TIDMGABI TIDMGABC
RNS Number : 0597A
GCP Asset Backed Income Fund Ltd
21 September 2022
GCP Asset Backed Income Fund Limited
(the "Company" or "GCP Asset Backed")
LEI: 213800FBBZCQMP73A815
Half-yearly report and unaudited interim condensed financial
statements for the period ended 30 June 2022
The Directors of the Company are pleased to announce the
Company's interim results for the period ended 30 June 2022. The
full unaudited half-yearly report and unaudited condensed financial
statements can be accessed via the Company's website at
www.gcpassetbacked.com.
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 2022, its market capitalisation was GBP421.4 million.
The Company is a constituent of the FTSE All - Share Index.
AT A GLANCE - 30 JUNE 2022
HY20 HY21 HY22
----------------------------- ------ ------ -------
Market capitalisation GBPm 389.8 450.8 421.4
Value of investments(1) GBPm 429.5 476.5 427.7
Dividends for the period p 3.10 3.15 3.16(2)
Share price p 88.30 102.50 95.80
NAV per share p 100.83 102.71 98.45
Profit for the period GBPm 6.9 16.1 10.2
----------------------------- ------ ------ -------
HIGHLIGHTS FOR THE PERIOD
- Dividends of 3.16(2) pence per share declared for the period,
in line with the increased dividend target(3) of 6.325 pence per
share for the year.
- Total shareholder return(4) for the period of 2.0% (30 June
2021: 16.0%) and an annualised total shareholder return since
IPO(4) of 5.2%.
- Profit for the period of GBP10.2 million (30 June 2021:
GBP16.1 million) reflecting the impact of the decrease in fair
value of the Group's Co - living loan. Excluding the fair value
decrease, profit for the period would have been GBP15.6 million (30
June 2021: GBP18.7 million).
- NAV per share of 98.45(5) pence at 30 June 2022.
- Loans of GBP25.9 million advanced and repayments of GBP42.7
million received in the period.
- Exposure to a diversified, partially inflation and/or interest
rate protected portfolio of 59 asset backed loans with a third
party valuation of GBP423.6(6) million at 30 June 2022.
- Post period end, the Group advanced GBP23.7 million secured
against four projects and received repayments totalling GBP11.1
million.
1. Includes the valuation of the Subsidiary, refer to note 8 for
further information.
2. Total dividend of 3.1625 pence includes a quarterly dividend
of 1.58125 pence per share for the quarter to 30 June 2022, which
was declared post period end.
3. 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.
4. Alternative performance measure - refer below for definitions
and calculation methodology.
5. Does not include a provision for the dividend in respect of
the quarter to 30 June 2022, which was declared and paid post
period end.
6. Valuation of the loan portfolio held by the Subsidiary. The
Company makes its investments through its wholly owned Subsidiary.
Refer to note 1 for further information.
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 shares
to a diversified, partially dividends at the increased closed at 95.80 pence
inflation and/or interest target(3) rate set for per share at the period
rate protected portfolio 2022 of 6.325 pence per end and have traded at
of loans secured against share. Dividends totalling an average discount(2)
contracted medium to 3.16(4) pence per share to NAV for the period
long-term cash flows were declared for the of 1.1%.
and/or physical assets. period.
---------------------------- ------------------------------ ------------------------------
59 3.16p(4) 95.80p
Number of investments Dividends in respect Share price at 30 June
at 30 June 2022 of the period to 30 June 2022
2022
---------------------------- ------------------------------ ------------------------------
7.4%(1) 49% 2.7%
Weighted average annualised Portfolio by value with Discount(2) to NAV at
yield(2) of investment inflation and/or interest 30 June 2022
portfolio rate protection mechanisms
---------------------------- ------------------------------ ------------------------------
Further information on Company performance can be found
below.
1. Including the Company's Co-living loan which is held at net
realisable value. Excluding this loan, the weighted average
annualised yield(2) is 7.85%.
2. Alternative performance measure - refer below for definitions
and calculation methodology.
3. 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.
4. Total dividend of 3.1625 pence includes a quarterly dividend
of 1.58125 pence per share for the quarter to 30 June 2022, which
was declared post period end.
PORTFOLIO AT A GLANCE
A portfolio of 59 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
- 19 loans within sector
- GBP176.3m
- 42%
SOCIAL INFRASTRUCTURE
- 22 loans within sector
- GBP166.0m
- 39%
ENERGY AND INFRASTRUCTURE
- 8 loans within sector
- GBP26.8m
- 6%
ASSET FINANCE
- 10 loans within sector
- GBP54.5
- 13%
SENIOR RANKING SECURITY
73%
WEIGHTED AVERAGE ANNUALISED YIELD(1)
7.4%(2)
INFLATION AND/OR INTEREST RATE PROTECTION MECHANISMS
49%
1. Alternative performance measure - refer below for definitions
and calculation methodology.
2. Including the Company's Co-living loan which is held at net
realisable value. Excluding this loan, the weighted average
annualised yield(1) is 7.85%.
CHAIRMAN'S INTERIM STATEMENT
The first half of 2022 has seen major changes in the
macro-economic environment which bring both challenges and
opportunities.
Introduction
The first half of 2022 has seen major changes in the macro -
economic environment which bring both challenges and opportunities
for the Company. Whilst we have seen a reduction in the value of
the Co-living group loan, the rest of the portfolio continues to
perform well and has mitigants in place to manage the macro -
economic impacts of inflation and interest rate rises, which are
described in more detail below.
It has been positive to see the remaining UK Covid-19
restrictions lifted in the period. However, the start of 2022 has
brought new challenges, with global business activity restarting
post-pandemic and the conflict in Ukraine affecting the
macro-economic environment, principally through increases in energy
prices. Throughout the period, the portfolio has shown resilience,
with 95% of the loans continuing to perform as expected.
Investment activity
At the period end, the Company's portfolio comprised 59 loans,
offering diversification through exposure to 22 asset classes
including property development, social housing and infrastructure.
86% of the portfolio is secured against physical assets with the
balance secured against contracted cash flows.
During the period, the Group advanced GBP25.9 million secured
against 19 projects, with a further GBP23.7 million invested post
period end. The Group continues to target and invest into key
sectors with both new and existing borrowers who have demonstrated
strong governance and stewardship of their businesses, with a
strong pipeline of investment opportunities.
In the period, GBP42.7 million in repayments have been received,
including repayment of the Company's final investment in the
battery storage sector as well as repayments of football finance
positions and student accommodation projects.
As the Company matures, it is expected that the rate at which
principal is repaid will continue to increase. The Company factors
in this return of principal when considering its funding needs,
ensuring it utilises its RCF where necessary to mitigate against
the impact of cash drag.
Portfolio update
The work-out process for the Co-living group loan is ongoing.
Since the year end, there has been a decrease in the valuation of
the Co-living group loan, resulting in a reduction in the NAV of
1.22 pence per share. This was driven by developments in the sales
process for the assets. Whilst this is disappointing, we are
confident that the process will be completed satisfactorily and
remain committed to realising value for the Company. The Investment
Manager has provided further information below.
The multi-use community facility projects which were impacted by
the pandemic continue to be held at a discount to par of GBP1.2
million. These assets were operated under new management in the
period and have seen improvement in performance. Further
information is provided below.
No other reductions in valuation have been proposed in the
period, with the remaining loans in the portfolio performing
well.
Excluding the impact of the write-down on the Co-living group
loan, the NAV at 30 June 2022 would have increased by 0.38 pence
per share over the period. The increase was driven by excess income
and principal indexation on a number of care home loans with
inbuilt inflation protection mechanisms.
Financial performance
In the period, the Company's portfolio generated total income of
GBP13.4 million with profit for the period of GBP10.2 million,
decreasing from GBP16.1 million in the prior period due to the
decrease in fair value of the Co-living loan as detailed above.
Earnings of 2.32 pence per share on an IFRS basis were
generated, which includes the write-down of the Co-living loan and
changes to discount rates. Adjusted EPS(1) was 3.54 pence per
share, compared to the dividend of 3.16(2) pence for the
period.
NAV and share price performance
At the period end, the net assets of the Company were GBP433.0
million. The NAV per share decreased from 99.29 pence at 31
December 2021 to 98.45(3) pence at 30 June 2022.
The Company's shares have traded at a discount(1) since the
outset of the Covid-19 pandemic impacted financial markets, with an
average discount(1) of 1.1% to NAV in the period. Since IPO, the
shares have traded at an average discount(1) to NAV of 0.4%. At 30
June 2022, the shares were trading at 95.80 pence, representing a
2.7% discount(1) to NAV.
The Board and Investment Manager have continued to release
detailed portfolio information in shareholder communications, host
regular webinars and meet with shareholders on an individual basis
through the period. The Board continues to monitor the discount and
will look to implement share buybacks where this would offer value
to shareholders.
On 15 September 2022, the closing share price was 94.00 pence
with the shares trading at a 4.5% discount(1) to NAV.
Investment pipeline
The Investment Manager continues to see good opportunities for
investment in line with the investment strategy of the Company and
the principles which have guided investment since IPO. The current
pipeline includes further investment in residential property
development, nurseries and CNG stations which are providing
essential services and infrastructure to local communities.
