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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sigma Capital Group Plc | LSE:SGM | London | Ordinary Share | GB0004225073 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 202.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSGM
RNS Number : 1208E
Sigma Capital Group PLC
04 May 2017
4 May 2017
AIM: SGM
Sigma Capital Group plc
("Sigma" or "the Company" or "the Group")
The private rented sector ("PRS") and urban regeneration specialist
Final Results for the year ended 31 December 2016
HIGHLIGHTS
Hot Features
Premium
FY2016 FY2015
Revenue GBP5.4m GBP6.7m
Profit from GBP3.4m GBP1.8m
operations
Profit before GBP3.7m GBP2.6m*
tax
Earnings per 4.02p 3.39p*
share
Net assets per 40.7p 36.5p*
share
Cash at year GBP6.13m GBP25.14m
end
*restated
-- A year of significant strategic progress with PRS activities - although some project delays as previously reported -- PRS platform continued to expand:
- geographic presence extended into new regions - Sigma now active in North West, North East, and Midlands
- additional house-building partner added; Keepmoat Limited expands construction resource and geographic coverage
- 1,000(th) PRS home delivered and let in November 2016 -- Self-funded PRS activity made significant progress: - contributed GBP2.1m to profit from operations - GBP45m funding facility agreed with the Homes and Communities Agency in September 2016 - first site (50 family homes in Merseyside), completed and fully let by December 2016
- a further six sites are now underway in the North West, North East, and Midlands regions, with additional sites planned
- 'Simple Life' PRS brand launched in December 2016 to support scaling of self-funded activity -- Managed PRS activity overall progressed well: - contributed GBP0.6m to profit from operations
- Gatehouse Bank JV project (GBP105m development of 918 new family rental homes in the North West) completed in Q1 2017; currently 99% let with gross rental income of GBP7.5m pa
- UK PRS Properties venture (currently GBP84m development of new 607 family rental homes in the North West and Midlands) now on seven sites, with 252 homes completed
-- Regeneration activities continued to make a good contribution: - contributed GBP1.5m to profit from operations - GBP39m regeneration scheme, next to Lime Street Station, Liverpool, launched in October 2016
-- Proposed flotation of The PRS REIT plc ("PRS REIT") on the Main Market of the London Stock Exchange (Specialist Fund Segment) with a Sigma subsidiary appointed as Investment Adviser and Development Manager - see separate announcement issued today
- associated fund-raising of up to GBP250m, to be supported by the Homes and Communities Agency ("HCA")
- a potentially transformational event for Sigma, with proposed Admission expected at the end of May
-- Board remains confident about growth prospects as the Company's business model develops - asset backing is strengthening - critical shortage of new homes in England remains a structural issue - political and economic backdrop is favourable
David Sigsworth, Chairman of Sigma, said:
"I am delighted to report another year of significant development as we continued to scale Sigma's presence in the Private Rented Sector. The Group's financial results demonstrate the progress we are making, with profit before tax rising by 42% to GBP3.7m. While these results are encouraging, the strategic progress we made over the year, including our major funding agreement with the Homes and Communities Agency, is of greater significance and supports the material value creation we are targeting in the medium and long term.
"We remain confident about growth prospects for the Group. The shortage of new homes in England is structural and remains a critical issue, and the political and economic backdrop is favourable.
"Today's announcement of the proposed flotation of The PRS REIT plc, with Sigma appointed as Investment Adviser and Development Manager, is potentially transformational for the Group. We believe it will be the first quoted REIT to address opportunities in the PRS sector. Once launched, the REIT will support greater visibility of Sigma's revenues and future earnings and help us to maximise the value of our pipeline of development opportunities. We are delighted that the Homes and Communities Agency is supporting both Sigma and the PRS REIT in our mutual goal of creating thousands of high quality, professionally managed, new rental homes in England.
"In preparation for the REIT, we have altered our development schedules, delaying certain planned starts, so that we can provide the PRS REIT with a significant and immediate pipeline of development opportunities when it launches. We look forward to updating shareholders further at the end of May."
Enquiries:
Sigma Capital Graham Barnet, Chief T: 020 31 78
Group plc Executive 6378 (today)
Malcolm Briselden, T: 0333 999
Finance Director 9926
KTZ Communications Katie Tzouliadis, T: 020 3178
Emma Pearson 6378
N+1 Singer (Nomad James Maxwell, Michael T: 020 7496
& Broker) Taylor, 3000
Liz Yong
About Sigma Capital Group plc
www.sigmacapital.co.uk
Sigma is a private rented sector, residential development, and urban regeneration specialist, with offices in Edinburgh, Manchester and London. Sigma's principal focus is on the delivery of large scale housing schemes for the private rented sector. It has a well-established track record in assisting with property-related regeneration projects in the public sector, acting as a bridge between the public and private sectors.
Chairman's Statement
Introduction
I am delighted to report another year of significant development as we continued to scale Sigma's presence in the Private Rented Sector ("PRS"). The Group's financial results demonstrate the progress we are making, with profit from operations improving by 89% to GBP3.4m and profit before tax rising by 42% to GBP3.7m. While these results are encouraging, the strategic progress we have made is of greater significance and supports the material value creation we are targeting in the medium and long term.
We achieved a number of strategic milestones during the year. In our half year report, we highlighted in particular our intention to explore a long-term holding vehicle which could assist us in capitalising on our strong pipeline of opportunities in PRS. We are therefore delighted to announce today the proposed flotation on the Main Market of the London Stock Exchange (Specialist Fund Segment) of The PRS REIT plc ("PRS REIT"), with a Sigma subsidiary appointed as Investment Adviser and Development Manager. There is an associated fund-raising of up to GBP250 million alongside the flotation and the REIT intends to use gearing to enhance equity returns. Gearing is capped at 45% of gross asset value and is expected to be around 35% to 40% of gross asset value following stabilisation of the PRS portfolio. We believe that the PRS REIT will be the first quoted REIT in the UK to address the opportunities in PRS. The proposed IPO, which we expect to be completed at the end of May, represents the fulfilment of our work to explore the most efficient funding route to generate long term, predictable revenues and maximise both our control of our development pipeline and shareholder returns. Further information about the PRS REIT and Sigma's role as Investment Adviser and Development Manager, is provided in a prospectus, which is expected to be published later today.
