ANNUAL REPORT
& FINANCIAL
STATEMENTS
Year ended
31 December
2018
Contents
Key Points
PAGE
Key Points
Chairman’s Statement 3
Strategic Report 8
Directors 15
Advisers 16
FINANCIAL
FY FY %
2018 2017 increase
Revenue £12.5m £4.4m 181%
Directors’ Report 17
Profit from operations £10.2m £3.1m 227%
Directors’ Remuneration Report 19
Statement of Directors’
Responsibilities 21
Independent Auditor’s Report 22
Consolidated Income Statement 27
Consolidated Balance Sheet 28
Company Balance Sheet 29
Consolidated Statement
of Changes in Equity 30
Company Statement of
Changes in Equity 31
Consolidated and Company
Cash Flow Statements 32
Accounting Policies 33
Notes to the Financial Statements 39
Five Year Record 66
Company number 03942129
Profit before tax £12.2m £4.1m 205%
Basic EPS 12.65p 4.15p 205%
Cash generated
from operations £6.3m £1.8m 250%
Net assets £51.9m £40.0m 30%
Net assets per share 58.1p 45.1p 29%
Proposed dividend
per share 2.0p Nil
SUMMARY
>
Financial results show the benefit of the first
full year of The PRS REIT plc (the “REIT”)
>
>
-
launched by Sigma on 31 May 2017,
it is the only UK-quoted REIT wholly
dedicated to investment in new family
rental homes
Progressive dividend policy commenced,
reflecting the transformation in the
Company’s revenue and earnings profile and
the Board’s confidence in growth prospects
Launch today of the Sigma Scottish PRS
Fund (“Scottish Fund”) in partnership with
the Scottish Government.
-
initial resources of £43m to expand
Sigma’s PRS activities into Scotland
Sigma Capital Group plc | Annual Report & Financial Statements 2018 1
OPERATIONAL
PROSPECTS
> As referred to in March 2019, expected
planning approval delays have affected
the timetable for the delivery of homes.
As a consequence, Sigma has changed the
composition of the development pipeline
in order to maximize the delivery of homes
(and in turn, rental income) into the REIT,
and prioritised the allocation of development
sites towards the REIT versus self-funded
development on Sigma’s balance sheet for
subsequent sale to the REIT. With greater
visibility on the impact of all these factors,
the Board is now resetting its expectations
for Sigma’s current performance in the
current financial year
> Nonetheless, Sigma’s performance in 2019
is expected to improve materially over 2018,
and the Company believes that there are
further growth opportunities available
>
Second equity raise of £250m (gross) was
completed for the REIT in February 2018,
and £200m of debt facilities were secured
in June 2018. A further £200m of debt
facilities are in process, which will take the
REIT’s gross funding resource to £900m
> By the end of 2018, the gross development
cost of completed and contracted
development for the REIT stood at £530m –
almost 60% of the REIT’s expected funding
-
representing 3,575 homes, 775 of which
were completed by the year end
>
Sigma completed three self-funded
housing developments in 2018, which
were subsequently sold to the REIT for
a combined £31.1m after an independent
valuation
-
currently a further six self-funded sites
are at various stages of development
and will be sold to the REIT, subject
to the fulfillment of contracted terms
> Completed homes are renting well and
demand remains strong
>
>
Sigma’s PRS property platform was
expanded – both construction resource
and geographic reach
-
first sites in the South (above M25)
were started in the second half of 2018
Internal resource was increased, and further
investment in staff is planned to support
ongoing growth
2 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Key Points (continued)
GRAHAM BARNET
CEO of Sigma, commented:
“ The transformational effect of launching the PRS REIT
is now evident. All key financial measures are
significantly ahead year-on-year, and Sigma’s growth
prospects remain very strong.
“ We are also delighted to announce today the launch
of the Sigma Scottish PRS Fund, which is being
backed by the Scottish Government. It will see us
expand into a new market, which has a similar urgent
requirement for new homes as the rest of the UK.
“ The private rental sector is becoming an increasingly
central part of national housing delivery, and Sigma’s
model, which delivers high quality, professionally-
managed family homes has significant growth
potential. Whilst planning delays have led us to
change the mix of our development pipeline and
reset our expectations for the current financial year,
we still expect Sigma’s performance to improve
materially over 2018, and see further growth
opportunities for Sigma to grasp beyond those
currently underway.”
Sigma Capital Group plc | Annual Report & Financial Statements 2018 3
Chairman’s Statement
Introduction
In last year’s annual report, I highlighted the
fundamental change that the launch of The PRS REIT
plc (“REIT” or “PRS REIT”), on 30 May 2017, was
expected to make to Sigma’s earnings and growth
prospects. This year shows a full 12 month impact, and
the transformational effects are evident, with all key
financial measures significantly ahead year-on-year.
Group revenue for 2018 is 181% higher at £12.5m (2017:
£4.4m) and profit before tax for the year increased by
200% to £12.2m (2017: £4.1m). At the year end, net
assets were up by 30% to £51.9m (2017: £40.0m)
or 58.1p per share (2017: 45.1p per share), and cash
generated from operations increased by 250% to
£6.3m (2017: £1.8m). As expected, the Board is also
now pleased to commence a progressive dividend
policy, reflecting both the change in the scale of
the business and the Board’s confidence in future
growth prospects. A final dividend of 2.0p per share
is proposed for the financial year, which will be subject
to shareholder approval at the AGM.
Sigma’s PRS property platform, which provides
a professional and secure supply chain for the
acquisition, construction and management of rental
homes, is now principally being used to support the
REIT’s investment objectives, as well as the Group’s
own PRS developments.
By the end of 2018, despite some delays to construction
schedules, completed and contracted development for
the REIT amounted to £530m of gross development
cost (“GDC”). This is almost 60% of the REIT’s initial
gross funding resource of £900m, once additional debt
facilities are in place. Expressed in terms of new homes,
it represents some 3,575 properties, 775 of which were
completed by the year end.
As previously reported, we raised additional equity of
£250m for the REIT in February 2018, and secured debt
facilities of £200m in June, with further debt facilities
to be signed in due course. We already have sufficient
sites within our PRS property platform to fully deploy
these funds and, at the end of the first quarter of the
new financial year, Sigma had deployed in the REIT
£603m of GDC across 49 sites in multiple regions
in England. This takes the total of new homes either
underway or completed at 31 March 2019 to 3,951.
Within the next few weeks, we expect to deliver
our 1,000th home for the REIT, a significant milestone,
reflecting the substantial progress the business has
made since the REIT’s launch.
Sigma completed three self-funded development sites
in 2018, which were subsequently sold to the REIT
for a combined £31.1m after an independent valuation.
Currently, a further six self-funded sites, are at various
stages of development, spanning the North West,
Midlands and South. These have a combined GDC
of £70.3m and an estimated rental value (“ERV“) of
approximately £4m from over 300 new rental homes.
In November 2018, we finished the delivery of 684
family homes for UK PRS Properties that started in
December 2015. UK PRS Properties was our original
partner in PRS delivery, together with Gatehouse Bank
plc, and Sigma retains an interest in the c.1,600 new
rental homes delivered for these joint ventures through
its PRS property platform. The Company also benefits
from asset management fees from managing these
properties.
Looking forward, we are continuing to explore
opportunities to broaden our existing income streams,
and I am pleased to announce today the launch of
the Sigma Scottish PRS Fund (“the Scottish Fund”)
in partnership with the Scottish Government through
the Building Scotland Fund. The Scottish Fund will have
initial resources of £43m, with the Building Scotland
Fund providing a revolving credit facility of £30m and
the balance provided by Sigma as equity. This new
initiative represents a significant extension of Sigma’s
PRS activities and we will be working with a small
group of construction partners, as we do in England,
as well as with central and local government agencies
to deliver much needed housing in Scotland.
Demand for new PRS housing in the UK remains
high, especially for family homes, and we believe
that Sigma’s model, which creates high quality,
professionally managed homes, is unrivalled in its scale.
We are well advanced with delivery for the REIT, which
is targeting an initial 5,600 new rental homes, and are
pleased to be launching in Scotland. As previously
referred to, expected planning approval delays have
affected the timetable for the delivery of homes. As
a consequence, Sigma has changed the composition
of the development pipeline in order to maximise the
delivery of homes (and in turn, rental income) into the
REIT, and prioritised the allocation of development
sites towards the REIT versus self-funded development
on Sigma’s balance sheet for subsequent sale to the
REIT. With greater visibility on the impact of all of these
factors, the Board has reset its expectations for Sigma’s
financial performance in 2019. However, we remain
confident of delivering substantial and sustained
growth over the long term as we continue to deliver
the rental homes that the country requires.
4 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Chairman’s Statement (continued)
Financial Results
Business and Operational Overview
Sigma’s revenue for the year ended 31 December 2018
almost tripled to £12.5m (2017: £4.4m). This reflected
the first full year’s contribution from PRS activities
related to the REIT in addition to revenue from
Gatehouse Bank and UK PRS Properties, and the
benefit of rental income from Sigma’s self-funded
sites prior to their sale.
Administrative costs increased to £5.7m (2017: £4.2m).
The rise mainly reflected the expansion in staff
numbers as we took on additional resource to
support the ongoing scaling of our activities.
Profit from operations increased by 227% to £10.2m
(2017: £3.1m). This included realised and unrealised
gains from investment property of £3.6m (2017:
£2.7m), and an unrealised loss on investments of
£151,000 (2017: gain of £323,000).
Profit before tax tripled to £12.2m (2017: £4.1m)
and basic earnings per share more than tripled to
12.65p (2017: 4.15p).
The Group’s net asset backing continued to
strengthen. Net assets per share at the year-end
were up by 30% to £51.9m, which is equivalent to
58.1p per share (31 December 2017: £40.04m and
45.1p per share).
Cash generated from operations has significantly
improved at £6.3m (2017: £1.8m), which reflected
increased PRS activity.
Net cash at 31 December 2018 was higher year-on-year
at £19.8m (31 December 2017: £5.6m). This included
£8.4m of cash for land acquisitions that were made in
January 2019. Excluding this, net cash was 104% higher
than at the same point last year.
Dividends
Reflecting the transformation in the Company’s
revenue and earnings, and the Board’s confidence in
Sigma’s growth prospects, the Directors are very
pleased to commence a progressive dividend policy.
This policy is introduced with a proposed dividend of
2 pence per share for the financial year.
The payment of this dividend is subject to shareholder
approval at the Company’s AGM and, once approved,
will be paid on 28 June 2019 to shareholders on the
register on 31 May 2019.
Sigma is focused on delivering new homes for private
rental across the UK, with family homes its key target
market. The Group’s PRS property platform brings
together a network of formal and informal
relationships, which include construction partners,
central government and local authorities. Sigma
typically delivers a range of traditional housing
through its Platform partners, enabling the Company
to cater for a broad spectrum of demand, including
young couples as well as growing families.
Sigma’s income streams are broadly threefold:
> development management fees for the assets the
Group procures and delivers to third parties, now
almost exclusively the PRS REIT;
> asset management fees for the overall management
of the assets; and
> development profits on the assets the Group self-
funds and subsequently sells, once completed.
Sigma also retains any rental income prior to the
sale of a completed site.
Managed PRS Activities
The PRS REIT plc
Sigma subsidiaries are Investment Adviser and
Development Manager to the REIT which was launched
by Sigma on 31 May 2017. The REIT’s objective is to
create a substantial portfolio of new-build homes
across the UK for the private rental market.
The REIT’s portfolio is being built in two ways:
> Undeveloped sites
Sigma’s subsidiary, Sigma PRS Management Ltd
(“Sigma PRS”), sources sites for the REIT to acquire
and develop. Typically sites are sourced though
the Group’s PRS property platform (combining
building contractor partners, local authorities and
governmental bodies). As well as sourcing and
assessing suitable sites, Sigma PRS manages the
planning and development processes as well as
the subsequent letting of completed new homes.
A minimum of two thirds of the REIT’s new
properties will be funded in this manner.
For these services and the right of first refusal on
assets within Sigma’s PRS property platform, the
REIT pays Sigma a development management fee,
equivalent to 4% of the GDC of respective sites.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 5
> Completed sites
The REIT acquires completed PRS sites from Sigma
pursuant to a forward purchase agreement. Up
to a maximum of a third of new properties will be
acquired in this manner. Sigma earns development
profits from the sale of such sites, and receives
rental income until the point of sale.
All sites, whether undeveloped or completed, must
satisfy the REIT’s investment objectives and are
independently valued for the REIT prior to
acquisition.
Sigma earns asset management fees for managing the
REIT’s assets. These are calculated on a percentage
of the net asset value (“NAV”) of the REIT’s portfolio,
on a sliding scale. Sigma earns 1% of the value of the
REIT’s adjusted net assets up to £250m, with this
percentage moving to 0.9%, 0.8% at different
thresholds, and then to 0.7% at £1bn and above.
Sigma made significant progress over 2018 in
deploying the REIT’s capital, with proceeds allocated
to additional development sites in the North West,
Midlands, Yorkshire and, in the second half of the year,
to the REIT’s first sites in the South (above M25). The
intention is to create a geographically diverse portfolio
of homes in order to mitigate risk and generate
balanced returns.
During 2018, construction began on 23 sites, taking the
number of completed and contracted sites to 43. By
the end of 2018, the number of completed homes
stood at 775. Currently, 37 sites are contracted, with
other sites in the planning process. Sigma expects to
deliver the 1,000th new home for the REIT by the end
of May 2019, marking a significant milestone in the
maturity of the REIT, and a testament to the
effectiveness of Sigma’s PRS property platform
in just 24 months since IPO.
Sigma has strengthened its relationship with its
principal construction partner, Countryside Properties,
signing a major new Collaboration Agreement in June
2018. The Agreement has increased delivery resource
and opened new geographies. Countryside Properties
is now able to deliver new homes for the PRS property
platform across five regions, the North West, South
Yorkshire, Midlands (East and West), South (outside
M25), and South West of England. Sigma’s other
construction partners are Keepmoat and Engie with
Keepmoat delivering sites in Yorkshire and Engie
delivering sites across Yorkshire and East Midlands.
Galliford Try joined Sigma’s construction panel in 2018,
and the first site it undertook on behalf of the REIT
is now complete. The collaboration with Galliford Try
is expected to develop further over 2019.
Gatehouse Bank and UK PRS Properties
The new homes delivered under our joint venture with
Gatehouse Bank continue to rent very well. The 918
properties, located across sites in the North of England
were completed in March 2017 and produce rental
income of about £7.5m per annum for Gatehouse
Bank. Sigma earned an asset management fee of
approximately £0.48m in 2018 for managing these
assets.
Sigma’s joint venture with UK PRS Properties, which is
principally backed by the Kuwaiti Investment Authority
and institutional shareholders from the State of Kuwait,
completed the last tranche of its homes in November
2018. In total, 684 new rental properties were
constructed across sites in the North West and West
Midlands, with the GDC totalling £94m. As with the
Gatehouse Bank joint venture, the new homes were
delivered through Sigma’s PRS property platform.
Sigma earned £0.44m for its services from this joint
venture in 2018.
Self-funded PRS Activities
During the year, Sigma completed the development,
letting and sale of three sites to the REIT. Comprising
195 homes located in Wigan, Birmingham and Salford,
the rental income from the properties is about £1.8m
per annum. The combined sales value was £31.1m,
which generated a profit of about £3.9m for Sigma.
The Company currently has a further six development
sites under way in the North West, Midlands and South.
These will deliver approximately 300 homes in total
and have a combined GDC of £70.3m and an ERV of
£4.0m per annum. A site acquired in Essex was
Sigma’s first acquisition in the Southern region of
England.
Two sites, in Telford and Wigan, should be completed
and ready for acquisition by the REIT in 2019 and we
expect the remaining sites to be ready for sale to the
REIT in 2020.
6 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Chairman’s Statement (continued)
Launch of the Sigma Scottish PRS Fund in 2019
Sigma has been in discussions with the Scottish
Government throughout 2018 about the possibility of
replicating its PRS model in Scotland. This dialogue
has now concluded successfully, and we are delighted
to announce the launch of the Sigma Scottish PRS
Fund (“the Scottish Fund”) in partnership with the
Scottish Government. The Scottish Fund will have
initial funding of £43m, with £30m provided by the
Building Scotland Fund in the form of a revolving
credit facility and the balance provided by Sigma.
The Scottish Fund is the first dedicated vehicle to
focus on the creation of new rental homes for families
in the private rented sector in Scotland and opens up
a new geography and additional revenues for Sigma.
Demand for rental homes in Scotland is strong and the
Company will use its existing model of working with a
small group of delivery partners and central and local
government agencies to deliver PRS housing at pace.
As with the new-build homes funded by Sigma, the
properties within the Scottish Fund are intended to
meet the purchase criteria of the REIT, with sites close
to large employment centres, good quality primary
schools and local amenities. The REIT has no assets
in Scotland currently.
The Scottish Fund has the potential to enable the
delivery of over £40m of new assets per annum in
Scotland once the revolving credit facility is up to
full capacity, and the first appraisals are currently
underway. Sigma retains any capital uplift on the
sale of completed and let sites.
The Company wishes to thank the Scottish
Government for its support in helping to launch
Sigma’s PRS model in Scotland, and for its direct
backing with credit facilities. Sigma’s management has
a long history of delivering housing in Scotland and
looks forward to using the Scottish Fund to assist in
the housing delivery targets as it rolls out Sigma’s
brand of family rental homes in Scotland.
Regeneration Partnerships
Our regeneration activities support our local authority
partners and involve taking on projects that fit well
with our existing relationships and core PRS activities.
