Annual Report & Financial Statements
For the year ended 30 June 2022
1
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
02
Highlights
04
Strategic Report
04
Chairman’s Statement
08
IFRS and EPRA Performance Measures
10
Market Dynamics
12
Portfolio Analysis
26
Investment Strategy and Business Model
30
Investment Adviser’s Report
36
Environmental, Social and Governance
48
Principal Risks and Uncertainties
53
Stakeholder Engagement and
Section 172 Statement
56
Corporate Governance
57
Directors
58
Advisers
59
Report of the Directors
64
Statement of Directors’ Responsibilities
66
Corporate Governance Statement
74
Audit Committee Report
78
Management Engagement Committee Report
80
Directors’ Remuneration Policy
82
Directors’ Remuneration Report
86
Independent Auditor’s Report to the
Members of The PRS REIT plc
94
Financial Statements
95
Consolidated Statement of
Comprehensive Income
96
Consolidated Statement of Financial Position
97
Consolidated Statement of Changes in Equity
98
Consolidated Statement of Cash Flows
99
Company Statement of Financial Position
100
Company Statement of Changes in Equity
101
Company Statement of Cash Flows
102
Notes to the Financial Statements
Contents
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Company Number 10638461
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
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THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
“We’ve had another successful period with
just over 800 new rental homes added to the
portfolio during the financial year. This has
taken the number of completed homes in the
portfolio at the end of September to 4,856. We
expect to approach our 5,000th home towards
the end of 2022.
“We are now targeting 5,600 homes, providing
over £1 billion of assets with an anticipated
rental income stream of £57.5 million a year.
“The portfolio continues to perform very
well. We have seen strong rental growth
and anticipate increased occupier demand,
particularly in a rising interest rate environment,
which will make home ownership more
unattainable for some. Affordability is more
achievable for our customers. Our tenant base
spends on average 25% of their income on rent,
which is lower than last year’s figure of 29%.
“While there are current challenges, we are
well positioned to weather the current volatility.
More than 60% of our long-term investment
debt is at favourable fixed rates for an average
17 years, and the portfolio gearing is low at 31%.
“The structural shortage of high-quality rental
homes in the UK and rising demand against
a backdrop of higher interest rates continue
to demonstrate a need for our model of high-
quality, professionally-managed single family
rental homes.”
Steve Smith, Chairman of the PRS REIT, commented:
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THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Introduction
I am pleased to present The PRS REIT plc’s (the
“
PRS
REIT
”, or the “
Company
” or the “
Group
”) audited
financial results for the year ended 30 June 2022. Against
a very turbulent backdrop, the Company has continued
to successfully deliver its objectives and you will see
throughout the Report the strong position that it has
achieved and the positive actions that it has taken.
Largest portfolio of single-family rental homes in
the UK
We have continued to increase the Company’s portfolio
of new, high-quality family rental homes, with 802 homes
added during the financial year. This took the total number
of completed homes in the portfolio to 4,786 by the
financial year end, an increase of 20% (30 June 2021:
3,984 homes).
The estimated rental value (“
ERV
”) from our 4,786
completed homes is £47.8 million per annum, a 27% rise
on the same point last year (30 June 2021: £37.5 million
per annum). The percentage increase in rental value over
the year compared to the percentage increase in the
number of completed homes over the year reflects rental
growth over the period.
Of the 802 additional homes, 66 homes were added
through the acquisition of two fully-developed and let sites
from Sigma Capital Group Limited, which were bought
after having been independently assessed and valued by
Savills.
A further 693 homes, with an ERV of £7.2 million per
annum, were contracted at 30 June 2022, and are at
varying stages of the construction process.
Over the financial year, we acquired four sites, which we
are now developing. They have a combined ERV of
£3.3 million. We have acquired a further four development
sites in the first quarter of the new financial year.
The Company’s portfolio of high-quality single-family
homes and apartments remains the largest of its kind
in the UK. Our assets are geographically widely spread.
Currently, we have 70 sites (2021: 64 sites) across the
major regions of England and in Scotland. Sites are in the
North-West, North-East, Yorkshire, the Midlands, and in
the South-East (excluding London) and East of England,
with one site in Central Scotland. We are now targeting
approximately 5,600 homes with an ERV of around
£57.5 million per annum once the homes are fully
completed and let. This compares to the previous target
of 5,700 homes with an estimated ERV of £55.0 million
per annum immediately following our equity fundraise in
September 2021. The revision takes into account price
inflation on new sites and higher interest costs in relation
to variable rate debt.
Strategic Report
CHAIRMAN’S STATEMENT
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
1
Like-for-like rental growth on stabilised sites is defined as the annual rental growth on sites where all units have been completed and either all or nearly all have been let
Strong asset performance
I am pleased to report that our assets have performed
strongly throughout the year. Both occupancy and rent
collection (which is measured as rent collected relative
to rent invoiced in any given period) remained high.
Rent collection for the year was 99% (2021: 98%) on
this basis and occupancy stood at 98% at 30 June
2022 with 4,674 homes occupied out of the 4,786
completed homes (2021: 98%). Including those homes
where a letting had been agreed but occupancy had not
commenced, occupancy was 99%.
Net rental income for the financial year increased by
60% year-on-year to £34.3 million (2021: £21.5 million).
This reflects the benefit of a full year’s rental income on
properties that had been completed and let part-way
through the prior year, combined with both portfolio and
rental growth.
Like-for-like rental growth on stabilised sites over the year
was 5.1%
1
. This reflects a blended rate of c.10% on re-
lets to new tenants and c.4% on renewals with existing
tenants during the period. Gross rent arrears remained
modest despite the growth in the portfolio, standing at
£0.6 million at 30 June 2022 (30 June 2021: £0.4 million).
The PRS REIT’s average rental affordability ratio
has improved to 25% in 2022 (2021: 29%). This
is notwithstanding rental growth over the year and
compares to Homes England’s affordability target of 35%.
We believe it indicates a stronger tenant base.
This strong asset performance demonstrates ongoing
robust demand for our high-quality homes, which is also
supported by the structural undersupply of family homes
in the market.
In Propertymark’s latest report on the lettings sector
published in September, the leading membership body
for the residential letting agents reported that the number
of new tenants registered on average per member branch
reached a new peak in August, at 141. At the same time,
the supply of available homes to rent had not risen in
the last three months. Propertymark predicted that this
growing mismatch between supply and demand would
exert upward pressure on rent. Approximately 77% of its
members reported a month-on-month rent price increase
in August.
The Company’s Investment Adviser’s report provides
further commentary on housing delivery and asset
performance over the year.
Financial Results
Revenue, which is generated wholly from rental income,
increased by 58% year-on-year to £42.0 million (2021:
£26.6 million). This principally reflected a combination of
the substantial increase in the number of rental homes
making up the portfolio and strong rental growth. After
the deduction of non-recoverable property costs, which
were 18.2% of revenue (2021: 19.5%), net rental income
for the financial year was £34.3 million (2021:
£21.5 million), an increase of 60% over the year.
Expenses in the year rose to £7.5 million (2021:
£7.1 million, which included £0.5 million of one-off
expenses relating to the Company’s migration to the
Main Market). The increase over the prior year reflects
the rise in the size and scale of the portfolio.
The gain from the fair value adjustment on investment
property increased significantly from the prior year to
£99.7 million (2021: £39.0 million). Almost 80% of this
is attributable to higher ERV with almost 20% reflecting
yield compression, whilst development surplus on assets
under construction accounts for the remaining portion of
the uplift. ERV is now approximately £2.7 million higher
than passing rent on completed and let properties,
reflecting the continuing demand for the Company’s
product. The fair value of investment property is based
on ERV rather than passing rent.
Operating profit increased by 136% to £127.0 million
(2021: £53.7 million), which reflected the increase in
completed and let homes together with the rise in the
portfolio valuation.
Finance costs were higher at £11.1 million (2021:
£9.6 million) as we drew down and utilised investment
debt facilities and arranged additional development
debt funding during the year. Although interest rates
rose towards and after the end of the financial year, the
impact of this was relatively small during the period due
to the quantum of fixed rate investment debt. Finance
income from short-term deposits in the year was
£4,000 (2021: £nil), again reflecting the low interest rate
environment during the financial year.
Profit after taxation increased by £71.8 million or 163%
to £115.9 million (2021: £44.1 million) while basic and
diluted earnings per share rose by 140% to 21.4p (2021:
8.9p) on an IFRS basis.
STRATEGIC REPORT
CHAIRMAN’S STATEMENT (Cont.)
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THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
CHAIRMAN’S STATEMENT (Cont.)
STRATEGIC REPORT
CHAIRMAN’S STATEMENT (Cont.)
The Group’s IFRS net asset value (“
NAV
”) per share and
EPRA net tangible asset (“
NTA
”) per share at 30 June
2022, both increased to 116.4p (31 December 2021:
104.3p and 30 June 2021: 99.0p). This is a year-on-year
increase of 18% and a 12% increase over the prior six
months.
Net assets at 30 June 2022 were 30% higher year-on-
year at £639 million (30 June 2021: £490 million). This is
after paying dividends of £21.4 million in the year (2021:
£24.8 million).
Dividends
For the year to 30 June 2022, aggregate dividends of
4.0p per share were declared (2021: 4.0p per share) and
paid to shareholders (2021: 5.0p per share). Due to the
timing of dividend payments, the Company declared a
total of 4.0p per ordinary share but paid a total of 5.0p per
ordinary share during the prior year under review. Taking
into account the dividend paid on 26 August 2022, total
dividends paid since the Company’s inception in May 2017
amount to 22.0p per share.
Following the September 2021 equity placing, the current
dividend of 4.0p was almost fully covered on a run-rate
EPRA EPS basis at the end of the financial year. Dividend
cover will continue to grow as construction, completions
and lettings advance.
Debt Facilities
The Company had £440 million of committed debt
facilities available for utilisation as at 30 June 2022.
Gearing on portfolio (measured as net debt vs. investment
value) remains low at 31%, and 62.5% of the £400 million
of investment debt is fixed rate at an average of 2.9%.
The £440 million of committed debt facilities comprised
£400 million of investment debt facilities and £40 million
of development debt facilities although a small portion
of the investment debt facilities can also be utilised as
development debt facilities.
Our lending partners are: Scottish Widows (£250 million);
The Royal Bank of Scotland plc (£100 million); Lloyds
Banking Group plc (£50 million); and Barclays Bank PLC
(£40 million). £25 million of the Lloyds Banking Group/
RBS facility and the £40 million Barclays Bank PLC
debt facility are available to be drawn as development
debt facilities, which enables sites to be developed
simultaneously.
The debt facilities are subject to the maximum gearing
ratio of 45% of gross asset value. Approximately £350
million of these facilities have been drawn to date, with
the remainder presently forecast to be utilised over
the next 12 months as we finish the current phase of
construction, completion and letting activity. The fixed
interest long-term investment debt facilities of £250
million have an average term of 17.6 years and an
average weighted cost of 2.9% once fully drawn.
Environmental, Social and Governance (“ESG”)
Practices
The PRS REIT is a member of the UK Association of
Investment Companies and applies its Code of Corporate
Governance to ensure best practice in governance.
The Board is responsible for determining the Company’s
investment objectives and policy and has overall
responsibility for the Company’s activities, including the
review of investment activity and performance. The Board
consists of five independent non-executive directors, who
together bring significant and complementary experience
in fund management (including listed funds), equity capital
markets, public policy, operations and finance in the
property and investment funds sectors.
The Board delegates the day-to-day management of the
business, including the management of ESG matters,
to the Investment Adviser, Sigma PRS Management Ltd
(“
Sigma PRS
”), which is a subsidiary of Sigma, and a
signatory and participant of the United Nations Global
Compact. Sigma is part of PineBridge Investments, a
private, global asset manager with over US$140bn in
assets under management at June 2022.
Details of ESG policies and activities are contained in the
Investment Adviser’s Report. In that report, the results of
our recently commissioned Energy Efficiency Study are
recorded. Undertaken by Calfordseaden, a property and
construction consultancy firm, it compared the energy
consumption of the Company’s properties with housing
stock of various ages, and found that on average, the
Company’s homes were 74% cheaper to run on an annual
basis than homes built between 1900-1929, with running
costs 25% lower compared to homes built in 2010. Given
the current energy crisis, this is a significant plus point for
our tenants.
Outlook
The macro-economic environment has become more
uncertain with the war in Ukraine, inflation and rising
interest rates driving a more negative outlook in the UK
and globally. In terms of the UK housing market, the
impact of rising interest rates is expected to reduce
mortgage affordability and drive demand in the rental
sector as prospective homeowners turn to rental
alternatives. We expect these factors, together with the
existing structural shortage of quality family rental homes,
to provide a strong underpinning to demand in the private
rented sector.
Against this backdrop, our high-quality, well-located
homes remain highly attractive to prospective renters.
Our emphasis on customer service and strong promotion
of a sense of community in our developments is also an
important aspect of what our homes offer. In addition,
the proven energy efficiency of our homes is particularly
relevant with high and rising energy prices. The Board
remains confident that its cashflow will be stable and
sustainable.
The Company’s exposure to interest rate increases
is limited with approximately 60% of investment debt
fixed. In addition, our fixed-price construction contracts
will limit the Company’s exposure to price inflation on
existing contracts.
During the first quarter of the new financial year, another
70 new homes were added to the portfolio, taking the total
number of completed homes at 30 September 2022 to
4,856 and the ERV of completed homes to £49.4 million
per annum, up by 20%. This compares to 4,291
completed homes with a rental value of £41.1 million per
annum at the same point last year. Another 670 homes,
with an ERV of £7.3 million per annum, were contracted
and under way at the end of the first quarter.
Asset performance remains strong. In the first quarter,
rent collection was 99% (2021: 99%) and total
occupancy at 98% (30 September 2021: 98%), with
4,774 homes occupied out of the total of 4,856. A
further 45 were reserved for applicants who had passed
referencing and paid rental deposits. Total arrears at 30
September 2022 were low at £0.6 million. Like-for-like
blended rental growth on stabilised sites was 5.0%.
Towards the end of the calendar year, we expect the
number of completed homes in the portfolio to near
5,000, which would take the value of completed assets
close to £1bn and annual rental income to approximately
£51.0 million.
We are targeting a minimum dividend of 4.0p per share*
in the new financial year, and will declare the interim
dividend for the first quarter of the financial year in
October 2022.
On behalf of the Board, I would like to thank our
investors, customers and everyone involved in the
ongoing delivery and management of our rental portfolio,
including our supporters in government and our partner
housebuilders. Together we are creating attractive places
to live and making an important contribution to the UK
housing stock, the welfare of local communities and to
families and individuals.
We expect to make further strong progress and look
forward to the year ahead. We will continue to consult
with investors, advisors and others as we assess the
Company’s next stage of development.
Steve Smith
Chairman
10 October 2022
*This is a target only and there can be no assurance that the target can or will be met and should not be taken as an indication of the Company’s expected or actual future results.
Accordingly, potential investors should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the company will make any
distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
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THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
9
STRATEGIC REPORT
KPI
Explanation
Performance
Year to
30 June 2022
Year to
30 June 2021
IFRS NAV
(see note 28)
Unadjusted net asset value
116.4p per share
99.0p per share
EPRA NTA
(see note 28)
EPRA Net Tangible Asset is 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
116.4p per share
99.0p per share
IFRS EPS
(see note 16)
Unadjusted earnings per share
21.4p per share
8.9p per share
EPRA EPS
(see note 16)
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
3.0p per share
1.0p per share
Company
specific adjusted
EPS
(see note 16)
EPRA EPS (as above) adjusted to exclude
the non-recurring costs incurred by the
Company in the previous year as part of
the Migration to the Premium Segment of
the Main Market
3.0p per share
1.2p per share
EPRA Earnings
(see note 16)
EPRA Earnings is a measure of
operational performance and represents
the net income generated from the
operational activities excluding changes in
value of investment properties
£’000
16,162
£’000
5,130
IFRS AND EPRA PERFORMANCE MEASURES
Under the European Real Estate Association (“
EPRA
”)
published best practice recommendations (“
BPR
”) for
financial disclosures by public real estate companies, three
measures for reporting net asset value are available: EPRA
Net Tangible Assets (“
NTA
”), EPRA Net Reinstatement
Value (“
NRV
”), and EPRA Net Disposal Value (“
NDV
”).
The Group considers EPRA NTA to be the most relevant
measure for its operating activities, and has adopted this
as the Group’s primary measure of net asset value.
EPRA NRV is not considered an appropriate disclosure
measure for the PRS REIT as the Group has acquired,
constructed and developed the vast majority of assets
and this would therefore equate to adjusted historic
construction cost.
The valuation of the Group’s assets is undertaken in
accordance with RICS guidance. However, this does not
include any adjustment to reflect the size and scale of the
Group’s overall portfolio of assets. The Board’s view is that
collective marketing of the portfolio would attract a higher
valuation reflecting yield compression attributable to the
size and scale of the overall portfolio. In the absence of
comparable market evidence for such a portfolio, EPRA
NDV is not considered an appropriate measure.
As in prior years, due to the stage of completion of the
PRS REIT’s development assets within the Group’s
portfolio, it is not considered appropriate to disclose the
EPRA metrics of Net Initial Yield and Cost Ratio at this
reporting date.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
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2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
(Cont.)
STRATEGIC REPORT
MARKET DYNAMICS (Cont.)
MARKET DYNAMICS
The Build-to-Rent (“
BTR
”) sector has been maturing
as an asset class in the UK over the last 10 years.
Nonetheless BTR remains a very small proportion of
the wider private residential rental sector, at less than
2% in Q2 2022 according to Savills. More recently, the
rate of entry of new participants into the BTR sector has
increased together with the weight of capital. This trend
reflects the magnitude of the opportunity in the UK and
increasing recognition of the role of BTR in accelerating
overall housing delivery. The Letwin Report into build out
rates, published in October 2018, was one of the first
independent reports to highlight its role.
The British Property Federation (“
BPF
”) monitors BTR
delivery and, at the end of April 2022, the BPF BTR Q2
2022 presentation prepared for BPF by Savills, reported a
14% increase in the number of BTR homes delivered year-
on-year, with a slight bias to regional delivery. In its Q1
2022 update, the BPF reported 73,000 BTR completions,
46,000 homes under construction, and a further 100,000
homes in planning. To provide context, the private
rental sector as a whole comprises approximately five
million homes, with the market fragmented and mainly
comprising private landlords.
The major part of BTR delivery is still focused on
apartments in major city centres. By contrast, the
PRS REIT is focused on creating single-family homes
in the suburbs. According to the BPF BTR Q2 2022
presentation prepared for BPF by Savills, single-family
home delivery reached approximately 8,500 homes in
April 2022, with a further 9,500 units currently either under
construction or in planning. This puts the PRS REIT at the
forefront of this sector.
Demand in the private rented sector in recent years has
been further fuelled by substantial house price growth,
which has increased the hurdles to home ownership.
According to the Office of National Statistics, at the end
of 2021, the ratio of average house price to income in
England was 9.1, up from 7.9 a year earlier.
The cessation of the stamp duty incentive in June 2021
and closure of the Government’s Help-to-Buy scheme
to new applications on 31 October 2022, are likely to
further increase demand in the private rented sector.
While the Mini-budget proposals in September 2022
sought to help those looking to purchase homes, with
changes to the stamp duty regime and an increase in the
nil-rated threshold limit, rising interest rates are likely to
have a more profound effect. Affordability remains the key
constraint to home ownership, and recent increases in
mortgage rates will result in further interest in the private
rented sector.
Furthermore, as mortgage costs are rising sharply, it is
evident that a greater volume of rental homes will be
required, with the location and type of home also being
important. There is a significant undersupply in the sector,
created by the lack of new home delivery over many
years and exacerbated in recent times by outflows from
the buy-to-let (“
BTL
”) sector, which we expect to be
a significant market determinant in the coming period.
The BTL sector has experienced increasing costs and
a series of tax and regulatory changes, which has led
to c.180,000 BTL mortgage redemptions since 2016,
according to research undertaken by Savills. Further
challenges are ahead for owners of older rental homes,
with new regulation requiring all rental homes to possess
an energy performance certificate (“
EPC
”) of ‘C’ or above
from 2025. The average EPC in the UK is ‘D’. This new
regulation is expected to lead to private landlords exiting
the market, deterred by prohibitive upgrade costs. The
PRS REIT’s portfolio is unaffected since all of its homes
are rated ‘C’ or above, with 86% rated ‘A’ or ‘B’.
The lack of adequate rental supply and increasing tenant
demand are likely to create further upward pressure on
rents, especially for homes that are well-located and
well-managed. While there are now more entrants in the
single-family BTR sector, it continues to be significantly
underserved.
Private Rented Sector Reform
In June 2022, the Government published a policy paper,
which set out its long-term vision for the private rented
sector. Titled “A fairer private rented sector”, it contains
plans to fundamentally reform the private rented sector in
the country and level up housing quality .
A list of the main proposals set out in the white paper is
below:
All rental homes will be required to meet a ‘Decent
Homes Standard’ for the first time.
Section 21 of The Housing Act 1988 (‘no-fault’
evictions) is set to be abolished. This would remove
a landlord’s ability to seek possession after a fixed
term has ended. Should a landlord have reasonable
grounds to seek possession, then Section 8 of the
Housing Act 1988 could be used.
Fixed-term tenancies, both assured and assured
shorthold, will be converted to periodic tenancies, so
that tenancies will in effect be open-ended.
Tenant rent increases will be limited to once a year.
First-tier rent tribunal – powers will be given to confirm
or reduce contested rents, but not to increase them
(as is currently the case).
Landlords and agents will not be able to institute
blanket bans on renting to families with children
or those in receipt of benefits and potentially other
vulnerable groups.
Tenants will be given the right to request a pet in their
property, which cannot be unreasonably refused.
The Tenant Fees Act 2019 will be amended so that
landlords can request that their tenants buy insurance
to cover any damage that pets may create.
Other proposals include a new single Ombudsman and a
Property Portal, which will include a landlord registration
scheme. Thought is also being given as to how tenants
can ‘port’ their deposits to relieve them from having to
find additional funds whilst the custodial scheme for their
preceding dwelling is being resolved or arbitrated.
As a responsible and professional landlord with a high-
quality product and an emphasis on customer care,
we welcome the Government’s desire to ensure that
everyone has a right to a decent home and to support
responsible landlords. Its proposals align with our own
policies and therefore are unlikely to adversely impact the
way the Company operates.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
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2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
PORTFOLIO ANALYSIS
STRATEGIC REPORT
PORTFOLIO ANALYSIS
As at 30 June 2022, the valuation of the Group’s property
portfolio was £962 million (2021: £780 million) and the
investment value of all sites under way at that date was
£1 billion on completion (2021: £829 million) with their
ERV on completion at £55 million (2021: £47 million).
Property Portfolio by Regional Split – at 30 June
2022
The regional split by investment value was – North West
54% (2021: 56%), West Midlands 17% (2021: 18%),
South East 12% (2021: 13%), Yorkshire 9% (2021:
9%), North East 3% (2021: 3%), East Midlands 4%
(2021: 1%) and Scotland 1% (2021: nil).
Other Metrics – at 30 June 2022
The rent roll at 30 June 2022 was £47.8 million (2021:
£37.5 million) and the average rent was £10,004 per
annum or £834 per month (2021: £9,420 per annum or
£785 per month).
Forecast average rent across the current portfolio when
complete is £10,500 per annum or £875 per month
(2021: £10,188 per annum or £849 per month).
The average size of site was 78 (2021: 79) housing
units.
The split between 1, 2, 3 and 4-bed properties was
approximately 3%, 26%, 62% and 9% respectively
(2021: 4%, 26%, 61% and 9% respectively).
Contractor split was – Countryside 86%; Vistry 8%;
Seddon 5% and EQUANS (formerly Engie) 1% (2021:
Countryside 78%; Vistry 15%; EQUANS (formerly
Engie) 4%; and Seddon 3%).
The deduction from gross to net rent across the
portfolio for the year ended 30 June 2022 was 18.2%
(2021: 19.5%).
Bad debts (net) for the year were £381,000 (2021:
£4,000 net recovery) and the bad debt provision at the
year-end was £281,000 (2021: £31,000) reflecting a
prudent approach in the current economic climate.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
15
14
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
Household Income Bracket
There was very little change in the proportion of customers across the main income brackets when compared with the
preceding year. The minor reduction of those earning under £25,000 as a proportion of the customer base would seem
to correlate with the drop in residents under 25 years of age identified earlier. Those earning over £65,000 have slightly
increased for the second year in succession. As a percentage of rent to household income our portfolio has an average
of 25% compared to 29% in the prior year. This indicates a stronger customer base and is after blended rental growth of
5.1%.
Distance Travelled
The distance travelled by customers from their previous address to their new ‘Simple Life’
1
home is also recorded.
The two largest categories are those travelling between 10-50 miles and greater than 50 miles. This supports growing
national recognition of the Simple Life brand.
Tenancies with Children
Whilst the portfolio comprises mainly family homes, only approximately 40% of households included children.
Referring back to the age groupings, it could be assumed that the major cohort of 26-35 year-olds are moving into the
Company’s homes with the intention of starting a family. Of those residents with children, the two largest groupings are
those with two or four children.
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
All 2022 statistics are based on new applicant data between July 2021 and June 2022 and include sites acquired from Sigma.
The prior year’s statistics are based on all successful Simple Life applications referenced between June 2019 and June 2021.
1
‘Simple Life’ - The PRS REIT’s rental homes are marketed under the ‘Simple Life’ brand.
Age Groupings
The largest age grouping across the customer base at the time of sampling on 30 June 2022 was 26-35 years. This
grouping represented 41% of the total customer base, and is consistent with last year’s sample. There was a small
decrease in under 25s within the portfolio over the year, which is considered a fluctuation rather than indicative of any
broader social or macro-economic trend.
2022
2021
2022
2021
2022
2021
2022
2021
Under 25
26-35
36-45
46-55
56-65
65+
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0%
5%
10%
15%
20%
25%
30%
Under £25k
£25k-£35k
£35k-£45k
£45k-£55k
£55k-£65k
£65k+
< 3 miles
3 -10 miles
10 - 50 miles
> 50 miles
0%
5%
10%
15%
20%
25%
30%
35%
None
One Child
Two Children
Three Children
Four+ Children
0%
10%
20%
30%
40%
50%
60%
70%
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
17
16
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Property Portfolio
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
Address:
WOODBINE ROAD (Mackets Lane), Halewood, Liverpool, L25 9PB
NW
50
40,540
0.9%
£9,050,000
£9,065,000
£223.61
£500,940
£12.36
Description:
The Property comprises a completed development of 50 houses with a mix of two, three and four bedroom houses.
Address:
BAYTREE LANE, Middleton M24 2EL
NW
110
98,346
2.1%
£21,645,000
£21,725,000
£220.90
£1,204,560
£12.25
Description:
The Property comprises a completed site of 110 units with a mix of two, three and four bedroom houses.
Address:
PRINCE’S GARDENS (Manor Top Phase 1), Sheffield S2 1EY
Y
78
78,628
1.5%
£14,875,000
£14,980,000
£190.52
£889,680
£11.32
Description:
The Property forms part of a wider development site with 78 units, being a mix of three and four bedroom houses.
The development is completed.
Address:
EAST HILL GARDENS (East Bank Road), Sheffield S2 3PX
Y
58
59,217
1.2%
£12,365,000
£12,440,000
£210.07
£697,860
£11.78
Description:
The Property comprises a part completed development of 58 units being a mix of three and four bedroom houses.
Address:
WOODFORD GRANGE (Woodford Lodge Phase 1&2), Winsford CW7 4EH
NW
54
45,505
1.0%
£9,820,000
£9,845,000
£216.35
£532,752
£11.71
Description:
The Property comprises a completed site of 54 houses with a mix of two, three and four bedrooms.
Address:
DURBAN MILL, Oldham OL8 4JT
NW
80
69,425
1.4%
£14,645,000
£14,655,000
£211.09
£793,440
£11.43
Description:
The Property comprises a completed development of 80 houses, with a mix of two, three and four bedrooms.
Address:
CORAL MILL, Newhey, Rochdale OL16 3SS
NW
69
54,282
1.2%
£12,465,000
£12,510,000
£230.46
£692,220
£12.75
Description:
The Property comprises a completed development of 45 houses with a mix of three and four bedroom houses as well
as 24 two bedroom low rise apartments and therefore will provide a total of 69 units.
Address:
HIGHFIELD GREEN (Tower Hill 2), Knowsley L33 1DF
NW
42
37,247
0.7%
£7,415,000
£7,445,000
£199.88
£411,000
£11.03
Description:
The Property comprises a completed development of 42 units with a mix of three and four bedroom houses.
Address:
SHREWSBURY CLOSE (Tintern Avenue), Middleton M24 6JQ
NW
88
74,322
1.7%
£16,985,000
£17,050,000
£229.41
£922,740
£12.42
Description:
The Property comprises a completed site of 88 houses with a mix of two, three and four bedroom houses.
Address:
HAMILTON SQUARE (Howe Bridge Mill), Atherton M46 6JQ
NW
59
51,106
1.1%
£11,200,000
£11,225,000
£219.64
£607,380
£11.88
Description:
The Property comprises a completed site of 59 units made up of two, three and four bedroom houses.
Address:
JUNIPER GROVE (Leach Lane), St Helens WA9 4PJ
NW
55
46,303
1.0%
£10,000,000
£10,030,000
£216.62
£542,700
£11.72
Description:
The Property comprises a completed development of 55 houses with a mix of two and three bedroom homes.
Address:
PRINCE’S GARDENS (Manor Top Phase 2), Sheffield S2 1EY
Y
85
89,916
1.6%
£16,460,000
£16,570,000
£184.28
£984,360
£10.95
Description:
The Property forms part of a wider development site with 85 units, being a mix of three and four bedroom houses.
The site is completed.
Address:
YEW GARDENS, Granby Road, Doncaster DN12 1JU
Y
53
42,010
0.8%
£7,935,000
£7,960,000
£189.48
£472,860
£11.26
Description:
The Property comprises a completed development of 53 houses with a mix of two and three bedroom houses.
Address:
SPIRIT QUARTERS, Monkswood Crescent, Coventry CV2 1FG
WM
29
27,522
0.6%
£5,620,000
£5,635,000
£204.75
£304,980
£11.08
Description:
The Property comprises a completed development of 29 houses with a mix of three and four bedroom houses.
Address:
SPIRIT QUARTERS, Milverton Crescent, Coventry CV2 1GN
WM
20
17,140
0.4%
£3,860,000
£3,865,000
£225.50
£209,220
£12.21
Description:
The Property comprises a completed development of 20 houses with a mix of three and four bedroom houses.
Address:
PARK GRANGE HOUSE (Norfolk Park), Sheffield S2 3RE
Y
24
18,447
0.4%
£3,700,000
£3,705,000
£200.85
£232,980
£12.63
Description:
The Property comprises a completed development of 24 two bedroom apartments.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
19
18
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Address:
PRESCOT PARK (Carr Lane), Prescot, L34 1NS
NW
140
116,016
2.6%
£26,090,000
£26,160,000
£225.49
£1,422,420
£12.26
Description:
The Property comprises a completed development, which comprises 24 one and two bedroom apartments and 116
houses, with a mix of three and four bedroom homes.
