Annual Results for the year ended 31 December 2022
30 March 2023
Gresham House plc
("Gresham House," "the Group" or "the Company")
Annual Results for the year ended 31 December 2022
20% AUM increase to £7.8bn and 60% dividend increase proposed
The Board of Gresham House plc (AIM:GHE), the specialist alternative asset manager, is pleased to announce another year of strong performance and organic growth, despite the volatile economic conditions of 2022.
Assets under management (AUM) grew once again in the year increasing by 20% to £7.8 billion, with organic growth of £1.1 billion (17% growth). This resulted in net core income rising 25% and growth in operating profit of 34%. The Group has a strong cash position of £32 million and an undrawn committed Revolving Credit Facility (RCF) of £20 million available. The continued strong performance has generated a 19.3% Return on Capital Employed (ROCE) and has led to adjusted diluted Earnings Per Share (EPS) increasing by 12% to 55.2p. As a result, the Board is recommending a 60% increase in the dividend to 16.0 pence, representing a 256% increase in the dividend over three years, which is 3.5x covered by adjusted diluted EPS.
Momentum has been maintained with a positive start to 2023 including new fundraisings across our asset classes.
Financial highlights
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As at/for the year to 31 |
As at/for the year to 31 Dec 2021 |
Change
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Assets under management (AUM) (£bn) |
7.8 |
6.5 |
+20% |
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Cash, liquid and investment in managed assets (£mn) |
70.1 |
78.3 |
-10% |
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Net core income (£mn) |
77.3 |
61.6 |
+25% |
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Adjusted operating profit (£mn)1 |
27.1 |
20.2 |
+34% |
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Adjusted operating margin |
35.0% |
32.7% |
+7% |
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Comprehensive net income (£mn) |
11.4 |
12.0 |
-6% |
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Adjusted diluted Earnings Per Share (EPS) |
55.2p |
49.4p |
+12% |
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Dividend |
16.0p |
10.0p |
+60% |
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Financial highlights
§ Significant AUM growth of 20% to £7.8 billion (2021: £6.5 billion), with organic growth of £1.1 billion (17%) driven by strong fundraising and investment performance in challenging market conditions
§ Strong net core income growth of 25% to £77.3 million (2021: £61.6 million)
§ Growth in adjusted operating profit of 34% to £27.1 million (2021: £20.2 million)1
§ Continued improvement in adjusted operating margin to 35%, at the end of 2022, up from 33% at the end of 2021
§ ROCE of 19.3%, in line with our 20.0% medium-term target (2021: 34.1%)2
§ Adjusted diluted EPS growth of 12% to 55.2 pence (2021: 49.4 pence)
§ Final dividend proposed to increase by 60% to 16.0 pence (2021: 10.0 pence), 3.5x covered by adjusted operating profits and on track to achieve the 3x cover target set as part of GH25 five-year strategic plan
§ Robust balance sheet with undrawn committed £20.0 million RCF positioning the Group well to capture growth in 2023
Strategic highlights
§ Continued successful execution of GH25 including both financial and strategic targets
§ Further international expansion through acquisition of Burlington RE Property Management in Ireland, launch of the Irish Strategic Forestry Fund, and New Zealand carbon credits mandate
§ Consolidated significant market positions in specialist segments; largest listed battery energy storage fund in Europe, seventh largest forestry asset manager globally and largest in the UK, and second largest VCT manager in the UK
§ Delivering against our Corporate Sustainability Strategy and published Task Force on Climate-related Financial Disclosures (TCFD) reporting and roadmap
§ Maintenance of strong culture with high levels of employee engagement, augmented by our employee share ownership schemes
Commenting on the results, Tony Dalwood, Chief Executive of Gresham House, said:
"We are ahead of our GH25 five-year targets through the strong execution of our financial and strategic goals to create shareholder value. Importantly, we are delivering strong investment performance for clients.
"During a year in which many fund management businesses have found growth challenging we have increased AUM organically by 17% and raised the proposed dividend by 60%.
"Our differentiated and relatively resilient asset classes, together with our investment track records, will provide further growth opportunities both in the UK and internationally.
"We move into 2023 in a strong position and have continued to raise funds across a number of our asset classes. The long-term potential to scale Gresham House remains our ambition."
Gresham House is hosting its Annual Results webinar at 09:00am today.
https://greshamhouse.zoom.us/webinar/register/WN_0sCf8iihSr6QxGJVMB7Uow
1. Adjusted operating profit metric defined as operating profit after charging interest, and excluding depreciation and amortisation, acquisition and restructuring related expenses from acquisitions, acquisition-related share-based payments and remuneration, profits on disposal of property, plant and equipment, net performance fees and net development gains. Adding back the above items, net gains on investments and fair value movements, tax and losses from discontinued operations results in net comprehensive income. A reconciliation is included within the Financial Review.
2. Return on capital employed defined as adjusted operating profit, plus net performance fees, net realised gains on development activity and fair value movements in investments, less fair value movement in contingent consideration, divided by opening net assets, adjusted for shares issued in the year.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014
For more information contact:
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Gresham House plc Tony Dalwood, Chief Executive Kevin Acton, Chief Financial Officer
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+44 (0)20 3837 6271
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Houston Alexander Clelland Kay Larsen Kelsey Traynor
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+44 (0)20 4529 0549 |
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Canaccord Genuity Limited - Nominated Adviser and Joint Broker Bobbie Hilliam Harry Pardoe
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+44 (0)20 7523 8000 |
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Jefferies International Limited - Financial Adviser and Joint Broker Paul Nicholls James Umbers
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+44 (0)20 7029 8000 |
This announcement contains forward-looking statements that involve substantial risks and uncertainties, and actual results and developments may differ materially from those expressed or implied by these statements. These forward-looking statements are statements regarding Gresham House plc's intentions, beliefs or current expectations concerning, among other things, its results of operations, financial condition, prospects, growth, strategies, and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as of the date of this announcement and Gresham House plc does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this announcement
Chairman's statement
Introduction
I am delighted to update shareholders on another year of strong returns, with significantly enhanced profits and scale. Indeed, it is notable that the business now generates annual profits over two times greater than the market value of Gresham House immediately prior to the new management team taking the reins in 2014 and evolving the company into an alternative asset manager.
Economic uncertainty continued during the year driven by the war in Ukraine, higher energy prices, rising inflation and a cost of living crisis, and yet the business has continued to perform, demonstrating the quality of the leadership team and the resilient nature of Gresham House's investment strategies. The team's focus remained on performance in 2022, supported by our commitment to sustainability, and with continued progress made towards the delivery of our five-year strategy, GH25, which is at the heart of all our corporate activity.
The resilience the Group demonstrated during this financial period is testament to the employees and their hard work, led by a committed management team, which underpins how we drive shareholder value. Gresham House is now firmly established in the market as an expert and innovative investor, providing client solutions with sustainable strategies and leading the way for this growing focus globally, with the financial returns continuing to speak for themselves.
Activity in the period
Funds were raised across all asset classes in challenging conditions. It was a busy year for everyone in the Group across all our divisions, including our most recent acquisition, Burlington RE Property Management Limited (Burlington) in Ireland.
Overall, Gresham House continues to be positioned as an investment solutions provider, creating new products and investments for clients and leading the way with innovation in specialist asset classes with high-growth potential. The Board was also pleased to see that the 2022 Employee Engagement Survey once again showed high levels of satisfaction and commitment amongst staff. I must take this opportunity to thank all the employees at Gresham House who are the engine of the business, maintaining our momentum.
Financials
In a challenging environment, it is commendable that the Group has delivered such strong results. AUM once again rose and at the end of the financial period was £7.8 billion, 20% up on last year. We saw net core income up 25%, while adjusted operating profit was up 34% at £27.1 million. Total comprehensive net income for the year was £11.4 million, reflecting adjusted operating profit, less the impact of amortisation from management contracts acquired, value movements on the balance sheet and tax (2021: £12.0 million). We also achieved Return on Capital Employed (ROCE) of 19.3% a metric the Board and executives are proud of.
We had £32 million of cash plus substantial development and investment assets on the balance sheet at 31 December 2022, which alongside the £20 million Revolving Credit Facility puts us in a strong position for the upcoming year.
Dividend
The Board recognises the importance of total shareholder return and hence as part of our GH25 target, we also committed in 2022 to increase the dividend to a level covered by earnings of three times by 2025. Having made good progress in the year, the Board is pleased to propose an increase in dividend to 16.0 pence, up 60%, which results in a 256% increase over three years and is 3.5x covered by adjusted diluted earnings per share.
Sustainability
Gresham House has been ahead of the curve in terms of sustainability and is now a market leader, managing assets across forestry, battery energy storage, solar, wind, as well as housing and sustainable infrastructure. With the growth of sustainability as a global focus, it has been clear this year that this increased attention has also brought an increase in the level of scrutiny and regulation.
At Gresham House, we are dedicated to being transparent with our sustainable approach, embedding climate-related risks and opportunities in our business processes and identifying clear goals that we set out as part of our GH25 strategy. This includes enhancing our Task Force on Climate-related Financial Disclosures (TCFD) reporting. Further to this, the Group is working to define and finalise its net zero commitments and targets. We will also be publishing our third annual Sustainable Investment Report shortly.
The Group is held accountable by the Sustainability Committee, which was established in July 2021 and is chaired by our Senior Independent Director, Gareth Davis. In addition, the Sustainability Executive Committee regularly keeps the Board level Sustainability Committee up to date on progress made by the Group against core sustainability objectives.
Shareholders
Gresham House has significantly increased in value since the management buy-in led by our Chief Executive Tony Dalwood eight years ago. Our communication with shareholders has at all times been a priority. We have ongoing engagement through a number of channels and continue to evolve the way in which we communicate via news flow and announcements. We also introduced a new monthly video series in 2022 featuring our CEO and various heads of departments within the business, to provide insight into how the various asset classes are performing and how they are positioned to deliver returns even in the face of macroeconomic challenges.
In November 2022, we also hosted our second Capital Markets Day, which was focused on the resilience of Gresham House's specialist asset classes including the inflation and interest rate-hedging characteristics of our range of investment strategies. This was an opportunity to engage with the market and we received overwhelmingly positive feedback from attendees of the virtual event.
Board
The Board remains committed to high integrity whilst delivering shareholder value, with four non-executive directors and myself in post. During this year, following a thorough process, we welcomed Sarah Ing as a Non-Executive Director and Audit Committee Chair following the conclusion of the Company's 2022 AGM. Sarah has a long career as a top-rated equity analyst covering the UK general financial services sector and we are delighted she has chosen to join us.
I first joined the Board alongside the management buy-in at the end of 2014, so 2023 will be my ninth year as Chair. In accordance with corporate governance practice, I therefore intend to retire when the results for that year are put before shareholders at the AGM in the spring of 2024. Our Senior Independent Director, Gareth Davis, will lead the process of selecting my successor.
Annual General Meeting
We will be holding our Annual General Meeting (AGM) in person again this year and look forward to welcoming shareholders to our 2023 AGM at Eversheds Sutherland (International) LLP, 1 Wood Street, London, on Thursday 11 May 2023.
Outlook
It is fair to say that the past few years have been challenging, with 2022 being no exception. Despite this, Gresham House has demonstrated its resilient approach to long-term investing, and delivered on its strategy, creating a strong foundation for continued growth in 2023. The senior management are sensitive to the challenges within the global macroeconomic environment and have themselves admirably committed to zero salary increases in 2023.
While we expect 2023 to remain volatile, we are confident that an unwavering commitment to our core strategy will drive further progress towards achieving our GH25 goals and we will be developing the framework for our longer term strategic ambitions during the course of the year. While there are undoubtedly macroeconomic challenges for the Company and its clients to navigate, we continue to work hard to grow AUM through our distribution channels.
As we look ahead, we anticipate that the momentum achieved in expanding our capabilities across the UK and overseas will continue, following deals in Australia, New Zealand and Ireland in our forestry and real estate divisions in 2022. We also anticipate further expansion domestically and internationally across other key asset classes, with battery energy storage activities set to establish an overseas foothold in 2023. It is evident that this management team has dedicated itself to growing shareholder value over the last eight years.
While growth has been primarily organic, this has been enhanced by acquisitions with clear strategic and financial integration benefits. During this period there have been many challenges, however the team has exhibited integrity, energy and ambition whilst focusing on shareholder value objectives. It is a privilege to Chair a Group where financial, social and environmental returns are positive.
Anthony Townsend
Chairman
29 March 2023
Chief Executive's report
Overview
We are now three years into our GH25 five-year plan. A plan which aims to build value for shareholders through the growth and expansion of this sustainability-focused, specialist alternative asset management business. Substantial progress towards the successful delivery of both our strategic and financial goals is evident. Importantly, we have typically exceeded our target returns for our investors.
Gresham House continues to invest in its people and platforms to build a sustainable long-term investment business fit for the future. The culture of the business has evolved as it has grown, but the focus on "making a difference" remains. To meet the needs of clients, who are increasingly looking for financial returns alongside positive ESG outcomes, requires a dynamic and aspirational team.
Retaining our top talent is an absolute priority and whilst financial incentives are very important, working in an entrepreneurial, dynamic, and enjoyable environment is highly valued. I am extremely proud to be working with a group of people, now 223 in number, who share qualities of ambition, energy, and integrity. This is a culture that will stand the test of time and will therefore endure the challenges presented by the macroeconomic outlook.
Private capital investment is essential to support a world which is striving to grow and evolve. As recent history reminds us, governments have stepped in on multiple occasions with sizeable commitments of public money to address serious issues including the Global Financial Crisis, the COVID-19 pandemic, energy security and war. We believe it is imperative that private capital increasingly becomes the major contributor to future investment.
Gresham House differentiates itself by providing a number of real asset classes which were previously not on the investment radar. We have set out to institutionalise these areas for investment and then scale the assets under management. This can take time. Time to educate investors and to prove that the asset class can deliver both the appropriate financial and non-financial returns. We believe we have a track record of achieving this, with examples including forestry and battery energy storage, and are well on the way to meeting this objective within both our sustainable infrastructure and affordable housing platforms.
Meanwhile, our Strategic Equity division has a critical role to play in facilitating economic growth through the support it provides to growth companies at an early stage with capital and strategic guidance. This is an area where Gresham House can make a difference for the future of the UK and Irish economies through innovation and entrepreneurialism.
Our strong performance throughout 2022 was driven by maintaining our investment discipline and by continuing to operate in our specialist asset classes, which have shown resilience in a volatile year. We have also been able to effectively deploy balance sheet capital to grow the business which has generated additional strong financial returns.
We have further established the business as a provider of solutions for existing and prospective clients. Natural capital and sustainable investment opportunities are areas where we have expertise and intellectual property. We are focused on delivering investments which meet the ESG criteria of our investor base whilst also delivering on their primary remit to achieve capital and income growth.
The 12-month period was characterised by market volatility, rising inflation, the cost-of-living crisis and the threat of recession. In the face of this challenging environment, our diversified and innovative portfolio of asset classes continued to deliver returns, whilst real assets provided resilience against rising inflation and interest rates. As a result, we saw clear growth throughout 2022 in portfolio allocation to alternatives and real assets which is continuing into 2023.
Gresham House funds focused on Forestry, New Energy, Sustainable Infrastructure and Real Estate (UK Housing and Commercial Property in Ireland) delivered good progress both in terms of fundraising and importantly in the deployment of those funds. We were also pleased to see positive net inflows in our Strategic Equity funds during a period when many investors have been negative on UK equity markets.
Across the Real Assets division, we have offerings that provide nature-based solutions covering for example afforestation (planting trees), carbon credits as well as the development of biodiversity net gain habitat banks (rewilding areas to offset the impact of new property developments). This is an area of increasing focus for clients, and we continue to provide solutions to meet these specific needs.
Our international presence is expanding, with real estate and forestry investments in Ireland, Australia and New Zealand. At the end of 2022, we further extended our international capabilities with the launch of the Irish Strategic Forestry Fund that will support the creation of new forests and make a significant contribution to Ireland's Climate Action Plan. Further international expansion will follow in 2023 as we look to expand our battery energy storage capabilities into overseas markets in Europe and the US.
Gresham House's focus on delivering measurable returns on investment, underpinned by long-term sustainability, is reflected in the quality of our financial performance in 2022. AUM at the end of December 2022 was up 20% at £7.8 billion, of which 17% was organic growth, as we near our GH25 target of £8.0+ billion (upgraded from £6.0 billion in March 2022). Adjusted operating profits were up 34% at £27.1 million, with an improving adjusted operating margin of 35%.
ROCE was 19.3% in the year, which is in line with our target of "20% over the medium term" (upgraded from 15% in March 2022).
In 2022, we also established a dividend policy targeting three times adjusted operating profits coverage by the end of GH25 and are pleased to be making good progress, increasing the proposed dividend by 60% to 16.0 pence (2021: 10 pence), which is 3.5x covered by adjusted diluted earnings per share.
Strategic objectives and sustainability
Gresham House has been focused on providing sustainability-focused investment strategies for the past eight years, having been at the forefront of this innovative approach to asset management and the delivery of returns. During that time, we have witnessed first-hand how sustainability has become a central consideration for most, if not every, investment decision. At the same time, there has been a palpable shift in emphasis towards investor demand for tangible returns, and this was particularly notable in 2022 amid a tough macroeconomic environment. Our performance in 2022 demonstrates that Gresham House's diversified mix of real assets and equity strategies enables us to work with clients to find solutions that deliver the financial return on investment they seek.
As we work to expand our international activities we are committed to maintaining market leadership in many of our specialist asset classes.
Sustainability
The Group has continued throughout 2022 to embed the Corporate Sustainability Strategy that we set out in last year's Annual Report.
We made further progress throughout the year against the measurement of our sustainability objectives and worked closely with specialist consultants to calculate the carbon footprint of our operations and investments. As we move further into 2023, we have built on our Task Force on Climate-Related Financial Disclosures (TCFD) reporting, with enhanced reporting of climate risks and opportunities across operations and investments including the goal to set net-zero science-based targets in line with the Paris Agreement.
GH25
Since setting out our GH25 strategic targets in March 2020, we have made strong progress, prompting us to upgrade these GH25 objectives in March 2022, as outlined below. We continue to advance towards achieving these GH25 milestones and will be looking at our ambitions for the next five years in the coming twelve months.
These ambitions will continue to be centred around the delivery of long-term sustainable returns through the deployment of funds into UK early and later stage SMEs within our Strategic Equity division and through the innovative and scalable asset classes within our Real Assets division, where increased focus will likely centre on the climate transition to net zero as well as natural capital, encompassing a range of assets including forestry, and biodiversity net gain habitat banks.
Financial objectives
§ AUM growth - 20% £7.8bn growth in 2022 - organic and acquisitive
§ Operating margins - improved to 35% from 33% - investment in the business - creating a higher quality business, comparable to more mature peers
§ Maintain ROCE of 20% on balance sheet in the medium term - in line at 19.3% in 2022
Strategic objectives
§ Recognised leader in sustainable investment and governance
§ Multiple award wins, second Sustainable Investment Report, Stewardship Report approved by the FRC, Corporate Sustainability Strategy being delivered and DEI committee formed and actions being taken
§ Superior returns for funds managed:
§ Top quartile - LF Gresham House UK Multi Cap Income Fund ranked number 1 out of 75 funds in the UK Equity Income sector since launch in 2017 to 31 December 2022
§ Long-term performance - Forestry as an asset class continues to show very strong performance, with our long-established forestry funds reporting an average return in excess of 14.2% since inception
§ GRID annualised NAV total return since IPO of 17.2% against a target of 8%
§ Strong strategic positions in our specialist areas1:
§ Largest battery storage investment trust in the UK and Europe: GRID
§ Largest commercial forestry asset manager in the UK and now operating in Ireland, Australia and New Zealand
§ Second largest VCT player in the UK: Baronsmead and Mobeus VCTs
§ Develop the business internationally - Burlington acquisition in Ireland, launch of Irish Strategic Forestry Fund
§ Enhance Gresham House brand - now an established asset manager that has become the go-to on our specialist asset classes (e.g. vertical farming or battery storage)
1 Measured by size of assets under management
Employees and clients
In 2022, we again expanded the breadth and depth of our client base. This has been supported by the persistent structural increase in allocations to alternatives, and as new institutional investors recognise and are attracted by the quality of returns that impact investing can deliver, from our sustainability focused asset classes. We are proud to work with 16 Local Government Pension Schemes (LGPS) across our Real Asset strategies. In our Strategic Equity division, our award winning LF Gresham House UK Multi Cap Income Fund received net inflows in the year and has now been included within three of the national wealth management central coverage lists (Brewin Dolphin, Rathbones and Evelyn).
All this progress has been driven by our excellent team. We have invested further in bringing top-flight talent on board and I am pleased that our annual employee engagement survey registers a high level of advocacy for, and alignment with, the Gresham House brand and business, as we continue to build our profile and reputation as a leading investor.
The dynamic and entrepreneurial culture at Gresham House is augmented by our employee share ownership scheme. Share ownership is important to the business as it encourages better alignment of our people with our shareholders as they are given the opportunity to become one themselves. We offer all employees two methods through which to access share ownership: Save As You Earn, which enables employees to buy a limited amount of shares out of their monthly salary and usually at a significant discount to the market price; and Bonus Share Matching, which allows employees to opt to 'roll' some of their annual bonus (if any is awarded) into shares.
We are proud of our efforts to build on our meritocratic culture of excellence at Gresham House, driven by our firm belief that our employees are our most valuable asset.
AUM
AUM growth of £1.3 billion to £7.8 billion represented an increase of 20% in the year (2021: £6.5 billion). The main driver of this growth was 17% organic, plus the acquisition of Burlington in Ireland accounted for the remaining 3%.
We drove net inflows across every division generating £0.8 billion AUM growth and were particularly pleased to note net inflows in the Strategic Equity division when markets were experiencing material outflows. Fundraising in our Real Assets division underlined the attractiveness of the asset classes in which we operate across both institutional and wholesale distribution channels.
AUM performance highlighted the two sides of the business, with the Strategic Equity division, which is more exposed to short-term equity market movements, experiencing value reductions of £0.2 billion, and the Real Assets division delivering positive performance of £0.5 billion, highlighting the diversified nature of the asset classes that the Group manages.
Real Assets
Forestry
Gresham House has continued to grow and is now the seventh largest forestry investment manager and ninth largest manager of natural capital in the world by value, with £3.4 billion of client assets in the UK, Europe and Australasia.
Our approach to investing in sustainable forestry, encompassing forestry and land management solutions, diversifies an investment portfolio and provides exposure to potential increases in the value of timber, carbon, natural capital and underlying land value that support long-term management programmes. The outlook for the asset class remains positive in the face of a weakened macroeconomic environment, with forestry historically demonstrating resilience in high interest rate environments due to the low levels of debt while also remaining resilient in the face of rising inflation.
In 2022, we acquired a portfolio of New Zealand forestry and carbon credit assets for £49 million on behalf of an institutional client. We also established the Irish Strategic Forestry Fund, which was launched at the end of the year and will provide up to €200 million for existing forestry assets in Ireland in addition to creating new forests and hopes to make a significant contribution to Ireland's Climate Action Plan. We are very pleased that the Irish Strategic Forestry Fund has attracted a €25 million cornerstone investment from The Ireland Strategic Investment Fund, Ireland's sovereign development fund.
To support these international ambitions, we have hired expert forestry investment managers locally in Ireland and Australia to help our UK-based teams maintain the momentum of our activities in these countries.
In the period, we were delighted to open an office in Edinburgh, shifting our headquarters in the south of Scotland to the capital, more conveniently located for both our team and visiting clients and counterparties.
New Energy - Battery Energy Storage
Gresham House invests in battery energy storage via Gresham House Energy Storage Fund plc (GRID), the UK's largest fund investing in operational, utility-scale battery energy storage systems. A market leader in battery storage, in 2022 GRID was named Best Sustainable Specialist Fund at the Investment Week Sustainable Investment Awards for the second year in succession as well as winning the Environmental & Renewables category at the Investment Company of the Year Awards.
GRID saw strong progress throughout 2022 supported by the increasing recognition of the key role battery energy storage plays in the journey towards widespread deployment of renewable energy and decarbonisation. This was evidenced by the success of GRID's £150 million fundraise in May 2022, which was significantly oversubscribed.
In November 2022, GRID also secured £155 million of incremental term debt through an accordion arrangement under existing facilities to further support its deployment ambitions.
At 31 December 2022, GRID's portfolio included 20 operational sites with a total capacity of 550MW and GRID has since completed on a further 40MW operational site. GRID has a pipeline of 1.4GW as at 13 March 2023, of which 437MW is under construction and expected to complete in 2023 and 940MW of pipeline in the UK and Ireland are expected to start construction in 2023.
Furthermore, following shareholder approval of changes to its investment policy in April 2022, GRID is now permitted to expand internationally. As the Battery Energy Storage Systems (BESS) market opportunity expands globally, GRID is now well placed to address opportunities outside of the UK, in areas where there is regulatory clarity and compatibility.
New Energy - Solar and Wind
In renewable energy, in 2022 we made notable progress in our strategy to deliver collocated battery and renewable energy projects. Collocation is where a battery energy storage system is built alongside renewable energy generation and both assets share the same grid connection infrastructure. These projects provide significant benefits to the UK Grid by improving system reliability and enabling greater integration of renewables and the team is working towards the launch of a new institutional fund to prioritise investment in this area, with the aim of a first close in early 2023.
In July, we announced the acquisition of two fully consented solar and battery energy storage projects in Durham, UK from Canadian Solar. One of these projects exchanged contracts with the Gresham House Solar Distribution LLP before the end of 2022 and the remaining project has since been sold as part of the launch of the new renewables and collocated battery energy storage fund. This is an example of how we have used the Group's balance sheet to warehouse assets ahead of launching new funds. We consider collocation to be a strong area of growth both in the UK market and internationally, which we are well placed to address.
Sustainable Infrastructure
Gresham House deploys its Sustainable Infrastructure strategy to target private capital returns from innovative solutions required to evolve key environmental and societal challenges.
Thematically, the Sustainable Infrastructure strategy covers decarbonisation; health and education; resource efficiency; digital inclusion; regeneration; and waste solutions.
In 2022, assets under management passed £490 million with £133 million from investors raised in Q3 2022 despite a challenging macroeconomic environment. The investor demand for Sustainable Infrastructure includes the regional growth impact created by the division's investments via Gresham House's BSIF I and BSIF II funds alongside two North West regionally focused co-investment funds.
Areas that made particular progress in 2022 included high-speed broadband and vertical farming.
In January 2022, Gresham House invested £164 million in Borderlink Broadband through its BSIF strategy to improve digital inclusion in underserved communities in the UK. In September and October 2022, Borderlink, which trades as GoFibre, secured a £6.6 million contract in Teesdale and a £7.3 million contract in North Northumberland as part of the UK Government's £5 billion Project Gigabit (F20) programme to upgrade broadband infrastructure.
Cornwall-based Wildanet, a high-speed broadband provider also backed by Gresham House, announced in early 2023 two contract wins under the Project Gigabit initiative to connect hard-to-reach homes and businesses in Cornwall and further support digital inclusion.
Our activities in vertical farming also made substantial progress in 2022. Vertical farming is conducted in controlled indoor environments, using soilless techniques. These techniques optimise plant growth and minimise land requirements, using 95% less water than traditional farming with no requirement for chemicals or pesticides.
Fischer Farms, which grows a range of leafy greens and herbs, received a £26 million investment in 2021 from BSIF I and II. In 2022, it achieved capacity to supply up to 6.5 tonnes of leaf salad, lettuce, leafy herbs and other fresh produce to UK supermarkets daily. In November 2022, Fischer Farms announced that construction was completed on its Farm 2, the world's largest vertical farm, in Norwich, alongside a vertical farm facility in Lichfield and plans to develop a third in Hull in 2023.
Within the BSIF strategy's regeneration theme and supported by Gresham House, the Environment Bank have created a new infrastructure asset class to invest in the production of biodiversity net gain habitats that will build nature back better. The natural capital habitat banks created will offer property developers and other counterparties a mechanism to ensure new commercial developments deliver a biodiversity net gain and meet the new Environment Act regulation due to come into force later this year. We anticipate strong demand for this asset class later in 2023 and beyond.
