ANNUAL REPORT
& FINANCIAL
STATEMENTS
For the nine month period ended
30 September 2020
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
CONTENTS
KEY POINTS
CHAIRMAN’S STATEMENT
CORONAVIRUS AND GOING CONCERN REVIEW
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
PRINCIPAL RISKS AND UNCERTAINTIES
DIRECTORS
ADVISERS
DIRECTORS’ REPORT
DIRECTORS’ REMUNERATION REPORT
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
AUDIT COMMITTEE REPORT
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
ACCOUNTING POLICIES
NOTES TO THE FINANCIAL STATEMENTS
FIVE YEAR RECORD
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Company number 03942129
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KEY POINTS
SUMMARY
• Results in line with market expectations
•
•
•
Business model showed considerable resilience in the face of the coronavirus pandemic
Strong bounce back after the opening up of the construction and lettings industries in May 2020
Major joint venture, potentially worth £45m in fee income alone in the first five years, agreed with
EQT Real Estate in September; targeting £1bn build-to-rent portfolio in Greater London
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
FINANCIAL RESULTS
MANAGED PRS ACTIVITIES
SELF-FUNDED PRS ACTIVITIES
9-month reporting period following the change of accounting reference date to
30 September
Revenue
Profit from operations
Profit before tax
Earnings per share
Net assets
Net assets per share
Cash balances
Dividend per share
9 months
to 30 September
2020
12 months
to 31 December
2019
£8.0m
£3.2m
£3.2m
2.84p
£61.1m
68.3p
£25.8m
2.0p
£13.9m
£12.0m
£13.0m
11.63p
£60.5m
67.6p
£16.8m
2.0p
CORONAVIRUS IMPACT
•
Disruption of construction activity is estimated to have reduced activity level by 25%
over the 9-month period
• No requirement to furlough staff or to use Government assistance schemes
• Rental demand and rent collection remained strong
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
The PRS REIT plc (“REIT”)
• A total of 1,017 new rental homes were
delivered to the REIT in the 9-month period,
taking its portfolio to 2,634 homes at 30
September 2020, with an estimated rental
value (“ERV”) of £24.3m pa
• The REIT’s funding resource of £900m (gross)
was fully committed by 31 December 2020
with the acquisition of a fully-let development
of 123 suburban new homes. This development
had originally been created and developed by
Sigma for BlackRock Real Assets
•
•
Two self-funded developments were
completed and sold to the REIT for a total of
£11.9m after independent valuation. Sigma’s
realised profit was £1.1m.
Six developments (c.395 homes) are currently
under way, with a gross development cost
(“GDC”) of c.£90.8m and ERV of c.£5.1m. The
two London developments will seed the EQT
Real Estate joint venture
POST PERIOD AND OUTLOOK
• In Q1 of the new financial year, a total of 529
• ESG manager appointed in November 2020
homes (including from the above acquisition)
were added to the REIT’s portfolio, taking it
to 3,163 completed homes, with an ERV of
£29.4m at 31 December 2020
-
-
a further 1,963 homes were contracted,
which takes the portfolio to 5,126
homes, with an ERV of £48.8m pa, when
completed and let
delivery of the REIT’s 5,000th completed
home is expected in late 2021/early 2022
Gatehouse Bank and UK PRS Properties
partnerships
• The Thistle Portfolio and UK PRS Portfolio
(together c.1,600 PRS homes) contributed
£0.4m and £0.4m of asset management fees
respectively in the period
•
•
•
•
New Collaboration Agreement with principal
construction partner, Countryside Properties
plc, signed in December to deliver up to
5,000 new PRS homes over the next three
years
Investment Advisory Agreement with the
REIT was extended from 31 May 2022 to 31
December 2025
Sigma’s interest in the Thistle Portfolio (918
PRS homes) was realised; net cash of £2.9m is
£1m ahead of book value
Q1 trading is in line with management
expectations and Board is confident of
growth prospects
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KEY POI NTS (CONTINUED)
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
GRAHAM BARNET,
CEO OF SIGMA CAPITAL GROUP PLC,
COMMENTED:
“Sigma’s final results reflect the impact of the coronavirus crisis and the
shorter nine month reporting period, following the change of year end.
Nonetheless, we delivered over 1,000 new rental homes for The PRS REIT plc in the
period, and delivery momentum has bounced back to almost pre-coronavirus level.
“The launch of our £1bn joint venture with EQT Real Estate, which is targeting 3,000 new
London rental homes over the next five years, was a landmark event in September 2020. It
sees us advance into a new geography, and adds new long-term income streams. Like the recent
high-profile sale of the ‘Thistle’ portfolio of suburban rental homes, which we created for Gatehouse
Bank, it is further recognition of the value our model creates both for partners and for Sigma.
“The business is in a very strong position, financially and operationally. Our new agreements with
Countryside Properties, for housing delivery, and with The PRS REIT plc, extending our advisory
agreement, create added visibility. Trading in the first quarter of the new financial year is in line with
management expectations, and with demand for our rental homes remaining high, the Group is in a
strong position to achieve its targets for the financial year.”
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
5
5
CHAIRMAN’S STATEMENT
INTRODUCTION
This report presents Sigma’s trading results
for the nine months ending 30 September
2020 and the comparative figures are for the
12 months ending 31 December 2019. This
follows the change in Sigma’s financial year
end to 30 September, which should result in a
reporting cycle that is more compatible with the
Company’s seasonal trading pattern.
We are very pleased with Sigma’s performance,
given the unprecedented challenges the
coronavirus pandemic presented in the period.
The global outbreak has caused significant
economic and social turmoil, which still
continues. The response shown by our staff
and partners to this exceptional situation has
been outstanding, and we would like to thank
everyone for their care and commitment. They
have helped the business to negotiate the
difficulties in the period well. Sigma’s significant
cash resource, which currently stands at £26.2m,
positions the business strongly in the face of
further disruption, although with the rollout of
the mass vaccine programme, we hope to see
a more stable situation emerge. The Company’s
resilience through the crisis reflects both our
robust business model and careful financial
management. We have increased our resource
in order to support growth plans and there was
no requirement to furlough staff or take up any
Government’s assistance.
In September, we were delighted to announce
the launch of a major joint venture with EQT
Real Estate, the real estate platform of global
investment firm EQT. Homes England, the
housing agency of the UK government is
supporting the venture, which aims to create a
£1bn build-to-rent portfolio of c. 3,000 homes
in Greater London in this first phase. This new
agreement is potentially worth c.£45m in fee
income alone over the first five years. We are
now advancing the delivery of initial seed assets
and progressing development opportunities
through our PRS property platform. It provides
a professional and secure supply chain for the
acquisition, construction and management of
rental homes.
We agreed two significant contracts after the
year end. First, in December, we signed a new
collaboration agreement with Countryside
Properties plc (“Countryside”), our principal
home building partner, covering the delivery of
up to 5,000 new private rental sector (“PRS”)
homes over the next three years. The new
agreement supports both companies’ growth
ambitions, and enables Sigma to map out
housing delivery effectively while Countryside
is able to deliver homes more quickly on its
larger, mixed tenure sites. Secondly, in January
2021, we agreed terms to extend our Investment
Advisory Services with The PRS REIT plc (“the
REIT” or “the PRS REIT”). The new agreement
has extended our contract from 31 May 2022 to
31 December 2025. This gives us considerable
additional visibility, with the extension equating
to a potential c.£16m of asset management
income.
In addition, after the period end, the Thistle
Portfolio, our first large-scale portfolio of 918 PRS
homes that was completed in 2017 for £110m for
Gatehouse Bank, was sold for c.£150m. The sale
has crystallised our beneficial interest at £2.9m
net, c.53% above its book value. It is powerful
validation of the strength of our model and the
value we create for Sigma and our partners.
Government measures to contain the spread
of the virus, including lockdowns and other
restrictions, set construction activity back by
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
an estimated 600 homes over the nine month
period and adversely impacted both fee income
and capital growth relating to self-financed
assets. Nonetheless we delivered a significant
number of new rental homes; 1,017 homes to the
PRS REIT in the shortened financial period. This
delivery compares to 842 homes in the last full
financial year and the quickening pace reflects
the increased number of sites under construction
and advancing to maturity.
By the end of December 2020, at the close of
the first quarter of Sigma’s current financial
year, a further 529 new homes were delivered
to the REIT (which includes the BlackRock Real
Assets homes). This took the REIT’s portfolio to
3,163 completed homes, with an ERV of £29.4m,
and 1,963 contracted homes, at varying stages
of development. Together, these 5,126 homes
will provide an ERV of £48.8m per annum once
completed and let.
Demand for our new rental homes remains high,
reflecting their build-quality and location, and the
undersupply that exists. Let homes have been
performing well, on average 2% above budget.
While uncertainty remains, particularly over
the coronavirus situation, Sigma is well-
positioned, financially and operationally. We
have significantly increased the Company’s
geographic reach and potential opportunity,
and added significant new income streams. The
Board therefore views growth prospects very
confidently.
The additional 1,017 homes took the REIT’s
portfolio of completed homes to 2,634 at 30
September 2020, providing an estimated rental
value (“ERV”) of £24.3m per annum when fully
let. A further 2,369 contracted homes, with
an ERV of £23.3m per annum were also under
way at that point. Homes are located in most of
the major regions of England, providing good
geographical diversification. Locations are
chosen with care, with proximity to good primary
schools a priority.
While Sigma’s housing delivery in the period was
primarily for the REIT and funded by the REIT,
a tranche was funded by Sigma. We completed
and sold two self-funded sites to the REIT
for a combined £11.9m based on independent
valuations, crystallising a realised gain of £1.1m.
The sites were fully-let at the point of sale, and
comprised 52 homes, with an ERV of £0.6m p.a.
A further four self-funded sites are under way for
the REIT.
We also acquired a fully-let development of
123 rental homes on behalf of the REIT from
BlackRock Real Assets in December 2020. We
knew the development well, having created and
delivered it for BlackRock Real Assets in 2019.
The acquisition of this asset also marked the
completion of the commitment of the REIT’s
funding resource of £900m (gross).
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
CHAIRMAN’S STATEMENT (CONTINUED)
FINANCIAL RESULTS
DIVIDENDS
MANAGED PRS ACTIVITIES
• Completed sites
Please note that, following the change in Sigma’s
accounting reference date, the financial period
under review comprises the nine months ended
30 September 2020. The comparative period
comprises 12 months ended 31 December 2019.
The Board is pleased to declare a dividend
of 2.0p per share for the nine month financial
period (12 months to 31 December 2019: 2.0p),
which reflects the Board’s confidence in the
Company’s growth prospects.
In the nine month period ended 30 September
2020, the Group generated total revenue of
£8.0m (2019: £13.9m). However, the period
included six weeks when all construction activity
was suspended because of the coronavirus
pandemic and a further twelve weeks of
disruption before activity returned to more
normalised levels. Revenue comprised PRS
income relating to the REIT, Gatehouse Bank and
UK PRS Properties, as well as rental income from
completed homes on self-funded sites, prior to
the sites’ full completion and onward sale.
Profit from operations for the nine months was
£3.2m (2019: £12.0m). This included realised
and unrealised gains from investment property
of £1.3m (2019: £3.9m), and recognition of an
unrealised loss on investments of £0.2 million
(2019: unrealised gain £0.2 million).
Profit before tax for the nine months was £3.2m
(2019: £13.0m) and basic earnings per share was
2.84p (2019: 11.63p).
Net assets at 30 September 2020 stood
at £61.1m, equivalent to 68.3p per share (31
December 2019: £60.5m, equivalent to 67.6p per
share).
Cash used by operations in the nine months was
£1.3m (2019: cash generated from operations
£8.0m), reflecting lower creditors as a result of
reduced PRS activity.
Cash balances at 30 September 2020 amounted
to £25.8m (31 December 2019: £16.8m), and at 19
January 2021 cash balances totalled £26.2m.
The dividend will be paid on 12 March 2021 to
shareholders on the register on 26 February 2021.
BUSINESS AND OPERATIONAL
OVERVIEW
Sigma is focused on delivering high-quality new
homes for private rental across the UK. The
Group’s PRS property platform brings together
a network of formal and informal relationships.
These include construction partners, central
government and local authorities. Sigma
typically delivers a range of traditional housing
through its property platform partners, enabling
the Company to cater for a broad spectrum of
demand, from young couples to growing families
and retirees.
With the launch of the joint venture with EQT
Real Estate, from 2021, Sigma’s income streams
now comprise:
•
•
•
•
acquisition fees for the assets that the Group
procures and delivers to third parties;
development management fees for the assets
the Group procures and delivers to third
parties;
asset management fees for the overall
management of the assets; and
development profits on the assets that the
Group self-funds and subsequently sells, once
completed. Sigma also retains any rental
income prior to the sale of a completed site.
EQT Real Estate
In September 2020, the Group announced the
launch of a joint venture with EQT Real Estate,
the real estate platform of global investment firm
EQT, to deliver high quality, new-build homes
for private rental in Greater London. The joint
venture is being supported by Homes England,
the housing agency of the UK government,
and is targeting the establishment of an initial
portfolio of approximately 3,000 homes with a
value in excess of £1bn. Two sites, currently under
development by Sigma, at Fresh Wharf, Barking
and Beam Park, Havering will be acquired by the
joint venture on practical completion, expected
by September 2021.
The PRS REIT plc
Sigma subsidiaries are Investment Adviser and
Development Manager to the REIT, which was
created and subsequently launched by Sigma on
31 May 2017. The REIT’s objective is to establish a
substantial portfolio of new-build homes across
the regions 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. As well as sourcing and assessing
suitable sites, Sigma PRS manages the
planning and development processes and the
subsequent letting of completed homes. Two
thirds of the REIT’s new properties has been
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.
The REIT acquires completed PRS sites
from Sigma pursuant to a forward purchase
agreement. Sigma earns development profits
from the sale of such sites, and receives rental
income from let homes until the point of sale.
Completed assets may also be acquired from
other third parties.
All sites must satisfy the REIT’s investment
objectives and are independently valued for
the REIT prior to acquisition.
On 20 January 2021, we were pleased to report
that our Investment Advisory Agreement with
the REIT had been extended from 31 May 2022
to the end of December 2025, with a one year
notice period thereafter.
The agreement sets out Sigma’s asset
management fees for managing the REIT’s
assets, with fees calculated on a sliding scale,
based on a percentage of the adjusted net asset
value (“NAV”) of the REIT’s portfolio. Sigma earns
1% of the value of the REIT’s adjusted net assets
up to £250m, with this percentage moving to
0.9% and 0.75% at intermediate thresholds, and
then to 0.5% at £1bn and above and 0.4% at £2bn
and above. The agreed extension equates to an
additional c.£16m in asset management fees.
The total debt facilities available to the REIT
at 30 June 2020 comprised a £150 million
revolving credit facility with Lloyds Banking
Group / RBS and two fixed rate term loans
with Scottish Widows for £100 million and
£150 million respectively. In September 2020,
Sigma negotiated an additional £50 million
development debt facility for the REIT with
Barclays Bank PLC.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
9
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
In January 2021, Sigma’s beneficial interest in the
Thistle Portfolio was realised when the portfolio
was sold for a total consideration of c.£150m
to Goldman Sachs Merchant Banking Division
and Pitmore. Sigma will receive a total net cash
payment of £2.9m following completion, which
represents its share of total sale profits after
certain hurdles. This sum stands at 53% above
the book value of £1.9m ascribed to this interest
in both these and the Company’s 2019 report
and accounts.
The Thistle Portfolio has consistently generated
attractive returns, with average occupancy over
99% and rent collection in excess of 98%. This
includes during the coronavirus pandemic and
is in line with the performance of Sigma’s own
assets and the REIT’s portfolio. Its sale marks the
first significant sale in the UK of a portfolio of
new-build, single-family suburban PRS houses,
and provides market evidence for the current
and future valuation of the Company’s assets,
both on its own balance sheet and managed for
external parties.
The homes in the initial UK PRS Properties
portfolio, which we completed in November
2018, are situated across sites in the North
West and West Midlands. They generate
approximately £6.2m in annual rental income.
Sigma earned £0.43m for its services from this
joint venture in the period to 30 September
2020. In June 2020, we commenced the delivery
of a site of 65 units at Walsall in the West
Midlands, which is expected to complete in the
spring of 2022.
CHAIRMAN’S STATEMENT (CONTINUED)
Although the aggregate debt facilities total £450
million, £75 million of the Lloyds Banking Group
/ RBS facility and the £50 million Barclays Bank
PLC debt facility are drawn as development debt
facilities to enable a larger number of sites to be
developed simultaneously. Following practical
completion and stabilisation of lettings on sites
partially funded by development debt, the assets
are refinanced using the REIT’s longer-term
investment debt facilities. On that basis, the
total borrowings will not exceed the maximum
gearing level of 45%.
On 3 December 2020, the Company announced
that it had delivered the 3,000th home for the
REIT. Soon after, Sigma completed negotiations
for the acquisition of a fully-let development
of 123 homes from BlackRock Real Assets,
taking the REIT’s portfolio at 31 December 2020
to 3,163 homes, with an ERV of £29.4m. The
development was well-known to us, having been
created and developed by Sigma for BlackRock
Real Assets in 2019. Its acquisition also marked
the full commitment by Sigma of the REIT’s
funding resource of £900m (gross).
Delivery of new homes for the REIT in the period
under review was severely disrupted by the
coronavirus pandemic and, in particular, by the
initial national lockdown. Construction activity
was suspended for approximately six weeks,
from the end of March to early May. Sites were
reopened with social distancing and other safety
measures in place, and while this has adversely
affected the pace of delivery, the new working
practices are working well. We estimate that the
shutdown and decreased productivity reduced
unit delivery in the nine month period by c. 600
homes.
Notwithstanding the disruption, a total of 1,017
homes were completed in the nine month period
to 30 September 2020, compared with 842 in
the prior 12-month financial year. This reflected
the significant increase in the number of sites in
the delivery programme. It took the total number
of completed homes at 30 September 2020 to
2,634 across six of the eight major regions of
England (31 December 2019: 1,617). The ERV of
the completed homes at 30 September 2020
was £24.3m per annum (31 December 2019:
£14.9m per annum).
We are now well into the final stages of
delivering the REIT’s initial portfolio, which once
fully optimized is anticipated to be around 5,200
homes, with an ERV of approximately £50.0m
per annum. Delivery of the 5,000th home is
currently expected in late 2021/early 2022.
Gatehouse Bank and UK PRS Properties
The 918 new homes, known as the Thistle
Portfolio, delivered under our joint venture
with Gatehouse Bank, and the 684 properties
completed for UK PRS Properties, which is
principally backed by the Kuwaiti Investment
Authority and institutional shareholders from the
State of Kuwait, continued to rent very well.
The homes in the Thistle Portfolio, which we
completed in March 2017, are located across
15 sites in the North of England and generate
rental income of about £8.3m per annum
for Gatehouse Bank. Sigma earned an asset
management fee of approximately £0.4m
from the portfolio in the nine months to 30
September 2020.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
11
CHAIRMAN’S STATEMENT (CONTINUED)
SELF-FUNDED PRS ACTIVITIES
During the period, Sigma completed the
development, letting and sale of two self-funded
sites to the REIT, a 21-unit development in
Bury St. Edmunds and 31-unit development in
Birmingham. The combined rental income from
the 52 properties is about £0.6m per annum.
The total sales value of the two sites was £11.9m,
based on an independent valuations by Savills,
and the realised profit for Sigma was £1.1m.
The Company currently has six self-funded
development sites under way, in the North West,
Midlands, South and London. These will deliver
approximately 395 homes in total and have a
combined GDC of £90.8m and an ERV of £5.1m
per annum.
The two development sites in London have
a total GDC of c.£43.1m and are Sigma’s first
build-to-rent activity in this region. One site
is an 80-unit development site at Beam Park,
part of a £1 billion regeneration project under
way across the London Boroughs of Havering
and Barking & Dagenham, on land released
by the Greater London Authority as part of its
plans for new London homes. The other site is
a 77-unit development at Fresh Wharf, a major
riverside scheme close to Barking Town centre.
Sigma is working with Countryside Properties
and L&Q New Homes at the Beam Park scheme,
and with Countryside Properties and Notting
Hill Developments at Fresh Wharf. Once the
properties have achieved practical completion
they will be sold to our London joint venture
with EQT Real Estate, seeding the venture with
its first completed assets.
Opportunity for PRS in Scotland
The Sigma Scottish PRS Fund (“the Scottish
Fund”) was established in partnership with
the Scottish Government to create new rental
homes in Scottish cities. To support the venture,
a Collaboration Agreement was signed with
Springfield Properties plc (“Springfield”), a
leading house builder in Scotland. However,
this venture was paused with the onset of the
coronavirus crisis although we continue to
review our options relative to value creation
opportunities elsewhere in the UK.
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.
The transformation of a 19-acre former
secondary school site at Gateacre in Liverpool,
was completed in 2019 and, as a result, the Group
dealt with residual matters during 2020. The
Group received dividends from its joint venture
with Countryside during the period of £4.3m.
BUILDING COMMUNITIES
The new homes that Sigma is delivering for the
REIT’s portfolio form new neighbourhoods and
communities. We recognise our responsibility
towards ensuring that these are well-functioning
communities, and our vision is to create homes
and neighbourhoods that people will enjoy living
in and will feel a part of.
All the homes that we deliver are marketed
under our ‘Simple Life’ brand and, as we have
previously stated, our goal is for this brand to be
increasingly recognised as representing a gold
standard in the private rental market.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Mike has over 20 years of experience in senior
financial roles at listed and private companies.
He has worked across a range of sectors,
including residential property. He was previously
Group CFO at Baxters Food Group Limited,
the international food processing company,
CFO at Lomond Capital, the residential asset
management company specialising in the UK
private rental sector, and Group Finance Director
at Murray International Holdings Limited, the
property and metals group.
The finance team was further strengthened with
the appointment of a Group Financial Planning
and Treasury Manager along with a Financial
Controller dedicated to the REIT’s activities.
Our dedicated London team, which is working
on delivery for our joint venture with EQT Real
Estate, was strengthened with the appointment
of a London-based asset manager and a
dedicated financial analyst.
The Board is committed to maintaining high
standards of Corporate Governance, and
continues to adhere to the Quoted Companies
Alliance Code. The Board has considered how
each principle of this Code is applied and
we provide a full explanation in our Strategic
Report section and also on our website www.
sigmacapital.co.uk. We have a clear strategy and
business model, focused risk management, an
effective and experienced Board, appropriate
governance structures and effective dialogue
with our major shareholders. Our intention is to
continue to develop our culture and our dialogue
with the wider stakeholder interests.
In order to help to forge the social links that
underpin communities and create a sense of
neighbourliness, we organise regular events
across our developments to bring people
together. We also build links with the wider
community. We have supported a number of
local primary schools over the past year, with
projects including a library refurbishment and the
provision of outdoor play equipment. We intend
to continue to build on these 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.
At this difficult time, we have increased
our communication with tenants to ensure
that tenants feel well- supported by us. At
the beginning of lockdown, we launched a
programme of online interactions, including
exercise, cookery classes, and advice on
accessing the Government’s assistance packages.
We intend to maintain supportive contact with
tenants throughout the lockdown period.
THE BOARD AND MANAGEMENT
In May 2020, I was delighted to join the Board
as Non-executive Chairman. I was previously
Group Chief Executive of Countryside Properties
plc, and before that I was UK Chief Executive of
Taylor Wimpey plc and Chief Operating Officer
of SEGRO plc. We are very pleased that David
Sigsworth, my predecessor, remains on the Board
as Senior Independent Non-executive Director.
In March 2020, Mike McGill was appointed to
the Board as Group Chief Financial Officer.
As well as taking executive responsibility
for the overall financial management of the
Group and its subsidiaries, Mike is specifically
responsible for financial matters relating to
the REIT. Malcolm Briselden, Finance Director
of Sigma, remains in operational charge of
Sigma’s finance team, working closely with
Mike. Malcolm is focusing on Sigma’s activities
outside the REIT, including London.
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CHAIRMAN’S STATEMENT (CONTINUED)
OUTLOOK
The pace of delivery for the PRS REIT has stepped up significantly over the last six months. This reflects
the number of sites under construction and advancing towards maturity. While coronavirus restrictions
somewhat slowed activity, there is very good momentum now, and we expect to deliver the 5,000th
completed rental home for the PRS REIT in late 2021 or early 2022.
Rent collection and rent demand across all portfolios remains strong. Over the six months to 31
December 2021, the rent collected on the REIT’s portfolio was 100% of the rent invoiced during the
period while arrears have remained unchanged at only £0.2m. This is less than 1% of annualised ERV
of £29.4m on completed homes. At 31 December 2020, 3,045 homes of the 3,163 completed homes
were occupied. The recent extension of our Investment Advisory Services contract with the REIT gives
us even greater visibility of earnings and allows us to plan effectively for the next stage of the REIT’s
growth.
The sale of the Thistle Portfolio, Sigma’s first large-scale PRS portfolio, for c.£150m proves the value
that our model is able to create for partners and for Sigma. We completed this portfolio’s delivery in
March 2017 for a gross development cost of £110m, and it has consistently delivered returns above
expectations, with average occupancy at 99% and average rent collection at 98%. We believe that
its sale, in which Sigma’s beneficial interest realised £2.9m net, is the first of a large-scale portfolio of
single-let family homes in the UK. It will act as a benchmark for the valuations of Sigma’s other PRS
portfolios.
Our new joint venture with EQT Real Estate launched in September has added another long-term
recurring revenue stream and the opportunity for capital growth on self-funded assets. We are also
delighted to have Homes England’s continuing support with this new venture. We are in the process of
acquiring and developing initial seed assets for the targeted 3,000 home portfolio, and are increasing
our pipeline of opportunity to more than meet our targets. We estimate that fee income alone from
the JV is worth a potential c.£45m to Sigma in the first five years. This is based on a delivery of £1bn in
gross development costs.
The new collaboration agreement with Countryside for another 5,000 homes over the next three years
further underpins our growth plans.
I would like to thank all our staff and partners, particularly Countryside, for their ongoing support in a
difficult period for us all. We look forward to an exciting year of further growth and development.
Trading in the first quarter of the new financial year is in line with management expectations, and
with construction activity now closer to normal levels, the Group is in a strong position to achieve its
targets for the financial year.
Ian Sutcliffe
Chairman
20 January 2021
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
15
15
CORONAVIRUS
AND GOING
CONCERN REVIEW
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
CORONAVIRUS AND
GOING CONCERN REVIEW
CORONAVIRUS AND
GOING CONCERN
This going concern review begins with a
summary of the risks that coronavirus poses to
the Company together with actions we have
already taken and continue to take to ensure that
not only does the business weather the storm,
but will also be well placed to emerge from the
crisis in a position of financial strength.
Countries around the world have been hit
by coronavirus. The virus has spread on a
global basis and is designated a “pandemic”.
Despite significant mitigating action including
self-isolation for people suspected of having
the virus, and a combination of an effective
lockdown through social distancing for all but
essential workers and the imposition of varying
degrees of restrictions on social interaction
across the country, the impact of the virus has
been significant in terms of extent and timing.
