RNS Number : 6303K
TOC Property Backed Lendng Tst PLC
30 August 2019
TOC PROPERTY BACKED LENDING TRUST PLC
Half-Yearly Report for the six months to 31 May 2019
CHAIRMAN'S STATEMENT
I am pleased to be writing to you for the first time since I became Chairman on 30 April 2019 following Stephen Coe's retirement. Stephen oversaw the progress made throughout the first 27 months of the Company's life, and his wise counsel will be missed.
NET ASSET VALUE
The net asset value at 31 May 2019 was 93.39 pence per share, down 1.1% from 94.39 pence at 30 November 2018, giving a net asset value total return for the six month period of 2.36% when dividends are taken into account. The portfolio of loans remains focused on the North East of England and on Scotland, providing a measure of insulation against the economic vagaries of London and the South East.
DIVIDENDS
That said, reduced property transaction volumes and the slowdown in price increases of which my predecessor spoke in March have continued, as has the backdrop of political uncertainty. In such circumstances, a measure of prudence has been adopted, in the form of a quarter percent reduction in the quarterly dividends from 1.75 pence per share to 1.50 pence per share. As already announced, the third interim dividend is also expected to be 1.50 pence per share. The fourth interim dividend, scheduled for December 2019, is expected to be at least 1.50 pence per share and will be considered in the light of the circumstances then prevailing.
PORTFOLIO AND GEARING
The portfolio at today's date totals £24.9m of value (equivalent 2018 figure: £24.9m) representing 15 projects, of which the Company has a profit share agreement in seven. While these arrangements offer sound long-term potential, in terms of possible capital uplifts in due course, the Board does not account for any potential profits on such projects until there is sufficient clarity and visibility as to the projects eventual outcome visibility and certainty around such profits. No new unrealised profits have been recognised in the period.
During the period loans of £5.6m were repaid. Since the end of May a further £0.5m of loans were repaid, while further investment of £2.6m has been made.
At 31 May 2019, £0.7m of the Company's £8.5m committed revolving facility was drawn down. These arrangements expire on 24 October 2019 and negotiations to renew the facility are well advanced.
The Investment Adviser's report provides further details of the individual projects.
RELATED PARTIES
Three loans (Pendower Hall, Medburn and Charlton Bonds) to parties related to the Investment Adviser or its principals continue to be renewed on a short term basis while the Adviser arranges alternative financing for them. The sale of property units in Charlton Bonds remains in progress, with continuing repayments to the Company, but progress has been slower in relation to Pendower and Medburn. A further update will be given in due course. Interest payments are current on all three related party projects.
CONCLUSION
The Company's pipeline of potential new loans is strong and indeed growing so as it becomes more widely known and its track record becomes established this should cause both portfolio diversity to increase further and allow the very best opportunities to be taken up.
On a forward-looking basis, the third quarter was extremely encouraging, with more than £6 million of new money agreed at lending margins that should enhance net asset value returns over time.
JOHN NEWLANDS, CHAIRMAN
29 AUGUST 2019
INVESTMENT ADVISER'S REVIEW
ABOUT THE ADVISER
Tier One Capital Ltd, as Investment Adviser, provides bespoke wealth management, investment management and fund management services to high net worth (HNW) private clients, charities and institutions.
Tier One Capital Ltd currently has a team of 22 individuals with offices in London, Lausanne and its head office in Newcastle upon Tyne.
INVESTMENT ADVISER'S REPORT
REVIEW OF THE 6 MONTHS TO 31 MAY 2019
In its third year of trading the portfolio continued to perform well, posting a NAV total return of 2.36% and paying its annual dividend at 1.5p per quarter for the first two quarters of the year. We continue to be mindful of the ongoing challenges our borrowers are facing in a climate of rising interest rates, a weakening housing market and the ever-present shadow of Brexit. Our hands-on approach and the benefit of staying very close to all of our portfolio has helped us mitigate this risk to date.
The Company agreed one new facility of £300,000 with Glenfarg Partnership Ltd in April 2019 which has all been drawn down. This mezzanine loan will assist in the development of 13 retirement apartments in Perthshire, Scotland. The loan is at a 10% rate, with security being taken by a second charge over the development, behind a high street senior lender and a second ranking debenture. The borrowers have contributed a significant amount of their own funds and, with an LTV of 34.8%, our facility ensures there is enough funding to complete the project.