Reaching this point outstrips other important staging posts attained in the year although, as we previously reported, there were also some delays which affected our managed and self-funded PRS activities in 2016. I am very pleased to highlight, in particular, the major funding agreement with the Homes and Communities Agency ("HCA"), signed at the end of September, and our new PRS partnership with Keepmoat Limited ("Keepmoat") signed in June. Our HCA relationship enables us to materially increase the development of our own self-funded PRS portfolio and has subsequently led to the HCA's commitment to support the PRS REIT with a direct investment of 9.99% of the gross IPO proceeds up to GBP25m in the REIT. Our partnership with Keepmoat significantly increases our construction resource and provides further access to land assets in other parts of the UK. It also complements our existing, flourishing partnership with our founding partner, Countryside Properties plc ("Countryside"), which has constructed all our completed PRS units to date. Our first site with Keepmoat, in Sheffield, commenced in July 2016 and is progressing well and we are also continuing to expand significantly our activities with Countryside.
Over the year, we also acquired the first six sites for Sigma's self-funded PRS portfolio. These will deliver 345 high quality, new homes, at a gross development cost of approximately GBP45m. The first of those sites, in Merseyside, comprising 50 new homes, was fully developed and let by the end of 2016.
Across our managed PRS activities, with Gatehouse Bank plc ("Gatehouse") and UK PRS Properties, we continued to progress our major development schemes. By the end of November 2016, we completed and let our 1,000(th) PRS home, with the majority representing the new homes we are delivering for these funding partners and the balance being our own self-funded homes. This milestone event took the gross development cost of the new homes completed by Sigma's PRS platform at November 2016 to GBP120m since construction commenced in November 2014. The rental income stream from these new homes is in excess of GBP8m per annum.
Since November 2016, we have delivered a further 270 new PRS homes, bringing the total number of new homes built by our platform to 1,270. The Company is also now building across three regions of England - the North West, North East, and the Midlands. We are also progressing plans to develop in the South of England.
Whilst our principal focus is on PRS, our regeneration activities continue to produce good results. These activities support the objectives of our local authority partners and are mainly in the provision of market-for-sale and social housing. Towards the end of October, we were pleased to report the launch of a GBP39m regeneration scheme, immediately adjacent to Lime Street Station in the centre of Liverpool.
The new financial year has started very positively. We have continued to make progress on the delivery of our self-funded PRS portfolio as well as our managed PRS activities. In preparing for the proposed REIT, we have also rescheduled developments, delaying planned starts. Once successfully launched, the PRS REIT will transform our model, allowing us to better capitalise on our development pipelines and significantly improve revenue and earnings visibility.
Financial Results
The Group generated revenues of GBP5.38m for the financial year to 31 December 2016 (2015: GBP6.72m). Profit from operations improved by 89% to GBP3.37m (2015: GBP1.82m), with Sigma's self-funded PRS activities contributing GBP2.1m (2015: nil). Managed PRS activities contributed GBP0.6m (2015: GBP0.9m) and regeneration activities added GBP1.5m (2015: GBP1.7m) to profit from operations. The Group's non-core venture capital activities and other holding activities generated a loss from operations of GBP0.8m (2015: loss of GBP0.7m).
Administrative expenses rose by 13.7% to GBP3.6m during the year (2015: GBP3.17m) mainly as a result of the increased number of employees as we accelerated the PRS model.
Profit before tax for the year rose by 42% to GBP3.67m (2015: GBP2.59m restated). This is after an exceptional item of GBP0.4m which related to the termination of the Group's agreement with Torrin Asset Management (2015: nil). Basic earnings per share increased by 19% to 4.02p (2015: 3.39p restated).
The Group's net assets backing continues to strengthen, with net assets per share at the year end increasing by 12% to GBP36.09m (2015: GBP32.26m restated), equivalent to 40.7p per share (31 December 2015: 36.5p per share restated). After the Group's investment in PRS activities during the year, cash at 31 December 2016 stood at GBP6.1m (2015: GBP25.1m).
*Prior year adjustment
The Group's prior year's results have been adjusted to reflect the Group's share of profits, being GBP449,000, from Countryside Sigma Limited, Sigma's joint venture vehicle with Countryside Properties plc.
Dividends
At this stage of Sigma's development, the Board is not recommending the payment of a dividend. However, the Board intends that the Company will recommend or declare dividends at a future date, subject to the performance of the business, and will keep the dividend policy under review.
Revolving credit facility
In September 2016, we agreed a GBP45m revolving credit facility with the HCA to accelerate the delivery of our own PRS portfolio. The first amounts drawn under this facility were completed in January 2017.
Operational Overview
The expansion of Sigma's self-funded PRS activities was a key theme over 2016. Following the launch of these activities in December 2015, which was supported by a GBP20m (gross) fund raising, our funding agreement with the HCA in September 2016 has enabled us to scale up our plans. While we experienced unavoidable delayed starts across three sites in the first half of the year, by December 2016 we had acquired six sites, with our first site also completed and fully let. This site comprised 50 new family homes, at Mackets Lane in Merseyside. All six sites, which are located in the North West, North East and the Midlands, will deliver a total of 345 homes at a gross development cost of approximately GBP45m. Following the year end, in January 2017, Sigma acquired a seventh site, in Telford, which will comprise approximately 70 new homes at a gross development cost of c. GBP11m. We commenced our first site under our new Keepmoat relationship in the summer of 2016 in Sheffield. This site comprises approximately 24 new family homes and we expect to start on additional sites in 2017. In December 2016, we also launched our own PRS brand, Simple Life, (www.simplelifehomes.co.uk) which will help to differentiate our offering in the rental marketplace. All our properties will be marketed and let under this brand, and managed by our existing lettings partner SDL Group. Our intention is for Simple Life to be recognised as standing for high quality, professionally managed rental homes.