In Liverpool, construction continued to progress well at
Gateacre, a 19 acre former secondary school, and the
project is expected to be completed during 2019. The
site consists of 231 new family homes for open market
sale, and, as at the end of December 2018, 198 of the
homes have been sold with the remainder either
exchanged or reserved.
Work on the Lime Street redevelopment in Liverpool
also progressed well, with a student residence and
hotel both completed in 2018. Retail and leisure units,
providing 30,000 sq. ft. of space, are also under
development.
Sigma’s partnership with Salford City Council remains
productive and provided significant development
opportunities for the Company’s PRS activities over
the year.
Following the conclusion of development works
relating to the North Solihull Partnership project,
the Company resigned from this partnership in
September 2018.
Building Communities
As Sigma establishes the REIT’s portfolio of houses,
we are also very aware that we are creating new
neighbourhoods and communities. We take this
responsibility very seriously and are fully committed
to creating well-functioning communities, as well as
building thoughtfully-designed, desirable and well-
located homes. Our vision is to create communities
which people want to belong to, as well as homes
that they want to live in.
We aim to create a sense of identity within our
developments and thereby a feeling of belonging
amongst our tenants. As previously reported, the
Company wishes the ‘Simple Life’ brand, under which
the REIT’s homes are marketed, to represent a higher
standard of rental home, and a higher standard of
community wellbeing.
We wish to create communities in which members
forge the social links and bonds that underpin
familiarity and neighbourliness. To this end we arrange
regular events across our developments that help to
bring people together. We are also seeking to build
links with the wider community, and over the past year
have supported, for example, a number of local
primary schools, with projects including a library
refurbishment and the provision of outdoor play
equipment. We will continue to build on these early
initiatives, and are moving forward with ideas, big and
small, which will help to create a better environment
for our tenants and their local communities.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 7
Outlook
The business has made a great leap forward
over the last year and Sigma’s 2018 financial results
demonstrate the effectiveness of the PRS model we
have established.
We are now close to 70% through the deployment of
the REIT’s expected gross funds of £900m. As at 31
March 2019, the number of completed sites stood at 12
and a further 37 sites are currently under construction,
with our 1,000th rental home for the REIT due for
delivery before the end of May. Completed assets are
performing well and we expect this to continue,
supported by macroeconomic factors, including a
shortage of homes, and our high quality, professionally
managed offering. While we have experienced delays
to site commencements, and are now factoring this
into our expectations for the outturn for the current
financial year, we expect to deliver strong growth in
2019. We anticipate that all our key financial measures,
including cash generation and net assets, will grow
significantly over the longer term and to support this
growth, we will be investing in the business to
strengthen our teams.
We see further opportunities to expand our business
model and today’s announcement of the extension of
our model into Scotland, with the launch of the Sigma
PRS Scottish Fund, is another step in Sigma’s
continuing development.
David Sigsworth OBE
Chairman
28 April 2019
8 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Strategic Report
The Directors have pleasure in presenting their
Strategic Report for the year ended 31 December 2018.
Business Activities and Group Structure
Sigma is a public limited liability holding company
incorporated in England and is listed on the Alternative
Investment Market. Its activities, including those of its
subsidiaries, are principally focused on the PRS sector
but also encompass urban regeneration and property
asset management.
At 31 December 2018, Sigma had five principal and
wholly-owned subsidiaries:
> Sigma Capital Property Ltd ("SCP")
> Sigma PRS Management Ltd (“Sigma PRS”)
> Sigma Inpartnership Ltd ("SIP")
> Strategic Property Asset Management Ltd
("SPAM")
> Sigma Technology Investments Limited ("STI")
The Group's PRS activities are carried out by SCP, its
subsidiaries and Sigma PRS. In May 2017, the Group
announced the launch of The PRS REIT plc (“PRS
REIT” or “REIT”) on the Specialist Fund Segment of
the Main Market of the London Stock Exchange. At the
same time, £250m gross was raised through an Initial
Public Offering of REIT shares, with the net funds to be
used to create a substantial portfolio of new-build PRS
homes. In February 2018, a further £250m (gross) was
raised for the REIT through a Placing Programme and,
in June 2018, £200m of debt facilities were agreed.
Sigma PRS is Investment Adviser to the PRS REIT,
having signed a five year management contract. It is
also Development Manager to the REIT, and holds an
equity interest in it.
By the end of 2018, the Group’s PRS property platform
had completed 775 homes for the REIT. This number is
anticipated to grow to about 5,600 homes once all the
net proceeds of the REIT’s expected £900m (gross) of
funding have been deployed.
SCP funds the development of new PRS homes and,
during 2018, completed and subsequently sold three
fully developed and let PRS sites to the PRS REIT,
bringing the total number of self-funded and
completed PRS sites to seven since 2015 when self-
funded PRS activity started. At the end of 2018, SCP
was active on a further four PRS sites and has
contracted on a further two additional sites since
then, taking the total number of sites currently under
construction to six. Two of these are expected
to be sold to the PRS REIT during 2019.
The Group’s first PRS joint venture was with Gatehouse
Bank plc. Launched in November 2014, the joint
venture comprised 918 new family homes, the last
tranche of which was completed in March 2017. Rental
and occupation levels have performed consistently
well since then. A second phase, consisting of 684 PRS
homes across eight sites, was launched in December
2015 with UK PRS Properties (a fund principally
backed by the Kuwait Investment Authority and
institutional shareholders from the State of Kuwait).
This second phase was completed during 2018, and
rental and occupancy levels across these sites have
also performed well.
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 now has
two partnerships, with Liverpool City Council and
Salford City Council.
Most of the Group’s property management activities
that are outside of its PRS and local authority
relationships are undertaken by SPAM.
The Group has equity interests in a venture capital
fund and in an unquoted company, both held by STI.
Growth Strategy
The Group’s core strategy is to utilise its property and
capital raising expertise to further its PRS activities
and the delivery of family housing. This will be done
by further broadening the geographies in which we
deliver assets, and by diversifying the financial
instruments we manage in order to deliver those
assets. Operationally, this is effected by working with
local authorities, house builders, funding partners,
Homes England, and now with the Scottish
Government as we launch the Sigma Scottish PRS
Fund in 2019. The Board believes that the Group is
emerging as one of the leading operators in the private
rented sector in the UK, and the leading player in
family homes.
The build-to-rent sector is growing and is expected to
account for 25% of all housing stock by 2020, up from
19% in 2015. To date, most build-to-rent activity has
been focused on London and on the construction of
flats, with activity in the regions of England lagging
behind. The current pipeline of built-to-rent homes in
both London and the regions remains modest at
c.140,000 homes, presenting the Group with a
significant growth opportunity.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 9
Sigma's growth strategy remains focused on extending
its activities so as to be in a position to deliver homes
across multiple regions in the UK through its PRS
property platform. Diversifying home delivery in this
way mitigates the risk associated with a narrower
geographic concentration. Locations near to large
employment centres, local transport infrastructure
and good primary schooling also remain fundamental
to Sigma’s PRS model.
During 2018, the Group expanded its delivery within
South Yorkshire and the Midlands, and extended its
operations into the South of England above the M25
motorway. Our launch in Scotland in 2019 will add
further opportunity and we are actively looking at
additional geographic expansion.
Sigma has now delivered over 2,500 PRS homes
in four and a half years through its PRS property
platform. These have been predominantly for
Gatehouse Bank and UK PRS Properties although at
the end of March 2019, some 944 homes have been
completed for the REIT, including those funded by
Sigma. Over the course of the next three years, Sigma
will be focused on delivering the balance of the 5,600
homes that make up the REIT’s expected initial
portfolio, and on utilising its own resource of some
£75m in this deployment. The Group also has a
pipeline of development opportunities over and above
those development sites already allocated to meet
the REIT’s initial targets. This places the Group in a
very strong position for continuing growth.
Sigma derives value through fees, both development
management and asset management, as well as
through development profits on assets built and
subsequently sold to the REIT. We have now
broadened that value spectrum further with the
launch of the Sigma PRS Scottish Fund.
OVERVIEW OF THE BUSINESS
Private Rented Sector Residential Portfolio
The Group’s PRS model enables it to move residential
land assets with planning permission, predominately
sourced from local authority partnerships and house
building relationships, to its fund structures.
From a local authority perspective, a key advantage
Sigma offers is that it can deliver large-scale, high
quality housing, which helps to meet both local
housing need and regeneration objectives. Efficiency is
another key attraction since the PRS model can deliver
new homes at a rate that is some four to five times
faster than the rate at which ‘market-for-sale’ homes
are typically built. ‘Market for-sale’ homes tend to be
constructed at the pace of sales demand, which can be
restricted by mortgage availability. Furthermore, local
authorities benefit from increased council tax receipts
from new homes as well as from the Government's
New Homes Bonus Scheme in England.
The rapidity of delivery provided by our PRS property
platform is both attractive to and synergistic for our
housebuilding partners as it offers an enhanced return
on capital as well as de-risking and quickly maturing
those sites on which there are a mix of ‘market-for-
sale’ and PRS homes. The control and rapidity of this
delivery is without doubt the biggest challenge in our
business.
The PRS REIT plc
In 2017, the PRS REIT raised £250m gross proceeds
through an oversubscribed IPO to invest in new PRS
homes. In February 2018, additional gross proceeds
of £250m were raised via a Placing Programme, and
debt facilities of £200m were secured from Scottish
Widows and Lloyds Banking Group in June 2018.
Negotiations are well underway for further debt of
£200m, which when achieved takes the REIT’s gross
funding resource to £900m. As previously stated,
the launch of the REIT represented a fundamental
transformation of Sigma’s model. The Company has
a five year management contract with the REIT as
Investment Adviser, and is also Development Manager.
Sigma is remunerated by the REIT in two ways. Firstly,
Sigma receives an investment advisory fee, which is
based on an adjusted net asset value of the REIT’s
portfolio, and, secondly, it receives a development
management fee in respect of sites that are developed
directly by the REIT.
In addition, the REIT may acquire completed and
fully let sites from Sigma, through forward purchase
agreements, dependent on those sites meeting its
investment criteria. Sites are independently valued
on behalf of the REIT and Sigma recognises any
revaluation gains. As at 31 December 2018, a total
of seven fully developed and let sites had been
acquired by the REIT from Sigma.
As at 31 December 2018, the gross development cost
of sites either completed or contracted to the REIT
stood at £530m, equating to c.3,575 homes. By 31
March 2019, these figures had increased to £603m
of gross development cost and c.3,951 homes.
10 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Strategic Report (continued)
Sigma Self-funded PRS
Joint Venture with Gatehouse Bank plc - Phase 1
The Company has been funding its own PRS assets
since 2015, when it raised £20m (gross) from a share
placing in order to create a substantial portfolio of new
rental homes, leveraging its existing PRS infrastructure
and relationships. In 2016, the Group agreed a £45m
revolving credit facility with Homes England, which
materially increased its ability to scale its delivery of
self-funded homes.
During 2018, three sites were completed, let and then
acquired by the REIT, taking the number of sites that
the Company has successfully developed and sold to
the REIT to seven, therefore releasing capital for
further investment. The Company is currently active
on a further six sites. Two of these are expected to
be completed and sold to the REIT during 2019,
with the balance expected to be ready for letting
and sale in 2020.
Our joint venture with Gatehouse Bank, which
launched in November 2014, helped to prove the
effectiveness of our PRS model and was completed
in March 2017. The project delivered 918 new rental
properties across sites in the North West of England,
with homes built on land procured by Sigma, using its
local authority partnerships. Gatehouse, a leading
London-based Shariah compliant investment bank with
a real estate portfolio across the UK and Europe,
delivered the equity element of the venture whilst
Barclays Bank plc provided the debt financing.
The sites continue to perform well with current
occupancy in excess of 95% and rental levels are
strong. We are experiencing a renewal rate of over 70%
with existing tenants on those properties that have
been let for in excess of 12 months. The properties
have been let under the brand, ‘DIFRENT’.
‘Simple Life’ Letting Brand
(www.simplelifehomes.co.uk).
We wish to create a new experience for tenants in
the rental market and all PRS sites, including those
developed by the REIT, are marketed under our build-
to-rent brand, ‘Simple Life’. The creation of this
consumer brand identifies our product to potential
customers, and our objective is to position it as
the ‘gold standard’ in the private rented sector.
As its name suggests, ‘Simple Life’ is dedicated to
‘making life simple’ for tenants, whether this is through
our new improved customer communication tools,
online ‘how to’ videos or the speed at which repairs
can be carried out by our dedicated maintenance
teams or ‘Handymen’. Additionally, we are also
strongly focused on promoting a sense of community
as tenants move into Simple Life homes. We aim to do
this both by creating opportunities for neighbours to
get together through events that we run, and by
forging links with the wider community, especially
through our support for schools and local charities.
We are pleased that results from recent surveys
indicate a high level of satisfaction among tenants
and there are customer testimonial videos available
to watch on our dedicated YouTube channel,
https://www.youtube.com/channel/UCsZTzlt2UuzQF_y
pvTpWD1Q.
Joint Venture with UK PRS Properties - Phase 2
Our second phase of PRS homes was with UK PRS
Properties and completed in November 2018. This
phase comprised the construction of 684 family
homes over eight sites in the North West and Midlands.
Lettings have been strong, with current occupancy in
excess of 95%. The renewal rate for existing tenants
that have been renting for a minimum of 12 months is
70%. As with phase 1, the new homes are let under the
‘DIFRENT’ brand.
The PRS phases with Gatehouse and UK PRS
Properties generated, and continue to generate,
fees for the Group. An upfront fee was paid on
commencement of a site, a development management
fee was 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)
The 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.£120m. Although the
initial partnership period has ended, the Liverpool
Sigma Capital Group plc | Annual Report & Financial Statements 2018 11
Partnership will continue to develop and manage
those sites under option until completion.
Salford Partnership (also known as Higher Broughton
Partnership)
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.
Residential Projects
The regeneration of the site at Norris Green completed
during 2018. The development consists of eight phases
totalling 829 properties of which 394 properties are
‘market-for-sale’, 214 are affordable homes and 221
are private properties for rent, delivered by our PRS
joint ventures.
Construction on the former Queen Mary School site,
which is approximately one mile from Norris Green
completed in 2017. The scheme comprised a total of
200 new homes, 64 of which were designated for our
joint venture with Gatehouse. All of the PRS units
continue to perform well and all the 136 ‘market-for-
sale’ homes have been sold.
Construction at Gateacre, a 19-acre former secondary
school in Liverpool, continued to progress well and
is expected to be completed during 2019. The site
consists of 231 new family homes for open market sale,
ranging from two and three bedroom townhouses to
five bedroom executive detached homes. As at the
end of December 2018, 198 of the new homes have
been sold with the remainder either exchanged or
reserved.
Commercial Projects
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, which is pre-let to
Premier Inn, along with 30,000 sq.ft. of retail and
leisure units. During 2018, the student residence was
delivered along with the hotel c.18,000 sq.ft. of the
retail space has been let to Lidl. A further 7,500 sq.ft.
of space is expected to be let to a food and beverage
operator in the next few months.
The Salford Partnership is our partnership with Salford
City Council and Royal Bank of Scotland.
During the year, we continued to deal with residual
matters arising from previous residential and
commercial projects of the Salford Partnership.
Sigma’s relationship with Salford City Council
continues to be productive, and provides PRS
development opportunities. As previously reported,
a total of four sites comprising 206 units were
developed as part of our joint venture with Gatehouse,
and a further two sites consisting of 220 units have
been completed as part of the joint venture with UK
PRS Properties. We have now acquired five additional
sites in Salford on behalf of the REIT and expect to
acquire further sites over the coming months.
North Solihull Partnership
This Partnership was set up in 2007 by Solihull
Metropolitan Borough Council, Bellway Homes, West
Mercia Housing Association and SIP. Its remit was to
coordinate and deliver the regeneration of an area of
c.1,000 acres in North Solihull. The key objectives of
the Partnership were 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 role in the provision of development management
services, including development planning, coordination
and procurement of development works has come to
an end and the Company resigned from the North
Solihull Partnership in September 2018.
Venture Capital Activities
Sigma continues to be a limited partner in one venture
fund, which was transferred to Shackleton Ventures
Limited in 2013. Sigma’s investment in the fund held
by STI. Sigma also holds an investment in an unquoted
company.
Financial Review of 2018
The Group’s revenue increased by 181% to £12,477,000
(2017: £4,437,000) as a result of significant revenue
from the PRS REIT including investment advisory fees
and development management fees. In addition there
were revenues from our managed PRS activities with
Gatehouse and UK PRS Properties along with rental
income from our self-funded portfolio. Gross profit
increased by 186% to £12,410,000 (2017: £4,334,000).
12 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Strategic Report (continued)
The Group made a trading profit in the year of
£6,691,000 (2017: £66,000), with property activities
contributing a trading profit of £8,665,000 (2017:
£105,000). The venture capital activities contributed
a trading loss of £906,000 (2017: trading loss of
£8,000). Full detail of the results for the year by
business segment is provided in note 3 to the
financial statements.
Administrative costs increased to £5,719,000 (2017:
£4,268,000) reflecting the impact of the increase
in the number of employees and activities of the
Company as a result of our increased investment
in PRS activities including the REIT.
Profit from operations increased by 227% to
£10,204,000 (2017: £3,116,000) including gains from
investment property of £3,664,000 (2017: £2,727,000),
and an unrealised loss on investments of £151,000
(2017: gain of £323,000).
