TIDMHONY
RNS Number : 1860Z
Honeycomb Investment Trust PLC
13 September 2022
Honeycomb Investment Trust plc
Registered Number: 09899024
Interim Report and Unaudited Financial Statements
For the period from 1 January 2022 to 30 June 2022
13 September 2022
Honeycomb Investment Trust plc today announces its Interim
Report and Unaudited Financial Statements for the period ended 30
June 2022.
Copies of the interim report can be obtained from the following
website: www.honeycombplc.com
1 Strategic Report
The Company
Honeycomb Investment Trust plc ("the Company" or "Honeycomb") is
a UK listed investment trust. It provides investors with access to
asset-backed lending opportunities that its manager, Pollen Street
Capital Limited (the "Investment Manager"), believes has potential
to generate high income returns together with strong capital
preservation. The Company holds an investment portfolio on its
balance sheet. This portfolio is invested in predominantly high
quality, diversified and low risk asset based direct lending
investments, with potential to generate high income returns,
together with strong capital preservation.
At the General Meeting held on 1 June 2022, shareholders voted
in favour of the combination of Pollen Street Capital Holdings
Limited ("Pollen Street"), the parent company of the Investment
Manager, and Honeycomb to form an asset management company that
benefits from a complementary set of investment management
activities and balance sheet activities (the "Combination"). The
directors believe that the combined business has an attractive
dividend yield and strong growth opportunities. The Combination is
expected to complete during September 2022.
Pollen Street was founded in 2013 and is an alternative
investment management company with deep capability across the
financial and business services sectors and a focus on investments
aligned with mega-trends, being new technology driving disruptive
business models, significant SME financing whitespace and the green
transition, that are shaping the future of the industry. Pollen
Street has extensive experience managing funds with credit and
private equity strategies and has a strong and consistent track
record of delivering top tier returns.
Investment Objective
The Company and its subsidiaries (together, "the Group") operate
an asset backed credit strategy that delivers stable income
alongside strong downside protection through providing
predominantly senior lending to non-bank lenders secured on their
underlying loan portfolios. The investment strategy is supported by
the ongoing structural changes in the financial services industry
that create a significant opportunity for non-bank lenders to reach
customers who are underserved by mainstream banks with bespoke and
appropriate products. The strategy is focused on generating
positive impact around five key areas where Honeycomb can make a
meaningful difference: environmental impact; affordable housing;
financial inclusion; regional economic growth and the highest
standards of governance. The Combination will enable the Company to
earn management fees and performance fees and carried interest on
funds managed or advised by Pollen Street.
Performance Highlights
Dividend Yield
2021 8.0%
=====
H1 2022 8.0%
=====
Target 8.0%
=====
Dividend yield stable at 8.0 per cent of IPO issue price - in
line with the published target
Note - target dividend is not a profit forecast
NAV Return
2021 8.5%
=====
H1 2022 8.0%
=====
NAV return building on the resilience shown through Covid-19
NAV per Share
31 Dec 2021 1,019.1p
=========
30 June 2022 1,019.7p
=========
NAV per share stable
See section 5 for reconciliation to Alternative Performance
Measures
Chairman's Statement
I am pleased to present the 2022 interim results for Honeycomb
Investment Trust plc, covering the period 1 January 2022 to 30 June
2022.
Combination With Pollen Street
At the General Meeting held on 1 June 2022 shareholders voted in
favour of the resolution to combine Pollen Street Capital Holdings
Limited and Honeycomb Investment Trust plc. The Combination is
expected to complete during September 2022 following approval of
the transaction by regulators. My board colleagues and I are
looking forward to the successful completion of this transaction
and would like to thank the Board's advisers for their hard
work.
My fellow directors and I believe that the Combination offers
shareholders the opportunity to benefit from a compelling
combination with a fast growing, purpose-led, high performing
private capital asset manager. Pollen Street benefits from:
-- Expertise in investing in both private equity and credit;
-- A proven track record of strong returns at low risk
-- A growing and established blue chip investor base
-- Deep technical expertise in critical financial and business
services sectors across the capital structure
-- A long history of operating as a trusted partner to secure excellent deal flow
-- Being a purpose and values-based organisation; and
-- A well invested platform sharing deep insight and best
practice positioned to grow and drive operational leverage
Pollen Street and Honeycomb have been working together closely
for the past six years, with Pollen Street acting as Honeycomb's
investment manager.
Economic Environment
There has been extensive disruption in the macroeconomic
environment over H1 2022. The war in Ukraine; has led to an
unsettled geo-political environment and considerable market
volatility. Alongside that, there are concerns about inflation,
rising interest rates, as well as continued pressure across supply
chains. These have all exacerbated uncertainty.
Despite this market backdrop, Pollen Street has continued to
grow, with assets under management ("AuM") increasing to GBP3.2
billion at 30 June 2022 from GBP3.0 billion at 31 December 2021,
and Honeycomb's investment asset portfolio has been resilient with
performance maintained in line with the historical track
record.
The board risk committee is monitoring these emerging risks
carefully to ensure that they are being managed appropriately.
Investment asset portfolio
Honeycomb's investment portfolio performed well throughout the
first half of the year, demonstrating consistent and robust
performance. The Company delivered an annualised NAV return of 8.0
per cent[1] for the period (H1 2021: 8.7 per cent). This
performance is particularly pleasing given the macroeconomic
backdrop noted above. My board colleagues and I believe the
Company's strategy, combining bespoke structuring and asset backing
via large diverse pools of financial and hard assets, is invaluable
in driving good performance through a more uncertain and volatile
macro environment.
The performance of the underlying Credit Assets has remained
consistent throughout the first six months of 2022. Investment
Assets[2] have remained broadly stable (31 December 2021: GBP615
million; 30 June 2022: GBP583 million) with the Company redeploying
capital from realised deals into new as well as existing
investments.
[1] See section 5 for reconciliation to Alternative Performance
Measures
[2] Investment Assets includes credit assets held at amortised
cost, credit assets held at fair value through profit or loss and
equity assets held at fair value through profit or loss
The interim results show a reduced level of expected credit loss
("ECL") provision charges under IFRS 9, against the same period in
2021. The ECL release for the first half of 2022 was GBP0.1 million
(30 June 2021: GBP0.5 million charge, 31 December 2021 full year:
GBP0.8 million release). The portfolio continues to benefit from
the Investment Manager's shift to structurally secured assets with
greater protection from adverse credit losses. The investment
assets are now 97 per cent senior and asset secured.
The Manager has a strong pipeline of transactions in
documentation or late stage due diligence. The pipeline is well
diversified across subsectors and asset classes.
Gearing
Gearing remains within the target range. Net debt to equity was
63.6 per cent as at 30 June 2022, down from 70.9 per cent as at 31
December 2021.
Following completion of the Combination, the target gearing will
be unchanged: net debt to tangible equity is targeted to remain
between 50 per cent. to 75 per cent. and the debt facilities will
be upsized and extended resulting in a lower blended margin.
Dividends
The Company has continued to meet its dividend target of 20
pence per share per quarter, in line with the target dividend yield
of 8.0 per cent annualised on the issued share price at the
Company's initial public offering.
Following completion of the Combination, I am pleased to
reiterate that the Company is targeting increasing the dividend in
2022 with total dividends for the period of GBP30 million (2021:
GBP28 million), increasing again to GBP32 million in respect of
2023 and a progressive dividend policy of at least GBP33 million in
respect of 2024.
Share Price and Buybacks
A total of 523,000 shares have been repurchased over H1 2022
under the Board's share buyback programme. The board continues to
monitor the share price closely and will use further buybacks as
appropriate.
Outlook
My board colleagues and I are excited about the future for the
combined Company. I am confident that Pollen Street is well
positioned in its target markets to benefit from the strong
tailwinds from investor demand in its products. With a highly
experienced team, the Company is well placed to deliver on its
goals.
The investment portfolio's strong performance through the first
six months of 2022, builds on a successful 2021. The Investment
Manager's intensive approach to portfolio management and focus on
asset-backed, senior secured investments, positions the Company
well. The combination of the dividend yield, with the strong growth
opportunities in AuM, positions the Company favourably compared to
its peer group and presents a compelling opportunity for
shareholders.
Robert Sharpe
Chairman
12 September 2022
Investment Manager's Report on the Investment Portfolio
This section covers Pollen Street's investment manager's report
on Honeycomb's on balance sheet Investment Asset portfolio. See
Pollen Street Update, on page 9, for a wider update on Pollen
Street's business.
The Pollen Street team has been investing together in the
financial and business services sectors since 2008 and possesses a
strong and consistent track record as a multi-strategy investment
manager. Pollen Street believes that its sector expertise, combined
with structured assessments of key industry drivers, enables
sourcing of attractive opportunities and the mitigation of downside
risks.
The Pollen Street team aims to be the partner of choice in its
market by employing its sector specialist knowledge, deep industry
insight and extensive and long-standing network. Pollen Street
believes that these attributes, combined with its sector-dedicated
investment team and proactive approach to origination has delivered
industry leading returns whilst having a controlled risk
profile.
H1 2022 Highlights
The portfolio has continued to perform strongly in 2022 with the
underlying return on assets of 9.0 per cent. and de-minimis bad
debts or impairments. This has delivered an 8.0 per cent annualised
NAV return and 39p per share in dividends for the first six months
of the year (30 June 2021: 8.7 per cent and 44p respectively).
The portfolio has also remained highly invested with investment
assets closing the period at GBP583m and net debt to equity at
63.6%. Several new transactions have been completed in H1 with a
focus on sustainability and financings that help individuals reduce
their carbon footprint. These include a senior facility provided to
ONTO, Europe's largest pure play electric vehicle leasing business,
secured on their fleet of electric vehicles; and a senior facility
to Tier, Europe's largest micro mobility operator, secured on their
fleet of scooters and bikes. In addition, we have also done a
number of upsizes to facilities with existing borrowers.
Pollen Street continues to focus on asset-backed, senior secured
loans which we believe positions the portfolio to perform well
through a more difficult macro environment . The combination of
bespoke structuring, seniority, diverse asset pools and covenants
combine to offer strong downside protection alongside the
attractive yields Pollen Street has consistently been able to
achieve.
We continue to operate a proactive and collaborative approach
with our new and existing partners. We are in constant dialogue
with our borrowers to ensure we are receiving regular updates and
underlying live performance data to enable us to be both forward
looking and proactive.
Alongside the new partners onboarded in H1 2022, we have a
strong pipeline of well progressed transactions, as well as a
broader pipeline of GBP2 billion to support future growth.
Half Yearly NAV Return
Profit for the first 6 months of the year was GBP13.7 million
(30 June 2021: GBP15.5 million), which translated into an earnings
per share of 39p (30 June 2021: 44 pence), which is broadly in line
with guidance issued at the time of the Company's initial public
offering.
Investment Assets and Net Debt to Equity Ratio
The net debt to equity ratio closed the period at 63.6 per cent.
(30 June 2021: 66.1 per cent.), which is also within the target
range of 50 per cent to 75 per cent.
Dividend Per Share and Annualised Dividend Yield
Since its IPO in December 2015 the investment portfolio has
delivered a NAV return equivalent of 54 per cent (including
dividends declared or paid) with the NAV per share (cumulative of
income) of 1,019.7 pence per ordinary share at 30 June 2022.
Economic Environment
The broader macro environment remains uncertain with a number of
risks and concerns with the impact of inflation and higher interest
rates the most immediate threat albeit offset somewhat by
continuing high levels of employment and rising nominal wages. We
are monitoring the performance of the underlying assets closely and
we are still seeing very consistent and good performance. We are
factoring in the impact of higher prices and interest rates when
underwriting and structuring and are also seeing opportunities in
sectors with low correlation to the macro. The uncertain
environment is also presenting opportunities and we are taking the
opportunity to increase returns on new transactions alongside
continuing to ensure prudent LTVs such that our investments are
able to withstand significant stresses without impairment.
The investment portfolio is well hedged from an interest rate
perspective with GBP237m of floating rate liabilities and GBP269m
of floating rate credit assets.
Portfolio
NAV returns for the investment portfolio have been consistent
throughout H1 2022, building on the strong performance on 2021. As
at 30 June 2022, 97 per cent of the investment portfolio consists
of senior and secured exposures across 35 borrowers with an average
balance outstanding of GBP16 million, average LTV of 68 per cent
and collateralised by over 200,000 underlying financial or hard
assets.
The remainder of the portfolio is made up of the small equity
portfolio of 3 per cent.
ESG
We were delighted win the award for Best Responsible Alternative
Investment Team UK 2022 by CFI, for the second year running. The
award recognises the team's commitment to investments that "help
consumers make greener choices, increase their access to finance
and SMEs to promote job creation".
The Investment Manager has undertaken significant upgrades to
data collection and developed a proprietary scoring system to
benchmark investments and monitor overall performance. The team
uses this data to work closely with lending partners to implement
action plans and support their positive impact.
With an ever-growing focus on actionable and meaningful ESG
reporting we are proud of the progress we have made in H1 2022. As
an Investment Manager we are excited to deliver against our values
in generating positive impact for our partners and wider society
alongside delivering attractive risk adjusted returns and
sustainable growth for shareholders.
We were also thrilled that Pollen Street Capital was recognised
for our progress and work in DE&I, with two FTAdviser Diversity
and Inclusion Awards. Lindsey McMurray was named Diversity Champion
of the Year (Small Firm) at the Diversity in Finance Awards 2022.
Pollen Street Capital was also recognised in the Company Champion
awards, being Highly Commended in the Championing Women's Equality
Award.
Outlook
We are proud to once again continue to have delivered 8.0 per
cent returns on investment assets.
Honeycomb has a track record of consistent credit performance.
The stability of the performance reflects the prudent approach,
discipline and high standards of governance in the Investment
Manager's established business model.
We believe the combination of asset backing via large diverse
pools of financial and hard assets along with bespoke structuring
means our asset-backed credit strategy is well positioned to
perform through a more uncertain and volatile macro environment.
Despite the more challenging macro-outlook, the Investment Manager
believes that asset-backed direct lending represents a resilient
asset class that delivers strong relative value versus other
private credit opportunities and publicly traded comparable
companies.
We look forward to working more closely together with the board
of Honeycomb as a single combined business.
Pollen Street
12 September 2022
Pollen Street Update
Pollen Street's asset management business has performed in line
with expectations over H1 2022. This is a particularly pleasing
result given the macro-economic environment.
The business has continued to grow its investor base in H1 2022
with GBP0.2 billion raised since 31 December 2021, increasing AuM
on an investor commitment basis from GBP3.0 billion at 31 December
21 to GBP3.2 billion at 30 June 22. This capital has been raised
into the credit strategies across both Flagship Credit III and the
separately managed accounts ("SMAs"). The Private Equity business
has not been in active fundraising in 2022 whilst Flagship PE IV is
deployed, good progress is being made towards the launch of
Flagship PE V in 2023.
AuM on an investor commitment basis[3] is broken down by
strategy as follows:
-- GBP1.8 billion in private equity split by:
o GBP0.7 billion in Flagship PE IV;
o GBP0.3 billion in Flagship PE III; and
o GBP0.8 billion in satellite and coinvest vehicles.
-- GBP1.4 billion in private credit split by:
o GBP0.3 billion in Flagship Credit III;
o GBP0.5 billion in SMAs; and
o GBP0.6 billion in on balance sheet assets.
Average Fee Paying AuM [4] has also grown strongly over the
first 6 months of 2022 increasing to GBP2.1 billion , an uplift of
GBP0.3 billion or 21 per cent on the average for the 12 month
period ending 31 December 2021.
