12 October 2021

PRSR.L

The PRS REIT plc

("PRS REIT" or "the REIT" or "the Company" or "the Group")

Audited Full Year Results

for the year ended 30 June 2021 & First Quarter Update

Portfolio at 4,291 completed homes and demand remains strong

KEY POINTS

Financial

*after dividend payments

Operational

·      Delivery progressed well, with 4,000th home milestone reached just after financial year-end

-       1,902 new homes added to the portfolio (2020: 909), taking total at financial year-end to 3,984 homes with an ERV of £37.5m p.a. (2020: £19.1m p.a.). A further 1,071 home were under way (30 June 2020: 2,803)

-       coronavirus-related disruptions reduced activity levels by c.5-10% (2020: c.40%)

·      Total dividends per share declared, 4.0p (2020: 4.0p)

-       post equity placing, current dividend expected to be almost fully covered on a run-rate EPRA EPS basis by the financial year-end

Outlook

·      In Q1 2022, a further 307 homes were added, taking the portfolio to 4,291 completed homes, with an ERV of £41.0m p.a.  A further 764 homes were under way at 30 September 2021

·      Rental demand remains strong; at 30 September 2021, 98% of 4,291 completed homes were occupied, and a further 52 homes reserved for qualified applicants with rental deposits paid

·      Gross proceeds of £55.6m were raised on 29 September 2021 through an equity raise. The net funds will support the acquisition of five sites, expected to deliver c. 500 new homes with an ERV of £4.8m p.a.  Two of the five sites have now been acquired

·      The Company remains on track to reach its 5,000th home in the middle of calendar 2022 and, following the recent equity placing, a higher target of 5,700 homes, with an ERV approaching £55m p.a.

·      Long-term growth opportunity is strong underpinned by structural undersupply of high-quality, family rental homes

Steve Smith, Chairman of the PRS REIT, commented:

"We are pleased with the continued progress of The PRS REIT plc in its fourth year of activity. We have effectively navigated the ongoing challenges posed by the coronavirus pandemic, delivering almost 2,000 new homes in the year. By the end of the first quarter of the new financial year, the portfolio comprised 5,055 completed and contracted homes, and following the recent equity placing we are firmly on track to deliver a higher target of 5,700 homes.

"Demand for our homes remains strong, and in a recent survey of customers 10 months into their tenancies, 96% of respondents reported that they were happy in their homes.

"The continued undersupply of high-quality, well-managed family rental homes means that we remain highly confident of long-term prospects for the Company. We are very pleased to be playing a role in helping to solve the UK's housing shortage, providing desirable homes across the country for hard-working families"

For further information, please contact:

NOTES TO EDITORS

About The PRS REIT plc
www.theprsreit.com    

The PRS REIT plc is a closed-ended real estate investment trust established to invest in the Private Rented Sector ("PRS") and to provide shareholders with an attractive level of income together with the potential for capital and income growth. The Company is investing over £1bn in a portfolio of high quality homes for private rental across the regions, having raised a total of £0.56bn (gross) through its Initial Public Offering, on 31 May 2017 and subsequent fundraisings in February 2018 and September 2021. The UK Government's Homes England has supported the Company with direct investments. On 2 March 2021, the Company transferred its entire issued share capital to the premium listing segment of the Official List of the FCA and to the London Stock Exchange's premium segment of the Main Market. On 16 July 2021, the Company announced the completion of the 4,000^th new rental home for its portfolio, which the Company believes is the largest build-to-rent single family rental portfolio in the UK.

LEI:  21380037Q91HU97WZX58

About Sigma Capital Group Limited (formerly Sigma Capital Group plc)
www.sigmacapital.co.uk

Sigma Capital Group Limited ("Sigma") is a PRS, 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. The Company 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.

Sigma has created an unrivalled property platform, which sources sites and brings together construction resource to develop them, enabling Sigma to deliver an integrated solution to partners. As well as sourcing sites and managing all stages of the planning and development process, Sigma also manages the rental of completed homes through its award winning rental brand 'Simple Life'. The Company's subsidiary, Sigma PRS Management Limited, is Investment Adviser to The PRS REIT plc.

About Sigma PRS Management Limited

Sigma PRS Management Limited is a wholly-owned subsidiary of Sigma Capital Group Limited and is Investment Adviser to The PRS REIT plc. It sources investments and operationally manages the assets of The PRS REIT plc and advises the Alternative Investment Fund Manager ("AIFM") and The PRS REIT plc on a day-to-day basis in accordance with The PRS REIT plc's Investment Policy. The AIFM is G10 Capital Limited. Sigma PRS Management Ltd is an appointed representative of G10 Capital Limited, which is authorised and regulated by the Financial Conduct Authority (FRN:648953).

Chairman's Statement

Introduction

I am pleased to present The PRS REIT plc's ("the PRS REIT", "the Company" or "the Group") audited financial results for the year ended 30 June 2021. The Company has continued to make good progress in the delivery of the largest portfolio of single family homes for rent in the UK, despite the continuing challenges presented by the coronavirus pandemic. While we estimate that activity levels decreased by about 5-10% as a result of coronavirus-related disruptions, this was significantly less than in the previous financial year, when the construction industry was shut down completely for some six to eight weeks, which contributed to an estimated decrease in activity levels in that year of about 40%.

Instead, construction continued throughout the year, and by the financial year-end we were very close to reaching 4,000 new rental homes in our portfolio, having achieved the milestone of 3,000 new homes in December 2020. In total, 1,902 new homes were added to the portfolio over the financial year (2020: 909). This took the size of the portfolio at 30 June 2021 to 3,984 completed homes, with an estimated rental value ("ERV") of £37.5 million per annum (30 June 2020: 2,082 homes with an ERV of £19.1 million per annum). A further 1,071 homes, with an ERV of £10.6 million per annum, were at various stages of the delivery process at 30 June 2021. The total gross development cost ("GDC") of the 44 completed sites and the 20 additional sites under way at 30 June 2021 amounted to £789 million (2020: £757 million).

The Company's portfolio of assets across its now 66 sites, as of 11 October 2021, is geographically widely spread, with sites located throughout the major regions of England, including the North West, North East, Yorkshire, the Midlands, the South East (excluding London) and the East of England, and now Scotland.

During the first quarter of the new financial year, we added a further 307 new homes to the portfolio, taking it to 4,291 new homes at 30 September 2021, with an ERV of £41.0 million per annum. The number of homes contracted at this point was 5,055. This includes development sites that are under forward-purchase agreements. Following the equity placing at the end of September 2021, the Company's initial target of 5,200 homes with an ERV of approximately £50.0 million has been revised upwards to 5,700 homes with an ERV of approximately £55.0 million.

Demand for the PRS REIT's properties remained strong, and rental income has more than doubled year-on-year, reflecting the volume of new homes added to the portfolio and let. Rent collected (relative to rent invoiced) over the year stood at 98% (2020: 98%). While we froze rental rates for tenant renewals at pre-pandemic levels from March to December, rental rates from new tenancies show annual growth of approximately 6.2% for re-let properties and 4% for those properties whose occupiers renewed their tenancy, since the re-opening of the market in May 2020. Of the 3,984 completed homes at 30 June 2021, 3,888 (98%) were occupied with a further 80 homes reserved to qualified applicants, and data for the end of September shows a similar occupancy rate of 98% on completed homes.

We completed some important steps in the second half of the financial year. In January 2021, we extended our Investment Advisory Services contract with Sigma PRS Management Ltd, agreeing a reduced fee structure as the net asset value increases. This extension has enabled us to plan for the next stage of the Company's development with greater clarity. In March 2021, we completed the transfer of the Company from the Specialist Fund Segment to the Premium Segment of the Main Market of the London Stock Exchange. The migration facilitates our eligibility for inclusion in FTSE's EPRA and UK Index Series and should help to broaden the share register.

