TIDMSGM
RNS Number : 1576J
Sigma Capital Group PLC
28 March 2018
28 March 2018
AIM: SGM
SIGMA CAPITAL GROUP PLC
("Sigma" or the "Company")
The private rented sector ("PRS") and urban regeneration
specialist
The PRS REIT plc - Maiden Interim Results
Sigma, the PRS, residential development and urban regeneration
specialist, notes that The PRS REIT plc ("PRS REIT") has today
issued its maiden interim results, which cover the period to 31
December 2017.
Sigma's wholly owned subsidiary, Sigma PRS Management Limited,
is the Invetsment Advisor to the PRS REIT, sourcing investments,
managing assets and advising it on a day-to-day basis.
Graham Barnet, CEO of Sigma, commented:
"The PRS REIT continues to make very good progress and remains
on track to deliver its targeted total dividend of 5.0p per share
for the period to 30 June 2018.
"Sigma's sophisticated delivery platform, supported by key house
building partners as well as Homes England, remains a key
differentiator, and we are pleased to be supporting the REIT in its
objective to create a substantial portfolio of high-quality, new
build, family rental homes across the UK."
A copy of the PRS REIT's announcement can be found below.
Enquiries:
Sigma Capital Group Graham Barnet, Chief T: 020 3178 6378 (today)
plc Executive
Malcolm Briselden, T: 0333 999 9926
Finance Director
KTZ Communications Katie Tzouliadis, T: 020 3178 6378
Irene Bermont-Penn,
Emma Pearson
N+1 Singer James Maxwell, Liz T: 020 7496 3000
(NOMAD and Broker) Yong, Michael Taylor
NOTES TO EDITORS
About Sigma Capital Group plc
(www.sigmacapital.co.uk)
Sigma Capital Group plc is a private rented sector, residential
development, and urban regeneration specialist, with offices in
Edinburgh, Manchester and London. Sigma's principal focus is on the
delivery of large scale housing schemes for the private rented
sector. It has a well-established track record in assisting with
property-related regeneration projects in the public sector, acting
as a bridge between the public and private sectors. Its subsidiary,
Sigma PRS Management Limited, is Investment Adviser to The PRS REIT
plc.
About Sigma PRS Management Limited
Sigma PRS Management Limited is a wholly owned subsidiary of
AIM-quoted Sigma Capital Group plc and is the Company's Investment
Adviser. It sources investments and manages the assets of The PRS
REIT plc and advises the Alternative Investment Fund Manager
("AIFM") and the PRS REIT on a day-to-day basis in accordance with
the PRS REIT's Investment Policy. The Investment Adviser is an
appointed representative (reference number: 776293) of the
AIFM.
About The PRS REIT plc
(www.theprsreit.com)
The PRS REIT is a closed-ended real estate investment trust
established to invest in the Private Rented Sector and to provide
shareholders with an attractive level of income together with the
potential for capital and income growth. In its Initial Public
Offering, on 31 May 2017, the Company raised GBP250 million gross
equity capital via a Placing, Offer for Subscription and
Intermediaries Offer and today has raised a further GBP250m through
an additional Placing. Both fundraisings were supported by the UK
Government's Homes England (formerly Homes and Communities Agency),
with direct investments totaling c. GBP30 million.
28 March 2018
PRSR.L
The PRS REIT plc
("the Company" or "the PRS REIT")
Maiden Interim Results
Trading period covers the 7 months
from 31 May 2017 to 31 December 2017
Financial Highlights
-- Successful admission to the Specialist Fund
Segment of the Main Market of the London
Stock Exchange on 31 May 2017, with GBP250m
(gross) raised via a Placing, Offer for Subscription,
and Intermediaries Offer
- The Company is the UK's first quoted REIT
exclusively focused on the Private Rented
Sector ("PRS")
-- IFRS Net Asset Value of GBP245.5m at period
end, equating to 98.2p per share
-- EPRA Net Asset Value of 98.2p at period end
-- EPRA NNNAV of 98.2p at period end
-- Total earnings per share over the period
amounted to 0.22p
Post period:
-- Further GBP250m (gross) secured in February
2018 under the Company's Placing Programme
-- Credit approved terms secured in January 2018
for GBP200m debt, from Scottish Widows Investment
Partnership and Lloyds Banking Group
-- Maiden dividend of 1.5 p per share paid in
March 2018
Property Highlights
-- IPO proceeds (net) fully committed by early
January 2018, well ahead of schedule:
- will deliver c.1,720 new rental homes in
the North West, Midlands and South Yorkshire
- total Estimated Rental Value ("ERV") per
annum of GBP15.7m, once fully let
- annualised rent roll at 31 December 2017
totalled GBP2.1m
-- Investment in new homes in additional regions
across the UK is currently underway
-- Construction and supply chain resource has
been significantly enhanced
-- A further c. 3,800 new homes, representing
c. GBP540m of gross development costs ("GDC")
is under contract in Construction Framework
Agreements with housebuilding partners
Steve Smith, Non-Executive Chairman, said:
"The PRS REIT has made excellent progress since its IPO last
May, and our fundraising in February of GBP250m, together with
expected gearing, will substantially increase our financial
resource, to some GBP900m. This translates into the development of
over 6,000 new rental homes.
"The supply of rental properties in the UK, especially for
families, remains critically short of current and projected need,
and our model of newly-built high quality, professionally managed
homes, will help to bridge some of that shortfall.
