TIDMGHE
RNS Number : 8766R
Gresham House PLC
11 March 2021
Gresham House plc
("Gresham House," "the Group" or "the Company")
Annual Results for the year ended 31 December 2020
Strong Organic Growth in AUM of 35%
The Board of Gresham House plc, (AIM: GHE), the specialist
alternative asset manager, is pleased to announce another year of
strong growth, both organically and through acquisition, with
Assets Under Management (AUM) increasing by 42% to GBP4.0 billion,
and significant increases to revenue and adjusted operating profit.
The Group has momentum in fundraising and plans for further AUM
growth across its divisions in 2021. The Board is also pleased to
announce a 33% increase in the dividend to 6.0p (2019: 4.5p).
FINANCIAL HIGHLIGHTS
As at/for As at/for Change
the year to the year (%)
31 Dec 2020 to 31 Dec
2019
Assets under management (GBPm) 3,970 2,797 +42
Cash and liquid assets (GBPm) 45.1 41.3 +9
Net core income (GBPm) 40.8 31.7 +29
Adjusted operating profit (GBPm) 12.1 10.3 +17
Net performance fees and gains
on investments (GBPm) 1.0 1.5 -33
Comprehensive net income (GBPm) 0.8 -0.8 n/a
Dividend (p) 6.0 4.5 +33
-- Strong AUM growth of 42% to GBP4.0 billion (2019: GBP2.8
billion), with organic growth of GBP1.0 billion (35%)
-- Robust net core income growth of 29% to GBP40.8 million
(2019: GBP31.7 million) and growth in adjusted operating
profit of 17% to GBP12.1 million (2019: GBP10.3 million)
-- Final dividend proposed to increase by 33% to 6.0 pence
(2019: 4.5 pence)
-- Good progress in first year of five-year strategic plan
GH25 to create shareholder value as part of identified
strategic and financial Group objectives
-- International presence progressed by proposed acquisition
of Appian Asset Management Limited, the EU-based regulated
asset manager, subject to regulatory approval in 2021
-- Enhanced client base, with six of the ten largest UK
Local Government Pension Schemes investing in funds managed
by Gresham House
-- Continued investment in the team to scale AUM in identified
areas of strong growth potential
SUSTAINABILITY HIGHLIGHTS
-- The Group's inaugural Sustainable Investment Report
will be published week beginning 15(th) March 2021
-- Sustainable Investing Committee embedded in the business
has supported the Group's recognition in this area
with top Principles for Responsible Investment scores
and Green Economy Mark from the London Stock Exchange
-- Forestry division growth includes planting 9.0 million
trees in 2020. Carbon dioxide sequestration across
the forestry portfolio totalled approximately 35 million
tonnes as at the end of December 2020. It is estimated
that 1.5 million tonnes of CO(2) was absorbed in 2020.
Commenting on the results, Tony Dalwood, Chief Executive of
Gresham House, said:
"The growth within each of the asset classes at Gresham House
reflects the quality of our investment teams and client demand for
these specialist areas. We start the second year of the GH25 plan
with positive momentum despite the ongoing macroeconomic and social
challenges, and we continue to invest alongside our growth
ambitions in order to deliver client targets and generate
shareholder value from AUM growth".
Gresham House is hosting its annual results webinar at 10:00 AM
today via this link
-ends-
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014
Gresham House plc
Tony Dalwood, Chief Executive
Kevin Acton, Chief Financial Officer +44 (0)20 3837 6271
Houston gh@houston.co.uk
Alexander Clelland +44 (0)20 4529 0549
Anushka Mathew
Canaccord Genuity Limited - Nominated Adviser
and Joint Broker
Bobbie Hilliam
Georgina McCooke +44 (0)20 7523 8000
Jefferies International Limited - Financial
Adviser and Joint Broker
Paul Nicholls
Max Jones +44 (0)20 7029 8000
About Gresham House
Gresham House plc is a London Stock Exchange quoted specialist
alternative asset management group (GHE.LN) that provides funds,
direct investments and tailored investment solutions including
co-investment. It focuses on five areas of long-term alternative
investment within its two divisions of Strategic Equity and Real
Assets.
Gresham House manages investments and co-investments through its
FCA regulated investment management platform Gresham House Asset
Management Limited on behalf of institutions, family offices,
charities and endowments and private individuals.
The Group aims to generate superior returns across a range of
alternative investment strategies over long-term investment
horizons. As a signatory to the UN-supported Principles for
Responsible Investment, Gresham House is committed to operating
responsibly and sustainably and believes its strategy of taking the
long view in delivering sustainable investment solutions will
continue to be a growing factor in the strength of its market
positioning.
www.greshamhouse.com
Chairman's Statement
2020 has unquestionably been one of the most challenging years
we have seen, with the COVID-19 pandemic affecting global
populations and economies on an unprecedented scale. However,
despite the difficulties and uncertainty we faced, I am pleased to
report yet another busy and productive year for Gresham House, in
which we have made strong progress against GH25, our five-year
growth plan, and demonstrated the resilience of our business. This
is directly attributable to the quality and drive of the people
within this business.
COVID-19
We entered the pandemic in a good position, with a strong
balance sheet supported by the resilient nature of our assets and
have continued to grow and outperform the market. Our operations
have remained largely unaffected and stable throughout, thanks to
the early and decisive action taken by management to protect the
business and the impressive response of our talented team, as they
adapted swiftly to new ways of working. We continue to prioritise
their safety, health, and wellbeing, encouraging a culture of
'overcommunication' with colleagues and clients, and close team
collaboration.
I am pleased that the Company, Management Committee and
Directors donated GBP100,000 in aggregate to the Trussell Trust, a
charity that works to end the need for food banks in the UK, and
NHS Charities Together, as we aimed to support communities in need.
In addition, we set up a Give As You Earn Scheme for all employees
and the Company will match donations made.
Activity in the period
I am delighted to see the remarkable 42% growth in AUM over the
past year, bringing us to GBP4.0 billion of AUM, demonstrating the
attractive nature of our strategies.
Around GBP1.0 billion of this growth has been organic, which has
been achieved through very strong fundraising success in a tough
market across our strategies in housing, forestry, sustainable
infrastructure and new energy - all vital to the UK Government's
plans for a green economic recovery in the UK post the pandemic. In
Strategic Equity, we have also held up well against a difficult
broader economic backdrop and grown our assets further, alongside
winning the GBP150 million mandate for Strategic Equity Capital plc
(SEC). Fundraising highlights across the year include the British
Strategic Investment Fund (BSIF) hitting its GBP300 million target,
the Gresham House Energy Storage Fund (GRID) raising GBP150
million, exceeding its target, the Baronsmead VCTs raising GBP57
million as well as the successful fund raise for Gresham House
Forest Fund I LP.
We have also made good progress with acquisition-based growth,
with the integration of TradeRisks, the fund management and debt
advisory services group, boosting our Housing division and the
recently announced acquisition of Appian Asset Management, which is
subject to Central Bank of Ireland approval, ensuring a
strengthened presence in Ireland to target growth in the
post-Brexit world. TradeRisks has again shown the capability of
this management team to add value through integration and execute
on potential synergies.
Our performance has also been recognised by the industry and the
market, as we appeared on twelve shortlists and won five awards
including 'Boutique of the Year' in the Investment Week Specialist
Fund Awards 2020 and, for a third year running, 'Best Alternative
Investment Manager' in the WealthBriefing European Awards. I am
particularly proud that we have continued to invest in the
business, having recruited 21 new joiners in a tough, uncertain
market.
Sustainability
It has been pleasing to see the progress we have made with
embedding sustainability in every aspect of our business, as we
achieved industry leading scores for our first submission to the
Principles for Responsible Investment and were also awarded the
Green Economy Mark by the London Stock Exchange. We have expanded
the range of sustainability focused investment strategies with new
opportunities including carbon credit and affordable housing
investment platforms. Rebecca Craddock-Taylor, our Sustainable
Investment Director who joined us in July 2020 is leading this
process as we get ready to publish our inaugural Sustainable
Investment Report. The culture within the Group is strong and
positive with evidence of this coming through our employee
survey.
Results
The growth that we have seen this year is noteworthy given the
tough external backdrop. Net core income has increased by 29% to
reach GBP40.8 million (2019: GBP31.7 million), while adjusted
operating profit was GBP12.1 million, growing by 17% (2019: GBP10.3
million). Net comprehensive income is up to a profit of GBP0.8
million (2019: GBP0.8 million loss). Our robust balance sheet and
the strong cash and net liquid asset positions have also provided
us with the flexibility to continue the pursuit of our growth
ambitions.
Dividend
We intend to increase the dividend for this year to 6.0 pence,
an increase of 33% (2019: 4.5 pence), with the Board cognisant of
striking a balance between continuing to invest in the business for
growth and providing a progressive dividend policy. The dividend
increase for the year reflects the positive long-term outlook we
anticipate for the company.
Shareholders
We continue to welcome new shareholders to the register as we
broaden our supportive shareholder base and it is pleasing to see
the quality of that base, a reflection of the capital markets
supporting our growth and management teams. As our market
capitalisation has grown beyond the GBP250 million threshold, we
have come a long way since the GBP12 million capitalisation at the
time of the Management Buy-In a little over five years ago.
Importantly, the senior management team has shown that it can
generate organic growth alongside adding value by acquisitions.
Board
Richard Chadwick, our Senior Independent Director and Chairman
of the Audit Committee, has served on the Board since June 2008.
His knowledge of the Company's history prior to the advent of the
current management team has been very useful and his continuity on
the Audit Committee has been valuable during a period of
considerable change. However, after nearly 13 years on the Board it
is time to plan for his succession. I have therefore agreed with
him that he should serve one more year, which will give us time to
recruit a new Chairman of the Audit Committee and facilitate an
orderly handover of his responsibilities; he will then retire at
the conclusion of next year's AGM. In accordance with our Articles
and the provisions of the QCA Corporate Governance Code, Richard
will therefore stand for re-election at this year's AGM.
Outlook
As we commence 2021 still in lockdown, we continue to prioritise
our employees' safety and wellbeing. We will continue to invest in
the business, as we scale our platform, ensuring that we are
resourced to match our ambitions. We are confident the year ahead
will take us further on our journey to achieve our GH25
objectives.
Although COVID-19 continues to disrupt our daily lives, we
approach the year ahead with optimism, and are excited about our
growth trajectory, as our product offering and sustainable
investment focus continue to provide attractive returns over the
long-term whilst delivering shareholder value.
Gresham House operates in areas with strong opportunities for
growth from increased allocation to alternative assets, underpinned
by significant demand for sustainable investment, placing us in a
position of long-term strength. We have witnessed the resilience of
our business in 2020 and are confident that we will continue to
grow in the coming year.
Anthony Townsend
Chairman
10 March 2021
Chief Executive's Report
Introduction
In March 2020, we set out GH25, our ambitious strategic plan to
generate shareholder value over the next five years, at that stage
unaware of the full extent of the pandemic that would follow,
resulting in a tumultuous period economically, socially and
politically. I am pleased to say that the quality of our business
has been highlighted in so many ways including the adaptability of
our people to address these challenges. The subsequent actions and
change in routine to achieve our clients' objectives have been
something to be proud of, and importantly, momentum in profit
growth alongside strategic development has continued.
Over this period, we have grown our AUM by 42% to GBP4.0
billion, in line with our ambitious plans. Of this growth, GBP1.0
billion (35%) was organic, through strong fundraising performances
across both the Real Assets and Strategic Equity divisions,
increasing the depth of the Group's institutional client base. We
have also grown through selective acquisitions, including Appian
Asset Management, subject to approval from the Central Bank of
Ireland, and TradeRisks, a fund management business and specialist
provider of debt structuring and advisory services to the housing
and social infrastructure sectors. With the acquisition of Appian,
we have accelerated our international expansion plans with the
addition of a regulated EU-based platform post-Brexit. TradeRisks
considerably enhances our Housing platform with the addition of a
highly experienced team to help us build scale in this important
area. We believe these are further examples of our approach to
create shareholder value through complementary additions to the
Gresham House platform, where target returns, business development
plans and synergies are clear.
Throughout what has been both a difficult and highly disruptive
period, to the market and to the business environment, we have
remained cognisant that our companies, and our industry, are
defined by the people who work within them. Our key assets are our
people, and the effect that the COVID-19 situation continues to
have on individuals and families financially, psychologically and
socially, has been at the forefront of our minds. We have
maintained a focus on team safety, through remote working and
staggered working times in the office, and closely monitored the
physical and mental health of the Gresham House family. I am proud
of our team's dedication and response plus our ability to continue
business as usual during such a difficult time. We continue to
remain vigilant to the threat posed by the pandemic whilst focused
on our client and shareholder objectives.
We have seen structural growth in the asset classes in which
Gresham House invests, in terms of continued growth in
institutional investor allocation to alternatives and growth in
demand for ESG investment opportunities. A survey of institutional
investors by CoreData found that 40% will increase their
allocations to alternative investment strategies over the next
three to five years. Equally, Mercer's 2020 survey of the European
pension industry shows 88% of institutional investors now plan to
integrate ESG into their investment policy.
As a consequence, we see a strong outlook for organic growth
within the business, underpinned by structural growth in the demand
for new energy, forestry, sustainable infrastructure, housing,
early-stage technology companies and those targeting
entrepreneurial growth. As we look to the year ahead, we do so with
cautious optimism and the knowledge that we are well-positioned to
benefit from structural growth in demand for our investments from
clients across the spectrum of institutional, Family Office, High
Net Worth and retail.
GH25
We believe the GH25 framework objectives will generate
substantial shareholder value, resulting in Gresham House becoming
an "asset to covet" for all stakeholders, shareholders, employees
and clients. GH25 aims to double shareholder value over the five
years to 2025. With sustainability at the heart of our strategy to
generate long-term shareholder value, we aim to grow AUM to over
GBP6.0 billion, increase operating margins to 40% and maintain
target Returns on Invested Capital (ROIC) of 15% or above.
At the end of the first year of our strategic plan, we have
increased AUM by GBP1.2 billion both organically and via
acquisition, making solid progress towards our goal. This has
included capturing synergies from the TradeRisks acquisition, which
significantly enhances our ability to scale our housing platform,
and we anticipate further synergies with the proposed acquisition
of Appian Asset Management in Ireland.
We continue to invest substantially in the business, across all
our platforms in areas where we see long-term sustainable
opportunities to grow and subsequently benefit from the operational
gearing.
We are also on track to maintain ROIC of 15% through the use of
our balance sheet in the medium term. This has also been
demonstrated in the performance of historic acquisitions. In 2020,
this was further evidenced by balance sheet investments in battery
storage projects through the wholly-owned subsidiary Gresham House
Devco Limited, and its subsequent sales to Gresham House Energy
Storage Fund plc (GRID).
We have continued to see superior returns from funds managed,
with resilient performance in the LF Gresham House UK Micro Cap and
LF Gresham House UK Multi Cap Income funds over 2020. In addition,
forestry as an asset class continues to show very strong
performance, with our forestry funds generating an average return
of 15% in the last 12 months. We pride ourselves on our ability to
manage funds which provide investors with diversification benefits
during periods of market volatility.
Gresham House is a specialist in several niche investment areas
and our market share in these continues to grow. We now have the
largest battery storage investment trust in the UK in GRID, and we
are the largest commercial forestry asset manager in the UK. These
asset classes evidence how we can provide sustainable solutions to
clients whilst growing the client base through capable investment,
asset management and distribution talent.
Importantly, we are increasing our international footprint with
the proposed acquisition of Appian Asset Management in Ireland and
working on capturing a substantial carbon credit-based forestry
opportunity in New Zealand. The acquisition of Appian expands our
capabilities to develop existing strategies in Ireland, and further
across Europe, with a particular focus on sustainable
infrastructure, social housing, specialist equities and
forestry.
We continue to enhance the Gresham House brand, with industry
recognition and our broader profile in the media, including
national broadcast media, and across social media, delivering our
messages to the market directly and succinctly through showcasing
our growing capabilities.
Sustainability
In 2020, we were pleased that our commitment to embedding ESG
and sustainable investing across the Group was recognised by the
London Stock Exchange, which awarded us the coveted Green Economy
Mark in July. The Green Economy Mark is only awarded to listed
companies that derive more than 50% of annual revenues from
environmental solutions. We also received our first scores from the
UN-supported Principles for Responsible Investment, with an A+
rating for Strategy & Governance, the highest possible score.
Our investment strategies scored an A+ in Infrastructure, A in
Public Equity and an A in Private Equity.
We have continued to invest in our leadership in this critical
area with the hire of Rebecca Craddock-Taylor as Sustainable
Investment Director, who has been working to develop and embed
existing sustainable investment policies across both the Real
Assets and Strategic Equity divisions. In 2020, we codified our
approach to sustainable investment with the establishment of a
Sustainable Investing Committee under Rebecca's leadership. This
committee comprises senior representatives across the company and
ensures delivery against the sustainable investment policies that
are embedded across each stage of the investment lifecycle. It also
sets the culture for sustainability at Gresham House from the
top.
We lead by example and sustainability now forms part of every
employee's objectives so that it permeates every aspect of the
business. In 2020, we hosted our first webinar on our approach to
sustainable investment, providing examples of the application to
real assets including forestry, new energy and sustainable
infrastructure. We will also launch our first Sustainable
Investment Report shortly and host further webinars in this area,
which lies at the heart of what we do.
Assets under management
Our GH25 ambition to double shareholder value is driven by our
ability to grow AUM. The table below provides more detail on our
progress in the year, growing AUM by 42% to GBP4.0 billion:
AUM as Net Fund Performance Funds AUM as AUM Movement AUM Movement
at 31 Flows GBPm won/ at 31 GBPm %
Dec 2019 (1) acquired Dec 2020
GBPm GBPm GBPm GBPm
Strategic Equity
Strategic Public
Equity 283 35 42 148 508 225 80%
Private Equity
(2) 425 37 5 (55) 412 (13) (3)%
Subtotal 708 72 47 93 920 212 30%
Real assets
Forestry 1,333 85 393 - 1,811 478 36%
New Energy and
Sustainable
Infrastructure 663 267 2 - 932 269 41%
Housing 93 35 (5) 184 307 214 230%
Subtotal 2,089 387 390 184 3,050 961 46%
Total AUM 2,797 459 437 277 3,970 1,173 42%
------------------------- ---------- --------- ------------ ---------- ---------- ------------- -------------
(1) Includes funds raised, redemptions and distributions.
(2) The LMS contract was terminated in May 2020.
Organic growth in AUM of 35% in the year was c.GBP1.0 billion,
driven by net fundraising across the Group, fund performance and
winning a new fund mandate.
Net fund inflows in the year reflected the resilient demand for
the sustainable investment funds that we manage occurring across
each division in the business. Notable fundraises include GRID
raising GBP150 million, Gresham House Forest Fund I LP raising
GBP108 million, BSIF securing additional commitments of GBP100
million as well as the Strategic Equity funds generating net
inflows from the open-ended funds and Baronsmead VCTs. We were also
able to diversify and deepen our client base and we now manage
funds for six of the ten largest UK Local Government Pension
Schemes in the UK.
Performance in the year generated GBP437 million in AUM, with
the demand for Forestry increasing and valuations improving as a
result.
We also added a further GBP277 million which includes winning
the Strategic Equity Capital plc (SEC) mandate (GBP147 million) and
ReSI plc (GBP184 million) through the acquisition of TradeRisks.
Our busy year has been reflected in the growth in our AUM.
Real Assets
As expected, Real Assets remained robust during the pandemic,
offering resilience and a safe haven in a time of heightened
volatility in global equity markets.
Forestry continued to provide an excellent safe harbour for
capital throughout the crisis. We have seen growth in the
underlying value of all the forests that we manage and there has
been significant interest from investors in the sector. As a
consequence, we closed the Gresham House Forest Fund I LP
fundraising at GBP108 million, securing a new institutional
investor, driven by the potential for attractive long-term returns,
our expertise in the sector and the robust underlying
characteristics of the asset class. We are also looking further
afield at carbon credits and forestry to support our international
growth.
In New Energy, GRID raised over GBP150 million in the year, with
its last equity raise being oversubscribed significantly, and we
were able to supply 100MW of utility scale battery storage projects
from our development pipeline. The proceeds of the fundraising will
be used to finance a c.485MW pipeline of energy storage projects.
We are pleased to be meeting a fundamental need within the UK
energy network. Additional renewable generation capacity brings the
need for more energy storage to achieve a cost-effective energy
transition, and our new pipeline will help meet this need. As part
of our commitment to New Energy, we are also investing in
unsubsidised renewable energy assets and plan to launch a renewable
energy fund for institutional clients in this important area.
We were delighted to reach a final close of GBP300 million for
our British Strategic Investment Fund (BSIF) in 2020, the upper
limit of our fundraising target, and received further backing from
UK Local Government Pension Schemes who are committed to funding UK
infrastructure. BSIF is focused on sustainable infrastructure areas
and has already deployed capital into the renewable energy, battery
storage, waste disposal, fibre broadband, vertical farming and key
worker accommodation sectors and we look forward to launching a
second fund in the coming year.
Following the acquisition of TradeRisks in March, we have
further built out our Housing team with Residential Secure Income
plc (ReSI) adding GBP184 million in AUM to the division. The team
has also worked together on the launch of Gresham House Residential
Secure Income LP (GH ReSI LP), which will target institutional
investors and local government pension schemes looking to access
the under-addressed UK shared ownership residential property market
and aim to deliver a quantifiable social impact. The aim is to have
a first close in the first half of 2021.
Strategic Equity
The pandemic has taken its toll on global equity markets in
2020, with high levels of volatility and market uncertainty, marked
by a significant fall in valuations in March, followed by an
unprecedented stimulus package from governments globally.