Address:
WARD’S KEEP (Heathfield Lane Phases 1&2), Darlaston WS10 8QY
WM
109
86,494
1.9%
£19,525,000
£19,580,000
£226.37
£1,059,720
£12.25
Description:
The Property comprises a completed development which proposes 16 one bedroom apartments and 93 two, three
and four bedroom houses.
Address:
EARLE STREET, Newton-le-Willows WA12 9XD
NW
97
80,451
1.7%
£17,290,000
£17,330,000
£215.41
£944,160
£11.74
Description:
The Property comprises a completed development of 24 one and two bedroom apartments and 73 houses, with a
mix of three and four bedroom homes.
Address:
CANALSIDE (Whitworth Way), Wigan WN6 7QF
NW
145
118,888
2.6%
£26,450,000
£26,525,000
£223.11
£1,442,220
£12.13
Description:
The Property comprises a completed development which proposes 24 two bedroom apartments and 121 two, three
and four bedroom houses.
Address:
HOLYBROOK (Romanby Shaw), Bradford BD10 0EH
Y
47
39,612
0.9%
£9,075,000
£9,105,000
£229.85
£492,660
£12.44
Description:
The Property comprises a completed development of 47 houses, with a mix of two, three and four bedroom houses.
Address:
JAMES MILL WAY (Cable Street), Wolverhampton WV2 2QD
WM
164
136,910
3.1%
£31,910,000
£32,075,000
£234.28
£1,735,920
£12.68
Description:
The Property comprises a completed development which proposes 164 two, three and four bedroom houses.
Address:
CHASE PARK, Ellesmere Port CH65 5DE
NW
40
40,126
0.7%
£7,515,000
£7,530,000
£187.66
£407,580
£10.16
Description:
The Property comprises a completed development of 40 houses, with a mix of two, three and four bedroom houses.
Address:
EMPYREAN (Lower Broughton 5), Salford M7 1GA
NW
298
182,077
4.6%
£47,460,000
£47,530,000
£261.04
£2,884,980
£15.84
Description:
The Property comprises a completed development of 299 apartments in a mix of one and two bed formats with one
flat occupied by a concierge and not let.
Address:
HOLLYSTONE BANK (Riverside College), Runcorn WA7 4DS
NW
83
64,513
1.4%
£13,705,000
£13,760,000
£213.29
£753,060
£11.67
Description:
The Property comprises a completed development which proposes 32 two bedroom apartments and 51 two, three
and four bedroom houses.
Address:
HILTON PARK (Chadwick Street), Leigh WN7 1RL
NW
103
80,108
1.7%
£17,910,000
£17,970,000
£224.32
£972,660
£12.14
Description:
The Property comprises a completed development which comprises 8 one bedroom apartments and 95 two, three
and four bedroom houses.
Address:
GALTON LOCK (Mafeking Road), Smethwick B66 2EG
WM
63
52,874
1.2%
£12,535,000
£12,575,000
£237.83
£664,020
£12.56
Description:
The Property comprises a completed development of 63 two, three and four bedroom houses.
Address:
HIGHFIELD GREEN (Tower Hill 3), Knowsley L33 1DF
NW
96
76,411
1.5%
£15,640,000
£15,690,000
£205.34
£866,940
£11.35
Description:
The Property forms part of a wider development site and comprises a completed site of 96 units, being a mix of two
and three bedroom houses.
Address:
SUTHERLAND GRANGE (Sutherland School), Trench, Telford TF2 7JR
WM
123
106,521
2.3%
£23,405,000
£23,520,000
£220.80
£1,272,960
£11.95
Description:
The Property comprises a completed development which comprises 123 two, three and four bedroom houses.
Address:
HAVENSWOOD (Newhaven Business Park), Eccles M30 0HH
NW
84
63,423
1.5%
£15,595,000
£15,660,000
£246.91
£861,240
£13.58
Description:
The Property comprises a completed development which proposes 48 one and two bedroom apartments and 36
three and four bedroom houses.
Address:
STONEFIELD EDGE (Bilston Urban Village), Wolverhampton, WV14 0LA
WM
123
95,251
2.2%
£22,015,000
£22,130,000
£232.33
£1,210,980
£12.71
Description:
The Property comprises a completed development which proposes 48 two bedroom apartments and 75 two, three
and four bedroom houses.
STRATEGIC REPORT
PORTFOLIO ANALYSIS
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Address:
ABBOTSFIELD (Reginald Road), St Helens WA9 4HX
NW
92
77,712
1.6%
£16,510,000
£16,580,000
£213.35
£897,240
£11.55
Description:
The Property comprises a completed development which proposes 92 two, three and four bedroom houses.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Property Portfolio (Cont.)
21
20
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Address:
REYNOLDS PLACE (Eaton Works), Walkden, M28 3GW
NW
148
122,761
2.7%
£27,355,000
£27,420,000
£223.36
£1,501,860
£12.23
Description:
The Property comprises a completed development of 62 one and two bedroom apartments and 86 two, three and
four bedroom houses.
Address:
HAREWOOD CLOSE (Durham Street), Rochdale, OL11 1AH
NW
38
30,465
0.7%
£6,950,000
£6,990,000
£229.44
£378,300
£12.42
Description:
The Property comprises a completed development which proposes 38 two and three bedroom houses.
Address:
ROCHWOOD RISE (Entwisle Road), Rochdale, OL16 2LJ
NW
54
45,001
1.0%
£10,360,000
£10,435,000
£231.88
£564,660
£12.55
Description:
The Property comprises a completed development which proposes 54 two and three bedroom houses.
Address:
NORWICH GREEN (Norwich Street), Rochdale OL11 1LL
NW
70
57,166
1.2%
£12,720,000
£12,775,000
£223.47
£691,320
£12.09
Description:
The Property comprises a completed development which proposes 70 two, three and four bedroom houses.
Address:
BROOKSIDE GRANGE (Roch Street), Rochdale OL16 2NG
NW
100
72,557
1.6%
£16,505,000
£16,615,000
£228.99
£944,940
£13.02
Description:
The Property comprises a completed development which proposes 48 one and two bedroom apartments and 52 two,
three and four bedroom houses.
Address:
OUR LADY’S (Our Lady’s School), Little Hulton M28 0HF
NW
73
62,703
1.4%
£14,460,000
£14,510,000
£231.41
£785,220
£12.52
Description:
The Property comprises a completed development of 73 two, three and four bedroom houses.
Address:
COPPENHALL PLACE (Bombardier), Crewe CW1 3JB
NW
131
110,875
2.3%
£23,820,000
£23,855,000
£215.15
£1,297,020
£11.70
Description:
The Property comprises a completed development of 24 two bedroom apartments and 107 three and four bedroom
houses.
Address:
BEEHIVE MILL, Bolton BL3 2NF
NW
127
103,990
2.4%
£24,315,000
£24,375,000
£234.40
£1,319,220
£12.69
Description:
The Property comprises a completed development which proposed 127 two, three and four bedroom houses.
Address:
SILKIN GREEN, Hinkshay Road, Telford TF4 3PF
WM
78
67,266
1.4%
£14,505,000
£14,545,000
£216.23
£787,200
£11.70
Description:
The Property comprises a completed development of 78 two, three and four bedroom houses.
Address:
QUEEN VICTORIA PLACE (Queen Victoria Street), Blackburn BB2 2QG
NW
68
56,805
1.2%
£11,905,000
£11,935,000
£210.10
£645,900
£11.37
Description:
The Property comprises a completed development which comprises 68 two, three and four bedroom houses.
Address:
BASE AT NEWHALL (Harlow Phase 2), Harlow CM17 9LR
SE
74
63,081
2.4%
£24,460,000
£24,460,000
£387.76
£1,210,680
£19.19
Description:
The Property comprises a completed development site which comprises 74 two, three and four bedroom houses.
Address:
MILARD GRANGE (Houghton Regis Parcel 6), Houghton Regis LU6 6JZ
SE
129
120,067
4.0%
£40,925,000
£41,200,000
£343.14
£2,175,240
£18.12
Description:
The Property comprises a part completed development site which proposes 129 two, three and four bedroom houses.
Construction is due to complete in November/December 2022.
Address:
DUTTON FIELDS (Airfields), Deeside CH5 2RD
NW
99
80,460
1.8%
£17,815,000
£17,875,000
£222.16
£967,440
£12.02
Description:
The Property comprises a completed development site which comprises 99 two, three and four bedroom houses.
Address:
BELMONT PLACE (Owens Farm), Hindley Green WN2 4XS
NW
50
43,992
1.0%
£9,775,000
£9,825,000
£223.34
£531,840
£12.09
Description:
The Property comprises 50 two, three and four bedroom houses. This scheme is complete.
Address:
ASHFIELD PARK, Station Road, Normanton WF6 2ND
Y
72
55,834
1.4%
£13,795,000
£13,825,000
£247.61
£748,200
£13.40
Description:
The Property comprises a completed site of 72 two and three bedroom houses.
Address:
STANLEY PARK (Stanley Potteries), Stoke ST6 3PP
WM
63
50,880
1.0%
£10,177,500
£10,285,000
£202.14
£556,620
£10.94
Description:
The Property comprises a part completed development of 63 two and three bedroom houses.
STRATEGIC REPORT
PORTFOLIO ANALYSIS
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Property Portfolio (Cont.)
23
22
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Address:
BRACKEN GRANGE (Brackenhoe), Middlesborough TS4 3AE
NE
80
62,182
1.3%
£13,005,000
£13,050,000
£209.87
£749,280
£12.05
Description:
The Property comprises a completed site of 80 two and three bedroom houses.
Address:
KIRKLEATHAM GREEN, Redcar TS10 4GY
NE
80
62,038
1.3%
£13,430,000
£13,480,000
£217.29
£729,600
£11.76
Description:
The Property comprises a completed site of 80 two and three bedroom houses.
Address:
COPPICE HILL (Houghton Regis Parcel 8), Houghton Regis LU6 6JZ
SE
113
94,023
3.4%
£22,682,500
£34,335,000
£365.18
£1,812,960
£19.28
Description:
The Property comprises a part completed development of 113 two and three bedroom houses. Construction has
started on site and is due to complete in May 2025.
Address:
BRICKKILN PLACE (Brickkiln Ph1&2), Wolverhampton WV3 0BS
WM
24
18,956
0.4%
£4,425,000
£4,430,000
£233.70
£239,640
£12.64
Description:
The Property comprises a completed development of 24 two, three and four bedroom houses.
Address:
BRICKKILN PLACE (Brickkiln Ph3), Wolverhampton WV3 0BS
WM
7
6,090
0.1%
£1,360,000
£1,360,000
£223.32
£73,560
£12.08
Description:
The Property comprises a completed development of 7 three and four bedroom houses.
Address:
BLUEBELL MANOR (Dawley Road), Telford TF1 2LT
WM
31
23,164
0.5%
£5,555,000
£5,555,000
£239.81
£300,660
£12.98
Description:
The Property comprises a completed development of 31 two and three bedroom houses.
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
Address:
PULLMAN GREEN (Hexthorpe Phase 1), Doncaster DN4 0BE
Y
69
55,759
1.1%
£11,290,000
£11,290,000
£202.48
£610,980
£10.96
Description:
The Property comprises a completed development of 69 two, three and four bedroom houses.
Address:
PULLMAN GREEN (Hexthorpe Phase 2), Doncaster DN4 0BE
Y
49
39,291
0.8%
£7,897,500
£8,105,000
£206.28
£438,660
£11.16
Description:
The Property comprises a part completed development of 49 two and three bedroom houses. Construction has
started on site and is due to complete in November 2022.
Address:
HOLYOAKE ROAD, Walkden M28 3DL
NW
123
94,441
2.2%
£22,595,000
£22,665,000
£239.99
£1,274,280
£13.49
Description:
The Property comprises a completed development of 60 two bedroom apartments and 63 three and four bedroom
houses.
Address:
RIBBLESDALE AVENUE, Accrington BB5 5BQ
NW
47
38,933
0.7%
£7,220,000
£7,580,000
£194.69
£410,160
£10.54
Description:
The Property comprises a part completed development of 47 two, three and four bedroom houses. Construction has
started on site and is due to complete in December 2022.
Address:
BASE AT NEWHALL (Harlow Phase 1a), Harlow CM17 9LR
SE
28
32,000
1.1%
£11,495,000
£11,550,000
£360.94
£587,040
£18.35
Description:
The Property comprises a completed development of 28 three and four bedroom houses.
Address:
FORNHAM PLACE at Marham Park (Marham Park Parcel D), Bury St Edmunds IP31 6NG
SE
16
13,544
0.5%
£4,645,000
£4,645,000
£342.96
£251,340
£18.56
Description:
The Property is complete and comprises 16 two and three bedroom houses.
Address:
DRACAN VILLAGE AT DRAKELOW PARK (Phase 1), Burton-on-Trent DE15 9UA
EM
154
125,875
2.8%
£12,140,000
£28,770,000
£228.56
£1,557,120
£12.37
Description:
The Property is currently in development. We understand that once complete the development will comprise 154 two,
three and four bedroom houses.
Address:
DRACAN VILLAGE AT DRAKELOW PARK (Phase 2), Burton-on-Trent DE15 9UA
EM
41
32,890
0.8%
£2,227,500
£7,660,000
£232.90
£414,600
£12.61
Description:
The Property is currently in development and will comprise 41 two, three and four bedroom houses.
Address:
FORNHAM PLACE at Marham Park (Marham Park Parcel C), Bury St Edmunds IP31 6NG
SE
21
18,114
0.6%
£6,190,000
£6,195,000
£342.00
£335,340
£18.51
Description:
The Property comprises a completed development of 21 two and three bedroom houses.
Address:
LEA HALL GARDENS, Handsworth B20 2AP
WM
31
29,056
0.7%
£6,700,000
£6,720,000
£231.28
£347,700
£11.97
Description:
The Property comprises a completed development of 31 three and four bedroom houses.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Property Portfolio (Cont.)
25
24
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
PORTFOLIO ANALYSIS (Cont.)
STRATEGIC REPORT
Site
1 Bed
2 Bed
3 Bed
4 Bed
Total
Coral Mill
0
24
39
6
69
Durban Mill
0
8
64
8
80
Woodbine Road
0
12
38
0
50
Baytree Lane
0
8
82
20
110
Prince's Gardens - Phase 1
0
0
58
20
78
East Hill Gardens
0
0
35
23
58
Woodford Grange
0
8
41
5
54
Highfield Green - Phase 2
0
0
34
8
42
Park Grange House
0
24
0
0
24
Shrewsbury Close
0
10
76
2
88
Hamilton Square
0
10
41
8
59
Juniper Grove
0
12
43
0
55
Prince's Gardens - Phase 2
0
0
54
31
85
Yew Gardens
0
9
44
0
53
Spirit Quarters - Monkswood Crescent
0
0
27
2
29
Spirit Quarters - Milverton Crescent
0
0
19
1
20
Holybrook
0
7
33
7
47
Chase Park
0
3
23
14
40
Prescot Park
6
18
107
9
140
Wards Keep
16
24
53
16
109
Earle Street
6
18
58
15
97
Canalside
0
39
92
14
145
James Mill Way
0
40
105
19
164
Empyrean
99
189
10
0
298
Abbotsfield
0
20
64
8
92
Hollystone Bank
0
40
37
6
83
Hilton Park
8
23
68
4
103
Galton Lock
0
11
46
6
63
Highfield Green - Phase 3
0
28
68
0
96
Sutherland Grange
0
18
81
24
123
Havenswood
24
24
26
10
84
Stonefield Edge
0
57
50
16
123
Reynolds Place
4
65
59
20
148
Harewood Close
0
10
28
0
38
Rochwood Rise
0
11
43
0
54
Norwich Green
0
17
53
0
70
Brookside Grange
12
42
42
4
100
Our Lady's
0
5
62
6
73
Coppenhall Place
0
24
93
14
131
Beehive Mill
0
38
82
7
127
Silkin Green
0
11
59
8
78
Queen Victoria Place
0
17
47
4
68
Base at Newhall - Phase 2
0
14
49
11
74
Milard Grange - Parcel 6
0
6
108
15
129
Dutton Fields
0
32
61
6
99
Belmont Place
0
6
33
11
50
Ashfield Park
0
26
46
0
72
Stanley Park
0
18
45
0
63
Bracken Grange
0
39
41
0
80
Kirkleatham Green
0
40
40
0
80
Coppice Hill - Parcel 8
0
25
88
0
113
Brickkiln Place - Phase 1 & 2
0
10
10
4
24
Brickkiln Place - Phase 3
0
0
6
1
7
Bluebell Manor
0
17
14
0
31
Fornham Place at Marham Park - Parcel C
0
8
13
0
21
Lea Hall Gardens
0
0
28
3
31
Pullman Green - Phase 1
0
23
42
4
69
Pullman Green - Phase 2
0
14
35
0
49
Holyoake Road
0
60
52
11
123
Ribblesdale Avenue
0
12
33
2
47
Base at Newhall - Phase 1a
0
0
9
19
28
Fornham Place at Marham Park - Parcel D
0
8
8
0
16
Drakelow Phase 1
0
37
109
8
154
Drakelow Phase 2
0
13
26
2
41
Brookfield Vale Phase 1
0
28
51
6
85
Brookfield Vale Phase 2
0
12
53
4
69
Bertha Park
0
22
49
4
75
Baberton Grange
0
10
36
4
50
Total
175
1,404
3,269
480
5,328
%
3%
26%
62%
9%
100%
Development Portfolio - Mix by Property Size
Address:
BROOKFIELD VALE Phase 1, Blackburn BB2 3TZ
NW
85
69,348
1.5%
£992,500
£14,805,000
£213.49
£801,240
£11.55
Description:
The Property is a part completed development of 85 two, three and four bedroom houses.
TOTALS
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
5,328
4,389,087
100.0%
£960,882,500
£1,022,055,000
£232.86
£55,908,852
£12.74
LOCATION KEY:
NW
= North West,
Y
= Yorkshire,
WM
= West Midlands,
SE
= South East,
NE
= North East,
EM
= East Midlands
S
= Scotland
Address:
BROOKFIELD VALE Phase 2, Blackburn BB2 3TZ
NW
69
57,988
1.2%
£4,295,000
£12,345,000
£212.89
£668,160
£11.52
Description:
The Property is currently in development and will comprise 69 two, three and four bedroom houses.
Address:
BERTHA PARK, Perth PH1 3JE
S
75
62,301
1.4%
£11,970,000
£13,910,000
£223.27
£771,060
£12.38
Description:
The Property is a part completed development and will comprise 75 two, three and four bedroom houses.
Address:
BABERTON GRANGE, Plough Hill, Nuneaton CV10 9NZ
WM
50
41,848
1.0%
£10,255,000
£10,255,000
£245.05
£541,380
£12.94
Description:
The Property is a completed development comprising 50 two, three and four bedroom houses.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Location
Units
Area
(sq ft)
% of
Portfolio by
Investment
Value
Market
Value at
30 June 2022
Investment
Value at
30 June 2022
Capital
Rate psf
Market Rental
Value at
30 June 2022
Rental
Rate psf
Property Portfolio (Cont.)
27
26
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Business Activities
The PRS REIT plc is a public limited company
incorporated in England on 24 February 2017. Together
with its subsidiaries, it is the first quoted Real Estate
Investment Trust (“
REIT
”) to focus purely on the Private
Rented Sector (“
PRS
”).
The Company completed its IPO on 31 May 2017, raising
initial gross proceeds of £250 million through the issue of
250 million ordinary shares of one pence each at an issue
price of £1 each, and the shares were admitted to trading
on the Specialist Fund Segment of the Main Market of the
London Stock Exchange. The Company has since raised
additional funds, through two further placings and through
gearing, taking its total available resources to £956 million
(gross). On 2 March 2021, the Company transferred its
entire issued share capital to the premium listing segment
of the Official List of the FCA and to the London Stock
Exchange’s premium segment of the Main Market.
Investment Objective, Policy and Business
Model
The PRS REIT is seeking to provide investors with an
attractive level of income, together with the prospect of
income and capital growth, through the establishment of
a portfolio of newly-constructed residential rental homes
in or near towns and cities in the UK for the private
rented sector.
The Company has developed a scalable business
model, capable of delivering new homes across multiple
geographies and sites. It utilises the Investment Adviser’s
PRS property delivery and management platform.
The Company’s portfolio of homes is targeted at the
family market, which is the largest segment within the
private rented sector. The Company is concentrating on
traditional housing that has a broad appeal across the
demand spectrum, and differing house types for different
life stages, including smaller houses for young couples
and retirees, and larger houses for growing families. It
also invests in some low-rise flats in appropriate locations
to broaden the rental offering.
The Company has invested in multiple sites across the
UK, targeting the largest employment centres in England,
predominantly in the Midlands and North, and outside
London. Locations are chosen for their accessibility to
main road and rail links, good primary schooling, and to
centres of economic activity, which promote long-term
employment prospects. The new-build nature of the
assets, alongside standardised specifications, means that
they benefit from a 10-year building warranty, typically
from the NHBC (National House Building Council) and
manufacturers’ warranties. The homes are let on Assured
Shorthold Tenancies (as defined in the Housing Act 1988)
to qualifying tenants.
The sourcing of assets is undertaken by Sigma PRS and
the Company is building its portfolio in two ways.
In the first instance, Sigma PRS selects suitable
development sites (“
PRS development sites
”), obtains
detailed planning permission and agrees a fixed price
design & build contract with one of the Sigma PRS’s
construction partners. Sigma PRS then manages the
delivery process on behalf of the Company.
As the assets are acquired with detailed planning
consent and fixed price design & build contracts, the
Company is exposed to minimal development risk.
The construction risk is further mitigated with standard
design & build contracts containing liquidated damages
clauses for non-performance, financial retentions for one
year after completion and a parent company guarantee
ensuring the satisfactory performance by the contractor
together with an indemnity for losses incurred. In
accordance with the right of first refusal agreement with
Sigma PRS, the Company has sourced not less than
two-thirds of its assets in this way.
In the second instance, assets are acquired by entering
into forward purchase agreements with Sigma Capital
Group Limited (“
Sigma
”), the ultimate holding company
of Sigma PRS. These assets are acquired as completed
and stabilised developments. Typically, they have been
constructed by the same construction partners and
supply chain, thereby ensuring homogeneity of the
housing stock. Completed and stabilised developments
are also purchased from other third-parties using
approved construction partners.
The PRS REIT retains the right of first refusal to acquire
and develop any sites sourced by Sigma PRS that
meet its investment objective and policy subject to the
availability of funding.
STRATEGIC REPORT
STRATEGIC REPORT
INVESTMENT STRATEGY AND BUSINESS MODEL (Cont.)
INVESTMENT STRATEGY AND BUSINESS MODEL
Scottish Home Awards
Large Development of the Year 2022 (Bertha Park)
WINNER
Homes For Scotland Awards
Large Development of the Year 2022 (Bertha Park)
FINALIST
NW Insider Residential Property Awards
Tech of the Year (My Simple Life Mobile App)
WINNER
CENE Awards
Building Project of the Year 2022 (Kirkleatham Green)
SHORTLISTED
Property Week RESI Awards
Health and Wellbeing Award 2021
SHORTLISTED
Home Views
Top 20 Regional Developments 2021 (Prince’s Gardens)
TOP 20 FINALIST
Property Week RESI Awards 2022
Landlord of the Year 2022 (Simple Life Homes)
WINNER
NW Insider Residential Property Awards
Apartment Scheme of the Year 2022 (Empyrean)
SHORTLISTED
CENE Awards
Residential Project of the Year 2022 (Kirkleatham Green)
SHORTLISTED
Property Week RESI Awards
Residential Company of the Decade 2021 (Sigma
Capital)
SHORTLISTED
Property Week RESI Awards
Best Covid Response 2021
WINNER
Home Views
Top 5 National Management Companies (over 2000
units) 2021 (Simple Life Homes)
TOP 5 FINALIST
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
29
28
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
INVESTMENT STRATEGY AND BUSINESS MODEL (Cont.)
Achieving Scale and Reducing Risk
The Sigma PRS Platform
The Investment Adviser has been utilising Sigma’s well-
established PRS property delivery and management
platform (the “
Sigma PRS Platform
”) to scale the
PRS REIT’s portfolio and to minimise development and
operational risks. Specifically, the Sigma PRS Platform
facilitates the efficient sourcing and development of
investment opportunities.
The Sigma PRS Platform comprises relationships with
construction partners, central government, and local
authorities. Key construction partners include Countryside
Partnerships, Vistry, EQUANS (formerly Engie) and
Seddon. Homes England, an executive non-departmental
public body sponsored by the Ministry of Housing,
Communities & Local Government, works closely with
Sigma in the common goal of accelerating new housing
delivery in England.
All pre-development risks are identified and underwritten
by Sigma and its partners, and development 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. During the
construction phase, many of the properties are pre-let and
subsequently occupied as they complete.
Through its wide network of relationships, the Sigma PRS
Platform sources land for development sites, and has
delivered a variety of high-quality house types efficiently
and in volume. This underpins the PRS REIT’s objective to
build at scale and across multiple geographies.
Multiple Geographies
By creating assets across multiple locations and in
different regions, the PRS REIT’s concentration risk is
reduced.
The Company has targeted a mix of locations, which
demonstrate higher yielding profiles (predominantly those
in the North of England) and/or greater potential for capital
appreciation (often in our Southern opportunities). Proximity
to good primary schools remains a key requirement,
reflecting the Company’s focus on family rental.
In addition, no investment has been made in any single
completed PRS site or PRS development site that
exceeds 20 per cent of the aggregate value of the total
assets of the Company at the time of commitment.
‘Simple Life’ Brand
The PRS REIT’s rental homes are marketed under the
‘Simple Life’ brand. The brand has created an identity
for the PRS REIT’s product and, over time, aims to be
recognised as representing a ‘gold standard’ in the private
rented sector, providing a combination of high-quality,
sensibly-priced rental homes with high customer service
levels.
The PRS REIT’s long-term approach to the ownership of
its assets provides further reassurance to tenants, and
the neighbourhood initiatives that are sponsored also help
to create a sense of community within the Company’s
developments.
Investment Restrictions
The Group is aiming to create a high-quality, diversified
portfolio and the following investment restrictions are
observed:
the Group is only investing in private rented
residential houses and apartments located in the UK
(predominantly in England);
the Group may invest in assets that require
development by means of the Group’s forward funding
model, which when completed would fall within the
Company’s investment policy, provided that the Group
will not undertake development without planning
consent in place and that the gross committed (but
unspent) construction costs to the Group of all such
forward funded development does not exceed 25 per
cent of the aggregate gross value of total assets of the
Group at the time of commitment, as determined in
accordance with the accounting principles adopted by
the Group from time to time (the “
gross asset value
”).
Any forward funded development will only be for
investment purposes;
in order to further manage risk in the portfolio, no
investment by the Group in any completed PRS site
or PRS development site will exceed 10 percent of the
aggregate value of the gross asset value of the Group
at the time of commitment); and
the Group is not investing in other alternative
investment funds or closed ended investment
companies.
Debt Financing and Gearing
Three tranches of equity have been raised to date,
£250 million (gross) at the Company‘s IPO on 31 May
2017, a further £250 million (gross) in February 2018, and
an additional £55.6 million (gross) in September 2022.
The PRS REIT is using gearing to enhance equity returns.
The level of borrowing is prudent for the asset class,
whilst maintaining flexibility in the underlying security
requirements and the structure of both the PRS portfolio
and the Group. The Group has raised debt from banks
and institutions, with equity from Homes England and the
capital markets. The aggregate borrowings of the Group
are always subject to an absolute maximum, calculated
at the time of drawdown of the relevant borrowings, of
not more than 45% of the gross asset value, although
the Investment Adviser expects actual gearing to settle to
around 40% following stabilisation of the initial portfolio.
At 30 June 2022, the Group had the following agreed
debt facilities in place:
£100 million fully drawn 15-year term loan, fixed rate
interest at 3.1%, with Scottish Widows (2021:
£100 million drawn), matures June 2033;
£150 million fully drawn 25-year term loan, fixed rate
interest at 2.8%, with Scottish Widows (2021:
£150 million drawn), matures June 2044;
£150 million revolving credit facility with Lloyds Banking
Group / RBS, of which £70.4 million of investment
debt was drawn and £15 million of a £25 million 2-year
development debt facility drawn (2021: £68.6 million of
the £75 million development debt facility was drawn),
matures February 2023; and
£40 million 3-year term development debt facility with
Barclays Bank PLC, of which £15.2 million was drawn
(2021: £50 million 2-year term development debt
facility of which £42.4 million was drawn), matures
August 2025.
Although the aggregate debt facilities total £440 million,
£25 million of the Lloyds Banking Group / RBS facility and
the £40 million Barclays Bank PLC debt facility can be
drawn as development debt to enable a larger number of
sites to be developed simultaneously. Following practical
completion and stabilisation of lettings on sites partially
funded by development debt, the assets are refinanced
using the Company’s longer-term investment debt
facilities. On this basis, the total borrowings will not exceed
the maximum gearing level of 45% highlighted above.
Derivatives
The PRS REIT may utilise derivatives for efficient portfolio
management. In particular, the Company may engage in
full or partial interest rate hedging or otherwise seek to
mitigate the risk of interest rate increases on borrowings
incurred, in accordance with the gearing limits as part of
the management of the PRS Portfolio.
REIT Status
The Company will conduct its affairs so as to enable it to
remain qualified as a REIT for the purposes of Part 12 of
the Corporation Tax Act 2010 (and the regulations made
thereunder).
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
31
30
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
INVESTMENT ADVISER’S REPORT
Sigma PRS Management Ltd (“
Sigma PRS
”), a wholly-
owned subsidiary of Sigma Capital Group Limited, is the
Company’s Investment Adviser, and is pleased to provide
a report on the PRS REIT’s activities and progress for the
year ended 30 June 2022.
Operational Review
Development Activity and Acquisitions
A total of 802 homes were added to the PRS REIT’s
portfolio in the financial year to 30 June 2022. This
compared with 1,902 in the prior year, and reflects
the advanced stage of the rollout of the portfolio, with
fewer sites under active development as the portfolio
approaches maturity. Two fully-developed and let sites
were acquired during the year, comprising 66 homes in
total. Both sites were acquired from Sigma Capital Group
Limited, having been independently assessed and valued
by Savills before acquisition.
The total number of completed homes in the portfolio
at the end of June 2022 stood at 4,786, an increase
of 20% on the same point last year (2021: 3,984). The
homes are located across six of the eight major regions of
England and one region in Scotland, and their combined
estimated rental value (“
ERV
”) amounted to £47.8 million
per annum as at 30 June 2022. This is a 27% increase
in the portfolio’s anticipated rent over the year (30 June
2021: ERV of completed homes stood at £37.5 million per
annum).
Four development sites were also acquired during the
financial year. They have an ERV amount of £3.3 million,
and we have acquired a further four development sites for
the PRS REIT in the first quarter of the new financial year.
The Company’s assets now reflect a difference between
ERV, used for valuation, and anticipated rent paid by
tenants. As at 30 June 2022, ERV was estimated to be
£2.7 million higher than anticipated rent in aggregate.
