Annual Report
& Financial Statements
For the year ended 30 June 2024
HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
NOTES
HIGHLIGHTS
3
Highlights
STRATEGIC REPORT
9
Chairman’s Statement
13
IFRS and EPRA performance measures
14
Market dynamics
16
Portfolio analysis
27
Investment strategy and business model
31
Investment Adviser’s Report
41
Environmental, Social and Governance
47
Principal risks and uncertainties
51
Stakeholder engagement and
Section 172 Statement
CORPORATE GOVERNANCE
59
Chairman’s Introduction
61
Directors and Advisers
63
Report of the Directors
69
Statement of Directors’ Responsibilities
71
Corporate Governance Statement
79
Audit Committee Report
83
Nomination & Remuneration Committee Report
87
Management Engagement Committee Report
89
Directors’ Remuneration Policy
91
Directors’ Remuneration Report
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF THE PRS REIT PLC
97
Independent Auditor’s Report to the Members
of the PRS REIT plc
FINANCIAL STATEMENTS
107
Consolidated statement of comprehensive income
108
Consolidated statement of financial position
109
Consolidated statement of changes in equity
110
Consolidated statement of cash flows
111
Company statement of financial position
112
Company statement of changes in equity
113
Company statement of cash flows
NOTES
114
Notes to the financial statements
141
Supplementary information
INDEPENDENT AUDITOR’S REPORT
HIGHLIGHTS
Portfolio very close
to completion with
“These are truly excellent numbers reflecting the efficacy of the strategy and the hard work
and commitment of the Board, our investment adviser, Sigma, our investors, banking
and housebuilding partners, and local and central government supporters. To be
in position to deliver a set of results of this quality after so many obstructions
along the way, notably COVID and debt cost inflation, is a great achievement.
The Company is perfectly poised for its next phase of growth; investors are
in a very strong position, with multiple options and, on a personal note,
I sincerely hope that investors grasp the opportunity to enable the
business to achieve its full potential.
“The Board remains confident about prospects, with affordability
– average rent as a proportion of gross household income –
and asset performance both very strong. In line with our
announcement issued on 13 September, the newly-
constituted Board intends to review the Company’s
strategy and will provide an update when
appropriate. The Company is fully focused on
maximising value for all shareholders.”
Steve Smith, Chairman of
The PRS REIT plc
HIGHLIGHTS
5,425
NEW HOMES
BUILT
Asset performance is excellent, and rental
demand remains strong.
3
The PRS REIT plc Annual Report & Financial Statements 2024
Year to
30 June 2024
Year to
30 June 2023
Change
Revenue
£58.2m
£49.7m
+17%
Net rental income
£47.3m
£40.2m
+18%
Operating profit
£111.7m
£58.9m
+90%
Profit after tax
£93.7m
£42.5m
+120%
Basic earnings per share
17.1p
7.7p
+122%
EPRA earnings per share
1
3.7p
3.1p
+19%
Net assets at 30 June
£731m
£660m
+11%
IFRS NAV and EPRA NTA per share
2
133.2p
120.1p
+11%
At 30 Sept
2024
At 30 June
2024
At 30 June
2023
Year-on-
year change
Number of completed homes
5,425
5,396
5,080
+6%
Estimated rental value (“ERV”) per annum
£67.5m
£65.1m
£55.0m
+18%
Number of contracted homes
151
180
444
-59%
ERV per annum
£1.6m
£1.4m
£3.8m
-63%
Completed and contracted sites
72
72
71
+1%
ERV per annum of completed and contracted sites*
£69.1m
£66.5m
£58.8m
+13%
Rent collected
(as a percentage of total rent
invoiced for the period)
100%
99%
99%
–
*
based on all completed units being occupied/income producing
Financial
Operational
Key points
1
A full reconciliation between IFRS profit and EPRA earnings can be found in note 16 of the Financial Statements
2
A reconciliation of IFRS NAV to EPRA NTA can be found in note 29 of the Financial Statements
4
The PRS REIT plc Annual Report & Financial Statements 2024
HIGHLIGHTS
3
Like-for-like blended rental growth on investment property 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
HIGHLIGHTS
Profit after tax
▲
120% to £93.7m (2023:
£42.5m), and EPRA earnings per share
up 19% to 3.7p (2023: 3.1p) – reflects
significant rise in revenue and very strong
portfolio management, including costs
Operating profit
▲
by 90% to £111.7m
(2023: £58.9m), reflecting the higher gains
of £73.4m from fair value adjustments
on investment property compared to the
prior year (2023: £25.4m)
>
ERV continued to grow strongly in FY24
>
yields softened slightly in FY24 to 4.59% from 4.47%
(FY23: yields softened to 4.47% from 4.13%)
>
the softening in yields in FY24 were more than offset
by the increase in ERV
Net asset value up 11% to £731m/133.2p
per share at 30 June 2024 (2023:
£660m/120.1p per share), driven by
strong ERV growth
>
as at 30 June 2024, ERV was estimated to be £5.4m
higher than passing rent (2023: £5.1m higher), another
indicator of strong rental demand
>
EPRA NTA increased by 11% to 133.2p per share
(2023: 120.1p)
Another year of excellent portfolio
performance:
>
rent collection at 99% (2023: 99%);
>
occupancy at 96% at 30 June 2024 (2023: 97%) c.50
units handed over on one site at the end of May have
adversely affected this rate by 1% due to 40 of these
units remaining unlet at 30 June. Including all homes
where a letting had been agreed (with applicants
passing referencing and having paid a rental deposit),
but occupation had not taken place by 30 June 2024,
occupancy was 98% (2023: 98%);
>
gross arrears at £1.7m at 30 June 2024 (30 June
2023: £1.0m). As at 31 July 2024 gross arrears stood
at £1.3 million;
>
like-for-like blended rental growth
3
of c.12% over the
year on stabilised sites (where all units were completed
and either all, or nearly all, had been let at the end of
the comparative period)
>
re-lets to new tenants achieved c.15% rental growth
(2023: c.12%);
>
affordability (average rent as a proportion of gross
household income) remains very strong at 23% as at
30 June 2024 (2023: 22%); and
>
property costs continued to be well managed – the
deduction from gross to net rent across the portfolio
was 18.8% (2023: 19.1%).
An additional 316 new homes were added
to the portfolio over the year taking it
to 5,396 completed homes at 30 June
2024, up 6% year-on-year (2023: 294 new
homes added; 5,080 completed homes)
>
ERV of the 5,396 homes at 30 June 2024 was £65.1m
p.a. (30 June 2023: 5,080 homes with ERV of £55.0m
p.a.)
>
a further 180 homes with an ERV of £1.4m p.a. were
under way at 30 June 2024
5
The PRS REIT plc Annual Report & Financial Statements 2024
Outlook
Requisition event
In light of the excellent results and rent
collection, the Company is currently reviewing
the target dividend for FY25, and expect to
provide an update to the market in the Q1
Trading Update
Current trading remains very strong Q1 FY25
(1 July – 30 September 2024)
>
portfolio increased to 5,425 completed homes, with ERV
of £67.5m p.a. at 30 September 2024
>
a further 151 homes with an ERV of £1.6m p.a. were
under way
>
occupancy high at 98%
>
rent collection very strong at 100%
>
like-for-like rental growth on stabilised sites over the year
to 30 September 2024 was c.12%
>
affordability (average rent as a proportion of gross
household income) remains very healthy at 24%
Once all the existing sites are completed and
homes let, the portfolio will comprise c.5,600
homes, with ERV of £69.1m p.a.
>
the majority of the 151 homes currently under way are
expected to be completed by the end of the first calendar
quarter in 2025
Prospects remain very positive
>
structural shortage of quality family rental homes in the
UK; the number of properties available to rent is at a
14-year low
4
>
under supply exacerbated by private landlords exiting
rental market, weak sales market and rising rental demand
>
Zoopla, a leading UK property website, stated in
September 2024 in its Rental Market Report that
high demand and a low supply of properties continue
to keep rents high and that there are still 25% fewer
properties available in 2024 compared to 2019. It
anticipates that potential further tax changes will result
in more landlords selling and that rents will continue to
rise, with the supply/demand imbalance set to remain
into 2025.
A Requisition Notice, received on 29 August
2024, was withdrawn on 13 September
2024 following shareholder discussions
and an agreement with the Requisitioning
Shareholders, including on Board changes
4 TwentyCi https://www.twentyci.co.uk/resources/
Approx 82% of the current £427m
of investment debt is fixed at an
average interest rate of 3.8% over
an average term of 16 years
Total dividends of 4.0p per share
declared in FY24 (2023: 4.0p) with
dividends covered on an EPRA
run-rate basis from March 2024
Average net investment yield on
the portfolio softened slightly to
4.59% (30 June 2023: 4.47%)
EPRA loan to value (“LTV”) on
portfolio continues to be low at
36% (2023: 37%)
6
The PRS REIT plc Annual Report & Financial Statements 2024
HIGHLIGHTS
STRATEGIC
REPORT
Largest portfolio of single-family rental homes in the UK
Over the financial year, 316 new rental homes were added
successfully to the portfolio, taking it to 5,396 completed homes
at 30 June 2024 (30 June 2023: 5,080 completed homes),
a 6% increase. A further 180 homes were contracted at that
date and were at varying stages of the construction process.
We currently expect that most of these 180 homes will be
completed by the end of the first quarter of calendar year 2025.
The ERV of the 5,396 completed homes is £65.1 million per
annum (30 June 2023: £55.0 million per annum on 5,080
completed homes), an 18% rise year-on-year. The percentage
increase in rental value over the year compared to the
percentage increase in the number of completed homes over
the same period mainly reflects rental growth over the period.
The ERV of the additional 180 homes currently under way is
£1.4 million per annum, taking the total ERV of the portfolio to
around £66.5 million per annum.
The Company’s homes are spread across 72 sites (2023:
71 sites), mainly in the major regions of England, including the
North-West, North-East, Yorkshire, the Midlands, the South-
East (excluding London) and East of England. One site is
located in North Wales and another in Central Scotland.
Very strong asset performance
As expected, The PRS REIT’s assets performed strongly over
the financial year. Occupancy and rent collection (measured
as rent collected relative to rent invoiced in a given period)
remained very high, with rent collection at 99% (2023: 99%) and
occupancy at 96% at 30 June 2024 (2023: 97%), with 5,181
homes occupied out of 5,396 completed homes. This rate was
adversely affected by an additional tranche of c.50 units (c.1%)
on one site that were made available at the end of May 2024. Of
these, 40 were unoccupied at the end of June 2024. Including
all homes where a letting had been agreed, with applicants
passing referencing and having paid a rental deposit, but
occupation had not taken place by 30 June 2024, occupancy
was 98% (2023: 98%).
Like-for-like rental growth over the year on stabilised sites
(where all units are completed and let, or nearly all let, at the
end of the comparative period) was c.12%. This reflected a
blended growth rate of c.15% on re-lets to new tenants and
c.10% on renewals with existing tenants. Gross rent arrears
remained modest despite the growth in the portfolio, standing at
£1.7 million at 30 June 2024 (2023: £1.0 million). The 30 June
2024 arrears number was higher due to the year end falling on a
weekend, as at 31 July 2024 gross arrears stood at £1.3 million.
An important statistic is the portfolio’s affordability ratio, which is
measured as average rent as a proportion of gross household
income. This is currently at a very healthy level of 23% (2023:
22%) demonstrating a strong tenant base and wage increases.
It is also well within the Office for National Statistics
5
guidance
that rent should be less than 30% of tenants’ gross household
income.
Net rental income over the financial year increased by 18% to
£47.3 million (2023: £40.2 million). The rise was driven by a
combination of three factors: a full year’s rental contribution from
properties that had been completed and let part-way through the
prior financial year; increased unit numbers; and rental growth.
The portfolio’s excellent asset performance to date
demonstrates the continuing need for high-quality family rental
homes. Supply side issues have worsened over the year, with
private landlords continuing to exit the market, while demand
has been further fuelled by higher interest rates and general
economic uncertainty. These factors have put further obstacles
in place for potential homeowners.
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 2024. The Company’s portfolio
of rental homes continued to perform
very strongly, and the Group is now
over 99% through its current delivery
programme. When completed, the
portfolio is expected to comprise
c.5,600 homes, with estimated rental
value (“
ERV
”) of £69.1 million p.a.
5
9
The PRS REIT plc Annual Report & Financial Statements 2024
Chairman’s Statement
In its latest Housing Insight Report, published in September
2024, Propertymark, the leading professional body for estate
and letting agents, commercial agents, auctioneers, valuers
and inventory providers, stated that overall demand continued
to outstrip supply, with around 8 new applicants registered for
each available property in July 2024, and that new instructions
trended downward pointing to the potential for further supply
constraints.
Zoopla, a leading UK property website, reported
in September 2024 in its Rental Market Report that while rental
inflation had slowed to the lowest level in almost three years,
it is cooling off a high base and still double pre-pandemic
levels. Zoopla stated that high demand and a low supply of
properties continue to keep rents high and that there are still
25% fewer properties available in 2024 compared to 2019. It
also anticipates that potential further tax changes will result in
more landlords selling and that rents will continue to rise, with
the supply/demand imbalance set to remain into 2025.
After the financial year end in July 2024, we extended
the Company’s Investment Advisory and Development
Management Agreements with Sigma PRS Management Ltd
(“Sigma PRS”), agreeing a reduced fee structure at the same
time. The two Agreements have been extended by two and
a half years from the end of their previous terms to 30 June
2029, but the reduced rates took effect from 1 July 2024, are
expected to result in immediate cost savings on a pro forma
basis of approximately 0.1 pence per annum on EPRA EPS,
or c.£0.5 million per annum, based on the Company’s Net
Asset Value as at 30 June 2024. The Company’s contractual
arrangements with Sigma retain important and valuable
contractual protections, including the Company’s right of
first refusal to acquire single family housing development
opportunities introduced by Sigma PRS. Sigma PRS operates
the largest build-to-rent platform in the UK and has established
a leading position in the single family homes market. The
Board believes that this provides the Company with significant
operational benefits and that Sigma PRS’s expertise and
experience is evidenced in the performance of the portfolio
and in particular the gross to net metric.
Financial results
Revenue, which is generated wholly from rental income,
increased by 17% year-on-year to £58.2 million (2023:
£49.7 million). This increase reflects a combination of strong
rental growth, a full year’s rental income from homes let
part-way through the prior financial year, and the increase in
completed homes. Non-recoverable property costs as a % of
revenue decreased slightly to 18.8% of revenue (2023: 19.1%),
benefiting from tight cost management by the Investment
Adviser as well as rental income growth, which together more
than offset higher costs and additional homes coming out of
warranty. Net rental income for the financial year rose by 18%
to £47.3 million (2023: £40.2 million).
Expenses in the year increased to £9.2 million (2023:
£8.3 million), reflecting portfolio growth.
The gain from the fair value adjustment on investment property
was £73.4 million (2023: £25.4 million), driven by the growth
in ERV which was marginally offset by average net investment
yield movements.
The independent valuer’s assessment of ERV on completed
and let properties at 30 June 2024 was approximately
£5.4 million (2023: £5.1 million) higher than passing rent;
it demonstrates strong market demand for the Company’s
product. The fair value of investment property is based on
the valuer’s estimate of ERV with a capital deduction from
investment value where appropriate to reflect the difference
between the passing rent and ERV.
Operating profit increased by 90% to £111.7 million (2023:
£58.9 million), which reflected the increase in gains from fair
value adjustments on investment property. These gains are
non-cash items.
Finance costs were higher, as expected, at £18.2 million
(2023: £16.5 million) reflecting the increased quantum of debt
and change in interest rates compared to the previous year,
as well as the Company’s utilisation of the variable rate RBS
investment debt facility during the year. The impact of the larger
quantum of debt and higher interest rate on more recent debt
issuance continues to be mitigated by the lower cost fixed rate
investment debt with Scottish Widows. Finance income from
short-term deposits in the year was £188,000 (2023: £49,000),
reflecting the full year of increased interest rates.
Profit after taxation increased by £51.2 million or 120% to
£93.7 million (2023: £42.5 million) while basic and diluted
earnings per share increased by 122% to 17.1p (2023: 7.7p)
on an IFRS basis.
The Group’s IFRS net asset value (“
NAV
”) per share and EPRA
net tangible asset (“
NTA
”) per share at 30 June 2024, both
increased to 133.2p (31 December 2023: 123.6p and 30 June
2023: 120.1p). This is an 11% increase over the prior year and
an 8% increase over the prior six months.
Net assets at 30 June 2024 were 11% higher year-on-year at
£731 million (30 June 2023: £660 million). This is after paying
dividends of £22.0 million in the year (2023: £22.0 million).
Debt facilities
As at the financial year-end on 30 June 2024, the Company
had £460 million of committed debt facilities available for
utilisation, of which nearly £420 million was drawn. This
comprised £427 million of investment debt facilities and
£33 million of development debt facilities.
Debt refinancing
At the beginning of the financial year in July 2023, the
Company refinanced its £150 million revolving credit facility
(“RCF”) provided by The Royal Bank of Scotland plc (“RBS”)
and Lloyds Banking Group plc, agreeing a £102 million
fixed-rate debt facility for 15 years with Legal and General
Investment Management (“LGIM”) and a £75 million floating-
rate debt facility for two years with RBS.
CHAIRMAN’S STATEMENT
STRATEGIC REPORT
10
The PRS REIT plc Annual Report & Financial Statements 2024
CHAIRMAN’S STATEMENT
This refinancing resulted in a number of significant benefits:
>
it extended the proportion of the Company’s overall debt
covered by long-term facilities to approximately 82% (with
the average term of the long-term facilities being 16 years).
Before this, approximately 63% of the Company’s overall
debt was covered by long-term facilities (with their average
term being 17 years).
>
it lengthened the maturity of the Company’s overall debt
facilities, with the average term for all debt increased
to 13.7 years at 30 June 2023, from 10.9 years at
31 December 2022; and
>
it reduced future annual debt amortisation costs. This
reflects the lower arrangement fees and a longer period of
amortisation.
Following the refinancing, our lending partners across our
£460 million of committed debt facilities are: Scottish Widows
(£250 million – investment debt); Legal and General Investment
Management (£102 million – investment debt); The Royal Bank
of Scotland plc (“RBS”) (£75 million – investment debt); and
Barclays Bank PLC (£33 million – development debt). The
majority of our debt (£427 million) is classed as investment debt,
with the £33 million debt facility from Barclays Bank available
to be drawn as development debt, enabling multiple sites to be
developed simultaneously.
The PRS REIT has total fixed long-term debt facilities of
£352 million, with an average blended interest rate of 3.8%.
This compares favourably with the average net investment
yield of 4.59% as at 30 June 2024. These long-term debt
facilities account for approximately 82% of the Company’s total
investment debt of £427 million.
The portfolio’s gearing remains low at 36% EPRA LTV (2023:
37%), and, in line with the Company’s Investment Policy, the
debt facilities are below the maximum gearing ratio of 45% of
gross asset value.
Environmental, Social and Governance
(“ESG”) practices
The PRS REIT is a member of the UK Association of Investment
Companies and applies the Association’s 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. This includes the review of
investment activity and performance. The day-to-day
management of ESG matters is delegated to the Investment
Adviser, Sigma PRS. Sigma PRS is also a signatory and
participant of the United Nations Global Compact.
As a landlord with thousands of homes across the UK, the
Board is very aware of the Company’s possible impact on
people’s lives and conscious of its societal responsibilities.
The potential for our homes and activities to contribute very
positively to the communities in which the Group operates is
high. For this to be achieved, the core proposition must be
right. First and foremost, the Group aims to provide high-quality,
energy-efficient, well-located homes that are well-maintained
and supported by high customer service levels. At the same
time, the delivery of new homes and new developments have
an impact on the environment, with the potential to be positive
or negative. Environmental considerations are rightly becoming
more and more important. In addition to these issues, the Board
places a high priority on fostering a sense of community within
developments and believes that the Company should play its
role in promoting and encouraging strong community bonds.
This approach drives the Group’s ESG activities and policies.
The Investment Adviser’s Report provides further details of
these, and I am very pleased to highlight the steps we are
continuing to take to generate environmental benefits, to deliver
a high standard of customer care and ensure that people enjoy
living in The PRS REIT’s homes and feel a sense of community.
The Board believes that the social activities that are regularly
organised across developments and the links forged between
charities, beneficiaries and the Company’s tenants, all help
to generate meaningful benefits both on an individual and
social scale. The feedback received from both residents and
beneficiaries is testimony to this and a number of examples are
provided in the Investment Adviser’s Report.
The Board aims to continue to widen the Company’s ESG
activities over the new financial year.
Requisition event and Board changes
As previously reported, the Board received a Requisition Notice
on 29 August 2024 from Requisitioning Shareholders. The
Requisition proposed Board changes, including the appointment
of Robert Naylor and Christopher Mills as Non-executive
Directors, with a view to the new Directors working with the
remaining Board members to undertake a review of options to
return value to shareholders.
Following a consultation process with both major shareholders
and Requisitioning Shareholders, undertaken by a Sub-
Committee of independent non-executive Directors not subject
to the Requisition, the Company announced on 13 September
2024, that the Requisition Notice had been withdrawn and that
the following changes would be taking place:
>
I will be stepping down as Non-executive Chairman of the
Company at the Company’s forthcoming AGM. I am nearing
the end of my term and the transition may help to facilitate
near-term change;
>
Geeta Nanda, Senior Independent Director, will become
Interim Chair at the AGM and lead the appointment process
for a new permanent, independent, non-executive Chair;
>
the Board will launch the appointment process immediately,
with support from external consultants to identify and
appoint a non-executive Chair with relevant experience; and
>
Robert Naylor and Christopher Mills will be appointed to the
Board as non-executive Directors and proposed for election
at the AGM.
11
The PRS REIT plc Annual Report & Financial Statements 2024
CHAIRMAN’S STATEMENT
Steffan Francis will remain as a non-Executive Director, ensuring
continuity of property experience. The succession plan for
Steffan Francis and Rod MacRae, currently scheduled for
2025 with their tenure coming up to nine years of service, will
be conducted in accordance with the AIC Code of Corporate
Governance and will balance the appropriate skills required.
The Board had originally expected to provide an update on
Strategy with these results. However, given the changes
to the Board, the Strategy will now be reviewed by the
newly-constituted Board and an update will be given when
appropriate. Further details are set out in the ‘Shareholder
Engagement’ section below.
As we stated previously on 13 September 2024, the Board
believes the agreement and changes reflect a balance of the
views of all shareholders. They also respect the principles of
good governance in orderly succession planning, and help to
ensure that a new independent Chair and any future Board
directors have the appropriate blend of skills and expertise.
In addition, the Board believes the agreement will allow the
Company to move forward and focus on value maximisation
for all shareholders.
Two Board changes took place earlier in the financial year.
On 10 October 2023, Karima Fahmy was appointed as
an Independent Non-Executive Director. Karima replaced
Jim Prower, who retired as an Independent Non-Executive
Director at the conclusion of the Annual General Meeting
on 4 December 2023. Karima is a corporate lawyer with
extensive experience of the UK property market, including the
residential sector and urban regeneration. The Board takes this
opportunity to thank Jim for his contribution to the Company
during his tenure and wishes him a happy retirement.
Outlook
We have added 29 new homes to the portfolio in the first
quarter of the new financial year, taking the portfolio to 5,425
completed homes at 30 September 2024, with a further
151 under way. The ERV of completed homes has risen
to £67.5 million per annum (30 September 2023: 5,129
completed homes with an ERV of £57.6 million per annum).
The performance of the portfolio remains excellent. Rent
collection in the first quarter was 100% (2023: 98%) and total
occupancy at 30 September was at 98% (30 September 2023:
98%), with 5,303 homes occupied out of the total of 5,425.
At that point, a further 86 homes were reserved for applicants
who had passed referencing and paid rental deposits, but
not yet taken occupancy. Total arrears at 30 September
2024 stood at £1.6 million (2023: £1.1 million). The like-for-
like blended rental growth on stabilised sites over the year to
30 September 2024 was c.12% (2023: c.10%).
We remain confident that the majority of the balance of 151 still
to be delivered will be completed by the end of this calendar
year, with the balance delivered over the course of the first few
months of calendar 2025. With this final tranche of homes, the
portfolio will comprise approximately 5,600 homes with an ERV
of £69.1 million per annum. Since March 2024, the annual 4p
per share dividend has been fully covered on a run rate EPRA
EPS basis. Dividend cover will continue to grow as construction,
completions and lettings advance, and as rental growth
continues. Reflecting our confidence in the ongoing performance
of the portfolio, strong rental demand and orderly delivery of the
remaining homes to be completed, we are currently reviewing
the target dividend for FY25, and expect to provide an update to
the market within the Q1 Trading Update.
We expect to declare
the interim dividend for the first quarter of the new financial year
in November 2024.
Currently, 82% of the Company’s long-term debt is fixed at
an average weighted cost of 3.8% over an average term of
16 years. With interest rates now tracking more favourably,
this gives the option to secure another fixed-rate, long-term
investment debt facility in 2025 to replace the short-term RBS
variable rate facility if the interest rate cycle continues to move
favourably. In the meantime, the Company has entered into
discussions for additional short-term debt facilities to ensure
funding for the completion of the portfolio.
In this my last Annual Chairman’s Statement and on behalf of my
fellow Directors, I would like to express our appreciation to all
those who have supported the establishment and growth of the
PRS REIT. It has been a ground-breaking venture and with the
support of investors, housebuilding partners, financiers, local and
central government, we have created the largest portfolio of single
family homes in the UK for the private rented market. In particular I
wish to express our appreciation of the truly excellent contribution
of our manager, Sigma. Sigma created the opportunity through its
relationships within the UK housebuilding sector and industry best
practices and have delivered excellent performance throughout
my tenure as Chairman.
Our homes are high-quality, energy-efficient and professionally
managed. They have been built for families and individuals
up and down the country and have been designed to be
attractive, long-term places in which to live, with a strong sense
of community. As we near the end of the delivery phase of the
portfolio, we are proud to have played a small part in alleviating
the UK’s acute need for housing, and for forging a new path in
the still emerging build-to-rent sector.
The PRS REIT’s business model remains firmly supported by
market fundamentals. Population growth, changing household
formations and low new housing volumes continue to drive
demand. We expect our homes to continue to rent very well.
The Board remains confident about prospects, with affordability
– average rent as a proportion of gross household income
– and asset performance both very strong. In line with our
announcement issued on 13 September, the newly-constituted
Board intends to review the Company’s strategy and will provide
an update when appropriate. The Company is fully focused on
maximising value for all shareholders.
Steve Smith
Chairman
7 October 2024
* 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.
STRATEGIC REPORT
12
The PRS REIT plc Annual Report & Financial Statements 2024
IFRS and EPRA performance measures
Under the European Real Estate Association (“
EPRA
”) 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.
KPI
Explanation
Performance
Year to
30 June 2024
Year to
30 June 2023
IFRS NAV
(see note 29)
Unadjusted net asset value.
133.2p per share
120.1p per share
EPRA NTA
(see note 29)
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.
133.2p per share
120.1p per share
IFRS EPS
(see note 16)
Unadjusted earnings per share.
17.1p per share
7.7p 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.
3.7p per share
3.1p 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
20,263
£’000
17,099
EPRA Net Initial Yield
(“NIY”)
(see supplementary
information, page 142)
Annualised rental income based on the cash rents
passing at the balance sheet date, less non-
recoverable property operating expenses, divided
by the market value of the property, increased with
(estimated) purchasers’ costs.
4.2%
4.1%
EPRA Cost Ratio
including direct vacancy
costs
(see supplementary
information, page 142)
Administrative and operating costs (including costs
of direct vacancy) divided by gross rental income.
34.6%
35.9%
EPRA Loan to Value
(“LTV”)
(see supplementary
information, page 143)
The Group’s net debt expressed as a percentage of
the investment property portfolio.
