TIDMPRSR
RNS Number : 4102C
PRS REIT PLC (The)
11 October 2022
PRSR.L
The PRS REIT plc
("PRS REIT" or "the REIT" or "the Company" or "the Group")
Audited Full Year Results
for the year ended 30 June 2022 & First Quarter Update
Portfolio now at 4,856 completed homes.
Assets are performing strongly, and rental demand continues to
grow
KEY POINTS
Financial
Year to Year to
30 June 30 June
2022 2021 Change
------------------------------------ ---------- --------- -------
Revenue GBP42.0m GBP26.6m +58%
Net rental income GBP34.3m GBP21.5m +60%
Operating profit GBP127.0m GBP53.7m +136%
Profit after tax GBP115.9m GBP44.1m +163%
Basic earnings per share 21.4p 8.9p +140%
Adjusted earnings per share ([1]) 3.0p 1.2p +150%
Net assets at 30 June GBP639m GBP490m +30%
IFRS NAV and EPRA NTA per share
([2]) 116.4p 99.0p +18%
------------------------------------ ---------- --------- -------
Operational
At At At
30 Sept 30 June 30 June Year-on-year
2022 2022 2021 change
--------------------------------- ---------- --------- --------- -------------
Number of completed homes 4,856 4,786 3,984 +20%
Estimated rental value ("ERV")
per annum* GBP49.4m GBP47.8m GBP37.5m +27%
--------------------------------- ---------- --------- --------- -------------
Number of contracted homes 670 693 1,071 -35%
ERV per annum GBP7.3m GBP7.2m GBP10.6m -32%
Completed and contracted sites 70 68 64 +6%
ERV per annum of completed
and contracted sites* GBP56.7m GBP55.0m GBP48.1m +14%
--------------------------------- ---------- --------- --------- -------------
Rent collected (as a percentage
of total rent invoiced for
the period) 99% 99% 98%
--------------------------------- ---------- --------- --------- -------------
*based on all completed units being occupied/income
producing
-- Net asset value up 30% year-on-year to GBP639m or 116.4p per
share at 30 June 2022 (2021: GBP490m or 99.0p per share)
- reflects ERV increase, underpinned by strong rental growth
- EPRA NTA was 116.4p per share
-- Assets continued to perform strongly, with rent collection at
99% for FY 2022 (2021: 98%) and occupancy at 98% at 30 June 2022
(2021: 98%)
- gross arrears remained low at GBP0.6m as at 30 June 2022 (30 June 2021: GBP0.4m)
- like-for-like blended rental growth over the year was 5.1% on
stabilised sites (where all units have been completed and either
all or nearly all have been let). Re-lets to new tenants achieved
c.10% rental growth
- average tenant rental affordability ratio now at 25% in 2022
(2021: 29%), notwithstanding 5.1% rental growth, indicating a
stronger tenant base
- operating costs reduced to 18.2% from 19.5%, reflecting the
benefits of scale and close management
-- Portfolio expanded with the addition of 802 homes in the
year, taking the total number of completed homes to 4,786 at 30
June 2022
- ERV up 27% to GBP49.4m p.a. as at 30 June 2022
- a further 693 contracted homes with an ERV of GBP7.2m p.a. were under way at 30 June 2022
- portfolio total revised to c.5,600 homes with ERV of
c.GBP57.5m p.a. (previously 5,700 homes, with ERV of c.GBP55.0m
p.a.). This reflects price inflation on new sites and higher debt
costs as well as significantly stronger rent
-- Total dividends of 4.0p per share declared (2021: 4.0p)
- minimum dividend of 4.0p per share targeted for FY 2023
-- Average net investment yield on the portfolio of 4.125% (30 June 2021: 4.25%)
-- Gearing on portfolio (measured as net debt vs. investment
value) low at 31%, with 62.5% of the existing GBP400m of investment
debt fixed rate at an average of 2.9%
Outlook
-- Portfolio to reach c.5,000 homes around the end of 2022 and
completed assets are performing strongly
- portfolio as at 30 September 2022 increased to 4,856 completed
homes, with an ERV of GBP49.4m p.a, and a further 670 homes with an
ERV of GBP7.3m p.a. are under way
- four development sites were acquired in Q1 2023
- energy efficiency of homes is high - 86% have an EPC rating of
'A' or 'B'; the balance is rated 'C', running costs are c. 25%
lower compared to homes built in 2010 according to independent
survey.
- Q1 2023 asset performance was strong, with occupancy at 98%
and rent collection at 99% as a proportion of rent invoiced during
the last quarter
-- UK rental market remains strong and there is a growing mismatch between supply and demand
- macro -economic environment - especially rising interest rates
- is increasing the numbers moving from buying to renting
Steve Smith, Chairman of the PRS REIT, commented:
"We've had another successful period with just over 800 new
rental homes added to the portfolio during the financial year. This
has taken the number of completed homes in the portfolio at the end
of September to 4,856. We expect to approach our 5,000(th) home
towards the end of 2022.
"We are now targeting 5,600 homes, providing over GBP1 billion
of assets with an anticipated rental income stream of GBP57.5
million a year.
"The portfolio continues to perform very well. We have seen
strong rental growth and anticipate increased occupier demand,
particularly in a rising interest rate environment, which will make
home ownership more unattainable for some. Affordability is more
achievable for our customers. Our tenant base spends on average 25%
of their income on rent, which is lower than last year's figure of
29%.
"While there are current challenges, we are well positioned to
weather the current volatility. More than 60% of our long-term
investment debt is at favourable fixed rates for an average 17
years, and the portfolio gearing is low at 31%.
"The structural shortage of high-quality rental homes in the UK
and rising demand against a backdrop of higher interest rates
continue to demonstrate a need for our model of high-quality,
professionally-managed single family rental homes."
For further information, please contact:
The PRS REIT plc Tel: 020 3178 6378
Steve Smith, Non-executive Chairman (c/o KTZ Communications)
Sigma PRS Management Limited Tel: 0333 999 9926
Graham Barnet, Mike McGill
Singer Capital Markets Securities Limited Tel: 020 7496 3000
James Maxwell, Asha Chotai (Investment Banking)
Alan Geeves, James Waterlow, Sam Greatrex
(Sales)
Panmure Gordon (UK) Limited Tel: 020 7886 2500
Chloe Ponsonby, Alex Collins
David Hawkins, Tom Scrivens (Sales)
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 ("PRS") and to
provide shareholders with an attractive level of income together
with the potential for capital and income growth. The Company is
investing over GBP1bn in a portfolio of high quality homes for
private rental across the regions, having raised a total of
GBP0.56bn (gross) through its Initial Public Offering, on 31 May
2017 and subsequent fundraisings in February 2018 and September
2021. The UK Government's Homes England has supported the Company
with direct investments. On 2 March 2021, the Company transferred
its entire issued share capital to the premium listing segment of
the Official List of the FCA and to the London Stock Exchange's
premium segment of the Main Market. Approaching its 5,000(th) new
rental home, which is expected at around the end of 2022, the
Company believes its portfolio is the largest build-to-rent
single-family rental portfolio in the UK.
LEI: 21380037Q91HU97WZX58
About Sigma Capital Group Limited
www.sigmacapital.co.uk
Sigma Capital Group Limited ("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 Company 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 excellent property procurement and
management 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
manages the rental of completed homes through its award-winning
rental brand 'Simple Life'. The Company's 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
Sigma Capital Group Limited 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 AIFM 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
Introduction
I am pleased to present The PRS REIT plc's ("the PRS REIT", or
the "Company" or the "Group") audited financial results for the
year ended 30 June 2022. Against a very turbulent backdrop, the
Company has continued to successfully deliver its objectives and
you will see throughout the Report the strong position that it has
achieved and the positive actions that it has taken.
Largest portfolio of single-family rental homes in the UK
We have continued to increase the Company's portfolio of new,
high-quality family rental homes, with 802 homes added during the
financial year. This took the total number of completed homes in
the portfolio to 4,786 by the financial year end, an increase of
20% (30 June 2021: 3,984 homes).
The estimated rental value ("ERV") from our 4,786 completed
homes is GBP47.8 million per annum, a 27% rise on the same point
last year (30 June 2021: GBP37.5 million per annum). The percentage
increase in rental value over the year compared to the percentage
increase in the number of completed homes over the year reflects
rental growth over the period.
Of the 802 additional homes, 66 homes were added through the
acquisition of two fully-developed and let sites from Sigma Capital
Group Limited, which were bought after having been independently
assessed and valued by Savills.
A further 693 homes, with an ERV of GBP7.2 million per annum,
were contracted at 30 June 2022, and are at varying stages of the
construction process.
Over the financial year, we acquired four sites, which we are
now developing. They have a combined ERV of GBP3.3 million. We have
acquired a further four development sites in the first quarter of
the new financial year.
The Company's portfolio of high-quality single-family homes and
apartments remains the largest of its kind in the UK. Our assets
are geographically widely spread. Currently, we have 70 sites
(2021: 64 sites) across the major regions of England and in
Scotland. Sites are in the North-West, North-East, Yorkshire, the
Midlands, and in the South-East (excluding London) and East of
England, with one site in Central Scotland. We are now targeting
approximately 5,600 homes with an ERV of around GBP57.5 million per
annum once the homes are fully completed and let. This compares to
the previous target of 5,700 homes with an estimated ERV of GBP55.0
million per annum immediately following our equity fundraise in
September 2021. The revision takes into account price inflation on
new sites and higher interest costs in relation to variable rate
debt.
Strong asset performance
I am pleased to report that our assets have performed strongly
throughout the year. Both occupancy and rent collection (which is
measured as rent collected relative to rent invoiced in any given
period) remained high. Rent collection for the year was 99% (2021:
98%) on this basis and occupancy stood at 98% at 30 June 2022 with
4,674 homes occupied out of the 4,786 completed homes (2021: 98%).
Including those homes where a letting had been agreed but occupancy
had not commenced, occupancy was 99%.
Net rental income for the financial year increased by 60%
year-on-year to GBP34.3 million (2021: GBP21.5 million). This
reflects the benefit of a full year's rental income on properties
that had been completed and let part-way through the prior year,
combined with both portfolio and rental growth.
