31st March 2023 NAV and Company Update
11 May 2023
Foresight Sustainable Forestry Company Plc
31 March 2023 Net Asset Value and Company Update
Foresight Sustainable Forestry Company Plc ("The Company", "FSF"), an investment company that invests in UK forestry and afforestation assets, announces that as at 31 March 2023 its unaudited Net Asset Value ("NAV") was £186.6 million (30 September 2022: £180.6 million), resulting in a NAV per Ordinary Share of 108.5 pence, up 3.5 pence from 105.0 pence at 30 September 2022.
H1 2023 Performance Highlights
- NAV has increased to £186.6 million (30 September 2022: £180.6 million).
- NAV per Ordinary Share has increased to 108.5 pence, a NAV per share return of 3.3% since 30 September 2022.
- The Company has delivered a total NAV per Ordinary Share return of 10.6% since IPO.
- The key drivers of the uplift are the upwards revaluation of FSF's properties (+5.1p) and carbon credit recognition (+1.1p), driven by mark-to-market valuation gains on recently acquired properties and the completion of planting c.955,000 trees at four afforestation properties.
- FSF acquired 15 properties in the period, leading to a total portfolio of 65 individual properties at 31 March 2023.
- Of the total portfolio, 53% are established forestry properties, 43% are afforestation properties and 4% are mixed properties (by value).
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- The majority of the current timber harvesting programme remains on hold with the Company opting instead for biological growth of its timber stock whilst closely monitoring the timber market. |
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Summary of NAV key drivers from 30 September 2022 to 31 March 2023:
|
Item |
p/share movement |
|
NAV at 30 September 2022 |
105.0 |
|
Tax and transaction costs on acquisitions |
(0.9) |
|
Operational expenditure |
(1.0) |
|
Afforestation & restock costs |
(0.8) |
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Portfolio revaluation gains |
5.1 |
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Voluntary carbon credit valuation gains |
1.1 |
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NAV at 30 September 2022 |
108.5 |
Portfolio valuation update
Within the portfolio, from 30 September 2022, the property revaluation delivered an aggregate gross gain of £7.1 million, representing a weighted average (across the three investment categories) valuation uplift of 4.0%.
· Afforestation properties delivered gross gains of £5.0 million, representing a 7.4% increase in that category, driven by mark-to-market gains and recognition of the successful completion of planting at four properties (details of which can be found below).
· Standing forestry properties delivered gross gains of £1.6 million, representing a 2.1% increase in that category, largely driven by mark-to-market uplifts on recently acquired properties. Valuations for established forest properties have remained comparatively stable during a period of relatively subdued timber prices.
· Mixed afforestation and forestry properties delivered gross gains of £0.5 million, representing a 2.0% increase in that category. Valuations have remained stable, reflecting the market for forestry properties and the fact that the afforestation projects included within these mixed properties are yet to complete planting.
Valuations were conducted by an independent third-party on a property-by-property basis in accordance with the Royal Institute of Chartered Surveyors (RICS) Red Book Fair Value methodology. Despite the widening economic issues over the last six months, the investment market for forestry assets has remained robust with the independent valuer confirming that there were enough comparable transactions during the period to provide sufficient evidence for the portfolio's valuation.
The breakdown of the portfolio as at 31 March 2023, including the progress overview of how the portfolio's afforestation campaign is progressing, is shown in Appendix A.
Operational Update
By the end of March 2023, FSF successfully completed planting at Auchensoul, Redding Farm, Upper Bar and Frongoch, with c.955,000 trees planted as expected with no material deviations.
Completion of planting on those properties represents a significant milestone in the Company's development and is the main driver of the capital appreciation delivered during the period.
In aggregate, the four newly planted properties are forecast to produce an estimated 190,500 tonnes of sustainable timber for each c.35-40-year rotation while also sequestering 126,000 tonnes of additional CO2. All of the properties are undergoing an independent validation process to confirm the number of voluntary carbon units that are accredited to each.
During the period to 31 March 2023, FSF sold 6,384 tonnes of timber. The Company's strategy is to harvest when it is NAV accretive to do so. In H1 2023, the Company elected to leave c.117,0000 tonnes of mature timber 'on-the-stump' and continuing to add biomass, given slightly softer timber prices. FSF will continue to monitor timber pricing and bring more substantial volumes to market when trading conditions are more favourable.
Value ascribed to progress towards creation of carbon credits
Since the completion of planting at four afforestation schemes in the period, FSF has recognised an additional £1.9 million of value ascribed to the creation of carbon credits. This estimate takes into consideration the verifier's 20% buffer to ensure that the number of units offset or traded is conservative versus the amount of carbon that will be sequestered. The four properties are estimated to create c.107,500 voluntary carbon credits (net of the 20% buffer) and are part of a wider afforestation programme that is expected to see the creation of c.1,000,000 voluntary carbon credits in total from the current portfolio.
