Half-year Report
11/08/2025 07:00
RNS Number : 6904U
Develop North PLC
11 August 2025
DEVELOP NORTH PLC
Interim Report & Financial Statements for the six months ending 31 May 2025
Announcement of Interim Results
LEI: 213800EXPWANYN3NEV68
This announcement contains regulated information.
Chairman's Statement
Highlights
· Net Asset Value total return of 2.5% for the six months to 31 May 2025.
· Dividends of 2.0 pence per share paid or declared during the period, equivalent to an annualised yield of 5.1%.
· Loan to value ("LTV") of the portfolio reduced to 68.7% (30 November 2024: 71.2%).
· Three exits during the period, bringing the number of exits to 26 since inception.
· 66% of the portfolio now deployed in the North East of England.
Introduction
I am pleased to present the Company's results for the half year ended 31 May 2025, during which the Company entered its ninth year of trading. The financial reporting period has included two cuts in UK interest rates, reducing the base rate to 4.25%. At the time of writing (August 2025), there had been a further rate cut of 0.25%, taking interest rates to 4.0%. UK Consumer Price Inflation (CPI) is also proving difficult to rein in, running at 3.4% over the twelve months to May 2025, down a mere 0.1% from a year earlier. The UK's GDP growth forecast for 2025 is generally expected to be around 1%, with some forecasts ranging slightly higher or lower.
Turning to the housing market, impending Stamp Duty changes accelerated the rate of transactions earlier in the year, leading to an easing of sales in more recent months. This one-off effect is now working through, with house prices predicted to grow by a moderate 2% during 2025 but to gather pace to 5% or more in 2026. These points are described more fully in the Investment Adviser's Report.
Net Asset Value
The Company's Net Asset Value ('NAV') per share decreased from 79.81p to 79.79p over the six months ended 31 May 2025. Taking the effects of dividend distributions into account, this has resulted in a NAV Total Return for the period of 2.5%.
This figure may be placed into context by the total return figures over the same period of the Association of Investment Companies' (AIC's) 'Property-Debt' sector, of which Develop North is a component member, of 1.4% and of the AIC's 'Debt-Loans' sector of (1.9%).
Dividends
A quarterly dividend of 1 penny per share was paid on 27 June 2025 in respect of the quarter ended 28 February 2025. As set out in the Annual Report, the Company expects to pay dividends at a rate of 1 penny per share per quarter, equivalent to 4 pence per share per year in aggregate.
Depending on market conditions and the performance of the investment portfolio, a final balancing payment may be made at the end of the current financial year so as to at least fulfil the UK investment company qualification requirements.
Share Buybacks
In December 2023 the Company announced the extension of the share buyback programme which began in November 2023. A further 566,369 Ordinary shares were purchased under this extension. In April 2024 the Company announced a new share buyback programme to purchase further Ordinary shares for up to a total maximum consideration of £500k. The Company repurchased 689,655 Ordinary shares under the new programme.
No share buybacks were completed during the period under report. The authority to buy back shares was renewed at the recent AGM. The Board will continue to monitor the discount to NAV at which the shares trade and consider embarking upon further buy backs as and when appropriate.
Investment Portfolio
The total value of the Company's portfolio now stands at £21.6 million, from 15 live projects.
New Investments:
The Company agreed two new facilities during the period: a £2.4 million, 11 month facility to fund a roadside retail development in South Tyneside. Secondly, a £1.2million, 18 month loan to finance a boutique smart hotel in Edinburgh. In total, £2.6 million was deployed into five projects including the two new projects mentioned above. The quality of the loan book continues to be maintained with the Loan to Value moving from 71.2% at 30 November 2024 to 68.7% at 31 May 2025.
Exits:
Three portfolio exits were completed during the period, bringing the number of exits to twenty-six since inception.
Impairments:
As specified by the requirements of accountancy standard IFRS 9, the Company has continued to recognise an impairment charge should interest not be paid by the borrower and there is not a clear expectation that this can be recovered subsequently. During the period, two projects were unable to meet their interest obligations in full. IFRS 9 also requires the Company to consider various credit loss scenarios and assign a risk weighting to these. This calculation generates a provision which is taken as a further impairment for the period. In the six months ended 31 May 2025 the Company has set the provision at £64,000. This is an increase of £15,000 from the general provision at 30 November 2024. This provision is based on forward looking scenarios and is designed to withstand market-related shocks, reflecting current economic uncertainties. The loan portfolio is discussed more fully in the Investment Adviser's review.