"We have an unrivalled approach to delivery, using a
partner-based platform, developed by Sigma Capital Group plc. With
this and the ongoing support of all involved, including Homes
England and local authorities, we remain confident that the PRS
REIT will continue to make progress towards its objectives."
For further information, please contact:
The PRS REIT plc Tel: +44 (0)20 3178
Steve Smith, Non-executive Chairman 6378
Sigma PRS Management Limited Tel: +44 (0)333 999
Graham Barnet 9926
Graeme Hogg
N+1 Singer Tel: +44 (0)20 7496
James Maxwell, Liz Yong, James 3000
Hopton (Corporate Finance)
Michael Taylor (Corporate Broking)
Stifel Tel: +44 (0)20 7710
Mark Young, Neil Winward, Tunga 7600
Chigovanyika
G10 Capital Limited (AIFM) Tel: +44 (0)20 3696
Gerhard Grueter, Anthony Wood, 1302
Gaia Udage
KTZ Communications Tel: +44 (0)20 3178
Katie Tzouliadis, Irene Bermont-Penn, 6378
Emma Pearson
NOTES TO EDITORS
About The PRS REIT plc
(www.theprsreit.com)
The PRS REIT is a closed-ended real estate investment trust
established to invest in the Private Rented Sector and to provide
shareholders with an attractive level of income together with the
potential for capital and income growth. In its Initial Public
Offering, on 31 May 2017, the Company raised GBP250 million gross
equity capital and, on 20 February 2018, it raised a further
GBP250m on through an additional Placing. Both fundraisings were
supported by the UK Government's Homes England (formerly Homes and
Communities Agency), with direct investments totaling c. GBP30
million.
Chairman's Statement
This interim report is the Company's first since its ordinary
shares were admitted to trading on the Specialist Fund Segment of
the Main Market of the London Stock Exchange on 31 May 2017. At
admission, the Company also successfully raised gross proceeds of
GBP250 million, in an equity fundraising that was very well
supported both by institutional and qualifying private investors.
The PRS REIT's admission was notable, being the first quoted REIT
to address PRS and the first to focus on family rental homes, a
particularly undersupplied area.
The financial results presented in this report cover the seven
month period from 31 May 2017, which was when the PRS REIT
commenced its business operations, to 31 December 2017. The Company
was incorporated on 24 February 2017.
The Company has made very good progress since its IPO,
committing the net proceeds of its fundraising well ahead of
schedule. This represents 1,720 new rental homes, with a total
estimated rental value per annum of GBP15.7 million, once fully
let. At the end of January 2018, credit secured terms were agreed
for debt facilities totalling GBP200 million, which will provide
additional capital for deployment when concluded, and, in February
2018, the Company raised a further GBP250 million (gross) of new
funds via a second placing under its Placing Programme.
Supported by its Investment Adviser, Sigma PRS Management Ltd
("Sigma PRS"), a wholly-owned subsidiary of Sigma Capital Group plc
("Sigma"), a pipeline of additional investment opportunities is now
available to the Company. These opportunities represent
approximately, 3,800 new homes, and have a combined total gross
development cost of c. GBP540 million. They are currently in
detailed appraisal or in the process of acquisition. This pipeline
is under contract in Construction Framework Agreements with
housebuilding partners.
As set out in its IPO Prospectus, the PRS REIT's ambition is to
create portfolios of high quality, newly-constructed PRS homes
across the UK regions, predominantly catering for middle-income
families. Its investment objectives are to provide investors with
an attractive level of income together with the prospect of income
and capital growth.
Financial Results
Net assets as at 31 December 2017 totalled GBP245.5 million,
representing a NAV per share of 98.2p on an International Financial
Reporting Standards ("IFRS") basis as adopted by the European
Union. The NAV value per share on an EPRA basis is also the same at
98.2p.
The PRS REIT's revenue in its inaugural seven months to 31
December 2017 was GBP0.6 million, all of which was derived from
rental income. The net rental income for this period was GBP0.5
million.
The Company's profit from operations was GBP0.3 million after
total expenses of GBP1.8 million, and gains from fair value
adjustments on investment property of GBP1.6 million.
Profit before tax for the period was GBP0.5 million and basic
earnings per share was 0.22p.
Distributable Reserves
As stated in the Company's IPO Prospectus, in order to increase
the distributable reserves available to facilitate the payment of
future dividends, the Company resolved that, conditional upon First
Admission and approval of the Court, the amount standing to the
credit of the share premium account be cancelled and transferred to
a special distributable reserve.
Court approval was obtained on 1 November 2017 and a certificate
of cancellation was issued by Companies House on 2 November
2017.
Financing
In accordance with its stated strategy and after a review of the
market undertaken by J C Rathbone Associates, the Company sought
offers of debt funding from clearing and institutional lenders in
order to enhance equity returns. At the end of January 2018, credit
agreed terms for a blended debt facility totalling GBP200 million
were agreed and are currently in the process of completion. These
debt facilities will be provided by Scottish Widows Investment
Partnership ("SWIP") and Lloyds Banking Group ("LBG").
Dividends
On 31 January 2018, the Board was pleased to declare a maiden
dividend of 1.5p per ordinary share for the period to 31 December
2017. The dividend was paid as an ordinary UK dividend on 16 March
2018 to shareholders on the register as at 16 February 2018.
As previously reported, the Company is targeting a total
dividend of 5.0p per ordinary share for the period ending 30 June
2018, and 5.0p per ordinary share for the year from 1 July 2018 to
30 June 2019. The stabilised dividend yield target is 6% or more
per annum and net total shareholder returns of 10% or more per
annum are being targeted post stabilisation, based on the IPO issue
price of 100p per share.
