TIDMGABI TIDMGABC
RNS Number : 1352N
GCP Asset Backed Income Fund Ltd
28 September 2021
GCP Asset Backed Income Fund Limited
Half-yearly report and unaudited interim condensed financial
statements for the period ended 30 June 2021
The Directors of the Company are pleased to announce the
Company's interim results for the period ended 30 June 2021. The
full unaudited half-yearly report and unaudited condensed financial
statements can be accessed via the Company's website at
https://www.graviscapital.com/funds/gcp-asset-backed/literature
For further information, please contact:
Gravis Capital Management Limited +44 (0) 20 3405 8500
David Conlon
Joanne Fisk
Investec Bank plc +44 (0)20 7597 4000
Helen Goldsmith
Denis Flanagan
Neil Brierley
Buchanan/Quill +44 (0)20 7466 5000
Helen Tarbet
Sarah Gibbons-Cook
Henry Wilson
ABOUT THE COMPANY
GCP Asset Backed Income Fund Limited is a listed investment
company which focuses predominantly on investments in UK asset
backed loans.
The Company seeks to provide shareholders with attractive
risk-adjusted returns through regular, growing distributions and
modest capital appreciation over the long term.
The Group is currently invested in a diversified portfolio of
asset backed loans across the social infrastructure, property,
energy and infrastructure and asset finance sectors, located
predominantly in the UK.
The Company is a closed-ended investment company incorporated in
Jersey. The Company has a premium listing on the Official List of
the FCA with its shares admitted to trading on the Premium Segment
of the Main Market of the LSE since 23 October 2015.
At 30 June 2021, its market capitalisation was GBP450.8 million.
The Company is a constituent of the FTSE All--Share Index.
AT A GLANCE - 30 JUNE 2021
HY19 HY20 HY21
--------------------------- ------ ------ ---------
Market capitalisation GBPm 471.7 389.8 450.8
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Value of investments GBPm 421.1 429.5 476.5
--------------------------- ------ ------ ---------
Dividends for the period p 3.10 3.10 3.15(1)
--------------------------- ------ ------ ---------
Ordinary share price p 107.00 88.30 102.50
--------------------------- ------ ------ ---------
NAV per ordinary share p 102.31 100.83 102.71(2)
--------------------------- ------ ------ ---------
Profit for the period GBPm 13.2 6.9 16.1
--------------------------- ------ ------ ---------
HIGHLIGHTS FOR THE PERIOD
-- Dividends of 3.15(1) pence per share declared for the period.
-- Total shareholder return(3) for the period of 16.0% (prior
period: -16.0%) and an annualised total shareholder return since
IPO(3) of 6.2%.
-- Profit for the period of GBP16.1 million, increased from
GBP6.9 million in the prior period where discount rate adjustments
impacted valuations due to the Covid-19 pandemic. Early repayment
fee income of GBP2.4 million was received in the period.
-- NAV per ordinary share of 102.71(2) pence at 30 June 2021.
-- Loans of GBP69.4 million advanced and repayments of GBP37.6 million received in the period.
-- Exposure to a diversified, partially inflation and/or
interest rate protected portfolio of 54 asset backed loans with a
third party valuation of GBP473.5 million at 30 June 2021.
-- Post period end, the Group advanced GBP16.3 million secured
against 17 projects and received repayments totalling GBP33.8
million. Further, the fair value of the Group's co--living loan
decreased with an estimated consequent reduction in the NAV of 3.69
pence per share.
1. Includes a quarterly dividend of 1.575 pence per share for
the quarter to 30 June 2021, which was declared and paid post
period end.
2. Does not include a provision for the dividend in respect of
the quarter to 30 June 2021, which was declared and paid post
period end.
3. Alternative performance measure - refer to below for definitions and calculation methodology.
INVESTMENT OBJECTIVES AND KPIs
The Company's purpose as a closed--ended investment company is
to meet its investment objective, which is to generate attractive
risk--adjusted returns through regular, growing distributions and
modest capital appreciation over the long term.
ATTRACTIVE RISK ADJUSTED REGULAR, GROWING DISTRIBUTIONS CAPITAL APPRECIATION
RETURNS
---------------------------- ------------------------------ ------------------------------
To provide shareholders To provide shareholders To achieve modest appreciation
with returns that are with regular, growing in shareholder value
attractive with regard dividend distributions. over the long term.
to the level of risk
taken.
KEY PERFORMANCE INDICATORS
---------------------------- ------------------------------ ------------------------------
The Group is exposed The Company is paying The Company's ordinary
to a diversified, partially dividends at the target(2) shares closed at 102.50
inflation and/or interest rate set for 2021. The pence per share at the
rate protected portfolio Company has declared period end and have traded
of loans secured against dividends totalling 3.15(3) at an average discount(1)
contracted medium to pence per ordinary share to NAV for the period
long-term cash flows for the period. of 6.4%.
and/or physical assets.
54 3.15p (3) 102.50p
Number of investments Dividends in respect Ordinary share price
at 30 June 2021 of the period to 30 June at 30 June 2021
2021
7.8% 44% 0.2%
Weighted average annualised Percentage of portfolio Discount(1) to NAV at
yield(1) on investment by value with inflation 30 June 2021
portfolio and/or interest rate
protection
---------------------------- ------------------------------ ------------------------------
Further information on Company performance can be found
below.
1. Alternative performance measure - refer to below for definitions and calculation methodology.
2. Information in relation to dividends set out above is for
illustrative purposes only and is not intended to be, and should
not be taken as, a profit forecast or estimate.
3. Includes a quarterly dividend of 1.575 pence per share for
the quarter to 30 June 2021, which was declared and paid post
period end.
PORTFOLIO AT A GLANCE
A portfolio of 54 asset backed loans with an average life of
five years which are partially inflation and/or interest rate
protected. The loans fall within the following sectors and are
secured predominantly against assets and cash flows in the UK:
PROPERTY
-- 17 loans within sector
-- GBP212.1m
-- 45%
ASSET FINANCE
-- 9 loans within sector
-- GBP61.3m
-- 13%
ENERGY AND INFRASTRUCTURE
-- 8 loans within sector
-- GBP44.9m
-- 9%
SOCIAL INFRASTRUCTURE
-- 20 loans within sector
-- GBP155.2m
-- 33%
SENIOR RANKING SECURITY
70%
WEIGHTED AVERAGE ANNUALISED YIELD(1)
7.8%
INFLATION AND/OR INTEREST RATE PROTECTION
44%
1. Refer to alternative performance measure below for definitions and calculation methodology.
CHAIRMAN'S INTERIM STATEMENT
This period of change has brought both challenges and
opportunities for the Company. Whilst some sectors have seen
disruption, there have been opportunities for new investment which
match the strong levels of repayment.
Introduction
The past 18 months have presented significant challenges for all
of us and the Company is no exception. The Covid-19 pandemic
continues to create significant uncertainty, notwithstanding the
vaccination programmes and other measures under way in the
countries in which the Group invests. We continue to strive to
actively manage our portfolio of loans to protect capital value and
produce attractive total returns for our shareholders.
Overall, the first half of the year has been largely positive
for the Company. All but one of our 54 investments continued to
perform in the period, all expected payments of interest have been
made(1) and excess principal repayments received with several loans
repaying early. These early repayments continue to have a positive
impact for the Company, with GBP2.4 million of repayment fees being
received in the period.
As set out below, our co--living loan, which had been flagged as
being impacted by the Covid-19 pandemic, had liquidity issues in
the period. As a result, the co-living group appointed a large
investment bank to run a sales process, which unfortunately post
period end failed to produce a satisfactory result for the lenders.
Subsequent to the period end and to maximise recovery, the
consortium of lenders formed a credit bid vehicle backed by highly
experienced developers and operators of student accommodation and
co-living assets.
The Investment Manager and Board are disappointed with the
estimated consequent reduction in NAV of 3.69 pence per share.
However, we believe this estimate to be conservative and will
collectively work hard to recover additional value for the Group.
We remain satisfied that the unique characteristics of this loan
within the Group's portfolio of loans means there is no
read--across to our other loans, which, as these results highlight
continue to perform.
In light of the continued uncertainties caused by the Covid-19
pandemic, the Board, Investment Manager and Valuation Agent have
continued to be prudent with regard to the discount rates applied
to a number of loans, reflecting the perceived market risk of
assets in those sectors. Notwithstanding this, during the period 14
loans had their risk premium reduced due to the strong performance
of the underlying assets. Over the period, four loans (including
the co-living loan) had their market risk premium increased. The
net impact of these adjustments was a negative impact of 0.46 pence
per share in the period.
The Company generated earnings of 3.67 pence per share on an
IFRS basis, which includes the adjustment to discount rates as
detailed above. EPS excluding these discount rate adjustments
(adjusted EPS(2) ) was 4.13 pence per share, which more than fully
covered the dividend of 3.15 pence for the period.
1. As previously reported by the Company, the CHP loan was in
default and, as such, no payments were expected until the sale
completed in April 2021.
2. Alternative performance measure - refer to below for definitions and calculation methodology.
Covid-19 impact
The Investment Manager has been closely monitoring the
performance of investments and the impact that the Covid-19
pandemic continues to have on the portfolio. At the period end, the
Group's investments were categorised into the following broad
headline risk bands:
COVID-19 VALUATION % OF VALUATION % OF
IMPACT ON AT 30 JUNE PORTFOLIO AT 30 JUNE PORTFOLIO
BORROWER DESCRIPTION 2021 30 JUNE 2021 2020 30 JUNE 2020
----------- ------------------------------------- ------------------- ------------- --------------- -------------
Significant impact on how the
business of the borrower operates,
increases in costs or reductions
in revenues. Expected disruption to
the business model in the medium
High term. GBP38.2 million(1) 8.1% GBP37.2 million 8.7%
----------- ------------------------------------- ------------------- ------------- --------------- -------------
Some impact on how the business of
the borrower operates, some
increases in costs or reductions
in revenues. Limited expected
disruption to the business model in GBP172.9 GBP257.1
Medium the medium term. million 36.5% million 60.1%
----------- ------------------------------------- ------------------- ------------- --------------- -------------
No major impact to the way the
business of the borrower operates,
with revenue and costs remaining
in line with previous periods. No
expected disruption to the business GBP262.4 GBP133.6
Low model in the long term. million 55.4% million 31.2%
----------- ------------------------------------- ------------------- ------------- --------------- -------------
The 'high' impact investments detailed in the table on risk and
viability below comprise co-living assets and two operational
multi-use community facilities, all of which have a public-facing
element and continue to be exposed to a greater impact from the
Covid-19 pandemic.
Co-living loan
In May 2021, our loan to a co-living developer and operator
breached a liquidity covenant, leading to the co-living group
appointing a large investment bank to run a sales process. This was
considered the optimal process for the lenders due to the upcoming
working capital requirements of the co--living group, principally
as a result of their large development pipeline. Initial offers
were received at the end of June 2021, which informed the increased
discount rate adjustment at this time, and the fair value.
A preferred bidder was appointed at the end of July on the same
price point as the initial bids. Unfortunately the preferred bidder
was unable to agree a business plan with certain of the co--living
group's senior funders and co--investors. This led to them
withdrawing from the process. The lending consortium considered a
number of other bids for the co-living group. It was determined
that the most deliverable recovery arose through a credit bid,
targeting six of the co-living group's most attractive assets.
The bid was formulated with a group that is highly experienced
in the development and operation of student accommodation and
co-living assets. The assumed recovery under the proposed
transaction has been based solely on a conservative view of the
sales value of these assets. No recoveries from the other assets
within the co-living group are reflected in the Company's
determination of its net asset value.
These events have resulted in an estimated consequent reduction
in NAV of 3.69 pence per share. The impact will be reflected in the
forthcoming 30 September 2021 NAV and is disclosed as a post
balance sheet event below.
This is clearly a very disappointing result for the whole lender
consortium, considering the security package and asset backed
structure in place. The structure of this loan was unique in the
portfolio and therefore, whilst we intend to take a note of lessons
learned from this transaction, we do not believe that the impact
should be read-across to other mezzanine positions in the
portfolio. The remainder of the Company's portfolio continues to
perform as expected. The Investment Manager has provided further
information below.
1. Following events which occurred post period end, the fair
value of the co-living loan has decreased. Refer to note 16.
NAV and share price performance
At the period end, the net assets of the Company were GBP451.7
million. The NAV per ordinary share increased from 102.18 pence at
31 December 2020 to 102.71 pence(1) at 30 June 2021.
The Company's ordinary shares have traded at a discount(2) since
the outset of the Covid-19 pandemic impacted financial markets,
with an average discount(2) of 6.4% to NAV in the period. Since
IPO, the shares have traded at an average premium(2) to NAV of
1.1%. At 30 June 2021, the shares were trading at 102.50 pence,
representing a 0.2% discount(2) to NAV.
The Board sought to manage the discount(2) over the period
through a number of methods, including releasing more detailed
portfolio information in shareholder communications, hosting
quarterly webinars and meeting shareholders on an individual basis.
The Board also approved the repurchase of shares as the share price
discount(2) to NAV offered value to shareholders. A total of
325,000 shares were bought back in the period at an average price
of 90.22 pence per share.
On 24 September 2021, the closing share price per ordinary share
was 98.40 pence with the shares trading at a 4.2% discount(2) to
NAV.
Investments
During the period, the Group advanced GBP69.4 million secured
against 25 projects. The Group continues to target and invest into
key sectors with existing borrowers who have demonstrated strong
governance and stewardship of their businesses.
A total of GBP37.6 million of principal was repaid in the
period. As the Company matures, it is expected that the rate at
which principal is repaid will continue to increase. The Company
factors this return of principal when considering its funding
needs, ensuring it utilises its RCF where necessary to mitigate
against the impact of cash drag.
