Sigma Capital : 2021 Half Yearly Report

Company number 03942129

SIGMA CAPITAL GROUP PLC

INTERIM REPORT AND FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2021

EDINBURGH	MANCHESTER	LONDON (postal only)
18 Alva Street	Floor 3, 1 St Ann Street	8 Harley Place
Edinburgh	Manchester	London
EH2 4QG	M2 7LR	W1G 8QE
	Tel: [phone]

INTERIM REPORT AND FINANCIAL STATEMENTS

For the six months ended 31 March 2021

CONTENTS		PAGE
KEY POINTS	2
CHAIRMAN'S STATEMENT	4
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT	9
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	10
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	11
CONSOLIDATED STATEMENT OF CASH FLOWS	12
NOTES TO THE FINANCIAL STATEMENTS	13

KEY POINTS

Financial
		Six months to	Six months to	Nine months
		31 March	30 June	to 30 Sept
		2021	2020	2020
	Revenue	£6.6m	£5.0m	£8.0m
	Profit from operations	£4.1m	£0.9m	£3.2m
	Profit before tax	£4.1m	£1.0m	£3.2m
	Earnings per share	3.82p	0.85p	2.84p
	Cash flow from operating activities	£4.3m	(£1.6m)	(£1.3m)
	Cash balances at period end	£25.4m	£23.4m	£25.8m
	Net assets per share	70.4p	65.9p	68.3p

Following the change in Sigma's accounting reference date, the financial period under review comprises the six months ended 31 March 2021 while the comparative period comprises the six months ended 30 June 2020.

Operational

Managed PRS activities

The PRS REIT plc ("the PRS REIT")

• 956 new homes delivered in H1, taking total portfolio to 3,590 at 31 March 2021, with an estimated rental value ("ERV") of £33.3m p.a.
• Rental demand and collection remained strong.
• Currently 1,008 homes under way (excl. Sigma-funded sites), with ERV of c.£9.4m p.a.
• 4,000th new rental home due imminently - just four years after REIT's launch.
• PRS REIT shares admitted to trading on the Premium Segment of the Main Market of the London Stock Exchange in March 2021

EQT Real Estate joint venture

• Launched in September 2020, targeting an initial portfolio of c.3,000 build to rent homes with a value in excess of £1bn.
• Two sites developed by Sigma, are expected to be acquired by the joint venture at completion, due before the financial year end. They will deliver 157 homes with an ERV of c.£2.5m
• A further two development sites have been acquired and are under way, together comprising 142 rental homes with an ERV of c.£2.6m p.a. and gross development cost ("GDC") of c.£48.6m
• Additional pipeline sites are progressing well

Gatehouse Bank and UK PRS Properties partnerships

• Sale of initial PRS portfolio with Gatehouse Bank (c.918 homes) for c.£150m triggered realisation of carried interest, amounting to £2.7m - 43% above book value, reflecting the strength of the valuation on disposal
• A 66-unit site for UK PRS Properties is on track for delivery in the spring of 2022

Self-funded PRS activities

• Five developments providing 321 homes are currently under way, with a GDC of c.£72.3m and ERV of c.£4.2m. The two London sites will seed the EQT Real Estate joint venture (as mentioned above).
• Post period, in May 2021 a 28-unit development site with ERV of £0.6m, completed and fully let in H1, was sold to the PRS REIT for c.£10.5m, following an independent valuation by Savills.
• First development in Scotland has been agreed with Springfield Properties plc - a 75-unit site within
  Springfield's Bertha Park Village project near Perth.

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KEY POINTS (CONTINUED)

Recommended acquisition

• As reported on 11 June 2021, an agreement was reached on the terms for a recommended cash offer for
  Sigma by PineBridge Benson Elliot LLP ("PineBridge"), part of PineBridge Investments, a private global asset manager with $133.0 billion in assets under management at 31 March 2021.
• Sigma's Independent Directors have unanimously recommended the offer, and at the time of announcement, shareholders accounting for approximately 61% of Sigma's issued equity indicated their support.

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

"These results reflect Sigma's continuing good progress. The recent offer for Sigma by PineBridge Benson Elliot LLP was unanimously recommended by Sigma's Independent Directors as in the best interests of staff, partners and shareholders as a whole, and is now following due process."