Dividend policy
The Company set a dividend target(4) of 6.325 pence per share
for 2022. The Directors are pleased to confirm that the Company is
on track to meet this target(4) , with dividends totalling 3.16(2)
pence per share being declared in respect of the period.
Market overview and outlook
The period has seen a reduction in the uncertainties presented
by the Covid-19 pandemic, with all remaining restrictions in the UK
lifted on 1 April 2022. Whilst the portfolio has been impacted by
the Covid-19 pandemic, it remains resilient, with only three of the
59 loans not meeting their principal or interest payment
obligations. The majority of the portfolio has performed well, with
borrower management teams navigating the challenges of the pandemic
to ensure their businesses continue to provide important
infrastructure and services such as childcare, accommodation for
students, new homes, CNG fuel and care for elderly and vulnerable
people.
Across the global economy, challenges in returning to pre -
pandemic levels of activity alongside the conflict in Ukraine and
increased geopolitical instability have impacted supply chains,
employment and energy prices, which in turn has led to a rise in
the rate of inflation not seen in the UK for decades.
The portfolio includes a large proportion of loans with
contractual mechanisms which offer protection against inflation
and/or interest rates. It has a weighted average loan life of five
years, allowing for reinvestment at prevailing rates; further
detail is provided below. We believe that these features mean that
the Company has mitigants in place to operate in an inflationary
environment. Equally, the increases in base rates and reduction in
available capital from traditional lending sources may present an
opportunity for the Company as an alternative lender, to invest in
sectors and assets which would previously have been able to access
cheaper capital.
The Investment Manager continues to see good opportunities for
investment into new projects and is focused on delivering the
current pipeline to ensure efficient deployment of repaid
capital.
ESG
The Company published its first ESG policy in January 2022,
which can be found on the website. The policy details how ESG
issues are considered throughout the Company's operations and used
to guide decisions, processes and policies wherever possible with
the aim of operating a sustainable business model that does not
detrimentally impact the environment and provides benefits to
society.
In the period, incentive schemes have been implemented which
reduce fees charged to borrowers subject to the successful delivery
of ESG projects. To date, this has included scholarship nursery
places, co-living rooms for refugees fleeing the conflict in
Ukraine and sponsored studio space in East London.
The Board is also pleased to announce that Joanna Dentskevich
has been appointed as 'ESG representative', being the Director
responsible for implementation of ESG policy.
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
Following a detailed review of the principal risks and
uncertainties detailed in the Company's 2021 annual report, the
Directors now consider, in light of the current inflationary
environment, there to be a new principal risk focusing on the
macro-economic environment and a longer period of economic
uncertainty. The Directors also concluded that there had been an
increase in the residual risk of the principal risk pertaining to
credit risk. The remaining risks and uncertainties remain unchanged
since publication.
The principal risks and uncertainties are expected to remain
relevant to the Company for the next six months of its financial
year. The principal risk categories 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 52 to 56 of the
2021 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.
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
20 September 2022
For more information, refer to the Investment Manager's report
below.
1. Alternative performance measure - refer below for definitions
and calculation methodology.
2. Total dividend of 3.1625 pence includes a quarterly dividend
of 1.58125 pence per share for the quarter to 30 June 2022, which
was declared post period end.
3. Does not include a provision for the dividend in respect of
the quarter to 30 June 2022, which was declared and paid post
period end.
4. 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.
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.
3.16p(1)
Dividends declared for the period
2.0%
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.
The Company's investment objective, other policies and
restrictions are set out in its 2021 annual report and financial
statements, which is available on the Company's website. There have
been no changes since publication.
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. Mainstream lenders operating in the
market often restrict their lending to certain asset types, sectors
or loan sizes, particularly in times of economic uncertainty. 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. Total dividend of 3.1625 pence includes a quarterly dividend
of 1.58125 pence per share for the quarter to 30 June 2022, which
was declared post period end.
2. Alternative performance measure - refer 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
The portfolio performed well in the period, showing resilience,
with 95% of the loans continuing to perform as expected.
Investments that have performed well include loans to a
children's nursery group which accounted for 6.4% of the portfolio
at the period end. The group provides high-quality childcare in
specially designed settings and has grown from two to 17 sites,
with the support of the Company. In the period, the group completed
a significant equity raise which will allow it to continue
developing new sites. The Investment Manager is working with the
group on new development projects and hopes to provide additional
funding in due course. Elsewhere in the portfolio, the five care
homes supported by the Company continue to perform well. These
homes are modern, purpose-built care homes offering first-rate care
to elderly and vulnerable people in regions with an undersupply of
care provision. One site is currently under construction and
expected to open in 2023. The remaining sites are all operational
and currently at 90% occupancy. The Company's total exposure across
the operational assets is at an LTV(1) of 63%, yielding an average
of 8.4% and amortising over the term of the loans. The Investment
Manager believes these loans provide good risk-adjusted returns
with exposure to profitable assets and strong asset backing.
Co-living update
The Co-living loan defaulted in May 2021 and was placed into
administration by the Lender Consortium in September 2021 after a
transaction to buy the Co-living group failed. The Investment
Manager continues to work on the realisation of the Co-living
group's assets with a number of assets now transacted, including
the Canary Wharf asset, which exchanged post period end and is
expected to complete in October 2022.
In the period, a further write-down of this loan was taken,
principally as a result of issues that arose during the due
diligence process on the Canary Wharf and Old Oak assets. The
Investment Manager believes there are mitigants to these positions
and is continuing to work on these to ensure further recovery is
made on this loan.
The loan has been challenging to work-out as the Company was
lending at a group level as part of a syndicate. This means that
agreement must be reached with asset level lenders and
co-investors, all of whom have different drivers and objectives.
Due to these complications, the significant adviser fees incurred
have had a material impact on the recovery made against this
loan.
The assets themselves have performed well through the period and
continue to do so. The Old Oak asset has moved to c.97% occupancy
post period end, with the average weekly rate and projected
bookings at its highest ever level, with a significant shift to
tenants taking out six to twelve month agreements. We therefore
continue to remain positive about the sector and note that no asset
level lenders have suffered any losses.
As previously noted, we do not believe any read-across should be
made from the position on this loan to the rest of the portfolio,
where the Company lends at the asset level. The Investment Manager
has been working hard to maximise the recovery available to the
Company and has sought to take on board the lessons learned from
this loan.
Portfolio updates
The multi-use community facilities were operated under new
ownership during the period. These consist of studios, co-working
space, bars, food outlets and events space across two sites in
London. Collectively, the assets comprise 1.6% of the portfolio.
The assets were adversely impacted by the Covid-19 pandemic as
restrictions on hospitality and public spaces prevented the sites
from operating. As restrictions have lifted, consumer confidence
has grown and both sites have seen improvements in footfall.
The percentage of the portfolio invested in overseas projects
decreased in the period from 22% at December 2021 to 17% at June
2022. This was primarily driven by repayments of loans to student
accommodation assets and football broadcasting contracts outside of
the UK. The Investment Manager is not targeting a significant
increase in overseas exposure but believes that careful selection
of projects which offer risk-adjusted returns and additional
diversification is positive for the portfolio.
Exposure to assets under construction has increased from 13% to
17% of the portfolio in the period. All of the construction
projects are under fixed price contracts with experienced
contractors and the Investment Manager employs third party
specialist advisers to monitor the projects and report on key
milestones. The projects are all proceeding materially on time and
budget with a number anticipated to complete in the coming
months.
The Investment Manager believes that pressures on the
construction sector from both supply chain challenges and inflation
will make fixed price construction contracts harder to access and
therefore restrict traditional lending from banks to the sector.
This could present interesting funding opportunities for the
Company to support larger developments.
Pipeline projects are largely new projects with existing
borrowers and into sectors with which the Investment Manager is
very familiar. The Investment Manager believes that a consistent
approach to asset selection and seeking strong asset backing, good
management teams and in sectors where there is structural demand
will continue to build a resilient and well-performing
portfolio.
1. Alternative performance measure - refer below for definitions
and calculation methodology.
Inflation
Inflation has continued to increase in the period, with CPI
increasing by 9.4% in the twelve months to June 2022. This has
primarily been driven by the return to pre-pandemic activity levels
and the increase in energy prices due to the ongoing conflict in
Ukraine.
An inflationary environment will impact on how borrower
companies operate but can equally present opportunities for new
investment. At publication date, the Bank of England has increased
base rates to 1.75% with further increases anticipated over the
next twelve months. Whilst the Investment Manager has not yet seen
the increased rates positively impacting the pipeline, further
increases in interest rates could see the Company's lending rates
become more competitive in sectors which were previously able to
access cheaper financing.
As can be seen below, 49% of the portfolio benefits from partial
inflation protection by one of the mechanisms set out below and a
further 44% consists of loans with a duration of under three years,
allowing for reinvestment of loans at prevailing rates, with the
remainder of the loans with a duration of over three years. The
Investment Manager believes that, together, these characteristics
provide mitigation against an inflationary environment. The impact
of these protections is already flowing through, with principal
indexation on the care home loans contributing a 0.31 pence per
share uplift in NAV in the period.
