REG - Pollen Street Group - Full Year 2024 Results
25/03/2025 07:15
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RNS Number : 9644B Pollen Street Group Limited 25 March 2025
25 March 2025
Pollen Street Group Limited: Full Year 2024 Results
Pollen Street Group Limited ("Pollen Street") today announces the publication
of its Annual Report and Accounts for the year ended 31 December 2024.
2024 has been a pivotal year for Pollen Street with strong financial
performance and strategic progress marked by growing Asset Management revenue
and profits together with consistent Investment Company returns. Assets under
Management ("AuM") increased 29%, with healthy growth across both private
equity and private credit strategies. Pollen Street has entered 2025 with
strong momentum and, with continued focus on its core specialisms, it looks
forward to continued growth towards its medium-term target of £10 billion
total AuM.
AUM (£bn) 2024 2023 YoY Growth (%)
Total AuM 5.4 4.2 29%
Fee Paying AuM 4.0 3.4 17%
INCOME STATEMENT (£m) 2024 2023 YoY Growth (%)
Fund Management Income 66.8 49.2 36%
Fund Management Administration Costs (41.1) (34.3) 20%
Fund Management EBITDA 25.7 14.9 72%
Income on Net Investment Assets 31.8 30.2 5%
EBITDA 57.5 45.1 27%
Profit After Tax 49.6 39.9 24%
EPS 78.8p 62.2p
DPS 53.6p 61.0p
Financial Highlights for 2024
· Total AuM increased to £5.4 billion (2023: £4.2 billion), driven
by the success of Private Equity Fund V and Private Credit Fund IV
o Private Equity Fund V AuM has surpassed the initial target of €1 billion
o Private Credit Fund IV AuM on track to achieve £1 billion target during
2025
· Total Fee-Paying AuM increased to £4.0 billion (2023: £3.4
billion)
· £1.1 billion invested in Private Equity and £0.6 billion in
Private Credit in the year
· Fund Management Income grew 36% to £66.8 million (2023: £49.2
million)
· Fund management EBITDA increased to £25.7 million (2023: £14.9
million) accounting for 45% of Group EBITDA (2023: 33%) made up of Fee-Related
Earnings of £21.7 million and Performance-Related Earnings of £4.0 million
· The Investment Company maintained its consistent track record with
Income on Net Investment Assets increasing to £31.8 million (2023: £30.2
million), representing a return of 9.6% (2023: 8.8%)
· Operating profit increased to £58.2 million (2023: £44.5
million)
· Second (and final) interim dividend of 27.1p brings dividends
declared in respect of 2024 to £33.0 million (2023: £32.1 million) in line
with previous guidance
2025 Outlook
As Pollen Street looks ahead to 2025, the group has confidence in its
strategic direction and ability to capitalise on the attractive opportunities
ahead. The growth prospects for private markets remain strong and Pollen
Street is confident in meeting its medium-term goal of Total AuM of £10
billion.
Key priorities for 2025 include:
· Complete fundraising of Private Equity Fund V with final close
ahead of target
· Complete fundraising of Private Credit Fund IV, targeting £1
billion and maintain deployment
· Expand AuM towards our medium term target of £10bn
· Maintain a progressive dividend policy while strategically
deploying capital for shareholder value
· Return surplus capital to shareholders through share buybacks,
subject to relative attractiveness compared to other value-creation
opportunities
Lindsey McMurray, Chief Executive Officer, said: "We are proud of the
continued progress that Pollen Street has achieved in the last year. Our AuM
increased in both Private Equity and Private Credit, reflecting our investors'
confidence in our strategies. Private Equity Fund V surpassed its €1 billion
target and the Private Credit strategy and team are increasingly recognised as
a clear leader in their field. 2025 has started well with continued
fundraising momentum, solid asset performance and a promising pipeline of
deployment opportunities. Looking ahead, we are strategically positioned to
capture future growth with our specialist focus, diversified investor base and
long track record of performance setting us apart."
Results presentation:
Pollen Street Group Limited will host its results presentation for Full Year
2024 Results at 9 AM; 25 March 2025
Register for the webinar:
https://pollencap.zoom.us/webinar/register/WN_aWLlvKP_RhS9RW6hAmWYog
(https://pollencap.zoom.us/webinar/register/WN_aWLlvKP_RhS9RW6hAmWYog)
The full results presentation is available on the group's website
www.pollenstreetgroup.com (http://www.pollenstreetgroup.com) .
About Pollen Street
Pollen Street is an alternative asset manager dedicated to investing within
the financial and business services sectors across both Private Equity and
Private Credit strategies. The business was founded in 2013 and has
consistently delivered top tier returns alongside growing AuM.
Pollen Street benefits from a complementary set of asset management activities
focused on managing third-party AuM (the "Asset Manager") together with
on-balance sheet investments (the "Investment Company").
The Asset Manager raises capital from high quality investors and deploys it
into its Private Equity and Private Credit strategies. The strong recurring
revenues from this business enable delivery of scalable growth.
The Investment Company invests in the strategies of the group delivering
attractive risk adjusted returns and accelerating growth in third-party AuM of
the Asset Manager through investing in Pollen Street funds, taking advantage
of attractive investment opportunities and aligning interest with our
investors to grow AuM. Today the portfolio is largely invested in credit
assets with the allocation to Private Equity expected to increase to 30 per
cent in the long term. The portfolio consists of both direct investments and
investments in funds managed by Pollen Street.
POLN is listed on the London Stock Exchange (ticker symbol: POLN) and is a
member of the FTSE 250 index. Further details are available at
www.pollenstreetgroup.com (http://www.pollenstreetgroup.com) .
For further information about this announcement please contact:
Pollen Street - Corporate Development Director
Shweta Chugh
+44 (0)20 3965 5081
Barclays Bank plc - Joint Broker
Neal West / Stuart Muress
+44 (0)20 7623 2323
Investec Bank plc - Joint Broker
Ben Griffiths / Kamalini Hull
+44 (0)20 7597 4000
FGS Global
Chris Sibbald / Anna Tabor
PollenStreetCapital-LON@fgsglobal.com
(mailto:PollenStreetCapital-LON@fgsglobal.com)
MUFG Corporate Governance Limited
Company Secretary
POLNcosec@cm.mpms.mufg.com (mailto:POLNcosec@cm.mpms.mufg.com)
Annual Report and Accounts
The Annual Report and Accounts are available to view and download from the
Company's website
https://ir.pollenstreetgroup.com/investors/financial-information/
(https://ir.pollenstreetgroup.com/investors/financial-information/) . Neither
the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into or forms part of this announcement. The information set out
below does not constitute the Company's statutory accounts for the year ended
31 December 2024 but is derived from those accounts. Statutory accounts for
the year ended 31 December 2024 will be delivered to the Registrar of
Companies in due course. The group's auditors have reported on those accounts:
their report was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under 'Section
263 (2) or (3) of The Companies (Guernsey) Law, 2008. The following text are
selected extracts from the Annual Report and Accounts.
A copy of the Annual Report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Chair's Statement
Robert Sharpe
Chair
As Chairman of Pollen Street Group Limited, I am pleased to report on another
year of significant progress and accomplishment in 2024. The Group has
delivered strong performance across all key metrics while advancing our
strategic objectives.
A Pivotal Year of Exceptional Delivery
Our 2024 performance reflects the successful execution of our strategy with
consistent delivery of strong returns through a clear and repeatable
investment strategy and achievement of successful fundraises across both
Private Equity and Private Credit. By attracting new investors and deepening
relationships with existing investors, we have grown total AuM to £5.4
billion in December 2024, a 29 per cent increase from £4.2 billion at the end
of 2023.
In 2024, we increased AuM across both Private Equity and Private Credit.
Private Equity AuM grew to £3.5 billion - a 32 per cent increase on prior
year driven by strong investor support for Private Equity Fund V as well as
co-investment offered to our Limited Partners ("LPs"). Private Credit AuM grew
to £1.9 billion - a 24 per cent increase, with capital raised in Private
Credit Fund IV and associated separately managed accounts. The Investment
Company maintained its track record of stable and predictable returns, with
income on Net Investment Assets growing to £31.8 million (2023: £30.2
million), representing a return on Net Investment Assets of 9.6 per cent
(2023: 8.8 per cent) for the year ended 31 December 2024. This growth enabled
the Group to return £48 million to shareholders through dividends and share
buybacks during the year.
The private capital sector continues to benefit from favourable macro
tailwinds, including increasing institutional allocation to private markets
and sustained demand especially in the mid-market. We expect further
acceleration in this trend, which as a focused financial and business services
specialist with a proven investment strategy, we are well-positioned to
capitalise on.
Our financial performance has been robust, with Operating Profit showing
substantial growth underpinned by strong AuM growth and operational leverage.
The Investment Company continues to be a key asset, driving third party AuM
growth while maintaining robust income generation and growing capital invested
through Pollen Street managed funds.
Capital Allocation Framework & Buyback Programme
Reflecting our strategic and operational development, and following its
conversion from an investment trust to a commercial company, the Group put in
place an enhanced capital allocation framework in March 2024. This framework
prioritises strategic growth in our funds and other organic growth
opportunities, while also providing confidence in additional cash returns to
shareholders which were value accretive. Through 2024, we have demonstrated
disciplined adherence to the framework.
We have committed £196 million to Pollen Street funds as well as making cash
returns to shareholders of £48 million. The Board has declared a second
interim dividend of 27.1 pence per share, bringing the total dividend for the
year to 53.6 pence per share or £33 million.
Corporate Governance and ESG Reporting
The implementation of the final stages of the reorganisation of the Group
following the combination of Pollen Street Capital Holdings Limited with
Pollen Street Limited (formerly Honeycomb Investment Trust Plc) was a key
focus for the start of the year. This included the transition from an
Investment Trust to a Commercial Company.
Strong governance is core to how we are building better, more sustainable
businesses. Through our systematic data-driven approach to environmental,
social, and governance ("ESG"), we've helped portfolio companies and borrowers
develop robust policies and procedures, supporting sustainable growth and
operational excellence, as well as driving progress in the social and
environmental spheres. The expansion of ESG margin ratchets from 8 to 16
credit facilities demonstrates Pollen Street's commitment to incentivising
positive change.
The Group continues to strengthen its approach to reporting and climate risk
management, ensuring transparency and accountability across its investments,
considering the evolving ESG regulatory environment.
As I noted in the Annual General Meeting in June 2024, I have now reached my
nine-year tenure as a Director of the Group. A search is underway for a new
Chair with several strong candidates identified and interviewed. Once the new
Chair has been identified the intention is for there to be a period of three
months handover to ensure a smooth transition.
I am pleased to welcome Crispin Goldsmith who joined the leadership team as
Chief Financial Officer ("CFO") in January 2025. Crispin's experience across
both private and public markets brings a unique blend of skills to our
financial leadership.
Looking Forward
Outlook: Pollen Street's Growth Trajectory
The last year has been pivotal for the Pollen Street Group, characterised by
substantial AuM growth, supported by the success of Private Equity Fund V and
Private Credit Fund IV. Our fundraising achievements have affirmed our
competitive edge and specialised strategic focus, and our recent inclusion in
the FTSE 250 in January 2025 was a significant corporate milestone.
As we progress through 2025, whilst mindful of an increasingly uncertain
global environment, our outlook remains positive. The private markets
landscape continues to present growth opportunities, with our specialist focus
positioning us strongly. We are actively expanding our investor relationships,
further driving AuM growth, while maintaining strong Investment Company
returns, notwithstanding any share buyback activities.
The Board and I extend our gratitude to the entire Pollen Street team for
their exceptional execution. We look forward to delivering further success in
2025, thanks to the continued support of our limited partner investors,
shareholders and employees.
Robert Sharpe
Chair
24 March 2025
CEO Report
Lindsey McMurray
Chief Executive Officer
I am pleased to report another year of strong performance for Pollen Street,
marked by exceptional investment and fundraising execution and strategic
growth. Our AuM saw a significant increase, across both Private Equity and
Private Credit strategies demonstrating the strength and resilience of the
business. Private Equity AuM growth was driven by the success of our Private
Equity Fund V as well as strong co-investment initiatives. Private Equity V
has surpassed its target of €1 billion with further capital commitments
anticipated in 2025. Similarly, Private Credit experienced a strong year of
fundraising and deployment. This is continuing well during 2025. Our focus on
financial and business services, coupled with our long track record of
performance, continues to set us apart in the competitive alternative asset
management landscape.
Delivering Strong Performance
This year's success is reflected in strong growth of fund management revenue
and earnings. The Group's Operating Profit grew to £58.2 million for 2024, up
from £44.5 million in 2023. The primary growth driver was our Asset Manager,
with Operating Profit increasing to £27.2 million (47 per cent of Group),
from £15.9 million (36 per cent of Group) in 2023. This growth underscores
our robust operational framework, well-invested platform and strategic market
positioning. It highlights the operational leverage inherent in our business
model, allowing us to scale revenues while maintaining costs efficiently.
Well-Positioned Strategy
Our investment strategies, leveraging both Private Equity and Private Credit
capabilities, have proven resilient in the current turbulent market
environment. Our ability to deliver consistent, high-quality returns, within
an attractive risk framework, positions us strongly for sustainable, long-term
growth. The strength of our balance sheet remains a crucial differentiator and
enables us to align ourselves with our LPs. With £196 million in General
Partner ("GP") commitments to Pollen Street managed funds, we are well
positioned to attract new investors, deepen existing relationships and pursue
selective inorganic growth opportunities.
ASSET MANAGER
Private Equity
Our Private Equity strategy focuses on backing mid-market companies in the
financial and business services sector, typically taking majority stakes in
European-headquartered businesses. We partner with talented leadership teams,
often founder-led, to accelerate growth by applying deep sector expertise and
a proven operational framework.
Our approach, which has been refined and tested through multiple market
cycles, targets companies with an excellent customer proposition that are well
positioned to take advantage of opportunities as the industry continues to
undergo structural changes. This strength has persisted well in 2024 and 2025
through macro-economic and political volatility. The Financial Services
sector, our core specialism, continues to experience change and disruption
through technology transformation and adoption, industry consolidation and
evolving regulatory oversight. We remain strategically well placed to navigate
and capitalise on opportunities.
Private Credit
Our Private Credit strategy focuses on providing predominantly senior secured,
asset-based lending to mid-market companies across Europe. We target non-bank
lenders, leasing businesses, technology companies, and other entities with
diverse portfolios of financial or hard assets. This approach allows us to
fill the funding gap created by the retrenchment of banks from lending markets
following the global financial crisis, a trend that has continued to
accelerate in recent years.
Through 2024, the private credit market continued to provide strong conditions
for growth with higher interest rates and ongoing borrowing demand from the
SME community. Our reliable and consistent approach and growing reputation has
ensured that we remain an attractive destination for borrowers and that we
continue to deliver returns uncorrelated to other private credit strategies.
Fundraising and Deployment
Total AuM was at £5.4 billion as of 31 December 2024, up 29 per cent from
£4.2 billion at the end of 2023. Our journey over the last year has been
marked by significant milestones, particularly in our fundraising for Private
Equity Fund V, which now has €1.1 billion in commitments, exceeding our €1
billion target. Given strong investor appetite, we are continuing fundraising
into 2025 with the final close now expected in mid-2025. Along with Private
Equity Fund V, we have raised over £400 million of funds in Co-Invest
vehicles. Whilst these are non-fee-paying, this further supports the
development of long-term strategic relationships with our investors. In
Private Credit, we raised over £500 million in Credit funds in 2024,
completing the first close of Private Credit Fund IV and a new UK Separate
Managed Account ("SMA"). Fundraising for Private Credit Fund IV has strong
momentum and is on track to meet the target of £1 billion in 2025. At
December 2024, we had in excess of £500 million of available capital in our
Credit funds which will convert to fee-paying AuM once deployed.
2024 was also a strong year for deployment. We invested £1.1 billion in
Private Equity and £0.6 billion in Private Credit. We have a rich pipeline of
opportunities in both strategies and look forward to another strong year for
deployments in 2025.
Client Base
The strength of our investor relationships has been central to our fundraising
progress. Our LP investor base continues to be the cornerstone of our success.
We have nurtured strong relationships with existing investors while expanding
our geographical reach. Many of our new investors are the result of several
years of dedicated relationship building.
The fundraise during the year across the strategies has been instrumental in
deepening our penetration into the deep capital pools in Europe, North America
and the Middle East. Our strategic approach has diversified our investor base,
tapping into new markets and reflecting the investments we have made in
business development capabilities within the team. As we move forward, we
remain dedicated to nurturing these relationships with continued outstanding
performance to ensure that Pollen Street is strategically positioned for
sustained long-term growth.
INVESTMENT COMPANY
Our balance sheet continues to be a highly valuable strategic asset enabling
the acceleration of Third-Party AuM growth as we demonstrate strong alignment
with our LPs. The ability for the manager to make significant GP commitments,
c.2 - 5 per cent in Private Equity Funds and 7 - 10 per cent in Private Credit
Funds, supports in attracting new investors and in growing relationships with
existing ones.
The Investment Company has committed £196 million to Pollen Street managed
funds, with 66 per cent drawn (2023: 29 per cent). As of the end of 2024, the
balance sheet allocation was 91 per cent Private Credit and 9 per cent Private
Equity. Our balance sheet investments have performed well, delivering robust
Investment Company returns and, notwithstanding share buybacks of £23 million
on top of dividends paid of £25 million, the Investment Company delivered
strong income generation of £31.8 million.
Success Indicators
I am delighted to report that we have excelled across all the success
indicators outlined in our half-year 2024 results presentation.
· AuM Growth - Total AuM increased by 29 per cent to £5.4 billion,
Fee-Paying AuM grew by 17 per cent to £4.0 billion at 31 December 2024 and
has further increased to £4.3 billion during Q1 2025. Further growth in
Fee-Paying AuM is expected throughout 2025.
· High Quality Income and Margin Expansion - Sustained addition of
contractual and recurring income and embedded fees across both strategies.
· Investment Returns - Strong and consistent track record.
· Operational Efficiency - Significant improvement in efficiency, Fund
Management EBITDA Margin increasing from 30 per cent as at the end of 2023 to
39 per cent.
· Investor Base Expansion - Strengthened our LP base, and expanded
penetration into deep and sophisticated markets.
OUTLOOK FOR 2025
As we look further into 2025, I am confident in our strategic direction and
our ability to capitalise on the opportunities ahead. Our focus remains on
delivering exceptional returns to our investors and shareholders with our key
priorities for 2025:
· Complete fundraising of Private Equity Fund V to final close
ahead of target
· Complete fundraising of Private Credit Fund IV, targeting £1
billion and maintain deployment
· Expand AuM towards our medium term target of £10 billion
· Maintain our progressive dividend policy while strategically
deploying capital for shareholder value
· Return surplus capital to shareholders through share buybacks,
subject to relative attractiveness compared to other value-creation
opportunities
The medium-term growth prospects for private markets remain strong, and we are
confident in our long-term goal of reaching a Total AuM of £10 billion,
notwithstanding an increasingly uncertain global landscape.
In closing, I would like to extend my gratitude to our amazing team whose hard
work and commitment have been instrumental in achieving these results. I also
want to thank our limited partners, shareholders and wider group of
counterparties for their continued trust and support.
I would specifically like to thank Robert Sharpe, our Chairman, who will be
retiring from the Board this year. Robert has been an exceptional leader of
the Board and the Group as it has transitioned from an investment trust to our
current business. He leaves us with a very strong strategic position and we
are extremely grateful.
Lindsey McMurray
Chief Executive Officer
24 March 2025
Private Equity Strategy
Michael England
Partner
This section gives insight into our Private Equity strategy. The Group earns
management fees and carried interest from managing and advising funds
investing in this strategy.
Our Private Equity strategy focuses on backing mid-market companies in the
financial and business services sector. We look to take majority stakes in
businesses headquartered in Europe. We back talented and driven leadership
teams and we seek to accelerate their growth by applying deep sector knowledge
and a proven operational framework to build businesses with the potential to
deliver top-tier returns.
We invest aligned with structural growth trends which form the basis of our
investment themes, from the consolidation of distribution to the wide-ranging
impact of middle and back-office automation that is shaping the entire sector.
We pinpoint these drivers of change and align our investment strategy to
support businesses at the forefront of these opportunities, that are well
positioned to win share in their relevant markets.
Our strategy has been in place for 19 years and has been tested through
multiple market events and cycles. Throughout this period, we have grown the
strategy through a consistent track record of delivering top-tier returns
based upon a robust and disciplined approach to investing, bringing to bear
our specialist knowledge and best practice.
How it Works: Clear Opportunity Set and Established Investment Strategy
Our investment strategy is dedicated to buying and building great businesses
serving the financial ecosystem across five key sub-sectors:
· Payments;
· Wealth;
· Insurance;
· Technology-enabled services; and
· Lending.
Through thematic origination, deep sector knowledge and the Pollen Street
network, our investment team curates a rich pipeline of businesses. Within
these investment theses, we seek to back inspirational leadership teams who
have the passion and discipline to deliver strong growth safely. We drive
growth through our proven operational framework, which is built upon four key
pillars:
· Technology innovation and digital transformation;
· Buy, build and consolidation;
· Globalisation and product development; and
· Embedding responsible investing principles.
2024 - A Platform for Continued Growth
During the year, we have delivered consistently strong performance across our
Private Equity funds, with impressive revenue and EBITDA growth, steady
deployment activity into attractive platforms and clear progress on exits.
Pollen Street welcomed three new platform deals:
· Etops: a consolidator in the European asset and wealth management
technology sector
· Keylane: Leading European SaaS provider to insurers and pension
administrators
· Mattioli Woods: UK wealth manager with £20bn of client assets
from over 23,000 clients
This is supported by the completion of 22 bolt-ons to accelerate the growth of
existing portfolio companies, with over €2bn of acquired Enterprise Value.
Alongside this, the pace of exits continues to build, with the sale of:
· Punkta: the end-to-end platform for insurance services in the
Polish market
· Aro: acquired by Clearscore, a transaction that sets up the
combined group for its next phase of growth
This performance has translated into strong momentum in the final stages of
fundraising of Private Equity Fund V, which has now surpassed the target. The
Private Equity strategy continues to attract new investors and deepen the
relationship with existing ones. The success of the fundraising of Private
Equity Fund V is a reflection of the confidence that investors draw from
Pollen Street's track record of top-tier returns, the pace of growth the
investment team has demonstrated is achievable across the portfolio and the
depth of pipeline of attractive deals into which the fund will be invested.
Michael England
Partner
24 March 2025
Private Credit Strategy
Matthew Potter
Partner
Pollen Street's Private Credit strategy is focused on asset-based lending
("ABL") to mid-market companies across Europe. The Group earns management
fees, performance fees and carried interest from managing and advising funds
investing in this strategy. This section gives insight into the strategy and
its performance in 2024.
Asset-based lending is the funding behind the everyday credit that powers our
economy and society. We provide funding to support everything from building
homes, to funding SMEs, to vehicle financing. We do this by providing
predominantly senior secured loans to companies that are serving these end
markets secured on diverse portfolios of cash flow generating assets, such as
loans, leases and vehicles, alongside corporate guarantees.
Following the global financial crisis, and the subsequent retrenchment of the
banks from lending markets, Pollen Street identified opportunities to fill the
funding gap in what is a large and growing market. This is a trend that has
continued to accelerate further in recent years. Our asset-backed lending
strategy aims to deliver returns uncorrelated to other private credit
strategies with a through-the-cycle approach designed to withstand significant
stress. Direct asset-backing combined with seniority, comprehensive covenants
and bespoke structuring delivers significant downside protection and alignment
with asset originators and servicers. Pollen Street has a proven ability to
access a hard-to-reach market through our dedicated team, meaning we are able
to consistently generate premium returns versus other private and public debt
strategies.
We are experts in this large market, with a deep network of long-term
established relationships and experience that allows us to identify
opportunities and target a fragmented and underpenetrated part of the market.
Our team focuses on the mid-market where we believe the greatest opportunity
and largest financing gap exists meaning we can create the most favourable
risk-reward profile. This has increasingly led to Pollen Street having a
reputation as the "go-to" provider in the market.
We also believe in the positive economic impact our asset-backed financing can
deliver. The facilities we provide fund the real economy and can deliver
economic growth and job creation, facilitate the building of new homes and
finance the energy transition.
How it Works: Structuring for Protection
The investment strategy seeks to combine the benefits of the asset-backed and
corporate lending markets following a tested and structured investment
approach that has delivered consistently strong returns and low volatility.
