Housing group predicts 205% increase in annual pre-tax profits
Sigma, the Manchester-based PRS (private rented sector), residential development and urban regeneration specialist, said trading, particularly in the second half of its financial year, has been very strong.
The firm updated the market today on it financial year to December 31, 2018.
It said the board expects the company’s full year results to show a significant uplift in revenue and profitability over the prior year, with pre-tax profit slightly ahead of current market forecasts.
Profit before tax is expected to be approximately £12.4m – a year-on-year increase of 205% – on revenue of approximately £12.5m.
These results partly reflect the strong macro-economic drivers underpinning the continuing successful growth of Manchester-based The PRS REIT, the launch of which in May 2017 marked a significant milestone in the development of Sigma’s business model.
Sigma’s subsidiary, Sigma PRS Management, is investment adviser to the PRS REIT and the PRS REIT retains ‘first access’ rights to Sigma’s PRS Platform.
Over the course of the second half the company made very good progress in driving the PRS REIT’s expansion, including into new geographic regions.
Together with its main PRS partner, Countryside Properties, Sigma secured 20 additional development sites for the PRS REIT in this period.
Sigma also completed two self-financed PRS sites in the second half that were subsequently purchased by the PRS REIT for a total consideration of £22m.
The company has a further five self-financed sites under construction that are under contract to be purchased by the PRS REIT when completed and let.
The sites are expected to deliver around 280 PRS units for a GDC (gross development cost) of around £46.3m, and have estimated rental value (ERV) of £2.85m per annum. Completion is expected over the course of 2019 and first half of 2020.
As at December 31, 2018, the total number of sites that are completed or contracted – sites under construction which have been purchased by the PRS REIT or the PRS REIT’s investment adviser – for the PRS REIT stood at 43 across six regions.
These sites have a GDC of £530m and will deliver 3,575 new homes, with 798 homes completed at the year end, including homes under direct development by Sigma. The ERV of these homes is £33.2m.
By the year end, Sigma PRS had around £900m of the PRS REIT’s funding either deployed or committed to deployment, including the £530m of completed or contracted development referred to above.
The pipeline of development opportunity continues to grow, and now stands at around £1bn, all sourced through Sigma’s PRS Platform.
Rental demand for family homes remains strong, helping to underpin yield targets, and management remains positive about growth prospects in 2019 and beyond. It is also investing to support the company’s ongoing growth over the coming year.
Results for the full year to December 31, 2018, are expected to be announced towards the end of April.
It is also the company’s intention to propose a final dividend for the year, marking the start of a progressive dividend policy.