Portfolio characteristics
- Inflation protection mechanisms 49%:
- Principal indexation 20%
- Direct rate linkage 18%
- Profit sharing 11%
- Fixed rate, over 3 years remaining 7%
- Fixed rate, under 3 years remaining 44%
Inflation protection mechanisms
There are a number of mechanisms in place within the portfolio
which offer different forms of inflation protection on the
loans.
The mechanics of these protections are explained in more detail
in the adjacent table. The portfolio characteristics above shows
the percentage of the portfolio benefiting from each mechanism.
Given the scale of inflation being reported, when applying these
mechanisms, the Investment Manager will take into account the
borrower's ability to pass on inflationary costs through their
business model and retains discretion on how increases to rates or
loans are applied.
The Investment Manager believes that these mechanisms will
support the Company in the current inflationary environment and
going forward.
Type of protection How does it work? Portfolio investments
---------------------- ---------------------------------------- ---------------------------
Direct rate linkage The interest rate charged for - Buy-to-let mortgages
the loan is directly linked to - Management fee contracts
the base rate. Increases in the - Nurseries
rate (usually above an agreed
threshold) result in a direct
increase to the loan interest
rate.
---------------------- ---------------------------------------- ---------------------------
Principal indexation When RPI, CPI or interest rates - Care homes
rise above an agreed strike price, - Bridging and development
the loan principal outstanding loans
is increased following a formula, - Social housing
which is normally 50% of the
difference between the current
interest rate or inflation and
the agreed base rate.
Typically, this is used on longer-dated
assets with inflation linked
income models or bridging loans.
---------------------- ---------------------------------------- ---------------------------
Profit sharing Share warrants and profit-sharing - Renewable investments
mechanisms are in place on certain - Residential property
loans. These options allow the
Company to share in profits generated
by borrowers e.g. where they
are able to increase lending
rates on bridging loans.
---------------------- ---------------------------------------- ---------------------------
Fixed rate, under Maintaining a portfolio which - Bridging loans
three years remaining regularly repays and requires - Football financing
reinvestment means that the Company - Development loans
is able to reinvest at prevailing
rates and reflect current market
dynamics.
The weighted average life of
the portfolio is five years.
---------------------- ---------------------------------------- ---------------------------
TOP TEN INVESTMENTS BY VALUE
Key
1. Sector type
2. % of portfolio by value
3. Asset class
4. Multi/single asset exposure
1. Bridging Co 1
1. Property
2. 5.9%
3. Residential property
4. Multi asset
2. Development Fin Co 6
1. Property
2. 5.0%
3. Residential property
4. Multi asset
3. Student Accom 2
1. Social infrastructure
2. 4.7%
3. Student accommodation
4. Multi asset
4. Property Co 2
1. Social infrastructure
2. 4.1%
3. Social housing
4. Multi asset
5. Contract Income 3
1. Asset finance
2. 3.6%
3. Contract income
4. Single asset
6. Care Homes Co 3
1. Social infrastructure
2. 3.5%
3. Care home
4. Single asset
7. Property Co 7
1. Property
2. 3.5%
3. Residential property
4. Multi asset
8. Property Co
1. Social infrastructure
2. 3.5%
3. Social housing
4. Multi asset
9. Co-living Co 3
1. Property
2. 3.2%
3. Co-living
4. Multi asset
10. Care Homes Co 2
1. Social infrastructure
2. 3.1%
3. Care home
4. Single asset
Further information on the portfolio can be found on the
Company's website.
Investment portfolio
At 30 June 2022, the Group was exposed to a diversified
portfolio of 59 asset backed investments with a fair value of
GBP423.6(1) million, of which 73% benefit from senior security and
49% from partial inflation and/or interest rate protection. The
weighted average annualised yield(2) on the Group's investments was
7.4%(3) , 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 83% of such security, with the remainder of the assets
located in Europe, the USA, Australia and Hong Kong.
The Company has minimal currency exposure (which is hedged) with
all investments either denominated in Pound Sterling or exposure
hedged to Pound Sterling using rolling forward contracts. Post
period end, the Company advanced a further GBP3.2 million secured
against international projects.
PORTFOLIO ANALYSIS
SECTOR TYPE
Property | 42%
Social infrastructure | 39%
Asset finance | 13%
Energy and infrastructure | 6%
SECURITY RANKING
Senior | 73%
Mezzanine | 27%
INTEREST RATE PROFILE
<7% | 26%
7-8% | 38%
>8% | 36%
TERM PROFILE
<5 yrs | 72%
5-10 yrs | 7%
>10 yrs | 21%
LOCATION
UK | 83%
Europe | 8%
Rest of world | 9%
1. Valuation of the loan portfolio held by the Subsidiary.
2. Alternative performance measure - refer below for definitions
and calculation methodology.
3. Including the Co-living loan which is held at net realisable
value. Excluding this loan, the weighted average annualised
yield(2) is 7.85%.
New investments
During the period, the Group made investments totalling GBP25.9
million.
Investments have been made in a number of attractive asset
classes over the period, including football finance, new build
residential property developments and construction of a
purpose-built care home.
Repayments in the period have included the final battery storage
project which the Company was invested in, resulting in a final IRR
of 9.1%. In addition, the Company has received repayment on the
first football finance position and a partial repayment of an
overseas student accommodation project.
The Investment Manager continues to see a strong pipeline of
attractive asset backed financing opportunities.
INVESTMENTS AND REPAYMENTS DURING THE PERIOD(1)
SECTOR AVERAGE SECURITY STATUS INVESTMENTS REPAYMENTS
TERM
--------------------- ------- ------------------- ------------------------ --------------- --------------
Asset finance 5 years Senior Operational GBP2.1 million GBP2.4 million
Energy and 2 years Senior Operational/Construction GBP0.7 million GBP5.4 million
infrastructure
Property(2) 1 year Senior/Subordinated Operational/Construction GBP10.2 million GBP8.6 million
Social infrastructure 8 years Senior/Subordinated Operational/Construction GBP12.9 million GBP26.3
million
--------------------- ------- ------------------- ------------------------ --------------- --------------
Total GBP25.9 GBP42.7
million million
--------------------- ------- ------------------- ------------------------ --------------- --------------
INVESTMENTS AND REPAYMENTS POST PERIOD(1)
SECTOR AVERAGE SECURITY STATUS INVESTMENTS REPAYMENTS
TERM
--------------- ------- ------------------- ------------------------ --------------- --------------
Asset finance 2 years Senior Operational GBP3.2 million GBP2.3 million
Energy and - - - - GBP0.4 million
infrastructure
Property 1 year Senior/Subordinated Operational/Construction GBP20.5 million GBP8.4 million
--------------- ------- ------------------- ------------------------ --------------- --------------
Total GBP23.7 GBP11.1
million million
--------------- ------- ------------------- ------------------------ --------------- --------------
1. The Company makes its investments through its wholly owned
Subsidiary. Refer to note 1 for further information.
2. Includes development projects that were subject to review by
the Board under the Company's investment approval process, refer to
below.
RISKS AND VIABILITY
Update on principal risks and uncertainties
The Board considers the principal uncertainties faced by the
Company during the year to be as detailed below.
UNCERTAINTY 1: Covid-19
Since early 2020, there has been a period of rapid regulatory,
economic and societal change to manage the spread of Covid-19,
which has presented challenges for operational businesses. In the
period, all remaining Covid-19 restrictions in the UK were
lifted.
Travel restrictions for Australia have remained in place during
the period, although these have now been lifted post period end.
Student accommodation projects have seen the impact of these
restrictions with reduced occupancy as universities continue to
offer hybrid learning. However, as these restrictions have now been
lifted, we expect improved occupancy moving into the next academic
year.
At the time of writing, the likelihood of new Covid-19
regulations being introduced is very low, with little political
appetite to return to such restrictions. However, businesses
continue to experience issues around staffing, illness and supply
chain management being attributed to the lasting impact of the
pandemic.
To date, the impact on the Company's portfolio has been limited
to the operation of the Co-living group and the Company's
investments in multi-use community facilities. Positively,
operational performance of both the community facility assets has
improved in the period.
Covid-19 remains a principal uncertainty for the Company and the
Board continues to monitor its impact on the Company's
portfolio.
UNCERTAINTY 2: BREXIT
Significant uncertainty around the economic relationship between
the UK and the EU continues. Following the expiry of the transition
period on 31 December 2020, the terms on which the UK will interact
with the EU continue to be negotiated.
Post period end, following the resignation of Boris Johnson, Liz
Truss won the Conservative party leadership contest and became
prime minister of the UK. We are not anticipating any major change
to the current Brexit position noting that Ms Truss' position
remained consistent with the previous administration during her
campaign to become prime minister.
Brexit legislation is having an impact on supply chain and
staffing, particularly for projects under construction or reliant
on a migrant workforce. Therefore, the Board believes that Brexit
should remain a principal uncertainty for the Company.
UNCERTAINTY 3: CONFLICT IN UKRAINE
As noted in the 2021 annual report of the Company, the Board
considers the ongoing conflict in Ukraine to be a principal
uncertainty for the Company.
