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RNS
Sigma Capital Group PLC   -  SGM   

Final Results

Released 07:15 29-Apr-2019

RNS Number : 3230X
Sigma Capital Group PLC
29 April 2019
 

 

29 April 2019

AIM: SGM

  

SIGMA CAPITAL GROUP PLC

("Sigma" or the "Group" or the "Company")

 

The private rented sector ("PRS") and urban regeneration specialist

 

Final Results

For the year ended to 31 December 2018

 

KEY POINTS

 

Financial

 

FY 2018

FY 2017

% increase

 

Revenue

£12.5m

£4.4m

181%

 

Profit from operations

£10.2m

£3.1m

227%

 

Profit before tax

£12.2m

£4.1m

205%

 

Basic EPS

12.65p

4.15p

205%

 

Cash generated from operations

£6.3m

£1.8m

250%

 

Net assets

£51.9m

£40.0m

30%

 

Net assets per share

58.1p

45.1p

29%

 

Proposed dividend per share

2.0p

nil

 

 

Summary

Financial results show the benefit of the first full year of The PRS REIT plc (the "REIT")

 

launched by Sigma on 31 May 2017, it is the only UK-quoted REIT wholly dedicated to investment in new family rental homes

Progressive dividend policy commenced, reflecting the transformation in the Company's revenue and earnings profile and the Board's confidence in growth prospects

Launch today of the Sigma Scottish PRS Fund ("Scottish Fund") in partnership with the Scottish Government. (See separate announcement)

 

initial resources of £43m to expand Sigma's PRS activities into Scotland

 

Operational

Second equity raise of £250m (gross) was completed for the REIT in February 2018, and £200m of debt facilities were secured in June 2018. A further £200m of debt facilities are in process, which will take the REIT's gross funding resource to £900m

By the end of 2018, the gross development cost of completed and contracted development for the REIT stood at £530m, almost 60% of the REIT's expected funding

 

representing 3,575 homes, 775 of which were completed by the year end

Sigma completed three self-funded housing developments in 2018, which were subsequently sold to the REIT for a combined £31.1m after an independent valuation

 

currently a further six self-funded sites are at various stages of development and will be sold to the REIT, subject to the fulfillment of contracted terms

Completed homes are renting well and demand remains strong

Sigma's PRS property platform was expanded - both construction resource and geographic reach

 

first sites in the South (above M25) were started in the second half of 2018

Internal resource was increased, and further investment in staff is planned to support ongoing growth

 

Prospects

As referred to in March 2019, expected planning approval delays have affected the timetable for the delivery of homes. As a consequence, Sigma has changed the composition of the development pipeline in order to maximise the delivery of homes (and in turn, rental income) into the REIT, and prioritised the allocation of development sites towards the REIT versus self-funded development on Sigma's balance sheet for subsequent sale to the REIT. With greater visibility on the impact of all of these factors, the Board is now resetting its expectations for Sigma's performance in the current financial year

Nonetheless, Sigma's performance in 2019 is expected to improve materially over 2018, and the Company believes that there are further growth opportunities available

 

Graham Barnet, CEO of Sigma, commented:

 

"The transformational effect of launching the PRS REIT is now evident. All key financial measures are significantly ahead year-on-year, and Sigma's growth prospects remain very strong.

 

"We are also delighted to announce today the launch of the Sigma Scottish PRS Fund, which is being backed by the Scottish Government. It will see us expand into a new market, which has a similar urgent requirement for new homes as the rest of the UK.

 

"The private rental sector is becoming an increasingly central part of national housing delivery, and Sigma's model, which delivers high quality, professionally-managed family homes has significant growth potential. Whilst planning delays have led us to change the mix of our development pipeline and reset our expectations for the current financial year, we still expect Sigma's performance to improve materially over 2018, and see further growth opportunities for Sigma to grasp beyond those currently underway."

 

 

Enquiries:

 

Sigma Capital Group plc

 

Graham Barnet, Chief Executive

 

T: 020 3178 6378 (today)

 

 

Malcolm Briselden, Finance Director

 

T: 0333 999 9926

 

 

 

 

 

KTZ Communications

 

Katie Tzouliadis, Dan Mahoney

 

T: 020 3178 6378

 

 

 

 

 

N+1 Singer
(NOMAD and Broker)

 

James Maxwell, James Moat, Ben Farrow

 

T: 020 7496 3000

 

 

 

NOTES TO EDITORS

 

About Sigma Capital Group plc
(www.sigmacapital.co.uk)

 

Sigma Capital Group plc is a private rented sector, residential development, and urban regeneration specialist, with offices in Edinburgh, Manchester and London. Sigma's principal focus is on the delivery of large scale housing schemes for the Private Rented Sector. It has a well-established track record in assisting with property-related regeneration projects in the public sector, acting as a bridge between the public and private sectors. Its subsidiary, Sigma PRS Management Ltd, is Investment Adviser to The PRS REIT plc.

 

About Sigma PRS Management Ltd

 

Sigma PRS Management Ltd is a wholly-owned subsidiary of Sigma Capital Group plc and is The PRS REIT plc's Investment Adviser, sourcing investments, managing assets, and advising the Alternative Investment Fund Manager ("AIFM") and The PRS REIT plc on a day-to-day basis, in accordance with the REIT's Investment Policy. The Investment Adviser is an appointed representative (reference number: 776293) of the AIFM.

 

About The PRS REIT plc
(www.theprsreit.com)

 

The PRS REIT is a closed-ended real estate investment trust established to invest in the Private Rented Sector and to provide shareholders with an attractive level of income together with the potential for capital and income growth. In its Initial Public Offering, on 31 May 2017, the Company raised £250m (gross) of equity capital, and, on 20 February 2018, a further £250m (gross) was raised through an additional Placing. Both fundraisings were supported by the UK Government's Homes England (formerly Homes and Communities Agency), with direct investments that together totaled c.£30m. Together with debt facilities, the PRS REIT's total resource is expected to grow to c.£900m.

 

 

 

 

CHAIRMAN'S STATEMENT

 

INTRODUCTION

 

In last year's annual report, I highlighted the fundamental change that the launch of The PRS REIT plc ("REIT" or "PRS REIT"), on 30 May 2017, was expected to make to Sigma's earnings and growth prospects. This year shows the first full 12 month impact, and the transformational effects are evident, with all key financial measures significantly ahead year-on-year.

 

Group revenue for 2018 is 181% higher at £12.5m (2017: £4.4m) and profit before tax for the year increased by 200% to £12.2m (2017: £4.1m). At the year end, net assets were up by 30% to £51.9m (2017: £40.0m) or 58.1p per share (2017: 45.1p per share), and cash generated from operations increased by 250% to £6.3m (2017: £1.8m). As expected, the Board is also now pleased to commence a progressive dividend policy, reflecting both the change in the scale of the business and the Board's confidence in future growth prospects. A final dividend of 2.0p per share is proposed for the financial year, which will be subject to shareholder approval at the AGM.

 

Sigma's PRS property platform, which provides a professional and secure supply chain for the acquisition, construction and management of rental homes, is now principally being used to support the REIT's investment objectives, as well as the Group's own PRS developments.

 

By the end of 2018, despite some delays to construction schedules, completed and contracted development for the REIT amounted to £530m of gross development cost ("GDC"). This is almost 60% of the REIT's initial gross funding resource of £900m, once additional debt facilities are in place. Expressed in terms of new homes, it represents some 3,575 properties, 775 of which were completed by the year end.

