interim report 2017 - social housing...

Civitas Social Housing PLCInterim Report 2017

www.civitassocialhousing.com

http://civitassocialhousing.com/

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Civitas Social Housing PLC Interim Report 2017 Civitas Social Housing PLC Interim Report 2017

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ContentsKey highlights 2-3

Chairman’s Statement 4-5

Portfolio 6-7

Investment Advisor’s Report 8-14

Extract from The Good Economy (“TGE”) Social Impact Report 2017 15-21

Key Performance Indicators (KPIs) 22

Principal risks and uncertainties 23-25

Corporate governance 26-28

Directors’ responsibilities for the interim financial statements 29

Independent review report to Civitas Social Housing PLC 30-31

Condensed Consolidated Statement of Comprehensive Income 32

Condensed Consolidated Statement of Financial Position 33

Condensed Consolidated Statement of Changes in Equity 34

Condensed Consolidated Statement of Cash Flows 35

Notes to the condensed consolidated financial statements 36-65

Glossary 66

Company information 68

Civitas Social Housing PLC (“Civitas” or “the Company”) is the first real estate investment trust dedicated to investing exclusively into existing portfolios of built Social Homes in England and Wales. The Company a�ieved admission to the premium listing segment of the Official List of the London Sto� Ex�ange in November 2016, raising £350 million in an oversubscribed IPO and a further £302 million through a C Share issue in November 2017.

As at 30 September 2017, the Company has built a diversified portfolio of 282 Social Homes across England and Wales providing high-quality accommodation for 1,827 tenants with 10 Registered Providers involving 83 Local Authorities.

Civitas’ objective is to deliver sustainable returns to its shareholders by making socially relevant investments within the regulated Social Housing sector in England and Wales.

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Financial highlights

Key highlights

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N D J F M A M J J A S O

Share price performance (p)

Market capitalisation

£390.25m

Market capitalisation of £390.25 million as at 30 September 2017

Portfolio NAV1

109.6p/share (+11.8%)Portfolio NAV1 per share, an increase of 11.6p or 11.8% (IPO 98p)

IFRS NAV

103.2p/share (+5.3%)IFRS NAV per share, an increase of 5.2p per share or 5.3% (IPO 98p)

Total shareholder return

13.7%

Total shareholder return since IPO (increase in share price plus dividends)

1 The unaudited Portfolio NAV of the Company is calculated on the basis of an independent Portfolio Valuation undertaken by Jones Lang LaSalle Ltd as at 30 September 2017, valuing the properties on the basis of a portfolio and assuming that they are held in corporate entities, in line with the Company’s strategy. The condensed consolidated financial statements have been prepared on the basis of the IFRS NAV with a reconciliation to the Portfolio NAV provided in note 14 to the condensed consolidated financial statements. The IFRS NAV is based upon a valuation of ea� underlying investment property rather than the value ascribed to the portfolio and on the assumption of a theoretical sale of ea� property rather than the corporate entities in whi� all of the Company’s investment properties are held.

Operational highlights

282 £285.3m 1,827properties acquired deployed tenants

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50

100

150

200

250

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Number of Properties

D J F M A M J J A S0

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1,000

1,500

2,000

Number of Tenancies

D J F M A M J J A S

83 10 50Local Authorities fund the rent and care services associated with our properties

Housing Associations enter into long term leases on our properties

Care Providers deliver care services to tenants in our properties

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2

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6

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Number of Housing Associations

D J F M A M J J A S

£17.4m 6% 24.3 yearsannualised rental income at period end

average net yield before pur�ase costs

WAULT* of the portfolio

* Weighted average unexpired lease term

Earnings based on Portfolio NAV

13.1p/shareComprehensive income per share including revaluations based on the Portfolio NAV

Earnings based on IFRS NAV

6.7p/shareComprehensive income per share including revaluations based on the IFRS NAV

Dividend per share

2.25pDividends declared for the period to 30 September 2017; targeting 3p per share for the period to 31 December 2017 and 5p per share annually thereafter, targeted to increase broadly in line with inflation

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The Company’s objective is to provide shareholders with an attractive level of income, whi� is expected to grow broadly in line with inflation, together with the potential for capital growth. The Company invests in a portfolio of Social Homes, whi� benefit from inflation adjusted long-term leases or occupancy agreements with Housing Associations or Local Authorities.

The Company’s laun� via an oversubscribed Initial Public Offering (IPO) raised gross proceeds of £350 million. The Company was the first REIT to be listed on the London Sto� Ex�ange offering a focused exposure to built Social Housing. It has since established itself as a leading owner of built Social Homes, providing a considerable number of people with high quality homes that suit their particular needs on a long-term basis.

As at 30 September 2017, the Civitas’ portfolio comprised 282 properties housing 1,827 tenants, leased to 10 Registered Providers, involving 83 Local Authorities and 50 Care Providers with a focus on Specialist Support Housing. These investments were made using the net proceeds of the IPO. The current portfolio benefits from a weighted average unexpired lease term of 24.3 years. Approximately 25% of the properties held are new to the Social Housing sector. Since 30 September 2017 the Company has acquired a further 29 properties, housing 115 tenants and made significant further progress on whi� I report later.

DividendsOn 4 May 2017, the Company declared its maiden interim dividend of 0.75p per Share, and declared a further two quarterly dividends of 0.75p in both July and October in respect of the three month periods to 30 June 2017 and 30 September 2017 respectively.

The target set out at laun� was to pay dividends totalling 3p per share for the period through to 31 December 2017, targeting 5p per annum thereafter whi� the Company expects to increase broadly in line with inflation over time.

Financial resultsThe Company’s financial performance over the period has been very encouraging.

On a Portfolio Valuation basis, whi� assumes that properties are held within SPVs and valued as a discreet portfolio, the unaudited Portfolio Net Asset Value per Share as at 30 September 2017 was 109.6p. This represents an increase since IPO (based on 98.0p per Ordinary Share) of 11.8%.

On an IFRS Valuation basis, whi� assumes that properties are valued individually and structured without the benefit of the SPVs in whi� they are actually held, the unaudited IFRS Net Asset Value per Share as at 30 September 2017 was 103.2p. This represents an increase since laun� (based on 98.0p per Ordinary Share) of 5.3%.

The Group has now rea�ed operating profitability: the operating profit for the Group excluding revaluations for the period from 18 November 2016 to 30 September 2017 was £2.6 million, with total comprehensive income of £45.9 million on a Portfolio Valuation basis and £23.6 million on an IFRS Valuation basis implying Net Earnings per Share for the period of 13.1p and 6.7p, respectively. Approximately 99% of the Company’s income is ultimately derived from either local or central Government, whi� is paid directly to the Registered Providers.

Chairman’s StatementI am pleased to present the Company’s first unaudited interim results for the period from its listing on 18 November 2016 to 30 September 2017.

Progress since the end of SeptemberWe are pleased that the Company is on course to a�ieve its target to be fully invested within the timescales indicated at IPO and has delivered on its stated objectives through investment in a high quality diversified portfolio of Social Homes throughout England and Wales.

C Share IssueThe Board is delighted that shareholders have supported our growth plans by subscribing for a further £302 million of equity in November 2017. We believe that this reflects the Company’s prospects and its consistent delivery against its objectives since it was listed. We believe the issue will place the Company in the best possible position to capitalise on the pipeline of potential investment opportunities over the next 12 months; thereby continuing to deliver for tenants and shareholders alike.

Loan financingOn 3 November 2017, the Company agreed a £52.5 million term loan facility with Scottish Widows Limited, with a term of 10 years, an interest rate of 2.99% representing leverage of 30% (as calculated on the loan to market value of the property portfolio). This facility is secured against certain of the Group’s properties and the SPVs in whi� those properties are held and forms part of the programme to a�ieve an overall level of indebtedness in the order of c.25% loan to market value.

On 16 November 2017, the Company further agreed a £40 million revolving credit facility with Lloyds Bank plc, available for a term of three years, at a floating rate above 3-month LIBOR. This facility is secured against certain of the Group’s properties and the SPVs in whi� those properties are held.

Negotiations are in process with additional lenders in relation to further facilities, expected to be announced in due course.

The additional financing will allow the Company to continue its strong deployment momentum and the Board considered the terms of the facilities fair and reasonable.

OutlookThere remains a �ronic shortage of all forms of Social Housing in the UK, including specialist Social Housing, with estimated demand from 4.5 million people awaiting allocation of a social home. We continue to build the pipeline of quality investments that meet our investment criteria. Our Investment Advisor has identified more than £500 million of Social Homes that may be acquired by the Group over the next 12 months, of whi� approx. £100 million is expected to be available in the near term. Our Investment Advisor will continue to implement a disciplined policy focused on quality opportunities, whilst rejecting others on the grounds of quality, location and value for money.

The Company has strengthened its position further through additional investment. We continue to be the only listed investment company focused on this sector that is not exposed to development and forward funding.

The Board is grateful for the support and encouragement of the Company’s shareholders and the hard work of the Investment Advisor and our other advisors.

Michael Wrobel Chairman23 November 2017

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1112

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2930

Portfolioas at 30 September 2017

As depicted in the table below and map opposite, the Company’s Portfolio is spread across England and Wales, reflecting the Company’s objective of creating a coherent yet diversified portfolio.

KEY REGION COUNTY PROPERTIES TENANCIES

1 North East Durham 57 3602 York & Humber South Yorkshire 11 813 York & Humber West Yorkshire 7 624 North West Lancashire 24 775 North West Merseyside 28 1916 East Midlands Derbyshire 3 107 East Midlands Leicestershire 3 108 East Midlands Northamptonshire 2 89 East Midlands Nottinghamshire 10 8210 West Midlands Staffordshire 7 5011 West Midlands Warwickshire 7 2812 West Midlands Worcestershire 2 713 East Bedfordshire 1 1914 East Cambridgeshire 9 2515 East Lincolnshire 1 1316 East Hertfordshire 3 1917 Greater London Greater London 11 16018 South East Berkshire 4 2919 South East East Sussex 1 520 South East Hampshire 12 6621 South East Kent 3 3122 South East Oxfordshire 2 1123 South East Surrey 5 3224 South West Cornwall 7 8025 South West Devon 2 726 South West Dorset 35 23227 South West Gloucestershire 19 8128 South West Somerset 3 3329 South West Wiltshire 1 330 Wales West Glamorgan 2 15

Total 282 1,827

† Excluding purchase costs* Weighted Average

Unexpired Lease Term

Capital deployed†

£285.3 million

Properties

282

Tenancies

1,827

WAULT*

24.3 years

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Investment Advisor’s Report“We are pleased to present our Investment Advisor’s report and to reflect on a first year of substantial progress. Building on our first mover advantage we have created a diversified portfolio of high-quality Social Homes, a�ieved a number of important social impact gains and in doing so have invested the great majority of the capital raised at the time of IPO"Paul Bridge, Chief Executive Officer, Civitas Housing Advisors Limited

CHA, the Investment Advisor to the Company, is pleased to report on progress in the period from IPO in November 2016 to 30 September 2017.

During this period we have acquired 282 properties, leased to 10 Registered Providers and housing 1,827 tenants across 83 Local Authorities, with care support provided by 50 Care Providers. Since the period end we have acquired a further 29 properties housing 115 tenants and, as a result when taken together with the pipeline, all capital raised at IPO is either deployed or allocated to specific acquisitions. As a result the Company is on tra� to meet the dividend targets set at IPO of 3p per share in aggregate for the period from IPO to 31 December 2017 and 5p per share annually thereafter.

Investment ObjectiveAn investment in the Company enables investors to gain exposure to a diversified portfolio of Social Homes in England and Wales.

The Investment Objective is to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of Social Homes, whi� benefit from inflation-adjusted long-term leases and occupancy agreements with Registered Providers.

After 2017 the Company aims to deliver a targeted dividend of 5p per annum, whi� it expects to increase broadly in line with inflation and with the objective for that to be paid from income generated as opposed to capital growth of the portfolio.

Investment StrategyThe Group has acquired and will continue to seek to acquire existing Social Homes in locations across England and Wales where the Investment Advisor believes there to be long-term demand. As the Social Homes sector is highly fragmented, developing long-term relationships with Housing Associations, Local Authorities, Care Providers and private owners is important in acquiring suitable portfolios of Social Homes.

This is aided by the fact that the Group was the first REIT to be listed on the London Sto� Ex�ange to offer a focused exposure to Social Housing in England and Wales and as su� is seen to have a first mover advantage. It is also supported by a broadly based team within the Investment Advisor including a number of figures from within the Social Housing sector who have held senior roles and positions of responsibility.