Gearing
The Company continues to benefit from a gearing facility with Shawbrook Bank Limited, which is expected to be renewed for a further year in August 2025. At the period end £2.85m had been drawn down under this facility.
New Director
I am delighted to welcome Dr Sameer Al Ansari as a Non-Executive Director and Deputy Chairman with effect from 2 May 2025.
Dr Al-Ansari, an internationally respected figure in finance, investment and corporate governance, will play a key role in shaping Develop North's future investment and wider fund strategy. His appointment will also support the fund's ambitions to raise its international profile, drive new investment into the Company, and promote economic growth across the North East region.
Outlook
For Develop North and its shareholders, not to mention the North East of England, these are exciting and potentially transformative times, as the post- reporting period note below explains. In the nearer term, the intention is to continue the process of creating and managing a diversified portfolio of fixed rate loans secured over land and/or property, predominantly but not exclusively in our local region here in the North East.
To make an accurate assessment of the company's outlook, it is necessary to look past the torrent of alarming headlines faced daily whether domestically or on the global stage. It is obviously important to keep abreast of developments covering everything from conflicts in the Middle East and Ukraine to the effects of US tariffs on international trade to political developments as the Labour government approaches its second year in office. To assess the investment outlook for our company, however, it is important to look at the prospects and background factors a little nearer home.
The Office for Budget Responsibility (OBR) forecasts 1.0% growth in 2025 for the UK economy, while the Treasury's June 2025 survey of independent forecasts produces a similar figure averaging 1.1%.These are not exciting numbers - but whatever the external backdrop, people will always need houses. Bank and building societies will also always need to offer mortgages to millions of people to make their own businesses work. Last but not least, there is widespread agreement that there is a crucial shortage of housing stock across the UK.
Develop North and its management team stands ready to play its part over the coming months and years.
John Newlands
Chairman
8 August 2025
Post-reporting period Note
On 9 July 2025, the Company announced via the London Stock Exchange a proposed change to its investment policy and potential fundraise to enhance shareholder value through a broader, more diversified portfolio of investments predominantly focused in the North East of England.
As announced, the revised investment policy will enable the Company to allocate the capital that it intends to raise across a wider range of asset classes, pursuing investments across three core areas: Real Estate Lending, Commercial Real Estate and Residential Real Estate.
Supporting Tier One Capital in managing the Company through its next phase of growth is an experienced and regionally embedded asset management team, comprising Homes or Houses, specialists in residential acquisitions and leasing; and Broadoak Asset Management, experts in commercial real estate investment.
The proposed changes to the Investment Policy will enable the Company to take advantage of a growing investment opportunity in the North East, with two major recent events contributing to a far higher level of focus in the region than before, including the formalisation of a £1.4 billion devolution agreement in May 2024 and the increased international profile following the acquisition of Newcastle United by the Saudi Public Investment Fund.
A potential fundraise would enable the Company to invest at greater scale and take advantage of the new opportunities identified in the new Investment Policy.
Further details may be found in the Company's RNS announcement dated 9 July 2025:
https://www.investegate.co.uk/announcement/rns/develop-north--dvno/change-to-investment-policy-potential-fundraise/8969899
Investment Adviser's Review
REVIEW OF THE 6 MONTHS TO 31 MAY 2025
Investment Adviser's highlights:
· NAV Total Return of 2.5% for the 6 months to 31 May 2025.
· Funds deployed into two new projects
· Three exits during the period, bringing the number of exits to twenty-six since inception
· Loan to Value (LTV) of portfolio reduced to 68.7%
· Dividends totalling 2p per share paid or declared for the six months to 31 May 2025, equivalent to an annualised dividend yield of 5.1%.
· 66% of funds deployed in North East England reflecting the Company's ongoing commitment to focus operations on our chosen regional markets.
This Interim Report and Accounts covers the end of the eighth and the beginning of the ninth year of performance of the Company, since it's listing in January 2017.
