TIDMGHE
RNS Number : 6166A
Gresham House PLC
13 September 2018
Gresham House plc
("Gresham House," "the Group" or "the Company")
Interim results for the six months ended 30 June 2018
Increasing scale, efficiency and relevance to a wider investor
constituency
Gresham House plc, (AIM:GHE) the specialist alternative asset
manager, has reported a strong first half of the year, more than
doubling assets under management, developing a high-quality
pipeline of new opportunities and expanding its distribution
capabilities.
Highlights
As at As at Change
30 Jun 31 Dec
18 17
(GBPm) (GBPm) (%)
------------------------------ ----------- ----------- -------
Assets under management 1,609 649 +148
Cash and liquid assets(1) 33.3 24.5 +36
Six months Six months
to 30 to 30
Jun 18 Jun 17
------------------------------ ----------- ----------- -------
Total income 4.9 2.5 +98
Operating loss (0.5) (1.1) +58
Adjusted operating profit(2) 0.4 (0.8) -
(1) Cash and liquid assets includes cash and investments in
tangible and realisable assets
(2) Adjusted operating profit is defined as the net trading
profit of the Group before deducting amortisation, depreciation and
exceptional items relating to acquisition and restructuring costs.
Represents a GBP1.2m improvement from a GBP0.8m loss to a GBP0.4m
profit
-- Growth in AUM to GBP1.6bn results in H1 adjusted operating
profit of GBP0.4m - profitability enhanced by the capture of
identified synergies from acquisitions with more identified for
2019
-- Strong balance sheet with cash and liquid assets of
GBP33.3m
-- Strong performance of existing funds managed by the Group,
including Gresham House Strategic plc where the three-year
anniversary saw outperformance over benchmark by 11.2% since the
Group took over the management contract
-- All corporate acquisitions to date have met or exceeded their
15% medium-term return on shareholder capital hurdle
-- Successful completion of GBP15.0m placing to fund
transformational acquisition of FIM Services, enhancing the Group's
forestry and new energy asset management capabilities (Gresham
House now the largest UK commercial forestry asset manager)
-- Continuing investment in scaling existing five asset
management divisions, operations, marketing and distribution
capability from organic cashflow
-- Intention to accelerate dividend policy with an initial
payment in 2019
Commenting on the results, Anthony Dalwood, Chief Executive,
said:
"We have made excellent progress in the first half, adding scale
to the business, making us more relevant and accessible to a wider
constituency of investors.
"The challenges created by wider macroeconomic and geopolitical
conditions have increased investors' focus on our areas of
expertise. We are gaining greater brand recognition by identifying
and developing high-quality investment opportunities and providing
excellent client service.
"Whilst we focus on completing the integration of the FIM
business, there remain attractive opportunities to grow the
business organically and through acquisition. We will continue to
be selective in our acquisition strategy, focusing on the most
effective way to create value for shareholders."
- Ends -
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014
For more information contact:
Gresham House plc
Tony Dalwood, Chief Executive Officer +44 (0)20 3837 6270
Canaccord Genuity - Nominated Adviser
and Joint Broker
Bobbie Hilliam
Martin Davison
Michael Reynolds +44 (0)20 7523 8000
Jefferies International Limited - Financial
Adviser and Joint Broker
Paul Nicholls
Max Jones
Chris Binks +44 (0)20 7029 8000
Montfort Communications greshamhouse@montfort.london
Olly Scott +44 (0)78 1234 5205
Louis Supple +44 (0)20 3770 7914
About Gresham House
Incorporated in 1857, Gresham House plc is an AIM quoted
specialist asset management group focused on alternative and
illiquid assets classes, aiming to generate superior sustainable
returns for clients and shareholders over the long-term.
Shareholder value creation will be driven by long-term growth in
earnings as a result of increasing AUM and returns from invested
capital.
Gresham House manages investments and co-investments through its
investment management platform on behalf of institutions, family
offices, high-net-worth individuals, charities and endowments and
private individuals. www.greshamhouse.com
Disclaimers
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.
CHAIRMAN'S STATEMENT
During the first half of the year, we have continued to
implement our strategy of creating a diverse range of high-quality
alternative investment opportunities, delivered with outstanding
client service. Over three years into our plan to create a
market-leading alternative investment manager, I am delighted to
report that we continue to make strong progress and are excited by
the opportunities before us.
ACTIVITY IN THE PERIOD
The continued success of the Group relies on maintaining
sustainable long-term growth, identifying new investment
opportunities and using the balance sheet to develop our offering
for clients.
The management team has maintained strong momentum during the
period, growing the Group's Assets Under Management, ("AUM") by
148% to over GBP1.6 billion, (2017: GBP649 million), driven by the
transformative acquisition of FIM Services Limited, ("FIM") in May
2018. Gresham House is now a market-leading forestry asset manager
in the UK with enhanced expertise in new energy asset
management.
The final part of the Hazel Capital LLP ("Hazel Capital")
transaction completed in the period, with the Group acquiring
stakes in energy storage projects and expanding its revenue
opportunities in the renewables market. The team is developing
these new projects, which are expected to be an attractive addition
to the Group's investment pipeline.
Taking the wider pipeline into consideration, we have an
exciting array of new opportunities in prospect. Consequently, we
have continued to invest in our distribution and sales
capabilities, ensuring that we are able to address a wider investor
audience.