35.7%
36.6%
13
The PRS REIT plc Annual Report & Financial Statements 2024
Market dynamics
The Build to Rent (“
BtR
”) sector in the UK is playing an
increasingly important part in overall housing delivery. Its value
as an accelerant in the delivery of mixed-development sites
(those including private for sale, private rental and affordable
homes) is well recognised and BtR is adding thousands of extra
new homes to overall UK housing delivery. The UK BtR market
still remains relatively undeveloped, especially when compared
to more mature markets such as the USA and Germany.
The growth of UK BtR is being driven by the structural problems
of the owner-occupied and rental markets, both of which are
impacted by a severe shortage of properties, leading to strong
rental growth. Over the last 20 years rental growth has averaged
3.2% compared to earnings growth that has averaged 3.1%
over this period.
The new Labour Government is intending to reintroduce annual
home delivery targets through the National Planning Policy
Framework and has increased the previously discarded target of
300,000 new dwellings per annum to 370,000 new dwellings
per annum. We believe that BtR has the potential to be an
important contributor in the new drive for new homes.
The BtR sector has grown strongly over the last year. According
to data compiled by Savills for the British Property Federation’s
(“
BPF
”) and published in July 2024, BtR completions in Q2
reached record levels, with the sector starting to make an
appreciable difference to housing delivery across a growing
number of locations within the UK. The total number of
completed BtR units at the end of Q2 stood at 115,778 and
the total number of BtR homes in planning was 57,000 homes,
a near record level. However for the third quarter in a row the
number of completions remained above the number of starts
on sites. The continued slow-down in new starts is ascribed to
ongoing sector challenges, including build cost inflation, cost of
debt and the impact of economic and political uncertainty on
investors. The British Property Federation called for more action
to convert planning consents to starts on site and to bring
forward new schemes through the planning proceed in order to
service the huge rental demand.
STRATEGIC REPORT
14
The PRS REIT plc Annual Report & Financial Statements 2024
MARKET DYNAMICS
There is a substantial shortage of properties in the UK for both
the owner-occupied and rental sectors. CBRE, the global real
estate adviser, reported that the UK’s private rented residential
sector has lost about 400,000 rental homes since 2016 due
to growing cost pressures and higher mortgage costs. Private
landlords in the buy-to-let sector are still the largest provider
of rental properties in the UK. They have been under pressure
from an increasingly unfavourable tax regime, growing regulatory
burden as well as base rate rises, and this pressure is set to
continue. According to a report by UK Finance, the banking
trade body, the value of lending into the buy to let sector fell by
52% over the course of 2023 equating to a reduction in loans
from 25,280 in the last quarter of 2022 to just over 12,000 at
the same point in 2023. Savills also reported in August 2024
that sales of second homes and buy-to-let properties had risen
by 34% in the period 2021-2024 compared to the preceding
three years, with these sales accounting for one-in-six of all
property disposals, compared to one-in-fifteen in 2013-2014.
Challenges in the home ownership market have also continued
to fuel demand in the rental sector. The median house price to
income ratio at the end of 2023 was 8.1, according to the Office
for National Statistics, which although lower than the preceding
year (8.3), is still at historic highs while mortgage rates have also
risen sharply over the previous two years. The deposits required
for most mortgages still remain beyond the reach of many. By
comparison, the PRS REIT’s homes remain very affordable. At
30 June 2024, the average household income of a PRS REIT
tenant was £52,500 (30 September 2023: £51,000) and the
average rent was £1,005 per calendar month (2023: £934),
meaning that annual rent as a proportion of household income
was 23% (2023: 22%). This reflects a combination of stronger
wage inflation and the emergence of a wealthier cohort of
potentially disenfranchised would-be home buyers who have
entered the rental market.
The shortage of rental properties, with low stock levels and
relatively low availability, remains evident. A report from TwentyCI
and TwentyEA in early July 2024 stated that whilst some of
the previous year’s pressure in the rental market was easing,
availability remained at historic lows and that demand is still
outstripping supply. CBRE’s Mid Year Market Outlook 2024
forecasts that stretched affordability will exert a downward
pressure although this will take time to feed through, and
as such forecasts strong rent growth of 6% in 2024 for the
remainder of the year. A report from the Office for National
Statistics, published in July 2024, noted that average UK private
rents increased by 8.6% in the 12 months to June 2024.
In summary, it is clear that the market opportunity in BtR
remains significant and that the sector remains an important
means of fulfilling a social need and meeting demand for high-
quality, well-managed rental housing in the UK.
Private Rented Sector Reform
The recently-elected Labour Government has introduced the
Renters (Reform) Bill, which aims to change the law about
rented homes. A key proposal is reform of the grounds for
repossession, with the abolition of Section 21 “no fault”
evictions, thereby removing a landlord’s ability to evict tenants
without reason. Other proposals include the abolition of fixed-
term assured tenancies and assured shorthold tenancies, the
strengthening of timeframes in which landlords are required to
investigate and fix reported health hazards and a requirement
for rental properties to have an EPC rating of C or above by
2030. These proposals are likely to put further pressure on
private landlords to exit the sector.
In addition, the Government is targeting an increase in the
number of new houses to be built every year and has set out
a goal of 1.5 million new homes over the life of the Parliament.
BtR homes will be central to that delivery.
We are in favour of proposals that support the rights of tenants
to a decent home while also supporting responsible landlords.
As a professional landlord, the PRS REIT is in the market for
the long-term and does not view current proposals as likely to
materially adversely impact the Company’s operations.
15
The PRS REIT plc Annual Report & Financial Statements 2024
Portfolio analysis
As at 30 June 2024, the value of the Group’s completed
property portfolio was c.£1.1 billion (2023: c.£1.0 billion). The
investment value of all sites was £1.2 billion on completion
(2023: £1.1 billion). These valuations were arrived at
independently by Savills, the global real estate services
provider.
Regional split of the portfolio by
investment value – at 30 June 2024
The portfolio is geographically diversified and the regional split
by investment value at 30 June 2024 was as follows:
>
North West 52% (2023: 51%);
>
West Midlands 21% (2023: 21%);
>
South East 11% (2023: 11%);
>
Yorkshire 11% (2023: 11%);
>
North East 2% (2023: 3%);
>
Wales 2% (2023: 2%); and
>
Scotland 1% (2023: 1%).
Other key metrics – at 30 June 2024
>
Gross-to-net: the deduction from gross to net rent across
the portfolio for the year ended 30 June 2024 improved to
18.8% (2023: 19.1%).
>
Rent roll: the rent roll at 30 June 2024 was £65.1 million
(2023: £55.0 million) and the average rent was £12,060
per annum or £1,005 per month (2023: £10,831 per
annum or £903 per month).
>
Average size of site: the average size of site was 77
housing units (2023: 74 housing units).
>
Properties by bedroom number: the split between 1, 2, 3
and 4-bedroom properties was approximately 3%, 26%,
62% and 9% respectively (2023: 3%, 26%, 62% and 9%
respectively).
>
Bad debt: bad debt expense for the year was £0.3 million
(2023: £0.2 million) and the bad debt provision at the
year-end was £0.7 million (2023: £0.5 million) reflecting a
prudent approach in the current economic climate.
STRATEGIC REPORT
16
The PRS REIT plc Annual Report & Financial Statements 2024
PORTFOLIO ANALYSIS
Age groupings
The largest age grouping across the customer base at the time of sampling on 30 June 2024 was 26-35 years. This age group
represented 45% of the total customer base. It was also the largest grouping in 2023 although it accounted for a marginally higher
proportion of the total customer base at 46%. All other age groups remained largely consistent with 2023, with the exception of the
36-45 age grouping, which is more strongly represented in 2024 compared to 2023. It is considered this grouping includes potential
home buyers who have moved into the rented sector due to the difficulties in the for-sale sector.
2023
2024
Under 25
26-35
36-45
46-55
56-65
65+
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Household income bracket
Across the mid-ranges of household incomes, 2024 groupings are similar to 2023. The greatest changes between 2024 and 2023
are in the lowest and highest income brackets – with the most marked change in the, £65,000 plus gross income bracket, which
has increased sharply year-on-year. This was also the case in the prior year. We have seen more households on lower incomes
coming back into the portfolio although the average income as a whole across the portfolio has moved higher.
2023
2024
0%
5%
10%
15%
20%
25%
30%
35%
Under £25k
£26k-£35k
£36k-£45k
£46k-£55k
£56k-£65k
£65k+
17
The PRS REIT plc Annual Report & Financial Statements 2024
Distance travelled
We record the distance travelled by tenants from their previous address to their new ‘Simple Life’
6
home. The two largest
categories are those travelling ‘under 3 miles’ and ‘greater than 50 miles’. As the brand is nationwide, we believe that this
shows increasing brand awareness and that our model of site selection in and around major conurbations is capturing residents
moving for employment reasons.
Tenancies with children
Approximately 45% of households included children, which is broadly unchanged from last year. It is assumed that some in
the 26-35 year-old group are moving into homes with the intention of starting a family, but the high volume of renters without
children may indicate a tendency to defer or abandon family formation. The two largest groupings of tenants with children are
those with two or four plus children. This is similar to the prior year.
The data for both years are based on new applicant, regional data collected for the Simple Life Homes brand.
2023
2024
2023
2024
< 3 miles
3 -10 miles
10 - 50 miles
> 50 miles
0%
10%
20%
30%
40%
50%
60%
None
One Child
Two Children
Three Children
Four+ Children
0%
10%
20%
30%
40%
50%
60%
70%
PORTFOLIO ANALYSIS
6
‘Simple Life’ – The PRS REIT’s rental homes are marketed under the ‘Simple Life’ brand.
STRATEGIC REPORT
18
The PRS REIT plc Annual Report & Financial Statements 2024
Property portfolio – North West
Address
Units
Asset completed more
than 3 years ago
Debt pool
Empyrean (Lower Broughton 5), Salford M7 1GA
298
N
LGIM
Reynolds Place (Eaton Works), Walkden M28 3GW
148
N
LGIM
Canalside (Whitworth Way), Wigan WN6 7QF
145
Y
SWII
Prescot Park (Carr Lane), Prescot L34 1NS
140
Y
SW
Coppenhall Place (Bombardier), Crewe CW1 3JB
131
N
–
Beehive Mill, Bolton BL3 2NF
127
N
SWII
Holyoake Road, Walkden M28 3DL
123
Y
SWII
Baytree Lane, Middleton M24 2EL
110
Y
SW
Hilton Park (Chadwick Street), Leigh WN7 1RL
103
Y
SWII
Brookside Grange (Roch Street), Rochdale OL16 2NG
100
Y
SWII
Earle Street, Newton-le-Willows WA12 9XD
97
Y
SW
Highfield Place (Tower Hill 3), Knowsley L33 1DF
96
Y
LGIM
Abbotsfield (Reginald Road), St Helens WA9 4HX
92
Y
SWII
Shrewsbury Close (Tintern Avenue), Middleton M24 6JQ
88
Y
SW
Brookfield Vale Phase 1, Blackburn BB2 3TZ
85
N
BB
Havenswood (Newhaven Business Park), Eccles M30 0HH
84
Y
SWII
Hollystone Bank (Riverside College), Runcorn WA7 4DS
83
Y
SWII
Durban Mill, Oldham OL8 4JT
80
Y
SW
Our Lady’s (Our Lady’s School), Little Hulton M28 0HF
73
Y
SW
Norwich Green (Norwich Street), Rochdale OL11 1LL
70
Y
SWII
Coral Mill, Newhey, Rochdale OL16 3SS
69
Y
SW
Brookfield Vale Phase 2, Blackburn BB2 3TZ
69
N
RBS
Queen Victoria Place (Queen Victoria Street), Blackburn BB2 2QG
68
Y
SWII
Hamilton Square (Howe Bridge Mill), Atherton M46 6JQ
59
Y
SW
Juniper Grove (Leach Lane), St Helens WA9 4PJ
55
Y
SW
Woodford Grange (Woodford Lodge Phase 1&2), Winsford CW7 4EH
54
Y
SW
Rochwood Rise (Entwisle Road), Rochdale OL16 2LJ
54
Y
SWII
Woodbine Road (Mackets Lane), Halewood, Liverpool L25 9PB
50
Y
SW
Belmont Place (Owens Farm), Hindley Green WN2 4XS
50
Y
SW
Ribblesdale Place, Accrington BB5 5BQ
47
N
RBS
Highfield Green (Tower Hill 2), Knowsley L33 1DF
42
Y
SW
Chase Park, Ellesmere Port CH65 5DE
40
Y
SW
Harewood Close (Durham Street,) Rochdale OL11 1AH
38
Y
SWII
2,968
Number of units
52%
of portfolio by investment value
PORTFOLIO ANALYSIS
19
The PRS REIT plc Annual Report & Financial Statements 2024
Address
Units
Asset completed more
than 3 years ago
Debt pool
James Mill Way (Cable Street), Wolverhampton WV2 2QD
164
Y
SWII
Dracan Village at Drakelow Park Phase 1, Burton-on-Trent DE15 9UA
154
N
BB
Sutherland Grange (Sutherland School), Trench, Telford TF2 7JR
123
Y
SWII
Stonefield Edge (Bilston Urban Village), Wolverhampton WV14 0LA
123
Y
SWII
Ward’s Keep (Heathfield Lane Phases 1&2), Darlaston WS10 8QY
109
Y
SWII
Silkin Green, Hinkshay Road, Telford TF4 3PF
78
Y
SW
Galton Lock (Mafeking Road), Smethwick B66 2EG
63
Y
SW
Stanley Park (Stanley Potteries), Stoke ST6 3PP
63
N
LGIM
Baberton Grange, Plough Hill, Nuneaton CV10 9NZ
50
N
LGIM
Dracan Village at Drakelow Park Phase 2, Burton-on-Trent DE15 9UA
41
N
-
Kingmakers View, Wolvey, Hinkley, LE10 3JF
32
N
BB
Bluebell Manor (Dawley Road), Telford TF1 2LT
31
N
RBS
Lea Hall Gardens, Handsworth B20 2AP
31
Y
SWII
Spirit Quarters, Monkswood Crescent, Coventry CV2 1FG
29
Y
SW
Brickkiln Place (Brickkiln Ph1&2), Wolverhampton WV3 0BS
24
Y
SWII
Spirit Quarters, Milverton Crescent, Coventry CV2 1GN
20
Y
SW
Ashbank Heights, Werrington, Stoke, ST9 0JR
16
N
RBS
Brickkiln Place (Brickkiln Ph3), Wolverhampton WV3 0BS
7
Y
SWII
Charlton Gardens, Phase 1, Telford, TF1 6BN
7
N
RBS
Charlton Gardens, Phase 2, Telford, TF1 6BN
3
N
RBS
Property portfolio – West Midlands
1,168
Number of units
21%
of portfolio by investment value
PORTFOLIO ANALYSIS
STRATEGIC REPORT
20
The PRS REIT plc Annual Report & Financial Statements 2024
Address
Units
Asset completed more
than 3 years ago
Debt pool
Prince’s Gardens (Manor Top Phase 2), Sheffield S2 1EY
85
Y
SWII
Prince’s Gardens (Manor Top Phase 1), Sheffield S2 1EY
78
Y
SW
Ashfield Park, Station Road, Normanton WF6 2ND
72
N
LGIM
Pullman Green (Hexthorpe Phase 1), Doncaster DN4 0BE
69
N
RBS
East Hill Gardens (East Bank Road), Sheffield S2 3PX
58
Y
SWII
Yew Gardens, Granby Road, Doncaster DN12 1JU
53
Y
SW
Pullman Green (Hexthorpe Phase 3), Doncaster DN4 0BE
52
N
RBS
Pullman Green (Hexthorpe Phase 2), Doncaster DN4 0BE
49
N
RBS
Holybrook (Romanby Shaw), Bradford BD10 0EH
47
Y
SW
Pullman Green (Hexthorpe Phase 4), Doncaster DN4 0BE
39
N
BB
Park Grange House (Norfolk Park), Sheffield S2 3RE
24
Y
SW
Property portfolio – Yorkshire
626
Number of units
11%
of portfolio by investment value
PORTFOLIO ANALYSIS
21
The PRS REIT plc Annual Report & Financial Statements 2024
Address
Units
Asset completed more
than 3 years ago
Debt pool
Milard Grange (Houghton Regis Parcel 6), Houghton Regis LU6 6JZ
129
N
LGIM
Coppice Hill (Houghton Regis Parcel 8), Houghton Regis LU6 6JZ
113
N
BB
Base at Newhall (Harlow Phase 2), Harlow CM17 9LR
74
N
LGIM
Base at Newhall (Harlow Phase 1a), Harlow CM17 9LR
28
N
SWII
Fornham Place at Marham Park (Marham Park Parcel C), Bury St
Edmunds IP31 6NG
21
Y
SWII
Fornham Place at Marham Park (Marham Park Parcel D), Bury St
Edmunds IP31 6NG
16
N
SWII
Property portfolio – South East
381
Number of units
11%
of portfolio by investment value
PORTFOLIO ANALYSIS
STRATEGIC REPORT
22
The PRS REIT plc Annual Report & Financial Statements 2024
Property portfolio – North East
160
Number of units
2%
of portfolio by investment value
Address
Units
Asset completed more
than 3 years ago
Debt pool
Bracken Grange (Brackenhoe), Middlesborough TS4 3AE
80
N
LGIM
Kirkleatham Green, Redcar TS10 4GY
80
N
RBS
Address
Units
Asset completed more
than 3 years ago
Debt pool
Dutton Fields (Airfields), Deeside CH5 2RD
99
N
LGIM
Property portfolio – Wales
99
Number of units
2%
of portfolio by investment value
PORTFOLIO ANALYSIS
23
The PRS REIT plc Annual Report & Financial Statements 2024
Property portfolio – Scotland
75
Number of units
1%
of portfolio by investment value
Address
Units
Asset completed more
than 3 years ago
Debt pool
Bertha Park, Perth PH1 3JE
75
N
SWII
SW
: Scottish Widows £100m long term investment debt fixed rate facility,
SWII
: Scottish Widows £150m long term investment debt fixed rate facility,
LGIM
: Legal and
General Investment Management £102m long term investment debt fixed rate facility,
RBS
: £75m short term investment debt variable rate facility,
BB
: Barclays short
term £33m development debt variable rate facility
PORTFOLIO ANALYSIS
STRATEGIC REPORT
24
The PRS REIT plc Annual Report & Financial Statements 2024
Coral Mill
Durban Mill
Woodbine Road
Baytree Lane
Prince's Gardens - Phase 1
East Hill Gardens
Woodford Grange
Highfield Green - Phase 2
Park Grange House
Shrewsbury Close
Hamilton Square
Juniper Grove
Prince's Gardens - Phase 2
Yew Gardens
Spirit Quarters - Monkswood Crescent
Spirit Quarters - Milverton Crescent
Holybrook
Chase Park
Prescot Park
Wards Keep
Earle Street
Canalside
James Mill Way
Empyrean
Abbotsfield
Hollystone Bank
Hilton Park
Galton Lock
Highfield Place - Phase 3
Sutherland Grange
Havenswood
Stonefield Edge
Reynolds Place
Harewood Close
Rochwood Rise
Norwich Green
Brookside Grange
Our Lady's
6
16
6
99
8
24
4
12
24
8
12
8
8
24
10
10
12
9
7
3
18
24
18
39
40
189
20
40
23
11
28
18
24
57
65
10
11
17
42
5
39
64
38
82
58
35
41
34
76
41
43
54
44
27
19
33
23
107
53
58
92
105
10
64
37
68
46
68
81
26
50
59
28
43
53
42
62
6
8
20
20
23
5
8
2
8
31
2
1
7
14
9
16
15
14
19
8
6
4
6
24
10
16
20
4
6
69
80
50
110
78
58
54
42
24
88
59
55
85
53
29
20
47
40
140
109
97
145
164
298
92
83
103
63
96
123
84
123
148
38
54
70
100
73
Total 1 Bed
Total 2 Bed
Total 3 Bed
Total 4 Bed
Development portfolio – mix by property size
PORTFOLIO ANALYSIS
25
The PRS REIT plc Annual Report & Financial Statements 2024
Total 4 Bed
498
9%
Total 1 Bed
Total 2 Bed
Total 3 Bed
175
3%
1,426
26%
3,378
62%
TOTAL
5,477
Coppenhall Place
Beehive Mill
Silkin Green
Queen Victoria Place
Base at Newhall - Phase 2
Milard Grange - Parcel 6
Dutton Fields
Belmont Place
Ashfield Park
Stanley Park
Bracken Grange
Kirkleatham Green
Coppice Hill - Parcel 8
Brickkiln Place - Phase 1 & 2
Brickkiln Place - Phase 3
Bluebell Manor
Fornham Place at Marham Park - Parcel C
Lea Hall Gardens
Pullman Green - Phase 1
Pullman Green - Phase 2
Holyoake Road
Ribblesdale Avenue
Base at Newhall - Phase 1a
Fornham Place at Marham Park - Parcel D
Dracan Village at Drakelow Park Phase 1
Dracan Village at Drakelow Park Phase 2
Brookfield Vale Phase 1
Brookfield Vale Phase 2
Bertha Park
Baberton Grange, Plough Hill
Pullman Green - Phase 4
Kingmakers View, Wolvey, Hinkley
Charlton Gardens, Phase 1, Telford Phase 1
Charlton Gardens, Phase 2, Telford Phase 2
Ashbank Heights, Werrington, Stoke
Pullman Green - Phase 3
24
38
11
17
14
6
32
6
26
18
39
40
25
10
17
8
23
14
60
12
8
37
13
28
12
22
10
93
82
59
47
49
108
61
33
46
45
41
40
88
10
6
14
13
28
42
35
52
33
9
8
109
26
51
53
49
36
14
7
8
4
11
15
6
11
4
1
3
4
11
2
19
8
2
6
4
4
4
27
12
32
5
12 2
3
2
2
30
4
18
131
127
78
68
74
129
99
50
72
63
80
80
113
24
7
31
21
31
69
49
123
47
28
16
154
41
85
69
75
50
39
32
7
3
16
52
PORTFOLIO ANALYSIS
STRATEGIC REPORT
26
The PRS REIT plc Annual Report & Financial Statements 2024
Investment strategy and business model
Awards
Over the course of the year, a number of developments have been shortlisted or won awards while Simple Life
7
has been
recognised for its social impact as well as its technology. We are delighted to highlight the following:
NE INSIDER PROPERTY AWARDS
Residential Development of the Year 2024 (Kirkleatham Green)
(WINNER)
NW INSIDER RESIDENTIAL PROPERTY AWARDS
BTR Development of the Year 2024 (Brookfield Vale)
(SHORTLISTED)
LOVE TO RENT AWARDS
Tech in BTR 2023 (‘
MySimpleLife
’ mobile app)
(SHORTLISTED)
LOVE TO RENT AWARDS
Best BTR SFH Development 2023 (Stonefield Edge)
(
WINNER)
LOVE TO RENT AWARDS
Social Impact in BTR 2023 (Simple Life Homes)
(
WINNER)
CITYWIRE INVESTMENT TRUST AWARDS
Best Specialist Trust Award 2023 (The PRS REIT plc)
(
WINNER)
7
‘Simple Life’ – The PRS REIT’s rental homes are marketed under the ‘Simple Life’ brand.
27
The PRS REIT plc Annual Report & Financial Statements 2024
Business activities
The PRS REIT plc is a public limited company that was
incorporated in England on 24 February 2017. Together with its
subsidiaries, it is the only quoted Real Estate Investment Trust
(“
REIT
”) to focus purely on the Private Rented Sector (“
PRS
”).
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. It is delivering this through the establishment of
a large-scale portfolio of newly-constructed residential rental
homes for the private rented sector in or near towns and cities
in the UK, excluding London.
The Company’s scalable business model is able to deliver
new homes across multiple regions and sites. It utilises the
Investment Adviser’s PRS property delivery and management
platform (the “
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 has concentrated on traditional housing,
with broad appeal, and its portfolio comprises differing house
types, built to standardised specifications. They cater for most life
stages, including smaller houses for young couples and retirees,
and larger houses for growing families. The Company has also
invested in some low-rise flats to broaden its rental offering.
The Company’s homes are located across multiple sites in the
UK, outside London, with the largest proportion sited in the
Midlands and the North. Their locations have been carefully
chosen for their accessibility to main road and rail links, good
primary schooling, and proximity to centres of economic
activity, which promote long-term employment prospects. The
new-build nature of the assets means that they benefit from a
10-year building warranty, typically from the NHBC (National
House Building Council), and manufacturers’ warranties.
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 has
been building its portfolio in two ways.
>
In the first instance, Sigma PRS selects suitable
development sites, obtains detailed planning permission
and agrees a fixed-price design & build contract with one of
its construction partners. Thereafter, Sigma PRS manages
the delivery process on behalf of the Company.
Assets are always acquired with detailed planning consent
and fixed price design & build contracts, thereby minimising
the Company’s exposure to development risk. Construction
risk has been further mitigated with standard fixed-price
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
and an indemnity for losses incurred. Over 80% of the
Company’s assets have been sourced through this way.
>
In the second instance, assets are acquired by entering
into forward purchase agreements with Sigma Capital
Group Limited (“
Sigma
”), the holding company of Sigma
PRS. The assets are only acquired once fully completed
and let. Typically, they have been constructed by the same
construction partners and supply chain as other assets
whose development is described above, thereby ensuring
homogeneity of the Company’s housing stock. Completed
and stabilised developments may also be purchased from
other third-parties using approved construction partners.
INVESTMENT STRATEGY AND BUSINESS MODEL
STRATEGIC REPORT
28
The PRS REIT plc Annual Report & Financial Statements 2024
In both instances, assets are acquired at the valuation provided
by an independent valuer. The PRS REIT retains the right-of-
first-refusal to acquire and develop any sites sourced by Sigma
PRS that meet the Company’s investment objective and policy
subject to the availability of funding.
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
to scale the PRS REIT’s portfolio and to minimise development
and operational risks.
Dedicated Sigma teams manage legal due diligence, corporate
debt provision, site identification, development management,
accounting and financial reporting, brand representation, and
leasing and property management.
The efficacy of the Platform is well established and its scale
brings significant financial and operational benefits to the
PRS REIT. These include the Platform’s relationships with
development partners, which support the identification and
acquisition of new homes, the award-winning ‘Simple Life’
lettings brand, which has widespread consumer recognition,
and the Platform’s substantial economies of scale. These
elements have helped to facilitate growth opportunities, and
support income growth and cost control.
Dedicated finance team
Sigma has a dedicated PRS REIT accounting and financial
reporting team, which covers all aspects of the Company’s
finances. This includes: site acquisition; funding; board,
management and statutory reporting; performance monitoring;
forecasting; debt covenant compliance; and taxation.
Debt and legal teams
The debt and legal teams at Sigma use their extensive
knowledge of the PRS REIT and their longstanding relationships
with funders within the sector to secure bespoke, competitively
priced debt facilities. These are used to ensure sufficient
ongoing support for assets throughout their lifecycles. The legal
teams have also built-up strong relationships with funders’
advisers and this helps to ensure a streamlined and efficient
legal process when transferring assets across debt pools, which
drives optimum use of capital within the business.
Development team
Sigma has well-established relationships with construction
partners, central government, and local authorities. Key
construction partners include: Vistry Group including
Countryside Partnerships; Kellen Homes; Springfield Properties;
Lovell; Telford Homes; and Persimmon. Homes England, an
executive non-departmental public body sponsored by the
Department for Levelling Up, Housing and Communities, works
closely with Sigma towards the common goal of accelerating
new housing delivery in England.
Marketing team
The PRS REIT’s homes are marketed under Sigma’s ‘Simple
Life’ brand, which is widely recognised as a leader in the
single-family rental sector. The number of enquires received
from Simple Life’s marketing channels during lease up periods
is now consistently greater than those received from traditional
property portals.
Lettings management team
A specialist Sigma team of leasing and property management
professionals manage the pricing and the release of new homes
and oversee the customer experience across all properties.
Sigma has also developed an award-winning, bespoke tenant
app., which supports high customer service levels. It continues
to be enhanced with new functionality.