Although the Company is predominantly invested in the UK with no
investments in Ukraine, Russia, or Belarus, or borrowers being
impacted by sanctions imposed due to the war, the Company's
borrowers are exposed to the increases in energy prices now being
experienced worldwide as a result of the conflict.
To date, the impact has been limited with the assets in the
portfolio absorbing increases in their budgets. However, the Board
is aware that the rise in energy costs will be a concern for all
businesses within the portfolio impacting their operating costs and
profitability.
The Board continues to monitor the wider impact of the conflict
on geopolitical relationships and volatility in the energy
market.
In the period, one of the residual risk profiles of the
principal risks included in the Company's 2021 annual report and
financial statements has increased, with the residual risk profile
of all other principal risks remaining stable. In addition, the
Board has identified a new principal risk, which is set out
below.
CATEGORY 1: CREDIT RISK
----------------------------------------------- --------------------------------- -----------------------------
CHANGE IN RESIDUAL
RISK IMPACT HOW THE RISK IS MANAGED RISK OVER THE PERIOD
--------------------- ------------------------ --------------------------------- -----------------------------
Borrower default, The success of The Investment Manager Increase
loan non-performance the Group is dependent continuously monitors During the period,
and collateral upon borrowers the actual performance inflation has driven
risks fulfilling their of projects and their increases in operational
Borrowers to payment obligations borrowers, taking action costs for borrowers
whom the Group when they fall where appropriate, and particularly with
has provided due. Failure of reports on performance regard to energy
loans default the Group to receive of the Group's portfolio prices. The subsequent
or become insolvent. payments or to to the Board each quarter. impact on supply
recover part or chain costs for construction
all amounts owed projects and salary
together with potential costs has impacted
additional costs on revenue lines
incurred from the for businesses. Where
renegotiation and/or borrowers are not
restructuring of able to pass these
loans can result costs on, this could
in substantial impact on their ability
irrecoverable costs to service their
being incurred. debt.
This could have
a material adverse To date, none of
effect on the NAV the Group's borrowers
of the Company have missed interest
and its ability or principal payments
to meet its stated as a result of cost
target returns inflation. However,
and dividend. this continues to
be an area of focus
for the Investment
Manager. Over the
next year, inflation
and energy costs
increases are expected
to present further
challenges.
CATEGORY 2: ECONOMIC RISK
----------------------------------------------- --------------------------------- -----------------------------
CHANGE IN RESIDUAL
RISK IMPACT HOW THE RISK IS MANAGED RISK OVER THE PERIOD
--------------------- ------------------------ --------------------------------- -----------------------------
Macro-economic Continued high The portfolio has partial New
The Company inflation, increases inflation protection,
invests in in energy prices, in particular on longer-dated
a variety of increases in interest loans, through a number
sectors and rates and geopolitical of different mechanisms
geographies uncertainty could including direct rate
which could have a material linkage, profit sharing
be impacted adverse effect and principal indexation.
in different on (i) the underlying These are described
ways by changes Project Companies in more detail above.
in interest e.g. by reducing In addition, the weighted
rates, inflation the value of underlying average loan life of
and the geopolitical assets or stressing the portfolio is five
environment. cash flow where years, allowing for
revenue does not reinvestment of the
keep pace with loans at prevailing
rising costs and rates.
(ii) the ability
of the Company The diversification
to meet the investment of the portfolio across
objective. 22 asset classes and
multiple geographies
also offers additional
protection in a changing
environment.
The Investment Manager
is continuing to see
opportunities for reinvestment
in attractive sectors
and at appropriate risk-adjusted
rates. It is monitoring
changes in inflation
and interest rates closely.
--------------------- ------------------------ --------------------------------- -----------------------------
Going concern and viability
The Investment Manager has carried out a going concern and
viability review. This analysed the scenarios and estimates used in
the viability assessment included in the 2021 annual report and
noted no significant variances. The analysis considered the equity
financing, debt financing and investment portfolio of the Company,
and which has been reviewed by the Board.
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 has increased its dividend target for the year and
continues to deliver regular income to shareholders.
HY22 HY21 Relevance to strategy
------------------------------------------------ --------- -------- -----------------------------------------------
Dividends for the period 3.16p(1) 3.15p The dividend reflects the Company's aim to
deliver regular, growing dividends and is a key
element of total return.
------------------------------------------------ --------- -------- -----------------------------------------------
Basic earnings per share 2.32p 3.67p Basic EPS represents the earnings generated by
the Group's investment portfolio in line with
the investment strategy.
------------------------------------------------ --------- -------- -----------------------------------------------
Annualised total shareholder return since IPO(2) 5.2% 6.2% Total return measures the delivery of the
Company's strategy, to provide shareholders
with
attractive total returns in the longer term.
------------------------------------------------ --------- -------- -----------------------------------------------
Dividend yield(2) 6.6%(3) 6.1% The dividend yield measures the Company's
ability to deliver on its investment strategy
of
generating regular, growing dividends.
------------------------------------------------ --------- -------- -----------------------------------------------
Profit for the period GBP10.2m GBP16.1m Profit for the period measures the Company's
ability to deliver attractive risk-adjusted
returns
from its investment portfolio.
------------------------------------------------ --------- -------- -----------------------------------------------
NAV per ordinary share 98.45p(4) 102.71p The NAV per share measures the Company's aim to
deliver modest capital appreciation over the
long term.
------------------------------------------------ --------- -------- -----------------------------------------------
1. Total dividend of 3.15625 pence includes a quarterly dividend
of 1.58125 pence per share for the quarter to 30 June 2022, which
was declared post period end.
2. Alternative performance measure - refer 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 2022, which was declared and paid post
period end.
FINANCIAL REVIEW
The Company generated total income of GBP10.2 million, declared
dividends of 3.16(1) pence per share and delivered a total
shareholder return(2) of 2.0% 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
GBP13.4 million (30 June 2021: GBP19.4 million). Profit for the
period was GBP10.2 million (30 June 2021: GBP16.1 million), with
basic EPS of 2.32 pence (30 June 2021: 3.67 pence). Adjusted EPS(2)
for the period was 3.54 pence per share, which excludes the unwind
of changes in discount rates in relation to the Covid-19 pandemic
and the write-down on the Co-living loan.
The dividend for the period of 3.16(1) pence was paid as 1.58125
pence per share for the quarter to 31 March 2022 with a further
dividend of 1.58125 pence per share for the quarter to 30 June
2022, declared post period end, on 22 July 2022.
Ongoing charges
The Company's ongoing charges percentage(2) for the period,
calculated in accordance with the AIC methodology, was 1.2%
annualised (30 June 2021: 1.2% annualised).
Investment valuation
The weighted average discount rate(2) across the portfolio at 30
June 2022 was 7.62%. 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
(excluding the Co-living loan); refer to note 14.3 for further
information. 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.
Cash position
The Company received interest payments of GBP15.7 million (30
June 2021: GBP17.2 million) and capital repayments of GBP42.7
million (30 June 2021: GBP37.6 million) in the period, in line with
expectations. The Company paid cash dividends of GBP13.9 million
(30 June 2021: GBP13.9 million) and a further GBP7.0 million post
period end. Total cash reserves at the period end were GBP8.6
million (30 June 2021: GBP9.5 million).
Borrowings
The Company continues to utilise its RCF with RBSI for an amount
of GBP50 million, which expires in August 2023. At the period end
GBP1.9 million was drawn (31 December 2021: GBP19.9 million). The
Company uses the RCF to ensure it effectively utilises its cash
resources to reduce any cash drag which impacts dividend
coverage.
Conflicts of interest
In the period, GBP1.5 million was advanced under existing
facilities to finance development projects in the USA and
Australia. Post period end, the Group committed GBP18.6 million to
finance a residential development project in 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. Total dividend of 3.1625 pence includes a quarterly dividend
of 1.58125 pence per share for the quarter to 30 June 2022, which
was declared post period end.
2. Alternative performance measure - refer 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 2022 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
20 September 2022
INDEPENT REVIEW REPORT
To GCP Asset Backed Income Fund Limited
Report on 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 for the six month period ended 30 June 2022. 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 2022;
- 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.
