in respect of the audit services provided
and that an effective audit can be conducted for this
fee. BDO LLP were paid fees of £61,000 in respect
of non-audit services in the year to 30 September
2022 (2021: £34,000). These services were in respect
of the interim review of the Interim Report for the
period ended 31 March 2022 (£34,000) and reporting
accountant services (£27,000). The consolidated
financial statements provides details of the
remuneration of the Company’s external auditor. This
can be found on page 143 of the Annual Report.
Notes to resolution 9
Ordinary resolution: Policy of paying quarterly interim
dividends.
The purpose of the renewal is to provide flexibility to the
Company to continue implementing its quarterly interim
dividend policy.
Notes to resolution 10
Ordinary resolution: Continuation vote
Under the Articles of Association of the Company,
the Directors are required to propose an ordinary
resolution at the Annual General Meeting following the
fifth anniversary from its initial public offering that the
Company should continue as presently constituted
and at every fifth AGM thereafter. In accordance with
this, a continuation vote is scheduled to be held at
the Company’s AGM in 2023 in order to extend the
Company’s life for another five years.
Notes to resolution 11
Ordinary resolution: Authority to allot
The purpose of this resolution is to grant the Board the
authority to allot ordinary shares in accordance with
Section 551 of the Act up to up to 37,032,656 Ordinary
Shares (excluding shares held in Treasury) in the capital
of the Company (equivalent to approximately 20% of the
Ordinary Shares in issue at the date of the notice of this
meeting). While the Directors have no present intention
of exercising this authority, they consider it important
to have the maximum flexibility commensurate with
good corporate governance guidelines, to raise finance
to enable the Company to respond to investment
opportunities, market developments and conditions.
No ordinary shares will be issued for cash at a price
less than the prevailing net asset value per ordinary
share at the time of issue pursuant to this authority.
This authority shall expire at the conclusion of the
Company’s Annual General Meeting to be held in 2024,
or, if earlier, on the expiry of 15 months from the passing
of this resolution,
save that the Company may, at any
time prior to the expiry of such authority, make an offer
or enter into an agreement which would or might require
the allotment of shares in pursuance of such an offer or
agreement as if such authority had not expired.
Notes to resolutions 12 and 13
Special resolution: Disapplication of
pre-emption rights
If the Directors wish to exercise the authority under
resolution 11 and offer shares (or sell treasury shares
which the Company may purchase and elect to hold
as treasury shares) for cash, company law requires
that unless shareholders have given specific authority
for the waiver of their statutory pre-emption rights,
the new shares must be first offered to existing
shareholders in proportion to their existing holdings.
There may be occasions, however, when the Directors
will need the flexibility to allot new shares (or to
grant rights over shares) for cash or to sell treasury
shares for cash without first offering them to existing
shareholders in proportion of their holdings in order
to make investments in line with the Company’s
investment policies. This cannot be done unless the
shareholders have first waived their pre-emption rights.
These Resolutions will, if passed, authorise the
Directors to do this by allowing the Directors to allot
shares for cash or sell treasury shares for cash up to
an aggregate nominal value of £37,032,656.20, which
is equivalent to approximately 20% of the Company’s
issued Ordinary Share capital as the date of this Notice
(being the latest practicable date prior to the publication
of this notice).
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In the event that resolution 12 is passed, but resolution
13 is not passed, the Directors will only be authorised to
issue Ordinary Shares up to an aggregate nominal value
of £18,516,328, which represents approximately 10% of
the Company’s issued Ordinary Share capital (excluding
shares held in Treasury) as the date of this Notice (being
the latest practicable date prior to the publication
of this notice).
Resolutions 12 and 13 will allow the Company to carry out
one or more tap issues, in aggregate, up to 20% of the
number of Ordinary Shares in issue at the AGM and thus
to pursue specific investment op-portunities in a timely
manner in the future and without the requirement to
publish a prospectus and in-cur the associated costs.
The Directors are aware that the combined authority
to disapply pre-emption rights in respect of up to 20%
of the Company’s issued Ordinary Share capital sought
under resolutions 12 and 13 is higher than the 10%
typically sought by investment companies. However,
the Directors believe that a higher authority is justified
to enable the Company to fund future acquisitions in
line with the Company’s anticipated acquisition pipeline.