The Company agreed the refinance of The Willows project for a further three years, with an increase of 0.48% to the interest rate. The Company also agreed the refinance of Inveniam Home Loans for a further two years, three months with a higher interest rate of 10% until additional capital is repaid. There were further deployments of capital as follows:
Deployments of Capital
Newgate Street
£650,000
West Auckland
£628,000
Springs
£625,000
Pendower Hall
£287,500
Barley Croft
£250,000
The Willows
£65,000
Whitefield Farm
£50,000
Fernhill
£30,861
Marley Hill and Medburn
£25,000
Post half year end, the Company entered into two new facilities on 16 August 2019. The first was a £3.4m facility with Esh Chilton Moor Ltd, a wholly owned subsidiary of Esh Investments Ltd. This two year loan at an 8% rate will provide finance to develop 34 three and four bed detached homes in Chilton Moor, County Durham. The Esh Group are a leading construction group of companies which operate across the North East of England, Yorkshire and Cumbria. This facility has the benefit of a profit share via an exit fee of 10%.
The second new facility was a £3.05m facility with Bede & Cuthbert Developments Ltd, the second project we have supported with this borrowing team. This two year, six month loan at an 8% rate, will provide finance to develop 30 three and four bed detached houses in Bill Quay, South Tyneside. This team is expected to deliver the Marley Hill project and repay all outstanding loans and interest as well as a level of profit share. We are therefore pleased to support the second development in a well-established residential area. This facility also has the benefit of a 25.1% profit share.
In February 2019 the fourth successful exit of the Company occurred with the repayment of Bylaugh Hall. The £3,379,000 loan, at 8%, was to support the acquisition and development of a grade two listed grand hall in Norfolk. The facility pre-dated the formation of the Company and was brought into the Company on the date of listing. This represented an IRR of 8.3%.
During the first six months of the year there were a number of partial redemptions including:
Partial Redemptions
Marley Hill
£1,731,064
Charlton's Bonds
£270,680
Inveniam Home Loans
£197,395
Post year end there were further partial redemptions for West Auckland and Inveniam Home Loans returning £400,000 and £138,176 of capital.
As at 30 November 2018, we reported that three of the projects, Barley Croft, West Auckland and Pendower Hall had not performed in line with expectations. The decision was made to recognise capital impairments at that time. While good progress has been made, we are not amending the impairment at this time and we will revisit this again when considering the 31 August 2019 NAV.
In October 2018, the Company agreed a committed revolving facility with Shawbrook Bank. This facility has already allowed the Company to achieve further growth with £0.7m of the facility being drawn at 31 May 2019 (£3m: 30 Nov 2019) and a further £1.55m drawn down post quarter end. The intention is to deploy this facility over the coming months.
At 31 May 2019, the Company had 15 live facilities, seven of which are a profit share arrangement for the benefit of the Company, with the deployment level sitting at £24,865,056.
DEPLOYMENT
The portfolio continues to be deployed across residential 62% (30 Nov 2018: 56%), commercial 26% (30 Nov 2018: 34%), sale and leaseback 9% (30 Nov 2018: 8%) and cash 3% (30 Nov 2018: 2%).
The current average interest rate being achieved on the combined loan book is 7.67% (Nov 2018: 8.38%), with the reduction due largely to the Bedlington project no longer earning interest, and a short term interest rate reduction on West Auckland to 6% from 8%. The average loan size has decreased from £1.87m at 30 November 2018 to £1.66m at 31 May 2019.
PROFIT SHARE PROJECTS
There are currently seven Profit Share projects in the portfolio (Nov 2018: seven).
Since the listing of the Company we have recognised an uplift in the equity value of one of the seven facilities (Nov 2018: one), The rest are recognised as nil, as we consider it prudent either because projects are at a relatively early stage of their lifecycle or the projects appear unlikely to result in a profit to the Company. We shall continue to monitor and review this on an ongoing basis.
PIPELINE
The Investment Adviser continues to see strong deal flow, reflective of the lack of finance options available to developers in the regions. There was £26.3m of potential funding opportunities across 8 projects split as follows:
Regional Allocation
Scotland: 84.52%
North East: 15.48%
Sector Allocation
Commercial: 84.52%
Residential: 15.48%
OUTLOOK
The Investment Adviser continues to see a greater balance of risk and return by providing loan facilities to high quality and experienced property development teams in the regions, as opposed to central London. The current geographical breakdown of the Company's deployment approach shows approximately 82% (Nov 2018: 74%) of the Company's loans being focused in the North East, reflecting the Investment Adviser's commitment to providing facilities based on a relationship led approach. The North East property market also provides protection against a decline in London property markets, as traditionally the region does not see the boom and bust dynamic created by significantly inflated property prices.