Asset management team
The asset management team is responsible for detailed reviews
of tenancies, and income and asset management, which are
undertaken on a weekly basis. This underpins the orderly
management of both tenancy renewals and new lets, supporting
optimal income predictability and cash generation. The scale of
Sigma’s broader operations outside the PRS REIT, means that
the Platform benefits from significant wider economies of scale,
including considerable purchasing power, which reduce costs
and provide greater long-term visibility of costs.
Geographic diversification
The PRS REIT’s concentration risk has been reduced by
creating assets across multiple locations and in different
regions. Certain locations demonstrate higher yielding profiles
(predominantly those in the North of England) while others
provide greater potential for capital appreciation (often in the
South of England). Proximity to good primary schools has
remained a key requirement, reflecting the Company’s focus on
the single-family rental sector.
In addition, no investment has been made in any single
completed PRS site or PRS development site that exceeds
10% 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 aims to represent a ‘gold standard’ in the private
rented sector, by providing high-quality, sensibly-priced rental
homes that are supported by high customer service standards.
The PRS REIT’s long-term approach to the ownership of its
assets also provides important reassurance to residents that
their tenancies offer longevity. The Group also actively fosters
initiatives that help to create a sense of community within the
Group’s developments.
INVESTMENT STRATEGY AND BUSINESS MODEL
29
The PRS REIT plc Annual Report & Financial Statements 2024
Investment restrictions
The Group observes the following investment restrictions:
>
the Group only invests in private rented residential houses
and apartments located in the UK (predominantly in
England);
>
the Group invests in assets that require development by
means of the Group’s forward funding model, (so long as
when completed they fall within the Company’s investment
policy). However, it does not undertake development
without planning consent being in place or if the gross
committed (but unspent) construction costs to the Group
of all such forward funded development exceeds 25% 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 exceeds 10% of the aggregate
value of the gross asset value of the Group at the time of
commitment); and
>
the Group does not invest in other alternative investment
funds or closed ended investment companies.
Equity and debt financing
As previously outlined, the PRS REIT has obtained funding via
equity raises from the capital markets and Homes England
and utilises gearing to enhance equity returns. The level of
borrowing, raised from banks and other institutions, 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 Company’s Investment Policy
requires the aggregate borrowings of the Group to be 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. Once the portfolio is fully stabilised, the Investment
Adviser expects gearing to settle to around 40% of gross asset
value. Further detail of the Company’s debt facilities can be
found in the Investment Adviser’s Report.
Derivatives
The PRS REIT uses 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 Company’s gearing limits as part of the
management of the 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).
INVESTMENT STRATEGY AND BUSINESS MODEL
STRATEGIC REPORT
30
The PRS REIT plc Annual Report & Financial Statements 2024
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. It is pleased to provide a report on the PRS
REIT’s activities and progress for the year ended 30 June 2024
and to outline the portfolio’s performance in the first quarter of
the new financial year ending 30 June 2025.
Operational review
Development activity and acquisitions
A total of 316 homes were added to the PRS REIT’s portfolio
in the financial year to 30 June 2024 (2023: 294 homes).
This included the acquisition, from Sigma, of a new, fully-let
development of 52 homes in Yorkshire. These new homes took
the total number of completed homes in the portfolio at the end
of June 2024 to 5,396, an increase of 6% on the same point
last year (2023: 5,080).
The combined estimated rental value (“ERV”) of the completed
homes in the portfolio increased by 18% year-on-year to
£65.1 million per annum (30 June 2023: £55.0 million
per annum). The majority of these homes are in six of the
eight major regions of England, with the remainder being a
development in Wales and another development in Central
Scotland.
There is a difference between ERV, used for valuation, and
actual passing rent paid by tenants. As at 30 June 2024, ERV
was estimated to be £5.4 million higher than passing rent (2023:
£5.1 million higher). This reflects the strong demand for the
Company’s homes. The fair value of the Company’s investment
properties as at 30 June 2024 is based on ERV with a capital
deduction from investment value where appropriate to reflect
the difference between the passing rent and ERV, with all
estimates compiled independently by Savills.
The table below provides further information on development
activity over the financial year, as well as comparative data for
the financial year ended 30 June 2023 and data for the first
quarter of the new financial year ending 30 June 2025.
At
30 September
2024
At
30 June
2024
At
30 June
2023
Number of completed homes
5,425
5,396
5,080
ERV per annum of completed homes
£67.5m
£65.1m
£55.0m
Completed sites
68
68
63
Contracted sites
4
4
8
Number of contracted homes
151
180
444
ERV per annum of contracted homes
£1.6m
£1.4m
£3.8m
Construction resource
The construction resource provided by the Sigma PRS Platform
has national reach, enabling the expansion of the Company into
key population centres across the UK, primarily in England, and
supporting the creation of a geographically diverse portfolio.
There are many benefits for our construction partners
in partnering with us. These include strengthening their
ability to bid for land with local councils and improving their
operational efficiencies with their own housing delivery. This
partnership approach works 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. The
standardisation of housing type also means that completed
assets can be maintained and managed more efficiently.
Financial results
Income statement
The Group’s revenue (which is wholly derived from rental
income) increased by 17% over the year to £58.2 million
(2023: £49.7 million). After the deduction of non-recoverable
property costs, the net rental income was £47.3 million (2023:
£40.2 million). Administration expenses were slightly higher at
£9.2 million (2023: £8.3 million) reflecting portfolio growth.
The gain from the fair value adjustment on investment property
was £73.4 million, significantly higher than last year (2023:
£25.4 million). It continues to reflect a combination of higher
ERV offset partially by the negative impact of slightly higher
yields in the current and previous periods as asset values move
inversely to yield. Operating profit increased to £111.7 million
(2023: £58.9 million).
31
The PRS REIT plc Annual Report & Financial Statements 2024
Finance costs for the year were higher at £18.2 million (2023:
£16.5 million), which resulted from increased debt utilisation
and associated costs during the year, as the portfolio was
further built out, and higher interest rates. Finance income
from short-term deposits was up sharply to £188,000 (2023:
£49,000). The profit after taxation increased to £93.7 million
(2023: £42.5 million).
The basic and fully diluted earnings per share on an IFRS basis
for the year increased to 17.1p (2023: 7.7p).
Dividends
The total dividend for the financial year under review amounted
to 4.0p (2023: 4.0p) per ordinary share, declared and paid
quarterly as follows:
>
on 2 November 2023, the Company declared a dividend
of 1.0 pence per Ordinary Share in respect of the period
from 1 July 2023 to 30 September 2023, which was paid
on 1 December 2023 to shareholders on the register as at
10 November 2023;
>
on 31 January 2024, the Company declared a dividend
of 1.0 pence per Ordinary Share in respect of the period
from 1 October 2023 to 31 December 2023, which was
paid on 8 March 2024 to shareholders on the register as at
16 February 2024;
>
on 23 April 2024, the Company declared a dividend of
1.0 pence per Ordinary Share in respect of the period from
1 January 2024 to 31 March 2024, which was paid on
31 May 2024 to shareholders on the register as at 10 May
2024; and
>
on 1 August 2024, the Company declared a dividend of
1.0 pence per Ordinary Share in respect of the period
from 1 April 2024 to 30 June 2024, which was paid on
30 August 2024 to shareholders on the register as at 9
August 2024.
Balance sheet
The principal items on the balance sheet are investment
property of £1.1 billion (2023: £1.0 billion), cash and cash
equivalents of £18.1 million (2023: £13.2 million), long-term
loans of £385.1 million (2023: £248.4 million), short term loans
of £31.8 million (2023: £126.7 million) and trade and other
payables, accruals and deferred income of £16.3 million (2023:
£20.1 million).
Investment property includes completed assets and assets
under construction at fair value.
Debt financing
At 30 June 2024, the PRS REIT had the following debt
facilities:
>
£100 million term loan of 15 years with Scottish Widows,
fully drawn as at 30 June 2024 (2023: fully drawn) and
maturing in June 2033. Interest is fixed at 3.1% 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 2024 (2023: fully drawn) and
maturing in June 2044. Interest is fixed at 2.8% and the
loan is secured over assets allocated to Scottish Widows;
>
£102 million term loan of 15 years with Legal and General
Investment Management, fully drawn as at 30 June 2024
(2023: £nil) and maturing in July 2038. Interest is fixed at
6.0% and the loan is secured over assets allocated to Legal
and General Investment Management;
>
£75 million revolving credit facility (“
RCF
”) with The Royal
Bank of Scotland plc (“
RBS
”) for an initial term of two
years, to mid-July 2025. Interest was based on three-
month Sterling Overnight Interbank Average Rate (“SONIA”)
plus applicable margin and the loan was secured over
assets allocated to Lloyds Banking Group. As at 30 June
2024, £34.3 million had been drawn; and
>
£33 million (2023: £40 million) development debt facility
with Barclays Bank PLC, maturing in 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 2024, £32.6 million had been drawn
(2023: £15.2 million drawn).
Debt refinancing
At the beginning of July 2023, the Company refinanced its
£150 million RCF provided by RBS and Lloyds Banking Group
plc, replacing it with £102 million facility with Legal and General
Investment Management, together with a £75 million floating-
rate debt facility agreed with RBS; see table above. The
floating-rate facility provides flexibility to refinance this element
of debt at a potentially more favourable rate during the two-
year term of the loan.
The Company immediately deployed approximately
£115 million of these new facilities (i.e. the £102 million
fixed-rate facility and £13 million of the floating-rate facility) to
fund fully completed and stabilised sites. A further £21 million
of floating-rate debt was drawn down to fund those sites still in
the process of being completed and stabilised in the period to
30 June 2024. The remaining £41 million of these new facilities
is expected to be drawn in the next 6 to 12 months.
INVESTMENT ADVISER’S REPORT
STRATEGIC REPORT
32
The PRS REIT plc Annual Report & Financial Statements 2024
In September 2023, the Barclays Bank PLC development debt
facility was reduced from £40 million to £33 million.
Gearing on the portfolio remains low at 36% EPRA LTV (2023:
37%). Approximately 82% of the £427 million of investment
debt is now fixed rate at an average of 3.8%, which compares
favourably against the average net investment yield for valuation
purposes of 4.59%.
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% of the value
of the assets. Although the aggregate debt facilities total £460
million, the £33 million Barclays Bank PLC debt facility can be
drawn as development debt. This enables a larger number of
sites to be developed simultaneously. Once those sites that
have been partially funded by development debt have been fully
completed and homes let, the assets are refinanced using the
Company’s longer-term investment debt facilities. On this basis,
total borrowings will not exceed the maximum gearing level of
45% highlighted above.
Key performance indicators
The Company’s performance is tracked and the major key performance indicators (“
KPIs
”) are shown below:
KPI
June 2024
June 2023
Change
Rental income (gross)
£58.2m
£49.7m
+17%
Average rent per month per tenant
£1,005
£903
+11%
Number of properties available to rent
5,396
5,080
+6%
Average net investment yield
4.6%
4.5%
+2%
Non-recoverable property costs as a percentage of gross rent (gross
to net)
18.8%
19.1%
-2%
Fair value uplift on investment property
£73.4m
£25.4m
+186%
Operating profit
£111.7m
£58.9m
+119%
Earnings per share (“
EPS
”)
17.1p
7.7p
+119%
EPRA EPS
3.7p
3.1p
+19%
Dividends declared per share in relation to the period
4.0p
4.0p
–
Dividends paid during the period
4.0p
4.0p
–
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.
The valuation of the Group’s property assets is based on five
key drivers:
>
land purchase;
>
cost to build;
>
ERV;
>
gross to net income deductions; and
>
yield.
INVESTMENT ADVISER’S REPORT
33
The PRS REIT plc Annual Report & Financial Statements 2024
At
30 September
2024
At
30 June
2024
Number of completed PRS homes
5,425
5,396
ERV per annum of completed homes
£67.5m
£65.1m
Number of contracted homes
151
180
ERV per annum of contracted homes
£1.6m
£1.4m
Rental income, being passing rent rather than ERV, and gross
to net income deductions or operating costs, are the key
factors in determining net income. Small variations in these
can have a material impact on the valuation of property or the
net income levels. These drivers therefore form the basis of the
key performance indicators measured and monitored by the
Company. Other Special Assumptions applied in addition to the
key drivers, and used since inception include: all individual site
valuations have been treated assuming part of a larger portfolio
(in excess of £50 million); and an indirect purchase of a special
purpose vehicle holding title to the asset, so stamp duty is
assessed on a share purchase basis rather than as property.
As the majority of the property assets are now completed and
let (with costs incurred), our primary focus has moved to rental
income performance, operating expenses and average net
investment yield. Levels of rental income are dependent on the
number of completions and annual rent levels set at the time
of renewals and re-lets. The portfolio’s average rent at 30 June
2024 was £1,005 per calendar month, which reflects year-on-
year growth of 11% (2023: £903 per calendar month) and is
consistent with the like-for-like blended rental growth of c.12%
on stabilised sites during the financial year.
The number of completed homes is the other key determinant
of gross rental income. At the end of June 2024 the number of
completed homes was 5,396, up by 316 (6%) from 5,080 at the
same point in 2023. The delivery of the initial portfolio is nearing
its end, with only a relatively small number of homes remaining to
be delivered and the majority of assets completed and let.
Operating expenses determine the quantum of gross rental
income that is converted into net rental income. This, in turn,
determines the underlying profitability of the Group. In addition,
the independent valuers utilise industry-standard assumptions
on long-term sustainable operating expenses in performing
their valuation work. Monitoring real-life operating expense
levels against the industry-standard assumptions is therefore
key in assessing overall asset performance and re-affirming the
assumptions utilised by the independent valuers. The prevailing
level of operating expenditure of 18.8% (2023: 19.1%) is lower
than the long-term sustainable assumption and this reflects the
still relatively young age of the assets in the portfolio.
Valuation of the Group’s property assets, which is undertaken
by independent valuers, represents the largest component
of the balance sheet. Movements in the valuation between
balance sheet dates are therefore essential in understanding
profitability through the income statement and asset strength
on the statement of financial position.
The valuation uplift during the year reflects a combination of the
development surplus recognised on assets under construction
together with the impact of the revaluation of the portfolio
at the year end. The valuation uplift of £73.4 million (2023:
£25.4 million) is the result of the combined impact of ERV and
average net investment yield movements. Over the financial
year, the ERV of completed homes grew to £65.1 million from
£55.0 million, an 18% uplift, of which unit numbers account for
only 6%, while the average net investment yield has softened
from 4.47% to 4.59%. As asset values move inversely to
yield, the ERV growth has more than offset the increase in net
investment yield.
The portfolio’s average rental affordability ratio (measured as
rent paid as a proportion of gross household income) is very
healthy at 23% in 2024 (2023: 22%). This is after like-for-like
rental growth on stabilised sites of c.12% over the financial year
(2023: c.8%). The like-for-like rental growth on stabilised sites
is the annual rental growth on sites where all units have been
completed and let/nearly all let.
Post period review
Over the first quarter of the new financial year, 29 new homes
were added to the portfolio, taking the number of completed
homes at 30 September 2024 to 5,425, and the cumulative
ERV of completed homes to £67.5 million per annum. At the
end of September 2024, there were an additional 151 homes,
with a combined ERV of £1.6 million per annum, under way.
The portfolio’s total ERV of completed and not-yet-completed
homes therefore amounted to £69.1 million at 30 September
2024. It is currently expected the majority of the remaining
homes will be delivered by the end of the calendar year 2024.
The Company continues to work with one of its principal house
building partners to resolve a planning issue in respect of one
of its sites. Further details can be found in Note 18.
The table below provides further information of delivery activity
over the first quarter of the new financial year.
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The PRS REIT plc Annual Report & Financial Statements 2024
Percentage of tenants who responded that:
July 2022 –
June 2023
July 2023 –
June 2024
Welcome
survey
the team made it easy to apply
96%
96%
they were kept well-informed during the application process
89%
91%
they received all the information they required
91%
89%
the quality of their home met with their expectations
90%
87%
they would recommend ‘Simple Life’
96%
96%
Six-month
survey
they were still happy with their home
98%
94%
they were happy with the service provided
89%
90%
they felt they had been kept well-informed
88%
86%
they felt that the Simple Life team has been responsive and that are
satisfied with the service provided
89%
90%
the communal areas were well maintained
84%
88%
they feel part of a community
85%
89%
they felt their maintenance requests were fixed in a timely manner
77%
81%
they would recommend ‘Simple Life’
95%
94%
Renewal
survey
they were happy with their ‘Simple Life’ experience so far
96%
97%
they renewed their tenancy because they love the property
58%
54%
they renewed their tenancy because they love the area
20%
28%
they renewed their tenancy because of the rent (value for money)
5%
4%
they renewed their tenancy because ‘Simple Life’ offers a better service
than a ‘one-off’ landlord
17%
15%
they see themselves staying with ‘Simple Life’ for 4 years or more
58%
62%
they see themselves staying for 3 years or more
76%
78%
they would recommend ‘Simple Life’
94%
94%
All results are based on responses on a range from “neutral” to “strongly agree”. Tenants are given the option to respond on a
range from “disagree” to “strongly disagree”. These responses are not included in the results reported above. The total number
of respondents to the three surveys for the 12 months ended June 2024 was as follows: ‘Welcome’ survey – 287 (2023: 281);
Six-month survey – 246 (2023: 223); and Renewal survey – 660 (2023: 330).
INVESTMENT ADVISER’S REPORT
Resident feedback
Understanding how happy residents are with their homes and with customer service is extremely important and we obtain and track
resident feedback regularly. All tenants are sent a tenant satisfaction survey about one week into their tenancy and then again six
months later. This helps us to understand tenants’ experience from the outset, with our lettings and moving-in teams, and then once
settled into their tenancies. We also seek to ask tenants to complete a survey when renewing their tenancies.
The following table provides a summary of our surveys conducted in the 12-month periods to 30 June 2024 and to 30 June 2023.
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The PRS REIT plc Annual Report & Financial Statements 2024
Overall the results from the latest survey show a high level
of tenant satisfaction, and that there is a strong level of
consistency in tenant satisfaction between the two years.
The largest increases in tenant satisfaction between the two
years is in the Six-month survey results, and related to the
maintenance of communal areas, the timely resolution of
maintenance requests, and feeling part of a community. There
was a four percentage point rise in each of these categories.
It is encouraging to see that across the three surveys the
proportion of tenants who stated that they would recommend
Simple Life remained very high at between 94% and 96%.
The strength of the Simple Life brand has continued to grow.
>
Over the calendar year 2023 (Jan-Dec) the Simple Life
website received c.364,000 users to the website and over
16,500 enquiry submissions.
>
The main sources of enquiry to the Simple Life website for
information on newly-launched developments are: online
search (26%), word-of-mouth recommendation (16%) and
site signage (12%).
>
The main sources of enquiry to the Simple Life website for
information on all developments are: online search (26%),
word-of mouth recommendation (21%), and portal listings
(16%).
>
Simple Life’s following on Facebook, Instagram, YouTube at
31 July 2024 was 5,600+, 5,200+ and 1,100+ respectively.
At the end of July 2024, Simple Life had 200+ followers on
TikTok (the newest social media channel for the brand).
>
Over 5,300 tenants have signed up to the Simple Life
mobile app (74% of households) as at 31 July 2024.
Tenant initiatives
Affordability and energy calculator
As reported previously, an affordability calculator, based on the
Investment Adviser’s referencing criteria, is built into the Simple
Life website. It is designed as an aid to assist prospective
residents to determine how much monthly rent they can afford
relative to their earnings and outgoings.
Following the energy efficiency modelling that Sigma undertook
in 2022, the Simple Life website now offers an energy efficiency
calculator against our most common property types. Users are
able to input their usage habits and property details to obtain
an energy bill estimate.
Rental availability
The Simple Life website 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.
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INVESTMENT ADVISER’S REPORT
the
simple life chat
‘My Simple Life’ mobile app
The bespoke resident mobile app, ‘My Simple Life’, available on
Google and Apple devices, provides a convenient and efficient
‘one-stop shop’ for residents’ needs. It offers:
>
easy access to all important documents, such as 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 meter-readings, including ‘push’ notifications
when a new reading is ready to view;
>
access to an open forum, enabling residents on the same
development to engage with each other;
>
easy reporting of maintenance problems;
>
exclusive affiliate offers and discounts;
>
a dedicated health and wellbeing section;
>
latest news;
>
information on the local area; and
>
a section for tenant feedback.
The app continues to be updated, adding new functionality and
services. Over the period, this included:
>
the ability to add images to forum topics and comments
– particularly relevant for ‘lost and found’ enquiries and
furniture swaps; and
>
a diary function, allowing notifications to any upcoming
neighbourhood events, competitions and other important
memos.
There are further plans to expand and develop the app over the
new financial year.
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Affiliate offers
The range of affiliate offers available to tenants was broadened
over the year. New offers agreed included discounts from
Hello Fresh, Furniture Box, Blinds Direct, and byMATTER, the
innovative cleaning and home products company. These offers
supplement existing affiliate offers from Oddbox, Sky, Argos,
Dunelm, Wayfair, AO, Pretty Little Thing, Appleyard London
Florists, The Modern Milkman, ESPA, Virgin Wines, Simply
Cook, Smol and many more.
Podcast
The ‘Simple Life Chat’ podcast, headed by Capital Radio
presenter, Russ Morris, continues to explore topics of interest
to residents, with experts and residents participating in
discussions.
Online reviews
Simple Life
is registered with Trustpilot, the review platform,
and tenants are routinely invited to leave reviews. This
helps the Investment Adviser to identify any areas that need
improvement. There are over 960 reviews on Trustpilot and
Simple Life achieved an overall rating of 3.5 stars out of 5.0.
This compares to an average rating of 2.9 for the business
category of Property Rental Agency. All reviews are monitored,
with responses provided as appropriate.
Simple Life developments also feature on ‘Home Views’, a
dedicated review website for housing developments. They
have gained an average score of 4.29 out of 5.00 from
approximately 793 resident reviews (with the BtR benchmark
at 4.29).
INVESTMENT ADVISER’S REPORT
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Customer testimonials
A selection of customer testimonials are below.
“Everything is great. Homes are lovely
and everything is so simple living here. My
house is open plan which is great, garden
is massive! I’ve got 2 bedrooms which are
nice and spacious. I’ve always felt really
looked after here, the customer service
is great. I’ve lived here now 4 years and I
couldn’t see myself living anywhere else.
The views from the homes looking over
the River Mersey are always a dream.”
Jemma
(Hollystone Bank Resident),
Home Views
“I live in the 2 bedroom irwell property,
I love the open plan layout downstairs
and all of the appliances being built in
and hidden away. Lovely view of the
back garden through the large French
doors. The property management is so
easy through the Simple Life app, the
communication and customer service is
excellent.”
Jessica C
(Brookfield Vale Resident),
Home Views
“The development is great with a
lot of very friendly people who are great.
Also the facilities is great too report a fault
with my toilet it was fixed the same day . . .
amazing thank you Simple Life for allowing
me to live in a beautiful home.”
Sarah S
(Pullman Green Resident),
Home Views
“Great house and if you need
help they’re always there for you to fix
any problems promptly. Amazing and the
location of the property is perfect.”
Ash
(Charlton Gardens Resident),
Home Views
“Amazing company throughout. Our home
is stunning and we now have a home for
life.”
Michele
, Trustpilot
INVESTMENT ADVISER’S REPORT
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The PRS REIT plc Annual Report & Financial Statements 2024
Summary and outlook
The performance of the portfolio over the year was excellent and its performance over the first quarter of the new financial year
continues this trend. Occupancy and demand over the first quarter remained at very high levels and rent collection was extremely
strong. Affordability, which is average rent as a proportion of gross household income, continued to track very well too, both in
absolute terms and when measured against the guidance provided by the Office for National Statistics.
We expect the portfolio to continue perform strongly in the new financial year, since the factors driving demand remain unchanged.
Higher mortgage rates and general economic uncertainty will also stimulate the rental market.
We are approaching the end of the initial phase of housing delivery for the PRS REIT. By the end of calendar 2024, we expect to
have delivered the majority of the balance of homes that are still under construction. The remaining homes should be completed in
the first half of calendar 2025. At that point, the PRS REIT’s portfolio will comprise about 5,600 homes with an ERV of £69.1 million
per annum, underscoring its leadership position in single-family rental homes in the UK.
We look to the future with confidence and continue to focus our efforts on steering through remaining delivery, providing residents
with a high standard of customer care, and ensuring all developments remain attractive, environmentally sustainable, and
neighbourly places in which to live.
“The house is a cosy one, with lots of
modern facilities including the solar panel,
smart meters, security and zoned heating
system. The house is well equipped
with an oven, a washing machine with
the dryer, a dishwasher, a fridge. The
management is efficient and we always
get prompt responses.”
Su
, (Ashfield Park Resident),
Home Views
“Simple Life Homes is leading the way
how to manage rented accommodation.
They have thought of everything and it’s
clear they have invested time, effort and
money in making the process as smooth
for the tenant as possible. They have a
dedicated app and process to manage
your property, report problems, seek help
and much more. They have even included
user manuals for all of your appliances in
their app. That’s pretty impressive. I would
highly recommend!”
Nikola
, Trustpilot
“Just moved into my new Simple Life
home and I can’t wait for the journey!!
They have been very friendly, very patient
and understanding and I feel very lucky to
be picked for one of these lovely homes,
after searching for over 3yrs for a home.”
Sasha
, Trustpilot
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The PRS REIT plc Annual Report & Financial Statements 2024
Environmental, Social and Governance
ESG statement
The Company’s Investment Adviser (“IA”), Sigma PRS,
undertakes the day-to-day management of the PRS REIT plc’s
ESG strategy. Sigma PRS also takes responsibility for managing
ESG priorities at Company level and at an asset level. All the
Company’s assets are managed under the ‘Simple Life’ brand,
which is operated by Sigma PRS. The Investment Adviser
reports on ESG matters to the PRS REIT’s Board on a quarterly
basis, and there are regular meetings between Sigma PRS and
the Company on all matters of strategy, planning and direction.
Approach
Sigma PRS engages with leading industry bodies that seek
to promote high ESG standards and best practice, and has
signed up to the United National Global Compact (“UN Global
Compact”) as well as committing to the UN’s Sustainable
Development Goals (“
SDG
”) and to SDG Ambition, which
guides the UN’s goals.
The UN Global Compact is the world’s largest corporate
sustainability initiative and a special initiative of the United
Nations Secretary-General. It is designed to encourage business
leaders to implement universal sustainability principles, in
particular, the UN Global Compact’s Ten Principles and so help
to deliver the UN’s SDG. The Ten Principles 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.
SDG Ambition is focused on the UN’s target of Land
Degradation Neutrality (“
LDN
”) and its LDN principles.
Objectives include zero deforestation and enhanced biodiversity
through tree and wildflower planting programmes.
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.
EPRA’s 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 Investment Adviser regularly monitors the changing
legislative and reporting landscape, including the EU
Sustainable Finance Disclosure Regulation (“
SFDR
”), the UN
Principles of Responsible Investment (“
PRI
”), the Task Force on
Climate-Related Financial Disclosures (“
TCFD
”), the Taskforce
on Nature-related Financial Disclosures (“
TNFD
”), the EU’s
Corporate Sustainability Reporting Directive (“
CSRD
”), as well
as national and city-level regulations, which are increasing.
National Government initiatives on biodiversity, including
Biodiversity net gain, and energy are closely tracked and
Sigma PRS has incorporated these and other ESG factors into
investment advisory processes and operations. A summary of
Sigma PRS’s policy approaches in key areas is outlined below:
Opportunity review
>
ESG risks are assessed, reviewed and monitored, and
strategies are established, based on recognised frameworks
such as climate change and social needs.
Investment advice
>
ESG issues are listed and addressed in a summary
investment paper, which informs decision-making at the
Investment Adviser’s Investment Committee approval stage.
>
ESG costs, including those related to ongoing community
involvement, are determined and factored into investment
decision-making processes.
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The PRS REIT plc Annual Report & Financial Statements 2024
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 e.g. service
providers.
>
Policy reviews and updates are ongoing.
>
Good practice is established.
>
Carbon reduction opportunities are regularly researched
and reviewed.
>
Investment restrictions are screened to ensure ongoing
compliance.