The depth of relationships that have been established in the sector is reflected in the various long-term arrangements that the Investment Advisor has been able to enter into to secure high quality properties at attractive yields. This complements the broader array of relationships that have led to significant incoming investment opportunities and enabled the Group to acquire all properties off-market to date.

The Social Housing sector contains a variety of property types and tenures. At the time of IPO the Group stated that it would invest at least 75% in Specialist Supported Housing. That has proven to be the case and at the date of this report almost the entire portfolio is invested in Specialist Supported Housing.

As part of the due diligence programme undertaken by the Group it is frequently the case that the legal arrangements between the various parties within a Specialist Supported Housing project will be updated and revised to enable the Group to rea� its target of receiving investment grade cash flows. This will be undertaken prior to the announcement of a pur�ase and typically contributes to any increase in value of the property reported subsequently at the quarterly valuation date.

The Group also seeks to ensure that all acquired properties are of a high standard and where necessary it will agree a s�edule of works by way of improvement that will typically be undertaken by the respective Housing

Association and monitored by the Group’s property advisors, Jones Lang LaSalle Ltd.

The need for Social HousingThe UK Housing market continues to feature prominently on the national agenda, with all major political parties indicating the provision of housing is a priority. There is broad consensus that the UK requires up to 300,000 new homes ea� year to meet current and projected demand.

The Department of Communities and Local Government statistics as of Mar� 2017 show that housing supply has been on an upward trajectory in recent years with 162,880 completed units in 2016/17 but this still falls well below the widely accepted target.

Civitas has acquired Social Homes in locations across England and Wales where the Investment Advisor believes there to be long-term demand (clockwise from top left): Brickwall Lane, Ruislip; Greyhound Lane, Streatham; Holloway Road, London; Golders Green, London.

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At the same time the la� of supply and funding, together with �anges to how welfare is delivered, means housing options for vulnerable people remain limited. Indeed the need for Specialist Supported Housing continues to grow (currently around 10,000 people with a learning disability are on waiting lists for housing with support) as councils struggle to rehouse vulnerable people within suitable community settings (an obligation placed on adult social services teams under the Care Act 2014).

This is further reflected by the existence and cost of NHS “bed blo�ing” whi� is estimated to be in the region of £900 million per annum. As a result, patients are left in hospital with needs that would be better and more cost-effectively served via care in the community. Lord Patri�

Carter’s 2016 review included an estimate of the cost of caring for all delayed transfer patients in a residential care setting at £835 million over five years to 2020/21, compared to c.£3.3 billion for acute care in hospitals; this is before considering the benefits for patients in terms of quality of care whi� are significant.

Encouragingly, and in line with our expectations, the Government announcement of 25 October 2017 reversed an earlier proposal to cap social rents at the local housing allowance rate, providing reassurance to existing providers; and accepting that specialist housing costs more to deliver than general needs housing. The Government has further announced on 4 October 2017 that for the five years from 2020 the general needs rent settlement will be set at CPI plus 1%.

RegulatesCare Providers

Tenancy Agreement(Housing Management)

Agreement forProvision of Care

Housing Benefit(Av. 100% of rent)

Housing Benefitadministration by the

Local Authority

Funding under LocalGovernment FinanceSettlement (including

for care and forhousing support)

Rental/LeaseAgreement

(Av. 25 years)Net Rent

NominationAgreement andVoid Guarantee

Tenant

Care Provider

Local Authority

Registered Provider

(Housing Association)

Specialist Supported Housing: Rental Income

Investment Advisor’s Report

Specialist Supported Housing The Group has and will continue to seek to acquire Specialist Supported Housing portfolios, whi� includes housing for some of the most vulnerable in society. Typically, government funding for ea� tenant under this categorisation represents 100% of the cost. This includes, housing (rent and property maintenance) as well as the cost for care (paid to the Care Provider and usually representing the largest element of the overall funding). Costs are paid from the Department for Communities and Local Government and the Department of Work and Pensions to the relevant Local Authority, whi� then passes funds on to the Registered Provider and Care Provider.

Net rental yields in the Specialist Supported Housing sector are typically in the region of 5.5% to 6.5% and are indexed in line with CPI or CPI+1%. Larger portfolios managed by major Housing Associations may trade below these levels.

In ea� instance the Local Authority is responsible for paying the Care Provider directly for its provision of services to the tenant. The Care Provider itself comes under the regulation

of the Care Quality Commission. The Registered Provider typically enters into a service level agreement with the Care Provider. The Group does not undertake responsibility for the operations of the care provider or care for the individual tenants. The diagram opposite shows the parties involved in the provision of Specialist Supported Housing and the flows of funding from Government directly to the relevant institutions.

Long-term leases and occupancy agreementsWe expect that the Group will continue to typically enter into long-term inflation adjusted leases or in certain instances long-term inflation adjusted occupancy agreements for periods in excess of 20 years with Registered Providers, where all management and maintenance obligations will be serviced by the Registered Providers.

The nature of the lease arrangements with the Registered Providers will be su� that the Registered Providers, and not the Company, will be the landlord under applicable landlord and tenancy legislation.

Where the counterparty is a Local Authority, or where we believe it is in the Group’s interest,

Denmark Road, Gloucester Hendon Way, London

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the Group may consider unexpired leases of not less than 10 years. This may be due to the constraints on Local Authorities from entering into longer terms arrangements.

The Investment PipelineWe have established a significant investment pipeline and identified a number of new assets whi� meet the Investment Objective and Investment Strategy, including off-market portfolios identified through our contacts and relationships in the sector.

These assets come from an increasingly broad range of sources reflecting the enhanced profile of the Group and CHA within the Social Housing sector. Opportunities are being sourced through Registered Providers (due to mergers, sto� rationalisation and capital release), Local Authorities, Care Providers and private companies. We have strengthened the Group’s relationship with particular Registered Providers, whi� is enabling the Company to benefit from more investment opportunities from these same Registered Providers. As part of this broadening network CHA, on behalf of the Company, has established commercial understandings with specific Registered Providers, independent owners, developers

and suppliers of Social Homes including Care Providers, whi� are expected to deliver a significant quantity of opportunities to acquire Social Homes. Together the various sources of pipeline opportunities account for more than £500 million of Social Homes that have the potential to be delivered over the next 12 months, with approximately £100 million potentially in the near term.

As part of the Company’s plans to seek further diversification within the specialist areas of the regulated Social Housing sector, we anticipate that pipeline transactions will include not just homes for tenants with care needs based around learning disability and autism but also dependency, homelessness and the desire to release hospital beds through the use of “step down” accommodation associated with the NHS. In ea� case the Company intends to operate the same model with a Registered Provider entering into a long-term arrangement with the Company and providing on the ground property services.

It should be noted that the Company may or may not proceed with the acquisition of any su� pipeline opportunities. The Company currently has no mutually binding contractual

Investment Advisor’s ReportCivitas facilitating growthCivitas is able to support Social Housing providers, su� as PASHA, to restructure their portfolio so that the maximum amount of resources can be directed towards providing vital tenancy and support services. In August 2017, Civitas completed the pur�ase of 21 of PASHA’s supported living facilities, with 183 tenancies, for a total consideration of £22.9 million. The properties in this portfolio, whi� have been adapted for use as specialist supported housing with facilities for those with physical and/or mental disabilities or other needs, will be leased ba� to PASHA, who will be responsible for management and maintenance of the properties.

Kyles Way, Bartley Green, Birmingham. Hersham Road, Walton-on-Thames, Surrey

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obligations with Registered Providers or other potential vendors of Social Housing for the acquisition of Social Homes, but we are confident that sufficient suitable housing portfolios will be identified, assessed and acquired to substantially invest or commit the net issue proceeds from the C Share raise and the proceeds of the debt raise within 12 months following admission. This confidence is based in part on the success that the Group has a�ieved in investing the net IPO proceeds and in the commercial understandings already established.

We look forward to continued progress over the forthcoming months and to deploying further capital to improve the quality and availability of Social Housing across England and Wales.

Civitas Housing Advisors LimitedInvestment Advisor23 November 2017

Extract from The Good Economy (“TGE”) Social Impact Report 2017“Generating positive social impact from our investments is as important to us as it is to our partner housing providers. In our view successful investment in the sector should provide a fair return to our shareholders and discernible benefit for the people who live in the properties that we own. To this end, we are incorporating a social impact evaluation within the regular monitoring of our investments”Mi�ael Wrobel, Chairman

The Company aims to help ta�le the �ronic shortage of social housing in the UK. Social homes, those supplied by Housing Associations and Local Authorities in England and Wales, account for approximately 17.5% of total housing sto� (approx. 2.65 million properties). These homes are provided by around 1,500 Housing Associations and many Local Authorities.

Despite the scale of the sector there is today a widely recognised significant shortfall of all types of social housing in England and Wales, with approximately 4.5 million people having qualified for social housing sitting on Local Authority housing waiting lists. Over the last 10 years the proportion of social housing has fallen from 45% to 20% of all new homes built. This fall is partly due to the level of capital subsidy, whi� has been progressively reduced as governments of all political persuasion have pushed Housing Associations towards replacing public subsidy with private finance.

The Company is providing part of the funding solution to the social housing crisis. Its strategy is to acquire portfolios of built Social Homes in England and Wales that are managed by Housing Associations or Local Authorities (also referred to as “Registered Providers”). Working in partnership with Registered Providers, the Company helps them unlo� capital held in existing Social Homes for new development. The Company also pur�ases existing private properties and brings them into the social housing sector to be managed by Registered Providers and provided to social tenants on a long-term basis.

The Company invests in Social Homes designed for specialist supported living, typically both for those with mid- and upper-level care needs

or with other support requirements as well as general needs homes. Revenue is generated from rental income from long-term leases and occupancy agreements of typically in excess of 20 years. Today almost 100% of rental income is from central or local government whi� supports low-income and vulnerable people to meet the costs of housing and care that they are unable to afford themselves.

The Company’s focus is on preserving the availability of Social Homes within the social sector and ensuring that they continue to be made available to the low-income and vulnerable people for whom they were intended. It is also increasing the availability of Social Homes through investing in properties to be newly managed by Registered Providers.

Civitas properties are spread across all regions of England and Wales, with 71% of properties located in the 40% most deprived Local Authorities. In addition 26% of properties have, as a result of being brought by Civitas into the regulated Social Housing sector for the first time, been converted to a Care Setting with a capacity for a further 341 residents.

The Company is also committed to supporting the work of relevant �arities in the homelessness and social housing sector and plays an active role in supporting resear�, policy and action to solve the UK social housing crisis. This is reflected in the partnership with the national homelessness �arity Crisis. Civitas sponsors the Crisis Renting Ready programme, designed to assist homeless clients to a�ieve a home, and also contributes more broadly to the work of Crisis.

Investment Advisor’s Report

Beach Road, Weston Super Mare Snow Hill, Leicester

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CHA is the Investment Advisor to Civitas and is responsible for the origination of the investment portfolio and its day-to-day management and improvement.

Social impact assessment methodologyCivitas is a social impact investor that aims to deliver positive social impact alongside a financial return. Impact investing adds a third dimension – impact – to the traditional financial investment considerations of risk and return. Civitas integrates social value considerations into all stages of the investment process. It is committed to measuring, managing and reporting on its social performance, ensuring transparency and accountability to all its stakeholders, including residents, Registered Providers and shareholders.

Civitas’ three principal social objectives are to:

1. Increase the availability of social housingacross England and Wales, particularly forvulnerable people.

2. Improve the quality of social housing.

3. Offer value for money for the public purse.

Increase the availability of social housing across England and Wales, particularly for vulnerable peopleCivitas aims to have a national footprint, investing in social homes throughout England and Wales, particularly in lower income areas where tenants cannot typically afford private accommodation or care. It also aims to bring new properties into the regulated social housing sector, increasing the availability of social housing overall.

Improve the quality of social housingCivitas is committed to ensuring all properties are renovated to high-quality standards. It a�ieves this by commissioning independent inspections of all properties it is considering pur�asing, including �e�ing the overall condition of the property, as well as the gas and electricity fittings and other safety aspects. Civitas arranges for payment of the costs of any improvements needed and ensures these are fully inspected. It enters into full repairing and insuring leases with the Registered Providers giving due consideration to how these are funded and in particular working closely with the Registered Providers to evaluate underlying long-term need for the services being provided under the leases.

