TIDMSGM
RNS Number : 5202S
Sigma Capital Group PLC
12 March 2019
12 March 2019
AIM: SGM
SIGMA CAPITAL GROUP PLC
("Sigma" or the "Company")
The private rented sector ("PRS") and urban regeneration
specialist
The PRS REIT plc - Interim Results
Sigma, the PRS, residential development and urban regeneration
specialist, notes that The PRS REIT plc ("PRS REIT") has today
issued its interim results, which cover the six months ended 31
December 2018.
Sigma's wholly owned subsidiary, Sigma PRS Management Limited,
is Investment Advisor to the PRS REIT, sourcing investments,
managing its assets and advising the PRS REIT on a day-to-day
basis.
A copy of the PRS REIT's announcement is provided below.
Enquiries:
Sigma Capital Group Graham Barnet, Chief Executive T: 020 3178 6378 (today)
plc
Malcolm Briselden, Finance T: 0333 999 9926
Director
KTZ Communications Katie Tzouliadis, Dan T: 020 3178 6378
Mahoney
N+1 Singer James Maxwell, James Moat, T: 020 7496 3000
(NOMAD and Broker) Ben Farrow
12 March 2019
PRSR.L
The PRS REIT plc
("the Company" or "the PRS REIT")
Interim Results
for the six months ended 31 December 2018 ("H1")
KEY POINTS
Summary
-- Continuing good progress. Initial target of committing gross funds
of GBP900m (including debt) to create a portfolio of newly-built rental
homes across the UK was achieved in H1.
-- Completed assets are performing well and demand for the Company's well-located,
professionally-managed houses remains high.
-- Total dividends paid since launch on 31 May 2017 is 7.0p per share.
Target total dividend for FY 2019 is 5p(1) per share.
-- Some short term headwinds are anticipated from expected planning approval
delays. Stabilised covered dividend target for FY 30 June 2022 is c.5.5p(1)
per share (from original target of 6p), with the Company targeting
a total dividend of 5.0p(1) per share each year until that point.
-- Family rental housing remains critically undersupplied and the drivers
underpinning rising demand are unchanged.
Financial
Six months ended 2018 2017 Change
31 Dec
Rental income (gross) GBP2.3m GBP0.6m Up 3.8x
Profit from operations GBP7.3m GBP0.3m Up 24.3x
Profit before tax GBP7.5m GBP0.5m Up 14.6x
Basic earnings
per share 1.5p 0.22p Up 6.8x
Net assets at 31 GBP477.2m GBP245.5m Up 94%
Dec
IFRS and EPRA NAV 96.3p 98.2p
per share at 31 (after dividends (after nil dividends
Dec of 6.0p paid) paid)
Operational
Post H1,
During At at 28 Feb
H1 end of H1 2019
Number of completed PRS units 370 775 904
Number of completed and contracted
sites 21 43 49
Number of completed and contracted
units 2,166 3,575 3,951
GDC of completed and contracted
sites GBP328.5m GBP530.0m GBP603.0m
ERV of completed and contracted
sites GBP20.2m GBP33.2m GBP37.3m
-- Completed assets are performing well, and rental demand
is high
At 31 December 2018:
- average gross yields on completed assets 6.2%
average capital uplift on completed assets
- to Investment Value 5.3%
average capital uplift on completed assets
- to Vacant Possession Value 12.8%
cost management of Gross to Net during development
- phase 15.6%
- re-letting period (average) 6.7 days
- rents 2% above budget
Dividends
-- Q1 and Q2 dividends together totalled 2p per share - 1p
per share respectively;
- bringing total dividends paid since launch to 7p per
share
-- Total dividend target for FY 2019 is 5.0p(1) per share
and the same each year thereafter until stabilisation in
FY 2022.
Outlook
-- The Board views long term prospects with confidence.
Steve Smith, Chairman of the PRS REIT, said:
"The PRS REIT made pleasing progress in the first half, and the
growth in the number of completed rental homes is showing through
in these financial results. We closed the half year with about
3,575 homes either built or under construction, with that number
now at around 3,951.
"Looking over the remainder of the financial year, we anticipate
short term headwinds that are likely to cause some delays to
current construction schedules. We have therefore re-estimated our
stabilised covered dividend target taking this into account, and
now estimate it to be around 5.5p(1) per share from 6.0p
previously. Our dividend targets for the current financial year and
each year thereafter until stabilisation is 5.0p(1) per share.
Outside these delays, the model is working well, with delivery and
operational costs in line with expectations, continuing high demand
for our homes, and good visibility on the deployment of the
remaining tranches of our gross capital.
"Housing for the family rental market remains critically
undersupplied and the opportunity for the Company to establish
itself as a major provider of high quality, professionally managed
houses in the UK remains substantial. Consequently, the Board
continues to view long term prospects with confidence."
(1) This is a target only and there can be no assurance that the
target can or will be met and should not be taken as an indication
of the Company's expected or actual future results. Accordingly,
potential investors should not place any reliance on this target in
deciding whether or not to invest in the Company or assume that the
company will make any distributions at all and should decide for
themselves whether or not the target dividend yield is reasonable
or achievable.
This announcement is released by The PRS REIT plc and contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) 596/2014 ("MAR"), and is disclosed in
accordance with the Company's obligations under Article 17 of
MAR.