>
The ability of investments to comply with ESG standards
is assessed.
Processes and strategies
The PRS REIT recognises its responsibilities regarding the
environment and also public priorities. The Government’s ‘10
Point Plan for a Green Industrial Revolution’, and “Net Zero
Strategy: Build Back Greener” set out pathways 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 continuing need for action in
areas such as energy and water consumption, non-fossil fuel
heating provision and biodiversity. In developing the Company’s
ESG agenda, Sigma PRS 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 legislative requirements and best practice.
The Investment Adviser aims to create residential environments
that promote societal and individual well-being through the
provision of:
>
high-quality, well-designed, energy efficient homes;
>
long-term tenancies;
>
well-located developments which offer ready access to
centres of employment, good local primary education,
public transport and retail centres;
>
professional repair and maintenance;
>
high levels of customer service
>
regular community events; and
>
active engagement and support for local charities, clubs
and groups.
Environmental impact and data
The Company is aware of the impact that its activities have
on the environment and remains highly motivated about
taking action to minimise and mitigate any negative aspects.
The energy efficiency of the portfolio’s homes is an important
aspect of their design and build. All the new homes added
during the financial year ended 30 June 2024 achieved an
Energy Performance Certificate (“EPC”) rating of at least a B,
and across the Company’s portfolio 87% of homes are rated A
or B. The balance have an EPC rating of C, which are typically
the flatted developments.
The EPC data for the Company’s homes as of 30 June 2024
is as follows:
EPC Rating
No. of Homes
%
A
47
1%
B
4,671
86%
C
678
13%
Total
5,396
100%
In line with goals to continually improve energy efficiency and
futureproof assets in line with government targets and the
Future Homes Standard, Sigma PRS is working closely with
construction partners to install new technologies. This includes
solar photovoltaic panels and electric vehicle (“
EV
”) charging
facilities where possible. Air Source Heat Pumps, District Heating
Networks, and Wastewater Heat Recovery Systems are also
considered for inclusion in design specifications.
Sigma PRS continues to work with its supply partners to monitor
and track greenhouse gas emissions and waste produced in the
construction and operation of homes. The data will help to direct
future initiatives to reduce carbon emissions. Sigma PRS is in the
process of undertaking a major carbon assessment project on
500 occupied homes. Data collation is not necessarily easy as
there is no legal obligation on customers, or other third parties to
provide information. The project is being conducted with arbnco
Ltd, which assists businesses in the assessment, measurement
and improvement of their ESG performance and the capture of
‘real life’ operational data will be immensely valuable in establishing
energy and carbon calculations for the wider portfolio.
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 a
company. Examples of Scope 1 include direct emissions from fuel
combustion on site such as boilers and fleet vehicles. Scope 2
emissions relate to indirect emissions generated from purchased
energy such as electricity, and Scope 3 emissions relate to
emissions created by the products we buy from suppliers and
that our customers use.
Additional information 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
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
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The PRS REIT plc Annual Report & Financial Statements 2024
Social engagement and impact
The Company places great importance on engaging with the
communities in which its developments are sited. Over the last
twelve months, the Company has supported over 40 charities,
schools and clubs across the country, either financially or
practically, through work undertaken by the Investment Adviser.
Residents are often involved in selecting good causes to
support.
A wide range of organisations and social initiatives are
supported, ranging from local clubs, promoting participation for
all, to national charities. Examples include: Smart Works, which
operates in Edinburgh, Manchester, Birmingham and London
and focuses on assisting women to secure employment and
improve the trajectory of their lives; Embassy Village based in
Manchester which aims to improve the lives of the homeless;
Barnardo’s Gap Homes Project, which supports young people
at the point of leaving care; and Capability Scotland’s Our
Inclusive Community Project, which delivers care, support and
education for disabled children and adults across Scotland.
The PRS REIT aims to build long-term productive relationships
with its charity partners and good causes and to involve tenants
as much as possible.
Large-scale engagements during the year included the
Simple Life Schools and Communities Biodiversity Project, in
partnership with Green the UK, and sponsorship of Speed of
Sight track days. The Simple Life Schools and Communities
Biodiversity Project is a countrywide project that involves
communities and schools engaging in nature-related activities,
including tree planting, vegetable cultivation, and wildflower
cultivation. During the year, eight schools and 194 children
benefited from nature-based activities and workshops. Speed
of Sight is a charity that provides driving experiences across
the country for children and adults with visual impairment or
other physical challenges. Over 90 individuals enjoyed the four
track days we sponsored, participating in an activity that might
otherwise have been unavailable to them and stimulate their
ideas of what they can achieve.
Examples of the feedback we have received from our social and
charitable efforts are below.
“Our journey together [with Simple
Life] has been an incredible display
of staff engagement, commitment and
passion for our cause, growing stronger with
every endeavour. Their unwavering support
speaks volumes about their commitment and
values, enabling us to continue making every
day special for the children and families we
support.”
Ashleigh Wood
, Zoe’s Place,
Middlesbrough
“Our partnership with Simple Life
Homes is invaluable… our joint
thinking achieves fantastic engagement
opportunities and shared success. Our most
recent venture was in the form of a sponsored
branded banner, a small item that has had
a huge impact. In just five days, the newly-
designed banner reached close to 100,000
views across our social media platforms,
opening doors to new audiences. This simple
gesture of support through sponsorship has
not only reinforced our impact - and enabled
us to reach more people who might want to
get involved with our charity - but it may have
also reached those who need the services our
amazing hospice team provides.”
Tommy Harrington
, Zoe’s Place Baby
Hospice, Middlesbrough
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
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“Not only did the children get a lot
from the day and retain their learning, but
the sense of community and togetherness that
has come from bringing volunteers together
is priceless and ongoing! I have had many
compliments about the new border on the
flower bed too. I feel like the ‘hard work’ put in
by the children has been very beneficial and I
have seen a difference in the children already
this term. A heartfelt thank you for involving
me and the kids in all the projects. An absolute
pleasure!”
Teacher, Dawley Primary School
“Once again may I thank you for
your continued support. We have
benefitted from both the donations to the
Foodbank and also to the Financial Inclusion
Hub. We are now officially more than a
Foodbank and have a fulltime Citizens Advice
worker with us and are in the process of
appointing a Strategic Support Officer or
Relationship Manager. Over this past year the
work of our part time CAB Officer saw 225
people and recovered over £200,000 of debt.
This was so successful that we have now
extended it to a fulltime contract with CAB.”
David Hughes, Chair of Trustees,
Atherton & Leigh Foodbank
“It was mind-blowing and to a certain
extent, one of the best days of my
life. I never thought there would have been a
possibility. Not with me being in a wheelchair,
but with a combination of things, I didn’t think
I’d be able to do it.”
Robert, participant in a Speed of Sight
track day
“On behalf of everyone at Smart
Works, thank you to Simple Life
Homes for supporting our charity and the
women we serve. We passionately believe that
when our clients are equipped with a perfect
high-quality interview outfit, expert one-to-
one coaching and self-belief, they have the
tools they need to get the job and transform
their lives. As Smart Works celebrates its 10th
anniversary, we want to double the number of
women helped across the UK to 10,000 women
a year by 2025. Thank you for joining our
mission to empower all women who need help
getting into work, at what could not be a more
crucial or important time.”
Kate Stephens, Smart Works CEO
“At Speed of Sight, we take immense
pride in our partnership with Simple Life
Homes and your dedication has significantly
contributed to the success of our initiatives.
Your commitment is truly aiding us in
achieving the charitable aims and objectives
of Speed of Sight.”
John Galloway, Co-Founder Speed of
Sight
“The funding from Simple Life has
enabled us to kit out the new team in
full matchday kit & a training top. This takes
some of the burden from the parents as they
have to pay monthly / yearly subs. We have
three to four boys that wouldn’t have signed
up for the season due to the additional cost
of the kit as most families in the area are from
an underprivileged background. To see the
smile on the boys faces when I got to training
and handed out the new kits is the reason I do
this.”
Ryan Doherty, Sundon Park Rangers U12
Football coach,
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
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The PRS REIT plc Annual Report & Financial Statements 2024
“Sutton’s junior section is entirely
volunteer led. Equipment, kit, league
fees and ground maintenance costs are all on
the rise, and we are very lucky and grateful
to be part of Simple Life Homes community
sponsorship programme. This programme
has allowed for the general playing conditions
at Sutton to improve. The support we
have received from Simple Life Homes is
unwavering and we are very excited for our
next crop of youngsters to bear the fruits of
the new and improved junior section, with new
and increased amounts of equipment, better
facilities and more opportunities for those for
whom Cricket may not have been an option
previously.”
Gary Greener, Sutton Cricket Club
Chairman, St Helens
“The support from
Simple Life
Homes
has helped our team develop way
above expectations. With their financial
and social support, it has been possible to
purchase more equipment which has allowed
for much more structured training, as well as
our numbers increasing enormously from the
start of last season. We are very grateful for
their support and look forward to a continued
relationship in the coming seasons to allow
Women’s cricket to continue to flourish.”
Leah Etheridge, Women’s team captain,
Sutton Cricket Club, St Helens
Resident focused initiatives
The Investment Adviser’s report covers many of our resident-
focused initiatives. They are designed to create specific
opportunities for residents to engage with each other and
to bring educational, social and other benefits. Two further
initiatives are highlighted below.
Outward Bound Trust
Sigma PRS partnership with The Outward Bound Trust,
‘Building for My Future’, has grown and a larger number of
young people have been able to participate in Outward Bound
Trust’s outdoor learning programmes, fully funded by Sigma
Capital Group. Young people from schools and youth groups
close to Simple Life homes as well as living in Simple Life
Homes enjoyed a week of outdoor challenges and adventure. A
selection of feedback from participants is below.
Rees
“The camp wasn’t like anything I have experienced, it is hard,
really hard but it is totally worth it. The most memorable part
of this experience was the hiking and the expedition. I have
acrophobia, my legs would tremble and my heart will beat
faster and faster. I have learnt the importance of resilience
and discipline after this trip, only the resilient and hardworking
people could enjoy the view after all the climbing!”
Laith
“The Ullswater Centre and the activities was my escape
from the city life. The 5 days I have spent there brought back
memories, made memories and made me new friends. It
taught me teamwork and how communication is effective when
working with a team. The experience taught me to be humble
and stay calm when things go the wrong way.”
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
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The PRS REIT plc Annual Report & Financial Statements 2024
Chloe
“Outward Bound was a once in a lifetime experience for me. I
feel like the course helped me in so many ways, I got to meet
new people and I stepped out my comfort zone in so many
situations. One of my biggest challenges was abseiling as I
have a fear of heights and I had to push myself to commit to
the abseil, however once I had completed it, I was very proud
of myself and this achievement. Outward Bound pushes you
physically and mentally, I learned different skills and discovered
new things about myself. One of those skills is being able to
communicate and put my ideas forward. I also discovered
that I’m a determined person and I like to encourage others
to succeed.”
12 Days of Christmas, December 2023
In our 12 Days of Christmas 2023 campaign, residents were
invited to nominate a local charity close to their hearts to
receive a £1,000 donation over the 12 days of Christmas. We
doubled our donation, enabling us to support 24 charities. We
are delighted to highlight below some of the feedback both
from charities and tenants following the campaign.
Helen, The Joshua Tree
“…the donation will support the vital work we do to support
families affected by childhood cancers. What’s even more
brilliant is that I live in Simple Life homes myself so put forward
the charity I work for.”
Joseph Buckmaster
“ I would like to nominate the charity Flat Pack Music of which
I am Artistic Director. We are a north west based music charity
focussed on changing the perception of and engagement
with classical music and opera, fostering closer communities
and helping with mental wellbeing. As a small charity securing
micro grants like this are crucial to showing we can carry out
the projects we aim to do. This in turn enables us to secure
larger pots of funding. We have just started a project to bring
professional musicians to Carehomes around the area. At no
cost to the homes. £1000 would go a huge way to helping any
of these projects.”
Tracey Roberts founder and CEO of
The Jade L Roberts Project
“I am absolutely delighted and overwhelmed. Your generosity
means everything to us and to the community. We know you
have a lot of choices when it comes to donating, and we are so
grateful that you chose to donate to our cause.”
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 (2023: 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 and ethnicity
Directors of The
PRS REIT Plc
2024
2023
Men
60%
80%
Women
40%
20%
Not specified / prefer
not to say
–
–
Directors of The
PRS REIT Plc
2024
2023
White British or other
White (including
minority white groups)
60%
80%
Mixed/ Multiple Ethnic
Groups
20%
–
Asian / Asian British
20%
20%
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
STRATEGIC REPORT
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The PRS REIT plc Annual Report & Financial Statements 2024
Principal risks and uncertainties
The Board is responsible for determining the nature and extent
of the principal risks that the Group is willing to take in achieving
its objectives and has carried out a robust assessment of the
principal risks facing the Group, including those that would
threaten the business model, future performance, solvency
or liquidity. The Board recognises that its ability to manage
risk effectively throughout the organisation is central to the
Company’s success.
The Board continually consider emerging risks and during the
year under review, the weakening macroeconomic environment
in the UK, including higher interest rates, inflationary pressures,
and the risk of recession, together with global conflicts in
Ukraine and the Middle East, were 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 Investment Adviser who are responsible and
accountable for identifying and managing risk as part of their
objectives. As part of this the Investment Adviser 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 is the policies, frameworks and
challenge provided to ensure that the Investment Adviser
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. Other Special Assumptions applied in addition to
the key drivers, and used since inception include: all individual
site valuations have been treated assuming part of a larger
portfolio (in excess of £50 million); and an indirect purchase of a
special purpose vehicle holding title to the asset, so stamp duty
is assessed on a share purchase basis rather than as 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 Investment Adviser, 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 Investment Adviser.
The Company appoints an external valuer 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 valuer by the providers of debt, and
expert review by further independent valuers 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 to net
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 Investment Adviser’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 Investment Adviser 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.
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The PRS REIT plc Annual Report & Financial Statements 2024
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.
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 Investment Adviser. 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 Investment Adviser is responsible for providing certain
asset 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 Investment
Adviser to retain its existing staff and/or to recruit individuals of
similar experience and calibre. Whilst the Investment Adviser
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 Investment
Adviser, there is no guarantee that the Investment Adviser
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 Investment Adviser but
not entirely within the Investment Adviser’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
Investment Adviser is required to devote such time and have
all necessary competent personnel and equipment as may
be required to enable the Investment Adviser to carry out its
obligations properly and efficiently. However, if the Investment
Adviser 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 Investment
Adviser to dedicate competent personnel to the Company’s
business, they may not be able to do so.
PRINCIPAL RISKS AND UNCERTAINTIES
STRATEGIC REPORT
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The PRS REIT plc Annual Report & Financial Statements 2024
PRINCIPAL RISKS AND UNCERTAINTIES
49
The PRS REIT plc Annual Report & Financial Statements 2024
The Board mitigates these risks by holding regular Board
meetings (at least four times per financial period), which are
attended by the Investment Adviser, whilst also having regular
informal meetings with the key members of the Investment
Adviser on a more regular basis. The Board’s Management
Engagement Committee also meets at least once a year to
consider the performance of the Investment Adviser and the
other outsourced professional firms and advisers engaged by
the Company. The Board actively engages with key personnel
of the Investment Adviser 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 Investment Adviser
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.
During the year the weakened macroeconomic environment
in the UK, and the UK election were identified by the Board as
key emerging risks. The risk of higher interest rates affecting
the Group’s financial performance and banking covenants was
of particular focus. The increase in interest rates charged on
the variable investment and development debt facilities were
partially offset by the increase in rental growth experienced in
the private rental sector and there were no covenant breaches.
Prior to the refinancing announced on 10 July 2023, this was of
particular focus as the Group had 37% of its investment debt
facilities on floating rates. Subsequent to the refinancing, the
Group now has 82% of its debt facilities as long-term, fixed
rate arrangements. The process of refinancing the Group’s
remaining variable rate investment debt was prolonged to
ensure that the best interest rates were obtained.
With regards to inflationary pressures, the Company remains
in a good position to manage and mitigate construction cost
increases, using fixed price fixed design & build contracts. The
majority 99% of the contracted development sites have now
been completed in relation to the target of c.5,600 units. To
date, inflation has not had a negative effect on the Company
other than some delays to the 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 remains strong and is
reflected in rising rents which have more than offset the
slight softening of yield which is included in the valuation of
our existing properties. The risk of recession has also been
considered, particularly in relation to possible increased tenant
default and the subsequent impact on financial returns. This
risk continues to be closely monitored and is mitigated by a
geographically diverse portfolio, the use of rental insurance
contracts where considered appropriate, and a continued
focus on identifying at an early stage where there could be
potential issues.
It would now appear that the UK economy is gradually turning
a corner. Following a technical recession in the second half
of 2023, GDP rebounded by 0.6% in the first 2 quarters of
2024. Inflation rates are now reducing and closer to the Bank
of England target levels and it is expected that interest rates
are likely to reduce further during the latter part of 2024 and
2025, providing some recovery for real household incomes. The
change of UK government in July 2024 was considered by the
Board in terms of potential policy changes in the sector and this
will continue to be monitored as the new Labour government
begins to bring in its new regime and approach to house building
in the UK. There are presently no specific policy changes that are
seen as providing additional material risks to the PRSR Group.
In relation to the conflicts in Ukraine and the Middle East, this
has not had a direct impact on the Group but are continually
monitored in terms of contributing to higher inflation and
interest rate environments.
The Board continues to monitor closely the 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
51 to 56.
PRINCIPAL RISKS AND UNCERTAINTIES
STRATEGIC REPORT
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The PRS REIT plc Annual Report & Financial Statements 2024
Stakeholder Engagement
and Section 172 Statement
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 provides
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 and ensures that it listens, 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 PRS
REIT’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 51 to 56. Section 172(1) of the Companies Act 2006,
requires Directors to act in the way they consider, in good faith,
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 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.
The Company does not have any employees and therefore
S172(1)(b) is not applicable.
To ensure that the Directors are aware of and understand
their duties, they are provided with all the 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
Company’s joint brokers, the Investment Adviser, the Company
Secretary, and the AIFM as and when appropriate.
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The PRS REIT plc Annual Report & Financial Statements 2024
Our stakeholders
Our customers
Our local communities and
environment
Our investors and funders
Who are
they?
Our tenants and their families.
Communities who live in and
around our properties as well
as local organisations and
enterprises, including the natural
surroundings of our properties.
The entities, institutions and individuals
who own shares in the Company
together with the lenders who provide
debt finance.
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.
>
Given the Company develops
real estate, and therefore its
assets have an impact on
the surrounding communities
and natural environment,
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.
>
Continued shareholder and
lender support is critical to the
sustainability of the Company and
delivery of the Company’s long-
term business growth strategy.
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.
>
Our Community Fund.
>
Support for local
organisations, such as
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.
>
Attractive returns on their
respective equity and debt
investments.
>
Delivery of strategy and financial
performance.
>
Execution of investment objective.
>
Effective communication of the
Company’s progress and ongoing
strategy.
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT
STRATEGIC REPORT
52
The PRS REIT plc Annual Report & Financial Statements 2024
Our customers
Our local communities and
environment
Our investors and funders
Ways we are
engaging
with them
>
Customer satisfaction
surveys.
>
Utilisation of an in-house
mobile app which provides
communication and
information between tenant
and landlord on a variety of
topics. The app includes a
community forum which is
monitored.
>
A resident engagement
survey is carried out once a
year to gain feedback in to
brand activity and customer
engagement.
>
Review platforms such as
Trust Pilot and Home Views
are monitored. All reviews
within the last 12 month
period have been responded
to and feedback circulated.
>
Residents give star ratings
for sub-contractors following
maintenance completions.
>
Further information on
how we engage with our
customers can be found on
pages 52 to 55.
>
Ensuring that engagement
with shareholders provides
an opportunity to discuss
ESG matters.
>
Fostering networks which
connect our occupiers
with local communities and
organisations, providing an
opportunity for feedback.
>
For further information on
the Group’s ESG policies
and performance please see
pages 41 to 46, and the full
report on the Company’s
website, www.theprsreit.com
>
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
shareholder attendance and queries
at its Annual General Meeting.
>
During the year, the Company
has specifically engaged with its
largest shareholders ahead of
the refinancing of the Company’s
debt facilities and extension of
the Investment Advisory and
Development Management
Agreements.
>
Communication through the
Company’s joint brokers.
>
Returns-focused strategy with clear
targets set.
>
Meetings held with substantial
shareholders, debt providers and
potential investors.
>
Regular formal and informal
communication with both equity
and debt providers.
>
Provision of information on the
Company’s website.
>
Further information as to how the
Company has engaged with its
shareholders can be found on
pages 51 to 56.
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT
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The PRS REIT plc Annual Report & Financial Statements 2024
Our customers
Our local communities and
environment
Our investors and funders
Impact of
engagement
on key
decisions
>
Any areas for improvement
identified and new processes
put in place.
>
Feedback themes for house
specification identified,
influencing specification
alterations to future
developments.
>
Sub-contractor star ratings
allows for the monitoring
of the performance of
partners, ensuring that sub-
contractors meet the Group’s
standards of customer care.
>
Seasonal events and
marketing activities, such as
summer ice cream dashes,
cinema nights, pizza events
and Christmas parades.
>
Key developments and new
functions to the mobile app.
>
Delivering properties that
target strong environmental
certifications and energy
efficiency.
>
Facilitation of resident
nominated charity support.
>
Promoting the mitigation
of carbon emissions on
existing properties including
installation of PV panels, EV
charging points, utilisation
of modern methods of
construction and reduction
of waste.
>
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.
>
The Board’s proposal on the final
total dividend for the 2024 financial
year of 4.0p per share (2023: 4.0p)
reflects the Board’s confidence in
the Company’s long-term financial
health and growth prospects.
>
The Board listened to shareholder
feedback and in July 2023, following
engagement with lenders, the LBG
/ RBS £150 million debt facility
was refinanced, and the Company
secured a £102 million facility of
fixed-rate debt for 15 years, together
with a further £75 million of floating-
rate debt agreed for two years,
providing the Company with the
flexibility to refinance this element
over that period.
>
The Board signed new terms
for the Investment Advisory
and Development Management
Agreements, as announced
on 9 July 2024. This extended
the existing relationship with
the Investment Adviser and
Development Manager (together
“the Investment Adviser”).
The Investment Adviser has
demonstrated its ability by
establishing the largest portfolio
of new-build family rental homes
in the UK. It also operates the
largest build-to-rent platform in the
UK and has established a leading
position in the single family homes
sector. Extending the relationship
has provided additional certainty to
shareholders, as well as immediate
cost savings. The contractual
arrangements retain important and
valuable contractual protections,
including the Company’s right of
first refusal to acquire single family
housing development opportunities
introduced by Sigma PRS.
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT
STRATEGIC REPORT
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The PRS REIT plc Annual Report & Financial Statements 2024
Our partners and suppliers
Our Investment Adviser
Who are they?
Construction partners, local authorities, Letting
Agent, AIFM, Joint Brokers, Company Secretary,
other suppliers and all other organisations we have
a direct relationship with including those set out on
page 62.
Sigma PRS Management Ltd.
Why are they
important to
us?
>
As an externally managed REIT, the Company
outsources all its administrative functions to
external service providers, who are critical to the
administration and running of the business.
>
Performance of the Investment Adviser is critical for
the Company to successfully deliver its investment
strategy and meet its performance targets.
>
The Investment Adviser must be able to
demonstrate a track record of success and be in
alignment with the Company’s values and success
criteria.
What matters
to them
>
Reliability and dependability of the PRS REIT.
>
Reputation of the Company and maintaining high
standards of business conduct.
>
Customer recommendations, enabling them to
win new/additional business.
>
Contributing to the success of the PRS REIT.
>
Collaboration and long-term partnerships.
>
Provision of support and clear direction from the
Board in terms of overall strategy and policy.
Ways we are
engaging with
them
>
Maintaining an open and active dialogue both
through formal Board meetings and regular
interaction outside of meetings.
>
Annual evaluation of key service providers.
>
Developing long term relationships with
suppliers.
>
Payment of suppliers in accordance with credit
terms which are typically less than 30 days.
>
The Board and Sigma PRS work together closely.
The Investment Adviser attends the quarterly Board
meetings and reports to the Board on progress
and performance.
>
The Management Engagement Committee of the
Board reviews the performance of the Investment
Adviser annually.
>
Regular informal and formal discussions between
members of the Board and the Investment Adviser,
together with members of the Audit Committee
and the Investment Adviser.
>
Further information as to how the Company has
engaged with the Investment Adviser can be found
on page 55.
Impact of
engagement on
key decisions
>
Through the Management Engagement
Committee process, the Board continues to
provide transparent and actionable feedback
to the Company’s service providers, which has
resulted in service providers continually looking
to improve processes and ensure that they are
aligned with the high standards of business
conduct expected by the Board.
>
Strategic oversight and clear direction by the Board
has been crucial in ensuring that the Investment
Adviser has been able to execute the Company’s
investment strategy effectively. This was specifically
enhanced through the process and outcome of
the extension of the Investment Advisory and
Development Management Agreements, which
provides Sigma additional certainty to deliver
the investment strategy for the long-term. The
Board has also supported the Investment Adviser
in refinancing the Company’s LBG / RBS £150
million debt facility, which enabled the successful
conclusion of this process.
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT
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The PRS REIT plc Annual Report & Financial Statements 2024
Principal decisions
Principal decisions have been defined as those that have a
material impact on the PRS REIT and its key stakeholders. In
taking these decisions, the Directors considered their duties
under section 172 of the Act.
Dividend and dividend policy
The Board made the decision to target a dividend of 4.0 pence
per ordinary share in respect of the year ended 30 June 2024,
and this target has been met.
The Board provides shareholders with the opportunity to vote
on the dividend policy of the Company at the Annual General
Meeting.
Debt refinancing
At the beginning of the financial year, the Company successfully
completed the refinancing of its £150 million revolving credit
facility provided by RBS and Lloyds Banking Group plc. A
£102 million facility of fixed-rate debt for 15 years, together
with a further £75 million of floating-rate debt agreed for two
years, were secured, providing the Company with the flexibility
to refinance this element over that period. These facilities were
established with Legal and General Investment Management
and RBS respectively.
Approximately 82% of the Company’s overall debt is now
covered by long-term facilities, which have an average term of
16 years, further protecting shareholder returns and supporting
the Investment Adviser to deliver on executing the Company’s
strategic objectives.
Extension of Investment Advisory and Development
Management Agreements
After the year end, the Company extended its existing
Investment Advisory Agreement and Development
Management Agreement with Sigma PRS Management Ltd.
At the same time, the Company agreed improved fee
structures in both agreements, resulting in immediate cost
savings.
Both agreements have been extended to 30 June 2029, which
is an extension of 2.5 years from the end of the previous term,
and the contract changes apply from 1 July 2024. Further
details can be found on pages 87 to 88.
Change of Directors
During 2023, the Company undertook a formal recruitment
process led by the Nomination & Remuneration Committee,
with the support of an independent search consultancy,
for the appointment of a new Board member. This process
actively encouraged a diverse pool of candidates who could
contribute specific skills and experience identified by the Board
and would support the Board’s commitment to diversity, in
line with the FCA’s targets under the Listing Rules. The Board
were pleased to announce the appointment of Karima Fahmy
as an Independent Non-Executive Director with effect from
10 October 2023.
During the year, Jim Prower stepped down from his role as
an Independent Non-Executive Director with effect from the
conclusion of the Annual General Meeting on 4 December 2023.
Further Board changes have been agreed as outlined in the
Chairman’s Statement.
By order of the Board
Steve Smith
Chairman
7 October 2024
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT
STRATEGIC REPORT
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The PRS REIT plc Annual Report & Financial Statements 2024
CORPORATE
GOVERNANCE
Chairman’s Introduction
Dear Shareholders,
I am pleased to introduce the Corporate Governance Report,
which covers the year ended 30 June 2024. The Board
recognises that a strong corporate governance framework helps
provide the foundation for an environment of trust, transparency,
and accountability, which is vital to the achievement of the
Company’s objectives.
