TIDMPRSR
RNS Number : 2521T
PRS REIT PLC (The)
24 March 2021
24 March 2021
PRSR.L
The PRS REIT plc
("the Company" or "the PRS REIT")
Interim Results for the six months to 31 December 2020
Highlights
Strong progress with home completions accelerating
Summary
-- Strong progress over the period, after the opening up of the
construction and lettings sector in May 2020 following initial
national lockdown
-- Total dividend target* for FY2021 remains at a minimum of
4.0p per ordinary share - with dividends of 1.0p per ordinary share
having already been paid for each of Q1 and Q2. Dividend
progression* expected in FY2022
-- Shares admitted to trading on the Premium Segment of the Main Market on 2 March 2021
Financial
H1 2021 H1 2020 Change
Rental income (gross) GBP10.7m GBP5.6m +91%
------------------- ------------------- -------
Profit from operations GBP24.7m GBP12.4m +99%
------------------- ------------------- -------
Profit before tax GBP20.3m GBP11.0m +85%
------------------- ------------------- -------
Basic earnings per share 4.1p 2.2p +86%
------------------- ------------------- -------
Net assets at 31 December GBP476.3m GBP470.4m +1%
------------------- ------------------- -------
96.2p 95.0p
IFRS and EPRA NAV per share (after cumulative (after cumulative
at dividend payments dividend payments
31 December of 15.0p) of 11.0p) +1%
------------------- ------------------- -------
Operational
At At
31 December 31 December
2020 2019 Change
Completed homes
------------- ------------- -------
Number of completed PRS homes 3,163 1,617 +96%
------------- ------------- -------
Estimated rental value ("ERV") per
annum GBP29.4m GBP14.9m +97%
------------- ------------- -------
Contracted homes
------------- ------------- -------
Number of contracted homes 1,963 3,328 -41%
------------- ------------- -------
ERV per annum GBP19.4m GBP32.7m -41%
------------- ------------- -------
Total number of sites (completed
and contracted) 65 62 +5%
------------- ------------- -------
Number of completed and contracted
units 5,126 4,945 +4%
------------- ------------- -------
ERV per annum GBP48.8m GBP47.6m +3%
------------- ------------- -------
-- 1,081 new rental homes were added in H1 (H1 2019: 444),
taking the portfolio to 3,163 completed homes at 31 December 2020,
up 96% from a year ago and up 52% on H2 2020
o includes three acquisitions of completed and let developments;
175 homes in total
o ERV of portfolio at period end was GBP29.4m per annum, almost
double a year ago (2019: GBP14.9m)
-- Coronavirus-related disruption of construction activity
reduced activity level by c. 10% over the period
Completed assets performed well and demand is strong - rent roll
almost doubled year-on-year, while rent arrears remained static
Outlook
-- At 19 March 2021, the portfolio had grown to 3,530 completed
homes, with c.1,600 homes under way
o 3,359 homes were let, providing an annualised rental income of
GBP30.9m and a further 93 homes reserved with qualified
applicants
-- The Board is confident of prospects for the remainder of the
financial year and the Company remains firmly on track to take
delivery of its 5,000(th) new home by early 2022
-- Family rental housing market in the UK remains significantly
undersupplied, providing a strong underpin for the Company's
longer-term growth prospects
Steve Smith, Non-Executive Chairman of The PRS REIT plc,
said:
"The PRS REIT has made strong progress since construction
activity reopened in May after the initial national lockdown.
"Several major milestones were reached in the period. The
portfolio's 3,000th new rental home was added in December,
following the delivery of the 2,000th home in June, and the balance
of our GBP 900 million gross funding resource was fully committed.
The acquisition of three fully-completed and let sites has
accelerated income delivery, and we remain well on our way to our
5,000th home by early 2022, based on current construction
schedules.
"The PRS REIT has now created the largest portfolio of
brand-new, single-family rental homes in the UK. We are fulfilling
an important social need, and demand for our high-quality,
professionally-managed homes remains strong. There continues to be
a deficit in supply and we are confident about prospects for the
Company and the delivery of our dividend target for the current
financial year."
*These are targets only and not a forecast. There can be no
assurance that these targets will be met and they should not be
taken as an indication of the Company's expected future results
.
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 Ltd Tel: 0333 999 9926
Graham Barnet, Mike McGill
N+1 Singer Tel: 020 7496 3000
James Maxwell, James Moat, Sebastian Burke
Panmure Gordon (UK) Limited Tel: 020 7886 2500
Chloe Ponsonby (Corporate Broking), Alex Collins
(Corporate Finance)
G10 Capital Limited (part of the IQEQ Group Tel: 020 3745 2826
as AIFM)
Paul Turner
KTZ Communications Tel: 020 3178 6378
Katie Tzouliadis, Dan Mahoney
NOTES TO EDITORS
About The PRS REIT plc
www.theprsreit.com
The PRS REIT plc 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. The Company is investing
GBP0.9bn in a portfolio of high quality homes for private rental
across the regions, having 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.
LEI: 21380037Q91HU97WZX58
About Sigma Capital Group plc
www.sigmacapital.co.uk
Sigma Capital Group plc ("Sigma") is a PRS, 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. The c ompany 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.
Sigma has created an unrivalled PRS platform, which sources
sites and brings together construction resource to develop them,
enabling Sigma to deliver an integrated solution to partners. As
well as sourcing sites and managing all stages of the planning and
development process, Sigma also manages the rental of completed
homes through its award-winning rental brand, 'Simple Life'.
The c ompany's subsidiary, Sigma PRS Management Ltd, is
Investment Adviser to The PRS REIT plc. In September 2020, Sigma
launched a joint venture with EQT Real Estate, the real estate
platform of global investment firm EQT to establish a GBP1bn
portfolio of high quality, new-build homes for private rental in
Greater London.
About Sigma PRS Management Ltd
Sigma PRS Management Ltd 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 operationally 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 Manager is G10 Capital Limited. Sigma PRS Management Ltd
is an appointed representative of G10 Capital Limited, which is
authorised and regulated by the Financial Conduct Authority
(FRN:648953).
Chairman's Statement
Overview
This interim report covers The PRS REIT plc's (the "Company" or
"PRS REIT") results and progress for the six months ended 31
December 2020.