Significant credit protection is created through both asset security and
transaction structuring with senior loans secured directly against large and
diverse pools of the assets which generate the revenue and cash flow of the
borrowers, as well as securing a full corporate guarantee with comprehensive
covenants.
We seek to follow a structured investment approach that focuses on:
· Diverse asset-backing: predominantly senior loans secured on
highly diverse tangible assets to maintain credit protection;
· Bespoke structuring: highly structured investments that seek to
create strong downside protection and align incentives with our borrowers; and
· Conservative leverage on assets with tangible value: substantial
credit protection from borrower cash equity, asset pool profits and corporate
guarantees.
2024 - Continued growth building on strong foundations
In 2024, the Private Credit business has been focused on fundraising for our
fourth flagship credit fund, Private Credit Fund IV, and continued deployment
in both Private Credit Fund III and across our SMAs. With the backdrop of the
completion of a £280 million SMA mandate from a large UK public pension fund
and strong momentum in raising Private Credit Fund IV fundraising is
progressing well.
Driven by a deep pipeline, Private Credit Fund III is now fully deployed, with
21 investments and continues to generate attractive returns and high-income
distributions for investors. The portfolio is performing well and has already
delivered a number of realisations with realised returns ahead of underwritten
expectations.
Private Credit Fund IV deployment has started at pace, now benefiting from a
well-seeded portfolio with 11 investments closed. Return performance has been
strong and by sourcing a deep pipeline we have been able to be highly
selective and have built strong diversification across asset classes in both
the UK and Europe.
Further, we were pleased to achieve a Fund Rating of "A" for Private Credit
Fund IV, based on our investment approach and the strategy we deploy
consistently across both Private Credit Fund III and Private Credit Fund IV.
We believe this highlights the quality of our approach.
Throughout 2024 debt markets remained buoyant with high volumes of primary
issuance across public and private markets. This environment saw spreads
reduce particularly across broadly syndicated and heavily intermediated
markets where barriers to entry for capital are low and markets are highly
efficient. In the asset-based lending sector we saw a similar increase in
activity with borrowers looking to take advantage of the current environment
to secure debt facilities to enable them to grow their businesses. Returns and
margins are more resilient in mid-market ABL, as market inefficiencies and the
bi-lateral nature of transactions create greater barriers to entry, meaning we
are able to secure better lender terms and protections. Our pipeline is at
record levels with net unlevered Internal Rate of Returns ("IRRs") still
typically 11 per cent to 13 per cent, with a good balance between asset
classes, including our key investment areas of SME, real estate and government
backed receivables.
Matthew Potter
Partner
24 March 2025
CFO Report
Crispin Goldsmith
Chief Financial Officer
Delivering Strong Performance
I am pleased to present Pollen Street's financial results for 2024. It has
been a successful year, with strong growth in our financial performance from
excellent fundraising outcomes and continued robust fund performance marking
progress towards our medium-term targets. This has driven an increase in
Fee-Paying AuM of £0.6 billion, or 17 per cent, on the prior year which has
in turn generated higher management fees and allowed the Group to deliver
profits for 2024 which are ahead of expectations. The Investment Company
delivered performance in line with expectations despite the declining interest
rate environment and the completion of £22.9 million of share buybacks which
had the effect of reducing invested assets.
Fundraising across both strategies brings total AuM to £5.4 billion as at 31
December 2024 (31 December 2023: £4.2 billion). Fundraising for Private
Equity Fund V has been strong, as we continue to develop new relationships
with investors and deepen existing ones, and is already ahead of our €1
billion target. We expect to complete the fundraising of this fund during
2025, with an additional £0.2 billion already closed in early 2025. In
addition to the fundraising activity for Private Equity Fund V, we have also
raised £0.4 billion of co-invest funds to invest alongside our flagship
funds.
Fundraising for Private Credit Fund IV has strong momentum as we capitalise on
our leading position in the asset-backed market. We are on track to raise the
target £1 billion in total commitments during 2025, with £0.1 billion closed
in early 2025. Deployment of the new funds was active with 15 new deals and
£238 million commitments invested; the business has a large pipeline of
attractive new deals to continue this deployment into 2025.
The Operating Profit for the Group increased by 31 per cent to £58.2 million
(2023: £44.5 million). The main driver of this material increase was the 71
per cent increase in the Operating Profit of the Asset Manager segment to
£27.2 million (2023: £15.9 million) as successful fundraising grew revenue,
while the business benefitted from its inherent operational gearing. There was
a £1.6 million increase in Operating Profit of the Investment Company,
reflecting the positive effect of the transition into Pollen Street managed
funds and the benefit of redeploying realised Credit Assets into a higher
interest rate environment.
The Investment Asset portfolio delivered another period of strong and
consistent performance with Income on Net Investment Assets of £31.8 million
(2023: £30.2 million). In particular, the portfolio generated a strong level
of cash of £239 million (2023: £184 million), driven by a high level of
realisations and demonstrating the quality and liquidity of the assets.
In accordance with our strategy, investments from the Investment Company into
Pollen Street managed funds have increased with £196 million currently
committed, up from £93 million at December 2023. These commitments are
typically drawn over several years. At 31 December 2024, £130 million had
been drawn (2023: £57 million).
Growing Asset Manager Earnings
Assets under management are tracked on a total and fee-paying basis. Total AuM
tracks the commitments that investors have made into funds managed by the
Asset Manager, whereas Fee-Paying AuM tracks the basis on which the Group
earns management fees. For Private Equity, the Fee-Paying AuM is the committed
capital in the flagship funds, changing to invested capital at the earlier of
five years from first close or when the subsequent flagship fund holds its
first close. Co-investment vehicles are typically non-fee paying. Fee-Paying
AuM for Private Credit is the net invested amount. So non-Fee-Paying AuM for
Private Credit will become fee-paying as it is deployed. Total AuM was £5.4
billion as at 31 December 2024 (2023: £4.2 billion).
Total AuM 2024 2023
(£ billion) (£ billion)
Private Equity 3.5 2.6
Credit 1.9 1.6
Total 5.4 4.2
Fee-Paying AuM 2024 2023
(£ billion) (£ billion)
Private Equity 2.6 2.0
Credit 1.4 1.4
Total 4.0 3.4
Fundraising has increased Private Equity Fee-Paying AuM to £2.6 billion
(2023: £2.0 billion), with Fee-Paying AuM for the Private Credit strategy at
£1.4 billion (2023: £1.4 billion). The Private Credit strategy has seen the
amortisation of several SMAs following underlying loan repayments offset by
growth in deployment for its new funds. Combined, this represents a growth
rate of 17 per cent in Fee-Paying AuM for the year. We expect Fee-Paying AuM
for the Private Credit strategy to increase going forward as the newly raised
funds in Private Credit Fund IV are deployed and convert into Fee-Paying AuM.
As a result of continuing Private Equity fundraising and Private Credit
deployment, Fee-Paying AuM has now increased to £4.3 billion.
Fund Management Income comprises management fees, performance fees and income
from carried interest. Revenue growth has been driven by increases in the
Group's Fee-Paying AuM and the beneficial impact of catch-up fees, as outlined
below. Total Income increased by 36 per cent to £66.8 million (2023: £49.2
million).
Fund Management Administration Costs increased at a lower rate of 19 per cent
to £39.6 million (2023: £33.3 million). This moderate increase reflects a
well-invested cost base, leading to a flow through from incremental revenue to
profitability. The cost increase has been driven by a combination of
promotions and pay rises within the team and with a slight increase in
headcount. As a result, Operating Profit in the Asset Manager segment
increased by 71 per cent to £27.2 million (2023: £15.9 million).
The Group tracks the performance of this segment using Fund Management EBITDA,
which is the Operating Profit less the accounting cost of the office lease 1 ,
which was a £1.5 million charge for 2024 (2023: £1.0 million) driven by a
rent review increase. Fund Management EBITDA has grown by 72 per cent to
£25.7 million (2023: £14.9 million), while Fund Management EBITDA Margin has
grown from 30 per cent to 39 per cent over the year, reflecting the inherent
operational leverage in the Asset Manager.
Asset Manager Profitability 2024 2023
(£ million) (£ million)
Total Income 66.8 49.2
Administration Costs (39.6) (33.3)
Operating Profit 27.2 15.9
Depreciation of lease asset (1.5) (1.0)
Fund Management EBITDA 25.7 14.9
Fund Management EBITDA Margin 39% 30%
Fund Management EBITDA now stands at 45 per cent of the Group EBITDA, up from
33 per cent in 2023.
Asset Manager Financial Ratios 2024 2023
Management Fee Rate 1.50% 1.16%
(% of Average Fee-Paying AuM)
Performance Fee Rate 17% 30%
(% of Fund Management Income)
Fund Management EBITDA Margin 39% 30%
(% of Fund Management Income)
In general, Private Equity funds charge fees on committed capital. Investors
who join these funds after the first investors' admission date are charged
catch-up fees, so all investors pay fees from the date of the first close. In
general, Private Credit funds charge fees on net invested capital. Capital is
generally recycled until the end of the investment period. Management fee
rates remain the same for the duration of the funds. We have guided to a
long-term management fee rate blended across the Private Equity and Private
Credit strategies of between 1.25 per cent and 1.5 per cent and are at the
upper end of this guidance in 2024 at 1.50 per cent (2023: 1.16 per cent) in
part due to the catch-up fees charged on the funds raised in Private Equity
Fund V in the year. Excluding the £5.9 million of catch-up management fees
charged, the Management Fee Rate for 2024 would have been 1.34 per cent.
In addition to management fees, the Group earns performance fees and carried
interest. These allow the Group to share in the profits of the funds under
management and are variable amounts dependent on the level of fund returns.
The entitlement to carried interest and the amount, is determined by the level
of accumulated profits exceeding an agreed threshold (the "hurdle") over the
lifetime of each fund. The Group earns 25 per cent of the carried interest in
all funds since Fund IV in Private Equity and Fund III in Private Credit.
Carried interest is generally 20 per cent of the Private Equity fund returns
over a hurdle of 8 per cent per annum with full catch-up. Carried interest for
the Private Credit funds is generally 10 per cent of returns with a 5 to 6 per
cent hurdle and full catch-up. Performance fees and carried interest
recognised in 2024 reflect the continued growth in the value of the fund
portfolios and represents 17 per cent of Fund Management Income for the year
(2023: 30 per cent) and 7 per cent of total income for the year (2023: 11 per
cent). This is at the lower end of the long-term guidance of 15 per cent to 25
per cent of Fund Management Income, reflecting outperformance in management
fees together with stable performance fee and carry valuation growth.
As part of the combination of Pollen Street Capital Holdings Limited with
Pollen Street Limited (formerly Honeycomb Investment Trust Plc) completed on
30 September 2022 (the "Combination"), the group purchased 25 per cent of the
carried interest rights in two of the Private Equity Funds. These are
recognised under IFRS 9 and represent 90 per cent of the recognised carried
interest to date. The remaining carried interest owned by the Group is
accounted for under IFRS 15 and income is only recognised to the extent it is
highly probable that there would not be a significant reversal of any
accumulated income recognised on the completion of a fund. The reversal risk
due to uncertainty of future fund performance is managed through the
application of discounts. The discount applied for each fund depends on the
stage and maturity profile of each fund and therefore recognises the
de-risking of the income over time, taking into account diversity of assets,
whether there has been a recent market correction (and whether this has
already been factored into the valuation of the fund) and the expected average
remaining holding period. Under IFRS 15, if no discount rate was applied to
the carried interest outstanding the carried interest receivable would
increase by £13.1 million (2023: £5.2 million).
Consistent Investment Company Returns
The Investment Company delivered strong returns in the period with Return on
Net Investment Assets increasing to 9.6 per cent and Income on Net Investment
Assets of £31.8 million, in line with expectations despite £22.9 million of
share buybacks, which had the effect of reducing invested assets. We have
maintained our disciplined approach resulting in robust performance which is
well diversified across deals and borrowers and the performance of Pollen
Street managed funds. The largest investment accounted for 10.1 per cent of
the portfolio, with the portfolio being 80 per cent invested in Credit Assets
and 20 per cent invested in Private Equity Assets (either in direct deals or
through Pollen Street managed funds). The portfolio has seen high levels of
cash generation in the year of £239 million (2023: £184 million) driven by
realisations and strong cash generation from interest payments and
amortisations on continuing positions. This cash generation demonstrates the
quality and liquidity of the portfolio and facilitates the rotation of the
portfolio from direct investments to focus on investing in Pollen Street
managed funds.
Investment Company Segment 2024 2023
Investment Assets £504 million £533 million
Average Net Investment Assets £330 million £344 million
Income on Net Investment Assets £31.8 million £30.2 million
Return on Net Investment Assets 9.6% 8.8%
This transition has continued to progress during the year with £196 million
committed to Pollen Street managed funds at the year end. These commitments
were £130 million drawn as at 31 December 2024, and are expected to continue
to draw over the investment period of the funds. As at 31 December 2024, the
investment portfolio was £504 million (2023: £533 million). The phased
drawdown of fund commitments combined with the high cash realisations in the
year has led to a reduction in the size of the overall asset portfolio and a
corresponding reduction in the debt position of the Group with a reduction in
the debt-to-tangible-equity ratio from 60 per cent to 53 per cent.
We completed a new 4-year £200 million senior debt facility on 10 June 2024
refinancing the previous facility and achieving a lower margin. This was
subsequently upsized to £240 million on 13 December 2024 to refinance certain
SPV facilities which enable us to reduce the operating cost base. The total
drawn leverage for the Group was £188.3 million (2023: £210.8 million). In
addition, the Group had £11.2 million (2023: £19.7 million) of cash
resulting in a strong liquidity position and a net debt-to-tangible equity
ratio of 50 per cent (2023: 54 per cent).
Profit before Tax and Tax
Profit before Tax for the Group increased by 31 per cent to £55.8 million for
2024 (2023: £42.6 million). The main drivers of this are the increase of
£11.3 million in the Operating Profit from the Asset Manager segment, a £1.6
million increase in Operating Profit of the Investment Company.
The charge for depreciation and amortisation is £2.4 million (2023: £1.9
million). This relates to a charge of £0.3 million (2023: £0.3 million)
associated with the depreciation of the Group's fixed assets, a charge of
£1.5 million (2023: £1.0 million) associated with the depreciation of the
Group's leased assets and a charge of £0.6 million (2023: £0.6 million)
associated with the amortisation of intangible assets representing the value
of customer relationships.
As a result of the Reorganisation, the Group now incurs corporation tax on all
of its activities as the Investment Company is no longer an investment trust.
The current tax charge for the period was £3.1 million (2023: £0.3 million),
benefitting from unused tax losses arising from previously incurred management
expenses in the Investment Company following the Reorganisation. The Group is
now also able to recognise a deferred tax asset of £3.3 million as at 31
December 2024 (2023: nil) in respect of the balance of these unused tax
losses. This deferred tax asset is expected to crystallise fully in 2025. The
Group also recognised a deferred tax liability in respect of the recognition
of fair value gains within the Investment Company and carried interest in the
Asset Manager. The deferred tax liability of £8.9 million (2023: £3.1
million) will crystallise as the realised gain from these begins to flow to
the Group in the medium term. The deferred tax charge for the year was £3.1
million (2023: £2.4 million). The effective tax rate for 2024 was 11.1 per
cent (2023: 17.8 per cent 2 ).
As detailed in Note 7 to the financial statements, the Group has a lower
effective tax rate than the UK statutory rate. This is largely driven by
timing differences on the taxation of management fee income and significant
tax loss carry-forwards in the UK due to certain forms of income that are not
subject to UK corporation tax. We expect the effective tax rate to increase
going forward.
2024 2023
(£ million) (£ million)
Operating Profit of Asset Manager 27.2 15.9
Operating Profit of Investment Company 31.8 30.2
Operating Loss of Central segment (0.8) (1.6)
Operating Profit of Group 58.2 44.5
Depreciation and amortisation (2.4) (1.9) 3
Profit before Tax 55.8 42.6
Corporation tax (6.2) (2.7)
Profit after Tax 49.6 39.9
Earnings per Share & Dividends
Earnings per share (basic and diluted) increased by 27 per cent to 78.8 pence
per share (2023: 62.2 pence per share). The Board is pleased to confirm a
second (and final) interim dividend for the period ended 31 December 2024 of
27.1 pence per share, amounting to a total payment of £16.5 million. This
dividend, combined with the interim dividend payment of £16.5 million, is
consistent with the Group's guidance that it will pay a dividend of no lower
than £33.0 million in respect of 2024 and that dividends will grow
progressively thereafter. This represents a £0.9 million increase on the
total dividend paid in respect of 2023 of £32.1 million.
During 2024, following completion of the Reorganisation and conversion to a
commercial company, the timing of dividend payments was changed to allow for
dividends to be declared on a semi-annual, rather than a quarterly, basis. As
a result of this re-phasing there was a one-off reduction in dividend payments
paid in 2024, from £32.1 million in 2023 to £24.9 million in 2024. Prior to
conversion to a commercial company, net interest income was distributed to
shareholders through dividends designated as interest distributions. As a
commercial company, whilst maintaining a progressive dividend policy, it is
expected that the Group will retain an increasing share of earnings in order
to re-invest in value creation opportunities in line with the Capital
Allocation Framework.
The second interim dividend will be paid on 2 May 2025 to shareholders on the
share register at the record date, being 4 April 2025. The ex-dividend date
will be 3 April 2025. Pollen Street operates a Dividend Re-Investment
Programme ("DRIP"), details of which are available from the Company's
Registrars, Computershare. The final date for DRIP elections will be 9 April
2025.
During 2024, we completed an initial share buyback programme with a commitment
of up to £30.0 million, reflecting the confidence we have in the resilience
of our business and the attractive fundamental value and prospects of the
Group. At 31 December 2024, £22.9 million had been used to repurchase
3,222,257 shares.
Outlook
The Group remains in a strong position and is strategically well-placed and
well-resourced for further growth in 2025 and beyond. Fund Management Income
is expected to continue to grow with the final close of Private Equity Fund V
above its target of €1 billion, and further capital raises in Private Credit
Fund IV and their subsequent deployment under the Private Credit strategies.
The balance sheet has delivered stable and robust performance with a healthy
balance of direct positions and investments in Pollen Street managed funds to
ensure alignment with Limited Partner interests. The Group is trading in line
with expectations.
In accordance with the Capital Allocation Framework announced in 2024, the
Group intends to continue to pay a progressive dividend and may return surplus
capital to shareholders through share buybacks. Moderate growth in the
dividend, below the level of earnings growth, will allow dividend cover to
increase over time. Any share buybacks will be subject to Board approval and
will be evaluated against other value-creation opportunities available.
Crispin Goldsmith
Chief Financial Officer
24 March 2025
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended For the year ended
31 December 2024 31 December 2023
Unaudited 4
Notes £'000 £'000
Management fee income 5 50,282 28,912
Carried interest and performance fee income 5, 14 7,786 11,480
Interest income on Credit Assets held at amortised cost 5 41,380 57,668
Gains on Investment Assets held at fair value 5, 10 18,998 5,102
Total income 118,446 103,162
Expected credit loss (charge) / release 5, 9 (593) 970
Third-party servicing costs 5 (1,177) (2,374)
Net operating income 116,676 101,758
Administration costs 5 (41,931) (36,691)
Finance costs 5, 17 (16,587) (20,590)
Operating profit 58,158 44,477
Depreciation 5 (1,730) (1,233)
Amortisation 5, 13 (640) (640)
Profit before tax 55,788 42,604
Tax charge 7 (6,190) (2,664)
Profit after tax 49,598 39,940
Other comprehensive income 62 (453)
Foreign currency translation reserve
Total comprehensive income 49,660 39,487
Earnings per share 8 78.8 p 62.2 p
(basic and diluted)
The notes to the accounts form an integral part of the financial statements.
Company Statement of Profit or Loss and Other Comprehensive Income
For the year ended For the year ended
31 December 2024 31 December 2023
Notes £'000 £'000
Revenue 5 40,508 103
Administration costs 5 (1,486) (103)
Profit before tax 39,022 -
Tax charge 7 - -
Profit after tax 39,022 -
The notes to the accounts form an integral part of the financial statements.
Consolidated Statement of Financial Position
As at As at
31 December 2024 31 December 2023
Unaudited(4)
Notes £'000 £'000
Non-current assets
Credit Assets at amortised cost 9 309,423 444,490
Investment Assets held at fair value through profit or loss 10 194,176 88,220
Fixed assets 11 1,149 1,277
Lease assets 12 4,860 3,817
Goodwill and intangible assets 13 227,100 227,740
Carried interest 14 25,073 17,332
Deferred tax asset 7 3,256 -
Total non-current assets 765,037 782,876
Current assets
Trade and other receivables 15 35,542 17,942
Current tax receivable 561 -
Cash and cash equivalents 11,195 19,746
Total current assets 47,298 37,688
Total assets 812,335 820,564
Current liabilities
Interest-bearing borrowings 17 498 132,738
Trade and other payables 18 29,249 19,149
Lease liabilities 12 1,376 1,402
Current tax payable - 981
Derivative financial liabilities 16 1,467 179
Total current liabilities 32,590 154,449
Total assets less current liabilities 779,745 666,115
Non-current liabilities
Interest-bearing borrowings 17 187,767 78,026
Lease liabilities 12 3,756 2,750
Deferred tax liability 7 8,866 3,093
Total non-current liabilities 200,389 83,869
Net assets 579,356 582,246
Shareholders' funds
Ordinary share capital 21 610 642
Share premium 21 549,757 -
Retained earnings 29,196 4,978
Other reserves 21 (207) 576,626
Total shareholders' funds 579,356 582,246
Net asset value per share (pence) 23 950.0 906.8
The notes to the accounts form an integral part of the financial statements.
The financial statements of Pollen Street Group Limited (company number
70165), which includes the notes, were approved and authorised by the Board of
Directors on 24 March 2025 and were signed on its behalf by:
Robert Sharpe
Chair
24 March 2025
Company Statement of Financial Position
As at As at
31 December 2024 31 December 2023
Notes £'000 £'000
Non-current assets
Investments in subsidiaries 28 571,269 -
Total non-current assets 571,269 -
Current assets
Trade and other receivables 15 23,986 108
Total current assets 23,986 108
Total assets 595,255 108
Current liabilities
Trade and other payables 18 29,167 108
Total current liabilities 29,167 108
Net assets 566,088 -
Shareholders' funds
Ordinary share capital 21 610 -
Share premium 21 542,972 -
Retained earnings 22,506 -
Total shareholders' funds 566,088 -
The notes to the accounts form an integral part of the financial statements.
The financial statements of Pollen Street Group Limited (company number
70165), which includes the notes, were approved and authorised by the Board of
Directors on 24 March 2025 and were signed on its behalf by:
Robert Sharpe
Chair
24 March 2025
Consolidated Statement of Changes in Shareholders' Funds
For the year ended 31 December 2024
Ordinary Share Capital Share Premium Retained Earnings Special Distributable Reserve Merger Reserves Foreign Currency Translation Reserve Total Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds as at 1 January 2024 642 - 4,978 351,625 225,270 (269) 582,246
Reallocation of reserves - 576,895 - (351,625) (225,270) - -
Profit after taxation - - 49,598 - - - 49,598
Reclassification of transaction costs - 517 (517) - - - -
Transaction costs in relation to the Reorganisation - (4,833) - - - - (4,833)
Dividends paid - - (24,863) - - - (24,863)
Buybacks (32) (22,822) - - - - (22,854)
Foreign currency translation reserve - - - - - 62 62
Shareholders' funds as at 610 549,757 29,196 - - (207) 579,356
31 December 2024
For the year ended 31 December 2023
Ordinary Share Capital Share Premium Retained Earnings Special Distributable Reserve Merger Reserves Foreign Currency Translation Reserve Total Equity
Unaudited(4) £'000 £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds as at 1 January 2023 689 299,599 2 51,979 225,270 - 577,539
Profit after taxation - - 39,940 - - - 39,940
Dividends paid - - (31,664) - - - (31,664)
Cancellation of treasury shares (47) 47 - - - - -
Cancellation of share premium reserve - (299,646) - 299,646 - - -
Reallocation of reserves - - (184) - - 184 -
Transfer from goodwill - - (2,651) - - - (2,651)
Deferred tax adjustment - - (465) - - - (465)
Foreign currency translation reserve - - - - - (453) (453)
Shareholders' funds as at 642 - 4,978 351,625 225,270 (269) 582,246
31 December 2023
Unaudited(4)
The notes to the accounts form an integral part of the financial statements.
