TIDMGHE
RNS Number : 5739V
Gresham House PLC
19 April 2016
19 April 2016
Gresham House plc ("Gresham House" or "the Company")
(AIM: GHE)
AUDITED RESULTS FOR YEAR ENDED 31 DECEMBER 2015
TRANSFORMATION TO A SPECIALIST ASSET MANAGER IN THE FIRST YEAR
UNDER THE NEW MANAGEMENT TEAM AND ASSETS UNDER MANAGEMENT ("AUM")
GROWTH TO GBP0.24 BILLION
Transformation to specialist asset manager under new
management
-- Scalable growth platform established for differentiated and
illiquid asset management strategies
-- FCA authorisation for newly formed subsidiary Gresham House Asset Management (GHAM)
-- Advisory group formed and continued investment in talent.
Rupert Robinson as managing director of GHAM and Graham Bird head
of Strategic Public Equity team
Established third party assets under management ("AUM") of
GBP0.24 billion within first year
-- Initial Strategic Public Equity ("SPE") investment mandate
awarded for Gresham House Strategic plc ("GHS"), formerly SPARK
Ventures plc ("SPARK")
-- Acquisition of leading forestry asset manager Aitchesse Ltd for GBP7.0 million
Financial highlights
-- Results in line with management expectations for the year:
- Investment in the business resulted in operating loss of
GBP1.68 million (2014: GBP0.41 million)
- Cash at the end of the year GBP4.4 million (2014: GBP11.2 million)
-- Strong balance sheet comprising cash, marketable securities,
receivables and saleable property assets
Post year-end
-- Currently launching new forestry fund and increasing institutional access to asset class
-- New GBP7 million banking facility with Kleinwort Benson Bank Ltd
-- Richard Davidson appointed chairman of the Investment
Committee and lead fund manager at Gresham House Forestry
-- Kevin Acton to join the Board as Finance Director from June 2016
-- Organic growth and acquisition opportunities continue to be appraised
Tony Dalwood, CEO of Gresham House, comments:
"Gresham House's transformation to a specialist asset manager
has progressed well and we are now in a strong position to take
advantage of the structural growth in alternative asset management.
We have a strong balance sheet and scalable platform to support AUM
growth and the momentum is starting to generate a consistent flow
of deal opportunities and ideas across all our Group
businesses.
This has been the first full year under the new management team
and having successfully completed stage one, we have now entered
into stage two of our journey. The Board and the executive team are
focused on growing profitability, management fees and performance
fees whilst increasing assets under management, both organically
and through acquisition."
For further enquiries, please contact:
Gresham House plc
Tony Dalwood, Chief Executive
Officer +44 (0) 203 837 6278
Liberum
Neil Elliot/Jill Li +44 (0) 20 3100 2000
Montfort Communications, greshamhouse@montfort.london
PR Adviser +44 (0) 203 770 7906
Rory King
Website: www.greshamhouse.com
Disclaimers
This announcement does not constitute an invitation to
underwrite, subscribe for, or otherwise acquire or dispose of any
Gresham House plc shares or other securities. This announcement
contains certain forward looking statements with respect to the
financial condition, results, operations and businesses of Gresham
House plc. These statements and forecasts involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward looking
statements and forecasts.
Past performance is no guide to future performance and persons
needing advice should consult an independent financial adviser.
Financial calendar
Report & Accounts posted to shareholders 22 April 2016
and available on Company website
Annual General Meeting 11.00 am on
15 June 2016
10 Snow Hill London EC1A
2AL
Registered office
5 New Street Square London EC4A 3TW
***
CHAIRMAN'S STATEMENT
2015 was a year of great change for Gresham House.
Phase one of the ambitious development plan put in place by the
new management team in December 2014 is complete. At 31 December
2015, from a standing start, Gresham House is a fully established
specialist asset management business with approaching GBP0.24
billion of third party assets under management.
The new Board outlined the objectives for 2015 in the last
annual report and accounts and I am pleased to be able to tell
shareholders that the management team has made great progress in
achieving these both organically and through acquisition. The
management team has also made substantial progress in the
successful disposal and stewardship of Gresham House's legacy
property assets. This continues to ensure the Group has a strong
asset-backed balance sheet to support opportunistic deployment of
capital.
2016 started with concerns over weakening global economic growth
causing stock market volatility. Fortunately, we have limited
exposure to emerging markets, foreign currency fluctuations or
depressed commodity prices. The looming uncertainty caused by
Brexit may influence the financial markets in the very short term,
however we are building the group for the long term and we are
confident that the long-term value creation opportunity will not be
affected. Nonetheless, we will undoubtedly feel the effect of the
broader economic influences of these global events. The Board aims
to ensure that the business is run in a way that builds long-term
value regardless of the wider backdrop.
I would like to take this opportunity to thank all the
management and staff for their commitment and contribution to the
transformation of Gresham House. As you read on, you will see that
2015 has been an exciting time and as the Group grows, it behoves
me to welcome new members. In particular, it has been a pleasure to
bring under the Gresham House umbrella Aitchesse Limited, our
specialist forestry management business based in Perth, Scotland.
As the cornerstone of the Gresham House Real Asset division, I am
sure that Aitchesse will make an invaluable contribution to the
development of the Group going forward.
Duncan Abbot, our finance director and company secretary stepped
down from the Board of the Company and resigned as company
secretary with effect from 31 December 2015. Duncan has however
continued to oversee the Company's finance and compliance function,
including the preparation of the 2015 accounts. I would like to
take this opportunity, on behalf of everyone at Gresham House, to
pay special thanks to Duncan for his hard work over the last year.
As Gresham House moves into the next phase of its development, I am
pleased to welcome Kevin Acton who will join the group, subject to
the usual regulatory approvals, as our new finance director with
effect from 6 June 2016. Kevin joins us from Oaktree Capital
Management (UK) LLP.
Our next interim statement will be a significant one for the
Company. For the first time, we will be able to report on our
business where, for the whole of the reporting period, we will have
results from both established divisions within our specialist asset
management business: Gresham House Strategic Equity and Gresham
House Real Assets.
With solid foundations developed in 2015 and with good momentum,
particularly from the second half of the year, the Group is well
positioned for another year of organic and acquisitive growth.
Anthony Townsend
Chairman
18 April 2016
CHIEF EXECUTIVE'S REPORT
The first full year under the new management team has been a
transformational period.
The business has been converted from an investment trust with
legacy property and direct equity assets and a complex web of
subsidiaries into a specialist asset manager addressing the
increasing demand for long-term alternative investment strategies
and illiquid asset classes.
The new team has established an asset management platform that
will now be scaled and from a standing start has grown third party
assets under management ("AUM") to GBP0.24 billion, organically and
through acquisition.
The results for the year ended 31 December 2015 are in line with
management expectations and I am pleased to report significant
progress on the journey we embarked upon in December 2014.
We set out to put in place three key pillars necessary to
successfully and sustainably develop Gresham House into a
specialist asset manager: a scalable investment platform, a
disciplined investment philosophy, and highly capable team of
individuals. It has been a productive year for the team and we have
made substantial strides towards our plan to create a specialist
asset manager focused on alternative and differentiated investment
products:
-- We established Gresham House Asset Management Limited
("GHAM") and in November gained authorisation from the Financial
Conduct Authority ("FCA") to conduct designated investment business
in the UK
-- Under GHAM we have established two divisions: The first,
Strategic Equity, includes Strategic Public Equity (SPE), and was
established in July with the award of the investment mandate for
AIM-traded investment company SPARK Ventures plc (since rebranded
in October 2015 Gresham House Strategic plc (AIM: GHS) ("GHS").
Secondly, our acquisition of Aitchesse Limited, one of the UK's
leading managers of commercial forestry, marked the launch of the
Gresham House Real Assets division
-- We have appointed new brokers, moved offices and recruited
new and experienced members to our team
(MORE TO FOLLOW) Dow Jones Newswires
April 19, 2016 02:01 ET (06:01 GMT)
The results to 31 December 2015 are detailed fully in the
Strategic Report and reflect the investment we have made in the
platform and people throughout this transformational year. AUM
growth was achieved during the second half of the year. Therefore,
the material revenues relating to the development of AUM to GBP0.24
billion reflect five months' fee contribution from GHAM in respect
of the management of GHS and only six weeks' contribution from
Aitchesse. In line with expectations, the Group operating loss
widened from GBP406,000 in 2014 to GBP1,685,0000 for the year as
the management team invested in the platform.
Since our initial working capital fund raise of GBP10.6 million
(net of expenses) in December 2014, the new management team has
continued to invest in growing Gresham House.
We are also making significant headway in turning legacy
property assets into cash to reinvest into the business. Our asset
backed balance sheet and merchant banking-style approach to
aligning interests with shareholders has been a driving force
throughout this transitional year. A new GBP7 million bank
facility, as detailed below, will ensure we have available capital
to develop further the Strategic Equity and Real Assets
businesses.
Strategic Equity
The award of our first investment advisory mandate by SPARK (now
GHS) was an important milestone for Gresham House because it marked
the launch of our first division, Gresham House Strategic Equity.
It was a significant management contract to be awarded to GHAM,
with a management fee income of 1.5% per year of the net asset
value of the GHS portfolio plus performance fee potential.
In line with our approach to alignment of interests, Gresham
House invested in GHS in two ways: we invested GBP5 million in new
ordinary shares and we exchanged our 10.6% holding in
SpaceandPeople plc for new ordinary shares in GHS. As a result of
the asset swap, Gresham House invested a total of GBP6.4 million in
GHS shares and now holds 19.2% of the issued share capital of that
company. We had considerable support from our major shareholders
during this process, which saw a restructuring of the investment
company that is now our quoted vehicle that enables investors to
access the SPE investment strategy.
Based on the net asset value released on 18 April 2016, since
GHAM took on the management contract and the investment policy
changed, the discount to net asset value at which GHS traded has
more than halved to 22.5% from a previous average of 54%. We are
working actively to further close the discount and investment
performance is an important component of that; we are pleased that,
whilst it is still only short term, the NAV performance has
marginally outperformed its benchmark at these early stages.
The fund managers made an active decision to hold a significant
weighting in cash in the second half of 2015 within GHS. This cash
is increasingly being deployed where opportunities have arisen as a
result of reduced valuations or where a company's access to capital
maybe constrained; these investments include BeHeard Group plc and
Quarto Group plc. Taking into account the current discount to NAV,
GHS is currently priced below 5x forecast EBITDA (as a weighted
average, Dec 2016) with in excess of 10% forecast EBITDA growth
(calculations exclude cash and Be Heard, for which there are no
current forecasts). This compares to 9x for the FTSE Allshare with
average forecast growth of 6%. We are particularly excited by the
potential returns that may be generated by looking at the 'value'
areas of the quoted companies universe, which are relatively lowly
valued as markets and investors choose to focus on 'quality' and
'growth' at any price. We believe 2016 could be the year when we
see value investment strategies and stocks return to favour and
begin to generate the long-term returns that historical data has
shown to outperform other investment strategies. We continue to see
good opportunities for value investments which fit our criteria for
illiquid asset management and, due to their limited access to
growth capital, are being overlooked by the wider market.