Placing Programme
On the 31 January 2018, the Company announced a proposed placing
of up to 250 million new ordinary shares at 102.5p per share to
qualified investors, having fully committed the net proceeds raised
in the Company's IPO. This placing was completed on 20 February
2018, with gross proceeds of GBP250 million raised, both from
existing and new shareholders. Homes England also participated in
this second placing, taking its direct investment into the Company
to c.GBP30 million.
Outlook
The supply of residential housing in the UK remains critically
short of requirements. Whilst supply has improved in recent years,
upward pressure on housing numbers is still acute, reflecting both
population growth and the changing nature of household composition.
Over the next 10 years, the UK population is predicted to increase
by 5.4% and the number of households is expected to rise by 8.1%.
Housing is high on the government policy agendas and there is
agreement across the political spectrum that the nation needs to
build over 300,000 new homes per annum not only to meet current
need but also to address historic undersupply.
Commentators estimate that the private rental sector will make
up some 25% of all households by 2020, from approximately 19%
today. Currently, there is a pipeline of an estimated GBP17 billion
of rented stock with a forecast requirement of GBP300 billion over
the next five years, leaving a very large gap in delivery. There is
now a growing understanding of how the emerging build-to-rent
sector and institutional money can play a significant role in
helping to accelerate housing delivery and further professionalise
the rented sector.
Against this backdrop of critical undersupply and high demand,
there is a significant opportunity for the PRS REIT to become a
significant contributor to new housing delivery and a major
participant in the still nascent UK build-to-rent sector. Our focus
is on developing new rental houses for middle-income families,
which account for a significant proportion of the occupier market
and whose needs are unlikely to be met by the current build-to-rent
pipeline, 90% of which comprises flats.
With Sigma's sophisticated delivery platform, which is supported
by key house building partners as well as a productive relationship
with Homes England, we remain confident that the Company is well
positioned to deliver on its investment objectives. Once gearing is
in place (based on 40 per cent. loan-to-value), our total capacity
will reach up to GBP900 million of gross development costs, which
we estimate will deliver over 6,000 high quality new, family homes
for rent.
We take this opportunity to thank all our shareholders and other
stakeholders, and look forward to providing a further update on the
Company's progress in our next Quarterly Update, which we expect to
publish in early April.
Steve Smith
Chairman
27 March 2018
Key Performance Indicators ("KPI's")
KPI Explanation Performance
------- -------------------------------- -------------------------
IFRS Unadjusted net asset value 98.2 p per share
NAV
------- -------------------------------- -------------------------
EPRA Net asset value adjusted 98.2 p per share
NAV to include properties and
other investment interests
at fair value and to exclude
certain items not expected
to crystallise in a long
terms property business
model
------- -------------------------------- -------------------------
EPRA EPRA NAV adjusted to include 98.2 p per share
NNNAV the fair value of financial
instruments, debt and deferred
taxes
------- -------------------------------- -------------------------
EPRA Administrative & operating For the period
Cost costs (including & excluding from 31 May
Ratio costs of direct vacancy) to 31 December
divided by gross rental 2017 the administrative
income and operating
costs were higher
than the rental
income.
------- -------------------------------- -------------------------
EPS Unadjusted earnings per 0.22 p per share
share
------- -------------------------------- -------------------------
Investment adviser's report
Sigma PRS Management Ltd, the Investment Adviser to the Company,
is pleased to report on the PRS REIT's progress in the period from
IPO, on 31 May 2017, to 31 December 2017.
The first seven months since the IPO has seen strong and
substantial progress, with the net proceeds of the initial GBP250
million of capital raised committed well ahead of target, and due
to deliver c.1,720 new PRS homes. With the second placing, which
raised an additional GBP250 million in February 2018, and the
completion of GBP200 million of debt facilities underway, the
Company is well-placed for further strong progress.
Investment Objective
The Company is addressing the significant undersupply of high
quality, professionally managed rental stock in the UK,
particularly for families.
The Company is seeking to provide investors with an attractive
level of income, together with the prospect of income and capital
growth, through investment in portfolios of newly constructed
private rented sector sites of multiple individual units,
comprising mainly family homes. Units are let on Assured Shorthold
Tenancies (as defined in the Housing Act 1988) to qualifying
tenants.
Investment Strategy and Delivery Progress
The Company is investing in high quality, newly-built homes
across the UK (and outside London), predominantly in England, and
is aiming to create a geographically diversified portfolio. The
location of the new homes is important, with sites chosen for their
proximity to the largest employment centres in the country and
local amenities, and where they closely follow the main road and
rail infrastructure. Sites near well-performing primary schools are
especially favoured. The Company is predominantly focused on family
houses but will also invest in some low rise flats in appropriate
locations.
The PRS REIT is building its portfolios in two ways:
-- the PRS REIT will acquire undeveloped sites
sourced by Sigma PRS, with development subsequently
managed by Sigma PRS (or another member of Sigma
as development manager), with the intention
of letting the new completed PRS units.
The PRS REIT aims to fund a minimum of two-thirds
of the new properties this way. All pre-development
risks are identified and underwritten by Sigma
and its partners, and sites will have an appropriate
certificate of title, detailed planning consent
and a fixed price design and build contract
with one of Sigma's housebuilding partners.
During the construction phase, the properties
are pre-let and subsequently occupied as they
complete.
-- the PRS REIT will acquire completed PRS sites
from Sigma (and/or one of its subsidiaries),
or from third parties, as stabilised developments
that accord with the PRS REIT's investment objectives
and satisfy both return and occupancy hurdles.
