Interim results
14/09/2023 07:00
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RNS Number : 3801M Gresham House PLC 14 September 2023
Gresham House plc
("Gresham House," "the Group" or "the Company")
Interim results for the six months ended 30 June 2023
Continued AUM growth across asset classes; strong long-term investment
performance for clients
Gresham House plc, (AIM: GHE), the specialist alternative asset manager, is
pleased to announce its unaudited interim results for the six months ending 30
June 2023. Assets under management (AUM) rose 5% to £8.3 billion, with an 8%
rise in adjusted operating profit to £14.2 million and an adjusted operating
margin of 34%. The Group is seeing continued AUM growth into the second half
of 2023, alongside strong long-term absolute and relative investment
performance for clients.
Financial highlights
* Assets under management (AUM) organic growth of 5% (£0.5 billion) in H1 to
£8.3 billion
* Net core income up 12% to £41.6 million (H1 2022: £37.2 million)
* Adjusted operating profit up 8% to £14.2 million (H1 2022: £13.2 million)
* Adjusted operating margin of 34% (H1 2022: 35%)
* Return on capital employed (ROCE) of 19.0% on an annualised basis in H1 in
line with 20.0% medium-term targets (H1 2022: 15.5%)
* Balance sheet cash used to continue to invest in and develop projects to grow
long-term AUM and to cornerstone new funds
Strategic highlights
* Continued outperformance of targets for the majority of funds
* Continued progress with international expansion including the Irish Strategic
Forestry Fund and the development of international products
* Greater recognition of the Gresham House brand across the industry, winning
and nominated for prestigious industry awards and establishing the business as
a "go to" for alternative investments aligned with clients' sustainability
objectives
Sustainability highlights
* Gresham House partnered with Pensions for Purpose to produce a timely Impact
Lens report on Natural Capital and Biodiversity - leading debate in this
critical area
* Winner of Environmental Finance Sustainable Investment Awards for TCFD Report
of the Year
* Continued progress against our Corporate Sustainability Strategy and stated
goal of becoming a leader in ESG investing by 2025
Outlook
* Despite the market slowdown for fundraising, growth has continued into the
second half of 2023, with a clear pathway for further momentum from here
across all our asset classes
* Identified pipeline of potential investors for funds targeting closes in the
second half of the year
* Continued investment into the Group's long-term strategic plan beyond GH25
* In late 2023 or early 2024, the Gresham House journey is set to continue under
private ownership with the same talented and dedicated teams delivering strong
financial and non-financial returns for clients
Commenting on the results, Tony Dalwood, Chief Executive of Gresham House,
said:
"In the first six months of 2023, we have delivered further growth in the
business and we have continued to advance our international expansion
ambitions. We now have a strong and firmly established market position,
endorsed by recent industry awards wins and nominations as a leading provider
of alternative investment solutions spanning natural capital, renewable energy
and strategic equity. We now look beyond the GH25 plan towards the next ten
years and a new chapter for Gresham House as a private company targeting
continued strong investment performance from our range of specialist asset
classes."
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
I am writing to update you on the interim results for the first half of 2023,
a period of continued activity and progress for Gresham House. As shareholders
are aware, on 17 July 2023 the Boards of Gresham House plc and Seed Bidco
Limited ("Bidco"), a newly incorporated entity formed by funds advised by
Searchlight Capital Partners L.P. and its affiliates ("Searchlight") for the
purposes of making an offer for Gresham House, announced that they had reached
agreement on the terms of a recommended final(( 1 )) cash offer pursuant to
which Bidco would acquire the entire issued and to be issued share capital of
Gresham House (the "Acquisition"). At Gresham House's General Meeting ("GM")
on 30 August 2023, shareholders approved the Acquisition (subject to
regulatory approvals and final Court sanction).
Incorporated back in 1857, our business has enjoyed many successful chapters
over the years, the most recent of which began with the management buy-in,
late in 2014 and the start of becoming a regulated alternative asset
management business. From managing approximately £250 million on behalf of
its clients in December 2015, Gresham House today actively manages
approximately £8.3 billion of assets, across a footprint that spans the UK,
Ireland, Australia and New Zealand, on behalf of institutions, charities and
endowments, family offices, private individuals and their advisers. Gresham
House's growth trajectory is testament to its successful investment in its
people and platforms, which has delivered a sustainable long-term investment
business, with a clear focus on making a positive impact on its clients who
are increasingly looking for financial returns alongside positive ESG
outcomes.
Over the past eight years under this management team, the Company has worked
tirelessly to drive financial returns and to achieve our clients' investment
goals. We have successfully established leading positions within specialist
sustainability-focused areas of the growing alternative assets market and, as
we wait for the Acquisition to complete in late 2023 or early 2024, Gresham
House continues to operate as normal. Our teams remain committed to providing
the same high-quality service to our clients, with the same rigorous
processes, the same intensity and the same alignment.
The result of this hard work and completion of the Acquisition would deliver a
total return to shareholders of over 300% since December 2014, significantly
outperforming the 55% total return for the FTSE All Share index over the same
period.
The people within Gresham House have been remarkable and, through their
efforts, we have made strong strategic progress against our GH25 objectives,
our five-year plan. Our teams have successfully balanced investment in future
growth with achieving sustained profitability and growth targets. We have also
made significant strides in international expansion, making satisfactory
progress against our 2023 targets with further plans for inorganic activity in
the second half of the year.
Financial Results
During the first half of 2023, we achieved 5% growth in AUM to £8.3 billion,
all through organic inflows. Thanks to our team's dedication and the
attractiveness of our asset classes to institutional, wholesale and retail
investors, every division experienced net positive inflows and funds were
raised across various strategies including battery storage, forestry, shared
ownership housing, our UK equity funds, and VCTs. The Company ends the
six-month period to 30 June 2023 with a strong balance sheet position, with
£32.5 million in cash and no borrowings.
Our financial results for H1 2023 showcase our continued growth and strength.
Net core income increased by 12% to £41.6 million, compared to £37.2 million
in H1 2022. Similarly, our adjusted operating profit rose by 8% to £14.2
million, showing steady progress. Fundraising in 2023 is weighted towards H2,
which means that the relevant funds will then be deployed appropriately,
thereby having a positive impact on management fee revenues and transaction
fees in H2 2023. As a result, performance for the full year remains in line
with management expectations.
Sustainability
At Gresham House, we understand the importance of sustainability and our
responsibility towards the environment and society. We remain committed to
providing solutions to clients looking for exposure to these themes as they
seek to generate financial returns. We have been focused recently on more
clearly defining our Natural Capital platform and product offering and
continue to make good progress against our corporate sustainability strategy.
