Specialist Investment Properties : SIPP - Final Resultsof the year ended 31 December

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain. 26 May 2017 Specialist Investment Properties plc

(the "Company" or "SIPP")

Final Results for the year ended 31 December 2016

Specialist Investment Properties plc is pleased to announce its final results for the year to 31 December 2016.

For further information: Specialist Investment Properties plc

John Le Poidevin / Lynn Bruce / Simon Clements

[phone]

Allenby Capital Limited (Nomad and Broker to the Company)

David Worlidge / James Thomas / Liz Kirchner

[phone]

Strategic Report

We take pleasure in reporting our first set of consolidated annual results since Specialist Investment

Properties plc ("SIPP" or "the Group") began to implement its new investing policy.

The Group completed its initial fundraise in February 2016 and has spent the remainder of the year deploying the capital raised into its three identified asset classes of children's homes, supported living accommodation and short term accommodation for local authorities. Debt funding was secured during the year to increase the pool of available capital for acquisition opportunities. By the end of the year, we are pleased to report that SIPP had reached a stabilised portfolio of high yielding and profit generative assets.

It is evident that the sectors in which SIPP has chosen to operate offer strong income returns as well as the potential for future capital growth, and our Investment Adviser has identified a number of investment opportunities available in the market. The Group has, however, now used the majority of its available capital and will not be able to achieve the critical mass it could do without further raising and deployment of funds. Accordingly, SIPP sought some months ago to raise additional equity capital. This did not proceed because the small size of the company and the extent of its

investment pipeline limited the market capitalisation of the company post fund-raising which diminished the attractiveness for institutional investors (who were generally positive about the investment strategy but were looking for a larger market capitalisation).

As a suitable fundraising was not possible, the Board is now considering the best options to realise value in the Group which may include seeking shareholder approval for the cancellation of the Company's ordinary shares from trading on AIM in order to preserve shareholder value and/or a sale of the Group's assets. Details regarding the assignment of two supported living properties can be found below.

Financial Review

Following the adoption of the Group's new investing policy, SIPP conducted a placing and open offer

which raised £2.1m before costs on 23 February 2016.

The Group made its first acquisitions of two properties on 1 March 2016 and continued to add to its portfolio throughout the year. As a result, the revenue for the Group for the year does not give a steady state picture. Total annualised rent for the properties now held by the Group is £623,000.

As a consequence of the limited amount of time that the properties acquired had been held for during the year and the low yield on cash balances held for property purchases in the pipeline, the Group incurred a loss before and after taxation of £136,000 for the year. The Group had reached monthly profitability by December 2016.

The Group's balance sheet shows net assets of £2.2m, including £6.2m gross value of investment properties, £0.4m of cash and £4.3m of borrowings.

The key performance indicators of the business are considered to be investment property valuations, net assets, rental yields and profit.

Portfolio Summary

The Group's portfolio of £6.2m of investment properties at 31 December 2016 consisted of six former residential properties operating as children's homes; two supported living homes comprising twelve self-contained apartments and one three-bedroom house; and sixteen residential units providing short term accommodation to local authorities to allow them to meet their statutory obligations. The children's homes and supported living homes are leased to care operators and housing associations on long term full repairing and insuring leases with inflation adjustment for rent over the life of the lease.

The Group has acquired two further properties in its short-term accommodation portfolio subsequent to the year end at attractive indicative gross yields.

Units	Purchase price excl costs (£000s)	Passing rent (£000s)	Gross yield %
Acquired during the year
Children's homes	6	2,160	213	9.9%
Supported Living homes	15	1,468	136	9.2%
Short term accommodation	16	2,163	241	11.2%
As at 31 December 2016	37	5,791	590	10.2%

Acquired subsequent to the year end
Short term accommodation	2	262	33	12.6%
Current portfolio	39	6,053	623	10.3%

The gross rental yield for the current portfolio on purchase costs after taking account of stamp duty, legal costs and fees is 9.5% p.a.

Assignment of two supported living properties

During the year, the Group exchanged contracts for the purchase of two further supported living properties in St Helens, Merseyside and Workington, Cumbria, details of which were announced on 2 and 15 September 2016 respectively. Both of these properties were under construction at the year end. Subsequent to the year end, one of these properties has now reached practical completion, with the second expected to achieve this later this month.

In order to complete the purchases, the Group would be required to either raise additional equity as part of a larger capital raise or to draw down substantially on its debt facilities, including the bridging facility in place with Heritage Square Limited. As stated above, the Board has not been able to effect an equity raise. If the Group were to draw down solely against the available debt facilities the Board has concluded that the cost of additional debt would mean that acquiring these properties would be earnings dilutive for the Group and as such the Board has been investigating alternative options. The Board is pleased to announce that it has agreed terms for the assignment of these property purchases to Puma Social Care Investments Limited ("PSCI") in a process that will reimburse all of the Group's costs to date in relation to the two prospective purchases and reflect any increase in value since the exchange of contracts. An independent valuation of the properties was obtained by the Board which indicated that the open market value of the two properties, once developed, operating and with the agreed lease in place, net of costs, was £3,335,000. The cash consideration payable by PSCI is £121,100, which will result in the Group achieving a profit on reassignment of

£26,858 after adjusting for construction monitoring fees of £31,950 and the reimbursement of

£62,292 of legal expenses incurred by the Group.

PSCI is deemed to be a related party under Rule 13 of the AIM Rules as it is one-third owned by Shore Capital Group Limited, the majority shareholder of the Group's Investment Adviser, Puma Investment Management Limited. Another member of the Shore Capital group of companies is also a substantial shareholder in SIPP. Lynn Bruce, a director the Group, is also a director of PSCI. As a consequence, the assignment of the property purchases to PSCI is deemed to be a related party transaction under Rule 13 of the AIM Rules.

John Le Poidevin and Simon Clements, the independent directors of the Group, having consulted with the Group's nominated adviser, Allenby Capital Limited, consider that the terms of the assignment are fair and reasonable insofar as shareholders are concerned.

Principal Risks and Uncertainties

The principal risks and uncertainties of the Group, together with consideration of their management and mitigation, are presented in note 14 to the financial information.

Outlook

Having established a stabilised and cash generative portfolio, the Board is now considering the best options to realise value in the Group.

Results and dividends

The results for the financial year are set out on page 10. The Directors do not propose a final dividend.

Principal activities

The principal activity of the Group is that of owning and renting out properties in the social care sector.

Consolidated Statement of Comprehensive Income For the year ended 31 December 2016

2016	2015
Notes	£'000	£'000
Revenue	3	174	-
Administrative expenditure	(229)	(168)
Operating loss	4	(55)	(168)
Interest income	1	2
Finance costs	5	(82)	-
Loss before taxation	(136)	(166)
Taxation	6	-	-
Loss for the year and total comprehensive expense	(136)	(166)
Attributable to:
Equity holders of the parent	(136)	(166)