Like-for-like rental growth on stabilised sites over the year
was 5.1% (1) . This reflects a blended rate of c.10% on re-lets to
new tenants and c.4% on renewals with existing tenants during the
period. Gross rent arrears remained modest despite the growth in
the portfolio, standing at GBP0.6 million at 30 June 2022 (30 June
2021: GBP0.4 million).
The PRS REIT's average rental affordability ratio has improved
to 25% in 2022 (2021: 29%). This is notwithstanding rental growth
over the year and compares to Homes England's affordability target
of 35%. We believe it indicates a stronger tenant base.
This strong asset performance demonstrates ongoing robust demand
for our high-quality homes, which is also supported by the
structural undersupply of family homes in the market.
In Propertymark's latest report on the lettings sector published
in September, the leading membership body for the residential
letting agents reported that the number of new tenants registered
on average per member branch reached a new peak in August, at 141.
At the same time, the supply of available homes to rent had not
risen in the last three months. Propertymark predicted that this
growing mismatch between supply and demand would exert upward
pressure on rent. Approximately 77% of its members reported a
month-on-month rent price increase in August.
The Company's Investment Adviser's report provides further
commentary on housing delivery and asset performance over the
year.
(1) Like-for-like rental growth on stabilised sites is defined
as the annual rental growth on sites where all units have been
completed and either all or nearly all have been let
Financial Results
Revenue, which is generated wholly from rental income, increased
by 58% year-on-year to GBP42.0 million (2021: GBP26.6 million).
This principally reflected a combination of the substantial
increase in the number of rental homes making up the portfolio and
strong rental growth. After the deduction of non-recoverable
property costs, which were 18.2% of revenue (2021: 19.5%), net
rental income for the financial year was GBP34.3 million (2021:
GBP21.5 million), an increase of 60% over the year.
Expenses in the year rose to GBP7.5 million (2021: GBP7.1
million, which included GBP0.5 million of one-off expenses relating
to the Company's migration to the Main Market). The increase over
the prior year reflects the rise in the size and scale of the
portfolio.
The gain from the fair value adjustment on investment property
increased significantly from the prior year to GBP99.7 million
(2021: GBP39.0 million). Almost 80% of this is attributable to
higher ERV with almost 20% reflecting yield compression, whilst
development surplus on assets under construction accounts for the
remaining portion of the uplift. ERV is now approximately GBP2.7
million higher than passing rent on completed and let properties,
reflecting the continuing demand for the Company's product. The
fair value of investment property is based on ERV rather than
passing rent.
Operating profit increased by 136% to GBP127.0 million (2021:
GBP53.7 million), which reflected the increase in completed and let
homes together with the rise in the portfolio valuation.
Finance costs were higher at GBP11.1 million (2021: GBP9.6
million) as we drew down and utilised investment debt facilities
and arranged additional development debt funding during the year.
Although interest rates rose towards and after the end of the
financial year, the impact of this was relatively small during the
period due to the quantum of fixed rate investment debt. Finance
income from short-term deposits in the year was GBP4,000 (2021:
GBPnil), again reflecting the low interest rate environment during
the financial year.
Profit after taxation increased by GBP71.8 million or 163% to
GBP115.9 million (2021: GBP44.1 million) while basic and diluted
earnings per share rose by 140% to 21.4p (2021: 8.9p) on an IFRS
basis.
The Group's IFRS net asset value ("NAV") per share and EPRA net
tangible asset ("NTA") per share at 30 June 2022, both increased to
116.4p (31 December 2021: 104.3p and 30 June 2021: 99.0p). This is
a year-on-year increase of 18% and a 12% increase over the prior
six months.
Net assets at 30 June 2022 were 30% higher year-on-year at
GBP639 million (30 June 2021: GBP490 million). This is after paying
dividends of GBP21.4 million in the year (2021: GBP24.8
million).
Dividends
For the year to 30 June 2022, aggregate dividends of 4.0p per
share were declared (2021: 4.0p per share) and paid to shareholders
(2021: 5.0p per share). Due to the timing of dividend payments, the
Company declared a total of 4.0p per ordinary share but paid a
total of 5.0p per ordinary share during the prior year under
review. Taking into account the dividend paid on 26 August 2022,
total dividends paid since the Company's inception in May 2017
amount to 22.0p per share.
Following the September 2021 equity placing, the current
dividend of 4.0p was almost fully covered on a run-rate EPRA EPS
basis at the end of the financial year. Dividend cover will
continue to grow as construction, completions and lettings
advance.
Debt Facilities
The Company had GBP440 million of committed debt facilities
available for utilisation as at 30 June 2022. Gearing on portfolio
(measured as net debt vs. investment value) remains low at 31%, and
62.5% of the GBP400 million of investment debt is fixed rate at an
average of 2.9%.
The GBP440 million of committed debt facilities comprised GBP400
million of investment debt facilities and GBP40 million of
development debt facilities although a small portion of the
investment debt facilities can also be utilised as development debt
facilities.
Our lending partners are: Scottish Widows (GBP250 million); The
Royal Bank of Scotland plc (GBP100 million); Lloyds Banking Group
plc (GBP50 million); and Barclays Bank PLC (GBP40 million). GBP25
million of the Lloyds Banking Group/ RBS facility and the GBP40
million Barclays Bank PLC debt facility are available to be drawn
as development debt facilities, which enables sites to be developed
simultaneously.
The debt facilities are subject to the maximum gearing ratio of
45% of gross asset value. Approximately GBP350 million of these
facilities have been drawn to date, with the remainder presently
forecast to be utilised over the next 12 months as we finish the
current phase of construction, completion and letting activity. The
fixed interest long-term investment debt facilities of GBP250
million have an average term of 17.6 years and an average weighted
cost of 2.9% once fully drawn.
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 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, who together bring significant and
complementary experience in fund management (including 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 Management Ltd ("Sigma PRS"), which is a subsidiary of
Sigma, and a signatory and participant of the United Nations Global
Compact. Sigma is part of PineBridge Investments, a private, global
asset manager with over US$140bn in assets under management at June
2022.
Details of ESG policies and activities are contained in the
Investment Adviser's Report. In that report, the results of our
recently commissioned Energy Efficiency Study are recorded.
Undertaken by Calfordseaden, a property and construction
consultancy firm, it compared the energy consumption of the
Company's properties with housing stock of various ages. We are
pleased to highlight that it found that on average, the Company's
homes were 74% cheaper to run on an annual basis than homes built
between 1900-1929, with running costs 25% lower compared to homes
built in 2010. Given the current energy crisis, this is a
significant plus point for our tenants.
Outlook
The macro-economic environment has become more uncertain with
the war in Ukraine, inflation and rising interest rates driving a
more negative outlook in the UK and globally. In terms of the UK
housing market, the impact of rising interest rates is expected to
reduce mortgage affordability and drive demand in the rental sector
as prospective homeowners turn to rental alternatives. We expect
these factors, together with the existing structural shortage of
quality family rental homes, to provide a strong underpinning to
demand in the private rented sector.
Against this backdrop, our high-quality, well-located homes
remain highly attractive to prospective renters. Our emphasis on
customer service and strong promotion of a sense of community in
our developments is also an important aspect of what our homes
offer. In addition, the proven energy efficiency of our homes is
particularly relevant with high and rising energy prices. The Board
remains confident that its cashflow will be stable and
sustainable.
The Company's exposure to interest rate increases is limited
with approximately 60% of investment debt fixed. In addition, our
fixed-price construction contracts will limit the Company's
exposure to price inflation on existing contracts.
During the first quarter of the new financial year, another 70
new homes were added to the portfolio, taking the total number of
completed homes at 30 September 2022 to 4,856 and the ERV of
completed homes to GBP49.4 million per annum, up by 20%. This
compares to 4,291 completed homes with a rental value of GBP41.1
million per annum at the same point last year. Another 670 homes,
with an ERV of GBP7.3 million per annum, were contracted and under
way at the end of the first quarter.
Asset performance remains strong. In the first quarter, rent
collection was 99% (2021: 99%) and total occupancy at 98% (30
September 2021: 98%), with 4,774 homes occupied out of the total of
4,856. A further 45 were reserved for applicants who had passed
referencing and paid rental deposits. Total arrears at 30 September
2022 were low at GBP0.6 million. Like-for-like blended rental
growth on stabilised sites was 5.0%.
Towards the end of the calendar year, we expect the number of
completed homes in the portfolio to near 5,000, which would take
the value of completed assets close to GBP1bn and annual rental
income to approximately GBP51.0 million.
We are targeting a minimum dividend of 4.0p per share* in the
new financial year, and will declare the interim dividend for the
first quarter of the financial year in October 2022.
On behalf of the Board, I would like to thank our investors,
customers and everyone involved in the ongoing delivery and
management of our rental portfolio, including our supporters in
government and our partner housebuilders. Together we are creating
attractive places to live and making an important contribution to
the UK housing stock, the welfare of local communities and to
families and individuals.
We expect to make further strong progress and look forward to
the year ahead. We will continue to consult with investors,
advisors and others as we assess the Company's next stage of
development.
Steve Smith
Chairman
10 October 2022
* 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.
IFRS AND EPRA PERFORMANCE MEASURES
Under the European Real Estate Association ("EPRA") best
practice recommendations ("BPR") for financial disclosures by
public real estate companies, three measures for reporting net
asset value are available, EPRA Net Tangible Assets ("NTA"), EPRA
Net Reinstatement Value ("NRV"), and EPRA Net Disposal Value
("NDV").
The Group considers EPRA NTA to be the most relevant measure for
its operating activities, and has adopted this as the Group's
primary measure of net asset value.
EPRA NRV is not considered an appropriate disclosure measure for
the PRS REIT as the Group has acquired, constructed and developed
the vast majority of assets and this would therefore equate to
adjusted historic construction cost.
The valuation of the Group's assets is undertaken in accordance
with RICS guidance. However, this does not include any adjustment
to reflect the size and scale of the Group's overall portfolio of
assets. The Board's view is that collective marketing of the
portfolio would attract a higher valuation reflecting yield
compression attributable to the size and scale of the overall
portfolio. In the absence of comparable market evidence for such a
portfolio, EPRA NDV is not considered an appropriate measure.
As in prior years, due to the stage of completion of the PRS
REIT's development assets within the Group's portfolio, it is not
considered appropriate to disclose the EPRA metrics of Net Initial
Yield and Cost Ratio at this reporting date.
