TIDMPRSR
RNS Number : 6665F
PRS REIT PLC (The)
23 March 2022
23 March 2022
PRSR.L
The PRS REIT plc
("PRS REIT" or "the REIT" or "the Company" or "the Group")
Interim Results
for the six months ended 31 December 2021
Strong asset performance and portfolio now at over 4,560
completed homes
KEY POINTS
Financial
Six months ended
Six months ended 31 December
31 December 2021 2020 Change
-------------------------- ------------------ ----------------- -------
Revenue GBP19.9m GBP10.7m +86%
Net rental income GBP16.4m GBP8.4m +95%
Operating profit GBP44.0m GBP24.7m +78%
Profit after tax GBP38.6m GBP20.3m +90%
Basic earnings per share 7.4p 4.1p +80%
At At
31 December 2021 30 Jun 2021 Change
------------------------ ------------------ ------------- -------
Net assets* GBP572.9m GBP490.3m +17%
IFRS and EPRA NTA* per
share 104.3p 99.0p +5%
------------------------ ------------------ ------------- -------
*after dividend payments
Operational
Portfolio delivery At At At
31 Dec 2021 30 Jun 2021 31 Dec 2020
--------------------------------- ------------- ------------- -------------
No. of completed homes 4,489 3,984 3,163
Estimated rental value ("ERV") GBP43.5m GBP37.5m GBP29.4m
per annum
--------------------------------- ------------- ------------- -------------
No. of contracted homes 949 1,071 1,963
ERV per annum GBP8.2m GBP10.6m GBP19.4m
Completed and contracted
sites 67 64 65
ERV per annum GBP51.7m GBP48.1m GBP48.8m
--------------------------------- ------------- ------------- -------------
No. of completed and contracted
homes 5,438 5,055 5,126
--------------------------------- ------------- ------------- -------------
Portfolio performance At At
31 Dec 2021 31 Dec 2020
------------------------------------------------ ------------- -------------
Average gross yields on cost of completed
assets 6.4% 6.2%
------------------------------------------------ ------------- -------------
Average capital uplift on cost of completed
assets to investment value 15.1% 9.7%
------------------------------------------------ ------------- -------------
Average capital uplift on cost of completed
assets to vacant possession value 21.8% 17.4%
Cost management of Gross to Net 17.6% 21.3%
Rent collection (rent collected in H1 relative
to rent invoiced in H1) 99% 100%
------------------------------------------------ ------------- -------------
Like-for-like rental growth (based on average
rent per unit for stabilised sites) 3.2% 0.5%
------------------------------------------------ ------------- -------------
Average yield on assets in the portfolio 4.2% 4.3%
------------------------------------------------ ------------- -------------
-- Strong performance from completed assets
- continued high demand for homes, with 99% of homes occupied or reserved
- extremely strong rent collection relative to rent invoiced at
99%, with arrears remaining at c. 1% of annualised ERV despite a
significant increase in rent roll
- net rental income up 95% to GBP16.4m (2020: GBP8.4m)
- like-for-like rental growth for H1 was 2.4%
-- Bloomberg cumulative total return from IPO to 31 December 2021 of 27.7p
-- Portfolio target has increased to c.5,700 homes with an ERV
of c.GBP55m per annum following a c.GBP55.6m equity placing in
September 2021
- proceeds of placing fully committed by December 2021
-- Continued progress in delivery, against challenges of
coronavirus and supply chain disruption
- 505 new homes added in H1, taking portfolio to 4,489 completed
homes, with an ERV of GBP43.5m p.a., and a further 949 homes under
way
- three development sites and one fully-completed and let site acquired in H1
- two additional development sites expected to be acquired in H2
-- Total dividends per share declared in H1, 2.0p (2020: 2.0p)
- minimum dividend target of 4.0p* per share for the financial year
Outlook
-- As at 11 March 2022, an additional 72 homes have been added
to the portfolio, taking it to 4,561 completed homes, with an ERV
of GBP44.8m p.a, and a further 877 were under way
-- Rental demand remains very strong, underpinned by nationwide
undersupply of quality rental housing for families, and will
support prospects for further rental growth
-- As the portfolio approaches stabilisation and the benefits of
scale are realised, the outlook for the PRS REIT remains very
positive as a first mover in an attractive market segment
Steve Smith, Non-Executive Chairman of The PRS REIT plc,
said:
"The PRS REIT's portfolio of built-to-rent family homes is the
largest of its kind in the UK and continues to perform extremely
well. Demand for our high-quality homes has remained strong,
evidenced in our occupancy levels and reservations.
"We are delivering our target gross yield on completed assets
and seeing very good capital appreciation on both completed assets
and newly-constructed vacant assets.
"We remain focused on completing the delivery of our portfolio
of contracted homes. Our target has risen to around 5,700
built-to-rent homes, generating an estimated rental income
approaching GBP55m a year, following a fundraising in
September.
"We are confident that the Company is on track to achieve market
expectations for the year, and continue to see significant
opportunity in this highly attractive market segment. The PRS
REIT's first mover status means it is well-positioned for further
progress."
*These are targets only and not a forecast. There can be no
assurance that these targets will be met and they should not be
taken as an indication of the Company's expected future results
.
For further information, please contact:
The PRS REIT plc Tel: 020 3178 6378
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
(Markets)
Panmure Gordon (UK) Limited Tel: 020 7886 2500
Chloe Ponsonby (Corporate Broking), Alex Collins
(Corporate Finance)
David Hawkins, Tom Scrivens (Sales)
G10 Capital Limited (part of the IQEQ Group Tel: 020 7397 5450
as AIFM)
Paul Cowland
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. In 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. The Company has over 4,500 new rental
homes in its portfolio, which the Company believes is the largest
build-to-rent single family rental portfolio in the UK.
LEI: 21380037Q91HU97WZX58
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).
About Sigma Capital Group Limited (formerly Sigma Capital Group
plc)
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, and is part of PineBridge
Investments, a private, global asset manager with $150bn in assets
under management as at December 2021.
Sigma's principal focus is on the delivery of large scale
housing schemes for the private rented sector. Sigma has a
well-established track record in assisting with property related
regeneration projects in the public sector, acting as a bridge
between the public and private sectors.
Sigma has created an unrivalled property platform, which sources
sites and brings together construction resource to develop them,
enabling Sigma to deliver an integrated solution to partners. As
well as sourcing sites and managing all stages of the planning and
development process, Sigma also manages the rental of completed
homes through its award winning rental brand 'Simple Life'. Sigma's
subsidiary, Sigma PRS Management Limited, is Investment Adviser to
The PRS REIT plc.
Chairman's Statement
Overview
I am pleased to present The PRS REIT plc's (the "Company" or
"PRS REIT") financial results and progress for the six months ended
31 December 2021.
Our portfolio of build-to-rent ("BTR") family homes continued to
increase. We believe that it is the largest of its kind in the UK,
with a delivery and management platform that remains unrivalled.