Profit before tax was £12,181,000 (2017: £4,057,000),
which is an increase of 200%.
The Group’s net assets increased by 30% to
£51,876,000 at 31 December 2018 (31 December 2017:
£40,035,000). This is equivalent to 58.1p per share
(31 December 2017: 45.1p per share).
Balance sheet
The principal items in the consolidated balance
sheet are goodwill of £533,000 (2017: £533,000),
investment property of £23,621,000 (2017:
£29,205,000), property and equipment of £1,297,000
(2017: £1,123,000), accrued income of £502,000 (2017:
£4,756,000), contract receivables of £3,001,000 (2017:
£nil), cash of £22,828,000 (2017: £6,167,000) and trade
and other payables, including tax, of £4,531,000 (2017:
£4,898,000).
The goodwill relates to the acquisition of SIP and is
reviewed each year for impairment. The investment
property relates to Sigma’s own PRS assets. The
property and equipment principally relates to the
Group’s head office in Edinburgh. Accrued income
includes £502,000 expected to be received in 2019
and the contract receivables of £3,001,000 relate
to the Group’s carried interest with Gatehouse and
development management fees in respect of the site
at Gateacre which are both due in over one year as
detailed in note 21 to the accounts. The trade and
other payables of £4,531,000 includes £1,218,000 in
relation to the Group’s investment in property and
was paid in January 2019.
The Group’s current assets exceed its current liabilities
by £21,245,000 (2017: £4,567,000). The Group has
three long term liabilities totalling £3,704,000 (2017:
£523,000). These relate to a loan of £371,000 provided
in relation to its acquisition and redevelopment of the
Group headquarters, a development facility of
£2,617,000, in respect of its self-funded PRS and
deferred tax of £716,000. Further details are provided
in notes 23 and 24.
Cash flow
Cash balances improved by £16,661,000 to
£22,828,000 (2017: increased by £42,000 to
£6,167,000), however the balance includes £8,447,000
to fund acquisitions of land during January 2019. In
2017, the predominant reason for the cash inflow was
due to realisation of the sale of investment property
less the re-investment in further self-funded PRS
activities. In 2018, the sale of and reinvestment in
property continued whilst the cash flow benefited
from the development and investment advisory fees
from the REIT. Further details are provided in the
consolidated cash flow statement. The cash inflow
from operating activities was £6,332,000 (2017:
£1,786,000). The cash inflow from investing activities
was £7,695,000 (2017: outflow of £1,786,000) along
with the cash inflows from financing activities of
£2,634,000 (2017: £42,000).
Key performance indicators
The key performance indicators are concentrated on
the property activities.
The Group’s key performance indicators include:
2018 2017
£’000 £’000 Increase
Revenue – all property
activities 12,477 4,424 181%
Operating profit –
property activities 12,189 2,832 330%
Realised and unrealised
profit on revaluation of
investment property 3,664 2,727 34%
Group profit from
operations 10,204 3,116 227%
Cash balances 22,828* 6,167 270%
* includes cash of £8,447,000 for land acquisitions
that took place in January 2019
Sigma Capital Group plc | Annual Report & Financial Statements 2018 13
Revenue from property activities and the operating
profit from property activities have increased
significantly from the prior year largely due to the
Group’s first full year of activity in relation to the PRS
REIT from which it earns development management
and investment advisory fees. The Group’s realised
and unrealised profit on the revaluation of investment
property is derived from development of seven
investment properties, three of which were sold to
the REIT during the year. The Group’s total profit from
operations has improved over the prior year as a
result of its property activities as discussed above
and cash balances are strong as a result of the
Group’s increased activities and the increased
recurring nature of its revenue.
The Board also monitors certain non-financial key
performance indicators including the number of
properties developed and delivered, the status of
developments in progress and lettings activity for
completed developments. Further details are given
on pages 9 and 10 of the strategic report.
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 is
maintained 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 those 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 and also
by ensuring that properties are let to good quality
tenants, and are professionally managed, providing
customers with a high level of customer 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 Group’s own
self-funded portfolio, along with its appointment as
Investment Adviser and Development Manager to the
REIT, 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 on the timing of rental income in respect
of its investment properties, property development
management and investment advisory 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.
Employees
Employees are fundamental to the Group’s success
and we are committed to the involvement and
development of staff at all levels. The Group continues
to keep its employees informed on matters affecting
them as employees and on the various factors
affecting the performance of the Group. This is
achieved effectively through regular informal
meetings. There is an employee share scheme
which is open to all employees.
During the year the Group continued to fulfil its legal
obligation in relation to pension auto-enrolment and
offers all employees the opportunity to join a defined
contribution scheme managed by the Group.
Applications for employment by disabled persons are
always fully considered, bearing in mind the aptitudes
of the applicant concerned. In the event of members
of staff becoming disabled, every effort will be made
to ensure that their employment with the Group
continues and that appropriate training is arranged.
It is the policy of the Group that the training, career
development and promotion of disabled persons
should, as far as possible, be identical to that of
other employees.
14 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Strategic Report (continued)
Corporate Social Responsibility and Sustainability
report
As a long term investor in property, the Company is
committed to a sustainable approach to all areas of the
business. In construction, our delivery partners ensure
that the properties are delivered in an environmentally
responsible, ethical, safe and sustainable manner,
which includes adherence to relevant social and
environmental legislation and codes of practice.
In the creation of communities, the Company strives
to design developments that attract a broad range of
tenants and offer occupants house types that provide
the opportunity to move up or down the housing
ladder depending upon life stage.
As Sigma expands the REIT’s portfolio of houses, we
aim not just to build high-quality homes but to create
communities that people want to belong to. We are
very aware of the responsibility we have as we create
new neighbourhoods and communities, and are fully
committed to building and maintaining these strong
networks around our homes.
Sigma wishes to create a feeling of belonging amongst
our tenants, and to that end we try to encourage
forging social links and bonds that underpin familiarity
and neighbourliness. To inspire this, we arrange regular
events across all of our developments that help to
bring people together. Last year, we organised Easter
egg hunts across all of our neighbourhoods, an ice
cream dash at the height of summer that saw us
distribute several thousand pots and a festive visit
by Santa and his reindeer at Christmas, all to a
great reception.
We are also seeking to build links with the wider
community, and over the past year have supported a
number of projects to strengthen our involvement.
Schools have been a particular focus and projects such
as the refurbishment of a library, including creative
reading spaces, the provision of outdoor play
equipment and the funding of educational school trips.
Outside of schools we continue to support the Salford-
based homeless drop-in centre, Loaves and Fishes, as
well as Park Palace Ponies in Liverpool, a charity that
aims to make horse-riding more accessible to children
in inner city areas.
Over the course of 2019, we will be installing clothing
banks at our developments, as well as undertaking a
monthly donation programme to a Salford-based food
bank. Our pledge to plant 1,000 trees over the course
of the year is also underway, as we aim to create a
better and more sustainable environment for all our
communities.
This strategic report was approved by the Board on
28 April 2019 and signed on behalf of the Board by
GF Barnet
Chief Executive Officer
28 April 2019
Sigma Capital Group plc | Annual Report & Financial Statements 2018 15
Directors
David Sigsworth OBE,
Non-Executive Chairman (Age 72)
Gwynn Thomson, RICS
Property Investment Director (Age 51)
David is a former main board director of FTSE 100
listed Scottish and Southern Energy plc (“SSE”) and
Scottish Hydro Electric plc. On retirement from SSE,
he was appointed to the chair of the Scottish
Environment Protection Agency, Scotland’s main
environmental regulator. David remains active in the
sustainable energy sector and holds several associated
non-executive directorships.
Graham Barnet
Chief Executive Officer (Age 55)
Graham founded Sigma in 1996 and is the architect of
the Sigma PRS model. He also co-founded and created
the Winchburgh development, one of the largest single
housing delivery sites in Scotland. A qualified lawyer,
Graham worked for Noble Grossart Limited, Edinburgh
Financial Trust Limited and Shepherd & Wedderburn,
specialising in corporate finance and corporate law,
prior to forming his own company in 1994. This
company, Merchant Investments Limited, was a
specialist consultancy involved in the management
of businesses both in the traditional and technology
sectors.
Graeme Hogg
Chief Operating Officer (Age 53)
Graeme has worked in the property and property
finance sector throughout his career. He has worked
on major commercial and residential development
projects and has seven years of international
experience in the areas of property development
and fund management. Graeme co-founded Sigma
Inpartnership with Duncan Sutherland in late 2000
and was instrumental in the creation of its three
regeneration partnerships.
Malcolm Briselden, ACMA, CGMA
Finance Director and Company Secretary (Age 51)
Malcolm is a chartered management accountant
who joined the Company as Group Financial Controller
in April 2012 before becoming Finance Director in
January 2015. Prior to Sigma, Malcolm spent nine
years at The Premier Property Group Limited, the
commercial property arm of Murray International
Holdings Limited.
Gwynn is a chartered surveyor with 25 years’
experience in residential and commercial property
investment. He joined Sigma in 2010 and has been
integral to the formation and running of the Sigma PRS
model. Gwynn was previously a director of investment
and valuation at DTZ.
Duncan Sutherland
Regeneration Director (Age 67)
Duncan has 30 years’ experience of working closely
with local authorities, investors and developers in
large-scale partnership regeneration projects. He co-
founded Sigma Inpartnership with Graeme Hogg in
2000 and has been key in developing the partnership
model with local government partners. Duncan was
a Non-Executive Director of High Speed Two (HS2)
Limited from 2013 to 2018, and is now on the board
of Homes England, the Government’s housing
delivery agency.
James McMahon
Non-Executive Director (Age 70)
Jim is a former senior partner in tax and corporate
finance at PricewaterhouseCoopers and was a founder
partner of West Coast Capital with Sir Tom Hunter
in 2001. He has 20 years’ experience in the property
market, including at Board level and has been a
Director of Office Shoes, Booker plc, House of
Fraser and Prestbury Group.
The two non-executive Directors are the members
of the Audit Committee and the Remuneration
Committee. James McMahon is Chairman of the Audit
Committee and David Sigsworth is Chairman of the
Remuneration Committee.
16 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Advisers
Registrars
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Auditor
BDO LLP
150 Aldersgate Street
London
EC1A 4AB
Nominated Adviser and Broker
Nplus1 Singer Capital Markets Limited
One Bartholomew Lane
London
EC2N 2AX
Legal and Tax Adviser
Dentons UKMEA LLP
One Fleet Place
London
EC4M 7WS
Secretary and Registered Office
Malcolm Briselden, ACMA
Floor 3, 1 St. Ann Street
Manchester
M2 7LR
Trading Address
18 Alva Street
Edinburgh
EH2 4QG
Financial PR
KTZ Communications
No. 1 Cornhill
London
EC3V 3ND
Valuers
Savills (UK) Limited
33 Margaret Street
London
W1G 0JD
Sigma Capital Group plc | Annual Report & Financial Statements 2018 17
Directors’ Report
The Directors present their annual report on the
affairs of the Group, together with the audited
financial statements and auditor’s report, for the year
ended 31 December 2018.
Results and dividends
The Group made a net profit before tax for the year
of £12,181,000 (2017: £4,057,000). The Directors
recommend a final dividend of 2.0p per share for
the financial year which will be subject to shareholder
approval at the AGM (2017: nil). The Directors are
confident of the prospects of the Group for the
current year.
Review of the business and future developments
The Directors are required to present an extended
business review reporting on the development and
performance of the Group and the Company during
the year, their positions at the end of the year and
future developments. This requirement is met by the
Chairman’s Statement and the Strategic Report on
pages 3 to 14.
Directors
The current Directors of the Company are listed on
page 15, all of whom held office throughout the year
except where indicated otherwise. Details of Directors’
interests in share options and in shares are given in the
Directors’ Remuneration Report on pages 19 to 20.
Treasury activities and financial instruments
The Group’s financial instruments comprise cash,
equity investments plus other items such as trade
debtors and trade creditors that arise directly from
its operations. At 31 December 2018, the Group
had positive cash balances of £22,828,000 (2017:
£6,167,000). The cash balance as at 31 December 2018
includes £8,447,000 held by solicitors in relation to
acquisitions of land in January 2019.
The Group’s policy is to keep surplus funds on short
term and instant access deposit to earn the prevailing
market rate of interest. The Group's policy is only to
borrow funds if such funds are needed to develop
specific assets in which case the loan is secured
against that asset and is held within the subsidiary
company undertaking the development.
It is the Group’s policy not to speculate in derivative
financial instruments. The Company is not exposed to
significant foreign exchange risks as transactions in
foreign currency are minimal.
Directors’ indemnity insurance
The Group held a Directors and Officers insurance
policy in place throughout the year in respect of the
Company and the Group's subsidiaries.
Political donations
No political contributions were made during the year
(2017: £nil).
Risk factors
Going concern
Information on the Group’s financial risk management
objectives and policies relating to market risk, credit
risk and liquidity risk is provided in note 1 to the
financial statements. The broader risks of the business
are considered in the Strategic Report.
The income generated by the Group’s PRS activities,
regeneration partnerships and other property activities
comprises both contracted revenue and one-off
income streams. As a consequence, the Directors
believe that the Group is well placed to manage its
business risks successfully. After making enquiries,
the Directors have a reasonable expectation that the
Company and the Group have adequate resources to
continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going
concern basis in preparing the annual report and
financial statements.
18 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Directors’ Report (continued)
Corporate governance
The Board is committed to maintaining high standards
of corporate governance. To the extent applicable,
and to the extent able (given the current size and
structure of the Group and the Board of Directors), the
Company has adopted the Quoted Companies Alliance
Corporate Governance Code. Details of how Company
complies with the Code, the reasons for any non-
compliance, and the principles contained in
the Code, are set out on the Company’s website:
https://www.sigmacapital.co.uk/investor-
relations/corporate-governance-statement.
Details of the attendance record of individual Directors
at Board and committee meetings held during the
financial year are as follows:
DIRECTOR POSITION
David Sigsworth OBE Non-executive Chairman
Graham Barnet CEO
Graeme Hogg COO
Malcolm Briselden Finance Director
Gwynn Thomson Property Investment Director
Duncan Sutherland Regeneration Director
Jim McMahon Non-executive Director
BOARD*
AUDIT REMUNERATION
COMMITTEE*
COMMITTEE*
NOMINATIONS
COMMITTEE*
4/5
4/5
1/5
5/5
5/5
4/5
4/5
1/1
n/a
n/a
n/a
n/a
n/a
1/1
2/2
n/a
n/a
n/a
n/a
n/a
2/2
1/1
1/1
0/1
1/1
1/1
1/1
0/1
* Number of scheduled meetings attended / maximum number of meetings Director could have attended
Awareness of relevant audit information
Auditor
At the date of this report and insofar as each of the
Directors is aware:
> There is no relevant audit information of which the
auditor is unaware.
> The Directors have taken all steps they ought to
have taken to make themselves aware of any
relevant audit information and to establish that the
auditor is aware of that information.
Moore Stephens LLP were originally appointed as
auditors. On 1 February 2019 Moore Stephens LLP
merged its practice with BDO LLP and resigned as
auditors with effect from that date. BDO LLP were
appointed as auditors with effect from that date
and a resolution to re-appoint BDO LLP as auditor
will be proposed at the Annual General Meeting.
This Directors Report has been approved by the Board
on the 28 April 2019 and is signed on its behalf by
Malcolm Briselden, ACMA, CGMA
Company Secretary
28 April 2019
Sigma Capital Group plc | Annual Report & Financial Statements 2018 19
Directors’ Remuneration Report
Directors’ remuneration
The two non-executive Directors comprise the
members of the Remuneration Committee. David
Sigsworth chairs the committee. The Remuneration
Committee decides the remuneration policy that
applies to executive Directors.
Salaries and benefits
The Remuneration Committee meets at least once a
year in order to consider and set the remuneration
packages for executive Directors. The remuneration
packages are benchmarked to ensure comparability
with companies of a similar size and complexity.
Remuneration comprises basic salary and, for most
Directors, pension contributions to the Director’s
personal pension scheme, and benefits in kind. In
addition, certain Directors are paid a car allowance
or receive a contribution to their travel expenses.
Remuneration also includes share options and carried
interest as detailed below. An analysis of remuneration
by Director is given in note 11 of these financial
statements.
Contracts of service
GF Barnet has a one-year rolling service agreement
with the Company. The other executive Directors have
service agreements with a three-month notice period.
Directors’ interests – interests in share options
Details of options held by Directors who were in office at 31 December 2018 are set out below.