As a consequence, the economy has been supported to a
significant degree, including a GBP330 billion UK Government
financial package, restoring valuations, and combating negative
sentiment. Throughout this crisis, we have supported our portfolio
companies, particularly in the hard-hit sectors such as leisure and
retail.
We have seen steady growth through net fund inflows into our
open-ended vehicles, despite continued outflows for UK equities
across the industry, and raised GBP57 million over the course of
the year for the Baronsmead VCTs, reflecting strong ongoing demand
for a dynamic, entrepreneurial approach to investing in the UK's
early-stage growth businesses, a key area for post-Brexit UK.
Gresham House was also appointed investment manager for SEC. Our
appointment was made on the basis of the depth of expertise within
the Gresham House platform, with talent such as Ken Wotton and
Brendan Gulston, and a team with a superior 20-year track record of
investing in small caps and creating shareholder value through
constructive corporate engagement using a private equity approach
to publicly quoted companies. This has also been demonstrated by
the very strong five-year performance of Gresham House Strategic
plc, managed by the strategic public equity team including Richard
Staveley, and Laurence Hulse.
People and culture
The Gresham House culture is fundamental to who we are as a
business. We have cultivated a culture of dynamism based on
empowering individual flair and entrepreneurial thinking. This
enables us to design and implement innovative investment solutions
capable of building a sustainable future for all our
stakeholders.
Over the course of 2020 we have invested in our people to
achieve our AUM growth ambitions, making hires across the business,
attracting key fund managers such as Peter Bachmann for Sustainable
Infrastructure, and hiring across distribution.
Employee engagement remains strong and our employee survey
showed 94% of employees would recommend Gresham House as a good
place to work to their network and friends. We are also making good
progress with diversity at management level, with women holding 32%
of our senior managerial roles. I would like to express my personal
thanks to this great team for their dedication to our purpose and
ambitions.
We are committed to diversity and inclusion, whilst making a
positive change, and this is evident in actions not simply words.
As part of this commitment, we are participating in the
#100BLACKINTERNS initiative, which aims to offer Black students
across the UK an opportunity to begin a career in investment
management. The internships are paid and will last a minimum of six
weeks over the summer of 2021.
We have also added to the Gresham House team in partnership with
Leadership Through Sport & Business (LTSB), a social mobility
charity that prepares and supports young people from disadvantaged
backgrounds into meaningful roles in accounting and technology with
major firms. They make sure those at risk of under-employment find
careers equal to their ambition and ability.
At the year end, we employed 122 people, demonstrating the
continued growth in the business since we started in 2014, with
just a few individuals. Our goals are well aligned with that of our
clients, with senior management owning a material 8% of the shares.
We see increasing management and employee share ownership, through
both our bonus share matching, with c.50% take up by employees, and
share save schemes.
Our talented team continues to gain recognition from across the
industry and we were named Alternative Investment Manager of the
Year at the UK Pensions Awards, as well as European Alternative
Investment Manager of the Year by Funds Europe, among other
accolades. These awards are well deserved and a testament to the
commitment, excellence and dedication that underpins our
culture.
Outlook
As the pandemic continues, there is no doubt that the market
will continue to be challenging and we expect volatility in equity
and bond markets alongside turbulence in the real economy as many
stimulus packages cease and governments look to fund the enormous
debts accumulated.
At present, market valuations in certain areas also show
bubble-like characteristics. However, there are areas of the market
and sectors where good value exists and others that feature
structural growth dynamics including sustainability that make them
attractive to alternative asset managers. The balance and long-term
resilience of our business model and mix mitigates volatility in
earnings due to extraneous factors, such as COVID-19.
We are now into the second year of our five-year plan, having
gone through the 'J curve' of growth. This is an exciting journey
and one that contains even more potential than seemed possible in
2015.
Over the course of 2021, we look forward to completing our
acquisition of Appian Asset Management and its integration into our
operations as we build the platform and further capitalise on our
plans for international expansion.
We are also excited by the pipeline of fundraising we have
planned for 2021 across all areas of our business.
In Housing, we look forward to launching GH ReSI LP and in
Sustainable Infrastructure we have the ongoing deployment of BSIF,
with a follow-on fund to come during the year. We will also be
launching new funds in Forestry, including an international theme,
and in New Energy with renewables and battery storage. Across
equities, the strong investment performance should attract more
investors to the specialist approaches within the Strategic Public
Equity, VCT and Equity Funds areas.
Our focus is to deliver on stakeholder objectives in order to
make Gresham House an asset to covet for clients, employees and
shareholders. The opportunity with our existing asset classes is
growing, and clients are seeking new investment solutions to
achieve both their financial and sustainability ambitions. We have
shown that we can grow the business organically and through
acquisition, and the Gresham House brand is growing in a positive
way.
I am fortunate to be working with a team of ambitious people who
understand client and shareholder objectives. The aim is to keep
raising the bar year on year, and this capable team keep rising to
the challenge supported by structural growth in our markets from
clients for specialist and differentiated products and
solutions.
Tony Dalwood
Chief Executive
10 March 2021
Financial Review
In what can only be described as difficult conditions for all,
the Group has maintained its growth trajectory and has delivered in
the first year of its five-year strategy, GH25. The Group has grown
AUM by 42% in the year to 31 December 2020, with a closing AUM of
GBP4.0 billion, up GBP1.2 billion in the year (2019: GBP2.8
billion). The AUM growth includes the acquisition of TradeRisks
Limited (TradeRisks) in March 2020, which added GBP184 million to
AUM. This growth has helped to increase net core income in the year
by 29% to GBP40.8 million (2019: GBP31.7 million) and deliver an
adjusted operating profit of GBP12.1 million, up 17% in the year
(2019: GBP10.3 million).
The Group has continued to use its balance sheet to develop
projects and support the growth of the business, with the sale of
two battery storage projects delivering an additional GBP1.0
million in net gains in the year (2019: GBP1.3 million).
Total comprehensive net income after the deduction of
amortisation and other acquisition related costs has delivered a
profit of GBP0.8 million (2019: GBP0.8 million loss). We are also
pleased to announce our intention to increase the final dividend by
33% to 6.0 pence for the year ended 31 December 2020, building on
the Group's 2019 final dividend of 4.5 pence.
We present the performance of the Group using the non-GAAP
adjusted operating profit metric. The aim of the adjusted operating
profit metric is to show the true performance of the core asset
management business through the management fee income and revenues
earned, less the administrative overheads associated with
delivering asset management services. The adjusted operating profit
metric below highlights the performance of the core asset
management business separately from performance fees and realised
gains on the sale of investments. The performance fees and realised
gains on the sale of investments are presented alongside the
variable compensation costs payable as a result of their
generation, to show the net impact on the Group.
The adjusted operating profit metric thereby excludes
depreciation and amortisation, exceptional items from acquisition
costs and restructuring and acquisition related share-based
payments, as they are effectively an earn out paid to the sellers
of businesses acquired rather than an operating expense.
Adjusted operating profit
2020 2019
GBP'000 GBP'000
Income 41,936 31,784
Dividend income from associates 202 1,323
----------- -----------
Gross core income 42,138 33,107
Rebates, distribution costs and fundraising
costs (1,364) (1,383)
----------- -----------
Net core income 40,774 31,724
Administration overheads (excluding amortisation,
depreciation, exceptional items and acquisition
related share-based payment charges) (28,690) (21,047)
Finance costs (25) (390)
----------- -----------
Adjusted operating profit 12,059 10,287
----------- -----------
Adjusted operating margin 29.6% 32.4%
----------- -----------
Performance fees (gross) - 1,944
Variable compensation attributable to performance
fees - (1,744)
----------- -----------
Performance fees net of costs - 200
Realised gains on investment 3,482 2,369
Variable compensation attributable to realised
gains (2,474) (1,037)
----------- -----------
Realised gains net of costs 1,008 1,332
----------- -----------
Performance fees and realised gains net of
costs 1,008 1,532
----------- -----------
Adjusted operating profit, performance fees
and realised gains net of costs 13,067 11,819
Amortisation and depreciation (8,931) (8,527)
Exceptional items (1,775) (1,063)
Acquisition related share-based payment charges (593) (593)
Net gains/(losses) on investments* 134 (2,463)
Tax (1,084) (23)
----------- -----------
Operating profit/(loss) after tax 818 (850)
----------- -----------
(Loss)/profit from discontinued operations (12) 55
----------- -----------
Total comprehensive net income 806 (795)
=========== ===========
*Excluding dividend income from associates of GBP0.2 million
(2019: GBP1.3 million) and realised gains on investments of GBPnil
(2019: GBP2.4 million).
The adjusted operating profit metric has increased to GBP12.1
million (2019: GBP10.3 million) and the adjusted operating margin
based on net core income reduced to 29.6% (2019: 32.4%) following
the investment in the business to achieve our growth ambitions.
Income
2020 2019
GBP'000 GBP'000
Asset management income 40,304 31,427
Dividend and investment
income 554 278
Other income 1,078 79
Total income 41,936 31,784
-------- --------
Divided income from associates 202 1,323
-------- --------
Gross core income 42,138 33,107
-------- --------
Rebates, distribution costs and fundraising costs (1,364) (1,383)
-------- --------
Net core income 40,774 31,724
-------- --------
Net core income
Total net core income has increased by 29% in the year to
GBP40.8 million (2019: GBP31.7 million), driven by the strong 35%
organic growth in AUM in the year to GBP4.0 billion (2019: GBP2.8
billion). This increase includes the revenues generated by the
acquisition of TradeRisks, the specialist housing fund manager in
March 2020. We have presented net core income to reflect the
rebates, distribution costs and fundraising fees paid to deliver
core income by the Group.
The Group provides high-quality services in actively managed
alternative asset classes. Delivery of returns for investors is key
and requires the team of asset management specialists to drive
investment performance. As such, we operate in higher fee margin
specialist areas of asset management.
The Group benefits from a diverse range of long-term management
contracts, the majority of which are closed ended and provide a
stable view on future revenue streams. This is demonstrated through
the weighted average life of limited partner management contracts
accounting for GBP1.3 billion in AUM being over 14 years in asset
classes such as forestry. The spread of products managed by the
Group's Real Assets and Strategic Equity divisions also ensures
that the Group is not exposed to any one particular market,
providing good diversification. The open-ended funds in the
Strategic Equity division had an AUM of GBP269 million at the end
of the year (2019: GBP224 million), which was an increase in the
year, despite the impact of the pandemic.
Dividend, interest and other income
We continue to use our balance sheet to invest alongside clients
and develop or support products managed by the Group and dividends,
interest and other income reflect this. Overall dividend and
investment income increased in 2020 to GBP554,000 (2019:
GBP278,000), primarily due to dividends from Gresham House Energy
Storage Fund plc (GRID) of GBP314,000 (2019: GBP149,000).
Other income of GBP1,078,000 (2019: GBP79,000) principally
reflects the net operating income earned from the two battery
storage projects while under the Group's ownership, prior to being
sold to GRID.
Dividend income from associates relates to dividends recognised
for Gresham House Strategic plc (GHS) of GBP202,000 in the year
(2019: GBP1,323,000). In the prior year, Noriker Power Limited paid
a dividend in specie of GRID shares and cash of GBP1.2 million to
Gresham House plc and GHS declared dividends of GBP172,000 in the
year. These are recognised in the share of associates profit line
in the income statement and separated out as part of the adjusted
operating profit metric disclosure.
Administrative overheads
Administrative overheads, excluding amortisation, depreciation
and exceptional items were GBP28.7 million in the year (2019:
GBP21.0 million). The increase in cost base includes the costs of
the TradeRisks business of GBP2.4 million, which has been
integrated with our Housing division.
The Group has taken the conscious decision to invest in the team
in order to grow the business effectively. In the earlier stages of
this investment there is an impact on operating margins and the
speed at which we achieve our target 40% adjusted operating margins
in the medium-term. The benefit of this investment will be
recognised when the revenues generated come through increased
AUM.
Investment in key team members across the Group in 2020 led to
the Group's full-time equivalent headcount standing at 122 at the
end of the year up from 94 at the end of 2019. This included 21 new
hires as we focused on the key roles needed to grow the business.
People costs have consequently increased in the year to GBP23.3
million from GBP15.6 million in 2019, alongside variable
compensation relating to performance fees and realised gains of
GBP2.5 million (2019: GBP2.8 million).
The Group has also benefited from improved performance across
the divisions, which drives the bonus pools based on a share of the
profits with the teams and thereby increases costs.
Total office costs across the Group were GBP0.8 million (2019:
GBP0.7 million), reflecting the additional office costs from the
acquisition of TradeRisks offsetting the cost savings as a result
of reduced office activity due to the pandemic.
We operate with offices in London, Oxford, Dumfries and Perth
and continue to operate a flexible approach to the London office
where it is important that we commit to an appropriate size and
time frame to accommodate acquisition activity as part of our
strategic growth.
When we acquire businesses, we focus on the synergies that can
be delivered as a result of combining complementary businesses. It
is not only acquisitions where we target cost savings, we continue
to review all areas of the Group's cost base diligently to ensure
that we are operating efficiently and in a lean manner. We do
however ensure that appropriate investment takes place in areas
that will support the growth of the business.
Finance costs
The Group put in place a GBP5.0 million revolving credit
facility with Santander in December 2020. The facility was not
drawn in the year and with no other borrowing in the year the
finance costs were GBP25,000. The GBP390,000 finance cost in 2019
reflects the interest and arrangement fees paid for the term loan
and revolving credit facility of GBP357,000 and IFRS 16 Lease
interest of GBP33,000.
Amortisation and depreciation
Amortisation of management contracts, client contacts, the
website and IT platform development accounted for GBP8.0 million
(2019: GBP7.7 million) as these intangible assets continue to be
amortised over their useful lives. The acquisition of TradeRisks in
March 2020 required the assessment of the fair value of the ReSI
plc management contract and customer relationships within the
businesses, which are being amortised over their useful lives.
Depreciation of GBP871,000 in the year (2019: GBP816,000)
relates primarily to office leases, motor vehicles used by the
Forestry business and IT equipment.
Exceptional items
We classify exceptional items as those fees and costs which
relate to acquisitions and restructuring of the business post
acquisition as well as one-off costs. Exceptional items in 2020
were GBP1.8 million compared to GBP1.1 million in 2019. These
include the acquisition costs associated with TradeRisks as well as
Appian Asset Management (Appian), which exchanged in December 2020
and is subject to approval from the Central Bank of Ireland,
alongside restructuring costs.
Gains/(losses) on investments
2020 2019
GBP'000 GBP'000
Share of associates' profits 158 246
Gains/(losses) in investments held at fair
value 4,599 3,048
Fair value movement in deferred receivable 224 -
Movement in fair value of contingent consideration (1,163) (2,065)
Total gains/(losses) on investments 3,818 1,229
Less realised gains on development projects (3,482) (2,369)
Less dividend income from associates (202) (1,323)
-------- --------
Net gains/(losses) on investments 134 (2,463)
======== ========
The Group has made gains on its investments and fair value
movements in acquisition related contingent consideration totalling
GBP3.8 million in 2020 (2019: GBP1.2 million).
The share of associates' profits relates to the 23% holding that
the Group has in GHS and the Group's 27% holding in Noriker Power
Limited (Noriker). The last results announcement from GHS was on 10
November 2020 for the six-month period to 30 September 2020. Under
associate accounting, the Group has therefore recognised its share
of the loss in the period of GBP133,000 (2019: GBP77,000 profit),
which included dividends received in the year of GBP202,000 (2019:
GBP172,000).
The Group's investment in Noriker was acquired for alignment as
Noriker develops battery storage projects which are part of the
pipeline of projects to be acquired by GRID when operational. The
Group's share of Noriker profits in 2020 was GBP326,000 (2019:
GBP187,000). Noriker did not pay a dividend in 2020 (2019: GBP1.1
million).
The associates have different year ends to that of the Group,
however no material adjustments are required to the reported
numbers.
The gain of GBP4.6 million from investments held at fair value
in the year (2019: GBP3.0 million) includes realised and unrealised
gains and losses on the co-investments that have been made in the
funds managed or advised by Gresham House. The key driver of this
was the realised gain made on the sale of the Thurcroft and Wickham
Market battery storage projects to GRID, making a gross realised
profit of GBP3.5 million (2019: GBP2.4 million gross gain on sale
of Red Scar battery project). Both of these sales of battery
development projects made a return on investment in excess of the
Group's medium-term target of 15%. The net gain after the deduction
of variable compensation relating to the project was GBP1.0 million
for the Group.
The other notable unrealised value increase in the year was the
GBP0.8 million increase in the value of the Gresham House Forestry
Friends and Family Fund LP, based on the independent valuation at
the end of the year.
Fair value movement in contingent consideration
Both the TradeRisks and Livingbridge VC acquisitions have a
contingent payment element which is driven by AUM growth or revenue
performance over a three-year period since acquisition. The
contingent consideration payment has been fair valued at each
reporting period end with the movement in the fair value recognised
in the income statement.
The TradeRisks deferred consideration is driven by AUM growth
assumptions and cost synergies. At the year end these assumptions
have been reviewed and the primary driver for the increase in the
deferred consideration is the unwinding of the discount applied
between the year end and settlement in 2023.
The Livingbridge VC business revenue performance to December
2020 and estimates for 2021 have been used to estimate the fair
value of the contingent consideration. The increase in the fair
value on the balance sheet reflects this and the unwind of the
discount between the period end and settlement in 2022.
The FIM contingent consideration of GBP4.8million was paid in
full in August 2020.
Tax
The Group continues to utilise the losses available against the
current trading activity, however this year is now in a tax paying
position. The tax charge noted reflects taxable profits within the
Group partially offset by the deferred tax liability recognised on
the acquisition of the FIM and TradeRisks businesses and the impact
of the movement in the fair value of the management contracts.
Financial position
2020 2019
GBP'000 GBP'000
Assets
Investments* 23,259 21,902
Cash 21,886 19,432
--------- --------
Tangible/realisable
assets 45,145 41,334
Intangible assets 59,970 58,545
Other assets 18,057 13,560
--------- --------
Total assets 123,172 113,439
Liabilities
Borrowing - -
Contingent consideration 6,933 10,510
Other creditors 19,772 12,692
--------- --------
Total Liabilities 26,705 23,202
--------
Net assets 96,467 90,237
========= ========
*The above presentation of the Group's balance sheet highlights
the Group's direct exposure to those vehicles and entities that it
has invested in. We have therefore adjusted the IFRS statement of
financial position for the following items which are required to be
consolidated under IFRS 10 to present the Group on an investment
basis:
DevCo Projects - removed the "Assets of a disposal group held
for sale" of GBP7,363,000 (2019: (GBP12,188,000) and "Liabilities
of a disposal group classified as held for sale" of GBP2,072,000
(2019: GBP9,718,000) and replaced with the investment exposure in
"investments in securities" GBP5,842,000 (2019: GBP3,678,000) and
"investment in associates" of GBP20,000 (2019: GBP54,000).
Gresham House Forestry Friends and Family Fund LP - reduced the
value by the non-controlling interest amount of GBP811,000 (2019:
GBP527,000) to show the Group's underlying exposure to this
fund.
Tangible/realisable assets
The above highlights the strong balance sheet position that the
Group improved on during 2020. The tangible/realisable assets
supporting this total GBP45.1 million (2019: GBP41.3 million),
comprise investments and cash.
Investments
The Group invests in or alongside the funds that it manages to
align itself with clients. The below table provides a summary of
the investment portfolio at the end of the year:
Investment Portfolio 2020 2019
GBP'000 GBP'000
Investment in associates
Gresham House Strategic plc (GHS) 8,456 8,791
Noriker Power Limited 666 341
DevCo Projects 20 54
-------- --------
9,142 9,186
Investment in securities
DevCo Projects 5,842 3,678
Gresham House Energy Storage Fund plc (GRID) 2,859 5,402
Gresham House Forestry Fund LP 2,068 1,489
Gresham House Strategic Public Equity LP 1,162 844
Residential Secure Income plc (ReSI plc) 864 -
LF Gresham House Smaller Companies Fund 703 633
Gresham House British Strategic Investment Fund
(BSIF) 269 -
Strategic Equity Capital plc (SEC) 173 -
Other investments 177 670
-------- --------
14,117 12,716
-------- --------
Total investments (excluding non-controlling
interests) 23,259 21,902
======== ========
Investments in associates
The Group maintained its holding in GHS in the year at 23%. The
last publicly available results for the six months to 30 September
2019 has led to a decrease in the recognised value as an associate
of GBP133,000 (2019: GBP70,000 increase), which after adjusting for
the dividend payment of GBP202,000 (2019: GBP172,000) in the year
results in a value of GBP8,456,000 (2019: GBP8,791,000).
The Group treats Noriker as an associate and the Group's share
of Noriker's profits for the year to 31 December 2020 was
GBP326,000 (2019: GBP187,000).
Investments in securities
IFRS 10: Consolidation requires the consolidation of the Group's
investments in battery storage Development Company projects (DevCo
Projects) as the Group has a controlling position in these
projects. The DevCo Projects have borrowed to pay the deposits for
the utility scale batteries and this borrowing is secured at the
DevCo Project level on the batteries and there is no recourse to
the Group. The disclosure above therefore shows the Group's net
exposure to the DevCo Projects, i.e. the equity and loan investment
in the vehicles and nets out the borrowing and utility scale
battery assets as shown in the IFRS statement of financial position
assets and liabilities of a disposal group held for sale.
The Group increased its investment in the DevCo Projects in the
year, which totalled GBP5.9 million (2019: GBP3.7 million) at the
end of 2020 and are in the exclusive pipeline for GRID to purchase
when they are operational. GRID will go through a detailed
independent valuation process when the projects are operational as
part of the acquisition process and these projects currently remain
on track to be operational in 2021 and 2022. During the year, the
Group sold two projects, Thurcroft and Wickham Market, which
delivered a net gain of GBP1.0 million to the Group.