Across our managed PRS activities, our PRS platform completed the first phase of PRS homes in our Gatehouse joint venture ("PRS Fund") in the first quarter of the current financial year. This first phase comprised 918 new family rental homes, in the North West of England at a total gross development cost of GBP105m. It is one of the UK's first large scale PRS schemes of new family homes and is currently 99% let and generating a gross rental income per annum of GBP7.5m. The second phase of managed PRS homes, with UK PRS Properties, which currently comprises 607 new homes with a total development cost of GBP84m, is underway across the North West, North East and Midlands regions of England. To date, 252 properties are complete. Our partners are exploring their funding options to allow them to commence further sites.
The continuing success and development of our PRS platform could not have been achieved without the support and commitment of our delivery partners, Countryside Properties ("Countryside"), and the SDL Group, and our funding partners, Gatehouse, UK PRS Properties and Barclays Bank. We were delighted to secure another partner, Keepmoat, which has a long term aim of delivering thousands of new PRS homes across England. The HCA is another new partner whose support is helping to unlock the creation of hundreds of new rental homes by Sigma. I would also like to thank our existing and new shareholders for their backing during the year.
Our regeneration activities, which support our local authority partners, continued to make progress over the year. The delivery of a 200 market-for-sale housing site at Gateacre in Liverpool with our partners, Liverpool City Council and Countryside, progressed well and 46 of the new homes have now been sold or reserved since the show homes opened in January 2017. In March 2016 we completed the sale of the remaining acreage of residential development land at Norris Green in Liverpool, which is in the process of delivering 69 private rented units. The land was acquired by UK PRS Properties in our second phase of PRS. Norris Green is an award winning regeneration project delivering 829 new homes across a variety of tenures. Once complete, it will be one of the most successful housing regenerations schemes in England. Our team, along with our partners, can take pride in what has been achieved in regenerating the community and improving the lives of residents. Across all sites in Liverpool, the residential regeneration effort by all will result in the delivery of 1,165 homes across all tenures.
In October 2016, working with Liverpool City Council and our commercial development partner, ION Developments, we commenced the redevelopment of Lime Street Eastern Terrace, Liverpool. This mixed-use development incorporates a c. 400 bedroom student residence, a c. 100-bedroom hotel, pre-let to Premier Inn, along with 30,000 sq.ft of retail and leisure units and is due to complete in July 2018. We are also working with our partners on other regeneration schemes in Liverpool.
The Board
As previously reported, in April 2016, Bill MacLeod stepped down from the Board and Company. We wish him well as he pursues other activities.
Staff
On behalf of the Board, I would like to thank our staff for all their efforts during 2016. Sigma continues to transform its business and has made significant progress in the delivery of PRS homes in the UK. This could not have been accomplished without the hard work, skill and enthusiasm of all involved. Their dedicated efforts are much appreciated.
Everyone can be extremely proud of what has been achieved not only for the Company but also in the communities where high quality new housing can boost the prospects of individuals and stimulate the local economy.
Outlook
We remain confident about growth prospects for the Group. The shortage of new homes in England is structural and remains a critical issue, and the political and economic backdrop is favourable.
The proposed launch of The PRS REIT is a potentially transformational event for Sigma, reinforcing the Group's position as a leader in PRS. It will also help us to maximise our control over the pipeline of development opportunities we have identified, and improve revenue and earnings visibility.
In preparation for the REIT, we have altered our development schedules, delaying certain planned starts, so that we can provide the PRS REIT with a significant and immediate pipeline of development opportunities when it launches. We look forward to updating shareholders further at the end of May.
David Sigsworth OBE
Chairman
3 May 2017
STRATEGIC REPORT
The Directors have pleasure in presenting their Strategic Report for the year ended 31 December 2016.
Business activities and Group structure
Sigma, together with its subsidiaries, is a property group principally focused on the PRS sector. Its activities also encompass urban regeneration and property asset management.
Sigma is a public limited liability company incorporated in England. It acts as a holding company and at 31 December 2016 had four principal wholly owned subsidiaries:
- Sigma Capital Property Limited ("SCP")
- Sigma Inpartnership Limited ("SIP")
- Strategic Property Asset Management Limited ("SPAM")
- Sigma Technology Investments Limited ("STI")
The Group's PRS activities are carried out by SCP and its subsidiaries. During 2016, SCP has been investing in its own self-funded portfolio of private rented homes with the acquisition of seven sites to date; one site, consisting of 50 PRS homes, has been completed and let. The Group's first PRS joint venture with Gatehouse Bank plc commenced in November 2014 and has now completed the delivery of 918 new family homes for the private rental market, with construction costs as forecast, occupation levels of 99%, and rental levels exceeding initial budget expectations. In December 2015, a second phase of PRS homes was launched with UK PRS Properties (a fund principally backed by the Kuwait Investment Authority and institutional shareholders from the State of Kuwait). This second phase is progressing well and is currently active on seven sites for the delivery of 607 new family rental homes of which 252 having already been completed.
The Group's property regeneration activities are largely carried out by its subsidiary, SIP, which undertakes large-scale property-related regeneration projects, working as a bridge between public and private sector organisations. Founded in 2000 and operating from offices in Manchester, SIP established three partnerships, with Liverpool City Council, Salford City Council and Solihull Metropolitan Borough Council. The partnerships hold option arrangements with each local authority partner for the delivery of a mix of residential, commercial, education and health schemes.
Most of the Group's property management activities which sit outside of its PRS and local authority relationships are undertaken by SPAM. Until early 2016, the Group acted through SPAM, as property manager for its historic property limited partnership, SI Limited Partnership No 7. This partnership holds the investment in the City Wharf development in Aberdeen. The Group has a 19.3% holding in SI Limited Partnership No 7, although this investment was written down to nil in 2009.
Whilst the Group has ceased its venture capital management activities, it still holds an interest in a venture capital fund and in a direct non-quoted equity investment both of which are held in STI.
Key strategy
Our core strategy is to utilise our property and capital raising expertise whilst working with local authorities, house building and funding partners, along with the Homes and Communities Agency to further our PRS activities and maintain our position at the vanguard of the private rented sector.
