TIDMGHE
RNS Number : 7633E
Gresham House PLC
15 March 2022
15 March 2022
Gresham House plc
("Gresham House," "the Group" or "the Company")
Annual Results for the year ended 31 December 2021
65% AUM increase to GBP6.5bn with strong organic growth
The Board of Gresham House plc, (AIM: GHE), the specialist
alternative asset manager, is pleased to announce a year of
significant growth, both organically and through acquisitions.
Assets under management (AUM) rose 65% to GBP6.5 billion. Growth in
AUM has led to material growth in revenue, operating margin and
profit. The Group made strong progress against its GH25 strategic
objectives and increased its AUM target in November 2021 to GBP8.0
billion. The Board is pleased to confirm that following the
achievement of adjusted diluted EPS of 49.4p, up 50%, it is
recommending a 67% increase in the dividend to 10.0 pence (2020:
6.0 pence).
Financial highlights
As at/for As at/for Change
the year to the year (%)
31 Dec 2021 to 31 Dec
2020
Assets under management (GBPbn) 6.5 4.0 +65%
Cash and liquid assets (GBPmn) 78.3 45.1 +73%
Net core income (GBPmn) 61.6 40.8 +51%
Adjusted operating profit
(GBPmn) 20.2 12.1 +67%
Performance fees and development
gains net of costs (GBPmn) 3.5 1.0 +250%
Comprehensive net income (GBPmn) 12.0 0.8 +1394%
Adjusted diluted Earnings
Per Share (p) 49.4p 32.9p +50%
Dividend (p) 10.0 6.0 +67%
-- Substantial AUM growth of 65% to GBP6.5 billion (2020: GBP4.0
billion), with organic growth of GBP1.9 billion (c.50%)
o Driven by strong fundraising, targeted acquisitions, and
investment performance
-- Strong net core income growth of 51% to GBP61.6 million (2020: GBP40.8 million)
-- Growth in adjusted operating profit of 67% to GBP20.2 million
(2020: GBP12.1 million) and 50% increase to adjusted diluted EPS to
49.4 pence (2020: 32.9 pence)
-- Return on Capital Employed increased to 34.1% (2020: 16.0%)
-- Final dividend proposed to increase by 67% to 10.0 pence (2020: 6.0 pence)
-- Strong balance sheet with GBP40.3 million cash; GBP20.0
million undrawn RCF; plus GBP38.0 million investments
Strategic highlights
-- Outstanding fundraising performance, with net inflows of
GBP1.2 billion (2020: GBP0.4 billion) across all of the Group's
strategies, including:
o GBP206 million of net inflows in Strategic Equity open-ended
and VCT funds
o GBP100 million of additional fundraising for Gresham House
Energy Storage Fund plc (GRID)
o GBP202 million raised for new forestry fund Gresham House
Forest Growth & Sustainability LP
o GBP150 million BSIF II LP, the Group's second sustainable
infrastructure fund
o GBP430 million from AXA IM Alts Australian forestry
mandate
-- Continued growth and diversification of client base across
broadening range of institutional and wholesale investors
o Driven by product development and targeting of growing
channels
-- Targeted acquisitions have enhanced AUM by GBP625 million and
enhanced the Group's potential:
o International footprint established following completion of
Appian Asset Management Limited acquisition, an EU-based AIFM in
June 2021
o Private Equity platform substantially augmented by acquisition
of VCT business of Mobeus Equity Partners LLP in October 2021
-- Further established market leadership in sustainability
across battery storage, solar, wind, forestry, housing, and
sustainable infrastructure
-- Continued investment in talent to facilitate future growth in AUM
-- Leading position in UK forestry in 2021 supports winning of
international mandates in Australia and Ireland
-- Well positioned for further growth across all asset classes in 2022 and beyond
GH25 upgrades
-- GH25 five-year strategy target for AUM increased from GBP6.0 billion to GBP8.0+ billion
-- EBITDA margin of 32.7% (2020: 29.6%), on track to achieve 40.0% target
-- GH25 ROCE target raised from 15% to '20% over the medium term'
-- Dividend policy established to target three times adjusted
operating profits coverage by the end of GH25
Commenting on the results, Tony Dalwood, Chief Executive of
Gresham House, said:
"Throughout 2021 we made exceptional progress on the delivery of
our GH25 five-year strategy and are reporting outstanding growth in
AUM, profitability and revenue. We are focused on private assets
which exhibit long-term superior investment returns alongside
sustainability characteristics.
"We have demonstrated our ability to grow organically and to add
value through acquisitions, providing an exciting future for our
Group. Gresham House Ireland and the Mobeus VCT businesses enhance
the strategic ambitions and potential for the Group.
"Momentum across the business continues to be buoyed by the
structural shift driving fund inflows into alternative asset
classes as we continue to diversify our client base. Our
ESG-focused strategy and strong investment performance mean we are
well placed to capture the rising demand for investments that
deliver both financial returns and sustainable, climate-based
solutions.
"In light of our excellent 2021 performance, we are well on
track to achieve our GH25 objectives and have therefore upgraded
our targets in accordance with our ambition and strategic goals.
Despite the current macroeconomic environment and geo-political
events, we are confident of further growth throughout 2022 as we
continue to deliver value to all our stakeholders."
Gresham House is hosting its Annual Results webinar at 09:00am
today.
Link:
https://greshamhouse.zoom.us/webinar/register/WN_ReTB3jbdTVC_JbWkP2sEaQ
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014
For more information contact:
Gresham House plc
Tony Dalwood, Chief Executive
Kevin Acton, Chief Financial Officer +44 (0)20 3837 6271
Houston gh@houston.co.uk
Alexander Clelland +44 (0)20 4529 0549
Kay Larsen
Joe Burgess
Canaccord Genuity Limited - Nominated Adviser
and Joint Broker
Bobbie Hilliam
Georgina McCooke +44 (0)20 7523 8000
Jefferies International Limited - Financial
Adviser and Joint Broker
Paul Nicholls
Max Jones +44 (0)20 7029 8000
About Gresham House
Gresham House is a specialist alternative asset management
group, focused on sustainable investments across a range of
investment strategies, including forestry, housing, sustainable
infrastructure, renewable energy and battery storage, public and
private equity.
Our origins stretch back to 1857, while our focus is on the
future and the long term. Quoted on the London Stock Exchange
(GHE:LN) we actively manage GBP6.5 billion of assets on behalf of
institutions, family offices, charities and endowments, private
individuals and their advisers. We act responsibly within a culture
of empowerment that encourages individual flair and entrepreneurial
thinking.
As a signatory to the UN-supported Principles for Responsible
Investment (PRI), our vision is to always make a positive social or
environmental impact, while delivering on our commitments to
shareholders, employees and investors. www.greshamhouse.com
Chairman's statement
Introduction
I am pleased to report on a year of exceptionally strong,
profitable growth for Gresham House, with substantial increases in
assets under management (AUM) and margins complementing both
organic and acquisitive progress. The business has adapted and
delivered against its targets and made excellent strides against
its GH25 ambitions while remaining resilient in the face of the
ongoing pandemic and continued uncertainty in the markets. In light
of this, we are increasing our GH25 Return on Capital Employed
(ROCE) target from 15% to 20% average over the medium term as well
as improving our dividend policy to target three times operating
profit coverage by the end of GH25.
This resilience and continued growth momentum is a huge
testament to our employees' dedication and the excellent
performance of the management team, which has contributed to
excellent shareholder value creation year after year. The
dedication of the senior management team and the capability and
integrity with which they lead the business permeates throughout
the Group. An internal focus on both financial and strategic
metrics has cultivated an ambitious and successful culture and,
supported by excellent colleagues, the executive team has sought to
establish the Gresham House brand as a symbol of superior
investment performance, teamwork and ambition in pursuit of
shareholder value creation. Meanwhile, share ownership throughout
the organisation has promoted employee belief and alignment with
the brand we are building.
Activity in the period
I am delighted to report that we have significantly accelerated
our outstanding growth rate in AUM, increasing it 65% over the
year. Organic growth included growing demand within the Forestry
division resulting in new business AUM growth of over GBP600
million. As part of this Gresham House saw further international
expansion with the completion of an Australian forestry mandate,
announced on 9 December 2021, while significant fundraises were
achieved across the Group within our British Sustainable
Infrastructure Fund II LP, Gresham House Energy Storage Fund plc
(GRID), Gresham House Forest Growth & Sustainability LP, and
Gresham House Residential Secure Income LP (ReSI LP), as well as in
our VCTs and equity funds.
Alongside strong organic growth, we also grew the business
further through strategic acquisitions, namely Appian Asset
Management Limited in June, as well as the VCT business of Mobeus
Equity Partners LLP in October, adding a further GBP303 million and
GBP369 million respectively in the year.
Given the significant progress made against our five-year
strategy, GH25, we revised our AUM target upwards by 33% to GBP8
billion AUM in November, whilst maintaining the targets of 40%
EBITDA margin and 15% ROCE by 2025. As a result of recent strong
performance, we continue to track towards or exceed these financial
targets with an EBITDA margin of 32.7% (2020: 29.6%) and ROCE(1) of
34.1% for 2021 (2020: 16.0%).
The Board was pleased to note that the 2021 Employee Engagement
Survey demonstrated high levels of satisfaction and commitment
amongst staff, with a 96% advocacy rate, against an external
benchmark of 73%. The survey also showed a staff alignment score of
80%, against an external benchmark of 66%.
1. Return on capital employed defined as adjusted operating
profit, plus net performance fees, net realised gains on
development activity and fair value movements in investments less
fair value movements on contingent consideration, divided by
opening net assets, adjusted for shares issued in the year.
Sustainability
We continue with our aim to be a market leader in
sustainability, with assets across battery storage, solar, wind and
forestry, as well as housing and sustainable infrastructure. Core
to this are the sustainability goals we set out as part of our GH25
strategy, first announced in March 2020, aiming to further develop
the business as a leading specialist alternative asset manager with
sustainability at its heart.
This year we established our Sustainability Committee, chaired
by Gareth Davis, as a subcommittee of the Board to provide
oversight and accountability for our sustainability-related
practices across the business. The Committee met for the first time
in August 2021 where a range of sustainability factors were
discussed, including how we will advance our management of climate
change-related risks and opportunities.
Going forward, we expect there will be an ever-increasing focus
on impact and sustainable investments. It is now an important
factor for all asset managers and a differentiator for Gresham
House in the market.
Financials
I am very proud of the excellent results achieved by the Group
this year. Alongside the substantial 65% growth in AUM, we saw net
core income increase by 51% to reach GBP61.6 million (2020: GBP40.8
million), while adjusted operating profit was GBP20.2 million,
growing by 67% (2020: GBP12.1 million). Net comprehensive income
was up substantially to GBP12.0 million (2020: GBP0.8 million) and
we also achieved ROCE of 34.1% (2020: 16.0%). Our balance sheet
remains strong with GBP40.3 million of cash, GBP38.0 million of
investments and GBP20.0 million of undrawn Revolving Credit
Facility (RCF), leaving us very well positioned to support our
ambitions and continue our exciting growth trajectory in 2022.
Dividend
We intend to increase the dividend for this year to 10.0 pence,
an increase of 67% (2020: 6.0 pence). As outlined earlier, and as
part of our GH25 strategy, we have reviewed our dividend policy to
increase it to target adjusted operating profit coverage of three
times by 2025. Shareholders should therefore look towards
increasing dividends in the future.
Shareholders
Having raised GBP42.0 million via a placing alongside our
acquisition of the VCT business of Mobeus Equity Partners LLP, we
welcomed several new, long-term supportive shareholders to the
register. We were delighted with the level of backing and we hope
to continue engaging with both our current and new shareholders in
the capital markets going forward. The company has evolved
substantially from the sub-GBP15 million market capitalisation at
the time the new management team commenced its plans in December
2014. We have benefited from a broadening of our shareholder base
and look forward to attracting further new, long-term shareholders
to continue the growth of the business.
Board
We were delighted to welcome Sarah Ing as the Audit Committee
Chair Designate this year, who will take on full responsibility for
the role following the retirement of our current Chair, Richard
Chadwick, at the conclusion of the 2022 AGM. Sarah is a chartered
accountant, with listed company experience as a Non-Executive
Director on XPS Pensions Group plc and CMC Markets plc boards and
is already adding value to the Board.
Richard leaves us after many years of exceptional service to
Gresham House having seen the business go from a property-based
investment company to the alternative asset manager we are today,
and his knowledge of the corporate history has proved very
valuable. We are extremely grateful for his contribution to this
growth throughout his tenure and wish him well in his
retirement.
Richard also holds the position of Senior Independent Director
on the Board. I am pleased to be able to advise that this role will
pass to Gareth Davis after the 2022 AGM.
Annual General Meeting
After two years of COVID-19 restrictions, requiring a virtual
meeting, we can now at last revert to holding our Annual General
Meetings in person again. The intention is therefore to look
forward to welcoming shareholders to our 2022 AGM at Eversheds
Sutherland (International) LLP, 100 Wood Street, London, on
Thursday 12 May 2022.
Outlook
We have continued to establish ourselves as a significant player
in alternative assets and sustainable investing, areas which have
shown continued resilience during 2021, and we approach the year
ahead with confidence. We have made excellent progress against our
GH25 objectives and we have revised these upwards as we grow
further. I believe that our product offering, and sustainable
investment focus will continue to provide attractive investment
characteristics to existing and potential clients seeking returns
within a sustainability framework.
With the opportunities ahead we are confident that we will
continue our strong growth momentum, in line with our ambitions, to
create shareholder value and sustainable returns to clients and
investors, and add further depth and breadth to our platform. My
thanks go to all those within the Company for their hard work and
dedication as well as the support from our clients and
shareholders.
Anthony Townsend
Chairman
14 March 2022
Chief Executive's report
Strategic overview
Throughout 2021 we made excellent progress in the delivery of
our GH25 five-year strategic plan launched in 2020. As we entered
2021 the UK, and indeed much of the world, was still operating
under lockdown conditions. Nevertheless, the entire Gresham House
team continued to demonstrate commitment, resilience and
resourcefulness in the face of the economic and social challenges
that the pandemic has created. We adapted in various ways as a
company and continued to drive strong organic growth with progress
evident across each of our asset classes. Importantly, investment
performance for clients was also something to be proud of.
Gresham House delivered 65% growth in AUM by the year end,
rising to GBP6.5 billion (2020: GBP4.0 billion). Organic growth
represented c.50%, alongside two strategic acquisitions which
increased AUM by a further c.15%.
The acquisition of Appian Asset Management, first announced at
the end of 2020, completed in June 2021 to establish Gresham House
Ireland (GHI). Based in Dublin, GHI is an active asset manager and
the acquisition brought c.EUR350 million of AUM into Gresham House
providing a platform for investment outside the UK, with an
increasing emphasis on assets with a sustainability focus.
In October, we substantially built out our private equity
capability with the acquisition of the VCT business of Mobeus
Equity Partners LLP. The four Mobeus VCTs brought a combined AUM of
GBP369 million and a high-quality, experienced team with
complementary skills. Following this acquisition, Gresham House has
become one of the leading players in the VCT market with combined
AUM of GBP887 million across the Baronsmead and Mobeus brands.
As a result of both organic growth and these key acquisitions, I
am delighted to report that our profitability rose 67%, whilst our
margin increased to 33%, marking strong progress towards our GH25
target of 40% margin.
Momentum across the business continues to be buoyed by a
structural shift in asset allocation by investors, including
appetite for our sustainability-focused asset classes which
continues to increase. Alternative assets proved robust during a
volatile 2020, and in 2021 showed their ability to perform.
The World Economic Forum's Global Risk Report 2021 highlighted
that over the next ten years environmental risks are the five most
critical long-term threats to the world, with the three most severe
risks identified as climate action failure, extreme weather, and
biodiversity loss. Many of our funds are seeking to address these
crucial areas.
Global sustainable fund assets doubled in just a six-month
period to reach $3.9 trillion in September 2021, according to
financial services information provider Morningstar. Globally,
alternative assets under management are set to continue to grow
strongly from $13.32 trillion at the end of 2021 to $23.21 trillion
by 2026.
Throughout 2021, demand and allocations to Gresham House managed
funds with a sustainable investment focus saw significant growth,
and this trend is expected to continue into 2022 and beyond.
Throughout the year our market share in these assets continued
to expand. We also grew our client base and welcomed new investors
across the spectrum of institutional, family office, high net
worth, wholesale and retail investors into our specialist and
differentiated products and solutions.
The developments outlined above are driving continued
shareholder value creation. Crucially, we have also delivered clear
strategic progress driven by our ambitious, sustainability-focused
culture and underpinned by rigorous internal processes. We ended
the year with market-leading positions in several of our asset
classes, notably VCT, forestry, housing and battery storage. We
also developed our international profile, through an Australian
forestry mandate that completed in December.
GH25
Our GH25 strategy was launched in March 2020 to articulate a
five-year ambition with sustainability at the heart of our
strategy. Within it we targeted long-term shareholder value by more
than doubling AUM to over GBP6.0 billion, increasing operating
margins to 40% and generating a target ROCE of 15% or above.
As a result of a very strong year of growth, we announced in
November that we would raise our AUM target by 33% to greater than
GBP8.0 billion.
Following continued expansion of the Group, we are proud to
announce that we now intend to establish a dividend policy with a
medium-term target of three times adjusted operating profits cover
by 2025, to underline the increasing quality and profitability of
the business alongside a recognition of the importance of income
for some shareholders. Separately, we are also aiming to achieve an
increased ROCE target to 20% over the medium term, recognising the
importance shareholders place on capital returns.
Strategic objectives
As we move into 2022, Gresham House is firmly establishing
itself as a leader in sustainable investment and best practice
corporate governance.
We launched our inaugural Sustainable Investment Report in March
2021 and delivered a stewardship report, which received Financial
Reporting Council approval. We also embedded our commitment to
sustainability at the highest level of the business with the
creation of our Board level Sustainability Committee. Within the
business we also strive to achieve appropriate Diversity, Equity
and Inclusion (DEI) objectives.
Gresham House has a leadership position across our specialist
alternative investment activities. In battery storage, the Gresham
House Energy Storage Fund plc (GRID) secured GBP280 million in debt
and new funding in 2021 making it the largest fund of its kind in
the UK. We are also the largest asset manager of forestry in the UK
and continue to develop our international franchise with assets in
Australia and Ireland. In Strategic Equity, the acquisition of the
Mobeus VCTs business has expanded our VCT platform significantly to
position us as a leading player in the sector.
The scale and scope of our business, and the central platform
infrastructure we provide to support our investment strategies,
have enabled us to deliver superior returns on funds managed, and
industry leading growth in a number of our asset classes.
As part of the GH25 strategy we are committed to developing the
business internationally and have made notable progress in
establishing an overseas foothold during 2021 with the completion
of the Appian acquisition to establish Gresham House Ireland and
the Australian forestry mandate that was secured in December.
The Gresham House brand has continued to grow and to establish
itself in the alternative investment sector during 2021. This has
been clearly illustrated by the many awards won across the Group
during the year, including winning best Alternatives Investment
Management at both the Pensions Age Awards and Sustainable &
ESG Investment Awards 2021.
Financial objectives
-- AUM growth - 65% GBP2.5bn growth in 2021 - organic and acquisitive
-- Operating margins - improved to 33% from 30% - investment in
the business - creating a higher quality business, comparable to
more mature peers
-- Maintain ROCE of 15% on balance sheet in the medium term - hit 34% in 2021
Strategic objectives
-- Recognised leader in sustainable investment and governance -
multiple award wins, launched Sustainable Investment Report,
Stewardship Report approved by the FRC, Sustainability Committee
established at Gresham House plc Board level, DEI committee and
actions being taken
-- Superior returns for funds managed
o Top Quartile - LF Gresham House UK Multi Cap Income Fund
ranked second out of 84 funds in the UK Equity Income sector over
three years to 31 December 2021 and remains number one in the
sector since launch in June 2017.
o Long-term performance - Forestry as an asset class continues
to show very strong performance, with our mature retail forestry
funds reporting an average return in excess of 13.6% since
inception.
o Outperforming target returns - GRID achieved a total return of
14.2% since IPO in 2018. BSIF Infrastructure achieved an IRR of
16.2% to 31 December 2021. ReSI plc total return of 27.0% in
2021.
-- Leaders in our specialist areas
o Largest battery storage investment trust in the UK and Europe,
GRID.
o Largest commercial forestry asset manager in the UK and now
operating in Australia.
o Second largest VCT player in the UK: Baronsmead and Mobeus
VCTs.
-- Develop the business internationally - Appian acquisition and Australian forestry.
-- Enhance Gresham House brand - now an established asset
manager that has become the go-to on our specialist asset classes
(e.g. vertical farming alongside battery storage).
Employees and clients
People and culture
The Gresham House team has grown steadily in recent years and
now totals 185 employees in the core asset management business.
This expansion has been driven by our focus on investing in talent,
bringing leading expertise into the business across all asset
classes and activities.
With share ownership across the business, the ambitions of the
business and its staff are closely aligned with those of our
clients. Employees own c.10% of shares. We value our employees as
our greatest asset and were delighted that our latest staff survey
at the end of 2021 showed strong levels of advocacy for the
business with 96% of staff happy to recommend Gresham House as a
good place to work.
A dynamic, entrepreneurial and meritocratic culture is critical
to our ongoing success and the significant new hires into the
business, including key investment and distribution professionals,
have further enhanced this.
Equally, we are committed to increasing Diversity, Equity and
Inclusion (DEI) across the business and we have taken steps to
achieve this through our participation in the #100BlackInterns
programme, and the establishment of the Group's DEI Committee,
which has launched a number of key initiatives.
We will continue to invest in our people, developing career
aspirations as we consider this to be fundamental to achieving our
growth ambitions for the business.
Clients
During 2021 we further expanded and diversified our client base
at both an institutional and wholesale level, and welcomed James
Lindsay as Head of Institutional Business, working alongside
Heather Fleming and Catriona Buckley. We were pleased that new
corporate pension schemes, such as Centrica invested in ReSI LP and
that new institutional clients invested in the Gresham House Forest
Growth & Sustainability LP. These are important steps as
institutional clients begin to understand the returns and
sustainability dynamics of investing in forestry. This highlights
our ability to be able to increase the coverage of our fund
offerings across wider distribution channels, carefully packaging
our products into relevant fund structures for a wider range of
clients.
We have also developed a number of relationships in the
Strategic Equity division to provide access to a wider client base
through platforms and wealth manager connections.
Sustainability
We are committed to embedding sustainability throughout the
business to underpin the ESG focus of our investment approach.
In 2021 we established the Sustainability Committee as a
sub-committee of the Board, chaired by Gareth Davis, to provide
leadership for the implementation of this commitment with
objectives for every employee across Gresham House.
We are also proud to be publishing our second annual Sustainable
Investment Report.
We are focused on investments that both yield tangible and
reliable returns for investors in our funds, whilst delivering
positive social and environmental gains in areas that include
battery storage, forestry and affordable housing.
We have set out a new Corporate Sustainability Strategy, with
our ambitions built on three key pillars: Gresham House as a
sustainable business and employer; a sustainable corporate citizen;
and a sustainable investor.
Sustainable business and employer
Our growth will be influenced by our ability to successfully
integrate sustainability authentically into our day-to-day business
activities and our investment decisions. A key progressive step for
this is our commitment to the Task Force on Climate-related
Financial Disclosure (TCFD) reporting to assess our carbon
footprint and continuously assess the measures we are taking to
reduce it.
Sustainable corporate citizenship
We are fostering a commitment to corporate citizenship across
the business through community and charitable initiatives including
our support of the British Heart Foundation and Centrepoint. We are
also committed to giving all employees two days volunteering leave
per year to support employee engagement across the business but
also to ensure our colleagues are contributing to wider society
through charitable initiatives.
Sustainable investor
Solving some of the world's greatest challenges - climate
change, biodiversity loss and social inequality - can be achieved
through the creation of new innovative solutions and technology
with private market capital investing in real assets. Private
markets are widely considered to offer growth opportunities in
sustainable investment alongside attractive financial returns. With
sustainability as a core element of our investment activities, we
are committed to achieving attractive financial returns for our
clients whilst delivering sustainability-focused investment
solutions and strategies.
We ensure best practice throughout our investment activities
through constant assessment and evaluation.
AUM
AUM as Net Performance Net funds AUM as AUM movement AUM movement
at 31 fund won/ at 31
December flows(1) acquired December
2020 2021
GBPmn GBPmn GBPmn GBPmn GBPmn GBP mn %
Strategic Equity
Strategic Public
Equity 508 179 162 188 1,037 529 104%
Private Equity 412 27 60 388 887 475 115%
Subtotal 920 206 222 576 1,924 1,004 109%
Real Assets
Forestry 1,811 611 531 - 2,953 1,142 63%
New Energy &
Sustainable
Infrastructure 932 258 23 - 1,213 281 30%
Real Estate 307 91 1 49 448 141 46%
Subtotal 3,050 960 555 49 4,614 1,564 51%
Total AUM 3,970 1,166 777 625 6,538 2,568 65%
------------------------ ---------- ---------- ------------ ---------- ---------- ------------- -------------
(1) Includes funds raised, redemptions and distributions.
AUM growth in the year totalled 65%, closing the year out at
GBP6.5 billion (2020: GBP4.0 billion). This was driven by organic
growth of GBP1.9 billion (c.50% growth) and acquisitions which
added a further GBP0.6 billion.