 

As previously reported, we raised additional equity of £250m for the REIT in February 2018, and secured debt facilities of £200m in June, with further debt facilities to be signed in due course. We already have sufficient sites within our PRS property platform to fully deploy these funds and, at the end of the first quarter of the new financial year, Sigma had deployed in the REIT £603m of GDC across 49 sites in multiple regions in England. This takes the total of new homes either underway or completed at 31 March 2019 to 3,951. Within the next few weeks, we expect to deliver our 1,000th home for the REIT, a significant milestone, reflecting the substantial progress the business has been made since the REIT's launch.  

 

Sigma completed three self-funded development sites in 2018, which were subsequently sold to the REIT for a combined £31.1m after an independent valuation. Currently, a further six self-funded sites are at various stages of development, spanning the North West, Midlands and the South. These have a combined GDC of £70.3m and an estimated rental value ("ERV") of approximately £4m from over 300 new rental homes.

 

In November 2018, we finished the delivery of 684 family homes for UK PRS Properties that started in December 2015. UK PRS Properties was our original partner in PRS delivery, together with Gatehouse Bank plc, and Sigma retains an interest in the c.1,600 new rental homes delivered for these joint ventures through its PRS property platform. The Company also benefits from asset management fees from managing these properties.

 

Looking forward, we are continuing to explore opportunities to broaden our existing income streams, and I am pleased to announce today the launch of the Sigma Scottish PRS Fund ("the Scottish Fund") in partnership with the Scottish Government through Building Scotland Fund. The Scottish Fund will have initial resources of £43m, with the Building Scotland Fund providing a revolving credit facility of £30m and the balance provided by Sigma as equity. This new initiative represents a significant extension of Sigma's PRS activities and, we will be working with a small group of construction partners, as we do in England, as well as with central and local government agencies to deliver much needed housing in Scotland.

 

Demand for new PRS housing in the UK remains high, especially for family homes, and we believe that Sigma's model, which creates high quality, professionally managed homes, is unrivalled in its scale. We are well advanced with delivery for the REIT, which is targeting an initial 5,600 new rental homes, and are pleased to be launching in Scotland. As previously referred to, expected planning approval delays have affected the timetable for the delivery of homes. As a consequence, Sigma has changed the composition of the development pipeline in order to maximise the delivery of homes (and in turn, rental income) into the REIT, and prioritised the allocation of development sites towards the REIT versus self-funded development on Sigma's balance sheet for subsequent sale to the REIT. With greater visibility on the impact of all of these factors, the Board has reset its expectations for Sigma's financial performance in 2019. However, we remain confident of delivering substantial and sustained growth over the long term as we continue to deliver the rental homes that the country requires.

 

FINANCIAL RESULTS

 

Sigma's revenue for the year ended 31 December 2018 almost tripled to £12.5m (2017: £4.4m). This reflected the first full year's contribution from PRS activities related to the REIT in addition to revenue from Gatehouse Bank and UK PRS Properties, and the benefit of rental income from Sigma's self-funded sites prior to their sale.

 

Administrative costs increased to £5.7m (2017: £4.2m). The rise mainly reflected the expansion in staff numbers as we took on additional resource to support the ongoing scaling of our activities.

 

Profit from operations increased by 227% to £10.2m (2017: £3.1m). This included realised and unrealised gains from investment property of £3.6m (2017: £2.7m), and an unrealised loss on investments of £151,000 (2017: gain of £323,000).

 

Profit before tax tripled to £12.2m (2017: £4.1m) and basic earnings per share more than tripled to 12.65p (2017: 4.15p).

 

The Group's net asset backing continued to strengthen. Net assets per share at the year-end were up by 30% to £51.9m, which is equivalent to 58.1p per share (31 December 2017: £40.04m and 45.1p per share.

 

Cash generated from operations has significantly improved at £6.3m (2017: £1.8m), which reflected increased PRS activity.

 

Net cash at 31 December 2018 was higher year-on-year at £19.8m (31 December 2017: £5.6m). This included £8.4m of cash for land acquisitions that were made in January 2019. Excluding this, net cash was 104% higher than at the same point last year.

 

DIVIDENDS

 

Reflecting the transformation in the Company's revenue and earnings, and the Board's confidence in Sigma's growth prospects, the Directors are very pleased to commence a progressive dividend policy. This policy is introduced with a proposed dividend of 2 pence per share for the financial year.

 

The payment of this dividend is subject to shareholder approval at the Company's AGM and, once approved, will be paid on 28 June 2019 to shareholders on the register on 31 May 2019.

 

BUSINESS AND Operational Overview

 

Sigma is focused on delivering new homes for private rental across the UK, with family homes its key target market. The Group's PRS property platform brings together a network of formal and informal relationships, which include construction partners, central government and local authorities. Sigma typically delivers a range of traditional housing through its Platform partners, enabling the Company to cater for a broad spectrum of demand, including young couples as well as growing families.

Sigma's income streams are broadly threefold:

development management fees for the assets the Group procures and delivers to third parties, now almost exclusively the PRS REIT;

asset management fees for the overall management of the assets; and 

development profits on the assets the Group self-funds and subsequently sells, once completed.  Sigma also retains any rental income prior to the sale of a completed site.

MANAGED PRS ACTIVITIES

The PRS REIT plc

Sigma subsidiaries are Investment Adviser and Development Manager to the REIT, which was launched by Sigma on 31 May 2017. The REIT's objective is to create a substantial portfolio of new-build homes across the UK for the private rental market.

The REIT's portfolio is being built in two ways:

Undeveloped sites

Sigma's subsidiary, Sigma PRS Management Ltd ("Sigma PRS"), sources sites for the REIT to acquire and develop. Typically sites are sourced though the Group's PRS property platform (combining building contractor partners, local authorities and governmental bodies). As well as sourcing and assessing suitable sites, Sigma PRS manages the planning and development processes as well as the subsequent letting of completed new homes. A minimum of two thirds of the REIT's new properties will be funded in this manner.

For these services and the right of first refusal on assets within Sigma's PRS property platform, the REIT pays Sigma a development management fee, equivalent to 4% of the GDC of respective sites.

Completed sites

The REIT acquires completed PRS sites from Sigma pursuant to a forward purchase agreement. Up to a maximum of a third of new properties will be acquired in this manner. Sigma earns development profits from the sale of such sites, and receives rental income until the point of sale.

 

All sites, whether undeveloped or completed, must satisfy the REIT's investment objectives and are independently valued for the REIT prior to acquisition.

 

Sigma earns asset management fees for managing the REIT's assets. These are calculated on a percentage of the net asset value ("NAV") of the REIT's portfolio, on a sliding scale. Sigma earns 1% of the value of the REIT's adjusted net assets up to £250m, with this percentage moving to 0.9%, 0.8% at different thresholds, and then to 0.7% at £1bn and above.

 

Sigma made significant progress over 2018 in deploying the REIT's capital, with proceeds allocated to additional development sites in the North West, the Midlands, Yorkshire and, in the second half of the year, to the REIT's first sites in the South (above the M25 motorway). The intention is to create a geographically diverse portfolio of homes in order to mitigate risk and generate balanced returns.