For further information, please contact:
The PRS REIT plc Tel: 020 3178 6378 (c/o
Steve Smith, Non-executive Chairman KTZ Communications)
Sigma PRS Management Limited Tel: 0333 999 9926
Graham Barnet, Graeme Hogg
N+1 Singer Tel: 020 7496 3000
James Maxwell, James Moat, Ben
Farrow
Stifel Tel: 020 7710 7600
Mark Young, Neil Winward, Gaudi
Le Roux
G10 Capital Limited (AIFM) Tel: 020 3696 1302
Gerhard Grueter, Anthony Wood, Gaia
Udage
KTZ Communications Tel: 020 3178 6378
Katie Tzouliadis, Dan Mahoney
NOTES TO EDITORS
About The PRS REIT plc
(www.theprsreit.com)
LEI: 21380037Q91HU97WZX58
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. It has raised a total of
GBP500m (gross) through its Initial Public Offering, on 31 May
2017, and a subsequent placing in February 2018. Both fundraisings
were supported by the UK Government's Homes England with direct
investments.
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 Investment Adviser to The
PRS REIT plc. It sources investments and manages the assets of The
PRS REIT plc and advises the Alternative Investment Fund Manager
("AIFM") and The PRS REIT plc on a day-to-day basis in accordance
with The PRS REIT plc's Investment Policy. The Investment Adviser
is an appointed representative (reference number: 776293) of the
AIFM.
CHAIRMAN'S STATEMENT
Overview
This is the Company's second interim report since its launch and
it covers the six months ended 31 December 2018. The report
summarises the progress that has been made in the first half of the
financial year and provides the Board's view of the Company's near
and longer term prospects, including the expected challenges in the
short term, particularly in the light of current political
uncertainty.
Overall, we are pleased with the PRS REIT's progress over the
first six months of the new financial year. At 31 December 2018,
2,800 new rental homes across 32 sites in England were under
construction for the Company's portfolio, and the number of
completed homes in the portfolio stood at 775. The gross
development cost ("GDC") of these 3,575 homes amounts to around
GBP530m, and their combined estimated rental value ("ERV") when
completed is GBP33.2m per annum.
Our development activity has continued to increase since the
half year end, and at 28 February 2019 amounted to GDC of GBP603m,
resulting in nearly 70% of the Company's expected gross funds of
GBP900m now being in deployment. This equates to 3,951 new rental
homes, of which 904 were completed as at 28 February 2019. Once
fully completed and let, these 3,951 homes are expected to yield
GBP37.3m per annum in rental income.
As we reported in early January 2019, we now have full
visibility over the deployment of the balance of funds, with
additional development sites identified and approved or under
formal appraisal by the Investment Adviser and with planning being
sought and/or sites in the process of being acquired. These
additional sites together with existing sites being delivered
should take the PRS REIT's initial portfolio to a total of around
5,600 new rental properties, yielding approximately GBP56.0m in
rental income per annum once all the homes are completed and let.
In line with the Company's risk diversification policy, the homes
are located across a range of sites in different regions of
England, including some sites in the South.
We are encouraged that at 31 December 2018 the average gross
yield on developed assets was 6.2%, marginally ahead of our initial
expectations. Our model of fixed price design and build contracts,
standardised specifications, targeted locations and tight cost
management has helped to support this outcome. The Company's IFRS
and EPRA Net Asset Value ("NAV") on an investment valuation basis
were both 96.3p as at 31 December 2018. This is stated after the
payment of dividends totalling 6.0p per share in the period since
the launch of the PRS REIT on 31 May 2017 to 31 December 2018.
Valuing the Company's portfolio on a Vacant Possession basis would
improve the Company's IFRS and EPRA NAV at 31 December 2018 to an
estimated 101.1p.
Looking to the immediate future and beyond, the Board expects
continuing progress although we are now also factoring in current
political and economic uncertainties. As previously reported, we
experienced some delays with development activity in the third
quarter of the last financial year. Given the current backdrop and
the local elections that will take place in early May, we believe
it prudent to anticipate lengthening decision-making processes at
local government level. This has a direct bearing on site
commencement schedules, and slower delivery, particularly of larger
sites, would reduce the Company's earnings during the development
phase. A consequence of this would be that more of our development
profits would be utilised to support dividend payments during the
development phase. Taking into account time delays, and while
maintaining a 5p(1) per share annual dividend target until
stabilisation, our stabilised covered dividend target for the
financial year to June 2022 is now c.5.5p(1) as opposed to our
original target of 6.0p per share. The Company continues to target
net total shareholder returns of 10%(1) or more per annum on
stabilisation. Outside delays, the model is working well; delivery
and operational costs are in line with expectations, demand for our
homes is high, and the Company has good visibility on the
deployment of the remaining tranches of its gross capital.
The PRS REIT's growing portfolio of homes is establishing it as
a leading player in the build-to-rent sector, and the Company
remains the only quoted REIT to focus exclusively on the Private
Rented Sector ("PRS") in the UK. Notably, it is the first to focus
on family houses. This market continues to be underserved, with
build-to-rent activity overwhelmingly concentrated on the
development of flats, and demand for the Company's well-located,
professionally managed houses continues to be strong.
Financial Results
The growth in the number of completed PRS assets in the
portfolio is now showing through in the Company's financial
results, with revenue, all of which was derived from rental income,
having increased to GBP2.3m in the six months ended 31 December
2018 (2017: GBP0.6m). The net rental income for the period was
GBP1.9m (2017: GBP0.5m) after non-recoverable property costs.
Profit from operations increased to GBP7.3m (2017: GBP0.3m)
after gains of GBP8.2m from fair value adjustments on investment
property (2017: GBP1.6m) and total expenses of GBP2.8m (2017:
GBP1.8m). Profit before tax for the period increased to GBP7.5m
(2017: GBP0.5m) and basic earnings per share rose to 1.5p (2017:
0.22p).
As at 31 December 2018, the PRS REIT's net assets totalled
GBP477.2m (2017: GBP245.5m), which represents a NAV per share of
96.3p, on both the International Financial Reporting Standards
("IFRS") basis as adopted by the European Union and on an EPRA
(European Public Real Estate Association) basis (30 June 2018: IFRS
and EPRA NAV both 96.3p, and 31 December 2017: both 98.2p per
ordinary share).