The Group invested GBP5.0 million in GRID at the IPO to ensure
that it reached GBP100.0 million in size and GRID has since
successfully raised further capital to grow the vehicle. At the end
of 2020, the Group reduced its direct investment in GRID by GBP2.5
million to GBP2.9 million as it looks to deploy capital for new
initiatives around the Group.
Gresham House Forestry Fund LP performed well in the year, with
increases in the value of the underlying forests driving an
increase in the Group's investment to GBP2.0 million (2019: GBP1.5
million), excluding non-controlling interests.
Gresham House Strategic Public Equity LP continued to invest
during 2020 and generated realised and unrealised gains of
GBP197,000 (2019: GBP177,000).
Following the acquisition of TradeRisks, the Group owns
GBP864,000 in ReSI plc, the listed housing REIT, providing further
alignment with our clients.
The other investments demonstrate the Group's ability to
co-invest alongside the funds that it manages and provides
alignment with clients, for example committing GBP1.0 million at
the final close to BSIF.
Cash and Borrowing
The cash balance of the Group was GBP21.9 million at the end of
the year (2019: GBP19.4 million) and reflected operating cash
profits generated in the year as well as a number of other
items.
The issuance of shares in the Company following investor-lead
demand in March 2020 generated GBP7.7 million after costs. The
Group also sold two DevCo projects, Thurcroft and Wickham Market,
in October and December respectively, generating GBP5.7 million
gross proceeds.
The acquisition of TradeRisks in March 2020 was settled in
GBP8.0 million net cash and the issuance of GBP3.5 million of
Company shares.
The completion of the FIM earn out period resulted in a cash
payment of GBP4.8 million in final settlement of the acquisition of
the FIM business in August 2020 and the payment of the first
instalment of contingent consideration of GBP5.0 million was made
to the sellers of Livingbridge VC LLP in December 2020.
Cash generated by operating activity and the above was used to
support growth initiatives across the business in areas such as
investing a further GBP1.3 million in DevCo Projects and committing
GBP1.0 million to BSIF.
As highlighted, the DevCo Projects have borrowed to fund the
acquisition of utility scale batteries, and this exposure is netted
off against the DevCo Projects. On consolidation, the IFRS
statement of financial position includes this borrowing amount of
GBP2.1 million under liabilities of a disposal group classified as
held for sale, although this borrowing has no recourse to the Group
(2019: GBP9.7 million).
Finally, to provide flexibility as the Group enters 2021 with a
range of opportunities to grow the business the Group has put in
place a new Revolving Credit Facility (RCF) with Santander. The RCF
has a GBP5.0 million limit, with a GBP5.0 million accordion
allowing the Group to extend the size of the RCF to GBP10.0
million, with a three-year term.
Intangible assets
Intangible assets are primarily made up of the management
contracts acquired as part of acquisitions and the goodwill
associated with these acquisitions. As at 31 December 2020, the net
book value of management contracts and other intangible assets was
GBP30.3 million (2019: GBP34.5 million), reflecting the
amortisation of the management contracts over their useful lives,
and the addition of the ReSI plc management contract following the
acquisition of TradeRisks. No contracts were impaired at the year
end.
Goodwill resulting from acquisitions is reviewed each year end
and there was no indication that impairment to goodwill should be
considered to the book value of GBP29.7 million (2019: GBP24.1
million). Further details are included in the notes to the
financial statements.
Contingent consideration
Contingent consideration reduced from GBP10.5 million to GBP6.9
million in the year, reflecting the final settlement of the FIM
earn out of GBP4.8 million in August 2020, the settlement of the
first deferred payment to the sellers of Livingbridge VC LLP of
GBP5.0 million in December 2020. This was offset by the addition of
the GBP3.3 million fair value of the contingent consideration
payable to the sellers of TradeRisks, amounts payable on DevCo
Projects of GBP2.1 million plus the unwind of the discount from the
year end to the date of settlement.
Going Concern
The Directors carry out a rigorous assessment of all the factors
affecting the business in deciding to adopt a going concern basis
for the preparation of the accounts. The Directors have reviewed
and examined the financial and other processes embedded in the
business, in particular the annual budget process. On the basis of
such review and the significant liquid assets underpinning the
balance sheet relative to the Group's predictable operating cost
profile, the Directors consider that the adoption of a going
concern basis, covering a period of at least 12 months from the
date of this report, is appropriate.
Kevin Acton
Chief Financial Officer
10 March 2021
GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31
DECEMBER
2020 2019
Notes GBP'000 GBP'000
Income
Asset management income 40,304 31,427
Dividend and interest income 554 278
Other operating income 1,078 79
Performance fees and carried interest - 1,944
--------- ---------
Total income 1 41,936 33,728
Operating costs
Administrative overheads 3 (42,052) (34,331)
--------- ---------
Net operating loss before exceptional
items (116) (603)
Finance costs 7 (25) (390)
Exceptional items 6 (1,775) (1,063)
--------- ---------
Net operating loss after exceptional items (1,916) (2,056)
Gains and losses on investments and fair
value movements
Share of associates' profits/(losses) 17 158 246
Gains and losses on investments held at
fair value 12 4,599 3,048
Movement in fair value of contingent consideration (1,163) (2,065)
Movement in value of deferred receivable 224 -
--------- ---------
Operating profit/(loss) before taxation 1,902 (827)
Taxation 9 (1,084) (23)
--------- ---------
Operating profit/(loss) from continuing
operations 818 (850)
(Loss)/profit from discontinued operations (12) 55
--------- ---------
Profit/(loss) and total comprehensive
income 806 (795)
========= =========
Attributable to:
Equity holders of the parent 577 (850)
Non-controlling interest 229 55
--------- ---------
806 (795)
========= =========
Basic profit/(loss) per ordinary share
(pence) 10 1.9 (3.2)
========= =========
Diluted profit/(loss) per ordinary share
(pence) 10 1.8 (3.2)
========= =========
Basic adjusted profit per ordinary share
(pence) 10 34.5 35.3
========= =========
Diluted adjusted profit per ordinary share
(pence) 10 32.9 31.2
========= =========
STATEMENTS OF CHANGES IN EQUITY YEARED 31 DECEMBER
Group 2020 Equity
Ordinary attributable Non-
share Share Retained to equity controlling Total
Notes capital premium reserves shareholders interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December
2019 6,956 69,242 14,039 90,237 582 90,819
Profit and total comprehensive
income for the year - - 577 577 229 806
Contributions by and
distributions to owners
Share-based payments 28 2 38 (4,863) (4,823) - (4,823)
Issue of shares 26 1,065 10,762 - 11,827 - 11,827
Dividends paid 11 - - (1,351) (1,351) - (1,351)
Total contributions by
and distributions to
owners 1,067 10,800 (6,214) 5,653 - 5,653
Balance at 31 December
2020 8,023 80,042 8,402 96,467 811 97,278
Group 2019 Equity
Ordinary Share attributable Non-
share Share warrant Retained to equity controlling Total
Notes capital premium reserve reserves shareholders interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December
2018 6,218 57,901 58 15,036 79,213 527 79,740
Adjustments for changes
in accounting policy - - - 6 6 - 6
--------- --------- --------- ---------- -------------- ------------- --------
Balance at 31 December
2018 after adjustment 6,218 57,901 58 15,042 79,219 527 79,746
Loss and total
comprehensive
income for the year - - - (850) (850) 55 (795)
Contributions by
and distributions
to owners
Share-based payments 28 8 189 - 642 839 - 839
Issue of shares 26 730 11,152 (58) - 11,824 - 11,824
Dividends paid 11 - - - (795) (795) - (795)
--------- --------- --------- ---------- -------------- ------------- --------
Total contributions
by and distributions
to owners 738 11,341 (58) (153) 11,868 - 11,868
--------- --------- --------- ---------- -------------- ------------- --------
Balance at 31 December
2019 6,956 69,242 - 14,039 90,237 582 90,819
========= ========= ========= ========== ============== ============= ========
YEARED 31 DECEMBER
Company 2020 Ordinary
share Share Retained Total
Notes capital premium reserves equity
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December 2019 6,956 69,242 12,379 88,577
Loss and total comprehensive income for
the year - - (1,771) (1,771)
Contributions by and distributions to
owners
Issue of shares 26 1,067 10,800 - 11,867
Dividends paid 11 - - (1,351) (1,351)
--------- --------- ---------- --------
Total contributions by and distributions
to owners 1,067 10,800 (1,351) 10,516
--------- --------- ---------- --------
Balance at 31 December 2020 8,023 80,042 9,257 97,322
========= ========= ========== ========
Company 2019 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 2018 6,218 57,901 58 13,394 77,571
Adjustments for changes in accounting
policy - - - 6 6
--------- --------- --------- ---------- --------
Balance at 31 December 2018 after
adjustment 6,218 57,901 58 13,400 77,577
Loss and total comprehensive income
for the year - - - (226) (226)
Contributions by and distributions
to owners
Issue of shares 26 738 11,341 (58) - 12,021
Dividends paid 11 - - - (795) (795)
--------- --------- --------- ---------- --------
Total contributions by and distributions
to owners 738 11,341 (58) (795) 11,226
--------- --------- --------- ---------- --------
Balance at 31 December 2019 6,956 69,242 - 12,379 88,577
========= ========= ========= ========== ========
STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER
Group Company
Notes 2020 2019 2020 2019
Assets GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments 12 9,086 9,621 5,342 7,550
Tangible fixed assets 13 1,090 813 564 610
Investment in subsidiaries 16 - - 79,872 79,872
Investment in associates 17 9,142 9,186 65 65
Intangible assets 14 59,970 58,545 749 386
79,288 78,165 86,592 88,483
-------- -------- -------- --------
Current assets
Trade receivables 18 3,184 5,334 - -
Accrued income and prepaid
expenses 19 13,783 7,200 760 159
Other current assets 20 551 1,420 6,885 3,988
Deferred tax 23 1,051 613 153 276
Cash and cash equivalents 21,886 19,432 7,826 1,940
Non-current assets held for
sale
Assets of a disposal group
held for sale 15 7,363 12,188 - -
-------- -------- -------- --------
Total current assets and
non-current assets held for
sale 47,818 46,187 15,624 6,363
-------- -------- -------- --------
Total assets 127,106 124,352 102,216 94,846
-------- -------- -------- --------
Current liabilities
Trade and other payables 21 18,780 15,210 243 283
Short-term borrowings 22 - - 4,651 5,986
Liabilities of a disposal
group classified as held
for sale
Liabilities of a disposal
group classified as held
for sale 15 2,072 9,718 - -
-------- -------- -------- --------
20,852 24,928 4,894 6,269
-------- -------- -------- --------
Total assets less current
liabilities 106,254 99,424 97,322 88,577
Non-current liabilities
Deferred taxation 23 3,227 2,632 - -
Long term borrowings 24 - - - -
Other creditors 25 5,749 5,973 - -
-------- -------- -------- --------
8,976 8,605 - -
-------- -------- -------- --------
Net assets 97,278 90,819 97,322 88,577
======== ======== ======== ========
Capital and reserves
Ordinary share capital 26 8,023 6,956 8,023 6,956
Share premium 29 80,042 69,242 80,042 69,242
Retained reserves 29 8,402 14,039 9,257 12,379
-------- -------- -------- --------
Equity attributable to equity
shareholders 96,467 90,237 97,322 88,577
Non-controlling interest 29 811 582 - -
-------- -------- -------- --------
Total equity 97,278 90,819 97,322 88,577
======== ======== ======== ========
Basic net asset value per
ordinary share (pence) 30 300.6 324.3 303.6 318.3
======== ======== ======== ========
Diluted net asset value per
ordinary share (pence) 30 287.4 288.2 290.3 282.9
======== ======== ======== ========
The loss after tax for the Company for the year ended 31 December
2020 was GBP1,771,000. The financial statements were approved and
authorised for issue by the Board and were signed on its behalf
on 10 March 2021.
Kevin Acton
Chief Financial Officer
GROUP STATEMENT OF CASH FLOWS FOR THE YEARED 31 DECEMBER
2020 2019
Notes GBP'000 GBP'000
Cash flow from operating activities
Net cash generated from operations 31 17,592 9,646
Corporation tax paid (1,856) (178)
Interest paid on loans (25) (265)
--------- ---------
Net cash flow from operating activities 15,711 9,203
--------- ---------
Cash flow from investing activities
Acquisition of TradeRisks Limited (8,045) -
Deferred consideration paid (9,842) -
Investment in associates - (65)
Dividends received from associates 186 118
Purchase of investments (1,007) (2,149)
Sale of investments 3,032 319
Deferred proceeds received on sale of
investment properties - 1,033
Investment in DevCo Projects (1,271) (1,510)
DevCo loans repaid 1,096 -
Proceeds received on sale of DevCo projects 4,581 -
Purchase of fixed assets (152) (269)
Sale of fixed assets - 40
Purchase of intangible assets (584) (302)
--------- ---------
(12,006) (2,785)
--------- ---------
Cash flow from financing activities
Repayment of loans - (10,000)
Receipt of loans (net of fees paid) - -
Share issue proceeds 8,010 6,495
Share issue costs (347) (8)
Share warrants exercised 182 4,859
Share-based payments settled (7,125) (833)
Dividends paid (1,351) (795)
Capital element of lease payments (620) (662)
--------- ---------
(1,251) (944)
--------- ---------
Increase in cash and cash equivalents 2,454 5,474
Cash and cash equivalents at start of
year 19,432 13,958
Cash and cash equivalents at end of year 21,886 19,432
========= =========
COMPANY STATEMENT OF CASH FLOWS FOR THE YEARED 31 DECEMBER
2020 2019
Notes GBP'000 GBP'000
Cash flow from operating activities
Net cash generated from operations 31 (1,180) 118
Interest paid on loans (8) (255)
-------- ---------
Net cash flow from operating activities (1,188) (137)
-------- ---------
Cash flow from investing activities
Purchase of investments (930) (2,149)
Sale of investments 3,032 319
DevCo loans repaid 1,096 -
Investment in associates - (65)
Purchase of fixed assets (152) (267)
Sale of fixed assets - 15
Purchase of intangible assets (593) (302)
-------- ---------
2,453 (2,449)
-------- ---------
Cash flow from financing activities
Repayment of loans - (10,000)
Net advances to Group undertakings (1,387) (1,588)
Share issue proceeds 8,010 6,495
Share issue costs (347) (8)
Share warrants exercised 182 4,859
Dividends paid (1,351) (795)
Capital element of lease payments (486) (585)
-------- ---------
4,621 (1,622)
-------- ---------
Increase/(decrease) in cash and cash equivalents 5,886 (4,208)
Cash and cash equivalents at start of
year 1,940 6,148
Cash and cash equivalents at end of year 7,826 1,940
======== =========
PRINCIPAL ACCOUNTING POLICIES
The Group's principal accounting policies are as follows:
(a) Basis of preparation and going concern
Gresham House plc is a public limited company limited by shares
incorporated in the United Kingdom under the Companies Act and
registered in England with company number 871. The address of the
registered office is 5 New Street Square, London, EC4A 3TW.
The financial statements of the Group and the Company have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. The
financial statements are presented in sterling, which is also the
Group's functional currency. The financial statements have been
prepared on a historical cost basis, except for the following:
-- Certain financial assets and liabilities and certain classes
of property plant and equipment are measured at fair value; and
-- Assets held for sale are measured at fair value less costs to sell.
There were no new accounting standards, which were effective for
periods beginning 1 January 2020 adopted during the year that would
have had a material impact on the Group's results.
The Group has sufficient financial resources and ongoing
investment management contracts. As a consequence, the Directors
believe that the Group is well placed to manage its business risks
successfully. The Directors have a reasonable expectation, after
performing downside scenario stress tests, that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Whilst Brexit and COVID-19 has impacted the
environment in which the Group operates it has not had a material
impact on the Group's resources. Thus, the Directors continue to
adopt the going concern basis of accounting in preparing the
financial statements.
(b) Basis of consolidation
Subsidiaries
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee;
exposure to variable returns from the investee; and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control. The
consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings made up
to the year end as if they formed a single entity. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation. The acquisition method of accounting is used to
account for business combinations by the Group. Refer to Note r)
iv) for further details on whether the Group controls funds that it
also manages.
Associates
Where the Group has significant influence, it has the power over
(but not control of) the financial and operating policy decisions
of another entity, it is classified as an associate. This is
typically where the Group holds over 20% of the voting shares in
the entity. Associates are initially recognised in the Group
Statement of Financial Position at cost. Subsequently, associates
are accounted for using the equity method, where the Group's share
of post-acquisition profits and losses and other comprehensive
income is recognised in the Group Statement of Comprehensive
Income. Dividends received or receivable from associates are
recognised as a reduction in the carrying amount of the
investment.
Profits and losses arising on transactions between the Group and
its associates are recognised only to the extent of unrelated
investors' interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is
eliminated against the carrying value of the associate.
Where there is an indication of impairment that the investment
in an associate has been impaired, the carrying amount of the
investment will be tested for impairment in the same way as other
non-financial assets.
(c) Presentation of Statement of Comprehensive Income
As permitted by section 408 of the Companies Act 2006, the
Company has not presented its own Statement of Comprehensive
Income. Details of the Company's results for the year are set out
in Note 29, the loss for the year being GBP1,771,000 (2019:
GBP226,000).
(d) Segment reporting
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the Board in order to allocate resources to the segments and to
assess their performance.
The Group's reportable segments, which are those reported to the
Board are Real Assets, Strategic Equity and Central. The Real
Assets division includes Forestry, New Energy and Sustainable
Infrastructure and Housing, and the Strategic Equity division
includes Public and Private Equity.
(e) Revenue recognition
The fixed consideration element of asset management contracts is
measured at the fair value of the consideration received or
receivable, is stated net of value added tax and is earned within
the United Kingdom. The fixed consideration element of asset
management contracts is recognised evenly over the contracted
period, as the contracts require the Group to perform an
indeterminate number of individual asset management services over
the duration of the contract. Typically, the asset management fees
are based on a fixed percentage of the net asset values of the
funds managed or committed capital. Asset management income also
includes catch-up management fees on final close of limited
partnership funds, directors and advisory fees and fundraising
fees. Performance fees are recognised as revenue only to the extent
that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. The
potential volatility of performance fee revenue means that it is
generally only recognised when the measures on which it is based
have finally been determined. Cash payments in relation to fixed
and variable revenues earned are generally received shortly after
the relevant quarter end.
Other revenue recognition
(i) Dividend and interest income
Income from listed securities is recognised when the right to
receive the dividend has been established. Interest receivable is
recognised when it is probable that the economic benefits will flow
to the Group and the amount of revenue can be reliably measured.
Interest income is accrued on a time basis by reference to the
principal outstanding.
(ii) Other income
Other income earned by the Group is recognised to the extent
that it is probable that the economic benefits will flow to the
Group and that revenue can be reliably measured in line with any
contractual arrangements in place.
(f) Expenses
All expenses and interest payable are accounted for on an
accruals basis.
(g) Tangible fixed assets
Each class of tangible fixed assets is carried at cost less,
where applicable, any accumulated depreciation.
The carrying amount of tangible fixed assets is reviewed
annually by the Directors to ensure it is not in excess of the
recoverable amount from those assets. The recoverable amount is
assessed on the basis of the expected net cash flows which will be
received from the assets' employment and subsequent disposal.
The depreciable amount of all tangible fixed assets is
depreciated on a straight-line basis over their estimated useful
lives to the Group commencing from the time the asset is held ready
for use, and are depreciated at the following rates:
Office equipment 25%
Motor vehicles 25%
Leasehold property 10%
Right of use assets over the lease term
(h) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit before tax as reported in
the Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are not taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the Statement of
Financial Position date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
Statement of Financial Position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the assets to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset
realised. Deferred tax is charged or credited in the Statement of
Comprehensive Income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
(i) Leases
A lease is defined as a contract that conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. At the commencement date of a lease a
right of use asset and a lease liability are recognised in the
financial statements.
The lease liability is initially measured at the present value
of expected future lease payments discounted at the interest rate
implicit in the lease or, if that rate cannot be determined, the
lessee's incremental borrowing rate. Subsequently the lease
liability decreases by the lease payments made, offset by interest
on the liability, and may be remeasured to reflect any reassessment
of expected payments or to reflect any lease modifications.
The right of use asset is initially measured at the amount of
the initial lease liability plus: any lease payments made on or
before the commencement date less incentives received; any
incremental costs of obtaining the lease; and, if any, the costs of
decommissioning the asset and any restoration work to return the
asset to the condition required under the terms of the lease.
Subsequently the right of use asset is valued using the cost
model. The asset is amortised on a straight-line basis over the
expected term of the lease, adjusted for any remeasurement of the
lease liability, and is shown net of the accumulated depreciation
and any impairment provisions.
Leases for low value assets and short-term leases are expensed
to operating profit on a straight-line basis over the term of the
lease.
(j) Investments
In line with IFRS 9: Financial Instruments, financial assets
designated as at fair value through profit and loss (FVTPL) at
inception are those that are managed and whose performance is
evaluated on a fair value basis. Information about these financial
assets is provided internally on a fair value basis to the Group's
key management. The equity investments which do not meet the
definitions of an associate or subsidiary remain held at fair value
through profit and loss.
(i) Assets held for sale
Non-current assets held for sale are measured at the lower of
carrying amount and fair value less costs to sell (except where the
exemptions of paragraph 5 of IFRS 5 apply) and are classified as
such if their carrying amount will be recovered through a sale
transaction rather than through continuing use. Investment property
that is held for sale is measured at fair value in accordance with
paragraph 5 of IFRS 5.
