Annual Results for the year ended 31 December 2022
30/03/2023 07:00
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RNS Number : 7003U Gresham House PLC 30 March 2023
30 March 2023
Gresham House plc
("Gresham House," "the Group" or "the Company")
Annual Results for the year ended 31 December 2022
20% AUM increase to £7.8bn and 60% dividend increase proposed
The Board of Gresham House plc (AIM:GHE), the specialist alternative asset
manager, is pleased to announce another year of strong performance and organic
growth, despite the volatile economic conditions of 2022.
Assets under management (AUM) grew once again in the year increasing by 20% to
£7.8 billion, with organic growth of £1.1 billion (17% growth). This
resulted in net core income rising 25% and growth in operating profit of 34%.
The Group has a strong cash position of £32 million and an undrawn committed
Revolving Credit Facility (RCF) of £20 million available. The continued
strong performance has generated a 19.3% Return on Capital Employed (ROCE) and
has led to adjusted diluted Earnings Per Share (EPS) increasing by 12% to
55.2p. As a result, the Board is recommending a 60% increase in the dividend
to 16.0 pence, representing a 256% increase in the dividend over three years,
which is 3.5x covered by adjusted diluted EPS.
Momentum has been maintained with a positive start to 2023 including new
fundraisings across our asset classes.
Financial highlights
As at/for the year to 31 As at/for the year to 31 Dec 2021 Change
Dec 2022
Assets under management (AUM) (£bn) 7.8 6.5 +20%
Cash, liquid and investment in managed assets (£mn) 70.1 78.3 -10%
Net core income (£mn) 77.3 61.6 +25%
Adjusted operating profit (£mn)(1) 27.1 20.2 +34%
Adjusted operating margin 35.0% 32.7% +7%
Comprehensive net income (£mn) 11.4 12.0 -6%
Adjusted diluted Earnings Per Share (EPS) 55.2p 49.4p +12%
Dividend 16.0p 10.0p +60%
Financial highlights
§ Significant AUM growth of 20% to £7.8 billion (2021: £6.5 billion), with
organic growth of £1.1 billion (17%) driven by strong fundraising and
investment performance in challenging market conditions
§ Strong net core income growth of 25% to £77.3 million (2021: £61.6
million)
§ Growth in adjusted operating profit of 34% to £27.1 million (2021: £20.2
million)(1)
§ Continued improvement in adjusted operating margin to 35%, at the end of
2022, up from 33% at the end of 2021
§ ROCE of 19.3%, in line with our 20.0% medium-term target (2021: 34.1%)(2)
§ Adjusted diluted EPS growth of 12% to 55.2 pence (2021: 49.4 pence)
§ Final dividend proposed to increase by 60% to 16.0 pence (2021: 10.0
pence), 3.5x covered by adjusted operating profits and on track to achieve the
3x cover target set as part of GH25 five-year strategic plan
§ Robust balance sheet with undrawn committed £20.0 million RCF
positioning the Group well to capture growth in 2023
Strategic highlights
§ Continued successful execution of GH25 including both financial and
strategic targets
§ Further international expansion through acquisition of Burlington RE
Property Management in Ireland, launch of the Irish Strategic Forestry Fund,
and New Zealand carbon credits mandate
§ Consolidated significant market positions in specialist segments; largest
listed battery energy storage fund in Europe, seventh largest forestry asset
manager globally and largest in the UK, and second largest VCT manager in the
UK
§ Delivering against our Corporate Sustainability Strategy and published Task
Force on Climate-related Financial Disclosures (TCFD) reporting and roadmap
§ Maintenance of strong culture with high levels of employee engagement,
augmented by our employee share ownership schemes
Commenting on the results, Tony Dalwood, Chief Executive of Gresham House,
said:
"We are ahead of our GH25 five-year targets through the strong execution of
our financial and strategic goals to create shareholder value. Importantly, we
are delivering strong investment performance for clients.
"During a year in which many fund management businesses have found growth
challenging we have increased AUM organically by 17% and raised the proposed
dividend by 60%.
"Our differentiated and relatively resilient asset classes, together with our
investment track records, will provide further growth opportunities both in
the UK and internationally.
"We move into 2023 in a strong position and have continued to raise funds
across a number of our asset classes. The long-term potential to scale Gresham
House remains our ambition."
Gresham House is hosting its Annual Results webinar
(https://greshamhouse.zoom.us/webinar/register/WN_0sCf8iihSr6QxGJVMB7Uow) at
09:00am today.
https://greshamhouse.zoom.us/webinar/register/WN_0sCf8iihSr6QxGJVMB7Uow
(https://greshamhouse.zoom.us/webinar/register/WN_0sCf8iihSr6QxGJVMB7Uow)
1. Adjusted operating profit metric defined as operating profit after charging
interest, and excluding depreciation and amortisation, acquisition and
restructuring related expenses from acquisitions, acquisition-related
share-based payments and remuneration, profits on disposal of property, plant
and equipment, net performance fees and net development gains. Adding back the
above items, net gains on investments and fair value movements, tax and losses
from discontinued operations results in net comprehensive income. A
reconciliation is included within the Financial Review.
2. Return on capital employed defined as adjusted operating profit, plus net
performance fees, net realised gains on development activity and fair value
movements in investments, less fair value movement in contingent
consideration, divided by opening net assets, adjusted for shares issued in
the year.
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014
For more information contact:
Gresham House plc +44 (0)20 3837 6271
Tony Dalwood, Chief Executive
Kevin Acton, Chief Financial Officer
Houston gh@houston.co.uk (mailto:gh@houston.co.uk)
Alexander Clelland +44 (0)20 4529 0549
Kay Larsen
Kelsey Traynor
Canaccord Genuity Limited - Nominated Adviser and Joint Broker +44 (0)20 7523 8000
Bobbie Hilliam
Harry Pardoe
Jefferies International Limited - Financial Adviser and Joint Broker +44 (0)20 7029 8000
Paul Nicholls
James Umbers
This announcement contains forward-looking statements that involve substantial
risks and uncertainties, and actual results and developments may differ
materially from those expressed or implied by these statements. These
forward-looking statements are statements regarding Gresham House plc's
intentions, beliefs or current expectations concerning, among other things,
its results of operations, financial condition, prospects, growth, strategies,
and the industry in which it operates. By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future. These
forward-looking statements speak only as of the date of this announcement and
Gresham House plc does not undertake any obligation to publicly release any
revisions to these forward-looking statements to reflect events or
circumstances after the date of this announcement
Chairman's statement
Introduction
I am delighted to update shareholders on another year of strong returns, with
significantly enhanced profits and scale. Indeed, it is notable that the
business now generates annual profits over two times greater than the market
value of Gresham House immediately prior to the new management team taking the
reins in 2014 and evolving the company into an alternative asset manager.
Economic uncertainty continued during the year driven by the war in Ukraine,
higher energy prices, rising inflation and a cost of living crisis, and yet
the business has continued to perform, demonstrating the quality of the
leadership team and the resilient nature of Gresham House's investment
strategies. The team's focus remained on performance in 2022, supported by our
commitment to sustainability, and with continued progress made towards the
delivery of our five-year strategy, GH25, which is at the heart of all our
corporate activity.
The resilience the Group demonstrated during this financial period is
testament to the employees and their hard work, led by a committed management
team, which underpins how we drive shareholder value. Gresham House is now
firmly established in the market as an expert and innovative investor,
providing client solutions with sustainable strategies and leading the way for
this growing focus globally, with the financial returns continuing to speak
for themselves.
Activity in the period
Funds were raised across all asset classes in challenging conditions. It was a
busy year for everyone in the Group across all our divisions, including our
most recent acquisition, Burlington RE Property Management Limited
(Burlington) in Ireland.
Overall, Gresham House continues to be positioned as an investment solutions
provider, creating new products and investments for clients and leading the
way with innovation in specialist asset classes with high-growth potential.
The Board was also pleased to see that the 2022 Employee Engagement Survey
once again showed high levels of satisfaction and commitment amongst staff. I
must take this opportunity to thank all the employees at Gresham House who are
the engine of the business, maintaining our momentum.
Financials
In a challenging environment, it is commendable that the Group has delivered
such strong results. AUM once again rose and at the end of the financial
period was £7.8 billion, 20% up on last year. We saw net core income up 25%,
while adjusted operating profit was up 34% at £27.1 million. Total
comprehensive net income for the year was £11.4 million, reflecting adjusted
operating profit, less the impact of amortisation from management contracts
acquired, value movements on the balance sheet and tax (2021: £12.0 million).
We also achieved Return on Capital Employed (ROCE) of 19.3% a metric the Board
and executives are proud of.
We had £32 million of cash plus substantial development and investment assets
on the balance sheet at 31 December 2022, which alongside the £20 million
Revolving Credit Facility puts us in a strong position for the upcoming year.
Dividend
The Board recognises the importance of total shareholder return and hence as
part of our GH25 target, we also committed in 2022 to increase the dividend to
a level covered by earnings of three times by 2025. Having made good progress
in the year, the Board is pleased to propose an increase in dividend to 16.0
pence, up 60%, which results in a 256% increase over three years and is 3.5x
covered by adjusted diluted earnings per share.
Sustainability
Gresham House has been ahead of the curve in terms of sustainability and is
now a market leader, managing assets across forestry, battery energy storage,
solar, wind, as well as housing and sustainable infrastructure. With the
growth of sustainability as a global focus, it has been clear this year that
this increased attention has also brought an increase in the level of scrutiny
and regulation.
At Gresham House, we are dedicated to being transparent with our sustainable
approach, embedding climate-related risks and opportunities in our business
processes and identifying clear goals that we set out as part of our GH25
strategy. This includes enhancing our Task Force on Climate-related Financial
Disclosures (TCFD) reporting. Further to this, the Group is working to define
and finalise its net zero commitments and targets. We will also be publishing
our third annual Sustainable Investment Report shortly.
The Group is held accountable by the Sustainability Committee, which was
established in July 2021 and is chaired by our Senior Independent Director,
Gareth Davis. In addition, the Sustainability Executive Committee regularly
keeps the Board level Sustainability Committee up to date on progress made by
the Group against core sustainability objectives.
Shareholders
Gresham House has significantly increased in value since the management buy-in
led by our Chief Executive Tony Dalwood eight years ago. Our communication
with shareholders has at all times been a priority. We have ongoing engagement
through a number of channels and continue to evolve the way in which we
communicate via news flow and announcements. We also introduced a new monthly
video series in 2022 featuring our CEO and various heads of departments within
the business, to provide insight into how the various asset classes are
performing and how they are positioned to deliver returns even in the face of
macroeconomic challenges.
In November 2022, we also hosted our second Capital Markets Day, which was
focused on the resilience of Gresham House's specialist asset classes
including the inflation and interest rate-hedging characteristics of our range
of investment strategies. This was an opportunity to engage with the market
and we received overwhelmingly positive feedback from attendees of the virtual
event.
Board
The Board remains committed to high integrity whilst delivering shareholder
value, with four non-executive directors and myself in post. During this year,
following a thorough process, we welcomed Sarah Ing as a Non-Executive
Director and Audit Committee Chair following the conclusion of the Company's
2022 AGM. Sarah has a long career as a top-rated equity analyst covering the
UK general financial services sector and we are delighted she has chosen to
join us.
I first joined the Board alongside the management buy-in at the end of 2014,
so 2023 will be my ninth year as Chair. In accordance with corporate
governance practice, I therefore intend to retire when the results for that
year are put before shareholders at the AGM in the spring of 2024. Our Senior
Independent Director, Gareth Davis, will lead the process of selecting my
successor.
Annual General Meeting
We will be holding our Annual General Meeting (AGM) in person again this year
and look forward to welcoming shareholders to our 2023 AGM at Eversheds
Sutherland (International) LLP, 1 Wood Street, London, on Thursday 11 May
2023.
Outlook
It is fair to say that the past few years have been challenging, with 2022
being no exception. Despite this, Gresham House has demonstrated its resilient
approach to long-term investing, and delivered on its strategy, creating a
strong foundation for continued growth in 2023. The senior management are
sensitive to the challenges within the global macroeconomic environment and
have themselves admirably committed to zero salary increases in 2023.
While we expect 2023 to remain volatile, we are confident that an unwavering
commitment to our core strategy will drive further progress towards achieving
our GH25 goals and we will be developing the framework for our longer term
strategic ambitions during the course of the year. While there are undoubtedly
macroeconomic challenges for the Company and its clients to navigate, we
continue to work hard to grow AUM through our distribution channels.
As we look ahead, we anticipate that the momentum achieved in expanding our
capabilities across the UK and overseas will continue, following deals in
Australia, New Zealand and Ireland in our forestry and real estate divisions
in 2022. We also anticipate further expansion domestically and internationally
across other key asset classes, with battery energy storage activities set to
establish an overseas foothold in 2023. It is evident that this management
team has dedicated itself to growing shareholder value over the last eight
years.
While growth has been primarily organic, this has been enhanced by
acquisitions with clear strategic and financial integration benefits. During
this period there have been many challenges, however the team has exhibited
integrity, energy and ambition whilst focusing on shareholder value
objectives. It is a privilege to Chair a Group where financial, social and
environmental returns are positive.
Anthony Townsend
Chairman
29 March 2023
Chief Executive's report
Overview
We are now three years into our GH25 five-year plan. A plan which aims to
build value for shareholders through the growth and expansion of this
sustainability-focused, specialist alternative asset management business.
Substantial progress towards the successful delivery of both our strategic and
financial goals is evident. Importantly, we have typically exceeded our target
returns for our investors.
Gresham House continues to invest in its people and platforms to build a
sustainable long-term investment business fit for the future. The culture of
the business has evolved as it has grown, but the focus on "making a
difference" remains. To meet the needs of clients, who are increasingly
looking for financial returns alongside positive ESG outcomes, requires a
dynamic and aspirational team.
Retaining our top talent is an absolute priority and whilst financial
incentives are very important, working in an entrepreneurial, dynamic, and
enjoyable environment is highly valued. I am extremely proud to be working
with a group of people, now 223 in number, who share qualities of ambition,
energy, and integrity. This is a culture that will stand the test of time and
will therefore endure the challenges presented by the macroeconomic outlook.
Private capital investment is essential to support a world which is striving
to grow and evolve. As recent history reminds us, governments have stepped in
on multiple occasions with sizeable commitments of public money to address
serious issues including the Global Financial Crisis, the COVID-19 pandemic,
energy security and war. We believe it is imperative that private capital
increasingly becomes the major contributor to future investment.
Gresham House differentiates itself by providing a number of real asset
classes which were previously not on the investment radar. We have set out to
institutionalise these areas for investment and then scale the assets under
management. This can take time. Time to educate investors and to prove that
the asset class can deliver both the appropriate financial and non-financial
returns. We believe we have a track record of achieving this, with examples
including forestry and battery energy storage, and are well on the way to
meeting this objective within both our sustainable infrastructure and
affordable housing platforms.
Meanwhile, our Strategic Equity division has a critical role to play in
facilitating economic growth through the support it provides to growth
companies at an early stage with capital and strategic guidance. This is an
area where Gresham House can make a difference for the future of the UK and
Irish economies through innovation and entrepreneurialism.
Our strong performance throughout 2022 was driven by maintaining our
investment discipline and by continuing to operate in our specialist asset
classes, which have shown resilience in a volatile year. We have also been
able to effectively deploy balance sheet capital to grow the business which
has generated additional strong financial returns.
We have further established the business as a provider of solutions for
existing and prospective clients. Natural capital and sustainable investment
opportunities are areas where we have expertise and intellectual property. We
are focused on delivering investments which meet the ESG criteria of our
investor base whilst also delivering on their primary remit to achieve capital
and income growth.
The 12-month period was characterised by market volatility, rising inflation,
the cost-of-living crisis and the threat of recession. In the face of this
challenging environment, our diversified and innovative portfolio of asset
classes continued to deliver returns, whilst real assets provided resilience
against rising inflation and interest rates. As a result, we saw clear growth
throughout 2022 in portfolio allocation to alternatives and real assets which
is continuing into 2023.
Gresham House funds focused on Forestry, New Energy, Sustainable
Infrastructure and Real Estate (UK Housing and Commercial Property in Ireland)
delivered good progress both in terms of fundraising and importantly in the
deployment of those funds. We were also pleased to see positive net inflows in
our Strategic Equity funds during a period when many investors have been
negative on UK equity markets.
Across the Real Assets division, we have offerings that provide nature-based
solutions covering for example afforestation (planting trees), carbon credits
as well as the development of biodiversity net gain habitat banks (rewilding
areas to offset the impact of new property developments). This is an area of
increasing focus for clients, and we continue to provide solutions to meet
these specific needs.
Our international presence is expanding, with real estate and forestry
investments in Ireland, Australia and New Zealand. At the end of 2022, we
further extended our international capabilities with the launch of the Irish
Strategic Forestry Fund that will support the creation of new forests and
make a significant contribution to Ireland's Climate Action Plan. Further
international expansion will follow in 2023 as we look to expand our battery
energy storage capabilities into overseas markets in Europe and the US.
Gresham House's focus on delivering measurable returns on investment,
underpinned by long-term sustainability, is reflected in the quality of our
financial performance in 2022. AUM at the end of December 2022 was up 20% at
£7.8 billion, of which 17% was organic growth, as we near our GH25 target of
£8.0+ billion (upgraded from £6.0 billion in March 2022). Adjusted operating
profits were up 34% at £27.1 million, with an improving adjusted operating
margin of 35%.
ROCE was 19.3% in the year, which is in line with our target of "20% over the
medium term" (upgraded from 15% in March 2022).
In 2022, we also established a dividend policy targeting three times adjusted
operating profits coverage by the end of GH25 and are pleased to be making
good progress, increasing the proposed dividend by 60% to 16.0 pence (2021: 10
pence), which is 3.5x covered by adjusted diluted earnings per share.
Strategic objectives and sustainability
Gresham House has been focused on providing sustainability-focused investment
strategies for the past eight years, having been at the forefront of this
innovative approach to asset management and the delivery of returns. During
that time, we have witnessed first-hand how sustainability has become a
central consideration for most, if not every, investment decision. At the same
time, there has been a palpable shift in emphasis towards investor demand for
tangible returns, and this was particularly notable in 2022 amid a tough
macroeconomic environment. Our performance in 2022 demonstrates that Gresham
House's diversified mix of real assets and equity strategies enables us to
work with clients to find solutions that deliver the financial return on
investment they seek.
As we work to expand our international activities we are committed to
maintaining market leadership in many of our specialist asset classes.
Sustainability
The Group has continued throughout 2022 to embed the Corporate Sustainability
Strategy that we set out in last year's Annual Report.
We made further progress throughout the year against the measurement of our
sustainability objectives and worked closely with specialist consultants to
calculate the carbon footprint of our operations and investments. As we move
further into 2023, we have built on our Task Force on Climate-Related
Financial Disclosures (TCFD) reporting, with enhanced reporting of climate
risks and opportunities across operations and investments including the goal
to set net-zero science-based targets in line with the Paris Agreement.
GH25
Since setting out our GH25 strategic targets in March 2020, we have made
strong progress, prompting us to upgrade these GH25 objectives in March 2022,
as outlined below. We continue to advance towards achieving these GH25
milestones and will be looking at our ambitions for the next five years in the
coming twelve months.
These ambitions will continue to be centred around the delivery of long-term
sustainable returns through the deployment of funds into UK early and later
stage SMEs within our Strategic Equity division and through the innovative and
scalable asset classes within our Real Assets division, where increased focus
will likely centre on the climate transition to net zero as well as natural
capital, encompassing a range of assets including forestry, and biodiversity
net gain habitat banks.
Financial objectives
§ AUM growth - 20% £7.8bn growth in 2022 - organic and acquisitive
§ Operating margins - improved to 35% from 33% - investment in the business -
creating a higher quality business, comparable to more mature peers
§ Maintain ROCE of 20% on balance sheet in the medium term - in line at 19.3%
in 2022
Strategic objectives
§ Recognised leader in sustainable investment and governance
§ Multiple award wins, second Sustainable Investment Report, Stewardship
Report approved by the FRC, Corporate Sustainability Strategy being delivered
and DEI committee formed and actions being taken
§ Superior returns for funds managed:
§ Top quartile - LF Gresham House UK Multi Cap Income Fund ranked number 1
out of 75 funds in the UK Equity Income sector since launch in 2017 to 31
December 2022
§ Long-term performance - Forestry as an asset class continues to show very
strong performance, with our long-established forestry funds reporting an
average return in excess of 14.2% since inception
§ GRID annualised NAV total return since IPO of 17.2% against a target of 8%
§ Strong strategic positions in our specialist areas(1):
§ Largest battery storage investment trust in the UK and Europe: GRID
§ Largest commercial forestry asset manager in the UK and now operating in
Ireland, Australia and New Zealand
§ Second largest VCT player in the UK: Baronsmead and Mobeus VCTs
§ Develop the business internationally - Burlington acquisition in Ireland,
launch of Irish Strategic Forestry Fund
§ Enhance Gresham House brand - now an established asset manager that has
become the go-to on our specialist asset classes (e.g. vertical farming or
battery storage)
(1) Measured by size of assets under management
Employees and clients
In 2022, we again expanded the breadth and depth of our client base. This has
been supported by the persistent structural increase in allocations to
alternatives, and as new institutional investors recognise and are attracted
by the quality of returns that impact investing can deliver, from our
sustainability focused asset classes. We are proud to work with 16 Local
Government Pension Schemes (LGPS) across our Real Asset strategies. In our
Strategic Equity division, our award winning LF Gresham House UK Multi Cap
Income Fund received net inflows in the year and has now been included within
three of the national wealth management central coverage lists (Brewin
Dolphin, Rathbones and Evelyn).
All this progress has been driven by our excellent team. We have invested
further in bringing top-flight talent on board and I am pleased that our
annual employee engagement survey registers a high level of advocacy for, and
alignment with, the Gresham House brand and business, as we continue to build
our profile and reputation as a leading investor.
The dynamic and entrepreneurial culture at Gresham House is augmented by our
employee share ownership scheme. Share ownership is important to the business
as it encourages better alignment of our people with our shareholders as they
are given the opportunity to become one themselves. We offer all employees two
methods through which to access share ownership: Save As You Earn, which
enables employees to buy a limited amount of shares out of their monthly
salary and usually at a significant discount to the market price; and Bonus
Share Matching, which allows employees to opt to 'roll' some of their annual
bonus (if any is awarded) into shares.
We are proud of our efforts to build on our meritocratic culture of excellence
at Gresham House, driven by our firm belief that our employees are our most
valuable asset.
AUM
AUM growth of £1.3 billion to £7.8 billion represented an increase of 20% in
the year (2021: £6.5 billion). The main driver of this growth was 17%
organic, plus the acquisition of Burlington in Ireland accounted for the
remaining 3%.
We drove net inflows across every division generating £0.8 billion AUM growth
and were particularly pleased to note net inflows in the Strategic Equity
division when markets were experiencing material outflows. Fundraising in our
Real Assets division underlined the attractiveness of the asset classes in
which we operate across both institutional and wholesale distribution
channels.
AUM performance highlighted the two sides of the business, with the Strategic
Equity division, which is more exposed to short-term equity market movements,
experiencing value reductions of £0.2 billion, and the Real Assets division
delivering positive performance of £0.5 billion, highlighting the diversified
nature of the asset classes that the Group manages.
Real Assets
Forestry
Gresham House has continued to grow and is now the seventh largest forestry
investment manager and ninth largest manager of natural capital in the world
by value, with £3.4 billion of client assets in the UK, Europe and
Australasia.
Our approach to investing in sustainable forestry, encompassing forestry and
land management solutions, diversifies an investment portfolio and provides
exposure to potential increases in the value of timber, carbon, natural
capital and underlying land value that support long-term management
programmes. The outlook for the asset class remains positive in the face of a
weakened macroeconomic environment, with forestry historically demonstrating
resilience in high interest rate environments due to the low levels of debt
while also remaining resilient in the face of rising inflation.
In 2022, we acquired a portfolio of New Zealand forestry and carbon credit
assets for £49 million on behalf of an institutional client. We also
established the Irish Strategic Forestry Fund, which was launched at the end
of the year and will provide up to €200 million for existing forestry assets
in Ireland in addition to creating new forests and hopes to make a significant
contribution to Ireland's Climate Action Plan. We are very pleased that the
Irish Strategic Forestry Fund has attracted a €25 million cornerstone
investment from The Ireland Strategic Investment Fund, Ireland's sovereign
development fund.
To support these international ambitions, we have hired expert forestry
investment managers locally in Ireland and Australia to help our UK-based
teams maintain the momentum of our activities in these countries.
In the period, we were delighted to open an office in Edinburgh, shifting our
headquarters in the south of Scotland to the capital, more conveniently
located for both our team and visiting clients and counterparties.
New Energy - Battery Energy Storage
Gresham House invests in battery energy storage via Gresham House Energy
Storage Fund plc (GRID), the UK's largest fund investing in operational,
utility-scale battery energy storage systems. A market leader in battery
storage, in 2022 GRID was named Best Sustainable Specialist Fund at the
Investment Week Sustainable Investment Awards for the second year in
succession as well as winning the Environmental & Renewables category at
the Investment Company of the Year Awards.
GRID saw strong progress throughout 2022 supported by the increasing
recognition of the key role battery energy storage plays in the journey
towards widespread deployment of renewable energy and decarbonisation. This
was evidenced by the success of GRID's £150 million fundraise in May 2022,
which was significantly oversubscribed.
In November 2022, GRID also secured £155 million of incremental term debt
through an accordion arrangement under existing facilities to further support
its deployment ambitions.
At 31 December 2022, GRID's portfolio included 20 operational sites with a
total capacity of 550MW and GRID has since completed on a further 40MW
operational site. GRID has a pipeline of 1.4GW as at 13 March 2023, of which
437MW is under construction and expected to complete in 2023 and 940MW of
pipeline in the UK and Ireland are expected to start construction in 2023.
Furthermore, following shareholder approval of changes to its investment
policy in April 2022, GRID is now permitted to expand internationally. As the
Battery Energy Storage Systems (BESS) market opportunity expands globally,
GRID is now well placed to address opportunities outside of the UK, in areas
where there is regulatory clarity and compatibility.
New Energy - Solar and Wind
In renewable energy, in 2022 we made notable progress in our strategy to
deliver collocated battery and renewable energy projects. Collocation is where
a battery energy storage system is built alongside renewable energy generation
and both assets share the same grid connection infrastructure. These projects
provide significant benefits to the UK Grid by improving system reliability
and enabling greater integration of renewables and the team is working towards
the launch of a new institutional fund to prioritise investment in this area,
with the aim of a first close in early 2023.