The construction and lettings sectors were opened in early May
2020 in England, following the easing of restrictions put in place
during the initial national lockdown to contain the spread of the
coronavirus. Since then, our Investment Adviser, Sigma PRS
Management Ltd ("Sigma PRS"), together with all our delivery
partners, have worked hard to ensure the safety and welfare of all
those involved in the delivery and management of our homes, putting
in place new working protocols in line with government guidance. In
addition, Sigma PRS continued with its wide-range of tenant
initiatives, including online health and well-being classes and
community events, to ensure that customers have remained fully
supported.
Despite the challenges, I am pleased to report that the Company
performed well. We took delivery of 3,000(th) home in early
December, having reached our 2,000(th) home in mid-June. In total,
1,081 new homes were added over the period. This compares to 909
homes added over the entirety of the last financial year. These new
additions took the Company's portfolio by 31 December 2020 to 3,163
homes (30 June 2020: 2,082 and 31 December 2019: 1,617), providing
an estimated rental value ("ERV") of GBP29.4 million per annum.
Construction spanned 65 sites across the regions of England (31
December 2019: 62 sites).
The Company made three acquisitions of fully completed and let
sites in the period, two from Sigma Capital Group and one from
BlackRock Real Assets. Together they added 175 newly-built,
fully-let homes, with a combined ERV of approximately GBP1.8
million. The latter acquisition also marked the full commitment of
the balance of the Company's funding resource of GBP900 million
(gross), and accelerated income delivery for the Company.
Rent collection and rent demand both remained strong. Over the
six months to 31 December 2020, rent collections matched rent
invoiced during the period while rent arrears (defined as rent
outstanding past its due date) remained unchanged at only GBP0.2
million. This is less than 1% of annualised ERV of GBP29.4 million
on completed homes. At 31 December 2020, 3,045 homes of the 3,163
completed homes were occupied, and a further 55 homes were reserved
to qualified applicants, with rental deposits paid.
The latest data on construction activity at 19 March 2021 shows
that an additional 367 homes have been completed since 1 January
2021, taking the portfolio to 3,530 completed homes across six
regions, with an ERV of GBP32.5 million per annum. Approximately
352 homes were let or reserved between 1 January and 19 March 2021.
The total number of homes let at that date was 3,359, providing an
annualised rental income of GBP30.9 million, and a further 93 homes
were reserved to qualified applicants, with rental deposits paid.
An additional 1,600 homes are currently under construction.
The Company's resilience through the crisis reflects both our
robust business model and careful financial management. Our housing
delivery model, based on fixed-price design and build contracts,
limits construction risk and our diversified customer base provides
a robust underpinning to rental income. The Company's financial
position remains very strong, and the cost base has been covered by
gross rental income since before the initial lockdown in March
2020.
The PRS REIT's growing portfolio of homes is establishing it as
a leading player in the build-to-rent sector, and we remain the
only quoted REIT to focus exclusively on the Private Rented Sector
("PRS") in the UK and the first to focus on family homes. This
market continues to be underserved, with the majority of
build-to-rent activity concentrated on the development of city
centre flats. We expect long-term demand for our family houses to
remain strong, given the severe shortage of housing and the
attraction of our high quality, well-located,
professionally-managed homes.
We are pleased to have strong governmental support, including
from Homes England, the public body sponsored by the Ministry of
Housing, Communities & Local Government, as a shareholder.
In January 2021, we extended our Investment Advisory Services
contract with Sigma PRS. This has secured access to an unrivalled
platform in the private rented sector, which is capable of
providing a comprehensive service spanning site origination and
development, and asset management. It allows us to plan effectively
for the next stage of the Company's development, providing greater
clarity over future growth.
The Company's transfer from the Specialist Fund Segment to the
Premium Segment of the Main Market of the London Stock Exchange
took place on 2 March. The migration will enable us to broaden the
share register and facilitates our eligibility for inclusion in
FTSE's EPRA and UK Index Series.
Financial results
Revenue, which was all derived from rental income, increased
year-on-year by 91% to GBP10.7 million in the six months ended 31
December 2020 (H1 2019: GBP5.6 million), reflecting continued
growth in completed and let homes in the portfolio. After
non-recoverable property costs, the net rental income for the
period increased by 87% to GBP8.4 million (H1 2019: GBP4.5
million).
Profit from operations rose by 99% to GBP24.7 million over the
first half (H1 2019: GBP12.4 million) after gains of GBP19.4
million from fair value adjustments on investment property (H1
2019: GBP10.9 million) and total expenses of GBP3.1 million (H1
2019: GBP2.9 million). Profit before tax for the period increased
by 85% to GBP20.3 million (H1 2019: GBP11.0 million) and basic
earnings per share rose by 86% to 4.1p (H1 2019: 2.2p).
As at 31 December 2020, the PRS REIT's net assets had risen to
GBP476.3 million over the six month period (30 June 2020: GBP470.9
million and 31 December 2019: GBP470.4 million). This represents a
net asset value ("NAV") per share of 96.2p, on both the
International Financial Reporting Standards ("IFRS") basis, as
adopted by the European Union, and the European Public Real Estate
Association ("EPRA") basis (30 June 2020: IFRS and EPRA NAV both
95.1p).
The movement in the NAV position, from 95.1p to 96.2p between 30
June 2020 and 31 December 2020, is after total dividend payments of
3.0p per share (GBP14.9 million). These dividend payments related
to the third and fourth quarters of the 2020 financial year and the
first quarter of 2021, and were paid respectively in July,
September, and December 2020.
Operating cash inflows continue to exceed operating outflows and
cover the Company's cost base.
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
IFRS EPS (pence per share) 4.1 2.2 3.3
------------------ ------------------ ----------------
EPRA EPS (pence per share) 0.2 - 0.1
------------------ ------------------ ----------------
As at As at As at
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
IFRS NAV (pence per share) 96.2 95.0 95.1
------------------ ------------------ ----------------
EPRA NAV (pence per share) 96.2 95.0 95.1
------------------ ------------------ ----------------
Dividends
Three dividend payments, each of 1.0p per ordinary share, were
made in the period, on 17 July, 18 September and 11 December 2020.
These payments related to the three-month periods ended 31 March,
30 June and 30 September 2020. A dividend of 1.0p per ordinary
share relating to the second quarter of the current financial year
ended 31 December 2020 was paid on 8 March 2021 to shareholders on
the register as at 19 February 2021. This brought the total of
dividends paid to date since the Company's inception in May 2017,
to 16.0p per share.
The Board expects to announce the payment of an interim dividend
for the three months ending 31 March 2021 in the fourth quarter of
the current financial year. It continues to target a minimum total
dividend of 4.0p per ordinary share for the current financial year.