Post period end, a further GBP16.3 million was advanced and
GBP33.8 million was repaid.
Credit facility
Post period end, the Company extended its RCF with RBSI which is
now due to mature in August 2023, with all commercial terms
remaining the same as the previous GBP50 million facility.
Dividend policy
The Company set a dividend target(3) of 6.30 pence per share for
2021. The Directors are pleased to confirm that the Company is on
track to meet this target(3) , with dividends totalling 3.15(4)
pence per ordinary share being declared in respect of the
period.
Market overview and outlook
As noted in the 2020 annual report, the Covid-19 pandemic
continues to present significant uncertainties and challenges for
underlying borrowers and the global economy.
The biggest impact has been felt in the portfolio by assets with
public-facing elements (being the co-living and multi-use community
facility assets) which have been directly impacted by lockdown
regulations restricting hospitality and travel sectors from
operating. Certain additional conditions impacting travel remain in
place and there continues to be speculation over whether lockdowns
will be reintroduced later in the year, giving continued
uncertainty to these asset operators.
Whilst we have not been immune to the difficulties presented by
the pandemic, we believe that the portfolio is in a good position,
with the Investment Manager working hard to recover additional
value in the co-living loan.
Across the portfolio, 44% of the loans have inflation or
interest rate protection in place. Typically, we will look to
ensure there is protection on loans with a longer tenor and where
the cash flows of the underlying business are exposed to inflation
risk.
The Investment Manager continues to see opportunities for
investment in a variety of sectors which remain underserved by
mainstream lenders and has a strong pipeline to deploy funds
returned through repayments.
Taking lessons learned over the five and a half years since the
launch of the Company, the Investment Manager remains focused on
identifying and executing transactions which will enhance the
portfolio and deliver shareholder returns.
ESG
ESG and responsible investing are key priorities for the Board
this year and during the period the Directors have been developing
a policy to ensure ESG issues are considered throughout the Company
and to help guide decisions, processes and policies wherever
possible with the aim of operating a sustainable business model not
detrimentally impacting the environment and providing benefits to
society.
It is intended that the policy will use the framework of the PRI
principles, to which our Investment Manager is a signatory, and
will ensure alignment across the Company, its investments and its
service providers.
The Board looks forward to sharing the policy with shareholders
prior to the year end.
Governance and compliance
The Board recognises the importance of a strong corporate
governance culture and continues to maintain principles of good
corporate governance as set out in the AIC Code.
Principal risks and uncertainties
The Directors consider that the principal risks and
uncertainties facing the Company, in particular the uncertainties
relating to the impact of Brexit and the Covid-19 pandemic, remain
unchanged since the publication of the Company's 2020 annual
report. The principal risks and uncertainties are expected to
remain relevant to the Company for the next six months of its
financial year. The principal risks include (but are not limited
to) credit risk, economic risk, key resource risk, regulatory risk
and execution risk.
Further details can be found below and on pages 44 to 49 of the
2020 annual report.
Going concern statement
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that the Company
has adequate resources to continue in operational existence for a
period of at least twelve months from the date on which the
half-yearly report and unaudited interim condensed financial
statements are approved.
In making the assessment, the Directors have considered the
continued likely impacts of the ongoing Covid-19 pandemic on the
Company, operations and the investment portfolio.
The Directors, Investment Manager, Administrator and other
service providers have put in place contingency plans to minimise
disruption. Furthermore, the Directors are not aware of any
material uncertainties that may cast significant doubt on the
Company's ability to continue as a going concern, having taken into
account the liquidity of the Group's investment portfolio and the
Company's financial position in respect of its cash flows,
borrowing facilities and investment commitments (of which there are
none of significance). Therefore, the financial statements have
been prepared on a going concern basis.
On behalf of the Board
Alex Ohlsson
Chairman
27 September 2021
For more information, please refer to the Investment Manager's
report below.
1. Does not include a provision for the dividend in respect of
the quarter to 30 June 2021, which was declared and paid post
period end.
2. Alternative performance measure - refer to below for definitions and calculation methodology.
3. The dividend target set out above is a target only and not a
profit forecast or estimate and there can be no assurance that it
will be met.
4. Includes a quarterly dividend of 1.575 pence per share for
the quarter to 30 June 2021, which was declared and paid post
period end.
INVESTMENT MANAGER'S REPORT
The Company's investment objective is to generate attractive
risk-adjusted returns through regular, growing distributions and
modest capital appreciation over the long term.
3.15p(1)
Dividends declared for the period
16.0%
Total shareholder return(2) for the period
The Investment Manager
Gravis Capital Management Limited provides discretionary
investment management and risk management services to the Group
which includes investment identification, investment due diligence
and structuring, investment monitoring, the management and
reporting of the existing loan portfolio and financial reporting
support. Investment decisions are made on behalf of the Group by
the Investment Manager's investment committee, with an update
provided to the Board on a quarterly basis and additional updates
when significant events have occurred. The Board has overall
responsibility for the Group's activities, including the review of
investment activity, performance, control and supervision of the
Investment Manager.
The Investment Manager also provides advice regarding the
Company's equity and debt funding requirements. The Investment
Manager is the AIFM to the Company. The basis of the remuneration
of the Investment Manager is set out in note 15 to the unaudited
interim condensed financial statements.
Summary investment policy
The Company makes investments(3) in a diversified portfolio of
senior and subordinated debt instruments which are secured against,
or comprise, contracted, predictable medium to long-term cash flows
and/or physical assets.
The Company's investments will typically be unquoted and will
include, but not be limited to, senior loans, subordinated loans,
mezzanine loans, bridge loans and other debt instruments. The
Company may also make limited investments in equities,
equity-related derivative instruments such as warrants, controlling
equity positions (directly or indirectly) and/or directly in
physical assets.
The Company will at all times invest and manage its assets in a
manner which is consistent with the objective of spreading
investment risk. This will include diversification by asset type,
counterparty, locality and revenue source.
At the AGM in May 2021, the Company's shareholders approved an
amendment to the Company's investment policy to increase the
maximum overseas exposure from 20% to 30% of gross assets. The
Company's investment objective, other policies and restrictions are
set out in its 2020 annual report and financial statements, which
is available on the Company's website.
Asset backed lending overview
Asset backed lending is an approach to structuring investments
used to fund infrastructure, industrial or commercial projects,
asset financing and equipment leases. Asset backed lending relies
on the following to create security against which investment can be
provided:
-- the intrinsic value of physical assets; and/or
-- the value of long-term, contracted cash flows generated from
the sale of goods and/or services produced by an asset.
Asset backed lending is typically provided to a Project Company,
a corporate entity established with the specific purpose of owning,
developing and operating an asset. Financing is provided to the
Project Company with recourse solely to the shares held in, and
assets held by, that Project Company.
Cash generation to service loans and other financing relies on
the monetisation of the goods and/or services the Project Company's
assets provides. Lenders implement a security structure that allows
them to take control of the Project Company and its assets to
optimise the monetisation of goods and/or services associated with
such assets if the Project Company has difficulties complying with
its financing terms.
Typically, an asset backed lending structure involves a number
of counterparties, who enter into contractual relationships with
the Project Company that apportion value and risk through providing
services (e.g. operations and maintenance) associated with the
development, ownership and/or operations of an asset. In
structuring an asset backed loan, the Project Company will seek to
ensure risks (and associated value) are apportioned to those
counterparties best able to manage them. This ensures the effective
pricing and management of risks inherent in the asset. Further, it
also means the residual risks (and potential rewards) being taken
by the Project Company are well understood by the parties providing
finance to such company.
The benefits associated with asset backed debt investments
Investment in asset backed loans offers relatively secure and
predictable returns to their lenders when compared with general
corporate or unsecured lending. Further, the reduction since 2007
in the availability of mainstream debt (primarily from banks) has
created the potential for more attractive pricing on debt
investments, particularly where such investments have been
originated and structured to accommodate the borrowers' specific
requirements. In particular, where borrowers may not have access to
mainstream financing for reasons other than the creditworthiness of
the relevant proposition, such as loan size, tenure, structure or
an understanding of the underlying cash flows and/or asset,
attractive rates are available for those willing to commit the
resource, innovation and time to understanding and identifying a
solution for a specific borrower's requirements.
A loan secured against a specific asset (within a Project
Company established specifically for that asset) is capable of
analysis broadly by reference to a set of known variables such
as:
-- how an asset generates cash flow;
-- its current value;
-- expected future value;
-- the competence of its service providers; and
-- the availability of alternative parties in the event of a
failure by one or more service providers.
The need to fully understand the risks associated with a given
asset and structure arrangements with experienced service providers
to effectively manage those risks requires specialist skills and
resources. For this reason, the Company's target market remains
underserviced by mainstream lenders, therefore offering an
attractive risk--adjusted return for parties with relevant
experience and access to the required resources.
1. Includes a quarterly dividend of 1.575 pence per share for
the quarter to 30 June 2021, which was declared and paid post
period end.
2. Alternative performance measure - refer to below for definitions and calculation methodology.
3. The Company makes its investments through its wholly owned
Subsidiary. Refer to note 1 for further information.
INVESTMENT PORTFOLIO
Portfolio performance
We are pleased to report that despite the ongoing economic
disruption caused by the Covid-19 pandemic impacting the co-living
group and the multi-use community facilities, the portfolio
performed in line with the Investment Manager's expectations during
the first half of the financial year, with all expected interest
and principal payments received(1) . The limited impact of the
Covid-19 pandemic on the Company's cash flows over the period
illustrates both the highly cash--generative nature of the
portfolio as well as the strong performance of the portfolio's
underlying loans.
During the period, the portfolio experienced a number of
positive developments. Firstly, there was a positive resolution to
the CHP loan. This loan defaulted in March 2019 and we worked with
a number of different parties to achieve a sale of the asset, which
closed in the period. The sale resulted in an immediate repayment
of GBP1.1 million, with a further GBP1.1 million held in escrow
subject to any potential warranty claims, which together represent
slightly more than the fair value after it was revalued
downwards.
The GBP1.1 million held in escrow is expected to be released in
two tranches in December 2021 and March 2023. We are not
anticipating any successful warranty claims but given the time
elapsed since default, a small reduction in fair value is being
retained against the loan.
Secondly, at the AGM in May 2021, the Company's shareholders
approved an amendment to the Company's investment policy to
increase the maximum overseas exposure from 20% to 30% of gross
assets. The Investment Manager made two further investments in
overseas assets and additional drawdowns under committed
projects.
The Company ended the period with an overseas exposure of 20% of
gross assets. The Investment Manager aims to grow the overseas
exposure slowly, where investments present good risk
diversification and return.
In the portfolio, the co-living group and the multi-use
community facilities have been most heavily impacted by the
Covid-19 pandemic and have encountered further difficulties over
the period.
The co-living group provides a mixture of long stay and short
stay accommodation. The loan represents 6.9% of the portfolio by
value. As announced in the Company's updates on 13 and 15 September
2021, there was a subsequent deterioration of bid levels for the
group and it was decided that a credit bid would offer the best
route for the lender consortium. This resulted in an estimated
consequent reduction in the NAV of 3.69 pence per share.
The lender consortium has proposed to fund an acquisition
vehicle with the intention of completing a credit bid for six of
the co--living group's assets, to be operated by an experienced
operator. Given the complexity of the group and the immediate
funding needs of the underlying projects, we believe this structure
offers the best path to realising value in the assets. We will
continue to work with the other lenders in the consortium to
complete this transaction and hope to recover additional value from
other assets in the co--living group, which remain subject to
security. We remain confident that the circumstances and
structuring of this loan, which led to losses for the whole lender
consortium, are unique to this asset and do not reflect the quality
of protections in the Company's portfolio.
The multi-use community facilities host food outlets, community
spaces, artist studios, bars, and event and co-working areas. The
facilities represent a combined 1.1% of the portfolio by value.
These assets have faced significant challenges through the multiple
lockdowns and are also experiencing liquidity issues at the group
level. Therefore, we are engaged with the borrower in an ongoing
sales process. At the time of writing, three bidders are actively
engaged in the process and undergoing due diligence on the
group.
The Company's dividend continues to be fully covered on an
adjusted EPS(2) basis. The total dividend was 117% covered by EPS
of 3.67 pence and 131% covered by an adjusted EPS(2) of 4.13
pence.
Exposure to assets under construction has increased from 12% at
the year end to 13% of the portfolio. Where assets are in
construction, the Investment Manager employs third party advisers
to monitor progress against key milestones. The Investment Manager
is pleased to report that the remaining assets under construction
are proceeding materially on time and budget.
Property continues to represent the largest sector for the
Company, making up 45% of the portfolio, across residential
property, co--living and buy-to-let mortgages. In the period, there
was significant regulatory change with the expiry of the stamp duty
holiday relief. Nevertheless, we are pleased to see continued
resilience in the UK residential property market with average house
prices rising over the year.
The low average LTV(1) of c.65% against the property assets
continues to provide significant security against market
downturns.
The Investment Manager continues to see many positives across
the Company's diversified portfolio, which continues to generate
positive returns for shareholders, whilst recognising the
challenges posed by a small number of assets.
1. As previously reported by the Company, the CHP loan was in
default and, as such, no payments were expected until the sale
completed in April 2021.