As the Company's activities grow our social impact increases commensurately. Aside from the contribution the Company is making to creating high-quality new homes for families across the country, we continue to strive to foster a sense of community within our developments. Through our Investment Adviser we are also focusing on making a wider societal and environmental contribution.

In March 2021, we were pleased to welcome Geeta Nanda to the Board as a Non-executive Director. She is Chief Executive Officer of Metropolitan Thames Valley Housing Association and brings significant relevant experience.

The Investment Adviser's report provides further commentary on housing delivery, asset performance and our ESG activity over the year.

Financial Results

Revenue, which is generated wholly from rental income, more than doubled year-on-year to £26.6 million (2020: £12.9 million). This reflected the substantial increase in the number of rental homes making up the portfolio. After the deduction of non-recoverable property costs, net rental income for the financial year was £21.5 million (2020: £10.2 million).

Expenses in the year increased to £7.1 million (2020: £6.2 million), however this included £0.5 million of one-off expenses relating to the Company's migration to the Main Market. The gain from the fair value adjustment on investment property increased significantly from the prior year to £39.0 million (2020: £15.8 million). This was due to a combination of higher rents and yield compression. Operating profit increased by 170% to £53.7 million (2020: £19.9 million) as a result of the increase in completed and let units together with the rise in the portfolio valuation.

Finance costs amounted to £9.6 million (2020: £3.7 million). These reflect the drawdown and utilisation of debt funding during the year. There was no finance income from short-term deposits in the year (2020: £0.2 million) reflecting the very low interest rate environment.

Profit after taxation increased by 169% to £44.1 million (2020: £16.4 million) and basic and diluted earnings per share rose by 170% to 8.9p (2020: 3.3p) on an IFRS basis.

The Group's net asset value ("NAV") per share at 30 June 2021, on an IFRS basis, increased to 99.0p (31 December 2020: 96.2p and 30 June 2020: 95.1p) as did the EPRA NTA per share (previously EPRA NAV per share) (31 December 2020: 96.2p and 30 June 2020: 95.1p).

Net assets of the Group at 30 June 2021 were 4.0% higher year-on-year at £490.3 million (30 June 2020: £471 million) after paying dividends of £24.8 million in the year.

Dividends

For the year to 30 June 2021, aggregate dividends of 4.0p per share were declared to shareholders (2020: 4.0p per share). Due to the timing of dividend payments, the Company paid a total of 5.0p per ordinary share during the year under review (2020: 4.0p per share). Taking into account the dividend paid on 3 September 2021, total dividends paid since the Company's inception in May 2017 are 18.0p per share.

Prior to the equity placing, the Company's current dividend was fully covered on a run rate cash basis and was expected to be fully covered on an annualised EPRA EPS basis by 31 December 2021. Following the equity placing, the current dividend is expected to be almost fully covered on a run-rate EPRA EPS basis by the end of the financial year. Dividend cover will continue to grow as construction, completions and lettings advance.

Environmental, Social and Governance ("ESG") Practices

The PRS REIT is a member of the UK Association of Investment Companies and applies its Code of Corporate Governance to ensure best practice in governance.

The Board of Directors is responsible for determining the Company's investment objectives and policy, and has overall responsibility for the Company's activities, including the review of investment activity and performance. The Board consists of five independent Non-executive Directors, all of whom bring significant and complementary experience in the management of listed funds, equity capital markets, public policy, operations and finance in the property and investment funds sectors.

We believe that the Company's activities have significant positive social impact, and we take our responsibilities to our tenants and the communities in which our sites are located very seriously. We wish to create new homes and developments that tenants enjoy living in and to provide excellent customer service. The 'Simple Life' brand, through which our properties are marketed and managed, has received a number of awards for its service levels, and we are delighted that recent customer satisfaction survey results indicate a very high level of satisfaction amongst tenants across all key performance indicators.

The Investment Adviser manages the delivery of our ESG strategy and details of our policies and activities are contained separately in the Investment Adviser's Report. However, I am pleased to highlight the Investment Adviser's continued support for a broad range of charities, schools and institutions close to the Company's developments over the financial year. Engagement with residents to help direct specific support is ongoing, and there has been an increased focus on developing strong and growing relationships with local charities, alongside continued support for larger national charities such as the Women's Aid, the NSPCC and the British Heart Foundation. Support and engagement continue to grow with Salford Loaves and Fishes, Centrepoint, Park Palace Ponies, and several local foodbanks, while new links and connections are being made with charities such as Sheffield Flourish, a community mental health charity, and Zoe's Place in Middlesbrough, a baby and children's hospice providing much needed support to families.

Our Investment Adviser will continue with these and other valuable initiatives, which foster a greater sense of community between residents and within the wider neighbourhoods in which our developments are located

Post Period - Equity Raise

In the first quarter of the new financial year, we undertook an equity raise in order to acquire assets identified by the Investment Adviser, and on 27 September 2021 announced that a total of c.£55.6 million (gross) had been raised at an issue price of 103p per share.

The fundraising was made available to both institutional and retail investors. A total of 53,232,575 shares (c.£54.8 million) were placed with new and existing institutional investors, with 741,589 shares (c.£0.8 million) placed with retail investors. The net funds will be used to acquire five sites, with the potential for c.500 new homes at a GDC of £76.6 million, providing a total ERV of £4.8m per annum.  Two of the five sites have since been acquired. Located in Bertha Park in Perthshire, Scotland and Drakelow in Burton upon Trent, South Derbyshire, their total development cost is £37.3 million. Together they are expected to add a further 229 homes with an ERV of £2.3 million per annum.

Outlook

We are pleased with the PRS REIT's progress, now in its fifth year, and with 4,291 homes in the portfolio and 764 under way at the end of September, the Company looks well placed to reach 5,000 rental homes by the middle of calendar 2022. Given the pandemic situation and other challenges, this is no mean achievement.

Following the equity raise in September, our target for the portfolio has been revised from 5,200 to approximately 5,700 new homes. Once completed, these homes are expected to have a combined estimated rental value of around £55.0 million per annum, and the Company's gross assets will approach £1 billion.

Demand for the homes in our portfolio remains high, and we believe that the structural undersupply of high-quality family rental homes will continue to drive demand. We believe there is considerable anecdotal evidence, as well as a growing number of data points, to support the view that renting is increasingly seen as a flexible and long-term alternative to home ownership, not a short term reaction to economic, market or other circumstances.

Both new enquiries and renewals over the first quarter of the new financial year were strong and at 30 September 2021, the rent roll stood at £40.1 million per annum and rent collected in the first quarter (against rent invoiced) was at 99%.

Against this backdrop, we view prospects for the future extremely positively and we also consider that the Government's recent proposals, set out in its Planning White Paper published in August, are generally favourable for the PRS REIT.

We continue to target a minimum dividend of 4.0p per share* in the new financial year, and will declare the interim dividend for the first quarter in October 2021.

I would like to take this opportunity to thank all of our staff and stakeholders and our supporters in government and the construction industry, for their hard work and support over the year. Their continuing efforts enable us to make a positive contribution towards the UK's housing shortage and deliver much needed new housing stock to hardworking families, local communities and more generally to society as a whole.

We look forward with confidence to the year ahead, and will continue to consult with the PRS REIT's advisers and others as we assess the Company's next stage of development.

Steve Smith

Chairman

11 October 2021

* 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.