Company Statement of Changes in Shareholders' Funds
For the year ended 31 December 2024
Ordinary Share Capital Share Premium Retained Earnings Total Equity
£'000 £'000 £'000 £'000
Shareholders' funds as at 1 January 2024 - - - -
Issue of share capital 642 570,627 - 571,269
Transaction costs in relation to the Reorganisation - (4,833) - (4,833)
Profit after taxation - - 39,022 39,022
Dividends paid - - (16,516) (16,516)
Buybacks (32) (22,822) - (22,854)
Shareholders' funds as at 31 December 2024 610 542,972 22,506 566,088
For the year ended 31 December 2023
Ordinary Share Capital Share Premium Retained Earnings Total Equity
£'000 £'000 £'000 £'000
Shareholders' funds as at 1 January 2023 - - - -
Profit after taxation - - - -
Dividends paid - - - -
Shareholders' funds as at 31 December 2023 - - - -
The notes to the accounts form an integral part of the financial statements.
Consolidated Statement of Cash Flows
For the year ended For the year ended
31 December 2024 31 December 2023
Unaudited(4)
Notes £'000 £'000
Cash flows from operating activities:
Cash generated from operations 24 35,077 37,225
Net repayments of Credit Assets at amortised cost 141,662 82,741
Dividends received from Investment Assets - 1,507
Purchase of investments at fair value 10 (94,984) (44,227)
Proceeds from disposal of investments at fair value 10 6,483 25,682
Tax paid (3,669) (105)
Net cash inflow from operating activities 84,569 102,823
Cash flows from investing activities:
Purchase of fixed assets 11 (156) (137)
Net cash inflow from investing activities (156) (137)
Cash flows from financing activities:
Payment of lease liabilities 12 (1,564) (1,350)
Reorganisation transaction costs (4,833) -
Drawdown of interest-bearing borrowings 17 240,500 37,000
Repayments of interest-bearing borrowings 17 (260,519) (91,094)
Transaction costs for financing activities 17 (2,880) -
Interest paid on financing activities 17 (15,951) (19,135)
Share buybacks (22,854) -
Dividends paid in the year 22 (24,863) (31,664)
Net cash outflow from financing activities (92,964) (106,243)
Net change in cash and cash equivalents (8,551) (3,557)
Cash and cash equivalents at the beginning of the year 19,746 23,303
Cash and cash equivalents at the end of the year 11,195 19,746
Interest received for the Group for the year ended 31 December 2024 was £33.5
million (2023: £53.9 million).
The notes to the accounts form an integral part of the financial statements.
Company Statement of Cash Flows
For the year ended For the year ended
31 December 2024 31 December 2023
Notes £'000 £'000
Cash flows from operating activities:
Cash generated from operations 24 44,203 -
Net cash inflow from operating activities 44,203 -
Cash flows from financing activities:
Reorganisation transaction costs (4,833)
Share buybacks (22,854) -
Dividends paid in the year 22 (16,516) -
Net cash outflow from financing activities (44,203) -
Net change in cash and cash equivalents - -
Cash and cash equivalents at the beginning of the year - -
Cash and cash equivalents at the end of the year - -
The notes to the accounts form an integral part of the financial statements.
Notes to the Financial Statements
1. General information
Pollen Street Group Limited is a public company limited by shares,
incorporated and registered under the laws of Guernsey with registration
number 70165. Pollen Street Group Limited is referred to as the "Company", and
together with its subsidiaries, the 'Group'. The registered office of the
Company is: Mont Crevelt House, Bulwer Avenue, St. Sampson, Guernsey, GY2 4LH.
The principal place of business of the Company is 11-12 Hanover Square,
London, W1S 1JJ.
The Company was established on 24 December 2021. The Company's purpose was to
become the parent company of Pollen Street Limited ("PSL"), previously Pollen
Street plc, by way of a scheme of arrangement (the "Scheme"). The Company's
activities until the Scheme came into effect were compliance related. The
scheme of arrangement came into effect on 24 January 2024.
On 24 January 2024, the Company became the immediate and ultimate parent of
Pollen Street Limited by way of a scheme of arrangement pursuant to Part 26 of
the UK Companies Act 2006. As part of this, the shares of Pollen Street
Limited were delisted and cancelled, and new shares were issued to the Company
so that the Company holds 100 per cent of the issued shares in Pollen Street
Limited. New shares in the Company were also issued to the former shareholders
of Pollen Street Limited on a one-to-one basis and were admitted to trading on
the London Stock Exchange's ("LSE") main market for listed securities.
On 14 February 2024, Pollen Street Limited distributed the entire issued share
capital of Pollen Street Capital Holdings Limited ("PSCHL") to the Company
referred to as the Distribution. The Scheme and the Distribution are together
referred to as the "Reorganisation".
The principal activity of the Group is to act as an alternative asset manager
investing within the financial and business services sectors across both
Private Equity and Private Credit strategies, as well as holding on-balance
sheet investments consisting of both direct investments and investments in
funds managed by Pollen Street. The principal activity of the Company is to be
the holding company for two 100 per cent owned subsidiaries engaged in these
asset management and investment activities.
2. Material accounting policies
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of The Companies
(Guernsey) Law 2008, and the Disclosure Guidance and Transparency Rules
sourcebook of the UK's Financial Conduct Authority ("FCA"). The accounting
policies comprise standards and interpretations approved by the International
Accounting Standards Board ("IASB") and International Financial Reporting
Committee as adopted in the UK, including interpretations issued by the IFRS
Interpretations Committee and interpretations issued by the International
Accounting Standard Committee ("IASC") that remain in effect.
The Reorganisation is a capital reorganisation and has been accounted for
using the book-value method. This method applies retrospectively, meaning that
the financial statements are restated as if the Reorganisation had occurred at
the beginning of the earliest period presented, i.e. from 1 January 2023.
The prior year comparatives are unaudited for Pollen Street Group Limited.
They are based on the audited consolidated financial statements for Pollen
Street Limited as set out in the Pollen Street Limited Annual Report and
Accounts for the year ended 31 December 2023 and the audited Pollen Street
Group Limited financial statements for the year ended 31 December 2023 as set
out in the Pollen Street Group Limited Annual Report and Accounts for the year
ended 31 December 2023. These numbers have been included as comparatives in
accordance with the book-value method of accounting for capital
reorganisations. Refer to the Capital Reorganisation accounting policy below
for more details.
Going concern
The Directors have reviewed the financial projections of the Group, which show
that the Group will be able to generate sufficient cash flows in order to meet
its liabilities as they fall due within 12 months from the approval of these
financial statements. These financial projections have been performed for the
Group under stressed scenarios, and in all cases the Group is able to meet its
liabilities as they fall due. For the Investment Company, the stressed
scenarios included halting future Investment Asset originations, late
repayments of the largest structured facility and individual exposures
experience ongoing performance at the worst monthly impact experienced
throughout 2023 and 2024. For the Asset Manager, the stressed scenarios
included no new funds being raised.
The Directors consider these scenarios to be the most relevant risks to the
Group's operations. Finally, the Directors reviewed financial and
non-financial covenants in place for all debt facilities within the
subsidiaries of the Group with no breaches anticipated, even in the stressed
scenario. The Directors are satisfied that the going concern basis remains
appropriate for the preparation of the financial statements.
The material accounting policies adopted by the Company are set out below and
have been consistently applied across periods presented and all values are in
pounds.
Adoption of new and amended standards and interpretations
Standards, interpretations and amendments to published standards effective for the year ended 31 December 2024
The following new and amended standards do not have a material impact on the
Group's financial statements:
International accounting standards and interpretations Effective date
Amendments to IAS 1: Classification of Liabilities as Current or Non-current 1 January 2024
and Non-current liabilities with covenants
Amendments to IFRS 16: Lease liability in a sale and leaseback 1 January 2024
Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements 1 January 2024
Standards, interpretations and amendments to published standards which are not yet effective
New and amended standards that have been issued, but are not yet effective, up
to the date of the Group's financial statements are disclosed below. These
standards do not have a material impact on the Group's financial statements,
with the exception of IFRS 18: 'Presentation and Disclosure in Financial
Statements' which will impact the presentation and disclosure of financial
statements. The Group plans to adopt these, if applicable, when they become
effective.
International accounting standards and interpretations Effective date
Amendments to IAS 21: Lack of Exchangeability 1 January 2025
Amendments to IFRS 9 and IFRS 7: Amendments to the Classification and 1 January 2026
Measurement of Financial Instruments
New Accounting Standard IFRS 18: 'Presentation and Disclosure in Financial 1 January 2027
Statements'
New Accounting Standard IFRS 19: 'Subsidiaries without Public Accountability: 1 January 2027
Disclosures'
Accounting policies
Consolidation
Subsidiaries are investees controlled by the Company. The Company controls an
investee if it is exposed to, or has the rights to, variable returns from its
involvement with the investee and has the ability to affect those returns
through its power over the investee. The Company reassesses whether it has
control if there are changes to one or more elements of control. The Company
does not consider itself to be an investment entity for the purposes of IFRS
10, as it does not hold substantially all of its investments at fair value.
Consequently, it consolidates its subsidiaries rather than holding at fair
value through profit or loss.
The Group also assessed the consolidation requirements for the carried
interest partnerships and certain underlying entities of Pollen Street managed
funds ("funds") which the Group holds as investments as explained in the
investments in associates section. Refer to Note 28 for further details.
In the consolidated financial statements, intra-group balances and
transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated. All entities within the Group have coterminous
reporting dates.
Capital reorganisation
Capital reorganisations are accounted for using the book-value method. This
methodology is used as these transactions do not represent a substantive
change in ownership. Instead, they are viewed as a reorganisation of entities
within the same group. The Directors consider this method to be the most
accurate reflection of the historical financial performance and position of
the combining entities following the Reorganisation.
This method applies retrospectively, meaning that the financial statements are
restated as if the Reorganisation had occurred at the beginning of the
earliest period presented. The assets and liabilities of the combining
entities are recognised at their carrying amounts in the financial statements.
No adjustments are made to reflect fair values or recognise any new assets or
liabilities, except where necessary to align accounting policies.
Any consideration transferred is recognised at its carrying amount. The
difference between the consideration transferred and the carrying amount of
the net assets acquired is recognised in equity.
Comparative information is restated to reflect the reorganisation as if it had
occurred at the beginning of the earliest period presented, i.e. 1 January
2023. This ensures consistency and comparability of financial information
across periods. Therefore, the prior year comparatives reflect those of the
Group when Pollen Street Limited was the ultimate parent of the Group. These
numbers were audited as part of the Pollen Street Limited consolidated Annual
Report and Accounts for the year ended 31 December 2023.
Refer to Note 4 for further details.
Investments in subsidiaries
Investments in subsidiaries in the Statement of Financial Position of the
Company are recorded at cost less provision for impairments. All transactions
between the Company and its subsidiary undertakings are classified as related
party transactions for the Company accounts and are eliminated on
consolidation.
Investments in associates
Associates are entities over which the Group has significant influence, but
does not control, generally accompanied by a shareholding of between 20 per
cent and 50 per cent of the voting rights.
Before the acquisition of Pollen Street Limited by the Company, Pollen Street
Limited acquired carried interest rights in two Private Equity funds as part
of the Combination on 30 September 2022. The rights are in the form of
partnership participations in carried interest partnerships. The Group has 25
per cent of the total interests in these partnerships. The Group has in excess
of 20 per cent participation and therefore is considered to have significant
influence over the partnerships and the partnerships are considered to be an
associate.
The Directors also consider any influence that the Group has in the set up of
any new carried interest partnerships in order to assess the power to control
them. The Group has between 1 per cent and 25 per cent of the total interests
in these partnerships. It was determined that the carried interest
partnerships were set up on behalf of the fund investors, and that on balance,
the Group does not control the carried interest partnerships. Where the Group
has in excess of 20 per cent of LP interest in the carried interest
partnership, the Group is considered to have significant influence. It was
therefore determined that these carried interest partnerships are also
accounted for as associates.
These carried interest partnerships (including associates and contract assets)
are presented in the 'Carried interest' line on the Consolidated Statement of
Financial Position; and income from the carried interest partnerships is
presented in the 'Carried interest and performance fee income' line on the
Consolidated Statement of Profit or Loss and Other Comprehensive Income.
The key judgemental areas for the accounting of carried interest partnerships
are set out in Note 3, Significant accounting estimates and judgements.
For the underlying entities or funds, the Directors consider the nature of the
relationships between the Group, the underlying entities or funds and the
investors. The Directors also consider any influence that the Group has in the
set up of the underlying entities or funds in order to assess the power to
control the underlying entities or funds. It was determined that the
underlying entities or funds were set up for the investors, and that on
balance, the Group does not control the underlying entities or funds.
The Group also holds more than 20 per cent of interest in certain underlying
entities or funds. The Group elects to hold these investments in associates at
Fair Value Through Profit or Loss ("FVTPL"). This treatment is permitted by
IAS 28 Investments in Associates and Joint Ventures, which permits investments
held by entities that are venture capital organisations, mutual funds or
similar entities to be excluded from its measurement methodology requirements
where those investments are designated, upon initial recognition, as at FVTPL
and accounted for in accordance with IFRS 9. These underlying entities or
funds are presented in the 'Investment Assets held at fair value through
profit or loss' line on the Consolidated Statement of Financial Position.
Changes in fair value of these entities or funds are presented in the 'Gains
on Investment Assets held at fair value' on the Consolidated Statement of
Profit or Loss and Other Comprehensive Income.
Details of how the Group classifies and measures assets at FVTPL are in the
classification and measurement section.
Business model assessment
The Group assesses the objective of the business model in which a financial
asset is held at a portfolio level in order to generate cash flows because
this best reflects the way the business is managed. That is, whether the
Group's objective is solely to collect the contractual cash flows from the
assets or is to collect both the contractual cash flows and cash flows arising
from the sale of assets. If neither of these are applicable, then the
financial assets are classified as part of the other business model and
measured at FVTPL.
The assessment includes:
· the stated policies and objectives for the portfolio and the
operation of those policies in practice, including whether the strategy
focuses on earning contractual interest revenue, maintaining a particular
interest rate profile, matching duration of the financial assets to the
duration of the liabilities that are funding those assets or realising cash
flows through the sale of assets;
· past experience on how the cash flows for these assets were
collected;
· how the performance of the portfolio is evaluated and reported;
· the risks that affect the performance of the business model (and
the financial assets held within that business model) and how those risks are
managed; and
· the frequency, volume and timing of deployment in prior years,
the reasons for such deployment and expectations about future deployment
activity. However, information about deployment activity is not considered in
isolation, but as part of an overall assessment of how the stated objective
for managing the financial assets is achieved and how cashflows are realised.
Assessment of whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, "principal" is defined as the fair value
of the financial asset on initial recognition. "Interest" is defined as
consideration for the time value of money, for the credit risk associated with
the principal amount outstanding during a particular period of time and for
other basic lending risks and costs (e.g. liquidity risk and administrative
costs), as well as a reasonable profit margin.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the contractual terms of the instrument are
considered. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making the assessment the
following features are considered:
· contingent events that would change the amount and timing of cash
flows;
· leverage features;
· prepayment and extension terms;
· terms that limit the Group's claim to cash flows from specified
assets, e.g. non-recourse asset arrangements; and
· features that modify consideration for the time value of money,
e.g. periodic reset of interest rates.
Classification and measurement
Financial assets and financial liabilities are recognised in the Consolidated
Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instrument. The Group shall offset financial
assets and financial liabilities if it has a legally enforceable right to set
off the recognised amounts and interests and intends to settle on a net basis.
Financial assets and liabilities are derecognised when the Group settles its
obligations relating to the instrument.
Classification and measurement - Financial assets
IFRS 9 contains a classification and measurement approach for debt instruments
that reflects the business model in which assets are managed and their cash
flow characteristics. This is a principle-based approach and applies one
classification approach for all types of debt instruments. For debt
instruments, two criteria are used to determine how financial assets are
classified and measured:
· the entity's business model (i.e. how an entity manages its debt
Instruments in order to generate cash flows by collecting contractual cash
flows, selling financial assets or both); and
· the contractual cash flow characteristics of the financial asset
(i.e. whether the contractual cash flows are solely payments of principal and
interest).
A debt instrument is measured at amortised cost if it meets both of the
following conditions and is not designated as at FVTPL:
a) it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
b) its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
IFRS 9 details the classification and measurement approach for assets measured
at fair value through other comprehensive income ("FVOCI") if it meets both of
the following conditions and is not designated as at FVTPL:
a) it is held within a business model whose objective is achieved by
both collecting contractual cash flows and selling financial assets; and
b) its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
Equity instruments and derivatives are measured at FVTPL, unless they are not
held for trading purposes, in which case an irrevocable election can be made
on initial recognition to measure them at FVOCI with no subsequent
reclassification to profit or loss. This election is made on an investment by
investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as
described above are measured at FVTPL.
All equity positions are measured at FVTPL. Financial assets measured at FVTPL
are recognised in the balance sheet at their fair value. Fair value gains and
losses together with interest coupons and dividend income are recognised in
the Consolidated Statement of Profit or Loss and Other Comprehensive Income
within Gains on Investment Assets held at fair value in the period in which
they occur. The fair values of assets and liabilities traded in active markets
are based on current bid and offer prices respectively. If the market is not
active the Group establishes a fair value by using valuation techniques. In
addition, on initial recognition the Group may irrevocably designate a
financial asset that otherwise meets the requirements to be measured at
amortised cost or at FVOCI as FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
The Group does not hold any FVOCI assets.
Classification and measurement - Financial liabilities
Financial liabilities are classified and subsequently measured at amortised
cost, except for:
· Financial liabilities at fair value through profit or loss: this
classification is applied to derivatives, financial liabilities held for
trading and other financial liabilities designated as such at initial
recognition. Gains or losses on financial liabilities designated at fair value
through profit or loss are presented partially in other comprehensive income
(the amount of change in the fair value of the financial liability that is
attributable to changes in the credit risk of that liability, which is
determined as the amount that is not attributable to change in market
conditions that give rise to market risk) and partially in profit or loss (the
remaining amount of change in the fair value of the liability). This is unless
such a presentation would create, or enlarge, an accounting mismatch, in which
case the gains and losses attributable to changes in the credit risk of the
liability are also presented in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income.
· Financial liabilities arising from the transfer of financial
assets which did not qualify for derecognition, whereby a financial liability
is recognised for the consideration received for the transfer. In subsequent
years, the Group recognises any expense incurred on the financial liability.
· Financial guarantee contracts and loan commitments.
Credit Assets at amortised cost
Loans are initially recognised at a carrying value equivalent to the funds
advanced to the borrower plus the cost of acquisition fees and transaction
costs. After initial recognition loans are subsequently measured at amortised
cost using the effective interest rate method ("EIRM") less expected credit
losses (see Note 9).
Expected credit loss allowance for financial assets measured at amortised cost
The credit impairment charge or release in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income represents the change in
expected credit losses which are recognised for loans and advances to
borrowers, other financial assets held at amortised cost.
IFRS 9 applies a single impairment model to all financial instruments subject
to impairment testing. Impairment losses are recognised on initial
recognition, and at each subsequent reporting period, even if the loss has not
yet been incurred. In addition to past events and current conditions,
reasonable and supportable forecasts affecting collectability are also
considered when determining the amount of impairment in accordance with IFRS
9.
At initial recognition, allowance is made for expected credit losses resulting
from default events that are possible within the next 12 months (12-month
expected credit losses). In the event of a significant increase in credit
risk, allowance (or provision) is made for expected credit losses resulting
from all possible default events over the expected life of the financial
instrument (lifetime expected credit losses). Financial assets where 12-month
expected credit losses are recognised are considered to be Stage 1; financial
assets which are considered to have experienced a significant increase in
credit risk are in Stage 2; and financial assets which have defaulted or are
otherwise considered to be credit-impaired are allocated to Stage 3. Stage 2
and Stage 3 are based on lifetime expected credit losses.
The measurement of expected credit loss ("ECL"), is primarily based on the
product of the instrument's probability of default ("PD"), loss given default
("LGD") and exposure at default ("EAD"), taking into account the value of any
collateral held or other mitigants of loss and including the impact of
discounting using the EIR.
· The PD represents the likelihood of a borrower defaulting on its
financial obligation, either over the next 12 months ("12M PD"), or over the
remaining lifetime ("Lifetime PD") of the obligation.
· EAD is based on the amounts the Group expects to be owed at the
time of default, over the next 12 months or over the remaining lifetime. For
example, for a revolving commitment, the Group includes the current drawn
balance plus any further amount that is expected to be drawn up to the current
contractual limit by the time of default, should it occur. The EAD is
discounted back to the reporting date using the EIR determined at initial
recognition.
· LGD represents the Group's expectation of the extent of loss on a
defaulted exposure. LGD varies by type of counterparty, type and seniority of
claim and availability of collateral or other credit support. LGD is expressed
as a percentage loss per unit of EAD. LGD is calculated on a 12-month or
lifetime basis, where 12-month LGD is the percentage of loss expected to be
made if the default occurs in the next 12 months and Lifetime LGD is the
percentage of loss expected to be made if the default occurs over the
remaining expected lifetime of the loan ("Lifetime LGD").
The ECL is determined by estimating the PD, LGD and EAD for each individual
exposure or collective segment. These three components are multiplied together
and adjusted for the likelihood of survival (i.e. the exposure has not prepaid
or defaulted in an earlier month). This effectively calculates an ECL, which
is then discounted back to the reporting date and summed. The discount rate
used in the ECL calculation is the original EIR or an approximation thereof.
The Lifetime PD is developed by applying a maturity profile to the current
12-month PD. The maturity profile looks at how defaults develop on a portfolio
from the point of initial recognition throughout the lifetime of the loans.
The maturity profile is based on historical observed data and is assumed to be
the same across all assets within a portfolio and credit grade band where
supported by historical analysis. The 12-month and lifetime EADs are
determined based on the expected payment profile, which varies by product
type:
· For amortising products and bullet repayment loans, this is based
on the contractual repayments owed by the borrower over a 12-month or lifetime
basis. This is also adjusted for any expected overpayments made by a borrower.
Early repayment/refinance assumptions are also incorporated into the
calculation.
· For revolving products, the EAD is predicted by taking current
drawn balance and adding a "credit conversion factor" which allows for the
expected drawdown of the remaining limit by the time of default. These
assumptions vary by product type and current limit utilisation band, based on
analysis of the Group's recent default data.
The 12-month and lifetime LGDs are determined based on the factors which
impact the recoveries made post default. These vary by product type.
· For secured products, this is primarily based on collateral type
and projected collateral values, historical discounts to market/book values
due to forced sales, time to repossession and recovery costs observed.
· For unsecured products, LGDs are typically set at product level
due to the limited differentiation in recoveries achieved across different
borrowers. These LGDs are influenced by collection strategies, including
contracted debt sales and price.
The main difference between Stage 1 and Stage 2 is the respective PD horizon.
Stage 1 estimates use a maximum of a 12-month PD, while Stage 2 estimates use
a lifetime PD. The main difference between Stage 2 and Stage 3 is that Stage 3
is effectively the point at which there has been a default event. For
financial assets in Stage 3, lifetime ECL continues to be recognised but now
recognises interest income on a net basis. This means that interest income is
calculated based on the gross carrying amount of the financial asset less ECL.
Stage 3 estimates continue to leverage existing processes for estimating
losses on impaired loans, however, these processes are updated to reflect the
requirements of IFRS 9, including the requirement to consider multiple
forward-looking scenarios using independent third-party economic information.
Movements between Stage 1 and Stage 2 are based on whether an instrument's
credit risk as at the reporting date has increased significantly relative to
the date it was initially recognised. Where the credit risk subsequently
improves such that it no longer represents a significant increase in credit
risk since origination, the asset is transferred back to Stage 1.
In assessing whether a borrower has had a significant increase in credit risk,
the following indicators are considered:
· Significant change in collateral value (secured facilities only)
which is expected to increase the risk of default;
· Actual or expected significant adverse change in operating
results of the borrower or performance of collateral;
· Significant adverse changes in business, financial and/or
economic conditions in the market in which the borrower operates;
· Actual or expected forbearance or restructuring;
· Significant increase in credit spread, where this information is
available; and
· Early signs of cashflow/liquidity problems such as delay in
servicing of payables.
However, as a backstop, unless identified at an earlier stage, the credit risk
of financial assets is deemed to have increased significantly when repayments
are more than 30 days past due. Movements between Stage 2 and Stage 3 are
based on whether financial assets are credit impaired as at the reporting
date. IFRS 9 contains a rebuttable presumption that default occurs no later
than when a payment is 90 days past due. The Group uses this 90-day backstop
for all its assets except for UK second charge mortgages, where the Group has
assumed a backstop of 180 days past due as mortgage exposures more than 90
days past due, but less than 180 days, typically show high cure rates and this
aligns to the Group's risk management practices. Assets can move in both
directions through the stages of the impairment model.