Real Estate
The UK's shortage of affordable housing is well documented and has been caused by demographic trends and historic undersupply of new homes. Gresham House's listed and unlisted housing investment vehicles - Gresham House BSI Housing LP, ReSI plc and ReSI LP - address a range of affordable housing problems.
Our funds offer a number of attractive characteristics including inflation-linked income, potential for long-term capital appreciation above inflation, secure and sustainable rental stream from thousands of residents, low volatility and high demand and diversification compared with traditional asset classes.
During 2022, Gresham House committed more than £185 million to 1,134 homes, driven by a focus on improving the quality of, and institutionalising, the UK's five million privately rented homes; and providing affordable home ownership options.
At 31 December 2022, the division had AUM of £794 million, a rise of 33% year-on-year (excluding the Burlington acquisition) and managed 6,000 homes across the UK.
During 2022, 655 shared ownership homes were acquired from housing associations, providing £68 million of long-term capital to be reinvested into either upgrading existing stock to ensure they meet the enhanced fire safety and energy efficiency standards, or into funding the development of new affordable homes.
The housing division raised over £80 million of new capital during the first half of 2022, with a number of raises planned for the second half of the year delayed to 2023 following the impact of volatility in September.
The Real Estate division also expanded overseas and into commercial property in 2022 with the announcement in March of the acquisition of the Burlington RE Property Management Limited (Burlington), one of Ireland's premier and top performing commercial property asset and development management companies, for an initial consideration of £1.7 million. At 31 December 2022, Burlington managed or advised on assets of €280 million.
Strategic Equity
The Strategic Equity division comprises both Public Equity and Private Equity strategies. It has a strong and differentiated market position to invest across the business lifecycle from relatively early-stage private growth businesses right through to more mature listed businesses. The breadth of touchpoints with companies of all sizes, public and private, gives the team a differentiated perspective and strong network that enhances the overall investment process.
Public Equity
Investors continued to retreat from UK equities in 2022, due to concerns around rising energy prices, higher inflation and the cost-of-living crisis. Nevertheless, Gresham House's Public Equity investment funds saw net inflows of £0.2 billion in the face of significant outflows across the sector.
Gresham House funds invest in high-quality, publicly quoted companies that have the potential to increase their value over the medium to long-term through strategic, operational or management initiatives. The challenging market backdrop in 2022 led to a sharp sell-off in equities and drove significant volatility. However, weaker share prices in listed companies that have strong longer-term fundamentals have provided a number of investment opportunities.
While UK equity markets saw pullbacks over the year, our longer term performance in our open-ended performance remains strong, demonstrating good-risk adjusted returns. Over the past ten years to 31 December 2022, the LF Gresham House UK Micro Cap Fund has been a top quartile performer in the IA UK Smaller Companies sector. Our LF Gresham House UK Multi Cap Income Fund is ranked one out of 76 funds in the UK Equity Income sector over five years to 31 December 2022 and remains number one in the sector since launch in June 2017. While our newest fund, the LF Gresham House UK Smaller Companies Fund outperformed the IA UK Smaller Companies sector and was ranked fourth out of 48 funds in the sector since inception in 2019 to 31 December 2022.
Strategic Equity Capital plc, the UK equity investment trust we manage, adopted a new share buyback policy in 2022, alongside a commitment from Gresham House to buy shares to support alignment. These initiatives plus the improving relative performance supported a significant reduction in the discount to NAV from an average of 14.6% in 2021 to 6.1% as at 31 December 2022.
In our Strategic Public Equity LP, the valuation shows a 16.9% IRR with the fund being 99.2% drawn as at 31 December 2022, generating relative and absolute strong performance.
Private Equity
Private Equity has a crucial role to play in supporting the growth of innovative and value-generating companies, as well as contributing to the UK's long-term economic growth story. The Private Equity division at Gresham House comprises of our Venture Capital Trust (VCT) platform which is the home of the Baronsmead and Mobeus VCTs. With a combined AUM of £0.8 billion in this area, we are the second largest VCT manager in the UK. The long-term opportunities for this area of the business are significant. Private capital and VCTs have a critical role to play in terms of building a more sustainable and green economy, helping to accelerate the levelling up agenda and reducing regional economic inequality.
The Baronsmead VCTs completed a £75 million fundraise in the FY22 tax year and announced a further fundraise in late 2022. The full £40 million and an overallotment of £10 million was completed in 2023.
Now fully integrated into the Gresham House Ventures platform, the successful track record of the Mobeus VCTs has supported the launch of two new share offers in 2022, experiencing significant investor demand, with the £111 million of share offers being significantly oversubscribed.
These successful fundraises have enabled us to deploy increasing levels of capital to support the growing demand from entrepreneurs for growth equity, and to provide greater levels of funding to existing portfolio companies during 2022. The Mobeus VCTs invested £17 million into unquoted companies in the year, and the unique hybrid Baronsmead VCTs invested £31 million into both quoted and unquoted businesses.
In addition to the VCT activity, we are also exploring a differentiated Limited Partnership opportunity, for investors in both the UK and Ireland, providing secondary capital to established Gresham House Ventures portfolio companies. The importance of nurturing entrepreneurial management and growth companies through the provision of capital and advice has never been more important. The resultant economic and social benefits are well documented.
Outlook
We move into 2023 in a good position and with a broadening range of innovative asset classes and strategies as we aim to continue to generate strong investment returns.
We continue to progress towards the achievement of our GH25 five-year strategic plan and we are well positioned to build further on this beyond 2025.
We have grown our international platform in several asset classes and intend to expand our reach further, particularly in forestry and battery energy storage, where there is clear potential for overseas growth.
The requirement for the economy to evolve in sustainable ways is driving demand for all our asset classes. Importantly, we see attractive financial returns from carbon sequestration, energy transition, sustainable infrastructure, affordable housing and growth capital investing.
With macroeconomic and capital market uncertainty comes opportunity when taking a long term view and it is great to see, investor appetite for our VCT investments, which will support growth companies and regional prosperity, remains robust. At the same time, depressed valuations in listed equity are providing some highly attractive buying opportunities into companies with compelling long-term fundamentals.
The Company is generating in line with its 20% ROCE targets and this is something to be proud of as we exhibit growth and the shareholder benefits of the compounding effect. I am thankful to my senior management team and all those contributing to this success employed at Gresham House.
A team with ambition, integrity, capability and energy is the basis of a winning one that also strives to make a positive difference.
Tony Dalwood
Chief Executive
29 March 2023
Financial review
The Group has grown Assets Under Management (AUM) by 20% to £7.8 billion in the year (2021: £6.5 billion). Of this £1.3 billion growth, £1.1 billion (17%) was organic driven by fundraising and performance, with the remaining £0.2 billion (3%) coming from the acquisition of Burlington RE Property Management Limited (Burlington), the award winning Irish real estate business.
This AUM growth has delivered an increase in net core income of 25% to £77.3 million (2021: £61.6 million) and an adjusted operating profit of £27.1 million, up 34% on last year's £20.2 million.
The Group has continued to use its balance sheet to develop projects and support the growth of the business, with the sale of battery energy storage projects and other development activity delivering an additional £0.6 million in net gains in the year (2021: £1.8 million).
Total comprehensive net income after the deduction of tax, amortisation and other acquisition-related costs has delivered a profit of £11.4 million (2021: £12.0 million). Following the update to our dividend policy, where we set the target dividend cover at three times adjusted operating profits by the end of the GH25 strategic plan in 2025, we are pleased to propose a 60% increase in the dividend for 2022 to 16.0 pence (2021: 10.0 pence), which is 3.5x covered by adjusted diluted earnings per share.
Assets Under Management
The composition and quality of the Group's AUM is one of the key differentiating factors for Gresham House. We operate in specialist markets, with long-term underlying asset classes in long-term vehicles. This provides visibility over future revenue streams for the Group and comfort when markets are volatile. Overall, the Group has c.90% of its AUM in long-term vehicles such as Limited Partnerships (LPs), listed funds or segregated mandates. By way of example, the weighted average life of the LPs that we manage is 14 years, and in asset classes which are not closely correlated with market movements such as forestry.
|
|
AUM as at 31 December 2021 |
Net fund flows1 |
Performance |
Net funds won/ acquired |
AUM as at 31 December 2022 |
|
AUM movement |
AUM movement |
|
|
£mn |
£mn |
£mn |
£mn |
£mn |
|
£mn |
% |
|
Strategic Equity |
|
|
|
|
|
|
|
|
|
Public Equity |
1,037 |
167 |
(138) |
- |
1,066 |
|
29 |
3% |
|
Private Equity |
887 |
16 |
(112) |
- |
791 |
|
(96) |
(11)% |
|
Subtotal |
1,924 |
183 |
(250) |
- |
1,857 |
|
(67) |
(3)% |
|
|
|
|
|
|
|
|
|
|
|
Real Assets |
|
|
|
|
|
|
|
|
|
Forestry |
2,953 |
125 |
340 |
- |
3,418 |
|
466 |
16% |
|
New Energy & Sustainable Infrastructure |
1,213 |
367 |
198 |
- |
1,778 |
|
565 |
47% |
|
Real Estate |
448 |
115 |
(12) |
243 |
794 |
|
346 |
77% |
|
Subtotal |
4,614 |
607 |
526 |
243 |
5,990 |
|
1,377 |
30% |
|
Total AUM |
6,538 |
790 |
276 |
243 |
7,847 |
|
1,310 |
20% |
1 Includes funds raised, redemptions and distributions.
Net fund inflows in the year were £0.8 billion, with positive net inflows from each division. The Strategic Equity division performed exceptionally well in challenging market conditions adding net inflows of £0.2 billion, when c.£25.0 billion was withdrawn from funds in 2022. This is testament to the track record of the investment team and the progress our wholesale distribution team are making.
We continued to raise capital for our LPs, listed vehicles and segregated mandates in 2022.
Our Forestry division raised £0.2 billion in LP funds, with a notable £49 million raised to invest in forestry in New Zealand to capture carbon credits on behalf of an institutional client, adding to our international credentials. This was partially offset by £83 million of sales from existing clients as they took advantage of pricing to secure profits.
New Energy and Sustainable Infrastructure raised capital on the back of their compelling investment propositions with fundraising of £0.4 billion in the year. Gresham House Energy Storage Fund plc (GRID) raised £150 million (gross) in the year through primary issuance, we secured a segregated mandate with a leading investment manager to invest £120 million in collocated battery storage and renewable energy projects and a further £133 million was committed to the British Sustainable Infrastructure II Fund LP (BSIF II) and co-investment vehicles, underlining the importance of providing access to this innovative asset class.
Real Estate raised a combined £0.1 billion capital in the year from our UK affordable housing funds Residential Secure Income plc (ReSI plc) and Gresham House Residential Secure Income LP (ReSI LP).
The impact of performance on AUM in the year reflected market movements. The Strategic Equity division's performance was down £0.2 billion, which was a 13% drop on the year's opening AUM and reflected the general markets for equities in 2022. This was offset by a positive £0.5 billion performance from the Real Assets division with notable increases in valuation in the Forestry division of £0.4 billion. This reflected the market pricing for forestry in general as investors recognised the resilient nature of sectors with less correlation to equity markets and inflation. We also noted value increases from GRID as its NAV grew as a result of the valuation of the underlying battery energy storage projects.
We also completed the acquisition of Burlington adding £243 million AUM to the Group in March 2022. Burlington has since been rebranded as Gresham House Real Estate and has been integrated with our business in Dublin. This adds expertise in commercial property to our Real Estate offering as well as further building our international growth plans.
Adjusted operating profit
We present the performance of the Group using the non-GAAP adjusted operating profit metric. The aim of the adjusted operating profit metric is to show the true performance of the core asset management business through the management fee income and revenues earned, less the administrative overheads associated with delivering asset management services. The adjusted operating profit metric below highlights the performance of the core asset management business separately from performance fees and gains on the sale of development projects. The performance fees and gains on the sale of development projects are presented alongside the variable compensation costs payable as a result of their generation, to show the net impact on the Group.
The adjusted operating profit metric thereby excludes depreciation and amortisation, exceptional items from acquisition costs and restructuring and acquisition-related share-based payments and remuneration, as they are effectively an earn out paid to the sellers of businesses acquired rather than an operating expense.
Adjusted operating profit
|
|
2022 |
2021 |
|
|
£'000 |
£'000 |
|
Income |
79,818 |
63,060 |
|
Dividend income from associates |
- |
285 |
|
Gross core income |
79,818 |
63,345 |
|
Rebates, distribution costs and fundraising costs |
(2,543) |
(1,736) |
|
Net core income |
77,275 |
61,609 |
|
Administration overheads (excluding amortisation, depreciation, exceptional items and acquisition-related share-based payment and remuneration) |
(49,635) |
(41,128) |
|
Finance costs* |
(560) |
(311) |
|
Adjusted operating profit |
27,080 |
20,170 |
|
Adjusted operating margin |
35.0% |
32.7% |
|
Performance fees (gross) |
1,015 |
6,163 |
|
Variable compensation attributable to performance fees |
(1,015) |
(4,449) |
|
Performance fees net of costs |
- |
1,714 |
|
|
|
|
|
Gains on development projects |
2,249 |
2,932 |
|
Variable compensation attributable to gains on development projects |
(975) |
(689) |
|
Development project costs |
(698) |
(470) |
|
Net development gains |
576 |
1,773 |
|
Performance fees and development gains net of costs |
576 |
3,487 |
|
|
|
|
|
Adjusted operating profit, performance fees and development project gains net of costs |
27,656 |
23,657 |
|
|
|
|
|
Non-core operating revenues |
2,523 |
1,140 |
|
Costs relating to non-core operating revenues |
(2,522) |
(1,102) |
|
Net non-core activity |
1 |
38 |
|
|
|
|
|
|
|
|
|
Amortisation and depreciation |
(12,359) |
(9,475) |
|
Acquisition and restructuring related costs* |
(3,310) |
(3,215) |
|
Acquisition related share-based payment and remuneration charges |
(1,917) |
(1,067) |
|
Net gains on investments and fair value movements** |
4,342 |
6,224 |
|
Tax |
(2,874) |
(4,107) |
|
Operating profit after tax |
11,539 |
12,055 |
|
Loss from discontinued operations |
(177) |
(14) |
|
Total comprehensive net income |
11,362 |
12,041 |
|
|
|
|
*Finance costs per the IFRS Statement of Comprehensive Income included £1.7 million relating to the unwind of the discount from contingent consideration. This has been reclassified as acquisition and restructuring related costs in the above disclosure as it is acquisition related.
**Excluding dividend income from associates of nil in 2022 (2021: £0.3 million) and gains on development projects of £2.2 million (2021: £2.9 million).
The adjusted operating profit metric has increased to £27.1 million (2021: £20.2 million) and the adjusted operating margin based on net core income increased to 35.0% (2021: 32.7%), showing the operating model of the business coming through in margin improvement as we target a 40% operating margin by 2025.
Income
|
|
2022 |
2021 |
|
|
£'000 |
£'000 |
|
Asset management income |
79,287 |
62,162 |
|
Dividend and investment income |
531 |
590 |
|
Other income |
- |
308 |
|
Total income |
79,818 |
63,060 |
|
Dividend income from associates |
- |
285 |
|
Gross core income |
79,818 |
63,345 |
|
Rebates, distribution costs and fundraising costs |
(2,543) |
(1,736) |
|
Net core income |
77,275 |
61,609 |
Net core income
Total net core income has increased by 25% in the year to £77.3 million (2021: £61.6 million), driven by the strong 20% growth in AUM in the year to £7.8 billion (2021: £6.5 billion). We present net core income to reflect the rebates, distribution costs and fundraising fees paid to deliver core income by the Group.
The Group provides high-quality services in actively managed alternative asset classes. Delivery of returns for investors is key and requires our team of asset management specialists to drive investment performance. As such, we operate in higher fee margin specialist areas of asset management and target a gross revenue margin of 1% across the Group.
The Group benefits from a diverse range of long-term management contracts, with c.90% of AUM being in closed-ended funds and structures which provide a stable view on future revenue streams. This is demonstrated through the weighted average life of limited partner management contracts accounting for £2.5 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.
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 was lower in 2022 at £531,000 (2021: £590,000), reflecting dividends from vehicles that we have invested in to align ourselves with clients, such as ReSI plc, and revenues earned from development projects in the period.
Other income of £308,000 in the prior year principally reflects the net operating income earned from a battery storage project while under the Group's ownership, prior to being sold to GRID.
The Group sold its stake in Rockwood Strategic plc in March 2022 and therefore has not received dividends from associates in the year. In the prior year these dividends were recognised in the share of associates profit line in the income statement and separated out as part of the adjusted operating profit metric disclosure.
Administrative overheads
Administrative overheads, excluding amortisation, depreciation and exceptional items, were up 21% in the year to £49.6 million (2021: £41.1 million). This reflects the first full year of costs relating to the Mobeus VCT team and Appian business, which were acquired in the prior year. These comprised costs of £0.6 million for three months of the Mobeus VCT business and six months of costs for Appian totalling £1.5 million in 2021.
The Group continued to focus its efforts on maximising profit growth and increasing shareholder value during 2022, which was a more challenging environment. We took immediate cost control measures part way through the year to review all planned hires and reduce discretionary spend in order to maximise profitability in 2022. Whilst doing this we focused on the adjusted operating margin target of 40% and were pleased to note the improvement in adjusted operating margin from 32.7% to 35.0% at the end of 2022. We are seeing the operating leverage come through the business as we grow AUM at a faster rate than the cost base required to service the increased level of AUM, and as such remain on track to achieve 40% operating margins in line with the GH25 target.
The investment in key team members across the Group in 2022 led to the Group's full-time equivalent headcount standing at 223 at the end of the year, up from 185 at the end of 2021. This included 14 people joining with the Burlington business and 60 new hires as we focused on the key roles needed to grow the business. Core people costs have consequently increased by 8% in the year to £38.4 million from £35.4 million in 2021, which includes variable compensation relating to performance fees, development gains and acquisition related remuneration of £3.9 million (2021: £6.2 million).
The Group has also benefited from improved performance across the majority of 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 £2.2 million (2021: £1.6 million), reflecting the London office move to 80 Cheapside as well as the additional office costs from the acquisition of Appian and Burlington.
We operate with offices in London, Dublin, Oxford, Edinburgh and Dumfries and continue to take a hybrid working approach, which provides flexibility to our growth plans and the team alike.
When we acquire businesses, we focus on the synergies that can be delivered as a result of combining complementary businesses. It is not only acquisitions where we target cost savings. We continue to review all areas of the Group's cost base diligently to ensure that we are operating efficiently and in a lean manner. We do, however, ensure that appropriate investment takes place in areas that will support the growth of the business.
Finance costs
The Group has a committed Revolving Credit Facility (RCF) with Santander of £20.0 million (2021: £20.0 million facility size). RCF interest and finance fees over the year were £447,000 (2021: £244,000), reflecting the increase in the size of the facility to £20 million for the full year, as the increase took place in 2021, with £113,000 reflecting lease costs. The remaining £1.7 million related to the unwind of the discount on contingent consideration in the year, which is recognised as a finance cost.
Amortisation and depreciation
Amortisation of management contracts, customer relationships, the website and IT platform development accounted for £11.2 million (2021: £8.5 million) as these intangible assets continue to be amortised over their useful lives. The increase in the year reflects the acquisition of Appian in June 2021, the Mobeus VCT business in October 2021 and the acquisition of Burlington in March 2022. These acquisitions require the assessment of the fair value of the management contracts and intangibles acquired within the businesses, which are being amortised over their useful lives and are the main drivers for the increase in the year.
Depreciation of £1.2 million in the year (2021: £959,000) relates primarily to office leases, motor vehicles used by the Forestry business and IT equipment.
Acquisition and restructuring related costs
These costs relate to acquisitions and restructuring of the business post-acquisition as well as one-off costs. Acquisition and restructuring related costs in 2022 were £3.3 million compared to £3.2 million in 2021. Current year costs include the acquisition costs associated with the Burlington business, alongside integration and restructuring costs. This also includes £0.3 million of DevCo-related acquisition and disposal costs that are required to be expenses in the year under IFRS, rather than capitalised as development activity (2021: £1.2 million), alongside £1.7 million of finance costs relating to the unwind of discount on contingent consideration, which is acquisition related and included in acquisition costs.
Performance fees and development gains
The Mobeus Income and Growth 2 VCT plc performance fee of £1.0 million was triggered and paid in the year. As part of the agreed terms of the acquisition of the Mobeus VCT business, this fee has been used to incentivise the private equity team and included as variable compensation for £1.0 million.
The Group sold four battery energy storage projects in 2022, with a capacity of 115MW. The projects have generated gross gains for the Group of £2.2 million, with IRRs ranging from 28% to 400% (2021: £2.9 million). The variable compensation relating to these gains was £1.0 million (2021: £0.7 million). We also report the cost of development activity in the development reporting, with £0.7 million invested in the period in sourcing and developing the pipeline of projects to develop and deliver as operational to GRID, as well as other development related SPV costs. The net gain after the deduction of variable compensation relating to the projects and costs associated with development activity was £0.6 million for the Group (2021: £1.8 million). This was lower than the prior year to reflect the additional investment in development activity in 2022.
Gains/(losses) on investments
|
|
2022 |
2021 |
|
|
£'000 |
£'000 |
|
Share of associates' profits |
1,052 |
4,955 |
|
(Loss)/profit on disposal of associate |
(101) |
461 |
|
Gains in investments held at fair value |
1,488 |
5,842 |
|
Movement in fair value of contingent consideration |
3,514 |
(1,659) |
|
Foreign exchange movements on translation of foreign subsidiary |
638 |
(158) |
|
Total gains on investments |
6,591 |
9,441 |
|
Less realised gains on development projects |
(2,249) |
(2,932) |
|
Less dividend income from associates |
- |
(285) |
|
Net gains on investments |
4,342 |
6,224 |
The Group has made gains on its investments and fair value movements in acquisition-related contingent consideration totalling £6.6 million in 2022 (2021: £9.4 million).
The share of associates' profits of £1.1 million relates to the 50% holding that the Group had in the Environment Bank Limited (EBL), a company targeting the delivery of habitat banks. The Group sold its stake in Gresham House Strategic plc and BSIF and BSIF II LPs exercised their option to acquire 25% of EBL from the Group, generating a net loss of £101,000 in the year.
The gain of £1.5 million from investments held at fair value in the year (2021: £5.8 million gain) includes realised and unrealised gains and losses on the co-investments that have been made in the funds managed or advised by Gresham House. This includes the DevCo gains of £2.2 million (2021: £2.9 million) recognised in the year.
Fair value movement in contingent consideration
The TradeRisks, Mobeus VCT business, Appian and Burlington acquisitions have contingent consideration elements which are driven by AUM growth, maintaining management contracts or revenue performance over a three-year period since acquisition. The contingent consideration payments have been fair valued at each reporting period end, with the movement in the fair value recognised in the income statement in the year of £3.5 million, reflecting a reduction in the expected deferred consideration payable.
Tax
The tax charge noted reflects taxable profits within the Group partially offset by the unwinding of the deferred tax liability recognised on the acquisitions of management contracts to date.
Financial position
|
|
|
2022 |
2021 |
|
|
|
|
£'000 |
£'000 |
|
|
Assets |
|
|
|
|
|
Investments* |
37,881 |
38,023 |
|
|
|
Cash |
|
32,205 |
40,252 |
|
|
Tangible/realisable assets |
|
70,086 |
78,275 |
|
|
|
|
|
|
|
|
Intangible assets |
87,335 |
95,012 |
|
|
|
Other assets |
47,314 |
36,259 |
|
|
|
Total assets |
204,735 |
209,546 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Borrowing |
- |
- |
|
|
|
Contingent consideration |
13,863 |
22,659 |
|
|
|
Other creditors |
40,829 |
40,425 |
|
|
|
Total Liabilities |
|
54,692 |
63,084 |
|
|
Net assets |
150,043 |
146,462 |
|
|
|
Non-controlling interests |
1,095 |
1,075 |
||
|
Net Assets per IFRS |
151,138 |
147,537 |
||
*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 £22,907,000 (2021: £17,545,000) and "Liabilities of a disposal group classified as held for sale" of £7,307,000 (2021: £7,499,000) and replaced with the investment exposure in "investments in securities" £18,640,000 (2021: £13,583,000).
Gresham House Forestry Friends and Family Fund LP - reduced the value by the non-controlling interest amount of £1,095,000 (2021: £1,075,000) 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 2022. The tangible/realisable assets supporting this total £70.1 million (2021: £78.3 million), comprising investments and cash.
Investments
The Group invests in or alongside the funds that it manages to align itself with clients. The below table provides a summary of the investment portfolio at the end of the year:
|
Investment portfolio |
2022 |
2021 |
|
|
£'000 |
£'000 |
|
Investment in associates |
|
|
|
Environment Bank Limited |
428 |
496 |
|
Rockwood Strategic plc |
- |
11,459 |
|
|
428 |
11,955 |
|
Investment in securities |
|
|
|
DevCo Projects |
18,640 |
13,583 |
|
Strategic Equity Capital plc (SEC) |
6,071 |
3,349 |
|
Residential Secure Income plc (ReSI plc) |
3,040 |
1,438 |
|
Warehoused investment |
2,000 |
- |
|
Gresham House Forestry Fund LP |
2,576 |
2,739 |
|
Gresham House British Strategic Investment Fund (BSIF) |
1,170 |
864 |
|
Residential Secure Income LP |
1,059 |
639 |
|
Gresham House Forestry Growth and Sustainability Fund LP |
956 |
1,000 |
|
Strategic Public Equity Co-Investment |
856 |
- |
|
Gresham House British Sustainable Infrastructure Fund II (BSIF II) |
481 |
- |
|
Gresham House Strategic Public Equity LP |
435 |
1,363 |
|
LF Gresham House UK Smaller Companies Fund |
- |
882 |
|
Other investments |
169 |
211 |
|
|
37,453 |
26,068 |
|
Total investments (excluding non-controlling interests) |
37,881 |
38,023 |
Investments in associates
The Group supported the early investment into Environment Bank Limited (EBL), an entity focused on creating habitat land banks to support rewilding in the UK. The Group sold 25% in the equity of EBL to BSIF and BSIF II LPs in December 2022. This generated a return of 15% on the Group's original investment and is an example of how the Group uses its balance sheet to support the growth of assets to be sold into funds managed by the Group, ultimately growing the AUM of the Group.
Investments in securities
IFRS 10: Consolidation, requires the consolidation of the Group's investments in battery energy 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 £18.6 million (2021: £13.6 million) at the end of 2022 and all of which 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 2023 and 2024. During the year, the Group sold four projects, Shilton Lane, Arbroath, UK Battery Storage and Stairfoot to GRID, which delivered a net gain of £2.2 million to the Group.
The Group invested a further £3.0 million into Strategic Equity Capital plc in the year, as well as supported the equity raise for ReSI plc by investing a further £2.0 million.
The Group also invested £1.3 million to warehouse an unlisted investment prior to the launch of an early stage venture fund that can invest alongside the VCTs.
Cash and borrowing
The cash balance of the Group was £32.2 million at the end of the year (2021: £40.3 million) and reflected operating cash profits generated in the year as well as investment acquisition and disposals. Net cash flow from operating activity was £11.3 million, which is after the payment of £6.2 million of corporation tax.
Net investment activity was a cash investment of £8.8 million, with key movements such as cash inflows from the sale of associates of £12.5 million and cash payments to settle contingent consideration amounts for business and DevCo project acquisitions of £10.9 million. We also invested £14.4 million into Devco projects and £8.3 million into investments to align with clients and warehouse investments in anticipation of launching new funds.
Other financing cash activities include the payment of £3.8 million of dividends in May 2022 and the cash settlement of share-based payments of £6.8 million.
Finally, to provide flexibility as the Group enters 2023 with a range of opportunities to grow the business, we have the £20.0 million committed RCF with Santander, which has been extended to 31 December 2024. The Group is therefore well positioned with cash and available facilities to take advantage of opportunities as they arise in 2023.