IFRS AND EPRA PERFORMANCE MEASURES

In October 2019, the European Real Estate Association ("EPRA") published new best practice recommendations ("BPR") for financial disclosures by public real estate companies. The BPR introduced three new measures for reporting net asset value: EPRA Net Tangible assets ("NTA"), EPRA Net Reinstatement Value ("NRV"), and EPRA Net Disposal Value ("NDV"). These new measures are effective for accounting periods starting 1 January 2020 and the Group has reported EPRA NTA in reporting the financial position as at 30 June 2021. The Group considers EPRA NTA to be the most relevant measure for its operating activities, therefore it will be adopted as the Groups' primary measure of net asset value, replacing previously reported EPRA Net Asset Value ("NAV").

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 therefore it equates 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 Group's overall assets. The Board's view is that collective marketing of the portfolio would attract a higher valuation reflecting yield compression attributable to the size and scale of the overall portfolio. In the absence of comparable market evidence for such a portfolio, EPRA NDV is not considered an appropriate measure.

As in prior years, due to the stage of completion of the PRS REIT's development assets within the Group's portfolio, it is not considered appropriate to disclose the EPRA metrics of Net Initial Yield and Cost Ratio at this reporting date.

Going Concern Review and Stress Test

Going Concern and Stress Test

This going concern review summarises the risks that the COVID-19 pandemic and other current economic issues affecting the UK, such as workforce shortages and potential inflation, pose to the Group and the parent Company of the PRS REIT, together with actions taken to ensure that the business is well-placed to continue in a position of financial strength.

During the second lockdown in November 2020 and the third lockdown in January 2021 until March 2021, imposed by the Government, house building and letting activity continued at a slightly slower pace than pre-pandemic levels. This was due to ongoing workplace restrictions around social distancing and, reduced workforce numbers, despite the vaccination programme, reflected in absence through either illness or self-isolating protocols. Both resulted in some delays to homes being completed, let and occupied. The Group's contractual obligations provide for payment to house builders in respect of work undertaken, and independently certified. Accordingly, development expenditure and associated cash outflows during lockdown periods reduced proportionately. However, the knock-on impact of the disruption is that practical completion dates for construction and subsequent letting activity have been delayed in comparison to original schedules.

The nature and spread of COVID-19 mean that not all sites and areas have been impacted consistently. A small number of sites have therefore been delayed disproportionately in comparison to the portfolio as a whole.

COVID-19 therefore continues to have the potential to impact the Group and Company as a result of the workplace and workforce issues outlined above, together with the risk that the Government may in future periods, introduce, or re-introduce, restrictions limiting, either wholly or partly, construction and letting activity on a regional or national basis.

Workforce shortages and potential inflation provide additional risks through disruption to the supply chain and pressure on pricing on the acquisition of sites.

These have the potential to impact the Company and Group in the following areas:

Stress Test

In light of the above, the parent Company of the PRS REIT and the Group, have performed a prudent financial stress test geared towards ensuring that the Company and Group have sufficient cash resources to weather the pandemic and current economic difficulties in the UK and emerge in a robust condition to continue to implement the Group's build-to-rent strategy.

In the unlikely event that the pandemic has truly passed, then the events of the last 18 months at the very least provide a reasonable basis on which to assess any similar future threat.  These events also provide a reasonable template on which to perform a financial "stress test" for the purpose of assessing the Group as a going concern and reviewing the adequacy of the Group's working capital on a forward-looking basis.  The stress test therefore incorporated the following sensitivities:

-       availability of funds pursuant to the terms and conditions of the Group's existing borrowing facilities with Scottish Widows, Lloyds Banking Group / RBS and Barclays Bank PLC;

-       cessation of onsite activity for a period of four months from October 2021 to January 2022;

-       absence of development management fees payable to Sigma Capital Group Limited ("Sigma") during the period of four months from October 2021 to January 2022 reflecting the cessation of onsite activity;

-       extension to the Group's development debt borrowing facilities that matches the four month period of cessation of onsite development activity;

-       absence of further asset purchases and aborting the purchase of completed asset sites from both Sigma and third parties;

-       loss of 15% of rental income in relation to increased hardship and redundancy levels affecting tenant occupancy rates and arrears levels for a period of six months from October 2021 to the end of March 2022;

-       inclusion of contracted revenue from existing tenancies with new tenancies reflecting the cessation of onsite activity for a period of four months from October 2021 to January 2022;

-       maintenance of the Group and Company's existing administrative overhead base of approximately £6 million per annum, comprising c.£4 million of investment advisory fees and c.£2 million of other overheads, without reduction from cost saving initiatives or mitigating action; and

-       continuation of the Company's stated dividend policy of a minimum of 1.0p per quarter and 4.0p per annum.

Conclusion of Stress Test

The conclusion of the stress test performed is that the parent Company of the PRS REIT and the Group have adequate cash resources to sustain an extended cessation of construction and letting activity lasting at least four months, together with a significant reduction in rental income.  This reflects the flexibility offered pursuant to the terms of the Forward Purchase Agreement between the Group and Sigma on the basis that the PRS REIT could reduce future asset purchases from Sigma if it considers that it does not have sufficient funds to complete.

The Directors therefore believe the parent Company of the PRS REIT and the Group are well placed to manage the business risks successfully and have a reasonable expectation that both 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 parent Company of the PRS REIT and the Group's financial statements for the year ended 30 June 2021. The Board is therefore of the opinion that the going concern basis adopted in the preparation of the consolidated and parent Company financial statements for the year ended 30 June 2021 is appropriate.

Conclusion

Together with evolving market conditions, including workforce shortages and potential inflation, COVID-19 remains a risk that requires careful monitoring and management in conjunction with the Group's house building partners and letting agents, in order to mitigate the potential issues pending the restoration of a more normal working and living environment. The parent Company of the PRS REIT and the Group will continue to review and assess objectively the impact of all of these factors together with the Government and regulatory response on both its strategy and focus of activities.

Market Dynamics

The PRS REIT's Investment Adviser, Sigma PRS Management Ltd ("Sigma PRS") is a subsidiary of Sigma Capital Group Limited ("Sigma"), and the PRS REIT's rental homes are marketed under Sigma's 'Simple Life' brand.

•     Sigma is a member of The UK Apartment Association ("UKAA") and the UKAA BTR steering group, which seeks to promote a wider understanding of BTR and engages with, Government, local authorities and renters.

•     Sigma is also a member of The British Property Federation ("BPF"), and the 'Simple Life' portfolio will form part of the 'Who Lives in BTR' research report this year.

•     In 2021, 'Simple Life' took part in a UK-wide campaign, organised by Love to Rent, a platform that provides advice and support to renters. Called, 'Renting but not as you know it', the campaign highlighted the variety of properties available from Build to Rent ("BTR") providers, as well as the benefits of renting from a professional landlord.

Over the course of the last 18 months, the coronavirus pandemic has made the issue of the availability of suburban family rental housing more topical. During the crisis, the movement of people out of city centres into the suburbs and the countryside as they sought more space, including gardens, has highlighted the lack of supply.

Build-to-rent as an asset class in the UK remains very small, but it is continuing to mature, and there is a rising level of investment in BTR and an increasing number of new entrants. The challenging state of the 'for sale' market is also influencing its growth. Average house prices to income continues to increase.  According to the Office for National Statistics, the ratio of average house price to income at the end of 2020 was almost 8 times. The Government's stimulus measure of waiving Stamp Duty below £500,000, which came to a close in June 2021, also resulted in an inflationary effect on some house prices.

Whilst barriers to entry into the home ownership sector have become higher, supply side constraints in the rental sector are also evident. Since 2017, approximately 180,000 buy-to-let mortgages have been redeemed, mainly reflecting the ending of some taxation benefits. Potential new small-scale entrants have also been deterred by high entry costs. The increasing level of institutional investment in the build-to-rent sector creates some relief, although current levels of supply are still very small.