Activities Outputs Outcomes Ultimate goal/impact

• Raise capital on LSE• Purchase properties that are

maintained as or increase social housing stock

• Build relationships with housing providers to ensure quality of housing and support ➧

Increased supply of good quality social housing• 100% of properties inspected• £ spent on improvements• 100% of properties undergo

affordability checks• Number of housing units (by

location and type)• Demographies of individuals

housed

➧

Residents are happy in their home and are able to live as independently as possible• Evidence of positive

outcomes for residentsValue for money for the public purse• Local authorities are satisfied

with the cost and quality of accommodation and care

• Evidence of cost savings

➧

Improved quality of life for low-income people and those with special needs

Offer value for money for the public purse Civitas aims to deliver Social Housing that has lower costs than alternatives (often long-stay institutional care) but with high-quality social care delivery. It ben�marks 100% of rents and also commissions Support Solutions UK to carry out an independent rent review for all properties to ensure rents are affordable and fair value. Investing in specialist supported housing rather than institutional care can result in real cost savings for government and better social outcomes for residents. The Good Economy (TGE), the independent social advisory firm will work with Civitas and its partners to evidence and provide more data on both the financial and social outcomes of Civitas’ portfolio over time.

The policy contextCivitas is supporting delivery of the National Transforming Care and Specialist Supported Housing Programmes.

The Winterbourne View Scandal and resultant report by Sir Stephen Bubb exposed systemic issues in the care system. It revealed that many people with learning disabilities or �allenging behaviour were being placed in inappropriate

care settings, staying far too long in hospitals or institutional care homes and, in some cases, were subject to physical and mental abuse.

In 2016, to a�ieve the substantial reduction in reliance on residential and inpatient care, the Department for Health published the National Transforming Care Programme. This sets out a clear programme of work whi� will encourage system-wide �ange to enable more people requiring care to live within communities, with the right support whilst being close to their friends and family.

A key element in the delivery of these aims is Specialist Supported Housing. This differs from conventional general supported housing in that it is developed directly in accordance with Local Authorities’ strategic priorities and there is no capital subsidy provided. Specialist Supported Housing offers a high-level of support and is designed, structurally altered, or refurbished to offer specialised services to allow people requiring care to live, or adjust to living, independently in the community.

Civitas is one of the first providers of private capital for Specialist Supported Housing.

Extract from The Good Economy (“TGE”) Social Impact Report 2017

Wood Lane, Ferryhill Mount Ephrain Road, Streatham

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Portfolio case studyWestmoreland Supported Housing Association (WSHA)

How WSHA beganWestmoreland Supported Housing Association (WSHA) was established in 2002 as a not-for-profit housing provider by Pat and John Finney. The inspiration for this came from their son Nigel, who was born prematurely and suffered brain damage at birth, leaving him with learning difficulties and limited physical ability. As Nigel grew up and aspired to move on from the care of parents Pat and John, it became apparent that there was a la� of suitable supported living facilities. Pat and John therefore decided to convert their six-bedroomed family home into a house suitable for supported living. Nigel moved into the property, together with three friends from the local community also requiring care, along with a support provider, and Westmoreland Supported Housing was born.

Growing to meet an unmet social needAs other families with disabled �ildren began to approa� Pat and John about options for

supported living, it became obvious there was a genuine demand for this type of facility. More specifically, there was a clear demand for the kind of specialist supported housing whi� would allow disabled adults a greater degree of independence, and their parents a greater degree of freedom from the commitment of round-the-clo� care.

The family ethos of Westmoreland remains. WSHA works closely and regularly with the tenants themselves, their family members, and their support providers to cater most effectively for the type of support required. Many of WSHA’s employees are themselves parents of disabled �ildren or have direct experience of the difficulties of finding appropriate care and living facilities, whi� lends a personable and empathetic tou� to the nature of the support provided. “Our staff have personal experience of disability so we’re on the same side as our clients”, says Yvonne Lee, CEO of WSHA. “All of our properties are designed to be a home from home and we like our tenants to treat their house as their home.”

Civitas providing funding for scale-upIn 2016, WSHA was ready to expand to meet demand, however, it didn’t have the funds to pur�ase more properties. Civitas has proved an ideal partner and working in partnership, Civitas and WSHA identify properties that are suitable for supported living. Civitas then pur�ases the properties, facilitates renovation and arranges for them to be fitted out to meet the individual’s care needs and leases them ba� to WSHA. WSHA uses its expertise and experience to manage the properties and liaises with the Local Authority to ensure appropriate care is provided by qualified external support providers.

“Civitas has allowed Westmoreland Supported Housing Association to rea� out and provide good quality homes and supported living to a far larger number of people than we otherwise would have been able to.”

Yvonne Lee, CEO of WSHA Westmoreland Supported Housing Association


From the original conversion of the Finney family home 15 years ago,

today WSHA provides for the care of

over 900 residentsin

more than200 propertiesall over England and Wales

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Case studyCrisis: Together we will end homelessness

Crisis is a national �arity for the homeless. It works to provide vital support so that people can rebuild their lives and are supported out of homelessness for good. With 50 years experience of working with homeless people, Crisis campaigns for permanent �ange, as well as offering one-to-one support, advice and courses for homeless people across England, Scotland and Wales.

In 2016, Crisis helped 10,000 people on their journey out of homelessness, with 1,000 of those progressing to external education or securing a paid job.

Yet, today homelessness in Britain is increasing. The combination of welfare reforms and the cost of private rental accommodation are resulting in growing numbers of people at risk of becoming homeless. Crisis estimates that 160,000 households – 0.25 million people – are in an acute housing situation. Rough sleeping levels in England alone have increased 132% since 2010 and 16% since 2015 according to official figures. The cost of inaction is severe.

Civitas has entered into a partnership with Crisis. Jon Sparkes, CEO of Crisis describes how Civitas’ value has three dimensions:

1. Grant funding – Civitas is funding oneHousing Trainer position for ‘Renting Ready’,a training course run by Crisis that helpsvulnerable people build the skills theyneed to live independently and successfullymanage their tenancies. Last year, throughthe work of these coa�es, Crisis was ableto place 800 homeless people into securehousing.

2. Knowledge sharing – CHA’s seniormanagement have offered the Crisis teamtheir thoughts and advice on how to getpolitical, business and investor stakeholderengagement towards ending homelessness.

“Civitas have offered us free advice, particularly around business strategy and investment, that is tremendously valuable and goes far beyond how the average corporate engages with a �arity. It feels like an equal relationship with us both committed to solving the problem of homelessness.”

3. Raising awareness – Civitas’ marketingstrategy and its presence more broadlywithin the corporate and financial sectorbrings the �allenge of homelessness,and the work of Crisis, to the attentionof audiences who may otherwise remainlargely ignorant of su� issues. Jon Sparkescomments: “It is too soon to judge if thisexposure will have any real impact but it’san area we will wat� closely.”

Both parties are committed to building the partnership over the long term.


“What has impressed me about Civitas is not only do they want to build social purpose into their business model, but they are trying to solve the housing problem on all fronts.”

Jon Sparkes, CEO, Crisis

Final reflectionsCivitas has proven that commercial investment models can be used to a�ieve social good. The first REIT to raise private capital to invest in social housing in England and Wales, Civitas is meeting the urgent need for more funding for affordable homes. TGE’s first Social Impact Report provides encouraging evidence that Civitas can deliver on its social objective of increasing the provision of high-quality social housing to improve the quality of life for low-income and vulnerable people in social need while delivering financial returns to long-term investors.

TGE have learnt that:• Having shared social objectives and shared

values is key.Civitas is selective about the partners itworks with and will only proceed with aninvestment when it is confident that theRegistered Provider is also committed todelivering the best quality housing and careto residents.

• Integrating social impact considerationsinto all phases of the investment processis critical to delivering on social outcomes.Civitas invests considerable resources intoappraising the geography and quality ofproperties, ensuring works are carried out onall properties to meet high quality and safetystandards.

• Being person-centred is vital.Civitas always takes a long-term view of theinvestment and only invests in propertiesthat are intended to remain as social homesfor residents with a significant proportionof investments being made in areas of highdeprivation.

In summaryCivitas intends to continue to enhance its monitoring and reporting of social outcomes and will continue to report to shareholders and other stakeholders through future impact reports.

Civitas has developed an innovative financial model that is helping to ta�le the �allenge of a la� of affordable housing and quality care for those in need. As a listed investment vehicle it offers all investors – both institutional and retail – the opportunity to invest for both a financial and social return.

This is a new social investment market bringing together the private, public and social sectors. It requires building awareness, trust and understanding but already Civitas is demonstrating, through its multi-disciplinary team and approa�, that it can deliver both financial and social value.

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23

Key Performance Indicators (KPIs) Principal risks and uncertainties

Measure Explanation Result

Capital deployed Target of deploying the IPO proceeds by 31 December 2017 and the C Share proceeds by 31 December 2018 or earlier

£285.3 million before costs deployed by 30 September 2017

Increase in Portfolio NAV per share and IFRS NAV per share

Target to a�ieve capital appreciation whilst maintaining a low risk strategy from enhancing the quality of cash flows from investments, by physical improvement of properties and by creating a significant diversified, high-quality portfolio

Portfolio NAV, 11.6p per share, an increase of 11.8% from IPO

IFRS NAV, 5.2p per share, an increase of 5.3% from IPO

Dividends per share Targeting 3p per share in the period from IPO to 31 December 2017; 5p per share per annum from the second year onwards growing broadly in line with inflation

Dividends of 2.25p per share declared for the period from IPO to 30 September 2017

Number of Local Authorities, Housing Associations and Care Providers

Target risk mitigation through a diversified portfolio (once fully invested) with no more than 25% exposure to any one Local Authority or single Housing Association and no more than 20% exposure to any single geographical area, once the capital of the Company is fully invested

As at 30 September 2017:

83 Local Authorities10 Housing Associations 50 Care Providers

Investment Management risks How managed/mitigated

The growth of the Company depends upon the ability of the Group to identify, select, acquire and manage investments that offer the potential for satisfactory returns, including the ability to enter into suitable lease and/or management arrangements with Registered Providers.

The Investment Advisor has established strong links with the market in order to identify and execute new transactions and has established a significant pipeline of over £500 million and has deployed or allocated all of the net IPO proceeds within the envisaged timescale.

The Group may face competition from other investors to acquire investments available in the Social Housing sector, whi� may restrict its ability to deploy capital effectively within a reasonable timescale.

The Company and its operations are subject to laws and regulations enacted by national and local governments and government policy. Any �ange in the laws, regulations and/or government policy affecting the Company may have a material adverse effect on the ability of the Company to successfully pursue its investment policy and meet its investment objective and on the value of the Company and the shares.

The Group focuses on ni�es where it believes the regulatory framework to be robust.

The Government announced on 25 October 2017 that social rents to the local housing allowance would not be capped; the Government has further announced that for the five years from 2019 the General Needs rent settlement will be set at CPI plus one. Both developments are supportive to the Civitas strategy and in line with the Group’s expectations.

A sizeable proportion of investments made by the Group may comprise interests in the legal title to Social Housing and residential property assets that are not publicly traded or freely marketable and these investments are often subject to restrictions on who may own and/or operate the property assets concerned and may, therefore, be difficult to value and/or realise at the value attributed to su� investments, or at all.

The long term strategy of the Company is to own Social Housing with long term inflation indexed leases in place with robust counterparties. The strategy is not therefore dependent on being able to dispose of properties, whi� are funded entirely by equity as at 30 September 2017 and, once the envisaged debt facilities are in place, will be conservatively leveraged thereby minimising the risk of forced sale.

24


25

Investment Management risks How managed/mitigated

Due Diligence may not reveal all facts and circumstances that may be relevant in connection with an investment and may not prevent an acquisition being materially overvalued.

The Group undertakes detailed due diligence on the properties, their condition, the proposed rental levels – ben�marking against comparable s�emes using both external consultants where required and its own proprietary database – and on the Registered Providers and Care Providers involved in ea� property to ensure that the pur�ase price is robust.

The Company is reliant on the Investment Advisor and third-party service providers to identify assets, structure transactions, complete due diligence and manage the portfolio.

The Board liaises closely with the Investment Advisor to review and approve transactions and due diligence, and monitor the portfolio. The Investment Advisor has assembled a team of professionals with a broad range of experience and third-party advisors engaged by the Group are all leading firms with significant expertise in the Social Housing sector.

Strategy and competitiveness risks How managed/mitigated

As a result of competition from other pur�asers of Social Housing properties the Group’s ability to deploy capital effectively within a reasonable timeframe may be restricted or the net initial yields at whi� the Group can acquire properties may decline su� that target returns cannot be met.