In July, we announced the acquisition of two fully consented solar and battery
energy storage projects in Durham, UK from Canadian Solar. One of these
projects exchanged contracts with the Gresham House Solar Distribution LLP
before the end of 2022 and the remaining project has since been sold as part
of the launch of the new renewables and collocated battery energy storage
fund. This is an example of how we have used the Group's balance sheet to
warehouse assets ahead of launching new funds. We consider collocation to be a
strong area of growth both in the UK market and internationally, which we are
well placed to address.
Sustainable Infrastructure
Gresham House deploys its Sustainable Infrastructure strategy to target
private capital returns from innovative solutions required to evolve key
environmental and societal challenges.
Thematically, the Sustainable Infrastructure strategy covers decarbonisation;
health and education; resource efficiency; digital inclusion; regeneration;
and waste solutions.
In 2022, assets under management passed £490 million with £133 million from
investors raised in Q3 2022 despite a challenging macroeconomic environment.
The investor demand for Sustainable Infrastructure includes the regional
growth impact created by the division's investments via Gresham House's BSIF I
and BSIF II funds alongside two North West regionally focused co-investment
funds.
Areas that made particular progress in 2022 included high-speed broadband and
vertical farming.
In January 2022, Gresham House invested £164 million in Borderlink Broadband
through its BSIF strategy to improve digital inclusion in underserved
communities in the UK. In September and October 2022, Borderlink, which trades
as GoFibre, secured a £6.6 million contract in Teesdale and a £7.3 million
contract in North Northumberland as part of the UK Government's £5 billion
Project Gigabit (F20) programme to upgrade broadband infrastructure.
Cornwall-based Wildanet, a high-speed broadband provider also backed by
Gresham House, announced in early 2023 two contract wins under the Project
Gigabit initiative to connect hard-to-reach homes and businesses in Cornwall
and further support digital inclusion.
Our activities in vertical farming also made substantial progress in 2022.
Vertical farming is conducted in controlled indoor environments, using
soilless techniques. These techniques optimise plant growth and minimise land
requirements, using 95% less water than traditional farming with no
requirement for chemicals or pesticides.
Fischer Farms, which grows a range of leafy greens and herbs, received a £26
million investment in 2021 from BSIF I and II. In 2022, it achieved capacity
to supply up to 6.5 tonnes of leaf salad, lettuce, leafy herbs and other fresh
produce to UK supermarkets daily. In November 2022, Fischer Farms announced
that construction was completed on its Farm 2, the world's largest vertical
farm, in Norwich, alongside a vertical farm facility in Lichfield and plans to
develop a third in Hull in 2023.
Within the BSIF strategy's regeneration theme and supported by Gresham House,
the Environment Bank have created a new infrastructure asset class to invest
in the production of biodiversity net gain habitats that will build nature
back better. The natural capital habitat banks created will offer property
developers and other counterparties a mechanism to ensure new commercial
developments deliver a biodiversity net gain and meet the new Environment Act
regulation due to come into force later this year. We anticipate strong demand
for this asset class later in 2023 and beyond.
Real Estate
The UK's shortage of affordable housing is well documented and has been caused
by demographic trends and historic undersupply of new homes. Gresham House's
listed and unlisted housing investment vehicles - Gresham House BSI Housing
LP, ReSI plc and ReSI LP - address a range of affordable housing problems.
Our funds offer a number of attractive characteristics including
inflation-linked income, potential for long-term capital appreciation above
inflation, secure and sustainable rental stream from thousands of residents,
low volatility and high demand and diversification compared with traditional
asset classes.
During 2022, Gresham House committed more than £185 million to 1,134 homes,
driven by a focus on improving the quality of, and institutionalising, the
UK's five million privately rented homes; and providing affordable home
ownership options.
At 31 December 2022, the division had AUM of £794 million, a rise of 33%
year-on-year (excluding the Burlington acquisition) and managed 6,000 homes
across the UK.
During 2022, 655 shared ownership homes were acquired from housing
associations, providing £68 million of long-term capital to be reinvested
into either upgrading existing stock to ensure they meet the enhanced fire
safety and energy efficiency standards, or into funding the development of new
affordable homes.
The housing division raised over £80 million of new capital during the first
half of 2022, with a number of raises planned for the second half of the year
delayed to 2023 following the impact of volatility in September.
The Real Estate division also expanded overseas and into commercial property
in 2022 with the announcement in March of the acquisition of the Burlington RE
Property Management Limited (Burlington), one of Ireland's premier and top
performing commercial property asset and development management companies, for
an initial consideration of £1.7 million. At 31 December 2022, Burlington
managed or advised on assets of €280 million.
Strategic Equity
The Strategic Equity division comprises both Public Equity and Private Equity
strategies. It has a strong and differentiated market position to invest
across the business lifecycle from relatively early-stage private growth
businesses right through to more mature listed businesses. The breadth of
touchpoints with companies of all sizes, public and private, gives the team a
differentiated perspective and strong network that enhances the overall
investment process.
Public Equity
Investors continued to retreat from UK equities in 2022, due to concerns
around rising energy prices, higher inflation and the cost-of-living crisis.
Nevertheless, Gresham House's Public Equity investment funds saw net inflows
of £0.2 billion in the face of significant outflows across the sector.
Gresham House funds invest in high-quality, publicly quoted companies that
have the potential to increase their value over the medium to long-term
through strategic, operational or management initiatives. The challenging
market backdrop in 2022 led to a sharp sell-off in equities and drove
significant volatility. However, weaker share prices in listed companies that
have strong longer-term fundamentals have provided a number of investment
opportunities.
While UK equity markets saw pullbacks over the year, our longer term
performance in our open-ended performance remains strong, demonstrating
good-risk adjusted returns. Over the past ten years to 31 December 2022, the
LF Gresham House UK Micro Cap Fund has been a top quartile performer in the IA
UK Smaller Companies sector. Our LF Gresham House UK Multi Cap Income Fund is
ranked one out of 76 funds in the UK Equity Income sector over five years to
31 December 2022 and remains number one in the sector since launch in June
2017. While our newest fund, the LF Gresham House UK Smaller Companies Fund
outperformed the IA UK Smaller Companies sector and was ranked fourth out of
48 funds in the sector since inception in 2019 to 31 December 2022.
Strategic Equity Capital plc, the UK equity investment trust we manage,
adopted a new share buyback policy in 2022, alongside a commitment from
Gresham House to buy shares to support alignment. These initiatives plus the
improving relative performance supported a significant reduction in the
discount to NAV from an average of 14.6% in 2021 to 6.1% as at 31 December
2022.
In our Strategic Public Equity LP, the valuation shows a 16.9% IRR with the
fund being 99.2% drawn as at 31 December 2022, generating relative and
absolute strong performance.
Private Equity
Private Equity has a crucial role to play in supporting the growth of
innovative and value-generating companies, as well as contributing to the UK's
long-term economic growth story. The Private Equity division at Gresham House
comprises of our Venture Capital Trust (VCT) platform which is the home of the
Baronsmead and Mobeus VCTs. With a combined AUM of £0.8 billion in this area,
we are the second largest VCT manager in the UK. The long-term opportunities
for this area of the business are significant. Private capital and VCTs have a
critical role to play in terms of building a more sustainable and green
economy, helping to accelerate the levelling up agenda and reducing regional
economic inequality.
The Baronsmead VCTs completed a £75 million fundraise in the FY22 tax year
and announced a further fundraise in late 2022. The full £40 million and an
overallotment of £10 million was completed in 2023.
Now fully integrated into the Gresham House Ventures platform, the successful
track record of the Mobeus VCTs has supported the launch of two new share
offers in 2022, experiencing significant investor demand, with the £111
million of share offers being significantly oversubscribed.
These successful fundraises have enabled us to deploy increasing levels of
capital to support the growing demand from entrepreneurs for growth equity,
and to provide greater levels of funding to existing portfolio companies
during 2022. The Mobeus VCTs invested £17 million into unquoted companies in
the year, and the unique hybrid Baronsmead VCTs invested £31 million into
both quoted and unquoted businesses.
In addition to the VCT activity, we are also exploring a differentiated
Limited Partnership opportunity, for investors in both the UK and Ireland,
providing secondary capital to established Gresham House Ventures portfolio
companies. The importance of nurturing entrepreneurial management and growth
companies through the provision of capital and advice has never been more
important. The resultant economic and social benefits are well documented.
Outlook
We move into 2023 in a good position and with a broadening range of innovative
asset classes and strategies as we aim to continue to generate strong
investment returns.
We continue to progress towards the achievement of our GH25 five-year
strategic plan and we are well positioned to build further on this beyond
2025.
We have grown our international platform in several asset classes and intend
to expand our reach further, particularly in forestry and battery energy
storage, where there is clear potential for overseas growth.
The requirement for the economy to evolve in sustainable ways is driving
demand for all our asset classes. Importantly, we see attractive financial
returns from carbon sequestration, energy transition, sustainable
infrastructure, affordable housing and growth capital investing.
With macroeconomic and capital market uncertainty comes opportunity when
taking a long term view and it is great to see, investor appetite for our VCT
investments, which will support growth companies and regional prosperity,
remains robust. At the same time, depressed valuations in listed equity are
providing some highly attractive buying opportunities into companies with
compelling long-term fundamentals.
The Company is generating in line with its 20% ROCE targets and this is
something to be proud of as we exhibit growth and the shareholder benefits of
the compounding effect. I am thankful to my senior management team and all
those contributing to this success employed at Gresham House.
A team with ambition, integrity, capability and energy is the basis of a
winning one that also strives to make a positive difference.
Tony Dalwood
Chief Executive
29 March 2023
Financial review
The Group has grown Assets Under Management (AUM) by 20% to £7.8 billion in
the year (2021: £6.5 billion). Of this £1.3 billion growth, £1.1 billion
(17%) was organic driven by fundraising and performance, with the remaining
£0.2 billion (3%) coming from the acquisition of Burlington RE Property
Management Limited (Burlington), the award winning Irish real estate business.
This AUM growth has delivered an increase in net core income of 25% to £77.3
million (2021: £61.6 million) and an adjusted operating profit of £27.1
million, up 34% on last year's £20.2 million.
The Group has continued to use its balance sheet to develop projects and
support the growth of the business, with the sale of battery energy storage
projects and other development activity delivering an additional £0.6 million
in net gains in the year (2021: £1.8 million).
Total comprehensive net income after the deduction of tax, amortisation and
other acquisition-related costs has delivered a profit of £11.4 million
(2021: £12.0 million). Following the update to our dividend policy, where we
set the target dividend cover at three times adjusted operating profits by the
end of the GH25 strategic plan in 2025, we are pleased to propose a 60%
increase in the dividend for 2022 to 16.0 pence (2021: 10.0 pence), which is
3.5x covered by adjusted diluted earnings per share.
Assets Under Management
The composition and quality of the Group's AUM is one of the key
differentiating factors for Gresham House. We operate in specialist markets,
with long-term underlying asset classes in long-term vehicles. This provides
visibility over future revenue streams for the Group and comfort when markets
are volatile. Overall, the Group has c.90% of its AUM in long-term vehicles
such as Limited Partnerships (LPs), listed funds or segregated mandates. By
way of example, the weighted average life of the LPs that we manage is 14
years, and in asset classes which are not closely correlated with market
movements such as forestry.
AUM as at 31 December 2021 Net fund flows(1) Performance Net funds won/ acquired AUM as at 31 December 2022 AUM movement AUM movement
£mn £mn £mn £mn £mn £mn %
Strategic Equity
Public Equity 1,037 167 (138) - 1,066 29 3%
Private Equity 887 16 (112) - 791 (96) (11)%
Subtotal 1,924 183 (250) - 1,857 (67) (3)%
Real Assets
Forestry 2,953 125 340 - 3,418 466 16%
New Energy & Sustainable Infrastructure 1,213 367 198 - 1,778 565 47%
Real Estate 448 115 (12) 243 794 346 77%
Subtotal 4,614 607 526 243 5,990 1,377 30%
Total AUM 6,538 790 276 243 7,847 1,310 20%
(1) Includes funds raised, redemptions and distributions.
Net fund inflows in the year were £0.8 billion, with positive net inflows
from each division. The Strategic Equity division performed exceptionally well
in challenging market conditions adding net inflows of £0.2 billion, when
c.£25.0 billion was withdrawn from funds in 2022. This is testament to the
track record of the investment team and the progress our wholesale
distribution team are making.
We continued to raise capital for our LPs, listed vehicles and segregated
mandates in 2022.
Our Forestry division raised £0.2 billion in LP funds, with a notable £49
million raised to invest in forestry in New Zealand to capture carbon credits
on behalf of an institutional client, adding to our international credentials.
This was partially offset by £83 million of sales from existing clients as
they took advantage of pricing to secure profits.
New Energy and Sustainable Infrastructure raised capital on the back of their
compelling investment propositions with fundraising of £0.4 billion in the
year. Gresham House Energy Storage Fund plc (GRID) raised £150 million
(gross) in the year through primary issuance, we secured a segregated mandate
with a leading investment manager to invest £120 million in collocated
battery storage and renewable energy projects and a further £133 million was
committed to the British Sustainable Infrastructure II Fund LP (BSIF II) and
co-investment vehicles, underlining the importance of providing access to this
innovative asset class.
Real Estate raised a combined £0.1 billion capital in the year from our UK
affordable housing funds Residential Secure Income plc (ReSI plc) and Gresham
House Residential Secure Income LP (ReSI LP).
The impact of performance on AUM in the year reflected market movements. The
Strategic Equity division's performance was down £0.2 billion, which was a
13% drop on the year's opening AUM and reflected the general markets for
equities in 2022. This was offset by a positive £0.5 billion performance from
the Real Assets division with notable increases in valuation in the Forestry
division of £0.4 billion. This reflected the market pricing for forestry in
general as investors recognised the resilient nature of sectors with less
correlation to equity markets and inflation. We also noted value increases
from GRID as its NAV grew as a result of the valuation of the underlying
battery energy storage projects.
We also completed the acquisition of Burlington adding £243 million AUM to
the Group in March 2022. Burlington has since been rebranded as Gresham House
Real Estate and has been integrated with our business in Dublin. This adds
expertise in commercial property to our Real Estate offering as well as
further building our international growth plans.
Adjusted operating profit
We present the performance of the Group using the non-GAAP adjusted operating
profit metric. The aim of the adjusted operating profit metric is to show the
true performance of the core asset management business through the management
fee income and revenues earned, less the administrative overheads associated
with delivering asset management services. The adjusted operating profit
metric below highlights the performance of the core asset management business
separately from performance fees and gains on the sale of development
projects. The performance fees and gains on the sale of development projects
are presented alongside the variable compensation costs payable as a result of
their generation, to show the net impact on the Group.
The adjusted operating profit metric thereby excludes depreciation and
amortisation, exceptional items from acquisition costs and restructuring and
acquisition-related share-based payments and remuneration, as they are
effectively an earn out paid to the sellers of businesses acquired rather than
an operating expense.
Adjusted operating profit
2022 2021
£'000 £'000
Income 79,818 63,060
Dividend income from associates - 285
Gross core income 79,818 63,345
Rebates, distribution costs and fundraising costs (2,543) (1,736)
Net core income 77,275 61,609
Administration overheads (excluding amortisation, depreciation, exceptional
items and acquisition-related share-based payment and remuneration)
(49,635) (41,128)
Finance costs* (560) (311)
Adjusted operating profit 27,080 20,170
Adjusted operating margin 35.0% 32.7%
Performance fees (gross) 1,015 6,163
Variable compensation attributable to performance fees (1,015) (4,449)
Performance fees net of costs - 1,714
Gains on development projects 2,249 2,932
Variable compensation attributable to gains on development projects (975) (689)
Development project costs (698) (470)
Net development gains 576 1,773
Performance fees and development gains net of costs 576 3,487
Adjusted operating profit, performance fees and development project gains net 27,656 23,657
of costs
Non-core operating revenues 2,523 1,140
Costs relating to non-core operating revenues (2,522) (1,102)
Net non-core activity 1 38
Amortisation and depreciation (12,359) (9,475)
Acquisition and restructuring related costs* (3,310) (3,215)
Acquisition related share-based payment and remuneration charges (1,917) (1,067)
Net gains on investments and fair value movements** 4,342 6,224
Tax (2,874) (4,107)
Operating profit after tax 11,539 12,055
Loss from discontinued operations (177) (14)
Total comprehensive net income 11,362 12,041
*Finance costs per the IFRS Statement of Comprehensive Income included £1.7
million relating to the unwind of the discount from contingent consideration.
This has been reclassified as acquisition and restructuring related costs in
the above disclosure as it is acquisition related.
**Excluding dividend income from associates of nil in 2022 (2021: £0.3
million) and gains on development projects of £2.2 million (2021: £2.9
million).
The adjusted operating profit metric has increased to £27.1 million (2021:
£20.2 million) and the adjusted operating margin based on net core income
increased to 35.0% (2021: 32.7%), showing the operating model of the business
coming through in margin improvement as we target a 40% operating margin by
2025.
Income
2022 2021
£'000 £'000
Asset management income 79,287 62,162
Dividend and investment income 531 590
Other income - 308
Total income 79,818 63,060
Dividend income from associates - 285
Gross core income 79,818 63,345
Rebates, distribution costs and fundraising costs (2,543) (1,736)
Net core income 77,275 61,609
Net core income
Total net core income has increased by 25% in the year to £77.3 million
(2021: £61.6 million), driven by the strong 20% growth in AUM in the year to
£7.8 billion (2021: £6.5 billion). We present net core income to reflect the
rebates, distribution costs and fundraising fees paid to deliver core income
by the Group.
The Group provides high-quality services in actively managed alternative asset
classes. Delivery of returns for investors is key and requires our team of
asset management specialists to drive investment performance. As such, we
operate in higher fee margin specialist areas of asset management and target a
gross revenue margin of 1% across the Group.
The Group benefits from a diverse range of long-term management contracts,
with c.90% of AUM being in closed-ended funds and structures which provide a
stable view on future revenue streams. This is demonstrated through the
weighted average life of limited partner management contracts accounting for
£2.5 billion in AUM being over 14 years in asset classes such as forestry.
The spread of products managed by the Group's Real Assets and Strategic Equity
divisions also ensures that the Group is not exposed to any one particular
market, providing good diversification.
Dividend, interest and other income
We continue to use our balance sheet to invest alongside clients and develop
or support products managed by the Group and dividends, interest and other
income reflect this. Overall dividend and investment income was lower in 2022
at £531,000 (2021: £590,000), reflecting dividends from vehicles that we
have invested in to align ourselves with clients, such as ReSI plc, and
revenues earned from development projects in the period.
Other income of £308,000 in the prior year principally reflects the net
operating income earned from a battery storage project while under the Group's
ownership, prior to being sold to GRID.
The Group sold its stake in Rockwood Strategic plc in March 2022 and therefore
has not received dividends from associates in the year. In the prior year
these dividends were recognised in the share of associates profit line in the
income statement and separated out as part of the adjusted operating profit
metric disclosure.
Administrative overheads
Administrative overheads, excluding amortisation, depreciation and exceptional
items, were up 21% in the year to £49.6 million (2021: £41.1 million). This
reflects the first full year of costs relating to the Mobeus VCT team and
Appian business, which were acquired in the prior year. These comprised costs
of £0.6 million for three months of the Mobeus VCT business and six months of
costs for Appian totalling £1.5 million in 2021.
The Group continued to focus its efforts on maximising profit growth and
increasing shareholder value during 2022, which was a more challenging
environment. We took immediate cost control measures part way through the year
to review all planned hires and reduce discretionary spend in order to
maximise profitability in 2022. Whilst doing this we focused on the adjusted
operating margin target of 40% and were pleased to note the improvement in
adjusted operating margin from 32.7% to 35.0% at the end of 2022. We are
seeing the operating leverage come through the business as we grow AUM at a
faster rate than the cost base required to service the increased level of AUM,
and as such remain on track to achieve 40% operating margins in line with the
GH25 target.
The investment in key team members across the Group in 2022 led to the Group's
full-time equivalent headcount standing at 223 at the end of the year, up from
185 at the end of 2021. This included 14 people joining with the Burlington
business and 60 new hires as we focused on the key roles needed to grow the
business. Core people costs have consequently increased by 8% in the year to
£38.4 million from £35.4 million in 2021, which includes variable
compensation relating to performance fees, development gains and acquisition
related remuneration of £3.9 million (2021: £6.2 million).
The Group has also benefited from improved performance across the majority of
the divisions, which drives the bonus pools based on a share of the profits
with the teams and thereby increases costs.
Total office costs across the Group were £2.2 million (2021: £1.6 million),
reflecting the London office move to 80 Cheapside as well as the additional
office costs from the acquisition of Appian and Burlington.
We operate with offices in London, Dublin, Oxford, Edinburgh and Dumfries and
continue to take a hybrid working approach, which provides flexibility to our
growth plans and the team alike.
When we acquire businesses, we focus on the synergies that can be delivered as
a result of combining complementary businesses. It is not only acquisitions
where we target cost savings. We continue to review all areas of the Group's
cost base diligently to ensure that we are operating efficiently and in a lean
manner. We do, however, ensure that appropriate investment takes place in
areas that will support the growth of the business.
Finance costs
The Group has a committed Revolving Credit Facility (RCF) with Santander of
£20.0 million (2021: £20.0 million facility size). RCF interest and finance
fees over the year were £447,000 (2021: £244,000), reflecting the increase
in the size of the facility to £20 million for the full year, as the increase
took place in 2021, with £113,000 reflecting lease costs. The remaining £1.7
million related to the unwind of the discount on contingent consideration in
the year, which is recognised as a finance cost.
Amortisation and depreciation
Amortisation of management contracts, customer relationships, the website and
IT platform development accounted for £11.2 million (2021: £8.5 million) as
these intangible assets continue to be amortised over their useful lives. The
increase in the year reflects the acquisition of Appian in June 2021, the
Mobeus VCT business in October 2021 and the acquisition of Burlington in March
2022. These acquisitions require the assessment of the fair value of the
management contracts and intangibles acquired within the businesses, which are
being amortised over their useful lives and are the main drivers for the
increase in the year.
Depreciation of £1.2 million in the year (2021: £959,000) relates primarily
to office leases, motor vehicles used by the Forestry business and IT
equipment.
Acquisition and restructuring related costs
These costs relate to acquisitions and restructuring of the business
post-acquisition as well as one-off costs. Acquisition and restructuring
related costs in 2022 were £3.3 million compared to £3.2 million in 2021.
Current year costs include the acquisition costs associated with the
Burlington business, alongside integration and restructuring costs. This also
includes £0.3 million of DevCo-related acquisition and disposal costs that
are required to be expenses in the year under IFRS, rather than capitalised as
development activity (2021: £1.2 million), alongside £1.7 million of finance
costs relating to the unwind of discount on contingent consideration, which is
acquisition related and included in acquisition costs.
Performance fees and development gains
The Mobeus Income and Growth 2 VCT plc performance fee of £1.0 million was
triggered and paid in the year. As part of the agreed terms of the acquisition
of the Mobeus VCT business, this fee has been used to incentivise the private
equity team and included as variable compensation for £1.0 million.
The Group sold four battery energy storage projects in 2022, with a capacity
of 115MW. The projects have generated gross gains for the Group of £2.2
million, with IRRs ranging from 28% to 400% (2021: £2.9 million). The
variable compensation relating to these gains was £1.0 million (2021: £0.7
million). We also report the cost of development activity in the development
reporting, with £0.7 million invested in the period in sourcing and
developing the pipeline of projects to develop and deliver as operational to
GRID, as well as other development related SPV costs. The net gain after the
deduction of variable compensation relating to the projects and costs
associated with development activity was £0.6 million for the Group (2021:
£1.8 million). This was lower than the prior year to reflect the additional
investment in development activity in 2022.
Gains/(losses) on investments
2022 2021
£'000 £'000
Share of associates' profits 1,052 4,955
(Loss)/profit on disposal of associate (101) 461
Gains in investments held at fair value 1,488 5,842
Movement in fair value of contingent consideration 3,514 (1,659)
Foreign exchange movements on translation of foreign subsidiary 638 (158)
Total gains on investments 6,591 9,441
Less realised gains on development projects (2,249) (2,932)
Less dividend income from associates - (285)
Net gains on investments 4,342 6,224
The Group has made gains on its investments and fair value movements in
acquisition-related contingent consideration totalling £6.6 million in 2022
(2021: £9.4 million).
The share of associates' profits of £1.1 million relates to the 50% holding
that the Group had in the Environment Bank Limited (EBL), a company targeting
the delivery of habitat banks. The Group sold its stake in Gresham House
Strategic plc and BSIF and BSIF II LPs exercised their option to acquire 25%
of EBL from the Group, generating a net loss of £101,000 in the year.
The gain of £1.5 million from investments held at fair value in the year
(2021: £5.8 million gain) includes realised and unrealised gains and losses
on the co-investments that have been made in the funds managed or advised by
Gresham House. This includes the DevCo gains of £2.2 million (2021: £2.9
million) recognised in the year.
Fair value movement in contingent consideration
The TradeRisks, Mobeus VCT business, Appian and Burlington acquisitions have
contingent consideration elements which are driven by AUM growth, maintaining
management contracts or revenue performance over a three-year period since
acquisition. The contingent consideration payments have been fair valued at
each reporting period end, with the movement in the fair value recognised in
the income statement in the year of £3.5 million, reflecting a reduction in
the expected deferred consideration payable.
Tax
The tax charge noted reflects taxable profits within the Group partially
offset by the unwinding of the deferred tax liability recognised on the
acquisitions of management contracts to date.
Financial position
2022 2021
£'000 £'000
Assets
Investments* 37,881 38,023
Cash 32,205 40,252
Tangible/realisable assets 70,086 78,275
Intangible assets 87,335 95,012
Other assets 47,314 36,259
Total assets 204,735 209,546
Liabilities
Borrowing - -
Contingent consideration 13,863 22,659
Other creditors 40,829 40,425
Total Liabilities 54,692 63,084
Net assets 150,043 146,462
Non-controlling interests 1,095 1,075
Net Assets per IFRS 151,138 147,537
*The above presentation of the Group's balance sheet highlights the Group's
direct exposure to those vehicles and entities that it has invested in. We
have therefore adjusted the IFRS Statement of Financial Position for the
following items which are required to be consolidated under IFRS 10 to present
the Group on an investment basis:
DevCo Projects - removed the "Assets of a disposal group held for sale" of
£22,907,000 (2021: £17,545,000) and "Liabilities of a disposal group
classified as held for sale" of £7,307,000 (2021: £7,499,000) and replaced
with the investment exposure in "investments in securities" £18,640,000
(2021: £13,583,000).