In comparing the NAV position at 30 June 2018 to the NAV
position at 31 December 2018, it should be noted that the 31
December NAV of 96.3p is after dividend payments in August and
November, which together totalled 3.5p per share. Specifically
these were dividends of 2.5p per ordinary share paid on 31 August
2018, which related to the three months to 30 June 2018, and 1.0p
per ordinary share paid on 30 November 2018, which related to the
three months to 30 September 2018.
Period from
Six months ended 31 May to Period ended
31 December 31 December 2017 30 June 2018
KPI 2018 (unaudited) (unaudited) (audited)
EPRA Cost Ratio - - -
EPS (pence per share) 1.5 0.22 1.0
EPRA EPS (pence per
share) (0.1) (0.4) (0.7)
As at
As at 31 December As at 31 December 30 June 2018
KPI 2018 (unaudited) 2017 (unaudited) (audited)
IFRS NAV (pence per
share) 96.3 98.2 98.3
EPRA NAV (pence per
share) 96.3 98.2 98.3
Debt Facilities
The Company has GBP200m of debt facilities in place and the
first GBP50m will be drawn this month with the balance to be drawn
over the next six months or so as we commit to further
developments.
In-line with our stated funding strategy, we are close to
finalising credit terms for a further debt facility totalling
GBP200m, maintaining the Company's gearing at or below the limit of
45% Loan-to-Value. This completes the planned capital structure for
our initial phase of development, and the new debt facilities are
being provided by our existing partners, Scottish Widows and Lloyds
Banking Group.
Dividends
On 31 January 2019, the Board was pleased to declare a dividend
of 1.0p per ordinary share for the second quarter of the current
financial year, bringing total dividends paid to date since the
Company's inception to 7p per share. This latest dividend was paid
on 28 February 2019 to shareholders on the register as at 8
February 2019.
As previously reported, the Company is targeting a total
dividend of 5.0p(1) per ordinary share for the current financial
year ending 30 June 2019. This is now a target for each year
thereafter until stabilisation, which is expected in the financial
year ended 30 June 2022. The stabilised covered dividend that year
is now targeted at c. 5.5p(1) per share and the targeted net total
shareholder returns post stabilisation is 10%(1) or more per
annum.
Summary
Our completed PRS assets are performing well and, as the
Investment Adviser's report confirms, rental demand for our new
homes remains high. Other key performance indicators are also
encouraging and the Company's cost management, reflected in the
Gross to Net yield, during the development phase is one of the
industry's lowest.
While we anticipate short term headwinds that may cause some
delays to construction programmes, we have committed the balance of
the Company's GBP900m of expected gross funds, which will deliver
some 5,600 new rental homes. Beyond this, we continue to see
significant opportunity and there is a GBP1bn pipeline of new
development opportunities.
Housing for the family rental market remains critically
undersupplied and the Company is well-placed to continue its
roll-out of new homes across the regions and to establish itself as
a major provider of high quality, professionally managed houses in
the UK. We therefore continue to view the Company's long term
prospects very positively.
Steve Smith
Chairman
11 March 2019
INVESTMENT ADVISER'S REPORT
Sigma PRS Management Ltd ("Sigma PRS"), the Investment Adviser
to the Company and part of Sigma Capital Group plc ("Sigma"), is
pleased to report on the PRS REIT's progress in the six months
ended 31 December 2018.
We are very encouraged with the progress that has been made in
the period. Significantly, with sufficient qualifying sites
identified, we are in a position to utilise the Company's expected
funding capacity of some GBP900m (gross). This places the PRS REIT
in a strong position although the rate at which new sites start
construction remains a variable. In the short term, as our comments
in the Summary section of this report highlight, we view this as
the Company's primary challenge.
Investment Objective and Strategy
The Company is addressing a significant opportunity to create a
large portfolio of newly-constructed rental stock that meets
existing demand in the UK for well-located, high quality,
professionally managed rental homes.
In doing so, the Company is also seeking to provide investors
with an attractive level of income, together with the prospect of
income and capital growth.
The PRS REIT's main focus is on establishing PRS sites composed
of multiple individual family homes, with these homes let under the
'Simple Life' brand to qualifying tenants. Its aim is to create a
geographically diversified portfolio of properties that are close
to large employment centres and local amenities and that have easy
access to the main road and rail infrastructure. Proximity to good
quality primary education is also important. The Company is focused
on family houses, although it will also invest in some low rise
flats in appropriate locations.
The PRS REIT is building its portfolios in two ways:
-- by acquiring undeveloped sites sourced by Sigma PRS. Their
subsequent development is managed by Sigma PRS (or another
member of Sigma as development manager), and the completed
PRS units are let under the 'Simple Life' brand.
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 prior to acquisition
by the Company. During the construction phase, many of the
properties are pre-let and subsequently occupied as they
complete.
-- by acquiring completed PRS sites from Sigma (and/or one
of its subsidiaries), or from third parties. A prerequisite
is that these stabilised developments must accord with the
PRS REIT's investment objectives and satisfy both return
and occupancy hurdles. The Company can fund up to a maximum
of one third of new properties in this manner. To date this
route represents 20% of the Company's asset allocation.
The Investment Adviser's parent company, Sigma, has a
well-established PRS delivery platform, which plays a central role
in sourcing and developing investment opportunities. The PRS REIT
has first right of refusal over sites within Sigma's platform
assuming they meet its criteria and it has capital to fund the
opportunities.