According to the BPF, the total number of properties completed in the UK build-to-rent sector is only approximately 62,000 homes.  Set against the loss of 180,000 buy-to-let homes in a similar period of time, this means that the supply/demand ratio remains heavily in deficit. The pipeline of new properties under way in the sector is circa 40,000 and, in total, including homes already build and on site, a little under 200,000 homes are currently due to be delivered. With the private rented sector as a whole comprising circa 4 million homes, or approximately 20% of the overall UK housing stock, this shows the significant potential that exists for build-to-rent properties.

Across UK housing stock, approximately 80% of homes are houses. This proportion reduces slightly in the private rented sector where the ratio of houses to apartments is 63:37. This contrasts with the BTR sector where providers have concentrated on the delivery of flatted schemes, resulting in a ratio of houses to apartments of 12:88. According to Savills' research paper on the UK Private Rented Sector, 63% of the rental stock in the UK is houses. While this reflects the stock available, it may also indicate a preference on the part of renters for homes with outdoor space or a little more flexibility. Approximately 40% of the PRS REIT's portfolio is occupied by families with children, attracted by the benefits of living in houses with gardens, as opposed to apartments.

In summary, the BTR sector in the UK remains extremely small and the continuing focus on apartments rather than single family houses means that families with children remain an underserved segment in the private rented sector.

Extract from Portfolio Analysis

As at 30 June 2021, the valuation of the Group's property portfolio was £780 million (2020: £577 million) and the investment value of all sites under way at that date was £829 million on completion (2020: £722 million) with their ERV on completion at £47 million (2020: £42 million).

Property Portfolio by Regional Split - at 30 June 2021

·      The regional split by investment value was - North West (NW) 56% (2020: 56%), West Midlands (WM) 18% (2020: 20%), South East (SE) 13% (2020: 13%), Yorkshire (Y) 9% (2020: 7%), North East (NE) 3% (2020: 3%) and East Midlands (EM) 1% (2020: 1%).

Other Metrics - at 30 June 2021

·      The rent roll at 30 June 2021 was £37.5 million (2020: £19.1 million) and the average rent was £9,420 per annum or £785 per month (2020: £9,175 per annum or £765 per month).

·      Forecast average rent across the current portfolio when complete is £10,188 per annum or £849 per month (2020: £9,154 per annum or £792 per month).

·      The average size of site was 79 (2020: 83) housing units.

·      The split between 1, 2, 3 and 4 bed properties was approximately 4%, 26%, 61% and 9% respectively (2020: 4%, 26%, 61% and 9% respectively).

·      Contractor split was - Countryside 78%; Vistry 15%; Engie 4%; and Seddon 3% (2020: Countryside 86%; Engie 10%; Vistry 3%; and Seddon 1%).

·      The deduction from gross to net rent across the portfolio for the year ended 30 June 2021 was 19.5% (2020: 21.1%).

·      Bad debts for the year was a net recovery of £4,000 (2020: £24,000 expense) and the bad debt provision at the year-end was £31,000 (2020: £35,000).

Age Groupings

The largest age grouping across our customer base at the time of sampling was 26-35 years or 41% of the total. The increase in the under-25 age group correlates with the launch of our apartment scheme, Empyrean, in Manchester, which is suited to this younger occupier group.

Household Income Bracket

There was very little change in the proportion of our customers across the main income brackets when compared with the preceding year. However, there were two key differences; a c.2% increase in the lowest salary brackets, which is most likely a natural fluctuation, and a 5% rise to 15% in the representation of residents in the higher household income bracket of £65,000 or more.

Tenancies with Children

Whilst the portfolio comprises mainly family homes, only approximately 40% of tenancies include children in the household. Looking back to the age groupings, it is reasonable to assume that our major cohort of 26-35 year olds may be moving into our homes with the intention of starting a family. Of those residents with children, the two largest groupings are those with two or four children.

Distance Travelled

We measure the distance travelled by our residents from their previous addresses to their new 'Simple Life' home. The two largest categories are those travelling up to 10 miles to move to one of our homes.  However c. 40% of our residents have travelled between 10 and over 50 miles from their previous home, which we believe reflects the increasing reach and awareness of the 'Simple Life' brand and its online presence.

All 2021 statistics are based on new applicant data between July 2020 and June 2021 and include sites acquired from Sigma. The prior year's statistics are based on all successful 'Simple Life' applications referenced between June 2019 and June 2020.

Investment Adviser's Report

Sigma PRS Management Ltd ("Sigma PRS"), a wholly-owned subsidiary of Sigma Capital Group Limited, is the Company's Investment Adviser, and is pleased to provide a report on the PRS REIT's activities and progress for the year ended 30 June 2021.

Business Activities

The PRS REIT plc is a public limited company incorporated in England on 24 February 2017. Together with its subsidiaries, it is the first quoted Real Estate Investment Trust ("REIT") to focus on the Private Rented Sector ("PRS").

The Company completed its IPO on 31 May 2017, raising initial gross proceeds of £250 million through the issue of 250 million ordinary shares of one pence each at an issue price of £1 each, and the shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange. The Company has since raised additional funds, through two further placings and through gearing, taking its total available resources to £956 million (gross). On 2 March 2021, the Company transferred its entire issued share capital to the premium listing segment of the Official List of the FCA and to the London Stock Exchange's premium segment of the Main Market.

Investment Objective and Business Model

The PRS REIT is seeking to provide investors with an attractive level of income, together with the prospect of income and capital growth, through investment in newly-constructed residential private rented sector sites of multiple units, comprising mainly family homes. The homes are let on Assured Shorthold Tenancies (as defined in the Housing Act 1988) to qualifying tenants.

The Company is investing in multiple sites in cities and towns across the UK, targeting the largest employment centres in England, predominantly in the Midlands and North, but outside London. The locations closely follow the main rail and road infrastructure, and rental homes, being newly-built, come with the benefit of 10 year National House Building Council or equivalent warranties.

The Company is concentrating on traditional housing, which has a broad spectrum of demand, and differing house types for different life stages, including smaller houses for young couples and retirees, and larger houses for growing families. It also invests in some low-rise flats in appropriate locations to broaden the rental offering.

The PRS REIT is building its portfolio of PRS assets in two ways:

·      by acquiring residential development opportunities, with these development sites sourced and managed by Sigma PRS (or another member of Sigma acting as development manager). When completed, homes on these sites are subsequently let to individual qualifying tenants; and

·      by acquiring already completed and let PRS sites that fulfil the Company's investment objectives, including appropriate return and occupancy hurdles. Completed sites are acquired from Sigma, pursuant to a forward purchase agreement between the PRS REIT and Sigma, and subject to an independent valuation appraisal. Should the opportunity arise, the PRS REIT may acquire newly-built PRS assets from third party vendors. The Company has the ability to fund up to a maximum of one third of new properties in this manner.

The PRS REIT retains the right of first refusal to acquire and develop any sites sourced by Sigma PRS that meets its investment objective and policy.

There are certain restrictions in the PRS REIT's investment policy, for instance the PRS REIT will not invest in other alternative investment funds or closed-end investment companies.

Achieving Scale and Reducing Risk

The Sigma PRS Platform

The Investment Adviser is utilising Sigma's well-established PRS property delivery and management platform (the "Sigma PRS Platform") to help the PRS REIT achieve scale and to minimise development and operational risks. Specifically, the Sigma PRS Platform facilitates the efficient sourcing and development of investment opportunities.

The Sigma PRS Platform comprises relationships with construction partners, central government, and local authorities. Key construction partners include Countryside Properties, which is the primary house building partner, Vistry, Engie and Seddon. Homes England, an executive non-departmental public body sponsored by the Ministry of Housing, Communities & Local Government, works closely with Sigma in the common goal of accelerating new housing delivery in England.