Gresham House Forestry Friends and Family Fund LP - reduced the value by the
non-controlling interest amount of £1,095,000 (2021: £1,075,000) to show the
Group's underlying exposure to this fund.
Tangible/realisable assets
The above highlights the strong balance sheet position that the Group improved
on during 2022. The tangible/realisable assets supporting this total £70.1
million (2021: £78.3 million), comprising investments and cash.
Investments
The Group invests in or alongside the funds that it manages to align itself
with clients. The below table provides a summary of the investment portfolio
at the end of the year:
Investment portfolio 2022 2021
£'000 £'000
Investment in associates
Environment Bank Limited 428 496
Rockwood Strategic plc - 11,459
428 11,955
Investment in securities
DevCo Projects 18,640 13,583
Strategic Equity Capital plc (SEC) 6,071 3,349
Residential Secure Income plc (ReSI plc) 3,040 1,438
Warehoused investment 2,000 -
Gresham House Forestry Fund LP 2,576 2,739
Gresham House British Strategic Investment Fund (BSIF) 1,170 864
Residential Secure Income LP 1,059 639
Gresham House Forestry Growth and Sustainability Fund LP 956 1,000
Strategic Public Equity Co-Investment 856 -
Gresham House British Sustainable Infrastructure Fund II (BSIF II) 481 -
Gresham House Strategic Public Equity LP 435 1,363
LF Gresham House UK Smaller Companies Fund - 882
Other investments 169 211
37,453 26,068
Total investments (excluding non-controlling interests) 37,881 38,023
Investments in associates
The Group supported the early investment into Environment Bank Limited (EBL),
an entity focused on creating habitat land banks to support rewilding in the
UK. The Group sold 25% in the equity of EBL to BSIF and BSIF II LPs in
December 2022. This generated a return of 15% on the Group's original
investment and is an example of how the Group uses its balance sheet to
support the growth of assets to be sold into funds managed by the Group,
ultimately growing the AUM of the Group.
Investments in securities
IFRS 10: Consolidation, requires the consolidation of the Group's investments
in battery energy storage Development Company projects (DevCo Projects) as the
Group has a controlling position in these projects. The DevCo Projects have
borrowed to pay the deposits for the utility-scale batteries and this
borrowing is secured at the DevCo Project level on the batteries and there is
no recourse to the Group. The disclosure above therefore shows the Group's net
exposure to the DevCo Projects, i.e. the equity and loan investment in the
vehicles, and nets out the borrowing and utility-scale battery assets as shown
in the IFRS Statement of Financial Position assets and liabilities of a
disposal group held for sale.
The Group increased its investment in the DevCo Projects in the year, which
totalled £18.6 million (2021: £13.6 million) at the end of 2022 and all of
which are in the exclusive pipeline for GRID to purchase when they are
operational. GRID will go through a detailed independent valuation process
when the projects are operational as part of the acquisition process and these
projects currently remain on track to be operational in 2023 and 2024. During
the year, the Group sold four projects, Shilton Lane, Arbroath, UK Battery
Storage and Stairfoot to GRID, which delivered a net gain of £2.2 million to
the Group.
The Group invested a further £3.0 million into Strategic Equity Capital plc
in the year, as well as supported the equity raise for ReSI plc by investing a
further £2.0 million.
The Group also invested £1.3 million to warehouse an unlisted investment
prior to the launch of an early stage venture fund that can invest alongside
the VCTs.
Cash and borrowing
The cash balance of the Group was £32.2 million at the end of the year (2021:
£40.3 million) and reflected operating cash profits generated in the year as
well as investment acquisition and disposals. Net cash flow from operating
activity was £11.3 million, which is after the payment of £6.2 million of
corporation tax.
Net investment activity was a cash investment of £8.8 million, with key
movements such as cash inflows from the sale of associates of £12.5 million
and cash payments to settle contingent consideration amounts for business and
DevCo project acquisitions of £10.9 million. We also invested £14.4 million
into Devco projects and £8.3 million into investments to align with clients
and warehouse investments in anticipation of launching new funds.
Other financing cash activities include the payment of £3.8 million of
dividends in May 2022 and the cash settlement of share-based payments of £6.8
million.
Finally, to provide flexibility as the Group enters 2023 with a range of
opportunities to grow the business, we have the £20.0 million committed RCF
with Santander, which has been extended to 31 December 2024. The Group is
therefore well positioned with cash and available facilities to take advantage
of opportunities as they arise in 2023.
Intangible assets
Intangible assets are primarily made up of the management contracts acquired
as part of acquisitions and the goodwill associated with these acquisitions.
As at 31 December 2022, the net book value of management contracts and other
intangible assets was £38.1 million (2021: £46.2 million), reflecting the
amortisation of the management contracts over their useful lives, and the
addition of the management contracts following the acquisition of the
Burlington business. No contracts were impaired at the year end.
Goodwill resulting from acquisitions is reviewed each year end and there was
no indication that impairment to goodwill should be considered to the book
value of £49.2 million (2021: £48.8 million). Further details are included
in the notes to the financial statements.
Contingent consideration
Contingent consideration reduced from £22.7 million to £13.9 million in the
year, reflecting the settlement of the final consideration for the acquisition
of the Livingbridge VC business, the acquisition of Burlington and a reduction
in the expected contingent consideration payable for the Appian business,
alongside the impact of the time value of money as future contingent
consideration amounts become more certain.
Outlook
The balance sheet is well capitalised to capture the growth opportunity in
front of us with cash of £32.2 million and an undrawn committed RCF of £20
million. We continue to invest to align ourselves with clients and develop
opportunities to launch new funds to grow AUM and continue delivering
shareholder value through 2023 and beyond.
Kevin Acton
Chief Financial Officer
29 March 2023
Group statement of comprehensive income
For the year ended 31 DECEMBER
2022 2021
Notes £'000 £'000
Income
Asset management income 79,287 62,162
Dividend and interest income 531 590
Other operating income 2,523 1,448
Performance fees and carried interest 1,015 6,163
Total income 1 83,356 70,363
Operating costs (73,232) (63,331)
Administrative overheads 3 (71,662) (60,116)
Acquisition and restructuring related costs 6 (1,570) (3,215)
Net operating profit 10,124 7,032
Finance costs 7 (2,300) (311)
Net operating profit after finance costs 7,824 6,721
Gains and losses on investments and fair value movements
Share of associates' profits 18 1,052 4,955
(Loss)/Profit on disposal of associate (101) 461
Gains and losses on investments held at fair value 12 1,488 5,842
Movement in fair value of contingent consideration 3,514 (1,659)
Operating profit before taxation 13,777 16,320
Taxation 9 (2,874) (4,107)
Operating profit from continuing operations 10,903 12,213
(Loss) from discontinued operations (177) (14)
Profit for the year 10,726 12,199
Other comprehensive income
Foreign exchange gains/(losses) on translation of a foreign subsidiary 638 (158)
Total Other comprehensive income/(loss) 638 (158)
Total comprehensive income 11,364 12,041
Attributable to:
Equity holders of the parent 11,344 11,777
Non-controlling interest 20 264
11,364 12,041
Basic profit per ordinary share (pence) 10 29.8 34.8
Diluted profit per ordinary share (pence) 10 28.6 32.7
Basic adjusted profit per ordinary share (pence) 10 57.7 52.6
Diluted adjusted profit per ordinary share (pence) 10 55.2 49.4
Year ended 31 DECEMBER
Group 2022 Notes Ordinary share capital Share premium Merger reserve Treasury shares Retained reserves Foreign exchange reserve Equity attributable to equity shareholders of the Parent Company Non- controlling interest Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 9,500 39,328 24,811 (51) 73,032 (158) 146,462 1,075 147,537
Profit and total comprehensive income for the year - - - - 10,706 638 11,344 20 11,364
Contributions by and distributions to owners
Share-based payments 29 - - - - (3,583) - (3,583) - (3,583)
Issue of shares 27 68 - 608 (1,041) - - (365) - (365)
Dividends paid 11 - - - - (3,815) - (3,815) - (3,815)
Total contributions by and distributions to owners 68 - 608 (1,041) 3,308 638 3,581 20 3,601
Balance at 31 December 2022 9,568 39,328 25,419 (1,092) 76,340 480 150,043 1,095 151,138
Group 2021 Notes Ordinary share capital Share premium Merger reserve Treasury shares Retained reserves Foreign exchange reserve Equity attributable to equity shareholders of the Parent Company Non- controlling interest Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2020 8,023 60,061 19,981 - 8,402 - 96,467 811 97,278
Profit and total comprehensive income for the year - - - - 11,935 (158) 11,777 264 12,041
Contributions by and distributions to owners
Share-based payments 29 - - - - (5,424) - (5,424) - (5,424)
Issue of shares 27 1,477 39,267 4,830 (51) - - 45,523 - 45,523
Cancellation of share premium - (60,000) - - 60,000 - - - -
Dividends paid 11 - - - - (1,881) - (1,881) - (1,881)
Total contributions by and distributions to owners 1,477 (20,733) 4,830 (51) 64,630 (158) 49,995 264 50,259
Balance at 31 December 2021 9,500 39,328 24,811 (51) 73,032 (158) 146,462 1,075 147,537
Year ended 31 DECEMBER
Company 2022 Notes Ordinary share capital Share premium Merger reserve Retained reserves Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 9,500 39,328 24,811 60,704 134,343
Loss and total comprehensive loss for the year - - - (3,996) (3,996)
Contributions by and distributions to owners
Share-based payments - - 767 767
Issue of shares 27 68 - 608 - 676
Dividends paid 11 - - - (3,815) (3,815)
Total contributions by and distributions to owners 68 - 608 (7,044) (6,368)
Balance at 31 December 2022 9,568 39,328 25,419 53,660 127,975
Company 2021 Notes Ordinary share capital Share premium Merger reserve Retained reserves Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 December 2020 8,023 60,061 19,981 9,257 97,322
Loss and total comprehensive loss for the year - - - (1,695) (1,695)
Contributions by and distributions to owners
Share-based payments - - - (4,977) (4,977)
Issue of shares 27 1,477 39,267 4,830 - 45,574
Cancellation of share premium - (60,000) - 60,000 -
Dividends paid 11 - - - (1,881) (1,881)
Total contributions by and distributions to owners 1,477 (20,733) 4,830 51,447 37,021
Balance at 31 December 2021 9,500 39,328 24,811 60,704 134,343
As at 31 DECEMBER
Group Company
Notes 2022 2021 2022 2021
Assets £'000 £'000 £'000 £'000
Non-current assets
Investments 12 19,912 13,560 12,733 8,308
Property, plant and equipment 13 2,127 2,927 1,461 1,912
Investment in subsidiaries 17 - - 80,148 80,148
Investment in associates 18 428 11,955 - -
Intangible assets 14 87,335 95,012 1,292 1,100
Long-term receivables 15 1,330 492 492 492
Deferred tax 24 1,802 2,197 66 92
112,934 126,143 96,192 92,052
Current assets
Trade receivables 19 11,216 11,135 - -
Accrued income and prepaid expenses 20 30,839 21,705 1,783 1,157
Other current assets 21 3,036 3,537 29,923 20,047
Cash and cash equivalents 32,205 40,252 2,976 23,800
Non-current assets held for sale
Assets of a disposal group held for sale 16 22,907 17,545 - -
Total current assets and non-current assets held for sale 100,203 94,174 34,682 45,004
Total assets 213,137 220,317 130,874 137,056
Current liabilities
Trade and other payables 22 40,290 42,721 911 519
Short-term borrowings 23 - - 1,541 1,136
Liabilities of a disposal group classified as held for sale
Liabilities of a disposal group classified as held for sale 16 7,307 7,499 - -
Total current liabilities and liabilities of a disposal group classified as 47,597 50,220 2,452 1,655
held for sale
165,540 170,097 128,422 135,401
Total assets less current liabilities
Non-current liabilities
Deferred taxation 24 9,155 10,597 - -
Long-term borrowings 25 - - - -
Other creditors 26 5,247 11,963 447 1,058
14,402 22,560 447 1,058
Net assets 151,138 147,537 127,975 134,343
Capital and reserves
Ordinary share capital 27 9,568 9,500 9,568 9,500
Share premium 29 39,328 39,328 39,328 39,328
Merger reserve 29 25,419 24,811 25,419 24,811
Treasury shares 29 (1,092) (51) - -
Retained reserves 29 76,340 73,032 53,660 60,704
Foreign exchange reserve 29 480 (158) - -
Equity attributable to equity shareholders of the Parent Company 150,043 146,462 127,975 134,343
Non-controlling interest 29 1,095 1,075 - -
Total equity 151,138 147,537 127,975 134,343
Basic net asset value per ordinary share (pence) 30 394.0 387.5 336.0 353.5
Diluted net asset value per ordinary share (pence) 30 377.1 366.6 321.6 334.6
The loss after tax for the Company for the year ended 31 December 2022 was
£3,996,000 (2021: £1,695,000 loss). The financial statements were approved
and authorised for issue by the Board and were signed on its behalf on 29
March 2023.
Kevin Acton
Chief Financial Officer
For the year ended 31 DECEMBER
2022 2021
Notes £'000 £'000
Cash flow from operating activities
Net cash generated from operations 31 17,546 21,130
Corporation tax paid (6,155) (968)
Interest paid on loans (141) (187)
Net cash flow from operating activities 11,250 19,975
Cash flow from investing activities
Acquisition of Appian Asset Management Limited - (841)
Acquisition of Mobeus VCT business - 514
Acquisition of Burlington Property RE Limited (627) -
Contingent consideration paid (10,913) (1,409)
Investment in associates - (1,165)
Sale of associates 12,478 3,296
Dividends received from associates - 383
Purchase of investments (8,334) (5,409)
Sale of investments 1,659 4,287
Investment in DevCo Projects (14,354) (12,349)
DevCo loans repaid 2,853 551
Proceeds received on sale of DevCo Projects 10,113 3,551
Purchase of fixed assets (366) (327)
Sale of fixed assets 296 6
Purchase of intangible assets (886) (724)
Total cash flow from investing activities (8,081) (9,636)
Cash flow from financing activities
Receipt of loans - 10,000
Repayment of loans - (10,000)
Share issue proceeds - 22,000
Share issue costs - (1,513)
Share-based payments settled (6,774) (9,734)
Dividends paid (3,815) (1,881)
Capital element of lease payments (627) (845)
Total cash flow from financing activities (11,216) 8,027
(Decrease)/Increase in cash and cash equivalents (8,047) 18,366
Cash and cash equivalents at start of year 40,252 21,886
Cash and cash equivalents at end of year 32,205 40,252
For the year ended 31 DECEMBER
2022 2021
Notes £'000 £'000
Cash flow from operating activities
Net cash generated from operations 31 (39) (1,911)
Interest paid on loans (266) (142)
Net cash flow from operating activities (305) (2,053)
Cash flow from investing activities
Purchase of investments (5,203)
(9,387)
Sale of investments 3,284
4,512
DevCo loans repaid - 551
Investment in DevCo Projects - (3,537)
Net cash (paid) / received from advances to Group undertakings* 7,693
(11,454)
Sale of associates - 65
Purchase of fixed assets (371)
(244)
Sale of fixed assets 6
82
Purchase of intangible assets (725)
(695)
Total cash flow from investing activities (17,186) 1,763
Cash flow from financing activities
Receipt of loans - 10,000
Repayment of loans - (10,000)
Net repayments of advances from Group undertakings* 3,515
765
Share issue proceeds - 22,000
Share issue costs - (1,513)
Share warrants exercised - -
Share-based payments settled - (5,253)
Dividends paid (1,881)
(3,815)
Capital element of lease payments (604)
(283)
Total cash flow from financing activities (3,333) 16,264
(Decrease)/increase in cash and cash equivalents (20,824) 15,974
Cash and cash equivalents at start of year 23,800 7,826
Cash and cash equivalents at end of year 2,976 23,800
* A portion of the prior year repayment from Group entities was investing in
nature (£7.7 million) but presented in financing activities. This has been
adjusted to be presented in investing activities.
The Group's principal accounting policies are as follows:
(a) Basis of preparation and going concern
Gresham House plc is a public limited company limited by shares incorporated
in the United Kingdom under the Companies Act and registered in England with
company number 871. The address of the registered office is 5 New Street
Square, London, EC4A 3TW.
The financial statements of the Group and the Company have been prepared in
accordance with the United Kingdom adopted International Accounting Standards
("IAS") with the requirements of the Companies Act 2006. The financial
statements are presented in Sterling, which is also the Group's functional
currency. The financial statements have been prepared on a historical cost
basis, except for the following:
§ certain financial assets and liabilities are measured at fair value; and
§ assets held for sale are measured at fair value less costs to sell.
There were annual improvements and amendments to the existing accounting
standards, which were effective for periods beginning 1 January 2022 adopted
during the year, however they have not had a material impact on the Group's
results. These includes:
§ Amendments to IFRS 3 Business Combinations;
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IAS 16 Property, Plant and Equipment;
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IAS 37 Provisions, Contingent Liabilities and Contingent Assets
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§ Annual Improvements to IFRSs (2018-2020 Cycle):
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IFRS 1
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, IFRS 9
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, Illustrative Examples accompanying IFRS 16
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.
Going Concern
The Group has sufficient financial resources and ongoing investment management
contracts. As a consequence, the Directors believe that the Group is well
placed to manage its business risks successfully. The Directors have a
reasonable expectation, after performing downside scenario stress tests on the
Group's cash flow, that the Group has adequate resources to continue in
operational existence for the foreseeable future. Downside scenario stress
tests included a material reduction in revenues from reducing net asset values
of the funds managed by the Group as well as reviews of variable costs and
discretionary investment. Whilst high inflation, high interest rates and the
Russia-Ukraine war has added to the market turmoil which impacted the
environment in which the Group operates, they have not had a material impact
on the Group's resources. The downside scenarios also reviewed the revolving
credit facility covenants, which were not breached as the revolving credit
facility was undrawn at the year end. The revolving credit facility is
available to draw should the Directors want to do so and this is available
until 21 December 2024. Thus, the Directors continue to adopt the going
concern basis of accounting in preparing the financial statements.
(b) Basis of consolidation
Subsidiaries
Where the Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee; exposure to variable returns
from the investee; and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control. The
consolidated financial statements incorporate the financial statements of the
Company and its subsidiary undertakings made up to the year end as if they
formed a single entity. All intra-group transactions, balances, income and
expenses are eliminated on consolidation. The acquisition method of accounting
is used to account for business combinations by the Group. Refer to Note (r)
iv) for further details on whether the Group controls funds that it also
manages.
At the Company level investments in subsidiaries are carried at cost less
impairment.
Associates
Where the Group has significant influence, it has the power over (but not
control of) the financial and operating policy decisions of another entity, it
is classified as an associate. This is typically where the Group holds over
20% of the voting shares in the entity. Associates are initially recognised
in the Group Statement of Financial Position at cost. Subsequently, associates
are accounted for using the equity method, where the Group's share of
post-acquisition profits and losses and other comprehensive income is
recognised in the Group Statement of Comprehensive Income. Dividends
received or receivable from associates are recognised as a reduction in the
carrying amount of the investment.
Profits and losses arising on transactions between the Group and its
associates are recognised only to the extent of unrelated investors' interests
in the associate. The investor's share in the associate's profits and losses
resulting from these transactions is eliminated against the carrying value of
the associate.
Where there is an indication of impairment that the investment in an associate
has been impaired, the carrying amount of the investment will be tested for
impairment in the same way as other non-financial assets.
(c) Presentation of Statement of Comprehensive Income
As permitted by Section 408 of the Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income. Details of the Company's
results for the year are set out in Note 29, the loss for the year being
£3,996,000 (2021: £1,695,000).
(d) Segment reporting
Operating segments are identified on the basis of internal reports about
components of the Group that are regularly reviewed by the Group Management
Committee ("GMC"), which is considered to be the Chief Operating Decision
Maker in order to allocate resources to the segments and to assess their
performance.
The Group has three reportable segments, which are those reported to the Board
are Real Assets, Strategic Equity and Central. The Real Assets segment
includes Forestry, New Energy and Sustainable Infrastructure and Real Estate
divisions, and the Strategic Equity division includes Public and Private
Equity divisions. While the Central segment principally comprises of
management activities such as strategic activities, corporate development and
costs associated with corporate governance and management.
(e) Revenue recognition
Revenue is recognised when the Group has satisfied its performance
obligations relating to the services to its clients. Revenue is measured at
the fair value of the consideration received or receivable and represents
amount receivables for services provided in the normal course of business, net
of discounts and value adding tax. Where the Group enters contracts which
includes multiple services, where each service can be determined to be
distinct, then its recognised separately.
The fixed consideration element of asset management contracts is measured at
the fair value of the consideration received or receivable and is earned
within the United Kingdom, Ireland, and Australasia. The fixed consideration
element of asset management contracts is recognised evenly over the contracted
period, as the contracts require the Group to perform an indeterminate number
of individual asset management services over the duration of the contract.
Typically, the asset management fees are based on a fixed percentage of the
net asset values of the funds managed or committed capital. The fees are
affected by the changed in net asset values, including market appreciation or
deprecation, foreign exchange translation and net outflows and inflows.
Asset management income also includes catch-up management fees on final
close of limited partnership funds, directors and advisory fees and
fundraising fees.
Catch-up management fees or equalisation fees are calculated as the management
fee payable from the date of commitment to the fund as if an investor had
joined the fund at inception of the fund and are typically calculated on the
investor's commitments to the limited partnership at the appropriate
management fee or priority profit share. In this instance, the period the
service relates to is assessed and for past service provision the catch-up
management fee is recognised when the new investor commits to the fund.
Performance fees are recognised as revenue only to the extent that it is
highly probable that a significant reversal in the amount of cumulative
revenue recognised will not occur. Performance fees are payable when a certain
hurdle rate has been achieved on a specific date, typically an NAV amount on
the year end reporting date of the specific fund. The potential for the NAV to
decrease from a reporting period end to the measurement date means that the
performance fee is generally only recognised when the measures on which it is
based have finally been determined. Cash payments in relation to fixed and
variable revenues earned are generally received shortly after the relevant
quarter end.
Fundraising fees are earned by the Group for providing fund raising services,
typically to the VCTs. This includes promoting the fund raise, legal
documentation and other administrative tasks of executing the fund raise.
Fundraising fees are typically paid on a percentage of the funds raised, i.e.
equity invested into the fund.
Other revenue recognition
(i) Dividend and interest income
Income from listed securities is recognised when the right to receive the
dividend has been established. Interest receivable is recognised when it is
probable that the economic benefits will flow to the Group and the amount of
revenue can be reliably measured. Interest income is accrued on a time basis
by reference to the principal outstanding and by using the effective interest
rate method.
(ii) Other income
Other income earned by the Group is recognised to the extent that it is
probable that the economic benefits will flow to the Group and that revenue
can be reliably measured in line with any contractual arrangements in place.
This includes non-core operating income which relates to income earned from
property services, which are not considered core asset management services to
the Group.
Adjustments to revenue arising from initial estimates recorded historically
have been immaterial as the Group only recognised revenue when it is highly
probable that a significant reversal in the amount of cumulative revenue
recognised will not occur.
At each reporting period end, where the performance obligation is satisfied
but the Group has not raised the associated invoices, revenue is accrued.
(f) Expenses
All expenses and interest payable are accounted for on an accruals basis.
Expenses incurred by the Group when acting as principal are presented in
administrative overheads cost in the SOCI. These costs included fundraising
costs, distribution fees payable to providers and advisers that distribute the
Group's products; as well as rebates to providers, advisers and investors.
These costs are recognised as they are incurred or over the service period
provided.
(g) Property, plant and equipment
Each class of property, plant and equipment is carried at cost less, where
applicable, any accumulated depreciation.
The carrying amount of property, plant and equipment is reviewed annually by
the Directors to ensure it is not in excess of the recoverable amount from
those assets. The recoverable amount is assessed on the basis of the expected
net cash flows which will be received from the assets' employment and
subsequent disposal.
The depreciable amount of all property, plant and equipment is depreciated on
a straight-line basis over their estimated useful lives to the Group
commencing from the time the asset is held ready for use, and are depreciated
at the following rates:
Office equipment 25%
Motor vehicles 25%
Leasehold property 10%
Right of use assets over the
lease term
(h) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit before tax as reported in the Statement of
Comprehensive Income because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are
not taxable or deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the
Statement of Financial Position date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each Statement of
Financial Position date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the assets to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset realised. Deferred tax is
charged or credited in the Statement of Comprehensive Income, except when it
relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
(i) Leases
A lease is defined as a contract that conveys the right to control the use of
an identified asset for a period of time in exchange for consideration. At the
commencement date of a lease a right of use asset and a lease liability are
recognised in the Statement of financial position.
The lease liability is initially measured at the present value of expected
future lease payments discounted at the interest rate implicit in the lease
or, if that rate cannot be determined, the lessee's incremental borrowing
rate. Subsequently the lease liability decreases by the lease payments made,
offset by interest on the liability, and may be remeasured to reflect any
reassessment of expected payments or to reflect any lease modifications.
The right of use asset is initially measured at the amount of the initial
lease liability plus: any lease payments made on or before the commencement
date less incentives received; any incremental costs of obtaining the lease;
and, if any, the costs of decommissioning the asset and any restoration work
to return the asset to the condition required under the terms of the lease.
Subsequently the right of use asset is valued using the cost model. The asset
is amortised on a straight-line basis over the expected term of the lease,
adjusted for any remeasurement of the lease liability, and is shown net of the
accumulated depreciation and any impairment provisions.
Leases for low value assets and short-term leases are expensed to operating
profit on a straight-line basis over the term of the lease.
(j) Investments
In line with IFRS 9: Financial Instruments, financial assets designated as at
fair value through profit and loss (FVTPL) at inception are those that are
managed and whose performance is evaluated on a fair value basis. Information
about these financial assets is provided internally on a fair value basis to
the Group's key management. The equity investments which do not meet the
definitions of an associate or subsidiary remain held at fair value through
profit and loss.
(i) Assets held for sale
Non-current assets held for sale are measured at the lower of carrying amount
or fair value less costs to sell (except where the exemptions of paragraph 5
of IFRS 5 apply) and are classified as such if their carrying amount will be
recovered through a sale transaction rather than through continuing use.
This is the case when the asset is available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of such
assets and the sale is considered to be highly probable. A sale is considered
to be highly probable if the appropriate level of management is committed to a
plan to sell the asset and a further active programme to locate a buyer and
complete the plan has been initiated. Further, the asset has to be marketed
for sale at a price that is reasonable in relation to its current fair value.