This is the case when the asset is available for immediate sale
in its present condition subject only to terms that are usual and
customary for sales of such assets and the sale is considered to be
highly probable. A sale is considered to be highly probable if the
appropriate level of management is committed to a plan to sell the
asset and a further active programme to locate a buyer and complete
the plan has been initiated. Further, the asset has to be marketed
for sale at a price that is reasonable in relation to its current
fair value. In addition, the sale is expected to qualify for
recognition as a completed sale within one year from the date that
it is classified as held for sale.
An impairment loss is recognised for any initial or subsequent
write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in
fair value less costs to sell of an asset (or disposal group), but
not in excess of any cumulative impairment loss previously
recognised. A gain or loss not previously recognised by the date of
the sale of the non-current asset (or disposal group) is recognised
at the date of derecognition.
Non-current assets (including those that are part of a disposal
group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the
liabilities of a disposal group classified as held for sale
continue to be recognised.
(ii) Securities
Purchases and sales of listed investments are recognised on the
trade date, the date on which the Group commit to purchase or sell
the investment. All investments are designated upon initial
recognition as held at fair value and are measured at subsequent
reporting dates at fair value, which is either the market bid price
or the last traded price, depending on the convention of the
exchange on which the investment is quoted. Fair values for
unquoted investments, or for investments for which there is only an
inactive market, are established by taking into account the
International Private Equity and Venture Capital Valuation
Guidelines.
(iii) Loans and receivables
Unquoted loan stock, loan receivables in development projects
and the deferred receivable are all classified at amortised cost
under IFRS 9 reflecting their held to collect business model.
Unquoted loan stock is classified as loans and receivables in
accordance with IFRS 9 if it meets the business model and cash
characteristics tests. The business model and cash characteristics
tests require the objective of owning the financial asset to
collect the contractual cash flows of interest and principal over
the life of the asset, rather than selling prior to contractual
maturity. The financial assets are held at amortised cost, less any
loss allowance, which is measured using the expected credit loss
impairment model. This assesses the movements in both the amortised
cost relating to the interest income and in respect of loss
allowances and these are reflected in the Statement of
Comprehensive Income.
(k) Exceptional items
The Group presents exceptional items as a non-GAAP measure on
the face of the Consolidated Statement of Comprehensive Income
those material items of income and expense which, because of the
nature and expected infrequency of the events giving rise to them,
merit separate presentation to allow shareholders to understand
better the elements of financial performance in the year so as to
facilitate comparison with prior years and to assess better trends
in financial performance.
(l) Intangible assets
(i) Goodwill
Goodwill, representing the excess of the cost of acquisition
over the fair value of the Group's share of the identifiable assets
and liabilities acquired, is capitalised in the Statement of
Financial Position. Following initial recognition, goodwill is
stated at cost less any accumulated impairment losses.
Goodwill will be reviewed for impairment annually or more
frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
(ii) Management contracts and client relationships
Intangible assets, such as management contracts and client
relationships acquired as part of a business combination or
separately, are capitalised where it is probable that future
economic benefits attributable to the assets will flow to the Group
and the fair value of the assets can be measured reliably.
They are recorded initially at fair value and then amortised, if
appropriate, over their useful lives. The fair value at the date of
acquisition is calculated using discounted cash flow methodology
and represents the valuation of the net residual income stream
arising from the management contracts or distribution agreements in
place at the date of acquisition. The management contracts and
client relationships are included in the Statement of Financial
Position as intangible assets. Intangible assets with a finite life
have no residual value and are amortised on a straight-line basis
over their expected useful lives as follows:
-- Client relationships arising on acquisition - five years
-- Management contracts arising on acquisition - one to 25 years
depending on the specific management contract details
(iii) Website and IT platform development
Costs associated with the development of the Group's website and
IT platform are capitalised in the Statement of Financial Position
and are amortised over the estimated useful life of four years.
Amortisation methods, useful lives and residual values will be
reviewed at each reporting date and adjusted if appropriate.
At each period end date, reviews are carried out of the carrying
amounts of intangible assets to determine whether there is any
indication that the assets have suffered an impairment loss. If any
such indication exists, the recoverable amount, which is the higher
of value in use and fair value less costs to sell, of the asset is
estimated in order to determine the extent, if any, of the
impairment loss.
If the recoverable amount of an asset or cash-generating unit
(CGU) is estimated to be less than its net carrying amount, the net
carrying amount of the asset or CGU is reduced to its recoverable
amount. Impairment losses are recognised immediately in the
Statement of Comprehensive Income. The Group assesses at the end of
each reporting period whether there is any indication that an
impairment loss recognised in prior periods may no longer exist or
may have decreased. If any such indication exists, the Group
estimates the recoverable amount of that asset. In assessing
whether there is any indication that an impairment loss recognised
in prior periods for an asset may no longer exist or may have
decreased, the Group considers, as a minimum, the following
indications:
(a) Whether the asset's market value has increased significantly during the period;
(b) Whether any significant changes with a favourable effect on
the entity have taken place during the period, or will take place
in the near future, in the technological, market, economic or legal
environment in which the entity operates or in the market to which
the asset is dedicated; and
(c) Whether market interest rates or other market rates of
return on investments have decreased during the period, and those
decreases are likely to affect the discount rate used in
calculating the asset's value in use and increase the asset's
recoverable amount materially.
(m) Financial instruments
Financial assets and financial liabilities are recognised on the
Consolidated Statement of Financial Position when the Group becomes
a party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, and the net amount
reported in the Consolidated Statement of Financial Position when
there is a legally enforceable right to settle on a net basis or
realise the asset and liability simultaneously and where the Group
intends to net settle.
(i) Trade and other receivables
Receivables are short-term in nature. Trade and other
receivables are recognised and carried at the lower of their
invoiced value and recoverable amount. Expected credit losses are
recognised in respect of each trade receivable and remeasured at
each report date based on the expected credit losses at that time.
The expected credit losses are estimated using a provision matrix
by reference to past default experience and an analysis of the
debtor's current financial position, adjusted for factors that are
specific to the debtor, general economic conditions of the industry
and an assessment of both the current as well as the forecast
direction of conditions at the reporting date.
(ii) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
(iii) Non-current receivables
Deferred receivables are recognised at the discounted value of
those receipts.
(iv) Dividends payable
All dividends are recognised in the period in which they are
approved by shareholders.
(v) Bank borrowings
Bank borrowings are initially recognised at fair value, net of
transaction costs incurred. Bank borrowings are subsequently
measured at amortised cost. Any difference between the proceeds
(net of transaction costs) and the redemption amount is recognised
in profit or loss over the period of the borrowings using the
effective interest rate method. Fees paid on the establishment of
loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility
will be drawn down. In this case, the fee is deferred until the
draw-down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the
fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
(vi) Trade and other payables
Trade payables are not interest-bearing and are stated at their
nominal value. Other payables are not interest-bearing and are
stated at their nominal value as any discounting of expected cash
flows is considered to be immaterial.
(vii) Borrowing costs
Unless capitalised under IAS 23 Borrowing Costs, all borrowing
costs are recognised in the Consolidated Statement of Comprehensive
Income in the period in which they are incurred. Finance charges,
including premiums paid on settlement or redemption and direct
issue costs and discounts related to borrowings, are accounted for
on an accruals basis and charged to the Consolidated Statement of
Comprehensive Income using the effective interest method.
(viii) Contingent consideration
Contingent consideration arises when settlement of all or any
part of the cost of a business combination or other acquisition,
for example management contract, is deferred. It is stated at fair
value at the date of acquisition, which is determined by
discounting the amount due to present value at that date.
Estimates are required in respect of the amount of contingent
consideration payable on acquisitions, which is determined
according to formulae agreed at the time of the business
combination, and normally related to the future earnings of the
acquired business. The Directors review the amount of contingent
consideration likely to become payable at each period end date, the
major assumption being the level of future profits of the acquired
business. Contingent consideration payable is discounted to its
fair value in accordance with applicable International Financial
Reporting Standards.
(n) Pensions
Payments to personal pension schemes for employees are charged
against profits in the year in which they are incurred.
(o) Share-based payments
The Group issued equity-settled share-based payments to certain
Directors and employees. Equity-settled share-based payments are
measured at fair value (excluding the effect of non-market based
vesting conditions) at the date of grant. The fair value determined
at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of the shares that will eventually vest and
adjusted for the effect of non-market based vesting conditions.
Fair value is measured using either a Black-Scholes or
Monte-Carlo option pricing model. The expected life used in the
model has been adjusted, based on management's best estimate, for
the effect of non-transferability, exercise restrictions and
behavioural considerations.
A liability equal to the portion of the goods or services
received is recognised at the current fair value determined at each
period end date for cash-settled share-based payments.
(p) Non-controlling interests
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein in accordance with IFRS 10. Non-controlling interests
consist of the amount of those interests at the date of the
original business combination and for acquisitions post 3 October
2010 following adoption of IAS 27, Consolidated and Separate
Financial Statements (Revised 2008), the non-controlling interests'
share of changes in equity since the date of the combination.
Prior to the adoption of IAS 27 (Revised 2008) losses
attributable to non-controlling interests in excess of the
non-controlling interests' share in equity were allocated against
the interests of the Group except to the extent that the
non-controlling interests have a binding obligation and are able to
make an additional investment to cover such losses. When the
subsidiary subsequently reports profits, the non-controlling
interests do not participate until the Group has recovered all of
the losses of the non-controlling interests it previously
reported.
(q) Business combinations
The Group recognises business combinations when it considers
that it has obtained control over a business, which could be an
entity or separate business within an entity (for example acquiring
management contracts and hiring the team to service those
contracts). The fair value of the assets acquired, and the
liabilities assumed from the business combination are assessed at
acquisition. The fair value of the consideration paid to the
sellers of the business is assessed, with particular reference to
the classification of payments to employees that could be
considered remuneration rather than consideration for a
business.
(r) Critical accounting estimates and judgements
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates. The estimates and
assumptions that have significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are those used to determine:
(i) Revenue recognition, performance fees, management fees and fund-raising fees
(ii) Treatment of battery storage development companies
(iii) Accounting for investment in associates - Gresham House
Strategic plc (GHS) and Noriker Power Limited (Noriker)
(iv) Consolidation assessment of funds managed and controlled by the Group
(v) Impairment review for Goodwill and Management Contracts from previous acquisitions
(vi) Valuation of contingent consideration
(vii) Valuation of Management Contract and Customer
Relationships as part of the TradeRisks acquisition
(i) Revenue recognition, performance, management and fundraising fees
The revenue recognition of the Group is driven by asset
management fees, which are recognised in line with the investment
management or advisory agreements in place with the appropriate
funds. These are typically based on the committed capital of
Limited Partnership funds, or Net Asset Values (NAV) for listed
vehicles managed or advised by the Group. The NAV is typically the
last audited or publicly available NAV announced by the Board of
these companies and is therefore independently approved.
Limited partnerships and other fund management fees are
typically based on committed capital, or an independent valuation
where appropriate. Where there is an interim close on a Limited
Partnership, the equalisation process for new Limited Partners
involves catch-up management fees or priority profit shares back to
inception of the fund. In this instance, the period the service
relates to is assessed and for past service provision the catch-up
management fee is recognised when the new Limited Partner joins the
fund.
Performance fees are recognised only when the Group is entitled
to receive the performance fee per the management contract. This is
on achievement of the hurdle rate and the outcome is known. No
performance fee was recognised from GHS plc in the year.
Fundraising fees are recognised as a percentage of funds raised,
with fundraising being the key performance obligation. The
fundraising relates to new share offers in 2020 by the VCTs managed
by the Group.
(ii) Treatment of battery storage development companies
The Group has invested in the development of battery storage
projects (DevCo Projects), which are part of the exclusive pipeline
to be sold to Gresham House Energy Storage Fund plc (GRID) when
operational. The DevCo Projects are held in separate SPVs, which
the Group entity Devco Limited owns between 60-70% of the equity in
the Group has also lent funds for the development of the
projects.
There are five key considerations in the accounting treatment of
the development companies:
a) Control (IFRS 10) - Devco Limited holds the majority of the
equity in the DevCo Projects and has also loaned capital to fund
the development of the DevCo Projects. Devco Limited is considered
in control of the DevCo Projects and therefore has consolidated
them in the Group financial statements.
b) Associates (IAS 28) - One of the DevCo Projects (Biggerbrook)
is accounted for as an associate as Devco Limited holds only 24% of
the equity and is not in a controlling position.
c) Classification of the assets in each DevCo Project - The SPVs
are developing battery storage facilities which are classified as
non-current assets under development until these assets become
operational. The Group has therefore classified these as
non-current assets, akin to tangible fixed assets.
d) Assets held for sale (IFRS 5) and loss of control - the sale
of the DevCo Projects (Wickham and Thurcroft) during the period has
been treated as a loss of control transaction under IFRS 10
resulting in a gain on sale being presented net in the Statement on
Comprehensive Income. At year end, a sale of an additional DevCo
Project has been agreed with GRID and is documented, including
price and conditions to complete the sale. It is expected that the
sale process will complete within a three to six-month time frame,
as such it has been deemed appropriate to treat this DevCo Project
as a disposal group held for sale under IFRS 5.
e) Borrowing costs (IAS 23) - the DevCo Projects have interest
payments relating to the amounts lent by GRID to fund the
acquisition of the battery assets at the project company level. The
DevCo Projects have capitalised finance costs per IAS 23 Borrowing
Costs as the characteristics of the development of the projects
(such as not generating revenues until operational, loans being
procured for the sole purpose of developing the projects and the
projects taking a long time to get ready for intended sale) permit
this. The capitalisation rate used was the weighted average of the
borrowing costs applicable to all relevant borrowings outstanding
during 2020.
(iii) Accounting for investment in associates - Gresham House
Strategic plc (GHS) and Noriker Power Limited (Noriker)
GHS is managed by GHAM and the Company also holds 23% of the
ordinary share capital as at 31 December 2020. The Directors
consider that the Company exercises significant influence over GHS,
but not control, through its holding and the investment management
agreement in place with GHAM. GHS therefore continues to be
classified as an associate.
Noriker is 27% owned by the Group and is not an entity managed
by GHAM. There are no specific additional rights that the Group
have as investors in Noriker, however with a 27% holding, the Board
considers this a position of significant influence and has
concluded that Noriker should be treated as an associate.
These are included in the table in the consolidation assessment
below for completeness.
(iv) Consolidation assessment of funds managed and controlled by the Group
When assessing whether the Group controls funds that are managed
on behalf of third parties, the Group is required to assess whether
it has power over these funds; exposure, or rights, to variable
returns from its involvement with the fund; and has the ability to
use its power over the funds to affect the amount of the Group's
returns. This can also be considered when the Group is acting in
its capacity as agent or principal. An agent is acting on behalf of
third-party investors, whereas a principal is acting for its own
benefit.
IFRS 10 provides guidance for considering the assessment of
whether fund managers are acting as agent or principal, and
therefore whether the Group should consolidate the funds that it
manages or not. The key considerations when assessing this are
decision making authority of the fund manager, rights held by third
parties, remuneration and exposure to returns. The following
provides further detail on the Directors' assessment of control
over the funds that are managed by Gresham House Asset Management
Limited (GHAM), the FCA regulated entity within the Group and
whether the Company or its subsidiaries are acting as agent or
principal:
Fund Manager/ Removal rights Remuneration Gresham Agent/ Accounting
Adviser of investors basis House Principal treatment
holding
GHS Yes Substantive Market norm 23% Agent Associate
--------- --------------- ------------- --------- ----------- -----------------
Noriker No n/a n/a 27% Agent Associate
--------- --------------- ------------- --------- ----------- -----------------
GHF FF Yes No Market norm 71% Principal Consolidate
LP
--------- --------------- ------------- --------- ----------- -----------------
GHFF LP Yes Substantive Market norm 0% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
GRID Yes Substantive Market norm 0.7% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
Residential Yes Substantive Market norm 0.5% Agent No consolidation
Secured
Income
plc
--------- --------------- ------------- --------- ----------- -----------------
BSIF Yes Substantive Market norm <1% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
SPE LP Yes Substantive Market norm 0% Agent No consolidation
--------- --------------- ------------- --------- ----------- -----------------
Baronsmead Yes Substantive Market norm 0% Agent No consolidation
VCTs
--------- --------------- ------------- --------- ----------- -----------------
Strategic Yes Substantive Market norm <1% Agent No consolidation
Equity
Capital
plc
--------- --------------- ------------- --------- ----------- -----------------
Micro Cap Yes Substantive Market norm 0% Agent No consolidation
Fund
--------- --------------- ------------- --------- ----------- -----------------
Multi Cap Yes Substantive Market norm 0% Agent No consolidation
Income
Fund
--------- --------------- ------------- --------- ----------- -----------------
Gresham Yes Substantive Market norm 0% Agent No consolidation
House Renewable
Energy
VCTs
--------- --------------- ------------- --------- ----------- -----------------
Forestry Yes Substantive Market norm 0% Agent No consolidation
LP Funds
--------- --------------- ------------- --------- ----------- -----------------
New Energy Yes Substantive Market norm 0% Agent No consolidation
LP Funds
--------- --------------- ------------- --------- ----------- -----------------
Gresham House Forestry Fund LP (GHFF LP) is managed by GHAM.
GHAM is exposed to variable returns through its management fee and
acquisition fees, as well as the Company's limited partnership
interest in Gresham House Forestry Friends and Family LP (GHF FF
LP), a vehicle which in turn is a limited partner in GHFF LP.
The limited partners of GHFF LP have the ability to remove the
manager without cause, by obtaining limited partner special
consent. There are a number of limited partners that would be
required to co-ordinate to remove the manager. The Directors'
assessment of this right indicates that the manager is acting as
agent for GHFF LP and therefore should not consolidate GHFF LP.
The Directors' assessment of GHF FF LP, however, indicates that
it is in a controlling position with a 71% holding and therefore
should consolidate this in the Group financial statements.
Gresham House Energy Storage Fund plc (GRID) is managed by GHAM
and the Company has a direct and indirect investment in GRID
totalling 0.7%. The assessment of whether GHAM is acting as agent
or principal requires assessing the other entities and individuals
that are connected to Gresham House and their investment in GRID.
BSIF has a 6% investment in GRID, however the assessment of whether
BSIF is controlled by GHAM concluded that GHAM does not control
BSIF and therefore should not be included in the proportion of GRID
that is under the control of GHAM.
The acquisition of TradeRisks Limited (TradeRisks) in March 2020
included the acquisition of shares in Residential Secured Income
plc (ReSI plc), which is now managed by the Group. At the end of
2020 the Group held 0.5% in ReSI plc. The Directors' assessment
indicates that GHAM is acting as agent for ReSI plc and therefore
should not consolidate ReSI plc.
Gresham House Strategic Public Equity LP (SPE LP) is managed by
GHAM, a subsidiary of Gresham House plc. GHAM in its role as
investment adviser is exposed to variable returns through its
management fee, however the Company is not directly invested in SPE
LP. The limited partners of SPE LP have the ability to remove the
manager without cause, one year after the final close of SPE LP on
obtaining limited partner special consent. The Directors'
assessment indicates that GHAM is acting as agent for SPE LP and
therefore should not consolidate SPE LP.
Gresham House British Strategic Investment Fund (BSIF) Strategy,
which comprises the two sub-funds, Gresham House BSI Infrastructure
LP and Gresham House BSI Housing LP, is managed by GHAM. The
manager is exposed to variable returns through its management fee
and has committed GBP0.5 million to each sub-fund, making up less
than 1.0% of committed capital. While exposed to the variable
returns as an investor, this is not considered a material exposure.
The limited partners of the BSIF Strategy also have the ability to
remove the manager without cause, one year after the final close of
the BSIF sub-funds with a special resolution. The Directors'
assessment of this right and the fact that the Company is not
invested in the BSIF Strategy indicates that the manager is acting
as agent for the BSIF Strategy and therefore should not consolidate
the BSIF Strategy.
The remaining funds of the Baronsmead VCTs, Gresham House
Renewable Energy VCTs, the LF Gresham House UK Micro Cap Fund
(Micro Cap Fund), the LF Gresham House UK Multi Cap Income Fund
(Multi Cap Income Fund) and the recently won mandate for Strategic
Equity Capital plc (SEC) are managed by GHAM, however are not
invested in by the Group (or have less than 1% holding). The Board
has therefore concluded that the Group is acting as agent and
therefore should not consolidate these funds.
(v) Impairment review for Goodwill and Management Contracts from
previous acquisitions
Per IAS 36 Impairment of Assets, the potential impairment of
Goodwill and Management Contracts generated by prior acquisitions
is reviewed. The WACC rates used for discounting were derived using
a CAPM model, accounting for the different risk profile of acquired
contracts. No terminal value was assigned for the review.
(a) Goodwill Impairment Testing
The potential value of the acquired cash generating units based
on discounted cash flow of potential future performance of the
acquired contracts was assessed. It has been assumed that the cash
generating unit will continue to grow in line with reasonable
assumptions based on historic assumptions and the business model.
The revenues and costs were modelled using a discounted cash flow
model, with the estimated value compared to the goodwill on the
Statement of Financial Position and other intangible assets and
acquired assets. Where the value estimated less other intangible
and tangible assets is greater than the goodwill amount on the
Statement of Financial Position , no impairment is recognised.
There were no indications of impairment against all goodwill
balances of the Group as at 31 December 2020.
(b) Management Contracts Impairment Review
The management contacts were revalued using a discounted cash
flow method to assess the remaining value of the contract to the
end of its expected life. This is assumed with no growth from fund
raising and costs assumed appropriate in a no growth business. The
valuation was compared to the carrying value of the management
contracts as at 31 December 2020 and there were no indications of
impairment.
(vi) Valuation of contingent consideration
The fair value of contingent consideration payable to the
sellers of Livingbridge VC and TradeRisks businesses has been
estimated with reference to the contractual requirements as at 31
December 2020.