This reflects the strength of demand for the Company’s
portfolio of assets. The fair value of the Group’s investment
properties as at 30 June 2022 is based on ERV as
opposed to anticipated rent.
The table below provides further information in
summarised form of development activity over the
financial year, and includes data for the first quarter of
the new financial year as well as comparative data for the
financial year ended 30 June 2021.
Construction Resource
The construction resource provided by the Sigma PRS
Platform has national reach. It underpins the continued
expansion of the Company to key population centres in
England and across the UK, supporting the creation of a
geographically diverse portfolio.
There are many clear benefits for our construction
partners in partnering with us. These include
strengthening their ability to bid for land with local councils
and improving operational efficiencies with their own
housing delivery. This partnership approach is working
well and the model we operate of using standard family
house types, fixed price design & build contracts, together
with standardised specification, helps to ensure that
developments are built to budget and that our PRS assets
can be maintained and managed efficiently.
INVESTMENT ADVISER’S REPORT
At
30 September 2022
At
30 June 2022
At
30 June 2021
Number of completed homes
4,856
4,786
3,984
ERV per annum of completed homes
£49.4m
£47.8m
£37.5m
Completed sites
58
58
44
Contracted sites
12
10
20
Number of contracted homes
670
693
1,071
ERV per annum of contracted homes
£7.3m
£7.2m
£10.6m
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
33
32
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
£40 million (2021: £50 million) development debt
facility with Barclays Bank PLC, matures August
2025. Interest is based on three-month SONIA plus
applicable margin and the loan is secured over assets
allocated to Barclays Bank PLC. As at 30 June 2022,
£15.2 million had been drawn.
The PRS REIT’s aggregate borrowings will always be
subject to an absolute maximum, calculated at the time
of drawdown of the relevant borrowings, of not more than
45 per cent of the value of the assets.
Gearing on the portfolio, which is measured as net
debt against investment value, remains low at 31%.
Approximately 62.5% of the £400 million of investment
debt is fixed rate at an average of 2.9%.
Financial Results
Income statement
The Group’s revenue (which is wholly derived from
rental income) increased by nearly 60% over the year to
£42.0 million (2021: £26.6 million). After the deduction
of non-recoverable property costs, the net rental income
was £34.3 million (2021: £21.5 million). Administration
expenses were slightly higher at £7.5 million (2021:
£7.1 million, which included non-recurring accounting and
legal expenses of £0.5 million incurred in relation to the
Company’s migration to the Main Market).
The gain from the fair value adjustment on investment
property was £99.7 million (2021: £39.0 million), with the
majority of the increase attributable to higher rents and
a small portion attributable to yield compression in the
current financial year. Operating profit was £127.0 million
(2021: £53.7 million).
Finance costs for the year were £11.1 million (2021:
£9.6 million) reflecting the debt utilisation and associated
costs during the year as well as an increase in interest rates
on variable rate debt towards the end of the fiscal year.
Finance income for the period from short-term deposits
was £4,000 (2021: £nil). The profit after finance income
and taxation was £115.9 million (2021: £44.1 million).
The basic and fully diluted earnings per share on an IFRS
basis for the year were 21.4p (2021: 8.9p).
Dividends
The Company has declared a total of 4.0p (2021: 4.0p)
per ordinary share for the year under review, which
comprised the following:
On 5 November 2021, the Company announced the
declaration of a dividend of 1.0 pence per Ordinary
Share in respect of the period from 1 July 2021 to 30
September 2021, which was paid on 3 December 2021
to shareholders on the register as at 19 November 2021.
On 18 January 2022, the Company announced the
declaration of a dividend of 1.0 pence per Ordinary
Share in respect of the period from 1 October 2021 to
31 December 2021, which was paid on 11 February
2022 to shareholders on the register as at 28 January
2022.
On 12 April 2022, the Company announced the
declaration of a dividend of 1.0 pence per Ordinary
Share in respect of the period from 1 January 2022 to
31 March 2022, which was paid on 13 May 2022 to
shareholders on the register as at 22 April 2022.
On 25 July 2022, the Company announced the
declaration of a dividend of 1.0 pence per Ordinary
Share in respect of the period from 1 April 2022 to
30 June 2022, which was paid on 26 August 2022 to
shareholders on the register as at 5 August 2022.
Balance Sheet
The principal items on the balance sheet are investment
property of £961.9 million (2021: £780.4 million), cash and
cash equivalents of £48.7 million (2021: £86.4 million),
long-term loans of £246.7 million (2021: £245.9 million),
short term loans of £100.0 million (2021: £110.0 million)
and trade and other payables, accruals and deferred
income of £32.0 million (2021: £27.2 million).
Investment property includes completed assets and
assets under construction at fair value. Trade and other
payables include £4.9 million of development expenditure
and £10.3 million for the acquisition of a completed site,
which was acquired on 30 June 2022 and paid in July
2022.
Debt Financing
The PRS REIT has the following debt facilities:
£150 million revolving credit facility with Lloyds Banking
Group / RBS for an initial term of three years, which
can be extended further for up to two years, matures
February 2023. Interest is based on three-month Sterling
Overnight Interbank Average Rate (“
SONIA
”) plus
applicable margin and the loan is secured over assets
allocated to Lloyds Banking Group. As at 30 June 2022,
£85.4 million had been drawn (2021: £68.6 million);
£100 million term loan of 15 years with Scottish
Widows, fully drawn as at 30 June 2022 (2021: fully
drawn). Interest is fixed at 3.1%, matures June 2033
and the loan is secured over assets allocated to
Scottish Widows;
£150 million term loan of 25 years with Scottish
Widows, fully drawn as at 30 June 2022 (2021: fully
drawn). Interest is fixed at 2.8%, matures June 2024
and the loan is secured over assets allocated to
Scottish Widows; and
STRATEGIC REPORT
INVESTMENT ADVISER’S REPORT (Cont.)
STRATEGIC REPORT
INVESTMENT ADVISER’S REPORT (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
35
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THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
INVESTMENT ADVISER’S REPORT (Cont.)
All the KPIs are in line with management expectations.
Rental income increases, non-recoverable property costs,
operating profit, and the number of properties available
to rent reflect the increased size of the portfolio and the
progression of development sites.
It is also worth highlighting that the portfolio’s average
rental affordability ratio has improved to 25% in 2022
(2021: 29%), which is an indication of a stronger tenant
base, and is after rental growth of 5.1% over the year (on
stabilised sites).
Post Period Review
Over the first quarter of the new financial year, 70 new
homes were added to the portfolio, taking the number
of completed homes at 30 September 2022 to 4,856,
providing an ERV of £49.4 million per annum. At the end
of September 2022, contracted homes amounted to 670,
with an ERV of £7.3 million per annum. The total ERV
of contracted and completed homes at 30 September
amounted to £56.7 million.
Following the September 2021 equity placing, the
Company is targeting a portfolio of 5,600 homes once
complete with an ERV of c.£56.0 million.
The table below provides further information of delivery
activity over the first quarter of the new financial year.
Summary and Outlook
The long-term growth opportunity available to the
PRS REIT remains substantial, driven by the strong
underlying supply and demand fundamentals in the
housing market. We also believe that PRS housing (at
scale) can play a part in accelerating the overall delivery
of new homes, a key agenda with local authorities and
Central Government.
In addition, the track record that we have established in
delivering high quality new homes across multiple sites
through our efficient supply chain platform places the
Company in a strong position in the PRS market.
Notwithstanding current challenges and uncertainties,
including the cost-of-living crisis, higher development
costs and rising interest rates, we believe that the
Company remains well-positioned to achieve its targets.
At
30 September
2022
At
30 June
2022
Number of completed
PRS homes
4,856
4,786
ERV per annum of
completed homes
£49.4m
£47.8m
Number of contracted
homes
670
693
ERV per annum of
contracted homes
£7.3m
£7.2m
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Key performance indicators
The Company’s aim to deliver sustainable earnings and
long-term capital growth through the execution of the
Group’s strategy is tracked by monitoring the below key
performance indicators (“
KPI
”) include:
KPI
June 2022
June 2021
Rental income (gross)
£42.0m
£26.6m
Average rent per month per tenant
£834
£785
Non-recoverable property costs as a percentage of gross
rent (gross to net)
18.2%
19.5%
Fair value uplift on investment property
£99.7m
£39.0m
Operating profit
£127.0m
£53.7m
Dividends declared per share in relation to the period
4.0p
4.0p
Dividends paid during the period
4.0p
5.0p
Number of properties available to rent
4,786
3,984
STRATEGIC REPORT
INVESTMENT ADVISER’S REPORT (Cont.)
37
36
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Continued research and review of carbon reduction
opportunities are ongoing.
Investment restrictions are screened.
The ability of investments to comply with ESG
standards is assessed.
Processes and strategies
As an industry leader in the provision of private rental
homes, the PRS REIT recognises its responsibilities
towards, and also changing public priorities, regarding
the environment. The Government’s ‘10 Point Plan for
a Green Industrial Revolution’, established in November
2020 aims to accelerate the UK’s attainment of net zero
carbon emissions and encompasses energy, production,
transport, innovation and the natural environment, with
2050 set as the endpoint of its net zero goal.
In the real estate sector, there is a need for action in areas
such as energy and water consumption, non-fossil fuel
heating provision and biodiversity. In working towards
further developing the Company’s ESG agenda, the IA
has embedded best practices, and works closely with
supply chain and construction partners to ensure that
their policies and activities comply with the PRS REIT’s
commitment to the UN Global Compact.
Environmental Impact and Data
The Company is aware of the impact that its activities
have on the environment, and is committed to taking
action to minimise and mitigate any negative aspects as
much as possible.
A particular focus for the Company is ensuring that the
homes in its portfolio are highly energy efficient. As a
result its portfolio more than meets the Government’s
requirement for all private rented sector homes to have an
EPC rating of at least ‘C’ by 2030. The EPC data for the
Company’s homes is as follows:
The Company provides residents with access to clean
and renewable energy through the installation of electric
vehicle (“
EV
”) charging facilities and photovoltaic panels
where possible. To date, 188 homes have access
to EV chargers, 255 homes have been installed with
wiring looms, a specially designed wiring system, which
provides for greater efficiency, protection and safety, and
18 EV chargers have been installed at apartment blocks.
In addition, photovoltaic panels have been installed at
close to 1,000 homes.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
ESG statement
The Company’s Investment Adviser (“
IA
”), Sigma PRS,
undertakes the day-to-day management of the Company’s
ESG strategy and takes responsibility for managing the
Company’s ESG priorities at both a Company level and an
asset level. Sigma PRS reports on ESG matters to the PRS
REIT’s Board on a quarterly basis.
Sigma PRS also utilises the services of EVORA Global, a
leading sustainability consultant specialising in real estate
solutions, to assist with the analysis of the Company’s
ESG performance and ongoing strategy.
Approach
The Company recognises that it is a long-term
stakeholder in the communities and neighbourhoods
it creates and takes this responsibility very seriously. In
order to better achieve its ESG goals, its Investment
Adviser engages with leading industry bodies that seek to
promote high ESG standards and best practice.
The IA is a signatory of the United Nations Global
Compact (“
UN Global Compact
”), a voluntary initiative
designed to encourage business leaders to implement
universal sustainability principles and, in particular, the
UN Global Compact’s Ten Principles. These are derived
from the Universal Declaration of Human Rights, the
International Labour Organisation’s Declaration on
Fundamental Principles and Rights at Work, the Rio
Declaration on Environment and Development, and the
United Nations Convention Against Corruption.
The PRS REIT is a member of European Public Real
Estate Association (“
EPRA
”), a not-for-profit association
that represents the publicly-traded European real estate
sector. Its mission is to promote, develop and represent
the European public real estate sector by, amongst
other things, providing better information to investors
and stakeholders, actively engaging in public and
political debate, and promoting best practices.
The Company has submitted data for the first time
to the Global Real Estate Sustainability Benchmark
(“
GRESB
”). GRESB is an industry-led organisation,
which provides ESG data to financial markets. It
collects, validates, scores and benchmarks ESG data
to provide business intelligence, engagement tools
and regulatory reporting solutions for investors, asset
managers and the wider industry.
Sigma PRS monitors the changing legislative and
reporting landscape, including the EU Sustainable Finance
Disclosure Regulation (“
SFDR
”), the UN Principles of
Responsible Investment (“
PRI
”), and the Task Force on
Climate-Related Financial Disclosures (“
TCFD
”), as well as
national and city-level regulations, which are increasing.
It also uses the Social Value Portal (“
SVP
”), an online
platform, which procures, measures, manages and
reports social value and validates data.
The IA has incorporated ESG factors into its decision-
making processes and operations. Its practices are based
on the following policy approaches:
Opportunity review
ESG risks are assessed, reviewed and monitored, and
strategies for enhancement and/or mitigation are set.
These strategies are based on recognised frameworks
such as climate change and social needs.
Investment decisions
ESG issues are listed and addressed in a summary
investment paper, which informs decision-making at the
Investment Committee approval stage;
ESG costs, including for ongoing community
involvement, are also determined and factored into
investment decision-making processes.
Asset management
Appropriate governance structures are established.
Relevant laws and regulations are adhered to.
ESG issues are monitored and managed.
Impacts on the natural habitat surrounding PRS
assets are managed.
Local community engagement and support plans
are established, reviewed and developed.
Due diligence is performed on third parties.
Policy reviews and updates are ongoing.
Good practice is established.
STRATEGIC REPORT
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
EPC Rating
Total Homes
%
A
47
1%
B
4,058
85%
C
681
14%
4,786
100%
39
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THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The Investment Adviser recently commissioned
Calfordseaden, a property and construction consultancy
firm, to undertake an Energy Efficiency Study to compare
the energy consumption of the Company’s properties
with housing stock of various ages.
Four of the Company’s core house types were reviewed
and compared with comparable houses built in four age
ranges from the start of the 1900’s to 2010.
As the graph above demonstrates, the study showed
that the running costs of the Company’s homes were
markedly cheaper than comparable homes built between
the 1900’s and 2010. This is primarily due to their
energy efficiency. On average, the Company’s homes
were 74% cheaper to run on an annual basis than
homes built between 1900-1929, with running costs
25% lower compared to homes built in 2010. With the
recent increases in energy prices, the efficiency of the
Company’s homes is not only a major environmental
positive, but it is also a benefit to residents.
Sigma PRS is also working closely with the Company’s
construction partners to monitor the greenhouse gas
emissions and waste produced in the construction of
homes. Data on waste and emissions for construction
completed with Countryside Partnerships in FY21 can be
found below.
Scope 1 and 2 emissions are those owned or controlled
by a company. Scope 3 emissions are a result of the
activities of the company, but occur from sources not
owned or controlled by the company. Examples of Scope
1 include direct emissions from fuel combustion on site
such as boilers and fleet vehicles; Scope 2 relates to
indirect emissions generated from purchased energy
such as electricity; and Scope 3 relates to the emissions
created by the products we buy and use from suppliers.
Further details on the PRS REIT’s environmental, social
and governance activities can be found in its annual ESG
Report, which is available on the Company’s website at
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
Homes with PV panels
installed
% of portfolio with
PV panels installed
Estimated generated
kWh/yr
Estimated avoided
CO
2
emissions kg/yr
966
21%
592,584
148,864
Asset Environmental Construction Data – Countryside Partnerships
No. of units
completed in FY21
Waste
(tonnes)
Waste diverted
from landfill (%)
Scope 1
(t
CO
2
)
Scope 2
(t
CO
2
)
Scope 3
(t
CO
2
)
1,050
8,301
99.8
1,212
257
395
Simple Life Standard Property Types vs Comparator Running Costs By Age Of Property
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
Simple Life
1900-1929
1991-1995
2003-2006
2007-2011
Weaver End
Weaver Mid
Irwell End
Irwell Mid
Dee
Ellesmere
Cost
41
40
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
Comments from charities and organisations that Sigma
PRS has been involved with are below.
David Hughes from
Atherton and Leigh Foodbank said:
Gill, Team Administrator, from the
Speed of Sight Team said:
Paul Harrison, Head Coach at
Doncaster Plant Works ABC said:
Sara Benson, Corporate and Major Donor Fundraiser
for Zoe’s Place, Middlesbrough, said:
“On behalf of Atherton & Leigh Foodbank
may I once again thank you and everyone
concerned in providing this generous grant
supporting our local Foodbank. Your valued
donations this year will be utilised in keeping
our vehicle on the road this year with repairs,
fuel and insurance. Without a reliable vehicle
the charity could not fulfil the collection of food
from our collection points and deliver from
our warehouse to our distribution centres.
Furthermore especially this year, fuel, light and
heating plus distribution centre rents all add to
the fundraising necessary in order to keep the
charity running efficiently.”
“Thank you for the message you sent in respect
of the generous donation you want to make
to us. That is absolutely fantastic. This gift will
help us to continue to provide life-changing
driving experiences for people with disabilities.”
“Getting sponsorship like this is brilliant, really
outstanding and it means such a lot to the
club. I can’t tell you how much we can do with
funding like this. Not only will we be able to
replace some of the windows at the club, we
can also get more equipment, uniform and
kit. But most of all it means that some of our
boxers with real talent will get to compete in
competitions as we can cover the entry costs
and put them up. For some this will mean their
first trip down to London and for others it’ll be
the first time they have been away at all.”
“Every single penny raised by Sigma Capital
will go towards helping us provide these
wide range of specialist services to all of our
beautiful children for another day.”
Social Engagement
A key focus for the Company is engaging with the wider
community in which its developments are sited.
Over the last twelve months, the Company’s Investment
Adviser has supported over 20 charities and clubs across
the country, either financially or practically. The Investment
Adviser has sought to ensure that residents can readily
identify with the charities and organisations that are
selected and they are often involved in the selection
process.
A wide range of organisations and social initiatives were
supported over the year, from local clubs promoting
girls’ football, boxing and driving experiences for the
disabled, to national charities, including The British Heart
Foundation’s Defibrillator Register project, and of the
NSPCC’s parenting skills project, ‘Look, Say, Sing, Play’
in Liverpool, and its adolescent sexual abuse project.
Engagement with charity partners is important and,
during the year, visits were organised a number of charity
partners, including Embassy Village, Atherton and Leigh
Foodbank, Salford Loaves and Fishes, Barnardos Gap
Homes Project, Speed of Sight, and Carluke Men’s Shed.
These occasions offer the opportunity for the Investment
Adviser to discuss ongoing engagement and how best to
provide support.
A particular initiative during the year, was the organisation
of an Escape Room Roadshow for children, which was
brought to 29 PRS REIT communities and 15 local
schools. The Roadshow covered the themes of wellbeing,
the environment, and literacy. Feedback on this initiative
can be found at:
43
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2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Online reviews
Simple Life is registered with Trustpilot and routinely invites
residents to leave reviews. This helps to identify any areas
that need improvement. Simple Life now has just under
500 reviews on Trustpilot and has an overall rating of 4
stars out of 5, which is above the average of 3.7 for our
business category of Property Rental Agency.
Simple Life developments are also now on Home Views, a
dedicated review website for housing developments. Simple
Life has an average score across all developments of 4.2
out of 5 from approximately 600 resident reviews, and 98%
of residents rated their development average to excellent.
Customer Reviews and Satisfaction
A selection of customer testimonies are reproduced below.
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
Move in survey
10 month survey
96%
said the team
made it easy to apply
87%
said they were
kept well-informed
during the application
process
91%
said they received
all the information
they required
89%
said they found
the process of moving
into their home
straightforward
89%
said the quality
of the home met with
their expectations
96%
said they would
recommend ‘Simple
Life’
96%
said they are still
happy with their home
89%
said they are
happy with the service
provided
79%
said they felt they
have been kept well-
informed
88%
said the
communal areas are
well maintained
86%
said they feel part
of a community
93%
said they would
recommend ‘Simple
Life’
Move in survey
6 month survey
Renewal survey
93%
said the team
made it easy to apply
88%
said they were
kept well-informed
during the application
process
84%
said they received
all the information
they required
93%
said the quality
of the home met with
their expectations
95%
said they would
recommend ‘Simple
Life’
95%
said they are still
happy with their home
89%
said they are
happy with the service
provided
83%
said they felt they
have been kept well-
informed
76%
said they feel
their Asset Manager
is responsive and they
are satisfied with the
service they have
provided
86%
said the
communal areas are
well maintained
85%
said they feel part
of a community
76%
said they feel
their maintenance
requests are fixed in a
timely manner
94%
said they would
recommend ‘Simple
Life’
96%
were happy with
the experience they
had with ‘Simple Life’
so far
49%
of people
renewed because they
love the property
40%
renewed because
they love the area
9%
renewed because
of the rent (value for
money)
2%
renewed because
‘Simple Life’ offers a
better service than a
‘one-off’ landlord
62%
of people see
themselves staying
with ‘Simple Life’ for
4+ years (or 78% 3
or more years)
91%
said they would
recommend ‘Simple
Life’
Resident feedback
All tenants automatically receive a tenant
satisfaction survey email one week into their
tenancy and then approximately six months
later. This helps the Investment Adviser
to monitor tenants’ experience with the
lettings and moving-in teams and to assess
their experiences as settled residents.
The following information is based on tenant
satisfaction results for the 12-month period
from July 2021 to the end of June 2022.
All results are based on responses from neutral – strongly agree
The following information is based on tenant
satisfaction results for the 12-month period
from July 2020 to the end of June 2021.
Overall results from the latest survey are
in line with those of the prior year, with
some results showing an improvement
in customer satisfaction. A number of
new questions were added to the six-
month survey to better assess customers’
views on property management and
maintenance.
The strength of the Simple Life brand
continues to grow. Over the past 12
months the Simple Life website has had
over two million page views and over
20,000 enquiry submissions. The number
of leads coming through the website
continues to slightly exceed enquiries
coming from third-party websites, such as
Rightmove. Site signage, recommendation
and online search continue to be the
largest sources of enquiries of those
coming through the website.
“We have found our experience with Simple Life
so far to be of the highest standard. They are
prompt in their responses and are always lovely
on the phone. I hear lots of negative experiences
people have when renting a property elsewhere
but I feel secure in the knowledge that that
won’t be us!”
Amber, Prince’s Gardens
“Seamless, professional and super friendly
service from all of colleagues I have spoken
with in various departments at Simple Life. The
whole experience and beginning of my journey
as a tenant with Simple Life has more than met
all of my expectations and more! Love the App,
communication is so easy / any information
I have asked for has been delivered almost
immediately. They literally cannot be more
helpful and my new home is literally fantastic.
Thank you Simple Life :)”
Theresa, Ribblesdale Place
“We are currently in the process of our
application. We contacted Simple Life about
the scheme we were interested in and the
information we received was very detailed.
As previous Simple Life tenants, we can
wholeheartedly recommend them ... hence our
return to Simple Life for our potential new home!”
Josephine, on Trustpilot
“Been renting 2nd house now from Simple
Life and I have never seen better service than
this agency is providing. Replying to emails,
returning calls and actioning everything within
hours/days. Highly recommend.”
Szymon, on Trustpilot
“The activities you take time to plan are
amazing. The fixflo website you have is good.
Wouldn’t want anyone else as a landlord. You’ve
set the bar high.”
Sabrina, Galton Lock on Home Views
“The best part is that it is a home that I have
always dreamt of. Simple Life truly makes our life
easy by providing such beautiful and affordable
homes and 24-hour customer service.”
Ipra, Shrewsbury Close
“Property is well-designed and superbly
managed. The sleek, modern design of the
properties make for outstanding value or money
and make perfect homes as everything you need
is built into the house. Overall, very impressive!”
Adam, Durban Mill
“Our landlord is absolutely fab and sorts any
issues we have quickly and to a high standard.”
Abbs, Base at Newhall on Home Views
4.2/5*
on HomeViews
4/5*
on Trust Pilot
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2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Resident Focused Initiatives and Tech
Home Businesses
The pandemic has resulted in an increase in the number
of people setting up businesses from home. Responding
to this trend, we implemented a process requesting that
tenants notify us of business operations from home.
The principal aim of this is for the Investment Adviser
to endeavour to ensure compliance with insurance
requirements while supporting residents. We have also
enabled residents to use our platforms to promote their
businesses, and have established a Residents Business
Directory, which often offers exclusive discounts to other
residents in the area.
Property Alterations
We operate a property alterations request process, which
provides residents with greater clarity over permissible
property alterations as well as a better understanding of
residents’ obligations at the end of their tenancies.
Virtual Inspections
A system of virtual ‘property health checks’ continues to
work well to identify and monitor issues and also to identify
responsibility for repairs and maintenance. It enables
residents to carry out certain property checks themselves
and to make repairs at particular stages of their tenancy.
This reduces disputes over deposit recovery at the end of
a tenancy. In-person checks continue to be conducted on
key dates, including at the end of and on the anniversaries
of tenancies.
Outward Bound Trust
Sigma PRS launched an initiative with The Outward Bound
Trust, called ‘Building for My Future’. It enabled 10 young
people, aged 15-19 years, from across the country, to test
their resilience and learn new skills as they tackled a series
of challenges on the water and in the mountains. The
comments below from participants illustrate some of the
lasting benefits.
Book Boxes and Guardians
In August 2021, Sigma PRS launched a Book Box
programme across several developments to encourage
residents to share books. To date, 17 book boxes have
been installed serving over 30% of the portfolio, with
residents signing up to be “guardians” of the boxes on
each of these sites. The book boxes were sustainably
made from 100% repurposed materials in partnership with
a specialist recycling company.
Affordability Calculator
An affordability calculator, based on the Investment
Adviser’s referencing criteria, can be found on the Simple
Life website. It is designed as an aid to assist prospective
residents determine how much monthly rent they can
afford relative to their earnings and outgoings.
Rental Availability
The Simple Life website now lists the availability of rental
homes in real time. As well as giving potential renters a
better service, it also facilitates a more efficient uptake of
homes.
“The confidence I gained was invaluable and
it was the type that could only be achieved by
taking that leap of faith, meeting new people
and committing to challenges fully.”
“Going forward in the future, I know that
taking different paths (even if they are out
of your comfort zone) can absolutely lead to
great success and I know that even when I am
put in the most stressful environments, I can
overcome them and that is something to be
proud of.”
“I never thought one week could change the
way I view things so much, but it definitely
influenced a self-reflection on myself and
my lack of connection with nature and the
outdoors. It felt like a hard reset on myself and
a detox from technology, even though this was
not compulsory. I found myself never needing
technology while hiking or cliff jumping.”
47
46
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
STRATEGIC REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (Cont.)
Human Rights
The obligations under the Modern Slavery Act 2015
(the “
Act
”) are not applicable to the Company given its
size. However, to the best of its knowledge, the Group is
satisfied that its principal suppliers and advisors comply
with the provisions of the Act.
The Company operates a zero-tolerance approach to
bribery, corruption and fraud.
Health and Safety
In order to maintain high standards of health and
safety for those working on sites, monthly checks
by independent project monitoring surveyors are
commissioned to ensure that all potential risks have been
identified and mitigated. These checks supplement those
undertaken by construction and development partners.
The data is reported to the Board on a quarterly basis in
the event of a nil return, and immediately in the event of
an incident. There were no reportable incidents over the
year (2021: none).
Governance
Strong governance is essential to ensuring that risks
are identified and managed, and that accountability,
responsibility, fairness and transparency are maintained at
all times.
The Company is subject to statutory reporting
requirements and to rules and responsibilities prescribed
by the London Stock Exchange and the Financial
Conduct Authority. The Board has a balanced range of
complementary skills and experience, with independent
Non-executive Directors who provide oversight, and
challenge decisions and policies as they see fit. The Board
believe in robust and effective corporate governance
structures and are committed to maintaining high
standards and applying the principles of best practice.
Employee Diversity – Gender
‘My Simple Life’ Mobile App
The Investment Adviser launched a bespoke resident mobile app
in August 2021. Available on Google and Apple devices, it has
been designed to provide a convenient and efficient ‘one-stop
shop’ for residents’ needs. It has been very well-received by
residents to date, and provides:
easy access to all important documents, including tenancy
agreements, inventories, EPC, gas and EICR certificates;
information on homes, including floorplans and measurements;
information on home appliances, including manuals;
access to statements of account, with certain payments
enabled via the app;
access to an open forum, enabling residents on the same
development to engage with each other;
the ability to report maintenance problems;
exclusive affiliate offers and discounts;
latest news;
information on the local area; and
the ability to leave feedback.
New services and facilities will be added to the app, with the
following about to go live:
content presentation by property type (apartment or house);
notification log; and
a new meter reading section, which allows residents to access
easily their meter readings and request new meter readings.
Resident Affiliate Offers
Sigma PRS has increased the range of affiliate offers that are
available to tenants, and the launch of the mobile app has created
greater awareness of the offers available. Affiliate offers include
discounts with Oddbox, Sky, Hussle, Argos, Dunelm, Wayfair, AO,
Pretty Little Thing, Appleyard London Florists, and The Modern
Milkman.
Podcast
In June 2021, the Investment Adviser launched the ‘Simple Life
Chat’ podcast, hosted by radio presenter and journalist, Jen
Thomas. It addresses the experience of renting and explores
topics of interest to residents, with experts and residents
participating in discussions.
Directors of The PRS REIT plc
2022
2021
Male
80%
80%
Female
20%
20%
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
49
48
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
PRINCIPAL RISKS AND UNCERTAINTIES
The Board of Directors recognise that there are a number
of risks which could have an impact on the Company’s
strategic and investment objectives.
The Board continually consider emerging risks and
during the year under review the ongoing COVID-19
pandemic, the war in Ukraine and resultant global volatility
and macro-economic uncertainty in the UK have been
identified.
Risk management and risk appetite
The Group’s assets are made up of UK Build to Rent
(“
BTR
”) property. Its principal risks are therefore related to
the UK BTR market in general and also to the particular
circumstances of the individual properties and the tenants
within the properties. Taking this into account, the Group’s
risk appetite policies and procedures, alongside the
appropriate controls and financial reporting are regularly
reviewed and updated to ensure they remain in line with
regulation and corporate governance.
The Company applies the ‘Three Lines of Defence’ model
for effective risk management and control:
The first line of defence is performed by the
management team of the IA who are responsible and
accountable for identifying and managing risk as part
of their objectives. As part of this the IA produces a
risk register that it provides to the Audit Committee for
review and consideration at least twice per year.
The second line of defence are the policies, frameworks
and challenge provided to ensure that the IA is
effectively managing risk. This is performed by the
Board and reported on by the Audit Committee.
The third line of defence is independent assurance
provided by the external auditor.
The below list sets out the current identifiable principal
risks and uncertainties which the Board are monitoring.
Valuation risk – investment property
The valuation of the Group’s property assets is primarily
based on five key drivers being, land purchase, cost to
build, rental income, gross to net income deductions, and
yield. Small variations in these can have a material impact
on the valuation of property.
Valuation risk is mitigated by a combination of factors
including the detailed site selection and appraisal process,
fixed price building contracts at competitive rates to
control costs, quality product from house builders, project
monitoring and review by the IA, tenant selection and
management by Lettings Agents, geographic spread of
sites / assets, mixture of asset size and portfolio spread.
The sector is considered attractive to investors and debt
providers with some defensive attributes in relation to
recessionary risk. Notwithstanding the above mitigating
factors, the Board constantly monitors risk around these
factors in conjunction with the IA.