The Investment Advsior has established strong links with vendors and has completed over £300 million of acquisitions to date and established a pipeline of future acquisitions su� that all of the net IPO proceeds have been deployed or allocated within the envisaged timescale and all of whi� are at net initial yields that meet the target return criteria.

The value of the investments made by the Company may �ange from time to time according to a variety of factors, including movements and expected movements in interest rates and in inflation and general market pricing of similar investments. Su� �anges could impact the value of the Company’s investment portfolio.

The Group invests in projects with stable pre-determined, long term leases in place with CPI or CPI plus 1% indexation and its strategy is not focused on sale of properties.

Principal risks and uncertainties

Accounting, legal and regulatory risks How managed/mitigated

If the Company fails to qualify, or remain qualified, as a REIT, its rental income and gains will be subject to UK corporation tax.

Any �ange in the tax status of the Company or any of its underlying investments or in tax legislation or practice (including in relation to taxation rates and allowances)or in accounting standards could adversely affect the investment return of the Company.

The Group has been structured to be REIT compliant and continuously monitors the tax status using professional taxation advisors.

The Board has ultimate responsibility for ensuring adherence to the UK REIT regime and monitors the compliance reports provided by the Investment Advisor and other third party providers.

The Company may not a�ieve full compliance with all applicable legislation leading to reputational or financialconsequences.

The Board monitors compliance information provided by its advisors and legal counsel and thereby monitors regulatory developments in the UK as well as listing rules and FCA marketing rules.

Operational risks, including cyber crime How managed/mitigated

Disruption to, or failure of the systems of third party providers could prevent accurate reporting and monitoring of the Company’s financial position. This includes the risk of cyber crime and potential threat to security, business continuity and reputation.

The Board monitors the services provided by the Investment Advisor and other service providers and the key elements whi� are designed to provide effective internal control.

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27

Corporate governance

The Board is comprised of four non-executive directors. All the directors are independent of the Investment Advisor and the AIFM. They are responsible for the strategy and oversight of the Company and for, inter alia, determining the Company’s Investment Objective and Policy.

They ensure that risks are effectively managed through robust policies and procedures, supported by the right values and culture. The Board’s primary focus is the sustainable long term success of the Group to deliver value for shareholders, taking into account other stakeholders.

The Board is responsible for investment decisions, other than to the extent delegated to the AIFM and/or the Investment Advisor, and the appointment, supervision and monitoring of the Company’s service providers, including amongst others the AIFM and the Investment Advisor. The Board is responsible for the

interim and annual financial statements of the Company and, in conjunction with the AIFM will also approve the periodic calculation of the Net Asset Value.

The Board considers the principles and recommendations of the AIC Code of Corporate Governance (AIC Code) by reference to the AIC Corporate Governance Guide for Investment Companies (AIC Guide). The AIC Code sets out a framework of best practice in respect of the governance of investment companies. It has been endorsed by the Financial Reporting Council as an alternative means for AIC members to meet their obligations in relation to the UK Corporate Governance Code. The Board considers that reporting against the principles and recommendations of the AIC Code provides better information to shareholders.

How the Board Operates The Board meets formally at least quarterly, in addition, the Board meets on an ad hoc basis, typically every month, for the purpose of considering potential transactions and associated due diligence and for approving the acquisition of properties recommended by the Investment Advisor that fall outside of the instructions specified in the Investment Management Agreement. The Board of Directors has final approval for these acquisitions with an ongoing responsibility to monitor property portfolio performance against forecasts as reported by the Investment Advisor. There have been additional Board meetings to approve the C Share Issue and in connection with debt restructuring.

For this purpose, the Board receives periodic reports from the AIFM and the Investment Advisor detailing the performance of the

Company. The Board delegates certain responsibilities and functions to the Audit and Management Engagement Committee, whi� has written terms of reference.

To assist the Board in the day-to-day operations of the Company, arrangements have been put in place to delegate authority for performing certain of the day-to-day operations of the Company to the AIFM, the Investment Advisor and other third-party service providers, su� as the Administrator and the Company Secretary. The Board and the Investment Advisor operate in a supportive, co-operative and open environment.

Michael Wrobel Independent non-executive Chairman

Audit and Management Engagement Committee

Alastair Moss Independent non-executive director


Peter Baxter Independent non-executive director


Caroline Gulliver Independent non-executive director

Chair of the Audit and Management Engagement Committee

Company Secretary

Responsibility for ensuring good

information flows within the Board

and its committees and between the AIFM/Investment

Manager and non-executive

directors, as well as advising the Board through the Chairman

on all governance matters.

Shareholders

ChairmanResponsible for leadership of the Board and ensuring its effectiveness on all aspects

of its role. Independence stems from the ability to make those objective decisions that may be in conflict with the interests of management.

The BoardResponsible for the long term success of the Company, the Company’s strategic aims,

risks, values and standards. It sets the Company’s Investment Objective and Investment Policy and is responsible for the Company’s investment decisions,

other than to the extent delegated to the AIFM and/or the Investment Advisor.

Audit and Management Engagement CommitteeReviews the scope and results of external audits, their cost effectiveness and the independence and objectivity of the external auditors. It appraises the actions and

judgements of the Investment Advisor and other advisors in relation to the interim and annual financial statements and the Company’s compliance with relevant statutory

and regulatory requirements. Furthermore, it monitors the effectiveness of the Company’s internal control systems and the performance of the AIFM, the Investment

Advisor, Administrator, Depositary, Company Secretary and Registrar and other service providers.

AIFMThe AIFM performs certain risk management functions for the

Company in accordance with its Prospectuses, the Articles of Association and English laws

and regulations (in particular, the AIFMD) in the exclusive interest of

investors and oversees the portfolio management functions exercised by

the Board.

Civitas’ governance framework

Investment AdvisorAppointed to act as an appointed representative of the current AIFM

(authorised and regulated by the FCA)and provides investment and asset management services to the Group. Responsible for sourcing investment

opportunities, due diligence, transactions and financial reporting,

and ongoing monitoring of investments.

The Board

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29

Board meetingsA formal agenda is approved by the Chairman and circulated by the Company Secretary in advance of ea� meeting to the non-executive directors and other attendees. A typical agenda includes, an analysis of portfolio performance and exposure, an update on the investment pipeline, the Company’s financial performance to ensure the Company’s ability to pay its targeted dividend on a fully cash covered basis, the Company’s anticipated future performance, updates on investor relations, statutory and regulatory compliance, and any corporate governance matters.

The Investment Advisor attends the Board meetings together with representatives from the AIFM and Company Secretary. Representatives of the Company’s other advisors are also invited to attend Board meetings from time to time.

Committees The Company operates through the Board and its main Board committee namely the Audit and Management Engagement Committee. The Board evaluates the membership of its Board committees on an annual basis and aims to ensure that ea� of the committees has a different non-executive director as its �airman.

The Audit and Management Engagement Committee, �aired by Caroline Gulliver, meets at least twice a year. The Committee reviews the scope and results of the external audit, its cost effectiveness and the independence and objectivity of the external auditors, including the provision of non-audit services. Ea� year the Audit and Management Engagement Committee reviews the terms of the AIFM

Agreement and the Investment Management Agreement and examines the effectiveness of the Company’s internal control systems and the performance of the AIFM, Investment Advisor, Administrator, Depositary, Company Secretary and Registrar, and other service providers.

Remuneration and Nomination CommitteeGiven the size and nature of the Company, it is not deemed necessary to form a separate remuneration committee or nomination committee. The Board, as a whole, will assess the remuneration and composition of the Board and whether it has the correct balance of skills, experience, knowledge and independence to operate effectively. Disclosure of this point will be made in the annual report in accordance with the provisions of the AIC Code.

Corporate governance Directors’ responsibilities for the interim financial statements

The directors confirm that to the best of their knowledge this condensed set of consolidated financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the operating and financial review on pages 4 to 14 includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8. of the Disclosure and Transparency rules of the United Kingdom’s Financial Conduct Authority namely:

• An indication of important events thathave occurred during the first 11 monthssince admission on 18 November 2016 andtheir impact on the condensed consolidatedfinancial statements and a description ofthe principal risks and uncertainties for theremaining six months of the financial year;and

• Material related party transactions sinceadmission on 18 November 2016.

A list of directors is shown on page 26.

For and on behalf of the Board.

Michael Wrobel Chairman23 November 2017

Attendance at Board meetingsBoard

meetings eligible

to attend

Scheduled Board

meetings attended

Mi�ael Wrobel 15 15

Peter Baxter 15 15

Caroline Gulliver 15 15

Alastair Moss 15 12

30

Civitas Social Housing PLC Interim Report 2017

31

Independent review report to Civitas Social Housing PLC

Report on the interim condensed consolidated financial statements

Our conclusionWe have reviewed Civitas Social Housing PLC’s condensed consolidated financial statements (the “interim financial statements”) in the Interim Report of Civitas Social Housing PLC for the period 18 November 2016 to 30 September 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

What we have reviewedThe interim financial statements comprise:

• the Condensed Consolidated Statement ofFinancial Position as at 30 September 2017;

• the Condensed Consolidated Statement ofComprehensive Income for the period thenended;

• the Condensed Consolidated Statement ofCash Flows for the period then ended;

• the Condensed Consolidated Statement ofChanges in Equity for the period then ended;and

• the explanatory notes to the interim financialstatements.

The interim financial statements included in the Interim Report have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directorsThe Interim Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Interim Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involvesWe conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLPChartered Accountants London 23 November 2017

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33

From From18 November 2016 29 September 2016

to 30 September 2017

to 17 November2016

Note £ £

IncomeRental income 5 7,032,541 –

Total income 7,032,541 –

ExpensesDirectors’ remuneration 6 (119,521) (8,733)Investment advisory fees 8 (2,981,589) –General and administrative expenses 9 (1,510,746) (22,667)

Total expenses (4,611,856) (31,400)

Gain from fair value adjustment on investment property 13 20,979,237 –

Operating profit/(loss) 23,399,922 (31,400)

Finance income 10 183,344 –Finance costs 11 (2,207) –

Profit/(loss) for the period before tax 23,581,059 (31,400)

Taxation 12 – –

Profit/(loss) being total comprehensive income/(loss) attributable to shareholders for the period

23,581,059 (31,400)

Earnings per share – basic 30 6.7p (68,261p)

All amounts reported in the Condensed Consolidated Statement of Comprehensive Income for the period ended 30 September 2017 relate to continuing operations.

At At30 September

201717 November

2016Note £ £

Assets Non-current assetsInvestment property 13 321,000,000 –

Total non-current assets 321,000,000 –

Current assetsTrade and other receivables 15 1,707,256 50,001Cash at bank 16 46,405,995 –

Total current assets 48,113,251 50,001

Total assets 369,113,251 50,001

LiabilitiesCurrent liabilitiesTrade and other payables 17 7,813,592 81,400

Total current liabilities 7,813,592 81,400

Total liabilities 7,813,592 81,400

Total net assets/(liabilities) 361,299,659 (31,399)

EquityShare capital 18 3,500,000 1Share premium reserve 19 – –Capital reduction reserve 20 334,250,000 –Retained earnings/(accumulated losses) 21 23,549,659 (31,400)

Total equity 361,299,659 (31,399)

IFRS Net asset value per share – basic 31 103.23p (31,399p)

Condensed Consolidated Statement of Comprehensive Income (unaudited)For the period from 18 November 2016 to 30 September 2017

Condensed Consolidated Statement of Financial Position (unaudited)As at 30 September 2017

The accompanying notes on pages 36 to 65 form an integral part of these condensed consolidated financial statements. The accompanying notes on pages 36 to 65 form an integral part of these condensed consolidated financial statements.