This minimum target is expected to be fully covered by earnings on
an annualised basis by the middle of calendar 2021, with coverage
continuing to grow during the financial year ending 30 June 2022 as
construction, completions and lettings advance. The dividend for
the next financial year is expected to show progression on the
current financial year.
Debt Facilities
As at 31 December 2020, the Company had GBP450 million of
committed debt facilities available for utilisation. This comprises
GBP400 million of investment debt facilities and GBP50 million of
development debt facilities with our lending partners being
Scottish Widows (GBP250 million), The Royal Bank of Scotland plc
(GBP100 million), Lloyds Banking Group plc (GBP50 million) and
Barclays Bank PLC (GBP50 million). GBP75 million of the Lloyds
Banking Group/ RBS facility and the GBP50 million Barclays Bank PLC
debt facility are available to be drawn as development debt
facilities, which enables a larger number of sites to be developed
simultaneously. The debt facilities are subject to the maximum
gearing ratio of 45% of gross asset value such that the effective
maximum debt is GBP400 million. Approximately GBP360 million of
these facilities have been drawn to date with the remainder
expected to be utilised over the next 12 months as we finish the
current phase of construction, completion and letting activity. The
long-term investment debt facilities of GBP400 million have an
average term of 14.3 years and an average weighted cost of 2.4%
once fully drawn. As ever, we would like to thank our banking
partners for their support.
The Company's gearing, measured by comparing net debt to the
investment value of assets, is low at around 29% (31 December 2019:
4% and 30 June 2020: 15%) and it has headroom in its covenants.
Environmental, Social and Governance ( "ESG") Practices
The PRS REIT is a member of the UK Association of Investment
Companies and applies its Code of Corporate Governance to ensure
best practice in governance.
The Board of Directors is responsible for determining the
Company's investment objectives and policy, and has overall
responsibility for the Company's activities including the review of
investment activity and performance. The Board consists of five
independent non-executive directors, all of whom bring significant
and complementary experience in the management of listed funds,
equity capital markets, public policy, operations and finance in
the property and investment funds sectors.
The Board delegates the day-to-day management of the business,
including the management of ESG matters, to the Investment Adviser,
Sigma PRS. Sigma PRS, the creator of the PRS REIT, specialises in
the sourcing, development and management of PRS assets, with in
excess of GBP1 billion under management. It is also a signatory and
participant of the United Nations Global Compact.
Details of ESG policies and activities are contained separately
in the Investment Adviser's Report.
Board of Directors
Today, we are very pleased to welcome Geeta Nanda to the Board
as a Non-executive Director. She is Chief Executive Officer of
Metropolitan Thames Valley Housing Association ("MTVH") and brings
significant experience of the property sector, including the
Private Rented Sector. MTVH provides housing at different levels of
affordability for people living in London, the South East, East
Midlands and east of England, and manages 60,000 homes with 100,000
residents, as well as an ongoing new-build programme. Geeta was
previously Chief Executive Officer of Thames Valley Housing
Association Ltd, and oversaw its merger with Metropolitan Housing
Trust to create MTVH. She is also an Advisory Board member of
Cities Restart, the body dedicated to helping cities reopen
following COVID-19, a Board member of The National Housing
Federation, the industry body representing providers of housing,
and Vice Chair and Chair-elect of G15, the group of London's
largest housing associations.
Geeta was previously a Non-executive Director of McCarthy &
Stone plc, the retirement communities developer and manager, from
2015 until its acquisition in early 2021, a Non-executive Director
of The St Mungo Community Housing Association, a charity that helps
the homeless, and Vice Chair of SCOPE, the national disability
charity. In 2013, she was an awarded an OBE for her services to
social housing.
We look forward to working with her and are confident that her
wide-ranging skills and understanding of the sector will strengthen
the Board as the Company continues to develop.
Outlook
The pace of home completions has stepped up significantly over
the last six months, and with 3,530 completed homes in the
portfolio as at 19 March 2021 and a further 1,600 under way, the
Company has already created the largest portfolio of
newly-constructed, single-family rental homes in the UK.
The Company remains firmly on track to take delivery of its
5,000th completed home by early 2022, based on current construction
schedules. This will take us very close to our eventual, fully
optimised target of 5,200 homes, providing an ERV of approximately
GBP50.0 million per annum.
Demand for our homes continues to be strong and rent collection
remains robust, with arrears broadly constant from the start of
lockdown to March 2021 at GBP0.2 million despite the significant
increase in rent roll.
While the financial and economic impact of the coronavirus
crisis has created uncertainties, we believe that the PRS REIT
remains well-positioned for further progress. There continues to be
a deficit in the supply of high-quality family homes and we are
very pleased to play our part in fulfilling this important social
need. We remain confident about the delivery of our dividend target
for the current financial year and expect dividend progression in
the next financial year, subject to continuing good progress.
Overall, we continue to view prospects very positively.
Steve Smith
Chairman
23 March 2021
Investment adviser's report
Sigma PRS Management Ltd ("Sigma PRS"), the Investment Adviser
to the PRS REIT and a wholly-owned subsidiary of Sigma Capital
Group plc ("Sigma"), is pleased to report on the Company's progress
for the six months to 31 December 2020.
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 seeks 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. The aim is to create a
geographically diverse portfolio of properties that have easy
access to the main road and rail infrastructure and are close to
large employment centres and local amenities. Proximity to good
quality primary education is of particular importance and a major
attraction for families with children. While the Company is focused
on family houses, it will also invest in some low-rise flats in
appropriate locations where a greater diversity of rental levels is
required.
The PRS REIT is building its portfolios in two ways:
-- by acquiring undeveloped sites sourced by Sigma PRS. Their
subsequent delivery is managed by Sigma PRS (or another member of
the Sigma Group 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. 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 the Sigma group, or
from third parties. A pre-requisite is that these completed and
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 only 17% of the
Company's asset allocation.
Sigma, has a well-established PRS delivery platform, which
sources and develops investment opportunities. The PRS REIT has
first right of refusal over sites within Sigma's platform assuming
they meet its investment criteria and it has available capital to
fund the opportunities.
The platform comprises well-established relationships with
construction partners, particularly Countryside Properties PLC
("Countryside Properties") but also Engie Regeneration Limited,
Seddon Construction Limited, Springfield Properties plc and Vistry
Partnerships Limited (formerly Galliford Try Partnerships Limited),
as well as local authorities and letting agencies. These
relationships enable Sigma to identify and source land and deliver
and manage 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, has been extremely supportive of Sigma, with both
parties sharing the common goal of accelerating new housing
delivery in England.