This sector is now critically important in addressing the effects of the structural supply problems in the UK housing market and helping those disenfranchised from home ownership by affordability constraints. The sector additionally addresses the needs of an increasing group of those who simply enjoy the flexibility that renting professionally managed new homes offers. The market has grown by 2.2m households in the last 10 years and is forecast to grow by a further 1.1m in the next five, adding to the supply pressures inherent in the market.
In terms of the geographic roll out, Sigma's strategy is to extend its activities beyond its existing local authority partnerships to other core cities in England. Our main direction of travel for these new opportunities is expanding our delivery in the Midlands and expanding into the south of England, broadly following the route of HS2, the largest infrastructure project in the UK. We have now delivered over 1,200 homes in a little over two years and our current overall active pipeline is in excess of 2,800 PRS homes in Greater Manchester, Merseyside, the North East and the Midlands. We have visibility over a further 2,000 plus plots within our key target locations.
This PRS model is the key component of our strategy for 2017 and will continue to be executed through our dedicated Sigma PRS Platform.
To this end, in September 2016, we agreed an innovative GBP45m revolving credit facility with the Homes and Communities Agency which will allow us to significantly increase the delivery of our own assets. We have also signed a strategic partnership in June 2016 with an additional housebuilding partner, Keepmoat, enabling us to expand our geographic area of operation. Our coverage now includes the North East, North West and the Midlands, and we are actively appraising sites in a fourth region.
The most exciting element to our strategy going forward is the intention to float the first ever UK quoted REIT, specifically focused on investment in the private rented sector. The PRS REIT is targeting a fundraise of GBP250m of equity. This, coupled with the HCA facility and our expanded housebuilding partnerships, will allow a significant acceleration of our delivery capability and also enable Sigma to recycle its capital through the REIT's purchase of Sigma's seed portfolio.
Overview of the business
Private Rented Sector residential portfolio
Our PRS model, which has been designed to address the need for new homes in the UK, allows us to move residential land assets with planning permission, predominately from local authority partnerships and our house building relationships, to our fund structures.
From a local authority perspective, the key advantage is that it benefits from the delivery of large-scale high quality housing quickly, meeting both an urgent social need and wider regeneration objectives. This is achieved as the PRS model delivers houses typically at four to five times the rate of those built 'for sale' which tend to be built at the pace of sales demand.
Furthermore, the local authorities benefit from increased council tax receipts from the new homes as well as from the Government's new homes bonus. The rapidity of delivery provided by our platform is both attractive to and synergistic for our housebuilding partners as it offers an enhanced return on capital as well as derisking and quickly maturing those sites on which there are a mix of 'for sale' and PRS homes.
Sigma PRS
In 2015, the Company raised GBP20m (gross) from a share placing to create a substantial portfolio of self-funded PRS assets, leveraging its existing PRS infrastructure and relationships. In 2016, the Group agreed a GBP45m revolving credit facility with the Homes and Communities Agency ("HCA") materially up scaling our delivery of self-funded new rental homes. This is the first facility of its kind with the HCA and confirms the benefits of our strategy for central Government policy and for housing demand. Sigma has acquired seven sites for development across the North West, North East and Midlands regions of England. The first site, consisting of 50 new rental homes in Merseyside, was completed in November 2016. There was strong demand for the properties, which let quickly, and they are generating gross rental income in excess of that originally forecast. Three further sites will complete development during 2017 with the remainder in 2018. This portfolio is earmarked for purchase by The PRS REIT, in the event of the REIT's successful launch, allowing us to build further new PRS homes.
2016 also saw the launch of our new PRS brand 'Simple Life' (www.simplelifehomes.co.uk), through which all our new sites will be marketed. The creation of this new consumer brand helps to further professionalise our approach to potential customers and, over time, we are aiming for Simple Life to be recognised as the 'gold standard' for tenant experience.
Simple Life will be managed by SDL Group, which has managed the letting of all our delivered PRS properties to date under the auspices of Sigma's in-house asset management and marketing teams.
Joint Venture with Gatehouse Bank plc - Phase 1
This first phase of homes is built on land procured by Sigma and is underpinned by our existing local authority partnerships. Gatehouse, a leading London-based Shariah compliant investment bank with a real estate portfolio worth in excess of GBP1 billion across the UK and Europe, delivered the equity element of the venture whilst Barclays Bank plc provided the debt financing.
This first phase was completed after the year end, in March 2017, and consists of 918 new privately rented residential properties in the North West of England, with construction costs as forecast. The site is currently 99% let with rental levels continuing to be in excess of those originally forecast. For those properties which have been let for in excess of 12 months we are experiencing an 83% renewal rate with existing tenants. The properties have been let by the SDL Group under the brand, 'DIFRENT'.
Joint Venture with UK PRS Properties - Phase 2
Our second phase of PRS homes, in partnership with UK PRS Properties, commenced in December 2015 and construction is currently underway on seven sites across the North West and Midlands regions of England which will deliver 607 family homes, with a gross development cost in excess of GBP84m. To date, 252 properties have been delivered, with lettings progressing well and rental levels in excess of those forecast. As with phase 1, the new homes are being let by the SDL Group under the 'DIFRENT' brand.
The PRS phases with Gatehouse and UK PRS Properties generate fees for the Group. An upfront fee is paid on commencement of a site, a management fee is paid quarterly over the duration of the delivery period, and a quarterly asset management fee is paid once the properties are let. Sigma also retains a share of the net profits on disposal of the assets, subject to a minimum return to investors.
Urban regeneration
Liverpool Partnership (also referred to as Regeneration Liverpool)
Our Liverpool Partnership is a limited liability partnership formed in 2007 between SIP and Liverpool City Council. The partnership was given an initial ten year option over a 60 acre residential development site, known as Norris Green, which had outline planning consent for around 800 new homes, with a total development value of c. GBP120 million. The partnership was established with the flexibility to develop additional sites at the discretion of Liverpool City Council and, over the last three years, the Council has increased the number of sites under option. The key sites added are Gateacre, the former Queen Mary School site and Lime Street/Knowledge Quarter. Although the initial partnership period has ended, the Liverpool Partnership will continue to develop and manage those sites under option until completion.