Our portfolio spans the major regions of England and central
Scotland, and at the period end, stood at 4,489 completed homes
with an additional 949 homes under way at that point. This is an
increase of 42% against the same point last year (31 December 2020:
3,163 completed homes) and a 13% increase since 30 June 2021 (30
June 2021: 3,984 completed homes). The value of our net assets at
31 December 2021 was GBP572.9 million, up by 20% year-on-year and
by 17% since 30 June 2021 (31 December 2020: GBP476.3 million and
30 June 2021: GBP490.3 million). This equates to a net asset value
("NAV") per share of 104.3p. The Bloomberg cumulative total return
from IPO to 31 December 2021 is 27.7p.
The most recent data at 11 March 2022 shows the portfolio at
4,561 completed homes, with a further 877 homes under way, at
varying stages of the construction process.
This is a significant achievement, and progress should be seen
against the background of the ongoing challenges arising out of the
coronavirus pandemic, which has caused labour and supply chain
disruption. Following our fundraising in September 2021, we raised
our target number of homes to 5,700. Once all these homes are
completed, the portfolio will provide an estimated annual rental
income approaching GBP55.0 million, and we expect to reach the
landmark of 5,000 completed homes towards the end of calendar
2022.
Our properties continued to rent very well. Occupancy at 31
December 2021 was at 98% (31 December 2020: 96%), and rent
collection (which is rent collected relative to rent invoiced in
the period) was very strong at 99% (2020: 99%). Total arrears
remained low, at GBP0.5 million at 31 December 2021, which is c.1%
of annualised ERV on completed units (H1 2021: GBP0.2 million on
3,163 completed units).
We also achieved rental growth with new tenant lettings. These
realised average like-for-like rental growth per unit on stabilised
sites of 3.2% over the year to 31 December 2021. Average
like-for-like rental growth per unit on stabilised sites over the
six months to 31 December 2021 was 2.4%. This reflects a period
prior to 31 December 2020 when rental increases were frozen for
existing tenants during the initial months of the pandemic. These
are strong performance figures.
Reflecting the growth of the portfolio, net rental income for
the six months to 31 December 2021 increased by 95% to GBP16.4
million compared with the same period in 2020 (H1 2020: GBP8.4
million). The ERV of the 4,489 homes in our portfolio at the period
end was GBP43.5 million per annum, up 48% (31 December 2020:
GBP29.4 million per annum). As at 11 March 2022 on 4,561 homes, ERV
increased to GBP44.8 million per annum.
The September equity placing raised gross proceeds of
approximately GBP55.6 million, which was used to acquire three
sites with planning permission for 383 new homes, with an ERV of
GBP3.6 million per annum. The aggregate gross development cost
("GDC") is GBP60.3 million. We plan to acquire two further sites by
the end of June 2022 using debt funding. These additional sites
should deliver approximately 160 new homes, with an ERV of c.GBP1.5
million per annum.
The Board continues to target a minimum total dividend of 4.0p
per ordinary share for the current financial year.
The Investment Adviser's report provides further commentary on
housing delivery, asset performance and our ESG activity over the
year.
Financial results
Revenue, which is derived entirely from rental income, increased
by 86% to GBP19.9 million against the same period last year (H1
2021: GBP10.7 million). This reflected growth in completed and let
homes. After non-recoverable property costs, the net rental income
for the period was GBP16.4 million, a 95% rise on the first half of
2020 (H1 2020: GBP8.4 million) ahead of the overall growth in
rental income.
Profit from operations rose by 78% to GBP44.0 million (H1 2021:
GBP24.7 million) after gains of GBP31.1 million from fair value
adjustments on investment property (H1 2021: GBP19.4 million) and
total expenses of GBP3.8 million (H1 2021: GBP3.1 million).
Profit before tax increased by 90% to GBP38.6 million (H1 2021:
GBP20.3 million), and basic earnings per share rose by 80% to 7.4p
(H1 2021: 4.1p). Of this, 1.4p represented recurring earnings per
share in line with the EPRA definition compared to 2.0p of
dividends, reflecting 70% dividend cover in the period.
Net assets stood at GBP572.9 million as at 31 December 2021, a
rise of 20% against the same point in 2020 (31 December 2020:
GBP476.3 million and 30 June 2021: GBP490.3 million). This equates
to a net asset value ("NAV") of 104.3p per share, on an
International Financial Reporting Standards ("IFRS") basis and the
European Public Real Estate Association ("EPRA") Net Tangible Asset
("NTA") basis (30 June 2021: IFRS and EPRA NTA both 99.0p).
Six months Six months Year
ended ended ended
31 December 31 December 30 June
NAV movement: 2021 2020 2021
Opening NAV 99.0p 95.1p 95.1p
------------- ------------- ---------
Valuation and development 5.9p 4.1p 8.8p
------------- ------------- ---------
Earnings 1.4p 0.0p 0.1p
------------- ------------- ---------
Dividends paid (2.0)p (3.0)p (5.0)p
------------- ------------- ---------
Closing NAV 104.3p 96.2p 99.0p
------------- ------------- ---------
The movement in the NAV position, from 99.0p to 104.3p between
30 June 2021 and 31 December 2021, is after total dividend payments
of 2.0p per share (GBP10.3 million). These dividend payments
related to the fourth quarter of the 2021 financial year and the
first quarter of 2022 financial year, and were paid in September
and December 2021, respectively.
Operating cash inflows continued to exceed operating outflows
and covered the Company's cost base.
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2021 (unaudited) 2020 (unaudited) 2021 (audited)
IFRS EPS (pence per share) 7.4 4.1 8.9
------------------ ------------------ ----------------
EPRA EPS (pence per share) 1.4 0.2 1.0
------------------ ------------------ ----------------
As at As at As at
31 December 31 December 30 June
2021 (unaudited) 2020 (unaudited) 2021 (audited)
IFRS NAV (pence per share) 104.3 96.2 99.0
------------------ ------------------ ----------------
EPRA NTA (pence per share) 104.3 96.2 99.0
------------------ ------------------ ----------------
Dividends
Two dividend payments, each of 1.0p per ordinary share, were
made in the period, on 3 September and 3 December 2021. These
payments related to the last quarter of the 2020 financial year
ended 30 June and the first quarter of the current financial year.
A dividend of 1.0p per ordinary share relating to the second
quarter of the current financial year was paid on 11 February 2022
to shareholders on the register as at 28 January 2022. This brought
the total of dividends paid to date since the Company's inception
in May 2017 to 20.0p per share.
The Board expects to announce the payment of an interim dividend
for the third quarter of the current financial year in April.