KPI Explanation Performance
Year to Year to
30 June 2022 30 June 2021
----------------- ----------------
IFRS NAV Unadjusted net asset value 116.4p per share 99.0p per share
(see note
8)
----------------------------------- ----------------- ----------------
EPRA NTA EPRA Net Tangible Asset 116.4p per share 99.0p per share
(see note is net asset value adjusted
8) 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
----------------------------------- ----------------- ----------------
IFRS EPS Unadjusted earnings per 21.4p per share 8.9p per share
(see note share
4)
----------------------------------- ----------------- ----------------
EPRA EPS Earnings per share excluding 3.0p per share 1.0p per share
(see note investment property revaluations,
4) gains and losses on disposals,
changes in the fair value
of financial instruments
and associated close-out
costs and their related
taxation
----------------------------------- ----------------- ----------------
Company specific EPRA EPS (as above) adjusted 3.0p per share 1.2p per share
adjusted EPS to exclude the non-recurring
(see note 4) costs incurred by the
Company in the previous
year as part of the Migration
to the Premium Segment
of the Main Market
----------------------------------- ----------------- ----------------
EPRA Earnings EPRA Earnings is a measure GBP'000 GBP'000
of operational performance
and represents the net
income generated from
the operational activities
excluding changes in value
of investment properties
(see note 4) 16,162 5,130
----------------------------------- ----------------- ----------------
Market Dynamics
The Build-to-Rent ("BTR") sector has been maturing as an asset
class in the UK over the last 10 years. Nonetheless BTR remains a
very small proportion of the wider private residential rental
sector, at less than 2% in Q2 2022 according to Savills. More
recently, the rate of entry of new participants into the BTR sector
has increased together with the weight of capital. This trend
reflects the magnitude of the opportunity in the UK and increasing
recognition of the role of BTR in accelerating overall housing
delivery. The Letwin Report into build out rates, published in
October 2018, was one of the first independent reports to highlight
its role.
The British Property Federation ("BPF") monitors BTR delivery
and, at the end of April 2022, the BPF BTR Q2 2022 presentation,
prepared for BPF by Savills, reported a 14% increase in the number
of BTR homes delivered year-on-year, with a slight bias to regional
delivery. In its Q1 2022 update, the BPF reported 73,000 BTR
completions, 46,000 homes under construction, and a further 100,000
homes in planning. To provide context, the private rental sector as
a whole comprises approximately five million homes, with the market
fragmented and mainly comprising private landlords.
The major part of BTR delivery is still focused on apartments in
major city centres. By contrast, the PRS REIT is focused on
creating single-family homes in the suburbs. According to the BPF
BTR Q2 2022 presentation, single-family home delivery reached
approximately 8,500 homes in April 2022, with a further 9,500 units
currently either under construction or in planning. This puts the
PRS REIT at the forefront of this sector.
Demand in the private rented sector in recent years has been
further fuelled by substantial house price growth, which has
increased the hurdles to home ownership. According to the Office of
National Statistics, at the end of 2021, the ratio of average house
price to income in England was 9.1, up from 7.9 a year earlier. The
cessation of the stamp duty incentive in June 2021 and closure of
the Government's Help-to-Buy scheme to new applications on 31
October 2022, are likely to further increase demand in the private
rented sector. While the Mini-budget proposals in September 2022
sought to help those looking to purchase homes, with changes to the
stamp duty regime and an increase in the nil-rated threshold limit,
rising interest rates are likely to have a more profound effect.
Affordability remains the key constraint to home ownership, and
recent increases in mortgage rates will result in further interest
in the private rented sector.
Furthermore, as mortgage costs are rising sharply, it is evident
that a greater volume of rental homes will be required, with the
location and type of home also being important. There is a
significant undersupply in the sector, created by the lack of new
home delivery over many years and exacerbated in recent times by
outflows from the buy-to-let ("BTL") sector, which we expect to be
a significant market determinant in the coming period. The BTL
sector has experienced increasing costs and a series of tax and
regulatory changes, which has led to c.180,000 BTL mortgage
redemptions since 2016, according to research undertaken by
Savills. Further challenges are ahead for owners of older rental
homes, with new regulation requiring all rental homes to possess an
energy performance certificate ("EPC") of 'C' or above from 2025.
The average EPC in the UK is 'D'. This new regulation is expected
to lead to private landlords exiting the market, deterred by
prohibitive upgrade costs. The PRS REIT's portfolio is unaffected
since all of its homes are rated 'C' or above, with 86% rated 'A'
or 'B'.
The lack of adequate rental supply and increasing tenant demand
are likely to create further upward pressure on rents, especially
for homes that are well-located and well-managed. While there are
now more entrants in the single-family BTR sector, it continues to
be significantly underserved.
Private Rented Sector Reform
In June 2022, the Government published a policy paper, which set
out its long-term vision for the private rented sector. Titled "A
fairer private rented sector", it contains plans to fundamentally
reform the private rented sector in the country and level up
housing quality.
A list of the main proposals set out in the white paper is
below:
-- All rental homes will be required to meet a 'Decent Homes Standard' for the first time.
-- Section 21 of The Housing Act 1988 ('no-fault' evictions) is
set to be abolished. This would remove a landlord's ability to seek
possession after a fixed term has ended. Should a landlord have
reasonable grounds to seek possession, then Section 8 of the
Housing Act 1988 could be used.
-- Fixed-term tenancies, both assured and assured shorthold,
will be converted to periodic tenancies, so that tenancies will in
effect be open-ended.
-- Tenant rent increases will be limited to once a year.
-- First-tier rent tribunal - powers will be given to confirm or
reduce contested rents, but not to increase them (as is currently
the case).
-- Landlords and agents will not be able to institute blanket
bans on renting to families with children, those in receipt of
benefits and potentially other vulnerable groups.
-- Tenants will be given the right to request a pet in their
property, which cannot be unreasonably refused. The Tenant Fees Act
2019 will be amended so that landlords can request that their
tenants buy insurance to cover any damage that pets may create.
Other proposals include a new single Ombudsman and a Property
Portal, which will include a landlord registration scheme. Thought
is also being given as to how tenants can 'port' their deposits to
relieve them from having to find additional funds whilst the
custodial scheme for their preceding dwelling is being resolved or
arbitrated.
As a responsible and professional landlord with a high-quality
product and an emphasis on customer care, we welcome the
Government's desire to ensure that everyone has a right to a decent
home and to support responsible landlords. Its proposals align with
our own policies and therefore are unlikely to adversely impact the
way the Company operates .
Extract from Portfolio Analysis
As at 30 June 2022, the valuation of the Group's property
portfolio was GBP962 million (2021: GBP780 million) and the
investment value of all sites under way at that date was GBP1
billion on completion (2021: GBP829 million) with their ERV on
completion at GBP55 million (2021: GBP47 million).
Property Portfolio by Regional Split - at 30 June 2022
The regional split by investment value was - North West 54%
(2021: 56%), West Midlands 17% (2021: 18%), South East 12% (2021:
13%), Yorkshire 9% (2021: 9%), North East 3% (2021: 3%), East
Midlands 4% (2021: 1%) and Scotland 1% (2021: nil).
Other Metrics - at 30 June 2022
-- The rent roll at 30 June 2022 was GBP47.8 million (2021:
GBP37.5 million) and the average rent was GBP10,004 per annum or
GBP834 per month (2021: GBP9,420 per annum or GBP785 per
month).
-- Forecast average rent across the current portfolio when
complete is GBP10,500 per annum or GBP875 per month (2021:
GBP10,188 per annum or GBP849 per month).
-- The average size of site was 78 (2021: 79) housing units.
-- The split between 1, 2, 3 and 4-bed properties was
approximately 3%, 26%, 62% and 9% respectively (2021: 4%, 26%, 61%
and 9% respectively).
-- Contractor split was - Countryside 86%; Vistry 8%; Seddon 5%
and EQUANS (formerly Engie) 1% (2021: Countryside 78%; Vistry 15%;
EQUANS (formerly Engie) 4%; and Seddon 3%).
-- The deduction from gross to net rent across the portfolio for
the year ended 30 June 2022 was 18.2% (2021: 19.5%).
-- Bad debts (net) for the year were GBP381,000 (2021: GBP4,000
net recovery) and the bad debt provision at the year-end was
GBP281,000 (2021: GBP31,000) reflecting a prudent approach in the
current economic climate.
Age Groupings
The largest age grouping across the customer base at the time of
sampling on 30 June 2022 was 26-35 years. This grouping represented
41% of the total customer base, and is consistent with last year's
sample. There was a small decrease in under 25s within the
portfolio over the year, which is considered a fluctuation rather
than indicative of any broader social or macro-economic trend .
Age 2022 2021
Under 25 23.1% 27.6%
------
26-35 38.3% 40.5%
------
36-45 20.9% 16.3%
------
46-55 10.0% 9.3%
------
56-65 5.7% 4.7%
------
65+ 2.0% 1.5%
------
Household Income Bracket
There was very little change in the proportion of customers
across the main income brackets when compared with the preceding
year. The minor reduction of those earning under GBP25,000 as a
proportion of the customer base would seem to correlate with the
drop in residents under 25 years of age identified earlier. Those
earning over GBP65,000 have slightly increased for the second year
in succession. As a percentage of rent to household income, our
portfolio has an average of 25% compared to 29% in the prior year.
This indicates a stronger customer base and is after blended rental
growth of 5.1%.
Annual Household 2022 2021
Income
Under GBP25k 24.8% 25.6%
------
GBP25k-GBP35k 15.7% 19.6%
------
GBP35k-GBP45k 17.7% 18.5%
------
GBP45k-GBP55k 13.4% 13.6%
------
GBP55k-GBP65k 7.9% 6.9%
------
GBP65k+ 20.5% 15.5%
------
Tenancies with Children
Whilst the portfolio comprises mainly family homes, only
approximately 40% of households included children. Referring back
to the age groupings, it could be assumed that the major cohort of
26-35 year-olds are moving into the Company's homes with the
intention of starting a family. Of those residents with children,
the two largest groupings are those with two or four children.
Children 2022 2021
None 58.5% 58.9%
------
One child 8.5% 8.3%
------
Two children 16.9% 16.9%
------
Three children 3.5% 3.0%
------
Four+ children 12.6% 13.0%
------
Distance Travelled
The distance travelled by customers from their previous address
to their new 'Simple Life' (1) home is also recorded. The two
largest categories are those travelling between 10-50 miles and
greater than 50 miles. This supports growing national recognition
of the Simple Life brand.
