Audited Results for Year Ended 31 December 2017

RNS Number : 3202G

Gresham House PLC

01 March 2018

1 March 2018

Gresham House plc ("Gresham House" or "the Company")

(AIM: GHE)

Audited Results for Year Ended 31 December 2017

A Year of Organic Growth with 79% Increase in Assets Under Management plus Operating Profitability Achieved in H2 2017 Ahead of Expectations

Assets under management ("AUM") increased 79% to £649 million (2016: £363 million)

Asset management revenue up 85% to £6.5 million (2016: £3.5 million)

Adjusted operating loss reduced to £0.7 million (2016: £2.4 million loss)

Adjusted operating profitability achieved in the second half of 2017

Organic growth of £200 million (a 55% rise over the year) including the launch of the British Strategic Investment Fund ("BSIF") and growth across other existing strategies

Acquisition growth of £86 million (up 24%) through the purchase of Hazel Capital, the renewable energy asset manager, in October 2017

Completed the sale of the legacy property portfolio post year end, fully repaying debt - strong balance sheet with tangible/realisable assets of £24.4 million

Anthony Dalwood, CEO of Gresham House, comments:

"Three years on from the start of our journey, Gresham House Group is a specialist alternatives asset manager in a strong position to build the momentum that we have created. We are seeing institutional investors increasing their allocations to alternatives. With our newest offerings in new energy and infrastructure, we can provide pension funds, family office and other institutional clients with tailored solutions including co-investment opportunities in some of the fastest growing and most sought-after market segments in the alternatives sector."

"We have a promising pipeline of acquisitions and organic growth opportunities, a strong balance sheet and a high-quality team to continue to execute the shareholder value creation strategy in 2018."

For further enquiries, please contact:

Gresham House plc

Tony Dalwood, Chief Executive Officer

+44 (0) 203 837 6270

Liberum

Neil Elliot/Jill Li

+44 (0) 20 3100 2000

Montfort Communications

Gay Collins / Toto Reissland-Burghart

greshamhouse@montfort.london

+44 (0) 203 770 7907

Website: www.greshamhouse.com

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014

Disclaimers

This announcement contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Gresham House plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

Chairman's Statement

Activity in the year

Gresham House has grown from strength to strength in 2017 and I am pleased to report that this management is delivering well against our stated objectives. Assets Under Management ("AUM") at the year end stand at £649 million, some 79% greater than at the beginning of 2017. The Group is now run-rate profitable* at the adjusted operating profit level.

Organic growth in AUM totalled £200 million (a 55% rise over the year) and acquisitive growth was £86 million (up 24%). The key drivers were the launch of the Gresham House British Strategic Investment Fund ("BSIF"), adding £165 million, and the acquisition of the Hazel Capital business adding a further £86 million as at 31 December 2017.

As I highlighted in the Interim Results, BSIF is a great example of the team providing relevant solutions to meet the specific needs of investors. Local government pension schemes and other institutional investors are seeking long-term opportunities in UK housing and infrastructure-related assets. BSIF provides them with a clear partnership solution, particularly for investments of less than £50 million and the potential to direct those investments to local or regional opportunities. The team continues to work hard fundraising for BSIF and is targeting a final close of £250 million by the end of 2018.

I was also pleased to announce the completion of the acquisition of Hazel Capital, the renewable energy asset manager, in October 2017. The Gresham House New Energy strategy, our fifth strategy as an alternative asset manager, has been set up under the leadership of Hazel's founder Ben Guest. I welcome Ben and his team to Gresham House and I am excited about the prospects of working together.

We now have five investment strategies in total, which sit within our two core divisions:

(1) Strategic Equity

· Public Equity

· Private Assets

(2) Real Assets

· Forestry

· Housing and Infrastructure

· New Energy

Results

The Group has reached an important inflection point. It has become run-rate profitable at the adjusted operating profit level earlier than anticipated. The increase in AUM is making a positive impact on returns and the adjusted operating loss** has reduced to £0.7 million (2016: £2.4 million loss). We achieved adjusted operating profit in the second half of 2017 of £0.1 million, compared to the £0.8 million adjusted operating loss**, reported for our first half to 30 June 2017.

In 2017 we also completed the sale of the legacy property portfolio, adding significant liquidity to the Gresham House balance sheet and finalising our transition from a property-owning business to a pure-play asset manager. Furthermore, with the subsequent repayment of the Kleinwort Benson loan, we have a simpler and stronger balance sheet to support our plan for growth as a pure-play asset manager in 2018. Further details of our financial performance will be found in the Financial Review.

*Run-rate profitable is defined as the annualised management fee revenues and other income earned from the AUM as at the period end, less the annualised cost base at the period end.

**Adjusted operating loss has been restated per note 9 of the financial statements

The Board

There have been changes on the Board that I want to highlight. We have recruited two new non-executive directors who position the Company well for our next stage of growth; Simon Stilwell joined on 18 December 2017 and Rachel Beagles joins on 1 March 2018.

Simon brings a wealth of experience from his two decades in capital markets and the development of Liberum under his leadership. He is well placed to help guide Gresham House through the next phase of its growth. Simon is currently the Chief Executive Officer of Vitesse Media, an AIM-listed digital media and events business.

Rachel has an impressive track record as a non-executive director or chairman of several investment companies and has recently been appointed as the Chairman of the Association of Investment Companies. Rachel's prior experience as a Managing Director at Deutsche Bank and as Vice-Chair of Newlon Housing Trust, a social housing provider operating in North & East London, will also provide valuable insight to the Board.

Peter Moon stepped down as a Non-Executive Director and Chairman of the Audit Committee at the end of 2017. He has taken on the role of Chairman of the Investment Committee for BSIF, which he is well placed to lead given his experience as Chief Investment Officer at the Universities Superannuation Scheme. I would particularly like to thank Peter for his very valuable service as a director over our early formative years. Richard Chadwick has taken over as Audit Committee Chairman, which as a Chartered Accountant and existing member of the Audit Committee he is well placed to do.

The Board has a significant role to play in the development of the business, performing such roles as counsel to the executive management team and providing perspective on strategic matters. The evolving Gresham House plc Board aims to support the long-term aspirations of this growing asset management group.

AGM

This year we are holding our AGM at Eversheds Sutherland (International) LLP, One Wood Street, London, EC2V 7WS on 17 May 2018 at 10:00am and I hope to see as many shareholders as possible there. Our CEO Anthony Dalwood will give a brief update after the formal business of the AGM is concluded.

Outlook

With the continuing low interest rate environment and the uncertainty around what Brexit will bring, these are interesting times in which to invest. The management team's clear strategy is to provide investment solutions with a long-term horizon aiming to counter near-term uncertainty. There is a promising pipeline of organic and acquisitive growth opportunities identified for this year. By operating with the same careful and diligent approach that we have used to date, I believe the management team assembled is one of quality and cohesion, which will continue to create shareholder and client value in 2018.

The hard work and dedication of the whole team has driven the business to where it is today and I believe that we have the right team in place to continue to deliver against our stated objectives.

Anthony Townsend

Chairman

28 February 2018

Chief Executive's Statement

Specialist alternative asset manager

Gresham House has continued its journey from an Investment Trust in December 2014 to the pure-play specialist alternative asset manager we are today thanks to the efforts of our management team alongside the support of clients and shareholders. Three years on, we have met our stated objectives, by growing AUM 79% to £649 million in the twelve months to 2017 and achieving profitability on a run-rate basis, at the adjusted operating profit level, at the end of 2017. I am pleased to state that at the adjusted operating level we have reduced the loss from £2.4 million in 2016 to £0.7 million in 2017, and exit a good year ahead of original management expectations.

The Group is now diversified across two divisions, which cover five strategies and is well positioned for long-term growth in alternatives asset management. It is working with strategic partners and creating shareholder value through multiple avenues of growth in AUM, carried interest and profits.

The sale of the legacy property portfolio in the year leaves the business with a strong balance sheet and we have also received advice that the Company now qualifies for inheritance tax business property relief at 100% in appropriate cases**. Gresham House can now be considered a pure-play specialist alternative asset manager, aiming to capture value from the structural growth in alternative asset allocation. This will help us achieve our vision:

· To build a leading specialist alternative asset management company whereby the Group becomes an "asset to covet"

· To create long-term shareholder value through sustainable and superior investment performance, and quality service provision

· To create a culture of empowerment where individual flair and entrepreneurial thinking is encouraged, enabling us to attract and retain top talent

Generating shareholder value

To build Gresham House into an asset to covet and generate shareholder value, we target growth through increasing AUM along with client satisfaction. We have had significant AUM growth over the past twelve months, with the addition of the New Energy and Housing & Infrastructure strategies. We now have five complementary strategies under the Strategic Equity and Real Assets divisions.

Assets Under Management, £ million

	31 Dec 2014	31 Dec 2015	31 Dec 2016	31 Dec 2017
Strategic Equity	0	37	116	115
Real Assets	0	205	247	534
Total	0	242	363	649

Overall AUM has grown by 79% in the year to £649 million (2016: £363 million), reflecting organic growth of £200 million (55%) and acquisitive growth of £86 million (24%).

Organic growth was supported by the launch and interim close of the British Strategic Investment Fund ("BSIF") at £165 million, a significant milestone. BSIF is a closed-ended limited partnership operating over a twelve-year period. The business generates sustainable management fee income and has the potential to deliver carried interest should BSIF achieve its annualised target return. Strategic equity AUM was broadly flat following the return of capital to LMS shareholders ahead of the expected schedule.

The completion of the Hazel Capital transaction in October 2017 is an exciting addition to Gresham House's product offering in the area of renewables and new energy infrastructure-related assets. Alongside the Hazel Renewable Energy VCT management contracts and the master service agreements representing AUM of £86 million, we also have a developed pipeline of energy storage assets. We are excited about the potential to grow this area as client product increases with a team who have a proven track record in this socially responsible arena.

Disciplined approach

To create value for shareholders and clients alike, Gresham House operates with risk management and controls at the forefront of the decision-making process. Minimising and mitigating against the risks that the Group faces is key to delivering long-term returns, particularly in the increasingly stringent regulatory environment in which we operate. We have built this approach into all our investment processes through the use of experienced members of our Investment Committees at both the Group and the strategy levels. This discipline aims to safeguard the funds of our clients and shareholders.

Our ability to integrate new businesses into Gresham House and add value through our central functions is further key to generating shareholder value. We have demonstrated our ability to do this with the acquisition of the Aitchesse business, now fully integrated as Gresham House Forestry and delivering on the 15% long-term return hurdles. The Hazel Capital business is being successfully integrated into the Gresham House family as the New Energy strategy and we continue to work on scaling this area.

We successfully launched our client portal at the end of 2017 to achieve greater interaction and transparency between clients and our investment managers. Clients are able to log on to the system and see deal-by-deal co-investment opportunities in a structured and simple manner. They can review their portfolio through accessing information on the assets underlying their investments, read appraisals and investment papers where available, as well as see how much of their committed cash has been drawn down. This allows them discretion to increase allocations through co-investment and hence their exposure to regions, sectors or deals specific to their interests. This level of engagement will materially enhance the client service proposition.

*Adjusted operating loss has been restated per note 9 of the financial statements

** This statement is intended only as a guide to current UK tax legislation and to what is understood to be the current practice of HMRC, both of which are subject to change with retrospective effect. This statement does not constitute advice to any shareholders or potential investor.

Talented team

Following the management buy-in in 2014, the team has grown and evolved. The right people working productively and efficiently at Gresham House is critical to our success. We aim to create a culture of empowerment for our team, where individual flair and entrepreneurial thinking is encouraged. This commitment to people is at the core of Gresham House's values and has resulted in a diverse and dynamic team.

The acquisition of the Hazel Capital business and team has been a big step forward in hiring a high quality investment team to enhance our product offering. Ben Guest has joined Gresham House as head of the New Energy strategy and fund manager of BSIF. Ben's expertise in renewable energy investment has generated top quartile performance for the Hazel Renewable Energy VCTs. Our product development and distribution team is working hard on a partnership approach to providing long-term solutions to clients in a variety of products, by listening to their needs and matching our offering accordingly.

Michael Hart joined in June 2017 from Amundi to head up the distribution drive and to add his experience to this critical function within the business. He has already made a number of introductions to institutional investors who we are currently working with to provide investment solutions. This area remains one of development focus.

Additional key hires in the year include Andy Hampshire joining us as Chief Technology Officer from Lloyds Development Capital. His business integration experience as well as technology focus has been clearly demonstrated with the successful implementation of the client portal and integration of the Forestry and New Energy businesses.

Other hires have included bolstering our investment management teams and marketing functions. Overall, we are focused on building a mix of quality individual talent to deliver continued growth for Gresham House. We were encouraged that so many team members took up the opportunity to reinvest in Gresham House through the bonus share matching scheme.

Increasing allocation to alternative assets

The search for higher returns and income, in a low interest rate world, have accelerated changes in clients' asset allocation and product demand. We have seen a growing popularity of passive funds, sustained increased demand for income products and a shift to diversified investment solutions. This has driven a greater interest in higher returning areas such as alternative assets which have shown superior long-term risk-return characteristics.