This is positively driving ESG developments through enhanced reporting, new
policies, and monitoring. Our TCFD reporting has been recognised with awards
for best practice, and we have partnered with Pensions for Purpose and
commissioned their Impact Lens report on Natural Capital and Biodiversity.
Shareholders
The shareholder vote at the GM on 30 August 2023 in relation to the
Acquisition represents a positive step and we will keep shareholders updated
as we progress through the process, in compliance with the regulations to
which Gresham House is subject.
Outlook
Looking ahead, the Group's management have started to plan for the long term
through an updated 10-year strategy ambition and we remain confident in our
ability to grow and lead in our specialist long-term asset classes. Our
commitment to delivering excellent investment performance to our clients
remains our top priority. While we recognise the challenges presented by
macroeconomic headwinds, such as rising interest rates, high inflation and
market volatility, we are well-positioned to navigate turbulence in the
markets in which we operate, supported by the resilience of our private real
asset classes and the strong performance of our strategic equity division. We
understand that as a result of wider external factors, institutional investors
are taking more time to commit. Nonetheless, we firmly believe in the
attractiveness of our long-term investment strategies and in our role helping
clients address major global trends including the energy transition, climate
change and the pathway to Net Zero.
Our success is a result of the hard work of our team and their desire to grow
the business while achieving attractive outcomes for our clients, shareholders
and broader stakeholders. We have an exciting pipeline of clients eager to
invest in our funds and look forward to continuing to deliver and outperform
against their financial objectives and to meeting their sustainability
ambitions.
There is much more to come in the next chapter for Gresham House, as the team
remains dedicated to delivering on our strategic goals in GH25 and beyond into
the next decade. I am pleased Searchlight recognise the opportunity set for
Gresham House and are supporting the management team on executing Gresham
House's long term strategic ambitions including continuing to generate
superior investment returns for clients.
Anthony Townsend
Chairman
13 September 2023
Chief Executive's report
Proposed acquisition by Searchlight Capital Partners
On 17 July 2023, the Boards of Gresham House plc and Seed Bidco Limited
("Bidco"), a newly incorporated entity formed by funds advised by Searchlight
Capital Partners L.P. and its affiliates ("Searchlight") for the purposes of
making an offer for Gresham House, announced that they had reached agreement
on the terms of a recommended final(( 2 )) cash offer pursuant to which Bidco
would acquire the entire issued and to be issued share capital of Gresham
House (the "Acquisition") for £11.05 per share. This offer, which was
unanimously recommended by our Board, was approved by shareholders at our
General Meeting on 30 August 2023, subject to regulatory approvals and final
Court sanction. As a result, the Group expects to de-list and execute its
existing strategy with its management team as a private group.
Since the management buy-in of Gresham House in late 2014, the Group has been
transformed from a loss-making investment trust into a profitable, leading
specialist alternative asset manager focused on sustainable investments across
a range of strategies, with expertise covering forestry, real estate,
sustainable infrastructure, renewable energy, battery storage and public and
private equity. Today, Gresham House actively manages £8.3 billion of assets,
across a footprint that spans the UK, Ireland, Australia, and New Zealand, on
behalf of institutions, charities and endowments, family offices, private
individuals, and their advisers.
We set out our strategy to grow AUM, margins and deliver returns on capital
employed though our strategic targets. Looking back over the last eight years
we can see that we've made great progress from a standing start. This has been
delivered through a combination of organic growth and acquiring eight
businesses in a disciplined manner to deliver returns on investment in excess
of 15%.
We have also improved operating margins, reflecting the improvement in the
quality of the earnings of the business from -11% in 2017 to 35% at the end of
December 2022.
Searchlight highly values the current structure, strategy and management of
Gresham House and believes that Gresham House has a strong team of talented
employees who will be key to Gresham House's success going forward. The team
has strategic ambitions for the next ten years and are therefore excited about
Gresham House's prospects. Crucially, we look forward to continuing to provide
exceptional service and targeting investment outperformance for our clients
for the next chapter of growth under new and supportive ownership.
Overview of H1 2023
Moving on to our performance in the first half of 2023, Gresham House has
delivered robust results across the Group, in the face of continued market
volatility, rising inflation and interest rates.
Our diversified and innovative portfolio of asset classes continued to deliver
returns, with the majority of investment products outperforming relative to
either their comparator benchmarks or stated target returns, and with a number
of our real assets strategies additionally offering resilience against rising
inflation and interest rates.
In our Real Assets division, Forestry LP returns on long-established funds
have delivered an average 13.7% IRR since inception to 30 June 2023, and for
clients with exposure to battery storage via Gresham House Energy Storage Fund
plc (GRID) the annualised NAV total return since IPO is 14.9% versus the
stated fund target of 8%.
In our Strategic Equity division, the performance of our open-ended equity
funds has been strong despite the challenging environment, and this has been
reflected by positive net inflows in the first half of the year. The LF UK
Multi Cap Income Fund remains the top performing fund in its sector since
inception in 2017, having delivered 58% since launch and 3% YTD (versus 16.5%
and 0.1% respectively for the IA UK Equity Income Index). Strategic Equity
Capital plc (SEC plc) has also continued to deliver very good returns relative
to its peers and the wider sector since Gresham House's public equity team led
by Ken Wotton took over the management of the company. SEC plc has delivered
17.1% NAV Total Return for the year to 30 June 2023, versus 0.7% for the FTSE
Small Cap Total Return ex IT Index.
Meeting, and in many instances exceeding, performance targets for clients has
enabled us to report steady growth, supported by the continued shift in
portfolio allocations to alternatives and real assets.
In H1 2023, we also continued to invest in strategic growth areas while
maintaining our focus on operating margins over the medium term. AUM for the
Group rose 5% to reach £8.3 billion as at 30 June 2023. This growth, notably
wholly organic, has lifted the total AUM figure above the upgraded £8 billion
target set in our GH25 five-year strategy.
Additional fundraising activity since 30 June 2023 has further boosted AUM by
over £60million at time of writing. This includes the £50 million first
close of Gresham House's initial LP as part of the Group's Private Equity
platform to support growth capital investment in the UK & Ireland, which
will seek to leverage the competitive advantage of the Gresham House VCT
platform to provide access to high-potential growth companies. The Group also
raised a further £13 million from private clients for forestry funds.
ROCE for the first half of 2023 was 19.0% (FY 2022: 19.3%), in line with our
GH25 target of 20.0% over the medium term.
Progress on 2023 priorities - Financial
AUM
In H1 2023, we made continued progress towards achieving our GH25 financial
objectives, exceeding our target of £8 billion AUM.