This represents a material risk to house building
and letting activity together with the operations
of the Company as a whole. Coronavirus has
impacted the Group in the following areas:
•
•
•
Company staff operating from home or
otherwise unable to work or absent from
work;
House builders unable to continue with
construction work on sites or forced to reduce
or suspend construction work on sites due to
a combination of the effective lockdown and
restrictions or as staff are unable to work or
are absent from work;
Letting agents unable to progress activities in
respect of lettings, repairs and maintenance or
only able to operate a limited service due to
a combination of the effective lockdown and
restrictions or as staff are unable to work or
are absent from work;
•
•
•
•
•
Income reduction and doubtful debts as some
tenants struggle to maintain rental payments
resulting from a loss of income due to a
combination of the effective lockdown and
restrictions or as individuals are without work,
unable to work or are absent from work;
Disruption to the supply chain as raw
materials and construction products are not
produced or imported as workers are unable
to work or are absent from work;
General disruption to employees, house
builders, letting agents and the supply chain
due to restrictions on the movement of goods
and people;
Impact of the virus on the economy and
market sentiment; and
Further waves of the coronavirus and potential
for further national lockdowns or significant
localised restrictions on social interaction.
The absence of Company staff from the office
workplace has been mitigated by remote working
from home. We have adapted our technology
to facilitate remote working throughout the
business in order to keep our operations and
projects as on track as practically possible
during the coronavirus pandemic. The Company
has not furloughed staff or made use of any of
the Government schemes providing support to
companies or individuals in financial difficulty
during or because of the crisis. Sigma’s intention
is still to keep all employees actively working as
far as possible and to maintain contractual terms
and conditions throughout.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
17
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
be able to continue construction and lettings
activity, particularly in those regions unaffected
by restrictions. As mentioned above, cessation
of construction work on development sites
would reduce short-term cash outflows although
practical completion and lettings schedules
would be delayed.
There remains the risk of further waves
of coronavirus unless and until the wider
vaccination programme is implemented, and
greater potential for further national and local
lockdowns or restrictions. Having experienced
the initial lockdowns, the Group and Company
have a good understanding of how to react
quickly to adapt to additional lockdowns.
CORONAVIR US AN D GOING CO NCE RN RE VI EW (CONTINUED)
A greater issue has been in relation to house
building and letting activity where the effective
lockdown ceased construction activity in the
short term from the end of March up until May
when lockdown restrictions began to ease. Even
then, construction activity only began to resume
comprehensively in June and has subsequently
been adjusted to reflect continuing requirements
for social distancing and guidance around
public transport meaning that construction
levels have not fully returned to pre-lockdown
levels. A further complication has been the
introduction of varying degrees of localised
lockdown restrictions in response to outbreaks
of coronavirus in particular areas.
Importantly, the Company’s contractual obligations
only provide for payment to house builders in
respect of work undertaken and independently
certified. The absence of construction activity
thereby negates development expenditure thus
mitigating cash outflows.
In relation to income and doubtful debts, the
Company carefully vets prospective tenants and
typically obtains rent insurance for at least the
first year of new lettings where there is limited
covenant history or if the employment sector
is considered to be at greater risk. To date,
coronavirus related arrears have been managed
by agreeing payment plans with tenants
encountering difficulties. The insurer has been
notified of this in order to preserve rights of
claim but policies ultimately pay out in the event
that arrears are not recovered through payment
plans. This, together with the geographic spread
of multiple sites will help mitigate against the
inevitable bad debts.
Preserving the employment of staff, rather
than furloughing, also enables Sigma to work
with letting agents as we proactively assist and
support those tenants encountering difficulty
during the crisis in a responsible and reasonable
manner. The adaptation of our technology has
meant that this important tenant interaction and
engagement has continued through a variety of
telephone, e-mail and social media.
In terms of supply chain disruption, significant
efforts and contingencies had already been put
in place in respect of Brexit through securing
additional inventory of supplies, including timber.
In addition, all of our suppliers have worked
quickly to adapt to new ways of working in
accordance with government guidelines to
enable all areas of the business to continue,
although at a slower rate than before.
The coronavirus has had a major impact on
the economy and market sentiment. During
August, announcements indicated that the UK
has technically entered a severe recession as a
result of two successive quarters of negative
GDP growth. The Bank of England has recently
signalled that another technical recession
is likely following the most recent round of
restrictions. However, there is a structural
under supply of new family homes in the UK
and indications suggest that the pandemic and
recession may have increased demand for the
Group’s high quality but affordable product
across multiple regions.
There is a risk of reduced property valuations
due to changes in rental levels, bad and
doubtful debt risk and sector attractiveness
impacting yields. Having experienced the first
lockdown, the Group and Company has a
good understanding of how to react quickly
to adapt to further lockdowns. New systems
are in place, which enable the Company to
better support tenants e.g. with online repairs
and maintenance assistance. It presently
appears that varying degrees of lockdown
measures look likely to continue pending broad
vaccination coverage. Given the geographic
spread of sites and reflecting government’s
desire to maintain as much economic activity
as is reasonably possible, the Group is likely to
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
19
CORONAVIR US AND GOING CO NCE RN RE VI EW (CONTINUED)
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
CORONAVIRUS STRESS TESTS
In light of the above, the Company has
performed a prudent financial stress test
geared towards ensuring that it has sufficient
cash resources to weather the pandemic and
subsequently emerge in a strong enough
condition to continue to implement the
focused build to rent strategy. The stress test
incorporated the following sensitivities:
A starting point of £25.8 million of cash
balances with no associated borrowings;
Cessation of construction activities for
a period of 3 months from the end of
December 2020 albeit currently construction
is continuing on all sites;
For investment property developed by Sigma
a delay of 3 months to current expected
forecast sale date;
Development fees generated from
construction activities in The PRS REIT plc
modelled as not being earned during the 3
month period of the cessation of construction
activities;
Reduction of rental income on properties
owned by Sigma by 20% with no subsequent
recovery therefore reflecting potential on
going coronavirus issues;
Inclusion of only contracted revenue and does
not include any additional revenue from any
new potential sources;
Continuation of employment costs as
currently contracted without any reduction
for cost saving initiatives, mitigating action
or contribution from any Government backed
furlough scheme;
-
-
-
-
-
-
-
20
-
-
Maintenance of the Company’s overhead base
of c.£7million per annum without reduction
from cost saving initiatives or mitigating
action; and
Prudent assumptions in relation to tax
liabilities and the timing of payment in
respect thereof.
In addition, the Group’s limited recourse
development facility of £45m with Homes
England is due for repayment on 30 September
2021. We are currently in discussions with Homes
England regarding this and based on our long
standing relationship and strong partnership
with Homes England, reasonably expect
the facility to be renewed. The relationship
is reflected not just in the provision of the
development facility to Sigma Group but also
in the role of Homes England as a cornerstone
investor in the PRS REIT and lender to the
Company’s joint venture in London with EQT.
However, for going concern purposes the
Company has assessed that in the highly unlikely
event that the facility is not renewed, it will have
enough cash resources, after the agreed sale
of its London assets to its joint venture with
EQT Real Estate, for the facility to be repaid if
required.
CONCLUSION OF CORONAVIRUS STRESS TESTS
The conclusion of our stress test is that the business has more than adequate cash resources to
sustain an extended cessation of construction and disruption to letting activity lasting at least 12
months with estimated funding resources of more than £24 million remaining and being maintained
even after this time. Without any income or costs saving measures whatsoever, which is neither
commercial nor realistic, this would represent more than three years’ worth of total overheads for the
business.
Therefore, the Directors believe the Group is well placed to manage its business risks successfully and
the Directors have a reasonable expectation that the Group will have adequate resources to continue
in operational existence for the foreseeable future and for a period of at least 12 months from the date
of the approval of the Group’s consolidated financial statements for the period ended 30 September
2020. The Board is therefore of the opinion that the going concern basis adopted in the preparation of
the consolidated financial statements for the period ended 30 September 2020 is appropriate.
CORONAVIRUS CONCLUSION
Overall, coronavirus remains a real and existing risk which requires careful monitoring and a
management in conjunction with our house building partners and Letting Agents in order to mitigate
the likely issues as much as possible pending the restoration of a more normal working and living
environment. As one would expect the Company will continue to objectively review and assess the
impact of the coronavirus outbreak and government response on both its strategy and focus of
activities. Importantly, however, the pandemic will ultimately pass and the Company is well placed to
thrive thereafter.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
21
21
STRATEGIC
REPORT
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
STRATEGIC REPORT
The Directors have pleasure in presenting their Strategic Report for the period ended 30 September
2020. This report must be read in conjunction with the Chairman’s Statement on pages 6 to 14,
the Stakeholder Engagement and S172 Statement on pages 34 to 39 and the Principal Risks and
Uncertainties on pages 62 to 69.
CORONAVIRUS
The impact of the coronavirus and the Company
and Group’s Going Concern Review are discussed
on pages 16 to 21.
BUSINESS ACTIVITIES AND
GROUP STRUCTURE
Sigma is a public limited liability holding
company incorporated in England and is listed on
AIM, the London Stock Exchange’s international
market for smaller growing companies. Its
activities, including those of its subsidiaries, are
principally focused on the Private Rented Sector,
but also encompass urban regeneration and
property asset management.
At 30 September 2020, Sigma had four principal
and wholly-owned subsidiaries:
- Sigma Capital Property Ltd (“SCP”)
- Sigma PRS Management Ltd (“Sigma PRS”)
- Sigma Inpartnership Ltd (“SIP”)
- 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, £250 million 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 £250 million
(gross) was raised through a Placing Programme
and, since then, the REIT has secured £400
million of debt facilities. Sigma PRS is Investment
Adviser to the REIT, having signed a five year
management contract in May 2017.
This contract was extended in January 2021 from
31 May 2022 to 31 December 2025, with a one
year notice period thereafter. Sigma PRS is also
Development Manager to the REIT, and holds an
equity interest in it.
Over the period, Sigma added 1,017 homes to
the REIT’s portfolio, taking it to 2,634 homes
at 30 September 2020. On 3 December 2020,
the 3,000th home was completed, and on
21 December 2020, Sigma announced it had
negotiated the acquisition of a development of
123 fully-let units from Blackrock Real Assets.
This took the total number of completed homes
in the REIT’s portfolio to 3,163 on 31 December
2020. The acquisition also marked the full
commitment of the REIT’s funding resource of
£900m (gross). The REIT’s portfolio, once fully
optimised, is anticipated to grow to about 5,200
homes and delivery of the 5,000th home is
currently expected in late 2021/early 2022.
In September 2020, the Group announced the
launch of a residential joint venture with EQT
Real Estate to deliver high quality, new-build
homes for private rental in Greater London.
The joint venture is being supported by
Homes England, the housing agency of the UK
Government, and is targeting the establishment
of an initial portfolio of approximately 3,000
homes with a value in excess of £1 billion.
Through SCP, Sigma also funds the development
of new PRS homes and, during period to 30
September 2020, completed and subsequently
sold two fully-developed and let PRS sites to
the REIT. This brought the total number of
completed self-funded sites to eleven since
2015 when self-funded PRS activity started. SCP
currently has a further six self-funded PRS sites
underway. This includes two sites in London, at
Fresh Wharf, Barking and Beam Park, Havering.
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
for Gatehouse Bank and UK PRS Properties, as
well as the homes we have delivered for the REIT
and for ourselves.
Over the course of the new financial year and
beyond, Sigma will be focused on continuing
the delivery of the balance of the 5,200 homes
that make up the REIT’s expected initial portfolio
as well as progressing its joint venture with
EQT Real Estate, and extending its platform
relationships. Management believes that the
Group remains in a very strong position for
continuing growth.
STRATEGI C REPORT (CONTINUED)
Once completed, these sites will be acquired
by the EQT Real Estate joint venture, thereby
seeding the initial portfolio with assets.
The Group’s first PRS joint venture (the Thistle
Portfolio), was launched in November 2014 with
Gatehouse Bank plc. Comprising 918 new family
homes, the portfolio was completed in March
2017 and proved the effectiveness of the Group’s
PRS property platform. A venture targeting 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). Construction was completed
in 2018, and, in June 2020, we commenced the
development of a new site for UK PRS Properties
in the West Midlands. This site comprises 66
rental units and is scheduled to complete in the
Spring of 2022.
Rental and occupancy levels across both these
ventures have consistently performed well.
In January 2021, Sigma’s beneficial interest
in the Thistle Portfolio was realised when the
Portfolio was successfully sold by Gatehouse
Bank. Sigma’s share of total sale profit, after
certain hurdles, is £2.9m cash (net). This is
53% above the book value of £1.9m ascribed
to Sigma’s interest in the Thistle Portfolio as
at 30 September 2020. The highly successful
sale strongly validates Sigma’s strategy and
demonstrates the value that our model is
capable of creating.
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 has two partnerships, with
Liverpool City Council and Salford City Council.
The Group has equity interests in a venture
capital fund and in an unquoted company, both
held by STI.
infrastructure and good primary schooling are
fundamental to Sigma’s PRS model.
During the period to 30 September 2020, the
Group expanded and enhanced its delivery into
London with the announcement of the joint
venture with EQT Real Estate. In December
2020, we also entered into a new Collaboration
Agreement with Countryside for a further
c.5,000 new homes over the next three years.
This new agreement comes after our previous
collaboration fulfilled its target of 5,000 homes.
Sigma has now delivered c.4,800 PRS homes
in six years since creating its PRS property
platform. This includes the 1,602 homes delivered
GROWTH STRATEGY
The Group’s core strategy is to utilise its
property and capital raising expertise to further
its PRS activities and deliver family housing. The
geographies in which we deliver assets have
steadily expanded, and we have also diversified
the financial instruments that we manage to
deliver those assets. We work with central and
local authorities, house builders and funding
partners, including Homes England. The Board
believes that the Group is one of the leading
operators in the private rented sector in the UK,
and a leading player in family homes.
The private rental sector currently accounts
for around 25% of all housing stock, up from
around 19% in 2015. The institutionally owned
and managed build-to-rent sector represents
under 4% of this total, which according to Savills,
has the potential to grow to c.1.5m households
or a third of all available rental stock. Most
build-to-rent activity in the UK to date has been
focused on the development of higher value
flats in London and regional city centres, with
little development elsewhere in the regions. The
current pipeline of build-to-rent homes in both
London and the regions remains modest at
c.172,000 homes, with just over 51,000 complete.
This provides a significant growth opportunity
for the Group, particularly with our focus on
single-family homes in the regions and at the
“affordable” end of the spectrum of market rent.
Sigma’s growth strategy remains focused on
extending its activities so as to deliver homes
across multiple regions in the UK through its PRS
property platform. Diversifying delivery in this
way mitigates the risk associated with a narrower
geographic concentration. In addition, locations
near to large employment centres, local transport
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
25
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
STRATEGI C REPORT (CONTINUED)
OVERVIEW OF THE BUSINESS
Private Rented Sector Residential Portfolio
The Group’s PRS model enables it to purchase
residential land assets with planning permission,
predominately sourced from local authority
partnerships and house building relationships,
for its fund structures.
From a local authority perspective, a key
advantage that Sigma offers is that it can deliver
large-scale, high-quality housing that helps to
meet both local housing need and regeneration
objectives. Efficiency is another major attraction
since Sigma’s 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
and, in England, from the Government’s New
Homes Bonus Scheme.
The rapidity of delivery provided by our PRS
property platform is also attractive to our house
building partners as it offers the opportunity
of an enhanced return on capital as well as
de-risking and quickly maturing those sites on
which there is a mix of ‘market-for-sale’ and PRS
homes. The control and pace of this delivery
is without doubt the biggest challenge in our
business.
The PRS REIT plc
In 2017, the PRS REIT raised £250 million (gross)
through an IPO to invest in new PRS homes
and in February 2018, a further £250 million
(gross) was raised via a Placing Programme.
Investment and development debt facilities
totalling £450 million have been secured with
Scottish Widows, Lloyds Banking Group, The
Royal Bank of Scotland plc and Barclays Bank
plc with maximum gearing of 45%. This took the
REIT’s funding resource to £900 million (gross).
As previously stated, the launch of the REIT in
2017 fundamentally transformed Sigma’s model.
The Company has a management contract with
the REIT as Investment Adviser, and is also
Development Manager. In January 2021, the term
of this contract was extended from 31 May 2022
to 31 December 2025, with a one year notice
period thereafter.
Sigma is remunerated by the REIT in two ways.
Firstly, Sigma receives development management
fees in respect of sites that are developed
directly by the REIT and, secondly, it receives an
investment advisory fee, which is based on an
adjusted net asset value of the REIT’s portfolio.
In addition, the REIT may acquire completed and
let sites from Sigma, through forward purchase
agreements, subject to those sites meeting its
investment criteria. Sites are independently
valued on behalf of the REIT and Sigma
recognises any revaluation gains.
As at 30 September 2020, the number of
completed and contracted homes for the
PRS REIT stood at 5,003 with a total ERV of
c.£47.6m. At 31 December 2020, this had grown
to c. 5,126, with a total ERV of £48.8m.
London joint venture with EQT Real Estate
In September 2020, the Group announced the
launch of a joint venture with EQT Real Estate,
the real estate platform of global investment
firm EQT, to deliver high-quality, new-build
homes for private rental in Greater London.
The joint venture is being supported by
Homes England, the housing agency of the UK
government, and is targeting the establishment
of an initial portfolio of approximately 3,000
homes with a value in excess of £1bn. Two sites,
currently under development by Sigma, at Fresh
Wharf, Barking and Beam Park, Havering will
be acquired by the joint venture on practical
completion. This is expected by September 2021.
Sigma Self-funded PRS - regions
The Company has been funding its own PRS
assets since 2015, when it raised £20 million
(gross) from a share placing in order to create a
substantial portfolio of new rental homes. In 2016,
the Group agreed a £45 million revolving credit
facility with Homes England, which materially
increased its ability to scale its delivery of self-
funded homes.
During 2020, two development sites were
completed, let and then acquired by the REIT,
thereby releasing capital for further investment.
This takes the number of sites that the Company
has successfully developed and sold to the REIT
to eleven. All sites acquired by the REIT are
independently valued. The Company is currently
active on a further six sites, including two in
London.
Sigma Self-funded PRS - London
In September 2019, Sigma acquired two sites in
London from Countryside Properties plc at Fresh
Wharf, Barking and Beam Park, Havering. They
have a total development cost of c.£43.0 million
and will yield a total of 157 units. We expect both
assets to be completed and then sold to our joint
venture with EQT Real Estate.
Beam Park is an 80-unit development site that
is part of a £1 billion regeneration project that
is under way across the London Boroughs of
Havering on land released by the Greater London
Authority. Fresh Wharf is a 77-unit development
site forming part of a major riverside scheme
near to Barking.
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
In 2021, we plan to expand our brand into
London as part of our new joint venture with
EQT Real Estate. The same ‘gold standard’
approach will be applied in this market.
STRATEGI C REPORT (CONTINUED)
‘Simple Life’ Letting Brand
All of Sigma’s PRS sites, including those we
deliver for the REIT, are marketed under our
build-to-rent brand, ‘Simple Life’. Our objective is
to position ‘Simple Life’ as the ‘gold standard’ in
the private rented sector offering a high quality,
long-term rental solution for those wanting to
benefit from the flexibility of renting. We take a
proactive approach to monitor the needs of both
our residents and the wider rental market.
The brand is dedicated to ‘making life simple’
for residents, whether this is through new
technology, such as our FixFlo maintenance
reporting software, our new resident portal, or
through helpful initiatives such as our ‘how to’
videos and teams of ‘Handymen’. Additionally,
we are strongly focused on promoting a sense of
community for residents of Simple Life homes.
We do this both by creating opportunities for
neighbours to get together through the many
events that we run throughout the year, and
by forging links with the wider community,
especially through our support for schools and
local charities. Our focus on residents’ health and
wellbeing and our efforts to support residents
through the challenges of the coronavirus has
further demonstrated the customer-centric
approach our brand represents.
New tracking processes implemented in 2020,
has allowed the Company to build a greater
understanding of the sources of enquiries, with
our website generating the greatest number of
leads. Recommendations from existing customers
was one of the biggest reasons for visiting the
Simple Life website*.
Results from the last 12 months of our customer
satisfaction surveys (below) indicate a high
level of satisfaction among tenants and there
are a number of customer testimonial videos
available to watch on our dedicated YouTube
channel: https://www.youtube.com/channel/
UCsZTzlt2UuzQF_ypvTpWD1Q.
Move in survey
10 month survey
97% said the team made it easy to apply
96% said they are still happy with their home
89% said they were kept well-informed during
the application process
89% said they are happy with the service provided
96% said they received all the information they
required
73% said they felt they have been kept well-informed
91% said they found the process of moving in to
their home straight forward
94% said the communal areas are well maintained
87% said the quality of the home met with their
expectations
85% said they feel part of a community
94% said they would recommend Simple Life
95% said they would recommend Simple Life
*Based on Ascend data 2020
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
29
29
STRATEGI C REPORT (CONTINUED)
Joint Ventures with Gatehouse Bank plc and UK
PRS Properties
Launched in November 2014 and completed in
March 2017, our joint venture with Gatehouse
Bank helped to prove the effectiveness of our
PRS model. The venture delivered 918 high-
quality, single-family homes (mainly houses)
across 15 sites in the North West of England,
for a total gross development cost of c.£110m
(the Thistle Portfolio). Homes were built on land
procured by Sigma, using its local authority
partnerships. Access to good schooling,
transport links and other amenities were
priorities when selecting sites. Gatehouse Bank,
a leading London-based Shariah compliant
investment bank, delivered the equity element of
the venture whilst Barclays Bank plc provided the
debt financing.
The Thistle Portfolio has consistently performed
well, with high occupancy levels in excess of
95%. It generates approximately £8.3 million per
annum in rental income.
In January 2021, the Thistle portfolio was sold to
Goldman Sachs Merchant Banking Division and
Pitmore for a total consideration of c.£150m. This
crystallised Sigma’s beneficial interest, generating
a total net cash payment of £2.9m to Sigma,
after certain hurdles. This was 53% above book
value of £1.9m at 30 September 2020. The Thistle
Portfolio generated c.£0.5m in annual asset
management fees, which following the sale will
no longer apply.
Our joint venture with UK PRS Properties
completed its initial portfolio of 684 family
homes across eight sites in the North West and
Midlands in November 2018. This portfolio has
also performed very well, and Sigma earns annual
asset management fees of c.£0.4m per annum. In
June 2020, we commenced the delivery of a site
of 65 units at Walsall in the West Midlands for UK
PRS Properties. The site is due to complete in the
spring of 2022.
Sigma continues to retain a share of the net profits
on disposal of the assets of UK PRS Properties,
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.£120 million. During 2019,
the final element of the regeneration project was
completed and the Group no longer expects to
earn fees as a result of this partnership.
Residential Projects
The transformation of a 19-acre former
secondary school site at Gateacre in Liverpool,
was completed in 2019 and, as a result, the Group
dealt with residual matters during 2020. The
Group received dividends from its joint venture
with Countryside during the period of £4.3m.
Salford Partnership (also known as
Higher Broughton Partnership)
The Salford Partnership is our partnership with
Salford City Council and The Royal Bank of
Scotland plc.
During the year, we continued to deal with
residual matters arising from previous residential
and commercial projects of the Salford
Partnership and no further fees are anticipated
from this partnership.
Sigma’s relationship with Salford City Council
remains productive, and continues to provide
PRS development opportunities.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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 is held by STI. Sigma also
holds an investment in an unquoted company.
FINANCIAL REVIEW OF 2020
Figures for the period under review are for
the nine month period to 30 September 2020,
following the change in the Group’s accounting
reference date. The comparative figures are for a
12 month period to 31 December 2019.
The Group’s revenue in the nine month period
totalled £8 million (2019: £13.9 million), and
reflected the impact of the coronavirus pandemic
and shorter accounting period. The majority of
the Group’s income is from development and
investment advisory fees in respect of the REIT.
In addition, revenues included fees from our
managed PRS activities with Gatehouse Bank
and UK PRS Properties, and rental income from
our self-funded portfolio. Gross profit was £7.9
million (2019: £13.8 million).
The Group made a trading profit in the period
of £2.2 million (2019: £7.9 million), with property
activities contributing a trading profit of £2.2
million (2019: £8.0 million). The venture capital
activities contributed a trading loss of £6,000
(2019: profit £13,000). Full detail of the results
for the period by business segment is provided in
note 3 to the financial statements.
Administrative costs were £5.7 million (2019:
£5.9 million). This reflected the recruitment of
additional employees to support the Company’s
continuing growth and £0.4m of non-recurring
costs.
Profit from operations was £3.2 million (2019:
£12.0 million) including gains from investment
property of £1.3 million (2019: £3.9 million) and
an unrealised loss of investments of £0.2 million
(2019: profit £0.2 million).
Profit before tax for the nine months was £3.2
million (2019: £13.0 million).
The Group’s net assets increased to £60.8 million
at 30 September 2020 (2019: £60.5 million).
This equates to 67.9p per share (2019: 67.6p per
share).
Balance sheet
The principal assets in the consolidated balance
sheet are investment property of £66.0 million
(2019: £53.8 million) as detailed in note 15, cash
of £25.8m (2019: £16.8m), and investments held
of £4.9 million (2019: £9.9 million) as detailed in
notes 18, 19 and 20, which together account for
92% (2019: 92%) of total assets.
The main current liability is the Homes England
development loan of £42.7 million (2019: £19.2
million), which represents 88% (2019: 67%) of
total liabilities and as detailed in note 23.
Cash flow
Cash balances increased by £9.0 million to
£25.8 million (2019: reduced by £6 million to
£16.8 million). The increase during the period
is primarily attributable to dividends of £4.3m
received from our joint venture Countryside
Sigma and cash realised from the disposal
of historic investment property transactions,
partially offset by the dividend paid to
shareholders. Further details are provided in the
consolidated cash flow statement.
The cash outflow from operating activities was
£1.3 million (2019: inflow £8.0 million). The cash
outflow from investing activities was £11.6 million
(2019: £28.8 million) along with the cash inflows
from financing activities of £21.8 million (2019:
£14.8 million).
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
31
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
STRATEGI C REPORT (CONTINUED)
The key performance indicators are concentrated on the property activities.
The Group’s key performance indicators include:
Revenue – all property activities
Operating profit – property activities
Realised and unrealised profit on revaluation of investment property
Profit from operations
Basic earnings per share
Cash balances
Gearing
Net assets per share
9 months
2020
£’000
12 months
2019
£’000
7,952
3,266
1,258
3,198
2.84
25,769
28.3%
68.3p
13,865
11 ,886
3,919
11 ,985
11.63p
16,827
4.5%
67.6p
The Group’s main source of revenue is from
its property activities and movements are an
indication of changes in recurring revenues.
Revenue from this sector has decreased from
the prior year largely due to the effect of the
coronavirus and the reduction in the length of
the accounting period. An analysis of revenue by
property segment is detailed in note 3.
As well as revenue from its managed property
activities, the Group develops investment
property for capital appreciation and rental
income. The Group’s realised and unrealised
profit on the revaluation of investment property
is derived from development of eleven
investment properties, two of which were sold
to the REIT during the period. The two disposals
realised a cash profit of £1.1m (2019: two
disposals, £2.1m). Further details are provided in
notes 6 and 15.
As a result of the impact of coronavirus and the
shorter accounting period, basic earnings per
share decreased.