DIRECTOR DATE OF GRANT NUMBER EXERCISE PRICE EXERCISE DATE EXPIRY DATE
GF Barnet 28.11.13 114,286 26.25p 28.11.16 – 27.11.23 27.11.23
GF Barnet 19.11.14 250,000 68.00p 19.11.17 – 18.11.24 18.11.24
GF Barnet 05.01.16 400,000 93.50p 05.01.19 – 04.01.26 04.01.26
GF Barnet 25.05.17 300,000 87.00p 25.05.20 – 24.05.27 14.05.27
M Briselden 28.11.13 50,000 26.25p 28.11.16 – 27.11.23 27.11.23
M Briselden 19.11.14 174,816 68.00p 19.11.17 – 18.11.24 18.11.24
M Briselden 05.01.16 250,000 93.50p 05.01.19 – 04.01.26 04.01.26
M Briselden 25.05.17 132,500 87.00p 25.05.20 – 24.05.27 14.05.27
G Hogg 29.07.11 131,500 7.50p 29.07.14 – 28.07.21 28.07.21
G Hogg 28.11.13 40,000 26.25p 28.11.16 – 27.11.23 27.11.23
G Hogg 19.11.14 250,000 68.00p 19.11.17 – 18.11.24 18.11.24
G Hogg 05.01.16 400,000 93.50p 05.01.19 – 04.01.26 04.01.26
G Hogg 25.05.17 250,000 87.00p 25.05.20 – 24.05.27 14.05.27
D Sutherland 29.07.11 119,500 7.50p 29.07.14 – 28.07.21 28.07.21
D Sutherland 28.11.13 42,857 26.25p 28.11.16 – 27.11.23 27.11.23
D Sutherland 19.11.14 64,503 68.00p 19.11.17 – 18.11.24 18.11.24
D Sutherland 25.05.17 72,500 87.00p 25.05.20 – 24.05.27 14.05.27
G Thomson 28.11.13 38,095 26.25p 28.11.16 – 27.11.23 27.11.23
G Thomson 19.11.14 200,000 68.00p 19.11.17 – 18.11.24 18.11.24
G Thomson 05.01.16 250,000 93.50p 05.01.19 – 04.01.26 04.01.26
G Thomson 25.05.17 132,500 87.00p 25.05.20 – 24.05.27 14.05.27
Details of the Company’s option schemes are set out in note 26 to the financial statements.
The market price of the Company’s shares at 31 December 2018 was 130p. The range of market prices during the
year was 88p to 149p.
20 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Directors’ Remuneration Report (continued)
Carried interest arrangements
Two of the Directors have been allocated a share of
the carried interest assigned to Sigma arising from
the historic venture funds. Current estimates are that
no value is attributable to this carried interest.
Subject to certain performance conditions, four of the
Directors may be entitled to a share of the total carried
interest which could arise from an exit in respect of the
Group’s investment in the PRS joint venture with
Gatehouse.
Based on the methodology used to recognise a portion
of the carried interest as Group revenue, the value of
the total entitlement would be £713,000. This amount is
dependent upon the actual outcome of the project and
is not contractually due to the Directors unless there is
an exit in respect of Sigma’s investment which is not
expected to be until Q2 2022 at the earliest. The total
entitlement to the Directors is split in the following
proportions:
GF Barnet
G Hogg
G Thomson
D Sutherland
8.50%
8.50%
5.00%
3.00%
Subject to certain performance conditions, four of the
Directors may be entitled to a share of the total carried
interest which could arise from an exit in respect of the
Group’s investment in the PRS joint venture with UK
PRS Properties.
Based on the methodology used to recognise a portion
of the carried interest as Group revenue, the value of
the total entitlement would be nil. This amount is
dependent upon the actual outcome of the project and
is not contractually due to the Directors unless there is
an exit in respect of Sigma’s investment which is not
expected to be until 2020 at the earliest. The total
entitlement to the Directors is split in the following
proportions:
GF Barnet
G Hogg
G Thomson
M Briselden
7.50%
7.50%
2.50%
2.25%
properties. Based on methodology used to recognise
the fair value uplift on investment property, the value
of the current total entitlement remaining would be
£536,000. This amount is dependent on the actual
disposal of the investment property and is not
contractually due to the Directors unless there is a
disposal. The total entitlement to the Directors is split
in the following proportions:
GF Barnet
G Hogg
G Thomson
M Briselden
4.5%
4.5%
1.5%
1.5%
During the year, the disposal of certain investment
property was completed and the Directors received the
following profit shares:
GF Barnet
G Hogg
G Thomson
M Briselden
£210,000
£210,000
£70,000
£70,000
Directors’ interests - interests in shares
Directors in office at 31 December 2018 had the
following interests in the ordinary shares of 1p each of
the Company:
2018 2017
NUMBER NUMBER
GF Barnet 6,213,237 6,213,237
M Briselden 61,660 61,660
G Hogg 712,356 536,496
D Sigsworth 671,971 671,971
G Thomson 392,857 142,857
D Sutherland 145,299 145,299
All of the above interests are beneficial. There were no
dealings in the Company's shares by any of the
Directors between 31 December 2018 and 28 April 2019.
Subject to certain performance conditions, four of the
Directors may be entitled to a share of the total profit
on disposal in relation to the Group’s self-funded PRS
D Sigsworth OBE
Chairman
28 April 2019
Sigma Capital Group plc | Annual Report & Financial Statements 2018 21
Statement of Directors’ Responsibilities
The Directors are responsible for keeping adequate
accounting records sufficient to show and explain
company transactions and which disclose with
reasonable accuracy at any time the financial position
of the Company and the Group and to enable them to
ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and the
Group and hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors are responsible for preparing the annual
report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that
law, the Directors have prepared the Group and Parent
Company financial statements in accordance with
International Financial Reporting Standards as
adopted by the European Union. Under company
law, the Directors must not approve the financial
statements unless they are satisfied that they give
a true and fair view of the state of affairs of the
Company and the Group and of the profit or loss
of the Group for that period.
In preparing those financial statements, the Directors
are required to:
> select suitable accounting policies and then apply
them consistently;
> present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable, understandable information;
> provide additional disclosures when compliance
with the specific requirements in IFRSs are
insufficient to enable users to understand the
impact of particular transactions, other events and
conditions on the entity’s financial position and
financial performance; and
> prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group will continue in business.
22 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Independent Auditor’s Report
to the shareholders of Sigma Capital Group plc
Opinion
We have audited the financial statements of Sigma
Capital Group Plc (the ‘Company’) and its subsidiaries
(collectively the ‘Group’) for the year ended 31
December 2018 which comprise the Consolidated
Statement of Comprehensive Income, the
Consolidated and Company Statements of Balance
Sheet, the Consolidated and Company Statements of
Changes in Equity, the Consolidated and Company
Statements of Cash Flows, the Accounting Policies and
the related notes. The financial reporting framework
that has been applied in their preparation is applicable
law and International Financial Reporting Standards
(IFRS) as adopted by the European Union and, as
regards the Company financial statements, as applied
in accordance with the provisions of the Companies
Act 2006.
In our opinion:
> the financial statements give a true and fair view of
the state of the Group’s and the Company’s affairs
as at 31 December 2018 and of the Group’s profit
for the year then ended;
> the Group financial statements have been properly
prepared in accordance with IFRS as adopted by
the European Union;
> the Company financial statements have been
properly prepared in accordance with IFRS as
adopted by the European Union and as applied in
accordance with the provisions of the Companies
Act 2006; and
> have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the “Auditor’s
responsibilities for the audit of the financial
statements” section of our report. We are independent
of the Group and the Company in accordance with the
ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s
Ethical Standard, and we have fulfilled our ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our
audit opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following
matters in which the ISAs (UK) require us to report to
you where:
> the Directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate, or
> the Directors have not disclosed in the financial
statements any identified material uncertainties
that may cast significant doubt about the Group’s
or the Company’s ability to continue to adopt the
going concern basis of accounting for a period of
at least twelve months from the date when the
financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance in
our audit of the financial statements of the current
period and include the most significant assessed risks
of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in
the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 23
KEY AUDIT MATTER
RESPONSE
Impairment of goodwill
In this area our audit procedures included:
Goodwill relates to the excess of the cost of the Group’s
shares in Sigma Inpartnership Limited, over the fair
value of the Group’s share of net assets of this company
at the date of acquisition. The Group carries out an
annual impairment review using a discounted cash flow
model. The discounted cash flow model contained
significant levels of judgement over the assumptions
used including the discount rate and over the
assumptions of the cash flow forecasts which includes
future sales. Due to the inherent uncertainty involved in
forecasting and discounting future cash flows this is
one of the key areas of judgement. The accounting
policies are disclosed on pages 33 to 38.
> Assessment of the integrity of the discounted cash
flow model and principles, including the
assumptions used by management.
> Considered the impact of the key assumptions on
the value in use by undertaking a sensitivity
analysis.
Valuation of investment properties
In this area our audit procedures included:
The Group holds investment properties which comprise
properties owned by the Group held for rental income.
Investment properties are valued by independent
external valuers whose details are disclosed in note 15.
The valuation of investment properties requires
significant judgement and there is therefore a risk that
the properties are incorrectly valued. The accounting
policies are disclosed on pages 33 to 38.
> The inputs to the valuation model were checked
against market indices and any significant
variances investigated.
> Actual and expected costs were agreed to relevant
documentation and the calculation of the fair value
based on stage of completion was reviewed.
> We held a discussion with the external valuer to
challenge the key assumptions, gain a better
understanding of their independence and quality
control procedures and their approach to valuation.
> The instructions provided to the valuer was
reviewed for completeness and to check that there
was no evidence of management bias.
Valuation of share of profit from joint venture
In this area our audit procedures included:
Liverpool Inpartnership 2007 Limited, a subsidiary of
the Group, has a 25.1% share in Countryside Sigma
Limited with the remainder shares being held by
Countryside Properties (UK) Limited and is entitled to
50% distribution. The year-end of Countryside Sigma
Limited is not coterminous with that of the Group.
Given the magnitude of the Group’s share and therefore
the impact on profit, the valuation of share of profit
from Countryside Sigma Limited which accounts for
over 15% of the Group’s profit is considered a significant
risk. The accounting policies are disclosed on pages 33
to 38.
> Actual costs incurred and stage of completion were
reviewed against the development programme.
> A sample of development costs were traced to
support documentation.
> Extraction of cost from work in progress was
traced to sale transactions and a sample of
development costs was agreed to payment
certificate.
> Details of properties sold have been checked
against Land Registry data.
24 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Independent Auditor’s Report (continued)
to the shareholders of Sigma Capital Group plc
Our application of materiality
An overview of the scope of our audit
We set certain thresholds for materiality. These helped
us to determine the nature, timing and extent of our
audit procedures and to evaluate the effect of
misstatements, both individually and on the financial
statements as a whole. We consider materiality to be
the magnitude by which misstatements, including
omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements
below these levels will not necessarily be evaluated
as immaterial as we also take into account of the
nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
We determined the materiality for the Group financial
statements as a whole to be £594,000 (2017:
£461,000), calculated with reference to a benchmark
of the Group’s gross assets, of which it represents 1%.
In addition, we set a specific materiality level of
£408,000 (2017: £57,000) for items within underlying
pre-tax profit calculated at 5% of profit before tax
adjusted for capital items.
Whilst materiality for the financial statements of a
whole was £594,000, each component of the Group
was audited to a lower level of materiality. Significant
component materiality ranged from £4,800 to
£182,000.
The Company materiality was £65,000 (2017:
£41,000).
Performance materiality is the application of
materiality at the individual account or balance level
set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected
and undetected misstatements exceeds materiality
for the financial statements as a whole. The Group’s
performance materiality was set at £416,000 (2017:
£323,000) which represents 70% (2017: 70%) of the
overall materiality level.
We reported to the Audit Committee all potential
adjustments in excess of £29,700. We also agreed to
report the differences below these thresholds that, in
our view, warranted reporting on qualitative grounds.
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements. In particular,
we looked at where the Directors made subjective
judgements, for example in respect of the valuation
of investment properties and goodwill which have a
high level of estimation uncertainty involved.
We considered the risk of the financial statements
being misstated or not prepared in accordance with
the underlying legislation or standards. We then
directed our work toward areas of the financial
statements which we assessed as having the highest
risk of containing material misstatements.
There are 15 significant components in the Group,
which are all registered and operate in the UK, each
of which is subject to a full scope audit by BDO LLP.
We gained an understanding of the legal and
regulatory framework applicable to the Group and the
industry in which it operates, and considered the risk
of acts by the Group which were contrary to applicable
laws and regulations, including fraud. These included
but were not limited to compliance with Companies
Act 2006, the AIM rules, the principles of the QCA
Corporate Governance Code and industry practice
represented by IFRS (EU).
We designed audit procedures to respond to the risk,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example,
forgery, misrepresentations or through collusion.
We focused on laws and regulations that could give
rise to a material misstatement in the Group financial
statements. Our tests included, but were not limited to:
> agreement of the financial statement disclosures
to underlying supporting documentation;
> enquiries of management;
> review of minutes of board meetings throughout
the period; and
> obtaining an understanding of the control
environment in monitoring compliance with laws
and regulations
Sigma Capital Group plc | Annual Report & Financial Statements 2018 25
Matters on which we are required to report by
exception
In the light of the knowledge and understanding of
the Group and the Company and its environment
obtained in the course of the audit, we have not
identified material misstatements in the Strategic
report or the Directors’ Report.
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires
us to report to you if, in our opinion:
> adequate accounting records have not been kept
by the Company, or returns adequate for our audit
have not been received from branches not visited
by us; or
> the Company financial statements are not in
agreement with the accounting records and
returns; or
> certain disclosures of Directors’ remuneration
specified by law are not made; or
> we have not received all the information and
explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors'
Responsibilities on page 21, the Directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a
true and fair view, and for such internal control as
the Directors determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors
are responsible for assessing the Group’s and the
Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going
concern and using the going concern basis of
accounting unless the Directors either intend to
liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
There are inherent limitations in the audit procedures
described above and the further removed non-
compliance with laws and regulations is from the
events and transactions reflected in the financial
statements, the less likely we would become aware
of it. As in all of our audits we also addressed the risk
of management override of internal controls, including
testing journals and evaluating whether there was
evidence of bias by the Directors that represented
a risk of material misstatement due to fraud.
Other information
The Directors are responsible for the other information.
The other information comprises the information
included in the Annual Report and Financial
Statements, other than the financial statements
and our auditor’s report thereon. Our opinion on
the financial statements does not cover the other
information and, except to the extent otherwise
explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the
other information is materially inconsistent with the
financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether there is a material misstatement in the
financial statements or a material misstatement of
the other information. If, based on the work we have
performed, we conclude that there is a material
misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
> the information given in the Strategic Report and
the Directors’ Report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
> the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
26 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Independent Auditor’s Report (continued)
to the shareholders of Sigma Capital Group plc
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance
about whether the consolidated financial statements
as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs(UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these consolidated financial statements.
A further description of our responsibilities for the
audit of the consolidated financial statements is
located on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than
the Company and the Company’s members as a body,
for our audit work, for this report, or for the opinions
we have formed.
Timothy West (Senior Statutory Auditor)
for and on behalf of BDO LLP,
Statutory Auditor
London, UK
28 April 2019
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number
OC305127)
Sigma Capital Group plc | Annual Report & Financial Statements 2018 27
Consolidated Comprehensive
Income Statement
for the year ended 31 December 2018
2018 2017
NOTES £’000 £’000
Revenue 3 and 4 12,477 4,437
Cost of sales 5 (67) (103)
Gross profit 12,410 4,334
Unrealised gain on revaluation of investment property 15 1,362 1,915
Realised gain on revaluation of investment property 15 2,302 812
Unrealised (loss)/profit on the revaluation of investments 20 (151) 323
Administrative expenses 7 (5,719) (4,268)
Profit from operations 10,204 3,116
Finance income 8 135 285
Finance costs 9 (166) (196)
Dividends received 10 58 -
Share of profit of joint venture 18 1,950 852
Profit before tax 12,181 4,057
Taxation 12 (906) (378)
Profit for the year 11,275 3,679
Other comprehensive income
Revaluation of own property 16 186 -
Total comprehensive income for the year 11,461 3,679
Earnings per share attributable to the equity holders of the Company:
Basic profit per share 13 12.65p 4.15p
Diluted profit per share 13 12.38p 4.10p
The accompanying notes are an integral part of this consolidated comprehensive income statement.
28 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Consolidated Balance Sheet
at 31 December 2018
2018 2017
NOTES £’000 £’000
ASSETS
Non-current assets
Goodwill and other intangibles 14 533 533
Investment property 15 23,621 29,205
Property and equipment 16 1,297 1,123
Investment in joint venture 18 3,694 1,744
Fixed asset investments 19 2 2
Financial assets at fair value through profit and loss 20 2,187 899
Trade and other receivables 21 3,001 3,088
34,335 36,594
Current assets
Trade receivables 21 1,927 950
Other current assets 21 1,076 2,403
Cash and cash equivalents 22,828 6,167
25,831 9,520
Total assets 60,166 46,114
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings 23 2,988 523
Deferred tax 24 716 603
3,704 1,126
Current liabilities
Trade and other payables 22 3,667 4,826
Interest bearing loans and overdrafts 23 55 55
Current tax liability 22 864 72
Total liabilities 8,290 6,079
Net assets 51,876 40,035
Equity
Called up share capital 25 893 887
Share premium account 25 32,048 31,885
Capital redemption reserve 34 34
Merger reserve (249) (249)
Capital reserve (7) (7)
Revaluation reserve 186 -
Retained earnings 18,971 7,485
Equity attributable to equity holders of the Company 51,876 40,035
The accompanying notes are an integral part of this consolidated balance sheet.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 29
Company Balance Sheet
at 31 December 2018
2018 2017
NOTES £’000 £’000
ASSETS
Non-current assets
Property and equipment 16 23 33
Investment in subsidiaries 17 2,921 2,921
Trade and other receivables 21 - -
2,944 2,954
Current assets
Trade receivables 21 26,646 27,105
Other current assets 21 41 43
Cash and cash equivalents 6,263 83
32,950 27,231
Total assets 35,894 30,185
LIABILITIES
Current liabilities
Trade and other payables 22 181 1,736
Total liabilities 181 1,736
Net assets 35,713 28,449
Equity
Called up share capital 25 893 887
Share premium account 25 32,048 31,885
Capital redemption reserve 34 34
Retained earnings 2,738 (4,357)
Total equity 35,713 28,449
The accompanying notes are an integral part of this balance sheet.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present
the Company income statement. The profit for the Company for the year was £6,885,000 (2017: loss of £14,000).