Net inflows in the year of GBP1.2 billion (2020: GBP0.4 billion)
represented a great year for fundraising across all of the Group's
strategies, ranging from net inflows in the Strategic Equity
open-ended funds to consistent fundraising for GRID (GBP100
million), new forestry funds such as the Gresham House Forest
Growth & Sustainability LP (GBP202 million) and BSIF II LP, our
second sustainable infrastructure fund (GBP150 million).
The underlying funds have continued to perform well with
performance driving AUM up by GBP0.8 billion (2020: GBP0.4
billion). This was notable in the Forestry strategy, where the
independent valuations of the forests managed by the Group
continued to rise in value, generating a further GBP0.5 billion in
AUM.
We also added GBP0.6 billion in AUM through the acquisition of
Appian Asset Management Limited (Appian), now Gresham House
Ireland, which added GBP303 million across the Strategic Equity and
Real Estate strategies, and GBP369 million through the acquisition
of the Mobeus VCT business in October 2021.
Strategic Equity
In 2021, we significantly increased the scale and scope of the
Gresham House VCT business through the acquisition of the Mobeus
VCT business, alongside the Baronsmead VCTs, which raised GBP71
million in new funds. In combination with Baronsmead, the Gresham
House VCT platform had AUM of GBP887 million at the end of
December, the second largest manager in the UK. We welcome Trevor
Hope, and Clive Austin, joining the Strategic Equity Executive
Committee with Tania Hayes, Bevan Duncan and Ken Wotton.
We also delivered a very strong performance in 2021 from our
open-ended funds, which nearly doubled in size, with growth driven
by our substantially enhanced distribution capabilities.
Performance across all funds was strong. Strategic Equity
Capital plc (SEC) delivered 26.6% growth in the year. There was
24.6% growth in the Gresham House UK Micro Cap Fund, and 26.5%
growth in the Gresham House UK Smaller Companies Fund. The
performance of Gresham House Strategic under our management over
the six years delivered a total return of 141%, a substantial
outperformance versus the 74% of its benchmark. As a result, our
fund managers are widely recognised across the industry for their
investment capabilities and our LF Gresham House UK Multi Cap
Income Fund won the UK Equity Income category at the Investment
Week Fund Manager of the Year Awards 2021.
Real Assets
Forestry
Through 2021, Forestry remained a compelling asset class for
patient capital and we were pleased to see increasing appetite from
UK institutional investors for our forestry funds. During the year,
we launched the Gresham House Forest Growth & Sustainability
LP. The fund raised GBP202 million over the year and will invest in
forestry that addresses demand for timber and for carbon
credits.
We also expanded our international footprint, establishing a
foothold in Australia with the acquisition of Green Triangle Forest
Products on behalf of AXA IM Alts. Building on this momentum, we
intend to launch a dedicated International Forestry Fund in
2022.
New Energy - Battery Storage
Gresham House invests in battery storage via Gresham House
Energy Storage Fund plc (GRID), the UK's largest fund investing in
utility-scale battery energy storage systems.
During 2021, GRID raised GBP280 million, incorporating GBP100
million in an oversubscribed equity raise in July and a GBP180
million, five-year, debt facility secured in September 2021. GRID
is seeing favourable developments in the battery storage market
driven by Ofgem and National Grid and is very well funded to
address these opportunities. During the year, the Group was able to
develop and sell 50MW of operational utility-scale battery storage
projects to GRID from the in-house battery storage project
development pipeline.
GRID has also signed agreements for the acquisition of a further
425MW of shovel-ready capacity across seven projects during the
period, which have, or shall, complete subject to certain
conditions being met. These projects progress our ambitions towards
its target of c.1.3GW of operational capacity by H1 2023.
New Energy - Solar and Wind
In New Energy, Gresham House are investing in a range of assets
including wind farms and solar parks. Gresham House manages 150MW
of wind farms in the UK through Limited Partnership (LP) and
unlisted structures and in 2021 acquired the 24MW Inverclyde Wind
Farm in Scotland, which has a 15-year Power Purchase Agreement with
Tesco.
In Solar, Gresham House is managing 92MW of solar parks - both
roof and ground mounted solar assets - across 17 ground mounted
sites and four companies owning many roof mounted assets. We also
partnered with Anesco on a 200MW ground mounted solar portfolio
pipeline.
Sustainable Infrastructure
We were pleased to raise GBP150 million for our second
sustainable infrastructure fund, BSIF II LP, and deployment has
been strong under Peter Bachmann and team.
Our investments directly address key sustainability challenges
and provide innovative solutions that seek to enable a new, more
sustainable, way of living. Areas within which we source investable
solutions include: decarbonisation; digital inclusion; health and
education; regeneration; resource efficiency; and waste solutions.
In addition to funds already deployed, the team has an identified
pipeline of GBP1.6 billion.
As part of our digital inclusion investment strategy, we have
invested in three full fibre network providers: Borderlink, which
targets the hard-to-reach parts of the Scottish and English
Borders; Wildanet, which is focused on the rural areas of Cornwall
and Devon; and Telcom, which focuses on apartment blocks and office
buildings across the 'Northern Powerhouse' cities and towns.
We have also made notable headway in our resource efficiency
investments, in particular in vertical farming with Fischer Farms,
which is in the process of developing the world's largest vertical
farm in Norfolk. This opens the potential to fund multiple replicas
across the UK to meet high supermarket demand for leafy greens with
strong sustainability credentials.
Real Estate
Our Real Estate funds (formerly known as Housing) saw strong
fund inflows in 2021, with investors attracted to their stable and
secure inflation-linked returns, alongside the clear social
benefits of affordable housing. We closed a new shared ownership
housing fund, ReSI LP led by Ben Fry, with commitments of GBP120.0
million at the end of 2021, and we have a strong investment
pipeline in place for these funds.
Our listed vehicle, Residential Secure Income plc ( ReSI plc),
which invests in independent retirement living and shared
ownership, introduced charters in 2021 for the acquired shared
ownership portfolios we own and manage, to ensure we embed best
practice across our activities, and we also established a resident
welfare team that supports digitally excluded residents.
The UK's shortage of affordable housing is well documented and
caused by demographic trends and historic undersupply of new homes
and Gresham House's listed and unlisted housing investment vehicles
- Gresham House BSI Housing LP, ReSI plc and ReSI LP - address a
range of affordable housing problems.
Moving into the current year, ReSI plc completed a GBP15.0
million equity raise on 3 February 2022, which together with
existing capital resources and an ultra-long-term debt facility,
will allow the fund to fully finance GBP39.0 million of accretive
shared ownership transactions currently underway.
The Appian Burlington Property Fund, now managed by Gresham
House Ireland, won the MSCI European Property Investment Award for
the second year running and under the leadership of Patrick
Lawless, our business in Ireland is well positioned. We are pleased
to see the launch of the Credit Union Income Fund post year end.
This fund invests in loans to Approved Housing Bodies (AHBs) to
generate a secure and steady income from social housing.
Outlook
We are entering the third year of our GH25 five-year plan with
an enhanced investment platform supported by strong performances
across all asset classes which has driven the increase in our ROCE
target over the medium term to 20% as well as the announcement of
our dividend policy to reach three times coverage by 2025. The
five-year plan exists to provide a clear framework for shareholder
value creation. We are pleased to be successfully executing on that
ambition and have plans to capture the increasing growth
opportunities.
We approach 2022 with the world facing different challenges than
those seen in 2021 as we hopefully move through the COVID-19
pandemic. However, we have to operate in a world coping with the
Russian invasion of Ukraine alongside increasing inflationary
pressures. The Group does not manage or own any Russian assets and
have minimal exposure to assets that are exposed to Russian
sanctions and we believe that we do not have any Russian
shareholders. These issues will see risk premia rise and have
consequent impacts on valuations. It is important to remember that
our asset classes and philosophy are long term. With that
investment horizon in mind, the growth in demand for our product
areas should continue its positive momentum.
We have a dynamic programme of fundraising mapped out for 2022
across all areas of the business, which will be well supported by
our strong and diversified distribution channels, spanning
institutional, wholesale, retail and high net worth investors and
family offices.
We are committed to delivering a sustainable investment
framework that will generate returns for both our investors and the
wider environment, economy and society and anticipate further
growth in investor appetite across new energy, sustainable
infrastructure, forestry, real estate, and both public and private
equity.
With improved margins and higher quality AUM, as we move into
2022, we are well positioned to benefit from investors' increasing
demands for investment opportunities that address the most pressing
issues of our time. The increased globalisation of investment
allows our strategic positions in these specialist asset classes to
scale substantially from this point. The Board is confident that
the Group is on track for further growth in the coming year and
beyond and will continue to deliver value for all our
stakeholders.
Tony Dalwood
Chief Executive
14 March 2022
Financial review
The Group has continued its momentum in 2021, building on the
foundations laid in 2020 and delivering exceptional growth in AUM
and profits. We continued to face challenges from the COVID-19
pandemic in 2021; however, we demonstrated the quality of the
business and the team, operating in an agile manner to deliver
returns for shareholders and clients.
The Group has grown AUM by 65% in the year to 31 December 2021,
with a closing AUM of GBP6.5 billion, up GBP2.5 billion in the year
(2020: GBP4.0 billion). The AUM growth was driven by strong organic
growth of c.50% (GBP1.9 billion), alongside the acquisitions of the
Mobeus VCT business and Appian Asset Management Limited (Appian),
the EU-based AIFM, adding a further GBP0.6 billion in the year.
This growth has helped to increase net core income in the year by
51% to GBP61.6 million (2020: GBP40.8 million) and deliver an
adjusted operating profit of GBP20.2 million, up 67% in the year
(2020: GBP12.1 million).
The performance of funds managed by the Group has also delivered
net performance fees of GBP1.7 million (2020: GBPnil) highlighting
the team's strong performance for clients in the year.
The Group has continued to use its balance sheet to develop
projects and support the growth of the business, with the sale of
battery storage projects and other development activity delivering
an additional GBP1.8 million in net gains in the year (2020: GBP1.0
million).
Total comprehensive net income after the deduction of tax,
amortisation and other acquisition-related costs has delivered a
profit of GBP12.0 million (2020: GBP0.8 million). As a result of
the improvement in the Group's profitability and growth in the
business, we have reviewed the dividend policy and are looking to
target dividend cover of three times by the end of the GH25
strategic plan in 2025. We are therefore pleased to announce our
intention to increase the final dividend by 67% to 10.0 pence for
the year ended 31 December 2021, building on the Group's 2020 final
dividend of 6.0 pence.
We present the performance of the Group using the non-GAAP
adjusted operating profit metric. The aim of the adjusted operating
profit metric is to show the true performance of the core asset
management business through the management fee income and revenues
earned, less the administrative overheads associated with
delivering asset management services. The adjusted operating profit
metric below highlights the performance of the core asset
management business separately from performance fees and gains on
the sale of development projects. The performance fees and gains on
the sale of development projects are presented alongside the
variable compensation costs payable as a result of their
generation, to show the net impact on the Group.
The adjusted operating profit metric thereby excludes
depreciation and amortisation, exceptional items from acquisition
costs and restructuring and acquisition-related share-based
payments and remuneration, as they are effectively an earn out paid
to the sellers of businesses acquired rather than an operating
expense.
Adjusted operating profit
2021 2020
GBP'000 GBP'000
Income 63,060 41,936
Dividend income from associates 285 202
----------- -----------
Gross core income 63,345 42,138
Rebates, distribution costs and fundraising
costs (1,736) (1,364)
----------- -----------
Net core income 61,609 40,774
Administration overheads (excluding amortisation,
depreciation, exceptional items and acquisition-related
share-based payment charges) (41,128) (28,690)
Finance costs (311) (25)
----------- -----------
Adjusted operating profit 20,170 12,059
----------- -----------
Adjusted operating margin 32.7% 29.6%
----------- -----------
Performance fees (gross) 6,163 -
Variable compensation attributable to performance (4,449) -
fees
----------- -----------
Performance fees net of costs 1,714 -
Gains on development projects 2,932 3,482
Variable compensation attributable to gains
on development projects (689) (2,474)
Development project costs (470) -
----------- -----------
Net development gains 1,773 1,008
----------- -----------
Performance fees and development gains
net of costs 3,487 1,008
----------- -----------
Adjusted operating profit, performance
fees and development project gains net
of costs 23,657 13,067
Non-core operating revenues 1,140 -
Costs relating to non-core operating revenues (1,102) -
----------- -----------
Net non-core activity 38 -
Amortisation and depreciation (9,475) (8,931)
Exceptional items (3,215) (1,775)
Acquisition related share-based payment
and remuneration charges (1,067) (593)
Net gains/(losses) on investments and fair
value movements* 6,224 134
Tax (4,107) (1,084)
----------- -----------
Operating profit after tax 12,055 818
----------- -----------
Loss from discontinued operations (14) (12)
----------- -----------
Total comprehensive net income 12,041 806
=========== ===========
*Excluding dividend income from associates of GBP0.3 million
(2020: GBP0.2 million) and gains on development projects of GBP2.9
million (2020: GBP3.5 million).
The adjusted operating profit metric has increased to GBP20.2
million (2020: GBP12.1 million) and the adjusted operating margin
based on net core income increased to 32.7% (2020: 29.6%) showing
the operating model of the business coming through in margin
improvement as we target a 40% operating margin as part of the GH25
strategy.
Income
2021 2020
GBP'000 GBP'000
Asset management income 62,162 40,304
Dividend and investment income 590 554
Other income 308 1,078
-------- --------
Total income 63,060 41,936
Dividend income from associates 285 202
-------- --------
Gross core income 63,345 42,138
Rebates, distribution costs and
fundraising costs (1,736) (1,364)
Net core income 61,609 40,774
-------- --------
Net core income
Total net core income has increased by 51% in the year to
GBP61.6 million (2020: GBP40.8 million), driven by the strong c.50%
organic growth in AUM in the year to GBP6.5 billion (2020: GBP4.0
billion). This increase includes the revenues generated by the
acquisition of the Mobeus VCT business from October 2021 and
Appian, the EU-based AIFM, from June 2021. We present net core
income to reflect the rebates, distribution costs and fundraising
fees paid to deliver core income by the Group.
The Group provides high-quality services in actively managed
alternative asset classes. Delivery of returns for investors is key
and requires our team of asset management specialists to drive
investment performance. As such, we operate in higher fee margin
specialist areas of asset management.
The Group benefits from a diverse range of long-term management
contracts, with c.90% of AUM being in closed-ended funds and
structures which provide a stable view on future revenue streams.
This is demonstrated through the weighted average life of limited
partner management contracts accounting for GBP2.0 billion in AUM
being over 14 years in asset classes such as forestry. The spread
of products managed by the Group's Real Assets and Strategic Equity
divisions also ensures that the Group is not exposed to any one
particular market, providing good diversification. The open-ended
funds in the Strategic Equity division had an AUM of GBP800 million
at the end of the year (2020: GBP269 million), reflecting the
addition of the funds managed by Appian of GBP284 million alongside
strong inflows and performance from the open-ended equity funds,
which added a further GBP247 million.
Dividend, interest and other income
We continue to use our balance sheet to invest alongside clients
and develop or support products managed by the Group and dividends,
interest and other income reflect this. Overall dividend and
investment income increased in 2021 to GBP590,000 (2020:
GBP554,000), primarily due to interest earned on a development
project of GBP279,000, offsetting reduced dividends from Gresham
House Energy Storage Fund plc (GRID) as the Group traded out of its
holding to recycle capital elsewhere in the business.
Other income of GBP308,000 (2020: GBP1,078,000) principally
reflects the net operating income earned from a battery storage
project while under the Group's ownership, prior to being sold to
GRID. Two projects were sold in the prior year, which were revenue
generating for a period of time before their sale process completed
with GRID.
Dividend income from associates relates to dividends recognised
for Gresham House Strategic plc (GHS, now known as Rockwood
Realisation plc) of GBP125,000 in the year (2020: GBP202,000) and
Noriker Power Limited of GBP160,000 (2020: GBPnil). These are
recognised in the share of associates profit line in the income
statement and separated out as part of the adjusted operating
profit metric disclosure.
Administrative overheads
Administrative overheads, excluding amortisation, depreciation
and exceptional items, were up 43% in the year to GBP41.1 million
(2020: GBP28.7 million). The increase in cost base includes three
months of the Mobeus VCT business' cost totalling GBP0.6 million
and six months of costs for Appian totalling GBP1.5 million.
The Group continues to focus its efforts on maximising profit
growth and increasing shareholder value and as such invested
further in the core functions of the business in 2021. Whilst doing
this we focused on the operating margin target of 40% and were
pleased to note the improvement in operating margin from 29.6% to
32.7% at the end of 2021. We are starting to see the operating
leverage come through the business as we grow AUM at a faster rate
than the cost base required to service the increased level of AUM
and as such remain on track to achieve 40% operating margins over
the medium term.
The investment in key team members across the Group in 2021 led
to the Group's full-time equivalent headcount standing at 185 at
the end of the year, up from 122 at the end of 2020. This included
16 people joining with the Mobeus VCT business,22 with the Appian
business and 64 new hires as we focused on the key roles needed to
grow the business. People costs have consequently increased in the
year to GBP34.8 million from GBP23.3 million in 2020, alongside
variable compensation relating to performance fees and development
gains of GBP5.1 million (2020: GBP2.5 million).
The Group has also benefited from improved performance across
the divisions, which drives the bonus pools based on a share of the
profits with the teams and thereby increases costs.
Total office costs across the Group were GBP1.6 million (2020:
GBP0.8 million), reflecting the London office move to 80 Cheapside
as well as the additional office costs from the acquisition of
Appian.
We operate with offices in London, Dublin, Oxford, Dumfries and
Perth and continue to operate a hybrid working approach, which
provides flexibility to our growth plans and the team alike.
When we acquire businesses, we focus on the synergies that can
be delivered as a result of combining complementary businesses. It
is not only acquisitions where we target cost savings. We continue
to review all areas of the Group's cost base diligently to ensure
that we are operating efficiently and in a lean manner. We do,
however, ensure that appropriate investment takes place in areas
that will support the growth of the business.
Finance costs
The Group increased the size of its revolving credit facility
(RCF) with Santander in December 2021 to GBP20.0 million (2020:
GBP5.0 million facility size). RCF interest and finance fees over
the year were GBP244,000 (2020: GBPnil) with the remaining
GBP67,000 relating to IFRS 16 lease interest (2020: GBP25,000).
Amortisation and depreciation
Amortisation of management contracts, customer relationships,
the website and IT platform development accounted for GBP8.5
million (2020: GBP8.0 million) as these intangible assets continue
to be amortised over their useful lives. The increase in the year
reflects the acquisition of the Mobeus VCT business in October 2021
and Appian in June 2021. This required the assessment of the fair
value of the management contracts and brand acquired within the
businesses, which are being amortised over their useful lives and
are the main drivers for the increase in the year.
Depreciation of GBP959,000 in the year (2020: GBP871,000)
relates primarily to office leases, motor vehicles used by the
Forestry business and IT equipment.
Exceptional items
We classify exceptional items as those fees and costs which
relate to acquisitions and restructuring of the business post
acquisition as well as one-off costs. Exceptional items in 2021
were GBP3.2 million compared to GBP1.8 million in 2020. These
include the acquisition costs associated with the Mobeus VCT
business, as well as Appian, which completed in June 2021,
alongside restructuring costs. This also includes GBP1.2 million of
DevCo-related acquisition and disposal costs that are required to
be expenses in the year under IFRS, rather than capitalised as
development activity.
Gains/(losses) on investments
2021 2020
GBP'000 GBP'000
Share of associates' profits 4,955 158
Profit on disposal of associate 461 -
Gains/(losses) in investments held at
fair value 5, 842 4,599
Fair value movement in deferred receivable - 224
Movement in fair value of contingent
consideration (1,659) (1,163)
Foreign exchange movements on translation (158) -
of foreign subsidiary
Total gains on investments 9,441 3,818
Less realised gains on development projects (2,932) (3,482)
Less dividend income from associates (285) (202)
-------- --------
Net gains/(losses) on investments 6,224 134
======== ========
The Group has made gains on its investments and fair value
movements in acquisition-related contingent consideration totalling
GBP9.4 million in 2021 (2020: GBP3.8 million).
The share of associates' profits relates to the 23% holding that
the Group has in GHS. The last results announcement from GHS was on
7 December 2021 for the six-month period to 30 September 2021.
Under associate accounting, the Group has therefore recognised its
share of the profits over GHS's last 12 months' reported profits of
GBP5.8 million (2020: GBP133,000 profit), which included dividends
received in the year of GBP125,000 (2020: GBP202,000).
The Group sold its investment in Noriker Power Limited in
December 2021 and as such has recognised a profit on disposal of
GBP0.5 million. The gain of GBP5.8 million from investments held at
fair value in the year (2020: GBP4.6 million) includes realised and
unrealised gains and losses on the co-investments that have been
made in the funds managed or advised by Gresham House. The key
driver of this was the gains recognised on the sale of the Byers
Brae and Enderby battery storage projects to GRID, making a gross
profit on sale of GBP2.9 million (2020: GBP3.5 million gross gain
on sale of Thurcroft and Wickham Market battery projects). Both
these battery storage development projects sales made a return on
investment in excess of the Group's medium-term target of 15%. The
net gain after the deduction of variable compensation relating to
the projects and costs associated with development activity was
GBP1.8 million for the Group (2020: GBP1.0 million).
The other notable unrealised value increase in the year was the
GBP0.9 million increase in the value of the Gresham House Forestry
Friends and Family Fund LP, based on the independent valuation at
the end of the year alongside unrealised valuation increases
totalling a further GBP2.0 million in funds and co-investments
managed by the Group.
Fair value movement in contingent consideration
The Livingbridge VC business, TradeRisks, Mobeus VCT business
and Appian acquisitions have contingent payment elements which is
driven by AUM growth, maintaining management contracts or revenue
performance over a three-year period since acquisition. The
contingent consideration payments have been fair valued at each
reporting period end with the movement in the fair value recognised
in the income statement.
The Livingbridge VC business revenue performance to December
2021 has been used to estimate the fair value of the contingent
consideration, which reached its maximum pay-out of GBP2.5 million
as a result of delivering revenues in excess of the business plan
at the time of acquisition. The increase in the fair value on the
balance sheet reflects this and the unwind of the discount between
the period end and settlement in 2022.
The TradeRisks deferred consideration is driven by AUM growth
assumptions and cost synergies. At the year end these assumptions
have been reviewed and the primary driver for the increase in the
deferred consideration is the unwinding of the discount applied
between the year end and settlement in 2023.
The Appian and Mobeus VCT business contingent considerations
have been fair valued as part of the acquisition process, with
limited fair value movement noted since acquisition in June and
October 2021 respectively.
Tax
The Group continues to utilise the losses available against the
current trading activity. The tax charge noted reflects taxable
profits within the Group partially offset by the unwinding of the
deferred tax liability recognised on the acquisition of the FIM,
Livingbridge, TradeRisks, Mobeus VCT and Appian businesses and the
impact of the movement in the fair value of the management
contracts.
Financial position
2021 2020
GBP'000 GBP'000
Assets
Investments* 38,023 23,259
Cash 40,252 21,886
--------- --------
Tangible/realisable
assets 78,275 45,145
Intangible assets 95,012 59,970
Other assets 36,259 18,057
--------- --------
Total assets 209,546 123,172
Liabilities
Borrowing - -
Contingent consideration 22,659 6,933
Other creditors 40,425 19,772
--------- --------
Total Liabilities 63,084 26,705
--------
Net assets 146,462 96,467
========= ========
*The above presentation of the Group's balance sheet highlights
the Group's direct exposure to those vehicles and entities that it
has invested in. We have therefore adjusted the IFRS Statement of
Financial Position for the following items which are required to be
consolidated under IFRS 10 to present the Group on an investment
basis:
DevCo Projects - removed the "Assets of a disposal group held
for sale" of GBP17,545,000 (2020: GBP7,363,000) and "Liabilities of
a disposal group classified as held for sale" of GBP7,499,000
(2020: GBP2,072,000) and replaced with the investment exposure in
"investments in securities" GBP13,921,000 (2020: GBP5,842,000).
Gresham House Forestry Friends and Family Fund LP - reduced the
value by the non-controlling interest amount of GBP1,075,000 (2020:
GBP811,000) to show the Group's underlying exposure to this
fund.
Tangible/realisable assets
The above highlights the strong balance sheet position that the
Group improved on during 2021. The tangible/realisable assets
supporting this total GBP78.3 million (2020: GBP45.1 million),
comprising investments and cash.
Investments
The Group invests in or alongside the funds that it manages to
align itself with clients. The below table provides a summary of
the investment portfolio at the end of the year:
Investment portfolio 2021 2020
GBP'000 GBP'000
Investment in associates
Rockwood Realisation plc (formerly Gresham
House Strategic plc or GHS) 11,459 8,456
Environment Bank Limited 496 -
Noriker Power Limited - 666
DevCo Projects - 20
-------- --------
11,955 9,142
Investment in securities
DevCo Projects 13,583 5,842
Strategic Equity Capital plc (SEC) 3,349 173
Gresham House Forestry Fund LP 2,739 2,068
Residential Secure Income plc (ReSI plc) 1,438 864
Gresham House Strategic Public Equity LP 1,363 1,162
Gresham House Forestry Growth and Sustainability
Fund LP 1,000 -
LF Gresham House Smaller Companies Fund 882 703
Gresham House British Strategic Investment
Fund (BSIF) 864 269
Residential Secured Income LP 639 -
Other investments 211 177
Gresham House Energy Storage Fund plc (GRID) - 2,859
26,068 14,117
-------- --------
Total investments (excluding non-controlling
interests) 38,023 23,259
======== ========
Investments in associates
GHS changed its name to Rockwood Realisation plc (Rockwood) and
changed its investment strategy in line with results from the
extraordinary general meeting held in December 2021. Rockwood has
since been in the process of realising its portfolio and returning
capital to shareholders, with GBP2.4 million being returned to the
Company in 2021.