OutLook
Pollen Street expects to continue the momentum in fundraising
from H1 2022 through into H2 with increasing AuM in the credit
business alongside continuing to prepare for the launch of the new
flagship PE fund in 2023. As such the Company expects to deliver
similar growth in AuM (on an investor commitment basis(3) ) in H2
2022 as H1 2022, which reflects:
-- small decline in private equity AuM given the timing of new
fund launches and portfolio realisations; and
-- 30 per cent to 40 per cent growth in Credit AuM.
Total Fund Management Revenue in 2022 is expected to grow by
approximately 10 per cent over 2021 (GBP34m). This is broken down
by:
-- Gross management fee revenues in 2022 are expected to be
broadly in line with 2021 with growth in credit management fees
almost offsetting private equity catch up management fees received
in 2021, which only occur in the years in which flagship private
equity funds are raised. This is expected to result in management
fee income over Average Fee Paying AuM(4) of approximately 1.25 per
cent given the growth in credit AuM and timing of the new flagship
private equity fund; and
-- Performance fees for 2022 are expected to be in line with the
long-term guidance of 15 per cent to 25 per cent of total Pollen
Street Fund Management Revenue.
As set out in the Circular published on 10 May 2022, the
medium-term guidance for the combined group remains unchanged and
is expected to deliver:
-- GBP4 - 5 billion of medium term fee paying AUM (c.2 to 3 years);
-- Management fee rate of approximately 1.25-1.50 per cent on
average Fee Paying AuM over the long term
-- Carried interest and performance fees representing
approximately 15 to 25 per cent of total Fund Management Revenue on
average over the long - term;
-- Long - term Fund Management Adjusted EBITDA Margin in excess of 50 per cent.;
-- Targeted investment returns of approximately 8 per cent long
term return on Net Investment Assets; and
-- a dividend for the Combined Group of GBP30 million in
aggregate for the year ending 31 December 2022 and GBP32 million in
aggregate for the year ending 31 December 2023, with the aim of
growing the aggregate dividend payable by the Combined Group
progressively over time, with the aggregate dividend payable for
the year ending 31 December 2024 being not lower than GBP33
million.
3 AuM on an investor commitment basis calculated as investor
commitments for active private equity funds, invested cost for
other private equity funds, total assets for the Company's on
balance sheet assets and investor commitments for private credit
funds
4 Average Fee Paying AuM is calculated as the average of the
opening and closing investor commitments for active fee paying
private equity funds, invested cost for other fee paying private
equity funds, total assets for the Company's on balance sheet
assets and net invested amount for fee paying private credit
funds
Top Ten Investment Assets
This section shows the largest investment assets within
Honeycomb's Investment Asset portfolio.
Country Deal Structure Sector Value Percentage
Type of holding LTV of assets(2)
at period-end
(GBPm)(1)
=== ================= ========= =========== ========== ================= =============== ====== ==============
Downing
Development United
1 Loans Kingdom Structured Senior Real Estate 56.9 63% 10.0%
=== ================= ========= =========== ========== ================= =============== ====== ==============
Sancus Loans United
2 Limited Kingdom Structured Senior Real Estate 55.4 54% 9.7%
=== ================= ========= =========== ========== ================= =============== ====== ==============
Creditfix United Discounted
3 Limited Kingdom Structured Senior Fee Receivables 51.3 39% 9.0%
=== ================= ========= =========== ========== ================= =============== ====== ==============
UK Agricultural United Direct
4 Finance Kingdom Portfolio Senior Real Estate 50.8 50% 8.9%
=== ================= ========= =========== ========== ================= =============== ====== ==============
United Direct
5 Beaufort Kingdom Portfolio Senior Real Estate 34.5 70% 6.1%
=== ================= ========= =========== ========== ================= =============== ====== ==============
United Direct
6 Queen Street Kingdom Portfolio Senior Real Estate 32.1 75% 5.7%
=== ================= ========= =========== ========== ================= =============== ====== ==============
Nucleus Cash
Flow Finance United
7 Limited Kingdom Structured Senior CBILS SME 31.8 96% 5.6%
=== ================= ========= =========== ========== ================= =============== ====== ==============
United Direct Secured
8 GE Portfolio Kingdom Portfolio Secured Consumer 27.8 61% 4.9%
=== ================= ========= =========== ========== ================= =============== ====== ==============
iWoca Loans United
9 Limited Kingdom Structured Senior SME 18.4 90% 3.2%
=== ================= ========= =========== ========== ================= =============== ====== ==============
Amicus
Commercial United Direct
10 Mortgages Kingdom Portfolio Senior Real Estate 16.9 60% 3.0%
=== ================= ========= =========== ========== ================= =============== ====== ==============
1 Direct portfolios have been aggregated by originator and
servicer
2 Percentage of total investment assets of the Group (investment
assets calculated as the carrying balance of all credit assets at
amortised cost, credit assets held at fair value through profit or
loss and equity investments held at fair value through profit or
loss).
As at 30 June 2022 the value of the top 10 assets totalled
GBP375.9 million (June 2021: 387.3 million, 31 December 2021:
GBP403.0 million) which equated to 66.1 per cent (June 2021: 65.2
per cent, 31 December 2021: 65.5 per cent) of investment assets
(investment assets calculated as the carrying balance of all credit
assets at amortised cost and credit and equity investments held at
fair value through profit or loss)
Investment Portfolio Composition
Loan Book Stratification by Asset Class & Structure
Real estate 45.1%
Secured Consumer 7.6%
Discounted Fee Receivables 9.5%
SME 7.3%
SME CBILS 5.4%
Commercial Mortgages 6.9%
Training Loans 3.3%
Consumer 1.7%
Unsecured Consumer 1.6%
EV Fleet Finance 2.4%
Micromobility Fleet
Finance 1.3%
Equity 2.7%
Other 5.2%
Investment Returns Bridge
Investment Yield 9.0%
Impairments and Write
Offs 0.0%
Risk Adjusted Yield 9.0%
Equity & working capital (0.5)%
Effect of Leverage
& IM fees (0.2)%
Fund Opex (0.6)%
Underlying Nav Return 7.7%
Effect of Buybacks 0.3%
NAV Return 8.0%
ESG at The Heart of Investment Management
The Investment Manager has developed a framework which helps
contribute to the UN Sustainable Development Goals (SDGs). These
provide a lens through which investors can align themselves with
the needs of the wider world. The metrics we collect from our
credit partners enable us to develop deeper insights into where
investments have an impact
The ESG framework is built around identifying where our
portfolio companies can have a positive impact and amplifying that
through investment processes. We provide reporting on this
framework annually in the Pollen Street Capital ESG Report.
https://www.pollencap.com/responsible-investing/esg-report-2021/ .
All of our credit facilities align to SDGs, but the ones in the
framework below are where we feel we have the most
concentration.
Environmental impact
We recognise our responsibility to do business in a manner that
protects and improves the environment for our future generations,
as well as supporting businesses that take us closer to a clean and
sustainable environment.
Create a lasting environmental impact - create solutions that
have a positive environmental impact - e.g. funding for residential
energy efficiency initiatives and electric vehicles
Social impact
We aim to ensure that the products and services of our portfolio
companies and credit partners provide the best outcomes for
stakeholders, including improving financial health for consumers
and SMEs.
Financial inclusion - access to loans and other financial
products is made available to a broad audience, promoting greater
access to opportunity
We believe a diverse business has multiple benefits. We champion
diversity and seek to ensure that equal opportunities are promoted
to all.
Promote diversity - Promoting diversity and, in particular
seeking to broaden representation at Board and company levels
We focus on efforts that provide real benefits and which address
relevant regional issues
Reginal economic growth - Provide services to small businesses
promoting growth and job creation throughout the markets in which
Pollen Street operates
Governance and leadership
We ensure we are appropriately accountable for our decisions,
implementing strong governance throughout operational processes
with the ability to identify and manage material risk factors,
including sustainability risks. As we focus our investments within
the largely regulated financial services sector, our portfolio
operates high governance standards as a baseline.
Reducing the impact of financial crime - Reduce overall levels
of financial crime in Financial Services with effective AML and
Cyber procedures and governance ESG in the Investment Process
The Investment Manager is pleased with the progress and impacts
we are seeing across the ESG and Diversity & Inclusion agenda,
combined with external recognition of our efforts.
Pollen Street participates in a number of organisations and
initiatives to advance collaboration, best-practice and
transparency on ESG across the industry and broader society, These
include the United Nations' Principles of Responsible Investment,
the ESG Data Convergence Initiative, and Initiative Climate
International.
We are thrilled that Pollen Street Capital has been named Best
Responsible Alternative Investment Team UK 2022 by Capital Finance
International (CFI). This is the second year we have been awarded
this title.
Pollen Street is now Carbon Neutral. We have reduced Pollen
Street's scope 2 emissions by sourcing renewable electricity
tariffs, and offsetting all emissions by purchasing verified carbon
offsets to achieve the goal we set ourselves of having carbon
neutral operations by 2022. Through data and engagement, we can
help our portfolio investments to accelerate their commitments to
reduce and remove their carbon emissions.
ESG MEASUREMENT
Pollen Street Capital collects data across its Credit portfolio,
collecting both core ESG metrics and relevant impact measures, as
well as aligning with regulatory disclosures such as the EU
sustainable Financial Disclosure ("SFDR").
In the first half of the year, we have expanded our ESG data
collection across our firm and portfolio and have developed a
proprietary scoring mechanism. This means we are better equipped
than ever to track and build on our positive impact, and enables us
to benchmark investments, monitor overall performance and to
identify areas for ESG improvement.
ESG IN ACTION
Through our investments we can drive change, whether that be by
funding green alternatives for homes and transport, accelerating
financial inclusion and promoting high quality products and
efficiency, or even driving regional economic growth by investing
in businesses and real estate developers across the UK and Europe
that help to reduce regional disparities. The following table shows
recent examples of how Pollen Street Capital's credit facilities
have supported a tangible ESG impact. The potential impact on the
17 Sustainable Development Goals as set by the United Nations has
also been shown in the table.
POSITIVE ENVIRONMENTAL Accelerating the transition to green
IMPACT transport
Micro-mobility
The Investment Manager recently completed
an EUR80m
facility with one of the world's leading
micro-mobility
providers. The financing provides additional
resources for the firm's existing micro-mobility
portfolio, helping to tackle carbon emissions
by
providing alternative green transport
to cities around
the world and drive positive change in
travel habits.
SOCIALLY IMPACTFUL PRODUCTS Enabling developers of affordable, efficient
& PROPOSITIONS and good value homes
Our credit partners include real estate
and bridging lenders. These lenders support
communities in meeting the critical housing
gap in the UK and Europe, adopt sustainable
living standards and improve the environmental
impact of property.
Two recently announced joint ventures
in have been with high quality partners
in Ireland, financing much needed homes
all across the region.
Supporting Regional economies across
the UK
The Investment Manager overall, and the
Honeycomb Portfolio, are regionally balanced
with facilities and borrowers across the
UK and Ireland.
87% of the Investment Manager's facilities
are outside London.
--------------------------------------------------
Principal Risks and Uncertainties
The Group faces a number of both principal and emerging risks,
and as a result, the management of the risks we face is central to
everything we do. These risks could have a material impact on
financial performance and position and could cause actual results
to differ materially from expected and historical results.
The Board has carried out a robust assessment of its principal
and emerging risks and considers the controls in place help to
mitigate the risks on a regular basis. It maintains a risk register
that identifies the risks facing the Group, classifying the
probability of the risk and the potential impact that an occurrence
of the risk could have on the Group . The risk register was last
reviewed by the Risk Committee and Board on 6 September 2022. It
was previously reviewed by the Risk Committee on 20 January
2022.
The Combination with Pollen Street changes the business and
consequently the risk profile materially. The impact of the
Combination has been described below as a single item. There has
been extensive disclosure published in the transaction documents
around this. These are available on the Company's website. Further
disclosure in relation to this will be published in the full year
accounts for 2022. Additionally, there are changes arising from the
unsettled geo-political environment, rising inflation &
interest rates, as well as continued pressure across supply
chains.
Combination With Pollen Street
The Combination with Pollen Street is materially changing the
business and consequently the risk profile. The combined group
inherits risks associated with the Pollen Street business such as
risks associated with the combined group's ability to raise
additional third party capital to manage, the management fee rates
that are due on the capital raised and the recognition of
performance fees and carried interest income from the funds under
management
Mitigation
There are a range of risk mitigants that reduce the exposure to
these risks. The mitigants include tail winds in the sector, which
is causing growth in demand for private equity and private credit
funds, the combined group's track record or raising capital and
negotiating management and performance fees and extensive diligence
conducted by third party advisers advising Honeycomb on the
Combination with Pollen Street.
Further information will be available in prospectus, which will
be published shortly on the Company's website.
Investment Risks
Achievement of the Investment Objective
There can be no assurance that the Investment Manager will
continue to be successful in implementing the Company's investment
objective.
Mitigation
The Group's investment decisions are delegated to the Investment
Manager. Performance of the Group against its investment objectives
is closely monitored on an ongoing basis by the Investment Manager
and the Board and is reviewed in detail at each Board meeting. The
Board has set investment restrictions and guidelines which the
Investment Manager monitors and reports on quarterly to the Board.
In the event it is required, any action required to mitigate
underperformance is taken as deemed appropriate by the Investment
Manager. We expect the economic environment to create some
compelling new opportunities for the Group which the Investment
Manager will selectively review and deploy capital into.
Fluctuations in the market price of Issue Shares
The market price of the Group's shares may fluctuate in response
to different factors and there can be no assurance that
shareholders will receive back the amount of their investment in
the Group's shares.
Mitigation
The Investment Manager and the Board closely monitor the
Company's shares price. The Company may purchase the shares in the
market with the intention of enhancing value to shareholders.
However, there can be no assurance that any repurchases will take
place or that any repurchases will have the intended effect.
Exposure to Credit Risk
The Group is exposed to credit losses if customers or
counterparties are unable to repay loans and outstanding interest
and fees or through fraud. The Group invests a significant
proportion of its assets in Credit Assets which, by their nature,
are exposed to credit risk and may be impacted by adverse economic
and market conditions, including through higher impairment charges,
increased capital losses and reduced opportunities for the Group to
invest in Credit Assets. Additionally, competition could serve to
reduce yields and lower the volume of loans generated by the
Group.
Mitigation
The Group invests in a diverse portfolio of assets, diversified
by the number of borrowers, the type, and the credit risk of each
borrower. Many loans are senior and/or secured and hence the
Company benefits from seniority over other creditors and security
over collateral. Additionally, the Group provided for expected
credit loses within the valuation of its assets. Please see Note 11
to the financial statements for more details on Credit Risk.
Origination rates and performance of the underlying assets of
the Group are closely monitored on an ongoing basis by the
Investment Manager and the Board and are reviewed in detail at each
Board meeting. The Manager has access to a diversified range of
sources from which to select attractive assets. For structured
lending facilities the Group undertakes a robust process.
Facilities are secured and typically structured with minimum asset
coverage ratios and covenants to provide early warning of credit
deterioration and adequate asset cover in the event of stress.
Borrowing
The Group uses borrowings to enhance investment returns. Whilst
the use of borrowings should enhance the Net Asset Value of the
Group's issued shares when the value of the Group's underlying
assets is rising, it will have the opposite effect where the
underlying asset value is falling. In addition, in the event that
the Group's income falls for whatever reason, the use of borrowings
will increase the impact of such a fall on the Group's return and
accordingly will have an adverse effect on the Group's ability to
pay dividends to shareholders.
Mitigation
The Investment Manager and the Board closely monitors the level
of gearing of the Group. The Group has a maximum limitation on
borrowings of 100 per cent of Net Asset Value (calculated at the
time of draw down) which the Investment Manager may affect at its
discretion. Further, the group targets maintaining a net debt to
tangible equity ratio in the range of 50 to 75 per cent.