The Company intends to fund up to a maximum
of one third of new properties in this manner.
Sigma's well-established PRS delivery platform plays a central
role in sourcing and developing investment opportunities. The
platform comprises well-established relationships with construction
partners, which include Countryside Properties, Keepmoat
Regeneration and Engie, and local authorities. These relationships
enable Sigma PRS to identify, source and deliver land and
properties on behalf of the Company in the target geographies.
Homes England, which is an executive non-departmental public body
sponsored by the Ministry of Housing, Communities & Local
Government, continues to work closely with Sigma in the common goal
of accelerating new housing delivery in England.
The c.1,720 new rental homes that were secured in the period are
expected to generate an Estimated Rental Value ("ERV") of GBP15.7
million per annum. As at 28 February 2018, 247 units were built and
let, equating to an annualised rental income of GBP2.2 million.
These assets comprise the majority of 'The First Acquisition
Portfolio' and the 'Initial Development Portfolio' as identified in
the Company's prospectus of 4 May 2017.
Over the period and into 2018, Sigma has continued to expand its
geographic reach, construction and supply chain resource as well as
its access to suitable development land to support the PRS REIT's
investment objectives.
In particular, Sigma is in discussions with its key construction
partner, Countryside, to accelerate the volume of completed new
homes for rent over the course of 2018. These homes will be
predominantly located across the North West, West Midlands and
South.
In addition, the Company has entered into a new framework
agreement with Engie, covering Sheffield and South Yorkshire, which
will help to expand the PRS REIT's presence in these regions.
Summary
We are delighted with the progress made so far by the Company,
and it remains on track to deliver its targeted total dividend of
5.0p per ordinary share for the period ending 30 June 2018. We
continue to target a stabilised dividend yield of 6%. or more per
annum, with a net total shareholder return target of 10% post
stabilisation, based on the IPO issue price of 100p per share.
Sigma PRS Management Ltd
27 March 2018
CONDENSED CONSOLIDATED Statement of COMPREHENSIVE INCOME
For the period from 31 May 2017 to 31 December 2017
Notes 31 May
to
31 December
2017
(unaudited)
GBP'000
Rental Income 4 583
Cost of sales (99)
--------------
Net rental income 484
Expenses
Directors' remuneration 5 (9)
Investment advisory fee 7 (1,382)
Administrative expenses 8 (364)
Total expenses (1,755)
Gain from fair value adjustment
on investment property 11 1,618
--------------
Operating profit 347
Finance income net of finance costs 9 192
Profit before taxation 539
Taxation 10 -
--------------
Profit after tax attributable to
the equity holders of the Company 539
==============
Earnings per share attributable
to the equity holders of the Company:
Basic IFRS earnings per share 19 0.22p
All of the Group activities are classed as continuing and there
were no comprehensive gains or losses in the period other than
those included in the statement of comprehensive income.
CONDENSED CONSOLIDATED Statement of financial position
As at 31 December 2017
Notes At
31 December
2017 (unaudited)
GBP'000
ASSETS
Non-current assets
Investment property 11 56,957
56,957
------------------
Current assets
Other receivables 12 451
Cash and cash equivalents 13 194,255
194,706
Total assets 251,663
Current liabilities
Trade and other payables 14 6,124
Total liabilities 6,124
Net assets 245,539
==================
EQUITY
Called up share capital 15 2,500
Share premium account 16 -
Capital reduction reserve 17 242,500
Redeemable preference 18 -
shares
Retained earnings 539
------------------
Total equity attributable
to the equity holders
of the Company 245,539
==================
IFRS net asset value per
share 20 98.2p
As at 31 December 2017, there is no difference between IFRS NAV
per share and the EPRA NAV per share.
condensed Consolidated statement of changes in equity
For the period from 31 May 2017 to 31 December 2017
Share Capital Redeemable
Share premium Reduction Preference Retained Total
capital account Reserve Shares earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Share capital issued
in the period 2,500 247,500 - 50 - 250,050
Share capital issue
costs paid - (5,000) - - (5,000)
Cancellation of
share premium (242,500) 242,500 - - -
Share capital redeemed
in the period - - - (50) - (50)
Profit for the
period - - - - 539 539
At 31 December
2017 2,500 - 242,500 - 539 245,539
--------- ---------- ----------- ------------ ---------- --------
condensed CONSOLIDATED STATEMENT OF Cash Flows
For the period from 31 May 2017 to 31 December 2017
31 May
to
31 December
2017
(unaudited)
Notes GBP'000
Cash flows from operating activities
Profits before tax 539
Adjustments for:
less Finance Income (192)
less fair value adjustment on
investment property (1,618)
add interest received 54
-------------
Cash generated from operations (1,217)
Increase in trade and other receivables (313)
Increase in trade and other payables 390
-------------
Net cash outflow from operating
activities (1,140)
Net cash used in operating activities (1,140)
-------------
Cash flows from investing activities
Acquisition of subsidiaries (34,754)
Purchase of investment property
at fair value through profit
and loss (14,851)
Net cash invested in investing
activities (49,605)
-------------
Cash flows from financing activities
Issue of shares 250,000
Cost of share issue (5,000)
-------------
Net cash generated from financing
activities 245,000
-------------
Net increase in cash and cash
equivalents 194,255
Cash and cash equivalents at -
beginning of period
-------------
Cash and cash equivalents at
end of period 13 194,255
=============
Notes to the Financial Statements
1. General information
The PRS REIT plc (the "Company") is a public limited company
incorporated on 24 February 2017 in England and having its
registered office at Floor 3, 1 St. Ann Street, Manchester, M2 7LR
with company number 10638461.