The Group maintained its holding in Rockwood in the year at 23%.
The last publicly available results for the six months to 30
September 2020 have led to an increase in the recognised value as
an associate of GBP5.8 million (2020: GBP133,000 decrease), which
after adjusting for the dividend payment of GBP125,000 (2020:
GBP202,000) in the year results in a value of GBP11,458,000 (2020:
GBP8,456,000).
The Group supported the early investment into Environment Bank
Limited, an entity focused on creating habitat land banks to
support rewilding in the UK. It is envisaged that the Group's
holding will be sold to BSIF II LP when Environment Bank Limited is
operational and generating cash flows. This is an example of the
Group using its balance sheet to support the growth of assets to be
sold into funds managed by the Group, ultimately growing the AUM of
the Group.
In December 2021, the Group sold its interest in Noriker
realising a gain of GBP729,000.
Investments in securities
IFRS 10: Consolidation, requires the consolidation of the
Group's investments in battery storage Development Company projects
(DevCo Projects) as the Group has a controlling position in these
projects. The DevCo Projects have borrowed to pay the deposits for
the utility-scale batteries and this borrowing is secured at the
DevCo Project level on the batteries and there is no recourse to
the Group. The disclosure above therefore shows the Group's net
exposure to the DevCo Projects, i.e. the equity and loan investment
in the vehicles, and nets out the borrowing and utility-scale
battery assets as shown in the IFRS Statement of Financial Position
assets and liabilities of a disposal group held for sale.
The Group increased its investment in the DevCo Projects in the
year, which totalled GBP13.6 million (2020: GBP5.8 million) at the
end of 2021 and are in the exclusive pipeline for GRID to purchase
when they are operational. GRID will go through a detailed
independent valuation process when the projects are operational as
part of the acquisition process and these projects currently remain
on track to be operational in 2022 and 2023. During the year, the
Group sold seven projects, Byers Brae and six Statera projects,
which delivered a net gain of GBP1.8 million to the Group.
The Group invested GBP5.0 million in GRID at the IPO to ensure
that it reached GBP100.0 million in size and GRID has since
successfully raised further capital to grow the vehicle. At the end
of 2021, the Group realised its direct investment in GRID as it
looks to deploy capital for new initiatives around the Group.
Gresham House Forestry Fund LP performed well in the year, with
increases in the value of the underlying forests driving an
increase in the Group's investment to GBP2.7 million (2020: GBP2.1
million), excluding non-controlling interests.
Gresham House Strategic Public Equity LP continued to invest
during 2021 and generated realised and unrealised gains of
GBP430,000 (2020: GBP197,000).
The other investments demonstrate the Group's ability to
co-invest alongside the funds that it manages and provides
alignment with clients, for example investing GBP1.0 million into
the Gresham House Forest Growth & Sustainability LP as well as
committing up to GBP1.0 million to ReSI LP, the shared ownership
housing fund. These are investments where, as general partner,
Gresham House uses its balance sheet to align itself with its
clients.
Cash and borrowing
The cash balance of the Group was GBP40.3 million at the end of
the year (2020: GBP21.9 million) and reflected operating cash
profits generated in the year as well as a number of significant
cash movements such as equity fundraising and capital returned on
the sale of investments.
The Company issued new equity with a value of GBP42.0 million
(gross) for cash in September 2021 (GBP40.5 million net of fees).
This equity raise was to fund the acquisition of the Mobeus VCT
business as well as provide capital to support the Group's
ambitious development activities.
The acquisition of the Mobeus VCT business in October 2021
incurred an initial consideration of GBP20.0 million in cash, with
deferred and contingent consideration to follow in the coming
years. The acquisition of Appian in June 2021 required a net
payment of GBP3.1 million (EUR3.6 million).
The deferred consideration element of the Hazel Capital
acquisition completed in the year with a cash payment of GBP5.3
million under the Hazel LTIP.
Investment and development activity in the year totalled GBP18.9
million which included commitments to new funds launched by the
Group of GBP1.6 million (such as ReSI LP, and Gresham House Forest
Growth & Sustainability LP), capital investments to win new
mandates of GBP3.0 million (SEC) and development projects such as
battery storage and other renewable energy projects of GBP12.3
million.
The Group also benefited from the sale of a number of battery
storage projects delivering GBP3.6 million and the sale of its
stake in Noriker of GBP0.8 million
Finally, to provide flexibility as the Group enters 2022 with a
range of opportunities to grow the business, we have increased the
size of the RCF with Santander to GBP20.0 million, with a
three-year term. The Group is therefore well positioned with cash
and available facilities to take advantage of opportunities as they
arise in 2022.
Intangible assets
Intangible assets are primarily made up of the management
contracts acquired as part of acquisitions and the goodwill
associated with these acquisitions. As at 31 December 2021, the net
book value of management contracts and other intangible assets was
GBP46.2 million (2020: GBP30.3 million), reflecting the
amortisation of the management contracts over their useful lives,
and the addition of the management contracts, customer
relationships and Mobeus brand following the acquisitions of the
Mobeus VCT business and Appian. No contracts were impaired at the
year end.
Goodwill resulting from acquisitions is reviewed each year end
and there was no indication that impairment to goodwill should be
considered to the book value of GBP48.8 million (2020: GBP29.7
million). Further details are included in the notes to the
financial statements.
Contingent consideration
Contingent consideration increased from GBP6.9 million to
GBP22.7 million in the year, reflecting the acquisition of the
Mobeus VCT business and Appian alongside the impact of the time
value of money as future contingent consideration amounts become
more certain.
Outlook
The balance sheet is well positioned to capture the growth
opportunity in front of us with cash of GBP40.3 million and
investments of GBP38.0 million providing a solid platform. We have
laid further foundations in 2021 and look forward to growing the
business further in 2022.
Kevin Acton
Chief Financial Officer
14 March 2022
Group statement of comprehensive income
For the year ended 31 DECEMBER
2021 2020
Notes GBP'000 GBP'000
Income
Asset management income 62,162 40,304
Dividend and interest income 590 554
Other operating income 1,448 1,078
Performance fees and carried interest 6,163 -
--------- ---------
Total income 1 70,363 41,936
Operating costs (63,331) (43,827)
--------- ---------
Administrative overheads 3 (60,116) (42,052)
Exceptional items 6 (3,215) (1,775)
--------- ---------
Net operating profit /(loss) 7,032 (1,891)
Finance costs 7 (311) (25)
Net operating profit /(loss) after finance
costs 6,721 (1,916)
Gains and losses on investments and fair
value movements
Share of associates' profits 18 4,955 158
Profit on disposal of associate 461 -
Gains and losses on investments held at
fair value 12 5,842 4,599
Movement in fair value of contingent consideration (1,659) (1,163)
Movement in value of deferred receivable - 224
Operating profit before taxation 16,320 1,902
Taxation 9 (4,107) (1,084)
--------- ---------
Operating profit from continuing operations 12,213 818
Loss from discontinued operations (14) (12)
--------- ---------
Profit for the year 12,199 806
Other comprehensive income
Foreign exchange losses on translation
of a foreign subsidiary (158) -
--------- ---------
Profit and total comprehensive income 12,041 806
========= =========
Attributable to:
Equity holders of the parent 11,777 577
Non-controlling interest 264 229
--------- ---------
12,041 806
========= =========
Basic profit per ordinary share (pence) 10 34.8 1.9
========= =========
Diluted profit per ordinary share (pence) 10 32.7 1.8
========= =========
Basic adjusted profit per ordinary share
(pence) 10 52.6 34.5
========= =========
Diluted adjusted profit per ordinary share
(pence) 10 49.4 32.9
========= =========
Statements of changes in equity
Year ended 31 DECEMBER
Group 2021 Equity
attributable
to equity
shareholders
Ordinary Foreign of the Non-
share Share Merger Treasury Retained exchange Parent controlling Total
Notes capital premium reserve shares reserves reserve Company interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
December 2020 8,023 60,061 19,981 - 8,402 - 96,467 811 97,278
Profit and
total
comprehensive
income for
the
year - - - - 11,935 (158) 11,777 264 12,041
Contributions
by and
distributions
to owners
Share-based
payments 29 - - - - (5,424) - (5,424) - (5,424)
Issue of
shares 27 1,477 39,267 4,830 (51) - - 45,523 - 45,523
Cancellation
of share
premium - (60,000) - - 60,000 - - - -
Dividends paid 11 - - - - (1,881) - (1,881) - (1,881)
--------- --------- -------- --------- --------- --------- ------------- ------------ --------
Total
contributions
by and
distributions
to owners 1,477 (20,733) 4,830 (51) 52,695 - 38,218 - 38,218
--------- --------- -------- --------- --------- --------- ------------- ------------ --------
Balance at 31
December 2021 9,500 39,328 24,811 (51) 73,032 (158) 146,462 1,075 147,537
========= ========= ======== ========= ========= ========= ============= ============ ========
Group 2020 Equity
attributable
to equity
shareholders
Ordinary Share Merger of the Non-
share premium reserve Retained Parent controlling Total
Notes capital (restated) (restated) reserves Company interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
December
2019 6,956 52,594 16,648 14,039 90,237 582 90,819
Profit and total
comprehensive
income for the
year - - - 577 577 229 806
Contributions by
and
distributions to
owners
Share-based
payments 29 2 38 - (4,863) (4,823) - (4,823)
Issue of shares 27 1,065 7,429 3,333 - 11,827 - 11,827
Dividends paid 11 - - - (1,351) (1,351) - (1,351)
--------- ------------ ------------ ---------- -------------- ------------- --------
Total
contributions
by and
distributions
to owners 1,067 7,467 3,333 (6,214) 5,653 - 5,653
--------- ------------ ------------ ---------- -------------- ------------- --------
Balance at 31
December
2020 8,023 60,061 19,981 8,402 96,467 811 97,278
========= ============ ============ ========== ============== ============= ========
Company 2021 Ordinary
share Share Merger Retained Total
Notes capital premium reserve reserves equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December 2020 8,023 60,061 19,981 9,257 97,322
Loss and total comprehensive income
for the year - - - (1,695) (1,695)
Contributions by and distributions
to owners
Share-based payments - - - (4,977) (4,977)
Issue of shares 27 1,477 39,267 4,830 - 45,574
Cancellation of share premium - (60,000) - 60,000 -
Dividends paid 11 - - - (1,881) (1,881)
--------- --------- --------- ---------- --------
Total contributions by and distributions
to owners 1,477 (20,733) 4,830 53,142 38,716
--------- --------- --------- ---------- --------
Balance at 31 December 2021 9,500 39,328 24,811 60,704 134,343
========= ========= ========= ========== ========
Company 2020 Ordinary Share Merger
share premium reserve Retained Total
Notes capital (restated) (restated) reserves equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December 2019 6,956 52,594 16,648 12,379 88,577
Loss and total comprehensive income
for the year - - - (1,771) (1,771)
Contributions by and distributions
to owners
Issue of shares 27 1,067 7,467 3,333 - 11,867
Dividends paid 11 - - - (1,351) (1,351)
--------- ------------ ------------ ---------- --------
Total contributions by and distributions
to owners 1,067 7,467 3,333 (1,351) 10,516
--------- ------------ ------------ ---------- --------
Balance at 31 December 2020 8,023 60,061 19,981 9,257 97,322
========= ============ ============ ========== ========
Statements of financial position
As at 31 DECEMBER
Group Company
Notes 2021 2020 2021 2020
Assets GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments 12 13,560 9,086 8,308 5,342
Property, plant and equipment 13 2,927 1,090 1,912 564
Investment in subsidiaries 17 - - 80,148 79,872
Investment in associates 18 11,955 9,142 - 65
Intangible assets 14 95,012 59,970 1,100 749
Long-term receivables 15 492 - 492 -
Deferred tax 24 2,197 1,051 92 153
126,143 80,339 92,052 86,745
-------- -------- -------- --------
Current assets
Trade receivables 19 11,135 3,184 - -
Accrued income and prepaid
expenses 20 21,705 13,783 1,157 760
Other current assets 21 3,537 551 20,047 6,885
Cash and cash equivalents 40,252 21,886 23,800 7,826
Non-current assets held for
sale
Assets of a disposal group
held for sale 16 17,545 7,363 - -
-------- -------- -------- --------
Total current assets and
non-current assets held for
sale 94,174 46,767 45,004 15,471
-------- -------- -------- --------
Total assets 220,317 127,106 137,056 102,216
-------- -------- -------- --------
Current liabilities
Trade and other payables 22 42,721 18,780 519 243
Short-term borrowings 23 - - 1,136 4,651
Liabilities of a disposal
group classified as held
for sale
Liabilities of a disposal
group classified as held
for sale 16 7,499 2,072 - -
-------- -------- -------- --------
Total current liabilities
and liabilities of a disposal
group classified as held
for sale 50,220 20,852 1,655 4,894
-------- -------- -------- --------
Total assets less current
liabilities 170,097 106,254 135,401 97,322
-------- -------- -------- --------
Non-current liabilities
Deferred taxation 24 10,597 3,227 - -
Long-term borrowings 25 - - - -
Other creditors 26 11,963 5,749 1,058 -
-------- -------- -------- --------
22,560 8,976 1,058 -
-------- -------- -------- --------
Net assets 147,537 97,278 134,343 97,322
======== ======== ======== ========
Capital and reserves
Ordinary share capital 27 9,500 8,023 9,500 8,023
Share premium 30 39,328 60,061 39,328 60,061
Merger reserve 30 24,811 19,981 24,811 19,981
Treasury shares 30 (51) - - -
Retained reserves 30 73,032 8,402 60,704 9,257
Foreign exchange reserve 30 (158) - - -
-------- -------- -------- --------
Equity attributable to equity
shareholders of the Parent
Company 146,462 96,467 134,343 97,322
Non-controlling interest 30 1,075 811 - -
-------- -------- -------- --------
Total equity 147,537 97,278 134,343 97,322
======== ======== ======== ========
Basic net asset value per
ordinary share (pence) 31 387.5 300.6 353.5 303.6
======== ======== ======== ========
Diluted net asset value per
ordinary share (pence) 31 366.6 287.4 334.6 290.3
======== ======== ======== ========
The loss after tax for the Company for the year ended 31 December
2021 was GBP1,695,000. The financial statements were approved and
authorised for issue by the Board and were signed on its behalf
on 14 March 2022.
Kevin Acton
Chief Financial Officer
Group statement of cashflows
For the year ended 31 DECEMBER
2021 2020
Notes GBP'000 GBP'000
Cash flow from operating activities
Net cash generated from operations 32 21,130 17,592
Corporation tax paid (968) (1,856)
Interest paid on loans (187) (25)
--------- ---------
Net cash flow from operating activities 19,975 15,711
--------- ---------
Cash flow from investing activities
Acquisition of Appian Asset Management
Limited (841) -
Acquisition of Mobeus VCT business 514 -
Acquisition of TradeRisks Limited - (8,045)
Deferred consideration paid (1,409) (9,842)
Investment in associates (1,165) -
Sale of associates 3,296 -
Dividends received from associates 383 186
Purchase of investments (5,409) (1,007)
Sale of investments 4,287 3,032
Investment in DevCo Projects (12,349) (1,271)
DevCo loans repaid 551 1,096
Proceeds received on sale of DevCo Projects 3,551 4,581
Purchase of fixed assets (327) (152)
Sale of fixed assets 6 -
Purchase of intangible assets (724) (584)
--------- ---------
Total cash flow from investing activities (9,636) (12,006)
--------- ---------
Cash flow from financing activities
Receipt of loans 10,000 -
Repayment of loans (10,000) -
Share issue proceeds 22,000 8,010
Share issue costs (1,513) (347)
Share warrants exercised - 182
Share-based payments settled (9,734) (7,125)
Dividends paid (1,881) (1,351)
Capital element of lease payments (845) (620)
--------- ---------
Total cash flow from financing activities 8,027 (1,251)
--------- ---------
Increase in cash and cash equivalents 18,366 2,454
Cash and cash equivalents at start of
year 21,886 19,432
Cash and cash equivalents at end of year 40,252 21,886
========= =========
Company statement of cashflows
For the year ended 31 DECEMBER
2021 2020
Notes GBP'000 GBP'000
Cash flow from operating activities
Net cash generated from operations 32 (1,911) (1,180)
Interest paid on loans (142) (8)
--------- --------
Net cash flow from operating activities (2,053) (1,188)
--------- --------
Cash flow from investing activities
Purchase of investments (5,203) (930)
Sale of investments 3,284 3,032
DevCo loans repaid 551 1,096
Investment in DevCo Projects (3,537) -
Sale of associates 65 -
Purchase of fixed assets (371) (152)
Sale of fixed assets 6 -
Purchase of intangible assets (725) (593)
--------- --------
Total cash flow from investing activities (5,930) 2,453
--------- --------
Cash flow from financing activities
Receipt of loans 10,000 -
Repayment of loans (10,000) -
Net repayments from (advances to) Group
undertakings 11,208 (1,387)
Share issue proceeds 22,000 8,010
Share issue costs (1,513) (347)
Share warrants exercised - 182
Share-based payments settled (5,253) -
Dividends paid (1,881) (1,351)
Capital element of lease payments (604) (486)
--------- --------
Total cash flow from financing activities 23,957 4,621
--------- --------
Increase in cash and cash equivalents 15,974 5,886
Cash and cash equivalents at start of
year 7,826 1,940
Cash and cash equivalents at end of year 23,800 7,826
========= ========
Principal accounting policies
The Group's principal accounting policies are as follows:
(a) Basis of preparation and going concern
Gresham House plc is a public limited company limited by shares
incorporated in the United Kingdom under the Companies Act and
registered in England with company number 871. The address of the
registered office is 5 New Street Square, London, EC4A 3TW.
The financial statements of the Group and the Company have been
prepared in accordance with United Kingdom adopted International
Accounting Standards in conformity with the requirements of the
Companies Act 2006. The financial statements are presented in
Sterling, which is also the Group's functional currency. The
financial statements have been prepared on a historical cost basis,
except for the following:
-- certain financial assets and liabilities are measured at fair
value; and
-- assets held for sale are measured at fair value less costs to
sell.
There were no new accounting standards, which were effective for
periods beginning 1 January 2021 adopted during the year that would
have had a material impact on the Group's results.
The Group has sufficient financial resources and ongoing
investment management contracts. As a consequence, the Directors
believe that the Group is well placed to manage its business risks
successfully. The Directors have a reasonable expectation, after
performing downside scenario stress tests, that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Downside scenario stress tests included a
material reduction in revenues from reducing net asset values of
the funds managed by the Group as well as reviews of variable costs
and discretionary investment. Whilst Brexit and COVID-19 have
impacted the environment in which the Group operates they have not
had a material impact on the Group's resources. The downside
scenarios also reviewed the revolving credit facility covenants,
which were not breached as the revolving credit facility was
undrawn at the year end. Thus, the Directors continue to adopt the
going concern basis of accounting in preparing the financial
statements.
(b) Basis of consolidation
Subsidiaries
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee;
exposure to variable returns from the investee; and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control. The
consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings made up
to the year end as if they formed a single entity. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation. The acquisition method of accounting is used to
account for business combinations by the Group. Refer to Note (r)
iv) for further details on whether the Group controls funds that it
also manages. At the Company level investments in subsidiaries are
carried at cost less impairment.
Associates
Where the Group has significant influence, it has the power over
(but not control of) the financial and operating policy decisions
of another entity, it is classified as an associate. This is
typically where the Group holds over 20% of the voting shares in
the entity. Associates are initially recognised in the Group
Statement of Financial Position at cost. Subsequently, associates
are accounted for using the equity method, where the Group's share
of post-acquisition profits and losses and other comprehensive
income is recognised in the Group Statement of Comprehensive
Income. Dividends received or receivable from associates are
recognised as a reduction in the carrying amount of the
investment.
Profits and losses arising on transactions between the Group and
its associates are recognised only to the extent of unrelated
investors' interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is
eliminated against the carrying value of the associate.
Where there is an indication of impairment that the investment
in an associate has been impaired, the carrying amount of the
investment will be tested for impairment in the same way as other
non-financial assets.
(c) Presentation of Statement of Comprehensive Income
As permitted by Section 408 of the Companies Act 2006, the
Company has not presented its own Statement of Comprehensive
Income. Details of the Company's results for the year are set out
in Note 30, the loss for the year being GBP1,695,000 (2020:
GBP1,771,000).
(d) Segment reporting
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the Board in order to allocate resources to the segments and to
assess their performance.
The Group's reportable segments, which are those reported to the
Board are Real Assets, Strategic Equity and Central. The Real
Assets division includes Forestry, New Energy and Sustainable
Infrastructure and Real Estate, and the Strategic Equity division
includes Public and Private Equity.
(e) Revenue recognition
The fixed consideration element of asset management contracts is
measured at the fair value of the consideration received or
receivable, is stated net of value added tax and is earned within
the United Kingdom. The fixed consideration element of asset
management contracts is recognised evenly over the contracted
period, as the contracts require the Group to perform an
indeterminate number of individual asset management services over
the duration of the contract. Typically, the asset management fees
are based on a fixed percentage of the net asset values of the
funds managed or committed capital. Asset management income also
includes catch-up management fees on final close of limited
partnership funds, directors and advisory fees and fundraising
fees.
Catch-up management fees or equalisation fees are calculated as
the management fee payable from the date of commitment to the fund
as if an investor had joined the fund at inception of the fund and
are typically calculated on the investor's commitments to the
limited partnership at the appropriate management fee or priority
profit share.
Performance fees are recognised as revenue only to the extent
that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. Performance
fees are payable when a certain hurdle rate has been achieved on a
specific date, typically an NAV amount on the year end reporting
date of the specific fund. The potential for the NAV to decrease
from a reporting period end to the measurement date means that the
performance fee is generally only recognised when the measures on
which it is based have finally been determined. Cash payments in
relation to fixed and variable revenues earned are generally
received shortly after the relevant quarter end.
Fundraising fees are earned by the Group for providing fund
raising services, typically to the VCTs. This includes promoting
the fund raise, legal documentation and other administrative tasks
of executing the fund raise. Fundraising fees are typically paid on
a percentage of the funds raised, i.e. equity invested into the
fund.
The costs associated with fund raising, distribution and rebates
to investors as part of a fund raising are recognised as they are
incurred or over the service period provided and are presented as
part of the net core income disclosure. These costs are incurred
with the Group acting as principal.
Other revenue recognition
(i) Dividend and interest income
Income from listed securities is recognised when the right to
receive the dividend has been established. Interest receivable is
recognised when it is probable that the economic benefits will flow
to the Group and the amount of revenue can be reliably measured.
Interest income is accrued on a time basis by reference to the
principal outstanding and by using the effective interest rate
method.
(ii) Other income
Other income earned by the Group is recognised to the extent
that it is probable that the economic benefits will flow to the
Group and that revenue can be reliably measured in line with any
contractual arrangements in place. This includes non-core operating
income which relates to income earned from property services, which
are not considered core asset management services to the Group.
(f) Expenses
All expenses and interest payable are accounted for on an
accruals basis.
(g) Property, plant and equipment
Each class of property, plant and equipment is carried at cost
less, where applicable, any accumulated depreciation.
The carrying amount of property, plant and equipment is reviewed
annually by the Directors to ensure it is not in excess of the
recoverable amount from those assets. The recoverable amount is
assessed on the basis of the expected net cash flows which will be
received from the assets' employment and subsequent disposal.
The depreciable amount of all property, plant and equipment is
depreciated on a straight-line basis over their estimated useful
lives to the Group commencing from the time the asset is held ready
for use, and are depreciated at the following rates:
Office equipment 25%
Motor vehicles 25%
Leasehold property 10%
Right of use assets over the lease term
(h) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit before tax as reported in
the Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are not taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the Statement of
Financial Position date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
Statement of Financial Position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the assets to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset
realised. Deferred tax is charged or credited in the Statement of
Comprehensive Income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
(i) Leases
A lease is defined as a contract that conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. At the commencement date of a lease a
right of use asset and a lease liability are recognised in the
financial statements.
The lease liability is initially measured at the present value
of expected future lease payments discounted at the interest rate
implicit in the lease or, if that rate cannot be determined, the
lessee's incremental borrowing rate. Subsequently the lease
liability decreases by the lease payments made, offset by interest
on the liability, and may be remeasured to reflect any reassessment
of expected payments or to reflect any lease modifications.
The right of use asset is initially measured at the amount of
the initial lease liability plus: any lease payments made on or
before the commencement date less incentives received; any
incremental costs of obtaining the lease; and, if any, the costs of
decommissioning the asset and any restoration work to return the
asset to the condition required under the terms of the lease.
Subsequently the right of use asset is valued using the cost
model. The asset is amortised on a straight-line basis over the
expected term of the lease, adjusted for any remeasurement of the
lease liability, and is shown net of the accumulated depreciation
and any impairment provisions.