Further detail on the Company's debt facilities can be found in
Note 14.
Interest Rate Risk
The Group invests in Credit Assets which may be subject to a
fixed rate of interest, or a floating rate of interest (which may
be linked to base rates or other benchmarks) and expects that its
borrowings will be subject to a floating rate of interest. Any
mismatches the Group has between the income generated by its Credit
Assets, on the one hand, and the liabilities in respect of its
borrowings, on the other hand, may subject the Group to interest
rate risk.
Mitigation
Interest rate risk exposures may be managed, in part, by
matching any floating rate borrowings with investments in Credit
Assets that are also subject to a floating rate of interest. The
Group may use derivative instruments, including interest rate
swaps, to reduce its exposure to fluctuations in interest rates,
however some unmatched risk may remain.
Liquidity
The Group may invest in assets that are aligned with the Group's
strategy and that present opportunities to enhance the Group's
return on its investments. Such assets are likely to be illiquid
and therefore may be more difficult to realise.
Mitigation
The Group actively manages its liquidity position to ensure
there is sufficient liquidity to meet liabilities as they fall due.
Other mitigants include long-term debt facilities with amortisation
periods rather than bullet repayments; amortising assets that are
highly cash generative; strong covenant packages that gives the
Group ability to influence the borrower's behaviours in times of
stress.
Operational Risks
Third Party Service Providers
The Group has no employees and the Directors have all been
appointed on an independent non-executive basis. Whilst the Group
has taken all reasonable steps to establish and maintain adequate
procedures, systems and controls to enable it to comply with its
obligations, the Group is reliant upon the performance of
third-party service providers for its executive function. In
particular, the Investment Manager, Depositary, Custodian,
Administrator, Registrar and servicers, amongst others, will be
performing services which are integral to the day-to-day operation
of the Group.
As part of this, the operations of the third-party service
providers are highly dependent on IT systems. Any critical system
failure, prolonged loss of service availability or material breach
of data security could cause serious damage to the third-party's
ability to provide services to the Group, which could result in
significant compensation costs or regulatory sanctions or a breach
of applicable regulations. In particular, failures or breaches
resulting in the loss or publication of confidential customer data
could cause long-term damage to reputation and could affect
regulatory approvals and competitive position which could undermine
their ability to attract and retain customers.
The termination of service provision by any service provider, or
failure by any service provider to carry out its obligations either
by fraud or error to the Group, or to carry out its obligations to
the Group in accordance with the terms of its appointment, could
have a material adverse effect on the Group's operations and its
ability to meet its investment objective.
Mitigation
The Group has appointed third-party service providers who hold
the appropriate regulatory approvals for the function they perform,
are experienced in their field, and have a reputation for high
standards of business conduct. Further, day-to-day oversight of
third-party service providers is exercised by the Investment
Manager and reported to the Board on a quarterly basis. As
appropriate to the function being undertaken, each of the service
providers is subject to regular performance and compliance
monitoring. The performance of the Investment Manager in its duties
to the Group is subject to ongoing review by the Board on a
quarterly basis as well as formal annual review by the Group's
Management Evaluation Committee.
The appointment of each service provider is governed by
agreements which contain the ability to terminate each of these
counterparties with limited notice should they continually or
materially breach any of their obligations to the Group.
Reliance on key individuals
The Group will rely on key individuals at the Investment Manager
to identify and select investment opportunities and to manage the
day-to-day affairs of the Group. There can be no assurance as to
the continued service of these key individuals at the Investment
Manager. The departure of key individuals from the Investment
Manager without adequate replacement may have a material adverse
effect on the Group's business prospects and results of operations.
Accordingly, the ability of the Group to achieve its investment
objective depends on the experience of the Investment Manager's
team, and more generally on the ability of the Investment Manager
to attract and retain suitable staff.
Mitigation
The interests of the Investment Manager are closely aligned with
the performance of the Group through the management and performance
fee structures in place and direct investment by certain key
individuals of the Investment Manager. Furthermore, investment
decisions are made by a team of professionals, mitigating the
impact loss of any single key professional within the Investment
Manager's organisation. The performance of the Investment Manager
in its duties to the Group is subject to ongoing review by the
Board on a quarterly basis as well as formal annual review by the
Group's Management Evaluation Committee.
Regulatory Risks
Tax
Any changes in the Group's tax status or in taxation legislation
could affect the Group's ability to provide returns to shareholders
and affect the tax treatment for shareholders of their investments
in the Group.
Mitigation
The Group intends at all times to conduct its affairs so as to
enable it to qualify as an investment trust for the purposes of
Section 1158 of the Corporation Tax Act 2010. Both the Board and
the Investment Manager are aware of the requirements which are to
be fulfilled in any accounting period for the Group to maintain its
investment trust status. The conditions required to satisfy the
investment trust criteria are monitored by the Investment Manager
and performance of the same shall be reported to the Board on a
quarterly basis. Where new SPVs are created or acquired these are
done in such a way to not impact the potential tax liability of the
Group.
Breach of applicable legislative obligations
The Group and its third-party service providers are subject to
various legislative and regulatory regimes, including, but not
limited to, the Consumer Credit Act General Data Protection
Regulation and the Data Protection Act 2018. Any breach of
applicable legislative and/or regulatory obligations could have a
negative impact on the Group and impact returns to
shareholders.
Mitigation
The Group engages only with third-party service providers which
hold the appropriate regulatory approvals for the function they are
to perform and can demonstrate that they can adhere to the
regulatory standards required of them. Each appointment is governed
by agreements which contain the ability for the Group to terminate
the arrangements with each of these counterparties with limited
notice should such counterparty continually or materially breach
any of their legislative obligations, or their obligations to the
Group more broadly. Additionally, each of the counterparties is
subject to regular performance and compliance monitoring by the
Investment Manager, as appropriate to their function, to ensure
that they are acting in accordance with applicable regulations and
are aware of any upcoming regulatory changes which may affect the
Group. Performance of third-party service providers is reported to
the Board on a quarterly basis, whilst the performance of the
Investment Manager in its duties to the Group is subject to ongoing
review by the Board on a quarterly basis as well as formal annual
review by the Group's Management Evaluation Committee.
emerging risks
The Group monitors its emerging risks, supporting organisational
readiness for external volatility. This incorporates input and
insight from both a top-down and bottom-up perspective:
-- Top-down: Emerging risks identified by directors at a group
level via the Risk Committee and the Board.
-- Bottom-up: Emerging risks identified at a business level and
escalated, where appropriate by the Investment Manager, via risk
updates into the Risk Committee and the Board.
Emerging risks are monitored by the Risk Committee on an ongoing
basis, with agreed actions tracked to ensure the Group's
preparedness should an emerging risk crystallise.
Over the period, the committee has focused on risks arising from
the Combination with Pollen Street. The committee benefitted from
extensive third party diligence conducted by advisers to
Honeycomb.
Mitigation
Emerging risks are monitored by the Risk Committee on an ongoing
basis. Actions are tracked to ensure the Group's preparedness
should an emerging risk crystallise. The Risk Committee will
continue to monitor these risks and respond to the evolving risk
landscape.
Investment Restrictions
The Group invests in Credit Assets originated across various
sectors to ensure diversification and to seek to mitigate
concentration risks. The following investment limits and
restrictions apply to the Group to ensure that the diversification
of the portfolio is maintained, that concentration risk is limited
and that limits are placed on risk associated with borrowings.
The Group will not invest, in aggregate, more than 10 per cent
of the aggregate value of total assets of the Group ("Gross
Assets"), at the time of investment, in other investment funds that
invest in Credit Assets.
The Group will not invest, in aggregate, more than 50 per cent
of Gross Assets, at the time of investment, in Credit Assets
comprising investments in loans (alongside or in conjunction with
Shawbrook Bank ("Shawbrook")) referred to the Origination Partner
by Shawbrook. Shawbrook is a portfolio company of funds managed or
advised by Pollen Street Capital Limited.
The following restrictions apply, in each case at the time of
the investment by the Group:
-- no single Credit Asset comprising a consumer credit asset
shall exceed 0.15 per cent of Gross Assets;
-- no single SME or corporate loan, or trade receivable, shall
exceed 5.0 per cent of Gross Assets;
-- no single facility, security or other interest backed by a
portfolio of loans, assets or receivables (excluding any borrowing
ring-fenced within any SPV which would be without recourse to the
Group) shall exceed 20 per cent of Gross Assets. For the avoidance
of doubt, this restriction shall not prevent the Group from
directly acquiring portfolios of Credit Assets which comply with
the other investment restrictions described in this section;
and
-- The Group will not invest in Equity Assets to the extent that
such investment would, at the time of investment, result in the
Group controlling more than 35 per cent of the issued and voting
share capital of the issuer of such Equity Assets.
Other restrictions
The Group may invest in cash, cash equivalents, money market
instruments, money market funds, bonds, commercial paper or other
debt obligations with banks or other counterparties having single-A
(or equivalent) or higher credit rating as determined by an
internationally recognised agency or systemically important bank,
or any "governmental and public securities" (as defined for the
purposes of the Financial Conduct Authority's Handbook of rules and
guidance) for cash management purposes and with a view to enhancing
returns to shareholders or mitigating credit exposure.
The Group will not invest in Collateralised Loan Obligations
("CLO") or Collateralised Debt Obligations ("CDO"). CLO's are a
form of securitisation whereby payments from multiple loans are
pooled together and passed on to different classes of owners in
various tranches. CDO's are pooled debt obligations where pooled
assets serve as collateral.
These restrictions were not breached in the periods ended 30
June 2022, 30 June 2021 or the year ended 31 December 2021.
Key Performance Indicators
30 June 2022 30 June 2021 31 December
2021
================================= ============= ============= ============
NET ASSET VALUE
NET ASSET VALUE (CUM INCOME)
(GBP'000) (1) 354,218 358,595 359,342
MARKET CAPITALISATION (GBP'000)
(2) (3) 309,159 342,019 333,204
================================= ============= ============= ============
PER SHARE METRICS
SHARE PRICE (AT CLOSE) (4) 890p 970p 945.0p
NAV PER SHARE (CUM INCOME)
(1) 1,019.7p 1,017.0p 1,019.1p
SHARES IN ISSUE 34,736,934 35,259,741 35,259,741
================================= ============= ============= ============
PERFORMANCE INDICATORS AND
KEY RATIOS
PREMIUM / (DISCOUNT) (2) (5) (12.7)% (4.6)% (7.3)%
ANNUALISED NAV RETURN (2)
(6) 8.0% 8.7% 8.5%
PROFIT (GBP'000) (7) (14) 13,745 15,467 30,318
ITD TOTAL NAV RETURN (2) (8)
(9) 54.0% 45.6% 49.9%
DEBT TO EQUITY (2) (10) 66.9% 74.0% 74.5%
NET DEBT TO EQUITY (2) (11) 63.6% 66.1% 70.9%
DIVID RETURN (2) (12) (14) 8.0% 8.0% 8.0%
ONGOING CHARGES (2) (13) (14) 2.2% 2.2% 2.3%
================================= ============= ============= ============
The Board monitors success in implementing the Group's strategy
against a range of key performance indicators ("KPIs"), which are
viewed as significant measures of success over the longer term.
Although performance relative to the KPIs is also monitored over
shorter periods, it is success over the long-term that is viewed as
more important, given the inherent volatility of short-term
investment returns. The principal KPIs are set out below with
commentary included throughout the Strategic Report:
(1) NET ASSET VALUE (CUM INCOME): includes the value of
investments, other assets and cash, including current year revenue,
less liabilities. NAV per share is calculated by dividing the
calculated figure by the total number of shares.
(2) ALTERNATIVE PERFORMANCE MEASURES: Alternative Performance
Measures ("APMs") are used to improve the comparability of
information between reporting periods, either by adjusting for
uncontrollable or one-off factors which impact upon IFRS measures
or, by aggregating measures, to aid the user understand the
activity taking place. The Strategic Report includes both statutory
and adjusted measures, the latter of which, reflects the underlying
performance of the business and provides a more meaningful
comparison of how the business is managed. APMs are not considered
to be a substitute for IFRS measures but provide additional insight
on the performance of the business. Reconciliations to amounts
appearing in the financial statements can be found in section
5.
( 3) MARKET CAPITALISATION: the closing mid-market share price
multiplied by the number of shares outstanding at period end.
( 4) SHARE PRICE (AT CLOSE): closing mid-market share price at
period end (excluding dividends reinvested).
( 5) PREMIUM / (DISCOUNT): the amount by which the price per
share of an investment trust is either higher (at a premium) or
lower (at a discount) than the net asset value per share (cum
income), expressed as a percentage of the net asset value per
share.
(6) ANNUALISED NAV RETURN: is calculated as Net Asset Value (Cum
Income) at the end of the period, plus dividends declared during
the period, divided by NAV (Cum Income) at the start of the period,
calculated on a per share basis, pro-rata for the number of the
days in the period
(7) PROFIT: is profit after taxation
(8) ITD: inception to date - excludes issue costs.
(9) TOTAL NAV RETURN: is calculated as Net Asset Value (Cum
Income) at the end of the period, plus dividends declared during
the period, divided by NAV (Cum Income) at the start of the period,
calculated on a per share basis. There was a 1.06 per cent uplift
on the inception to date total NAV per share return due to the
effect of shares being issued at a premium during May-17 capital
raise and 0.73 per cent in relation to the April-18 capital
raise.
(10) DEBT TO EQUITY: is calculated as the Group's interest
bearing debt divided by the net asset value, expressed as a
percentage.
(11) NET DEBT TO EQUITY: is calculated as the Group's interest
bearing debt, less cash and cash equivalents, divided by the net
asset value, expressed as a percentage.
(12) DIVID RETURN: is calculated as the total declared dividends
for the period divided by IPO issue price.
(13) ONGOING CHARGES RATIO: The Annualised Ongoing Charge is
calculated using the Association of Investment Companies
recommended methodology. It is calculated as a percentage of
annualised ongoing charge over average reported Net Asset Value.