The remaining Livingbridge VC contingent consideration is driven
by the hurdle to deliver revenues of between GBP30.9 million and
GBP37.2 million in the three years to 31 December 2021. The fair
value has been based on a weighted probability of outcomes over the
three-year period and discounted by 15%.
The TradeRisks contingent consideration can total a maximum of
GBP6.0 million, payable in cash to the sellers based on the
following:
-- 0.5% of funds raised payable in three years, with maximum
amount capped at GBP3.0 million. Any realised synergies payable in
three years, capped at GBP1.0 million.
-- GBP2.0 million payable within six months post-completion for any inventory true-up.
The fair value of the contingent consideration has been
estimated using estimated outcomes, the probability of those
outcomes and discounting this at 7.5%. This is cash settled and
will therefore be recognised as a liability on the balance sheet
and the fair value assessed each reporting period.
(vii) Valuation of Management Contract and Customer
Relationships as part of the TradeRisks acquisition
The acquisition of TradeRisks Limited (TradeRisks) in March 2020
is classified as a business combination under IFRS 3: Business
Combinations. The management contract of ReSI plc, the listed
housing fund, is therefore required to be fair valued. This has
been valued using a discounted cash flow model, with assumptions
regarding length of contract, appropriate costs and appropriate
discount rate applied. Contributory asset charges have also been
applied to determine the fair value of the management contract.
TradeRisks also had a number of customer relationships that have
been fair valued using the annual retainers in place. A discounted
cash flow model has also been used to value these customer
relationships factoring in attrition rates, contributory asset
charges and a consistent discount rate with the management contract
valuation.
(s) Foreign currency
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange ruling at the Statement of
Financial Position date. Transactions in foreign currencies are
translated into sterling at the rate of exchange ruling at the date
of transaction. Exchange differences are taken into account in
arriving at the operating result.
NOTES TO THE ACCOUNTS
1 INCOME
2020 2019
GBP'000 GBP'000
Asset management income
Asset management income 40,304 31,427
-------- --------
40,304 31,427
-------- --------
Dividend and interest income
Dividend income - Listed UK 316 166
Interest receivable: Banks 69 52
Other 169 60
-------- --------
554 278
-------- --------
Other operating income
Other income 51 79
DevCo income* 1,027 -
-------- --------
1,078 79
-------- --------
Performance fees
Performance fees - 1,944
-------- --------
- 1,944
-------- --------
Total income 41,936 33,728
======== ========
Total income comprises
Asset management income 40,304 31,427
Dividends 316 166
Interest 238 112
Other operating income 1,078 79
Performance fees - 1,944
-------- --------
41,936 33,728
======== ========
*DevCo income represents the net operating income in the year
from battery storage projects prior to projects being sold to
GRID.
2 SEGMENTAL REPORTING
The Board and management team of the Company have organised and
reported the performance of the business by Real Assets, Strategic
Equity and Central segments. These have evolved as the business has
grown to become a specialist asset manager.
Real Assets includes the Forestry, New Energy and Sustainable
Infrastructure and Housing divisions.
Strategic Equity includes the Public Equity and Private Equity
divisions.
Central includes the general income created and costs incurred
by the central functions of the business that are not directly
linked to Real Assets or Strategic Equity.
All activity and revenue are derived from operations within the
United Kingdom.
2 SEGMENTAL REPORTING - continued
For the year ended 31 December Real Strategic
2020 Assets Equity Central Consolidated
Gross core income GBP'000 GBP'000 GBP'000 GBP'000
Asset management income 26,198 14,106 - 40,304
Interest income 157 19 62 238
Dividend income 314 2 - 316
Other operating income 1,077 - 1 1,078
Dividend income from associates* - 202 - 202
Rebates, distribution costs
and fundraising costs (190) (1,174) - (1,364)
--------- ---------- -------- -------------
Net core income 27,556 13,155 63 40,774
Segment expenses (12,924) (6,433) (9,333) (28,690)
Finance costs - - (25) (25)
--------- ---------- -------- -------------
Adjusted operating profit/(loss) 14,632 6,722 (9,295) 12,059
--------- ---------- -------- -------------
Net performance fees - - - -
Net realised gains on investments 1,008 - - 1,008
--------- ---------- -------- -------------
Adjusted operating profit
including performance fees
and realised gains on investments 15,640 6,722 (9,295) 13,067
========= ========== ========
Exceptional items (1,775)
Depreciation and amortisation (8,904)
Loss on disposal of tangible
fixed assets (27)
Share of associate's profit/(loss)* (44)
Share-based payments relating
to acquisitions (593)
Profits on investments at
fair value 1,117
Movement in fair value of
contingent consideration (1,163)
Movement in fair value of
deferred receivable 224
-------------
Profit before taxation from
continuing operations 1,902
=============
*Share of associate's profit/(loss) of GBP44,000 excludes dividend
income received in the year of GBP202,000.
For the year ended 31 December Real Strategic
2019 Assets Equity Central Consolidated
Gross core income GBP'000 GBP'000 GBP'000 GBP'000
Asset management income 18,483 12,944 - 31,427
Interest income 41 24 47 112
Dividend income 140 25 - 166
Other operating income 47 14 18 79
Dividend income from associates* 1,151 172 - 1,323
Rebates, distribution costs
and fundraising costs (421) (962) - (1,383)
-------- ---------- -------- -------------
Net core income 19,441 12,218 65 31,724
Segment expenses (7,698) (5,010) (8,339) (21,047)
Finance costs - - (390) (390)
-------- ---------- -------- -------------
Adjusted operating profit/(loss) 11,743 7,208 (8,664) 10,287
-------- ---------- -------- -------------
Net performance fees - 200 - 200
Net realised gains on investments 1,332 - - 1,332
-------- ---------- -------- -------------
Adjusted operating profit
including performance fees
and realised gains on investments 13,075 7,408 (8,664) 11,819
======== ========== ========
Exceptional items (1,063)
Depreciation and amortisation (8,484)
Loss on disposal of tangible
fixed assets (43)
Share of associate's profit/(loss)* (1,077)
Share-based payments relating
to acquisitions (593)
Profits on investments at
fair value 679
Movement in fair value of
contingent consideration (2,065)
-------------
Loss before taxation from
continuing operations (827)
=============
* Share of associate's profit/(loss) of GBP1,077,000 excludes dividend
income received in the year of GBP1,323,000.
2 SEGMENTAL REPORTING - continued
During the year the Group had one customer accounting for more
than 10% of the Group's revenue, totalling GBP4,631,000 (2019: one
customer, totalling GBP4,610,000).
Other information:
31 December 2020 Real Strategic
Assets Equity Central Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 50,372 36,082 40,652 127,106
Segment liabilities (8,185) (1,585) (20,058) (29,828)
-------- ---------- --------- -------------
42,187 34,497 20,594 97,278
======== ========== ========= =============
Capital expenditure - - 1,215 1,215
Depreciation and amortisation 3,231 4,572 1,128 8,931
Non-cash expenses other than depreciation - - 2,268 2,268
Goodwill included within segment assets 17,551 12,167 - 29,718
31 December 2019 Real Strategic
Assets Equity Central Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 46,334 64,241 13,777 124,352
Segment liabilities (12,371) (7,025) (14,137) (33,533)
--------- ---------- --------- -------------
33,963 57,216 (360) 90,819
========= ========== ========= =============
Capital expenditure - - 610 610
Depreciation and amortisation 2,742 4,865 920 8,527
Non-cash expenses other than depreciation 312 - 1,844 2,156
Goodwill included within segment assets 11,896 12,167 - 24,063
3 OPERATING COSTS
Administrative overheads comprise the following:
2020 2019
GBP'000 GBP'000
Directors' emoluments (excluding benefits in kind
and share-based payments) 1,898 1,809
Auditor's remuneration * 246 176
Amortisation 8,033 7,668
Depreciation 871 816
Loss on disposal of assets 27 43
Wages and salaries 17,402 12,310
Social security costs 3,575 1,986
Share-based payments 2,266 1,844
Other operating costs 7,734 7,478
-------- --------
42,052 34,130
======== ========
Staff costs (including Directors'
emoluments) were:
Wages, salaries and fees 19,237 14,072
Social security costs 3,575 1,986
Pension costs 716 539
-------- --------
23,528 16,597
======== ========
3 OPERATING COSTS - continued
* A more detailed analysis of auditor's remuneration
is as follows: 2020 2019
GBP,000 GBP,000
Audit fees - Company and consolidated financial statements 40 40
Audit fees - audit of the Company's
subsidiaries 206 136
246 176
======== ========
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.
The average number of persons employed by the Group, including
the Executive Directors, was 113 (2019: 87). The Company has no
employees.
4 DIRECTORS' EMOLUMENTS
The emoluments of the Directors are disclosed in the
Remuneration Report in the 2020 Annual Report.
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 GBP270,000 (2019:
GBP198,000).
5 Business combinations
a) TradeRisks Limited
On 5 March 2020 the Group acquired 100% of the issued share
capital of TradeRisks Limited (TradeRisks), a company registered in
England. TradeRisks is a fund management business and specialist
provider of debt structuring and advisory services to the housing
and social infrastructure sectors. TradeRisks' wholly owned and
separately FCA regulated subsidiary, ReSI Capital Management
Limited (RCML), is the manager of Residential Secure Income plc
(ReSI plc) (LSE: RESI), a closed-ended investment company which
seeks to deliver secured income returns to its shareholders by
investing in portfolios of shared ownership, retirement and local
authority housing. The management contracts for ReSI plc were
acquired as part of the acquisition of TradeRisks.
The fair value of the identifiable net assets acquired, and the
consideration paid under IFRS 3 are as follows:
Net
book Fair
value Adjustments value
GBP'000 GBP'000 GBP'000
Investments 463 - 463
Tangible fixed assets 180 346 526
Intangible fixed assets 97 - 97
Cash 1,639 - 1,639
Trade and other receivables 5,999 - 5,999
Trade and other payables (410) (346) (756)
Management contracts - 2,886 2,886
Customer relationships - 263 263
Deferred tax liability (16) (598) (614)
Total identifiable net assets 7,952 2,551 10,503
======== ============ ========
Under the terms of the acquisition agreement, the fair value of
the consideration paid to the vendors of TradeRisks was:
GBP'000
Cash 9,684
Shares - 555,555 shares in Gresham House plc valued
at 625p per share on 4 March 2020 3,472
--------
Total initial consideration 13,156
Contingent consideration 3,002
Total consideration 16,158
==========
The consideration shares were admitted to trading on AIM on 11
March 2020.
5 BUSINESS COMBINATIONS - continued
Contingent consideration
Contingent consideration totalling a maximum of GBP6.0 million
will be payable in cash to the sellers based on the following:
-- 0.5% of funds raised payable in three years, with maximum
amount capped at GBP3.0 million. The expected fair value at
acquisition was GBP1.6 million.
-- Any realised synergies payable in three years, capped at
GBP1.0 million. The expected fair value at acquisition was GBP0.6
million.
-- GBP2.0 million payable within 6 months post-completion for
any inventory true-up. The expected fair value at acquisition was
GBP0.8 million. GBP0.6 million was settled in 2020, with GBP0.8
million payable within the next 12 months.
The fair value of the contingent consideration has been
estimated at the date of acquisition using estimated outcomes, the
probability of those outcomes and discounting this at 7.5%. This is
cash settled and will therefore be recognised as a liability on the
balance sheet and the fair value assessed each reporting period.
The fair value at the time of acquisition was calculated as GBP3.0
million.
Revenue and profits of TradeRisks
TradeRisks was acquired on 5 March 2020. The Group has
recognised the following amounts in respect of TradeRisks for the
43-week period ended 31 December 2020:
GBP'000
Revenue 2,535
Profit before tax 148
The GBP148,000 profit for the period of ownership reflects the
impact of COVID-19 on the debt arrangement business, which has
delayed a number of debt advisory transactions which are now
expected to complete in 2021.
Prior to acquisition by the Group, TradeRisks had a 31 July year
end. The results for the most recent audited reporting period prior
to acquisition were to 31 July 2019:
GBP'000
Revenue 5,897
Profit before tax 2,187
Goodwill
Goodwill arises due to the excess of the fair value of the
consideration payable over the fair value of the net assets
acquired and was calculated as GBP5.7 million at acquisition. It is
mainly attributable to the skills of the team acquired, the
synergies expected to be achieved from the acquisition and the
business development potential. Goodwill arising on the TradeRisks
acquisition is not deductible for tax purposes.
Fair value
The fair value of the management contracts and customer
relationships have been estimated using a discounted cash flow
model. The estimated cash flows have been valued at a discount of
7.5%. This resulted in the fair value of management contracts being
recognised at GBP2,886,000 and the customer relationships at
GBP263,000.
b) Appian Asset Management Limited
On 17 December 2020 the Group announced the acquisition of
Appian Asset Management Limited (Appian) for an initial
consideration of EUR4.55 million, with EUR3.6 million payable on
completion (EUR2.7 million in cash from existing resources of the
Group and EUR0.9 million in new shares issued by the Company) and
including EUR0.95 million for cash within the business (the
Acquisition). Further variable deferred consideration is payable
subject to targeted earnings performance up to 31 December 2023,
bringing potential total consideration to EUR10.0 million. The
transaction is subject to approval from the Central Bank of Ireland
and is expected to complete in the first half of 2021.
Based in the Republic of Ireland, Appian is an active asset
manager with c.EUR330 million in AUM as at 30 September 2020 with
EUR0.4 million normalised EBITDA for the year to 30 November 2020.
The firm manages a range of funds which invest globally across
traditional and alternative asset classes including equities,
property, infrastructure, and forestry.
Appian's funds will complement those offered by Gresham House,
with a planned social housing fund in Ireland complementary to
Gresham House's Residential Secure Income LP fund to be launched in
2021, targeting the shared ownership housing market and aiming to
unlock a supply of more affordable houses.
Acquisition costs in relation to business combinations have been
classified as exceptional items (see Note 6).
6 EXCEPTIONAL ITEMS
2020 2019
GBP'000 GBP'000
Acquisition costs
TradeRisks Limited 868 -
Appian Asset Management Limited 328 -
FIM Services Limited - 2
Livingbridge VC - 10
Joint Venture costs 219 251
Other 30 -
-------- --------
1,445 263
Restructuring costs 330 646
Exceptional legal fees - 154
-------- --------
1,775 1,063
======== ========
Acquisition associated restructuring costs and exceptional legal
fees are considered exceptional and not part of the normal
operating activity of the Group.
7 FINANCE COSTS
2020 2019
GBP'000 GBP'000
Interest payable on bank loans - 188
Finance fees - 169
Interest payable on leases 25 33
25 390
======== ========
See Note 24 for details of borrowings.
8 IFRS 16 LEASES
IFRS 16 Leases replaced IAS 17 Leases and was effective for
annual periods beginning on or after 1 January 2019. The Group has
therefore adopted the standard from 1 January 2019.
The only material impact on the Group relates to leases for use
of office space at various locations. These were earlier classified
as operating leases under IAS 17, with lease rentals charged to
operating expenses on a straight-line basis over the lease term. As
required by IFRS 16, as a lessee, the Group has recognised a lease
liability representing the present value of the obligation to make
lease payments, and a related right-of-use (ROU) asset in line with
the process explained under the statement of compliance.
The rate implicit in the leases are not evident and so the
entities' incremental borrowing rates have been used. The
incremental rate referred to by IFRS 16 indicates the rate of
interest that a lessee would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an
asset of a similar value to the ROU asset in a similar economic
environment. The weighted average incremental borrowing rate used
on the date of initial application of the leases is 3.25%.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the ROU asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit and loss over the life of the
lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period.
2020 2019
GBP'000 GBP'000
ROU asset cost 2,221 1,344
ROU asset accumulated depreciation (1,623) (896)
Retained reserves * (6) (6)
Depreciation expense 666 665
* representing the net impact of recognising the leases under
IFRS 16 as at 1 January 2019 as the Group chose to not restate
prior periods as a matter of practical expedience afforded by the
standard. The impact on retained reserves was immaterial.
8 IFRS 16 LEASES - continued
An analysis of the lease liability relating to ROU assets is as
follows:
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January 445 - 243 -
IFRS 16 restatement 346 1,065 - 838
Additions 470 42 446 -
Cash payments (645) (695) (486) (618)
Interest expense 25 33 8 23
-------- --------
As at 31 December 641 445 211 243
======== ======== ======== ========
Please see Note 32 Financial Instruments for the maturity
profile of leases.
The Group has elected not to apply IFRS 16 to:
(a) Low value leases for various IT equipment leased across the
business. The maximum third-party new item price of any excluded
equipment is less than GBP3,000. The total amount of lease payments
for the year ended 31 December 2020 relating to these leases was
GBP21,000.
It is also noted that:
(a) The impact of lease liability and ROU asset on deferred taxes is expected to be immaterial;
(b) There were no material residual value guarantees or
contractual dilapidation commitments that impacted the initial
recognition value for ROU assets and lease liability;
(c) There were no purchase options for leased assets that was
made available to or requested by the Group; and
(d) Lease values do not include any termination penalties as the
business intends to use the properties to the end of lease
terms.
Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The lease agreements
do not impose any covenants other than the security interests in
the leased assets that are held by the lessor. Leased assets may
not be used as security for borrowing purposes.
9 TAXATION
2020 2019
GBP'000 GBP'000
(a) Analysis of credit in period:
UK Corporation tax at 19% (2019:
19%) 1,778 680
(Over)/underprovision in prior
year (237) 268
Deferred tax (457) (925)
-------- --------
Total tax charge 1,084 23
======== ========
(b) Factors affecting tax credit
for period:
Profit/(loss) on ordinary activities before tax multiplied
by standard rate of corporation tax in the UK of
19% (2019: 19%) 361 (157)
Tax effect of:
Dividend income not taxable (73) -
Amortisation not taxable 617 945
Other gains and losses not taxable (913) 226
Utilisation of previously unrecognised
tax losses (11) (1,259)
Prior year adjustment (237) 268
Deferred tax not recognised (689) -
Fixed asset timing differences 2,029 -
Actual tax charge 1,084 23
======== ========
The Group has unutilised tax losses of approximately GBP10.2
million (2019: GBP10.3 million) available against future
corporation tax liabilities. A potential deferred taxation asset of
GBP1.6 million (2019: GBP1.5 million) in respect of some of these
losses has not been recognised in these financial statements as it
is not considered sufficiently probable that the Group will
generate sufficient taxable profits from the same trade to recover
these amounts in full. The Company recognised a deferred tax asset
of GBP0.2 million (2019: GBP0.3 million) in the current year. No
material uncertain tax positions exist as at 31 December 2020. This
assessment relies on estimates and assumptions and may involve a
series of complex judgments about future events. To the extent that
the final tax outcome of these matters is different than the
amounts recorded, such differences will impact income tax expense
in the period in which such determination is made.
10 EARNINGS PER SHARE
(a) Basic and diluted profit/(loss) per share
2020 2019
Total net profit/(loss) attributable to equity
holders of the parent (GBP'000) 577 (850)
Weighted average number of shares in issue during
the period 30,479,015 26,479,021
Basic profit/(loss) per share attributable to
equity holders of the parent (pence) 1.9 (3.2)
=========== ===========
Diluted profit/(loss) per share attributable to
equity holders of the parent (pence) 1.8 (3.2)
=========== ===========
1,475,509 (2019: 3,491,093) shares were deemed to have been
issued at nil consideration as a result of shares which could be
issued under the bonus share matching plan, long term incentive
plans and acquisition related share-based payments which, as
required under IAS 33, Earnings per Share, were not recognised in
the previous year as they would reduce the loss per share (see Note
27).
(b) Adjusted earnings per share
Adjusted earnings per share is based on adjusted operating
profit after tax, which is stated after charging interest but
before depreciation, amortisation, share-based payments relating to
acquisitions, profits and losses on disposal of tangible fixed
assets, net performance fees, net development gains and exceptional
items, to provide the non-GAAP measure of the performance as an
asset manager. This includes dividend and income received from
investments in associates.
Adjusted profit for calculating adjusted earnings per share:
2020 2019
GBP'000 GBP'000
Net operating loss after exceptional
items (1,916) (2,056)
Add back:
Exceptional operating expenses 1,775 1,063
Depreciation and amortisation 8,904 8,484
Loss on disposal of tangible
fixed assets 27 43
Dividend income received from
associates 202 1,323
Net performance fees - (200)
Variable compensation attributable to realised
gains on investments 2,474 1,037
Share-based payments relating
to acquisitions 593 593
-------- --------
Adjusted profit attributable to equity holders
of the parent before tax 12,059 10,287
======== ========
Corporation tax attributable to adjusted operating
profit (1,541) (948)
-------- --------
Adjusted profit attributable to equity holders
of the parent after tax 10,518 9,339
======== ========
Adjusted profit per share (pence)
- basic* 34.5 35.3
======== ========
Adjusted profit per share (pence)
- diluted* 32.9 31.2
======== ========
*The 2019 adjusted profit per share (basic and diluted) have
been restated to include the deduction of corporation tax.
11 DIVIDS
In May 2020 the Company paid GBP1,351,000 which represents a
final dividend for the year ended 31 December 2019 of 4.5 pence per
share. A final dividend for the year ended 31 December 2018 of 3.0
pence per share totalling GBP795,000 was paid in May 2019 .
Set out below is the total dividend payable in respect of the
financial year, which is the basis on which the requirements of
Section 1158 Corporation Tax Act 2010 are considered.