During the period, the Board continued to work together
effectively, facilitating an environment of collaborative decision-
making that promotes the long-term success of the Company,
on behalf of our shareholders. This was enhanced with
Karima Fahmy who joined the Board as a Non-Executive
Director and a member of the Audit and Management
Engagement Committees on 10 October 2023, and was
elected by shareholders at the Annual General Meeting on
4 December 2023. As indicated in the Chairman’s Statement,
I will step down as non-executive Chairman at the Company’s
forthcoming AGM and will be succeeded by Geeta Nanda
as interim independent non-executive Chair at the AGM and
she will lead the appointment process for a new permanent,
independent, non-executive Chair. As announced on
13 September 2024, Robert Naylor and Christopher Mills
will be appointed to the Board as non-executive Directors
and proposed for election at the AGM following the date of
this report.
The following Corporate Governance Report sets out the
corporate governance principles that the Board has adopted,
how these have been applied and highlights the key governance
events that have taken place during the period.
Statement of compliance
The Board of The PRS REIT plc is committed to maintaining
high standards of corporate governance and considers that
reporting against the Principles and Provisions of the AIC
Code of Corporate Governance issued in February 2019 (the
“AIC Code”), provides better information to shareholders as it
addresses the Principles and Provisions set out in the 2018 UK
Corporate Governance Code (the “UK Code”), as well as setting
out additional Provisions on issues that are of specific relevance
to the Company, and is endorsed by the Financial Reporting
Council (the “FRC”).
The AIC Code is available from the AIC website at
https://www.theaic.co.uk/ and 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 Company has complied with the Principles and Provisions
of the AIC Code throughout the period.
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, 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.
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The PRS REIT plc Annual Report & Financial Statements 2024
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The PRS REIT plc Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
Directors and Advisers
Steve Smith,
Non-executive Chairman
(Age 71) appointed 24 April 2017
Steve has over 40 years of experience in
the real estate industry. Steve acted as
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 is also
Non-Executive Chairman of Sancus
Lending, an AIM listed property finance
business. He 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.
Karima Fahmy,
Non-executive Director
(Age 45) appointed 10 October 2023
Karima is a corporate lawyer with
extensive experience of the UK property
sector. During her executive career,
she worked at Grosvenor Group, the
international property group, latterly as
General Counsel until 2020. Karima holds
two other non-executive directorships in
the property sector. She is Non-Executive
Director of Latimer Developments
Limited, the development arm of the
Clarion Housing Group, the UK’s largest
housing association, and a Trustee
of Clarion Futures, Clarion Housing
Group’s charitable foundation. She is
also Non-Executive Director of Balanced
Commercial Property Trust Limited.
In addition, Karima is an Independent
Member of the University of Cambridge
Property Board and Non-Executive
Director of Bournemouth University. She
is a trustee of United Learning Trust,
a schools group, and trustee of Great
Ormond Street Hospital’s Children's
Charity, where she is also a Member of
its Property & Development Committee.
Steffan Francis,
Non-executive Director
(Age 69) appointed 24 April 2017
Steffan has more than 40 years of
experience in the real estate industry.
Until his retirement, Steffan was a
Director at M&G Real Estate where
he was responsible for the £6 billion
“Long Income” business. Previously
he had been responsible for the
institutional funds at M&G Real Estate
and at Prudential Property Investment
Managers. He was also an independent
adviser to the British Steel Pension
Trustees. Currently, Steffan is a non-
executive Director of M&G (Guernsey)
Limited. He is a Fellow of the Royal
Institution of Chartered Surveyors and
a member of the Investment Property
Forum.
Roderick MacRae,
Non-executive Director
(Age 60) appointed 24 April 2017
Roderick (“Rod”) has over 20 years’
experience in the financial services
sector. Latterly, he was an Executive
Director at Abrdn plc (previously
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
Abrdn 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. Prior to that, Rod was Chief
Operating Officer at Edinburgh Fund
Managers, which he joined in 1991 and
was acquired by Abrdn 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 REIT Audit Committe.
Geeta Nanda, OBE,
Senior Independent Director
(Age 59) appointed 24 March 2021
Geeta has over 35 years’ experience
working in the property sector. Until
recently, she was 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 was
responsible for the management of
around 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 was previously 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
was 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. She is
currently a Non-Executive Director
of Barratt Redrow plc, Chair of Citra
Pathways Limited, and an advisory
member to Homewards the Prince and
Princess of Wales Royal Foundation on
homelessness.
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The PRS REIT plc Annual Report & Financial Statements 2024
Registered Office
Floor 3, 1 St. Ann Street
Manchester
M2 7LR
Auditor
RSM UK Audit LLP
25 Farringdon Street
London
EC4A 4AB
Joint Broker
Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
Legal and Tax Adviser
Dentons UK and Middle East LLP
One Fleet Place
London
EC4M 7WS
AIFM
G10 Capital Limited
4th Floor, 3 More London Riverside
London
SE1 2AQ
Valuers
Savills (UK) Limited
33 Margaret Street
London
W1G 0JD
Company Secretary
Hanway Advisory Limited
The Scalpel, 18th Floor
52 Lime Street
London
EC3M 7AF
Financial Adviser and
Joint Broker
Singer Capital Markets Advisory LLP
1 Bartholomew Lane
London
EC2N 2AX
Financial PR
KTZ Communications
No. 1 Cornhill
London
EC3V 3ND
Investment Adviser
Sigma PRS Management Ltd
Floor 3, 1 St. Ann Street
Manchester
M2 7LR
Depository
Gen II Fund Services (formerly Crestbridge Property
Partnerships Limited)
8 Sackville Street
London
W1S 3DG
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
DIRECTORS AND ADVISERS
62
The PRS REIT plc Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
Report of the Directors
The Directors are pleased to present the Annual Report, together with the audited financial statements, for the year ended 30 June
2024. The information that fulfils the requirements of the Corporate Governance statement in accordance with rule 7.2 of the
DTR can be found in this Report of the Directors and in the Corporate Governance section on pages 71 to 78, all of which is
incorporated into this Report of the Directors by reference.
Principal activity
The Company is a closed-ended investment company and is a Real Estate Investment Trust. The principal activity of the Company
The Directors do not anticipate any change in the principal activity of the Company in the foreseeable future.
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. Following the changes to the UK
Listing Rules, the Company is listed on the closed-ended investment funds category of the FCA's Official List and its Ordinary
Shares are traded on the London Stock Exchange's Main Market.
Results and dividends
The financial results for the year can be found in the Consolidated Statement of Comprehensive Income on page 107. The
Company declared the following interim dividends in respect of the year to 30 June 2024, amounting to 4.0p per share:
Relevant period
Dividend per
share (p)
Ex-dividend
date
Record
date
Payment
date
1 July 2023 to
30 September 2023
1.0
9 November 2023
10 November 2023
1 December 2023
1 October 2023 to
31 December 2023
1.0
15 February 2024
16 February 2024
8 March 2024
1 January 2024 to
31 March 2024
1.0
9 May 2024
10 May 2024
31 May 2024
1 April 2024 to
30 June 2024
1.0
1 August 2024
9 August 2024
30 August 2024
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The PRS REIT plc Annual Report & Financial Statements 2024
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 9 to 12.
Articles of Association (the “Articles”)
The Company’s Articles may only be amended with
shareholders’ approval by special resolution at a general
meeting of shareholders.
Directors
The current Directors of the Company are listed on page 61,
all of whom held office throughout the year, except Karima
Fahmy who was appointed as a Non-Executive Director with
effect from 10 October 2023. Jim Prower stepped down
from his role as a Non-Executive Director with effect from the
conclusion of the Annual General Meeting on 4 December
2023. As announced on 13 September 2024, Robert Naylor
and Christopher Mills will be appointed to the Board following
the publication of this report, and Steve Smith will step down
as Chairman at the Annual General Meeting on 3 December
2024. 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 (2023: none). In accordance with the
Articles, every person appointed as a Director during the period
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 91 to 94.
Powers of Directors
The Directors’ powers are determined by the Companies
Act 2006 and the Company’s Articles. 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 91 to 94.
Directors’ indemnity insurance
Subject to the provisions of any relevant legislation, the
Company has agreed to indemnify each Director against all
liabilities which any Director may suffer or incur arising out of
or in connection with any claim made, or proceedings taken
against him/her, or any application made by him/her, on the
grounds of his/her negligence, default, breach of duty or
breach of trust in relation to the Company or any associated
Company.
This policy remained in force during the financial period and
also at the date of approval of the financial statements.
The Company maintains appropriate Directors’ and Officers’
liability insurance in respect of legal action against its Directors
on an ongoing basis.
Share capital
At the AGM held on 4 December 2023, 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 £549,251 which represented 10% 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 2024, the Company had 549,251,458 ordinary
shares in issue (2023: 549,251,458), none of which were held
in treasury (2023: none).
REPORT OF THE DIRECTORS
64
The PRS REIT plc Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
Investor
Number of ordinary shares
% holding of issued share capital
Invesco High Income Fund
49,089,585
8.94
Aquila Life UK Equity Index Fund
32,389,719
5.90
Homes & Communities Agency
29,878,047
5.44
Invesco UK Equity Income Fund
21,877,700
3.98
Smithfield Alternative Investment Fund
18,600,000
3.39
Investor
Number of ordinary shares
% holding of issued share capital
Invesco High Income Fund
49,089,585
8.94
Aquila Life UK Equity Index Fund
32,389,719
5.90
Homes & Communities Agency
29,878,047
5.44
BlackRock Inc
29,493,570
5.36
Invesco UK Equity Income Fund
21,877,700
3.98
Smithfield Alternative Investment Fund
18,600,000
3.39
As at 30 September 2024 the following substantial shareholdings were held:
In accordance with DTR 5, the Company was advised of the following significant direct and indirect interests in the issued ordinary
share capital of the Company as at 30 June 2024:
Investor
Interests in
ordinary shares
% holding
disclosed*
Date
of notification
Homes and Communities Agency
24,999,999
9.99
31 May 2017
Janus Henderson Group plc
15,099,100
6.04
1 June 2017
Columbia Threadneedle
Not disclosed
Below 5
22 December 2020
AXA Investment Managers S.A.
26,917,000
4.90
19 July 2022
Standard Life Aberdeen plc affiliated investment
management entities
23,345,700
4.71
24 June 2020
CCLA Investment Management Ltd
25,830,640
4.70
28 September 2022
Liontrust Investment Partners LLP
27,444,097
4.997
9 November 2023
Waverton Investment Management Limited
34,059,800
6.20
5 January 2024
Invesco Ltd
71,224,439
12.967547
23 April 2024
Aviva PLC
49,695,866
9.05
3 July 2024
The Company was advised of the following significant direct and indirect interests in the issued ordinary share capital of the
Company between 1 July 2024 and 7 October 2024:
BlackRock Inc
29,493,570
5.36
26 September 2024
Aviva PLC
49,420,295
9.00
1 October 2024
*
The percentage of voting rights detailed above was calculated at the time of the relevant disclosures made in accordance with Rule 5 of the Disclosure Guidance and Transparency Rules.
Substantial shareholdings
As at 30 June 2024, 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.
Information provided to the Company pursuant to DTR 5 is available via the Regulatory News section on the Group’s website.
REPORT OF THE DIRECTORS
65
The PRS REIT plc Annual Report & Financial Statements 2024
Related party transactions
Related party transactions during the period to 30 June 2024
can be found in note 33 of the financial statements.
Research and development
No expenditure on research and development was made
during the year (2023: Nil).
Donations and contributions
In December 2022, the Company established the PRS REIT
Community Fund, and made a commitment for the financial
year 2023/24 to donate up to £250,000 towards charitable
organisations, activities and events, in support of the residents
and wider community. During the year to 30 June 2024, the
PRS REIT Community Fund has made donations totalling
£204,000 to a range of charities, groups, activities and events
that either directly support the Company’s residents and wider
community, or charities and groups that have been nominated
by the residents, in conjunction with the Investment Adviser
(2023: £84,000). No political donations were made during the
year (2023: Nil).
Branches outside the UK
There are no branches of the business located outside the
United Kingdom.
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, 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.
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 2024:
>
any emissions from the Group’s development of investment
properties have been the contractors’ responsibility rather
than the Groups 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 Groups 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 Investment Adviser 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 Investment Adviser as it is not
under its control and it does not have the ability to compel third
parties to provide.
As such, the Board believes that the Company had no
reportable emissions for the periods ended 30 June 2024 and
30 June 2023.
Management arrangements
Please refer to the Management Engagement Committee
Report on pages 87 to 88 for details on the Company’s
management arrangements and service providers.
Financial risk management
The principal risks and uncertainties faced by the Company
and the Group are set out on pages 47 to 50. Information on
the financial risk management objectives and policies relating to
market risk, credit risk and liquidity risk is provided in note 5 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 2024, the Group
had positive cash balances of £18 million (2023: £13 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 2024, the Group had borrowings of £250
million with Scottish Widows, £102 million with Legal and
General Investment Management and a £75 million facility with
RBS plc of which £34 million was drawn. In addition, the Group
had a £33 million revolving credit facility with Barclays Bank
PLC of which £33 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 24.
REPORT OF THE DIRECTORS
66
The PRS REIT plc Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
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 them 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 Provision 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
the period for which the Board regularly reviews forecasts,
and which encompasses the lifetime of the Group’s remaining
development projects. The Board considers the future
performance of the Group beyond three years, but less
certainty exists over the forecasting assumptions beyond this
period.
The Directors considered a number of other factors when
assessing the viability of the Group and Company:
>
strong rent collection rates maintained, cash collections
from tenants during the year matched 99% of all rent
invoiced during the year;
>
continued strong rental demand;
>
continued increases in estimated rental value;
>
Group EPRA loan to value ratio of 36% as at 30 June 2024;
>
Group cash of £18.1 million at 30 June 2024, of which
£13.9 million was immediately available;
>
access to approximately £41 million of undrawn debt
facilities; and
>
82% of the Group’s investment debt facilities are fixed
interest facilities with a weighted average debt maturity of
16 years and an average weighted cost of 3.8%.
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 47 to 50.
REPORT OF THE DIRECTORS
67
The PRS REIT plc Annual Report & Financial Statements 2024
The Board believes that the three-year period selected is an
appropriate period over which to assess the viability of the
Company. The assumptions underpinning the forecasting
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. Sensitivity analysis has been
undertaken to consider the potential impacts of the Group’s
significant risks on the cashflows and covenant compliance, in
particular modelling the impact of decreased rental income and
increased costs. No downside scenarios resulted in forecast
breach of covenants.
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 Environmental, Social and Governance report is on
pages 41 to 46.
Corporate Governance Statement
The corporate governance statement is set out on pages
71 to 78.
Stakeholder engagement and Section 172
statement
The Group’s stakeholder engagement and Section 172
statement are set out on pages 51 to 56.
Auditor
A resolution to reappoint RSM UK Audit LLP as Auditor will be
proposed at the next 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 is unaware and each Director has taken all the steps
that they ought to have taken as a Director to make himself /
herself aware of any relevant audit information and to establish
that the Company’s Auditor is aware of that information.
Post balance sheet events
Details of any significant post balance sheet events are
included on pages 139 to 140 of these financial statements.
By order of the Board
Steve Smith
Director
7 October 2024
REPORT OF THE DIRECTORS
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CORPORATE GOVERNANCE
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report,
the Directors’ Report, the Directors’ Remuneration Report, the
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. Under
that law, the Directors have elected 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 61 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
website.
Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy.
Approval
This Statement of Directors’ Responsibilities was approved by
the Board and signed on its behalf by:
Steve Smith
Chairman
7 October 2023
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70
Corporate Governance Statement
Responsibilities
The Board is collectively responsible for the sustainable
long-term success of the Group and for delivering 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 and has oversight
over the management and conduct of the Group’s business,
strategy and development. The Board determines the Group’s
Investment Policy and risk appetite and ensures compliance
with the Group’s Investment Policy.
The Board is also responsible for the control and supervision
of the Alternative Investment Fund Manager (“
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. 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. 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:
>
Board membership and powers including the appointment
and removal of Board members taking account of
recommendations from the Nomination & Remuneration
Committee;
>
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 and Auditor;
>
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;
>
approval of any related party transactions subject to further
regulatory requirements; and
>
oversight of the Group’s operations, ensuring compliance
with statutory and regulatory obligations.
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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 47 to 50.
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 and Group, 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 and Group. 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 and Group 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.
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;
>
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; and
>
the Audit Committee reviews the internal control
recommendations made by the external auditors, including
the results of periodic testing of key controls as part of their
audit work.
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 47
to 50.
CORPORATE GOVERNANCE STATEMENT
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Director
Attendance*
Date of Appointment
Length of Service at
30 June 2024
Steve Smith
6/6
24 April 2017
7 years
Steffan Francis
6/6
24 April 2017
7 years
Rod MacRae
6/6
24 April 2017
7 years
Geeta Nanda
6/6
24 March 2021
3 years
Karima Fahmy**
4/4
10 October 2023
8 months
Jim Prower***
1/2
20 May 2019
–
*
Number of scheduled meetings attended/maximum number of meetings that the Director could have attended.
** Appointed with effect from 10 October 2023.
*** Retired with effect from the conclusion of the Annual General Meeting on 4 December 2023.
Composition
The Board consists of a Non-Executive Chairman and four
other Non-Executive Directors, including a Senior Independent
Director, all of whom were considered independent on and
since their appointment. All the Directors are independent of the
Investment Adviser and the AIFM.
Steve Smith is the Chairman of the Company, to be succeeded
by Geeta Nanda as Interim Chair at the 3 December 2024
AGM, and is responsible for leadership and oversight of the
Board to ensure that it functions effectively. The Chairman, in
conjunction with the Company Secretary, ensures that accurate,
timely and clear information is received, and sufficient time is
given in meetings to review all agenda items thoroughly. They
promote constructive debate and facilitates a supportive,
co-operative and open environment between the Investment
Adviser and the Directors. They are 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 61.
The Company appointed Geeta Nanda as Senior
Independent Director, with effect from 21 March 2023. The
Senior Independent Director acts as a sounding board and
intermediary for the other Directors and for shareholders.
Board membership and meeting attendance
During the year to 30 June 2024, the number of scheduled Board meetings attended by each Director was as follows:
CORPORATE GOVERNANCE STATEMENT
Investment Adviser
The Company and the AIFM appointed Sigma PRS
Management Ltd (“
Sigma PRS
”) as the Investment Adviser
in March 2017. Sigma PRS is responsible for the physical
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 Investment Adviser is part of
the Sigma Capital Group, a leading provider of PRS properties in
the UK. As a wholly owned subsidiary of Sigma, the Investment
Adviser benefits from the extensive experience and expertise
of the Sigma team 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.
The Company announced on 9 July 2024 that it had extended
its existing Investment Advisory Agreement with Sigma PRS
and agreed an improved fee structure. The Development
Management Agreement has also been extended, on an
improved fee structure. The contract changes applied from
1 July 2024 and the agreement is terminable on not less than
12 months’ notice by either party, such notice not to expire earlier
than 30 June 2029. 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 Investment Adviser to deliver satisfactory performance for the
Company in accordance with its Investment Objective. The Board
is satisfied with the performance of the Investment Adviser and
considers its continued appointment on the new terms agreed to
be in the best interests of the Company and its shareholders as
a whole.
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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.
In accordance with the Articles of Association, every person
appointed as a Director during the period 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 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. In relation to the long-term succession plan,
the succession plan for Steffan Francis and Rod MacRae
currently scheduled for 2025, with their tenure coming up to
nine years of service, will be conducted in accordance with the
AIC Code of Corporate Governance.
Board committees
The Board has established a Management Engagement
Committee, an Audit Committee, and a Nomination &
Remuneration Committee.
The Management Engagement Committee meets at least
once a year and keeps the terms of engagement with the
AIFM and Investment Adviser under review and examines the
performance of the AIFM, Investment Adviser, Administrator,
Depositary, Company Secretary, valuer and other service
providers. 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 pages 87 to 88.
The Audit Committee meets at least three times 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 also examines the effectiveness of the
Company’s internal control systems. The Audit Committee
comprises four 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 79
to 81.
The Nomination & Remuneration Committee was established
during the previous financial year and comprises of three of the
Non-Executive Directors. It meets at least once a year and as
required. The Nomination & Remuneration Committee assists
the Board by reviewing the size, structure and skills of the
Board and considering whether any changes are required, or
new appointments necessary. It leads the recruitment process
for candidates for the Board, and ensures that plans are in
place for orderly succession to the Board, whilst overseeing
the development of a diverse pipeline. The Nomination &
Remuneration Committee also reviews any proposed changes
to the remuneration of the Directors of the Company for
recommendation to, and discussion with, the wider Board.
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 meets formally on, at
least, a quarterly basis with additional meetings arranged as
necessary. During the current period, there were six meetings.
At each Board meeting, the Directors follow a formal agenda
which is set by the Chair, and the Board 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.
CORPORATE GOVERNANCE STATEMENT
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Discussions of the Board
During the year, the Board considered the following key matters:
>
Review of health and safety matters, including the potential
impact of the Fire Safety Act 2021 and Building Safety Act
2022 on the Company’s portfolio;
>
Review of the Investment Adviser’s processes with regards
to advising on asset allocation;
>
The appointment of Karima Fahmy to the Board as a Non-
Executive Director, following a recommendation from the
Nomination & Remuneration Committee;
>
Review and approval of the change of Joint Corporate
Broker from Panmure Gordon to Jefferies;
>
Review and approval of the change of Registrar from Link to
Computershare;
>
Review and approval of the reappointment of the
Company’s Valuers’;
>
Proposed extension of the Company’s £75 million floating-
rate debt for a further year and increase to £100 million,
provided by RBS;
>
The extension of the Investment Adviser and Development
Management Agreements;
>
The wider macro-economic conditions and the market
sentiment towards the UK REIT sector, and the challenges
this presented towards the Company’s share price;
>
Review and approval of the Company’s 2023 Annual Report
and interim results;
>
Discussion regarding the implementation of an ESG
framework and the putting together of a Company-specific
budget for ESG activities;
>
The Group’s corporate structure;
>
The key performance indicators by which the Group
measures success;
>
Updates on relevant government or regulatory
developments;
>
Review of quarterly management accounts;
>
Review of the Company’s share price rating, performance
and trading and the Group’s NAV performance;
>
Declaration of the Company’s interim dividends;
>
The Company’s compliance with the REIT conditions;
>
Review and update of the Company’s Risk Register;
>
Analysis of the Company’s shareholder register;
>
Review of corporate governance compliance, Group
subsidiary activity and Depositary report; and
>
Review and approval of the Board’s emergency and long-
term succession plans.
The Investment Adviser attends a portion of the Board
meetings. Representatives from the AIFM and the Company’s
other advisers are also invited to attend elements of the 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 conducts a formal annual evaluation process and,
recognising the importance of this process, intends to conduct
an externally facilitated evaluation once every three years. The
last externally facilitated evaluation was undertaken in respect of
the year ending 30 June 2022.
The Board has undertaken an internal performance evaluation
in respect of the year ending 30 June 2024 designed to
assess the strengths and effectiveness of the Board and
its Committees. The Directors were asked to complete a
questionnaire, that considered, amongst other things, the
composition of the Board and its Committees, leadership, the
efficiency of Board processes, and stakeholder engagement.
Having conducted the evaluation, the Board considers that it
has performed effectively and that it has the appropriate mix
of skills, experience and knowledge. The Directors believe
that they work effectively together both inside and outside of
formal Board meetings. The Board is also satisfied that the
Chairman remains independent of the Investment Adviser 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. The Board believes that
each individual Director has been effective and demonstrated
commitment to the role. The Board discussed the challenges
and opportunities identified through the evaluation and agreed
that the recommendations will be monitored at the quarterly
Board meetings to ensure progress has been made.
CORPORATE GOVERNANCE STATEMENT
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Challenges and opportunities
2024 Development Points
Board Collaboration
It is recommended that additional time be dedicated to Board-only sessions, including
discussion of strategy, and site visits to existing properties to enhance Board collaboration.
Professional Development
It is recommended that the Board dedicate more time to the professional development of
the Directors, to ensure continuous improvement of knowledge and skills.
Service Providers
It is recommended that an enhanced review of the Company’s services providers is
completed to ensure that the scope and cost of providers remains appropriate from the time
of initial appointment.
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 Listing Rules
6.6.6R(9) and 11.4.23R. At the date of this report, the Board
has fulfilled all three of the targets to have at least one member
from a minority ethnic background, for at least one of the senior
Board positions to be held by a woman, and for at least 40%
of the Board to be women. The Board monitors the balance of
skills, knowledge, experience and diversity on the Board and
leads succession planning.
Following the Board changes expected to take place following
the date of this report, which are detailed on pages 11 to 12,
the Board will fulfil two of the three targets. It is the Board’s
intention that all future appointments will be made on merit
and take into consideration the recognised benefits of all types
of diversity, and that the principles of the Listing Rules 6.6.6R
and 11.4.23R are taken in account in any further recruitment
processes and Board changes.
Tenure policy
In accordance with best practice, the Board considers that the
length of time each Director, including the Chairman, serves
on the Board should be limited to a maximum of nine years. To
facilitate the development of an effective succession pipeline
and a diverse board, this period can be extended for a limited
time if necessary.
Continuity, self-examination and ability to do the job are the
relevant criteria on which the Board assesses a Director’s
independence. Length of service of current Directors,
succession planning and independence will be reviewed each
year as part of the Board evaluation process.
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 Investment Adviser 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.
CORPORATE GOVERNANCE STATEMENT
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CORPORATE GOVERNANCE
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 Investment Adviser maintain a policy to avoid
and manage any conflicts of interest that may arise between
themselves and the Group. The Investment Adviser has
established a clear and robust framework to ensure that any
conflicts of interest are appropriately governed that includes:
>
the Investment Adviser’s obligation to provide the Group
with a right of first refusal on every investment opportunity
meeting the Group’s investment policy and, 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 Investment Adviser’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; and
>
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
Investment Adviser’s investment approach, the role and
responsibilities of a Director and guidance on corporate
governance and the 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.
During the period, the Directors received periodic guidance
on regulatory and compliance changes at quarterly Board
meetings.
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.
The Board has considered emergency and long-term
succession planning arrangements and a formal succession
plan has been agreed. The succession plan for Steffan Francis
and Rod MacRae, currently scheduled for 2025 with their
tenure coming up to nine years of service, will be conducted in
accordance with the AIC Code of Corporate Governance and
will balance the appropriate skills required.
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.
Anti-bribery policy
PRS REIT has a zero-tolerance policy towards bribery and
is committed to carrying out its business fairly, honestly, and
openly. The anti-bribery policies and procedures apply to all its
officers and to those representing the PRS REIT.
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.
CORPORATE GOVERNANCE STATEMENT
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The PRS REIT plc Annual Report & Financial Statements 2024
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 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 brokers
speak 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.
The Company’s next Annual General Meeting will be held on
3 December 2024. Shareholders are encouraged to attend and
vote, along with any other 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 fully acknowledges and shares the frustration
raised on 29 August 2024 by the Requisitioning Shareholders
and other investors around the discount to NAV and share
price performance that does not reflect the strong operational
performance and opportunity of the business. The Board
continually reviews actions under its control that may act to
address the discount to NAV.
While the Company’s share
price has been steadily rising since July 2024, the Board
notes that the PRS REIT was not alone in trading at such a
discount with the UK REIT and UK Investment Trust sectors
all trading at meaningful average discounts.
The Board had
previously intended to announce an update on Strategy with
full year results.
Given the Board changes announced on 13
September, the Board intends to review strategy with the newly
constituted Board and provide an update when appropriate.
Regarding the risks and rewards to which shareholders 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 details of 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
.
CORPORATE GOVERNANCE STATEMENT
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CORPORATE GOVERNANCE
Audit Committee Report
The following pages set out the Audit Committee report of The
PRS REIT plc for the financial year ended 30 June 2024.
The Audit 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
The Audit Committee comprises of four Non-Executive
Directors, Rod MacRae as Chairman, Steffan Francis, Geeta
Nanda and Karima Fahmy (appointed to the Audit Committee
with effect from 10 October 2023), 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. The Board is satisfied that the combined knowledge
and experience of its members is such that the Audit
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.