The Company appoints an external valuation agent on
a three-year basis to provide continuity and stability,
whilst also representing a natural point for review
and consideration. In addition, the use of a separate
independent valuation agent by the providers of debt, and
expert review by further independent valuation agents
appointed by the Group’s auditors, RSM, ensures that
there are a number of views and opinions on valuation
being considered and taken into account at any point.
Site selection
As discussed under Valuation Risk, the principal drivers
for the valuation of the PRS REIT’s property assets are:
land purchase, cost to build, rental income, gross to net
income deductions and yield. Selection of sites which
match the investment criteria in terms of cost to purchase
and build, ERV, gross net to income deductions and
yield are therefore critical to the success of individual
developments.
Site selection risk is mitigated by performing detailed
appraisal and assessment of all aspects of a site,
including location, access to transport links, education,
amenities, and employment which are necessary to
formalise a view on the likely viability and profitability as
a build to rent development. This process also involves
expert third party guidance from valuers, house builders,
and lettings agents. The process is particularly important
given the prevailing background of cost inflation outpacing
rental growth. The IA’s process on site assessment and
appraisal necessarily involves a number of individuals with
different skill sets to ensure a balance of views and full
consideration of all factors.
The portfolio approach including broad geographic
spread adopted by the IA also helps to mitigate the
associated risks.
The Company seeks to obtain and maintain a pipeline
of potential PRS properties and PRS development
sites with partners for future development. There is no
certainty that viable, commercially justifiable sites, with
planning permission, can continue to be sourced on
acceptable terms. The availability of viable, commercially
justifiable sites with planning permission may therefore
adversely affect the ability of the PRS REIT to continue
to pursue further growth which could, in turn, have a
material adverse impact on the overall level of returns for
Shareholders.
The Board and the Investment Adviser manage this risk
through a number of long-term partnerships, including
different local councils and a variety of house builders,
to maintain a wide range of opportunities that are
geographically spread.
Whilst the Company has signed Forward Purchase
Agreements (“
FPA
”) in respect of the sites to be acquired
from the Sigma Group, it has not committed to acquiring
these sites. The FPA is conditional on:
Practical completion of all units;
Confirmation of good and marketable title;
Tenant occupation and rent stabilisation; and
Availability of funding.
As a result, the Board considers that the Company has
a high degree of flexibility in relation to the timing of site
acquisitions, and therefore the Company’s future funding
requirements.
Access to land
The strategy to date in the build to rent private residential
housing sector has been underpinned by strong
relationships with a small number of councils and house
builders. In order to continue to develop and grow the
PRS REIT, access to new development sites will be
required. This may require the IA to establish new local
authority partnerships and house builder relationships in
order to broaden the PRS REIT’s access to residential
development land at a price to fit the PRS model and to
other commercial developments.
Sourcing sites may require the PRS REIT and the IA to
broaden the relationship base presently utilised to identify
sites. Housing demand, both owned and let, continues
to exceed supply in the UK and looks likely to continue to
do so for the foreseeable future. However, the availability
of sites is likely to represent a greater risk in terms of
site selection with the risk that less viable and financially
attractive sites are developed. Detailed appraisal and
assessment of all aspects of a site - location, access,
transport links, education, amenities, employment etc.
- are necessary to formalise a view on the likely viability
and profitability as a build to rent development. This will
also involve expert third party guidance from independent
valuers, house builders and lettings agents. The process
is particularly important given the background of cost
inflation outpacing rental growth.
The IA process on site assessment and appraisal
necessarily involves a number of individuals with
different skill sets to ensure a balance of views and full
consideration of all factors. There is also an ultimate sign
off by the Land Director, Regional Managing Director,
Investment Director, Lettings Director, Chief Financial
Officer and Chief Executive of the IA. In terms of other
mitigating factors, it should be noted that development
sites typically have c.80-100 properties on them. In
the unlikely eventuality that the dynamics on a site -
particularly rental demand and / or rental value given that
land cost and design & build cost are fixed previously
- then this would likely only impact the valuation and
financial returns on that site. The portfolio approach
including the broad geographic spread adopted by the
PRS REIT and the IA means that while there are likely to
be some sites that do not materialise as expected, there
are likely to be as many winners as losers. On this basis,
the approach adopted should mitigate the associated
risks.
STRATEGIC REPORT
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
51
50
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Risks relating to the Company’s reliance on the
Investment Adviser
The Company has the benefit of access to the Sigma
PRS platform through the IA. If the Investment Advisory
Agreement is terminated it is likely that the Company
will cease to have access to the platform and to the
relationships and contractual frameworks with Approved
Contractors, Local Authorities, and the Approved Letting
Agents, together with the favourable terms and economies
of scale derived from these that have taken years to
establish. The Company would also need to identify
replacement sources of PRS Development Sites and
Completed PRS Sites.
In accordance with the Investment Advisory Agreement,
the IA is responsible for providing certain management and
investment advisory services to the Company. Accordingly,
the Company will be reliant upon, and its success will
depend on, the Investment Adviser and its key personnel,
services and resources.
Consequently, the future ability of the Company to
successfully pursue its investment objective and
investment policy may, among other things, depend on the
ability of the IA to retain its existing staff and/or to recruit
individuals of similar experience and calibre. Whilst the IA
has endeavoured to ensure that the principal members
of its management team are suitably incentivised,
the retention of key members of the team cannot be
guaranteed. Furthermore, in the event of a departure
of a key employee of the IA, there is no guarantee that
the IA would be able to recruit a suitable replacement or
that any delay in so doing would not adversely affect the
performance of the Company. Events impacting the IA
but not entirely within the IA’s control, such as its financial
performance, it being acquired or making acquisitions or
changes to its internal policies and structures, could in turn
affect its ability to retain key personnel.
Under the terms of the Investment Advisory Agreement,
the IA is required to devote such time and have all
necessary competent personnel and equipment as may
be required to enable the IA to carry out its obligations
properly and efficiently. However, if the IA fails to allocate
the appropriate time or resources to the Company’s
investments, the Company may be unable to achieve its
investment objectives. In addition, although the Investment
Advisory Agreement requires the IA to dedicate competent
personnel to the Company’s business they may not be
able to do so.
The Board notes that on 9 September 2021, the entire
share capital of Sigma Capital Group Limited was acquired
by a wholly-owned indirect subsidiary of investment
funds managed by PineBridge Benson Elliott LLP. This
represents a change to the ultimate ownership of the
IA, although there is no change to the obligations and
responsibilities of the IA pursuant to the terms and
conditions of the Investment Advisory Agreement.
The Board mitigates these risks by holding regular
Board meetings (at least four times per financial period)
whilst also having regular informal meetings with the key
members of IA on a more regular basis. The Board also
has an Executive Management meeting at least twice a
year to consider the performance of the IA and the other
outsourced professional firms and advisers engaged
by the Company. The Board actively engages with key
personnel of the IA and assesses its key main risks to
ensure that it is adequately staffed with suitably qualified
personnel and that succession planning is in place.
Risks relating to the REIT status of the Group
There is a risk that the Company may fail to remain
qualified as a REIT and therefore its rental income and
capital gains will be subject to UK corporation tax. Any
change in the tax status of the Company or a change in
tax legislation could adversely affect the investment return
of the Company.
The Company has been structured to be REIT compliant
and the Board will continue to monitor the tax status using
professional taxation advisers.
Risks relating to compliance
The Group has a wider variety of compliance risks ranging
from factors including status as a Real Estate Investment
Trust on the Premium Segment of the London Stock
Exchange, scale and complexity of the Group structure,
Companies House requirements, HMRC obligations,
planning requirements, Health & Safety, statutes and
legislation.
Compliance risks are mitigated by the Board and the
Investment Adviser utilising and employing qualified
professionals and professional advisers to ensure
compliance with current legislation and requirements
including – auditors, tax advisors, Nominated Advisor,
recognised house builder partners and legal advisers.
Emerging risks
As well as the principal risks, the Directors identify any
emerging risks which are considered as part of the formal
risk review. Emerging risks encompass those that are
rapidly evolving, for which the probability or severity are
not yet fully understood. As a result, any appropriate
mitigations are also still evolving, however, these emerging
risks are not considered to pose a material threat to the
Company in the short term. This could, however, change
depending on how these risks evolve over time. Senior
members of the IA are responsible for day-to-day matters
and have a breadth of experience across all corporate
areas; they consider emerging risks and any appropriate
mitigation measures required. These emerging risks
are then raised as part of the risk assessment where it
is considered whether these emerging risks have the
potential to have a materially adverse effect on the Group.
The Board is mindful that the UK is feeling the after-
effects of COVID-19 and Brexit on the economy, with
disruption to supply chains globally leading to inflationary
consequences. Fortunately, to date this has not had
a negative effect on the Company other than delaying
completion of assets under construction due to supply
chain issues, while offsetting this has been the continued
strong demand for Build to Rent assets. The market for
such assets has continued to strengthen, and is reflected
in tighter yields and rising rents, both of which are
reflected in the valuation of our existing properties.
In addition, the war in Ukraine and the resultant effects
on the global economy are being considered. While the
Company has no direct exposure to Europe, it is not
currently seeing any significant impact on our existing
business but will continue to monitor the situation closely.
The area where the Company has witnessed inflationary
pressures the most, is in regards to raw material and
labour costs. This primarily reflects the impact of supply
chain disruption caused by a combination of Covid-19,
Brexit and the war in Ukraine.
The Company is, however, in a good position to manage
and mitigate cost increases, through the use of fixed
price fixed Design and Build contracts. It is also at a
stage where the majority of the contracted development
sites have been completed in relation to the revised
target of 5,600 units. This therefore represents a risk
on potential future sites as opposed to one in respect
of existing sites. Equally, the favourable occupational
investment markets also mean that any cost inflation on
future sites would at worst be at least partially offset by
rising rents and capital values.
The Board is monitoring closely the recent market volatility
to ensure that all risks to the Company and Group are
identified and addressed where possible to reduce the
potential negative effects.
The Company’s Section 172 statement is included on
pages 53 to 55.
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES (Cont.)
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
53
52
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Stakeholder engagement
The PRS REIT is focused on delivering new homes for
private rental across the UK, with family homes its key
target market. The Group’s PRS activities bring together
a network of formal and informal relationships, which
include: construction partners; central government;
local authorities; customers; and communities. As a
sustainable business, the Company is providing an
innovative build-to-rent solution to address a national,
market, and societal demand for quality family homes.
Across the UK, the PRS REIT engages with a range of
interest groups to ensure that it listens to, understands
and responds appropriately to the interests and
concerns of all stakeholders, as well as seeking to deliver
sustainable value for them.
Effective engagement with stakeholders at Board level,
and throughout the Group’s business, is crucial to fulfilling
the Company’s goal to deliver family PRS homes across
the UK. While the importance of giving due consideration
to stakeholders is not new, we are taking the opportunity
to explain in more detail how the Board has engaged with
the PRS REIT’s stakeholders. The Company continues
to be collaborative with all stakeholder groups, including
customers, partners, house builders, suppliers, local
authorities, regulators, funders and investors. This
approach necessarily involves listening to and taking
account of their views and feedback, while also being
open to change.
Section 172 statement
The following serves as the Company’s section 172
statement and should be read in conjunction with the
Strategic Report on pages 4 to 55. Section 172(1) of the
Companies Act 2006, requires Directors to fulfil their duty
to promote the success of the Company. In doing this, the
Directors must act in good faith, and in a manner which
would most likely promote the success of the company
for the benefit of its members as a whole. The Directors
should have regard to:
the likely consequences of any decision in the long
term,
the interests of the company’s employees,
the need to foster the company’s business
relationships with suppliers, customers and others,
the impact of the company’s operations on the
community and the environment,
the desirability of the company maintaining a reputation
for high standards of business conduct, and
the need to act fairly as between members of the
company.
To ensure that the Directors are aware and understand
their duties, they are provided with all relevant Company
information when they are appointed to the Board and
receive regular updates and training on matters where
appropriate. Directors also have access to the advice
and services of the Company Secretary as well as
independent advisers, should they wish. Directors receive
technical updates from the NOMAD, the Company
Secretary, and the Investment Manager as and when
appropriate.
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
STRATEGIC REPORT
55
54
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Our stakeholders
55
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT (Cont.)
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT (Cont.)
Our customers
Our local communities and environment
Who are they?
Our tenants, their families, and
the people who live in or around
our sites.
Communities who live in and around our properties as
well as local organisations and enterprises, including
the natural surroundings of our properties.
Why are they
important to
us?
-
Customer service is at the
heart of our business. Our
tenants provide us with rental
income, so it is essential that
we serve their needs
-
The Board places an ever-increasing emphasis on
the importance of ESG factors
-
The Board and the Investment Adviser are
fully committed to managing the business and
implementing the investment strategy responsibly
What matters
to them?
-
Affordable, high quality, well
maintained, homes at market
prices that suit their needs
-
Provision of accommodation
in areas of strong employment
with good infrastructure,
transport links and local
education
-
Community environment
which enhances wellbeing
-
Places which foster social connections and enhance
wellbeing
-
Support for local organisations, e.g. schools and
charitable institutions
-
Minimising carbon emissions during construction
and after completion when tenants occupy
properties
-
Minimising waste and conserving water during
construction and after completion when tenants
occupy properties
- Promoting environmental responsibility
-
Preserving and enhancing biodiversity
Ways we are
engaging with
them?
-
Delivering properties that
target strong environmental
certifications
-
582 tenant surveys completed
annually
-
Utilisation of an in-house
app which provides two
way communication and
information between tenant
and landlord on a variety of
topics
-
Seasonal events and marketing
activities e.g. Easter egg
hunts, Pizza nights, Christmas
events
-
Further information on how
we engage with our customers
can be found on pages 36 to
47
-
Fostering networks which connect our occupiers
with local communities and organisations
-
Designing and delivering low-carbon emission
properties including installation of EV panels, EV
charging points, utilisation of modern methods of
construction and reduction of waste
-
Promoting the mitigation of carbon emissions on
existing properties
-
Identifying opportunities to increase biodiversity
on and around properties
-
Recycling activities including installation of clothes
banks on sites
-
Support for local schools and charities though
donations for projects
-
Garden maintenance and provision of open green
spaces
-
For further information on the Groups’ ESG policies
and performance please see pages 36 to 47, and
the full report on the Company’s website,
Our investors and funders
Our partners and suppliers
Our Investment Adviser (“
IA
”)
The entities, institutions and individuals who
own shares in the Company together with the
lenders who provide debt finance.
Construction partners, local
authorities, Letting Agent,
Company Secretary, suppliers
and all other organisations we
have a direct relationship with
Sigma PRS Management Ltd
(“
Sigma PRS
”)
-
Continued shareholder and lender support is
critical to the sustainability of the Company
and delivery of the Company’s long-term
business growth strategy
-
As we outsource all of our
administrative functions to
external service providers,
they are critical to the
administration and running of
our business
-
Performance of the IA is
critical for the Company
to successfully deliver its
investment strategy and meet
its performance targets
-
Delivery of strategy and financial
performance
-
Effective communication of the Company’s
progress and ongoing strategy
-
Attractive returns on their respective equity
and debt investments
-
Reliability and dependability
of the PRS REIT
-
Customer recommendations,
enabling them to win new/
additional business
-
Contributing to the success of
the PRS REIT
- Long term partnerships
-
Provision of support and clear
direction by the Board in
terms of overall strategy and
policy
-
Through a combination of Annual and Interim
Reports, presentation of financial results and
announcements to the market
-
Provision of financial information and covenant
compliance certificates to debt funders
-
The Company encourages and welcomes
shareholder queries at its Annual General
Meeting
-
Communication through the Company’s joint
brokers
-
Returns-focused strategy with clear targets set
-
Meetings offered to substantial shareholders,
debt providers and potential investors who all
met at least once in the last year
-
Regular formal and informal communication
with both equity and debt providers
-
Further information as to how the Company
has engaged with its shareholders can be
found on page 73.
-
The Board’s proposal on the final total
dividend for the 2022 financial year of 4.0p
per share (2021: 4.0p) reflects the Board’s
confidence in the Company’s long-term
financial health and growth prospects
-
Maintaining an open and
active dialogue
-
Developing long term
relationships with suppliers
-
Partnership approach based
on open and consistent
dialogue, focused on
delivering solutions
-
Payment of suppliers in
accordance with credit terms
which are typically less than
30 days
-
The Board and Sigma
PRS have a close working
relationship. The IA attends
the regular Board meetings
and reports to the Board on
progress and performance
-
The Management Engagement
Committee of the Board
reviews the performance of
the IA annually
-
Regular informal and formal
discussions between members
of the Board and the IA,
together with members of the
Audit Committee and the IA
-
Further information as to how
the Company has engaged
with our IA can be found on
page 68.
Employees
Apart from the Directors, The PRS REIT does not have
any employees (2021: nil). Sigma PRS Management Ltd
is the appointed Investment Adviser to the PRS REIT.
By order of the Board
Steve Smith
Chairman
10 October 2022
57
56
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
DIRECTORS
Steve Smith, Non-Executive Chairman (Age 68)
appointed 24 April 2017
Steve has over 40 years of experience in the real estate
industry. Steve is currently Non-Executive Chairman
of Sancus Lending, an AIM listed property finance
business. Previously, he was the Chief Investment Officer
of British Land Company PLC, the FTSE 100 real estate
investment trust from January 2010 to March 2013 with
responsibility for the group’s property and investment
strategy. Prior to joining British Land, Steve was Global
Head of Asset Management and Transactions at AXA
Real Estate Investment Managers, where he was
responsible for the asset management of a portfolio
of more than €40 billion on behalf of life funds, listed
property vehicles, unit linked and closed end funds.
Before joining AXA in 1999, he was Managing Director
at Sun Life Properties for five years. Steve was formerly
Non-Executive Chairman of Starwood European Real
Estate Finance Limited and Alternative Income REIT plc
and a Non-Executive Director of Tritax Big Box REIT plc
and Gatehouse Bank plc.
Steffan Francis, Non-Executive Director (Age 67)
appointed 24 April 2017
Steffan has more than 40 years of experience in the
real estate industry. Until 2016, Steffan was Director of
Fund Management at M&G Real Estate where he was
responsible for the £6 billion “Long Income” business. He
was also involved in creating and ensuring the long term
success of a number of real estate funds, including the
M&G Secured Property Income Fund, which, within 10
years of being launched, became the largest property fund
on the AREF/MSCI UK quarterly Property Fund Index.
Currently, Steffan is a Non-executive Director of M&G
(Guernsey) Limited and is also an independent adviser to
the British Steel Pension Trustees. Steffan is a Fellow of
the Royal Institution of Chartered Surveyors.
Roderick MacRae, Non-Executive Director (Age 58)
appointed 24 April 2017
Rod has over 20 years of experience in the financial
services sector. Latterly, he was an Executive Director at
Aberdeen Asset Management PLC as the Group Head
of Risk with responsibility for UK and Global operational
risk and regulatory compliance. He was also Chairman
of the Aberdeen Asset Management group executive
risk management committee, the senior risk oversight
function of the group. He has extensive involvement in
corporate activity including transformational acquisitions
and defence strategies. Previously he was Chief Operating
Officer at Edinburgh Fund Managers, which he joined
in 1991 and was acquired by Aberdeen in 2003. Rod is
a member of the Institute of Chartered Accountants of
Scotland having qualified with Coopers & Lybrand and is
the Chairman of the Company’s Audit Committee.
Geeta Nanda, OBE, Non-Executive Director (Age 57)
appointed 24 March 2021
Geeta has over 30 years’ experience working in
the property sector. She is Chief Executive Officer
of Metropolitan Thames Valley Housing Association
(“
MTVH
”), having previously led its creation in 2017 with
the merger of Metropolitan Housing Trust and Thames
Valley Housing Association Ltd, where she was Chief
Executive Officer for over 9 years. At MTVH, Geeta is
responsible for the management of 60,000 homes, with
120,000 residents, and an ongoing new-build programme
of over 1,000 homes a year. She also has significant
experience of PRS, having established ‘Fizzy Living’,
the London PRS subsidiary of Thames Valley Housing
Association Ltd in 2012. Geeta is a member of the Homes
for Londoners mayoral Board, and a Board member
of The National Housing Federation, the industry body
representing providers of housing. She is also Chair of
G15, the group of London’s largest housing associations.
She was previously a Non-executive Director of McCarthy
& Stone plc, the retirement communities’ developer and
manager, from 2015 until its acquisition in early 2021,
a Non-executive Director of The St Mungo Community
Housing Association, a charity that helps the homeless,
and Vice Chair of SCOPE, the national disability charity.
Jim Prower, Non-Executive Director (Age 67)
appointed 20 May 2019
Jim, a Chartered Accountant, has over 35 years’
experience in senior financial roles. Between 1998 and
2015, he was Group Finance Director at Argent Group
plc, the UK based property developer and then Finance
Partner of Argent (Property Development) Services LLP
and Argent Investments LLP, which specialise in mixed
use developments with a focus on place making and
inner city regeneration; Jim was involved in Argent’s
major developments in Manchester, Birmingham and the
City of London, and from 2008 to 2015 he worked on
the King’s Cross Central joint venture, one of Europe’s
largest regeneration projects. Prior to this, Jim was Group
Finance Director at NOBO Group plc and at Creston
Land & Estates plc. Jim was formerly Senior Independent
Director at Empiric Student Property plc and Tritax Big
Box REIT plc, and a Non-executive Director at Alternative
Income REIT plc.
CORPORATE GOVERNANCE
Corporate Governance
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
59
58
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The Directors present their annual report on the affairs of
the Group, together with the audited financial statements,
for the year ended 30 June 2022.
Principal activity
The principal activity of the Company is the investment in,
and management of, new build PRS residential housing
which is primarily located in various regions of England.
The Company commenced trading on 31 May 2017 after
the successful initial raising of £250 million gross proceeds
through its IPO. Its shares were listed on the Specialist
Fund Segment of the Main Market of the London Stock
Exchange until 2 March 2021 when it migrated to the
Premium Segment of the Main Market of the London
Stock Exchange.
Results and dividends
The financial results for the year can be found in the
Consolidated Statement of Comprehensive Income on
page 95. The following dividends were paid during the year:
3 September 2021
1.0p per ordinary share
3 December 2021
1.0p per ordinary share
8 March 2022
1.0p per ordinary share
13 May 2022
1.0p per ordinary share
Total dividends paid in the prior year was 5.0p. Since the
year-end, a dividend of 1.0p per ordinary share was paid
on 26 August 2022.
Review of the business and future
developments
The Directors are required to present an extended business
review reporting on the development and performance
of the Group and the Company, their positions at the
end of the period, and an indication of the likely future
developments in the Group’s business. This requirement is
met by the Strategic Report on pages 4 to 55.
Articles of Association
The Company’s Articles of Association may only be
amended by special resolution at a general meeting of
shareholders.
Directors
The current Directors of the Company are listed on page
57, all of whom held office throughout the year. The
Board consists solely of Non-executive Directors, each
of whom is independent of the Investment Adviser and
the Company. The Company therefore has no executive
Directors or employees (2021: none). In accordance
with the Articles of Association, every person appointed
as an additional director during the course of the year
must stand for re-election at the next Annual General
Meeting (“
AGM
”). The Board follows the revised AIC
Code of Corporate Governance that applies to financial
periods commencing after 1 January 2019 and requires
that all Directors will stand for re-election annually. The
appointment and replacement of Directors is governed
by the Company’s Articles, the AIC Code, the Companies
Act 2006 and any related legislation. The details of the
Directors’ remuneration along with the Director’s beneficial
interest in securities of the Company are given in the
Directors’ Remuneration Report on pages 82 to 84.
Powers of Directors
The Directors’ powers are determined by the Companies
Act 2006 and the Company’s Articles of Association. The
Articles may be amended by a special resolution of the
shareholders. The Directors may exercise all the powers of
the Company provided that the applicable legislation and
Articles do not stipulate that any such powers must be
exercised by the shareholders.
Directors’ interests in shares
The Directors’ interests in the Company’s shares are
disclosed in the Directors’ Remuneration Report on pages
82 to 84.
Directors’ indemnity insurance
The Group held a Directors and Officers insurance policy
in place throughout the year and prior year in respect of
the Company and the Group’s subsidiaries.
REPORT OF THE DIRECTORS
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
ADVISERS
Registered Office
Floor 3, 1 St. Ann Street
Manchester M2 7LR
AIFM
G10 Capital Limited
4th Floor, 3 More London Riverside
London SE1 2AQ United Kingdom
Company Secretary
Hanway Advisory Limited
(appointed 31 March 2022)
1 King William Street
London EC4N 7AF
Valuers
Savills (UK) Limited
33 Margaret Street
London W1G 0JD
Auditor
RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB
Financial PR
KTZ Communications
No. 1 Cornhill
London EC3V 3ND
Financial Adviser and Broker
Singer Capital Markets Advisory LLP
One Bartholomew Lane
London EC2N 2AX
Investment Adviser
Sigma PRS Management Ltd
Floor 3, 1 St. Ann Street
Manchester M2 7LR
Joint Broker
Panmure Gordon (UK) Limited
One New Change
London EC4M 9AF
Depository
Crestbridge Property Partnerships Limited
8 Sackville Street
London W1S 3DG
Legal and Tax Adviser
Dentons UK and Middle East LLP
One Fleet Place
London EC4M 7WS
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
61
60
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Greenhouse gas emissions reporting
The Board has considered the requirement to disclose
the Company’s measured carbon sources under the
Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013.
During the year ended 30 June 2022:
any emissions from the Group’s development of
investment properties have been the contractors’
responsibility rather than the Group’s so the principle of
operational control has been applied;
any emissions from the Group’s completed assets have
been the tenants’ responsibility rather than the Group’s
so the principle of operational control has been applied;
any emissions from the Company’s registered office
or from offices used to provide administrative support
are deemed to fall under the Investment Adviser’s
responsibility; and
the Group does not lease or own any vehicles which
fall under the requirements of Mandatory Emissions
reporting.
Work to measure and understand the emissions from the
two phases of business, construction and lettings, is under
review. The IA is investing time and resources in this area in
order to endeavour to capture aggregated data which can
be utilised to further understand and measure the impact of
the Company’s assets on emissions. This information is not
presently available to the IA as it not under its control.
As such, the Board believes that the Company had no
reportable emissions for the periods ended 30 June 2022
and 30 June 2021.
Management Arrangements
Investment Adviser
The Company and the AIFM have appointed Sigma PRS
as the Investment Adviser. Sigma PRS is responsible
for the management of the assets of the Company
and advising the Company and the AIFM on a day-
to-day basis in respect of the Company’s Investment
Policy. Sigma PRS may transact on the Company’s
behalf in relation to the acquisition of PRS development
sites and completed PRS sites in accordance with the
Company’s investment objectives and investment policy.
The Investment Advisory Agreement (the “
Agreement
”)
was extended, with effect from 1 January 2021. The
Agreement signed on 3 May 2017 provided for an
initial minimum contracted term of five years to 31 May
2022, being the fifth anniversary of the initial admission
of the Company’s shares to trading on the Specialist
Fund Segment of the Main Market of the London Stock
Exchange, with a one year notice period thereafter.
Under the new agreement, the contracted term has been
extended to 31 December 2025, with a one year notice
period thereafter, with a reduction in the Investment
Adviser fee rates above £500m of net asset value
compared to the original arrangement. The Agreement
may be terminated by the Company and the Company’s
Alternative Investment Fund Manager (“
AIFM
”)
immediately if the Investment Adviser is in material
breach of the Agreement or is the subject of insolvency
proceedings. The Investment Adviser fee arrangement
in respect of Sigma PRS is detailed in note 11 of the
financial statements, in addition the Investment Adviser
is entitled to a development management fee of 4.0% of
gross development spend.
AIFM
G10 Capital Limited has been appointed as the
Company’s AIFM. Subject to the overall supervision of
the Directors, the AIFM is responsible for overall portfolio
management and risk management of the Company,
ensuring compliance with the Company’s investment
policy and the requirements of the UK AIFM Regime
and EU Alternative Investment Fund Managers Directive
(“
AIFMD
”) that apply to the Company. The AIFM manages
the PRS REIT’s investments in accordance with the
policies laid down by the Board and in accordance
with the investment restrictions referred to in the AIFM
Agreement. The AIFM Agreement provides that the
Company will pay to the AIFM the following fees:
(a) an initial one-off fee of £12,000;
(b) a monthly fee of £6,000;
(c) £1,000 per investment committee meeting; and
(d) Ad-hoc work as required.
The AIFM Agreement is terminable by any of the parties
to it on six months’ written notice. The AIFM Agreement
may be terminated by the Company immediately if the
AIFM ceases to maintain its alternative investment fund
manager permission; fails to notify the Company of a
regulatory investigation which is relevant to the AIFM’s
ongoing appointment as alternative investment fund
manager; is in material breach of the agreement; or is the
subject of insolvency proceedings. The AIFM Agreement
may be terminated immediately if a member of Sigma, the
parent company of Sigma PRS, is directly appointed as
alternative investment fund manager of the Company.
CORPORATE GOVERNANCE
REPORT OF THE DIRECTORS (Cont.)
CORPORATE GOVERNANCE
REPORT OF THE DIRECTORS (Cont.)
Substantial shareholdings
As at 30 June 2022, the Company is aware of the following substantial shareholdings, which were directly or indirectly
interested in 3% or more of the total voting rights in the Company’s issued share capital.
As at 30 September 2022 the following substantial shareholdings were held:
Restrictions on the transfer of shares
There are no restrictions on the transfer of securities in the Company, except as a result of:
the FCA’s Listing Rules, which require certain individuals to have approval to deal in the Company’s shares; and
the Company’s Articles of Association, which allow the Board to decline to register a transfer of shares or otherwise
impose a restriction on shares, to prevent the Company or Investment Adviser breaching any law or regulation.
The Company is not aware of any agreements between holders of securities that may result in restrictions on
transferring securities in the Company.
Investor
Number of
ordinary shares
% holding of
issued share capital
Invesco High Income Fund
49,089,585
8.94
Homes & Communities Agency
29,878,047
5.44
Aviva Life & Pensions UK
27,899,367
5.08
Invesco UK Equity Income Fund
2 1 ,877,700
3.98
Smithfield Alternative Investment Fund
17,351,074
3.16
Investor
Number of
ordinary shares
% holding of
issued share capital
Invesco High Income Fund
49,089,585
8.94
Aviva Life & Pensions UK
29,988,238
5.46
Homes & Communities Agency
29,878,047
5.44
Invesco UK Equity Income Fund
2 1 ,877,700
3.98
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Share capital
At the AGM held on 15 December 2021, the Directors
were authorised to:
issue securities up to an aggregate nominal amount
of £1,830,838 representing approximately 33.33% of
the Company’s issued share capital at the time of the
annual general meeting;
dis-apply pre-emption rights in respect of securities and
to issue securities for cash up to an aggregate nominal
amount equal to £1,098,502 which represented 20% of
the Company’s issued share capital at that time; and
allow the PRS REIT to buy back up to 14.99% of the
issued share capital of the Company at that time,
provided the Directors believed it to be in the best
interests of shareholders where to do so would likely
result in an increase in earnings per share.