Leases for low value assets and short-term leases are expensed
to operating profit on a straight-line basis over the term of the
lease.
(j) Investments
In line with IFRS 9: Financial Instruments, financial assets
designated as at fair value through profit and loss (FVTPL) at
inception are those that are managed and whose performance is
evaluated on a fair value basis. Information about these financial
assets is provided internally on a fair value basis to the Group's
key management. The equity investments which do not meet the
definitions of an associate or subsidiary remain held at fair value
through profit and loss.
(i) Assets held for sale
Non-current assets held for sale are measured at the lower of
carrying amount or fair value less costs to sell (except where the
exemptions of paragraph 5 of IFRS 5 apply) and are classified as
such if their carrying amount will be recovered through a sale
transaction rather than through continuing use.
This is the case when the asset is available for immediate sale
in its present condition subject only to terms that are usual and
customary for sales of such assets and the sale is considered to be
highly probable. A sale is considered to be highly probable if the
appropriate level of management is committed to a plan to sell the
asset and a further active programme to locate a buyer and complete
the plan has been initiated. Further, the asset has to be marketed
for sale at a price that is reasonable in relation to its current
fair value. In addition, the sale is expected to qualify for
recognition as a completed sale within one year from the date that
it is classified as held for sale.
An impairment loss is recognised for any initial or subsequent
write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in
fair value less costs to sell of an asset (or disposal group), but
not in excess of any cumulative impairment loss previously
recognised. A gain or loss not previously recognised by the date of
the sale of the non-current asset (or disposal group) is recognised
at the date of derecognition.
Non-current assets (including those that are part of a disposal
group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the
liabilities of a disposal group classified as held for sale
continue to be recognised.
(ii) Securities
Purchases and sales of listed investments are recognised on the
trade date, the date on which the Group commit to purchase or sell
the investment. All investments are designated upon initial
recognition as held at fair value and are measured at subsequent
reporting dates at fair value, which is either the market bid price
or the last traded price, depending on the convention of the
exchange on which the investment is quoted. Fair values for
unquoted investments, or for investments for which there is only an
inactive market, are established by taking into account the
International Private Equity and Venture Capital Valuation
Guidelines.
(iii) Loans and receivables
Unquoted loan stock, loan receivables in development projects
and the deferred receivable are all classified at amortised cost
under IFRS 9 reflecting their held to collect business model.
Unquoted loan stock is classified as loans and receivables in
accordance with IFRS 9 if it meets the business model and cash
characteristics tests. The business model and cash characteristics
tests require the objective of owning the financial asset to
collect the contractual cash flows of interest and principal over
the life of the asset, rather than selling prior to contractual
maturity. The financial assets are held at amortised cost, less any
loss allowance, which is measured using the expected credit loss
impairment model. This assesses the movements in both the amortised
cost relating to the interest income and in respect of loss
allowances and these are reflected in the Statement of
Comprehensive Income.
(k) Exceptional items
The Group presents exceptional items as a non-GAAP measure on
the face of the Consolidated Statement of Comprehensive Income
those material items of income and expense which, because of the
nature and expected infrequency of the events giving rise to them,
merit separate presentation to allow shareholders to understand
better the elements of financial performance in the year so as to
facilitate comparison with prior years and to assess better trends
in financial performance.
(l) Intangible assets
(i) Goodwill
Goodwill, representing the excess of the cost of acquisition
over the fair value of the Group's share of the identifiable assets
and liabilities acquired, is capitalised in the Statement of
Financial Position. Following initial recognition, goodwill is
stated at cost less any accumulated impairment losses.
Goodwill will be reviewed for impairment annually or more
frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
(ii) Management contracts and client relationships
Intangible assets, such as management contracts and client
relationships acquired as part of a business combination or
separately, are capitalised where it is probable that future
economic benefits attributable to the assets will flow to the Group
and the fair value of the assets can be measured reliably.
They are recorded initially at fair value and then amortised, if
appropriate, over their useful lives. The fair value at the date of
acquisition is calculated using discounted cash flow methodology
and represents the valuation of the net residual income stream
arising from the management contracts or distribution agreements in
place at the date of acquisition. The management contracts and
client relationships are included in the Statement of Financial
Position as intangible assets. Intangible assets with a finite life
have no residual value and are amortised on a straight-line basis
over their expected useful lives as follows:
-- Client relationships arising on acquisition - five years
-- Management contracts arising on acquisition - one to 25 years
depending on the specific management contract details
(iii) Website and IT platform development
Costs associated with the development of the Group's website and
IT platform are capitalised in the Statement of Financial Position
and are amortised over the estimated useful life of four years.
(iv) Brands
Brands acquired as part of a business combination or separately,
are capitalised where it is probable that future economic benefits
attributable to the assets will flow to the Group and the fair
value of the brand can be measured reliably.
They are recorded initially at fair value and then amortised
over their useful lives. The fair value at the date of acquisition
is calculated using discounted cash flow methodology and represents
the valuation of the net residual income stream arising from the
brands at the date of acquisition. The brands are included in the
Statement of Financial Position as intangible assets. Intangible
assets with a finite life have no residual value and are amortised
on a straight-line basis over their expected useful lives of five
years.
Amortisation methods, useful lives and residual values will be
reviewed at each reporting date and adjusted if appropriate.
At each period end date, reviews are carried out of the carrying
amounts of intangible assets to determine whether there is any
indication that the assets have suffered an impairment loss. If any
such indication exists, the recoverable amount, which is the higher
of value in use and fair value less costs to sell, of the asset is
estimated in order to determine the extent, if any, of the
impairment loss.
If the recoverable amount of an asset or cash-generating unit
(CGU) is estimated to be less than its net carrying amount, the net
carrying amount of the asset or CGU is reduced to its recoverable
amount. Impairment losses are recognised immediately in the
Statement of Comprehensive Income. The Group assesses at the end of
each reporting period whether there is any indication that an
impairment loss recognised in prior periods may no longer exist or
may have decreased. If any such indication exists, the Group
estimates the recoverable amount of that asset. In assessing
whether there is any indication that an impairment loss recognised
in prior periods for an asset may no longer exist or may have
decreased, the Group considers, as a minimum, the following
indications:
(a) whether the asset's market value has increased significantly during the period;
(b) whether any significant changes with a favourable effect on
the entity have taken place during the period, or will take place
in the near future, in the technological, market, economic or legal
environment in which the entity operates or in the market to which
the asset is dedicated; and
(c) whether market interest rates or other market rates of
return on investments have decreased during the period, and those
decreases are likely to affect the discount rate used in
calculating the asset's value in use and increase the asset's
recoverable amount materially.
(m) Financial instruments
Financial assets and financial liabilities are recognised on the
Consolidated Statement of Financial Position when the Group becomes
a party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, and the net amount
reported in the Consolidated Statement of Financial Position when
there is a legally enforceable right to settle on a net basis or
realise the asset and liability simultaneously and where the Group
intends to net settle.
(i) Trade and other receivables
Receivables are short term in nature. Trade and other
receivables are recognised and carried at the lower of their
invoiced value and recoverable amount. Expected credit losses are
recognised in respect of each trade receivable and remeasured at
each report date based on the expected credit losses at that time.
The expected credit losses are estimated using a provision matrix
by reference to past default experience and an analysis of the
debtor's current financial position, adjusted for factors that are
specific to the debtor, general economic conditions of the industry
and an assessment of both the current as well as the forecast
direction of conditions at the reporting date.
(ii) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
(iii) Non-current receivables
Deferred receivables are recognised at the discounted value of
those receipts.
(iv) Dividends payable
All dividends are recognised in the period in which they are
approved by shareholders.
(v) Bank borrowings
Bank borrowings are initially recognised at fair value, net of
transaction costs incurred. Bank borrowings are subsequently
measured at amortised cost. Any difference between the proceeds
(net of transaction costs) and the redemption amount is recognised
in profit or loss over the period of the borrowings using the
effective interest rate method. Fees paid on the establishment of
loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility
will be drawn down. In this case, the fee is deferred until the
draw-down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the
fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
(vi) Trade and other payables
Trade payables are not interest-bearing and are stated at their
nominal value. Other payables are not interest-bearing and are
stated at their nominal value as any discounting of expected cash
flows is considered to be immaterial.
(vii) Borrowing costs
Unless capitalised under IAS 23 Borrowing Costs, all borrowing
costs are recognised in the Consolidated Statement of Comprehensive
Income in the period in which they are incurred. Finance charges,
including premiums paid on settlement or redemption and direct
issue costs and discounts related to borrowings, are accounted for
on an accruals basis and charged to the Consolidated Statement of
Comprehensive Income using the effective interest method.
(viii) Contingent consideration
Contingent consideration arises when settlement of all or any
part of the cost of a business combination or other acquisition,
for example management contract, is deferred. It is stated at fair
value at the date of acquisition, which is determined by
discounting the amount due to present value at that date.
Estimates are required in respect of the amount of contingent
consideration payable on acquisitions, which is determined
according to formulae agreed at the time of the business
combination, and normally related to the future earnings, revenues
or fundraising targets of the acquired business. The Directors
review the amount of contingent consideration likely to become
payable at each period end date, the major assumption being the
level of future profits of the acquired business. Contingent
consideration payable is discounted to its fair value in accordance
with applicable International Financial Reporting Standards.
(n) Pensions
The Group operates defined contribution pension schemes where
payments to such schemes for employees are charged against profits
in the year in which they are incurred.
(o) Share-based payments
The Group issued equity-settled share-based payments to certain
Directors and employees. Equity-settled share-based payments are
measured at fair value (excluding the effect of non-market based
vesting conditions) at the date of grant. The fair value determined
at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of the shares that will eventually vest and
adjusted for the effect of non-market based vesting conditions.
Fair value is measured using a Monte-Carlo option pricing model.
The expected life used in the model has been adjusted, based on
management's best estimate, for the effect of non-transferability,
exercise restrictions and behavioural considerations.
A liability equal to the portion of the goods or services
received is recognised at the current fair value determined at each
period end date for cash-settled share-based payments.
(p) Non-controlling interests
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein in accordance with IFRS 10. Non-controlling interests
consist of the amount of those interests at the date of the
original business combination and for acquisitions post 3 October
2010 following adoption of IAS 27 Consolidated and Separate
Financial Statements (Revised 2008), the non-controlling interests'
share of changes in equity since the date of the combination.
(q) Business combinations
The Group recognises business combinations when it considers
that it has obtained control over a business, which could be an
entity or separate business within an entity (for example acquiring
management contracts and hiring the team to service those
contracts). The fair value of the assets acquired, and the
liabilities assumed from the business combination are assessed at
acquisition. The fair value of the consideration paid to the
sellers of the business is assessed, with particular reference to
the classification of payments to employees that could be
considered remuneration rather than consideration for a
business.
(r) Critical accounting estimates and judgements
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates. The estimates and
assumptions that have significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are those used to determine:
(i) revenue recognition, performance fees, management fees and fund-raising fees
(ii) treatment of battery storage development companies
(iii) accounting for investment in associates - Gresham House
Strategic plc (GHS - now known as Rockwood Realisation plc)
(iv) consolidation assessment of funds managed and controlled by the Group
(v) impairment review for Goodwill and Management Contracts from previous acquisitions
(vi) valuation of contingent consideration
(vii) Mobeus VCT business acquisition - valuation of management contracts and brand
(viii) Appian Asset management Limited business acquisition -
valuation of management contracts
(i) Revenue recognition, performance, management and fundraising fees
The revenue recognition of the Group is driven by asset
management fees, which are recognised in line with the investment
management or advisory agreements in place with the appropriate
funds. These are typically based on the committed capital of
Limited Partnership funds, or Net Asset Values (NAV) for listed
vehicles managed or advised by the Group. The NAV is typically the
last audited or publicly available NAV announced by the Board of
these companies and is therefore independently approved. As a
result there is limited uncertainty in the amount of revenue to be
recognised.
Limited partnerships and other fund management fees are
typically based on committed capital, or an independent valuation
where appropriate. Where there is an interim close on a Limited
Partnership, the equalisation process for new Limited Partners
involves catch-up management fees or priority profit shares back to
inception of the fund. In this instance the judgement relates to
the assessment of service period, which represents past service
provision for management fees as if the new Limited Partner joined
at inception.
Performance fees are recognised only when the Group is entitled
to receive the performance fee per the management contract. This is
on achievement of the hurdle rate as set out in the management or
advisory agreements and the outcome is known as it is based on the
audited NAV of the fund. Performance fees were recognised and paid
by GHS plc and Baronsmead VCT plc in the year.
Fundraising fees are recognised as a percentage of funds raised,
with fundraising being the key performance obligation. The
fundraising relates to new share offers in 2021 by the VCTs managed
by the Group. Judgement is applied at the end of the period, should
the issuance date for new investors fall after the period end. The
commitments received by the receiving agent are used to estimate
the amount of funds raised and consequently the amount of
fundraising fee to be recognised at the period end. This is
confirmed post period through the share allotment process run by
the registrar of the VCTs.
(ii) Treatment of battery storage development companies
The Group has invested in the development of battery storage
projects (DevCo Projects), which are part of the exclusive pipeline
to be sold to Gresham House Energy Storage Fund plc (GRID) when
operational. The DevCo Projects are held in separate SPVs, which
the Group entity Devco Limited owns between 60-100% of the equity
in, and the Group has also lent funds for the development of the
projects.
There are five key considerations in the accounting treatment of
the development companies:
a) Control (IFRS 10) - Devco Limited holds the majority of the
equity in the DevCo Projects and has also loaned capital to fund
the development of the DevCo Projects. Devco Limited is considered
in control of the DevCo Projects and therefore has consolidated
them in the Group financial statements.
b) Associates (IAS 28) - one of the DevCo Projects (Biggerbrook)
was accounted for as an associate in the prior year as Devco
Limited held only 24% of the equity and was not in a controlling
position.
c) Classification of the assets in each DevCo Project - the SPVs
are developing battery storage facilities which are classified as
non-current assets under development until these assets become
operational. The Group has therefore classified these as
non-current assets, akin to property, plant and equipment .
d) Assets held for sale (IFRS 5) and loss of control - the sale
of the DevCo Projects (Byers Brae and Enderby) during the period
has been treated as a loss of control transaction under IFRS 10
resulting in a gain on sale being presented net in the Statement of
Comprehensive Income. It is expected that the sale process will
complete within a six-month time frame; as such, it has been deemed
appropriate to treat this DevCo Project as a disposal group held
for sale under IFRS 5.
e) Borrowing costs (IAS 23) - the DevCo Projects have interest
payments relating to the amounts lent by GRID to fund the
acquisition of the battery assets at the project company level. The
DevCo Projects have capitalised finance costs per IAS 23 Borrowing
Costs as the characteristics of the development of the projects
(such as not generating revenues until operational, loans being
procured for the sole purpose of developing the projects and the
projects taking a long time to get ready for intended sale) permit
this. The capitalisation rate used was the weighted average of the
borrowing costs applicable to all relevant borrowings outstanding
during 2021.
(iii) Accounting for investment in associates - Gresham House
Strategic plc (GHS ), Environment Bank Limited (EBL ) and Noriker
Power Limited (Noriker)
The Board remains satisfied that the Group did not exercise
control over GHS, based on the Group's stake and the fact that the
management contract with GHS was terminated by the Board of GHS on
11 October 2021, thereby reducing any influence GHAM has over
GHS.
Nonetheless, the Board has concluded that the Group does
exercise significant influence over GHS due to its 23% equity
stake. As a result of this, it remains appropriate to account for
the Group's stake in GHS as an associate of the Group. The stake in
GHS was acquired in August 2015, however, the requirement to
account for GHS as an associate arose with effect from 23 November
2015, the date the Company ceased being an investing company and
became an operating company which resulted in a reassessment of the
accounting for all such equity investments. The Board concluded
that the Company continues to have significant influence over
GHS.
Noriker
On 8 June 2018, the Group acquired a 28% investment in Noriker,
the battery storage developer, which was fully sold in December
2021. The Group has treated this as the disposal of an associate in
the year.
EBL
On 7 May 2021, the Group acquired a 50% investment in
Environment Bank Limited (EBL), the habitat bank development
company. The Group has also entered into an option agreement with
Gresham House BSI Infrastructure LP and Gresham House British
Sustainable Infrastructure Fund II LP (BSIF funds) for the BSIF
funds to acquire 25% from the Group. The Group does not have the
ability to control the board of EBL through majority voting rights
or the ability to appoint or remove the majority of the board of
directors. The Director's assessment is that the Group can exercise
significant influence over EBL and has treated it as an
associate.
(iv) Consolidation assessment of funds managed and controlled by the Group
When assessing whether the Group controls funds that are managed
on behalf of third parties, the Group is required to assess whether
it has power over these funds; exposure, or rights, to variable
returns from its involvement with the fund; and has the ability to
use its power over the funds to affect the amount of the Group's
returns. This can also be considered when the Group is acting in
its capacity as agent or principal. An agent is acting on behalf of
third-party investors, whereas a principal is acting for its own
benefit.
IFRS 10 provides guidance for considering the assessment of
whether fund managers are acting as agent or principal, and
therefore whether the Group should consolidate the funds that it
manages or not. The key considerations when assessing this are
decision making authority of the fund manager, rights held by third
parties, remuneration and exposure to returns. The following
provides further detail on the Directors' assessment of control
over the funds that are managed by Gresham House Asset Management
Limited (GHAM), the FCA regulated entity within the Group and
whether the Company or its subsidiaries are acting as agent or
principal:
Fund Manager/ Removal rights Remuneration Gresham Agent/ Accounting
adviser of investors basis House principal treatment
holding
Rockwood No Substantive n/a 23% Agent Associate
Realisation
(formerly
GHS)
--------- --------------- ------------- --------- ----------- -----------------
EBL No n/a n/a 50% Agent Associate
--------- --------------- ------------- --------- ----------- -----------------
GHF FF LP Yes No Market norm 71% Principal Consolidate
--------- --------------- ------------- --------- ----------- -----------------
GHFF LP Yes Substantive Market norm 0% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
GRID Yes Substantive Market norm - Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
Residential Yes Substantive Market norm <1% Agent No consolidation
Secured Income
plc
--------- --------------- ------------- --------- ----------- -----------------
BSIF Yes Substantive Market norm <1% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
BSIF II LP Yes Substantive Market norm <1% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
SPE LP Yes Substantive Market norm 0% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
Baronsmead Yes Substantive Market norm 0% Agent No consolidation
VCTs
--------- --------------- ------------- --------- ----------- -----------------
Mobeus VCTs Yes Substantive Market norm 0% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
Strategic Yes Substantive Market norm <1% Agent No consolidation
Equity Capital
plc
--------- --------------- ------------- --------- ----------- -----------------
Micro Cap Yes Substantive Market norm 0% Agent No consolidation
Fund
--------- --------------- ------------- --------- ----------- -----------------
Multi Cap Yes Substantive Market norm 0% Agent No consolidation
Income Fund
--------- --------------- ------------- --------- ----------- -----------------
Gresham House Yes Substantive Market norm 0% Agent No consolidation
Renewable
Energy VCTs
--------- --------------- ------------- --------- ----------- -----------------
Forestry Yes Substantive Market norm 0% Agent No consolidation
LP Funds
--------- --------------- ------------- --------- ----------- -----------------
New Energy Yes Substantive Market norm 0% Agent No consolidation
LP Funds
--------- --------------- ------------- --------- ----------- -----------------
Gresham House Forestry Fund LP (GHFF LP) is managed by GHAM.
GHAM is exposed to variable returns through its management fee and
acquisition fees, as well as the Company's limited partnership
interest in Gresham House Forestry Friends and Family LP (GHF FF
LP), a vehicle which in turn is a limited partner in GHFF LP.
The limited partners of GHFF LP have the ability to remove the
manager without cause, by obtaining limited partner special
consent. There are a number of limited partners that would be
required to co-ordinate to remove the manager. The Directors'
assessment of this right indicates that the manager is acting as
agent for GHFF LP and therefore should not consolidate GHFF LP.
The Directors' assessment of GHF FF LP, however, indicates that
it is in a controlling position with a 71% holding and therefore
should consolidate this in the Group financial statements.
The acquisition of TradeRisks Limited (TradeRisks) in March 2020
included the acquisition of shares in Residential Secured Income
plc (ReSI plc), which is now managed by the Group. At the end of
2021 the Group held less than 1%% in ReSI plc. The Directors'
assessment indicates that GHAM is acting as agent for ReSI plc and
therefore should not consolidate ReSI plc.
Gresham House Energy Storage Fund plc (GRID) is managed by GHAM
and the Company sold its direct investment in GRID in 2021. The
assessment of whether GHAM is acting as agent or principal requires
assessing the other entities and individuals that are connected to
Gresham House and their investment in GRID. BSIF has a 5%
investment in GRID, however the assessment of whether BSIF is
controlled by GHAM concluded that GHAM does not control BSIF and
therefore should not be included in the proportion of GRID that is
under the control of GHAM.
Gresham House British Strategic Investment Fund (BSIF Strategy),
which comprises two sub-funds, Gresham House BSI Infrastructure LP
and Gresham House BSI Housing LP, is managed by GHAM. The manager
is exposed to variable returns through its management fee and has
committed GBP0.5 million to each sub-fund, making up less than 1.0%
of committed capital. While exposed to the variable returns as an
investor, this is not considered a material exposure. The limited
partners of the BSIF Strategy also have the ability to remove the
manager without cause, one year after the final close of the BSIF
sub-funds with a special resolution. The Directors' assessment of
this right and the fact that the Company is not invested in the
BSIF Strategy indicates that the manager is acting as agent for the
BSIF Strategy and therefore should not consolidate the BSIF
Strategy.
BSIF II LP has the same assessment as BSIF LP, with the manager
acting as agent and therefore should not consolidate BSIF II
LP.
Gresham House Strategic Public Equity LP (SPE LP) is managed by
GHAM, a subsidiary of Gresham House plc. GHAM in its role as
investment adviser is exposed to variable returns through its
management fee, however the Company is not directly invested in SPE
LP. The limited partners of SPE LP have the ability to remove the
manager without cause, one year after the final close of SPE LP on
obtaining limited partner special consent. The Directors'
assessment indicates that GHAM is acting as agent for SPE LP and
therefore should not consolidate SPE LP.
The remaining funds of the Baronsmead VCTs, Mobeus VCTs, Gresham
House Renewable Energy VCTs, the LF Gresham House UK Micro Cap Fund
(Micro Cap Fund), the LF Gresham House UK Multi Cap Income Fund
(Multi Cap Income Fund) and Strategic Equity Capital plc (SEC) are
managed by GHAM, however are not invested in by the Group (or have
less than 1% holding). The Board has therefore concluded that the
Group is acting as agent and therefore should not consolidate these
funds.
(v) Impairment review for Goodwill and Management Contracts from
previous acquisitions
Per IAS 36 Impairment of Assets, the potential impairment of
Goodwill and Management Contracts generated by prior acquisitions
is reviewed. The WACC rates used for discounting were derived using
a CAPM model, accounting for the different risk profile of acquired
contracts. No terminal value was assigned for the review.
(a) Goodwill impairment testing
The potential value of the acquired cash generating units based
on discounted cash flow of potential future performance of the
acquired contracts was assessed. The cash generating units are
defined as the collection of management contracts generating
revenues which have a clearly allocated cost base and relate to the
businesses that have been acquired by the Group. The cash
generating units are the businesses formerly known as Aitchesse,
Hazel Capital, FIM, Livingbridge VCT business, Mobeus VCT business,
TradeRisks and Appian Asset Management. It has been assumed that
the cash generating unit will continue to grow in line with
reasonable assumptions based on historic assumptions and the
business model. The revenues and costs were modelled using a
discounted cash flow model, with the estimated value compared to
the goodwill on the Statement of Financial Position and other
intangible assets and acquired assets. Where the value estimated
less other intangible and tangible assets is greater than the
goodwill amount on the Statement of Financial Position, no
impairment is recognised. There were no indications of impairment
against all goodwill balances of the Group as at 31 December 2021
(2020: No impairment).
(b) Management Contracts impairment review
The management contacts were revalued using a discounted cash
flow method to assess the remaining value of the contract to the
end of its expected life. This is assumed with no growth from fund
raising and costs assumed appropriate in a no growth business. The
valuation was compared to the carrying value of the management
contracts as at 31 December 2021 and there were no indications of
impairment.
(vi) Valuation of contingent consideration
The fair value of contingent consideration payable to the
sellers of Livingbridge VC, TradeRisks, Mobeus VCT and Appian
businesses has been estimated with reference to the contractual
requirements as at 31 December 2021.
The remaining Livingbridge VC contingent consideration is driven
by the hurdle to deliver revenues of between GBP30.9 million and
GBP37.2 million in the three years to 31 December 2021. The
revenues delivered over the period are in excess of the GBP37.2
million and therefore the maximum payout of GBP2.5 million will be
made in March 2022.
The TradeRisks contingent consideration can total a maximum of
GBP6.0 million, payable in cash to the sellers based on the
following:
-- 0.5% of funds raised payable in three years, with maximum
amount capped at GBP3.0 million;
-- Any realised synergies payable in three years, capped at
GBP1.0 million; and
-- GBP2.0 million payable within six months post-completion for
any inventory true-up.