The platform comprises well-established relationships with
construction partners, particularly Countryside Properties but also
Keepmoat Regeneration, Engie and Galliford Try, as well as local
authorities. We are engaged with a further select group of
potential partners who will complement and expand the Company's
geographical coverage of the UK. All these relationships enable us
to identify, source and deliver land and properties on behalf of
the Company in the target geographies. Homes England, an executive
non-departmental public body sponsored by the Ministry of Housing,
Communities & Local Government, also works closely with Sigma
in the common goal of accelerating new housing delivery in
England.
Delivery Progress
Significant progress was made over the first half of the
financial year and we have now identified the remainder of the
sites required to utilise the Company's expected funding of around
GBP900m (gross) when full gearing is included.
The table below provides a summary of development activity,
including the number of PRS units that have been completed since
the launch of the Company, the gross development cost of sites and
the estimated rental value of all the homes that are under
construction or completed.
Total Post H1,
During at 31 Dec at 28 Feb
H1 2018 2019
Number of completed PRS units 370 775 904
Number of completed and contracted
sites 21 43 49
Number of completed and contracted
units 2,166 3,575 3,951
GDC of completed and contracted
sites GBP328.5m GBP530.0m GBP603.0m
ERV of completed and contracted
sites GBP20.2m GBP33.2m GBP37.3m
By 31 December 2018, the Company's portfolio of completed homes
stood at 775 and these homes are generating an annualised income of
approximately GBP7.0m. When added to the number of homes that were
under construction at the end of December, the total of homes that
are coming through for the portfolio at that date amounted to
3,575. Since the period end, a further 376 homes, with an expected
revenue of GBP4.1m in annualised rental income, have been
contracted. This takes the ERV to GBP37.3m per annum once the 3,951
homes have been completed and let.
The vast majority of the Company's sites are located across the
North of England and the Midlands. However, in September 2018 the
PRS REIT contracted its first site in the South of England, in
Essex, and has since signed contracts over three further sites in
the South. These three Southern sites are expected to deliver a
combined total of 248 homes and yield GBP4.2m in rental income per
year once completed and let. While yields in the South East are
typically lower than in other regions of England, the risk
diversification is helpful in the context of the overall
portfolio.
In total, 21 new sites were secured under contract in the first
half of the financial year. Of these, 19 were development sites and
two were fully completed and let sites. The 21 sites have a
combined gross development cost of GBP328.5m and will comprise
2,166 new homes when finished, generating an expected combined
rental income of over GBP20.2m per annum.
The 19 development sites consist of eleven sites in the North
West, five sites in the Midlands, two southern sites, and one site
in Yorkshire. The sites were selected as they fulfil the selection
criteria of being accessible and close to centres of employment and
good quality primary education.
The two completed sites, situated in Salford, Greater Manchester
and Smethwick, near Birmingham, were purchased for a combined total
of GBP22.0m and added 73 and 63 homes respectively, with the
combined annualised rental income being GBP1.2m per annum (GBP0.6m
per annum each). Savills provided an independent valuation on both
sites before their purchase by the PRS REIT.
Rental Performance and Key Metrics
The Company's completed properties continued to perform well,
justifying the selection criteria. Rental income has been 2% higher
than management budget and, when a vacancy arises, re-letting
takes, on average, about seven days.
Control of costs also remains well within the budget of 17% of
income set for the first four years (which represents the
development phase) and is running at an efficient 15.6%.
The table below summaries key performance measures on completed
assets, all of which are very encouraging and remain on target:
Average gross yields on completed
-- assets 6.2%
Average capital uplift on completed
-- to Investment Value 5.3%
Average capital uplift on completed
-- assets to Vacant Possession Value 12.8%
Cost management of Gross to Net during
-- development phase 15.6%
-- Re-letting period 6.7 days average
-- Rents 2% above budget
The Investment Valuation completed in December showed an average
uplift in the value of completed assets over the costs of delivery
of 5.3%, underlining the benefits of the PRS REIT's model.
Benchmarked against vacant possession value, the average uplift in
the value was 12.8%.
The Market and Our Simple Life Brand
The residential rental housing market in the UK remains
significantly undersupplied and the drivers underpinning rising
demand are unchanged. In his report to Government in 2018, Sir
Oliver Letwin highlighted the contribution that the build-to-rent
sector can make in accelerating the delivery of much needed
supply.
The private rented sector as a whole now amounts to GBP1.5
trillion and accounts for over 20% of all UK households, having
doubled in the last decade and a half. The build-to-rent sector as
a subset is still remarkably small and whilst it is now distributed
fairly evenly between London and the regions, it still only
accounts for about 140,000 units. As a comparison, some 72,000
buy-to-let mortgages were redeemed in the last 18 months. In
addition, most of this new build-to-rent supply comprises apartment
blocks, which are generally not targeted towards the family
market.
The PRS REIT's homes are marketed under the 'Simple Life' brand,
which was established with the aim of representing a gold standard
in lettings.
According to our analysis undertaken in December 2018, the
families, couples and single people who live in a 'Simple Life'
home earn an average of GBP39,000 per household, have an average
age of 34.5 years, and half have children. Two thirds of our new
customers in December travelled up to 50 miles to live in one of
our homes, with 22% travelling more than 50 miles.
Corporate Social Responsibility and Charitable Activity
A core tenet underpinning the 'Simple Life' brand is 'community'
and the belief that we can play an active part in fostering a sense
of community among our tenants and their neighbours. We do this
through the organisation of community events, which range from
organised activities around festive events at Christmas and Easter
to initiatives such as 'Pizza Night' and the 'Summer Ice Cream
Dash'.