In 2012, we formed a joint venture company with a major local commercial property development company, ION Developments Limited (formerly Neptune Developments Limited), to help accelerate the delivery of the commercial regeneration projects in Liverpool. In 2013, we established a second joint venture company, Countryside Sigma Limited, with house building specialist, Countryside, to assist us in the delivery of residential regeneration projects in the City.
Land in the Liverpool Partnership can be developed using any one of the following three ways: by the Liverpool Partnership (with SIP earning a management fee and participating in a profit share); by SIP (with SIP earning a fee and an agreed priority profit); or by the Liverpool Partnership selling a site on the open market, with SIP earning a percentage of the sales price achieved. At least 20% of the land must be disposed of by sale on the open market. The majority of the land will be developed by SIP through our venture companies with Countryside and ION Developments Limited.
Residential Projects
The regeneration of the site at Norris Green continues to make excellent progress with the final phase now in full swing. The development consists of eight phases totaling 829 properties of which 394 properties are for sale, 214 are affordable homes and 221 are private properties for rent delivered by our PRS joint ventures. Seven of the phases are complete and construction is progressing well on the final phase of 269 homes, 200 being for sale and 69 for rent. At the end of March 2017 we had completed 633 of the homes. Of the 221 PRS properties, 198 are complete with all (bar six) fully let. It is anticipated that the balance of the units will be completed before the end of June 2017.
Construction on the former Queen Mary School site, which is approximately one mile from Norris Green is progressing well, with only the open market sale element left to complete. The scheme comprised a total of 200 new homes, with 64 homes designated for the PRS Fund. All of the PRS units have been constructed and are fully let, with rents in line with or in excess of that originally targeted. Our affiliate, Countryside Sigma Limited, is building the 136 open market sale homes and, to date, 123 have been built and sold, with only 13 remaining.
Construction is also progressing well at Gateacre, a 19 acre former secondary school. The site consists of 200 new family homes for open market sale ranging from two and three bedroom town houses to five bedroom executive detached homes. The site is being marketed from two sales areas and uptake has been excellent with 6-8 units currently being completed per month. To date, 46 of the new homes are sold or reserved, since the show homes opened in January 2017.
Commercial Projects
The Liverpool Partnership secured a land option agreement to develop three key sites within the Knowledge Quarter in March 2013. This is a major flagship mixed-use development to the south and east of Lime Street railway station in the centre of Liverpool and we continue to work with our commercial joint venture partner, ION Developments on these sites.
Planning consent together with a forward funding commitment for the redevelopment of Lime Street Eastern Terrace was secured for a mixed use development incorporating a c. 400 bedroom student residence, a Premier Inn hotel and 30,000 sq.ft of retail/leisure units. However, following a delay, commencement on site did not take place until October 2016 with completion now due for July 2018.
Redevelopment plans for the former ABC cinema on Lime Street have now been finalised and take a phased approach to the project. Whilst discussions are still ongoing with an operator for the venue, an initial planning application has been lodged for a change of use from cinema to live, mixed performance events venue, nightclub/bar and television sound stage. The aim is for this to be determined during the summer together with concluding a contract with an operator.
The plans for the redevelopment of Mount Pleasant Car Park are being worked on in conjunction with a potential funder for the project and also in consultation with other stake holders with significant land holdings in the Knowledge Quarter area. The aim is to be in a position to lodge a full planning application later this year.
Salford Partnership (also known as Higher Broughton Partnership)
The Salford Partnership is our partnership with Salford City Council and Royal Bank of Scotland.
During the year, we dealt with residual matters arising from previous residential and commercial projects of the Salford Partnership.
Sigma is working closely with Salford City Council to bring additional land for delivery for PRS. A total of four sites and 206 units have been developed as part of the initial phase of our PRS Fund with Gatehouse and a further two sites consisting of 220 units are being developed as part of the joint venture with UK PRS Properties. We are in the process of reviewing more.
North Solihull Partnership
The Partnership was set up in 2007 by Solihull Metropolitan Borough Council, Bellway Homes, West Mercia Housing Association and SIP, with a remit of coordinating and delivering the regeneration of an area of circa 1,000 acres in North Solihull. The key objectives of the Partnership are to deliver new and replacement housing stock, ten new or refurbished primary schools and five new village centres incorporating neighbourhood council, medical and retail facilities. Our key role is the provision of development management services, including strategic development planning, coordination and procurement of development works, in return for agreed fees for these services.
We continue to provide strategic advice to the Partnership on developments whilst our relationship with the Partnership allows us to look at PRS opportunities and we are actively in discussions with the council in that respect.
City Wharf, Aberdeen
Sigma continued to provide property management services to SI Limited Partnership No. 7 and its lender National Asset Management Agency ("NAMA"). In August 2015 NAMA disposed of the loan that supported the underlying property vehicles to OCM Albion Debtco DAC ("the Lender"). During 2015 the economic climate in Aberdeen deteriorated as a result in the fall of the oil price which resulted in two of the tenants, occupying three floors of City Wharf, exercising their right to break their leases. In light of these factors the Lender demanded immediate repayment of the loan and consequently the underlying property companies went into administration. The Group's role as asset manager therefore came to an end in February 2016.
Venture Capital activities
Sigma continues to be a limited partner in one venture fund which was transferred to Shackleton Ventures Limited in 2013 with its investment in the fund held by STI. Sigma also holds one investment in an unquoted company.
Financial Review of 2016
The Group's revenue decreased by 19.9% to GBP5,383,000 (2015: GBP6,724,000). Revenue included the sale of development land at Norris Green, Liverpool, revenues from our managed PRS activities with Gatehouse and UK PRS Properties along with our first rental income from our self-funded portfolio. Despite the fall in revenues, gross profit decreased by only 3.5% to GBP4,923,000 (2015: GBP5,103,000).