Rod MacRae is a Chartered Accountant, and has more than
20 years of experience in the financial services sector.
Meetings
There are at least three scheduled Audit Committee meetings
per any financial period and its quorum is two members. During
the year to 30 June 2024, the Committee has met three times.
The attendance at these meetings was as follows:
Director
Attendance*
Rod MacRae (Chairman)
3/3
Steffan Francis
3/3
Geeta Nanda
3/3
Karima Fahmy**
1/1
Jim Prower***
1/2
*
Number of scheduled meetings attended/maximum number of meetings that
the Director could have attended.
** Appointed with effect from 10 October 2023.
***
Retired with effect from the conclusion of the Annual General Meeting on
4 December 2023.
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 and any formal announcements relating to the
financial results;
>
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 as
a whole are considered fair, balanced and understandable
and provide a true and fair view of the Company’s
financial position as at 30 June 2024 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
>
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;
>
review the effectiveness of the external audit process, taking
into consideration relevant UK professional and regulatory
requirements;
>
review the policy on the engagement of the Auditor;
(including provision of non audit-services); and
>
safeguard the Auditor’s independence and objectivity.
External property valuation
>
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.
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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 need to establish an Internal Audit function;
>
reviewed the adequacy of the Company’s arrangements as
they relate to compliance, whistleblowing and fraud;
>
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;
>
made recommendations to the Board to put to
shareholders for their approval at the AGM regarding the
re-appointment of the external Auditor and approval of the
remuneration and terms of engagement of the external
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 47 to
50. The Administrator and the Investment Adviser update
the Audit Committee on changes to accounting policies, risk,
legislation and areas of significant judgement by the Investment
Adviser.
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 of 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 2022, together, where
applicable, with the UK National Supplement effective
14 January 2019, together the “Red Book”. The Investment
Adviser, Audit Committee and Board have 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 Audit 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. In addition,
since the year-end, members of the Audit Committee have met
independently with the valuer.
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 Audit 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 Group and Company as a whole and in addition provides
the information necessary for shareholders to assess the
Company’s performance, strategy and investment objectives.
Audit fees and non-audit services
An audit fee of £150,000 has been agreed in respect of the
audit of the Company for the year ended 30 June 2024 (2023:
£140,000). The audit fees of the Group for the period ended
30 June 2024 totalled £320,000 (2023: £288,000).
AUDIT COMMITTEE REPORT
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CORPORATE GOVERNANCE
The cost of non-audit services provided by the Auditor to the
Company for the financial period ended 30 June 2024 was
£25,000 (2023: £22,500) of which £25,000 related to the agreed
upon procedures on the interim financial statements (2023:
£22,500). To safeguard the external Auditor’s independence and
objectivity there was prior approval of a detailed scope of work
and no additional safeguards were considered necessary due to
the nature of procedures involved.
Following a tender process undertaken during the year, Grant
Thornton UK 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 on 25 April 2017. In accordance with the rules around
audit partner rotation, Mr Graham Ricketts, Partner at RSM,
has been appointed since the year ended 30 June 2023 as the
responsible individual on the audit. No tender for the audit of the
Company has been undertaken.
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
Audit 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 July 2026. Having considered the Auditor’s
independence in respect of the year ended 30 June 2024, 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 establishing an Internal Audit function, taking into
account the size and complexity of the Company and its
business. In coming to this conclusion, the Audit Committee
noted that the external auditors check the operation of certain
controls on a sample basis as part of their audit.
The Audit Committee will continue to review this position on
an annual basis and make recommendations to the Board as
appropriate.
Performance evaluation
Refer to the above Corporate Governance Statement on pages
75 to 76, for further details on the performance evaluation.
Rod MacRae
Audit Committee Chairman
7 October 2024
AUDIT COMMITTEE REPORT
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CORPORATE GOVERNANCE
Nomination & Remuneration
Committee Report
The following pages set out the Nomination & Remuneration
Committee report of The PRS REIT plc for the financial year
ended 30 June 2024.
The Nomination & Remuneration Committee was established
with effect from 28 November 2022.
Committee membership
The Nomination & Remuneration Committee comprises of three
Non-Executive Directors, Steve Smith as Chairman, Steffan
Francis and Geeta Nanda.
Meetings
There is at least one scheduled meeting per financial year and
its quorum is two members. During the year to 30 June 2024,
the Committee met once. The attendance at this meeting was
as follows:
Director
Attendance*
Steve Smith (Chairman)
1/1
Steffan Francis
1/1
Geeta Nanda
1/1
*
Number of scheduled meetings attended/maximum number of meetings that
the Director could have attended.
Role of the Nomination & Remuneration
Committee
The Nomination & Remuneration Committee’s main function
is to evaluate the performance of the Board, ensure the Board
composition, skills and experience are optimal, lead the
process for appointments to the Board and oversee an orderly
succession plan to the Board, ensuring the development
of a diverse pipeline for succession. The Nomination &
Remuneration Committee also reviews any proposed changes
to the remuneration of the Directors of the Company for
recommendation to, and discussion with, the wider Board.
Matters considered by the Nomination &
Remuneration Committee
The Nomination & Remuneration Committee discussed matters
including, but not limited to: tenure policy, diversity policy,
Board composition, Board skills, Board experience, succession
planning, time commitments, remuneration, and the Listing Rule
requirements on Board diversity. The Committee also led the
recruitment process for a new Non-Executive Director, working
with an independent external search consultant. The Committee
identified and nominated Karima Fahmy, for the approval of the
Board. This is discussed in further detail below.
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Succession planning and recruitment
A key focus of the Nomination & Remuneration Committee
during the year was the continued implementation of a
long-term succession plan for the Board. Under its Terms of
Reference, once a decision is made to recruit an additional
Director, the Nomination & Remuneration Committee has the
responsibility for identifying and leading that process on behalf
of the Board. A formal role description is created, which is
based upon requirements identified from a review of the current
balance of experience and skills, as well as due regard to the
benefits of diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths. The Nomination &
Remuneration Committee is responsible for identifying
suitable candidates, and engaging with an independent
external consultant to facilitate the search through an open
and transparent process, in order to identify appropriate
candidates, including those from different social and ethnic
backgrounds.
During 2023, the Committee engaged with Nurole Ltd
(“Nurole”) to support its recruitment process. Nurole have no
other connection with the Company or any of its Directors.
Nurole provided a longlist of candidates which was reviewed
by the Committee to create a shortlist. First stage interviews
then took place with short-listed candidates and Committee
members, following which a smaller shortlist of preferred
candidates met with the wider Board. Following this process,
the Nomination & Remuneration Committee, having considered
her other commitments prior to appointment, recommended
Karima Fahmy to the Board for appointment as a Non-
Executive Director. Karima joined the Board on 10 October
2023 and following a period to allow Karima to settle into her
role, and in line with the succession plan, Jim Prower stepped
down from the Board with effect from the conclusion of the
Annual General Meeting on 4 December 2023.
Further to the Requisition Notice received on 29 August 2024,
as announced on 13 September 2024, an agreement had been
reached with the requisitioning shareholders such that Robert
Naylor and Christopher Mills will be appointed to the Board
as non-executive directors following the date of this report. As
such, an external search consultancy has not been used in
respect to their appointments.
A key focus for the remainder of 2024 will be the recruitment
for a new independent non-executive Chair, and for 2025 will
be a recruitment for the replacement of Rod MacRae as Audit
Chair, with his tenure coming up to nine years of service.
Performance evaluation
Refer to the above Corporate Governance Statement on pages
75 to 76, for further details on the performance evaluation.
Re-election of Directors
All Directors submit themselves for election or re-election on an
annual basis. All Directors in office as at the date of this report
are to be proposed for re-election at the 2024 AGM.
Tenure policy and diversity policy
Refer to the above Corporate Governance Statement on page
76, for further details on the Tenure and Diversity Policies.
Remuneration
Further details can be found in the Directors’ Remuneration
Report on page 91.
Diversity
FCA Listing Rule diversity targets
The FCA’s Listing Rules require that the Company reports on
whether the following targets have been met: at least 40% of
individuals on the Board are women; at least one of the senior
Board positions is held by a woman; and at least one individual
on its Board is from a minority ethnic background.
NOMINATION & REMUNERATION COMMITTEE REPORT
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CORPORATE GOVERNANCE
The Board is compliant with the relevant targets. As set out above, following the Board changes announced on 13 September
2024, including the appointment of Robert Naylor and Christopher Mills following the date of this report, and Steve Smith stepping
down at the 2024 AGM, the Board will be compliant with two of the three targets. However, the Board remains committed to
maintaining diversity in the boardroom.
As an investment company with solely independent, Non-Executive Directors, the Company does not have a Chief Executive
or Chief Financial Officer and has no employees. Accordingly, no disclosures regarding executive management positions have
been included.
Steve Smith
Nomination & Remuneration Committee Chairman
7 October 2024
Ethnic Diversity
Number of Board
members
Percentage of the Board
%
Number of senior
positions on the Board
8
White British or other White (including
minority white groups)
3
60
1
Mixed / Multiple Ethnic Groups
1
20
–
Asian / Asian British
1
20
1
Black / African / Caribbean / Black British
–
–
–
Other ethnic group, including Arab
–
–
–
Not specified / prefer not to say
–
–
–
8
Senior positions include Chair and Senior Independent Director.
Gender Diversity
Number of Board
members
Percentage of the Board
%
Number of senior
positions on the Board
8
Men
3
60
1
Women
2
40
1
Not specified / prefer not to say
–
–
–
The following table sets out the gender and ethnic diversity of the Board as at 30 June 2024 in accordance with the Listing Rules:
NOMINATION & REMUNERATION COMMITTEE REPORT
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CORPORATE GOVERNANCE
Management Engagement
Committee Report
The following pages set out the Management Engagement
Committee report of The PRS REIT plc for the financial year
ended 30 June 2024.
The Management Engagement 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 Management Engagement Committee comprises Steve
Smith as Chairman, Steffan Francis, Rod MacRae, Geeta
Nanda and Karima Fahmy.
Meetings
There is at least one scheduled meeting per any financial year
and its quorum is two members. During the year to 30 June
2024, the Committee met once. The attendance at this meeting
was as follows:
Director
Attendance*
Steve Smith (Chairman)
1/1
Steffan Francis
1/1
Rod MacRae
1/1
Geeta Nanda
1/1
Karima Fahmy**
0/0
Jim Prower***
0/1
*
Number of scheduled meetings attended/maximum number of meetings that
the Director could have attended.
** Appointed with effect from 10 October 2023.
*** Retired with effect from the conclusion of the Annual General Meeting on 4
December 2023.
Role of the Management Engagement
Committee
The Management Engagement 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.
The Management Engagement Committee also monitors and
evaluates the performance of other key service providers to the
Company.
Matters considered by the Management
Engagement Committee
At its meeting during the year under review, the Management
Engagement Committee has:
>
reviewed the performance of the AIFM and Investment
Adviser and reviewed the Agreements with the AIFM and
Investment Adviser; and
>
reviewed the performance of other third-party service
providers and made recommendations to the Board
regarding these.
Performance evaluation
Refer to the above Corporate Governance Statement on pages
75 to 76, for further details on the performance evaluation.
Management arrangements
Investment Adviser
The Company and the AIFM have appointed Sigma PRS
Management Ltd (“
Sigma PRS
”) as the Investment Adviser.
Sigma PRS is responsible for the physical 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 Investment Advisory Agreement (the
“
Agreement
”) was signed on 3 May 2017 and provided for
an initial minimum contracted term of five years to 31 May
2023, 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. The Agreement was first
extended, with effect from 1 January 2021, to 31 December
2025, with a one-year notice period thereafter. The Investment
Adviser fee arrangement in respect of Sigma PRS is detailed in
note 11 of the financial statements in respect of the year ended
30 June 2024. In addition, up to 30 June 2024, the Investment
Adviser was entitled to a development management fee of 4.0%
of gross development spend on land and gross development
spend on construction.
As announced on 9 July 2024, the Agreement was extended
with effect from 1 July 2024, to 30 June 2029, which is inclusive
of a one-year notice period. The Company also agreed an
improved fee structure, and the revised fees for 1 July 2024
onwards, remaining payable monthly in arrears, is as follows:
(i)
0.90 per cent. (previously 1.00%) per annum of the
Adjusted Net Asset Value up to, and including, £250 million;
(ii)
0.85 per cent. (previously 0.90%) per annum of the
Adjusted Net Asset Value in excess of £250 million and up
to, and including, £500 million;
(iii)
0.70 per cent. (previously 0.75%) per annum of the
Adjusted Net Asset Value in excess of £500 million and up
to, and including, £1 billion;
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(iv)
0.40 per cent. (previously 0.50%) per annum of the
Adjusted Net Asset Value in excess of £1 billion and up to,
and including, £2 billion; and
(v)
0.30 per cent. (previously 0.40%) per annum of the
Adjusted Net Asset Value in excess of £2 billion.
In addition, with effect from 1 July 2024, the Investment
Adviser development management fee has been reduced to
3.0% of gross development spend on land and 3.5% of gross
development spend on construction.
As previously, the Agreement may still terminated by the
Company and the Company’s AIFM immediately if the
Investment Adviser is in material breach of the Agreement or is
the subject of insolvency proceedings.
AIFM
G10 Capital Limited (part of the IQ-EQ Group) 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, excluding the
initial one-off fee of £12,000 which has already been paid:
(a)
a monthly fee of £7,623 (increased from £6,930 per month
in September 2023);
(b)
a PRIIPS Monthly Maintenance Fee of £1,271 (increased
from £1,155 per month in September 2023);
(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.
Depositary
Gen II Fund Services (formerly 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. A 6%
increase to the total fee was applied from October 2022. 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 £70,000 plus VAT, payable
monthly in arrears.
Company secretarial
Hanway Advisory Limited, an independent third party, was
appointed Company Secretary to the Company with effect from
31 March 2022. Sigma Capital Property Ltd were formerly the
Company Secretary. The Company pays annual fees of £58,000
plus VAT (increased from £50,000 per annum from July 2023),
payable quarterly in arrears.
Review of service providers
The Management Engagement Committee reviews the ongoing
performance and continuing appointment of the Company’s
key service providers on an annual basis. The Management
Engagement 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 Management Engagement Committee has reviewed the
continuing appointment of the AIFM and Investment Adviser
and is satisfied that their appointment remains in the best
interests of shareholders.
Steve Smith
Management Engagement Committee Chairman
7 October 2024
MANAGEMENT ENGAGEMENT COMMITTEE REPORT
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CORPORATE GOVERNANCE
Directors’ Remuneration Policy
The Directors’ Remuneration Policy of the Company is set by
the Board and was last approved by shareholders at the Annual
General Meeting held on 15 December 2021 and became
effective from the conclusion of that meeting. This approval will
expire at the upcoming Annual General Meeting. In accordance
with section 439A of the Companies Act 2006, the Board will
seek shareholder approval of this Directors’ Remuneration
Policy at the Annual General Meeting to be held on 3 December
2024. If approved, the Directors’ Remuneration Policy will
take effect from the conclusion of the Annual General Meeting
until the policy is 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
policy provisions are set out below.
Changes to the remuneration policy
The Directors’ Remuneration Components table below has
been refreshed for clarity and to demonstrate the operation
of each component of remuneration and how this links to the
Company’s strategy. In practice, there is no change to operation
or structure of the remuneration, and nor is there a current
intention to change the fees of the Non-Executive Directors.
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 she may be paid such reasonable additional
remuneration as the Board may from time to time determine.
Directors’ remuneration components
Component
Operation
Link to strategy
Annual Fee
Each Non-Executive Director receives a basic fee.
The total aggregate fees that can be paid to the
Non-Executive Chair and Directors in any given
financial year will be calculated in accordance with the
Company’s Articles of Association.
The level of the annual fee has been set to attract and
retain high calibre Non-Executive Directors with the
skills and experience necessary for the role.
Additional Fee
A Non-Executive Director may be given an additional
fee to perform any duties outside the scope of the
ordinary duties of the Non-Executive Director.
The additional fee for services outside of the scope
of ordinary duties offers flexibilities for a Director to
be awarded additional remuneration to adequately
compensate a Director where this is considered
appropriate for the effective functioning of, or in
furtherance of, the Company’s aims.
Expenses
Article 84 of the Company’s Articles of Association
permits for any Non-Executive Director to be repaid
expenses incurred in attending and returning from
Board, Committee or general meetings of the
Company or otherwise properly and reasonably
incurred by a Non-Executive Directors in connection
with the business of the Company.
In line with market practice, the Company will
reimburse the Directors for expenses to ensure that
they are able to carry out their duties effectively.
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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. The letters of appointment are available for inspection
at the Company’s registered office.
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 2023 (excluding the Directors’ Remuneration
Policy) was approved by shareholders at the AGM held on 4
December 2023. The results taken on a poll were as follows:
Directors’ Remuneration Report
For – number of votes cast
386,276,083
99.76%
Against – number of votes cast
913,133
0.24%
Total votes cast
387,189,216
Number of votes withheld
42,705
The Directors’ Remuneration Policy was approved by
shareholders at the AGM held on 15 December 2021, and the
results take on a poll were as follows:
Directors’ Remuneration Policy
For – number of votes cast
403,938,951
99.95%
Against – number of votes cast
188,333
0.05%
Total votes cast
404,127,284
Number of votes withheld
6,200
DIRECTORS’ REMUNERATION POLICY
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CORPORATE GOVERNANCE
Directors’ Remuneration Report
The Board presents its Directors’ Remuneration Report in
respect of the year ended 30 June 2024. 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).
The law requires the Company’s Auditor to audit certain
disclosures. Where disclosures have been audited, they are
indicated as such. The Auditor’s opinion is included in the
Auditor’s Report on pages 97 to 104.
Annual Statement from the Chairman
I am pleased to present the Directors’ Remuneration Report for
the financial year ended 30 June 2024.
The Board has established a separate Nomination &
Remuneration Committee which has responsibility 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. Resolutions to approve the Directors’ Remuneration
Report and the Directors’ Remuneration Policy 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 table of remuneration components
has been refreshed for clarity and to demonstrate the operation
of each component of remuneration and how this links to the
Company’s strategy, set out above.
The Directors are remunerated for their services at such rate
as the Board shall from time to time determine. The Board
will typically pay a higher fee for the Chair of the Board, and
an additional fee for the Non-Executive Director who chairs
the Audit Committee, in addition to the base fee of the Non-
Executive Directors. 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.
For the year to 30 June 2024, the Directors’ fees were set at
a rate of £52,500 per annum in respect of the Chairman and
£37,500 per annum in respect of the other Directors, with an
additional £5,000 to the Chairman of the Audit Committee.
The fee increases in the prior year followed a remuneration
benchmarking exercise and independent advice, to ensure that
the fees were sufficient to attract and retain Directors of suitable
calibre and with the skills, knowledge and experience necessary
for the role having regards to the expected time commitment.
There were no other payments for extra services in the period
ended 30 June 2024 (2023: £nil).
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Single total figure (audited)
The Directors who served during the year and prior period received the following total fixed fee remuneration:
Y.E. 2023
Y.E. 2022
Y.E. 2021
Y.E. 2020
Non-
Executive
Director
Annual
Fee
(£’000)
Additional
Fee
(£’000)
Other
taxable
benefits
(£’000)
Total
for year
ended
30 June
2024
(£’000)
Total
(£’000)
%
Annual
Change
Total
(£’000)
%
Annual
Change
Total
(£’000)
%
Annual
Change
Total
(£’000)
%
Annual
Change
Steve
Smith
(Chairman)
52.5
–
–
52.5
46.9
+12
45.0
–
45.0
–
45.0
–
Steffan
Francis
37.5
–
–
37.5
31.9
+18
30.0
–
30.0
–
30.0
–
Rod
MacRae
(Audit
Committee
Chair)
42.5
42.5
36.9
+15
35.0
–
35.0
–
35.0
–
Geeta
Nanda
1
37.5
–
–
37.5
31.9
+18
30.0
N/A
8.2
N/A
–
–
Karima
Fahmy
2
27.3
–
–
27.3
–
N/A
–
–
–
–
–
–
Former Non-Executive Director
Jim
Prower
3
16.0
–
–
16.0
31.9
–50
30.0
–
30.0
–
30.0
N/A
Total
213.3
–
–
213.3
179.5
+19
170.0
+15
148.2
+6
140.0
–
1
Geeta Nanda was appointed to the Board with effect from 23 March 2021.
2
Karima Fahmy was appointed to the Board with effect from 10 October 2023.
3
Jim Prower retired from the Board with effect from 4 December 2023.
DIRECTORS’ REMUNERATION REPORT
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
Year ended
30 June
2024
£’000
Year ended
30 June
2023
£’000
Directors’ aggregate remuneration
213
180
Dividends paid to all shareholders*
21,970
21,970
*
includes all dividends paid in relation to the year ended 30 June 2024 and year ended 30 June 2023
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CORPORATE GOVERNANCE
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.
120
110
100
90
80
70
60
130
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
PRS REIT
FTSE 250
FTSE ALL SHARE REITS
FTSE 350 REITS
DIRECTORS’ REMUNERATION REPORT
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The PRS REIT plc Annual Report & Financial Statements 2024
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 2024, the following Directors (including their connected persons) had beneficial interests in the following number of
shares in the Company:
Ordinary
Shares
2024
Ordinary
Shares
2023
Steve Smith (Chairman)
446,577
305,000
Geeta Nanda (Senior Independent Director)
–
–
Steffan Francis
125,000
125,000
Rod MacRae (Audit Committee Chairman)
125,000
125,000
Karima Fahmy
–
–
There have been no changes to Directors’ share interests between 30 June 2024 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 Report.
Approval
The Directors’ Remuneration Report was approved by the Board on 7 October 2024.
On behalf of the Board.
Steve Smith
Chairman
DIRECTORS’ REMUNERATION REPORT
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CORPORATE GOVERNANCE
INDEPENDENT
AUDITOR’S
REPORT
Independent Auditor’s Report to the
Members of The PRS REIT plc
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 2024 which comprise the Consolidated Statement of Comprehensive Income, Consolidated and Company
Statements of Financial Position, Consolidated and Company Statements of Changes in Equity, Consolidated and Company
Statements 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.
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
2024 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.
Summary of our audit approach
Key audit matters
Group
>
Valuation of investment property
Parent Company
>
No key audit matters
Materiality
Group
>
Overall materiality: £11,600,000 (2023: £10,500,000)
>
Performance materiality: £8,730,000 (2023: £7,880,000)
Parent Company
>
Overall materiality: £6,040,000 (2023: £5,700,000)
>
Performance materiality: £4,530,000 (2023: £4,275,000)
Scope
Our audit procedures covered 100% of revenue, 100% of total assets and 100% of profit
before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group and
parent company 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 and parent company financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
Valuation of investment property
Key audit matter description
The Group owns a portfolio of residential investment properties. The total value of the portfolio
at 30 June 2024 was £1,139.8m (2023: £1,034.7m). The portfolio includes completed sites
and sites in the development phase, the latter are described as investment properties under
construction. All investment property assets are held at fair value. At 30 June 2024 the assets
under construction were valued at £55.7m (2023: £87.0m).
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 a 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 127 to 129.
Further information is disclosed in the Audit Committee report on pages 79 to 81; the
significant accounting judgements and estimates on page 118; significant accounting policies
on pages 115 to 118 and note 18 to the financial statements on pages 127 to 129.
How the matter was
addressed in the audit
Our audit work included the following:
>
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.
>
We selected a sample of 17 sites, and requested the auditor’s expert review the valuation
at the year end date and comment on whether the value is within a reasonable range and
whether the overall valuation is based on appropriate judgments and market data. Our
sample was selected using auditor judgement and included sites where the rent or yield
movements were higher or lower than expected from our overall review of the portfolio,
where the year on year valuation movement was not in line with the average of the
portfolio, and other material sites which were included to obtain coverage, in terms of value
and location, over both completed assets and development sites.
>
We discussed with the Investment Adviser and the external valuer the overall movement
in property values and 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 obtained an understanding of the methodology and key assumptions used in the
valuation. We challenged the appropriateness of these through consulting with an auditor’s
expert and reviewing market data, and used this to inform our challenge of the Investment
Adviser and the external valuer.
>
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 based on
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. For a sample of properties,
we requested explanations and evidence of how the external valuer has determined the
market rent used in the valuations.
>
We audited the disclosures in the financial statements relating to the valuation of
investment property, including those relating to estimates and the key valuation
assumptions disclosed in note 18.
Key observations
Based on our audit work, we are satisfied that the judgements and assumptions used in
arriving at the fair value of the Group’s property portfolio are appropriate and supported by the
evidence obtained during the audit.
We have determined that there are no key audit matters to communicate in our report in relation to the parent company.
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The PRS REIT plc Annual Report & Financial Statements 2024
INDEPENDENT AUDITOR’S REPORT
Group
Parent company
Overall materiality
£11,600,000 (2023: £10,500,000)
£6,040,000 (2023: £5,700,000)
Basis for determining overall
materiality
1% of total assets
1.3% 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 value of
investment property, which forms the
majority of total assets.
Total assets used as a benchmark as
we assessed that the shareholders will
be primarily interested in the value of
investment property, represented by the
investment held by the Parent Company
in its property holding subsidiaries, which
forms the majority of total assets.
Performance materiality
£8,730,000 (2023: £7,880,000)
£4,530,000 (2023: £4,275,000)
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 £2.4m
(2023: £2.5m) 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 £2.4m
(2023: £2.5m) 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 have been reported 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 have been reported to
the Audit Committee.
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 as a
whole, 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:
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
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The PRS REIT plc Annual Report & Financial Statements 2024
An overview of the scope of our audit
The group consists of 114 entities, all of which are based in the UK.
The group is managed as one component and has therefore been treated as a single component on which full scope audit
procedures have been performed.
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 the information used in the going concern assessment for consistency with management’s plans and information
obtained through our other audit work;
>
Challenging the major assumptions in management’s forecasts, being the level of rents receivable, expenses, capital
expenditure, dividends and finance costs;
>
Assessing management’s sensitivity analysis, including considering the impact on bank loan covenants;
>
Reviewing the appropriateness of going concern disclosures within the financial statements.
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 entity 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.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
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INDEPENDENT AUDITOR’S REPORT
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 and 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 67;
>
Directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why the period is
appropriate set out on pages 67 to 68;
>
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 67;
>
Directors’ statement on fair, balanced and understandable set out on page 69;
>
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 47 to 50;
>
Section of the annual report that describes the review of effectiveness of risk management and internal control systems set out
on page 72; and,
>
Section describing the work of the audit committee set out on pages 79 to 81.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
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The PRS REIT plc Annual Report & Financial Statements 2024
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 69, 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.
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 framework that the
group and parent company operate in and how the group and parent company are complying with the legal and regulatory
framework;
>
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 overall control
environment.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
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INDEPENDENT AUDITOR’S REPORT
The most significant laws and regulations were determined as follows:
Legislation / Regulation
Additional audit procedures performed by the Group audit engagement team
included:
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 compliance with REIT legislation.
In addition to the valuation of investment property which is included above as a key audit matter, the areas that we identified as
being susceptible to material misstatement due to fraud were:
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.
Related party transactions and
balances
Obtaining the list of related parties and checking for omissions through review of related
directorships, board minutes and declarations of interest;
Auditing a sample of related party transactions to ensure they are in line with the
underlying agreements; and
Checking any related party transactions are appropriately disclosed in the financial
statements.
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.
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 seven years, covering the years ending 30 June 2018 to
30 June 2024.
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).
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE PRS REIT PLC
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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
Rules, these financial statements will form part of
the Annual Financial Report prepared in Extensible
Hypertext Markup Language (XHTML) format and
filed on the National Storage Mechanism of the UK
FCA. This auditor’s report provides no assurance over
whether the annual financial report has been prepared
in XHTML format.