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 2022, the net book value of management contracts and other intangible assets was £38.1 million (2021: £46.2 million), reflecting the amortisation of the management contracts over their useful lives, and the addition of the management contracts following the acquisition of the Burlington business. 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 £49.2 million (2021: £48.8 million). Further details are included in the notes to the financial statements.
Contingent consideration
Contingent consideration reduced from £22.7 million to £13.9 million in the year, reflecting the settlement of the final consideration for the acquisition of the Livingbridge VC business, the acquisition of Burlington and a reduction in the expected contingent consideration payable for the Appian business, alongside the impact of the time value of money as future contingent consideration amounts become more certain.
Outlook
The balance sheet is well capitalised to capture the growth opportunity in front of us with cash of £32.2 million and an undrawn committed RCF of £20 million. We continue to invest to align ourselves with clients and develop opportunities to launch new funds to grow AUM and continue delivering shareholder value through 2023 and beyond.
Kevin Acton
Chief Financial Officer
29 March 2023
Group statement of comprehensive income
For the year ended 31 DECEMBER
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
Notes |
|
£'000 |
|
£'000 |
|
Income |
|
|
|
|
|
|
Asset management income |
|
|
79,287 |
|
62,162 |
|
Dividend and interest income |
|
|
531 |
|
590 |
|
Other operating income |
|
|
2,523 |
|
1,448 |
|
Performance fees and carried interest |
|
|
1,015 |
|
6,163 |
|
Total income |
1 |
|
83,356 |
|
70,363 |
|
Operating costs |
|
|
(73,232) |
|
(63,331) |
|
Administrative overheads |
3 |
|
(71,662) |
|
(60,116) |
|
Acquisition and restructuring related costs |
6 |
|
(1,570) |
|
(3,215) |
|
Net operating profit |
|
|
10,124 |
|
7,032 |
|
Finance costs |
7 |
|
(2,300) |
|
(311) |
|
Net operating profit after finance costs |
|
|
7,824 |
|
6,721 |
|
Gains and losses on investments and fair value movements |
|
|
|
|
|
|
Share of associates' profits |
18 |
|
1,052 |
|
4,955 |
|
(Loss)/Profit on disposal of associate |
|
|
(101) |
|
461 |
|
Gains and losses on investments held at fair value |
12 |
|
1,488 |
|
5,842 |
|
Movement in fair value of contingent consideration |
|
|
3,514 |
|
(1,659) |
|
Operating profit before taxation |
|
|
13,777 |
|
16,320 |
|
Taxation |
9 |
|
(2,874) |
|
(4,107) |
|
Operating profit from continuing operations |
|
|
10,903 |
|
12,213 |
|
(Loss) from discontinued operations |
|
|
(177) |
|
(14) |
|
Profit for the year |
|
|
10,726 |
|
12,199 |
|
Other comprehensive income |
|
|
|
|
|
|
Foreign exchange gains/(losses) on translation of a foreign subsidiary |
|
|
638 |
|
(158) |
|
Total Other comprehensive income/(loss) |
|
|
638 |
|
(158) |
|
Total comprehensive income |
|
|
11,364 |
|
12,041 |
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
Equity holders of the parent |
|
|
11,344 |
|
11,777 |
|
Non-controlling interest |
|
|
20 |
|
264 |
|
|
|
|
11,364 |
|
12,041 |
|
Basic profit per ordinary share (pence) |
10 |
|
29.8 |
|
34.8 |
|
Diluted profit per ordinary share (pence) |
10 |
|
28.6 |
|
32.7 |
|
Basic adjusted profit per ordinary share (pence) |
10 |
|
57.7 |
|
52.6 |
|
Diluted adjusted profit per ordinary share (pence) |
10 |
|
55.2 |
|
49.4 |
Year ended 31 DECEMBER
|
Group 2022 |
Notes |
Ordinary share capital |
Share premium |
Merger reserve |
Treasury shares |
Retained reserves |
Foreign exchange reserve |
Equity attributable to equity shareholders of the Parent Company |
Non- controlling interest |
Total equity |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 December 2021 |
|
9,500 |
39,328 |
24,811 |
(51) |
73,032 |
(158) |
146,462 |
1,075 |
147,537 |
|
Profit and total comprehensive income for the year |
|
- |
- |
- |
- |
10,706 |
638 |
11,344 |
20 |
11,364 |
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
|
|
Share-based payments |
29 |
- |
- |
- |
- |
(3,583) |
- |
(3,583) |
- |
(3,583) |
|
Issue of shares |
27 |
68 |
- |
608 |
(1,041) |
- |
- |
(365) |
- |
(365) |
|
Dividends paid |
11 |
- |
- |
- |
- |
(3,815) |
- |
(3,815) |
- |
(3,815) |
|
Total contributions by and distributions to owners |
|
68 |
- |
608 |
(1,041) |
3,308 |
638 |
3,581 |
20 |
3,601 |
|
Balance at 31 December 2022 |
|
9,568 |
39,328 |
25,419 |
(1,092) |
76,340 |
480 |
150,043 |
1,095 |
151,138 |
|
Group 2021 |
Notes |
Ordinary share capital |
Share premium |
Merger reserve |
Treasury shares |
Retained reserves |
Foreign exchange reserve |
Equity attributable to equity shareholders of the Parent Company |
Non- controlling interest |
Total equity |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 December 2020 |
|
8,023 |
60,061 |
19,981 |
- |
8,402 |
- |
96,467 |
811 |
97,278 |
|
Profit and total comprehensive income for the year |
|
- |
- |
- |
- |
11,935 |
(158) |
11,777 |
264 |
12,041 |
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
|
|
Share-based payments |
29 |
- |
- |
- |
- |
(5,424) |
- |
(5,424) |
- |
(5,424) |
|
Issue of shares |
27 |
1,477 |
39,267 |
4,830 |
(51) |
- |
- |
45,523 |
- |
45,523 |
|
Cancellation of share premium |
|
- |
(60,000) |
- |
- |
60,000 |
- |
- |
- |
- |
|
Dividends paid |
11 |
- |
- |
- |
- |
(1,881) |
- |
(1,881) |
- |
(1,881) |
|
Total contributions by and distributions to owners |
|
1,477 |
(20,733) |
4,830 |
(51) |
64,630 |
(158) |
49,995 |
264 |
50,259 |
|
Balance at 31 December 2021 |
|
9,500 |
39,328 |
24,811 |
(51) |
73,032 |
(158) |
146,462 |
1,075 |
147,537 |
Year ended 31 DECEMBER
|
Company 2022 |
Notes |
Ordinary share capital |
Share premium |
Merger reserve |
Retained reserves |
Total equity |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 December 2021 |
|
9,500 |
39,328 |
24,811 |
60,704 |
134,343 |
|
Loss and total comprehensive loss for the year |
|
- |
- |
- |
(3,996) |
(3,996) |
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
Share-based payments |
|
- |
- |
|
767 |
767 |
|
Issue of shares |
27 |
68 |
- |
608 |
- |
676 |
|
Dividends paid |
11 |
- |
- |
- |
(3,815) |
(3,815) |
|
Total contributions by and distributions to owners |
|
68 |
- |
608 |
(7,044) |
(6,368) |
|
Balance at 31 December 2022 |
|
9,568 |
39,328 |
25,419 |
53,660 |
127,975 |
|
Company 2021 |
Notes |
Ordinary share capital |
Share premium |
Merger reserve |
Retained reserves |
Total equity |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 December 2020 |
|
8,023 |
60,061 |
19,981 |
9,257 |
97,322 |
|
Loss and total comprehensive loss for the year |
|
- |
- |
- |
(1,695) |
(1,695) |
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
Share-based payments |
|
- |
- |
- |
(4,977) |
(4,977) |
|
Issue of shares |
27 |
1,477 |
39,267 |
4,830 |
- |
45,574 |
|
Cancellation of share premium |
|
- |
(60,000) |
- |
60,000 |
- |
|
Dividends paid |
11 |
- |
- |
- |
(1,881) |
(1,881) |
|
Total contributions by and distributions to owners |
|
1,477 |
(20,733) |
4,830 |
51,447 |
37,021 |
|
Balance at 31 December 2021 |
|
9,500 |
39,328 |
24,811 |
60,704 |
134,343 |
As at 31 DECEMBER
|
|
|
|
Group |
|
Company |
||||
|
|
Notes |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Assets |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
Investments |
12 |
|
19,912 |
|
13,560 |
|
12,733 |
|
8,308 |
|
Property, plant and equipment |
13 |
|
2,127 |
|
2,927 |
|
1,461 |
|
1,912 |
|
Investment in subsidiaries |
17 |
|
- |
|
- |
|
80,148 |
|
80,148 |
|
Investment in associates |
18 |
|
428 |
|
11,955 |
|
- |
|
- |
|
Intangible assets |
14 |
|
87,335 |
|
95,012 |
|
1,292 |
|
1,100 |
|
Long-term receivables |
15 |
|
1,330 |
|
492 |
|
492 |
|
492 |
|
Deferred tax |
24 |
|
1,802 |
|
2,197 |
|
66 |
|
92 |
|
|
|
|
112,934 |
|
126,143 |
|
96,192 |
|
92,052 |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
Trade receivables |
19 |
|
11,216 |
|
11,135 |
|
- |
|
- |
|
Accrued income and prepaid expenses |
20 |
|
30,839 |
|
21,705 |
|
1,783 |
|
1,157 |
|
Other current assets |
21 |
|
3,036 |
|
3,537 |
|
29,923 |
|
20,047 |
|
Cash and cash equivalents |
|
|
32,205 |
|
40,252 |
|
2,976 |
|
23,800 |
|
Non-current assets held for sale |
|
|
|
|
|
|
|
|
|
|
Assets of a disposal group held for sale |
16 |
|
22,907 |
|
17,545 |
|
- |
|
- |
|
Total current assets and non-current assets held for sale |
|
|
100,203 |
|
94,174 |
|
34,682 |
|
45,004 |
|
Total assets |
|
|
213,137 |
|
220,317 |
|
130,874 |
|
137,056 |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
22 |
|
40,290 |
|
42,721 |
|
911 |
|
519 |
|
Short-term borrowings |
23 |
|
- |
|
- |
|
1,541 |
|
1,136 |
|
Liabilities of a disposal group classified as held for sale |
|
|
|
|
|
|
|
|
|
|
Liabilities of a disposal group classified as held for sale |
16 |
|
7,307 |
|
7,499 |
|
- |
|
- |
|
Total current liabilities and liabilities of a disposal group classified as held for sale |
|
|
47,597 |
|
50,220 |
|
2,452 |
|
1,655 |
|
Total assets less current liabilities |
|
|
165,540 |
|
170,097 |
|
128,422 |
|
135,401 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
Deferred taxation |
24 |
|
9,155 |
|
10,597 |
|
- |
|
- |
|
Long-term borrowings |
25 |
|
- |
|
- |
|
- |
|
- |
|
Other creditors |
26 |
|
5,247 |
|
11,963 |
|
447 |
|
1,058 |
|
|
|
|
14,402 |
|
22,560 |
|
447 |
|
1,058 |
|
Net assets |
|
|
151,138 |
|
147,537 |
|
127,975 |
|
134,343 |
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
|
|
|
Ordinary share capital |
27 |
|
9,568 |
|
9,500 |
|
9,568 |
|
9,500 |
|
Share premium |
29 |
|
39,328 |
|
39,328 |
|
39,328 |
|
39,328 |
|
Merger reserve |
29 |
|
25,419 |
|
24,811 |
|
25,419 |
|
24,811 |
|
Treasury shares |
29 |
|
(1,092) |
|
(51) |
|
- |
|
- |
|
Retained reserves |
29 |
|
76,340 |
|
73,032 |
|
53,660 |
|
60,704 |
|
Foreign exchange reserve |
29 |
|
480 |
|
(158) |
|
- |
|
- |
|
Equity attributable to equity shareholders of the Parent Company |
|
|
150,043 |
|
146,462 |
|
127,975 |
|
134,343 |
|
Non-controlling interest |
29 |
|
1,095 |
|
1,075 |
|
- |
|
- |
|
Total equity |
|
|
151,138 |
|
147,537 |
|
127,975 |
|
134,343 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net asset value per ordinary share (pence) |
30 |
|
394.0 |
|
387.5 |
|
336.0 |
|
353.5 |
|
Diluted net asset value per ordinary share (pence) |
30 |
|
377.1 |
|
366.6 |
|
321.6 |
|
334.6 |
|
|
|
|
|
|
|
|
|
|
|
|
The loss after tax for the Company for the year ended 31 December 2022 was £3,996,000 (2021: £1,695,000 loss). The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 29 March 2023.
Kevin Acton Chief Financial Officer
|
|||||||||
For the year ended 31 DECEMBER
|
|
|
|
2022 |
|
2021 |
|
|
Notes |
|
£'000 |
|
£'000 |
|
Cash flow from operating activities |
|
|
|
|
|
|
Net cash generated from operations |
31 |
|
17,546 |
|
21,130 |
|
Corporation tax paid |
|
|
(6,155) |
|
(968) |
|
Interest paid on loans |
|
|
(141) |
|
(187) |
|
Net cash flow from operating activities |
|
|
11,250 |
|
19,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
|
Acquisition of Appian Asset Management Limited |
|
|
- |
|
(841) |
|
Acquisition of Mobeus VCT business |
|
|
- |
|
514 |
|
Acquisition of Burlington Property RE Limited |
|
|
(627) |
|
- |
|
Contingent consideration paid |
|
|
(10,913) |
|
(1,409) |
|
Investment in associates |
|
|
- |
|
(1,165) |
|
Sale of associates |
|
|
12,478 |
|
3,296 |
|
Dividends received from associates |
|
|
- |
|
383 |
|
Purchase of investments |
|
|
(8,334) |
|
(5,409) |
|
Sale of investments |
|
|
1,659 |
|
4,287 |
|
Investment in DevCo Projects |
|
|
(14,354) |
|
(12,349) |
|
DevCo loans repaid |
|
|
2,853 |
|
551 |
|
Proceeds received on sale of DevCo Projects |
|
|
10,113 |
|
3,551 |
|
Purchase of fixed assets |
|
|
(366) |
|
(327) |
|
Sale of fixed assets |
|
|
296 |
|
6 |
|
Purchase of intangible assets |
|
|
(886) |
|
(724) |
|
Total cash flow from investing activities |
|
|
(8,081) |
|
(9,636) |
|
Cash flow from financing activities |
|
|
|
|
|
|
Receipt of loans |
|
|
- |
|
10,000 |
|
Repayment of loans |
|
|
- |
|
(10,000) |
|
Share issue proceeds |
|
|
- |
|
22,000 |
|
Share issue costs |
|
|
- |
|
(1,513) |
|
Share-based payments settled |
|
|
(6,774) |
|
(9,734) |
|
Dividends paid |
|
|
(3,815) |
|
(1,881) |
|
Capital element of lease payments |
|
|
(627) |
|
(845) |
|
Total cash flow from financing activities |
|
|
(11,216) |
|
8,027 |
|
|
|
|
|
|
|
|
(Decrease)/Increase in cash and cash equivalents |
|
|
(8,047) |
|
18,366 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at start of year |
|
|
40,252 |
|
21,886 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
|
32,205 |
|
40,252 |
For the year ended 31 DECEMBER
|
|
|
|
2022 |
|
2021 |
|
|
Notes |
|
£'000 |
|
£'000 |
|
Cash flow from operating activities |
|
|
|
|
|
|
Net cash generated from operations |
31 |
|
(39) |
|
(1,911) |
|
Interest paid on loans |
|
|
(266) |
|
(142) |
|
Net cash flow from operating activities |
|
|
(305) |
|
(2,053) |
|
|
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
|
Purchase of investments |
|
|
(9,387) |
|
(5,203) |
|
Sale of investments |
|
|
4,512 |
|
3,284 |
|
DevCo loans repaid |
|
|
- |
|
551 |
|
Investment in DevCo Projects |
|
|
- |
|
(3,537) |
|
Net cash (paid) / received from advances to Group undertakings* |
|
|
(11,454) |
|
7,693 |
|
Sale of associates |
|
|
- |
|
65 |
|
Purchase of fixed assets |
|
|
(244) |
|
(371) |
|
Sale of fixed assets |
|
|
82 |
|
6 |
|
Purchase of intangible assets |
|
|
(695) |
|
(725) |
|
Total cash flow from investing activities |
|
|
(17,186) |
|
1,763 |
|
Cash flow from financing activities |
|
|
|
|
|
|
Receipt of loans |
|
|
- |
|
10,000 |
|
Repayment of loans |
|
|
- |
|
(10,000) |
|
Net repayments of advances from Group undertakings* |
|
|
765 |
|
3,515 |
|
Share issue proceeds |
|
|
- |
|
22,000 |
|
Share issue costs |
|
|
- |
|
(1,513) |
|
Share warrants exercised |
|
|
- |
|
- |
|
Share-based payments settled |
|
|
- |
|
(5,253) |
|
Dividends paid |
|
|
(3,815) |
|
(1,881) |
|
Capital element of lease payments |
|
|
(283) |
|
(604) |
|
Total cash flow from financing activities |
|
|
(3,333) |
|
16,264 |
|
|
|
|
|
|
|
|
(Decrease)/increase in cash and cash equivalents |
|
|
(20,824) |
|
15,974 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at start of year |
|
|
23,800 |
|
7,826 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
|
2,976 |
|
23,800 |
* A portion of the prior year repayment from Group entities was investing in nature (£7.7 million) but presented in financing activities. This has been adjusted to be presented in investing activities.
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 the United Kingdom adopted International Accounting Standards ("IAS") with the requirements of the Companies Act 2006. The financial statements are presented in Sterling, which is also the Group's functional currency. The financial statements have been prepared on a historical cost basis, except for the following:
§ certain financial assets and liabilities are measured at fair value; and
§ assets held for sale are measured at fair value less costs to sell.
There were annual improvements and amendments to the existing accounting standards, which were effective for periods beginning 1 January 2022 adopted during the year, however they have not had a material impact on the Group's results. These includes:
§ Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets
§ Annual Improvements to IFRSs (2018-2020 Cycle): IFRS 1 , IFRS 9 , Illustrative Examples accompanying IFRS 16 .
Going Concern
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 on the Group's cash flow, that the Group has adequate resources to continue in operational existence for the foreseeable future. Downside scenario stress tests included a material reduction in revenues from reducing net asset values of the funds managed by the Group as well as reviews of variable costs and discretionary investment. Whilst high inflation, high interest rates and the Russia-Ukraine war has added to the market turmoil which impacted the environment in which the Group operates, they have not had a material impact on the Group's resources. The downside scenarios also reviewed the revolving credit facility covenants, which were not breached as the revolving credit facility was undrawn at the year end. The revolving credit facility is available to draw should the Directors want to do so and this is available until 21 December 2024. Thus, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
(b) Basis of consolidation
Subsidiaries
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee; exposure to variable returns from the investee; and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings made up to the year end as if they formed a single entity. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The acquisition method of accounting is used to account for business combinations by the Group. Refer to Note (r) iv) for further details on whether the Group controls funds that it also manages.
At the Company level investments in subsidiaries are carried at cost less impairment.
Associates
Where the Group has significant influence, it has the power over (but not control of) the financial and operating policy decisions of another entity, it is classified as an associate. This is typically where the Group holds over 20% of the voting shares in the entity. Associates are initially recognised in the Group Statement of Financial Position at cost. Subsequently, associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Group Statement of Comprehensive Income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.
Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.
Where there is an indication of impairment that the investment in an associate has been impaired, the carrying amount of the investment will be tested for impairment in the same way as other non-financial assets.
(c) Presentation of Statement of Comprehensive Income
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. Details of the Company's results for the year are set out in Note 29, the loss for the year being £3,996,000 (2021: £1,695,000).
(d) Segment reporting
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Group Management Committee ("GMC"), which is considered to be the Chief Operating Decision Maker in order to allocate resources to the segments and to assess their performance.
The Group has three reportable segments, which are those reported to the Board are Real Assets, Strategic Equity and Central. The Real Assets segment includes Forestry, New Energy and Sustainable Infrastructure and Real Estate divisions, and the Strategic Equity division includes Public and Private Equity divisions. While the Central segment principally comprises of management activities such as strategic activities, corporate development and costs associated with corporate governance and management.
(e) Revenue recognition
Revenue is recognised when the Group has satisfied its performance obligations relating to the services to its clients. Revenue is measured at the fair value of the consideration received or receivable and represents amount receivables for services provided in the normal course of business, net of discounts and value adding tax. Where the Group enters contracts which includes multiple services, where each service can be determined to be distinct, then its recognised separately.
The fixed consideration element of asset management contracts is measured at the fair value of the consideration received or receivable and is earned within the United Kingdom, Ireland, and Australasia. 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. The fees are affected by the changed in net asset values, including market appreciation or deprecation, foreign exchange translation and net outflows and inflows. Asset management income also includes catch-up management fees on final close of limited partnership funds, directors and advisory fees and fundraising fees.
Catch-up management fees or equalisation fees are calculated as the management fee payable from the date of commitment to the fund as if an investor had joined the fund at inception of the fund and are typically calculated on the investor's commitments to the limited partnership at the appropriate management fee or priority profit share. 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 investor commits to the fund.
Performance fees are recognised as revenue only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. Performance fees are payable when a certain hurdle rate has been achieved on a specific date, typically an NAV amount on the year end reporting date of the specific fund. The potential for the NAV to decrease from a reporting period end to the measurement date means that the performance fee is generally only recognised when the measures on which it is based have finally been determined. Cash payments in relation to fixed and variable revenues earned are generally received shortly after the relevant quarter end.
Fundraising fees are earned by the Group for providing fund raising services, typically to the VCTs. This includes promoting the fund raise, legal documentation and other administrative tasks of executing the fund raise. Fundraising fees are typically paid on a percentage of the funds raised, i.e. equity invested into the fund.
Other revenue recognition
(i) Dividend and interest income
Income from listed securities is recognised when the right to receive the dividend has been established. Interest receivable is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be reliably measured. Interest income is accrued on a time basis by reference to the principal outstanding and by using the effective interest rate method.
(ii) Other income
Other income earned by the Group is recognised to the extent that it is probable that the economic benefits will flow to the Group and that revenue can be reliably measured in line with any contractual arrangements in place. This includes non-core operating income which relates to income earned from property services, which are not considered core asset management services to the Group.
Adjustments to revenue arising from initial estimates recorded historically have been immaterial as the Group only recognised revenue when it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.
At each reporting period end, where the performance obligation is satisfied but the Group has not raised the associated invoices, revenue is accrued.
(f) Expenses
All expenses and interest payable are accounted for on an accruals basis.
Expenses incurred by the Group when acting as principal are presented in administrative overheads cost in the SOCI. These costs included fundraising costs, distribution fees payable to providers and advisers that distribute the Group's products; as well as rebates to providers, advisers and investors. These costs are recognised as they are incurred or over the service period provided.
(g) Property, plant and equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation.
The carrying amount of property, plant and equipment is reviewed annually by the Directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets' employment and subsequent disposal.
The depreciable amount of all property, plant and equipment is depreciated on a straight-line basis over their estimated useful lives to the Group commencing from the time the asset is held ready for use, and are depreciated at the following rates:
Office equipment 25%
Motor vehicles 25%
Leasehold property 10%
Right of use assets over the lease term
(h) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
(i) Leases
A lease is defined as a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the commencement date of a lease a right of use asset and a lease liability are recognised in the Statement of financial position.
The lease liability is initially measured at the present value of expected future lease payments discounted at the interest rate implicit in the lease or, if that rate cannot be determined, the lessee's incremental borrowing rate. Subsequently the lease liability decreases by the lease payments made, offset by interest on the liability, and may be remeasured to reflect any reassessment of expected payments or to reflect any lease modifications.
The right of use asset is initially measured at the amount of the initial lease liability plus: any lease payments made on or before the commencement date less incentives received; any incremental costs of obtaining the lease; and, if any, the costs of decommissioning the asset and any restoration work to return the asset to the condition required under the terms of the lease.
Subsequently the right of use asset is valued using the cost model. The asset is amortised on a straight-line basis over the expected term of the lease, adjusted for any remeasurement of the lease liability, and is shown net of the accumulated depreciation and any impairment provisions.
Leases for low value assets and short-term leases are expensed to operating profit on a straight-line basis over the term of the lease.
(j) Investments
In line with IFRS 9: Financial Instruments, financial assets designated as at fair value through profit and loss (FVTPL) at inception are those that are managed and whose performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair value basis to the Group's key management. The equity investments which do not meet the definitions of an associate or subsidiary remain held at fair value through profit and loss.
(i) Assets held for sale
Non-current assets held for sale are measured at the lower of carrying amount or fair value less costs to sell (except where the exemptions of paragraph 5 of IFRS 5 apply) and are classified as such if their carrying amount will be recovered through a sale transaction rather than through continuing use.
This is the case when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and the sale is considered to be highly probable. A sale is considered to be highly probable if the appropriate level of management is committed to a plan to sell the asset and a further active programme to locate a buyer and complete the plan has been initiated. Further, the asset has to be marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale is expected to qualify for recognition as a completed sale within one year from the date that it is classified as held for sale.
Assets acquired with a view for resell are classified as discontinued operations and falls under assets held for sale and measured at fair value less costs to sell.
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 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.
(iv) Loan receivables in development projects
Loans for the development projects are held at fair value through profit and loss (FVTPL). Fair value is calculated based on the expected cashflows from the loan and then discounting using a synthetic credit rating and bank of English risk-free rate. The synthetic credit rating was used due to inactive market for these loans. Changes in fair value are recognised in profit and loss as they arise.
(k) Acquisition and restructuring related expenses
Acquisition and restructuring related expenses are costs that are incurred as part of business combinations and asset acquisitions, as well as restructuring of the business post acquisition. These also includes acquisition-related share-based payments and remuneration as they are effectively an earn out to the sellers of businesses acquired rather than an operating expense.
The Group discloses Acquisition and restructuring related expenses separately on the face of the Consolidated Statement of Comprehensive Income in accordance with IAS 1, as to disclose material items separately by nature. This has also been included as non-GAAP measure, as due to its 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. Goodwill arising from a business combination is allocated to the cash-generating unit (CGU) that are expected to benefit from the business combination. Following initial recognition, goodwill is not amortised but rather tested for impairment annually. The group test goodwill for impairment at the CGU level in January after financial year end. Goodwill is also tested for impairment more frequently if an event occurs or circumstances change that would indicate (refer to below for indicators) that the carrying value of the CGU is below its recoverable amount.
If the recoverable amount is below the CGU's carrying value, then an impairment loss is recognised, and allocation is first to goodwill and then, to the other assets of the CGU pro rata on the basis of the carry amount of each asset.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill once impaired shall not be reversed.
(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 only after technical and commercial feasibility of the asset intend use have been established and will generate future economic benefits. These costs are included in the Statement of Financial Position and are amortised over the estimated useful life of four years.
(iv) Brands
Brands acquired as part of a business combination or separately, are capitalised where it is probable that future economic benefits attributable to the assets will flow to the Group and the fair value of the brand can be measured reliably.
They are recorded initially at fair value and then amortised over their useful lives. The fair value at the date of acquisition is calculated using discounted cash flow methodology and represents the valuation of the net residual income stream arising from the brands at the date of acquisition. The brands are included in the Statement of Financial Position as intangible assets. Intangible assets with a finite life have no residual value and are amortised on a straight-line basis over their expected useful lives of five years.
(v) Intangible from development projects
Intangibles acquired for the development projects are consents for the development of the assets and include planning permissions and grid connections. These assets are unique and due to its unobservable input to determine fair value, as such, the fair value is deemed to be the consideration paid minus the identified tangible assets. These assets are classified as held for sale under IFRS 5 and measured under fair value less cost to sell. Amortisation is not required under IFRS 5. Refer to critical accounting estimates and judgements for further details.
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 assets estimated in order to determine the extent, if any, of the impairment loss.
If the recoverable amount of an asset 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, such as impact from the Ukraine war, inflation, and interest rates.
(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 contingent based on specified future events occurring. It is stated at fair value at the date of acquisition, which is determined by discounting the estimated amount due in the future back to present value at that date. Fair value movements in the year are recognised in the income statement.