Ongoing charges are those expenses of a type which are likely to
recur in the foreseeable future, whether charged to capital or
revenue, and which relate to the operation of the investment
company as a collective fund, excluding the costs of
acquisition/disposal of investments, financing charges and
gains/losses arising on investments. Ongoing charges are based on
costs incurred in the year as being the best estimate of future
costs. The AIC excludes performance fees from the Ongoing Charges
calculation
(14) For 30 June 2022 the period covered is 1 January 2022 to 30
June 2022, for 30 June 2021 the period covered is 1 January 2021 to
30 June 2021 and for 31 December 2021 the period covered is 1
January 2021 to 31 December 2021
2 Directors Report
Statement of Directors' Responsibilities
The Directors, being the persons responsible, confirm that to
the best of their knowledge:
a) the condensed set of Unaudited Financial Statements contained
within the half-yearly financial report have been prepared in
accordance with UK-adopted IAS 34 'Interim Financial Reporting', as
required by the Disclosure and Transparency Rule 4.2.4R, and gives
a true and fair view of the assets, liabilities and financial
position of the Group;
b) the Interim Management Report includes a fair review, as
required by Disclosure and Transparency Rule 4.2.7R, of important
events that have occurred during the first six months of the
financial year, their impact on the condensed set of unaudited
Financial Statements, and a description of the principal risks and
perceived uncertainties for the remaining six months of the
financial year; and
c) the Interim Management Report includes a fair review of the
information concerning related parties' transactions as required by
Disclosure and Transparency Rule 4.2.8R. Signed on behalf of the
Board by
Robert Sharpe
Chairman
12 September 2022
3 Unaudited Financial Statements
Consolidated Statement of Comprehensive Income
For the period from 1 For the period from 1
January 2022 to 30 June January 2021 to 30 June
2022 2021
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
====================== ===== ======== ======== ======== ======== ======== ========
Net Income
Interest Income
on credit assets
at amortised cost 3 25,045 - 25,045 29,479 - 29,479
Income on assets
at fair value
through profit
and loss 9 1,570 - 1,570 103 192 295
Credit impairment
releases / (charges) 8 128 - 128 (516) - (516)
Third party servicing (1,134) - (1,134) (1,469) - (1,469)
====================== ===== ======== ======== ======== ======== ======== ========
Net operating
income before
financing and
fund costs 25,609 - 25,609 27,597 192 27,789
Finance costs 14 (6,369) - (6,369) (6,644) - (6,644)
====================== ===== ======== ======== ======== ======== ======== ========
Net operating
income before
fund costs 19,240 - 19,240 20,953 192 21,145
Management and
performance fee 4 (4,370) (78) (4,448) (4,814) (75) (4,889)
Fund expenses 5 (1,047) - (1,047) (789) - (789)
Total operating
expenses (5,417) (78) (5,495) (5,603) (75) (5,678)
Profit / (loss)
before taxation 13,823 (78) 13,745 15,350 117 15,467
Tax expense - - - - - -
Profit / (loss)
after taxation 13,823 (78) 13,745 15,350 117 15,467
====================== ===== ======== ======== ======== ======== ======== ========
Earnings per share
(basic and diluted) 6 39.3p (0.2)p 39.1p 43.5p 0.3p 43.8p
====================== ===== ======== ======== ======== ======== ======== ========
The total column of this statement represents the Statement of
comprehensive income prepared in accordance UK-adopted
International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those
standards. The supplementary revenue return and capital return
columns are both prepared under guidance issued by the Association
of Investment Companies ("AIC"). All items in the above statement
derive from continuing operations.
No operations were discontinued during the period.
The Company does not have any income or expense that is not
included in net profit for the period. Accordingly, the net profit
for the period is also the Total Comprehensive Income for the
period, as defined in IAS1 (revised). There is no other
comprehensive income for the period.
The notes on pages 30 to 52 form an integral part of the
financial statements.
For the period from 1 January 2021 to 31 December 2021
Notes Revenue Capital Total
GBP'000 GBP'000 GBP'000
====================== ===== ======== ======== ========
Net Income
Interest Income
on credit assets
at amortised cost 3 56,484 - 56,484
Income / (Loss)
on credit and
equity assets
at fair value
through profit
and loss 9 1,874 (1,337) 537
Credit impairment
losses 8 844 - 844
Third party servicing (2,810) - (2,810)
====================== ===== ======== ======== ========
Net operating
income before
financing and
fund costs 56,392 (1,337) 55,055
Finance costs 14 (12,859) - (12,859)
====================== ===== ======== ======== ========
Net operating
income before
fund costs 43,533 (1,337) 42,196
Management and
performance fee 4 (9,560) (158) (9,718)
Fund expenses 5 (2,160) - (2,160)
Total operating
expenses (11,720) (158) (11,878)
Profit before
taxation 31,813 (1,495) 30,318
Tax expense - - -
Profit after
taxation 31,813 (1,495) 30,318
====================== ===== ======== ======== ========
Earnings per
share (basic and
diluted) 6 90.2p (4.2)p 86.0p
====================== ===== ======== ======== ========
The total column of this statement represents the Statement of
comprehensive income prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those
standards. The supplementary revenue return and capital return
columns are both prepared under guidance issued by the Association
of Investment Companies ("AIC"). All items in the above statement
derive from continuing operations.
No operations were discontinued during the year.
The Company does not have any income or expense that is not
included in net profit for the year. Accordingly, the net profit
for the year is also the Total Comprehensive Income for the year,
as defined in IAS1 (revised). There is no other comprehensive
income for the year.
The notes on pages 30 to 52 form an integral part of the
financial statements.
Consolidated Statement of Financial Position
Notes 30 June 2022 30 June 2021 31 December
GBP'000 GBP'000 2021
GBP'000
=============================== ===== ============ ============ ===========
Non-current assets
Assets held at fair value
through profit or loss 9 59,158 20,967 48,770
Credit assets at amortised
cost 8 523,476 573,113 565,994
Derivative assets held at
fair value through profit
or loss - 26 -
582,634 594,106 614,764
Current assets
Cash and cash equivalents 11,848 28,359 12,948
Receivables 12 1,002 5,320 6,554
=============================== ===== ============ ============ ===========
12,850 33,679 19,502
Total assets 595,484 627,785 634,266
Current liabilities
Management and performance
fee payable 4 (1,900) (2,770) (4,468)
Other payables 13 (1,559) (953) (2,691)
Derivative liability held
at fair value through profit
or loss (696) - (108)
Interest bearing borrowings 14 (62,601) (28,600) (49,339)
=============================== ===== ============ ============ ===========
(66,756) (32,323) (56,606)
Total assets less current
liabilities 528,728 595,462 577,660
Non-current liabilities
Interest bearing borrowings 14 (174,510) (236,867) (218,318)
Net assets 354,218 358,595 359,342
=============================== ===== ============ ============ ===========
Shareholders' funds
Ordinary share capital 15 347 352 352
Share premium 299,599 299,599 299,599
Revenue reserves 4,567 2,431 4,790
Capital reserves (2,322) (632) (2,244)
Special distributable reserves 16 52,027 56,845 56,845
=============================== ===== ============ ============ ===========
Total shareholders' funds 354,218 358,595 359,342
=============================== ===== ============ ============ ===========
Net asset value per share 18 1,019.7p 1,017.0p 1,019.1p
=============================== ===== ============ ============ ===========
The notes on pages 30 to 52 form an integral part of the
financial statements. The financial statements on pages 25 to 30
were approved by the Board of Directors of Honeycomb Investment
Trust plc (a public limited company incorporated in England and
Wales with company number 09899024) and authorised for issue on 12
September 2022.
Consolidated Statement of Changes in Shareholders' Funds
For the period from 1 January 2022 to 30 June 2022
Ordinary Special
Share Share Revenue Capital Distributable Total
Capital Premium Reserves Reserves Reserves Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
====================== ======== ======== ========= ========= ============== ========
Shareholders'
funds at
1 January 2022 352 299,599 4,790 (2,244) 56,845 359,342
====================== ======== ======== ========= ========= ============== ========
Ordinary shares
bought back (5) - - - (4,818) (4,823)
====================== ======== ======== ========= ========= ============== ========
Profit after taxation - - 13,823 (78) - 13,745
====================== ======== ======== ========= ========= ============== ========
Dividends paid
in the period - - (14,046) - - (14,046)
====================== ======== ======== ========= ========= ============== ========
Shareholders'
funds at
30 June 2022 347 299,599 4,567 (2,322) 52,027 354,218
====================== ======== ======== ========= ========= ============== ========
The Group's capital reserve arising on investments sold and
revenue reserve may be distributed by way of a dividend. The
portion of capital reserve arising on investments held is wholly
non-distributable. There may be factors that restrict the value of
the reserves that can be distributed and these factors may be
complex to determine. Amounts fully distributable may therefore not
be the total of the revenue reserve and the portion of the capital
reserve arising on investments sold.
For the period from 1 January 2021 to 30 June 2021
Ordinary Special
Share Share Revenue Capital Distributable Total
Capital Premium Reserves Reserves Reserves Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ ======== ======== ========= ========= ============== ========
Shareholders'
funds at
1 January 2021 352 299,599 1,185 (749) 56,845 357,232
================ ======== ======== ========= ========= ============== ========
Ordinary shares - - - - - -
bought back
================ ======== ======== ========= ========= ============== ========
Profit / (Loss)
after taxation - - 15,350 117 - 15,467
================ ======== ======== ========= ========= ============== ========
Dividends paid
in the period - - (14,104) - - (14,104)
================ ======== ======== ========= ========= ============== ========
Shareholders'
funds at
30 June 2021 352 299,599 2,431 (632) 56,845 358,595
================ ======== ======== ========= ========= ============== ========
The Group's capital reserve arising on investments sold and
revenue reserve may be distributed by way of a dividend. The
portion of capital reserve arising on investments held is wholly
non-distributable. There may be factors that restrict the value of
the reserves that can be distributed and these factors may be
complex to determine. Amounts fully distributable may therefore not
be the total of the revenue reserve and the portion of the capital
reserve arising on investments sold.
For the year ended 31 December 2021
Ordinary Special
Share Share Revenue Capital Distributable Total
Capital Premium Reserves Reserves Reserves Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================== ======== ======== ========= ========= ============== ========
Shareholders'
funds at
1 January 2021 352 299,599 1,185 (749) 56,845 357,232
================== ======== ======== ========= ========= ============== ========
Ordinary shares - - - - - -
bought back
================== ======== ======== ========= ========= ============== ========
Profit / (Loss)
after taxation - - 31,813 (1,495) - 30,318
================== ======== ======== ========= ========= ============== ========
Dividends paid
in the year - - (28,208) - - (28,208)
================== ======== ======== ========= ========= ============== ========
Shareholders'
funds at
31 December 2021 352 299,599 4,790 (2,244) 56,845 359,342
================== ======== ======== ========= ========= ============== ========
The Group's capital reserve arising on investments sold and
revenue reserve may be distributed by way of a dividend. The
portion of capital reserve arising on investments held is wholly
non-distributable. There may be factors that restrict the value of
the reserves that can be distributed and these factors may be
complex to determine. Amounts fully distributable may therefore not
be the total of the revenue reserve and the portion of the capital
reserve arising on investments sold.
The notes on pages 30 to 52 form an integral part of the
financial statements.
Consolidated Statement of Cash Flows
For the period ended 30 June 2022
30 June 2022 30 June 2021 31 December
GBP'000 GBP'000 2021
Notes GBP'000
=============================== ===== ============ ============ ===========
Cash flows from operating
activities:
Profit after taxation 13,745 15,467 30,318
Adjustments for:
Net purchase of fair
value credit investments 9 (8,554) - (21,583)
(Advances) / repayments
of investments at amortised
cost 42,644 (25,892) (22,883)
Change in expected credit
loss 8 (128) 516 (844)
Net change in unrealised
gains 9 (1,834) (103) (854)
Finance costs 6,369 6,644 12,859
(Increase) / decrease
in receivables 12 5,552 1,453 219
Increase in derivatives 587 (5) 130
Increase in payables 13 (3,700) (3,449) (13)
=============================== ===== ============ ============ ===========
Net cash inflow from
operating activities 54,681 (5,369) (2,651)
Cash flows from financing
activities:
Redemption of shares 16 (4,820) - -
Drawdown of interest
bearing borrowings 14 - - 27,000
Repayments of interest-bearing
borrowings 14 (31,372) (9,092) (34,375)
Interest paid on financing
activities 14 (5,543) (5,624) (11,366)
Dividends declared and
paid 7 (14,046) (14,104) (28,208)
=============================== ===== ============ ============ ===========
Net cash (outflow) from
financing activities (55,781) (28,820) (46,949)
Net change in cash and
cash equivalents (1,100) (34,189) (49,600)
Cash and cash equivalents
at the beginning of
the period 12,948 62,548 62,548
============ ============ ===========
Cash and cash equivalents 11,848 28,359 12,948
=============================== ===== ============ ============ ===========
The notes on pages 30 to 52 form an integral part of the
financial statements.
Notes to the Financial Statements
1. General Information
Honeycomb Investment Trust plc (the "Company") and its
subsidiaries (together, the "Group") is a closed-ended investment
company incorporated in England and Wales on 2 December 2015 with
registered number 09899024. The registered office is 6th Floor, 65
Gresham Street, London, EC2V 7NQ, United Kingdom. The Company
commenced operations on 23 December 2015 and carries on business as
an investment trust within the meaning of chapter 4 of Part 24 of
the Corporation Tax Act 2010.
The Group's investment objective is to provide shareholders with
an attractive level of dividend income and capital growth through
the acquisition of Credit Assets, together with selected equity
investments that are aligned with the Group's strategy and that
present opportunities to enhance the Group's returns from its
investments.
The Group seeks to acquire Credit Assets which meet the
specified underwriting criteria through two routes; (1) providing
structured loans to specialist finance companies whereby the Group
takes security on the assets originated by the borrower with the
borrower also providing 'first loss' in the form of 'real capital'
whilst the Group provides the senior capital; and (2) acquiring
portfolios of whole loans whereby the Group is exposed to the
underlying risk and rewards of the loan that have the potential to
provide attractive returns for investors on a risk-adjusted
basis.
The Group's investment manager is Pollen Street Capital Limited
a UK-based company authorised and regulated by the FCA, who also
acts as the Alternative Investment Fund Manager (the "AIFM") under
the Alternative Investment Fund Managers Directive (the "AIFMD").
The Group is defined as an Alternative Investment Fund and is
subject to the relevant articles of the AIFMD.
As at 30 June 2022 the Company's share capital comprised
39,449,919 ordinary shares in issue (30 June 2021: 39,449,919, 31
December 2021: 39,449,919), of which 4,712,985 were held by the
Company as treasury shares (30 June 2021: 4,190,178, 31 December
2021: 4,190,178). The total number of voting rights at 30 June 2022
was therefore 35,259,741 (30 June 2021: 35,259,741, 31 December
2021: 35,259,741). These shares are listed and trade on the Premium
Segment of the London Stock Exchange's main market.
2. Principal Accounting Policies
Basis of accounting
The financial statements for the 6 months period ended 30 June
2022 have been prepared on the basis of the policies set out in the
2021 annual financial statements and in accordance with UK adopted
IAS 34 and the Disclosure Guidance and Transparency Rules
sourcebook of the UK's Financial Conduct Authority.
The results for the half year ended 30 June 2022 constitute
non-statutory accounts within the meaning of Section 435 of the
Companies Act 2006 and have not been audited by the Group's
Auditor.
The interim financial statements need to be read in conjunction
with the annual consolidated financial statements for the year
ended 31 December 2021 which were prepared in accordance with
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The financial statements have been prepared on a going concern
basis and under the historic cost convention modified by the
revaluation of financial assets held at fair value through profit
and loss as applicable. The Directors consider that the Group has
adequate financial resources to enable it to continue operations
for a period of no less than 12 months from the reporting date.
Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements.
The principal accounting policies adopted by the Group are
consistent with those set out on pages 76 - 87 of the Annual report
2021. Where presentational guidance set out in the Statement of
Recommended Practice ("SORP") for investment trusts issued by the
Association of Investment Companies ("AIC") in November 2014 is
consistent with the requirements of IFRS, the Directors have sought
to prepare the financial statements on a basis compliant with the
recommendations of the SORP.
All values are rounded to the nearest thousand pounds unless
otherwise indicated.
Significant Accounting Judgements, Estimates and Assumptions
The preparation of financial statements in accordance with both
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards requires the Group to make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting
period. UK company law and IFRS require the Directors, in preparing
the Group's financial statements, to select suitable accounting
policies, apply them consistently and make judgements and estimates
that are reasonable. The Group's estimates and assumptions are
based on historical experience and expectations of future events
and are reviewed on an ongoing basis. Although these estimates are
based on the Directors' best knowledge of the amount, actual
results may differ ultimately from those estimates.
The estimates of most significance to the financial statements,
are in relation to expected credit losses, equity investments at
fair value through profit or loss and consolidation. These have
been applied consistently with the methodology detailed in the
annual report on pages 88 to 90.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
To estimate expected credit losses, the Group uses a model to
project a number of key variables to generate future economic
scenarios. These scenarios are used to produce a weighted average
probability of default ("PD") for each product grouping which is
used to determine stage allocation and calculate the related ECL
allowance. Scenario probabilities reflect management judgement and
are informed by data analysis of past recessions, transitions in
and out of recession, and the current economic outlook. The key
assumptions made, and the accompanying paths, represent the 'best
estimate' of a scenario at a specified probability. The scenarios
have been updated using the latest economic forecasts produced by
Oxford Economics for June 2022 and an assessment of the potential
outlook for the economy in light of the evolving macro economic
situation. The impact of the change in scenarios is not
material.