We have progressed plans to launch a new Limited Partnership
that will enable us to broaden the investor base in the SPE
strategy and grow AUM. In addition, we have established a
partnership with a respected third party distributor to address the
wholesale/retail client channel.
Real Assets
Our acquisition of Aitchesse, one of the UK's leading commercial
forestry managers, in November 2015 marked the launch of the
Gresham House Real Assets division. The GBP7.0 million maximum
consideration was funded from a combination of cash, loan notes and
Gresham House shares. The transaction has been divided into an
initial consideration stage plus an earn-out through to 2018.
Since 2007 Aitchesse's experienced and capable team has
increased AUM by around 400 % and the strategy has outperformed the
equity markets over the last 10 years by over 16% per annum. The
team now manages around 30,000 hectares of forestry valued at over
GBP200 million for a small client base of endowments, institutions,
and high net worth families.
We are excited by the prospective returns and the opportunity to
widen Aitchesse's client base whilst increasing the AUM. We are
working closely with the Aitchesse team to launch new forestry
investment products and, in February 2016, we announced our
intention to launch the Gresham House Forestry Fund LP, which will
target unleveraged net returns of 10%. We have started to market
the fund to potential investors.
The cornerstone investment for the fund will be a portfolio of
forests in the West of Scotland. We have entered into conditional
contracts to acquire the assets on behalf of the fund for a total
consideration of GBP12.1 million.
We continue to review opportunities presented to us for similar
acquisitions.
In due course, Aitchesse will be rebranded Gresham House
Forestry and will form a core component of our Real Assets
business.
People
One of our three pillars for growth is developing a team of
capable investment and business managers. In the course of the
year, we have recruited a number of people who will build on our
business offering. As a result, we have moved to flexible office
space at 107 Cheapside, London EC2V 6DN.
Graham Bird, with whom I worked at SVG Advisers, has joined
Gresham House to lead our SPE team. Graham is also fund manager
alongside me on the GHS investment mandate.
Rupert Robinson, former chief executive of Schroders Private
Bank, has joined us as managing director of our newly formed
subsidiary, Gresham House Asset Management Limited.
Since the year-end, we are very pleased to have Richard Davidson
join the Aitchesse team (Gresham House Forestry) as chair of the
investment committee and lead fund manager. Richard is an
experienced forestry investor and was previously a fund manager at
Lansdowne Partners and Chief European Equity Strategist at Morgan
Stanley.
I would like to thank Duncan Abbot, who was integral to the
initial development of the new Gresham House strategy and I wish
him all the best for the future. Going forward we welcome Kevin
Acton who joins us from Oaktree Capital Management in June 2016 as
Finance Director.
I indicated that we would establish an Advisory Group to support
the development of Gresham House through business insight, network
expansion, deal flow and investment appraisal. As such, I welcome
Gareth Davis, Alan Mackay and Sir Roy Gardner, all of whom have
superb attributes to support the team on the continuing journey
toward further shareholder value growth.
We have a dynamic team now in place and are fortunate to be
supported by a strong long-term shareholder base.
Legacy assets
With respect to our legacy assets, we have continued to maximise
value through a realisation process and reinvestment in the
specialist asset management business. The share exchange between
SpaceandPeople and GHS was part of a wider process that other GHS
investors were able to participate in and is an example of the way
in which Gresham House is seeking to be innovative in product
development.
On 22 September 2015, we completed the sale of 25.8 acres of
land at Newton-le-Willows to FTSE 100 housebuilder Persimmon Homes
Ltd (Persimmon). The transaction will realise a total consideration
of GBP7.25 million net. A deposit and initial payment of GBP944,610
has been received and the balance will be receivable in three
tranches in March 2017, 2018 and 2019. In addition, Gresham House
is entitled to an overage payment in the event that Persimmon
achieves a selling price in excess of an agreed amount per square
foot. Gresham House still retains a five acre site with retail
planning permission bordering the residential site so there is
scope for additional property value realisation.
At our Southern Gateway site in Speke, we have made considerable
progress in lettings. The newer tenants offer the potential of
stronger and more valuable relationships. The current book value of
GBP7.65 million is an uplift since the new management team took
over the Group, and whilst Brexit appears to have increased the
risk aversion of property investors, Gresham House will seek to
maximise and realise shareholder value from this asset in 2016.
We have provided GBP440,000 against our investment in Memorial
Holdings Limited as at 31 December 2015. We were aware at the time
of the December 2014 transaction that the equity of that company
was under pressure due to its debt burden and after the year-end,
we sold our shares for a nominal amount to the main financier of
the company thereby crystallising the provision created at 31
December 2015. We also hold an investment in the mezzanine debt of
Memorial through our stake in Kemnal Investments Limited. Kemnal
has agreed with Memorial to extend the mezzanine term for a further
two years. We believe that the current trading forecasts and
strategy of Memorial supports the repayment of our share of the
mezzanine debt of GBP466,000, together with accrued interest to
date of GBP153,000.
(MORE TO FOLLOW) Dow Jones Newswires
April 19, 2016 02:01 ET (06:01 GMT)
Banking facility
To fund the planned growth of Gresham House, and after the
year-end, we recently concluded a new banking facility with
Kleinwort Benson Bank Limited to borrow GBP7 million. The borrowing
is secured against our property assets and the deferred proceeds of
the sale of the Newton-le-Willows site. The facility will be
repayable in three tranches to match the deferred proceeds due from
Persimmon . Part of the funding has been used to repay the existing
Co-op facility of GBP2.85 million and pay down the GBP0.67m
short-term loan notes issued in connection with the acquisition of
Aitchesse Limited. The balance of the proceeds will be available
for general working capital and further investment
opportunities.
Outlook
The growth in alternative asset management continues as
institutions, ultra high net worths and family offices seek
superior investment returns in this low return world, and we
believe we are well positioned to capitalise on this trend.
The macroeconomic environment continues to be challenging and
2015 saw near zero UK equity and bond returns. Global growth
appears to be slowing with recent downward revisions and earnings
growth expectations having been reduced in the developed world with
forecast growth now around 35% lower than expected at the start of
the year. As we are close to the end of the current economic cycle,
alongside the peaking of corporate profit margins and relatively
high valuations in the equity markets, it should therefore not be a
surprise that financial market volatility has been evident. This is
likely to continue whilst these ingredients plus an overvalued bond
market remain. The pressures on dividends over the next couple of
years will be significant and long-term returns from the equity
markets are likely to be below the 7-8% plus per annum that
investors aspire to. Seeking out areas and asset classes where
superior returns can potentially be generated will become a more
valuable business model.
As such, I look towards the next development stage of Gresham
House with optimism and enthusiasm. To say that the business has
been transformed may seem a decisive statement, but Gresham House
is very different today compared to when I took on the role as CEO.
Our Company now has a scalable platform for growth. The progress
made in transitioning to a specialist asset manager with a strong
balance sheet and a developing brand is being recognised. This
momentum is starting to generate a regular flow of ideas across all
our Group businesses and we are currently appraising organic growth
and acquisition opportunities.
We have an ambitious business plan, and feel that we are now at
stage two of our journey. With GBP0.24 billion of AUM, the Board
and the executive team is focused on growing profitability,
management and performance fees whilst increasing assets under
management, both organically and by acquisition.
Anthony Dalwood
Chief Executive Officer
18 April 2016
STRATEGIC REPORT
This report has been prepared by the Directors in accordance
with the requirements under section 414 of the Companies Act 2006.
The purpose of this report is to inform shareholders about how the
Company fared during the year ended 31 December 2015.
Short forms and abbreviations are defined above in the
Chairman's and Chief Executive's Reports.
Strategic objective
The Directors intend to develop the Company as a quoted platform
principally for the investment in, and the investment management
of, differentiated, specialist or illiquid assets in order to
generate superior risk adjusted returns for shareholders over the
longer term. Returns are expected to be principally through capital
growth. In addition, the Directors intend to develop an asset
management business, either organically or through one or more
acquisitions.
Recent Developments
On 8 October 2014, the Company announced the final terms of a
new strategic direction including the appointment of new
directors.
Since 1 December 2014, the Directors have been pursuing a
strategy to:
-- develop the Company as a quoted platform principally for
investment in, and the investment management of, differentiated,
specialist or illiquid assets in order to generate superior risk
adjusted returns for shareholders of the Company over the longer
term;
-- develop an asset management business organically or through
one or more acquisitions; and
-- manage and develop an appropriate strategy for each of the
Company's legacy assets (including its property assets) so as to
maximise the value of the assets over the medium term in order to
recycle the capital into areas the Directors believe will generate
superior returns.
In continuance of the strategy described above, the Company has
begun to focus on investment management of relatively
differentiated, specialist or illiquid assets, through the asset
management mandate with GHS and the acquisition of Aitchesse and we
will continue to seek out new investment fund opportunities.
In line with the Directors' strategy to develop the Company as a
quoted platform for investment in, and the investment management
of, differentiated, specialist or illiquid assets, the Company
established its Strategic Public Equity ("SPE") investment team.
The team is led by Graham Bird and Tony Dalwood, and has a mandate
to target superior long-term investment returns through applying
private equity techniques to investing in public markets.
On 21 July 2015, GHAM (a subsidiary of Gresham House) entered
into its first asset management mandate with SPARK Ventures plc
("SPARK") to be led by the SPE investment team and, at the same
time, Gresham House agreed to invest GBP5 million in Spark and
exchanged its entire 10.6% shareholding in SpaceandPeople plc for
new shares in SPARK. The appointment and associated fundraising by
Spark was approved by its shareholders on 6 August 2015. On 28
October 2015, SPARK'S name was changed to Gresham House Strategic
plc.
GHAM applied to be authorised by the Financial Conduct Authority
so that GHAM can act as the investment management vehicle for the
Group's operations. GHAM received authorisation from the FCA on 6
November 2015.
On 4 November 2015, the Company announced that, in line with its
strategy to develop an asset management business, we had agreed to
acquire the entire issued share capital of Aitchesse, an asset
management business based in Scotland that focuses on managing
forestry and timber assets.