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CHAIRMAN'S STATEMENT

Introduction

During late 2020, we decided to review the strategic options and relative benefits of the various routes available to the business to fund its future growth and maximise shareholder value. Recognising the attractiveness of Sigma as a platform for investors with access to greater capital availability, we decided to appoint Rothschild & Co. to run a private sale process for Sigma in order to maximise value for Sigma's shareholders.

This process attracted participation from multiple well-funded parties and we provided interested parties with access to due diligence information through a virtual data room and a series of management sessions.

On 11 June 2021, we announced that we had reached an agreement on the terms of a recommended cash offer for Sigma Capital Group plc ("Sigma" or the "Group" or the "Company") with PineBridge Benson Elliot LLP ("PineBridge"), part of PineBridge Investments, a private global asset manager with $126.3 billion in assets under management. Sigma's Independent Directors have unanimously recommended the offer, and at the time of announcement, shareholders accounting for approximately 61% of Sigma's issued equity indicated their support either through irrevocable undertakings or letters of intent.

In recommending the offer, the Independent Sigma Directors believe that the Company can better execute its current strategy by leveraging its strong brand, relationships, and expertise. In order to deliver its next phase of growth, Sigma would require consistent access to capital to invest in scale into UK PRS product and further grow the business through forming new housebuilder partnerships, expanding operations into new regional markets and widening its rental product offering. The Independent Sigma Directors believe the Company's acquisition by PineBridge will accelerate the delivery of these strategic benefits at a rate which would be otherwise difficult to achieve as a standalone AIM-listed company.

Full details of the proposed offer will shortly be posted to the Company's shareholders and the offer remains subject to shareholder approval and due process. If the necessary approvals are obtained, it is currently expected that the acquisition will complete in the third quarter of the current calendar year.

Sigma made good progress over the first six months of the financial year, with housing delivery proceeding at close to pre-coronavirus levels even with the necessary social distancing and other protective measures in place. This was helped by increasing use of modular building methods. We completed the delivery of a further 956 new homes for The PRS REIT plc ("the PRS REIT"), taking our total delivery at 31 March 2021 to 3,590 completed homes with an estimated rental value of £33.3m p.a.. Rental demand remained high and at 31 March, 3,433 of the REIT's 3,590 completed homes were occupied and a further 74 reserved with deposits paid. Rent collection also continued to be strong.

The portfolio is well on its way to its fully optimised target of 5,200 homes across most of the major regions of England, with an ERV of approximately £50.0m per annum. We expect to reach the milestone of the 4,000th home for the PRS REIT imminently, and remain on track to deliver the 5,000th completed home by early 2022.

Our joint venture with EQT Real Estate, which is focused on Greater London, is building out its pipeline of potential opportunities. Two Sigma-funded seed sites, under construction at Fresh Wharf, Barking and Beam Park, Havering, are expected to be acquired by the joint venture before the end of the current financial year. As at 23 June, two further sites development had been acquired and were under way, consisting of 142 rental homes with a GDC of £48.6m and an expected ERV of c.£2.6m per annum.

Our own self-funded sites also progressed well. Five sites at varying stages of delivery are under way. These should deliver a total of 321 new homes when fully completed and include two London sites, which are expected to be acquired by the EQT Real Estate joint venture. In May, we concluded the sale of one completed and let site, in Harlow, Essex, to the PRS REIT for £10.5m following an independent valuation by Savills. We are currently in the process of agreeing an expansion of our financing arrangements to enable the next tranche of self-funded development sites to start, and are concluding partner and asset delivery conditions. Having experienced some delay in this process, we now expect new site development to commence before the end of the current financial year.

We were also very pleased to extend our relationship with Countryside Properties plc ("Countryside"), our principal home building partner, in a new Collaboration Agreement as previously reported. It continues the successful partnership we have established over the last six years.

As we look ahead, the Company is well-positioned for further growth and on behalf of the Board, I would like to thank staff and partners for their commitment during what remained an unsettled period as we all continue to negotiate the remaining challenges of the coronavirus pandemic.

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