RESULTS
Income for the first half of the year nearly doubled in
comparison to the first half of 2017, reaching GBP4.9 million, (H1
2017: GBP2.5 million). The Group is now profitable on an underlying
basis, achieving an adjusted operating profit of GBP0.4 million,
(H1 2017: GBP0.8 million loss) driven by organic activity, such as
the British Strategic Investment Fund and Gresham House Strategic
plc and acquiring management contracts and businesses, such as
Hazel Capital and FIM.
The Gresham House Group is focused on generating long-term
shareholder value through growing organically alongside selective
acquisitions in specialist alternative asset management.
The Board has considered the Company's long-term dividend policy
and is pleased to announce that it intends to propose a dividend
payment alongside the announcement of the full year results of the
Company for the year ended 31 December 2018.
SHAREHOLDERS
As management continues to grow the business, the Group is
fortunate to enjoy the support of a strong and committed
shareholder base. This was evidenced most recently during the GBP15
million placement and accelerated book build as part of the FIM
transaction, where we were over-subscribed and also welcomed a
number of new shareholders to the register. The Board will continue
to work closely with the Group's shareholders as we continue to
implement our strategy for the business. We are also delighted that
there is a growing ownership of Gresham House shares within the
employees of the Group who are investing through such mechanisms as
bonus reinvestment in "bonus share matching" and "save as you
earn".
BOARD
It is vital that growth companies have access to the right
expertise and experience at Board level in order to provide the
necessary governance and support to management. I was delighted to
welcome Rachel Beagles to the Board in March 2018 who has, together
with the 2017 appointment of Simon Stilwell, proved invaluable.
OUTLOOK
The excellent progress made during the first half of the year
helped the Group maintain its strong momentum. There's no doubt
that Tony Dalwood and his team have worked hard over the past three
years to build a significant specialist alternative asset
management business. We are developing an exciting pipeline of
opportunities to grow organically and there remain attractive
opportunities to grow through acquisition.
As the management team continues to integrate recent
acquisitions and develop future opportunities, we look forward with
optimism.
Anthony Townsend
Chairman
13 September 2018
CHIEF EXECUTIVE'S REPORT
In the first half of 2018, the Company made excellent progress.
Our increased size gives us greater relevance to a wider
constituency of investors and our brand, website and client portal
are gaining greater recognition. We have ambitious plans to
continue growing the business in line with our vision to become an
"asset to covet", with teams across the business developing
high-quality new investment opportunities for clients.
CONTINUED GROWTH
The acquisition of FIM during the period has had a
transformative effect on the business: more than doubling AUM to
GBP1.6 billion; expanding long-term sustainable management fee
income; adding a strong team; and bringing a complementary investor
base into the Group, widening its distribution capabilities for new
product launches.
At the same time, we have continued our work to develop a range
of new investment opportunities, where our blend of skills and
expertise can be most effectively deployed to generate high-quality
returns for investors and shareholders. Examples of this include
our New Energy team developing products in areas such as energy
storage systems, where we are targeting new launches in the near
future. After the period end, we launched a further fundraising for
FIM Solar Distribution LLP and plan to raise further funds for the
FIM Sustainable Timber and Energy LP in the second half of
2018.
DISCIPLINED APPROACH
The Group's continued growth requires a diligent and disciplined
approach to managing risk and controls within the business. The
Investment Committee process exists to challenge capital allocation
decisions for both Gresham House plc as well as the funds that are
managed and advised by the Group. This discipline aims to safeguard
client and shareholder funds alike.
GENERATING SHAREHOLDER VALUE
Scale and efficiency are central elements of creating
shareholder value in a successful asset management business. During
the period we added significant scale to the business and have
focused on optimising the Group's new and existing operations.
The integration of the FIM business is going well and we are
already starting to see the benefit of operational efficiency
gains. We have only recognised the profits of the FIM business
since acquisition towards the end of May 2018, so the second half
of 2018 will see the real impact of FIM on the profits of the
Group. In addition, we have identified further synergies for
2019.
Turning to the wider Group, all acquisitions to date have met
their 15% medium-term return on capital hurdle, demonstrating the
team's ability to create value through acquisitions and
integration. The earnout payment to the sellers of the Aitchesse
business was also settled in the period, confirming a return on
investment of 15% since acquisition.
We are also creating shareholder value through the development
of new investment products and the effective management of existing
funds through our two core divisions, Strategic Equity and Real
Assets. The British Strategic Investment Fund ("BSIF") is a good
example where we continue to have strong interest from local
government pension schemes looking to invest in housing and
infrastructure opportunities below GBP50 million. BSIF has invested
and committed GBP27 million across PRS (private rental sector)
housing and energy storage systems (utility scale batteries) and
has an exciting pipeline of investment opportunities.
The performance of the other funds that the Group manages has
been strong, with Gresham House Strategic plc recently passing its
three-year anniversary and outperforming its benchmark by 11.2%.
This fund has the potential to generate performance fees, alongside
other funds, which have the potential to make carried interest
payments to the Group. We currently do not accrue for performance
fees and carried interest in our results until they are certain,
but current performance indicates that we would expect these to be
delivered in future periods.
Looking ahead, we have a number of exciting new energy,
infrastructure, and private equity investment opportunities
alongside which we are using the Group's balance sheet to develop
assets and seed new initiatives, such as energy storage
systems.