AUM grew 5% to £8.3 billion (2022: £7.8 billion), with net inflows totalling
£0.3 billion. Overall performance added £0.1 billion, with the Forestry and
New Energy divisions offsetting the market driven decline in Real Estate in
the first half of the year. More detail on the movement in AUM by division, by
net fund flows and performance can be found in the financial review.
Our Sustainable Infrastructure strategy, BSIF II, secured a total of £80
million in commitments from Bedfordshire Pension Fund and Staffordshire
Pension Fund in the first half and help to support and accelerate the
deployment of profitable, real asset-based solutions to key environmental and
societal challenges facing the UK.
In New Energy, Centrica committed a £65 million investment to the new Gresham
House Secure Income Renewable Energy & Storage LP (SIRES) at the end of
March.
Gresham House Energy Storage Fund plc (GRID) raised a further £50 million in
May to support its first international acquisition of 160 MW of solar with
collocated four-hour battery energy storage system projects in California.
Whilst the investor retreat from UK equities continued into 2023, due to
concerns around rising energy prices, growing inflation and high interest
rates, our Public Equity investment funds saw net inflows of £36 million, as
we continued to capture market share based on our strong track record in this
asset class.
Our Private Equity funds also remained robust, and the Baronsmead VCTs
announced a successful £50 million fundraise at the end of March 2023. The
funds raised will be used to target new investment opportunities in the short
to medium term and to continue to support the capital requirements of existing
portfolio companies and this crucially important area of growth company
investment.
Fundraising into H2 2023
Across the Group, positive momentum has continued into the second half of the
year, with over £60 million raised since 30 June 2023, and several fund
closes expected as we move further into the second half of the year.
In Forestry, the Irish Strategic Forestry Fund is targeting another close in
H2 2023, with our expanded international investor base helping to deliver
growth and access to the Irish forestry market.
Other fundraising activity in Forestry includes further closes of Gresham
House Forest Fund VI LP and Gresham House Forest Growth & Sustainability
LP in the UK whilst further international activity is also ongoing.
The final close of BSIF II and co-invest vehicles in Sustainable
Infrastructure is scheduled for the end of H2 2023, targeting a total
fundraise of £450 million. In Real Estate, we expect a further close for our
shared ownership housing fund Gresham House Residential Secure Income LP
(ReSI) in H2.
EBITDA margin
In H1 2023, we delivered an operating profit margin in the period of 34%,
compared to 35% at the end of 2022. Investment in senior talent and systems to
strengthen our operational capabilities and to support the long-term growth of
the business has been a strategic priority, alongside maintaining our focus in
H1 2023 on productivity and efficiency.
ROCE
In H1 2023, we continued to effectively utilise the balance sheet and invest
strategically to grow AUM and delivered a ROCE of 19.0% in line with our
medium-term target of 20.0% ROCE.
Progress on 2023 priorities - Strategic
Our strategic objectives fall within the following categories: investment
performance and market share, sustainability, international expansion, market
positioning, and client diversification and depth.
Investment performance and market share
Our performance in H1 2023 continued robustly with a number of funds
delivering in line with, or ahead of, our internal targets.
We continue to maintain leading market shares in specialist areas. Gresham
House is a significant player in battery energy storage as outlined above and
Gresham House Energy Storage Fund plc (GRID) is the largest battery storage
investment trust in the UK and Europe.
We have also maintained our position as the UK's largest forestry asset
manager and we are the seventh largest globally when measured by AUM.
Currently active in the UK, Australia, New Zealand, and Ireland, in H2 2023
the Forestry division is progressing talks to raise an international fund,
along with plans to conclude a further close for the Irish Strategic Forestry
Fund.
In Private Equity, Gresham House is the second largest VCT manager in the UK,
as manager and adviser of the two Baronsmead and four Mobeus VCTs,
respectively.
Leaders in sustainable investing
In sustainability, we have continued to make progress against the pillars of
our Corporate Sustainability Strategy and the priority topics identified for
H1 2023.
As a sustainable investor we are committed to the belief that our clients
should not need to compromise their primary objectives of strong financial
returns in order to meet their sustainability goals. Alongside a keen
sustainability focus within all the Group's investment strategies, we are
setting ourselves at the forefront of the more nascent conversation about
Natural Capital. Our platform offers a suite of investment solutions
predicated on the Group's expertise and experience in sustainable forestry as
well as emerging asset classes within our sustainable infrastructure strategy,
such as habitat banks and vertical farming.
In H1 2023, Gresham House partnered with Pensions for Purpose to produce a
timely Impact Lens report on Natural Capital and Biodiversity, which provides
a review of these asset classes and points to potential growth in investor
appetite for investment solutions in these areas.
In addition, the Task Force on Climate-Related Financial Disclosures (TCFD)
report we published in March 2023 alongside our Sustainable Investment Report
2022 was recognised at the Environmental Finance Sustainable Investment Awards
as TCFD Report of the Year. This is a strong endorsement of our best practice
approach to this increasingly important method of reporting.
International
Our international ambitions are making steady progress, with the planned
further close of the Irish Strategic Forestry Fund scheduled for Q3 2023.
Fundraising is underway for our International Forestry Fund, and we are
working on international segregated mandates, which builds on our existing
presence in Australia, New Zealand and Ireland.
Brand and client diversification and depth
The Gresham House brand has consistently gained in strength and profile,
driven by our market leading and innovative investment strategies, expertise,
and experience, combined with recognition of the value that we deliver to our
stakeholders across our asset classes. This is generating significant client
diversification and depth, with many new fund launches attracting new
institutional and long-term clients. The various wins we outline in the Awards
section below are testament to the reputation Gresham House has achieved for
best-in-class delivery in all areas of the business.
Awards
Since the start of 2023, we have achieved industry recognition by winning a
range of awards, both in relation to our overall strategy and to the
performance of certain specific funds.
* Wealth Briefing European Awards: Specialist Investment Manager with AUM over
£5 billion - Gresham House
* ESG Investing awards: Best ESG Investment Fund, Infrastructure (Private
Markets) - BSIF
* Refinitiv Lipper Fund Awards: Equity UK Small & Mid Cap - Gresham House UK
Smaller Companies
* Citywire UK Awards: UK Equity Income - Gresham House
* Environmental Finance Sustainable Investment Awards: Renewables Fund of the
Year - GRID
* Environmental Finance Sustainable Investment Awards: TCFD Report of the Year -
Gresham House
People
I am proud of our entrepreneurial team and culture which remains a key
differentiator for the business. Whilst cognisant of the need to deliver
operational efficiencies, we have continued to strengthen our operational
effectiveness with the strategic recruitment of leading talent in specific
areas of growth.