2. Alternative performance measure - refer to below for definitions and calculation methodology.
PORTFOLIO ANALYSIS
Sector type
Property 45%
Social infrastructure 33%
Asset finance 13%
Energy and infrastructure 9%
Security ranking
Senior 70%
Mezzanine 30%
Term profile
<5 yrs 75%
5-10 yrs 9%
>10 yrs 16%
Interest rate profile
<7% 23%
7-8% 41%
>8% 36%
Location
UK 80%
Europe 12%
Rest of world 8%
1. Alternative performance measure - refer to below for definitions and calculation methodology.
TOP TEN INVESTMENTS BY VALUE
Key
1 Sector type
2 % of portfolio by value
3 Asset class
4 Multi/single asset exposure
1. Development Fin Co 6
1 Property
2 8.6%
3 Residential property
4 Multi asset
2. Co-living Co 3(1)
1 Property
2 6.9%
3 Co-living
4 Multi asset
3. Infrastructure 1
1 Energy and infrastructure
2 5.3%
3 Infrastructure
4 Multi asset
4. Student Accom 3
1 Social infrastructure
2 5.0%
3 Student accommodation
4 Single asset
5. Bridging Co 2
1 Property
2 4.8%
3 Residential property
4 Multi asset
6. Bridging Co 1
1 Property
2 4.6%
3 Residential property
4 Multi asset
7. Student Accom 2
1 Social infrastructure
2 4.2%
3 Student accommodation
4 Single asset
8. Property Co 2
1 Social infrastructure
2 3.7%
3 Social housing
4 Multi asset
9. Contract Income 3
1 Asset finance
2 3.2%
3 Contract income
4 Single asset
10. Property Co 7
1 Property
2 3.1%
3 Residential property
4 Multi asset
Further information on the portfolio can be found on the
Company's website.
1. Following events which occurred post period end, the fair
value of the co-living loan has decreased. Refer to note 16.
Investment portfolio and new investments
At 30 June 2021, the Group was exposed to a diversified
portfolio of 54 asset backed investments with a fair value of
GBP473.5 million, of which 70% benefit from senior security and 44%
from partial inflation and/or interest rate protection. The
weighted average annualised yield(1) on the Group's investments was
7.8%, with a weighted average expected term of five years.
The key metrics above, principally yield and inflation and/or
interest rate protection, are in line with the same period last
year, demonstrating that the Company is continuing to deploy
capital efficiently at rates that are value accretive to
shareholders.
The portfolio is primarily backed by assets in the UK,
representing 80% of such security, with the remainder of the
Group's security provided by assets located in Europe, the USA,
Australia and Hong Kong. The Company has minimal currency exposure
(which is hedged) with 99% of investments either denominated in
Pound Sterling or exposure hedged to Pound Sterling using rolling
forward contracts. Post period end, the Company advanced a further
GBP3.0 million secured against international projects.
During the period, the Group made investments totalling GBP69.4
million.
Investments have been made in a number of attractive asset
classes over the period including football finance, infrastructure
assets and new-build residential property developments. In
addition, the impact of Covid-19 has opened up growth opportunities
for some borrowers. In the period we have made further investments
in new nursery projects and an additional CNG development station,
allowing both of these borrowers to expand their businesses and
providing additional security.
The Investment Manager continues to see a strong pipeline of
attractive asset backed financing opportunities to deploy its
remaining capital, including amounts available under the RCF.
INVESTMENTS AND REPAYMENTS DURING THE PERIOD(2)
SECTOR AVERAGE TERM SECURITY STATUS INVESTMENTS REPAYMENTS
----------------------- ------------ ------------------- ------------------------ --------------- ---------------
Asset finance 5 years Senior Operational GBP17.1 million GBP1.3 million
----------------------- ------------ ------------------- ------------------------ --------------- ---------------
Energy and
infrastructure 6 years Senior Operational GBP27.7 million GBP19.8 million
----------------------- ------------ ------------------- ------------------------ --------------- ---------------
Property(3) 2 years Senior/Subordinated Operational GBP15.6 million GBP16.1 million
----------------------- ------------ ------------------- ------------------------ --------------- ---------------
Social infrastructure 8 years Senior/Subordinated Operational/Construction GBP9.0 million GBP0.4 million
----------------------- ------------ ------------------- ------------------------ --------------- ---------------
Total GBP69.4 million GBP37.6 million
----------------------- ------------ ------------------- ------------------------ --------------- ---------------
INVESTMENTS AND REPAYMENTS POST PERIOD(2)
SECTOR AVERAGE TERM SECURITY STATUS INVESTMENTS REPAYMENTS
------------------------- ------------ ------------ ----------- --------------- ---------------
Asset finance 6 years Senior Operational GBP3.0 million -
------------------------- ------------ ------------ ----------- --------------- ---------------
Energy and infrastructure - - - - GBP14.7 million
------------------------- ------------ ------------ ----------- --------------- ---------------
Property 2 years Subordinated Operational GBP10.5 million GBP19.1 million
------------------------- ------------ ------------ ----------- --------------- ---------------
Social infrastructure 10 years Senior Operational GBP2.8 million -
------------------------- ------------ ------------ ----------- --------------- ---------------
Total GBP16.3 million GBP33.8 million
------------------------- ------------ ------------ ----------- --------------- ---------------
1. Alternative performance measure - refer to below for definitions and calculation methodology.
2. The Company makes its investments through its wholly owned
Subsidiary. Refer to note 1 for further information.
3. Includes development projects that were subject to review by
the Board under the Company's investment approval process, refer
below.
RISKS AND VIABILITY
Covid-19 impact
The Covid-19 pandemic continues to present a number of
challenges to the Company, albeit that the principal risks and
uncertainties faced by the Company remain unchanged from December
2020.
Whilst the UK has resumed unrestricted economic activity since
July, other investment jurisdictions including Australia have
recently seen increased restrictions resulting from rising cases
and low vaccination rates. The situation is being closely
monitored, with a particular focus on the impact of travel
restrictions on the occupancy of operation student accommodation
assets.
The Board, on advice from its Valuation Agent and Investment
Manager, has continued to quantify any increase in risk through the
discount rate applied to the loans in the portfolio. When assessing
changes to discount rates, the Board, on advice from its Valuation
Agent and Investment Manager, takes account of the movements in
pricing of risk across the market as a whole, such as those caused
by the uncertainties associated with the Covid-19 pandemic.
It also considers an asset-specific approach which takes into
account a number of other variables that can impact the discount
rate, such as:
-- the underlying loan structure (senior or mezzanine);
-- the operational stage (construction or operational);
-- risk rating factors, such as each project's revenue and cost
drivers which could impact the debt service loan cover ratios;
and
-- the value of the underlying security structure.
The table on below sets out a summary of the risk rating factors
and discount rate movements for each asset class experiencing a
'high, medium or low' impact from the Covid-19 pandemic, as set out
above.
It should be noted that whilst this prudent approach to value
adjustment has been taken in respect of the portfolio, the
principal amount of debt owed by the underlying borrowers has not
changed.
In the event of non-payment of interest by a borrower,
outstanding amounts would be added to the principal owed and
therefore become recoverable in final repayments or against any
enforcement proceeds, taking into account the value of the
underlying security structure for each loan.
Changes to discount rates result in a revaluation of
investments, which is reflected through fair value movements in the
statement of comprehensive income. Where discount rate changes
result in a downward revaluation, as the loans approach their
maturity dates, income recognised in future years will be higher
than the interest accrued on the loan due to a phenomenon known as
'pull-to-par' where loans converge on their par value at maturity.
This phenomenon leads to an increase in the Company's dividend
cover ratio(1) on an earnings basis (under IFRS). The opposite
effect is noted on any loans which have been revalued upward. The
Board and the Investment Manager consider this aspect when
evaluating and declaring dividends.
The discount rate adjustments set out below had a 0.46 pence per
share impact on the earnings and NAV of the Company.
1. Alternative performance measure - refer to below for definitions and calculation methodology.
COVID-19 AVERAGE %
IMPACT ON % OF IMPACTED 30 JUNE 2021 RISK DISCOUNT
BORROWER PORTFOLIO ASSET CLASS GBP'000 RATING FACTORS RATE CHANGE
------------ ----------- --------------------- ------------ ----------------------------- ------------
High 8.1% Co-living 32,827(1) Occupancy levels and LTV 4.00%
Multi-use community
facilities 5,377 Regulatory risk and occupancy 9.00%
------------ ----------- --------------------- ------------ ----------------------------- ------------
Total 38,204
------------ ----------- --------------------- ------------ ----------------------------- ------------
Occupancy, operating costs
Medium 36.5% Student accommodation 22,310 and construction timetables 1.25%
Residential
property 131,359 Default rates and LTV 0.15%
Occupancy and operating
Nurseries 18,157 costs 0.25%
CHP 1,028 N/A N/A
------------ ----------- --------------------- ------------ ----------------------------- ------------
Total 172,854
------------ ----------- --------------------- ------------ ----------------------------- ------------
Various asset
Low 55.4% classes 262,485 Multiple factors
------------ ----------- --------------------- ------------ ----------------------------- ------------
Total 262,485
------------ ----------- --------------------- ------------ ----------------------------- ------------
Valuation of portfolio 473,543
------------------------- --------------------- ------------ ----------------------------- ------------
1. Following events which occurred post period end, the fair
value of the co-living loan has decreased. Refer to note 16.
Update on principal risks and uncertainties
In light of the ongoing impact of the Covid-19 pandemic and
Brexit, the Board is providing the update below on the
uncertainties impacting the Company and their impact on the
Company's principal risks for those risks where residual risk has
changed since the year end.
UNCERTAINTY 1: COVID-19
The Board has continued to monitor and assess the impact of the
Covid-19 pandemic on the Company's portfolio.
As noted above, the co-living group and the multi-use community
facilities have experienced direct impact through restrictions on
their ability to operate due to UK Government legislation. Post
period end, the majority of regulations impacting on operations of
business in the UK were relaxed, allowing for increased
activity.
The key risk to the portfolio remains any future waves of
infections and the reintroduction of restrictions on the operations
of businesses in the portfolio, as currently seen in Australia. It
is important to note, however, that Australia's vaccination
programme is ongoing, which should assist in limiting any future
restrictions going forward.
The Board is aware of the ongoing impact of Covid-19 on staffing
and supply chain management. To date, there has been no impact on
the portfolio but this is an area of increased focus for the
Company which will be monitored over the coming months.
The Covid-19 pandemic is an ongoing uncertainty which the Board
continues to closely monitor.
UNCERTAINTY 2: BREXIT
As noted in the 2020 annual report, the Board considers Brexit
to be a principal uncertainty for the Company.
Whilst the UK officially left the EU on 31 January 2020 and
began a transition period that ended on 31 December 2020, there
remains considerable uncertainty around the future relationship
between the UK and the EU.
The Board continues to monitor the impact of Brexit on the
portfolio's reliance on the EU for materials and/or labour, in
particular for projects under construction in the UK. However, to
date, no impact has been seen on the Company caused by Brexit or
associated regulatory and political changes.
The Board will continue to monitor the potential macro-economic
and political impacts of Brexit in the coming months to assess
whether Brexit will continue to be an uncertainty for the
Company.
In the period, none of the residual risk profiles of the
principal risks of the Company have increased, including as a
result of the
Covid-19 pandemic (as set out above and below) with the residual
risk profile of one principal risk decreasing in the period and
the rest remaining stable.
RISK 1: REGULATORY RISK
HOW THE CHANGE IN THE RESIDUAL
RISK IMPACT RISK IS MANAGED RISK IN THE PERIOD
----------------------- ---------------------- -------------------------- --------------------------
Changes in laws, Any change in the The Company has Decreased
regulation and/or laws, regulations a comprehensive In the period,
policy and/or Government compliance monitoring the stamp duty
The Company, its policy affecting programme relevant holiday relief
operations and the Company or to its operations introduced by the
the underlying the underlying that ensures compliance UK Government in
Project Companies Project Companies with developments July 2020 was phased
are subject to may have a material and change in legislation out, resulting
laws and regulations adverse effect and regulation in an initial fall
enacted by national on the ability in the Channel in UK house prices.
and local Governments. of the Company Islands and the However, this was
to successfully UK, including monitoring outweighed by the
pursue the investment the impact of Brexit significant increases
policy and meet in the jurisdictions in house prices
its investment in which the Group over the last year
objective, which invests. The programme and therefore did
therefore may impact also monitors compliance not have a material
the value of the with listing and impact on the Company.
Company. FCA marketing rules. Regulatory risk
as a result of
changing policy
to manage the Covid-19
pandemic continues.
However, there
is more certainty
than in earlier
periods as the
UK Government looks
to reduce restrictions
and regulation.
The Investment
Manager will continue
to monitor the
impact of any changes
in policy across
the portfolio.
As noted above,
the continued uncertainty
around Brexit also
poses risks to
the underlying
borrower businesses,
particularly where
those businesses
rely on migrant
labour or imported
materials from
the EU. To date,
no impact has been
seen as a result
of changing regulation
due to Brexit.
The Investment
Manager will continue
to monitor the
impact of any changes
in policy on these
borrowers.
----------------------- ---------------------- -------------------------- --------------------------
Going concern and viability
In addition to the analysis set out above which informed changes
to the discount rates of the assets, the Investment Manager has
carried out a going concern and viability review. This analysed the
impact of the Covid-19 pandemic on the equity financing, debt
financing and investment portfolio of the Company, and which has
been reviewed by the Board.
Following events which occurred post period end, the fair value
of the co-living loan has decreased with an estimated consequent
reduction in the NAV of 3.69 pence per share. The co-living loan
had unique characteristics which means there is no read-across to
other loans in the Group's portfolio, which continue to perform as
expected.
As such, the Board remains of the view that none of the
challenges identified impact the going concern or viability of the
Company.
COMPANY PERFORMANCE
The Company continues to deliver regular income to
shareholders.