The financial statements on pages 27 to 65 were approved by the Board of Directors and authorised for issue on
28 April 2019 and were signed on its behalf by:
GF Barnet
Chief Executive Officer
28 April 2019
Registered number 03942129
30 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Consolidated Statement of Changes in Equity
for the year ended 31 December 2018
SHARE CAPITAL
SHARE PREMIUM REDEMPTION MERGER CAPITAL REVALUATION RETAINED TOTAL
CAPITAL ACCOUNT RESERVE RESERVE RESERVE RESERVE EARNINGS EQUITY
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2017 887 31,885 34 (249) (7) - 3,537 36,087
Profit and loss for
the year - - - - - - 3,679 3,679
Transactions with owners
in their capacity as owners
Issue of shares - - - - - - - -
Share-based payments - - - - - - 269 269
At 31 December 2017 887 31,885 34 (249) (7) - 7,485 40,035
Revaluation reserve - - - - - 186 - 186
Profit and loss for the year - - - - - - 11,275 11,275
Transactions with owners
in their capacity as owners
Issue of shares 6 163 - - - - - 169
Share-based payments - - - - - - 211 211
At 31 December 2018 893 32,048 34 (249) (7) 186 18,971 51,876
Sigma Capital Group plc | Annual Report & Financial Statements 2018 31
Company Statement of Changes in Equity
for the year ended 31 December 2018
SHARE CAPITAL
SHARE PREMIUM REDEMPTION RETAINED TOTAL
CAPITAL ACCOUNT RESERVE EARNINGS EQUITY
£’000 £’000 £’000 £’000 £’000
At 1 January 2017 887 31,885 34 (4,612) 28,194
Issue of shares - - - - -
Loss for the year - - - (14) (14)
Share-based payments - - - 269 269
At 31 December 2017 887 31,885 34 (4,357) 28,449
Issue of shares 6 163 - - 169
Profit for the year - - - 6,884 6,884
Share-based payments - - - 211 211
At 31 December 2018 893 32,048 34 2,738 35,713
32 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Consolidated and Company
Cash Flow Statements
for the year ended 31 December 2018
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
NOTES £’000 £’000 £’000 £’000
Cash flows from operating activities
Cash received/(used in) from operations 29 6,332 1,786 (342) (3,317)
Net cash generated from/(used in) operating activities 6,332 1,786 (342) (3,317)
Cash flows from investing activities
Purchase of property and equipment (14) (37) - -
Purchase of investment property (40,447) (35,925) - -
Proceeds from the sale of investment property 49,696 34,273 - -
Purchase of financial assets at fair value (1,439) - - -
Dividends received 58 - 6,350 -
Repayment of loans by PRS Fund - 92 - -
Finance cost net of finance income (159) (189) 2 5
Net cash generated from/(invested in)
investing activities 7,695 (1,786) 6,352 5
Cash flows from financing activities
Bank and other loans 2,465 42 - -
Issue of shares 169 - 169 -
Net cash generated from financing activities 2,634 42 169 -
Net increase/(decrease) in cash and cash equivalents 16,661 42 6,179 (3,312)
Cash and cash equivalents at beginning of year 6,167 6,125 83 3,395
Cash and cash equivalents at end of year 22,828 6,167 6,262 83
The accompanying notes are an integral part of this cash flow statement.
Reconciliation of changes in liabilities arising from financing activities
GROUP GROUP
2018 2017
£’000 £’000
Opening balance of loans at 1 January 578 536
New loans 2,520 97
Repayment in the year (55) (55)
3,043 578
Further details are provided in note 23.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 33
Accounting Policies
for the year ended 31 December 2018
The principal accounting policies are summarised
below. They have all been applied consistently
throughout the year and the preceding year.
Basis of accounting
The financial statements have been prepared on
a going concern basis. The business model of the
Group together with the principal risks and
uncertainties are set out in the Strategic Report and
the Group’s financial risk management is covered in
note 1. The progress of the Group since the balance
sheet date is described in the Chairman’s Statement
and Strategic Report. The Group had a bank balance
of £22,828,000 at the end of the year and therefore
has considerable financial resources for the size of its
current business activities.
The financial statements of the Group have been
prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted for use in
the European Union. The Company has prepared
its financial statements in accordance with IFRS
as adopted for use in the European Union and as
applied in compliance with the provisions of the
Companies Act 2006.
The financial statements have been prepared on the
historical cost basis, except where IFRS requires an
alternative treatment. The principal variations from
historical cost relate to financial instruments and
investment property.
Adoption of new and revised standards
Other than as disclosed below the accounting policies
applied are the same as those applied in the financial
statements for the year ended 31 December 2017.
Except for some additional disclosures under IFRS 9
and IFRS 15, new standards introduced during the
period had no material impact on the results or net
assets of the Company or Group.
In line with the requirements of the standard with
regard to the transition option adopted, the Group
has not restated its comparative information which
continues to be reported under previous revenue
standards IAS 11 and IAS 18
IFRS 15 provides a single, principles based five-step
model to be applied to all sales contracts as outlined
below. It is based on the transfer of control of goods
and services to customers (based on the satisfaction
of identified individual performance obligations) and
replaces the separate models for goods, services and
constructions contracts. The five steps are:
1.
Identify the contract(s) with the customer;
2.
Identify the performance obligations in the
contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance
obligations in the contract; and
5. Recognise revenue when or as the entity satisfies
it performance obligations.
As a result of this new standard the Group has
reviewed its accounting policies in respect of revenue
recognition (where applicable) and this is detailed
below:
Accounting policy applied from 1 January 2018
Regeneration
Revenue from regeneration activities is generated from
both project and development management fees and
each are considered to have just one measurable
performance obligation. Project management fees are
based on a percentage of the total development cost
whilst development fees are based on the profit of the
relevant scheme and both are recognised on the
commencement of development.
IFRS 15 - Revenue from Contracts with Customers
Managed Property
The Directors have completed their assessment of
the impact of IFRS 15 Revenue from contracts with
Customers. Whilst the review was comprehensive,
there was no impact on the Group financial statements
other than disclosure requirements.
Transaction fees are based on either project or site
commencement and are therefore considered to have
just one measurable performance obligation being that
of the project or site commencement. Fees are based
on a percentage of the total development cost.
The Group has adopted the standard from 1 January
2018 and has adopted IFRS 15 using the cumulative
effect approach. Further detail and analysis on the
Group’s various revenue streams can found in note 4.
Development management fees are based on a fixed
percentage of the development cost and is measured
throughout the development period. Development
management involves looking after developments in
34 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Accounting Policies (continued)
progress and is therefore considered to have
continuous measurable performance obligations.
loss. The Group’s assessment of this new standard
does not give rise to any significant adjustments.
Investment advisory fees are based on a fixed
percentage of an adjusted net asset value and have
continuous performance obligations through the
project period. These are defined in the investment
advisory agreement but include managing the assets,
seeking out, evaluating and recommending investment
opportunities and ensuring management information is
provided to the REIT board and regulatory information
is provided to the AIFM.
Fees in relation to administrative services provided
are a fixed amount per annum. The agreement is to
provide finance and administration services and is
considered to have continuous performance
obligations.
The Group earns a carried interest on a managed PRS
portfolio and is considered to have one performance
obligation when the project commenced. The price is
variable and restraint is applied to the recognition of
revenue which was over the initial life of the project
of four years.
Owned PRS Property
The Group rents residential housing to individual
tenants who are invoiced monthly in advance based on
an agreed assured shorthold tenancy which lasts for a
period of twelve months. Rental income is not covered
by IFRS 15.
Venture Capital
The Group receives a limited amount of revenue from
its management of the legacy venture funds. As a
result, it is therefore considered to have continuous
performance obligations.
IFRS 9 – Financial Instruments
IFRS 9 divides all financial assets that were in the
scope of IAS 39 into two classifications – those
measured at amortised cost and those measured at
fair value. Where assets are measured at fair value,
gains or losses are either recognised entirely in profit
or loss or in other comprehensive income. The impact
is that impairments are recognised on an expected
cost basis instead of the previous incurred loss
approach. As such where there are expected to be
credit losses these are recognised in the profit and
There is only one new standard which has been
published which is mandatory, but not effective for the
year ended 31 December 2018. The Directors do not
anticipate that the adoption of the revised standard
and interpretation will have a significant impact on the
figures included in the financial statements in the
period of initial application other than the following:
IFRS 16 – Leases
The standard is effective for periods beginning on or
after 1 January 2019.
IFRS 16 eliminates the classification of leases as either
operating leases or finance leases for a lessee. Instead
all leases are treated in a similar way to finance leases
applying IAS 17. Leases are ‘capitalised’ by recognising
the present value of the lease payments and showing
them either as lease assets (right-of-use assets) or
together with property, plant and equipment. If lease
payments are made over time, a company also
recognises a financial liability representing its
obligation to make future lease payments. IFRS 16
replaces the typical straight-line operating lease
expense for those leases applying IAS 17 with a
depreciation charge for lease assets (included within
operating costs) and an interest expense on lease
liabilities (included within finance costs). Adoption of
IFRS 16 is not expected to have a material impact on
the Group’s reported results.
As a lessor
The Group leases residential property to individual
qualifying tenants on assured shorthold tenancies
which are no longer than twelve months. The tenancy
agreements do not contain any non-lease elements
such as insurance or common area maintenance
As a lessee
The Group leases office space in Manchester which
expires in 2021 and as a consequence no material
impact is expected. In addition, the Group also leases
low-value computer equipment which is exempt from
reporting under IFRS 16.
The Group’s operating leases are disclosed in note 28.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 35
Basis of consolidation
The Group financial statements consolidate the
financial statements of Sigma and its subsidiary
undertakings. The Group has taken advantage of the
exemption under IFRS 1 First-time Adoption of
International Financial Reporting Standards not to
adopt IFRS 3 retrospectively and hence has used
merger accounting for STM which was first
consolidated into the Group in 2000. All other
subsidiary undertakings are consolidated using
acquisition accounting from the date of acquisition.
Under acquisition accounting, the cost of an
acquisition is measured as the fair value of the assets
given, equity instruments issued and liabilities incurred
or assumed at the date of exchange. Identifiable
assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured
initially at their fair values at the acquisition date.
The excess of the cost of acquisition over the fair value
of the Group’s share of the identifiable net assets
acquired is recorded as goodwill. The direct costs of
acquisition are recognised immediately as an expense.
The Company has guaranteed the liabilities of certain
subsidiaries included within note 17. Where the
Company has guaranteed the liabilities of the
subsidiary and they are included within the
consolidated financial statements the subsidiaries were
exempt from the requirements of audit under Section
479A of the Companies Act 2006. The Group has an
interest in two limited partnerships which undertake
property regeneration, the Salford Partnership and the
Liverpool Partnership (together “the Partnerships”).
The Group has a 32.99% share of any profits that might
arise in the Salford Partnership through its 25% holding
in the General Partner of this partnership, through a
wholly owned subsidiary which acts as a limited
partner and through three other wholly owned
subsidiaries. The Group has a 0.01% share of any
profits that might arise in the Liverpool Partnership
through a wholly owned subsidiary. The Directors
consider that the Group neither exercises control nor
has the potential to control the Partnerships and acts
in a commercial capacity as project manager,
development manager and developer of the
underlying projects undertaken by the Partnerships.
The Group has a 25.1% equity interest in Countryside
Sigma Limited ("CSL") a residential housing developer
also engaged in the sourcing and provision of
affordable housing for housing associations and other
registered social landlords. The Group earns profits on
residential developments depending on the size of
each development and is entitled to 50% of the
residual profits of CSL once all developments are
complete. The Group uses the equity method, initially
at cost, and the carrying amount is increased or
decreased to reflect the Group’s share of the profit or
loss with the amount recognised in the profit and loss
account. The Directors consider that the Group neither
exercises control nor has the potential to control CSL.
The Group has a 20.1% interest in Thistle Limited
Partnership ("TLP"), its PRS joint venture with
Gatehouse. The Group will retain a share of the net
disposal profits on the assets, subject to a minimum
return to investors. The Directors consider that the
Group neither exercises control nor has the potential
to control TLP and acts in a commercial capacity as
development and asset manager.
The Group also has a 20% interest in UK PRS (Jersey) I
LP in relation to its PRS joint venture with UK PRS
Properties. The Group will retain a share of net
disposal profits on the assets, subject to a minimum
return to investors. The Directors consider that the
Group neither exercises control nor has the potential
to control UK PRS (Jersey) I LP and acts in a
commercial capacity as development and asset
manager.
Intangible assets
Goodwill
Goodwill arising on consolidation represents the
excess of the cost of acquisition over the Group’s
interest in the fair value of the identifiable assets and
liabilities of a subsidiary at the date of acquisition.
Goodwill is recognised as an asset and reviewed for
impairment annually. For the purposes of assessing
impairment, assets are grouped in to cash generating
units (CGU) being the lowest levels for which there are
separately identifiable cash flows. Any impairment is
recognised immediately in the income statement and
is not subsequently reversed. When the Group
disposes of an interest in a subsidiary, the value of
goodwill is reduced by the proportion that relates to
the interest being disposed of.
Acquired intangible assets
Intangible assets are recognised on business
combinations if they are separable from the acquired
entity or give rise to other contractual/legal rights. The
amounts ascribed to such intangibles are arrived at by
using appropriate valuation techniques.
36 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Accounting Policies (continued)
The significant intangibles recognised by the Group,
their useful economic lives and the methods used to
determine the cost of intangibles acquired in a
business combination are as follows:
INTANGIBLE USEFUL VALUATION
ASSET ECONOMIC LIFE METHOD
Customer Remaining Multi-period
relationships period of Earnings
Method contract
Interests in joint ventures
Investments in joint ventures are accounted for by
the equity method of accounting and are initially
recognised at cost, and the carrying amount is
increased or decreased to recognise the Group’s share
of profit or loss after the date of acquisition. The
Group’s share of profit or loss is recognised in the
income statement.
Investment Property
Property that is held for long-term rental yields or for
capital appreciation or both is classified as investment
property under IAS 40. Investment property, including
that which is being constructed for future use as
investment property, is measured initially at cost
including related transactions costs. After initial
recognition, investment property is carried at fair
value. Gains or losses arising from changes in the fair
value of the Group’s investment properties are
included in profit from operations in the income
statement of the period in which they arise. Investment
property falls within Level 3 of the fair value hierarchy
as defined by IFRS 13. Further details are provided in
note 1 and in the Market Risk section below.
Property and equipment
Property is held at fair value less subsequent
depreciation and impairment. The only property held
is the Group’s premises at 18 Alva Street, Edinburgh
and was valued by an independent expert as at 31
December 2018. Equipment is stated at cost less
depreciation and any provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised
on the Group’s balance sheet when the Group
becomes a party to the contractual provisions of
the instrument.
Trade and other receivables
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using
the effective interest method, less provision for
impairment and appropriate allowances for credit
losses over the expected life of the asset. A provision
for impairment is established when there is objective
evidence that the Group will not be able to collect all
amounts due. The amount of the provision is the
difference between the asset's carrying amount and
the present value of estimated future cash flows,
discounted at the effective interest rate. The
movement in the provision is recognised in the
comprehensive income statement.
Cash
Cash and cash equivalents comprise cash at bank and
cash held at solicitors.
Depreciation
Depreciation is provided at rates calculated to write off
the cost less estimated residual value of each asset on
a straight-line basis over its expected useful life. The
rates of depreciation are as follows:
Investments
Investments represent the Group’s interest in the
equity value of one quoted stock, one unquoted stock
and one venture capital fund managed by a third party.
Property (excluding land)
over the term of the lease
Leasehold improvements
over the term of the lease
Fixtures and office equipment
25% per annum
Computer equipment
33-50% per annum
Investments are classified as financial assets at fair
value through profit or loss and are initially measured
at cost. Subsequent measurement is at fair value. The
fair value of the quoted stock is based on the mid
market price at the balance sheet date.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 37
The fair value of the unquoted stock is established
using International Private Equity and Venture Capital
Valuation Guidelines. The fair value of the investments
in the venture capital fund is based on the net asset
value of the fund at the Company's year end as
reported by the independent fund manager where the
Board believes that this is materially equivalent to fair
value. The fund manager undertakes a full fair value
assessment of the investments held by the venture
capital fund using valuation methodologies in line
with British Venture Capital Association guidelines.
Investments classified as “financial assets at fair value
through profit or loss” are recognised as non-current
assets.
Investment in subsidiary companies is stated at cost
less provision for any impairment in value.
Trade payables
Trade payables are not interest bearing and are stated
at their amortised cost.
Equity instruments
Equity instruments issued by the Company are
recorded at the proceeds received, net of direct
issue costs.
Current and deferred tax
The charge for current tax is based on the results
for the year as adjusted for items which are non-
assessable or disallowed. It is calculated using rates
that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax is accounted for using the balance sheet
liability method in respect of temporary differences
arising from differences between the carrying amount
of assets and liabilities in the financial statements and
the corresponding tax basis used in the computation
of taxable profit. In principle, deferred tax liabilities are
recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against
which deductible temporary differences can be
recognised. Such assets and liabilities are not
recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in
a transaction which affects neither the tax profit nor
the accounting profit.
Deferred tax is calculated at the rates that are
expected to apply when the asset or liability is settled.