Estimates are required in respect of the amount of contingent consideration payable on acquisitions, which is determined according to formulae agreed at the time of the business combination, and normally related to the future earnings, revenues or fund raising targets of the acquired business. The Directors review the amount of contingent consideration likely to become payable at each period end date, the major assumption being the level of future profits of the acquired business. Contingent consideration payable is discounted to its fair value in accordance with applicable International Financial Reporting Standards.
(n) Pensions
The Group operates defined contribution pension schemes where payments to such schemes for employees are charged against profits in the year in which they are incurred.
(o) Share-based payments
The Group issued equity-settled share-based payments to certain Directors and employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured using a Monte-Carlo option pricing model for schemes with market based vesting conditions and Black Scholes for non-market based vesting condition. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.
A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each period end date for cash-settled share-based payments.
(p) Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein in accordance with IFRS 10. Non-controlling interests consist of the amount of those interests at the date of the original business combination and for acquisitions post 3 October 2010 following adoption of IAS 27 Consolidated and Separate Financial Statements (Revised 2008), the non-controlling interests' share of changes in equity since the date of the combination.
(q) Business combinations
The Group recognises business combinations when it considers that it has obtained control over a business, which could be an entity or separate business within an entity (for example acquiring management contracts and hiring the team to service those contracts). The fair value of the assets acquired, and the liabilities assumed from the business combination are assessed at acquisition. The fair value of the consideration paid to the sellers of the business is assessed, with particular reference to the classification of payments to employees that could be considered remuneration rather than consideration for a business. Consideration paid in excess of the acquisition date fair value of net tangible and identifiable intangible assets is known as goodwill. Refer to goodwill in note I for details.
(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.
Key sources of estimates uncertainty
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) Valuation of contingent consideration
(ii) Burlington RE Property Management Limited business acquisition - valuation of management contracts
Key Judgements
These are as follows:
(iii) Revenue recognition for performance fees and fund-raising fees
(iv) Treatment of battery storage development companies (DevCo)
(v) Accounting for investment in associates - Environment Bank Limited
(vi) Consolidation assessment of funds managed and controlled by the Group
(vii) Impairment review for Goodwill
(viii) Valuation of unlisted investments
(i) Valuation of contingent consideration
TradeRisks
The TradeRisks contingent consideration could total a maximum of £6.0 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 £3.0 million;
§ any realised synergies payable in three years, capped at £1.0 million; and
§ £2.0 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. Further details and potential outcomes are provided in note 5.
Mobeus
The Mobeus VCT business contingent consideration is based on the Mobeus VCTs maintaining the VCT investment advisory agreements with Gresham House over the three years post acquisition from October 2021 to October 2024 (maximum £8.9 million payable as contingent consideration) and achieving certain AUM growth targets over these three-year period (maximum £0.8 million).
In financial year 2022, £0.8m of the deferred consideration was paid. The fair value of the contingent consideration value as at 31 December 2022 is £9.8m, this is based on an assumption that there is reasonable likelihood of the business maintaining the VCT contracts and this amount has therefore been discounted for the time value of money. The contingent consideration is also based on estimate of the business achieving the AUM targets for the Mobeus VCT funds and has been discounted using the appropriate WACC at 12%. Further details and potential outcomes are provided in note 5.
Appian
The Appian contingent consideration is driven by applying a multiple of 1.4x to the estimated earnings to be delivered for the year to 31 December 2022 and 31 December 2023, as well as AUM targets. The contingent consideration was being reduced to £1.0 million as at 31 December 2022. This is based on actual performance in financial year 2022 and a reduction in earnings and AUM estimate for financial year 2023 based on latest budget. This outcome could range from €0.3 million deferred consideration up to the estimated €1.1 million. Further details and potential outcomes are provided in note 5.
Burlington
The Burlington contingent consideration is calculated as 40% of 6.5 times the average EBITDA in three years ending 31 December 2024. The fair value of £0.9m for the contingent consideration has been estimated at the date of acquisition using estimated outcomes and discounting this at 8.0%. As at 31 December 2022, management deemed this estimate has not changed and performance to continue as expected. Further details and potential outcomes are provided in note 5.
(ii) Burlington RE Property Management Limited business acquisition - valuation of management contracts
The acquisition of Burlington RE Property Management Limited in March 2022 is classified as a business combination under IFRS 3, Business Combinations. The acquisition involved the purchase of 100% of the share capital of Burlington RE Property Management Limited, which includes its management contracts.
The valuation of the management contracts represents an estimation of the expected present value of the profitability of those contracts. The management agreements are therefore required to be fair valued at acquisition. This has been valued using a discounted cash flow model, with assumptions regarding length of contract, appropriate costs and appropriate discount rate applied. Contributory asset charges have also been applied to determine the fair value of the management contract. Deferred tax liabilities have also been recognised to reflect the temporary timing differences as the management contracts are amortised over their useful lives. Further details and potential outcomes are provided in note 5.
(iii) Revenue recognition for performance and fundraising fees
The revenue recognition of the Group is driven by asset management fees, which are recognised in line with the investment management or advisory agreements in place with the appropriate funds. These are typically based on the committed capital of Limited Partnership funds, or Net Asset Values (NAV) for listed vehicles managed or advised by the Group. The NAV is typically the last audited or publicly available NAV announced by the Board of these companies and is therefore independently approved. As a result there is limited uncertainty or judgement in the amount of revenue to be recognised.
However, judgement in timing of revenue recognition is required for performance and fundraising fees and revenue is only recognised when there is limited uncertainty in the amount or revenue to be recognised.
Performance fees are recognised only when the Group is entitled to receive the performance fee per the management contract. This is on achievement of the hurdle rate as set out in the management or advisory agreements and the outcome is known as it is based on the audited NAV of the fund. The Mobeus Income and Growth 2 VCT plc NAV was ahead of the hurdle rate at 30 September 2022 and therefore paid a Performance fee to Gresham House Asset Management Limited during 2022.
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 2022 by the VCTs managed by the Group. Judgement is applied at the end of the period and the fundraising fees accrued are based on the shares allotted by the VCTs at the period end.
(vi) Treatment of battery storage development companies
IFRS 5 - Asset 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 100% of the equity in, and the Group has also lent funds for the development of the projects.
Judgement is required on the 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) - No DevCo Projects were held as associates at 31 December 2022 where the Group had a significant influence holding (greater than 20%, but less than 50%)
c) Classification of the assets in each DevCo Project - the SPVs are developing battery storage facilities which are classified as non-current assets unless all the IFRS 5 criteria are met. Where the Group has acquired the assets with a view to resale and the conditions under IFRS 5 are met, it is classified as a disposal group and discontinued operations.
d) Assets held for sale (IFRS 5) and loss of control - the sale of the DevCo Projects (Shilton Lane, Arbroath, Stairfoot) during the period has been treated as a loss of control transaction under IFRS 10 resulting in a gain on sale being presented net in the Statement of Comprehensive Income. Lister, Monets and Hazelboro meet the conditions under IFRS 5, as such are treated as disposal groups 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 2022.
Asset vs business acquisition
Judgement is required to determine if the DevCo Projects are asset or business acquisition as IF RS 3 requires us to determine whether assets acquired , and any liabilities assumed constitute a business. If the assets and liabilities are not considered to be a business, then the transaction should be accounted for as asset acquisition.
Business consists of inputs and processes applied to those inputs that have the ability to contribute to the creation of ou tputs. All three elements must exist to be considered a business. Management performs an assessment on each project to determine if those three elements exist at the date of acquisition. Only when inputs, processes and outputs exist would the acquisition be treated as a business acquisition and be accounted for under IFRS 3 'business combination'. Otherwise it is treated as an asset acquisition.
(vii) Accounting for investment in associates - Environment Bank Limited (EBL )
On 7 May 2021, the Group acquired a 50% investment in EBL, the habitat bank development company. The Group has also entered into an option agreement with Gresham House BSI Infrastructure LP and Gresham House British Sustainable Infrastructure Fund II LP (BSIF funds) for the BSIF funds to acquire 25% from the Group. The Group does not have the ability to control the board of EBL through majority voting rights or the ability to appoint or remove the majority of the board of directors. The Director's assessment is that the Group can exercise significant influence over EBL and has treated it as an associate.
The BSIF funds exercised the option to acquire 25% of EBL from the Group in December 2022, leaving the Group with a 25% investment in EBL, which continues to be treated as an associate.
(viii) Consolidation assessment of funds managed and controlled by the Group
Judgement is required 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/ adviser |
Removal rights of investors |
Remuneration basis |
Gresham House holding |
Agent/ principal |
Accounting treatment |
|
EBL |
No |
n/a |
n/a |
25% |
Agent |
Associate |
|
GHF FF LP |
Yes |
No |
Market norm |
71% |
Principal |
Consolidate |
|
GHFF LP |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
GRID |
Yes |
Substantive |
Market norm |
- |
Agent |
No consolidation |
|
Residential Secured Income plc |
Yes |
Substantive |
Market norm |
<2% |
Agent |
No consolidation |
|
BSIF |
Yes |
Substantive |
Market norm |
<1% |
Agent |
No consolidation |
|
BSIF II LP |
Yes |
Substantive |
Market norm |
<1% |
Agent |
No consolidation |
|
SPE LP |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
Baronsmead VCTs |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
Mobeus VCTs |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
Strategic Equity Capital plc |
Yes |
Substantive |
Market norm |
<4% |
Agent |
No consolidation |
|
Micro Cap Fund |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
Multi Cap Income Fund |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
Gresham House Renewable Energy VCTs |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
Forestry LP Funds |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
New Energy LP Funds |
Yes |
Substantive |
Market norm |
0% |
Agent |
No consolidation |
|
Irish Strategic Forestry Fund LP |
Yes |
Substantive |
Market norm |
5% |
Agent |
No consolidation |
Gresham House Forestry Fund LP (GHFF LP) is managed by GHAM. GHAM is exposed to variable returns through its management fee and acquisition fees, as well as the Company's limited partnership interest in Gresham House Forestry Friends and Family LP (GHF FF LP), a vehicle which in turn is a limited partner in GHFF LP.
The limited partners of GHFF LP have the ability to remove the manager without cause, by obtaining limited partner special consent. There are a number of limited partners that would be required to co-ordinate to remove the manager. The Directors' assessment of this right indicates that the manager is acting as agent for GHFF LP and therefore should not consolidate GHFF LP.
The Directors' assessment of GHF FF LP, however, indicates that it is in a controlling position with a 71% holding and therefore should consolidate this in the Group financial statements.
The acquisition of TradeRisks Limited (TradeRisks) in March 2020 included the acquisition of shares in Residential Secured Income plc (ReSI plc), which is now managed by the Group. At the end of 2022 the Group held less than 2% of the ordinary shares in ReSI plc. The Directors' assessment indicates that GHAM is acting as agent for ReSI plc and therefore should not consolidate ReSI plc.
Gresham House Energy Storage Fund plc (GRID) is managed by GHAM and the Company sold its direct investment in GRID in 2021. The assessment of whether GHAM is acting as agent or principal requires assessing the other entities and individuals that are connected to Gresham House and their investment in GRID. BSIF has a 5% investment in GRID, and a control assessment hash concluded that GHAM does not control BSIF and therefore should not be included in the proportion of GRID that is under the control of GHAM.
Gresham House British Strategic Investment Fund (BSIF Strategy), which comprises two sub-funds, Gresham House BSI Infrastructure LP and Gresham House BSI Housing LP, is managed by GHAM. The manager is exposed to variable returns through its management fee and has committed £0.5 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 indicates that the manager is acting as agent for the BSIF Strategy and therefore should not consolidate the BSIF Strategy.
BSIF II LP has the same assessment as BSIF LP, with the manager acting as agent and therefore should not consolidate BSIF II LP.
Gresham House Strategic Public Equity LP (SPE LP) is managed by GHAM, a subsidiary of Gresham House plc. GHAM in its role as investment adviser is exposed to variable returns through its management fee, however the Company is not directly invested in SPE LP. The limited partners of SPE LP have the ability to remove the manager without cause, one year after the final close of SPE LP on obtaining limited partner special consent. The Directors' assessment indicates that GHAM is acting as agent for SPE LP and therefore should not consolidate SPE LP.
Irish Strategic Forestry Fund LP (ISFF) is managed by GHAM. The manager is exposed to variable returns through its management fee and has committed €1.0 million to the fund, making up c5% of committed capital at first close. While exposed to the variable returns as an investor, this is not considered a material exposure. The limited partners of the ISFF fund also have the ability to remove the manager without cause. The Directors' assessment of this right indicates that the manager is acting as agent for the ISFF and therefore should not consolidate the ISFF fund.
The remaining funds of the Baronsmead VCTs, Mobeus VCTs, Gresham House Renewable Energy VCTs, the LF Gresham House UK Micro Cap Fund (Micro Cap Fund), the LF Gresham House UK Multi Cap Income Fund (Multi Cap Income Fund) and Strategic Equity Capital plc (SEC) are managed by GHAM, however are not invested in by the Group (or have less than 4% 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
At each reporting date, the Group applies judgement to determine whether there is any indication that the management contracts from previous acquisitions may be impaired. If any indication exists a full assessment is undertaken, whilst Goodwill is assessed on an annual basis. Should the review of goodwill or management contracts indicate that the carrying value exceeds the estimated recoverable amount, the assets are written down to its recoverable.
Goodwill impairment testing
Goodwill impairment assessment is based on the expected future returns of the relevant CGU as a whole. Impairment is assessed for the smallest identifiable CGU. Impairment arises when the recoverable amount of the CGU is lower than its net carrying value. CGUs are defined as the collection of management contracts generating revenues which have a clearly allocated cost base and relate to the businesses that have been acquired by the Group. The CGUs are the businesses formerly known as Aitchesse, Hazel Capital, FIM, Livingbridge VCT business, Mobeus VCT business, TradeRisks, Appian Asset Management and Burlington RE Property Management.
Goodwill has been assessed for each business acquired for impairment as at 31 December 2022. This assessment includes an analysis of the recoverable amounts of the CGUs by using value in use based on expected cash flow models from the specific businesses based on expected fundraising and other growth factors as well as the associated cost of delivering the planned revenues. The cash flows projections include estimates and assumptions to align with the Group's budget and forecasts.
A discount rate or weighted average cost of capital (WACC) derived from the capital asset pricing model (CAPM) 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 impairment arises. The recoverable amounts are compared to the goodwill on the Statement of Financial Position and other intangible assets and acquired assets within the CGU. Where the recoverable amounts 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 2022 (2021: No impairment). Refer to note 14 for further details.
(vi) Valuation of unlisted investments
The Group invests in unlisted investments, typically in Limited Partnerships that the Group manages and other unlisted investments with the aim of growing the asset management business. The valuation of these investments is based on the latest available fund information, which his typically the prior quarters fund report. The funds perform year end valuations at the same time as the Group is preparing its annual results so the draft valuations, where available are reviewed to assess whether any material difference in valuation should be updated for.
(s) Foreign currency
Assets and liabilities in foreign currencies are translated into Sterling at the rates of exchange ruling at the Statement of Financial Position date. Transactions in foreign currencies are translated into Sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.
Exchange gains and losses arising on the retranslation of monetary financial assets are treated as a separate component of the change in fair value and recognised in profit or loss. Exchange gains and losses on non-monetary OCI financial assets form part of the overall gain or loss in OCI recognised in respect of that financial instrument.
On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
(t) Treasury shares
Consideration paid/received for the purchase/sale of treasury shares is recognised directly in equity. The cost of treasury shares held is presented as a separate reserve (the "treasury share reserve"). Any excess of the consideration received on the sale of treasury shares over the weighted average cost of the shares sold is credited to retained earnings.
(u) Gresham House Employee Benefit Trust (GH EBT)
As the Company is deemed to have control of the GH EBT, it is treated as a subsidiary and consolidated for the purposes of the Consolidated Financial Statements. The GH EBT's assets (other than investments in the Company's shares), liabilities, income and expenses are included on a line-by-line basis in the Consolidated Financial Statements. The GH EBT's investment in the Company's shares is deducted from equity in the consolidated statement of financial position as if they were treasury shares.1 Income
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Asset management income |
|
|
|
|
|
|
|
|
|
|
Asset management income |
|
|
|
|
|
|
79,287 |
|
62,162 |
|
|
|
|
|
|
|
|
79,287 |
|
62,162 |
|
Dividend and interest income |
|
|
|
|
|
|
|
|
|
|
Dividend income - listed UK |
|
|
|
|
|
|
305 |
|
173 |
|
Interest receivable: banks |
|
|
|
|
|
|
28 |
|
8 |
|
Other |
|
|
|
|
|
|
198 |
|
409 |
|
|
|
|
|
|
|
|
531 |
|
590 |
|
Other operating income |
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
- |
|
15 |
|
DevCo income** |
|
|
|
|
|
|
- |
|
293 |
|
Non-core operating income* |
|
|
|
|
|
|
2,523 |
|
1,140 |
|
|
|
|
|
|
|
|
2,523 |
|
1,448 |
|
Performance fees |
|
|
|
|
|
|
|
|
|
|
Performance fees |
|
|
|
|
|
|
1,015 |
|
6,163 |
|
|
|
|
|
|
|
|
1,015 |
|
6,163 |
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
|
|
|
|
83,356 |
|
70,363 |
* Non-core operating income relates to income earned from Residential Property Management Limited and Gresham House O&M Limited for property services, which are not considered core asset management services to the Group.
** DevCo income represents the net operating income in the year from battery storage projects prior to projects being sold to GRID.
Gross core revenue as disclosed in the adjusted operating profit metric:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Asset management income - core operations |
|
|
|
|
|
|
79,287 |
|
62,162 |
|
Dividend and interest income |
|
|
|
|
|
|
531 |
|
590 |
|
Other operating income |
|
|
|
|
|
|
- |
|
308 |
|
Dividend income from associates |
|
|
|
|
|
|
- |
|
285 |
|
Gross core revenue |
|
|
|
|
|
|
79,818 |
|
63,345 |
2 Segmental reporting
The Board and management team of the Company have organised and reported the performance of the business by Real Assets, Strategic Equity and Central segments. These have evolved as the business has grown to become a specialist asset manager.
Real Assets includes the Forestry, New Energy & Sustainable Infrastructure and Real Estate divisions.
Strategic Equity includes the Public Equity and Private Equity divisions.
Central includes the general income created and costs incurred by the central functions of the business that are not directly linked to Real Assets or Strategic Equity, and includes management activities such as strategic activities, corporate development and costs associated with corporate governance and management.
The majority of activity and revenue in 2022 are derived from operations within the United Kingdom, however, the Group is growing internationally with activity in Ireland and Australasia in 2022.
|
For the year ended 31 December 2022 |
|
|
Real Assets |
|
Strategic Equity |
|
Central |
|
Consolidated |
|
Gross core income |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Asset management income |
|
|
47,384 |
|
31,903 |
|
- |
|
79,287 |
|
Interest income |
|
|
29 |
|
- |
|
197 |
|
226 |
|
Dividend income |
|
|
160 |
|
- |
|
145 |
|
305 |
|
Other operating income |
|
|
- |
|
- |
|
- |
|
- |
|
Dividend income from associates |
|
|
- |
|
- |
|
- |
|
- |
|
Rebates, distribution costs and fundraising costs* |
|
|
(57) |
|
(2,486) |
|
- |
|
(2,543) |
|
Net core income |
|
|
47,516 |
|
29,417 |
|
342 |
|
77,275 |
|
Segment expenses |
|
|
(23,274) |
|
(10,056) |
|
(16,305) |
|
(49,635) |
|
Finance costs |
|
|
- |
|
- |
|
(560) |
|
(560) |
|
Adjusted operating profit/(loss) |
|
|
24,242 |
|
19,361 |
|
(16,523) |
|
27,080 |
|
Net performance fees |
|
|
- |
|
- |
|
- |
|
- |
|
Net DevCo gains |
|
|
- |
|
- |
|
576 |
|
576 |
|
Net non-core activities |
|
|
1 |
|
- |
|
- |
|
1 |
|
Adjusted operating profit including performance fees and realised gains on investments |
|
|
24,243 |
|
19,361 |
|
(15,947) |
|
27,657 |
|
Acquisition and restructuring related costs |
|
|
|
|
|
|
|
|
(3,309) |
|
Depreciation and amortisation |
|
|
|
|
|
|
|
|
(12,403) |
|
Profit on disposal of property, plant and equipment |
|
|
|
|
|
|
|
|
44 |
|
Share of associate's profit |
|
|
|
|
|
|
|
|
1,052 |
|
Profit on disposal of associate |
|
|
|
|
|
|
|
|
(101) |
|
Share-based payments relating to acquisitions |
|
|
|
|
|
|
|
|
(318) |
|
Acquisition related remuneration |
|
|
|
|
|
|
|
|
(1,600) |
|
Loss on investments at fair value |
|
|
|
|
|
|
|
|
(761) |
|
Movement in fair value of contingent consideration |
|
|
|
|
|
|
|
|
3,514 |
|
Profit from continuing operations |
|
|
|
|
|
|
|
|
13,775 |
|
*Rebates, distribution costs and fundraising costs are presented within administrative overheads cost in the Statement of Comprehensive income but presented as part of Net core income when presenting adjusted operating profit as these are expenses paid to deliver core income by the Group.
|
|||||||||
|
For the year ended 31 December 2021 |
|
|
Real Assets |
|
Strategic Equity |
|
Central |
|
Consolidated |
|
Gross core income |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Asset management income |
|
|
38,947 |
|
23,215 |
|
- |
|
62,162 |
|
Interest income |
|
|
406 |
|
7 |
|
4 |
|
417 |
|
Dividend income |
|
|
146 |
|
27 |
|
- |
|
173 |
|
Other operating income |
|
|
293 |
|
- |
|
15 |
|
308 |
|
Dividend income from associates* |
|
|
160 |
|
125 |
|
- |
|
285 |
|
Rebates, distribution costs and fundraising costs** |
|
|
(142) |
|
(1,594) |
|
- |
|
(1,736) |
|
Net core income |
|
|
39,810 |
|
21,780 |
|
19 |
|
61,609 |
|
Segment expenses |
|
|
(17,562) |
|
(5,644) |
|
(17,922) |
|
(41,128) |
|
Finance costs |
|
|
- |
|
- |
|
(311) |
|
(311) |
|
Adjusted operating profit/(loss) |
|
|
22,248 |
|
16,136 |
|
(18,214) |
|
20,170 |
|
Net performance fees |
|
|
- |
|
1,714 |
|
- |
|
1,714 |
|
Net DevCo gains |
|
|
1,773 |
|
- |
|
- |
|
1,773 |
|
Net non-core activities |
|
|
38 |
|
- |
|
- |
|
38 |
|
Adjusted operating profit including performance fees and realised gains on investments |
|
|
24,059 |
|
17,850 |
|
(18,214) |
|
23,695 |
|
Acquisition and restructuring related costs |
|
|
|
|
|
|
|
|
(3,215) |
|
Depreciation and amortisation |
|
|
|
|
|
|
|
|
(9,475) |
|
Loss on disposal of property, plant and equipment |
|
|
|
|
|
|
|
|
- |
|
Share of associate's profit* |
|
|
|
|
|
|
|
|
4,670 |
|
Profit on disposal of associate |
|
|
|
|
|
|
|
|
461 |
|
Share-based payments relating to acquisitions |
|
|
|
|
|
|
|
|
(615) |
|
Acquisition related remuneration |
|
|
|
|
|
|
|
|
(452) |
|
Profits on investments at fair value |
|
|
|
|
|
|
|
|
2,910 |
|
Movement in fair value of contingent consideration |
|
|
|
|
|
|
|
|
(1,659) |
|
Profit from continuing operations |
|
|
|
|
|
|
|
|
16,320 |
|
*Share of associate's profit of £4,670,000 excludes dividend income received in the year of £285,000. **Rebates, distribution costs and fundraising costs are presented within administrative overheads cost in the Statement of Comprehensive income but presented as part of Net core income when presenting adjusted operating profit as these are expenses paid to deliver core income by the Group. |
|||||||||
During the year the Group had no customers accounting for more than 10% of the Group's revenue (2021: no customer).
Other information:
|
31 December 2022 |
Real Assets |
|
Strategic Equity |
|
Central |
|
Consolidated |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Segment assets |
94,416 |
|
58,865 |
|
59,856 |
|
213,137 |
|
Segment liabilities |
(13,574) |
|
(5,867) |
|
(42,558) |
|
(61,999) |
|
|
80,842 |
|
52,998 |
|
17,298 |
|
151,138 |
|
Capital expenditure |
- |
|
- |
|
410 |
|
410 |
|
Depreciation and amortisation |
2,960 |
|
8,275 |
|
2,211 |
|
13,446 |
|
Non-cash expenses other than depreciation |
- |
|
- |
|
3,566 |
|
3,566 |
|
Goodwill included within segment assets |
18,338 |
|
30,897 |
|
- |
|
49,235 |
|
31 December 2021 |
Real Assets |
|
Strategic Equity |
|
Central |
|
Consolidated |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Segment assets |
75,856 |
|
78,460 |
|
66,001 |
|
220,317 |
|
Segment liabilities |
(20,909) |
|
(22,613) |
|
(29,258) |
|
(72,780) |
|
|
54,947 |
|
55,847 |
|
36,743 |
|
147,537 |
|
Capital expenditure |
1 |
|
54 |
|
2,985 |
|
3,040 |
|
Depreciation and amortisation |
2,828 |
|
5,549 |
|
1,098 |
|
9,475 |
|
Non-cash expenses other than depreciation |
- |
|
- |
|
3,788 |
|
3,788 |
|
Goodwill included within segment assets |
17,552 |
|
31,244 |
|
- |
|
48,796 |
3 Operating costs
Administrative overheads comprise the following:
|
|
|
|
2022 |
|
2021 |
||||
|
|
|
|
Core activities |
|
Non-core activities |
|
Total |
|
Total |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Directors' emoluments (excluding benefits in kind and share-based payments) |
|
|
1,792 |
|
- |
|
1,792 |
|
2,982 |
|
Auditor's remuneration* |
|
|
734 |
|
- |
|
734 |
|
360 |
|
Amortisation |
|
|
11,205 |
|
43 |
|
11,248 |
|
8,516 |
|
Depreciation |
|
|
1,136 |
|
19 |
|
1,155 |
|
959 |
|
Profit on disposal of assets |
|
|
(44) |
|
- |
|
(44) |
|
- |
|
Wages and salaries |
|
|
31,536 |
|
1,371 |
|
32,907 |
|
27,357 |
|
Social security costs |
|
|
5,113 |
|
127 |
|
5,240 |
|
4,817 |
|
Share-based payments |
|
|
3,566 |
|
- |
|
3,566 |
|
3,788 |
|
Other operating costs |
|
|
14,102 |
|
962 |
|
15,064 |
|
11,337 |
|
|
|
|
69,140 |
|
2,522 |
|
71,662 |
|
60,116 |
|
Staff costs (including Directors' emoluments) were: |
|
|
|
|
|
|
|
|
|
|
Wages, salaries and fees |
|
|
32,020 |
|
1,300 |
|
33,320 |
|
30,275 |
|
Social security costs |
|
|
5,113 |
|
127 |
|
5,240 |
|
4,817 |
|
Pension costs |
|
|
1,309 |
|
70 |
|
1,379 |
|
1,038 |
|
|
|
|
38,442 |
|
1,497 |
|
39,939 |
|
36,130 |
|
*A more detailed analysis of auditor's remuneration is as follows: |
|
2022 |
|
2021 |
|||||
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Audit fees Company and consolidated financial statements |
|
88 |
|
40 |
|||||
|
Audit fees - audit of the Company's subsidiaries |
|
|
|
|
|
|
634 |
|
298 |
|
Non audit services - CASS reporting to the FCA |
|
|
|
|
|
|
12 |
|
22 |
|
|
|
|
|
|
|
|
734 |
|
360 |
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 236 (2021: 173), including 36 employees relating to non-core activities (2021: 22). The Company has no employees.