As at 30 June 2022, the Company had 549,251,458
ordinary shares in issue (2021: 495,277,294), none of
which were held in treasury (2021: none).
63
62
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
continued increases in estimated rental value;
Group loan to value of 31% as at 30 June 2022;
Group cash of £48.7 million at 30 June 2022, of which
£37.8 was immediately available;
Access to approximately £90 million of undrawn debt
facilities; and
62.5% of the Group’s investment debt facilities are
fixed interest facilities and at the year-end had a
weighted average debt maturity of 17.6 years and an
average weighted cost of 2.9%.
In assessing the Company’s viability, the Board has
carried out a robust assessment of the principal risks
and uncertainties facing the Group, as set out on pages
48 to 51.
In determining the 3-year timescale, the Board has
considered the Group’s and Company’s detailed
forecasting model. The assumptions underpinning this
model show that within three years all investment property
acquisitions are forecast to have been completed, all
assets under construction should be developed and
rent stabilisation thereon should be achieved. The LBG /
RBS £150 million debt facility is in the process of being
refinanced, in the event that refinancing is not completed
then the Company would seek to roll forward the existing
facility until such time that the refinancing was completed.
The Board’s expectation is further underpinned by regular
dialogue with the Investment Adviser regarding market
conditions, the availability of investment opportunities,
principal risks and uncertainties and any change
in the regulatory framework. The Group’s principal
and emerging risks and uncertainties continue to be
monitored closely by the Board. Based on the results of
this analysis, the Directors have a reasonable expectation
that the Group and Company will be able to continue in
operation and meet its liabilities as they fall due for the
next three years.
Environmental, Social and Governance
The Board’s report on Environmental, Social and
Governance is on pages 36 to 47.
Corporate Governance Statement
The corporate governance statement is set out on pages
66 to 73.
Stakeholder engagement and Section 172
statement
The Groups’ stakeholder engagement and Section 172
statement are set out on pages 53 to 55.
Auditor
A resolution to reappoint RSM UK Audit LLP as Auditor
will be proposed at the Annual General Meeting.
Audit information
The Directors who held office at the date of approval of
this Report of the Directors confirm that, so far as they
are aware, there is no relevant audit information of which
the Company’s Auditor are unaware and each Director
has taken all the steps that they ought to have taken as
a Director to make himself aware of any relevant audit
information and to establish that the Company’s Auditor
are aware of that information.
Post balance sheet events
Details of any significant post balance sheet events are
detailed on page 133 of these financial statements.
By order of the Board
Steve Smith
Director
10 October 2022
CORPORATE GOVERNANCE
REPORT OF THE DIRECTORS (Cont.)
Depositary
Crestbridge UK Limited are the appointed Company’s
depositary for the purposes of the AIFMD. Under the terms
of the Depositary Agreement, the Depositary was paid
an initial one-off fee of £5,000. Provided that the assets
under management of the Company exceed £100 million,
the Company shall also pay the Depositary an annual
fee. The annual fee starts at £20,000 per annum with an
additional fee of 0.667 basis points of any increase above
£100 million, subject always to a maximum fee of £40,000
per annum. The Company’s assets under management
are reviewed quarterly. The Depositary is entitled to be
reimbursed by the Company for all costs and expenses
properly and reasonably incurred in the performance of
duties under the Depositary Agreement.
Administration services
Sigma Capital Property Ltd, also a subsidiary of Sigma,
has been appointed as the Company’s Administrator to
provide day-to-day administration of the Company, and
provide development and production of statutory annual
accounts, interim accounts and reports to shareholders
of the Company in accordance with IFRS and EPRA. The
Administrator is also responsible for calculating the Net
Asset Value of the Ordinary Shares based on information
provided to the Administrator by Sigma PRS. The
Administration Agreement provides that the Company will
pay the Administrator an annual fee of £80,000 plus VAT,
payable monthly in arrears.
Sigma Capital Property Ltd was formerly the Company
Secretary to the Company. Hanway Advisory Limited,
an independent third party, was appointed Company
Secretary with effect from 31 March 2022.
Financial risk management
The principal risks and uncertainties faced by the Company
and the Group are set out on pages 48 to 51. Information
on the financial risk management objectives and policies
relating to market risk, credit risk and liquidity risk is
provided in note 4 to the financial statements.
Treasury activities and financial instruments
The Group’s financial instruments comprise cash and
cash equivalents, plus other items such as trade and other
receivables, trade and other payables and borrowings that
arise directly from its operations. At 30 June 2022, the
Group had positive cash balances of £48.7 million (2021:
£86.4 million).
The Group’s policy is to keep surplus funds on short
term and instant access deposit to earn the prevailing
market rate of interest. At 30 June 2022, the Group had
borrowings of £250 million with Scottish Widows and a
revolving credit facility with Lloyds Banking Group plc and
RBS plc of £150 million of which £85.5 million was drawn.
In addition, the Group has a £40 million revolving credit
facility with Barclays Bank PLC of which £15.2 million was
drawn. Further information with regard to the Group’s cash
and cash equivalents is provided in note 21 of the financial
statements and borrowings in note 23.
Political donations
No political contributions were made during the year (2021:
nil).
Going concern
The Company’s current financial position is set out in the
Strategic Report and financial statements. The Board
regularly reviews the position of the Company and its
ability to continue as a going concern throughout the year.
The Board confirms that it has a reasonable expectation
that the Company and the Group have adequate
resources to manage their business risks successfully
and allow it to continue in operational existence for the
foreseeable future and the Board believes that there are
no material uncertainties in relation to the Group’s and
Company’s ability to continue for a period of at least 12
months from the date of this report. Accordingly, the
Board of Directors consider that it is appropriate to adopt
the going concern basis of accounting in preparing the
annual report and financial statements. Please see note 3
of the financial statements for more information.
Viability statement
In accordance with Principle 36 of the AIC Code, the
Directors have assessed the prospects of the Group and
Company and future viability over a three-year period,
being longer than the twelve months required by the going
concern provision.
The Directors considered a number of other factors when
assessing the viability of the Company:
strong rent collection rates, 99% of all rent invoiced has
been collected in the year;
continued strong rental demand;
CORPORATE GOVERNANCE
REPORT OF THE DIRECTORS (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
65
64
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The Directors are responsible for preparing the Strategic
Report and the Directors’ Report, the Directors’
Remuneration Report, the Separate Corporate
Governance Statement and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group
and Company financial statements for each financial
year. The Directors have elected under company law
and are required under the Listing Rules of the Financial
Conduct Authority to prepare the Group financial
statements in accordance with UK-adopted International
Accounting Standards. The Directors have elected
under company law to prepare the Company financial
statements in accordance with UK-adopted International
Accounting Standards.
The Group and Company financial statements are
required by law and UK-adopted International Accounting
Standards to present fairly the financial position of the
Group and the Company and the financial performance
of the Group; the Companies Act 2006 provides in
relation to such financial statements that references in the
relevant part of that Act to financial statements giving a
true and fair view are references to their achieving a fair
presentation.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group
for that period.
In preparing each of the Group and Company financial
statements, the Directors are required to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether they have been prepared in accordance
with UK-adopted International Accounting Standards;
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the group
and the company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and the Company’s transactions and disclose
with reasonable accuracy at any time the financial position
of the Group and the Company and enable them to
ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act
2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Directors’ statement pursuant to the Disclosure
and Transparency Rules
Each of the Directors, whose names and functions
are listed on page 57 confirm that, to the best of each
person’s knowledge:
the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit of the company and the undertakings included
in the consolidation taken as a whole; and
the Strategic Report contained in the Annual
Report includes a fair review of the development
and performance of the business and the position
of the company and the undertakings included in
the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the www.theprsreit.com website.
Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Approval
This Statement of Directors’ Responsibilities was
approved by the Board and signed on its behalf by:
Steve Smith
Chairman
10 October 2022
CORPORATE GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
67
66
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Statement of Compliance
The Company is committed to maintaining high standards
of corporate governance and considers that reporting
against the principles and recommendations of the
AIC Code of Corporate Governance issued in February
2019 (the “
AIC Code
”), provides better information to
shareholders as it addresses all the principles set out
in the 2018 UK Corporate Governance Code (the “
UK
Code
”), as well as setting out additional principles and
recommendations on issues that are of specific relevance
to investment trusts, and is endorsed by the Financial
Reporting Council (the “
FRC
”). The AIC Code has been
voluntarily followed by the Company. The AIC Code is
available from the AIC website at theaic.co.uk. It includes
an explanation of how the AIC Code adapts the Principles
and Provisions set out in the UK Code to make them
relevant for investment companies. A copy of the UK Code
can be obtained at frc.org.uk.
The Board recognises the importance of a strong corporate
governance culture and has established a framework for
corporate governance which it considers to be appropriate.
The UK Code includes provisions relating to:
the role of the chief executive; and
executive directors’ remuneration.
For the reasons set out in the AIC Code, the Board
considers these provisions not relevant to the position
of the Company, being an externally managed REIT. In
particular, all of the Company’s day-to-day management
and administrative functions are outsourced to third parties.
As a result, the Company has no executive directors,
employees or internal operations. The Company has
therefore not reported further in respect of these provisions.
The Board has reviewed the principles and
recommendations of the AIC Code and considers that the
Company has complied with these throughout the year,
except as disclosed below:
given the size of the Board and the close working
relationship of the Directors, the Board does not
consider it necessary to appoint a senior independent
director (Provision 14 of the AIC Code).
given the structure and size of the Board, the Board
does not consider it necessary to appoint a separate
nomination committee. The roles and responsibilities
normally reserved for this committee are matters
reserved for the Board. The need for a nomination
committee is kept under review. (Provision 22 of the AIC
Code).
given the structure and size of the Board and that the
Company does not have a workforce, the Board does
not consider it necessary to establish a remuneration
committee. The roles and responsibilities normally
reserved for this committee are matters reserved for the
Board (Provision 37 of the AIC Code).
Responsibilities
The Board is collectively responsible for the sustainable
long-term success of the Group and to deliver value for
shareholders. The Board does not routinely involve itself
in day-to-day business decisions. It provides overall
leadership and sets the strategic direction of the Group.
The Directors are responsible for ensuring compliance
with the Group’s investment policy and have oversight of
the management and conduct of the Group’s business,
strategy and development.
The Board is also responsible for the control and
supervision of the AIFM and the Investment Adviser and
compliance with the principles and recommendations of the
AIC Code. The Board ensures the maintenance of a sound
system of internal controls and risk management (including
financial, operational and compliance controls) and reviews
the overall effectiveness of the systems in place throughout
the year and no problems have been identified. The Board
is responsible for approval of any changes to the capital,
corporate and/or management structure of the Group.
The AIFM is responsible for overall portfolio management
(including compliance with the Group’s investment
policy) and risk management of the Group, including the
implementation and review of adequate risk management
systems.
The Investment Adviser is responsible for the asset
management of the Group’s portfolio, including arranging
for the acquisition of PRS development sites and liaising
with third parties providing services to the Group.
CORPORATE GOVERNANCE STATEMENT
The Investment Adviser also provides certain development
management services to the Group, in connection with the
construction and delivery of new PRS units.
The Directors have adopted a formal schedule of matters
reserved for decision by the Board. These include the
following:
Oversight of the Group’s operations, ensuring
compliance with statutory and regulatory obligations;
Board membership and powers including the
appointment and removal of Board members;
Establishing the overall control framework, Stock
Exchange related matters, including the approval
of communications to the Stock Exchange, and
communications with shareholders, other than
announcements of a routine nature;
Appointment, termination, and regular assessment of
the performance of the principal advisers, including
the AIFM, Investment Adviser, legal and tax advisers,
administrator, valuer, financial adviser and broker,
registrar, Auditor and any other key service providers;
Approval of acquisitions from Sigma Capital Group
Limited and subsidiary undertakings;
Approval of annual and half yearly financial reports,
to 30 June and 31 December respectively, dividends,
accounting policies and significant changes in
accounting practices;
Review of the adequacy of corporate governance
procedures;
Review of the risk management systems and the
effectiveness of internal controls;
Alterations to and approval of the Group’s capital
structure, dividend policy, treasury policy, borrowing
facilities and any banking relationships; and
Approval of any related party transactions subject to
further regulatory requirements.
The Board has carried out a robust assessment of the
emerging principal risks affecting the business, including
those which would threaten its business model, future
performance, solvency or liquidity. Details of these risks
and their management are set out in this report on pages
48 to 51.
The Board has reviewed the effectiveness of the AIFM and
Investment Adviser’s compliance and control systems in
operation insofar as they relate to the affairs of the Group
and further reviews the arrangements with the Depository
to ensure the safeguarding of the Company’s assets and
security of the shareholders’ investment is being maintained.
As the Company principally invests in property assets,
the Board does not consider that there is any need to
determine a separate remit for the Investment Adviser
regarding voting and corporate governance issues in
respect of investee companies. While the Company has
a number of subsidiary undertakings these are all special
purpose vehicles set up for the purposes of holding
property assets and are all wholly owned and controlled by
the Company.
Internal Control Review
The Board is responsible for the systems of internal
controls relating to the Company, including the reliability
of the financial reporting process, and for reviewing the
systems’ effectiveness. The Directors have reviewed and
considered the guidance supplied by the FRC on risk
management, internal control and related finance and
business reporting and an ongoing process is in place
for identifying, evaluating and managing the principal and
emerging risks faced by the Company. This process,
together with key procedures established with a view to
providing effective financial control, was in place during the
year under review and at the date of this report.
The internal control systems are designed to ensure
that proper accounting records are maintained, that the
financial information on which business decisions are made
and which is issued for publication is reliable, and that the
assets of the Company are safeguarded.
The risk management process and systems of internal
control are designed to manage rather than eliminate
the risk of failure to achieve the Company’s objectives. It
should be recognised that such systems can only provide
reasonable, not absolute, assurance against material
misstatement or loss.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
69
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2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The Directors have carried out a review of the
effectiveness of the systems of internal control as they
have operated over the period and up to the date of
approval of the annual report and financial statements.
There were no matters arising from this review that
required further investigation and no significant failings or
weaknesses were identified. The internal control systems
do not eliminate risk and can only provide reasonable
assurance against misstatement or loss.
Internal Control Assessment Process
Robust risk assessments and reviews of internal controls
are undertaken regularly in the context of the Company’s
overall investment objective.
The following are the key internal controls which the
Company has in place:
a risk register which identifies key and emerging risks
and the controls in place to mitigate those risks (this
register is maintained by the Investment Adviser subject
to oversight of the Audit Committee);
a procedure to monitor the compliance status of the
Company to ensure that it can continue to be approved
as a REIT;
the Investment Adviser and the Administrator prepare
forecasts and management accounts which allow the
Board to assess performance; and
the controls employed by the Investment Adviser and
other third-party service providers, are periodically
reviewed by the Audit Committee; and there are agreed
and defined investment criteria, specified levels of
authority and exposure limits in relation to investments,
leverage and payments.
The risks of any failure of internal controls and impact of
such risks are identified in the risk register, which is regularly
reviewed by the Board, through the Audit Committee.
Taking into account the review of the Group’s principal
and emerging risks, and its knowledge of the business,
the Audit Committee has reviewed and approved any
statements included in the annual report concerning
internal controls (including the financial reporting process
for the entities included in the consolidation as a whole) and
risk management and has determined that the effectiveness
of the internal controls was satisfactory. The principal and
emerging risks and uncertainties identified from the risk
register can be found on pages 48 to 51.
Investment Adviser
The Company and the AIFM appointed Sigma PRS as the
Investment Adviser in May 2017. Sigma PRS is responsible
for the management of the assets of the Company and
advising the Company and the AIFM on a day-to-day basis
in respect of the Company’s Investment Policy. The IA
is part of the Sigma Capital Group, a leading provider of
PRS properties in the UK. As a wholly owned subsidiary of
Sigma, the IA benefits from the extensive experience and
expertise of the Sigma with access to its PRS property
platform to source investment opportunities that meet the
investment objectives of the Company, management of all
properties within the portfolio, and providing marketing and
investor relations services to the Company.
During the prior year an extension to the original Investment
Advisory Agreement (“
IAA
”) was agreed. The initial IAA
signed on 3 May 2017 and provided for an initial minimum
contracted term of five years to 31 May 2022, being the
fifth anniversary of the initial admission of the Company’s
shares to trading on the Specialist Fund Segment of the
Main Market of the London Stock Exchange, with a one
year notice period thereafter. Under the new agreement, the
contract term has been extended to 31 December 2025,
with a one year notice period thereafter.
The agreement with the IA is terminable on not less than
12 months’ notice by either party, such notice not to
expire earlier than 31 December 2026. The performance
of the Investment Adviser has been reviewed on an
ongoing basis throughout the period by the Board at its
quarterly meetings. The Board considers a number of
factors including investment performance, the skills and
experience of key staff and the capability and resources
of the IA to deliver satisfactory performance for the
Company in accordance with its Investment Objective.
The Board is satisfied with the performance of the IA
and considers its continued appointment on the terms
agreed to be in the best interests of the Company and its
shareholders as a whole.
Annual report and financial statements
The Directors have responsibility for preparing the annual
report and financial statements. Each of the Directors
considers that, taken as a whole, the annual report and
financial statements are fair, balanced and understandable
and provide the information necessary for shareholders to
assess the Group’s position and performance, business
model and strategy.
Composition
The Board consists of a Non-executive Chairman and four
Non-executive Directors, all of whom were considered
independent on, and since their appointment. All of the
Directors are independent of the Investment Adviser and
the AIFM.
Steve Smith is the Chairman of the Company. The
Chairman is responsible for leadership and oversight of
the Board to ensure that it functions effectively. Steve
ensures that accurate, timely and clear information is
received and sufficient time is given in meetings to review
all agenda items thoroughly. He promotes constructive
debate and facilitates a supportive, co-operative and open
environment between the IA and the Directors. He is also
responsible for ensuring that the Company’s obligations to
its shareholders are understood and met. The Chairman
is deemed by his fellow independent Board members
to be independent in character and judgement and free
of any conflicts of interest. He considers himself to have
sufficient time to spend on the affairs of the Company.
The Chairman has no significant commitments other than
those disclosed in his biography on page 57.
The Non-executive Directors hold, or have held, senior
positions in industry and commerce and contribute a wide
range of skills, experience and objective perspective to the
Board. Through the Board committees, the Non-executive
Directors bring focus and independence to strategy,
governance, internal controls and risk management.
During the year, the Board was satisfied that all Directors
were able to commit sufficient time to discharge their
responsibilities effectively having given due consideration to
the Directors’ external appointments. The Directors were
advised on appointment of the expected time required to
fulfil their roles and have confirmed that they remain able
to make that commitment. All material changes in any
Director’s commitments outside the Group are required to
be, and have been, disclosed prior to the acceptance of
any such appointment.
Directors are selected and appointed by the Board as a
whole. There is no separate nomination committee as
the Board is considered small relative to listed trading
companies. All Directors are therefore responsible for
reviewing the size, structure and skills of the Board and
considering whether any changes are required or new
appointments are necessary to meet the requirements of
the Company’s succession plan or to maintain a balanced
Board.
In accordance with the Articles of Association, every
person appointed as a Director during the course of the
year must stand for re-election at the next Annual General
Meeting (“
AGM
”). The Board follows the revised AIC Code
of Corporate Governance that applies to financial periods
commencing after 1 January 2019 and requires that all
Directors will stand for re-election annually and that all
Directors will not serve for a period of more than nine years
in accordance with the UK Code.
The Board has also considered and developed a
succession plan both for the long-term and short-term in
the event of any unforeseen change in circumstances in
respect of the individual board members.
Director
Attendance*
Date of Appointment
Length of Service at
30 June 2022
Steve Smith
9/9
24 April 2017
5 years
David Steffan Francis
9/9
24 April 2017
5 years
Roderick MacRae
9/9
24 April 2017
5 years
Geeta Nanda
7/9
24 March 2021
1 year
Jim Prower
9/9
20 May 2019
3 years
The Board has a reasonable expectation that the Group and
the Company will be able to continue in operation and meet
its liabilities as they fall due over the next twelve months
from the date of this report. The going concern and viability
statements of the Group are set out on pages 62 to 63.
Board membership and meeting attendance
During the year to 30 June 2022, the number of scheduled
Board meetings attended by each Director was as follows:
*Number of scheduled meetings attended/maximum number of meetings that the Director could have attended.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT (Cont.)
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
71
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THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
review of quarterly management accounts
review of the Company’s share price rating,
performance and trading and the Group’s NAV
performance
analysis of the Company’s shareholder register
review of corporate governance compliance, Group
subsidiary activity and Depositary report
The IA attends the Board meetings. Representatives from
the AIFM and the Company’s other advisers are also
invited to attend Board meetings from time to time.
Performance Evaluation
The Directors recognise that the evaluation process
is a significant opportunity to review the practices
and performance of the Board, its committees and its
individual Directors, and to implement actions to improve
the Board’s focus and effectiveness which contribute to
the Group’s success.
The Board has undertaken an internal performance
evaluation designed to assess the strengths and
effectiveness of the Board and its committees. The
evaluation considered (amongst other things) the
composition, balance and effectiveness of the Board, the
quality of management information, the independence
and the overall performance of the Board and its
Committees.
Having conducted the evaluation, the Board considers
that it has performed effectively and that it demonstrates
a good balance of skills, performance and knowledge.
The Board is also satisfied that the Chairman remains
independent of the IA and the AIFM and has exhibited
a good leadership style, promoting effective decision-
making, constructive debate and ensuring the Board
functions well as a unit. Whilst the Board recognises
it could be more diverse, it does not consider it is in
the best interests of shareholders to force diversity by
imposing fixed criteria or quotas. The Board will continue
to make appointments based on merit, having regard
to a number of factors including gender, ethnicity, skills
and experience. In identifying suitable candidates to
fill Board vacancies, the Board uses the services of
external advisers to facilitate the search. In relation to
the appointment of Geeta Nanda during the prior year,
the Board appointed the Lygon Group, an independent
executive search and board consulting partnership
providing services to quoted and private equity backed
firms. The Board confirmed the independence of Lygon
Group prior to their appointment. The Board will continue
to monitor and encourage diversity.
Diversity Policy
The Board believes that a diverse and inclusive culture
is essential to the long-term success of the company
allowing us to respond to our diverse customer base. At
the Board we set the tone for diversity and inclusion and
our culture, and treat everyone with dignity, respect and
fairness, regardless of protected characteristics such as
disability, religion or belief, sexual orientation or any other
factors.
The Board supports the recommendations of the
Hampton-Alexander and Parker Reviews and believes
that diversity of gender, social and ethnic backgrounds,
cognitive and personal attributes, contribute to a more
effective and objective decision-making process in the
boardroom.
The Board agrees with the principles of the new Listing
Rules LR 9.8.6R(9) and LR 14.3.33R(1). The Board has
fulfilled the target to have at least one member from a
minority ethnic background. The Board is small in size
with five members, one of whom is female, constituting
20% female representation rather than the targeted 40%.
Given the Company is an externally managed investment
company, and does not have the roles of CEO, CFO or
senior independent director, the Board is not required to
report against the target that at least one of the senior
board positions is held by a woman. The Board monitors
the balance of skills, knowledge, experience and diversity
on the Board and leads succession planning.
The Directors remain committed to taking steps to
increasing both the diversity of the Board and meeting
all of the targets set out in the Listing Rules. The Board
have made progress towards compliance with the
recommendations as set out above and expect to be
compliant with the relevant targets by the end of 2023.
The Board will formally report on its progress against
these targets in the Company’s 2023 Annual Report.
All Board appointments are made on merit and take
into consideration the recognised benefits of all types of
diversity.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT (Cont.)
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT (Cont.)
Remuneration
Given that the Company has no executive Directors
or other employees, the Board does not consider
it necessary to establish a separate remuneration
committee. The Board takes responsibility for reviewing
the levels of remuneration set.
Board Committees
The Board has established a Management Engagement
Committee and an Audit Committee.
The Audit Committee meets at least twice a year and
reviews the scope and results of the external audit, its
cost effectiveness and the independence and objectivity
of the external Auditors, including the provision of non-
audit services. The Audit Committee comprises 4 of the
Non-executive Directors given the size of the Board and to
benefit from the broad range of financial, commercial and
property sector experience which enables them to provide
better oversight of financial and risk matters. Rod MacRae
is Chairman of the Audit Committee. Further details about
the Audit Committee can be found on pages 74 to 76.
The Management Engagement Committee meets at least
twice a year and keeps the terms of engagement with the
AIFM and Investment Adviser under review and examines
the effectiveness of the Company’s internal control
systems and the performance of the AIFM, Investment
Adviser, Administrator, Depositary, Company Secretary,
valuer and other service providers. Other than signing
a new Investment Adviser Agreement that included a
reduction in the Investment Adviser’s fee calculation,
there were no other changes to the terms of these
engagements. The Management Engagement Committee
comprises the whole board given the size of the Board
with each member independent of the AIFM and the
Investment Adviser. The Management Engagement
Committee receives reports and analysis from each of
the Investment Adviser and AIFM and reviews these,
making recommendations for change or requests for
additional information where appropriate to ensure
ongoing performance under the terms of their respective
contractual arrangements. Steve Smith is the Chairman of
the Management Engagement Committee. Further details
about the Management Engagement Committee can be
found on page 78.
The Committees’ delegated responsibilities are clearly
defined in formal terms of reference, which are available
on the Company’s website.
Board Meetings
During a full financial period, the Board meet formally on
a quarterly basis with additional meetings arranged as
necessary. There were six meetings during the year. The
additional meetings in the year were in connection with
the approval of the 2021 Annual Report and Financial
Statements, and the debt facilities with both Lloyds
Banking Group / RBS and Barclays.
At each Board meeting, the Directors follow a formal
agenda which is set by the Chair, and the papers are
circulated in advance of the meeting by the Company
Secretary to ensure that the Directors receive accurate,
clear and timely information to help them to discharge
their duties. For this purpose, the Board receives periodic
reports from the AIFM and the Investment Adviser
detailing the performance of the Group. The primary focus
at the meetings are a review of investment opportunities,
investment performance and associated matters such
as financial returns, profitability, gearing, asset allocation,
level of the share price discount or premium, marketing
and investor relations and industry issues.
Discussions of the Board
During the year, the Board spent time discussing the
following items:
health and safety
investment policy and objectives
the approval of debt facilities with Barclays
the Group’s corporate structure
the Group’s communication strategy
the key performance indicators by which the Group
measures success
updates on relevant government or regulatory
developments
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
73
72
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The Board considered emergency and long-term
succession planning arrangements and a formal
succession plan was agreed.
Health and safety
Health and safety is of prime importance to the Group, and
is considered equally with all other business management
activities to ensure protection of stakeholders be they
tenants, advisers, suppliers, visitors or others. The Board
regularly discusses health and safety issues with the
Investment Adviser. The Group is committed to fostering
the highest standards in health and safety as it believes
that all unsafe acts and unsafe conditions are preventable.
All our stakeholders have a responsibility to support the
aim of ensuring a secure and safe environment, and all our
stakeholders are tasked with responsibility for achieving
this commitment.
Transparency
The Company aims to be transparent, and to ensure
that it communicates with its shareholders and
other stakeholders in a manner that enhances their
understanding of its business. The Company engages
Sigma PRS to maintain accounting documentation that
clearly identifies the true nature of all business transactions,
assets and liabilities, in line with the relevant regulatory,
reporting, accounting, and legal requirements. No record
or entry is knowingly false, distorted, incomplete, or
suppressed. All reporting is fair, reasonable, complete
and in compliance in all material respects with stated
accounting policies and procedures.
The Company does not knowingly misstate or
misrepresent management information for any reason, and
the Company expects the same to apply to its suppliers.
The Company may be required to make statements or
provide reports to regulatory bodies, government agencies
or other government departments, as well as to the media.
The Company ensures that such statements or reports
are correct, timely, and not misleading, and that they are
delivered through the appropriate channels. Through its
website the Company provides its Annual Report, other
statements and any appropriate information to enable
shareholders and stakeholders to assess the performance
of its business. The Company complies with the applicable
laws and regulations concerning the disclosure of
information relating to the Company.
Shareholder engagement
The Group encourages active interest and contribution
from both its institutional and private investors and
responds promptly to all queries received by the Group.
The Board recognises the importance of maintaining
strong relationships with shareholders, and the Directors
place a great deal of importance on understanding
shareholder sentiment.
The Investment Adviser and the Group’s financial advisers
regularly meet and receive calls from shareholders and
analysts in order to understand their views, and the
Group’s broker speaks to shareholders regularly, ensuring
shareholder views are communicated to the Board. The
Board takes responsibility for, and has a direct involvement
in, the content of communications regarding major
corporate issues.
Shareholders are encouraged to attend and vote at the
Company’s shareholder meetings, so they can discuss
governance and strategy and the Board can enhance its
understanding of shareholder views. The Board attends
the Company’s shareholder meetings to answer any
shareholder questions and the Chairman makes himself
available, as necessary, outside of these meetings to speak
to shareholders.
The Board believes that sufficient information is available
to shareholders to understand the balance of risk and
reward to which they are exposed by holding shares in
the Company. The publication of the Key Information
Document on the Company’s website, which is prepared
by the AIFM in conjunction with the Investment Adviser,
provides the nature and key risks of the Company to
shareholders. The Board is committed to providing
investors with regular announcements of significant events
affecting the Group and all investor documentation is
available on the Group’s website www.theprsreit.com.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT (Cont.)
Culture
The Directors are aware that establishing and maintaining
a healthy culture amongst the Board and in its interaction
with the Investment Adviser, other service providers,
shareholders and other stakeholders will support the
delivery of its purpose, values and investment strategy.
The Board seeks to promote a culture of openness,
transparency and integrity through ongoing dialogue and
engagement with its stakeholders.
The Group has a number of policies and procedures
in place to assist with maintaining a culture of good
governance including those relating to diversity, Directors’
conflicts of interest and Directors’ dealings in the
Company’s shares. The Board assesses and monitors
compliance with these policies as well as the general
culture of the Board regularly through Board meetings
and in particular during the annual evaluation process.
These policies and behaviours are designed to align the
culture with the long term strategy of the Group. The Board
seeks to appoint the best possible service providers and
evaluates their service on a regular basis.
The Board considers the culture of the IA and other service
providers, including their policies, practices and behaviour,
through regular reporting from these stakeholders and in
particular during the annual review of the performance and
continuing appointment of all service providers.
Conflicts of interest
The Group operates a conflicts of interest policy that has
been approved by the Board and sets out the approach
to be adopted and procedures to be followed where a
Director, or such other persons to whom the Board has
determined the policy applies, has an interest which
conflicts, or potentially may conflict, with the interests of
the Group. Under the policy and the Company’s Articles
of Association, the Board may authorise potential conflicts
that may arise, subject to imposing limits or conditions
when giving authorisation if this is appropriate.
The Group reserves the right to withhold information
relating to or relevant to a conflict matter from the Director
concerned, and/or to exclude the Director from any Board
information, discussions or decisions which may or will
relate to that matter of conflict, or where the Chairman
considers that it would be inappropriate for a Director to
take part in such discussion or decision, or receive such
information. Procedures have been established to monitor
actual and potential conflicts of interest on a regular basis
and the Board is satisfied that these procedures are
working effectively.