TALENTED TEAM
Achieving our objectives for the business can only happen with
the right mix of high-quality people performing to the best of
their abilities. Testament to this is our recent win of Best
Alternative Investment Manager at the 2018 European Wealth Briefing
Awards. I am grateful to everyone working in the business for what
we have achieved so far and will do in the future.
The focus on where to deploy resources is critical to our
continued development and we have identified the need to enhance
the Group's distribution and sales capabilities in addition to
building our investment teams to deploy capital for investors in an
efficient and profitable manner.
With this in mind, I am very pleased that Heather Fleming has
joined us as Head of Institutional Business. Heather was previously
the Head of Institutional Distribution for UK & Ireland at
Fidelity and brings considerable experience and expertise to our
fundraising strategy. We will also be hiring to provide greater
support for Heather and grow this critical area of the
business.
I am also delighted to welcome the team who have joined Gresham
House as part of the FIM transaction. We have a high-quality
forestry and renewables team to merge with our existing team of
strong individuals and capabilities. We expect these key areas of
our Real Assets division to develop and grow and I look forward to
continuing to work closely with all of the team on new developments
and initiatives.
OUTLOOK
Our strategy for Gresham House is proceeding as planned, with
organic and acquisitive growth increasing our scale, enabling us to
be more efficient, creating attractive investment opportunities for
clients and creating value for shareholders. With the achievement
of operational profitability, new fundraisings and initiatives, we
are gaining momentum across the Group and expect this to positively
impact the bottom line.
Whilst we focus on completing the integration of the FIM
business, there remain attractive opportunities to grow the
business organically and through acquisition. We will continue to
be selective in our acquisition strategy, focusing on the most
effective way to create value for shareholders.
The geopolitical outlook for the UK and Europe remain uncertain
as the terms of Brexit continue to be negotiated. We are monitoring
this closely to manage the risks and also capitalise on
opportunities as the fundamental characteristics of long-term
alternative assets remain attractive to investors.
Whilst valuations across most traditional asset classes are
relatively high, the growing demand for alternatives managed by
teams with strong track records, continues to grow as asset
allocation to these areas increases. Investors are increasingly
looking for "partners" to support them in achieving their
investment and positive social impact targets. Gresham House has
shown multiple points of evidence that it can be a solutions
provider and is looking to increase these partnership relationships
with more family offices, pension schemes and high net worth
individuals to achieve client and shareholder value objectives.
Anthony Dalwood
Chief Executive
13 September 2018
FINANCIAL REVIEW
The first half of 2018 has been another important period in the
development of Gresham House, with the completion of the FIM
transaction and the business continuing to grow.
ADJUSTED OPERATING PROFIT
Gresham House continues to be profitable and delivered an
adjusted operating profit for the six months to 30 June 2018 of
GBP0.4 million, (H1 2017: GBP0.8 million loss). As a reminder, we
use the non-GAAP measure of adjusted operating profit as a key
performance indicator for Gresham House as an alternative asset
manager. Adjusted operating profit is defined as the net trading
profit of the Group before deducting amortisation, depreciation and
exceptional items relating to acquisition and restructuring costs,
to show the true performance of the asset management business.
Six months Six months
to 30 Jun to 30 Jun
18 17
GBP'000 GBP'000
-------------------------------------------------- ----------- -----------
Income 4,948 2,501
----------- -----------
Administration overheads (excluding amortisation
and depreciation and exceptional items) (4,575) (3,066)
Finance costs - (220)
Adjusted operating profit/(loss) 373 (785)
----------- -----------
Amortisation and depreciation (847) (572)
Exceptional items (977) -
----------- -----------
Net trading loss (1,451) (1,357)
Gains/(losses) on investments 1,073 236
Tax - -
----------- -----------
Operating loss after tax (378) (1,121)
----------- -----------
Profit/(loss) from discontinued operations 18 (1,021)
----------- -----------
Total comprehensive income (360) (2,142)
----------- -----------
INCOME
Total income in the period increased by 98% to GBP4.9 million,
(H1 2017: GBP2.5 million). This was driven by the management fees
for new vehicles, such as BSIF, being in operation for the full
period and solid performances across existing funds. The weighted
average length of LP management contracts (representing AUM of over
GBP700 million) is 17.3 years, highlighting the long-term and high
quality nature of the Group's income streams. The acquisition of
FIM completed on 21 May 2018 and the Group results therefore
include approximately six weeks of revenues from the FIM Forestry
and Renewable Energy funds. The impact of the transaction on the
Group's profits will be more noticeable in the second half of
2018.
ADMINISTRATION EXPENSES
Administration expenses, (excluding amortisation, depreciation
and exceptional items) have increased to GBP4.6 million, (H1 2017:
GBP3.1 million) in the period, reflecting the growth of the
business. The average number of employees in the period was 45, (H1
2017: 31) with the increase representing the New Energy team who
joined as part of the Hazel Capital transaction in November 2017
and the recently acquired FIM team. We continue to manage costs
diligently while ensuring that we invest in critical areas of the
business. This includes a focused investment in distribution and
sales support teams as well as our investment teams, with new hires
planned in the second half of the year.
The transaction activity and related fees in the period have
increased exceptional items to GBP1.0 million, (H1 2017: nil). The
FIM transaction fees and associated restructuring costs of
integrating FIM with the existing Gresham House Forestry and New
Energy businesses are considered one-off costs. We expect the
result of the integration to generate cost synergies as well as
increased revenue opportunities.