The regional Rightmove house price index for June 2019 shows the average price for a property in the North East at £153,806 which is an annual increase of 3.2% from last year. Considering the previous month, however, prices and average time to sell (77 days) remained flat.
In comparison, the average price for a property in Greater London now stands at £618,880 in June 2019 which is an annual decrease of 2.0% from the previous year and a decrease of 0.4% from the previous month. The average time to sell is slightly lower (72 days) compared to May. Dampened demand and Brexit uncertainty made the number of sales in London fall sharply over the last 5 years. Indeed, also in May, transaction volumes have continued their downward trend in London and the South, indicating some hesitancy to engage the market. Elsewhere, the number of transactions remained flat, highlighting again a marked north/south divide as all northern regions are selling better than those in the southern part of the UK.
National average asking prices
Month
Avg. asking price
Monthly change
Annual change
Index
June 2019
£309,348
0.3%
0.0%
239.2
May 2019
£308,290
0.9%
0.1%
238.3
National average asking prices by market sector (excluding Inner London)
Sector
June 2019
May 2019
Monthly change
Annual change
First-time buyers
£191,364
£191,067
0.2%
-0.1%
Second-steppers
£277,757
£277,229
0.2%
0.9%
Top of the ladder
£553,680
£553,243
0.1%
-0.5%
We believe that the UK housing market should behave in line with the broader economy. House prices and transaction volumes are likely to remain close to current levels over the near term since Brexit uncertainty will remain a drag on market sentiment and economic activity. However, healthy labour market conditions and low interest rates should provide underlying support. We believe that once Brexit is resolved, housing will again become the main item on the government's agenda, and we feel that the Company is well placed to take advantage of this.
The Investment Adviser remains confident of being able to continue to implement the Company's investment policy, and to deliver the level of consistent quarterly income that many UK investors demand.
IAN MCELROY,
TIER ONE CAPITAL LTD
29 AUGUST 2019
THE INVESTMENT PORTFOLIO AS AT 31 MAY 2019
Project
Sector
Region
Maturity Date
Rate %
Profit Share
Security
% NAV
LTV (May 19) %
Loan Value (May 19) £'000s
Loan Value (Nov 18) £'000s
The Willows*
Commercial
Essex
May 2022
7.48
No
Senior
16.16
74.02
4,123
4,058
West Auckland
Residential
North East
Mar 2020
6.00
No
Senior
13.07
95.61
3,336
2,709
St Hilds
Sale & Leaseback
North East
Feb 2020
8.00
25.1%
Senior
9.01
99.82
2,300
2,300
Newgate Street
Residential
North East
Aug 2020
8.00
25.1%
Senior
8.42
127.00
2,150
1,500
Springs
Residential
North East
May 2020
10.00
25.1%
Senior
7.84
80.59
2,000
1,375
Medburn
Residential
North East
Jul 2020
8.00
No
Senior
7.31
71.91
1,865
1,840
Pendower Hall
Commercial
North East
Aug 2019
10.00
No
Senior
7.05
89.03
1,800
1,513
Bedlington
Residential
North East
Dec 2019
0.00
25.1%
Senior
6.71
87.48
1,712
1,462
Inveniam Home Loans**
Residential
North East
Sep 2021
10.00
No
Subordinate
5.40
68.11
1,378
1,575
Whitefield Farm
Residential
North East
Jan 2020
10.00
Exit fee taken
Senior
4.11
113.70
1,050
1,000
Marley Hill
Residential
North East
Jan 2020
8.00
25.1%
Senior
4.03
60.47
1,029
2,729
Charlton's Bonds
Residential/ Commercial
North East
May 2020
8.00
No
Senior
2.73
100.00
697
967
Fernhill***
Residential
North East
Jul 2019
10.00
No
Senior & Subordinate
2.25
76.34
575
525
Gateshead Town Hall
Commercial
North East
Jun 2023
8.00
Yes
Senior
2.16
84.62
550
550
Glenfarg
Residential
Scotland
Apr 2020
10.00
No
Subordinate
1.18
34.68
300
-
Bylaugh Hall
Commercial
Norfolk
Nov 2018
8.00
No
Subordinate
-
-
-
3,379
Cash
2.57
657
606
Total / Weighted Average
8.40
100.00
87.89
25,522
28,088
*Client interest rate changed from 7% to 7.48% on 31 May 2019.