Delivery progress
Towards the end of December 2020, we completed the full
allocation of the Company's gross funding of GBP900 million (which
includes gearing) by acquiring a fully-completed and let site from
BlackRock Real Assets for approximately GBP19.1 million. This was
after a careful review of the acquisition opportunities available.
The site, situated in Walkden, a suburb to the north west of
Manchester, comprises 123 homes and generates GBP1.16 million per
annum in rental income. It is well-known to us, having been
originally sourced and completed by Sigma's PRS property platform
in June 2019, and it is also similar to other sites in the PRS
REIT's portfolio.
In addition, we made two acquisitions of fully completed and let
sites in the period from Sigma for a total of GBP11.8 million.
These sites, in Lea Hall, Birmingham and Bury St Edmunds, Suffolk,
added a combined 52 homes, with an estimated rental value ("ERV")
of GBP0.6 million per annum. Together with the site acquired from
BlackRock Real Assets, they have helped to accelerate rental income
growth.
While the pace of housing delivery over the first half was
affected by coronavirus restrictions, a total of 1,081 new homes
were completed through our platform. This took the total number of
completed homes in the Company's portfolio at 31 December 2020 to
3,163. This is almost double the same point in 2019 when 1,617
homes had been completed, and a 52% increase from 2,082 homes at 30
June 2020. The homes have an ERV of GBP29.4 million per annum,
which is also almost double the GBP14.9 million of a year ago and a
54% increase from GBP19.1 million at 30 June 2020.
Purchases of investment property over the first half to 31
December 2020 totalled GBP104.1 million (H1 2019: GBP134.5
million). The year-on-year reduction reflects the natural cycle of
expenditure, from site acquisition through to unit development and
completion. Expenditure is typically higher during the earlier
months of acquiring and developing a site and reduces nearing
completion across a site.
The table below provides a summary of development activity, and
shows the cumulative number of PRS units that have been completed
since the launch of the Company on 31 May 2017 and the ERV of homes
under construction or completed.
At
At 31 December At 30 September 30 June At 31 December
2020 2020 2020 2019
Completed homes
Number of completed PRS units 3,163 2,634 2,082 1,617
--------------- ---------------- --------- ---------------
Rental income per annum GBP29.4m GBP24.3m GBP19.1m GBP14.9m
--------------- ---------------- --------- ---------------
Contracted homes
Number of contracted homes 1,963 2,369 2,803 3,328
--------------- ---------------- --------- ---------------
ERV per annum GBP19.4m GBP23.3m GBP27.4m GBP32.7m
--------------- ---------------- --------- ---------------
Total number of sites (completed
and contracted) 65 64 62 62
--------------- ---------------- --------- ---------------
Number of completed and contracted
units 5,126 5,003 4,885 4,945
--------------- ---------------- --------- ---------------
ERV per annum GBP48.8m GBP47.6m GBP46.6m GBP47.6m
--------------- ---------------- --------- ---------------
The number of sites in the Company's portfolio increased to 65
sites at 31 December 2020 (31 December 2019: 62). They span all the
major regions of England and, to date, 39 sites are fully complete
and producing income, with the remaining 26 still part-way through
development. Some of these part-completed sites are producing
rental income from completed and let homes. This reflects
construction planning, with development sites built out in such a
way that as tranches of homes are completed, they can be released
for letting while construction continues elsewhere on the site,
subject to health and safety review. The approach enables
development sites to become income-generating relatively
quickly.
Approximately 60% of homes in the portfolio, both completed and
under development, are located in the North West, with the Midlands
accounting for approximately 18%, and Yorkshire and the North East
representing around 15%. Homes in the South of England account for
7% of the portfolio. The wide geographical spread of homes across
the regions of England has created a diverse customer base, which
helps to mitigate concentration risk. This is particularly relevant
given the uncertainties in the economy caused by the coronavirus
pandemic and lockdown.
Between 1 January and 19 March 2021, we delivered a further 367
rental homes with an ERV of approximately GBP3.1 million per annum.
This has taken the Company's portfolio of completed homes at 19
March 2021 to 3,530 homes, with an ERV of around GBP32.5
million.
Rental performance and key performance measures
Over the first half of the financial year, annualised rental
income of completed assets almost doubled year-on-year to GBP29.4
million gross (31 December 2019: GBP14.9 million and 30 June 2020:
GBP19.1 million), reflecting the increase in asset delivery and
strong demand. Acquisitions of completed assets during the period
accelerated this rental income growth.
Despite the pressures during the period, rent collection
remained resilient matching rent invoiced in the period while rent
arrears remained static.
While rental growth in the period was affected by our decision
in March 2020 to freeze increases on tenancy renewals,
like-for-like growth was still in the region of 0.5%. During the
first lockdown, regulations meant that the average time taken to
re-let a property increased to a little over a fortnight, however
this has now returned to the pre-pandemic level of eight days,
which confirms strong underlying demand.
Reservation rates remained strong over the period and into 2021
with an average of 65 new applications currently being received
each week. At the Lower Broughton development in Salford, which is
the Company's largest development currently under way, comprising
299 homes across six blocks, 108 units have been let and 53 have
been reserved since the end of November 2020. At 19 March 2021, out
a total of 3,530 completed homes, 3,359 homes have been let,
providing annualised rental income of GBP30.9 million with a
further 93 homes reserved to qualified applicants with rent
deposits paid at that date.
The Company's cost base remains covered, and operating cash
inflows have increased in the period as rental income from
completed and let homes has grown.
As previously advised, legislative change, in the form of the
Tenant Fees Act 2019, which came into force on 1 June 2019, has
added almost 1.5% of additional cost to the lettings process, and
contributed to an increase in overall running costs. However, this
cost will reduce as the portfolio grows, reflecting a revised
letting agent fee structure that will lower total lettings costs by
over 1.0%. Currently, non-recoverable property costs are 21.3% of
gross rent, reflecting the higher lettings costs. All other costs
are in line with management's targets.