 

During 2018, construction began on 23 sites, taking the number of completed and contracted sites to 43. By the end of 2018, the number of completed homes stood at 775. Currently, 37 sites are contracted, with other sites in the planning process. Sigma expects to deliver the 1,000th new home for the REIT by the end of May 2019, marking a significant milestone in the maturity of the REIT, and a testament to the effectiveness of Sigma's PRS property platform in just 24 months since IPO.

 

Sigma has strengthened its relationship with its principle construction partner, Countryside Properties, signing a major new Collaboration Agreement in June 2018. The Agreement has increased delivery resource and opened new geographies. Countryside Properties is now able to deliver new homes for the PRS property platform across five regions, the North West, South Yorkshire, the Midlands (East and West), the South (outside the M25), and South West of England. Sigma's other construction partners, Keepmoat and Engie, are delivering across Yorkshire, and Yorkshire and East Midlands respectively. Galliford Try joined Sigma's construction panel in 2018, and the first site it undertook on behalf of the REIT is now complete. The collaboration with Galliford Try is expected to develop further over 2019.

 

Gatehouse Bank and UK PRS Properties

 

The new homes delivered under our joint venture with Gatehouse Bank continue to rent very well. The 918 properties, located across sites in the North of England were completed in March 2017 and produce rental income of about £7.5m per annum for Gatehouse Bank. Sigma earned an asset management fee of approximately £0.48m in 2018 for managing these assets.

 

Sigma's joint venture with UK PRS Properties, which is principally backed by the Kuwaiti Investment Authority and institutional shareholders from the State of Kuwait, completed the last tranche of its homes in November 2018. In total, 684 new rental properties were constructed across sites in the North West and West Midlands, with the GDC totaling £94m. As with the Gatehouse Bank joint venture, the new homes were delivered through Sigma's PRS property platform. Sigma earned £0.44m for its services from this joint venture in 2018.

 

SELF-FUNDED PRS ACTIVITIES

 

During the year, Sigma completed the development, letting and sale of three sites to the REIT. Comprising 195 homes located in Wigan, Birmingham and Salford, the rental income from the properties is about £1.8m per annum. The combined sales value was £31.1m, which generated a profit of about £3.9m for Sigma.    

 

The Company currently has a further six development sites underway, in the North West, Midlands and South. These will deliver approximately 300 homes in total, have a combined GDC of £70.3m, and an ERV of £4.0m per annum. A site acquired in Essex was Sigma's first acquisition in the Southern region of England.

 

Two of the sites, in Telford and Wigan, should be completed and ready for acquisition by the REIT in 2019, and we expect the remaining sites to be ready for sale to the REIT in 2020.

 

Launch of the Sigma Scottish PRS Fund in 2019

 

Sigma has been in discussions with the Scottish Government throughout 2018 about the possibility of replicating its PRS model in Scotland. This dialogue has now concluded successfully, and we are delighted to announce the launch of the Sigma Scottish PRS Fund ("the Scottish Fund") in partnership with the Scottish Government. The Scottish Fund will have initial funding of £43m, with £30m provided by the Building Scotland Fund in the form of a revolving credit facility and the balance provided by Sigma.

 

The Scottish Fund is the first dedicated vehicle to focus on the creation of new rental homes for families in the private rented sector in Scotland and opens up a new geography and additional revenues for Sigma. Demand for rental homes in Scotland is strong and the Company will use its existing model of working with a small group of delivery partners and central and local government agencies to deliver PRS housing at pace.

 

As with the new-build homes funded by Sigma, the properties within the Scottish Fund are intended to meet the purchase criteria of the REIT, with sites close to large employment centres, good quality primary schools and local amenities. The REIT has no assets in Scotland currently.

 

The Scottish Fund has the potential to enable the delivery of in excess of £40m of new assets per annum in Scotland once the revolving credit facility is up to full capacity, and the first appraisals are currently underway. Sigma retains any capital uplift on the sale of completed and let sites.

 

The Company wishes to thank the Scottish Government for its support in helping to launch Sigma's PRS model in Scotland, and for its direct backing with credit facilities. Sigma's management has a long history of delivering housing in Scotland and looks forward to using the Scottish Fund to assist in the housing delivery targets as it rolls out Sigma's brand of family rental homes in Scotland.

 

REGENERATION PARTNERSHIPS

 

Our regeneration activities support our local authority partners and involve taking on projects that fit well with our existing relationships and core PRS activities.

 

In Liverpool, construction continued to progress well at Gateacre, a 19 acre, former secondary school, and the project is expected to be completed during 2019. The site consists of 231 new family homes for open market sale, and, as at the end of December 2018, 198 of the homes have been sold with the remainder either exchanged or reserved.

 

Work on the Lime Street redevelopment in Liverpool also progressed well, with a student residence and hotel both completed in 2018. Retail and leisure units, providing 30,000 sq. ft of space, are also under development.

 

Sigma's partnership with Salford City Council remains productive and provided significant development opportunities for the Company's PRS activities over the year.

Following the conclusion of development works relating to the North Solihull Partnership project, the Company resigned from this partnership in September 2018.

BUILDING COMMUNITIES

 

As Sigma establishes the REIT's portfolio of houses, we are also very aware that we are creating new neighbourhoods and communities. We take this responsibility very seriously and are fully committed to creating well-functioning communities, as well as building thoughtfully-designed, desirable and well-located homes. Our vision is to create communities which people want to belong to, as well as homes that they want to live in.

 

We aim to create a sense of identity within our developments and thereby a feeling of belonging amongst our tenants. As previously reported, the Company wishes the 'Simple Life' brand, under which the REIT's homes are marketed, to represent a higher standard of rental home and a higher standard of community well-being.

 

We wish to create communities in which members forge the social links and bonds that underpin familiarity and neighbourliness. To this end we arrange regular events across at our developments that help to bring people together. We are also seeking to build links with the wider community, and over the past year have supported, for example, a number of local primary schools, with projects including a library refurbishment and the provision of outdoor play equipment. We will continue to build on these early initiatives, and are moving forward with ideas, big and small, which will help to create a better environment for our tenants and their local communities.

 

OUTLOOK

 

The business has made a great leap forward over the last year and Sigma's 2018 financial results demonstrate the effectiveness of the PRS model we have established.

We are now close to 70% through the deployment of the REIT's expected gross funds of £900m. As at 31 March 2019, the number of completed sites stood at 12 and a further 37 sites are currently under construction, with our 1,000th rental home for the REIT due for delivery before the end of May. Completed assets are performing well and we expect this to continue, supported by macroeconomic factors, including a shortage of homes, and our high quality, professionally managed offering. While we have experienced delays to site commencements as a result of planning delays and are now factoring this into our expectations for the current financial year, we expect to deliver strong growth in 2019. We anticipate that all our key financial measures, including cash generation and net assets, will grow significantly over the long term, and to support this growth, we will be investing in the business to strengthen our teams.

We see further opportunities to expand our business model and today's announcement of the extension of our model into Scotland, with the launch of the Sigma PRS Scottish Fund, is another step in Sigma's continuing development.

David Sigsworth OBE

Chairman

 

 

 

STRATEGIC REPORT

 

The Directors have pleasure in presenting their Strategic Report for the year ended 31 December 2018.

 

BUSINESS ACTIVITIES AND GROUP STRUCTURE

Sigma is a public limited liability holding company incorporated in England and is listed on the Alternative Investment Market. Its activities, including those of its subsidiaries, are principally focused on the PRS sector but also encompass urban regeneration and property asset management.