The Company's investment objective is to provide debt finance to the property sector. The Company also benefits from a small number of equity positions attained at nil cost in four of the borrowing entities which it supports. In addition, the Company benefits from exit fees on redemption of other projects that additionally contribute to the Senior and Profit lending type.
Progress on the Company's Strategic Objectives:
· Weighted Average interest generated was 9.8% - up from 9.4% on the prior year end.
· Prudent cost control saw overheads maintained at last years level - a below inflation rise.
· Portfolio LTV improved at 68.7%
· Further progress in managing non-performing assets and improvement in loan book quality.
· Fund liquidity further improved, with the continuation of the share buy-back exercise.
Economic Backdrop and Outlook:
The first six months of the financial year have seen two interest rate cuts with the base rate at 4.25% at the period end. At the time of writing (August 2025), there had been a further rate cut of 0.25%, taking interest rates to 4.0%. The Bank of England has been understandably cautious and the most recent minutes from 7 May 2025 suggest "a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate". Many commentators are interpreting this as a sign that the Bank will continue to cut rates during the rest of 2025 and into 2026.
2025 has been up and down for the housing market with the stamp duty changes accelerating transactions earlier in the year leading to a softening of the market in more recent months. Commentators are now expecting house prices to grow by only 2% during 2025 but for 2026 to grow by 5%.
Build cost inflation and labour in the construction sector have broadly returned to normal levels with BICS all-in tender price index, which measurers the trend of contractors pricing levels in accepted tenders, showing annual growth of 2.3% in the second quarter of this year. Labour remain the main driver of project costs, with increases to employers' National Insurance Contributions and the National Living Wage feeding into an expected 7.1% annual increase in the BCIS Labour cost index in Q2 2025
The Company has used the first six months to continue to support quality borrowers with strong business plans which is reflected in the consistent recurring income that is being generated across the portfolio.
We are pleased to report an active period for new transactions, deployments to existing projects together with full and partial exits:
The Company agreed two new facilities during the period:
· South Tyneside - £2.4m 11-month facility
· Edinburgh - £1.2m 18-month facility
During the period a total of £2.6m was deployed into five projects including the two new projects mentioned above.
At the period end, fund deployment totalled £21.6m. The quality of the loan book continues to be maintained with the Loan to Value moving from 71.2% at 30 November 2024 to 68.7% at 31 May 2025.
Portfolio Exits
There was three portfolio exits during the period, bringing the number of exits to twenty-six since inception.
Partial Redemptions Update
During the period there was £2.9m of partial redemptions across four of the portfolio projects including the three exits in the period.
Impairments
In accordance with IFRS 9 the Company recognises the gross interest receivable on all its loans, and then recognises an impairment charge if that interest is not paid by the borrower and there is not a clear expectation that this can be recovered subsequently. During the period, two projects were unable to meet their interest obligations in full.
IFRS 9 also requires the Company to consider various credit loss scenarios and assign a risk weighting to these. This calculation generates a provision which is taken as a further impairment for the period. In the six months ended 31 May 2025 the Company has set the provision at £64,000. This is an increase of £15,000 from the general provision at 30 November 2024.This provision is based on forward looking scenarios and is designed to withstand market-related shocks, reflecting current economic uncertainties.
Gearing
The Company has agreed to renew its committed revolving credit facility with Shawbrook Bank for a further year. Again, the key driver was headroom and liquidity. This renewal for a seventh year demonstrates the support that the Company has from its lender, and the growing confidence in future deployment given the current strength of pipeline.
BUYBACK PROGRAMME
In November 2023, the Company announced the commencement of a share buyback programme. To date the Company has purchased 1,945,862 shares in the market. The shares will be held as treasury shares on the Company's balance sheet.
OUTLOOK
Residential
As at 31 May 2025, 74.9% of deployed funds were invested across 9 projects with a residential focus with a further £0.481m committed to live projects.
Commercial
As at 31 May 2025, 25.1% of deployed funds were invested across 5 projects with a commercial focus.
PIPELINE
There is currently £4.7m at various stages of due diligence across two projects, all in the North East.