The table below summarises key performance measures on completed
assets as at 31 December 2020:
Average gross yields on cost of completed
assets 6.2%
Average capital uplift on completed assets
to Investment Value 9.7%
------
Average capital uplift on completed assets
to Vacant Possession Value 17.4%
------
Cost management of Gross to Net 21.3%
------
Like-for-like rental growth 0.5%
------
The Investment Valuation completed in December 2020 showed an
average uplift in the value of completed assets over the costs of
delivery of 9.7%. The average uplift in the value of completed
assets on a vacant possession basis against the cost of delivery
was 17.4%. Both of these uplifts provide significant headroom
between cost and value, underlining the benefits of the Investment
Adviser's PRS model.
ESG statement
We undertake the day-to-day management of the Company's ESG
strategy and take responsibility for how the Company's ESG
priorities are managed at both Company and asset level. We report
to the PRS REIT's Board on ESG on a quarterly basis.
Operational approach
To help focus and better direct ESG efforts, we have signed up
to the UN Global Compact, and are guided by its 10 core principles,
based on human rights, labour, environment and anti-corruption. In
November 2020, Sigma Capital Group plc appointed a dedicated ESG
Director, who will help to further develop our ESG initiatives, and
in December 2020, we appointed a leading sustainability consultant
specialising in real estate solutions to analyse the Company's
current ESG performance.
Work is currently under way towards submissions to achieve a
GRESB rating. Formerly known as the 'Global Real Estate
Sustainability Benchmark', GRESB is an organisation that provides
standardised and validated ESG data to the capital markets. It has
become the leading ESG benchmark for real estate and infrastructure
investments globally. We are also applying to join the European
Public Real Estate Association (EPRA), a non-profit association
representing Europe's publicly listed property companies. It works
to represent the real estate sector through the provision of better
information to investors and stakeholders, active involvement in
the public and political debate, improvement of the general
operating environment, and the promotion of best practices.
In order to incorporate ESG factors into our decision-making
processes and operations, our practices are based on the following
policy approaches:
Opportunity review
-- ESG risks are assessed, reviewed and monitored, and
strategies for enhancement and mitigation are set, based on the
understanding and recognition of the value assigned in the emerging
frameworks such as climate change and associated social need;
and
-- Mitigation plans are identified.
Investment decision
-- ESG issues are listed and addressed in a summary investment
paper that informs decision-making at the Investment Committee
stage; and
-- ESG costs, particularly ongoing community and charitable
involvement, continue to be determined and factored into the
investment decision process.
Asset management
-- Appropriate governance structures are established.
-- Relevant laws and regulations are adhered to.
-- COVID-19 Guidelines issued - structures, reviews and support
in place.
-- Ongoing monitoring and management of ESG issues is
established.
-- Impacts on the natural habitat surrounding PRS assets are
managed.
-- Local community engagement and support plans are established,
reviewed and developed.
-- Due diligence is performed on third parties.
-- Policy reviews and updates are ongoing.
-- Good practice is established.
-- Continued research and review of carbon reduction
opportunities are ongoing.
-- Investment restrictions are screened.
-- Investment's ability to comply with the ESG standards is
assessed.
Environment
Processes and strategies
As industry leaders in the provision of private rental homes, we
recognise our responsibilities and the changing priorities towards
the environment in our industry. The Government has recently set
out its 10 Point Plan for a 'Green Industrial Revolution'. The plan
aims to accelerate the UK's attainment of net zero carbon emissions
and encompasses energy, transport, innovation, and the natural
environment, with 2050 set as the endpoint of its net zero goal. In
our industry, there is a need for action in areas such as energy
and water consumption, non-fossil fuel heating provision,
biodiversity, and we aim to work with forward-looking partners, who
share our goals. In working towards further developing our ESG
agenda, we are embedding best practices, auditing and tracking the
supply chain, and ensuring that policies and activities comply with
our commitment to the UN Global Compact.
Partnerships
We continue to engage closely with our partners as they develop
and enhance their ESG focus and commitments. 'Future proofing'
assets, net zero carbon emissions and biodiversity are shared
priorities. We are pleased to report that our principal
construction partner Countryside Properties' modular construction
methods have reduced traffic flow and site waste, with factory
waste being recycled and diverted from landfill. Other partners are
also making progress with sustainability goals, including
recycling.
Energy & Power
We are putting in place plans for a transition away from gas
boilers, in line with the Government's pledge to ban gas boilers by
2025, and possibly as early as 2023. We are working with our
partners on alternative sources of heating, including air and
ground source heat pumps, which we expect to have installed on a
pilot basis in a sample of homes by the end of 2021.
Water
All homes completed in this period have been fitted with water
meters, flow restrictors on taps and dual flush cisterns, in line
with current building regulations. Our key delivery partner,
Countryside Properties, shares this commitment to water-saving
procedures, and has reduced site water usage for the third
consecutive year through regular inspections and water-saving
fittings.
Maintenance Support
We introduced a repair and management app, FixFlo, in the
period. This has significantly improved customer service levels and
has created operational efficiencies, reducing contractor visits
and related emissions.
Printing
Our printing partner, Pinksheep, operates a sustainability
scheme, which provides transparency over the sustainability of its
products and donates a proportion of our spending to Trees for
Life, a registered charity working to rewild the Scottish
Highlands. We also receive regular reports, updating us on our
carbon offset and planting data.
Physical Environment
We understand the benefits of green spaces for tenants, and are
developing a broad and ambitious biodiversity strategy. This
includes wildlife initiatives, a programme of planting native trees
and the creation of wildlife-friendly gardens and spaces. We are
also fostering links with The Woodland Trust, the UK's largest
woodland conservation charity, and Plant Britain. The coronavirus
pandemic has reinforced the importance of outdoor space for health
and wellbeing, and the physical environment of our developments
will continue to be an important focus.
Clothes Banks
We are installing clothes banks across all our sites, where
possible, and encourage residents to act sustainably. All donated
garments are either redistributed to good causes or recycled. We
also include reusable shopping bags and water flasks in the
'Welcome' boxes provided to new residents.
Transport
We continue to encourage employees of Sigma to join the Electric
Vehicle Scheme, which facilitates access to electric vehicles and
is supported through a salary sacrifice scheme. We are also
installing charging points on developments to encourage the use of
electric vehicles by residents. Our sites typically have good
access to public transport, which will also help to support lower
vehicle usage and reduced carbon emissions.
Schools and Education
Our support to local schools is long-standing and part of our
investment in local communities. The impact of lockdowns on schools
and their pupils has been severe and we look forward to supporting
school initiatives such as the Daily Mile running track at Mills
Hill Primary and the Pond Regeneration project at River View
Primary, as schools reopen.