All pre-development risks are identified and underwritten by Sigma and its partners, and development sites will have an appropriate certificate of title, detailed planning consent and a fixed price design and build contract with one of Sigma's housebuilding partners. During the construction phase, many of the properties are pre-let and subsequently occupied as they complete.

Through its wide network of relationships, the Sigma PRS Platform represents a very good source of land for development sites, and is able to deliver a variety of high-quality house types efficiently and in volume. This underpins the PRS REIT's objective to build at scale and across multiple geographies.

Multiple Geographies

By creating assets across multiple locations and regions, we aim to minimise the PRS REIT's concentration risk.

We are targeting a mix of locations that demonstrate both higher yielding profiles (predominantly those in the North of England) and developments where there is greater potential for capital appreciation (often in our Southern opportunities). Proximity to good primary schools is also a key requirement as the Company is focused on the family rental market.

In addition, no investment will be made in any single completed PRS site or PRS development site that exceeds 20 per cent of the aggregate value of the total assets of the Company at the time of commitment.

'Simple Life' Brand

The PRS REIT's rental homes are marketed under the 'Simple Life' brand. The brand has created an identity for the PRS REIT's product and, over time, we would like it to be recognised as representing a 'gold standard' in the private rented sector, providing a combination of a high-quality, sensibly-priced homes and high customer service levels.

The PRS REIT's long-term approach to the ownership of its assets provides further reassurance to tenants, and the neighbourhood initiatives that we sponsor also help to create a sense of community within our developments.

Financing Resource

Equity Placing Programme

Three tranches of equity have been raised to date, £250 million (gross) at the Company's IPO on 31 May 2017, and a further £250 million (gross) in February 2018. Homes England participated in both fundraisings, taking its direct investment in the Company to a total of approximately £30 million. In September 2021, an additional £55.6 million (gross) was raised.

Debt Facilities

The Company is using gearing to enhance equity returns, and in June 2019, agreed terms with Scottish Widows and Lloyds Banking Group to increase its total longer-term debt facilities to £400 million. Further details can be found in the 'Financial Results' segment of this report on page 35. During the financial year, the Company arranged a further £50 million development debt facility with Barclays Bank PLC. The PRS REIT's aggregate borrowings will always be subject to an absolute maximum, calculated at the time of drawdown of the relevant borrowings, of not more than 45 per cent of the value of the assets.

Operational Review

Development Activity and Acquisitions

Delivery of new homes from the development pipeline remains the key focus. The coronavirus pandemic has continued to cause some disruption to delivery but not on the same scale as in the prior financial year with the first national lockdown.

During the period of the second lockdown imposed by the Government from the end of December 2020, house building and letting activity continued at a slower than pre-pandemic levels due to ongoing workplace restrictions around social distancing and, despite the vaccination programme, reduced workforce numbers reflecting absence through either illness of self-isolating protocols. Both resulted in some delays to homes being completed, let and occupied.

Notwithstanding COVID-19, a total of 1,902 homes were completed in the year to 30 June 2021, compared with 909 in the prior year. This reflected the significant increase in the number of sites in the delivery programme and the estimated impact of the pandemic on unit delivery in the prior. The total number of completed homes at the end of June 2021 was 3,984 (2020: 2,082) across six of the eight major regions of England.

This included four fully-developed and let sites acquired during the year, comprising in total 203 homes. Three of these sites were acquired from Sigma Capital Group Limited. All sites were independently assessed and valued by Savills before acquisition.

The estimated rental value of the portfolio at 30 June 2021 amounted to £37.5 million per annum, almost double the level at 30 June 2020 (£19.1 million per annum).

The table below provides further detail in summarised form of our development activity in 2021 and 2020, including activity in the first quarter of the new financial year.

Construction Resource

The construction resource provided by the Sigma PRS Platform has national reach. It underpins the continued expansion of the Company to key population centres in England, supporting the creation of a geographically diverse portfolio.

There are many clear benefits for our construction partners in partnering with us. These include strengthening their ability to bid for land with local councils and improving operational efficiencies with their own housing delivery. This partnership approach is working well and the model we operate of using standard family house types, fixed price design & build contracts, and standardised specification, helps to ensure that developments are built to budget and that our PRS assets can be maintained and managed efficiently.

In our annual report last year we highlighted that we had started to take delivery of homes produced by Countryside Properties new sectional-building technology. We are delighted to announce that over 926 of our new homes have now been constructed using this system.

Financial Results

Income statement

The Group's revenue (which is wholly derived from rental income) more than doubled over the year to £26.6 million (2020: £12.9 million). After the deduction of non-recoverable property costs, the net rental income was £21.5 million (2020: £10.2 million). Administration expenses were higher at £7.1 million (2020: £6.2 million) but included non-recurring accounting and legal expenses of £0.5 million in relation to the Company's migration to the Main Market.

The gain from the fair value adjustment on investment property was £39.0 million (2020: £15.8 million), with a portion of the increase attributable to a combination of higher rents and yield compression in the current financial year. Operating profit was £53.7 million (2020: £19.9 million). Finance costs for the year were £9.6 million (2020: £3.7 million) reflecting the debt utilisation and associated costs during the year. With interest rates at historic lows, there was no finance income for the period from short-term deposits (2020: £0.2 million). The profit after finance income and taxation was £44.1 million (2020: £16.4 million).

The basic and fully diluted earnings per share on an IFRS basis for the year was 8.9p (2020: 3.3p).

Dividends

The Company has declared a total of 4.0p per ordinary share for the year under review, which comprised the following:

·      On 9 November 2020, the Company announced the declaration of a dividend of 1.0 pence per Ordinary Share in respect of the period from 1 July 2020 to 30 September 2020, which was paid on 11 December 2020 to shareholders on the register as at 20 November 2020.

·      On 10 February 2021, the Company announced the declaration of a dividend of 1.0 pence per Ordinary Share in respect of the period from 1 October 2020 to 31 December 2020, which was paid on 8 March 2021 to shareholders on the register as at 19 February 2021.

·      On 13 May 2021, the Company announced the declaration of a dividend of 1.0 pence per Ordinary Share in respect of the period from 1 January 2021 to 31 March 2021, which was paid on 18 June 2021 to shareholders on the register as at 21 May 2021.

·      On 2 August 2021, the Company announced the declaration of a dividend of 1.0 pence per Ordinary Share in respect of the period from 1 April 2021 to 30 June 2021, which was paid on 3 September 2021 to shareholders on the register as at 13 August 2021.

Reflecting the timing of dividend payments, the Company paid a total of 5.0p per ordinary share during the year under review due to the delayed payment of the final FY2020 dividend.

Balance Sheet

The principal items on the balance sheet are, investment property of £780.4 million (2020: £577.1 million), cash and cash equivalents of £86.4million (2020: £59.3 million), long-term loans of £244.9 million (2020: £144.2 million), short term loans of £110 million (2020: £nil) and trade and other payables of £27.2 million (2020: £23.9 million).

The investment property includes completed assets and assets under construction at fair value. Trade and other payables includes £10.5 million of development expenditure that was paid in July 2021.

Debt Financing

The PRS REIT has the following debt facilities:

·      £150 million revolving credit facility with Lloyds Banking Group / RBS for an initial term of two years, which can be extended further for up to two years. Interest is based on three month SONIA plus applicable margin and the loan is secured over assets allocated to Lloyds Banking Group. As at 30 June 2021, £68.6 million had been drawn;

·      £100 million term loan of 15 years with Scottish Widows, fully drawn as at 30 June 2021. Interest is fixed at the 15 year swap rate of 1.59% plus applicable margin, 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 2021. Interest is fixed at the 25 year swap rate of 1.16% plus applicable margin, and the loan is secured over assets allocated to Scottish Widows; and

·      £50 million development debt facility with Barclays Bank PLC. Interest is based on three month LIBOR plus applicable margin and the loan is secured over assets allocated to Barclays Bank PLC. As at 30 June 2021, £42.4 million had been drawn.