3. Interest income on credit assets at amortised cost
Group 30 June 2022 30 June 2021 31 December
GBP'000 GBP'000 2021
GBP'000
============================ ============ ============ ===========
Investment income
Interest income 22,867 27,067 51,900
Commitment fee income 808 1,218 2,403
Arrangement fee income 1,291 1,207 2,232
Net profit / (loss) on
foreign exchange 75 (13) (53)
Total investment income 25,041 29,479 56,482
Other income
Deposit interest 4 - 2
============ ============ ===========
Total income 25,045 29,479 56,484
============================ ============ ============ ===========
*Net profit / (loss) on foreign exchange also includes fair
value movements on derivatives taken out to economically hedge fair
value exposures
4. Management and Performance Fee
Management Fee
The management fee is calculated and payable monthly in arrears
at a rate equal to 1/12 of 1.0 per cent per month of Gross Asset
Value (the "Management Fee"). Gross Asset Value is the equivalent
of Total Assets on the Consolidated Statement of Financial
Position. The aggregate fee payable on this basis must not exceed
1.0 per cent of the gross assets of the Company and its group in
any year. The Management Fee is allocated between the revenue and
capital accounts based on the prospective split of the Gross Asset
Value between revenue and capital.
In respect of any issue of Ordinary Shares or C Shares, until
the date on which 80 per cent of the net proceeds of such issue
have been invested or committed to be invested in Credit Assets or
Equity Assets, the Net Asset Value attributable to such Ordinary
Shares or C Shares shall, for the purposes of the Management Fee,
exclude any portion of the issue proceeds in cash, or invested in
cash deposits or cash equivalent investments. Where there are C
Shares in issue, the Management Fee will be calculated separately
on the gross assets attributable to the Ordinary Shares and the C
Shares.
Management fees charged for the period ended 30 June 2022
totalled GBP2.9 million (30 June 2021: GBP3.2 million, 31 December
2021: GBP6.4 million) of which GBP0.4 million was payable at 30
June 2022 (30 June 2021: GBP1.1 million, 31 December 2021: GBP1.0
million).
Performance Fee
The Investment Manager is also entitled to a performance fee,
which is calculated in respect of each twelve-month period starting
on 1 January and ending on 31 December in each calendar year
("Calculation Period"), and the nal Calculation Period shall end on
the day on which the management agreement is terminated or, if
earlier, the business day immediately preceding the day on which
the Company goes into liquidation.
The performance fee will only be payable if the Adjusted Net
Asset Value at the end of a Calculation Period exceeds a hurdle
threshold, equal to the Adjusted Net Asset Value immediately
following admission to trading on the London Stock Exchange,
compounded at a rate equal to 5 per cent per annum (the
"Hurdle").
If, on the last day of a Calculation Period (each a "Calculation
Date"), the Adjusted Net Asset Value exceeds the Hurdle, the
Investment Manager shall be entitled to a performance fee equal to
the lower of:
a) the amount by which the Adjusted Net Asset Value exceeds the
Hurdle, in each case as at the Calculation Date; and
b) 10 per cent of the amount by which total growth in Adjusted
Net Asset Value since first admission (being the aggregate of the
growth in Adjusted Net Asset Value in the relevant Calculation
Period and in each previous Calculation Period), after adding back
any performance fees paid to the Investment Manager, exceeds the
aggregate of all performance fees payable to the Investment Manager
in respect of all previous Calculation Periods.
'Adjusted Net Asset Value' means the Net Asset Value after: (i)
excluding any increases or decreases in Net Asset Value
attributable to the issue or repurchase of any Ordinary Shares;
(ii) adding back the aggregate amount of any dividends paid or
distributions made in respect of any Ordinary Shares; (iii)
excluding the aggregate amount of any dividends or distributions
accrued but unpaid in respect of any Ordinary Shares; and (iv)
excluding the amount of any Performance Fees accrued but unpaid, in
each case without double counting.
In the event that C Shares are in issue, the Investment Manager
shall be entitled to a performance fee in respect of the net assets
referable to the C Shares on the same basis as summarised above,
except that a Calculation Period shall be deemed to end on the date
of the conversion of the relevant tranche of C Shares into Ordinary
Shares.
Performance fees for the period ended 30 June 2022 totalled
GBP1.5 million (30 June 2021: GBP1.7 million, 31 December 2021:
GBP3.4 million) of which GBP1.5 million was payable at 30 June 2022
(30 June 2021: GBP1.7 million, 31 December 2021: GBP3.4
million).
5. Fund expenses
Group 30 June 2022 30 June 2021 31 December
GBP'000 GBP'000 2021
GBP'000
======================= ============ ============ ===========
Directors' fees 112 99 203
Administrator's fees 89 89 179
Auditors' remuneration 160 143 319
Project Costs - 48 18
Other expenses 686 410 1,441
Total fund expenses 1,047 789 2,160
======================= ============ ============ ===========
All expenses where applicable are exclusive of VAT. Directors'
fees at the period ended 30 June 2022 include GBP111,875 (30 June
2021: GBP99,000, 31 December 2021: GBP203,000) paid to
Directors'.
6. Earnings per share
Group 31 December
30 June 2022 30 June 2021 2021
============================ ============ ============ ===========
Revenue 39.3p 43.5p 90.2p
Capital (0.2)p 0.3p (4.2)p
============================ ============ ============ ===========
Earnings per ordinary share 39.1p 43.8p 86.0p
============================ ============ ============ ===========
The calculation for the period ended 30 June 2022 is based on a
profit after tax of GBP13.8 million (30 June 2021: GBP15.4 million,
31 December 2021: GBP31.8 million) and capital returns of (GBP0.1)
million (30 June 2021: GBP0.1 million, 31 December 2021: (GBP1.5)
million) and total returns of GBP13.7 million (30 June 2021:
GBP15.5 million, 31 December 2021: GBP30.3 million) and a weighted
average number of ordinary shares of 35,135,634 (30 June 2021:
35,259,741, 31 December 2021: 35,259,741).
7. Ordinary dividends
30 June 2022 30 June 2021 31 December
GBP'000 GBP'000 2021
GBP'000
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 31 December
2020 (paid 26 March 2021) - 7,052 7,052
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 31 March 2021
(paid on 25 June 2021) - 7,052 7,052
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 30 June 2021
(paid on 30 September 2021) - - 7,052
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 30 September
2021
(paid 24 December 2021) - - 7,052
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 31 December
2021
(paid 22 March 2022) 7,052 - -
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 31 March 2022
(paid on 22 June 2022) 6,994 - -
============================= ============ ============ ===========
Total dividend paid/to be
paid in relation to period 14,046 14,104 28,208
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 30 June 2022
(to be paid on 30 September
2022) 6,947 - -
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 30 June 2021
(paid on 30 September 2021) 7,052
============================= ============ ============ ===========
20.00p Interim dividend for
the period to 31 December
2021
(paid 25 March 2022) - - 7,052
============================= ============ ============ ===========
Total dividend paid/to be
paid in relation to period 13,941 14,104 28,208
============================= ============ ============ ===========
The 30 September 2022 interim dividend of 20.00 pence was
approved on 6 September 2022 and will be paid on 30 September 2022
.
8. Investments at Amortised Cost
(a) Credit Assets at amortised cost
The disclosure below presents the gross carrying value of
financial instruments to which the impairment requirements in IFRS
9 are applied and the associated allowance for ECL. Please see Note
2 for more detail on the allowance for ECL.
The following table analyses loans by industry sector and
represent the concentration of exposures on which credit risk is
managed for the Group as at 30 June 2022.
30 June 2022 31 December 2021
================== ========================================== ============================================
Group and Gross Carrying Allowance Net Carrying Gross Carrying Allowance Net Carrying
Company Amount for ECL Amount Amount for ECL Amount
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================== ================= ========= ============ ============== ========= =================
Total Assets
at amortised
cost 532,866 (9,390) 523,476 576,780 (10,786) 565,994
================== ================= ========= ============ ============== ========= =================
The following table analyses loans by staging for both the Group
and Company as at 30 June 2022:
============================================================================================================
30 June 2022 31 December 2021
================== ========================================== ============================================
Group and Gross Carrying Allowance Net Carrying Gross Carrying Allowance Net Carrying
Company Amount for ECL Amount Amount for ECL Amount
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================== ================= ========= ============ ============== ========= =================
Credit Assets at amortised
cost
Stage 1 502,292 (1,103) 501,189 544,233 (952) 543,281
Stage 2 5,575 (618) 4,957 6,363 (946) 5,417
Stage 3 24,999 (7,669) 17,330 26,184 (8,888) 17,296
Total Assets 532,866 (9,390) 523,476 576,780 (10,786) 565,994
================== ================= ========= ============ ============== ========= =================
Group and Company Stage 1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
===================================== ========= ============ ============== ==============================
At 1 January 2022 952 946 8,888 10,786
Movement from stage 1 to
stage 2 (2) 134 - 132
Movement from stage 1 to
stage 3 (1) - 59 58
Movement from stage 2 to
stage 1 3 (163) - (160)
Movement from stage 2 to
stage 3 - (172) 236 64
Movement from stage 3 to
stage 1 - - (182) (182)
Movement from stage 3 to
stage 2 - 24 (59) (35)
Decreases due to repayments 264 (18) (863) (617)
Increases due to origination - - - -
Remeasurements due to modelling (18) (96) 726 612
Loans sold (95) (37) (131) (263)
Loans written off - - (1,005) (1,005)
===================================== ========= ============ ============== ==============================
Allowance for ECL at 30
June 2022 1,103 618 7,669 9,390
===================================== ========= ============ ============== ==============================
Group and Company Stage Total
1 Stage 2 Stage 3 GBP'000
GBP'000 GBP'000 GBP'000
============================= ========= ========= ========= =========
At 1 January 2021 1,464 1,927 27,086 30,477
Movement from stage 1
to stage 2 (39) 465 - 426
Movement from stage 1
to stage 3 (84) - 2,286 2,202
Movement from stage 2
to stage 1 9 (302) - (293)
Movement from stage 2
to stage 3 - (698) 890 192
Movement from stage 3
to stage 1 8 - (587) (579)
Movement from stage 3
to stage 2 - 145 (385) (240)
Remeasurements due to
repayments, originations,
sales and remodelling 691 (28) (2,149) (1,486)
Allowances on loans written
off - (1) (289) (290)
============================= ========= ========= ========= =========
Allowance for ECL at
30 June 2021 2,049 1,508 ) 26,852 30,409
============================= ========= ========= ========= =========
Group and Company Stage Total
1 Stage 2 Stage 3 GBP'000
GBP'000 GBP'000 GBP'000
================================= ========= ========= ========= =========
At 1 January 2021 1,464 1,927 27,086 30,477
Movement from stage 1 to
stage 2 (8) 450 - 442
Movement from stage 1 to
stage 3 (2) - 766 764
Movement from stage 2 to
stage 1 - (218) - (218)
Movement from stage 2 to
stage 3 - (321) 432 111
Movement from stage 3 to
stage 1 2 - (388) (386)
Movement from stage 3 to
stage 2 - 58 (237) (179)
Decreases due to repayments (53) (139) (1,651) (1,843)
Increases due to origination 67 - - 67
Remeasurements due to modelling 460 33 (94) 399
Loans sold (978) (843) (16,714) (18,535)
Loans written off - (1) (312) (313)
Allowance for ECL at 31
December 2021 952 946 8,888 10,786
================================= ========= ========= ========= =========
(b) Expected Credit Loss allowance for IFRS 9
Under the expected credit loss model introduced by IFRS 9
Impairment Provisions are driven by changes in credit risk of
instruments, with a provision for lifetime expected credit losses
recognised where the risk of default of an instrument has increased
significantly since initial recognition.
The following table analyses Group loans by stage and sector for
the period ended 30 June 2022:
Group Total
GBP'000
=========================== =========
At 1 January 2022 10,786
Charge for period - Stage
1 (32)
Charge for period - Stage
2 (15)
Charge for period - Stage
3 (81)
Charge for period - total (128)
Loans sold & write-offs (1,268)
Allowance for ECL at 30
June 2022 9,390
============================== =========
The following table analyses Group loans by stage and sector for
the period ended 30 June 2021:
Group Total
GBP'000
============================== =========
At 1 January 2021 30,477
Charge for period - Stage
1 585
Charge for period - Stage
2 (418)
Charge for period - Stage
3 349
Charge for period - total 516
Loans sold (248)
Gross value of loans written
off (336)
================================= =========
Allowance for ECL at 30
June 2021 30,409
================================= =========
The following table analyses Group loans by stage and sector for
the period ended 31 December 2021:
Group Total
GBP'000
=========================== =========
At 1 January 2022 30,477
Charge for period - Stage
1 290
Charge for period - Stage
2 (483)
Charge for period - Stage
3 (651)
Charge for period - total (844)
Loans sold (18,847)
Allowance for ECL at 31
December 2021 10,786
============================== =========
Measurement uncertainty and sensitivity analysis of ECL
The recognition and measurement of ECL is highly complex and
involves the use of significant judgement and estimation. This
includes the formulation and incorporation of multiple
forward-looking economic conditions into ECL to meet the
measurement objective of IFRS 9.
The Group has adopted the use of three economic scenarios,
representative of Oxford Economics view of forecast economic
conditions, sufficient to calculate unbiased ECL. They represent a
'most likely outcome' (the Base scenario) and two, less likely,
'outer' scenarios, referred to as the 'Upside' and 'Downside'
scenarios.
The ECL recognised in the financial statements reflect the
effect on expected credit losses of a range of possible outcomes,
calculated on a probability-weighted basis, based on the economic
scenarios described in Note 2 to the financial statements,
including management overlays where required. The
probability-weighted amount is typically a higher number than would
result from using only the Base (most likely) economic scenario.
ECLs typically have a non-linear relationship to the many factors
which influence credit losses, such that more favourable
macroeconomic factors do not reduce defaults as much as less
favourable macroeconomic factors increase defaults. The ECL
calculated for each of the scenarios represent a range of possible
outcomes that have been evaluated to estimate ECL. As a result, the
ECL calculated for the Upside and Downside scenarios should not be
taken to represent the upper and lower limits of possible actual
ECL outcomes. There is a high degree of estimation uncertainty in
numbers representing tail risk scenarios when assigned a 100 per
cent. A wider range of possible ECL outcomes reflects uncertainty
about the distribution of economic conditions and does not
necessarily mean that credit risk on the associated loans is higher
than for loans where the distribution of possible future economic
conditions is narrower.
For stage 3 impaired loans, LGD estimates consider independent
recovery valuations provided by external consultants where
available, or internal forecasts corresponding to anticipated
economic conditions.
9. Assets at Fair Value Through Profit or Loss
Total assets at fair value through profit or loss
(a) Movements in the period
The tables below set out the total movement in assets measured
at fair value through profit or loss for the Group for the periods
ended 30 June 2022, 30 June 2021 and 31 December 2021.