We also wish 'Simple Life' to play its part in supporting the
wider local community, predominantly through charitable and
sponsorship activities. During 2018, for example, we supported five
primary schools close to Simple Life developments with donations
that have been used for improving library facilities, enabling
school trips and providing outdoor play equipment. We have also
made donations to charities, such as Park Palace Ponies in
Liverpool, which provides inner city children with the opportunity
of learning to ride. We intend to expand our community-based
activities in 2019, focusing in particular on the issue of
homelessness. We will continue to support the Salford-based 'Loaves
and Fishes', which carries out valuable work with homeless and
vulnerable people and in particular runs a drop-in centre. At the
same time, we hope to launch other initiatives that help to address
this problem.
Summary
The PRS REIT's progress over the first half of the year has been
encouraging, and the Company is well-positioned to continue the
delivery of further sites. In the current political and economic
climate though, and with local elections that will be taking place
in early May, we believe there may be an increased risk of delays
in decision-making at local government level. If this occurs,
particularly in relation to larger sites, it would affect
construction schedules and consequently earnings during the
development phase. With the delays experienced in the last
financial year, we therefore think it is prudent at this stage to
maintain the 5.0p(1) annual dividend target until stabilisation and
to revise our stabilised covered dividend target for the financial
year to 30 June 2022 to c. 5.5p(1) per share from 6.0p per
share.
The Company's completed assets are performing well and rental
demand remains strong. We see continuing opportunities for further
growth and have identified an additional GBP1bn pipeline of
development opportunity over and above current committed
activity.
Sigma PRS Management Ltd
11 March 2019
DEFINITIONS
Contracted refers to sites under construction (under a design
and build contract), which have been purchased
by the PRS REIT or the PRS REIT's Investment Adviser
(forward sold to the PRS REIT).
Committed refers to development sites that have been approved
or are under formal appraisal by the Investment
Adviser, and where planning consent is being sought,
and/or are in the process of being acquired.
Pipeline refers to sites that have been identified as being
suitable for appraisal. These sites are typically
sourced from Sigma's PRS Platform, and are typically
under a Framework Agreement or Collaboration Agreement
with a construction partner.
IFRS NAV Unadjusted net asset value
EPRA NAV Net asset value adjusted 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 Cost Ratio Administrative and operating costs (including
and excluding costs of direct vacancy) divided
by gross rental income
EPS Unadjusted earnings per share
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2018
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Rental Income 4 2,320 583 1,765
Non-recoverable property costs (376) (99) (274)
------------- ------------- -------------
Net rental income 1,944 484 1,491
Administrative Expenses
Directors' remuneration (61) (9) (67)
Investment advisory fee 5 (2,195) (1,382) (3,295)
Administrative expenses 6 (552) (364) (977)
------------- ------------- -------------
Total expenses (2,808) (1,755) (4,339)
Gain from fair value adjustment on
investment property 11 8,157 1,618 5,515
------------- ------------- -------------
Operating profit 7,293 347 2,667
Finance income 7 488 192 570
Finance costs 8 (246) - -
------------- ------------- -------------
Profit before taxation 7,535 539 3,237
Taxation 9 - - -
------------- ------------- -------------
Total comprehensive income for the
period/year attributable to the equity
holders of the Company 7,535 539 3,237
============= ============= =============
Earnings per share attributable to
the equity holders of the Company:
Basic IFRS earnings per share 15 1.5p 0.22p 1.0p
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 2018
As at As at
As at 31
December 31 December
2018 2017 30 June 2018
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Investment property 11 269,232 56,957 121,109
------------- ------------- --------------
269,232 56,957 121,109
------------- ------------- --------------
Current assets
Trade receivables 56 - 28
Other receivables 5,024 451 3,786
Cash and cash equivalents 230,295 194,255 374,339
------------- ------------- --------------
235,375 194,706 378,153
------------- ------------- --------------
Total assets 504,607 251,663 499,262
------------- ------------- --------------
LIABILITIES
Non-current liabilities 2,475 - 961
Current liabilities
Trade and other payables 24,937 6,124 12,296
------------- ------------- --------------
Total liabilities 27,412 6,124 13,257
------------- ------------- --------------
Net assets 477,195 245,539 486,005
============= ============= ==============
EQUITY
Called up share capital 12 4,953 2,500 4,943
Share premium account 13 245,005 - 244,025
Capital reduction reserve 14 216,465 242,500 233,800
Redeemable preference shares - - -
Retained earnings 10,772 539 3,237
------------- ------------- --------------
Total equity attributable to the
equity holders of the Company 477,195 245,539 486,005
============= ============= ==============
IFRS net asset value per share 16 96.3p 98.2p 98.3p
As at 31 December 2018, there is no difference between IFRS NAV
per share and the EPRA NAV per share.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2018
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
At 31 May 2017
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
--------- ---------- ----------- ------------ ---------- ---------
Share capital issued
in the period 2,443 248,024 - - - 250,467
Share capital issue
costs paid - (3,999) - - - (3,999)
Cancellation of share - - - - - -
premium
Share capital redeemed - - - - - -
in the period
Dividend paid - - (8,700) - - (8,700)
Profit for the period - - - - 2,698 2,698
At 30 June 2018 4,943 244,025 233,800 - 3,237 486,005
--------- ---------- ----------- ------------ ---------- ---------
Share capital issued
in the period 9 962 - - - 971
Share capital issue
costs not paid - 19 - - - 19
Dividend paid - - (17,335) - - (17,335)
Profit for the period - - - - 7,535 7,535
At 31 December 2018 4,953 245,005 216,465 - 10,772 477,195
--------- ---------- ----------- ------------ ---------- ---------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December 2018
Six months Period from 31
ended May to
31 December Period ended
2018 31 December 2017 30 June 2018
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profits before tax 7,535 539 3,237
Adjustments for:
less finance income net of finance
costs (242) (192) (570)
less fair value adjustment on
investment property (8,157) (1,618) (5,515)
add interest received - 54 -
------------ ----------------- -------------
Cash used in operations (864) (1,217) (2,848)
Increase in trade and other
receivables (1,367) (313) (3,748)
Increase in trade and other
payables 1,218 390 1,708
Net cash used in operating activities (1,013) (1,140) (4,888)
------------ ----------------- -------------
Cash flows from investing activities
Acquisition of subsidiaries (21,980) (34,754) (40,770)
Purchase of investment property
at fair value through profit
and loss (103,173) (14,851) (63,451)
Finance income net of finance
costs (1,357) - 504
------------ ----------------- -------------
Net cash used in investing activities (126,510) (49,605) (103,717)
------------ ----------------- -------------
Cash flows from financing activities
Issue of shares 971 250,000 500,467
Cost of share issue (157) (5,000) (8,823)
Redeemable preference share - - -
Dividends paid (17,335) - (8,700)
------------ ----------------- -------------
Net cash (used in)/generated
from financing activities (16,521) 245,000 482,944
------------ ----------------- -------------
Net (decrease)/increase in cash
and cash equivalents (144,044) 194,255 374,339
Cash and cash equivalents at
beginning of period 374,339 - -
------------ ----------------- -------------
Cash and cash equivalents at
end of period 230,295 194,255 374,339
============ ================= =============
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 12 March
2019.