**Client interest rate changed from 8% to 10% on 1 May 2019.
***Client interest rate changed from 8% to 10% on 1 May 2019
STATEMENT OFDIRECTORS' RESPONSIBILITIES
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The risks, and the way in which they are managed, are described in more detail under the heading 'Principal Risks and Uncertainties' within the Strategic Report in the Company's Annual Report and Accounts for the year ended 30 November 2018. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE INTERIM REPORT
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union and gives a true and fair view of the assets, liabilities, financial position and profit of the Company;
· the Chairman's Statement and Investment Adviser's Review (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure and Transparency Rules (DTR) 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;
· the Statement of Principal Risks and Uncertainties above is a fair review of the information required by DTR 4.2.7R; and
· the Chairman's Statement and Investment Adviser's Review together with the condensed set of financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.
On Behalf of the Board
JOHN NEWLANDS, CHAIRMAN
29 AUGUST 2019
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 31 May 2019 (unaudited)
Six months ended 31 May 2019 (unaudited)
Year ended 30 November 2018 (audited)
Notes
Revenue £'000
Capital £'000
Total £'000
Total £'000
Total £'000
REVENUE
Investment interest
1,001
-
1,001
923
2,044
Total revenue
1,001
-
1,001
923
2,044
Unrealised gain on investments
-
-
-
-
104
Total income
1,001
-
1,001
923
2,148
EXPENDITURE
Impairments
-
-
-
-
(746)
Other expenses
(324)
(30)
(354)
(239)
(550)
Total expenditure
(324)
(30)
(354)
(239)
(1,296)
Profit before finance costs and taxation
677
(30)
647
684
852
NET FINANCE COSTS
Interest payable
(41)
-
(41)
-
(14)
Profit before taxation
636
(30)
606
684
838
TAXATION
-
-
-
-
-
Profit and total comprehensive profit for the period/year
636
(30)
606
684
838
Basic earnings per share
3
2.36p
(0.11)p
2.25p
2.74p
3.27p
The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations. There is no other comprehensive income as all income is recorded in the statement above.
CONDENSED STATEMENT OF FINANCIAL POSITION
Notes
As at 31 May 2019 (unaudited) £'000
As at 31 May 2018 (unaudited) £'000
As at 30 November 2018 (audited) £'000
NON-CURRENT ASSETS
Investments held at fair value
5
-
-
104
Loans at amortised cost
6
8,000
8,703
8,238
8,000
8,703
8,342
CURRENT ASSETS
Loans at amortised cost
6
16,865
15,173
19,140
Other receivables and prepayments
431
382
473
Cash and cash equivalents
657
963
606
17,953
16,518
20,219
TOTAL ASSETS
25,953
25,221
28,561
CURRENT LIABILITIES
Loan facility
(675)
-
(2,944)
Other payables and accrued expenses
(133)
(224)
(203)
TOTAL LIABILITIES
(808)
(224)
(3,147)
NET ASSETS
25,145
24,997
25,414
SHARE CAPITAL AND RESERVES
Share capital
7
269
256
269
Share premium
9,094
7,924
9,094
Special distributable reserve
16,455
16,455
16,455
Revenue reserve
(210)
470
29
Capital reserve
(463)
(108)
(433)
EQUITY SHAREHOLDERS' FUNDS
25,145
24,997
25,414
Net asset value per ordinary share
8
93.39p
97.57p
94.39p
The notes form an integral part of the financial statements.
The financial statements were approved by the Board of Directors of TOC Property Backed Lending Trust plc (a public limited company incorporated in England and Wales with company number 10395804) and authorised for issue on 29 August 2019.