HY21 HY20 Relevance to strategy
------------------- ---------- ------- ------------------------------------------------
Dividends declared 3.15p 3.10p The dividend reflects the Company's
in respect of ability to deliver regular, sustainable,
the period long-term dividends and is a key element
of total return.
------------------- ---------- ------- ------------------------------------------------
Basic earnings 3.67p(1) 1.56p Basic EPS represents the earnings generated
per share by the Group's investment portfolio
in line with the investment strategy.
------------------- ---------- ------- ------------------------------------------------
Annualised total 6.2% 3.4% Total return measures the delivery of
shareholder return the Company's strategy, to provide shareholders
since IPO(2) with attractive total returns in the
longer term.
------------------- ---------- ------- ------------------------------------------------
Dividend yield(2) 6.1%(3) 7.3% The dividend yield measures the Company's
ability to deliver on its investment
strategy of generating regular, sustainable,
long--term dividends.
------------------- ---------- ------- ------------------------------------------------
Profit for the GBP16.1m GBP6.9m Profit for the period measures the Company's
period ability to deliver attractive risk--adjusted
returns from its investment portfolio.
------------------- ---------- ------- ------------------------------------------------
NAV per ordinary 102.71p(4) 100.83p Growth in NAV per share measures the
share Company's ability to deliver modest
capital appreciation over the long term.
------------------- ---------- ------- ------------------------------------------------
1. Includes an unrealised loss of 0.46 pence per share in
respect of discount rate adjustments to reflect the uncertainties
associated with the Covid-19 pandemic.
2. Alternative performance measure - refer to below for definitions and calculation methodology.
3. Total dividend declared for the period annualised, relative
to the closing share price at the period end, expressed as a
percentage.
4. Does not include a provision for the dividend in respect of
the quarter to 30 June 2021, which was declared and paid post
period end.
FINANCIAL REVIEW
The Company generated total income of GBP19.4 million, declared
dividends of 3.15 pence per share and delivered a total shareholder
return(1) of 16.0% for the period.
Financial performance
The Company has prepared its half-yearly report and unaudited
interim condensed financial statements in accordance with IAS 34
Interim Financial Reporting.
In the period, the Company's portfolio generated total income of
GBP19.4 million. Profit for the period was GBP16.1 million, with
basic EPS of 3.67 pence. Adjusted EPS(1) for the period was 4.13
pence per share, which excludes changes in discount rates.
The dividend for the period was paid as 1.575 pence per share
for the quarter to 31 March 2021 with a further dividend of 1.575
pence per share for the quarter to 30 June 2021, declared post
period end, on 22 July 2021.
Ongoing charges
The Company's ongoing charges percentage for the period,
calculated in accordance with the AIC methodology, was 1.2%
annualised (30 June 2020: 1.2% annualised).
Investment valuation
The weighted average discount rate(1) across the portfolio at 30
June 2021 was 8.6%. The valuation of investments is sensitive to
changes in discount rates applied. A sensitivity analysis detailing
the impact of a change in discount rates is given in note 14.3.
The Valuation Agent carries out a fair market valuation of the
Group's investments on behalf of the Board on a semi-annual basis.
Any assets which may be subject to discount rate changes are valued
on a quarterly basis. The valuation principles used by the
Valuation Agent are based on a discounted cash flow methodology. A
fair value for each asset acquired by the Group is calculated by
applying a discount rate (determined by the Valuation Agent) to the
cash flow expected to arise from each asset.
At the period end, the valuation of investments includes an
adjustment to discount rates to reflect the uncertainties
associated with the Covid-19 pandemic. These adjustments were first
applied in March 2020 and contributed to an overall discount rate
increase of 106 basis points across the portfolio. Since that date,
the Board and the Valuation Agent have been able to take a more
asset-specific approach in determining discount rates. This
resulted in an overall decrease to the weighted average discount
rate [1] of 13 basis points in the period, excluding the previously
defaulted CHP loan. The decrease reflects tightened spreads and
positive performance across the Company's property investments.
Changes to discount rates by asset class are presented in the
table above.
Cash position
The Company received interest payments of GBP17.2 million and
capital repayments of GBP37.6 million in the period, in line with
expectations. The Company paid cash dividends of GBP13.9 million
during the period and a further GBP6.9 million post period end.
Total cash reserves at the period end were GBP9.5 million.
Borrowings
During the period, the Company had access to an RCF with RBSI
for an amount of GBP50 million, which matured in August 2021. Post
period end, a 24 month extension option was exercised and, as a
result, the facility will now expire in August 2023. All commercial
terms remain the same as the previous GBP50 million facility.
Conflicts of interest
In the period, GBP1.0 million was drawn under existing
facilities to finance student accommodation development projects in
the UK and the USA. The directors of the Investment Manager
directly or indirectly own an equity interest in these development
projects. In accordance with the Company's investment approval
process, the investments were reviewed and approved by the
Board.
GCP Infra
Where there is any overlap for a potential investment with GCP
Infra, GCP Infra has a right of first refusal over such investment.
During the period, no investments were offered to GCP Infra under
its right of first refusal. To date, no investments offered to GCP
Infra have been accepted.
1. Alternative performance measure - refer to below for definitions and calculation methodology.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Under the terms of the DTRs of the FCA, the Directors are
responsible for preparing the half-yearly report and unaudited
interim condensed financial statements in accordance with
applicable regulations.
The Directors confirm to the best of their knowledge that:
-- the unaudited interim condensed financial statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting;
-- the Chairman's interim statement and the Investment Manager's
report constitute the Company's interim management report, which
includes a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year);
-- the unaudited interim condensed financial statements include
a fair review of the information required by DTR 4.2.8R (disclosure
of related parties' transactions and changes therein); and
-- the half-yearly report and unaudited interim condensed
financial statements for the period ended 30 June 2021 give a true
and fair view of the assets, liabilities, financial position and
return of the Company.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
On behalf of the Board
Alex Ohlsson
Chairman
Colin Huelin
Director
27 September 2021
INDEPENT REVIEW REPORT
To GCP Asset Backed Income Fund Limited
Report on the review of the unaudited interim condensed
financial statements
Our conclusion
We have reviewed GCP Asset Backed Income Fund Limited's
unaudited interim condensed financial statements (the "interim
financial statements") in the half-yearly report and unaudited
interim condensed financial statements of GCP Asset Backed Income
Fund Limited (the "Company") for the six month period ended 30 June
2021. Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the unaudited interim condensed statement of financial position as at 30 June 2021;
-- the unaudited interim condensed statement of comprehensive income for the period then ended;
-- the unaudited interim condensed statement of cash flows for the period then ended;
-- the unaudited interim condensed statement of changes in
equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
report and unaudited interim condensed financial statements have
been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Company
is the Companies (Jersey) Law 1991 and International Financial
Reporting Standards (IFRSs).
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The half-yearly report and unaudited interim condensed financial
statements, including the interim financial statements, is the
responsibility of, and has been approved by, the Directors. The
Directors are responsible for preparing the half-yearly report and
unaudited interim condensed financial statements in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly report and unaudited
interim condensed financial statements based on our review. This
report, including the conclusion, has been prepared for and only
for the Company for the purpose of complying with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly agreed by our
prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the International Auditing and Assurance Standards Board.
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
report and unaudited interim condensed financial statements and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim
financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey, Channel Islands
27 September 2021
UNAUDITED INTERIM CONDENSED STATEMENT OF COMPREHENSIVE
INCOME
For the period ended 30 June 2021
Period ended Period ended
30 June 2021 30 June 2020
Notes GBP'000 GBP'000
----------------------------------------------------------------------------------- ----- ------------ ------------
Income
Loan interest realised 3 17,231 17,889
Net unrealised loss on financial assets at fair value through profit or loss 3 (1,225) (9,382)
Net gain/(loss) on derivative financial instruments 3 773 (382)
----------------------------------------------------------------------------------- ----- ------------ ------------
Net changes in fair value of financial assets and financial liabilities at fair
value through
profit or loss 16,779 8,125
----------------------------------------------------------------------------------- ----- ------------ ------------
Fee income 3 2,634 1,806
Deposit interest income - 5
----------------------------------------------------------------------------------- ----- ------------ ------------
Total income 19,413 9,936
----------------------------------------------------------------------------------- ----- ------------ ------------
Expenses
Investment management fees (1,972) (1,905)
Operating expenses (787) (657)
Directors' remuneration (100) (101)
----------------------------------------------------------------------------------- ----- ------------ ------------
Total expenses (2,859) (2,663)
----------------------------------------------------------------------------------- ----- ------------ ------------
Total operating profit before finance costs 16,554 7,273
----------------------------------------------------------------------------------- ----- ------------ ------------
Finance costs
Finance expenses 4 (426) (372)
----------------------------------------------------------------------------------- ----- ------------ ------------
Total profit and comprehensive income 16,128 6,901
----------------------------------------------------------------------------------- ----- ------------ ------------
Basic and diluted earnings per share (pence) 7 3.67 1.56
----------------------------------------------------------------------------------- ----- ------------ ------------
All items in the above statement are derived from continuing
operations.
The notes below form an integral part of the financial
statements.
UNAUDITED INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2021
(Audited)
As at
As at 31 December
30 June 2021 2020
Notes GBP'000 GBP'000
------------------------------------------------------ ----- ------------ -----------
Assets
Financial assets at fair value through profit or loss 8 476,546 445,962
Other receivables and prepayments 9 2,271 108
Derivative financial instruments 14 80 158
Cash and cash equivalents 10 9,455 9,994
------------------------------------------------------ ----- ------------ -----------
Total assets 488,352 456,222
------------------------------------------------------ ----- ------------ -----------
Liabilities
Other payables and accrued expenses 12 (1,458) (1,604)
Derivative financial instruments 14 (41) -
Revolving credit facilities 11 (35,116) (4,856)
------------------------------------------------------ ----- ------------ -----------
Total liabilities (36,615) (6,460)
------------------------------------------------------ ----- ------------ -----------
Net assets 451,737 449,762
------------------------------------------------------ ----- ------------ -----------
Equity
Share capital 13 442,607 442,900
Retained earnings 9,130 6,862
------------------------------------------------------ ----- ------------ -----------
Total equity 451,737 449,762
------------------------------------------------------ ----- ------------ -----------
Ordinary shares in issue (excluding treasury shares) 13 439,833,518 440,158,518
------------------------------------------------------ ----- ------------ -----------
NAV per ordinary share (pence per share) 102.71 102.18
------------------------------------------------------ ----- ------------ -----------
The unaudited interim condensed financial statements were
approved and authorised for issue by the Board of Directors on 27
September 2021 and signed on its behalf by:
Alex Ohlsson
Chairman
Colin Huelin
Director
The notes below form an integral part of the financial
statements.
UNAUDITED INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2021
Share Retained Total
capital earnings equity
Notes GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----- ------- -------- --------
Balance as at 1 January 2021 442,900 6,862 449,762
Total profit and comprehensive income for the period - 16,128 16,128
Share repurchases 13 (293) - (293)
Dividends paid 6 - (13,860) (13,860)
----------------------------------------------------- ----- ------- -------- --------
Balance as at 30 June 2021 442,607 9,130 451,737
----------------------------------------------------- ----- ------- -------- --------
UNAUDITED INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2020
Share Retained Total
capital earnings equity
Notes GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----- ------- -------- --------
Balance as at 1 January 2020 443,915 7,931 451,846
Total profit and comprehensive income for the period - 6,901 6,901
Equity shares issued 13 518 - 518
Share issue costs (20) - (20)
Share repurchases 13 (386) - (386)
Dividends paid 6 - (13,687) (13,687)
----------------------------------------------------- ----- ------- -------- --------
Balance as at 30 June 2020 444,027 1,145 445,172
----------------------------------------------------- ----- ------- -------- --------
The notes below form an integral part of the financial
statements.
UNAUDITED INTERIM CONDENSED STATEMENT OF CASH FLOWS
For the period ended 30 June 2021
Period ended Period ended
30 June 2021 30 June 2020
Notes GBP'000 GBP'000
----------------------------------------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Total operating profit before finance costs 16,554 7,273
Adjustments for:
Net changes in fair value of financial assets and financial liabilities at fair
value through
profit or loss 3 (16,779) (8,125)
Realised gains/(losses) on derivative instruments 892 (375)
Decrease in other payables and accrued expenses (120) (49)
(Increase)/decrease in other receivables and prepayments (2,163) 32
----------------------------------------------------------------------------------- ----- ------------ ------------
Total (1,616) (1,244)
----------------------------------------------------------------------------------- ----- ------------ ------------
Interest received from Subsidiary 3 17,231 17,889
Investment in Subsidiary 8 (69,433) (49,520)
Capital repayments from Subsidiary 8 37,624 64,533
----------------------------------------------------------------------------------- ----- ------------ ------------
Net cash flow (used in)/generated from operating activities (16,194) 31,658
----------------------------------------------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Proceeds from revolving credit facilities 11 34,150 11,399
Repayment of revolving credit facilities 11 (4,000) (20,875)
Share issue costs - (20)
Share repurchases 13 (293) (386)
Finance costs paid (342) (269)
Dividends paid 6 (13,860) (13,169)
----------------------------------------------------------------------------------- ----- ------------ ------------
Net cash flow generated from/(used in) financing activities 15,655 (23,320)
----------------------------------------------------------------------------------- ----- ------------ ------------
Net (decrease)/increase in cash and cash equivalents (539) 8,338
Cash and cash equivalents at beginning of the period 9,994 8,687
----------------------------------------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at end of the period 9,455 17,025
----------------------------------------------------------------------------------- ----- ------------ ------------
Net cash flow used in operating activities includes:
Interest received from bank deposits - 5
Interest received from Subsidiary 3 17,231 17,889
----------------------------------------------------------------------------------- ----- ------------ ------------
Non-cash items:
Purchase of financial assets: indexation (24) (304)
Interest received from Subsidiary 24 304
Scrip dividend 6 - (518)
Equity issue in respect of scrip dividend - 518
----------------------------------------------------------------------------------- ----- ------------ ------------
The notes below form an integral part of the financial
statements.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL
STATEMENTS
For the period ended 30 June 2021
1. General information
The Company is a public closed-ended investment company
incorporated on 7 September 2015 and domiciled in Jersey, with
registration number 119412. The Company is governed by the
provisions of the Companies Law and the CIF Law.