 

At 31 December 2018, Sigma had five principal and wholly-owned subsidiaries:

 

Sigma Capital Property Ltd ("SCP")

Sigma PRS Management Ltd ("Sigma PRS")

Sigma Inpartnership Ltd ("SIP")

Strategic Property Asset Management Ltd ("SPAM")

Sigma Technology Investments Limited ("STI")

 

The Group's PRS activities are carried out by SCP, its subsidiaries and Sigma PRS. In May 2017, the Group announced the launch of The PRS REIT plc ("PRS REIT" or "REIT") on the Specialist Fund Segment of the Main Market of the London Stock Exchange. At the same time, £250m gross was raised through an Initial Public Offering of REIT shares, with the net funds to be used to create a substantial portfolio of new-build PRS homes. In February 2018, a further £250m (gross) was raised for the REIT through a Placing Programme and, in June 2018, £200m of debt facilities were agreed. Sigma PRS is Investment Adviser to the PRS REIT, having signed a five year management contract. It is also Development Manager to the REIT, and holds an equity interest in it.

 

By the end of 2018, the Group's PRS property platform had completed 775 homes for the REIT. This number is anticipated to grow to about 5,600 homes once all the net proceeds of the REIT's expected £900m (gross) of funding have been deployed.

 

SCP funds the development of new PRS homes and, during 2018, completed and subsequently sold three fully developed and let PRS sites to the PRS REIT, bringing the total number of self-funded and completed PRS sites to seven since 2015 when self-funded PRS activity started. At the end of 2018, SCP was active on a further four PRS sites and has contracted on a further two sites since then, taking the total number of sites currently underway to six. Two of these are expected to be sold to the PRS REIT during 2019.

 

The Group's first PRS joint venture was with Gatehouse Bank plc. Launched in November 2014, the joint venture comprised 918 new family homes, the last tranche of which was completed in March 2017. Rental and occupation levels have performed consistently well since then. A second phase, consisting of 684 PRS homes across eight sites, was launched in December 2015 with UK PRS Properties (a fund principally backed by the Kuwait Investment Authority and institutional shareholders from the State of Kuwait). This second phase was completed during 2018, and rental and occupancy levels across these sites have also performed well.

 

The Group's property regeneration activities are largely carried out by its subsidiary, SIP, which undertakes large-scale, property-related regeneration projects, working as a bridge between public and private sector organisations. Founded in 2000 and operating from offices in Manchester, SIP now has two partnerships, with Liverpool City Council and Salford City Council.

 

Most of the Group's property management activities that are outside of its PRS and local authority relationships are undertaken by SPAM.

 

The Group has equity interests in a venture capital fund and in an unquoted company, both held by STI.

 

GROWTH STRATEGY

 

The Group's core strategy is to utilise its property and capital raising expertise to further its PRS activities and the delivery of family housing. This will be done by further broadening the geographies in which we deliver assets, and by diversifying the financial instruments we manage in order to deliver those assets. Operationally, this is effected by working with local authorities, house builders, funding partners, Homes England, and now with the Scottish Government as we launch of the Sigma Scottish PRS Fund in 2019. The Board believes that the Group is emerging as one of the leading operators in the private rented sector in the UK, and the leading player in family homes.

 

The build-to-rent sector is growing and is expected to account for 25% of all housing stock by 2020, up from 19% in 2015. To date, most build-to-rent activity has been focused on London and on the construction of flats, with activity in the regions of England lagging behind. The current pipeline of built-to-rent homes in both London and the regions remains modest at c.140,000 homes, presenting the Group with a significant growth opportunity.

 

Sigma's growth strategy remains focused on extending its activities so as to be in a position to deliver homes across multiple regions in the UK through its PRS property platform. Diversifying home delivery in this way mitigates the risk associated with a narrower geographic concentration. Locations near to large employment centres, local transport infrastructure, and good primary schooling also remain fundamental to Sigma's PRS model.

 

During 2018, the Group expanded its delivery within South Yorkshire and the Midlands, and extended its operations into the South of England above the M25 motorway. Our launch in Scotland in 2019 will add further opportunity and we are actively looking at additional geographic expansion.

 

Sigma has now delivered over 2,500 PRS homes in four and a half years through its PRS property platform. These have been predominantly for Gatehouse Bank and UK PRS Properties although at the end of March 2019, some 944 homes have been completed for the REIT, including those funded by Sigma. Over the course of the next three years, Sigma will be focused on delivering the balance of the 5,600 homes that make up the REIT's expected initial portfolio, and on utilising its own resource of some £75m in this deployment. The Group also has a pipeline of development opportunities over and above those development sites already allocated to meet the REIT's initial targets. This places the Group in a very strong position for continuing growth.

 

Sigma derives value through fees, both development management and asset management, as well as through development profits on assets built and subsequently sold to the REIT. We have now broadened that value spectrum further with the launch of the Sigma PRS Scottish Fund.   

 

OVERVIEW OF THE BUSINESS

 

Private Rented Sector residential portfolio

The Group's PRS model enables it to move residential land assets with planning permission, predominately sourced from local authority partnerships and house building relationships, to its fund structures.

 

From a local authority perspective, a key advantage Sigma offers is that it can deliver large-scale, high quality housing, which helps to meet both local housing need and regeneration objectives. Efficiency is another key attraction since the PRS model can deliver new homes at a rate that is some four to five times faster than the rate at which 'market-for-sale' homes are typically built. 'Market for-sale' homes tend to be constructed at the pace of sales demand, which can be restricted by mortgage availability. Furthermore, local authorities benefit from increased council tax receipts from new homes as well as from the Government's New Homes Bonus Scheme in England.

 

The rapidity of delivery provided by our PRS property platform is both attractive to and synergistic for our housebuilding partners as it offers an enhanced return on capital as well as de-risking and quickly maturing those sites on which there are a mix of 'market-for- sale' and PRS homes. The control and rapidity of this delivery is without doubt the biggest challenge in our business.

 

The PRS REIT plc

In 2017, the PRS REIT raised £250m gross proceeds through an oversubscribed IPO to invest in new PRS homes. In February 2018, additional gross proceeds of £250m were raised via a Placing Programme, and debt facilities of £200m were secured from Scottish Widows and Lloyds Banking Group in June 2018. Negotiations are well underway for further debt of £200m, which when achieved takes the REIT's gross funding resource to £900m. As previously stated, the launch of the REIT represented a fundamental transformation of Sigma's model. The Company has a five year management contract with the REIT as Investment Adviser, and is also Development Manager.

 

Sigma is remunerated by the REIT in two ways. Firstly, Sigma receives an investment advisory fee, which is based on an adjusted net asset value of the REIT's portfolio, and, secondly, it receives a development management fee in respect of sites that are developed directly by the REIT.

 

In addition, the REIT may acquire completed and fully let sites from Sigma, through forward purchase agreements, dependent on those sites meeting its investment criteria. Sites are independently valued on behalf of the REIT and Sigma recognises any revaluation gains. As at 31 December 2018, a total of seven fully developed and let sites had been acquired by the REIT from Sigma.   

 

As at 31 December 2018, the gross development cost of sites either completed or contracted to the REIT stood at £530m, equating to c.3,575 homes. By 31 March 2019, these figures had increased to £603m of gross development cost and c.3,951 homes.