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
20 September 2022
UNAUDITED INTERIM CONDENSED STATEMENT OF COMPREHENSIVE
INCOME
For the period ended 30 June 2022
Period Period
ended ended
30 June 30 June
2022 2021
Notes GBP'000 GBP'000
--------------------------------------------------------------------------------------------- ----- ------- -------
Income
Loan interest realised 3 15,731 17,231
Net loss on financial assets at fair value through profit or loss 3 (2,459) (1,225)
Net (loss)/gain on derivative financial instruments 3 (558) 773
--------------------------------------------------------------------------------------------- ----- ------- -------
Net changes in fair value of financial assets and financial liabilities at fair value through
profit or loss 12,714 16,779
Other income 3 722 2,634
--------------------------------------------------------------------------------------------- ----- ------- -------
Total income 13,436 19,413
--------------------------------------------------------------------------------------------- ----- ------- -------
Expenses
Investment management fees 15 (1,907) (1,972)
Operating expenses (808) (787)
Directors' remuneration 15 (104) (100)
--------------------------------------------------------------------------------------------- ----- ------- -------
Total expenses (2,819) (2,859)
--------------------------------------------------------------------------------------------- ----- ------- -------
Total operating profit before finance costs 10,617 16,554
--------------------------------------------------------------------------------------------- ----- ------- -------
Finance costs
Finance expenses 4 (430) (426)
--------------------------------------------------------------------------------------------- ----- ------- -------
Total profit and comprehensive income 10,187 16,128
--------------------------------------------------------------------------------------------- ----- ------- -------
Basic and diluted earnings per share (pence) 7 2.32 3.67
--------------------------------------------------------------------------------------------- ----- ------- -------
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 2022
(Audited)
As at As at
30 June 31 December
2022 2021
Notes GBP'000 GBP'000
------------------------------------------------------ ----- ----------- -----------
Assets
Cash and cash equivalents 10 8,603 10,108
Derivative financial instruments 14 - 492
Other receivables and prepayments 9 35 128
Financial assets at fair value through profit or loss 8 427,705 446,989
------------------------------------------------------ ----- ----------- -----------
Total assets 436,343 457,717
------------------------------------------------------ ----- ----------- -----------
Liabilities
Derivative financial instruments 14 (229) -
Other payables and accrued expenses 12 (1,440) (1,445)
Revolving credit facilities 11 (1,643) (19,546)
------------------------------------------------------ ----- ----------- -----------
Total liabilities (3,312) (20,991)
------------------------------------------------------ ----- ----------- -----------
Net assets 433,031 436,726
------------------------------------------------------ ----- ----------- -----------
Equity
Share capital 13 442,607 442,607
Retained losses (9,576) (5,881)
------------------------------------------------------ ----- ----------- -----------
Total equity 433,031 436,726
------------------------------------------------------ ----- ----------- -----------
Ordinary shares in issue (excluding treasury shares) 13 439,833,518 439,833,518
------------------------------------------------------ ----- ----------- -----------
NAV per ordinary share (pence per share) 98.45 99.29
------------------------------------------------------ ----- ----------- -----------
The unaudited interim condensed financial statements were
approved and authorised for issue by the Board of Directors on
20 September 2022 and signed on its behalf by:
Alex Ohlsson
Chairman
Colin Huelin FCA
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 2022
Share Retained Total
capital losses equity
Notes GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----- ------- -------- --------
Balance as at 1 January 2022 442,607 (5,881) 436,726
Total profit and comprehensive income for the period - 10,187 10,187
Dividends paid 6 - (13,882) (13,882)
----------------------------------------------------- ----- ------- -------- --------
Balance as at 30 June 2022 442,607 (9,576) 433,031
----------------------------------------------------- ----- ------- -------- --------
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
----------------------------------------------------- ----- ------- -------- --------
The notes below form an integral part of the financial
statements.
UNAUDITED INTERIM CONDENSED STATEMENT OF CASH FLOWS
For the period ended 30 June 2022
Period Period
ended ended
30 June 30 June
2022 2021
Notes GBP'000 GBP'000
------------------------------------------------------------------------------------------- ----- -------- --------
Cash flows from operating activities
Total operating profit before finance costs 10,617 16,554
Adjustments for:
Net changes in fair value of financial assets and financial liabilities at fair value
through
profit or loss 3 (12,714) (16,779)
Realised gains on derivative instruments 3 163 892
Increase/(decrease) in other payables and accrued expenses 11 (120)
Decrease/(increase) in other receivables and prepayments 93 (2,163)
------------------------------------------------------------------------------------------- ----- -------- --------
Total (1,830) (1,616)
------------------------------------------------------------------------------------------- ----- -------- --------
Loan interest realised 3 15,731 17,231
Investment in Subsidiary 8 (25,896) (69,433)
Capital repayments from Subsidiary 8 42,721 37,624
------------------------------------------------------------------------------------------- ----- -------- --------
Net cash flow generated from/(used in) operating activities 30,726 (16,194)
------------------------------------------------------------------------------------------- ----- -------- --------
Cash flows from financing activities
Proceeds from revolving credit facilities 11 11,500 34,150
Repayment of revolving credit facilities 11 (29,500) (4,000)
Share repurchases 13 - (293)
Finance costs paid (349) (342)
Dividends paid 6 (13,882) (13,860)
------------------------------------------------------------------------------------------- ----- -------- --------
Net cash flow (used in)/generated from financing activities (32,231) 15,655
------------------------------------------------------------------------------------------- ----- -------- --------
Net decrease in cash and cash equivalents (1,505) (539)
Cash and cash equivalents at beginning of the period 10,108 9,994
------------------------------------------------------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of the period 8,603 9,455
------------------------------------------------------------------------------------------- ----- -------- --------
Net cash flow used in operating activities includes:
Loan interest realised 3 15,731 17,231
------------------------------------------------------------------------------------------- ----- -------- --------
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 2022
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 Jersey Company 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 2022, the Company had one wholly owned Subsidiary,
GABI UK, (31 December 2021: one) incorporated in England and Wales
on 23 October 2015 (registration number 9838893). GABI UK had two
subsidiaries (31 December 2021: 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 (dissolved on 7 June
2022)) and GABI GS comprises the Group. The registered office
address for GABI UK, GABI Housing, GABI Blyth (prior to its
dissolution) and GABI GS is 24 Savile Row, London W1S 2ES.
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.
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 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.
The Group's investments are predominantly 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 are typically unquoted and include, but
are not 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 at all times invests and manages 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.
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 annual improvements to IFRS, changes in
standards, legislative and regulatory amendments, changes in
disclosure and presentation requirements. The adoption of these has
had no 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 2021 annual report.
2.1 Basis of preparation
The unaudited interim condensed financial statements for the
period ended 30 June 2022 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 the Jersey Company Law. They should be read
in conjunction with the Company's annual report and financial
statements for the year ended 31 December 2021 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 2021.
The financial information for the period ended 30 June 2022 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 20 September 2022.
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 2021
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. At 30 June 2022,
there were no C shares in issue (31 December 2021: none).
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.
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.
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 enables 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.
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
facilities 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 (excluding the Co-living loan), 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 (including inflation) 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.
The valuation of the Co-living loan
The Group's Co-living loan was valued by combining recovery
values on realised assets with an estimate of recoverability of
amounts on the three key remaining properties. The estimates are
based on negotiations with prospective buyers and independent
valuation reports. Further, adjustments to reflect specific known
transaction risks were applied and additional assumptions were
applied for professional fees required to complete the sale of
remaining assets. Further information is given in note 14.3.
(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.
(c) 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 Period
ended ended
30 June 30 June
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------------------------------------- ------- -------
Loan interest realised 15,731 17,231
---------------------------------------------------------------------------------------------- ------- -------
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) (2,371) (1,910)
Equity - representing one ordinary share in the Subsidiary 803 685
Realised loss on financial assets at fair value through profit or loss:
Debt - Secured Loan Notes up to GBP1,000,000,000(3) (891) -
---------------------------------------------------------------------------------------------- ------- -------
Net loss on financial assets at fair value through profit or loss (2,459) (1,225)
---------------------------------------------------------------------------------------------- ------- -------
(Loss)/gain on derivative financial instruments:
Unrealised loss on forward foreign exchange contracts (721) (119)
Realised gain on forward foreign exchange contracts 163 892
---------------------------------------------------------------------------------------------- ------- -------
Net (loss)/gain on derivative financial instruments (558) 773
---------------------------------------------------------------------------------------------- ------- -------
Net changes in fair value of financial assets and financial liabilities at fair value through
profit or loss 12,714 16,779
---------------------------------------------------------------------------------------------- ------- -------
1. Refer to note 8 for further information.
2. Comprises downward revaluation in respect of Co-living loan
partially offset by unrealised gains in respect of discount rate
adjustments and principal indexation of GBP1.4 million applied to
certain loans.
3. Comprises foreign exchange losses upon repayment of a loan
which are offset by gains on forward foreign exchange
contracts.
The table below analyses other income earned by the Company by
type:
Period Period
ended ended
30 June 30 June
2022 2021
GBP'000 GBP'000
--------------------------- ------- -------
Arrangement fee income 62 163
Commitment fee income 175 35
Early repayment fee income 485 2,436
--------------------------- ------- -------
Total 722 2,634
--------------------------- ------- -------
4. Finance expenses
Period Period
ended ended
30 June 30 June
2022 2021
GBP'000 GBP'000
------------------------------------- ------- -------
Arrangement fees relating to the RCF 111 120
Commitment fees relating to the RCF 149 138
Interest expense relating to the RCF 170 168
------------------------------------- ------- -------
Total 430 426
------------------------------------- ------- -------
5. Taxation
Profits arising in the Company for the period ended 30 June 2022
are subject to tax at the standard rate of 0% (30 June 2021: 0%) in
accordance with the Income Tax Law.