The ordinary and C shares (when in issue) of the Company are
admitted to the Official List of the FCA and are traded on the
Premium Segment of the Main Market of the LSE.
The Company makes its investments through its wholly owned
Subsidiary, by subscribing for the Secured Loan Notes issued by the
Subsidiary. The Subsidiary subsequently on--lends the funds to
borrowers.
At 30 June 2021, the Company had one wholly owned Subsidiary,
GABI UK, (31 December 2020: one) incorporated in England and Wales
on 23 October 2015 (registration number 9838893). GABI UK had two
subsidiaries (31 December 2020: two): GABI Housing (registration
number 10497254) incorporated in England and Wales on 25 November
2016 and GABI GS (registration number 10546087) incorporated in
England and Wales on 4 January 2017. The Company, GABI UK, GABI
Housing (including its subsidiary, GABI Blyth) and GABI GS
comprises the Group. The registered office address for GABI UK,
GABI Housing, GABI Blyth and GABI GS is 24 Savile Row, London W1S
2ES.
The Company, through its Subsidiary, seeks to meet its
investment objective through a diversified portfolio of investments
which are secured against, or comprise, contracted, predictable
medium to long-term cash flows and/or physical assets.
On 30 June 2021, the assets held within GABI Blyth were
transferred to its parent, GABI Housing. It is the Company's
intention to wind-up GABI Blyth, the process of which is
ongoing.
GABI GS holds shares as security for loans issued to underlying
borrowers, where required. Its purpose is to isolate any potential
liabilities that may arise from holding shares as security from the
Company. During the year ended 31 December 2020, one of the loans
was refinanced, leaving one such arrangement in place.
GABI Housing invests in five properties and the social income
stream that is derived from these properties through letting them
to specialist housing associations.
The Group's investments will predominantly be in the form of
medium to long-term fixed or floating rate loans which are secured
against cash flows and/or physical assets which are predominantly
UK based.
The Group's investments will typically be unquoted and will
include, but not be limited to, senior loans, subordinated loans,
mezzanine loans, bridge loans and other debt instruments. The Group
may also make limited investments in equities, equity-related
derivative instruments such as warrants, controlling equity
positions (directly or indirectly) and/or directly in physical
assets.
The Group will at all times invest and manage its assets in a
manner which is consistent with the objective of spreading
investment risk.
Where possible, investments are structured to benefit from
partial inflation and/or interest rate protection.
At the AGM in May 2021, the Company's shareholders approved an
amendment to the Company's investment policy to increase the
maximum overseas exposure from 20% to 30% of gross assets. The
Company's investment objective, other policies and restrictions are
set out in its 2020 annual report and financial statements, which
is available on the Company's website.
2. Significant accounting policies
The principal accounting policies applied in the preparation of
these unaudited interim condensed financial statements are set out
below. In the current period, the Company has applied amendments to
IFRS. These include improvements to IFRS, changes in standards,
legislative and regulatory amendments, changes in disclosure and
presentational requirements including updates related to Covid-19.
The adoption of these has not had any material impact on these or
prior years' financial statements and the accounting policies used
by the Company followed in these condensed interim financial
statements are consistent with the 2020 annual report.
2.1 Basis of preparation
The unaudited interim condensed financial statements for the
period ended 30 June 2021 have been prepared in accordance with IAS
34 Interim Financial Reporting.
The unaudited interim condensed financial statements do not
include all financial information required for full annual
financial statements and therefore do not constitute statutory
accounts as defined in Companies Law. They should be read in
conjunction with the Company's annual report and financial
statements for the year ended 31 December 2020 which were prepared
in accordance with IFRS issued by the IASB and interpretations
issued by IFRIC as approved by IASC (which remain in effect) and
audited by the Independent Auditor, who issued an unqualified audit
opinion. The accounting policies adopted in the unaudited interim
condensed financial statements are the same as those applied in the
annual report and financial statements for the year ended 31
December 2020.
The financial information for the period ended 30 June 2021 has
been reviewed by the Independent Auditor, in accordance with
International Standard on Review Engagements 2410, Review of
Interim Financial Information performed by the Independent Auditor
and were approved for issue on 27 September 2021.
The financial risk management objectives include (but are not
limited to) market risk, interest rate risk, credit risk, currency
risk and liquidity risk which are detailed in the Company's 2020
annual report and financial statements. The Board considers that
these remain unchanged.
In accordance with the investment entities exemption contained
in IFRS 10 Consolidated Financial Statements, the Directors have
determined that the Company continues to meet the definition of an
investment entity and as a result the Company is not required to
prepare consolidated financial statements. The Company's investment
in its Subsidiary is measured at fair value and treated as a
financial asset through profit or loss in the statement of
financial position (refer to note 2.2(b)).
The Company raises capital through the issue of ordinary shares
and C shares. The net assets attributable to the C share class,
when in issue, are accounted for and managed by the Company as a
distinct pool of assets, with the Company ensuring that separate
cash accounts are created and maintained. Expenses are either
specifically allocated to an individual share class or split
proportionally by the NAV of each share class. When in issue, C
shares are classified as a financial liability.
Going concern
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that the Company
has the resources to continue in business for the foreseeable
future, being a period of at least twelve months from the date on
which these unaudited interim condensed financial statements were
approved.
In making the assessment, the Directors have considered the
likely impacts of the ongoing Covid-19 pandemic on the Company,
operations and the investment portfolio.
The Directors noted the cash balance exceeds any short-term
liabilities and the Company is able to meet the obligations of the
Company as they fall due. The surplus cash reserves in addition to
the RCF will enable the Company to meet any funding requirements
and finance future additional investments. The Company is a
closed-ended investment company, where assets are not required to
be liquidated to meet day-to-day redemptions.
Whilst the economic future is uncertain, and the Directors
believe that it is possible the Company could experience further
reductions in income and/or valuation of the underlying investment
portfolio, this should not be to a level which would threaten the
Company's ability to continue as a going concern.
The Directors, the Investment Manager and other service
providers have enacted plans to minimise disruption from the
Covid-19 pandemic. Furthermore, the Directors are not aware of any
material uncertainties that may cast doubt upon the Company's
ability to continue as a going concern, having taken into account
the liquidity of the Company's investment portfolio and the
Company's financial position in respect of its cash flows,
borrowing and investment commitments. Therefore, the unaudited
interim condensed financial statements have been prepared on a
going concern basis.
2.2 Significant accounting estimates and judgements
The preparation of unaudited interim condensed financial
statements in accordance with IFRS requires the Directors to make
estimates and judgements that affect the reported amounts
recognised in the unaudited interim condensed financial statements.
However, uncertainty about these assumptions and judgements could
result in outcomes that require a material adjustment to the
carrying amount of the asset or liability in the future. There are
no changes in estimates reported in prior financial statements that
require disclosure in these financial statements.
(a) Critical accounting estimates and assumptions
Fair value of instruments not quoted in an active market
The Company's investments are made by subscribing for the
Secured Loan Notes issued by the Subsidiary. The Subsidiary's
assets consist of investments held by the Subsidiary, which
represent secured loan facilities issued to the Project Companies.
The Subsidiary's assets are not quoted in an active market and,
therefore, the fair value is determined using a discounted cash
flow methodology, adjusted as appropriate for market, credit and
liquidity risk factors (refer to note 14.3 for further
information). This requires assumptions to be made regarding future
cash flows and the discount rates applied to these cash flows. The
Subsidiary's investments are valued by a third party Valuation
Agent on a semi-annual basis. Investments which may be subject to
discount rate changes are valued on a quarterly basis.
The models used by the Valuation Agent use observable data to
the extent practicable. However, areas such as credit risk (both
own and counterparty), volatilities and correlations require
estimates to be made. Changes in assumptions about these factors
could affect the reported fair value of financial instruments.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The investment in the Subsidiary is held at fair value through
profit or loss. Income distributions and interest payments from the
Subsidiary are included as part of the fair value movement
calculation, together with any unrealised movement in the fair
value of the holding in the Subsidiary.
The value of the investment in the Subsidiary is based on the
aggregate of the NAV of the Subsidiary and the value of the Secured
Loan Notes issued by the Subsidiary. Refer to note 8 for further
details.
(b) Critical judgements
Assessment as investment entity
The Directors have concluded that the Company continues to meet
the definition of an investment entity.
Entities that meet the definition of an investment entity within
IFRS 10 Consolidated Financial Statements are required to measure
their subsidiaries at fair value through profit or loss rather than
consolidate. The criteria which define an investment entity are as
follows:
-- an entity that obtains funds from one or more investors for
the purpose of providing those investors with investment
services;
-- an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both; and
-- an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Directors have concluded that the Company continues to meet
the characteristics of an investment entity, in that it:
-- raises funds from investors through the issue of equity, has
more than one investor and its investors are not related parties,
other than those disclosed in note 15;
-- invests in a portfolio of investments held by the Subsidiary
for the purposes of generating risk-adjusted returns through
regular distributions and modest capital appreciation; and
-- the Company's investments are held at fair value through
profit or loss with the performance of its portfolio evaluated on a
fair value basis.
Accordingly, the Company's Subsidiary is not consolidated, but
rather the investment in the Subsidiary is accounted for at fair
value through profit or loss. The value of the investment in the
Subsidiary is based on the aggregate of the NAV of the Subsidiary
and the value of the Secured Loan Notes issued by the
Subsidiary.
Assessment of co-living loan
The Directors have concluded that the course of events leading
to a decrease in fair value of the co--living loan post period end,
as disclosed in note 16, did not give rise to an adjusting event
under IAS 10 Events after the Reporting Period.
At period end, the valuation of the co-living loan had been
adjusted for all known risks based on the information available at
the time.
It is thus the view of the Directors and the Investment Manager
that the valuation of the co-living loan most accurately reflects
the course of events, and as such the unaudited interim condensed
financial statements have not been adjusted for the period ended 30
June 2021.
(c) Functional and presentation currency
The primary objective of the Company is to generate returns in
Pound Sterling, its capital raising currency. The Company's
performance is evaluated in Pound Sterling. Therefore, the
Directors consider Pound Sterling as the currency that most
faithfully represents the economic effects of the underlying
transactions, events and conditions.
The unaudited interim condensed financial statements are
presented in Pound Sterling and all values have been rounded to the
nearest thousand pounds (GBP'000) except where otherwise
indicated.
(d) Segmental information
The Directors view the operations of the Company as one
operating segment, being the investment portfolio of asset backed
loans held through the Subsidiary, which is a registered UK
company. All significant operating decisions are based on the
analysis of the Subsidiary's investments as one segment. The
financial results from this segment are equivalent to the financial
results of the Company as a whole, which are evaluated regularly by
the Directors.
3. Operating income
The table below analyses the operating income derived from the
Company's financial assets and financial liabilities at fair value
through profit or loss:
Period ended Period ended
30 June 2021 30 June 2020
GBP'000 GBP'000
------------------------------------------------------------------------------------------ ------------ ------------
Loan interest realised 17,231 17,889
Unrealised (loss)/gain on financial assets at fair value through profit or loss(1)
Debt - Secured Loan Notes up to GBP1,000,000,000(2) (1,910) (10,596)
Equity - representing one ordinary share in the Subsidiary 685 1,214
------------------------------------------------------------------------------------------ ------------ ------------
Net unrealised loss on financial assets at fair value through profit or loss (1,225) (9,382)
------------------------------------------------------------------------------------------ ------------ ------------
(Loss)/gain on derivative financial instruments
Unrealised loss on forward foreign exchange contracts (119) (7)
Realised gain/(loss) on forward foreign exchange contracts 892 (375)
------------------------------------------------------------------------------------------ ------------ ------------
Net gain/(loss) on derivative financial instruments 773 (382)
------------------------------------------------------------------------------------------ ------------ ------------
Net changes in fair value of financial assets and financial liabilities at fair value
through
profit or loss 16,779 8,125
------------------------------------------------------------------------------------------ ------------ ------------
1. Refer to note 8 for further information.
2. Includes unrealised losses in respect of discount rate
adjustments made to reflect the uncertainties associated with the
Covid-19 pandemic.
The table below analyses the fees income earned by the Company
by type:
Period ended Period ended
30 June 2021 30 June 2020
GBP'000 GBP'000
--------------------------- ------------ ------------
Arrangement fee income 163 72
Commitment fee income 35 279
Early repayment fee income 2,436 1,451
Sundry income - 4
--------------------------- ------------ ------------
Total 2,634 1,806
--------------------------- ------------ ------------
4. Finance expenses
Period ended Period ended
30 June 2021 30 June 2020
GBP'000 GBP'000
------------------------------------------ ------------ ------------
Arrangement fees relating to the RCF 120 133
Commitment fees relating to the RCF 138 180
Early repayment costs relating to the RCF - 2
Interest expense relating to the RCF 168 57
------------------------------------------ ------------ ------------
Total 426 372
------------------------------------------ ------------ ------------
5. Taxation
Profits arising in the Company for the period ended 30 June 2021
are subject to tax at the standard rate of 0% (30 June 2020: 0%) in
accordance with the Income Tax Law.