Group
GBP'000
======================================= =========
Opening fair value 48,770
Purchases at cost 9,587
Disposal at cost (1,033)
Income on fair value assets 1,570
Realised income on fair value assets (819)
FX revaluation on fair value assets 1,083
Closing fair value at 30 June 2022 59,158
Comprising:
Equity assets at fair value 15,659
Credit assets at fair value 43,499
Closing fair value as at 30 June 2022 59,158
======================================= =========
Group
GBP'000
======================================= =========
Opening fair value 20,864
Purchases at cost -
Disposal at cost -
Income on fair value assets 103
Realised income on fair value assets -
Closing fair value at 30 June 2021 20,967
Comprising:
Equity assets at fair value 3,035
Credit assets at fair value 17,932
Closing fair value as at 30 June 2021 20,967
Group
GBP'000
=========================================== =========
Opening fair value 20,864
Purchases at cost 31,347
Reclassification from loans at amortised
cost 5,476
Disposal at cost (9,726)
Income on fair value assets 809
Realised income on fair value assets -
Closing fair value at 31 December 2021 48,770
Comprising:
Equity assets at fair value 15,659
Credit assets at fair value 33,111
Closing fair value as at 31 December 2021 48,770
(b) Fair value of financial instruments
IFRS 13 requires the Company to classify its financial
instruments held at fair value using a hierarchy that reflects the
significance of the inputs used in the valuation methodologies.
These are as follows:
-- Level 1 - quoted prices in active markets for identical investments;
-- Level 2 - other significant observable inputs (including
quoted prices for similar investments, interest rates, prepayments,
credit risk, etc.); and
-- Level 3 - significant unobservable inputs (including the
Company's own assumptions in determining the fair value of
investments).
An investment is always categorised as Level 1, 2 or 3 in its
entirety. In certain cases, the fair value measurement for an
investment may use a number of different inputs that fall into
different levels of the fair value hierarchy. In such cases, an
investment's level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement. The assessment of the significance of a particular
input to the fair value measurement requires judgement and is
specific to the investment.
The following sets out the classifications in valuing the
Group's investments:
Group Closing fair value Closing fair value Closing fair value
as at 30 June 2022 as at 30 June 2021 as at 31 December
GBP'000 GBP'000 2021
GBP'000
========= ==================== ==================== ===================
Level 1 - - -
Level 2 - - -
Level 3 59,158 48,770 20,967
========= ==================== ==================== ===================
Total 59,158 48,770 20,967
========= ==================== ==================== ===================
Equity assets at Fair value through profit or loss
The tables below set out the movement in equity assets measured
at fair value through profit or loss for the Group for the periods
ended 30 June 2022, 30 June 2021 and 31 December 2021.
Group
GBP'000
======================================= =========
Opening fair value 15,659
Purchases at cost -
Disposal at cost -
Income on fair value assets -
Realised income on fair value assets -
FX revaluation on fair value assets -
Closing fair value at 30 June 2022 15,659
Comprising:
Valued using an earnings multiple 1,359
Valued using a TNAV multiple 14,300
Closing fair value as at 30 June 2022 15,659
======================================= =========
Group
GBP'000
======================================= =========
Opening fair value 14,959
Purchases at cost -
Disposal at cost -
Income on fair value assets -
Realised income on fair value assets -
FX revaluation on fair value assets -
Closing fair value at 30 June 2021 14,959
Comprising:
Valued using an earnings multiple 1,380
Valued using a TNAV multiple 13,579
Closing fair value as at 30 June 2021 14,959
======================================= =========
Group
GBP'000
=========================================== =========
Opening fair value 14,959
Purchases at cost 2,037
Disposal at cost -
Income on fair value assets (1,337)
Realised income on fair value assets -
Closing fair value at 31 December 2021 15,659
Comprising:
Valued using an earnings multiple 1,359
Valued using a TNAV multiple 14,300
Closing fair value as at 31 December 2021 15,659
=========================================== =========
Credit assets at fair value through profit or loss
The tables below set out the movement in credit assets measured
at fair value through profit or loss for the Group for the periods
ended 30 June 2022, 30 June 2021 and 31 December 2021.
Group 2022
GBP'000
======================================= =========
Opening fair value 33,111
Purchases at cost 9,587
Disposal at cost (1,033)
Income on fair value assets 1,570
Realised income on fair value assets (819)
FX revaluation on fair value assets 1,083
Closing fair value at 30 June 2022 43,499
Comprising:
Valued using an earnings multiple -
Valued using a TNAV multiple 43,499
Closing fair value as at 30 June 2022 43,499
======================================= =========
Group
GBP'000
======================================= =========
Opening fair value 5,905
Purchases at cost -
Disposals -
Income on fair value assets 103
Realised income on fair value assets -
FX revaluation on fair value assets -
Closing fair value at 30 June 2021 6,008
Comprising:
Valued using an earnings multiple 1,655
Valued using a TNAV multiple 4,353
Closing fair value as at 30 June 2021 6,008
Group
GBP'000
=============================================== =========
Opening fair value 5,905
Purchases at cost 29,310
Reclassification from loans at amortised cost 5,476
Disposals (9,726)
P&L on fair value assets 2,146
Closing fair value at 31 December 2021 33,111
Comprising:
Valued using an earnings multiple 7,775
Valued using a TNAV multiple 25,336
Closing fair value as at 31 December 2021 33,111
10. Financial Risk Management
The Group's investing activities undertaken in pursuit of its
investment objective involve certain inherent risks. The main
financial risks arising from the Group's financial instruments are
credit risk, market risk and liquidity risk. The Board reviews and
agrees policies for managing each of these risks as summarised
below. Credit risk is analysed further in Note 11.
Market risk
The fair value or future cash flows of a financial instrument
held by the Group may fluctuate because of changes in market
prices. Market risk can be summarised as comprising three types of
risk:
-- Interest rate risk - the risk that the fair value or future
cash flows of financial instruments will fluctuate because of
changes in market interest rates; and
-- Currency risk - the risk that the fair value or future cash
flows of financial instruments will fluctuate because of changes in
foreign exchange rates.
-- Price risk - the risk that the fair value or future cash
flows of financial instruments will fluctuate because of changes in
market prices (other than those arising from interest rate risk or
currency risk);
The Group's exposure, sensitivity to and management of each of
these risks is described in further detail below. Management of
market risk is fundamental to the Group's investment objective. The
investment portfolio is continually monitored to ensure an
appropriate balance of risk and reward. The Board has also
established a series of investment parameters, which are reviewed
annually, designed to limit the risk inherent in managing a
portfolio of investments.
(a) Interest rate risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows or the fair value of
financial instruments.
The Group invests in Credit Assets which may be subject to a
fixed rate of interest, or a floating rate of interest (which may
be linked to base rates or other benchmarks). The Group's
borrowings may be subject to a floating rate of interest.
The Group manages the mismatch it has in respect of the income
generated by its Credit Assets, on the one hand, with the
liabilities in respect of its borrowings, on the other hand, by
matching any floating rate borrowings with investments in Credit
Assets that are also subject to a floating rate of interest. To the
extent that the Group is unable to match its funding in this way,
it may use derivative instruments, including interest rate swaps,
to reduce its exposure to fluctuations in interest rates, however
some unmatched risk may remain. The Group has not used any interest
rate derivate instruments in the period.
The Group finances its operations through its share capital and
reserves, including realised gains on investments as well as the
Group's debt facilities. As at 30 June 2022 the Group had GBP237.1
million drawn down under these facilities (30 June 2021: GBP265.5
million, 31 December 2021: GBP270.0 million).
Exposure of the Group's financial assets and liabilities to
floating interest rates and fixed interest rates as at 30 June 2022
is shown below:
Floating Rate Fixed Rate Total
Group Financial instrument GBP'000 GBP'000 GBP'000
=========================== ============= ========== =========
Credit Assets at
amortised cost 245,737 277,739 523,476
Credit Assets at
fair value 23,385 20,114 43,499
Cash and cash equivalents 11,848 - 11,848
Interest bearing
borrowings (237,111) - (237,111)
=========================== ============= ========== =========
Net total exposure 43,859 297,853 341,712
=========================== ============= ========== =========
Exposure of the Group's financial assets and liabilities to
floating interest rates (giving cash flow interest rate risk when
rates are reset) and fixed interest rates (giving fair value risk)
as at 30 June 2021 is shown below:
Fixed or Administered
Floating Rate Rate Total
Group Financial instrument GBP'000 GBP'000 GBP'000
=========================== ============= ===================== =========
Credit Assets at
amortised cost 248,202 324,911 573,113
Cash and cash equivalents 28,359 - 28,359
Interest bearing
borrowings (265,467) - (265,467)
=========================== ============= ===================== =========
Net total exposure 11,094 324,911 336,005
=========================== ============= ===================== =========
Exposure of the Group's financial assets and liabilities to
floating interest rates (giving cash flow interest rate risk when
rates are reset) and fixed interest rates (giving fair value risk)
as at 31 December 2021 is shown below:
Fixed or Administered
Floating Rate Rate Total
Group Financial instrument GBP'000 GBP'000 GBP'000
=========================== ============= ===================== =========
Credit Assets at
amortised cost 269,053 296,941 565,994
Cash and cash equivalents 12,948 - 12,948
Interest bearing
borrowings (267,657) - (267,657)
=========================== ============= ===================== =========
Net total exposure 14,344 296,941 311,285
=========================== ============= ===================== =========
(b) Currency risk
Currency risk is the risk that the value of net assets will
fluctuate due to changes in foreign exchange rates. Relevant risk
variables are generally movements in the exchange rates of foreign
currencies in which the Group holds financial assets and
liabilities. The assets of the Group are invested in Credit Assets
and other investments including unquoted equities which are
denominated in Pounds Sterling and other currencies. Accordingly,
the value of such assets may be affected favourably or unfavourably
by fluctuations in currency rates. The Group generally hedges
currency exposure between Pounds Sterling and other currencies.
Concentration of foreign currency exposure
The Investment Manager monitors the fluctuations in foreign
currency exchange rates and may use forward foreign exchange
contracts to hedge the currency exposure of the Group's non-GBP
denominated investments. The Investment Manager re-examines the
currency exposure on a regular basis in each currency and manages
the Group's currency exposure in accordance with market
expectations. The Group does not currently designate any
derivatives as hedges for hedge accounting purposes as described
under IFRS 9 and records its derivative activities on a fair value
basis.
The below table presents the net exposure to Euros and US
Dollars at 30 June 2022. The table includes forward foreign
exchange contracts at their notional exposure value and excludes
all GBP assets and liabilities recorded on the Consolidated
Statement of Financial Position.
Currency Net Exposure after
Total Assets Total Liabilities Forward Contract Forward Contract
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
=============== ============ ================= ================ ==================
Euros 17,668 (19) (17,050) 599
US Dollars 22,663 (39) (21,766) 858
=============== ============ ================= ================ ==================
Total exposure 40,331 (58) (38,816) 1,457
=============== ============ ================= ================ ==================
If the GBP exchange rate simultaneously increased or decreased
by 10 per cent against the above currencies, the impact on profit
would be an increase or decrease of GBP146,000. 10 per cent is
considered to be a reasonably possible movement in foreign exchange
rates. All forward contracts held at 30 June 2022 were carried out
with Lumon Pay Limited.
The below table presents the net exposure to Euros and US
Dollars at 30 June 2021.
Currency Net Exposure after
Total Assets Total Liabilities Forward Contract Forward Contract
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
=============== ============ ================= ================ ==================
Euros 3,718 (7) (3,515) 196
US Dollars 2,227 (12) (2,170) 45
=============== ============ ================= ================ ==================
Total exposure 5,945 (19) (5,685) 241
=============== ============ ================= ================ ==================
The below table presents the net exposure to Euros at 31
December 2021, there was no US Dollar exposure. The table includes
forward foreign exchange contracts at their notional exposure value
and excludes all GBP assets and liabilities recorded on the
Consolidated Statement of Financial Position.
Currency Net Exposure after
Total Assets Total Liabilities Forward Contract Forward Contract
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
=============== ============ ================= ================ ==================
US Dollars 9,149 - (8,758) 391
Total exposure 9,149 - (8,758) 391
=============== ============ ================= ================ ==================
(c) Price risk
Price risk is the risk that the fair value of future cash flows
of a financial instrument will fluctuate because of changes in
market prices (other than those arising from interest rate risk or
currency risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer, or
factors affecting similar financial instruments traded in the
market. Local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health
issue, recessions, or other events could have a significant impact
on the Group and market prices of its investments. This risk
applies to financial instruments held by the Group, including
equity assets, credit assets and derivatives.
Capital Management
The Company's primary objectives in relation to the management
of capital are driven by strategic and organisational requirements
but are focused around:
-- ensuring its ability to continue as a going concern; and
-- maximising the long-term capital growth for its shareholders
through an appropriate balance of equity capital and gearing.
In the management of capital and in its definition, we include
equity (including revenue and capital reserves), debt (including
long-term credit facilities, commercial paper backstopped by
long-term credit facilities and any hedging assets or liabilities
associated with long-term debt items), cash and temporary
investments.
The Board manage the capital structure and make adjustments to
it considering changes in economic conditions and the risk
characteristics of the business. The Company has met the above
objectives through diversifying the leverage facilities through the
introduction of a new Topco facility during 2020, a new amortising
term loan and an increase in an existing facility.
The Group monitors capital using a ratio of net debt to equity.
Net debt is calculated by deducting cash and cash equivalents from
total interest-bearing borrowings (as shown in the Consolidated
Statement of Financial Position). The Group's net debt to equity
ratio which is a key performance indicator used for internal
management at Group level was 66.9 per cent at 30 June 2022 (30
June 2021: 66.1 per cent , 31 December 2021: 70.9 per cent).
The Group is subject to externally imposed capital
requirements:
-- The Company's Articles of Association restrict borrowings to
the value of its share capital and reserves;
-- As a public company, the Company has a minimum share capital of GBP50,000;
-- To be able to pay dividends out of profits available for
distribution by way of dividends, the Company must be able to meet
one of the two capital restriction tests imposed on investment
companies by company law; and
-- The Company's borrowings are subject to covenants limiting
the total exposure based on a cap of borrowings as a percentage of
the eligible borrowing base, alongside other covenants including
but not limited to single investment exposure limits and weighted
average coupon and remaining term requirements.
The Company has complied with all the above requirements during
this financial period.
11. Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation.
The Group's credit risks arise principally through exposures to
loans originated or acquired by the Group and cash deposited with
banks, both of which are subject to risk of borrower default.
The Investment Manager establishes and adheres to stringent
underwriting criteria. The Group invests in a granular portfolio of
assets, diversified at the underlying borrower level, with each
loan being subject to a maximum single loan exposure limit. This
helps mitigate credit concentrations in relation to an individual
customer, a borrower group or a collection of related
borrowers.
The credit quality of loans is assessed through evaluation of
various factors, including credit scores, payment data, collateral
available from the borrower and other information.
The Group further mitigates its exposure to credit risk through
structuring facilities whereby the facilities are secured on a
granular pool of performing loans and structured so that the
Origination Platform and or borrower provides the first loss, and
the Group finances the senior risk.
Further risk is mitigated in the property sector as the Group
takes collateral in the form of property to mitigate the credit
risk arising from residential mortgage lending and commercial real
estate.
The Group ensures that it only deposits cash balances with
institutions with appropriate financial standing or those deemed to
be systemically important.
Liquidity risk
Liquidity risk is the risk that the Group will be unable meet
its obligations in respect of financial liabilities as they fall
due.
The Group manages its liquid resources to ensure sufficient cash
is available to meet its expected contractual commitments. It
monitors the level of short-term funding and balances the need for
access to short-term funding, with the long-term funding needs of
the Group.
A substantial proportion of the Group's net assets are in loans,
whose cash collections could be utilised to meet funding
requirements if necessary. The Group has the power, under its
Articles of Association, to take out both short and long-term
borrowings subject to a maximum value of one hundred percent of its
share capital and reserves.