The AIFM and IA maintain a policy to avoid and manage
any conflicts of interest that may arise between themselves
and the Group. The IA has established a clear and robust
framework to ensure that any conflicts of interest are
appropriately governed that includes:
the IA’s obligation to provide the Group with a right of
first refusal on every investment opportunity meeting
the Group’s investment policy, subject to availability of
funding, with the intention that the Group undertakes
not less than two-thirds of all such opportunities with the
balance being developed by the Investment Adviser and
forward sold to the Group
the IA’s obligation to sell all stabilised investment assets
to the Group on pre-agreed terms at a price equal to the
market value determined by an independent valuation
expert
other conflict matters, in particular regarding the value,
quality or other terms relating to the acquisition of assets
by the Group
Professional development
All Directors received a comprehensive and robust
induction programme on appointment to the Board
that covered the IA’s investment approach, the role and
responsibilities of a Director and guidance of corporate
governance and applicable regulatory and legislative
landscape. The Chairman regularly reviews and discusses
the development needs with each Director. Each Director
is fully aware that they should take responsibility for their
own individual development needs and take the necessary
steps to ensure they are wholly informed of regulatory and
business developments.
Succession Planning
The Board has given full consideration to succession
planning to ensure progressive refreshing of the Board,
taking into account the challenges and opportunities
facing the Board and the balance of skills and expertise,
factoring in the benefits of a diverse Board that are
required in the future.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
75
74
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
I am pleased to present the Audit Committee (the
“
Committee
”) report of The PRS REIT plc covering the
financial year ended 30 June 2022.
The Committee, which reports to the Board, has
governance responsibilities to oversee the Company’s
financial reporting processes, which include the risk
management and internal financial controls of the
Investment Adviser.
Committee Membership
During the financial year ended 30 June 2022, the Audit
Committee comprised Roderick MacRae, Jim Prower and
Steffan Francis, who all have a broad range of financial,
commercial and property sector expertise which enables
them to provide oversight of both financial and risk matters.
At our meeting on 10 August 2022, Geeta Nanda was
appointed as a member of the Committee. The Board is
satisfied that the combined knowledge and experience
of its members is such that the Committee discharges its
responsibilities in an effective manner and has competence
relevant to the sector in which it operates.
In addition, the Board is satisfied that at least one member
of the Audit Committee has recent and relevant financial
experience. Roderick MacRae and Jim Prower are both
Chartered Accountants. Roderick has almost 20 years of
experience in the financial services sector and Jim was,
until 2015, Group Finance Director at Argent Group plc, the
UK based property developer.
Meetings
There are at least two scheduled Audit Committee
meetings per any financial period and its quorum is two
members. For the period from 1 July 2021 to 11 October
2022, the Committee has met five times. The attendance at
these meetings was as follows:
Role of the Audit Committee
The principal duties of the Audit Committee are:
Financial reporting
consider the integrity of the interim and full year financial
statements which includes the preliminary results
announcement of the Company;
report to the Board on any significant financial reporting
issues and judgments having regard to any matters
communicated to it by the Auditor; and
as requested by the Board, to review the contents of the
annual report and financial statements and advise the
Board on whether the report and financial statements
provide a true and fair view of the Company’s financial
position as at 30 June 2022 and further provides
shareholders with sufficient information to assess the
financial position of the Company and Group, and
the Group’s performance, investment strategy and
investment objectives.
Risk management and control
review the adequacy of the internal controls and risk
management systems of the Company’s Investment
Adviser; and
report to the Board on the Company’s procedures for
detecting fraud.
External audit
to manage the relationship with the Company’s external
Auditor, including reviewing the Auditor’s remuneration,
independence and performance and making
recommendations to the Board as appropriate;
to review the effectiveness of the external audit process,
taking into consideration relevant UK professional and
regulatory requirements;
to review the policy on the engagement of the Auditor;
and
to safeguard the Auditor’s independence and objectivity.
External property valuation
to review the quality and appropriateness of the half-
yearly and full year external valuations of the Group’s
property portfolio.
Other
review the Committee’s terms of reference and
performance effectiveness.
The Audit Committee reports and makes
recommendations to the Board, after each meeting.
Matters considered by the Audit Committee
At its meetings during the year under review, the Audit
Committee has:
reviewed the internal controls and risk management
systems of the Company;
reviewed the Company’s half-year and full-year financial
results;
agreed the audit plan with the Auditor, including the
agreement of the audit fee;
reviewed the annual valuation reports from the
independent valuation expert, Savills (UK) Limited;
reviewed the provision of non-audit services by the
Auditor;
reviewed the independence of the Auditor;
reviewed the Audit Findings Report and discussed
findings from the audit with the Auditor; and
reviewed the Group’s financial statements and advised
the Board accordingly.
The Company’s principal risks can be found on pages
48 to 51. The Administrator and the IA update the Audit
Committee on changes to accounting policies, risk,
legislation and areas of significant judgement by the IA.
Significant matters considered by the Audit
Committee in the year
Property portfolio valuation
Investment property is held in the financial statements
at fair value. There are independent valuations which
are carried out by a qualified independent valuation
expert. The valuations depend on some data provided
by the Investment Adviser and the independent valuation
expert makes decisions and assumptions on criteria,
some of which are subjective. As the valuation of the
properties within the Group’s portfolio is central to the
Company’s business the Directors consider that the value
of investment properties is a significant issue due to the
magnitude of the total amount, the potential impact on
the movement in value on the reported results and the
subjectivity of the valuation process.
The investment properties are independently valued by
an external valuation expert, Savills (UK) Limited. The
valuations are prepared in accordance with the RICS
Valuation - Global Standards (incorporating the IVSC
International Valuation Standards) effective from 31
January 2021, together, where applicable, with the UK
National Supplement effective 14 January 2019, together
the “Red Book”. The IA has held open discussions with
the valuers throughout the period on the valuation process
to discuss various elements of the property valuations
and the Auditor also has direct access to them as part
of the audit process. Given the audit risks related to the
valuation of the property portfolio, the Auditor engaged its
own independent valuation expert to review the Group’s
valuation. Since the year-end, the Committee has reviewed
the valuation reports and has discussed these reports with
the valuer, the Investment Adviser and the Auditor. The
Audit Committee was satisfied with the valuation reports.
Maintenance of REIT status
The UK REIT regime enables the Group to benefit from
favourable tax treatment. The Audit Committee and Board
monitors the PRS REIT’s compliance status throughout the
year and considers requirements for the maintenance of
the Company’s REIT status.
External audit process
Before the commencement of the audit, the Audit
Committee met with the Auditor, to discuss the scope of
the audit plan. Before completion of the external audit,
the Committee met again with the Auditor to discuss the
findings of the external audit and consider and evaluate
any findings.
True and fair view
After the consideration of the above matters and detailed
review, the Audit Committee was of the opinion that the
annual report and financial statements represent a true
and fair view of the Company as a whole and in addition
provides the information necessary for shareholders
to assess the Company’s performance, strategy and
investment objectives.
AUDIT COMMITTEE REPORT
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT (Cont.)
*
Number of scheduled meetings attended/maximum
number of meetings that the Director could have attended.
** Appointed 10 August 2022.
Director
Attendance *
Rod MacRae (Chairman)
5/5
Steffan Francis
5/5
Jim Prower
5/5
Geeta Nanda**
2/2
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
77
76
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Audit fees and non-audit services
An audit fee of £120,000 has been agreed in respect of
the audit of the Company for the year ended 30 June
2022 (2021: £100,000). The audit fees of the Group for
the period ended 30 June 2022 totalled £234,000 (2021:
£254,000).
The cost of non-audit services provided by the Auditor to
the Company for the financial period ended 30 June 2022
was £20,500 (2021: £69,000) of which £20,500 related
to the agreed upon procedures on the interim financial
statements (2021: £19,500), in the prior year £50,000
related to corporate finance services for the Company’s
migration to the Premium Segment of the Main Market.
To safeguard the external Auditor’s independence and
objectivity there was prior approval of a detailed scope
and no additional safeguards were considered necessary
due to the nature of procedures involved. BDO LLP have
been engaged to advise on taxation compliance matters.
Independence and objectivity of the Auditor
RSM UK Audit LLP (“
RSM
”) were appointed as Auditor to
the Company since IPO on 31 May 2017, during which
time Mr Euan Banks, Partner at RSM, has been the
responsible individual on the audit. No tender for the audit
of the Company has been undertaken. In accordance with
the rules around audit partner rotation, Mr Banks can only
act as engagement partner for a maximum of five years and
will need to rotate off after the year ending 30 June 2022.
In evaluating RSM’s performance, the Audit Committee
considered the effectiveness of the audit process, quality
of delivery, staff expertise, audit fees and the Auditor’s
independence, along with matters raised during the audit.
The Committee received confirmation from RSM that
they maintain appropriate internal safeguards in line with
applicable professional standards. In accordance with
new requirements relating to the appointment of Auditors,
the Company will need to conduct an audit tender no
later than for the accounting period beginning 1 June
2026. Having considered the Auditor’s independence
in respect of the year ended 30 June 2022, the Audit
Committee is satisfied with the Auditor’s performance,
objectivity and independence.
Review of Auditor appointment
Following consideration of the performance of the Auditor,
the service provided during the year and a review of their
independence and objectivity, the Audit Committee has
recommended to the Board the continued appointment of
RSM UK Audit LLP as the Company’s external independent
Auditor.
Internal audit
The Audit Committee has determined that there is not
presently a need for an internal audit function given the
limited size and complexity of the Company and its
business. However, the Committee is keeping this under
review. The Committee will review this position on an
annual basis and make recommendations to the Board as
appropriate.
Rod MacRae
Audit Committee Chairman
10 October 2022
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
79
78
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
MANAGEMENT ENGAGEMENT COMMITTEE REPORT
I am pleased to present the Management Engagement
Committee (the “
Committee
”) report of The PRS REIT plc
covering the financial year ended 30 June 2022.
The Committee, which reports to the Board, has
governance responsibilities to review the Company’s
continuing appointment of the AIFM and Investment
Adviser.
Committee Membership
The Committee comprises Steve Smith as Chairman,
Steffan Francis, Roderick MacRae, Geeta Nanda and Jim
Prower.
Meetings
There is at least one scheduled meeting per any financial
year and its quorum is two members. For the period from 1
July 2021 to 11 October 2022, the Committee met twice.
The attendance at these meetings was as follows:
Role of the Management Engagement
Committee
The Committee is primarily responsible for reviewing the
appropriateness of the continuing appointment of the AIFM
and Investment Adviser, ensuring that the appointments
continue to be in the best interests of shareholders and
that the terms of the AIFM Agreement and Investment
Advisory Agreement remain competitive and sensible for
shareholders.
Matters Considered by the Management
Engagement Committee
At its meetings during the year under review, the
Management Engagement Committee has:
reviewed the performance of the AIFM and Investment
Adviser and satisfied itself that the AIFM Agreement and
Investment Advisory Agreements remain competitive and
sensible for shareholders; and
reviewed the performance of other third-party service
providers and made recommendations to the Board
regarding these.
Review of Service Providers
The Committee reviews the ongoing performance and
continuing appointment of the Company’s key service
providers on an annual basis. The Committee also
considers any variation to the terms of key service
providers’ agreements and reports its findings to the Board.
Continuing Appointment of the AIFM and
Investment Adviser
The Committee has reviewed the continuing appointment
of the AIFM and Investment Adviser and are satisfied
that their appointment remains in the best interests of
shareholders.
Steve Smith
Management Engagement Committee Chairman
10 October 2022
*
Number of scheduled meetings attended/maximum number of
meetings that the Director could have attended.
Director
Attendance*
Steve Smith (Chairman)
2/2
Steffan Francis
2/2
Roderick MacRae
2/2
Geeta Nanda
2/2
Jim Prower
2/2
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
81
80
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The Directors’ Remuneration Policy of the Company is set
by the Board and was approved by shareholders at the
Annual General Meeting held on 15 December 2021. The
policy provisions set out below will apply until they are next
put to shareholders for renewal of that approval, which
must be at intervals of not more than three years, or earlier
if proposals are made to vary the policy. The Directors’
Remuneration Policy is binding and sets the parameters
within which Directors’ remuneration may be set.
The Directors’ Remuneration Policy of the Company
is to pay its Non-executive Directors fees that are
appropriate for the role and the amount of time spent in
discharging their duties, that are broadly in line with those
of comparable real estate investment companies and that
are sufficient to attract and retain suitably qualified and
experienced individuals which therefore supports the long
term strategic objectives of the Group.
The fees paid will be reviewed on an annual basis and
may also be reviewed when new Non-executive Directors
are recruited to the Board. The Directors of the Company
are entitled to such rates of annual fees as the Board,
at its discretion, shall from time to time determine.
The Chairman of the Board and the Audit Committee
Chairman are entitled to receive fees at a higher level than
those of the other Directors, reflecting their additional
duties and responsibilities. Annual fees are pro-rated
where a change takes place during the financial year.
In addition to the annual fee, under the Company’s Articles
of Association, if any Director is requested to perform any
special duties or services outside his or her ordinary duties
as a Director, he or her may be paid such reasonable
additional remuneration as the Board may from time to
time determine.
Directors and Officers liability insurance cover is
maintained by the Company on behalf of the Directors.
Directors are entitled to be paid all expenses properly
incurred in attending Board or shareholder meetings or
otherwise in or with a view to the performance of their
duties.
As all Directors are Non-executive and there are no
employees, the Company does not operate any share
option or other long-term incentive schemes and the
Directors’ fees are not subject to any performance
criteria. No pension or other retirement benefits schemes
are operated by the Company for any of its Directors.
Letters of appointment
No Director has a service contract with the Company.
The Directors are appointed under letters of appointment.
Their appointment and any subsequent termination or
retirement is subject to the Articles of Association. The
Directors’ letters of appointment provide that, upon the
termination of a Director’s appointment, that Director must
resign in writing and all records remain the property of the
Company. A Director’s appointment can be terminated in
accordance with the Articles of Association and without
compensation. There is no notice period specified in the
Articles of Association for the removal of Directors and all
Directors are subject to re-election by shareholders every
year from the date they were last re-elected.
Approach to recruitment remuneration
The remuneration package for any new Chairman or Non-
executive Director will be the same as the prevailing rates
determined on the bases set out above. The Board will
not pay any introductory fee or incentive to any person to
encourage them to become a Director, but may pay the
fees of search and recruitment specialists in connection
with the appointment of any new Non-executive Director.
Views of shareholders
Any views expressed by shareholders on the fees being
paid to Directors are taken into consideration by the
Board when reviewing levels of remuneration. No views
have been expressed to date.
Voting at the AGM
The Directors’ remuneration report for the year ended
30 June 2021 and the Directors’ remuneration policy
were approved by shareholders at the AGM held on 15
December 2021. The results taken on a poll were as
follows:
Directors’ Remuneration Report
Directors’ Remuneration Policy
DIRECTORS’ REMUNERATION POLICY
Component
Director
Annual Fee
£’000
Purpose of Remuneration
Annual fee
Chairman
45
Commitment as Chairman of a public
company
Annual fee
Non-executive Directors
30
Commitment as Non-executive Directors
of a public company
Additional fee
Chairman of the Audit
Committee
5
For additional responsibilities and time
commitment
Additional fee
All Directors
Discretionary
For extra or special services performed
in their role as a Director
Expenses
All Directors
n/a
Reimbursement of expenses incurred in
the performance of duties as a Director
Directors’ Remuneration Components
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION POLICY (Cont.)
For – number of votes cast
403,974,951
99.96%
Against - number of votes cast
152,333
0.04%
Total votes cast
404,133,484
Number of votes withheld
6,200
For – number of votes cast
403,938,951
99.95%
Against - number of votes cast
188,333
0.05%
Total votes cast
404,133,484
Number of votes withheld
6,200
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
83
82
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The Board presents its Directors’ Remuneration Report in
respect of the year ended 30 June 2022. The Board has
prepared this report in accordance with the Large and
Medium-Sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2008 (as amended).
An ordinary resolution for the approval of the Directors’
Remuneration Report will be put to shareholders at the
forthcoming AGM of the Company. This is an advisory
vote only.
The law requires the Company’s Auditor to audit certain
of the disclosures required. Where disclosures have been
audited, they are indicated as such. The Auditor’s opinion
is included in the Auditor’s Report on pages 86 to 93.
Annual Statement from the Chairman
I am pleased to present the Directors’ Remuneration
Report for the financial year ended 30 June 2022.
As the Board has no executive Directors, it does
not consider it necessary to establish a separate
Remuneration Committee. The Board as a whole
is therefore responsible for decisions regarding
remuneration. The Board consists entirely of Non-
executive Directors and the Company has no employees.
Companies are required to seek shareholder approval of
the Remuneration Report each year and of the Directors’
Remuneration Policy on at least a three-yearly basis. The
vote on the Directors’ Remuneration Report is an advisory
vote, whilst the Directors’ Remuneration Policy is subject
to a binding vote. Resolutions to approve the Directors’
Remuneration Report will be put before shareholders
at the forthcoming AGM of the Company. During the
next financial year, it is expected that there will be no
significant change in the implementation of the Directors’
Remuneration Policy.
The Directors are remunerated for their services at such
rate as the Board shall from time to time determine. The
Board has set three levels of fees: one for the Chairman,
one for other Directors, and an additional fee that is paid
to the Director who chairs the Audit Committee. Fees
are reviewed annually in accordance with the Directors’
Remuneration Policy. The fee for any new Director
appointed will be determined on the same basis.
The Directors’ fees have been set at a rate of £45,000
per annum in respect of the Chairman and £30,000 per
annum in respect of the other Directors, with an additional
£5,000 to the Chairman of the Audit Committee. No
person provided advice or services to the Board in respect
of the consideration of the Directors’ remuneration.
Following a review of Directors’ fees subsequent to the
year-end, no changes are currently being proposed. There
were no other payments for extra services in the period
ended 30 June 2022 (2021: £nil).
Directors’ fees for the period (audited)
The Directors who served during the year and prior period
received the following total fixed fee remuneration:
During the year and prior year, no taxable benefits were
received by any of the Directors.
The amounts paid to the Directors were for services as
Non-executive Directors.
Under the Company’s Articles of Association, the total
aggregate remuneration and benefits in kind of the
Directors of the Company is subject to a maximum of
£300,000 in any financial year. Any change to this would
require shareholder approval.
Relative importance of spending on pay
Total shareholder return
The graph below shows the total shareholder return (as
required by company law) of the Company’s Ordinary
Shares relative to a return on a hypothetical holding
over the same period in the FTSE 250, FTSE All Share
REITS and FTSE 350 REITS. Total shareholder return
is the measure of returns provided by a Company to
shareholders reflecting share price movements and
assuming reinvestment of dividends.
DIRECTORS’ REMUNERATION REPORT
Year ended
30 June 2022
£’000
Year ended
30 June 2021
£’000
% change
Steve Smith (Chairman)
45
45
-
Steffan Francis
30
30
-
Rod MacRae (Audit Committee Chairman)
35
35
-
Geeta Nanda (appointed 24 March 2021)
30
8
n/a
Jim Prower
30
30
-
170
148
Year ended
30 June 2022
£’000
Year ended
30 June 2021
£’000
Directors’ aggregate remuneration
170
148
Dividends paid to all shareholders*
21,430
24,764
*includes all dividends paid in relation to the year ended 30 June 2022 and year ended 30 June 2021
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT (Cont.)
PRS REIT
FTSE 250
FTSE ALL SHARE REITS
FTSE 350 REITS
01/07/2021
12/08/2021
24/09/2021
05/11/2021
17/12/2021
02/02/2022
16/03/2022
29/04/2022
15/06/2022
800
850
900
950
1,000
1,050
1,100
1,150
1,200
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
85
84
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Loss of office
The Directors do not have service contracts with the
Company but are engaged under letters of appointment
under which there is no entitlement to compensation for
loss of office.
Directors’ interests (Audited)
There is no requirement under the Company’s Articles of
Association or the terms of their appointment for Directors
to hold shares in the Company.
As at 30 June 2022, the following Directors (including
their connected persons) had beneficial interests in the
following number of shares in the Company:
There have been no changes to Directors’ share interests
between 30 June 2022 and the date of this report.
The shareholdings of the Directors are not significant and
therefore do not compromise their independence.
None of the Directors or any person connected with them
has a material interest in the Company’s transactions,
arrangements or agreements during the year.
Statement of voting at general meetings
The Company is committed to ongoing shareholder
dialogue and takes an active interest in voting outcomes.
Where there are substantial votes against resolutions in
relation to Directors’ remuneration, the Company will seek
the reasons for any such vote and will detail any resulting
actions in an announcement.
The Company’s forthcoming AGM will be an opportunity
for shareholders to vote on the Directors’ Remuneration
Policy and the Directors’ Remuneration Report.
Approval
The Directors’ Remuneration Report was approved by the
Board on 10 October 2022.
On behalf of the Board.
Steve Smith
Chairman
Ordinary shares 2022
Ordinary shares 2021
Steve Smith (Chairman)
1 55,000
80,000
Steffan Francis
1 05,000
80,000
Rod MacRae (Audit Committee Chairman)
100,000
100,000
Jim Prower
52,000
22,000
Geeta Nanda
-
-
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT (Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
87
86
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
In our opinion:
the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs
as at 30 June 2022 and of the group’s profit for the
year then ended;
the group financial statements have been properly
prepared in accordance with UK-adopted International
Accounting Standards;
the Parent Company financial statements have been
properly prepared in accordance with UK-adopted
International Accounting Standards and as applied in
accordance with the Companies Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report.
We are independent of the group and parent company
in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to
listed public interest entities and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our
professional judgment, were of most significance in our
audit of the Group financial statements of the current
period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we
identified, including those which had the greatest effect
on the overall audit strategy, the allocation of resources
in the audit and directing the efforts of the engagement
team. These matters were addressed in the context of
our audit of the Group financial statements as a whole,
and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
We have determined that there are no key audit matters
to communicate in our report in relation to the Parent
Company.
Independent Auditor’s
Report to the members
of The PRS REIT plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
(Cont.)
Opinion
We have audited the financial statements of The PRS
REIT plc (the “
Parent Company
”) and its subsidiaries
(the “
group
”) for the year ended 30 June 2022 which
comprise the Consolidated Statement of Comprehensive
Income, Consolidated and Company Statement of
Financial Position, Consolidated and Company Statement
of Changes in Equity, Consolidated and Company
Statement of Cash Flows and notes to the financial
statements, including significant accounting policies. The
financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable
law and UK-adopted International Accounting Standards.
The financial reporting framework that has been applied
in the preparation of the Parent Company financial
statements is applicable law and UK-adopted International
Accounting Standards and, as regards the Parent
Company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Summary of our audit approach
Key audit matters
Group
- Valuation of Investment Property
Parent Company
- No key audit matters
Materiality
Group
- Overall materiality: £10,100,000 (2021: £8,740,000)
- Performance materiality: £7,620,000 (2021: £6,550,000)
Parent Company
- Overall materiality: £5,580,000 (2021: £7,830,000)
- Performance materiality: £4,180,000 (2021: £5,870,000)
Scope
Our audit procedures covered 100% of group rental income, group profit,
and group total assets.
89
88
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing
and extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and on
the financial statements, could reasonably influence the economic decisions of the users we take into account the
qualitative nature and the size of the misstatements. Based on our professional judgement, we determined materiality
as follows:
An overview of the scope of our audit
The group consists of 82 active components, all of which are based in the UK.
The coverage achieved by our audit procedures was:
Full scope statutory audits were performed on 36 components, including 3 consolidations. The remaining 46 entities
have taken subsidiary exemptions from audit and are audited through 3 of these consolidations.
Investment property valuations
Key audit matter description
This is detailed in the Audit Committee report on pages
74 to 76; the significant accounting judgements and
estimates on page 109; significant accounting policies on
page 105 and notes to the financial statements on pages
122 to 123.
The Group owns a portfolio of investment properties
which includes residential properties only. The total value
of the portfolio at 30 June 2022 was £961m. The Group
either acquires completed sites or sites that are ready to
develop with full planning consent having been granted,
the latter are described as investment properties under
construction and have been valued at fair value. At 30
June 2022 these were valued at £120m. The properties
are predominately located in the north of England and the
Midlands.
The Directors’ assessment of the value of the investment
properties at year end date is considered a key audit
matter due to the magnitude of the total amount, the
potential impact of the movement in value on the reported
results, and the subjectivity and complexity of the
valuation process.
The valuation is carried out by external valuers, Savills, in
line with the methodology set out in note 18 on pages 122
to 123.
How the matter was addressed in the audit
We audited the independent valuations of investment
properties to check the valuations are appropriate and
correctly recorded in the financial statements.
We assessed the external valuer’s qualifications and
expertise and considered their terms of engagement; we
also considered their objectivity and any other existing
relationships with the Group.
We engaged a property valuation specialist as our auditor
expert to assist in the audit of the valuations. They
provided us with sector specific data to assist in our
challenge of the assumptions applied by the valuer.
We selected a sample of 10 sites that were either
individually material or had valuation or yield movements
that were higher or lower than expected from our overall
review of the portfolio and requested the auditor’s expert
complete a detailed valuation assessment.
We discussed with the Investment Adviser and the
external valuer the overall movement in property values
giving consideration to whether properties were fully
developed or under construction and recognising the
similarity of tenant profiles. We also specifically considered
any properties where the fair value was not consistent
with overall movements of the entire portfolio, to gain an
understanding of why these exceptions were reasonable.
We reviewed and challenged the methodologies used
with the Investment Adviser, the external valuer, and the
auditor’s expert to check these were consistent where
appropriate.
For assets under construction, we assessed the stage of
completion by reference to the stage of works completed
to date and the amount still to be completed to the
underlying documentation and forecasts.
We tested inputs provided by the Investment Adviser
to the external valuer to check these reflected the key
observable inputs for each property and considered
whether market data for a sample of properties was
consistent with the valuation report. We reviewed and
agreed these to the disclosures set out in these accounts.
Key observations
We concluded that the fair values of the investment
properties being adopted by the Group were acceptable.
Group
Parent company
Overall materiality
£10,100,000 (2021: £8,740,000)
£5,580,000 (2021: £7,830,000)
Basis for determining
overall materiality
0.99% of Total Assets
1.32% of Total Assets
Rationale for benchmark
applied
Total assets used as a benchmark as
we assessed that the shareholders will
be primarily interested in the growth in
the value of property, represented by
the property valuation.
Total assets used as a benchmark as we
assessed that the shareholders will be
primarily interested in the growth in the
value of property, represented by the
investment held by the Parent Company
in its property holding subsidiaries.
Performance materiality
£7,620,000 (2021: £6,550,000)
£4,180,000 (2021: £5,870,000)
Basis for determining
performance materiality
75% of overall materiality
75% of overall materiality
Reporting materiality
levels for transactions
where materiality levels
are lower than overall
materiality
The Income Statement was tested
to a lower Specific Materiality figure
of £2.1m (2021: £1.3m) to reflect that
the income statement values are
significantly lower than those in the
Statement of Financial Position.
The Income Statement was tested to a
lower Specific Materiality figure of £2.1m
(2021: £1.3m) to reflect that the income
statement values are significantly lower
than those in the Statement of Financial
Position.
Reporting of
misstatements to the
Audit Committee
Misstatements in excess of £50,000 (or
£10,000 for Related Party transactions)
and misstatements below that
threshold that, in our view, warranted
reporting on qualitative grounds.
Misstatements in excess of £50,000 (or
£10,000 for Related Party transactions)
and misstatements below that threshold
that, in our view, warranted reporting on
qualitative grounds.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
(Cont.)
91
90
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Conclusions relating to going concern
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate. Our evaluation of the Directors’ assessment
of the Group’s and Parent Company’s ability to continue to
adopt the going concern basis of accounting included:
Reviewing management’s going concern assessment
paper covering the 12-month period from date of
approval of the financial statements
Checking the mathematical accuracy of the underlying
financial model
Assessing management’s sensitivity analysis, including
considering the impact on bank loan covenants
Reviewing the appropriateness of going concern
disclosures within the financial statements
We concluded that the Directors’ assessment was
appropriate in the circumstances and have no key
observations to make.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s or the Parent Company’s
ability to continue as a going concern for a period of at
least twelve months from when the financial statements
are authorised for issue.
In relation to the entities reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the
relevant sections of this report.
Other information
The other information comprises the information included
in the annual report other than the financial statements
and our auditor’s report thereon. The Directors are
responsible for the other information contained within the
annual report. Our opinion on the financial statements
does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether the other information
is materially inconsistent with the financial statements
or our knowledge obtained in the course of the audit
or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the
course of the audit:
the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report
by exception
In the light of the knowledge and understanding of the
Group and the Parent Company and their environment
obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the
Directors’ Report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by
the parent company, or returns adequate for our audit
have not been received from branches not visited by
us; or
the parent company financial statements and the part
of the directors’ remuneration report to be audited
are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified
by law are not made; or
we have not received all the information and
explanations we require for our audit.
Corporate governance statement
We have reviewed the Directors’ statement in relation to
going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the parent
company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review by
the Listing Rules.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit:
Directors’ statement with regards the appropriateness
of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 62;
Directors’ explanation as to its assessment of the
group’s prospects, the period this assessment covers
and why this period is appropriate set out on pages 62
and 63;
Director’s statement on whether it has a reasonable
expectation that the group will be able to continue in
operation and meets its liabilities set out on page 62;
Directors’ statement on fair, balanced and
understandable set out on page 68;
Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out
on page 66;
The section of the annual report that describes the
review of effectiveness of risk management and
internal control systems set out on page 68; and,
The section describing the work of the audit committee
set out on pages 74 to 76.
Responsibilities of directors
As explained more fully in the Directors’ responsibilities
statement set out on page 64, the directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view,
and for such internal control as the directors determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or
the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in
the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the
basis of these financial statements.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
(Cont.)
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
(Cont.)
93
92
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
The extent to which the audit was considered
capable of detecting irregularities, including
fraud
Irregularities are instances of non-compliance with laws
and regulations. The objectives of our audit are to obtain
sufficient appropriate audit evidence regarding compliance
with laws and regulations that have a direct effect on the
determination of material amounts and disclosures in the
financial statements, to perform audit procedures to help
identify instances of non-compliance with other laws and
regulations that may have a material effect on the financial
statements, and to respond appropriately to identified
or suspected non-compliance with laws and regulations
identified during the audit.
In relation to fraud, the objectives of our audit are to
identify and assess the risk of material misstatement of
the financial statements due to fraud, to obtain sufficient
appropriate audit evidence regarding the assessed risks
of material misstatement due to fraud through designing
and implementing appropriate responses and to respond
appropriately to fraud or suspected fraud identified during
the audit.
However, it is the primary responsibility of management,
with the oversight of those charged with governance,
to ensure that the entity’s operations are conducted in
accordance with the provisions of laws and regulations
and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement
in respect of irregularities, including fraud, the group audit
engagement team:
obtained an understanding of the nature of the
industry and sector, including the legal and regulatory
frameworks that the group and parent company
operate in and how the group and parent company are
complying with the legal and regulatory frameworks;
inquired of management, and those charged with
governance, about their own identification and
assessment of the risks of irregularities, including any
known actual, suspected or alleged instances of fraud;
discussed matters about non-compliance with laws
and regulations and how fraud might occur including
assessment of how and where the financial statements
may be susceptible to fraud having obtained an
understanding of the effectiveness of the control
environment.