FAIR VALUE MOVEMENTS
Other items of note in the period were the settlement of the
earnout from the Aitchesse acquisition for GBP3.2 million and the
current assessment on the size of the tranche two payment to LMS
being reduced to zero, based on the NAV of LMS being below the
GBP67.5 million threshold. The net fair value impact of these in
the period was a gain of GBP48,000.
FINANCIAL POSITION
The increase in the net assets of the Group relates primarily to
the share placement of GBP15.0 million and GBP9.8 million
consideration shares issued as part of the FIM transaction.
Intangible assets have increased as a result by GBP24.1 million for
FIM management contracts and goodwill.
Cash remained strong at the end of the period at GBP17.4
million, (2017: GBP9.8 million), with key inflows being the
repayment of GBP1.6 million by Persimmon, GBP2.0 million received
in settlement for the sale of the remaining land at
Newton-le-Willows as well as cash received on the exercise of a
number of warrants in the period of GBP3.5 million.
Combining this with the operating cash flows from the asset
management business has generated a healthy cash position at the
end of the period. We intend to use the cash to invest in
acquisitions that are complementary to the Group and add
shareholder value in line with our 15% medium-term return hurdles,
as well as seed new projects and funds to grow the business.
We look forward to continuing to grow in the second half of 2018
as we integrate FIM and deliver further organic growth.
Kevin Acton
Finance Director
13 September 2018
UNAUDITED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year ended
ended ended
30 Jun 30 Jun 31 Dec
18 (unaudited) 17 (unaudited) 17
(audited)
Notes GBP' 000 GBP' GBP'
000 000
--------------------------------------- ------ ----------------- ----------------- -----------
Income
Asset management income 4,760 2,409 5,805
Dividend and interest income 155 24 431
Other operating income 33 68 221
----------------- ----------------- -----------
Total income 5 4,948 2,501 6,457
Operating costs
Administrative overheads (5,422) (3,638) (8,021)
----------------- ----------------- -----------
Net operating loss before exceptional
items (474) (1,137) (1,564)
Finance costs - (220) (344)
Exceptional items * (977) - (308)
Net operating loss after exceptional
items (1,451) (1,357) (2,216)
Gains and losses on investments
Share of associates' profits /
(losses) 927 (72) (68)
Gains and (losses) on investments
held at fair value 86 172 (230)
Movement in fair value of contingent
consideration 48 16 (56)
Movement in fair value of deferred
receivable 12 120 148
Operating loss before taxation (378) (1,121) (2,422)
Taxation - - -
----------------- ----------------- -----------
Operating loss from continuing
operations (378) (1,121) (2,422)
Profit/(loss) from discontinued
operations 7 18 (1,021) (1,104)
Total comprehensive income (360) (2,142) (3,526)
================= ================= ===========
Attributable to:
Equity holders of the parent (369) (1,892) (3,124)
Non-controlling interest 9 (250) (402)
----------------- ----------------- -----------
(360) (2,142) (3,526)
================= ================= ===========
Basic and diluted loss per ordinary
share (pence) 8 (2.6) (15.7) (25.9)
* Exceptional items relate to professional fees and
restructuring costs incurred in respect of the acquisition of FIM
Services Limited which took place on 21 May 2018 (see note 6) and
the Hazel Capital LLP transaction.
UNAUDITED CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
Six months ended 30 June 2018 (unaudited)
Ordinary Share Share Retained Equity Non-controlling Total
share premium warrant reserves attributable interest equity
capital reserve to equity
shareholders
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------- -------------- ---------------- --------
Balance at 31 December
2017 3,134 9,649 319 15,268 28,370 477 28,847
Comprehensive income
for the period
Loss for the period - - - (369) (369) 9 (360)
--------- --------- --------- ---------- -------------- ---------------- --------
Total comprehensive
income for the period - - - (369) (369) 9 (360)
Contributions by and
distributions to owners
Transfer of non-controlling
interest deficit - - - 6 6 (6) -
Share based payments - - - 78 78 - 78
Issue of shares 2,016 30,872 (261) - 32,627 - 32,627
--------- --------- --------- ---------- -------------- ---------------- --------
Total contributions
by and distributions
to owners 2,016 30,872 (261) 84 32,711 (6) 32,705
--------- --------- --------- ---------- -------------- ---------------- --------
Balance at 30 June
2018 5,150 40,521 58 14,983 60,712 480 61,192
========= ========= ========= ========== ============== ================ ========
Six months ended 30 June 2017 (unaudited)
Ordinary Share Share Retained Equity Non-controlling Total
share premium warrant reserves attributable interest equity
capital reserve to equity
shareholders
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------- -------------- ---------------- --------
Balance at 31 December
2016 2,546 2,611 319 18,657 24,133 491 24,624
Comprehensive income
for the period
Loss for the period - - - (1,892) (1,892) (250) (2,142)
--------- --------- --------- ---------- -------------- ---------------- --------
Total comprehensive
income for the period - - - (1,892) (1,892) (250) (2,142)
Contributions by and
distributions to owners
Transfer of non-controlling
interest deficit - - - (245) (245) 245 -
Share based payments - - - 51 51 - 51
Issue of shares 588 7,038 - - 7,626 - 7,626
--------- --------- --------- ---------- -------------- ---------------- --------
Total contributions
by and distributions
to owners 588 7,038 - (194) 7,432 245 7,677
--------- --------- --------- ---------- -------------- ---------------- --------
Balance at 30 June
2017 3,134 9,649 319 16,571 29,673 486 30,159
========= ========= ========= ========== ============== ================ ========
Year ended 31 December 2017 (audited)
Ordinary Share Share Retained Equity Non-controlling Total
share premium warrant reserves attributable interest equity
capital reserve to equity
shareholders