The fair value of the contingent consideration has been
estimated using estimated outcomes, the probability of those
outcomes and discounting this at 7.5%. This is cash settled and
will therefore be recognised as a liability on the balance sheet
and the fair value assessed each reporting period.
The Mobeus VCT business contingent consideration is based on the
Mobeus VCTs maintaining the VCT investment advisory agreements with
Gresham House over the three years post acquisition (maximum GBP8.9
million payable as deferred consideration) and achieving certain
AUM growth targets over the three-year period (maximum GBP0.8
million). The contingent consideration for maintaining the VCT
contracts has been considered a reasonable likelihood and this
amount has therefore been discounted for the time value of money.
The contingent consideration for achieving the AUM targets has been
probability weighted and discounted using the appropriate WACC.
The Appian deferred consideration is driven by applying a
multiple of 1.4x to the probability weighted earnings to be
delivered in the year to 30 June 2023 and 30 June 2024. This
outcome could range from zero deferred consideration up to the
estimated EUR6.4 million.
(vii) Mobeus VCT business acquisition - valuation of management contracts and brand
The acquisition of the Mobeus VCT business in October 2021 is
classified as a business combination under IFRS 3, Business
Combinations. The acquisition involved the novation of the
investment advisory agreements for the four Mobeus VCTs and a brand
licence agreement and the transfer in of the team into the
Group.
The investment advisory agreements for the four VCTs are
therefore required to be fair valued at acquisition. This has been
valued using a discounted cash flow model, with assumptions
regarding length of contracts of 7.7 years, appropriate costs and
appropriate discount rate applied. Contributory asset charges have
also been applied to determine the fair value of the management
contract. Deferred tax liabilities have also been recognised to
reflect the temporary timing differences as the management
contracts are amortised over their useful lives.
The brand licence agreement allows the Group t o use the Mobeus
brand name on the VCTs for up to four years from acquisition. This
has been fair valued using the royalty relief method and will be
amortised over the four-year period.
(viii) Appian Asset Management Limited business acquisition -
valuation of management contracts
The acquisition of Appian Asset Management Limited in June 2021
is classified as a business combination under IFRS 3, Business
Combinations. The acquisition involved the purchase of 100% of the
share capital of Appian Asset Management Limited, which includes
the management contracts of a number of funds.
The management agreements are therefore required to be fair
valued at acquisition. This has been valued using a discounted cash
flow model, with assumptions regarding length of contract,
appropriate costs and appropriate discount rate applied.
Contributory asset charges have also been applied to determine the
fair value of the management contract. Deferred tax liabilities
have also been recognised to reflect the temporary timing
differences as the management contracts are amortised over their
useful lives.
(s) Foreign currency
Assets and liabilities in foreign currencies are translated into
Sterling at the rates of exchange ruling at the Statement of
Financial Position date. Transactions in foreign currencies are
translated into Sterling at the rate of exchange ruling at the date
of transaction. Exchange differences are taken into account in
arriving at the operating result.
Exchange gains and losses arising on the retranslation of
monetary financial assets are treated as a separate component of
the change in fair value and recognised in profit or loss. Exchange
gains and losses on non-monetary OCI financial assets form part of
the overall gain or loss in OCI recognised in respect of that
financial instrument.
On consolidation, the results of overseas operations are
translated into Sterling at rates approximating to those ruling
when the transactions took place. All assets and liabilities of
overseas operations, including goodwill arising on the acquisition
of those operations, are translated at the rate ruling at the
reporting date. Exchange differences arising on translating the
opening net assets at opening rate and the results of overseas
operations at actual rate are recognised in other comprehensive
income and accumulated in the foreign exchange reserve.
(t) Treasury shares
Consideration paid/received for the purchase/sale of treasury
shares is recognised directly in equity. The cost of treasury
shares held is presented as a separate reserve (the "treasury share
reserve"). Any excess of the consideration received on the sale of
treasury shares over the weighted average cost of the shares sold
is credited to retained earnings.
(u) Gresham House Employee Benefit Trust (GH EBT)
As the Company is deemed to have control of the GH EBT, it is
treated as a subsidiary and consolidated for the purposes of the
Consolidated Financial Statements. The GH EBT's assets (other than
investments in the Company's shares), liabilities, income and
expenses are included on a line-by-line basis in the Consolidated
Financial Statements. The GH EBT's investment in the Company's
shares is deducted from equity in the consolidated statement of
financial position as if they were treasury shares.
Notes to the accounts
1 Income
2021 2020
GBP'000 GBP'000
Asset management income
Asset management income 62,162 40,304
62,162 40,304
-------- --------
Dividend and interest income
Dividend income - listed UK 173 316
Interest receivable: banks 8 69
Other 409 169
-------- --------
590 554
-------- --------
Other operating income
Other income 15 51
DevCo income** 293 1,027
Non-core operating income* 1,140 -
-------- --------
1,448 1,078
Performance fees
Performance fees 6,163 -
-------- --------
6,163 -
-------- --------
Total income 70,363 41,936
======== ========
Total income comprises:
Asset management income 62,162 40,304
Dividends 173 316
Interest 417 238
Other operating income 308 1,078
Non-core operating income* 1,140 -
Performance fees 6,163 -
-------- --------
70,363 41,936
======== ========
* Non-core operating income relates to income earned from
Residential Property Management Limited for property services,
which are not considered core asset management services to the
Group.
** DevCo income represents the net operating income in the year
from battery storage projects prior to projects being sold to
GRID.
Gross core revenue as disclosed in the adjusted operating profit
metric:
2021 2020
GBP'000 GBP'000
Asset management income - core
operations 62,162 40,304
Dividend and interest income 590 554
Other operating income 308 1,078
Dividend income from associates 285 202
Gross core revenue 63,345 42,138
======== ========
2 Segmental reporting
The Board and management team of the Company have organised and
reported the performance of the business by Real Assets, Strategic
Equity and Central segments. These have evolved as the business has
grown to become a specialist asset manager.
Real Assets includes the Forestry, New Energy & Sustainable
Infrastructure and Real Estate divisions.
Strategic Equity includes the Public Equity and Private Equity
divisions.
Central includes the general income created and costs incurred
by the central functions of the business that are not directly
linked to Real Assets or Strategic Equity.
All activity and revenue are derived from operations within the
United Kingdom.
For the year ended 31 December Real Strategic
2021 Assets Equity Central Consolidated
Gross core income GBP'000 GBP'000 GBP'000 GBP'000
Asset management income 38,947 23,215 - 62,162
Interest income 406 7 4 417
Dividend income 146 27 - 173
Other operating income 293 - 15 308
Dividend income from associates* 160 125 - 285
Rebates, distribution costs
and fundraising costs (142) (1,594) - (1,736)
--------- ---------- --------- -------------
Net core income 39,810 21,780 19 61,609
Segment expenses (17,562) (5,644) (17,922) (41,128)
Finance costs - - (311) (311)
--------- ---------- --------- -------------
Adjusted operating profit/(loss) 22,248 16,136 (18,214) 20,170
--------- ---------- --------- -------------
Net performance fees - 1,714 - 1,714
Net DevCo gains 1,773 - - 1,773
Net non-core activities 38 - - 38
--------- ---------- --------- -------------
Adjusted operating profit
including performance fees
and realised gains on investments 24,059 17,850 (18,214) 23,695
========= ========== =========
Exceptional items (3,215)
Depreciation and amortisation (9,475)
Loss on disposal of property,
plant and equipment -
Share of associate's profit/(loss)* 4,670
Profit on disposal of associate 461
Share-based payments relating
to acquisitions (615)
Acquisition related remuneration (452)
Profits on investments at
fair value 2,910
Movement in fair value of
contingent consideration (1,659)
Profit from continuing operations 16,320
=============
*Share of associate's profit of GBP4,670,000 excludes dividend
income received in the year of GBP285,000
For the year ended 31 December Real Strategic
2020 Assets Equity Central Consolidated
Gross core income GBP'000 GBP'000 GBP'000 GBP'000
Asset management income 26,198 14,106 - 40,304
Interest income 157 19 62 238
Dividend income 314 2 - 316
Other operating income 1,077 - 1 1,078
Dividend income from associates* - 202 - 202
Rebates, distribution costs
and fundraising costs (190) (1,174) - (1,364)
--------- ---------- -------- -------------
Net core income 27,556 13,155 63 40,774
Segment expenses (12,924) (6,433) (9,333) (28,690)
Finance costs - - (25) (25)
--------- ---------- -------- -------------
Adjusted operating profit/(loss) 14,632 6,722 (9,295) 12,059
--------- ---------- -------- -------------
Net realised gains on investments 1,008 - - 1,008
--------- ---------- -------- -------------
Adjusted operating profit
including performance fees
and realised gains on investments 15,640 6,722 (9,295) 13,067
========= ========== ========
Exceptional items (1,775)
Depreciation and amortisation (8,904)
Loss on disposal of property,
plant and equipment (27)
Share of associate's profit/(loss)* (44)
Share-based payments relating
to acquisitions (593)
Profits on investments at
fair value 1,117
Movement in fair value of
contingent consideration (1,163)
Movement in fair value of
deferred receivable 224
-------------
Profit from continuing operations 1,902
=============
*Share of associate's profit/(loss) of GBP44,000 excludes
dividend income received in the year of GBP202,000.
During the year the Group had no customers accounting for more
than 10% of the Group's revenue (2020: one customer, totalling
GBP4,631,000).
Other information:
31 December 2021 Real Strategic
Assets Equity Central Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 75,856 78,460 66,001 220,317
Segment liabilities (20,909) (22,613) (29,258) (72,780)
--------- ---------- --------- -------------
54,947 55,847 36,743 147,537
========= ========== ========= =============
Capital expenditure 1 54 2,985 3,040
Depreciation and amortisation 2,828 5,549 1,098 9,475
Non-cash expenses other than depreciation - - 3,788 3,788
Goodwill included within segment assets 17,552 31,244 - 48,794
31 December 2020 Real Strategic
Assets Equity Central Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 50,372 36,082 40,652 127,106
Segment liabilities (8,185) (1,585) (20,058) (29,828)
-------- ---------- --------- -------------
42,187 34,497 20,594 97,278
======== ========== ========= =============
Capital expenditure - - 1,215 1,215
Depreciation and amortisation 3,231 4,572 1,128 8,931
Non-cash expenses other than depreciation - - 2,268 2,268
Goodwill included within segment assets 17,551 12,167 - 29,718
3 Operating costs
Administrative overheads comprise the following:
2021 2020
Core Non-core
activities activities Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Directors' emoluments (excluding
benefits in kind and share-based
payments) 2,982 - 2,982 1,898
Auditor's remuneration* 360 - 360 246
Amortisation 8,516 - 8,516 8,033
Depreciation 950 9 959 871
Loss on disposal of assets - - - 27
Wages and salaries 26,713 644 27,357 17,402
Social security costs 4,757 60 4,817 3,575
Share-based payments 3,788 - 3,788 2,266
Other operating costs 10,939 398 11,337 7,734
------------ ------------ -------- --------
59,005 1,111 60,116 42,052
============ ============ ======== ========
Staff costs (including Directors'
emoluments) were:
Wages, salaries and fees 29,631 644 30,275 19,237
Social security costs 4,757 60 4,817 3,575
Pension costs 1,008 30 1,038 716
------------ ------------ -------- --------
35,396 734 36,130 23,528
============ ============ ======== ========
* A more detailed analysis of auditor's remuneration
is as follows: 2021 2020
GBP'000 GBP'000
Audit fees - Company and consolidated financial statements 40 40
Audit fees - audit of the Company's
subsidiaries 298 186
Non audit services - CASS reporting
to the FCA 22 20
360 246
======== ========
The Audit Committee reviews the nature and extent of non-audit
services to ensure that independence is maintained.
The average number of persons employed by the Group, including
the Executive Directors, was 173 (2020: 113), including 22
employees relating to non-core activities (2020: nil). The Company
has no employees.
4 Directors' emoluments
The audited emoluments of the Directors are disclosed in the
Remuneration Report in the 2021 Annual Report and Audited Financial
Statements.
The Directors are considered to be the Group's only key
management personnel. Employer's National Insurance contributions
in respect of the Directors for the year were GBP505,000 (2020:
GBP270,000).
5 Business combinations
a) Appian Asset Management Limited
On 29 June 2021 the Group acquired 100% of the issued share
capital of Appian Asset Management Limited (Appian), a company
registered in Ireland. Appian is an active asset manager with
around EUR350 million in Assets Under Management (AUM) as at 31
December 2020. The acquisition enhances the Group's capabilities to
develop existing strategies in Ireland and Europe, particularly
those with a sustainability focus including Forestry, Sustainable
Infrastructure, and Real Estate. Appian was subsequently renamed
Gresham House Asset Management Ireland Limited.
The fair value of the identifiable net assets acquired, and the
consideration paid under IFRS 3 is as follows:
Net book
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
Property, plant and equipment 54 441 495
Cash 2,305 - 2,305
Trade and other receivables 604 - 604
Trade and other payables (1,464) (690) (2,154)
Management contracts - 2,231 2,231
Goodwill - 4,044 4,044
Deferred tax liability - (511) (511)
Total identifiable net assets 1,499 5,515 7,014
========= ============ ===========
The adjustments relate to the recognition of management
contracts and associated deferred tax, goodwill and the IFRS 16
lease asset and liability.
Under the terms of the acquisition agreement, the fair value of
the consideration paid to the vendors of Appian was:
GBP'000
Cash 3,146
Shares - 104,168 shares in Gresham House plc valued
at 940.0p per share on 29 June 2021 979
--------
Total initial consideration 4,125
Contingent consideration 2,889
Total consideration 7,014
========
The consideration shares were admitted to trading on AIM on 5
July 2021.
Contingent consideration
Contingent consideration with an expected fair value of EUR4.6
million will be payable in cash to the sellers based on the
following:
-- 1.4 times year two earnings, payable in two years. The
expected fair value at acquisition was GBP1.1 million;
-- 1.4 times year three earnings, payable in three years. The
expected fair value at acquisition was GBP1.4 million; and
-- up to EUR0.75 million payable in three years based on certain
AUM and earnings targets. The expected fair value at acquisition
was GBP0.4 million.
The fair value of the contingent consideration has been
estimated at the date of acquisition using estimated outcomes, the
probability of those outcomes and discounting this at 13.0%. Up to
50% of the contingent consideration may be settled in Gresham House
plc shares at the Company's discretion. As such this will be
recognised as a liability on the balance sheet and the fair value
assessed each reporting period. The fair value at the time of
acquisition was calculated as GBP2.9 million. The potential
undiscounted amount of all future payments that the Group could be
required to make under the contingent consideration arrangement is
between EURnil million and EUR6.4 million.
Revenue and profits of Appian
The actual revenues and profits that have been generated since
the acquisition of Appian on 29 June 2021 to 31 December 2021
were:
EUR'000
Revenues 1,988
Profit before tax 190
Prior to acquisition by the Group, Appian had a 31 December year
end. The results for the most recent audited reporting period prior
to acquisition were to 31 December 2020. Had Appian been part of
the Group for the entire reporting period the following sums would
have been consolidated:
EUR'000
Revenue 3,403
Profit before tax 284
Goodwill
Goodwill arises due to the excess of the fair value of the
consideration payable over the fair value of the net assets
acquired. It is mainly attributable to the skills of the team
acquired, the synergies expected to be achieved from the
acquisition and the business development potential. Goodwill
arising on the Appian acquisition is not deductible for tax
purposes.
Fair value
The fair value of the management contracts and customer
relationships have been estimated using a discounted cash flow
model. The estimated cash flows have been valued at a discount of
13.0%.
Acquisition costs in relation to business combinations have been
classified as exceptional items (see Note 6).
b) Mobeus VCT business
On 1 October 2021 the Company acquired the VCT business of
Mobeus Equity Partners LLP (Mobeus), a UK-based investment firm
managing assets across two distinct client groups, one of which is
the VCT business acquired by the Company. The acquisition of Mobeus
included the novation and acquisition of investment advisory
contracts for Mobeus Income & Growth VCT plc, Mobeus Income
& Growth 2 VCT plc, Mobeus Income & Growth 4 VCT plc and
The Income & Growth VCT plc (together, the "Mobeus VCTs"), with
a combined AUM of GBP369 million as at March 2021, and the hiring
of the Mobeus VCT team. The acquisition of Mobeus was to build out
the Group's existing VCT business.
The fair value of the identifiable net assets acquired, and the
consideration paid under IFRS 3 is as follows:
Fair value
GBP'000
Management contracts 21,115
Brand 456
Goodwill 15,118
Liabilities assumed (514)
Deferred tax (5,031)
Total identifiable net assets 31,144
===========
Under the terms of the acquisition agreement, the fair value of
the consideration paid to the vendors of Mobeus was:
GBP'000
Vendor placing shares - 2,197,802 shares in Gresham
House plc valued at 907.0p per share on 1 October 2021 19,934
Consideration shares - 439,560 shares in Gresham House
plc valued at 907.0p per share on 1 October 2021 3,986
Excess cash and net working capital (514)
--------
Total initial consideration 23,406
Contingent consideration 7,738
Total consideration 31,144
========
The vendor placing and consideration shares were admitted to
trading on AIM on 1 October 2021.
Contingent consideration
Contingent consideration with an expected fair value of GBP7.7
million will be payable in cash to the sellers over a three-year
period conditional on contract retention and fundraising and AUM
targets.
The fair value of the contingent consideration has been
estimated at the date of acquisition using estimated outcomes, the
probability of those outcomes and discounting this at 12.0%. As
such this will be recognised as a liability on the balance sheet
and the fair value assessed each reporting period.
The potential undiscounted amount of all future payments that
the Group could be required to make under the contingent
consideration arrangement is between GBPnil million and GBP12.1
million.
Goodwill
Goodwill arises due to the excess of the fair value of the
consideration payable over the fair value of the net assets
acquired. It is mainly attributable to the skills of the team
acquired, the synergies expected to be achieved from the
acquisition and the business development potential.
None of the goodwill is expected to be deductible for income tax
purposes.
Actual revenue and profits of Mobeus
The actual revenues and profits that have been generated since
the acquisition of Mobeus on 1 October 2021 to 31 December 2021
were:
GBP'000
Revenues 2,588
Profit before tax 1,917
The disclosure of hypothetical revenues and profits of Mobeus
for the year ended 31 December 2021 is not considered relevant due
to the nature of the transaction. The entire Mobeus business was
not acquired and there will be revenues and expenses not relevant
to the business acquired.
Fair value
The fair value of the management contracts has been estimated
using a discounted cash flow model. The estimated cash flows have
been valued at a discount of 12.0%. This resulted in fair value of
management contracts totalling GBP21,115,000 being recognised at
acquisition. The fair value of the brand has been estimated using a
relief from royalty approach which resulted in a value of
GBP456,000 being recognised at acquisition.
Acquisition costs in relation to business combinations have been
classified as exceptional items (see Note 6).
c) TradeRisks Limited
On 5 March 2020 the Group acquired 100% of the issued share
capital of TradeRisks Limited (TradeRisks), a company registered in
England. TradeRisks is a fund management business and specialist
provider of debt structuring and advisory services to the housing
and social infrastructure sectors. TradeRisks' wholly owned and
separately FCA regulated subsidiary, ReSI Capital Management
Limited (RCML), is the manager of Residential Secure Income plc
(ReSI plc) (LSE: RESI), a closed-ended investment company which
seeks to deliver secured income returns to its shareholders by
investing in portfolios of shared ownership, retirement and local
authority housing. The management contracts for ReSI plc were
acquired as part of the acquisition of TradeRisks.
The fair value of the identifiable net assets acquired, and the
consideration paid under IFRS 3 is as follows:
Net
book Fair
value Adjustments value
GBP'000 GBP'000 GBP'000
Investments 463 - 463
Property, plant and equipment 180 346 526
Intangible fixed assets 97 - 97
Cash 1,639 - 1,639
Trade and other receivables 5,999 - 5,999
Trade and other payables (410) (346) (756)
Management contracts - 2,886 2,886
Customer relationships - 263 263
Deferred tax liability (16) (598) (614)
Total identifiable net assets 7,952 2,551 10,503
======== ============ ========
Under the terms of the acquisition agreement, the fair value of
the consideration paid to the vendors of TradeRisks was:
GBP'000
Cash 9,684
Shares - 555,555 shares in Gresham House plc valued
at 625p per share on 4 March 2020 3,472
--------
Total initial consideration 13,156
Contingent consideration 3,002
Total consideration 16,158
==========
The consideration shares were admitted to trading on AIM on 11
March 2020.
Contingent consideration
Contingent consideration totalling a maximum of GBP6.0 million
will be payable in cash to the sellers based on the following:
-- 0.5% of funds raised payable in three years, with maximum
amount capped at GBP3.0 million. The expected fair value at
acquisition was GBP1.6 million;
-- any realised synergies payable in three years, capped at
GBP1.0 million. The expected fair value at acquisition was GBP0.6
million; and
-- GBP2.0 million payable within six months post-completion for
any inventory true-up. The expected fair value at acquisition was
GBP0.8 million. GBP0.6 million was settled in 2020, with GBP0.8
million settled during the current year.
The fair value of the contingent consideration has been
estimated at the date of acquisition using estimated outcomes, the
probability of those outcomes and discounting this at 7.5%. This is
cash settled and will therefore be recognised as a liability on the
balance sheet and the fair value assessed each reporting period.
The fair value at the time of acquisition was calculated as GBP3.0
million.
Revenue and profits of TradeRisks
TradeRisks was acquired on 5 March 2020. The Group recognised
the following amounts in respect of TradeRisks for the 43-week
period ended 31 December 2020:
GBP'000
Revenue 2,535
Profit before tax 148
The GBP148,000 profit for the period of ownership reflects the
impact of COVID-19 on the debt arrangement business, which delayed
a number of debt advisory transactions which have since completed
in 2021.
Prior to acquisition by the Group, TradeRisks had a 31 July year
end. The results for the most recent audited reporting period prior
to acquisition were to 31 July 2019:
GBP'000
Revenue 5,897
Profit before tax 2,187
Goodwill
Goodwill arises due to the excess of the fair value of the
consideration payable over the fair value of the net assets
acquired and was calculated as GBP5.7 million at acquisition. It is
mainly attributable to the skills of the team acquired, the
synergies expected to be achieved from the acquisition and the
business development potential. Goodwill arising on the TradeRisks
acquisition is not deductible for tax purposes.
Fair value
The fair value of the management contracts and customer
relationships has been estimated using a discounted cash flow
model. The estimated cash flows have been valued at a discount of
7.5%. This resulted in the fair value of management contracts being
recognised at GBP2,886,000 and the customer relationships at
GBP263,000. The net book value of the management contracts and
customer relationships has been reviewed for impairment and no
impairment has been recognised as at 31 December 2021.
6 Exceptional items
2021 2020
GBP'000 GBP'000
Acquisition costs
TradeRisks Limited 19 868
Appian Asset Management Limited 187 328
Mobeus 1,141 -
Joint Venture costs 4 219
Other 79 30
-------- --------
1,430 1,445
Restructuring costs 633 330
DevCo acquisition and disposal
costs 1,152 -
-------- --------
3,215 1,775
======== ========
Acquisition, associated restructuring costs and exceptional
legal fees are considered exceptional and not part of the normal
operating activity of the Group.
7 Finance costs
2021 2020
GBP'000 GBP'000
Interest payable on bank loans 148 -
Finance fees 96 -
Interest payable on leases 67 25
311 25
======== ========
See Note 25 for details of borrowings.
8 IFRS 16 Leases
IFRS 16 Leases relates to leases for use of office space at
various locations. As a lessee, the Group has recognised a lease
liability representing the present value of the obligation to make
lease payments, and a related right-of-use (ROU) asset in line with
the process explained under the statement of compliance.
The rate implicit in the leases is not evident and so the
entities' incremental borrowing rates have been used. The
incremental rate referred to by IFRS 16 indicates the rate of
interest that a lessee would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an
asset of a similar value to the ROU asset in a similar economic
environment. The weighted average incremental borrowing rate used
on the date of initial application of the leases is 3.25%, which
refers to interest charge on the Group's revolving credit
facility.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the ROU asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit and loss over the life of the
lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period.
2021 2020
GBP'000 GBP'000
ROU asset cost 3,526 2,221
ROU asset accumulated depreciation (1,220) (1,623)
Retained reserves * (6) (6)
Depreciation expense 713 666
* Representing the net impact of recognising the leases under
IFRS 16 as at 1 January 2019 as the Group chose to not restate
prior periods as a matter of practical expedience afforded by the
standard. The impact on retained reserves was immaterial.
An analysis of the lease liability relating to ROU assets is as
follows:
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January 641 445 211 243
IFRS 16 restatement 689 346 - -
Additions 1,970 470 1,734 446
Cash payments (912) (645) (625) (486)
Foreign exchange movements (14) - - -
Interest expense 67 25 21 8
-------- --------
As at 31 December 2,441 641 1,341 211
======== ======== ======== ========
Please see Note 33 Financial Instruments for the maturity
profile of leases.
The Group has elected not to apply IFRS 16 to:
(a) Low value leases for various IT equipment leased across the
business. The maximum third-party new item price of any excluded
equipment is less than GBP3,000. The total amount of lease payments
for the year ended 31 December 2021 relating to these leases was
GBP21,000.