Key performance indicators

The Group's key performance indicators ("KPI") include:

All the KPIs are in line with management expectations. Increases in rental income, 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.

Market Overview

The delivery of new homes in the last reported period of 2019/20 fell short of the annual government target of 300,000 homes by 80,000, with 220,000 new build completions in the year. Due to the coronavirus pandemic it is not anticipated that this shortfall will have been rectified during 2020/21.

The supply of rented properties has also reduced following tighter regulation and increased tax burdens, which caused large outflows from the 'Buy-to-let' sector. According to Savills, in 2010, 78% of landlords in the private rented sector owned more than one property, but by 2018, this had reduced to 45%. Latest research by Savills reveals that the number of buy to let mortgage redemptions has reached 180,000 since 2017, suggesting further supply side pressure in the sector.

With the average home in the UK now a multiple of 7.7 times gross average salary (2020), the choices available to those who are too economically active to qualify for affordable housing, but without sufficient savings to pay for a minimum deposit (including to qualify for "Help to Buy"), are increasingly limited. The Build-to-Rent ("BTR") sector can absorb some of this demand, although currently there are only 62,000 operational homes and just 39,500 under construction.

BTR currently accounts for just 2% of all private rented homes in the UK, which when compared to 45% in the US and 55% in Germany, indicates the potential growth in the market. Savills estimates that the sector, which experienced investment volumes of £550 million in Q2 2021 alone, could expand to nearer £550 billion at full maturity.

The UK market continues to focus on high-density flatted developments in city centre locations whilst the PRS REIT has maintained its focus on regional family homes. The relevance of the PRS REIT's housing model has been brought into sharp relief this year with COVID-19 and home-working causing tenants to rethink their space requirements and the need for private outdoor space.

Post Period Review

Progress since the start of the new financial year has continued positively, in line with management expectations.

Over the first quarter of the new financial year, 307 new homes were added to the portfolio, taking the number of completed homes at 30 September 2021 to 4,291, providing an ERV of £41.1 million per annum. At the end of September 2021, contracted homes amounted to 764, with an ERV of £7.1 million per annum. The total ERV of contracted and completed homes at 30 September 2021 amounted to £48.1 million per annum.

Following the equity placing, the Company is targeting a portfolio of 5,700 homes with an ERV of c.£55.0 million per annum. A total of c£54.8m (gross) was raised in the equity placing, from both new and existing investors, including retail investors. The net funds will finance the acquisition of five sites, two of which have now been acquired. The five sites are expected to add a combined c.500 new homes, at a GDC of £76.6 million, and provide a total ERV of £4.8m per annum.  The two newly-acquired sites are in Bertha Park in Perthshire, Scotland and Drakelow in Burton upon Trent, South Derbyshire. Their total development cost is £40.1 million and, once completed, the sites should contribute a further 229 homes with an ERV of £2.3 million per annum.

The table below provides further information of delivery activity over the first quarter of the new financial year.

Summary and Outlook

The growth opportunity available to the PRS REIT remains substantial, driven by the strong underlying supply and demand fundamentals in the housing market. We also believe that PRS housing (at scale) can play a part in accelerating the overall delivery of new homes, a key agenda with local authorities and Central Government.

In addition, the track record that we have established in delivering high quality new homes across multiple sites through our efficient supply chain platform places the Company in a strong position in the PRS market.

Notwithstanding current challenges and uncertainties, we believe that the Company remains firmly on track to invest its full available capital and associated gearing to time and budget.

Environmental, Social and Governance

ESG statement

Sigma PRS undertakes the day-to-day management of the Company's ESG strategy and takes responsibility for how the Company's ESG priorities are managed at both Company and asset level. Sigma PRS reports to the PRS REIT's Board on ESG on a quarterly basis.

Approach

The Company recognises that it is a long-term stakeholder in the communities and neighbourhoods it creates, and takes this responsibility very seriously. The Investment Adviser has joined the United Nations Global Compact ("UN Global Compact"), which is a voluntary initiative designed to encourage business leaders to implement universal sustainability principles and in particular the UN Global Compact's Ten Principles. These are derived from the Universal Declaration of Human Rights, the International Labour Organisation's Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nationals Convention Against Corruption.

In November 2020, the Investment Adviser appointed an ESG Director to take oversight of ESG initiatives, and in December 2020, the Company appointed EVORA, a leading sustainability consultant specialising in real estate solutions, to analyse the Group's current ESG performance and help direct strategies, plans and decisions going forward.

Reflecting the growing importance of ESG globally, Sigma PRS is currently working towards a Global Real Estate Sustainability Benchmark ("GRESB") rating, a globally recognised benchmark for reporting real estate ESG performance. The PRS REIT is a member of European Public Real Estate Association ("EPRA"), a non-profit association representing Europe's publicly listed property companies. EPRA's mission is to promote, develop and represent the European public real estate sector. This is achieved through the provision of better information to investors and stakeholders, active involvement in the public and political debate, improvement of the general operating environment, promotion of best practices, and the cohesion and strengthening of the industry.

Although voluntary at present, many of these frameworks are important investor tools, and increasingly reflect a 'license to operate' within the market. The Company is also mindful of the changing legislative landscape, including the EU Sustainable Finance Disclosure Regulation ("SFDR"), EU Taxonomy, as well as growing UK national and city-level regulations.

Defining value is a challenge and the Group recognises the growing significance of Social Value in real estate, with frameworks such as the Social Value Portal ("SVP") and the Housing Associations' Charitable Trust (the "HACT"), providing matrices and dashboards, reflecting performance and progress in these areas. The PRS REIT has already engaged with the SVP and is seeking alignment where possible to the UNs 17 Sustainable Development Goals ("SDGs"). Identifying material issues and the key SDGs that the Group supports will be an important part of this process.

The PRS REIT is also reviewing other reporting frameworks, such as the UN Principles of Responsible Investment ("PRI"), and the Task Force on Climate-Related Financial Disclosures ("TCFD").

In order to incorporate ESG factors into decision-making processes and operations, the Group's practices are based on the following policy approaches:

Opportunity review

·      ESG risks are assessed, reviewed and monitored, and strategies for enhancement and mitigation are set, based on the understanding and recognition of the value assigned in the emerging frameworks such as climate change and associated social need; and

·      mitigation plans are identified.

Investment decision

·      ESG issues are listed and addressed in a summary investment paper that informs decision-making at the Investment Committee stage; and

·      ESG costs, particularly ongoing community and charitable involvement, are determined and factored into the investment decision process.

Asset management

·      Appropriate governance structures are established.

·      Relevant laws and regulations are adhered to.

·      COVID-19 Guidelines issued - structures, reviews and support in place.

·      Ongoing monitoring and management of ESG issues is established.

·      Impacts on the natural habitat surrounding PRS assets are managed.

·      Local community engagement and support plans are established, reviewed and developed.

·      Due diligence is performed on third parties.

·      Policy reviews and updates are ongoing.

·      Good practice is established.

·      Continued research and review of carbon reduction opportunities are ongoing.

·      Investment restrictions are screened.

·      Ability of investments to comply with ESG standards is assessed.