As at 30 September 2020 the Group’s
investment in property had increased to £66.0
million across six sites including the two in
London. The Group’s property portfolio is
discussed further in the strategic report and an
analysis is provided in note 15 of the accounts.
The Group’s financial assets decreased to £4.5m
(2019: £5.2m). This decrease is primarily due to
the reduction in the price of PRS REIT shares
during the period. Further details are provided in
note 20.
Trade and other receivables of less than one year
decreased to £2.1m (2019: £4.0m) mainly as a
result of the payment of outstanding fees that
were due at 31 December 2019.
The cash balances remained strong as a result
of the recurring nature of the Group’s revenue
as well as the receipt of dividends from its joint
venture, Countryside Sigma, and realisation of
historic profits from the disposal of investment
property.
Trade and other payables less than one year
decreased to £3.8m (2019: £6.6m). This is largely
as a result of the reduced construction costs
outstanding due at the end of the period. The
majority of construction costs are paid in the
month following in which they are invoiced.
The Group’s net debt borrowings compared to its
net assets shows a gearing of 28.3% (2019: 4.5%).
This, in part, reflects the increased utilisation of
the revolving debt facility with Homes England.
The amount of facility outstanding as at 30
September 2020 was £42.7m (31 December 2019:
£19.2m).
Net assets per share at the year-end improved
to 68.3p, a rise of 1% (2019: 67.6p) reflecting
the combination of the profit after tax made
during the nine months and reserve movements,
including the dividend.
The Board 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
on these are given on pages 23 to 27 of the
Strategic Report.
This strategic report was approved by the Board
on 20 January 2021 and signed on behalf of the
Board by
Graham Barnet
Chief Executive Officer
20 January 2021
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
33
STAKEHOLDER
ENGAGEMENT
AND SECTION
172 STATEMENT
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
STAKEHOLDER ENGAGEMENT
AND SECTION 172 STATEMENT
STAKEHOLDER ENGAGEMENT
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, local authorities,
customers and communities. As a sustainable
business, Sigma is providing an innovative build-
to-rent solution to address a national, market and
societal demand for quality family homes.
Across the UK, Sigma engages with a range
of interest groups to ensure we listen and
understand the interests and concerns of all
stakeholders, as well as seeking to deliver
sustainable value for them.
Effective engagement with stakeholders at Board
level and throughout our business is crucial to
fulfilling Sigma’s goal to deliver family PRS homes
across the UK. While the importance of giving
due consideration to our stakeholders is not new,
we continue to explain in more detail how the
Board engages with our stakeholders. We adopt a
collaborative approach with all stakeholder groups
including employees, customers, partners, house
builders, suppliers, local authorities, regulators,
funders and investors. This necessarily involves
listening to and taking account of their views and
feedback, while also being open to change.
SECTION 172 STATEMENT
The following serves as our section 172 statement
and should be read in conjunction with the
Strategic report on pages 22 to 33. Section 172 of
the Companies Act 2006 requires Directors to take
into consideration the interests of stakeholders
in their decision making. The Directors continue
to have regard to the interests of the Company’s
employees and other stakeholders, including
the impact of its activities on the community,
the environment and the Company’s reputation,
when making decisions. Acting in good faith and
fairly between members, the Directors consider
what is most likely to promote the success of
the Company for its members in the long term.
The Directors are therefore fully aware of their
responsibilities to promote the success of the
Company in accordance with section 172 of the
Companies Act 2006.
To ensure the Company continues to operate in
line with good corporate practice, all Directors
are frequently provided with refresher guidance
on the scope and application of section 172 from
the Company’s legal and financial advisors. This
allows Board members to reflect on how the
Sigma engages with its stakeholders and identify
opportunities for enhancement in the future.
The Board regularly reviews our principal
stakeholders and how we engage with them.
The stakeholder voice is constantly brought into
the boardroom through information provided
by management and advisers, including
the Company’s brokers, and also by direct
engagement with stakeholders themselves.
The relevance of each stakeholder group may
increase or decrease depending on the matter or
issue in question, so the Board seeks to consider
the needs and priorities of each stakeholder
group during its discussions and as part of its
decision making.
Throughout these financial statements, we
provide examples of how this engagement
with stakeholders takes place to ensure that
we can appropriately consider their interests
in assessing, considering and implementing
particular courses of action.
EMPLOYEES
We work to attract, develop and retain quality
talent, equipped with the right skills for the
future. Our people have a crucial role in delivering
against our strategy and creating value. As Sigma
comprises a relatively small overall team, and with
direct employee interaction, the Board can readily
identify and respond to changes in requirements
in respect of resource, skills and experience.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
planning permission, predominately sourced from
local authority partnerships and house building
relationships, to its fund structures.
This requires four separate parties involving local
authorities, house builders and funding partners,
with Sigma performing the roles of facilitator
and co-ordinator. Regular and collaborative
communication and dialogue is essential with all
of these parties to ensure success. Without this,
Sigma could not develop, establish and maintain
the partnership relations it has, let alone forge
new ones.
The creation of new partnerships is also key.
Given that sites will typically take well in excess
of 24 months to identify, plan, develop and let, it
is imperative that Sigma constantly has a focus
on future sites through regular dialogue with
multiple parties.
REGULATORS
The Group is subject to statutory reporting
requirements and to rules and responsibilities
prescribed by the London Stock Exchange. The
Board has a balanced range of complementary
skills and experience, with independent non-
executive directors who provide oversight, and
challenge decisions and policies as they see
fit. The Board believes in robust and effective
corporate governance structures and is
committed to maintaining high standards and
applying the principles of best practice.
Compliance is maintained through the utilisation
of recognised professional advisers and the Board
would not hesitate to seek input in this regard
from the listing authority.
STAKEHOLDER ENGAGEME NT AN D S E CTIO N 172 STATEM EN T (CONTINUED)
This is reflected in the staff appointments made
during the period to strengthen the team.
Reflecting the investment made in and quality
of the Company’s employees, Sigma has not
furloughed staff or made use of any of the
Government schemes providing support to those
companies or individuals in financial difficulty
during or because of the crisis. Sigma’s intention
is to keep all employees actively working as
far as possible and to maintain contractual
terms and conditions throughout. This reflects
the Company’s long-term commitment to its
workforce and would appear to be appropriate
given the strong financial position of Sigma.
CUSTOMERS AND COMMUNITIES
The creation of functioning neighbourhoods
and thriving communities is core to our beliefs.
This starts with site selection and our contention
that all sites should be close to good transport
links, strong areas of employment and good
quality primary schooling, thereby providing our
customers with access to a social and economic
framework upon which a new community can be
built. Whilst it is critical that the houses we create
are fit for purpose, varied enough to be suitable
to a wide range of occupiers and life stages as
well as providing the flexibility for the increasing
need to work from home, we make great efforts
to forge linkages between their occupants and
the wider community. By organising regular
customer events in each of our neighbourhoods
as well as working with local schools and
charities we endeavour to forge friendships and
familiarity between our customers to enable
them to feel at home, but also for that home to
integrate with the wider community. In what has
been an unprecedented 2020, our charitable
donations have focussed on organisations most
relevant to the pandemic and we asked our
customers to tell us how to distribute those
funds, emphasising that a Simple Life customer’s
relationship with us does not begin and end at
the front door of their home.
ENVIRONMENT
We are aware of our responsibility to the
environment and ensuring that the development
that we manage is done so in a responsible and
sustainable way. We look to our development
partners to have policies demonstrating their
commitment to the environment through a
responsible approach to development as well as
the custody and integrity of their supply chain. As
we move forward we will look to audit these facts.
We announced last year that our main
construction partner, Countryside Properties
has opened a new modular panel factory
in Warrington capable of manufacturing up
to 1,500 homes per year using sustainable
timber from certified forests whilst the factory
generates no waste to landfill. By August this
year we had taken 527 homes from the factory
and are now consistently using this technology
with Countryside to deliver a more sustainable
approach to development.
To assist in identifying and implementing
additional further opportunities to improve
social and environmental aspects of the Group’s
work and impact on stakeholders, Sigma
recently appointed an Environmental, Social and
Governance Manager. This is a newly created
position in the Company and recognises our
commitment to engagement and implementation
of action in this area.
LOCAL AUTHORITIES, HOUSE
BUILDERS AND FUNDERS
The Group’s core strategy is to utilise its
property and capital raising expertise to further
its PRS activities and deliver family housing.
The geographies in which we deliver assets has
steadily expanded, and we have also diversified
the financial instruments that we manage to
deliver those assets. The Group’s PRS model
enables it to move residential land assets with
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
STAKEHOLDER ENGAGEME NT AN D S E CTIO N 172 STATEM EN T (CONTINUED)
SHAREHOLDERS
The Board welcomes the opportunity to engage
with our shareholders and with the capital
markets more generally. We have a high level of
investor communication through our financial
calendar activity, through investor meetings,
roadshows, site visits and our AGM.
Sigma’s Chairman takes overall responsibility
for ensuring that the views of our shareholders
are communicated to the Board and that our
Directors are made aware of shareholders’ issues
and concerns so these can be fully considered.
The Board achieves this through:
•
•
•
Active dialogue with shareholders, prospective
shareholders and analysts, led by the Chief
Executive Officer and Group Chief Financial
Officer;
Regular dialogue between the Company’s
broker and NOMAD and shareholders; and
Chairman and the Chair of the Audit
Committee being available to meet
institutional shareholders.
Feedback from any such meetings is shared with
all Board members including a feedback report
prepared by the Company’s brokers following
investor presentations and discussions.
The Chairman and the Board consider that there
are appropriate mechanisms in place to listen
to the views of shareholders and communicate
them to the Board without it being necessary for
the Chairman or Chair of the Audit Committee to
attend all meetings with shareholders. The Board
believes that this approach is consistent with the
2016 Code on dialogue with shareholders and is
in line with good corporate governance.
Major investor relations engagement activities
carried out during the period and prior year are
set out below:
•
Numerous meetings, presentations and
conference calls hosted with institutional
investors or prospective investors; and
• Frequent site visits, whenever possible.
Investors, prospective investors and analysts can
contact the Chairman or Chief Executive Officer
or access information on our corporate website.
The Board believes that appropriate steps have
been taken during the year so that all members
of the Board, and in particular the non-executive
Directors, have an understanding of the views of
major shareholders.
DIVIDEND
The Board’s proposal on the dividend for the
2020 financial period of 2.0p per share (12
months to 31 December 2019: 2.0p) reflects
a combination of factors in relation to the
Company’s finances and operations both in
the short and long-term. This includes the
Company’s revenue, earnings and cash reserves
together with the Board’s confidence in Sigma’s
growth prospects. As outlined in the Chairman’s
Statement, this decision has not been made
lightly in view of the current situation and the
Coronavirus and Going Concern Review detailed
on pages 16 to 21 of these financial statements
formed part of these dividend deliberations. As
the conclusion to this review states however,
the pandemic will pass and the Company is well
placed to thrive thereafter. The dividend proposal
therefore reflects the Board’s confidence in
the Company’s long-term financial health and
growth prospects and provides a return to the
shareholders who have invested funds with the
Board and the Company.
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
39
ENVIRONMENTAL,
SOCIAL AND
GOVERNANCE
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE
INTRODUCTION
Recognising, reacting and responding to the
sustainability and ethical impacts of all we do
is the basis behind Environmental, Social and
Governance (“ESG”). With this in mind, and to
help focus and better direct our ESG efforts,
Sigma has signed up to the UN Global Compact,
and commits to complying and adhering to its 10
core principles, based on human rights, labour,
environmental and anti-corruption factors. Our
management structure operates with clear policies
and practices, to identify, address and manage
ESG issues effectively throughout the lifecycle
of our managed PRS assets. The appointment,
in November, of a dedicated ESG Manager is
designed to enhance and develop further our
commitment to and engagement in this area.
Reflecting the growing importance of ESG
globally, the Company intends to seek external
assessment and recognition of its achievements
in these areas. It is currently working towards
submissions to achieve a rating from GRESB,
a globally recognised benchmark for reporting
real estate ESG performance, and to join the
European Public Real Estate Association (EPRA)
which represents the real estate sector by
providing better information to investors and
promoting best practice.
To support these efforts, the Company has
appointed EVORA, a leading sustainability
consultant specialising in real estate solutions,
to undertake a Gap Analysis of our current ESG
performance, which will help direct strategies,
plans and decisions going forward.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
•
•
•
•
COVID-19 Guidelines issued – structures,
reviews and support in place;
Ongoing monitoring and management of ESG
issues is established;
Impacts on the natural habitat surrounding
PRS assets are managed;
Local community engagement and support
plans are established, reviewed and developed;
• Due diligence is performed on third parties;
• Policy reviews and updates ongoing;
• Good practice is established;
•
Continued research and review of carbon
reduction opportunities are ongoing;
•
Investment restrictions are screened; and
•
Investment’s ability to comply with the ESG
standards is assessed.
Sigma strongly believes that all three elements of
ESG are intertwined and are viewed as one entity,
but for the purposes of this report, each element
is reported separately below, with clear overlaps
evident.
OPERATIONAL APPROACH
Sigma recognises that the PRS investments,
which it undertakes and manages on behalf of its
funders, have an impact on the environment and
can also affect the lives of our employees, service
providers, supply chain, residents and the wider
community, indeed all with whom we engage and
interact. We therefore incorporate ESG factors
into decision-making processes and the way in
which we operate.
Our practices are based on the following policy
approaches:
Opportunity review
•
ESG risks are assessed, reviewed and
monitored, and strategies for enhancement
and mitigation are set based on the
understanding and recognition of the value
assigned in the emerging national and
international frameworks such as climate
change and associated social need; and
• Mitigation plans are identified
Investment decision
•
ESG issues are listed and addressed in a
summary investment paper that informs
decision-making at the Investment Committee
stage; and
•
ESG costs, particularly ongoing community
and charitable involvement, continue to be
determined and factored into the investment
decision process
Asset management
•
Appropriate governance structures are
established;
• Relevant laws and regulations are adhered to;
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
41
ENVIRONMENTAL, SOCIAL AND GOVE RN AN CE (CONTINUED)
ENVIRONMENTAL
We are all aware that our world is a rapidly
changing environment, and as industry leaders
in the provision of private rental homes, Sigma
recognises the role it plays in helping to lead
the way forward. This changing landscape is
illustrated by the recent announcement of the
Government’s 10 Point Plan for a green industrial
revolution, in which energy, nature, transport
and innovation goals were revised to reflect
the country’s targets in relation to eradicating
climate change. The Company is acutely aware
of the intense need for action on areas such as
energy and water consumption, non-fossil fuel
heating provision, biodiversity and the global
goals for 2030 and 2050. The Net Zero Emissions
agenda, and target, continues to be a focus for the
Company, and we aim to work with partners who
share the same outlook and are aligned with our
commitments.
What we report in the following demonstrates
our commitment and determination to support
strategies and actions in these areas going
forward, and highlights the good work being done
at present in all areas of ESG in the Company.
Processes and strategies
The Company’s activities can be viewed in
two parts in relation to the environment, at
construction and post-construction stages.
Throughout, we take account of the potential
impact of current and potential business partners,
ensuring that partners with whom we elect to
operate share our values and can demonstrate
a clear and tangible commitment to working
sustainably. Ongoing engagement and dialogue
is key to ensuring that the practices and policies
of those partners reflect the Company’s ESG
needs and expectations. Partners are required
to share their policies on the management and
origination of their supply chain, the usage of
resources and their approach to biodiversity, and
to integrate efficient design into the homes they
build in partnership with the Company. Indeed,
they are selected on this basis. Going forward, as
part of our interaction and collaboration we will
review delivery in this area to ensure necessary
adjustments and progress is maintained.
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Partnerships
Sigma works with many partners, large and small,
in the course of our business, and ensuring these
partnerships share our ESG values and goals is
important to us.
We announced last year that Countryside
Properties, a FTSE4Good Index member,
had opened a new modular panel factory in
Warrington capable of manufacturing up to
1,500 homes per year using sustainable timber
(100% certified Forestry Stewardship Council
or Programme for the Endorsement of Forest
Certification), whilst the factory generates
no landfill waste. This brought with it clear
environmental benefits of reduced traffic flow
and waste on site. Construction of these modular
frames has enabled us to contribute positively
to considerable diversion of waste from landfill.
Positive outcomes include: recycling of timber
and general waste; use of plasterboard waste
for animal bedding and new plasterboard; and
plastics recycled as Damp Proof Course (DPC)
and Damp Proof Membrane (DPM) products.
By August 2020 we had taken 527 homes from
the factory and are now consistently using this
technology with Countryside to deliver a more
sustainable approach to development.
Vistry Group, with whom we also work reported
10% overall improvement for NHBC Construction
Quality. In 2019, Vistry Group increased their
overall level of recycling to 96% and drive
further improvements through monthly waste
performance reports. Waste diverted from
landfill increased to 25,133 tonnes (2018: 23,972
tonnes) and this will continue to be a focus
going forward. Vistry Group have committed to
a review of long-term ESG strategy, including
undertaking a review of the Group’s sustainability
strategy. They will assess in line with the Task
Force on Climate-related Financial Disclosure
(TCFD), the United Nations’ Sustainable
Development Goals (UN SDG) and ESG indices.
Through consultation they will gather data to
better understand their carbon footprint, a goal
we will follow with interest. Such commitments
and other examples of partner focus on ESG is
shared within this document as relevant.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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ENVI RONMENTAL, SOCIAL AND GOVE RN A NCE (CONTINUED)
Energy & Power
Ahead of the Government’s pledge to ban
gas boilers by 2025, and possibly as early as
2023, together with the expected transitional
challenges, the Company is committed to
meeting this requirement through proactive
discussion and planning with our partners. The
current provision of electric heating and hot
water from District Heating (DH) systems at
our London developments is a positive step in
this transition, and a definite demonstration of
the Company’s focus in this area. Investment in
new technologies in energy saving, such as the
addition of Green and Brown Roof and Dwelling
solar panels at suitable communities, further
highlights the Company’s path going forward.
Advice for residents on gas and electricity
efficiency is also available, and homes have been
fitted with energy efficient white appliances
rated A or B in line with best practice. Meters are
generally provided by British Gas for dual fuel,
and British Gas provide electronic monitors as
standard; though these can be changed to suit
residents’ choice. As part of their commitment
to sustainable homes, Countryside reported
the Standard Assessment Procedure (SAP)
average rating for the 2019 reporting year
as 85/100 (EPC rating B) (2018: 92/100 EPC
rating A) for the Energy Rating of Dwellings,
a reduction as a direct result of the addition
of historical buildings, which are typically less
energy efficient by virtue of their inherent
structure, into the portfolio. SAP calculates the
energy performance in buildings and is used to
provide energy ratings in homes. The Company
is committed to fitting its homes with EPC
energy rated A or B appliances, in line with our
commitment to more energy efficient homes.
To further drive high standards, and encourage
energy efficiency, at least 75% of all light fittings
in our homes are classified as low energy. The
provision of solar panels is provided where
planning currently dictates, and those on
apartment developments support energy needs
in communal areas. Inclusion of time sensitive
switch operated and energy efficient LED
ensures efficiency is a key consideration in our
construction. In line with this drive, Countryside
site energy use has been reduced through the
fitting of passive infrared sensor (PIR) lighting,
with generator switch to energy-efficient mode
facility, during site closures. Alongside the obvious
energy saving benefits, benefits to our residents
in terms of light reduction and security is clear.
Water
We all understand the importance of responsible
water use, and therefore 100% of our homes
completed in the last year have been fitted
with a water meter, flow restrictors on taps and
dual flush cisterns, in line with current building
regulations. Residents are given guidance on the
basic principles for water conservation such as
shower over bath, half kettle basics, and efficient
tap use. Our Countryside partners, share this
commitment to water saving procedures,
reducing company site water use in the last
reporting year, for the third consecutive year,
to 22,816 cubic metres (2018: 33,414m cubic
meters), through regular inspections and the
utilization of water-saving fittings.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Maintenance Support
The use of online FixFlo maintenance services,
launched in February 2020, further supports our
goals towards greater efficiency by centralising
this provision thereby reducing call out traffic
and emissions from a range of suppliers.
Residents are guided through and encouraged
to self-fix, and data is monitored, helping to
direct future planning and support. Review and
evaluation of how this system can be delivered,
improved and developed, is currently ongoing.
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Printing
Pink Sheep, our printing partner, has
sustainability at the heart of their business,
and has measures in place to offset printing
requirement by teaming with Trees for Life, a
programme which involves planting trees and
re-wilding the Scottish Highlands. Their recently
published Sustainability Whitepaper, Lead Your
Business through the Sustainability Minefield,
illustrates their awareness and commitment
to leading the way positively. It aims to help
educate and make clear the impact of choices
made when selecting products and services,
by stating sustainability credentials on all
products. Going forward Pink Sheep will report
our monthly carbon offsetting and tree planting
data, and audit our sustainability picture, based
on printing and marketing activity, helping us to
make informed decisions for the future.
Physical environment
The Company is mindful and aware of our
responsibility to the environment and we are
committed to ensuring that our management of
this valuable resource is done in a responsible
and sustainable way. We appreciate the health
and wellbeing benefits of green spaces to
people and the environment, and are focussed
on the planting of trees and developing areas
rich in biodiversity within our communities.
We are working with landscapers to broaden
our tree planting programme and implement a
wildflower planting scheme that will promote
a greater volume of invertebrate life. This will
in turn support the wild bird population and
greater overall biodiversity. As part of our focus
on such initiatives we will work closely with
our partners to target this area such as Vistry’s
installation of hedgehog highways in all their
communities, having joined forces with the
British Hedgehog Preservation Society, and
Countryside’s partnership with NatureSpace
Partnership in research on the protection of
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Promotion of electric cars and
transport policy
The Company has a forward-thinking Electric
Vehicle Policy, with attractive incentives
for employees to switch away from fossil
fuels, facilitating access to electric vehicles,
supported through a salary sacrifice scheme.
Given the Government’s ambitious step
towards Net Zero Emissions with an end
to petrol and diesel car sales by 2030, this
generous and impactful Company initiative is
extremely proactive. Countryside Properties
also introduced options such as hybrid
transport, cycle schemes, home working and
promotion of public transport to reduce travel
emissions further. Our contractor partners
have also agreed to the adoption of targets
to electrify their workforce transport. Looking
ahead, the Company strives to look towards
the possibility of providing electric charging
stations within its communities. Currently,
residents can request installation of a personal
vehicle charging point, and we have installed
charging station facilities for our residents
at some units. All properties benefit from
ease of location to public transport facilities,
encouraging reduction in vehicle use and
resulting emissions.
the endangered great crested newt, and their
installation of bat and bird boxes to further
protect local ecology on sites. All of these
efforts support our commitment in this regard.
Recent challenges with movement restrictions,
and the importance of outdoor space alongside
projects such as Planting Britain, and fostering
links with The Woodland Trust, will be an ESG
focus going forward. We regularly address
and discuss options to further enhance the
physical environment to encourage, and
support, a healthy lifestyle, in respect of access
to communal spaces and public transport links.
Going forward we are committed to enhancing
the physical environment in all our communities,
to promote the best possible experience for our
residents and the wider community.
Clothes banks
Our goal is to install clothes banks close to
all units, and to encourage residents to act
sustainably. Collected garments are either
redistributed to good causes or recycled, and
we have forged a link with the charity White
Rose Fashion Cycle, supporting The Aegis
Trust, in this regard. There are currently 4
developments with active banks, and others due
for installation as communities are completed.
By the end of 2021 the target is to have 15
communities with clothes banks in place.
As a result of these efforts we have raised
£5,746 for this charity, saved 1,045kg
from landfill and a carbon offset 3,762kg,
representing a positive start upon which to
build. We also include reusable shopping
bags and water flasks in the ‘Welcome’ boxes
provided to new residents.
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
We look to all our partners to have policies demonstrating their commitment to the
environment through a responsible approach to development as well as the custody and
integrity of their supply chain. As we move forward, we will audit the implementation and
delivery of these.
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ENVIRONMENTAL, SOCIAL AND GOVE RNA NCE (CONTINUED)
SOCIAL
Strong social values underpin the Company’s engagement with residents and the local communities
in which the Company’s homes are situated, and the Company is very proud of its achievements and
positive impact in this area of ESG. These values include integrity, trust and respect for others. We see
our Simple Life brand as representing a new, higher standard of rental experience, and our aim is for
residents to feel secure with us and enjoy their home and neighbourhood with total peace of mind.
Schools and Education
We strongly believe in, and are committed to,
investing in our wider communities, and the
schools and education opportunities close to
us are key focal points. We continue to have
strong links with 10 primary schools across the
country, and have enjoyed seeing the impact
funding has had on the learning environment
and wellbeing of the children, and indeed adults,
in these schools. Long-term connections are
being forged and we look forward to following
the stories and completed projects from these
schools, on the benefits and opportunities
created from our close links. Projects such
as enhanced outdoor facilities for exercise,
gardening and planting, and increased IT
facilities, could not have been more relevant
this past year, with opportunities for outdoor
classroom space and the daily mile reported as
highly successful and beneficial.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Having access to outdoor space is known to
have a positive impact on mental health and
well-being, and Daniel Gauld, Head Teacher at
River View Primary School in Salford, confirms
this importance in his feedback on the benefits
for the children at River View from the pond
regeneration project we supported. His
comments:
“We’re really grateful for the second donation
from Sigma. Nature and being outdoors is
brilliant for the children’s mental health and
wellbeing and the new pond area is brilliant.”
“The outdoor greenhouse built from the first
donation allows us to associate reading time
within playtime and has made a huge difference
to the school.”
This also highlights the real benefit of ongoing
support and collaboration, building a strong and
lasting relationship with our wider communities.
Having the opportunity to play, learn and simply
be outdoors is so important to developing a
sense of place, building strong communities,
and understanding the importance of our
responsibility in creating Places for People.
The benefits are well documented, particularly
during the coronavirus pandemic and we look
forward to further support with current and new
initiatives in this area going forward.
Full details of the schools involved and the
wonderful work they have been doing, is
detailed in the Corporate Social Responsibility
(CSR) 2020 report on our website:
https://www.sigmacapital.co.uk/investor-
relations/results-reports-presentations/
Feedback from the Head Teacher, Ian Mason,
at Mills Hill Primary School in Middleton on the
benefits their Daily Mile running track has made,
illustrates the positive impact the Company’s
community engagement can have. He comments:
“The children’s daily walks around the
playground eventually developed into them
running three times a week and it’s brilliant to
see that fitness levels have improved.”
“We encourage our children to be both
active physically and to be creative with their
environment. The much-needed money from
Sigma has transformed our playground and
facilities and allowed our pupils to reap the
benefits of keeping fit.”
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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The Salford Foundation
Supporting young people beyond school is also
key to establishing strong links and community
relationships. Commitment to supporting
this move from school into the workplace is
a developing area through our work with The
Salford Foundation. Company members are
delighted to be able to offer experience and
time mentoring students on topics as diverse as
self-image and careers in property, alongside the
provision of guidance through mock interviews
for those about to enter the world of work.