JOHN NEWLANDS
CHAIRMAN
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the six months ending 31 May 2019
Share capital
Share premium
Special distributable reserve
Capital reserve
Revenue reserve
Total
(unaudited)
£'000
£'000
£'000
£'000
£'000
£'000
AT BEGINNING OF THE PERIOD Total comprehensive income for the period:
269
9,094
16,455
(433)
29
25,414
Profit for the period TRANSACTIONS WITH OWNERS RECOGNISED DIRECTLY IN EQUITY:
-
-
-
(30)
636
606
Dividends paid
-
-
-
-
(875)
(875)
At 31 May 2019
269
9,094
16,455
(463)
(210)
25,145
For the year ending 30 November 2018
Share capital
Share premium
Special distributable reserve
Capital reserve
Revenue reserve
Total
(audited)
£'000
£'000
£'000
£'000
£'000
£'000
AT BEGINNING OF THE YEAR Total comprehensive income for the period:
227
5,152
16,455
(108)
540
22,266
Profit for the year TRANSACTIONS WITH OWNERS RECOGNISED DIRECTLY IN EQUITY:
-
-
-
(325)
1,163
838
Ordinary shares issued
42
4,188
-
-
-
4,230
Share issue costs
-
(246)
-
-
-
(246)
Dividends paid
-
-
-
-
(1,674)
(1,674)
At 30 November 2018
269
9,094
16,455
(433)
29
25,414
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the six months ending 31 May 2018 (unaudited)
Share capital
Share premium
Special distributable reserve
Capital reserve
Revenue reserve
Total
£'000
£'000
£'000
£'000
£'000
£'000
AT BEGINNING OF THE PERIOD
Total comprehensive income for the period:
227
5,152
16,455
(108)
540
22,266
Profit for the period
-
-
-
-
684
684
TRANSACTIONS WITH OWNERS
RECOGNISED DIRECTLY IN
EQUITY:
Ordinary shares issued
29
2,896
-
-
-
2,925
Share issue costs
-
(124)
-
-
-
(124)
Dividends paid
-
-
-
-
(754)
(754)
At 31 May 2018
256
7,924
16,455
(108)
470
24,997
CONDENSED CASH FLOW STATEMENT
Six months to 31 May 2019 (unaudited)
Six months to 31 May 2018 (unaudited)
Year ending 30 November 2018 (audited)
Notes
£'000
£'000
£'000
OPERATING ACTIVITIES
Profit after taxation
636
684
838
Impairments
-
-
746
Unrealised gain on investments
-
-
(104)
Decrease/(increase) in other receivables
42
(84)
(174)
(Decrease)/increase in other payables
(70)
83
72
NET CASH INFLOW FROM
OPERATING ACTIVITIES BEFORE
608
683
1,378
INTEREST AND AFTER TAXATION
Interest paid
41
14
NET CASH INFLOW FROM
OPERATING ACTIVITIES
649
683
1,392
INVESTING ACTIVITIES
Loans given
(3,096)
(3,300)
(10,260)
Loans repaid
5,713
1,206
3,918
NET CASH INFLOW/(OUTFLOW)
FROM INVESTING ACTIVITIES
2,617
(2,094)
(6,342)
FINANCING
Issue of ordinary shares
-
2,812
3,984
Equity dividends paid
(875)
(754)
(1,674)
Bank loan drawn down
701
-
2,944
Interest paid
(41)
-
(14)
Repayment of loan
(3,000)
-
NET CASH (OUTFLOW)/INFLOW
FROM FINANCING
(3,215)
2,058
5,240
INCREASE IN CASH AND CASH
EQUIVALENTS
51
647
290
Cash and cash equivalents at the start of the period / year
606
316
316
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD / YEAR
657
963
606
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. INTERIM RESULTS
The condensed financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and the accounting policies set out in the statutory accounts of the Company for the year ended 30 November 2018. The condensed financial statements do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the financial statements of the Company for the year ended 30 November 2018, which were prepared under IFRS as adopted by the European Union. There have been no significant changes to management judgements and estimates.
The condensed financial statements have been prepared on the going concern basis. In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing these financial statements.
2. INVESTMENT MANAGER'S AND INVESTMENT ADVISER'S FEES
INVESTMENT MANAGER
The Company has appointed R&H Fund Services (Jersey) Limited to act as the Company's alternative investment fund manager (AIFM) for the purposes of AIFMD pursuant to the Investment Management Agreement and accordingly the AIFM is responsible for providing discretionary portfolio management and risk management services to the Company, subject to the overall control and supervision of the Directors. The AIFM is entitled to receive fees from the Company of £15,000 per annum on total assets up to £100 million, or a fee from the Company of £20,000 per annum if total assets are over £100 million. There is a balance of £42,288 accrued for the Investment Manager for the period ended 31 May 2019 (Year to 30 November 2018: £18,000).
INVESTMENT ADVISER
The AIFM has appointed Tier One Capital Ltd to act as the Company's investment adviser pursuant to which the AIFM has delegated discretionary portfolio management services to the Investment Adviser, subject to the overall control and supervision of the Directors.