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35

Condensed Consolidated Statement of Changes in Equity (unaudited)

Condensed Consolidated Statement of Cash Flows (unaudited)For the period from 18 November 2016 to 30 September 2017

Retained

ShareShare

premiumCapital

reductionearnings/

(accumulatedcapital reserve reserve losses) Total equity

Note £ £ £ £ £

Balance at 29 September 2016 – – – – –

Loss being total comprehensive loss for the period

– – – (31,400) (31,400)

Issue of Ordinary Shares Share capital issued in the period

18 1 – – – 1

Balance at 17 November 2016 1 – – (31,400) (31,399)

Profit being total comprehensive income for the period

– – – 23,581,059 23,581,059

Issue of Ordinary SharesShare capital issued in the period 18,19 3,499,999 346,500,000 – – 349,999,999Formation and issue costs paid 19 – (7,000,000) – – (7,000,000)Cancellation of share premium 19 – (339,500,000) 339,500,000 – –

Dividend paidInterim dividend for the period ended 31 Mar� 2018 (1.5p) 20 – – (5,250,000) – (5,250,000)

Balance at 30 September 2017 3,500,000 – 334,250,000 23,549,659 361,299,659

From From18 November 2016 29 September 2016

to 30 September 2017

to 17 November2016

Note £ £

Cash flows from operating activities Profit/(loss) before income tax 23,581,059 (31,400)Adjustments for:Less: finance income (183,344) –Less: net gain from fair value adjustment on investment property 13 (20,979,237) –Add: interest received 181,993 –

Operating results before working capital �anges 2,600,471 (31,400)

Increase in trade and other receivables (1,556,874) (50,000)Increase in trade and other payables 6,668,524 81,400

Net cash flow generated from operating activities 7,712,121 –

Cash flows from investing activities

Pur�ase of investment properties (285,710,409) –Subsequent expenditure on investment property (13,345,717) –Restricted cash held as retention money 16 (6,115,226) –

Net cash flow used in investing activities (305,171,352) –

Proceeds from issue of Ordinary Share capital 18,19 350,000,000 –

Cost of share issues 19 (7,000,000) –

Dividends paid to equity shareholders 20 (5,250,000) –

Net cash flow generated from financing activities 337,750,000 –

Net increase in cash and cash equivalents 40,290,769 –

Unrestricted cash and cash equivalents at the beginning of the period 16 – –

Unrestricted cash and cash equivalents at the end of the period 16 40,290,769 –

The accompanying notes on pages 36 to 65 form an integral part of these condensed consolidated financial statements. The accompanying notes on pages 36 to 65 form an integral part of these condensed consolidated financial statements.

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37

1. CORPORATE INFORMATIONCivitas Social Housing PLC (the “Company”) was incorporated in England and Wales under the Companies Act 2006 as a public company limited by shares on 29 September 2016 with company number 10402528 under the name Civitas REIT PLC whi� was subsequently �anged to the existing name on 3 October 2016. The address of the registered office is 5 Old Bailey, London, EC4M 7BA, United Kingdom. The Company is registered as an investment company under section 833 of the Companies Act 2006 and is domiciled in the United Kingdom.

The principal activity of the Company is to act as the ultimate parent company of Civitas Social Housing PLC and its subsidiaries (the “Group”), whose principal activity is to provide shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of Social Homes.

2. BASIS OF PREPARATIONThe condensed consolidated financial statements have been prepared in accordance with the disclosure and transparency rules of the Financial Conduct Authority and with IAS 34, Interim Financial Reporting, as adopted by the European Union.

The condensed consolidated financial statements for the period ended 30 September 2017 have been reviewed by the Company’s Auditor, PricewaterhouseCoopers LLP, in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Group. The condensed consolidated financial statements are unaudited and do not constitute statutory accounts for the purposes of the Companies Act 2006.

The Group’s annual report and accounts for the period to 17 November 2016 have been delivered to the Registrar of Companies. The Group’s independent auditor’s report on those accounts was unqualified, did not include references to any matters to whi� the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

The following are new standards, interpretations and amendments, whi� are not yet effective and have not been early adopted in this financial information, that will or may have an effect on the Company’s future financial statements:

• IFRS 9 Financial Instruments. The standard will replace IAS 39 Financial Instruments andcontains two primary measurement categories for financial assets (effective for annual periodsbeginning on or after 1 January 2018)

• IFRS 15 Revenue from contracts. The standard replaces IAS 11 Construction Contracts, IAS 18Revenue. The standard introduces a new revenue recognition model that recognises revenueeither at a point in time or over time (effective for annual periods beginning on or after1 January 2018)

• IFRS 16 Leases: introduction of a single, on-balance sheet accounting model (effective forannual periods beginning on or after 1 January 2019). The disclosure requirements of IFRS 16will be considered in due course

The directors have assessed the impact on the condensed consolidated financial statements of the standards listed above and at present they do not anticipate that the adoption of these standards and interpretations will have a material impact on the condensed consolidated financial statements in the period of initial application, other than on presentation and disclosure.

2.1. Going concernThe Group benefits from a secure income stream from long leases with the Housing Associations, whi� are not overly reliant on any one tenant and present a well-diversified risk. The Group’s cash balances as at 30 September 2017 were £46.4 million, of whi� £40.3 million was readily available and it had no debt borrowing.

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

The directors believe that there are currently no material uncertainties in relation to the Group’s ability to continue for the period of at least 12 months from the date of the Group’s condensed consolidated financial statements. The Board is, therefore, of the opinion that the going concern basis adopted in the preparation of the condensed consolidated financial statements is appropriate.

2.2. Statement of complianceThe Group has opted to prepare financial statements in accordance with EU endorsed International Financial Reporting Standards, IFRICs interpretations and Companies Act 2006.

Notes to the condensed consolidated financial statements (unaudited)

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39

2. BASIS OF PREPARATION (continued)

2.3. Functional and presentation currencyThe functional currency of the Company is the British Pound and the presentation currency of the Group is also the British Pound. All values are rounded to the nearest pound, except where otherwise indicated.

2.4. Reporting periodThese condensed consolidated financial statements have been prepared for the period from 18 November 2016 to 30 September 2017 with the prior period statements prepared from 29 September 2016 to 17 November 2016. The periods covered by these condensed consolidated financial statements vary in length and level of activities therefore it is not entirely comparable.

Following an application to extend the accounting reference date to 31 Mar�, the Company’s next reporting will cover the period from 18 November 2016 to 31 Mar� 2018.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATE AND ASSUMPTIONSIn the application of the Group’s accounting policies, whi� are described in note 4, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

3.1. Investment propertiesThe Group uses the valuation carried out by its independent valuers as the fair value of its property portfolio. The valuation is based upon assumptions including future rental income and the appropriate discount rate. The valuers also make reference to market evidence of transaction prices for similar properties. Further information is provided in note 14.

The Group’s properties have been independently valued by Jones Lang LaSalle Ltd. (“JLL” or the “Valuer”) according to the definitions published by the Royal Institute of Chartered Surveyors’ (“RICS”) Valuation – Professional Standards, January 2014, Global and UK Editions (commonly known as the “Red Book”). JLL is one of the most recognised professional firms within Social Housing valuation and has sufficient current local and national knowledge of both Social Housing generally and specialist supported housing (“SSH”) and has the skills and understanding to undertake the valuations competently.

With respect to the Group’s condensed consolidated financial statements, investment properties are valued at their fair value at ea� balance sheet date in accordance with IFRS 13 whi� recognises a variety of fair value inputs depending upon the nature of the investment. 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 – External inputs are “unobservable”. Value is the director’s best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation te�niques and a determination of whi� assumptions should be applied in valuing su� assets and with particular focus on the specific attributes of the investments themselves.

Given the bespoke nature of ea� of the Group’s investments, the particular requirements of due diligence and financial contribution obtained from the vendors together with the recent emergence of Specialist Supported Housing, all of the Group’s investment properties are included in Level 3.

3.2. Business combinationsThe Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether ea� acquisition represents the acquisition of a business or the acquisition of an asset. Management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property.

Where su� acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

All corporate acquisitions during the period have been treated as asset pur�ases rather than business combinations because no integrated set of activities were acquired.

3.3. Operating lease contracts – the Group as lessorThe Group has acquired investment properties that are subject to commercial property leases with Registered Providers. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.


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41

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of the condensed consolidated financial statements are set out below. The policies have been consistently applied to all periods presented, unless otherwise stated.

4.1. Basis of consolidationThe condensed consolidated financial statements comprise of the financial information of the Group as at the period end date.

Subsidiaries are all entities over whi� 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 are included in the condensed consolidated financial statements from the date that control commences until the date that control ceases.

If an equity interest in a subsidiary is transferred but a controlling interest continues to be held after the transfer then the �ange in ownership interest is accounted for as an equity transaction.

Accounting policies of the subsidiaries are consistent with the policies adopted by the Company.

4.2. Investment propertyInvestment property, whi� is property held to earn rentals and/or for capital appreciation, is initially measured at cost, being the fair value of the consideration given, including expenditure that is directly attributable to the acquisition of the investment property. After initial recognition, investment property is stated at its fair value at the balance sheet date. Gains and losses arising from �anges in the fair value of investment property are included in profit or loss for the period in whi� they arise in the Condensed Consolidated Statement of Comprehensive Income.

Subsequent expenditure is capitalised only when it is probable that future economic benefits are associated with the expenditure. Ongoing repairs and maintenance are expensed as incurred.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is incurred in profit or loss in the period in whi� the property is derecognised.

Significant accounting judgements, estimates and assumptions made for the valuation of investment properties are discussed in note 3.

4.3. LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Company has determined that it retains all the significant risks and rewards of ownership of the properties and accounts for the contracts as operating leases as discussed in note 3.

Properties leased out under operating leases are included in investment property in the Condensed Consolidated Statement of Financial Position. Rental income from operating leases is recognised on a straight line basis over the term of the relevant leases.

4.4. Trade and other receivablesTrade and other receivables are amounts due in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non–current assets.

Trade and other receivables are initially recognised at fair value, and subsequently where necessary re–measured at amortised cost less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence the Group will not be able to collect all amounts due according to the original terms of the receivables.

4.5. Cash and cash equivalentsCash and cash equivalents include cash in hand, cash held by lawyers and liquidity funds with a term of no more than three months that are readily convertible to known amount of cash and whi� are subject to an insignificant risk of �anges in value.

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

4.6. ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.

4.7. Trade and other payablesTrade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost until settled.


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43

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

4.8. TaxationTaxation on the profit or loss for the period not exempt under UK REIT regulations is comprised of current and deferred tax. Tax is recognised in the Condensed Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movement in equity, in whi� case it is recognised as a direct movement in equity. Current tax is expected tax payable on any non REIT taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax that is provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

4.9. Capital management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.

The Group considers proceeds from share issuance and retained earnings as capital.

Until the Group is fully invested and pending re-investment or distribution of cash receipts, the Group will invest in cash, cash equivalents, near cash instruments and money market instrument.

The directors may use gearing to enhance equity returns. The level of borrowing will be on a prudent basis for the asset class and will seek to a�ieve a low cost of funds, whilst maintaining the flexibility in the underlying security requirements and the structure of both the Portfolio and the Group.

The Group may, following a decision of the Board, raise debt from banks and/or the capital markets and the aggregate borrowings of the Group will always be subject to an absolute maximum, calculated at the time of drawdown, of 40% of the Gross Asset Value on a fully invested basis.

4.10. Dividend payable to shareholdersDividends to the Company’s shareholders are recognised as a liability in the Group’s condensed consolidated financial statements in the period in whi� the dividends are approved. In the UK, interim dividends are recognised when paid.

4.11. Rental incomeRental income from investment property is recognised on a straight-line basis over the term of ongoing leases and is shown gross of any UK income tax. Lease incentives are spread evenly over the lease term.

4.12. Finance income and finance costsFinance income is recognised as interest accrues on cash balances held by the Group. Finance costs consist of interest and other costs that the Group incurs in connection with bank and other borrowings. These costs are expensed in the period in whi� they occur.

4.13. ExpensesAll expenses are recognised in the Condensed Consolidated Statement of Comprehensive Income on an accruals basis.

4.14. Investment advisory feesInvestment advisory fees are recognised in the Condensed Consolidated Statement of Comprehensive Income on an accrual basis.

4.15. Share issue costsThe costs of issuing or reacquiring equity instruments (other than in a business combination) are accounted for as a deduction from equity.

4.16. Impairment of financial assetsA financial asset not carried at fair value through profit or loss is assessed at ea� reporting date to determine whether there is evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

5. NET RENTAL INCOME18 November 2016 29 September 2016

to 30 September 2017 to 17 November 2016£ £

Rental income from investment property 7,032,541 –Direct property expenses – –

7,032,541 –

As per the lease agreements between the Group and the Registered Providers, the Registered Providers are responsible for the settlement of all present and future rates, taxes, costs and other impositions payable in respect of the Property. As a result, no direct property expenses were incurred.