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 that a counterparty will not meet its obligations
under a financial instrument or customer contract leading to a
financial loss. The Group is exposed to credit risk both from its
property activities and financing activities.
Credit risk relating to property activities
The Group receives property rental income from its investments
in PRS assets. Risk is mitigated as PRS assets consist of
residential family housing with multiple tenants in multiple
locations. Rental income is paid monthly in advance. Rental income
outstanding and due to the Company as at 31 December 2018 amounted
to GBP56,000
Credit risk arising related to financial instruments including
cash deposits
Risk arises as a result of the cash deposits with banks and
financial institutions. The Board of Directors believe the credit
risk on short term deposits and current account balances are
limited as they are held with banks with high credit ratings. As at
31 December 2018, short term deposits and current account balances
were held with the following banks:
Royal Bank of Scotland plc
Investec Bank plc
Barclays Bank plc
Lloyds Banking Group
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 capital expenditure and working capital requirements.
As at 31 December 2018, the Group's amount of current financial
assets was in excess of its financial liabilities by
GBP365,000,000. The table below summarises the maturities of the
Group's non-derivative financial liabilities as at 31 December
2018:
Less than one 1 - 3 years
year GBP'000 GBP'000
Trade and other
payables 24,937 2,475
3. Accounting Policies
The principal accounting policies applied in the preparation of
the condensed consolidated interim financial statements are
summarised below and in the annual audited financial statements for
the period ended 30 June 2018 as described in the Group's Annual
Report for that period and as available on the website
(www.theprsreit.com).
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 2018 were GBP230.3m of which GBP129.7m was readily
available. Capital investment outstanding for contracts entered
into as at 31 December 2018 were GBP177m. As at 31 December 2018,
the Group has no debt borrowing but has GBP200m of debt facilities
in place. 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. The
condensed consolidated interim financial information should be read
in conjunction with the Group's audited financial statements for
the year ended 30 June 2018, which have been prepared in accordance
with International Financial Reporting Standards ("IFRS") 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 group's financial
statements for the year ended 30 June 2018 have been reported on by
its auditors and delivered to the Registrar of Companies. The
report of the auditors on those financial statements was
unqualified and did not draw attention to any matters by way of
emphasis. It also did not contain a statement under section 498 of
the Companies Act 2006
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 16 - Leases
The standard is effective for accounting periods commencing on
or after 1 January 2019.
Under IFRS 16, most leased assets are capitalised by recognising
the net present value of the lease payments as an asset and a
financial liability representing the obligation to make future
lease payments. The Directors are assessing the impact of this
standard on the financial statements but anticipate that there will
be no impact on the Group's financial statements as it does not
hold any operating leases as lessee.
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 2018, 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, is measured initially at its cost
including related transactions costs. After initial recognition,
investment property is carried at fair value. Investment properties
under construction are initially recognised at cost including
related transaction costs. Subsequently, the assets are re-measured
at fair value at each reporting date by where:
-- Fair value (at the date of valuation) = development spend to date plus
expected final uplift in valuation multiplied by % of site development
completed; where
-- Expected final uplift = Expected Investment value on completion less
gross development cost
This method of valuation is different to that as reported at 30
June 2018 but the Board believes is a much simpler and transparent
method of valuation than the residual approach previously adopted
and importantly provides a true worth and fair value of the assets
during the construction phase. 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 statement of comprehensive income.
Operating leases
Rental income charge to tenants from operating leases is
recognised on a straight line basis over the term of the relevant
lease. Tenant lease incentives are recognised as a reduction of
rental income when they arise. Amounts received from tenants to
terminate leases or to compensate for dilapidations are recognised
in the profit and loss account when the right to receive them
arises.
Cash
Cash and cash equivalents comprise cash in hand, cash at bank,
cash held in treasury deposits and cash held by solicitors.
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 arises from assured shorthold tenancies on
investment properties with a period no longer than 12 months and 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.
Costs of Borrowing
Borrowing costs are capitalised and are amortised over the debt
term.
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.
Acquisition of subsidiaries
During the period, the Group acquired two property owning
special purpose vehicles that were included in the IPO prospectus.
As set out in the group's annual financial statements for the
period to 30 June 2018, these acquisitions were dependent on the
IPO and have therefore been treated as business combinations in
line with the requirement of 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 PRS Sigma PRS
Investments Investments
IV & V (Our Lady's)
Limited Limited
GBP'000 GBP'000
Investment properties
acquired 10,320 11,660
Other receivables 13 13
Other payables (19) (29)
------------- --------------
Total consideration
paid 10,314 11,644
============= ==============
-- 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
Acquisition of subsidiaries - as a group of assets and
liabilities
During the period, the Group acquired a further five property
owning special purpose vehicles. The Directors considered whether
these acquisitions meet the definition of the acquisition of a
business or the acquisition of a group of assets and liabilities.