The Investment Adviser is entitled to receive from the Company an investment adviser fee which is calculated and paid quarterly in arrears at an annual rate of 0.25 per cent. per annum of the prevailing Net Asset Value if less than £100m; or 0.50 per cent. per annum of the prevailing Net Asset Value if £100m or more. The Investment Adviser has agreed (unless otherwise decided by the Board) to waive its fee until the Net Asset Value is at least £50 million.
There are no performance fees payable
3. EARNINGS PER SHARE
The revenue, capital and total return per ordinary share is based on each of the profit after tax and on 26,924,063 ordinary shares, being the weighted average number of ordinary shares in issue throughout the period.
Six months ended 31 May 2019
Six months ended 31 May 2018
Year ended 30 November 2018
£'000
Pence per share
£'000
Pence per share
£'000
Pence per share
Revenue earnings
636
2.36
684
2.74
1,163
4.54
Capital earnings
(30)
(0.11)
-
-
(325)
(1.27)
Total earnings
606
2.25
684
2.74
(838)
3.27
Average number of shares in issue
26,924,063
24,997,360
25,593,773
Earnings for the period to 31 May 2019 should not be taken as a guide to the results for the year to 30 November 2019.
4. DIVIDENDS
Six months ended 31 May 2019 £'000
Six months ended 31 May 2018 £'000
Year ended 30 November 2018 £'000
In respect of the prior year:
First interim dividend
-
-
415
Second interim dividend
-
-
448
Third interim dividend
471
340
340
In respect of the current year:
First interim dividend
404
414
471
Total
875
754
1,674
A second interim dividend for the year ending 30 November 2019, of 1.50 pence per share, was paid on 4 July 2019 to shareholders on the register on 14 June 2019.
5. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
The Company's investment held at fair value through profit or loss represents its profit share arrangements whereby the Company owns 25.1% of the following companies:
Bede and Cuthbert Developments Ltd
Dinosauria Ltd
Gatsby Homes Ltd
Northumberland Ltd
Northumberland (Whitefield Farm) Ltd
Ryka Developments Ltd
Thursby Homes (Springs) Ltd
The valuation of these interim period and prior period assets requires critical judgement. The projects remain at a very early stage and no equity value could currently be expected to be recovered should they not complete. As the projects move closer to completion, the Board and Investment Adviser will utilise financial and market data to judge the fair value of the profit shares.
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 - Unadjusted, fully accessible and current quoted prices in active markets for identical assets or liabilities.
· Level 2 - Quoted prices for similar assets or liabilities, or other directly or indirectly observable inputs which exist for the duration of the period of investment.
· Level 3 - External inputs are unobservable. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instrument.
All investments are considered Level 3. There have been no movements between levels during the period.
6. LOANS AT AMORTISED COST
31 May 2019 £'000
31 May 2018 £'000
30 November 2018 £'000
Opening balance
27,378
21,678
21,678
Unrealised gain on investments
104
104
104
Loans deployed
3,096
3,300
10,260
Principal repayments
(5,713)
(1,206)
(3,918)
Impairments
-
-
(746)
Total loans at amortised cost
24,865
23,876
27,378
Split:
Non-current assets: Loans due for repayment after one year
8,000
8,703
8,238
Current assets: Loans due for repayment under one year
16,865
15,173
19,140
The Company's loans are accounted for using the effective interest method. The carrying value of each loan is determined after taking into consideration any requirement for impairment provisions. As at 31 May 2019 the Board agreed, after consideration of the economic climate, the loan to value ratios and prior credit loss experience of the borrowers, that there is no requirement for impairment. No impairment was required in the prior year/period.
7. SHARE CAPITAL
Nominal value £'000
Number of Ordinary shares of 1p
At 30 November 2017
227
22,693,559
Issue 7 December 2017
10
958,257
Issue 2 March 2018
5
617,216
Issue 5 April 2018
14
1,350,000
Issue 18 June 2018
13
1,305,031
Issued and fully paid as at 30 November 2018
269
26,924,063
Issued and fully paid as at 31 May 2019
269
26,924,063
The ordinary shares are eligible to vote and have the right to participate in either an interest distribution or participate in a capital distribution (on a winding up).
8. NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share is based on net assets of £25,144,488 (31 May 2018: £24,997,201; 30 November 2018: £25,413,868) and on 26,924,063 ordinary shares (31 May 2018: 25,619,032; 30 November 2018: 26,924,063), being the number of ordinary shares in issue at the period/year end.
9. RELATED PARTIES
The Directors are considered to be related parties. No Director has an interest in any transactions which are, or were, unusual in their nature or significant to the nature of the Company.