In February, our Real Estate division welcomed Mike Adams and Burak Varisli to
lead the division and drive our progress in Build-to-Rent, Shared Ownership,
and age-appropriate housing for older people. We also enhanced our
distribution capabilities with the addition of Alastair Leather and Claire
Glennon over the summer. All have brought deep sector expertise and experience
to Gresham House and are making a notable contribution to the success of the
business.
Outlook
The Board and management team anticipate continued momentum into H2 2023 and
beyond, with a clear path to growth across all our asset classes. We are
developing further breadth and depth in our client base as we demonstrate our
international credentials. We have a pipeline of investors into funds
targeting H2 2023 closes, despite the impact of the current challenging
macroeconomic environment on decision-making timeframes.
Our strong balance sheet ensures that we remain well-positioned to invest in
enhancing our offer to all our stakeholders. We remain buoyant at the
opportunity set and confident that Gresham House will continue to drive the
delivery of its financial and strategic goals, and maintain its leading market
position as Gresham House moves towards the next phase of its growth.
By late 2023 or early 2024, we anticipate that the Gresham House journey will
continue as an exciting new chapter commences under private ownership. As we
grow our client base in the UK, Ireland, and internationally, the same
talented and dedicated teams will continue to serve our clients, supporting
them with the delivery of strong financial and non-financial returns to meet
their objectives. Over the next decade, our investment solutions will be
delivered with an unwavering focus on investment performance combined with
sustainability to align with our clients' ambitions.
Tony Dalwood
Chief Executive
13 September 2023
Sustainability overview
Progress on our Corporate Sustainability Strategy
Our Corporate Sustainability Strategy communicates the objectives we have set
to meet our GH25 ambition to be a leader in sustainable investment. Here we
detail our progress against its three core pillars:
Gresham House as a sustainable investor
Gresham House as a sustainable business and employer
Gresham House as a sustainable corporate citizen
Gresham House as a sustainable investor
For us, sustainable investment means delivering value for investors by
adopting a long-term approach that considers environmental, social and
governance outcomes in our investment decision making and actions. We believe
that sustainable investments drive returns because they are good for people
and the planet.
In this context, we are proud of the progress we have made against our
priority topics during the first half of 2023:
Climate change and pollution
* Improved carbon emissions data and quality associated with our investments,
including a first iteration of a lifecycle carbon analysis (LCA) for our
operational forestry activities
* Reported in line with the recommendations of the Task Force on Climate-Related
Financial Disclosures (TCFD), a year ahead of the mandatory deadline,
providing our key stakeholders with a better understanding of our exposure to
climate-related risks and the climate-related opportunities that we are
pursuing
Natural capital
* Published an impact research paper in collaboration with Pensions for Purpose
to support investors' understanding of how UK assets owners are addressing
natural capital and biodiversity in their investment activities
* Presented an educational session on natural capital to an audience of pension
schemes and their advisers
* Responded to the Taskforce on Nature-related Financial Disclosures (TNFD)
consultation on its Nature-Related Risk & Opportunity Management and
Disclosure Framework v0.4
Risk and compliance
* Published our third annual Sustainable Investment Report
* Mapped modern slavery risks across the supply chains of our Real Assets
division
* Achieved SFDR Article 8 alignment for our Irish Forestry strategy
* Created a Group-wide process to support the implementation of SFDR for new
funds
* Submitted our 2023 Stewardship Code Report to the Financial Reporting Council
* Published our proprietary Impact Framework for our Sustainable Infrastructure
strategies, in line with the recommendations of the Impact Frontiers (formerly
Impact Management Project)
Marketplace responsibility
* Completed an annual audit of our internal ESG processes, policies and ESG
Decision Tools used by investment teams, and ESG content included in
Investment Committee papers
* Finalised the integration of an ESG data provider into the Public Equity
investment process
Supply chain sustainability
* Joined the Solar Energy UK Responsible Sourcing Steering Group to better
understand how peers are addressing supply chain risks and opportunities and
to drive progress in the industry
Moving forward, we are focused on several core priorities including:
* Potentially registering our international forestry fund as our first SFDR
article 9 aligned fund
* Formalising and communicating our Net-Zero strategy
* Expanding our natural capital solutions for investors
* Mapping the modern slavery risks across our Real Assets and improve relevant
supply chain policies and processes in response to findings
* Improving our ESG data collation systems
Gresham House as a sustainable employer and business, and sustainable
corporate citizen
The other two pillars of our Corporate Sustainability Strategy focus on
driving shareholder value by having a positive influence on the environment
and societies our business and our people are a part of, as well as
recognising and honouring our legal, moral, and economic responsibilities to
the communities in which we operate.
Our achievements over the first half of 2023 include:
Commitment to sustainability
* Established an internal Sustainability Working Group to enhance Gresham
House's operational sustainability by improving operational efficiencies at
each office location
* Delivered two internal ESG Lunch & Learn sessions: 'The Future of Food'
and 'How ESG creates value'
Climate change and pollution
* Developed an internal data collation system to improve data accuracy of our
carbon footprint
* Introduced a travel policy with the objective of reducing our work-related
travel emissions
Employment, health, safety and wellbeing
* Offering employees the opportunity to have an annual health check
Community care and engagement
* Initiated new charity partnerships for the next two years
UK:
Royal Society for Blind Children
Campaign Against Living Miserably
Ireland:
Peter McVerry Trust
Jack & Jill Children's Foundation
Financial review
Over the course of the first six-month period in 2023, the Group has
demonstrated the resilience in its asset classes with growth in AUM of £0.5
billion from £7.8 billion at the beginning of the year to £8.3 billion, a 5%
increase and exceeded our GH25 AUM target of £8.0 billion. This growth has
been delivered with net inflows across all divisions, underlining the
performance of our funds and the structural growth in long-term asset classes
that remain attractive to clients.
The Group's net core income in the six-month period increased by 12% to £41.6
million (H1 2022: £37.2 million), with adjusted operating profit increasing
by 8% to £14.2 million compared to £13.2 million for the first half of 2022.
The Group has continued to focus on investing in the business, people and
systems to support the Group's growth trajectory and build on our operational
capabilities. Our operating profit margin for this period stands at 34%, a
marginal adjustment from the 35% in H1 2022, which is attributed to the timing
of fundraising activities and deployment being weighted towards H2 in 2023.
The Group's total comprehensive income grew to £4.5 million compared with
£2.2 million in H1 2022, an increase of 107%. The main drivers of this
improvement were the relative stronger performance of fair value movements on
the balance sheet and the reduction in the tax charge due to movements in the
deferred tax liability.