This backdrop has prompted some investors to expand their investment horizons both in timeframe (longer term) and universe (non-traditional asset classes) to capture superior risk-adjusted returns, particularly in search of income yield.

Gresham House is positioned to capitalise on the shift in asset allocation amongst clients from traditional to alternative asset classes for investors searching for a solution to gain from long-term investment opportunities.

Outlook

We have delivered well against our 2017 objectives growing AUM, both organically and through acquisitions and becoming run-rate profitable in the second half of the year. More details of our objectives and how we achieved these in 2017 are contained in the Strategic Framework section.

We continue to see institutional investors increase their allocations to alternatives as they seek long-term investment returns as well as achieving environmental, social and governance objectives. By continuing to provide tailored solutions to investors' long-term needs, we are positioning Gresham House for further growth.

Asset valuations on almost all traditional metrics suggest that peak margins with high multiples are likely to lead to relatively low medium-term equity returns. Indeed, should bond yields rise significantly from this point, then we should expect volatility and a decrease in asset valuations more broadly. Gresham House is therefore well-positioned as a specialist alternative asset manager with long-term contracts in areas where we believe that superior investment returns can be potentially generated.

As we look forward to 2018, we remain focused on growing the business and building the Gresham House brand as an "asset to covet", where employees are proud to work for Gresham House, clients want to invest with Gresham House and shareholders want to own Gresham House. The ability to deliver on this will be determined by AUM growth, both organically and through the successful integration of acquisitions. We now have an offering in the new energy and infrastructure related markets, which are some of the fastest growing and most sought-after market segments in the alternatives sector.

We are positioned for growth, with a strong net cash balance sheet and a high quality team. In addition, we have a promising pipeline of acquisitions and organic growth opportunities and are therefore excited about the potential to continue to deliver greater value to clients and shareholders in 2018 and beyond.

Anthony Dalwood

Chief Executive Officer

28 February 2018

Strategic Framework

Building a leading specialist alternative asset management company whereby Gresham House becomes an "asset to covet"

Strategic objective: To deliver long-term value to shareholders and clients whereby Gresham House becomes an "asset to covet"

Objectives

Progress in 2017

KPIs

2018 Priorities

Deliver organic growth in AUM

- Successful launch of the British Strategic Investment Fund (BSIF): £165m committed at 31 December 2017

- Forestry AUM growth of £36m, up 15% in the year

- Strategic Equity AUM marginal reduced by £1m after strategic return of £11m capital to shareholders by LMS Capital plc

Organic growth in AUM

2017: £200m

2016: £54m

2015: £0m

- Final close BSIF at £250m by end of 2018

- Grow Forestry AUM through final close of Gresham House Forestry Fund LP and new initiatives

- Manage GHS plc and LMS Capital plc effectively to increase NAV

- Capitalise on client portal co-investment facility to provide additional AUM growth plus client service

Deliver acquisition growth in AUM

- Successful acquisition of the Hazel Capital business in October 2017

- Successful continued integration of Gresham House Forestry, delivering in line with long-term return hurdle of 15%

- Successful continued integration of LMS Capital plc management contract delivering in line with long-term return hurdle of 15%

Acquisition growth in AUM

2017: £86m

2016: £68m

2015: £242m

- Identify and execute on acquisitions to complement the existing business and provide further scale

- Disciplined capital allocation policy to generate 15% return on capital employed ("ROCE") hurdle in the long term

Deliver operating profitability to shareholders

- Run-rate profitable at end 2017

- Delivering revenue growth through both organic and acquisition growth in AUM

- Managing cost base to support growth

Adjusted Operating loss

2017:(£0.7m)

2016: (£2.4m)

2015: (£2.3m)

- Deliver growing operating profitability in 2018 through revenue growth and management of cost base

Deliver operational efficiencies

- Increased revenue per employee to £222k

- Clear focus on synergies from acquisitions and integration plans

- Benefits of operational leverage

- Delivering AUM growth by more than increases in cost base

Revenue per employee

2017: £222k

2016: £148k

2015: £67k

- Focus on integration of new acquisitions to deliver synergies

- Build AUM from existing cost base

- Invest in revenue generating team members

Financial Review

The Group has had another transformative year, with AUM growing by 79% to £649 million (2016: £363 million) and revenues increasing by 85% to £6.5 million (2016: £3.5 million). Alongside the development of the specialist alternative asset management business, the team has realised the remaining legacy property portfolio and with the final sale of the land at Newton-le-Willows completing in February 2018, we now have a clean balance sheet with zero debt. The Group has also been advised that following the sale of the legacy portfolio, the Company's shares now qualify for inheritance tax business property relief at 100% in appropriate cases. *

* This statement is intended only as a guide to current UK tax legislation and to what is understood to be the current practice of HMRC, both of which are subject to change with retrospective effect. This statement does not constitute advice to any shareholders or potential investor.

As a result of the legacy property disposals, we have reclassified the legacy property business unit as a discontinued operation within these results. We have also revisited the definition of adjusted operating profit/loss, the non-GAAP measure, to clearly disclose the trading performance of the Group as a specialist alternative asset manager.

Adjusted operating loss

	2017	2016
	£'000	£'000
Income	6,457	3,496
Administration overheads (excluding amortisation and depreciation and exceptional items)	(6,824)	(5,459)
Finance costs	(344)	(442)
Adjusted operating loss	(711)	(2,405)

Amortisation and depreciation	(1,197)	(1,433)
Exceptional items	(308)	-
Net trading loss	(2,216)	(3,838)
(Losses) and gains on investments	(206)	430
Tax	-	33
Operating loss before tax	(2,422)	(3,375)
(Loss)/profit from discontinued operations	(1,104)	339
Total comprehensive income	(3,526)	(3,036)

The adjusted operating profit/loss definition has been simplified to use the Group's net trading loss and deduct amortisation and depreciation of intangible and tangible assets and exceptional items. This now represents the management fee income earned from the specialist asset management business, less the administrative overheads associated with delivering the asset management services.

The growth in AUM in the year has improved the adjusted operating loss* from £2.4 million in 2016 to £0.7 million in 2017. After the deduction of amortisation and depreciation, exceptional items and the loss from discontinued operations the total comprehensive income for the year was a loss of £3.5 million (2016: £3.0 million). The main impact was the £1.1 million loss from the discontinued operations, which was primarily due to the sale of the legacy asset, Southern Gateway, in a difficult market for commercial property in the UK.

*2016 adjusted operating loss has been restated in line with the revised calculation of adjusted operating profit/loss per above.

Income

	2017	2016
	£'000	£'000
Asset management income	5,805	3,202
Dividend and investment income	431	249
Other income	221	45
Total income	6,457	3,496

Asset management income

Total income has increased by 85% in the year to £6.5 million (2016: £3.5 million). This has been driven by the increase in AUM during the year from both new funds raised and the acquisition of the Hazel Capital business. On an annualised basis, the management fee income from funds managed as at 31 December 2017 is £7.7 million, which is predominantly based on long-term management contracts.

The Real Assets division delivered £2.8 million (2016: £2.1 million) from the existing Forestry strategy as well as £0.8 million from the newly formed BSIF fund within the Housing and Infrastructure strategy and £0.2 million for the two months' income from the New Energy strategy.

Dividend, interest and other income

Dividend and interest income is a good example of how we use our balance sheet to invest to deliver against our long-term 15% per annum return hurdle. Interest earned on the working capital loan provided to Hazel Capital, while we progressed our due diligence on the acquisition of the business, was £306k and we also earned an arrangement fee of £135k. The total amount borrowed was £4.5 million at a rate of 15% per annum, which was secured on the underlying assets of Hazel Capital and fully repaid before the end of the year. We also received a £106k dividend from Gresham House Strategic plc in the year.

Administrative overheads

Administrative overheads, excluding amortisation, depreciation and exceptional items was £6.8 million (2016: £5.5 million). We continue to invest in the team and operational infrastructure to support the growth of the business, which has seen the number of employees increase from 26 to 36 at the end of 2017.

This includes the hiring of the Hazel Capital team of ten people from 31 October 2017. We have also added key hires to critical areas of the business, including Andy Hampshire as the Chief Technology Officer and Michael Hart as head of distribution and additional investment team members. These roles are very important to implementing our stated strategy and all have had a strong start since joining Gresham House. People costs have consequently increased to £4.6 million from £3.7 million in the year.

Total office costs across the Group were £0.5 million (2016: £0.3 million). The increase in the size of the business in London also required us to review our office arrangements and in February 2017 we moved to Octagon Point in St Paul's. The acquisition of the Hazel Capital business also included the cost of the office in Hammersmith of £70k per annum. We continue to maintain a flexible approach to our office space during this phase of the Group's life and the serviced office space at Octagon Point currently serves us well.

As part of the integration of our new businesses and a review of the existing business costs, we continue to work hard at identifying areas where we can identify synergies and maximise our operating profit.

Finance costs

Following the sale of the Southern Gateway site in Speke, the outstanding £4.4 million Kleinwort Benson loan was repaid. Finance fees of £344k (2016: £442k) represent loan interest up to the point of repayment as well as the remaining arrangement and legal fees that were being amortised over the life of the loan.

Amortisation and depreciation

Amortisation of management contracts, client contacts and the new Gresham House website and client portal account for £1.1 million (2016: £1.4 million) as these intangible assets continue to be amortised over their useful lives.

Depreciation of £87k in the year (2016: £69k) has a lesser impact on the Group's income statement and relates primarily to motor vehicles used by the forestry business.

Exceptional items

Exceptional items of £308k relate to professional fees incurred in respect of the acquisition of the Hazel Capital LLP business, which took place on 31 October 2017 (2016: £nil).

(Losses)/gains on investments

	2017	2016
	£'000	£'000
Share of associate's (losses)/profits	(68)	628
(Losses)/gains on investments held at fair value	(230)	(147)
Movement in fair value of contingent consideration	(56)	(253)
Movement in fair value of deferred receivable	148	202
Total (losses)/gains on investments	(206)	430

The (losses)/gains on investments table above represent the movements in the investment that the Group has made in the funds that it manages as well as the legacy investments in securities.

The share of associate's profits relates to the 19.3% holding that the Group has in Gresham House Strategic plc ("GHS"). The last results announcement from GHS was on 24 November 2017 for the six-month period to 30 September 2017. Under associate accounting, the Group has therefore recognised its share of the loss in the period of £68k.

The loss of £230k on investments held at fair value in the year (2016: £147k) includes both positive movements on the co-investment that has been made in the funds managed or advised by Gresham House, being offset by a £619k impairment to the last material legacy investment, a loan to Kemnal Investments Limited. The loan was due for repayment in February 2018, however pressure on the capital structure and a review of the business model has required the Group to fully impair the investment. We continue to work with the business to recover value.

Fair value movement in contingent consideration and deferred receivable

The fair value movement in the contingent consideration payable to the sellers of Aitchesse and the second tranche payment to LMS has increased by £56k in the year (2016: £253k).

The deferred receivable relates to future payments due from Persimmon from the sale of the original Newton-le-Willows site in September 2015. The fair value movement of £148k represents the total increase in fair value as the payments become due (2016: £202k).

Discontinued operations

The classification of the legacy property portfolio as discontinued operations in the year includes rental income, property outgoings, the fair value movement in the remaining property and the net loss on the sale of the Southern Gateway and Newton-le-Willows sites. The key driver of the £1.1 million loss (2016: £339k gain) is the sale of Southern Gateway, which was achieved in difficult property market conditions, but was strategically important for the business to complete its transition to specialist alternative asset manager. Note 7 to the accounts provides a further breakdown of discontinued operations.

Financial position

	2017	2016
	£'000	£'000
Assets
Investments*	8,974	8,873
Property	1,986	10,000
Deferred receivable - Persimmon	3,694	5,180
Cash	9,785	2,802
Tangible/realisable assets	24,439	26,855

Intangible assets	6,327	6,630
Other assets	3,070	2,037
Total assets	33,836	35,522

Liabilities
Borrowing	-	5,896
Contingent consideration	3,301	3,237
Other creditors	2,165	2,256
	5,466	11,389
Net assets	28,370	24,133

*IFRS requires the consolidation of Gresham House Forestry Friends and Family Fund LP. This has been adjusted here for the £477k non-controlling interest to show the Group's position on an investment basis.

Tangible/realisable assets

The above highlights the strong balance sheet position that the Group has at the end of 2017. The tangible/realisable assets supporting this total £24.4 million (2016: £26.9 million), comprise investments, the Newton-le-Willows property (the sale of which completed in February 2018), amounts receivable from Persimmon on the sale of a legacy property site in September 2015 and cash.

Investments

Investments include the value of the Group's holding at the end of the year in Gresham House Forestry LP ("GHF LP") of £1.2 million (2016: £1.2 million), co-investment in SPE LP of £0.8 million (2016: £0.5 million) and the Group's associate holding in GHS of £6.5 million (2016: £6.5 million) and £0.3 million in LMS Capital plc ("LMS"). These are all in vehicles or co-investments in funds managed or advised by Gresham House, highlighting clear alignment with our clients.

Property

The Southern Gateway site was sold in September 2017 for a gross value of £7.25 million.