The Directors of the Company received £62k fees for their services during the six months to 31 May 2019 (six months to 31 May 2018: £64k; to 30 November 2018: £129k). £nil was payable at the period and prior year end.
Ian McElroy is Chief Executive of Tier One Capital Ltd and is a founding shareholder and director of the firm. Stephen Black is a founding shareholder of Tier One Capital Ltd and resigned as a director of the firm on 28 September 2018.
Tier One Capital Ltd received no investment adviser's fee during the period and prior year and £nil was payable at the period and prior year end. Tier One Capital Ltd receive a 20% margin and arrangement fee for all loans it facilitates.
Stephen Black and Ian McElroy are shareholders owning 50% of Inveniam Corporate Finance Ltd to which the Company paid £nil for financial modelling to the 31 May 2019, (30 November 2018: £nil, 31 May 2018: £36k). There are various related party relationships in place with the borrowers as below:
· Pendower Hall
Stephen Black and Ian McElroy are former directors of Pendower Hall Ltd having resigned on 15 June 2018. Pendower Hall Ltd is 100% owned by Inperpetuity Ltd. Inperpetuity Ltd is 100% owned by Stephen Black and his spouse Jill Black. The loan amount outstanding as at 31 May 2019 was £2.0m (30 November 2018: £1.713m, 31 May 2018: £1.2m). Transactions in relation to loans made during the period amounted to £0.475m (30 November 2018: £0.480m, 31 May 2018: £Nil). Interest due to be received as at 31 May 2019 was £0.033m (30 November 2018: £0.027m, 31 May 2018: £0.021m). Interest received during the period amounted to £0.139m (30 November 2018: £0.139m, 31 May 2018: £0.061m).
· Rare Earth Medburn
Stephen Black and Ian McElroy are former directors of Rare Earth Medburn Ltd, having resigned on 15 June 2018. Rare Earth Medburn Ltd is 100% owned by Stephen Black and his spouse Jill Black, having previously been owned by Inperpetuity Ltd. The loan amount outstanding as at 31 May 2019 was £1.8m (30 November 2018: £1.8m, 31 May 2018: £1.6m). Transactions in relation to loans made during the period amounted to £0.025m (30 November 2018: £0.210m, 31 May 2018: £Nil). Interest due to be received as at 31 May 2019 was £0.025m (30 November 2018: £0.025m, 31 May 2018: £0.022m). Interest received during the period amounted to £0.63m (30 November 2018: £0.141m, 31 May 2018: £0.065m).
· Thursby Homes (Charlton Bonds)
Tier One Capital Ltd sold its full shareholding of 25.1% of Thursby Homes Ltd on the 20 March 2019. The loan amount outstanding as at 31 May 2019 was £0.697m (30 November 2018: £0.967m, 31 May 2018: £1.2m). Transactions in relation to loans repaid during the period amounted to £0.271m (30 November 2018: £0.975m, 31 May 2018: £0.8m). Interest due to be received as at 31 May 2019 was £0.009m (30 November 2018: £0.013m, 31 May 2018: £0.027m). Interest received during the period amounted to £0.033m (30 November 2018: £0.099m, 31 May 2018: £0.071m).
The following related parties arise due to the opportunity taken to advance the 25.1% profit share contracts
· Ryka Developments
The Company owns 25.1% of the borrower Ryka Developments Ltd. Stephen Black is a former director of Ryka Developments Ltd, having resigned on 21 September 2018. The loan amount outstanding as at 31 May 2019 was £2.3m (30 November 2018: £2.3m, 31 May 2018: £2.3m). Transactions in relation to loans made during the period amounted to £nil (30 November 2018: £nil, 31 May 2018: £nil). Interest due to be received as at 31 May 2019 was £31k (30 November 2018: £31k, 31 May 2018: £31k). Interest received during the period amounted to £92k (30 November 2018: £184k, 31 May 2018: £92k).
· Gatsby Homes
The Company owns 25.1% of the borrower Gatsby Homes Ltd. T1C Nominees Ltd is a former director of Gatsby Homes Ltd, having resigned on 5 October 2018. T1C Nominees Ltd is owned by Stephen Black and Ian McElroy who are directors. The loan amount outstanding as at 31 May 2019 was £1.7m (30 November 2018: £1.9m, 31 May 2018 £1.2m). Transactions in relation to loans made during the period amounted to £0.2m (30 November 2018: £1.1m, 31 May 2018: £0.4m). Interest due to be received as at 31 May 2019 was £31k (30 November 2018: £31k, 31 May 2018: £19). Interest received during the period amounted to £nil (30 November 2018: £100k, 31 May 2018: £41k).
