Foresight Sustain. - 30 September 2022 Net Asset Value

Foresight Sustainable Forestry

15/11/2022 07:00

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RNS Number : 3684G  Foresight Sustain. Forestry Co PLC  15 November 2022

15 November 2022

 

Foresight Sustainable Forestry Company Plc

("FSF" or "the Company")

 

30 September 2022 Net Asset Value ("NAV") and Notice of Full Year Results

 

 

Foresight Sustainable Forestry Company Plc, an investment company that invests
in UK forestry and afforestation assets, announces that as at 30 September
2022 its unaudited NAV was £180.6 million (31 March 2022: £135.5 million),
resulting in a NAV per Ordinary Share of 105.0 pence, up 0.8 pence from 104.2
pence as at 31 March 2022. The Company also announces the publication date of
its audited Full Year Results for the period to 30 September 2022.

 

Highlights

 -  NAV per Share over the full period increased to 105.0 pence, a total NAV
    return since IPO of 5.0%.
 -  Overall NAV increase of £50.6 million between IPO and 30 September 2022, a
    material proportion of which was due to the successful £45 million equity
    raise in June 2022
 -  Total fixed asset portfolio valuation increase of £12.1 million (up 9.1%)
    from inception to 30 September 2022
 -  Voluntary carbon credits recognised within valuations for the first time,
    resulting in a £0.6 million increase in the value of the portfolio from two
    planted afforestation assets

 

NAV Update

 

In aggregate, the Company's NAV increased by £50.6 million between IPO on 24
November 2021 and 30 September 2022. This was due to FSF's successful £45
million equity raise in June 2022, 16 acquisition transactions, increases in
portfolio valuations and, for the first time, the recognition of voluntary
carbon credits in valuations.

 

The NAV per share increase in the six-month period to 30 September 2022 has
been impacted by transaction costs from the high volume of afforestation
acquisitions, the commencement of development activities on multiple
afforestation properties, and costs related to securing new equity and debt
capital. The benefits of investing in development projects and increasing the
Company's available capital base for deployment are becoming apparent in the
very strong valuation uplifts delivered by the first two afforestation assets
where planting has been completed. Successful afforestation development and
the securing of the related voluntary carbon credits is a core part of the
Company's business model and the value recognition received on the first two
afforestation properties validates this strategy.

 

Summary of NAV key drivers from 31 March 2022 to 30 September 2022:

 

 Item                               p/share movement
 NAV at 31 March 2022               104.2
 Equity increase (share issue)      0.3
 Operational expenditure            (0.8)
 Acquisitions & due diligence       (0.7)
 Afforestation & restock            (0.4)
 Forest operational costs           (0.1)
 Portfolio revaluation              2.1
 Voluntary carbon credit valuation  0.4
 NAV at 30 September 2022           105.0

 

Portfolio Valuations

 

Within the total portfolio, the property revaluation delivered a gain of
£12.1 million (up 9.1%) from IPO to 30 September 2022. Following this
increase, FSF's split of afforestation properties (by value) now stands at 41%
of the total portfolio. The remaining 59% of the portfolio by value is split
between established forestry assets (56%) and non-core assets (3%).

 

During the period, the largest property valuation increases were from two
planted afforestation properties, Mountmill Burn and Banc Farm. Of the
combined £2.6 million uplift since acquisition, an increase of 89%, £0.6
million was the result of 36,000 voluntary carbon credits being recognised in
the valuations. These properties demonstrate the capital appreciation
potential of afforestation sites once development milestones are met. The
Company has a further 25 afforestation properties as part of a series of
development activities which is estimated to see 6.4 million trees planted
over 2023 and 2024, and the creation of approximately 800,000 voluntary carbon
credits, after the verifier's 20% buffer has been catered for to ensure that
the number of units offset or traded is conservative versus the estimated
carbon actually sequestered. Afforestation properties remain the engine room
of performance and the Company is looking to increase the portfolio allocation
to this asset type in the coming year.

 

Afforestation properties also bring significant Sustainability and ESG ("S
& ESG") benefits. For example, FSF's Banc Farm afforestation scheme saw
229,320 trees planted, 75% of which were conifers that are forecast to deliver
48,153 tonnes of sustainable timber production for each c.35-year rotation.
25% of trees planted were non-commercial broadleaves and includes 350 Black
Poplar trees which are recognised by the Forestry Commission as one of the
UK's rarest native species. FSF's planting is expected to increase the total
UK population of this tree species by approximately 5%. The rare and
endangered tree planting at the property also includes 1,500 Holm Oak and 300
Juniper trees, both of which are on the International Union for Conservation
of Nature's 'Red List'. As a result of this, using DEFRA's Biodiversity Metric
3.0, the scheme will improve the property's baseline biodiversity habitat unit
value by 60%. Finally, the scheme will see the introduction of mountain biking
trails, the construction of a car park for visitors and the creation of 25-30
jobs for the local community during the first year from planting commencing.
Whilst each scheme is different and tailored to the specific site and region
in question, the potential for these types of benefits is explored during the
design process across all of FSF's afforestation portfolio.