We exchanged sale contracts on the remaining land at Newton-le-Willows for gross proceeds of £2.1 million in December 2017, which subsequently completed in February 2018. This was the last remaining property investment and means the business has now fully disposed of its legacy property assets and can focus purely on the specialist alternative asset management business.

Deferred receivable - Persimmon

The Persimmon deferred receivable relates to the instalments that are due from Persimmon annually up to 22 March 2019. In the year £1.6 million was paid by Persimmon. The next instalment due on 22 March 2018 is £2.1 million, with a final payment due on 22 March 2019 of £1.6 million. The deferred receivable has been fair valued as this was designated at fair value through profit or loss at inception.

Intangible assets

Intangible assets of £6.3 million (2016: £6.6 million) relate to the Aitchesse Limited (now Gresham House Forestry Limited) acquisition, the LMS management contract award and the recently acquired contracts from Hazel Capital LLP.

The intangible assets recognised at the end of the year for Aitchesse of goodwill, management contracts and customer relationships totalled £4.8 million (2016: £5.4 million). The performance of the business has supported the goodwill recognised and the management contract and customer relationships have been amortised in line with their expected useful lives.

The LMS contract has been amortised over its three-year life and has a carrying value of £0.8 million as at 31 December 2017 (2016: £1.2 million).

The contracts from the Hazel Capital business acquisition on 31 October 2017 have been fair valued at £0.3 million, with goodwill of also £0.3 million also to be recognised. The management contracts will be amortised over their useful lives.

Borrowing

The Kleinwort Benson loan of £5.9 million at the beginning of the year was fully repaid following the sale of Southern Gateway. The Group now has no borrowing in place and operates with a substantial net cash position of £9.8 million as at 31 December 2017 (2016: £2.8 million).

Contingent consideration

The contingent consideration payable to the original owners of Aitchesse requires EBITDA generation by the Aitchesse business of between £1.7 million and £3.5 million in the period from 1 July 2015 to 28 February 2018. The current assessment is that 87% of this EBITDA is expected to be achieved, with the Group incurring the corresponding deferred consideration, which after discounting indicates a fair value of £3.0 million (2016: £3.0 million).

The remaining £251k relates to the fair value of the second tranche payment due to LMS for the management contract in August 2018.

Going Concern

The Financial Reporting Council has determined that all companies should carry out a rigorous assessment of all the factors affecting the business in deciding to adopt a going concern basis for the preparation of the accounts. The Directors have reviewed and examined the financial and other processes embedded in the business, in particular the annual budget process and the financial stress testing inherent in the Internal Capital Adequacy Assessment Process ('ICAAP'). On the basis of such review and the significant liquid assets underpinning the balance sheet relative to the Group's predictable operating cost profile, the directors consider that the adoption of a going concern basis, covering a period of at least 12 months from the date of this report, is appropriate.

Kevin Acton

Finance Director

28 February 2018

Group Statement of Comprehensive Income

FOR THE YEAR ENDED 31 DECEMBER 2017

		2017	2016 *
Notes
		£'000	£'000
Income	1
Asset management income		5,805	3,202
Dividend and interest income		431	249
Other operating income		221	45
Total income		6,457	3,496
Operating costs
Administrative overheads	3	(8,021)	(6,892)
Net operating loss before exceptional items		(1,564)	(3,396)
Finance costs	6	(344)	(442)
Exceptional items	**	(308)	-
Net operating loss after exceptional items		(2,216)	(3,838)
Gains and losses on investments:
Share of associate's (losses)/profits	17	(68)	628
Losses on investments held at fair value	11	(230)	(147)
Movement in fair value of contingent consideration		(56)	(253)
Movement in fair value of deferred receivable		148	202
Operating loss before taxation		(2,422)	(3,408)
Taxation	8	-	33
Operating loss from continuing operations		(2,422)	(3,375)
(Loss)/profit from discontinued operations	7	(1,104)	339
Total comprehensive income		(3,526)	(3,036)

Attributable to:
Equity holders of the parent		(3,124)	(3,027)
Non-controlling interest		(402)	(9)
		(3,526)	(3,036)
Basic and diluted loss per ordinary share (pence)	9	(25.9)	(30.3)

* Comparatives for the year ended 31 December 2016 have been restated to reflect the reclassification of the Group's legacy property activities as discontinued operations (see note 7)

** Exceptional items relate to professional fees incurred in respect of the acquisition of the Hazel Capital LLP business which took place on 31 October 2017.

Statements of changes in Equity Group
YEAR ENDED 31 DECEMBER 2017
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Equity attributable to equity share-holders	Non-controlling interest	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2016		2,546	2,611	319	18,657	24,133	491	24,624
Comprehensive income for the year
Loss for the year		-	-	-	(3,124)	(3,124)	(402)	(3,526)
Total comprehensive income for the year		-	-	-	(3,124)	(3,124)	(402)	(3,526)
Contributions by and distributions to owners
Transfer of non-controlling interest deficit		-	-		(388)	(388)	388	-
Share based payments	27	-	-	-	123	123	-	123
Issue of shares	25	588	7,038	-	-	7,626	-	7,626
Total contributions by and distributions to owners		588	7,038	-	(265)	7,361	388	7,749
Balance at 31 December 2017		3,134	9,649	319	15,268	28,370	477	28,847


YEAR ENDED 31 DECEMBER 2016
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Equity attributable to equity share-holders	Non-controlling interest	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2015		2,463	1,688	64	21,611	25,826	-	25,826
Comprehensive income for the year
Loss for the year		-	-	-	(3,027)	(3,027)	(9)	(3,036)
Total comprehensive income for the year		-	-	-	(3,027)	(3,027)	(9)	(3,036)
Contributions by and distributions to owners
Non-controlling interest in Gresham House Friends & Family Fund LP		-	-	-	-	-	500	500
Share warrants issued	26	-	-	255	-	255	-	255
Share based payments	27	-	-	-	73	73	-	73
Issue of shares	25	83	923	-	-	1,006	-	1,006
Total contributions by and distributions to owners		83	923	255	73	1,334	500	1,834
Balance at 31 December 2016		2,546	2,611	319	18,657	24,133	491	24,624

Company
YEAR ENDED 31 DECEMBER 2017
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Total equity
		£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2016		2,546	2,611	319	16,153	21,629
Comprehensive income for the year
Loss for the year		-	-	-	(684)	(684)
Total comprehensive income for the year		-	-	-	(684)	(684)
Contributions by and distributions to owners
Issue of shares	25	588	7,038	-	-	7,626
Total contributions by and distributions to owners		588	7,038	-	-	7,626
Balance at 31 December 2017		3,134	9,649	319	15,469	28,571

YEAR ENDED 31 DECEMBER 2016
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Total equity
		£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2015		2,463	1,688	64	16,939	21,154
Comprehensive income for the year
Loss for the year		-	-	-	(786)	(786)
Total comprehensive income for the year		-	-	-	(786)	(786)
Contributions by and distributions to owners
Issue of shares	25	83	923	-	-	1,006
Share warrants issued	26	-	-	255	-	255
Total contributions by and distributions to owners		83	923	255	-	1,261
Balance at 31 December 2016		2,546	2,611	319	16,153	21,629

Statements of Financial Position

AS AT 31 DECEMBER 2017

			Group		Company
		Notes	2017	2016	2017	2016
Assets			£'000	£'000	£'000	£'000
Non-current assets
	Investments - securities	11	2,989	2,834	1,310	1,116
	Tangible fixed assets	13	196	179	51	13
	Investment in subsidiaries	16	-	-	18,265	16,292
	Investment in associate	17	6,462	6,530	-	-
	Intangible assets	14	6,327	6,630	198	-
	Long-term receivables	15	1,618	4,095	-	-
			17,592	20,268	19,824	17,421
Current assets
	Trade receivables	18	2,089	1,259	-	-
	Accrued income and prepaid expenses		785	917	219	219
	Deferred receivable	15	2,075	1,139	-	-
	Other current assets	19	-	-	7,878	9,734
	Cash and cash equivalents		9,785	2,802	6,484	858
Non-current assets held for sale
	Property investments	12	1,986	9,628	-	-
Total current assets and non-current assets held for sale			16,720	15,745	14,581	10,811
Total assets			34,312	36,013	34,405	28,232

Current liabilities
	Trade and other payables	20	5,463	2,229	282	87
	Short-term borrowings	21	-	1,015	5,552	1,377
			5,463	3,244	5,834	1,464
Total assets less current liabilities			28,849	32,769	28,571	26,768

Non-current liabilities
	Deferred taxation	22	-	-	-	-
	Long-term borrowings	23	-	4,881	-	4,881
	Other creditors	24	2	3,264	-	258
			2	8,145	-	5,139
Net assets			28,847	24,624	28,571	21,629

Capital and reserves
	Ordinary share capital	25	3,134	2,546	3,134	2,546
	Share premium	28	9,649	2,611	9,649	2,611
	Share warrant reserve	28	319	319	319	319
	Retained reserves	28	15,268	18,657	15,469	16,153

Equity attributable to equity shareholders			28,370	24,133	28,571	21,629
Non-controlling interest		28	477	491	-	-
Total equity			28,847	24,624	28,571	21,629

Basic net asset value per ordinary share (pence)		29	226.3	236.9	227.9	212.4
Diluted net asset value per ordinary share (pence)		29	211.2	236.9	224.4	212.4
The loss after tax for the Company for the year ended 31 December 2017 was £684,000. The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 28 February 2018. Kevin Acton Finance Director

Group Statement of Cash Flows

FOR THE YEAR ENDED 31 DECEMBER 2017

	Notes	2017	2017	2016	2016
		£'000	£'000	£'000	£'000
Cash flow from operating activities
Net cash utilised in operations	30		(1,615)		(3,337)

Corporation tax received/(paid)		33		(204)
Interest paid on loans		(236)		(226)
			(203)		(430)

Net cash flow from operating activities			(1,818)		(3,767)

Cash flow from investing activities
Purchase of investments		(5,177)		(1,831)
Sale of investments		4,946		918
Sale of investment properties		6,680		-
Deferred proceeds received on sale of investment properties		1,635		1,041
Expenditure on investment properties		(137)		(353)
Purchase of fixed assets		(137)		(125)
Sale of fixed assets		23		37
Purchase of intangible fixed assets		(762)		(148)
			7,071		(461)
Cash flow from financing activities
Repayment of loans		(5,896)		(4,454)
Receipt of loans		-		6,833
Share issue proceeds		7,626		6
LMS warrants issued		-		255
			1,730		2,640

Increase/(decrease) in cash and cash equivalents			6,983		(1,588)

Cash and cash equivalents at start of year			2,802		4,390

Cash and cash equivalents at end of year			9,785		2,802

Company Statement of Cash Flows

FOR THE YEAR ENDED 31 DECEMBER 2017

	Notes	2017	2017	2016	2016
		£'000	£'000	£'000	£'000
Cash flow from operating activities
Net cash utilised in operations	30		(443)		(406)

Interest paid on loans			(236)		(194)

Net cash flow from operating activities			(679)		(600)

Cash flow from investing activities
Purchase of investments		(5,177)		(581)
Sale of investments		4,946		918
Investment in subsidiary		(1,973)		(1,250)
Purchase of fixed assets		(48)		(16)
Purchase of intangible fixed assets		(219)		-
			(2,471)		(929)
Cash flow from financing activities
Repayment of loans		(5,896)		(1,604)
Receipt of loans		-		6,833
Advanced to Group undertakings		(6,462)		(4,789)
Receipts from Group undertakings		13,508		1,314
Share issue proceeds		7,626		6
LMS warrants issued		-		255
			8,776		2,015

Increase in cash and cash equivalents			5,626		486

Cash and cash equivalents at start of year			858		372

Cash and cash equivalents at end of year			6,484		858

Principal Accounting Policies

The Group's principal accounting policies are as follows:

(a) Basis of preparation

The financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Group has considerable 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 that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

The following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective at year-end. The directors do not intend to early adopt these standards. After initial review, the directors estimate that the adoption of these standards and interpretations will not have a material impact on the Group's financial statements in the period of initial application, other than presentation or disclosure, and a full assessment will be conducted subsequent to the year-end:

(i) IFRS 9 Financial Instruments (effective 1 January 2018)

(ii) IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)

(iii) IFRS 16 Leases (effective 1 January 2019)

(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.

Associates

Where the Group has significant influence, it has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. 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.

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 objective evidence 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.

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 28, the loss for the year being £684,000 (2016: £786,000).

(d) Segment reporting

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board in order to allocate resources to the segments and to assess their performance.

The Group's reportable segments, which are those reported to the Board are Real Assets, Strategic Equity and Central.

(e) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable is stated net of value added tax and is earned within the United Kingdom.

(i) Asset management income

Revenue represents management and advisory fees for the provision of fund management and forestry management services and is recognised in the Statement of Comprehensive Income when the services are performed net of VAT.

(ii) Rental income

Rental income comprises property rental income receivable net of VAT, recognised on a straight-line basis over the lease term and excludes service charges recoverable from the tenant.

(iii) 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.

(iv) Performance fees

Performance fees will be recognised on the date of entitlement in accordance with the management contract.

(f) Expenses

All expenses and interest payable are accounted for on an accruals basis.

(g) Property, plant and equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation.