It is also noted that:
(a) the impact of lease liability and ROU asset on deferred taxes is expected to be immaterial;
(b) there were no material residual value guarantees or
contractual dilapidation commitments that impacted the initial
recognition value for ROU assets and lease liability;
(c) there were no purchase options for leased assets that was
made available to or requested by the Group; and
(d) lease values do not include any termination penalties as the
business intends to use the properties to the end of lease
terms.
Lease terms are negotiated on an individual basis across all
seven leases and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants other
than the security interests in the leased assets that are held by
the lessor. Leased assets may not be used as security for borrowing
purposes. No rent concessions were applied and all lease payments
are considered fixed per the lease agreement.
9 Taxation
2021 2020
GBP'000 GBP'000
(a) Analysis of credit in period:
UK Corporation tax at 19% (2020:
19%) 2,883 1,778
Over provision in prior year (520) (237)
Deferred tax 1,744 (457)
-------- --------
Total tax charge 4,107 1,084
======== ========
(b) Factors affecting tax charge
for period:
Profit/(loss) on ordinary activities before tax multiplied
by standard rate of corporation tax in the UK of
19% (2020: 19%) 3,101 361
Tax effect of:
Dividend income not taxable - (73)
Amortisation not taxable 261 617
Disallowable expenses/non-taxable
income (2,468) (913)
Recognition of previously unrecognised
deferred tax liabilities 2,071 -
Utilisation of previously unrecognised
tax losses (449) (11)
Over provision in prior year (520) (237)
Deferred tax not recognised - (689)
Effect of tax rate change on
opening balances 2,328 2,029
Remeasurement of deferred tax (217) -
Actual tax charge 4,107 1,084
======== ========
The Group has unutilised tax losses of approximately GBP10.2
million (2020: GBP10.2 million) available against future
corporation tax liabilities. A potential deferred taxation asset of
GBP 2.6 million (2020: GBP1.6 million) in respect of some of these
losses has not been recognised in these financial statements as it
is not considered sufficiently probable that the Group will
generate sufficient taxable profits from the same trade to recover
these amounts in full. The Company recognised a deferred tax asset
of GBP0.1 million (2020: GBP0.2 million) in the current year. No
material uncertain tax positions exist as at 31 December 2021. This
assessment relies on estimates and assumptions and may involve a
series of complex judgements about future events. To the extent
that the final tax outcome of these matters is different from the
amounts recorded, such differences will impact income tax expense
in the period in which such determination is made.
10 Earnings per share
(a) Basic and diluted profit per share
2021 2020
Total net profit attributable to equity holders
of the parent (GBP'000) 11,777 577
Weighted average number of shares in issue during
the period 34,083,582 30,479,015
Number of shares held by the Gresham House Employee
Benefit Trust (204,007) -
----------- -----------
33,879,575 30,479,015
=========== ===========
Basic profit per share attributable to equity
holders of the parent (pence) 34.8 1.9
=========== ===========
Diluted profit per share attributable to equity
holders of the parent (pence) 32.7 1.8
=========== ===========
2,229,892 (2020: 1,475,509) shares were deemed to have been
issued at nil consideration as a result of shares which could be
issued under the bonus share matching plan, long-term incentive
plans and acquisition related share-based payments.
(b) Adjusted earnings per share
Adjusted earnings per share is based on adjusted operating
profit after tax, which is stated after charging interest but
before depreciation, amortisation, share-based payments and
remuneration relating to acquisitions, profits and losses on
disposal of property, plant and equipment, net performance fees,
net non-core activities, net development gains and exceptional
items, to provide the non-GAAP measure of the performance as an
asset manager. This includes dividend and income received from
investments in associates.
Adjusted profit for calculating adjusted earnings per share:
2021 2020
GBP'000 GBP'000
Net operating profit/(loss) after
finance costs 6,721 (1,916)
Add back:
Exceptional operating expenses 3,215 1,775
Depreciation and amortisation 9,475 8,904
Loss on disposal of property,
plant and equipment - 27
Dividend income received from
associates 285 202
Net performance fees (1,714) -
Variable compensation attributable to gains
on development projects 689 2,474
Development project costs 470 -
Net non-core activity (38) -
Share-based payments relating
to acquisitions 615 593
Acquisition related remuneration 452 -
-------- --------
Adjusted profit attributable to equity holders
of the parent before tax 20,170 12,059
Corporation tax attributable to adjusted operating
profit (2,363) (1,541)
-------- --------
Adjusted profit attributable to equity holders
of the parent after tax 17,807 10,518
======== ========
Adjusted profit per share (pence)
- basic 52.6 34.5
======== ========
Adjusted profit per share (pence)
- diluted 49.4 32.9
======== ========
11 Dividends
In May 2021 the Company paid GBP1,881,000 which represents a
final dividend for the year ended 31 December 2020 of 6.0 pence per
share. A final dividend for the year ended 31 December 2019 of 4.5
pence per share totalling GBP1,351,000 was paid in May 2020 .
Set out below is the total dividend payable in respect of the
financial year, which is the basis on which the requirements of
Section 1158 Corporation Tax Act 2010 are considered.
2021 2020
GBP'000 GBP'000
Proposed final dividend for the year ended 31 December
2021 of 10.0 pence (2020: 6.0 pence) per share 3,800 1,926
======== ========
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
12 Investments
Investments have been classified
as follows: Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets 13,560 9,086 8,308 5,342
Other debtors due within one
year - Investment in development
projects (see Note 21) 3,537 551 3,537 551
-------- -------- -------- --------
17,097 9,637 11,845 5,893
======== ======== ======== ========
A further analysis of total investments
is as follows: Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Listed securities - on the London
Stock Exchange 4,993 3,991 3,555 3,202
Securities dealt in under AIM 1,363 950 1,363 950
Securities dealt in under Aquis
Exchange 5 7 5 7
Unlisted securities 10,736 4,689 6,922 1,734
-------- -------- -------- --------
Closing value at 31 December 17,097 9,637 11,845 5,893
======== ======== ======== ========
Investments valued at fair value
through profit and loss 13,560 8,874 8,308 5,130
Loans and receivables carried
at amortised cost 3,537 763 3,537 763
-------- -------- -------- --------
17,097 9,637 11,845 5,893
======== ======== ======== ========
The movement in investments valued at
fair value through profit and loss is: Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Opening cost 7,839 8,724 5,203 6,975
Opening net unrealised losses 1,035 190 (73) (132)
-------- -------- -------- --------
Opening value 8,874 8,914 5,130 6,843
Movements in the year:
Purchases at cost 5,851 1,309 5,203 885
Additions through business combinations - 463 - -
Sales - proceeds (4,047) (2,883) (3,045) (2,883)
Sales - realised gains and (losses)
on sales 1,081 226 361 226
Net unrealised gains and (losses) 1,801 845 659 59
Closing value 13,560 8,874 8,308 5,130
======== ======== ======== ========
Closing cost 10,724 7,839 7,722 5,203
Closing net unrealised gains/(losses) 2,836 1,035 586 (73)
-------- -------- -------- --------
Closing value 13,560 8,874 8,308 5,130
======== ======== ======== ========
The movement in loans and receivables
carried at amortised cost is: Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Opening value 763 1,915 763 1,915
Movements in the year:
Purchases at cost 6,296 47 6,296 47
Sales - proceeds (3,550) (1,245) (3,550) (1,245)
Sales - realised gains and (losses)
on sales 28 46 28 46
Net unrealised gains and (losses) - - - -
Transferred on acquisition of
subsidiary undertaking - - - -
-------- -------- -------- --------
Closing value 3,537 763 3,537 763
======== ======== ======== ========
Gains and losses on investments
held at fair value: Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Net realised gains on disposal 1,109 272 389 272
Net unrealised gains and (losses) 1,801 845 659 59
Profit on disposal of subsidiary
undertaking 2,932 3,482 - -
-------- -------- -------- --------
Net gains on investments 5,842 4,599 1,048 331
======== ======== ======== ========
13 Property, plant and equipment
Group 2021 Right
Office Motor Leasehold of use
equipment vehicles property assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 409 346 130 2,221 3,106
Additions 289 38 - 1,988 2,315
Additions through business
combinations 54 - - 806 860
Disposals during the year (99) (26) - (1,472) (1,597)
Foreign exchange movements - - - (17) (17)
----------- ---------- ---------- -------- --------
As at 31 December 653 358 130 3,526 4,667
=========== ========== ========== ======== ========
Depreciation
As at 1 January 195 169 29 1,623 2,016
IFRS 16 restatement through
business combinations - - - 365 365
Charge for the year 138 80 28 713 959
Disposals during the year (96) (23) - (1,472) (1,591)
Foreign exchange movements - - - (9) (9)
----------- ---------- ---------- -------- --------
As at 31 December 237 226 57 1,220 1,740
=========== ========== ========== ======== ========
Net book value as at 31 December 416 132 73 2,306 2,927
=========== ========== ========== ======== ========
Group 2020 Right
Office Motor Leasehold of use
equipment vehicles property assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 260 289 4 1,344 1,897
Additions 95 57 - 470 622
Additions through business
combinations 54 - 126 407 587
----------- ---------- ---------- -------- --------
As at 31 December 409 346 130 2,221 3,106
=========== ========== ========== ======== ========
Depreciation
As at 1 January 96 88 4 896 1,084
IFRS 16 restatement through
business combinations - - - 61 61
Charge for the year 99 81 25 666 871
----------- ---------- ---------- -------- --------
As at 31 December 195 169 29 1,623 2,016
=========== ========== ========== ======== ========
Net book value as at 31 December 214 177 101 598 1,090
=========== ========== ========== ======== ========
Company 2021 Right
Office Motor of use
equipment vehicles assets Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 348 292 1,445 2,085
Additions 211 38 1,752 2,001
Disposals during the year (92) (26) (1,472) (1,590)
----------- ---------- -------- --------
As at 31 December 467 304 1,725 2,496
=========== ========== ======== ========
Depreciation
As at 1 January 170 115 1,236 1,521
Charge for the year 98 80 469 647
Disposals during the year (89) (23) (1,472) (1,584)
----------- ---------- -------- --------
As at 31 December 179 172 233 584
=========== ========== ======== ========
Net book value as at 31 December 288 132 1,492 1,912
=========== ========== ======== ========
Company 2020 Right
Office Motor of use
equipment vehicles assets Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 253 235 991 1,479
Additions 95 57 454 606
As at 31 December 348 292 1,445 2,085
=========== ========== ======== ========
Depreciation
As at 1 January 89 34 746 869
Charge for the year 81 81 490 652
As at 31 December 170 115 1,236 1,521
=========== ========== ======== ========
Net book value as at 31 December 178 177 209 564
=========== ========== ======== ========
14 Intangible assets
Group 2021 Customer IT platform
Goodwill relationships Contracts Brands development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 29,718 3,335 46,650 - 1,242 80,945
Additions through
business combinations 19,162 - 23,346 456 - 42,964
Other additions - - - - 725 725
Disposals during
the year - - (1,406) - (9) (1,415)
Foreign exchange
movements (86) - (47) - - (133)
As at 31 December 48,794 3,335 68,543 456 1,958 123,086
========= =============== ========== ======== ============= ========
Amortisation
As at 1 January - 3,116 17,411 - 448 20,975
Charge for the year - 54 8,047 29 386 8,516
Disposals during
the year - - (1,406) - (8) (1,414)
Foreign exchange
movements - - (3) - - (3)
--------- --------------- ---------- -------- ------------- --------
As at 31 December - 3,170 24,049 29 826 28,074
========= =============== ========== ======== ============= ========
Net book value as
at 31 December 48,794 165 44,494 427 1,132 95,012
========= =============== ========== ======== ============= ========
Remaining amortisation 1-22
period n/a 3 years years 4 years 1-4 years
Group 2020 Customer IT platform
Goodwill relationships Contracts development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 24,063 3,072 43,764 588 71,487
Additions through business
combinations 5,655 263 2,886 97 8,901
Other additions - - - 593 593
Disposals - - - (36) (36)
As at 31 December 29,718 3,335 46,650 1,242 80,945
========= =============== ========== ============= ========
Amortisation
As at 1 January - 2,457 10,283 202 12,942
Charge for the year - 659 7,128 246 8,033
As at 31 December - 3,116 17,411 448 20,975
========= =============== ========== ============= ========
Net book value as at 31
December 29,718 219 29,239 794 59,970
========= =============== ========== ============= ========
1-23
Remaining amortisation period n/a 4 years years 1-4 years
Goodwill can be allocated to CGUs as follows
2021 2020
GBP'000 GBP'000
Appian Asset Management Limited 3,958 -
Livingbridge VCT business 12,167 12,167
Mobeus VCT business 15,118 -
TradeRisks Limited 5,655 5,655
FIM, Hazel Capital and Aitchesse 11,896 11,896
48,794 29,718
======== ========
Company 2021 2020
IT platform IT platform
development development
GBP'000 GBP'000
Cost
As at 1 January 1,181 588
Additions 725 593
As at 31 December 1,906 1,181
============= =============
Amortisation
As at 1 January 432 202
Charge for the year 374 230
As at 31 December 806 432
============= =============
Net book value as at 31 December 1,100 749
============= =============
Remaining amortisation period 1-4 years 1-4 years
The assumptions used to fair value the contracts, including
discount rates, growth rates and cash flow models are described in
more detail in the critical accounting estimates and judgements
section of the accounting policies.
Goodwill has been assessed for each business acquired for
impairment as at 31 December 2021. This assessment includes an
analysis of the expected cash flows from the specific businesses
based on expected fundraising and other growth factors as well as
the associated cost of delivering the planned revenues. A discount
has been applied to the cash flows to determine an estimate of the
fair value of the business, which is used to assess whether
goodwill should be impaired.
The discount rates applied by CGU in 2021 and 2020 is as
follows:
Appian Asset Management
Limited 12.3%
Livingbridge VCT business 15.0%
Mobeus VCT business 12.0%
TradeRisks Limited 7.5%
FIM, Hazel Capital and
Aitchesse 7.5%
No reasonably possible change in any of the variables used in
the goodwill impairment tests would give rise to an impairment.
15 Long-term receivables
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Other debtors 492 - 492 -
492 - 492 -
======== ======== ======== ========
Other debtors consist of rental deposits.
16 Disposal group held for sale
The Group has invested in the development of battery storage
projects, which are part of the exclusive pipeline to be sold to
Gresham House Energy Storage Fund plc (GRID) when operational, and
the development of solar projects (collectively known as DevCo
Projects). In some instances DevCo Projects have been sold prior to
being operational, with deferred consideration payable when the
project becomes operational. The DevCo Projects are held in
separate SPVs, which the Group entity Gresham House Devco Limited
owns 100% of the equity in, and the Group has also lent funds for
the development of the projects.
The sale of certain DevCo Projects has been agreed with GRID and
is documented, including price and conditions to complete the sale.
It is expected that the sale process will complete within a six to
12-month time frame, as such it has been deemed appropriate to
treat the DevCo Projects as assets held for sale under IFRS 5.
Specifically, they are classified as a "disposal group" held for
sale, whose value will be primarily recovered by sale.
The assets and liabilities of those SPVs which have been
consolidated by the Group are:
2021 2020
GBP'000 GBP'000
Assets of a disposal group held
for sale 17,545 7,363
Liabilities of a disposal group
classified as held for sale (7,499) (2,072)
10,046 5,291
======== ========
The Group's interest in other DevCo Projects can be summarised
as follows:
2021 2020
GBP'000 GBP'000
Loans and receivables brought
forward 551 1,208
Additions 3,537 -
Disposals (551) (657)
Loans and receivables carried
forward (Note 12) 3,537 551
======== ========
The Group's total exposure to DevCo Projects is:
2021 2020
GBP'000 GBP'000
Net assets and liabilities of
a disposal group held for sale 10,046 5,291
Loans and receivables 3,537 551
13,583 5,842
======== ========
During the year the Group acquired a controlling interest in
Arbroath Limited, Coupar Limited, Penwortham Storage Limited,
Grendon Storage Limited, Melksham West Storage Limited, Melksham
East Storage Limited, West Didsbury Storage Limited, Enderby
Storage Limited, Low Farm Solar Limited and Siddington Solar Farm
Limited.
During the year the Group disposed of GridReserve Limited (Byers
Brae), Penwortham Storage Limited, Grendon Storage Limited,
Melksham West Storage Limited, Melksham East Storage Limited, West
Didsbury Storage Limited and Enderby Storage Limited, with total
net proceeds of GBP11,583,000 due, realising a net gain on disposal
of GBP2,932,000.
17 Investment in subsidiaries
Company
2021 2020
Subsidiary undertakings GBP'000 GBP'000
As at 1 January 79,872 79,872
Additions 276 -
As at 31 December 80,148 79,872
======== ========
The subsidiary undertakings of Gresham House plc are as
follows:
Held
by other
Held by Group Country of incorporation and
Company companies registered office
% %
5 New Street Square, London
Aitchesse Limited - 100 EC4A 3TW, England
5 New Street Square, London
Arbroath Limited - 100 EC4A 3TW, England
5 New Street Square, London
Chartermet Limited - 95 EC4A 3TW, England
5 New Street Square, London
Coupar Limited - 100 EC4A 3TW, England
Deacon Commercial Development 5 New Street Square, London
and Finance Limited - 100 EC4A 3TW, England
5 New Street Square, London
Deacon Knowsley Limited - 95 EC4A 3TW, England
5 New Street Square, London
FIM Services Limited - 100 EC4A 3TW, England
FIM Windfarms (SC) General 58 Morrison Street, Glasgow
Partner Limited - 100 EH3 8BP, Scotland
Gresham House Asset Management 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Asset Management 42 Fitzwilliam Place, Dublin
Ireland Limited - 100 2, Ireland
Gresham House Carry Warehousing 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Capital Partners 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Company Secretarial 5 New Street Square, London
1 Limited - 100 EC4A 3TW, England
Gresham House Company Secretarial 5 New Street Square, London
2 Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Devco Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House EIS Limited - 100 EC4A 3TW, England
Gresham House Energy Storage 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Finance Limited - 100 EC4A 3TW, England
Riverview House, Friarton Road,
Gresham House Forestry Limited - 100 Perth PH2 8DF, Scotland
Gresham House Forestry Friends Riverview House, Friarton Road,
and Family LP 71.4 - Perth PH2 8DF, Scotland
Gresham House Forest Funds 5 New Street Square, London
General Partner Limited - 100 EC4A 3TW England
Gresham House (General Partner) Riverview House, Friarton Road,
Limited - 100 Perth PH2 8DF, Scotland
Riverview House, Friarton Road,
Gresham House GP LLP - 100 Perth PH2 8DF, Scotland
5 New Street Square, London
Gresham House Holdings Limited 100 - EC4A 3TW, England
5 New Street Square, London
Gresham House Housing Limited - 100 EC4A 3TW, England
Gresham House Initial Partner 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Infrastructure 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Investment Management 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Investment Management Dorey Court, Admiral Park,
(Guernsey) Limited - 100 St Peter Port GY1 2HT, Guernsey
5 New Street Square, London
Gresham House Investors Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House New Energy Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House (Nominees) Limited - 100 EC4A 3TW, England
Gresham House Private Capital 5 New Street Square, London
Solutions Limited - 100 EC4A 3TW, England
Gresham House Private Equity 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Private Wealth 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Real Assets Limited - 100 EC4A 3TW, England
Gresham House Renewable Infrastructure 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Services Limited - 100 EC4A 3TW, England
Gresham House Smaller Companies 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Solar Distribution 5 New Street Square, London
Designated Member 1 Limited - 100 EC4A 3TW, England
Gresham House Solar Distribution 5 New Street Square, London
Designated Member 2 Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House SPE Limited - 100 EC4A 3TW, England
Gresham House Special Situations 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Timberland General 5 New Street Square, London
Partner Limited - 100 EC4A 3TW, England
Held
by other
Held by Group Country of incorporation and
Company companies registered office
% %
Gresham House Windfarms General 5 New Street Square, London
Partner 3 Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Value Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House VCT Limited - 100 EC4A 3TW, England
5 New Street Square, London
Lister Battery Limited - 100 EC4A 3TW, England
5 New Street Square, London
Low Farm Solar Limited - 100 EC4A 3TW, England
5 New Street Square, London
Monets Garden Battery Limited - 100 EC4A 3TW, England
80 Cheapside, London EC2V 6EE,
MyFutureLiving Limited - 100 England
80 Cheapside, London EC2V 6EE,
My ReSI Home Limited - 100 England
5 New Street Square, London
New Capital Holdings Limited - 95 EC4A 3TW, England
5 New Street Square, London
Newton Estate Limited - 100 EC4A 3TW, England
ReSI Capital Management GP 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
ReSI Capital Management Limited - 100 EC4A 3TW, England
1(st) Floor, 2 Castle Street,
ReSI Property Management Limited - 100 Taunton TA1 4AS, England
1(st) Floor, 2 Castle Street,
Retirement Rentals Limited - 100 Taunton TA1 4AS, England
Retirement Rentals Nominee 1(st) Floor, 2 Castle Street,
Company 1 Limited - 100 Taunton TA1 4AS, England
5 New Street Square, London
Security Change Limited - 100 EC4A 3TW, England
5 New Street Square, London
Siddington Solar Farm Limited - 100 EC4A 3TW, England
9 East Loockerman Street, Dover
TradeRisks Inc - 100 DE 19901, United States
5 New Street Square, London
TradeRisks Limited - 100 EC4A 3TW, England
25a, Boulevard Royal L-2449
TradeRisks (Luxembourg) S.a.r.l. - 100 Luxembourg
5 New Street Square, London
Wolden Estates Limited - 100 EC4A 3TW, England
80 Cheapside, London EC2V 6EE,
Your ReSI Home Limited - 100 England
Gresham House Holdings Limited is the employing entity for the
Group. Gresham House Asset Management Limited, TradeRisks Limited
and ReSI Capital Management Limited are the FCA regulated
entities.
18 Investment in associates
2021 2020
GBP'000 GBP'000
Opening Investment in associates 9,142 9,186
Share of associates' profit 4,955 158
Dividends received from associates (285) (202)
Additions 1,165 -
Return of capital (2,441) -
Disposals (371) -
Redesignation (210) -
-------- --------
Closing investment in associates 11,955 9,142
======== ========
The above balance consists of the Group's holdings in Gresham
House Strategic plc (GHS, now known as Rockwood Realisation plc)
and Environment Bank Limited (EBL). The Group's holdings in Noriker
Power Limited (Noriker) and Biggerbrook Limited (Biggerbrook) were
disposed of during the year.
The Board believe that Gresham House plc exercises significant
influence over GHS, but not control, through its 23.4% equity
investment.
The latest published financial information of GHS was the
unaudited interim results for the six months to 30 September 2021.
The assets and liabilities at that date are shown below:
2021 2020
GBP'000 GBP'000
Non-current assets 67,987 38,461
Current assets 1,938 3,924
Current liabilities (4,916) (173)
Net assets 65,009 42,212
======== ========
The GHS consolidated unaudited statement of comprehensive income
noted realised and unrealised gains from continuing operations on
investments at fair value through profit and loss of GBP17,845,000,
revenues of GBP367,000 and total comprehensive income of
GBP12,887,000 for the six months ended 30 September 2021.
The registered office of GHS is 6(th) Floor, 60 Gracechurch
Street, London, EC3V 0HR.
The Board believe that Gresham House plc exercises significant
influence over EBL, but not control, through its 50% equity
investment. The latest financial information of EBL was the
unaudited results for the 8-month period to 31 December 2021. The
assets and liabilities at that date are shown below:
GBP'000
Non-current assets 34
Current assets 1,048
Current liabilities (607)
Long-term liabilities (670)
Net liabilities (195)
========
The EBL unaudited statement of comprehensive income noted
revenues of GBP567,000 and a loss before tax and total
comprehensive loss of GBP1,308,000 for the period ended 31 December
2021.
The registered office of EBL is Central House, 20 Central
Avenue, St Andrews Business Park, Norwich, NR7 0HR.
19 Trade receivables
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable within one
year:
Trade receivables 11,135 3,184 - -
Less allowance for credit losses - - - -
-------- --------
11,135 3,184 - -
======== ======== ======== ========
As at 31 December 2021, trade receivables of GBP614,000 (2020:
GBP87,000) were past due but not impaired. The ageing analysis of
these trade receivables is as follows:
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
1-3 months 516 53 - -
3-6 months 67 26 - -
More than 6 months 31 8 - -
-------- --------
614 87 - -
======== ======== ======== ========
As at 31 December 2021 there were no provisions against trade
receivables (2020: GBPnil).
The expected credit losses are estimated using a provision
matrix by reference to past default experience and an analysis of
the debtor's current financial position, adjusted for factors that
are specific to the debtor, general economic conditions of the
industry and an assessment of both the current as well as the
forecast direction of conditions at the reporting date. The Group
has therefore not recognised a loss allowance because historical
experience has indicated that the risk profile of trade receivables
is deemed low.
20 Accrued income and prepaid expenses
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Accrued income 9,561 9,124 75 -
Other debtors 10,794 3,457 713 642
Prepaid expenses 1,350 1,202 369 118
-------- --------
21,705 13,783 1,157 760
======== ======== ======== ========
The movement in other debtors includes an increase in deferred
consideration receivable from DevCo Projects to GBP9,748,000 at 31
December 2021 from GBP1,748,000 at 31 December 2020.