Graham Ricketts (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory
Auditor
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
7 October 2024
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INDEPENDENT AUDITOR’S REPORT
FINANCIAL
STATEMENTS
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2024
Note
30 June
2024
£’000
30 June
2023
£’000
Rental income
6
Non-recoverable property costs
7
(10,940 )
(9,551 )
Net rental income
Other income
8
Administrative expenses
Directors’ remuneration
9
(213 )
(180 )
Investment advisory fee
11
(6,051 )
(5,788 )
Other administrative expenses
12
(2,921 )
(2,300 )
Total administrative expenses
(9,185 )
(8,268 )
Gain from fair value adjustment on investment property
18
Operating profit
Finance income
13
Finance cost
14
(18,225 )
(16,478 )
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
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.
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107
107
FINANCIAL STATEMENTS
Note
30 June
2024
£’000
30 June
2023
£’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
24
Current liabilities
Trade and other payables
22
Provisions
23
Interest bearing loans and borrowings
24
Total liabilities
Net assets
EQUITY
Called up share capital
26
Share premium account
27
Capital reduction reserve
28
Retained earnings
Total equity attributable to the equity holders of the Company
IFRS net asset value per share (basic and diluted)
29
As at 30 June 2024, there is no difference between IFRS NAV per share and the EPRA NTA per share.
Steve Smith
Chairman
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Company No. 10638461
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INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Attributable to equity holders of the Company
Attributable to equity holders
of the Company
Share
capital
£’000
Share
premium
account
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 30 June 2022
Comprehensive income
Profit for the year
Transactions with owners
Dividends paid
(21,970 )
(21,970 )
At 30 June 2023
Comprehensive income
Profit for the year
Transactions with owners
Dividends paid
(5,492 )
(16,478 )
(21,970 )
At 30 June 2024
CONSOLIDATED STATEMENT OF CHANGES IN EQUITIY
For the year ended 30 June 2024
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FINANCIAL STATEMENTS
Note
30 June
2024
£’000
30 June
2023
£’000
Cash flows from operating activities
Profit before tax
Finance income
13
(188 )
(49 )
Finance costs
14
Fair value adjustment on investment property
18
(73,412 )
(25,353 )
Cash generated by operations
Increase in trade and other receivables
(8 )
(578 )
Decrease in trade and other payables
(3,117 )
(1,640 )
Net cash generated from operating activities
Cash flows from investing activities
Purchase of investment property
(9,100 )
Development expenditure on investment properties*
(22,084 )
(47,458 )
Decrease in capital trade and other payables
(10,255 )
Finance income
Net cash used in investing activities
(30,996 )
(57,664 )
Cash flows from financing activities
Bank and other loans advanced
24
Bank and other loans repaid
24
(110,229 )
(23,304 )
Finance costs
(19,082 )
(13,657 )
Dividends paid
17
(21,970 )
(21,970 )
Net cash generated from / (used in) financing activities
(9,130 )
Net increase / (decrease) in cash and cash equivalents
(35,484 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
21
* Includes capitalised interest of £1.9 million (2023: £0.9 million).
The accompanying notes are an integral part of this cash flow statement.
Total interest paid in the year was £16.6 million (2023: £12.0 million).
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2024
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INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Note
30 June
2024
£’000
30 June
2023
£’000
ASSETS
Non-current assets
Investment in subsidaries
19
75,425
75,425
Other receivables
20
334,513
346,540
409,938
421,965
Current assets
Other receivables
20
112
263
Cash and cash equivalents
21
13,623
8,044
13,735
8,307
Total assets
423,673
430,272
Current liabilities
Trade and other payables
22
2,090
1,655
Total liabilities
2,090
1,655
Net assets
421,583
428,617
EQUITY
Called up share capital
26
5,493
5,493
Share premium account
27
298,974
298,974
Capital reduction reserve
28
113,092
118,584
Retained earnings
4,024
5,566
Total equity attributable to the equity holders of the Company
421,583
428,617
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 profit attributable to the Parent Company for the year ended 30 June
2024 amounted to £14.9 million (2023: profit of £32.9 million).
These financial statements were approved by the Board of Directors on 7 October 2024 and signed on its behalf by:
Steve Smith
Chairman
COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Company No. 10638461
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FINANCIAL STATEMENTS
Share
capital
£’000
Share
premium
account
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 30 June 2022
5,493
298,974
140,554
(27,293)
417,728
Comprehensive income
Profit for the year
–
–
–
32,859
32,859
Transactions with owners
Dividends paid
–
–
(21,970)
–
(21,970)
At 30 June 2023
5,493
298,974
118,584
5,566
428,617
Comprehensive income
Profit for the year
–
–
–
14,936
14,936
Transactions with owners
Dividends paid
–
–
(5,492)
(16,478)
(21,970)
At 30 June 2024
5,493
298,974
113,092
4,024
421,583
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2024
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INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
Note
30 June
2024
£’000
30 June
2023
£’000
Cash flows from operating activities
Profit before tax
14,935
32,859
Dividends received from subsidiary undertakings
(23,700)
(40,850)
Finance income
(153)
(46)
Cash used in operations
(8,918)
(8,037)
Decrease / (Increase) in other receivables
151
(22)
Increase / (Decrease) in trade and other payables
434
(861)
Net cash used in operating activities
(8,333)
(8,920)
Cash flows from investing activities
Decrease in other receivables
35,729
10,242
Finance income
153
46
Net cash generated from investing activities
35,882
10,288
Cash flows from financing activities
Dividends paid
17
(21,970)
(21,970)
Net cash used in financing activities
(21,970)
(21,970)
Net increase / (decrease) in cash and cash equivalents
5,579
(20,602)
Cash and cash equivalents at beginning of year
8,044
28,646
Cash and cash equivalents at end of year
21
13,623
8,044
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June 2024
FINANCIAL STATEMENTS
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NOTES TO THE FINANCIAL STATEMENTS
1. General information
The PRS REIT plc (the “
”, 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
”).
The financial statements are prepared on the historical cost basis, except where IFRS requires or permits 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.
3. Going concern
The consolidated and Company financial statements have been prepared on a going concern basis. The Directors have reviewed
the current and projected financial position of the Group, making reasonable assumptions about future trading performance with
sensitivity testing undertaken to replicate plausible downside scenarios related to the principal risks and uncertainties associated
with the business. As interest rate exposure has largely been mitigated with 82% of the investment debt in the portfolio at fixed
rates, the Directors paid particular attention to the risk of a deterioration in the forecast rental growth over the review period
which would have a negative impact on both forecast valuations and cashflows. The outcome of this stress testing indicated
that covenants on existing facilities would not be breached. As part of the review, the Group has considered its cash balances,
and its debt maturity profile, including undrawn facilities. The Group had net current liabilities of £22.3 million as at 30 June 2024
(2023: net current liabilities £124.5 million). The decrease in net current liabilities reflects the refinancing of the LBG / RBS debt
facility (refinanced on maturity in July 2024), and the new LGIM long term investment debt facility (£101.9 million). The current
drawn Barclays development loan of £32.6 million is expected to be repaid within the next 12 months as longer term investment
debt is drawn against completed sites reducing net current liabilities further. The Group’s cash balances at 30 June 2024 were
£18.1 million (2023: £13.2 million), of which £4.2 million was restricted but released within 3 months. The Group had debt
borrowing as at 30 June 2024 of £415.3 million (2023: £374.1 million). 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.
Capital commitments outstanding as at 30 June 2024 were £6.4 million (2023: £27.3 million). The Group’s current ERV as at
30 June 2024, was £65.1 million from 5,396 homes and has increased to £67.5 million from 5,425 homes as at 30 September
2024. This has increased the Company’s recurring income which 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 2,800 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 2024.
NOTES TO THE FINANCIAL STATEMENTS
As at 30 June 2024
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NOTES
NOTES TO THE FINANCIAL STATEMENTS
4. Summary of significant accounting policies
Basis of consolidation
The consolidated 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 results of subsidiaries are 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 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.
Financial instruments
Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instrument.
Financial liabilities
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract
that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the
Group are recorded at the proceeds received, net of direct issue costs.
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NOTES TO THE FINANCIAL STATEMENTS
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 based on the expected credit loss model detailed within IFRS 9. The expected
credit losses on financial assets are estimated on a lifetime basis 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, 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 2024 the Group’s loss allowance for expected credit losses on trade
receivables was £691,000 (2023: £453,000).
The receivables due to the Company from subsidiaries are non-interest bearing loans, repayable on demand. These are stated at
cost less any allowance for expected credit losses (“
ECL
”). The Company measures the loss allowance for intra-Group receivables
over lifetime ECL, this was immaterial in the current year and prior year.
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 initially recognised at fair value, net of transaction costs incurred and subsequently at amortised cost.
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
A right-of-use asset is recognised at the commencement date of a lease. The ROU asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date
net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an
estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are subsequently measured at fair value and classified within investment properties.
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NOTES
NOTES TO THE FINANCIAL STATEMENTS
Impairment of assets
At each balance sheet date, the Directors review the carrying amounts of the Company’s non-current assets, which aren’t
measured at fair value, 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.
Provisions
Onerous contracts
– A provision for onerous contracts is measured at the present value of the lower of the expected cost of
terminating the contract and the expected net cost of continuing with the contract, which is determined based on the incremental
costs of fulfilling the obligation under the contract and an allocation of other costs directly related to fulfilling the contract.
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 accrued using the effective interest rate method on bank loans held by the Group.
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 2024 was £1.9 million
(2023: £0.9 million). The weighted capitalisation rate for the year to 30 June 2024 was 8.5% (2023: 5.8%), and is determined by
the margin rate plus compounded SONIA rate, per the Barclays development debt facility.
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.
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NOTES TO THE FINANCIAL STATEMENTS
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.
Estimates
In the process of applying the Group’s accounting policies, the Directors have made the following estimates, which have the most
significant effect on the amounts recognised in the consolidated financial statements:
(i) Fair value of investment property
The fair value of any property, including investment property under construction, is determined by an independent property
valuation expert to be the estimated amount for which a property should exchange on the date of the valuation in an arm’s
length transaction. The valuation experts use recognised valuation techniques applying principles of both IAS40 and IFRS13.
The 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. Other Special Assumptions applied in addition to the key unobservable inputs identified
above, and used since inception include: all individual site valuations have been treated assuming part of a larger portfolio (in
excess of £50 million); and an indirect purchase of a special purpose vehicle holding title to the asset, so stamp duty is assessed
on a share purchase basis rather than as property. Further details on the valuation of the investment properties, including
sensitivities, are disclosed in note 18.
Judgements
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 a property owning special purpose vehicle. The Directors considered whether this
acquisition met 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 acquisition 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 acquisition which were as follows:
|
Sigma PRS Investments
(Hexthorpe Phase 3) Limited
£'000
|
|
|
Investment properties acquired
|
9,100
|
|
Other receivables
|
55
|
|
Other payables
|
(27)
|
|
Total consideration paid
|
9,128
|
>
Investment property is measured at fair value as at the date of the acquisition of the subsidiary by an independent valuation expert.
>
Other receivables are taken as being the value recorded in the accounts of the Company acquired, being the best estimate of
the amounts actually recoverable.
>
Other payable balances are measured at the amounts actually payable.
118
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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 pages 141 to 143.
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 2023.
A number of new standards and amendments to standards and interpretations have been issued for the current accounting year.
The Group has adopted the following new standards and amendments for the first time for the year ended 30 June 2024, none of
which have had a material impact on the Group.
>
IFRS 17 ‘Insurance Contracts’;
>
amendments to IAS 8 impacting the definition of accounting estimates;
>
Pillar Two model rules and associated IAS 12 amendments;
>
amendments to IAS 12 impacting deferred tax related to assets and liabilities arising from a single transaction; and
>
amendments to IAS 1 and IFRS Practice Statement 2 impacting the disclosure of accounting policies.
Standards and interpretations in issue but not yet effective
The following standards and interpretations which have been issued but are not yet effective include:
>
IAS 1 ‘Presentation of Financial Statements’ on the classification of liabilities and non-current liabilities with covenants;
>
IFRS 16 ‘Leases’ on sale and leaseback arrangements;
>
limited scope amendments to both IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments in Associates and
Joint Ventures’ in respect of sale or contribution of assets between an investor and its associates or joint ventures; and
>
IFRS 18 ‘Presentation and Disclosure in Financial Statements’.
With the exception of IFRS 18, these amendments to standards that are not yet effective are not expected to have a material impact
on the Group’s results. These have not yet been adopted by the Group.
5. Financial risk management
The Group’s business activities are set out in the Strategic Report on pages 9 to 12. 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 capital of the Group is managed in accordance with its investment policy. 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 meet their 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 2024 the Group had short term
debt of £32.6 million (2023: £126.7 million) and cash at bank of £18.1 million (2023: £13.2 million). At 30 June 2024 the Company
had no short term debt (2023: £nil) and cash at bank of £13.6 million (2023: £8.0 million). There were no changes in the Group’s
and Company’s approach to capital management during the year.
119
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
The Group’s capital is represented by the Ordinary Shares, share premium, capital reduction reserve and retained earnings reserve.
The Group is not subject to any externally-imposed capital requirements except for the requirement as a REIT to distribute at least
90% of its tax-exempt rental business profits.
Financial instruments
The Group's 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 and borrowings, the main purpose of
which is to finance the acquisition and development of the Group's investment property portfolio.
|
Amortised cost
|
||
|
Group
|
2024
£’000
|
2023
£’000
|
|
Financial assets
|
||
|
Trade and other receivables
|
2,150
|
1,899
|
|
Cash and other cash equivalents
|
18,053
|
13,198
|
|
Total financial assets
|
20,203
|
15,097
|
|
Financial liabilities
|
||
|
Trade and other payables
|
16,332
|
20,091
|
|
Interest bearing loans and borrowings
|
416,935
|
375,185
|
|
Total financial liabilities
|
433,267
|
395,276
|
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.
|
Amortised cost
|
||
|
Company
|
2024
£’000
|
2023
£’000
|
|
Financial assets
|
||
|
Trade and other receivables
|
334,513
|
346,803
|
|
Cash and other cash equivalents
|
13,623
|
8,044
|
|
Total financial assets
|
348,136
|
354,847
|
|
Financial liabilities
|
||
|
Trade and other payables
|
2,090
|
1,649
|
|
Total financial liabilities
|
2,090
|
1,649
|
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 (2023: nil).
120
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Interest rate risk
The Group has mitigated 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. Derivatives may be used when considered appropriate to mitigate interest
rate risk. Based on the debt profile at the year-end, a 1% change in variable interest rates would result in an income statement
adjustment of £0.7 million (2023: £1.3 million).
|
Lender
|
Balance as at
30 June 2024
|
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
|
|
Legal and General Investment Management
|
£101.9 million
|
15 years
|
6.04%
|
Fixed
|
July 2038
|
|
RBS
|
£34.3 million
|
2 years
|
6.95%
|
Variable
|
July 2025
|
|
Barclays Bank PLC
|
£32.6 million
|
3 years
|
8.55%
|
Variable
|
September 2025
|
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 2024 (2023: 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 2024 amounted to £1.7 million (2023: £1.0 million).
As at 30 June 2024 the Group’s loss allowance for expected credit losses on these trade receivables was £691,000 (2023:
£453,000). The Group’s loss allowance is assessed based on the ageing of individual debts, as well as current occupancy of each
individual property. Amounts are only written off when there is no expectation of recovery. As at 30 June 2024, net trade receivables
were 1.6% (2023: 1.0%), and total arrears over 30 days were 1.4% (2023: 1.2%) of the estimated rental value (“
ERV
”) of the
portfolio.
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 is limited as they are held with banks with high credit ratings. As at 30 June
2024, 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
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 (2023: £nil).
121
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
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 2024, the Group had net current liabilities of £22.2 million (2023: net current liabilities of £111.4 million). The table
below summarises the undiscounted maturities of the Group’s non-derivative financial liabilities as at 30 June 2024 and 30 June
2023:
|
Group
|
On
demand
£’000
|
< 3
months
£’000
|
3 to 12
months
£’000
|
1 to 5
years
£’000
|
> 5
years
£’000
|
Total
£’000
|
|
2024
|
||||||
|
Trade and other payables
|
–
|
2,001
|
13,258
|
1,073
|
–
|
16,332
|
|
Loans and borrowings
|
–
|
30,375
|
14,716
|
64,145
|
489,487
|
598,723
|
|
–
|
32,376
|
27,974
|
65,218
|
489,487
|
615,055
|
|
|
2023
|
||||||
|
Trade and other payables
|
–
|
4,003
|
14,007
|
2,081
|
–
|
20,091
|
|
Loans and borrowings
|
–
|
123,823
|
11,521
|
30,227
|
332,969
|
498,540
|
|
–
|
127,826
|
25,528
|
32,308
|
332,969
|
518,631
|
For the majority of borrowings, the fair values are not materially different from their carrying amounts, since the interest payable
on those borrowings is either close to current market rates or the borrowings are of a short-term nature. Material differences are
identified only for the following borrowings:
|
2024
Carrying
amount
£’000
|
2024
Fair
value
£’000
|
2023
Carrying
amount
£’000
|
2023
Fair
value
£’000
|
|
|
Bank loans (long-term, fixed interest)
|
352,000
|
282,477
|
250,000
|
166,511
|
The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate.
As at 30 June 2024, the Company had net current assets of £11.6 million (2023: £6.7 million). The table below summarises the
maturities of the Company’s non-derivative financial liabilities as at 30 June 2024 and 30 June 2023:
|
Company
|
On
demand
£’000
|
< 3
months
£’000
|
3 to 12
months
£’000
|
1 to 5
years
£’000
|
> 5
years
£’000
|
Total
£’000
|
|
2024
|
||||||
|
Trade and other payables
|
–
|
2,090
|
–
|
–
|
–
|
2,090
|
|
–
|
2,090
|
–
|
–
|
–
|
2,090
|
|
|
2023
|
||||||
|
Trade and other payables
|
–
|
1,655
|
–
|
–
|
–
|
1,655
|
|
–
|
1,655
|
–
|
–
|
–
|
1,655
|
122
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
6. Rental income
|
2024
£’000
|
2023
£’000
|
|
|
Gross rental income from investment property
|
58,231
|
49,701
|
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 individually significant customers.
7. Non-recoverable property costs
|
2024
£’000
|
2023
£’000
|
|
|
Property expenses and irrecoverable costs
|
10,940
|
9,551
|
Non-recoverable property costs represent direct operating expenses in relation to rental income arising on investment properties.
The impairment charge to the income statement in relation to trade receivables was £313,000 (2023: £161,000).
8. Other income
|
2024
£’000
|
2023
£’000
|
|
|
Other income
|
194
|
1,646
|
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
|
2024
£’000
|
2023
£’000
|
|
|
Directors’ emoluments
|
213
|
180
|
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 91 to 94.
10. Particulars of employees
The Group had no employees during the year or prior year other than the Directors.
11. Asset management fees
|
2024
£’000
|
2023
£’000
|
|
|
Asset management fee
|
6,051
|
5,788
|
Sigma PRS Management Ltd is appointed as the Investment Adviser of the Company.
The Asset Management Fee (the “
Asset Management Fee
”) payable to the Investment Adviser is payable monthly in arrears, and
the rates used to calculate the Asset Management Fee are as follows:
(i) 1.00% per annum of the Adjusted NAV* up to, and including, £250 million;
(ii) 0.90% per annum of the Adjusted NAV in excess of £250 million and up to, and including, £500 million;
(iii) 0.75% per annum of the Adjusted NAV in excess of £500 million and up to, and including, £1 billion;
(iv) 0.50% per annum of the Adjusted NAV in excess of £1 billion and up to, and including, £2 billion; and
(v) 0.40% per annum of the Adjusted NAV in excess of £2 billion.
123
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
The asset management fee payable to the Investment Adviser (the “
Asset Management Fee
”) was revised with effect from 1 July
2024 such that the Company will pay a reduced fee for Adjusted Net Asset Values* (“
Adjusted NAV
”) as follows:
(i)
0.90 per cent. (previously 1.00%) per annum of the Adjusted Net Asset Value up to, and including, £250 million;
(ii)
0.85 per cent. (previously 0.90%) per annum of the Adjusted Net Asset Value in excess of £250 million and up to, and
including, £500 million;
(iii)
0.70 per cent. (previously 0.75%) per annum of the Adjusted Net Asset Value in excess of £500 million and up to, and
including, £1 billion;
(iv) 0.40 per cent. (previously 0.50%) per annum of the Adjusted Net Asset Value in excess of £1 billion and up to, and
including, £2 billion; and
(v)
0.30 per cent. (previously 0.40%) per annum of the Adjusted Net Asset Value in excess of £2 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 30 June 2029.
*
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.
12. Administrative expenses
|
2024
£’000
|
2023
£’000
|
|
|
Legal and professional fees*
|
553
|
352
|
|
Administration and secretarial fees
|
162
|
175
|
|
Audit, accounting, and tax fees
|
467
|
361
|
|
Valuation fees
|
337
|
333
|
|
Depositary fees
|
45
|
43
|
|
Financial adviser and broker fees
|
204
|
201
|
|
Insurance
|
53
|
59
|
|
Public relations
|
246
|
102
|
|
Regulatory fees
|
212
|
165
|
|
Subscriptions and donations
|
234
|
114
|
|
Disallowed VAT
|
408
|
395
|
|
2,921
|
2,300
|
*
Includes a one-off incentive payment of £0.4 million (net) to the lettings management agent in respect of substantial rental growth (2023: £nil).
This incentive has been removed moving forward.
Services provided by the Group’s Auditor and its associates
The Group has obtained the following services from its Auditor and its associates:
|
2024
£’000
|
2023
£’000
|
|
|
Audit of the Group financial statements
|
150
|
140
|
|
Audit of the subsidiary financial statements
|
170
|
148
|
|
Agreed upon procedures on the half year report
|
25
|
23
|
|
345
|
311
|
124
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
13. Finance income
|
2024
£’000
|
2023
£’000
|
|
|
Interest on short term deposits
|
188
|
49
|
14. Finance cost
|
2024
£’000
|
2023
£’000
|
|
|
Amortisation of debt legal costs and arrangement fees
|
2,817
|
4,315
|
|
Interest on bank loans
|
15,408
|
12,163
|
|
18,225
|
16,478
|
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.
|
2024
£’000
|
2023
£’000
|
|
|
Current and deferred tax
|
||
|
Corporation tax charge/(credit) for the period
|
–
|
–
|
|
Total current income tax charge/(credit) in the income statement
|
–
|
–
|
The tax charge for the period is less than the standard rate of corporation tax in the UK of 25% (2023: 20.5%). The differences are
explained below.
|
2024
£’000
|
2023
£’000
|
|
|
Profit before tax
|
93,675
|
42,452
|
|
Tax at UK corporation tax standard rate of 25% / 20.5%
|
23,419
|
8,703
|
|
Change in value of exempt investment properties
|
(18,353)
|
(5,189)
|
|
Exempt REIT income
|
(5,507)
|
(3,723)
|
|
Amounts not deductible for tax purposes
|
110
|
16
|
|
Unutilised residual current period tax losses not recognised in deferred tax
|
862
|
418
|
|
Capital allowances claimed against exempt REIT income
|
(49)
|
(40)
|
|
Capitalised interest claimed against exempt REIT income
|
(482)
|
(185)
|
|
–
|
–
|
From 1 April 2017 to 31 March 2023, the standard rate of corporation tax in the UK was 19%, from 1 April 2023 the standard rate
of corporation tax in the UK was 25%.
REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with Part 12 of
CTA 2010.
125
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
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:
|
2024
£’000
|
2023
£’000
|
|
|
Earnings per IFRS income statement
|
93,675
|
42,452
|
|
Adjustments to calculate EPRA Earnings:
|
||
|
Changes in value of investment properties (Note 18)
|
(73,412)
|
(25,353)
|
|
EPRA Earnings
|
20,263
|
17,099
|
|
Weighted average number of ordinary shares (Note 26)
|
549,251,458
|
549,251,458
|
|
IFRS EPS (pence)
|
17.1
|
7.7
|
|
EPRA EPS (pence)
|
3.7
|
3.1
|
Further details of the EPRA performance measure are given on page 13.
17. Dividends
The following dividends were paid during the current year and prior year:
|
2024
£’000
|
2023
£’000
|
|
|
Dividends on ordinary shares declared and paid:
|
||
|
Dividend of 1.0p for the 3 months to 30 June 2022
|
–
|
5,493
|
|
Dividend of 1.0p for the 3 months to 30 September 2022
|
–
|
5,493
|
|
Dividend of 1.0p for the 3 months to 31 December 2022
|
–
|
5,492
|
|
Dividend of 1.0p for the 3 months to 31 March 2023
|
–
|
5,492
|
|
Dividend of 1.0p for the 3 months to 30 June 2023
|
5,492
|
–
|
|
Dividend of 1.0p for the 3 months to 30 September 2023
|
5,493
|
–
|
|
Dividend of 1.0p for the 3 months to 31 December 2023
|
5,493
|
–
|
|
Dividend of 1.0p for the 3 months to 31 March 2024
|
5,492
|
–
|
|
21,970
|
21,970
|
|
|
Proposed dividends on ordinary shares:
|
||
|
3 months to 30 June 2023: 1.0p per share
|
–
|
5,493
|
|
3 months to 30 June 2024: 1.0p per share
|
5,493
|
–
|
|
5,493
|
5,493
|
126
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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 2024 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, incorporating the IVSC International Valuation Standards effective from
31 January 2022, together, where applicable, with the UK National Supplement effective 14 January 2019, (together 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.
|
Completed
Assets
£’000
|
Assets under
Construction
£’000
|
Total
£’000
|
|
|
At 30 June 2022
|
840,355
|
121,560
|
961,915
|
|
Property additions - subsequent expenditure
|
–
|
47,464
|
47,464
|
|
Change in fair value
|
26,963
|
(1,600)
|
25,353
|
|
Transfers to completed assets
|
80,419
|
(80,419)
|
–
|
|
At 30 June 2023
|
947,727
|
87,005
|
1,034,732
|
|
Properties acquired on acquisition of subsidiaries
|
9,100
|
–
|
9,100
|
|
Property additions - subsequent expenditure
|
–
|
22,083
|
22,083
|
|
Right of use asset movement during the year
|
496
|
–
|
496
|
|
Change in fair value
|
68,095
|
5,317
|
73,412
|
|
Transfers to completed assets
|
58,660
|
(58,660)
|
–
|
|
At 30 June 2024
|
1,084,078
|
55,745
|
1,139,823
|
The historic cost of completed assets and assets under construction as at 30 June 2024 was £863.8 million (2023: £831.8 million).
The carrying amount of investment property pledged as security as at 30 June 2024 was £1.1 billion (2023: £952.5 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 £1.5 million as at 30 June 2024 (2023: £1.0 million).
The PRS REIT acquired a site at Coppenhall Place, Crewe, with planning consent during the year ended 30 June 2019. At the
same time, the Company also entered into a fixed price design and build contract with one of its principal house building partners
to complete 131 units. This represented approximately 50% of the entire Coppenhall Place site with the balance being developed
by the house builder as market for sale units. The design and build contract contained standard clauses making the house builder
responsible for delivering the site and doing so in compliance with the requirements of the original planning consent.
Shortly after physical completion and letting of more than 95% of the units on the site acquired by the PRS REIT, a dispute arose
between the respective Council and the house builder regarding compliance with the original planning consent. After consultation
between these two parties, the house builder submitted a further planning application with a view to resolving the areas of dispute.
The submission was recommended to the Elected Council Members (“Members”) by the Council Executive but a decision was
deferred at the hearing in order that the Members could obtain additional information on viability, a peer review to clarify on-site
ventilation and clarification on queries regarding potential soil contamination in certain areas of the whole site. As at the date
of approval of these financial statements the house building partner continues to work with the Council Executive to address
outstanding matters before reverting to the Members for approval. The Investment Adviser is closely monitoring progress. The
Board of the PRS REIT is of the view that remaining areas of work will be completed and the planning issues ultimately finalised to
the satisfaction of all parties, including the private owners of the market for sale units. The house builder continues to have dialogue
with the Council Executive and is currently hopeful of going back to the Members for approval in November 2024.