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------- -------------- ---------------- --------
Balance at 31 December
2016 2,546 2,611 319 18,657 24,133 491 24,624
Comprehensive income
for the period
Loss for the period - - - (3,124) (3,124) (402) (3,526)
--------- --------- --------- ---------- -------------- ---------------- --------
Total comprehensive
income for the period - - - (3,124) (3,124) (402) (3,526)
Contributions by and
distributions to owners
Transfer of non-controlling
interest deficit - - - (388) (388) 388 -
Share based payments - - - 123 123 - 123
Issue of shares 588 7,038 - - 7,626 - 7,626
--------- --------- --------- ---------- -------------- ---------------- --------
Total contributions
by and distributions
to owners 588 7,038 - (265) 7,361 388 7,749
--------- --------- --------- ---------- -------------- ---------------- --------
Balance at 31 December
2017 3,134 9,649 319 15,268 28,370 477 28,847
========= ========= ========= ========== ============== ================ ========
UNAUDITED CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Notes 30 Jun 30 Jun 31 Dec
18 17 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------- ------ ------------- ------------- -----------
Assets
Non-current assets
Investments - securities 10 4,788 4,580 2,989
Tangible fixed assets 388 215 196
Investment in associate 9,618 6,457 6,462
Intangible assets 29,706 6,127 6,327
Long-term receivables - 1,661 1,618
Total non-current assets 44,500 19,040 17,592
------------- ------------- -----------
Current assets
Trade receivables 1,644 957 2,089
Accrued income and prepaid
expenses 2,016 937 785
Deferred receivable 2,112 2,059 2,075
Cash and cash equivalents 17,418 8,100 9,785
Non-current assets held for sale
Investment property - 8,516 1,986
------------- ------------- -----------
Total current assets and non-current
assets held for sale 23,190 20,569 16,720
------------- ------------- -----------
Total assets 67,690 39,609 34,312
------------- ------------- -----------
Current liabilities
Trade and other payables 3,335 1,866 2,170
Contingent consideration - 2,962 3,293
Short-term borrowings - 2,025 -
------------- ------------- -----------
3,335 6,853 5,463
------------- ------------- -----------
Total assets less current liabilities 64,355 32,756 28,849
Non-current liabilities
Long-term borrowings - 2,324 -
Other creditors 3,163 273 2
------------- ------------- -----------
3,163 2,597 2
Net assets 61,192 30,159 28,847
============= ============= ===========
Capital and reserves
Ordinary share capital 11 5,150 3,134 3,134
Share premium 40,521 9,649 9,649
Share warrant reserve 58 319 319
Retained reserves 14,983 16,571 15,268
------------- ------------- -----------
Equity attributable to equity
shareholders 60,712 29,673 28,370
Non-controlling interest 480 486 477
Total equity 61,192 30,159 28,847
============= ============= ===========
Basic net asset value per ordinary
share 13 294.7p 236.7p 226.3p
============= ============= ===========
Diluted net asset value per ordinary
share 13 275.5p 236.7p 211.2p
============= ============= ===========
UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOWS
Notes Six months Six months Year ended
ended ended
30 Jun 30 Jun 31 Dec
18 17 17
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------- ------ ------------- ------------- -----------
Cash flows from operating activities
Net cash utilised in operations 14 244 (484) (1,615)
Interest paid on loans - (145) (236)
Corporation tax received - 33 33
------------- ------------- -----------
Net cash flows in operating activities 244 (596) (1,818)
============= ============= ===========
Cash flows from investing activities
Cash consideration for FIM Services (10,828) - -
Limited
Deferred consideration paid (1,027) - -
Investment in associates (1,979) - -
Purchase of investments (229) (1,574) (5,177)
Sale of investments 16 - 4,946
Sale of investment properties 1,985 - 6,680
Deferred proceeds received on
sale of investment properties 1,593 1,634 1,635
Expenditure on investment properties - (123) (137)
Purchase of fixed assets (111) (99) (137)
Sale of fixed assets 20 16 23
Purchase of intangible assets (123) (39) (762)
(10,683) (185) 7,071
============= ============= ===========
Cash flows from financing activities
Repayment of loans - (1,547) (5,896)
Share warrants exercised 3,544 - -
Share issue proceeds 15,000 7,626 7,626
Share issue costs (472) - -
------------- ------------- -----------
18,072 6,079 1,730
============= ============= ===========
Increase in cash and cash equivalents 7,633 5,298 6,983
Cash and cash equivalents at start
of period 9,785 2,802 2,802
Cash and cash equivalents at end
of period 17,418 8,100 9,785
============= ============= ===========
NOTES TO THE ACCOUNTS
1 REPORTING ENTITY
Gresham House plc ("the Company") is a company incorporated in
England. The unaudited condensed group interim financial statements
of the Company as at and for the six months ended 30 June 2018
comprise the Company and its subsidiary undertakings (together
referred to as the "Group"). All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
2 STATEMENT OF COMPLIANCE
The financial information presented in these interim results has
been prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards issued
by the International Accounting Standards Board, as adopted by the
European Union. The principal accounting policies adopted in the
preparation of the financial information in these interim results
are primarily unchanged from those used in the Company's financial
statements for the year ended 31 December 2017 and are consistent
with those that the Company expects to apply in its financial
statements for the year ended 31 December 2018. The only change has
been the adoption of the following new accounting standards, which
are effective for periods beginning 1 January 2018:
IFRS 9 Financial Instruments - IFRS 9 replaced the
classification and measurement models for financial instruments in
IAS 39 Financial Instruments: Recognition, with three
classification categories: amortised cost, fair value through
profit or loss and fair value through other comprehensive income.