We have continued to use the Group balance sheet to invest in areas which will
lead to increasing AUM and the generation of long-term management fees.
Assets under management
AUM grew organically by 5% in the first six-month period to £8.3 billion
(December 2022: £7.8 billion).
£ millions AUM Net fund flows(1) Performance Funds acquired/won AUM Total growth
December 2022
June
2023
Strategic Equity
Public Equity 1,066 36 15 - 1,117 5%
Private Equity 791 27 (13) - 805 2%
Subtotal 1,857 63 2 - 1,922 4%
Real Assets
Forestry 3,418 20 72 - 3,510 3%
New Energy & Sustainable Infrastructure 1,778 213 80 - 2,071 16%
Real Estate 794 10 (45) - 759 (4%)
Subtotal 5,990 243 107 - 6,340 6%
Total AUM 7,847 306 109 - 8,262 5%
1. Including funds raised, redemptions and distributions.
Against a backdrop of market volatility, rising inflation and interest
rates, the Group demonstrated the resilience of the asset classes that it
operates in with net fund inflows totalling £306 million across all divisions
and a net improvement in performance of £109 million, delivering the 5%
increase in AUM in the period. The Chief Executive's review provides further
detail on the fundraising activity by fund in the first half of the year.
Real Assets remained resilient and highlighted the diversity in our asset
classes with overall growth in AUM of 6% to £6.3 billion.
Sustainable Infrastructure and New Energy had notable fundraising of £213
million as we continued to raise capital for battery storage (including
collocated battery storage) and sustainable infrastructure funds, which,
alongside increases in the underlying Net Asset Values of the funds of £80
million, grew AUM by 16% in the period to £2.1 billion.
Forestry fundraising for 2023 is weighted towards H2. With £20 million raised
in H1 2023 from institutional investment in the Gresham House Forestry Growth
and Sustainability Fund, combined with increases in the valuation of part of
the forestry portfolio of £72 million, AUM increased by 3% to £3.5 billion.
Real Estate added £10 million through our Irish Real Estate funds, which was
offset by a reduction in performance across the division of £45 million,
reflecting general market movements in the Real Estate sector. H1 2023 AUM
stands at £759 million, down 4% in the period.
Strategic Equity AUM grew by 4% with AUM at £1.9 billion, reflecting the
strong track record of the team, raising capital for the VCTs as well as
continuing to deliver net inflows into Public Equity, against significant
headwinds for UK equity markets.
The Public Equity division generated £36 million net inflows, whereas the UK
smaller company equity market has continued to witness significant outflows.
Performance of £15 million in the first half reflected the net improvement in
value across the underlying portfolio.
In Private Equity, the Baronsmead VCTs successfully raised £50 million, which
drove a net inflow, after distributions of £27 million. There was some
negative movement in fair valuing the portfolio with a £13 million reduction
overall.
Adjusted operating profit
The adjusted operating profit for the Group grew in the first six-month period
of 2023 by 8% to £14.2 million (H1 2022: £13.2 million). We use the non-GAAP
measure of adjusted operating profit as a key performance indicator for
Gresham House as an alternative asset manager and have separated out net
performance fees and net gains on investments. As set out in the 2022 Annual
Report, the adjusted operating profit is defined as the net trading profit of
the Group before deducting amortisation, depreciation and exceptional items
relating to acquisition and restructuring costs and share-based payments and
remuneration relating to acquisitions.
Six months to 30 June 2023 Six months to 30 June 2022
£'000 £'000
Gross core income 43,125 38,526
Rebates, distribution costs and fundraising costs (1,563) (1,345)
Net core income 41,562 37,181
Administration overheads (excluding amortisation, depreciation, exceptional (27,107) (23,751)
items and acquisition related share-based payments and remuneration)
Finance costs* (286) (278)
Adjusted operating profit 14,169 13,152
Adjusted operating margin 34.1% 35.4%
Realised gains on development projects 954 -
Variable compensation attributable to realised gains (260) -
Development project costs (746) (225)
Expenses included in administration expenses (55) (35)
Net Development losses (107) (260)
Non-core operating revenues 1,699 1,100
Costs relating to non-core operating revenues (1,592) - (1,064)
Net non-core operating activity 107 36
Adjusted operating profit including net realised losses on development 14,169 12,928
projects and non-core activities
Amortisation and depreciation (6,227) (6,092)
Acquisition related share-based payments charges (159) (217)
Acquisition related remuneration (224) (1,243)
Acquisition and restructuring related costs* (1,990) (1,278)
Net (losses)/gains on investments and other fair value movements (964) (673)
Tax (56) (1,257)
Operating profit after tax 4,549 2,168
Loss from discontinued operations (58) (3)
Total comprehensive net income 4,491 2,165
*Finance costs per the IFRS statement of Comprehensive Income included £0.6
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.
Income
Net core income in the period increased by 12% to £41.6 million (H1 2022:
£37.2 million). This increase reflects the organic growth in AUM across the
business.
The long-term nature of the Group's Real Asset management contracts highlight
the stable revenue streams for the business with over £2.8 billion of AUM in
Limited Partnership management contracts, with a weighted average contract
length of 13.5 years. The underlying assets within these funds of forests,
infrastructure, renewable energy and housing continue to provide a stable
platform to grow the business.
Administration expenses
Administration expenses (excluding amortisation, depreciation, share-based
payments relating to acquisitions, acquisition and restructuring related
costs) have increased in the period by 14% to £27.1 million (H1 2022: £23.8
million). Cost management and the focus on margins in a challenging
environment, with increasing inflation and cost of living pressures, are a
critical part of how we manage the business. We continue to manage costs
diligently while ensuring we maintain investment in the business to capture
growth opportunities across all key areas.
The Group's full time equivalent headcount is 216 at the end of June 2023 (H1
2022: 205 and December 2022: 223).
Development projects
We continue to use the Group's balance sheet to develop battery storage and
other New Energy projects to grow the Group's AUM. The Group sold one battery
energy storage project in the period and gross gains for the first six-months
of the year for the Group were £1.0 million. The variable compensation
relating to this gain was £0.3 million. There are a number of projects which
are expected to become operational in late 2023 and early 2024 and we shall
update shareholders as this takes place. Other costs associated with battery
storage development projects were £0.8 million in the period (H1 2022: £0.3
million), reflecting the investment in developing the pipeline of projects for
the funds managed by the Group.
Acquisition related remuneration
Acquisition related remuneration decreased to £0.2 million from £1.2
million, reflecting the earn-out payments in the last 12 months for the Mobeus
VCT business acquisition.