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45

6. DIRECTORS’ REMUNERATION18 November 2016 29 September 2016


Directors’ fees 115,017 8,733Employer’s National Insurance Contributions 4,504 –

119,521 8,733

The directors are remunerated for their services at su� rate as the directors shall from time to time determine. The aggregate remuneration and benefits in kind of the directors of the Company (in ea� case, solely in their capacity as su�) in respect of the year ending on 31 Mar� 2018 payable out of the assets of the Company is not expected to exceed £200,000. The Chairman received a director’s fee of £35,000 per annum, and the other directors of the Board received a fee of £30,000 per annum (with the exception of the �airman of the Audit Committee who will receive an additional fee of £2,500 per annum).

During the Board meeting on 26 July 2017, a resolution was passed authorising an increase to the fees of the Chairman to £50,000 per annum, the Chairman of the Audit Committee and the other directors to £36,000 per annum and £32,000 per annum respectively effective from 1 August 2017.

7. PARTICULARS OF EMPLOYEESThe Group had no employees during the period (17 November 2016 period: nil) other than the directors.

8. INVESTMENT ADVISORY FEES18 November 2016 29 September 2016


Advisory fee 2,981,589 –

2,981,589 –

Civitas Housing Advisors Limited (“CHA”) is appointed as the Investment Advisor of the Company.

Under the current Investment Management Agreement, the Advisory Fee shall be an amount calculated in respect of ea� Quarter, in ea� case based upon the Portfolio Net Asset Value (further explained in note 14) most recently announced to the market at the relevant time (as adjusted for issues or repur�ases of Shares in the period between the date of su� announcement and the date of the relevant calculation), on the following basis:

a) on that part of the Portfolio Net Asset Value up to and including £250 million, an amount equalto 1% of su� part of the Portfolio Net Asset Value;

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

c) on that part of the Portfolio Net Asset Value over £500 million and up to and including£1,000 million, an amount equal to 0.8% of su� part of the Portfolio Net Asset Value;

d) on that part of the Portfolio Net Asset Value over £1,000 million, an amount equal to 0.7%of su� part of the Portfolio Net Asset Value.

The appointment of the Investment Advisor shall continue in force unless and until terminated by either party giving to the other not less than 12 months’ written notice, su� notice not to expire earlier than 30 November 2021.


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47

9. GENERAL AND ADMINISTRATIVE EXPENSES18 November 2016 29 September 2016


Legal and professional fees 664,412 – Administration fees 178,327 11,167Consultancy fees 170,175 – Audit fees 175,000 11,500Abortive costs 90,000 –Valuation fees 72,000 – Depositary fees 45,697 – Grants and donations 35,946 _Insurance 24,376 – Marketing 23,975 – Regulatory fees 20,394 – Sundry expenses 10,042 – Directors’ expenses 402 –

1,510,746 22,667

Abortive costs represent legal and professional fees incurred in relation to acquisition of investment properties that were considered but subsequently aborted.

10. FINANCE INCOME18 November 2016 29 September 2016


Interest on liquidity funds 183,344 –

183,344 –

11. FINANCE COSTS18 November 2016 29 September 2016


Bank �arges 2,207 –

2,207 –

12. TAXATIONAs a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it meets certain conditions as set out in the UK REIT regulations. For the current period ended 30 September 2017, the Group did not have any non-qualifying profits and accordingly there is no tax �arge in the period. If there were any non-qualifying profits and gains, these would be subject to corporation tax.

It is assumed that the Group will continue to be a group UK REIT for the foreseeable future, su� that deferred tax has not been recognised on temporary differences relating to the property rental business. No deferred tax asset has been recognised in respect of the unutilised residual current year losses as it is not anticipated that sufficient residual profits will be generated in the future.

18 November 2016 29 September 2016to 30 September 2017 to 17 November 2016

£ £

Current taxCorporation tax �arge/(credit) for the year – – Adjustment in respect of prior years – –

Total current income tax �arge/(credit) in the income statement – –

The tax �arge for the year is less than the standard rate of corporation tax in the UK of 19%. The differences are explained below.

Profit/(loss) before tax 23,581,059 (31,400)Tax at UK corporation tax standard rate of 19% (17 November 2016: 20%) 4,480,401 (6,280) Change in value of exempt investment properties (3,986,055) –Exempt REIT income (779,006) –Amounts not deductible for tax purposes 54,364 –Unutilised residual current year tax losses 230,296 6,280

– –

The standard rate of corporation tax was reduced from 20% to 19% from 1 April 2017. The Government has announced that the corporation tax standard rate is to be reduced to 17% with effective date from 1 April 2020.

REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with Part 12 of CTA 2010.


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49

13. INVESTMENT PROPERTY18 November 2016 29 September 2016


Balance at beginning of period – – Property acquisitions 300,020,763 –Change in fair value during the period 20,979,237 –

Balance at end of period 321,000,000 –

In accordance with “IAS 40: Investment Property”, the investment property has been independently valued at fair value by JLL, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued, however the valuations are the ultimate responsibility of the directors.

JLL valued the Civitas Social Housing PLC property portfolio on the basis of ea� individual property and the theoretical sale of the properties without the benefit of any corporate wrapper at £321,000,000 as at 30 September 2017.

JLL has provided valuations services to the Company with regards to the properties for the past 12 months. In relation to the period ending 30 September 2017, the proportion of the total fees payable by the Company to JLL’s total fee income was less than 5% and is therefore minimal. Additionally, JLL has a rotation policy in place whereby the signatories on the valuations rotate after seven years.

All corporate acquisitions during the period have been treated as asset pur�ases rather than business combinations because they are considered to be acquisitions of properties rather than businesses.

The Company’s investment policy is to invest in a diversified portfolio of Social Homes throughout England and Wales. The directors intend that the Company will meet its investment objective principally by investing in portfolios of Specialist Supported Housing, but may also acquire General Needs Housing, and entering into long-term inflation adjusted full repairing and insuring leases effectively of 25 years with Registered Providers, where all management and maintenance obligations will be serviced by the Registered Providers. The Group will not undertake any development activity or assume any development or construction risk. However, the Group may engage in renovating or customising existing homes, as necessary. The Group will make prudent use of leverage to finance the acquisition of Social Homes and to preserve capital on a real basis.

The Group will focus on delivering capital growth by holding the Portfolio over the long term and therefore it is unlikely that the Group will dispose of any part of its Portfolio. In the unlikely event that a part of the Portfolio is disposed of, the directors intend to reinvest the proceeds from su� disposals in assets in accordance with the Company’s investment policy. The Portfolio has to date been constructed in su� a manner, utilising new SPVs to hold investments and incurring an initial SDRT �arge su� that any subsequent divestment can be undertaken in an efficient manner and with lower costs for the acquirer based around an expectation of SDRT or stamp duty at 0.5%. In return this is expected to enhance the value received by the Group on a sale and so enhance the carrying value of the investments. This is not reflected in the IFRS Portfolio Valuation stated above, whi� assumes that properties are sold individually without the tax benefits of the SPVs in whi� the properties are now held.

On 1 November 2016 Civitas Housing Advisors Limited (“CHA”) was appointed as the exclusive Investment Advisor of the Company by entering into the Investment Advisory Agreement with the Company.

Under this agreement, the Investment Advisor will advise the Company and provide certain management services in respect of the property portfolio.

The Investment Advisor is entitled to a quarterly fee. Please refer to note 8 for further details.

The appointment of the Investment Advisor shall continue in force unless and until terminated by either party giving to the other not less than 12 months’ written notice, su� notice not to expire earlier than 30 November 2021.

Key statisticsThe metrics below are in relation to the total portfolio held as at 30 September 2017.

Portfolio metricsCapital deployed* £285.3 millionProperties 282Tenancies 1,827Registered Providers 10Local Authorities 83Care Providers 50Average Net Initial Yield* 6%

*calculated excluding pur�ase costs


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51

13. INVESTMENT PROPERTY (continued)

Regional exposureIn line with the guidelines set out in the prospectus, once remaining capital is deployed, no exposure to any one region greater than 20% will exist.

Region *Cost (£’000s) % of portfolio

East Midlands 20.2 7%East of England 10.3 4%Greater London 52.4 18%North East 38.2 13%North West 30.9 11%South East 35.5 12%South West 64.5 23%Wales 1.9 1%West Midlands 14.2 5%Yorkshire and the Humber 17.2 6%

Total 285.3 100%

*excluding pur�ase costs

Fair value hierar�yQuoted

prices in Significant Significantactive unobservable unobservable

markets inputs inputsTotal (Level 1) (Level 2) (Level 3)

Date of valuation £ £ £ £

Assets measured at fair value:Investment properties 30 September 2017 321,000,000 – – 321,000,000

Investment properties 17 November 2016 – – – –

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

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

As noted previously all of the Group’s investments are reported as Level 3 in accordance with IFRS 13 where external inputs are “unobservable” and value is the directors’ best estimate, based upon advice from relevant knowledgeable experts.

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

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

The following descriptions and definitions relating to valuation te�niques and key unobservable inputs made in determining fair values are as follows:

Valuation te�niques: market value methodThe estimated amount for whi� a property should ex�ange between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion. Su� marketing to be structured su� that the sale is undertaken in su� a manner and in a specific market with a view to maximising the value a�ieved.

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

1) The rate of inflation as measured by CPI; it should be noted that all leases benefit from eitherCPI or CPI+1 indexation.

2) The discount rate applied to the rental flows.

Key factors in determining the discount rates applied include the regulated Social Housing sector and demand for ea� SSH property owned by the Group, costs of acquisition and refurbishment of ea� property, the anticipated future underlying cash flows for ea� property, ben�marking of ea� underlying rent for ea� property (passing rent), and the fact that all of the properties within the Group’s Portfolio have the benefit of full repairing and insuring leases entered into by a Housing Association.

As at the balance sheet date the lease lengths within the Group’s portfolio ranged from an effective 22 years to 25 years with a weighted average unexpired lease term of 24.3 years. The greater the length then all other metrics being equal the greater the value of the property.

All of the properties within the Group’s portfolio benefit from leases with annual indexation based upon CPI or CPI+1.


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53

13. INVESTMENT PROPERTY (continued)

Sensitivities of measurement of significant unobservable inputsAs set out within significant accounting estimates and judgements above, the Group’s property Portfolio Valuation is open to judgements and is inherently subjective by nature.

As a result the following sensitivity analysis has been prepared:

Average discount rate and rangeThe average discount rate used in the Group’s property Portfolio Valuation is 6.5%.

The range of discount rates used in the Group’s property Portfolio Valuation is from 6% to 7%.

-0.5% in +0.5% in +0.25% in -0.25% inDiscount rate Discount rate CPI (2%) CPI (2%)

£’000 £’000 £’000 £’000

(Decrease)/increase in the IFRS fair value of investment properties as at 30 September 2017 18,674 (19,245) 9,613 (10,303)

(Decrease)/increase in the IFRS fair value of investment properties as at 17 November 2016 n/a n/a n/a n/a

14. PORTFOLIO NET ASSET VALUEThe objective of the Portfolio Net Asset Value “Portfolio NAV” measure is to highlight the fair value of the net assets on an ongoing, long term basis, whi� aligns with the Group’s business strategy as an ongoing REIT with a long–term investment outlook. This Portfolio NAV is made available on a quarterly basis on the Company’s website and announced via RIS.

In order to arrive at Portfolio Net Asset Value, two adjustments are made to the IFRS Net Asset Value (“IFRS NAV”) reported in the condensed consolidated financial statements su� that;

i) The hypothetical sale of properties will take place on the basis of a sale of a corporate vehiclerather than a sale of underlying property assets. This assumption reflects the basis upon whi�the Company’s assets have been assembled within specific SPVs.

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

NAV£

Net Asset Value per the condensed consolidated financial statements 361,299,659

Effect of the adoption of the assumed, hypothetical sale of the properties as a portfolio and on the basis of sale of a corporate vehicle/s 22,300,000

Portfolio Net Asset Value as at 30 September 2017 383,599,659

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

Net issue proceeds 343,000,000Operating profits 2,570,422Capital appreciation 43,279,237Dividend paid (5,250,000)Portfolio Net Asset Value as at 30 September 2017 383,599,659Property assets 343,300,000Net cash1 40,299,659

1 adjusted for net current assets

The Portfolio Net Asset Value as at 30 September 2017 of £383.6 million equates to a Portfolio Net Asset Value of 109.6p per Ordinary Share in the capital of the Company based upon an issued share capital of 350,000,000 Ordinary Shares.

Stated below is the Consolidated Statement of Comprehensive Income for the period from 18 November 2016 to 30 September 2017, reflecting the application of the above two assumptions.

SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – PORTFOLIO NAV BASISFor the period from 18 November 2016 to the 30 September 2017

18 November 2016 29 September 2016to 30 September 2017 to 17 November 2016

£ £

Rental income 7,032,541 – Expenses (4,611,856) (31,400)Gain from fair value adjustment on investment property 43,279,237 – Net finance income 181,137 –

Profit/(loss) being total comprehensive income/(loss) attributable to shareholders for the period 45,881,059 (31,400)

Adjusted Earnings per share – basic 13.1p (68,261p)


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55

15. TRADE AND OTHER RECEIVABLESAs at As at

30 September 2017 17 November 2016£ £

Rent receivable 1,166,417 – Recoverable from tenants 332,156 – Prepayments and other receivables 208,683 – Amounts due from shareholders – 50,001

1,707,256 50,001

The prepayments and other receivables amount above includes prepaid legal and professional fees of £99,030 that have been incurred in connection with the acquisitions yet to be completed.

16. CASH AND CASH EQUIVALENTSAs at As at


Cash held by lawyers 21,817,448 – Liquidity funds 13,173,365 – Restricted cash 6,115,226 – Cash at Bank 5,299,956 –

46,405,995 –

Liquidity funds refer to money placed in money market funds. These are highly liquid funds with accessibility within 24 hours and subject to insignificant risk of �anges in value.

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

Restricted cash represents retention money held by lawyers in relation to deferred payments subject to a�ievement of certain conditions, other retentions and cash segregated to fund repair, maintenance and improvement works to bring the properties up to satisfactory standards for the Group and the tenants. Currently that amount of cash is held in escrow.

Cash and cash equivalents reported in the Condensed Consolidated Statement of Cash Flows totalled £40,290,769 (17 November 2016: £nil) as at the period end, whi� excludes the amounts held as retention money totalling £6,115,226. Total cash held at bank as reported in the Condensed Consolidated Statement of Financial Position is £46,405,995 (17 November 2016: £nil).

17. TRADE AND OTHER PAYABLESAs at As at


Trade and other payables 6,150,651 – Acquisition costs accruals 1,063,665 – Accruals 599,276 31,400Amounts due to shareholders – 50,000

7,813,592 81,400

18. SHARE CAPITALAs at As at


Authorised:350 million Ordinary Shares (2016: 100 shares) of £0.01 ea� 3,500,000 1

Issued and fully paid:350 million Ordinary Shares (2016: 100 shares) of £0.01 ea� 3,500,000 –

The Company a�ieved admission to the premium listing segment of the Official List of the London Sto� Ex�ange on 18 November 2016, raising £350 million. As a result of the IPO, at 18 November 2016, 349,999,900 shares at £0.01 per share have been issued and fully paid.

19. SHARE PREMIUM RESERVEThe share premium relates to amounts subscribed for share capital in excess of nominal value.

As at As at30 September 2017 17 November 2016

£ £

Balance at beginning of period – – Share premium arising on Ordinary Shares issued in relation to equity issuance 346,500,000 – Share issue costs (7,000,000) – Transfer to capital reduction reserve (339,500,000) –

Balance at end of period – –


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57

19. SHARE PREMIUM RESERVE (continued)During the Board meeting on 15 November 2016, a resolution was passed authorising thecancellation of the share premium account and it was conditional upon the three following terms:

• Admission of the Ordinary Shares to listing on the UK Listing Authority’s Official List• Trading on London Sto� Ex�ange’s Main Market for listed securities• Approval of the Court for the reduction of share capital.

The amount standing to the credit of the share premium account of the Company following completion of the Issue (less any issue expenses set off against the share premium account) was, as a result, credited as a distributable reserve to be established in the Company’s books of account whi� shall be capable of being applied in any manner in whi� the Company’s profits available for distribution (as determined in accordance with the CA 2006) are able to be applied.

In order to cancel the share premium account the Company needed to obtain a court order, whi� was received on 1 February 2017. An SH19 form was sent to Companies House with a copy of the court order on 1 February 2017 and the certificate of cancellation was issued by Companies House on 13 February 2017.

20. CAPITAL REDUCTION RESERVEAs at As at


Balance at beginning of period – – Transfer from share premium reserve 339,500,000 – Interim dividend for the period (5,250,000) –

Balance at end of period 334,250,000 –

On 4 May 2017 the Company declared an interim dividend in respect of the period ending 31 Mar� 2018. The dividend paid was of 0.75p per Ordinary Share and was paid as an ordinary UK dividend on 31 May 2017.

On 27 July 2017 the Company declared an interim dividend in respect of the period ending 31 Mar� 2018. The dividend paid was of 0.75p per Ordinary Share and was paid as an ordinary UK dividend on 31 August 2017.

21. RETAINED EARNINGS/(ACCUMULATED LOSSES)As at As at


Balance at beginning of period (31,400) – Profit/(loss) for the period 23,581,059 (31,400)

Balance at end of period 23,549,659 (31,400)

22. OPERATING LEASESThe future minimum lease payments under non-cancellable operating leases receivable by the Group are as follows:

< 1 year 2-5 years > 5 years Total£ £ £ £

30 September 2017 17,397,062 69,635,911 229,483,944 316,516,917

17,397,062 69,635,911 229,483,944 316,516,917

Leases are direct-let agreements with Registered Providers for a term between 15 to 25 years with indexed linked annual rent reviews. All current leases are Full Repairing and Insuring (FRI) leases, the tenants are therefore obliged to repair, maintain and renew the properties ba� to the original conditions.

The following table gives details of percentage of annual rental income per Registered Provider:

Registered Provider % of total annual rent

Westmoreland Supported Housing Limited 31%First Priority Housing Association 14%Inclusion Housing CIC 13%PAS Housing Association 9%Kindstream Housing CIC 8%New Walk Property Management CIC 8%Trinity Housing Association Limited 6%Harbour Light Assisted Living CIC 6%IKE Supported Housing Limited 3%Hilldale Housing Associates Limited 2%

100%

23. CONTROLLING PARTIESAs at 30 September 2017 there is no ultimate controlling party.


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59

24. SEGMENTAL INFORMATIONIFRS 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 (whi� in the Group’s case is delegated to the Investment Advisor, who has formed an Executive Team consisting of seven directors at CHA) in order to allocate resources to the segments and to assess their performance.

The internal financial reports received by the CHA Executive Team contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the condensed consolidated financial statements.

The Group’s property portfolio comprised 282 Social Housing properties as at 30 September 2017 in England and Wales. The directors consider that these properties represent a coherent and diversified portfolio with similar economic �aracteristics and, as a result, these individual properties have been aggregated into a single operating segment. In the view of the directors there is accordingly one reportable segment under the provisions of IFRS 8.

All of the Group’s properties are based in the UK. No geographical grouping is contained in any of the internal financial reports provided to the CHA Executive Team and, therefore, no geographical segmental analysis is required by IFRS 8.

25. RELATED PARTY DISCLOSUREThe directors are remunerated for their services at su� rate as the directors shall from time to time determine. The aggregate remuneration and benefits in kind of the directors of the Company (in ea� case, solely in their capacity as su�) in respect of the year ending on 31 Mar� 2018 payable out of the assets of the Company is not expected to exceed £200,000. The Chairman received a director’s fee of £35,000 per annum, and the other directors of the Board received a fee of £30,000 per annum (with the exception of the �airman of the Audit Committee who will receive an additional fee of £2,500 per annum).

During the Board meeting on 26 July 2017, a resolution was passed authorising an increase to the fees of the Chairman to £50,000 per annum, the Chairman of the Audit Committee and the other directors to £36,000 per annum and £32,000 per annum respectively effective from 1 August 2017.

Following the admission of the Company to the premium segment of the London Sto� Ex�ange on 18 November 2016, the directors pur�ased the following number of £0.01 nominal Ordinary Shares of £1.00 ea�:

Mi�ael Wrobel Chairman 30,000 Ordinary SharesPeter Baxter Director 20,000 Ordinary SharesCaroline Gulliver Audit Committee 25,000 Ordinary SharesAlastair Moss Director 5,000 Ordinary Shares

For the period from 18 November 2017 to 30 September 2017, fees of £115,017 were incurred and paid to the directors.

Civitas Social Housing UK LLP (the “LLP”) – a limited liability partnership incorporated in England and Wales with registered number OC414370 whose registered office is at 5 Old Bailey, London EC4M 7BA.

The Company and CHA (collectively the “Members”) entered into a limited liability partnership agreement with the LLP on 1 November 2016 to govern the mutual rights and duties of the LLP and the Members of the LLP. Under the terms of the Limited Liability Partnership Agreement, the Investment Advisor was entitled to an amount of £980,072 as Priority Profit Share from the date of admission to 31 Mar� 2017, whi� is included in the Investment advisory fees of £2,981,589 mentioned above and in note 8. There was no consideration paid or due from the Members of the LLP. The limited liability partnership agreement and the original Investment Advisory Agreement were terminated on 1 April 2017 and were replaced by the current Investment Management Agreement.

As at 30 September 2017 an amount of £2,145 (17 November 2016: £nil) was due from the LLP.

26. TRANSACTIONS WITH INVESTMENT ADVISOROn 1 November 2016 Civitas Housing Advisors Limited was appointed as the Investment Advisor of the Company.

For the period from 18 November 2017 to 30 September 2017, fees of £2,981,589 were incurred and paid to CHA.

As at 30 September 2017, no amounts (17 November 2016: £50,001) were due from CHA.

Following the admission of the Company to the premium segment of the London Sto� Ex�ange on 18 November 2016, CHA pur�ased 50,000 Ordinary Shares.

27. CONSOLIDATED ENTITIESThe Group consists of a parent company, Civitas Social Housing PLC, incorporated in the UK and a number of subsidiaries held directly by Civitas Social Housing PLC, whi� operate and are incorporated in the UK.

The Group owns 100% equity shares of all subsidiaries listed below and has the power to appoint and remove the majority of the Board of Directors of those subsidiaries. The relevant activities of the below subsidiaries are determined by the Board of Directors based on simple majority votes. Therefore the directors of the Group concluded that the Group has control over all these entities and all these entities have been consolidated within the condensed consolidated financial statements.

The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act.


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27. CONSOLIDATED ENTITIES (continued)Ownership Country of Name of Entity Principal activity Incorporation %

Civitas Social Housing UK LLP Investment Holding Company UK 100%Civitas SPV1 Ltd Property Investment UK 100%FPI CO 73 Ltd Property Investment UK 100%FPI CO 74 Ltd Property Investment UK 100%FPI CO 78 Ltd Property Investment UK 100%FPI CO 84 Ltd Property Investment UK 100%Civitas SPV6 Ltd Property Investment UK 100%FPI CO 88 Ltd Property Investment UK 100%FPI CO 90 Ltd Property Investment UK 100%FPI CO 89 Ltd Property Investment UK 100%FPICO 87 Ltd Property Investment UK 100%FPI CO 94 Ltd Property Investment UK 100%FPI Co 96 Ltd Property Investment UK 100%FPI CO 29 Ltd Property Investment UK 100%FPI CO 82 Ltd Property Investment UK 100%FPI CO 54 Ltd Property Investment UK 100%FPI CO 63 Ltd Property Investment UK 100%FPI CO 85 Ltd Property Investment UK 100%FPI CO 93 Ltd Property Investment UK 100%FPI CO 98 Ltd Property Investment UK 100%FPI CO 101 Ltd Property Investment UK 100%Civitas SPV22 Ltd Property Investment UK 100%Civitas SPV23 Ltd Property Investment UK 100%Civitas SPV25 Ltd Property Investment UK 100%FPI Co 95 Ltd Property Investment UK 100%FPI Co 121 Ltd Property Investment UK 100%FPI Co 105 Ltd Property Investment UK 100%FPI Co 103 Ltd Property Investment UK 100%FPI Co 123 Ltd Property Investment UK 100%FPI Co 122 Ltd Property Investment UK 100%FPI Co 97 Ltd Property Investment UK 100%FPI Co 124 Ltd Property Investment UK 100%FPI Co 86 Ltd Property Investment UK 100%FPI Co 125 Ltd Property Investment UK 100%FPI Co 102 Ltd Property Investment UK 100%FPI Co 126 Ltd Property Investment UK 100%MSL (17) Limited Property Investment UK 100%Civitas SPV24 Ltd Property Investment UK 100%Civitas SPV27 Ltd Property Investment UK 100%Civitas SPV28 Ltd Property Investment UK 100%Civitas SPV29 Ltd Property Investment UK 100%BCP 1 Ltd Property Investment UK 100%SPV BCP 3 Ltd Property Investment UK 100%FPI Co 142 Ltd Property Investment UK 100%FPI Co 145 Ltd Property Investment UK 100%Civitas Social Housing Jersey 1 Limited Investment Holding Company Jersey 100%

The registered address for the subsidiaries across the Group is 5 Old Bailey, London, United Kingdom EC4M 7BA, except for the following:

• Civitas Social Housing Jersey 1 Limited where its registered address is 3rd Floor, LiberationHouse, Castle Street, St. Helier, Jersey JE1 1BL.

