Net Asset Value and Company Update
10 May 2024
Foresight Sustainable Forestry Company Plc
("FSF" or "the Company")
31 March 2024 Net Asset Value and Company Update
Foresight Sustainable Forestry Company Plc, an investment company that invests in UK forestry and afforestation assets, is delighted to announce that the Company's unaudited Net Asset Value ("NAV") has increased to £175.8 million (30 September 2023: £169.2 million) as at 31 March 2024.
Summary of NAV key movements from 30 September 2023 to 31 March 2024 (the "Period"):
|
Item |
p/share movement |
|
30 September 2023 NAV |
98.4 |
|
Net Afforestation & Restock Expenditure |
(1.1) |
|
Portfolio revaluation gains |
3.7 |
|
Voluntary carbon credit valuation gains |
3.7 |
|
Asset Level Operating Expenditure |
(1.0) |
|
Fund Operating Expenditure |
(1.5) |
|
31 March 2024 NAV |
102.2 |
NAV per share increased to 102.2 pence, representing an increase of 3.9% or 3.8 pence for the Period. The key drivers of the increase have been successful completion of planting and value ascribed towards the creation of carbon credits at newly planted afforestation properties.
H1 2024 Planting and Carbon Credit Highlights
· Approximately 2.9 million trees were planted at 13 afforestation properties during the period.
· FSF has planted 4.3 million trees across 19 planting properties since IPO to 31 March 2024.
· An additional c.334,000 carbon credits associated with new planting have been recognised on FSF's balance sheet, taking the total number of carbon credits to c.478,000.
· The Company also successfully received validation from the Soil Association for c.35,000 of those carbon credits.
· As at 31 March 2024, the total value ascribed towards the creation of carbon credits was £9.2 million (30 September 2023: £2.7 million).
H1 2024 Portfolio Overview
· As at 31 March 2024, the Company's portfolio encompassed 12,654 hectares of land and comprised 39 afforestation properties, 25 forestry properties and five mixed (forestry and afforestation) properties.
· During the Period, the Company's portfolio sequestered c.17,559 tCO2e increasing the total to c.81,513 tCO2e since IPO.
Planting Completed Post-Period
· Between 31 March 2024 and 10 May 2024, the Company planted an additional c.650,000 trees at four afforestation properties, bringing the total number of afforestation properties where planting has been completed since IPO to 23.
· Based on an independent RICS Red Book property valuation and the Company's comparable transactions-based approach to carbon credit valuation, the additional four completed planting schemes are expected to result in a further £2.1 million or 1.2 pence per share of net portfolio value gains.
Planting Outlook for 2024 Year End and Spring 2025
· From 10 May 2024, the Company expects to plant approximately 2.1 million trees at seven afforestation properties by the next valuation cycle (30 September 2024).
· From 1 October 2024, the Company anticipates to plant approximately 2.3 million trees at fourteen afforestation properties by the 31 March 2025 valuation cycle.
· By Spring 2025, the Company expects to have planted c.9 million trees over a total forest area of 4,500 hectares since IPO.
|
|
|
UK Forestry Investment Market
There were £33.9 million of 2023 comparable transactions relevant to the Company's 30 September 2023 RICS Red Book valuation observed by Savills with a weighted average price of £22.9k per net productive commercial hectare. For the 31 March 2024 valuation there were an additional £59.4 million of relevant 2023 comparable transactions observed by Savills with a weighted average price of £27.6k per net productive commercial hectare.
The observed transaction volumes (in GBP) and pricing in the UK forestry investment market therefore stabilised and improved during the Period. However, as the 2023 total transaction volume of £93.3 million remains substantially lower than the 2021-2022 average of £275.9 million, the current independent RICS Red Book valuation has been kept broadly flat versus the position at 30 September 2023, other than where afforestation properties have achieved completion of planting.
Overall, the Company's portfolio valuation has been resilient and demonstrated relatively low volatility during challenging macro-economic and UK forestry investment market conditions over the last 12-18 months and the Investment Manager's opinion of the forestry investment market is positive for 2024.
Timber Prices
Timber prices in the UK and Europe have been positively impacted by a rise in US demand. In February 2024, Swedish lumber exports to the US increased 60% year-on-year, attributed to a 10.7% increase in housing construction. It is the Investment Manager's belief that increased demand for UK and European timber is to continue.
The Company observes strong UK small roundwood prices and strengthening sawlog prices, allowing it to progress its 2024 harvesting programme. FSF has c.166,000 tonnes of standing timber ready for harvesting.
Operational Update
An updated portfolio breakdown to the end of the planting season will be provided in the Company's Interim Report due to be released in June 2024. The latest portfolio breakdown can be found in the appendix.
The Company's £30 million Revolving Credit Facility ("RCF") has been extended and reaches maturity in July 2026. At 31 March 2024, the Company had drawn £18.3 million on the RCF. The Company intends to service/repay the RCF through a combination of timber harvesting and planned disposal of non-core assets.
Richard Davidson, Chair of Foresight Sustainable Forestry Company Plc, commented:
"I am delighted to report that FSF has been successfully driving NAV gains by planting a further 2.3 million trees during the period, bringing the total number of trees planted since IPO to 4.3 million at the reporting date. Planting has continued at pace since period end with a further 650,000 trees planted since 31 March 2024, and we are pleased to outline the additional impact that this is expected to have on the value of our portfolio.
"Despite headwinds seen in the investment trust market, we continue to build meaningful value across our afforestation portfolio. Add to this strengthening timber and property prices and it is clear that we have a strong platform from which to build."
Appendix
|
Gross Area
|
30 September 20232 |
31 March 20242 |
Difference |
10 May 2024 (post period end) |
|
Development Stage Afforestation Assets (Hectares) |
5,167 |
3,058 |
(2,109) |
3,058 |
|
Planting Stage Afforestation Assets (Hectares) |
93 |
481 |
+ 388 |
- |
|
Establishment Stage Afforestation Assets (Hectares) |
1,035 |
2,986 |
+ 1,951 |
3,467 |
|
Established Forest Assets (Hectares) |
6,251 |
6,129 |
(112) 3 |
6,129 |
|
Total (Hectares) |
12,545 |
12,654 |
|
12,654 |
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 property completed but trees establishing and stabilising (typically a 3-5 year period).
Established Forestry Assets - Trees stabilised and established.
¹ Acquisition costs = consideration paid to Seller + transaction taxes + deal costs (excludes cumulative net project development costs and operational costs of the properties).
2 All numbers are total land holding and include both Other Land and Non-Core areas.
3 Re-allocation of open ground to afforestation.
For further information, please contact:
|
Foresight Sustainable Forestry Company Plc Robert Guest Richard Kelly fsfc@foresightgroup.eu
|
+44 20 3667 8100 |
|
Stifel Nicolaus Europe Limited Edward Gibson-Watt Bruno Benega Rajpal Padam Catriona Neville
|
+44(0) 20 7663 3227 |
|
SEC Newgate Elisabeth Cowell Alice Cho Harry Handyside
|
+44 (0)20 3757 6882 fsf@secnewgate.co.uk
|
About the Company
Foresight Sustainable Forestry Company Plc 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%, 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.
The Company 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.
The Company is managed by Foresight Group LLP. https://fsfc.foresightgroup.eu/
Notes
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.
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