In addition, the higher authority is expected to broaden
the Company’s asset base which will increase the
diversity of the portfolio. It will also allow the Company
to broaden its investor base and enhance the size and
liquidity of the Company’s share capital, and spread the
fixed operating costs over a larger capital base, thereby
reducing the Company’s ongoing charges ratio.
In accordance with UK Listing Rules, the Company will
only issue Ordinary Shares pursuant to this authority
at a price that is not less than the prevailing net
asset value per share of the Company calculated in
accordance with its IFRS accounting policies at the time
of issue. In addition, the Directors will not sell treasury
shares at less than such net asset value per share.
Resolutions 12 and 13 will be proposed as special
resolutions to provide the Company with the necessary
authority. If given, the authority will expire at the
conclusion of the next AGM of the Company in 2024 or,
if earlier on the expiry of 15 months from the passing
of this resolution. The Directors intend to renew
such authority in respect of 10% of the Company’s
issued Ordinary Share capital (excluding shares held
in Treasury) at successive AGMs in accordance with
current best practice.
Notes to resolution 14
Special resolution: Purchase of own shares
The current authority of the Company to make market
purchases of up to approximately 14.99 per cent of its
issued share capital expires shortly. This resolution
seeks renewal of such authority until the next AGM,
or the expiry of 15 months after the passing of the
resolution is earlier. The price paid for shares will not be
less than the nominal value nor more than the maximum
amount permitted to be paid in accordance with the
rules of the Financial Conduct Authority in force as
at the date of purchase. This power will be exercised
only if, in the opinion of the Directors, a repurchase
would be in the best interests of shareholders as a
whole. Any shares repurchased under this authority
will either be cancelled or held in Treasury at the
discretion of the Board for future re-sale in appropriate
market conditions.
The authority sought would replace the authority
previously given to the Directors. The maximum
number of ordinary shares authorised to be purchased
pursuant to the authority represents approximately
14.99 per cent of the total number of ordinary shares in
issue (excluding shares held in Treasury) as at the date
of this Notice.
This authority shall expire at the conclusion of
the Company’s next Annual General Meeting to
be held in 2024.
Notes to resolution 15
Special resolution: Notice of General Meetings
Under the provisions in the Act, listed companies
must call general meetings (other than an annual
general meeting) on at least 21 clear days’ notice
unless the company:
a.
has obtained shareholder approval for the holding
of general meetings on 14 clear days’ notice by
passing an appropriate resolution at its most
recent annual general meeting; and
b.
offers the facility for shareholders to vote by
electronic means accessible to all shareholders.
To enable the company to utilise the shorter notice
period of 14 days for calling such general meetings,
shareholders are asked to approve this resolution. The
shorter notice period would not be used as a matter of
routine for such meetings, but only where the flexibility
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is merited by the business of the meeting and is thought
to be to the advantage of shareholders as a whole.
If granted, this authority will be effective until the
company’s next annual general meeting.
Recommendation
The Directors consider that all the resolutions to be
proposed at the Annual General Meeting are in the
best interests of the Company and its shareholders
as a whole. The Directors unanimously recommend
that shareholders vote in favour of all the resolutions,
as they intend to do in respect of their own beneficial
holdings of shares.
Administrative notes to the Notice of Annual
General Meeting
Website address
1
Information regarding the meeting, including
the information required by section 311A of the
Companies Act 2006, is available from https://
www.resireit.com/
Entitlement to attend and vote
2
Only those holders of Ordinary Shares registered on
the Company’s register of members at 6.00 p.m. on
Friday 27 January or, if this meeting is adjourned,
at close of business on the day two days prior to
the adjourned meeting, shall be entitled to vote
at the meeting.
Appointment of Proxies
3
Members entitled to vote at the meeting (in
accordance with Note 2 above) are entitled to
appoint a proxy to vote in their place. If you wish
to appoint a proxy please use the Form of Proxy or
follow the instructions at note 7 below if you wish to
appoint a proxy through the CREST electronic proxy
appointment service. In the case of joint members,
only one need sign the Form of Proxy. The vote of
the senior joint member will be accepted to the
exclusion of the votes of the other joint members.
For this purpose, seniority will be determined by the
order in which the names of the members appear
in the register of members in respect of the joint
shareholding.
The completion and return of the
Form of Proxy will not stop you attending and voting
in person at the meeting should you wish to do so. A
proxy need not be a member of the Company.