6. Dividends
Period ended Period ended
Pence 30 June 2021 30 June 2020
Quarter ended Dividend per share GBP'000 GBP'000
------------------------------------------------ ------------------------ -------------- ------------ ------------
Current period dividends
30 June 2021(1) / 2020 Second interim dividend 1.575 / 1.550 - -
31 March 2021 / 2020 First interim dividend 1.575 / 1.550 6,927 6,843
------------------------------------------------ ------------------------ -------------- ------------ ------------
Total 3.150 / 3.100
------------------------------------------------ ------------------------ -------------- ------------ ------------
Prior period dividends
31 December 2020 / 2019 Fourth interim dividend 1.575 / 1.550 6,933 6,844
------------------------------------------------ ------------------------ -------------- ------------ ------------
Total 1.575 / 1.550
------------------------------------------------ ------------------------ -------------- ------------ ------------
Dividends in the statement of changes in equity 13,860 13,687
Dividends settled in shares(2) - (518)
------------------------------------------------------------------------------------------ ------------ ------------
Dividends in the statement of cash flows 13,860 13,169
------------------------------------------------------------------------------------------ ------------ ------------
1. The second interim dividend was declared after the period end
and is therefore not accrued for in the unaudited interim condensed
financial statements.
2. Dividends settled in shares are where shareholders have
elected to take the scrip dividend alternative.
On 22 July 2021, the Company declared a second interim dividend
of 1.575 pence per ordinary share amounting to GBP6.9 million which
was paid on 27 August 2021 to ordinary shareholders on the register
at close of business on 30 July 2021.
The Board, at its discretion, suspended the scrip dividend
alternative for the first and second interim dividends. The
suspension was as a result of the likely discount between any scrip
dividend reference price of the shares and the net asset value per
share of the Company at the time. The Board intends to keep the
payment of future scrip dividends under review.
7. Earnings per share
Basic earnings per share is calculated by dividing profit for
the period attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares in issue during the
period. Diluted earnings per share is calculated by dividing the
profit attributable to ordinary shareholders by the diluted
weighted average number of ordinary shares.
Weighted
average
Total profit number of Pence
ordinary
GBP'000 shares per share
---------------------------------------------- ------------ ----------- ---------
Period ended 30 June 2021
Basic and diluted earnings per ordinary share 16,128 439,957,689 3.67
---------------------------------------------- ------------ ----------- ---------
Period ended 30 June 2020
Basic and diluted earnings per ordinary share 6,901 441,581,106 1.56
---------------------------------------------- ------------ ----------- ---------
8. Financial assets at fair value through profit or loss:
investment in Subsidiary
The Company's financial assets at fair value through profit or
loss comprise its investment in the Subsidiary, which represents
amounts advanced to finance the Group's investment portfolio in the
form of Secured Loan Notes and equity, in addition to derivatives
(see note 14) utilised for the purpose of hedging foreign currency
exposure. The Company's investment in the Subsidiary at 30 June
2021 comprised:
(Audited)
30 June 31 December
2021 2020
Debt - Secured Loan Notes up to GBP1,000,000,000 GBP'000 GBP'000
--------------------------------------------------------------------------------------------- -------- -----------
Opening balance 443,855 453,081
Purchase of financial assets 69,433 126,545
Repayment of financial assets (37,624) (130,610)
Unrealised (loss)/gain on financial assets and financial liabilities at fair value through
profit or loss:
Unrealised valuation loss(1) (2,023) (5,233)
Unrealised foreign exchange (loss)/gain (455) 133
Other unrealised movements on investments(2) 568 (61)
--------------------------------------------------------------------------------------------- -------- -----------
Total unrealised loss on financial assets and financial liabilities at fair value through
profit or loss (1,910) (5,161)
--------------------------------------------------------------------------------------------- -------- -----------
Total 473,754 443,855
--------------------------------------------------------------------------------------------- -------- -----------
1. Includes unrealised losses in respect of discount rate
adjustments made to reflect the uncertainties associated with the
Covid-19 pandemic.
2. Other unrealised movements on investments are attributable to
the timing of the debt service payments and principal indexation
applied.
The difference between the fair value of the Secured Loan Notes
and the underlying investments of the Subsidiary is as a result of
payment timings and differing application of the effective interest
rate in respect of the underlying investments, as set out in the
table below.
(Audited)
30 June 31 December
2021 2020
GBP'000 GBP'000
------------------------------------------------------------------------------ ------- -----------
Fair value of the underlying investments held by the Subsidiary 473,543 444,235
Principal received from the Subsidiary in respect of an underlying investment - (400)
Principal received from underlying investments and held by the Subsidiary 149 12
Interest rate differential 62 8
------------------------------------------------------------------------------ ------- -----------
Fair value of Secured Loan Notes 473,754 443,855
------------------------------------------------------------------------------ ------- -----------
(Audited)
30 June 31 December
2021 2020
Equity - representing one ordinary share in the Subsidiary GBP'000 GBP'000
----------------------------------------------------------- ------- -----------
Opening balance 2,107 796
Unrealised gain on investment in Subsidiary 685 1,311
----------------------------------------------------------- ------- -----------
Total 2,792 2,107
----------------------------------------------------------- ------- -----------
Financial assets at fair value through profit or loss 476,546 445,962
----------------------------------------------------------- ------- -----------
The above represents a 100% interest in the Subsidiary at 30
June 2021 (31 December 2020: 100%).
9. Other receivables and prepayments
(Audited)
30 June 31 December
2021 2020
GBP'000 GBP'000
--------------------- ------- -----------
Arrangement fees 41 49
Other income debtors 2,206 6
Prepayments 24 53
--------------------- ------- -----------
Total 2,271 108
--------------------- ------- -----------
10. Cash and cash equivalents
(Audited)
30 June 31 December
2021 2020
GBP'000 GBP'000
-------------------------- ------- -----------
Cash and cash equivalents 9,455 9,994
-------------------------- ------- -----------
Total 9,455 9,994
-------------------------- ------- -----------
11. Interest-bearing loans and borrowings
(Audited)
30 June 31 December
2021 2020
GBP'000 GBP'000
------------------------------------------ ------- -----------
Opening balance 5,000 9,476
Proceeds from amounts drawn on the RCF(1) 34,150 54,599
Repayment of amounts drawn on the RCF (4,000) (59,075)
------------------------------------------ ------- -----------
RCF drawn at the period/year end 35,150 5,000
Loan arrangement fees unamortised (34) (144)
------------------------------------------ ------- -----------
Total 35,116 4,856
------------------------------------------ ------- -----------
1. Excluding the amount drawn down as an alternative to cash
cover for the open forward foreign exchange contracts.
Any amounts drawn under the RCF are to be used in, or towards,
the making of investments (including a reduction of the available
commitment as an alternative to cash cover for entering into
forward foreign exchange contracts) in accordance with the
Company's investment policy.
On 19 August 2021, the Company entered into an agreement with
RBSI to extend the existing RCF by 24 months to August 2023, with
an additional one year extension option subject to lender
approval.
A total of GBP120,000 of costs were amortised (30 June 2020:
GBP25,000) as loan arrangement fees during the period and charged
through the statement of comprehensive income.
Total drawdowns of GBP35.2 million were repayable at the period
end (31 December 2020: GBP5.0 million).
During the period, utilisation requests were submitted to RBSI
in relation to the open forward foreign exchange contracts. These
utilisations restrict the amount available for drawdown on the RCF.
At the period end, a utilisation request for the sum of GBP2.2
million (30 June 2020: GBP335,000) was in place, which limited the
amount available for drawdown to GBP47.8 million.
Interest on amounts drawn under the RCF is charged at LIBOR plus
2.10% per annum. A commitment fee is payable on undrawn amounts of
0.84%.
The RCF with RBSI is secured against the investment in the
Subsidiary.
At 30 June 2021, the Company is in full compliance with all loan
covenants stipulated in the RCF agreement.
12. Other payables and accrued expenses
(Audited)
30 June 31 December
2021 2020
GBP'000 GBP'000
---------------------------- ------- -----------
Accruals 402 520
Loan commitment fee accrued 61 84
Loan interest accrued - 2
Investment management fees 995 998
---------------------------- ------- -----------
Total 1,458 1,604
---------------------------- ------- -----------
13. Authorised and issued share capital
(Audited)
30 June 2021 31 December 2020
-------------------- --------------------
Number Number
Share capital account of shares GBP'000 of shares GBP'000
--------------------------------------------------------------- ----------- ------- ----------- -------
Ordinary shares issued at no par value and fully paid
Shares in issue at beginning of the period/year 442,033,518 444,414 441,544,019 443,915
--------------------------------------------------------------- ----------- ------- ----------- -------
Equity shares issued through:
Dividends settled in shares(1) - - 489,499 518
--------------------------------------------------------------- ----------- ------- ----------- -------
Total shares issued in the period/year - - 489,499 518
--------------------------------------------------------------- ----------- ------- ----------- -------
Share issue costs - - - (19)
--------------------------------------------------------------- ----------- ------- ----------- -------
Total shares in issue 442,033,518 444,414 442,033,518 444,414
--------------------------------------------------------------- ----------- ------- ----------- -------
Treasury shares
Shares in treasury at beginning of the period/year (1,875,000) (1,514) - -
Total shares purchased and held in treasury in the period/year (325,000) (293) (1,875,000) (1,514)
--------------------------------------------------------------- ----------- ------- ----------- -------
Total shares held in treasury (2,200,000) (1,807) (1,875,000) (1,514)
--------------------------------------------------------------- ----------- ------- ----------- -------
Total ordinary share capital excluding treasury shares 439,833,518 442,607 440,158,518 442,900
--------------------------------------------------------------- ----------- ------- ----------- -------
1. Dividends settled in shares are where shareholders have
elected to take the scrip dividend alternative.
The offer of a scrip dividend alternative was suspended at the
Board's discretion, for all 2020 dividends and all 2021 dividends
to date, as a result of the likely discount between the scrip
dividend reference price and the quarterly NAV per share of the
Company. The Board intends to keep the payment of future scrip
dividends under review.
During the period, 325,000 (31 December 2020: 1,875,000)
ordinary shares of no par value and fully paid were repurchased and
held in treasury for an aggregate consideration of GBP293,000 (31
December 2020: GBP1,514,000).
The Company's share capital is represented by no par value
ordinary shares. At 30 June 2021, the Company's issued share
capital comprised 442,033,518 ordinary shares (31 December 2020:
442,033,518), 2,200,000 of which are held in treasury (31 December
2020: 1,875,000).
The ordinary shares carry the right to dividends out of the
profits available for distribution as determined by the Board. Each
holder of an ordinary share is entitled to attend meetings of
shareholders and, on a poll, to one vote for each share held.
The Company may also issue C shares which, when in issue, are
classified as a financial liability (refer to note 2.1).
14. Financial instruments
The table below sets out the classifications of the carrying
amounts of the Company's financial assets and financial liabilities
into categories of financial instruments.
(Audited)
30 June 31 December
2021 2020
Financial assets GBP'000 GBP'000
----------------------------------------------------------------- -------- -----------
Cash and cash equivalents 9,455 9,994
Other receivables and prepayments 2,271 108
----------------------------------------------------------------- -------- -----------
Total financial assets at amortised cost 11,726 10,102
----------------------------------------------------------------- -------- -----------
Derivative financial instruments 80 158
Financial assets at fair value through profit and loss 476,546 445,962
----------------------------------------------------------------- -------- -----------
Total financial assets at fair value through profit and loss 476,626 446,120
----------------------------------------------------------------- -------- -----------
Total financial assets 488,352 456,222
----------------------------------------------------------------- -------- -----------
Financial liabilities
Other payables and accrued expenses (1,458) (1,604)
Revolving credit facilities (35,116) (4,856)
----------------------------------------------------------------- -------- -----------
Total financial liabilities at amortised cost (36,574) (6,460)
----------------------------------------------------------------- -------- -----------
Derivative financial instruments (41) -
----------------------------------------------------------------- -------- -----------
Total financial liabilities at fair value through profit or loss (41) -
----------------------------------------------------------------- -------- -----------
Total financial liabilities (36,615) (6,460)
----------------------------------------------------------------- -------- -----------
14.1 Derivative financial instruments
Derivative financial instruments comprise forward foreign
exchange contracts for the purpose of hedging foreign currency
exposure of the Company to four Euro and one US Dollar denominated
investments made by the Subsidiary (for which the final repayment
dates range from 31 March 2023 to 31 December 2024); the
investments represent 6.0% of the portfolio by value. The Company
intends to utilise the forward foreign exchange contract on a
rolling three month basis for the term of the investment.
The table below sets out the forward foreign exchange contracts
held by the Company at the period/year end:
Principal Hedged Fair value
30 June 2021 Maturity amount amount GBP'000
----------------- ------------------ ---------------- ------------- ----------
Contract EUR/GBP 02 July 2021 (GBP14,482,390) EUR16,779,297 80
Contract EUR/GBP 21 September 2021 (GBP3,778,844) EUR4,403,487 (7)
Contract EUR/GBP 30 September 2021 (GBP3,521,482) EUR4,115,556 (17)
Contract EUR/GBP 02 March 2022 (GBP8,094,808) EUR9,401,310 (12)
----------------- ------------------ ---------------- ------------- ----------
Total EUR/GBP (GBP29,877,524) EUR34,699,650 44
------------------------------------- --------------- ------------- ----------
Contract USD/GBP 30 September 2021 (GBP2,171,947) $3,008,798 (5)
----------------- ------------------ ---------------- ------------- ----------
Total USD/GBP (GBP2,171,947) $3,008,798 (5)
------------------------------------- --------------- ------------- ----------
Total (GBP32,049,471) - 39
------------------------------------- --------------- ------------- ----------
Principal Hedged Fair value
31 December 2020 (audited) Maturity amount amount GBP'000
--------------------------- ---------------- ---------------- ------------- ----------
Contract EUR/GBP 12 January 2021 (GBP9,931,464) EUR10,945,467 96
Contract EUR/GBP 22 March 2021 (GBP4,618,223) EUR5,064,806 62
--------------------------- ---------------- ---------------- ------------- ----------
Total (GBP14,549,687) EUR16,010,273 158
--------------------------------------------- --------------- ------------- ----------
14.2 Capital management
The Company's capital is represented by share capital comprising
issued ordinary share capital and its credit facilities, as
detailed in note 13 and note 11 respectively.