It was concluded that acquisitions did not meet the criteria for
the acquisition of a business as outlined in IFRS 3 as they did not
have an integrated set of activities and assets that were capable
of being conducted and managed for the purpose of providing a
return in the form of dividends, lower costs or other economic
benefits directly to investors. Furthermore, a business consists of
inputs and process applied to those inputs that have the ability to
create outputs. All assets acquired and liabilities assumed in
acquisition of a group of assets and liabilities are measured at
acquisition date fair value. The Directors have reviewed the fair
value of the assets and liabilities as at the date of the
acquisitions which were as follows:
Sigma PRS Sigma PRS Sigma PRS Sigma PRS
Investments Investments Sigma PRS Investments Investments
(Cable (Whitworth Investments (Darlaston (Sutherland
Street Way II) (Darlaston Phase 2 School
II) Limited Limited II) Limited II) Limited II) Limited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment properties
acquired 2,862 2,519 1,755 1,746 2,905
Other receivables - 473 - - 548
Other payables - - - - (20)
Total consideration
paid 2,862 2,992 1,755 1,746 3,433
============= ============= ============= ============= =============
-- 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 the amounts actually
recoverable.
-- Other creditor balances are measured at the amounts actually payable.
4. Rental Income
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Gross rental income from investment
property 2,320 583 1,765
------------- ------------- -------------
2,320 583 1,765
============= ============= =============
5. Investment Advisory Fees
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Advisory fee 2,195 1,382 3,295
------------- ------------- -------------
2,195 1,382 3,295
============= ============= =============
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.
6. General and Administrative Expenses
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Legal and professional fees 73 36 91
Administration and secretarial
fees 69 53 123
Audit and tax fees 59 23 134
Valuation fees 58 24 156
Depositary fees 20 17 56
Financial adviser and broker 30 35 66
Insurance 13 9 20
Public relations 32 20 41
Regulatory fees 87 75 134
Sundry expenses - 4 5
Costs of acquisition of subsidiaries 42 19 24
Disallowed VAT 69 49 127
------------- ------------- -------------
552 364 977
============= ============= =============
7. Finance Income
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest on short term deposits 488 192 570
------------- ------------- -------------
488 192 570
============= ============= =============
8. Finance Costs
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Amortisation of loan arrangement 132 - -
fees
Amortisation of loan commitment 114 - -
fees
246 - -
============= ============= =============
9. 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 2018, 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.
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 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.
Period from
Six months
ended 31 May to
Period ended
31 December 31 December 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Profit before tax 7,535 539 3,237
Tax at UK corporation tax standard
rate of 19% 1,432 102 615
Change in value of exempt investment
properties (1,550) (307) (1,048)
Exempt REIT income (340) (82) (232)
Amounts not deductible for tax
purposes - - 14
Unutilised residual current year
tax losses 410 287 582
Difference in deferred tax rates 48 - 69
------------- ------------- -------------
- - -
============= ============= =============
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 2018, 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.
10. Dividends
The following dividends were paid during the period:
Six months Period from Period from
ended 31 May to 31 May 2017
31 December 31 December to 30 June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Dividend of 1.5p for the 7 months
to 31 December 2017 - - 3,757
Dividend of 1.0p for the 3 months
to 31 March 2018 - - 4,943
Dividend of 2.5p for the 3 months
to 30 June 2018 12,382 - -
Dividend of 1.0p for the 3 months
to 30 September 2018 4,953 - -
------------- ------------- -------------
17,335 - 8,700
============= ============= =============
On 31 July 2018, the Company announced the declaration of an
interim dividend in respect of the period to 30 June 2018 of 2.5
pence per Ordinary Share, which was payable on 31 August 2018 to
shareholders on the register as at 10 August 2018.
On 31 October 2018, the Company announced the declaration of an
interim dividend in respect of the period from 1 July 2018 to 30
September 2018 of 1.0 pence per Ordinary Share which was payable on
30 November 2018 to shareholders on the register as at 9 November
2018.
A further dividend was paid during February 2019 which is
detailed under note 20, Post Balance Sheet Events.
11. Investment Property
In accordance with International Accounting Standard, IAS 40
'Investment Property', investment property has been independently
valued at fair value by Savills (UK) Limited, 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.
Completed Assets under
Assets Construction Total
GBP'000 GBP'000 GBP'000
Properties acquired on acquisition
of subsidiaries 31,695 3,059 34,754
Property additions - subsequent
expenditure - 20,585 20,585
Change in fair value 175 1,443 1,618
Transfers to completed assets - - -
---------- -------------- --------
As at 31 December 2017 31,870 25,087 56,957
Properties acquired on acquisition
of subsidiaries 9,075 7,581 16,656
Property additions - subsequent
expenditure - 43,599 43,599
Change in fair value 675 3,222 3,897
Transfers to completed assets 2,015 (2,015) -
---------- -------------- --------
As at 30 June 2018 43,635 77,474 121,109
Properties acquired on acquisition
of subsidiaries 21,980 11,787 33,767
Property additions - subsequent
expenditure - 106,199 106,199
Change in fair value 1,534 6,623 8,157
Transfers to completed assets 35,657 (35,657) -
---------- -------------- --------
As at 31 December 2019 102,806 166,426 269,232
Change in fair value 2,384 11,288 13,672
========== ============== ========
Fair Values
IFRS 13 sets out a three-tier hierarchy for financial assets and
liabilities valued at fair value. These are as follows:
Level 1 quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2 inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or
indirectly; and
Level 3 unobservable inputs for the asset or 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:
Completed assets:
Type Range
Investment yield 4.25% - 4.75%
Gross to net assumption 22.5% - 25%
12. Share Capital
No. of Shares Share Capital
GBP'000
Balance at 31 May 2017 - -
Shares issued in relation to
IPO 250,000,000 2,500
Balance as at 31 December 2017 250,000,000 2,500
Shares issued in relation to
management contract 445,578 4
Shares issued in relation to
Placing Programme 243,902,440 2,439
-------------- --------------
Balance as at 30 June 2018 494,348,018 4,943
Shares issued in relation to
management contract 929,276 10
-------------- --------------
Balance as at 31 December 2018 495,277,294 4,953
============== ==============
13. Share Premium Reserve
The share premium relates to amounts subscribed for share
capital in excess of nominal value.