You may appoint more than one proxy provided each
proxy is appointed to exercise the rights attached to
a different share or shares held by you. If you choose
to appoint multiple proxies use a separate copy of
this form (which you may photocopy) for each proxy,
and indicate after the proxy’s name the number
of shares in relation to which they are authorised
to act (which, in aggregate, should not exceed the
number of Ordinary Shares held by you). Please also
indicate if the proxy instruction is one of multiple
instructions being given. All forms must be signed
and re-turned in the same envelope. Additional
forms may be obtained by contacting the Company’s
registrars, Computershare Investor Services PLC
helpline on 0370 889 3181. Shareholders can access
their information at www.investorcentre.co.uk.
4
You can appoint the Chairman of the Meeting, or
any other person. If you wish to appoint someone
other than the Chairman, cross out the words “the
Chairman of the Meeting” on the Form of Proxy and
insert the full name of your appointee.
5
You can instruct your proxy how to vote on each
resolution by marking the resolutions For and
Against using the voting methods stated in notes
6 and 7 below. If you wish to abstain from voting
on any resolution please mark these resolutions
withheld. It should be noted that a vote withheld
is not a vote in law and will not be counted in the
calculation of the proportion of votes “For” and
“Against” a resolution. If you do not indicate how
your proxy should vote, he/she can exercise his/
her discretion as to whether, and if how so how,
he/she votes on each resolution, as he/she will
do in respect of any other business (including
amendments to resolutions) which may properly be
conducted at the meeting.
A company incorporated in England and Wales or
Northern Ireland should execute the Form of Proxy
under its common seal or otherwise in accordance with
Section 44 of the Companies Act 2006 or by signature
on its behalf by a duly authorised officer or attorney
whose power of attorney or other authority should be
enclosed with the Form of Proxy.
Appointment of proxy using
6
You can vote either:
by logging on to www.eproxyappointment.com
and following the instructions. Shareholders will
need their shareholder reference number, PIN
and control number to submit a proxy vote this
way (which will be provided via email or on their
paper form of proxy);
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You may request a hard copy form of proxy
directly from the registrars, Computershare
Investor Services on Tel: 0370 889 3181; or
in the case of CREST members, by utilising the
CREST electronic proxy appointment service in
accordance with the procedures set out below.
To be valid, a form of proxy should be lodged with
the Company’s registrars, Computershare Investor
Services PLC, The Pavilions, Bridgewater Road,
Bristol, BS99 6ZY so as to be receive not later
than 48 hours before the time appointed for the
meeting or any adjourned meeting or, in the case of
a poll taken subsequent to the date of the meeting
or adjourned meeting, so as to be received no
later than 24 hours before the time appointed for
taking the poll.
Appointment of a proxy through CREST
7
CREST members who wish to appoint a proxy
or proxies through the CREST electronic proxy
appointment service may do so for the meeting to
be held on the above date and any adjournment(s)
thereof by using the procedures described in the
CREST Manual. CREST Personal Members or other
CREST sponsored members, and those CREST
members who have appointed a voting service
provider(s), should refer to their CREST sponsor or
voting service provider(s), who will be able to take
the appropriate action on their behalf.
In order for a proxy appointment or instruction made
using the CREST service to be valid, the appropriate
CREST message (a “CREST Proxy Instruction”)
must be properly authenticated in accordance with
Euroclear UK & Ireland Limited’s specifications
and must contain the information required for such
instructions, as described in the CREST Manual.
The message, regardless of whether it constitutes
the appointment of a proxy or an amendment to
the instruction given to a previously appointed
proxy, must, in order to be valid, be transmitted
so as to be received by the Company’s agent (ID:
3RA50) by the latest time(s) for receipt of proxy
appointments specified in the notice of meeting. For
this purpose, the time of receipt will be taken to be
the time (as deter-mined by the timestamp applied
to the message by the CREST Applications Host)
from which the Company’s agent is able to retrieve
the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change
of instructions to a proxy’s appointee through
CREST should be communicated to the appointee
through other means.
CREST members and, where applicable, their
CREST sponsors or voting service providers should
note that Euroclear UK & Ireland Limited does not
make available special procedures in CREST for any
particular messages. Normal system timings and
limitations will therefore apply in relation to the input
of CREST Proxy Instructions.
