Civitas Social Housing – Regulatory action may be net positive

Civitas Social Housing (CSH) has met its dividend targets, grown its NAV and invested over £674m into 557 properties (housing almost 3,750 tenants) since its launch in November 2016. It has now merged its C share and ordinary share portfolios and is focused on optimising its capital structure (targeting an LTV of 35%), which should, all things being equal, further strengthen its revenue account.
Over the past few months, a number of the Registered Providers that are counterparties to CSH’s leases have been issued with grading under review notices by the Regulator for Social Housing. This note takes a look at this issue and offers some thoughts as to why the regulator’s actions may have minimal direct impact on CSH but, in the medium-term, could serve to enhance the quality of its earnings.

Income and capital growth from social housing

CSH aims to provide its shareholders with an attractive level of income, together with the potential for capital growth from investing in a portfolio of social homes. The company expects that these will benefit from inflation adjusted long-term leases or occupancy agreements with Registered Providers and that they will deliver, on a fully-invested and geared basis, a targeted dividend yield of 5% per annum on the issue price. CSH intends to increase the dividend broadly in line with inflation.



wdt_ID Year ended Price total return (%) IFRS NAV total return (%) IFRS adj. earnings per share (pence) EPRA earnings per share (pence) Dividend per share (pence)
2 31/03/18 (0.6) 10.7 2.60 1.44 4.25
3 31/03/19 5.0