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 for the first six-months of the year were £2.0 million compared
to £1.3 million for the same time last year, this increase reflects costs
predominately relating to the Searchlight transaction, while the remaining
increase is due to restructuring costs from prior acquisitions. There were no
acquisition costs in the first half of 2023.
Net losses on investments and other fair value movements
Net losses on investments and other fair value movements reduced to a loss of
£1.0 million, this is due to losses on investments in the period of £0.1
million which were the result of mark to market valuations on the Group's
listed investments, a reduction of £0.4 million, or 25% of associate's
losses for Environmental Bank Limited, and the remaining movement due to
foreign exchange translation loss on subsidiaries and fair value movement in
contingent consideration.
Financial position
The Group balance sheet remains strong with cash at end of the period of
£32.5 million, an improvement of £0.3 million from the beginning of the
year, with the £20 million Revolving Credit Facility (RCF) remaining undrawn
in the period. The Group continues to use its balance sheet to grow the
business and invests in, or alongside, funds that it manages. Investments at
the period end were at £32.3 million, down from £37.9 million at the
beginning of the year.
On top of generating £12.5 million in cash from operating activities, the
Group invested £3.3 million into funds managed by the Group and other growth
opportunities alongside a further £9.4 million into Devco projects. The Group
also received £14.4 million on the sale of Devco projects in the period.
Outlook
The increase in inflation, the cost of living and interest rates continues to
dominate the minds of investors, clients and staff. We continue to focus on
how we can provide solutions for clients in asset classes that continue to
exhibit structural growth. Following the anticipated change in ownership as a
result of the Acquisition by Bidco in late 2023 or early 2024, we will
continue to operate with the same teams focussed on delivering the same level
of service and returns for clients.
We have a strong pipeline of new clients looking to invest in our funds in the
second half of the year and will continue to work hard to deliver increased
commitments to funds, grow AUM and deliver returns for clients throughout the
remainder of 2023 and into 2024.
Kevin Acton
Chief Financial Officer
13 September 2023
Unaudited condensed group statement of comprehensive income
Six months ended Six months ended Year ended
30 June 2023 (unaudited) 30 June 2022 (unaudited) 31 December 2022
(audited)
Notes £'000 £'000 £'000
Income
Asset management income 41,847 38,285 79,287
Dividend and interest income 1,278 241 531
Other operating income 1,699 1,100 2,523
Performance fees and carried interest - - 1,015
Total income 5 44,824 39,626 83,356
Operating costs (39,367) (34,467) (73,232)
Administrative overheads (37,933) (33,972) (71,662)
Acquisition and restructuring related costs 7 (1,434) (495) (1,570)
Net operating profit 5,457 5,159 10,124
Finance costs (842) (1,061) (2,300)
Net operating profit after finance costs 4,615 4,098 7,824
Gains and losses on investments
Share of associates' (losses)/profits (389) (203) 1,052
Profit on disposal of associate - 295 (101)
Gains/(losses) on investments held at fair value 1,097 (945) 1,488
Movement in fair value of contingent consideration (108) (57) 3,514
Operating profit before taxation 5,215 3,188 13,777
Taxation (56) (1,257) (2,874)
Operating profit from continuing operations 5,159 1,931 10,903
Loss from discontinued operations (58) (3) (177)
Profit for the period 5,101 1,928 10,726
(610) 237 638
Other comprehensive income
Foreign exchange (losses)/gains on translation of a foreign subsidiary
Profit and total comprehensive income 4,491 2,165 11,364
Attributable to:
Equity holders of the parent 4,477 2,153 11,344
Non-controlling interest 14 12 20
4,491 2,165 11,364
Basic profit per ordinary share (pence) 11.9 5.7 29.8
8
Diluted profit per ordinary share (pence)* 11.6 5.3 28.6
8
Basic adjusted profit per ordinary share (pence) 28.2 28.5 57.7
8
Diluted adjusted profit per ordinary share (pence)* 27.6 26.9 55.2
8
*Diluted number of shares are on a net basis after deduction of income tax and
national insurance
Unaudited condensed group statements of changes in equity
Six months ended 30 June 2023 (unaudited)
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 2022 9,568 39,328 25,419 (1,092) 76,340 480 150,043 1,095 151,138
Profit and total comprehensive income for the period - - - - 5,087 (610) 4,477 14 4,491
Contributions by and distributions to owners
Share-based payments - - - - 1,317 - 1,317 - 1,317
Issue of shares - - - (3,285) - - (3,285) - (3,285)
Dividends paid - - - - (6,054) - (6,054) - (6,054)
Total contributions by and distributions to owners - - - (3,285) 350 (610) (3,545) 14 (3,531)
Balance at 30 June 2023 9,568 39,328 25,419 (4,377) 76,690 (130) 146,498 1,109 147,607
Six months ended 30 June 2022 (unaudited)
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 period - - - - 1,916 237 2,153 12 2,165
Contributions by and distributions to owners
Share-based payments - - - 84 (2,194) - (2,110) - (2,110)
Issue of shares 68 - 608 (50) - - 626 - 626
Dividends paid - - - - (3,814) - (3,814) - (3,814)
Total contributions by and distributions to owners 68 - 608 34 (4,092) 237 (3,145) 12 (3,133)
Balance at 30 June 2022 9,568 39,328 25,419 (17) 68,940 79 143,317 1,087 144,404
Year ended 31 December 2022 (audited)
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 - - - - (3,583) - (3,583) - (3,583)
Issue of shares 68 - 608 (1,041) - - (365) - (365)
Dividends paid - - - - (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
Unaudited condensed group statement of financial position
Notes 30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
Assets £'000 £'000 £'000
Non-current assets
Investments 10 22,961 15,859 19,912
Property, plant and equipment 2,311 2,577 2,127
Investment in associates 39 293 428
Intangible assets 81,766 92,891 87,335
Long-term receivables 492 492 1,330
Deferred tax 1,776 2,198 1,802
109,345 114,310 112,934
Current assets
Trade receivables 16,711 11,560 11,216
Accrued income and prepaid expenses 21,357 18,061 30,839
Other current assets 10 2,596 7,604 3,036
Cash and cash equivalents 32,462 28,062 32,205
Non-current assets held for sale
Assets of a disposal group held for sale 19,252 29,831 22,907
Total current & non-current assets held for sale 92,378 95,118 100,203
Total assets 201,723 209,428 213,137
Current liabilities
Trade and other payables 29,647 32,606 40,290
Short-term borrowings - - -
Liabilities of a disposal group held for sale
Liabilities of a disposal group held for sale 11,413 10,866 7,307
Total liabilities and liabilities of a disposal group held for sale 41,060 43,472 47,597
Total assets less current liabilities 160,663 165,956 165,540
Non-current liabilities
Deferred taxation 7,901 9,996 9,155
Long-term borrowings - - -
Other creditors 5,155 11,556 5,247
13,056 21,552 14,402
Net assets 147,607 144,404 151,138
Capital and reserves
Ordinary share capital 11 9,568 9,568 9,568
Share premium 39,328 39,328 39,328
Merger reserve 25,419 25,419 25,419
Treasury shares (4,377) (17) (1,092)
Retained reserves 76,690 68,940 76,340
Foreign exchange reserve (130) 79 480
Equity attributable to equity shareholders of the Parent Company 146,498 143,317 150,043