Share Premium
GBP'000
Balance at 31 May 2017 -
Share premium arising on shares issued in relation
to IPO 247,500
Share issue expense in relation to the IPO (5,000)
Transfer to capital reduction reserve (242,500)
--------------
Balance as at 31 December 2017 -
Share premium arising on shares issued in relation
to the management contract 463
Share premium arising on shares issued in relation
to the Placing Programme 247,561
Share issue expense in relation to the Placing Programme (3,999)
--------------
Balance as at 30 June 2018 244,025
Share issue credit in relation to Placing Programme
expenses 18
Share premium arising on shares issued in relation
to the management contract 962
--------------
Balance as at 31 December 2018 245,005
==============
14. Capital Reduction Reserve
As at As at As at
31 December 31 December 30 June
2018 2017 2018
GBP'000 GBP'000 GBP'000
Opening balance 233,800 - -
Transfer from share premium reserve - 242,500 242,500
Dividends paid (17,335) - (8,700)
------------- ------------- ---------
Balance at end of period 216,465 242,500 233,800
============= ============= =========
15. 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
attributable Weighted average
to ordinary number of Earnings
shareholders Ordinary Shares per share
GBP'000 Number Pence
For the period ended 31 December
2018 7,535 495,085,378 1.52
For the period from 31 May to
31 December 2017 539 250,000,000 0.22
For the period ended 30 June
2018 3,237 330,854,803 1.00
-------------- ----------------- -----------
16. 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 As at As at
31 December 31 December 30 June
2018 2017 2018
Net assets at end of period (GBP'000) 477,195 245,539 486,0056
Shares in issue at end of period
(number) 495,277,294 250,000,000 494,348,018
Basic IFRS NAV per share (pence) 96.3 98.2 98.3
============= ============= ============
The NAV per share calculated on an EPRA basis is the same as the
Basic IFRS NAV per share.
17. Capital commitments
The Group have entered into contracts with unrelated parties for
the construction of residential housing with a total value of
GBP318,074,000. As at 31 December 2018, GBP176,930,000 of such
commitments remained outstanding.
18. Contingent Liability
The Investment Adviser is currently seeking clearance from HM
Revenue and Customs in terms of the VAT rate applicable that it
applies to the Investment Advisory fee that is charged to the
Company. After seeking specialist advice the Investment Adviser
believes that the fees charged will be treated as a VAT exempt
supply.
The Company might have to pay the VAT on investment advisory
fees. For the period 31 May 2017 to 31 December 2018 the amount of
VAT that would have applied to the Investment Advisory fees is
GBP1,098,000.
19. 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 1 July 2018 to 31 December 2018, fees of
GBP2,195,000 were incurred and payable to Sigma PRS Management Ltd
in respect of investment advisory services. At 31 December 2018,
GBP372,000 remained unpaid.
For the period from 1 July 2018 to 31 December 2018, development
fees of GBP4,533,000 were incurred and payable to Sigma PRS
Management Ltd. At 31 December 2018, GBP1,155,000 remained
unpaid.
On 8 August 2018, Sigma PRS Management Ltd acquired 929,276
shares in the Company equivalent to 50% of the development
management fee earned for the period from 1 July 2018 to 31
December 2018. Subsequent to 31 December 2018, Sigma PRS Management
Ltd acquired a further 976,804 shares.
During the period from 1 July 2018 to 31 December 2018, the
Company acquired the following subsidiaries from Sigma Capital
Group plc, the ultimate holding company of the Investment
Adviser:
Name of Entity Consideration
Sigma PRS Investments IV and V Limited GBP10,314,000
--------------
Sigma PRS Investments (Our Lady's) GBP11,664,000
Limited
--------------
Sigma PRS Investments (Cable Street GBP2,862,000
II) Limited
--------------
Sigma PRS Investments (Whitworth GBP2,992,000
Way II) Limited
--------------
Sigma PRS Investments (Darlaston GBP1,755,000
II) Limited
--------------
Sigma PRS Investments (Darlaston GBP1,746,000
Phase 2 II) Limited
--------------
Sigma PRS Investments (Sutherland GBP3,433,000
School II) Limited
--------------
20. Post Balance Sheet Events
Dividend
On 31 January 2019, the Company declared an interim dividend in
respect of the period from 1 October 2018 to 31 December 2018 of
1.0p per Ordinary Share totalling GBP4,952,773. The dividend was
paid on 28 February 2019 to shareholders on the register at 8
February 2019.
Acquisition of investment properties
Since 31 December 2018 and to the date of this report, the
Company has acquired the following land for development of
investment property:
-- Acquired a site in January 2019 located in Rochdale, Greater Manchester
for GBP217,000; and
-- Acquired a site in January 2019 located in Newhaven, Salford for GBP2,782,000.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GGUGCWUPBGBG
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March 12, 2019 03:01 ET (07:01 GMT)
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