21 Other current assets
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Amounts owed by Group undertakings - - 16,510 6,334
Loan Receivables - Investment
in development projects (see
Note 12) 3,537 551 3,537 551
Corporation tax recoverable - - - -
-------- --------
3,537 551 20,047 6,885
======== ======== ======== ========
Amounts owed by Group undertakings are repayable on demand and
attract interest of between 0% and 15% per annum.
Receivables from Group undertakings and loans to Group
undertakings are considered to be a low credit risk. Credit risk
for these assets has not increased significantly since their
initial recognition. As such, no expected credit losses have been
recognised in respect of Group balances as any effect would be
immaterial for the Company.
22 Trade and other payables
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Trade creditors 742 705 - -
IFRS 16 lease creditor 643 440 283 211
Other creditors 2,955 1,561 32 14
Accruals and deferred income 24,195 14,416 204 18
Corporation tax payable 1,692 273 - -
Contingent consideration (Note
26) 12,494 1,385 - -
-------- --------
42,721 18,780 519 243
======== ======== ======== ========
23 Short-term borrowings
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Bank loans - within current liabilities
(Note 25) - - - -
Amounts owed to Group undertakings - - 1,136 4,651
- - 1,136 4,651
========== ========== ======== ========
24 Deferred taxation
Under International Accounting Standard (IAS) 12 (Income Taxes)
provision is made for the deferred tax liability associated with
the recognition of the management contracts and customer
relationships as part of the 100% acquisition of FIM and TradeRisks
and the acquisition of the Mobeus VCT business. This has been
initially recognised at 17% for FIM, 19% for TradeRisks, 24% for
Appian and 24% for Mobeus of the fair value of the intangible
assets at acquisition and reassessed each year end, with the
movement being recognised in the income statement.
During the year the Group reassessed the assumptions made at the
time of the acquisition of the Livingbridge VC management
contracts. This resulted in a deferred tax liability of
GBP2,071,000 being recognised at a rate of 22% on 1 October
2021.
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 19% (2020: 19%). The
increase in the main rate of corporation tax to 25% was
substantively enacted with effect from April 2023. This new rate
has been applied to deferred tax balances which are expected to
reverse after 1 April 2023.
As at 31 December 2021 the deferred tax liability was
GBP8,743,000 (2020: GBP3,227,000).
Deferred tax assets have been recognised in respect of all tax
losses and other temporary differences giving rise to deferred tax
assets where the Directors believe it is probable that these assets
will be recovered.
The Group has recognised a deferred tax asset of GBP2,197,000
(2020: GBP1,051,000) in relation to differences between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit and is accounted for using the statement of
financial position liability method. The Company has recognised
GBP92,000 (2020: GBP153,000) in respect of these differences.
The movement on the deferred tax account is as shown below:
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January (2,176) (2,019) 153 276
Deferred tax recognised in profit
and loss (1,744) 457 (61) (123)
Deferred tax recognised in equity 1,062 - - -
-------- -------- -------- --------
(2,858) (1,562) 92 153
Arising on business combinations (5,542) (614) - -
Balance as at 31 December (8,400) (2,176) 92 153
======== ======== ======== ========
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Deferred tax asset 2,197 1,051 92 153
Deferred tax liability (10,597) (3,227) - -
(8,400) (2,176) 92 153
========= ======== ======== ========
25 Long-term borrowings
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Bank loans - - - -
- - - -
======== ======== ======== ========
On 31 December 2021, the Company signed an amendment and
restatement agreement relating to the facility agreement originally
dated 21 December 2020 with Banco Santander SA (the facility),
increasing the facility size from GBP5.0 million to GBP20.0
million. The facility is secured with fixed and floating charges
over certain of the Company's assets, with cross guarantees
provided by Gresham House Asset Management Limited and Gresham
House Holdings Limited. The fixed charges relate to certain Group
bank accounts with a carrying value of GBP32.3 million as at the
year end.
No amounts were drawn under this facility at the year end.
The Group has complied with the financial covenants attached to
the facility.
The interest payable on the facility is SONIA plus 3.05%.
26 Non-current liabilities - other creditors
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Contingent consideration 10,165 5,548 - -
IFRS 16 lease creditor 1,798 201 1,058 -
11,963 5,749 1,058 -
======== ======== ======== ========
Contingent consideration
Livingbridge VC
The Livingbridge VC contingent consideration has been determined
in two parts.
The first is that the VCT Boards do not give notice to GHAM
within two years of the acquisition. Should this be the case, then
a payment of GBP5.0 million will be made to the sellers of
Livingbridge VC. Contingent consideration totalling GBP5.0 million
was paid in respect of this during the previous year.
The second part of the contingent consideration is the hurdle to
deliver revenues from the Livingbridge VC business of between
GBP30.9 million and GBP37.2 million in the three years to 31
December 2021. The maximum amount payable on achieving the GBP37.2
million hurdle is GBP2.5 million and the minimum payable is zero if
the GBP30.9 million hurdle is not achieved. The fair value of the
remaining contingent consideration payable to the Livingbridge VC
sellers as at 31 December 2021 was GBP2.4 million.
TradeRisks
Contingent consideration totalling a maximum of GBP6.0 million
will be payable in cash to the sellers based on the following:
a) 0.5% of funds raised payable in three years, with maximum amount capped at GBP3.0 million;
b) any realised synergies payable in three years, capped at GBP1.0 million; and
c) GBP2.0 million payable within six months post-completion for any inventory true-up.
Payments totalling GBP0.8 million relating to part c) were paid
during the year (2020: GBP0.6 million).
The fair value of the remaining contingent consideration payable
to the TradeRisks sellers as at 31 December 2021 was GBP2.7
million.
Monets Garden
The Group acquired a controlling interest in Monets Garden
Battery Limited, a battery storage development project, during the
previous year. Under the terms of the SPA deferred consideration of
GBP0.3 million was paid in February 2021 and a further amount of
GBP0.75 million was paid in February 2022.
Lister Battery
The Group acquired a controlling interest in Lister Battery
Limited, a battery storage development project, during the previous
year. Under the terms of the SPA deferred consideration of GBP0.3
million was paid in February 2021 and a further amount of GBP0.75
million was paid in February 2022.
Arbroath Limited
The Group acquired a controlling interest in Arbroath Limited, a
battery storage development project, during the year. Under the
terms of the SPA deferred consideration of GBP0.18 million is
payable by 31 March 2022.
Coupar Limited
The Group acquired a controlling interest in Coupar Limited, a
battery storage development project, during the year. Under the
terms of the SPA deferred consideration of GBP0.375 million is
payable by 31 March 2022.
Statera Projects
The Group acquired a controlling interest in Penwortham Storage
Limited, Grendon Storage Limited, Melksham West Storage Limited,
Melksham East Storage Limited, West Didsbury Storage Limited and
Enderby Storage Limited, battery storage development projects
collectively known as the Statera Projects, during the year. Under
the terms of the SPA deferred consideration of GBP4.037 million is
payable by 30 June 2022.
Appian
Contingent consideration with an expected fair value of GBP4.0
million will be payable in cash to the sellers based on the
following:
-- 1.4 times year two earnings, payable on 30 June 2023. The
expected fair value as at 31 December 2021 is GBP1.1 million;
-- 1.4 times year three earnings, payable on 30 June 2024. The
expected fair value as at 31 December 2021 is GBP1.5 million;
and
-- up to EUR0.75 million payable on 30 June 2024 based on
certain AUM and earnings targets. The expected fair value as at 31
December 2021 is GBP0.4 million.
The fair value of the contingent consideration has been
estimated using expected outcomes, the probability of those
outcomes and discounting this at 13.0%. Up to 50% of the contingent
consideration may be settled in Gresham House plc shares at the
Company's discretion.
Mobeus
Contingent consideration totalling a maximum of GBP9.7 million
will be payable in cash to the sellers based on the following:
-- GBP4.1 million payable on 31 December 2022 subject to the
retention of the management contracts;
-- GBP2.9 million payable on 31 December 2023 subject to the
retention of the management contracts;
-- a maximum of GBP1.9 million payable after three years subject
to the retention of the management contracts; and
-- a maximum of GBP0.8 million payable in three years subject to fundraising and AUM targets.
The fair value of the contingent consideration has been
estimated using expected outcomes, the probability of those
outcomes and discounting this at 12.0%. The expected fair value as
at 31 December 2021 is GBP8.0 million.
27 Share capital
2021 2020
GBP'000 GBP'000
Allotted: Ordinary - 38,000,819 (2020: 32,091,707)
fully paid shares of 25 pence 9,500 8,023
======== ========
During the year the Company issued the following new ordinary
shares:
-- 750,000 shares on 26 March 2021 at par into the Gresham House Employee Benefit Trust;
-- 104,168 shares on 29 June 2021 at a price of 940.0 pence per
share to the vendors of Appian Asset Management Limited;
-- 2,197,802 shares on 17 September 2021 at a price of 910.0
pence per share by way of a placing;
-- 219,780 shares on 17 September 2021 at a price of 910.0 pence
per share by way of a retail placing;
-- 439,560 shares on 1 October 2021 at a price of 895.0 pence
per share to the vendors of the Mobeus VCT business; and
-- 2,197,802 shares on 1 October 2021 at a price of 907.0 pence
per share by way of a vendor placing.
The Gresham House Employee Benefit Trust (EBT) held 204,007
shares at 31 December 2021, with a par value of GBP51,000 (2020:
nil).
The shares held by the GH EBT are expected to be issued under
share option contracts. The shares were acquired during the year.
In 2021, 1,287,450 shares were issued to employees.
28 Share warrants
Group 2021 2020
Shareholder Total Shareholder Total
warrants warrants warrants warrants
Balance as at 1 January - - 56,363 56,363
Warrants exercised during the
year - - (56,302) (56,302)
Warrants lapsed during the
year - - (61) (61)
As at 31 December - - - -
============== ============ =============== ===========
Shareholder warrants
On 1 December 2014, the Company issued 1,073,904 shareholder
warrants to existing shareholders as at the close of business on 28
November 2014 on a 1:5 basis, such warrants having been admitted to
trading on AIM. Shareholder warrants were freely transferable,
exercisable at any time between 1 January 2015 and 31 December 2019
at an exercise price of 323.27 pence per ordinary share and subject
to the terms of the shareholder warrant instrument dated 7 October
2014. Shareholder warrants not exercised by 31 December 2019
lapsed.
During the previous year, 56,302 shareholder warrants were
converted into ordinary shares resulting in the issue of 56,302 new
ordinary shares. Notice was given by shareholder warrant holders by
31 December 2019 for 56,363 shareholder warrants, of which 56,302
have been exercised, with the remaining 61 shareholder warrants
lapsing.
29 Share based payments
2016 Long-term incentive plan
Following approval from shareholders at the General Meeting of
the Company on 20 November 2015, the Directors implemented a
long-term incentive plan (2016 LTIP) to incentivise the management
team as well as align their interests with those of shareholders on
28 July 2016 through enhancing shareholder value.
For the purposes of the 2016 LTIP, "shareholder value" is the
difference between the market capitalisation of the Company at the
point in time that any assessment is made and the sum of:
(i) the market capitalisation of the Company a) at 1 December
2014 for first awards made to management who joined the Company
before 30 September 2015 (old joiners) and b) at the date of award
in all other cases (new joiners); and
(ii) the aggregate value (at the subscription price) of all
ordinary shares issued thereafter and up to the point in time that
any assessment is made, in each case adjusted for dividends and
capital returns to shareholders and/or issue of new shares.
The beneficiaries of the 2016 LTIP, will in aggregate be
entitled to an amount of up to 20.0% of shareholder value created
over the exercise period, subject to performance criteria set out
below. Individual participation in the shareholder value created
will be determined by the Remuneration Committee.
There will be certain hurdles the Company's share price has to
achieve before an award vests.
In the event that the Company achieves an average mid-market
closing price equal to compound growth at 7% per annum for a period
of ten consecutive dealing days in the period after 1 December 2016
for first awards to management who joined the Company before 30
September 2015 and from the second anniversary of the date of award
in all other cases, 50% of the award will vest.
In the event that the share price of the Company outperforms the
FTSE All Share Index in the period after 1 December 2016, and from
the second anniversary of the date of the award in all other cases,
50% of the award shall vest.
Each award will require a minimum term of employment of three
years and awards will be made to current management and new joiners
at the Company's discretion.
IFRS 2: Share-based Payments sets out the criteria for an
equity-settled share-based payment, which has market performance
conditions. The 2016 LTIP meets these criteria and should therefore
be recognised at award at fair value and amortised over the vesting
period of two years. There is no amount payable by the
beneficiaries on exercise. The table below details the type and
number of shares in Gresham House Holdings Limited issued and
exercised in the year:
2021 A Shares A Shares
old new Total
joiners joiners B Shares C Shares D Shares LTIP
Balance as at 1 January - - 104 - 180 284
Exercised during the year - - (104) - - (104)
----------- ----------- --------- --------- --------- ------
As at 31 December - - - - 180 180
=========== =========== ========= ========= ========= ======
Exercisable at year end - - - - 180 180
=========== =========== ========= ========= ========= ======
Months to vesting - - - - -
=========== =========== ========= ========= =========
2020 A Shares A Shares
old new Total
joiners joiners B Shares C Shares D Shares LTIP
Balance as at 1 January 870 46 208 104 180 1,408
Exercised during the year (870) (46) (104) (104) - (1,124)
--------- --------- --------- --------- --------- --------
As at 31 December - - 104 - 180 284
========= ========= ========= ========= ========= ========
Exercisable at year end - - 104 - - 104
========= ========= ========= ========= ========= ========
Months to vesting - - - - 12
========= ========= ========= ========= =========
104 B Shares were exercised during the year and at the Company's
discretion were settled in cash. The difference between the fair
value recognised over the vesting period and the fair value at the
date of exercise of GBP2.4 million was recognised in retained
reserves. The fair value of the remaining D Shares at the year end
was GBP1.9 million which could result in the issuance of 211,724
shares in Gresham House plc based on the year end share price of
900 pence.
Fair value
The fair value of the award at the date of the award has been
determined using an expected returns model, which is based on a
number of scenarios and probabilities of the Company's performance
for the period when the awards may be exercised. The assumptions in
the model have estimated the shareholder value created and applied
discounts for liquidity and likelihood of exercise by participants.
The weighted average valuation of the Company has been used to
calculate the expected shareholder value created and consequently
the value of the plan.
2018 Long-term incentive plan
The Remuneration Committee considered and implemented a
long-term incentive arrangement in 2018 (2018 LTIP). The 2016 LTIP
became exercisable during 2018 and as such the Remuneration
Committee introduced the 2018 LTIP to align the management team and
wider members of the business for the next three years with
shareholders.
The 2018 LTIP is a deferred share award, which vests in three
years from the date of award subject to management remaining
employed by the Company as at the vesting date. There is no
staggered vesting period, vesting is at the end date in three
years' time.
During the year ended 31 December 2021, 421,805 awards were
exercised and net-settled by ordinary shares held by the Gresham
House Employee Benefit Trust. During the year ended 31 December
2020, 7,331 awards were exercised and net-settled by ordinary
shares held by the Gresham House Employee Benefit Trust. The
weighted average share price at the date of exercise was 887 pence
(2020: 740 pence).
2019 Long-term incentive plan
The Remuneration Committee considered and implemented a
long-term incentive arrangement in 2019 (2019 LTIP).
Under the 2019 LTIP, 274,728 deferred shares were awarded to the
management team and 121,063 deferred shares were awarded to the
wider members of the business, with a fair value at award of GBP1.5
million and GBP0.7 million respectively. The awards to the
management team vest in three years from the date of award subject
to management remaining employed by the Company as at the vesting
date and achievement of performance conditions. There is no
staggered vesting period, vesting is at the end date in three
years' time. The awards to the wider members of the business also
vest in three years from the date of award but there are no
performance conditions.
The performance conditions relating to the management team's
awards are that in the event that the Company achieves an average
mid-market closing price equal to compound growth at 7% per annum
over the three-year period from award, or the growth in Adjusted
Earnings Per Share has compound growth of 7% per annum or more, 50%
of the award will vest.
In the event that the share price of the Company outperforms the
FTSE All Share Index from the third anniversary of the date of the
award in all other cases, 50% of the award will vest.
The fair value of the 2019 LTIP was measured as the share price
at the date of award. The impact of the volatility in the share
price has been deemed to be immaterial.
2021 Long-term incentive plan
The Remuneration Committee considered and implemented a
long-term incentive arrangement in 2021 (2021 LTIP).
Under the 2021 LTIP, 109,448 deferred shares were awarded to the
wider members of the business, with a fair value at award of GBP0.9
million. The 2021 LTIP is a deferred share award, which vests in
three years from the date of award subject to the team remaining
employed by the Company as at the vesting date. There is no
staggered vesting period, vesting is at the end date in three
years' time.
2019
2019 LTIP LTIP
2018 - management other 2021
LTIP team staff LTIP Total
Balance as at 31 December
2019 429,136 274,728 121,064 - 824,928
Exercised in the year (7,331) - (4,504) - (11,835)
---------- -------------- -------- -------- ----------
Balance as at 31 December
2020 421,805 274,728 116,560 - 813,093
Issued in the year - - - 109,448 109,448
Exercised in the year (421,805) - - - (421,805)
Lapsed in the year - - (9,009) - (9,009)
---------- -------------- -------- -------- ----------
Balance as at 31 December
2021 - 274,728 107,551 109,448 491,727
========== ============== ======== ======== ==========
Exercisable at year end - - - - -
========== ============== ======== ======== ==========
2020 Long-term incentive plan
The Directors implemented the 2020 long-term incentive plan
(2020 LTIP) in December 2020 to incentivise the management team as
well as align their interests with those of shareholders through
enhancing shareholder value. This scheme replaced the 2016 LTIP
which had vested and was exercised by the majority of the
management team during 2020.
The 2020 LTIP pool principles state that the value of the awards
will be driven by the total return to shareholders over (i) 1
January 2020 to 31 December 2023 (the first measurement period) and
(ii) 1 January 2020 to 31 December 2024 (the second measurement
period).
In the event that total return to shareholders over the first
measurement period is 7% p.a. (Performance Hurdle) or more, a
maximum related plan pool of value equal to 7.5% of such total
return may arise. In the event that total return to shareholders is
more than the Performance Hurdle over the second measurement
period, a maximum of 15% of such total return to shareholders may
arise (less any pool value distributed under the awards in respect
of the first measurement period).
Return to shareholders for such purposes shall be measured from
a base value of GBP165,706,250, being the 90-day average market
capitalisation of the Company to 1 January 2020, to the respective
90-day market capitalisation averaging periods at each of the
measurement periods and shall include the value of dividends
(assumed reinvested) and other capital (if any) returned.
Appropriate adjustments to the required minimum 7% p.a. level of
growth in return shall be made in respect of any capital raised
during the measurement periods.
IFRS 2: Share-based Payments sets out the criteria for an
equity-settled share-based payment, which has market performance
conditions. The 2020 LTIP meets these criteria and should therefore
be recognised at award at fair value and amortised over the vesting
period of four years from the date of award. The fair value of the
2020 LTIP at award was GBP5.7 million and at year end was GBP16.9
million, which equates to 1,901,586 Gresham House plc shares at 900
pence.
There is no amount payable by the beneficiaries on exercise and
the number of shares in respect of which the awards may vest when
aggregated with those issuable or issued in respect of awards
granted under the 2020 LTIP and any other Company employees' share
scheme, shall not exceed 20% of prevailing issued share capital in
accordance with the AIM Admission circular dated 4 November 2015.
Scaling back of awards shall apply to such extent as required to
ensure this limit is not breached.
Renewable Energy team long-term incentive plan
The Renewable Energy management team, which joined as part of
the acquisition of the asset management business of Hazel Capital
LLP, had a long-term incentive plan in place, which granted the
team a total of 1,000 A Shares in Gresham House New Energy Limited
on 31 October 2017. The plan is an earn out plan following the
acquisition of Hazel Capital LLP and is considered an acquisition
related share-based payment. The vesting date of the A Shares was
31 December 2020, when the holders are entitled to receive either
Gresham House plc shares, or cash at the Company's discretion in
exchange for their A Shares. Under the guidance in IFRS 2:41, it
has been considered that the A Share settlement should be treated
as an equity-settled instrument.
The A Shares vested on 31 December 2020 with a valuation, based
on the average profits generated by the New Energy division between
31 October 2017 and 31 December 2020, of GBP13.0 million. The award
was partially settled with 984,124 shares in Gresham House plc,
with a fair value of 787.5 pence per share and, at the Company's
discretion, the balance of GBP5.3 million was settled in cash. The
difference between the fair value recognised over the vesting
period and the fair value at the date of exercise was recognised in
retained reserves.
The fair value of the A Shares at award was GBP276,000 (GBP276
per share), which was amortised over the three-year and two-month
vesting period.
Livingbridge VC long-term incentive plan
The Livingbridge VC long-term incentive plan is an
equity-settled incentive scheme and considered an acquisition
related share-based payment. The recipients of the scheme will
receive up to GBP2.5 million in aggregate in Gresham House plc
shares based on the three-year period to 31 December 2021. There is
a hurdle to deliver revenues from the Livingbridge VC business of
between GBP30.9 million and GBP37.2 million in the three years to
31 December 2021. The maximum amount payable on achieving the
GBP37.2 million hurdle is GBP2.5 million and the minimum payable is
zero if the GBP30.9 million hurdle is not achieved. As at 31
December 2021 the hurdle had been reached and the full GBP2.5
million will be settled in Gresham House plc shares or cash in
March 2022.
Mobeus VC long-term incentive plan
The Mobeus VC long-term incentive plan is an equity-settled
incentive scheme and considered an acquisition related share-based
payment. The recipients of the scheme will receive up to GBP1.3
million in aggregate in Gresham House plc shares based on the
three-year period to 1 October 2024.
Bonus share matching plan
The Company introduced in 2016 a share matching plan linked to
the discretionary annual bonus scheme to encourage management and
employees to invest in the long-term growth of the Company.
Subject to Remuneration Committee approval, management and
employees entitled to a bonus may be permitted (but not required)
to defer and reinvest up to 50% of their annual bonus into ordinary
shares which will be released to them after three years together
with any additional matching shares subject to performance criteria
set out below. In 2021 the Remuneration Committee approved the
reinvestment of up to 50% of annual bonuses into ordinary shares by
management and employees subject to a maximum amount of GBP100,000
(2020: 50% subject to a maximum amount of GBP100,000).
In the event that the Company achieves a mid-market closing
price equal to 7% per annum compound growth from the date of
deferral, the participants will receive 50% of the matching shares
benefit. In the event that the Company's share price outperforms
the FTSE All Share Index from the date of deferral, the
participants will receive 50% of the matching shares.
Shares will be awarded in the ratio one share for each share
invested. In the event that this performance condition is not met,
the participants will receive only the ordinary shares acquired
with the deferred bonus.
The bonus shares to be awarded after the three-year period and
subject to performance conditions have been fair valued using a
Monte Carlo simulation. The key variables include the risk-free
rate of 0.32% and volatility of the Company share price of 16%. The
fair value of the matching shares relating to the 2020 bonuses is
GBP316,000 (GBP1.57 per share) and will be amortised over the
three-year vesting period.
Save as you earn (SAYE) scheme
In 2018 the Remuneration Committee approved a SAYE scheme for
the benefit of all employees of the Group whereby employees can
save up to GBP500 per month over a three-year period. At the end of
the three-year period the employees have an option to purchase
Company shares at the agreed exercise price or receive their
savings in cash. The exercise price for the 2020 scheme is 399
pence. The following table outlines the maximum number of shares
under the SAYE scheme:
Fair
Shares value Exercise
under of option price
option (pence) (pence)
2019 SAYE scheme 106,266 85 373
2020 SAYE scheme 74,567 104 399
2021 SAYE scheme - - -
--------
180,833
========
68,707 SAYE options in relation to the 2018 SAYE scheme were
exercised in the year at an exercise price of 325 pence.
For all share-based payment awards the performance conditions
and employment conditions as specified per scheme are required to
be met at the vesting dates otherwise the awards lapse or are
forfeited accordingly. Specific details are included in the schemes
above.
30 Reserves
2021 2020 (restated)
Share Foreign Share
premium Merger Treasury exchange Retained premium Merger Retained
account reserve shares reserve reserves account reserve reserves
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at
1 January 60,061 19,981 - - 8,402 52,594 16,648 14,039
(Loss)/profit
and total comprehensive
income - - - (158) 12,500 - - 577
Issue of shares 39,267 4,830 (51) - - 7,429 3,333 -
Share-based payments - - - - (5,424) 38 - (4,863)
Cancellation
of share premium (60,000) - - - 60,000 - - -
Dividends paid - - - - (1,881) - - (1,351)
As at 31 December 39,328 24,811 (51) (158) 73,597 60,061 19,981 8,402
========= ========= ========= ========== ========== ========= ========= ==========
2021 2020 (restated)
Share Share
premium Merger Retained premium Merger Retained
account reserve reserves account reserve reserves
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January 60,061 19,981 9,257 52,594 16,648 12,379
Loss and total comprehensive
income - - (1,695) - - (1,771)
Issue of shares 39,267 4,830 - 7,467 3,333 -
Share-based payments (60,000) - 60,000 - - -
Cancellation of share premium - - (4,977) - - -
Dividends paid - - (1,881) - - (1,351)
As at 31 December 39,328 24,811 60,704 60,061 19,981 9,257
========= ========= ========== ========= ========= ============
2021 2020
Non-controlling
interest: GBP'000 GBP'000
Balance as at
1 January 811 582
Interest in trading result
for the year (3) (2)
Interest in investments - securities 267 231
As at 31 December 1,075 811
======== ========
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share premium account Amount subscribed for share capital in
excess of nominal value.