The carrying amount of property, plant and equipment is reviewed annually by the directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets' employment and subsequent disposal.

The depreciable amount of all fixed assets is depreciated on a straight-line basis over their estimated useful lives to the Group commencing from the time the asset is held ready for use, and are depreciated at the following rates:

Office equipment 25%

Motor vehicles 25%

Leasehold property 10%

(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 never 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. Deferred tax is also provided for on revaluation surpluses on investment properties.

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) Operating leases and hire purchase contracts

Amounts payable under operating leases are charged directly to the Statement of Comprehensive Income on a straight-line basis over the period of the lease. The aggregate costs of operating lease incentives provided by the Group are recognised as a reduction in rental income on a straight-line basis over the lease term.

(j) Investments

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, in accordance with the documented investment strategy of the Company. Information about these financial assets is provided internally on a fair value basis to the Group's key management. All equity investments that were previously classified as held at fair value through profit or loss have been reassessed as at the date the Company became a trading company. The equity investments which do not meet the definitions of an associate or subsidiary remain held at fair value through profit and loss.

(i) Properties

Property investments are included in the Statement of Financial Position at fair value and are not depreciated.

Sale and purchase of property assets is generally recognised on unconditional exchange except where completion is expected to occur significantly after exchange. For conditional exchanges, sales are recognised when the conditions have been satisfied. Profits and losses are calculated by reference to the carrying value at the end of the previous financial year, adjusted for subsequent capital expenditure and less directly related costs of sale.

(ii) Assets held for sale

Non-current assets held for sale are measured at the lower of carrying amount and fair value less costs to sell (except where the exemptions of paragraph 5 of IFRS 5 apply) and are classified as such if their carrying amount will be recovered through a sale transaction rather than through continuing use. Investment property that is held for sale is measured at fair value in accordance with paragraph 5 of IFRS 5.

This is the case when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and the sale is considered to be highly probable. A sale is considered to be highly probable if the appropriate level of management is committed to a plan to sell the asset and a further active programme to locate a buyer and complete the plan has been initiated. Further, the asset has to be marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale is expected to qualify for recognition as a completed sale within one year from the date that it is classified as held for sale.

(iii) 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 as follows:

(i) Investments which have been made in the last 12 months are valued at cost in the absence of overriding factors;

(ii) Investments in companies at an early stage of development are also valued at cost in the absence of overriding factors;

(iii) Where investments have gone beyond the stage in their development in (ii) above, the shares may be valued by having regard to a suitable price-earnings ratio to that company's historical post-tax earnings or the net asset value of the investment; and

(iv) Where a value is indicated by a material arm's length market transaction by a third party in the shares of a company, that value may be used.

(iv) Loans and receivables

Unquoted loan stock is classified as loans and receivables in accordance with IAS 39 and carried at amortised cost using the Effective Interest Rate method. Movements in both the amortised cost relating to the interest income and in respect of capital provisions are reflected in the Statement of Comprehensive Income. Loan stock accrued interest is recognised in the Statement of Financial Position as part of the carrying value of the loans and receivables at the end of each reporting period.

(k) Exceptional items

The Group presents as exceptional items on the face of the Consolidated Statement of Comprehensive Income those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year so as to facilitate comparison with prior years and to assess better trends in financial performance.

(l) Intangible assets

(i) Goodwill

Goodwill, representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable assets and liabilities acquired, is capitalised in the Statement of Financial Position. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses.

Goodwill will be reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

(ii) Management contracts and client relationships

Intangible assets, such as management contracts and client relationships acquired as part of a business combination or separately, are capitalised where it is probable that future economic benefits attributable to the assets will flow to the Group and the fair value of the assets can be measured reliably.

They are recorded initially at fair value and then amortised, if appropriate, over their useful lives. The fair value at the date of acquisition is calculated using discounted cash flow methodology and represents the valuation of the net residual income stream arising from the management contracts or distribution agreements in place at the date of acquisition. The management contracts and client relationships are included in the Statement of Financial Position as intangible assets. Intangible assets with a finite life have no residual value and are amortised on a straight-line basis over their expected useful lives as follows:

· Client relationships arising on acquisition - 5 years

· Management contracts arising on acquisition - 1 to 3 years depending on the specific management contract details

(iii) Website and client portal

Costs associated with the development of the Group's website and client portal are capitalised in the Statement of Financial Position and are amortised over the estimated useful life of 4 years.

Amortisation methods, useful lives and residual values will be reviewed at each reporting date and adjusted if appropriate.

At each period end date, reviews are carried out of the carrying amounts of intangible assets to determine whether there is any indication that the assets have suffered an impairment loss. If any such indication exists, the recoverable amount, which is the higher of value in use and fair value less costs to sell, of the asset is estimated in order to determine the extent, if any, of the impairment loss.

If the recoverable amount of an asset or cash-generating unit ("CGU") is estimated to be less than its net carrying amount, the net carrying amount of the asset or CGU is reduced to its recoverable amount. Impairment losses are recognised immediately in the Statement of Comprehensive Income. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognised in prior periods may no longer exist or may have decreased. If any such indication exists, the Group estimates the recoverable amount of that asset. In assessing whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased, the Group considers, as a minimum, the following indications:

(a) Whether the asset's market value has increased significantly during the period;

(b) Whether any significant changes with a favourable effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is dedicated; and

(c) Whether market interest rates or other market rates of return on investments have decreased during the period, and those decreases are likely to affect the discount rate used in calculating the asset's value in use and increase the asset's recoverable amount materially.

(m) Financial instruments

Financial assets and financial liabilities are recognised on the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position when there is a legally enforceable right to settle on a net basis, or realise the asset and liability simultaneously and where the Group intends to net settle.

(i) Trade and other receivables

Receivables are short-term in nature. Trade and other receivables are recognised and carried at the lower of their invoiced value and recoverable amount. Provision is made when there is objective evidence that the Group will not be able to recover balances in full.

(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

All bank loans are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. Interest costs on loans are charged to the Statement of Comprehensive Income as incurred.

(vi) Trade and other payables

Trade payables are not interest-bearing and are stated at their nominal value. Other payables are not interest-bearing and are stated at their nominal value as any discounting of expected cash flows is considered to be immaterial.

(vii) Borrowing costs

Unless capitalised under IAS 23, Borrowing Costs, all borrowing costs are recognised in the Consolidated Statement of Comprehensive Income in the period in which they are incurred. Finance charges, including premiums paid on settlement or redemption and direct issue costs and discounts related to borrowings, are accounted for on an accruals basis and charged to the Consolidated Statement of Comprehensive Income using the effective interest method.

(viii) Contingent consideration

Contingent consideration arises when settlement of all or any part of the cost of a business combination or other acquisition, for example management contract, is deferred. It is stated at fair value at the date of acquisition, which is determined by discounting the amount due to present value at that date.

Estimates are required in respect of the amount of contingent consideration payable on acquisitions, which is determined according to formulae agreed at the time of the business combination, and normally related to the future earnings of the acquired business. The directors review the amount of contingent consideration likely to become payable at each period end date, the major assumption being the level of future profits of the acquired business. Contingent consideration payable is discounted to its fair value in accordance with applicable International Financial Reporting Standards.

(n) Pensions

Payments to personal pension schemes for employees are charged against profits in the year in which they are incurred.

(o) Share based payments

The Group issued equity-settled share based payments to certain directors and employees. Equity-settled share based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

Fair value is measured using a Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.

A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each period end date for cash-settled share based payments.

(p) Non-controlling interests

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and for acquisitions post 3 October 2010 following adoption of IAS 27, Consolidated and Separate Financial Statements (Revised 2008), the non-controlling interests' share of changes in equity since the date of the combination.

Prior to the adoption of IAS 27 (Revised 2008) losses attributable to non-controlling interests in excess of the non-controlling interests' share in equity were allocated against the interests of the Group except to the extent that the non-controlling interests have a binding obligation and is able to make an additional investment to cover such losses. When the subsidiary subsequently reports profits, the non-controlling interests do not participate until the Group has recovered all of the losses of the non-controlling interests it previously reported.

(q) Critical accounting estimates and judgments

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are those used to determine:

(i) Consolidation of third party funds managed by the Group;

(ii) Value of investment properties;

(iii) Value of investments at fair value through profit and loss;

(iv) Impairment in the value of loans;

(v) Accounting for distribution fees;

(vi) Valuation of employee share and bonus matching schemes;

(vii) Valuation and estimated useful life of intangible assets; and

(viii) Valuation of contingent consideration.

Consolidation of third party funds managed by the Group

When assessing whether the Group controls funds that are managed on behalf of third parties, the Group is required to assess whether it has power over these funds; exposure, or rights, to variable returns from its involvement with the fund; and has the ability to use its power over the funds to affect the amount of the Group's returns. This can also be considered when the Group is acting in its capacity as agent or principal. An agent is acting on behalf of third party investors, whereas a principal is acting for its own benefit.

IFRS 10 provides guidance for considering the assessment of whether fund managers are acting as agent or principal, and therefore whether the Group should consolidate the funds that it manages or not. The key considerations when assessing this are decision making authority of the fund manager, rights held by third parties, remuneration and exposure to returns. The following provides further detail on the directors' assessment of control over the funds that are managed by Gresham House Asset Management Limited ("GHAM"), the FCA regulated entity within the Group.

Gresham House Strategic Public Equity LP ("SPE LP") is managed by GHAM, a subsidiary of Gresham House plc. GHAM in its role as investment advisor is exposed to variable returns through its management fee, however the Company is not directly invested in SPE LP. The limited partners of SPE LP have the ability to remove the manager without cause, one year after the final close of SPE LP on obtaining limited partner special consent. The directors' assessment indicates that GHAM is acting as agent for SPE LP and therefore should not consolidate SPE LP.

Gresham House Forestry Fund LP ("GHF 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 ("GHFF"), a vehicle which in turn is a limited partner in GHF LP.

The limited partners of GHF LP have the ability to remove the manager without cause, one year after the final close of GHF LP on 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 GHF LP and therefore should not consolidate GHF LP.

The directors' assessment of GHFF however indicates that it is in a controlling position and therefore should consolidate this in the Group financial statements.

Gresham House Strategic plc ("GHS") is managed by GHAM and the Company also holds 19.3% of the ordinary share capital as at 31 December 2017. The directors consider that the Company exercises significant influence over GHS, but not control, through its holding and the investment management agreement in place with GHAM. GHS has therefore been classified as an associate.

Gresham House British Strategic Investment Fund ("BSIF") is managed by GHAM. The manager is exposed to variable returns through its management fee. Neither the Company, nor any of its subsidiaries are directly invested in BSIF and therefore are not exposed to the variable returns as an investor in the fund. The limited partners of BSIF also have the ability to remove the manager without cause, one year after the final close of BSIF. The directors' assessment of this right and the fact that the Company is not invested in BSIF indicates that the manager is acting as agent for BSIF and therefore should not consolidate BSIF.

Value of investments at fair value through profit and loss

The investments which are held at fair value through profit and loss in unquoted companies require judgement to be exercised, with reference to the valuation policy and International Private Equity Valuation guidelines. Further details can be found in note 11.

Impairment in the value of loans

Impairment reviews of the loans held by the Group require a careful assessment of the performance and financial position of the company involved from the best information that is available. This assessment requires the exercise of judgement to conclude whether an impairment is appropriate to the loans held by the Group. Further details can be found in note 11.

Accounting for distribution fees

A distribution agent was used to commit an investor to BSIF. The distributor is required to provide a service from the date the investor commits to the fund, up until the final capital drawdown during the investment period. As such, the distributor fee has been amortised over the service period. The service period has been assessed with reference to the expected size of the fund at final close on 31 December 2018 and the pipeline of investments expected to be executed over the three-year investment period of the fund from final close. As at 31 December 2017, it was estimated that the fund would be fully invested within three years from 31 December 2017 and as such with the investor committing to the fund on 16 June 2017, the service period has been estimated at three and a half years and the distributor fee spread on a straight-line basis over the service period. The service period will be monitored as the fund has its final close.

Valuation of employee share and bonus matching schemes

The Group introduced a long-term incentive plan for the New Energy team who joined in October 2017. The long-term incentive plan is based on the profits created by the New Energy team over the period to 31 December 2020. This has been recognised at fair value and under IFRS 2 has been assessed as an equity settled payment. The fair value has been determined by modelling scenarios and weighting the estimated probability of each outcome. Appropriate discounts have then been applied to reflect the lack of marketability and control to determine the fair value.

The bonus share matching scheme was implemented in the year as described in the remuneration report. The bonus shares to be awarded after the three year period and subject to performance conditions have been fair valued using a monte carlo simulation. The key variables include the risk-free rate of 0.32% and volatility of the Company share price of 16%. Further details can be found in note 27.

Valuation and estimated useful life of intangible assets

Intangible assets are fair valued at initial recognition with reference to expected cash flows from specific management contracts and associated costs. The useful lives have been estimated with reference to the minimum contractual terms.