The Company is quoted on the Specialist Fund Segment of the Main
Market of the London Stock Exchange.
This condensed consolidated interim financial information was
approved and authorised for issue by a duly appointed and
authorised committee of the Board of Directors on 27 March
2018.
This condensed consolidated interim financial information has
not been audited or reviewed by the Company's auditor.
2. Financial Risk Management
The 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 each of
these risks that are summarised below.
Market Risk
Risk relating to Investment Property
Investment in property is subject to varying degrees of risk.
Some factors that affect the value of the investment in property
include:
-- changes in the general economic climate;
-- competition from available properties;
and
-- government regulations, including planning,
environmental and tax laws.
Interest Rate Risk
The Group has limited interest rate risk. Its risk is on income
and cash flows from changes in market interest rates. From time to
time, certain of the Group's cash resources are placed on short
term fixed deposits to take advantage of preferential rates
otherwise cash resources are held in current, floating rate
accounts.
Credit Risk
Credit risk is the risk that counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. Property rental income arises from the
Group's investments in PRS assets. Rental income is paid monthly in
advance.
Liquidity Risk
The Group seeks to manage liquidity risk to ensure sufficient
liquidity is available to meet the requirements of the business and
to invest cash assets safely and profitably. The Board reviews
regularly available cash to ensure that there are sufficient
resources for working capital requirements.
3. Accounting policies
The principal accounting policies applied in the preparation of
the condensed consolidated interim financial statements are
summarised below and will be used in the audited financial
statements for the period ended 30 June 2018
Basis of accounting
This condensed consolidated interim financial information has
been prepared on a going concern basis. The Group's cash balances
at 31 December 2017 were GBP194.3m of which GBP118.5m was readily
available. The Group has no debt borrowing. In addition, on 20
February 2018, the Group raised additional gross proceeds of
GBP250m through a placing of shares in the Specialist Fund Segment
of the Main Market of the London Stock Exchange. As a consequence,
the Directors believe the Group is well placed to manage its
business risks successfully. After making enquiries, the Directors
have a reasonable expectation that the Group have adequate
resources to continue in operational assistance for the foreseeable
future and for a period of at least 12 months from the date of the
Group's condensed consolidated interim financial statements. The
Board is therefore of the opinion that the going concern basis
adopted in the preparation of the condensed consolidated interim
financial statements is appropriate.
This condensed consolidated interim financial information has
been prepared in accordance with International Accounting Standard
34 "Interim Financial Reporting" as adopted by the EU.
This condensed consolidated interim financial information does
not constitute statutory accounts within the meaning of s434 of the
Companies Act 2006 and are unaudited.
The financial statements have been prepared on the historical
cost basis, except where IFRS requires an alternative treatment.
The principal variations from historical cost relate to financial
instruments (IAS 39).
Adoption of new and revised standards
The following are new standards, interpretations and amendments,
which are not effective and have not been early adopted in these
condensed consolidated interim financial statements that may have
an effect on the Company's future financial statements.
IFRS 9 Financial Instruments
The standard is effective for periods beginning on or after 1
January 2018.
The standard makes substantial changes to the measurement of
financial assets and financial liabilities. There will only be
three categories of financial assets whereby financial assets are
recognised at either fair value through profit and loss, fair value
through other comprehensive income or measured at amortised cost.
On adoption of the standard, the Group will have to re-determine
the classification of its financial assets based on the business
model for each category of financial asset. This is not considered
likely to give rise to any significant adjustments other than
reclassifications.
IFRS 15 - Revenue from contracts with customers
The date the standard is effective from 1 January 2018.
The standard has been developed to provide a comprehensive set
of principles in presenting the nature, amount, timing and
uncertainty of revenue and cash flows arising from a contract with
a customer. The standard is based around the following steps in
recognising revenue:
-- Identify the contract with the customer;
-- Identify the performance obligations in
the contract;
-- Determine the transaction price;
-- Allocate the transaction price; and
-- Recognise revenue when a performance obligation
is satisfied.
On application of the standard the disclosures are likely to
increase. The standard includes principles on disclosing the
nature, amount, timing and uncertainty of revenue and cash flows
arising from contracts with customers, by providing qualitative and
quantitative information.
Basis of consolidation
The condensed consolidated financial statements comprise of the
financial information of The PRS REIT plc and its subsidiary
undertakings. Subsidiaries are all entities over which the Group
has control. The financial information of the subsidiaries are
included in the consolidated financial statements from the date
that control commences. All intra group transactions are eliminated
on consolidation.
Segmental reporting
For the period from 31 May 2017 to 31 December 2017, the
Directors regard the Group as having just one reportable segment,
Property, and the business only operates in the United Kingdom.
Investment Property
Property that is held for long-term rental yields or for capital
appreciation or both is classified as investment property under IAS
40. Investment property, including that which is being constructed
for future use as investment property, is measured initially at its
cost including related transactions costs. After initial
recognition, investment property is carried at fair value. The
investment properties are externally valued by Savills. Savills are
qualified external valuers who hold a recognised and relevant
professional qualification. Gains or losses arising from changes in
the fair value of the Group's investment properties are included in
profit from operations in the income statement of the period in
which they arise. Investment property falls within level 3 of the
fair value hierarchy as defined by IFRS 13. Further details are
provided in note 11.
Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for
impairment is established when there is objective evidence that the
Group will not be able to collect all amounts due. The amount of
the provision is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted at
the effective interest rate. The movement in the provision is
recognised in the comprehensive income statement.
Cash
Cash and cash equivalents comprise cash in hand, cash at bank,
cash held in treasury deposits and cash held by solicitors. Further
details are provided in note 13.
Trade payables
Trade payables are not interest bearing and are stated at their
amortised cost.
Taxation
Taxation on the profit or loss for the period not exempt under
UK REIT regulations is comprised of current and deferred tax. Tax
is registered in the Condensed Consolidated Statement of
Comprehensive Income except to the extent that it relates to items
recognised as a direct movement in equity, in which case it is
recognised as a direct movement in equity. Current tax is expected
tax payable on any non REIT taxable income for the period, using
tax rates enacted or substantively enacted at the balance sheet
date.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax basis used in the
computation of taxable profit. In principle, deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be recognised.
Deferred tax is calculated at the rates that are expected to
apply when the asset or liability is settled. Deferred tax is
charged or credited in the income statement, except when it relates
to items credited or charged directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net
basis.
Revenue recognition
Rental income from investment properties is accounted for on an
accruals basis.
Expenses
All expenses are recognised in the Condensed Consolidated
Statement of Comprehensive Income on an accruals basis.
Finance Income
Finance income is recognised as it accrues on cash balances and
treasury deposits held by the Group.
Share Issue Costs
The costs of issuing equity instruments are accounted for as a
deduction from equity.
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies, the
Directors have made the following judgements which have the most
significant effect on the amounts recognised in the consolidated
financial statements.
Application of acquisition accounting to the transaction which
took place on the 5 June 2017
The Directors have considered the accounting treatment of the
acquisition which took place on the 5 June 2017 by The PRS REIT plc
and its subsidiary The PRS REIT Holding Company Limited of the
issued share capital of Sigma PRS Investments I Limited ("SPRSI)
and the application of IFRS 3 'Business Combinations' and IFRS 10
'Consolidated Financial Statements'.
Taking these reporting standards into consideration the
Directors have concluded that the consolidated financial statements
should be prepared on the acquisition accounting basis. In the
consolidated accounts, all the assets and liabilities of the Group
are shown as analysed on a line by line basis with the activity of
the subsidiary being consolidated from the acquisition date of 5
June 2017.
The reasons for the adoption of the acquisition accounting
are:
(a) the acquisition of SPRSI was conditional
on the IPO proceeding and an integral part
of the transaction; and
(b) there is a substantial change in ownership
of SPRSI by virtue of the IPO.
Acquisition of subsidiaries
During the period, the Group acquired four property owning
special purpose vehicles. The Directors considered whether these
acquisitions met the definition of the acquisition of a business or
the acquisition of a group of assets and liabilities. It was
concluded that acquisitions met the criteria for the acquisition of
a business as outlined in IFRS 3. All assets acquired and
liabilities assumed in a business combination are measured at
acquisition date fair value. The fair value of the assets and
liabilities as at the date of the acquisitions were as follows:
Sigma Sigma
Sigma PRS Investments PRS Investments
PRS Investments II & (Baytree
I Limited III Limited II) Limited
GBP'000 GBP'000 GBP'000
Investment properties
acquired 7,300 24,395 3,059
Other receivables 16 75 396
Other payables (17) (52) -
----------------- ----------------- -----------------
Total consideration
paid 7,299 24,418 3,455
================= ================= =================
-- Investment property is measured at fair
value as at the date of the acquisition
of the subsidiary by an independent valuation
expert.
-- Other receivables are taken as being the
value recorded in the accounts of the Company
acquired, being the best estimate of their
fair value.
-- Other creditor balances are measured at
the amounts actually payable.
-- The total consideration paid was cash settled
and no goodwill arose on acquisition
4. Rental Income
31 May
to 31
December
2017
GBP'000
Gross rental income from investment
property 583
----------
583
==========
5. Directors' Remuneration
31 May
to 31
December
2017
GBP'000
Directors' emoluments 9
----------
9
==========
The directors are remunerated for their services at such rate as
the directors shall from time to time determine. The Chairman
receives a director's fee of GBP45,000 per annum, and the other
directors of the Board receive a fee of GBP30,000 per annum (with
the exception of the Chairman of the Audit Committee who will
receive an additional fee of GBP5,000 per annum).
6. Particulars of Employees
The Group had no employees during the period other than the
directors.
7. Investment Advisory Fees
31 May
to 31
December
2017
GBP'000
Advisory fee 1,382
----------
1,382
==========
Sigma PRS Management Ltd is appointed as the Investment Adviser
of the Company. Under the current Investment Management Agreement,
the Advisory Fee shall be an amount calculated in respect of each
month, in each case based upon the Adjusted Net Asset Value on the
following basis:
(a) 1 per cent per annum of the Adjusted Net
Asset Value up to, and including, GBP250
million;
(b) 0.90 per cent per annum of the Adjusted
Net Asset Value in excess of GBP250 million;
(c) 0.80 per cent per annum of the Adjusted
Net Asset Value in excess of GBP500 million
and up to, and including, GBP1 billion;
and
(d) 0.70 per cent per annum of the Adjusted
Net Asset Value in excess of GBP1 billion.
The appointment of the Investment Adviser shall continue in
force unless and until terminated by either party giving to the
other not less than 12 months' written notice, such notice not to
expire earlier than 31 May 2023.