To continue this support during the recent
COVID-19 challenges, some members of staff
filmed short videos about their career path
and job role for the children to watch during
lockdown. Many children took the opportunity
to raise follow-up questions with those staff
members to learn more. Building further on this
work we have 6 team members signed up to
help conduct virtual mock interviews over the
next 6-12 months.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Charities
The Company continues its ongoing support of
and work with charities, full details of which are
available to read in the Corporate and Social
Responsibility Report on the website. Our work
with charities including: Park Palace Ponies,
in Liverpool; Loaves and Fishes in Salford;
and The Big Help Project in Knowsley; Food
banks, in the North West and the Midlands, and
our involvement and support of local sports
clubs near our developments including Sale
Girls Football Club, Sale U18 Rugby Club, and
Wolverhampton Tennis Club.
COVID-19 has hardened the resolve of the
Company to offer support where it can. This
year has seen considerable challenges for many
people. In response to this and in consultation
with our residents, the Company donated
£100,000 to a further four charities all reflecting
the real impact of the pandemic. The charities
selected from this shared consultation process
were Trussell Trust (£17,700) – a charity building
a Hunger Free Future, Women’s Aid (£25,480)
– a charity supporting victims of domestic
violence, Centrepoint (£24,840) – a charity
fighting homelessness amongst young people
and Mind UK (£31,980) – a charity supporting
better mental health. Each charity was
gifted an initial donation of £12,500,
with proportion of the remaining
£50,000 allocated through a
resident engagement and poll.
Park Palace Ponies
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
ENVIRONMENTAL, SOCIAL AND GOVE RNA NCE (CONTINUED)
Our Residents
We place our residents and communities at the
heart of our business. We strive to be a visible and
engaging partner, and place value and importance
on feedback and communication. It is through this
community engagement and dialogue that we
aim to build strong and lasting relationships, and
communities where People matter.
Residents are invited to complete surveys
throughout their time with us, and we use
this feedback to plan and direct change and
improvements. Examples of positive change and
impact from such resident engagement can be
seen in the removal of our standard pet premium
charge on agreements. A review of the end-of-
tenancy work costs, established little variance in
the costs of rectification works from households
with pets and those without. This response for
our residents is one of the first taken by a PRS
landlord.
Events and activities on-site and on-line have
generated increased community engagement,
with consultation with residents ensuring
provision encouraged involvement across whole
community demographics.
During the challenges of COVID-19 lockdown
period earlier this year, the Easter Egg Hunt took
on an on-line virtual guise, with 12 eggs hidden
across the ‘Simple Life’ website. Residents followed
clues that took them to the four corners of the
site, with a mix of ‘quick wins’ and ‘brain teasers’
to keep the hunt interesting. There were over 130
entries over the course of the week and while all
entrants were rewarded with a branded chocolate
bar, 10 winners received a chocolate hamper from
Love Cocoa, a sustainable chocolate company.
An example of the well supported events
include an Autumn visit from The Wood
Fired Pizza Company, for communities with
apartment homes giving neighbours an
opportunity to meet and socialise over a slice
of pizza. In addition, prior to Christmas Santa
visited children in 20 communities across
Manchester, Merseyside, Cheshire, West
Midlands, Shropshire and South Yorkshire,
exchanging 2,000 bags of chocolate money
for some carefully composed Christmas lists!
The Summer 2020 ice-cream dash was
bigger than ever before. Over the course of
six days the ‘Simple Life’ branded ice-cream
van visited 29 communities across England.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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ENVIRONMENTAL, SOCIAL AND GOVE RN AN CE (CONTINUED)
The second ‘Simple Life’ Annual Resident
Newspaper was delivered to all residents in
June 2020. The publication gives residents
a roundup of the previous 12 months,
including events, competitions, campaigns,
testimonials, charitable donations and school
initiatives. It also informs residents of plans
for the months ahead.
The ‘Simple Life’ resident portal went live in
August 2020. It enables residents to access
many services including: online payments;
tenancy documents; ‘how-to’ guides; news;
offers; and an open forum with other residents.
The portal also incorporates an online
maintenance reporting tool, FixFlo. As well as
enabling residents to access online tutorials,
it offers a simple, streamlined approach for
residents to report, discuss and remain updated
about any maintenance issues they may have.
We are aware of the enormous potential from
this portal and are thrilled to see residents
supporting local businesses and events through
this medium. As resident numbers have grown,
so has engagement with ‘Simple Life’ on social
media. There was a significant increase in
resident ‘Simple Life’ Instagram home accounts
being set up, all dedicated to making their
‘Simple Life’ rental house their home. This has
encouraged residents to form a community
online, sharing their best home-style tips.
Such events, support and activities serve to
foster friendly and engaged neighbourhoods,
and promote social interaction across age
ranges. The positive impact of online and social
media has been clearly evident and effective
during this difficult year, with increasing
engagement through Instagram and Facebook,
alongside the residents’ online portal, ensuring
regular communication and engagement
has been maintained. It has never been more
important to stay connected, and it is hoped
that we can build upon this going forward.
There are a number of exciting initiatives at
the planning stage, for our residents and wider
communities to enjoy in the coming year and
we look forward to providing an update on their
success in due course.
SIGMA CAPITAL GROUP PLC
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Supporting Our Communities
2020 was without doubt a challenging year for
many and our commitment to a shared sense of
community has been so important. In the early
stages of the COVID-19 pandemic we anticipated
that a proportion of our residents were likely to
experience some degree of financial distress,
whether as a result of being placed on furlough,
losing their job or families having to fall back to
one income in order to facilitate childcare whilst
schools were closed.
At an early stage we sent out communication
to our residents, through various channels of
our awareness of the challenges, opening up
pathways for dialogue should they experience
difficulty paying their rent during the period of
lockdown. We offered support and reassurance
that we were willing to help, and encouraged
residents to contact us.
As cases appeared, these were reviewed
sensitively and we deferred rents for the initial
three months of lockdown, where required. The
amount deferred was very much addressed on
an individual basis, but for those furloughed a
20% deferral was typically agreed and this rose
to 50% for those harder hit. In some cases we
extended the deferral period to 4 months to help
with transition back to work. To date support has
been granted to 80 residents out of a portfolio of
c.1,200 lettings at the onset of the lockdown
The annual ‘Peace of Mind’ month took place
in April 2020. Residents were encouraged
to nominate a loved one whom they felt
deserved a little ‘peace of mind’. In total, over
50 entries were obtained with eight deserving
winners selected to receive a spa day for two,
and a ‘peace of mind’ prize tailored to their
preferences. Prizes included shopping vouchers,
holiday cottage vouchers, DJ equipment,
football tickets and motorbike lessons.
During lockdown, ‘Peace of Mind’ month was
extended with a special ‘health and wellbeing’
series aimed at helping residents to keep
mentally and physically healthy. A great sense
of community developed as residents were
encouraged to stay connected online. A number
of videos were posted on social channels,
created for ‘Simple Life’ by professionals,
partners and even residents, across a range of
themes, including meditation, make-up, pilates
and baking.
These 2020 challenges and focus on the human aspects of people and enhanced awareness of mental
health has also been evident in the work of our partners. Countryside introduced mental health first aiders
into the Group as part of their commitment to wellbeing, and aim to have a mental health first aider
present on every site in the year ahead, with 33 currently trained, whilst Vistry rolled out a programme
entitled Mental Health First Aid across the Vistry Group, including training for all line managers.
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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ENVI RONMENTAL, SOCIAL AND GOVE RN A NCE (CONTINUED)
Research
As part of our commitment to providing quality
homes and communities where people enjoy living,
Sigma commissioned a report into the Private Rented
Sector, with the objective of gaining an up-to-date
picture of current consumer behaviour and attitudes
towards renting and the rental experience. Such
independent in-depth qualitative and quantitative
data collection, from over 2,000 renters across
England, highlighted some key insights. Research
was gathered from a broad representation of the
renting community, and not limited to our residents.
Such research and results will help direct and guide
future planning and activities, ensuring we are well
informed, keeping up to date with and providing for
the market needs.
The full report, ‘The Rental Experience:
Setting the Standard’ can be viewed and
downloaded on the Sigma website http://
www.sigmacapital.co.uk/our-prs-model/the-
private-rented-sector-marketplace/
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Awards
Our aim is to deliver high quality long-term rental solutions for our residents, which go above and
beyond the rental industry standards. Whilst awards are not the focus, recognition of the work and
care of all involved is of course appreciated, and the awards we have been shortlisted for and won
over the course of the last year reflects our ambition to build a sector leading product and service.
The strength of partnerships we have created with our home builders and investors alike, further
illustrates this focus on quality and commitment.
WINNER
Property Management Awards
Build to Rent Provider of the Year 2019
(Winner)
Property Week Resi Awards
Landlord of the Year 2020
(Shortlisted)
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Insider North West Residential Property Awards
- Social Impact Award 2020
(Shortlisted)
Yorkshire Insider Property Awards
- Public Private Partnership 2020
- Large Development of the Year 2020
(Shortlisted for both – winner to be announced)
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
ENVI RONMENTAL, SOCIAL AND GOVE RN A NCE (CONTINUED)
Health and safety
In order to maintain high standards of health
and safety for those working on our sites, we
commission monthly checks by independent
project monitoring surveyors to ensure that
all potential risks are identified and mitigated.
These checks supplement those undertaken by
our development partners. The data is reported
to the Board on a quarterly basis in the event of
a nil return, and immediately in the event of an
incident. We are pleased to announce that there
have been no reportable incidents in the year.
Equality
Sigma is committed to creating and sustaining a
positive and inclusive working environment for
all of our employees. Our aim is to ensure that
employees are equally valued and respected
and that our organisation is representative of
all members of society. We define diversity as
valuing everyone as an individual and this is
reflected within our values and behaviours and
our leadership habits that provide a collaborative
and supportive working environment for all
employees. A key part of this is that equality of
opportunity is a core value and our goal is to
ensure that the best person for any role has the
opportunity to apply for and excel in it.
Commitment to equality, diversity and
inclusion
The Board considers that all stakeholders stand
to benefit when diversity of thoughts, ideas and
ways of working from individuals with different
backgrounds, experiences and identities are
embraced. To this end, the Board is focused on
the following:
•
•
•
•
•
No tolerating any form of unacceptable
behaviour, harassment, discrimination,
bullying (including cyber bullying) or
victimisation in any area of employment
or in the provision of our services to our
customers;
Encourage anyone who feels they have been
subject to or witnessed discrimination to raise
their concerns in an appropriate forum;
Make every person aware of their personal
responsibility for implementing and
promoting equal opportunities in their day
to day dealings with people and encourage
employees to treat everyone with dignity and
respect;
Regularly review all our employment
practices, policies and procedures to ensure
compliance with the requirements of this
statement;
To monitor the effectiveness of our
commitment to diversity and inclusion and
the supporting policies and procedures at
least annually.
The Board of Directors has overall responsibility
for ensuring that we operate within a framework
of equality of opportunity. Senior management
have overall management responsibility,
delegated to all managers throughout the
organisation.
All employees have a duty to support and
uphold the principles of our commitment
to equality, diversity and inclusion and its
supporting policies and procedures.
•
Creation of an environment in which
individual differences and the contribution of
all team members are recognised and valued;
As part of a wider review, the Directors have
again assessed whether they have both the
breadth and depth of skills and experience to
fulfil their roles. Full biographical details of the
directors and their skills and experience can
be found at https://www.sigmacapital.co.uk/
investor-relations/board-of-directors
The Directors who have been appointed to the
Company have been chosen because of the
range of skills and experience they offer and
which are appropriate for the strategy and
objectives for the Company. The Nominations
Committee assists the Board in determining
the composition and make-up of the Board. It
is responsible for periodically evaluating the
balance of skills, experience, independence and
knowledge of the Board.
The Board recognises that its membership
currently has limited diversity and this will
continue to form a part of any future recruitment
consideration. At a senior management level
there is however considerably more diversity
and recent appointments to the PRS REIT Head
of Finance, ESG Manager and Group Financial
Planning & Treasury Manager have all been
female, reflecting the policy outlined above.
The Company encourages continuing education
of its directors, officers and employees where
appropriate in order to ensure that they have
the necessary skills and knowledge to meet their
respective obligations to the Company. This
includes supporting personnel through external
examination and qualification programmes
ranging from ACCA to Company Secretarial to
Association of Corporate Treasurers.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
•
•
•
Additional disclosure around the decision-
making of the Remuneration Committee set
out as part of the Directors remuneration
report on pages 76 to 80
Inclusion of an Audit Committee report which
is set out on pages 82 to 85.
Refresh of corporate policies on the following
topics which will shortly be shared with
employees as part of a consultation process:
- Whistleblowing Policy
- Anti-bribery and Corruption Policy
- Remuneration Policy
- Share Dealing Code
Consistent with the QCA code, the various
policies and procedures are subject to
continuous review and updating by the Board of
Directors.
GOVERNANCE
The Group is subject to statutory reporting
requirements and to rules and responsibilities
prescribed by the London Stock Exchange. The
Board has a balanced range of complementary
skills and experience, with independent non-
executive directors who provide oversight, and
challenge decisions and policies as they see
fit. The Board believe in robust and effective
corporate governance structures and are
committed to maintaining high standards and
applying the principles of best practice.
The Board has adopted the Quoted Companies
Alliance (QCA) Corporate Governance Code
in line with the AIM Rules requiring all AIM-
listed companies to adopt and comply with a
recognised corporate governance code. As part
of the appointment of Ian Sutcliffe as Chairman,
the Board of Directors reviewed the Company’s
performance against the QCA guidelines
and updated Sigma’s Corporate Governance
Statement accordingly. An independent
consultant with governance experience within
a FTSE100 company was engaged to assist the
Board in this regard.
The Board considers that the Company
continues to comply with the QCA Code in all
respects but following the review has made a
number of changes to enhance disclosure and
transparency of its operations in line with the
spirit of the QCA code. These areas include the
following:
•
Clarifying principles for the appointment,
service and independence of Directors on
appointment and during their tenure
•
Appointment of a Senior Independent
Non-Executive Director
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PRINCIPAL
RISKS AND
UNCERTAINTIES
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
PRINCIPAL RISKS AND UNCERTAINTIES
The Board of Directors recognise that there are a number of risks which could have an impact on the
Company’s strategy and investment objectives. The below list sets out the current identifiable principal
risks and uncertainties which the Board are monitoring:
•
•
•
•
•
Income reduction and doubtful debts as some
tenants struggle to maintain rental payments
resulting from a loss of income due to a
combination of the effective lockdown and
restrictions or as individuals are without work,
unable to work or are absent from work;
Disruption to the supply chain as raw
materials and construction products are not
produced or imported as workers are unable
to work or are absent from work;
General disruption to employees, house
builders, letting agents and the supply chain
due to restrictions on the movement of goods
and people;
Impact of the virus on the economy and
market sentiment; and
Further waves of the coronavirus and potential
for further national lockdowns or significant
localised restrictions on social interaction.
CORONAVIRUS
Countries around the world have been hit by
coronavirus. The virus has spread on a global
basis and has been designated a “pandemic”.
Despite significant mitigating action including
self-isolation for people suspected of having
the virus, and a combination of an effective
lockdown through social distancing for all but
essential workers and the imposition of varying
degrees of restrictions on social interaction
across the country, the impact of the virus has
been significant in terms of extent and timing.
This represents a risk to housebuilding and
letting activity together with the operations of
the Company as a whole.
Coronavirus has impacted the Group in the
following areas:
•
•
•
Company staff operating from home or
otherwise unable to work or absent from
work;
House builders unable to continue with
construction work on sites or forced to reduce
or suspend construction work on sites due to
a combination of the effective lockdown and
restrictions or as staff are unable to work or
are absent from work;
Letting agents unable to progress activities in
respect of lettings, repairs and maintenance or
only able to operate a limited service due to
a combination of the effective lockdown and
restrictions or as staff are unable to work or
are absent from work;
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
There is a risk of reduced property valuations due
to changes in rental levels, bad and doubtful debt
risk and sector attractiveness impacting yields.
Having experienced the first lockdown, the Group
and Company has a good understanding of how
to react quickly to adapt to further lockdowns.
New systems are in place, which enable the
Company to better support tenants e.g. with
online repairs and maintenance assistance.
It presently appears that varying degrees of
lockdown measures look likely to continue for the
foreseeable future, pending broad vaccination
coverage. Given the geographic spread of sites
and reflecting government’s desire to maintain as
much economic activity as is reasonably possible,
the Group is likely to be able to continue
construction and lettings activity, particularly
in those regions unaffected by restrictions. As
mentioned above, cessation of construction work
on development sites would reduce short-term
cash outflows although practical completion and
lettings schedules would be delayed.
There remains the risk of further waves
of coronavirus unless and until the wider
vaccination programme is implemented, and
greater potential for further national and local
lockdowns or restrictions. Having experienced
the initial lockdowns, the Group and Company
have a good understanding of how to react
quickly to adapt to additional lockdowns.
Overall, coronavirus remains a real and existing
risk which requires careful monitoring and a
management in conjunction with our house
building partners and Letting Agents in order
to mitigate the likely issues as much as possible
pending the restoration of a more normal
working and living environment. As one would
expect the Company will continue to objectively
review and assess the impact of the coronavirus
outbreak and government response on both
its strategy and focus of activities. Importantly,
however, the pandemic will ultimately pass and
the Company is well placed to thrive thereafter.
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
The absence of Company staff from the office
workplace has been mitigated by remote working
from home. We have adapted our technology to
facilitate remote working throughout the business
in order to keep our operations and projects as
on track as practically possible during coronavirus
pandemic. The Company has not furloughed
staff or made use of any of the Government
schemes providing support to companies or
individuals in financial difficulty during or because
of the crisis. Sigma’s intention is still to keep all
employees actively working as far as possible
and to maintain contractual terms and conditions
throughout.
A greater issue has been in relation to house
building and letting activity where the effective
lockdown ceased construction activity in the
short term from the end of March up until May
when lockdown restrictions began to ease. Even
then, construction activity only began to resume
comprehensively in June and has subsequently
been adjusted to reflect continuing requirements
for social distancing and guidance around public
transport meaning that construction levels have
not fully returned to pre-lockdown levels. A
further complication has been the introduction of
varying degrees of localised lockdown restrictions
in response to outbreaks of coronavirus in
particular areas.
Importantly, the Company’s contractual
obligations only provide for payment to
house builders in respect of work undertaken
and independently certified. The absence
of construction activity thereby negates
development expenditure thus mitigating cash
outflows.
In relation to income and bad debts, the
Company carefully vets prospective tenants and
typically obtains rent insurance for at least the
first year of new lettings where there is limited
covenant history or if the employment sector
is considered to be at greater risk. To date,
coronavirus related arrears have been managed
by agreeing payment plans with tenants
encountering difficulties. The insurer has been
notified of this in order to preserve rights of
claim but policies ultimately pay out in the event
that arrears are not recovered through payment
plans. This, together with the geographic spread
of multiple sites, will help mitigate against the
inevitable bad debts.
Preserving the employment of staff, rather
than furloughing, also enables Sigma to work
with letting agents as we proactively assist and
support those tenants encountering difficulty
during the crisis in a responsible and reasonable.
The adaptation of our technology has meant
that this important tenant interaction and
engagement has continued through a variety of
telephone, e-mail and social media.
In terms of supply chain disruption, significant
efforts and contingencies had already been put
in place in respect of Brexit through securing
additional inventory of supplies, including timber.
In addition, all of our suppliers have worked
quickly to adapt to new ways of working in
accordance with government guidelines to enable
all areas of the business to continue, although at
a slower rate than before.
The coronavirus has had a major impact on the
economy and market sentiment. During August
2020, announcements indicated that the UK
has technically entered a severe recession as a
result of two successive quarters of negative
GDP growth. The Bank of England has recently
signalled that another technical recession is likely
following the most recent round of restriction.
However, there is a structural under supply of new
family homes in the UK and indications suggest
that the pandemic and recession may have
increased demand for the Group’s high quality
but affordable product across multiple regions.
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65
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
STRATEGIC RISKS
Site selection
The principal drivers for the valuation of the
Group’s property assets are land purchase, cost
to build, rental income, gross to net income
deductions and yield. Small variations in these
can have a material impact on the valuation
of any property. The selection of sites which
match the investment criteria in terms of cost to
purchase and build, rentals, gross net to income
deductions and yield is therefore critical to the
success of individual developments.
Detailed appraisal and assessment of all aspects
of a site such as location, access, transport
links, education, amenities and employment
are necessary to formalise a view on the likely
viability and profitability as a build-to-rent
development. This necessarily involves expert
third party guidance from valuers, house builders
and lettings agents.
The Group’s process on site assessment and
appraisal necessarily involves a number of
individuals with different skill sets to ensure
a balance of views and full consideration of
all factors. There is also an ultimate sign off
by Site Director, Investment Director, Lettings
Director, Finance Director, Group Chief Financial
Officer and Chief Executive Officer. In the
unlikely eventuality that the dynamics on a site,
particularly rental demand and/or rental value
given that land cost and design & build cost
are previously fixed, transpire differently from
anticipated then this would only impact the
valuation and financial returns on that site. The
portfolio approach adopted by the Group means
that while there are likely to be some sites that
do not materialise as expected, the selection
criteria and approach should generate more
winners than losers. On this basis, the approach
adopted should mitigate the associated risks.
Diversifying income streams
The group’s business is focused on build-to-
rent in the private residential housing sector.
Build to rent is exposed to variations in supply,
demand, costs, funding and valuation as a result
of changes in macro-economic conditions. These
could impact customer, funder and investor
appetite and sentiment towards the sector.
Focus on build to rent in the private residential
sector therefore represents a potential
concentration exposure in terms of the Group’s
strategy.
Through focusing on the build to rent private
residential sector in the UK, the Group has
made a deliberate strategic decision to utilise
its experience to target an underdeveloped
market with good financial fundamentals, strong
investor appetite, tenant demand, supplier
demand and a national requirement for growth
in the number of homes to buy or let as occupier
demand continues to outstrip supply. Within this,
the Company has a number of income streams
- rental income, development management fees,
investment management fees and gains on asset
valuation. Some are of these are contracted for
long periods.
At present, there are no signs that the
underlying dynamics are changing. Indeed, it
could be argued that the market fundamentals
support continued growth in the requirement for
properties to meet demand for rental units. On
this basis, the Group would manage this risk by
monitoring market and economic developments
to identify any change in circumstances and
then adapt strategy accordingly.
Personnel and Succession planning
Group structure and operations presently have
a low number of employees relative to the gross
value of assets under management and profit
before tax. There is a reliance on a small number
of individuals who could be regarded as critical
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
to the business operations and performance with
limited back-up or cover. Recruitment, retention
and succession planning are therefore key to
successful implementation of the Group strategy.
The Board continually assesses and monitors
the strength, depth and experience of the
management team. During 2020 a number of
senior additions have been made including a
new non-executive Chairman and ESG Manager.
The Head Office Finance Function has appointed
a Group Chief Financial Officer along with a
Group Financial Planning and Treasury Manager
as well as the segregation of the Group finance
function into teams dedicated respectively to
the Group and the PRS REIT.
The announcement of our London joint venture
with EQT Real Estate has meant that our
separate team with responsibility for the London
assets has grown with the appointment of an
Asset Manager.
The recently strengthened financial management
includes the implementation of improved
structure, financial reporting, forecasting and
governance framework which reflects the size,
scale and operations of the Group. Finance
systems and data management processes
are being upgraded with a full review of IT
systems and infrastructure also underway.
Notwithstanding the above changes, ensuring
that the growth of the business is matched by
the quantum and skills of the workforce, both
presently and in the future, will require constant
monitoring and review.
POLITICAL RISK
Although the Company does not export to the
EU, Brexit has a number of potential impacts on
the business. Exposures include supply chain
reliance on EU imports, labour availability due to
changes in immigration and the economic and
market impact of leaving the EU. Although a
trading agreement between the UK and EU has
been agreed, there remain some uncertainties
surrounding the implementation of this in
practice. Pending clarification through the
passage of time, there will continue to be some
doubts around the potential impact of the exit.
The Group’s activities are focused on the build-
to-rent private residential sector in the UK with
no EU or international assets. Within this focus,
the debt funding, equity investment, rent levels,
tenant demand and yields could all be impacted
by market and economic factors potentially
influenced by Brexit albeit there are defensive
attributes in relation to a downturn or recession
that would likely mitigate this.
The largest risk is in respect of the potential
impacts on the physical movement of goods
from the EU for housebuilding and/or tariffs/
duties imposed on such goods. The impact
would only apply to new design and build
contracts - with existing contracts being fixed
price with pricing risk effectively borne by the
house builder.. Uncertainty surrounding the
practical implementation of the trade agreement
means that this area requires careful monitoring
and represents a significant risk pending clarity.
Similarly, although there is a risk in respect of
labour resource due to changes in immigration,
house building partners consider that there
is sufficient qualified and experienced labour
within the UK. However, the uncertainty
surrounding the nature and detail of immigration
policy together with the practical impact of
the trade agreement means that this area also
requires careful monitoring and represents a risk
pending clarity.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
OPERATIONAL RISK
Development fee income
The Group’s development fee income streams
are dependent on continued development of
new sites and assets. Maintaining and expanding
on the number and quantum of new sites is
therefore key to managing development fee
income for the Group.
The vast majority of the related assets and
sites are being managed by the Company
meaning that it has a strong degree of visibility
over income streams. A potential risk to the
Group is that development management fees
represent the majority of the Group’s income
and are effectively driven by the acquisition
and development of new sites. Maintaining and
growing the number of new sites for acquisition
and development is therefore key to securing the
majority of future revenue.
The Company has also sought to mitigate this
risk through establishing additional revenue
sources and reducing the proportion of the
income emanating from the PRS REIT. The
launch of the London joint venture with EQT Real
Estate represents an example of an additional
revenue stream from diversification. While this
will necessarily involve further development
management fees in the short-term, it will grow
to represent an additional source of long-term
recurring asset management fees.
Counterparty risk
The Group undertakes property investment with
a number of partner relationships exposing it
to counterparty risk such as house builders for
design and build contracts and lettings agents
for tenant management.
The Group maintains relationships with a number
of councils and house builders. In terms of cost
effectiveness and efficiency, the Group presently
utilises two Lettings Agents. As we reported last
year the incumbent Lettings Agent had been
served notice and we continue the transitioning
across to the new party. During the intervening
period, it requires to be recognised that the
exiting and new Lettings Agent will both require
careful management in order to reduce risk.
In terms of house building, although a majority of
site developments are undertaken by one party,
Countryside, this represents a true partnership
arrangement. Contrary to the situation with
the Lettings Agent, where the size and scale
of the operation merits the involvement of
one party, there remains opportunity to utilise
alternative house builders and to develop greater
partnerships with others. While monitoring
the relationship remains key, the Countryside
partnership presently works very well.
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
69
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
DIRECTORS
Ian Sutcliffe
Non-Executive Chairman
(Age 61)
(Appointed on 5 May 2020)
Ian has a wealth of experience and a
significant track record throughout his career
in property and construction. Most recently
Ian was Group Chief Executive of Countryside
Properties plc, until his retirement in
early 2020. He was also previously Senior
Independent Director at Ashtead Group plc,
UK Chief Executive of Taylor Wimpey plc and
Chief Operating Officer of SEGRO plc.
Gwynn Thomson
RICS, Property Investment Director (Age 53)
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.
Graham Barnet
Chief Executive Officer
(Age 57)
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.
Duncan Sutherland
Public Affairs Director (Age 68)
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.