4 Directors' emoluments
The Directors who served in the year received the following emoluments:
|
Year ended 31 December 2022 |
Basic salary |
Benefits |
Cash bonuses |
Bonus share matching (i) |
Pensions (ii) |
2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Executive: |
|
|
|
|
|
|
|
Tony Dalwood |
398 |
3 |
672 |
100 |
40 |
1,213 |
|
Kevin Acton |
265 |
2 |
260 |
100 |
27 |
654 |
|
|
|
|
|
|
|
|
|
Non-Executive: |
|
|
|
|
|
|
|
Anthony Townsend |
60 |
- |
- |
- |
- |
60 |
|
Rachel Beagles |
35 |
- |
- |
- |
- |
35 |
|
Richard Chadwick (iii) |
15 |
- |
- |
- |
- |
15 |
|
Gareth Davis |
35 |
- |
- |
- |
- |
35 |
|
Sarah Ing (iv) |
52 |
- |
- |
- |
- |
52 |
|
Simon Stilwell |
60 |
- |
- |
- |
- |
60 |
|
Total |
920 |
5 |
932 |
200 |
67 |
2,124 |
|
|
|
|
|
|
|
|
i. The Executive Directors have elected to reinvest part of their bonuses in the Company's ordinary shares through the Bonus Share Matching plan.
ii. Payments have been made in lieu of contribution towards pension scheme.
iii. Richard Chadwick retired from the Board at the 2022 AGM in May 2022.
iv. Sarah Ing acted as Richard Chadwick's alternate from September 2021 until his retirement at the conclusion of the 2022 AGM whereupon she was appointed as a Director and Chair of the Audit Committee, and received a director's fee of £28,333 in June 2022.Simon Stilwell received a fee of £20,000 for additional Board projects undertaken in the year.
|
Year ended 31 December 2021 |
Basic salary |
Benefits |
Cash Bonuses |
Bonus share matching (i) |
Pensions (ii) |
2021 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Executive: |
|
|
|
|
|
|
|
Tony Dalwood |
386 |
3 |
866 |
100 |
39 |
1,394 |
|
Kevin Acton |
258 |
2 |
351 |
100 |
26 |
737 |
|
|
|
|
|
|
|
|
|
Non-Executive: |
|
|
|
|
|
|
|
Anthony Townsend |
60 |
- |
- |
- |
- |
60 |
|
Rachel Beagles |
35 |
- |
- |
- |
- |
35 |
|
Richard Chadwick |
40 |
- |
- |
- |
- |
40 |
|
Gareth Davis |
35 |
- |
- |
- |
- |
35 |
|
Sarah Ing (iii) |
- |
- |
- |
- |
- |
- |
|
Simon Stilwell |
40 |
- |
- |
- |
- |
40 |
|
Total |
854 |
5 |
1,217 |
200 |
65 |
2,341 |
|
|
|
|
|
|
|
|
i. The Executive Directors have elected to reinvest part of their bonuses in the Company's ordinary shares through the Bonus Share Matching plan.
ii. Payments have been made in lieu of contribution towards pension scheme.
iii. Sarah Ing has joined the Board as an alternate Director and was appointed as a Director at the conclusion of the 2022 AGM. No fees were earned in the year to 31 December 2021.
Long-term incentive plans and share ownership of Executive Directors
The Executive Directors held the following ordinary shares in the Company and have the following equity awards outstanding as at 31 December 2022 (number of ordinary shares):
|
Number of ordinary shares (iv) |
Ordinary shares held (i) |
Bonus share matching (ii) 2019 |
Bonus share matching (ii) 2020 |
Bonus share matching (ii) 2021 |
Bonus share matching (ii) 2022 |
2020 LTIP (iii) |
Total |
|
Awarded |
|
2020 |
2021 |
2022 |
2023 |
2020 |
|
|
Vesting date |
|
2023 |
2024 |
2025 |
2026 |
2023/24 |
|
|
|
|
|
|
|
|
|
|
|
Tony Dalwood |
935,303 |
34,416 |
12,296 |
11,372 |
13,252 |
448,332 |
1,454,971 |
|
Kevin Acton |
261,798 |
- |
12,296 |
11,372 |
13,252 |
227,614 |
526,332 |
i. Includes shares held directly, by family members and deferred shares purchased under the bonus share matching plan as at 31 December 2022.
ii. Bonus share matching 2019, 2020, 2021 and 2022 are the result of the Executive Directors electing to reinvest their cash bonus into Gresham House plc shares, which subject to achieving hurdles could result in the number of shares above being awarded on the vesting date. The number of shares disclosed above reflects the matching shares that would be received should the hurdles be achieved.
iii. The value of the 2020 LTIP as at 31 December 2022, based on the creation of £69.4 million of shareholder value, and assuming it vested and had achieved all performance hurdles, generates the gross number of shares.
iv. These share awards are disclosed before tax.
Ordinary shares held and equity awards outstanding as at 31 December 2021 (number of ordinary shares):
|
Number of ordinary shares (iv) |
Ordinary shares held (i) |
2016 LTIP - D shares |
Bonus share matching (ii) 2018 |
Bonus share matching (ii) 2019 |
Bonus share matching (ii) 2020 |
Bonus share matching (ii) 2021 |
2019 LTIP |
2020 LTIP (iii) |
Total |
|
Awarded |
|
2019 |
2019 |
2020 |
2021 |
2022 |
2019 |
2020 |
|
|
Vesting date |
|
2021 |
2022 |
2023 |
2024 |
2025 |
2022 |
2023/24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tony Dalwood |
918,737 |
- |
- |
34,416 |
12,296 |
11,372 |
68,943 |
617,990 |
1,663,754 |
|
Kevin Acton |
249,889 |
70,575 |
6,737 |
- |
12,296 |
11,372 |
55,154 |
313,748 |
719,771 |
i. Includes shares held directly, by family members and deferred shares purchased under the bonus share matching plan.
ii. Bonus share matching 2018, 2019, 2020 and 2021 are the result of the Executive Directors electing to reinvest their cash bonus into Gresham House plc shares, which subject to achieving hurdles could result in the number of shares above being awarded on the vesting date. The number of shares disclosed above reflects the matching shares that would be received should the hurdles be achieved.
iii. The value of the 2020 LTIP as at 31 December 2021, based on the creation of £112.8 million of shareholder value, and assuming it vested and had achieved all performance hurdles, generates the gross number of shares.
iv. These share awards are disclosed before tax.
Long-term incentive plans vested or exercised in the year to 31 December 2022:
|
|
Bonus Share Matching 2018 Shares received (i) |
Total shares received in 2022 |
2019 LTIP cash settled (ii) |
2016 LTIP cash settled (iii) |
Total cash settled from LTIPs in 2022 |
|
Tony Dalwood |
- |
- |
£563,105 |
- |
563,105 |
|
Kevin Acton |
7,247 |
7,247 |
£450,481 |
£702,080 |
1,152,561 |
i. The Bonus Share Matching plan from 2018 fully vested in March 2022, with Kevin Acton receiving the deferred shares and matching shares under the plan and the figures shown above are net of income tax liabilities.
ii. The 2019 LTIP fully vested and was exercised during 2022 and was settled in cash. The figures shown is gross and tax was deducted via payroll.
iii. The 2016 LTIP D Shares vested and were exercised in 2022. This was cash settled and paid gross.
Long-term incentive plans vested or exercised in the year to 31 December 2021:
|
|
2018 LTIP shares received (i) |
Bonus share matching 2017 Shares received (ii) |
Total shares received in 2021 |
GHS performance fees |
Total cash settled from LTIPs in 2021 |
|
Tony Dalwood |
58,166 |
- |
58,166 |
£552,599 |
552,599 |
|
Kevin Acton |
36,192 |
5,161 |
41,353 |
94,132 |
94,132 |
i. The 2018 LTIP fully vested and was exercised during 2021 and is the net number of shares delivered to the individuals.
ii. The Bonus Share Matching plan from 2017 fully vested in May 2021, with Kevin Acton receiving the deferred shares and matching shares under the plan and the figures shown above are net of income tax liabilities.
The Directors are considered to be the Group's only key management personnel. Employer's National Insurance contributions in respect of the Directors for the year were £493,000 (2021: £505,000).
5 Business combinations
a) Burlington RE Property Management Limited
On 15 March 2022 the Group acquired 100% of the issued share capital of Burlington RE Property Management Limited (Burlington), a company registered in Ireland. Burlington is one of Ireland's premier independent commercial property asset and development management companies, and manages or advises assets of €340 million as at 31 December 2021.
The Acquisition forms part of Gresham House's ongoing international expansion plans, as set out in its five-year strategy (GH25) and is the Group's second acquisition in Ireland, following the completion of the Appian Asset Management transaction in 2021. It consolidates the existing relationship between the two businesses to achieve long-term alignment.
The fair value of the identifiable net assets acquired, and the consideration paid under IFRS 3 are as follows:
|
|
Net book value |
|
Adjustments |
Fair value |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Tangible fixed assets |
2 |
|
- |
|
2 |
|
Cash |
390 |
|
- |
|
390 |
|
Trade and other receivables |
267 |
|
- |
|
267 |
|
Trade and other payables |
(328) |
|
- |
|
(328) |
|
Management contracts |
- |
|
1,511 |
|
1,511 |
|
Goodwill |
- |
|
742 |
|
742 |
|
Deferred tax liability |
- |
|
(189) |
|
(189) |
|
Total identifiable net assets |
331 |
|
2,064 |
|
2,395 |
Under the terms of the acquisition agreement, the fair value of the consideration paid to the vendors of Burlington was:
|
|
|
£'000 |
|
Cash |
|
1,027 |
|
Shares - 73,177 shares in Gresham House plc valued at 855.0p per share on 15 March 2022 |
|
626 |
|
Total initial consideration |
|
1,653 |
|
Contingent consideration |
|
742 |
|
Total consideration |
|
2,395 |
The consideration shares were admitted to trading on AIM on 21 March 2022.
Contingent consideration
Contingent consideration with an expected fair value of €1.0 million will be payable to the sellers within 20 business days of publication of the accounts for the year ending 31 December 2024. This is calculated as 40% of 6.5 times the average EBITDA in three years ending 31 December 2024.
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 8.0%. Up to 50% of the contingent consideration may be settled in Gresham House plc shares at the Company's discretion. As such this will be recognised as a liability on the balance sheet and the fair value assessed each reporting period. The fair value at the time of acquisition was calculated as £742k. The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between €nil and €1.0 million.
Revenue and profits of Burlington
Burlington was acquired on 15 March 2022. The Group has recognised the following revenues and costs in respect of Burlington for the period ended 31 December 2022:
|
|
€'000 |
|
Revenue |
1,650 |
|
Profit before tax |
170 |
Prior to acquisition by the Group, Burlington had a 31 December year end. The results for the most recent audited reporting period prior to acquisition were to 31 December 2021. Had Burlington been part of the Group for the entire reporting period the following sums would have been consolidated:
|
|
€'000 |
|
Revenue |
2,071 |
|
Profit before tax |
280 |
Goodwill
Goodwill arises due to the excess of the fair value of the consideration payable over the fair value of the net assets acquired. It is mainly attributable to the skills of the team acquired, the synergies expected to be achieved from the acquisition and the business development potential. Goodwill arising on the Burlington acquisition is not deductible for tax purposes.
Fair value
The fair value of the management contracts has been estimated using a discounted cash flow model. The estimated cash flows have been valued at a discount of 8.0% and the management contracts are amortised over eight years.
b) DevCo Entities
The Group acquired the share capital and 100% of the voting rights in the following companies during the year:
|
Company acquired |
Acquisition date |
Disposal date |
|
|
|
|
|
Hazelboro Limited |
31 May 2022 |
|
|
UK Battery Storage Limited |
4 March 2022 |
30 June 2022 |
|
Stairfoot Limited |
5 May 2022 |
22 December 2022 |
|
GreenGridPower Limited |
21 April 2022 |
14 October 2022 |
The fair value of the assets acquired, and liabilities assumed on acquisition are as follows:
|
|
Hazelboro |
|
Stairfoot |
|
GreenGrid Power |
|
UK Battery Storage |
|
|
£'000 |
|
|
|
|
|
|
|
Identifiable net assets |
2,453 |
|
1,819 |
|
3,482 |
|
2,686 |
|
Total consideration paid |
2,453 |
|
1,819 |
|
3,482 |
|
2,686 |
|
Satisfied by: |
|
|
|
|
|
|
|
|
Cash paid |
2,249 |
|
482 |
|
2,495 |
|
2,686 |
|
Deferred consideration |
204 |
|
1,337 |
|
987 |
|
- |
|
Total Consideration |
2,453 |
|
1,819 |
|
3,482 |
|
2,686 |
The four entities acquired is held exclusively with a view of resale and will be measured as fair value less costs to sell under IFRS 5 'asset held for sale'. The Group has applied IFRS 5 alternative implementation guidance by treating each subsidiary acquisition as a single investment asset and will be remeasured at each reporting date under IFRS 5 to the lower of its initial carrying amount and the fair value less costs to sell (in accordance with the general requirements for disposal group). However, it should be noted that remeasurement will not be necessary in the subsequent period, because the entity held for sale should generally be sold in that period. The acquired entities are presented in the balance sheet as assets and liabilities held for sale under IFRS 5.
During the year the Group disposed of UK Battery Storage Limited, Stairfoot Limited, GreenGridPower Limited, with total realising a net gain on disposal of £2.1 million and £0.1 million from previously recovered cost.
c) Appian Asset Management Limited
On 29 June 2021 the Group acquired 100% of the issued share capital of Appian Asset Management Limited (Appian), a company registered in Ireland. Appian is an active asset manager with around €350 million in Assets Under Management (AUM) as at 31 December 2020. The acquisition enhances the Group's capabilities to develop existing strategies in Ireland and Europe, particularly those with a sustainability focus including Forestry, Sustainable Infrastructure, and Real Estate. Appian was subsequently renamed Gresham House Asset Management Ireland Limited.
The fair value of the identifiable net assets acquired, and the consideration paid under IFRS 3 is as follows:
|
|
Net book value |
|
Adjustments |
Fair value |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Property, plant and equipment |
54 |
|
441 |
|
495 |
|
Cash |
2,305 |
|
- |
|
2,305 |
|
Trade and other receivables |
604 |
|
- |
|
604 |
|
Trade and other payables |
(1,464) |
|
(690) |
|
(2,154) |
|
Management contracts |
- |
|
2,231 |
|
2,231 |
|
Goodwill |
- |
|
4,044 |
|
4,044 |
|
Deferred tax liability |
- |
|
(511) |
|
(511) |
|
Total identifiable net assets |
1,499 |
|
5,515 |
|
7,014 |
The adjustments relate to the recognition of management contracts and associated deferred tax, goodwill and the IFRS 16 lease asset and liability.
Under the terms of the acquisition agreement, the fair value of the consideration paid to the vendors of Appian was:
|
|
|
£'000 |
|
Cash |
|
3,146 |
|
Shares - 104,168 shares in Gresham House plc valued at 940.0p per share on 29 June 2021 |
|
979 |
|
Total initial consideration |
|
4,125 |
|
Contingent consideration |
|
2,889 |
|
Total consideration |
|
7,014 |
The consideration shares were admitted to trading on AIM on 5 July 2021.
Contingent consideration
Contingent consideration with an expected fair value at acquisition of €4.6 million will be payable in cash to the sellers based on the following:
§ 1.4 times year two earnings, payable in two years. The expected fair value at acquisition was £1.1 million;
§ 1.4 times year three earnings, payable in three years. The expected fair value at acquisition was £1.4 million; and
§ up to €0.75 million payable in three years based on certain AUM and earnings targets. The expected fair value at acquisition was £0.4 million.
The fair value of the contingent consideration has been estimated at the date of acquisition using estimated outcomes, the probability of those outcomes and discounting this at 13.0%. Up to 50% of the contingent consideration may be settled in Gresham House plc shares at the Company's discretion. As such this will be recognised as a liability on the balance sheet and the fair value assessed each reporting period. The fair value at the time of acquisition was calculated as £2.9 million. The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between €nil and €6.4 million.
Revenue and profits of Appian
The actual revenues and profits that have been generated since the acquisition of Appian on 29 June 2021 to 31 December 2021 were:
|
|
€'000 |
|
Revenues |
1,988 |
|
Profit before tax |
190 |
Prior to acquisition by the Group, Appian had a 31 December year end. The results for the most recent audited reporting period prior to acquisition were to 31 December 2020. Had Appian been part of the Group for the entire reporting period the following sums would have been consolidated:
|
|
€'000 |
|
Revenue |
3,403 |
|
Profit before tax |
284 |
Goodwill
Goodwill arises due to the excess of the fair value of the consideration payable over the fair value of the net assets acquired. It is mainly attributable to the skills of the team acquired, the synergies expected to be achieved from the acquisition and the business development potential. Goodwill arising on the Appian acquisition is not deductible for tax purposes.
Fair value
The fair value of the management contracts and customer relationships have been estimated using a discounted cash flow model. The estimated cash flows have been valued at a discount of 13.0% and are amortised over five years.
Acquisition costs in relation to business combinations have been classified as exceptional items (see Note 6).
d) Mobeus VCT business
On 1 October 2021 the Company acquired the VCT business of Mobeus Equity Partners LLP (Mobeus), a UK-based investment firm managing assets across two distinct client groups, one of which is the VCT business acquired by the Company. The acquisition of Mobeus included the novation and acquisition of investment advisory contracts for Mobeus Income & Growth VCT plc, Mobeus Income & Growth 2 VCT plc, Mobeus Income & Growth 4 VCT plc and The Income & Growth VCT plc (together, the "Mobeus VCTs"), with a combined AUM of £369 million as at March 2021, and the hiring of the Mobeus VCT team. The acquisition of Mobeus was to build out the Group's existing VCT business.
The fair value of the identifiable net assets acquired, and the consideration paid under IFRS 3 is as follows:
|
|
|
|
|
Fair value |
|
|
|
|
|
|
|
£'000 |
|
Management contracts |
|
|
|
|
21,115 |
|
Brand |
|
|
|
|
456 |
|
Goodwill |
|
|
|
|
15,118 |
|
Liabilities assumed |
|
|
|
|
(514) |
|
Deferred tax |
|
|
|
|
(5,031) |
|
Total identifiable net assets |
|
|
|
|
31,144 |
Under the terms of the acquisition agreement, the fair value of the consideration paid to the vendors of Mobeus was:
|
|
|
£'000 |
|
Vendor placing shares - 2,197,802 shares in Gresham House plc valued at 907.0p per share on 1 October 2021 |
|
19,934 |
|
Consideration shares - 439,560 shares in Gresham House plc valued at 907.0p per share on 1 October 2021 |
|
3,986 |
|
Excess cash and net working capital |
|
(514) |
|
Total initial consideration |
|
23,406 |
|
Contingent consideration |
|
7,738 |
|
Total consideration |
|
31,144 |
The vendor placing and consideration shares were admitted to trading on AIM on 1 October 2021.
Contingent consideration
Contingent consideration with an expected fair value at acquisition of £7.7 million will be payable in cash to the sellers over a three-year period conditional on contract retention and fundraising and AUM targets.
The fair value of the contingent consideration has been estimated at the date of acquisition using estimated outcomes, the probability of those outcomes and discounting this at 12.0%. As such this will be recognised as a liability on the balance sheet and the fair value assessed each reporting period.
The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between £nil and £12.1 million.
Goodwill
Goodwill arises due to the excess of the fair value of the consideration payable over the fair value of the net assets acquired. It is mainly attributable to the skills of the team acquired, the synergies expected to be achieved from the acquisition and the business development potential.
None of the goodwill is expected to be deductible for income tax purposes.
Actual revenue and profits of Mobeus
The actual revenues and profits that have been generated since the acquisition of Mobeus on 1 October 2021 to 31 December 2021 were:
|
|
£'000 |
|
Revenues |
2,588 |
|
Profit before tax |
1,917 |
The disclosure of hypothetical revenues and profits of Mobeus for the year ended 31 December 2021 is not considered relevant due to the nature of the transaction. The entire Mobeus business was not acquired and there will be revenues and expenses not relevant to the business acquired.
Fair value
The fair value of the management contracts has been estimated using a discounted cash flow model. The estimated cash flows have been valued at a discount of 12.0%. This resulted in fair value of management contracts totalling £21,115,000 being recognised at acquisition. The fair value of the brand has been estimated using a relief from royalty approach which resulted in a value of £456,000 being recognised at acquisition.
Acquisition costs in relation to business combinations have been classified as acquisition and restructuring related costs (see Note 6).
6 Acquisition and restructuring related costs
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Acquisition costs |
|
|
|
|
|
|
|
|
|
|
Burlington RE Property Management Limited |
|
|
|
|
|
|
174 |
|
- |
|
TradeRisks Limited |
|
|
|
|
|
|
- |
|
19 |
|
Appian Asset Management Limited |
|
|
|
|
|
|
- |
|
187 |
|
Mobeus VCT business |
|
|
|
|
|
|
4 |
|
1,141 |
|
Joint Venture costs |
|
|
|
|
|
|
- |
|
4 |
|
Other |
|
|
|
|
|
|
60 |
|
79 |
|
|
|
|
|
|
|
|
238 |
|
1,430 |
|
Restructuring, integration and legal costs |
|
|
|
|
|
|
872 |
|
633 |
|
DevCo acquisition and disposal costs |
|
|
|
|
|
|
460 |
|
1,152 |
|
|
|
|
|
|
|
|
1,570 |
|
3,215 |
7 Finance costs
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Interest payable on bank loans |
|
|
|
|
|
|
253 |
|
148 |
|
Finance cost on unwind of contingent consideration |
|
|
|
|
|
|
1,745 |
|
- |
|
Finance fees |
|
|
|
|
|
|
189 |
|
96 |
|
Interest payable on leases |
|
|
|
|
|
|
113 |
|
67 |
|
|
|
|
|
|
|
|
2,300 |
|
311 |
See Note 25 for details of borrowings.
8 IFRS 16 Leases
IFRS 16 Leases relates to leases for use of office space at various locations. As a lessee, the Group has recognised a lease liability representing the present value of the obligation of the lease payments, and a related right-of-use (ROU) asset in line with the process explained under the accounting policy.
The rate implicit in the leases is not evident and so the entities' incremental borrowing rates have been used. The incremental rate referred to by IFRS 16 indicates the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the ROU asset in a similar economic environment. The weighted average incremental borrowing rate used on the date of initial application of the leases is 3.25%, which refers to the interest charge on the Group's revolving credit facility.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the ROU asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and loss over the life of the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
ROU asset cost |
|
|
|
|
|
|
3,044 |
|
3,526 |
|
ROU asset accumulated depreciation |
|
|
|
|
|
|
(1,547) |
|
(1,220) |
|
Retained reserves * |
|
|
|
|
|
|
(6) |
|
(6) |
|
Depreciation expense |
|
|
|
|
|
|
835 |
|
713 |
* 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.
The table below summaries the maturity profile of the Group's liabilities based on contractual discounted payment at 31 December 2022 and 2021
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Less than one year |
|
|
|
|
|
|
790 |
|
643 |
|
One to two years |
|
|
|
|
|
|
698 |
|
1,311 |
|
Two to five years |
|
|
|
|
|
|
310 |
|
348 |
|
More than five years |
|
|
|
|
|
|
145 |
|
139 |
|
|
|
|
|
|
|
1,943 |
|
2,441 |
|
An analysis of the lease liability relating to ROU assets is as follows:
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Balance as at 1 January |
|
|
2,441 |
|
641 |
|
1,341 |
|
211 |
|
IFRS 16 restatement |
|
|
(38) |
|
689 |
|
- |
|
- |
|
Additions |
|
|
20 |
|
1,970 |
|
- |
|
1,734 |
|
Cash payments |
|
|
(627) |
|
(912) |
|
(283) |
|
(625) |
|
Foreign exchange movements |
|
|
35 |
|
(14) |
|
- |
|
- |
|
Interest expense |
|
|
112 |
|
67 |
|
42 |
|
21 |
|
As at 31 December |
|
1,943 |
|
2,441 |
|
1,100 |
|
1,341 |
|
Please see Note 33 Financial Instruments for the maturity profile of leases.
The Group has elected not to apply IFRS 16 to:
(a) Low value leases for various IT equipment leased across the business. The maximum third-party new item price of any excluded equipment is less than £3,000. The total amount of lease payments for the year ended 31 December 2022 relating to these leases was £19,000 (2021: £21,000).
It is also noted that:
(a) the impact of lease liability and ROU asset on deferred taxes is expected to be immaterial;
(b) there were no material residual value guarantees or contractual dilapidation commitments that impacted the initial recognition value for ROU assets and lease liability;
(c) there were no purchase options for leased assets that was made available to or requested by the Group; and
(d) lease values do not include any termination penalties as the business intends to use the properties to the end of lease terms.
Lease terms are negotiated on an individual basis across all seven leases and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. No rent concessions were applied and all lease payments are considered fixed per the lease agreement.
9 Taxation
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
(a) Analysis of charge in period: |
|
|
|
|
|
|
|
|
|
|
UK Corporation tax at 19% (2021: 19%) |
|
|
|
|
|
|
4,800 |
|
2,883 |
|
Over provision in prior year |
|
|
|
|
|
|
90 |
|
(520) |
|
Deferred tax |
|
|
|
|
|
|
(2,016) |
|
1,744 |
|
Total tax charge |
|
|
|
|
|
|
2,874 |
|
4,107 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Factors affecting tax charge for period: |
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before tax multiplied by standard rate of corporation tax in the UK of 19% (2021: 19%) |
|
2,584 |
|
3,101 |
|||||
|
Tax effect of: |
|
|
|
|
|
|
|
|
|
|
Dividend income not taxable |
|
|
|
|
|
|
- |
|
- |
|
Amortisation not taxable |
|
|
|
|
|
|
- |
|
261 |
|
Disallowable expenses/non-taxable income |
|
|
|
|
|
|
558 |
|
(2,468) |
|
Recognition of previously unrecognised deferred tax liabilities |
|
|
|
|
|
- |
|
2,071 |
|
|
Utilisation of previously unrecognised tax losses |
|
|
|
|
|
|
(404) |
|
(449) |
|
Over provision in prior year |
|
|
|
|
|
|
90 |
|
(520) |
|
Deferred tax not recognised |
|
|
|
|
|
|
- |
|
- |
|
Effect of tax rate change on opening balances |
|
|
|
|
|
|
40 |
|
2,328 |
|
Remeasurement of deferred tax |
|
|
|
|
|
|
6 |
|
(217) |
|
Actual tax charge |
|
|
|
|
|
|
2,874 |
|
4,107 |
The Company recognised a deferred tax asset of £1.8 million (2021: £0.1 million) in the current year. No material uncertain tax positions exist as at 31 December 2022. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
10 Earnings per share
(a) Basic and diluted profit per share
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
Total net profit attributable to equity holders of the parent (£'000) |
|
11,342 |
|
11,777 |
||||||
|
Weighted average number of shares in issue during the period |
|
38,212,553 |
|
34,083,582 |
||||||
|
Number of shares held by the Gresham House Employee Benefit Trust |
|
(191,781) |
|
(204,007) |
||||||
|
|
|
38,020,772 |
|
33,879,575 |
||||||
|
Dilutive shares* |
|
1,705,923 |
|
2,150,707 |
||||||
|
Weighted average dilutive shares in issue during the period |
|
39,726,695 |
|
36,030,282 |
||||||
|
Basic profit per share attributable to equity holders of the parent (pence) |
|
29.8 |
|
34.8 |
||||||
|
Diluted profit per share attributable to equity holders of the parent (pence) |
|
28.6 |
|
32.7 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
*Dilutive shares were deemed to have been issued at nil consideration as a result of shares which could be issued under the bonus share matching plan, long-term incentive plans and acquisition related share-based payments.
(b) Adjusted earnings per share
Adjusted earnings per share is based on adjusted operating profit after tax, which is stated after charging interest but before depreciation, amortisation, share-based payments and remuneration relating to acquisitions, profits and losses on disposal of property, plant and equipment, net performance fees, net non-core activities, net development gains and exceptional items, to provide the non-GAAP measure of the performance as an asset manager. This includes dividend and income received from investments in associates.