Charities
In consultation with our residents, we donated GBP100,000 over
the 2020 calendar year to four nominated charities. The charities
selected from this consultation process were Centrepoint
(GBP24,840), which works with the homeless young people, Mind UK
(GBP31,980), the mental health charity, Trussell Trust (GBP17,700),
which works to alleviate hunger and poverty, and Women's Aid
(GBP25,480), which supports victims of domestic violence. A
donation of GBP12,500 was given to each charity, with the remaining
GBP50,000 allocated through a residents poll. Alongside this, we
continued to donate to and work with other charities. This included
The Salford Foundation, which champions disadvantaged young people,
where a number of our staff have been assisting online during the
lockdown.
Our Residents
Despite the challenges of the pandemic and lockdown, we have
been able to continue with our resident activities, both online and
in person. Our 'Simple Life' branded ice-cream van visited 29
communities during the summer when lockdown restrictions were
eased. In August 2020, the 'Simple Life' resident portal also went
live, enabling residents to access a variety of services such as
online payments, tenancy documents, 'how-to' guides, and the online
maintenance reporting tool, 'FixFlo'. We also engaged with
residents through Instagram and Twitter to provide lines of
communication during periods of lockdown.
Covid-19
During the coronavirus crisis, we offered deferred payment
support programmes to those experiencing difficulty paying rent,
with cases reviewed on an individual basis. We also offered support
for residents' physical and mental wellbeing, and extended our
'Peace of Mind Month' programme with a special 'health and
wellbeing' series. Videos were created for 'Simple Life' by
professionals, partners and residents across a range of themes,
including meditation, make-up, Pilates and baking, and we were
pleased to see a great sense of community develop as residents
engaged together online.
Health and Safety
In order to maintain high standards of health and safety for
those working on our sites, we commission monthly checks by
independent project monitoring surveyors to ensure that all
potential risks are identified and mitigated. These checks
supplement those undertaken by our development partners. The data
is reported to the Board on a quarterly basis in the event of a nil
return, and immediately in the event of an incident. We are pleased
to announce that there have been no reportable incidents in the
period.
Equality
We aim to provide a collaborative and supportive working
environment for all employees. Equality of opportunity is a core
value and we wish to ensure that the best person for any role has
the opportunity to apply for and to excel in it.
Governance
Strong governance is essential to ensuring that risks are
identified and managed, and that the interests of shareholders are
protected. Strong governance also helps to underpin a
well-functioning business and plays a part in ensuring the delivery
of returns in line with expectations.
Sigma and the Company are both subject to statutory reporting
requirements and to rules and responsibilities prescribed by the
London Stock Exchange. The Boards of both Companies include
independent non-executive directors who provide oversight, and
challenge decisions and policies as they see fit. Both Boards
believe in robust and effective corporate governance
structures.
Summary
Despite the coronavirus pandemic and the restrictions that have
slowed the pace of housing construction, we have made strong
progress with housing delivery over the first half, and the
Company's portfolio at 19 March 2021 stood at 3,530 completed
homes. With the remaining balance of the PRS REIT's gross funding
fully committed, we are now wholly focused on the delivery of homes
currently under development. Based on current schedules, we remain
firmly on target to deliver the portfolio's 5,000(th) home by early
2022.
Completed homes have continued to perform well across the
portfolio in 2021 and rental demand is strong. Between 1 January
and 19 March 2021, we continued to record strong lettings and
reservations, with the effective lettings ratio (which includes 93
qualified applicants with deposits paid) at 98%. We believe this
demonstrates the ongoing attraction of our homes, our high
standards of customer care and structural undersupply.
While there is no doubt that the coronavirus crisis continues to
create uncertainty, the Company's resilient model has been
demonstrated over the past year. Looking ahead over the remainder
of the financial year and beyond, we remain confident that the PRS
REIT is in a strong position to achieve its performance
targets.
The Board will consider the payment of an interim dividend in
respect of the three months to 31 March 2021 in the fourth quarter
of the current financial year. It continues to target* a minimum
total dividend for the current financial year of 4p per ordinary
share. A 4p dividend is expected to be fully covered by earnings on
an annualised basis by the middle of calendar 2021, with coverage
continuing to grow during the financial year ending 30 June 2022 as
construction, completions and lettings advance. For the next
financial year, we expect to see dividend progression*, subject to
continuing good progress.
Sigma PRS Management Ltd
23 March 2021
*These are targets only and not forecasts. There can be no
assurance that these targets will be met and they should not be
taken as an indication of the Company's expected future results
.
DEFINITIONS
The following terms shall have the meanings specified below:
"Average capital uplift on completed assets to investment value"
means the difference between investment value and gross development
cost divided by gross development cost.
"Average capital uplift on completed assets to vacant possession
value" means the difference between vacant possession value and
gross development cost divided by gross development cost.
"Average gross yields on completed assets" means current
expected rental value divided by gross development cost
"Committed" means 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.
"Contracted" means 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).
"EPRA NAV" means 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 term property business
model.
"EPS" means unadjusted earnings per share.
"EPRA EPS" means earnings per share excluding investment
property revaluations, gains and losses on disposals, changes in
the fair value of financial instruments and associated close out
costs and their related taxation
"IFRS NAV" means unadjusted net asset value.
"Pipeline" means 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.