The Board continues to target a minimum total dividend of 4.0p
per ordinary share for the current financial year. This minimum
target is expected to be almost fully covered by earnings on an
annualised run-rate basis by the end of the financial year, with
coverage continuing to grow during the financial year ending 30
June 2023 as construction, completions and lettings advance.
Debt Facilities
As at 31 December 2021, the Company had GBP450 million of
committed debt facilities available for utilisation. This comprises
GBP400 million of investment debt facilities and GBP50 million of
development debt facilities although a 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 (GBP50
million). GBP25 million of the Lloyds Banking Group/ RBS facility
and the GBP50 million Barclays Bank PLC debt facility are available
to be drawn as development debt facilities, which enables a number
of sites to be developed simultaneously.
The debt facilities are subject to the maximum gearing ratio of
45% of gross asset value. Approximately GBP330 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
long-term investment debt facilities of GBP400 million have an
average term of 11.7 years and an average weighted cost of 2.8%
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 the management of listed funds, equity
capital markets, public policy, operations and finance in the
property and investment funds sectors.
The Board delegates the day-to-day management of the business,
including the management of ESG matters, to the Investment Adviser,
Sigma PRS Management Ltd ("Sigma PRS"), which is a subsidiary of
Sigma Capital Group Limited ("Sigma"), and a signatory and
participant of the United Nations Global Compact. Sigma Capital
Group Limited is part of PineBridge Investments, a private, global
asset manager with $150bn in assets under management as at December
2021.
Details of ESG policies and activities are contained separately
in the Investment Adviser's Report.
Outlook
The need for high-quality rental homes for families in the UK
remains acute while the supply of new homes continues to fall short
of both Government aspirations and aggregate and increasing demand.
The buy-to-let sector, which traditionally provided the bulk of the
rental stock in the UK is continuing to see private landlords leave
the market, and there have been 180,000 buy-to-let redemptions
since 2017. These factors are continuing to create upward pressure
on rental demand.
While we are mindful of the current inflationary environment,
which is creating a rise in the cost of living for the population,
demand for the Company's high-quality family rental homes remains
strong and we expect our assets continue to perform well. This is
in part a reflection of the affordable nature of our properties and
the fact that rising interest rates typically drive an expansion in
renting versus home ownership. It also reflects the rental
management model, created by Sigma PRS, which aims both to set a
higher standard of customer care in the private rented sector than
hitherto and to create communities that are attractive to renters
generally and families in particular.
These factors are driving performance, and the combination of
growing income, rental appreciation and asset value growth are
beginning to enhance returns to shareholders. As the Built-to-Rent
sector becomes more established and institutionally attractive, we
expect to make significant progress.
We continue to see significant opportunity in the market, and as
a first mover in an attractive market segment we believe that the
PRS REIT is well-positioned for further progress.
The Board is confident that the Company is on track to meet
market expectations for the financial year and to progress towards
covering the current annual dividend of 4.0p per share on an
annualised basis by the end of the 2022 financial year.
Finally, I would like to thank our investors, who have supported
us through our formative period, our customers, Sigma, our
housebuilder partners and all of our stakeholders who have helped
to create what is fast becoming an exciting investment opportunity
and the preeminent PRS investment vehicle for family homes.
Steve Smith
Chairman
22 March 2022
Investment adviser's report
Sigma PRS Management Ltd ("Sigma PRS"), the Investment Adviser
to the PRS REIT is pleased to report on the Company's progress for
the six months to 31 December 2021. Sigma PRS is a wholly-owned
subsidiary of Sigma Capital Group Limited ("Sigma"), which is part
of PineBridge Investments, a private global asset manager with over
$150bn in assets under management.
Investment objective and strategy
The Company is taking advantage of the substantial opportunity
in the private rented sector, and aims to provide investors with an
attractive level of income, together with the prospect of income
and capital growth. It is doing so by creating a large portfolio of
newly-constructed rental stock that meets existing demand in the UK
for well-located, high-quality, professionally -managed rental
homes.
The PRS REIT has delivered a large number of private rented
sector housing schemes, which are let under the 'Simple Life'
brand. It has created a geographically diverse portfolio of
properties that have easy access to the main road and rail
infrastructure and are close to large employment centres and local
amenities. Proximity to good quality primary education is of
particular importance, being a major attraction for families with
children. While the Company is focused on family houses, it has
also invested in some low-rise flats in appropriate locations where
a greater diversity of rental levels is required.
The PRS REIT has built and continues to build its portfolios in
two ways:
-- by acquiring undeveloped sites sourced by Sigma PRS. The
delivery is managed by Sigma PRS (or another member of the Sigma
Group as development manager), and the completed units are let
under the 'Simple Life' brand.
The PRS REIT aims to fund a minimum of two-thirds of the new
properties in this way. Pre-development risks are identified and
underwritten by Sigma and its partners, and sites will have an
appropriate certificate of title, detailed planning consent and a
fixed-price design and build contract with one of Sigma's
housebuilding partners prior to acquisition by the Company. During
the construction phase, many of the properties are pre-let and
subsequently occupied as they complete.
-- by acquiring completed PRS sites from the Sigma Group, or
from third parties. A pre-requisite is that these completed and
stabilised developments must accord with the PRS REIT's investment
objectives and satisfy both return and occupancy hurdles. The
Company may fund up to a maximum of one third of new properties in
this manner. To date, this route represents 17% of the Company's
portfolio.
Sigma has a well-established PRS delivery platform, which
sources and develops investment opportunities. The PRS REIT has
first right of refusal over sites within Sigma's platform assuming
they meet its investment criteria and it has available capital to
fund the opportunities.
The platform benefits from well-established relationships with
construction partners, including Countryside Partnerships PLC,
previously known as Countryside Properties PLC ("Countryside"),
Engie Regeneration Limited, Seddon Construction Limited,
Springfield Properties plc and Vistry Partnerships Limited, as well
as with local authorities and letting agencies. These relationships
enable Sigma to identify and source land, and deliver and manage
properties on behalf of the Company in the target geographies.
Homes England, an executive non-departmental public body sponsored
by the Ministry of Housing, Communities & Local Government, has
been extremely supportive of Sigma, with both parties sharing the
common goal of accelerating new housing delivery in England.
Delivery and pipeline
A total of 505 new homes were added to the PRS REIT's portfolio
in the first half of the current financial year. This took the
total number of completed homes in the Company's portfolio at 31
December 2021 to 4,489, a 42% increase year-on-year (31 December
2020: 3,163 homes). The homes have an estimated rental value
("ERV") of GBP43.5 million per annum (31 December 2020: GBP29.4
million per annum), a rise of 48%.
Purchases of investment property over the first half to 31
December 2021 totalled GBP48.0 million (H1 2020: GBP104.1 million).
The year-on-year reduction reflects the maturity of the portfolio
and the normal cycle of property development expenditure, where
expenditure is typically higher during the earlier months of
acquiring and developing a site, and reduces as homes complete
across a site.