In assessing whether a borrower is credit-impaired, the following qualitative
indicators are considered:
· Whether the borrower is in breach of financial covenants, for
example where concessions have been made by the lender relating to the
borrower's financial difficulty or there are significant adverse changes in
business, financial or economic conditions on which the borrower operates;
· Where the credit risk has increased, the remaining lifetime PD at
the reporting date is assessed in comparison to the residual lifetime PD
expected at the reporting date when the exposure was first recognised; and
· Any cases of forbearance.
The criteria above have been applied to all Credit Assets at amortised cost
held by the Group and are consistent with the definition of default used for
internal credit risk management purposes. The default definition has been
applied consistently to model the PD, EAD and LGD throughout the Group's
expected credit loss calculations.
Inputs into the assessment of whether a financial instrument is in default and
their significance may vary over time to reflect changes in circumstances.
Under IFRS 9, when determining whether the credit risk (i.e. the risk of
default) on a financial instrument has increased significantly since initial
recognition, reasonable and supportable information that is relevant and
available without undue cost or effort, including both quantitative and
qualitative information and analysis based on historical experience, credit
assessment and forward-looking information.
The measurement of expected credit losses for each stage and the assessment of
significant increases in credit risk considers information about past events
and current conditions as well as reasonable and supportable forward-looking
information. A "Base case" view of the future direction of relevant economic
variables and a representative range of other possible forecasts scenarios
have been developed. The process has involved developing two additional
economic scenarios and considering the relative probabilities of each outcome.
The base case represents a most likely outcome and is aligned with information
used for other purposes, such as strategic planning and budgeting. The number
of scenarios and their attributes are reassessed at each reporting date. All
of the portfolios of the Group use one positive, one optimistic and one
downside scenario. These scenario weightings are determined by a combination
of statistical analysis and expert judgement, taking account of the range of
possible outcomes each chosen scenario is representative of.
The estimation and application of forward-looking information requires
significant judgement. PD, LGD and EAD inputs used to estimate Stage 1 and
Stage 2 credit loss allowances, are modelled and adjusted based on the
macroeconomic variables (or changes in macroeconomic variables) that are most
closely correlated with credit losses in the relevant portfolio. The Group has
utilised macroeconomic scenarios prepared and provided by Oxford Economics
("Oxford"). Oxford combines two decades of forecast data with the quantitative
assessment of the current risks facing the global and domestic economy to
produce robust forward-looking distributions for the economy. Oxford construct
three alternative scenarios at specific percentile points in the distribution.
In any distribution, the probability of a given discrete scenario is close to
zero. Therefore, scenario probabilities represent the probability of that
scenario or similar scenarios occurring. In effect, a given scenario
represents the average of a broader bucket of similar severity scenarios and
the probability reflects the width of that bucket. Given that it is known
where the IFRS 9 scenarios sit in the distribution (the percentiles), their
probability (the width of the bucket of similar scenarios) depends on how many
scenarios are chosen. Scenario probabilities must add up to 100 per cent so
the more scenarios chosen, the smaller the section of the distribution, or
bucket, each scenario represents and therefore the smaller the probability.
This allows the probabilities to be calculated according to whichever subset
of scenarios have been chosen for use in the ECL calculation. Oxford updates
these scenarios on a quarterly basis to reflect changes to the macroeconomic
environment. The Group updates the scenarios during the year if economic
conditions change materially. Oxford selects the scenarios to represent a
broadly fixed probability within the distribution of potential outcomes. As
such the Group has maintained the probability of each scenario at a broadly
constant level despite the changing macroeconomic environment. The Base case
is given a 40 per cent weighting and the downside and upside a 30 per cent
weighting each, which is unchanged from the prior year.
As with any economic forecasts, the projections and likelihoods of occurrence
are subject to a high degree of inherent uncertainty and therefore the actual
outcomes may be significantly different to those projected. The Group
considers these forecasts to represent its best estimate of the possible
outcomes and has analysed the non-linearities and asymmetries within the
Group's different portfolios to establish that the chosen scenarios are
appropriately representative of the range of possible scenarios.
Other forward-looking considerations not otherwise incorporated within the
above scenarios, such as the impact of any regulatory, legislative or
political changes, have also been considered, but no adjustment has been made
to the ECL for such factors. This is reviewed and monitored for
appropriateness at each reporting date.
Expected credit loss allowance for receivables
Receivables consist of trade and other debtor balances and prepayments and
accrued income. Trade receivables balances are represented by fees receivable
for investment fund management and advisory services provided during the year
to the Group's customers. The Group's customers are funds that the Group
manages or advises. As such, the Group has detailed and up-to-date information
on the financial position and outlook of its counterparties. Receivable
balances are generally collected on a monthly or quarterly basis and are
therefore short-term in nature. The Group applies a simplified approach in
calculating ECLs and recognises a loss allowance based on lifetime ECLs at
each reporting date. Given the historic rate of recoverability is 100 per cent
and the absence of reasons to believe the recoverability pattern will change,
management's assessment is that ECL calculated under IFRS 9 would be
immaterial at the end of the current and previous reporting period. Management
will continue to assess the recoverability at each reporting date for changes
in the circumstances surrounding the recoverability of the trade and other
receivables, and recognise an expected credit loss allowance when appropriate.
Write-off policy for financial assets measured at amortised cost
A loan or advance is normally written off, either partially or in full,
against the related allowance when the proceeds from realising any available
security have been received or there is no realistic prospect of recovery and
the amount of the loss has been determined. Subsequent recoveries of amounts
previously written off decrease the amount of impairment losses recorded in
the income statement.
Modification of loans
The Group sometimes renegotiates or otherwise modifies the contractual cash
flows of loans to customers. When this happens, the Group assesses whether or
not the new terms are substantially different to the original terms. The Group
does this by considering, among others, the following factors:
· if the borrower is in financial difficulty, whether the
modification merely reduces the contractual cash flows to amounts the borrower
is expected to be able to pay;
· whether any substantial new terms are introduced, such as a
profit share/equity-based return that substantially affects the risk profile
of the loan;
· significant extension of the loan term when the borrower is not
in financial difficulty;
· significant change in the interest rate;
· change in the currency the loan is denominated in; and
· insertion of collateral, other security or credit enhancements
that significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Group derecognises the original
financial asset and recognises a new asset at fair value and recalculates a
new EIR for the asset. The date of renegotiation is consequently considered to
be the date of initial recognition for impairment calculation purposes,
including for the purpose of determining whether a significant increase in
credit risk has occurred. However, the Group also assesses whether the new
financial asset recognised is deemed to be credit-impaired at initial
recognition, especially in circumstances where the renegotiation was driven by
the debtor being unable to make the originally agreed payments. Differences in
the carrying amounts are also recognised in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income as a gain or loss on
derecognition. If the terms are not substantially different, the renegotiation
or modification does not result in derecognition, and the Group recalculates
the gross carrying amount based on the revised cash flows of the financial
asset and recognises a modification gain or loss in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income. The new gross carrying
amount is recalculated by discounting the modified cash flows at the original
EIR (or credit-adjusted EIR for purchased or originated credit-impaired
financial assets).
Modification of financial assets
The Group sometimes modifies the terms of loans provided to customers due to
commercial renegotiations, or for distressed loans, with a view to maximising
recovery.
Such restructuring activities include extended payment term arrangements,
payment holidays and payment forgiveness. Restructuring policies and practice
are based on indicators or criteria which, in the judgement of management,
indicate that payment will most likely continue. These policies are kept under
continuous review. Restructuring is most commonly applied to term loans.
The risk of default of such assets after modification is assessed at the
reporting date and compared with the risk under the original terms at initial
recognition, when the modification is not substantial and so does not result
in derecognition of the original assets. The Group monitors the subsequent
performance of modified assets. The Group may determine that the credit risk
has significantly improved after restructuring, so that the assets are moved
from Stage 2 or Stage 3.
Collateral and other credit enhancements
The Group employs a range of policies to mitigate credit risk. The most common
of these is accepting collateral for funds advanced. The Group has internal
policies of the acceptability of specific classes of collateral or credit risk
mitigation.
The Group prepares a valuation of the collateral obtained as part of the loan
origination process. This assessment is reviewed periodically. The principal
collateral types for loans and advances are:
· mortgages over residential properties;
· security over our borrowers receivables;
· margin agreement for derivatives, for which the Group has also
entered into master netting agreements;
· charges over business assets such as premises, inventory and
accounts receivable; and
· charges over financial instruments such as debt securities and
equities.
Longer-term finance and lending to corporate entities are generally secured;
revolving individual credit facilities are generally unsecured.
Collateral held as security for financial assets other than loans and advances
depends on the nature of the instrument. Derivatives are also generally
collateralised, such as collateralised debt obligations, in order to provide
collateral as a form of security for the obligations arising from the
derivative.
The Group closely monitors collateral held for financial assets considered to
be credit-impaired, as it becomes more likely that the Group will take
possession of collateral to mitigate potential credit losses.
Derecognition other than a modification
Financial assets, or a portion thereof, are derecognised when the contractual
rights to receive the cash flows from the assets have expired, or when they
have been transferred and either (i) the Group transfers substantially all the
risks and rewards of ownership, or (ii) the Group neither transfers nor
retains substantially all the risks and rewards of ownership and the Group has
not retained control.
The Group enters into transactions where it retains the contractual rights to
receive cash flows from assets but assumes a contractual obligation to pay
those cash flows to other entities and transfers substantially all of the
risks and rewards. These transactions are accounted for as "pass-through"
transfers that result in derecognition if the Group:
· has no obligation to make payments unless it collects equivalent
amounts from the assets;
· is prohibited from selling or pledging the assets; and
· has an obligation to remit any cash it collects from the assets
without material delay.
Derecognition
Financial liabilities are derecognised when they are extinguished (i.e. when
the obligation specified in the contract is discharged, cancelled or expires).
Different terms, as well as substantial modifications of the terms of existing
financial liabilities, are accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. The
terms are substantially different if the discounted present value of the cash
flows under the new terms, including any fees paid net of any fees received
and discounted using the original EIR, is at least 10 per cent different from
the discounted present value of the remaining cash flows of the original
financial liability. In addition, other qualitative factors, such as the
currency that the instrument is denominated in, changes in the type of
interest rate, new conversion features attached to the instrument and change
in covenants are also taken into consideration. If an exchange of debt
instruments or modification of terms is accounted for as an extinguishment,
any costs or fees incurred are recognised as part of the gain or loss on the
extinguishment. If the exchange or modification is not accounted for as an
extinguishment, any costs or fees incurred adjust the carrying amount of the
liability and are amortised over the remaining term of the modified liability.
Investments held at fair value through profit or loss
The investments held at FVTPL include Equity Assets and Credit Assets.
Equity Assets held at FVTPL are valued in accordance with the International
Private Equity and Venture Capital Valuation Guidelines ("IPEVCV") effective 1
January 2019 with the latest update in December 2022 as recommended by the
British Private Equity and Venture Capital Association.
Equity Assets are instruments that have equity-like returns; that is,
instruments that do not contain a contractual obligation to pay and that
evidence a residual interest in the issuer's net assets. Examples of equity
instruments include ordinary shares or investments in Private Equity funds
managed or advised by the Group. Investments into funds managed by the Group
are valued on the net asset value of each fund. The valuations typically
reflect the fair value of the Group's proportionate share of each investment
as at the reporting date.
Credit Assets at FVTPL consists of loans made to counterparties where the
contractual cash flows do not meet the requirements of the solely payments of
principal and interest test or are otherwise classified at fair value,
together with investments in Private Credit funds managed or advised by the
Group. See the section on Classification and measurement - Financial assets
earlier in this Note. Examples of credit instruments include credit
instruments where incremental cash flows are due contingent on certain events
occurring.
These Credit Assets at FVTPL are priced at their amortised cost value as a
proxy for the fair value, given that they are floating rate assets and
performing in line with expectations with limited credit risk.
Credit Assets at FVTPL also consists of investments in Private Credit Funds
managed by the Group and are valued based off the net asset value of each
fund. The valuations typically reflect the fair value of the Group's
proportionate share of each investment as at the reporting date.
Purchases and sales of unquoted investments are recognised when the contract
for acquisition or sale becomes unconditional.
IFRS 13 requires the Group to classify its financial instruments held at fair
value using a hierarchy that reflects the significance of the inputs used in
the valuation methodologies. These are as follows:
· Level 1 - quoted prices in active markets for identical
investments.
· Level 2 - other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayments, credit risk,
etc.).
· Level 3 - significant unobservable inputs (including the Group's
own assumptions in determining the fair value of investments).
An investment is always categorised as Level 1, 2 or 3 in its entirety. In
certain cases, the fair value measurement for an investment may use a number
of different inputs that fall into different levels of the fair value
hierarchy. The assessment of the significance of a particular input to the
fair value measurement requires judgement and is specific to the investment.
The gain on fair value is shown in the 'Gains on Investment Assets held at
fair value' line on the Consolidated Statement of Profit or Loss and Other
Comprehensive Income.
Fixed assets
Fixed assets are shown at cost less accumulated depreciation. Depreciation is
calculated by the Group on a straight-line basis by reference to the original
cost, estimated useful life and residual value. Cost includes the original
purchase price of the asset and the costs attributable to bringing the asset
to its working condition for its intended use. The period of estimated useful
life for this purpose is up to 10 years. Residual values are assumed to be
nil.
Plant and equipment is stated at historical cost less accumulated depreciation
and impairment. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Depreciation is charged so as to allocate the cost of assets less their
residual value over their estimated useful lives, using the straight-line
method.
Depreciation is provided on the following basis:
Fixtures and fittings 3
years
Office equipment 3
years
Electric vehicles
5 years
Leasehold improvements 10 years
The assets' residual values, useful lives and depreciation methods are
reviewed, and adjusted prospectively if appropriate, or if there is an
indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised in the Consolidated Statement of Profit
or Loss and Other Comprehensive Income.
Goodwill
Goodwill is initially measured at cost, which constitutes the excess of the
aggregate of the consideration transferred over the net identifiable assets
acquired and liabilities assumed. If the fair value of the net assets acquired
is in excess of the aggregate consideration transferred, the Group reassesses
whether it has correctly identified all of the assets acquired and all of the
liabilities assumed, and reviews the procedures used to measure the amounts to
be recognised at the acquisition date. If the reassessment still results in an
excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in the Consolidated
Statement of Profit or Loss and Other Comprehensive Income.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses.
Goodwill is tested for impairment on an annual basis and whenever there is an
indication that the recoverable amount of a cash-generating unit ("CGU") is
less than its carrying amount. Any impairment loss recognised on the goodwill
is not reversed subsequently. For the purpose of impairment testing, goodwill
acquired in a business combination is, from the acquisition date, allocated to
each of the Group's CGUs or group of CGUs that are expected to benefit from
the combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units. A CGU represents the lowest level at
which goodwill is monitored for internal management purposes.
Where goodwill has been allocated to a CGU and part of the operation within
that unit is disposed of, the goodwill associated with the disposed operation
is included in the carrying amount of the operation when determining the gain
or loss on disposal. Goodwill disposed in these circumstances is measured
based on the relative values of the disposed operation and the portion of the
CGU retained.
Intangibles
Intangible assets, which constitute acquired customer relationship assets
acquired from a business combination, are stated at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets are assessed
at each reporting date when there are indicators of impairment.
Amortisation is calculated using the straight-line method to allocate the
amortised amount of the assets to their residual values over their estimated
useful lives.
Leases
The Group assesses at contract inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all
leases, except for short-term leases and leases of low-value assets. The Group
recognises lease liabilities to make lease payments and lease assets
representing the right to use the underlying assets.
Lease assets
The Group recognises lease assets at the commencement date of the lease (i.e.,
the date the underlying asset is available for use). Lease assets are measured
at cost, less any accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of lease assets includes
the amount of lease liabilities recognised, initial direct costs incurred, an
estimate of costs to be incurred in restoring the underlying asset to the
condition required by the terms and conditions of the lease and lease payments
made at or before the commencement date less any lease incentives received.
Lease assets are depreciated on a straight-line basis over the shorter of the
lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the
lease term or the cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated useful life of the asset.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments less any lease incentives
receivable and amounts expected to be paid under residual value guarantees.
The lease payments also include payments of penalties for terminating the
lease, if the lease term reflects the Group exercising the option to
terminate.
In calculating the present value of lease payments, the Group uses its
incremental borrowing rate at the lease commencement date because the interest
rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change
in the lease term, a change in the lease payments (e.g., changes to future
payments resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to purchase the
underlying asset.
Carried interest receivable
Carried interest represents unrealised and realised shares of fund profits
from holdings in carried interest partnerships where the Group receives
variable returns as an incentive for management of the underlying funds. The
realised amount is the amount actually received. For the unrealised
performance, the amount recognised is determined against an assessment of the
underlying investor returns exceeding an agreed threshold or hurdle, and is
either accounted for under IFRS 9 (for carried interest partnerships acquired
as part of the Combination) or under IFRS 15 (for non-acquired carried
interest partnerships).
Movements in fair value, and amounts accrued as revenue under IFRS 15, are
shown in the 'Carried interest and performance fee income' line on the
Consolidated Statement of Profit or Loss and Other Comprehensive Income, with
the outstanding balance shown in the 'Carried interest' line on the
Consolidated Statement of Financial Position and are typically presented as
non-current assets unless they are expected to be received within the next 12
months.
Cash and cash equivalents
Cash and cash equivalents, which are presented as a single class of asset on
the Consolidated Statement of Financial Position, comprise cash at bank,
including cash that is restricted and held in reserve.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual arrangements entered into.
Derivatives
The Group uses foreign exchange spot, forward and swap transactions to hedge
foreign exchange movements in non-GBP assets or liabilities in order to
minimise foreign exchange exposure.
Derivative financial instruments are initially measured at fair value on the
date on which the derivative contract is entered into and are subsequently
measured at fair value at each reporting date. The Group does not designate
derivatives as cash flow hedges and so all fair value movements are recognised
in the Income Statement in the 'Gains on Investment Assets held at fair value'
line on the Consolidated Statement of Profit or Loss and Other Comprehensive
Income. The fair value of unsettled forward currency contracts is calculated
by reference to the market for forward contracts with similar maturities.
Interest-bearing borrowings
Interest-bearing borrowings are initially recognised at a carrying value
equivalent to the proceeds received net of issue costs associated with the
borrowings. After initial recognition, interest-bearing borrowings are
subsequently measured at amortised cost using the effective interest rate
("EIR") method.
Finance costs
Finance costs are accrued on the EIR basis and are presented as a separate
line on the Consolidated Statement of Profit or Loss and Other Comprehensive
Income.
Dividends
Dividends to shareholders are recognised in the period in which they are paid.
Income
The Group has four primary sources of income: management fee income, carried
interest and performance fee income, interest income on Credit Assets held at
amortised cost, and gains on Investment Assets held at fair value.
Management fee income includes fees charged by the Group to the funds that it
manages for the provision of investment fund management and advisory services,
which are treated as a single performance obligation. The parties to
agreements for fund management services comprise the Group and the investors
of each fund. Accordingly, the group of investors of each fund are identified
as a customer for accounting purposes.
Management fees are earned over a period and are recognised on an accrual
basis in the same period in which the service is performed. Management fees
are based on an agreed percentage of either committed or invested capital,
depending on the fund and its life stage, in accordance with individual
management agreements or limited partnership agreements.
Income is measured based on the consideration specified in the contracts and
exclude amounts collected on behalf of third parties, discounts and value
added taxes.
For Private Equity managed funds, management fee income is charged from the
inception of the fund. Where an LP enters the fund as part of subsequent
closes "catch-up" management fee income is calculated and charged as if the LP
had entered the fund on first close. These management fees are earned over a
prior period where the provision of investment fund management and advisory
services has already been provided and the corresponding performance
obligation is satisfied. Therefore, these catch-up management fees are
recognised immediately in full. This is not applicable on Private Credit funds
given that management fee income is charged on invested capital, rather than
commitments.
Carried interest and performance fee income includes income recognised under
IFRS 15 from holdings in carried interest partnerships where the Group
receives variable returns as an incentive for the funds that it manages.
Carried interest represents a share of fund profits through the Group's
holdings in carried interest partnerships. The amount is determined by the
level of accumulated profits exceeding an agreed threshold or hurdle. The
carried interest income is recognised when the performance obligations are
expected to be met. Income is only recognised to the extent that it is highly
probable that there would not be a significant reversal of any accumulated
revenue recognised on the completion of a fund. The uncertainty of future fund
performance is reduced through the application of discounts in the calculation
of carried interest income. Performance fees are generally calculated as a
percentage of the appreciation in the net asset value of a fund above a
defined hurdle, and are recognised on an accrual basis when the fee amount can
be estimated reliably, and it is highly probable that it will not be subject
to significant reversal.
Management fees and performance fees are charged to the Investment Company by
the Asset Manager. These fees are shown in Note 5, operating segments.
However, they are eliminated on consolidation.
Interest income on Credit Assets held at amortised cost is generated from
loans originated by the Group. Interest from loans are recognised in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income for
all instruments measured at amortised cost using the EIRM. The EIRM is a
method of calculating the amortised cost of a financial asset or financial
liability and of allocating the interest income or interest expense over the
relevant period. The effective interest rate ("EIR") is the rate that exactly
discounts estimated future cash flows through the expected life of the
financial instrument or, when appropriate, a shorter period to the net
carrying amount of the financial asset or financial liability. When
calculating the EIR, the Group takes into account all contractual terms of the
financial instrument, for example prepayment options, but does not consider
future credit losses. The calculation includes all fees paid or received
between parties to the contract that are an integral part of the EIR,
transaction costs and all other premiums or discounts. Fees and commissions
which are not considered integral to the EIR model and deposit interest income
are recognised on an accruals basis when the service has been provided or
received.
Gains on Investment Assets held at Fair Value include realised and unrealised
income on assets accounted for at fair value, including equity assets and
credit assets. Refer to the Investments held at fair value through profit or
loss section for further details.
Pensions
The Group makes contributions into employee personal pension schemes. Once the
contributions have been paid, the Group has no further payment obligations.
The contributions are recognised as an expense in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income when they fall due. Amounts
not paid are shown in accruals as a liability in the Consolidated Statement of
Financial Position.
Share-based payments
The Group grants annual bonuses to its Executive Directors and other senior
employees some of which are deferred in accordance with the Group's
Remuneration Policy. Deferred awards may be used to acquire shares in Pollen
Street Group Limited (a Share-Based Award), or fund commitments into Pollen
Street managed funds (Co-Investment Opportunity) and are subject to malus and
clawback provisions.
The Share-Based Awards generally vest after three years, subject to the
opportunity for co-investment. The Co-Investment Opportunity permits the
employee to collect the deferred award early, either in shares or up front in
cash, provided they elect to apply the after-tax proceeds of the deferred
award into a fund managed by the Group that has a contractual duration of
longer than three years.
The Group accounts for Share-Based Awards as share-based payments. The awards
are considered to be compound financial instruments, because the employee has
the right to demand settlement in cash. The Group first measures the fair
value of the cash component, which is considered to be a cash-settled
share-based payment, and then measures the fair value of the equity component
taking into account that the counterparty must forfeit the right to receive
cash in order to receive the equity instrument, which is considered to be an
equity-settled share-based payment.
Segmental reporting
The Group has two segments: the Asset Manager segment and the Investment
Company segment. The primary revenue streams for the Asset Manager segment
consist of management fees and performance fees or carried interest arising
from managing Private Equity and Private Credit funds. The Investment Company
segment primarily consists of the Group Investment Assets and borrowings. The
primary revenue stream for the Investment Company segment is interest income
and fair value gains on Investments held at fair value.
The Asset Manager segment charges management and performance fees to the
Investment Company segment for managing the segment's assets. These fees are
shown in the segmental results. However, they are eliminated in the
consolidated financial statements. Refer to Note 5 for further details.
Taxation
Although the Company is incorporated and registered under the laws of
Guernsey, the Company elected to be UK resident for taxation purposes, and as
a result is non-tax resident in Guernsey. Furthermore, following the
Reorganisation that occurred on 24 January 2024, Pollen Street Limited ceased
to be classified as an investment trust under Section 1158 of the Corporation
Tax Act 2010. As such, Pollen Street Limited will incur corporation tax on its
profits from the beginning of the period. Prior to 24 January 2024, the tax
expense of the Group arose within the Asset Manager segment and comprised
current and deferred tax. Further information on the Reorganisation is
available in Note 4.