At 30 June 2022 the Company had a committed debt facility
totalling GBP200.0 million with a maturity date of 4 September
2023. This facility includes a term and revolving facility secured
on a range of assets. The Company also has a 2-year term facility
that is structured as run-off financing in that the debt will
paydown over the term of the facility and a GBP35m amortising term
loan with a 49 year term, but where final repayment is expected in
2024 in line with the facility it is secured against.
The repayment terms and the covenants have been stress tested
over the term of each of these facilities to ensure compliance.
Assets and liabilities not carried at fair value but for which
fair value is disclosed
For the Group for the period ended 30 June 2022:
Group As Presented Fair Value
================== ============ ========================================
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
================== ============ ======== ========= ======== =========
Assets
Investments at
amortised cost 523,476 - - 542,913 542,913
Receivables 1,002 - 1,002 - 1,002
Cash and cash
equivalents 11,848 11,848 - - 11,848
================== ============ ======== ========= ======== =========
Total assets 536,326 11,848 1,002 542,913 555,763
================== ============ ======== ========= ======== =========
Liabilities
Management and
performance fee
payable (1,900) - (1,900) - (1,900)
Other payables (1,559) - (1,559) - (1,559)
Interest bearing
borrowings (237,111) - (237,111) - (237,111)
================== ============ ======== ========= ======== =========
Total liabilities (240,570) - (240,570) - (240,570)
================== ============ ======== ========= ======== =========
For the Group for the period ended 30 June 2021:
Group As Presented Fair Value
================== ============ ========================================
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
================== ============ ======== ========= ======== =========
Assets
Investments at
amortised cost 573,113 - - 586,113 586,113
Receivables 5,320 - 5,320 - 5,320
Cash and cash
equivalents 28,359 28,359 - - 28,359
================== ============ ======== ========= ======== =========
Total assets 606,792 28,359 5,320 586,113 619,792
================== ============ ======== ========= ======== =========
Liabilities
Management fee
payable (1,053) - (1,053) - (1,053)
Performance fee
payable (1,717) - (1,717) - (1,717)
Other payables (953) - (953) - (953)
Interest bearing
borrowings (265,467) - (265,467) - (265,467)
================== ============ ======== ========= ======== =========
Total liabilities (269,190) - (269,190) - (269,190)
================== ============ ======== ========= ======== =========
For the Group for the year ended 31 December 2021:
Group As Presented Fair Value
================== ============ =========================================
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
================== ============ ======== ========= ======== ==========
Assets
Investments
at amortised
cost 565,994 - - 579,482 579,482
Receivables 6,554 - 6,554 - 6,554
Cash and cash
equivalents 10,500 10,500 - - 10,500
================== ============ ======== ========= ======== ==========
Total assets 583,048 10,500 6,554 579,482 579,536
================== ============ ======== ========= ======== ==========
Liabilities
Management fee
payable (1,037) - (1,037) - (1,037)
Performance
fee payable (3,431) - (3,431) - (3,431)
Other payables (2,392) - (2,392) - (2,392)
Deemed Loan (82,326) - (82,326) - (82,326)
================== ============ ======== ========= ======== ==========
Interest bearing
borrowings (183,182) - (183,182) - (183,182)
================== ============ ======== ========= ======== ==========
Total liabilities (272,368) - (272,368) - (272,368)
================== ============ ======== ========= ======== ==========
Categorisation within the hierarchy has been determined based on
the lowest level input that is significant to the fair value
measurement of the relevant asset or liability (see Note 9 for
details). Further details of the loans at amortised cost held by
the Group can be found in Note 8 to the financial statements.
12. Receivables
The table below set out a breakdown of the Group
receivables.
Group 30 June 2022 30 June 2021 31 December 2021
GBP'000 GBP'000 GBP'000
================== ============ ============ ================
Prepayments and
other debtors 956 1,285 5,583
Amounts due from
platforms - 3,577 924
Other receivables 46 458 47
================== ============ ============ ================
Total receivables 1,002 5,320 6,554
================== ============ ============ ================
The above receivables do not carry any interest and are short
term in nature. The Directors consider that the carrying values of
these receivables approximate their fair value.
Amounts due from platforms relate to cash that has been
collected by the platform partners but not yet remitted to the
Group, whereby the credit asset at amortised cost has been treated
as if this cash had been received.
13. Other Payables
The table below set out a breakdown of the Group payables.
Group 30 June 2022 30 June 2021 31 December 2021
GBP'000 GBP'000 GBP'000
===================== ============ ============ ================
Accruals and other
payables 3,459 3,723 7,159
Total other payables 3,459 3,723 7,159
===================== ============ ============ ================
14. Interest Bearing Borrowings
The table below sets out a breakdown of the Group's
interest-bearing borrowings.
Group 30 June 2022 30 June 2021 31 December 2021
GBP'000 GBP'000 GBP'000
============================== ============ ============ ================
Current Liabilities
Credit facility 62,716 29,883 49,435
Interest and commitment
fees payable 233 245 195
Prepaid interest
and
commitment fees (348) (1,528) (291)
Total current liabilities 62,601 28,600 49,339
Non-Current Liabilities
Credit facility 175,893 238,385 220,545
Interest and commitment - - -
fees payable
Prepaid interest
and
commitment fees (1,383) (1,518) (2,227)
Total non-current
liabilities 174,510 236,867 218,318
============================== ============ ============ ================
Total interest-bearing
borrowings 237,111 265,467 267,657
============================== ============ ============ ================
At 30 June 2022 the Company's main debt facility was a GBP200
million facility, being a GBP170 million term loan (30 June 2021:
GBP170 million, 31 December 2021: GBP170 million) and GBP30 million
revolving credit facility (30 June 2021: GBP80 million, 31 December
2021: GBP80 million). At 31 December 2021 and 30 June 2022 the term
loan was fully drawn with GBPnil drawn on the revolving element.
Interest is charged at SONIA plus a margin with the facility
maturing in September 2023. The debt facility is secured against
the Company's loan portfolios and other assets, in addition to the
net exposures the Company holds where the Company is the junior
lender to an SPV.
In August 2019, the Group entered a two-year debt facility to
finance three residential mortgage portfolios, two commercial
mortgage pools and a small unsecured consumer pool. These
portfolios were previously leveraged through the Company level debt
facility but obtaining assets specific leverage on these provides a
lower cost of funding at a higher advance rate. The total debt
raised on day one of this facility was GBP81.0 million. Interest is
charged at SONIA plus a margin. The facility was a 2-year term with
a 1-year extension option and is structured as a run-off financing
in that the debt will paydown over the term of the facility. During
2020 the 1-year extension was exercised and an additional mortgage
portfolio was transferred into the pool. The facility is being
extended in September 2022. The carrying value of the portfolio of
loans, which this facility is secured against, at 30 June 2022 was
GBP66.1 million (30 June 2021: GBP85.0 million, 31 December 2021:
GBP76.5 million).
In December 2020, the Group entered into a GBP35 million debt
facility secured against a structured SME facility, the carrying
value of this structured SME facility at 30 June 2022 was GBP31.8
million (30 June 2021: GBP46.1m, 31 December 2021: GBP39.5
million). The debt facility charges SONIA plus a margin and is an
amortising term loan with the full GBP35 million drawn on day one.
The facility has a 49-year term but final repayment is expected in
2024.
As at the 30 June 2022 the below related debt costs had been
incurred by the Group.
Group 30 June 2022 30 June 2021 31 December 2021
GBP'000 GBP'000 GBP'000
======================== ============ ============ ================
Interest and commitment
fees payable 5,581 5,687 11,022
Other finance charges 788 957 1,837
======================== ============ ============ ================
Total finance
costs 6,369 6,644 12,859
======================== ============ ============ ================
As at the 30 June 2022 the below changes occurred for the
Group:
Group Total
GBP'000
================================ =========
At 1 January 2022 267,657
Drawdown of interest -
bearing borrowings
Repayments of interest-bearing
borrowing (31,372)
Finance costs 6,369
Interest paid on financing
activities (5,543)
At 30 June 2022 237,111
================================ =========
As at the 30 June 2021 the below changes occurred for the
Group:
Group Total
GBP'000
========================================== =========
At 1 January 2021 273,539
Drawdown of interest bearing borrowings -
Repayments of interest-bearing borrowing (9,092)
Finance costs 6,644
Interest paid on financing activities (5,624)
At 30 June 2021 265,467
========================================== =========
As at the 31 December 2021 the below changes occurred for the
Group:
Group Total
GBP'000
================================ =========
At 1 January 2021 273,539
Drawdown of interest
bearing borrowings 27,000
Repayments of interest-bearing
borrowing (34,375)
Finance costs 12,859
Interest paid on financing
activities (11,366)
At 31 December 2021 267,657
================================ =========
The below table analyses the Group's financial liabilities into
relevant maturity groupings as well as expected future interest and
commitment fee costs based on the remaining period at the
Consolidated Statement of Financial Position date to the final
scheduled maturity date.
30 June 2022 More than
Group Financial < 1 year 1 - 5 years 5 years Total
instrument GBP'000 GBP'000 GBP'000 GBP'000
======================== ======== =========== =========== ==========
Credit facility 59,129 179,589 - 238,718
Interest and commitment
fees payable (189) (1,418) - (1,607)
Total exposure 58,940 178,171 - 237,111
======================== ======== =========== =========== ==========
The below table analyses the Group's financial liabilities into
relevant maturity groupings as well as expected future interest and
commitment fee costs based on the remaining period at the
Consolidated Statement of Financial Position date to the final
scheduled maturity date.
30 June 2021 < 1 year 1 - 5 years Total
Group Financial instrument GBP'000 GBP'000 GBP'000
============================ ======== =========== ========
Credit facility 29,883 238,385 268,268
Interest and commitment
fees payable 8,361 12,871 21,232
============================ ======== =========== ========
Total exposure 38,244 251,256 289,500
============================ ======== =========== ========
The below table analyses the Group's financial liabilities into
relevant maturity groupings as well as expected future interest and
commitment fee costs based on the remaining period at the
Consolidated Statement of Financial Position date to the final
scheduled maturity date.
31 December 2021 More than
Group Financial < 1 year 1 - 5 years 5 years Total
instrument GBP'000 GBP'000 GBP'000 GBP'000
======================== ======== =========== =========== ========
Credit facility 49,435 185,545 35,000 269,980
Interest and commitment
fees payable (96) (2,944) 717 (2,323)
======================== ======== =========== =========== ========
Total exposure 49,339 182,601 35,717 267,657
======================== ======== =========== =========== ========
15. Ordinary Share Capital
The table below details the issued share capital of the Company
as at the date of the Financial Statements.
30 June 30 June 31 December
2022 2021 2021
================================= ========== ========== ===========
No. Issued, allotted and fully
paid ordinary shares of GBP0.01
each 34,736,934 35,259,741 35,259,741
Cost GBP'000 347 352 352
================================= ========== ========== ===========
The table below shows the movement in shares during the period
to 30 June 2022:
Shares in issue Shares in issue
at the at
beginning of the Buyback of the end of the
period Ordinary Shares period
================ ================= ================ ===============
Ordinary Shares 35,259,741 (522,807) 34,736,934
Treasury Shares 4,190,178 522,807 4,712,985
================ ================= ================ ===============
The table below shows the movement in shares during the period
to 30 June 2021:
Shares in issue Shares in issue
at the at
beginning of the Buyback of the end of the
period Ordinary Shares period
================ ================= ================ ===============
Ordinary Shares 35,259,741 - 35,259,741
Treasury Shares 4,190,178 - 4,190,178
================ ================= ================ ===============
The table below shows the movement in shares during the year to
31 December 2021:
Shares in issue Shares in issue
at the at
beginning of the Buyback of the end of the
period Ordinary Shares period
================ ================= ================ ===============
Ordinary Shares 35,259,741 - 35,259,741
Treasury Shares 4,190,178 - 4,190,178
================ ================= ================ ===============
16. Special Distributable Reserve
At a general meeting of the Company held on 14 December 2015,
special resolutions were passed approving the cancellation of the
amount standing to the credit of the Company's share premium
account as at 23 December 2015.
Following the approval of the Court and the subsequent
registration of the Court order with the Registrar of Companies on
21 March 2016, the reduction became effective. Accordingly, GBP98.1
million, previously held in the share premium account, has been
transferred to the special distributable reserve as disclosed in
the Statement of Financial Position.
During the period the Company repurchased an additional 522,807
shares (30 June 2021: nil , 31 December 2021: 4,190,178) using the
special distributable reserve for an amount of GBP4.8m (30 June
2021:GBP23.98 million, 31 December 2021: GBP34.82 million).
17. Investments in SUBSIDIARIES
On 20 June 2019 the Group incorporated Sting Funding Limited
("Sting"), a limited Company incorporated under the law of England
and Wales. The company is registered at 1 Bartholomew Lane, London,
United Kingdom, EC2N 2AX. The Group is considered to control Sting
through holding 100 per cent of the issued shares. As a result, the
financial statements are prepared on a consolidated basis. Sting
became active on 28 August 2019 when it drew down on a debt
facility backed by commercial and second charge residential
mortgages.
The Company also consolidates a structured entity, Bud Funding
Limited ("Bud"), a limited company incorporated under the law of
England and Wales. The company is registered at 1 Bartholomew Lane,
London, United Kingdom, EC2N 2AX. The Company is considered to
control Bud through its exposure to the variable returns of the
vehicle through holding of a junior note issued by it and by way of
control exerted through its involvement in the initial creation of
Bud and in the absence of another entity now having control. Bud
was incorporated on 2 November 2020 and the junior note was funded
on 2 December 2020, at which point the control began.
The assets of the subsidiaries are credit assets that are
included as part of the impairment policies of the group and no
impairment triggers have been identified for the subsidiaries.
18. Net Asset Value per Ordinary Share
30 June 30 June 31 December
2022 2021 2021
============================= ======== ======== ===========
Net asset value per ordinary
share pence 1,019.7p 1,017.0p 1,019.1p
Net assets attributable
GBP'000 354,218 358,595 359,342
============================= ======== ======== ===========
The net asset value per ordinary share as at 30 June 2022 is
based on net assets at the period-end of GBP354.2 million and on
34,736,934 ordinary shares in issue at the period-end.
The net asset value per ordinary share at 30 June 2021 is based
on net assets of GBP358.6 million and on 35,259,741 ordinary shares
in issue.
The net asset value per ordinary share as at 31 December 2021 is
based on net assets at the year-end of GBP359.3 million and on
35,259,741 ordinary shares in issue at the year-end.
19. Contingent Liabilities and Capital Commitments
As at 30 June 2022, 30 June 2021 and 31 December 2021 there were
no contingent liabilities or capital commitments for the Group.
20. Related Party Transactions and Transactions with the
Investment Manager
IAS 24 'Related party disclosures' requires the disclosure of
the details of material transactions between the Company and any
related parties. Accordingly, the disclosures required are set out
below:
During 2022, in line with the Board's remuneration policy, and
Directors' entitlement to additional fees in respect of any
additional services performed by them, the Remuneration Committee
reviewed a proposal for additional fees to be payable to Directors
in respect of the Combination with Pollen Street Capital Holdings
Limited, which required Directors to dedicate additional time to
review associated documents and to attend additional meetings.
Following such discussion, and upon the advice of the Remuneration
Committee, the Board agreed an additional payment to the Chairman
of GBP50,000 and to the other Directors of GBP40,000. Such fees
were set with regard to other comparable investment companies who
have undertaken equivalent activities.
The following fee structure for Directors is in effect:
-- Chairman - GBP60,000 per annum
-- Senior Independent Director - GBP50,000 per annum
-- Non-Executive Director - GBP45,000 per annum
-- Chair of Audit Committee - Additional supplement of GBP5,000 per annum
-- Chair of Risk Committee - Additional supplement of GBP5,000 per annum
-- Chair of Remuneration Committee - Additional supplement of GBP5,000 per annum
As at 30 June 2022, Joanne Lake held 2,713 Ordinary Shares in
the Company, no other Directors held an interest in the Company
shares at this date.