Mike McGill
Group Chief Financial Officer (Age 52)
(Appointed 30 March 2020)
Mike qualified as a chartered accountant
with Coopers & Lybrand in 1991. He has
executive responsibility for the overall financial
management of the Group and its subsidiaries
as well as the PRS REIT. Mike has over 20 years
of experience in senior financial roles at listed
and private companies across a range of sectors,
including commercial, residential and industrial
property, international food manufacturing,
logistics, warehousing and distribution. This
includes significant corporate finance and
transactional experience from the sale and
purchase of various real estate and trading
businesses both internationally and in the UK.
Malcolm Briselden
ACMA, CGMA, Finance Director and
Company Secretary (Age 53)
(Resigned 30 March 2020)
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.
David Sigsworth OBE
Senior Independent Non-Executive Director
(Age 74)
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.
James McMahon
Non-Executive Director (Age 71)
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.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
71
The non-executive Chairman and the two non-executive Directors are the members of the Audit Committee, the Remuneration
Committee and the Nominations Committee. James McMahon is Chairman of the Audit Committee, David Sigsworth is Chairman
of the Remuneration Committee and Ian Sutcliffe is Chairman of the Nominations Committee.
ADVISERS
Registrars
Link Group
34 Beckenham Road
Beckenham
Kent BR3 4TU
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
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
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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 nine month period ended 30 September 2020.
RESULTS AND DIVIDENDS
TREASURY ACTIVITIES AND
FINANCIAL INSTRUMENTS
The Group made a net profit before tax for the
year of £3.2m (2019: £13.0m). The Directors have
declared a dividend of 2.0p per share for the
financial period (12 months to 31 December 2019:
2.0p). The dividend will be paid on 12 March 2021
to shareholders on the register on 26 February
2021.
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 period, their positions at the end of the
period and future developments. This requirement
is met by the Chairman’s Statement on pages 6 to
14, the Coronavirus and Going Concern Review on
pages 16 to 21 and the Strategic Report on pages
22 to 33.
DIRECTORS
The current Directors of the Company are listed
on pages 70 and 71, all of whom held office
throughout the period except where indicated
otherwise. Details of Directors’ interests in share
options and in shares are given in the Directors’
Remuneration Report on pages 76 to 80.
RISK FACTORS
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 on
pages 62 to 68.
The Group’s financial instruments comprise cash,
equity investments plus other items such as trade
receivables and trade payables that arise directly
from its operations. At 30 September 2020, the
Group had positive cash balances of £25.8m
(2019: £16.8m).
The Group’s policy is to keep surplus funds on
short-term and instant access deposit to earn
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 period in respect
of the Company and the Group’s subsidiaries.
POLITICAL DONATIONS
No political contributions were made during the
period (2019: £nil).
72
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ANNUAL REPORT & FINANCIAL STATEMENTS 2020
73
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
DIRECTORS’ REPORT (CONTINUED)
GOING CONCERN
The impact of coronavirus and the ability of the Company and the Group to continue in operational
existence for the foreseeable future is discussed on pages 16 to 21.
CORPORATE GOVERNANCE
The Board is committed to maintaining high standards of corporate governance. The Company has
adopted the Quoted Companies Alliance Corporate Governance Code. The Board considers that the
Company complies with the QCA Code in all respects. The principles contained in the Code, are set
out on the Company’s website: https://www.sigmacapital.co.uk/esg/governance/
Details of the attendance record of individual Directors at Board and committee meetings held during
the financial period are as follows:
Director
Ian Sutcliffe
Graham Barnet
Mike McGill
Gwynn Thomson
Duncan Sutherland
David Sigsworth OBE
Jim McMahon
Position
Non-executive Chairman
CEO
Group CFO
Property Investment Director
Public Affairs Director
Senior Independent Non-
Executive Director
Non-executive Director
Board*
2/2
3/3
3/3
3/3
3/3
Audit
Committee*
1/1
n/a
n/a
n/a
n/a
Remuneration
Committee*
1/1
n/a
n/a
n/a
n/a
Nominations
Committee*
n/a
2/2
1/1
2/2
2/2
3/3
3/3
2/2
2/2
1/1
1/1
2/2
2/2
*Number of all meetings attended / maximum number of meetings Director could have attended
AWARENESS OF RELEVANT AUDIT INFORMATION
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; and
•
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.
AUDITOR
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 20 January 2021 and is signed on its behalf by
Malcolm Briselden, ACMA, CGMA
Company Secretary
20 January 2021
74
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
75
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION
The three 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
twice a year in order to consider and set the
remuneration packages for executive Directors.
The remuneration packages are benchmarked
against a range of independently researched
and published data sources of annual analysis
of Director’s Remuneration in Smaller Listed
Companies. This has been, and remains,
an appropriate means of providing the
Remuneration Committee with an assessment of
comparability against companies of a similar size
and business sector as well as taking account of
inflation and market conditions.
In recent years however the company has
grown rapidly, the complexity of the business
has increased markedly and Group operations
have become more focussed on property
development and investment management
for third parties. Currently, the largest of these
relationships is with the PRS REIT where Sigma
subsidiaries manage a property portfolio with a
value approaching £1bn pursuant to the terms
of a long term management agreement. This
is in addition to the property development
and investment management Sigma Group
undertakes on its own balance sheet.
The traditional approach of linking salaries, in
particular, to market capitalisation of the Sigma
Group is not considered to be a suitable or
equitable means of reflecting executive efforts
and associated profit growth. The Remuneration
Committee have therefore augmented salary
awards to reflect the large fund management
component of current activity.
Other elements currently in the remuneration
package of executive Directors are simple
in nature and very much geared directly to
shareholder benefit. A bonus pool representing
10% of annual net profit of the Sigma Group is
available to the Remuneration Committee to be
distributed on merit following consideration of
recommendations from the CEO. There is no other
annual award payment or Performance Share
Plan. The Board agrees a challenging annual plan
with the CEO which is set against the longer term
growth objectives for the Group. The CEO in turn
sets targets and objectives for the other executive
Directors and uses those to regularly review and
monitor progress with each individual throughout
the year. The Remuneration Committee awards
bonus according to individual performance
outturn. The underlying principle is to seek
continuous improvement throughout the Group.
Given the rapid changes in the Group’s business,
noted earlier, the Remuneration Committee
is aware that the level of bonus available to
executive Directors is smaller, as a proportion of
the total package, than in comparable entities.
The intention is to review this issue in a way
which recognises the longer term nature of the
investment management activity and incentivises
success in that regard in parallel with outstanding
achievement in terms of annual and sustainable
long-term profit growth. However, pending the
introduction of such arrangements, the carried
interest programme operated is considered to
align the short, medium and long-term interests
of senior management and shareholders.
Benefits from carried interest arrangements arise
as the outcome of certain projects are finalised.
Again these only occur when a considerably
larger benefit arises for the Group and ultimately
its shareholders. Executive Directors participate
in the carried interest of any project according
to their own direct contribution to its success
and therefore, carried interest awards are very
focussed on individual innovation and drive for
completion.
Share options are issued in association with
exceptional Group performance and are spread
widely throughout group employees. These have
a three year vesting period after which employees
are free to exercise them. All Directors are limited
in their disposal of company shares by normal
executive restrictions.
The Remuneration Committee believe these
remuneration and reward arrangements to be in
the interests of investors as well as employees.
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.
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SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
77
DIRECTORS’ REMUNERATIO N R E P ORT (CONTINUED)
DIRECTORS’ INTERESTS – INTERESTS IN SHARE OPTIONS
Details of options held by Directors who were in office at 30 September 2020 are set out below:
Date of grant
Number
Exercise price
Exercise date
Expiry date
Director
GF Barnet
GF Barnet
GF Barnet
GF Barnet
GF Barnet
M McGill
I Sutcliffe
28.11.13
19.11.14
05.01.16
25.05.17
30.04.20
30.04.20
05.05.20
D Sutherland
29.07.11
D Sutherland
28.11.13
D Sutherland
19.11.14
D Sutherland
25.05.17
D Sutherland
30.04.20
G Thomson
G Thomson
28.11.13
19.11.14
G Thomson
05.01.16
G Thomson
25.05.17
G Thomson
30.04.20
114,286
250,000
400,000
300,000
200,000
250,000
1,000,000
119,500
42,857
64,503
72,500
50,000
38,095
200,000
250,000
132,500
75,000
26.25p
68.00p
93.50p
87.00p
82.00p
82.00p
86.00p
7.50p
26.25p
68.00p
87.00p
82.00p
26.25p
68.00p
93.50p
87.00p
82.00p
28.11.16 – 27.11.23
19.1 1 .17 – 18.1 1 .24
27.1 1 .23
18.1 1 .24
05.01.19 – 04.01.26
04.01.26
25.05.20 – 24.05.27
24.05.27
30.04.23 – 29.04.30
29.04.30
30.04.23 – 29.04.30
29.04.30
05.05.23 – 04.05.30
04.05.30
29.07.14 – 28.07.21
28.07.21
28.1 1 .16 – 27.1 1 .23
19.1 1 .17 – 18.1 1 .24
27.1 1 .23
18.1 1 .24
25.05.20 – 24.05.27
14.05.27
30.04.23 – 29.04.30
29.04.30
28.1 1 .16 – 27.1 1 .23
19.1 1 .17 – 18.1 1 .24
27.1 1 .23
18.1 1 .24
05.01.19 – 04.01.26
04.01.26
25.05.20 – 24.05.27
14.05.27
30.04.23 – 29.04.30
29.04.30
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 30 September 2020 was 127.5p. The range of market
prices during the year was 67.0p to 127.5p.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
CARRIED INTEREST
ARRANGEMENTS
One of the Directors has 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, three
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 as at
30 September 2020 would be £445,000. 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. In January 2021 the
investment portfolio in respect of the Group’s
investment in the PRS Joint venture with
Gatehouse was sold and as a result it is expected
that the carried interest will be realised during
2021. The total entitlement to the Directors is split
in the following proportions:
GF Barnet
G Thomson
D Sutherland
8.50%
5.00%
3.00%
Subject to certain performance conditions, two
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 presently used to
recognise a portion of the carried interest as
Group revenue, the value of the total entitlement
is expected to 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 2021 at the earliest. The
total entitlement to the Directors is split in the
following proportions:
GF Barnet
G Thomson
7.50%
2.50%
Subject to certain performance conditions, two
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. Based on
methodology used to recognise the fair value
uplift on investment property, the value of the
current total entitlement remaining would be
£462,000. 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 Thomson
4.5%
1.5%
During the period, the disposal of certain
investment property was completed and the
Directors received the following profit shares in
respect of carried interest:
GF Barnet
G Thomson
£54,000
£17,000
78
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
79
DIRECTORS’ REMUNERATIO N R E P ORT (CONTINUED)
DIRECTORS’ INTERESTS - INTERESTS IN SHARES
Directors in office at 30 September 2020 had the following interests in the ordinary shares of 1p each
of the Company:
GF Barnet
M McGill
J McMahon
D Sigsworth
I Sutcliffe
D Sutherland
G Thomson
2020
Number
2019
Number
6,2 1 3 ,237
6,213,237
31,000
100,000
716,9 7 1
1,000,000
145,299
392,85 7
100,000
671, 9 7 1
-
145,299
392,857
All of the above interests are beneficial. There were no dealings in the Company’s shares by any of the
Directors between 30 September 2020 and 20 January 2021
Ian Sutcliffe
Chairman
20 January 2021
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
STATEMENT OF
DIRECTORS’ RESPONSIBILITIES
The directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the company’s transactions
and disclose with reasonable accuracy at any
time the financial position of the company
and enable them to ensure that the financial
statements comply with the requirements of the
Companies Act 2006. They are also responsible
for safeguarding the assets of the company
and hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
WEBSITE PUBLICATION
The directors are responsible for ensuring the
annual report and the financial statements
are made available on a website. Financial
statements are published on the Company’s
website in accordance with legislation in the
United Kingdom governing the preparation and
dissemination of financial statements, which
may vary from legislation in other jurisdictions.
The maintenance and integrity of the company’s
website is the responsibility of the directors.
The directors’ responsibility also extends to the
ongoing integrity of the financial statements
contained therein.
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 elected to prepare
the Group and Company financial statements in
accordance with International Financial Reporting
Standards (IFRSs) 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 Group and Company and
of the profit or loss of the Group and Company
for that period. The directors are also required
to prepare financial statements in accordance
with the rules of the London Stock Exchange for
companies trading securities on AIM.
In preparing these financial statements, the
directors are required to:
•
•
•
•
select suitable accounting policies and then
apply them consistently;
make judgements and accounting estimates
that are reasonable and prudent;
state whether they have been prepared in
accordance with IFRSs as adopted by the
European Union, subject to any material
departures disclosed and explained in the
financial statements;
prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the company will continue in
business.
80
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
81
AUDIT
COMMITTEE
REPORT
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
AUDIT COMMITTEE REPORT
I am pleased to present the Audit Committee (the
“Committee”) report of the Company covering
the financial period ended 30 September 2020.
The Committee, which reports to the Board,
has governance responsibilities to oversee the
Company’s risk management, internal financial
controls and financial reporting processes.
Risk management and control
•
Review the adequacy of the internal controls
and risk management systems of the
Company’s Investment Adviser; and
•
Report to the Board on the Company’s
procedures for detecting fraud.
The Committee members consist of the three
non-executive Directors who have a broad
range of financial, commercial and property
sector expertise which enables them to provide
oversight of both financial and risk matters.
ROLE OF THE AUDIT COMMITTEE
The principal duties of the Audit Committee are:
Financial reporting
•
Consider the integrity of the interim and full
year financial statements which includes the
preliminary results announcement of the
Company;
•
•
Report to the Board on any significant financial
reporting issues and judgments having regard
to any matters communicated to it by the
Auditor; and
As requested by the Board, to review the
contents of the annual report and financial
statements and advise the Board on whether
the report and financial statements provide a
true and fair view of the Company’s financial
position as at 30 September 2020 and
further provides shareholders with sufficient
information to assess the financial position
of the Company and Group, and the Group’s
performance, investment strategy and
investment objectives.
External audit
•
Manage the relationship with the Company’s
external Auditor, including reviewing the
Auditor’s remuneration, independence and
performance and making recommendations to
the Board as appropriate;
•
•
Review the policy on the engagement of the
Auditor; and
Safeguard the Auditor’s independence and
objectivity.
External property valuation
•
Review the quality and appropriateness of the
half-yearly and full year external valuations of
the Group’s property portfolio.
Other
•
Review the Committee’s terms of reference
and performance effectiveness.
The Committee meets at least twice annually and
its quorum is two members. The Audit Committee
reports and makes recommendations to the
Board, after each meeting.
82
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
83
AUD IT COMMITTE E REPORT (CONTINUED)
MATTERS CONSIDERED BY THE
AUDIT COMMITTEE
There are at least two scheduled Audit
Committee meetings in any financial period. For
the period from 1 January 2020 to 30 September
2020, the Committee has met twice. The
attendance at these meetings was as follows:
Director
Attendance *
Jim McMahon (Chairman)
David Sigsworth
Ian Sutcliffe
2/2
2/2
1/1
*Number of scheduled meetings attended/maximum number of
meetings that the Director could have attended.
At these meetings, the Audit Committee has:
•
Reviewed the internal controls and risk
management systems of the Company;
• Reviewed financial results;
•
Agreed the audit plan with the Auditor,
including the agreement of the audit fee;
• Reviewed the annual valuations;
•
•
•
Reviewed the provision of non-audit services
by the Auditor if any;
Reviewed the independence of the Auditor;
and
Reviewed the Group’s financial statements and
advised the Board accordingly.
The Company’s principal risks can be found on
pages 62 to 68. The Group CFO updates the
Audit Committee on changes to accounting
policies, risk, legislation and areas of significant
judgement in the financial statements.
84
SIGNIFICANT MATTERS
CONSIDERED BY THE AUDIT
COMMITTEE IN THE PERIOD
Coronavirus pandemic
The coronavirus pandemic has represented and
continues to represent a significant risk to the
house building and letting activity together with
the operations of the Company as a whole. It
is significant in terms of extent and timing and
therefore could have an impact on whether the
Company could continue as a going concern. The
Board of Directors have considered all the risks
and impact of those on the Company as a result
of the pandemic. As part of this, it has performed
a prudent financial stress test to ensure that it
has significant cash resources to weather the
pandemic and subsequently emerge in a strong
enough condition to continue to implement the
focused build to rent strategy.
Property portfolio valuation
Investment property is held in the financial
statements at fair value. The valuations are
carried out by the Board of Directors. Gwynn
Thomson RICS, Property Investment Director,
is a chartered surveyor with over 25 years’
experience in residential and commercial
property investments produces the valuations
which are approved by the Board. The
valuations are prepared in accordance with
RICS Valuation Professional Standards 2014
and are compliant with International Valuation
Standards. The valuation of the properties
within the Group’s portfolio is a significant issue
due to the magnitude of the total amount, the
potential impact on the movement in value on
the reported results and the subjectivity of the
valuation process.
These internal valuations are compared against
independent valuations prepared for the
Company’s funders by an external valuation
specialist. Although not directly comparable,
these provide an element of independent
evidence to corroborate and provide comfort to
the Board and the Audit Committee as regards
the valuations adopted.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
External audit process
Before the commencement of the audit, the Audit
Committee met with the Auditor, to discuss the
scope of the audit plan. After completion of the
external audit, the Committee met again with the
Auditor to discuss the findings of the external
audit and consider and evaluate any findings.
True and fair view
After the consideration of the above matters
and detailed review, the Audit Committee was of
the opinion that the annual report and financial
statements, represent a true and fair view of the
Company as a whole and in addition provides
the information necessary for shareholders to
assess the Company’s performance, strategy and
investment objectives.
Audit fees and non-audit services
An audit fee of £44,000 has been agreed in
respect of the audit of the Parent Company and
Group consolidation for the period ended 30
September 2020 (Year to 31 December 2019:
£55,000). The audit fees of the Group for the
period ended 30 September 2020 were £104,000
(Year to 31 December 2019: £115,000).
The cost of non-audit services provided by the
Auditor to the Group for the financial period
ended 30 September 2020 was £30,000 (Year to
31 December 2019: £30,000).
BDO LLP have also been engaged to advise on
taxation compliance matters. To safeguard the
external Auditor’s independence and objectivity
there was prior approval of a detailed scope and
engagement of separate tax team to provide
tax services. No additional safeguards were
considered necessary due to the nature of
procedures involved.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Independence and objectivity
of the Auditor
BDO LLP (“BDO”) was appointed Auditor to the
Company in February 2020 after the Company’s
previous auditors merged their practice with BDO
in February 2020. Timothy West, Partner at BDO,
has been the audit partner on the audit since
2017. No tender for the audit of the Company has
been undertaken.
In evaluating BDO’s performance, the Audit
Committee considered the effectiveness of the
audit process, quality of delivery, staff expertise,
audit fees and the Auditor’s independence,
along with matters raised during the audit. The
Committee received confirmation from BDO that
they maintain appropriate internal safeguards
in line with applicable professional standards.
Having considered the Auditor’s independence
in respect of the period ended 30 September
2020, the Audit Committee is satisfied with
the Auditor’s performance, objectivity and
independence.
Review of Auditor appointment
Following consideration of the performance
of the Auditor, the service provided during
the period and a review of their independence
and objectivity, the Audit Committee has
recommended to the Board the continued
appointment of BDO LLP as the Company’s
external independent Auditor.
Internal audit
The Audit Committee has determined that there
is no need for an internal audit function given the
size, nature and complexity of the Company and
its business.
Jim McMahon
Audit Committee Chairman
20 January 2021
85
INDEPENDENT AUDITOR’S REPORT
to the members of Sigma Capital Group plc
OPINION ON THE FINANCIAL
STATEMENTS
BASIS FOR OPINION
In our opinion:
•
•
•
the financial statements give a true and fair
view of the state of the Group’s and of the
Parent Company’s affairs as at 30 September
2020 and of the Group’s profit for the period
then ended;
the Group financial statements have been
properly prepared in accordance with
international accounting standards in
conformity with the requirements of the
Companies Act 2006;
the Parent Company financial statements
have been properly prepared in accordance
with international accounting standards
in conformity with the requirements of
the Companies Act 2006 and as applied
in accordance with the provisions of the
Companies Act 2006; and
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
believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis
for our opinion. Our audit opinion is consistent
with the additional report to the audit committee.
Independence
We remain independent of the Group and the
Parent 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 as applied to listed
entities, and we have fulfilled our other ethical
responsibilities in accordance with these
requirements.
•
the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
CONCLUSIONS RELATING TO
GOING CONCERN
We have audited the financial statements of
Sigma Capital Group plc (the ‘Parent Company’)
and its subsidiaries (the ‘Group’) for the 9
month period ended 30 September 2020 which
comprise the Consolidated Comprehensive
Income Statement, the Consolidated and
Company Statements of Financial Position,
the Consolidated and Company Statements
of Changes in Equity, the Consolidated and
Company Cash Flows Statements, and notes to
the financial statements, including a summary
of significant accounting policies. The financial
reporting framework that has been applied
in their preparation is applicable law and
international accounting standards in conformity
with the requirements of the Companies Act
2006 and, as regards the Parent Company
financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In auditing the financial statements, we have
concluded that the Directors’ use of the going
concern basis of accounting in the preparation of
the financial statements is appropriate.
The Group’s borrowing arrangements with
Homes England, (“HCA”) which are subject
to financial covenants, are due for renewal in
September 2021 and COVID-19 has had an
impact on the Group. The uncertainty created
by the pandemic has increased the level of
estimation and judgement involved in relation
to going concern assessments and increased
the risk of material uncertainties being present.
As summarised in the accounting policies on
pages 104 to 112 and note 32 and detailed in the
Directors’ report, management have modelled a
number of scenarios to incorporate the expected
impact of the COVID-19 pandemic, plans for
86
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
renewal of the Group’s borrowing arrangements,
the contracted property sales post period-
end and the limited recourse status of the loan
taking account of the Group’s net current liability
position. We therefore identified going concern
as a key audit matter based on our assessment of
the significance of the risk on our audit strategy
Our evaluation of the Directors’ assessment of
the Group and the Parent Company’s ability to
continue to adopt the going concern basis of
accounting included:
•
•
•
•
Assessment of the latest board approved cash
flow forecasts for the Group, which covered
a period of more than 3 years from the date
of approval of these financial statements
to September 2024. For the period ending
September 2022 we corroborated input data
and reviewed the current period and after
date results against forecasts. We challenged
management’s assumptions taking account of
the relevant contractual arrangements in place
in respect of development progress;
Assessment of the appropriateness of the
scenarios evaluated and potential impact
based on our knowledge of the business and
available market information, taking account of
COVID-19 especially in relation to the impact of
timing of completion of the London properties
and their pre-contracted sales. We considered
relevant sensitivities relating to development
delays, financing availability and financial
covenants;
We also reviewed the signed SPAs in relation
to the contracted property sales to verify the
agreed sales values in relation to loan facility;
We have reviewed the correspondence with
HCA in connection with the renewal of the new
loan agreement and noted that arrangements
had yet to be finalised;
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
•
•
We considered management statement that
in the event of no income or cost saving
measures they have sufficient cash reserves to
cover 3 years of total overhead based on our
assessment and we performed a sensitivity
analysis of this; and
Review of the disclosures in the accounting
policies and note 32 to check that an
appropriate explanation of the potential
impact of COVID-19, impact of the borrowing
arrangements in place at the time of approval
and the current lockdown was provided.
Based on the work we have performed, we have
not identified any material uncertainties relating
to events or conditions that, individually or
collectively, may cast significant doubt on the
Group and the Parent entity’s ability to continue
as a going concern for a period of at least twelve
months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of
the Directors with respect to going concern are
described in the relevant sections of this report.
87
INDEPENDENT AUDITOR ’S R E PO RT (CONTINUED)
100% (2019: 100%) of Group profit before tax
Coverage
100% (2019: 100%) of Group revenue
100% (2019: 100%) of Group total assets
Key audit matters
2020
2019
KAM 1:
Valuation of
investment properties
KAM 2:
Going concern
3
3
3
3
Materiality
Group financial statements as a whole
£1,569,000 (2019: £1,337,000) based on 1.5% (2019: 1.5%) of total assets.
AN OVERVIEW OF THE SCOPE OF
OUR AUDIT
Our Group audit was scoped by obtaining an
understanding of the Group and its environment,
including the Group’s system of internal control,
and assessing the risks of material misstatement
in the financial statements. We also addressed
the risk of management override of internal
controls, including assessing whether there was
evidence of bias by the Directors that may have
represented a risk of material misstatement.
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
which involves a high level of estimation
uncertainty, as well as the Directors’ assessment
of going concern.
There are 6 (2019: 7) 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.
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) that
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 2020
Key audit matter
How the scope of our audit addressed the key audit
matter
Valuation of investment
properties (page 136)
In this area our audit work included, but was not restricted to,
the following:
The Group holds investment
properties which comprise
properties, both completed and
under construction. Investment
properties are valued by the
Directors at the reporting date.
The Directors’ valuation
process includes a comparison
to valuation evidence prepared
by external valuers as a cross-
check, including valuation
reports prepared in relation
to purchases and sales of
properties in the period as
well as a desk top valuation of
the regional properties at the
reporting date.
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 104 to
112.
• We assessed the competency and qualifications of the Director
preparing the valuations of the investment properties at the
reporting date.
• We met with the Group’s Directors to discuss and challenge
the valuation methodology and key inputs and assumptions
used, and considered if there were any indicators of undue
management influence on the valuations.
• We formed our own market expectations with the assistance
of our internal property valuation experts. We compared the
key valuation assumptions against our market expectations
and challenged the Directors and the external valuer where
significant variances from these expectations were identified.
The key valuation assumptions were considered to be the
investment yields, estimated rental values and expected gross
to net income rates, which we reviewed by reference to market
data based on the location and specifics of each property. Our
review of these assumptions included reference to comparable
market transactions, and, where considered relevant, rental
data from sites the Group has previously completed.
•
In respect of the properties in the course of development, on
a sample basis we tested the accuracy of the key observable
valuation inputs supplied to and used by the Directors. This
included agreeing the costs incurred to date to supporting
documentation and reviewing the costs to complete against
the latest development appraisals to gain assurance over the
calculation of the fair value based on stage of completion. In
respect of the income-generating properties, this included
agreeing on a sample basis the passing level of rental income
and lease terms to underlying supporting documentation.
• We reviewed the appropriateness of the Group’s disclosures
within the financial statements in relation to valuation
methodology, key valuation inputs and valuation uncertainty.
Key observations:
We did not identify any indicators to suggest that the judgements
and estimates made in the valuation of the Group’s investment
properties were inappropriate.
88
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
89
INDEPE NDENT AUDITOR ’S R E PO RT (CONTINUED)
OUR APPLICATION OF
MATERIALITY
We apply the concept of materiality both in
planning and performing our audit, and in
evaluating the effect of misstatements. 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.
In order to reduce to an appropriately low level
the probability that any misstatements exceed
materiality, we use a lower materiality level,
performance materiality, to determine the extent
of testing needed. Importantly, misstatements
below these levels will not necessarily be
evaluated as immaterial as we also take 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.
Based on our professional judgement, we
determined materiality for the financial
statements as a whole and performance
materiality as follows:
Group financial statements
Parent company financial statements
2020
2019
2020
2019
Materiality
£1,569,000
£1,337,000
£571,000
£547,000
Basis for determining
materiality
Rationale for the
benchmark applied
Calculated with reference to a
benchmark of the Group’s total
assets, of which it represents 1.5%
(2019: 1.5%)
We consider total assets to be one
of the principal considerations
for the users of the financial
statements in assessing the
financial performance of the
Group.
