PRS REIT : Interim Report and Financial Statements for the six months ended 31 December 2022

Company Number 10638461

THE PRS REIT PLC

INTERIM REPORT AND FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2022

EDINBURGH	MANCHESTER	LONDON (postal only)
18 Alva Street	Floor 3, 1 St Ann Street	8 Harley Place
Edinburgh	Manchester	London
EH2 4QG	M2 7LR	W1G 8QE
	Tel: [phone]

INTERIM REPORT AND FINANCIAL STATEMENTS

For the six months ended 31 December 2022

CONTENTS		PAGE
HIGHLIGHTS	2
CHAIRMAN'S STATEMENT	4
INVESTMENT ADVISER'S REPORT	8
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	16
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION	17
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	18
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	19
NOTES TO THE FINANCIAL STATEMENTS	20

Very strong asset performance and portfolio now at over 4,980 completed homes

HIGHLIGHTS

Financial

	Six months	Six months
	ended	ended
	31 December	31 December
	2022	2021	Change
Revenue	£24.2m	£19.9m	+22%
Net rental income	£19.6m	£16.4m	+20%
Adjusted earnings*	£16.9m	£12.9m	+31%
Operating profit	£22.7m	£44.0m	-48%
Profit after tax	£14.7m	£38.6m	-62%
Basic earnings per share	2.7p	7.4p	-64%

* Operating profit excluding changes in the fair value of investment properties

• Profitability in line with management expectations and the year-on-year change mainly reflects the difference in gains from fair value adjustments on investment property between the two periods, with £5.8m recognised in the period under review ("H1 2023") compared to £31.1m in the comparative period ("H1 2022"). These gains are non-cash items.

	At	At
	31 Dec	30 Jun
	2022	2022	Change
Net assets	£643m	£639m	+1%
IFRS NAV and EPRA NTA per share	117.1p	116.4p	+1%
Operational
Portfolio delivery	At	At	At
	31 Dec	30 Jun	31 Dec
	2022	2022	2021
No. of completed homes	4,913	4,786	4,489
Estimated rental value ("ERV") per annum	£50.7m	£47.8m	£43.5m
No. of contracted homes	613	693	949
ERV per annum	£6.6m	£7.2m	£8.2m
Completed and contracted sites	71	68	67
ERV per annum	£57.3m	£55.0m	£51.7m
No. of completed and contracted homes	5,526	5,479	5,438
Portfolio performance		At	At
		31 Dec	31 Dec
		2022	2021
Cost management of Gross to Net		18.8%	17.6%
Rent collection (rent collected in H1 relative to rent invoiced in H1)	98%	99%
Like-for-like rental growth (based on average rent per unit for	5.7%	3.2%
stabilised sites)
Average yield on assets in the portfolio		4.3%	4.2%

• Housing delivery in its final stages, with 127 homes completed in H1 2023, taking the Company's portfolio to 4,913 completed homes with an ERV of £50.7m p.a. at 31 December 2022 and a further 613 homes under way
  o four development sites were acquired, which will deliver 97 homes once completed
• Completed assets continued to perform strongly; occupancy at 97% (98% including homes reserved for applicants who have passed referencing and paid deposits) and rent collection also at 98%

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HIGHLIGHTS (Cont.)

1. like-for-likerental growth for the year to 31 December 2022 on stabilised sites was c. 5.7% - with renewals up by c.5% and re-lets to new tenants up by c.10%

1. arrears remained low at c.1% of annualised ERV

1. net rental income up 20% to £19.6m (H1 2022: £16.4m)

1. average rent as a proportion of gross household income was at c.25% - well below Homes

England's upper limit of 35%

• 1. Bloomberg cumulative total return from IPO to 31 December 2022 of 13.5p
• Net asset value per share increased in H1 2023 to 117.1p (30 June 2022: 116.4p). This reflects strong ERV growth, which offset the softening in the net average investment yield
• 1. The Single Family Rental sub-sector delivered the most robust performance in investment yields across the property sector, reflecting the resilience of this category1
• Delivery estimated to finalise at c.5,600 homes, with an ERV of c.£58m per annum*

Outlook

• Dividends amounting to 2.0p per share were declared in H1 2023 (H1 2022: 2.0p). Total dividend target for FY 2023 remains 4.0p per share*, which is expected to be almost fully covered by earnings on an annualised run-rate basis by the financial year-end
• Between 1 January and 10 March 2023, 68 new homes were added to the portfolio, taking it to 4,981 completed homes with an ERV of £52.2 million p.a. A further 545 homes were under construction at 10 March 2023
• Rental demand for high-quality family homes remains very strong nationally and is expected to grow against a background of structural under supply, interest rate rises and cost-of-living pressures

Steve Smith, Non-Executive Chairman of The PRS REIT plc, said:

"The PRS REIT's portfolio of high-quality, professionally managed, build-to-rent family homes continues to perform very strongly. Demand, affordability, occupancy levels and rent collection are all high and arrears remain low. This supports cash generation and predictable income flows as our portfolio nears completion.