CONDENSED CONSOLIDATED Statement of COMPREHENSIVE INCOME
For the six months ended 31 December 2020
Six months Six months Year ended
ended ended 30 June
31 December 31 December
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Rental income 10,676 5,607 12,945
Non-recoverable property costs (2,278) (1,140) (2,728)
------------- ------------- -----------
Net rental income 8,398 4,467 10,217
Administrative expenses
Directors' remuneration (70) (70) (140)
Investment advisory fee (2,143) (2,164) (4,339)
Administrative expenses (891) (680) (1,681)
------------- ------------- -----------
Total expenses (3,104) (2,914) (6,160)
Gain from fair value adjustment
on investment property 4 19,371 10,867 15,806
------------- ------------- -----------
Operating profit 24,665 12,420 19,863
Finance income - 188 220
Finance costs (4,411) (1,651) (3,676)
------------- ------------- -----------
Profit before taxation 20,254 10,957 16,407
Taxation - - -
------------- ------------- -----------
Total comprehensive income for the
period / year attributable to the
equity holders of the Company 20,254 10,957 16,407
============= ============= ===========
Earnings per share attributable
to the equity holders of the Company:
Basic IFRS earnings per share 6 4.1p 2.2p 3.3p
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 2020
Notes As at
As at 30 June
As at 31
December 31 December
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Investment property 4 700,591 519,870 577,119
------------- ------------- -----------
700,591 519,870 577,119
------------- ------------- -----------
Current assets
Trade receivables 189 227 191
Other receivables 5,095 2,718 3,463
Cash and cash equivalents 128,897 74,962 59,304
------------- ------------- -----------
134,181 77,907 62,958
------------- ------------- -----------
Total assets 834,772 597,777 640,077
------------- ------------- -----------
LIABILITIES
Non-current liabilities
Accruals and deferred income 7,291 2,976 4,598
Interest bearing loans and borrowings 331,197 96,807 145,244
------------- -------------
338,488 99,783 149,842
Current liabilities
Trade and other payables 19,967 27,570 19,314
------------- ------------- -----------
19,967 27,570 19,314
Total liabilities 358,455 127,353 169,156
------------- ------------- -----------
Net assets 476,317 470,424 470,921
============= ============= ===========
EQUITY
Called up share capital 5 4,953 4,953 4,953
Share premium account 245,005 245,005 245,005
Capital reduction reserve 171,890 191,701 186,748
Retained earnings 54,469 28,765 34,215
------------- ------------- -----------
Total equity attributable to
the equity holders of the Company 476,317 470,424 470,921
============= ============= ===========
IFRS net asset value per share 7 96.2p 95.0p 95.1p
As at 31 December 2020, there was 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 2020
Share Capital
Share premium reduction Retained Total
capital account reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2019 4,953 245,005 206,559 17,808 474,325
Dividend paid 10 - - (14,858) - (14,858)
Profit for the period - - - 10,957 10,957
At 31 December 2019 4,953 245,005 191,701 28,765 470,424
--------- --------- ----------- ---------- ---------
Dividend paid - - (4,953) - (4,953)
Profit for the period - - - 5,450 5,450
At 30 June 2020 4,953 245,005 186,748 34,215 470,921
--------- --------- ----------- ---------- ---------
Dividend paid 10 - - (14,858) - (14,858)
Profit for the period - - - 20,254 20,254
--------- --------- ----------- ---------- ---------
At 31 December 2020 4,953 245,005 171,890 54,469 476,317
========= ========= =========== ========== =========
condensed CONSOLIDATED STATEMENT OF Cash Flows
For the six months ended 31 December 2020
Year
ended
Six months Six months
ended ended 30 June
31 December 31 December
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 20,254 10,957 16,407
Finance income - (188) (220)
Finance costs 4,411 1,651 3,676
Fair value adjustment on investment
property 4 (19,371) (10,867) (15,806)
-----------
Cash generated from operations 5,294 1,553 4,057
Increase in trade and other
receivables (1,630) (1,730) (1,680)
Increase / (Decrease) in trade
and other payables 3,259 (3,634) (3,677)
Net cash generated from / (used
in) operating activities 6,923 (3,811) (1,300)
------------- ------------- -----------
Cash flows from investing activities
Acquisition of subsidiaries - (8,170) -
Purchase of investment property 4 (104,101) (126,328) (193,772)
Finance income - 221 236
------------- -------------
Net cash used in investing activities (104,101) (134,277) (193,536)
------------- ------------- -----------
Cash flows from financing activities
Bank and other loans 187,107 - 50,000
Finance costs (5,478) (2,038) (5,995)
Dividends paid (14,858) (14,858) (19,811)
------------- ------------- -----------
Net cash (used in) / generated
from financing activities 166,771 (16,896) 24,194
------------- ------------- -----------
Net increase / (decrease) in
cash and cash equivalents 69,593 (154,984) (170,642)
Cash and cash equivalents at
beginning of period 59,304 229,946 229,946
------------- ------------- -----------
Cash and cash equivalents at
end of period 128,897 74,962 59,304
============= ============= ===========
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 was quoted on the Specialist Fund Segment of the
Main Market of the London Stock Exchange until 2 March 2021 when it
migrated to the Premium Segment of the Main Market of the London
Stock Exchange.
This interim condensed consolidated financial information was
approved and authorised for issue by the Board of Directors on [2
3] March 2021 .
2. Basis of Preparation and changes to the Group's accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 31 December 2020 have been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's annual consolidated financial statements as at 30 June 2020
which have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the EU. The Group's
annual consolidated financial statements are available on the
Company's' website, www.theprsreit.com.
Adoption of new and revised standards
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 30 June 2020,
except for the adoption of new standards effective as of 1 July
2020. A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective for the
current accounting period. None of these are expected to have a
material impact on the consolidated financial statements of the
Group. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
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 - as a group of assets and
liabilities
During the period, the Group acquired three 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 the acquisitions did not meet the criteria for the
acquisition of a business, as outlined in IFRS 3, because 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 processes 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:
The PRS REIT Sigma PRS
Holyoake Unit Investments Sigma PRS
Trust (formerly (Bury St Investments
BlackRock Housing Edmunds) (Lea Hall)
Unit Trust) Limited Limited
GBP'000 GBP'000 GBP'000
Investment properties
acquired 19,000 5,945 5,905
Other receivables 489 17 11
Other payables (389) (45) (20)
-------------------
Total consideration paid 19,100 5,917 5,896
=================== ============= ================
-- 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 payable balances are measured at the amounts actually payable.
3. Going concern
The interim condensed consolidated financial statements have
been prepared on a going concern basis. The Group's cash balances
at 31 December 2020 were GBP129 million of which GBP3 million was
readily available. The Group had debt borrowing as at 31 December
2020, of GBP337 million, and has secured further facilities of
GBP113 million. Capital commitments outstanding as at 31 December
2020 were GBP93 million. The Group's ERV as at 31 December 2020,
was GBP29.4 million from 3,163 homes and has increased to
GBP32.5million from 3,530 homes as at 19 March 2021. This has
increased the Company's recurring income and at this level is more
than sufficient to cover monthly cash costs. The Company has
monitored and performed stress tests throughout the period since
the Government imposed the first national lockdown almost one year
ago and these have shown the Group to be in a strong position
throughout.
Therefore, 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 will have
adequate resources to continue in operational existence for the
foreseeable future and for a period of at least 12 months from the
date of the approval of the Group's interim condensed consolidated
financial statements for the six months ended 31 December 2020. The
Board is therefore of the opinion that the going concern basis
adopted in the preparation of the interim condensed consolidated
financial statements for the six months ended 31 December 2020 is
appropriate.