Distance Travelled 2022 2021
<3 miles 24.0% 30.4%
------
3-10 miles 27.0% 29.0%
------
10-50 miles 21.7% 23.8%
------
>50 miles 27.3% 16.8%
------
All 2022 statistics are based on new applicant data between July
2021 and June 2022 and include sites acquired from Sigma. The prior
year's statistics are based on all successful Simple Life
applications referenced between June 2019 and June 2021.
(1) ' Simple Life' - The PRS REIT's rental homes are marketed
under the 'Simple Life' brand.
AWARDS
Scottish Home Awards Property Week Resi Awards 2022
Large Development of the Year Landlord of the Year 2022 (Simple
2022 (Bertha Park) Life Homes)
(Winner) (Winner)
Homes for Scotland Awards NW Insider Residential Property
Large Development of the Year Awards
2022 (Bertha Park) Apartment Scheme of the Year 2022
(Finalist) (Empyrean)
(Shortlisted)
NW Insider Residential Property
Awards CENE Awards
Tech of the Year (My Simple Life Residential Project of the Year
Mobile App) 2022 (Kirkleatham Green)
(Winner) (Shortlisted)
Property Week RESI Awards
CENE Awards Residential Company of the Decade
Building Project of the Year 2022 2021 (Sigma Capital)
(Kirkleatham Green) (Shortlisted)
(Shortlisted)
Property Week RESI Awards
Property Week RESI Awards Best Covid Response 2021
Health and Wellbeing Award 2021 (Winner)
(Shortlisted)
Home Views
Home Views Top 5 National Management Companies
Top 20 Regional Developments 2021 (over 2000 units) 2021 (Simple
(Prince's Gardens) Life Homes)
(Top 20 Finalist) (Top 5 Finalist)
Investment Adviser's Report
Sigma PRS Management Ltd ("Sigma PRS"), a wholly-owned
subsidiary of Sigma Capital Group Limited, is the Company's
Investment Adviser, and is pleased to provide a report on the PRS
REIT's activities and progress for the year ended 30 June 2022.
Operational Review
Development Activity and Acquisitions
A total of 802 homes were added to the PRS REIT's portfolio in
the financial year to 30 June 2022. This compared with 1,902 in the
prior year, and reflects the advanced stage of the rollout of the
portfolio, with fewer sites under active development as the
portfolio approaches maturity. Two fully-developed and let sites
were acquired during the year, comprising 66 homes in total. Both
sites were acquired from Sigma Capital Group Limited, having been
independently assessed and valued by Savills before
acquisition.
The total number of completed homes in the portfolio at the end
of June 2022 stood at 4,786, an increase of 20% on the same point
last year (2021: 3,984). The homes are located across six of the
eight major regions of England and one region in Scotland, and
their combined estimated rental value ("ERV") amounted to GBP47.8
million per annum as at 30 June 2022. This is a 27% increase in the
portfolio's rental value over the year (30 June 2021: ERV of
completed homes stood at GBP37.5 million per annum).
Four development sites were also acquired during the financial
year. They have an ERV amount of GBP3.3 million, and we have
acquired a further four development sites for the PRS REIT in the
first quarter of the new financial year.
The Company's assets now reflect a difference between ERV, used
for valuation, and anticipated rent paid by tenants. As at 30 June
2022, ERV was estimated to be GBP2.7 million higher than
anticipated rent in aggregate. This reflects the strength of demand
for the Company's portfolio of assets. The fair value of the
Group's investment properties as at 30 June 2022, is based on ERV
as opposed to anticipated rent.
The table below provides further information in summarised form
of development activity over the financial year, and includes data
for the first quarter of the new financial year as well as
comparative data for the financial year ended 30 June 2021.
At At At
30 September 30 June 30 June
2022 2022 2021
Number of completed homes 4,856 4,786 3,984
-------------- --------- ---------
ERV per annum of completed GBP49.4m GBP47.8m GBP37.5m
homes
-------------- --------- ---------
Completed sites 58 58 44
-------------- --------- ---------
Contracted sites 12 10 20
-------------- --------- ---------
Number of contracted homes 670 693 1,071
-------------- --------- ---------
ERV per annum of contracted GBP7.3m GBP7.2m GBP10.6m
homes
-------------- --------- ---------
Construction Resource
The construction resource provided by the Sigma PRS Platform has
national reach. It underpins the continued expansion of the Company
to key population centres in England and across the UK, supporting
the creation of a geographically diverse portfolio.
There are many clear benefits for our construction partners in
partnering with us. These include strengthening their ability to
bid for land with local councils and improving operational
efficiencies with their own housing delivery. This partnership
approach is working well and the model we operate of using standard
family house types, fixed price design & build contracts,
together with standardised specification, helps to ensure that
developments are built to budget and that our PRS assets can be
maintained and managed efficiently.
Financial Results
Income statement
The Group's revenue (which is wholly derived from rental income)
increased by nearly 60% over the year to GBP42.0 million (2021:
GBP26.6 million). After the deduction of non-recoverable property
costs, the net rental income was GBP34.3 million (2021: GBP21.5
million). Administration expenses were slightly higher at GBP7.5
million (2021: GBP7.1 million, which included non-recurring
accounting and legal expenses of GBP0.5 million incurred in
relation to the Company's migration to the Main Market).
The gain from the fair value adjustment on investment property
was GBP99.7 million (2021: GBP39.0 million), with the majority of
the increase attributable to higher rents and a small portion
attributable to yield compression in the current financial year.
Operating profit was GBP127.0 million (2021: GBP53.7 million).
Finance costs for the year were GBP11.1 million (2021: GBP9.6
million) reflecting the debt utilisation and associated costs
during the year as well as an increase in interest rates on
variable rate debt towards the end of the fiscal year. Finance
income for the period from short-term deposits was GBP4,000 (2021:
GBPnil). The profit after finance income and taxation was GBP115.9
million (2021: GBP44.1 million).
The basic and fully diluted earnings per share on an IFRS basis
for the year were 21.4p (2021: 8.9p).
Dividends
The Company has declared a total of 4.0p (2021: 4.0p) per
ordinary share for the year under review, which comprised the
following:
-- On 5 November 2021, the Company announced the declaration of
a dividend of 1.0 pence per Ordinary Share in respect of the period
from 1 July 2021 to 30 September 2021, which was paid on 3 December
2021 to shareholders on the register as at 19 November 2021.
-- On 18 January 2022, the Company announced the declaration of
a dividend of 1.0 pence per Ordinary Share in respect of the period
from 1 October 2021 to 31 December 2021, which was paid on 11
February 2022 to shareholders on the register as at 28 January
2022.
-- On 12 April 2022, the Company announced the declaration of a
dividend of 1.0 pence per Ordinary Share in respect of the period
from 1 January 2022 to 31 March 2022, which was paid on 13 May 2022
to shareholders on the register as at 22 April 2022.
-- On 25 July 2022, the Company announced the declaration of a
dividend of 1.0 pence per Ordinary Share in respect of the period
from 1 April 2022 to 30 June 2022, which was paid on 26 August 2022
to shareholders on the register as at 5 August 2022.
Balance Sheet
The principal items on the balance sheet are investment property
of GBP961.9 million (2021: GBP780.4 million), cash and cash
equivalents of GBP48.7 million (2021: GBP86.4 million), long-term
loans of GBP246.7 million (2021: GBP245.9 million), short term
loans of GBP100.0 million (2021: GBP110.0 million) and trade and
other payables, accruals and deferred income of GBP32.0 million
(2021: GBP27.2 million).
Investment property includes completed assets and assets under
construction at fair value. Trade and other payables include GBP4.9
million of development expenditure and GBP10.3 million for the
acquisition of a completed site, which was acquired on 30 June
2022, and paid in July 2022.
Debt Financing
The PRS REIT has the following debt facilities:
-- GBP150 million revolving credit facility with Lloyds Banking
Group / RBS for an initial term of three years, which can be
extended further for up to two years, matures February 2023.
Interest is based on three-month Sterling Overnight Interbank
Average Rate ("SONIA") plus applicable margin and the loan is
secured over assets allocated to Lloyds Banking Group. As at 30
June 2022, GBP85.4 million had been drawn (2021: GBP68.6
million);
-- GBP100 million term loan of 15 years with Scottish Widows,
fully drawn as at 30 June 2022 (2021: fully drawn). Interest is
fixed at 3.1%, matures June 2033 and the loan is secured over
assets allocated to Scottish Widows;
-- GBP150 million term loan of 25 years with Scottish Widows,
fully drawn as at 30 June 2022 (2021: fully drawn). Interest is
fixed at 2.8%, matures June 2044 and the loan is secured over
assets allocated to Scottish Widows; and
-- GBP40 million (2021: GBP50 million) development debt facility
with Barclays Bank PLC, matures August 2025. Interest is based on
three-month SONIA plus applicable margin and the loan is secured
over assets allocated to Barclays Bank PLC. As at 30 June 2022,
GBP15.2 million had been drawn.
The PRS REIT's aggregate borrowings will always be subject to an
absolute maximum, calculated at the time of drawdown of the
relevant borrowings, of not more than 45 per cent of the value of
the assets.
Gearing on the portfolio, which is measured as net debt against
investment value, remains low at 31%. Approximately 62.5% of the
GBP400 million of investment debt is fixed rate at an average of
2.9%.
Key performance indicators
The Company's aim to deliver sustainable earnings and long-term
capital growth through the execution of the Group's strategy is
tracked by monitoring the below key performance indicators ("KPI")
include:
KPI June 2022 June 2021
Rental income (gross) GBP42.0m GBP26.6m
---------- ----------
Average rent per month per tenant GBP834 GBP785
---------- ----------
Non-recoverable property costs as a percentage
of gross rent (gross to net) 18.2% 19.5%
---------- ----------
Fair value uplift on investment property GBP99.7m GBP39.0m
---------- ----------
Operating profit GBP127.0m GBP53.7m
---------- ----------
Dividends declared per share in relation to
the period 4.0p 4.0p
---------- ----------
Dividends paid during the period 4.0p 5.0p
---------- ----------
Number of properties available to rent 4,786 3,984
---------- ----------
All the KPIs are in line with management expectations. Rental
income increases, non-recoverable property costs, operating profit,
and the number of properties available to rent reflect the
increased size of the portfolio and the progression of development
sites.