Goodwill has been reviewed for impairment with reference to the performance of the underlying businesses. In the case of Gresham House Forestry, an estimate of the value of the business today has been made using the 2017 earnings and an appropriate multiple for a business of this size. The value of this business is in excess of the carrying amount of this cash generating unit. There is no impairment of goodwill at 31 December 2017 and any reasonable change in key assumptions in the determination of the recoverable amount do not result in an impairment in goodwill. Further details can be found in note 14.

Valuation of contingent consideration

The fair value of contingent consideration for the Gresham House Forestry business and the LMS contract has been estimated with reference to the contractual requirements. In the case of Gresham House Forestry this has involved calculating the EBITDA over the period to 31 December 2017 and estimating the EBITDA from 1 January 2018 to 28 February 2018 and applying suitable discount rates. In the case of the LMS contract, assumptions around NAV growth have been used to estimate the NAV as at 16 August 2018. Further details can be found in note 24.

Notes to the Accounts

1 INCOME

	2017	2016
	£'000	£'000
Asset management income
Fund management income	2,966	1,082
Forestry management income	2,839	2,120
	5,805	3,202
Dividend and interest income
Dividend income - Listed UK	106	7
Interest receivable: Banks	2	4
Other	323	238
	431	249
Other operating income
Arrangement fees	135	-
Reversal of provision against loans	9	5
Consultancy fees receivable	14	40
Other income	63	-
	221	45
Total income	6,457	3,496
Total income comprises
Asset management income	5,805	3,202
Dividends	106	7
Interest	325	242
Other operating income	221	45
	6,457	3,496

2 SEGMENTAL REPORTING

The Board and management team of the Company have organised and report the performance of the business by Real Assets, Strategic Equity and Central segments. These have evolved as the business has grown to become the specialist asset manager that it is today.

Real Assets includes the Forestry, New Energy and Housing and Infrastructure divisions.

Strategic Equity includes the Public Equity and Private Assets 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.

As a result of reclassifying the legacy property portfolio as discontinued operations, this is no longer classified as a business segment and is separately reported.

All activity and revenue is derived from operations within the United Kingdom.

31 December 2017

	Real Assets	Strategic Equity	Central	Consolidated
Revenue	£'000	£'000	£'000	£'000
Asset management income	3,820	1,915	-	5,735
Interest income	1	2	322	325
Dividend income	-	106	-	106
Other operating income	-	133	158	291
Total revenue	3,821	2,156	480	6,457
Segment expenses	(1,920)	(2,447)	(2,457)	(6,824)
Finance costs	-	-	(344)	(344)
Adjusted operating profit/(loss)	1,901	(291)	(2,321)	(711)
Exceptional items				(308)
Depreciation and amortisation				(1,209)
Profit on disposal of tangible fixed assets				12
Share of associate's loss				(68)
Losses on investments at fair value				(230)
Movement in fair value of contingent consideration				(56)
Movement in fair value of deferred receivable				148
Loss before taxation from continuing operations				(2,422)

31 December 2016 (restated)

	Real Assets	Strategic Equity	Central	Consolidated
Revenue	£'000	£'000	£'000	£'000
Asset management income	2,120	1,082	-	3,202
Interest income	1	1	247	249
Other operating income	-	-	45	45
Total revenue	2,121	1,083	292	3,496
Segment expenses	(1,422)	(1,647)	(2,390)	(5,459)
Finance costs	-	-	(442)	(442)
Adjusted operating profit/(loss)	699	(564)	(2,540)	(2,405)
Depreciation and amortisation				(1,441)
Profit on disposal of tangible fixed assets				8
Share of associate's profit				628
Losses on investments at fair value				(147)
Movement in fair value of contingent consideration				(253)
Movement in fair value of deferred receivable				202
Loss before taxation from continuing operations				(3,408)

Comparatives for the year ended 31 December 2016 have been restated to reflect the reclassification of the Group's legacy property activities as discontinued operations (see note 7)

During the year the Group had four customers accounting for more than 10% of the Group's revenue, totalling £3,876,000 (2016: four customers, totalling £2,483,000).

Other information

31 December 2017

	Real Assets	Strategic Equity	Legacy Property	Central	Consolidated
	£'000	£'000	£'000	£'000	£'000
Segment assets	4,120	11,760	5,759	12,673	34,312
Segment liabilities	(350)	(336)	(90)	(4,689)	(5,465)
	3,770	11,424	5,669	7,984	28,847
Capital expenditure	667	542	137	5,056	6,402
Depreciation and amortisation	674	487	5	31	1,197
Non-cash expenses other than depreciation	-	-	-	123	123
Goodwill included within segment assets	3,218	-	-	-	3,218

31 December 2016

	Real Assets	Strategic Equity	Legacy Property	Central	Consolidated
	£'000	£'000	£'000	£'000	£'000
Segment assets	2,853	8,914	15,775	8,471	36,013
Segment liabilities	(296)	(144)	(526)	(10,423)	(11,389)
	2,557	8,770	15,249	(1,952)	24,624
Capital expenditure	1,865	581	311	16	2,773
Depreciation and amortisation	1,250	157	5	3	1,415
Non-cash expenses other than depreciation	-	-	-	73	73
Goodwill included within segment assets	2,942	-	-	-	2,942

3 OPERATING COSTS


Administrative overheads comprise the following:	2017	2016
	£'000	£'000
Directors' emoluments (excluding benefits in kind and share based payments)	791	968
Auditor's remuneration *	127	106
Amortisation	1,122	1,364
Depreciation	87	77
Profit on disposal of assets	(12)	(8)
Wages and salaries	3,185	2,234
Social security costs	531	428
Operating lease rentals - land and buildings	-	3
Share based payments	123	73
Other operating costs	2,067	1,647
	8,021	6,892
Staff costs (including directors' emoluments) were:
Wages, salaries and fees	3,852	3,100
Social security costs	537	434
Pension costs	214	151
	4,603	3,685

* A more detailed analysis of auditor's remuneration is as follows:	2017	2016
	£'000	£'000
Audit fees	127	106
Auditor's other fees -other services	-	12
	127	118

The directors consider the auditor was best placed to provide these other services. The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained.

The average number of persons employed by the Group, including the executive directors, was 32 (2016: 26). The Company has no employees.

The Group has no commitments under operating leases for the current and prior year.

4 DIRECTORS' EMOLUMENTS

The emoluments of the directors are disclosed in the Remuneration Report on pages 43 to 46.

The directors are considered to be the Group's only key management personnel. Employers' National Insurance Contributions in respect of the directors for the year were £102,000 (2016: £137,000).

5 Business combinations during the period

The Company acquired the asset management business of Hazel Capital LLP (Hazel Capital), a leading UK manager of new energy infrastructure, on 31 October 2017. This included the novation and acquisition of investment advisory contracts for Hazel Renewable Energy VCT1 plc and Hazel Renewable Energy VCT2 plc and other master service agreements. The Hazel Capital team were also employed by Gresham House Holdings Limited.

The team has been hired to run the Gresham House New Energy division, adding a further complementary alternative asset management division to the Group and growing assets under management.

The fair value of the assets acquired and the consideration paid under IFRS 3 are as follows:

	£'000
Identifiable assets acquired
Fair value of management contracts	324
Goodwill	276
	600
Consideration
Cash	600

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.

Actual revenue and profits of Hazel Capital

The actual revenues and profits that have been generated by the Gresham House New Energy division, since the acquisition of the Hazel Capital asset management business on 31 October 2017 to 31 December 2017 are:

	£'000
Revenues	259
Profit before tax	28

The disclosure of hypothetical revenues and profits of Hazel Capital for the year ended 31 December 2017 is not considered relevant due to the nature of the transaction. The entire Hazel Capital LLP 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 15%. This resulted in fair value of £324,000.

Costs associated with the acquisition of the business of Hazel Capital totalled £308,000 and are shown as an exceptional item in the Group Statement of Comprehensive Income.

There were no new business combinations that took place during the year ended 31 December 2016.

6 FINANCE COSTS

	2017	2016
	£'000	£'000
Interest payable on loans and overdrafts	170	293
Finance fees	174	149
	344	442

7 DISCONTINUED OPERATIONS

Discontinued operations represent the legacy property portfolio of the Group, with the sale of the Southern Gateway site completing during the year, and the sale of the remaining land at Newton-le-Willows completing in February 2018.

The disposal group fulfilled the requirements of IFRS 5 to be classified as "discontinued operations" in the Consolidated Statement of Comprehensive Income, the results of which are set out below:

	2017	2016
	£'000	£'000
Rental Income	531	741
Other operating income	22	27
Property outgoings	(191)	(290)
(Loss) / profit on disposal of investment properties	(1,135)	103
Movement in fair value of investment property	(331)	(242)
Net (loss)/profit from discontinued operations	(1,104)	339

Attributable to:
Equity holders of the parent	(716)	330
Non-controlling interest	(388)	9
	(1,104)	339

Property outgoings comprise the following:	2017	2016
	£'000	£'000
Wages and salaries	49	49
Redundancy costs	41	-
Social security costs	6	6
Other operating costs (net of service charges recoverable from tenants of £584,000 (2016: £803,000))	95	235
	191	290

Cash flows from discontinued operations were:

	2017	2016
	£'000	£'000
Cash flow from operating activities	670	728
Cash flow from investing activities	8,178	688
Cash flow from financing activities	-	-

8 TAXATION

	2017	2016
	£'000	£'000
(a) Analysis of charge in period:
UK Corporation tax at 19.25% (2016: 20%)	-	-
Overprovision in prior year	-	(33)
Total tax credit	-	(33)

(b) Factors affecting tax credit for period:
Loss on ordinary activities before tax multiplied by standard rate of corporation tax in the UK of 19.25% (2016: 20%)	(679)	(614)
Tax effect of:
Investment losses not taxable	46	29
Dividend income not taxable	(20)	(1)
Amortisation not taxable	212	238
Expenses disallowed	86	69
Other gains and losses not taxable	(5)	(138)
Movement in losses carried forward	360	384
Actual tax credit	-	(33)

The Group has unutilised tax losses of approximately £12.5 million (2016: £11.2 million) available against future corporation tax liabilities. The potential deferred taxation asset of £2.1 million (2016: £2.2 million) in respect of these losses has not been recognised in these financial statements as it is not considered sufficiently probable that the Group will generate sufficient taxable profits from the same trade to recover these amounts in full.

9 EARNINGS PER SHARE

(a) Basic and diluted loss per share

	2017	2016
Total net loss attributable to equity holders of the parent (£'000)	(3,124)		(3,027)

Weighted average number of ordinary shares in issue during the period	12,073,106		9,976,412

Basic and diluted loss per share attributable to equity holders of the parent (pence)	(25.9)		(30.3)

898,747 (2016: nil) shares were deemed to have been issued at nil consideration as a result of the shareholder, supporter warrants and LMS warrants granted and shares which could be issued under the bonus share matching plan and long-term incentive plans which, as required under IAS 33, Earnings per Share, have not been recognised as they would reduce the loss per share (see note 26).

(b) Adjusted earnings per share

Adjusted earnings per share is based on adjusted operating loss, which is stated after charging interest but before depreciation, amortisation, profit on disposal of tangible fixed assets and exceptional items. This has been restated compared to prior periods to reflect the classification of the legacy property portfolio as discontinued operations and simplify the non-GAAP measure of the performance as an asset manager.

Adjusted loss for calculating adjusted earnings per share:

	2017	2016
	£'000	£'000
Operating loss before taxation for the year	(2,216)	(3,838)
Add back:
Exceptional operating expenses	308	-
Depreciation and amortisation	1,209	1,441
Profit on disposal of tangible fixed assets	(12)	(8)
Adjusted loss attributable to equity holders of the parent	(711)	(2,405)
Adjusted loss per share (pence)	(5.9)	(24.1)

10 DIVIDENDS

No dividends have been paid or proposed in the year (2016: nil).

11 INVESTMENTS - SECURITIES

An analysis of total investments is as follows:

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Listed securities - on the London Stock Exchange	281	-	281	-
Securities dealt in under AIM	787	468	787	468
Securities dealt in under NEX Exchange	38	31	38	31
Unlisted securities	1,883	2,335	204	617
Closing value at 31 December	2,989	2,834	1,310	1,116

Investments valued at fair value through profit and loss	2,830	2,217	1,151	499
Loans and receivables valued at amortised cost	159	617	159	617
	2,989	2,834	1,310	1,116

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Opening cost	4,565	6,094	2,815	6,094
Opening net unrealised losses	(1,731)	(4,526)	(1,699)	(4,526)
Opening value	2,834	1,568	1,116	1,568
Movements in the year:
Purchases at cost	5,331	2,331	5,331	581
Sales - proceeds	(4,946)	(918)	(4,946)	(918)
Sales - realised gains & (losses) on sales	(81)	(2,942)	(81)	(2,942)
Net unrealised gains & (losses)	(149)	2,795	(110)	2,827
Closing value	2,989	2,834	1,310	1,116

Closing cost	4,869	4,565	3,119	2,815
Closing net unrealised losses	(1,880)	(1,731)	(1,809)	(1,699)
Closing value	2,989	2,834	1,310	1,116

Gains and losses on investments held at fair value	Group			Company
	2017	2016		2017		2016
	£'000	£'000		£'000		£'000
Net realised gains & (losses) on disposal	(81)	(2,942)		(81)		(2,942)
Net unrealised gains & (losses)	(149)	2,795		(110)		2,827
Net losses on investments	(230)	(147)		(191)		(115)
Net unrealised gains and losses includes the impairment of a loan and accrued interest of £619,000 due from Kemnal Investments Limited, a legacy investment included within the central segment. The loan was due for repayment in February 2018, however pressure on the capital structure and a review of the business model has required the Group to fully impair the investment.
An analysis of investments is as follows:	Group		Company
	2017	2016	2017		2016
	£'000	£'000	£'000		£'000
Equity investments	2,830	2,217	1,151		499
Unquoted loan stock	159	617	159		617
	2,989	2,834	1,310		1,116

Further information on the measurement of fair value can be found in note 32.