The acquisition of Aitchesse, effective from 23 November 2015,
resulted in Gresham House becoming an operating company instead of
an investing company. The Company ceased to be subject to the AIM
Rules that relate to investing companies and therefore is no longer
required to have an investing policy. Instead, the Directors intend
to pursue a strategy to develop an asset management business
focusing on the management of relatively differentiated, specialist
or illiquid assets.
Since 1 December 2014, the Directors have developed a strategy
for each of the Group's material legacy assets.
On 22 September 2015, the sale of 25.8 acres of the site at
Newton-le-Willows to Persimmon was completed in accordance with the
sale and purchase contract that was exchanged in April 2014, for a
total consideration of GBP7.25 million (excluding overage
payments). The Directors are now considering the sale of the
remaining five acres of the site; and the property at Speke (as
described in further detail below) is now virtually fully let and
the Directors have very recently started working with Jones Lang
LaSalle to sell this legacy asset.
Our strategy has been to focus on Strategic Equity, Real Asset
management and the continued realisation of the Group's legacy
assets.
Strategic Equity
The strategic equity investment strategy includes applying a
private equity approach to making influential "block" stake
investments in smaller quoted companies. Central to this strategy
is constructive engagement with management and shareholders of
investee companies in support of a clear equity value creation
plan, which combined with the adoption of private equity
techniques, including an investment committee and advisory group,
aims for a significant de-risking of an investment.
The Directors believe the private equity approach described
above can lead to superior investment returns as it targets
inefficiencies in certain segments of the public markets. There are
over 1,200 companies in the FTSE Small Cap index and on AIM: the
Directors believe that these companies typically have limited
research coverage and may often have limited access to growth
capital often leading to valuation opportunities being overlooked
by the wider market.
In line with its plans for this core element of the business, on
21 July 2015 GHAM was awarded its first investment advisory mandate
to manage GHS using the strategic equity investment strategy. As at
31 December 2015, GHS had assets under management of approximately
GBP36. 5 million (GBP36. 4 million at 8th April 2016 (being the
latest available weekly net asset value update released by GHS
prior to the publication of this document).
As at 31 December 2015, GHS held six investments, which together
represent 58.1% of its AUM. The largest investment is its holding
in AIM-quoted IMImobile plc, which was valued at approximately
GBP15.6 million as at 31 December 2015 (GBP15. 6 million at 8th
April 2016).
GHS will focus mainly on cash generative companies where there
is scope through management engagement to identify opportunities to
implement either strategic, management or operational changes to
create shareholder value in the business and to generate improved
equity returns.
Under the GHS Investment Management Agreement, GHAM was
appointed as investment adviser to GHS, for which GHAM receives a
fee of 0.125% per month of the net asset value of the GHS
portfolio. In addition, GHAM is entitled to a performance fee of
15% of the increase in net asset value per share of GHS over a 7%
hurdle. Upon receipt of FCA authorisation, GHAM became Investment
Manager of GHS.
(MORE TO FOLLOW) Dow Jones Newswires
April 19, 2016 02:01 ET (06:01 GMT)
As part of the transaction, the Company made an investment of
GBP5 million in GHS and exchanged its entire 10.6% shareholding in
SpaceandPeople plc for new shares in GHS. From 21 July 2015 to 23
November 2015, as an investing company, the holding in GHS was
classified as an investment and held at fair value through profit
and loss. During that period, the Group incurred a fair value loss
of GBP459,000.
The Group holds 19.2% of the issued share capital of GHS. Due to
the close relationship, between the Group and the company, it has
been decided that Gresham House plc will account for its 19.2%
stake in GHS as an associate. This is because of the significant
influence it is perceived we have over the affairs of GHS through
GHAM's investment management mandate even though our shareholding
is below 20% and we do not have an appointed director on the Board
of that company. There has been no reporting of results for GHS
from the date of its recognition as an associate at 31 December
2015. As such, no profit or loss has been recognised on the
associate for that period. GHS has a year-end of 31 March 2016 and
therefore the results of GHS will be incorporated into the Group up
to the latest published annual information.
The Company intends to grow its Strategic Equity division and
will continue to seek out new mandates to achieve this goal. GHAM
intends launching a limited partnership for those investors who
prefer to invest alongside GHS in a limited partnership vehicle.
The Directors believe there to be a demand for this from ultra high
net worth individuals, family offices and smaller institutional
investors.
Real Asset management
The Directors believe that there is an increasing demand for
long-term superior returns from illiquid and alternative asset
management strategies. Institutions, family offices and ultra-high
net worth individuals are increasing allocation to alternative
strategies and private equity. Real assets can offer attractive
benefits to investors, including superior investment returns, which
are typically uncorrelated to equities, funds and UK commercial
property. The increase in asset allocation towards this area has
been significant over the last 20 years and is ongoing, reflected
by the fact that pension funds, who had a zero percentage
allocation on average to "alternatives" (ex-property) in 1995, are
now allocating approximately 9% of their assets under management to
this asset class.
The Company intends to build on its specialist asset management
group, which will incorporate various illiquid or differentiated
asset strategies. Our first step was the acquisition of Aitchesse
(described more fully in note 4 to the accounts) a specialist asset
manager of forests and timber. It has a strong financial record and
the Directors believe the business to be a successful model on
which it can build. The specialist knowledge of the management team
at Aitchesse and the experience of the Company should be a
successful combination: Aitchesse will be able to provide the
expert forest management skills required to manage the commercial
forest element of the assets. The Company's experience will assist
in the growth and institutionalisation of Aitchesse's business and
the Group will use its network of contacts to introduce potential
investors in forestry assets to Aitchesse.
The Company will also seek to grow this business unit
organically and, should further opportunities arise, through the
acquisition of differentiated specialist asset managers.
Specialisms may include infrastructure, renewables, forestry and
real estate, amongst others. The common theme tying the specialisms
together is that they involve the acquisition of tangible assets
and should create long-term, intrinsic value growth. The team is
focused on creating shareholder value through assets under
management and resultant earnings growth, including carried
interest and performance fees from third party assets under
management.
Legacy assets
The Board has been pursuing an orderly realisation of the
Group's assets and property to redeploy the sale proceeds in
pursuit of its plans for the Strategic Equity division and Real
Asset division (as described above):
On 29 April 2014, contracts were exchanged with Persimmon for
the sale of 25.8 acres gross of the site at Newton-le-Willows, with
the sale completing on 22 September 2015. The Board is holding the
remaining five acres of the site for future review when Persimmon's
building programme on the adjacent site is well progressed.
On 7 August 2015, the Company exchanged its entire 10.6%
shareholding in SpaceandPeople plc (a public company whose shares
are traded on AIM) for new shares in GHS.
The property at Speke (as described in further detail below) is
now virtually fully let. The Company is currently considering the
sale of the property and has instructed Jones Lang La Salle to
advise.
The Company will continue to appraise its assets and any
opportunities for sale or realisation in furtherance of its
development (as was the case with the exchange of its
SpaceandPeople holding).
The proceeds from the sale of legacy assets will be utilised by
the Group to implement its strategy of building a specialist asset
management business, through additional acquisitions of asset
management businesses, through the seeding of new funds which the
Company may wish to promote, direct co-investments alongside
clients or the recruitment of talented individuals with asset
management experience.
Investing policy
Until 23 November 2015, Gresham House was an investing company
and had the investing policy set out below.
Gresham House plc will seek to use the expertise and experience
of its new Board of directors and members of the Investment
Committee to invest according to a robust private equity-style
"value" investment philosophy. The Company's investing policy is to
invest in assets that will typically have a number of the following
characteristics:
- an illiquidity discount;
- a minimum target rate of return of 15%;
- cash generative (or expected to generate cash within a reasonable investment horizon);
- relatively differentiated, specialist or illiquid;
- attractive management track records;
- potential for superior risk adjusted returns;
- potential for liquidity or exit within an identified time frame;
- potential for the Company to have a competitive advantage; and/or
- potential for the Company to add incremental value to an investment.
Investments may be either passive or active and the Company may
make investments directly or indirectly (including through any
asset management business, special purpose vehicle or underlying
fund) and for cash or share consideration. In particular, the
Company may:
- invest in and take controlling or non-controlling stakes in
publically and/or privately held companies (primarily in equity and
related instruments) and also in convertible or non-convertible
debt instruments;
- set up and potentially co-invest in funds including
cornerstone investments in specialist funds on preferred terms
which may include lower management fees; and
- enter into derivative contracts (including but not limited to
currency hedging, or other portfolio risk management
techniques).
A majority of the direct investments made by the Company will be
in securities of small and medium sized companies. Initial
potential target areas may include small public (less than GBP250
million market capitalisation) and private companies.
The Company will not invest more than 35% of the Group's gross
assets, at the time when the investment is made, in securities
issued by any single company other than in a single collective
investment undertaking or fund structure. Where such an investment
is made in a single collective investment undertaking, due regard
will be paid to the concentration of risk that such an investment
may entail. The investment will only be made after the Investment
Committee is convinced that the risk/return relationship is
acceptable.
The Board of directors will consider investment in a number of
business areas, particularly those sectors in which the Board of
directors collectively believes that it and/or members of the
Investment Committee has the necessary expertise and experience to
be able to manage the opportunity.
Investments may be made in any country globally.
The Company has no borrowing limits.
A typical direct investment (other than in connection with the
development of an asset management business or an investment in a
fund) will be expected to have a holding period of between three to
five years, but may be shorter or longer, as appropriate, to
develop realisable intrinsic value in order to maximise shareholder
value.
The Directors' initial intention is to re-invest profits into
the Company rather than paying dividends and shareholder returns
are likely to be through capital appreciation. However, the
directors may pay dividends in accordance with any alternative
dividend policy that they may adopt from time to time in order to
maximise shareholder value over the longer term.
Any material change in the Investing policy will require prior
shareholder approval in accordance with the AIM Rules for
Companies.
Whilst the Company operated as an investing company, it was the
intention of the Directors to develop an asset management business,
either organically or through one or more acquisitions. The
development of such an asset management business, through the
acquisition of Aitchesse on 23 November 2015 led to the Company
ceasing to be an investing company (as defined in the AIM Rules for
Companies) and instead becoming a trading company (i.e. a company
which operates an asset management business with some direct and
indirect investments). The key consequences of such a development
are as follows:
- NAV per share ceased to be an appropriate performance
indicator with focus becoming profitability and AUM growth;
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- the Company may now acquire businesses where the acquisition
involves recognising purchased goodwill and other intangible
assets, which may have to be amortised. Such amortisation would
have a negative impact on the Company's balance sheet, despite such
acquisitions being made in anticipation of contributing in time to
the Company's earnings;
- the Company's Standard Industrial Classification may change.