Deferred tax is charged or credited in the income
statement, except when it relates to items credited or
charged directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation
authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
Share-based payments
The Group issues equity-settled share-based payments
to certain employees. Equity-settled share-based
payments are measured at fair value (excluding the
effect of non-market based vesting conditions) at the
date of grant. The fair value determined at the grant
date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of shares or
options that will eventually vest.
Fair value is measured using the Black Scholes-Merton
pricing model. The expected life used in the model has
been adjusted, based on management’s best estimate,
for the effects of non-transferability, exercise
restrictions, and behavioural considerations.
Revenue recognition
The Group’s revenue streams, other than rental income,
are recognised as per IFRS 15 which was implemented
on the 1 January 2018.
Fees for services provided by the Group are measured
at the fair value of the consideration received or
receivable, net of value added tax.
Rental income from investment properties is
accounted for on an accruals basis. Property project
management fees are recognised when the service
is provided. Income arising from profit share
arrangements is recognised when the amount of profit
can be reliably estimated but discounted to reflect
when the amount will actually be received. The profit
38 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Accounting Policies (continued)
share estimate is reviewed on a quarterly basis.
Development management fees are recognised over
the development period based on a percentage of
development spend. Transaction fees and other fees
for corporate finance work are recognised when the
service is provided. Carried interest is recognised over
the initial period of the project but discounted to
reflect when the amount will actually be received and
is reviewed on a quarterly basis. Investment advisory
fees are recognised monthly based on an adjusted Net
Asset Value of The PRS REIT plc.
Revenue recognised in advance of invoicing is shown
within contract receivables within debtors.
Operating leases
Amounts due under operating leases are charged to
the income statement in equal annual instalments over
the period of the lease.
Retirement benefit costs
The Group manages a defined contribution retirement
benefit scheme. The amount charged to the income
statement in respect of retirement benefit costs are
the contributions payable in the year. Differences
between contributions payable in the year and
contributions actually paid are shown as either
prepayments or accruals in the balance sheet.
Impairment
At each balance sheet date, the Group reviews the
carrying amounts of its property and equipment and
intangible assets with finite lives to determine whether
there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss. Where
it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to
which the asset belongs.
Goodwill arising on acquisition is allocated to cash-
generating units. The recoverable amount of the cash-
generating unit to which goodwill has been allocated is
tested for impairment annually, or on such other
occasions that events or changes in circumstances
indicate that it might be impaired. If the recoverable
amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is
reduced to its recoverable amount. Impairment losses
are recognised as an expense immediately.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in
prior years. Impairment losses relating to goodwill
are not reversed.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 39
Notes to the Financial Statements
for the year ended 31 December 2018
1.
Financial risk management
Financial risk factors
The Group’s business activities are set out in the Strategic Report on pages 8 to 14. These activities expose
the Group to a number of financial risks. The following describes the Group’s objectives, policies and
processes for managing these risks and the methods used to measure them. The Group only operates in the
UK and transacts in sterling. It is therefore not exposed to any foreign currency exchange risk.
Capital risk management
The Group’s objectives for managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
efficient capital structure to manage the cost of capital. The capital structure of the Group consists of cash
and cash equivalents, equity and debt. The Group meets its objectives by aiming to achieve a steady growth
by mitigating risk, which will generate regular and increasing returns to the shareholders. The Group also
seeks to minimise the cost of capital and optimise its capital structure. At 31 December 2018 the Group had
short term debt of £55,000 (2017: £55,000). There were no changes in the Group’s approach to capital
management during the year.
Market risk
Price risk
The Group is exposed to equity securities price risk because of equity investments held by the Group and
classified on the consolidated balance sheet either as financial assets at fair value through profit and loss or
trading investments which are also held at fair value through profit or loss. At 31 December 2018, 34% (2017:
65%) of the Group’s investments was investment in one venture fund and 59% (2017: nil) was the investment
in quoted stock.
The venture fund invests in early stage companies which are by their nature of a higher risk than more
mature trading companies. Risk is mitigated to a certain extent by the fact that the fund holds investments in
several companies. At 31 December 2018, the fund held 7 investments (2017: 7 investments). A third party
manages the venture fund.
A net movement of 10% in the value of the venture fund holdings would give rise to a movement in the
income statement of £74,000 (2017: £67,000) whilst a net 10% movement in the value of the quoted stock
would give rise to a movement in the income statement of £130,000 (2017: £nil).
The Group’s financial assets at fair value through the profit and loss account fall either within Level 1 or Level
3. The Group’s investment in a quoted stock falls within Level 1 and its value is readily available on The
London Stock Exchange. The Group’s investment in a venture fund and unquoted stock fall with Level 3.
The investment valuations are provided by the manager of the fund based on industry guidelines and
reviewed quarterly by the Board. The valuations are based on market data related to multiples appropriate
to the related industry and development stage of the investee. The significant unobservable inputs relate to
this data.
The Group earns profit share in respect of property projects which is partly based on development values
and is therefore exposed to price risk.
40 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
1.
Financial risk management (continued)
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
Level 2
quoted prices (unadjusted) in active markets for identical assets and liabilities;
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 independent valuation
expert are based on RIC’s Professional Valuation Standards, but include a number of unobservable inputs
and other valuation assumptions.
The significant unobservable inputs and the range of values used are:
TYPE
RANGE
Investment yield 4.0% to 4.75%
Gross to net assumption 21.5% to 25.0%
The impact of changes to the significant unobservable inputs are:
2018 2018 2017 2017
INCOME BALANCE INCOME BALANCE
STATEMENT SHEET STATEMENT SHEET
IMPACT IMPACT IMPACT IMPACT
£’000 £’000 £’000 £’000
Improvement in yield by 0.125% 608 608 1,155 1,155
Worsening in yield by 0.125% (644) (644) (1,130) (1,130)
Improvement in gross to net by 1% 279 279 515 515
Worsening in gross to net by 1% (279) (279) (550) (550)
The above sensitivities are the average values in respect of all investment property fair valued at 31
December 2018 and includes investment properties under construction.
Interest rate risk
The Group has limited interest rate risk in respect of its loan that part funded the acquisition and
refurbishment of its new head office. The impact is on income and operating cash flow and arises from
changes in market interest rates. The Group also has limited interest rate risk on its loan from Homes England
which is utilised to fund property investment. At 31 December 2018, the total loan outstanding was
£2,617,000 (2017: £97,000). From time to time, certain of the Group’s cash resources are placed on short
term fixed deposit of up to one year to take advantage of preferential rates. Otherwise, cash resources are
held in current, floating rate accounts. See note 23 for details of loans.
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables and other current assets.
During the year ended 31 December 2018, the Group’s cash and cash equivalents were held with the Bank of
Scotland and Royal Bank of Scotland plc.
The concentration of credit risk from trade receivables and other current assets varies throughout the year
depending on the timing of transactions and invoicing of fees.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 41
Property rental income arises from the Group’s investment in PRS assets. Rental income is derived from
multiple tenants across the Group’s portfolio, is paid monthly in advance and historically and currently has
suffered no bad debts. Under IFRS 9, the Group is required to consider historic, current and forward looking
information when assessing whether to recognise any credit losses.
Property project management fees arise from Sigma Inpartnership's joint venture, CSL. The fees are agreed
in advance and are recognised as per the accounting policy on revenue recognition. Fees are payable on a
monthly basis over the development period. Each project is subject to financial due diligence prior to
commencement including a detailed appraisal. The project is reviewed regularly thereafter. As the fees are
paid throughout the development period the risk is reduced.
The profit share arising from Sigma Inpartnership's joint venture, CSL, is recognised as per the accounting
policy on revenue recognition. The profit share is payable once the project is complete and once other
criteria have been fulfilled. Each project is subject to financial due diligence prior to commencement
including a detailed appraisal. The project is reviewed regularly thereafter. The profit share is expensed in the
joint venture before the calculation of the Group’s equity investment.
Property project management fees arise in respect of Sigma Inpartnership’s joint venture with ION
Developments. The fees are agreed in advance and are recognised as per the accounting policy on revenue
recognition. Fees are payable monthly over the development period. Each project is subject to financial due
diligence prior to commencement including a detailed appraisal. The project is reviewed regularly thereafter.
Carried interest arises from the Group’s PRS activities and is recognised as per the accounting policy on
revenue recognition. The carried interest is payable on exit or from an agreed valuation. The Group’s PRS
activities are subject to financial due diligence prior to commencement including a detailed appraisal. The
performance of the project is monitored on a monthly basis with updates on the level of carried interest
calculated on a half yearly basis. Carried interest is recognised over the expected life of the project and
therefore the risk is reduced. The fair value of the carried interest falls within Level 3 of the three tier
hierarchy and includes a number of unobservable inputs. The significant items are:
TYPE
VALUE
Investment yield 4.47%
Gross to net assumption 22.5%
Rental growth 1.75%
The amount of carried interest recognised is £1,889,000 and is disclosed as a contract receivable. It is paid
on the disposal of the investment or the Company can issue an exit notice in March 2022.
Revenue recognised in advance of the contracted right to invoice or receive payment is shown in accrued
income. The amounts recognised will be paid during the development period, usually between one month
and up to four years, but the underlying fundamentals of the projects are such that the credit risk
represented by these amounts is deemed to be low.
Property project management fees are also earned by Sigma Inpartnership that arise from the work
undertaken on the two regeneration partnerships with Liverpool City Council and Salford City Council. The
basis of these fees for the coming year and beyond is agreed in advance with each partnership and each
month the invoices are approved by the partnership for payment. Consequently, the amounts outstanding at
any one time generally represent only one or two months’ fees and the credit risk of the customers is
deemed to be low.
Development fees earned in respect of the Group’s PRS Joint Ventures with Gatehouse Bank plc and UK PRS
Properties are agreed in advance of the project or a site commencing, are based on the expected
development costs and are payable quarterly in arrears.
42 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
Asset management fees are earned in respect of the Group’s PRS Joint Ventures with Gatehouse Bank plc
and UK PRS Properties and are earned based on the number of residential units that have reached practical
completion.
Development fees earned in respect of the Group’s PRS activities with The PRS REIT plc are based on actual
development spend in a month and is paid monthly in arrears.
Investment advisory fees are based on an adjusted net asset value of the PRS REIT and are paid monthly
in arrears.
Other exposures of the Group are spread over a number of customers and counterparties with little
concentration on any one entity.
The concentration of credit risk arising from trade receivables and other current assets is analysed below:
2018 2017
£’000 £’000
Property management fees due to Sigma Inpartnership Ltd 59 24
Development and asset management fees due to Sigma Capital Property Ltd 79 240
Development management fees due to Sigma PRS Management Ltd 1,387 305
Investment advisory fees due to Sigma PRS Management Ltd 372 208
Other property management fees 30 174
Other debtors 457 498
Other prepayments 117 132
Other accrued income 502 4,760
Other contract receivables 3,001 -
Social security and other taxes - 100
6,004 6,441
The maximum exposure to credit risk for trade receivables and other current assets is represented by their
carrying amount. The development management fees and investment advisory fees due to Sigma PRS
Management Ltd were paid in January 2019.
Liquidity risk
The Group seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the requirements
of the business and to invest cash assets safely and profitably. The Board reviews regularly available cash to
ensure there are sufficient resources for working capital requirements. As at 31 December 2018 the Group’s
amount of current financial assets was in excess of its financial liabilities by £17,541,000 (2017: £3,441,000.
The below summarises the maturities of the Group’s financial liabilities (excluding tax) as at 31 December
2018:
2018 2017
£’000 £’000
Amounts payable in less than one year:
Trade and other payables 3,667 4,826
Loans 55 55
3,722 4,881
Amounts payable between one and five years:
Loans 2,988 523
Sigma Capital Group plc | Annual Report & Financial Statements 2018 43
2.
Significant accounting estimates and judgements
Sources of estimation uncertainty
The preparation of the financial statements requires the Group to make estimates, judgements and
assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. The Directors base their estimates on historical experience and
various other assumptions that they believe are reasonable under the circumstances, the results of which form
the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually made and are based on historic experience and other factors,
including expectations of future events that are believed to be reasonable in the circumstances.
As the use of estimates is inherent in financial reporting, actual results could differ from these estimates.
The Directors believe the following to be the key areas of estimation and judgement:
(i) Revenue recognition
The Group believes that the most significant judgement area in the application of its accounting policies
is in respect of revenue recognition. The matters taken into account when assessing the amount of
revenue to recognise are detailed in the accounting policy on revenue recognition.
(ii) Consideration of credit losses
The matters taken into account in the recognition of credit losses include historic, current and forward
looking information
(iii) Fair value of investment property
The matters taken into account when assessing the fair value of investment property are detailed in the
accounting policy on investment property.
(iv) Fair value of unlisted investments
The matters taken into account when assessing the fair value of the unlisted investments are detailed in
the accounting policy on investments and in the assessment of Market Risk set out in note 1.
(v) Goodwill and impairment
The recoverable amount of goodwill is determined based on value in use calculations of the cash-
generating units to which it relates. Further detail on key assumptions, including growth rates, discount
rates and the time period of these value in use calculations is given in note 14.
44 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
3.
Segmental information – business segments
At 31 December 2018 the Group has just one business activity, property.
The Group had three significant customers in the year. Thistle Limited Partnership was a significant customer
with profit share and carried interest earned of £483,000 (2017: £620,000), UK PRS (Jersey) Properties I
Limited with fees of £628,000 (2017: £716,000) and The PRS REIT plc with development and investment
advisory fees earned of £10,583,000 (2017: £2,370,000).
The revenue from services from the Group’s Owned PRS property represents £468,000 (2017: £488,000) of
gross rental income. Rental operating costs attributable to the gross rental income for the year were £67,000
(2017: £103,000).
The Directors regard the Group’s reportable segments of business to be property, venture capital fund
investment and holding company activities. The business operates in a single region, the UK. Costs are
allocated to the appropriate segment as they arise with central overheads apportioned on a reasonable
basis.
The segment analysis for the year ended 31 December 2018 is as follows:
MANAGED OWNED PRS VENTURE HOLDING INTRA GROUP
REGENERATION PROPERTY PROPERTY CAPITAL COMPANY ADJUSTMENTS TOTAL
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Revenue from services 83 11,917 468 9 - - 12,477
Trading profit/(loss) 110 8,156 399 (906) 533 (1,601) 6,691
Unrealised gain on
revaluation of
investment property - - 1,362 - - - 1,362
Realised profit on
revaluation of
investment property - - 2,302 - - - 2,302
Unrealised gain
on revaluation
of investments - (140) - (11) - - (151)
Profit/(loss) from
operations 110 8,016 4,063 (917) 533 (1,601) 10,204
Finance income 86 44 - 3 2 - 135
Finance costs - (10) (156) - - - (166)
Dividend
(paid)/received - (5,392) - (900) 6,350 - 58
Profit distribution
to partners - 6,700 (6,700) - - - -
Share of associate 1,950 - - - - - 1,950
Profit/(loss) before tax 2,146 9,358 (2,793) (1,814) 6,885 (1,601) 12,181
Total assets 9,291 10,089 34,017 1,971 37,543 (32,745) 60,166
Total liabilities (302) (4,406) (31,917) (1,676) (1,830) 31,841 (8,290)
Net assets 8,989 5,683 2,100 295 35,713 (904) 51,876
Capital expenditure - 14 - - - - 14
Depreciation - 16 - - 10 - 26
Sigma Capital Group plc | Annual Report & Financial Statements 2018 45
Segmental assets
Net assets of the Group’s Regeneration activities consists mainly of its investment in a joint venture and
contract receivables 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 segment analysis for the year ended 31 December 2017 is as follows:
MANAGED OWNED PRS VENTURE HOLDING INTRA GROUP
REGENERATION PROPERTY PROPERTY CAPITAL COMPANY ADJUSTMENTS TOTAL
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Trading (loss)/profit (11) (269) 385 (8) (20) (11) 66
Unrealised gain on
revaluation of investment
property - - 1,915 - - - 1,915
Realised profit on
the revaluation of
investment property - - 812 - - - 812
Unrealised gain
on revaluation
of investments - - - 323 - - 323
Profit/(loss) from
operations (11) (269) 3,112 315 (20) (11) 3,116
Finance income 186 92 1 1 5 - 285
Finance costs - (14) (182) - - - (196)
Share of associate 852 - - - - - 852
Profit/(loss) before tax 1,027 (191) 2,931 316 (15) (11) 4,057
Total assets 7,134 5,621 31,674 3,787 33,436 (35,538) 46,114
Total liabilities (265) (8,635) (26,748) (1,678) (4,987) 36,234 (6,079)
Net assets 6,869 (3,014) 4,926 2,109 28,449 696 40,035
Capital expenditure - 37 - - - - 37
Depreciation - 15 - - 10 - 25
4.
Revenue
Nature of revenue streams
The following should be read in conjunction with the Group’s new accounting policy applied from 1 January
2018 as detailed in the accounting policies on pages 33 to 34:
Regeneration
The Group’s property regeneration activities undertake large-scale property related regeneration projects
working as a bridge between public and private sector organisations. There has been no new activities in the
current or prior year and has been dealing with residual matters in that respect. The Group has project
management fees outstanding which will be paid during 2019 and development fees which are expected to
be paid by the end of 2019.
46 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
4.
Revenue (continued)
Managed Property
The Group’s managed property segment is leading the way in the delivery of the residential family housing in
the private rented sector market using its Sigma PRS platform for the delivery of homes across the regions
of the United Kingdom.