Current income tax
Current income tax assets and liabilities are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and
tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date in the countries where the Group
operates and generates taxable income.
Current income tax relating to items recognised directly in equity is
recognised in equity and not in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income. Management periodically evaluates positions
taken in the tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes provisions where
appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences,
except:
· when the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
· in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint arrangements,
when the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and any unused tax losses. Deferred
tax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses can be
utilised, except:
· when the deferred tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss;
and
· in respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint arrangements,
deferred tax assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at each
reporting date and are recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised
in Other Comprehensive Income ("OCI") or directly in equity.
Tax benefits acquired as part of a business combination, but not satisfying
the criteria for separate recognition at that date, are recognised
subsequently if new information about facts and circumstances change. The
adjustment is either treated as a reduction in goodwill (as long as it does
not exceed goodwill) if it was incurred during the measurement period or
recognised in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income.
The Group offsets deferred tax assets and deferred tax liabilities if and only
if it has a legally enforceable right to set off current tax assets and
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities which intend
either to settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Sales tax
Expenses and assets are recognised net of the amount of sales tax, except:
· when the sales tax incurred on a purchase of assets or services
is not recoverable from the taxation authority, in which case, the sales tax
is recognised as part of the cost of acquisition of the asset or as part of
the expense item, as applicable; and
· when receivables and payables are stated with the amount of sales
tax included.
The net amount of sales tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the Consolidated
Statement of Financial Position.
Expenses
All expenses are accounted for on an accruals basis.
Foreign currency
The financial statements have been prepared in Pounds Sterling because that is
the currency of the majority of the transactions during the year, so has been
selected as the presentational currency.
The liquidity of the Group is managed on a day-to-day basis in Pounds Sterling
as the Group's performance is evaluated in that currency. Therefore, the
Directors consider Pounds Sterling as the currency that most faithfully
represents the economic effects of the underlying transactions, events and
conditions and is therefore the functional currency.
Transactions involving foreign currencies are converted at the exchange rate
ruling at the date of the transaction. Foreign currency monetary assets and
liabilities are translated into Pounds Sterling at the exchange rate ruling on
the year-end date. Foreign exchange differences arising on translation would
be recognised in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income.
Receivables
Receivables do not carry any interest and are short term in nature. They are
initially stated at their nominal value and reduced by appropriate allowances
for expected credit losses (if any).
Payables
Payables represent amounts for goods and services provided to the consolidated
entity prior to the end of the financial period and which are unpaid. The
amounts are unsecured and are usually paid within 30 days of recognition.
Payables are non-interest-bearing and are initially stated at their nominal
value.
Shares
Ordinary and treasury shares are classified as equity. The costs of issuing or
acquiring equity are recognised in equity (net of any related income tax
benefit), as a reduction of equity on the condition that these are incremental
costs directly attributable to the equity transaction that otherwise would
have been avoided.
The costs of an equity transaction that is abandoned are recognised as an
expense. Those costs might include registration and other regulatory fees,
legal fees, accounting and other professional advisers, printing costs and
stamp duties.
Treasury shares have no entitlements to vote and are held directly by the
Company.
3. Significant accounting estimates and judgements
The UK-adopted International Accounting Standards requires the Group to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. IFRS requires the Directors, in
preparing the Group's financial statements, to select suitable accounting
policies, apply them consistently and make judgements and estimates that are
reasonable. The Group's estimates and assumptions are based on historical
experience and expectations of future events and are reviewed on an ongoing
basis. Although these estimates are based on the Directors' best estimate of
the amount, actual results may differ materially from those estimates.
Estimates
The estimates of most significance to the financial statements are detailed
below. Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Expected Credit loss allowance for financial assets measured at amortised cost
The calculation of the Group's ECL allowances and provisions against loan
commitments and guarantees under IFRS 9 is complex and involves the use of
significant judgement and estimation. Loan Impairment Provisions represent an
estimate of the losses incurred in the loan portfolios at the balance sheet
date. Individual impairment losses are determined as the difference between
the carrying value and the present value of estimated future cash flows,
discounted at the loans' original EIR. The calculation involves the
formulation and incorporation of multiple forward-looking economic conditions
into ECL to meet the measurement objective of IFRS 9, depending on a range of
factors such as changes in the economic environment in the UK. The most
significant factors are set out below.
Definition of default - The PD of an exposure, both over a 12-month period and
over its lifetime, is a key input to the measurement of the ECL allowance.
Default has occurred when there is evidence that the customer is experiencing
significant financial difficulty which is likely to affect the ability to
repay amounts due.
A number of the Group's loans are secured against underlying collateral. The
Directors do not consider the value of this collateral when assessing the
probability of default. However, the structure of certain lending arrangements
may improve the Group's ability to recover borrowings, even in cases of
heightened default risk.
The definition of default adopted by the Group is described in expected credit
loss allowance for financial assets measured at amortised cost above. The
Group has rebutted the presumption in IFRS 9 that default occurs no later than
when a payment is 90 days past due on some of its portfolio.
The lifetime of an exposure - To derive the PDs necessary to calculate the ECL
allowance it is necessary to estimate the expected life of each financial
instrument. A range of approaches has been adopted across different product
groupings including the full contractual life and taking into account
behavioural factors such as early repayments and refinancing. The Group has
defined the lifetime for each product by analysing the time taken for all
losses to be observed and for a material proportion of the assets to fully
resolve through either closure or write-off.
Significant increase in credit risk ("SICR") - Performing assets are
classified as either Stage 1 or Stage 2. An ECL allowance equivalent to 12
months' expected credit losses is established against assets in Stage 1;
assets classified as Stage 2 carry an ECL allowance equivalent to lifetime
expected credit losses. Assets are transferred from Stage 1 to Stage 2 when
there has been a SICR since initial recognition.
A number of the Group's loans are secured against underlying collateral. The
Directors do not consider the value of this collateral when assessing whether
there has been a significant increase in credit risk. However, the structure
of certain lending arrangements may improve the Group's ability to recover
borrowings, even in cases of heightened default risk, therefore influencing
whether there has been a SICR
The Group uses a quantitative test together with qualitative indicators and a
backstop of 30 days past due for determining whether there has been a SICR.
The setting of precise trigger points combined with risk indicators requires
judgement. The use of different trigger points may have a material impact upon
the size of the ECL allowance.
Forward-looking information - IFRS 9 requires the incorporation of
forward-looking macroeconomic information that is reasonable and supportable,
but it provides limited guidance on how this should be performed. The
measurement of expected credit losses is required to reflect an unbiased
probability-weighted range of possible future outcomes.
In order to do this the Group uses a model to project a number of key
variables to generate future economic scenarios. These are ranked according to
severity of loss and three economic scenarios have been selected to represent
an unbiased and full loss distribution. They represent a "most likely outcome"
(the Base case scenario) and two, less likely, "outer" scenarios, referred to
as the "Upside" and "Downside" scenarios. These scenarios are used to produce
a weighted average PD for each product grouping which is used to calculate the
related ECL allowance. This weighting scheme is deemed appropriate for the
computation of unbiased ECL. Key scenario assumptions are set using external
economist forecasts, helping to ensure the IFRS 9 scenarios are unbiased and
maximise the use of independent information. Using externally available
forecast distributions helps ensure independence in scenario construction.
While key economic variables are set with reference to external distributional
forecasts, the overall narrative of the scenarios is aligned to the
macroeconomic risks faced by the Group at 31 December 2024.
The choice of alternative scenarios and probability weighting is a combination
of quantitative analysis and judgemental assessments, designed to ensure that
the full range of possible outcomes and material non-linearity are captured.
Paths for the two outer scenarios are benchmarked to the Base scenario and
reflect the economic risk assessment. Scenario probabilities reflect
management judgement and are informed by data analysis of past recessions,
transitions in and out of recession, and the current economic outlook. The key
assumptions made, and the accompanying paths, represent management's "best
estimate" of a scenario at a specified probability. Suitable narratives are
developed for the central scenario and the paths of the two outer scenarios.
It may be insufficient to use three scenarios in certain economic
environments. Additional analysis may be requested at management's discretion,
including the production of extra scenarios. We anticipate there will only be
limited instances when the standard approach will not apply. The Base case,
Upside and Downside scenarios are usually generated annually and those
described herein reflect the conditions in place at the balance sheet date and
are only updated during the period if economic conditions change
significantly.
The Group's mild upside scenario can be thought of as an alternative, more
optimistic, base case in which several different upside risks materialise. In
this scenario, the UK economy records growth of 1.4 per cent in 2025 and 1.7
per cent in 2026. The labour market recovers gradually, and the unemployment
rate falls to its recent decade-low of 4.0 per cent by 2029. Supported by the
turnaround in confidence, incomes and employment, residential house prices
only see a mild fall in 2025-26 and recover thereafter. A sharp increase in
consumption lifts financial market sentiment from its current levels resulting
in renewed gains in asset prices.
The base case forecasts unemployment to peak at 4.4 per cent in December 2025,
and the Bank of England base rate to reduce to 2.5 per cent by the end of
2028. The downside scenario forecasts unemployment to reach a peak of 6.7 per
cent in late 2027 and remain relatively high thereafter, staying above 5.8 per
cent over the entire forecast period. To counter the economic downturn, the
downside scenario forecasts the base rate to fall more quickly to 1.8 per cent
by December 2026.
The one-year forecast changes in key economic drivers are shown in the table
below 5 .
See Note 9 for a breakdown of IFRS 9 provisioning.
As at 31 December 2024 Base Upside Downside
UK unemployment rate yearly change (0.03)% (0.67)% 1.07%
UK HPI yearly change 1.19% 3.20% (7.13)%
UK Base Rate yearly change (1.00)% 0.52% (1.85)%
As at 31 December 2023 Base Upside Downside
UK unemployment rate yearly change 0.24% (0.15%) 1.56%
UK HPI yearly change (5.85%) (2.32%) (11.93%)
UK Base Rate yearly change 4.85% 5.75% 3.88%
Loss given default - referred to as LGD, represents the expectation of the
extent of loss on a defaulted exposure. LGD varies by type of counterparty,
type and seniority of claim and availability of collateral or other credit
support. LGD is expressed as a percentage loss per unit of exposure at the
time of default. LGD is calculated on a 12-month or lifetime basis, where
12-month LGD is the percentage of loss expected to be made if the default
occurs in the next 12 months and Lifetime LGD is the percentage of loss
expected to be made if the default occurs over the remaining expected lifetime
of the loan.
The 12-month and lifetime LGDs are determined based on the factors which
impact the recoveries made post default. These vary by product type:
· For secured products, this is primarily based on collateral type
and projected collateral values, historical discounts to market/book values
due to forced sales, time to repossession and recovery costs observed.
· For unsecured products, LGDs are typically set at product level
due to the limited differentiation in recoveries achieved across different
borrowers. These LGDs are influenced by collection strategies, including
contracted debt sales and price.
Exposure at default - referred to as EAD, is based on the amounts expected to
be owed at the time of default, over the next 12 months or over the remaining
lifetime. IFRS 9 requires an assumed draw down profile for committed amounts.
The Group also considers post-model adjustments to address model limitations
or factors that have not been captured in the models. These represent the
factors that are not fully accounted for as part of the modelling described
above, such as potential uncertainty arising from the cost-of-living crisis
and the current economic environment.
Equity Asset valuation
The valuation of unquoted investments and investments for which there is an
inactive market is a key area of estimation and may cause material adjustment
to the carrying value of those assets and liabilities. The unquoted Equity
Assets are valued on a periodic basis using techniques including a market
multiple approach, costs approach and/or income approach. The valuation
process is collaborative, involving the finance and investment functions of
the Group with the final valuations being reviewed by the Valuation Committee,
which is a management-level Committee responsible for the oversight of the
valuation of investments. The techniques used include earnings multiples,
discounted cash flow analysis, the value of recent transactions and the net
asset value of the investment. The valuations often reflect a synthesis of a
number of different approaches in determining the final fair value estimate.
The individual approach for each investment will vary depending on relevant
factors that a market participant would take into account in pricing the
asset. These might include the specific industry dynamics, the Investee's
stage of development, profitability, growth prospects or risk as well as the
rights associated with the particular security.
Increases or decreases in any of the inputs in isolation may result in higher
or lower fair value measurements. Changes in fair value of all investments
held at fair value, which includes Equity Assets are recognised in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income. On
disposal, realised gains and losses are also recognised in the Consolidated
Statement of Profit or Loss and Other Comprehensive Income. Transaction costs
are included within gains or losses on investments held at fair value,
although any related interest income, dividend income and finance costs are
disclosed separately in the financial statements.
Sensitivity analysis has been performed on equity asset valuations in Note 10.
Impairment assessment for Goodwill
Goodwill is assessed for indicators of impairment at each reporting date and
whenever there is an indication that the recoverable amount of a
cash-generating unit ("CGU") is less than its carrying amount, and tested for
impairment annually. For the impairment test, goodwill is allocated to the CGU
or groups of CGUs which benefit from the synergies of the acquisition and
which represent the lowest level at which goodwill is monitored for internal
management purposes.
The recoverable amount of CGUs is determined based on the higher of
value-in-use and fair value less costs to sell. Key assumptions in the
discounted cash flow projections are prepared based on current economic
conditions and comprise an estimated long-term growth rate, the period over
which future cashflows have been forecast, the weighted average cost of
capital and estimated operating margins. Wherever possible, the inputs into
the discounted cash flow projections used for the impairment test of goodwill
are based on third party observable data.
Sensitivity analysis has been performed on the goodwill impairment assessment
in Note 13.
Carried interest
Carried interest represents unrealised and realised shares of fund profits
from holdings in carried interest partnerships where the Group receives
variable returns as an incentive for management of the underlying funds. The
realised amount is the amount actually received. For the unrealised
performance, the amount recognised is determined against an assessment of the
underlying investor returns exceeding an agreed threshold or hurdle, and is
either accounted for under IFRS 9 (for carried interest partnerships acquired
as part of the Combination) or under IFRS 15 (for non-acquired).
Movements in fair value, and amounts accrued as revenue under IFRS 15, are
shown in the 'Carried interest and performance fee income' line on the
Consolidated Statement of Profit or Loss and Other Comprehensive Income, with
the outstanding balance shown in the 'Carried interest' line on the
Consolidated Statement of Financial Position.
Carried interest at fair value is only recognised under IFRS 15 provided it
has been determined as being highly probable that there will not be a
significant reversal. The value of carried interest, under this method, has
been modelled by assessing the value of the assets in the fund as well as the
terms of the carried interest arrangements that the Group is a beneficiary of.
The value of the assets have been discounted to ensure that it is highly
probable that there will not be a significant reversal.
The discount applied for each fund depends on the stage and maturity profile
of each fund, and therefore recognises the de-risking of the income over time,
taking into account diversity of assets, whether there has been a recent
market correction and the expected average remaining holding period.
If the discount rates were unwound to give the notional carried interest due
to the Group based on unrealised fair value of investment in the relevant
funds this would result in additional carried interest income of £13.1
million (2023: £5.2 million) being recognised.
Carried interest at fair value is modelled by estimating from the value of the
funds' investments and the amount that would be due to the Group under the
terms of the carried interest arrangements if the assets were realised at
these values. Carried interest includes an embedded option where carried
interest holders participate in gains but not losses of the fund subject to
certain hurdles. The value of this option has been modelled using a variety of
techniques, including the Black Scholes option valuation model and scenario
analysis.
Sensitivity analysis has been performed on carried interest valuations in Note
14.
Judgements
The critical judgements relate to the consolidation of Group companies, the
consolidation of fund investments and the accounting for carried interest
partnerships.
Consolidation of Group companies
Determining whether the Group has control of an entity is generally
straightforward when based on ownership of the majority of the voting capital.
However, in certain instances, this determination will involve significant
judgement, particularly in the case of structured entities where voting rights
are often not the determining factor in decisions over the relevant
activities. This judgement may involve assessing the purpose and design of the
entity. It will also often be necessary to consider whether the Group, or
another involved party with power over the relevant activities, is acting as a
principal in its own right or as an agent on behalf of others.
Consolidation of fund investments
It was assessed throughout the period whether the Group should consolidate
investments in funds managed or advised by the Group into the results of the
Group. Control is determined by the extent of which the Group has power over
the investee, exposure or rights to variable returns from its involvement with
the investee and the ability to use its power over the investee to affect the
amount of the investor's returns.
The Group has assessed the legal nature of the relationships between the
Group, the relevant fund, the General Partners and the LPs. This assessment
included carrying out a control assessment of each LP in accordance with IFRS
10 to consider whether the LPs should be consolidated into the financial
statements of the Group. The Group has determined that control over the LPs
ultimately resides with the underlying fund majority investors and that the
Group, through the Asset Manager, acts as an agent to the underlying fund
majority investors and not as principal. The Group also determined that as the
manager, the Group has the power to influence the returns generated by the
fund, but the Group's interests typically represent only a small proportion of
the total capital within each fund. The Group has therefore concluded that the
Group acts as an agent, which is primarily engaged to act on behalf, and for
the benefit, of the LPs rather than to act for its own benefit.
Accounting for carried interest partnerships
Carried interest represents unrealised and realised shares of fund profits
from holdings in carried interest partnerships where the Group receives
variable returns as an incentive for management of the underlying funds. The
amount is determined by the level of accumulated profits exceeding an agreed
threshold or hurdle. The rights are in the form of partnership interests in
carried interest partnerships. The Group has between 1 and 25 per cent of the
total interests in these partnerships.
The Group has undertaken a control assessment of each carried interest
partnership in accordance with IFRS 10 to consider whether they should be
consolidated into the Group's results. The Group has considered the nature of
the relationships between the Group, the fund, the fund investors, the carried
interest partnership and participants in the carried interest partnership. The
Group has determined that the power to control the carried interest
partnerships ultimately resides with the fund investors and that the Group is
therefore an agent and not a principal. This is because the purpose and design
of the carried interest partnerships and the carry rights in the fund are
determined at the outset by each fund's Limited Partner Agreement ("LPA"),
which requires investor agreement and reflects investor expectations to
incentivise individuals to enhance performance of the underlying fund. While
the Group has some power over the carried interest partnerships, these powers
are limited and represent the best interests of all carried interest holders
collectively and hence, these are assessed to be on behalf of the fund
investors.
The Group has assessed the payments and the returns the carried interest
holders make and receive from their investment in carried interest and have
considered whether those carried interest holders, who are also employees of
the Group, were providing a service for the benefit of the Group or the
investors in the fund. The Group concluded that the carried interest
represents a separate relationship between the fund investors and the
individual employees and that the carried interest represents an investment
requiring the individuals to put their own capital at risk and that, after an
initial vesting period, continued rights to returns from the investment is not
dictated by continuation of employment. As a result of this, distributions
from these carried interest partnerships are not consolidated in the Group's
Consolidated Statement of Profit or Loss.
In addition, the Group has also considered the variability of returns for all
carried interest partnerships and in doing so have determined that the Group
is exposed to variable returns in the range of 1 to 25 per cent as at 31
December 2024, with the main beneficiaries of the carried interest partnership
variable returns being the other participants. The Group concluded that the
carried interest partnership are not controlled by the Group and therefore
should not be consolidated.
The Group has also assessed whether the Group has significant influence over
the carried interest partnerships under IAS 28, Investments in Associates and
Joint Ventures. Where the Group has a share of 20 per cent or more of the
rights to the carried interest, the Group is considered to have significant
influence and therefore these carried interest partnerships are treated as an
associate.
4. Acquisition of Pollen Street Limited
On 24 January 2024, Pollen Street Group Limited was introduced as the new
parent of Pollen Street Limited by way of a scheme of arrangement (the
"Scheme"). Pollen Street Limited subsequently distributed the entire issued
share capital in Pollen Street Capital Holdings Limited to Pollen Street Group
Limited (the "Distribution", and together with the Scheme the
"Reorganisation") on 14 February 2024.
Pollen Street Group Limited now has two wholly owned subsidiaries with a clear
and operationally useful distinction between the businesses carried on by the
Investment Company and the Asset Manager.
The Reorganisation does not change the operational activities of the overall
business from a shareholder's perspective.
The Company controls Pollen Street Limited and Pollen Street Capital Holdings
Limited with both entities being consolidated under the book-value method.
This method applies retrospectively, meaning that the financial statements are
restated as if the Reorganisation had occurred at the beginning of the
earliest period presented. The assets and liabilities of the combining
entities are recognised at their carrying amounts in the financial statements.
No adjustments are made to reflect fair values or recognise any new assets or
liabilities, except where necessary to align accounting policies.
The Group expensed £0.1 million of costs associated with the acquisition of
Pollen Street Limited. The costs associated with the issuance of shares of
£4.8 million were presented in Share Premium in the Consolidated Statement of
Financial Position and Consolidated Statement of Changes in Shareholders'
Funds.
The following table shows the value of the consideration, the purchase price
allocation and the goodwill:
Pollen Street Limited
acquisition on
24 January 2024
£'000
Consideration 571,269
Purchase price allocation
Net asset value 571,269
Intangibles -
Subsidiary value 571,269
Goodwill -
Consideration
The consideration for the acquisition of Pollen Street Limited was in the form
of issuance of shares in Pollen Street Group Limited to the shareholders of
Pollen Street Limited. The gross amount was £571.3 million. The number of
shares issued on the acquisition date on 24 January 2024 was 64,209,595.
Subsidiary net asset value
The following table shows the breakdown of the Net Asset Value of Pollen
Street Limited as at 24 January 2024:
Pollen Street Limited as at 24 January 2024 £'000
Credit Assets at amortised cost 432,940
Investment Assets held at fair value through profit or loss 88,551
Investments in subsidiaries 239,027
Cash and cash equivalents 21,594
Trade and other receivables 6,310
Derivative assets held at fair value through profit or loss 429
Trade & other payables and current tax payable (14,393)
Interest-bearing borrowings (203,189)
Net asset value 571,269
Cash and cash equivalents
The cash and cash equivalents represents the value of the cash held at this
date.
Trade and other receivables
The fair value of the trade and other receivables acquired were equal to the
gross contractual amounts receivable. The main receivables consist of trade
and other receivables balances, prepayments and accrued income. Receivable
balances were represented by fees receivable for prepayments, investment fund
management and advisory services. This includes investors in funds that are
managed and advised by the Group; as such, detailed and up-to-date information
on the financial position and outlook of its counterparties is available.
Credit Assets at amortised cost
The Credit Assets at amortised cost represents the value of the Credit Assets
at amortised cost.
Investment Assets held at fair value through profit or loss
The Investments held at FVTPL include Equity Assets, Credit Assets and
investments in Pollen Street managed Private Equity and Private Credit funds.
Carried interest
Carried interest comprises the share of the profits of managed third-party
funds. The carried interest participations are defined and agreed with the LPs
in each Fund's LPA. The exact measurement for the carried interest in
different funds can differ, such as containing different hurdle rates and
waterfalls.
Derivative financial assets
The derivative asset held at fair value through profit or loss are formed of
open foreign exchange forward contracts to hedge foreign exchange movements in
non-GBP assets or liabilities in order to minimise foreign exchange exposure.
Deferred tax
Deferred tax comprises of temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes at the reporting date.
Investments in subsidiaries
Investments in subsidiaries represents Pollen Street Limited's investment in
Pollen Street Capital Holdings Limited and Sting Funding Limited, which is
recorded at cost less provision for impairments.
Trade & other payables and tax payable
The main items of the payables acquired include corporation tax and general
business accruals.
5. Operating segments
The Group has two operating segments: the Asset Manager segment and the
Investment Company segment.
The Asset Manager segment incorporates the activities of the Group that
provide investment management and investment advisory services to a range of
funds under management within Private Equity and Private Credit strategies.
The primary revenue streams for the Asset Manager segment consist of
management fees, performance fees and carried interest. Fund management
services are also provided to the Investment Company segment, however fees
from these services are eliminated from the Group consolidated financial
statements. Fund Management EBITDA in the Strategic Report is the Operating
Profit of the Asset Manager segment adjusted for the depreciation of the lease
asset.
The Investment Company segment holds the Investment Assets of the Group. The
primary revenue stream for this segment is interest income and fair value
gains on the Investment Asset portfolio. The Operating Profit of the
Investment Company segment is referred to as the Income on Net Investment
Assets in the Strategic Report.