The Company may seek to raise additional capital from time to
time to the extent that the Board and the Investment Manager
believe the Company will be able to make suitable investments. The
Company raises capital only when it has a clear view of a robust
pipeline of advanced investment opportunities to ensure the rapid
deployment of capital.
The Company may borrow up to 25% of its NAV at such time any
such borrowings are drawn down.
14.3 Fair value of financial assets
Valuation of financial instruments
The Company measures fair values using the following fair value
hierarchy that reflects the significance of inputs used in making
the measurements. Categorisation within the hierarchy has been
determined on the basis of the lowest level input that is
significant to their fair value measurement of the relevant assets
as follows:
-- Level 1: valued using quoted prices unadjusted in active
markets for identical assets or liabilities;
-- Level 2: valued by reference to valuation techniques using
observable inputs for the asset or liability other than quoted
prices included in Level 1; or
-- Level 3: valued by reference to valuation techniques using
inputs that are not based on observable market data for the asset
or liability.
An investment is always categorised as Level 1, 2 or 3 in its
entirety. In certain cases the fair value measurement for an
investment may use a number of different inputs that fall into
different levels of the fair value hierarchy. In such cases, an
investment level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement. The assessment of the significance of a particular
input to the fair value measurement requires judgement and is
specific to the investment.
The Valuation Agent has carried out semi-annual fair valuations
of the financial assets of the Subsidiary (quarterly for
investments subject to discount rate changes). The same discount
rates, determined by the Valuation Agent, are applied to the future
cash flows of the Secured Loan Notes, to determine the fair value
of the assets of the Company.
The Company recognises transfers between levels of the fair
value hierarchy at the end of the reporting period during which the
change has occurred.
The table below sets out fair value measurements of financial
instruments at the year end, by the level in the fair value
hierarchy into which the fair value measurement is categorised. The
amounts are based on the value recognised in the unaudited interim
condensed statement of financial position. All fair value
measurements are recurring.
Level Level Level
1 2 3 Total
Financial assets at fair value through profit or loss at 30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------------------- ------- ------- ------- -------
Investment in Subsidiary - - 476,546 476,546
Derivative financial instruments - 80 - 80
---------------------------------------------------------------------- ------- ------- ------- -------
Total - 80 476,546 476,626
---------------------------------------------------------------------- ------- ------- ------- -------
Level Level Level
1 2 3 Total
Financial assets at fair value through profit or loss at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000l
-------------------------------------------------------------------------- ------- ------- ------- --------
Investment in Subsidiary - - 445,962 445,962
Derivative financial instruments - 158 - 158
-------------------------------------------------------------------------- ------- ------- ------- --------
Total - 158 445,962 446,120
-------------------------------------------------------------------------- ------- ------- ------- --------
Level Level Level
1 2 3 Total
Financial liabilities at fair value through profit or loss at 30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------------- ------- ------- ------- -------
Derivative financial instruments - (41) - (41)
--------------------------------------------------------------------------- ------- ------- ------- -------
Level Level Level
1 2 3 Total
Financial liabilities at fair value through profit or loss at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------------ ------- ------- ------- -------
Derivative financial instruments - - - -
------------------------------------------------------------------------------ ------- ------- ------- -------
The derivative financial instruments are classified as Level 2
as observable market data is used for valuation and pricing.
The Directors have classified the financial instruments relating
to 'Investment in Subsidiary' as Level 3 due to the limited number
of comparable and observable market transactions in this sector.
The current input for Level 3 at year end is the discount rates for
these investments which are considered to be primarily modelled
rather than market observed. The secured loan facilities that the
Subsidiary has invested in are also classified as Level 3.
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and end of the period:
(Audited)
30 June 31 December
2021 2020
GBP'000 GBP'000
------------------------------------------------------------------------------------- -------- -----------
Opening fair value of financial instruments 445,962 453,877
Investment in Subsidiary 69,433 126,545
Capital repayments from Subsidiary (37,624) (130,610)
Unrealised (loss)/gain on financial assets at fair value through profit or loss(1) :
Debt - Secured Loan Notes up to GBP1,000,000,000 (1,910) (5,161)
Equity - representing one ordinary share in the Subsidiary 685 1,311
------------------------------------------------------------------------------------- -------- -----------
Closing fair value of financial instruments 476,546 445,962
------------------------------------------------------------------------------------- -------- -----------
1. Refer to note 8 for further information.
For the Company's financial instruments categorised as Level 3,
changing the discount rate used to value the underlying instruments
alters the fair value. In determining the discount rate for
calculating the fair value of financial assets at fair value
through profit or loss, reference is made to Pound Sterling
interest rates, movements of comparable credit markets and
observable yield on comparable instruments. Hence, movements in
these factors would give rise to changes in the discount rate. A
change in the discount rate used to value Level 3 investments would
have the effect on the valuation as shown in the table below.
The fair value of the investment in the Subsidiary is based on
the aggregate of the NAV of the Subsidiary and the value of the
Secured Loan Notes issued by the Subsidiary. At 30 June 2021, the
NAV of the Subsidiary was as follows:
(Audited)
30 June 31 December
2021 2020
GBP'000 GBP'000
----------- ------- -----------
GABI UK(1) 2,792 2,107
----------- ------- -----------
1. Refer to note 8 for further information.
The key driver of the NAV of the Subsidiary is the valuation of
its portfolio of secured loan facilities issued to the Project
Companies.
The Secured Loan Notes issued by the Subsidiary that the Company
has subscribed for, are valued on a discounted cash flow basis in
line with the methodology used by the Valuation Agent, applying the
following discount rates:
Key
Fair value(1) Valuation unobservable Discount
GBP'000 technique inputs rate
--------------------------------------------------------- ------------- -------------------- ------------ --------
Financial assets at fair value through profit or loss 30 Discount
June 2021 476,546 Discounted cash flow rate 8.6%
Financial assets at fair value through profit or loss 31 Discount
December 2020 (audited) 445,962 Discounted cash flow rate 8.4%
--------------------------------------------------------- ------------- -------------------- ------------ --------
1. Including the NAV of the Subsidiary.
The investments held by the Subsidiary are valued on a
discounted cash flow basis, in line with the methodology used by
the Valuation Agent. At the period end, discount rates ranged from
5-17% (31 December 2020: 6-17%).
The Directors review the valuation report provided by the
Valuation Agent which includes reference to the inputs used in the
valuation of investments and the appropriateness of their
classification in the fair value hierarchy. In particular, the
Directors are satisfied that the significant inputs into the
determination of the discount rate adopted by the Valuation Agent
are pursuant to the Valuation Agent engagement letter. Should the
valuation approach change, causing an investment to meet the
characteristics of a different level of the fair value hierarchy,
it will be reclassified accordingly.
During the period, there were no transfers of investments
between levels.
The table below shows how changes in discount rates affect the
changes in the valuation of financial assets at fair value through
profit or loss. The range of discount rate changes has been
determined with reference to historic discount rates made by the
Valuation Agent. In the period, discount rates were adjusted,
giving an overall discount rate decrease of 13 basis points,
excluding the previously defaulted CHP loan. The decrease reflects
tightened spreads and positive performance across the Company's
property investments.
30 June 2021
Change in discount rates (1.00%) (0.50%) 0.00% 0.50% 1.00%
-------------------------------------------------------------------- -------- -------- -------- -------- --------
Value of financial assets at fair value through profit or loss
(GBP'000) 491,344 483,790 476,546 469,589 462,898
Change in value of financial assets at fair value (GBP'000) 14,798 7,244 - (6,957) (13,648)
-------------------------------------------------------------------- -------- -------- -------- -------- --------
31 December 2020 (audited)
Change in discount rates (1.00%) (0.50%) 0.00% 0.50% 1.00%
------------------------------------------------------------------------ ------- ------- ------- ------- --------
Value of financial assets at fair value through profit or loss (GBP'000) 461,747 453,684 445,962 438,557 431,447
Change in value of financial assets at fair value (GBP'000) 15,785 7,722 - (7,405) (14,515)
------------------------------------------------------------------------ ------- ------- ------- ------- --------
14.4 Liquidity risk
The Directors have elected to present the liquidity disclosure
table below to illustrate the net liquidity exposure of the
Company. The Company ensures it maintains adequate reserves by
continuously monitoring forecast and actual cash flows, matching
the maturity profiles of financial assets and liabilities to ensure
the Company is able to meet the obligations of the Company as they
fall due. The Company is a closed-ended investment company, where
assets are not required to meet day-to-day redemptions. The current
cash balance plus available borrowing, through the revolving credit
facility, enables the Company to meet any funding requirements and
finance future investments. The table below analyses all of the
Company's assets and liabilities into relevant maturity groupings
based on the remaining period from 30 June 2021 to the contractual
maturity date.
All cash flows in the table below are presented on an
undiscounted basis.
Less than One to Three to Greater than
one month three months twelve months twelve months Total
30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- ------------ ------------- ------------- --------
Financial assets
Financial assets at fair value through profit or loss 4,755 19,741 102,118 519,751 646,365
Other receivables and prepayments 2,247 17 7 - 2,271
Derivative financial instruments 80 - - - 80
Cash and cash equivalents 9,455 - - - 9,455
----------------------------------------------------- --------- ------------ ------------- ------------- --------
Total financial assets 16,537 19,758 102,125 519,751 658,171
----------------------------------------------------- --------- ------------ ------------- ------------- --------
Financial liabilities
Other payables and accrued expenses (7) (1,352) (99) - (1,458)
Derivative financial instruments - (29) (12) - (41)
Revolving credit facilities (35,116) - - - (35,116)
----------------------------------------------------- --------- ------------ ------------- ------------- --------
Total financial liabilities (35,123) (1,381) (111) - (36,615)
----------------------------------------------------- --------- ------------ ------------- ------------- --------
Net exposure (18,586) 18,377 102,014 519,751 621,556
----------------------------------------------------- --------- ------------ ------------- ------------- --------
Less than One to Three to Greater than
one month three months twelve months twelve months Total
31 December 2020 (audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ --------- ------------ ------------- ------------- -------
Financial assets
Financial assets at fair value through profit or loss - 10,409 94,589 516,071 621,069
Other receivables and prepayments 55 7 46 - 108
Derivative financial instruments 96 62 - - 158
Cash and cash equivalents 9,994 - - - 9,994
------------------------------------------------------ --------- ------------ ------------- ------------- -------
Total financial assets 10,145 10,478 94,635 516,071 631,329
------------------------------------------------------ --------- ------------ ------------- ------------- -------
Financial liabilities
Other payables and accrued expenses (179) (1,378) (47) - (1,604)
Revolving credit facilities (4,856) - - - (4,856)
------------------------------------------------------ --------- ------------ ------------- ------------- -------
Total financial liabilities (5,035) (1,378) (47) - (6,460)
------------------------------------------------------ --------- ------------ ------------- ------------- -------
Net exposure 5,110 9,100 94,588 516,071 624,869
------------------------------------------------------ --------- ------------ ------------- ------------- -------
15. Related party disclosures
As defined by IAS 24 Related Party Disclosures, parties are
considered to be related if one party has the ability to control
the other party or exercise significant influence over the party in
making financial or operational decisions. Subsidiary companies are
also determined to be related parties as they are members of the
same group of companies.
Directors
The non-executive Directors of the Company are considered to be
the key management personnel of the Company. Directors'
remuneration for the period (including reimbursement of
Company-related expenses) totalled GBP100,000 (30 June 2020:
GBP101,000). At 30 June 2021, liabilities in respect of these
services amounted to GBP50,000 (31 December 2020: GBP50,000).
At 30 June 2021, the Directors of the Company held directly or
indirectly, and together with their family members, 161,171
ordinary shares in the Company (31 December 2020: 141,521).
Alex Ohlsson is the managing partner of Carey Olsen, the
Company's Jersey legal advisers. Carey Olsen has provided legal
services to the Company during the period. Carey Olsen maintains
procedures to ensure that the Chairman has no involvement in the
provision of legal services to the Company. Additionally, the
Company maintains procedures to ensure that the Chairman takes no
part in any decision to engage the services of Carey Olsen. During
the period, the aggregate sum of GBP2,000 was paid to Carey Olsen
(30 June 2020: GBP17,000) in respect of legal work, of which GBPnil
is outstanding at period end (31 December 2020: GBPnil).
Investment Manager
The Company is party to an investment management agreement with
the Investment Manager dated 28 September 2015 and as amended and
restated in December 2020, pursuant to which the Company has
appointed the Investment Manager to provide discretionary portfolio
and risk management services relating to the assets on a day-to-day
basis in accordance with its investment objective and policies,
subject to the overall control and supervision of the Board.
As a result of the responsibilities delegated under this
investment management agreement, the Company considers it to be a
related party by virtue of being 'key management personnel'. Under
the terms of the investment management agreement, the notice period
of the termination of the Investment Manager by the Company is
twelve months.