The Group recognises all equity investments within the scope of
IFRS 9 as measured at fair value through profit or loss.
IFRS 9 also introduced an expected credit loss impairment model,
which is applied to all financial assets, except for financial
assets classified as designated as at fair value through profit or
loss. The assessment of impairment losses introduces the concept of
an expectation of credit losses, even in the absence of a default
event. Under IFRS 9, credit loss allowances will be measured on
each reporting date according to a three-stage expected credit loss
impairment model:
-- Stage 1 - From initial recognition of a financial asset to
the date on which the asset has experienced a significant increase
in credit risk relative to its initial recognition, a loss
allowance is recognised equal to the credit losses expected to
result from defaults occurring over the next 12 months.
-- Stage 2 - Following a significant increase in credit risk
relative to the initial recognition of the financial asset, a loss
allowance is recognised equal to the credit losses expected over
the remaining lifetime of the asset.
-- Stage 3 - When a financial asset is considered to be
credit-impaired, a loss allowance equal to full lifetime expected
credit losses will be recognised. Interest revenue is calculated
based on the carrying amount of the asset, net of the loss
allowance, rather than on its gross carrying amount.
Stage 1 and Stage 2 credit loss allowances effectively replace
the collectively-assessed allowance for loans not yet identified as
impaired recorded under IAS 39, while Stage 3 credit loss
allowances effectively replace the individually and collectively
assessed allowances for impaired loans. The measurement of expected
credit losses is based on the impairment reviews, which reflect the
underlying performance of the financial asset, expected cash flows
and changes in expected performance. As at the date of these
interim results there are no indications of impairment losses or
expected credit losses. There has been no material impact as a
result of the adoption of IFRS 9.
IFRS 15 Revenue from Contracts with Customers - IFRS 15
establishes a five-step model that applies to revenue arising from
contracts with customers and provides a more structured approach to
measuring and recognising revenue. The Group has two principal
revenue streams in the form of management fees and performance
fees. As part of the assessment process, the five-step model has
been applied to each material revenue stream. It is considered that
the application of the five-step model to material revenue streams
does not result in any significant change to either the timing of
when revenue is recognised or to the value of the amounts
recognised in the financial statements when compared to the way in
which revenue was previously recognised under IAS 18 Revenue. The
Group has not recognised any performance or carried interest fees
in these interim results, but will do so when they meet the
criteria outlined in IFRS 15. There has been no material impact as
a result of the adoption of IFRS 15.
The financial information for the year ended 31 December 2017
presented in this Interim Report does not constitute the Company's
statutory accounts for that period but has been derived from them.
The Report and Accounts for the year ended 31 December 2017 were
audited and have been filed with the Registrar of Companies. The
Independent Auditor's Report on the Report and Accounts for the
year ended 31 December 2017 was unqualified and did not draw
attention to any matters by way of emphasis and did not contain
statements under s498(2) or (3) of the Companies Act 2006. The
financial information for the periods ended 30 June 2017 and 30
June 2018 are unaudited and have not been reviewed by the Company's
auditors.
3 ESTIMATES AND MANAGEMENT JUDGEMENTS
The preparation of the unaudited condensed group interim
financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these unaudited condensed group interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation were the same as those that applied to the group
financial statements as at and for the year ended 31 December 2017.
The distribution fee accounting treatment was also revisited and
management concluded that the treatment remains consistent with the
group financial statements as at and for the year ended 31 December
2017.
4 FINANCIAL RISK MANAGEMENT
The Group's financial risk management objectives and policy are
consistent with those disclosed in the group financial statements
as at and for the year ended 31 December 2017.
5 INCOME
Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun 17
18 17
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- -----------
Asset management income
Asset management income 4,760 2,409 5,805
4,760 2,409 5,805
----------- ----------- -----------
Income from investments
Dividend income - Listed UK 140 - 106
Interest receivable - Bank & brokers 6 1 2
- Other 9 23 323
----------- ----------- -----------
155 24 431
----------- ----------- -----------
Other operating income
Arrangement fees - 19 135
Reversal of provision against loans - 5 9
Consultancy fees receivable 6 8 14
Other fees receivable 27 36 63
33 68 221
Total income 4,948 2,501 6,457
=========== =========== ===========
6 BUSINESS COMBINATIONS
On 21 May 2018, shareholders approved the acquisition of FIM
Services Limited (FIM) at a general meeting. The Group acquired
100% of the issued share capital of FIM, a company registered in
England whose principal activity is the management of forestry and
other renewable energy assets.
At 31 December 2017, FIM managed 83,000 hectares of forestry and
127MW of renewable energy generating assets in onshore windfarms
and ground-mounted solar parks for clients through long-term
limited partnerships, LLP structures and managed accounts for high
net worth individuals.