The following tables show the consolidated operating segments profit and loss
movements for their respective years:
For the year ended 31 December 2024
Group Asset Manager Investment Company Central £'000 Total
£'000 £'000 £'000
Management fee income 49,600 - (5,193) 44,407
Catch-up management fee income 5,875 - - 5,875
Carried interest and performance fee income 11,320 - (3,534) 7,786
Interest income on Credit Assets held at amortised cost - 41,380 - 41,380
Gains on Investment Assets held at fair value 6 - 18,998 - 18,998
Total income 66,795 60,378 (8,727) 118,446
Expected credit loss charge - (593) - (593)
Third-party servicing costs - (1,177) - (1,177)
Net operating income 66,795 58,608 (8,727) 116,676
Administration costs (39,386) (10,467) 7,922 (41,931)
Finance costs (235) (16,352) - (16,587)
Operating profit 27,174 31,789 (805) 58,158
Depreciation (1,730) - - (1,730)
Amortisation - - (640) (640)
Profit before tax 25,444 31,789 (1,445) 55,788
For the year ended 31 December 2023
Group Asset Manager Investment Company Central £'000 Total
£'000 £'000 £'000
Management fee income 34,332 - (5,420) 28,912
Carried interest and performance fee income 14,831 - (3,351) 11,480
Interest income on Credit Assets held at amortised cost - 57,668 - 57,668
Gains on Investment Assets held at fair value - 5,102 - 5,102
Total income 49,163 62,770 (8,771) 103,162
Expected credit loss release - 970 - 970
Third-party servicing costs - (2,374) - (2,374)
Net operating income 49,163 61,366 (8,771) 101,758
Administration costs (33,026) (10,833) 7,168 (36,691)
Finance costs (230) (20,360) - (20,590)
Operating profit 15,907 30,173 (1,603) 44,477
Depreciation (1,233) - - (1,233)
Amortisation - - (640) (640)
Profit before tax 14,674 30,173 (2,243) 42,604
Asset Manager EBITDA For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Operating profit of the Asset Manager 27,174 15,907
Depreciation of lease asset 7 (1,451) (959)
Fund Management EBITDA 25,723 14,948
Fund Management EBITDA Margin 39% 30%
Investment Company Returns For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Income on Net Investment Assets 31,789 30,173
Average Net Investment Assets 330,125 344,275
Return on Net Investment Assets 9.6% 8.8%
All of the Credit Assets at amortised cost were held within the Investment
Company segment and held by Pollen Street Limited, Pollen Street Investments
Limited and Sting Funding Limited at year end . The Investment Assets held at
fair value through profit or loss as at 31 December 2024 were £194.2 million
(2023: £88.2 million), of which £194.2 million (2023: £88.2 million) were
held within the Investment Company segment and held by Pollen Street Limited
and Pollen Street Investments Limited, and no Investment Assets (2023: nil)
were held within Pollen Street Capital Holdings Limited and its subsidiaries.
The Gains on Investment Assets at fair value includes both realised and
unrealised income.
Income
Management fee income represents all income in the form of management fees
arising in the Asset Manager. Carried interest and performance fee income
includes income earned by the Asset Manager that is in the form of a
performance fee or the carried interest share from the funds under management.
Interest income relates to income earned by the Investment Company on loans
provided to third parties. Gains/(losses) on Investment Assets held at fair
value include revenue earned by the Group on its Investment Asset portfolio.
There was realised carried interest of nil (2023: £1.2 million). The
remaining carried interest income was unrealised.
For the Company, income is made up of dividend income of £39.0 million (2023:
nil) received from subsidiaries and from costs of £1.5 million (2023: £0.1
million) that are charged to the Investment Company and the Asset Manager.
Expenses
Estimated credit losses relate to any charges/(releases) on the assets held at
amortised cost within the Investment Company. Administrative costs include
employee expenses such as salaries, bonuses and any employee benefits costs
incurred by the Asset Manager.
The following table shows the fees payable to the Company's auditor
PricewaterhouseCoopers LLP ("PwC"):
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Fees for the audit of the Company and Group financial statements 640 624
Fees for the statutory audits of the subsidiaries 275 262
Audit related assurance services 38 855
Non-audit fees - 55
Total 953 1,796
The audit related assurance services for the current year relate to client
assets audit of a subsidiary. The audit related assurance services and
non-audit fees for the year ended 31 December 2023 were in relation to work
performed by PwC as Reporting Accountants in relation to historical financial
information of the Group as part of the Reorganisation.
Central
The Central column consists primarily of the elimination of inter-segment
fees, which are fees charged by the Asset Manager to the Investment Company,
exceptional costs and the amortisation of intangibles acquired as part of the
business combination.
6. Employees
The following tables show the average monthly number of employees and the
Directors during the year.
Group - Average number of staff For the year ended For the year ended
31 December 2024 31 December 2023
Directors 7 7
Professional staff 86 82
Total 93 89
Company - Average number of staff For the year ended For the year ended
31 December 2024 31 December 2023
Directors 7 7
Total 7 7
There were no employees in the Company throughout the year (2023: nil) and the
Company had 6 Directors as at 31 December 2024 (2023: 7). The Group had a
total of 88 employees as at 31 December 2024 (2023: 84).
The following table shows the total staff costs incurred during the year. This
includes the Group's five Non-Executive Directors of Pollen Street Group
Limited (2023: five). The total number of employees and Directors as at 31
December 2024 was 94 (2023: 91).
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Staff costs
Wages and salaries 27,135 23,534
Social security costs 4,432 3,719
Defined contribution pension cost 173 148
Total 31,740 27,401
Wages and salaries include the expense recognised in relation to awards under
the Group's deferred bonus plan.
7. Corporation tax
a) Tax expense
The tax charge for the Group for the year was £6.2 million (2023: £2.7
million). The Company incurred no tax during the year (2023: nil).
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Current tax expenses
UK corporation tax charge for the year 3,078 385
Prior year adjustment 38 (137)
Total current tax 3,116 248
Deferred tax expense
Origination and reversal of timing differences 2,676 2,373
Changes in tax rate for deferred tax - 152
Prior year adjustment 398 (109)
Total deferred tax 3,074 2,416
Total tax charge 6,190 2,664
The Company incurred no tax expense during the year (2023: nil).
b) Factors affecting taxation charge for the year
The taxation charge for the year is based on the standard rate of UK
corporation tax of 25 per cent from 1 April 2024 (2023: 23.52 per cent). A
reconciliation of the taxation charge for the year is based on the standard
rate of UK corporation tax to the actual taxation charge is shown below.
The effective tax rate for the year ended 31 December 2024 is 11.1% (2023:
6.3%). The tax on profit before tax is different to the standard rate of
corporation tax in the UK of 25.0% (2023: 23.5%) primarily due to timing
differences on taxation of management fee income and tax losses carried
forward in the UK due to certain forms of income that are not subject to UK
corporation tax.
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Profit before taxation 55,788 42,604
Profit before taxation multiplied by the standard rate of UK Corporation tax 13,947 10,020
(25.0%) (2023: 23.5%)
Effects of:
Interest distributions paid - (7,549)
Non-taxable and non-deductible items (3,427) (949)
Origination and reversal of timing differences 1,871 1,257
Recognition of previously unrecognised losses (6,568) -
Changes in tax rate for deferred tax - 127
Other permanent differences (89) -
Fixed asset differences 21 4
Prior year adjustment 435 (246)
Total tax charge 6,190 2,664
c) Deferred tax asset and liability
Following the Reorganisation that occurred on 24 January 2024, Pollen Street
Limited ceased to be classified as an investment trust under Section 1158 of
the Corporation Tax Act 2010. As such Pollen Street Limited now incurs
corporation tax but is also able to recognise a deferred tax asset in respect
of unused tax losses. The origination of the deferred tax asset in the current
year has resulted in a tax credit.
The following table shows the deferred tax asset and liability for the year:
For the year ended For the year ended
31 December 2024 31 December 2023
Group Deferred tax asset £'000 Deferred tax liability £'000 Total Deferred tax asset £'000 Deferred tax liability £'000 Total
£'000 £'000
Opening balance - (3,093) (3,093) - (94) (94)
Prior year adjustment - (242) (242) - (26) (26)
Credit / (charge) to profit or loss 3,256 (5,531) (2,275) - (2,508) (2,508)
Deferred tax adjustment - - - - (465) (465)
Closing balance 3,256 (8,866) (5,610) - (3,093) (3,093)
The deferred tax asset in respect of short-term timing differences and carried
forward losses of £9.3 million is expected to crystallise fully in 2025. The
deferred tax liability in respect of the recognition of fair value gains
within the Investment Company and carried interest in the Asset Manager will
crystallise as the realised gain from these begins to flow to the Group in the
medium term.
8. Earnings per Share
The table below shows the Group's earnings per share for the year ended 31
December 2024:
Group For the year ended For the year ended
31 December 2024 31 December 2023
Profit after tax (£'000) 49,598 39,940
Average number of shares ('000) 62,977 64,210
Earnings per ordinary share 78.8 pence 62.2 pence
9. Credit Assets at amortised cost
a) Credit Assets at amortised cost
The disclosure below presents the gross carrying value of financial
instruments and the associated allowance for ECL provision under IFRS. See
Notes 2 and 3 for more detail on the allowance for ECL.
As at As at
31 December 2024 31 December 2023
Group Gross Carrying Amount £'000 Allowance for ECL £'000 Net Carrying Amount £'000 Gross Carrying Amount £'000 Allowance for ECL £'000 Net Carrying Amount £'000
Credit Assets at amortised cost
Stage 1 283,226 (596) 282,630 411,491 (693) 410,798
Stage 2 15,785 (368) 15,417 21,527 (576) 20,951
Stage 3 19,316 (7,940) 11,376 19,783 (7,042) 12,741
Closing balance 318,327 (8,904) 309,423 452,801 (8,311) 444,490
The Company has no Credit Assets at amortised cost (2023: nil).
The reduction in Credit Assets at amortised cost is driven by the rotation of
the portfolio to focus on investing in Pollen Street managed funds from direct
investments.
The following table analyses ECL by staging for the Group:
For the year ended 31 December 2024
Group Stage 1 £'000 Stage 2 £'000 Stage 3 £'000 Total
£'000
As at 1 January 2024 693 576 7,042 8,311
Movement from stage 1 to stage 2 (2) 90 - 88
Movement from stage 1 to stage 3 (1) - 280 279
Movement from stage 2 to stage 1 - (75) - (75)
Movement from stage 2 to stage 3 - (101) 173 72
Movement from stage 3 to stage 1 - - (104) (104)
Movement from stage 3 to stage 2 - 15 (66) (51)
Movements within stage (12) (3) 752 737
Decreases due to repayments (241) (38) (234) (513)
Remeasurements due to modelling 159 (96) 97 160
Allowance for ECL as at 31 December 2024 596 368 7,940 8,904
For the year ended 31 December 2023
Group Stage 1 £'000 Stage 2 £'000 Stage 3 £'000 Total
£'000
As at 1 January 2023 1,013 678 7,590 9,281
Movement from stage 1 to stage 2 (75) 235 - 160
Movement from stage 1 to stage 3 (202) - 468 266
Movement from stage 2 to stage 1 2 (150) - (148)
Movement from stage 2 to stage 3 - (156) 335 179
Movement from stage 3 to stage 1 - - (124) (124)
Movement from stage 3 to stage 2 - 60 (150) (90)
Decreases due to repayments - (24) (274) (298)
Remeasurements due to modelling (45) (67) (803) (915)
Allowance for ECL as at 31 December 2023 693 576 7,042 8,311
b) Expected Credit Loss allowance for IFRS 9
Under the IFRS 9 expected credit loss model, impairment provisions are driven
by changes in credit risk of instruments, with a provision for lifetime
expected credit losses recognised where the risk of default of an instrument
has increased significantly since initial recognition.
The following table analyses ECL by staging for the Group:
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
As at 1 January 8,311 9,281
Release for period - Stage 1 (97) (300)
Release for period - Stage 2 (208) (21)
Charge / (release) for period - Stage 3 898 (649)
Charge / (release) for period 593 (970)
Loans sold & write-offs - -
Allowance for ECL 8,904 8,311
Measurement uncertainty and sensitivity analysis of ECL
The recognition and measurement of ECL is highly complex and involves the use
of significant judgement and estimation. This includes the formulation and
incorporation of multiple forward-looking economic conditions into ECL to meet
the measurement objective of IFRS 9.
The Group has adopted the use of three economic scenarios, representative of
Oxford Economics view of forecast economic conditions, sufficient to calculate
an unbiased ECL. They represent a "most likely outcome", the Base scenario,
and two, less likely, outer scenarios, referred to as the "Upside" and
"Downside" scenarios.
The ECL recognised in these financial statements reflects the effect on
expected credit losses of a range of possible outcomes, calculated on a
probability-weighted basis, based on the economic scenarios described in Note
3, including management overlays where required. The probability-weighted
amount is typically a higher number than would result from using only the Base
(most likely) economic scenario. ECLs typically have a non-linear relationship
to the many factors which influence credit losses, such that more favourable
macroeconomic factors do not reduce defaults as much as less favourable
macroeconomic factors increase defaults. The ECL calculated for each of the
scenarios represent range of possible outcomes that have been evaluated to
estimate ECL. As a result, the ECL calculated for the Upside and Downside
scenarios should not be taken to represent the upper and lower limits of
possible actual ECL outcomes. There is a high degree of estimation uncertainty
in numbers representing tail risk scenarios when assigned a 100 per cent
weight. A wider range of possible ECL outcomes reflects uncertainty about the
distribution of economic conditions and does not necessarily mean that credit
risk on the associated loans is higher than for loans where the distribution
of possible future economic conditions is narrower.
For Stage 3 impaired loans, LGD estimates consider independent recovery
valuations provided by external valuers where available, or internal forecasts
corresponding to anticipated economic conditions.
Analysis shows that the ECL would have been £0.5 million higher, as at 31
December 2024 (2023: £0.6 million higher), if the weighting of the scenarios
were changed to allocate a 100 per cent weight to the downside scenario. The
sensitivity of the ECL has been further analysed by assessing the impact of
£10.0 million of portfolio Credit Assets at amortised cost moving from Stage
1 to Stage 2 based on the ECL coverage of the loan book at the reporting date.
The analysis shows that the ECL would have been £0.2 million higher (2023:
£0.6 million higher) under this sensitivity as the provision coverage
increases from Stage 1 to Stage 2.
c) Disposals of Credit Assets at amortised cost
The Group did not dispose of any assets for the year ended 31 December 2024
(2023: nil) and so no profit or loss on disposal was recorded during the year
(2023: nil).
d) Geographical analysis
The Group had the following geographical exposures of its Credit Assets at
amortised cost in GBP equivalent:
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
UK 281,702 402,428
Europe 27,721 42,062
Total 309,423 444,490
The majority of revenue was obtained in the UK. For the year ended 31 December
2024, the Group earned revenues from European Credit Assets of GBP equivalent
3.7 million (2023: GBP equivalent 5.4 million).
10. Investment Assets at fair value through profit or loss
a) Investment Assets at fair value through profit or loss
The following table shows the total Investment Assets at fair value through
profit or loss of the Group, which includes both Equity Assets and Credit
Assets for the year ended 31 December 2024.
For the year ended 31 December 2024
Group Equity Assets £'000 Credit Assets £'000 Total
£'000
Opening balance 26,839 61,381 88,220
Additions at cost 45,172 49,812 94,984
Realisations (168) (8,021) (8,189)
Unrealised gains through profit or loss 11,541 1,330 12,871
Realised gains through profit or loss - 5,813 5,813
Foreign exchange revaluation - 477 477
Closing balance 83,384 110,792 194,176
Comprising:
Valued using net asset value 43,916 85,115 129,031
Valued using an earnings multiple 15,385 - 15,385
Valued using a discounted cash flow 1,360 25,677 27,037
Valued using a liquidity discount 22,723 - 22,723
Closing balance 83,384 110,792 194,176
For the Group as at 31 December 2023:
For the year ended 31 December 2023
Group Equity Assets £'000 Credit Assets £'000 Total
£'000
Opening balance 16,449 48,057 64,506
Additions at cost 10,390 33,837 44,227
Realisations - (25,682) (25,682)
Unrealised gains through profit or loss - 2,912 2,912
Realised gains through profit or loss - 2,747 2,747
Foreign exchange revaluation - (490) (490)
Closing balance 26,839 61,381 88,220
Comprising:
Valued using net asset value 11,180 48,824 60,004
Valued using an earnings multiple 14,300 - 14,300
Valued using a discounted cash flow 1,359 12,557 13,916
Closing balance 26,839 61,381 88,220
The Company has no Investment Assets at fair value through profit or loss
(2023: nil).
b) Fair value classification of total Investment Assets
The Group Investment Assets at fair value through profit or loss are
classified as level 3 assets with a value as at 31 December 2024 of £194.2
million (2023: £88.2 million). There were no movements for the Group (2023:
no movements) between the fair value hierarchies during the year.
c) Sensitivity analysis of assets at fair value through profit or loss
The investments are in Equity Assets, Private Equity Funds and Private Credit
Funds, which are valued using different techniques, including net asset value
("NAV"), earnings multiple, discounted cash flows ("DCF"), recent transactions
and a market approach. Sensitivity to the quantitative information regarding
the unobservable inputs for the Group's Level 3 positions as at 31 December
2024 and 31 December 2023 is given below:
Valuation technique Sensitivity applied As at As at
31 December 2024 31 December 2023
£'000 £'000
Impact of sensitivity Impact of sensitivity
Net asset value NAV changed by 10% 12,903 6,000
Earnings multiple Earnings multiple changed by 1x 1,296 1,156
Discounted cash flow Cash flows changed by 10% 2,704 1,392
Liquidity discount Discount changed by 10% 2,840 -
d) Financial assets and liabilities not carried at fair value but for
which fair value is disclosed
For the Group as at 31 December 2024:
Carrying Value Fair Value
Group £'000 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Credit Assets at amortised cost 309,423 - - 317,629 317,629
Carried interest receivable 1,365 - - 1,365 1,365
Trade and other receivables 35,542 - 35,542 - 35,542
Cash and cash equivalents 11,195 11,195 - - 11,195
Total assets 357,525 11,195 35,542 318,994 365,731
Liabilities
Trade and other payables (29,249) - (29,249) - (29,249)
Interest-bearing liabilities (188,265) - (188,265) - (188,265)
Total liabilities (217,514) - (217,514) - (217,514)
For the Group as at 31 December 2023:
Carrying Value Fair Value
Group £'000 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Credit Assets at amortised cost 444,490 - - 454,254 454,254
Carried interest receivable 1,365 - - 1,365 1,365
Trade and other receivables 17,942 - 17,942 - 17,942
Cash and cash equivalents 19,746 19,746 - - 19,746
Total assets 483,543 19,746 17,942 455,619 493,307
Liabilities
Trade and other payables (19,149) - (19,149) - (19,149)
Interest-bearing liabilities (210,764) - (210,764) - (210,764)
Total liabilities (229,913) - (229,913) - (229,913)
Note 9 provides further details of the loans at amortised cost held by the
Group.
The fair value of the receivable and payable balances approximates their
carrying amounts due to the short-term nature of the balances. The Group
considers that the carrying values of these receivables and payables
approximate their fair value.
e) Geographical analysis
The Group had the following geographical exposures of its Investment Assets
held at fair value through profit or loss in GBP equivalent:
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
UK 52,992 27,333
Europe 127,582 60,887
USA 13,602 -
Total 194,176 88,220
The majority of revenue was obtained in the UK. For the year ended 31 December
2024, the Group earned revenues from US and European Investment Assets of GBP
equivalent 14.6 million (2023: GBP equivalent 5.0 million).
11. Fixed assets
The table below sets out the movement in fixed assets for the Group during the
year.
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Cost
Opening balance 1,607 1,470
Additions 156 137
Closing balance 1,763 1,607
Accumulated depreciation
Opening balance (330) (56)
Depreciation expense (284) (274)
Closing balance (614) (330)
Net book value 1,149 1,277
The Group's fixed assets comprise of fixtures and fittings, office equipment
and electric vehicles.
The Company has no fixed assets (2023: nil).
12. Leases
The Group leases include office premises where the Group is a tenant which
include fixed periodic rental payments over the fixed lease terms of no more
than five years remaining from the reporting date. The total cash outflow
during the year in relation to leases was £1.6 million (2023: £1.4 million).
Set out below are the carrying amounts of lease assets recognised and the
movements during the year.
Group - Lease assets For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Cost
Opening balance 4,873 5,042
Remeasurement due to lease modification 2,494 -
Lease maturity - (169)
Closing balance 7,367 4,873
Accumulated depreciation
Opening balance (1,056) (266)
Depreciation expense (1,451) (959)
Lease maturity - 169
Closing balance (2,507) (1,056)
Net book value 4,860 3,817
The table below shows the provision for restoration costs on lease contracts
which has been recognised as part of the lease assets acquired:
Group - Lease provision For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Opening balance 82 99
Unwinding of discount 5 1
Lease maturity - (18)
Closing balance 87 82
Set out below are the carrying amounts of lease liabilities and the movements
during the year.
Group - Lease liabilities For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Opening balance 4,152 5,268
Remeasurement due to lease modification 2,309 -
Accretion of interest 235 229
Payments (1,564) (1,345)
Closing balance 5,132 4,152
Remeasurement due to lease modification
During the year ended 31 December 2024, the Group's office lease underwent a
rent review, resulting in an increase in quarterly lease payments from
£325,000 to £390,953. This change necessitated a remeasurement of the lease
liability and right-of-use asset in accordance with IFRS 16. The remeasurement
resulted in an increase of £2.5 million to the lease asset and £2.3 million
to the lease liability. This adjustment reflects the present value of the
revised lease payments for the remaining lease term, discounted using the
original discount rate determined at the lease commencement date.
The table below shows the lease liabilities by maturity:
Group - Lease liabilities For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Current 1,376 1,402
Non-current 3,756 2,750
Closing balance 5,132 4,152
The following are the amounts recognised in the Consolidated Statement of
Profit or Loss:
Group - Amounts recognised in profit or loss For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Depreciation expense 1,451 959
Finance costs - Lease liability interest 235 229
Finance costs - Unwinding of discount 5 1
Closing balance 1,691 1,189
The incremental borrowing rate ("IBR") has been estimated based on what the
lessee would have to pay to borrow over a similar term as the leases at
origination of the lease. The rate of the IBR is in line with the interest
margin payable on the Group's debt facilities. If the IBR had been 1 per cent
higher or lower, the impact on the lease liabilities would be as follows:
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Lease assets
Increase IBR by 1% (113) (210)
Decrease IBR by 1% 183 226
Lease liabilities
Increase IBR by 1% (90) (110)
Decrease IBR by 1% 214 114
The Company has no lease assets or lease liabilities (2023: nil).
13. Goodwill and intangible assets
The following tables show the goodwill and intangible assets held by the Group
for their respective periods:
For the year ended For the year ended
31 December 2024 31 December 2023
Group Goodwill £'000 Intangibles £'000 Total Goodwill £'000 Intangibles £'000 Total
£'000 £'000
Cost
Opening balance 224,540 4,000 228,540 227,191 4,000 231,191
Transfer to reserves - - - (2,651) - (2,651)
Closing balance 224,540 4,000 228,540 224,540 4,000 228,540
Amortisation
Opening balance - (800) (800) - (160) (160)
Amortisation - (640) (640) - (640) (640)
Closing balance - (1,440) (1,440) - (800) (800)
Net book value 224,540 2,560 227,100 224,540 3,200 227,740
Goodwill
a) Impairment testing
Goodwill is calculated as the consideration for an acquisition less the value
of the assets acquired. The goodwill relates to the acquisition of 100 per
cent of the share capital of Pollen Street Capital Holdings Limited ("PSCHL")
by Pollen Street Limited ("PSL") on 30 September 2022. The goodwill recognised
was made up of one cash-generating unit, which includes future management and
performance fees.
As per the requirements of IAS 36 "Impairment of assets", goodwill is tested
for impairment annually. The goodwill recognised as part of the acquisition
above is compared to a financial model used to estimate the value in use
("VIU") of PSCHL. The value in use involves identifying the cashflows
associated with the revenue streams of PSCHL and carrying out a forecast of
future cashflows that are discounted back to their net present value based on
discount rates obtained from relevant industry comparable information.
Goodwill was tested for impairment on 31 December 2024 and no impairment was
identified (2023: no impairment identified). The cashflows have been forecast
four years into the future (2023: five years), where the final year is
assigned a terminal value. The value in use of goodwill was £328 million
(2023: £296 million) which is £103 million (2023: £71 million) above the
goodwill value of £225 million (2023: £225 million) presented by the Group.