Adjusted profit for calculating adjusted earnings per share:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Net operating profit after finance costs |
|
|
|
|
|
|
7,824 |
|
6,721 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
Acquisition and restructuring related expenses, including finance costs related to the unwind of discount on contingent consideration |
|
|
|
|
|
|
3,308 |
|
3,215 |
|
Depreciation and amortisation |
|
|
|
|
|
|
12,359 |
|
9,475 |
|
Loss on disposal of property, plant and equipment |
|
|
|
|
|
|
- |
|
- |
|
Dividend income received from associates |
|
|
|
|
|
|
- |
|
285 |
|
Net performance fees |
|
|
|
|
|
|
- |
|
(1,714) |
|
Variable compensation attributable to gains on development projects |
|
|
|
975 |
|
689 |
|||
|
Development project costs |
|
|
|
698 |
|
470 |
|||
|
Net non-core activity |
|
|
|
|
|
|
(1) |
|
(38) |
|
Share-based payments relating to acquisitions |
|
|
|
|
|
|
317 |
|
615 |
|
Acquisition related remuneration |
|
|
|
|
|
|
1,600 |
|
452 |
|
Adjusted profit attributable to equity holders of the parent before tax |
|
|
|
27,080 |
|
20,170 |
|||
|
Corporation tax attributable to adjusted operating profit |
|
|
|
(5,147) |
|
(2,363) |
|||
|
Adjusted profit attributable to equity holders of the parent after tax |
|
|
|
21,933 |
|
17,807 |
|||
|
Adjusted profit per share (pence) - basic |
|
|
|
|
|
|
57.7 |
|
52.6 |
|
Adjusted profit per share (pence) - diluted |
|
|
|
|
|
|
55.2 |
|
49.4 |
11 Dividends
In May 2022 the Company paid £3,814,818 which represents a final dividend for the year ended 31 December 2021 of 10.0 pence per share. A final dividend for the year ended 31 December 2020 of 6.0 pence per share totalling £1,881,172 was paid in May 2021 .
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.
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Proposed final dividend for the year ended 31 December 2022 of 16.0 pence (2021: 10.0 pence) per share |
|
6,124 |
|
3,815 |
|||||
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 |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2020 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Non-current assets |
|
|
19,912 |
|
13,560 |
|
12,733 |
|
8,308 |
|
Other debtors due within one year - Investment in development projects (see Note 21) |
|
|
3,036 |
|
3,537 |
|
3,036 |
|
3,537 |
|
|
|
|
22,948 |
|
17,097 |
|
15,769 |
|
11,845 |
|
A further analysis of total investments is as follows: |
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Listed securities - on the London Stock Exchange |
|
|
9,275 |
|
4,993 |
|
7,773 |
|
3,555 |
|
Securities dealt in under AIM |
|
|
435 |
|
1,363 |
|
435 |
|
1,363 |
|
Securities dealt in under Aquis Exchange |
|
|
3 |
|
5 |
|
3 |
|
5 |
|
Unlisted securities |
|
|
10,199 |
|
10,736 |
|
4,522 |
|
6,922 |
|
Closing value at 31 December |
|
|
19,912 |
|
17,097 |
|
12,733 |
|
11,845 |
|
Investments valued at fair value through profit and loss |
|
|
19,912 |
|
13,560 |
|
12,733 |
|
8,308 |
|
Loans and receivables carried at FVTPL* |
|
|
3,036 |
|
3,537 |
|
3,036 |
|
3,537 |
|
|
|
|
22,948 |
|
17,097 |
|
15,769 |
|
11,845 |
*Investment in development projects changed to FVTPL in the current year from amortised cost due to the change in the business model for managing the loan receivables. Fair value is calculated based on expected cashflow from the loan and discounted using the riskiest synthetic credit rating due to the loans inactive market.
The movement in investments valued at fair value through profit and loss is:
|
|
Group |
|
Company |
||||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Opening cost |
|
|
10,724 |
|
7,839 |
|
7,722 |
|
5,203 |
|
Opening net unrealised gains/(losses) |
|
|
2,836 |
|
1,035 |
|
586 |
|
(73) |
|
Opening value |
|
|
13,560 |
|
8,874 |
|
8,308 |
|
5,130 |
|
Movements in the year: |
|
|
|
|
|
|
|
|
|
|
Purchases at cost |
|
|
8,825 |
|
5,851 |
|
7,084 |
|
5,203 |
|
Additions through business combinations |
|
|
- |
|
- |
|
- |
|
- |
|
Sales - proceeds |
|
|
(1,659) |
|
(4,047) |
|
(1,659) |
|
(3,045) |
|
Sales - realised gains on sales |
|
|
693 |
|
1,081 |
|
693 |
|
361 |
|
Net unrealised (losses)/gains |
|
|
(1,507) |
|
1,801 |
|
(1,693) |
|
659 |
|
Closing value |
|
|
19,912 |
|
13,560 |
|
12,733 |
|
8,308 |
|
Closing cost |
|
|
18,583 |
|
10,724 |
|
13,840 |
|
7,722 |
|
Closing net unrealised gains/(losses) |
|
|
1,329 |
|
2,836 |
|
(1,107) |
|
586 |
|
Closing value |
|
|
19,912 |
|
13,560 |
|
12,733 |
|
8,308 |
The movement in loans and receivables carried at fair value through profit and loss is:
|
|
|
Group |
|
Company |
|||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Opening value |
|
|
3,537 |
|
763 |
|
3,537 |
|
763 |
|
Movements in the year: |
|
|
|
|
|
|
|
|
|
|
Purchases at cost |
|
|
2,303 |
|
6,296 |
|
2,303 |
|
6,296 |
|
Sales - proceeds |
|
|
(2,853) |
|
(3,550) |
|
(2,853) |
|
(3,550) |
|
Sales - realised gains on sales |
|
|
49 |
|
28 |
|
49 |
|
28 |
|
Closing value |
|
|
3,036 |
|
3,537 |
|
3,036 |
|
3,537 |
|
Gains and losses on investments held at fair value: |
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Net realised gains on disposal |
|
|
694 |
|
1,109 |
|
693 |
|
389 |
|
Net unrealised (losses)/gains |
|
|
(1,455) |
|
1,801 |
|
(1,643) |
|
659 |
|
Net gains on investments |
|
|
(761) |
|
2,910 |
|
(950) |
|
1,048 |
|
Gains and losses on disposal of subsidiary undertaking: |
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Profit on disposal of subsidiary undertaking* |
|
|
2,249 |
|
2,932 |
|
- |
|
- |
|
Total net gains on Investment |
|
|
1,488 |
|
5,842 |
|
- |
|
- |
*Profit from disposal of subsidiary undertaking is from the Group disposed of DevCo Projects; UK Battery Storage Limited, Arbroath Limited, Stairfoot Limited, GreenGridPower Limited during the year.
13 Property, plant and equipment
|
Group 2022 |
Office equipment |
|
Motor vehicles |
|
Leasehold property |
|
Right of use assets |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
|
|
As at 1 January |
653 |
|
358 |
|
130 |
|
3,526 |
|
4,667 |
|
Additions |
153 |
|
213 |
|
- |
|
36 |
|
402 |
|
Additions through business combinations |
8 |
|
- |
|
- |
|
- |
|
8 |
|
Disposals during the year |
(46) |
|
(120) |
|
(130) |
|
(562) |
|
(858) |
|
Foreign exchange movements |
- |
|
- |
|
- |
|
44 |
|
44 |
|
As at 31 December |
768 |
|
451 |
|
- |
|
3,044 |
|
4,263 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
As at 1 January |
237 |
|
226 |
|
57 |
|
1,220 |
|
1,740 |
|
Charge for the year |
158 |
|
90 |
|
16 |
|
835 |
|
1,099 |
|
Disposals during the year |
(28) |
|
(94) |
|
(73) |
|
(529) |
|
(724) |
|
Foreign exchange movements |
- |
|
- |
|
- |
|
21 |
|
21 |
|
As at 31 December |
367 |
|
222 |
|
- |
|
1,547 |
|
2,136 |
|
Net book value as at 31 December |
401 |
|
229 |
|
- |
|
1,497 |
|
2,127 |
|
Group 2021 |
Office equipment |
|
Motor vehicles |
|
Leasehold property |
|
Right of use assets |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
|
|
As at 1 January |
409 |
|
346 |
|
130 |
|
2,221 |
|
3,106 |
|
Additions |
289 |
|
38 |
|
- |
|
1,988 |
|
2,315 |
|
Additions through business combinations |
54 |
|
- |
|
- |
|
806 |
|
860 |
|
Disposals during the year |
(99) |
|
(26) |
|
- |
|
(1,472) |
|
(1,597) |
|
Foreign exchange movements |
- |
|
- |
|
- |
|
(17) |
|
(17) |
|
As at 31 December |
653 |
|
358 |
|
130 |
|
3,526 |
|
4,667 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
As at 1 January |
195 |
|
169 |
|
29 |
|
1,623 |
|
2,016 |
|
IFRS 16 restatement through business combinations |
- |
|
- |
|
- |
|
365 |
|
365 |
|
Charge for the year |
138 |
|
80 |
|
28 |
|
713 |
|
959 |
|
Disposals during the year |
(96) |
|
(23) |
|
- |
|
(1,472) |
|
(1,591) |
|
Foreign exchange movements |
- |
|
- |
|
- |
|
(9) |
|
(9) |
|
As at 31 December |
237 |
|
226 |
|
57 |
|
1,220 |
|
1,740 |
|
Net book value as at 31 December |
416 |
|
132 |
|
73 |
|
2,306 |
|
2,927 |
|
Company 2022 |
Office equipment |
|
Motor vehicles |
|
Right of use assets |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
As at 1 January |
467 |
|
304 |
|
1,725 |
|
2,496 |
|
Additions |
153 |
|
213 |
|
- |
|
366 |
|
Disposals during the year |
(46) |
|
(120) |
|
- |
|
(166) |
|
As at 31 December |
574 |
|
397 |
|
1,725 |
|
2,696 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
As at 1 January |
179 |
|
172 |
|
233 |
|
584 |
|
Charge for the year |
130 |
|
90 |
|
559 |
|
779 |
|
Disposals during the year |
(34) |
|
(94) |
|
- |
|
(128) |
|
As at 31 December |
275 |
|
168 |
|
792 |
|
1,235 |
|
Net book value as at 31 December |
299 |
|
229 |
|
933 |
|
1,461 |
|
Company 2021 |
Office equipment |
|
Motor vehicles |
|
Right of use assets |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
As at 1 January |
348 |
|
292 |
|
1,445 |
|
2,085 |
|
Additions |
211 |
|
38 |
|
1,752 |
|
2,001 |
|
Disposals during the year |
(92) |
|
(26) |
|
(1,472) |
|
(1,590) |
|
As at 31 December |
467 |
|
304 |
|
1,725 |
|
2,496 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
As at 1 January |
170 |
|
115 |
|
1,236 |
|
1,521 |
|
Charge for the year |
98 |
|
80 |
|
469 |
|
647 |
|
Disposals during the year |
(89) |
|
(23) |
|
(1,472) |
|
(1,584) |
|
As at 31 December |
179 |
|
172 |
|
233 |
|
584 |
|
Net book value as at 31 December |
288 |
|
132 |
|
1,492 |
|
1,912 |
14 Intangible assets
|
Group 2022 |
Goodwill |
|
Customer relationships |
|
Contracts |
|
Brands |
|
IT platform development |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January |
48,794 |
|
3,335 |
|
68,543 |
|
456 |
|
1,958 |
|
123,086 |
|
Additions through business combinations |
742 |
|
- |
|
1,512 |
|
- |
|
- |
|
2,254 |
|
Other additions |
- |
|
- |
|
759 |
|
- |
|
695 |
|
1,454 |
|
Disposals during the year |
(568) |
|
- |
|
- |
|
- |
|
- |
|
(568) |
|
Foreign exchange movements |
265 |
|
- |
|
199 |
|
- |
|
- |
|
464 |
|
As at 31 December |
49,233 |
|
3,335 |
|
71,013 |
|
456 |
|
2,653 |
|
126,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January |
- |
|
3,170 |
|
24,049 |
|
29 |
|
826 |
|
28,074 |
|
Charge for the year |
- |
|
56 |
|
10,568 |
|
113 |
|
511 |
|
11,248 |
|
Disposals during the year |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Foreign exchange movements |
- |
|
- |
|
33 |
|
- |
|
- |
|
33 |
|
As at 31 December |
- |
|
3,226 |
|
34,650 |
|
142 |
|
1,337 |
|
39,355 |
|
Net book value as at 31 December |
49,233 |
|
109 |
|
36,363 |
|
314 |
|
1,316 |
|
87,335 |
|
Remaining amortisation period |
n/a |
|
2 years |
|
1-22 years |
|
3 years |
|
1-4 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group 2021 |
Goodwill |
|
Customer relationships |
|
Contracts |
|
Brands |
|
IT platform development |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January |
29,718 |
|
3,335 |
|
46,650 |
|
- |
|
1,242 |
|
80,945 |
|
Additions through business combinations |
19,162 |
|
- |
|
23,346 |
|
456 |
|
- |
|
42,964 |
|
Other additions |
- |
|
- |
|
- |
|
- |
|
725 |
|
725 |
|
Disposals during the year |
- |
|
- |
|
(1,406) |
|
- |
|
(9) |
|
(1,415) |
|
Foreign exchange movements |
(86) |
|
- |
|
(47) |
|
- |
|
- |
|
(133) |
|
As at 31 December |
48,794 |
|
3,335 |
|
68,543 |
|
456 |
|
1,958 |
|
123,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January |
- |
|
3,116 |
|
17,411 |
|
- |
|
448 |
|
20,975 |
|
Charge for the year |
- |
|
54 |
|
8,047 |
|
29 |
|
386 |
|
8,516 |
|
Disposals during the year |
- |
|
- |
|
(1,406) |
|
- |
|
(8) |
|
(1,414) |
|
Foreign exchange movements |
- |
|
- |
|
(3) |
|
- |
|
- |
|
(3) |
|
As at 31 December |
- |
|
3,170 |
|
24,049 |
|
29 |
|
826 |
|
28,074 |
|
Net book value as at 31 December |
48,794 |
|
165 |
|
44,494 |
|
427 |
|
1,132 |
|
95,012 |
|
Remaining amortisation period |
n/a |
|
3 years |
|
1-22 years |
|
4 years |
|
1-4 years |
|
|
Goodwill can be allocated to CGUs as follows
|
|
|
2022 |
|
2021 |
|
|
|
£'000 |
|
£'000 |
|
Burlington RE Property Management Limited |
|
786 |
|
- |
|
Appian Asset Management Limited |
|
3,611 |
|
3,958 |
|
Livingbridge VCT business |
|
12,167 |
|
12,167 |
|
Mobeus VCT business |
|
15,118 |
|
15,118 |
|
TradeRisks Limited |
|
5,655 |
|
5,655 |
|
FIM, Hazel Capital and Aitchesse |
|
11,896 |
|
11,896 |
|
|
|
49,233 |
|
48,794 |
The Group tests whether goodwill has suffered any impairment on an annual basis.
Goodwill impairment assessment is based on the expected future returns of the relevant CGU as a whole. Goodwill has been assessed for each CGU for impairment as at 31 December 2022. This assessment includes an analysis of the recoverable amounts of the CGUs by using value in use based on forecasted cash flow models.
Each impairment model includes a 5-year cash flows with the most recent approved budget by the Board. The cash flows is based on expected fundraising and other growth factors as set out by the Group Strategic as well as the associated cost of delivering the planned revenues. The model includes the calculated terminal value as the lower of the year 5 cash flows multiplied by the acquisition EV multiple and the year 5 cash flows is then discounted.
A discount rate or weighted average cost of capital (WACC) derived from the capital asset pricing model (CAPM) 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 impairment arises.
The key assumption in the cashflow projections are the terminal value and discount rate applied to the CGUs in 2022 and 2021 is as follows:
|
|
|
2022 |
2021 |
|
Burlington RE Property Management |
|
8.0% |
- |
|
Appian Asset Management Limited |
|
13.0% |
12.3% |
|
Livingbridge VCT business |
|
16.0% |
15.0% |
|
Mobeus VCT business |
|
14.0% |
12.0% |
|
TradeRisks Limited |
|
8.0% |
7.5% |
|
FIM, Hazel Capital and Aitchesse |
|
10.0% |
7.5% |
The terminal value used in the models are based on lower end of the range. Adverse movements in an additional discount rate of up to 7% would not lead to any impairment for any of the CGUs.
The assumptions used on goodwill impairment, including discount rates, and cash flow projections are described in more detail in the critical accounting estimates and judgements section of the accounting policies.
|
Company |
|
2022 |
|
2021 |
|
|
|
IT platform development |
|
IT platform development |
|
|
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
As at 1 January |
|
1,906 |
|
1,181 |
|
Additions |
|
695 |
|
725 |
|
As at 31 December |
|
2,601 |
|
1,906 |
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
As at 1 January |
|
807 |
|
432 |
|
Charge for the year |
|
502 |
|
374 |
|
As at 31 December |
|
1,309 |
|
806 |
|
Net book value as at 31 December |
|
1,292 |
|
1,100 |
|
Remaining amortisation period |
|
1-4 years |
|
1-4 years |
15 Long-term receivables
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Other debtors |
|
|
1,330 |
|
492 |
|
492 |
|
492 |
|
|
|
1,330 |
|
492 |
|
492 |
|
492 |
|
Other debtors consist of rental deposits and deferred consideration receivable.
16 Disposal group held for sale
The Group has invested in the development of battery storage projects, which are part of the exclusive pipeline to be sold to Gresham House Energy Storage Fund plc (GRID) when operational, and the development of solar projects (collectively known as DevCo Projects). In some instances DevCo Projects have been sold prior to being operational, with deferred consideration payable when the project becomes operational. The DevCo Projects are held in separate SPVs, which the Group entity Gresham House Devco Limited owns 100% of the equity in, and the Group has also lent funds for the development of the projects. These loans are measured at FVTPL.
The sale of certain DevCo Projects has been agreed with GRID and is documented, including price and conditions to complete the sale. It is expected that the sale process will complete within a six to 12-month time frame, as such it has been deemed appropriate to treat the DevCo Projects as assets held for sale under IFRS 5. Specifically, they are classified as a "disposal group" held for sale, whose value will be primarily recovered by sale and is measured under fair value less cost to sell (FVLCS).
Assets acquired with a view for resell are classified as discontinued operations and falls under assets held for sale and measured at fair value less costs to sell.
The assets and liabilities of those SPVs which have been consolidated by the Group are:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Assets of a disposal group held for sale |
|
|
|
|
|
|
22,907 |
|
17,545 |
|
Liabilities of a disposal group classified as held for sale |
|
|
|
|
|
|
(7,307) |
|
(7,499) |
|
|
|
|
|
|
|
|
15,600 |
|
10,046 |
The Group's interest in other DevCo Projects can be summarised as follows:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Loans and receivables brought forward |
|
|
|
|
|
|
3,537 |
|
551 |
|
Additions |
|
|
|
|
|
|
2,352 |
|
3,537 |
|
Disposals |
|
|
|
|
|
|
(2,853) |
|
(551) |
|
Loans and receivables carried forward (Note 12) |
|
|
|
|
|
|
3,036 |
|
3,537 |
The Group's total exposure to DevCo Projects is:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Net assets and liabilities of a disposal group held for sale |
|
|
|
|
|
|
15,600 |
|
10,046 |
|
Loans and receivables |
|
|
|
|
|
|
3,036 |
|
3,537 |
|
|
|
|
|
|
|
|
18,636 |
|
13,583 |
An analysis of the financial results of the disposal group operation is as follow:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Revenue |
|
|
|
|
|
|
- |
|
4 |
|
Expenses |
|
|
|
|
|
|
(166) |
|
(174) |
|
Loss for the disposal group |
|
|
|
|
|
|
(166) |
|
(170) |
During the year the Group acquired a controlling interest in UK Battery Storage Limited, Stairfoot Limited, GreenGridPower Limited, and HazelBoro Limited. In addition, it also purchased the assets and liabilities of Worcestershire Solar 1 Limited and Warwickshire Solar 1 Limited. These acquisitions are classified as held for sale under IFRS 5 and measured FVLCS from acquisition date.
During the year the Group disposed of UK Battery Storage Limited, Arbroath Limited, Stairfoot Limited, GreenGridPower Limited, with total net proceeds of £7.5 million due, realising a net gain on disposal of £2.2 million.
17 Investment in subsidiaries
|
|
|
|
|
|
|
|
Company |
||
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
Subsidiary undertakings |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
As at 1 January |
|
|
|
|
|
|
80,148 |
|
79,872 |
|
Additions |
|
|
|
|
|
|
- |
|
276 |
|
As at 31 December |
|
|
|
|
|
|
80,148 |
|
80,148 |
The subsidiary undertakings of Gresham House plc are as follows:
|
Held by Company |
Held by other Group companies |
Country of incorporation and registered office |
|
|
|
% |
% |
|
|
Aitchesse Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Coupar Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Deacon Commercial Development and Finance Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
FIM Services Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
FIM Windfarms (SC) General Partner Limited |
- |
100 |
58 Morrison Street, Glasgow EH3 8BP, Scotland |
|
Gresham House Asset Management Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Asset Management Ireland Limited |
- |
100 |
42 Fitzwilliam Place, Dublin 2, Ireland |
|
Gresham House Asset Management (Resources) Ireland Limited |
- |
100 |
42 Fitzwilliam Place, Dublin 2, Ireland |
|
Gresham House Carry Warehousing Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Capital Partners Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Climate Transition Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Cockenzie Storage Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Devco Pipeline Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Devco Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House EIS Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Energy Storage Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Finance Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Forestry Limited |
- |
100 |
58 Morrison Street, Edinburgh, EH3 8BP, Scotland |
|
Gresham House Forestry Friends and Family LP |
71.4 |
- |
58 Morrison Street, Glasgow EH3 8BP, Scotland |
|
Gresham House Forestry General Partner (Ireland) Limited |
- |
100 |
1-2 Victoria Buildings, |
|
Gresham House Forest Funds General Partner Limited |
- |
100 |
5 New Street Square, London EC4A 3TW England |
|
Gresham House (General Partner) Limited |
- |
100 |
58 Morrison Street, Edinburgh, EH3 8BP, Scotland |
|
Gresham House GP LLP |
- |
100 |
58 Morrison Street, Edinburgh, EH3 8BP, Scotland |
|
Gresham House GP II LLP |
- |
100 |
58 Morrison Street, Edinburgh, EH3 8BP, Scotland |
|
Gresham House Holdings Limited |
100 |
- |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Housing Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Initial Partner Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Infrastructure Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Investment Management Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Investment Management (Guernsey) Limited |
- |
100 |
Dorey Court, Admiral Park, St Peter Port GY1 2HT, Guernsey |
|
Gresham House Investors Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Ireland Real Estate Limited |
- |
100 |
42 Fitzwilliam Place, Dublin 2, Ireland |
|
Gresham House (Nominees) Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House O&M Services Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Private Capital Solutions Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Private Equity Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Private Wealth Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Real Assets Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Renewable Infrastructure Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Services Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Smaller Companies Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Solar Distribution Designated Member 1 Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Solar Distribution Designated Member 2 Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House SPE Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Special Situations Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Timberland General Partner Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Held by Company |
Held by other Group companies |
Country of incorporation and registered office |
|
|
|
% |
% |
|
|
Gresham House Windfarms General Partner 3 Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House Value Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Gresham House VCT Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Hazelboro Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Lister Battery Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Monets Garden Battery Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
MyFutureLiving Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
My ReSI Home Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
New Capital Holdings Limited |
- |
95 |
5 New Street Square, London EC4A 3TW, England |
|
Newton Estate Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
ReSI Capital Management GP Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
ReSI Capital Management Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
ReSI Property Management Limited |
- |
100 |
1st Floor, 2 Castle Street, Taunton TA1 4AS, England |
|
Retirement Rentals Limited |
- |
100 |
1st Floor, 2 Castle Street, Taunton TA1 4AS, England |
|
Retirement Rentals Nominee Company 1 Limited |
- |
100 |
1st Floor, 2 Castle Street, Taunton TA1 4AS, England |
|
Security Change Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
TradeRisks Inc |
- |
100 |
9 East Loockerman Street, Dover DE 19901, United States |
|
TradeRisks Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
TradeRisks (Luxembourg) S.a.r.l. |
- |
100 |
25a, Boulevard Royal L-2449 Luxembourg |
|
Warwickshire Solar 1 Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Wolden Estates Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Worcestershire Solar 1 Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
Your ReSI Home Limited |
- |
100 |
5 New Street Square, London EC4A 3TW, England |
|
|
|
|
|
Gresham House Holdings Limited is the employing entity for the Group. Gresham House Asset Management Limited, TradeRisks Limited and ReSI Capital Management Limited are the FCA regulated entities.
18 Investment in associates
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Opening Investment in associates |
|
|
|
|
|
|
11,955 |
|
9,142 |
|
Share of associates' profit |
|
|
|
|
|
|
1,052 |
|
4,955 |
|
Dividends received from associates |
|
|
|
|
|
|
- |
|
(285) |
|
Additions |
|
|
|
|
|
|
- |
|
1,165 |
|
Return of capital |
|
|
|
|
|
|
- |
|
(2,441) |
|
Disposals |
|
|
|
|
|
|
(12,579) |
|
(371) |
|
Redesignation |
|
|
|
|
|
|
- |
|
(210) |
|
Closing investment in associates |
|
|
|
|
|
|
428 |
|
11,955 |
The above balance consists of the Group's holdings in Environment Bank Limited (EBL) of 25%, the Group reduced its holdings from 50% to 25% in the year. In 2022, the Group also realised its investment in Rockwood Strategic plc (formerly Gresham house Strategic plc or GHS) for £11.8m in the period.
The Board believe that Gresham House plc exercises significant influence over EBL, but not control, through its 25% equity investment.
The latest financial information of EBL was the unaudited results for the 8 month period to 31 December 2022. The assets and liabilities at that date are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£'000 |
|
|
|
Non-current assets |
|
|
|
|
|
|
|
186 |
|
|
|
Current assets |
|
|
|
|
|
|
|
4,179 |
|
|
|
Current liabilities |
|
|
|
|
|
|
|
(1,708) |
|
|
|
Long-term liabilities |
|
|
|
|
|
|
|
(2,237) |
|
|
|
Net liabilities |
|
|
|
|
|
|
|
420 |
|
|
The EBL unaudited statement of comprehensive income noted revenues of £4,609,000 (2021: £567,000) and a profit before tax and total comprehensive loss of £718,917 (2021: loss £1,308,000) for the period ended 31 December 2022.
The registered office of EBL is Central House, 20 Central Avenue, St Andrews Business Park, Norwich, NR7 0HR.
19 Trade receivables
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Amounts receivable within one year: |
|
|
|
|
|
|
|
|
|
|
Trade receivables |
|
|
11,216 |
|
11,135 |
|
- |
|
- |
|
Less allowance for credit losses |
|
|
- |
|
- |
|
- |
|
- |
|
|
|
|
11,216 |
|
11,135 |
|
- |
|
- |
As at 31 December 2022, trade receivables of £1,201,000 (2021: £614,000) were past due but not impaired. The ageing analysis of these trade receivables is as follows:
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
1-3 months |
|
|
886 |
|
516 |
|
- |
|
- |
|
3-6 months |
|
|
245 |
|
67 |
|
- |
|
- |
|
More than 6 months |
|
|
70 |
|
31 |
|
- |
|
- |
|
|
|
|
1,201 |
|
614 |
|
- |
|
- |
As at 31 December 2022 there were no provisions against trade receivables (2021: £nil).
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, such as, the impact from the Ukraine war, inflation, and interest rates. The Group has therefore not recognised a loss allowance because historical experience has indicated that the risk profile of trade receivables is deemed low.
20 Accrued income and prepaid expenses
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Accrued income |
|
|
8,641 |
|
9,561 |
|
- |
|
75 |
|
Other debtors |
|
|
21,217 |
|
10,794 |
|
1,689 |
|
713 |
|
Prepaid expenses |
|
|
981 |
|
1,350 |
|
94 |
|
369 |
|
|
|
|
30,839 |
|
21,705 |
|
1,783 |
|
1,157 |
The movement in other debtors includes an increase in deferred consideration receivable from DevCo Projects to £10,887,000 at 31 December 2022 from £9,748,000 at 31 December 2021, as well as other debtors in Gresham House Investment Management £5,164,000 (2021: £29,000) and Gresham House Forestry GP £4,991,000 (2021:nil).