Processes and strategies

As an industry leader in the provision of private rental homes, the PRS REIT recognises its responsibilities and the changing priorities towards the environment in this sector. The Government recently set out its 10 Point Plan for a 'Green Industrial Revolution'. The Plan aims to accelerate the UK's attainment of net zero carbon emissions and encompasses energy, transport, innovation and the natural environment, with 2050 set as the endpoint of its net zero goal. In the real estate sector, there is a need for action in areas such as, energy and water consumption, non-fossil fuel heating provision, biodiversity. In working towards further developing the Group's ESG agenda, we are embedding best practices, auditing and tracking the supply chain, and ensuring that policies and activities comply with the PRS REIT's commitment to the UN Global Compact.

The activities of the Company in all aspects of Environment, Social and Governance are set out in the ESG Report 2021, which can be obtained from the Company's website at, www.prsreit.com.

COVID-19 Response

It was important to increase communications with residents with the onset of the national lockdown in March 2020, and to engage supportively with those customers concerned about their financial situation. Approximately 80 residents were financially affected by the Government's emergency measures, and a range of solutions were offered. Rental holidays of between 20% and 50% of rent due were provided for up to four months, with payment plans agreed for the repayment of the deferral amounts. This has worked well for residents and the majority of deferred rent has been subsequently repaid.

The Company was also pleased to join its customer base in thanking the NHS staff for their work, and nearly 150 residents who were NHS workers benefitted from the initiative to provide a 20% rental discount for three months.

Customer Reviews and Satisfaction

As 'Simple Life' gets larger and awareness of the brand increases around the country, more people wish to understand the service offering. Sigma PRS has registered with Trust Pilot and routinely invites residents to leave reviews. This helps to identify any areas that need improvement. Of the reviews to date, over 80% of people have given 'Simple Life' a 3-5 star review, and its total score is 4.2 stars out of 5.

Here are a sample of comments from the Company's residents:

"We LOVE our new home and couldn't be more thankful to have been able to move in during this difficult time. Lovely walking into our new home also and finding a care package from yourselves - very nice touch. Plenty of informational emails and brochures provided."

Abigail Hyslop, customer satisfaction survey

"A stressful time made easy."

Stephen Kerry, Highfield Place, customer satisfaction survey

"The team were extremely helpful moving into our new home - made a stressful situation seem easier and made the experience more enjoyable"

Kirstin De Figueriedo, customer satisfaction survey

"As a 'Simple Life' tenant for the last (almost) 2 years I can honestly say they really do treat their tenants as they say. We moved into our brand new house and felt at home straight away. Yes there were teething issues, but when aren't there? If only more landlords were like 'Simple Life', there would be less of a stigma around renting"

Wiggleman12345 5 star review left on Apple podcasts (The 'Simple Life' Chat)

"Such a perfect first home for me and my partner, we couldn't ask for more! It's clean, well laid out and every little detail has been thought out carefully. The support on house DIY is great for people moving into their first home with plenty of simplelifehome youtube videos! Windows are cleaned!! Communication between the staff at 'Simple Life' homes is fast. If you ever have an issue with something they are quick to respond and deal with it for you. They have lovely event days for residents and great online competitions and promote 'Simple Life' homes residents if you have a business. Honestly the best!'

Sasha Moore 5 star review on Trust Pilot

"Very good experiences as a tenant: from a very beginning during the application process to living in one of their houses. Good cooperation: phone calls are answered and you are being listened. A good quality house which makes living in it as a very pleasant experience which is very important for a foreigner who needed to have found a new house in a new country. The company philosophy, ethos seem to represent very personal approach. I recommend that company as a trustful one."

Aleksandra Marta 5 star review on Trust Pilot

"Won't be moving! Been a simple life tenant for 9 months now.... best landlord by far couldn't ask for more."

Jennifer Williams 5 star review on Trust Pilot

"Out with the old and in with the new. Not just words 'Simple Life' team listen and do….can I say in a short time since the changeover of new management, you are all making a difference, you get things done and keep to your word, not fobbed off. The neighbours, we call ourselves 'Simple Life' families, have all said what a difference. I am very proud of my beautiful 'Simple Life' forever home. Just wanted to thank you personally Kate for the support and reassurance you gave me. We're not tenants we're a 'Simple Life' family because 'Simple Life' really do care"

Fidelma, 5 star review on Trust Pilot

What our residents have to say…

All tenants automatically receive a tenant satisfaction survey email one week into their tenancy and then between 6 and 10 months later. This helps the Investment Adviser to monitor tenants' experience with the lettings and moving-in team and their later experience as settled residents.

The following information is based on tenant satisfaction results for the 12 month period from July 2020 to the end of June 2021.

All results are based on responses from neutral - strongly agree

Results are in line with those of last year, with some improving. This is very encouraging, especially in the context of the pandemic and related delays in construction.

The increase in reviews reflects the growth of 'Simple Life' and increased brand awareness. The rise in the number of tenant leads originating through the 'Simple Life' website or the 'Simple Life' phone number has increased to 47%, compared with leads arising from Rightmove (23%), Zoopla (14%) and OntheMarket (15%), which reflects the increase in brand awareness.

In addition, 15% of all leads arising from the 'Simple Life' website/phone line were as a result of a recommendation.

The variety of house types in the 'Simple Life' portfolio (from 1 bedroom apartments to 4 bedroom houses) and the geographic spread of locations is creating an increasingly compelling brand proposition within the rental marketplace. 'Simple Life' is able to offer a rental solution for almost every life stage, and it is encouraging that between 10-14% of people who are recorded as 'leaving', choose to move to an alternate 'Simple Life' property in a different location or to a larger or smaller home.

Resident Focused Initiatives and Tech

Pets

In last year's report we highlighted our move to abolish pet rent after conducting research into the issue. In the year under review, we changed our restrictions on the total number of pets permitted in a development so that it aligns better with the number of households with pets across the country.

Home Businesses

The pandemic has driven an increase in the number of people setting up businesses from home. Responding to this trend, we have implemented a process to ensure that tenants notify us of business operations from home. This enables Sigma PRS to ensure compliance with insurance requirements while supporting residents. We have also enabled residents to use our platforms to promote their businesses, and now have a Residents Business Directory, which often offers exclusive discounts to other residents in the area.

Property Alterations

In order to help to make residents feel more at home, and in acknowledgement of our findings that one of the key barriers to renting is the limitations placed on making a property feel more personal, we have introduced a property alterations request process.

Many of the most common requests have now been collated and there is a standardised approach to what is permitted. The aim is to provide residents and our agents with a streamlined approach and to give residents greater clarity over the changes that they can make, together with our expectations at the end of their tenancy.

Virtual Inspections

One of the common complaints of renting is the inspection process. Many tenants consider that this can sometimes feel intrusive. During the financial year, Sigma PRS reviewed the way these checks have been communicated, and amended the process to a 'Property Health-check'. The aim is to make residents aware that part of the process is to ensure that the property is fit for purpose as well as confirming that they are taking good care of the property. In addition, a system of virtual property health checks has been introduced. This provides residents with the option of carrying out property checks themselves at certain stages of their tenancy. Meanwhile, in-person health checks will continue to be conducted on key dates, such as end of tenancies and anniversaries of tenancies.

'My Simple Life' Mobile App

Sigma launched a bespoke resident mobile app in August 2021. Available on Google and Apple, it has been designed to provide a convenient and efficient 'one-stop shop' for residents' needs.  It has been very well-received by residents to date, and provides:

•     easy access to all important documents, including tenancy agreements, inventories, EPC, gas and EICR certificates;

•     information on homes, including floorplans and measurements

•     information on home appliances, including manuals;

•     access to statements of account, with certain payments enabled via the app;

•     access to an open forum, enabling residents on the same development to engage with each other;

•     the ability to report maintenance problems;

•     exclusive affiliate offers and discounts;

•     latest news;

•     information on the local area; and

•     the ability to leave feedback.