It is also worth highlighting that the portfolio's average
rental affordability ratio has improved to 25% in 2022 (2021: 29%),
which is an indication of a stronger tenant base, and is after
rental growth of 5.1% over the year (on stabilised sites).
Post Period Review
Over the first quarter of the new financial year, 70 new homes
were added to the portfolio, taking the number of completed homes
at 30 September 2022 to 4,856, providing an ERV of GBP49.4 million
per annum. At the end of September 2022, contracted homes amounted
to 670, with an ERV of GBP7.3 million per annum. The total ERV of
contracted and completed homes at 30 September amounted to GBP56.7
million.
Following the September 2021 equity placing, the Company is
targeting a portfolio of 5,600 homes once complete with an ERV of
c.GBP56.0 million.
The table below provides further information of delivery
activity over the first quarter of the new financial year.
At At
30 September 30 June
2022 2022
Number of completed PRS homes 4,856 4,786
-------------- ---------
ERV per annum of completed homes GBP49.4m GBP47.8m
-------------- ---------
Number of contracted homes 670 693
-------------- ---------
ERV per annum of contracted homes GBP7.3m GBP7.2m
-------------- ---------
Summary and Outlook
The long-term growth opportunity available to the PRS REIT
remains substantial, driven by the strong underlying supply and
demand fundamentals in the housing market. We also believe that PRS
housing (at scale) can play a part in accelerating the overall
delivery of new homes, a key agenda with local authorities and
Central Government.
In addition, the track record that we have established in
delivering high-quality new homes across multiple sites through our
efficient supply chain platform places the Company in a strong
position in the PRS market.
Notwithstanding current challenges and uncertainties, including
the cost-of-living crisis, higher development costs and rising
interest rates, we believe that the Company remains well-positioned
to achieve its targets.
Environmental, Social and Governance
ESG statement
The Company's Investment Adviser ("IA"), Sigma PRS, undertakes
the day-to-day management of the Company's ESG strategy and takes
responsibility for managing the Company's ESG priorities at both a
Company level and an asset level. Sigma PRS reports on ESG matters
to the PRS REIT's Board on a quarterly basis.
Sigma PRS also utilises the services of EVORA Global, a leading
sustainability consultant specialising in real estate solutions, to
assist with the analysis of the Company's ESG performance and
ongoing strategy.
Approach
The Company recognises that it is a long-term stakeholder in the
communities and neighbourhoods it creates and takes this
responsibility very seriously. In order to better achieve its ESG
goals, its Investment Adviser engages with leading industry bodies
that seek to promote high ESG standards and best practice.
-- The IA is a signatory of the United Nations Global Compact
("UN Global Compact"), a voluntary initiative designed to encourage
business leaders to implement universal sustainability principles
and, in particular, the UN Global Compact's Ten Principles. These
are derived from the Universal Declaration of Human Rights, the
International Labour Organisation's Declaration on Fundamental
Principles and Rights at Work, the Rio Declaration on Environment
and Development, and the United Nations Convention Against
Corruption.
-- The PRS REIT is a member of European Public Real Estate
Association ("EPRA"), a not-for-profit association that represents
the publicly-traded European real estate sector. Its mission is to
promote, develop and represent the European public real estate
sector by, amongst other things, providing better information to
investors and stakeholders, actively engaging in public and
political debate, and promoting best practices.
-- The Company has submitted data for the first time to the
Global Real Estate Sustainability Benchmark ("GRESB"). GRESB is an
industry-led organisation, which provides ESG data to financial
markets. It collects, validates, scores and benchmarks ESG data to
provide business intelligence, engagement tools and regulatory
reporting solutions for investors, asset managers and the wider
industry.
Sigma PRS monitors the changing legislative and reporting
landscape, including the EU Sustainable Finance Disclosure
Regulation ("SFDR"), the UN Principles of Responsible Investment
("PRI"), and the Task Force on Climate-Related Financial
Disclosures ("TCFD"), as well as national and city-level
regulations, which are increasing.
It also uses the Social Value Portal ("SVP"), an online
platform, which procures, measures, manages and reports social
value and validates data.
The IA has incorporated ESG factors into its decision-making
processes and operations. Its practices are based on the following
policy approaches:
Opportunity review
-- ESG risks are assessed, reviewed and monitored, and
strategies for enhancement and/or mitigation are set. These
strategies are based on recognised frameworks such as climate
change and social needs.
Investment decisions
-- ESG issues are listed and addressed in a summary investment
paper, which informs decision-making at the Investment Committee
approval stage;
-- ESG costs, including for ongoing community involvement, are
also determined and factored into investment decision-making
processes. Asset management
-- Appropriate governance structures are established.
-- Relevant laws and regulations are adhered to.
-- ESG issues are monitored and managed.
-- 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.
-- The ability of investments to comply with ESG standards is assessed.
Processes and strategies
As an industry leader in the provision of private rental homes,
the PRS REIT recognises its responsibilities towards, and also
changing public priorities, regarding the environment. The
Government's '10 Point Plan for a Green Industrial Revolution',
established in November 2020 aims to accelerate the UK's attainment
of net zero carbon emissions and encompasses energy, production,
transport, innovation and the natural environment, with 2050 set as
the endpoint of its net zero goal.
In the real estate sector, there is a need for action in areas
such as energy and water consumption, non-fossil fuel heating
provision and biodiversity. In working towards further developing
the Company's ESG agenda, the IA has embedded best practices, and
works closely with supply chain and construction partners to ensure
that their policies and activities comply with the PRS REIT's
commitment to the UN Global Compact.
Environmental Impact and Data
The Company is aware of the impact that its activities have on
the environment, and is committed to taking action to minimise and
mitigate any negative aspects as much as possible.
A particular focus for the Company is ensuring that the homes in
its portfolio are highly energy efficient. As a result its
portfolio more than meets the Government's requirement for all
private rented sector homes to have an EPC rating of at least 'C'
by 2030. The EPC data for the Company's homes is as follows:
EPC Total
Rating Homes %
A 47 1%
------- -----
B 4,058 85%
------- -----
C 681 14%
------- -----
4,786 100%
------- -----
The Company provides residents with access to clean and
renewable energy through the installation of electric vehicle
("EV") charging facilities and photovoltaic panels where possible.
To date, 188 homes have access to EV chargers, 255 homes have been
installed with wiring looms, a specially designed wiring system,
which provides for greater efficiency, protection and safety, and
18 EV chargers have been installed at apartment blocks. In
addition, photovoltaic panels have been installed at close to 1,000
homes.
Homes with PV % of portfolio Estimated generated Estimated avoided
panels installed with PV panels kWh/yr CO2 emissions
installed kg/yr
966. 21% 592,584 148,864
---------------- -------------------- ------------------
The Investment Adviser recently commissioned Calfordseaden, a
property and construction consultancy firm, to undertake an Energy
Efficiency Study to compare the energy consumption of the Company's
properties with housing stock of various ages.
Four of the Company's core house types were reviewed and
compared with comparable houses built in four age ranges from the
start of the 1900's to 2010.
As the graph above demonstrates, the study showed that the
running costs of the Company's homes were markedly cheaper than
comparable homes built between the 1900's and 2010. This is
primarily due to their energy efficiency. On average, the Company's
homes were 74% cheaper to run on an annual basis than homes built
between 1900-1929, with running costs 25% lower compared to homes
built in 2010. With the recent increases in energy prices, the
efficiency of the Company's homes is not only a major environmental
positive, but it is also a benefit to residents.
Sigma PRS is also working closely with the Company's
construction partners to monitor the greenhouse gas emissions and
waste produced in the construction of homes. Data on waste and
emissions for construction completed with Countryside Partnerships
in FY21 can be found below.
Asset Environmental Construction Data - Countryside Partnerships
No. of units Waste diverted
completed from landfill Scope Scope 2 Scope 3
in FY21 Waste (tonnes) (%) 1 (tCO2) (tCO2) (tCO2)
--------------- --------------- ---------- -------- --------
1,050 8,301 99.8 1,212 257 395
--------------- --------------- ---------- -------- --------
Scope 1 and 2 emissions are those owned or controlled by a
company. Scope 3 emissions are a result of the activities of the
company, but occur from sources not owned or controlled by the
company. Examples of Scope 1 include direct emissions from fuel
combustion on site such as boilers and fleet vehicles; Scope 2
relates to indirect emissions generated from purchased energy such
as electricity; and Scope 3 relates to the emissions created by the
products we buy and use from suppliers.
Further details on the PRS REIT's environmental, social and
governance activities can be found in its annual ESG Report, which
is available on the Company's website at www.theprsreit.com.
Social Engagement
A key focus for the Company is engaging with the wider community
in which its developments are sited.
Over the last twelve months, the Company's Investment Adviser
has supported over 20 charities and clubs across the country,
either financially or practically. The Investment Adviser has
sought to ensure that residents can readily identify with the
charities and organisations that are selected and they are often
involved in the selection process.
A wide range of organisations and social initiatives were
supported over the year, from local clubs promoting girls'
football, boxing and driving experiences for the disabled, to
national charities, including The British Heart Foundation's
Defibrillator Register project, and of the NSPCC's parenting skills
project, 'Look, Say, Sing, Play' in Liverpool, and its adolescent
sexual abuse project.
Engagement with charity partners is important and, during the
year, visits were organised a number of charity partners, including
Embassy Village, Atherton and Leigh Foodbank, Salford Loaves and
Fishes, Barnardos Gap Homes Project, Speed of Sight, and Carluke
Men's Shed. These occasions offer the opportunity for the
Investment Adviser to discuss ongoing engagement and how best to
provide support.
A particular initiative during the year, was the organisation of
an Escape Room Roadshow for children, which was brought to 29 PRS
REIT communities and 15 local schools. The Roadshow covered the
themes of wellbeing, the environment, and literacy. Feedback on
this initiative can be found at:
https://www.clevercogz.com/simplelife2022roadshow
Comments from charities and organisations that Sigma PRS has
been involved with are below.