4. 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 valuations are reviewed by the Board.
Completed Assets under
assets construction Total
GBP'000 GBP'000 GBP'000
As at 1 July 2019 152,925 209,350 362,275
Properties acquired on acquisition
of subsidiaries 8,170 14,476 22,646
Property additions - subsequent
expenditure 9 123,073 123,082
Right-of-use assets 1,000 - 1,000
Change in fair value 1,373 9,494 10,867
Transfers to completed assets 48,765 (48,765) -
---------- -------------- --------
As at 31 December 2019 212,242 307,628 519,870
Properties acquired on acquisition
of subsidiaries - 388 388
Property additions - subsequent
expenditure (9) 51,912 51,903
Right-of-use assets 19 - 19
Change in fair value 917 4,022 4,939
Transfers to completed assets 18,133 (18,133) -
---------- -------------- --------
As at 30 June 2020 231,302 345,817 577,119
Properties acquired on acquisition
of subsidiaries 31,606 - 31,606
Property additions - subsequent
expenditure - 72,495 72,495
Change in fair value 6,761 12,610 19,371
Transfers to completed assets 102,850 (102,850) -
---------- -------------- --------
As at 31 December 2020 372,519 328,072 700,591
========== ============== ========
The historic cost of completed assets and assets under
construction as at 31 December 2020 was GBP643.5 million (30 June
2020: GBP540.2 million).
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 4.00% - 4.75%
(net)
Gross to net assumption 22.50% - 25.00%
5. Share capital
No. of Shares Share Capital
GBP'000
Balance as at 31 December 2019 495,277,294 4,953
============== ==============
Balance as at 30 June 2020 495,277,294 4,953
============== ==============
Balance as at 31 December 2020 495,277,294 4,953
============== ==============
6. 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
2020 20,254 495,277,294 4.1
For the year ended 30 June 2020 16,407 495,277,294 3.3
For the period ended 31 December
2019 10,957 495,277,294 2.2
-------------- ----------------- -----------
7. IFRS Net Asset Value per share
Basic Net Asset Value ("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
2020 2019 2020
Net assets at end of period (GBP'000) 476,317 470,424 470,921
Shares in issue at end of period
(number) 495,277,294 495,277,294 495,277,294
Basic IFRS NAV per share (pence) 96.2 95.0 95.1
============= ============= ============
The NAV per share calculated on an EPRA basis is the same as the
Basic IFRS NAV per share.
8. Capital commitments
The Group has entered into contracts with unrelated parties for
the construction of residential housing with a total value of
GBP620.0 million (30 June 2020: GBP628.5 million). As at 31
December 2020, GBP92.5 million (30 June 2020: GBP172.3 million) of
such commitments remained outstanding.
9. Transactions with Investment Adviser
On 31 March 2017, Sigma PRS Management Ltd ("Sigma PRS") was
appointed as the Investment Adviser ("IA") of the Company.
For the period from 1 July 2020 to 31 December 2020, fees of
GBP2.1 million (1 July 2019 to 31 December 2019: GBP2.2 million)
were incurred and payable to Sigma PRS in respect of investment
advisory services. At 31 December 2019, GBP0.7 million remained
unpaid (30 June 2020: GBP1.1 million).
For the period from 1 July 2020 to 31 December 2020, development
fees of GBP2.8 million (1 July 2019 to 31 December 2019: GBP5.3
million) were incurred and payable to Sigma PRS. At 31 December
2020, GBP1.0 million (30 June 2020: GBP0.7 million) remained
unpaid.
During the period from 1 July 2020 to 31 December 2020, Sigma
PRS acquired 1,500,000 shares in the Company, increasing the total
shares held by Sigma PRS in the Company to 5,889,852, which
represents 1.19% of the issued share capital in the Company. The
shares were acquired in the market at an average price of 75.6
pence per share. All the shares acquired to date were in accordance
with the Development Management Agreement between the Company and
Sigma PRS.
During the period from 1 July 2020 to 31 December 2020, the
Company acquired the following subsidiaries from Sigma Capital
Group plc, the ultimate holding company of the IA:
Name of Entity Consideration
Sigma PRS Investments (Bury St Edmunds) GBP5.9 million
Limited
--------------------------
Sigma PRS Investments (Lea Hall) Limited GBP5.9 million
--------------------------
10. Dividends paid and proposed
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Dividends on
ordinary shares
declared
and paid:
3 months to 30
June 2019: 2.0p
per share - 9,905 9,905
3 months to 30
September 2019:
1.0p per share - 4,953 4,953
3 months to 31
December 2019:
1.0p
per share - - 4,953
3 months to 31 4,953 - -
March 2020: 1.0p
per share
3 months to 30 4,953 - -
June 2020: 1.0p
per share
3 months to 30 4,953 - -
September 2020:
1.0p per share
---------------------------- ---------------------------- ---------------------------
14,858 14,858 19,811
============================ ============================ ===========================
Proposed
dividends on
ordinary
shares:
3 months to 31 4,953 - -
December 2020:
1.0p
per share
3 months to 31
March 2020: 1.0p
per share - - 4,953
3 months to 30
June 2020: 2.0p
per share - - 4,953
3 months to 31 - 4,953 -
December 2019:
1.0p
per share
---------------------------- ---------------------------- ---------------------------
4,953 4,953 9,906
============================ ============================ ===========================
The proposed dividend was paid on 8 March 2021, to shareholders
on the register at 19 February 2021.
11. Post balance sheet events
Dividends
On 10 February 2021, the Company declared a dividend of 1.0p per
ordinary share in respect of the second quarter of the current
financial year. The dividend was paid on 8 March 2021 to
shareholders on the register as at 19 February 2021.
Admission to the Premium Segment
On 2 March 2021 the entire issued share capital was admitted to
trading on the Premium Segment of the Main Market of the London
Stock Exchange.
Coronavirus
Coronavirus remains a real and existing risk which requires
careful monitoring and a management in conjunction with our house
building partners and Letting Agents in order to mitigate the
likely issues as much as possible pending the restoration of a more
normal working and living environment. As one would expect the
Company will continue to objectively review and assess the impact
of the coronavirus outbreak and government response on both its
strategy and focus of activities. Importantly, however, the
pandemic will ultimately pass and the Company is well placed to
thrive thereafter.
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END
IR SEIFUDEFSESD
(END) Dow Jones Newswires
March 24, 2021 03:00 ET (07:00 GMT)
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