This would, in turn, alter the way in the Company is classified for
various statistical and analytical purposes and may limit the
ability of some investors to hold the Company's shares where the
investors' investment mandates are specific as to the type of share
they are able to hold; and
- the investing policy previously adopted ceases to be applicable.
The Group continues to hold investments in commercial properties
and will invest further but only where this enhances or protects
the value of existing investments. As any of these assets are
realised the proceeds of realisation will be redeployed in
accordance with the development of an asset management
business.
Performance during the year
The Group operating result for the year ended 31 December 2015
was a net operating loss of GBP1,685,000 against a loss of
GBP406,000 in 2014. The comparison between both years is as
follows:
2015 2014
GBP'000 GBP'000
Rental income 746 858
Fund management fee income 127 -
Forestry management fee
income 206 -
Dividend and investment
income 228 248
Other income 51 66
Property outgoings (339) (516)
Administration overheads (2,704) (1,062)
Net operating loss (1,685) (406)
======== ========
The significant variances between the two years are as
follows:-
We have the initial revenues from our asset management
businesses, although the contribution from GHAM is for only five
months and the Aitchesse contribution reflect six weeks
ownership.
Rental income increased at Southern Gateway during 2015 but the
comparative includes rental income from premises subsequently
vacated at Newton-le-Willows and overall rental income accordingly
has decreased.
The significant reduction in property outgoings of GBP177,000
over the year ended 31 December 2015 was due to increased occupancy
enabling the service charges to be recovered from tenants and not
being an unrecoverable expense, and no directors' remuneration
chargeable in 2015 (2014: GBP121,000).
Our administrative overheads were significantly increased as we
invested in people and the platform without the benefits yet of the
revenues from this expenditure flowing through.
Property portfolio
The property portfolio consists of the property in Speke,
Liverpool, known as Southern Gateway and a residual 5 acres at
Newton-le-Willows. The bulk of the site at Newton-le-Willows was
sold to Persimmon on 22 September 2015 for a total of GBP7.25
million net. As part of the negotiations with the local authority,
Persimmon was obliged to change its plan to secure planning
permission for the site. This resulted in a reduction in the number
of plots available for development, which in turn resulted in an
adjustment in the previously announced selling price of GBP150,000.
A deposit and initial payment of GBP944,610 has been received and
the balance will be receivable in three tranches over the next
three years. The asset was being carried in the balance sheet at 31
December 2014 at a discounted value of GBP6.82 million. Following
the sale, the remaining consideration is carried in the balance
sheet as a non-current asset at a discounted value of GBP5.92
million. In addition, Gresham House will be entitled to an overage
payment in the event that Persimmon achieves a selling price in
excess of an agreed amount per square foot. This has not been
recognised in the year-end balance sheet as the outcome depends on
the selling price of houses on the site in 2018 and beyond and is
uncertain.
Gresham House retains a five acre site with retail planning
permission contiguous to the site sold and will explore options for
this site now the sale of the main residential site has been
completed. We have suffered a reduction in the valuation of this
site that arises from the change in sentiment towards food
retailing.
At Speke, we continue with our strategy to maximise income over
the short term with a view to selling the property. The value of
the site has increased during the year from GBP7.25m to GBP7.65 m
at 31 December 2015 as a result of increased lettings.
Securities portfolio
At 31 December 2015, the value of the investment portfolio
decreased by GBP1.39 m primarily as a result of the disposal of the
investment in SpaceandPeople (GBP0.89 m) and the additional
provision made against Memorial Holdings Limited (GBP0.44 m) both
of which are discussed below.
In August 2015, we exchanged our shareholding in SpaceandPeople
for shares in GHS. This resulted in us realising a gain of
GBP433,000 as a result of the exchange.
On 23 November 2015, as a consequence of the change in our
status from an investing company to a trading company we have
accounted for GHS as an associate. The subsequent share price
decrease of GHS has required us, on a mark to market basis, to make
a fair value adjustment against the carrying value of the holding
in GHS as the share price has fallen below the price at which the
exchange was done in August 2015. This has required us to provide a
fair value adjustment of GBP459,000.
We have taken a further provision of GBP440,000 against our
holding in Memorial Holdings Limited, the cemetery business in
Kent. After the year-end, we sold our ordinary shares in MHL to the
majority shareholder at 1p per share, crystallising the loss
recognised in the provision. This followed an appraisal by the
directors of MHL of the prospects for the business. The Company has
an ancillary investment in Kemnal Investments Limited, which holds
mezzanine debt in MHL. As a result of the review of the business
activities of MHL, the facility has been extended for an additional
two years. We believe we will be able to recover both the principal
of GBP466,000 and the interest that has accrued to date of
GBP153,000 on the loan.
We are pleased to report that Attila (BR) Limited, a company in
which we hold a loan stock investment completed the sale of its
property site in Edinburgh to CALA Management Limited. The
consideration from the purchaser will enable Attila to redeem its
loan notes and pay Gresham House the rolled-up interest on the loan
stock that we have accrued. We are anticipating receipts in June
and December of 2016 from Attila, having received initial payments
in June and July 2015 totalling GBP277,000.
Borrowings and cash at bank
Loans at 31 December 2015 amounted to GBP2,850,000 against
GBP3,278,000 at 31 December 2014. The loan is from the Co-operative
Bank and is secured against the property portfolio. This
represented a loan to value of 30% against the overall property
investments.
Cash in hand at 31 December 2015 was GBP4.4 m (GBP11.2 m at 31
December 2014). This reduction in cash reflects a number of items
of expenditure during the year. GBP5m was invested in shares of
GHS, the sum of GBP1,841,000 was paid as the initial cash
consideration for Aitchesse and GBP710,000 was paid in professional
fees in connection with the acquisition of Aitchesse. Following the
completion of the sale of the Newton-le-Willows site, we agreed
with the Co-op Bank that the facility be reset at GBP2.85 million
after GBP428,000 of the initial proceeds from the sale were applied
in reducing the amount outstanding. This replaced a previous
agreement with the Co-op Bank wherein the existing facility with
the bank of GBP3.28 million as at 31 December 2014 was to be
extended by GBP372,000 to fund capital expenditure at Southern
Gateway, Speke.
After the year end, we entered into a new facility with
Kleinwort Benson Bank Limited. Under this new arrangement, entered
into on 12 April 2016, we have borrowed a total of GBP7m. The
borrowing is secured against our property assets and the deferred
proceeds of the sale of Newton-le-Willows site to Persimmon
announced in September 2015.
The facility will be repayable in three tranches to match the
deferred proceeds due from Persimmon, in March 2017, March 2018 and
March 2019.
Part of the funding has been used to repay the existing Co-op
facility of GBP2.85m and pay down the GBP0.67m short-term loan
notes issued in connection with the acquisition of Aitchesse. The
balance of the proceeds is available for general working capital
and investment purposes.
Key Performance Indicators
Prior to the new team and corporate strategy being initiated in
December 2014, the Board have historically considered the main
performance indicator to be net asset value per share ("NAV").
As flagged in last year's Strategic Report, the KPIs that are
relevant to the Company as it develops in to an asset management
operating company are as follows; earnings per share and assets
under management. As at 31 December 2015 the loss per share was
40.5p (83.3p, 2014). Third party assets under management at 31
December 2015 were GBP235m (GBPnil, 2014), being GBP36m of equity
assets we manage for GHS and GBP200m of forestry assets.
The number of hectares of forestry under management represents
30,000 hectares as at 31 December 2015 (2014: nil). As the business
develops, further KPIs will become relevant.
Capital reduction
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On 4 February 2015, the High Court approved the cancellation of
the Company's share premium account (the "Cancellation"). As a
consequence of the Cancellation, GBP12,508,000 standing to the
credit of the Company's share premium account was cancelled. This
will facilitate any share buyback or payment of dividends that the
Board of the Company may in the future approve by creating a
reserve of an equivalent amount that, subject to certain creditor
protection undertakings, will form part of a distributable
reserve.
The Cancellation has no effect on the overall net asset position
of the Company.
The Cancellation proposals were contained in the Company's
shareholder circular and AIM Admission Document, each dated 8
October 2014, and approved by shareholders at the Company's General
Meeting on 31 October 2014.
Principal risks, risk management and regulatory environment
There are a number of risks and uncertainties that face the
Group. The Board have established a structured approach to
identify, assess and manage these risks.
The following list highlights the principal risks.
Risks relating to the strategy of the Group
Failure to attract investment funds
The Directors' strategy envisages the development of an asset
management business. Such businesses are operationally geared and
success depends on attracting adequate investment funds to manage.
If the asset management business fails to attract sufficient assets
to generate fees, this could have a material adverse effect on the
Company's business, financial condition and prospects.
Ability to recruit and retain skilled personnel
The Company's success depends on qualified and experienced
employees to enable it to raise assets for its asset management
activity and successfully manage its investments. Should the
Company be unable to attract new employees this could have a
material adverse effect on the Company's ability to grow its
business.
Dependence on key executives
The Company's development and prospects are dependent upon the
service and performance of the Directors and senior management. The
loss of the services of any of the Directors or senior management
could cause disruption, which could have a material adverse effect
on the deliverability of the strategy, the development of the asset
management business and the financial prospects of the Company.
Exposure to macroeconomic, geographic, sector-related and
geo-political risks
The Company's investment activities will expose the Shareholders
to risks arising from macroeconomic, geographic, sector-related and
geo-political risks.
Nature of investee companies
A majority of the investments made by the funds, which GHAM
manages, will be in the securities of small and medium sized
companies. Such securities may involve a higher degree of risk than
would be the case for the securities of larger companies. If the
investments do not perform well, GHAM, as the fund manager, would
receive a lower management fee, and would be at risk of losing
investors as a result of poor performance.
Liquidity of portfolio
The funds managed by GHAM may invest in securities that are not
readily tradable, which may make it difficult for the funds to sell
its investments.
Delay/failure to make significant acquisition
The Directors' strategy anticipates that the Company will
develop by continuing to grow an asset management business through
acquisition. If the Company is unable to negotiate successfully a
meaningful acquisition or is unable to grow its asset management
business organically, that could have a material impact upon the
Company's ability to execute the Directors' strategy.
The Company is likely to face competition from a variety of
other potential purchasers in identifying and acquiring suitable
assets. Market conditions may have a negative impact on the
Company's ability to identify and execute investments in suitable
assets that generate acceptable returns.
Potential requirement for further investment
Any potential expansion activity and/or business development may
require additional capital. There can be no guarantee that the
necessary funds will be available on a timely basis on favourable
terms or at all or that, such funds (if raised) would be
sufficient. If additional funds are raised by issuing equity
securities, dilution to the existing Shareholders may result. If
the Company is not able to obtain additional capital on acceptable
terms or at all, it may be forced to curtail or abandon such
planned expansion, activity and/or business development.