The fair value of the identifiable net assets acquired and the
consideration paid under IFRS 3 are as follows:
Net book Adjustments Fair value
value
GBP'000 GBP'000 GBP'000
------------------------------- --------- ------------ -----------
Tangible fixed assets 165 - 165
Investments 818 (318) 500
Cash 6,024 - 6,024
Trade and other receivables 920 - 920
Trade and other payables (1,074) - (1,074)
Goodwill and client contracts - 24,117 24,117
Total identifiable net assets 6,853 23,799 30,652
========= ============ ===========
Under the terms of the acquisition agreement, the fair value of
the consideration paid to the vendors of FIM was:
GBP'000
------------------------------------------------ ---------
Cash 16,852
Shares - 2,390,244 shares in Gresham House plc
valued at 445.0p per share on 21 May 2018 10,637
---------
Total initial consideration 27,489
Contingent consideration 3,163
Total consideration 30,652
=========
The consideration shares were admitted to trading on AIM on 22
May 2018.
Contingent consideration
Contingent consideration totalling GBP4m will be payable in cash
when the revenues from the combined forestry businesses (FIM and
existing Gresham House Forestry) over two years are greater than
GBP14m. For amounts less than this there is a sliding scale which
reduces to nil deferred consideration where the combined revenues
are less than GBP13m.
Current forecasts are that the GBP14m hurdle will be achieved
and that the additional consideration will be paid in full.
The fair value of the contingent consideration has been
estimated at the date of acquisition using forecast details for the
combined business and discounting this at 11.0%. This is cash
settled and will therefore be recognised as a liability on the
balance sheet and the fair value assessed each reporting period.
The fair value at the time of acquisition was calculated as
GBP3,163,000.
Costs associated with the acquisition of FIM totalled GBP743,000
and are shown as an exceptional item in the Group Statement of
Comprehensive Income.
Business combinations in the prior periods related to the
acquisition of the asset management business of Hazel Capital LLP.
Further details can be found in Note 5 of the 2017 Report and
Accounts.
7 DISCONTINUED OPERATIONS
Discontinued operations represent the legacy property portfolio
of the Group, with the sale of the remaining land at
Newton-le-Willows completing during the period.
The disposal group fulfilled the requirements of IFRS 5 in the
prior period to be classified as "discontinued operations" in the
consolidated statement of comprehensive income, the results of
which are set out below:
Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun 17
18 17
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ----------- -----------
Rental income - 376 531
Other operating income - - 22
Property outgoings 19 (162) (191)
Loss on disposal of investment properties (1) - (1,135)
Movement in fair value of investment
property - (1,235) (331)
Net profit/(loss) from discontinued
operations 18 (1,021) (1,104)
=========== =========== ===========
8 EARNINGS PER SHARE
Basic and diluted loss per share
Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun 17
18 17
GBP'000 GBP'000 GBP'000
Total net loss attributable to equity
holders of the parent (GBP'000) (369) (1,892) (3,124)
Weighted average number of ordinary
shares in issue during the period 14,127,220 12,073,106 12,073,106
Basic and diluted loss per share to
equity holders of the parent (pence) (2.6) (15.7) (25.9)
=========== =========== ===========
1,439,875 (30 June 2017: nil; 31 December 2017: 898,747) shares
were deemed to have been issued at nil consideration as a result of
the shareholder, supporter and LMS warrants granted and shares
which could be issued under the bonus share matching plan and
long-term incentive plans which, as required under IAS 33, Earnings
per Share, have not been recognised as they would reduce the loss
per share.
Adjusted earnings per share
Adjusted earnings per share is based on adjusted operating
profit, which is stated after charging interest but before
depreciation, amortisation, profit on disposal of tangible fixed
assets and exceptional items, to simplify the non-GAAP measure of
the performance as an asset manager.
Adjusted profit/(loss) for calculating adjusted earnings per
share:
Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun 17
18 17
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- -----------
Operating loss before taxation for
the period (1,451) (1,357) (2,216)
Add back:
Exceptional operating expenses 977 - 308
Depreciation and amortisation 866 584 1,209
Profit on disposal of tangible fixed
assets (19) (12) (12)
Adjusted operating profit / (loss) 373 (785) (711)
Adjusted earnings / (loss) per share
(pence) - basic 2.6 (6.5) (5.9)
=========== =========== ===========
Adjusted earnings / (loss) per share
(pence) - diluted 2.4 (6.5) (5.9)
=========== =========== ===========
9 DIVIDENDS
No final or interim dividends were proposed or paid for the
periods ending 30 June 2018, 31 December 2017 and 30 June 2017.
10 INVESTMENTS - SECURITIES
An analysis of total investments is as follows:
30 Jun 30 Jun 31 Dec
18 17 17
GBP'000 GBP'000 GBP'000
------------------------------------------- -------- -------- --------
Listed securities - on the London Stock
Exchange 302 - 281
Securities dealt in under AIM 841 672 787
Securities dealt in under NEX Exchange 18 42 38
Unlisted securities 3,627 3,866 1,883
Carrying value 4,788 4,580 2,989
======== ======== ========
Investments valued at fair value through
profit or loss 4,465 2,417 2,830
Loans and receivables valued at amortised
cost 323 2,163 159
4,788 4,580 2,989
======== ======== ========
Unlisted securities include the Group's investment in the
Gresham House Forestry Fund LP (GBP1.7 million, including
non-controlling interests), investment in battery storage projects
(GBP1.1 million) and an investment of GBP0.5 million in Windfarm LP
Funds as per the FIM transaction.