The value in use model has a number of assumptions; the most significant
assumptions are the future income projections that are based on PSCHL's
forecast profit after tax, the discount rate used of 12.7 per cent (2023: 12.4
per cent), and the long-term growth rate of 3.9 per cent (2023: 3.6 per cent).
The future cashflow projections are based on management's best estimate using
historical performance and third-party data and applying assumptions to future
potential funds.
b) Sensitivities of key assumptions in calculating VIU
As at 31 December 2024, significant headroom is noted, and therefore no
impairment is identified (2023: nil). The future income projections would need
to fall short of its projected profit margins by over 31.5 per cent (2023:
23.3 per cent) over the period 2025 to 2028 (2023: 2024 to 2028) for the
goodwill to be impaired. Alternatively, the discount rate would have to
increase by 357 bps (2023: 350 bps) or the long-term growth rate would have to
decrease by 500 bps (2023: 350 bps) for the goodwill to be impaired.
Intangible assets
The intangible assets arose as part of the acquisition and represents existing
customer relationships of PSCHL. The intangible assets have a finite life,
which is estimated to be up to the end of 2028, and so the intangibles are
amortised on a straight-line basis up to the end of 2028 and are included in
Administration costs on the statement of profit or loss and other
comprehensive income. See Notes 2 and 4 for further information on intangible
assets.
14. Carried interest assets
The following table shows the total value of the carried interest held by the
Group, which includes both the carried interest at fair value through profit
or loss and the carried interest receivable:
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
Carried interest at fair value 23,708 15,967
Carried interest receivable 1,365 1,365
Closing balance 25,073 17,332
The Company has no carried interest entitlement (2023: nil).
Carried interest assets at fair value through profit or loss
a) Movements during the year
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Opening balance 15,967 6,495
Net changes in fair value movement 7,741 10,672
Realised proceeds - (1,200)
Closing balance 23,708 15,967
b) Fair value classification of carried interest at fair value
through profit or loss
Carried Interest at fair value through profit or loss is classified as a level
3 asset with a value as at 31 December 2024 of £23.7 million (2023: £16.0
million). There were no movements between the fair value hierarchies during
the year (2023: no movements).
c) Sensitivity analysis of carried interest at fair value through
profit or loss
The table below is the sensitivity impact on the inputs applied to the carried
interest assets at FVTPL. The sensitivity parameters are considered reasonable
assumptions in the movement in inputs:
As at 31 December 2024 As at 31 December 2023
Valuation Parameter Sensitivity applied Increase £'000 Decrease £'000 Increase £'000 Decrease £'000
Fund NAV +/- 10% 5,874 (4,886) 4,450 (4,349)
Option volatility +/- 10% 1,696 (504) 1,302 (716)
Option time to maturity +/- 1 Year 2,086 (1,819) 1,532 (1,714)
Option risk free rate +/- 1% 829 (384) 477 (475)
Carried interest receivable
Movements during the year
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
Opening balance 1,365 557
Carried interest income recognised in the profit or loss - 808
Closing balance 1,365 1,365
15. Trade and other receivables
The table below sets out a breakdown of the Group receivables:
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
Management and performance fees 17,762 6,496
Amounts due from debtors 50 4,555
Prepayments and other receivables 17,730 6,891
Closing balance 35,542 17,942
The receivables do not carry any interest and are short term in nature. The
Group considers that the carrying values of these receivables approximate
their fair value. There were no expected credit losses on receivables recorded
during the year (2023: nil).
The table below sets out a breakdown of the Company receivables:
Company As at As at
31 December 2024 31 December 2023
£'000 £'000
Amounts due from debtors 1,486 108
Promissory note 22,500 -
Closing balance 23,986 108
The receivables in the Company include an amount due from Pollen Street
Limited of £1.4 million (2023: £0.1 million) and to Pollen Street Capital
Holdings Limited of £74k (2023: nil). There were no expected credit losses on
receivables recorded during the year (2023: nil).
16. Derivative financial assets & liabilities
The table below presents the movement in the undiscounted notional values of
the foreign exchange forward contracts for the Group:
Group For the year ended For the year ended
31 December 2024 31 December 2023
EUR USD EUR USD
£'000 £'000 £'000 £'000
Opening notional balance 42,987 19,360 45,560 19,683
Net movement in notional value (14,215) 24,162 (2,573) (323)
Closing notional balance 28,772 43,522 42,987 19,360
The Company has no derivative financial assets (2023: nil).
The table below presents the mark to market of the foreign exchange forward
contracts as at the end of the year for the Group:
Group For the year ended For the year ended
31 December 2024 31 December 2023
EUR USD Total EUR USD Total
£'000 £'000 £'000 £'000 £'000 £'000
Opening balance (191) 12 (179) (839) (77) (916)
Fair value movement 219 (1,507) (1,288) 648 89 737
Closing balance 28 (1,495) (1,467) (191) 12 (179)
The fair value for the forward contracts is based on the forward rate curves
for the respective currencies. The maturity date for derivatives that were
held as at 31 December 2024 was less than one year (2023: less than one year).
The mark-to-market value is presented in the Derivative Financial Liabilities
line on the statement of financial position.
Fair value classification of derivatives
The Group derivatives are classified as level 2 in the fair value hierarchy
with a GBP equivalent value on 31 December 2024 of £(1.5) million (2023:
£(0.2) million). There were no movements between the fair value hierarchies
during the year. The derivatives are valued using market forward rates and are
contracts with a third party so are not traded on an exchange.
17. Interest-bearing borrowings
The table below sets out a breakdown of the Group's interest-bearing
borrowings.
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
Current liabilities
Credit facility - 132,493
Interest and commitment fees 218 437
Prepaid interest and commitment fees 280 (192)
Total current liabilities 498 132,738
Non-current liabilities
Credit facility 190,500 78,026
Prepaid interest and commitment fees (2,733) -
Total non-current liabilities 187,767 78,026
Total interest-bearing borrowings 188,265 210,764
On 10 June 2024, the Group refinanced its debt facility, this was subsequently
upsized on 13 December 2024 to £240 million, being a £120 million term loan
and £120 million revolving credit facility. The previous debt facility had a
£170 million term loan and £30 million revolving credit facility. As at 31
December 2024, the new debt facility was drawn £190.5 million, being £120
million on the term loan and £70.5 million on the revolving credit facility.
This debt facility is charged interest at SONIA plus a margin and matures in
June 2028.
As at 31 December 2024, the Group had fully repaid and extinguished all
liabilities in relation to its two amortising term loans previously secured
against SME facilities which were fully repaid on 13 December 2024 and 16
December 2024.
The Company has no interest-bearing borrowings (2023: nil).
The table below shows the related debt costs incurred by the Group during the
year:
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Interest and commitment fees 15,762 19,141
Other finance charges 825 1,449
Total finance costs 16,587 20,590
The table below shows the movements in interest-bearing borrowings of the
Group. Drawdowns and repayments of interest-bearing borrowings on revolving
facilities are shown gross.
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
Opening balance 210,764 263,633
Drawdowns of interest-bearing borrowings 240,500 37,000
Repayments of interest-bearing borrowing (260,519) (91,094)
Origination and legal fees (2,880) -
Finance costs 16,351 20,360
Interest paid on financing activities (15,951) (19,135)
Closing balance 188,265 210,764
The tables below analyse the Group's financial liabilities into relevant
maturity groupings.
As at 31 December 2024
Group <1 year £'000 1 - 5 years £'000 More than 5 years Total
£'000 £'000
Credit facility - 187,767 - 187,767
Interest and commitment fees 498 - - 498
Total exposure 498 187,767 - 188,265
As at 31 December 2023
Group <1 year £'000 1 - 5 years £'000 More than 5 years Total
£'000 £'000
Credit facility 132,493 74,912 3,114 210,519
Interest and commitment fees 245 - - 245
Total exposure 132,738 74,912 3,114 210,764
18. Trade and other payables
The table below set out a breakdown of the Group payables:
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
Staff salaries and bonuses 16,282 12,935
Audit fee accruals 953 1,059
Deferred income and other payables 12,014 5,155
Closing balance 29,249 19,149
The table below sets out a breakdown of the Company payables:
Company As at As at
31 December 2024 31 December 2023
£'000 £'000
Amounts due to creditors 28,153 -
Deferred income and other payables 1,014 108
Closing balance 29,167 108
The payables in the Company include an amount due to Pollen Street Limited of
£28.1 million (2023: nil) and to Pollen Street Capital Holdings Limited of
£43k (2023: nil).
19. Financial risk management
This Note details the management of financial risk and includes quantitative
data on specific financial risks.
The Group has a comprehensive risk management framework that includes risk
appetite statements, risk policies, procedures, a committee oversight
structure, a risk register, risk reporting, monitoring and risk controls.
Further details can be found in the Risk Management section. The Board
maintains oversight of this framework through the Board Risk Committee.
The most significant financial risks that the Group is exposed to are credit
risk, market risk, capital management and liquidity risk. Market risk includes
interest rate risk, foreign currency risk and price risk. Capital management
includes the risk of there being insufficient capital, including insufficient
capital of a particular type.
Credit risk
Credit risk is the risk of loss arising from failure of a counterparty to pay
the amounts that they are contractually due to pay. The Group is exposed to
credit risk principally through the Investment Company.
The Investment Committee approves all investment decisions, and all
investments are subject to extensive due diligence prior to approval. The
performance of each investment is monitored by the Investment Committee by way
of regular reviews of the investment and any collateral. Sector and asset
class concentrations across the investment portfolio are closely monitored and
controlled, with mitigating actions taken where appropriate.
Credit risk is mitigated through first loss protection, where the Group is
senior to equity in the partner and where the Group benefits from underlying
collateral, as well as diversification across the wide range of platforms that
makes up its portfolio.
Credit risk is analysed further in Note 20.
Market risk
In addition to the underlying trading performance of the Group's investment
portfolio, the fair value or future cash flows of a financial instrument held
by the Group may fluctuate because of changes in market prices. Market risk
can be summarised as comprising three types of risk:
· Interest rate risk - the risk of loss arising from changes in
market interest rates;
· Currency risk - the risk of loss arising from changes in foreign
exchange rates; and
· Price risk - the risk of loss arising from changes in other
market rates.
The Group's exposure, sensitivity to and management of each of these risks is
described in further detail below. Management of market risk is fundamental to
the Group's investment objective. The investment portfolio is continually
monitored to ensure an appropriate balance of risk and reward.
a) Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair value of financial instruments.
The Group invests in Credit Assets which may be subject to a fixed rate of
interest, or a floating rate of interest (which may be linked to base rates or
other benchmarks). The Group's borrowings are subject to a floating rate of
interest.
The Group intends to manage the mismatch it has in respect of the income
generated by its Credit Assets, on the one hand, with the liabilities in
respect of its borrowings, on the other hand, by matching any floating rate
borrowings with investments in Credit Assets that are also subject to a
floating rate of interest. To the extent that the Group is unable to match its
funding in this way, it may use derivative instruments, including interest
rate swaps, to reduce its exposure to fluctuations in interest rates, however
some unmatched risk may remain. The Group has not used any interest rate
derivative instruments in the current or prior year.
Exposure of the Group's financial assets and liabilities to floating interest
rates (giving cash flow interest rate risk when rates are reset) and fixed
interest rates (giving fair value risk) is shown below:
As at As at
31 December 2024 31 December 2023
Group Floating rate Fixed rate Total Floating rate Fixed rate Total
£'000 £'000 £'000 £'000 £'000 £'000
Credit Assets at amortised cost 224,315 85,108 309,423 266,965 177,525 444,490
Cash and cash equivalents 11,195 - 11,195 19,746 - 19,746
Interest-bearing borrowings (188,265) - (188,265) (210,764) - (210,764)
Total fixed and floating rate exposure 47,245 85,108 132,353 75,947 177,525 253,472
The Company has no fixed or floating rate exposure (2023: nil).
A 1 per cent change in interest rates impacts Group income on the assets with
a floating rate by £2.2 million for year to 31 December 2024 (2023: £2.7
million). For the year ended 31 December 2024, a 1 per cent change in interest
rates impacts the debt expense on the floating rate liabilities by £1.9
million (2023: £2.1 million).
b) Currency risk
Currency risk arises from foreign currency assets and liabilities. The Group
uses economic hedges to hedge currency exposure between the Pound Sterling and
other currencies using foreign exchange contracts.
The Group monitors the fluctuations in foreign currency exchange rates and
uses forward foreign exchange contracts to hedge the currency exposure of the
Group's non-GBP denominated investments. The Group re-examines the currency
exposure on a regular basis in each currency and manages the Group's currency
exposure in accordance with market expectations. The Group did not designate
any derivatives as hedges for accounting purposes as described under IAS 39 or
IFRS 9 during the current or prior year and records its derivative activities
on a fair value basis.
The Group's foreign exchange exposures are summarised in the tables below:
As at As at
31 December 2024 31 December 2023
Group EUR USD EUR USD
£'000 £'000 £'000 £'000
Credit Assets at amortised cost 27,721 14,453 42,062 -
Investment Assets at fair value 928 13,602 1,828 16,006
Trade and other receivables 10,973 213 1,674 86
Cash and cash equivalents 1,530 1,440 1,350 1,592
Total assets 41,152 29,708 46,914 17,684
Trade and other payables - - - -
Total liabilities - - - -
Net assets 41,152 29,708 46,914 17,684
Derivatives notional (28,879) (42,026) (54,591) (19,360)
Net exposure 12,273 (12,318) (7,677) (1,676)
If the GBP exchange rate increased by 10 per cent against the above
currencies, the impact on Group profit for the year ended 31 December 2024
would be £0.7 million (2023: £(0.96) million).
The Company has no currency risk exposure (2023: nil).
c) Price risk
Price risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in market prices (other than
those arising from interest rate risk or currency risk), whether those changes
are caused by factors specific to the individual financial instrument or its
issuer, or factors affecting similar financial instruments traded in the
market. Local, regional or global events such as war, acts of terrorism, the
spread of infectious illness or other public health issue, recessions, or
other events could have a significant impact on the Group and market prices of
its investments. This risk applies to financial instruments held by the Group,
including Equity Assets, Credit Assets, carried interest held at fair value
and derivatives. Sensitivity analysis on these financial instruments is
included in their respective notes to these financial statements.
Capital management
The Group manages its capital to ensure that the Group and its subsidiaries
have sufficient capital and the optimum combination of debt and equity. The
Group also manages its capital position to ensure compliance with capital
requirements imposed by the Financial Conduct Authority ("FCA") on certain
subsidiaries within the Group.
The Group monitors capital using a ratio of debt-to-equity. Debt is calculated
as total interest-bearing borrowings (as shown in the Consolidated Statement
of Financial Position). The Group's net debt-to-tangible equity ratio was 50
per cent as at 31 December 2024 (2023: 54 per cent). It is less than the
borrowing limit of 100 per cent set by the Board.
The Group's debt facility is subject to financial covenants. The Group's debt
facility agreements are subject to a ratio of total net debt to collateral
asset value of Credit Assets on a rolling annual period. During the year the
Group was fully compliant with regulatory capital requirements relating to its
regulated subsidiaries and the covenants on its debt facilities.
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its
obligations in respect of financial liabilities as they fall due.
The Group manages its liquid resources to ensure sufficient cash is available
to meet its expected contractual commitments both under normal and stressed
conditions, without incurring unacceptable losses or risking damage to its
reputation. It monitors the level of short-term funding and balances the need
for access to short-term funding, with the long-term funding needs of the
Group.
As at 31 December 2024 the Group had a committed debt facility totalling £240
million (2023: £200 million) with a maturity date of June 2028. This facility
includes a term and revolving facility secured on a range of assets. The Group
has no other debt facilities following the repayment and extinguishing of the
prior year facilities. Further details of the Group's debt facilities are in
Note 17.
The Group utilises its treasury system data such as live cash balance, debt
balances and upcoming payment obligations in order to monitor liquidity on an
ongoing basis.
The tables below show the cash flows of the Group's financial assets and
liabilities on an undiscounted basis by contractual maturity:
As at 31 December 2024
Group <3 months £'000 3-12 months £'000 1-5 years £'000 5+ years £'000 Total
£'000
Credit Assets at amortised cost 683 18,642 238,328 51,770 309,423
Investment Assets at fair value through profit or loss 41,894 11,833 65,009 75,440 194,176
Trade and other receivables 25,939 4,810 4,793 - 35,542
Cash and cash equivalents 11,195 - - - 11,195
Total assets 79,711 35,285 308,130 127,210 550,336
Liabilities
Trade and other payables (19,561) (7,697) (1,991) - (29,249)
Lease liabilities (391) (1,173) (3,966) - (5,530)
Interest-bearing borrowings (498) - (187,767) - (188,265)
Total liabilities (20,450) (8,870) (193,724) - (223,044)
As at 31 December 2023
Group <3 months £'000 3-12 months £'000 1-5 years £'000 5+ years £'000 Total
£'000
Credit Assets at amortised cost 72,218 103,751 239,781 24,729 440,479
Investment Assets at fair value through profit or loss - 13,137 62,751 12,332 88,220
Trade and other receivables 5,569 9,922 2,451 - 17,942
Cash and cash equivalents 19,746 - - - 19,746
Total assets 97,533 126,810 304,983 37,061 566,387
Liabilities
Trade and other payables (14,042) (3,314) (1,793) - (19,149)
Lease liabilities (391) (1,173) (5,530) - (7,094)
Interest-bearing borrowings (2,052) (130,686) (74,912) (3,114) (210,764)
Total liabilities (16,485) (135,173) (82,235) (3,114) (237,007)
As at 31 December 2024
Company <3 months £'000 3-12 months £'000 1-5 years £'000 5+ years £'000 Total
£'000
Trade and other receivables 23,986 - - - 23,986
Total assets 23,986 - - - 23,986
Liabilities
Trade and other payables (29,167) - - - (29,167)
Total liabilities (29,167) - - - (29,167)
As at 31 December 2023
Company <3 months £'000 3-12 months £'000 1-5 years £'000 5+ years £'000 Total
£'000
Trade and other receivables 108 - - - 108
Total assets 108 - - - 108
Liabilities
Trade and other payables (108) - - - (108)
Total liabilities (108) - - - (108)
20. Credit risk
Credit risk is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation.
The Group's credit risks arise principally through exposures to loans
originated or acquired by the Group and cash deposited with banks, both of
which are subject to risk of borrower default.
The Group establishes and adheres to stringent underwriting criteria. The
Group invests in a granular portfolio of assets, diversified at the underlying
borrower level, with each loan being subject to a maximum single loan exposure
limit. This helps mitigate credit concentrations in relation to an individual
customer, a borrower group or a collection of related borrowers.
The credit quality of loans is assessed through evaluation of various factors,
including credit scores, payment data, collateral available from the borrower
and other information.
The Group further mitigates its exposure to credit risk through structuring
facilities whereby the facilities are secured and structured so that the
borrower provides the first loss, and the Group finances the senior risk.
Further risk is mitigated in the property sector as the Group takes collateral
in the form of property to mitigate the credit risk arising from residential
mortgage lending and commercial real estate.
Set out below is the analysis of the gross closing balances of the Group's
Credit Assets at amortised cost split between unsecured and secured as at 31
December 2024:
Group As at 31 December 2024
Unsecured Secured Total
£'000 £'000 £'000
Credit Assets at amortised cost 13,632 304,695 318,327
Total secured and unsecured exposure 13,632 304,695 318,327
For the Group as at 31 December 2023:
Group As at 31 December 2023
Unsecured Secured Total
£'000 £'000 £'000
Credit Assets at amortised cost 68 452,733 452,801
Total secured and unsecured exposure 68 452,733 452,801
21. Equity
a) Share capital and premium
The table below shows the movement in shares of the Company during the year:
For the year ended For the year ended
31 December 2024 31 December 2023
No. Issued, allocated and fully paid ordinary shares of £0.01 each Ordinary shares Treasury shares Ordinary shares Treasury shares
Opening number of shares 64,209,597 - 64,209,597 4,712,985
Shares issued during the year - - - -
Number of shares bought back (3,222,257) 3,222,257 - -
Cancellation of treasury shares - - - (4,712,985)
Closing number of shares 60,987,340 3,222,257 64,209,597 -
Share capital represents the number of ordinary shares issued in the capital
of the Company multiplied by their nominal value of £0.01 each. Share premium
substantially represents the aggregate of all amounts that have ever been paid
above nominal value to the Company when it has issued ordinary shares. The
nominal value of ordinary shares as at 31 December 2024 was £0.6 million
(2023: £0.6 million). Treasury shares have no entitlements to vote and are
held directly by the Company. Treasury shares are excluded from the
Consolidated Statement of Financial Position.
b) Other reserves
On 21 November 2023, following shareholder and court approval the share
premium account was cancelled. Accordingly, £299.6 million, previously held
in the share premium account, was transferred to the Special Distributable
Reserve in 2023. As at 31 December 2023, the special distributable reserve
balance was £351.6 million.
Following completion of the Scheme, the Group was no longer subject to the
Association of Investment Company requirements to show the Revenue and Capital
reserves. As such, the two reserves were reallocated to a newly created
Retained Earnings reserve on 31 December 2023. As at 31 December 2023, the
Group had a retained earnings reserve balance of £8.1 million.
Merger Reserves include the additional reserves accounted for as part of the
acquisition that occurred during 2022. The Merger Reserve also includes the
costs associated with the issuance of shares.
The Foreign Currency Translation Reserve reflects the foreign exchange
differences arising on translation that are recognised in the Consolidated
Statement of Profit or Loss and Other Comprehensive Income.
22. Dividends
The table below sets out the dividends paid during the year ended 31 December
2024 and 31 December 2023.
Payment Date Amount per Share (pence) Total
£'000
Interim dividend for the period to 31 December 2022 March 2023 16.0p 7,916
Interim dividend for the period to 31 March 2023 June 2023 16.0p 7,916
Interim dividend for the period to 30 June 2023 September 2023 16.0p 7,916
Interim dividend for the period to 30 September 2023 December 2023 16.0p 7,916
Interim dividend for the period to 31 December 2023 March 2024 13.0p 8,347
Interim dividend for the period to 30 June 2024 October 2024 26.5p 16,516
Second interim dividend for the period to 31 December 2024 May 2025 27.1p 16,528
The second interim dividend for the period to 31 December 2024 of 27.1 pence
was approved on 24 March 2025 and will be paid on 2 May 2025.
The following table show the total dividends declared and the total dividends
paid:
For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Total dividends paid in the year 24,863 31,664
Total dividends in relation to the year 33,043 32,095
For the year ended 31 December 2024, dividends are declared on a semi-annual
basis. In prior years, dividends were declared and paid quarterly, such that
the distributions to shareholders for the year ended 31 December 2024 includes
the year end dividend for the period to 31 December 2023 and the interim
dividend for the period to 30 June 2024. As a result of this re-phasing there
was a one-off reduction in dividend payments made in 2024.
23. Net asset value per ordinary share
The following table shows the net asset value per ordinary share:
Group As at As at
31 December 2024 31 December 2023
Net asset value per ordinary share (pence) 950.0 906.8
Net assets attributable (£'000) 579,356 582,246
The Group net asset value per ordinary share as at 31 December 2024 is based
on net assets at the year-end of £579.4 million (2023: £582.2 million) and
ordinary shares of 60,987,340 (2023: 64,209,597) in issue at the year-end.
24. Cash generated from operations
Group For the year ended For the year ended
31 December 2024 31 December 2023
Notes £'000 £'000
Profit before taxation 55,788 42,604
Adjustments for:
Charge / (release) in expected credit loss 9 593 (970)
Gains on Investment Assets held at fair value 10 (18,684) (5,659)
Net interest from Credit Assets at amortised cost (7,855) (3,748)
Finance costs 17 16,587 20,590
Foreign exchange revaluation 226 3
Gains in carried interest 14 (7,741) (10,280)
Depreciation of fixed assets 11 284 274
Depreciation of lease assets 12 1,451 959
Amortisation of intangible assets 13 640 640
Increase in receivables 15 (17,600) (5,072)
Increase / (decrease) in payables 18 10,100 (1,379)
Increase / (decrease) in derivatives 16 1,288 (737)
Cash generated from operations 35,077 37,225
Company For the year ended For the year ended
31 December 2024 31 December 2023
Notes £'000 £'000
Profit before taxation 39,022 -
Adjustments for:
Increase in receivables 15 (23,878) (100)
Increase in payables 18 29,059 100
Cash generated from operations 44,203 -
25. Related party transactions
IAS 24 'Related Party Disclosures' requires the disclosure of the details of
material transactions between the Group and any related parties. Accordingly,
the disclosures required are set out below.