FCA Authorisations
GHAM is currently authorised by the FCA. GHAM is expected to
meet certain FCA standards. This will result in an extra cost to
the Group. Furthermore, should GHAM be in breach of its duties, the
FCA has a wide range of enforcement powers, which include
withdrawing a company's authorisation, suspending firms which
undertake regulated activities, and fining firms or individuals who
breach the rules. Use of these enforcement powers could bring about
reputational and financial damage to the Group.
Risks relating to the Group's existing assets
The Group's current investment portfolio consists of land and
commercial property (the property portfolio) and investments in
equity and debt securities in predominantly smaller companies (the
securities portfolio).
Property portfolio - general economic and property market
risks
The value of the Group's property portfolio is dependent on
general economic conditions as well as on the specific conditions
of the commercial property market.
Property portfolio - tenant associated risks
Any non-renewal of existing leases or early termination by the
existing tenants in the Group's property portfolio could result in
a significant decrease in the Group's net rental income as the
Group may not be able to secure a replacement tenant on favourable
terms, or at all, for the vacated space.
If the Group's net rental income declines, it would have less
cash available to service and repay its debts and the value of its
properties could decline as well. In addition, significant
expenditures associated with each property, such as taxes, service
charges and maintenance costs, are normally not reduced in
proportion to any decline in rental revenue from that property.
The Group is exposed to the credit risk of its tenants and the
creditworthiness of its tenants can decline over the short term.
This may result in less rental income for the Group, delayed
payments and/or costs or delay in taking enforcement or
repossession action. The Group may again not be able to secure a
replacement tenant on favourable terms or at all for space vacated
by such a defaulting tenant.
Property portfolio - sale risks
The sale proceeds from Persimmon are payable in three further
instalments. This exposes the Group to a credit risk with respect
to the future financial standing of Persimmon and also means that
the Group does not have all the proceeds of sale available for
working capital or investment capital purposes or for distribution
for some time after the sale.
Property portfolio - valuation risks
The valuation of the Group's property portfolio is inherently
subjective. As a result, the valuations of the Group's property
portfolio are subject to a degree of uncertainty and are made based
on assumptions (including hope value in relation to successful
negotiation of, and entry into, new leases) which may not prove to
be accurate, particularly in periods of volatility or low
transaction flow in the property market.
Property portfolio - liability risks
The Group may be subject to warranty claims due to defects in
quality or title relating to the leasing and sale of its
properties.
Property portfolio - illiquidity risks
Properties of the type remaining in the Group's portfolio can be
illiquid assets for reasons such as properties being tailored to
tenants' specific requirements and reduced demand for property on
the market. This may affect the Group's ability to, dispose of or
liquidate part of its portfolio on a timely basis or at a
satisfactory price, in response to changes in general economic
conditions, property market conditions or other conditions.
Securities portfolio - risks relating to investments in smaller
companies and private assets
The Group invests in smaller company securities. Individual
smaller companies can be expected, inter alia, in comparison to
larger companies, to have less mature businesses, less depth of
management and a higher risk profile. As a result, they may find it
difficult to secure financing and/or overcome periods of economic
slowdown. This may have a material adverse effect on the
performance of that smaller company and may make it difficult or
impossible for such company to repay its debts or lead it to reduce
its dividends, which could reduce the Company's cash resources.
Furthermore, the value of securities in smaller companies can be
more volatile than those of larger companies, particularly at times
of economic downturn.
The Group may thus not be able to dispose of any of its
investments in its securities portfolio for an acceptable price
and/or at a specific time.
Securities portfolio - risks relating to market and economic
conditions
The Group's investments are subject to normal market
fluctuations and the risks inherent in the purchase, holding or
selling of securities and there can be no assurance that
appreciation in the value of those investments will occur.
It should be noted that the Group currently has a 19.2% stake in
Gresham House Strategic plc ("GHS"). The shares of GHS are traded
on AIM. The value of these shares may be volatile and may go down
as well as up. As the Group holds a significant proportion of GHS's
shares, the value of the ordinary shares may be affected by the
value of the shares of GHS.
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The anticipated proceeds from the repayment of the Attila loan
notes and accrued interest exposes the Company to a risk on the
purchaser of the Attila property asset, CALA Management Limited.
Failure by the purchaser to pay the deferred consideration to
Attila would affect its ability to repay the loan notes, accrued
interest, and have a detrimental impact on the Company's working
capital.
Risks relating to Aitchesse Limited
In November 2015, the Group acquired Aitchesse Limited. There
are specific risk relating to that business which are summarised
below.
Concentration of clients
Aitchesse has a small and concentrated client base, with four
clients accounting for 96% of management fee income. In particular,
one client comprises 55% of Aitchesse's income from management
fees. The loss of such a client before the business can increase or
diversify its investor base is a risk and the loss could have a
significant adverse effect on Aitchesse's revenue. The current
management team is aware that it faces a concentration risk and its
management has been working to diversify their client base.
Sector focus - reliance on forestry
The success of Aitchesse relies on the continued attractiveness
to investors of the UK forestry and timber industry. Changes in the
sector, rendering timber less attractive as an investment, could
bring about a material adverse change to the business of
Aitchesse.
Regulation and tax
Regulation surrounding the forestry industry may be subject to
change. Currently, timber is allowed significant tax breaks (it is
not subject to income tax, capital gains tax or corporation tax and
is also exempt from inheritance tax).
If these tax breaks were repealed, timber could cease to be an
attractive investment to high-net-worth individuals and
ultra-high-net-worth individuals and families. This would have a
significant effect on the business of Aitchesse.
Bespoke arrangements
One fund managed by Aitchesse does not have a management
agreement in place. This means this fund is not required to give
notice to cancel its relationship with Aitchesse, nor are its fee
arrangements formalised. Aitchesse is currently working with this
client to put arrangements that are more formal in place and it is
now expected that the arrangements will be documented during
2016.
Reliance on suppliers
There are a limited number of suppliers in the forestry
industry. Although the Directors are satisfied that Aitchesse has
good relationships with its suppliers, there is a risk that, should
these relationships deteriorate, Aitchesse would struggle to find a
replacement supplier. Should this occur, Aitchesse may find it
difficult to achieve its cost effective land management, which
would affect the management fees it would receive.
The Board seeks to mitigate these and other perceived risks by
setting appropriate policies and by undertaking a risk assessment
at least annually.
For and on behalf of the Board
Anthony Dalwood
Chief Executive Officer
18 April 2016
FINANCIAL TABLES
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014
Notes
GBP'000 GBP'000
Income: 1
Asset Management income 333 -
Rental income 746 858
Dividend and interest income 228 248
Other operating income 51 66
--------- ---------
Total Income 1,358 1,172
Operating costs: 2
Property outgoings (339) (516)
Administrative overheads (2,704) (1,062)
Net operating loss (1,685) (406)
Finance costs 5 (144) (209)
Exceptional items * (773) (678)
--------- ---------
Net operating loss after exceptional items (2,602) (1,293)
Gains & losses on investments:
Fair value movement of investment property 11 (586) (523)
Fair value movement of investments 10 (459) (2,188)
Loss on disposal of investment properties 11 (158) -
Loss on disposal of investments 10 (26) 3
Group operating loss before taxation (3,831) (4,001)
Taxation 7 - -
---------
Loss and total comprehensive income (3,831) (4,001)
========= =========
Attributable to:
Equity holders of the parent (3,807) (4,753)
Non-controlling interest (24) 752
--------- ---------
(3,831) (4,001)
========= =========
Basic and diluted loss per ordinary share (pence) 8 (40.5) (83.3)
========= =========
* Exceptional items relate to professional fees incurred in
respect of the re-admission to AIM and acquisition of Aitchesse
Limited, which took place on 23 November 2015 and on the
reorganisation of the Group's legacy subsidiaries. (2014:
Exceptional items relate to professional fees incurred in respect
of the Proposals which took effect from 1 December 2014).