REVENUE STREAM
NATURE, TIMING OF SATISFACTION OF PERFORMANCE
OBLIGATIONS AND SIGNIFICANT PAYMENT TERMS
NATURE OF CHANGE IN ACCOUNTING POLICY
Transaction fees
Development
Management Fees
(Regeneration)
Development
Management Fees
(Managed PRS)
Investment Advisory
Fees
The Group earns transaction fees based
on when a PRS project or a PRS site
commenced development and is
deemed therefore to have one
performance obligation. Fees are
payable on commencement of the
project or site.
The Group earns development
management fees based on a fixed
percentage of the total development
cost. There is one performance
obligation when the site commences.
There are significant payment terms in
that the fees are payable at the end of
the development.
The Group earns development
management fees based on a fixed
percentage of the development cost
spent on a monthly basis and is
deemed to have continuous
performance obligations measured by
site progress. Revenue is recognised on
a monthly basis. Fees are payable
either monthly or quarterly in arrears.
The Group earns investment advisory
fees which are based on a monthly
adjusted net asset value and are
therefore recognised monthly and
payable monthly in arrears. The
performance obligations are
considered to be continuous and
include managing the assets, seeking
out, evaluating and recommending
investment opportunities and providing
information to the PRS REIT Board
and AIFM
Under IAS 18 revenue was recognised when
services provided to the customer where
completed.
Under IFRS 15, there is no change to the
point of revenue recognition as the
performance obligation is deemed to be at
the point when the PRS project or PRS site
has commenced.
Under IAS 18 revenue was recognised when
services provided to the customer where
completed.
Under IFRS 15, there is no change to the
point of revenue recognition as the
performance obligation is deemed to be
at the point when the project or site has
commenced.
Under IAS 18 revenue was recognised when
the development expenditure had been
incurred.
Under IFRS 15, there is no change to the
point of revenue recognition and the
performance obligations are continuous
throughout the development period.
Under IAS 18 revenue was recognised once
the service had been provided.
There is no change to the timing of revenue
recognition under IFRS, as the conditions
of the contract dictate that the revenue
should continue to be recognised on a
monthly basis.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 47
REVENUE STREAM
NATURE, TIMING OF SATISFACTION OF PERFORMANCE
OBLIGATIONS AND SIGNIFICANT PAYMENT TERMS
NATURE OF CHANGE IN ACCOUNTING POLICY
Administrative
Services
The Group earns fees in relation to
administrative services and is considered
to continuous performance obligations.
The fees are earned monthly and are
payable monthly in arrears
Carried Interest
The Group has a carried interest in its
managed property activities and in
respect of its joint venture with
Gatehouse. The performance obligation
is met when the project commences
but is restricted and recognised over
the initial four year life of the project.
The carried interest is payable either on
the disposal of the investment or the
Company can issue an exit notice in
March 2022, whichever is the sooner.
Under IAS 18 revenue was recognised once
the service had been provided.
There is no change to the timing of revenue
recognition under IFRS 15, as the
conditions of the contract dictate that the
revenue should continue to be recognised
on a monthly basis.
Under IAS 18 the revenue was recognised
based on development and asset
management performance over the initial
project term of four years
Under IFRS 15, there is no change to timing
of the revenue recognition as the revenue
is recognised once the service has been
provided and performance obligations
have been met.
5.
Cost of sales
2018 2017
£’000 £’000
PRS activities 67 103
6.
Profit on disposal of Investment property
Investment property is regarded as sold when the significant risks and returns have been transferred to the
buyer. This is deemed to be on legal completion. In line with IAS 40, the Group fair values its investment
properties and any adjustment is shown as an unrealised gain or loss in the profit and loss account. During
the year the Group disposed of investment properties crystallising a realised gain of £3.93m of which £1.63m
was recognised as fair value uplift in the prior year, see note 15.
48 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
7.
Expenses by nature
Expenses included in administrative expenses are analysed below.
2018 2017
£’000 £’000
Administrative expenses
Employee costs (salaries and national insurance) 3,957 2,864
Employers pension contributions 165 122
Share based payments 211 269
Other employee related costs 162 33
Consultancy 90 75
Travel and entertainment 259 221
Depreciation 26 25
Amortisation - 11
Operating lease rentals:
- plant and machinery 20 12
- land and buildings (net) 76 76
Other premises costs 72 71
Audit services:
- Fees payable to Company auditor for the audit of the parent company
and consolidated accounts 34 23
- the audit of the Company’s subsidiaries pursuant to legislation 36 32
Non-audit services:
-
tax services 30 20
- other accountancy services 14 4
Other legal, professional and financial costs 501 345
Administration costs 66 65
5,719 4,268
8.
Finance income
2018 2017
£’000 £’000
Interest income on short-term deposits and loans 6 7
Unwinding of discount 129 278
135 285
9.
Finance costs
2018 2017
£’000 £’000
Other interest 9 20
Non-utilisation fees 157 176
166 196
Sigma Capital Group plc | Annual Report & Financial Statements 2018 49
10. Dividend income
2018 2017
£’000 £’000
Dividends received from equity shares 58 -
The dividends received relate to the Group’s equity interest in The PRS REIT plc.
11. Directors and employees
The average monthly number of employees, including executive Directors, employed by the Group during the
year was:
2018 2017
Property 18 18
Administration 9 8
27 26
The aggregate remuneration was as follows:
2018 2017
£’000 £’000
Wages and salaries 3,505 2,544
Social security 452 320
Pension costs – defined contribution plans 165 122
Share based payment charge - equity settled 211 269
4,333 3,255
Remuneration comprises basic salary and pension contributions and some employees also receive a car
allowance or contribution to travel expenses. In addition, other payments are made which are benefits in
kind, being private health insurance and life assurance. The type of remuneration is consistent from year to
year. Ad hoc bonuses may be paid to reward exceptional performance. Such bonuses are decided by the
Remuneration Committee on the recommendation of the Chief Executive Officer. Share options are also
awarded to employees from time to time. In the past, the share options awarded had performance criteria
attached which related to the stock market performance of the Company. More recently the Remuneration
Committee has decided that this type of performance condition was not appropriate to individual employees
given the volatility of smaller company stocks including those of the Company. The granting of share options
to individual employees is determined by taking into account seniority, commitment to the business and
recent performance. Details of share options granted to and exercised by Directors in the year are contained
in the Directors' Remuneration Report.
50 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
11. Directors and employees (continued)
The key management of the Group comprises the Sigma Capital Group plc Board Directors. The total
remuneration for each Director is shown below.
ANNUAL OTHER
SALARY INCENTIVES BENEFITS TOTAL PENSION
________________ ________________ ________________ ________________ ________________
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Executive
GF Barnet 447 404 400 93 - - 847 497 41 -
M Briselden 149 138 75 - 6 6 230 144 15 14
G Thomson 140 133 70 - - - 210 133 14 13
G Hogg 337 295 300 73 5 5 642 373 34 28
D Sutherland 99 98 - 10 5 5 104 113 5 5
Non-executive
D Sigsworth 69 50 - - - - 69 50 - -
J McMahon 49 40 - - - - 49 40 - -
1,290 1,158 845 176 16 16 2,151 1,350 109 60
Annual incentives totalling £495,000 paid to Graham Barnet, Malcolm Briselden, Gwynn Thomson and
Graeme Hogg were payable on the successful raising of £250m gross placing proceeds for The PRS REIT plc
of which the Group is appointed as both Investment Adviser and Development Manager. Further incentives
totalling £350,000 were awarded based on the Group’s performance for the year.
Four of the Directors, subject to certain performance conditions may be entitled to a share of the total profit
on disposal in relation to the Group’s self-funded PRS properties. During the year, the total carried interest
realised in respect of the Directors was £560,000 (2017: £400,000). Further details are provided in the
Directors Remuneration Report.
Certain Directors have been allocated a share of the carried interest in respect of the PRS joint ventures with
Gatehouse and UK PRS properties. The carried interest recognised in the year was £nil (2017: £nil)
Details of the carried interest arrangements are contained in the Directors’ Remuneration Report.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 51
12. Taxation
2018 2017
£’000 £’000
UK corporation tax on profit for the year 793 72
Deferred tax – origination and reversal of timing differences 113 306
Tax on profit on ordinary activities 906 378
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are
explained below.
2018 2017
£’000 £’000
Profit before tax 12,181 4,057
Profit before tax at the effective rate of corporation tax in the UK of:
19.00% (2017: 19.25%) 2,314 781
Effects of:
Expenses not deductible for tax purposes 190 143
Share of joint venture profit after tax (370) (164)
Capital allowances in excess of depreciation 1 (1)
Utilisation of losses (1,055) (546)
Gains on revalued properties not recognised in deferred tax 12 (60)
Other short term timing differences not recognised in deferred tax - 299
Effect of difference between standard and deferred tax rate (42) (74)
Adjustments in respect of prior periods (39) -
Other adjustments (105) -
Tax charge for the year 906 378
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. The
amounts set out below will be available for offset against future taxable profits. These are stated using a
corporation tax rate of 17% (2017: 17%).
2018 2017
£’000 £’000
Unrelieved management expenses and other losses 1,789 2,614
Unrelieved capital losses - 167
Chargeable gains (280) (325)
Excess of depreciation over capital allowances 1 1
1,510 2,457
52 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
13. Profit per share
The calculation of the basic profit per share for the year ended 31 December 2018 and 31 December 2017 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 WEIGHTED
ATTRIBUTABLE TO AVERAGE BASIC PROFIT
SHAREHOLDERS NUMBER OF PER SHARE
£’000 SHARES (PENCE)
Year ended 31 December 2018 11,275 89,136,953 12.65
Year ended 31 December 2017 3,679 88,715,715 4.15
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 2018 of 91,044,281 (2017: 89,700,931).
For the year ended 31 December 2018, the diluted earnings per share is 12.38 pence (2017: 4.10 pence).
14. Goodwill and other intangible assets
OTHER
GOODWILL INTANGIBLES TOTAL
£’000 £’000 £’000
Cost
At 31 December 2017 and 31 December 2018 656 105 761
Amortisation and impairment
At 1 January 2017 123 94 217
Amortisation charge - 11 11
At 31 December 2017 123 105 228
Amortisation charge - - -
At 31 December 2018 123 105 228
Carrying value
At 31 December 2018 533 - 533
At 31 December 2017 533 - 533
Impairment
Goodwill and other intangibles arising on consolidation represent the excess of cost of an acquisition over
the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition. The
carrying amount of intangible assets, being the fair value of the contractual relationships, is allocated to the
cash generation units (CGUs) as follows:
Sigma Capital Group plc | Annual Report & Financial Statements 2018 53
Sigma Inpartnership
2018 2017
£’000 £’000
Goodwill 533 533
Intangible assets - -
The major assumption used in value in use calculations is as follows:
Pre-tax discount rate 9% 9%
The Directors estimate discount rates using pre-tax rates that reflect current market assessment of the time
value of money and the risk specific to the CGU. The pre-tax discount rate is based on a number of factors
including the risk free rate in the UK and the inherent risk of the forecast income streams included in the
Group’s cash flow projections.
The value in use cash flows are based upon management approved budgets for a period of one year
and on specific assumptions and projections on a project by project basis for a further four years, using
management’s detailed knowledge and expectations of the outcome of each project. Thereafter a
conservative estimate of continuing cash flows is included assuming nil growth.
The results of the value in use calculations for the CGU shows that Sigma Inpartnership exceeds its carrying
amount in both the current and prior year. It would require an increase to 18% in the discount rate for an
impairment to be considered.
15.
Investment property
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Cost
At 1 January 2018 27,290 22,808 - -
Additions during the year 40,436 35,925 - -
Disposals during the year (45,754) (31,443) - -
At 31 December 2018 21,972 27,290 - -
Fair value adjustment
At 1 January 2018 1,915 2,017 - -
Revaluation during the year 3,664 2,727 - -
Disposals during the year (3,930) (2,829) - -
At 31 December 2018 1,649 1,915 - -
Net book value
At 31 December 2018 23,621 29,205 - -
Investment property, including that which is being constructed for future use as investment property, is
measured initially at cost including related transactions costs. After initial recognition, investment property
is carried at fair value. The investment properties were valued by Savills who are qualified valuation experts
and hold a recognised and relevant professional qualification. The valuation basis of market value conforms
to international valuation standards. The valuation is based on market evidence of investment yields,
expected gross to net income rates and actual and expected rental values.
54 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
15.
Investment property (continued)
IFRS 13 sets out a three tier hierarchy for financial assets and liabilities valued at fair value. Investment
property falls within Level 3. Further details can be found on page 40.
Rental income from investment properties during the current year amounted to £468,000 (2017: £488,000)
and direct operating expenses during the current year were £67,000 (2017: £103,000).
16. Property and equipment
FIXTURES
FREEHOLD LEASEHOLD AND OFFICE COMPUTER
PROPERTY IMPROVEMENTS EQUIPMENT EQUIPMENT TOTAL
£’000 £’000 £’000 £’000 £’000
GROUP
Cost or fair value
At 1 January 2017 1,028 44 45 24 1,141
Additions 31 - 2 4 37
Disposals - - - (6) (6)
At 31 December 2017 1,059 44 47 22 1,172
Additions 5 - - 9 14
Revaluation 186 - - - 186
Disposals - - - - -
At 31 December 2018 1,250 44 47 31 1,372
Depreciation
At 1 January 2017 - 6 10 14 30
Charge for the year - 8 10 7 25
Disposals - - - (6) (6)
At 31 December 2017 - 14 20 15 49
Charge for the year - 9 11 6 26
Disposals - - - - -
At 31 December 2018 - 23 31 21 75
Net book value
At 31 December 2018 1,250 21 16 10 1,297
At 31 December 2017 1,059 30 27 7 1,123
Sigma Capital Group plc | Annual Report & Financial Statements 2018 55
16. Property and equipment (continued)
FIXTURES
LEASEHOLD AND OFFICE
IMPROVEMENTS EQUIPMENT TOTAL
£’000 £’000 £’000
COMPANY
Cost
At 1 January 2017 44 9 53
Additions - - -
Disposals - - -
At 31 December 2017 44 9 53
Additions - - -
Disposals - - -
At 31 December 2018 44 9 53
Depreciation
At 1 January 2017 6 4 10
Charge for the year 8 2 10
Disposals - - -
At 31 December 2017 14 6 20
Charge for the year 9 2 11
Disposals - - -
At 31 December 2018 23 8 31
Net book value
At 31 December 2018 21 1 22
At 31 December 2017 30 3 33
56 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
17.
Investment in subsidiaries and partnerships
COMPANY COMPANY
2018 2017
£’000 £’000
At 31 December 2017 and 31 December 2018 2,921 2,921
Subsidiaries and partnerships
The Company has investments in the following subsidiaries and partnerships as at 31 December 2018:
COUNTRY OF
COMPANY NAME INCORPORATION % HOLDING PRINCIPAL ACTIVITY
Sigma Capital Property Ltd Scotland 100 Property*
Sigma Inpartnership Ltd Scotland 100 Property*
Strategic Property Asset Management Ltd Scotland 100 Property*
Strategic Investment Management Holdings Limited Scotland 100 Property*
Sigma Property Investment Limited Scotland 100 Property*
Sigma Property Partners Limited Scotland 100 Property*
Sigma General Partner Limited Scotland 100 Property*
Sigma FP General Partner Limited Scotland 100 Property*
Sigma Thistle Founder Partner LP England 68.25 Property**
Sigma Thistle Phase II FP Limited Partnership Scotland 75 Property*
Sigma Thistle Phase II GP LLP Scotland 100 Property*
Sigma Thistle Phase II Limited Scotland 100 Property*
Sigma UK PRS GP Limited Jersey 100 Property***
Sigma Founder Partner Limited Partnership Scotland 100 Property*
Sigma PRS Developments Limited Scotland 100 Property*
Sigma PRS Investments VIII Limited England 85 Property**
Sigma PRS Investments IX Limited England 85 Property**
Sigma PRS Investments (Baytree) Limited England 85 Property**
Sigma PRS Investments (Bury St Edmunds) Limited England 85 Property**
Sigma PRS Investments (Bury St Edmunds II) Limited England 85 Property**
Sigma PRS Investments (Cable Street) Limited England 85 Property**
Sigma PRS Investments (Cable Street Phase 2) Limited England 85 Property**
Sigma PRS Investments (Cable Street Phase 2 II) Limited England 85 Property**
Sigma PRS Investments (Carr Lane) Limited England 85 Property**
Sigma PRS Investments (Carr Lane II) Limited England 85 Property**
Sigma PRS Investments (Darlaston) Limited England 85 Property**
Sigma PRS Investments (Darlaston II) Limited England 85 Property**
Sigma PRS Investments (Houghton Regis) Limited England 85 Property**
Sigma PRS Investments (Houghton Regis II) Limited England 85 Property**
Sigma PRS Investments (Lea Hall) Limited England 85 Property**
Sigma PRS Investments (Lea Hall II) Limited England 85 Property**
Sigma Capital Group plc | Annual Report & Financial Statements 2018 57
COUNTRY OF
COMPANY NAME INCORPORATION % HOLDING PRINCIPAL ACTIVITY
Sigma PRS Investments (Newhall) Limited England 85 Property**
Sigma PRS Investments (Newhall II) Limited England 85 Property**
Sigma PRS Investments (Newton Le Willows) Limited England 85 Property**
Sigma PRS Investments (Owens Farm) Limited England 85 Property**
Sigma PRS Investments (Owens Farm II) Limited England 85 Property**
Sigma PRS Investments (Plough Hill Road) Limited England 85 Property**
Sigma PRS Investments (Plough Hill Road II) Limited England 85 Property**
Sigma PRS Investments (Romandby Shaw) Limited England 85 Property**
Sigma PRS Investments (Romandby Shaw II) Limited England 85 Property**
Sigma PRS Investments (Station Road) Limited England 85 Property**
Sigma PRS Investments (Station Road II) Limited England 85 Property**
Sigma PRS Investments (Sutherland School) Limited England 85 Property**
Sigma PRS Investments (Whitworth Way) Limited England 85 Property**
Sigma PRS GP Limited Scotland 100 Property*
Sigma PRS General Partner LLP Scotland 100 Property*
Sigma PRS Management Ltd England 100 Property**
Sigma PRS Property Investments LP England 100 Property**
Liverpool Inpartnership Limited England 100 Property**
Solihull Inpartnership Limited England 100 Property**
Salford Inpartnership Limited Scotland 100 Property*
Inpartnership (LP) Limited Scotland 100 Property*
City Spirit Regeneration Ltd England 100 Property**
City Spirit Regeneration (Salford) Limited England 100 Property**
Inpartnership CS Limited England 100 Property**
Blackburn Inpartnership Limited Scotland 100 Property*
Sigma Technology Management Limited England 100 Venture Capital**
Sigma Technology Investments Limited England 100 Venture Capital**
Sigma Technology Founder Partners Limited England 100 Venture Capital**
Liverpool Inpartnership 2007 Limited England 100 Dormant**
Sigma PRS Properties LP Scotland 100 Dormant*
SI Hotels (GP1) Limited England 100 Dormant**
SI Hotels (GP2) Limited England 100 Dormant**
SI Hotels Glasgow (GP1) Limited Scotland 100 Dormant*
SI Hotels Glasgow (GP2) Limited Scotland 100 Dormant*
SI No 7 (GP1) Limited Scotland 100 Dormant*
SI No 7 (GP2) Limited Scotland 100 Dormant*
SI (LP) Limited England 100 Dormant**
Registered Office: 18 Alva Street, Edinburgh, EH2 4QG
Registered Office: Floor 3, 1 St. Ann Street, Manchester, M2 7LR
*
**
*** Registered Office: 44 Esplanade, St. Helier, Jersey, JE6 9WG
58 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
The Company has guaranteed the liabilities of the following subsidiaries exempt from audit under Section
479A of the Companies Act 2006. The names and company registration numbers are below:
COMPANY NAME COMPANY REGISTRATION NUMBER
Sigma Technology Founder Partners Limited 04080037
Sigma Technology Management Limited 03289432
Sigma Property Partners Limited SC488231
Salford Inpartnership Limited SC220873
Solihull Inpartnership Limited 05094769
Blackburn Inpartnership Limited SC266115
Inpartnership (LP) Limited SC260339
Inpartnership (CS) Limited 06529901
City Spirit Regeneration Limited 03278486
City Spirit Regeneration (Salford) Limited 04911111
Burrell Inpartnership Limited SC287397
18.