12 NON-CURRENT ASSETS HELD FOR SALE - PROPERTY INVESTMENTS

The orderly disposal of the legacy investment property portfolio has been ongoing in the year to 31 December 2017, with the sale of the Southern Gateway site completing during the year, and the sale of the remaining land at Newton-le-Willows completing in February 2018. As such, property investments have been classified as non-current assets held for sale.

A further analysis of total investment properties is as follows:

	Group
	2017	2016
Net book value and valuation	£'000	£'000
At 1 January	9,628	9,559
Additions during the year - expenditure on existing properties	137	311
Disposals during the year - gross proceeds	(7,250)	(103)
Disposal costs	570	-
Movement in rent free receivable	367	-
(Loss) / profit on disposal of investment properties	(1,135)	103
Movement in fair value during the year	(331)	(242)
At 31 December	1,986	9,628

Investment properties are shown at fair value based on current use and any surplus or deficit arising on valuation of property is reflected in the Statement of Comprehensive Income.

The Group completed the sale of the remaining property investment in February 2018 and the valuation as at 31 December 2017 has been based on the net sales proceeds received.

The gross property valuation has been adjusted for the fixed rental uplift as follows:

	2017	2016
	£'000	£'000
Gross valuation	1,986	10,000
Rent free receivable	-	(372)
	1,986	9,628

Operating leases

The future minimum lease payments receivable under non-cancellable operating leases are as follows:

	2017	2016
	£'000	£'000
Not later than one year	-	723
Between 2 and 5 years	-	1,271
Over 5 years	-	914
	-	2,908

Rental income recognised in the Statement of Comprehensive Income amounted to £531,000 (2016: £741,000).

The commercial leases vary according to the condition of the units let. The commercial units are leased on terms where the tenant has the responsibility for repairs and running costs for each individual unit (other than roof repairs in certain circumstances) with a service charge payable to cover estate services provided by the landlord.

The cost of the above properties as at 31 December 2017 is as follows:

							Group
							£'000
Brought forward							9,887
Additions during the year							137 7
Disposals during the year							(8,287)
							1,737

Capital commitments

Capital expenditure contracted for but not provided for in the financial statements for the Group was £nil (2016: £118,000) and for the Company was £nil (2016: £nil).

Movement in fair value of investment properties	Group
	2017	2016
	£'000	£'000
Realised (losses)/gains on disposal of investment property	(1,135)	103
Decrease in fair value	(331)	(242)
Movement in fair value of investment property	(1,466)	(139)

Further information on the measurement of fair value can be found in note 32.

13 TANGIBLE FIXED ASSETS

Group	2017				2016
	Office equipment	Motor vehicles	Leasehold property	Total	Office equipment	Motor vehicles	Leasehold property	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cost
As at 1 January	16	237	10	263	-	154	10	164
Additions	56	59	-	115	16	115	-	131
Disposals during the year	-	(75)	-	(75)	-	(32)	-	(32)
As at 31 December	72	221	10	303	16	237	10	263

Depreciation
As at 1 January	3	80	1	84	-	10	-	10
Charge for the year	11	75	1	87	3	73	1	77
Disposals during the year	-	(64)	-	(64)	-	(3)	-	(3)
As at 31 December	14	91	2	107	3	80	1	84

Net book value as at 31 December	58	130	8	196	13	157	9	179


Company
							2017	2016
							Office equipment	Office equipment
							£'000	£'000
Cost
As at 1 January							16	-
Additions							48	16
As at 31 December							64	16

Depreciation
As at 1 January							3	-
Charge for the year							10	3
As at 31 December							13	3

Net book value as at 31 December							51	13

14 INTANGIBLE ASSETS

Group

		2017						2016
	Goodwill		Customer relationships	Contracts	Website & client portal	Total	Goodwill		Customer relationships		Contracts		Total
	£'000		£'000	£'000	£'000	£'000	£'000		£'000		£'000		£'000
Cost
As at 1 January	2,942		3,072	1,980	-	7,994		2,942		3,072		574		6,588
Additions through business combinations	276		-	324	-	600		-		-		-		-
Other additions	-		-	-	219	219		-		-		1,406		1,406
As at 31 December	3,218		3,072	2,304	219	8,813		2,942		3,072		1,980		7,994

Amortisation
As at 1 January	-		615	749	-	1,364		-		-		-		-
Charge for the year	-		614	487	21	1,122		-		615		749		1,364
As at 31 December	-		1,229	1,236	21	2,486		-		615		749		1,364

Net book value as at 31 December	3,218		1,843	1,068	198	6,327		2,942		2,457		1,231		6,630

Remaining amortisation period	n/a		3 years	1.5 - 3 years	4 years			n/a		4 years		2.5 years
The website and client portal expenditure was undertaken by the Company.

15 NON-CURRENT ASSETS - LONG-TERM RECEIVABLES

On 22 September 2015, the sale of 25.8 acres of the site at Newton-le-Willows to Persimmon Homes Limited ("Persimmon") was completed. An initial payment of £944,610 was received with further payments of £937,252 received in 2016 and £1,634,083 during the year. The balance of the consideration, at fair value, will be receivable in two tranches as follows:

							£'000
On 22 March 2018 - included within current assets							2,075
On 22 March 2019							1,618
							3,693

The total cash value of the deferred receipts is £3,734,000, though this has been designated at fair value through the Statement of Comprehensive Income.

The discount rate applied was 1.61% (2016: 2.49%) being the average rate of borrowing on Persimmon's debt facilities.

Long-term receivables consist of the following:	Group
	2017	2016
	£'000	£'000
Deferred receivables	1,618	4,041
Other debtors	-	54
	1,618	4,095

16 INVESTMENTS IN SUBSIDIARIES

	Company
	2017	2016
Subsidiary undertakings	£'000	£'000
At 1 January	16,292	2,822
Additions	1,973	16,544
Disposals	-	(3,074)
At 31 December	18,265	16,292

The subsidiary undertakings of Gresham House plc are as follows:

	Held by Company	Held by other Group companies		Country of incorporation and registered office
	%		%
Acqco Store Limited	-		100	5 New Street Square, London EC4A 3TW, England
Aitchesse Limited	-		100	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Chartermet Limited	-		75	5 New Street Square, London EC4A 3TW, England
Deacon Commercial Development and Finance Limited	-		100	5 New Street Square, London EC4A 3TW, England
Deacon Knowsley Limited	-		75	5 New Street Square, London EC4A 3TW, England
Gresham House Asset Management 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 EIS 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	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Gresham House Forestry Friends and Family LP	71.4		-	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Gresham House (General Partner) Limited	-		100	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Gresham House GP LLP	-		100	Riverview House, Friarton Road, Perth, PH2 8DF, 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 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 New Energy 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 Renewable Energy VCT1 Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Renewable Energy VCT2 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 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 Value Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House VCT Limited	-		100	5 New Street Square, London EC4A 3TW, England
Knowsley Industrial Property Limited	-		100	5 New Street Square, London EC4A 3TW, England
New Capital Developments Limited	-		75	5 New Street Square, London EC4A 3TW, England
New Capital Holdings Limited	-		75	5 New Street Square, London EC4A 3TW, England
Newton Estate Limited	-		100	5 New Street Square, London EC4A 3TW, England
Security Change Limited	-		100	5 New Street Square, London EC4A 3TW, England
Wolden Estates Limited	-		100	5 New Street Square, London EC4A 3TW, England

17 INVESTMENT IN Associate

The Board believe that Gresham House plc exercises significant influence over Gresham House Strategic plc ("GHS"), but not control, through its 19.3% equity investment as well as the investment management agreement between GHAM and GHS.

	Group
	2017	2016
	£'000	£'000
Investment in associate	5,902	5,902
Share of associate's profit	560	628
	6,462	6,530

The latest published financial information of GHS was the unaudited interim results for the six months to 30 September 2017. The assets and liabilities at that date are shown below:


	2017	2016
	£'000	£'000
Non-current assets	33,570	25,233
Current assets	6,728	14,886
Current liabilities	(1,039)	(224)
Net assets	39,259	39,895

The GHS group unaudited statement of comprehensive income noted realised and unrealised gains from continuing operations on investments at fair value through profit and loss of £1,028,000 and revenues of £245,000 for the six months ended 30 September 2017.

The registered office of GHS is 77 Kingsway, London, WC2B 5SR.

18 TRADE RECEIVABLES

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Amounts receivable within one year:
Trade receivables	2,089	1,259	-	-
Less allowance for credit losses	-	-	-	-
	2,089	1,259	-	-

Trade receivables are assessed for impairment when older than 90 days. As at 31 December 2017, trade receivables of £286,000 (2016: £20,000) were past due but not impaired. The ageing analysis of these trade receivables is as follows:

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
1-3 months	254	-	-	-
3-6 months	5	20	-	-
More than 6 months	27	-	-	-
	286	20	-	-

As at 31 December 2017 trade receivables of £nil (2016: £nil) were impaired and provided for.

19 OTHER CURRENT ASSETS

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Amounts owed by Group undertakings	-	-	7,878	9,734
	-	-	7,878	9,734

20 TRADE AND OTHER PAYABLES

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Trade creditors	274	225	-	-
Other creditors	380	332	14	14
Accruals	1,516	1,672	17	73
Contingent consideration (note 24)	3,293	-	251	-
	5,463	2,229	282	87

21 SHORT-TERM BORROWINGS

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000

Bank loans - within current liabilities (note 23)	-	1,015	-	1,015
Amounts owed to Group undertakings	-	-	5,552	362
	-	1,015	5,552	1,377

22 DEFERRED TAXATION

Under International Accounting Standards ("IAS") 12 (Income Taxes) provision is made for the deferred tax liability associated with the revaluation of property investments.

The deferred tax provision on the revaluation of property investments calculated under IAS 12 is £nil at 31 December 2017 (2016: £nil) due to the availability of losses and indexation allowances.

23 LONG-TERM BORROWINGS

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Bank loans	-	4,881	-	4,881
	-	4,881	-	4,881

On 12 April 2016, the Company signed a £7.0 million banking facility agreement with Kleinwort Benson Bank Limited ("the facility"). The facility was secured against the Group's property assets and the deferred receivable from the sale of the Newton-le-Willows site to Persimmon in September 2015.

The facility was repaid in full on 14 September 2017 following the sale of the Group's property asset, Southern Gateway in Speke.

The interest payable on the facility was LIBOR plus 4.5%.

24 NON-CURRENT LIABILITIES - OTHER CREDITORS

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Contingent consideration	-	3,237	-	258
Other creditors	2	27	-	-
	2	3,264	-	258

Contingent consideration - Gresham House Forestry

Contingent consideration will be payable if Gresham House Forestry ("GHF") achieves certain EBITDA targets. The amount of additional consideration payable shall increase on a sliding scale depending on the EBITDA achieved in the period to 28 February 2018. The contingent consideration shall be payable if GHF achieves EBITDA between a range of £1,733,333 and £3,466,666 with the full £3,697,237 of additional consideration being payable if EBITDA of £3,466,666 or more is achieved and no additional consideration being payable if EBITDA of less than £1,733,333 is achieved.

In the event of the target being achieved, the Company is obliged to issue a further 736,074 shares to the vendors. The fair value of the contingent consideration has been based on the mid-market share price on 23 November 2015, the date of the acquisition of GHF, at 357.5p per share. The directors, having carefully reviewed the future business prospects of GHF, believe that 87% of the EBITDA will be achieved.

The additional consideration shall be satisfied by:

• the payment of up to £1,500,055 in cash to the vendors; and

• the issue of up to 736,074 new ordinary shares to the vendors.

Fair value

The fair value of the contingent consideration is estimated using an income approach based on a discount assuming approximately 75% pay-out of the contingent consideration as anticipated by the Board, supported by forecasts of the trading of GHF in the period to 28 February 2018.

Contingent cash payable has been valued at a discount of 13.5%.

The entire amount of the contingent consideration is recognised as a financial liability and is measured at fair value through comprehensive income at each reporting date.

The minimum contingent consideration is £nil.

Contingent consideration - LMS Capital plc

On 16 August 2016, Gresham House Asset Management ("GHAM") was appointed the investment manager of LMS Capital plc ("LMS"). The Company issued a first tranche of 332,484 new ordinary shares to LMS with a value of £1 million on 16 August 2016 and will issue a second tranche of new ordinary shares on the second anniversary of the appointment up to a value of £1.25 million subject to certain performance conditions. The contingent consideration for the second tranche payment of the LMS contract has a fair value of £251,000.