21 Other current assets
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Amounts owed by Group undertakings |
|
|
- |
|
- |
|
26,887 |
|
16,510 |
|
Loan Receivables - Investment in development projects (see Note 12) |
|
|
3,036 |
|
3,537 |
|
3,036 |
|
3,537 |
|
Corporation tax recoverable |
|
|
- |
|
- |
|
- |
|
- |
|
|
|
|
3,036 |
|
3,537 |
|
29,923 |
|
20,047 |
Amounts owed by Group undertakings are repayable on demand and attract interest of between 0% and 15% per annum.
Receivables from Group undertakings and loans to Group undertakings are considered to be a low credit risk. Credit risk for these assets has not increased significantly since their initial recognition. As such, no expected credit losses have been recognised in respect of Group balances as any effect would be immaterial for the Company.
During the year, there was a change in the business model for managing the loan receivables from the investment in development projects. As such, the classification has changed from amortised cost to FVTPL. Fair value is calculated based on expected cashflow from the loan and discounted using the riskiest synthetic credit rating due to the loans inactive market.
22 Trade and other payables
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Trade creditors |
|
|
2,328 |
|
742 |
|
- |
|
- |
|
IFRS 16 lease creditor |
|
|
790 |
|
643 |
|
653 |
|
283 |
|
Other creditors |
|
|
2,006 |
|
2,955 |
|
33 |
|
32 |
|
Accruals and deferred income |
|
|
24,611 |
|
24,195 |
|
225 |
|
204 |
|
Corporation tax payable |
|
|
444 |
|
1,692 |
|
- |
|
- |
|
Contingent consideration (Note 26) |
|
|
10,111 |
|
12,494 |
|
- |
|
- |
|
|
|
|
40,290 |
|
42,721 |
|
911 |
|
519 |
23 Short-term borrowings
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Bank loans - within current liabilities (Note 25) |
|
|
- |
|
- |
|
- |
|
- |
|
Amounts owed to Group undertakings |
|
|
- |
|
- |
|
1,541 |
|
1,136 |
|
|
|
|
- |
|
- |
|
1,541 |
|
1,136 |
24 Deferred taxation
Under International Accounting Standard (IAS) 12 (Income Taxes) provision is made for the deferred tax liability associated with the recognition of the management contracts and customer relationships as part of the 100% acquisition of FIM, TradeRisks, Appian, Burlington and the acquisition of the Mobeus VCT business. This has been initially recognised at 17% for FIM, 19% for TradeRisks, 12.5% for Appian, 12.5% for Burlington and 24% for Mobeus of the fair value of the intangible assets at acquisition and reassessed each year end, with the movement being recognised in the income statement.
During the 2021 the Group reassessed the assumptions made at the time of the acquisition of the Livingbridge VC management contracts. This resulted in a deferred tax liability of £2,071,000 being recognised at a rate of 22% on 1 October 2021.
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2021: 19%). The increase in the main rate of corporation tax to 25% was substantively enacted with effect from April 2023. This new rate has been applied to deferred tax balances which are expected to reverse after 1 April 2023.
As at 31 December 2022 the deferred tax liability was £9,155,000 (2021: £10,597,000).
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets where the Directors believe it is probable that these assets will be recovered.
The Group has recognised a deferred tax asset of £1,802,000 (2021: £2,197,000) 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 £66,000 (2021: £92,000) in respect of these differences.
The movement on the deferred tax account is as shown below:
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Balance as at 1 January |
|
|
(8,400) |
|
(2,176) |
|
92 |
|
153 |
|
Deferred tax recognised in profit and loss |
|
|
2,016 |
|
(1,744) |
|
(26) |
|
(61) |
|
Deferred tax recognised in equity |
|
|
(498) |
|
1,062 |
|
- |
|
- |
|
|
|
|
(6,882) |
|
(2,858) |
|
66 |
|
92 |
|
Arising on business combinations |
|
|
(471) |
|
(5,542) |
|
- |
|
- |
|
Balance as at 31 December |
|
|
(7,353) |
|
(8,400) |
|
66 |
|
92 |
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Deferred tax asset |
|
|
1,802 |
|
2,197 |
|
66 |
|
92 |
|
Deferred tax liability |
|
|
(9,155) |
|
(10,597) |
|
- |
|
- |
|
|
|
|
(7,353) |
|
(8,400) |
|
66 |
|
92 |
25 Long-term borrowings
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Bank loans |
|
|
- |
|
- |
|
- |
|
- |
|
|
|
|
- |
|
- |
|
- |
|
- |
On 16 February 2023, the Company signed an extension to the facility agreement with Banco Santander SA (the facility) for £20.0 million to 31 December 2024. The facility is secured with fixed and floating charges over certain of the Company's assets, with cross guarantees provided by Gresham House Asset Management Limited and Gresham House Holdings Limited. The fixed charges relate to certain Group bank accounts with a carrying value of £23.5 million as at the year end.
No amounts were drawn under this facility at the year end.
The Group has complied with the financial covenants attached to the facility.
The interest payable on the facility is SONIA plus 3.05%.
26 Non-current liabilities - other creditors
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Contingent consideration |
|
|
3,752 |
|
10,165 |
|
- |
|
- |
|
IFRS 16 lease creditor |
|
|
1,154 |
|
1,798 |
|
447 |
|
1,058 |
|
Other liabilities |
|
|
341 |
|
- |
|
- |
|
- |
|
|
|
|
5,247 |
|
11,963 |
|
447 |
|
1,058 |
Contingent consideration
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Current contingent consideration |
|
|
10,111 |
|
12,494 |
|
- |
|
- |
|
Non-current contingent consideration |
|
|
3,752 |
|
10,165 |
|
- |
|
- |
|
|
|
|
13,863 |
|
22,659 |
|
- |
|
- |
Contingent consideration paid in the year was £10.1 million (£0.8m was also paid in the year but form part of the partner consideration and reclassified as such in the year). Contingent consideration paid in 2021 was £1.4 million.
TradeRisks
Contingent consideration totalling a maximum of £6.0 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 £3.0 million;
b) any realised synergies payable in three years, capped at £1.0 million; and
c) £2.0 million payable within six months post-completion for any inventory true-up.
Payments totalling £1.5 million were paid during the 2022.
The fair value of the remaining contingent consideration payable to the TradeRisks sellers as at 31 December 2022 was £0.6 million.
26 Non-current liabilities - other creditors - continued
Appian
Contingent consideration with an expected fair value of £1.0 million will be payable in cash to the sellers based on the following:
· 1.4 times year two earnings, payable on 30 June 2023. The expected fair value as at 31 December 2022 is £0.3 million;
· 1.4 times year three earnings, payable on 30 June 2024. The expected fair value as at 31 December 2022 is £0.7 million; and
· up to €0.75 million payable on 30 June 2024 based on certain AUM and earnings targets. The expected fair value as at 31 December 2022 is nil.
The fair value of the contingent consideration has been estimated using expected outcomes and discounting this at 13.0%. Up to 50% of the contingent consideration may be settled in Gresham House plc shares at the Company's discretion.
Mobeus
Contingent consideration totalling a maximum of £9.7 million will be payable in cash to the sellers based on the following:
· £4.1 million was paid in January 2023 following the retention of the management contracts;
· £2.9 million payable on 31 December 2023 subject to the retention of the management contracts;
· a maximum of £1.9 million payable after three years subject to the retention of the management contracts; and
· a maximum of £0.8 million payable in three years subject to fundraising and AUM targets.
The fair value of the contingent consideration has been estimated using expected outcomes, the probability of those outcomes and discounting this at 12.0%. The expected fair value as at 31 December 2022 is £8.8. million.
Burlington
Contingent consideration with an expected fair value of €1.0 million will be payable to the sellers within 20 business days of publication of the accounts for the year ending 31 December 2024. This is calculated as 40% of 6.5 times the average EBITDA in three years ending 31 December 2024.
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 8.0%. Up to 50% of the contingent consideration may be settled in Gresham House plc shares at the Company's discretion. As such this will be recognised as a liability on the balance sheet and the fair value assessed each reporting period. The fair value at the at 31 December 2022 £0.9 million.
DevCo Projects
DevCo projects also have contingent consideration which are payable once certain operational matrices are met as per the SPA. GreenGridPower £1.0 million, Stairfoot £1.3 million and Hazelboro £0.2 million.
27 Share capital
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Allotted: Ordinary - 38,273,996 (2021: 38,000,819) fully paid shares of 25 pence |
|
9,568 |
|
9,500 |
|||||
During the year the Company issued the following new ordinary shares:
· 73,177 shares on 15 March 2022 to the vendors of Burlington RE Asset Management Limited; and
· 200,000 shares on 15 March 2022 at par into the Gresham House Employee Benefit Trust.
The Gresham House Employee Benefit Trust (EBT) held 191,781 shares at 31 December 2022, with a par value of £48,000 (2021: 204,007 shares with par value of £51,000).
The shares held by the GH EBT are expected to be issued under share option contracts. The shares were acquired during the year. In 2022, 384,461 shares were issued to employees (2021: 1,287,450).
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 was determined by the Remuneration Committee.
There were certain hurdles the Company's share price had to achieve before an award vested.
In the event that the Company achieves an average mid-market closing price equal to compound growth at 7% per annum for a period of ten consecutive dealing days in the period after 1 December 2016 for first awards to management who joined the Company before 30 September 2015 and from the second anniversary of the date of award in all other cases, 50% of the award will vest.
In the event that the share price of the Company outperforms the FTSE All Share Index in the period after 1 December 2016, and from the second anniversary of the date of the award in all other cases, 50% of the award shall vest.
Each award will require a minimum term of employment of three years and awards will be made to current management and new joiners at the Company's discretion.
IFRS 2: Share-based payments sets out the criteria for an equity-settled share-based payment, which has market performance conditions. The 2016 LTIP meets these criteria and should therefore be recognised at award at fair value and amortised over the vesting period of two years. There is no amount payable by the beneficiaries on exercise. The table below details the type and number of shares in Gresham House Holdings Limited issued and exercised in the year:
|
2022 |
A Shares old joiners |
|
A Shares new joiners |
|
B Shares |
|
C Shares |
|
D Shares |
|
Total LTIP |
|
Balance as at 1 January |
- |
|
- |
|
- |
|
- |
|
180 |
|
180 |
|
Exercised during the year |
- |
|
- |
|
- |
|
- |
|
(180) |
|
(180) |
|
As at 31 December |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Exercisable at year end |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Months to vesting |
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
2021 |
A Shares old joiners |
|
A Shares new joiners |
|
B Shares |
|
C Shares |
|
D Shares |
|
Total LTIP |
|
Balance as at 1 January |
- |
|
- |
|
104 |
|
- |
|
180 |
|
284 |
|
Exercised during the year |
- |
|
- |
|
(104) |
|
- |
|
- |
|
(104) |
|
As at 31 December |
- |
|
- |
|
- |
|
- |
|
180 |
|
180 |
|
Exercisable at year end |
- |
|
- |
|
- |
|
- |
|
180 |
|
180 |
|
Months to vesting |
- |
|
- |
|
- |
|
- |
|
- |
|
|
180 D Shares were exercised during the year and at the Company's discretion were settled in cash. The difference between the fair value recognised over the vesting period and the fair value at the date of exercise of £2.1 million was recognised in retained reserves. All awards under the 2016 LTIP have vested and been exercised as at 31 December 2022.
2018 Long-term incentive plan
The Remuneration Committee considered and implemented a long-term incentive arrangement in 2018 (2018 LTIP). The 2016 LTIP became exercisable during 2018 and as such the Remuneration Committee introduced the 2018 LTIP to align the management team and wider members of the business for the next three years with shareholders.
The 2018 LTIP is a deferred share award, which vests in three years from the date of award subject to management remaining employed by the Company as at the vesting date. There is no staggered vesting period, vesting is at the end date in three years' time.
During the year ended 31 December 2021, the full amount of the remaining 2018 LTIP of 421,805 awards were exercised and net-settled by ordinary shares held by the Gresham House Employee Benefit Trust. The weighted average share price at the date of exercise was 887 pence.
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 £1.5 million and £0.7 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 2019 LTIP vested and was exercised in September 2022 and was settled in cash for £2.2 million.
2021 Long-term incentive plan
The Remuneration Committee considered and implemented a long-term incentive arrangement in 2021 (2021 LTIP).
Under the 2021 LTIP, 109,448 deferred shares were awarded to the wider members of the business, with a fair value at award of £0.9 million. The 2021 LTIP is a deferred share award, which vests in three years from the date of award subject to the team remaining employed by the Company as at the vesting date. There is no staggered vesting period, vesting is at the end date in three years' time.
An award was made to a member of the Housing (Real Estate) division in January 2021. The number of Gresham House plc shares delivered at the vesting date is calculated by the fee earning assets under management raised in Housing funds up until the vesting date of 31 March 2023, multiplied by 0.07%, plus assets under management deployed multiplied by 0.03%, in aggregate divided by the average share price on issue. The fair value at the date of award was £0.2m.
2022 Long-term incentive plan
The Remuneration Committee considered and implemented a long-term incentive arrangement in 2022 (2022 LTIP).
Under the 2022 LTIP, 283,167 shares were awarded to wider members of the business with a fair value of £2.3m at award. These awards vest in three to four years time and there are no performance conditions.
There were a number of awards made under the 2022 LTIP to address specific long-term incentives for key individuals in the Group with specific measures and conditions to incentivise and retain the individuals concerned. These were as follows:
An award was made to one of the Housing team members in March 2022. The number of Gresham House plc shares delivered at the vesting date is calculated by the fee earning assets under management raised in a new fund up until the vesting date of 31 December 2023, multiplied by 0.15%, divided by the average share price on issue. The fair value at the date of award was £89,000.
An award was made to certain members of the Forestry team was made in May 2022 for 219,379 shares to be delivered at vesting on 16 March 2025, subject to the achievement EBITDA hurdles over the 3 financial years to 31 December 2024. The fair value at award was £1,309,000.
An award was made to certain members of the Strategic Equity team in August 2022. The number of Gresham House plc shares delivered at the vesting date is calculated by taking 50% of the cumulative Operating Profit of the division above a hurdle cumulative Operating Profit amount for the three years to 31 December 2025. The fair value at the award date was £148,000.
An award was made to certain members of the Strategic Equity team in August 2022. The number of Gresham House plc shares delivered at the vesting date is calculated as the AUM increase above £741 million in the Public Equity division, multiplied by 2.5%, multiplied by 12.5%. This scheme only vests when a takeover of the Company has taken place. As at 31 December 2022, if the Company i were to be taken over, the fair value of this award would be £157,000. With no takeover announced, the award had zero value at 31 December 2022.
|
|
2018 LTIP |
|
2019 LTIP - management team |
|
2019 LTIP other staff |
|
2021 LTIP |
|
2022 LTIP |
|
Total |
|
Balance as at 31 December 2020 |
421,805 |
|
274,728 |
|
116,560 |
|
- |
|
|
|
813,093 |
|
Issued in the year |
- |
|
- |
|
- |
|
109,448 |
|
- |
|
109,448 |
|
Exercised in the year |
(421,805) |
|
- |
|
- |
|
- |
|
|
|
(421,805) |
|
Lapsed in the year |
- |
|
- |
|
(9,009) |
|
- |
|
|
|
(9,009) |
|
Balance as at 31 December 2021 |
- |
|
274,728 |
|
107,551 |
|
109,448 |
|
- |
|
491,727 |
|
Issued in the year |
- |
|
- |
|
- |
|
- |
|
271,977 |
|
271,977 |
|
Exercised in the year |
- |
|
(274,728) |
|
(107,551) |
|
- |
|
|
|
(382,279) |
|
Lapsed in the year |
- |
|
- |
|
- |
|
- |
|
|
|
- |
|
Balance as at 31 December 2022 |
- |
|
- |
|
- |
|
109,448 |
|
271,977 |
|
381,425 |
|
Exercisable at year end |
- |
|
- |
|
- |
|
- |
|
|
|
- |
2020 Long-term incentive plan
The Directors implemented the 2020 long-term incentive plan (2020 LTIP) in December 2020 to incentivise the management team as well as align their interests with those of shareholders through enhancing shareholder value. This scheme replaced the 2016 LTIP which had vested and was exercised by the majority of the management team during 2020.
The 2020 LTIP pool principles state that the value of the awards will be driven by the total return to shareholders over (i) 1 January 2020 to 31 December 2023 (the first measurement period) and (ii) 1 January 2020 to 31 December 2024 (the second measurement period).
In the event that total return to shareholders over the first measurement period is 7% p.a. (Performance Hurdle) or more, a maximum related plan pool of value equal to 7.5% of such total return may arise. In the event that total return to shareholders is more than the Performance Hurdle over the second measurement period, a maximum of 15% of such total return to shareholders may arise (less any pool value distributed under the awards in respect of the first measurement period).
Return to shareholders for such purposes shall be measured from a base value of 165,706,250, 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 £5.7 million and as at 31 December 2022 was £10.4 million, which equates to 1,379,482 Gresham House plc shares at 755 pence.
There is no amount payable by the beneficiaries on exercise and the number of shares in respect of which the awards may vest when aggregated with those issuable or issued in respect of awards granted under the 2020 LTIP and any other Company employees' share scheme, shall not exceed 20% of prevailing issued share capital in accordance with the AIM Admission circular dated 4 November 2015. Scaling back of awards shall apply to such extent as required to ensure this limit is not breached.
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 £2.5 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 £30.9 million and £37.2 million in the three years to 31 December 2021. The maximum amount payable on achieving the £37.2 million hurdle is £2.5 million and the minimum payable is zero if the £30.9 million hurdle is not achieved. As at 31 December 2021 the hurdle had been reached and the full £2.5 million was settled with 185,011 Gresham House plc shares in March 2022.
TradeRisks long-term incentive plan
The TradeRisks 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 50% of EBITDA above the agreed Housing division (now known as Real Estate division) target EBITDA over the three year period to 5 March 2023. The fair value of this plan at award was nil.
Mobeus VC long-term incentive plan
The Mobeus VC long-term incentive plan is an equity-settled incentive scheme and considered an acquisition related share-based payment. The recipients of the scheme will receive up to £1.3 million in aggregate in Gresham House plc shares based on the three-year period to 1 October 2024.
Bonus share matching plan
The Company introduced in 2016 a share matching plan linked to the discretionary annual bonus scheme to encourage management and employees to invest in the long-term growth of the Company.
Subject to Remuneration Committee approval, management and employees entitled to a bonus may be permitted (but not required) to defer and reinvest up to 50% of their annual bonus into ordinary shares which will be released to them after three years together with any additional matching shares subject to performance criteria set out below. In 2022 the Remuneration Committee approved the reinvestment of up to 50% of annual bonuses into ordinary shares by management and employees subject to a maximum amount of £100,000 (2021: 50% subject to a maximum amount of £100,000).
In the event that the Company achieves a mid-market closing price equal to 7% per annum compound growth from the date of deferral, the participants will receive 50% of the matching shares benefit. In the event that the Company's share price outperforms the FTSE All Share Index from the date of deferral, the participants will receive 50% of the matching shares.
Shares will be awarded in the ratio one share for each share invested. In the event that this performance condition is not met, the participants will receive only the ordinary shares acquired with the deferred bonus.
The bonus shares to be awarded after the three-year period and subject to performance conditions have been fair valued using a Monte Carlo simulation. The key variables include the risk-free rate of 1.35% and volatility of the Company share price of 26%. The fair value of the matching shares relating to the 2022 bonuses is £933,000 and will be amortised over the three-year vesting period.
In 2022, the 2018 bonus share matching scheme vested on 7 March 2022 and performance conditions were met with 101,666 gross shares vested with a value of £831,000.
The deferred shares purchased and potential matchings shares at vesting currently outstanding as at 31 December 2022 were:
|
Number of shares |
BSM 2018 |
BSM 2019 |
BSM 2020 |
BSM 2021 |
|
Awarded |
Mar 2019 |
Mar 2020 |
Mar 2021 |
Mar 2022 |
|
Vesting date |
Mar 2022 |
Mar 2023 |
Mar 2024 |
Mar 2025 |
|
Opening deferred shares acquired |
51,964 |
142,949 |
201,141 |
- |
|
Deferred shares settled |
(51,964) |
(5,089) |
(11,129) |
(4,300) |
|
Deferred shares acquired |
- |
- |
- |
298,338 |
|
Closing deferred shares |
- |
137,860 |
190,012 |
294,038 |
|
|
|
|
|
|
|
Opening matching shares |
51,964 |
142,949 |
201,141 |
- |
|
Matching shares awarded |
- |
- |
- |
294,038 |
|
Lapsed in the period |
(4,092) |
(6,381) |
(9,677) |
(29,570) |
|
Matching shares settled |
(47,872) |
(4,523) |
(6,491) |
- |
|
Closing matching shares |
- |
132,045 |
184,973 |
264,468 |
Matching shares in the table above represent the matching shares that could be awarded should the performance conditions be met at the vesting date. The number of shares included above represents the gross number of shares required to settle the awards.
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 £500 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 2022 scheme is 665.6 pence. The following table outlines the maximum number of shares under the SAYE scheme:
|
|
|
|
|
|
Shares under option |
|
Fair value of option (pence) |
|
Exercise price (pence) |
|
2020 SAYE scheme |
|
|
|
|
74,567 |
|
104 |
|
399 |
|
2021 SAYE scheme |
|
|
|
|
- |
|
- |
|
- |
|
2022 SAYE scheme |
|
|
|
|
138,422 |
|
327 |
|
665.6 |
|
|
|
|
|
|
212,989 |
|
|
|
|
106,226 SAYE options in relation to the 2019 SAYE scheme were exercised in the year at an exercise price of 373 pence.
For all share-based payment awards the performance conditions and employment conditions as specified per scheme are required to be met at the vesting dates otherwise the awards lapse or are forfeited accordingly. Specific details are included in the schemes above.
29 Reserves
|
|
|
|
2022 |
|
|
2021 |
|
||||
|
|
Share premium account |
Merger reserve |
Treasury shares |
Foreign exchange reserve |
Retained reserves |
Share premium account |
Merger reserve |
Treasury shares |
Foreign exchange reserve |
Retained reserves |
|
|
Group |
39,328 |
24,811 |
(51) |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance as at 1 January |
- |
- |
- |
(158) |
73,032 |
60,061 |
19,981 |
- |
- |
8,402 |
|
|
Profit/(loss) and total comprehensive income |
- |
- |
- |
638 |
10,706 |
- |
- |
- |
(158) |
11,935 |
|
|
Issue of shares |
- |
608 |
(1,041) |
- |
|
39,267 |
4,830 |
(51) |
- |
- |
|
|
Share-based payments |
|
|
|
|
(3,583) |
- |
- |
- |
- |
(5,424) |
|
|
Cancellation of share premium |
- |
- |
- |
- |
- |
(60,000) |
- |
- |
- |
60,000 |
|
|
Dividends paid |
- |
- |
- |
- |
(3,815) |
- |
- |
- |
- |
(1,881) |
|
|
As at 31 December |
39,328 |
25,419 |
(1,092) |
480 |
76,340 |
39,328 |
24,811 |
(51) |
(158) |
73,032 |
|
|
|
2022 |
|
2021 |
|
||||
|
|
Share premium account |
Merger reserve |
Retained reserves |
|
Share premium account |
Merger reserve |
Retained reserves |
|
|
Company |
£'000 |
£'000 |
£'000 |
|
£'000 |
£'000 |
£'000 |
|
|
Balance as at 1 January |
39,328 |
24,811 |
60,704 |
|
60,061 |
19,981 |
9,257 |
|
|
Loss and total comprehensive income |
- |
- |
(3,996) |
|
- |
- |
(1,695) |
|
|
Issue of shares |
- |
608 |
- |
|
39,267 |
4,830 |
- |
|
|
Share-based payments |
- |
- |
767 |
|
- |
- |
(4,977) |
|
|
Cancellation of share premium |
- |
- |
- |
|
(60,000) |
- |
60,000 |
|
|
Dividends paid |
- |
- |
(3,815) |
|
- |
- |
(1,881) |
|
|
As at 31 December |
39,328 |
25,419 |
53,660 |
|
39,328 |
24,811 |
60,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
Non-controlling interest: |
|
|
|
£'000 |
|
|
|
£'000 |
|
Balance as at 1 January |
|
|
|
1,075 |
|
|
|
811 |
|
Interest in trading result for the year |
|
|
20 |
|
|
|
(3) |
|
|
Interest in investments - securities |
|
- |
|
|
|
26731 |
||
|
As at 31 December |
|
|
|
1,095 |
|
|
|
1,075 |
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share premium account Amount subscribed for share capital in excess of nominal value.
Merger reserve Represents the difference between the value of shares issued by the Company in exchange for the value of shares acquired in respect of the acquisition of subsidiaries accounted for under the acquisition method.
Treasury shares Weighted average cost of own shares held in treasury and by the GH EBT
Foreign exchange reserve Gains and losses arising on retranslating the net assets of overseas operations into sterling .