6. Dividends
Period ended Period ended
Pence 30 June 2022 30 June 2021
Quarter ended Dividend per share GBP'000 GBP'000
----------------------------------------- --------------------------- ------------------ ------------ ------------
Current period dividends
30 June 2022/2021 Second interim dividend(1) 1.58125 / 1.57500 - -
31 March 2022/2021 First interim dividend 1.58125 / 1.57500 6,955 6,927
----------------------------------------- --------------------------- ------------------ ------------ ------------
Total 3.16250 / 3.15000 6,955 6,927
---------------------------------------------------------------------- ----------------- ------------ ------------
Prior period dividends
31 December 2021/2020 Fourth interim dividend 1.57500 / 1.57500 6,927 6,933
----------------------------------------- --------------------------- ------------------ ------------ ------------
Total 1.57500 / 1.57500 6,927 6,933
---------------------------------------------------------------------- ----------------- ------------ ------------
Dividends in the statement of changes in equity 13,882 13,860
------------------------------------------------------------------------------------------ ------------ ------------
Dividends in the statement of cash flows 13,882 13,860
------------------------------------------------------------------------------------------ ------------ ------------
1. The second interim dividend was declared after the period end
and is therefore not accrued for in the unaudited interim condensed
financial statements.
On 22 July 2022, the Company declared a second interim dividend
of 1.58125 pence per ordinary share amounting to GBP7.0 million
which was paid on 2 September 2022 to ordinary shareholders on the
register at close of business on 5 August 2022.
The Board, at its discretion, has suspended the scrip dividend
alternative as a result of the likely discount between any scrip
dividend reference price of the shares and the NAV per share of the
Company. 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, excluding shares held in treasury. Diluted earnings per
share is calculated by dividing the profit attributable to ordinary
shareholders by the diluted weighted average number of ordinary
shares, excluding shares held in treasury.
Weighted
average
Total profit number Pence
of
GBP'000 ordinary per share
shares
---------------------------------------------- ------------ ----------- ---------
Period ended 30 June 2022
Basic and diluted earnings per ordinary share 10,187 439,833,518 2.32
---------------------------------------------- ------------ ----------- ---------
Period ended 30 June 2021
Basic and diluted earnings per ordinary share 16,128 439,957,689 3.67
---------------------------------------------- ------------ ----------- ---------
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. The Company's investment in
the Subsidiary comprised:
(Audited)
30 June 31 December
2022 2021
Debt - Secured Loan Notes up to GBP1,000,000,000 GBP'000 GBP'000
--------------------------------------------------------------------------------- -------- -----------
Opening balance 443,647 443,855
Investment in Subsidiary 25,896 134,504
Capital repayments from Subsidiary (42,721) (117,735)
Realised loss on financial assets at fair value through profit or loss(1) (891) -
Unrealised (loss)/gain on financial assets at fair value through profit or loss:
Unrealised valuation loss(2) (4,953) (17,029)
Unrealised foreign exchange gain 1,266 (983)
Other unrealised movements on investments(3) 1,316 1,035
--------------------------------------------------------------------------------- -------- -----------
Total unrealised loss on financial assets at fair value through profit or loss (2,371) (16,977)
--------------------------------------------------------------------------------- -------- -----------
Total 423,560 443,647
--------------------------------------------------------------------------------- -------- -----------
1. Comprises foreign exchange losses upon repayment of a loan
which are offset by gains on forward foreign exchange
contracts.
2. Comprises write-down of the Co-living loan, partially offset
by unrealised gains in respect of discount rate adjustments.
3. Other unrealised movements on investments at fair value
through profit or loss are attributable to the timing of the debt
service payments and principal indexation of GBP1.4 million applied
to certain loans.
The difference between the fair value of the Secured Loan Notes
and the underlying investments held by 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
2022 2021
Debt - Secured Loan Notes up to GBP1,000,000,000 GBP'000 GBP'000
-------------------------------------------------------------------- ------- -----------
Fair value of the underlying investments held by the Subsidiary 423,577 443,640
Interest rate differential 8 7
Unrealised loss on investments at fair value through profit or loss (25) -
-------------------------------------------------------------------- ------- -----------
Fair value of Secured Loan Notes 423,560 443,647
-------------------------------------------------------------------- ------- -----------
(Audited)
30 June 31 December
2022 2021
Equity - representing one ordinary share in the Subsidiary GBP'000 GBP'000
Opening balance 3,342 2,107
Unrealised gain on investment in the Subsidiary 803 1,235
----------------------------------------------------------- ------- -----------
Total 4,145 3,342
----------------------------------------------------------- ------- -----------
Financial assets at fair value through profit or loss 427,705 446,989
----------------------------------------------------------- ------- -----------
The above represents a 100% interest in the Subsidiary at 30
June 2022 (31 December 2021: 100%).
9. Other receivables and prepayments
(Audited)
30 June 31 December
2022 2021
GBP'000 GBP'000
--------------------- ------- -----------
Arrangement fees 2 64
Other income debtors 6 6
Prepayments 27 58
--------------------- ------- -----------
Total 35 128
--------------------- ------- -----------
10. Cash and cash equivalents
(Audited)
30 June 31 December
2022 2021
GBP'000 GBP'000
-------------------------- ------- -----------
Cash and cash equivalents 8,603 10,108
-------------------------- ------- -----------
Total 8,603 10,108
-------------------------- ------- -----------
11. Interest-bearing loans and borrowings
(Audited)
30 June 31 December
2022 2021
GBP'000 GBP'000
--------------------------------------- -------- -----------
Opening balance 19,899 5,000
Proceeds from amounts drawn on the RCF 11,500 40,250
Repayment of amounts drawn on the RCF (29,500) (25,351)
--------------------------------------- -------- -----------
RCF drawn at the period/year end 1,899 19,899
Loan arrangement fees unamortised (256) (353)
--------------------------------------- -------- -----------
Total 1,643 19,546
--------------------------------------- -------- -----------
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 GBP50 million RCF by 24 months to
August 2023, with an additional one year extension option subject
to lender approval. All terms of the RCF remain unchanged except
for the interest rate benchmark.
Interest on amounts drawn under the RCF was charged at LIBOR
plus 2.10% per annum from 16 April 2019 until the facility was
extended on 19 August 2021, when it was amended and restated and
the interest benchmark rate changed from LIBOR to SONIA (plus a
credit adjustment spread) plus a 2.10% margin. A commitment fee is
payable on undrawn amounts at a rate of 0.84% per annum.
The total costs incurred to extend the facility to August 2023
were GBP450,000, of which GBP425,000 related to the arrangement
fees and GBP25,000 in associated legal fees. The legal fees are
included as arrangement fees for reporting purposes.
A total of GBP111,000 of costs were amortised (30 June 2021:
GBP120,000) as loan arrangement fees during the period and charged
through the statement of comprehensive income; refer to note 4.
Total drawdowns of GBP1.9 million were repayable at the period
end (31 December 2021: GBP19.9 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 GBP1.5
million (30 June 2021: GBP2.2 million) was in place, which limited
the amount available for drawdown to GBP46.6 million.
The RCF with RBSI is secured against the investment in the
Subsidiary.
At 30 June 2022, 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
2022 2021
GBP'000 GBP'000
---------------------------- ------- -----------
Accruals 399 372
Loan commitment fee accrued 87 64
Loan interest accrued - 39
Investment management fees 954 970
---------------------------- ------- -----------
Total 1,440 1,445
---------------------------- ------- -----------
13. Authorised and issued share capital
(Audited)
30 June 2022 31 December 2021
-------------------- --------------------
Number Number
Share capital 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 442,033,518 444,414 442,033,518 444,414
------------------------------------------------------------------------ ----------- ------- ----------- -------
Equity shares issued through:
Dividends settled in shares(1) - - - -
------------------------------------------------------------------------ ----------- ------- ----------- -------
Total shares in issue 442,033,518 444,414 442,033,518 444,414
------------------------------------------------------------------------ ----------- ------- ----------- -------
Treasury shares
Shares repurchased and held in treasury at beginning of the period/year (2,200,000) (1,807) (1,875,000) (1,514)
Shares repurchased in the period/year - - (325,000) (293)
------------------------------------------------------------------------ ----------- ------- ----------- -------
Total shares repurchased and held in treasury (2,200,000) (1,807) (2,200,000) (1,807)
------------------------------------------------------------------------ ----------- ------- ----------- -------
Total ordinary share capital excluding treasury shares 439,833,518 442,607 439,833,518 442,607
------------------------------------------------------------------------ ----------- ------- ----------- -------
1. The offer of a scrip dividend alternative was suspended at
the Board's discretion, as a result of the discount between the
likely scrip dividend reference price and the relevant quarterly
NAV per share of the Company. The Board intends to keep the payment
of future scrip dividends under review.
The Company's share capital is represented by no par value
ordinary shares.
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). There were
no C shares in issue at 30 June 2022 (31 December 2021: none).