8. General and Administrative Expenses
31 May
to 31
December
2017
GBP'000
Legal and professional fees 36
Administration and secretarial
fees 53
Audit and tax fees 23
Valuation fees 24
Depositary fees 17
Financial adviser and broker 35
Insurance 9
Public relations 20
Regulatory fees 75
Sundry expenses 4
Costs of acquisition of subsidiaries 19
Disallowed VAT 49
----------
364
==========
9. Finance Income
31 May
to 31
December
2017
GBP'000
Interest on treasury reserve
deposits 192
----------
192
==========
10. Taxation
As a UK REIT, the Group is exempt from corporation tax on the
profits and gains from its property investment business, provided
it meets certain conditions as set out in the UK REIT regulations.
For the current period ended 31 December 2017, the Group did not
have any non-qualifying profits and accordingly there is no tax
charge 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 UK REIT for
the foreseeable future, such 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 period losses as it is not
anticipated that sufficient residual profits will be generated in
the future.
31 May
to31 December
2017
GBP'000
Current tax
Corporation tax charge/(credit)
for the period -
---------------
Total current income tax charge/(credit) -
in the income statement
===============
The tax charge for the period is less than the standard rate of
corporation tax in the UK of 19 per cent.. The differences are
explained below.
31 May
to 31
December
2017
GBP'000
Profit before tax 539
Tax at UK corporation tax standard
rate of 19% 102
Change in value of exempt investment
properties (307)
Exempt REIT income (82)
Amounts not deductible for tax purposes -
Unutilised residual current year
tax losses 287
----------
-
==========
The standard rate of corporation tax in the UK for the period
from incorporation to 31 March 2017 was 20%. From 1 April 2017 to
31 December 2017, the standard rate of corporation tax in the UK
was 19%.
REIT exempt income includes property rental income that is
exempt from UK Corporation Tax in accordance with Part 12 of CTA
2010.
11. Investment Property
In accordance with International Accounting Standard, IAS 40
'Investment Property', investment property has been independently
valued at fair value by Savills, an accredited external valuer with
a recognised relevant professional qualification and with recent
experience in the locations and categories of the investment
properties being valued. The valuation basis conforms to
International Valuation Standards and is based on market evidence
of investment yields expected gross to net income rates and actual
and expected rental values.
The valuations are the ultimate responsibility of the Directors.
Accordingly, the critical assumption used in establishing the
independent valuation are reviewed by the Board.
Total
GBP'000
Properties acquired on
acquisition of subsidiaries 34,754
Other property additions 20,585
Change in fair value 1,618
============
At 31 December 2017 56,957
============
Other property additions includes investment properties under
construction. The fair value of these assets when complete is
initially measured on acquisition and again as at the 31 December
2017 by Savills. The difference between cost and fair value is
recognised over the development period.
Fair Values
IFRS 13 sets out a three-tier hierarchy for financial assets and
liabilities valued at fair value. These are as follows:
Level quoted prices (unadjusted) in active
1 markets for identical assets and liabilities;
Level inputs other than quoted prices included
2 in Level 1 that are observable for the
asset or liability, either directly
or indirectly; and
Level unobservable inputs for the asset or
3 liability.
Investment property falls within Level 3. The Investment
valuations provided by the external valuation expert are based on
RICS Professional Valuation Standards, but include a number of
unobservable inputs and other valuation assumptions.
The significant unobservable inputs and the range of values used
are:
Type Range
Investment 4.5% to 4.65%
yield
Gross to net 21.5% to 23.5%
assumption
12. Other Receivables
As at
31 December
2017
GBP'000
Accrued income 193
Social security and other taxes 160
Prepayments and other receivables 98
-------------
451
=============
13. Cash and Cash Equivalents
As at
31 December
2017
GBP'000
Cash held by solicitors 812
Treasury reserve deposits 75,000
Cash at bank 118,443
-------------
194,255
=============
Cash held by solicitors is money held in escrow for expenses
expected to be incurred in relation to investment properties
pending completion. These funds are available immediately on
demand.
Treasury reserve deposits refers to money held on deposit for a
fixed term and fixed interest rate. At 31 December 2017, the Group
held one treasury reserve deposit which matured on 26 January
2018.
14. Trade and Other Payables
As at
31 December
2017
GBP'000
Trade payables 5,486
Accruals and deferred income 157
Other creditors 481
-------------
6,124
=============
15. Share Capital
As at
31 December
2017
GBP'000
Authorised:
250 million Ordinary Shares of GBP0.01
each 2,500
Issued and fully paid:
250 million Ordinary Shares of GBP0.01
each 2,500
=============
The Company was admitted to the Specialist Fund Segment of the
Main Market of the London Stock Exchange on 31 May 2017, raising
GBP250 million.
16. Share Premium Reserve
The share premium relates to amounts subscribed for share
capital in excess of nominal value.
As at
31 December
2017
GBP'000
Balance at beginning of period -
Share premium arising on Ordinary
Shares issued 247,500
Share issue costs (5,000)
Transfer to capital reduction reserve (242,500)
-------------
Balance at end of period -
=============
As stated in the Company's prospectus dated 4 May 2017, in order
to increase the distributable reserves available to facilitate the
payment of future dividends, the Company resolved that, conditional
upon First Admission and approval of the Court, the amount standing
to the credit of the share premium account be cancelled and
transferred to a special distributable reserve.
The Company obtained court approval on 1 November 2017. An SH19
form was sent to Companies House with a copy of the court order on
1 November 2017 and the certificate of cancellation was issued by
Companies House on 2 November 2017.