2020 2019
GBP'000 GBP'000
Proposed final dividend for the year ended 31 December
2020 of 6.0 pence (2019: 4.5 pence) per share 1,926 1,252
======== ========
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
12 INVESTMENTS
Investments have been classified
as follows: Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets 9,086 9,621 5,342 7,550
Other debtors due within one
year - Investment in development
projects (see Note 20) 551 1,208 551 1,208
-------- -------- -------- --------
9,637 10,829 5,893 8,758
======== ======== ======== ========
A further analysis of total investments
is as follows: Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Listed securities - on the London
Stock Exchange 3,991 5,624 3,202 5,624
Securities dealt in under AIM 950 531 950 531
Securities dealt in under Aquis
Exchange 7 10 7 10
Unlisted securities 4,689 4,664 1,734 2,593
-------- -------- -------- --------
Closing value at 31 December 9,637 10,829 5,893 8,758
======== ======== ======== ========
Investments valued at fair value
through profit and loss 8,874 8,914 5,130 6,843
Loans and receivables carried
at amortised cost 763 1,915 763 1,915
-------- -------- -------- --------
9,637 10,829 5,893 8,758
======== ======== ======== ========
The movement in investments valued at fair value through profit
and loss is:
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Opening cost 8,724 7,346 6,975 5,597
Opening net unrealised losses 190 (835) (132) (950)
-------- -------- -------- --------
Opening value 8,914 6,511 6,843 4,647
Movements in the year:
Purchases at cost 1,309 1,940 885 1,940
Additions through business combinations 463 - - -
Sales - proceeds (2,883) (257) (2,883) (257)
Sales - realised gains and (losses)
on sales 226 (305) 226 (305)
Net unrealised gains and (losses) 845 1,025 59 818
Closing value 8,874 8,914 5,130 6,843
======== ======== ======== ========
Closing cost 7,839 8,724 5,203 6,975
Closing net unrealised gains/(losses) 1,035 190 (73) (132)
-------- -------- -------- --------
Closing value 8,874 8,914 5,130 6,843
======== ======== ======== ========
The movement in loans and receivables
carried at amortised cost is: Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Opening value 1,915 1,613 1,915 1,613
Movements in the year:
Purchases at cost 47 1,332 47 1,332
Sales - proceeds (1,245) (62) (1,245) (62)
Sales - realised gains and (losses)
on sales 46 6 46 6
Net unrealised gains and (losses) - (47) - (47)
Transferred on acquisition of
subsidiary undertaking - (927) - (927)
-------- -------- -------- --------
Closing value 763 1,915 763 1,915
======== ======== ======== ========
Gains and losses on investments
held at fair value Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Net realised gains and (losses)
on disposal 272 (299) 272 (299)
Net unrealised gains and (losses) 845 978 59 771
Profit on disposal of subsidiary
undertaking 3,482 2,369 - -
-------- -------- -------- --------
Net gains/(losses) on investments 4,599 3,048 331 472
======== ======== ======== ========
13 TANGIBLE FIXED ASSETS
Group 2020 Right
Office Motor Leasehold of use
equipment vehicles property assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 260 289 4 1,344 1,897
Additions 95 57 - 470 622
Additions through business
combinations 54 - 126 407 587
As at 31 December 409 346 130 2,221 3,106
=========== ========== ========== ======== ========
Depreciation
As at 1 January 96 88 4 896 1,084
IFRS 16 restatement through
business combinations - - - 61 61
Charge for the year 99 81 25 666 871
As at 31 December 195 169 29 1,623 2,016
=========== ========== ========== ======== ========
Net book value as at 31 December 214 177 101 598 1,090
=========== ========== ========== ======== ========
Group 2019 Right
Office Motor Leasehold of use
equipment vehicles property assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 191 297 4 - 492
IFRS 16 restatement - - - 1,302 1,302
Additions 101 166 - 42 309
Disposals during the year (32) (174) - - (206)
----------- ---------- ---------- -------- --------
As at 31 December 260 289 4 1,344 1,897
=========== ========== ========== ======== ========
Depreciation
As at 1 January 56 101 3 - 160
IFRS 16 restatement - - - 231 231
Charge for the year 67 83 1 665 816
Disposals during the year (27) (96) - - (123)
----------- ---------- ---------- -------- --------
As at 31 December 96 88 4 896 1,084
=========== ========== ========== ======== ========
Net book value as at 31 December 164 201 - 448 813
=========== ========== ========== ======== ========
Company 2020 Right
Office Motor of use
equipment vehicles assets Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 253 235 991 1,479
Additions 95 57 454 606
As at 31 December 348 292 1,445 2,085
=========== ========== ======== ========
Depreciation
As at 1 January 89 34 746 869
Charge for the year 81 81 490 652
As at 31 December 170 115 1,236 1,521
=========== ========== ======== ========
Net book value as at 31 December 178 177 209 564
=========== ========== ======== ========
13 TANGIBLE FIXED ASSETS - continued
Company 2019 Right
Office Motor of use
equipment vehicles assets Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 178 - - 178
IFRS 16 restatement - - 991 991
Additions 107 284 - 391
Disposals during the year (32) (49) - (81)
----------- ---------- -------- --------
As at 31 December 253 235 991 1,479
=========== ========== ======== ========
Depreciation
As at 1 January 52 - - 52
IFRS 16 restatement - - 157 157
Charge for the year 64 42 589 695
Disposals during the year (27) (8) - (35)
----------- ---------- -------- --------
As at 31 December 89 34 746 869
=========== ========== ======== ========
Net book value as at 31 December 164 201 245 610
=========== ========== ======== ========
14 INTANGIBLE ASSETS
Group 2020 Customer IT platform
Goodwill Relationships Contracts development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 24,063 3,072 43,764 588 71,487
Additions through business
combinations 5,655 263 2,886 97 8,901
Other additions - - - 593 593
Disposals - - - (36) (36)
As at 31 December 29,718 3,335 46,650 1,242 80,945
========= =============== ========== ============= ========
Amortisation
As at 1 January - 2,457 10,283 202 12,942
Charge for the year - 659 7,128 246 8,033
As at 31 December - 3,116 17,411 448 20,975
========= =============== ========== ============= ========
Net book value as at 31
December 29,718 219 29,239 794 59,970
========= =============== ========== ============= ========
1-23
Remaining amortisation period n/a 4 years years 1-4 years
Group 2019 Customer IT platform
Goodwill Relationships Contracts development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 24,063 3,072 43,764 286 71,185
Additions - - - 302 302
As at 31 December 24,063 3,072 43,764 588 71,487
========= =============== ========== ============= ========
Amortisation
As at 1 January - 1,843 3,342 89 5,274
Charge for the year - 614 6,941 113 7,668
--------- --------------- ---------- ------------- --------
As at 31 December - 2,457 10,283 202 12,942
========= =============== ========== ============= ========
Net book value as at 31
December 24,063 615 33,481 386 58,545
========= =============== ========== ============= ========
1-24
Remaining amortisation period n/a 1 year years 1-4 years
14 INTANGIBLE ASSETS - continued
Company 2020 2019
IT platform IT platform
development development
GBP'000 GBP'000
Cost
As at 1 January 588 286
Additions 593 302
As at 31 December 1,181 588
============= =============
Amortisation
As at 1 January 202 89
Charge for the year 230 113
As at 31 December 432 202
============= =============
Net book value as at 31 December 749 386
============= =============
Remaining amortisation period 1-4 years 1-4 years
The assumptions used to fair value the contracts, including
discount rates, growth rates and cash flow models are described in
more detail in the critical accounting estimates and judgements
section of the accounting policies.
Goodwill has been assessed for each business acquired for
impairment as at 31 December 2020. This assessment includes an
analysis of the expected cash flows from the specific businesses
based on expected fundraising and other growth factors as well as
the associated cost of delivering the planned revenues. A discount
has been applied to the cash flows to determine an estimate of the
fair value of the business, which is used to assess whether
goodwill should be impaired.
No reasonably possible change in any of the variables used in
the goodwill impairment tests would give rise to an impairment.
15 DISPOSAL GROUP HELD FOR SALE
The Group has invested in the development of battery storage
projects (DevCo Projects), which are part of the exclusive pipeline
to be sold to Gresham House Energy Storage Fund plc (GRID) when
operational. The DevCo Projects are held in separate SPVs, which
the Group entity Devco Limited owns between 60-70% of the equity in
and the Group has also lent funds for the development of the
projects.
The sale of the DevCo Projects has been agreed with GRID and is
documented, including price and conditions to complete the sale. It
is expected that the sale process will complete within a six to
12-month time frame, as such it has been deemed appropriate to
treat the DevCo Projects as assets held for sale under IFRS 5.
Specifically, they are classified as a "disposal group" held for
sale, whose value will be primarily recovered by sale.
The assets and liabilities of those SPVs which have been
consolidated by the Group are:
2020 2019
GBP'000 GBP'000
Assets of a disposal group held
for sale 7,363 12,188
Liabilities of a disposal group
classified as held for sale (2,072) (9,718)
5,291 2,470
======== ========
The Group's interest in other DevCo Projects can be summarised
as follows:
2020 2019
GBP'000 GBP'000
Loans and receivables brought
forward 1,208 1,290
Additions - net of abort costs - 2,511
Disposals (657) -
Transferred on acquisition of
subsidiary undertaking * - (2,593)
Loans and receivables carried
forward (Note 12) 551 1,208
======== ========
* During the previous year the Group acquired a controlling
interest in HC ESS6 Limited and HC ESS7 Limited. Amounts previously
recognised as loans and receivables were therefore eliminated on
consolidation of these entities.
15 DISPOSAL GROUP HELD FOR SALE - continued
The Group's total exposure to DevCo Projects is:
2020 2019
GBP'000 GBP'000
Net assets and liabilities of
a disposal group held for sale 5,291 2,470
Loans and receivables 551 1,208
5,842 3,678
======== ========
During the year the Group acquired a controlling interest in
GridReserve Limited, Lister Battery Limited and Monets Garden
Battery Limited.
During the year the Group disposed of HC ESS6 Limited (Wickham
Market) and HC ESS7 Limited (Thurcroft), with total net proceeds of
GBP3,740,000 due, realising a net gain on disposal of
GBP3,482,000.
16 INVESTMENT IN SUBSIDIARIES
Company
2020 2019
Subsidiary undertakings GBP'000 GBP'000
As at 1 January 79,872 79,872
Additions - -
As at 31 December 79,872 79,872
======== ========
The subsidiary undertakings of Gresham House plc are as
follows:
Held
by other
Held by Group Country of incorporation and
Company companies registered office
% %
5 New Street Square, London
Aitchesse Limited - 100 EC4A 3TW, England
5 New Street Square, London
Chartermet Limited - 95 EC4A 3TW, England
Deacon Commercial Development 5 New Street Square, London
and Finance Limited - 100 EC4A 3TW, England
5 New Street Square, London
Deacon Knowsley Limited - 95 EC4A 3TW, England
5 New Street Square, London
FIM Services Limited - 100 EC4A 3TW, England
FIM Windfarms General Partner 5 New Street Square, London
2 Limited - 100 EC4A 3TW, England
FIM Windfarms (SC) General 15 Atholl Crescent, Edinburgh,
Partner Limited - 100 EH3 8HA, Scotland
5 New Street Square, London
GH ReSiHoldings Limited - 100 EC4A 3TW, England
Gresham House Asset Management 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Carry Warehousing 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Capital Partners 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Company Secretarial 5 New Street Square, London
1 Limited - 100 EC4A 3TW, England
Gresham House Company Secretarial 5 New Street Square, London
2 Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Devco Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House EIS Limited - 100 EC4A 3TW, England
Gresham House Energy Storage 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Finance Limited - 100 EC4A 3TW, England
Riverview House, Friarton Road,
Gresham House Forestry Limited - 100 Perth, PH2 8DF, Scotland
Gresham House Forestry Friends Riverview House, Friarton Road,
and Family LP 71.4 - Perth, PH2 8DF, Scotland
Gresham House Forest Funds 5 New Street Square, London
General Partner Limited - 100 EC4A 3TW, England
Gresham House (General Partner) Riverview House, Friarton Road,
Limited - 100 Perth, PH2 8DF, Scotland
Riverview House, Friarton Road,
Gresham House GP LLP - 100 Perth, PH2 8DF, Scotland
5 New Street Square, London
Gresham House Holdings Limited 100 - EC4A 3TW, England
5 New Street Square, London
Gresham House Housing Limited - 100 EC4A 3TW, England
Gresham House Initial Partner 5 New Street Square, London
Limited - 100 EC4A 3TW, England
16 INVESTMENT IN SUBSIDIARIES - continued
Held
by other
Held by Group Country of incorporation and
Company companies registered office
% %
Gresham House Infrastructure 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Investment Management 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Investment Management Dorey Court, Admiral Park,
(Guernsey) Limited - 100 St Peter Port, GY1 2HT, Guernsey
5 New Street Square, London
Gresham House Investors Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House New Energy Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House (Nominees) Limited - 100 EC4A 3TW, England
Gresham House Private Capital 5 New Street Square, London
Solutions Limited - 100 EC4A 3TW, England
Gresham House Private Equity 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Private Wealth 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Real Assets Limited - 100 EC4A 3TW, England
Gresham House Renewable Infrastructure 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Services Limited - 100 EC4A 3TW, England
Gresham House Smaller Companies 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Solar Distribution 5 New Street Square, London
Designated Member 1 Limited - 100 EC4A 3TW, England
Gresham House Solar Distribution 5 New Street Square, London
Designated Member 2 Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House SPE Limited - 100 EC4A 3TW, England
Gresham House Special Situations 5 New Street Square, London
Limited - 100 EC4A 3TW, England
Gresham House Timberland General 5 New Street Square, London
Partner Limited - 100 EC4A 3TW, England
Gresham House Windfarms General 5 New Street Square, London
Partner 3 Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House Value Limited - 100 EC4A 3TW, England
5 New Street Square, London
Gresham House VCT Limited - 100 EC4A 3TW, England
5 New Street Square, London
GridReserve Limited - 70 EC4A 3TW, England
Knowsley Industrial Property 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
Lister Battery Limited - 100 EC4A 3TW, England
5 New Street Square, London
Monets Garden Battery Limited - 100 EC4A 3TW, England
5 New Street Square, London
New Capital Developments Limited - 95 EC4A 3TW, England
5 New Street Square, London
New Capital Holdings Limited - 95 EC4A 3TW, England
5 New Street Square, London
Newton Estate Limited - 100 EC4A 3TW, England
ReSi Capital Management GP 5 New Street Square, London
Limited - 100 EC4A 3TW, England
5 New Street Square, London
ReSi Capital Management Limited - 100 EC4A 3TW, England
5 New Street Square, London
ReSi Homes Limited - 100 EC4A 3TW, England
5 New Street Square, London
Security Change Limited - 100 EC4A 3TW, England
9 East Loockerman Street, Dover,
TradeRisks Inc - 100 DE 19901, United States
5 New Street Square, London
TradeRisks Limited - 100 EC4A 3TW, England
25a, Boulevard Royal, L-2449
TradeRisks (Luxembourg) S.a.r.l. - 100 Luxembourg
5 New Street Square, London
Wolden Estates Limited - 100 EC4A 3TW, England
17 INVESTMENT IN ASSOCIATES
2020 2019
GBP'000 GBP'000
Opening Investment in associates 9,186 10,198
Additions - 65
Share of associates' profit 158 246
Dividends received from associates (202) (1,323)
Closing investment in associates 9,142 9,186
======== ========
The above balance consists of the Group's holdings in Gresham
House Strategic plc (GHS), Noriker Power Limited (Noriker) and
Biggerbrook Limited (Biggerbrook).
The Board believe that Gresham House plc exercises significant
influence over GHS, but not control, through its 23.4% equity
investment as well as the investment management agreement between
GHAM and GHS.
The latest published financial information of GHS was the
unaudited interim results for the six months to 30 September 2020.
The assets and liabilities at that date are shown below:
2020 2019
GBP'000 GBP'000
Non-current assets 38,461 39,128
Current assets 3,924 5,520
Current liabilities (173) (155)
Net assets 42,212 44,493
======== ========
The GHS consolidated unaudited statement of comprehensive income
noted realised and unrealised gains from continuing operations on
investments at fair value through profit and loss of GBP5,350,000
and revenues of GBP1,205,000 for the six months ended 30 September
2020.
The registered office of GHS is 6(th) Floor, 60 Gracechurch
Street, London, EC3V 0HR.
The Board believe that Gresham House plc exercises significant
influence over Noriker, but not control, through its 26.6% equity
investment.
The registered office of Noriker is Railway House, Bruton Way,
Gloucester, GL1 1DG.
The Board believe that Gresham House plc exercises significant
influence over Biggerbrook, but not control, through its 21.9%
equity investment.
The registered office of Biggerbrook is 5 New Street Square,
London, EC4A 3TW.
18 TRADE RECEIVABLES
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable within one
year:
Trade receivables 3,184 5,334 - -
Less allowance for credit losses - - - -
-------- --------
3,184 5,334 - -
======== ======== ======== ========
As at 31 December 2020, trade receivables of GBP87,000 (2019:
GBP82,000) were past due but not impaired. The ageing analysis of
these trade receivables is as follows:
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
1-3 months 53 53 - -
3-6 months 26 10 - -
More than 6 months 8 19 - -
-------- --------
87 82 - -
======== ======== ======== ========
As at 31 December 2020 there were no provisions against trade
receivables (2019: GBPnil).
The expected credit losses are estimated using a provision
matrix by reference to past default experience and an analysis of
the debtor's current financial position, adjusted for factors that
are specific to the debtor, general economic conditions of the
industry and an assessment of both the current as well as the
forecast direction of conditions at the reporting date. The Group
has therefore not recognised a loss allowance because historical
experience has indicated that the risk profile of trade receivables
is deemed low.
Group balances are not deemed to be impaired and when assessing
expected credit losses full recoverability of these balances is
expected.
19 ACCRUED INCOME AND PREPAID EXPENSES
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Accrued income 9,124 3,860 - -
Other debtors 3,457 2,582 642 -
Prepaid expenses 1,202 758 118 159
-------- --------
13,783 7,200 760 159
======== ======== ======== ========
20 OTHER CURRENT ASSETS
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Amounts owed by Group undertakings - - 6,334 2,780
Loan Receivables - Investment
in development projects (see
Note 12) 551 1,208 551 1,208
Corporation tax recoverable - 212 - -
-------- --------
551 1,420 6,885 3,988
======== ======== ======== ========
21 TRADE AND OTHER PAYABLES
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade creditors 705 469 - -
IFRS 16 lease creditor 440 321 211 243
Other creditors 1,561 1,228 14 23
Accruals 14,416 7,730 18 17
Corporation tax payable 273 801 - -
Contingent consideration (Note
25) 1,385 4,661 - -
-------- --------
18,780 15,210 243 283
======== ======== ======== ========
22 SHORT-TERM BORROWINGS
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Bank loans - within current liabilities
(Note 24) - - - -
Amounts owed to Group undertakings - - 4,651 5,986
- - 4,651 5,986
========== ========== ======== ========
23 DEFERRED TAXATION
Under International Accounting Standards (IAS) 12 (Income Taxes)
provision is made for the deferred tax liability associated with
the recognition of the management contracts and customer
relationships as part of the 100% acquisition of FIM and
TradeRisks. This has been recognised at 17% for FIM and 19% for
TradeRisks of the fair value of the intangible assets at
acquisition and reassessed each year end, with the movement being
recognised in the income statement. As at 31 December 2020 the
deferred tax liability was GBP3,227,000 (2019: GBP2,632,000).
The Group has recognised a deferred tax asset of GBP1,051,000
(2019: GBP613,000) in relation to differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit and is accounted for using the statement of financial
position liability method. The Company has recognised GBP153,000
(2019: GBP276,000) in respect of these differences.
The movement on the deferred tax account is as shown below:
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January (2,019) (2,944) 276 -
Deferred tax recognised in profit
and loss 457 925 (123) 276
-------- -------- -------- --------
(1,562) (2,019) 153 276
Arising on business combinations (614) - - -
Balance as at 31 December (2,176) (2,019) 153 276
======== ======== ======== ========
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Deferred tax asset 1,051 613 153 276
Deferred tax liability (3,227) (2,632) - -
(2,176) (2,019) 153 276
======== ======== ======== ========
24 LONG-TERM BORROWINGS
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Bank loans - - - -
- - - -
======== ======== ======== ========
On 21 December 2020, the Company signed a GBP5.0 million banking
facility agreement with Banco Santander SA (the facility). The
facility is secured with fixed and floating charges over certain of
Company's assets, with cross guarantees provided by Gresham House
Asset Management Limited and Gresham House Holdings Limited. The
fixed charges relate to certain Group bank accounts with a carrying
value of GBP17.8 million as at the year end.
The facility consists of a GBP5.0 million two-year revolving
credit facility with an option to request an extension of one year.
There is a further GBP5.0 million accordion to increase the size of
the facility. No amounts were drawn under this facility at the year
end.
The Group has complied with the financial covenants attached to
the facility.
The interest payable on the facility is LIBOR plus 3.05%. The
Group expects the facility to transition from LIBOR to alternative
interest rate benchmarks by the end of 2021.
25 NON-CURRENT LIABILITIES - OTHER CREDITORS
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Contingent consideration 5,548 5,849 - -
IFRS 16 lease creditor 201 124 - -
5,749 5,973 - -
======== ======== ======== ========
Contingent consideration
FIM
The contingent consideration payable to the sellers of FIM is
based on the combined Forestry division generating revenue of
between GBP13.0 million and GBP14.0 million over the two years from
acquisition on 22 May 2018. No contingent consideration is payable
below GBP13.0 million, a sliding scale from GBP13.0 million to
GBP14.0 million to receive from zero to GBP4.0 million.
A further contingent consideration is payable should the
combined divisions deliver revenues of greater than GBP18.0 million
over the same two-year period, above which 33% will be payable to
the sellers. Actual revenues generated during this period were
GBP20.6 million which resulted in an additional payment of GBP0.8
million.