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
2022 2021
GBP'000 GBP'000
------------------------------------------------------------ ------- -----------
Financial assets
Cash and cash equivalents 8,603 10,108
Other receivables 8 70
------------------------------------------------------------ ------- -----------
Total financial assets at amortised cost 8,611 10,178
------------------------------------------------------------ ------- -----------
Derivative financial instruments - 492
Financial assets at fair value through profit or loss 427,705 446,989
------------------------------------------------------------ ------- -----------
Total financial assets at fair value through profit or loss 427,705 447,481
------------------------------------------------------------ ------- -----------
Total financial assets 436,316 457,659
------------------------------------------------------------ ------- -----------
Financial liabilities
Derivative financial instruments (229) -
Other payables and accrued expenses (1,440) (1,445)
Revolving credit facilities (1,643) (19,546)
------------------------------------------------------------ ------- -----------
Total financial liabilities at amortised cost (3,312) (20,991)
------------------------------------------------------------ ------- -----------
Total financial liabilities (3,312) (20,991)
------------------------------------------------------------ ------- -----------
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 30 June 2027); the investments
represent 3.1% of the portfolio by value at the period end (31
December 2021: 6.2%). The Company intends to utilise the forward
foreign exchange contract on a rolling three month basis for the
term of the investment.
The tables below set out the forward foreign exchange contracts
held by the Company:
Principal Hedged Fair value
30 June 2022 Maturity amount amount GBP'000
--------------------------- ------------------ ---------------- ------------- ----------
Contract EUR/GBP 6 July 2022 (GBP2,093,101) EUR2,500,000 (57)
Contract EUR/GBP 22 September 2022 (GBP1,503,024) EUR1,743,057 (2)
Contract EUR/GBP 3 October 2022 (GBP2,563,088) EUR2,983,434 (15)
Contract EUR/GBP 8 March 2023 (GBP4,892,017) EUR5,717,300 (91)
--------------------------- ------------------ ---------------- ------------- ----------
Total EUR/GBP (GBP11,051,230) EUR12,943,791 (165)
----------------------------------------------- --------------- ------------- ----------
Contract USD/GBP 3 October 2022 (GBP1,948,805) $2,450,233 (64)
--------------------------- ------------------ ---------------- ------------- ----------
Total USD/GBP (GBP1,948,805) $2,450,233 (64)
----------------------------------------------- --------------- ------------- ----------
Total (GBP13,000,035) (229)
----------------------------------------------- --------------- ------------- ----------
Principal Hedged Fair value
31 December 2021 (audited) Maturity amount amount GBP'000
--------------------------- ------------------ ---------------- ------------- ----------
Contract EUR/GBP 5 January 2022 (GBP3,548,328) EUR4,102,222 102
Contract EUR/GBP 13 January 2022 (GBP11,772,735) EUR13,800,000 176
Contract EUR/GBP 2 March 2022 (GBP8,094,808) EUR9,401,310 185
Contract EUR/GBP 22 March 2022 (GBP1,773,917) EUR2,080,449 22
--------------------------- ------------------ ---------------- ------------- ----------
Total EUR/GBP (GBP25,189,788) EUR29,383,981 485
----------------------------------------------- --------------- ------------- ----------
Contract USD/GBP 5 January 2022 (GBP,2,218,241) $2,981,760 7
--------------------------- ------------------ ---------------- ------------- ----------
Total USD/GBP (GBP,2,218,241) $2,981,760 7
----------------------------------------------- --------------- ------------- ----------
Total (GBP27,408,029) 492
----------------------------------------------- --------------- ------------- ----------
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 notes 13 and 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 tables below set out fair value measurements of financial
instruments at the period/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 Total
1 2 3
30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------- ------- ------- -------
Financial assets at fair value through profit or loss - - 427,705 427,705
Derivative financial instruments - (229) - (229)
------------------------------------------------------ ------- ------- ------- -------
Total - (229) 427,705 427,476
------------------------------------------------------ ------- ------- ------- -------
Level 1 Level 3 Level 3 Total
31 December 2021 (audited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------- ------- ------- -------
Financial assets at fair value through profit or loss - - 446,989 446,989
Derivative financial instruments - 492 - 492
------------------------------------------------------ ------- ------- ------- -------
Total - 492 446,989 447,481
------------------------------------------------------ ------- ------- ------- -------
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 primary input for Level 3 at year end is the discount rates for
these investments (excluding the Co-living loan, refer below for
further information); discount rates 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/year:
(Audited)
30 June 31 December
2022 2021
GBP'000 GBP'000
------------------------------------------------------------------------------------- -------- -----------
Opening fair value of financial instruments at fair value through profit or loss 446,989 445,962
Investment in Subsidiary 25,896 134,504
Capital repayments from Subsidiary (42,721) (117,735)
Realised (loss)/gain on financial assets at fair value through profit or loss:
Debt - Secured Loan Notes up to GBP1,000,000,000(1) (891) -
Unrealised (loss)/gain on financial assets at fair value through profit or loss(2) :
Debt - Secured Loan Notes up to GBP1,000,000,000 (2,371) (16,977)
Equity - representing one ordinary share in the Subsidiary 803 1,235
------------------------------------------------------------------------------------- -------- -----------
Closing fair value of financial instruments at fair value through profit or loss 427,705 446,989
------------------------------------------------------------------------------------- -------- -----------
1. Comprises foreign exchange losses upon repayment of a loan
which are offset by gains on forward foreign exchange
contracts.
2. 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 2022, the
NAV of the Subsidiary was as follows:
(Audited)
30 June 31 December
2022 2021
GBP'000 GBP'000
----------- ------- -----------
GABI UK(1) 4,145 3,342
----------- ------- -----------
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 June Discounted Discount
2022 414,291(2) cash flow rate 7.6%(3)
Financial assets at fair value through profit or loss - 30 June Net realisable Discount
2022 13,414(4) value rate -
--------------------------------------------------------------- ------------- -------------- ------------ --------
Financial assets at fair value through profit or loss - 31 Discounted Discount
December 2021 (audited) 428,189(2) cash flow rate 7.5%(3)
Financial assets at fair value through profit or loss - 31 Discounted Discount
December 2021 (audited) 18,800(4) cash flow rate -
--------------------------------------------------------------- ------------- -------------- ------------ --------
1. Including the NAV of the Subsidiary.
2. Balance excludes the fair value of the Co-living loan which
is not valued on a discounted cash flow basis.
3. Weighted average discount rate(5) .
4. Fair value of the Co-living loan which is not valued on a
discounted cash flow basis, see below for further information.
5. Alternative performance measure - refer below for definitions
and calculation methodology.
The investments in Project Companies held by the Subsidiary
(excluding the Co-living loan) 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 6-13% (31 December 2021:
5-13%).
At 30 June 2022, the Group's Co-living loan was valued at
GBP13.4 million (31 December 2021: GBP18.8 million), which
represents an estimate of recoverability of amounts secured against
six key underlying properties and four other underlying properties.
The value is based on (i) realised sales values of three assets,
(ii) negotiated purchase prices with buyers in ongoing sales
processes and (iii) valuation reports from independent valuers.
Adjustments to reflect known transaction risks and professional
fees were also made to the valuation of the loan.
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 increased from 7.51%
to 7.62%.
30 June 2022
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) 440,570 433,986 427,705(1) 421,704 415,964
Change in value of financial assets at fair value (GBP'000) 12,685 6,281 - (6,001) (11,741)
------------------------------------------------------------ ------- ------- ---------- ------- --------
31 December 2021 (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) 459,795 453,246 446,989(1) 441,004 435,270
Change in value of financial assets at fair value (GBP'000) 12,806 6,257 - (5,985) (11,719)
------------------------------------------------------------ ------- ------- ---------- ------- --------
1. Balance includes the fair value of the Co-living loan which
is not valued on a discounted cash flow basis; refer above for
further details.
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 2022 to the contractual
maturity date.
All cash flows in the tables below are presented on an
undiscounted basis.
Less than One to Three Greater
to than
one month three twelve twelve Total
months months months
30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ --------- ------------ -------- -------- --------
Financial assets
Cash and cash equivalents 8,603 - - - 8,603
Other receivables and prepayments 8 16 11 - 35
Financial assets at fair value through profit or loss 15,329 26,155 107,462 442,069 591,015
------------------------------------------------------ --------- ------------ -------- -------- --------
Total financial assets 23,940 26,171 107,473 442,069 599,653
------------------------------------------------------ --------- ------------ -------- -------- --------
Financial liabilities
Derivative financial instruments (57) (2) (170) - (229)
Other payables and accrued expenses (4) (1,307) (129) - (1,440)
Revolving credit facilities - - - (1,899) (1,899)
------------------------------------------------------ --------- ------------ -------- -------- --------
Total financial liabilities (61) (1,309) (299) (1,899) (3,568)
------------------------------------------------------ --------- ------------ -------- -------- --------
Net exposure 23,879 24,862 107,174 440,170 596,085
------------------------------------------------------ --------- ------------ -------- -------- --------
Less than One to Three to Greater
than
one month three months twelve twelve Total
months months
31 December 2021 (audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ --------- ------------ -------- -------- --------
Financial assets
Cash and cash equivalents 10,108 - - - 10,108
Derivative financial instruments 285 207 - - 492
Other receivables and prepayments 70 7 51 - 128
Financial assets at fair value through profit or loss 1,508 37,760 111,492 428,341 579,101
------------------------------------------------------ --------- ------------ -------- -------- --------
Total financial assets 11,971 37,974 111,543 428,341 589,829
------------------------------------------------------ --------- ------------ -------- -------- --------
Financial liabilities
Other payables and accrued expenses (39) (1,317) (89) - (1,445)
Revolving credit facilities - - - (19,546) (19,546)
------------------------------------------------------ --------- ------------ -------- -------- --------
Total financial liabilities (39) (1,317) (89) (19,546) 20,991
------------------------------------------------------ --------- ------------ -------- -------- --------
Net exposure 11,932 36,657 111,454 408,795 568,838
------------------------------------------------------ --------- ------------ -------- -------- --------
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 GBP104,000 (30 June 2021:
GBP100,000). At 30 June 2022, liabilities in respect of these
services amounted to GBP65,000 (31 December 2021: GBP64,000).