17. Capital Reduction Reserve
As at
31 December
2017
GBP'000
Balance at beginning of period -
Transfer from share premium reserve 242,500
-------------
Balance at end of period 242,500
=============
18. Redeemable Preference Shares
On 24 April 2017, the Company allotted 50,000 redeemable
preference shares of GBP1 each to meet the minimum capital
requirements. On 31 May 2017 and on completion of the IPO, the
shares were redeemed at par value.
19. IFRS Earnings per Share
Earnings 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, only
basic earnings per share is quoted below.
The calculation of basic earnings per share is based on the
following:
Net profit Weighted
attributable average
to ordinary number Earnings
shareholders of Ordinary per share
GBP'000 Shares pence
From 31 May to 31 December
2017 539 250,000,000 0.22
============== ================= ===========
20. IFRS Net Asset Value per Share
Basic 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 period. As there are no
dilutive instruments, only basic NAV per share is quoted below.
Net asset values have been calculated as follows:
As at 31
December
2017
Net assets at end of period (GBP'000) 245,539
Shares in issue at end of period 250,000,000
Basic IFRS NAV per share pence 98.2
============
The NAV per share calculated on an EPRA basis is the same as the
Basic IFRS NAV per share for the period to 31 December 2017.
21. Controlling Parties
As at 31 December 2017, there is no ultimate controlling
party.
22. Consolidated Entities
The Group consists of a parent company, The PRS REIT plc,
incorporated in the UK and a number of subsidiaries held directly
and indirectly by The PRS REIT plc, which 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.
List of Subsidiaries:
Ownership Name of Entity Principal Activity Country %
of Incorporation
The PRS REIT Holding
Company Limited Property Investment UK 100%
The PRS REIT Development
Company Limited Property Investment UK 100%
The PRS REIT Memberco
Limited Property Investment UK 100%
The PRS REIT Investments
LLP Property Investment UK 100%
Sigma PRS Investments
I Limited Property Investment UK 100%
Sigma PRS Investments
II Limited Property Investment UK 100%
Sigma PRS Investments
III Limited Property Investment UK 100%
Sigma PRS Investments
(Baytree II) Limited Property Investment UK 100%
The registered office for the subsidiaries across the Group is
Floor 3, 1 St. Ann Street, Manchester, M2 7LR, except for Sigma PRS
Investments I Limited whose registered office is at 18 Alva Street,
Edinburgh, EH2 4QG.
23. Capital commitments
The Group have entered into contracts with unrelated parties for
the construction of residential housing with a total value of
GBP65,185,000. As at 31 December 2017, GBP47,845,000 of such
commitments remained outstanding.
24. Related Party Disclosure
The number of shares owned by the directors of the Company as at
31 December 2017 is as follows:
Company Director No. of Shares
held
Stephen Smith 80,000
Steffan Francis 30,000
Roderick MacRae 40,000
All of the shares of the directors were acquired on admission of
the Company to the Specialist Fund Segment of the Main Market of
the London Stock Exchange on 31 May 2017.
On 20 February 2018, Roderick MacRae acquired a further 60,000
shares as part of the Placing Programme. Further details are
provided in note 26.
For the period from 31 May 2017 to 31 December 2017, directors
fees of GBP9,000 were incurred.
25. Transactions with Investment Adviser
On 31 March 2017, Sigma PRS Management Ltd was appointed as the
Investment Adviser of the Company.
For the period from 31 May 2017 to 31 December 2017, fees of
GBP1,382,000 were incurred and payable to Sigma PRS Management Ltd
in respect of investment advisory services. At 31 December 2017,
GBP208,000 remained unpaid.
For the period from 31 May 2017 to 31 December 2017, development
fees of GBP936,000 were incurred and payable to Sigma PRS
Management Ltd. At 31 December 2017, GBP305,000 remained
unpaid.
Subsequent to 31 December 2017, Sigma PRS Management Ltd has
acquired shares in the Company equivalent to 50% of the development
management fee earned for the period from 31 May 2017 to 31
December 2017.
During the period the Company acquired the following
subsidiaries from Sigma Capital Group plc, the ultimate holding
company of the Investment Adviser:
Sigma PRS Investments I for a consideration of GBP7,299,000
Sigma PRS Investments (Baytree II) Limited for a consideration
of GBP3,455,000
Sigma PRS Investments II and III Limited for a consideration of
GBP24,418,000
26. Post Balance Sheet Events
Dividend
On 31 January 2018, the Company declared its first dividend in
respect of the period from incorporation to 31 December 2017 of
1.5p per Ordinary Share totalling GBP3,750,000. The dividend was
paid on the 16 March 2018 to shareholders on the register at 16
February 2018.
Placing
On 20 February 2018, the Company completed the placing of
243,902,440 ordinary shares of 1 pence each raising gross proceeds
of GBP250m.
Debt Finance
At the end of January 2018, credit agreed terms for a blended
debt facility totalling GBP200m were agreed and are currently in
the process of completion. These debt facilities will be provided
by Scottish Widows Investment Partnership ("SWIP") and Lloyds
Banking Group ("LBG").
27. Copies of the Interim Financial Statements
Copies of the interim report and financial statements are
available on the Company's website www.theprsreit.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SESFAWFASEID
(END) Dow Jones Newswires
March 28, 2018 02:01 ET (06:01 GMT)
Sigma Capital (LSE:SGM)
Historical Stock Chart
From Apr 2024 to May 2024
Sigma Capital (LSE:SGM)
Historical Stock Chart
From May 2023 to May 2024