The Group made a trading profit in the year of GBP1,325,000 (2015: GBP1,938,000), with property activities contributing a trading profit of GBP2,196,000 (2015: GBP2,544,000). The discontinued venture capital activities generated a trading profit of GBP8,000 (2015: trading loss of GBP6,000) and the trading profit was impacted by the costs incurred by the holding company on Group matters. Full detail of the results for the year by business segment is given in Note 3 to the financial statements.
Administrative costs increased to GBP3,598,000 (2015: GBP3,165,000) reflecting an increase in the number of employees as a result of our increased investment in PRS activities.
Profit from operations increased by 85% to GBP3,365,000 (2015: GBP1,818,000). This result included an unrealised gain of GBP2,017,000 (2015: GBPnil) on the revaluation of investment property and an unrealised gain on investments of GBP23,000 (2015: unrealised loss of GBP120,000). Profit before tax for the year was adversely affected by an exceptional item of GBP428,000 (2015: nil). This related to the Group's managed PRS activities and the termination of the Group's agreement with Torrin Asset Management. As a result, profit before tax was GBP3,670,000 (2015: GBP2,586,000 restated), which represents an increase of 42%.
Net assets of the Group increased by 12% to GBP36,087,000 at 31 December 2016 (31 December 2015: GBP32,255,000 restated). Net assets at 31 December 2016 were equivalent to 40.7p per share (31 December 2015: 36.5p per share restated).
Balance sheet
The principal items in the balance sheet are goodwill of GBP544,000 (2015: GBP561,000), investment property of GBP24,825,000 (2015: GBPnil), property and equipment of GBP1,111,000 (2015: GBP33,000), accrued income of GBP5,611,000 (2015: GBP5,361,000), loans to the PRS Fund totalling GBP92,000 (2015: GBP1,759,000), cash of GBP6,125,000 (2015: GBP25,135,000) and trade and other payables of GBP4,226,000 (2015: GBP3,134,000).
The goodwill relates to the acquisition of SIP and is reviewed each year for impairment. The investment property relates to Sigma's own PRS. The property and equipment principally relates to the Group's acquisition and redevelopment of its head office in Edinburgh. Accrued income includes GBP1,485,000 expected to be paid in 2017 and GBP4,126,000 which is due greater than one year as detailed in note 19 to the accounts. The loans to the PRS Fund of GBP92,000 were fully repaid in March 2017. The trade and other payables of GBP4,226,000 includes GBP2,901,000 in relation to its investment in property and was paid in January 2017.
The Group's current assets exceed its current liabilities by GBP4,492,000 (2015: GBP26,588,000). The Group has one long term liability of GBP481,000 (2015: GBPnil). This relates to a loan provided in relation to its acquisition and redevelopment of the Group headquarters as detailed further in note 21.
Cash flow
After the Group's investment in PRS activities, cash balances decreased by GBP19,010,000 to GBP6,125,000 (2015: increased by GBP19,915,000 to GBP25,135,000). The cash inflow from operating activities was GBP2,353,000 (2015: outflow of GBP995,000). The cash outflow from investing activities was GBP21,953,000 (2015: inflow of GBP1,756,000) along with the cash inflows from financing activities of GBP590,000 (2015: GBP19,154,000).
Key performance indicators
The key performance indicators are concentrated on the property activities.
The Group's key performance indicators include:
2016 2015
GBP'000 GBP'000 Change
Revenue - all property activities 5,373 6,698 (20%)
Operating profit - property
activities 4,213 2,544 +66%
Unrealised profit on revaluation
of investment property 2,017 - +100%
Group profit from operations 3,365 1,818 +85%
Cash balances 6,125 25,135 (76%)
Principal risks and uncertainties
The specific financial risks of price risk, interest rate risk and credit risk are discussed in the notes to the financial statements. The broader risks - financial, operational, cash flow and personnel - are considered below.
The principal financial risk relates to the housing market where a deterioration in the macro-economic outlook, the cyclical nature of residential market and a fall in house prices may affect Sigma's income and its ability to raise or deploy finance for housing projects. The Group manages these risks by keeping abreast of any trends so that any likely downturn is anticipated, maintaining good funding relationships, ensuring a reputation of building a good quality product and having diversity in its income streams. A financial risk is where the Group develops its own investment property and there may be increased costs from that originally forecast. This risk is mitigated by securing fixed price design and build contracts before the development commences. A further financial risk is the reduction in the value of the Group's investment property. This risk is mitigated by the number of properties and their geographical location but also focusing on ensuring that the properties are let to good quality tenants, and are professionally managed, so providing customers with a high level of service. In addition, the Group seeks to acquire investment sites at competitive prices.
The principal operational risks of the business reside around management's ability to secure new contracted property income streams from both residential and commercial property initiatives. The launch of its own self-funded portfolio, along with its joint ventures with Gatehouse and UK PRS Properties, have significantly increased the proportion of the Group's contracted revenue compared with one-off income streams.
Where the Group undertakes property developments on its own balance sheet, development risk is managed by maintaining close control of pre-contract costs and by limiting the number of early stage developments financed by the Group at any one time.
The main cash flow uncertainties of the business centre around the timing of rental income in respect of its investment properties, property project development fees and the receipt of profits arising out of the partnerships.
The Group is dependent on its Executive Directors and senior management for its success. There can be no assurance that the Group will be able to retain the services of these key personnel although historically the turnover of senior staff has been low. Incentives for senior staff include share options and carried interest in joint ventures, managed funds, and Sigma's Own PRS portfolio.
Sustainability report
Sustainability is firmly at the heart of the planning and housing system, and Sigma takes pride in working closely with our partners and local housing associations and communities to create sustainable, high quality developments.
Sigma currently focuses on creating new homes and communities in the PRS sector in the North West, North East and Midland areas of England. This has led to significant contributions to GDP and social prosperity in the region, not only revitalising neighbourhoods and creating much needed homes but also creating new jobs. Our contribution to increasing the housing stock is also a key source of revenue for the government and local authorities.
We are pleased to report that we continue to make good progress in achieving our sustainability objectives and we look forward to further developing our longer-term vision in providing better environments for our customers to live.