Calculated with reference to a benchmark
of the Parent Company’s total assets, of
which it represents 1.5% (2019: 1.5%)
We consider total assets an appropriate
benchmark for a holding company
Performance materiality
£1,176,750
£1,002,000
£428,250
£410,200
Basis for determining
performance materiality
Based on 75% (2019: 75%) of materiality having considered a number of factors
including the expected total value of known and likely misstatements based on
previous assurance engagements and other factors.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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. 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 course of 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 this gives rise to a material misstatement
in the financial statements themselves. 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.
Specific materiality
We also determined that for those classes of
transactions and balances which impact on the
Group’s earnings before tax, excluding property
valuation movements, a misstatement of less than
materiality for the financial statements as a whole,
specific materiality, could influence the economic
decisions of users. As a result, we determined
materiality for these items based on 7.5% (2019:
7.5%) of profit before tax adjusted for fair value
movement capital items averaged over 3 years at
£557,000 (2019: £725,000). We further applied
a performance materiality level of 75% (2019:
75%) of specific materiality to ensure that the
risk of errors exceeding specific materiality was
appropriately mitigated.
Component materiality
We set materiality for each component of the
Group based on a percentage of between 4%
and 36% (2019: 9% - 52%) of Group materiality
dependent on the size and our assessment of the
risk of material misstatement of that component.
Component materiality ranged from £66,000 to
£571,000 (2019: £125,000 to £696,000. In the
audit of each component, we further applied
performance materiality levels of 75% (2019:
75%) of the component materiality to our testing
to ensure that the risk of errors exceeding
component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee that
we would report to them all individual audit
differences in excess of £31,380 (2019: £26,000).
We also agreed to report differences below this
threshold that, in our view, warranted reporting
on qualitative grounds.
90
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
91
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SIGMA CAPITAL GROUP PLC (CONTINUED)
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit,
we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters
as described below.
Strategic report and
Directors’ report
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 period 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.
In the light of the knowledge and understanding of the Group and Parent 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.
Matters on which
we are required to
report by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not visited
by us; or
• the Parent Company financial statements and the part of the Directors’
remuneration report to be audited 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, 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
Parent 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 Parent Company or to cease operations, or have no realistic alternative but
to do so.
92
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
93
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF SIGMA CAPITAL GROUP PLC (CONTINUED)
AUDITOR’S RESPONSIBILITIES
FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable
assurance about whether the 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 financial
statements.
Extent to which the audit was capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of
non-compliance with laws and regulations. We
design procedures in line with our responsibilities,
outlined above, to detect material misstatements
in respect of irregularities, including fraud. The
extent to which our procedures are capable of
detecting irregularities, including fraud is detailed
below:
•
Through assessing our cumulative acquired
knowledge and review of relevant sector
information, 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 that were contrary to applicable
laws and regulations, including fraud;
•
We focused on laws and regulations that
could give rise to a material misstatement in
the financial statements, including, but not
limited to, the Companies Act 2006, the AIM
Rules and tax legislation;
•
•
We evaluated management’s incentives and
opportunities for fraudulent manipulation of
the financial statements (including the risk
of override of controls), and determined that
the principal risks were related to posting
inappropriate journal entries to manipulate
financial results and management bias in
accounting estimates;
We discussed among the engagement
team how and where fraud might occur in
the financial statements and any potential
indicators of fraud. As part of this discussion,
we identified potential for management bias
in the valuation of investment properties.
The key audit matters section of our report
explains this matter in more detail and
also describes the specific procedures we
performed in response to that key audit
matter. Furthermore, we communicated
relevant identified laws and regulations
and potential fraud risks to all engagement
team members and remained alert to any
indications of fraud or non-compliance with
laws and regulations throughout the audit;
• Our tests included:
-
-
obtaining an understanding of the control
environment in monitoring compliance with
laws and regulations and we considered the
adequacy of controls around procurement
fraud;
obtaining and reviewing supporting
documentation, concerning the Group’s
policies and procedures relating to:
•
•
•
identifying, evaluating and complying
with laws and regulations;
detecting and responding to the risks
of fraud; and
the internal controls established to
mitigate risks related to fraud or non-
compliance with laws and regulations.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
- enquiring of management as to:
•
•
the risks of non-compliance and any
instances thereof and existence of any
actual and potential litigation and claims;
and
whether they were aware of any
instances of non-compliance and
whether they have knowledge of any
actual, suspected or alleged fraud.
-
-
-
performing analytical procedures to identify
any unusual or unexpected relationships
that may indicate risks of material
misstatement due to fraud;
reviewing of Board and Committee meeting
minutes; and
reviewing the financial statement
disclosures and agreeing to supporting
documentation where relevant to assess
compliance with relevant laws and
regulations discussed above.
•
We also addressed the risk of management
override of internal controls by:
-
-
-
testing the appropriateness of journal
entries, in particular any journal entries
posted with unusual account combinations,
journals posted by senior management,
journals posted and reviewed by the same
individual and consolidation journals;
assessing whether the judgements made in
making accounting estimates are indicative
of a potential bias by the Directors that
represented a risk of material misstatement
due to fraud; and
evaluating the business rationale of any
significant transactions that are unusual or
outside the normal course of business.
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. There
are inherent limitations in the audit procedures
performed 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 are to become
aware of it.
A further description of our responsibilities
is available 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 Parent
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 Parent 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 Parent Company and the
Parent 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
20 January 2021
Our audit procedures were designed to respond
to risks of material misstatement in the financial
statements, recognising that the risk of not
detecting a material misstatement due to
BDO LLP is a limited liability partnership
registered in England and Wales (with registered
number OC305127)
94
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
95
CONSOLIDATED COMPREHENSIVE
INCOME STATEMENT
CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
for the nine month period ended 30 September 2020
at 30 September 2020
Revenue
Cost of sales
Gross profit
Unrealised gain on revaluation of investment property
Realised gain on revaluation of investment property
Unrealised (loss)/gain on revaluation of investments
held at fair value through profit and loss
Administrative expenses
Profit from operations
Finance income
Finance costs
Dividends received
Share of (loss)/profit of joint venture
Profit before tax
Taxation
Profit after tax for the period/year
Other comprehensive income
Unrealised loss on revaluation of investments held
at fair value through other comprehensive income
Revaluation of own property
Total comprehensive income for the period/year
Earnings per share attributable to the equity
holders of the Company:
Basic profit per share
Diluted profit per share
Notes
3 and 4
5
15
15
20
7
8
9
10
18
12
20
16
13
13
9 months to
30 September 2020
Year to
31 December 2019
£’000
7,952
(52)
7,900
843
415
(214)
£’000
13,865
(69)
13,796
3,410
509
214
(5,747)
(5,944)
3,197
19
(62)
139
(60)
3,233
(686)
2,547
(441)
-
2,106
2.84
2.8 1
11,985
44
(173)
185
963
13,004
(2,607)
10,397
(166)
-
10,231
11.63p
11.45p
The accompanying notes are an integral part of this consolidated comprehensive income statement.
Assets
Non-current assets
Goodwill and other intangibles
Investment property
Property and equipment
Investment in joint ventures
Fixed asset investments
Financial asset investments
Trade and other receivables
Current assets
Trade and other receivables
Other current assets
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax
Current liabilities
Trade and other payables
Interest bearing loans
Current tax liability
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Capital redemption reserve
Merger reserve
Capital reserve
Revaluation reserve
Retained earnings
Equity attributable to equity holders of the Company
30 September
2020
31 December
2019
Notes
£’000
£’000
14
15
16
18
19
20
21
21
21
23
24
22
23
25
25
27
27
27
27
533
66,042
1,402
356
2
4,545
-
72,880
4,023
6,871
25,769
36,663
533
53,801
1,283
4,657
2
5,200
1,889
67,365
4,047
750
16,827
21,624
109,543
88,989
-
1,370
1,370
3,844
43,079
110
47,033
48,403
19,488
1,453
20,941
6,565
55
972
7,592
28,533
61,140
60,456
895
32,210
34
(249)
(7)
186
28,071
61,140
894
32,107
34
(249)
(7)
186
27,491
60,456
96
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
The accompanying notes are an integral part of this consolidated statement of financial position.
97
COMPANY STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
at 30 September 2020
for the nine month period ended 30 September 2020
Notes
30 September
2020
£’000
31 December
2019
£’000
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Merger
reserve
£’000
Capital
reserve
£’000
Revaluation
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Assets
Non-current assets
Property and equipment
Deferred tax
Investment in subsidiaries
Current assets
Other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liability
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Capital redemption reserve
Retained earnings
Total equity
16
17
21
22
25
25
27
13
303
2,922
3,238
30,946
4,176
35,122
38,360
241
423
664
37,696
895
32,210
34
4,557
37,696
13
-
2,922
2,935
30,563
3,137
33,700
36,635
192
329
521
36,114
894
32,107
34
3,079
36,114
The accompanying notes are an integral part of this statement of financial position. 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 period was £3,004,000 (Year to 31
December 2019: £2,052,000).
The financial statements on pages 96 to 158 were approved by the Board of Directors and authorised
for issue on 20 January 2021 and were signed on its behalf by:
GF Barnet
Chief Executive Officer
20 January 2021
Registered number 03942129
At 1 January 2019
893
32,048
34
(249)
(7)
186
18,971
51,876
Profit for the year
Other
comprehensive
income
Transactions
with owners in
their capacity
as owners
Issue of shares
Share-based
payments
Dividends paid
At 31 December
2019
Profit for the year
Other
comprehensive
income
Transactions
with owners in
their capacity as
owners
Issue of shares
Share-based
payments net of
deferred tax
Dividend paid
At 30 September
2020
-
-
-
1
-
-
-
-
-
59
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,397
10,397
(166)
(166)
10,231
10,231
-
77
60
77
(1,788)
(1,788)
894
32,107
34
(249)
(7)
186
27,491
60,456
-
-
-
1
-
-
-
-
-
103
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,547
2,547
(441)
(441)
2,106
2,106
-
265
104
265
(1,791)
(1,791)
895
32,210
34
(249)
(7)
186
28,071
61,140
98
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
99
COMPANY STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED AND
COMPANY CASH FLOW STATEMENTS
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
for the nine month period ended 30 September 2020
for the nine month period ended 30 September 2020
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 1 January 2019
Issue of shares
Profit for the year
Share-based payments
Dividend paid
At 31 December 2019
Issue of shares
Profit for the year
Share-based payments net
of deferred tax
Dividend paid
893
1
-
-
-
32,048
59
-
-
-
894
32,107
1
-
-
-
103
-
-
-
34
-
-
-
-
34
-
-
-
-
At 30 September 2020
895
32,210
34
2,738
-
2,052
77
(1,788)
3,079
-
3,004
265
(1,791)
4,557
35,713
60
2,052
77
(1,788)
36,114
104
3,004
265
(1,791)
37,696
Group
9 Months to
30 Sep 2020
£’000
Group
Year ended
31 Dec 2019
£’000
Company
9 Months to
30 Sep 2020
£’000
Company
Year ended
31 Dec 2019
£’000
Notes
29
(1,289)
8,041
(267)
(3,916)
(1,289)
8,041
(267)
(3,916)
20
20
10
(155)
(37)
(23,041)
(16)
-
(61,229)
7,241
35,332
-
(2,982)
-
4,417
19
(62)
17
185
44
(165)
(11,618)
(28,814)
23,536
104
(1,791)
21,849
16,500
60
(1,788)
14,772
(16)
-
-
-
-
-
3,000
8
-
2,992
-
105
(1,791)
(1,686)
(1)
-
-
-
-
-
2,500
19
-
2,518
-
60
(1,788)
(1,728)
8,942
(6,001)
1,039
(3,126)
16,827
22,828
3,137
6,263
Cash flows from operating activities
Cash (used in)/generated from
operations
Net cash (outflow)/inflow from
operating activities
Cash flows from investing activities
Purchase of property and equipment
Investment in joint venture
Purchase of investment property
Proceeds from the sale of investment
property
Purchase of financial assets at fair
value
Distributions received
Dividends received
Finance income received
Finance cost paid
Net cash (outflow)/inflow from
investing activities
Cash flows from financing activities
Bank and other loans
Issue of shares
Dividends paid
Net cash inflow/(outflow) from
financing activities
Net increase/(decrease) in cash
and cash equivalents
Cash and cash equivalents at
beginning of period/year
Cash and cash equivalents at end of
period/year
25,769
16,827
4,176
3,137
The accompanying notes are an integral part of this cash flow statement.
100
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
101
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
CONSOLI DATED A ND COMPANY CAS H F LOW STATE MEN TS (CONTINUED)
Reconciliation of changes in liabilities arising from financing activities
Group
9 Months to
30 Sep 2020
£’000
Group
Year ended
31 Dec 2019
£’000
19,543
23,577
(41)
43,079
3,043
16,555
(55)
19,543
Opening balance of loans at 1 January
New loans
Repayment in the period
Further details are provided in note 23.
102
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
103
ACCOUNTING
POLICIES
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
ACCOUNTING POLICIES
for the nine month period ended 30 September 2020
The accounting policies set out below have been
applied consistently to all periods presented in
these financial statements.
BASIS OF ACCOUNTING
The financial statements have been prepared on
a going concern basis. The impact of coronavirus
and the ability of the Company and the Group
to continue in operational existence for the
foreseeable future is discussed in note 32.
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 statement
of financial position date is described in the
Chairman’s Statement and Strategic Report.
The Group had a bank balance of £25.8 million
as at 30 September 2020 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 and International
Accounting Standards as issued by the
International Accounting Standards Board (“IASB”)
and Interpretations (collectively IFRSs). The
Company has prepared its financial statements in
accordance with IFRS as applied in compliance
with the provisions of the Companies Act 2006.
The Company has elected to take the exemption
under section 408 of the Companies Act 2006 to
not present the Company income statement.
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
Standards and interpretations in issue but not
yet effective
A number of new standards and amendments
to existing standards have been published which
are mandatory but are not effective for the
period ended 30 September 2020. The Directors
do not anticipate that the adoption of these
revised standards and interpretations will have
a significant impact on the figures included in
the financial statements in the period of initial
application.
Summary of new accounting policies effective
from 1 January 2020
Amendments to References to the Conceptual
Framework in IFRS Standards
The conceptual framework helps develop
requirements in IFRS standards based on
consistent concepts and consideration of these
in turn should result in the IASB developing IFRS
standards that require entities to provide financial
information that is useful to investors, lenders
and other creditors. The framework was revised
as some important issues were not covered
or was unclear or out of date. The Directors
have assessed that the adoption does not
have a significant impact in the period of initial
application on the results or net assets of the
Company or Group.
Amendments to IFRS 16, coronavirus rent
concession
As a result of the coronavirus many lessors
around the world have provided or are expected
to provide an economic relief in the form of rent
concessions to lessees. Where there is a change
in lease payment, the accounting consequences
will depend on whether that change meets the
definition of a lease modification.
104
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
105
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
of the Gatehouse general partner. The Group
neither exercises control nor has the potential
to control TLP and solely 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. As
specified in the constitutional documents of the
Partnership, all power and authority lies with the
Gatehouse general partner and therefore Sigma
is contractually bound to follow the instructions
of the Gatehouse general partner. The Group
neither exercises control nor has the potential to
control UK PRS (Jersey) I LP and acts solely in a
commercial capacity as development and asset
manager.
ACCOUNTING POLICIES (CONTINUED)
for the nine month period ended 30 September 2020
As a lessor
The Group leases residential property to
individual qualifying tenants on assured short-
hold tenancies which are no longer than twelve
months. The Group has not reduced any lease
payments and for any coronavirus related arrears
they are managed by agreeing payment deferral
plans with tenants encountering difficulties. The
level of these payment deferral plans has not
been and is not material having amounted to less
than £100,000 of rent as a maximum.
As a lessee
The Company leases office space in Manchester
which expires in 2026. To date the Company has
neither received nor requested any reduction in
current lease payments.
Amendments to IFRS3, definition of a business
as key
This amendment relates to Business
Combinations and ‘Definition of a business’.
Neither the Company or the Group has any
business combinations to consider in the current
period or prior year and therefore the adoption
of this standard does not have any impact in the
period of initial application on the results or net
assets of the Company or the Group.
IAS 8 Accounting Policies, Changes in
Accounting Estimates and Error: Definition of
Material
This standard is applied in selecting and applying
accounting policies, accounting for changes
in estimates and reflecting corrections of prior
period errors. The Group has not changed any
accounting policies or changed the way that
it makes estimations. The Directors therefore
consider that the adoption does not have
a significant impact in the period of initial
application on the results or net assets of the
Company or Group.
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
Sigma Technology Management Limited (“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 acquired, equity instruments issued and
liabilities incurred or assumed at the date of
exchange. Identifiable assets acquired, together
with 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 a 32.99% share of any profits that
might arise in the Salford Limited Partnership
through its 25% holding in the General Partner
of this partnership, through a wholly owned
subsidiary which acts as a limited partner.
The Directors consider that the Group neither
exercises control nor has the potential to control
the partnerships and acts solely in a commercial
capacity as project manager, development
manager and developer of the underlying
projects undertaken by the partnership.
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 solely in a commercial capacity as
project manager, development manager and
developer of the underlying projects undertaken
by the partnership.
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. CSL’s
final project was completed in 2019 and will deal
with any further residual matters during 2021.
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 retains a share of the
net disposal profits on the assets, subject to a
minimum return to investors. As specified in the
constitutional documents of the Partnership,
all power and authority lies with the Gatehouse
general partner and therefore Sigma is
contractually bound to follow the instructions
106
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
107
ACCOUNTING POLICIES (CONTINUED)
for the nine month period ended 30 September 2020
INTANGIBLE ASSETS
INVESTMENT PROPERTY
INTERESTS IN JOINT VENTURES
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.
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.
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.
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:
PROPERTY AND EQUIPMENT
Property is held at fair value less subsequent
depreciation. 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.
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:
Intangible
asset
Useful
economic life
Valuation
method
Customer
relationships
Remaining
period of
contract
Multi-period
Earnings
Property (excluding land)
2% per annum
Leasehold improvements
over the term of the lease
Motor Vehicles
33% per annum
Fixtures and office equipment 25% per annum
Computer equipment
33-50% per annum
Investments in joint ventures are accounted for
by the equity method of accounting and are
initially recognised at cost. The carrying amount
is thereafter 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.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are
recognised on the Group’s statement of financial
position 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 carried at amortised
cost less provision for impairment. Where the
time value of money is material, receivables
are carried at amortised cost using the effect
interest method. Impairment provisions are
recognised based on the expected credit loss
model detailed within IFRS 9. The Group applies
the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected
credit loss provision for trade receivables and
contract assets. The amount of expected credit
losses is updated at each reporting date to reflect
changes in credit risk since initial recognition. The
expected credit losses on those financial assets
are estimated based on the Group’s historical
credit loss experience, adjusted for factors that
are specific to the debtors, general economic
conditions and an assessment of both the current
as well as the forecast direction of conditions at
the reporting date.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Cash
Cash and cash equivalents comprise cash at bank.
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.
Investments are classified as financial assets at
fair value through profit or loss or at fair value
through other comprehensive income and are
initially measured at fair value. Subsequent
measurement is at fair value. Investments
designated at fair value through other
comprehensive income on initial recognition is
irrevocable. The fair value of the quoted stock is
based on the bid price at the year-end date. The
fair value of the unquoted stock is established
using International Private Equity and Venture
Capital Valuation Guidelines. The fair value of the
investment 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 or financial assets at
fair value through other comprehensive income
are recognised as non-current assets.
Investments in subsidiary companies are stated at
cost less provision for any impairment in value.
108
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
109
ACCOUNTING POLICIES (CONTINUED)
for the nine month period ended 30 September 2020
Trade payables
Trade payables are not interest bearing and are
stated at amortised cost.
items credited or charged directly to equity, in
which case the deferred tax is also dealt with in
equity.
Equity instruments
Equity instruments issued by the Company are
recorded at the proceeds received, net of direct
issue costs.
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.
CURRENT AND DEFERRED TAX
SHARE-BASED PAYMENTS
The charge for current tax is based on the
results for the year 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
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 in accordance with IFRS
15 which was adopted from 1 January 2018. The
Group applies IFRS 15 to each of its revenue
streams analysing its nature, the timing of
satisfaction of performance obligations and any
significant payment terms. Full details of the
Group’s application of IFRS 15 is provided in note 4.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Revenue recognised in advance of invoicing is
accounted for as contract receivables within
trade and other receivables and is recognised at
fair value through profit and loss.
Managed property
Development management fees are based on
a fixed percentage of certain elements of the
actual development cost and are recognised
based on the actual development expenditure
measured on a monthly basis. As these are
recognised based on actual expenditure of
the development the Directors assess that
the risk of revenue reversal is negligible.
Development management involves looking
after developments in progress and is therefore
considered to have continuous measurable
performance obligations.
Investment advisory fees are based on a fixed
percentage of an adjusted net asset value of The
PRS REIT plc 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, 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.
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 covered under IFRS 16.
DIVIDEND INCOME
Dividends are received from financial assets
measured at fair value through profit or loss
(“FVPL”) and at fair value through other
comprehensive income (“FVOCI”). Dividends are
recognised as other income in profit or loss when
the right to receive payment is established.
FINANCE COSTS AND INCOME
Finance costs comprise interest expense on
borrowings and changes in the fair values of
derivative liabilities. All borrowing costs are
recognised in the profit or loss using the effective
interest method, except to the extent that they
are capitalised as being directly attributable to
the acquisition, construction or production of an
asset which necessarily takes a substantial period
of time to be prepared for its intended use or sale.
Interest income is accrued by reference to the
principal outstanding and the effective interest
rate applicable.
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 represents 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 statement of
financial position.
110
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
111
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
ACCOUNTING POLICIES (CONTINUED)
for the nine month period ended 30 September 2020
IMPAIRMENT
LEASES
IFRS 16 eliminates the classification of leases as
either operating leases or finance leases for a
lessee. Leases are ‘capitalised’ by recognising
the present value of the lease payments and
showing them either as lease assets (right-of-
use “ROU” 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 requires
the straight-line operating lease expense be
replaced with a depreciation charge for lease
assets (included within operating costs) and an
interest expense on lease liabilities (included
within finance costs).
As a lessor
The Group leases residential property to
individual qualifying tenants on assured short-
hold 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 2026, there was no material
impact after applying IFRS 16 and therefore no
adjustments have been made. The Group also
leases low-value computer equipment which is
exempt from reporting under IFRS 16, see note 28.
At each statement of financial position date,
the Group conducts an impairment review
of the carrying amounts of its property and
equipment and intangible assets with finite lives
to determine whether there is any indication that
those assets may have suffered an impairment
loss. 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.
112
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
113
NOTES TO
THE FINANCIAL
STATEMENTS
114
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
NOTES TO THE FINANCIAL STATEMENTS
for the nine month period ended 30 September 2020
1. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group’s business activities are set out in
the Strategic Report on pages 22 to 33. 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 not therefore directly
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, 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 30
September 2020 the Group had short term debt
of £43,079,000 (31 December 2019: £55,000).
There were no changes in the Group’s approach
to capital management during the period.
Financial instruments
The Group’s principal financial assets and
liabilities are those that arise directly from its
operations: trade and other receivables, trade and
other payables and cash and cash equivalents.
The Group’s other financial assets are its financial
asset investments and its principal financial
liabilities are loans, the main purpose of which is
to finance the acquisition and development of the
Group’s investment property portfolio.
Amortised cost
Fair value through
profit or loss
Fair value through other
comprehensive income
30 Sep
2020
£’000
31 Dec
2019
£’000
30 Sep
2020
£’000
31 Dec
2019
£’000
30 Sep
2020
£’000
31 Dec
2019
£’000
Financial assets
Financial asset investments
Trade and other receivables
Cash and other cash equivalents
Total financial assets
Financial liabilities
Trade and other payables
Interest bearing loans
Total financial liabilities
-
4,023
25,769
29,792
3,844
43,079
46,923
-
5,936
16,827
22,763
6,565
19,543
26,108
2,170
-
-
2,170
2,384
-
-
2,384
2,375
-
-
2,375
2,816
-
-
2,816
-
-
-
-
-
-
-
-
-
-
-
-
115
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
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
statement of financial position either as financial
assets held at fair value through profit and loss,
financial assets held at fair value through other
comprehensive income or trading investments
held at fair value through profit or loss. At 30
September 2020, 15% (2019: 14%) of the Group’s
investments were in one venture fund and 76%
(2019: 79%) represented an 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 30 September 2020, the fund held 6
investments (2019: 6 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 £69,000
(2019: £75,000) whilst a net 10% movement in
the value of the quoted stock would give rise
to a movement in the income statement of
£345,000 (2019: £410,000).
The Group’s financial assets held at fair value
through the profit and loss account and held at
fair value through other comprehensive income
fall either within Level 1 or Level 3. The Group’s
investment in quoted stock falls within Level 1
and its value is readily available on The London
Stock Exchange. The Group’s investments 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 are partly based on
development values and are therefore exposed
to price risk.
Fair values
IFRS 13 sets out a three-tier hierarchy for
financial assets and liabilities valued at fair value.
These are as follows:
Level 1
Quoted prices (unadjusted) in active
markets for identical assets and
liabilities;
Level 2
Inputs other than quoted prices
included in Level 1 that are observable
for the asset or liability, either directly
or indirectly; and
Level 3
Unobservable inputs for the asset or
liability.
Investment property falls within Level 3. The
valuations are carried out by the Board of
Directors. Gwynn Thomson RICS, Property
Investment Director, is a chartered surveyor
with over 25 years’ experience in residential and
commercial property investments produces the
valuations which are approved by the Board.
The valuations are prepared in accordance
with RICS Valuation Professional Standards
2014 and are compliant with International
Valuation Standards. These internal valuations
are compared against independent valuations
prepared for the Group’s funders by an
external valuation specialist. Although not
directly comparable, these provide an element
of independent evidence to corroborate and
provide comfort to the Board. The valuations
include a number of unobservable inputs and
other valuation assumptions.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
The significant unobservable inputs and the range of values used are:
Type
Range
Investment yield
3.75% to 4.25%
Gross to net assumption
22.5% to 25.0%
The impact of changes to the significant unobservable inputs are:
2020
Income
statement
impact
£’000
2020
Statement
of financial
position impact
£’000
2019
Income
statement
impact
£’000
2019
Statement
of financial
position impact
£’000
Improvement in yield by 0.125%
Worsening in yield by 0.125%
Improvement in gross to net by 1%
Worsening in gross to net by 1%
3,172
2,978
1,281
1,281
3,172
2,978
1,281
1,281
1,459
(1,359)
586
(576)
1,459
(1,359)
586
(576)
The above sensitivities are the average values
in respect of all investment property fair valued
at 30 September 2020 and include investment
properties under construction.
Interest rate risk
The impact of interest rate risk is on income and
operating cash flow and arises from changes
in market interest rates. The Group has limited
interest rate risk in respect of the £0.3 million
(2019: £0.4 million) loan that part funded the
acquisition and refurbishment of its head office.