· Bede and Cuthbert Developments
The Company owns 25.1% of the borrower Bede and Cuthbert Developments Ltd. Stephen Black and Ian McElroy are former directors of Bede and Cuthbert Developments Ltd, having resigned on 24 October 2018. The loan amount outstanding as at 31 May 2019 was £1.0m (30 November 2018: £2.6m, 31 May 2018: £1.9m). Transactions in relation to loans (repaid)/made during the period amounted to £(1.7m) (30 November 2018: £1.6m, 31 May 2018: £0.9m). Interest due to be received as at 31 May 2019 was £21k (30 November 2018: £35k, 31 May 2018: £26k). Interest received during the period amounted to £78k (30 November 2018: £146k, 31 May 2018: £43k).
· Thursby Homes (Springs)
The Company owns 25.1% of the borrower Thursby Homes (Springs) Ltd. The loan amount outstanding as at 31 May 2019 was £2.0m (30 November 2018: £1.4m, 31 May 2018: £1.3m). Transactions in relation to loans made during the period amounted to £0.6m (30 November 2018: £1.4m, 31 May 2018: £1.3m). Interest due to be received as at 31 May 2019 was £33k (30 November 2018: £18k, 31 May 2018: £nil). Interest received during the period amounted to £63k (30 November 2018: £54k, 31 May 2018: £nil).
· Northumberland
TOC Property Backed Lending Trust plc owns 25.1% of the borrower Northumberland Ltd. The loan amount outstanding as at 31 May 2019 was £2.2m (30 November 2018: £1.5m, 31 May 2018: £nil). Transactions in relation to loans made during the period amounted to £0.7m (30 November 2018: £1.5m, 31 May 2018: £nil). Interest due to be received as at 31 May 2019 was £26k (30 November 2018: £30k, 31 May 2018: £nil). Interest received during the period amounted to £61k (30 November 2018: £41k, 31 May 2018: £nil).
· Dinosauria
TOC Property Backed Lending Trust plc owns 25.1% of the borrower Dinosauria Ltd. The loan amount outstanding as at 31 May 2019 was £0.6m (30 November 2018: £0.6m, 31 May 2018: £nil). Transactions in relation to loans made during the period amounted to £nil (30 November 2018: £0.6m, 31 May 2018: £nil). Interest due to be received as at 31 May 2019 was £7k (30 November 2018: £7k, 31 May 2018: £nil). Interest received during the period amounted to £22k (30 November 2018: £19k, 31 May 2018: £nil).
10. OPERATING SEGMENTS
The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Company is engaged in a single unified business, being the investment of the Company's capital in financial assets comprising loans and joint venture equity contracts and in one geographical area, the United Kingdom, and that therefore the Company has no segments. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance is the total return on the Company's net asset value. As the total return on the Company's net asset value is calculated based on the IFRS net asset value per share as shown at the foot of the Consolidated Statement of Financial Position, the key performance measure is that prepared under IFRS. Therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements.
11. FAIR VALUE MEASUREMENTS
The fair value measurements for assets and liabilities are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. These different levels have been defined as follows:
· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
· Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.
· Level 3 - unobservable inputs for the asset or liability. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instrument. All investment properties are included in Level 3.
All investments are considered Level 3. There were no movements of any assets between levels and no transfers into and out of Level 3 during the six months ending 31 May 2019 and the year to 30 November 2018.
12. POST BALANCE SHEET EVENTS
On 6 June 2019, an interim dividend was declared of 1.5p with an ex-dividend date of 13 June 2019 and a payment date of 4 July 2019.
On 16 August 2019, a new loan of £500k was advanced to Esh Chilton Moor Ltd in relation to a development of 34 three and four bed houses in Chilton Moor, County Durham. This is part of a two year £3.4m facility.
On 16 August 2019, a new loan of £275k was advanced to Bede & Cuthbert Developments Ltd in relation to a development of 20 three and four bed houses in Bill Quay, Gateshead. This is part of a two year, six month £3.05m facility.
13. INTERIM REPORT STATEMENT
The Company's auditor, BDO LLP, has not audited or reviewed the Interim Report to 31 May 2019 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year ended 30 November 2018, which received an unqualified audit report and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies. No full statutory accounts in respect of any period after 30 November 2018 have been reported on by the Company's auditor or delivered to the Registrar of Companies.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR BIGDIGXDBGCC
