Residential Secure Income reports robust first half

The London-listed firm said gross rental income for the six months ended 31 March increased to £14.9m from £13.6m a year earlier, while net rental income rose to £9.4m from £8.8m.

Adjusted EPRA earnings grew 8.5% to £4.5m, translating to adjusted EPRA earnings per share of 2.4p.

Despite a reduction in dividends to 2.06p per share, the dividend cover improved significantly to 117% from 86% in the first half of the 2023 financial year.

The changes in the fair value of investment properties resulted in a negative adjustment of £7.3m.

As of 31 March, ReSI reported IFRS net assets of £154.4m, down from £168.7m at the end of September, with an IFRS net asset value per share of 83.4p.

The company's portfolio valuation stood at £317m, down from £345.1m in September, influenced by increased gilt yields.

EPRA net tangible assets per share were 77.2p, with a total return of -3.2%, an improvement from -18.1% in the prior period.

The loan-to-value ratio rose to 53%, expected to decrease to 50% on completion of the local authority portfolio sale.

Operationally, ReSI's portfolio, consisting of 2,996 homes valued at £317m, remained robust with full occupancy in the shared ownership segment.

The retirement living portfolio achieved a record occupancy rate of 96%, while progress was also made in its asset management initiatives, including improved re-letting times and a focus on rent growth.

ReSI said it was in the process of selling its local authority portfolio, with one asset sale completed for £5.6m, exceeding its September valuation.

The remainder of the portfolio was under offer, with completion expected in the second half of 2024.

It said the disposal was expected to reduce annualised dividend cover by around 6%, but would improve the overall quality of the portfolio through the repayment of a floating rate revolving credit facility.

Looking ahead, ReSI said it expected continued rental inflation-linked growth, driven by wage and pension increases.

The company said it would focus on operational improvements within its retirement portfolio and rationalising its portfolio footprint.

It said completion of the local authority portfolio sale and potential further disposals aimed at maximising shareholder value were expected to enhance ReSI's financial position.

However, investment market volumes were anticipated to remain low until future interest rate cuts occur, which could delay additional disposal opportunities.

The acute shortage of affordable homes in the UK, requiring an estimated £34bn of annual investment, underscored the ongoing demand in ReSI's market segment, the board noted.

“ReSI continues to deliver strong operational performance, with high levels of rent collection, occupancy, rent growth and stabilisation of operating costs,” said chairman Robert Whiteman.

“Coupled with Gresham House agreeing to reduce fund management fees, this has led to adjusted earnings growing by 9%, to comfortably cover our dividend.

“The sale of our local authority portfolio is continuing to progress, with one asset sale completing at the start of April and the remainder advancing through due diligence.”

Whiteman said sales proceeds would be used to repay floating rate debt.

“We continue to review opportunities to make further disposals that add value for shareholders, from which we would prioritise the return of capital.

“However, with investment market volumes expected to remain low until any future interest rate cuts, we expect opportunities may take time to emerge.

“In the meantime, we will maintain our focus on driving operational performance in the retirement portfolio, which should drive shareholder value.”

At 1005 BST, shares in Residential Secure Income REIT were up 2% at 46p.

Reporting by Josh White for Sharecast.com.