David Hughes from Atherton and Leigh Foodbank said:
"On behalf of Atherton & Leigh Foodbank may I once again
thank you and everyone concerned in providing this generous grant
supporting our local Foodbank. Your valued donations this year will
be utilised in keeping our vehicle on the road this year with
repairs, fuel and insurance. Without a reliable vehicle the charity
could not fulfil the collection of food from our collection points
and deliver from our warehouse to our distribution centres.
Furthermore especially this year, fuel, light and heating plus
distribution centre rents all add to the fundraising necessary in
order to keep the charity running efficiently."
Gill, Team Administrator, from the Speed of Sight Team said:
"Thank you for the message you sent in respect of the generous
donation you want to make to us. That is absolutely fantastic. This
gift will help us to continue to provide life-changing driving
experiences for people with disabilities."
Paul Harrison, Head Coach at Doncaster Plant Works ABC said:
"Getting sponsorship like this is brilliant, really outstanding
and it means such a lot to the club. I can't tell you how much we
can do with funding like this. Not only will we be able to replace
some of the windows at the club, we can also get more equipment,
uniform and kit. But most of all it means that some of our boxers
with real talent will get to compete in competitions as we can
cover the entry costs and put them up. For some this will mean
their first trip down to London and for others it'll be the first
time they have been away at all."
Sara Benson, Corporate and Major Donor Fundraiser for Zoe's
Place, Middlesbrough, said:
"Every single penny raised by Sigma Capital will go towards
helping us provide these wide range of specialist services to all
of our beautiful children for another day."
Resident feedback
All tenants automatically receive a tenant satisfaction survey
email one week into their tenancy and then approximately six months
later. This helps the Investment Adviser to monitor tenants'
experience with the lettings and moving-in teams and to assess
their experiences as settled residents.
The following information is based on tenant satisfaction
results for the 12-month period from July 2021 to the end of June
2022.
Move in survey 6-month survey Renewal survey
* 93% said the team made it easy to apply * 95% said they are still happy with their home * 96% were happy with the experience they had with
'Simple Life' so far
* 88% said they were kept well-informed during the * 89% said they are happy with the service provided
application process * 49% of people renewed because they love the property
* 83% said they felt they have been kept well-informed
* 84% said they received all the information they * 40% renewed because they love the area
required
* 76% said they feel their Asset Manager is responsive
and they are satisfied with the service they have * 9% renewed because of the rent (value for money)
* 93% said the quality of the home met with their provided
expectations
* 2% renewed because 'Simple Life' offers a better
* 86% said the communal areas are well maintained service than a 'one-off' landlord
* 95% said they would recommend 'Simple Life'
* 85% said they feel part of a community * 62% of people see themselves staying with 'Simple
Life' for 4+ years (or 78% 3 or more years)
* 76% said they feel their maintenance requests are
fixed in a timely manner * 91% said they would recommend 'Simple Life'
* 94% said they would recommend 'Simple Life'
----------------------------------------------------------- -----------------------------------------------------------
All results are based on responses from neutral - strongly
agree
The following information is based on tenant satisfaction
results for the 12-month period from July 2020 to the end of June
2021.
Move in survey 10 month survey
* 96% said the team made it easy to apply * 96% said they are still happy with their home
* 87% said they were kept well-informed during the * 89% said they are happy with the service provided
application process
* 79% said they felt they have been kept well-informed
* 91% said they received all the information they
required
* 88% said the communal areas are well maintained
* 89% said they found the process of moving into their
home straightforward * 86% said they feel part of a community
* 89% said the quality of the home met with their * 93% said they would recommend 'Simple Life'
expectations
* 96% said they would recommend 'Simple Life'
================================================================
All results are based on responses from neutral - strongly
agree
Overall results from the latest survey are in line with those of
the prior year, with some results showing an improvement in
customer satisfaction. A number of new questions were added to the
six-month survey to better assess customers' views on property
management and maintenance.
The strength of the Simple Life brand continues to grow. Over
the past 12 months the Simple Life website has had over two million
page views and over 20,000 enquiry submissions. The number of leads
coming through the website continues to slightly exceed enquiries
coming from third-party websites, such as Rightmove. Site signage,
recommendation and online search continue to be the largest sources
of enquiries of those coming through the website.
Online reviews
Simple Life is registered with Trustpilot and routinely invites
residents to leave reviews. This helps to identify any areas that
need improvement. Simple Life now has just under 500 reviews on
Trustpilot and has an overall rating of 4 stars out of 5, which is
above the average of 3.7 for our business category of Property
Rental Agency.
Simple Life developments are also now on Home Views, a dedicated
review website for housing developments. Simple Life has an average
score across all developments of 4.2 out of 5 from approximately
600 resident reviews, and 98% of residents rated their development
average to excellent.
Customer testimonies
A selection of customer testimonies are reproduced below.
"We have found our experience with Simple Life so far to be of
the highest standard. They are prompt in their responses and are
always lovely on the phone. I hear lots of negative experiences
people have when renting a property elsewhere but I feel secure in
the knowledge that that won't be us!"
Amber, Prince's Gardens
"The best part is that it is a home that I have always dreamt
of. Simple Life truly makes our life easy by providing such
beautiful and affordable homes and 24-hour customer service."
Ipra, Shrewsbury Close
"Property is well-designed and superbly managed. The sleek,
modern design of the properties make for outstanding value or money
and make perfect homes as everything you need is built into the
house. Overall, very impressive!"
Adam, Durban Mill
"Seamless, professional and super friendly service from all of
colleagues I have spoken with in various departments at Simple
Life. The whole experience and beginning of my journey as a tenant
with Simple Life has more than met all of my expectations and more!
Love the App, communication is so easy / any information I have
asked for has been delivered almost immediately. They literally
cannot be more helpful and my new home is literally fantastic.
Thank you Simple Life :)"
Theresa, Ribblesdale Place
" We are currently in the process of our application. We
contacted Simple Life about the scheme we were interested in and
the information we received was very detailed. As previous Simple
Life tenants, we can wholeheartedly recommend them ... hence our
return to Simple Life for our potential new home!"
Josephine, on Trustpilot
"Been renting 2nd house now from Simple Life and I have never
seen better service than this agency is providing. Replying to
emails, returning calls and actioning everything within hours/days.
Highly recommend."
Szymon, on Trustpilot
" Our landlord is absolutely fab and sorts any issues we have
quickly and to a high standard . "
Abbs, Base at Newhall on Home Views
"The activities you take time to plan are amazing. The fixflo
website you have is good. Wouldn't want anyone else as a landlord.
You've set the bar high."
Sabrina, Galton Lock on Home Views
Resident Focused Initiatives and Tech
Home Businesses
The pandemic has resulted in an increase in the number of people
setting up businesses from home. Responding to this trend, we
implemented a process requesting that tenants notify us of business
operations from home. The principal aim of this is for the
Investment Adviser to endeavour to ensure compliance with insurance
requirements while supporting residents. We have also enabled
residents to use our platforms to promote their businesses, and
have established a Residents Business Directory, which often offers
exclusive discounts to other residents in the area.
Property Alterations
We operate a property alterations request process, which
provides residents with greater clarity over permissible property
alterations as well as a better understanding of residents'
obligations at the end of their tenancies.
Virtual Inspections
A system of virtual 'property health checks' continues to work
well to identify and monitor issues and also to identify
responsibility for repairs and maintenance. It enables residents to
carry out certain property checks themselves and to make repairs at
particular stages of their tenancy. This reduces disputes over
deposit recovery at the end of a tenancy. In-person checks continue
to be conducted on key dates, including at the end of and on the
anniversaries of tenancies.
Outward Bound Trust
Sigma PRS launched an initiative with The Outward Bound Trust,
called 'Building for My Future'. It enabled 10 young people, aged
15-19 years, from across the country, to test their resilience and
learn new skills as they tackled a series of challenges on the
water and in the mountains. The comments below from participants
illustrate some of the lasting benefits.
"The confidence I gained was invaluable and it was the type that
could only be achieved by taking that leap of faith, meeting new
people and committing to challenges fully."
"Going forward in the future, I know that taking different paths
(even if they are out of your comfort zone) can absolutely lead to
great success and I know that even when I am put in the most
stressful environments, I can overcome them and that is something
to be proud of."
"I never thought one week could change the way I view things so
much, but it definitely influenced a self-reflection on myself and
my lack of connection with nature and the outdoors. It felt like a
hard reset on myself and a detox from technology, even though this
was not compulsory. I found myself never needing technology while
hiking or cliff jumping."
Book Boxes and Guardians
In August 2021, Sigma PRS launched a Book Box programme across
several developments to encourage residents to share books. To
date, 17 book boxes have been installed serving over 30% of the
portfolio, with residents signing up to be "guardians" of the boxes
on each of these sites. The book boxes were sustainably made from
100% repurposed materials in partnership with a specialist
recycling company.
Affordability Calculator
An affordability calculator, based on the Investment Adviser's
referencing criteria, can be found on the Simple Life website. It
is designed as an aid to assist prospective residents determine how
much monthly rent they can afford relative to their earnings and
outgoings.
Rental Availability
The Simple Life website now lists the availability of rental
homes in real time. As well as giving potential renters a better
service, it also facilitates a more efficient uptake of homes.
'My Simple Life' Mobile App
The Investment Adviser launched a bespoke resident mobile app in
August 2021. Available on Google and Apple devices, it has been
designed to provide a convenient and efficient 'one-stop shop' for
residents' needs. It has been very well-received by residents to
date, and provides:
-- easy access to all important documents, including tenancy
agreements, inventories, EPC, gas and EICR certificates;
-- information on homes, including floorplans and measurements;
-- information on home appliances, including manuals;
-- access to statements of account, with certain payments enabled via the app;
-- access to an open forum, enabling residents on the same
development to engage with each other;
-- the ability to report maintenance problems;
-- exclusive affiliate offers and discounts;
-- latest news;
-- information on the local area; and
-- the ability to leave feedback.
New services and facilities will be added to the app, with the
following about to go live:
-- content presentation by property type (apartment or house);
-- notification log; and
-- a new meter reading section, which allows residents to access
easily their meter readings and request new meter readings.
Resident Affiliate Offers
Sigma PRS has increased the range of affiliate offers that are
available to tenants, and the launch of the mobile app has created
greater awareness of the offers available. Affiliate offers include
discounts with Oddbox, Sky, Hussle, Argos, Dunelm, Wayfair, AO,
Pretty Little Thing, Appleyard London Florists, and The Modern
Milkman.