The Group is also exposed to interest rate risk
on its loan from Homes England which is utilised
to fund property investment. At 30 September
2020, the total loan outstanding was £42.7 million
(2019: £19.2 million). A 1% movement in interest
rates would result in a £0.4 million movement in
interest payments per annum.
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.
116
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
117
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
Credit risk
The Group’s credit risk is primarily attributable to
its trade receivables and other current assets.
During the year ended 30 September 2020, the
Group’s cash and cash equivalents were held
with Bank of Scotland plc, The Royal Bank of
Scotland plc and Barclays Bank plc.
The concentration of credit risk from trade
receivables and other current assets varies
throughout the period depending on the timing
of transactions and invoicing of fees.
Property rental income arises from the Group’s
investment in PRS assets. Rental income is
derived from multiple tenants across the Group’s
portfolio. It is paid monthly in advance and
both historically and currently the Group 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 historically
arose from Sigma Inpartnership’s joint venture,
CSL. The fees were agreed in advance and
recognised as per the accounting policy on
revenue recognition. Fees were payable on a
monthly basis over the development period.
Each project was subject to financial due
diligence prior to commencement including a
detailed appraisal. The project was reviewed
regularly thereafter. As the fees were paid
throughout the development period the risk
is reduced. The Group is dealing with residual
matters in respect of CSL and therefore does not
expect any further property management fees
to arise.
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 investment 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.
Carried interest arises from the Group’s PRS
activities with Gatehouse and is calculated
based on a valuation on a disposal of the
related investment or from an agreed valuation.
The Group’s PRS activities with Gatehouse
were 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 was recognised on a phased
basis over the initial expected life of the project.
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
valuation items as at 30 September are:
Type
Investment yield
Gross to net assumption
Rental growth
Range
4.47%
22.5%
1.75%
The amount of carried interest recognised as
at 30 September 2020 is £1,889,000 and is
disclosed as a contract receivable, the payment
of which is considered to be a credit risk. In
January 2021 the investment portfolio was sold
and as a result the carried interest has been
finalised at a value of £2,900,000.
The profit share arising from Sigma
Inpartnership’s joint venture, CSL, is recognised
as per the accounting policy on revenue
Revenue recognised in advance of the contracted
right to invoice or receive payment is shown in
accrued income. The amounts recognised will
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
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 Group is dealing with residual matters
in respect of both of these partnerships and
therefore does not expect any further property
project management fees to arise.
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. The credit
risk relates to the non-payment of fees. Asset
management relating to the PRS Joint Venture
with Gatehouse Bank plc will cease following the
sale of the investment assets in January 2021.
Development fees earned in respect of the
Group’s PRS activities with the PRS REIT are
based on actual development spend in a month
and are paid monthly in arrears. The credit risk
relates to the non-payment of fees.
Investment advisory fees are based on an
adjusted net asset value of the PRS REIT and are
paid monthly in arrears. The credit risk relates to
the non-payment of fees.
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:
Property management fees due to Sigma Inpartnership Ltd
Development and asset management fees due to Sigma Capital Property Ltd
Development management fees due to Sigma PRS Management Ltd
Investment advisory fees due to Sigma PRS Management Ltd
Other property management fees
Other receivables
Other prepayments
Other accrued income
Other contract receivables
9 Months to
30 Sep
2020
£’000
Year ended
31 Dec
2019
£’000
-
118
1,552
367
97
466
324
6,081
1,889
10,894
1,282
87
2,305
353
20
318
166
266
1,889
6,686
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 all paid by the end of December 2020.
118
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
119
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
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
regularly reviews available cash to ensure there
are sufficient resources for working capital
requirements. As at 30 September 2020
the Group’s net current liabilities were £10.4
million (31 December 2019: net current assets
£14.0 million) and the Group had positive cash
balances of £25.8m (2019: £16.8m).
The Group’s development facility with Homes
England is due for repayment on the 30
September 2021 and negotiations are underway
for this to be renewed. However the Directors
have assessed that it will have enough cash
resources for this to be repaid by 30 September
2021 if required.
The below summarises the maturities of the
Group’s financial liabilities, excluding tax, as at
30 September:
As at 30 September 2020
Trade and other payables
Loans
As at 31 December 2019
Trade and other payables
Loans
On demand
£’000
< 3
months
£’000
3 to 12
months
£’000
1 to 5 years
£’000
> 5 years
£’000
Total
£’000
-
-
-
-
-
-
1,872
14
1,886
4,511
14
1,972
43,065
45,037
2,054
41
4,525
2,095
-
-
-
-
19,488
19,488
-
-
-
-
-
-
3,844
43,079
46,923
6,565
19,543
26,108
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Fair value of investment property
The Group believes that the most significant
judgement area in the application of its
accounting policies is in respect of the fair
valuation of its investment property. The matters
taken into account when assessing the fair
value of investment property are detailed in the
accounting policy on investment property. The
key unobservable inputs used in the fair value
assessment of investment property along with the
impact as a result of a change to those inputs is
disclosed on pages 116 and 117.
The Directors believe the following to be the key
areas of estimation:
(i)
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.
(ii) 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.
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 IFRS 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 area of judgement:
120
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
121
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
3. SEGMENTAL INFORMATION – BUSINESS SEGMENTS
At 30 September 2020 the Group has just one business activity, property.
The Group had three significant customers in the period:
-
-
-
Thistle Limited Partnership: profit share earned in the £0.4 million (Year to 31 December 2019: £0.5
million);
UK PRS (Jersey) Properties I Limited: fees, £0.4 million (Year to 31 December 2019: £0.4 million);
and
The PRS REIT: development and investment advisory fees, £6.8 million (Year to 31 December 2019:
£12.5 million).
The revenue from services from the Group’s Owned PRS property for the period amounted to £0.3m
(Year to 31 December 2019: £0.4m) of gross rental income. Rental operating costs attributable to the
gross rental income for the period were £52,000 (Year to 31 December 2019: £69,000).
The Directors regard the Group’s reportable segments of business to be property (Regeneration,
Managed and Owned PRS), venture capital 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.
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 represent an historic
investment in one venture fund together with cash.
122
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
123
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
The segmental analysis for the nine month period ended 30 September 2020 is as follows:
The segmental analysis for the year ended 31 December 2019 is as follows:
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Regeneration
£’000
Managed
Property
£’000
Owned
PRS
Property
£’000
Venture
Capital
£’000
Holding
Company
£’000
Intra group
adjustments
£’000
Revenue from services
-
7,664
288
-
-
Trading (loss)/profit
Unrealised gain
on revaluation of
investment property
Realised profit
on revaluation of
investment property
Unrealised loss
on revaluation of
investments held at
fair value through
profit and loss
Profit/(loss) from
operations
Finance income
Finance costs
Dividend (paid)/
received
Profit distribution to
partners
Share of associate
Profit before tax
(15)
1,992
230
(6)
(48)
-
-
-
-
-
843
415
-
-
(201)
-
(13)
-
-
-
(15)
1,791
1,488
(19)
(48)
2
-
-
-
2
(5)
5
(57)
(2,861)
-
-
-
3
-
-
-
7
-
3,000
-
(60)
(73)
-
(1,073)
-
1,436
-
(16)
-
2,959
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
7,952
2,153
843
415
(214)
3,197
19
(62)
139
-
(60)
3,233
Total assets
Total liabilities
Net assets/(liabilities)
10,592
(882)
9,710
22,987
(13,583)
9,404
76,855
(71,991)
4,864
2,183
(1,658)
525
38,360
(664)
37,696
(41,434)
109,543
40,375 (48,403)
61,140
(1,059)
Regeneration
£’000
Managed
Property
£’000
Owned
PRS
£’000
Venture
Capital
£’000
Holding
Company
£’000
Intra group
adjustments
£’000
Revenue from services
(55)
13,515
385
20
-
(183)
7,860
302
13
(140)
-
-
-
-
-
3,410
509
-
-
(13)
-
227
-
-
-
(183)
7,847
4,221
240
(140)
14
-
-
-
4
(9)
1
(164)
(2,315)
-
2,000
(2,000)
6
-
-
-
963
794
-
7,527
-
2,058
-
246
19
-
2,500
-
-
2,379
Trading (loss)/profit
Unrealised gain
on revaluation of
investment property
Realised profit
on revaluation of
investment property
Unrealised gain
on revaluation of
investments held at
fair value through
profit and loss
Profit/(loss) from
operations
Finance income
Finance costs
Dividend (paid)/
received
Profit distribution to
partners
Share of associate
Profit before tax
Total assets
Total liabilities
Net assets
10,080
(322)
9,758
23,733
(12,307)
11,426
56,592
(53,071)
3,521
2,205
(1,662)
543
36,635
(521)
36,114
(40,256)
88,989
39,350 (28,533)
(906) 60,456
Total
£’000
13,865
7,852
3,410
509
214
11,985
44
(173)
185
-
963
13,004
-
-
-
-
-
-
-
-
-
-
-
-
Capital expenditure
Depreciation
-
-
138
20
-
-
-
-
17
15
-
-
155
35
Capital expenditure
Depreciation
-
-
15
20
-
-
-
-
1
10
-
-
16
30
124
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
125
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
4. REVENUE
6. PROFIT ON DISPOSAL OF INVESTMENT PROPERTY
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Nature of revenue streams
The following should be read in conjunction with the Group’s accounting policy as detailed in the
accounting policies on pages 110 and 111:
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
Accounting policy
Development
Management
Fees (Managed
PRS)
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.
Revenue is recognised when
the development expenditure
has been incurred. The
performance obligations are
continuous throughout the
development period.
Investment
Advisory Fees
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.
Administrative
Services
The Group earns fees in relation to administrative
services which are considered to be continuous
performance obligations. The fees are earned monthly
and are payable monthly in arrears
Revenue is recognised once
the service has been provided.
The conditions of the contract
dictate that the revenue
should be recognised on a
monthly basis.
Revenue is recognised once
the service has been provided.
The conditions of the contract
dictate that the revenue
should be recognised on a
monthly basis.
5. COST OF SALES
9 months to 30 September 2020
£’000
Year ended 31 December 2019
£’000
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 income
statement. During the period the Group disposed of investment properties based on independent
market valuations crystallising a realised gain of £1.07m (Year to 31 December 2019: £2.08m) of which
£0.6m was recognised as fair value uplift in prior years, see note 15.
7. EXPENSES BY NATURE
Expenses included in Administrative expenses are analysed below.
9 months to 30
September 2020
£’000
Year ended 31
December 2019
£’000
Administrative expenses
Employee costs (salaries and national insurance)
Employers pension contributions
Share based payments
Other employee related costs*
Consultancy
Travel and entertainment
Depreciation
Operating lease rentals:
- plant and machinery
- land and buildings (net)
Other premises costs
Audit services:
- fees payable to Company auditor for the audit of the parent
company and consolidated accounts
- the audit of the Company’s subsidiaries
Non-audit services:
- tax services
- other accountancy services
Other legal, professional and financial costs**
Administration costs
3,747
120
67
172
76
77
35
12
40
135
59
61
54
-
1,020
72
5,747
3,518
199
77
385
162
366
30
21
38
152
40
50
40
14
748
104
5,944
127
PRS activities
52
69
*Includes non-recurring amount of £0.1 million in prior year. **Includes non-recurring amount of £0.4m in current period.
126
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
8. FINANCE INCOME
Interest income on short-term deposits and loans
Unwinding of discount
9. FINANCE COSTS
Other interest
Non-utilisation fees
10. DIVIDEND INCOME
9 months to 30
September 2020
£’000
Year ended
31 December 2019
£’000
19
-
19
34
10
44
9 months to 30
September 2020
£’000
Year ended
31 December 2019
£’000
46
16
62
9
164
173
9 months to 30
September 2020
£’000
Year ended
31 December 2019
£’000
Dividends received from equity shares
139
185
The dividends received relate to the Group’s equity interest in The PRS REIT plc.
128
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
129
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
11. DIRECTORS AND EMPLOYEES
The average monthly number of employees, including executive Directors, employed by the Group
during the period and prior year was:
The key management of the Group comprises the Sigma Capital Group plc Board Directors. The total
remuneration for each Director is shown below. Amounts for 2020 represent remuneration from the
date of appointment where applicable for the nine month period to 30 September 2020 with the
comparable period being for the year ended 31 December 2019.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Property
Administration
The aggregate remuneration was as follows:
Wages and salaries
Social security
Pension costs – defined contribution plans
Share based payment charge - equity settled
9 months to 30
September 2020
Year ended
31 December 2019
24
15
39
23
11
34
9 months to 30
September 2020
£’000
Year ended
31 December 2019
£’000
3,325
422
120
67
3,934
3,228
382
199
77
3,886
Salary and fees Annual incentives Other payments
Total
Pension
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Executive
GF Barnet
M McGill
M Briselden*
G Thomson
G Hogg**
D Sutherland
Non-executive
I Sutcliffe
D Sigsworth
J McMahon
450
205
47
162
-
77
49
75
60
1,125
525
-
192
200
135
100
-
85
70
1,307
225
-
5
25
-
-
-
-
-
255
*up to and including 30 March 2020
**up to 10 September 2019
***Includes £128,000 of compensation for loss of office.
-
-
-
-
-
-
-
-
-
-
24
-
2
-
-
4
-
-
-
30
-
-
6
-
132***
5
699
205
54
187
-
81
525
-
198
200
267
105
-
-
-
143
49
75
60
1,410
-
85
70
1,450
23
-
5
16
-
3
-
-
-
47
58
-
19
20
14
4
-
-
-
115
During the period, GF Barnet was paid an annual incentive of £150k as a result of the financial
performance of the Company in 2019 and an annual incentive of £75k after finalising a major new joint
venture in London with EQT Real Estate.
Two 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 period, the
total carried interest realised in respect of the Directors was £71,000 (Year to 31 December 2019:
£304,000). 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 period was £nil
(2019: £nil)
Details of the carried interest arrangements are contained in the Directors’ Remuneration Report.
130
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
131
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
12. TAXATION
9 months to
30 September 2020
£’000
Year ended
31 December 2019
£’000
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
tax rate of 19% (2019: 19%) which was the rate substantively enacted at 30 September 2020.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Unrelieved management expenses and other losses
Unrelieved capital losses
Chargeable gains
Excess of depreciation over capital allowances
9 months to
30 September 2020
£’000
Year ended
31 December 2019
£’000
406
-
-
1
407
407
138
-
1
546
UK corporation tax on profit for the period/year
Adjustments in respect of prior periods
Deferred tax – origination and reversal of timing differences
Tax on profit on ordinary activities
571
-
115
686
1,840
30
737
2,607
The corporation tax assessed for the period is higher than the standard rate of corporation tax in the UK.
The differences are explained below.
Profit before tax
3,234
13,004
9 months to
30 September 2020
£’000
Year ended
31 December 2019
£’000
Profit before tax at the effective rate of corporation tax in
the UK of:
19% (2019: 19%)
Effects of:
Expenses not deductible for tax purposes
Share of joint venture profit after tax
Capital allowances in excess of depreciation
Utilisation of losses
Prior year adjustment for gains on revalued properties not
previously recognised in deferred tax
Effect of difference between standard and deferred tax
rate
Adjustment in relation to change in deferred tax rate
Movement in deferred tax
Deferred tax in respect of share options
Adjustments in respect of prior periods
Other adjustments
Tax charge for the period/year
614
110
11
(22)
(138)
-
-
197
24
(105)
-
(5)
686
2,471
88
(183)
1
(136)
267
80
-
-
30
(11)
2,607
132
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
133
133
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
13. PROFIT PER SHARE
The calculation of the basic profit per share for the year ended 30 September 2020 and 31 December
2019 is based on the profits attributable to the shareholders of the Group company divided by the
weighted average number of shares in issue during the period.
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:
Profit attributable
to shareholders
£000
Weighted average
number of shares
Basic profit
per share
(pence)
Nine month period to September 2020
2,547
89,528,727
Year ended 31 December 2019
10,397
89,404,694
2.84
11.63
Diluted profit per share is calculated by adjusting the weighted average number of ordinary shares in
issue on the assumption of conversion of all potentially 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 period/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 nine month period ended 30 September 2020 of
90,718,190 (Year ended 31 December 2019: 90,770,246). For the nine month period ended 30 September
2020, the diluted earnings per share is 2.81 pence (Year ended 31 December 2019: 11.45 pence).
14. GOODWILL AND OTHER INTANGIBLE ASSETS
Sigma Inpartnership
Goodwill
Intangible assets
The major assumption used in value in use calculations
is as follows:
Pre-tax discount rate
30 September 2020
£’000
31 December 2019
£’000
533
-
9%
533
-
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.
Cost
At 30 September 2020 and 31 December 2019
Amortisation and impairment
At 1 January 2019
Amortisation charge
At 31 December 2019
Amortisation charge
At 30 September 2020
Carrying value
At 30 September 2020
At 31 December 2019
Goodwill
£’000
Other intangibles
£’000
Total
£’000
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 of over 100% in the
discount rate for an impairment to be considered.
656
123
-
123
-
123
533
533
105
105
-
105
-
105
-
-
761
228
-
228
-
228
533
533
134
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
135
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
15. INVESTMENT PROPERTY
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
Cost
At 1 January
Additions during the period
Disposals during the year
At period end
Fair value adjustment
At 1 January
Revaluation during the year
Disposals during the year
At period end
Net book value
At period end
50,316
23,039
(10,987)
62,368
3,485
1,258
(1,069)
3,674
21,972
61,229
(32,885)
50,316
1,649
3,919
(2,083)
3,485
66,042
53,801
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 the Directors. 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.
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 pages 116 and 117.
Rental income from investment properties during the current period amounted to £288,000 (Year to
31 December 2019: £385,000) and direct operating expenses during the current period were £52,000
(Year to 31 December 2019: £69,000).
136
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
137
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
16. PROPERTY AND EQUIPMENT
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Freehold
property
£’000
Leasehold
improvements
£’000
Fixtures
and office
equipment
£’000
Computer
equipment
£’000
Motor
Vehicles
£’000
Total
£’000
Group
Cost or fair value
At 1 January 2019
Additions
Revaluation
Disposals
1,250
-
-
-
At 31 December 2019
1,250
Additions
Revaluation
Disposals
-
-
-
At 30 September 2020
1,250
Depreciation
At 1 January 2019
Charge for the year
Disposals
At 31 December 2019
Charge for the year
Disposals
At 30 September 2020
-
-
-
-
-
-
-
Net book value
At 30 September 2020
At 31 December 2019
1,250
1,250
44
-
-
-
44
17
-
-
61
23
9
-
32
15
-
47
14
12
47
7
-
-
54
6
-
-
60
31
12
-
43
7
-
50
10
11
31
9
-
-
40
28
-
-
68
21
9
-
30
9
-
39
28
10
-
-
-
-
-
104
-
-
1,372
16
-
-
1,388
155
-
-
104
1,543
-
-
-
-
4
-
4
75
30
-
105
35
-
140
100
-
1,402
1,283
Company
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Additions
Disposals
At 30 September 2020
Depreciation
At 1 January 2019
Charge for the year
Disposals
At 31 December 2019
Charge for the year
Disposals
At 30 September 2020
Net book value
At 30 September 2020
At 31 December 2019
Leasehold
improvements
£’000
Fixtures
and office
equipment
£’000
Total
£’000
44
-
-
44
16
-
60
23
9
-
32
15
-
47
12
12
9
1
-
10
-
-
10
8
1
-
9
-
-
9
1
1
53
1
-
54
16
-
70
31
10
-
41
16
-
57
13
13
No depreciation has been charged in respect of the freehold property. The residual value of the
freehold property approximates to its fair value and therefore depreciation is considered immaterial.
138
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
139
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
17. INVESTMENT IN SUBSIDIARIES AND PARTNERSHIPS
At Period End
2,922
2,922
Company
30 September 2020
£’000
Company
31 December 2019
£’000
SUBSIDIARIES AND PARTNERSHIPS
The Company has investments in the following subsidiaries and partnerships as at 30 September 2020:
Company Name
Sigma Capital Property Ltd
Sigma Inpartnership Ltd
Strategic Property Asset Management Ltd
Strategic Investment Management Holdings Limited
Sigma Property Investment Limited
Sigma Property Partners Limited
Sigma General Partner Limited
Sigma FP General Partner Limited
Sigma Thistle Founder Partner LP
Sigma Thistle Phase II FP Limited Partnership
Sigma Thistle Phase II GP LLP
Sigma Thistle Phase II Limited
Sigma UK PRS GP Limited
Sigma Founder Partner Limited Partnership
Sigma PRS Developments Limited
Sigma PRS Investments (Baytree) Limited
Sigma PRS Investments (Beam Park V&W) Limited
Sigma PRS Investments (Bury St Edmunds Parcel D) Limited
Sigma PRS Investments (Bury St Edmunds Parcel D II) Limited
Sigma PRS Investments (Carr Lane) Limited
Sigma PRS Investments (Cable Street) Limited
Sigma PRS Investments (Cable Street Phase 2) Limited
Sigma PRS Investments (Cable Street Phase 2 II) Limited
Sigma PRS Investments (Darlaston) Limited
Sigma PRS Investments (Darlaston Phase II) Limited
Sigma PRS Investments (Fresh Wharf) Limited
Sigma PRS Investments (Lock Lane) Limited
Sigma PRS Investments (Lock Lane II) Limited
Sigma PRS Investments (Lock Lane Parcel 2) Limited
Sigma PRS Investments (Lock Lane Parcel 2 II) Limited
Country of
Incorporation
%
Holding
Principal
Activity
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
England
Scotland
Scotland
Scotland
Jersey
Scotland
Scotland
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
100
100
100
100
100
100
100
100
68.25
75
100
100
100
100
100
85
85
85
85
85
85
85
85
85
85
85
85
85
85
85
Property*
Property*
Property*
Property*
Dormant*
Property*
Property*
Property*
Property**
Property*
Property*
Property*
Property***
Property*
Property*
Dormant**
Property**
Property**
Property**
Dormant**
Dormant**
Dormant**
Dormant**
Dormant**
Dormant**
Property**
Dormant**
Property**
Dormant**
Dormant**
140
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Company Name
Sigma PRS Investments (Newhall) Limited
Sigma PRS Investments (Newhall II) Limited
Sigma PRS Investments (Newton Le Willows) Limited
Sigma PRS Investments (Plough Hill Road) Limited
Sigma PRS Investments (Plough Hill Road II) Limited
Sigma PRS Investments (Romandby Shaw) Limited
Sigma PRS Investments (Romandby Shaw II) Limited
Sigma PRS Investments (Station Road) Limited
Sigma PRS Investments (Station Road II) Limited
Sigma PRS Investments (Sutherland School) Limited
Sigma PRS Investments (Whitworth Way) Limited
Sigma (Northern) Property Investments LP
Sigma (Northern) Founder Partner LP
Sigma (Northern) General Partner LLP
Sigma PRS Northern (Bertha Park) Limited
Sigma PRS GP Limited
Sigma PRS General Partner LLP
Sigma PRS Management Ltd
Sigma PRS Property Investments LP
Liverpool Inpartnership Limited
Solihull Inpartnership Limited
Salford Inpartnership Limited
Inpartnership (LP) Limited
City Spirit Regeneration Ltd
City Spirit Regeneration (Salford) Limited
Inpartnership CS Limited
Blackburn Inpartnership Limited
Sigma Technology Management Limited
Sigma Technology Investments Limited
Sigma Technology Founder Partners Limited
Liverpool Inpartnership 2007 Limited
SI Hotels (GP1) Limited
SI Hotels (GP2) Limited
SI Hotels Glasgow (GP1) Limited
SI Hotels Glasgow (GP2) Limited
SI No 7 (GP1) Limited
SI No 7 (GP2) Limited
SI (LP) Limited
The Sigma Foundation
Burrell Inpartnership
*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
Country of
Incorporation
%
Holding
Principal
Activity
England
England
England
England
England
England
England
England
England
England
England
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
England
England
England
England
Scotland
Scotland
England
England
England
Scotland
England
England
England
England
England
England
Scotland
Scotland
Scotland
Scotland
England
Scotland
Scotland
85
85
85
85
85
85
85
85
85
85
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
Property**
Property**
Dormant**
Property**
Property**
Dormant**
Dormant **
Dormant **
Dormant **
Dormant**
Dormant**
Property*
Property*
Property*
Dormant*
Property*
Property*
Property**
Property**
Property**
Property**
Property*
Property*
Property**
Property**
Property**
Property*
Venture Capital**
Venture Capital**
Venture Capital**
Dormant**
Dormant**
Dormant**
Dormant*
Dormant*
Dormant*
Dormant*
Dormant**
Dormant**
Dormant*
141
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
17. INVESTMENT IN SUBSIDIARIES AND PARTNERSHIPS (CONTINUED)
18. INVESTMENT IN JOINT VENTURES
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
The following subsidiaries were sold during the year to The PRS REIT Holding Company Limited:
Sigma PRS Investments (Bury St Edmunds) Limited
Sigma PRS Investments (Bury St Edmunds II) Limited
Sigma PRS Investments (Lea Hall) Limited
Sigma PRS Investments (Lea Hall II) Limited
Sigma PRS Investments (Dawley Road) Limited
Sigma PRS Investments (Dawley Road II) Limited
**Registered Office: Floor 3, 1 St. Ann Street, Manchester, M2 7LR
Country of
Incorporation
%
Holding
Principal
Activity
England
England
England
England
England
England
85
85
85
85
85
85
Property**
Property**
Property**
Property**
Dormant**
Property**
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
Sigma Technology Founder Partners Limited
Sigma Technology Management Limited
Sigma Property Partners Limited
Salford Inpartnership Limited
Solihull Inpartnership Limited
Blackburn Inpartnership Limited
Inpartnership (LP) Limited
Inpartnership (CS) Limited
City Spirit Regeneration Limited
City Spirit Regeneration (Salford) Limited
Burrell Inpartnership Limited
Company Registration
Number
04080037
03289432
SC488231
SC220873
05094769
SC266115
SC260339
06529901
03278486
0491 1 1 1 1
SC287397
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
At 1 January
Investment in new joint ventures
Share of (losses)/profits
Dividends received
At period end
Group share of net assets
4,657
37
(60)
(4,278)
356
356
3,694
-
963
-
4,657
4,657
-
-
-
-
-
-
-
-
-
-
-
-
The investment in new joint ventures during the period relates to our initial investment in our new joint
venture, London BTR Investments Limited in which the Group owns 5% of the ordinary share capital.
London BTR Investments Limited is incorporated in the United Kingdom and its registered address is
Floor 3, 1 St. Ann Street, Manchester M2 7LR. The account reference date is the 31 December. The joint
venture is with EQT Real Estate and aims to deliver high quality, new-build homes for private rental in
Greater London.
The remaining 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 unaudited results for the year to 30 September 2020 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 and during the period, two dividends totalling £4.3m were received by the Group from
Countryside Sigma.