PERFORMANCE SINCE 2018
Since 1 June 2018, the company has provided £50.1m across twenty-five new projects. These projects have generated an average IRR of 9.4% with only 0.2% of capital write offs which have been more than covered by associated exit and plot fees. These projects have also been lower risk projects with the LTVs than the historic projects.
The quality and experience of each management team that we are in discussions with will continue to enhance the Company's portfolio and strengthen its reputation in the market. This should lead to the creation of shareholder value that is sustainable in the longer term.
Ian McElroy
Tier One Capital Ltd
8 August 2025
THE INVESTMENT PORTFOLIO AS AT 31 MAY 2025
| Sector | % Portfolio | LTV* (May 25) | Loan Value (May 25) £'000s | LTV* (Nov 24) | Loan Value (Nov 24) £'000s |
| Residential | 73.8% | 71.0% | 16,194 | 75.3% | 17,032 |
| Commercial | 24.7% | 61.7% | 5,417 | 53.9% | 4,082 |
| Cash | 1.5% | - | 331 | - | 118 |
| General Impairment | - | - | (64) | - | (49) |
| Total/Weighted Average | 100.0% | 68.7% | 21,878 | 71.2% | 21,183 |
| Six months ended 31 May 2025 (unaudited) | Six months ended 31 May 2024 (unaudited) | Year ended 30 November 2024 (audited) | ||||
| Note | Revenue £'000 | Capital £'000 | Total £'000 | Total £'000 | Total £'000 | |
| REVENUE Investment interest | 1,036 | - | 1,036 | 953 | 1,938 | |
| Total revenue | 1,036 | - | 1,036 | 953 | 1,938 | |
| Losses on investments held at fair value through profit or loss | 5 | - | - | - | - | (143) |
| Amortisation of exit fees | 5, 6 | - | 13 | 13 | - | 126 |
| Total net income | 1,036 | 13 | 1,049 | 953 | 1,921 | |
| Expenditure Investment adviser fee | 2 | (30) | - | (30) | (31) | (61) |
| Impairments on investments held at amortised cost | 6 | - | (15) | (15) | (30) | (122) |
| Other expenses | (277) | (152) | (429) | (248) | (484) | |
| Total expenditure | (307) | (167) | (474) | (309) | (667) | |
| Profit/(loss) before finance costs and taxation | 729 | (154) | 575 | 644 | 1,254 | |
| Finance costs | ||||||
| Interest payable | (81) | - | (81) | (39) | (84) | |
| Profit/(loss) before taxation | 648 | (154) | 494 | 605 | 1,170 | |
| Taxation | - | - | - | - | - | |
| Profit/(loss) for the period/year and total comprehensive profit for the period/year | 648 | (154) | 494 | 605 | 1,170 | |
| Basic earnings per share | 3 | 2.59p | (0.61)p | 1.98p | 2.38p | 4.64p |
| As at 31 May 2025 (unaudited) | As at 31 May 2024 (unaudited) | As at 30 November 2024 (audited) | ||
| Notes | £'000 | £'000 | £'000 | |
| Non-current assets Loans at amortised cost | 6 | 1,000 | 3,064 | 1,000 |
| 1,000 | 3,064 | 1,000 | ||
| Current assets Investments held at fair value | 5 | 2,942 | 3,056 | 2,899 |
| Loans at amortised cost | 6 | 18,800 | 14,759 | 18,146 |
| Other receivables and prepayments | 3 | 16 | 17 | |
| Cash and cash equivalents | 332 | 239 | 115 | |
| 22,077 | 18,070 | 21,177 | ||
| Total assets | 23,077 | 21,134 | 22,177 | |
| Current liabilities | ||||
| Loan facility | (2,850) | (1,125) | (2,100) | |
| Other payables and accrued expenses | (297) | (138) | (141) | |
| Total liabilities | (3,147) | (1,263) | (2,241) | |
| Net assets | 19,930 | 19,871 | 19,936 | |
| Share capital and reserves | ||||
| Share capital | 7 | 269 | 269 | 269 |
| Share premium | 9,094 | 9,094 | 9,094 | |
| Special distributable reserve | 10,973 | 10,973 | 10,973 | |
| Capital reserve | (1,316) | (1,071) | (1,162) | |