In addition, the sale is expected to qualify for recognition as a completed
sale within one year from the date that it is classified as held for sale.
Assets acquired with a view for resell are classified as discontinued
operations and falls under assets held for sale and measured at fair value
less costs to sell.
An impairment loss is recognised for any initial or subsequent write-down of
the asset (or disposal group) to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair value less costs to sell of an
asset (or disposal group), but not in excess of any cumulative impairment loss
previously recognised. A gain or loss not previously recognised by the date
of the sale of the non-current asset (or disposal group) is recognised at the
date of derecognition.
Non-current assets (including those that are part of a disposal group) are not
depreciated or amortised while they are classified as held for sale. Interest
and other expenses attributable to the liabilities of a disposal group
classified as held for sale continue to be recognised.
(ii) Securities
Purchases and sales of listed investments are recognised on the trade date,
the date on which the Group commit to purchase or sell the investment. All
investments are designated upon initial recognition as held at fair value and
are measured at subsequent reporting dates at fair value, which is either the
market bid price or the last traded price, depending on the convention of the
exchange on which the investment is quoted. Fair values for unquoted
investments, or for investments for which there is only an inactive market,
are established by taking into account the International Private Equity and
Venture Capital Valuation Guidelines.
(iii) Loans and receivables
Unquoted loan stock and the deferred receivable are all classified at
amortised cost under IFRS 9 reflecting their held to collect business model.
Unquoted loan stock is classified as loans and receivables in accordance with
IFRS 9 if it meets the business model and cash characteristics tests. The
business model and cash characteristics tests require the objective of owning
the financial asset to collect the contractual cash flows of interest and
principal over the life of the asset, rather than selling prior to contractual
maturity. The financial assets are held at amortised cost, less any loss
allowance, which is measured using the expected credit loss impairment model.
This assesses the movements in both the amortised cost relating to the
interest income and in respect of loss allowances and these are reflected in
the Statement of Comprehensive Income.
(iv) Loan receivables in development projects
Loans for the development projects are held at fair value through profit and
loss (FVTPL). Fair value is calculated based on the expected cashflows from
the loan and then discounting using a synthetic credit rating and bank of
English risk-free rate. The synthetic credit rating was used due to inactive
market for these loans. Changes in fair value are recognised in profit and
loss as they arise.
(k) Acquisition and restructuring related expenses
Acquisition and restructuring related expenses are costs that are incurred as
part of business combinations and asset acquisitions, as well as restructuring
of the business post acquisition. These also includes acquisition-related
share-based payments and remuneration as they are effectively an earn out to
the sellers of businesses acquired rather than an operating expense.
The Group discloses Acquisition and restructuring related expenses separately
on the face of the Consolidated Statement of Comprehensive Income in
accordance with IAS 1, as to disclose material items separately by nature.
This has also been included as non-GAAP measure, as due to its material items
of income and expense which, because of the nature and expected infrequency of
the events giving rise to them, merit separate presentation to allow
shareholders to understand better the elements of financial performance in the
year so as to facilitate comparison with prior years and to assess better
trends in financial performance.
(l) Intangible assets
(i) Goodwill
Goodwill, representing the excess of the cost of acquisition over the fair
value of the Group's share of the identifiable assets and liabilities
acquired, is capitalised in the Statement of Financial Position. Goodwill
arising from a business combination is allocated to the cash-generating unit
(CGU) that are expected to benefit from the business combination. Following
initial recognition, goodwill is not amortised but rather tested for
impairment annually. The group test goodwill for impairment at the CGU level
in January after financial year end. Goodwill is also tested for impairment
more frequently if an event occurs or circumstances change that would indicate
(refer to below for indicators) that the carrying value of the CGU is below
its recoverable amount.
If the recoverable amount is below the CGU's carrying value, then an
impairment loss is recognised, and allocation is first to goodwill and then,
to the other assets of the CGU pro rata on the basis of the carry amount of
each asset.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill
once impaired shall not be reversed.
(ii) Management contracts and client relationships
Intangible assets, such as management contracts and client relationships
acquired as part of a business combination or separately, are capitalised
where it is probable that future economic benefits attributable to the assets
will flow to the Group and the fair value of the assets can be measured
reliably.
They are recorded initially at fair value and then amortised, if appropriate,
over their useful lives. The fair value at the date of acquisition is
calculated using discounted cash flow methodology and represents the valuation
of the net residual income stream arising from the management contracts or
distribution agreements in place at the date of acquisition. The management
contracts and client relationships are included in the Statement of Financial
Position as intangible assets. Intangible assets with a finite life have no
residual value and are amortised on a straight-line basis over their expected
useful lives as follows:
§ Client relationships arising on acquisition - five years
§ Management contracts arising on acquisition - one to 25 years depending on
the specific management contract details
(iii) Website and IT platform development
Costs associated with the development of the Group's website and IT platform
are capitalised only after technical and commercial feasibility of the asset
intend use have been established and will generate future economic benefits.
These costs are included in the Statement of Financial Position and are
amortised over the estimated useful life of four years.
(iv) Brands
Brands acquired as part of a business combination or separately, are
capitalised where it is probable that future economic benefits attributable to
the assets will flow to the Group and the fair value of the brand can be
measured reliably.
They are recorded initially at fair value and then amortised over their useful
lives. The fair value at the date of acquisition is calculated using
discounted cash flow methodology and represents the valuation of the net
residual income stream arising from the brands at the date of acquisition. The
brands are included in the Statement of Financial Position as intangible
assets. Intangible assets with a finite life have no residual value and are
amortised on a straight-line basis over their expected useful lives of five
years.
(v) Intangible from development projects
Intangibles acquired for the development projects are consents for the
development of the assets and include planning permissions and grid
connections. These assets are unique and due to its unobservable input to
determine fair value, as such, the fair value is deemed to be the
consideration paid minus the identified tangible assets. These assets are
classified as held for sale under IFRS 5 and measured under fair value less
cost to sell. Amortisation is not required under IFRS 5. Refer to critical
accounting estimates and judgements for further details.
Amortisation methods, useful lives and residual values will be reviewed at
each reporting date and adjusted if appropriate.
At each period end date, reviews are carried out of the carrying amounts of
intangible assets to determine whether there is any indication that the assets
have suffered an impairment loss. If any such indication exists, the
recoverable amount, which is the higher of value in use and fair value less
costs to sell, of the assets estimated in order to determine the extent, if
any, of the impairment loss.
If the recoverable amount of an asset is estimated to be less than its net
carrying amount, the net carrying amount of the asset or CGU is reduced to its
recoverable amount. Impairment losses are recognised immediately in the
Statement of Comprehensive Income. The Group assesses at the end of each
reporting period whether there is any indication that an impairment loss
recognised in prior periods may no longer exist or may have decreased. If any
such indication exists, the Group estimates the recoverable amount of that
asset. In assessing whether there is any indication that an impairment loss
recognised in prior periods for an asset may no longer exist or may have
decreased, the Group considers, as a minimum, the following indications:
(a) whether the asset's market value has increased significantly during the
period;
(b) whether any significant changes with a favourable effect on the entity
have taken place during the period, or will take place in the near future, in
the technological, market, economic or legal environment in which the entity
operates or in the market to which the asset is dedicated; and
(c) whether market interest rates or other market rates of return on
investments have decreased during the period, and those decreases are likely
to affect the discount rate used in calculating the asset's value in use and
increase the asset's recoverable amount materially.
(m) Financial instruments
Financial assets and financial liabilities are recognised on the Consolidated
Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets and liabilities are offset, and the net amount reported in
the Consolidated Statement of Financial Position when there is a legally
enforceable right to settle on a net basis or realise the asset and liability
simultaneously and where the Group intends to net settle.
(i) Trade and other receivables
Receivables are short term in nature. Trade and other receivables are
recognised and carried at the lower of their invoiced value and recoverable
amount. Expected credit losses are recognised in respect of each trade
receivable and remeasured at each report date based on the expected credit
losses at that time. The expected credit losses are estimated using a
provision matrix by reference to past default experience and an analysis of
the debtor's current financial position, adjusted for factors that are
specific to the debtor, general economic conditions of the industry and an
assessment of both the current as well as the forecast direction of conditions
at the reporting date, such as impact from the Ukraine war, inflation, and
interest rates.
(ii) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in
value.
(iii) Non-current receivables
Deferred receivables are recognised at the discounted value of those receipts.
(iv) Dividends payable
All dividends are recognised in the period in which they are approved by
shareholders.
(v) Bank borrowings
Bank borrowings are initially recognised at fair value, net of transaction
costs incurred. Bank borrowings are subsequently measured at amortised cost.
Any difference between the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss over the period of the
borrowings using the effective interest rate method. Fees paid on the
establishment of loan facilities are recognised as transaction costs of the
loan to the extent that it is probable that some or all of the facility will
be drawn down. In this case, the fee is deferred until the draw-down occurs.
To the extent there is no evidence that it is probable that some or all of
the facility will be drawn down, the fee is capitalised as a prepayment for
liquidity services and amortised over the period of the facility to which it
relates.
(vi) Trade and other payables
Trade payables are not interest-bearing and are stated at their nominal value.
Other payables are not interest-bearing and are stated at their nominal value
as any discounting of expected cash flows is considered to be immaterial.
(vii) Borrowing costs
Unless capitalised under IAS 23 Borrowing Costs, all borrowing costs are
recognised in the Consolidated Statement of Comprehensive Income in the period
in which they are incurred. Finance charges, including premiums paid on
settlement or redemption and direct issue costs and discounts related to
borrowings, are accounted for on an accruals basis and charged to the
Consolidated Statement of Comprehensive Income using the effective interest
method.
(viii) Contingent consideration
Contingent consideration arises when settlement of all or any part of the cost
of a business combination or other acquisition, for example management
contract, is contingent based on specified future events occurring. It is
stated at fair value at the date of acquisition, which is determined by
discounting the estimated amount due in the future back to present value at
that date. Fair value movements in the year are recognised in the income
statement.
Estimates are required in respect of the amount of contingent consideration
payable on acquisitions, which is determined according to formulae agreed at
the time of the business combination, and normally related to the future
earnings, revenues or fund raising targets of the acquired business. The
Directors review the amount of contingent consideration likely to become
payable at each period end date, the major assumption being the level of
future profits of the acquired business. Contingent consideration payable is
discounted to its fair value in accordance with applicable International
Financial Reporting Standards.
(n) Pensions
The Group operates defined contribution pension schemes where payments to such
schemes for employees are charged against profits in the year in which they
are incurred.
(o) Share-based payments
The Group issued equity-settled share-based payments to certain Directors and
employees. Equity-settled share-based payments are measured at fair value
(excluding the effect of non-market based vesting conditions) at the date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of the shares that will eventually vest
and adjusted for the effect of non-market based vesting conditions.
Fair value is measured using a Monte-Carlo option pricing model for schemes
with market based vesting conditions and Black Scholes for non-market based
vesting condition. The expected life used in the model has been adjusted,
based on management's best estimate, for the effect of non-transferability,
exercise restrictions and behavioural considerations.
A liability equal to the portion of the goods or services received is
recognised at the current fair value determined at each period end date for
cash-settled share-based payments.
(p) Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein in accordance with IFRS
10. Non-controlling interests consist of the amount of those interests at the
date of the original business combination and for acquisitions post 3 October
2010 following adoption of IAS 27 Consolidated and Separate Financial
Statements (Revised 2008), the non-controlling interests' share of changes in
equity since the date of the combination.
(q) Business combinations
The Group recognises business combinations when it considers that it
has obtained control over a business, which could be an entity or separate
business within an entity (for example acquiring management contracts and
hiring the team to service those contracts). The fair value of the assets
acquired, and the liabilities assumed from the business combination are
assessed at acquisition. The fair value of the consideration paid to the
sellers of the business is assessed, with particular reference to the
classification of payments to employees that could be considered remuneration
rather than consideration for a business. Consideration paid in excess of the
acquisition date fair value of net tangible and identifiable intangible assets
is known as goodwill. Refer to goodwill in note I for details.
(r) Critical accounting estimates and judgements
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may ultimately
differ from those estimates.
Key sources of estimates uncertainty
The estimates and assumptions that have significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are those used to determine:
(i) Valuation of contingent consideration
(ii) Burlington RE Property Management Limited business acquisition -
valuation of management contracts
Key Judgements
These are as follows:
(iii) Revenue recognition for performance fees and fund-raising fees
(iv) Treatment of battery storage development companies (DevCo)
(v) Accounting for investment in associates - Environment Bank Limited
(vi) Consolidation assessment of funds managed and controlled by the
Group
(vii) Impairment review for Goodwill
(viii) Valuation of unlisted investments
(i) Valuation of contingent consideration
TradeRisks
The TradeRisks contingent consideration could total a maximum of £6.0
million, payable in cash to the sellers based on the following:
§ 0.5% of funds raised payable in three years, with maximum amount capped at
£3.0 million;
§ any realised synergies payable in three years, capped at £1.0 million;
and
§ £2.0 million payable within six months post-completion for any inventory
true-up.
The fair value of the contingent consideration has been estimated using
estimated outcomes, the probability of those outcomes and discounting this at
7.5%. This is cash settled and will therefore be recognised as a liability on
the balance sheet and the fair value assessed each reporting period. Further
details and potential outcomes are provided in note 5.
Mobeus
The Mobeus VCT business contingent consideration is based on the Mobeus VCTs
maintaining the VCT investment advisory agreements with Gresham House over the
three years post acquisition from October 2021 to October 2024 (maximum £8.9
million payable as contingent consideration) and achieving certain AUM growth
targets over these three-year period (maximum £0.8 million).
In financial year 2022, £0.8m of the deferred consideration was paid. The
fair value of the contingent consideration value as at 31 December 2022 is
£9.8m, this is based on an assumption that there is reasonable likelihood of
the business maintaining the VCT contracts and this amount has therefore been
discounted for the time value of money. The contingent consideration is also
based on estimate of the business achieving the AUM targets for the Mobeus VCT
funds and has been discounted using the appropriate WACC at 12%. Further
details and potential outcomes are provided in note 5.
Appian
The Appian contingent consideration is driven by applying a multiple of 1.4x
to the estimated earnings to be delivered for the year to 31 December 2022 and
31 December 2023, as well as AUM targets. The contingent consideration was
being reduced to £1.0 million as at 31 December 2022. This is based on actual
performance in financial year 2022 and a reduction in earnings and AUM
estimate for financial year 2023 based on latest budget. This outcome could
range from €0.3 million deferred consideration up to the estimated €1.1
million. Further details and potential outcomes are provided in note 5.
Burlington
The Burlington contingent consideration is calculated as 40% of 6.5 times the
average EBITDA in three years ending 31 December 2024. The fair value of
£0.9m for the contingent consideration has been estimated at the date of
acquisition using estimated outcomes and discounting this at 8.0%. As at 31
December 2022, management deemed this estimate has not changed and performance
to continue as expected. Further details and potential outcomes are provided
in note 5.
(ii) Burlington RE Property Management Limited business acquisition -
valuation of management contracts
The acquisition of Burlington RE Property Management Limited in March 2022 is
classified as a business combination under IFRS 3, Business Combinations. The
acquisition involved the purchase of 100% of the share capital of Burlington
RE Property Management Limited, which includes its management contracts.
The valuation of the management contracts represents an estimation of the
expected present value of the profitability of those contracts. The management
agreements are therefore required to be fair valued at acquisition. This has
been valued using a discounted cash flow model, with assumptions regarding
length of contract, appropriate costs and appropriate discount rate applied.
Contributory asset charges have also been applied to determine the fair value
of the management contract. Deferred tax liabilities have also been recognised
to reflect the temporary timing differences as the management contracts are
amortised over their useful lives. Further details and potential outcomes are
provided in note 5.
(iii) Revenue recognition for performance and fundraising fees
The revenue recognition of the Group is driven by asset management fees, which
are recognised in line with the investment management or advisory agreements
in place with the appropriate funds. These are typically based on the
committed capital of Limited Partnership funds, or Net Asset Values (NAV) for
listed vehicles managed or advised by the Group. The NAV is typically the last
audited or publicly available NAV announced by the Board of these companies
and is therefore independently approved. As a result there is limited
uncertainty or judgement in the amount of revenue to be recognised.
However, judgement in timing of revenue recognition is required for
performance and fundraising fees and revenue is only recognised when there is
limited uncertainty in the amount or revenue to be recognised.
Performance fees are recognised only when the Group is entitled to receive the
performance fee per the management contract. This is on achievement of the
hurdle rate as set out in the management or advisory agreements and the
outcome is known as it is based on the audited NAV of the fund. The Mobeus
Income and Growth 2 VCT plc NAV was ahead of the hurdle rate at 30 September
2022 and therefore paid a Performance fee to Gresham House Asset Management
Limited during 2022.
Fundraising fees are recognised as a percentage of funds raised, with
fundraising being the key performance obligation. The fundraising relates to
new share offers in 2022 by the VCTs managed by the Group. Judgement is
applied at the end of the period and the fundraising fees accrued are based on
the shares allotted by the VCTs at the period end.
(vi) Treatment of battery storage development companies
IFRS 5 - Asset held for sale
The Group has invested in the development of battery storage projects (DevCo
Projects), which are part of the exclusive pipeline to be sold to Gresham
House Energy Storage Fund plc (GRID) when operational. The DevCo Projects are
held in separate SPVs, which the Group entity Devco Limited owns 100% of the
equity in, and the Group has also lent funds for the development of the
projects.
Judgement is required on the five key considerations in the accounting
treatment of the development companies:
a) Control (IFRS 10) - Devco Limited holds the majority of the equity in the
DevCo Projects and has also loaned capital to fund the development of the
DevCo Projects. Devco Limited is considered in control of the DevCo Projects
and therefore has consolidated them in the Group financial statements.
b) Associates (IAS 28) - No DevCo Projects were held as associates at 31
December 2022 where the Group had a significant influence holding (greater
than 20%, but less than 50%)
c) Classification of the assets in each DevCo Project - the SPVs are
developing battery storage facilities which are classified as non-current
assets unless all the IFRS 5 criteria are met. Where the Group has acquired
the assets with a view to resale and the conditions under IFRS 5 are met, it
is classified as a disposal group and discontinued operations.
d) Assets held for sale (IFRS 5) and loss of control - the sale of the
DevCo Projects (Shilton Lane, Arbroath, Stairfoot) during the period has been
treated as a loss of control transaction under IFRS 10 resulting in a gain on
sale being presented net in the Statement of Comprehensive Income. Lister,
Monets and Hazelboro meet the conditions under IFRS 5, as such are treated as
disposal groups held for sale under IFRS 5.
e) Borrowing costs (IAS 23) - the DevCo Projects have interest payments
relating to the amounts lent by GRID to fund the acquisition of the battery
assets at the project company level. The DevCo Projects have capitalised
finance costs per IAS 23 Borrowing Costs as the characteristics of the
development of the projects (such as not generating revenues until
operational, loans being procured for the sole purpose of developing the
projects and the projects taking a long time to get ready for intended sale)
permit this. The capitalisation rate used was the weighted average of the
borrowing costs applicable to all relevant borrowings outstanding during 2022.
Asset vs business acquisition
Judgement is required to determine if the DevCo Projects are asset or business
acquisition as IFRS 3 requires us to determine whether assets acquired, and
any liabilities assumed constitute a business. If the assets and liabilities
are not considered to be a business, then the transaction should be accounted
for as asset acquisition.
Business consists of inputs and processes applied to those inputs that have
the ability to contribute to the creation of outputs. All three elements
must exist to be considered a business. Management performs an assessment on
each project to determine if those three elements exist at the date of
acquisition. Only when inputs, processes and outputs exist would the
acquisition be treated as a business acquisition and be accounted for under
IFRS 3 'business combination'. Otherwise it is treated as an asset
acquisition.
(vii) Accounting for investment in associates - Environment Bank Limited
(EBL)
On 7 May 2021, the Group acquired a 50% investment in EBL, the habitat bank
development company. The Group has also entered into an option agreement with
Gresham House BSI Infrastructure LP and Gresham House British Sustainable
Infrastructure Fund II LP (BSIF funds) for the BSIF funds to acquire 25% from
the Group. The Group does not have the ability to control the board of EBL
through majority voting rights or the ability to appoint or remove the
majority of the board of directors. The Director's assessment is that the
Group can exercise significant influence over EBL and has treated it as an
associate.
The BSIF funds exercised the option to acquire 25% of EBL from the Group in
December 2022, leaving the Group with a 25% investment in EBL, which continues
to be treated as an associate.
(viii) Consolidation assessment of funds managed and controlled by the Group
Judgement is required when assessing whether the Group controls funds that are
managed on behalf of third parties, the Group is required to assess whether it
has power over these funds; exposure, or rights, to variable returns from its
involvement with the fund; and has the ability to use its power over the funds
to affect the amount of the Group's returns. This can also be considered when
the Group is acting in its capacity as agent or principal. An agent is acting
on behalf of third-party investors, whereas a principal is acting for its own
benefit.
IFRS 10 provides guidance for considering the assessment of whether fund
managers are acting as agent or principal, and therefore whether the Group
should consolidate the funds that it manages or not. The key considerations
when assessing this are decision making authority of the fund manager, rights
held by third parties, remuneration and exposure to returns. The following
provides further detail on the Directors' assessment of control over the funds
that are managed by Gresham House Asset Management Limited (GHAM), the FCA
regulated entity within the Group and whether the Company or its subsidiaries
are acting as agent or principal:
Fund Manager/ Removal rights of investors Remuneration basis Gresham House holding Agent/ Accounting treatment
adviser principal
EBL No n/a n/a 25% Agent Associate
GHF FF LP Yes No Market norm 71% Principal Consolidate
GHFF LP Yes Substantive Market norm 0% Agent No consolidation
GRID Yes Substantive Market norm - Agent No consolidation
Residential Secured Income plc Yes Substantive Market norm <2% Agent No consolidation
BSIF Yes Substantive Market norm <1% Agent No consolidation
BSIF II LP Yes Substantive Market norm <1% Agent No consolidation
SPE LP Yes Substantive Market norm 0% Agent No consolidation
Baronsmead VCTs Yes Substantive Market norm 0% Agent No consolidation
Mobeus VCTs Yes Substantive Market norm 0% Agent No consolidation
Strategic Equity Capital plc Yes Substantive Market norm <4% Agent No consolidation
Micro Cap Fund Yes Substantive Market norm 0% Agent No consolidation
Multi Cap Income Fund Yes Substantive Market norm 0% Agent No consolidation
Gresham House Renewable Energy VCTs Yes Substantive Market norm 0% Agent No consolidation
Forestry LP Funds Yes Substantive Market norm 0% Agent No consolidation
New Energy LP Funds Yes Substantive Market norm 0% Agent No consolidation
Irish Strategic Forestry Fund LP Yes Substantive Market norm 5% Agent No consolidation
Gresham House Forestry Fund LP (GHFF LP) is managed by GHAM. GHAM is exposed
to variable returns through its management fee and acquisition fees, as well
as the Company's limited partnership interest in Gresham House Forestry
Friends and Family LP (GHF FF LP), a vehicle which in turn is a limited
partner in GHFF LP.
The limited partners of GHFF LP have the ability to remove the manager without
cause, by obtaining limited partner special consent. There are a number of
limited partners that would be required to co-ordinate to remove the manager.
The Directors' assessment of this right indicates that the manager is acting
as agent for GHFF LP and therefore should not consolidate GHFF LP.
The Directors' assessment of GHF FF LP, however, indicates that it is in a
controlling position with a 71% holding and therefore should consolidate this
in the Group financial statements.
The acquisition of TradeRisks Limited (TradeRisks) in March 2020 included the
acquisition of shares in Residential Secured Income plc (ReSI plc), which is
now managed by the Group. At the end of 2022 the Group held less than 2% of
the ordinary shares in ReSI plc. The Directors' assessment indicates that GHAM
is acting as agent for ReSI plc and therefore should not consolidate ReSI plc.
Gresham House Energy Storage Fund plc (GRID) is managed by GHAM and the
Company sold its direct investment in GRID in 2021. The assessment of whether
GHAM is acting as agent or principal requires assessing the other entities and
individuals that are connected to Gresham House and their investment in GRID.
BSIF has a 5% investment in GRID, and a control assessment hash concluded that
GHAM does not control BSIF and therefore should not be included in the
proportion of GRID that is under the control of GHAM.
Gresham House British Strategic Investment Fund (BSIF Strategy), which
comprises two sub-funds, Gresham House BSI Infrastructure LP and Gresham House
BSI Housing LP, is managed by GHAM. The manager is exposed to variable returns
through its management fee and has committed £0.5 million to each sub-fund,
making up less than 1.0% of committed capital. While exposed to the variable
returns as an investor, this is not considered a material exposure. The
limited partners of the BSIF Strategy also have the ability to remove the
manager without cause, one year after the final close of the BSIF sub-funds
with a special resolution. The Directors' assessment of this right indicates
that the manager is acting as agent for the BSIF Strategy and therefore should
not consolidate the BSIF Strategy.
BSIF II LP has the same assessment as BSIF LP, with the manager acting as
agent and therefore should not consolidate BSIF II LP.
Gresham House Strategic Public Equity LP (SPE LP) is managed by GHAM, a
subsidiary of Gresham House plc. GHAM in its role as investment adviser is
exposed to variable returns through its management fee, however the Company is
not directly invested in SPE LP. The limited partners of SPE LP have the
ability to remove the manager without cause, one year after the final close of
SPE LP on obtaining limited partner special consent. The Directors' assessment
indicates that GHAM is acting as agent for SPE LP and therefore should not
consolidate SPE LP.
Irish Strategic Forestry Fund LP (ISFF) is managed by GHAM. The manager is
exposed to variable returns through its management fee and has committed
€1.0 million to the fund, making up c5% of committed capital at first close.
While exposed to the variable returns as an investor, this is not considered a
material exposure. The limited partners of the ISFF fund also have the ability
to remove the manager without cause. The Directors' assessment of this right
indicates that the manager is acting as agent for the ISFF and therefore
should not consolidate the ISFF fund.
The remaining funds of the Baronsmead VCTs, Mobeus VCTs, Gresham House
Renewable Energy VCTs, the LF Gresham House UK Micro Cap Fund (Micro Cap
Fund), the LF Gresham House UK Multi Cap Income Fund (Multi Cap Income Fund)
and Strategic Equity Capital plc (SEC) are managed by GHAM, however are not
invested in by the Group (or have less than 4% holding). The Board has
therefore concluded that the Group is acting as agent and therefore should not
consolidate these funds.