The Company completed an equity placing in September 2021,
raising GBP55.6 million, which took its Company's gross funding to
GBP956 million (including debt), the major part of which has been
fully allocated.
During October 2021, part of the placing proceeds were used to
acquire a completed and let 16-unit site in Bury St Edmunds,
Suffolk and three development sites, in Derbyshire, Lancashire and
Perthshire. When completed, these sites will add 383 homes to the
portfolio.
The table below provides a summary of development activity, and
shows the cumulative number of PRS units that have been completed
since the launch of the Company on 31 May 2017 and the ERV of homes
under construction or completed.
At 30
At 31 December June At 31 December
2021 2021 2020
No. of completed PRS units 4,489 3,984 3,163
--------------- --------- ---------------
Rental income per annum GBP43.5m GBP37.5m GBP29.4m
--------------- --------- ---------------
No. of contracted homes 949 1,071 1,963
--------------- --------- ---------------
ERV per annum GBP8.2m GBP10.6m GBP19.4m
--------------- --------- ---------------
Total number of sites (completed
and contracted) 67 64 65
--------------- --------- ---------------
No. of completed and contracted
units 5,438 5,055 5,126
--------------- --------- ---------------
ERV per annum GBP51.7m GBP48.1m GBP48.8m
--------------- --------- ---------------
Geographic diversification
The number of sites in the Company's portfolio increased to 67
sites at 31 December 2021 (31 December 2020: 65). They span the
major regions of England and central Scotland.
Approximately 58% of homes in the portfolio, both completed and
under development, are located in the North West of England, with
the Midlands accounting for approximately 19%, and Yorkshire and
the North East together representing around 14%. Homes in the South
of England account for 7% of the portfolio, and the remaining 2% of
homes are situated in central Scotland, the Company having acquired
its first development site here in the period. The wide
geographical spread of homes has created a diverse customer base,
which helps to balance risk - particularly important given current
geopolitical and economic uncertainties.
As at 31 December 2021, 52 sites were completed and income
producing, with the remaining 15 sites still part-way through
development. Many of the partially-completed sites are already
producing rental income. This is because sites are developed in
such a way that tranches of completed homes can be released for
letting while construction continues, subject to health and safety
reviews. The approach enables development sites to become
income-generating relatively quickly.
Rental performance and key performance measures
The PRS REIT's homes remain in demand, and the portfolio
continues to perform very strongly as it grows.
Increased rental income and rental growth
Reflecting the increasing number of assets in the portfolio and
buoyant demand, annualised gross rental income as at 31 December
2021 was 48% higher at GBP43.5 million than a year ago, and 16%
higher than at 30 June 2021 (31 December 2020: GBP29.4 million and
30 June 2021: GBP37.5 million). Acquisitions of completed assets
during the period accelerated this rental income growth.
It is worth noting that rental growth was to some extent
restrained by our decision in March 2020, during the first national
lockdown, to freeze increases on existing tenancy renewals.
Like-for-like growth in the 12 month period was 3.2% on stabilised
sites, with just over 2% of this increase arising in the first half
of the current financial year.
High occupancy levels
Occupancy levels were at 98% in December 2021, and including
those prospective tenants who had passed referencing and paid their
deposits, this figure increases to 99%. An average of 45 new
applications were received each week over the period.
Strong rent collection
Rent collection remained strong at 99%; this ratio is measured
as rent invoiced in the period relative to rent received in the
same period (2021: 99%). Rent arrears continued to be low, at
GBP0.5m, which is approximately 1% of annualised ERV (2021: less
than 1%).
Cost base covered
The Company's cost base is covered, and operating cash inflows
have increased in the period as rental income from completed and
let homes has grown.
As previously advised, legislative change in the form of the
Tenant Fees Act 2020, which came into force on 1 June 2020, added
almost 1.5% of additional cost to the lettings process, and
contributed to an increase in overall running costs in the prior
year. However, this cost has reduced with the growth in the
portfolio triggering a revised letting agent fee structure that has
lowered total lettings costs by over 1.0%. Currently,
non-recoverable property costs are 17.6% of gross rent, reflecting
the lower lettings costs. All other costs are in line with
management's targets.
Bloomberg total return
The Bloomberg cumulative total return from IPO to 31 December
2021 is 27.7p.
Key performance measures and investment valuation of completed
assets
The table below summarises key performance measures on completed
assets:
31 Dec 31 Dec
2021 2020
Average gross yields on cost of completed assets 6.4% 6.2%
------- -------
Average capital uplift on cost of completed assets
to Investment Value 15.1% 9.7%
------- -------
Average capital uplift on cost of completed assets
to Vacant Possession Value 21.8% 17.4%
------- -------
Average yield on assets in the portfolio 4.2% 4.3%
------- -------
Cost management of Gross to Net 17.6% 21.3%
------- -------
Like-for-like rental growth 3.2% 0.5%
------- -------
Significant uplift in value of completed assets
The Investment Valuation completed in December 2021 showed an
average uplift in the value of completed assets over the costs of
delivery of 15.1%.
The average uplift in the value of completed assets on a vacant
possession basis against the cost of delivery was 21.8%.
Both of these uplifts provide significant headroom between cost
and value, underlining the benefits of the Investment Adviser's PRS
model.
Latest data on delivery and asset performance
Between 1 January and 11 March 2022, we delivered a further 72
rental homes with an ERV of approximately GBP0.83 million per
annum. This has taken the Company's portfolio of completed homes at
11 March 2022 to 4,561 homes, with an ERV of around GBP44.8 million
per annum. A further 877 homes were under way at that point.
Out of 4,561 completed homes, 4,477 homes were let as at 11
March 2022, which provides an annualised rental income of GBP43.9
million, and a further 42 homes were reserved to qualified
applicants with rent deposits paid at that date.
ESG Approach
The PRS REIT recognises that it is a long-term stakeholder in
the communities and neighbourhoods it creates, and takes this role
very seriously. It has delegated the day-to-day management of ESG
strategy to the Investment Adviser, Sigma PRS. Sigma PRS has also
assumed responsibility for how the Company's ESG priorities are
managed at both Company and asset level, and funds the PRS REIT's
social and charitable activities. Sigma PRS reports to the PRS
REIT's Board on ESG on a quarterly basis.
The Investment Adviser is a signatory of the United Nations
Global Compact ("UN Global Compact"), which is 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 Nationals Convention Against Corruption.
The Company's 2021 ESG Report can be found on the Company's
website at, www.prsreit.com.
Processes and strategies
As an industry leader in the provision of private rental homes,
the PRS REIT is aware of its increased ESG responsibilities. Sigma
PRS therefore aims to work alongside forward-looking partners who
share the Company's goals and aspirations for reduced carbon
emissions. The Investment Adviser also recognises the need for
action in priority areas such as energy and water consumption,
non-fossil fuel heating provision, and biodiversity.