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STATEMENTS OF CHANGES IN EQUITY
Group
YEAR ENDED 31 DECEMBER 2015
Equity
Ordinary Share attributable
share Share warrant Retained to equity Non-controlling Total
Notes capital premium reserve reserves share-holders interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December
2014 2,336 12,508 64 12,934 27,842 - 27,842
Loss for the period
being
total comprehensive
income
for the year - - - (3,807) (3,807) (24) (3,831)
Transfer of
non-controlling
interest deficit - - - (24) (24) 24 -
Issue of shares 22 127 1,688 - - 1,815 - 1,815
Cancellation of
Share Premium - (12,508) - 12,508 - - -
Balance at 31
December
2015 2,463 1,688 64 21,611 25,826 - 25,826
========= ========= ========= ========== =============== ================ ========
YEAR ENDED 31 DECEMBER 2014
Equity
Ordinary Share attributable
share Share warrant Retained to equity Non-controlling Total
Notes capital premium reserve reserves share-holders interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December
2013 1,342 2,302 - 16,680 20,324 - 20,324
Loss for the period
being
total comprehensive
income
for the year - - - (4,753) (4,753) 752 (4,001)
Transfer of
non-controlling
interest deficit - - - 752 752 (752) -
Issue of shares 22 994 10,206 - - 11,200 - 11,200
Share based
payments - - - 255 255 - 255
Share warrants
issued - - 64 - 64 - 64
Balance at 31
December
2014 2,336 12,508 64 12,934 27,842 - 27,842
========= ========= ========= ========== =============== ================ ========
STATEMENTS OF CHANGES IN EQUITY - continued
Company
YEAR ENDED 31 DECEMBER 2015
Ordinary Share
share Share warrant Retained Total
Notes capital premium reserve reserves equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December 2014 2,336 12,508 64 6,946 21,854
Loss for the period being total
comprehensive income for the year - - - (2,515) (2,515)
Issue of shares 22 127 1,688 - - 1,815
Cancellation of Share Premium - (12,508) - 12,508 -
Balance at 31 December 2015 2,463 1,688 64 16,939 21,154
========= ========= ========= ========== ========
YEAR ENDED 31 DECEMBER 2014
Ordinary Share
share Share warrant Retained Total
Notes capital premium reserve reserves equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December 2013 1,342 2,302 - 10,377 14,021
Loss for the period being total
comprehensive income for the year - - - (3,686) (3,686)
Issue of shares 22 994 10,206 - - 11,200
Share based payments - - - 255 255
Share warrants issued - - 64 - 64
Balance at 31 December 2014 2,336 12,508 64 6,946 21,854
========= ========= ========= ========== ========
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
Group Company
Notes 2015 2014 2015 2014
Assets GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments - securities 10 1,568 2,955 1,568 2,955
Property investments 11 9,559 9,865 - -
Tangible fixed assets 12 154 - - -
Other investments 15 - - 2,822 322
Investment in associate 6 5,902 - 5,902 -
Intangible assets 13 6,588 - -
Long-term receivables 14 5,916 - - -
29,687 12,820 10,292 3,277
-------- ---------- -------- ---------
Current assets
Trade and other receivables 16 665 84 - -
Accrued income and prepaid expenses 1,081 913 383 519
Other current assets 17 - - 11,568 7,245
Cash and cash equivalents 4,390 11,209 372 10,883
Non-current assets held for sale
Property investments 11 - 6,810 - -
-------- ---------- -------- ---------
Total current assets and non-current
assets held for sale 6,136 19,016 12,323 18,647
---------- -------- ---------
Total assets 35,823 31,836 22,615 21,924
-------- ---------- -------- ---------
Current liabilities
Trade and other payables 18 4,390 716 1,435 70
Short term borrowings 19 2,850 3,278 26 -
7,240 3,994 1,461 70
Total assets less current
liabilities 28,583 27,842 21,154 21,854
Non-current liabilities
Deferred taxation 20 - - - -
Other creditors 21 2,757 - - -
-------- ---------- -------- ---------
2,757 - - -
Net assets 25,826 27,842 21,154 21,854
======== ========== ======== =========
Capital and reserves
Ordinary share capital 22 2,463 2,336 2,463 2,336
Share premium 1,688 12,508 1,688 12,508
Share warrant reserve 64 64 64 64
Retained reserves 21,611 12,934 16,939 6,946
Equity attributable to equity
shareholders 25,826 27,842 21,154 21,854
Non-controlling interest - - - -
Total equity 25,826 27,842 21,154 21,854
======== ========== ======== =========
Basic and diluted net asset value
per ordinary share (pence) 23 262.2 298.0 214.7 233.9
======== ========== ======== =========
The financial statements were approved and authorised for issue
by the Board and were signed on its behalf on 18 April 2016
A L Dalwood
GROUP STATEMENT OF CASH FLOWS
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April 19, 2016 02:01 ET (06:01 GMT)
FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2015 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Dividend income received 48 92
Interest received 317 7
Rental income received 549 762
Other cash payments (2,940) (1,929)
-------- --------
Net cash utilised in operations (2,026) (1,068)
Interest paid on property loans (175) (146)
-------- --------
(175) (146)
-------- --------
Net cash flow from operating
activities (2,201) (1,214)
Cash flow from investing activities
Acquisition of Aitchesse Limited (1,074) -
Purchase of investments (5,000) (10)
Sale of investments - 29
Sale of investment properties 2,222 148
Expenditure on investment properties (329) (515)
Purchase of fixed assets (24) -
Sale of fixed assets 15 -
Purchase of developments in
hand - (67)
Sale of development in hand - 417
-------- --------
(4,190) 2
Cash flow from financing activities
Repayment of loans (428) (468)
Share issue proceeds - 11,400
Share issue costs - (200)
Supporter warrants issued - 64
-------- --------
(428) 10,796
-------- --------
(Decrease)/increase in cash and cash equivalents (6,819) 9,584
Cash and cash equivalents at start of year 11,209 1,625
Cash and cash equivalents at end of year 4,390 11,209
======== ========
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2015 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Investment income received 48 92
Interest received 316 7
Other cash payments (1,711) (807)
-------- --------
Net cash flow from operating
activities (1,347) (708)
Cash flow from investing
activities
Purchase of investments (5,000) (10)
Sale of investments - 29
Investment in subsidiaries (2,500) -
Advanced to Group undertakings (8,621) (1,857)
Repaid by Group undertakings 6,957 1,184
Purchase of development
in hand - (67)
Sale of development in
hand - 417
-------- --------
(9,164) (304)
Cash flow from financing
activities
Share issue proceeds - 11,400
Share issue costs - (200)
Supporter warrants issued - 64
-------- --------
- 11,264
--------- --------
(Decrease)/increase in cash and cash
equivalents (10,511) 10,252
Cash and cash equivalents
at start of year 10,883 631
Cash and cash equivalents
at end of year 372 10,883
========= ========
Notes on the Consolidated Financial Statements
BASIS OF PREPARATION
The financial statements set out in the announcement do not
constitute the Company's statutory accounts for the year ended 31
December 2015 or the year ended 31 December 2014. The financial
information for the year ended 31 December 2015 and the year ended
31 December 2014 are extracted from the statutory accounts of
Gresham House plc.
The auditor, BDO LLP has reported on the accounts for both
periods; their report was unqualified.
The financial statements have been prepared on a going concern
basis.
The full statutory accounts will be available on the Company's
website at www.greshamhouse.com and will be posted to shareholders
shortly.
The financial statements of the Group and the Company have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
The accounting policies used by the Group in these condensed
financial statements are consistent with those applied in its
financial statements for the year to 31 December 2014. Other
standards and interpretations have been issued which will be
effective for future reporting periods but have not been adopted in
these financial statements.
1. INCOME
2015 2014
GBP'000 GBP'000
Asset management income
Fund management income 127 -
Forestry management income 206 -
-------- --------
333 -
-------- --------
Income from investments
Rental income 746 858
Dividend income - Listed UK 48 92
Interest receivable: Bank 40 7
Other 140 149
974 1,106
-------- --------
Other operating income
Dealing profits and losses - 1
Management fees receivable 51 65
51 66
-------- --------
Total income 1,358 1,172
======== ========
Total income comprises:
Asset management income 333 -
Rental income 746 858
Dividends 48 92
Interest 180 156
Other operating income 51 66
-------- --------
1,358 1
======== ========
2. OPERATING COSTS
Operating costs comprise the following: 2015 2014
GBP'000 GBP'000
a) Property outgoings:
Directors' emoluments (excluding benefits in kind) - 121
Wages and salaries 50 57
Social security costs 6 7
Other operating costs (net of service charges recoverable
from tenants
of GBP724,000 (2014: GBP486,000)) 283 331
-------- --------
339 516
======== ========
b) Administrative overheads:
Directors' emoluments (excluding benefits in kind) 880 352
Auditor's remuneration * 200 131
Depreciation 10 -
Profit on disposal of assets (6) -
Wages and salaries 647 44
Redundancy costs - 19
Social security costs 177 22
Operating lease rentals - land and buildings 24 24
Share based payments - 255
Other operating costs 772 215
-------- --------
2,704 1,062
======== ========
Staff costs (including directors' emoluments) were:
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Wages, salaries and fees 1,577 555
Redundancy costs - 33
Social security costs 183 29
Pension costs - 5
-------- --------
1,760 622
======== ========
* A more detailed analysis of auditor's remuneration 2015 2014
is as follows:
GBP'000 GBP'000
Audit fees 99 62
Auditor's other fees -other services relating to taxation - 6
Auditor's other fees -other services 101 63
-------- --------
200 131
======== ========
The Directors consider the auditor was best placed to provide
these other services. The Audit Committee reviews the nature and
extent of non-audit services to ensure that independence is
maintained.
GBP98, 000 of costs for other services above are pertaining to
the acquisition of Aitchesse, which have been recorded as an
exceptional item in the financial statements.
The average number of persons employed by the Group, including
the executive directors, was 12 (2014: 5).
The Group has no commitments under operating leases for the
current and prior year.
3. DIRECTORS' EMOLUMENTS
The emoluments of the Directors are disclosed in the
Remuneration Report in the statutory accounts of Gresham House
plc
The Directors are considered to be the Group's only key
management personnel. Employers' National Insurance Contributions
in respect of the Directors for the year were GBP89,000 (2014:
GBP16,000).
4. Business combinations during the period
On 20 November 2015, shareholders approved the acquisition of
Aitchesse Limited (Aitchesse) in a general meeting. The Group
acquired 100% of the issued share capital of Aitchesse, a Scottish
company whose principal activity is the management of forestry.
The principal reason for this acquisition is to pursue the
Group's objective of becoming a specialist asset manager of
illiquid investments. The Group also expects to develop new funds
utilising the expertise and contacts of Aitchesse. As a result of
the acquisition, the Company moved from being an investing company
to an operating company.
Details of the fair value of identifiable assets liabilities
acquired, purchase consideration and goodwill are as follows:
Net Book Adjustments Fair
Value value
GBP'000 GBP'000 GBP'000
Property, plant and equipment 102 - 102
Client contracts and relationships - 3,646 3,646
Trade and other receivables 116 - 116
Other current assets 289 - 289
Cash 767 - 767
Trade and other payables (814) - (814)
Goodwill - 2,942 2,942
-------- ----------- -------
Total identifiable net assets 460 6,588 7,048
======== =========== =======
Under the terms of the acquisition agreement, the initial
consideration paid to the vendors of Aitchesse was:
GBP'000
Cash paid 1,841
507,522 Shares in Gresham House plc valued
at 357.5p per share 1,814
Short Term Loan Notes 667
-------
Total Initial consideration 4,322
Contingent consideration (at fair value) 2,726
-------
Total consideration 7,048
=======
The consideration shares were admitted to trading on AIM on 23
November 2015.
Contingent Consideration
Contingent consideration will be payable if Aitchesse achieves
certain EBITDA targets. The amount of additional consideration
payable shall increase on a sliding scale depending on the EBITDA
achieved in the period to 22 February 2018. The contingent
consideration shall be payable if Aitchesse achieves EBITDA between
a range of GBP1,733,333 and GBP3,466,666 with the full GBP3,697,237
of additional consideration being payable if EBITDA of GBP3,466,666
or more is achieved and no additional consideration being payable
if EBITDA of less than GBP1,733,333 is achieved.
In the event of the target being achieved, the Company is
obliged to issue a further 736,074 shares to the vendors. The fair
value of the contingent consideration has been based on the
mid-market share price on 23 November 2015, the date of the
acquisition of Aitchesse, at 357.5p per share. The Directors,
having carefully reviewed the future business prospects of
Aitchesse, believe that the maximum contingent consideration will
be achieved and accordingly no adjustment is made to reflect the
likelihood of the target not being achieved.
The additional consideration shall be satisfied by:
-- the payment of up to GBP1,500,055 in cash to the Sellers;
and
-- the issue of up to 736,074 new Ordinary Shares to the
vendors.
Fair value
The fair value of the contingent consideration is estimated
using an income approach based on a discount assuming a maximum
payout of the contingent consideration as anticipated by the Board,
supported by forecasts of the trading of Aitchesse in the period to
22 February 2018.
Contingent cash payable has been valued at a discount of
13.5%.