Legislation / Regulation
Additional audit procedures performed by the Group audit engagement
team included:
IFRS/UK-adopted IAS
and Companies Act 2006
Review of the financial statement disclosures and testing to supporting
documentation;
Completion of disclosure checklists to identify areas of non-compliance.
REIT legislation
Review of the REIT status assessment prepared by management.
Inspection of advice received from external tax advisors.
Input from a REIT specialist was obtained regarding the calculation of property
income profits and the ability to calculate the Property Income Distribution
(“
PID
”) on a cumulative basis.
In addition to investment property valuations which is included above as a key audit matter, the area that we identified
as being most susceptible due to fraud was:
The most significant laws and regulations were determined as follows:
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Risk
Audit procedures performed by the audit engagement team:
Management override of
controls
Testing the appropriateness of journal entries and other adjustments;
Assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and
Evaluating the business rationale of any significant transactions that are unusual
or outside the normal course of business.
Other matters which we are required to address
Following the recommendation of the audit committee,
we were appointed by the Board of Directors on 25 April
2017 to audit the financial statements for the year ending
30 June 2018 and subsequent financial periods.
The period of total uninterrupted consecutive
appointments is five years, covering the years ending 30
June 2018 to 30 June 2022.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the Parent
Company and we remain independent of the Group and
the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report
to the Audit Committee, in accordance with ISAs (UK).
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
In due course, as required by the Financial Conduct
Authority (FCA) Disclosure Guidance and Transparency
Rule (DTR) 4.1.14R, these financial statements will form
part of the European Single Electronic Format (ESEF)
prepared Annual Financial Report filed on the National
Storage Mechanism of the UK FCA in accordance with
the ESEF Regulatory Technical Standard (“
ESEF RTS
”).
This auditor’s report provides no assurance over whether
the annual financial report has been prepared using the
single electronic format specified in the ESEF RT.
Euan Banks (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory
Auditor
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
10 October 2022
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
(Cont.)
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
(Cont.)
95
94
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2022
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.
Financial Statements
Note
30 June
2022
£’000
30 June
2021
£’000
Rental Income
6
Non-recoverable property costs
7
(7,635 )
(5,186 )
Net rental income
Other income
8
Administrative Expenses
Directors’ remuneration
9
(170 )
(148 )
Investment advisory fee
11
(5,158 )
(4,362 )
Other administrative expenses
12
(2,183 )
(2,028 )
Migration to Main Market expenses
(543 )
Total administrative expenses
(7,511 )
(7,081 )
Gain from fair value adjustment on investment property
18
Operating profit
Finance income
13
Finance cost
14
(11,129 )
(9,592 )
Profit before taxation
Taxation
15
Profit after tax and Total comprehensive income for the
year attributable to the equity holders of the Company
Earnings per share attributable to the equity holders of
the Company:
IFRS earnings per share (basic and diluted)
16
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
97
96
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
As at 30 June 2022, there is no difference between IFRS NAV per share and the EPRA NTA per share.
These consolidated group financial statements were approved by the Board of Directors and authorised for issue on
10 October 2022 and signed on its behalf by:
Steve Smith
Chairman
Share
capital
£’000
Share
premium
account
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 30 June 2020
Comprehensive income
Profit for the year
Transactions with owners
Dividend paid
(24,764 )
(24,764 )
At 30 June 2021
Comprehensive income
Profit for the year
Transactions with owners
Issue of ordinary shares
Dividend paid
(21,430 )
(21,430 )
At 30 June 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
Attributable to equity holders of the Company
FINANCIAL STATEMENTS
(Cont.)
FINANCIAL STATEMENTS
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Note
2022
£’000
2021
£’000
ASSETS
Non-current assets
Investment property
18
Current assets
Trade and other receivables
20
Cash and cash equivalents
21
Total assets
LIABILITIES
Non-current liabilities
Accruals and deferred income
22
Interest bearing loans and borrowings
23
Current liabilities
Trade and other payables
22
Interest bearing loans and borrowings
23
Total liabilities
Net assets
EQUITY
Called up share capital
25
Share premium account
26
Capital reduction reserve
27
Retained earnings
Total equity attributable to the equity holders of the Company
IFRS net asset value per share (basic and diluted)
28
99
98
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2022
The accompanying notes are an integral part of this cash flow statement.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has
not presented its own income statement in these financial statements. The loss attributable to the Parent Company
for the year ended 30 June 2022 amounted to £7.3 million (2021: loss of £6.4 million).
These financial statements were approved by the Board of Directors on 10 October 2022 and signed on its behalf by:
Steve Smith
Chairman
COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Note
30 June
2022
£’000
30 June
2021
£’000
ASSETS
Non-current assets
Investment in subsidiaries
19
75,425
325,742
75,425
325,742
Current assets
Other receivables
20
316,174
319,177
Cash and cash equivalents
21
28,646
25
344,820
319,202
Total assets
420,245
644,944
Current liabilities
Trade and other payables
22
2,517
252,988
Total liabilities
2,517
252,988
Net assets
417,728
391,956
EQUITY
Called up share capital
25
5,493
4,953
Share premium account
26
298,974
245,005
Capital reduction reserve
27
140,554
161,984
Retained earnings
(27,293)
(19,986)
Total equity attributable to the equity holders of the
Company
417,728
391,956
FINANCIAL STATEMENTS
(Cont.)
FINANCIAL STATEMENTS
(Cont.)
Note
30 June
2022
£’000
30 June
2021
£’000
Cash flows from operating activities
Profit before tax
Finance income
13
(4 )
Finance costs
14
Fair value adjustment on investment property
18
(99,727 )
(38,983 )
Cash generated by operations
Decrease /(increase) in trade and other receivables
(1,805 )
Increase in trade and other payables
Net cash generated from operating activities
Cash flows from investing activities
Purchase of investment properties
(81,822 )
(164,264 )
Finance income
Net cash used in investing activities
(81,818 )
(164,264 )
Cash flows from financing activities
Proceeds from issue of Ordinary Shares
25
Cost of share issue
26
(1,084 )
Bank and other loans advanced
23
Bank and other loans repaid
23
(100,014 )
(22,134 )
Finance costs
(10,809 )
( 1 1 ,059 )
Dividends paid
17
(21,430 )
(24,764 )
Net cash generated from financing activities
Net (decrease) / increase in cash and cash equivalents
(37,732 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
21
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
101
100
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June 2022
Share
capital
£’000
Share
premium
account
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 30 June 2020
4,953
245,005
186,748
(13,590)
423, 1 1 6
Comprehensive income
Loss for the year
-
-
-
(6,396)
(6,396)
Transactions with owners
Dividends paid
-
-
(24,764)
-
(24,764)
At 30 June 2021
4,953
245,005
161,984
(19,986)
391,956
Comprehensive income
Loss for the year
-
-
-
(7,307)
(7,307)
Transactions with owners
Issue of ordinary shares
540
53,969
-
-
54,509
Dividends paid
-
-
(21,430)
-
(21,430)
At 30 June 2022
5,493
298,974
140,554
(27,293)
417,728
Note
30 June
2022
£’000
30 June
2021
£’000
Cash flows from operating activities
Loss before tax
(7,307)
(6,396)
Finance income
(4)
-
Cash used in operations
(7,311)
(6,396)
Decrease/(increase) in trade and other receivables
3,003
(102,407)
(Decrease)/increase in trade and other payables
(154)
131,580
Net cash (used in)/generated from operating activities
(4,462)
22,777
Cash flows from investing activities
Finance income
4
-
Net cash generated from investing activities
4
-
Cash flows from financing activities
Proceeds from issue of Ordinary shares
25
55,593
-
Costs of share issue
26
(1,084)
-
Dividends paid
17
(21,430)
(24,764)
Net cash generated from/(used in) financing activities
33,079
(24,764)
Net increase / (decrease) in cash and cash equivalents
28,621
(1,987)
Cash and cash equivalents at beginning of year
25
2,01 2
Cash and cash equivalents at end of year
21
28,646
25
FINANCIAL STATEMENTS
(Cont.)
FINANCIAL STATEMENTS
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
103
102
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The PRS REIT plc
PRS REIT
”, the “
Company
” or the “
Group
”) is a public limited company incorporated
on 24 February 2017 in England Floor 3, 1 St. Ann Street, Manchester, M2 7LR
with Company Number 10638461. The Company did not commence trading until 31 May 2017 when the IPO was
completed. The Company was quoted on the Specialist Fund Segment of the Main Market of the London Stock
Exchange until 2 March 2021 when it migrated to the Premium Segment of the Main Market of the London Stock
Exchange. The nature of the Group’s operations and its principal activities are set out in the Chairman’s statement.
2. Basis of preparation
The financial statements of the Group and Company have been prepared in accordance with UK adopted International
Accounting Standards and the applicable legal requirements of the Companies Act 2006 (“
IFRS
”).
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
consolidated financial statements have transitioned to UK-adopted International Accounting Standards for the year
ended 30 June 2022. This change constitutes a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the year reported as a result of the change in framework.
The financial statements are prepared on the historical cost basis, except where IFRS requires an alternative treatment.
The principal variations from historical cost relate to investment properties (IAS40) which are measured as fair value
through profit or loss.
The financial statements are presented in Pounds Sterling, which is also the functional currency, and all values are
rounded to the nearest thousand pounds except where otherwise stated.
Notes to the
Financial Statements
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
105
104
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
4. Summary of significant accounting policies
Basis of Consolidation
The financial statements comprise of the financial statements of The PRS REIT plc and its subsidiary undertakings.
Subsidiaries are all entities over which the Group has control. The financial statements of the subsidiaries is included in
the consolidated financial statements from the date that control commences. All intra group transactions are eliminated
on consolidation.
Segmental reporting
For the current year and prior year, the Directors regard the Group as having just one reportable segment, Property, and
the business only operates in the United Kingdom. Segmental information is not therefore disclosed in these financial
statements.
Business combinations
The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers
whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Group accounts
for an acquisition as a business combination where an integrated set of activities is acquired in addition to the
investment properties.
Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities
of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred
tax arises.
Subsidiaries
Investments in subsidiaries are stated at cost less any provision for permanent diminution in value. A review for
impairment is carried out if events or changes in circumstances indicate that the carrying amount may not be
recoverable, in which case an impairment provision is recognised and charged to the Income Statement. The results
of subsidiaries acquired or disposed of during the year are included from the effective date of acquisition or up to the
effective date of disposal. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Investment property
Property that is held for long-term rental yields or for capital appreciation or both is classified as investment property
under IAS 40. Investment property is measured initially at its cost including related transaction costs. After initial
recognition, investment property is carried at fair value. Investment properties under construction are initially recognised
at cost including related transaction costs. Subsequently, the assets are re-measured at fair value at each reporting
date by where:
Fair value (at the date of valuation) = total development cost plus expected final uplift in valuation multiplied by % of
site development completed; where
Expected final uplift = Expected investment value on completion less gross development cost
The investment properties are externally valued by Savills. Savills are qualified external valuers who hold a recognised
and relevant professional qualification. Gains or losses arising from changes in the fair value of the Group’s investment
properties are included in profit from operations in the income statement of the period in which they arise. Investment
property falls within level 3 of the fair value hierarchy as defined by IFRS 13. Further details are provided in note 18.
3. Going concern
The consolidated and Company financial statements have been prepared on a going concern basis. The Group had net
current liabilities of £73.8 million as at 30 June 2022 (2021: net current liabilities £39.5 million). The increase in net current
liabilities reflects the LBG / RBS debt facility which is due to be refinanced on maturity in February 2023 which was £85.4
million drawn at 30 June 2022 (2021: £68.6 million drawn) and the utilisation of cash. The Group’s cash balances at
30 June 2022 were £48.7 million (2021: £86.4 million). The Group had debt borrowing as at 30 June 2022, of £345.6
million, and has secured further facilities comprising £54.4 million of investment debt. A portion of the development
debt facilities were utilised subsequent to the year-end to enable the Group to continue to develop assets to completion
and enabling the letting of these to tenants. Following stabilisation on a site, which comprises practical completion and
substantial letting, investment debt is drawn down to replace the development debt facilities utilised. The LBG / RBS
£150 million debt facility is in the process of being refinanced, in the event that refinancing is not completed then the
Company would seek to roll forward the existing facility until such time that the refinancing was completed.
Capital commitments outstanding as at 30 June 2022 were £50.2 million. The Group’s current ERV as at 30 June 2022,
was £47.8 million from 4,786 homes and has increased to £49.4 million from 4,856 homes as at 30 September 2022.
This has increased the Company’s recurring income and at this level is more than sufficient to cover monthly cash costs.
Based on the prevailing run-rate of monthly cash costs and average rent levels, approximately 2,192 homes are required
to generate income to cover monthly cash outlays.
The current market volatility is being monitored by the Board, however the strong income performance and high
proportion of fixed rate debt puts the Group in a good position.
Therefore, the Directors believe the Group and Company are well placed to manage their business risks successfully.
After making enquiries, the Directors have a reasonable expectation that the Group and Company 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 consolidated financial statements and the Company’s financial statements for the
year ended 30 June 2022.
107
106
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently carried at amortised cost less provision
for impairment. Where the time value of money is material, receivables are carried at amortised cost using the effective
interest method. Impairment provisions are recognised on a lifetime basis on the expected credit loss model detailed
within IFRS 9. The expected credit losses on financial assets are estimated based on the Group’s historical credit loss
experience adjusted for factors that are specific to the debtors, including general and, where material, local economic
conditions and an assessment of both the current and forecast direction of conditions at the reporting date.
We have engaged with tenants who have encountered financial difficulties during the COVID-19 pandemic and more
recently, and entered into payment plans where appropriate. Rent and legal insurance policies are in place and we
currently consider the risk of bad debts to be immaterial, although the situation remains under constant review. As at 30
June 2022 the Group’s loss allowance for expected credit losses on trade receivables was £281,000 (2021: £31,000).
The receivables due to the Company from subsidiaries are loans which are stated at cost less any allowance for
expected credit losses.
Cash
Cash and cash equivalents comprise cash in hand, cash at bank, cash held in treasury deposits and restricted cash.
Further details are provided in note 21.
Trade and other payables
Trade and other payables are not interest bearing and are initially recognised at fair value and subsequently measured at
their amortised cost.
Borrowings
Borrowings are recognised at fair value, net of transaction costs incurred.
Leases
As a lessor
The Group leases residential property to individual qualifying tenants on assured short-hold tenancies which are no
longer than twelve months. The tenancy agreements do not contain any non-lease elements such as insurance or
common area maintenance.
As a lessee
The Group has entered into ground leases on some of its sites. At the commencement date of the lease, the Group
recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease
payments include fixed payments less any lease incentives receivable and variable lease payments that depend on an
index or a rate. The variable lease payments that do not depend on an index or a rate are recognised as an expense
in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease
payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in
the lease is not readily determinable. After the commencement date, lease payments are allocated between the liability
and finance cost with the amount of the lease liability being increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification,
change in the lease term or change in the in-substance fixed lease payments.
Right-of-use (“ROU”) assets
The Group recognises ROU assets at the commencement date of the lease. ROU assets are measured at fair value
and classified within Investment Properties. The cost of ROU assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives
received.
Impairment of assets
At each balance sheet date, the Directors review the carrying amounts of the Group’s non-current assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset in its current condition is estimated in order to determine the extent of the impairment
loss, if any. The recoverable amount is the higher of fair value less cost to sell and value in use.
Taxation
Taxation on the profit or loss for the period not exempt under UK REIT regulations is comprised of current and deferred
tax. Tax is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates
to items recognised as a direct movement in equity, in which case it is recognised as a direct movement in equity.
Current tax is the expected tax payable on any non REIT taxable income for the period, using tax rates enacted or
substantively enacted at the reporting date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding
tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be recognised.
Deferred tax is calculated at the rates that are substantively enacted at the reporting date. Deferred tax is charged or
credited in the consolidated statement of comprehensive income, except when it relates to items credited or charged
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net basis.
Revenue recognition
Rental income arises from assured shorthold tenancies on investment properties with a period no longer than 12
months and is accounted for on an accruals basis and is recognised over the contractual period which does not
exceed 12 months.
Expenses
All expenses are recognised in the Consolidated Statement of Comprehensive Income on an accruals basis.
Finance income
Finance income is recognised as it accrues on cash balances and treasury deposits held by the Group.
Finance costs
Interest is charged as it accrues on bank loans held by the Group.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
109
108
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
Capitalised interest
During the development phase where funds from a development loan facility are drawn down to fund an asset, the
interest payable is capitalised as a cost of development of that asset. The amount capitalised in the year to 30 June
2022 was £2.5 million (2021: £2.1 million).
Costs of borrowing
Borrowing costs, including legal and professional fees, are recognised in the income statement over the period of the
borrowings using the effective interest method.
Dividends
Dividends on equity shares are recognised when they become legally payable.
Share issue costs
The costs of issuing equity instruments are accounted for as a deduction from equity.
Significant accounting judgements, estimates and assumptions
The preparation of the Group’s financial statements requires the Directors to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of
contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
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) Acquisition of subsidiaries – as a group of assets and liabilities
During the period, the Group acquired two 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:
Completed
Investment
properties
acquired
£’000
Development
Investment
properties
acquired
£’000
Other
receivables
£’000
Other
payables
£’000
Total
consideration
paid
Sigma PRS Investments
(Bury St Edmunds Parcel D) Limited
4,565
-
12
(35)
4,542
Sigma PRS Investments
(Plough Hill Road) Limited
10,255
-
25
(59)
10,221
Sigma PRS Northern
(Bertha Park) Limited
-
4,775
-
-
4,775
The PRS REIT
(Drakelow) Limited
-
6,751
1,276
-
8,027
14,820
11,526
1,313
(94)
27,565
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Investment property is measured at fair value as at the date of the acquisition of the subsidiary as determined by
an independent valuation expert.
Other receivables and other payables are taken as being the value recorded in the accounts of the company
acquired, being the amounts actually recoverable or payable.
111
110
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
(ii) 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 Group values its investment properties using the investment approach to valuation. Principal assumptions and
management’s underlying estimations that are used in the fair value assessment of completed assets relate to estimated
rental value, net investment yield and gross to net deductions. Principal assumptions and management’s underlying
estimations 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. There are
inter-relationships between the valuation inputs and they are primarily determined by market conditions. The effect of an
increase in more than one input could be to magnify the impact on the valuation. However, the impact on the valuation
could be offset by the inter-relationship of two inputs moving in opposite directions. Further details on the valuation of the
investment properties, including sensitivities, are disclosed in note 18.
Non-GAAP financial information
The Directors have identified certain measures that they believe will assist the understanding of the performance of
the business. The measures are not defined under IFRS and they may not be comparable with other companies’
adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures
of performance but they have been included as the Directors consider them to be important comparable and key
measures used within the business for assessing performance. The key non-GAAP measures identified by the Group
are set out on page 134.
Adoption of new and revised standards
Other than as disclosed below, the accounting policies applied are the same as those applied in the financial statements
for the year ended 30 June 2021.
In the current financial year the Group and Company have adopted a number of minor amendments to standards
effective in the year issued by the IASB, none of which have had a material impact on the Group and Company. These
amendments include IFRS 16 ‘Leases – Covid-19-Related Rent Concessions, and amendments to IFRS 9, IFRS 7, IFRS
4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2.
Standards and interpretations in issue but not yet effective
A number of new standards and amendments to standards and interpretations have been issued but are not yet
effective for the current accounting period. These amendments include amendments to IAS 1 ‘Presentation of Financial
Statements’ on classification of liabilities, a number of narrow-scope amendments to IFRS 3, IAS 16, IAS 17, IAS 37,
IAS 1, IAS 8, IAS 12, IFRS 10 and IAS 28 and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16. The
Directors do not expect any of these amendments to have a material impact on the Group’s results.
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
113
112
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Financial instruments
The Group’s principal financial assets and liabilities are those that arise directly from its operations: trade and other
receivables, trade and other payables and cash and cash equivalents. The Group’s other financial liabilities are loans,
the main purpose of which is to finance the acquisition and development of the Group’s investment property portfolio.
The Company’s principal financial assets and liabilities are those that arise directly from its activities as a holding
company: trade and other receivables, trade and other payables and cash and cash equivalents.
5. Financial risk management
The Group’s business activities are set out in the Strategic Report on pages 27 to 29. These activities expose the Group
and Company to a number of financial risks. The following describes the Group’s and Company’s objectives, policies
and processes for managing these risks and the methods used to measure them. The Board of Directors oversees the
management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks that
are summarised below. The Group only operates in the UK and transacts in sterling. It is therefore not directly exposed
to any foreign currency exchange risk.
Capital risk management
The Group’s and Company’s objectives for managing capital are to safeguard the Group’s and Company’s ability to
continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an efficient capital structure to manage the cost of capital. The capital structure of the Group and Company
consists of equity and debt. The Group and Company meets its objectives by aiming to achieve a steady growth by
mitigating risk, which will generate regular and increasing returns to the shareholders. The Group and Company also
seeks to minimise the cost of capital and optimise its capital structure. At 30 June 2022 the Group had short term debt
of £100.0 million (2021: £110.0 million) and cash at bank of £48.7 million (2021: £86.4 million). At 30 June 2022 the
Company had no short term debt (2021: nil) and cash at bank of £29 million (2021: £25,000). There were no changes in
the Group’s and Company’s approach to capital management during the year.
Amortised cost
Group
2022
£’000
2021
£’000
Financial assets
Trade and other receivables
6,618
5,879
Cash and other cash equivalents
48,682
86,414
Total financial assets
55,300
92,293
Financial liabilities
Trade and other payables
31,787
26,906
Interest bearing loans and borrowings
346,660
355,890
Total financial liabilities
378,447
382,796
Amortised cost
Company
2022
£’000
2021
£’000
Financial assets
Trade and other receivables
316,095
319,177
Cash and other cash equivalents
28,646
25
Total financial assets
344,741
319,202
Financial liabilities
Trade and other payables
2,517
252,686
Total financial liabilities
2,517
252,686
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
115
114
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Market risk
Risk relating to investment property
Investment in property is subject to varying degrees of risk. Some factors that affect the value of the investment in
property include:
changes in the general economic climate;
competition for available properties; and
government regulations, including planning, environmental and tax laws.
The Company holds no investment property directly (2021: nil).
Interest rate risk
The Group has limited interest rate risk on its investment and development loans due to the majority of long-term loan
facilities being fixed rate and therefore not subject to variation. A 1% change in interest rates would result in an income
statement adjustment of £0.7 million (2021: £0.6 million).
From time to time, certain of the Group’s cash resources are placed on short-term fixed deposits or on short-term notice
accounts to take advantage of preferential rates otherwise cash resources are held in current, floating rate accounts.
The Company had no external loans as at 30 June 2022 (2021: nil).
Credit risk
Credit risk is that a counterparty will not meet its obligations under a financial instrument or customer contract leading to a
financial loss. The Group is exposed to credit risk both from its property activities and financing activities.
Credit risk relating to property activities
The Group receives property rental income from its investments in PRS assets. Risk is mitigated as PRS assets consist
of residential family housing with multiple tenants in multiple locations. Rental income is paid monthly in advance. Gross
rental income outstanding and due to the Group as at 30 June 2022 amounted to £0.6 million (2021: £0.3 million). As
at 30 June 2022 the Group’s loss allowance for expected credit losses on these trade receivables was £281,000 (2021:
£31,000).
Credit risk arising related to financial instruments including cash deposits
Risk arises as a result of the cash deposits with banks and financial institutions. The Board of Directors believe the credit
risk on short-term deposits and current account balances are limited as they are held with banks with high credit ratings.
As at 30 June 2022, short-term deposits and current account balances were held with the following banks:
Royal Bank of Scotland plc
Barclays Bank PLC
Lloyds Banking Group plc
Lender
Balance as at
30 June 2022
Loan period
Interest rate
(all in)
Loan type
Maturity
Scottish Widows
£100.0 million
15 years
3.14%
Fixed
June 2033
Scottish Widows
£150.0 million
25 years
2.76%
Fixed
June 2044
Lloyds Banking Group plc / RBS
£85.4 million
3 years
3.16%
Variable
February 2023
Barclays Bank PLC
£15.2 million
3 years
4.66%
Variable
August 2025
Company credit risk relating to amounts due from Group undertakings
All balances are considered to be recoverable and are not past due. The total expected credit loss (“
ECL
”) provision
relating to loans and receivables for the Company is £nil (2021: £nil).
Liquidity risk
The Group and Company seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the
requirements of the business and to invest cash assets safely and profitably. The Board reviews regularly available cash
to ensure that there are sufficient resources for capital expenditure and working capital requirements.
As at 30 June 2022, the Group had net current liabilities of £73.8 million (2021: net current liabilities of £39.5 million).
The table below summarises the maturities of the Group’s non-derivative financial liabilities as at 30 June 2022 and 30
June 2021:
Group
On
demand
£’000
< 3
months
£’000
3 to 12
months
£’000
1 to 5
years
£’000
> 5
years
£’000
Total
£’000
2022
Trade and other payables
372
3,634
25,736
2,243
-
31,985
Loans and borrowings
-
29,075
81,274
36,962
337,531
484,842
372
32,709
107,010
39,205
337,531
516,827
2021
Trade and other payables
302
7,292
14,883
4,732
-
27,209
Loans and borrowings
-
50,623
66,609
29,264
344,588
491,084
302
57,915
81,492
33,996
344,588
518,293
Company
On
demand
£’000
< 3
months
£’000
3 to 12
months
£’000
1 to 5
years
£’000
> 5
years
£’000
Total
£’000
2022
Trade and other payables
372
2,145
-
-
-
2,517
372
2,145
-
-
-
2,517
2021
Trade and other payables
-
252,988
-
-
-
252,988
-
252,988
-
-
-
252,988
As at 30 June 2022, the Company had net current assets of £342.2 million (2021: £66.2 million). The table below
summarises the maturities of the Company’s non-derivative financial liabilities as at 30 June 2022 and 30 June 2021:
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
117
116
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
6. Rental income
The Group’s investment property consists of residential housing for the private rented sector and therefore has multiple
tenants across multiple sites. As a result, it does not have any significant customers.
7. Non-recoverable property costs
Non-recoverable property costs represent direct operating expenses in relation to rental income arising on investment
properties. The charge to the income statement in relation to write-offs and provisions made against doubtful debts was
£381,000 (2021: £4,000 credit, included in Administrative expenses).
8. Other income
Other income represents amounts payable by partners in respect of later than expected delivery of assets where the delay
is attributable to the partner.
9. Directors’ remuneration
The Directors are remunerated for their services at such rate as the Board shall from time to time determine. Further
details of the Directors’ remuneration are disclosed on pages 82 to 84.
10. Particulars of employees
The Group had no employees during the year or prior year other than the Directors.
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
2022
£’000
2021
£’000
Gross rental income from investment property
41,963
26,636
2022
£’000
2021
£’000
Other income
470
353
2022
£’000
2021
£’000
Directors’ emoluments
170
148
2022
£’000
2021
£’000
Other property expenses and irrecoverable costs
7,635
5,186
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
11. Asset management fees
Sigma PRS Management Ltd is appointed as the Investment Adviser of the Company. The asset management fee
payable to the Investment Adviser (the “
Asset Management Fee
”) was revised with effect from 1 January 2021 such
that the Company will pay a reduced fee for Adjusted Net Asset Values* (“
Adjusted NAV
”) above £500 million.
For Adjusted NAV up to, and including, £500 million, the rates remain unchanged.
The Asset Management Fee remains payable monthly in arrears, and the rates used to calculate the Asset
Management Fee are as follows:
(i)
1% per annum of the Adjusted NAV up to, and including, £250 million, which is unchanged;
(ii)
0.90%per annum of the Adjusted NAV in excess of £250 million and up to, and including, £500 million, which is
unchanged;
(iii)
0.75% per annum of the Adjusted NAV in excess of £500 million and up to, and including, £1 billion, which is
revised - see below;
(iv)
0.50% per annum of the Adjusted NAV in excess of £1 billion and up to, and including, £2 billion, which is revised -
see below; and
(v)
0.40% per annum of the Adjusted NAV in excess of £2 billion, which is revised.
The Asset Management Fee was previously calculated at a rate of 0.80% per annum of the Adjusted NAV in excess of
£500 million and up to, and including, £1 billion, and 0.70% per annum of the Adjusted NAV in excess of £1 billion.
The appointment of the Investment Adviser shall continue in force unless, and until terminated by either party, giving to
the other not less than 12 months’ written notice, such notice not to expire earlier than 31 December 2025.
*Adjusted Net Asset Value: the Net Asset Value, less an amount equal to the Development Cost incurred in relation to the PRS Development Sites under construction at
the relevant time by the Company and its subsidiaries, calculated in accordance with the Investment Advisory Agreement
2022
£’000
2021
£’000
Asset management fee
5,158
4,362
119
118
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
14. Finance cost
15. Taxation
As a UK REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business,
provided it meets certain conditions as set out in the UK REIT regulations. For the current year and prior year, the Group
did not have any non-qualifying profits and accordingly there is no tax charge in the period. If there were any non-
qualifying profits and gains, these would be subject to corporation tax.
It is assumed that the Group will continue to be a UK REIT for the foreseeable future, such that deferred tax has not
been recognised on temporary differences relating to the property rental business. No deferred tax asset has been
recognised in respect of the unutilised residual current period losses from non-qualifying activities as it is not anticipated
that sufficient residual profits will be generated from these in the future.
2022
£’000
2021
£’000
Audit of the Group financial statements
120
100
Audit of the subsidiary financial statements
114
152
Agreed upon procedures on the half year financial statements
21
20
Corporate finance services in relation to the Company’s Migration to the Main Market
-
50
255
322
2022
£’000
2021
£’000
Interest on short term deposits
4
-
13. Finance income
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
2022
£’000
2021
£’000
Legal and professional fees
365
399
Administration and secretarial fees
106
150
Audit, accounting, and tax fees
390
339
Valuation fees
332
297
Depositary fees
55
54
Financial adviser and broker fees
189
167
Insurance
82
36
Public relations
148
152
Regulatory fees
164
149
Sundry expenses
-
6
Subscriptions
30
30
Write off of receivables*
-
(4)
Disallowed VAT
322
253
2,183
2,028
*Reflects amounts written off net of recoveries from insurance policies
12. Administrative expenses
Services provided by the Group’s Auditors and its associates
The Group has obtained the following services from its Auditor and its associates:
2022
£’000
2021
£’000
Current and deferred tax
Corporation tax charge/(credit) for the period
-
-
Total current income tax charge/(credit) in the income statement
-
-
From 1 April 2017 to 30 June 2022, the standard rate of corporation tax in the UK was 19%.
REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with Part 12
of CTA 2010.