 

Sigma Self-funded PRS

The Company has been funding its own PRS assets since 2015, when it raised £20m (gross) from a share placing in order to create a substantial portfolio of new rental homes, leveraging its existing PRS infrastructure and relationships. In 2016, the Group agreed a £45m revolving credit facility with Homes England, which materially increased its ability to scale its delivery of self-funded homes.

 

During 2018, three sites were completed and let, and then acquired by the REIT, so releasing capital for further investment and taking the number of sites that the Company has successfully developed and sold to the REIT to seven,. The Company is currently active on a further six sites. Two of these are expected to be completed and sold to the REIT during 2019, with the balance expected to be ready for letting and sale in 2020.

 

'Simple Life' Letting Brand (www.simplelifehomes.co.uk).

We wish to create a new experience for tenants in the rental market, and all PRS sites, including those developed by the REIT, are marketed under our build-to-rent brand, 'Simple Life'. The creation of this consumer brand identifies our product to potential customers, and our objective is position it as the 'gold standard' in the private rented sector.

 

As its name suggests, 'Simple Life' is dedicated to 'making life simple' for tenants, whether this is through our new improved customer communication tools, online 'how to' videos or the speed at which repairs can be carried out by our dedicated maintenance teams or 'Handymen'. Additionally, we are also strongly focused on promoting a sense of community as tenants move into Simple Life homes. We aim to do this both by creating opportunities for neighbours to get together through events that we run, and by forging links with the wider community, especially through our support for schools and local charities.

 

We are pleased that results from recent surveys indicate a high level of satisfaction among tenants and there are customer testimonial videos available to watch on our dedicated YouTube channel, https://www.youtube.com/channel/UCsZTzlt2UuzQF_ypvTpWD1Q.

 

Joint Venture with Gatehouse Bank plc - Phase 1

Our joint venture with Gatehouse Bank, which launched in November 2014, helped to prove the effectiveness of our PRS model and was completed in March 2017. The project delivered 918 new rental properties across sites in the North West of England, with homes built on land procured by Sigma, using its local authority partnerships. Gatehouse, a leading London-based Shariah compliant investment bank with a real estate portfolio across the UK and Europe, delivered the equity element of the venture whilst Barclays Bank plc provided the debt financing.

 

The sites continue to perform well with current occupancy in excess of 95% and rental levels are strong. We are experiencing a renewal rate of over 70% with existing tenants on those properties that have been let for in excess of 12 months. The properties have been let under the brand, 'DIFRENT'.

 

 

Joint Venture with UK PRS Properties - Phase 2

Our second phase of PRS homes was with UK PRS Properties and completed in November 2018. This phase comprised the construction of 684 family homes over eight sites in the North West and Midlands. Lettings have been strong, with current occupancy in excess of 95%. The renewal rate for existing tenants that have been renting for a minimum of 12 months is 70%. As with phase 1, the new homes are let under the 'DIFRENT' brand.

 

The PRS phases with Gatehouse and UK PRS Properties generated, and continue to generate, fees for the Group. An upfront fee was paid on commencement of a site, a development management fee was paid quarterly over the duration of the delivery period, and a quarterly asset management fee is paid once the properties are let. Sigma also retains a share of the net profits on disposal of the assets, subject to a minimum return to investors.

 

URBAN REGENERATION

 

Liverpool Partnership (also referred to as Regeneration Liverpool)

The Liverpool Partnership is a limited liability partnership formed in 2007 between SIP and Liverpool City Council. The partnership was given an initial ten year option over a 60 acre residential development site, known as Norris Green, which had outline planning consent for around 800 new homes, with a total development value of c.£120m. Although the initial partnership period has ended, the Liverpool Partnership will continue to develop and manage those sites under option until completion.

 

In 2012, we formed a joint venture company with a major local commercial property development company, ION Developments Limited (formerly Neptune Developments Limited), to help accelerate the delivery of the commercial regeneration projects in Liverpool. In 2013, we established a second joint venture company, Countryside Sigma Limited, with house building specialist, Countryside, to assist us in the delivery of residential regeneration projects in the City.

 

Residential Projects

The regeneration of the site at Norris Green completed during 2018. The development consists of eight phases totaling 829 properties of which 394 properties are 'market-for-sale', 214 are affordable homes and 221 are private properties for rent, delivered by our PRS joint ventures.

 

Construction on the former Queen Mary School site, which is approximately one mile from Norris Green, completed in 2017. The scheme comprised a total of 200 new homes, 64 of which were designated for our joint venture with Gatehouse. All of the PRS units continue to perform well and all the 136 'market-for-sale' homes have been sold.

 

Construction at Gateacre, a 19-acre, former secondary school in Liverpool, continued to progress well and is expected to be completed during 2019. The site consists of 231 new family homes for open market sale, ranging from two and three bedroom townhouses to five bedroom executive detached homes. As at the end of December 2018, 198 of the new homes have been sold with the remainder either exchanged or reserved.

 

Commercial Projects

In October 2016, working with Liverpool City Council and our commercial development partner, ION Developments, we commenced the redevelopment of Lime Street Eastern Terrace, Liverpool. This mixed-use development incorporates a c.400 bedroom student residence, a c.100-bedroom hotel, which is pre-let to Premier Inn, along with 30,000 sq.ft. of retail and leisure units. During 2018, the student residence was delivered along with the hotel, and c.18,000 sq.ft. of the retail space has been let to Lidl. A further 7,500 sq.ft. of space is expected to be let to a food and beverage operator in the next few months.

 

Salford Partnership (also known as Higher Broughton Partnership)

The Salford Partnership is our partnership with Salford City Council and Royal Bank of Scotland.

 

During the year, we continued to deal with residual matters arising from previous residential and commercial projects of the Salford Partnership.

 

Sigma's relationship with Salford City Council continues to be productive, and provides PRS development opportunities. As previously reported, a total of four sites comprising 206 units were developed as part of our joint venture with Gatehouse, and a further two sites consisting of 220 units have been completed as part of the joint venture with UK PRS Properties. We have now acquired five additional sites in Salford on behalf of the REIT and expect to acquire further sites over the coming months.

 

North Solihull Partnership

This Partnership was set up in 2007 by Solihull Metropolitan Borough Council, Bellway Homes, West Mercia Housing Association and SIP. Its remit was to coordinate and deliver the regeneration of an area of c.1,000 acres in North Solihull. The key objectives of the Partnership were to deliver new and replacement housing stock, ten new or refurbished primary schools and five new village centres incorporating neighbourhood council, medical and retail facilities. Our role in the provision of development management services, including development planning, coordination and procurement of development works has come to an end and the Company resigned from the North Solihull Partnership in September 2018.

 

VENTURE CAPITAL ACTIVITIES

 

Sigma continues to be a limited partner in one venture fund, which was transferred to Shackleton Ventures Limited in 2013. Sigma's investment in the fund is held by STI. Sigma also holds an investment in an unquoted company.

 

FINANCIAL REVIEW OF 2018

 

The Group's revenue increased by 181% to £12,477,000 (2017: £4,437,000) as a result of significant revenue from the PRS REIT including investment advisory fees and development management fees. In addition there were revenues from our managed PRS activities with Gatehouse and UK PRS Properties along with rental income from our self-funded portfolio. Gross profit increased by 186% to £12,410,000 (2017: £4,334,000).