Podcast
In June 2021, the Investment Adviser launched the 'Simple Life
Chat' podcast, hosted by radio presenter and journalist, Jen
Thomas. It addresses the experience of renting and explores topics
of interest to residents, with experts and residents participating
in discussions.
Human Rights
The obligations under the Modern Slavery Act 2015 (the 'Act')
are not applicable to the Company given its size. However, to the
best of its knowledge, the Group is satisfied that its principal
suppliers and advisors comply with the provisions of the Act.
The Company operates a zero-tolerance approach to bribery,
corruption and fraud.
Health and Safety
In order to maintain high standards of health and safety for
those working on sites, monthly checks by independent project
monitoring surveyors are commissioned to ensure that all potential
risks have been identified and mitigated. These checks supplement
those undertaken by construction and 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. There were no
reportable incidents over the year (2021: none).
Governance
Strong governance is essential to ensuring that risks are
identified and managed, and that accountability, responsibility,
fairness and transparency are maintained at all times.
The Company is subject to statutory reporting requirements and
to rules and responsibilities prescribed by the London Stock
Exchange and the Financial Conduct Authority. The Board has a
balanced range of complementary skills and experience, with
independent Non-executive Directors who provide oversight, and
challenge decisions and policies as they see fit. The Board believe
in robust and effective corporate governance structures and are
committed to maintaining high standards and applying the principles
of best practice.
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
30 June 30 June
2022 2021
Note GBP'000 GBP'000
Rental Income 41,963 26,636
Non-recoverable property costs (7,635) (5,186)
--------- ---------
Net rental income 34,328 21,450
Other income 470 353
Administrative Expenses
Directors' remuneration (170) (148)
Investment advisory fee (5,158) (4,362)
Other administrative expenses (2,183) (2,028)
Migration to Main Market expenses - (543)
--------- ---------
Total administrative expenses (7,511) (7,081)
Gain from fair value adjustment on investment
property 6 99,727 38,983
--------- ---------
Operating profit 127,014 53,705
Finance income 4 -
Finance cost (11,129) (9,592)
--------- ---------
Profit before taxation 115,889 44,113
Taxation 3 - -
--------- ---------
Profit after tax and Total comprehensive
income for the year attributable to
the equity holders of the Company 115,889 44,113
========= =========
Earnings per share attributable to
the equity holders of the Company:
IFRS earnings per share (basic and diluted) 4 21.4p 8.9p
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.
Consolidated Statement of Financial Position
Company No. 10638461
As at 30 June 2022
2022 2021
Note GBP'000 GBP'000
ASSETS
Non-current assets
Investment property 6 961,915 780,366
---------- ---------
961,915 780,366
---------- ---------
Current assets
Trade and other receivables 7,286 6,589
Cash and cash equivalents 48,682 86,414
---------- ---------
55,968 93,003
---------- ---------
Total assets 1,017,883 873,369
---------- ---------
LIABILITIES
Non-current liabilities
Accruals and deferred income 2,243 4,732
Interest bearing loans and borrowings 7 246,687 245,860
248,930 250,592
Current liabilities
Trade and other payables 29,742 22,477
Interest bearing loans and borrowings 7 99,973 110,030
129,715 132,507
---------- ---------
Total liabilities 378,645 383,099
---------- ---------
Net assets 639,238 490,270
========== =========
EQUITY
Called up share capital 5,493 4,953
Share premium account 298,974 245,005
Capital reduction reserve 140,554 161,984
Retained earnings 194,217 78,328
---------- ---------
Total equity attributable to the equity
holders of the Company 639,238 490,270
========== =========
IFRS net asset value per share (basic
and diluted) 8 116.4p 99.0p
As at 30 June 2022, there is no difference between IFRS NAV per
share and the EPRA NTA per share.
These consolidated group financial statements were approved by
the Board of Directors and authorised for issue on 10 October 2022
and signed on its behalf by:
Steve Smith
Chairman
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
Attributable to equity holders of the Company
Share Capital
Share premium reduction Retained Total
capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2020 4,953 245,005 186,748 34,215 470,921
Comprehensive
income
Profit for the
year - - - 44,113 44,113
Transactions with
owners
Dividend paid - - (24,764) - (24,764)
At 30 June 2021 4,953 245,005 161,984 78,328 490,270
========= ========= =========== ========== =========
Comprehensive
income
Profit for the
year - - - 115,889 115,889
Transactions with
owners
Issue of ordinary
shares 540 53,969 - - 54,509
Dividend paid - - (21,430) - (21,430)
At 30 June 2022 5,493 298,974 140,554 194,217 639,238
========= ========= =========== ========== =========
Consolidated Statement of Cash Flows
For the year ended 30 June 2022
30 June 30 June
2022 2021
Note GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 115,889 44,113
Finance income (4) -
Finance costs 11,129 9,592
Fair value adjustment on investment
property 6 (99,727) (38,983)
---------- ----------
Cash generated by operations 27,287 14,722
Decrease / (increase) in trade and other
receivables 124 (1,805)
Increase in trade and other payables 4,795 3,295
Net cash generated from operating activities 32,206 16,212
---------- ----------
Cash flows from investing activities
Purchase of investment properties (81,822) (164,264)
Finance income 4 -
Net cash used in investing activities (81,818) (164,264)
---------- ----------
Cash flows from financing activities
Proceeds from issue of Ordinary Shares 55,593 -
Cost of share issue (1,084) -
Bank and other loans advanced 89,624 233,119
Bank and other loans repaid (100,014) (22,134)
Finance costs (10,809) (11,059)
Dividends paid 5 (21,430) (24,764)
---------- ----------
Net cash generated from financing activities 11,880 175,162
---------- ----------
Net (decrease) / increase in cash and
cash equivalents (37,732) 27,110
Cash and cash equivalents at beginning
of year 86,414 59,304
Cash and cash equivalents at end of
year 48,682 86,414
========== ==========
The accompanying notes are an integral part of this cash flow
statement.
Notes to the Financial Statements
1. General information
This final results announcement was approved for issue by a duly
appointed and authorised committee of the Board of Directors on 10
October 2022.
2. Basis of preparation
The financial information set out in this announcement does not
constitute statutory financial statements for the year ended 30
June 2022 and year ended 30 June 2021. The financial information in
this announcement has been derived from the statutory accounts for
the year ending 30 June 2022 and year ending 30 June 2021. The
report of the auditor on the statutory financial statements for the
year ended 30 June 2022 and year ended 30 June 2021 was (i)
unqualified; (ii) did not include references to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report; and (iii) did not contain statements under
section 498(2) or (3) of the Companies Act 2006. The statutory
financial statements for the year ended 30 June 2022 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting. The statutory accounts for the year ending
30 June 2021 have been delivered to the Registrar of Companies.
3. 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 year and prior year, 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 from non-qualifying
activities as it is not anticipated that sufficient residual
profits will be generated from these in the future.
4. 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,
basic and diluted earnings per share are the same for both the
current and prior periods.
The calculation of basic and diluted earnings per share is based
on the following :
2022 2021
GBP'000 GBP'000
Earnings per IFRS income statement 115,889 44,113
Adjustments to calculate EPRA Earnings:
Changes in value of investment properties (99,727) (38,983)
------------ ------------
EPRA Earnings: 16,162 5,130
============ ============
Company specific adjustments:
Non-recurring costs incurred by the
Company as part of the Migration to
the Premium Segment of the Main Market - 543
------------ ------------
Company Adjusted Earnings 16,162 5,673
============ ============
Weighted average number of ordinary
shares 535,203,388 495,277,294
IFRS EPS (pence) 21.4 8.9
EPRA EPS (pence) 3.0 1.0
Company specific Adjusted EPS (pence) 3.0 1.2
5. Dividends
The following dividends were paid during the current year and
prior year:
2022 2021
GBP'000 GBP'000
Dividends on ordinary shares declared
and paid:
Dividend of 1.0p for the 3 months to
31 March 2020 - 4,952
Dividend of 1.0p for the 3 months to
30 June 2020 - 4,953
Dividend of 1.0p for the 3 months to
30 September 2020 - 4,953
Dividend of 1.0p for the 3 months to
31 December 2020 - 4,953
Dividend of 1.0p for the 3 months to
31 March 2021 - 4,953
Dividend of 1.0p for the 3 months to 4,953 -
30 June 2021
Dividend of 1.0p for the 3 months to 5,492 -
30 September 2021
Dividend of 1.0p for the 3 months to 5,492 -
31 December 2021
Dividend of 1.0p for the 3 months to 5,493 -
31 March 2022
21,430 24,764
======== ========
Proposed dividends on ordinary shares:
3 months to 30 June 2021: 1.0p per
share - 4,953
3 months to 30 June 2022: 1.0p per 5,493 -
share
----------- -----------
5,493 4,953
=========== ===========
See note 10 for further information on proposed dividends.
6. Investment property
The freehold/heritable, leasehold and part freehold part
leasehold interests in the properties held within the PRS REIT were
independently valued as at 30 June 2022 by Savills (UK) Limited,
acting in the capacity of External Valuers as defined in the RICS
Red Book (but not for the avoidance of doubt as an External Valuer
of the PRS REIT as defined by the Alternative Investment Fund
Managers Regulations 2013). The valuations accord with the
requirements of IFRS 13 and the Royal Institution of Chartered
Surveyors' ("RICS") Valuation - Global Standards, effective from 31
January 2022, incorporating the IVSC International Valuation
Standards (the "RICS Red Book"). The valuations were arrived at
predominantly by reference to market evidence for comparable
property.
Savills (UK) Limited are an accredited External Valuer with
recognised and relevant professional qualifications and recent
experience of the location and category of the investment property
being valued.
The valuations are the ultimate responsibility of the Directors.
Accordingly, the critical assumptions used in establishing the
independent valuation are reviewed by the Board.
