Sigma Capital : 2020 Annual Report

Company number 03942129

SIGMA CAPITAL GROUP PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2020

ANNUAL REPORT AND FINANCIAL STATEMENTS for the nine month period ended 30 September 2020

CONTENTS		PAGE
KEY POINTS	2
CHAIRMAN'S STATEMENT	4
CORONAVIRUS AND GOING CONCERN REVIEW	10
STRATEGIC REPORT	13
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT	20
ENVIRONMENTAL, SOCIAL AND GOVERNANCE	23
PRINCIPAL RISKS AND UNCERTAINTIES	32
DIRECTORS	36
ADVISERS	37
DIRECTORS' REPORT	38
DIRECTORS' REMUNERATION REPORT	40
STATEMENT OF DIRECTORS' RESPONSIBILITIES	43
AUDIT COMMITTEE REPORT	44
INDEPENDENT AUDITOR'S REPORT	47
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT	54
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	55
COMPANY STATEMENT OF FINANCIAL POSITION	56
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	57
COMPANY STATEMENT OF CHANGES IN EQUITY	58
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS	59
ACCOUNTING POLICIES	60
NOTES TO THE FINANCIAL STATEMENTS	66
FIVE YEAR RECORD	94

KEY POINTS

Summary

• Results in line with market expectations
• Business model showed considerable resilience in the face of the coronavirus pandemic
• Strong bounce back after the opening up of the construction and lettings industries in May 2020
• Major joint venture, potentially worth £45m in fee income alone in the first five years, agreed with EQT Real Estate in September; targeting £1bn build-to-rent portfolio in Greater London

Financial Results

9-month reporting period following the change of accounting reference date to 30 September

	9 months	12 months
	to 30 September	to 31 December
	2020	2019
Revenue	£8.0m	£13.9m
Profit from operations	£3.2m	£12.0m
Profit before tax	£3.2m	£13.0m
Earnings per share	2.84p	11.63p
Net assets	£61.1m	£60.5m
Net assets per share	68.3p	67.6p
Cash balances	£25.8m	£16.8m
Dividend per share	2.0p	2.0p

Coronavirus Impact

• Disruption of construction activity is estimated to have reduced activity level by 25% over the 9-month period
• No requirement to furlough staff or to use Government assistance schemes
• Rental demand and rent collection remained strong

Managed PRS activities

The PRS REIT plc ("REIT")

• A total of 1,017 new rental homes were delivered to the REIT in the 9-month period, taking its portfolio to
  2,634 homes at 30 September 2020, with an estimated rental value ("ERV") of £24.3m pa
• The REIT's funding resource of £900m (gross) was fully committed by 31 December 2020 with the acquisition of a fully-let development of 123 suburban new homes. This development had originally been created and developed by Sigma for BlackRock Real Assets
• In Q1 of the new financial year, a total of 529 homes (including from the above acquisition) were added to the REIT's portfolio, taking it to 3,163 completed homes, with an ERV of £29.4m at 31 December 2020
• • a further 1,963 homes were contracted, which takes the portfolio to 5,126 homes, with an ERV of £48.8m pa, when completed and let
  • delivery of the REIT's 5,000th completed home is expected in late 2021/early 2022

Gatehouse Bank and UK PRS Properties partnerships

• The Thistle Portfolio and UK PRS Portfolio (together c.1,600 PRS homes) contributed £0.4m and £0.4m of asset management fees respectively in the period

Self-funded PRS activities

• Two self-funded developments were completed and sold to the REIT for a total of £11.9m after independent valuation. Sigma's realised profit was £1.1m.
• Six developments (c.395 homes) are currently under way, with a gross development cost ("GDC") of c.£90.8m and ERV of c.£5.1m. The two London developments will seed the EQT Real Estate joint venture

Post period and Outlook

• ESG manager appointed in November 2020
• New Collaboration Agreement with principal construction partner, Countryside Properties plc, signed in December to deliver up to 5,000 new PRS homes over the next three years
• Investment Advisory Agreement with the REIT was extended from 31 May 2022 to 31 December 2025
• Sigma's interest in the Thistle Portfolio (918 PRS homes) was realised; net cash of £2.9m is £1m ahead of book value
• Q1 trading is in line with management expectations and Board is confident of growth prospects

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KEY POINTS (continued)

Graham Barnet, CEO of Sigma Capital Group plc, commented:

"Sigma's final results reflect the impact of the coronavirus crisis and the shorter nine month reporting period, following the change of year end. Nonetheless, we delivered over 1,000 new rental homes for The PRS REIT plc in the period, and delivery momentum has bounced back to almost pre-coronavirus level.

"The launch of our £1bn joint venture with EQT Real Estate, which is targeting 3,000 new London rental homes over the next five years, was a landmark event in September 2020. It sees us advance into a new geography, and adds new long-term income streams. Like the recent high-profile sale of the 'Thistle' portfolio of suburban rental homes, which we created for Gatehouse Bank, it is further recognition of the value our model creates both for partners and for Sigma.

"The business is in a very strong position, financially and operationally. Our new agreements with Countryside Properties, for housing delivery, and with The PRS REIT plc, extending our advisory agreement, create added visibility. Trading in the first quarter of the new financial year is in line with management expectations, and with demand for our rental homes remaining high, the Group is in a strong position to achieve its targets for the financial year."

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