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
for the year ended 31 December 2016
2016 Restated
2015
GBP'000 GBP'000
Revenue 5,383 6,724
Cost of sales (460) (1,621)
Gross profit 4,923 5,103
Unrealised gain on revaluation
of investment property 2,017 -
Unrealised profit/(loss) on the
revaluation of investments 23 (120)
Administrative expenses (3,598) (3,165)
Profit from operations 3,365 1,818
Finance income 290 319
Share of profit of associate company 443 449
Exceptional items (428) -
Profit before tax 3,670 2,586
Taxation (105) (192)
Profit for the year 3,565 2,394
======== =========
Profit per share attributable to
the equity holders of the Company:
Basic profit per share 4.02p 3.39p
Diluted profit per share 3.97p 3.35p
There were no other comprehensive incomes or losses in either year other than those included in the comprehensive income statement. The accompanying notes are an integral part of this consolidated comprehensive income statement. The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Company income statement. The loss for the Company for the year was GBP739,000 (2015: GBP542,000).
CONSOLIDATED BALANCE SHEET
at 31 December 2016
2016 Restated
2015
GBP'000 GBP'000
Assets
Non-current assets
Goodwill and other intangibles 544 561
Investment property 24,825 -
Property and equipment 1,111 33
Investment in joint venture 892 449
Fixed asset investments 2 2
Financial assets at fair value
through profit and loss 576 553
Trade and other receivables 4,126 4,069
-------- ---------
32,076 5,667
-------- ---------
Current assets
Stocks - 509
Trade receivables 323 1,020
Other current assets 2,622 3,250
Cash and cash equivalents 6,125 25,135
-------- ---------
9,070 29,914
-------- ---------
Total assets 41,146 35,581
-------- ---------
Liabilities
Non-current liabilities
Interest bearing loans and
borrowings 481 -
Current liabilities
Trade and other payables 4,226 3,134
Interest bearing loans and
overdrafts 55 -
Deferred tax liability 297 192
---------
Total liabilities 5,059 3,326
-------- ---------
Net assets 36,087 32,255
======== =========
Equity
Called up share capital 887 885
Share premium account 31,885 31,833
Capital redemption reserve 34 34
Merger reserve (249) (249)
Capital reserve (7) (7)
Retained earnings 3,537 (241)
-------- ---------
Equity attributable to equity
holders of the Company 36,087 32,255
======== =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share Capital
Share premium redemption Merger Capital Retained Total
capital account reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2015 612 12,952 34 (249) (7) (2,722) 10,620
Transactions
with owners
in their
capacity
as owners - - - - - - -
Issue of
shares 273 19,783 - - - - 20,056
Cost of share
issue - (902) - - - - (902)
Comprehensive
income for
the year - - - - - 1,945 1,945
Share-based
payments - - - - - 87 87
At 31 December
2015 885 31,833 34 (249) (7) (690) 31,806
Prior year
adjustment* - - - - - 449 449
At 31 December
2015 restated 885 31,833 34 (249) (7) (241) 32,255
--------- --------- ------------ --------- --------- ---------- --------
Transactions
with owners
in their
capacity
as owners - - - - - - -
Issue of
shares 2 52 - - - - 54
Comprehensive
income for
the year - - - - - 3,565 3,565
Share-based
payments - - - - - 213 213
At 31 December
2016 887 31,885 34 (249) (7) 3,537 36,087
========= ========= ============ ========= ========= ========== ========
There were no other comprehensive incomes or losses in either year other than those included in the profit and loss for the year.
Consolidated Cash Flow Statements
for the year ended 31 December 2016
Group Group
2016 2015
GBP'000 GBP'000
Cash flows from operating activities
Cash received/(used in) from operations 2,353 (995)
Net cash used in operating activities 2,353 (995)
--------- --------
Cash flows from investing activities
Purchase of property and equipment (1,102) (25)
Purchase of investment property
at fair value through profit and
loss (22,808) -
Repayment of loans by PRS Fund 1,667 1,741
Fixed asset investments - (2)
Interest received and other financial
income 290 42
--------- --------
Net cash (invested in)/generated
from investing activities (21,953) 1,756
--------- --------
Cash flows from financing activities
Bank loan 536 -
Issue of shares 54 19,154
---------
Net cash generated from financing
activities 590 19,154
--------- --------
Net (decrease)/increase in cash
and cash equivalents (19,010) 19,915
Cash and cash equivalents at beginning
of year 25,135 5,220
Cash and cash equivalents at end
of year 6,125 25,135
========= ========
NOTES
1. This final results announcement was approved for issue by a duly appointed and authorised committee of the Board of Directors on 3 May 2017.
2. Basis of preparation
The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 December 2016 or 31 December 2015. The Audit reports of the auditor on the statutory financial statements for each of the years ended 31 December 2016 and 31 December 2015 were (i) unqualified; (ii) did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006. The statutory financial statements for the year ended 31 December 2015 have been delivered to the Registrar of Companies. The statutory financial statements for the year ended 31 December 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
While the financial information included in this final results announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as endorsed for the use in the European Union, this announcement does not itself contain sufficient information to comply with IFRS.
3. Segmental information - business segments
At 31 December 2016 the Group has just one business activity, property. The Group's venture capital fund management activities ceased in the first half of 2014.
The Group had four significant customers in the year. Thistle Limited Partnership was a significant customer with profit share and carried interest earned of GBP1,549,000 (2015: GBP2,137,000), UK PRS (Jersey) Properties I Limited with fees and carried interest of GBP1,247,000 (2015: GBP763,000), Countryside Sigma Limited with development management fees and profit share earned of GBP954,000 (2015: GBP1,441,000), Countryside Properties (UK) Limited with fees and sale of land totalling GBP548,000 (2015: GBP2,032,000) and ION Developments with fees totalling GBP577,000 (2015: GBPnil).
The revenue from services from the Group's Owned PRS property represents GBP66k of gross rental income (2015: GBPnil). Rental operating costs attributable to the gross rental income for the year were GBP16k (2015: GBPnil).