2022
£’000
2021
£’000
Profit before tax
115,889
44,113
Tax at UK corporation tax standard rate of 19%
22,018
8,381
Change in value of exempt investment properties
(18,948)
(7,407)
Exempt REIT income
(2,953)
(2,075)
Amounts not deductible for tax purposes
16
122
Unutilised residual current period tax losses not recognised in deferred tax
306
1,068
Capital allowances claimed against exempt REIT income
(44)
(89)
Capitalised interest claimed against exempt REIT income
(395)
-
-
-
The tax charge for the period is less than the standard rate of corporation tax in the UK of 19% (2021: 19%). The
differences are explained below.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
2022
£’000
2021
£’000
Amortisation of debt legal costs and arrangement fees
3,142
1,939
Interest on bank loans
7,987
7,653
11,129
9,592
121
120
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
16. Earnings per share
Earnings per share (“
EPS
”) amounts are calculated by dividing profit for the period attributable to ordinary equity holders
of the Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive
instruments, basic and diluted earnings per share are the same for both the current and prior periods.
The calculation of basic and diluted earnings per share is based on the following:
Further details of the EPRA performance measure are given on page 134.
17. Dividends
The following dividends were paid during the current year and prior year:
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
2022
£’000
2021
£’000
Dividends on ordinary shares declared and paid:
Dividend of 1.0p for the 3 months to 31 March 2020
-
4,952
Dividend of 1.0p for the 3 months to 30 June 2020
-
4,953
Dividend of 1.0p for the 3 months to 30 September 2020
-
4,953
Dividend of 1.0p for the 3 months to 31 December 2020
-
4,953
Dividend of 1.0p for the 3 months to 31 March 2021
-
4,953
Dividend of 1.0p for the 3 months to 30 June 2021
4,953
-
Dividend of 1.0p for the 3 months to 30 September 2021
5,492
-
Dividend of 1.0p for the 3 months to 31 December 2021
5,492
-
Dividend of 1.0p for the 3 months to 31 March 2022
5,493
-
2 1 ,430
24,764
Proposed dividends on ordinary shares:
3 months to 30 June 2021: 1.0p per share
-
4,953
3 months to 30 June 2022: 1.0p per share
5,493
-
5,493
4,953
2022
£’000
2021
£’000
Earnings per IFRS income statement
115,889
44,113
Adjustments to calculate EPRA Earnings:
Changes in value of investment properties
(99,727)
(38,983)
EPRA Earnings:
16,162
5,130
Company specific adjustments:
Non-recurring costs incurred by the Company as part of the
Migration to the Premium Segment of the Main Market
-
543
Company Adjusted Earnings
16,162
5,673
Weighted average number of ordinary shares
535,203,388
495,277,294
IFRS EPS (pence)
21.4
8.9
EPRA EPS (pence)
3.0
1.0
Company specific Adjusted EPS (pence)
3.0
1.2
See note 34 for further information on proposed dividends.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
123
122
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
Completed
Assets
£’000
Assets under
Construction
£’000
Total
£’000
At 30 June 2020
231,302
345,81 7
577, 1 1 9
Properties acquired on acquisition of subsidiaries
42,275
-
42,275
Property additions - subsequent expenditure
-
121,989
121,989
Change in fair value
13,408
25,575
39,983
Transfers to completed assets
246,789
(246,789)
-
At 30 June 2021
533,774
246,592
780,366
Properties acquired on acquisition of subsidiaries
14,820
1 1 ,526
26,346
Property additions - subsequent expenditure
-
55,476
55,476
Change in fair value
69,461
30,266
99,727
Transfers to completed assets
222,300
(222,300)
-
At 30 June 2022
840,355
121,560
961,915
The historic cost of completed assets and assets under construction as at 30 June 2022 was £785.0 million (2021:
£704.2 million).
The carrying amount of investment property pledged as security as at 30 June 2022 was £823.6 million (2021: £719.0
million).
The Group has recognised a right-of-use (“
ROU
”) asset within investment property in relation to ground rents payable on
certain investment property sites. The net book value of the ROU asset was £1 million as at 30 June 2022 (2021: £1 million).
A potential planning issue has been identified in the development of one of the Company’s sites. The Investment Adviser
is actively working with the relevant house builder and council to remedy the matter and anticipates that this will be
resolved in the near term. In the unlikely event that the issue is not resolved as anticipated, the Company would have
rights of recourse against the house builder.
18. Investment property
The freehold/heritable, leasehold and part freehold part leasehold interests in the properties held within the PRS REIT
were independently valued as at 30 June 2022 by Savills (UK) Limited, acting in the capacity of External Valuers as
defined in the RICS Red Book (but not for the avoidance of doubt as an External Valuer of the PRS REIT as defined
by the Alternative Investment Fund Managers Regulations 2013). The valuations accord with the requirements of IFRS
13 and the Royal Institution of Chartered Surveyors’ (“
RICS
”) Valuation – Global Standards, effective from 31 January
2022, incorporating the IVSC International Valuation Standards (the “
RICS Red Book
”). The valuations were arrived at
predominantly by reference to market evidence for comparable property.
Savills (UK) Limited are an accredited External Valuer with recognised and relevant professional qualifications and
recent experience of the location and category of the investment property being valued.
The valuations are the ultimate responsibility of the Directors. Accordingly, the critical assumptions used in establishing
the independent valuation are reviewed by the Board.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Type
Range
2022
2021
ERV per unit
£7k - £22k
£6k - £21k
Investment yield
3.75% to 4.50%
4.00% to 4.75%
Gross to net assumption
22.5% to 25.0%
22.5% to 25.0%
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:
2022
Impact on
statement of
comprehensive
income
£’000
2022
Impact on
statement
of financial
position
£’000
2021
Impact on
statement of
comprehensive
income
£’000
2021
Impact on
statement
of financial
position
£’000
Improvement in ERV by 5%
48,213
48,213
39,007
39,007
Worsening in ERV by 5%
(48,223)
(48,223)
(39,002)
(39,002)
Improvement in yield by 0.125%
30,124
30,124
23,619
23,619
Worsening in yield by 0.125%
(28,359)
(28,359)
(22,264)
(22,264)
Improvement in gross to net by 1%
12,492
12,492
10,850
10,850
Worsening in gross to net by 1%
(12,402)
(12 ,402)
(9,369)
(9,369)
Development assets are valued based on total development cost plus expected final uplift in valuation multiplied by %
of site development completed. The range of % completions as at 30 June 2022, was from 7% to 99% (2021: 36% to
99%). The final investment value uses the assumptions stated above. An increase of 2% in the gross development cost
would reduce the fair valuation of these assets by c.£2 million.
The impact of changes to the significant unobservable inputs for completed and development assets are:
125
124
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
2022
£’000
2021
£’000
Cost at the start of the year
325,742
456,349
Reclassification as Group receivables during the year
(250,317)
(130,607)
Cost at the end of the year
75,425
325,742
19. Investment in subsidiaries
Company
During the year and prior year the Company transferred costs related to certain group undertakings to another wholly
owned group undertaking. The Group comprises a number of companies, all subsidiaries included within these financial
statements are noted below:
Directly held:
Indirectly held:
Ownership Name of Entity
Company
number
Principal Activity
Country of
Incorporation
%
The PRS REIT Holding Company Limited
10695914
Investment Holding Company
England
100%
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
Ownership Name of Entity
Company
number
Principal Activity
Country of
Incorporation
%
*The PRS REIT Development Company Limited
10721759
Property Investment
England
100%
The PRS REIT Development Company II Limited
12298358
Property Investment
England
100%
The PRS REIT Property Investments Limited
12309160
Property Investment
England
100%
*The PRS REIT Investments LLP
OC418251
Property Investment
England
100%
The PRS REIT Investments II LLP
OC429585
Property Investment
England
100%
*The PRS REIT Memberco Limited
10854481
Property Investment
England
100%
The PRS REIT Memberco II Limited
12298381
Investment Holding Company
England
100%
The PRS REIT (LBG) Borrower Limited
11392913
Property Investment
England
100%
The PRS REIT (LBG) Holding Company Limited
11385652
Investment Holding Company
England
100%
The PRS REIT (LBG) Investments LLP
OC422964
Property Investment
England
100%
The PRS REIT (LBG) Memberco Limited
11409586
Investment Holding Company
England
100%
*The PRS REIT (SW) Borrower Limited
11393311
Property Investment
England
100%
The PRS REIT (SW) Holding Company Limited
11385650
Investment Holding Company
England
100%
*The PRS REIT (SW) Investments LLP
OC422966
Property Investment
England
100%
*The PRS REIT (SW) Memberco Limited
11409522
Investment Holding Company
England
100%
The PRS REIT (SW II) Holding Company Limited
12046818
Investment Holding Company
England
100%
*The PRS REIT (SW II) Borrower Limited
12049318
Property Investment
England
100%
*The PRS REIT (SW II) Investments LLP
OC427782
Property Investment
England
100%
*The PRS REIT (SW II) Memberco Limited
12052213
Investment Holding Company
England
100%
The PRS REIT (Barclays) Memberco Limited
12616572
Investment Holding Company
England
100%
The PRS REIT (Barclays) Holding Company Limited
12598004
Investment Holding Company
England
100%
The PRS REIT (Barclays) Borrower Limited
12599502
Property Investment
England
100%
The PRS REIT (Barclays) Investments LLP
OC432893
Property Investment
England
100%
*Sigma PRS Investments I Limited
SC522680
Property Investment
Scotland
100%
*Sigma PRS Investments II Limited
10128422
Property Investment
England
100%
*Sigma PRS Investments VI Limited
10467369
Property Investment
England
100%
*Sigma PRS Investments IV Limited
10383849
Property Investment
England
100%
*Sigma PRS Investments VIII Limited
10571586
Property Investment
England
100%
Sigma PRS Investments (Brackenhoe) Limited
12026470
Property Investment
England
100%
*Sigma PRS Investments (Bury St Edmunds) Limited
11721278
Property Investment
England
100%
Sigma PRS Investments (Dawley Road II) Limited
12064750
Property Investment
England
100%
*Sigma PRS Investments (Our Lady’s) Limited
10684675
Property Investment
England
100%
*Sigma PRS Investments (Owens Farm) Limited
11207716
Property Investment
England
100%
Sigma PRS Investments (Houghton Regis) Limited
11673725
Property Investment
England
100%
Sigma PRS Investments (Houghton Regis II) Limited
11676096
Property Investment
England
100%
Sigma PRS Investments (Houghton Regis Parcel 8II) Limited
11892855
Property Investment
England
100%
Ownership Name of Entity
Company
number
Principal Activity
Country of
Incorporation
%
Sigma PRS Investments (Houghton Regis Parcel 8A II) Limited
12169553
Property Investment
England
100%
*Sigma PRS Investments (Lea Hall) Limited
11726223
Property Investment
England
100%
*Sigma PRS Investments (Newhall) Limited
11521411
Property Investment
England
100%
*Sigma PRS Investments (Bury St Edmunds Parcel D) Limited
11934752
Property Investment
England
100%
The PRS REIT (Drakelow Park) Limited
13572147
Property Investment
England
100%
Sigma PRS Northern (Bertha Park) Limited
12323666
Property Investment
England
100%
*Sigma PRS Investments (Plough Hill Road) Limited
11362082
Property Investment
England
100%
Sigma PRS Investments (Fishmoor Parcel 1) Limited
13522429
Property Investment
England
100%
Sigma PRS Investments (Fishmoor Parcel 2) Limited
13522386
Property Investment
England
100%
The PRS REIT (Accrington) Limited
12936087
Property Investment
England
100%
The PRS REIT (Airfields II) Limited
12227845
Property Investment
England
100%
The PRS REIT (Airfields) Limited
12225418
Property Investment
England
100%
*The PRS REIT (Beehive) Limited
12299354
Property Investment
England
100%
*The PRS REIT (Bilston Urban Village) Limited
12299875
Property Investment
England
100%
The PRS REIT (Bombardier) Limited
12269588
Property Investment
England
100%
*The PRS REIT (Brickkiln Place) Limited
12342184
Property Investment
England
100%
*The PRS REIT (Cable Street) Limited
12300415
Property Investment
England
100%
*The PRS REIT (Durham Street) Limited
12299887
Property Investment
England
100%
*The PRS REIT (East Hill) Limited
12299857
Property Investment
England
100%
The PRS REIT (Eaton Works) Limited
12299949
Property Investment
England
100%
*The PRS REIT (Entwistle Road) Limited
12300010
Property Investment
England
100%
The PRS REIT (Harlow Phase II) Limited
12303917
Property Investment
England
100%
*The PRS REIT (Heathfield Lane) Limited
12300254
Property Investment
England
100%
The PRS REIT (Hexthorpe Phase A) Limited
12340014
Property Investment
England
100%
The PRS REIT (Hexthorpe Phase B) Limited
12340826
Property Investment
England
100%
*The PRS REIT (Hilton Park) Limited
12300173
Property Investment
England
100%
*The PRS REIT (Holyoake Memberco) Limited
12888895
Investment Holding Company
England
100%
*The PRS REIT (Holyoake) Limited
12882087
Property Investment
England
100%
The PRS REIT (LB 5) Limited
12300657
Property Investment
England
100%
*The PRS REIT (Manor Boot) Limited
12300405
Property Investment
England
100%
*The PRS REIT (Newhaven) Limited
12301039
Property Investment
England
100%
*The PRS REIT (Norwich Street) Limited
12301118
Property Investment
England
100%
The PRS REIT (Potteries) Limited
12279694
Property Investment
England
100%
*The PRS REIT (QVS) Limited
12303609
Property Investment
England
100%
The PRS REIT (Redcar) Limited
12338568
Property Investment
England
100%
*The PRS REIT (Reginald Road) Limited
12301641
Property Investment
England
100%
*The PRS REIT (Riverside College) Limited
12301225
Property Investment
England
100%
*The PRS REIT (Roch Street) Limited
12301230
Property Investment
England
100%
*The PRS REIT (Romanby Shaw) Limited
12301554
Property Investment
England
100%
The PRS REIT (Station Road) Limited
12279470
Property Investment
England
100%
*The PRS REIT (Sutherland School) Limited
12301839
Property Investment
England
100%
The PRS REIT (Tower Hill 3) Limited
12303826
Property Investment
England
100%
*The PRS REIT (Whitworth Way) Limited
12301879
Property Investment
England
100%
*The PRS REIT Holyoake General Partner Ltd
10809976
Property Investment
England
100%
Sigma PRS Investments (Cable Street II) Limited
11086887
Dormant
England
100%
Sigma PRS Investments (Carr Lane II) Limited
11054232
Dormant
England
100%
Sigma PRS Investments (Dawley Road) Limited
12026449
Dormant
England
100%
Sigma PRS Investments (Darlaston II) Limited
11028091
Dormant
England
100%
Sigma PRS Investments (Darlaston Phase 2 II) Limited
11159344
Dormant
England
100%
Sigma PRS Investments (Houghton Regis Parcel 8) Limited
11875798
Dormant
England
100%
Sigma PRS Investments (Houghton Regis Parcel 8A) Limited
12168751
Dormant
England
100%
Sigma PRS Investments (Newton Le Willows II) Limited
11009678
Dormant
England
100%
Sigma PRS Investments (Owens Farm II) Limited
11241786
Dormant
England
100%
Sigma PRS Investments (Sutherland School II) Limited
11382818
Dormant
England
100%
Sigma PRS Investments (Whitworth Way II) Limited
11086856
Dormant
England
100%
Sigma PRS Investments III Limited
10140376
Dormant
England
100%
Sigma PRS Investments V Limited
10385618
Dormant
England
100%
Sigma PRS Investments VII Limited
10462287
Dormant
England
100%
Sigma PRS Investments IX Limited
10573603
Dormant
England
100%
*Sigma PRS Investments (Bury St Edmunds II) Limited
11723358
Dormant
England
100%
*Sigma PRS Investments (Lea Hall II) Limited
11723562
Dormant
England
100%
*Sigma PRS Investments (Newhall II) Limited
11523248
Dormant
England
100%
*Sigma PRS Investments (Bury St Edmunds Parcel D II) Limited
11939076
Dormant
England
100%
Sigma PRS Investments (Plough Hill Road II) Limited
11365306
Dormant
England
100%
The PRS REIT (Bullcote Lane) Limited
12269343
Dormant
England
100%
The PRS REIT (Christopher Street) Limited
12340995
Dormant
England
100%
The PRS REIT (Minky Works) Limited
12339490
Dormant
England
100%
The PRS REIT (Rugby) Limited
12338561
Dormant
England
100%
The PRS REIT Investments Holding Company Limited
12302557
Dormant
England
100%
The registered office for the subsidiaries across the Group is: Floor 3, 1 St. Ann Street, Manchester, M2 7LR,
except for Sigma PRS Investments I Limited whose registered office is: 18 Alva Street, Edinburgh, EH2 4QG.
*Exempt from the requirement of the Companies Act 2006 relating to the audit of individual financial statements by virtue of section 479A of the Act.
127
126
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
Group
2022
£’000
Company
2022
£’000
Group
2021
£’000
Company
2021
£’000
Trade receivables
291
-
457
-
Receivables from group undertakings
-
315,933
-
318,830
Accrued income
941
5
320
5
Social security and other taxes
589
-
710
-
Prepayments and other receivables
5,465
236
5,102
342
7,286
316,174
6,589
319,177
20. Trade and other receivables
22. Trade and other payables
23. Interest bearing loans and borrowings
Group
2022
£’000
Company
2022
£’000
Group
2021
£’000
Company
2021
£’000
Restricted cash
10,979
-
84,793
-
Cash at bank
37,703
28,646
1,621
25
48,682
28,646
86,414
25
21. Cash and cash equivalents
Trade and other receivables are shown after deducting a credit loss provision of £281,000 (2021: £31,000). The
provision is calculated as an expected credit loss on trade and other receivables in accordance with IFRS 9. The charge
to the income statement in relation to write-offs and provisions made against doubtful debts was £381,000 (2021:
£4,000 credit). The charge during the financial year reflects some of the impacts of the COVID-19 pandemic and the
end of some of the government schemes supporting companies and employees; as well as the opening up of courts
post pandemic and an increase in the work undertaken to reflect the growing portfolio.
At the end of the reporting period, the Company had no provision for expected loss allowances (2021: £nil) in relation to
balances receivable from subsidiaries as recovery of the amounts due is considered probable.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The
Group’s maximum exposure on credit risk is the carrying value of trade receivables as presented above. As at 30 June
2022, £111,000 of trade receivables are more than thirty days old and not provided for (2021: £157,000). The Group
has no pledge as security on trade receivables.
Restricted cash comprises £10.8 million (2021: £84.8 million) in funds held in a bank account controlled by one of the
Group’s lenders which can be released to free cash once certain loan conditions are met.
The Company payables to group undertakings were interest free and repayable on demand.
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
Group
2022
£’000
Company
2022
£’000
Group
2021
£’000
Company
2021
£’000
Current Liabilities
Trade payables
14,227
1,146
7,291
2,035
Payables to group undertakings
-
-
-
250,270
Accruals and deferred income
15,352
1,208
14,996
493
Social security and other taxes
163
163
190
190
29,742
2,517
22,477
252,988
Non-Current Liabilities
Accruals and deferred income
2,243
-
4,732
-
31,985
2,517
27,209
252,988
Group
2022
£’000
Company
2022
£’000
Group
2021
£’000
Company
2021
£’000
Current liabilities
Bank loans at 1 July
109,998
-
-
-
Loans advanced in the year
89,624
-
133,119
-
Loans repaid in the year
(100,014)
-
(22,134)
-
Capitalised loan costs
333
-
(987)
-
Bank loans at 30 June
99,941
-
109,998
-
Lease liability
32
-
32
-
Total loans and borrowings
99,973
-
1 1 0,030
-
Non-current liabilities
Bank loans at 1 July
244,875
-
144,226
-
Loans advanced in the year
-
-
100,000
-
Capitalised loan costs
809
-
649
-
Bank loans at 30 June
245,684
-
244,875
-
Lease liability
1,003
-
985
-
Total loans and borrowings
246,687
-
245,860
-
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
129
128
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
24. Leases
Lease liabilities as lessee
The lease liabilities recognised are shown in the table below, the Group has no other leases.
Lease liabilities as lessor
The future minimum lease payments receivable under non-cancellable operating leases in respect of the Group’s
property portfolio are as follows:
The Group’s receivable leases are assured shorthold tenancies usually for periods for up to one year. The Company
had no leases in either the current or prior period.
25. Share capital
Share capital represents the nominal value of consideration received by the Company for the issue of 1p Ordinary Shares.
The Company was admitted to the Specialist Fund Segment of the Main Market of the London Stock Exchange on 31
May 2017 and migrated to the Premium Segment of the Main Market of the London Stock Exchange on 2 March 2021.
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.
The Group’s maximum loan to value ratio can be no more than 45%. As at 30 June 2022 the Group’s loan to value was
31% (2021: 42%).
Reconciliation of movements of borrowings to cash flows arising from financing activities:
* £150 million revolving credit facility. £75 million available in first 2 years for development debt purposes, reduced to £25 million from 1 January 2022.
2022
£’000
2021
£’000
Balance as at 1 July
354,873
144,226
Proceeds from borrowings
89,624
233, 1 1 9
Borrowings repaid
(100,014)
(22,134)
Interest paid
(9,825)
(8,706)
Non-utilisation fees paid
-
(895)
Arrangement and commitment fees paid
(846)
(1,504)
Finance costs
11,813
10,767
Balance as at 30 June
345,625
354,873
Group
2022
£’000
Group
2021
£’000
Lease liabilities
1,035
1,018
Amounts recognised in the income statement in non-recoverable
property costs
13
13
Group
2022
£’000
Group
2021
£’000
Receivable within 1 year
23,051
17,122
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
Bank loans
Through its subsidiaries the Company has granted fixed and floating charges over certain investment property assets to
secure the loans. At 30 June 2022 and 30 June 2021, the only other asset secured was £25 million of cash collateral.
The Group’s borrowing facilities are with Scottish Widows, Lloyds Banking Group plc / RBS plc and Barclays Bank PLC.
At 30 June 2022, these comprised the following:
Lender
Loan facility
Balance drawn
30 June 2022
Loan
period
Interest
rate (all in)
Loan
type
Maturity
Scottish Widows
£100 million
£100 million
15 years
3.14%
Fixed
June 2033
Scottish Widows
£150 million
£150 million
25 years
2.76%
Fixed
June 2044
Lloyds Banking Group plc / RBS*
£150 million
£85.4 million
3 years
3.16%
Variable
February 2023
Barclays Bank PLC
£40 million
£15.2 million
3 years
4.66%
Variable
August 2025
Group and Company
2022
No. of shares
2022
Share capital
£’000
2021
No. of shares
2021
Share capital
£’000
Balance at the beginning of year
495,277,294
4,953
495,277,294
4,953
Issue of shares
53,974,164
540
-
-
Balance at end of year
549,251,458
5,493
495,277,294
4,953
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
131
130
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
26. Share premium reserve
The share premium relates to amounts subscribed for share capital in excess of nominal value.
27. Capital reduction reserve
The capital reduction reserve is a distributable reserve to which the value of share premium, as a result of the IPO, has
been transferred. Dividends can be paid from this reserve.
The NTA per share calculated on an EPRA basis is the same as the IFRS NAV per share for the year ended 30 June
2022 and the year ended 30 June 2021.
29. Controlling parties
As at 30 June 2022 and 30 June 2021, there was no ultimate controlling party.
30. Consolidated entities
The Group consists of a parent company, The PRS REIT plc, incorporated in the UK and a number of subsidiaries held
directly and indirectly by The PRS REIT plc, which operate and are incorporated in the UK.
The Group owns 100% equity shares of all subsidiaries as listed in note 19 and has the power to appoint and remove
the majority of the Board of Directors of those subsidiaries. The relevant activities of the subsidiaries are determined by
the Board of Directors based on simple majority votes. Therefore the Directors of the Group concluded that the Group
has control over all these entities and all these entities have been consolidated within the financial statements.
31. Capital commitments
The Group has entered into contracts with unrelated parties for the construction of residential housing with a total value
of £689.8 million (2021: £663.8 million). As at 30 June 2022, £50.2 million (2021: £89.2 million) of such commitments
remained outstanding.
Group and Company
2022
£’000
2021
£’000
Balance at beginning of year
245,005
245,005
Share premium on the issue of Ordinary Shares
55,053
-
Share issue costs
(1 ,084)
-
Balance at end of year
298,974
245,005
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
2022
£’000
2021
£’000
Balance at beginning of year
161,984
186,748
Dividend paid of 1.0p per share for the period ended 31 March 2020
-
(4,952)
Final dividend paid of 1.0p per share for the year ended 30 June 2020
-
(4,953)
Dividend paid of 1.0p per share for the period ended 30 September 2020
-
(4,953)
Dividend paid of 1.0p per share for the period ended 31 December 2020
-
(4,953)
Dividend paid of 1.0p per share for the period ended 31 March 2021
-
(4,953)
Final dividend paid of 1.0p per share for the year ended 30 June 2021
(4,952)
-
Dividend paid of 1.0p per share for the period ended 30 September 2021
(5,492)
-
Dividend paid of 1.0p per share for the period ended 31 December 2021
(5,493)
-
Dividend paid of 1.0p per share for the period ended 31 March 2022
(5,493)
-
Balance at end of year
140,554
161,984
2022
2021
IFRS Net assets at 30 June (£’000)
639,238
490,270
EPRA adjustments to NTA
-
-
EPRA NTA at 30 June
639,238
490,270
Shares in issue at end of year
549,251,458
495,277,294
Basic IFRS NAV per share (pence)
116.4
99.0
EPRA NTA per share (pence)
116.4
99.0
28. Net Asset Value
The Group adopted the EPRA issued new best practice guidelines in the year ending 30 June 2021. EPRA Net Tangible
Assets (“
NTA
”), is considered to be the most relevant measure for the Group and replaces the previously reported
EPRA NAV. The underlying assumption behind the EPRA NTA calculation assumes entities buy and sell assets, thereby
crystallising certain levels of deferred tax liability. Due to the PRS REIT’s tax status, deferred tax is not applicable and
therefore there is no difference between IFRS NAV and EPRA NTA.
Basic IFRS NAV per share is calculated by dividing net assets in the Statement of Financial Position attributable to
ordinary equity holders of the parent by the number of Ordinary Shares outstanding at the end of the year. As there are
no dilutive instruments, only basic NAV per share is quoted below.
Net asset values have been calculated as follows:
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
133
132
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
For the current financial year, Directors’ fees of £170,000 (2021: £148,000) were incurred.
33. Transactions with Investment Adviser
On 31 March 2017, Sigma PRS was appointed the Investment Adviser of the Company. A new Investment Adviser
Agreement with Sigma PRS was signed in January 2021.
For the year ended 30 June 2022, fees of £5.2 million (2021: £4.4 million) were incurred and payable to Sigma PRS in
respect of investment advisory services. At 30 June 2022, £0.9 million (2021: £1.5 million) remained unpaid.
For the year ended 30 June 2022, development fees of £2.5 million (2021: £4.6 million) were incurred and payable to
Sigma PRS. At 30 June 2022, £0.1 million (2021: £0.3 million) remained unpaid.
For the year ended 30 June 2022, administration and secretarial services of £85,000 (2021: £90,000) were incurred and
payable to Sigma Capital Property Ltd, a fellow subsidiary of the ultimate holding company of the Investment Adviser. At
30 June 2022, £49,000 (2021: £40,500) remained unpaid.
During the year ended 30 June 2021, Sigma PRS acquired 1,500,000 shares in the Company in the market. The shares
purchased were acquired in the market at an average price of 76.4 pence per share. Sigma PRS’s shareholding as at 30
June 2022 was 5,889,852 (2021: 5,889,852), which represents 1.07% (2021: 1.19%) of the issued share capital in the
Company. All the shares acquired in the prior year were in accordance with the Development Management Agreement
between the Company and Sigma PRS.
For the year ended 30 June 2022, Sigma PRS received dividends from the Company of £236,000 (2021: £249,000).
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
Company Director
No. of shares held
Dividends received
2022
2021
2022
2021
Roderick MacRae
100,000
100,000
£4,000
£5,000
Steffan Francis
105,000
80,000
£3,700
£3,200
Steve Smith
155,000
80,000
£5,450
£4,000
Jim Prower
52,000
22,000
£1,780
£1,100
Geeta Nanda*
-
-
-
-
32. Related party disclosure
The number of shares owned by the Directors of the Company as at 30 June 2022 along with dividends they received
during the period is as follows:
*Appointed 24 March 2021
34. Post balance sheet events
Development site acquisitions
During August and September four development sites were acquired for a total consideration of £5.9 million.
Dividends
On 25 July 2022, the Company declared a dividend of 1.0p per ordinary share in respect of the fourth quarter of the
current financial year. The dividend was paid on 26 August 2022 to shareholders on the register as at 5 August 2022.
Taxation
The UK Government announced on the 23rd September 2022, that the increase in corporate tax rate from 19% to 25%
which is effective from 1 April 2023 will now not go ahead. There is no impact on the financial statements as at 30 June
2022 as a result of this announcement.
During the year, the Company acquired the following subsidiaries from Sigma Capital Group Limited, the ultimate
holding company of the Investment Adviser:
NOTES TO THE FINANCIAL STATEMENTS
(Cont.)
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
Name of entity
Consideration
Sigma PRS Investments (Bury St Edmunds Parcel D) Limited
Sigma PRS Investments (Bury St Edmunds Parcel D II) Limited
£4.5 million
Sigma PRS Investments (Plough Hill Road) Limited
Sigma PRS Investments (Plough Hill Road II) Limited
£10.2 million
Sigma PRS Northern (Bertha Park) Limited
£4.8 million
The PRS REIT (Drakelow Park) Limited
£8.0 million
Total
£27.5 million
135
134
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
SUPPLEMENTARY INFORMATION
II. INCOME STATEMENT
2022
£’000
2021
£’000
Rental income
41,963
26,636
Non-recoverable property costs
(7,635)
(5,186)
Net rental income
34,328
21,450
Other income
470
353
Administrative expenses
(7,511)
(7,081)
Operating profit before interest and tax
27,287
14,722
Net finance costs
(11,125)
(9,592)
Profit before taxation
16,162
5,130
Taxation on EPRA earnings
-
-
EPRA earnings
16,162
5,130
Weighted average number of Ordinary Shares
535,203,388
495,277,294
EPRA earnings per share
3.0p
1.0p
I. EPRA PERFORMANCE MEASURES SUMMARY
2022
2021
EPRA earnings per share
3.0p
1.0p
EPRA net tangible asset value (EPRA NTA)
116.4p
99.0p
III. STATEMENT OF FINANCIAL POSITION
2022
£’000
2021
£’000
Investment properties
961,915
780,366
Other net assets
23,983
65,794
Net borrowings
(346,660)
(355,890)
Total shareholders’ equity
639,238
490,270
Adjustments to calculate EPRA NTA:
-
-
EPRA net tangible assets
639,238
490,270
Ordinary Shares in issue at year end
549,251,458
495,277,294
EPRA NTA per share
116.4p
99.0p
The Group considers EPRA NTA to be the most relevant measure for its operating activities and has therefore adopted
this as the Group’s primary measure of net asset value.
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
136
THE PRS REIT PLC ANNUAL REPORT AND FINANCIAL STATEMENTS
2022
NOTES
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
INDEPENDENT AUDITORS REPORT
FINANCIAL STATEMENTS