The entire amount of the contingent consideration is recognised
as a deferred liability and is measured at fair value through
comprehensive income at each reporting date.
The minimum contingent consideration is GBPnil.
Revenue and profits of Aitchesse
Actual revenue and profits
Aitchesse was acquired on 23 November 2015. The Group has
recognised the following amounts in respect of Aitchesse for the
six week period ended 31 December 2015:
GBP'000
Revenue 206
Profit before tax 69
Gross hypothetical revenue and profits
Prior to acquisition by the Company, Aitchesse had a 30 June
year-end. The results for the most recent audited reporting period
prior to acquisition were to 30 June 2015. Had the Aitchesse been
part of the Group for the entire reporting period the following
sums would have been consolidated:
GBP'000
Revenue 1,912
Profit before tax 560
Acquisition costs of GBP710,000 arose as a result of the
transaction. These have been recognised as part of the exceptional
items in the Statement of Comprehensive Income.
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 Aitchesse acquisition is not deductible for tax
purposes.
5. FINANCE COSTS
2015 2014
GBP'000 GBP'000
Interest payable on loans and overdrafts 137 146
Finance fees 7 63
144 209
======== ========
6. Accounting for Associates
The Group acquired a stake of 706,806 shares in Gresham House
Strategic plc ("GHS") on 21 July 2015 by exchanging the Company's
entire interest in SpaceandPeople plc and an investment of GBP5m in
cash. The total initial investment was GBP6,361,000.
From 21 July 2015 to 23 November 2015, as an investing company,
the holding in GHS was classified as an investment and held at fair
value through profit and loss. During that period, the Company
incurred a fair value loss of GBP459,000. On 23 November 2015,
following the acquisition of Aitchesse, the Board reviewed the
accounting for all its equity investments as an operating company
and has accounted for GHS as an associate after that date.
The Board believe that Gresham House plc exercises significant
influence over GHS, but not control, through its 19.2% equity
investment as well as the investment management agreement between
GHAM and GHS.
There has been no reporting of results for GHS from the date of
its recognition as an associate on 23 November 2013 and 31 December
2015. As such, no profit or loss has been recognised on the
associate for that period. GHS has a year end of 31 March 2016 and
therefore the results of GHS will be incorporated into the Group up
to the latest published financial information.
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The latest published financial information of GHS was for the
unaudited interim results for the six months to 30 September 2015.
The assets and liabilities at that date are shown below:
Non Current Assets GBP19.3 million
Current Assets GBP17.2 million
Current Liabilities GBP0.2 million
Net Assets GBP36.4 million
7. TAXATION
2015 2014
GBP'000 GBP'000
(a) Analysis of charge in period:
UK Corporation tax at 20.25% (2014: 21.5%) - -
Total tax charge - -
======== ========
(b) Factors affecting tax charge for period:
Loss on ordinary activities before tax multiplied
by standard rate of corporation tax in the UK
of 20.25% (2014: 21.5%) (776) (860)
Tax effect of:
Investment losses not taxable 98 470
Dividend income not taxable (10) (20)
Expenses disallowed 153 1
Movement in losses carried forward 535 409
Actual tax charge - -
======== ========
The Group has unutilised tax losses of approximately GBP6.0
million (2014: GBP12.8 million) available against future
corporation tax liabilities. The potential deferred taxation asset
of GBP1.2 million (2014: GBP2.8 million) in respect 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.
8. LOSS PER SHARE
(a) Basic and diluted loss per share
The basic and diluted loss per share figure is based on the net
loss for the year attributable to the equity shareholders of
GBP3,807,000 (2014: GBP4,753,000) and on 9,404,614 (2014:
5,707,350) ordinary shares, being the weighted average number of
ordinary shares in issue during the period. No shares were deemed
to have been issued at nil consideration as a result of the
shareholder and supporter warrants granted.
The shareholder and supporter warrants are not dilutive as the
exercise price of the warrants is 323.27p which is higher than the
average market price of ordinary shares during the year.
(b) Adjusted loss per share
Adjusted earnings per share is based on adjusted loss after tax,
where adjusted loss is stated after charging interest but before
depreciation, amortisation, exceptional items and items relating to
previous years.
Adjusted loss for calculating adjusted earnings per share:
2015 2014
GBP000 GBP000
Loss before taxation for the year (3,831) (4,001)
Add back:
Exceptional operating expenses 773 678
Depreciation and amortisation 4 -
Adjusted loss before tax (3,054) (3,323)
Taxation: - -
Adjusted loss after tax for the calculation of
adjusted loss per share (3,054) (3,323)
Adjusted loss per share was as follows using the number of
shares calculated above:
2015 2014
pence pence
Adjusted loss per share (32.4) (58.2)
9. DIVIDENDS
No dividends have been paid or proposed in the year (2014:
GBPnil).
10. INVESTMENTS - SECURITIES
An analysis of total investments is as follows:
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Listed securities - on the London
Stock Exchange 105 106 105 106
Securities dealt in under
AIM - 928 - 928
Securities dealt in under
ISDX 51 69 51 69
Unlisted securities 1,412 1,852 1,412 1,852
-------- --------
Closing value at 31 December 1,568 2,955 1,568 2,955
======== ======== ======== ========
Investments valued at fair value
through profit or loss 157 1,544 157 1,544
Loans and receivables valued
at amortised cost 1,411 1,411 1,411 1,411
-------- -------- -------- --------
1,568 2,955 1,568 2,955
======== ======== ======== ========
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Opening cost 6,300 6,316 6,542 6,558
Opening net unrealised losses (3,345) (1,157) (3,587) (1,399)
-------- -------- -------- --------
Opening value 2,955 5,159 2,955 5,159
Movements in the year:
Purchases at cost 6,361 10 6,361 10
Sales - proceeds (7,263) (29) (7,263) (29)
Sales - realised gains & (losses)
on sales (26) 3 (268) 3
Net unrealised losses (459) (2,188) (217) (2,188)
Closing value 1,568 2,955 1,568 2,955
======== ======== ======== ========
Closing cost 6,094 6,300 6,094 6,542
Closing net unrealised losses (4,526) (3,345) (4,526) (3,587)
-------- -------- -------- --------
Closing value 1,568 2,955 1,568 2,955
======== ======== ======== ========
The cost of the investments held by the Company is different to
that of the Group as a result of unrealised gains on intra-group
transfers being eliminated on consolidation.
Gains and losses on investments held Group Company
at fair value
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Net realised gains & (losses) on disposal (26) 3 (268) 3
Net unrealised losses (459) (2,188) (217) (2,188)
Net losses on investments (485) (2,185) (485) (2,185)
======== ======== ======== ==========
An analysis of investments is as follows: Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 52 1,438 52 1,438
Fixed income securities 105 106 105 106
Unquoted loan stock 1,411 1,411 1,411 1,411
-------- --------
1,568 2,955 1,568 2,955
======== ======== ============ ========
11. PROPERTY INVESTMENTS
Property investments have been classified as follows: Group
2015 2014
GBP'000 GBP'000
Non current assets 9,559 9,865
Non-current assets held for sale - 6,810
-------- --------
9,559 16,675
======== ========
A further analysis of total property investments is as
follows:
Group
2015 2014
Net book value and valuation GBP'000 GBP'000
At 1 January 16,675 16,700
Additions during the year - expenditure on existing
properties 359 498
Disposals during the year (6,731) -
Loss on disposal of investment properties (158) -
Movement in fair value during the year (586) (523)
At 31 December 9,559 16,675
======== ========
Property investments are shown at fair value based on current
use and any surplus or deficit arising on valuation of property is
reflected in the Statement of Comprehensive Income.
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All property investments were valued by Jones Lang LaSalle
Limited, Chartered Surveyors, as at 31 December 2015 at a combined
total of GBP9,900,000. These external valuations were carried out
on the basis of Market Value in accordance with the latest edition
of the Valuation Standards published by the Royal Institution of
Chartered Surveyors.
The gross property valuation has been adjusted for the fixed
rental uplift as follows:
2015 2014
GBP'000 GBP'000
Gross valuation 9,900 16,675
Fixed rental uplift (341) -
9,559 16,675
======== ========
Operating leases
The future minimum lease payments receivable under
non-cancellable operating leases are as follows:
2015 2014
GBP'000 GBP'000
Not later than one year 657 561
Between 2 and 5 years 1,441 1,349
Over 5 years 682 872
2,780 2,782
======== ========
Rental income recognised in the Statement of Comprehensive
Income amounted to GBP746,000 (2014: GBP858,000).
The commercial leases vary according to the condition of the
units let. The commercial units are leased on terms where the
tenant has the responsibility for repairs and running costs for
each individual unit (other than roof repairs in certain
circumstances) with a service charge payable to cover estate
services provided by the landlord.
The cost of the above properties as at 31 December 2015 is as
follows:
Group
GBP'000
Brought forward 17,813
Additions during the year 359
Disposals during the year (8,596)
9,576
========
Capital commitments
Capital expenditure contracted for but not provided for in the
financial statements for the Group was GBP16,000 (2014: GBP248,000)
and for the Company was GBPnil (2014: GBPnil).
Movement in fair value of property Group
investments
2015 2014
GBP'000 GBP'000
Realised losses on disposal of property (158) -
Decrease in fair value (586) (523)
-------- --------
Movement in fair value of property
investments (744) (523)
======== ========
12. TANGIBLE FIXED ASSETS
Group
Motor Leasehold
Vehicles Property Total
GBP'000 GBP'000 GBP'000
Deemed cost
As at 1 January 2015 - - -
Additions 98 - 98
Additions on acquisition of subsidiary 92 10 102
---------- ---------- --------
Disposals during the year (36) - (36)
---------- ---------- --------
As at 31 December 2015 154 10 164
========== ========== ========
Depreciation
As at 1 January 2015 - - -
Charge for the year 10 - 10
Disposals during the year - - -
---------- ---------- --------
As at 31 December 2015 10 - 10
========== ========== ========
Net book value as at 31 December
2015 144 10 154
========== ========== ========
Net book value as at 31 December - - -
2014
========== ========== ========
13. INTANGIBLE ASSETS
Group
Customer
Goodwill relationships Contracts Total
GBP'000 GBP'000 GBP'000 GBP'000
Deemed cost
As at 1 January 2015 - - - -
Additions 2,942 3,072 574 6,588
As at 31 December 2015 2,942 3,072 574 6,588
=========== =============== ============ ========
Amortisation
As at 1 January 2015 - - - -
Charge for the year - - - -
As at 31 December 2015 - - - -
=========== =============== ============ ========
Net book value as at 31 December
2015 2,942 3,072 574 6,588
=========== =============== ============ ========
Net book value as at 31 December
2014 - - - -
=========== =============== ============ ========
All intangible assets relate to the acquisition of Aitchesse
Limited on 23 November 2015. No amortisation has been provided for
the period from 21 November 2015 to 31 December 2015 on the grounds
that any charge will be immaterial.