 

The Group made a trading profit in the year of £6,691,000 (2017: £66,000), with property activities contributing a trading profit of £8,665,000 (2017: £105,000). The discontinued venture capital activities contributed a trading loss of £906,000 (2017: trading loss of £8,000).

 

Administrative costs increased to £5,719,000 (2017: £4,268,000) reflecting the impact of the increase in the number of employees and activities of the Company as a result of our increased investment in PRS activities including the REIT.

 

Profit from operations increased by 227% to £10,204,000 (2017: £3,116,000) including gains from investment property of £3,664,000 (2017: £2,727,000), and an unrealised loss on investments of £151,000 (2017: gain of £323,000).

 

Profit before tax was £12,181,000 (2017: £4,057,000), which is an increase of 200%.

 

The Group's net assets increased by 30% to £51,876,000 at 31 December 2018 (31 December 2017: £40,035,000). This is equivalent to 58.1p per share (31 December 2017: 45.1p per share).

 

Balance sheet

The principal items in the balance sheet are goodwill of £533,000 (2017: £533,000), investment property of £23,621,000 (2017: £29,205,000), property and equipment of £1,297,000 (2017: £1,123,000), accrued income of £502,000 (2017: £4,756,000), contract receivables of £3,001,000 (2017: £nil), cash of £22,828,000 (2017: £6,167,000) and trade and other payables, including tax, of £4,531,000 (2017: £4,898,000).

 

The goodwill relates to the acquisition of SIP and is reviewed each year for impairment. The investment property relates to Sigma's own PRS assets. The property and equipment principally relates to the Group's head office in Edinburgh. Accrued income includes £502,000 expected to be received in 2019 and the contract receivables of £3,001,000 relate to the Group's carried interest with Gatehouse and development management fees in respect of the site at Gateacre which are both due in over one year. The trade and other payables of £4,531,000 includes £1,218,000 in relation to the Group's investment in property, and was paid in January 2019.

 

The Group's current assets exceed its current liabilities by £21,245,000 (2017: £4,567,000). The Group has three long term liabilities totalling £3,704,000 (2017: £523,000). These relate to a loan of £371,000, provided in relation to its acquisition and redevelopment of the Group headquarters, and a development facility of £2,617,000, in respect of its self-funded PRS and deferred tax of £716,000.

 

Cash flow

Cash balances improved by £16,661,000 to £22,828,000 (2017: increased by £42,000 to £6,167,000), however the balance includes £8,447,000 to fund acquisitions of land during January 2019. In 2017, the predominant reason for the cash inflow was due to realisation of the sale of investment property less the re-investment in further self-funded PRS activities. In 2018, the sale of and reinvestment in property continued whilst the cash flow benefited from the development and investment advisory fees from the REIT. The cash inflow from operating activities was £6,332,000 (2017: £1,786,000). The cash inflow from investing activities was £7,695,000 (2017: outflow of £1,786,000) along with the cash inflows from financing activities of £2,634,000 (2017: £42,000).

 

Key performance indicators

The key performance indicators are concentrated on the property activities.

 

The Group's key performance indicators include:

 

2018

£'000

2017

£'000

Increase

 

 

 

 

 

Revenue - all property activities

12,477

4,424

181%

Operating profit - property activities

12,189

2,832

330%

Realised and unrealised profit on revaluation of investment property

 

3,664

 

2,727

 

34%

Group profit from operations

10,204

3,116

227%

Cash balances

22,828*

6,167

270%

 

* includes cash of £8,447,000 for land acquisitions that took place in January 2019

 

Revenue from property activities and the operating profit from property activities have increased significantly from the prior year largely due to the Group's first full year of activity in relation to the PRS REIT from which it earns development management and investment advisory fees. The Group's realised and unrealised profit on the revaluation of investment property is derived from development of seven investment properties, three of which were sold to the REIT during the year. The Group's total profit from operations has improved over the prior year as a result of its property activities as discussed above and cash balances are strong as result of the Group's increased activities and the increased recurring nature of its revenue.

 

The Board also monitors certain non-financial key performance indicators including the number of properties developed and delivered, the status of developments in progress and lettings activity for completed developments.

 

Principal risks and uncertainties

The specific financial risks of price risk, interest rate risk and credit risk are discussed in the notes to the financial statements. The broader risks - financial, operational, cash flow and personnel - are considered below.

 

The principal financial risk relates to the housing market where a deterioration in the macro-economic outlook, the cyclical nature of residential market and a fall in house prices may affect Sigma's income and its ability to raise or deploy finance for housing projects. The Group manages these risks by: keeping abreast of any trends so that any likely downturn is anticipated; maintaining good funding relationships; ensuring a reputation for building a good quality product; and having diversity in its income streams. A financial risk is where the Group develops its own investment property and there may be increased costs above those originally forecast. This risk is mitigated by securing fixed price design and build contracts before the development commences. A further financial risk is the reduction in the value of the Group's investment property. This risk is mitigated by the number of properties and their geographical location and also by ensuring that properties are let to good quality tenants, and are professionally managed, providing customers with a high level of customer service. In addition, the Group seeks to acquire investment sites at competitive prices.

 

The principal operational risks of the business reside around management's ability to secure new contracted property income streams from both residential and commercial property initiatives. The Group's own self-funded portfolio, along with its appointment as Investment Adviser and Development Manager to the REIT, have significantly increased the proportion of the Group's contracted revenue compared with one-off income streams.

 

Where the Group undertakes property developments on its own balance sheet, development risk is managed by maintaining close control of pre-contract costs and by limiting the number of early stage developments financed by the Group at any one time.

 

The main cash flow uncertainties of the business centre on the timing of rental income in respect of its investment properties, property development management and investment advisory fees and the receipt of profits arising out of the partnerships.

 

The Group is dependent on its Executive Directors and senior management for its success. There can be no assurance that the Group will be able to retain the services of these key personnel although historically the turnover of senior staff has been low. Incentives for senior staff include share options and carried interest in joint ventures, managed funds and Sigma's own PRS portfolio.

 

EMPLOYEES

 

Employees are fundamental to the Group's success and we are committed to the involvement and development of staff at all levels. The Group continues to keep its employees informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved effectively through regular informal meetings. There is an employee share scheme which is open to all employees.

 

During the year the Group continued to fulfil its legal obligation in relation to pension auto-enrolment and offers all employees the opportunity to join a defined contribution scheme managed by the Group.

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort will be made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

 

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY REPORT

 

As a long term investor in property, the Company is committed to a sustainable approach to all areas of the business.  In construction, our delivery partners ensure that the properties are delivered in an environmentally responsible, ethical, safe and sustainable manner, which includes adherence to relevant social and environmental legislation and codes of practice.  In the creation of communities, the Company strives to design developments that attract a broad range of tenants and offer occupants house type that provide the opportunity to move up or down the housing ladder depending upon life stage. 

 

As Sigma expands the REIT's portfolio of houses, we aim not just to build high-quality homes but to create communities that people want to belong to. We are very aware of the responsibility we have as we create new neighbourhoods and communities, and are fully committed to building and maintaining these strong networks around our homes.