Completed Assets
Assets under Construction Total
GBP'000 GBP'000 GBP'000
At 30 June 2020 231,302 345,817 577,119
Properties acquired on acquisition
of subsidiaries 42,275 - 42,275
Property additions - subsequent
expenditure - 121,989 121,989
Change in fair value 13,408 25,575 39,983
Transfers to completed assets 246,789 (246,789) -
------------- -------------------- ------------
At 30 June 2021 533,774 246,592 780,366
------------- -------------------- ------------
Properties acquired on acquisition
of subsidiaries 14,820 11,526 26,346
Property additions - subsequent
expenditure - 55,476 55,476
Change in fair value 69,461 30,266 99,727
Transfers to completed assets 222,300 (222,300) -
------------- -------------------- ------------
At 30 June 2022 840,355 121,560 961,915
============= ==================== ============
The historic cost of completed assets and assets under
construction as at 30 June 2022 was GBP785.0 million (2021:
GBP704.2 million).
The carrying amount of investment property pledged as security
as at 30 June 2022 was GBP823.6 million (2021: GBP719.0
million).
The Group has recognised a right-of-use ("ROU") asset within
investment property in relation to ground rents payable on certain
investment property sites. The net book value of the ROU asset was
GBP1 million as at 30 June 2022 (2021: GBP1 million).
A potential planning issue has been identified in the
development of one of the Company's sites. The Investment Adviser
is actively working with the relevant house builder and council to
remedy the matter and anticipates that this will be resolved in the
near term. In the unlikely event that the issue is not resolved as
anticipated, the Company would have rights of recourse against the
house builder.
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:
Type Range
2022 2021
ERV per unit GBP7k - GBP22k GBP6k - GBP21k
Investment yield 3.75% to 4.50% 4.00% to 4.75%
Gross to net assumption 22.5% to 25.0% 22.5% to 25.0%
Development assets are valued based on total development cost
plus expected final uplift in valuation multiplied by % of site
development completed. The range of % completions as at 30 June
2022, was from 7% to 99% (2021: 36% to 99%). The final investment
value uses the assumptions stated above. An increase of 2% in the
gross development cost would reduce the fair valuation of these
assets by c.GBP2 million.
The impact of changes to the significant unobservable inputs for
completed and development assets are:
2022 2022 2021 2021
Impact on Impact Impact on Impact
statement on statement statement on statement
of comprehensive of financial of comprehensive of financial
income position income position
GBP'000 GBP'000 GBP'000 GBP'000
Improvement in ERV by
5% 48,213 48,213 39,007 39,007
Worsening in ERV by
5% (48,223) (48,223) (39,002) (39,002)
Improvement in yield
by 0.125% 30,124 30,124 23,619 23,619
Worsening in yield by
0.125% (28,359) (28,359) (22,264) (22,264)
Improvement in gross
to net by 1% 12,492 12,492 10,850 10,850
Worsening in gross to
net by 1% (12,402) (12,402) (9,369) (9,369)
7. Interest bearing loans and borrowings
Group Company Group Company
2022 2022 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
Current liabilities
Bank loans at 1 July 109,998 - - -
Loans advanced in the
year 89,624 - 133,119 -
Loans repaid in the year (100,014) - (22,134) -
Capitalised loan costs 333 - (987) -
---------- -------- --------- --------
Bank loans at 30 June 99,941 - 109,998 -
Lease liability 32 - 32 -
---------- -------- --------- --------
Total loans and borrowings 99,973 - 110,030 -
========== ======== ========= ========
Non-current liabilities
Bank loans at 1 July 244,875 - 144,226 -
Loans advanced in the
year - - 100,000 -
Capitalised loan costs 809 - 649 -
---------- -------- --------- --------
Bank loans at 30 June 245,684 - 244,875 -
Lease liability 1,003 - 985 -
---------- -------- --------- --------
Total loans and borrowings 246,687 - 245,860 -
========== ======== ========= ========
Bank loans
Through its subsidiaries the Company has granted fixed and
floating charges over certain investment property assets to secure
the loans. At 30 June 2022 and 30 June 2021, the only other asset
secured was GBP25 million of cash collateral.
The Group's borrowing facilities are with Scottish Widows,
Lloyds Banking Group plc / RBS plc and Barclays Bank PLC. At 30
June 2022, these comprised the following:
Lender Loan Balance Loan Interest
facility drawn period rate Maturity
30 June (all
2022 in)
Scottish GBP100 GBP100 15 3.14% Fixed June 2033
Widows million million years
-------------------- ------------------- ------------------ -------------------- -------------------- ---------------------
Scottish GBP150 GBP150 25 2.76% Fixed June 2044
Widows million million years
-------------------- ------------------- ------------------ -------------------- -------------------- ---------------------
Lloyds GBP150 GBP85.4 3 3.16% Variable February
Banking million million years 2023
Group
plc
/RBS*
-------------------- ------------------- ------------------ -------------------- -------------------- ---------------------
Barclays GBP40 GBP15.2 3 4.66% Variable August
Bank million million years 2025
PLC
-------------------- ------------------- ------------------ -------------------- -------------------- ---------------------
*GBP150 million revolving credit facility. GBP75 million
available in first 2 years for development debt purposes, reduced
to GBP25 million from 1 January 2022.
The Group's maximum loan to value ratio can be no more than 45%.
As at 30 June 2022 the Group's loan to value was 31% (2021:
42%).
Reconciliation of movements of borrowings to cash flows arising
from financing activities:
2022 2021
GBP'000 GBP'000
Balance as at 1 July 354,873 144,226
Proceeds from borrowings 89,624 233,119
Borrowings repaid (100,014) (22,134)
Interest paid (9,825) (8,706)
Non-utilisation fees paid - (895)
Arrangement and commitment fees paid (846) (1,504)
Finance costs 11,813 10,767
---------- -------------
Balance as at 30 June 345,625 354,873
========== =============
8. Net Asset Value
The Group adopted the EPRA issued new best practice guidelines
in the year ending 30 June 2021. EPRA Net Tangible Assets ("NTA"),
is considered to be the most relevant measure for the Group and
replaces the previously reported EPRA NAV. The underlying
assumption behind the EPRA NTA calculation assumes entities buy and
sell assets, thereby crystallising certain levels of deferred tax
liability. Due to the PRS REIT's tax status, deferred tax is not
applicable and therefore there is no difference between IFRS NAV
and EPRA NTA.
Basic IFRS NAV per share is calculated by dividing net assets in
the Statement of Financial Position attributable to ordinary equity
holders of the parent by the number of Ordinary Shares outstanding
at the end of the year. As there are no dilutive instruments, only
basic NAV per share is quoted below.
Net asset values have been calculated as follows:
2022 2021
IFRS Net assets at 30 June (GBP'000) 639,238 490,270
EPRA adjustments to NTA - -
------------ ------------
EPRA NTA at 30 June 639,238 490,270
------------ ------------
Shares in issue at end of year 549,251,458 495,277,294
Basic IFRS NAV per share (pence) 116.4 99.0
============ ============
EPRA NTA per share (pence) 116.4 99.0
============ ============
The NTA per share calculated on an EPRA basis is the same as the
IFRS NAV per share for the year ended 30 June 2022 and the year
ended 30 June 2021.
9. Transactions with Investment Adviser
On 31 March 2017, Sigma PRS was appointed the Investment Adviser
of the Company. A new Investment Adviser Agreement with Sigma PRS
was signed in January 2021.
For the year ended 30 June 2022, fees of GBP5.2 million (2021:
GBP4.4 million) were incurred and payable to Sigma PRS in respect
of investment advisory services. At 30 June 2022, GBP0.9 million
(2021: GBP1.5 million) remained unpaid.
For the year ended 30 June 2022, development fees of GBP2.5
million (2021: GBP4.6 million) were incurred and payable to Sigma
PRS. At 30 June 2022, GBP0.1 million (2021: GBP0.3 million)
remained unpaid.
For the year ended 30 June 2022, administration and secretarial
services of GBP85,000 (2021: GBP90,000) were incurred and payable
to Sigma Capital Property Ltd, a fellow subsidiary of the ultimate
holding company of the Investment Adviser. At 30 June 2022,
GBP49,000 (2021: GBP40,500) remained unpaid.
During the year ended 30 June 2021, Sigma PRS acquired 1,500,000
shares in the Company in the market. The shares purchased were
acquired in the market at an average price of 76.4 pence per share.
Sigma PRS's shareholding as at 30 June 2022 was 5,889,852 (2021:
5,889,852), which represents 1.07% (2021: 1.19%) of the issued
share capital in the Company. All the shares acquired in the prior
year were in accordance with the Development Management Agreement
between the Company and Sigma PRS.
For the year ended 30 June 2022, Sigma PRS received dividends
from the Company of GBP236,000 (2021: GBP249,000).
During the year, the Company acquired the following subsidiaries
from Sigma Capital Group Limited, the ultimate holding company of
the Investment Adviser :
Name of entity Consideration
Sigma PRS Investments (Bury St Edmunds GBP4.5 million
Parcel D) Limited
Sigma PRS Investments (Bury St Edmunds
Parcel D II) Limited
----------------
Sigma PRS Investments (Plough Hill Road) GBP10.2 million
Limited
Sigma PRS Investments (Plough Hill Road
II) Limited
----------------
Sigma PRS Northern (Bertha Park) Limited GBP4.8 million
----------------
The PRS REIT (Drakelow Park) Limited GBP8.0 million
----------------
Total GBP 27.5
million
----------------
10. Post balance sheet events
Development site acquisitions
During August and September four development sites were acquired
for a total consideration of GBP5.9 million.
Dividends
On 25 July 2022, the Company declared a dividend of 1.0p per
ordinary share in respect of the fourth quarter of the current
financial year. The dividend was paid on 26 August 2022, to
shareholders on the register as at 5 August 2022.
Taxation
The UK Government announced on the 23rd September 2022, that the
increase in corporate tax rate from 19% to 25% which is effective
from 1 April 2023 will now not go ahead. There is no impact on the
financial statements as at 30 June 2022 as a result of this
announcement .
11. Availability of statutory financial statements
Copies of the full statutory financial statements will be
available no later than 26 October 2022 and will be available on
the Company's website at www.theprsreit.com .
12. Annual General Meeting
The Annual General Meeting of the Company will be held at the
offices of Singer Capital Markets, 1 Bartholomew Lane, London EC2N
2AX on Monday 28 November 2022 commencing at 1.30 pm.
([1]) A full reconciliation between IFRS profit and Adjusted
earnings can be found in note 4 of the Financial Statements
([2]) A reconciliation of IFRS NAV to EPRA NTA can be found in
note 8 of the Financial Statements
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