"On 10 March 2023, the portfolio reached 4,981 homes and expects to reach 5,000 completed units by the end of March. Once delivery is fully complete, we expect the portfolio to comprise around 5,600 homes, with an estimated rental value of £58 million per year.

"Market factors remain strongly in our favour, and our sector - single family rental - is very robust. This reflects lack of supply, strong rental growth, and the benefit of multiple individual counterparties, which reduces concentration risk. Our homes are affordable for ordinary families up and down the country and we remain very confident of prospects for the PRS REIT."

*These are targets only and not a forecast. There can be no assurance that these targets will be met and they should not be taken as an

indication of the Company's expected future results.

1 CBRE UK Investment Yields Report (March 2023)

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CHAIRMAN'S STATEMENT

Overview

I am pleased to present The PRS REIT plc's (the "Company" or "PRS REIT") financial results for the six months ended 31 December 2022. The portfolio is in the final stages of its delivery programme; almost 90% finished, with 4,981 completed new homes at 10 March 2023 and 545 under way. Completed assets are continuing to perform strongly.

Largest portfolio of single-family rental homes in the UK

The Company's portfolio of build-to-rent ("BTR") family homes grew by an additional 127 homes over the six- month period. This took the total number of homes to 4,913 by 31 December 2022, a 9% increase against the same point last year (31 December 2021: 4,489 completed homes).

The estimated rental value ("ERV") of the 4,913 completed homes was £50.7 million per annum, increasing the portfolio's ERV by 17% year-on-year (31 December 2021: £43.5 million). The percentage rise in the portfolio's rental value against the percentage increase in the number of completed homes over the period reflects rental growth over that time.

At 31 December 2022, a further 613 homes with an ERV of £6.6 million per annum were under way and at varying stages of the construction process. Included within that number are 97 homes, which are under construction across four development sites in Warwickshire, Shropshire, South Yorkshire and Staffordshire and were acquired in the period with the September 2021 equity placing proceeds.

The value of our net assets at 31 December 2022 stood at £643 million, up by 12% year-on-year and by 1% since 30 June 2022 (31 December 2021: £573 million and 30 June 2022: £639 million). This equates to a net asset value ("NAV") per share of 117.1p. The Bloomberg cumulative total return from IPO to 31 December 2022 is 13.5p per share.

The Company's portfolio of high-qualitysingle-family homes remains the largest of its kind in the UK. Assets are geographically widely spread. Currently, we have 71 sites (31 December 2021: 67 sites) across the major regions of England, in the North-West,North-East, Yorkshire, the Midlands, East of England and South-East (excluding London), with a single site in Scotland at present.

The number of new homes continues to rise. Our most recent delivery data at 10 March 2023 shows that the portfolio has risen to 4,981 homes, taking its ERV to £52.2 million, with a further 545 homes under way. Once the delivery programme is complete, we currently estimate that the portfolio will comprise some 5,600 homes with an ERV of approximately £58 million per annum once the homes are fully let.

Continued strong asset performance

Occupancy and rent collection

We continued to experience high demand for our homes in the period, and occupancy and rent collection remained very strong. Occupancy at 31 December 2022 stood at 97%, with 4,788 of the 4,913 completed homes occupied (31 December 2021: 98%). A further 44 homes were reserved for applicants who had passed referencing and paid rental deposits, giving an occupancy rate of 98%. Rent collection (measured as rent collected relative to rent invoiced in the period) was 98% (31 December 2021: 99%).

Affordability and Arrears

The affordability ratio of homes remains very healthy, with average rent as a proportion of gross household income at approximately 25%. This is significantly within Home England's upper limit of 35%.

Total arrears remained low at 31 December 2022 at £0.7 million, which equated to approximately 1% of annualised ERV on completed units (H1 2022: £0.5 million on 4,489 completed units).

Rental income growth

The growth of the portfolio and strong asset performance is reflected in the 20% increase in net rental income to £19.6 million (H1 2022: £16.4 million). Like-for-like rental growth per unit on stabilised sites was 5.7% up over the twelve months to 31 December 2022 and up by 2.8% over the six months to 31 December 2022. Rental growth on lets to new tenants averaged a little over 10% and marginally below 5% on renewals with existing tenants.

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