 

FSF will release the inaugural standalone S & ESG report in February 2023
and it will act as a supplement to the information presented in the Full-year
Annual Report. The Company will detail several achievements since IPO and is
particularly looking forward to sharing information regarding its Forestry
Skills Training Programme.

 

As a result of mark-to-market gains, afforestation properties acquired since
31 March 2022 saw gains of £1.0 million, a 6.6% increase. The uplifts
demonstrate the value of the Company's proprietary direct origination
campaign. Afforestation properties in the portfolio that continued to be
developed but which have not yet reached development milestones remained
stable in their valuations.

 

Standing forestry properties delivered gains of £1.2 million, a 1.6% gain
from acquisition to 30 September 2022. Valuations for established forest
properties have remained comparatively stable, in line with the timber market
and the softening timber prices seen in the second half of the reporting
period.

 

Mixed forestry and afforestation properties, a category dominated by Fordie
Estate, delivered a 17.4% gain from acquisition to 30 September 2022, a £2.2m
of uplift. The development project at Fordie, which includes an afforestation
scheme of material scale, continues to progress well.

 

Valuations were performed on a property-by-property basis by an independent
third-party in accordance with the Royal Institute of Chartered Surveyors
(RICS) Red Book Fair Value methodology.

 

Notice of Results

 

FSF will publish its Full Results for the period to 30 September 2022 on
Wednesday, 14 December 2022.

 

The Company will host a virtual SparkLive presentation at 9:00 a.m. (UK time)
on Wednesday, 14 December 2022. To register your interest in attending the
presentation, please register at:
https://www.lsegissuerservices.com/spark/FORESIGHTSUSTAINABLEFORESTRYCOMPANY/events/b6793ad3-27a1-498e-9859-4e2282c53d6b
(https://www.lsegissuerservices.com/spark/FORESIGHTSUSTAINABLEFORESTRYCOMPANY/events/b6793ad3-27a1-498e-9859-4e2282c53d6b)
 

 

Richard Davidson, Chair of Foresight Sustainable Forestry Company, commented:

 

"Foresight Sustainable Forestry continues to apply its investment strategy
diligently and the NAV uplift announced demonstrates the success of the
Company's approach. It is particularly pleasing to see voluntary carbon
credits recognised for the first time as a source of additional value to our
properties and the Company will continue to generate these as we develop our
afforestation properties. The recent launch of the London Stock Exchange
Voluntary Carbon Market is further evidence of growing demand for these
credits and the need for a sophisticated market in which to trade them. We
have an exciting series of afforestation development opportunities within the
portfolio, and Mountmill Burn and Banc Farm have clearly demonstrated the
benefits of a well executed development plan. In just under a year since
listing on the LSE, FSF has achieved a huge amount and established a strong
platform for further growth."

About the Company

Foresight Sustainable Forestry Company Plc ("the Company") is an externally
managed investment company investing in a diversified portfolio of UK forestry
and afforestation assets. Targeting a net total return of more than CPI +5%,
the Company provides investors with the opportunity for real returns and
capital appreciation driven by the prevailing global imbalance between supply
and demand for timber; the inflation-protection qualities of UK land
freeholds; and biological tree growth of 3% to 4% not correlated to financial
markets. It also offers outstanding sustainability and ESG attributes and
access to carbon units related to carbon sequestration from new afforestation
planting. The Company targets value creation as the afforestation projects
successfully achieve development milestones in the process of converting open
ground into established commercial forest and woodland areas. The Company is
seeking to make a direct contribution in the fight against climate change
through forestry and afforestation carbon sequestration initiatives and to
preserve and proactively enhance natural capital and biodiversity across its
portfolio. It is managed by Foresight Group LLP.

 

 

For further information, please contact:

 Foresight Sustainable Forestry Company Plc                                  +44 20 3667 8100

 Robert Guest

 Richard Kelly

 Email: fsfc@foresightgroup.eu (mailto:fsfc@foresightgroup.eu)

 Website: https://fsfc.foresightgroup.eu/ (https://fsfc.foresightgroup.eu/)

                                                                             +44 20 7029 8000

 Jefferies International Limited

 Neil Winward

 Will Soutar

 Citigate Dewe Rogerson                                                      +44 7768 981763

 Toby Moore (toby.moore@citigatedewerogerson.com
 (mailto:toby.moore@citigatedewerogerson.com) )

 

 

This announcement does not constitute, and may not be construed as, an offer
to sell or an invitation to purchase investments of any description, or the
provision of investment advice by any party. No information set out in this
announcement is intended to form the basis of any contract of sale, investment
decision or any decision to purchase securities in the Company.

 

This announcement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends", "may", "will",
"targeting" or "should" or, in each case, their negative or other variations
or comparable terminology. All statements other than statements of historical
facts included in this announcement, including, without limitation, those
regarding the Company's financial position, strategy, plans, proposed
acquisitions and objectives, are forward-looking statements.

 

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