At 30 June 2022, the Directors of the Company held directly or
indirectly, and together with their family members, 161,171
ordinary shares in the Company (31 December 2021: 161,171 ordinary
shares).
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 2021: GBP2,000) in respect of legal work, of which GBPnil
is outstanding at period end (31 December 2021: GBPnil).
Investment Manager
The Company is party to an investment management agreement with
the Investment Manager, which was most recently 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 plus annual
increases in accordance with the rate of the RPI.
During the period, the Company incurred GBP1,921,000 (30 June
2021: GBP1,985,000) in respect of the services outlined above:
GBP1,907,000 (30 June 2021: GBP1,972,000) in respect of investment
management and advisory services and GBP14,000 (30 June 2021:
GBP13,000) in respect of AIFM services provided by the Investment
Manager. At 30 June 2022, liabilities in respect of these services
amounted to GBP962,000 (31 December 2021: GBP977,000).
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 16 of the Group's
investments has been met and paid by borrowers. During the period,
the Investment Manager received GBP7,000 (30 June 2021: GBP99,000)
from arrangement fees which had been met by borrowers and
GBP121,000 (30 June 2021: GBP120,000) 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 2022, the Company received GBP62,000 (30 June
2021: GBP163,000).
A number of the directors and employees of the Investment
Manager also sit on the board of the Subsidiary.
At 30 June 2022, the key management personnel of the Investment
Manager held directly or indirectly, and together with their family
members, 1,238,118 ordinary shares in the Company (31 December
2021: 1,209,651 ordinary shares).
The directors of the Investment Manager, and their family
members, directly or indirectly own an equity interest in the
student accommodation investments and one co-living investment 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 2022, the Company owned a 100% (31 December 2021:
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 (dissolved 7 June 2022); 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
2022 2021
Transactions GBP'000 GBP'000
---------------------------------------------------------------------------------------------- ------- -----------
Intercompany income received
Other income 660 2,471
Arrangement fee income 62 163
Loan interest realised 15,731 17,231
---------------------------------------------------------------------------------------------- ------- -----------
Total 16,453 19,865
---------------------------------------------------------------------------------------------- ------- -----------
(Audited)
30 June 31 December
2022 2021
Balances GBP'000 GBP'000
---------------------------------------------------------------------------------------------- ------- -----------
Intercompany balances receivable 2 64
---------------------------------------------------------------------------------------------- ------- -----------
Principal value of intercompany holdings within financial assets at fair value through profit
or loss 448,083 464,425
---------------------------------------------------------------------------------------------- ------- -----------
16. Subsequent events after the report date
On 21 July 2022, the Board, upon the recommendation of the
Remuneration and Nomination committee, approved an increase of
GBP5,000 in the Directors' base fee, plus an additional GBP5,000
per annum to be paid to the chair of the Remuneration and
Nomination committee in line with the remuneration of other
committee chairs, effective 1 January 2022. As of that date,
Directors' remuneration stands at GBP230,000 per annum, which is
within the GBP300,000 limit as defined by the Articles of the
Company.
On 22 July 2022, the Company declared a second interim dividend
of 1.58125 pence per ordinary share amounting to GBP7.0 million,
which was paid on 2 September 2022 to ordinary shareholders on the
register on 5 August 2022.
The Investment Manager continues to work on the realisation of
the Co-living group's assets, with a number of assets now
transacted, including the Canary Wharf asset, where exchange for
the sale was completed post period end, with completion due to
occur at the beginning of October 2022.
Further, the Group made two new investments and two further
advances totalling GBP23.7 million post period end. The Group also
received seven repayments totalling GBP11.1 million. Refer to the
Investment Manager's report 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.
Adjusted EPS
EPS adjusted to remove the effect of discount rate adjustments
made to reflect the uncertainties associated with the Covid-19
pandemic and the write-down of the Company's Co-living loan.
Period ended Period ended
30 June 30 June 2021
2022
Adjusted EPS (Pence per (Pence per
share) share)
------------------------------------------------------------------ ------------ ------------
Basic and diluted earnings 2.32 3.67
Adjustments to discount rates in respect of the Covid-19 pandemic - 0.46
Write-down of the Co-living loan 1.22 -
------------------------------------------------------------------ ------------ ------------
Adjusted EPS 3.54 4.13
------------------------------------------------------------------ ------------ ------------
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: Bloomberg
1. Refer to relevant APM for further information.
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 NAV of the Company over the reporting period.
Period Period
ended ended
NAV per 30 June NAV per 30 June
share 2022 share 2021
Quarter ended (pence) GBP'000 (pence) GBP'000
------------------- ------- ------- ------- --------
31 March 2022/2021 99.36 437,005 102.49 450,803
30 June 2022/2021 98.45 433,031 102.71 451,737
------------------- ------- ------- ------- --------
Average NAV 98.91 435,018 102.60 451,270
------------------- ------- ------- ------- --------
Discount/average discount
The amount, expressed as a percentage, that the Company's shares
trade below the prevailing NAV per share. This metric is shown at a
point in time or as an average over the stated period.
Dividend cover ratio
Ratio of earnings to dividends calculated as dividends per share
divided by EPS.
Period Period
ended ended
30 June 30 June
2022 2021
------------------------------------------------ ----------- ------------
Total profit and comprehensive income (GBP'000) 10,187 16,128
Weighted average number of shares 439,833,518 439,957,689
------------------------------------------------ ----------- ------------
Basic EPS (p) 2.32 3.67
Adjusted EPS (p) 3.54 4.13
Dividends (p) 3.16(1) 3.15
------------------------------------------------ ----------- ------------
Dividend cover ratio (basic) (0.73) 1.17
------------------------------------------------ ----------- ------------
Dividend cover ratio (adjusted) 1.12 1.31
------------------------------------------------ ----------- ------------
Dividend yield
Total dividend declared for the period annualised, relative to
the closing share price at the period end, expressed as a
percentage.
IRR
The 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.
Period Period
ended ended
30 June 30 June
2022 2021
Ongoing charges GBP'000 GBP'000
--------------------------- ------- -------
Investment management fees 1,907 1,972
Directors' remuneration 104 100
Operating expenses 808 787
--------------------------- ------- -------
Total expenses 2,819 2,859
Non-recurring expenses (158) (146)
--------------------------- ------- -------
Total 2,661 2,713
Annualised 5,365 5,471
--------------------------- ------- -------
Average NAV(2,3) 435,018 451,270
Ongoing charges ratio 1.2 1.2
--------------------------- ------- -------
1. Total dividend of 3.1625 pence includes a quarterly dividend
of 1.58125 pence per share for the quarter to 30 June 2022, which
was declared post period end.
2. Refer to relevant APM for further information.
3. Based on average NAV for the six month period to 30 June
2022.
Premium/average premium
The amount, expressed as a percentage, that the Company's shares
trade above the prevailing NAV per share. This metric is shown at a
point in time or as an average over the stated period.
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: Bloomberg
Total NAV 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
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 weighted average yield does not include principal
indexation.
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.
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
CIF Law
Collective Investment Funds (Jersey) Law 1988
CNG
Compressed natural gas
Company
GCP Asset Backed Income Fund Limited
CPI
Consumer price index
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
HY22
Six months ended 30 June 2022
HY21
Six months ended 30 June 2021
HY20
Six months ended 30 June 2020
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 above
Jersey Company Law
The Companies (Jersey) Law 1991, as amended
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 above
Weighted average annualised yield
Refer to APMs above
Weighted average discount rate
Refer to APMs above
CORPORATE INFORMATION
The Company
GCP Asset Backed Income Fund Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Directors and/or the Board
Alex Ohlsson (Chairman)
Joanna Dentskevich
Colin Huelin FCA
Marykay Fuller
Administrator, secretary and registered office of the
Company
Apex Financial Services (Alternative Funds) Limited
12 Castle Street, St Helier
Jersey JE2 3RT
Tel: +44 (0)20 4549 0700
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
Security Trustee
GRVS Capital Partners LLP (formerly Gravis Capital Partners
LLP)
24 Savile Row
London W1S 2ES
Share Register Analyst
Orient Capital Limited
65 Gresham Street
London EC2V 7NQ
Valuation Agent
Mazars LLP
Tower Bridge House
St Katharine's Way
London E1W 1DD
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