Merger reserve Represents the difference between the value of
shares issued by the Company in exchange for the value of shares
acquired in respect of the acquisition of subsidiaries accounted
for under the acquisition method.
Treasury shares Weighted average cost of own shares held in
treasury and by the GH EBT
Foreign exchange reserve Gains and losses arising on
retranslating the net assets of overseas operations into sterling
.
Retained earnings All other net gains and losses and
transactions with owners (e.g. dividends) not recognised
elsewhere.
Restatement of share premium
In the prior years when there had been the acquisitions of the
below entities, shares in the Group were issued in exchange for
obtaining the shareholding in the entity being acquired. S612 of
the Companies Act of 2006 indicates that when these shares are
issued at a premium, then S610 of the Companies Act of 2006 does
not apply, hence any excess over par shouldn't be taken to share
premium. In these cases merger relief applies and the excess above
par value should be allocated to a separate merger reserve. In the
prior year financial statements this excess above par value had not
been taken to a separate merger reserve.
Acquisitions:
-- 2018 - FIM and Livingbridge
-- 2020 - TradeRisks
The effect of the change is as follows and has had no impact on
the prior year's profit, total assets, total liabilities or total
equity. The change is a reclassification to a separate merger
reserve within equity.
Share Restated
premium share New merger
as presented Change premium reserve
GBP'000 GBP'000 GBP'000 GBP'000
31 December 2019 69,242 (16,648) 52,594 16,648
31 December 2020 80,042 (19,981) 60,061 19,981
31 Net asset value per share
Basic 2021 2020
Equity attributable to holders
of the parent (GBP'000) 146,462 96,467
Number of ordinary shares in issue
at the end of the period 38,000,819 32,091,707
Number of shares held by the Gresham House
Employee Benefit Trust (204,007) -
----------- -----------
37,796,812 32,091,707
Basic net asset value per share
(pence) 387.5 300.6
=========== ===========
Diluted 2021 2020
Equity attributable to holders
of the parent (GBP'000) 146,462 96,467
Number of ordinary shares in issue
at the end of the period 40,151,526 33,567,216
Number of shares held by the Gresham House
Employee Benefit Trust (204,007) -
----------- -----------
39,937,519 33,567,216
Basic net asset value per share
(pence) 366.6 287.4
=========== ===========
Diluted net asset value per share is based on the number of
shares in issue at the year end together with 2,150,707 shares
deemed to have been issued at nil consideration as a result of
shares which could be issued under the bonus share matching plan,
long-term incentive plans and acquisition related share-based
payments.
GBP'000
The movement during the year of the assets attributable
to ordinary shares were as follows:
Total net assets attributable
at 1 January 2021 96,467
Total recognised gains for the
year 11,777
Share-based payments (5,424)
Issue of shares 45,523
Dividends paid (1,881)
Total net assets attributable
at 31 December 2021 146,462
========
32 Notes to the statements of cash flows
a) Reconciliation of operating profit to operating cash
flows
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Net operating profit / (loss)
after finance costs 6,721 (1,916) (2,680) (1,981)
Loss from discontinued operations (14) (12) - -
Interest payable 214 25 169 8
Depreciation 959 871 648 652
Loss on disposal of property,
plant and equipment - 27 (1) -
Amortisation 8,516 8,033 374 230
Share-based payments 3,788 2,262 - -
Acquisition related remuneration 452 - - -
-------- -------- -------- --------
20,636 9,290 (1,490) (1,091)
Increase in long-term receivables (492) - (492) -
(Increase)/decrease in current
assets (7,745) 1,777 (87) (81)
Increase/(decrease) in current
liabilities 8,731 6,525 158 (8)
21,130 17,592 (1,911) (1,180)
======== ======== ======== ========
b) Non-cash investing and financing activities
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Acquisition of right-of-use assets
(Notes 8 and 13) 2,794 877 1,752 454
Partial settlement of business
combinations through the issue
of shares (Notes 5 and 27) 24,899 3,472 - -
27,693 4,349 1,752 454
======== ======== ======== ========
c) Net debt reconciliation
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 40,252 21,886 23,800 7,826
Borrowings - - (1,136) (4,651)
Amounts owed by Group undertakings - - 16,510 6,334
Lease liabilities (Note 8) (2,441) (641) (1,341) (211)
Net cash 37,811 21,245 37,833 9,298
======== ======== ======== ========
Group Leases Cash Total
GBP'000 GBP'000 GBP'000
Net cash/(debt) at 1 January
2020 (445) 19,432 18,987
Cash flows 620 2,454 3,074
New leases obtained through business
combinations (346) - (346)
New leases (470) - (470)
Net (debt)/cash at 31 December
2020 (641) 21,886 21,245
Cash flows 845 18,366 19,211
New leases obtained through business
combinations (689) - (689)
New leases (1,970) - (1,970)
Foreign exchange movements 14 - 14
-------- -------- --------
Net (debt)/cash at 31 December
2021 (2,441) 40,252 37,811
======== ======== ========
Company Net borrowings Leases Cash Total
GBP'000 GBP'000 GBP'000 GBP'000
Net (debt)/cash at 1 January
2020 (3,206) (243) 1,940 (1,509)
Cash flows 7,704 478 5,886 14,068
Non-cash intercompany movements (6,317) - - (6,317)
Other movements 3,502 - - 3,502
New leases - (446) - (446)
---------------
Net cash/(debt) at 31 December
2020 1,683 (211) 7,826 9,298
Cash flows 11,578 604 15,974 28,156
Non-cash intercompany movements (22,786) - - (22,786)
Other movements 24,899 - - 24,899
New leases - (1,734) - (1,734)
--------------- -------- -------- ---------
Net cash/(debt) at 31 December
2021 15,374 (1,341) 23,800 37,833
=============== ======== ======== =========
33 Financial instruments
The Group consists of the Company and subsidiary undertakings
whose principal activities are asset management.
The Group's financial instruments, which are held in accordance
with the Group's objectives and policies, comprise:
(i) securities consisting of listed and unlisted equity shares ;
(ii) a portfolio of listed and unlisted fixed income securities;
(iii) cash, liquid resources and short-term debtors and
creditors that arise directly from its operational activities;
and
(iv) short-term and long-term borrowings.
As at 31 December 2021 the following categories of financial
instruments were held by:
Group 2021 2020
Assets Assets
at fair at fair
Loans value Loans value
and receivables through and receivables through
at amortised profit at amortised profit
cost or loss cost or loss
Financial assets per Statement
of Financial Position GBP'000 GBP'000 GBP'000 GBP'000
Investments 3,537 13,560 763 8,874
Trade and other receivables
- current and non-current 11,627 9,748 3,184 1,718
Accrued income and other debtors 10,608 - 10,863 -
Cash and cash equivalents 40,252 - 21,886 -
66,024 23,308 36,696 10,592
================= ========= ================= =========
2021 2020
Liabilities Liabilities
Other at fair Other at fair
financial value financial value
liabilities through liabilities through
at amortised profit at amortised profit
cost or loss cost or loss
Financial liabilities per Statement
of Financial Position GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables - short-term 27,950 12,494 15,892 1,385
Other creditors - long-term 1,798 10,165 201 5,548
29,748 22,659 16,093 6,933
============== ============ ============== ============
Company 2021 2020
Assets Assets
at fair at fair
Loans value Loans value
and receivables through and receivables through
at amortised profit at amortised profit
cost or loss cost or loss
Financial assets per Statement
of Financial Position GBP'000 GBP'000 GBP'000 GBP'000
Investments 3,537 8,308 763 5,130
Accrued income and other debtors 1,280 - 643 -
Amounts owed by Group undertakings 16,510 - 6,334 -
Cash and cash equivalents 23,800 - 7,826 -
45,127 8,308 15,566 5,130
================= ========= ================= =========
2021 2020
Liabilities Liabilities
Other at fair Other at fair
financial value financial value
liabilities through liabilities through
at amortised profit at amortised profit
cost or loss cost or loss
Financial liabilities per Statement
of Financial Position GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables - short-term 519 - 243 -
Trade and other payables - long-term 1,058 - - -
Other loans - short and long-term 1,136 - 4,651 -
Bank loans - short and long-term - - - -
2,713 - 4,894 -
============== ============ ============== ============
The carrying value of loans and receivables and other financial
liabilities are not materially different to their fair values. The
Group's activities expose it to various types of risk that are
associated with the financial instruments and markets in which it
invests. The main risks to which the Group is exposed are market
price risk, credit risk, interest rate risk and liquidity risk. The
nature and extent of the financial instruments outstanding at the
Statement of Financial Position date and the risk management
policies employed by the Group are summarised below.
Market price risk
Market price risk is the risk that changes in market prices will
adversely affect the Group's income due to a decline in the
underlying value of assets under management, resulting in lower
fees.
The objective of market price risk management is to manage and
control market price exposure, while optimising the return on risk.
The Group manages strategic equity funds, which are exposed to
market prices. Forestry asset management fees are not linked
directly to market prices.
Market price risk arises from uncertainty about the future
prices of financial instruments held within the Group's portfolio.
It represents the potential loss that the Group might suffer
through holding market positions in the face of market movements.
The investments in equity and fixed interest stocks of unquoted
companies are not traded and as such the prices are more uncertain
than those of more widely traded securities.
Unquoted investments are valued as per accounting policy (j) in
these financial statements. Regular reviews of the financial
results, combined with close contact with the management of these
investments, provides sufficient information to support these
valuations.
Foreign currency risk
The Group is not materially exposed to currency risk as its
assets and liabilities are substantially denominated in S
terling.
Credit risk
Credit risk is the risk that a counterparty will fail to
discharge an obligation or commitment that it has entered into with
the Group.
The Group's maximum exposure to credit risk is:
2021 2020
GBP'000 GBP'000
Loan stock investments 3,537 763
Deferred receivable - short and
long-term 9,748 1,718
Trade and other receivables -
short-term 11,627 3,184
Accrued income and other debtors 10,608 10,863
Cash and cash equivalents 40,252 21,886
75,772 38,414
======== ========
The Group has an exposure to credit risk in respect of both loan
stock investments and other loans, most of which have no security
attached to them, or where they do, such security will rank after
any bank debt. The Company's exposure to credit risk is restricted
to investments, cash and cash equivalents, other loans, amounts
owed by Group undertakings and accrued income totalling
GBP45,127,000 (2020: GBP15,566,000).
Cash and cash equivalents consist of cash in hand and balances
with banks. To reduce the risk of counterparty default the Group
deposits its surplus funds in approved high-quality banks.
The following table shows the maturity of the loan stock
investments and other loans referred to above:
2021 2020
Loan stock investments GBP'000 GBP'000
Repayable within: - 1 year 3,537 763
1-2 years - -
2-3 years - -
3-4 years - -
4-5 years - -
3,537 763
======== ========
As at 31 December 2021 loan stock investments totalling
GBP858,000 (2020: GBP858,000) were impaired and provided for.
As at 31 December 2021 other loans totalling GBP54,000 (2020:
GBP54,000) were impaired and provided for.
There is potentially a risk whereby a counterparty fails to
deliver securities which the Company has paid for or pay for
securities which the Company has delivered. This risk is considered
to be small as where the transaction is in respect of quoted
investments the Company uses brokers with a high credit quality and
where the transaction is in respect of unquoted investments, these
are conducted through solicitors to ensure that payment matches
delivery.
Interest rate risk
The Group's fixed and floating interest rate securities, equity,
preference equity investments and loans and net revenue may be
affected by interest rate movements. Investments in small
businesses are relatively high-risk investments which are sensitive
to interest rate fluctuations.
The Group's assets include fixed and floating rate interest
instruments as detailed below. The Group is exposed to interest
rate movements on its floating rate liabilities.
The interest rate exposure profile of the Group's financial
assets and liabilities as at 31 December 2021 and 2020 were:
Group Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments 13,560 3,537 - - - 17,097
Cash - - 40,252 - - 40,252
Trade and other receivables 21,375 - - - - 21,375
Accrued income and
other debtors 10,608 - - - - 10,608
Creditors
* falling due within 1 year (27,307) - - (643) - (27,950)
* falling due after 1 year - - - (1,798) - (1,798)
--------------------- -------- --------- ------------ ------------ ---------
18,236 3,537 40,252 (2,441) - 59,584
===================== ======== ========= ============ ============ =========
Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments 8,874 763 - - - 9,637
Cash - - 21,886 - - 21,886
Trade and other receivables 4,902 - - - - 4,902
Accrued income and
other debtors 10,863 - - - - 10,863
Creditors
* falling due within 1 year (15,452) - - (440) - (15,892)
* falling due after 1 year - - - (201) - (201)
9,187 763 21,886 (641) - 31,195
===================== ======== ========= ============ ============ =========
Non-interest-bearing assets comprise the portfolio of ordinary
shares, dealing securities and non-interest-bearing loans.
Fixed rate assets comprise fixed rate loans, unsecured loans and
loans repayable on demand, with a weighted average interest rate of
15.0% (2020: 13.2%).
Floating rate assets and floating rate liability loans are
subject to interest rates which are based on SONIA and bank base
rates.
Fixed rate liabilities include lease creditors.
The interest rate exposure profile of the Company's financial
assets and liabilities as at 31 December 2021 and 2020 were:
Company Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments - securities 8,308 3,537 - - - 11,845
Cash - - 23,800 - - 23,800
Accrued income and
other debtors 1,280 - - - - 1,280
Amounts owed by Group
undertakings 16,510 - - - - 16,510
Creditors
* falling due within 1 year (236) - - (283) (1,136) (1,655)
* falling due after 1 year - - - (1,058) - (1,058)
--------------------- -------- --------- ------------ ------------ --------
25,862 3,537 23,800 (1,341) (1,136) 50,722
===================== ======== ========= ============ ============ ========
Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments - securities 5,130 763 - - - 5,893
Cash - - 7,826 - - 7,826
Accrued income and
other debtors 643 - - - - 643
Amounts owed by Group
undertakings 6,334 - - - - 6,334
Creditors
* falling due within 1 year (32) - - (211) - (243)
* falling due after 1 year - - - - (4,651) (4,651)
12,075 763 7,826 (211) (4,651) 15,802
===================== ======== ========= ============ ============ ========
Although the Group holds investments that pay interest, the
Board does not consider it appropriate to assess the impact of
interest rate changes upon the value of the investment portfolio as
interest rate changes are only one factor affecting market price
and the impact is likely to be immaterial. The Group had no bank
borrowings at the year end so the sensitivity of interest payable
to changes in interest rates was not relevant in 2021. Any change
to the interest rates on the floating rate assets and liabilities
is immaterial to the Group.
Liquidity risk
The investments in equity investments in Aquis Exchange traded
companies may be difficult to realise at their carrying value,
particularly if the investment represents a significant holding in
the investee company. Similarly, investments in equity and fixed
interest stocks of unquoted companies that the Company holds are
only traded infrequently. They are not readily realisable and may
not be realised at their carrying value where there are no willing
purchasers.
The Group has in place a revolving credit facility which it has
available to manage liquidity risk as required.
The table below analyses the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the
Statement of Financial Position date to the expected maturity date.
The amounts disclosed in the table are the contractual undiscounted
cash flows.
Less Between Between
than 1 and 2 and Over
As at 31 December 2021 1 year 2 years 5 years 5 years
GBP'000 GBP'000 GBP'000 GBP'000
Leases 644 863 947 335
Trade payables 742 - - -
Accruals 24,195 - - -
Contingent consideration 8,955 7,195 5,361 -
Other creditors 2,955 - - -
-------- ---------
37,491 8,058 6,308 335
======== ========= ========= =========
Less Between Between
than 1 and 2 and
As at 31 December 2020 1 year 2 years 5 years
GBP'000 GBP'000 GBP'000
Leases 443 205 14
Trade payables 705 - -
Accruals 14,416 - -
Contingent consideration 1,385 6,247 -
Other creditors 1,561 - -
--------
18,510 6,452 14
======== ========= =========
Capital risk management
The Group manages its capital to ensure that entities within the
Group and the Company will be able to continue to trade in an
orderly fashion whilst maintaining sustainable returns to
shareholders.
The capital structure of the Group and the Company consists of
short and long-term borrowings as disclosed in Notes 23 and 25,
cash and cash equivalents and equity attributable to equity
shareholders of the Company comprising issued share capital, share
premium, merger reserve, treasury shares, foreign exchange reserve
and retained reserves as disclosed in Notes 27, 28 and 30. The
Board reviews the capital structure of the Group and the Company on
a regular basis to ensure it complies with all regulatory capital
requirements. The financial measures that are subject to review
include cash flow projections and the ability to meet capital
expenditure and other contracted commitments, projected gearing
levels and interest covenants, although no absolute targets are set
for these.
The Group aims to hold sufficient cash to fulfil its
requirements with respect to regulatory capital. During the year
the Group and its subsidiary entities complied with all regulatory
capital requirements.
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Debt (2,441) (641) (2,477) (4,862)
Amounts owed by Group undertakings - - 16,510 6,334
Cash and cash equivalents 40,252 21,886 23,800 7,826
Net assets 147,537 97,278 134,343 97,322
Net cash 37,811 21,245 37,833 9,298
Net cash as a % of net assets 25.6% 21.8% 28.2% 9.6%
======== ======== ======== ========
34 Fair value measurements
Valuation inputs
IFRS 13 Fair Value Measurement - requires an entity to classify
its financial assets and liabilities held at fair value according
to a hierarchy that reflects the significance of observable market
inputs. The classification of these assets and liabilities is based
on the lowest level input that is significant to the fair value
measurement in its entirety. The three levels of the fair value
hierarchy are defined below.
Quoted market prices - Level 1
Financial instruments, the valuation of which is determined by
reference to unadjusted quoted prices for identical assets or
liabilities in active markets where the quoted price is readily
available, and the price represents actual and regularly occurring
market transactions on an arm's length basis. An active market is
one in which transactions occur with sufficient volume and
frequency to provide pricing information on an ongoing basis.
Valuation technique using observable inputs - Level 2
Financial instruments that have been valued using inputs other
than quoted prices as described for Level 1 but which are
observable for the asset or liability, either directly or
indirectly. The Group had no Level 2 investments in both the
current and prior year.
Valuation technique using significant unobservable inputs -
Level 3
Financial instruments, the valuation of which incorporates
significant inputs for the asset or liability that are not based on
observable market data (unobservable inputs). Unobservable inputs
are those not readily available in an active market due to market
illiquidity or complexity of the product. These inputs are
generally determined based on observable inputs of a similar
nature, historical observations on the level of the input or
analytical techniques.
Where investments are in a fund, the net asset value of the fund
is used to determine the fair value of the investment. The net
asset value is typically prepared by the manager of that specific
fund and provided to Group as an investor. The Group reviews the
valuation and uses this as the Level 3 assessment of fair
value.
The valuation techniques used by the Company for Level 3
financial assets can be found in accounting policy (j) (ii).
Investments in the unlisted securities includes investments in
five separate funds where the valuation methodology is considered a
Level 3 assessment.
One of the funds invests in a large number of forestry assets.
The forestry assets are held at fair value in the underlying fund.
An independent valuation of the forests within the underlying fund
is performed annually by forestry valuation experts by reference to
comparable market transactions for each underlying forestry asset
that considers factors including location, maturity of the forest
and size. There is no reasonable change in the inputs in each of
the underlying assets, which would give rise to a material
adjustment to the fair value of the investment.
The remaining four investments in funds are measured using the
fair value of the net asset value provided by the manager of those
funds, which are reviewed by the appropriate investment committee
and the inputs used are unobservable.
Further details of the securities portfolio can be found in Note
12 of these financial statements.
An analysis of the Group's and Company's assets measured at fair
value by hierarchy is set out below.
31 December Level Level
Group 2021 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 13,560 6,361 7,199
13,560 6,361 7,199
============ ======== ========
31 December Level Level
2020 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 8,874 4,949 3,925
8,874 4,949 3,925
============ ======== ========
31 December Level Level
Company 2021 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 8,308 4,923 3,385
8,308 4,923 3,385
============ ======== ========
31 December Level Level
2020 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 5,130 4,160 970
5,130 4,160 970
============ ======== ========
Set out below is a reconciliation of financial assets measured
at fair value based on Level 3.
Trade
Group Investments and other
31 December 2021 - securities receivables Total
GBP'000 GBP'000 GBP'000
Opening balance 3,925 - 3,925
Total gains:
In Statement of Comprehensive
Income 1,956 - 1,956
Additions 2,319 - 2,319
Disposals (1,001) - (1,001)
-------------- ------------- --------
Closing balance 7,199 - 7,199
============== ============= ========
Total gains/(losses) for the
year included in comprehensive
income for assets held at the
end of the reporting period 1,227 - 1,227
============== ============= ========
Trade
Investments and other
31 December 2020 - securities receivables Total
GBP'000 GBP'000 GBP'000
Opening balance 2,749 - 2,749
Total gains:
In Statement of Comprehensive
Income 875 - 875
Additions 344 - 344
Disposals (43) - (43)
-------------- ------------- --------
Closing balance 3,925 - 3,925
============== ============= ========
Total gains/(losses) for the
year included in comprehensive
income for assets held at the
end of the reporting period 878 - 878
============== ============= ========
Company
31 December 2021 Investments Total
GBP'000 GBP'000
Opening balance 970 970
Total gains:
In Statement of Comprehensive Income 293 293
Additions 2,122 2,122
Disposals - -
------------ --------
Closing balance 3,385 3,385
============ ========
Total gains for the year included in
comprehensive income for assets held
at the end of the reporting period 293 293
============ ========
31 December 2020 Investments Total
GBP'000 GBP'000
Opening balance 678 678
Total gains:
In Statement of Comprehensive Income 66 66
Additions 269 269
Disposals (43) (43)
------------ --------
Closing balance 970 970
============ ========
Total gains for the year included in
comprehensive income for assets held
at the end of the reporting period 69 69
============ ========
The only financial liabilities held at fair value relate to the
deferred consideration on the acquisition of TradeRisks Limited,
Appian Asset Management Limited, the DevCo Projects, the
acquisition of the fund and investment management businesses of
Livingbridge VC LLP and the acquisition of the VCT business of
Mobeus amounting to GBP22,659,000 (2020: GBP6,933,000). This is
measured using Level 3 valuation techniques. There were no such
financial liabilities held at fair value within the Company.
Price risk sensitivity
Based on values as at 31 December 2021 a 10% movement in the
fair values of 100% of the Group's equity investments would be
equivalent to a movement of GBP1,471,000 in both profit and net
assets.
35 Related party transactions
Group
During the year management fees totalling GBP690,675 (2020:
GBP672,077) and performance fees of GBP4,222,289 (2020: GBPnil)
were invoiced to Gresham House Strategic plc (GHS), a company in
which the Group has a 23.4% interest. At the year end GBPnil (2020:
GBP107,867) was due from GHS.
During the previous year a loan was provided to a Group company
by Corylus Capital LLP (Corylus), an entity in which Ben Guest,
head of the New Energy strategy, has a material interest. Interest
totalling GBP445,014 was charged by Corylus on this loan and no
balance was outstanding at the year end.
Company
During the year the following transactions occurred with Group
companies:
31 December 2021
Advanced Received Interest Balance
to from charged due from
/ (due
to)
GBP GBP GBP GBP
Security Change Limited 1,909 3,517,060 - 1,135,904
Gresham House Finance Limited - - - 221,400
Gresham House (Nominees)
Limited 7,000 - - 11,202
Gresham House Holdings Limited 44,386,455 37,898,090 - 10,953,142
GridReserve Limited - 741,152 - -
Lister Battery Limited 431,322 300,000 70,393 725,657
Monets Garden Battery Limited 554,801 300,000 73,195 856,014
Arbroath Limited 626,152 612,243 20,249 34,158
Coupar Limited 410,205 405,066 13,522 18,651
Enderby Storage Limited 250,563 198,433 5,313 57,443
Grendon Storage Limited 276,442 - 2,499 278,941
Melksham East & West Storage
Limited 1,477,417 1,292,833 32,674 217,258
Penwortham Storage Limited 840,879 781,857 18,900 77,922
West Didsbury Storage Limited 522,751 485,543 3,012 40,220
Low Farm Solar Limited 2,345,000 - - 2,345,000
Siddington Solar Farm Limited 1,345,000 - - 1,345,000
31 December 2020
Advanced Received Interest Balance
to from charged due from
/ (due
to)
GBP GBP GBP GBP
Security Change Limited 34,021 762 - (4,651,055)
Gresham House Finance Limited - - - 221,400
Gresham House (Nominees)
Limited 4,100 29,977 - 4,202
Gresham House Holdings Limited 14,579,771 8,813,465 - 4,464,777
GridReserve Limited 659,344 - 81,808 741,152
Lister Battery Limited 947,365 457,500 34,077 523,942
Monets Garden Battery Limited 951,225 457,500 34,293 528,018
36 Post Balance Sheet Events
Gresham House plc strongly denounces Russia's recent invasion of
Ukraine. Gresham Hou se plc and funds managed by the Group do not
own any Russian assets and have minimal exposure to Russian assets
that are subject to sanctions. Gresham House plc does not have any
Russian domiciled shareholders on its share register and has not
been made aware of any Russian investment in the funds managed by
the Group.
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