It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a
CREST personal member or sponsored member
or has appointed a voting service provider(s), to
procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary
to ensure that a message is transmitted by means
of the CREST system by any particular time. In this
connection, CREST members and, where applicable,
their CREST sponsors or voting service providers
are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of
the CREST system and timings.
The Company may treat as invalid a CREST
Proxy Instruction in the circumstances set
out in Regulation 35(5) (a) of the Uncertificated
Securities Regulations 2001. All messages relating
to the appointment of a proxy or an instruction
to a previously appointed proxy, which are to be
transmitted through CREST, must be lodged at 12.45
p.m. on Friday 27 January 2023 in respect of the
meeting. Any such messages received before such
time will be deemed to have been received at such
time. In the case of an adjournment, all messages
must be lodged with Computershare Investor
Services PLC no later than 48 hours before the
rescheduled meeting.
Termination of proxy appointments
8
In order to revoke a proxy instruction you will need
to inform the Company. Please send a signed hard
copy notice clearly stating your intention to revoke
your proxy appointment to Computershare Investor
Services PLC, The Pavilions, Bridgwater Road,
Bristol BS99 6ZY.
In the case of a member which is a company,
the revocation notice must be executed under
its common seal or otherwise in accordance
with section 44 of the Companies Act 2006 or by
signature on its behalf by an officer or attorney
whose power of attorney or other authority should
be included with the revocation notice.
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If you attempt to revoke your proxy appointment but
the revocation is received after the time specified in
note 2 above then, subject to the paragraph directly
below, your proxy will remain valid.
If you submit more than one valid proxy appointment
in respect of the same Ordinary Shares, the
appointment received last before the latest time for
receipt of proxies will take precedence.
Nominated Persons
9
If you are a person who has been nominated under
section 146 of the Companies Act 2006 to enjoy
information rights:
You may have a right under an agreement
between you and the member of the Company
who has nominated you to have information
rights (Relevant Member) to be appointed or
to have someone else appointed as a proxy
for the meeting.
If you either do not have such a right or if you
have such a right but do not wish to exercise
it, you may have a right under an agreement
between you and the Relevant Member to give
instructions to the Relevant Member as to the
exercise of voting rights.
Your main point of contact in terms of your
investment in the Company remains the Relevant
Member (or, perhaps, your custodian or broker)
and you should continue to contact them (and
not the Company) regarding any changes or
queries relating to your personal details and
your interest in the Company (including any
administrative matters). The only exception to
this is where the Company expressly requests a
response from you.
If you are not a member of the Company but you have
been nominated by a member of the Company to enjoy
information rights, you do not have a right to appoint
any proxies under the procedures set out in the notes
to the form of proxy.
Questions at the Meeting
10
Under section 319A of the Companies Act 2006,
the Company must answer any question you ask
relating to the business being dealt with at the
meeting unless:
answering the question would interfere unduly
with the preparation for the meeting or involve
the disclosure of confidential information;
the answer has already been given on a website
in the form of an answer to a question; or
it is undesirable in the interests of the Company
or the good order of the meeting that the
question be answered.
Issued Shares and total voting rights
11
As at the date of this Notice, the total number of
shares in issue is 194,149,261 Ordinary Shares of
1p each. The total number of Ordinary Shares with
voting rights is 185,163,281. On a vote by a show of
hands, every holder of Ordinary Shares who (being
an individual) is present by a person, by proxy or
(being a corporation) is present by a duly authorised
representative, not being himself a member, shall
have one vote. On a poll every holder of Ordinary
Shares who is present in person or by proxy shall
have one vote for every Ordinary Share held by him.
Communication
12
Except as provided above, members who have
general queries about the meeting should use
the following means of communication (no other
methods of communication will be accepted):
calling Computershare Investor Services PLC
shareholder helpline: 0370 889 3181;
in writing to Computershare Investor Services PLC,
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ.
You may not use any electronic address provided either
in this notice of meeting or in any related documents
(including the Form of Proxy for this meeting) to
communicate with the Company for any purposes other
than those expressly stated.
194
Residential Secure Income plc
Annual Report and Accounts 2022
04
Other Information - Notice of Annual General Meeting
The Pavilions
Bridgwater Road
Bristol
BS13 8FD
www.resi-reit.com