| Revenue reserve | 910 | 606 | 762 | |
| Equity shareholders' funds | 19,930 | 19,871 | 19,936 | |
| Net asset value per ordinary share | 8 | 79.79p | 79.55p | 79.81p |
| For the six months ended 31 May 2025 | Share capital £'000 | Share premium £'000 | Special distributable reserve £'000 | Capital reserve £'000 | Revenue reserve £'000 | Total £'000 |
| At beginning of the period | 269 | 9,094 | 10,973 | (1,162) | 762 | 19,936 |
| Total comprehensive income for the period: | ||||||
| Profit for the period | - | - | - | (154) | 648 | 494 |
| Transactions with owners recognised directly in equity: | ||||||
| Dividends paid(note 4) | - | - | - | - | (500) | (500) |
| Repurchase of shares into treasury | - | - | - | - | - | - |
| At 31 May 2025 | 269 | 9,094 | 10,973 | (1,316) | 910 | 19,930 |
| For the six months ended 31 May 2024 | Share capital £'000 | Share premium £'000 | Special distributable reserve £'000 | Capital reserve £'000 | Revenue reserve £'000 | Total £'000 |
| At beginning of the period | 269 | 9,094 | 12,267 | (1,059) | 133 | 20,704 |
| Total comprehensive income for the period: | ||||||
| Profit for the period | - | - | - | (1) | 606 | 605 |
| Transactions with owners recognised directly in equity: | ||||||
| Dividends paid (note 4) | - | - | (386) | - | (133) | (519) |
| Repurchase of shares into treasury | - | - | (908) | (11) | - | (919) |
| At 31 May 2024 | 269 | 9,094 | 10,973 | (1,071) | 606 | 19,871 |
| For the year ended 30 November 2024 | Share capital £'000 | Share premium £'000 | Special distributable reserve £'000 | Capital reserve £'000 | Revenue reserve £'000 | Total £'000 |
| At beginning of the year | 269 | 9,094 | 12,267 | (1,059) | 133 | 20,704 |
| Total comprehensive income for the year: | ||||||
| Profit for the year | - | - | - | (92) | 1,262 | 1,170 |
| Transactions with owners recognised directly in equity: | ||||||
| Dividends paid(note 4) | - | - | (386) | - | (633) | (1,019) |
| Repurchase of shares into treasury | - | - | (908) | (11) | - | (919) |
| At 30 November 2024 | 269 | 9,094 | 10,973 | (1,162) | 762 | 19,936 |
| Six months to 31 May 2025 (unaudited) £'000 | Six months to 31 May 2024 (unaudited) £'000 | Year ending 30 November 2024 (audited) £'000 | ||||
| Operating activities | ||||||
| Profit before taxation | 494 | 605 | 1,170 | |||
| Losses on investments held at fair value through profit and loss | - | - | 143 | |||
| Impairments on loans at amortised cost | 6 | 15 | 30 | 75 | ||
| Amortisation of exit fees | (13) | - | (126) | |||
| Interest expense | 1,036 | 39 | 84 | |||
| Changes in working capital | ||||||
| 5 | (55) | (34) | (84) | ||
| 6 | (163) | (268) | (152) | |||
| 14 | (3) | (4) | ||||
| Increase/(decrease) in other payables | 156 | (53) | (50) | |||
| Net cash inflow from operating activities AFTER TAXATION | 1,484 | 316 | 1,056 | |||
| Investing activities | ||||||
| Loans given | (3,456) | (3,291) | (9,151) | |||
| Loans repaid | 2,974 | 2,412 | 6,978 | |||
| Net cash OUTFLOW from investing activities | (482) | (879) | (2,173) | |||
| Financing | ||||||
| Equity dividends paid | (500) | (519) | (1,019) | |||
| Repurchase of shares into Treasury | - | (919) | (919) | |||
| Bank loan drawn down | 2,250 | 2,325 | 6,125 | |||
| Repayment of bank loan | (1,500) | (1,200) | (4,025) | |||
| Interest paid | (1,035) | (39) | (84) | |||
| Net cash (outfloW)/INflow from financing | (785) | (352) | 78 | |||
| INCREASE/(DEcrease) in cash and cash equivalents | 217 | (915) | (1,039) | |||