(v) Impairment review for Goodwill and Management Contracts from previous acquisitions
At each reporting date, the Group applies judgement to determine whether there is any indication that the management contracts from previous acquisitions may be impaired. If any indication exists a full assessment is undertaken, whilst Goodwill is assessed on an annual basis. Should the review of goodwill or management contracts indicate that the carrying value exceeds the estimated recoverable amount, the assets are written down to its recoverable.
Goodwill impairment testing
Goodwill impairment assessment is based on the expected future returns of the relevant CGU as a whole. Impairment is assessed for the smallest identifiable CGU. Impairment arises when the recoverable amount of the CGU is lower than its net carrying value. CGUs are defined as the collection of management contracts generating revenues which have a clearly allocated cost base and relate to the businesses that have been acquired by the Group. The CGUs are the businesses formerly known as Aitchesse, Hazel Capital, FIM, Livingbridge VCT business, Mobeus VCT business, TradeRisks, Appian Asset Management and Burlington RE Property Management.
Goodwill has been assessed for each business acquired for impairment as at 31 December 2022. This assessment includes an analysis of the recoverable amounts of the CGUs by using value in use based on expected cash flow models from the specific businesses based on expected fundraising and other growth factors as well as the associated cost of delivering the planned revenues. The cash flows projections include estimates and assumptions to align with the Group's budget and forecasts.
A discount rate or weighted average cost of capital (WACC) derived from the capital asset pricing model (CAPM) has been applied to the cash flows to determine an estimate of the fair value of the business, which is used to assess whether goodwill impairment arises. The recoverable amounts are compared to the goodwill on the Statement of Financial Position and other intangible assets and acquired assets within the CGU. Where the recoverable amounts less other intangible and tangible assets is greater than the goodwill amount on the Statement of Financial Position, no impairment is recognised. There were no indications of impairment against all goodwill balances of the Group as at 31 December 2022 (2021: No impairment). Refer to note 14 for further details.
(vi) Valuation of unlisted investments
The Group invests in unlisted investments, typically in Limited Partnerships
that the Group manages and other unlisted investments with the aim of growing
the asset management business. The valuation of these investments is based on
the latest available fund information, which his typically the prior quarters
fund report. The funds perform year end valuations at the same time as the
Group is preparing its annual results so the draft valuations, where available
are reviewed to assess whether any material difference in valuation should be
updated for.
(s) Foreign currency
Assets and liabilities in foreign currencies are translated into
Sterling at the rates of exchange ruling at the Statement of Financial
Position date. Transactions in foreign currencies are translated into
Sterling at the rate of exchange ruling at the date of transaction. Exchange
differences are taken into account in arriving at the operating result.
Exchange gains and losses arising on the retranslation of monetary financial
assets are treated as a separate component of the change in fair value and
recognised in profit or loss. Exchange gains and losses on non-monetary OCI
financial assets form part of the overall gain or loss in OCI recognised in
respect of that financial instrument.
On consolidation, the results of overseas operations are translated into
Sterling at rates approximating to those ruling when the transactions took
place. All assets and liabilities of overseas operations, including goodwill
arising on the acquisition of those operations, are translated at the rate
ruling at the reporting date. Exchange differences arising on translating the
opening net assets at opening rate and the results of overseas operations at
actual rate are recognised in other comprehensive income and accumulated in
the foreign exchange reserve.
(t) Treasury shares
Consideration paid/received for the purchase/sale of treasury shares is
recognised directly in equity. The cost of treasury shares held is presented
as a separate reserve (the "treasury share reserve"). Any excess of the
consideration received on the sale of treasury shares over the weighted
average cost of the shares sold is credited to retained earnings.
(u) Gresham House Employee Benefit Trust (GH EBT)
As the Company is deemed to have control of the GH EBT, it is treated as a
subsidiary and consolidated for the purposes of the Consolidated Financial
Statements. The GH EBT's assets (other than investments in the Company's
shares), liabilities, income and expenses are included on a line-by-line basis
in the Consolidated Financial Statements. The GH EBT's investment in the
Company's shares is deducted from equity in the consolidated statement of
financial position as if they were treasury shares.1
Income
2022 2021
£'000 £'000
Asset management income
Asset management income 79,287 62,162
79,287 62,162
Dividend and interest income
Dividend income - listed UK 305 173
Interest receivable: banks 28 8
Other 198 409
531 590
Other operating income
Other income - 15
DevCo income** - 293
Non-core operating income* 2,523 1,140
2,523 1,448
Performance fees
Performance fees 1,015 6,163
1,015 6,163
Total income 83,356 70,363
* Non-core operating income relates to income earned from Residential Property
Management Limited and Gresham House O&M Limited for property services,
which are not considered core asset management services to the Group.
** DevCo income represents the net operating income in the year from battery
storage projects prior to projects being sold to GRID.
Gross core revenue as disclosed in the adjusted operating profit metric:
2022 2021
£'000 £'000
Asset management income - core operations 79,287 62,162
Dividend and interest income 531 590
Other operating income - 308
Dividend income from associates - 285
Gross core revenue 79,818 63,345
2 Segmental reporting
The Board and management team of the Company have organised and reported the
performance of the business by Real Assets, Strategic Equity and Central
segments. These have evolved as the business has grown to become a specialist
asset manager.
Real Assets includes the Forestry, New Energy & Sustainable Infrastructure
and Real Estate divisions.
Strategic Equity includes the Public Equity and Private Equity divisions.
Central includes the general income created and costs incurred by the central
functions of the business that are not directly linked to Real Assets or
Strategic Equity, and includes management activities such as strategic
activities, corporate development and costs associated with corporate
governance and management.
The majority of activity and revenue in 2022 are derived from operations
within the United Kingdom, however, the Group is growing internationally with
activity in Ireland and Australasia in 2022.
For the year ended 31 December 2022 Real Assets Strategic Equity Central Consolidated
Gross core income £'000 £'000 £'000 £'000
Asset management income 47,384 31,903 - 79,287
Interest income 29 - 197 226
Dividend income 160 - 145 305
Other operating income - - - -
Dividend income from associates - - - -
Rebates, distribution costs and fundraising costs* (57) (2,486) - (2,543)
Net core income 47,516 29,417 342 77,275
Segment expenses (23,274) (10,056) (16,305) (49,635)
Finance costs - - (560) (560)
Adjusted operating profit/(loss) 24,242 19,361 (16,523) 27,080
Net performance fees - - - -
Net DevCo gains - - 576 576
Net non-core activities 1 - - 1
Adjusted operating profit including performance fees and realised gains on 24,243 19,361 (15,947) 27,657
investments
Acquisition and restructuring related costs (3,309)
Depreciation and amortisation (12,403)
Profit on disposal of property, plant and equipment 44
Share of associate's profit 1,052
Profit on disposal of associate (101)
Share-based payments relating to acquisitions (318)
Acquisition related remuneration (1,600)
Loss on investments at fair value (761)
Movement in fair value of contingent consideration 3,514
Profit from continuing operations 13,775
*Rebates, distribution costs and fundraising costs are presented within
administrative overheads cost in the Statement of Comprehensive income but
presented as part of Net core income when presenting adjusted operating profit
as these are expenses paid to deliver core income by the Group.
For the year ended 31 December 2021 Real Assets Strategic Equity Central Consolidated
Gross core income £'000 £'000 £'000 £'000
Asset management income 38,947 23,215 - 62,162
Interest income 406 7 4 417
Dividend income 146 27 - 173
Other operating income 293 - 15 308
Dividend income from associates* 160 125 - 285
Rebates, distribution costs and fundraising costs** (142) (1,594) - (1,736)
Net core income 39,810 21,780 19 61,609
Segment expenses (17,562) (5,644) (17,922) (41,128)
Finance costs - - (311) (311)
Adjusted operating profit/(loss) 22,248 16,136 (18,214) 20,170
Net performance fees - 1,714 - 1,714
Net DevCo gains 1,773 - - 1,773
Net non-core activities 38 - - 38
Adjusted operating profit including performance fees and realised gains on 24,059 17,850 (18,214) 23,695
investments
Acquisition and restructuring related costs (3,215)
Depreciation and amortisation (9,475)
Loss on disposal of property, plant and equipment -
Share of associate's profit* 4,670
Profit on disposal of associate 461
Share-based payments relating to acquisitions (615)
Acquisition related remuneration (452)
Profits on investments at fair value 2,910
Movement in fair value of contingent consideration (1,659)
Profit from continuing operations 16,320
*Share of associate's profit of £4,670,000 excludes dividend income received
in the year of £285,000.
**Rebates, distribution costs and fundraising costs are presented within
administrative overheads cost in the Statement of Comprehensive income but
presented as part of Net core income when presenting adjusted operating profit
as these are expenses paid to deliver core income by the Group.
During the year the Group had no customers accounting for more than 10% of the
Group's revenue (2021: no customer).
Other information:
31 December 2022 Real Assets Strategic Equity Central Consolidated
£'000 £'000 £'000 £'000
Segment assets 94,416 58,865 59,856 213,137
Segment liabilities (13,574) (5,867) (42,558) (61,999)
80,842 52,998 17,298 151,138
Capital expenditure - - 410 410
Depreciation and amortisation 2,960 8,275 2,211 13,446
Non-cash expenses other than depreciation - - 3,566 3,566
Goodwill included within segment assets 18,338 30,897 - 49,235
31 December 2021 Real Assets Strategic Equity Central Consolidated
£'000 £'000 £'000 £'000
Segment assets 75,856 78,460 66,001 220,317
Segment liabilities (20,909) (22,613) (29,258) (72,780)
54,947 55,847 36,743 147,537
Capital expenditure 1 54 2,985 3,040
Depreciation and amortisation 2,828 5,549 1,098 9,475
Non-cash expenses other than depreciation - - 3,788 3,788
Goodwill included within segment assets 17,552 31,244 - 48,796
3 Operating costs
Administrative overheads comprise the following:
2022 2021
Core activities Non-core activities Total Total
£'000 £'000 £'000 £'000
Directors' emoluments (excluding benefits in kind and share-based payments) 1,792 - 1,792 2,982
Auditor's remuneration* 734 - 734 360
Amortisation 11,205 43 11,248 8,516
Depreciation 1,136 19 1,155 959
Profit on disposal of assets (44) - (44) -
Wages and salaries 31,536 1,371 32,907 27,357
Social security costs 5,113 127 5,240 4,817
Share-based payments 3,566 - 3,566 3,788
Other operating costs 14,102 962 15,064 11,337
69,140 2,522 71,662 60,116
Staff costs (including Directors' emoluments) were:
Wages, salaries and fees 32,020 1,300 33,320 30,275
Social security costs 5,113 127 5,240 4,817
Pension costs 1,309 70 1,379 1,038
38,442 1,497 36,130
39,939
*A more detailed analysis of auditor's remuneration is as follows: 2022 2021
£'000 £'000
Audit fees Company and consolidated financial statements 88 40
Audit fees - audit of the Company's subsidiaries 634 298
Non audit services - CASS reporting to the FCA 12 22
734 360
The Audit Committee reviews the nature and extent of non-audit services to
ensure that independence is maintained.
The average number of persons employed by the Group, including the Executive
Directors, was 236 (2021: 173), including 36 employees relating to non-core
activities (2021: 22). The Company has no employees.
4 Directors' emoluments
The Directors who served in the year received the following emoluments:
Year ended 31 December 2022 Basic salary Benefits Cash bonuses Bonus share matching (i) Pensions (ii) 2022
£'000 £'000 £'000 £'000 £'000 £'000
Executive:
Tony Dalwood 398 3 672 100 40 1,213
Kevin Acton 265 2 260 100 27 654
Non-Executive:
Anthony Townsend 60 - - - - 60
Rachel Beagles 35 - - - - 35
Richard Chadwick (iii) 15 - - - - 15
Gareth Davis 35 - - - - 35
Sarah Ing (iv) 52 - - - - 52
Simon Stilwell 60 - - - - 60
Total 920 5 932 200 67 2,124
i. The Executive Directors have elected to reinvest part of their bonuses
in the Company's ordinary shares through the Bonus Share Matching plan.
ii. Payments have been made in lieu of contribution towards pension
scheme.
iii. Richard Chadwick retired from the Board at the 2022 AGM in May
2022.
iv. Sarah Ing acted as Richard Chadwick's alternate from September 2021
until his retirement at the conclusion of the 2022 AGM whereupon she was
appointed as a Director and Chair of the Audit Committee, and received a
director's fee of £28,333 in June 2022.Simon Stilwell received a fee of
£20,000 for additional Board projects undertaken in the year.
Year ended 31 December 2021 Basic salary Benefits Cash Bonuses Bonus share matching (i) Pensions (ii) 2021
£'000 £'000 £'000 £'000 £'000 £'000
Executive:
Tony Dalwood 386 3 866 100 39 1,394
Kevin Acton 258 2 351 100 26 737
Non-Executive:
Anthony Townsend 60 - - - - 60
Rachel Beagles 35 - - - - 35
Richard Chadwick 40 - - - - 40
Gareth Davis 35 - - - - 35
Sarah Ing (iii) - - - - - -
Simon Stilwell 40 - - - - 40
Total 854 5 1,217 200 65 2,341
i. The Executive Directors have elected to reinvest part of their
bonuses in the Company's ordinary shares through the Bonus Share Matching
plan.
ii. Payments have been made in lieu of contribution towards pension
scheme.
iii. Sarah Ing has joined the Board as an alternate Director and was
appointed as a Director at the conclusion of the 2022 AGM. No fees were earned
in the year to 31 December 2021.
Long-term incentive plans and share ownership of Executive Directors
The Executive Directors held the following ordinary shares in the Company and
have the following equity awards outstanding as at 31 December 2022 (number of
ordinary shares):
Number of ordinary shares (iv) Ordinary shares held (i) Bonus share matching (ii) 2019 Bonus share matching (ii) 2020 Bonus share matching (ii) 2021 Bonus share matching (ii) 2022 2020 LTIP Total
(iii)
Awarded 2020 2021 2022 2023 2020
Vesting date 2023 2024 2025 2026 2023/24
Tony Dalwood 935,303 34,416 12,296 11,372 13,252 448,332 1,454,971
Kevin Acton 261,798 - 12,296 11,372 13,252 227,614 526,332
i. Includes shares held directly, by family members and deferred shares
purchased under the bonus share matching plan as at 31 December 2022.
ii. Bonus share matching 2019, 2020, 2021 and 2022 are the result of
the Executive Directors electing to reinvest their cash bonus into Gresham
House plc shares, which subject to achieving hurdles could result in the
number of shares above being awarded on the vesting date. The number of shares
disclosed above reflects the matching shares that would be received should the
hurdles be achieved.
iii. The value of the 2020 LTIP as at 31 December 2022, based on the
creation of £69.4 million of shareholder value, and assuming it vested and
had achieved all performance hurdles, generates the gross number of shares.
iv. These share awards are disclosed before tax.
Ordinary shares held and equity awards outstanding as at 31 December 2021
(number of ordinary shares):
Number of ordinary shares (iv) Ordinary shares held (i) 2016 LTIP - D shares Bonus share matching (ii) 2018 Bonus share matching (ii) 2019 Bonus share matching (ii) 2020 Bonus share matching (ii) 2021 2019 LTIP 2020 LTIP Total
(iii)
Awarded 2019 2019 2020 2021 2022 2019 2020
Vesting date 2021 2022 2023 2024 2025 2022 2023/24
Tony Dalwood 918,737 - - 34,416 12,296 11,372 68,943 617,990 1,663,754
Kevin Acton 249,889 70,575 6,737 - 12,296 11,372 55,154 313,748 719,771
i. Includes shares held directly, by family members and deferred
shares purchased under the bonus share matching plan.
ii. Bonus share matching 2018, 2019, 2020 and 2021 are the result of
the Executive Directors electing to reinvest their cash bonus into Gresham
House plc shares, which subject to achieving hurdles could result in the
number of shares above being awarded on the vesting date. The number of shares
disclosed above reflects the matching shares that would be received should the
hurdles be achieved.
iii. The value of the 2020 LTIP as at 31 December 2021, based on the
creation of £112.8 million of shareholder value, and assuming it vested and
had achieved all performance hurdles, generates the gross number of shares.
iv. These share awards are disclosed before tax.
Long-term incentive plans vested or exercised in the year to 31 December 2022:
Bonus Share Matching 2018 Shares received (i) Total shares received in 2022 2019 LTIP cash settled (ii) 2016 LTIP cash settled (iii) Total cash settled from LTIPs in 2022
Tony Dalwood - - £563,105 - £563,105
Kevin Acton 7,247 7,247 £450,481 £702,080 £1,152,561
i. The Bonus Share Matching plan from 2018 fully vested in March 2022,
with Kevin Acton receiving the deferred shares and matching shares under the
plan and the figures shown above are net of income tax liabilities.
ii. The 2019 LTIP fully vested and was exercised during 2022 and was
settled in cash. The figures shown is gross and tax was deducted via payroll.
iii. The 2016 LTIP D Shares vested and were exercised in 2022. This was
cash settled and paid gross.
Long-term incentive plans vested or exercised in the year to 31 December 2021:
2018 LTIP shares received (i) Bonus share matching 2017 Shares received (ii) Total shares received in 2021 GHS performance fees Total cash settled from LTIPs in 2021
Tony Dalwood 58,166 - 58,166 £552,599 £552,599
Kevin Acton 36,192 5,161 41,353 £94,132 £94,132
i. The 2018 LTIP fully vested and was exercised during 2021 and is the net
number of shares delivered to the individuals.
ii. The Bonus Share Matching plan from 2017 fully vested in May 2021, with
Kevin Acton receiving the deferred shares and matching shares under the plan
and the figures shown above are net of income tax liabilities.
The Directors are considered to be the Group's only key management personnel.
Employer's National Insurance contributions in respect of the Directors for
the year were £493,000 (2021: £505,000).
5 Business combinations
a) Burlington RE Property Management Limited
On 15 March 2022 the Group acquired 100% of the issued share capital of
Burlington RE Property Management Limited (Burlington), a company registered
in Ireland. Burlington is one of Ireland's premier independent commercial
property asset and development management companies, and manages or advises
assets of €340 million as at 31 December 2021.
The Acquisition forms part of Gresham House's ongoing international expansion
plans, as set out in its five-year strategy (GH25) and is the Group's second
acquisition in Ireland, following the completion of the Appian Asset
Management transaction in 2021. It consolidates the existing relationship
between the two businesses to achieve long-term alignment.
The fair value of the identifiable net assets acquired, and the consideration
paid under IFRS 3 are as follows:
Net book value Adjustments Fair value
£'000 £'000 £'000
Tangible fixed assets 2 - 2
Cash 390 - 390
Trade and other receivables 267 - 267
Trade and other payables (328) - (328)
Management contracts - 1,511 1,511
Goodwill - 742 742
Deferred tax liability - (189) (189)
Total identifiable net assets 331 2,064 2,395
Under the terms of the acquisition agreement, the fair value of the
consideration paid to the vendors of Burlington was:
£'000
Cash 1,027
Shares - 73,177 shares in Gresham House plc valued at 855.0p per share on 15 626
March 2022
Total initial consideration 1,653
Contingent consideration 742
Total consideration 2,395
The consideration shares were admitted to trading on AIM on 21 March 2022.
Contingent consideration
Contingent consideration with an expected fair value of €1.0 million will be
payable to the sellers within 20 business days of publication of the accounts
for the year ending 31 December 2024. This is calculated as 40% of 6.5 times
the average EBITDA in three years ending 31 December 2024.
The fair value of the contingent consideration has been estimated at the date
of acquisition using estimated outcomes, the probability of those outcomes and
discounting this at 8.0%. Up to 50% of the contingent consideration may be
settled in Gresham House plc shares at the Company's discretion. As such this
will be recognised as a liability on the balance sheet and the fair value
assessed each reporting period. The fair value at the time of acquisition was
calculated as £742k. The potential undiscounted amount of all future payments
that the Group could be required to make under the contingent consideration
arrangement is between €nil and €1.0 million.
Revenue and profits of Burlington
Burlington was acquired on 15 March 2022. The Group has recognised the
following revenues and costs in respect of Burlington for the period ended 31
December 2022:
€'000
Revenue 1,650
Profit before tax 170
Prior to acquisition by the Group, Burlington had a 31 December year end. The
results for the most recent audited reporting period prior to acquisition were
to 31 December 2021. Had Burlington been part of the Group for the entire
reporting period the following sums would have been consolidated:
€'000
Revenue 2,071
Profit before tax 280
Goodwill
Goodwill arises due to the excess of the fair value of the consideration
payable over the fair value of the net assets acquired. It is mainly
attributable to the skills of the team acquired, the synergies expected to be
achieved from the acquisition and the business development potential. Goodwill
arising on the Burlington acquisition is not deductible for tax purposes.
Fair value
The fair value of the management contracts has been estimated using a
discounted cash flow model. The estimated cash flows have been valued at a
discount of 8.0% and the management contracts are amortised over eight years.
b) DevCo Entities
The Group acquired the share capital and 100% of the voting rights in the
following companies during the year:
Company acquired Acquisition date Disposal date
Hazelboro Limited 31 May 2022
UK Battery Storage Limited 4 March 2022 30 June 2022
Stairfoot Limited
5 May 2022 22 December 2022
GreenGridPower Limited 21 April 2022 14 October 2022
The fair value of the assets acquired, and liabilities assumed on acquisition
are as follows:
Hazelboro Stairfoot GreenGrid Power UK Battery Storage
£'000
Identifiable net assets 2,453 1,819 3,482 2,686
Total consideration paid 2,453 1,819 3,482 2,686
Satisfied by:
Cash paid 2,249 482 2,495 2,686
Deferred consideration 204 1,337 987 -
Total Consideration 2,453 1,819 3,482 2,686
The four entities acquired is held exclusively with a view of resale and will
be measured as fair value less costs to sell under IFRS 5 'asset held for
sale'. The Group has applied IFRS 5 alternative implementation guidance by
treating each subsidiary acquisition as a single investment asset and will be
remeasured at each reporting date under IFRS 5 to the lower of its initial
carrying amount and the fair value less costs to sell (in accordance with the
general requirements for disposal group). However, it should be noted that
remeasurement will not be necessary in the subsequent period, because the
entity held for sale should generally be sold in that period. The acquired
entities are presented in the balance sheet as assets and liabilities held for
sale under IFRS 5.
During the year the Group disposed of UK Battery Storage Limited, Stairfoot
Limited, GreenGridPower Limited, with total realising a net gain on disposal
of £2.1 million and £0.1 million from previously recovered cost.
c) Appian Asset Management Limited
On 29 June 2021 the Group acquired 100% of the issued share capital of Appian
Asset Management Limited (Appian), a company registered in Ireland. Appian is
an active asset manager with around €350 million in Assets Under Management
(AUM) as at 31 December 2020. The acquisition enhances the Group's
capabilities to develop existing strategies in Ireland and Europe,
particularly those with a sustainability focus including Forestry, Sustainable
Infrastructure, and Real Estate. Appian was subsequently renamed Gresham
House Asset Management Ireland Limited.
The fair value of the identifiable net assets acquired, and the consideration
paid under IFRS 3 is as follows:
Net book value Adjustments Fair value
£'000 £'000 £'000
Property, plant and equipment 54 441 495
Cash 2,305 - 2,305
Trade and other receivables 604 - 604
Trade and other payables (1,464) (690) (2,154)
Management contracts - 2,231 2,231
Goodwill - 4,044 4,044
Deferred tax liability - (511) (511)
Total identifiable net assets 1,499 5,515 7,014
The adjustments relate to the recognition of management contracts and
associated deferred tax, goodwill and the IFRS 16 lease asset and liability.
Under the terms of the acquisition agreement, the fair value of the
consideration paid to the vendors of Appian was:
£'000
Cash 3,146
Shares - 104,168 shares in Gresham House plc valued at 940.0p per share on 29 979
June 2021
Total initial consideration 4,125
Contingent consideration 2,889
Total consideration 7,014
The consideration shares were admitted to trading on AIM on 5 July 2021.
Contingent consideration
Contingent consideration with an expected fair value at acquisition of €4.6
million will be payable in cash to the sellers based on the following:
§ 1.4 times year two earnings, payable in two years. The expected fair value
at acquisition was £1.1 million;
§ 1.4 times year three earnings, payable in three years. The expected fair
value at acquisition was £1.4 million; and
§ up to €0.75 million payable in three years based on certain AUM and
earnings targets. The expected fair value at acquisition was £0.4 million.
The fair value of the contingent consideration has been estimated at the date
of acquisition using estimated outcomes, the probability of those outcomes and
discounting this at 13.0%. Up to 50% of the contingent consideration may be
settled in Gresham House plc shares at the Company's discretion. As such
this will be recognised as a liability on the balance sheet and the fair value
assessed each reporting period. The fair value at the time of acquisition was
calculated as £2.9 million. The potential undiscounted amount of all future
payments that the Group could be required to make under the contingent
consideration arrangement is between €nil and €6.4 million.
Revenue and profits of Appian
The actual revenues and profits that have been generated since the acquisition
of Appian on 29 June 2021 to 31 December 2021 were:
€'000
Revenues 1,988
Profit before tax 190
Prior to acquisition by the Group, Appian had a 31 December year end. The
results for the most recent audited reporting period prior to acquisition were
to 31 December 2020. Had Appian been part of the Group for the entire
reporting period the following sums would have been consolidated:
€'000
Revenue 3,403
Profit before tax 284
Goodwill
Goodwill arises due to the excess of the fair value of the consideration
payable over the fair value of the net assets acquired. It is mainly
attributable to the skills of the team acquired, the synergies expected to be
achieved from the acquisition and the business development potential. Goodwill
arising on the Appian acquisition is not deductible for tax purposes.
Fair value
The fair value of the management contracts and customer relationships have
been estimated using a discounted cash flow model. The estimated cash flows
have been valued at a discount of 13.0% and are amortised over five years.
Acquisition costs in relation to business combinations have been classified as
exceptional items (see Note 6).
d) Mobeus VCT business
On 1 October 2021 the Company acquired the VCT business of Mobeus Equity
Partners LLP (Mobeus), a UK-based investment firm managing assets across two
distinct client groups, one of which is the VCT business acquired by the
Company. The acquisition of Mobeus included the novation and acquisition of
investment advisory contracts for Mobeus Income & Growth VCT plc, Mobeus
Income & Growth 2 VCT plc, Mobeus Income & Growth 4 VCT plc and The
Income & Growth VCT plc (together, the "Mobeus VCTs"), with a combined AUM
of £369 million as at March 2021, and the hiring of the Mobeus VCT team. The
acquisition of Mobeus was to build out the Group's existing VCT business.