Contingent consideration totalling GBP4.8 million was paid to
the sellers of FIM during the year.
Livingbridge VC
The Livingbridge VC contingent consideration has been determined
in two parts.
The first being that the VCT Boards do not give notice to GHAM
within two years of the acquisition. Should this be the case, then
a payment of GBP5.0 million will be made to the sellers of
Livingbridge VC. Contingent consideration totalling GBP5.0 million
was paid in respect of this during the year.
The second part of the contingent consideration being the hurdle
to deliver revenues from the Livingbridge VC business of between
GBP30.9 million and GBP37.2 million in the three years to 31
December 2021. The maximum amount payable on achieving the GBP37.2
million hurdle is GBP2.5 million and the minimum payable is zero if
the GBP30.9 million hurdle is not achieved. The fair value has been
based on a weighted probability of outcomes over the three-year
period and discounted by 15% as per above.
The fair value of the remaining contingent consideration payable
to the Livingbridge VC sellers as at 31 December 2020 was GBP1.6
million.
TradeRisks
Contingent consideration totalling a maximum of GBP6.0 million
will be payable in cash to the sellers based on the following:
a) 0.5% of funds raised payable in three years, with maximum amount capped at GBP3.0 million.
b) Any realised synergies payable in three years, capped at GBP1.0 million.
c) GBP2.0 million payable within six months post-completion for any inventory true-up.
Payments totalling GBP0.6 million relating to part c) were paid
during the year.
The fair value of the remaining contingent consideration payable
to the TradeRisks sellers as at 31 December 2020 was GBP3.2
million.
Monets Garden
The Group acquired a controlling interest in Monets Garden
Battery Limited, a battery storage development project, during the
year. Under the terms of the SPA deferred consideration of GBP0.3
million was paid in February 2021 and a further amount of GBP0.75
million is payable by 31 January 2022.
Lister Battery
The Group acquired a controlling interest in Lister Battery
Limited, a battery storage development project, during the year.
Under the terms of the SPA deferred consideration of GBP0.3 million
was paid in February 2021 and a further amount of GBP0.75 million
is payable by 31 January 2022.
26 SHARE CAPITAL
2020 2019
GBP'000 GBP'000
Allotted: Ordinary - 32,091,707 (2019: 27,824,222)
fully paid shares of 25 pence 8,023 6,956
======== ========
During the year the Company issued the following new ordinary
shares:
-- 56,302 shares on 14 January 2020 at a price of 323.27 pence
per share as a result of the exercise of the remaining shareholder
warrants;
-- 2,924 shares on 14 January 2020 at a price of 324.8 pence per
share to employees under the Company's Save as you earn scheme;
-- 555,555 shares on 11 March 2020 at a price of 625.0 pence per
share to the vendors of TradeRisks Limited;
-- 4,770 shares on 11 March 2020 at a price of 632.5 pence per
share to management and employees under the Company's bonus share
matching plan;
-- 1,568,628 shares on 20 March 2020 at a price of 510.0 pence per share by way of a placing;
-- 750,000 shares on 6 July 2020 at par into the Gresham House Employee Benefit Trust; and
-- 1,329,306 shares on 31 July 2020 at par into the Gresham House Employee Benefit Trust.
27 SHARE WARRANTS
Group 2020 2019
Shareholder Total Shareholder Supporter Total
warrants warrants warrants warrants warrants
Balance as at 1 January 56,363 56,363 874,485 769,000 1,643,485
Warrants exercised during
the year (56,302) (56,302) (734,182) (769,000) (1,503,182)
Warrants lapsed during
the year (61) (61) (83,940) - (83,940)
As at 31 December - - 56,363 - 56,363
============ ========== ============ ========== ============
Shareholder warrants
On 1 December 2014, the Company issued 1,073,904 shareholder
warrants to existing shareholders as at the close of business on 28
November 2014 on a 1:5 basis, such warrants having been admitted to
trading on AIM. Shareholder warrants were freely transferable, and
exercisable at any time between 1 January 2015 and 31 December 2019
at an exercise price of 323.27 pence per ordinary share and were
subject to the terms of the shareholder warrant instrument dated 7
October 2014. Shareholder warrants not exercised by 31 December
2019 lapsed.
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, who acquired them at a price of 7.5
pence per warrant. Supporter warrants have the same entitlements as
the shareholder warrants save that (i) they were 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)
were not exercisable until 1 December 2015; and (iii) were subject
to the terms of the supporter warrant instrument dated 7 October
2014. All Supporter warrants were exercised in 2019.
During the year, 56,302 shareholder warrants were converted into
ordinary shares resulting in the issue of 56,302 new ordinary
shares (2019: 734,182 shareholder warrants and 769,000 supporter
warrants). Notice was given by shareholder warrant holders by 31
December 2019 for 56,363 shareholder warrants, of which 56,302 have
been exercised, with the remaining 61 shareholder warrants
lapsing.
28 SHARE-BASED PAYMENTS
2016 Long term incentive plan
Following approval from shareholders at the General Meeting of
the Company on 20 November 2015, the Directors implemented a long
term incentive plan (2016 LTIP) to incentivise the management team
as well as align their interests with those of shareholders on 28
July 2016 through enhancing shareholder value.
For the purposes of the 2016 LTIP, "shareholder value" is the
difference between the market capitalisation of the Company at the
point in time that any assessment is made and the sum of:
(i) The market capitalisation of the Company a) at 1 December
2014 for first awards made to management who joined the Company
before 30 September 2015 (old joiners) and b) at the date of award
in all other cases (new joiners); and
(ii) The aggregate value (at the subscription price) of all
ordinary shares issued thereafter and up to the point in time that
any assessment is made, in each case adjusted for dividends and
capital returns to shareholders and/or issue of new shares.
The beneficiaries of the 2016 LTIP, will in aggregate be
entitled to an amount of up to 20.0% of shareholder value created
over the exercise period, subject to performance criteria set out
below. Individual participation in the shareholder value created
will be determined by the Remuneration Committee.
There will be certain hurdles the Company's share price has to
achieve before an award vests.
In the event that the Company achieves an average mid-market
closing price equal to compound growth at 7% per annum for a period
of 10 consecutive dealing days in the period after 1 December 2016
for first awards to management who joined the Company before 30
September 2015 and from the second anniversary of the date of award
in all other cases, 50% of the award will vest.
In the event that the share price of the Company outperforms the
FTSE All Share Index in the period after 1 December 2016, and from
the second anniversary of the date of the award in all other cases,
50% of the award shall vest.
Each award will require a minimum term of employment of three
years and awards will be made to current management and new joiners
at the Company's discretion.
IFRS 2: Share-Based Payments sets out the criteria for an
equity-settled share-based payment, which has market performance
conditions. The 2016 LTIP meets these criteria and should therefore
be recognised at award at fair value and amortised over the vesting
period of two years. There is no amount payable by the
beneficiaries on exercise. The table below details the type and
number of shares in Gresham House Holdings Limited issued and
exercised in the year:
2020 A Shares A Shares
old new Total
joiners joiners B Shares C Shares D Shares LTIP
Balance as at 1 January 870 46 208 104 180 1,408
Exercised during the year (870) (46) (104) (104) - (1,124)
--------- --------- --------- --------- --------- --------
As at 31 December - - 104 - 180 284
========= ========= ========= ========= ========= ========
Exercisable at year end - - 104 - - 104
========= ========= ========= ========= ========= ========
Months to vesting - - - - 12
========= ========= ========= ========= =========
2019 A Shares A Shares
old new Total
joiners joiners B Shares C Shares D Shares LTIP
Balance as at 1 January 908 92 208 104 - 1,312
Issued in the year - - - - 180 180
Exercised during the year (38) (46) - - - (84)
--------- --------- --------- --------- --------- ------
As at 31 December 870 46 208 104 180 1,408
========= ========= ========= ========= ========= ======
Exercisable at year end 870 46 208 104 - 1,228
========= ========= ========= ========= ========= ======
Months to vesting - - - - 24
========= ========= ========= ========= =========
28 SHARE-BASED PAYMENTS - continued
916 A Shares were exercised during the year. 570 of these were
settled in equity and at the Company's discretion 346 were settled
in cash. For the cash settled awards the difference between the
fair value recognised over the vesting period and the fair value at
the date of exercise was recognised in retained reserves.
104 B Shares were exercised during the year and were settled in
equity.
104 C Shares were exercised during the year and at the Company's
discretion were settled in cash. The difference between the fair
value recognised over the vesting period and the fair value at the
date of exercise was recognised in retained reserves.
Fair value
The fair value of the award at the date of the award has been
determined using an expected returns model, which is based on a
number of scenarios and probabilities of the Company's performance
for the period when the awards may be exercised. The assumptions in
the model have estimated the shareholder value created and applied
discounts for liquidity and likelihood of exercise by participants.
The weighted average valuation of the Company has been used to
calculate the expected shareholder value created and consequently
the value of the plan.
2018 Long term incentive plan
The Remuneration Committee considered and implemented a long
term incentive arrangement in 2018 (2018 LTIP). The 2016 LTIP
became exercisable during 2018 and as such the Remuneration
Committee introduced the 2018 LTIP to align the management team and
wider members of the business for the next three years with
shareholders.
The 2018 LTIP is a deferred share award, which vests in three
years from the date of award subject to management remaining
employed by the Company as at the vesting date. There is no
staggered vesting period, vesting is at the end date in three
years' time.
During the year ended 31 December 2019, 7,113 awards were
exercised and settled by ordinary shares held by the Gresham House
Employee Benefit Trust. During the year ended 31 December 2019,
59,353 ordinary shares were issued under the 2018 LTIP with a fair
value at exercise of GBP0.4 million. The weighted average share
price at the date of exercise was 740 pence (2019: 622.5 pence)
2019 Long term incentive plan
The Remuneration Committee considered and implemented a long
term incentive arrangement in 2019 (2019 LTIP).
Under the 2019 LTIP, 274,728 deferred shares were awarded to the
management team and 121,063 deferred shares were awarded to the
wider members of the business, with a fair value at award of GBP1.5
million and GBP0.7 million respectively. The awards to the
management team vest in three years from the date of award subject
to management remaining employed by the Company as at the vesting
date and achievement of performance conditions. There is no
staggered vesting period, vesting is at the end date in three
years' time. The awards to the wider members of the business also
vest in three years from the date of award but there are no
performance conditions.
The performance conditions relating to the management team's
awards are that in the event that the Company achieves an average
mid-market closing price equal to compound growth at 7% per annum
over the three-year period from award, or the growth in Adjusted
Earnings Per Share has compound growth of 7% per annum or more, 50%
of the award will vest.
In the event that the share price of the Company outperforms the
FTSE All Share Index from the third anniversary of the date of the
award in all other cases, 50% of the award will vest.
The fair value of the 2019 LTIP was measured as the share price
at the date of award. The impact of the volatility in the share
price has been deemed to be immaterial.
2019
2019 LTIP LTIP
2018 - management other
LTIP team staff Total
Balance as at 31 December
2018 488,174 - - 488,174
Issued in the year - 274,728 121,064 395,792
Exercised in the year (59,353) - - (59,353)
--------- -------------- -------- ---------
Balance as at 31 December
2019 428,821 274,728 121,064 824,613
Exercised in the year (7,331) - (4,504) (11,835)
--------- -------------- -------- ---------
Balance as at 31 December
2020 421,490 274,728 116,560 812,778
========= ============== ======== =========
Exercisable at year end - - - -
========= ============== ======== =========
28 SHARE-BASED PAYMENTS - continued
2020 Long term incentive plan
The Directors implemented the 2020 long term incentive plan
(2020 LTIP) in December 2020 to incentivise the management team as
well as align their interests with those of shareholders through
enhancing shareholder value. This scheme replaced the 2016 LTIP
which had vested and was exercised by the majority of the
management team during 2020.
The 2020 LTIP pool principles state that the value of the awards
will be driven by the total return to shareholders over (i) 1
January 2020 to 31 December 2023 (the first measurement period) and
(ii) 1 January 2020 to 31 December 2024 (the second measurement
period).
In the event that total return to shareholders over the first
measurement period is 7% p.a. (Performance Hurdle) or more, a
maximum related plan pool of value equal to 7.5% of such total
return may arise. In the event that total return to shareholders is
more than the Performance Hurdle over the second measurement
period, a maximum of 15% of such total return to shareholders may
arise (less any pool value distributed under the awards in respect
of the first measurement period).
Return to shareholders for such purposes shall be measured from
a base value of GBP165,706,250, being the 90-day average market
capitalisation of the Company to 1 January 2020, to the respective
90-day market capitalisation averaging periods at each of the
measurement periods and shall include the value of dividends
(assumed reinvested) and other capital (if any) returned.
Appropriate adjustments to the required minimum 7% p.a. level of
growth in return shall be made in respect of any capital raised
during the measurement periods.
IFRS 2: Share-Based Payments sets out the criteria for an
equity-settled share-based payment, which has market performance
conditions. The 2020 LTIP meets these criteria and should therefore
be recognised at award at fair value and amortised over the vesting
period of four years from the date of award. The fair value of the
2020 LTIP at award was GBP5.7 million.
There is no amount payable by the beneficiaries on exercise and
the number of shares in respect of which the awards may vest when
aggregated with those issuable or issued in respect of awards
granted under the 2020 LTIP and any other Company employees' share
scheme, shall not exceed 20% of prevailing issued share capital in
accordance with the AIM Admission circular dated 4 November 2015.
Scaling back of awards shall apply to such extent as required to
ensure this limit is not breached.
Renewable Energy team long term incentive plan
The Renewable Energy management team, which joined as part of
the acquisition of the asset management business of Hazel Capital
LLP, has a long term incentive plan in place, which granted the
team a total of 1,000 A Shares in Gresham House New Energy Limited
on 31 October 2017. The plan is an earn out plan following the
acquisition of Hazel Capital LLP and is considered an acquisition
related share-based payment. The vesting date of the A Shares is 31
December 2020, at which point the holders are entitled to receive
either Gresham House plc shares, or cash at the Company's
discretion in exchange for their A Shares. Under the guidance in
IFRS 2:41, it has been considered that the A Share settlement
should be treated as an equity-settled instrument.
The value of the A Shares at vesting is based on a calculation,
which is based on the average profits generated by the New Energy
division between 31 October 2017 and 31 December 2020, which was
GBP10.2 million at 31 December 2020.
The fair value of the award has been determined using an
expected returns model, which is based on a number of scenarios and
probabilities of the New Energy division's performance for the
period from 31 October 2017 to 31 December 2020. The assumptions in
the model have estimated the average profits over the period and
applied discounts for liquidity and control and consequently the
value of the A Shares. The fair value of the A Shares at award was
GBP276,000 (GBP276 per share), which will be amortised over the
three-year and two-month vesting period.
Livingbridge VC long term incentive plan
The Livingbridge VC long term incentive plan is an equity
settled incentive scheme and considered an acquisition related
share-based payment. The recipients of the scheme will receive up
to GBP2.5 million in aggregate in Gresham House plc shares based on
the three-year period to 31 December 2021. There is a hurdle to
deliver revenues from the Livingbridge VC business of between
GBP30.9 million and GBP37.2 million in the three years to 31
December 2021. The maximum amount payable on achieving the GBP37.2
million hurdle is GBP2.5 million and the minimum payable is zero if
the GBP30.9 million hurdle is not achieved.
Bonus share matching plan
The Company introduced in 2016 a share matching plan linked to
the discretionary annual bonus scheme to encourage management and
employees to invest in the long-term growth of the Company.
Subject to Remuneration Committee approval, management and
employees entitled to a bonus may be permitted (but not required)
to defer and reinvest up to 50% of their annual bonus into ordinary
shares which will be released to them after three years together
with any additional matching shares subject to performance criteria
set out below. In 2020 the Remuneration Committee approved the
reinvestment of up to 50% of annual bonuses into ordinary shares by
management and employees (2019: 50%).
In the event that the Company achieves a mid-market closing
price equal to 7% per annum compound growth from the date of
deferral, the participants will receive 50% of the matching shares
benefit. In the event that the Company's share price outperforms
the FTSE All Share Index from the date of deferral, the
participants will receive 50% of the matching shares.
Shares will be awarded in the ratio one share for each share
invested. In the event that this performance condition is not met,
the participants will receive only the ordinary shares acquired
with the deferred bonus.
The bonus shares to be awarded after the three-year period and
subject to performance conditions have been fair valued using a
Monte Carlo simulation. The key variables include the risk-free
rate of 0.32% and volatility of the Company share price of 16%. The
fair value of the matching shares relating to the 2019 bonuses is
GBP209,000 (GBP1.46 per share) and will be amortised over the
three-year vesting period.
Save as you earn (SAYE) scheme
In 2018 the Remuneration Committee approved a SAYE scheme for
the benefit of all employees of the Group whereby employees can
save up to GBP500 per month over a three-year period. At the end of
the three-year period the employees have an option to purchase
Company shares at the agreed exercise price or receive their
savings in cash. The exercise price for the 2020 scheme is 399
pence (2019: 373 pence). The following table outlines the maximum
number of shares under the SAYE scheme:
Fair
Shares value Exercise
under of option price
option (pence) (pence)
2018 SAYE scheme 68,707 74 325
2019 SAYE scheme 106,266 85 373
2020 SAYE scheme 74,567 104 399
--------
249,540
========
29 RESERVES
2020 2019
Share Share Share Share
premium warrant Retained premium warrant Retained
account reserve reserves account reserve reserves
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January 69,242 - 14,039 57,901 58 15,036
Adjustments for changes in
accounting policy - - - - - 6
Profit/(loss) and total comprehensive
income - - 577 - - (850)
Issue of shares 10,762 - - 11,152 (58) -
Share-based payments 38 - (4,863) 189 - 642
Dividends paid - - (1,351) - - (795)
As at 31 December 80,042 - 8,402 69,242 - 14,039
========= ========= ========== ========= ========= ==========
2020 2019
Share Share Share Share
premium warrant Retained premium warrant Retained
account reserve reserves account reserve reserves
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January 69,242 - 12,379 57,901 58 13,394
Adjustments for changes in
accounting policy - - - - - 6
Loss and total comprehensive
income - - (1,771) - - (226)
Issue of shares 10,800 - - 11,341 (58) -
Dividends paid - - (1,351) - - -
As at 31 December 80,042 - 9,257 69,242 - 12,379
========= ========= ========== ========= ========= ============
2020 2019
Non-controlling
interest: GBP'000 GBP'000
Balance as at 1
January 582 527
Interest in trading result
for the year (2) (4)
Interest in investments - securities 231 59
811 582
======== ========
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share premium account Amount subscribed for share capital in
excess of nominal value.
Share warrant reserve Share warrants for which consideration has
been received but which are not exercised yet.
Retained earnings All other net gains and losses and
transactions with owners (e.g. dividends) not recognised
elsewhere.
30 NET ASSET VALUE PER SHARE
Basic 2020 2019
Equity attributable to holders
of the parent (GBP'000) 96,467 90,237
Number of ordinary shares in issue
at the end of the period 32,091,707 27,824,222
Basic net asset value per share
(pence) 300.6 324.3
=========== ===========
Diluted 2020 2019
Equity attributable to holders
of the parent (GBP'000) 96,467 90,237
Number of ordinary shares in issue
at the end of the period 33,567,216 31,315,093
Basic net asset value per share
(pence) 287.4 288.2
=========== ===========
Diluted net asset value per share is based on the number of
shares in issue at the year end together with 1,475,509 shares
deemed to have been issued at nil consideration as a result of
shares which could be issued under the bonus share matching plan,
long term incentive plans and acquisition related share-based
payments.
GBP'000
The movement during the year of the assets attributable
to ordinary shares were as follows:
Total net assets attributable
at 1 January 2020 90,237
Total recognised gains for the
year 577
Share-based payments (4,823)
Issue of shares 11,827
Dividends paid (1,351)
Total net assets attributable
at 31 December 2020 96,467
========
31 NOTES TO THE STATEMENTS OF CASH FLOWS
a) Reconciliation of operating profit to operating cash
flows
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Net operating loss after exceptional
items (1,916) (2,056) (1,981) (974)
Loss/(profit) from discontinued
operations (12) 55 - -
Interest payable 25 221 8 211
Depreciation 871 816 652 695
Loss/(profit) on disposal of
tangible fixed assets 27 43 - 36
Amortisation 8,033 7,668 230 113
Share-based payments 2,262 1,844 - -
-------- -------- -------- --------
9,290 8,591 (1,091) 81
Decrease in long-term receivables - 78 - 78
Decrease/(increase) in current
assets 1,777 (4,638) (81) (133)
Increase/(decrease) in current
liabilities 6,525 5,615 (8) 92
17,592 9,646 (1,180) 118
======== ======== ======== ========
b) Non-cash investing and financing activities
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Acquisition of right-of-use assets
(Notes 8 & 13) 877 42 454 -
Partial settlement of business
combinations through the issue
of shares (Notes 5 & 26) 3,472 - - -
4,349 42 454 -
31 NOTES TO THE STATEMENTS OF CASH FLOWS - continued
c) Net debt reconciliation
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 21,886 19,432 7,826 1,940
Borrowings - - (4,651) (5,986)
Amounts owed by Group undertakings - - 6,334 2,780
Lease liabilities (Note 8) (641) (445) (211) (243)
Net cash/(debt) 21,245 18,987 9,298 (1,509)
======== ======== ======== ========
Group Leases Cash Total
GBP'000 GBP'000 GBP'000
Net cash/(debt) at 1 January
2019 - 13,958 13,958
Cash flows 662 5,474 6,136
IFRS 16 restatement (1,065) - (1,065)
New leases (42) - (42)
Net cash/(debt) at 31 December
2019 (445) 19,432 18,987
Cash flows 620 2,454 3,074
New leases obtained through business
combinations (346) - (346)
New leases (470) - (470)
Net cash/(debt) at 31 December
2020 (641) 21,886 21,245
Company Net borrowings Leases Cash Total
GBP'000 GBP'000 GBP'000 GBP'000
Net cash/(debt) at 1 January
2019 (5,144) - 6,148 1,004
Cash flows 3,923 595 (4,208) 310
Non-cash intercompany movements (2,335) - - (2,335)
Other movements 350 - - 350
IFRS 16 restatement - (838) - (838)
---------------
Net cash/(debt) at 31 December
2019 (3,206) (243) 1,940 (1,509)
--------------- -------- -------- --------
Cash flows 7,704 478 5,886 14,068
Non-cash intercompany movements (6,317) - - (6,317)
Other movements 3,502 - - 3,502
New leases - (446) - (446)
--------------- -------- -------- --------
Net cash/(debt) at 31 December
2020 1,683 (211) 7,826 9,298
=============== ======== ======== ========
32 FINANCIAL INSTRUMENTS
The Group consists of the Company and subsidiary undertakings
whose principal activities are asset management.