As Sigma PRS continues to develop the Company's ESG agenda and
strategy, the focus is on embedding best practice, monitoring
supply chain activity, and ensuring policies and activities comply
with the PRS REIT's commitment to the UN Global Compact.
Partnerships
Sigma PRS engages closely with all partners to deliver the PRS
REIT's ESG commitments. Shared priorities include, reducing carbon
emissions, measuring impact and gathering data, 'future-proofing'
assets, and supporting biodiversity. Sigma PRS is pleased to report
good progress in construction data gathering with Countryside and
its Sustainability Team, and carbon reduction planning with Vistry
Group and its Sustainability Team. Initiatives to reduce traffic
flow and site waste, and to recycle and to divert waste from
landfill remain areas of focus for all partners.
Maintenance Support
The Investment Adviser's repair and management app, FixFlo,
continues to provide both a highly convenient way for Simple Life
customers to report repair and maintenance problems and for
maintenance services to be provided efficiently, with the minimum
of physical contractor visits, which typically incur carbon
emissions.
Over the first half of the financial year:
-- Of 11,000 issues raised:
- 48% were resolved through system advice and self-fix, and
- 52% continued to maintenance to fix/ contractor instructed
Energy Performance data
The energy performance of the homes in the portfolio is well
above the Government's targeted levels for rental properties, with
84% of homes achieving an EPC rating in band B, 1% in band A and
15% rated in band C. The minimum rating band is E for rentals.
Charities
Sigma PRS continued to support chosen partner charities, and in
addition has broadened the number of charities with which it has
links. In particular, Sigma PRS has increased its focus on local
charities, consulting with residents and colleagues over where to
direct support.
An example of resident collaboration during the first half was
the '12 Days of Christmas' campaign. The campaign received over 70
charity nominations from residents, and 12 charities each received
GBP1,000.
Projects
In the first half, Sigma PRS organised a Wellbeing Roadshow in
conjunction with Clever Cogz Learning, which took mobile Escape
Rooms to eight schools and 26 communities across the country. The
idea was to promote wellness and well-being to children, as well as
teamwork, at a time when children's mental health has been the
subject of considerable debate arising out of pandemic-related
restrictions.
In December 2021, Sigma PRS launched an outward-bound course,
'Building for my Future', in partnership with The Outward Bound
Trust, an educational charity that aims to help young people to
defy limitations through learning and outdoor adventures. Sigma PRS
will be providing places for 12 young people, aged between 16 and
18, to develop life and leadership skills, confidence and
resilience.
Residents social events
As lockdown restrictions lifted, Sigma PRS was able to resume
'resident events' for the PRS REIT's communities. Over the summer,
these events include ice-cream vans visits to 47 sites, with over
3,000 ice creams consumed. In the autumn, evening pizza events were
organised for a number of locations and an extended entertainment
evening held at our Empyrean development, providing over 1,300
pizzas in total. At Christmas, Sigma PRS arranged for Father
Christmas, his elves and accompanying band, to visit 54 sites. The
Investment Adviser continues to place great importance on the value
of these events and other opportunities for residents to come
together and socialise.
In August 2021, Sigma PRS launched the 'My Simple Life' mobile
app. While the app provides an easily accessible hub for home
documents, manuals, statements, it is also designed to provide
residents with social and neighbourhood news as well as information
on special offers. Over 1,600 residents have currently registered
to use the app.
The activities of the Company in all aspects of Environment,
Social and Governance are set out in the ESG Report 2021, which can
be obtained from the Company's website at, www.prsreit.com.
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 the Investment Adviser's and Company's knowledge, 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 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.
Gender diversity
The PRS REIT plc has five Board Directors. The male-to-female
ratio of Directors in 2021 was 80: 20 (2020: 100: 0).
Governance
Appropriate and proportionate governance is essential to ensure
that risks are identified and managed, and that accountability,
responsibility, fairness and transparency are maintained at all
times.
The Group 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 appropriate. The Board believe in robust
and effective corporate governance and is committed to maintaining
high standards and applying the principles of best practice.
Summary
With the balance of the PRS REIT's gross funding effectively
fully committed, Sigma PRS remains wholly focused on the delivery
of homes currently under development. Based on current schedules,
we expect to deliver the portfolio's 5,000th home towards the end
of calendar 2022. Fixed price design and build contracts provide
protection against raw material price inflation on current
contracted development, and therefore we expect the portfolio to
lag current inflation impacts.
Since January 2022, the start of the third financial quarter, a
further 72 new homes have been completed, taking the portfolio to
4,561 completed homes as at 11 March 2022, with a further 877 homes
under way. The ERV of the portfolio at that date is expected to be
GBP44.8m per annum.
Demand remains strong, and occupancy and reservation levels are
high. Between 1 January and 11 March 2022, the percentage of
occupied homes stood at 98%. Including applicants who have paid
deposits and passed our qualification process, the let portfolio
increases to 99%. Rent collection in the period was very strong at
99%, with arrears low. These figures continue to demonstrate not
only the attraction of our homes and our high standards of customer
care but the ongoing structural undersupply of quality family
rental homes. We expect rising interest rates to boost demand for
rental homes as mortgage affordability pressures increase,
especially for first-time buyers.
Looking ahead to the remainder of the financial year and beyond,
we remain confident that the PRS REIT is in a strong position to
achieve market expectations.
The Board will consider the payment of an interim dividend in
respect of the three months to 31 March 2022 in the fourth quarter
of the current financial year. It continues to target* a minimum
total dividend for the current financial year of 4p per ordinary
share.
The 4p dividend is expected to be almost fully covered by
earnings on an annualised basis by the end of the 2022 financial
year, with coverage continuing to grow thereafter as construction,
completions, lettings and asset management advance.
The global backdrop since the inception of PRS REIT has been
extraordinarily turbulent, so let us hope that the remainder of
2022 and beyond will bring greater stability.
Sigma PRS Management Ltd
22 March 2022
*These are targets only and not forecasts. There can be no
assurance that these targets will be met and they should not be
taken as an indication of the Company's expected future results
.
DEFINITIONS
The following terms shall have the meanings specified below:
"Average capital uplift on completed assets to investment value"
means the difference between investment value and gross development
cost divided by gross development cost.
"Average capital uplift on completed assets to vacant possession
value" means the difference between vacant possession value and
gross development cost divided by gross development cost.
"Average gross yields on cost of completed assets" means current
expected rental value divided by gross development cost.
"Committed" means development sites that have been approved or
are under formal appraisal by the Investment Adviser, and where
planning consent is being sought, and/or are in the process of
being acquired.
"Contracted" means sites under construction (under a design and
build contract), which have been purchased by the PRS REIT or the
PRS REIT's Investment Adviser (forward sold to the PRS REIT).