 

Sigma wishes to create a feeling of belonging amongst our tenants, and to that end we try to encourage the forging social links and bonds that underpin familiarity and neighbourliness. To inspire this, we arrange regular events across all of our developments that help to bring people together. Last year for example, we organised Easter egg hunts across all of our neighbourhoods, an ice cream dash at the height of summer that saw us distribute several thousand pots, and a festive visit by Santa and his reindeer at Christmas, all to a great reception.

 

We are also seeking to build links with the wider community, and supported a number of projects over the past year to strengthen our involvement. Schools were a particular focus and projects included the refurbishment of a library, including creative reading spaces, the provision of outdoor play equipment, and the funding of educational school trips. Outside of schools we continue to support the Salford-based homeless drop-in centre, Loaves and Fishes, as well as Park Palace Ponies, a Liverpool-based charity that aims to make horse-riding more accessible to children in inner city areas.

 

Over the course of 2019, we will be installing clothing banks at our developments, as well as undertaking a monthly donation programme to a Salford-based food bank. Our pledge to plant 1,000 trees over the course of the year is also underway, as we aim to create a better and more sustainable environment for all our communities.

 

 

This Strategic Report was approved by the Board and signed on behalf of the Board by

 

GF Barnet

Chief Executive Officer

 

 

 

 

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT

For the year ended 31 December 2018

 

 

 

2018

 

 

2017

 

£'000

 

£'000

 

 

 

 

Revenue

12,477

 

4,437

Cost of sales

(67)

 

(103)

 

 

 

 

Gross profit

12,410

 

4,334

 

 

 

 

Unrealised gain on revaluation of investment property

1,362

 

1,915

Realised gain on revaluation of investment property

2,302

 

812

Unrealised (loss)/profit on the revaluation of investments

(151)

 

323

 

 

 

 

Administrative expenses

(5,719)

 

(4,268)

 

 

 

 

Profit from operations

10,204

 

3,116

 

 

 

 

Finance income

135

 

285

Finance costs

(166)

 

(196)

Dividends received

58

 

-

Share of profit of joint venture

1,950

 

852

 

 

 

 

Profit before tax

12,181

 

4,057

 

 

 

 

Taxation

(906)

 

(378)

 

 

 

 

Profit for the year

11,275

 

3,679

 

 

 

 

Other comprehensive income

 

 

 

Revaluation of own property

186

 

-

Total comprehensive income for the year

11,461

 

3,679

 

 

 

 

Earnings per share attributable to the equity holders of the Company:

Basic profit per share

12.65p

 

4.15p

Diluted profit per share

12.38p

 

4.10p

 

The accompanying notes are an integral part of this consolidated comprehensive income statement.

 

 

 

CONSOLIDATED BALANCE SHEET

At 31 December 2018

 

 

 

2018

 

 

2017

 

£'000

 

£'000

Assets

 

 

 

Non-current assets

 

 

 

Goodwill and other intangibles

533

 

533

Investment property

23,621

 

29,205

Property and equipment

1,297

 

1,123

Investment in joint venture

3,694

 

1,744

Fixed asset investments

2

 

2

Financial assets at fair value through profit and loss

2,187

 

899

Trade and other receivables

3,001

 

3,088

 

34,335

 

36,594

Current assets

 

 

 

 

 

 

 

Trade receivables

1,927

 

950

Other current assets

1,076

 

2,403

Cash and cash equivalents

22,828

 

6,167

 

25,831

 

9,520

Total assets

60,166

 

46,114

 

 

 

 

Liabilities

 

 

 

Non-current liabilities

 

 

 

Interest bearing loans and borrowings

2,988

 

523

Deferred tax

716

 

603

 

3,704

 

1,126

Current liabilities

 

 

 

Trade and other payables

3,667

 

4,826

Interest bearing loans and overdrafts

55

 

55

Current tax liability

864

 

72

Total liabilities

8,290

 

6,079

 

 

 

 

Net assets

51,876

 

40,035

 

 

 

 

Equity

 

 

 

Called up share capital

893

 

887

Share premium account

32,048

 

31,885

Capital redemption reserve

34

 

34

Merger reserve

(249)

 

(249)

Capital reserve

(7)

 

(7)

Revaluation reserve

186

 

-

Retained earnings

18,971

 

7,485

 

 

 

 

Equity attributable to equity holders of the Company

51,876

 

40,035

 

 

 

 

The accompanying notes are an integral part of this consolidated balance sheet.

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2018

 

 

Share

capital

Share

premium

account

Capital redemption reserve

Merger

reserve

Capital reserve

Revaluation Reserve

Retained earnings

Total

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

At 1 January 2017

887

31,885

34

(249)

(7)

-

3,537

36,087

Profit and loss for the year

-

-

-

-

-

-

3,679

3,679

Transactions with owners in their capacity as owners

 

 

 

 

 

 

 

 

Issue of shares

-

-

-

-

-

-

-

-

Share-based payments

-

-

-

-

-

-

269

269

At 31 December 2017

887

31,885

34

(249)

(7)

-

7,485

40,035

 

 

 

 

 

 

 

 

 

Revaluation reserve

-

-

-

-

-

186

-

186

Profit and loss for the year

-

-

-

-

-

-

11,275

11,275

Transactions with owners in their capacity as owners

 

 

 

 

 

 

 

 

Issue of shares

6

163

-

-

-

-

-

169

Share-based payments

-

-

-

-

-

-

211

211

At 31 December 2018

893

32,048

34

(249)

(7)

186

18,971

51,876

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated and company Cash Flow Statements

For the year ended 31 December 2018

 

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Cash received/(used in) from operations

6,332

1,786

(342)

(3,317)

 

 

 

 

 

Net cash generated from/(used in) operating activities

6,332

1,786

(342)

(3,317)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchase of property and equipment

(14)

(37)

-

-

Purchase of investment property

(40,447)

(35,925)

-

-

Proceeds from the sale of investment property

49,696

34,273

-

-

Purchase of financial assets at fair value

(1,439)

-

-

-

Dividends received

58

-

6,350

-

Repayment of loans by PRS Fund

-

92

-

-

Finance cost net of finance income

(159)

(189)

2

5

Net cash generated from/(invested in) investing activities

7,695

(1,786)

6,352

5

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Bank and other loans

2,465

42

-

-

Issue of shares

169

-

169

-

Net cash generated from financing activities

2,634

42

169

-

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

16,661

42

6,179

(3,312)

 

 

 

 

 

Cash and cash equivalents at beginning of year

6,167

6,125

83

3,395

 

 

 

 

 

Cash and cash equivalents at end of year

22,828

6,167

6,262

83

 

 

 

 

 

The accompanying notes are an integral part of this cash flow statement.

 

Reconciliation of changes in liabilities arising from financing activities

 

 

Group

2018

Group 2017

 

£'000

£'000

 

 

 

Opening balance of loans at 1 January

578

536

New loans

2,520

97

Repayment in the year

(55)

(55)

 

3,043

578

 

 

 

NOTES

 

1.   This final results announcement was approved for issue by a duly appointed and authorised committee of the Board of Directors on 28 April 2019.

 

2.   The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 December 2018 or 31 December 2017. The Audit Reports of the Auditor on the statutory financial statements for each of the years ended 31 December 2018 and 31 December 2017 were (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 31 December 2017 have been delivered to the Registrar of Companies. The statutory financial statements for the year ended 31 December 2018 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

While the financial information included in this final results announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as endorsed for the use in the European Union, this announcement does not itself contain sufficient information to comply with IFRS.