The Group's financial instruments, which are held in accordance
with the Group's objectives and policies, comprise:
(i) securities consisting of listed and unlisted equity shares
(ii) a portfolio of listed and unlisted fixed income securities
(iii) cash, liquid resources and short-term debtors and
creditors that arise directly from its operational activities
(iv) short-term and long-term borrowings
32 FINANCIAL INSTRUMENTS - continued
As at 31 December 2020 the following categories of financial
instruments were held by:
Group 2020 2019
Assets Assets
at fair at fair
Loans value Loans value
and receivables through and receivables through
at amortised profit at amortised profit
cost or loss cost or loss
Financial assets per Statement
of Financial
Position GBP'000 GBP'000 GBP'000 GBP'000
Investments 763 8,874 1,915 8,914
Trade and other receivables
- current and non-current 3,184 1,718 5,334 -
Accrued income and other debtors 10,863 - 6,442 -
Cash and cash equivalents 21,886 - 19,432 -
36,696 10,592 33,123 8,914
================= ========= ================= =========
2020 2019
Liabilities Liabilities
at fair at fair
value value
Other through Other through
financial profit financial profit
liabilities or loss liabilities or loss
Financial liabilities per Statement
of Financial Position GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables - short-term 15,892 1,385 9,461 4,661
Bank loans - short and long-term - - - -
Other creditors - long-term 201 5,548 124 5,849
16,093 6,933 9,765 10,510
============= ============ ============= ============
Company 2020 2019
Assets Assets
at fair at fair
Loans value Loans value
and receivables through and receivables through
at amortised profit at amortised profit
cost or loss cost or loss
Financial assets per Statement
of Financial
Position GBP'000 GBP'000 GBP'000 GBP'000
Investments 763 5,130 1,915 6,843
Accrued income and other debtors 643 - 37 -
Amounts owed by Group undertakings 6,334 - 2,780 -
Cash and cash equivalents 7,826 - 1,940 -
15,566 5,130 6,672 6,843
================= ========= ================= =========
2020 2019
Liabilities Liabilities
at fair at fair
value value
Other through Other through
financial profit financial profit
liabilities or loss liabilities or loss
Financial liabilities per Statement
of Financial
Position GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables - short-term 32 - 40 -
Trade and other payables - long-term 211 - 243 -
Other loans - short and long-term 4,651 - 5,986 -
Bank loans - short and long-term - - - -
4,894 - 6,269 -
============= ============ ============= ============
The carrying value of loans and receivables and other financial
liabilities are not materially different to their fair values. The
Group's activities expose it to various types of risk that are
associated with the financial instruments and markets in which it
invests. The main risks to which the Group is exposed are market
price risk, credit risk, interest rate risk and liquidity risk. The
nature and extent of the financial instruments outstanding at the
Statement of Financial Position date and the risk management
policies employed by the Group are summarised below.
32 FINANCIAL INSTRUMENTS - continued
Market price risk
Market price risk is the risk that changes in market prices will
adversely affect the Group's income due to a decline in the
underlying value of assets under management, resulting in lower
fees.
The objective of market price risk management is to manage and
control market price exposure, while optimising the return on risk.
The Group manages strategic equity funds, which are exposed to
market prices. Forestry asset management fees are not linked
directly to market prices.
Market price risk arises from uncertainty about the future
prices of financial instruments held within the Group's portfolio.
It represents the potential loss that the Group might suffer
through holding market positions in the face of market movements.
The investments in equity and fixed interest stocks of unquoted
companies are not traded and as such the prices are more uncertain
than those of more widely traded securities.
Unquoted investments are valued as per accounting policy (j) in
these financial statements. Regular reviews of the financial
results, combined with close contact with the management of these
investments, provides sufficient information to support these
valuations.
Foreign currency risk
The Group is not materially exposed to currency risk as its
assets and liabilities are substantially denominated in
sterling.
Credit risk
Credit risk is the risk that a counterparty will fail to
discharge an obligation or commitment that it has entered into with
the Group.
The Group's maximum exposure to credit risk is:
2020 2019
GBP'000 GBP'000
Loan stock investments 763 1,915
Deferred receivable - short and
long-term 1,718 -
Trade and other receivables -
short-term 3,184 5,334
Accrued income and other debtors 10,863 6,442
Cash and cash equivalents 21,886 19,432
38,414 33,123
======== ========
The Group has an exposure to credit risk in respect of both loan
stock investments and other loans, most of which have no security
attached to them, or where they do, such security will rank after
any bank debt. The Company's exposure to credit risk is restricted
to investments, cash and cash equivalents, other loans, amounts
owed by Group undertakings and accrued income totalling
GBP15,566,000 (2019: GBP6,672,000).
Cash and cash equivalents consist of cash in hand and balances
with banks. To reduce the risk of counterparty default the Group
deposits its surplus funds in approved high-quality banks.
The following table shows the maturity of the loan stock
investments and other loans referred to above:
2020 2019
Loan stock investments GBP'000 GBP'000
Repayable within: - 1 year 763 1,648
1-2 years - 267
2-3 years - -
3-4 years - -
4-5 years - -
763 1,915
======== ========
As at 31 December 2020 loan stock investments totalling
GBP858,000 (2019: GBP858,000) were impaired and provided for.
As at 31 December 2020 other loans totalling GBP54,000 (2019:
GBP54,000) were impaired and provided for.
There is potentially a risk whereby a counterparty fails to
deliver securities which the Company has paid for or pay for
securities which the Company has delivered. This risk is considered
to be small as where the transaction is in respect of quoted
investments the Company uses brokers with a high credit quality and
where the transaction is in respect of unquoted investments, these
are conducted through solicitors to ensure that payment matches
delivery.
32 FINANCIAL INSTRUMENTS - continued
Interest rate risk
The Group's fixed and floating interest rate securities, its
equity, preference equity investments and loans and net revenue may
be affected by interest rate movements. Investments in small
businesses are relatively high-risk investments which are sensitive
to interest rate fluctuations.
The Group's assets include fixed and floating rate interest
instruments as detailed below. The Group is exposed to interest
rate movements on its floating rate liabilities.
The interest rate exposure profile of the Group's financial
assets and liabilities as at 31 December 2020 and 2019 were:
Group Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments 8,874 763 - - - 9,637
Cash - - 21,886 - - 21,886
Trade and other receivables 4,902 - - - - 4,902
Accrued income and
other debtors 10,863 - - - - 10,863
Creditors
* falling due within 1 year (15,452) - - (440) - (15,892)
* falling due after 1 year - - - (201) - (201)
--------------------- -------- --------- ------------ ------------ ---------
9,187 763 21,886 (641) - 31,195
===================== ======== ========= ============ ============ =========
Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments 8,914 1,915 - - - 10,829
Cash - - 19,432 - - 19,432
Trade and other receivables 5,334 - - - - 5,334
Accrued income and
other debtors 6,442 - - - - 6,442
Creditors
* falling due within 1 year (9,320) - - (321) - (9,641)
* falling due after 1 year - - - (124) - (124)
11,370 1,915 19,432 (445) - 32,272
===================== ======== ========= ============ ============ =========
Non-interest-bearing assets comprise the portfolio of ordinary
shares, dealing securities and non-interest-bearing loans.
Fixed rate assets comprise fixed rate loans, unsecured loans and
loans repayable on demand, with a weighted average interest rate of
13.2% (2019: 12.3%).
Floating rate assets and floating rate liability loans are
subject to interest rates which are based on LIBOR and bank base
rates.
Fixed rate liabilities include lease creditors.
32 FINANCIAL INSTRUMENTS - continued
The interest rate exposure profile of the Company's financial
assets and liabilities as at 31 December 2020 and 2019 were:
Company Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments - securities 5,130 763 - - - 5,893
Cash - - 7,826 - - 7,826
Accrued income and
other debtors 643 - - - - 643
Amounts owed by Group
undertakings 6,334 - - - - 6,334
Creditors
* falling due within 1 year (32) - - (211) - (243)
* falling due after 1 year - - - - (4,651) (4,651)
--------------------- -------- --------- ------------ ------------ --------
12,075 763 7,826 (211) (4,651) 15,802
===================== ======== ========= ============ ============ ========
Non-interest-bearing Fixed Floating Fixed Floating
assets/ rate rate rate rate Net
liabilities assets assets liabilities liabilities total
As at 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments - securities 6,843 1,915 - - - 8,758
Cash - - 1,940 - - 1,940
Accrued income and
other debtors 37 - - - - 37
Amounts owed by Group
undertakings 2,780 - - - - 2,780
Creditors
* falling due within 1 year (40) - - (243) - (283)
* falling due after 1 year - - - - (5,986) (5,986)
9,620 1,915 1,940 (243) (5,986) 7,246
===================== ======== ========= ============ ============ ========
Although the Company holds investments that pay interest, the
Board does not consider it appropriate to assess the impact of
interest rate changes upon the value of the investment portfolio as
interest rate changes are only one factor affecting market price
and the impact is likely to be immaterial. The Group had no bank
borrowings at the year end so the sensitivity of interest payable
to changes in interest rates was not relevant in 2020.
Liquidity risk
The investments in equity investments in Aquis Exchange traded
companies may be difficult to realise at their carrying value,
particularly if the investment represents a significant holding in
the investee company. Similarly, investments in equity and fixed
interest stocks of unquoted companies that the Company holds are
only traded infrequently. They are not readily realisable and may
not be realised at their carrying value where there are no willing
purchasers.
The Group has in place a revolving credit facility which it has
available to manage liquidity risk as required.
32 FINANCIAL INSTRUMENTS - continued
The table below analyses the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the
Statement of Financial Position date to the expected maturity date.
The amounts disclosed in the table are the contractual undiscounted
cash flows.
Less Between Between
than 1 and 2 and
As at 31 December 2020 1 year 2 years 5 years
GBP'000 GBP'000 GBP'000
Leases 443 205 14
Trade payables 705 - -
Accruals 14,416 - -
Contingent consideration 1,385 6,247 -
Other creditors 1,561 - -
--------
18,510 6,452 14
======== ========= =========
Less Between Between
than 1 and 2 and
As at 31 December 2019 1 year 2 years 5 years
GBP'000 GBP'000 GBP'000
Leases 323 69 72
Trade payables 469 - -
Accruals 7,730 - -
Contingent consideration 5,000 5,000 2,032
Other creditors 2,029 - -
--------
15,551 5,069 2,104
======== ========= =========
Capital risk management
The Group manages its capital to ensure that entities within the
Group and the Company will be able to continue to trade in an
orderly fashion whilst maintaining sustainable returns to
shareholders.
The capital structure of the Group and Company consist of short
and long-term borrowings as disclosed in Notes 22 and 24, cash and
cash equivalents and equity attributable to equity shareholders of
the Company comprising issued share capital, share premium, share
warrant reserve and retained reserves as disclosed in Notes 26, 27
and 29. The Board reviews the capital structure of the Group and
the Company on a regular basis to ensure it complies with all
regulatory capital requirements. The financial measures that are
subject to review include cash flow projections and the ability to
meet capital expenditure and other contracted commitments,
projected gearing levels and interest covenants, although no
absolute targets are set for these.
The Group aims to hold sufficient cash to fulfil its
requirements with respect to regulatory capital. During the year
the Group and its subsidiary entities complied with all regulatory
capital requirements.
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Debt (641) (445) (4,862) (6,229)
Amounts owed by Group undertakings - - 6,334 2,780
Cash and cash equivalents 21,886 19,432 7,826 1,940
Net assets 97,278 90,819 97,322 88,577
Net cash/(debt) 21,245 18,987 9,298 (1,509)
Net cash/(debt) as a % of net
assets 21.8% 20.9% 9.6% (1.7%)
======== ======== ======== ========
33 FAIR VALUE MEASUREMENTS
Valuation inputs
IFRS 13 - Fair Value Measurement - requires an entity to
classify its financial assets and liabilities held at fair value
according to a hierarchy that reflects the significance of
observable market inputs. The classification of these assets and
liabilities is based on the lowest level input that is significant
to the fair value measurement in its entirety. The three levels of
the fair value hierarchy are defined below.
Quoted market prices - Level 1
Financial instruments, the valuation of which are determined by
reference to unadjusted quoted prices for identical assets or
liabilities in active markets where the quoted price is readily
available, and the price represents actual and regularly occurring
market transactions on an arm's length basis. An active market is
one in which transactions occur with sufficient volume and
frequency to provide pricing information on an ongoing basis.
Valuation technique using observable inputs - Level 2
Financial instruments that have been valued using inputs other
than quoted prices as described for Level 1 but which are
observable for the asset or liability, either directly or
indirectly. The Group had no level 2 investments in both the
current and prior year.
Valuation technique using significant unobservable inputs -
Level 3
Financial instruments, the valuation of which incorporate
significant inputs for the asset or liability that are not based on
observable market data (unobservable inputs). Unobservable inputs
are those not readily available in an active market due to market
illiquidity or complexity of the product. These inputs are
generally determined based on observable inputs of a similar
nature, historical observations on the level of the input or
analytical techniques.
For investments in securities, which includes early-stage
private equity investments, the significant unobservable inputs
used include cash flow forecasts and discount rates. An increase in
the discount rate applied will decrease the fair value of the
investment whereas a decrease in the rate will increase the fair
value. No reasonable foreseeable changes to significant
unobservable inputs will result in a material impact to profit and
loss or equity.
Where investments are in a fund, the net asset value of the fund
is used to determine the fair value of the investment. The net
asset value is typically prepared by the manager of that specific
fund and provided to Group as an investor. The Group review the
valuation and use this as the Level 3 assessment of fair value.
The valuation techniques used by the Company for Level 3
financial assets can be found in accounting policy (j) (ii).
Investments in the unlisted securities relates to investments in
three separate funds where the valuation methodology is considered
a Level 3 assessment.
One of the funds invest in a large number of forestry assets.
The forestry assets are held at fair value in the underlying fund.
An independent valuation of the forests within the underlying fund
is performed annually by forestry valuation experts by reference to
comparable market transactions for each underlying forestry asset
that considers factors including location, maturity of the forest
and size. There is no reasonable change in the inputs in each of
the underlying assets would give rise to a material adjustment to
the fair value of the investment.
However, as a consequence of COVID-19 the external valuer has
reported the valuation of the Group's investment in Gresham House
Forestry Friends and Family Fund LP (GBP2.9 million valuation, of
which GBP811,000 is attributable to non-controlling interest) is
subject to 'material valuation uncertainty' as set out in VPS 3 and
VPGA 10 of the RICS Valuation - Global Standards. Consequently, in
respect of these valuations less certainty - and a higher degree of
caution - should be attached to their valuation than would normally
be the case. For the avoidance of doubt the 'material valuation
uncertainty' declaration, does not mean that the valuation cannot
be relied upon. Rather, this explanatory note has been included to
ensure transparency and to provide further insight as to the market
context under which the valuation opinion was prepared.
The remaining two investments in funds are measured using the
fair value of the net asset value provided by the manager of those
funds.
Further details of the securities portfolio can be found in Note
12 of these financial statements.
An analysis of the Group's and Company's assets measured at fair
value by hierarchy is set out below.
31 December Level Level
Group 2020 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 8,874 4,949 3,925
8,874 4,949 3,925
============ ======== ========
31 December Level Level
2019 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 8,914 6,165 2,749
8,914 6,165 2,749
============ ======== ========
33 FAIR VALUE MEASUREMENTS - continued
31 December Level Level
Company 2020 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 5,130 4,160 970
5,130 4,160 970
============ ======== ========
31 December Level Level
2019 1 3
GBP'000 GBP'000 GBP'000
Financial assets at fair value
through profit and loss
Investments
* Equities 6,843 6,165 678
6,843 6,165 678
============ ======== ========
Set out below is a reconciliation of financial assets measured
at fair value based on Level 3.
Trade
Group Investments and other
31 December 2020 - securities receivables Total
GBP'000 GBP'000 GBP'000
Opening balance 2,749 - 2,749
Total gains and (losses):
In Statement of Comprehensive
Income 875 - 875
Additions 344 - 344
Disposals (43) - (43)
-------------- ------------- --------
Closing balance 3,925 - 3,925
============== ============= ========
Total gains and (losses) for
the year included in comprehensive
income for assets held at the
end of the reporting period 878 - 878
============== ============= ========
Trade
Investments and other
31 December 2019 - securities receivables Total
GBP'000 GBP'000 GBP'000
Opening balance 1,924 1,033 2,957
Total gains and (losses):
In Statement of Comprehensive
Income 339 - 339
Additions 500 - 500
Disposals (14) (1,033) (1,047)
-------------- ------------- --------
Closing balance 2,749 - 2,749
============== ============= ========
Total gains and (losses) for
the year included in comprehensive
income for assets held at the
end of the reporting period 340 - 340
============== ============= ========
33 FAIR VALUE MEASUREMENTS - continued
Company
31 December 2020 Investments Total
GBP'000 GBP'000
Opening balance 678 678
Total gains and (losses):
In Statement of Comprehensive Income 66 66
Additions 269 269
Disposals (43) (43)
------------ --------
Closing balance 970 970
============ ========
Total gains and (losses) for the year
included in comprehensive income for
assets held at the end of the reporting
period 69 69
============ ========
31 December 2019 Investments Total
GBP'000 GBP'000
Opening balance 60 60
Total gains and (losses):
In Statement of Comprehensive Income 132 132
Additions 500 500
Disposals (14) (14)
------------ --------
Closing balance 678 678
============ ========
Total gains and (losses) for the year
included in comprehensive income for
assets held at the end of the reporting
period 132 132
============ ========
The only financial liabilities held at fair value relates to the
deferred consideration on the acquisition of TradeRisks Limited,
the Devco projects and the acquisition of the fund and investment
management businesses of Livingbridge VC LLP amounting to
GBP6,933,000. This is measured using Level 3 valuation techniques.
There were no such financial liabilities held at fair value within
the Company.
Price risk sensitivity
Based on values as at 31 December 2020 a 10% movement in the
fair values of 100% of the Group's equity investments would be
equivalent to a movement of GBP887,000 in both profit and net
assets.
34 RELATED PARTY TRANSACTIONS
Group
During the year management fees totalling GBP672,077 (2019:
GBP693,687) and performance fees of GBPnil (2019: GBP1,944,518)
were invoiced to Gresham House Strategic plc (GHS), a company in
which the Group has a 23.4% interest. At the year end GBP107,867
(2019: GBP75,783) was due from GHS.
During the year the Group was invoiced GBPnil (2019: GBP85,413)
for office and other costs by Corylus Capital LLP (Corylus), an
entity in which Ben Guest, head of the New Energy strategy, has a
material interest. At the year end GBPnil (2019: GBPnil) was due to
Corylus. At 31 December 2020 the loan provided by Corylus to HC
ESS6 Limited (ESS6) totalled GBPnil (2019: GBP3,261,656) Interest
totalling GBP445,014 (2019: GBP205,079) was charged by Corylus to
ESS6.
Company
During the year the Company repaid loans totalling GBP33,259
from (2019: received GBP2,121,736 from) Security Change Limited. At
the year end GBP4,651,055 (2019: GBP4,684,314) was due to Security
Change Limited. No interest was charged during the year (2019:
GBPnil).
During the year the Company received GBPnil (2019: GBPnil) from
Gresham House Finance Limited. At the year end GBP221,400 (2019:
GBP221,400) was owed by Gresham House Finance Limited. No interest
was charged during the year (2019: GBPnil).
During the year the Company received GBP25,877 from (2019:
advanced GBP30,079 to) Gresham House (Nominees) Limited. At the
year end GBP4,202 (2019: GBP30,079) was due from Gresham House
(Nominees) Limited. No interest was charged during the year (2019:
GBPnil).
During the year the Company advanced GBP5,766,306 to (2019:
repaid GBP1,500,561 to) Gresham House Holdings Limited. At the year
end GBP4,464,777 was due from (2019: GBP1,301,529 due to) Gresham
House Holdings Limited. No interest was charged during the year
(2019: GBPnil).
During the year the Company advanced GBP659,344 (2019: GBPnil)
to GridReserve Limited. Interest totalling GBP81,808 (2019: GBPnil)
was charged during the year. At the year end GBP741,152 (2019:
GBPnil) was owed by GridReserve Limited.
During the year the Company advanced GBP489,865 (2019: GBPnil)
to Lister Battery Limited. Interest totalling GBP34,077 (2019:
GBPnil) was charged during the year. At the year end GBP523,942
(2019: GBPnil) was owed by Lister Battery Limited.
During the year the Company advanced GBP493,725 (2019: GBPnil)
to Monets Garden Battery Limited. Interest totalling GBP34,293
(2019: GBPnil) was charged during the year. At the year end
GBP528,018 (2019: GBPnil) was owed by Monets Garden Limited.
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