Investment in joint venture
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
At 1 January 2018 1,744 892 - -
Share of profits 1,950 852 - -
At 31 December 2018 3,694 1,744 - -
Group share of net assets 3,694 1,744 - -
The share of net assets relates to the Group’s investment in Countryside Sigma Limited. Countryside Sigma
Limited is incorporated in the United Kingdom and the Group owns 25.1% of the ordinary share capital.
The accounting reference date of Countryside Sigma Limited is 30 September and its registered address
is Countryside House, The Drive, Great Warley, Brentwood, Essex CM13 3AT. The results for 12 months to
31 December 2018 and the financial position as at that date have been equity accounted in these financial
statements. The Group is contractually entitled to 50% of the profit expected to be realised at the end of
the development by Countryside Sigma Limited.
The following is the summarised financial position of Countryside Sigma Limited as at 30 September:
2018 2017
£’000 £’000
Profit for the financial year after taxation 3,793 1,489
Net assets at the end of the financial year 6,979 3,186
Sigma Capital Group plc | Annual Report & Financial Statements 2018 59
19. Fixed asset investments
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
At 1 January 2018 2 2 - -
Additions - - - -
At 31 December 2018 2 2 - -
This relates to the Group’s investment in UK PRS (Jersey) I Limited Partnership.
20. Financial assets at fair value through profit and loss
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
At 1 January 2018 899 576 - -
Additions 1,439 - - -
Fair value write (down)/up (151) 323 - -
At 31 December 2018 2,187 899 - -
The financial assets at fair value through profit and loss are the Group's holdings in venture capital funds,
quoted securities and one unquoted security. The underlying investments in the funds are in unlisted start-up
companies. The investments are valued by the manager of the fund on a basis consistent with industry
guidelines and are reviewed quarterly by the Board. The directly held quoted securities amount to
£1,298,000 and relates to the Group’s holding of equity shares in The PRS REIT plc. The directly held
unquoted security amounts to £151,000 and was also valued on a basis consistent with industry guidelines.
The quoted security falls within Level 1 of the fair value hierarchy as defined by IFRS 13 whereas the funds
and unquoted security fall within Level 3. The movement in the year and prior year of financial assets at fair
value based on their hierarchy is as follows:
LEVEL 1 LEVEL 3 TOTAL
£’000 £’000 £’000
At 1 January 2017 - 576 576
Additions - - -
Fair value write up - 323 323
At 31 December 2017 - 899 899
Additions 1,439 - 1,439
Fair value write (down)/up (141) (10) (151)
At 31 December 2018 1,298 889 2,187
The total fair value adjustments made during the year relating to investments, both financial assets at fair
value through profit and loss and trading investments, are set out below.
60 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
20. Financial assets at fair value through profit and loss (continued)
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Financial assets at fair value through profit and loss:
- the venture capital funds 72 96 - -
- quoted securities (141) - - -
- unquoted securities (82) 227 - -
(151) 323 - -
21. Trade receivables and other current assets
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Trade receivables 1,927 950 - -
Receivables from Group undertakings – current - - 26,646 27,105
Social security and other taxes - 100 - -
Other debtors 457 499 11 3
Prepayments and accrued income 619 1,804 30 40
Prepayments and accrued income – non current - 3,088 - -
Contract receivables – non current 3,001 - - -
6,004 6,441 26,688 27,148
Less prepayments and accrued income – non current - (3,088) - -
Contract receivables – non current (3,001) - - -
Current portion 3,003 3,353 26,688 27,148
Trade receivables
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Trade receivables not due 1,860 943 - -
Trade receivables past due 1-30 days 65 3 - -
Trade receivables past due 31-60 days - 3 - -
Trade receivables past due 61-90 days - 1 - -
Trade receivables past due over 90 days 2 - - -
Gross trade receivables at 31 December 2018 1,927 950 - -
Provision for bad debt at 1 January 2018 - - - -
Debt provisions reversed in the year - - - -
Provision for bad debt at 31 December 2018 - - - -
Net trade receivables at 31 December 2018 1,927 950 - -
Sigma Capital Group plc | Annual Report & Financial Statements 2018 61
The Directors consider that the carrying amount of trade receivables approximates to their fair value. Debts
provided for and written off are determined on an individual basis and included in Administrative expenses
in the financial statements. The Group’s maximum exposure on credit risk is fair value on trade receivables
as presented above. The Group has no pledge as security on trade receivables.
The Group’s non-current contract receivables represents amounts not yet invoiced and include fees of
£1,112,000 (2017: £1,242,000) expected to be paid no later than spring 2020 and £1,889,000 (2017:
£1,846,000) which is expected to be paid no earlier than 2022. The prior year amounts were shown in
non-current accrued income and prepayments and there has been no significant movement in the year.
22. Trade, other payables and current taxation
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Trade payables 1,296 3,352 19 32
Payables to Group undertakings - - 50 1,607
Social security and other taxes 357 141 57 47
UK Corporation tax 864 72 - -
Accruals and deferred income 2,014 1,333 55 50
4,531 4,898 181 1,736
The Directors consider that the carrying amount of trade payables approximates to their fair value.
23.
Interest – bearing loans and overdrafts
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Current liabilities
Bank loans 55 55 - -
Non-current liabilities
Bank loans 371 426 - -
Development facility 2,617 97 - -
2,988 523 - -
Total interest bearing loans and overdrafts 3,043 578 - -
The bank loan part funded the acquisition and redevelopment of the Group’s head office in Edinburgh. The
original value of the loan was £550,000 and is repayable in quarterly instalments with a final instalment in
2021. Interest is charged at commercial rates. The loan is held by Sigma Capital Property Ltd and is secured
on the property. A cross guarantee is provided by the Company.
The development facility is utilised to fund the Group’s investment in private rented sector property. The
total facility is £45m and interest is charged at commercial rates. The facility is held by Sigma PRS Property
Investments LP, a subsidiary of the Company, and is secured on a number of investment properties. A cross
guarantee is provided by the Company.
62 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
24. Deferred tax liability
GROUP COMPANY
2018 2018
£’000 £’000
Amounts due to be paid greater than one year 716 -
The movement in the year and prior year in the Group and Company net deferred tax liability position was as
follows:
Opening position as at 1 January 2017 297 -
Charge to statement of comprehensive income for the year 306 -
At 31 December 2017 603 -
Charge to statement of comprehensive income for the year 113 -
At 31 December 2018 716 -
The deferred tax liability relates to the Group’s joint venture with Gatehouse Bank.
25. Share capital and share premium
Group and Company
NUMBER ORDINARY SHARE
OF SHARES SHARES PREMIUM TOTAL
£’000 £’000 £’000
Opening balance as at 1 January 2018 88,715,715 887 31,885 32,772
Share options exercised during the year 623,071 6 163 169
Closing balance as at 31 December 2018 89,338,786 893 32,048 32,941
The total authorised number of ordinary shares is 130,000,000 (2017: 130,000,000) with a par value of 1p
per share (2017: 1p). All issued shares are fully paid.
26. Share options
The Company has two option schemes for executive Directors and employees, the Sigma Capital Group plc
Company Share Option Scheme 2010, which has received HM Revenue and Customs approval, and the Sigma
Capital Group plc Unapproved Share Option Scheme 2010. All options are granted at the market value of the
shares at the date of grant. Both share option schemes run for a period of ten years and have a vesting
period of three years. All employees are eligible to participate in the schemes. No payment is required from
option holders on the grant of an option. There were 275,000 options over ordinary shares (2017: 1,805,856)
granted during the year. No performance conditions or market conditions are attached to these options.
Sigma Capital Group plc | Annual Report & Financial Statements 2018 63
Movements in the number of share options outstanding and their related weighted average exercise prices
were as follows:
2018 2017
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE PRICE EXERCISE PRICE
IN PENCE PER OPTIONS IN PENCE PER OPTIONS
SHARE (‘000S) SHARE (‘000S)
At 1 January 2018 72.6 5,891 66.4 4,128
Granted 92.0 275 87.0 1,806
Exercised (27.0) (623) - -
Expired / lapsed (89.9) (481) 89.2 (43)
At 31 December 2018 77.7 5,062 72.6 5,891
Of the 5,062,000 outstanding options (2017: 5,891,000), 1,597,000 had vested at 31 December 2018 (2017:
3,251,000).
Share options outstanding at the end of the year have the following expiry date and exercise prices:
EXERCISE PRICE
PENCE PER 2018 2017
EXPIRY DATE SHARE NUMBER NUMBER
2021 8.0 - 250,000
2021 7.5 251,000 369,500
2023 26.25 330,238 411,190
2024 68.0 1,016,065 1,189,684
2026 93.5 1,714,383 1,864,383
2027 87.0 1,559,651 1,805,856
2028 92.0 190,000 -
There were 275,000 (2017: 1,805,856) options granted in the year. The weighted average fair value of options
granted to executive Directors and employees during the year determined using the Black-Scholes-Merton
valuation model was 19.8p per option. The significant inputs into the model were exercise price shown above,
volatility of 30%, dividend yield of 0%, expected option life of 4 years and annual risk free interest rate of
0.9%. Future volatility has been estimated based on historical data.
27. Other reserves
The capital redemption reserve was created on the buy-back of shares in the Company and their subsequent
cancellation, being the nominal value of the shares cancelled. The merger reserve and capital reserve were
created on the merger of Sigma Technology Management Limited ("STM") with the Company. The fair value
of equity-settled share-based payments is expensed on a straight line basis over the vesting period and the
amount expensed in each year is recognised in retained earnings. The movement in reserves for the years ended
31 December 2018 and 2017 is set out in the Consolidated and Company Statements of Changes in Equity.
64 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Notes to the Financial Statements (continued)
28. Operating lease commitments
In January 2016 the Company commenced a new lease for Group offices in Manchester under a non-
cancellable operating lease which expires in 2021. Other Group companies lease various plant and machinery
under non-cancellable lease agreements. The future aggregate minimum lease payments under non-
cancellable operating leases are as follows:
2018 2017
PLANT AND LAND AND PLANT AND LAND AND
MACHINERY BUILDINGS MACHINERY BUILDINGS
£’000 £’000 £’000 £’000
The Group
Within 1 year 15 30 12 30
From 2-5 years 24 30 26 60
After 5 years - - - -
39 60 38 90
The Company
Within 1 year - 30 - 30
From 2-5 years - 30 - 60
After 5 years - - - -
- 60 - 90
29. Cash flows from operating activities
GROUP GROUP COMPANY COMPANY
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Total comprehensive income for the year 11,461 3,679 6,885 (14)
Adjustments for:
Share-based payments 211 269 211 269
Depreciation 26 25 10 10
Amortisation - 11 -
Finance costs net of finance income 159 189 (2) (5)
Dividends received (58) - (6,350) -
Fair value loss/(profit) on financial assets
at fair value through profit or loss 151 (323) - -
Share of associate profit (1,950) (852) - -
Unrealised profit on revaluation of investment property (1,362) (1,915) - -
Realised profit on sale of investment property (2,302) (812) - -
Unrealised profit on revaluation of freehold property (186) - - -
Changes in working capital:
Trade and other receivables 435 538 3,710 (3,654)
Trade and other payables (253) 977 (4,806) 77
Cash flows from operating activities 6,332 1,786 (342) (3,317)
Sigma Capital Group plc | Annual Report & Financial Statements 2018 65
30. Capital commitments
The Group have entered into contracts with unrelated parties for the construction of residential housing with
a total value of £24,438,000 (2017: £31,380,000). As at 31 December 2018, £7,968,000 (2017: £11,544,000) of
such commitments remained outstanding.
31. Related party transactions
Sigma holds a 25.1% shareholding in Countryside Sigma Limited. Fees invoiced in relation to development
management services for the year were £1,025,000 (2017: £406,000). At 31 December 2018, Sigma was
owed £48,000 (2017: £9,000).
The Group has a 20.1% capital interest in Thistle Limited Partnership, its joint venture with Gatehouse. Profit
share earned and paid during the year were £483,000 (2017: £375,000). The Group also received interest of
£nil (2017: £3,000) in respect of its loans to Thistle Limited Partnership.
The Group has a 20% interest in UK PRS (Jersey) I LP in respect of its joint venture with UK PRS Properties.
Fees invoiced in relation to services for the year were £444,000 (2017: £1,009,000). At the year end, Sigma
were owed £nil (2017: £236,000).
Sigma owns 1,374,854 equity shares in The PRS REIT plc. Fees invoiced during the year in relation to
development management services, investment advisory services and administration fees amounted to
£10,673,000. As at 31 December 2018, Sigma was owed £1,759,000. In addition, Sigma sold its investments in
10 subsidiaries to The PRS REIT plc for a total value of £50,444,000. There were no amounts outstanding at
the end of the year.
Certain Directors have been allocated a share of the carried interest in respect of the PRS joint ventures with
Gatehouse and with UK PRS properties. In addition, subject to certain performance conditions, four of the
Directors may be entitled to a share of the total profit on disposal in relation to the Group’s self-funded PRS
properties. Details of the carried interest arrangements and the carried interest crystallised to date are
contained in the Directors’ Remuneration Report.
66 Sigma Capital Group plc | Annual Report & Financial Statements 2018
Five Year Record
2018 2017 2016 2015 2014
£’000 £’000 £’000 £’000 £’000
Revenue 12,477 4,437 5,383 6,724 3,868
Cost of sales (67) (103) (460) (1,621) (660)
Gross profit 12,410 4,334 4,923 5,103 3,208
Other operating income 3,513 3,050 2,040 (26) 170
Administrative and other expenses (5,719) (4,268) (3,598) (3,259) (3,192)
Profit from operations 10,204 3,116 3,365 1,818 186
Net finance income 27 89 290 319 28
Share of profits from joint
ventures/associate companies 1,950 852 443 449 -
Exceptional item - - (428) - -
Profit before tax 12,181 4,057 3,670 2,586 214
Taxation (906) (378) (105) (192) -
Profit for the year 11,275 3,679 3,565 2,394 214
Other comprehensive income 186 - - - -
Total comprehensive income for the year 11,461 3,679 3.565 2,394 214
Attributable to:
Equity holders of the Company 11,461 3,679 3,565 2,394 214
11,461 3,679 3,565 2,394 214
Net assets employed 51,876 40,035 36,087 32,255 10,620
Basic earnings per ordinary share (pence) 12.65 4.15 4.02 3.39 0.38
Hamilton Square,
Atherton
Woodbine Road,
Halewood
EDINBURGH:
18 Alva Street
Edinburgh
EH2 4QG
MANCHESTER:
Floor 3, 1 St Ann Street
Manchester
M2 7LR
LONDON:
40 Gracechurch Street
London
EC3V 0BT
T: 0333 999 9926
W: www.sigmacapital.co.uk