 

3.   Segmental information - business segments

At 31 December 2018 the Group has just one business activity, property.

 

The Group had three significant customers in the year. Thistle Limited Partnership was a significant customer with profit share and carried interest earned of £483,000 (2017: £620,000), UK PRS (Jersey) Properties I Limited with fees earned of £628,000 (2017: £716,000) and The PRS REIT plc with development and investment advisory fees earned of £10,583,000 (2017: £2,370,000).

 

The revenue from services from the Group's Owned PRS property represents £468,000 (2017: £488,000) of gross rental income. Rental operating costs attributable to the gross rental income for the year were £67,000 (2017: £103,000).

 

The Directors regard the Group's reportable segments of business to be property, venture capital fund investment and holding company activities. The business operates in a single region, the UK. Costs are allocated to the appropriate segment as they arise with central overheads apportioned on a reasonable basis.

 

The segment analysis for the year ended 31 December 2018 is as follows:

 

 

Regeneration

Managed Property

Owned PRS Property

Venture Capital

Holding Company

Intra group adjustments

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Revenue from services

83

11,917

468

9

-

-

12,477

 

 

 

 

 

 

 

 

Trading profit/(loss)

110

8,156

399

(906)

533

(1,601)

6,691

Unrealised gain on revaluation of investment property

-

-

1,362

-

-

-

1,362

Realised profit on revaluation of investment property

-

-

2,302

-

-

-

2,302

Unrealised gain on revaluation of investments

-

(140)

-

(11)

-

-

(151)

Profit/(loss) from operations

110

8,016

4,063

(917)

533

(1,601)

10,204

Finance income

86

44

-

3

2

-

135

Finance costs

-

(10)

(156)

-

-

-

(166)

Dividend (paid)/received

-

(5,392)

-

(900)

6,350

-

58

Profit distribution to partners

-

6,700

(6,700)

-

-

-

-

Share of associate

1,950

-

-

-

-

-

1,950

Profit/(loss) before tax

2,146

9,358

(2,793)

(1,814)

6,885

(1,601)

12,181

 

 

 

 

 

 

 

 

Total assets

9,291

10,089

34,017

1,971

37,543

(32,745)

60,166

Total liabilities

(302)

(4,406)

(31,917)

(1,676)

(1,830)

31,841

(8,290)

Net assets

8,989

5,683

2,100

295

35,713

(904)

51,876

 

 

 

 

 

 

 

 

Capital expenditure

-

14

-

-

-

-

14

Depreciation

-

16

-

-

10

-

26

 

Segmental assets

Net assets of the Group's Regeneration activities consists mainly of its investment in a joint venture and contract receivables in respect of property projects. The Group's Owned PRS Property consists of Investment property measured at fair value. Venture Capital net assets includes its historic investment in one venture fund and cash.

 

The segment analysis for the year ended 31 December 2017 is as follows:

 

 

Regeneration

Managed Property

Owned PRS Property

Venture Capital

Holding Company

Intra group adjustments

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Revenue from services

38

3,898

488

13

-

-

4,437

 

 

 

 

 

 

 

 

Trading (loss)/profit

(11)

(269)

385

(8)

(20)

(11)

66

Unrealised gain on revaluation
of investment property

-

-

1,915

-

-

-

1,915

Realised profit on the revaluation of investment property

-

-

812

-

-

-

812

Unrealised gain on revaluation
of investments

-

-

-

323

-

-

323

Profit/(loss) from operations

(11)

(269)

3,112

315

(20)

(11)

3,116

Finance income

186

92

1

1

5

-

285

Finance costs

-

(14)

(182)

-

-

-

(196)

Share of associate

852

-

-

-

-

-

852

Profit/(loss) before tax

1,027

(191)

2,931

316

(15)

(11)

4,057

 

 

 

 

 

 

 

 

Total assets

7,134

5,621

31,674

3,787

33,436

(35,538)

46,114

Total liabilities

(265)

(8,635)

(26,748)

(1,678)

(4,987)

36,234

(6,079)

Net assets

6,869

(3,014)

4,926

2,109

28,449

696

40,035

 

 

 

 

 

 

 

 

Capital expenditure

-

37

-

-

-

-

37

Depreciation

-

15

-

-

10

-

25

 

4.   Realised and unrealised gains on the revaluation of investment property

The total realised and unrealised gains during the year relating to investment property through profit and loss are set out below:

 

 

2018

£'000

2017

£'000

Increase

 

 

 

 

 

Realised and unrealised profit on revaluation of investment property

3,664

2,727

34%

 

5.   Unrealised profits on the revaluation of investments

The total fair value adjustments made during the year relating to financial assets at fair value through profit and loss are set out below:

 

 

Group

2018

Group

2017

 

£'000

£'000

Financial assets at fair value through profit and loss:

 

 

- the venture capital funds

72

96

- quoted securities

(141)

-

- unquoted securities

(82)

227

 

(151)

323

6.   Taxation

There is a current and deferred taxation charge in the year.

 

The Group's deferred tax assets, other than those relating to short term timing differences, are not recognised as it is not sufficiently clear that losses will be capable of utilisation in future periods.

 

7.   Profit per share

The calculation of the basic profit per share for the year ended 31 December 2018 and 31 December 2017 is based on the profits attributable to the shareholders of Sigma Capital Group plc divided by the weighted average number of shares in issue during the year.

 

 

Profit attributable to shareholders

Weighted average number of shares

Basic profit per share (pence)

 

£'000

 

 

 

 

Year ended 31 December 2018

11,275

89,136,953

12.65

 

 

 

 

Year ended 31 December 2017

3,679

88,715,715

4.15

 

Diluted profit per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all potential dilutive ordinary shares. The Company has only one category of potentially dilutive ordinary shares, those share options granted where the exercise price is less than the average price of the Company's shares during the year. Diluted profit per share is calculated by dividing the same profit attributable to equity holders of the Company as above by the adjusted number of ordinary shares in issue during the year ended 31 December 2018 of 91,044,281 (2017: 89,700,931). For the year ended 31 December 2018, the diluted earnings per share is 12.38 pence (2017: 4.10 pence).

 

8.   Cash flows from operating activities

 

Group

Group

Company

Company

 

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Total comprehensive income for the year

11,461

3,679

6,885

(14)

Adjustments for:

 

 

 

 

Share-based payments

211

269

211

269

Depreciation

26

25

10

10

Amortisation

-

11

-

 

Finance costs net of finance income

159

189

(2)

(5)

Dividends received

(58)

-

(6,350)

-

Fair value loss/(profit) on financial assets at fair value through profit or loss

151

(323)

-

-

Share of associate profit

(1,950)

(852)

-

-

Unrealised profit on revaluation of investment property

(1,362)

(1,915)

-

-

Realised profit on sale of investment property

(2,302)

(812)

-

-

Unrealised profit on revaluation of freehold property

(186)

-

-

-

Changes in working capital:

 

 

 

 

Trade and other receivables

435

538

3,710

(3,654)

Trade and other payables

(253)

977

(4,806)

77

Cash flows from operating activities    

6,332

1,786

(342)

(3,317)

 

9.   Availability of statutory financial statements

Copies of the full statutory financial statements will be available from the Company's offices at 18 Alva Street, Edinburgh, EH2 4QG no later than 21 May 2019 and are available on its website at www.sigmacapital.co.uk.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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