The second tranche issue of new ordinary shares will depend on the following:

· LMS extending the term of the portfolio management agreement for two years following the second anniversary of appointment on 16 August 2016;

· There being no material changes to the terms of the portfolio management agreement; and

· LMS undertaking not to return capital to shareholders during the two-year period following the second anniversary of appointment.

The value of the second tranche will be calculated by the Net Asset Value ("NAV") of the portfolio on the second anniversary of appointment:

· If the NAV is below £67.5 million, no shares will be issued;

· If the NAV is between £70.0 million and £80.0 million, the value of the second tranche shares will be between £500,000 and £1 million calculated on a straight-line basis;

· If the NAV is between £80.0 million and £85.0 million, the value of the second tranche shares will be between £1 million and £1.25 million calculated on a straight-line basis; and

· If the NAV is above £85.0 million the maximum value of shares issued will be capped at £1.25 million.

Fair value

The fair value of the contract has been estimated using an equal weighting of three scenarios. The estimated cash flows in each case has been valued at a discount of 15%. This resulted in fair value of £1,251,000, with a contingent consideration of £251,000, which has been included in current liabilities as deferred consideration, note 20.

The Company also issued 909,908 LMS Warrants to LMS on 14 October 2016, details are included in note 26.

GHAM will receive an annual management fee of:

· 1.5% of the average NAV of LMS for an NAV of up to £100 million;

· 1.25% of the average NAV of LMS for an NAV of between £100 million and £150 million; and

· 1.0% of the average NAV of LMS for an NAV of greater than £150 million.

GHAM will also receive a performance fee of 15% on the gain in NAV of new investments made since being appointed the investment manager of LMS, subject to a hurdle rate of 8%.

25 SHARE CAPITAL

	2017	2016
Share Capital	£'000	£'000

Allotted: Ordinary - 12,536,957 (2016: 10,185,487) fully paid shares of 25p each	3,134	2,546

On 13 March 2017, the Company issued 2,251,372 new ordinary shares at a price of 325p per share to the Royal County of Berkshire Pension Fund. A further 100,097 new ordinary shares were issued on 13 March 2017 at a price of 308.95p to management and employees under the Company's Bonus share matching plan. Additionally, 1 shareholder warrant was exercised during the year at a price of 323.27p

26 SHARE WARRANTS

	2017				2016
Group	Shareholder warrants	Supporter warrants	LMS warrants	Total warrants	Shareholder warrants	Supporter warrants	LMS warrants	Total warrants
Balance at 1 January	1,071,813	850,000	909,908	2,831,721	1,073,775	850,000	-	1,923,775
Warrants granted during the year	-	-	-	-	-	-	909,908	909,908
Warrants exercised during the year	(1)	-	-	(1)	(1,962)	-	-	(1,962)
As at 31 December	1,071,812	850,000	909,908	2,831,720	1,071,813	850,000	909,908	2,831,721

Shareholder warrants

On 1 December 2014, the Company issued 1,073,904 shareholder warrants to existing shareholders as at the close of business on 28 November 2014 on a 1:5 basis, such warrants having been admitted to trading on AIM. Shareholder warrants are freely transferable, are exercisable at any time between 1 January 2015 and 31 December 2019 at an exercise price of 323.27p per ordinary share and are subject to the terms of the shareholder warrant instrument dated 7 October 2014.

Supporter warrants

On 1 December 2014, the Company issued 850,000 supporter warrants to the new directors and certain members of the Investment Committee and Advisory Group at a price of 7.5p per warrant. Supporter warrants have the same entitlements as the shareholder warrants save that (i) they are not freely transferable (such supporter warrants only being transferable to certain family members, trusts or companies connected with the relevant warrant holder) and accordingly not quoted on AIM; (ii) are not exercisable until 1 December 2015; and (iii) are subject to the terms of the supporter warrant instrument dated 7 October 2014.

LMS warrants

On 14 October 2016, the Company issued 909,908 LMS warrants to LMS Capital plc ("LMS"). The LMS warrants entitle LMS to exercise one LMS warrant for one ordinary share in the Company from 14 October 2016 to 30 June 2018 at an exercise price of 323.27 pence per ordinary share. LMS paid a warrant purchase price of 28 pence per LMS warrant, totalling £255,000. The LMS warrants are not transferrable, unless consent of the Board of the Company has been provided and were issued in accordance with the LMS Warrant Instrument dated 14 October 2016.

During the year, 1 shareholder warrant was converted into ordinary shares resulting in the issue of 1 new ordinary share (2016: 1,962). Since the year end a further 3,422 shareholder warrants have been exercised.

27 SHARE BASED PAYMENTS

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 ("plan") 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 plan, "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 plan, will in aggregate be entitled to an amount of up to 13.8% of shareholder value created, subject to performance criteria set out below. Individual participation in the shareholder value created will be determined by the Remuneration Committee.

There will be certain hurdles the Company's share price has to achieve before an award vests.

In the event that the Company achieves an average mid-market closing price equal to compound growth at 7% per annum for a period of 10 consecutive dealing days in the period after 1 December 2016 for first awards to management who joined the Company before 30 September 2015 and from the second anniversary of the date of award in all other cases, 50% of the award will vest.

In the event that the share price of the Company outperforms the FTSE All Share Index in the period after 1 December 2016, and from the second anniversary of the date of the award in all other cases, 50% of the award shall vest.

Each award will require a minimum term of employment of three years and awards will be made to current management and new joiners at the Company's discretion.

IFRS 2: Share Based Payments sets out the criteria for an equity settled share based payment, which has market performance conditions. The plan meets these criteria and should therefore be recognised at award as 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 number of shares issued in the year:

			2017			2016
	A Shares Old joiners	A Shares New joiners	B Shares	Total LTIP	A Shares Old joiners	A Shares New joiners	Total LTIP
Balance at 1 January	908	92	-	1,000	908	92	1,000
Issued in the year	-	-	280	280	-	-	-
As at 31 December	908	92	280	1,280	908	92	1,000
Exercisable at year end	908	-	-	908	-	-	-
Months to vesting	-	7	20		12	19

The weighted average time to vesting is 16 months.

Fair value

The fair value of the award has been determined using an expected returns model, which is based on a number of scenarios and probabilities of the Company's performance for the period when the awards may be exercised. The assumptions in the model have estimated the shareholder value created and applied discounts for liquidity and likelihood of exercise by participants. The weighted average valuation of the Company has been used to calculate the expected shareholder value created and consequently the value of the plan. The fair value of the plan at award was £29,000 (£139.42 per share), which will be amortised over the two-year vesting period.

Renewable Energy team long-term incentive plan

The Renewable Energy management team has a long-term incentive plan in place, which granted the team a total of 1,000 A Shares in Gresham House New Energy Limited on 31 October 2017. The vesting date of the A Shares is 31 December 2020, at which point the holders are entitled to receive either Gresham House plc shares, or cash at the Company's discretion in exchange for their A Shares.

The value of the A Shares at vesting is based on a calculation, which applies a multiple and a 50% discount to the average profits generated by the New Energy division between 31 October 2017 and 31 December 2020.

The fair value of the award has been determined using an expected returns model, which is based on a number of scenarios and probabilities of the New Energy division's performance for the period from 31 October 2017 to 31 December 2020. The assumptions in the model have estimated the average profits over the period and applied discounts for liquidity and control and consequently the value of the A Shares. The fair value of the A Shares at award was £276,000 (£276 per share), which will be amortised over the three year and two month vesting period.

The settlement of the A Shares can be in either the Company's ordinary shares or in cash at the discretion of the Company. Under the guidance in IFRS 2:41, it has been considered that the A Share settlement should be treated as an equity settled instrument.

Bonus share matching plan

The Company introduced in 2016 a share matching plan linked to the discretionary annual bonus scheme to encourage management 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 100% 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 2017 the Remuneration Committee approved the reinvestment of up to 50% of annual bonuses into ordinary shares by management and employees (2016: 50%).

In the event that the Company achieves a mid-market closing price equal to 7% per annum compound growth from the date of deferral, the participants will receive 50% of the matching shares benefit. In the event that the Company's share price out-performs the FTSE All Share Index from the date of deferral, the participant will receive 50% of the matching shares.

Shares will be awarded in the ratio one share for each share invested. In the event that this performance condition is not met, the participants will receive only the ordinary shares acquired with the deferred bonus.

The bonus shares to be awarded after the three year period and subject to performance conditions have been fair valued using a monte carlo simulation. The key variables include the risk-free rate of 0.32% and volatility of the Company share price of 16%. The fair value of the matching shares relating to the 2016 bonuses is £87,084 (£0.87 per share) and will be amortised over the three-year vesting period.

28 RESERVES

	2017			2016
	Share premium account	Share warrant reserve	Retained reserves	Share premium account	Share warrant reserve	Retained reserves
Group	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January	2,611	319	18,657	1,688	64	21,611
Loss and total comprehensive income	-	-	(3,124)	-	-	(3,027)
Transfer of non-controlling interest deficit	-	-	(388)	-	-	-
Issue of shares	7,038	-	-	923	-	-
Issue of warrants	-	-	-	-	255	-
Share based payments	-	-	123	-	-	73
As at 31 December	9,649	319	15,268	2,611	319	18,657

	2017			2016
	Share premium account	Share warrant reserve	Retained reserves	Share premium account	Share warrant reserve	Retained reserves
Company	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January	2,611	319	16,153	1,688	64	16,939
Loss and total comprehensive income	-	-	(684)	-	-	(786)
Issue of shares	7,038	-	-	923	-	-
Issue of warrants	-	-	-	-	255	-
As at 31 December	9,649	319	15,469	2,611	319	16,153

	2017	2016
Non-controlling interest:	£'000		£'000
Balance as at 1 January	491		-
Interest in trading result for the year	(106)		56
Interest in investments- securities	(12)		500
Interest in movement in investment property for the year	(284)		(65)
Transfer deficit balance	388		-
	477		491

The following describes the nature and purpose of each reserve within equity:

Reserve Description and purpose

Share premium account Amount subscribed for share capital in excess of nominal value.

Share warrant reserve Share warrants for which consideration has been received but which are not exercised yet.

Retained earnings All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

29 NET ASSET VALUE PER SHARE

Basic	2017	2016
Equity attributable to holders of the parent (£'000)	28,370	24,133
Number of ordinary shares in issue at the end of the period	12,536,957	10,185,487
Basic net asset value per share (pence)	226.3	236.9

Diluted	2017	2016
Equity attributable to holders of the parent (£'000)	28,370	24,133
Adjusted number of ordinary shares in issue at the end of the period	13,435,704	10,185,487
Diluted net asset value per share (pence)	211.2	236.9

Diluted net asset value per share is based on the number of shares in issue at the year end together with 898,747 shares deemed to have been issued at nil consideration as a result of shareholder, supporter and LMS warrants granted and shares which could be issued under the bonus share matching plan and long-term incentive plans.

These shares and warrants had no dilutive effect in the prior year as the exercise price of the warrants is 323.27p which was higher than the average market price of ordinary shares during the year.

	£'000
The movement during the year of the assets attributable to ordinary shares were as follows:
Total net assets attributable at 1 January 2017	24,133
Total recognised losses for the year	(3,512)
Share based payments	123
Issue of shares	7,626
Total net assets attributable at 31 December 2017	28,370

30 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS

	Group		Company
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Net operating loss after exceptional items	(2,216)	(3,838)	(500)	(2,086)
(Loss)/profit from discontinued operations	(1,104)	339	-	-
Movement in fair value of investment property	1,466	139	-	-
Interest payable	170	293	170	260
Depreciation	87	77	31	3
Profit on disposal of tangible fixed assets	(12)	(8)	-	-
Amortisation	1,122	1,364	-	-
Share based payments	123	72	-	-
Intercompany loans waived	-	-	-	2,000
	(364)	(1,562)	(299)	177
Decrease/(increase) in long-term receivables	54	(54)	-	-
(Increase) / decrease in current assets	(1,219)	(430)	(154)	164
(Decrease) / increase in current liabilities	(86)	(1,291)	10	(747)
	(1,615)	(3,337)	(443)	(406)

31 FINANCIAL INSTRUMENTS

The Group consists of the Company and subsidiary undertakings whose principal activities are asset management, forestry management and property investment.

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 secondary 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 2017 the following categories of financial instruments were held by: -

Group	2017			2016
	Loans and receivables	Assets at fair value through comprehensive income		Loans and receivables	Assets at fair value through comprehensive income
Financial assets per Statement of Financial Position	£'000		£'000	£'000		£'000
Investments - securities	159		2,830	617		2,217
Trade and other receivables - current and non-current	2,089		3,693	1,259		5,180
Accrued income	563		-	387		-
Cash and cash equivalents	9,785		-	2,802		-
	12,596		6,523	5,065		7,397

	2017		2016
Other financial liabilities		Liabilities at fair value through comprehensive income	Other financial liabilities	Liabilities at fair value through comprehensive income
Financial liabilities per Statement of Financial Position	£'000	£'000	£'000	£'000
Trade and other payables - short-term *	2,170	3,293	2,229	-
Bank loans - short & long-term	-	-	5,896	-
Other creditors - long-term	2	-	27	3,237
	2,172	3,293	8,152	3,237

* £284,000 (2016: £245,000) of corporation tax, PAYE and VAT payable is included within trade and other payables.