11 SHARE CAPITAL
30 Jun 30 Jun 31 Dec
18 17 17
GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- --------
Allotted: Ordinary - 20,600,550 (30
June 2017: 12,536,957; 31 December
2017: 12,536,957) fully paid shares
of 25p each 5,150 3,134 3,134
======== ======== ========
12 SHARE WARRANTS
Shareholder Supporter LMS warrants Total
warrants warrants warrants
----------------------------- ------------ ---------- ------------- ------------
Balance at 1 January 2017 1,071,813 850,000 909,908 2,831,721
Warrants exercised during
the period (1) - - (1)
------------ ---------- ------------- ------------
Balance at 30 June 2017 1,071,812 850,000 - 2,831,720
Warrants exercised during - - - -
the period
------------ ---------- ------------- ------------
Balance at 31 December 2017 1,071,812 850,000 909,908 2,831,720
Warrants exercised during
the period (105,392) (81,000) (909,908) (1,096,300)
Balance at 30 June 2018 966,420 769,000 - 1,735,420
============ ========== ============= ============
Shareholder warrants
On 1 December 2014 the Company issued 1,073,904 shareholder
warrants to existing shareholders as at the close of business on 28
November 2014 on a 1:5 basis, such warrants having been admitted to
trading on AIM. Shareholder warrants are freely transferable, are
exercisable at any time between 1 January 2015 and 31 December 2019
at an exercise price of 323.27p per ordinary share and are subject
to the terms of the shareholder warrant instrument dated 7 October
2014.
Supporter warrants
On 1 December 2014 the Company issued 850,000 supporter warrants
to the new directors and certain members of the Investment
Committee and Advisory Group at a price of 7.5p per warrant.
Supporter warrants have the same entitlements as the shareholder
warrants save that (i) they are not freely transferable (such
supporter warrants only being transferable to certain family
members, trusts or companies connected with the relevant warrant
holder) and accordingly not quoted on AIM; (ii) are exercisable
between 1 December 2015 and 31 December 2019; and (iii) are subject
to the terms of the supporter warrant instrument dated 7 October
2014.
LMS warrants
On 14 October 2016 the Company issued 909,908 LMS warrants to
LMS Capital plc ("LMS"). The LMS warrants entitle LMS to exercise
one LMS warrant for one ordinary share in the Company from 14
October 2016 to 30 June 2018 at an exercise price of 323.27p per
ordinary share. LMS paid a warrant purchase price of 28p per LMS
warrant, totalling GBP255,000. The LMS warrants are not
transferable, unless consent of the Board of the Company has been
provided and were issued in accordance with the LMS warrant
instrument dated 14 October 2016.
During the period 105,392 shareholder warrants, 81,000 supporter
warrants and 909,908 LMS warrants were converted into ordinary
shares resulting in the issue of 1,096,300 new ordinary shares (30
June 2017: 1; 31 December 2017: 1).
13 NET ASSET VALUE PER SHARE
Basic
30 Jun 30 Jun 31 Dec
18 17 17
------------------------------------ ----------- ----------- -----------
Equity attributable to holders of
the parent (GBP'000) 60,712 29,673 28,370
Number of ordinary shares in issue
at the end of the period 20,600,550 12,536,957 12,536,957
Basic net asset value (pence) 294.7 236.7 226.3
=========== =========== ===========
Diluted
30 Jun 30 Jun 31 Dec
18 17 17
--------------------------------------- ----------- ----------- -----------
Equity attributable to holders of the
parent (GBP'000) 60,712 29,673 28,370
Number of ordinary shares in issue
at the end of the period 22,040,425 12,536,957 13,435,704
Diluted net asset value (pence) 275.5 236.7 211.2
=========== =========== ===========
Diluted net asset value per share is based on the number of
shares in issue at the period end together with 1,439,875 (30 June
2017: nil; 31 December 2017: 898,747) shares deemed to have been
issued at nil consideration as a result of the shareholder and
supporter warrants granted and shares which could be issued under
the bonus share matching plan and long-term incentive plans.
These shares and warrants had no dilutive effect for the period
ended 30 June 2017 as the exercise price of the warrants is 323.27p
which was higher than the average market price of the ordinary
shares during the period.
14 RECONCILIATION OF NET OPERATING LOSS TO OPERATING CASH
FLOWS
30 Jun 30 Jun 31 Dec
18 17 17
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------- --------
Net operating loss after exceptional
items (1,451) (1,357) (2,216)
Profit / (loss) from discontinued operations 18 (1,021) (1,104)
Movement in fair value of investment
property 1 1,235 1,466
Interest payable - 125 170
Depreciation 62 42 87
Profit on disposal of tangible fixed
assets (19) (12) (12)
Amortisation 804 542 1,122
Share
based
payments 78 51 123
-------- -------- --------
(507) (395) (364)
Decrease in long-term receivables - - 54
Decrease
/
(increase)
in
current
assets 354 282 (1,219)
Increase
/
(decrease)
in
current
liabilities 397 (371) (86)
-------- -------- --------
244 (484) (1,615)
-------- -------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BRGDCGUBBGID
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