Retained earnings All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
30 Net asset value per share
|
Basic |
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
Equity attributable to holders of the parent (£'000) |
|
|
|
|
|
|
150,041 |
|
146,462 |
|
|
|
Number of ordinary shares in issue at the end of the period |
|
|
|
|
|
38,273,996 |
|
38,000,819 |
|
||
|
Number of shares held by the Gresham House Employee Benefit Trust |
|
|
|
(191,781) |
|
(204,007) |
|
|
|||
|
|
|
|
|
|
|
38,082,215 |
|
37,796,812 |
|
||
|
Basic net asset value per share (pence) |
|
|
|
|
|
|
394.0 |
|
387.5 |
|
|
|
Diluted |
|
|
|
|
|
|
2022 |
|
2021 |
|
Equity attributable to holders of the parent (£'000) |
|
|
|
|
|
|
150,041 |
|
146,462 |
|
Number of ordinary shares in issue at the end of the period |
|
|
|
|
|
38,273,996 |
|
38,000,819 |
|
|
Number of shares held by the Gresham House Employee Benefit Trust |
|
|
|
(191,781) |
|
(204,007) |
|||
|
Number of dilutive shares* |
|
|
|
1,705,923 |
|
2,150,707 |
|||
|
|
|
|
|
|
|
39,788,138 |
|
39,947,519 |
|
|
Basic net asset value per share (pence) |
|
|
|
|
|
|
377.1 |
|
366.6 |
*Dilutive 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.
|
|
|
|
|
|
|
|
|
|
£'000 |
|
The movement during the year of the assets attributable to ordinary shares were as follows: |
|
|
|
|
|||||
|
Total net assets attributable at 1 January 2022 |
|
|
|
|
|
|
|
|
147,537 |
|
Total recognised gains for the year |
|
|
|
|
|
|
|
|
11,364 |
|
Share-based payments |
|
|
|
|
|
|
|
|
(3,583) |
|
Issue of shares |
|
|
|
|
|
|
|
|
(365) |
|
Dividends paid |
|
|
|
|
|
|
|
|
(3,815) |
|
Total net assets attributable at 31 December 2022 |
|
|
|
|
|
|
|
|
151,138 |
31 Notes to the statements of cash flows
a) Reconciliation of operating profit to operating cash flows
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Net operating profit / (loss) after finance costs |
|
|
7,824 |
|
6,721 |
|
(2,753) |
|
(2,680) |
|
Loss from discontinued operations |
|
|
(177) |
|
(14) |
|
- |
|
- |
|
Interest payable |
|
|
2,300 |
|
214 |
|
238 |
|
169 |
|
Depreciation |
|
|
1,155 |
|
959 |
|
779 |
|
648 |
|
Loss on disposal of property, plant and equipment |
|
|
(44) |
|
- |
|
(44) |
|
(1) |
|
Amortisation |
|
|
11,248 |
|
8,516 |
|
503 |
|
374 |
|
Share-based payments |
|
|
3,566 |
|
3,788 |
|
767 |
|
- |
|
Other fair value investment movements |
|
|
- |
|
- |
|
- |
|
- |
|
Acquisition related remuneration |
|
|
1,917 |
|
452 |
|
- |
|
- |
|
|
|
|
27,789 |
|
20,636 |
|
(510) |
|
(1,490) |
|
Increase in long-term receivables |
|
|
(838) |
|
(492) |
|
- |
|
(492) |
|
(Increase)/decrease in current assets |
|
|
(10,077) |
|
(7,745) |
|
(256) |
|
(87) |
|
Increase/(decrease) in current liabilities |
|
|
672 |
|
8,731 |
|
727 |
|
158 |
|
|
|
|
17,546 |
|
21,130 |
|
(39) |
|
(1,911) |
b) Non-cash investing and financing activities
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Acquisition of right-of-use assets (Notes 8 and 13) |
|
|
20 |
|
2,794 |
|
- |
|
1,752 |
|
Partial settlement of business combinations through the issue of shares (Notes 5 and 27) |
|
|
627 |
|
24,899 |
|
- |
|
- |
|
|
|
|
647 |
|
27,693 |
|
- |
|
1,752 |
c) Net debt reconciliation
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cash and cash equivalents |
|
|
32,205 |
|
40,252 |
|
2,976 |
|
23,800 |
|
Amounts owed to Group undertakings |
|
|
- |
|
- |
|
(1,541) |
|
(1,136) |
|
Lease liabilities (Note 8) |
|
|
(1,944) |
|
(2,441) |
|
(1,100) |
|
(1,341) |
|
Net cash |
|
|
30,261 |
|
37,811 |
|
335 |
|
21,323 |
|
Group |
|
|
|
|
Leases |
|
Cash |
|
Total |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Net cash/(debt) at 1 January 2021 |
|
|
|
|
(641) |
|
21,886 |
|
21,245 |
|
Cash flows |
|
|
|
|
845 |
|
18,366 |
|
19,211 |
|
New leases obtained through business combinations |
|
|
|
|
(689) |
|
- |
|
(689) |
|
New leases |
|
|
|
|
(1,970) |
|
- |
|
(1,970) |
|
Foreign exchange movements |
|
|
|
|
14 |
|
- |
|
14 |
|
Net (debt)/cash at 31 December 2021 |
|
|
|
|
(2,441) |
|
40,252 |
|
37,811 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows |
|
|
|
|
553 |
|
(8,047) |
|
(7,494) |
|
New leases |
|
|
|
|
(20) |
|
- |
|
(20) |
|
Foreign exchange movements |
|
|
|
|
(35) |
|
- |
|
(35) |
|
Net (debt) / Cash at 31 December 2022 |
|
|
|
|
(1,943) |
|
32,205 |
|
30,262 |
|
Company |
|
|
Net borrowings |
|
Leases |
|
Cash |
|
Total |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Net (debt)/cash at 1 January 2021 |
|
|
(4,651) |
|
(211) |
|
7,826 |
|
2,964 |
|
Cash flows |
|
|
3,515 |
|
604 |
|
15,974 |
|
20,093 |
|
New leases |
|
|
- |
|
(1,734) |
|
- |
|
(1,734) |
|
Net cash/(debt) at 31 December 2021 |
|
|
(1,136) |
|
(1,341) |
|
23,800 |
|
21,323 |
|
Cash flows |
|
|
756 |
|
283 |
|
(20,824) |
|
(19,785) |
|
Non-cash intercompany movements |
|
|
(774) |
|
- |
|
- |
|
(774) |
|
Other movements |
|
|
- |
|
(42) |
|
- |
|
(42) |
|
Net (debt) / Cash at 31 December 2022 |
|
|
(1,154) |
|
(1,100) |
|
2,976 |
|
722 |
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; and
(iv) short-term and long-term borrowings.
As at 31 December 2022 the following categories of financial instruments were held by:
|
Group |
2022 |
|
2021 |
||||
|
|
Assets at amortised cost |
|
Assets at fair value through profit or loss |
|
Assets at amortised cost |
|
Assets at fair value through profit or loss |
|
Financial assets per Statement of Financial Position |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Investments |
- |
|
19,912 |
|
3,537 |
|
13,560 |
|
Loans and receivables |
- |
|
3,036 |
|
- |
|
- |
|
Trade and other receivables - current and non-current |
21,187 |
|
- |
|
11,627 |
|
9,748 |
|
Accrued income and other debtors |
21,217 |
|
- |
|
10,608 |
|
- |
|
Cash and cash equivalents |
32,205 |
|
- |
|
40,252 |
|
- |
|
|
74,609 |
|
22,948 |
|
66,024 |
|
23,308 |
|
|
2022 |
|
2021 |
||||
|
|
Other financial liabilities at amortised cost |
|
Liabilities at fair value through profit or loss |
|
Other financial liabilities at amortised cost |
|
Liabilities at fair value through profit or loss |
|
Financial liabilities per Statement of Financial Position |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Trade and other payables - short-term |
28,390 |
|
10,111 |
|
27,950 |
|
12,494 |
|
Other creditors - long-term |
1,154 |
|
3,752 |
|
1,798 |
|
10,165 |
|
|
29,544 |
|
13,863 |
|
29,748 |
|
22,659 |
|
Company |
2022 |
|
2021 |
||||
|
|
Assets at amortised cost |
|
Assets at fair value through profit or loss |
|
Assets at amortised cost |
|
Assets at fair value through profit or loss |
|
Financial assets per Statement of Financial Position |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Investments |
- |
|
12,733 |
|
3,537 |
|
8,308 |
|
Loans and receivables |
- |
|
3,036 |
|
- |
|
- |
|
Accrued income and other debtors |
2,181 |
|
- |
|
1,280 |
|
- |
|
Amounts owed by Group undertakings |
26,887 |
|
- |
|
16,510 |
|
- |
|
Cash and cash equivalents |
2,976 |
|
- |
|
23,800 |
|
- |
|
|
32,044 |
|
15,769 |
|
45,127 |
|
8,308 |
|
|
2022 |
|
2021 |
||||
|
|
Other financial liabilities at amortised cost |
|
Liabilities at fair value through profit or loss |
|
Other financial liabilities at amortised cost |
|
Liabilities at fair value through profit or loss |
|
Financial liabilities per Statement of Financial Position |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Trade and other payables - short-term |
911 |
|
- |
|
519 |
|
- |
|
Trade and other payables - long-term |
447 |
|
- |
|
1,058 |
|
- |
|
Other loans - short and long-term |
1,541 |
|
- |
|
1,136 |
|
- |
|
Bank loans - short and long-term |
- |
|
- |
|
- |
|
- |
|
|
2,899 |
|
- |
|
2,713 |
|
- |
The carrying value of loans and receivables and other financial liabilities are not materially different to their fair values. The Group's activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The main risks to which the Group is exposed are market price risk, credit risk, interest rate risk and liquidity risk. The nature and extent of the financial instruments outstanding at the Statement of Financial Position date and the risk management policies employed by the Group are summarised below.
Market price risk
Market price risk is the risk that changes in market prices will adversely affect the Group's income due to a decline in the underlying value of assets under management, resulting in lower fees.
The objective of market price risk management is to manage and control market price exposure, while optimising the return on risk. The Group manages strategic equity funds, which are exposed to market prices. Forestry asset management fees are not linked directly to market prices.
Market price risk arises from uncertainty about the future prices of financial instruments held within the Group's portfolio. It represents the potential loss that the Group might suffer through holding market positions in the face of market movements. The investments in equity and fixed interest stocks of unquoted companies are not traded and as such the prices are more uncertain than those of more widely traded securities.
Unquoted investments are valued as per accounting policy (j) in these financial statements. Regular reviews of the financial results, combined with close contact with the management of these investments, provides sufficient information to support these valuations.
Foreign currency risk
The Group is not materially exposed to currency risk as its assets and liabilities are substantially denominated in S terling.
Credit risk
Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Group.
The Group's maximum exposure to credit risk is:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Loan stock investments |
|
|
|
|
|
|
3,036 |
|
3,537 |
|
Deferred receivable - short and long-term |
|
|
|
|
|
|
21,217 |
|
9,748 |
|
Trade and other receivables - short-term |
|
|
|
|
|
|
11,216 |
|
11,627 |
|
Accrued income and other debtors |
|
|
|
|
|
|
9,622 |
|
10,608 |
|
Cash and cash equivalents |
|
|
|
|
|
|
32,205 |
|
40,252 |
|
|
|
|
|
|
|
|
77,296 |
|
75,772 |
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 £47,813,000 (2021: £45,127,000).
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:
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
Loan stock investments |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Repayable within: - 1 year |
|
|
|
|
|
|
3,036 |
|
3,537 |
|
1-2 years |
|
|
|
|
|
|
- |
|
- |
|
2-3 years |
|
|
|
|
|
|
- |
|
- |
|
3-4 years |
|
|
|
|
|
|
- |
|
- |
|
4-5 years |
|
|
|
|
|
|
- |
|
- |
|
|
|
|
|
|
|
|
3,036 |
|
3,537 |
As at 31 December 2022 loan stock investments totalling £nil (2021: £858,000) were impaired and provided for.
As at 31 December 2022 other loans totalling £nil (2021: £54,000) were impaired and provided for.
There is potentially a risk whereby a counterparty fails to deliver securities which the Company has paid for or pay for securities which the Company has delivered. This risk is considered to be small as where the transaction is in respect of quoted investments the Company uses brokers with a high credit quality and where the transaction is in respect of unquoted investments, these are conducted through solicitors to ensure that payment matches delivery.
Interest rate risk
The Group's fixed and floating interest rate securities, equity, preference equity investments and loans and net revenue may be affected by interest rate movements. Investments in small businesses are relatively high-risk investments which are sensitive to interest rate fluctuations.
The Group's assets include fixed and floating rate interest instruments as detailed below. The Group is exposed to interest rate movements on its floating rate liabilities.
The interest rate exposure profile of the Group's financial assets and liabilities as at 31 December 2022 and 2021 were:
|
Group |
Non-interest-bearing assets/ liabilities |
|
Fixed rate assets |
|
Floating rate assets |
|
Fixed rate liabilities |
|
Floating rate liabilities |
|
Net total |
|
As at 31 December 2022 |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Investments |
19,912 |
|
3,036 |
|
- |
|
- |
|
- |
|
22,948 |
|
Cash |
- |
|
- |
|
32,205 |
|
- |
|
- |
|
32,205 |
|
Trade and other receivables |
21,187 |
|
- |
|
- |
|
- |
|
- |
|
21,187 |
|
Accrued income and other debtors |
21,217 |
|
- |
|
- |
|
- |
|
- |
|
21,217 |
|
Creditors |
|
|
|
|
|
|
|
|
|
|
|
|
- falling due within 1 year |
(27,600) |
|
- |
|
- |
|
(790) |
|
- |
|
(28,390) |
|
- falling due after 1 year |
- |
|
- |
|
- |
|
(1,154) |
|
- |
|
(1,154) |
|
|
34,716 |
|
3,036 |
|
32,205 |
|
(1,944) |
|
- |
|
68,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing assets/ liabilities |
|
Fixed rate assets |
|
Floating rate assets |
|
Fixed rate liabilities |
|
Floating rate liabilities |
|
Net total |
|
As at 31 December 2021 |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Investments |
13,560 |
|
3,537 |
|
- |
|
- |
|
- |
|
17,097 |
|
Cash |
- |
|
- |
|
40,252 |
|
- |
|
- |
|
40,252 |
|
Trade and other receivables |
21,375 |
|
- |
|
- |
|
- |
|
- |
|
21,375 |
|
Accrued income and other debtors |
10,608 |
|
- |
|
- |
|
- |
|
- |
|
10,608 |
|
Creditors |
|
|
|
|
|
|
|
|
|
|
|
|
- falling due within 1 year |
(27,307) |
|
- |
|
- |
|
(643) |
|
- |
|
(27,950) |
|
- falling due after 1 year |
- |
|
- |
|
- |
|
(1,798) |
|
- |
|
(1,798) |
|
|
18,236 |
|
3,537 |
|
40,252 |
|
(2,441) |
|
- |
|
59,584 |
Non-interest-bearing assets comprise the portfolio of ordinary shares, dealing securities and non-interest-bearing loans.
Fixed rate assets comprise fixed rate loans, unsecured loans and loans repayable on demand, with a weighted average interest rate of 15% (2021: 15.0%).
Floating rate assets and floating rate liability loans are subject to interest rates which are based on SONIA and bank base rates.
Fixed rate liabilities include lease creditors.
The interest rate exposure profile of the Company's financial assets and liabilities as at 31 December 2022 and 2021 were:
|
Company |
Non-interest-bearing assets/ liabilities |
|
Fixed rate assets |
|
Floating rate assets |
|
Fixed rate liabilities |
|
Floating rate liabilities |
|
Net total |
|
As at 31 December 2022 |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Investments - securities |
12,733 |
|
3,038 |
|
- |
|
- |
|
- |
|
15,771 |
|
Cash |
- |
|
- |
|
2,976 |
|
- |
|
- |
|
2,976 |
|
Accrued income and other debtors |
2,181 |
|
- |
|
- |
|
- |
|
- |
|
2,181 |
|
Amounts owed by Group undertakings |
26,887 |
|
- |
|
- |
|
- |
|
- |
|
26,887 |
|
Creditors |
|
|
|
|
|
|
|
|
|
|
|
|
- falling due within 1 year |
(1,799) |
|
- |
|
- |
|
(653) |
|
- |
|
(2,452) |
|
- falling due after 1 year |
- |
|
- |
|
- |
|
(447) |
|
- |
|
(447) |
|
|
40,002 |
|
3,038 |
|
2,976 |
|
(1,100) |
|
- |
|
44,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing assets/ liabilities |
|
Fixed rate assets |
|
Floating rate assets |
|
Fixed rate liabilities |
|
Floating rate liabilities |
|
Net total |
|
As at 31 December 2021 |
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Investments - securities |
8,308 |
|
3,537 |
|
- |
|
- |
|
- |
|
11,845 |
|
Cash |
- |
|
- |
|
23,800 |
|
- |
|
- |
|
23,800 |
|
Accrued income and other debtors |
1,280 |
|
- |
|
- |
|
- |
|
- |
|
1,280 |
|
Amounts owed by Group undertakings |
16,510 |
|
- |
|
- |
|
- |
|
- |
|
16,510 |
|
Creditors |
|
|
|
|
|
|
|
|
|
|
|
|
- falling due within 1 year |
(236) |
|
- |
|
- |
|
(283) |
|
(1,136) |
|
(1,655) |
|
- falling due after 1 year |
- |
|
- |
|
- |
|
(1,058) |
|
- |
|
(1,058) |
|
|
25,862 |
|
3,537 |
|
23,800 |
|
(1,341) |
|
(1,136) |
|
50,722 |
Although the Group holds investments that pay interest, the Board does not consider it appropriate to assess the impact of interest rate changes upon the value of the investment portfolio as interest rate changes are only one factor affecting market price and the impact is likely to be immaterial. The Group had no bank borrowings at the year end so the sensitivity of interest payable to changes in interest rates was not relevant in 2022. Any change to the interest rates on the floating rate assets and liabilities is immaterial to the Group.
Liquidity risk
The investments in equity investments in Aquis Exchange traded companies may be difficult to realise at their carrying value, particularly if the investment represents a significant holding in the investee company. Similarly, investments in equity and fixed interest stocks of unquoted companies that the Company holds are only traded infrequently. They are not readily realisable and may not be realised at their carrying value where there are no willing purchasers.
The Group has in place a revolving credit facility which it has available to manage liquidity risk as required.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the Statement of Financial Position date to the expected maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
|
As at 31 December 2022 |
|
|
Less than 1 year |
|
Between 1 and 2 years |
|
Between 2 and 5 years |
|
Over 5 years |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Leases |
|
|
874 |
|
632 |
|
464 |
|
220 |
|
Trade payables |
|
|
2,328 |
|
- |
|
- |
|
- |
|
Accruals |
|
|
24,612 |
|
- |
|
- |
|
|
|
Contingent consideration |
|
|
7,939 |
|
7,374 |
|
1,114 |
|
- |
|
Other creditors |
|
|
2,006 |
|
- |
|
- |
|
- |
|
|
|
|
37,759 |
|
8,006 |
|
1,578 |
|
220 |
|
As at 31 December 2021 |
|
|
Less than 1 year |
|
Between 1 and 2 years |
|
Between 2 and 5 years |
|
Over 5 years |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Leases |
|
|
644 |
|
863 |
|
947 |
|
335 |
|
Trade payables |
|
|
742 |
|
- |
|
- |
|
- |
|
Accruals |
|
|
24,195 |
|
- |
|
- |
|
- |
|
Contingent consideration |
|
|
8,955 |
|
7,195 |
|
5,361 |
|
- |
|
Other creditors |
|
|
2,955 |
|
- |
|
- |
|
- |
|
|
|
|
37,491 |
|
8,058 |
|
6,308 |
|
335 |
Capital risk management
The Group manages its capital to ensure that entities within the Group and the Company will be able to continue to trade in an orderly fashion whilst maintaining sustainable returns to shareholders.
The capital structure of the Group and the Company consists of short and long-term borrowings as disclosed in Notes 23 and 25, cash and cash equivalents and equity attributable to equity shareholders of the Company comprising issued share capital, share premium, merger reserve, treasury shares, foreign exchange reserve and retained reserves as disclosed in Notes 27, 28 and 30. The Board reviews the capital structure of the Group and the Company on a regular basis to ensure it complies with all regulatory capital requirements. The financial measures that are subject to review include cash flow projections and the ability to meet capital expenditure and other contracted commitments, projected gearing levels and interest covenants, although no absolute targets are set for these.
The Group aims to hold sufficient cash to fulfil its requirements with respect to regulatory capital. During the year the Group and its subsidiary entities complied with all regulatory capital requirements.
|
|
|
|
Group |
|
Company |
||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Debt |
|
|
(1,944) |
|
(2,441) |
|
(1,100) |
|
(2,477) |
|
Amounts owed by Group undertakings |
|
|
- |
|
- |
|
25,346 |
|
16,510 |
|
Cash and cash equivalents |
|
|
32,205 |
|
40,252 |
|
2,976 |
|
23,800 |
|
Net assets |
|
|
151,138 |
|
147,537 |
|
127,975 |
|
134,343 |
|
Net cash |
|
|
30,261 |
|
37,811 |
|
27,222 |
|
37,833 |
|
Net cash as a % of net assets |
|
|
20.0% |
|
25.6% |
|
21.27% |
|
28.2% |
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 is determined by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm's length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.
Valuation technique using observable inputs - Level 2
Financial instruments that have been valued using inputs other than quoted prices as described for Level 1 but which are observable for the asset or liability, either directly or indirectly. Loans from the development project is at Level 2.
Valuation technique using significant unobservable inputs - Level 3
Financial instruments, the valuation of which incorporates significant inputs for the asset or liability that are not based on observable market data (unobservable inputs). Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the input or analytical techniques.
Where investments are in a fund, the net asset value of the fund is used to determine the fair value of the investment. The net asset value is typically prepared by the manager of that specific fund and provided to the Group as an investor. The Group reviews the valuation and uses this as the Level 3 assessment of fair value.
The valuation techniques used by the Company for Level 3 financial assets can be found in accounting policy (j) (ii).
Investments in the unlisted securities includes investments in four separate funds and one unlisted company where the valuation methodology is considered a Level 3 assessment.
One of the funds invests in a large number of forestry assets. The forestry assets are held at fair value in the underlying fund. An independent valuation of the forests within the underlying fund is performed annually by forestry valuation experts by reference to comparable market transactions for each underlying forestry asset that considers factors including location, maturity of the forest and size. There is no reasonable change in the inputs in each of the underlying assets, which would give rise to a material adjustment to the fair value of the investment.
The remaining three investments in funds are measured using the fair value of the net asset value provided by the manager of those funds, which are reviewed by the appropriate investment committee and the inputs used are unobservable. The valuations provided by the managers have been reviewed for appropriateness with reference to market observable data where relevant and concluded to not be materially different to that proposed.
The unlisted company valuation has been prepared in line with the International Private Equity Valuation Guidelines.
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.
|
Group |
|
31 December 2022 |
|
Level 1 |
|
Level 2 |
Level 3 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
£'000 |
|
Financial assets at fair value through profit and loss |
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
- Equities |
|
19,912 |
|
9,710 |
|
- |
10,202 |
|
- Loans |
|
3,036 |
|
- |
|
3,036 |
|
|
|
|
22,948 |
|
9,710 |
|
3,036 |
10,202 |
|
|
|
|
|
|
31 December 2021 |
|
Level 1 |
|
Level 3 |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Financial assets at fair value through profit and loss |
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
- Equities |
|
|
|
|
13,560 |
|
6,361 |
|
7,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,560 |
|
6,361 |
|
7,199 |
|
Company |
|
31 December 2022 |
|
Level 1 |
|
Level 2 |
Level 3 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
£'000 |
|
Financial assets at fair value through profit and loss |
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
- Equities |
|
12,733 |
|
8,210 |
|
- |
4,523 |
|
- Loans |
|
3,036 |
|
- |
|
3,036 |
- |
|
|
|
15,769 |
|
8,210 |
|
3,036 |
4,523 |
|
|
|
|
|
|
31 December 2021 |
|
Level 1 |
|
Level 3 |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Financial assets at fair value through profit and loss |
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
- Equities |
|
|
|
|
8,308 |
|
4,923 |
|
3,385 |
|
|
|
|
|
|
8,308 |
|
4,923 |
|
3,385 |
Set out below is a reconciliation of financial assets measured at fair value based on Level 3.
|
Group 31 December 2022 |
|
|
|
|
Investments - securities |
|
Trade and other receivables |
|
Total |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Opening balance |
|
|
|
|
7,199 |
|
|
|
7,199 |
|
Total gains: |
|
|
|
|
- |
|
|
|
- |
|
In Statement of Comprehensive Income |
|
|
|
|
469 |
|
- |
|
469 |
|
Additions |
|
|
|
|
3,042 |
|
- |
|
3,042 |
|
Disposals |
|
|
|
|
(511) |
|
- |
|
(511) |
|
Closing balance |
|
|
|
|
10,199 |
|
- |
|
10,199 |
|
Total gains for the year included in comprehensive income for assets held at the end of the reporting period |
|
|
|
|
468 |
|
- |
|
468 |
|
Group 31 December 2021 |
|
|
|
|
Investments - securities |
|
Trade and other receivables |
|
Total |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Opening balance |
|
|
|
|
3,925 |
|
- |
|
3,925 |
|
Total gains: |
|
|
|
|
|
|
|
|
|
|
In Statement of Comprehensive Income |
|
|
|
|
1,956 |
|
- |
|
1,956 |
|
Additions |
|
|
|
|
2,319 |
|
- |
|
2,319 |
|
Disposals |
|
|
|
|
(1,001) |
|
- |
|
(1,001) |
|
Closing balance |
|
|
|
|
7,199 |
|
- |
|
7,199 |
|
Total gains for the year included in comprehensive income for assets held at the end of the reporting period |
|
|
|
|
1,227 |
|
- |
|
1,227 |
Level 3 fair value measurements are these derived from valuation techniques that include significant inputs that are not based on observable market data. As at 31 December 2022, the Group has £10.2 millions in Level 3 Assets measured at fair value, of which £7.3 millions are in Real Assets Funds and £2.9 millions in Private Equity investments.
The Group investments in Real Assets Funds includes Gresham House Growth Fund, Gresham House BSI Housing and Infrastructure LPs, Gresham House BSIF II LP and Gresham House ReSI LP. The Group uses the funds net asset value (NAV) as the basis for their fair value with valuation performed on an annual basis by an external valuer in accordance with industry valuation standards.
The Private Equity investments include a Strategic Public Equity Coinvestment and a warehoused private equity investment. The Strategic Public Equity Coinvestment valuation was based on the latest external manager partner statement. The warehoused private equity investment valuation uses the entity's earnings and comparable industry earnings multiple in line with industry standard valuation techniques.
Realised and unrealised gains and losses for Level 3 Assets are reported in Gains and losses on investments held at fair value in the Consolidated Statement of Comprehensive Income.
|
Company 31 December 2022 |
|
|
|
|
Investments |
|
Total |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Opening balance |
|
|
|
|
3,385 |
|
3,385 |
|
Total gains: |
|
|
|
|
(143) |
|
(143) |
|
In Statement of Comprehensive Income |
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
1,792 |
|
1,792 |
|
Disposals |
|
|
|
|
(512) |
|
(512) |
|
Closing balance |
|
|
|
|
4,522 |
|
4,522 |
|
Total gains for the year included in comprehensive income for assets held at the end of the reporting period |
|
|
|
|
(143) |
|
(143) |
|
Company 31 December 2021 |
|
|
|
|
Investments |
|
Total |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Opening balance |
|
|
|
|
970 |
|
970 |
|
Total gains: |
|
|
|
|
|
|
|
|
In Statement of Comprehensive Income |
|
|
|
|
293 |
|
293 |
|
Additions |
|
|
|
|
2,122 |
|
2,122 |
|
Disposals |
|
|
|
|
- |
|
- |
|
Closing balance |
|
|
|
|
3,385 |
|
3,385 |
|
Total gains for the year included in comprehensive income for assets held at the end of the reporting period |
|
|
|
|
293 |
|
293 |
The only financial liabilities held at fair value relate to the deferred consideration on the acquisition of TradeRisks Limited, Appian Asset Management Limited, the DevCo Projects, the acquisition of the fund and investment management businesses of Livingbridge VC LLP and the acquisition of the VCT business of Mobeus amounting to £13,864,000 (2021: £22,659,000). 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 2022 a 10% movement in the fair values of 100% of the Group's equity investments would be equivalent to a movement of £2,245,000 in both profit and net assets.
34 Related party transactions
Group
During the prior year management fees totalling £690,675 and performance fees of £4,222,289 were invoiced to Gresham House Strategic plc (GHS), now known as Rockwood Strategic plc, a company in which the Group had a 23.4% interest. The Group sold its entire holding in GHS in March 2022 and had no balances outstanding at the end of 2022.
Company
During the year the following transactions occurred with Group companies:
|
31 December 2022 |
|
|
|
|
|
|
|
||
|
|
Advanced to |
|
Received from |
|
Interest charged |
|
Balance due from / (due to) |
||
|
|
£ |
|
£ |
|
£ |
|
£ |
||
|
Security Change Limited |
13,804 |
|
5,264 |
|
- |
|
(1,127,364) |
||
|
Gresham House Finance Limited |
- |
|
- |
|
- |
|
221,400 |
||
|
Gresham House (Nominees) Limited |
11,000 |
|
- |
|
- |
|
22,202 |
||
|
Gresham House Holdings Limited |
30,868,005 |
|
19,577,397 |
|
- |
|
22,243,750 |
||
|
Gresham House EBT |
1,632,455 |
|
- |
|
- |
|
1,632,455 |
||
|
Worcestershire Solar 1 Ltd |
2,091,903 |
|
|
|
|
|
2,091,903 |
||
|
Warwickshire Solar 1 Ltd |
554,944 |
|
773,944 |
|
- |
|
(219,000) |
||
|
Lister Battery Limited |
30,200 |
|
- |
|
54,499 |
|
723,995 |
||
|
Monets Garden Battery Limited |
30,176 |
|
- |
|
63,933 |
|
854,053 |
||
|
Arbroath Limited |
1,770 |
|
38,469 |
|
2,541 |
|
- |
||
|
Coupar Limited |
- |
|
- |
|
1,387 |
|
20,038 |
||
|
Cockenzie Storage Limited |
104,934 |
|
- |
|
- |
|
104,934 |
||
|
Hazelboro Limited |
445,250 |
|
263,484 |
|
73,742 |
|
223,506 |
||
|
|
|
|
|
|
|
|
|
||
|
During the year the Company has income of £347,000 from DevCo Group Entities. |
|||||||||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2021 |
|
|
|
|
|
|
|
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35 Subsequent Events
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Post period end the Group sold its investment in Worcestershire Solar 1 Ltd and received cash of £6.2 million. |
|
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