Non-controlling interest 1,109 1,087 1,095
Total equity 147,607 144,404 151,138
Basic net asset value per ordinary share (pence) 388.1 375.1 394.0
12
Diluted net asset value per ordinary share (pence) 380.8 354.3 377.1
12
Unaudited condensed group statement of cash flows
Notes Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flow from operating activities
Net cash generated from operations 13 14,083 8,825 17,546
Corporation tax paid (1,250) (2,761) (6,155)
Interest paid on loans (286) (150) (141)
Net cash flow from operating activities 12,547 5,914 11,250
Cash flow from investing activities
Acquisition of Burlington RE Property Management Limited - (626)
(627)
Deferred consideration paid (6,425) (6,875) (10,913)
Sale of associates - 11,754 12,478
Purchase of investments (3,333) (4,069) (8,334)
Sale of investments 38 1,051 1,659
Investment in DevCo projects (9,423) (14,829) (14,354)
DevCo loans repaid 734 254 2,853
Proceeds received on sale of DevCo projects 13,624 3,740 10,113
Purchase of fixed assets (222) (208) (366)
Sale of fixed assets 60 19 296
Purchase of intangible assets (402) (547) (886)
(5,349) (10,336) (8,081)
Cash flow from financing activities
Share-based payments settled (112) (3,818) (6,774)
Dividends paid (6,054) (3,815) (3,815)
Capital element of lease payments (775) (135) (627)
(6,941) (7,768) (11,216)
Increase/(decrease) in cash and cash equivalents 257 (12,190) (8,047)
Cash and cash equivalents at start of period 32,205 40,252 40,252
Cash and cash equivalents at end of period 32,462 28,062 32,205
Notes to the accounts
1 Reporting entity
Gresham House plc (the "Company") is a public limited company limited by
shares incorporated in the United Kingdom under the Companies Act and
registered in England. The unaudited condensed group interim financial
statements of the Company as at and for the six months ended 30 June 2023
comprise the Company and its subsidiary undertakings (together referred to as
the "Group"). All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
2 Statement of compliance and basis of preparation
The financial information presented in these interim results has been prepared
in accordance with the United Kingdom adopted International Accounting
Standards ("IAS") with the requirements of the Companies Act 2006. The
principal accounting policies adopted in the preparation of the financial
information in these interim results are primarily unchanged from those used
in the Company's financial statements for the year ended 31 December 2022 and
are consistent with those that the Company expects to apply in its financial
statements for the year ended 31 December 2023.
The financial information for the year ended 31 December 2022 presented in
this Interim Report does not constitute the Company's statutory accounts for
that period but has been derived from them. The Report and Accounts for the
year ended 31 December 2022 were audited and have been filed with the
Registrar of Companies. The Independent Auditor's Report on the Report and
Accounts for the year ended 31 December 2022 was unqualified and did not draw
attention to any matters by way of emphasis and did not contain statements
under s498(2) or (3) of the Companies Act 2006. The financial information for
the periods ended 30 June 2022 and 30 June 2023 are unaudited and have not
been reviewed by the Company's auditors.
3 Estimates and management judgements
The preparation of the unaudited condensed group interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these unaudited condensed group interim financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation were the same as those that applied
to the group financial statements as at and for the year ended 31 December
2022.
4 Financial risk management
The Group's financial risk management objectives and policy are consistent
with those disclosed in the group financial statements as at and for the year
ended 31 December 2022.
5 Income
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
£'000 £'000 £'000
Asset management income
Asset management income 41,847 38,285 79,287
41,847 38,285 79,287
Income from investments
Dividend income - Listed UK 106 43 305
Interest receivable - Banks 74 5 28
- Other 1,098 193 198
1,278 241 531
Other operating income
Non-core operating income * 1,699 1,100 2,523
1,699 1,100 2,523
Performance fees
Performance fees - - 1,015
- - 1,015
Total income 44,824 39,626 83,356
* Non-core operating income relates to income earned from ReSI Property
Management Limited for property services and Gresham House O&M Services
Limited for O&M services, which are not considered core asset management
services to the Group.
Notes to the accounts
6 Business combinations
There have been no business combinations during the six months to 30 June
2023.
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 provisional 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 855.0 pence per share on 626
15 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.
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 30
June 2022:
€'000
Revenue 543
Profit before tax 119
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 to 31 December 2022 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 have been estimated using a
discounted cash flow model. The estimated cash flows have been valued at a
discount of 8.0%.
Notes to the accounts
7 Acquisition and restructuring related costs
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
£'000 £'000 £'000
Acquisition costs
Burlington RE Property Management Limited - 174 174
Mobeus VCT Business - 4 4
Bidco acquisition related costs 445 - -
Other acquisition costs 80 219 60
525 397 238
Restructuring costs 909 98 872
DevCo acquisition and disposal costs - - 460
1,434 495 1,570
Acquisition and restructuring related costs are expenses that are incurred as
part of a business combinations and asset acquisitions, as well as
restructuring of the business post-acquisition. The Group discloses
acquisition and restructuring costs separately on the face of the Consolidated
Statement of Comprehensive income in accordance with IAS 1, in order to
disclose material items separately by nature.
8 Earnings per share
(a) Basic and diluted profit per share
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Total net profit attributable to equity holders of the parent (£'000) 4,477 2,153 11,342
Weighted average number of ordinary shares in issue during the period 38,273,996 38,075,964 38,212,553
Number of shares held by the Gresham House Employee Benefit Trust (526,707) (69,542) (191,781)
Weighted average basic shares in issue during the period 37,747,289 38,006,422 38,020,772
Dilutive shares* 727,885 2,244,067 1,705,923
Weighted average dilutive shares in issue during the period 38,475,174 40,250,489 39,726,695
Basic profit per share to equity holders of the parent (pence) 11.9 5.7 29.8
Diluted profit per share to equity holders of the parent (pence) 11.6 5.3 28.6
*Dilutive shares were deemed to have been issued at nil consideration and, as
a result, shares which could be issued under the bonus share matching plan,
long-term incentive plans and acquisition related share-based payments are
based on the closing share price of 680p as at 30 June 2023. The dilutive
share number is the net number of shares which would be issued, with the Group
settling the income tax and national insurance liability in cash. The gross
number of dilutive shares that would have been issued was 1,326,502 as at 30
June 2023.