The Company now has a total of £2.5 million of value ascribed to carbon credits. The methodology, unit pricing and treatment of the additional value added at 31 March 2023 has remained consistent with the audited financial statements as at 30 September 2022.
Pipeline and deployment update
The Company has continued to identify opportunities using its proprietary direct origination campaign where assets may meet its afforestation criteria, with the total area under review exceeding 860,000 hectares. As at 31 March 2023, the Company had £1.6 million of cash available and a £30.0 million of additional available liquidity in its RCF facility.
FSF's pipeline is listed below and the Company continues to actively track and transact deals.
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Stage of investment |
Deployment (£m) |
Hectares |
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Transacting pipeline |
2.5 |
251 |
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Near-term pipeline |
15.2 |
1,112 |
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Further pipeline |
59.7 |
5,717 |
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Total |
77.4 |
7,080 |
Definitions
Transacting Pipeline - Deals in full transaction stages (e.g. legal documents in progress).
Near-term Pipeline - Opportunities with high likelihood of conversion (e.g. detailed discussions and/or held under option).
Further pipeline - Early stage potential opportunities which the Investment Manager is tracking, screening or in preliminary discussions on.
Richard Davidson, Chair of Foresight Sustainable Forestry Company Plc, commented:
"We are pleased to announce yet another NAV uplift as the Company starts to build momentum in its sustainable investment mission. Successful afforestation development remains the engine room of FSF's returns. The completion of our plantation projects at Auchensoul, Redding Farm, Upper Barr, and Frongoch marks a significant milestone for us. FSF has now more than doubled the value of the six completed afforestation schemes in the portfolio since original acquisition. It has also enabled FSF to generate a material volume of high-integrity, voluntary carbon credits. We believe that with the increasing demand for voluntary carbon credits and 31 further afforestation schemes in development, there is tremendous potential for the Company, leaving it well-positioned to deliver further returns for our shareholders."
For further information, please contact:
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Foresight Sustainable Forestry Company Plc Robert Guest Richard Kelly fsfc@foresightgroup.eu
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+44 20 3667 8100 |
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Jefferies International Limited Tom Yeadon Will Soutar Harry Randall
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+44 20 7029 8000
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SEC Newgate Elisabeth Cowell fsf@secnewgate.co.uk
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About the Company
Foresight Sustainable Forestry Company Plc ("the Company") is an externally managed investment company investing in a diversified portfolio of UK forestry and afforestation assets. Targeting a net total return of more than CPI (5-year average) +5%, the Company provides investors with the opportunity for real returns and capital appreciation driven by the prevailing global imbalance between supply and demand for timber; the inflation-protection qualities of UK land freeholds; and biological tree growth of 3% to 4% not correlated to financial markets. It also offers outstanding sustainability and ESG attributes and access to carbon units related to carbon sequestration from new afforestation planting. The Company targets value creation as the afforestation projects successfully achieve development milestones in the process of converting open ground into established commercial forest and woodland areas. The Company is seeking to make a direct contribution in the fight against climate change through forestry and afforestation carbon sequestration initiatives and to preserve and proactively enhance natural capital and biodiversity across its portfolio. It is managed by Foresight Group LLP. https://fsfc.foresightgroup.eu/
This announcement does not constitute, and may not be construed as, an offer to sell or an invitation to purchase investments of any description, or the provision of investment advice by any party. No information set out in this announcement is intended to form the basis of any contract of sale, investment decision or any decision to purchase securities in the Company.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will", "targeting" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.
Appendix
A. Portfolio Breakdown
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Asset classification |
Hectares |
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Development Stage Afforestation Assets ¹ |
3,430 |
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Planting Stage Afforestation Assets ¹ |
- |
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Establishment Stage Afforestation Assets ¹ |
690 |
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Established Forest Assets ¹ |
5,772 |
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Other Land ² |
1,851 |
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Total |
11,743 |
Definitions
Development Stage Afforestation Assets - Land prior to the securing of planning permission and grant application.
Planting Stage Afforestation Assets - Planning permission and grant application completed but initial planting of trees not yet completed.
Establishment Stage Afforestation Assets- Initial planting of site completed but trees establishing and stabilising (typically a 3-5 year period).
Established Forests Assets - Trees stabilised and established.
¹ Hectares within woodland creation scheme boundary or managed forest area boundary.
² Hectares not within woodland creation scheme boundary or managed forest boundary. This Other Land is held as part of the core Forestry Assets allocation and can accompany both Afforestation and Established Forest Assets.
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