The segment analysis for the year ended 31 December 2016 is as follows:
Owned Intra
Managed PRS Venture Holding group
Regeneration Property Property Capital Company adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
from services 2,171 3,136 66 10 0 0 5,383
============= ========== ========== ========= ========= ============= ========
Trading
profit/(loss) 1,538 607 51 8 (812) (67) 1,325
Unrealised
gain on
revaluation
of investment
property - - 2,017 - - - 2,017
Unrealised
gain on
revaluation
of investments - - - 23 - - 23
------------- ---------- ----------
Profit/(loss)
from operations 1,538 607 2,068 31 (812) (67) 3,365
Finance
income 128 87 - 2 73 - 290
Share
of associate 443 - - - - - 443
Exceptional
items - (428) - - - - (428)
------------- ---------- ---------- --------- --------- ------------- --------
Profit/(loss)
before
tax 2,109 266 2,068 33 (739) (67) 3,670
============= ========== ========== ========= ========= ============= ========
Total
assets 6,060 4,971 25,796 3,444 29,853 (28,978) 41,146
Total
liabilities (216) (7,486) (23,728) (1,651) (1,659) 29,681 (5,059)
------------- ---------- ----------
Net assets 5,844 (2,515) 2,068 1,793 28,194 703 36,087
============= ========== ========== ========= ========= ============= ========
Capital
expenditure - 1,052 - - 50 - 1,102
Depreciation 1 13 - 2 7 - 23
============= ========== ========== ========= ========= ============= ========
Segmental assets
Net assets of the Group's Regeneration activities consists mainly of its accrued income in respect of property projects. The Group's Owned PRS Property consists of Investment property measured at fair value. Venture Capital net assets includes its historic investment in one venture fund and cash.
The restated segment analysis for the year ended 31 December 2015 is as follows:
Owned Intra
Restated Managed PRS Venture Holding group
Regeneration Property Property Capital Company adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue from
services 3,602 3,096 - 26 - - 6,724
============== ========== ========== ========= ========= ============= ========
Trading profit/(loss) 1,652 892 - (6) (582) (18) 1,938
Unrealised
gain on revaluation
of investment
property - - - - - - -
Unrealised
loss on revaluation
of investments - - - (120) - - (120)
-------------- ---------- ----------
Profit/(loss)
from operations 1,652 892 - (126) (582) (18) 1,818
Finance income 65 212 - 2 40 - 319
Share of
associate 449 - - - - - 449
-------------- ---------- ---------- --------- --------- ------------- --------
Profit/(loss)
before tax 2,166 1,104 - (124) (542) (18) 2,586
============== ========== ========== ========= ========= ============= ========
Total assets 6,224 4,961 - 3,491 30,258 (8,795) 35,581
Total liabilities (2,493) (7,637) - (1,732) (1,592) 9,570 (3,326)
-------------- ---------- ----------
Net assets 3,731 (2,676) - 1,759 28,666 775 32,255
============== ========== ========== ========= ========= ============= ========
Capital expenditure - 25 - - - - 25
Depreciation - 6 - 3 1 - 10
============== ========== ========== ========= ========= ============= ========
4. Unrealised profits on the revaluation of investment property
The total fair value adjustments made during the year relating to investment property at fair value through profit and loss are set out below.
Group Group
2016 2015
GBP'000 GBP'000
Investment property at
fair value through profit
and loss 2,017 -
2,017 -
======== ========
5. Unrealised profits/(losses) on the revaluation of investments
The total fair value adjustments made during the year relating to financial assets at fair value through profit and loss are set out below.
Group Group
2016 2015
GBP'000 GBP'000
Financial assets at fair
value through profit and
loss:
- the venture capital funds 23 43
- Unquoted securities - (163)
23 (120)
-------- --------
6. Taxation
There is a deferred taxation charge in the year as the group expects to pay tax at a future date.
The Group's deferred tax assets, other than those relating to short term timing differences, are not recognised as it is not sufficiently clear that losses will be capable of utilisation in future periods.
7. Profit per share
The calculation of the basic profit per share for the year ended 31 December 2016 and 31 December 2015 is based on the profits attributable to the shareholders of Sigma Capital Group plc divided by the weighted average number of shares in issue during the year.
Profit
attributable
to shareholders
GBP'000 Weighted Basic
average profit
number per share
of shares (pence)
Year ended 31 December
2016 3,565 88,649,088 4.02
================= =========== ===========
Year ended 31 December
2015 (Restated) 2,394 70,555,231 3.39
================= =========== ===========
Diluted profit per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all potential dilutive ordinary shares. The Company has only one category of potentially dilutive ordinary shares, those share options granted where the exercise price is less than the average price of the Company's shares during the year. Diluted profit per share is calculated by dividing the same profit attributable to equity holders of the Company as above by the adjusted number of ordinary shares in issue during the year ended 31 December 2016 of 89,750,427 (2015: 71,511,717). For the year ended 31 December 2016, the diluted earnings per share is 3.97 pence (2015 restated: 3.35 pence).
8. Cash flows from operating activities
Restated
Group Group
2016 2015
GBP'000 GBP'000
Profit after tax 3,565 2,394
Adjustments for:
Share-based payments 213 87
Depreciation 23 10
Amortisation 17 18
Finance income (290) (319)
Fair value (profit)/loss on financial
assets at fair value through profit
or loss (23) 120
Loss on disposal of trading investments
at fair value through profit or
loss - 1
Share of associate profit (443) (449)
Unrealised profit on revaluation (2,017) -
of investment property
Changes in working capital:
Decrease/(increase) in stocks 509 (509)
Trade and other receivables (398) (4,741)
Trade and other payables 1,197 2,394
--------
Cash flows from operating activities 2,353 (995)
======== =========
9. Availability of statutory financial statements
Copies of the full statutory financial statements will be available from the Company's offices at 18 Alva Street, Edinburgh EH2 4QG no later than 24 May 2017 and are available on its website at www.sigmacapital.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKNDNFBKDQPK
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May 04, 2017 02:01 ET (06:01 GMT)
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