127
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
The financial statements include an investment value for the Coppenhall Place asset of £25.4 million as at 30 June 2024 on the
assumption that the planning matters are resolved. The value of the site represents approximately 2.2% of the balance sheet
investment value of assets as at the year-end date. Given the contractual protections, the risk of any potential impact to the Group
is considered highly unlikely, and given the value of the site relative to the overall balance sheet, the risk of any potential impact to
the Group is considered to be immaterial.
Fair Values
IFRS 13 sets out a three-tier hierarchy for 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:
|
Type
|
Range
2024
|
Average
2024
|
Range
2023
|
Average
2023
|
|
ERV per unit
|
£11k - £23k
|
£13k
|
£10k - £22k
|
£12k
|
|
Investment yield
|
4.25% to 5.25%
|
4.59%
|
4.10% to 5.00%
|
4.47%
|
|
Gross to net assumption
|
22.5% to 25.0%
|
22.9%
|
22.5% to 25.0%
|
22.9%
|
The following descriptions and definitions relate to key unobservable inputs made in determining fair values:
>
ERV (Estimated Rental Value) per unit: the estimated annual market rental value that could be earned on a unit basis annually;
>
Investment yield: the net income earned as a percentage of the investment value; and
>
Gross to net assumption: the non-recoverable property costs expected to be incurred on a rental property as a percentage of
rental income.
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 2024, was from 29% to 97% (2023: 29% 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.£1.1 million.
Other Special Assumptions applied in addition to the key unobservable inputs identified above, and used since inception include:
>
All individual site valuations have been treated assuming part of a larger portfolio (in excess of £50 million); and
>
An indirect purchase of a special purpose vehicle holding title to the asset, so stamp duty is assessed on a share purchase
basis rather than as property.
128
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
The impact of changes to the significant unobservable inputs for completed and development assets are:
|
2024
Impact on
statement of
comprehensive
income
£’000
|
2024
Impact on
statement
of financial
position
£’000
|
2023
Impact on
statement of
comprehensive
income
£’000
|
2023
Impact on
statement of
financial
position
£’000
|
|
|
Improvement in ERV by 5%
|
57,821
|
57,821
|
52,650
|
52,650
|
|
Worsening in ERV by 5%
|
(56,595)
|
(56,595)
|
(51,303)
|
(51,303)
|
|
Improvement in yield by 0.125%
|
32,232
|
32,232
|
30,078
|
30,078
|
|
Worsening in yield by 0.125%
|
(30,560)
|
(30,560)
|
(28,407)
|
(28,407)
|
|
Improvement in gross to net by 1%
|
15,486
|
15,486
|
14,192
|
14,192
|
|
Worsening in gross to net by 1%
|
(14,153)
|
(14,153)
|
(12,738)
|
(12,738)
|
The rates of sensitivity reflected in the above table have been selected as being reflective of movements experienced in ERV, yields
and gross to net expenses.
19. Investment in subsidiaries
Company
|
2024
£’000
|
2023
£’000
|
|
|
Cost at the start of the year
|
75,425
|
75,425
|
|
Cost at the end of the year
|
75,425
|
75,425
|
The Group comprises a number of companies, all subsidiaries included within these financial statements are noted below:
Directly held:
|
Name of Entity
|
Company
number
|
Principal Activity
|
Country of
Incorporation
|
%
ownership
|
|
The PRS REIT Holding Company Limited
|
10695914
|
Investment Holding
Company
|
England
|
100%
|
Indirectly held:
|
Name of Entity
|
Company
number
|
Principal
Activity
|
Country of
Incorporation
|
%
ownership
|
|
*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%
|
129
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
|
Name of Entity
|
Company
number
|
Principal
Activity
|
Country of
Incorporation
|
%
ownership
|
|
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 (Bluebird) Memberco Limited
|
12616572
|
Investment Holding
Company
|
England
|
100%
|
|
The PRS REIT (Bluebird) Holding Company Limited
|
12598004
|
Investment Holding
Company
|
England
|
100%
|
|
The PRS REIT (Bluebird) Borrower Limited
|
12599502
|
Property Investment
|
England
|
100%
|
|
The PRS REIT (Bluebird) Investments LLP
|
OC432893
|
Property Investment
|
England
|
100%
|
|
*The PRS REIT (LGIM) Memberco Limited
|
14903396
|
Investment Holding
Company
|
England
|
100%
|
|
The PRS REIT (LGIM) Holding Company Limited
|
14903127
|
Investment Holding
Company
|
England
|
100%
|
|
*The PRS REIT (LGIM) Borrower Limited
|
14903337
|
Property Investment
|
England
|
100%
|
|
*The PRS REIT (LGIM) Investments LLP
|
OC447554
|
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%
|
130
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
|
Name of Entity
|
Company
number
|
Principal
Activity
|
Country of
Incorporation
|
%
ownership
|
|
*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%
|
|
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%
|
|
The PRS REIT (Drakelow Park Phase 2) Limited
|
13985378
|
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%
|
|
**Sigma PRS Investments (Hexthorpe Phase 3)
Limited
|
13490582
|
Property Investment
|
England
|
100%
|
|
**Sigma PRS Investments (Hexthorpe Phase 3 II)
Limited
|
13496367
|
Property Investment
|
England
|
100%
|
|
The PRS REIT (Accrington) Limited
|
12936087
|
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%
|
131
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
|
Name of Entity
|
Company
number
|
Principal
Activity
|
Country of
Incorporation
|
%
ownership
|
|
*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%
|
|
The PRS REIT (Wolvey Campus) Limited
|
14188354
|
Property Investment
|
England
|
100%
|
|
The PRS REIT (Charlton Gardens) Limited
|
14229875
|
Property Investment
|
England
|
100%
|
|
The PRS REIT (Werrington) Limited
|
14231085
|
Property Investment
|
England
|
100%
|
|
The PRS REIT (Hexthorpe Phase 4) Limited
|
14230128
|
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%
|
132
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
|
Name of Entity
|
Company
number
|
Principal
Activity
|
Country of
Incorporation
|
%
ownership
|
|
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 Investments Holding Company Limited
|
12302557
|
Dormant
|
England
|
100%
|
|
The PRS REIT (Airfields II) Limited
|
12227845
|
Property Investment
|
England
|
100%
|
*
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.
**
Acquired in December 2023, see note 4 for further information.
The following wholly owned subsidiaries were struck off during the year:
The The PRS REIT (North Leigh Park) Limited
13699019
Sigma PRS Investments (Houghton Regis Parcel 8) Limited
11875798
Sigma PRS Investments (Houghton Regis Parcel 8A) Limited
12168751
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.
20. Trade and other receivables
|
Current
|
Group
2024
£’000
|
Company
2024
£’000
|
Group
2023
£’000
|
Company
2023
£’000
|
|
Trade receivables
|
1,015
|
–
|
565
|
–
|
|
Accrued income
|
1,018
|
–
|
946
|
5
|
|
Social security and other taxes
|
39
|
–
|
1,216
|
–
|
|
Prepayments and other receivables
|
4,745
|
112
|
4,339
|
258
|
|
6,817
|
112
|
7,066
|
263
|
|
Non-Current – Company
|
2024
£’000
|
2023
£’000
|
|
Receivables from group undertakings
|
334,513
|
346,540
|
|
334,513
|
346,540
|
Movements in the loss allowance of trade receivables are as follows:
|
Group
2024
£’000
|
Company
2024
£’000
|
Group
2023
£’000
|
Company
2023
£’000
|
|
|
Gross receivables being financial assets
|
2,841
|
334,513
|
2,352
|
346,803
|
|
Provisions for receivables impairment
|
(691)
|
–
|
(453)
|
–
|
|
Net receivables being financial assets
|
2,150
|
334,513
|
1,899
|
346,803
|
|
Receivables written-off during the year as uncollectable
|
85
|
–
|
161
|
–
|
The provision is calculated as an expected credit loss on trade and other receivables in accordance with IFRS 9. Trade receivables
are written off when there is no reasonable expectation of recovery, based on historical loss experience and a forward-looking
assessment.
133
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
Receivables from group undertakings have been issued without terms and are interest free. These have been considered for
impairment using the 12 months expected credit loss model because there have been no changes in credit risk since initial
recognition. The expected credit losses on amounts owed by Group companies is insignificant (2023: insignificant). The individual
companies comprising this balance hold sufficient net assets which could be used to repay the amount owed.
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 2024, £196,000 of
trade receivables are more than thirty days old and not provided for (2023: £248,000).
21. Cash and cash equivalents
|
Group
2024
£’000
|
Company
2024
£’000
|
Group
2023
£’000
|
Company
2023
£’000
|
|
|
Restricted cash
|
4,185
|
–
|
3,540
|
–
|
|
Cash at bank
|
13,868
|
13,623
|
9,658
|
8,044
|
|
18,053
|
13,623
|
13,198
|
8,044
|
Restricted cash comprises £4.2 million (2023: £3.5 million) in funds held in rent accounts which are released to free cash once
certain loan conditions are met.
22. Trade and other payables
|
Group
2024
£’000
|
Company
2024
£’000
|
Group
2023
£’000
|
Company
2023
£’000
|
|
|
Current liabilities
|
||||
|
Trade payables
|
1,988
|
1,026
|
4,003
|
750
|
|
Accruals and deferred income
|
13,187
|
1,057
|
13,067
|
899
|
|
Social security and other taxes
|
7
|
7
|
6
|
6
|
|
15,182
|
2,090
|
17,076
|
1,655
|
|
|
Non-current liabilities
|
||||
|
Accruals and deferred income
|
1,073
|
–
|
2,081
|
–
|
|
16,255
|
2,090
|
19,157
|
1,655
|
Accruals and deferred income are principally comprised of financial retentions with housebuilders, generally held for one year after
completion of a full site. These totalled £7.5 million as at 30 June 2024 (2023: £8.8 million).
The fair values approximate the carrying values.
23. Provisions
|
Group
2024
£’000
|
Company
2024
£’000
|
|
|
Current liabilities
|
||
|
Provision brought forward
|
934
|
–
|
|
Provision in the year
|
–
|
934
|
|
Provision released in the year
|
(857)
|
–
|
|
As at 30 June
|
77
|
934
|
A provision for onerous contracts on three development sites was made during the prior year. This reflected the increase in yields
over the year, with investment values moving inversely in relation to yields. These provisions have been released over the current
financial year as the development sites are completed, the remaining provision will be released in the next financial year.
134
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
24. Interest bearing loans and borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or
loss over the period of the borrowings using the effective interest method.
|
Group
2024
£’000
|
Company
2024
£’000
|
Group
2023
£’000
|
Company
2023
£’000
|
|
|
Current liabilities
|
||||
|
Bank loans at 1 July
|
126,713
|
–
|
99,941
|
–
|
|
Loans advanced in the year
|
28,859
|
–
|
49,801
|
–
|
|
Loans repaid in the year
|
(110,225)
|
–
|
(23,304)
|
–
|
|
Loan term extended
|
(13,101)
|
–
|
–
|
–
|
|
Capitalised loan costs
|
(345)
|
–
|
275
|
–
|
|
Bank loans at 30 June
|
31,901
|
–
|
126,713
|
–
|
|
Lease liability (Note 25)
|
32
|
–
|
32
|
–
|
|
Total loans and borrowings
|
31,933
|
–
|
126,745
|
–
|
|
Non-current liabilities
|
||||
|
Bank loans at 1 July
|
247,432
|
–
|
245,684
|
–
|
|
Loans advanced in the year
|
123,098
|
–
|
–
|
–
|
|
Loan term extended
|
13,101
|
–
|
–
|
–
|
|
Capitalised loan costs
|
(273)
|
–
|
1,748
|
–
|
|
Bank loans at 30 June
|
383,358
|
–
|
247,432
|
–
|
|
Lease liability (Note 25)
|
1,645
|
–
|
1,008
|
–
|
|
Total loans and borrowings
|
385,003
|
–
|
248,440
|
–
|
The fair value of loans and borrowings at year end totalled £349.7 million (2023: £300.2 million).
Bank loans
Through its subsidiaries the Company has granted fixed and floating charges over certain investment property assets to secure the loans.
The Group’s borrowing facilities are with Scottish Widows, Legal and General Investment Management, RBS plc and Barclays Bank
PLC. At 30 June 2024, these comprised the following:
|
Lender
|
Loan
facility
|
Balance
drawn
30 June 2024
|
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
|
|
Legal and General
Investment Management
|
£102 million
|
£102 million
|
15 years
|
6.04%
|
Fixed
|
July 2038
|
|
RBS
|
£75 million
|
£34 million
|
2 years
|
6.95%
|
Variable
|
July 2025
|
|
Barclays Bank PLC
|
£33 million
|
£33 million
|
3 years
|
8.55%
|
Variable
|
September 2025
|
As determined by the Company’s Investment Policy, the Group’s maximum loan to value ratio can be no more than 45%. As at
30 June 2024 the Group’s EPRA loan to value was 36% (2023: 37%).
135
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
Reconciliation of movements of borrowings to cash flows arising from financing activities:
|
2024
£’000
|
2023
£’000
|
|
|
Balance as at 1 July
|
374,145
|
345,625
|
|
Cash movements
|
||
|
Proceeds from borrowings
|
151,957
|
49,801
|
|
Borrowings repaid
|
(110,225)
|
(23,304)
|
|
Interest paid
|
(16,640)
|
(11,957)
|
|
Non-utilisation fees paid
|
(439)
|
(703)
|
|
Arrangement and commitment fees paid
|
(3,529)
|
(932)
|
|
Non-Cash movements
|
||
|
Finance costs
|
19,989
|
15,615
|
|
Balance as at 30 June
|
415,258
|
374,145
|
Debt refinancing
At the beginning of July 2023, the Company completed the refinancing of its £150 million revolving credit facility (“
RCF
”) provided
by RBS and Lloyds Banking Group plc. The Group secured a £102 million facility of fixed-rate debt for 15 years with Legal and
General Investment Management, together with a further £75 million of floating-rate debt agreed for two years with RBS.
25. Leases
Lease liabilities as lessee
The lease liabilities recognised are shown in the table below, the Group has no other leases.
|
Group
2024
£’000
|
Group
2023
£’000
|
|
|
Lease liabilities
|
1,677
|
1,040
|
|
Amounts recognised in the income statement in non-recoverable property costs
|
140
|
5
|
Lease receivables as lessor
The future minimum lease payments receivable under non-cancellable operating leases in respect of the Group’s property portfolio
are as follows:
|
Group
2024
£’000
|
Group
2023
£’000
|
|
|
Receivable within 1 year
|
19,149
|
27,784
|
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.
136
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
26. Share capital
Share capital represents the nominal value of consideration received by the Company for the issue of 1p Ordinary Shares.
|
Group and Company
|
2024
No. of
shares
|
2024
Share
capital
£’000
|
2023
No. of
shares
|
2023
Share
capital
£’000
|
|
Balance at the beginning of year
|
549,251,458
|
5,493
|
549,251,458
|
5,493
|
|
Balance at end of year
|
549,251,458
|
5,493
|
549,251,458
|
5,493
|
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.
27. Share premium reserve
The share premium relates to amounts subscribed for share capital in excess of nominal value.
Group and Company
|
2024
£’000
|
2023
£’000
|
|
|
Balance at beginning of year
|
298,974
|
298,974
|
|
Balance at end of year
|
298,974
|
298,974
|
28. 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.
|
2024
£’000
|
2023
£’000
|
|
|
Balance at beginning of year
|
118,584
|
140,554
|
|
Final dividend paid of 1.0p per share for the year ended 30 June 2022
|
–
|
(5,493)
|
|
Dividend paid of 1.0p per share for the period ended 30 September 2022
|
–
|
(5,493)
|
|
Dividend paid of 1.0p per share for the period ended 31 December 2022
|
–
|
(5,492)
|
|
Dividend paid of 1.0p per share for the period ended 31 March 2023
|
–
|
(5,492)
|
|
Final dividend paid of 1.0p per share for the year ended 30 June 2023
|
(5,492)
|
–
|
|
Balance at end of year
|
113,092
|
118,584
|
137
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
29. Net Asset Value
EPRA NTA is considered to be the most relevant measure for the Group. 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:
|
2024
|
2023
|
|
|
IFRS Net assets at 30 June (£’000)
|
731,425
|
659,720
|
|
EPRA adjustments to NTA
|
–
|
–
|
|
EPRA NTA at 30 June
|
731,425
|
659,720
|
|
Shares in issue at end of year
|
549,251,458
|
549,251,458
|
|
Basic IFRS NAV per share (pence)
|
133.2
|
120.1
|
|
EPRA NTA per share (pence)
|
133.2
|
120.1
|
The NTA per share calculated on an EPRA basis is the same as the IFRS NAV per share for the year ended 30 June 2024 and the
year ended 30 June 2023.
30. Controlling parties
As at 30 June 2024 and 30 June 2023, there was no ultimate controlling party.
31. 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.
32. Capital commitments
The Group has entered into contracts with unrelated parties for the construction of residential housing with a total value of
£712.5 million (2023: £712.5 million). As at 30 June 2024, £6.4 million (2023: £27.3 million) of such commitments remained
outstanding.
138
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES
NOTES TO THE FINANCIAL STATEMENTS
33. Related party disclosure
The number of shares owned by the Directors of the Company as at 30 June 2024 along with dividends they received during the
period is as follows:
|
Company Director
|
No. of shares held
|
Dividends received
|
||
|
2024
|
2023
|
2024
|
2023
|
|
|
Rod MacRae
|
125,000
|
125,000
|
£5,000
|
£4,750
|
|
Steffan Francis
|
125,000
|
125,000
|
£5,000
|
£4,800
|
|
Steve Smith
|
446,577
|
305,000
|
£13,832
|
£9,300
|
|
Geeta Nanda
|
–
|
–
|
–
|
–
|
|
Karima Fahmy
|
–
|
–
|
–
|
–
|
The Group and the Company have no key management personnel, other than the Non-Executive Directors. For the current financial
year, Directors’ fees of £213,000 (2023: £180,000) were incurred.
34. 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 July 2024 (see Note 35 for further information).
For the year ended 30 June 2024, fees of £6.1 million (2023: £5.8 million) were incurred and payable to Sigma PRS in respect of
asset management fees. At 30 June 2024, £0.5 million (2023: £0.5 million) remained unpaid.
For the year ended 30 June 2024, development management fees of £0.8 million (2023: £1.8 million) were incurred and payable to
Sigma PRS. At 30 June 2024, £0.03 million (2023: £0.2 million) remained unpaid. Development management fees were capitalised
as development costs during the year and prior year.
For the year ended 30 June 2024, administration and secretarial services of £70,000 (2023: £70,000) were incurred and payable
to Sigma Capital Property Ltd, a fellow subsidiary of the ultimate holding company of the Investment Adviser. At 30 June 2024,
£18,000 (2023: £9,000) remained unpaid.
Sigma PRS’s shareholding as at 30 June 2024 was 5,889,852 (2023: 5,889,852), which represents 1.07% (2023: 1.07%) of the
issued share capital in the Company. All the shares acquired were in accordance with the Development Management Agreement
between the Company and Sigma PRS.
For the year ended 30 June 2024, Sigma PRS received dividends from the Company of £236,000 (2023: £236,000).
During December 2023, the Group acquired Sigma PRS Investments (Hexthorpe Phase 3) Limited, a subsidiary from Sigma Capital
Group Limited, for consideration of £9.1 million.
35. Post balance sheet events
Dividends
On 1 August 2024, the Company declared a dividend of 1.0 p per ordinary share in respect of the fourth quarter of the current
financial year. The dividend was paid on 30 August 2024, to shareholders on the register as at 9 August 2024.
Related party transaction
Investment Advisory & Development Management Agreements - New Terms Signed
At the beginning of July 2024, the Company extended its existing Investment Advisory Agreement and Development Management
Agreement (together, the “Agreements”) with Sigma PRS Management Ltd, the Company's Investment Adviser and Development
Manager (together, the “Investment Adviser”). At the same time, it agreed improved fee structures in both the Agreements. The
contract changes apply from 1 July 2024. Both Agreements were extended to 30 June 2029, an extension of 2.5 years from the
end of the previous term, and the revised fee rates are set out below and, as stated, take effect from 1 July 2024.
Extension of Agreements
The Agreements took effect from 1 January 2021 and provided for a minimum contracted term of five years to 31 December 2026
(inclusive of a one-year notice period). In connection with the reduction in the Investment Adviser and Development Management fees,
the contracted term for the Agreements has been extended by 2.5 years, to 30 June 2029 (inclusive of a one-year notice period).
139
The PRS REIT plc Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
Revised Investment Adviser & Development Management Fees
(a) The Investment Adviser fee has been revised as follows and remains payable monthly in arrears:
(i)
0.90 per cent. (previously 1.00%) per annum of the Adjusted Net Asset Value up to, and including, £250 million;
(ii)
0.85 per cent. (previously 0.90%) per annum of the Adjusted Net Asset Value in excess of £250 million and up to, and
including, £500 million;
(iii)
0.70 per cent. (previously 0.75%) per annum of the Adjusted Net Asset Value in excess of £500 million and up to, and
including, £1 billion;
(iv)
0.40 per cent. (previously 0.50%) per annum of the Adjusted Net Asset Value in excess of £1 billion and up to, and including,
£2 billion; and
(v)
0.30 per cent. (previously 0.40%) per annum of the Adjusted Net Asset Value in excess of £2 billion.
(b)
The Development Management fee has been reduced to 3% on land and to 3.5% on construction (previously 4% on both land
and construction) components of the Development Cost. The fee remains payable monthly in arrears, with 50% of the fee used
to subscribe for ordinary shares in the Company bi-annually as previously.
The Company’s contractual arrangements retain important and valuable contractual protections, including the Company’s right of
first refusal to acquire single family housing development opportunities introduced by Sigma. They result in immediate cost savings
and the Board believed the terms of the contract extension provided appropriate incentivisation for Sigma to continue to deliver for
the Company. Sigma has delivered and manages a highly granular portfolio for the Company, which the Board considers to be best-
in-class.
Requisition Event and Board Changes
As previously reported, the Board received a Requisition Notice on 29 August 2024 from Requisitioning Shareholders. The
Requisition proposed Board changes, including the appointment of Robert Naylor and Christopher Mills as Non-executive Directors,
with a view to the new Directors working with the remaining Board members to undertake a review of options to return value to
shareholders.
Following a consultation process with both major shareholders and Requisitioning Shareholders, undertaken by a Sub-Committee
of independent non-executive Directors not subject to the Requisition, the Company announced on 13 September 2024, that the
Requisition Notice had been withdrawn and that the following changes will be taking place:
>
Steve Smith will step down as Non-executive Chairman at the Company’s forthcoming AGM. Steve is nearing the end of his
term and this change helped to facilitate a near-term resolution;
>
Geeta Nanda, Senior Independent Director, will become Interim Chair at the AGM and lead the appointment process for a new
permanent, independent, non-executive Chair;
>
the Board will launch the appointment process immediately, with support from external consultants to identify and appoint a
non-executive Chair with relevant experience; and
>
Robert Naylor and Christopher Mills will be appointed to the Board as non-executive Directors and proposed for election at
the AGM.
Steffan Francis will remain as a non-Executive Director, ensuring continuity of property experience. The succession plan for Steffan
Francis and Rod MacRae, currently scheduled for 2025 with their tenure coming up to nine years of service, will be conducted in
accordance with the AIC Code of Corporate Governance and will balance the appropriate skills required.
The Board had originally expected to provide an update on Strategy with these results. However, given the above changes to the
Board, the Strategy will now be reviewed by the newly-constituted Board and an update will be given when appropriate.
As we stated previously on 13 September 2024, the Board believes the agreement and changes announced reflect a balance of the
views of all shareholders. They also respect the principles of good governance in orderly succession planning, and help to ensure
that a new independent Chair and any future Board directors have the appropriate blend of skills and expertise. In addition, the
Board believes the agreement will allow the Company to move forward and focus on value maximisation for all shareholders.
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NOTES
SUPPLEMENTARY INFORMATION
I.
EPRA Performance Measures Summary
Notes | 2024 | 2023 | |
EPRA earnings per share | II | 3.7p | 3.1p |
EPRA net tangible asset value (EPRA NTA) | III | 133.2p | 120.1p |
EPRA cost ratio (including vacant property costs) | IV | 34.6% | 35.9% |
EPRA cost ratio (excluding vacant property costs) | IV | 34.4% | 35.6% |
EPRA Net Initial Yield | V | 4.2% | 4.1% |
EPRA loan to value | VI | 35.7% | 36.6% |
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.
II.
Income Statement
2024 £’000 | 2023 £’000 | |
Rental income | 58,231 | 49,701 |
Non-recoverable property costs | (10,940) | (9,551) |
Net rental income | 47,291 | 40,150 |
Other income | 194 | 1,646 |
Administrative expenses | (9,185) | (8,268) |
Operating profit before interest and tax | 38,300 | 33,528 |
Net finance costs | (18,037) | (16,429) |
Profit before taxation | 20,263 | 17,099 |
Taxation on EPRA earnings | – | – |
EPRA earnings | 20,263 | 17,099 |
Weighted average number of Ordinary Shares | 549,251,458 | 549,251,458 |
EPRA earnings per share | 3.7p | 3.1p |
III.
Statement of Financial Position
2024 £’000 | 2023 £’000 | |
Investment properties | 1,139,823 | 1,034,732 |
Other net assets | 8,538 | 173 |
Net borrowings | (416,936) | (375,185) |
Total shareholders’ equity | 731,425 | 659,720 |
Adjustments to calculate EPRA NTA: | ||
– | – | |
EPRA net tangible assets | 731,425 | 659,720 |
Ordinary Shares in issue at year end | 549,251,458 | 549,251,458 |
EPRA NTA per share | 133.2p | 120.1p |
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IV.
EPRA Cost Ratio
2024 £’000 | 2023 £’000 | |
Property operating expenses | 10,940 | 9,551 |
Administrative expenses | 9,185 | 8,268 |
EPRA costs (including vacant property expenses) (A) | 20,125 | 17,819 |
Vacant property costs | (102) | (114) |
EPRA costs (excluding vacant property expenses) (B) | 20,023 | 17,705 |
Gross Rental income (C) | 58,231 | 49,701 |
EPRA Cost Ratio (including vacant property expenses) (A/C) | 34.6% | 35.9% |
EPRA Cost Ratio (excluding vacant property expenses) (B/C) | 34.4% | 35.6% |
V.
EPRA Net Initial Yield (“NIY”)
2024 £’000 | 2023 £’000 | |
Total investment property | 1,139,823 | 1,034,732 |
Less: development properties | (55,745) | (87,043) |
Less: right of use asset | (1,536) | (1,040) |
Completed property portfolio | 1,082,542 | 946,649 |
Allowance for estimated purchasers’ costs | 24,898 | 21,773 |
Gross up completed property portfolio valuation (B) | 1,107,440 | 968,422 |
Annualised cash passing rental income | 60,644 | 51,264 |
Property outgoings | (13,645) | (11,534) |
Annualised net rents (A) | 46,999 | 39,730 |
Add: notional rent expiration of rent free periods or other lease incentives | – | – |
Topped-up net annualised rent (C) | 46,999 | 39,730 |
EPRA NIY (A/B) | 4.2% | 4.1% |
EPRA ‘topped up’ NIY* (C/B) | 4.2% | 4.1% |
*
This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted
rent periods and step rents) of which there were none (2023: nil).
SUPPLEMENTARY INFORMATION
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VI.
EPRA Loan to Value (“LTV”)
2024 £’000 | 2023 £’000 | |
Borrowings (net) | 415,259 | 374,145 |
Net payables | 9,515 | 20,091 |
Less: Cash and cash equivalents | (18,053) | (13,198) |
Net Debt (a) | 406,721 | 381,038 |
Investment properties at fair value | 1,139,823 | 1,034,732 |
Right of use asset / Net receivables | (1,536) | 6,026 |
Total Property Value (b) | 1,138,287 | 1,040,758 |
EPRA LTV (a / b) | 35.7% | 36.6% |
SUPPLEMENTARY INFORMATION
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