The fair value of the identifiable net assets acquired, and the consideration
paid under IFRS 3 is as follows:
Fair value
£'000
Management contracts 21,115
Brand 456
Goodwill 15,118
Liabilities assumed (514)
Deferred tax (5,031)
Total identifiable net assets 31,144
Under the terms of the acquisition agreement, the fair value of the
consideration paid to the vendors of Mobeus was:
£'000
Vendor placing shares - 2,197,802 shares in Gresham House plc valued at 907.0p 19,934
per share on 1 October 2021
Consideration shares - 439,560 shares in Gresham House plc valued at 907.0p 3,986
per share on 1 October 2021
Excess cash and net working capital (514)
Total initial consideration 23,406
Contingent consideration 7,738
Total consideration 31,144
The vendor placing and consideration shares were admitted to trading on AIM on
1 October 2021.
Contingent consideration
Contingent consideration with an expected fair value at acquisition of £7.7
million will be payable in cash to the sellers over a three-year period
conditional on contract retention and fundraising and AUM targets.
The fair value of the contingent consideration has been estimated at the date
of acquisition using estimated outcomes, the probability of those outcomes and
discounting this at 12.0%. As such this will be recognised as a liability on
the balance sheet and the fair value assessed each reporting period.
The potential undiscounted amount of all future payments that the Group could
be required to make under the contingent consideration arrangement is between
£nil and £12.1 million.
Goodwill
Goodwill arises due to the excess of the fair value of the consideration
payable over the fair value of the net assets acquired. It is mainly
attributable to the skills of the team acquired, the synergies expected to be
achieved from the acquisition and the business development potential.
None of the goodwill is expected to be deductible for income tax purposes.
Actual revenue and profits of Mobeus
The actual revenues and profits that have been generated since the acquisition
of Mobeus on 1 October 2021 to 31 December 2021 were:
£'000
Revenues 2,588
Profit before tax 1,917
The disclosure of hypothetical revenues and profits of Mobeus for the year
ended 31 December 2021 is not considered relevant due to the nature of the
transaction. The entire Mobeus business was not acquired and there will be
revenues and expenses not relevant to the business acquired.
Fair value
The fair value of the management contracts has been estimated using a
discounted cash flow model. The estimated cash flows have been valued at a
discount of 12.0%. This resulted in fair value of management contracts
totalling £21,115,000 being recognised at acquisition. The fair value of
the brand has been estimated using a relief from royalty approach which
resulted in a value of £456,000 being recognised at acquisition.
Acquisition costs in relation to business combinations have been classified as
acquisition and restructuring related costs (see Note 6).
6 Acquisition and restructuring related costs
2022 2021
£'000 £'000
Acquisition costs
Burlington RE Property Management Limited 174 -
TradeRisks Limited - 19
Appian Asset Management Limited - 187
Mobeus VCT business 4 1,141
Joint Venture costs - 4
Other 60 79
238 1,430
Restructuring, integration and legal costs 872 633
DevCo acquisition and disposal costs 460 1,152
1,570 3,215
7 Finance costs
2022 2021
£'000 £'000
Interest payable on bank loans 253 148
Finance cost on unwind of contingent consideration 1,745 -
Finance fees 189 96
Interest payable on leases 113 67
2,300 311
See Note 25 for details of borrowings.
8 IFRS 16 Leases
IFRS 16 Leases relates to leases for use of office space at various locations.
As a lessee, the Group has recognised a lease liability representing the
present value of the obligation of the lease payments, and a related
right-of-use (ROU) asset in line with the process explained under the
accounting policy.
The rate implicit in the leases is not evident and so the entities'
incremental borrowing rates have been used. The incremental rate referred to
by IFRS 16 indicates the rate of interest that a lessee would have to pay to
borrow over a similar term, and with a similar security, the funds necessary
to obtain an asset of a similar value to the ROU asset in a similar economic
environment. The weighted average incremental borrowing rate used on the
date of initial application of the leases is 3.25%, which refers to the
interest charge on the Group's revolving credit facility.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or
rate take effect, the lease liability is reassessed and adjusted against the
ROU asset.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit and loss over the life of the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
2022 2021
£'000 £'000
ROU asset cost 3,044 3,526
ROU asset accumulated depreciation (1,547) (1,220)
Retained reserves * (6) (6)
Depreciation expense 835 713
* Representing the net impact of recognising the leases under IFRS 16 as at 1
January 2019 as the Group chose to not restate prior periods as a matter of
practical expedience afforded by the standard. The impact on retained reserves
was immaterial.
The table below summaries the maturity profile of the Group's liabilities
based on contractual discounted payment at 31 December 2022 and 2021
2022 2021
£'000 £'000
Less than one year 790 643
One to two years 698 1,311
Two to five years 310 348
More than five years 145 139
1,943 2,441
An analysis of the lease liability relating to ROU assets is as follows:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Balance as at 1 January 2,441 641 1,341 211
IFRS 16 restatement (38) 689 - -
Additions 20 1,970 - 1,734
Cash payments (627) (912) (283) (625)
Foreign exchange movements 35 (14) - -
Interest expense 112 67 42 21
As at 31 December 1,943 2,441 1,100 1,341
Please see Note 33 Financial Instruments for the maturity profile of leases.
The Group has elected not to apply IFRS 16 to:
(a) Low value leases for various IT equipment leased across the business.
The maximum third-party new item price of any excluded equipment is less than
£3,000. The total amount of lease payments for the year ended 31 December
2022 relating to these leases was £19,000 (2021: £21,000).
It is also noted that:
(a) the impact of lease liability and ROU asset on deferred taxes is
expected to be immaterial;
(b) there were no material residual value guarantees or contractual
dilapidation commitments that impacted the initial recognition value for ROU
assets and lease liability;
(c) there were no purchase options for leased assets that was made
available to or requested by the Group; and
(d) lease values do not include any termination penalties as the business
intends to use the properties to the end of lease terms.
Lease terms are negotiated on an individual basis across all seven leases and
contain a wide range of different terms and conditions. The lease agreements
do not impose any covenants other than the security interests in the leased
assets that are held by the lessor. Leased assets may not be used as
security for borrowing purposes. No rent concessions were applied and all
lease payments are considered fixed per the lease agreement.
9 Taxation
2022 2021
£'000 £'000
(a) Analysis of charge in period:
UK Corporation tax at 19% (2021: 19%) 4,800 2,883
Over provision in prior year 90 (520)
Deferred tax (2,016) 1,744
Total tax charge 2,874 4,107
(b) Factors affecting tax charge for period:
Profit on ordinary activities before tax multiplied by standard rate of 2,584 3,101
corporation tax in the UK of 19% (2021: 19%)
Tax effect of:
Dividend income not taxable - -
Amortisation not taxable - 261
Disallowable expenses/non-taxable income 558 (2,468)
Recognition of previously unrecognised deferred tax liabilities - 2,071
Utilisation of previously unrecognised tax losses (404) (449)
Over provision in prior year 90 (520)
Deferred tax not recognised - -
Effect of tax rate change on opening balances 40 2,328
Remeasurement of deferred tax 6 (217)
Actual tax charge 2,874 4,107
The Company recognised a deferred tax asset of £1.8 million (2021: £0.1
million) in the current year. No material uncertain tax positions exist as
at 31 December 2022. This assessment relies on estimates and assumptions and
may involve a series of complex judgements about future events. To the extent
that the final tax outcome of these matters is different from the amounts
recorded, such differences will impact income tax expense in the period in
which such determination is made.
10 Earnings per share
(a) Basic and diluted profit per share
2022 2021
Total net profit attributable to equity holders of the parent (£'000) 11,342 11,777
Weighted average number of shares in issue during the period 38,212,553 34,083,582
Number of shares held by the Gresham House Employee Benefit Trust (191,781) (204,007)
38,020,772 33,879,575
Dilutive shares* 1,705,923 2,150,707
Weighted average dilutive shares in issue during the period 39,726,695 36,030,282
Basic profit per share attributable to equity holders of the parent (pence) 29.8 34.8
Diluted profit per share attributable to equity holders of the parent (pence) 28.6 32.7
*Dilutive shares were deemed to have been issued at nil consideration as a
result of shares which could be issued under the bonus share matching plan,
long-term incentive plans and acquisition related share-based payments.
(b) Adjusted earnings per share
Adjusted earnings per share is based on adjusted operating profit after tax,
which is stated after charging interest but before depreciation, amortisation,
share-based payments and remuneration relating to acquisitions, profits and
losses on disposal of property, plant and equipment, net performance fees, net
non-core activities, net development gains and exceptional items, to provide
the non-GAAP measure of the performance as an asset manager. This includes
dividend and income received from investments in associates.
Adjusted profit for calculating adjusted earnings per share:
2022 2021
£'000 £'000
Net operating profit after finance costs 7,824 6,721
Add back:
Acquisition and restructuring related expenses, including finance costs 3,308 3,215
related to the unwind of discount on contingent consideration
Depreciation and amortisation 12,359 9,475
Loss on disposal of property, plant and equipment - -
Dividend income received from associates - 285
Net performance fees - (1,714)
Variable compensation attributable to gains on development projects 975 689
Development project costs 698 470
Net non-core activity (1) (38)
Share-based payments relating to acquisitions 317 615
Acquisition related remuneration 1,600 452
Adjusted profit attributable to equity holders of the parent before tax 27,080 20,170
Corporation tax attributable to adjusted operating profit (5,147) (2,363)
Adjusted profit attributable to equity holders of the parent after tax 21,933 17,807
Adjusted profit per share (pence) - basic 57.7 52.6
Adjusted profit per share (pence) - diluted 55.2 49.4
11 Dividends
In May 2022 the Company paid £3,814,818 which represents a final dividend for
the year ended 31 December 2021 of 10.0 pence per share. A final dividend for
the year ended 31 December 2020 of 6.0 pence per share totalling £1,881,172
was paid in May 2021.
Set out below is the total dividend payable in respect of the financial year,
which is the basis on which the requirements of Section 1158 Corporation Tax
Act 2010 are considered.
2022 2021
£'000 £'000
Proposed final dividend for the year ended 31 December 2022 of 16.0 pence 6,124 3,815
(2021: 10.0 pence) per share
The proposed final dividend is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in these
financial statements.
12 Investments
Investments have been classified as follows: Group Company
2022 2021 2022 2020
£'000 £'000 £'000 £'000
Non-current assets 19,912 13,560 12,733 8,308
Other debtors due within one year - Investment in development projects (see 3,036 3,537 3,036 3,537
Note 21)
22,948 17,097 15,769 11,845
A further analysis of total investments is as follows: Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Listed securities - on the London Stock Exchange 9,275 4,993 7,773 3,555
Securities dealt in under AIM 435 1,363 435 1,363
Securities dealt in under Aquis Exchange 3 5 3 5
Unlisted securities 10,199 10,736 4,522 6,922
Closing value at 31 December 19,912 17,097 12,733 11,845
Investments valued at fair value through profit and loss 19,912 13,560 12,733 8,308
Loans and receivables carried at FVTPL* 3,036 3,537 3,036 3,537
22,948 17,097 15,769 11,845
*Investment in development projects changed to FVTPL in the current year from
amortised cost due to the change in the business model for managing the loan
receivables. Fair value is calculated based on expected cashflow from the loan
and discounted using the riskiest synthetic credit rating due to the loans
inactive market.
The movement in investments valued at fair value through profit and loss is:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Opening cost 10,724 7,839 7,722 5,203
Opening net unrealised gains/(losses) 2,836 1,035 586 (73)
Opening value 13,560 8,874 8,308 5,130
Movements in the year:
Purchases at cost 8,825 5,851 7,084 5,203
Additions through business combinations - - - -
Sales - proceeds (1,659) (4,047) (1,659) (3,045)
Sales - realised gains on sales 693 1,081 693 361
Net unrealised (losses)/gains (1,507) 1,801 (1,693) 659
Closing value 19,912 13,560 12,733 8,308
Closing cost 18,583 10,724 13,840 7,722
Closing net unrealised gains/(losses) 1,329 2,836 (1,107) 586
Closing value 19,912 13,560 12,733 8,308
The movement in loans and receivables carried at fair value through profit and
loss is:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Opening value 3,537 763 3,537 763
Movements in the year:
Purchases at cost 2,303 6,296 2,303 6,296
Sales - proceeds (2,853) (3,550) (2,853) (3,550)
Sales - realised gains on sales 49 28 49 28
Closing value 3,036 3,537 3,036 3,537
Gains and losses on investments held at fair value: Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Net realised gains on disposal 694 1,109 693 389
Net unrealised (losses)/gains (1,455) 1,801 (1,643) 659
Net gains on investments (761) 2,910 (950) 1,048
Gains and losses on disposal of subsidiary undertaking: Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Profit on disposal of subsidiary undertaking* 2,249 2,932 - -
Total net gains on Investment 1,488 5,842 - -
*Profit from disposal of subsidiary undertaking is from the Group disposed of
DevCo Projects; UK Battery Storage Limited, Arbroath Limited, Stairfoot
Limited, GreenGridPower Limited during the year.
13 Property, plant and equipment
Group 2022 Office equipment Motor vehicles Leasehold property Right of use assets Total
£'000 £'000 £'000 £'000 £'000
Cost
As at 1 January 653 358 130 3,526 4,667
Additions 153 213 - 36 402
Additions through business combinations 8 - - - 8
Disposals during the year (46) (120) (130) (562) (858)
Foreign exchange movements - - - 44 44
As at 31 December 768 451 - 3,044 4,263
Depreciation
As at 1 January 237 226 57 1,220 1,740
Charge for the year 158 90 16 835 1,099
Disposals during the year (28) (94) (73) (529) (724)
Foreign exchange movements - - - 21 21
As at 31 December 367 222 - 1,547 2,136
Net book value as at 31 December 401 229 - 1,497 2,127
Group 2021 Office equipment Motor vehicles Leasehold property Right of use assets Total
£'000 £'000 £'000 £'000 £'000
Cost
As at 1 January 409 346 130 2,221 3,106
Additions 289 38 - 1,988 2,315
Additions through business combinations 54 - - 806 860
Disposals during the year (99) (26) - (1,472) (1,597)
Foreign exchange movements - - - (17) (17)
As at 31 December 653 358 130 3,526 4,667
Depreciation
As at 1 January 195 169 29 1,623 2,016
IFRS 16 restatement through business combinations - - - 365 365
Charge for the year 138 80 28 713 959
Disposals during the year (96) (23) - (1,472) (1,591)
Foreign exchange movements - - - (9) (9)
As at 31 December 237 226 57 1,220 1,740
Net book value as at 31 December 416 132 73 2,306 2,927
Company 2022 Office equipment Motor vehicles Right of use assets Total
£'000 £'000 £'000 £'000
Cost
As at 1 January 467 304 1,725 2,496
Additions 153 213 - 366
Disposals during the year (46) (120) - (166)
As at 31 December 574 397 1,725 2,696
Depreciation
As at 1 January 179 172 233 584
Charge for the year 130 90 559 779
Disposals during the year (34) (94) - (128)
As at 31 December 275 168 792 1,235
Net book value as at 31 December 299 229 933 1,461
Company 2021 Office equipment Motor vehicles Right of use assets Total
£'000 £'000 £'000 £'000
Cost
As at 1 January 348 292 1,445 2,085
Additions 211 38 1,752 2,001
Disposals during the year (92) (26) (1,472) (1,590)
As at 31 December 467 304 1,725 2,496
Depreciation
As at 1 January 170 115 1,236 1,521
Charge for the year 98 80 469 647
Disposals during the year (89) (23) (1,472) (1,584)
As at 31 December 179 172 233 584
Net book value as at 31 December 288 132 1,492 1,912
14 Intangible assets
Group 2022 Goodwill Customer relationships Contracts Brands IT platform development Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
As at 1 January 48,794 3,335 68,543 456 1,958 123,086
Additions through business combinations 742 - 1,512 - - 2,254
Other additions - - 759 - 695 1,454
Disposals during the year (568) - - - - (568)
Foreign exchange movements 265 - 199 - - 464
As at 31 December 49,233 3,335 71,013 2,653 126,690
456
Amortisation
As at 1 January - 3,170 24,049 29 826 28,074
Charge for the year - 56 10,568 113 511 11,248
Disposals during the year - - - - - -
Foreign exchange movements - - 33 - - 33
As at 31 December - 3,226 34,650 142 1,337 39,355
Net book value as at 31 49,233 109 36,363 314 1,316 87,335
December
Remaining amortisation period n/a 2 years 1-22 years 3 years 1-4 years
Group 2021 Goodwill Customer relationships Contracts Brands IT platform development Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
As at 1 January 29,718 3,335 46,650 - 1,242 80,945
Additions through business combinations 19,162 - 23,346 456 - 42,964
Other additions - - - - 725 725
Disposals during the year - - (1,406) - (9) (1,415)
Foreign exchange movements (86) - (47) - - (133)
As at 31 December 48,794 3,335 68,543 1,958 123,086
456
Amortisation
As at 1 January - 3,116 17,411 - 448 20,975
Charge for the year - 54 8,047 29 386 8,516
Disposals during the year - - (1,406) - (8) (1,414)
Foreign exchange movements - - (3) - - (3)
As at 31 December - 3,170 24,049 826 28,074
29
Net book value as at 31 December 48,794 165 44,494 427 1,132 95,012
Remaining amortisation period n/a 3 years 1-22 years 4 years 1-4 years
Goodwill can be allocated to CGUs as follows
2022 2021
£'000 £'000
Burlington RE Property Management Limited 786 -
Appian Asset Management Limited 3,611 3,958
Livingbridge VCT business 12,167 12,167
Mobeus VCT business 15,118 15,118
TradeRisks Limited 5,655 5,655
FIM, Hazel Capital and Aitchesse 11,896 11,896
49,233 48,794
The Group tests whether goodwill has suffered any impairment on an annual basis.
Goodwill impairment assessment is based on the expected future returns of the relevant CGU as a whole. Goodwill has been assessed for each CGU for impairment as at 31 December 2022. This assessment includes an analysis of the recoverable amounts of the CGUs by using value in use based on forecasted cash flow models.
Each impairment model includes a 5-year cash flows with the most recent approved budget by the Board. The cash flows is based on expected fundraising and other growth factors as set out by the Group Strategic as well as the associated cost of delivering the planned revenues. The model includes the calculated terminal value as the lower of the year 5 cash flows multiplied by the acquisition EV multiple and the year 5 cash flows is then discounted.
A discount rate or weighted average cost of capital (WACC) derived from the capital asset pricing model (CAPM) has been applied to the cash flows to determine an estimate of the fair value of the business, which is used to assess whether goodwill impairment arises.
The key assumption in the cashflow projections are the terminal value and discount rate applied to the CGUs in 2022 and 2021 is as follows:
2022 2021
Burlington RE Property Management 8.0% -
Appian Asset Management Limited 13.0% 12.3%
Livingbridge VCT business 16.0% 15.0%
Mobeus VCT business 14.0% 12.0%
TradeRisks Limited 8.0% 7.5%
FIM, Hazel Capital and Aitchesse 10.0% 7.5%
The terminal value used in the models are based on lower end of the range.
Adverse movements in an additional discount rate of up to 7% would not lead to
any impairment for any of the CGUs.
The assumptions used on goodwill impairment, including discount rates, and
cash flow projections are described in more detail in the critical accounting
estimates and judgements section of the accounting policies.
Company 2022 2021
IT platform development IT platform development
£'000 £'000
Cost
As at 1 January 1,906 1,181
Additions 695 725
As at 31 December 2,601 1,906
Amortisation
As at 1 January 807 432
Charge for the year 502 374
As at 31 December 1,309 806
Net book value as at 31 December 1,292 1,100
Remaining amortisation period 1-4 years 1-4 years
15 Long-term receivables
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Other debtors 1,330 492 492 492
1,330 492 492 492
Other debtors consist of rental deposits and deferred consideration
receivable.
16 Disposal group held for sale
The Group has invested in the development of battery storage projects, which
are part of the exclusive pipeline to be sold to Gresham House Energy Storage
Fund plc (GRID) when operational, and the development of solar projects
(collectively known as DevCo Projects). In some instances DevCo Projects have
been sold prior to being operational, with deferred consideration payable when
the project becomes operational. The DevCo Projects are held in separate
SPVs, which the Group entity Gresham House Devco Limited owns 100% of the
equity in, and the Group has also lent funds for the development of the
projects. These loans are measured at FVTPL.
The sale of certain DevCo Projects has been agreed with GRID and is
documented, including price and conditions to complete the sale. It is
expected that the sale process will complete within a six to 12-month time
frame, as such it has been deemed appropriate to treat the DevCo Projects as
assets held for sale under IFRS 5. Specifically, they are classified as a
"disposal group" held for sale, whose value will be primarily recovered by
sale and is measured under fair value less cost to sell (FVLCS).
Assets acquired with a view for resell are classified as discontinued
operations and falls under assets held for sale and measured at fair value
less costs to sell.
The assets and liabilities of those SPVs which have been consolidated by the
Group are:
2022 2021
£'000 £'000
Assets of a disposal group held for sale 22,907 17,545
Liabilities of a disposal group classified as held for sale (7,307) (7,499)
15,600 10,046
The Group's interest in other DevCo Projects can be summarised as follows:
2022 2021
£'000 £'000
Loans and receivables brought forward 3,537 551
Additions 2,352 3,537
Disposals (2,853) (551)
Loans and receivables carried forward (Note 12) 3,036 3,537
The Group's total exposure to DevCo Projects is:
2022 2021
£'000 £'000
Net assets and liabilities of a disposal group held for sale 15,600 10,046
Loans and receivables 3,036 3,537
18,636 13,583
An analysis of the financial results of the disposal group operation is as
follow:
2022 2021
£'000 £'000
Revenue - 4
Expenses (166) (174)
Loss for the disposal group (166) (170)
During the year the Group acquired a controlling interest in UK Battery
Storage Limited, Stairfoot Limited, GreenGridPower Limited, and HazelBoro
Limited. In addition, it also purchased the assets and liabilities of
Worcestershire Solar 1 Limited and Warwickshire Solar 1 Limited. These
acquisitions are classified as held for sale under IFRS 5 and measured FVLCS
from acquisition date.
During the year the Group disposed of UK Battery Storage Limited, Arbroath
Limited, Stairfoot Limited, GreenGridPower Limited, with total net proceeds of
£7.5 million due, realising a net gain on disposal of £2.2 million.
17 Investment in subsidiaries
Company
2022 2021
Subsidiary undertakings £'000 £'000
As at 1 January 80,148 79,872
Additions - 276
As at 31 December 80,148 80,148
The subsidiary undertakings of Gresham House plc are as follows:
Held by Held by other Group companies Country of incorporation and registered office
Company
% %
Aitchesse Limited - 100 5 New Street Square, London EC4A 3TW, England
Coupar Limited - 100 5 New Street Square, London EC4A 3TW, England
Deacon Commercial Development and Finance Limited - 100 5 New Street Square, London EC4A 3TW, England
FIM Services Limited - 100 5 New Street Square, London EC4A 3TW, England
FIM Windfarms (SC) General Partner Limited - 100 58 Morrison Street, Glasgow EH3 8BP, Scotland
Gresham House Asset Management Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Asset Management Ireland Limited - 100 42 Fitzwilliam Place, Dublin 2, Ireland
Gresham House Asset Management (Resources) Ireland Limited - 100 42 Fitzwilliam Place, Dublin 2, Ireland
Gresham House Carry Warehousing Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Capital Partners Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Climate Transition Limited - 100 5 New Street Square, London EC4A 3TW, England
Cockenzie Storage Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Devco Pipeline Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Devco Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House EIS Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Energy Storage Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Finance Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Forestry Limited - 100 58 Morrison Street, Edinburgh, EH3 8BP, Scotland
Gresham House Forestry Friends and Family LP 71.4 - 58 Morrison Street, Glasgow EH3 8BP, Scotland
Gresham House Forestry General Partner (Ireland) Limited - 100 1-2 Victoria Buildings,
Haddington Road, Dublin 4,Ireland
Gresham House Forest Funds General Partner Limited - 100 5 New Street Square, London EC4A 3TW England
Gresham House (General Partner) Limited - 100 58 Morrison Street, Edinburgh, EH3 8BP, Scotland
Gresham House GP LLP - 100 58 Morrison Street, Edinburgh, EH3 8BP, Scotland
Gresham House GP II LLP - 100 58 Morrison Street, Edinburgh, EH3 8BP, Scotland
Gresham House Holdings Limited 100 - 5 New Street Square, London EC4A 3TW, England
Gresham House Housing Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Initial Partner Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Infrastructure Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Investment Management Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Investment Management (Guernsey) Limited - 100 Dorey Court, Admiral Park, St Peter Port GY1 2HT, Guernsey
Gresham House Investors Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Ireland Real Estate Limited - 100 42 Fitzwilliam Place, Dublin 2, Ireland
Gresham House (Nominees) Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House O&M Services Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Private Capital Solutions Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Private Equity Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Private Wealth Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Real Assets Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Renewable Infrastructure Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Services Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Smaller Companies Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Solar Distribution Designated Member 1 Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Solar Distribution Designated Member 2 Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House SPE Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Special Situations Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Timberland General Partner Limited - 100 5 New Street Square, London EC4A 3TW, England
Held by Held by other Group companies Country of incorporation and registered office
Company
% %
Gresham House Windfarms General Partner 3 Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Value Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House VCT Limited - 100 5 New Street Square, London EC4A 3TW, England
Hazelboro Limited - 100 5 New Street Square, London EC4A 3TW, England
Lister Battery Limited - 100 5 New Street Square, London EC4A 3TW, England
Monets Garden Battery Limited - 100 5 New Street Square, London EC4A 3TW, England
MyFutureLiving Limited - 100 5 New Street Square, London EC4A 3TW, England
My ReSI Home Limited - 100 5 New Street Square, London EC4A 3TW, England
New Capital Holdings Limited - 95 5 New Street Square, London EC4A 3TW, England
Newton Estate Limited - 100 5 New Street Square, London EC4A 3TW, England
ReSI Capital Management GP Limited - 100 5 New Street Square, London EC4A 3TW, England
ReSI Capital Management Limited - 100 5 New Street Square, London EC4A 3TW, England
ReSI Property Management Limited - 100 1(st) Floor, 2 Castle Street, Taunton TA1 4AS, England
Retirement Rentals Limited - 100 1(st) Floor, 2 Castle Street, Taunton TA1 4AS, England
Retirement Rentals Nominee Company 1 Limited - 100 1(st) Floor, 2 Castle Street, Taunton TA1 4AS, England
Security Change Limited - 100 5 New Street Square, London EC4A 3TW, England
TradeRisks Inc - 100 9 East Loockerman Street, Dover DE 19901, United States
TradeRisks Limited - 100 5 New Street Square, London EC4A 3TW, England
TradeRisks (Luxembourg) S.a.r.l. - 100 25a, Boulevard Royal L-2449 Luxembourg
Warwickshire Solar 1 Limited - 100 5 New Street Square, London EC4A 3TW, England
Wolden Estates Limited - 100 5 New Street Square, London EC4A 3TW, England
Worcestershire Solar 1 Limited - 100 5 New Street Square, London EC4A 3TW, England
Your ReSI Home Limited - 100 5 New Street Square, London EC4A 3TW, England
Gresham House Holdings Limited is the employing entity for the Group.