| Cash and cash equivalents at the start of the year | 115 | 1,154 | 1,154 | |||
| Cash and cash equivalents at the end of the period/year | 332 | 239 | 115 |
| 31 May 2025 £'000 | 30 November 2024 £'000 | |
| Investment Adviser fee | 30 | 61 |
| Six months ended 31 May 2025 | Six months ended 31 May 2024 | Year ended 30 November 2024 | ||||
| £'000 | Pence per share | £'000 | Pence per share | £'000 | Pence per share | |
| Revenue earnings | 648 | 2.59 | 606 | 2.38 | 1,262 | 5.00 |
| Capital earnings | (154) | (0.61) | (1) | 0.00 | (92) | (0.36) |
| Total earnings | 494 | 1.98 | 605 | 2.38 | 1,170 | 4.64 |
| Average number of shares in issue | 24,978,201 | 25,515,318 | 25,246,760 |
| Six months ended 31 May 2025 | Six months ended 31 May 2024 | Year ended 30 November 2024 | |
| £'000 | £'000 | £'000 | |
| Dividends paid in the year relating to previous year: | |||
| Interim dividend for the quarter ended August, paid in December | 250 | 262 | 262 |
| Interim dividend for the quarter ended November, paid in March | 250 | 257 | 257 |
| Dividends paid during and relating to the current year: | |||
| Interim dividend for the quarter ended February, paid in June | - | - | 250 |
| Interim dividend for the quarter ended May, paid in September | - | - | 250 |
| Total | 500 | 519 | 1,019 |
| 31 May 2025 £'000 | 31 May 2024 £'000 | 30 November 2024 £'000 | |
| Opening Balance | 2,899 | 3,024 | 3,024 |
| Principal repayments | (25) | (2) | (66) |
| Movements in interest receivable | 55 | 34 | 84 |
| Unrealised (losses)/gains on investments held at fair value through profit or loss | - | - | (143) |
| Amortisation of exit fees | 13 | - | - |
| Total investments held at fair value through profit and loss | 2,942 | 3,056 | 2,899 |
| Split: | |||
| Non-current assets: Investments held at fair value through profit and loss due for repayment after one year | - | - | - |
| Current assets: Investments held at fair value through profit and loss due for repayment under one year | 2,942 | 3,056 | 2,899 |
| 31 May 2025 £'000 | 31 May 2024 £'000 | 30 November 2024 £'000 | |
| Opening Balance | 19,146 | 16,704 | 16,704 |
| Loans deployed | 3,457 | 3,291 | 9,151 |
| Principal repayments | (2,951) | (2,410) | (6,912) |
| Movements in interest receivable | 163 | 268 | 152 |
| Movement in impairments | (15) | (30) | (75) |
| Amortisation of exit fees | - | - | 126 |
| Total Loans at amortised cost | 19,800 | 17,823 | 19,146 |
| Split: | |||
| Non-current assets: Loans at amortised cost due for repayment after one year | 1,000 | 3,064 | 1,000 |
| Current assets: Loans at amortised cost due for repayment under one year | 18,800 | 14,759 | 18,146 |
| Allotted, issued and fully paid: | 31 May 2025 £'000 | 31 May 2024 £'000 | 30 November 2024 £'000 |
| 24,978,201 (May 2024: 24,978,201; November 2024: 24,978,201) ordinary shares of 1p each | 250 | 249 | 250 |
| 1,945,862 (May 2024: 1,945,862; November 2024: 1,945,862) ordinary shares of 1p held in Treasury | 19 | 20 | 19 |
| 269 | 269 | 269 |
| Develop North PLC Ian McElroy | +44 (0) 191 222 0099 |
| Tier One Capital Ltd (Investment Adviser) Brendan O'Grady | +44 (0) 191 222 0099 |
| Apex Fund Administration Services (UK) Limited (Secretary) Suzanna Waterhouse | +44 (0) 1245 398984 |
| Cavendish Capital Markets Limited (Sponsor, Broker and Financial Adviser) Andrew Worne | +44 (0) 207 220 0500 |
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