(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 acquisition related and
restructuring costs 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:
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
£'000 £'000 £'000
Net operating profit after finance costs 4,615 4,098 7,824
Add back:
Acquisition and restructuring related expenses, including finance costs 1,990 495 3,308
related to the unwind of discount on contingent consideration
Depreciation and amortisation 6,227 6,100 12,359
Profit on disposal of tangible fixed assets - (8) -
Net performance fees - - -
Variable compensation attributable to realised gains on development projects 260 - 975
Development project costs 801 260 698
Net non-core activity (107) (36) (1)
Share-based payments relating to acquisitions 159 217 317
Acquisition related remuneration 224 1,243 1,600
Adjusted operating profit attributable to equity holders of the parent before 14,169 13,152 27,080
tax
Corporation tax attributable to adjusted operating profit (3,543) (2,333) (5,147)
Adjusted operating profit attributable to equity holders of the parent after 10,626 10,819 21,933
tax
Adjusted profit per share (pence) - basic 28.2 28.5 57.7
Adjusted profit per share (pence) - diluted 27.6 26.9 55.2
Notes to the accounts
9 Dividends
The Company paid £6.1 million during the period which represents a final
dividend for the year ended 31 December 2022 of 16.0 pence per share. A final
dividend for the year ended 31 December 2021 of 10.0 pence per share totalling
£3.8 million was paid in May 2022.
10 Investments - securities
Investments have been classified as follows:
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Non-current assets 22,961 15,859 19,912
Other debtors due within one year - Investment in development projects 2,596 7,604 3,036
25,557 23,463 22,948
A further analysis of total investments is as follows:
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Listed securities - on the London Stock Exchange 11,842 7,236 9,275
Securities dealt in under AIM 420 953 435
Securities dealt in under Aquis Stock Exchange 3 4 3
Unlisted securities 13,292 15,270 10,199
Closing value at end of the period 25,557 23,463 19,912
Investments valued at fair value through profit or loss 22,961 15,859 19,912
Loans and receivables carried at FVTPL* 2,596 7,604 3,036
25,557 23,463 22,948
*Investment in development projects were reclassified to FVTPL in the annual
results to 31 December 2022 from amortised cost due to the change in the
business model for managing the loan receivables. Fair value is calculated
based on expected cash flow from the loan and discounted using the highest
risk synthetic credit rating due to the loans inactive market.
11 Share capital
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Allotted: Ordinary - 38,273,996 (30 June 2022: 38,273,996; 31 December 2022: 9,568 9,568 9,568
38,273,996) fully paid shares of 25 pence each
Notes to the accounts
12 Net asset value per share
30 June 2023 30 June 2022 31 December 2022
Equity attributable to holders of the parent (£'000) 146,498 143,317 150,043
Number of ordinary shares in issue at the end of the period 38,273,996 38,273,996 38,273,996
Number of shares held by the Gresham House Employee Benefit Trust (526,707) (69,542) (191,781)
Basic number of ordinary shares in issue at the end of the period 37,747,289 38,204,454 38,082,215
Dilutive shares* 727,885 2,244,067 1,705,923
Number of ordinary shares in issue during the period post dilutive shares 38,475,174 40,448,521 39,788,138
Basic net asset value (pence) 388.1 375.1 394.0
Diluted net asset value (pence) 380.8 354.3 377.1
*Dilutive shares were deemed to have been issued at nil consideration and, as
a result, shares which could be issued under the bonus share matching plan,
long-term incentive plans and acquisition related share-based payments are
based on the closing share price of 680p as at 30 June 2023. The dilutive
share number is the net number of shares which would be issued, with the Group
settling the income tax and national insurance liability in cash. The gross
number of dilutive shares that would have been issued was 1,326,502 as at 30
June 2023.
13 Reconciliation of net operating profit to operating cash flows
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Net operating profit after exceptional items 4,615 4,881 7,824
Loss from discontinued operations - (3) (177)
Interest payable 842 184 2,300
Depreciation 529 574 1,155
(Profit)/loss on disposal of tangible fixed assets (25) (8) (44)
Amortisation 5,723 5,526 11,248
Share-based payments 1,680 1,708 3,566
Acquisition related remuneration - 884 1,917
13,364 13,746 27,789
Decrease/(increase in long-term receivables 838 - (838)
Decrease/(increase) in current assets 3,937 3,566 (10,077)
(Decrease)/increase in current liabilities (4,056) (8,487) 672
14,083 8,825 17,546
14 Post balance sheet events
On 30 June 2023, the closing Gresham House share price was 680p. At this
price, a number of awards over the Gresham House share schemes were out of the
money and the gross number of dilutive shares was 1,326,502. On 17 July 2023,
the Boards of Gresham House and Seed Bidco announced that they had reached
agreement on the terms of a recommended final* cash offer for the entire
issued and to be issued share capital of Gresham House by Seed Bidco (the
"Announcement"). At the Acquisition Price of 1,105p per Gresham House share, a
number of the share schemes in place would have value, increasing the number
of gross dilutive shares to 4,242,172, as disclosed in the Announcement. The
Acquisition was approved by Gresham House shareholders on 30 August 2023 and
is subject to certain regulatory approvals and final Court Sanction before
completion can take place. The Scheme is expected to become Effective in late
2023 or early 2024. Capitalised terms used in this note, unless otherwise
defined, shall have the meanings given to them in the Announcement.
*The financial terms of the Acquisition are final and will not be increased,
except that Bidco reserves the right to increase the Acquisition Price where:
(i) there is an announcement of a possible offer or a firm intention to make
an offer for Gresham House by any third party; or (ii) the Panel otherwise
provides its consent.
1 The financial terms of the Acquisition are final and will not be
increased, except that Bidco reserves the right to increase the acquisition
price where: (i) there is an announcement of a possible offer or a firm
intention to make an offer for Gresham House by any third party; or (ii) the
Panel otherwise provides its consent.
2 The financial terms of the Acquisition are final and will not be
increased, except that Bidco reserves the right to increase the acquisition
price where: (i) there is an announcement of a possible offer or a firm
intention to make an offer for Gresham House by any third party; or (ii) the
Panel otherwise provides its consent.
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