There were no other transactions during the period with the
Directors of the Company. At 30 June 2022, there was GBPnil (30
June 2021: GBPnil, 31 December 2021: GBPnil) payable to the
Directors for fees and expenses.
Investment Manager - Pollen Street Capital Limited (the
'Investment Manager'), a UK-based company authorised and regulated
by the FCA, has been appointed the Company's investment manager and
AIFM for the purposes of the AIFMD. Details of the services
provided by the Investment Manager and the fees paid are given on
Note 4 to the financial statements.
Management and performance fees incurred during the period to 30
June 2022 were GBP4.37 million (30 June 2021: GBP5.46 million, 31
December 2021: GBP9.72 million) of which GBP1.9 million (30 June
2021: GBP2.77 million, 31 December 2021: GBP4.47 million) was
payable to the Investment Manager as at the 30 June 2022.
The Group considers all transactions with the Investment Manager
or companies that are controlled by the Investment Manager as
related party transactions.
Oplo Group Limited ("Oplo", formerly 1(st) Stop Group) is an
English based consumer lender, owned by a fund that is managed by
an affiliate of the Investment Manager. During the period, the
structured facility to Oplo was repaid. The Group also had a
forward flow relationship in place with Oplo and these loans have
an outstanding balance as at 30 June 2022 of GBP9.5 million ( June
2021: GBP40.3 million, 31 December 2021: GBP47.6 million).
The Company also carried out FX hedging with Lumon Pay Limited
("LPL") in relation to some Euro and US dollar development finance
that it had entered during the period. Lumon is owned by a fund
that is managed by an affiliate of the Investment Manager. The
exposures at each reporting date are disclosed in Note 10.
21. Ultimate Controlling Party
It is the opinion of the Directors that there is no ultimate
controlling party.
22. Subsequent Events
On 6 September 2022 a dividend of 20.0 pence per ordinary share
was approved for payment on 30 September 2022.
23. Approval of the Financial Statements
The unaudited financial statements were approved by the Board of
Directors of Honeycomb Investment Trust plc (a public limited
company incorporated in England and Wales with company number
09899024) and authorised for issue on 12 September 2022.
4 Shareholders' Information
Directors, Portfolio Manager and Advisers
Directors Administrator
Robert Sharpe Apex Fund Services (UK) Ltd
Jim Coyle 5th Floor, Bastion House
Richard Rowney 140 London Wall
Joanne Lake London EC2Y 5DN
all at the registered office below England
Registered Office Depositary
6th Floor Indos Financial Limited
65 Gresham Street c/o JTC, 18th Floor, the Scalpel
London EC2V 7NQ 52 Lime Street, London EC3M 7AF
England England
Investment Manager and AIFM Registrar
Pollen Street Capital Limited Computershare Investor Services PLC
11 - 12 Hanover Square The Pavilions, Bridgwater Road
London W1S 1JJ Bristol BS99 6ZZ
England England
Financial Advisers and Brokers Company Secretary
Barclays Bank plc Link Company Matters Limited
1 Churchill Place Central Square
Canary Wharf 10th Floor, 29 Wellington Street
London E14 5H Leeds LS1 4DL
England England
Liberum Capital Limited
Level 12, Ropemaker Street Independent Auditors
25 Ropemaker Place PricewaterhouseCoopers LLP
London EC2Y 9LY 7 More London Riverside
England London SE1 2RT
England
Cenkos Securities plc
6.7.8 Tokenhouse Yard Share Identifiers
London EC2R 7AS ISIN: G B 0 0 BYZV3G25
England Sedol: BYZV3G2
Ticker: HONY
Custodian
Sparkasse Bank Malta PLC
Ix-Xatt ta' Qui-si-Sana
101 Townsquare
Sliema SLM3112
Malta
Website
http://www.honeycombplc.com/
Website
The Company's website can be found at www.honeycombplc.com. The
site provides visitors with Company information and literature
downloads. The Company's profile is also available on third-party
sites such as www.trustnet.com and
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Annual and half-yearly reports
Copies of the annual and half-yearly reports may be obtained
from the Company Secretary by calling emailing
hitcosec@linkgroup.com or by visiting www.honeycombplc.com.
Share prices and Net Asset Value information
The Company's ordinary shares of 1p each are quoted on the
London Stock Exchange:
-- SEDOL number: BYZV3G2
-- ISIN number: G B 0 0 BYZV3G25
-- EPIC code: HONY
The codes above may be required to access trading information
relating to the Company on the internet.
Electronic communications with the Company
The Group's consolidated annual report & audited financial
statements, half-yearly reports and other formal communications are
available on the Company's website. To reduce costs the Company's
half-yearly financial statements are not posted to shareholders but
are instead made available on the Company's website.
Whistleblowing
As the Company has no employees, the Company does not have a
whistleblowing policy. The Audit Committee reviews the
whistleblowing procedures of the Investment Manager and
Administrator to ensure that the concerns of their staff may be
raised in a confidential manner.
Warning to shareholders - share fraud scams
Fraudsters use persuasive and high-pressure tactics to lure
investors into scams. They may offer to sell shares that turn out
to be worthless or non-existent, or to buy shares at an inflated
price in return for an upfront payment. While high profits are
promised, if you buy or sell shares in this way, you will probably
lose your money.
How to avoid share fraud
-- Keep in mind that firms authorised by the FCA are unlikely to
contact you out of the blue with an offer to buy or sell shares
-- Do not get into a conversation, note the name of the person
and firm contacting you and then end the call
-- Check the Financial Services Register from www.fca.org.uk to
see if the person and firm contacting you is authorised by the
FCA
-- Beware of fraudsters claiming to be from an authorised firm,
copying its website or giving you false contact details
-- Use the firm's contact details listed on the Register if you want to call it back
-- Call the FCA on 0800 111 6768 if the firm does not have
contact details on the Register or you are told they are out of
date
-- Search the list of unauthorised firms to avoid at www.fca.org.uk/scams
-- Consider that if you buy or sell shares from an unauthorised
firm you will not have access to the Financial Ombudsman Service or
Financial Services Compensation Scheme.
-- Think about getting independent financial and professional
advice before you hand over any money
-- Remember: if it sounds too good to be true, it probably is!
5,000 people contact the Financial Conduct Authority about share
fraud each year, with victims losing an average of GBP20,000.
Report a scam
If you are approached by fraudsters, please tell the FCA using
the share fraud reporting form at fca.org.uk /scams, where you can
find out more about investment scams. You can also call the FCA
Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters, you should
contact Action Fraud on 0300 123 2040.
5.Definition and reconciliation to alternative performance
measures
Credit Assets Credit Assets are loans made to counterparties,
together with related investments.
==================== ======================================================
Equity Assets Equity Assets are selected equity investments
that are aligned with the Company's strategy and
that present opportunities to enhance the Company's
returns from its investments.
==================== ======================================================
Net asset value Net asset value represents the total value of
("NAV") the Group's assets less the total value of its
liabilities. For valuation purposes, it is common
to express the NAV on a per share basis.
==================== ======================================================
Ongoing Charges Ongoing charges is calculated as a percentage
of annualised ongoing charge over average reported
NAV. Ongoing charges are those expenses of a type
which are likely to recur in the foreseeable future.
==================== ======================================================
Premium If the share price of the Company is higher than
the NAV per share, the Company's shares are said
to be trading at a premium. The premium is shown
as a percentage of the NAV.
==================== ======================================================
Discount If the share price of the Company is lower than
the NAV per share, the Company's shares are said
to be trading at a discount. The discount is shown
as a percentage of the NAV.
==================== ======================================================
Fair Value The amount for which an asset could be exchanged,
or a liability settled, between willing parties
in an arm's length transaction.
==================== ======================================================
Registrar An entity that manages the Company's shareholder
register. The Company's registrar is Computershare
Investor Services PLC.
==================== ======================================================
Alternative An AIF, as defined in the AIFM Directive 2011/61/EU
Investment Fund on Alternative Investment Fund Managers.
("AIF")
==================== ======================================================
LIBOR ("London The interest rate participating banks offer to
Inter-Bank Offered other banks for loans on the London market.
Rate")
==================== ======================================================
Structured Loan Credit Asset whereby the Group typically has senior
secured loans to speciality finance companies,
whereby the security on our investment comprises
the assets originated by the speciality finance
company and the company provides the 'first loss'
in the form of 'real capital' whilst the Company
provides the senior capital. Corporate guarantees
also typically taken
==================== ======================================================
Direct Portfolio Portfolios of loans owned directly by the Group,
typically secured on property
==================== ======================================================
AIFM An Alternative Investment Fund Manager, as defined
in the AIFM Directive. Pollen Street Capital Limited
undertakes this role on behalf of the Company.
==================== ======================================================
Servicers Comprehensive loan servicing to support the full
loan lifecycle, from origination, through account
servicing to arrears management.
==================== ======================================================
Reconciliation to Alternative performance measures
Premium / (Discount) to NAV per share
30 June 2022 30 June 2021 31 December
2021
=========================== ============ ============ ===========
NAV per share (Cum income) 1,019.7p 1,017.0p 1,019.1p
Share Price at Close 890.0p 970.0p 945.0p
Premium / (Discount) (12.7)% (4.6)% (7.3)%
=========================== ============ ============ ===========
The premium / (discount) to NAV per share is calculated by
taking the difference between the share price at close and the NAV
per share (Cum income) and dividing it by the NAV per share.
Annual NAV per Share Return
30 June 2022 30 June 2021 31 December
2021
=========================== ============ ============ ===========
NAV per share (Cum income)
at period end 1,019.7p 1,017.0p 1,019.1p
NAV per share (Cum income)
at period start 1,019.1p 1,013.1p 1,013.1p
Dividends per share paid
in the period 40.0p 40.0p 80.0p
Annual Nav per Share
Return 8.0% 8.7% 8.5%
=========================== ============ ============ ===========
The annual NAV per share return is calculated by taking the
total of the closing NAV per share (Cum income) at period end,
adding the dividend per share paid in the period and subtracting
the NAV per share (Cum income) at period started, divided by the
NAV per share (Cum income) at period start. In the case of a
half-year, this return is pro-rated based on day count to generate
an annualised return.
Inception to Date ("ITD") NAV per Share Return
30 June 2022 30 June 2021 31 December
2021
=========================== ============ ============ ===========
NAV per share (Cum income) 1,019.7p 1,017.0p 1,019.1p
Opening NAV per share
(Cum income) at inception 982.0p 982.0p 982.0p
Dividends per share paid
since inception 492.9p 412.9p 452.9p
ITD NAV per Share Return 54.0% 45.6% 49.9%
=========================== ============ ============ ===========
The ITD NAV per share return is calculated by taking the total
of the closing NAV per share (cum income) at period end and adding
the dividend per share paid since inception and subtracting the
opening NAV per share (Cum Income) at inception, divided by the NAV
per share (cum income) at inception.
Debt to Equity
30 June 2022 30 June 2021 31 December
GBP'000 GBP'000 2021
GBP'000
============================ ============ ============ ===========
Net Asset Value 354,218 358,595 359,342
Interest Bearing Borrowings 237,111 265,467 267,657
Debt to Equity ratio 66.9% 74.0% 74.5%
============================ ============ ============ ===========
Cash and cash equivalents 11,848 28,359 12,948
Net Debt to Equity Ratio 63.6% 66.1% 70.9%
============================ ============ ============ ===========
Debt to equity ratio is calculated as the Group's
interest-bearing debt divided by the net asset value expressed as a
percentage. Net Debt to equity ratio is calculated as the Group's
interest-bearing debt less cash and cash equivalents, divided by
the net asset value expressed as a percentage.
Dividend Return
30 June 2022 30 June 2021 31 December
2021
========================= ============ ============ ===========
Dividend declared (pence
per share) 40.0 40.0 80.0
IPO issue price (pence
per share) 1,000.0 1,000.0 1,000.0
Dividend Return 8.0% 8.0% 8.0%
========================= ============ ============ ===========
Dividend return is calculated as the total declared dividends
for the period divided by IPO issue price. In the case of a
half-year, this return is pro-rated based on day count to generate
an annualised return.
Ongoing Charges
30 June 2022 30 June 2021 31 December
GBP'000 GBP'000 2021
GBP'000
======================= ============ ============ ===========
Auditors' remuneration 128 143 319
Administrator's fees 89 89 179
Directors' fees 160 110 227
Management Fee 2,922 3,172 6,349
Other costs 670 447 1,417
Average NAV 359,906 359,720 360,793
Ongoing Charges 2.2% 2.2% 2.3%
======================= ============ ============ ===========
Ongoing charges ratio: The Annualised Ongoing Charge is
calculated using the Association of Investment Companies
recommended methodology. It is calculated as a percentage of
annualised ongoing charge over average reported Net Asset Value.
Average NAV is calculated as the average of the previous 12 months
published monthly NAV's. Ongoing charges are those expenses of a
type which are likely to recur in the foreseeable future, whether
charged to capital or revenue, and which relate to the operation of
the investment company as a collective fund, excluding the costs of
acquisition/disposal of investments, financing charges and
gains/losses arising on investments. Ongoing charges are based on
costs incurred in the period as being the best estimate of future
costs. The AIC excludes performance fees from the Ongoing Charges
calculation.
NAV Return Bridge
2022
GBP'000
================================== ========
Monthly Average Credit Assets 572,858
Monthly Average NAV plus Leverage 606,686
Monthly Average NAV 359.906
================================== ========
Monthly Average Credit Assets is the mean of the aggregate of
the credit assets at amortised cost, credit assets held at fair
value through profit or loss and derivative assets held at fair
value through profit or loss for each month end from 31 December
2021 to 30 June 2022, inclusive.
Monthly Average NAV plus Leverage is the mean of the net assets
of the Group, plus interest bearing borrowings, for each month end
31 December 2021 to 30 June 2022, inclusive.
Monthly Average NAV is the mean of the net assets of the Group
for month end from 31 December 2021 to 30 June 2022 inclusive.
H1 2022
=================== ======= ======================================================
Investment Yield 9.0% Investment yield is calculated as Interest
Income on credit assets at amortised cost,
plus Income/(loss) on credit assets at fair
value through profit and loss, less third
party servicing, divided by Monthly Average
Credit Assets
=================== ======= ======================================================
Impairments and 0.0% Impairments and write-offs is calculated as
write-offs credit impairment losses over Monthly Average
Credit Assets
=================== ======= ======================================================
Credit asset return 9.0% Credit asset return is a sub-total of the
above
=================== ======= ======================================================
Equity and working (0.5%) The impact of equity and working capital is
capital calculated as the Statement of Comprehensive
Income amounts above plus Income / (Loss)
on equity assets at fair value through profit
and loss divided by Monthly Average NAV plus
Leverage, less the impact of items already
disclosed above
=================== ======= ======================================================
Effect of leverage (0.2%) Effect of leverage is calculated as the above
and Investment Statement of Comprehensive Income amounts
Manager fees above plus finance costs divided by Monthly
Average NAV, less the impact of items already
disclosed above. Investment Manager fees calculated
as Management fee and Performance fee divided
by Monthly Average NAV
=================== ======= ======================================================
Fund Opex (0.6%) Calculated as Fund expenses, divided by Monthly
Average NAV
=================== ======= ======================================================
Effect of Buybacks 0.3% Calculated as the difference between the cost
of the bought shares and their value at NAV
per share, divided by NAV
=================== ======= ======================================================
NAV return 8.0% Annual NAV per Share Return
=================== ======= ====================================================
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END
IR BLLLFLKLXBBD
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