Gresham House Asset Management Limited, TradeRisks Limited and ReSI Capital
Management Limited are the FCA regulated entities.
18 Investment in associates
2022 2021
£'000 £'000
Opening Investment in associates 11,955 9,142
Share of associates' profit 1,052 4,955
Dividends received from associates - (285)
Additions - 1,165
Return of capital - (2,441)
Disposals (12,579) (371)
Redesignation - (210)
Closing investment in associates 428 11,955
The above balance consists of the Group's holdings in Environment Bank Limited
(EBL) of 25%, the Group reduced its holdings from 50% to 25% in the year. In
2022, the Group also realised its investment in Rockwood Strategic plc
(formerly Gresham house Strategic plc or GHS) for £11.8m in the period.
The Board believe that Gresham House plc exercises significant influence over
EBL, but not control, through its 25% equity investment.
The latest financial information of EBL was the unaudited results for the 8
month period to 31 December 2022. The assets and liabilities at that date are
shown below:
£'000
Non-current assets 186
Current assets 4,179
Current liabilities (1,708)
Long-term liabilities (2,237)
Net liabilities 420
The EBL unaudited statement of comprehensive income noted revenues of
£4,609,000 (2021: £567,000) and a profit before tax and total comprehensive
loss of £718,917 (2021: loss £1,308,000) for the period ended 31 December
2022.
The registered office of EBL is Central House, 20 Central Avenue, St Andrews
Business Park, Norwich, NR7 0HR.
19 Trade receivables
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Amounts receivable within one year:
Trade receivables 11,216 11,135 - -
Less allowance for credit losses - - - -
11,216 11,135 - -
As at 31 December 2022, trade receivables of £1,201,000 (2021: £614,000)
were past due but not impaired. The ageing analysis of these trade receivables
is as follows:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
1-3 months 886 516 - -
3-6 months 245 67 - -
More than 6 months 70 31 - -
1,201 614 - -
As at 31 December 2022 there were no provisions against trade receivables
(2021: £nil).
The expected credit losses are estimated using a provision matrix by reference
to past default experience and an analysis of the debtor's current financial
position, adjusted for factors that are specific to the debtor, general
economic conditions of the industry and an assessment of both the current as
well as the forecast direction of conditions at the reporting date, such as,
the impact from the Ukraine war, inflation, and interest rates. The Group has
therefore not recognised a loss allowance because historical experience has
indicated that the risk profile of trade receivables is deemed low.
20 Accrued income and prepaid expenses
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Accrued income 8,641 9,561 - 75
Other debtors 21,217 10,794 1,689 713
Prepaid expenses 981 1,350 94 369
30,839 21,705 1,783 1,157
The movement in other debtors includes an increase in deferred consideration
receivable from DevCo Projects to £10,887,000 at 31 December 2022 from
£9,748,000 at 31 December 2021, as well as other debtors in Gresham House
Investment Management £5,164,000 (2021: £29,000) and Gresham House Forestry
GP £4,991,000 (2021:nil).
21 Other current assets
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Amounts owed by Group undertakings - - 26,887 16,510
Loan Receivables - Investment in development projects (see Note 12) 3,036 3,537 3,036 3,537
Corporation tax recoverable - - - -
3,036 3,537 29,923 20,047
Amounts owed by Group undertakings are repayable on demand and attract
interest of between 0% and 15% per annum.
Receivables from Group undertakings and loans to Group undertakings are
considered to be a low credit risk. Credit risk for these assets has not
increased significantly since their initial recognition. As such, no expected
credit losses have been recognised in respect of Group balances as any effect
would be immaterial for the Company.
During the year, there was a change in the business model for managing the
loan receivables from the investment in development projects. As such, the
classification has changed from amortised cost to FVTPL. Fair value is
calculated based on expected cashflow from the loan and discounted using the
riskiest synthetic credit rating due to the loans inactive market.
22 Trade and other payables
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade creditors 2,328 742 - -
IFRS 16 lease creditor 790 643 653 283
Other creditors 2,006 2,955 33 32
Accruals and deferred income 24,611 24,195 225 204
Corporation tax payable 444 1,692 - -
Contingent consideration (Note 26) 10,111 12,494 - -
40,290 42,721 911 519
23 Short-term borrowings
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Bank loans - within current liabilities (Note 25) - - - -
Amounts owed to Group undertakings - - 1,541 1,136
- - 1,541 1,136
24 Deferred taxation
Under International Accounting Standard (IAS) 12 (Income Taxes) provision is
made for the deferred tax liability associated with the recognition of the
management contracts and customer relationships as part of the 100%
acquisition of FIM, TradeRisks, Appian, Burlington and the acquisition of the
Mobeus VCT business. This has been initially recognised at 17% for FIM, 19%
for TradeRisks, 12.5% for Appian, 12.5% for Burlington and 24% for Mobeus of
the fair value of the intangible assets at acquisition and reassessed each
year end, with the movement being recognised in the income statement.
During the 2021 the Group reassessed the assumptions made at the time of the
acquisition of the Livingbridge VC management contracts. This resulted in a
deferred tax liability of £2,071,000 being recognised at a rate of 22% on 1
October 2021.
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 19% (2021: 19%). The increase in the main
rate of corporation tax to 25% was substantively enacted with effect from
April 2023. This new rate has been applied to deferred tax balances which are
expected to reverse after 1 April 2023.
As at 31 December 2022 the deferred tax liability was £9,155,000 (2021:
£10,597,000).
Deferred tax assets have been recognised in respect of all tax losses and
other temporary differences giving rise to deferred tax assets where the
Directors believe it is probable that these assets will be recovered.
The Group has recognised a deferred tax asset of £1,802,000 (2021:
£2,197,000) in relation to differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit and is accounted for using the
statement of financial position liability method. The Company has recognised
£66,000 (2021: £92,000) in respect of these differences.
The movement on the deferred tax account is as shown below:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Balance as at 1 January (8,400) (2,176) 92 153
Deferred tax recognised in profit and loss 2,016 (1,744) (26) (61)
Deferred tax recognised in equity (498) 1,062 - -
(6,882) (2,858) 66 92
Arising on business combinations (471) (5,542) - -
Balance as at 31 December (7,353) (8,400) 66 92
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Deferred tax asset 1,802 2,197 66 92
Deferred tax liability (9,155) (10,597) - -
(7,353) (8,400) 66 92
25 Long-term borrowings
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Bank loans - - - -
- - - -
On 16 February 2023, the Company signed an extension to the facility agreement
with Banco Santander SA (the facility) for £20.0 million to 31 December 2024.
The facility is secured with fixed and floating charges over certain of the
Company's assets, with cross guarantees provided by Gresham House Asset
Management Limited and Gresham House Holdings Limited. The fixed charges
relate to certain Group bank accounts with a carrying value of £23.5 million
as at the year end.
No amounts were drawn under this facility at the year end.
The Group has complied with the financial covenants attached to the facility.
The interest payable on the facility is SONIA plus 3.05%.
26 Non-current liabilities - other creditors
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Contingent consideration 3,752 10,165 - -
IFRS 16 lease creditor 1,154 1,798 447 1,058
Other liabilities 341 - - -
5,247 11,963 447 1,058
Contingent consideration
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Current contingent consideration 10,111 12,494 - -
Non-current contingent consideration 3,752 10,165 - -
13,863 22,659 - -
Contingent consideration paid in the year was £10.1 million (£0.8m was also
paid in the year but form part of the partner consideration and reclassified
as such in the year). Contingent consideration paid in 2021 was £1.4 million.
TradeRisks
Contingent consideration totalling a maximum of £6.0 million will be payable
in cash to the sellers based on the following:
a) 0.5% of funds raised payable in three years, with maximum amount capped
at £3.0 million;
b) any realised synergies payable in three years, capped at £1.0 million;
and
c) £2.0 million payable within six months post-completion for any
inventory true-up.
Payments totalling £1.5 million were paid during the 2022.
The fair value of the remaining contingent consideration payable to the
TradeRisks sellers as at 31 December 2022 was £0.6 million.
26 Non-current liabilities - other creditors - continued
Appian
Contingent consideration with an expected fair value of £1.0 million will be
payable in cash to the sellers based on the following:
· 1.4 times year two earnings, payable on 30 June 2023. The expected
fair value as at 31 December 2022 is £0.3 million;
· 1.4 times year three earnings, payable on 30 June 2024. The expected
fair value as at 31 December 2022 is £0.7 million; and
· up to €0.75 million payable on 30 June 2024 based on certain AUM
and earnings targets. The expected fair value as at 31 December 2022 is nil.
The fair value of the contingent consideration has been estimated using
expected outcomes and discounting this at 13.0%. Up to 50% of the contingent
consideration may be settled in Gresham House plc shares at the Company's
discretion.
Mobeus
Contingent consideration totalling a maximum of £9.7 million will be payable
in cash to the sellers based on the following:
· £4.1 million was paid in January 2023 following the retention of
the management contracts;
· £2.9 million payable on 31 December 2023 subject to the
retention of the management contracts;
· a maximum of £1.9 million payable after three years subject to
the retention of the management contracts; and
· a maximum of £0.8 million payable in three years subject to
fundraising and AUM targets.
The fair value of the contingent consideration has been estimated using
expected outcomes, the probability of those outcomes and discounting this at
12.0%. The expected fair value as at 31 December 2022 is £8.8. million.
Burlington
Contingent consideration with an expected fair value of €1.0 million will be
payable to the sellers within 20 business days of publication of the accounts
for the year ending 31 December 2024. This is calculated as 40% of 6.5 times
the average EBITDA in three years ending 31 December 2024.
The fair value of the contingent consideration has been estimated at the date
of acquisition using estimated outcomes, the probability of those outcomes and
discounting this at 8.0%. Up to 50% of the contingent consideration may be
settled in Gresham House plc shares at the Company's discretion. As such this
will be recognised as a liability on the balance sheet and the fair value
assessed each reporting period. The fair value at the at 31 December 2022
£0.9 million.
DevCo Projects
DevCo projects also have contingent consideration which are payable once
certain operational matrices are met as per the SPA. GreenGridPower £1.0
million, Stairfoot £1.3 million and Hazelboro £0.2 million.
27 Share capital
2022 2021
£'000 £'000
Allotted: Ordinary - 38,273,996 (2021: 38,000,819) fully paid shares of 25 9,568 9,500
pence
During the year the Company issued the following new ordinary shares:
· 73,177 shares on 15 March 2022 to the vendors of Burlington RE
Asset Management Limited; and
· 200,000 shares on 15 March 2022 at par into the Gresham House
Employee Benefit Trust.
The Gresham House Employee Benefit Trust (EBT) held 191,781 shares at 31
December 2022, with a par value of £48,000 (2021: 204,007 shares with par
value of £51,000).
The shares held by the GH EBT are expected to be issued under share option
contracts. The shares were acquired during the year. In 2022, 384,461 shares
were issued to employees (2021: 1,287,450).
28 Share based payments
2016 Long-term incentive plan
Following approval from shareholders at the General Meeting of the Company on
20 November 2015, the Directors implemented a long-term incentive plan (2016
LTIP) to incentivise the management team as well as align their interests with
those of shareholders on 28 July 2016 through enhancing shareholder value.
For the purposes of the 2016 LTIP, "shareholder value" is the difference
between the market capitalisation of the Company at the point in time that any
assessment is made and the sum of:
(i) the market capitalisation of the Company a) at 1 December 2014 for first
awards made to management who joined the Company before 30 September 2015 (old
joiners) and b) at the date of award in all other cases (new joiners); and
(ii) the aggregate value (at the subscription price) of all ordinary shares
issued thereafter and up to the point in time that any assessment is made, in
each case adjusted for dividends and capital returns to shareholders and/or
issue of new shares.
The beneficiaries of the 2016 LTIP, will in aggregate be entitled to an amount
of up to 20.0% of shareholder value created over the exercise period, subject
to performance criteria set out below. Individual participation in the
shareholder value created was determined by the Remuneration Committee.
There were certain hurdles the Company's share price had to achieve before an
award vested.
In the event that the Company achieves an average mid-market closing price
equal to compound growth at 7% per annum for a period of ten consecutive
dealing days in the period after 1 December 2016 for first awards to
management who joined the Company before 30 September 2015 and from the second
anniversary of the date of award in all other cases, 50% of the award will
vest.
In the event that the share price of the Company outperforms the FTSE All
Share Index in the period after 1 December 2016, and from the second
anniversary of the date of the award in all other cases, 50% of the award
shall vest.
Each award will require a minimum term of employment of three years and awards
will be made to current management and new joiners at the Company's
discretion.
IFRS 2: Share-based payments sets out the criteria for an equity-settled
share-based payment, which has market performance conditions. The 2016 LTIP
meets these criteria and should therefore be recognised at award at fair value
and amortised over the vesting period of two years. There is no amount payable
by the beneficiaries on exercise. The table below details the type and number
of shares in Gresham House Holdings Limited issued and exercised in the year:
2022 A Shares old A Shares new joiners B Shares C Shares D Shares Total LTIP
joiners
Balance as at 1 January - - - - 180 180
Exercised during the year - - - - (180) (180)
As at 31 December - - - - - -
Exercisable at year end - - - - - -
Months to vesting - - - - -
2021 A Shares old A Shares new joiners B Shares C Shares D Shares Total LTIP
joiners
Balance as at 1 January - - 104 - 180 284
Exercised during the year - - (104) - - (104)
As at 31 December - - - - 180 180
Exercisable at year end - - - - 180 180
Months to vesting - - - - -
180 D Shares were exercised during the year and at the Company's discretion
were settled in cash. The difference between the fair value recognised over
the vesting period and the fair value at the date of exercise of £2.1 million
was recognised in retained reserves. All awards under the 2016 LTIP have
vested and been exercised as at 31 December 2022.
2018 Long-term incentive plan
The Remuneration Committee considered and implemented a long-term incentive
arrangement in 2018 (2018 LTIP). The 2016 LTIP became exercisable during 2018
and as such the Remuneration Committee introduced the 2018 LTIP to align the
management team and wider members of the business for the next three years
with shareholders.
The 2018 LTIP is a deferred share award, which vests in three years from the
date of award subject to management remaining employed by the Company as at
the vesting date. There is no staggered vesting period, vesting is at the end
date in three years' time.
During the year ended 31 December 2021, the full amount of the remaining 2018
LTIP of 421,805 awards were exercised and net-settled by ordinary shares held
by the Gresham House Employee Benefit Trust. The weighted average share price
at the date of exercise was 887 pence.
2019 Long-term incentive plan
The Remuneration Committee considered and implemented a long-term incentive
arrangement in 2019 (2019 LTIP).
Under the 2019 LTIP, 274,728 deferred shares were awarded to the management
team and 121,063 deferred shares were awarded to the wider members of the
business, with a fair value at award of £1.5 million and £0.7 million
respectively. The awards to the management team vest in three years from the
date of award subject to management remaining employed by the Company as at
the vesting date and achievement of performance conditions. There is no
staggered vesting period, vesting is at the end date in three years' time.
The awards to the wider members of the business also vest in three years from
the date of award but there are no performance conditions.
The performance conditions relating to the management team's awards are that
in the event that the Company achieves an average mid-market closing price
equal to compound growth at 7% per annum over the three-year period from
award, or the growth in Adjusted Earnings Per Share has compound growth of 7%
per annum or more, 50% of the award will vest.
In the event that the share price of the Company outperforms the FTSE All
Share Index from the third anniversary of the date of the award in all other
cases, 50% of the award will vest.
The 2019 LTIP vested and was exercised in September 2022 and was settled in
cash for £2.2 million.
2021 Long-term incentive plan
The Remuneration Committee considered and implemented a long-term incentive
arrangement in 2021 (2021 LTIP).
Under the 2021 LTIP, 109,448 deferred shares were awarded to the wider members
of the business, with a fair value at award of £0.9 million. The 2021 LTIP is
a deferred share award, which vests in three years from the date of award
subject to the team remaining employed by the Company as at the vesting date.
There is no staggered vesting period, vesting is at the end date in three
years' time.
An award was made to a member of the Housing (Real Estate) division in January
2021. The number of Gresham House plc shares delivered at the vesting date is
calculated by the fee earning assets under management raised in Housing funds
up until the vesting date of 31 March 2023, multiplied by 0.07%, plus assets
under management deployed multiplied by 0.03%, in aggregate divided by the
average share price on issue. The fair value at the date of award was £0.2m.
2022 Long-term incentive plan
The Remuneration Committee considered and implemented a long-term incentive
arrangement in 2022 (2022 LTIP).
Under the 2022 LTIP, 283,167 shares were awarded to wider members of the
business with a fair value of £2.3m at award. These awards vest in three to
four years time and there are no performance conditions.
There were a number of awards made under the 2022 LTIP to address specific
long-term incentives for key individuals in the Group with specific measures
and conditions to incentivise and retain the individuals concerned. These were
as follows:
An award was made to one of the Housing team members in March 2022. The number
of Gresham House plc shares delivered at the vesting date is calculated by the
fee earning assets under management raised in a new fund up until the vesting
date of 31 December 2023, multiplied by 0.15%, divided by the average share
price on issue. The fair value at the date of award was £89,000.
An award was made to certain members of the Forestry team was made in May 2022
for 219,379 shares to be delivered at vesting on 16 March 2025, subject to the
achievement EBITDA hurdles over the 3 financial years to 31 December 2024. The
fair value at award was £1,309,000.
An award was made to certain members of the Strategic Equity team in August
2022. The number of Gresham House plc shares delivered at the vesting date is
calculated by taking 50% of the cumulative Operating Profit of the division
above a hurdle cumulative Operating Profit amount for the three years to 31
December 2025. The fair value at the award date was £148,000.
An award was made to certain members of the Strategic Equity team in August
2022. The number of Gresham House plc shares delivered at the vesting date is
calculated as the AUM increase above £741 million in the Public Equity
division, multiplied by 2.5%, multiplied by 12.5%. This scheme only vests when
a takeover of the Company has taken place. As at 31 December 2022, if the
Company i were to be taken over, the fair value of this award would be
£157,000. With no takeover announced, the award had zero value at 31 December
2022.
2018 LTIP 2019 LTIP - management team 2019 LTIP other staff 2021 LTIP 2022 Total
LTIP
Balance as at 31 December 2020 421,805 274,728 116,560 - 813,093
Issued in the year - - - 109,448 - 109,448
Exercised in the year (421,805) - - - (421,805)
Lapsed in the year - - (9,009) - (9,009)
Balance as at 31 December 2021 - 274,728 107,551 109,448 - 491,727
Issued in the year - - - - 271,977 271,977
Exercised in the year - (274,728) (107,551) - (382,279)
Lapsed in the year - - - - -
Balance as at 31 December 2022 - - - 109,448 271,977 381,425
Exercisable at year end - - - - -
2020 Long-term incentive plan
The Directors implemented the 2020 long-term incentive plan (2020 LTIP) in
December 2020 to incentivise the management team as well as align their
interests with those of shareholders through enhancing shareholder value. This
scheme replaced the 2016 LTIP which had vested and was exercised by the
majority of the management team during 2020.
The 2020 LTIP pool principles state that the value of the awards will be
driven by the total return to shareholders over (i) 1 January 2020 to 31
December 2023 (the first measurement period) and (ii) 1 January 2020 to 31
December 2024 (the second measurement period).
In the event that total return to shareholders over the first measurement
period is 7% p.a. (Performance Hurdle) or more, a maximum related plan pool of
value equal to 7.5% of such total return may arise. In the event that total
return to shareholders is more than the Performance Hurdle over the second
measurement period, a maximum of 15% of such total return to shareholders may
arise (less any pool value distributed under the awards in respect of the
first measurement period).
Return to shareholders for such purposes shall be measured from a base value
of £165,706,250, being the 90-day average market capitalisation of the
Company to 1 January 2020, to the respective 90-day market capitalisation
averaging periods at each of the measurement periods and shall include the
value of dividends (assumed reinvested) and other capital (if any) returned.
Appropriate adjustments to the required minimum 7% p.a. level of growth in
return shall be made in respect of any capital raised during the measurement
periods.
IFRS 2: Share-based payments sets out the criteria for an equity-settled
share-based payment, which has market performance conditions. The 2020 LTIP
meets these criteria and should therefore be recognised at award at fair value
and amortised over the vesting period of four years from the date of award.
The fair value of the 2020 LTIP at award was £5.7 million and as at 31
December 2022 was £10.4 million, which equates to 1,379,482 Gresham House plc
shares at 755 pence.
There is no amount payable by the beneficiaries on exercise and the number of
shares in respect of which the awards may vest when aggregated with those
issuable or issued in respect of awards granted under the 2020 LTIP and any
other Company employees' share scheme, shall not exceed 20% of prevailing
issued share capital in accordance with the AIM Admission circular dated 4
November 2015. Scaling back of awards shall apply to such extent as required
to ensure this limit is not breached.
Livingbridge VC long-term incentive plan
The Livingbridge VC long-term incentive plan is an equity-settled incentive
scheme and considered an acquisition related share-based payment. The
recipients of the scheme will receive up to £2.5 million in aggregate in
Gresham House plc shares based on the three-year period to 31 December 2021.
There is a hurdle to deliver revenues from the Livingbridge VC business of
between £30.9 million and £37.2 million in the three years to 31 December
2021. The maximum amount payable on achieving the £37.2 million hurdle is
£2.5 million and the minimum payable is zero if the £30.9 million hurdle is
not achieved. As at 31 December 2021 the hurdle had been reached and the
full £2.5 million was settled with 185,011 Gresham House plc shares in March
2022.
TradeRisks long-term incentive plan
The TradeRisks long-term incentive plan is an equity settled incentive scheme
and considered an acquisition related share based payment. The recipients of
the scheme will receive 50% of EBITDA above the agreed Housing division (now
known as Real Estate division) target EBITDA over the three year period to 5
March 2023. The fair value of this plan at award was nil.
Mobeus VC long-term incentive plan
The Mobeus VC long-term incentive plan is an equity-settled incentive scheme
and considered an acquisition related share-based payment. The recipients of
the scheme will receive up to £1.3 million in aggregate in Gresham House plc
shares based on the three-year period to 1 October 2024.
Bonus share matching plan
The Company introduced in 2016 a share matching plan linked to the
discretionary annual bonus scheme to encourage management and employees to
invest in the long-term growth of the Company.
Subject to Remuneration Committee approval, management and employees entitled
to a bonus may be permitted (but not required) to defer and reinvest up to 50%
of their annual bonus into ordinary shares which will be released to them
after three years together with any additional matching shares subject to
performance criteria set out below. In 2022 the Remuneration Committee
approved the reinvestment of up to 50% of annual bonuses into ordinary shares
by management and employees subject to a maximum amount of £100,000 (2021:
50% subject to a maximum amount of £100,000).
In the event that the Company achieves a mid-market closing price equal to 7%
per annum compound growth from the date of deferral, the participants will
receive 50% of the matching shares benefit. In the event that the Company's
share price outperforms the FTSE All Share Index from the date of deferral,
the participants will receive 50% of the matching shares.
Shares will be awarded in the ratio one share for each share invested. In the
event that this performance condition is not met, the participants will
receive only the ordinary shares acquired with the deferred bonus.
The bonus shares to be awarded after the three-year period and subject to
performance conditions have been fair valued using a Monte Carlo simulation.
The key variables include the risk-free rate of 1.35% and volatility of the
Company share price of 26%. The fair value of the matching shares relating to
the 2022 bonuses is £933,000 and will be amortised over the three-year
vesting period.
In 2022, the 2018 bonus share matching scheme vested on 7 March 2022 and
performance conditions were met with 101,666 gross shares vested with a
value of £831,000.
The deferred shares purchased and potential matchings shares at vesting
currently outstanding as at 31 December 2022 were:
Number of shares BSM 2018 BSM 2019 BSM 2020 BSM 2021
Awarded Mar 2019 Mar 2020 Mar 2021 Mar 2022
Vesting date Mar 2022 Mar 2023 Mar 2024 Mar 2025
Opening deferred shares acquired 51,964 142,949 201,141 -
Deferred shares settled (51,964) (5,089) (11,129) (4,300)
Deferred shares acquired - - - 298,338
Closing deferred shares - 137,860 190,012 294,038
Opening matching shares 51,964 142,949 201,141 -
Matching shares awarded - - - 294,038
Lapsed in the period (4,092) (6,381) (9,677) (29,570)
Matching shares settled (47,872) (4,523) (6,491) -
Closing matching shares - 132,045 184,973 264,468
Matching shares in the table above represent the matching shares that could be
awarded should the performance conditions be met at the vesting date. The
number of shares included above represents the gross number of shares required
to settle the awards.
Save as you earn (SAYE) scheme
In 2018 the Remuneration Committee approved a SAYE scheme for the benefit of
all employees of the Group whereby employees can save up to £500 per month
over a three-year period. At the end of the three-year period the employees
have an option to purchase Company shares at the agreed exercise price or
receive their savings in cash. The exercise price for the 2022 scheme is
665.6 pence. The following table outlines the maximum number of shares under
the SAYE scheme:
Shares under option Fair value of option (pence) Exercise price (pence)
2020 SAYE scheme 74,567 104 399
2021 SAYE scheme - - -
2022 SAYE scheme 138,422 327 665.6
212,989
106,226 SAYE options in relation to the 2019 SAYE scheme were exercised in the
year at an exercise price of 373 pence.
For all share-based payment awards the performance conditions and employment
conditions as specified per scheme are required to be met at the vesting dates
otherwise the awards lapse or are forfeited accordingly. Specific details
are included in the schemes above.