"EPRA NTA" means net asset value adjusted to include properties
and other investment interests at fair value and to exclude certain
items not expected to crystallise in a long term property business
model.
"EPS" means unadjusted earnings per share.
"EPRA EPS" means earnings per share excluding investment
property revaluations, gains and losses on disposals, changes in
the fair value of financial instruments and associated close out
costs and their related taxation.
"IFRS NAV" means unadjusted net asset value.
CONDENSED CONSOLIDATED Statement of COMPREHENSIVE INCOME
For the six months ended 31 December 2021
Six months Six months Year ended
ended ended 30 June
31 December 31 December
2021 2020 2021
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Rental income 19,865 10,676 26,636
Non-recoverable property costs (3,493) (2,278) (5,186)
------------- ------------- -----------
Net rental income 16,372 8,398 21,450
Other income 295 - 353
Administrative expenses
Directors' remuneration (83) (70) (148)
Investment advisory fee (2,485) (2,143) (4,362)
Other administrative expenses (1,235) (891) (2,028)
Migration to Main Market expenses - - (543)
------------- ------------- -----------
Total expenses (3,803) (3,104) (7,081)
Gain from fair value adjustment
on investment property 4 31,100 19,371 38,983
------------- ------------- -----------
Operating profit 43,964 24,665 53,705
Finance costs (5,414) (4,411) (9,592)
------------- ------------- -----------
Profit before taxation 38,550 20,254 44,113
Taxation - - -
------------- ------------- -----------
Total comprehensive income for the
period / year attributable to the
equity holders of the Company 38,550 20,254 44,113
============= ============= ===========
Earnings per share attributable
to the equity holders of the Company:
Basic earnings per share 7 7.4P 4.1p 8.9p
EPRA earnings per share 7 1.4P 0.2p 1.0p
All of the Group activities are classed as continuing and there
were no comprehensive gains or losses in the period other than
those included in the statement of comprehensive income.
CONDENSED CONSOLIDATED Statement of financial position
As at 31 December 2021
Notes As at
As at 30 June
As at 31
December 31 December
2021 2020 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Investment property 4 859,485 700,591 780,366
------------- ------------- -----------
859,485 700,591 780,366
------------- ------------- -----------
Current assets
Trade receivables 513 189 457
Other receivables 8,592 5,095 6,132
Cash and cash equivalents 48,633 128,897 86,414
------------- ------------- -----------
57,738 134,181 93,003
------------- ------------- -----------
Total assets 917,223 834,772 873,369
------------- ------------- -----------
LIABILITIES
Non-current liabilities
Accruals and deferred income 3,501 7,291 4,732
Interest bearing loans and borrowings 278,214 331,197 245,860
------------- -------------
281,715 338,488 250,592
Current liabilities
Trade and other payables 18,741 19,967 22,477
Interest bearing loans and borrowings 43,884 - 110,030
------------- ------------- -----------
62,625 19,967 132,507
Total liabilities 344,340 358,455 383,099
------------- ------------- -----------
Net assets 572,883 476,317 490,270
============= ============= ===========
EQUITY
Called up share capital 5 5,493 4,953 4,953
Share premium reserve 6 298,974 245,005 245,005
Capital reduction reserve 151,539 171,890 161,984
Retained earnings 116,877 54,469 78,328
------------- ------------- -----------
Total equity attributable to
the equity holders of the Company 572,883 476,317 490,270
============= ============= ===========
Net asset value per share 8 104.3p 96.2p 99.0p
As at 31 December 2021, there was no difference between NAV per
share and EPRA NTA per share.
condensed Consolidated statement of changes in equity
For the six months ended 31 December 2021
Share Capital
Share premium reduction Retained Total
capital reserve reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2020 4,953 245,005 186,748 34,215 470,921
Transactions with owners
Dividends paid 11 - - (14,858) - (14,858)
Comprehensive income
Profit for the period - - - 20,254 20,254
At 31 December 2020 4,953 245,005 171,890 54,469 476,317
--------- --------- ----------- ---------- ---------
Transactions with owners
Dividends paid - - (9,906) - (9,906)
Comprehensive income
Profit for the period - - - 23,859 23,859
At 30 June 2021 4,953 245,005 161,984 78,328 490,270
--------- --------- ----------- ---------- ---------
Transactions with owners
Issue of ordinary shares 540 53,969 - - 54,509
Dividends paid 11 - - (10,446) - (10,446)
Comprehensive income
Profit for the period - - - 38,550 38,550
--------- --------- ----------- ---------- ---------
At 31 December 2021 5,493 298,974 151,539 116,877 572,883
========= ========= =========== ========== =========
condensed CONSOLIDATED STATEMENT OF Cash Flows
For the six months ended 31 December 2021
Year
ended
Six months Six months
ended ended 30 June
31 December 31 December
2021 2020 2021
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 38,550 20,254 44,113
Finance costs 5,414 4,411 9,592
Fair value adjustment on investment
property 4 (31,100) (19,371) (38,983)
-----------
Cash generated from operations 12,864 5,294 14,722
Increase in trade and other
receivables (1,884) (1,630) (1,805)
(Decrease) / Increase in trade
and other payables (4,966) 3,259 3,295
Net cash generated from operating
activities 6,014 6,923 16,212
------------- ------------- -----------
Cash flows from investing activities
Purchase of investment property 4 (48,020) (104,101) (164,264)
Net cash used in investing activities (48,020) (104,101) (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 48,271 187,107 233,119
Bank and other loans repaid (82,789) - (22,134)
Finance costs (5,321) (5,478) (11,059)
Dividends paid (10,445) (14,858) (24,764)
------------- ------------- -----------
Net cash generated from financing
activities 4,225 166,771 175,162
------------- ------------- -----------
Net (decrease) / increase in
cash and cash equivalents (37,780) 69,593 27,110
Cash and cash equivalents at
beginning of period 86,414 59,304 59,304
------------- ------------- -----------
Cash and cash equivalents at
end of period 48,633 128,897 86,414
============= ============= ===========
Notes to the Financial Statements
1. General Information
The PRS REIT plc (the "Company") is a public limited company
incorporated on 24 February 2017 in England and having its
registered office at Floor 3, 1 St. Ann Street, Manchester, M2 7LR
with company number 10638461.
The Company is quoted on the Premium Segment of the Main Market
of the London Stock Exchange.
This interim condensed consolidated financial information was
approved and authorised for issue by the Board of Directors on 22
March 2022 .