142
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
143
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
18. INVESTMENT IN JOINT VENTURES (CONTINUED)
20. FINANCIAL ASSET INVESTMENTS
The following is the summarised financial position of Countryside Sigma Limited:
FINANCIAL ASSET INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
As at
30 September 2020
Unaudited
£’000
As at
30 September 2019
Audited
£’000
Inventories
Trade and other receivables
Cash and cash equivalents
Current assets
Current liabilities
Net assets
Revenue
Gross (loss)/profit
(Loss)/profit from operations
Net finance income/(costs)
(Loss)/profit before tax
Profit/(loss) after tax
-
294
344
638
-
638
-
(14)
(14)
4
(10)
19
The following is a reconciliation of the Group’s share of net assets as at 30 September:
Countryside Sigma Limited net assets as at 30 September
Groups share of net assets as at 30 September
Share of profit for the quarter ending 31 December 2019
Group share of net assets as at 30 September*
*Prior year share relates to 31 December 2019
19. FIXED ASSET INVESTMENTS
2020
£’000
638
319
-
319
-
309
17,834
18,143
(8,969)
9,174
20,536
2,768
2,747
(40)
2,708
2,195
2019
£’000
9,174
4,587
70
4,657
Group
30 September 2020
£’000
Group
31 December 2019
£’000
Company
30 September 2020
£’000
Company
31 December 2019
£’000
At 1 January
Additions
At Period End
2
-
2
2
-
2
-
-
-
-
-
-
This relates to the Group’s investment in UK PRS (Jersey) I Limited Partnership.
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
At 1 January
Additions
Distributions received
Fair value through profit and loss
At period end
2,384
-
-
(214)
2,170
2,187
-
(17)
214
2,384
-
-
-
-
-
-
-
-
The financial asset investments held 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, reviewed quarterly by the Board and amount to £0.7m (2019:
£0.7m). The directly held quoted securities amount to £1.1 million (2019: £1.3 million) and relates to part
of the Group’s holding of equity shares in The PRS REIT plc. The directly held unquoted security amounts
to £0.4 million (2019: £0.3 million) and was also valued on a basis consistent with industry guidelines.
EQUITY INSTRUMENTS DESIGNATED AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
At 1 January
Additions
Fair value through OCI
At period end
2,816
-
(441)
2,375
-
2,982
(166)
2,816
Total financial asset investments
4,545
5,200
-
-
-
-
-
-
-
-
-
-
The financial asset investments held at fair value through other comprehensive income are the
remainder of the Group’s holding of equity shares in The PRS REIT plc purchased since 31 December
2018 and reflect that the acquisition of the shares is a non-core activity of Group. As at 30 September
2020, the Group’s holding of PRS REIT shares amounted to 4,389,852 (2019: 4,389,852) which
represents a 0.89% (2019: 0.89%) holding in the PRS REIT.
144
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
145
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
20. FINANCIAL ASSET INVESTMENTS (CONTINUED)
21. TRADE RECEIVABLES AND OTHER CURRENT ASSETS
The quoted securities fall 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:
At 1 January 2019
Additions
Distributions received
Fair value through profit and loss
Fair value through OCI
At 31 December 2019
Additions
Distributions received
Fair value through profit and loss
Fair value through OCI
At 30 September 2020
Level 1
£’000
1,298
2,982
-
(13)
(166)
4,101
-
-
(201)
(441)
3,459
Level 2
£’000
889
-
(17)
227
-
1,099
-
-
(13)
-
1,086
Total
£’000
2,187
2,982
(17)
214
(166)
5,200
-
-
(214)
(441)
4,545
The total fair value adjustments made during the period relating to investments, both financial asset
investments at fair value through profit and loss and trading investments, are set out below.
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
Financial asset investments at fair
value through profit and loss:
- venture capital funds
- quoted securities
- unquoted securities
Financial asset investments at fair
value through OCI:
- quoted securities
(59)
(201)
46
(214)
(441)
(441)
243
(13)
(16)
214
(166)
(166)
-
-
-
-
-
-
-
-
-
-
-
-
146
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Trade receivables
Amounts owed by other Group undertakings
Other receivables
Prepayments and accrued income
Contract receivables
Contract receivables – non current
Current portion
Trade receivables
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
2,134
-
466
6,405
1,889
10,894
-
10,894
4,047
-
318
432
1,889
6,686
(1,889)
4,797
-
30,882
17
47
-
30,946
-
30,946
-
30,506
26
31
-
30,563
-
30,563
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
Trade receivables not due
Trade receivables past due 1-30 days
Trade receivables past due 31-60 days
Trade receivables past due 61-90 days
Trade receivables past due over 90 days
Gross trade receivables at end of period/year
Provision for bad debt at 1 January
Debt provisions reversed in the period/year
Provision for bad debt at end of period/year
Net trade receivables attend of period/year
1,243
-
531
-
360
2,134
-
-
-
2,134
4,043
-
-
-
4
4,047
-
-
-
4,047
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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. All trade receivables past due at
30 September 2020 were settled in full by 31
December 2020. 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 current contract receivables
represents amounts not yet invoiced and includes
fees of £1.9 million (2019: £1.9 million) in relation
to the PRS joint venture with Gatehouse. In
January 2021 the investment portfolio in relation
to the PRS joint venture with Gatehouse was sold
and therefore it is expected that the contract
receivable will be realised during 2021. No fees
(2019: £nil) were invoiced prior to the current
period end.
Recoverability of amounts owed by Group
undertakings is reviewed regularly. The Group
has assessed the estimated credit losses of these
loans and given the effective interest rate of the
loans is 0%, there would be an immaterial loss
expected on these loans.
147
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
22. TRADE AND OTHER PAYABLES
24. DEFERRED TAX LIABILITY
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
Trade payables
Other payables
Amounts owed to Group undertakings
Social security and other taxes
Accruals and deferred income
835
-
-
524
2,485
3,844
3,087
-
-
908
2,570
6,565
23
-
88
423
130
664
27
26
50
-
89
192
The Directors consider that the carrying amount of trade payables approximates to their fair value.
23. INTEREST BEARING LOANS
Group
30 September
2020
£’000
Group
31 December
2019
£’000
Company
30 September
2020
£’000
Company
31 December
2019
£’000
330
42,749
43,079
-
-
-
43,079
55
-
55
31 6
19 ,172
19,488
19,543
-
-
-
-
-
-
-
-
-
-
-
-
Current liabilities
Bank loans
Development facility
Non-current liabilities
Bank loans
Development facility
Total interest bearing loans and
overdrafts
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 £45 million 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 £10 million cross guarantee is provided by the Company.
Amounts due to be paid greater than one year
Group
2020
£’000
1,673
Company
2020
£’000
-
The movement in the period and prior year in the Group and Company net deferred tax
liability position was as follows:
Opening position as at 1 January 2019
Charge to statement of comprehensive income for the year
At 31 December 2019
Charge to statement of comprehensive income for the period
Deferred tax charged directly to profit and loss reserves
At 30 September 2020
Group
2020
£’000
716
737
1,453
115
(198)
1,370
Company
2020
£’000
-
-
-
-
The deferred tax liability relates to the Group’s joint venture with Gatehouse Bank (£0.8 million) and
property revaluations (£0.87 million) less expected deferred tax on share options (£0.3 million). A rate of
19% (2019: 17%) was applied as at 30 September 2020, being the rate substantively enacted at that date.
25. SHARE CAPITAL AND SHARE PREMIUM
GROUP AND COMPANY
Number of
shares
Ordinary
shares
£’000
Share
premium
£’000
Opening balance as at 1 January 2020
Share options exercised during the period
Closing balance as at 30 September 2020
89,435,87 1
1 1 7,085
89,552,956
894
1
895
32,107
103
32,210
Total
£’000
33,001
104
33,105
The total authorised number of ordinary shares is 130,000,000 (2019: 130,000,000) with a par value of 1p
per share (2019: 1p). All issued shares are fully paid.
148
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
149
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
26. SHARE OPTIONS
The Company has two share 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 2,261,000 options over
ordinary shares granted during the period (2019: nil) of which 15,000 were exercised. No performance
conditions or market conditions are attached to these options.
Movements in the number of share options outstanding and their related weighted average exercise
prices were as follows:
2020 Weighted
average exercise
price in pence per
share
77.4
83.8
(89.3)
-
Options
(‘000s)
4,690
2,260
(117)
-
79.3
6,833
2019 Weighted
average exercise
price in pence per
share
77.7
-
(62.3)
(87.5)
77.4
Options
(‘000s)
5,062
-
(97)
(275)
4,690
At 1 January 2019 and 2018
Granted
Exercised
Expired / lapsed
At 30 September 2020 and
31 December 2019
Of the 6,833,000 outstanding options (2019: 4,690,000), 4,422,000 had vested at 30 September 2020
(31 December 2019: 3,215,000).
Share options outstanding at the end of the period have the following expiry date and exercise prices:
Expiry date
Exercise
price pence per share
30 September 2020
Number
31 December 2019
Number
2021
2023
2024
2026
2027
2028
2030
2030
150
7.50
26.25
68.00
93.50
87.00
92.00
82.00
86.00
251,000
285,238
1,016,065
1,610,213
1,259,651
165,000
1,246,000
1,000,000
251,000
285,238
1,016,065
1,662,298
1,309,651
165,000
-
-
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
There were 2,261,000 options granted during the period (2019: nil) of which 15,000 were exercised. The
weighted average fair value of options granted to executive Directors and employees during the period
determined using the Black-Scholes-Merton valuation model was 17.8p per option. The significant inputs
into the model were exercise price shown above, volatility of 30%, dividend yield of 0.9%, expected
option life of 4 years and annual risk free interest rate of 0.12% and 0.03%. Future volatility was estimated
based on historical data.
27. OTHER RESERVES
Capital redemption reserve
This reserve was created on the buy-back of shares in the Company and their subsequent cancellation,
being the nominal value of the shares cancelled.
Merger reserve and Capital reserve
These were created on the merger of Sigma Technology Management Limited (“STM”) with the Company.
The movement in reserves for the period ended 30 September 2020 and year ended 31 December 2019
are set out in the Consolidated and Company Statements of Changes in Equity.
Revaluation reserve
This reserve was created when the property at 18 Alva Street, Edinburgh was revalued in 2018.
28. LEASES
The Group has a lease for its Manchester office which will end in early 2026. As at 30 September 2020,
outstanding lease payments were £160,000. Due to the immaterial value of the Right of use asset and
corresponding lease liability under the provisions of IFRS16, these have not been adjusted for in these
accounts.
The Group has a short term lease for its London office which will end in October 2021. As at 30
September, outstanding lease payments were £123,000. Due to the immaterial value of the Right of use
asset and corresponding lease liability under the provisions of IFRS16, these have not been adjusted for
in these accounts.
The Group also has certain leases of office equipment with low value. The Group applies the ‘short-term
lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
The following are the amounts recognised in the income statement:
30 September 2020
£’000
31 December 2019
£’000
Expense relating to leases of low-value assets
(included in Administrative expenses)
12
28
151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
29. CASH FLOWS FROM OPERATING ACTIVITIES
30. CAPITAL COMMITMENTS
Group
9 Months to
30 September
2020
£’000
Group
Year ended
31 December
2019
£’000
Company
9 Months to
30 September
2020
£’000
Company
Year ended
31 December
2019
£’000
2,106
10,231
3,004
2,052
Total comprehensive income for the year
Adjustments for:
Share-based payments
Depreciation
Finance costs
Finance income
Dividends received
Fair value (gain)/loss on financial assets held
at fair value through profit or loss
Share of associate loss/(profit)
Unrealised gain on revaluation of investment
property
67
35
62
(19)
(139)
214
60
77
30
173
(44)
(185)
(214)
(963)
(843)
(3,410)
Realised gain on sale of investment property
(415)
(509)
Fair value loss on financial assets held at fair
value through OCI
Deferred tax posted directly to reserves
Changes in working capital:
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash flows from operating activities
441
198
645
(3,701)
(1,289)
166
-
(682)
3,371
8,041
69
16
-
(8)
(3,000)
77
10
-
(19)
(2,500)
-
-
-
-
-
198
(688)
142
(267)
-
-
-
-
-
-
(3,876)
340
(3,916)
The Group have entered into contracts with
unrelated parties for the construction of residential
housing with a total value of £49.4million (2019:
£57.8 million). As at 30 September 2020, £10.7
million (31 December 2019: £25.0 million) 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 nine
month period were £nil (Year to 31 December 2019:
£1.3 million). At 30 September 2020, Sigma was
owed £nil (2019: £1.3 million). The amount owed at
31 December 2019 was subsequently paid in April
2020. In addition, during the nine month period
Sigma received dividends from Countryside Sigma
totaling £4.3m (Year to 31 December 2019: £nil).
The Group has a 20.1% capital interest in Thistle
Limited Partnership, its joint venture with
Gatehouse. Profit share earned and paid during
the nine month period were £0.4 million (Year to 31
December 2019: £0.5 million).
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 nine month period were £0.4 million (Year
to 31 December 2019: £0.4 million). At the period
end, Sigma was owed £121,000 (31 December 2019:
£4,000).
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Sigma owns 4,389,852 (31 December 2019:
4,389,852) equity shares in The PRS REIT plc.
Fees invoiced during the nine month period in
relation to development management services,
investment advisory services and administration
fees amounted to £6.8 million (Year ended 31
December 2019: £12.5 million). As at 30 September
2020, Sigma was owed £1.7 million (31 December
2019: £2.2 million). In addition, Sigma sold its
investments in 3 subsidiaries to The PRS REIT
plc for a total value of £12.2 million (Year ended
31 December 2019: sold its investments in 5
subsidiaries for a total value of £35.3 million). An
amount of £5.9m was outstanding at the end of
the period and subsequently paid in the first week
of October 2020 (31 December 2019: £nil).
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.
152
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
153
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
32. POST BALANCE SHEET EVENTS
•
Due to the on-going coronavirus pandemic
including further national lockdowns we have
considered this as a post balance sheet event.
CORONAVIRUS AND GOING
CONCERN
This going concern review begins with a summary
of the risks that coronavirus poses to the
Company together with actions we have already
taken and continue to take to ensure that not only
does the business weather the storm, but will be
also well placed to emerge from the crisis in a
position of financial strength.
Countries around the world have been hit by
coronavirus. The virus has spread on a global
basis and is designated a “pandemic”. Despite
significant mitigating action including self-isolation
for people suspected of having the virus, and a
combination of an effective lockdown through
social distancing for all but essential workers and
the imposition of varying degrees of restrictions
on social interaction across the country, the
impact of the virus has been significant in terms
of extent and timing. This represents a material
risk to house building and letting activity together
with the operations of the Company as a whole.
Coronavirus has impacted the Group in the
following areas:
•
•
Company staff operating from home or
otherwise unable to work or absent from work;
House builders unable to continue with
construction work on sites or forced to reduce
or suspend construction work on sites due to
a combination of the effective lockdown and
restrictions or as staff are unable to work or are
absent from work;
Letting agents unable to progress activities in
respect of lettings, repairs and maintenance or
only able to operate a limited service due to
a combination of the effective lockdown and
restrictions or as staff are unable to work or are
absent from work;
Income reduction and doubtful debts as some
tenants struggle to maintain rental payments
resulting from a loss of income due to a
combination of the effective lockdown and
restrictions or as individuals are without work,
unable to work or are absent from work;
Disruption to the supply chain as raw materials
and construction products are not produced or
imported as workers are unable to work or are
absent from work;
General disruption to employees, house
builders, letting agents and the supply chain
due to restrictions on the movement of goods
and people;
Impact of the virus on the economy and
market sentiment; and
Further waves of the coronavirus and potential
for further national lockdowns or significant
localised restrictions on social interaction.
•
•
•
•
•
The absence of Company staff from the office
workplace has been mitigated by remote working
from home. We have adapted our technology to
facilitate remote working throughout the business
in order to keep our operations and projects as
on track as practically possible during coronavirus
pandemic. The Company has not furloughed staff
or made use of any of the Government schemes
providing support to companies or individuals in
financial difficulty during or because of the crisis.
Sigma’s intention is still to keep all employees
actively working as far as possible and to maintain
contractual terms and conditions throughout.
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
A greater issue has been in relation to house
building and letting activity where the effective
lockdown ceased construction activity in the
short term from the end of March up until May
when lockdown restrictions began to ease. Even
then, construction activity only began to resume
comprehensively in June and has subsequently
been adjusted to reflect continuing requirements
for social distancing and guidance around public
transport meaning that construction levels have
not fully returned to pre-lockdown levels. A
further complication has been the introduction of
varying degrees of localised lockdown restrictions
in response to outbreaks of coronavirus in
particular areas.
Importantly, the Company’s contractual obligations
only provide for payment to house builders in
respect of work undertaken and independently
certified. The absence of construction activity
thereby negates development expenditure thus
mitigating cash outflows.
In relation to income and bad debts, the Company
carefully vets prospective tenants and typically
obtains rent insurance for at least the first year
of new lettings where there is limited covenant
history or if the employment sector is considered
to be at greater risk. To date, coronavirus related
arrears have been managed by agreeing payment
plans with tenants encountering difficulties.
The insurer has been notified of this in order to
preserve rights of claim but policies ultimately pay
out in the event that arrears are not recovered
through payment plans. This, together with the
geographic spread of multiple sites will help
mitigate against the inevitable bad debts.
Preserving the employment of staff, rather than
furloughing, also enables Sigma to work with
letting agents as we proactively assist and support
those tenants encountering difficulty during the
crisis in a responsible and reasonable manner. The
adaptation of our technology has meant that this
important tenant interaction and engagement has
continued through a variety of telephone, e-mail
and social media.
In terms of supply chain disruption, significant
efforts and contingencies had already been put
in place in respect of Brexit through securing
additional inventory of supplies, including timber.
In addition, all of our suppliers have worked quickly
to adapt to new ways of working in accordance
with government guidelines to enable all areas of
the business to continue, although at a slower rate
than before.
The coronavirus has had a major impact on the
economy and market sentiment. During August,
announcements indicated that the UK has
technically entered a severe recession as a result of
two successive quarters of negative GDP growth.
The Bank of England has recently signalled that
another technical recession is likely following the
most recent round of restrictions. However, there
is a structural under supply of new family homes in
the UK and indications suggest that the pandemic
and recession may have increased demand for the
Group’s high quality but affordable product across
multiple regions.
There is a risk of reduced property valuations due
to changes in rental levels, bad and doubtful debt
risk and sector attractiveness impacting yields.
Having experienced the first lockdown, the Group
and Company has a good understanding of how to
react quickly to adapt to further lockdowns. New
systems are in place, which enable the Company
to better support tenants e.g. with online repairs
and maintenance assistance. It presently appears
that varying degrees of lockdown measures look
likely to continue pending broad vaccination
coverage. Given the geographic spread of sites
and reflecting government’s desire to maintain
as much economic activity as is reasonably
possible, the Group is likely to be able to continue
construction and lettings activity, particularly
in those regions unaffected by restrictions. As
mentioned above, cessation of construction work
on development sites would reduce short-term
cash outflows although practical completion and
lettings schedules would be delayed.
154
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
155
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
32. POST BALANCE SHEET EVENTS
(CONTINUED)
There remains the risk of further waves of
coronavirus unless and until the wider vaccination
programme is implemented, and greater
potential for further national and local lockdowns
or restrictions. Having experienced the initial
lockdowns, the Group and Company have a good
understanding of how to react quickly to adapt to
additional lockdowns.
-
-
-
CORONAVIRUS STRESS TESTS
In light of the above, the Company has performed
a prudent financial stress test geared towards
ensuring that it has sufficient cash resources to
weather the pandemic and subsequently emerge
in a strong enough condition to continue to
implement the focused build to rent strategy. The
stress test incorporated the following sensitivities:
-
-
-
-
-
A starting point of £25.8 million of cash
balances with no associated borrowings;
Cessation of construction activities for a
period of 3 months from the end of December
2020 albeit currently construction is
continuing on all sites;
For investment property developed by Sigma
a delay of 3 months to current expected
forecast sale date;
Development fees generated from construction
activities in The PRS REIT plc modelled as not
being earned during the 3 month period of the
cessation of construction activities;
Reduction of rental income on properties
owned by Sigma by 20% with no subsequent
recovery therefore reflecting potential on
going coronavirus issues;
Inclusion of only contracted revenue and does
not include any additional revenue from any
new potential sources;
Continuation of employment costs as
currently contracted without any reduction
for cost saving initiatives, mitigating action
or contribution from any Government backed
furlough scheme;
Maintenance of the Company’s overhead base
of c.£7million per annum without reduction
from cost saving initiatives or mitigating
action; and
-
Prudent assumptions in relation to tax liabilities
and the timing of payment in respect thereof.
In addition, the Group’s limited recourse
development facility of £45m with Homes
England is due for repayment on 30 September
2021. We are currently in discussions with Homes
England regarding this and based on our long
standing relationship and strong partnership with
Homes England, reasonably expect the facility
to be renewed. The relationship is reflected not
just in the provision of the development facility
to Sigma Group but also in the role of Homes
England as a cornerstone investor in the PRS
REIT and lender to the Company’s joint venture
in London with EQT. However, for going concern
purposes the Company has assessed that in
the highly unlikely event that the facility is not
renewed, it will have enough cash resources, after
the agreed sale of its London assets to its joint
venture with EQT Real Estate, for the facility to be
repaid if required.
CONCLUSION OF CORONAVIRUS
STRESS TESTS
The conclusion of our stress test is that the
business has more than adequate cash resources
to sustain an extended cessation of construction
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
and disruption to letting activity lasting at least 12
months with estimated funding resources of more
than £24 million remaining and being maintained
even after this time. Without any income or cost
saving measures whatsoever, which is neither
commercial or realistic, this would represent more
than three years’ worth of total overheads for the
business.
Therefore, the Directors believe the Group is well
placed to manage its business risks successfully
and the Directors have a reasonable expectation
that the Group will have adequate resources
to continue in operational existence for the
foreseeable future and for a period of at least
12 months from the date of the approval of the
Group’s consolidated financial statements for
the period ended 30 September 2020. The
Board is therefore of the opinion that the going
concern basis adopted in the preparation of the
consolidated financial statements for the period
ended 30 September 2020 is appropriate.
Overall, coronavirus remains a real and existing
risk which requires careful monitoring and a
management in conjunction with our house
building partners and Letting Agents in order
to mitigate the likely issues as much as possible
pending the restoration of a more normal working
and living environment. As one would expect the
Company will continue to objectively review and
assess the impact of the coronavirus outbreak
and government response on both its strategy
and focus of activities. Importantly, however, the
pandemic will ultimately pass and the Company is
well placed to thrive thereafter.
NON-CURRENT ASSET REVIEW
As a result of the coronavirus pandemic the Group
has carried out a review of its non-current assets
as at 30 September 2020 highlighting possible
post-balance sheet movements that may result
from the emerging crisis.
Investment property
The Group develops and invests in residential
property where the underlying fundamentals
of market dynamics remain strong and there is
significant under supply. Specifically, the Group
invests in family homes for the PRS market and the
valuation of these assets conforms to international
valuation standards based on market evidence of
investment yields, expected gross to net income
deductions, and actual and expected rental values.
There are likely to be two short-term impacts in
respect of the recoverability of rental income as
some tenants inevitably encounter difficulties
and void rates as the practicalities of the effective
lockdown to combat coronavirus prevents lettings
from being completed. However, the valuation
principles remain strong and therefore there it
is not considered to be a material impact on
valuation as at 30 September 2020.
Venture Capital
The Group holds an investment in a venture capital
fund where the underlying investments in the
funds are in six unlisted start-up companies. The
full impact of coronavirus on these companies is
presently unknown but after a fall in their value at
the start of the pandemic there has been some
recovery as at 30 September 2020. Any further
potential impact on the Group is small with a 25%
reduction in value equating to £0.17m and is not
therefore considered to be material.
Unquoted security
The Group holds an investment in one unquoted
security. The full impact of coronavirus on this
investment is unknown although has not yet been
impacted in the period to 30 September 2020. The
potential impact on the Group is small with a 25%
reduction in value equating to £0.1m and is not
therefore considered to be material.
156
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
157
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the nine month period ended 30 September 2020
32. POST BALANCE SHEET EVENTS
(CONTINUED)
Quoted security
The Group’s quoted security relates to its
investment in the PRS REIT plc. As at 30
September 2020 the Group held 4,389,852
shares at price of 78.8p. As at 19 January
2021 the bid price of the shares was
84.2p representing an increase in value of
approximately £237k. On 5 October 2020 the
PRS REIT announced its audited annual accounts
for the year to 30 June 2020 and reported a Net
Asset Value of 95.1p per share.
Investment in joint venture
The Group’s investment in its one joint venture,
Countryside Sigma, completed its final project
in 2019 and is now dealing with residual matters
before distributing the cash and profit generated
to the shareholders. In the period to September
2020, two interim dividends totaling £4.3million
were received.
Property and equipment
The head office building in Edinburgh is owned
by the Group and was valued as at 31 December
2018. It does not anticipate a decrease in value of
its property as a result of coronavirus.
Gatehouse Bank plc
The Group’s venture with Gatehouse Bank, which
launched in November 2014 and completed
in March 2017, was sold to Goldman Sachs
Merchant Banking Division and Pitmore for a total
consideration of c.£150 million in January 2021.
The transaction marks the first significant sale in
the UK of a portfolio of new-build, single-family
suburban PRS houses, and provides market
evidence for the current and future valuation of
the Company’s assets, both on its balance sheet
and managed for external parties.
The transaction also results in the successful
realisation of Sigma’s beneficial interest in the
portfolio. After completion, Sigma will receive
a total cash payment of £2.9m. The £2.9m
represents Sigma’s share of total sale profits
after certain hurdles and stands at more than
50% above the book value of £1.9m as at 30
September 2020. The amount receivable of
£1.9m as at 30 September 2020 was previously
classified as a non-current asset. As outlined the
Group does not anticipate a decrease in value as a
result of coronavirus.
FIVE YEAR RECORD
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
Nine month
period to
30 September
2020
£’000
7,952
(52)
7,900
2019
£’000
13,865
(69)
13,796
2018
£’000
12,477
(67)
12,410
2017
£’000
4,437
(103)
4,334
2016
£’000
5,383
(460)
4,923
Revenue
Cost of sales
Gross profit
Other operating income
Administrative and other
expenses
1,044
4,133
3,513
3,050
2,040
(5,747)
(5,944)
(5,719)
(4,268)
(3,598)
Profit from operations
3,197
11,985
10,204
3,116
3,365
Net finance income
Share of (loss)/profit from
joint ventures
Exceptional item
Profit before tax
Taxation
Profit for the year
Other comprehensive (loss)
/ income
Total comprehensive
income for the year
Attributable to:
Equity holders of the
Company
96
(60)
-
3,233
(686)
2,547
(441)
56
963
-
13,004
(2,607)
10,397
(166)
27
1,950
-
12,181
(906)
11,275
186
89
852
-
4,057
(378)
3,679
-
290
443
(428)
3,670
(105)
3,565
-
2,106
10,231
11,461
3,679
3.565
2,106
2,106
10,231
10,231
11,461
11,461
3,679
3,679
3,565
3,565
Net assets employed
61,140
60,456
51,876
40,035
36,087
Basic earnings per ordinary
share (pence)
2.84
11.63
12.65
4.15
4.02
158
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
159
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
160
SIGMA CAPITAL GROUP PLC
ANNUAL REPORT & FINANCIAL STATEMENTS 2020
161
EDINBURGH
(Head Office)
18 Alva Street
Edinburgh EH2 4QG
0333 999 9926
www.sigmacapital.co.uk
MANCHESTER
Floor 3, 1 St Ann Street
Manchester M2 7LR
LONDON
(postal only)
8 Harley Place
London W1G 8QE