29 Reserves
2022 2021
Share premium account Merger reserve Treasury shares Foreign exchange reserve Retained reserves Share premium account Merger reserve Treasury shares Foreign exchange reserve Retained reserves
Group 39,328 24,811 (51) £'000 £'000 £'000 £'000 £'000
Balance as at 1 January - - - (158) 73,032 60,061 19,981 - - 8,402
Profit/(loss) and total comprehensive income - - - 638 10,706 - - - (158) 11,935
Issue of shares - 608 (1,041) - 39,267 4,830 (51) - -
Share-based payments (3,583) - - - - (5,424)
Cancellation of share premium - - - - - (60,000) - - - 60,000
Dividends paid - - - - (3,815) - - - - (1,881)
As at 31 December 39,328 25,419 (1,092) 480 76,340 39,328 24,811 (51) (158) 73,032
2022 2021
Share premium account Merger reserve Retained reserves Share premium account Merger reserve Retained reserves
Company £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 January 39,328 24,811 60,704 60,061 19,981 9,257
Loss and total comprehensive income - - (3,996) - - (1,695)
Issue of shares - 608 - 39,267 4,830 -
Share-based payments - - 767 - - (4,977)
Cancellation of share premium - - - (60,000) - 60,000
Dividends paid - - (3,815) - - (1,881)
As at 31 December 39,328 25,419 53,660 39,328 24,811 60,704
2022 2021
Non-controlling interest: £'000 £'000
Balance as at 1 January 1,075 811
Interest in trading result for the year 20 (3)
Interest in investments - securities - 26731
As at 31 December 1,095 1,075
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share premium account Amount subscribed for share
capital in excess of nominal value.
Merger reserve Represents the
difference between the value of shares issued by the Company in exchange for
the value of shares acquired in respect of the acquisition of subsidiaries
accounted for under the acquisition method.
Treasury shares Weighted
average cost of own shares held in treasury and by the GH EBT
Foreign exchange reserve Gains and losses
arising on retranslating the net assets of overseas operations into sterling.
Retained earnings All other net
gains and losses and transactions with owners (e.g. dividends) not recognised
elsewhere.
30 Net asset value per share
Basic 2022 2021
Equity attributable to holders of the parent (£'000) 150,041 146,462
Number of ordinary shares in issue at the end of the period 38,273,996 38,000,819
Number of shares held by the Gresham House Employee Benefit Trust (191,781) (204,007)
38,082,215 37,796,812
Basic net asset value per share (pence) 394.0 387.5
Diluted 2022 2021
Equity attributable to holders of the parent (£'000) 150,041 146,462
Number of ordinary shares in issue at the end of the period 38,273,996 38,000,819
Number of shares held by the Gresham House Employee Benefit Trust (191,781) (204,007)
Number of dilutive shares* 1,705,923 2,150,707
39,788,138 39,947,519
Basic net asset value per share (pence) 377.1 366.6
*Dilutive shares were deemed to have been issued at nil consideration as a
result of shares which could be issued under the bonus share matching plan,
long-term incentive plans and acquisition related share-based payments.
£'000
The movement during the year of the assets attributable to ordinary shares
were as follows:
Total net assets attributable at 1 January 2022 147,537
Total recognised gains for the year 11,364
Share-based payments (3,583)
Issue of shares (365)
Dividends paid (3,815)
Total net assets attributable at 31 December 2022 151,138
31 Notes to the statements of cash flows
a) Reconciliation of operating profit to operating cash flows
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Net operating profit / (loss) after finance costs 7,824 6,721 (2,753) (2,680)
Loss from discontinued operations (177) (14) - -
Interest payable 2,300 214 238 169
Depreciation 1,155 959 779 648
Loss on disposal of property, plant and equipment (44) - (44) (1)
Amortisation 11,248 8,516 503 374
Share-based payments 3,566 3,788 767 -
Other fair value investment movements - - - -
Acquisition related remuneration 1,917 452 - -
27,789 20,636 (510) (1,490)
Increase in long-term receivables (838) (492) - (492)
(Increase)/decrease in current assets (10,077) (7,745) (256) (87)
Increase/(decrease) in current liabilities 672 8,731 727 158
17,546 21,130 (39) (1,911)
b) Non-cash investing and financing activities
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Acquisition of right-of-use assets (Notes 8 and 13) 20 2,794 - 1,752
Partial settlement of business combinations through the issue of shares (Notes 627 24,899 - -
5 and 27)
647 27,693 - 1,752
c) Net debt reconciliation
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash and cash equivalents 32,205 40,252 2,976 23,800
Amounts owed to Group undertakings - - (1,541) (1,136)
Lease liabilities (Note 8) (1,944) (2,441) (1,100) (1,341)
Net cash 30,261 37,811 335 21,323
Group Leases Cash Total
£'000 £'000 £'000
Net cash/(debt) at 1 January 2021 (641) 21,886 21,245
Cash flows 845 18,366 19,211
New leases obtained through business combinations (689) - (689)
New leases (1,970) - (1,970)
Foreign exchange movements 14 - 14
Net (debt)/cash at 31 December 2021 (2,441) 40,252 37,811
Cash flows 553 (8,047) (7,494)
New leases (20) - (20)
Foreign exchange movements (35) - (35)
Net (debt) / Cash at 31 December 2022 (1,943) 32,205 30,262
Company Net borrowings Leases Cash Total
£'000 £'000 £'000 £'000
Net (debt)/cash at 1 January 2021 (4,651) (211) 7,826 2,964
Cash flows 3,515 604 15,974 20,093
New leases - (1,734) - (1,734)
Net cash/(debt) at 31 December 2021 (1,136) (1,341) 23,800 21,323
Cash flows 756 283 (20,824) (19,785)
Non-cash intercompany movements (774) - - (774)
Other movements - (42) - (42)
Net (debt) / Cash at 31 December 2022 (1,154) (1,100) 2,976 722
32 Financial instruments
The Group consists of the Company and subsidiary undertakings whose principal
activities are asset management.
The Group's financial instruments, which are held in accordance with the
Group's objectives and policies, comprise:
(i) securities consisting of listed and unlisted equity
shares;
(ii) a portfolio of listed and unlisted fixed income securities;
(iii) cash, liquid resources and short-term debtors and creditors
that arise directly from its operational activities; and
(iv) short-term and long-term borrowings.
As at 31 December 2022 the following categories of financial instruments were
held by:
Group 2022 2021
Assets at amortised cost Assets at fair value through profit or loss Assets at amortised cost Assets at fair value through profit or loss
Financial assets per Statement of Financial Position £'000 £'000 £'000 £'000
Investments - 19,912 3,537 13,560
Loans and receivables - 3,036 - -
Trade and other receivables - current and non-current 21,187 - 11,627 9,748
Accrued income and other debtors 21,217 - 10,608 -
Cash and cash equivalents 32,205 - 40,252 -
74,609 22,948 66,024 23,308
2022 2021
Other financial liabilities at amortised cost Liabilities at fair value through profit or loss Other financial liabilities at amortised cost Liabilities at fair value through profit or loss
Financial liabilities per Statement of Financial Position £'000 £'000 £'000 £'000
Trade and other payables - short-term 28,390 10,111 27,950 12,494
Other creditors - long-term 1,154 3,752 1,798 10,165
29,544 13,863 29,748 22,659
Company 2022 2021
Assets at amortised cost Assets at fair value through profit or loss Assets at amortised cost Assets at fair value through profit or loss
Financial assets per Statement of Financial Position £'000 £'000 £'000 £'000
Investments - 12,733 3,537 8,308
Loans and receivables - 3,036 - -
Accrued income and other debtors 2,181 - 1,280 -
Amounts owed by Group undertakings 26,887 - 16,510 -
Cash and cash equivalents 2,976 - 23,800 -
32,044 15,769 45,127 8,308
2022 2021
Other financial liabilities at amortised cost Liabilities at fair value through profit or loss Other financial liabilities at amortised cost Liabilities at fair value through profit or loss
Financial liabilities per Statement of Financial Position £'000 £'000 £'000 £'000
Trade and other payables - short-term 911 - 519 -
Trade and other payables - long-term 447 - 1,058 -
Other loans - short and long-term 1,541 - 1,136 -
Bank loans - short and long-term - - - -
2,899 - 2,713 -
The carrying value of loans and receivables and other financial liabilities
are not materially different to their fair values. The Group's activities
expose it to various types of risk that are associated with the financial
instruments and markets in which it invests. The main risks to which the Group
is exposed are market price risk, credit risk, interest rate risk and
liquidity risk. The nature and extent of the financial instruments outstanding
at the Statement of Financial Position date and the risk management policies
employed by the Group are summarised below.
Market price risk
Market price risk is the risk that changes in market prices will adversely
affect the Group's income due to a decline in the underlying value of assets
under management, resulting in lower fees.
The objective of market price risk management is to manage and control market
price exposure, while optimising the return on risk. The Group manages
strategic equity funds, which are exposed to market prices. Forestry asset
management fees are not linked directly to market prices.
Market price risk arises from uncertainty about the future prices of financial
instruments held within the Group's portfolio. It represents the potential
loss that the Group might suffer through holding market positions in the face
of market movements. The investments in equity and fixed interest stocks of
unquoted companies are not traded and as such the prices are more uncertain
than those of more widely traded securities.
Unquoted investments are valued as per accounting policy (j) in these
financial statements. Regular reviews of the financial results, combined with
close contact with the management of these investments, provides sufficient
information to support these valuations.
Foreign currency risk
The Group is not materially exposed to currency risk as its assets and
liabilities are substantially denominated in Sterling.
Credit risk
Credit risk is the risk that a counterparty will fail to discharge an
obligation or commitment that it has entered into with the Group.
The Group's maximum exposure to credit risk is:
2022 2021
£'000 £'000
Loan stock investments 3,036 3,537
Deferred receivable - short and long-term 21,217 9,748
Trade and other receivables - short-term 11,216 11,627
Accrued income and other debtors 9,622 10,608
Cash and cash equivalents 32,205 40,252
77,296 75,772
The Group has an exposure to credit risk in respect of both loan stock
investments and other loans, most of which have no security attached to them,
or where they do, such security will rank after any bank debt. The Company's
exposure to credit risk is restricted to investments, cash and cash
equivalents, other loans, amounts owed by Group undertakings and accrued
income totalling £47,813,000 (2021: £45,127,000).
Cash and cash equivalents consist of cash in hand and balances with banks. To
reduce the risk of counterparty default the Group deposits its surplus funds
in approved high-quality banks.
The following table shows the maturity of the loan stock investments and other
loans referred to above:
2022 2021
Loan stock investments £'000 £'000
Repayable within: - 1 year 3,036 3,537
1-2 years - -
2-3 years - -
3-4 years - -
4-5 years - -
3,036 3,537
As at 31 December 2022 loan stock investments totalling £nil (2021:
£858,000) were impaired and provided for.
As at 31 December 2022 other loans totalling £nil (2021: £54,000) were
impaired and provided for.
There is potentially a risk whereby a counterparty fails to deliver securities
which the Company has paid for or pay for securities which the Company has
delivered. This risk is considered to be small as where the transaction is in
respect of quoted investments the Company uses brokers with a high credit
quality and where the transaction is in respect of unquoted investments, these
are conducted through solicitors to ensure that payment matches delivery.
Interest rate risk
The Group's fixed and floating interest rate securities, equity, preference
equity investments and loans and net revenue may be affected by interest rate
movements. Investments in small businesses are relatively high-risk
investments which are sensitive to interest rate fluctuations.
The Group's assets include fixed and floating rate interest instruments as
detailed below. The Group is exposed to interest rate movements on its
floating rate liabilities.
The interest rate exposure profile of the Group's financial assets and
liabilities as at 31 December 2022 and 2021 were:
Group Non-interest-bearing assets/ liabilities Fixed rate assets Floating rate assets Fixed rate liabilities Floating rate liabilities Net total
As at 31 December 2022 £'000 £'000 £'000 £'000 £'000 £'000
Investments 19,912 3,036 - - - 22,948
Cash - - 32,205 - - 32,205
Trade and other receivables 21,187 - - - - 21,187
Accrued income and other debtors 21,217 - - - - 21,217
Creditors
- falling due within 1 year (27,600) - - (790) - (28,390)
- falling due after 1 year - - - (1,154) - (1,154)
34,716 3,036 32,205 (1,944) - 68,013
Non-interest-bearing assets/ liabilities Fixed rate assets Floating rate assets Fixed rate liabilities Floating rate liabilities Net total
As at 31 December 2021 £'000 £'000 £'000 £'000 £'000 £'000
Investments 13,560 3,537 - - - 17,097
Cash - - 40,252 - - 40,252
Trade and other receivables 21,375 - - - - 21,375
Accrued income and other debtors 10,608 - - - - 10,608
Creditors
- falling due within 1 year (27,307) - - (643) - (27,950)
- falling due after 1 year - - - (1,798) - (1,798)
18,236 3,537 40,252 (2,441) - 59,584
Non-interest-bearing assets comprise the portfolio of ordinary shares, dealing
securities and non-interest-bearing loans.
Fixed rate assets comprise fixed rate loans, unsecured loans and loans
repayable on demand, with a weighted average interest rate of 15% (2021:
15.0%).
Floating rate assets and floating rate liability loans are subject to interest
rates which are based on SONIA and bank base rates.
Fixed rate liabilities include lease creditors.
The interest rate exposure profile of the Company's financial assets and
liabilities as at 31 December 2022 and 2021 were:
Company Non-interest-bearing assets/ liabilities Fixed rate assets Floating rate assets Fixed rate liabilities Floating rate liabilities Net total
As at 31 December 2022 £'000 £'000 £'000 £'000 £'000 £'000
Investments - securities 12,733 3,038 - - - 15,771
Cash - - 2,976 - - 2,976
Accrued income and other debtors 2,181 - - - - 2,181
Amounts owed by Group undertakings 26,887 - - - - 26,887
Creditors
- falling due within 1 year (1,799) - - (653) - (2,452)
- falling due after 1 year - - - (447) - (447)
40,002 3,038 2,976 (1,100) - 44,916
Non-interest-bearing assets/ liabilities Fixed rate assets Floating rate assets Fixed rate liabilities Floating rate liabilities Net total
As at 31 December 2021 £'000 £'000 £'000 £'000 £'000 £'000
Investments - securities 8,308 3,537 - - - 11,845
Cash - - 23,800 - - 23,800
Accrued income and other debtors 1,280 - - - - 1,280
Amounts owed by Group undertakings 16,510 - - - - 16,510
Creditors
- falling due within 1 year (236) - - (283) (1,136) (1,655)
- falling due after 1 year - - - (1,058) - (1,058)
25,862 3,537 23,800 (1,341) (1,136) 50,722
Although the Group holds investments that pay interest, the Board does not
consider it appropriate to assess the impact of interest rate changes upon the
value of the investment portfolio as interest rate changes are only one factor
affecting market price and the impact is likely to be immaterial. The Group
had no bank borrowings at the year end so the sensitivity of interest payable
to changes in interest rates was not relevant in 2022. Any change to the
interest rates on the floating rate assets and liabilities is immaterial to
the Group.
Liquidity risk
The investments in equity investments in Aquis Exchange traded companies may
be difficult to realise at their carrying value, particularly if the
investment represents a significant holding in the investee company.
Similarly, investments in equity and fixed interest stocks of unquoted
companies that the Company holds are only traded infrequently. They are not
readily realisable and may not be realised at their carrying value where there
are no willing purchasers.
The Group has in place a revolving credit facility which it has available to
manage liquidity risk as required.
The table below analyses the Group's financial liabilities into relevant
maturity groupings based on the remaining period at the Statement of Financial
Position date to the expected maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows.
As at 31 December 2022 Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years
£'000 £'000 £'000 £'000
Leases 874 632 464 220
Trade payables 2,328 - - -
Accruals 24,612 - -
Contingent consideration 7,939 7,374 1,114 -
Other creditors 2,006 - - -
37,759 8,006 1,578 220
As at 31 December 2021 Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years
£'000 £'000 £'000 £'000
Leases 644 863 947 335
Trade payables 742 - - -
Accruals 24,195 - - -
Contingent consideration 8,955 7,195 5,361 -
Other creditors 2,955 - - -
37,491 8,058 6,308 335
Capital risk management
The Group manages its capital to ensure that entities within the Group and the
Company will be able to continue to trade in an orderly fashion whilst
maintaining sustainable returns to shareholders.
The capital structure of the Group and the Company consists of short and
long-term borrowings as disclosed in Notes 23 and 25, cash and cash
equivalents and equity attributable to equity shareholders of the Company
comprising issued share capital, share premium, merger reserve, treasury
shares, foreign exchange reserve and retained reserves as disclosed in Notes
27, 28 and 30. The Board reviews the capital structure of the Group and the
Company on a regular basis to ensure it complies with all regulatory capital
requirements. The financial measures that are subject to review include cash
flow projections and the ability to meet capital expenditure and other
contracted commitments, projected gearing levels and interest covenants,
although no absolute targets are set for these.
The Group aims to hold sufficient cash to fulfil its requirements with respect
to regulatory capital. During the year the Group and its subsidiary entities
complied with all regulatory capital requirements.
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Debt (1,944) (2,441) (1,100) (2,477)
Amounts owed by Group undertakings - - 25,346 16,510
Cash and cash equivalents 32,205 40,252 2,976 23,800
Net assets 151,138 147,537 127,975 134,343
Net cash 30,261 37,811 27,222 37,833
Net cash as a % of net assets 20.0% 25.6% 21.27% 28.2%
33 Fair value measurements
Valuation inputs
IFRS 13 Fair Value Measurement - requires an entity to classify its financial
assets and liabilities held at fair value according to a hierarchy that
reflects the significance of observable market inputs. The classification of
these assets and liabilities is based on the lowest level input that is
significant to the fair value measurement in its entirety. The three levels of
the fair value hierarchy are defined below.
Quoted market prices - Level 1
Financial instruments, the valuation of which is determined by reference to
unadjusted quoted prices for identical assets or liabilities in active markets
where the quoted price is readily available, and the price represents actual
and regularly occurring market transactions on an arm's length basis. An
active market is one in which transactions occur with sufficient volume and
frequency to provide pricing information on an ongoing basis.
Valuation technique using observable inputs - Level 2
Financial instruments that have been valued using inputs other than quoted
prices as described for Level 1 but which are observable for the asset or
liability, either directly or indirectly. Loans from the development project
is at Level 2.
Valuation technique using significant unobservable inputs - Level 3
Financial instruments, the valuation of which incorporates significant inputs
for the asset or liability that are not based on observable market data
(unobservable inputs). Unobservable inputs are those not readily available in
an active market due to market illiquidity or complexity of the product. These
inputs are generally determined based on observable inputs of a similar
nature, historical observations on the level of the input or analytical
techniques.
Where investments are in a fund, the net asset value of the fund is used to
determine the fair value of the investment. The net asset value is typically
prepared by the manager of that specific fund and provided to the Group as an
investor. The Group reviews the valuation and uses this as the Level 3
assessment of fair value.
The valuation techniques used by the Company for Level 3 financial assets can
be found in accounting policy (j) (ii).
Investments in the unlisted securities includes investments in four separate
funds and one unlisted company where the valuation methodology is considered a
Level 3 assessment.
One of the funds invests in a large number of forestry assets. The forestry
assets are held at fair value in the underlying fund. An independent
valuation of the forests within the underlying fund is performed annually by
forestry valuation experts by reference to comparable market transactions for
each underlying forestry asset that considers factors including location,
maturity of the forest and size. There is no reasonable change in the inputs
in each of the underlying assets, which would give rise to a material
adjustment to the fair value of the investment.
The remaining three investments in funds are measured using the fair value of
the net asset value provided by the manager of those funds, which are reviewed
by the appropriate investment committee and the inputs used are unobservable.
The valuations provided by the managers have been reviewed for appropriateness
with reference to market observable data where relevant and concluded to not
be materially different to that proposed.
The unlisted company valuation has been prepared in line with the
International Private Equity Valuation Guidelines.
Further details of the securities portfolio can be found in Note 12 of these
financial statements.
An analysis of the Group's and Company's assets measured at fair value by
hierarchy is set out below.
Group 31 December 2022 Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Financial assets at fair value through profit and loss
Investments
- Equities 19,912 9,710 - 10,202
- Loans 3,036 - 3,036
22,948 9,710 3,036 10,202
31 December 2021 Level 1 Level 3
£'000 £'000 £'000
Financial assets at fair value through profit and loss
Investments
- Equities 13,560 6,361 7,199
13,560 6,361 7,199
Company 31 December 2022 Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Financial assets at fair value through profit and loss
Investments
- Equities 12,733 8,210 - 4,523
- Loans 3,036 - 3,036 -
15,769 8,210 3,036 4,523
31 December 2021 Level 1 Level 3
£'000 £'000 £'000
Financial assets at fair value through profit and loss
Investments
- Equities 8,308 4,923 3,385
8,308 4,923 3,385
Set out below is a reconciliation of financial assets measured at fair value
based on Level 3.
Group Investments - securities Trade and other receivables Total
31 December 2022
£'000 £'000 £'000
Opening balance 7,199 7,199
Total gains: - -
In Statement of Comprehensive Income 469 - 469
Additions 3,042 - 3,042
Disposals (511) - (511)
Closing balance 10,199 - 10,199
Total gains for the year included in comprehensive income for assets held at 468 - 468
the end of the reporting period
Group Investments - securities Trade and other receivables Total
31 December 2021
£'000 £'000 £'000
Opening balance 3,925 - 3,925
Total gains:
In Statement of Comprehensive Income 1,956 - 1,956
Additions 2,319 - 2,319
Disposals (1,001) - (1,001)
Closing balance 7,199 - 7,199
Total gains for the year included in comprehensive income for assets held at 1,227 - 1,227
the end of the reporting period
Level 3 fair value measurements are these derived from valuation techniques
that include significant inputs that are not based on observable market data.
As at 31 December 2022, the Group has £10.2 millions in Level 3 Assets
measured at fair value, of which £7.3 millions are in Real Assets Funds and
£2.9 millions in Private Equity investments.
The Group investments in Real Assets Funds includes Gresham House Growth Fund,
Gresham House BSI Housing and Infrastructure LPs, Gresham House BSIF II LP and
Gresham House ReSI LP. The Group uses the funds net asset value (NAV) as the
basis for their fair value with valuation performed on an annual basis by an
external valuer in accordance with industry valuation standards.
The Private Equity investments include a Strategic Public Equity Coinvestment
and a warehoused private equity investment. The Strategic Public Equity
Coinvestment valuation was based on the latest external manager partner
statement. The warehoused private equity investment valuation uses the
entity's earnings and comparable industry earnings multiple in line with
industry standard valuation techniques.
Realised and unrealised gains and losses for Level 3 Assets are reported in
Gains and losses on investments held at fair value in the Consolidated
Statement of Comprehensive Income.
Company Investments Total
31 December 2022
£'000 £'000
Opening balance 3,385 3,385
Total gains: (143) (143)
In Statement of Comprehensive Income
Additions 1,792 1,792
Disposals (512) (512)
Closing balance 4,522 4,522
Total gains for the year included in comprehensive income for assets held at (143) (143)
the end of the reporting period
Company Investments Total
31 December 2021
£'000 £'000
Opening balance 970 970
Total gains:
In Statement of Comprehensive Income 293 293
Additions 2,122 2,122
Disposals - -
Closing balance 3,385 3,385
Total gains for the year included in comprehensive income for assets held at 293 293
the end of the reporting period
The only financial liabilities held at fair value relate to the deferred
consideration on the acquisition of TradeRisks Limited, Appian Asset
Management Limited, the DevCo Projects, the acquisition of the fund and
investment management businesses of Livingbridge VC LLP and the acquisition of
the VCT business of Mobeus amounting to £13,864,000 (2021: £22,659,000).
This is measured using Level 3 valuation techniques. There were no such
financial liabilities held at fair value within the Company.
Price risk sensitivity
Based on values as at 31 December 2022 a 10% movement in the fair values of
100% of the Group's equity investments would be equivalent to a movement of
£2,245,000 in both profit and net assets.
34 Related party transactions
Group
During the prior year management fees totalling £690,675 and performance fees
of £4,222,289 were invoiced to Gresham House Strategic plc (GHS), now known
as Rockwood Strategic plc, a company in which the Group had a 23.4% interest.
The Group sold its entire holding in GHS in March 2022 and had no balances
outstanding at the end of 2022.
Company
During the year the following transactions occurred with Group companies:
31 December 2022
Advanced to Received from Interest charged Balance due from / (due to)
£ £ £ £
Security Change Limited 13,804 5,264 - (1,127,364)
Gresham House Finance Limited - - - 221,400
Gresham House (Nominees) Limited 11,000 - - 22,202
Gresham House Holdings Limited 30,868,005 19,577,397 - 22,243,750
Gresham House EBT 1,632,455 - - 1,632,455
Worcestershire Solar 1 Ltd 2,091,903 2,091,903
Warwickshire Solar 1 Ltd 554,944 773,944 - (219,000)
Lister Battery Limited 30,200 - 54,499 723,995
Monets Garden Battery Limited 30,176 - 63,933 854,053
Arbroath Limited 1,770 38,469 2,541 -
Coupar Limited - - 1,387 20,038
Cockenzie Storage Limited 104,934 - - 104,934
Hazelboro Limited 445,250 263,484 73,742 223,506
During the year the Company has income of £347,000 from DevCo Group Entities.
31 December 2021
Advanced to Received from Interest charged Balance due from / (due to)
£ £ £ £
Security Change Limited 1,909 3,517,060 - (1,135,904)
Gresham House Finance Limited - - - 221,400
Gresham House (Nominees) Limited 7,000 - - 11,202
Gresham House Holdings Limited 44,386,455 37,898,090 - 10,953,142
GridReserve Limited - 741,152 - -
Lister Battery Limited 431,322 300,000 70,393 725,657
Monets Garden Battery Limited 554,801 300,000 73,195 856,014
Arbroath Limited 626,152 612,243 20,249 34,158
Coupar Limited 410,205 405,066 13,522 18,651
Enderby Storage Limited 250,563 198,433 5,313 57,443
Grendon Storage Limited 276,442 - 2,499 278,941
Melksham East & West Storage Limited 1,477,417 1,292,833 32,674 217,258
Penwortham Storage Limited 840,879 781,857 18,900 77,922
West Didsbury Storage Limited 522,751 485,543 3,012 40,220
Low Farm Solar Limited 2,345,000 - - 2,345,000
Siddington Solar Farm Limited 1,345,000 - - 1,345,000
35 Subsequent Events
Post period end the Group sold its investment in Worcestershire Solar 1 Ltd
and received cash of £6.2 million.
35 Subsequent Events
Post period end the Group sold its investment in Worcestershire Solar 1 Ltd
and received cash of £6.2 million.
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