2. Basis of Preparation and changes to the Group's accounting policies
Basis of preparation
The financial information for the period ended 31 December 2021,
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts for the
year ended 30 June 2021, has been delivered to the Registrar of
Companies. The auditors' report on those accounts was not
qualified, did not include a reference to matters to which the
auditor drew attention by way of emphasis without qualifying the
report, and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
The condensed consolidated interim financial report for the
half-year reporting period ended 31 December 2021, has been
prepared on a going concern basis using accounting policies
consistent with UK-adopted International Accounting Standards, in
accordance with IAS 34 Interim Financial Reporting. On 31 December
2020, EU-adopted IFRS was brought into UK law and became UK-adopted
international accounting standards, with future changes to IFRS
being subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1 July 2021. This change
constitutes a change in accounting framework however, there is no
impact on recognition, measurement or disclosure. The current
period financial information presented in this document has not
been reviewed or audited.
The interim report does not include all of the notes of the type
normally included in an annual financial report. Accordingly, this
report is to be read in conjunction with the annual report for the
year ended 30 June 2021, which has been prepared in accordance with
both International Accounting Standards, in conformity with the
requirements of the Companies Act 2006, and IFRSs adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union, and any public announcements made by the Group during the
interim reporting period. The Group's annual consolidated financial
statements are available on the Company's' website,
www.theprsreit.com.
Adoption of new and revised standards
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 30 June 2021,
except for the adoption of new standards effective as of 1 July
2021.
The Group has considered amendments to standards endorsed by the
UK Endorsement Board effective for the current accounting period
and determined that these do not have a material impact on the
consolidated financial statements of the Group in the period ended
31 December 2021. These amendments are as follows: References to
Conceptual Framework in IFRSs (amended); IFRS 16 (amended) -
Covid-19 related Rent Concessions; IFRS 9, IAS 39, IFRS 7, IFRS 4
and IFRS 16 (amended) - Interest Rate Benchmark Reform - Phase
2.
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective for the
current accounting period. None of these are expected to have a
material impact on the consolidated financial statements of the
Group.
The new standards and amendments are as follows:
IFRS 17 - Insurance Contracts; IAS 1 (amended) - Classification
of liabilities as current or non-current; IAS 1 and IFRS Practice
Statement 2 (amended) - Disclosure of Accounting Policy; IAS 8
(amended) - Definition of Accounting Estimate; and
IAS 12 (amended) - exception to the Initial Recognition
Exemption.
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies, the
Directors have made the following judgements which have the most
significant effect on the amounts recognised in the consolidated
financial statements.
i. Fair value of investment property
The fair value of any property, including investment property
under construction is determined by an independent property
valuation expert to be the estimated amount for which a property
should exchange on the date of the valuation in an arm's length
transaction. The valuation experts use recognised valuation
techniques applying principles of both IAS40 and IFRS13.
The key assumptions that are used in the fair value assessment
of completed assets are estimated rental value, net investment
yield and gross to net deductions. The key assumptions that are
used in the fair value assessment of assets under construction are
investment value on completion and, gross development costs, taking
into account construction costs spent and forecast costs to
completion.
The valuations are prepared in accordance with the Royal
Institution of Chartered Surveyors ("RICS") Valuation - Global
Standards (incorporating the IVSC International Valuation
Standards) effective from 31 January 2020 together, where
applicable, with the UK National Supplement effective 14 January
2019, together the "Red Book".
ii. Acquisition of subsidiaries - as a group of assets and liabilities
During the period, the Group acquired three property-owning
special purpose vehicles. The Directors considered whether these
acquisitions meet the definition of the acquisition of a business
or the acquisition of a group of assets and liabilities. Applying
the Concentration test, it was concluded that the acquisitions did
not meet the criteria for the acquisition of a business as outlined
in IFRS 3 as substantially all of the fair value of the gross asset
acquired was concentrated in a single identifiable asset.
The Directors have reviewed the fair value of the assets and
liabilities as at the date of the acquisitions which were as
follows:
Sigma PRS
Investments Sigma PRS Sigma PRS
(Bury St Investments Northern
Edmunds D) (Drakelow) (Bertha
Limited Limited Park) Limited
GBP'000 GBP'000 GBP'000
Investment properties acquired 4,565 6,751 4,775
Other receivables 12 1,276 -
Other payables (35) - -
Total consideration paid 4,542 8,027 4,775
============= ============= ===============
-- Investment property is measured at fair value as at the date
of the acquisition of the subsidiary by an independent valuation
expert.
-- Other receivables are taken as being the value recorded in
the accounts of the Company acquired, being the best estimate of
the amounts actually recoverable.
-- Other payable balances are measured at the amounts actually payable.
3. Going concern
The interim condensed consolidated financial statements have
been prepared on a going concern basis. The Group's cash balances
at 31 December 2021, were GBP49 million of which GBP37 million was
readily available. The Group had debt borrowing as at 31 December
2021, of GBP326 million (gross of unamortised arrangement fees),
and has secured further facilities of GBP124 million. Capital
commitments outstanding as at 31 December 2021, were GBP63 million.
The Group's ERV as at 31 December 2021, was GBP43.5 million from
4,489 homes and has increased to GBP44.8 million from 4,561 homes
as at 11 March 2022. This has increased the Company's recurring
income and at this level is more than sufficient to cover monthly
cash costs and to support dividend payments, thereby maintaining
the Company's REIT status. The Company has monitored and performed
stress tests throughout the period since the Government imposed the
first national lockdown almost two years ago, and these have shown
the Group to be in a strong position throughout.
Therefore, the Directors believe the Group is well placed to
manage its business risks successfully. After making enquiries, the
Directors have a reasonable expectation that the Group will have
adequate resources to continue in operational existence for the
foreseeable future and for a period of at least 12 months from the
date of the approval of the Group's interim condensed consolidated
financial statements for the six months ended 31 December 2021. The
Board is therefore of the opinion that the going concern basis
adopted in the preparation of the interim condensed consolidated
financial statements for the six months ended 31 December 2021, is
appropriate.
4. Investment property
In accordance with International Accounting Standard, IAS 40
Investment Property, investment property has been independently
valued at fair value by Savills (UK) Limited, an accredited
external valuer with a recognised relevant professional
qualification and with recent experience in the locations and
categories of the investment properties being valued. The valuation
basis conforms to International Valuation Standards and is based on
market evidence of investment yields, expected gross to net income
rates and actual and expected rental values.
The valuations are the ultimate responsibility of the Directors.
Accordingly, the critical assumption used in establishing the
independent valuations are reviewed by the Board.