For its services to the Company, the Investment Manager receives
an investment management fee which is calculated and paid quarterly
in arrears at an annual rate of 0.9% per annum of the prevailing
NAV of the Company less the value of the cash holdings of the
Company pro rata for the period for which such cash holdings have
been held. The Investment Manager also receives an annual fee of
GBP25,000 in relation to its role as the Company's AIFM, which has
been increased annually at the rate of the RPI since IPO.
During the period, the Company incurred GBP1,985,000 (30 June
2020: GBP1,918,000) in respect of the services outlined above:
GBP1,972,000 (30 June 2020: GBP1,905,000) in respect of investment
management and advisory services and GBP13,000 (30 June 2020:
GBP13,000) in respect of AIFM services provided by the Investment
Manager. At 30 June 2021, liabilities in respect of these services
amounted to GBP1,001,000 (31 December 2020: GBP1,004,000).
The Investment Manager, at its discretion, is entitled to an
arrangement fee of up to 1% of the value of each investment made by
the Company. The Investment Manager typically expects the cost of
any such fee to be covered by the borrowers, and not the Company.
To date, such fee in respect of all but eight of the Group's
investments has been met and paid by borrowers. During the period,
the Investment Manager received GBP99,000 (30 June 2020:
GBP107,000) from arrangement fees which had been met by borrowers
and GBP120,000 (30 June 2020: GBPnil) from arrangement fees which
had been met by the Company. To the extent any arrangement fee
negotiated by the Investment Manager with a borrower exceeds 1%,
the benefit of any such excess is paid to the Company; for the
period to 30 June 2021 the Company received GBP163,000 (30 June
2020: GBP72,000).
A number of the directors of the Investment Manager also sit on
the board of the Subsidiary.
At 30 June 2021, the key management personnel of the Investment
Manager held directly or indirectly, and together with their family
members, 1,210,600 ordinary shares in the Company (31 December
2020: 1,244,982). During the period, there were three additions and
one removal from the list of key management personnel within the
Investment Manager.
The directors of the Investment Manager, and their family
members, directly or indirectly own an equity interest in the
student accommodation investments held by the Subsidiary. These
investments are valued by the Valuation Agent in line with the rest
of the portfolio and were approved by the Board at the time of
acquisition.
Subsidiary
At 30 June 2021, the Company owned a 100% (31 December 2020:
100%) controlling stake in the Subsidiary. The Subsidiary is
considered to be a related party by virtue of being part of the
same group. The Company indirectly owns GABI Housing Limited, GABI
GS Limited and GABI Blyth; for further information on the Group
refer to note 1.
The following tables disclose the transactions and balances
between the Company and the Subsidiary.
30 June 30 June
2021 2020
Transactions GBP'000 GBP'000
------------------------------ ------- -------
Intercompany income received
Other income 2,471 1,739
Arrangement fee income 163 72
Loan interest income received 17,231 17,889
------------------------------ ------- -------
Total 19,865 19,700
------------------------------ ------- -------
(Audited)
30 June 31 December
2021 2020
Balances GBP'000 GBP'000
---------------------------------------------------------------------------------------------- ------- -----------
Intercompany balances receivable 41 49
---------------------------------------------------------------------------------------------- ------- -----------
Principal value of intercompany holdings within financial assets at fair value through profit
or loss 479,465 447,657
---------------------------------------------------------------------------------------------- ------- -----------
16. Subsequent events after the report date
On 22 July 2021, the Company declared a second interim dividend
of 1.575 pence per ordinary share amounting to GBP6.9 million,
which was paid on 27 August 2021 to ordinary shareholders on the
register on 30 July 2021.
On 19 August 2021, the Company extended the current RCF of GBP50
million so it will now expire in August 2023. Interest on amounts
drawn under the facility will be charged at SONIA plus 2.10% per
annum, a commitment fee is payable on undrawn amounts of 0.84% and
an arrangement fee of GBP425,000 was paid, to be amortised over the
period of the facility. All terms of the RCF remain the same as the
previous GBP50 million facility except for the interest benchmark
which changed from LIBOR to SONIA.
Post period end, the status of the Company's co-living loan and
the current bid levels under the accelerated sales process
subsequently deteriorated which led the Investment Manager to
estimate a consequent reduction in the NAV of 3.69 pence per share.
Further information is given in the Chairman's interim statement
and Investment Manager's report above respectively.
Further, the Group made three new investments and 14 further
advances totalling GBP16.3 million post period end. The Group also
received four repayments totalling GBP33.8 million. Refer to the
Investment Manager's report and the financial review above for
further details.
17. Ultimate controlling party
It is the view of the Board that there is no ultimate
controlling party.
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
The Board and the Investment Manager assess the Company's
performance using a variety of measures that are not defined under
IFRS and are therefore classed as APMs. Where possible,
reconciliations to IFRS are presented from the APMs to the most
appropriate measure prepared in accordance with IFRS.
All items listed below are IFRS financial statement line items
unless otherwise stated. APMs should be read in conjunction with
the unaudited interim condensed statement of comprehensive income,
the unaudited interim condensed statement of changes in equity, the
unaudited interim condensed statement of financial position and the
unaudited interim condensed statement of cash flows, which are
presented in the financial statements section of this report. The
APMs below may not be directly comparable with measures used by
other companies.
Annualised total shareholder return since IPO
Total shareholder return 1 expressed as a time weighted annual
percentage.
This is a standard performance metric across the investment
industry and allows comparability across the sector.
Source: Refinitiv
Adjusted EPS
EPS adjusted to remove the effect of discount rate adjustments
made to reflect the uncertainties associated with the Covid-19
pandemic.
Period ended
30 June
2021
(Pence per
Adjusted EPS share)
------------------------------------------------------------------ ------------
Basic and diluted earnings 3.67
Adjustments to discount rates in respect of the Covid-19 pandemic 0.46
------------------------------------------------------------------ ------------
Adjusted EPS 4.13
------------------------------------------------------------------ ------------
Average LTV
The ratio of a loan or mortgage to a property valuation,
averaged across the Company's property investments, expressed as a
percentage. This ratio demonstrates the headroom in the underlying
asset values to absorb negative movements in property
valuations.
Average NAV
The average net asset value of the Company over the reporting
period.
Period ended Period ended
NAV per share 30 June 2021 30 June 2020
Quarter ended (pence) GBP'000 GBP'000
--------------------- -------------- ------------ ------------
102.49 /
31 March 2021 / 2020 99.93 450,804 441,189
102.71 /
30 June 2021 / 2020 100.83 451,737 445,172
--------------------- -------------- ------------ ------------
102.60 /
Average NAV 100.38 451,271 443,181
--------------------- -------------- ------------ ------------
Discount
The amount, expressed as a percentage, that the Company's shares
trade below the prevailing NAV per share.
Dividend yield
Total dividend declared for the period annualised, relative to
the closing share price at the period end, expressed as a
percentage.
IRR
IRR is the interest rate at which the net present value of all
the cash flows (both positive and negative) from a project or
investment equal zero.
The internal rate of return is used to evaluate the
attractiveness of a project or investment.
Ongoing charges ratio
Ongoing charges ratio (previously "total expense ratios" or
"TERs") is a measure of the annual percentage reduction in
shareholder returns as a result of recurring operational expenses
assuming markets remain static and the portfolio is not traded.
This is a standard performance metric across the investment
industry and allows comparability across the sector and it is
calculated in accordance with the AIC's recommended
methodology.
30 June 2021 30 June 2020
Ongoing charges GBP'000 GBP'000
------------------------ ------------ ------------
Investment Manager 1,985 1,918
Directors' fees 100 101
Administration expenses 775 644
------------------------ ------------ ------------
Total expenses 2,860 2,663
Non-recurring expenses (146) -
------------------------ ------------ ------------
Total 2,714 2,663
Average NAV(1,2) 451,270 443,181
Ongoing charges ratio 1.2 1.2
------------------------ ------------ ------------
Dividend cover ratio
Ratio of earnings to dividends calculated as dividends per share
divided by EPS.
Period ended Period ended
Dividend cover ratio 30 June 2021 30 June 2020
------------------------------------------------ ------------ ------------
Total profit and comprehensive income (GBP'000) 16,128 6,901
Weighted average number of shares 439,957,689 441,518,106
------------------------------------------------ ------------ ------------
Basic EPS (p) 3.67 1.56
Dividends 3 (p) 3.15 3.10
------------------------------------------------ ------------ ------------
Dividend cover ratio 1.17 0.50
------------------------------------------------ ------------ ------------
Total shareholder return
A measure of the performance of a company's shares over time. It
combines share price movements and dividends to show the total
return to the shareholder expressed as a percentage. It assumes
that dividends are reinvested in the shares at the time the shares
are quoted ex dividend.
This is a standard performance metric across the investment
industry and allows comparability across the sector.
Source: Refinitiv
NAV total return
A measure of the performance of a company's shares over time. It
combines NAV movements and dividends to show the total return to
the shareholder expressed as a percentage. It assumes that
dividends are reinvested in the shares at the time the shares are
quoted ex dividend.
This is a standard performance metric across the investment
industry and allows comparability across the sector.
Source: Bloomberg
Premium
The amount, expressed as a percentage, that the Company's shares
trade above the prevailing NAV per share.
Weighted average annualised yield
The weighted average yield on the investment portfolio
calculated based on the yield of each investment weighted by the
principal balance outstanding on such investment, expressed as a
percentage.
The yield forms a component of investment cash flows used for
the valuation of financial assets at fair value through profit or
loss under IFRS 9.
Weighted average discount rate
A rate of return used in valuation to convert a series of future
anticipated cash flows to present value under a discounted cash
flow approach. This approach is used for the valuation of financial
assets at fair value through profit or loss under IFRS 9.
The average rate is calculated with reference to the relative
size of each investment.
1. Refer to relevant APM for further information.
2. Based on average NAV for the six month period to 30 June 2021.
3. Includes a quarterly dividend of 1.575 pence per share for
the quarter to 30 June 2021, which was declared and paid post
period end.
GLOSSARY
Adjusted EPS
Refer to APMs above
AIC
The Association of Investment Companies
AIC Code
AIC Code of Corporate Governance
AIFM
Alternative Investment Fund Manager
Annualised total shareholder return since IPO
Refer to APMs above
APM
Alternative performance measure
Average LTV
Refer to APMs above
Carey Olsen
Carey Olsen Jersey LLP
CHP loan
A loan secured against combined heat and power engines
CIF Law
Collective Investment Funds (Jersey) Law 1988
Companies Law
Companies (Jersey) Law 1991, as amended
Company
GCP Asset Backed Income Fund Limited
Discount
Refer to APMs above
Dividend cover ratio
Refer to APMs above
Dividend yield
Refer to APMs above
DTRs
Disclosure Guidance and Transparency Rules of the FCA
EPS
Earnings per share
ESG
Environmental, social and governance
FCA
Financial Conduct Authority
GABI Blyth
GABI Housing (Blyth) Limited
GABI GS
GABI GS Limited
GABI Housing
GABI Housing Limited
GABI UK and/or the Subsidiary
GCP Asset Backed Income (UK) Limited
GCP Infra
GCP Infrastructure Investments Limited, a third party company
advised by the Investment Manager
Group
The Company, GABI UK, GABI GS, GABI Housing and GABI Blyth
HY19
Six months ended 30 June 2019
HY20
Six months ended 30 June 2020
HY21
Six months ended 30 June 2021
IAS
International Accounting Standards
IASB
International Accounting Standards Board
IASC
International Accounting Standards Committee
IFRIC
International Financial Reporting Interpretations Committee
IFRS
International Financial Reporting Standards
Income Tax Law
Income Tax (Jersey) Law 1961, as amended
IPO
Initial public offering
IRR
Internal rate of return
Refer to APMs on above
LIBOR
London inter-bank offered rate
LSE
London Stock Exchange
LTV
Loan-to-value
NAV
Net asset value
Ongoing charges ratio
Refer to APMs above
Premium
Refer to APMs above
Project Company
A special purpose vehicle which owns and operates an asset
RBSI
The Royal Bank of Scotland International Limited
RCF
Revolving credit facility
RPI
Retail Price Index
Secured Loan Notes
Loan notes issued to the Company by the Subsidiary
SONIA
Sterling Overnight Index Average
Total shareholder return
Refer to APMs on above
Weighted average annualised yield
Refer to APMs on above
Weighted average discount rate
Refer to APMs on above
CORPORATE INFORMATION
Directors and/or the Board
Alex Ohlsson (Chairman)
Joanna Dentskevich
Colin Huelin
Marykay Fuller
Administrator, secretary and registered office of the
Company
Apex Financial Services (Alternative Funds) Limited
12 Castle Street, St Helier
Jersey JE2 3RT
Advisers to English law
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Advisers to Jersey law
Carey Olsen Jersey LLP
47 Esplanade, St Helier
Jersey JE1 OBD
Broker
Investec Bank plc
30 Gresham Street
London EC2V 7QP
Depositary
Apex Financial Services (Corporate) Limited
12 Castle Street, St Helier
Jersey JE2 3RT
Independent Auditor
PricewaterhouseCoopers CI LLP
37 Esplanade, St Helier
Jersey JE1 4XA
Investment Manager and AIFM
Gravis Capital Management Limited
24 Savile Row
London W1S 2ES
Principal banker and lender
Royal Bank of Scotland International Limited
71 Bank Street, St Helier
Jersey JE4 8PJ
Public relations
Quill Communications
107 Cheapside
London EC2V 6DN
Registrar
Link Market Services (Jersey) Limited
12 Castle Street, St Helier
Jersey JE2 3RT
Valuation Agent
Mazars LLP
Tower Bridge House
St Katharine's Way
London E1W 1DD
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