• BCP 1 Ltd and SPV BCP 3 Ltd where their registered address is 43 Berkeley Square, London,United Kingdom W1J 5FJ.

• FPI Co 142 Ltd and FPI Co 145 Ltd where their registered address is Barton Hall Hardy Street,Eccles, Man�ester, United Kingdom M30 7NB.

28. FINANCIAL RISK MANAGEMENTThe Group is exposed to market risk, interest rate risk, credit risk and liquidity risk in the current and future periods. The Board of Directors oversees the management of these risks. The Board of Directors reviews and agrees policies for managing ea� of these risks that are summarised below.

28.1. Market riskThe Group’s activities will expose it primarily to the market risks associated with �anges in property values.

Risk relating to investment in propertyInvestment in property is subject to varying degrees of risk. Some factors that affect the value of the investment in property include:

• �anges in the general economic climate;• 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 Group and as a result can influence the financial performance of the Group.

28.2. Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of �anges in market interest rates.

The Group will reduce the interest rate risk on its external borrowing by fixing the rate of interest payable.


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28. FINANCIAL RISK MANAGEMENT (continued)

28.3. Credit riskCredit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group will be exposed to credit risks from both its leasing activities and financing activities, including deposits with banks and financial institutions.

Credit risk related to financial instruments and cash depositsOne of the principal credit risks of the Group will arise with the banks and financial institutions. The Board of Directors believes that the credit risk on short–term deposits and current account cash balances is limited because the counterparties are banks with high credit ratings. In the case of cash deposits held with lawyers, the credit risk is limited because the cash is held by the lawyers within client accounts at banks with high credit ratings.

28.4. Liquidity risk The Group manages its liquidity and funding risks by considering cash flow forecasts and ensuring sufficient cash balances are held within the Group to meet future needs. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of financing through appropriate and adequate credit lines, and the ability of customers to settle obligations within normal terms of credit. The Group ensures, through forecasting of capital requirements, that adequate cash is available.

The following table details the Group’s liquidity analysis in respect of its trade payables:

Carrying < 3 3-12 1-5 > 5amount months months months months

17 November 2016 £ £ £ £ £

Trade and other payables (excluding related parties) 50,000 – 50,000 – –

50,000 – 50,000 – –

Carrying < 3 3-12 1-5 > 5amount months months months months

30 September 2017 £ £ £ £ £

Trade and other payables (excluding related parties) 6,150,651 – 6,150,651 – –

6,150,651 – 6,150,651 – –

29. POST BALANCE SHEET EVENTS

Amendments to corporate structureIncorporation of Civitas Social Housing Finance Company 1 LimitedOn 5 October 2017, Civitas Social Housing Finance Company 1 Limited was incorporated in Companies House under the Companies Act 2006 with registration number 10997707 and whose registered office is at 5 Old Bailey, London, United Kingdom EC4M 7BA.

On 5 October 2017, the ownership of Civitas Social Housing Finance Company 1 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.

Incorporation of Civitas Social Housing Finance Company 2 LimitedOn 5 October 2017, Civitas Social Housing Finance Company 2 Limited was incorporated in Companies House under the Companies Act 2006 with registration number 10997698 and whose registered office is at 5 Old Bailey, London, United Kingdom EC4M 7BA.


Incorporation of Civitas Social Housing Finance Company 3 LimitedOn 5 October 2017, Civitas Social Housing Finance Company 3 Limited was incorporated in Companies House under the Companies Act 2006 with registration number 10997714 and whose registered office is at 5 Old Bailey, London, United Kingdom EC4M 7BA.


Incorporation of Civitas Social Housing Jersey 2 LimitedOn 6 October 2017, Civitas Social Housing Jersey 2 Limited was incorporated in JFSC Companies Registry under the Companies (Jersey) Law 1991 with registration number 124876 and whose registered office is at 3rd Floor, Liberation House, Castle Street, St. Helier, Jersey JE1 1BL.

On 9 October 2017, the ownership of Civitas Social Housing Jersey 2 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.

Incorporation of Civitas Social Housing Jersey 3 LimitedOn 6 October 2017, Civitas Social Housing Jersey 3 Limited was incorporated in JFSC Companies Registry under the Companies (Jersey) Law 1991 with registration number 124877 and whose registered office is at 3rd Floor, Liberation House, Castle Street, St. Helier, Jersey JE1 1BL.

On 9 October 2017, the ownership of Civitas Social Housing Jersey 3 Limited was transferred to Civitas Social Housing PLC through a transfer of shares.


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29. POST BALANCE SHEET EVENTS (continued)Following advice, the Company has completed the process of transferring its property assetsindirectly through special purpose vehicles to Civitas Social Housing Jersey 1 Limited, Civitas SocialHousing Jersey 2 Limited and Civitas Social Housing Jersey 3 Limited on 13 October 2017.

Debt FinancingOn 3 November 2017, the Company agreed a £52.5 million term loan facility with Scottish Widows Limited, with a term of 10 years, an interest rate of 2.99% and gearing of 30% (as calculated on the loan to market value of the property portfolio). This facility is secured against certain of the Group’s properties and the SPVs in whi� those properties are held.

On 16 November 2017, the Company further agreed a £40 million revolving credit facility with Lloyds Bank plc, available for a term of three years, at a floating rate above 3-month LIBOR. This facility is secured against certain of the Group’s properties and the SPVs in whi� those properties are held.

AcquisitionsOn 4 October 2017, a property in the Greater London area was acquired for £3.9 million.

On 6 October 2017, a portfolio of properties in the West Midlands was acquired for £3.2 million.

On 11 October 2017, a portfolio of properties in Dorset and Cornwall was acquired for £3.9 million.



DividendOn 31 October 2017, the Company declared a third quarterly dividend in respect of the three months to 30 September 2017 of 0.75p per Ordinary Share totalling £2,625,000, payable on or around 30 November 2017 to shareholders on the register on 10 November 2017.

C Share PlacingOn 14 November 2017 the Company had raised a total of £302 million by way of a fully pre-emptive Open Offer, Placing, Offer for Subscription and Intermediaries Offer of C Shares, admitted to the Standard Listing segment of the Official List of the UK Listing Authority and to trading on the London Sto� Ex�ange’s main market for listed securities.

The costs related to the C Share issuance were capped at 2% of the gross proceeds and totalled £6.04 million.

30. IFRS EARNINGS PER SHAREEarnings per share (EPS) amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive instruments outstanding, only basic earnings per share is quoted below.

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

Net profit/(loss) Weighted averageattributable to number of Earnings

For the period from ordinary shareholders Ordinary Shares per share18 November 2016 to 30 September 2017 £ Number Pence

Basic IFRS earnings per share 23,581,059 350,000,000 6.7

For the period from inception to 17 November 2016

Basic IFRS earnings per share (31,400) 46 (68,261p)

31. IFRS NET ASSET VALUE PER SHAREBasic NAV per share is calculated by dividing net assets in the Condensed Consolidated Statement of Financial Position attributable to ordinary equity holders of the parent by the number of Ordinary Shares outstanding at the end of the year. As there are no dilutive instruments outstanding, only basic NAV per share is quoted below.

Net asset values have been calculated as follows:As at As at


Net assets at end of period 361,299,659 (31,399)

Shares in issue at end of period 350,000,000 100

Basic IFRS NAV per share 103.23p (31,399p)


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ALMO means an arm’s length management organisation, a not-for- profit company that provides housing services on behalf of a Local Authority.

Average Net Yield means the average yield on an investment or a portfolio that results from adding all interest, dividends or other income generated from the investment, divided by the average of the investments for the year.

CHA means Civitas Housing Advisors Limited, the Investment Advisor to the Company.

Care Provider means a provider of care services to the occupants of Specialist Supported Housing, registered with the Care Quality Commission.

Company means Civitas Social Housing PLC, a company incorporated in England and Wales with company number 10402528.

DCLG The Department of Communities and Local Government.

Group means the Company and its subsidiaries.

HCA means Homes and Communities Agency, the executive non-departmental public body, sponsored by the Department for Communities and Local Government, whi� is the regulator for Social Homes providers in England and Wales.

Housing Association means an independent society, body of trustees or company established for the purpose of providing low-cost social housing for people in housing need generally on a non-profit-making basis. Any trading surplus is typically used to maintain existing homes and to help finance new ones. Housing Associations are regulated by the Homes and Communities Agency.

IFRS Net Asset Value or IFRS NAV means the net asset value of the Group on the relevant date, prepared in accordance with IFRS accounting principles.

IFRS Valuation means an independent valuation of the Portfolio by Jones Lang LaSalle or su� other property advisor as the Directors may select from time to time, prepared in accordance with RICS “Red Book” guidelines and based upon a valuation of ea� underlying investment property rather than the value ascribed to the portfolio and on the assumption of a theoretical sale of ea� property rather than the corporate entities in whi� all of the Company’s investment properties are held.

Investment Advisor means Civitas Housing Advisors Limited, a company incorporated in England and Wales with company number 10278444, both in its capacity as investment advisor to the Company and as managing member of the LLP, as the context may require.

Glossary

Local Authority means the administrative bodies for the local government in England comprising of 326 authorities (including 32 London boroughs).

Portfolio Net Asset Value or Portfolio NAV means the net asset value of the Company, as at the relevant date, calculated on the basis of an independent Portfolio Valuation. See note 14 for a reconciliation to IFRS NAV.

Portfolio Valuation means an independent valuation of the Portfolio by Jones Lang LaSalle or su� other property advisor as the Directors may select from time to time, based upon the Portfolio being held, directly or indirectly, within a corporate vehicle or equivalent entity whi� is a wholly owned subsidiary of the Company and otherwise prepared in accordance with RICS “Red Book” guidelines.

REIT means a qualifying real estate investment trust in accordance with the UK REIT Regime introduced by the UK Finance Act 2006 and subsequently re-written into Part 12 of the Corporation Tax Act 2010.

Registered Providers means Housing Associations, Local Authorities and ALMOs.

RICS means Royal Institution of Chartered Surveyors.

Social Homes or Social Housing means homes whi� are Social Rented, Affordable Rented, other homes managed by Registered Providers or Low Cost Home Ownership homes.

Specialist Supported Housing or SSH means Social Housing whi� incorporates some form of care or other ancillary service on the premises.

SPV means special purpose vehicle, a corporate vehicle in whi� the Group’s properties are held.

WAULT means weighted average unexpired lease term.

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Non-executive directorsMi�ael Aleksander Wrobel, Chairman (appointed 24 October 2016)

Alastair Mi�ael Moss (appointed 24 October 2016)

Caroline Gulliver, Chair of the Audit and Management Engagement Committee (appointed 24 October 2016)

Peter Baxter (appointed 24 October 2016)

Registered Office5 Old Bailey London EC4M 7BA United Kingdom

Financial AdvisorCenkos Securities PLC6.7.8 Tokenhouse Yard London EC2R 7AS United Kingdom

Alternative Investment Fund Manager(from 24 November 2017)G10 Capital Limited136 Bu�ingham Palace RoadLondon SW1W 9SAUnited Kingdom

Investment AdvisorCivitas Housing Advisors Limited29 Farm StreetLondon W1J 5RLUnited Kingdom

Administrator and Company SecretaryLangham Hall UK Services LLP5 Old Bailey London EC4M 7BA United Kingdom

DepositaryLangham Hall UK Depositary LLP5 Old Bailey London EC4M 7BA United Kingdom

RegistrarLink Market Services LimitedThe Registry34 Be�enham RoadBe�enham Kent BR3 4TUUnited Kingdom

Independent Auditors and Reporting AccountantsPricewaterhouseCoopers LLP7 More London RiversideLondon SE1 2RTUnited Kingdom

Legal and Tax advisorNorton Rose Fulbright LLP3 More London RiversideLondon SE1 2AQUnited Kingdom

Public relations advisorPagefield Communications LtdThe Courtyard Studio18 Marshall StreetLondon W1F 7BEUnited Kingdom

Tax advisorBDO LLP55 Baker StreetLondon W1U 7EUUnited Kingdom

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