Company	2017			2016
	Loans and receivables	Assets at fair value through comprehensive income		Loans and receivables	Assets at fair value through comprehensive income
Financial assets per Statement of Financial Position	£'000		£'000	£'000		£'000
Investments - securities	159		1,151	617		499
Accrued income	219		-	219		-
Amounts owed by Group undertakings	7,878		-	9,734		-
Cash and cash equivalents	6,484		-	858		-
	14,740		1,151	11,428		499

	2017		2016
Other financial liabilities		Liabilities at fair value through comprehensive income	Other financial liabilities	Liabilities at fair value through comprehensive income
Financial liabilities per Statement of Financial Position	£'000	£'000	£'000	£'000
Trade and other payables - short-term	31	251	87	-
Other loans - short & long-term	5,552	-	6,258	-
Other creditors - long-term	-	-	-	258
	5,583	251	6,345	258

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. 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.

Based on values as at 31 December 2017, a 10% movement in the net asset values of those funds exposed to public markets would result in a £153,000 movement in both profit and net assets.

Credit risk

Credit risk is the risk that the 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:

	2017	2016
	£'000	£'000

Loan stock investments	159	617
Deferred receivable - short and long-term	3,693	5,180
Trade and other receivables - short-term	2,089	1,259
Accrued income	563	387
Cash and cash equivalents	9,785	2,802
	16,289	10,245

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 £14,740,000 (2016: £11,428,000).

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:

	2017	2016
(a) Loan stock investments	£'000	£'000
Repayable within: - 1 year	-	151
1-2 years	-	466
2-3 years	-	-
3-4 years	103	-
4-5 years	56	-
	159	617

As at 31 December 2017 loan stock investments totalling £718,000 (2016: £340,000) were impaired and provided for.

As at 31 December 2017 other loans totalling £54,000 (2016: £155,000) were impaired and provided for.

There is potentially a risk whereby a counter party 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, its equity, preference equity investments and loans and net revenue may be affected by interest rate movements. Investments in small businesses are relatively high-risk investments which are sensitive to interest rate fluctuations.

The Group's assets include fixed and floating rate interest instruments as detailed below. The Group is exposed to interest rate movements on its floating rate liabilities.

The interest rate exposure profile of the Group's financial assets and liabilities as at 31 December 2017 and 2016 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 2017	£'000		£'000		£'000		£'000		£'000	£'000
Investments - securities	2,830		159		-		-		-	2,989
Cash	-		-		9,785		-		-	9,785
Trade and other receivables	2,089		-		-		-		-	2,089
Accrued income	563		-		-		-		-	563
Creditors
- falling due within 1 year	(5,463)		-		-		-		-	(5,463)
- falling due after 1 year	-		-		-		(2)		-	(2)
	19		159		9,785		(2)		-	9,961
		Non-interest bearing assets/ liabilities		Fixed rate assets	Floating rate assets	Fixed rate liabilities		Floating rate liabilities			Net total
As at 31 December 2016		£'000		£'000	£'000	£'000			£'000		£'000
Investments - securities		2,217		617	-	-			-		2,834
Cash		-		-	2,802	-			-		2,802
Trade and other receivables		1,259		-	-	-			-		1,259
Accrued income		387		-	-	-			-		387
Creditors
- falling due within 1 year		(2,229)		-	-	-			(1,015)		(3,244)
- falling due after 1 year		(3,237)		-	-	(27)			(4,881)		(8,145)
		(1,603)		617	2,802	(27)			(5,896)		(4,107)

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 7.6% (2016: 10.0%).

Floating rate assets and floating rate liability loans are subject to interest rates which are based on LIBOR and bank base rates.

Fixed rate liabilities include hire purchase contracts and short-term loan notes.

The Group is not materially exposed to currency risk as its assets and liabilities are substantially denominated in sterling.

The interest rate exposure profile of the Company's financial assets and liabilities as at 31 December 2017 and 2016 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 2017	£'000	£'000	£'000	£'000		£'000	£'000
Investments - securities	1,151	159	-	-		-	1,310
Cash	-	-	6,484	-		-	6,484
Accrued income	219	-	-	-		-	219
Owed by Group undertakings	7,878	-	-	-		-	7,878
Creditors
- falling due within 1 year	(282)	-	-	-		-	(282)
	8,966	159	6,484	-		-	15,609

	Non-interest bearing assets/ liabilities	Fixed rate assets	Floating rate assets	Fixed rate liabilities	Floating rate liabilities		Net total
As at 31 December 2016	£'000	£'000	£'000	£'000		£'000	£'000
Investments - securities	499	617	-	-		-	1,116
Cash	-	-	858	-		-	858
Accrued income	219	-	-	-		-	219
Owed by Group undertakings	9,734	-	-	-		-	9,734
Creditors
- falling due within 1 year	(87)	-	-	-		(1,105)	(1,192)
- falling due after 1 year	(258)	-	-	-		(4,881)	(5,139)
	10,107	617	858	-		(5,986)	5,596

Although the Company holds investments that pay interest, the Board does not consider it appropriate to assess the impact of interest rate changes upon the value of the investment portfolio as interest rate changes are only one factor affecting market price and the impact is likely to be immaterial. The Group has no bank borrowings and as such, the Board does not consider it appropriate to show the sensitivity of interest payable to changes in interest rates.

Liquidity risk

The investments in equity investments in NEX 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 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. As the bank borrowings have been repaid liquidity risk is considered immaterial.

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 2017	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years
	£'000	£'000	£'000
Trade payables	274	-	-
Accruals	1,516	-	-
Contingent consideration	1,500	-	-
Other creditors	379	-	-
	3,669	-	-

As at 31 December 2016	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years
	£'000	£'000	£'000
Bank borrowings	1,413	2,264	2,863
Trade payables	225	-	-
Accruals	1,672	-	-
Contingent consideration	-	1,500	-
Other creditors	359	-	-
	3,669	3,764	2,863

Capital risk management

The Group manages its capital to ensure that entities within the Group and the Company will be able to continue to trade in an orderly fashion whilst maintaining sustainable returns to shareholders.

The capital structure of the Group and Company consist of short and long-term borrowings as disclosed in notes 21 and 23, cash and cash equivalents and equity attributable to equity shareholders of the Company comprising issued share capital, share premium, share warrant reserve and retained reserves as disclosed in notes 24 to 27. 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.

	Group		Company
	2017 £'000	2016 £'000	2017 £'000	2016 £'000
Debt	-	(5,896)	-	(5,896)
Cash and cash equivalents	9,785	2,802	6,484	858
Net assets	28,847	24,624	28,571	21,629
Net cash / (debt)	9,785	(3,094)	6,484	(5,038)
Net cash / (debt) as a % of net assets	33.9%	(12.6%)	22.7%	(23.3%)

32 FAIR VALUE MEASUREMENTS

Valuation inputs

IFRS 13 - Fair Value Measurement - requires an entity to classify its financial assets and liabilities held at fair value according to a hierarchy that reflects the significance of observable market inputs. The classification of these assets and liabilities is based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined below.

Quoted market prices - Level 1

Financial instruments, the valuation of which are determined by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm's length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

Valuation technique using observable inputs - Level 2

Financial instruments that have been valued using inputs other than quoted prices as described for level 1 but which are observable for the asset or liability, either directly or indirectly.

Valuation technique using significant unobservable inputs - Level 3

Financial instruments, the valuation of which incorporate significant inputs for the asset or liability that are not based on observable market data (unobservable inputs). Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the input or analytical techniques.

For investment properties, the significant unobservable input used in the valuation at 31 December 2017 are the expected net sales proceeds.

For investments in securities, which includes early-stage private equity investments, the significant unobservable inputs used include cash flow forecasts and discount rates. An increase in the discount rate applied will decrease the fair value of the investment whereas a decrease in the rate will increase the fair value. No reasonable foreseeable changes to significant unobservable inputs will result in a material impact to profit and loss or equity.

The valuation techniques used by the Company for level 3 financial assets can be found in accounting policy (j) (iii) and (iv).

Further details of the securities portfolio can be found in note 11 and of the property portfolio 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 2017	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Property investments	1,986	-	1,986
Investments - securities
- Equities	2,830	1,106	1,724
Trade and other receivables - short and long-term	3,693	-	3,693
	8,509	1,106	7,403

	31 December 2016	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Property investments	9,628	-	9,628
Investments - securities
- Equities	2,217	499	1,718
Trade and other receivables - long-term	5,180	-	5,180
	17,025	499	16,526

Company	31 December 2017	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Investments - securities
- Equities	1,151	1,106	45
	1,151	1,106	45

	31 December 2016	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Investments - securities
- Equities	499	499	-
	499	499	-

Set out below is a reconciliation of financial assets measured at fair value based on level 3.

Group 31 December 2017	Property investments	Investments - securities	Trade and other receivables	Total
	£'000	£'000	£'000	£'000
Opening balance	9,628	1,718	5,180	16,526
Total gains and (losses):
In Statement of Comprehensive Income	(1,466)	(41)	148	(1,359)
Additions	137	47	-	184
Disposals	(6,313)	-	(1,635)	(7,948)
Closing balance	1,986	1,724	3,693	7,403

Total gains and (losses) for the period included in comprehensive income for assets held at the end of the reporting period	(331)	(41)	148	(224)

31 December 2016	Property investments	Investments - securities	Trade and other receivables	Total
	£'000	£'000	£'000	£'000
Opening balance	9,559	1	5,916	15,476
Total gains and (losses):
In Statement of Comprehensive Income	(139)	(32)	202	31
Additions	311	1,750	-	2,061
Disposals	(103)	(1)	(938)	(1,042)
Closing balance	9,628	1,718	5,180	16,526

Total gains and (losses) for the period included in comprehensive income for assets held at the end of the reporting period	(242)	(32)	202	(72)

Company: 31 December 2017	Investments - securities	Total
	£'000	£'000
Opening balance	-	-
Total gains and (losses):
In Statement of Comprehensive Income	(2)	(2)
Additions	47	47
Closing balance	45	45

Total gains or losses for the period included in comprehensive income for assets held at the end of the reporting period	(2)	(2)

31 December 2016	Investments - securities	Total
	£'000	£'000
Opening balance	1	1
Disposals	(1)	(1)
Closing balance	-	-

Total gains or losses for the period included in comprehensive income for assets held at the end of the reporting period	-	-

The only financial liabilities held at fair value relates to the deferred consideration on the acquisition of Gresham House Forestry Limited and the appointment of Gresham House Asset Management Limited as investment manager to LMS Capital plc amounting to £3,293,000. This is measured using level 3 valuation techniques. The only such financial liabilities held at fair value within the Company relates to the LMS contingent consideration totalling £251,000.

Price risk sensitivity

Based on values as at 31 December 2017 a 10% movement in the fair values of the Group's equity and direct property investments would be equivalent to a movement of £482,000 in both profit and net assets.

33 RELATED PARTY TRANSACTIONS

Group

During the year management fees totalling £611,610 (2016: £542,453) were invoiced to Gresham House Strategic plc ("GHS"), a company in which the Group has a 19.3% interest. At the year-end £62,063 (2016: £57,803) was due from GHS.

During the year management fees totalling £1,143,334 (2016: £479,996) were invoiced to LMS Capital plc ("LMS"), a company with a significant shareholding in the Company as disclosed in the directors' report. At the year-end £104,870 (2016: £253,725) was due from LMS.

During the year management fees of £223,335 (2016: £nil) were invoiced to Hazel Capital LLP ("Hazel"), an entity in which Ben Guest, head of the New Energy strategy, has a material interest. Conversely, the Group was invoiced £58,848 (2016: £nil) by Hazel for office costs. These transactions reflect the activity of the New Energy strategy with effect from 31 October 2017. At the year-end £164,487 (2016: £nil) was due from Hazel.

Company

During the year the Company received loans totalling £8,560,271 from (2016: advanced £3,098,028 to) Security Change Limited. At the year-end £5,488,358 was due to (2016: £3,071,913 due from) Security Change Limited. No interest was charged during the year (2016: £nil).

During the year the Company received £nil (2016: £8,278,000) from Gresham House Finance Limited. At the year-end £221,400 (2016: £221,400) was owed by Gresham House Finance Limited. No interest was charged during the year (2016: £nil).

During the year the Company received £297,476 (2016: £361,460) from Gresham House Forestry Limited. At the year-end £63,984 (2016: £361,460) was owed to Gresham House Forestry Limited. No interest was charged during the year (2016: £nil).

During the year the Company advanced loans totalling £1,329,661 (2016: £2,005,085) to Gresham House Holdings Limited. At the year-end £7,656,723 (2016: £6,327,062) was owed by Gresham House Holdings Limited. No interest was charged during the year (2016: £nil).

During the year the Company charged management fees totalling £nil (2016: £nil) to Gresham House Asset Management Limited. At the year-end £nil (2016: £113,733) was owed by Gresham House Asset Management Limited.

34 POST BALANCE SHEET EVENTS

On 6 February 2018, the sale of the land at Newton-le-Willows was completed with the Group receiving gross proceeds of £2.1 million.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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