The 'Simple Life' Chat

In June 2021, we launched the 'Simple Life' Chat podcast, hosted by radio presenter and journalist, Jen Thomas. It aims to highlight the positive experiences of renting and address topics of interest. The podcast hosts discussions between experts and residents, and episodes so far have included: interviews with residents examining their reasons for renting and their rental experiences; interviews with 'Simple Life' employees, discussing their roles; and interviews with mental health advisers, who provided tips on how to cope with the stresses of moving home as well as general life stresses.

Sigma plans to produce at least four episodes of the podcast per year and aims to involve a variety of guests, including partners, suppliers and tenants. Future episodes will include discussions on the benefits of build-to-rent, sustainable lifestyles, including a focus on green initiatives by 'Simple Life', the importance of pets, building businesses from home, and the influence of reviews and ratings.

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 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.

Governance

Strong governance is essential to ensuring that risks are identified and managed, and that accountability, responsibility, fairness and transparency are maintained at all time.

The Group 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

FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2021

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.

Consolidated Statement of Financial Position

Company No. 10638461

As at 30 June 2021

As at 30 June 2021, there is no difference between IFRS NAV per share and the EPRA NTA per share.

These consolidated group financial statements were approved by the Board of Directors and authorised for issue on 11 October 2021 and signed on its behalf by:

Steve Smith

Chairman

Consolidated Statement of Changes in Equity

For the year ended 30 June 2021

Attributable to equity holders of the Company

Consolidated Statement of Cash Flows

For the year ended 30 June 2021

The accompanying notes are an integral part of this cash flow statement.

Notes to the Financial Statements

1.   General information

This final results announcement was approved for issue by a duly appointed and authorised committee of the Board of Directors on 11 October 2021.

2.   Basis of preparation

The financial information set out in this announcement does not constitute statutory financial statements for the year ended 30 June 2021 and year ended 30 June 2020. The financial information in this announcement has been derived from the statutory accounts for the year ending 30 June 2021 and year ending 30 June 2020. The report of the auditor on the statutory financial statements for the year ended 30 June 2021 and year ended 30 June 2020 was (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 30 June 2021 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The statutory accounts for the year ending 30 June 2020 have been delivered to the Registrar of Companies.

3.   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.

4.   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, only basic earnings per share is quoted below.

The calculation of basic and diluted earnings per share is based on the following:

5.   Dividends

The following dividends were paid during the current year and prior year:

6.   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 2021 by Savills (UK) Limited, acting in the capacity of External Valuers as defined in the RICS Red Book (but not for the avoidance of doubt as an External Valuer of the PRS REIT as defined by the Alternative Investment Fund Managers Regulations 2013). The valuations accord with the requirements of IFRS 13 and the Royal Institution of Chartered Surveyors' ("RICS") Valuation - Global Standards, effective from 31 January 2020, incorporating the IVSC International Valuation Standards (the "RICS Red Book"). The valuations were arrived at predominantly by reference to market evidence for comparable property.

Savills (UK) Limited are an accredited External Valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued.

The valuations are the ultimate responsibility of the Directors. Accordingly, the critical assumptions used in establishing the independent valuation are reviewed by the Board.

The historic cost of completed assets and assets under construction as at 30 June 2021 was £704.2 million (2020: £540.2 million).

The carrying amount of investment property pledged as security as at 30 June 2021 was £719.0 million (2020: £212.1 million).

During the prior financial year, the Group adopted the new accounting standard IFRS 16, Leases, and has recognised a right-of-use ("ROU") asset within investment property in relation to ground rents payable on certain investment property sites. The net book value of the ROU asset was £1 million as at 30 June 2021 (2020: £1 million).

Fair Values

IFRS 13 sets out a three-tier hierarchy for financial assets and liabilities valued at fair value. These are as follows:

Level 1   quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2   inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3   unobservable inputs for the asset or liability.

Investment property falls within Level 3.

The investment valuations provided by the external valuation expert are based on RICS Professional Valuation Standards, but include a number of unobservable inputs and other valuation assumptions. The significant unobservable inputs and the range of values used are:

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 was from 36% to 99%. The final investment value uses the assumptions stated above.

The impact of changes to the significant unobservable inputs for completed and development assets are:

7.   Net Asset Value

The Group adopted the EPRA issued new best practice guidelines in the year ending 30 June 2021. EPRA Net Tangible Assets ("NTA"), is considered to be the most relevant measure for the Group and replaces the previously reported EPRA NAV. The underlying assumption behind the EPRA NTA calculation assumes entities buy and sell assets, thereby crystallising certain levels of deferred tax liability. Due to the PRS REIT's tax status, deferred tax is not applicable and therefore there is no difference between IFRS NAV and EPRA NTA.

Basic IFRS NAV per share is calculated by dividing net assets in the Statement of Financial Position attributable to ordinary equity holders of the parent by the number of Ordinary Shares outstanding at the end of the year. As there are no dilutive instruments, only basic NAV per share is quoted below.

Net asset values have been calculated as follows:

The NTA per share calculated on an EPRA basis is the same as the IFRS NAV per share for the year ended 30 June 2021 and the year ended 30 June 2020.

8.   Transactions with Investment Adviser

On 31 March 2017, Sigma PRS was appointed as the Investment Adviser of the Company. A new Investment Adviser Agreement with Sigma PRS was signed in January 2021.

For the year ended 30 June 2021, fees of £4.4 million (2020: £4.3 million) were incurred and payable to Sigma PRS in respect of investment advisory services. At 30 June 2021, £1.5 million (2020: £1.1 million) remained unpaid.

For the year ended 30 June 2021, development fees of £4.6 million (2020: £7.3 million) were incurred and payable to Sigma PRS. At 30 June 2021, £0.3 million (2020: £0.7 million) remained unpaid.

For the year ended 30 June 2021, administration and secretarial services of £90,000 (2020: £90,000) were incurred and payable to Sigma Capital Property Ltd, a fellow subsidiary of the ultimate holding company of the Investment Adviser. At 30 June 2021, £40,500 (2020: £23,000) remained unpaid.

For the year ended 30 June 2021, Sigma PRS acquired 1,500,000 (2020: 750,000) shares in the Company. The shares purchased during the year were acquired in the market at an average price of 76.4 pence per share. Sigma PRS's shareholding as at 30 June 2021 was 5,889,852 (2020: 4,389,852), which represents 1.19% (2020: 0.73%) of the issued share capital in the Company. All the shares acquired in the year and prior year were in accordance with the Development Management Agreement between the Company and Sigma PRS.

For the year ended 30 June 2021, Sigma PRS received dividends from the Company of £249,000 (2020: £179,000).

During the year, the Company acquired the following subsidiaries from Sigma Capital Group Limited, the ultimate holding company of the Investment Adviser:

9.   Post balance sheet events

The Directors continue to carefully monitor the COVID-19 pandemic and other current economic situations and are responding appropriately.

On 11 October, the PRS REIT acquired from Sigma two development sites at a total cost of £12.8 million.

Equity raise

In the first quarter of the new financial year, the Company undertook an equity raise in order to acquire assets identified by the Investment Adviser, and on 27 September 2021 announced that a total of £55.6 million (gross) had been raised at an issue price of 103p per share. A total of 53,232,575 shares were placed with new and existing institutional investors, with 741,589 shares placed with retail investors.

Dividends

On 2 August 2021, the Company declared a dividend of 1.0p per ordinary share in respect of the fourth quarter of the current financial year. The dividend was paid on 3 September 2021 to shareholders on the register as at 13 August 2021.

10.  Availability of statutory financial statements

Copies of the full statutory financial statements will be available no later than 12 November 2021 and will be available on the Company's website at www.theprsreit.com.

11.  Annual General Meeting

The Annual General Meeting of the Company will be held on Wednesday 15 December 2021 commencing at 2.00 pm.