Affordable homes group hails strong half year with all key metrics showing growth

Manchester private rented sector housing group, PRS REIT, announced six month results for the period to December 31, 2023, today, with all its key figures showing pluses.

Revenues were up +16% to £28.1m, pre-tax profits up a stonking +106% to £30.3m, and net rental income up +17% to £22.9m. Rent collection also improved, from 98% the previous year to 99%.

Profitability was in line with management expectations, with the year-on-year change mainly reflected the difference in gains from fair value adjustments on investment property between the two periods, with £20.5m recognised in the period under review compared with £5.8m in the comparative period a year ago. These movements are non-cash items.

The total number of completed homes at the end of the review period was 5,576, up from 5,526 in the prior year.

Housing delivery is in its final stages for the current portfolio, with 184 new homes added to the company’s portfolio in H1 2024 (H1 2023: 127). This included the acquisition of a fully completed and let development site of 52 homes. A further 312 homes were under way at December 31, 2023 (December 31, 2022: 613)

Occupancy stood at 97% – or 98% including homes reserved for applicants who had passed referencing and paid deposits – in line with the previous year level.

Total arrears net of bad debt provision remained low at around £1m at period end (December 31, 2022: £0.7m) and reduced to £0.6m at January 31, 2024.

Affordability remained strong. Average rent as a proportion of gross household income was c.23% – significantly better than Homes England’s guidance limit of 35%.

Dividends amounting to 2p per share were declared in H1 2024 (H1 2023: 2p). Total dividend target for FY 2024 remains 4p per share.

Between January 1, and March 8, 2024, 42 new homes were added to the portfolio, taking it to 5,306 completed homes with an ERV of £61.7m pa. A further 270 homes with an ERV of £2.5m were under construction at March 8, 2024.

The company said rental demand for high quality family homes remains very strong nationally and is expected to grow against a background of structural under supply, higher interest rates and continued cost-of-living pressures.

Chief executive, Steve Smith, said: “The PRS REIT’s portfolio of high quality, professionally managed, build-to-rent family homes has delivered another strong performance.

“Despite the continued pressure in the wider economy, I am pleased to report that occupancy levels, rent collection, affordability and demand have all remained at very high levels, whilst arrears continued to stay low. These factors have helped to drive the increase in cash generation and predictable income flows achieved in the period as our portfolio moves closer to completion.

“I am also pleased to report that the 4p target dividend for the year is fully covered on an annualised run-rate basis from March 2024.”

He added: “On 8 March 2024, the portfolio reached 5,306 homes and we expect to achieve c.5,600 completed units by early summer 2025, if current progress is maintained. Once delivery is fully complete, we anticipate that the portfolio will have an estimated rental value of £64m per year.

“We operate in a very robust segment of the property rental market – single family rental – and macro factors remain very supportive of the business. This reflects the structural lack of supply of homes in the UK, and strong demand, which has been further fuelled by the adverse effects of higher interest rates for prospective home buyers.

“Industry forecasts anticipate further rental growth in 2024, which concurs with our view. We have built a portfolio of high quality homes that are affordable for ordinary families across the country and remain very confident of ongoing prospects for the PRS REIT.”