Completed Assets under
assets construction Total
GBP'000 GBP'000 GBP'000
As at 1 July 2020 231,302 345,817 577,119
Completed properties acquired
on acquisition of subsidiaries 31,606 - 31,606
Property additions - subsequent
expenditure - 72,495 72,495
Change in fair value 6,761 12,610 19,371
Transfers to completed assets 102,850 (102,850) -
---------- -------------- --------
As at 31 December 2020 372,519 328,072 700,591
Completed properties acquired
on acquisition of subsidiaries 10,669 - 10,669
Property additions - subsequent
expenditure - 49,494 49,494
Change in fair value 6,647 12,965 19,612
Transfers to completed assets 143,939 (143,939) -
---------- -------------- --------
As at 30 June 2021 533,774 246,592 780,366
Completed properties acquired
on acquisition of subsidiaries 4,565 - 4,565
Property additions - subsequent
expenditure - 43,454 43,454
Change in fair value 17,349 13,751 31,100
Transfers to completed assets 111,935 (111,935) -
---------- -------------- --------
As at 31 December 2021 667,623 191,862 859,485
========== ============== ========
The historic cost of completed assets and assets under
construction as at 31 December 2021 was GBP751.2 million (30 June
2021: GBP704.2 million).
Fair values
IFRS 13 sets out a three-tier hierarchy for financial assets and
liabilities valued at fair value. These are as follows:
Level 1 quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2 inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or
indirectly; and
Level 3 unobservable inputs for the asset or liability.
Investment property falls within Level 3. The investment
valuations provided by the external valuation expert are based on
RICS Professional Valuation Standards, but include a number of
unobservable inputs and other valuation assumptions. The
significant unobservable inputs and the range of values used
are:
Completed assets:
Type Range
Investment yield 4.00% - 4.50%
(net)
Gross to net assumption 22.50% - 25.00%
5. Share capital
No. of Shares Share Capital
GBP'000
Balance as at 31 December 2020 495,277,294 4,953
============== ==============
Balance as at 30 June 2021 495,277,294 4,953
============== ==============
Issue of shares 53,974,164 540
Balance as at 31 December 2021 549,251,458 5,493
============== ==============
In September 2021 the Company undertook an equity raise. On 4
October 2021,a total of 53,974,164 shares were issued at an issue
price of 103.0p.
6. Share premium reserve
The share premium relates to amounts subscribed for share
capital in excess of nominal value.
2020
GBP'000
Balance as at 31 December 2020 245,005
========
Balance as at 30 June 2021 245,005
========
Share premium on the issue of Ordinary
Shares 55,053
Share issue costs (1,084)
Balance as at 31 December 2021 298,974
========
7. Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Company by the weighted average number of Ordinary Shares in
issue during the period. As there are no dilutive instruments, only
basic earnings per share is quoted below.
The calculation of basic and diluted earnings per share is based
on the following:
31 December 31 December 30 June
2021 2020 2021
GBP'000 GBP'000 GBP'000
Earnings per IFRS income statement 38,550 20,254 44,113
Adjustments to calculate EPRA
Earnings:
Changes in value of investment
properties (31,100) (19,371) (38,983)
------------ ------------- ------------
EPRA Earnings: 7,450 883 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 7,450 883 5,673
============ ============= ============
Weighted average number of ordinary
shares 521,374,692 495,277,294 495,277,294
IFRS EPS (pence) 7.4 4.1 8.9
EPRA EPS (pence) 1.4 0.2 1.0
Company specific Adjusted EPS
(pence) - - 1.2
8. Net Asset Value per share
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 period. As there are no dilutive instruments,
only basic NAV per share is quoted below.
Net asset values have been calculated as follows:
As at As at As at
31 December 31 December 30 June
2021 2020 2021
IFRS Net assets (GBP'000) 572,883 476,317 490,270
EPRA adjustments to NTA (GBP'000) - - -
------------- ------------- ------------
EPRA NTA (GBP'000) 572,883 476,317 490,270
------------- ------------- ------------
Shares in issue at end of period 549,251,458 495,277,294 495,277,294
Basic IFRS NAV per share (pence) 104.3 96.2 99.0
============= ============= ============
EPRA NTA per share (pence) 104.3 96.2 99.0
============= ============= ============
The NTA per share calculated on an EPRA basis is the same as the
IFRS NAV per share all periods shown.
9. Capital commitments
The Group has entered into contracts with unrelated parties for
the construction of residential housing with a total value of
GBP671.4 million (30 June 2021: GBP663.8 million). As at 31
December 2021, GBP54.8 million (30 June 2021: GBP89.2 million) of
such commitments remained outstanding. The PRS REIT is also
committed to acquiring one completed and fully let development from
Sigma within the next 12 months for c.GBP9 million.
10. Transactions with Investment Adviser
On 31 March 2017, Sigma PRS Management Ltd ("Sigma PRS") was
appointed as the Investment Adviser ("IA") of the Company.
For the period from 1 July 2021 to 31 December 2021, fees of
GBP2.5 million (1 July 2020 to 31 December 2020: GBP2.1 million)
were incurred and payable to Sigma PRS in respect of investment
advisory services. At 31 December 2021, GBP0.5 million remained
unpaid (30 June 2021: GBP1.5 million).
For the period from 1 July 2021 to 31 December 2021, development
fees of GBP1.6 million (1 July 2020 to 31 December 2020: GBP2.8
million) were incurred and payable to Sigma PRS. At 31 December
2021, GBP0.2 million (30 June 2021: GBP0.3 million) remained
unpaid.
During the period from 1 July 2021 to 31 December 2021, the
Group acquired the following subsidiaries from Sigma Capital Group
Limited, the ultimate holding company of the IA:
Name of Entity Consideration
Sigma PRS Investments (Bury St Edmunds GBP4.5 million
D) Limited
--------------------------
Sigma PRS Northern (Bertha Park) Limited GBP4.8 million
--------------------------
Sigma PRS Northern (Drakelow) Limited GBP8.0 million
--------------------------
11. Dividends paid and proposed
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2021 (unaudited) 2020 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'000
Dividends on
ordinary shares
declared
and paid:
3 months to 31
March 2020: 1.0p
per share - 4,952 4,952
3 months to 30
June 2020: 1.0p
per share - 4,953 4,953
3 months to 30
September 2020:
1.0p per share - 4,953 4,953
3 months to 31
December 2020:
1.0p
per share - - 4,953
3 months to 31
March 2021: 1.0p
per share - 4,953
3 months to 30 4,953 - -
June 2021: 1.0p
per share
3 months to 30 5,493 - -
September 2021:
1.0p per share
10,446 14,858 24,764
============================ ============================ ===========================
Proposed
dividends on
ordinary
shares:
3 months to 31 - 4,953 -
December 2020:
1.0p
per share
3 months to 30
June 2021: 2.0p
per share - - 4,953
3 months to 31 5,493 - -
December 2021:
1.0p
per share
5,493 4,953 4,953
============================ ============================ ===========================
The proposed dividend was paid on 11 February 2022, to
shareholders on the register at 28 January 2022.
12. Post balance sheet events
Dividends
On 18 January 2022, the Company declared a dividend of 1.0p per
ordinary share in respect of the second quarter of the current
financial year. The dividend was paid on 11 February 2022, to
shareholders on the register as at 28 January 2022.
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END
IR SELFWEEESEDD
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