14. NON CURRENT ASSETS - LONG TERM RECEIVABLES
On 22 September 2015, the sale of 25.8 acres gross of the site
at Newton-le-Willows to Persimmon was completed. An initial payment
of GBP944,610 was received and the balance of the consideration, at
fair value, will be receivable in three tranches as follows:
GBP'000
On 22 March 2017 2,012
On 22 March 2018 1,955
On 22 March 2019 1,949
5,916
========
The total cash value of the deferred receipts is
GBP6,305,000.
The discount rate applied was 2.77% being the average rate of
borrowing on Persimmon's debt facilities.
15. OTHER INVESTMENTS
Company
2015 2014
Subsidiary undertakings GBP'000 GBP'000
At 1 January 322 322
Additions 2,500 -
At 31 December 2,822 322
======== ========
16. TRADE AND OTHER RECEIVABLES
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable within one year:
Trade receivables 665 88 - -
Less allowance for credit losses - (4) - -
--------
665 84 - -
======== ======== ======== ========
Allowances for credit losses on trade
receivables:
Allowances as at 1 January 4 - - -
Changes during the year charged/(released)
to Statement of Comprehensive Income:
- allowances reversed (4) - - -
- additional allowances - 4 - -
-------- -------- -------- --------
Allowances as at 31 December - 4 - -
======== ======== ======== ========
Trade and other receivables are assessed for impairment when
older than 90 days. As at 31 December 2015, trade receivables of
GBP73,000 (2014: GBP15,000) were past due but not impaired. The
ageing analysis of these trade receivables is as follows:
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
1-3 months 69 9 - -
3-6 months 1 6 - -
More than 6 months 3 - - -
======== ======== ======== ========
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April 19, 2016 02:01 ET (06:01 GMT)
As at 31 December 2015 trade receivables of GBPnil (2014:
GBP4,000) were impaired and provided for. The ageing of these
receivables is as follows:
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
1-3 months - - - -
3-6 months - - - -
6-12 months - 1 - -
More than 12 months - 3 - -
======== ======== ======== ========
The main credit risk represents the possibility of tenants
defaulting in their rental commitments. This risk is mitigated by
regular meetings with the tenants.
17. OTHER CURRENT ASSETS
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Amounts owed by Group undertakings - - 11,568 7,245
- - 11,568 7,245
========== ========== ======== ========
18. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Trade creditors 265 120 - -
Other creditors 1,913 119 53 70
Short term loan notes 667 - 667 -
Accruals 1,545 477 715 -
4,390 716 1,435 70
======== ======== ======== ========
19. CURRENT LIABILITIES - SHORT TERM BORROWINGS
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Bank overdrafts and short-term loans
(secured)
* property loans - within current liabilities 2,850 3,278 - -
- - 26 -
* other
2,850 3,278 26 -
======== ======== ======== ========
Property loans at 31 December 2015 amounted to GBP2,850,000
(2014: GBP3,278,000). The loan is from the Co-operative Bank and is
secured against the property portfolio. This represents a loan to
value of 30% against the overall property investments. Since the
year-end the loan has been refinanced, further details can be found
in note 25.
The loan carries an interest rate of 3.5% over 3 month LIBOR and
is secured by way of a legal mortgage over the investment property
of the Group, the deferred Persimmon proceeds and a floating charge
over the assets of New Capital Developments Limited. In addition
there is a cross guarantee in place with fellow subsidiary
undertakings and an interest guarantee by the Company.
20. DEFERRED TAXATION
Under International Accounting Standards ("IAS") 12 (Income
Taxes) provision is made for the deferred tax liability associated
with the revaluation of property investments.
The deferred tax provision on the revaluation of property
investments calculated under IAS 12 is GBPnil at 31 December 2015
(2014: GBPnil) due to the availability of losses and indexation
allowances. The potential deferred taxation asset of GBP1.2 million
(2014: GBP2.8 million) has not been recognised in these financial
statements.
21. NON-CURRENT LIABILITIES - OTHER CREDITORS
Group Company
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Deferred consideration (note 4) 2,726 - - -
Other creditors 31 - - -
2,757 - - -
======== ======== ======== ========
22. SHARE CAPITAL
2015 2014
Share Capital GBP'000 GBP'000
Allotted: Ordinary - 9,851,041 (2014: 9,343,390) fully
paid shares of 25p each 2,463 2,336
======== ========
On 20 November 2015, the Company issued 507,522 new ordinary
shares at a price of 357.5p per share as part of the acquisition
consideration for Aitchesse Limited. Additionally, 129 shareholder
warrants were exercised during the year at a price of 323.27p
23. NET ASSET VALUE PER SHARE
Basic and diluted
Basic and diluted net asset value per ordinary share is based on
equity attributable to equity shareholders at the year-end and on
9,851,041 (2014: 9,343,390) ordinary shares being the number of
ordinary shares in issue at the year-end. No shares were deemed to
have been issued at nil consideration as a result of shareholder
and supporter warrants granted.
The shareholder and supporter warrants are not dilutive as the
exercise price of the warrants is 323.27p which is higher than the
average market price of ordinary shares during the year.
GBP'000
The movement during the year of the assets attributable to
ordinary shares were as follows:
Total net assets attributable at 1 January 2015 27,842
Total recognised losses for the year (3,831)
Issue of shares 1,815
Total net assets attributable at 31 December 2015 25,826
========
24. SEGMENTAL REPORTING
For the year ended 31 December 2014 the Group's policy was to
invest in both securities and commercial properties.
For the year ended 31 December 2015, the Group invested in
securities and maintained its investment in commercial properties
and during the course of the year, the strategy that the new
management team had set out started to take shape.
From August 2015 onwards, the Group's asset management company,
Gresham House Asset Management Limited began to generate fund
advisory and then, upon FCA regulation, fund management fees from
its management of Gresham House Strategic plc. In November 2015,
the Group acquired the forestry management business of Aitchesse
Limited and generated fees from the management of forestry.
Accordingly, management reporting for the year ended 31 December
2015 is split on this basis under the headings "investment",
"property", "asset management" and "forestry". Inter-segment income
consists of management fees and interest on inter-company loans.
Unallocated corporate expenses relate to those costs, which cannot
be readily identified to either segment.
All activity and revenue is derived from operations within the
United Kingdom.
31 December 2015
Property Asset
Investment Investment Management Forestry Elimination Consolidated
Revenue GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External income 215 773 126 206 - 1,320
Inter - segment
income 517 - - - (517) -
----------- ------------ ------------ --------- ------------ -------------
Total revenue 732 773 126 206 (517) 1,320
Gains and losses
on investments
at fair value (485) - - - - (485)
Movement on property
investments at
fair value - (744) - - - (744)
Total income
and gains 247 29 126 206 (517) 91
Segment expenses - (339) (134) (138) - (611)
Inter - segment
expense - (120) (397) - 517 -
Finance costs - (144) - - - (144)
------------
Segment (loss)/profit 247 (574) (405) 68 - (664)
=========== ============ ============ ========= ============
Unallocated corporate
expenses (3,205)
-------------
Operating loss (3,869)
Interest income 38
-------------
Loss before taxation (3,831)
(MORE TO FOLLOW) Dow Jones Newswires
April 19, 2016 02:01 ET (06:01 GMT)
=============
31 December 2014
Property
Investment Investment Elimination Consolidated
Revenue GBP'000 GBP'000 GBP'000 GBP'000
External income 301 864 - 1,165
Inter - segment income 128 - (128) -
----------- ------------ ------------ -------------
Total revenue 429 864 (128) 1,165
Gains and losses on investments
at fair value (2,185) - - (2,185)
Movement on property investments
at fair value - (523) - (523)
Total income and gains (1,756) 341 (128) (1,543)
Segment expenses - (516) - (516)
Inter - segment expense - (128) 128 -
Finance costs - (209) - (209)
------------
Segment (loss)/profit (1,756) (512) - (2,268)
=========== ============ ============
Unallocated corporate expenses (1,740)
-------------
Operating loss (4,008)
Interest income 7
-------------
Loss before taxation (4,001)
=============
Other information
31 December 2015
Property
Investment Investment Asset Management Forestry Unallocated Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 15,101 17,157 2,477 1,154 - 35,889
Segment liabilities (4,717) (4,733) (7) (606) - (10,063)
----------- ------------ ----------------- --------- ------------ -------------
10,384 12,424 2,470 548 - 25,826
-------------
Capital expenditure 6,361 359 - 53 - 6,773
Depreciation - 3 - 1 - 4
Non-cash expenses
other than
depreciation - - - - - -
31 December 2014
Property
Investment Investment Unallocated Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 14,622 17,214 - 31,836
Segment liabilities (287) (3,707) - (3,994)
----------- ------------ ------------ -------------
14,335 13,507 - 27,842
-------------
Capital expenditure 10 498 - 508
Depreciation - - - -
Non-cash expenses other than depreciation - - 255 -
All non-current assets are located within the United
Kingdom.
25. POST BALANCE SHEET EVENTS
The following key events happened after the year-end:
Group reorganisation
The Group put in place a reorganisation of its subsidiaries.
Under the reorganisation, Gresham House Holdings Limited
("GHHL") became an intermediate holding company between Gresham
House plc and the subsidiaries of the Group.
As a part of the reorganisation, intercompany balances within
the Group were rationalised. The effects of the transactions
underlying the reorganisation will be reported in the 2016
statutory accounts of the subsidiaries concerned.
GHHL will be the vehicle through which the Group's long-term
incentive plan is organised.
Debt facility
On 12 April 2016, the Group signed a new GBP7 million banking
facility with Kleinwort Benson Bank Limited. The borrowing is
secured against the Group's property assets and the deferred
proceeds of the sale of the Newton-le-Willows site to Persimmon
Homes Limited ("Persimmon") announced last September.
The facility will be repayable in three tranches to match the
deferred proceeds due from Persimmon, over the next three
years:
Part of the funding was used to repay the Co-operative Bank
facility of GBP2.85 million and pay down the GBP0.67 million
short-term loan notes issued in connection with the acquisition of
Aitchesse. The balance of the proceeds, consistent with supporting
the growth strategy, will be available for general working capital
and investment purposes.
End
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR IPMJTMBJBTLF
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April 19, 2016 02:01 ET (06:01 GMT)
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