The Group considers all transactions with companies that are controlled by
funds managed by the Group as related party transactions.
The Group holds 4.0 per cent (2023: 4.0 per cent) equity in Tandem Money
Limited a portfolio company of funds managed by the Group. This is included in
Investment Assets at fair value through profit or loss in Note 10.
The Group has a servicing agreement with Oplo Group Limited, a wholly owned
subsidiary of Tandem Money Limited. As at 31 December 2024, the portfolio of
mortgages serviced under this agreement was £4.3 million (2023: £6.2
million).
The Group has an unsecured loan in place with Kingswood Group, a wealth and
investment manager that is controlled by Private Equity funds managed by the
Group. As at 31 December 2024, the facility had an outstanding balance of
£13.6 million (2023: nil).
The Group has a facility outstanding to Freedom Finance Limited, a portfolio
company managed by the Group, with a balance of £11.1 million (2023: £11.1
million). The facility was repaid in full post year end.
The Group has a participation in debt instruments issued by Soteria Insurance
Limited ("Soteria"), a subsidiary of a portfolio company managed by the Group,
with a balance of £5.5 million (2023: £9.0 million). Soteria is also an LP
in PSC Credit III (B) SCSp and as a result the Group charges Soteria
management fee and carried interest. These credit instruments are included in
Credit Assets at amortised cost in Note 9.
During the year, the Group made commitments to PSC Credit IV (B) SCSp of
£70.0 million which is a Private Credit fund managed by the Group. On 26 July
2024 the Group increased its commitment in PSC V (A) LP by £22.0 million to
take the total commitment to £42.0 million. On 29 November 2024, the Group
purchased a £11.3 million commitment in PSC Marlin LP ("Marlin"), including a
remaining capital commitment of £0.1 million. Please see Note 26 for analysis
of Group commitments to Pollen Street managed funds and any undrawn amount at
year end.
During the year, the Group carried out foreign exchange transactions with
Lumon Risk Management LTD ("Lumon", formerly Infinity International Limited)
in relation to EUR and USD derivative transactions. Lumon is one of the
Group's panel providers of foreign exchange and all foreign exchange
transactions are carried out on a best execution basis. Lumon is a portfolio
company owned by a Private Equity fund that is managed by the Group. The
derivatives exposure with Lumon is disclosed in Note 16.
During the year, the Company bought back 3,222,257 shares (2023: nil). During
the year, the Company cancelled no treasury shares (2023: 4,712,985). There
were no purchases of own shares during the year.
The Board of Directors are considered to be the key management personnel of
the Group. Their remuneration, including all forms of consideration such as
salary and fees, other benefits, pension contributions and annual bonus is
fully disclosed in the Annual Report on Remuneration.
26. Contingent liabilities and capital commitments
As at 31 December 2024, there were no contingent liabilities for the Group
(2023: nil).
The Group had £47.1 million (2023: £41.9 million) of undrawn committed
credit facilities and undrawn commitments in relation to direct Pollen Street
managed fund investments of £66.3 million (2023: £35.9 million).
27. Ultimate controlling party
It is the opinion of the Directors that there is no ultimate controlling party
of the Group.
28. Investments in subsidiaries
On 24 January 2024, Pollen Street Group Limited was introduced as the new
parent of Pollen Street Limited by way of a scheme of arrangement. Pollen
Street Limited subsequently distributed the entire issued share capital in
Pollen Street Capital Holdings Limited to Pollen Street Group Limited on 14
February 2024. The Company now has two wholly owned subsidiaries with a clear
and operationally useful distinction between the businesses carried on by the
Investment Company and the Asset Manager.
Refer to Note 4 for more details.
Company For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Opening balance - -
Increase in investments in subsidiaries 571,269 -
Closing balance 571,269 -
a) Impairment testing
As per the requirements of IAS 36 "Impairment of assets", investments in
subsidiaries are tested for impairment annually.
The carrying value of investments in subsidiaries is compared to a financial
model used to estimate the value in use of Pollen Street Limited ("PSL") and
Pollen Street Capital Holdings Limited ("PSCHL"). The value in use involves
identifying the independent cashflows associated with the revenue streams of
PSL and PCSHL and carrying out a forecast of future cashflows that are
discounted back to their net present value based on discount rates obtained
from relevant industry comparable information.
Investments in subsidiaries were tested for impairment on 31 December 2024 and
no impairment was identified.
The cashflows have been forecast four years into the future, where the final
year is assigned a terminal value. The value in use of the investments in
subsidiaries was £376 million for PSL and £366 million for PSCHL, which is
£44 million and £127 million respectively above the investments in
subsidiaries value presented by the Company. The value in use model has a
number of assumptions; the most significant assumptions are the future income
projections that are based on forecast profit after tax, the discount rate
used of 12.5 per cent for PSL and 12.7 per cent for PSCHL, and the long-term
growth rate of 3.9 per cent for both PSL and PSCHL.
The future cashflow projections are based on management's best estimate using
historical performance and third-party data and applying assumptions to future
potential funds.
b) Sensitivities of key assumptions in calculating VIU
The table below is the sensitivity impact on the inputs applied to the
investments in subsidiaries. The sensitivity parameters are considered
reasonable assumptions in the movement in inputs:
As at 31 December 2024 As at 31 December 2023
Valuation Parameter - PSL Sensitivity applied Increase £'000 Decrease £'000 Increase £'000 Decrease £'000
Future income projections +/- 10% 37,631 (37,631) - -
Discount rate +/- 100 bps (39,965) 50,516 - -
Growth rate +/- 100 bps 39,911 (31,596) - -
As at 31 December 2024 As at 31 December 2023
Valuation Parameter - PSCHL Sensitivity applied Increase £'000 Decrease £'000 Increase £'000 Decrease £'000
Future income projections +/- 10% 36,568 (36,568) - -
Discount rate +/- 100 bps (39,611) 49,820 - -
Growth rate +/- 100 bps 39,290 (31,288) - -
Investments in consolidated entities
The consolidated financial statements of the Group include the following
subsidiaries:
Name Country on incorporation Class of shares Holding Activity
Avant Credit of UK, LLC USA Ordinary 100% Lending company
Bud Funding Limited UK Ordinary 100% SPV
Financial Services Infrastructure Limited UK Ordinary 100% Dormant
Honeycomb Finance Limited UK Ordinary 100% Lending company
Juniper Lending Fund GP S.a.r.l Luxembourg Ordinary 100% General partner
Pollen Street Capital (US) Holdings LLC USA Ordinary 100% Holding company
Pollen Street Capital (US) LLC USA Ordinary 100% Asset management services
Pollen Street Capital Holdings Limited Guernsey Ordinary 100% Holding company
Pollen Street Capital Limited UK Ordinary 100% Asset management services
Pollen Street Capital Partners Limited UK Ordinary 100% Holding company
Pollen Street Investments Limited Guernsey Ordinary 100% Investment company services
Pollen Street Limited UK Ordinary 100% Investment company services
PollenUp Limited UK Ordinary 100% Dormant
PSC 3 Funding Limited UK Ordinary 100% Dormant
PSC Accelerator GP Limited Guernsey Ordinary 100% General partner
PSC Accelerator II (C) GP Limited Guernsey Ordinary 100% General partner
PSC Accelerator II GP Limited Guernsey Ordinary 100% General partner
PSC Accelerator II GP S.a.r.l Luxembourg Ordinary 100% General partner
PSC Accelerator Nominee Limited Guernsey Ordinary 100% Nominee
PSC Accelerator Nominee II Limited Guernsey Ordinary 100% Nominee
PSC Credit (OE) I GP S.a.r.l Luxembourg Ordinary 100% General partner
PSC Credit (P) GP S.a.r.l Luxembourg Ordinary 100% General partner
PSC Credit (T) GP S.a.r.l Luxembourg Ordinary 100% General partner
PSC Credit Holdings LLP UK Capital contribution 100% Asset management services
PSC Credit III GP S.a.r.l Luxembourg Ordinary 100% General partner
PSC Credit IV GP S.a.r.l Luxembourg Ordinary 100% General partner
PSC Credit Limited Cayman Ordinary 100% Holding company
PSC Digital Limited UK Ordinary 100% Holding company
PSC Group Carry GP Limited Guernsey Ordinary 100% General partner
PSC III Carry GP Limited UK Ordinary 100% General partner
PSC III G GP Limited Guernsey Ordinary 100% General partner
PSC III GP Limited UK Ordinary 100% General partner
PSC Investments (Q) GP Limited UK Ordinary 100% General partner
PSC IV GP Limited Guernsey Ordinary 100% General partner
PSC IV GP S.a.r.l Luxembourg Ordinary 100% General partner
PSC Marlin GP Limited Guernsey Ordinary 100% General partner
PSC Nominee 1 Limited UK Ordinary 100% Dormant
PSC Nominee 3 Limited UK Ordinary 100% Dormant
PSC Nominee 4 Limited Guernsey Ordinary 100% Nominee
PSC Nominee 5 Limited Guernsey Ordinary 100% Nominee
PSC Plane GP (Guernsey) Limited Guernsey Ordinary 100% General partner
PSC Service Company Limited UK Ordinary 100% Service company
PSC US Credit GP MM LLC USA Ordinary 100% General partner
PSC V GP Limited Guernsey Ordinary 100% General partner
PSC V GP S.a.r.l Luxembourg Ordinary 100% General partner
Saturn GP Limited UK Ordinary 100% General partner
SOF Annex Nominees Limited UK Ordinary 100% Dormant
SOF General Partner (Cayman) Limited Cayman Ordinary 100% General partner
SOF General Partner (Guernsey) Limited Guernsey Ordinary 100% General partner
SOF General Partner (Scotland) II Limited UK Ordinary 100% General partner
SOF General Partner (UK) Limited UK Ordinary 100% General partner
Sting Funding Limited UK Ordinary 100% SPV
All shares held in the Group's subsidiaries represent ordinary shares except
otherwise stated.
On 28 December 2023, PSC Income Fund I GP LLC and PSC SPV I GP LLC were
dissolved. Therefore, these subsidiaries are included in the prior year
comparatives, but not included in the consolidated financial statements of the
Group at 31 December 2024.
Investments in unconsolidated structured entities
The Group has interests in a number of entities who act as general partner to
a number of funds structured as limited partnerships. The limited partnerships
are not treated as subsidiary undertakings of the Group because the rights of
the general partners are exercised on behalf of other investors in the limited
partnerships and, being fiduciary in nature, are not considered to result in
power over the relevant activities of the limited partnerships. As such, the
Group is considered an agent.
The list of such limited partnerships in which the Group has an interest at 31
December 2024 are:
Name Jurisdiction
ISC IV (C) SCSp Luxembourg
Juniper Lending Fund SCSp Luxembourg
PSC Accelerator Carry LP Guernsey
PSC Accelerator II (A) LP Guernsey
PSC Accelerator II (B) SCSp Luxembourg
PSC Accelerator II (C) LP Guernsey
PSC Accelerator II Carry LP Guernsey
PSC Accelerator LP Guernsey
PSC Credit (OE) I SCSp Luxembourg
PSC Credit (P) SCSp Luxembourg
PSC Credit (T) Carry SCSp Luxembourg
PSC Credit (T) SCSp Luxembourg
PSC Credit III (A) SCSp Luxembourg
PSC Credit III (B) SCSp Luxembourg
PSC Credit III Carry SCSp Luxembourg
PSC Credit IV (A) SCSp Luxembourg
PSC Credit IV (B) SCSp Luxembourg
PSC Credit IV Carry SCSp Luxembourg
PSC Glebe LP Guernsey
PSC III Carry LP UK
PSC III G, LP Guernsey
PSC III Pooling LP Canada
PSC Investments (C), LP Guernsey
PSC IV (B) LP Guernsey
PSC IV (C), SCSp Luxembourg
PSC IV Carry, LP Guernsey
PSC Partners LP Guernsey
PSC IV, LP Guernsey
PSC Leto LP Guernsey
PSC Marlin LP Guernsey
PSC Neptune LP Guernsey
PSC Plane (Guernsey) LP Incorporated Guernsey
PSC Plane Carry LP Guernsey
PSC Science SCSp Luxembourg
PSC Tiger LP Guernsey
PSC US Wolverine LLC Delaware
PSC V (A) LP Guernsey
PSC V (B) SCSp Luxembourg
PSC V Carry LP Guernsey
PSC Venus LP Guernsey
PSCM Carry LP Guernsey
PSCM Pooling LP Guernsey
Special Opportunities Fund Carry LP Guernsey
Special Opportunities Fund (Guernsey) LP Guernsey
Special Opportunities Fund A LP UK
Special Opportunities Fund B LP UK
Special Opportunities Fund C LP UK
Special Opportunities Fund D LP UK
Special Opportunities Fund Employee LP Cayman
Special Opportunities Fund F LP UK
Special Opportunities Fund G LP UK
Special Opportunities Fund J LP UK
Special Opportunities Fund S1 LP UK
Special Opportunities Fund S2 LP UK
The maximum exposure to loss for investments in unconsolidated limited
partnerships is the carrying amount of any investments in limited partnerships
and loss of future fees. As at 31 December 2024, the carrying amount was
£150.0 million (2023: £75.1 million).
On 28 December 2023, PSC US Badger LLC and PSC US Buckeye LLC were dissolved.
Therefore, the Group no longer has an interest in these entities through
subsidiaries who act as general partner to these entities. As at 31 December
2024, PSC US Wolverine LLC is in the process of being dissolved.
Qualifying Limited Partnership
The Group holds an interest in Qualifying Limited Partnerships ("QLP"), the
balances and transactions of which have been incorporated into these financial
statements on a proportional consolidation basis. However, under proportional
consolidation and due to the de minimis interest in the QLPs, there is no
impact on the Consolidated Statement of Profit or Loss or the Consolidated
Statement of Financial Position.
The list of such qualifying limited partnerships in which the Group has an
interest at 31 December 2024 are:
Name Jurisdiction
PSC III LP UK
PSC Investments (Q) LP UK
PSC Investments B LP UK
PSC Investments LP UK
Associates
The Group accounts for investments in funds or carried interest partnerships
that give the Group significant influence, but not control, through
participation in the financial and operating policy decisions, as associates
at fair value through profit or loss. Information about the Group's
investments in associates measured at fair value is shown below.
The table below shows the carried interest partnerships that are accounted for
as associates by the Group. The carried interest partnerships appear as part
of Carried interest in the Group's Consolidated Statement of Financial
Position.
As at 31 December 2024
Group PSC V Carry LP £'000 PSC Accelerator II Carry LP £'000 PSC IV Carry LP £'000 PSC Accelerator Carry LP £'000 PSC Credit III Carry SCSp PSC Credit (T) Carry SCSp £'000
£'000
Net Assets Value - - 75,007 9,350 8,896 1,191
Country of incorporation Guernsey Guernsey Guernsey Guernsey Luxembourg Luxembourg
Group's interest in the associate 25% 25% 25% 25% 25% 25%
As at 31 December 2023
Group PSC V Carry LP £'000 PSC Accelerator II Carry LP £'000 PSC IV Carry LP £'000 PSC Accelerator Carry LP £'000 PSC Credit III Carry SCSp PSC Credit (T) Carry SCSp £'000
£'000
Net Assets Value - - 53,828 9,749 4,672 852
Country of incorporation Guernsey Guernsey Guernsey Guernsey Luxembourg Luxembourg
Group's interest in the associate 25% 25% 25% 25% 25% 25%
29. Subsequent events
On 24 March 2025 a dividend of 27.1 pence per ordinary share was approved for
payment on 2 May 2025.
The Company was admitted to the FTSE 250 on 17 January 2025.
Definitions and Reconciliation to Alternative Performance Measures
Definitions
Asset-Based Lending Collateralised financing where loans are secured by a company's assets with
credit limits determined by the assets' liquidation value.
Asset Manager The business segment of the Group that is responsible for managing third-party
AuM and the Investment Company's assets. All activities of this segment reside
in Pollen Street Capital Holdings Limited and its subsidiaries.
AuM The assets under management of the Group, defined as:
· investor commitments for active Private Equity funds;
· invested cost for other Private Equity funds;
· the total assets for the Investment Company; and
investor commitments for Private Credit funds.
Average Fee-Paying AuM The fee-paying asset under management of the Group, defined as:
· investor commitments for active fee-paying Private Equity funds;
· invested cost for other fee-paying Private Equity funds;
· the total assets for the Investment Company; and
· net invested amount for fee-paying Private Credit funds.
The average is calculated using the opening and closing balances for the
period.
Average Number of Shares Average number of closing daily ordinary shares, excluding treasury shares.
Co-investment A direct investment made alongside or in a Fund taking a pro-rata share of all
instruments.
Combination The acquisition of 100 per cent of the share capital of Pollen Street Capital
Holdings Limited by Pollen Street Limited (formerly Honeycomb Investment Trust
Plc) with newly issued shares in Pollen Street Limited as the consideration
that completed on 30 September 2022.
Credit Assets Loans made by the Group to counterparties, together with investments in
Private Credit funds managed or advised by the Group.
Equity Assets Instruments that have equity-like returns; that is, instruments that do not
contain a contractual obligation to pay and that evidence a residual interest
in the issuer's net assets. Examples include ordinary shares or investments in
Private Equity funds managed or advised by the Group. Carried interest
receivable by the Group is not classified as an Equity Asset.
Fair Value The amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants.
Fee-Paying AuM The fee-paying asset under management of the Group, defined as:
· investor commitments for active fee-paying Private Equity funds;
· invested cost for other fee-paying Private Equity funds;
· the total assets for the Investment Company; and
· net invested amount for fee-paying Private Credit funds.
Fund Management EBITDA Fund Management Income less Fund Management Administration Costs, including
the full cost of the office lease despite these costs being reported as
depreciation of a right-of-use asset and financing costs under IFRS 16.
Fund Management Income The income of the Group's Asset Manager according to IFRS reporting standards.
Fund Management EBITDA Margin The ratio of the Fund Management Adjusted EBITDA and the Fund Management
Income, expressed as a percentage.
Group Pollen Street Group Limited and its subsidiaries.
IFRS International Financial Reporting Standards as adopted by the United Kingdom.
Internal Rate of Return The discount rate that makes the net present value of all cash flows from a
particular investment equal to zero, effectively indicating the annualised
rate of return that the investment is expected to generate.
Investment Asset The Group's portfolio of Equity Assets and Credit Assets.
Investment Company The business segment of the Group that holds the Investment Asset portfolio
and the debt facilities. The activities of this segment predominately reside
within Pollen Street Limited, Pollen Street Investments Limited, Sting Funding
Limited and Bud Funding Limited.
Management Fee Rate The ratio of the Fund Management Income attributable to management fees and
the Average Fee-Paying AuM, annualised and expressed as a percentage.
Multiple on Invested Capital The return on an investment by comparing the total value realised to the
initial capital invested, indicating how many times the original investment
has been multiplied.
Net Investment Assets The Investment Assets plus surplus cash, net of debt.
Net Investment Asset Return The ratio of the income from Investment Company to the Net Investment Assets,
expressed as an annualised ratio.
Performance Fees Share of profits that the Asset Manager is due once it has returned the cost
of investment and agreed preferred return to investors.
Performance Fee Rate The ratio of the Fund Management Income attributable to carried interest and
performance fees and the total Fund Management Income, expressed as a
percentage.
Private Credit The Group's strategy for managing Credit Assets within its private funds.
Private Equity The Group's strategy for managing Equity Assets within its private funds.
Registrar An entity that manages the Company's shareholder register. The Company's
registrar is Computershare Investor Services PLC.
Reorganisation The reorganisation that was affected on 14 February 2024, to distribute the
entire issued share capital of Pollen Street Capital Holdings Limited from
Pollen Street Limited to the Company referred to as the Distribution. The
Scheme and the Distribution are together referred to as the "Reorganisation".
The Scheme The scheme of arrangement that was affected on 24 January 2024, to change the
listing category of Pollen Street Limited's shares to that of a commercial
company from an investment company and to introduce the Company as a Guernsey
incorporated holding company as the new parent of the Group.
SMA Separately Managed Accounts
Sterling Overnight Interbank Average Rate ("SONIA") The effective overnight interest rate paid by banks for unsecured transactions
in the British sterling market.
Structured Loan Credit Asset whereby the Group typically has senior secured loans to
speciality finance companies, with security on the assets originated by the
speciality finance company and first loss protection deriving from the
speciality finance company's equity. Corporate guarantees are also typically
taken.
Reconciliation to Alternative Performance Measures
The alternative performance measures are used to improve the comparability of
information between reporting periods, either by adjusting for uncontrollable
or one-off factors that impact upon IFRS measures or, by aggregating measures,
to aid the user to understand the activity taking place. Alternative
performance measures are not considered to be a substitute for IFRS measures
but provide additional insight on the performance of the business.
Management fee rate
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Management fee income for the Asset Manager 55,475 34,332
Average Fee-Paying AuM 3,692,237 2,947,371
Management fee rate 1.50% 1.16%
The Management Fee Rate is calculated by dividing the management fee income
for the Asset Manager by the Average Fee-Paying AuM. The Management Fee Rate
is annualised.
Performance fee rate
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Carried interest & performance fee income for the Asset Manager 11,320 14,831
Fund Management Income for the Asset Manager 66,795 49,163
Performance fee rate 17% 30%
The Performance Fee Rate is calculated by dividing the Carried interest and
performance fee income for the Asset Manager by the Fund Management Income for
the Asset Manager.
Fund Management EBITDA & Fund Management EBITDA Margin
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Operating profit of the Asset Manager 27,174 15,907
Depreciation of lease asset (1,451) (959)
Fund Management EBITDA 25,723 14,948
Fund Management Income for the Asset Manager 66,795 49,163
Fund Management EBITDA Margin 39% 30%
The Fund Management EBITDA is calculated by deducting the charge for the lease
asset depreciation from the statutory Operating Profit of the Asset Manager.
The Fund Management EBITDA Margin is calculated by dividing the Fund
Management EBITDA by the Fund Management Income.
Dividends per Share
Group For the year ended For the year ended
Pence per share 31 December 2024 31 December 2023
Q1 interim dividend - 16.0
Q2 interim dividend 26.5 16.0
Q3 interim dividend - 16.0
Q4 interim dividend 27.1 13.0
Dividend per share (pence) 53.6 61.0
During 2024, following completion of the Reorganisation and conversion to a
commercial company, the timing of dividend payments was changed to allow for
dividends to be declared on a semi-annual, rather than a quarterly, basis. In
addition, the partial dividend waiver given by former shareholders of Pollen
Street Capital Holdings Limited at the time of the Combination expired at 31
December 2023. Consequently, there was a reduction in dividends per share
declared from 61.0p for 2023 to 53.6p for 2024.
EBITDA
Group For the year ended For the year ended
31 December 2024 31 December 2023
£'000 £'000
Operating profit of the Asset Manager 27,174 15,907
Depreciation of lease asset (1,451) (959)
Fund Management EBITDA 25,723 14,948
Operating Profit of the Investment Company 31,789 30,173
EBITDA 57,512 45,121
The Fund Management EBITDA is calculated by deducting the charge for the lease
asset depreciation from the statutory Operating Profit of the Asset Manager.
EBITDA of the Group is calculated as the sum of the Fund Management EBITDA and
the Operating Profit of the Investment Company.
Tangible Net Asset Value, Debt-to-Tangible Equity Ratio & Net
Debt-to-Tangible Equity Ratio
Group As at As at
31 December 2024 31 December 2023
£'000 £'000
Net asset value 579,356 582,246
Goodwill & intangible assets (227,100) (227,740)
Tangible net asset value 352,256 354,506
Interest-bearing borrowings 188,265 210,764
Debt-to-tangible equity ratio 53.4% 59.5%
Cash and cash equivalents 11,195 19,746
Net debt-to-tangible equity ratio 50.3% 53.9%
The debt-to-tangible equity ratio is calculated as the Group's
interest-bearing debt divided by the tangible net asset value, expressed as a
percentage. The net debt-to-tangible equity ratio is calculated as the Group's
interest-bearing debt less cash and cash equivalents, divided by the tangible
net asset value expressed, as a percentage.
1 The accounting cost of the office lease is defined as the depreciation of
the lease asset.
2 Denominator used for 2023 is the Fund Management EBITDA given the
investment trust status prior to the Reorganisation.
3 The Reorganisation has been accounted for using the book-value method
meaning that the financial statements are restated as if the Reorganisation
had occurred at the beginning of the earliest period presented, i.e. from 1
January 2023. Under IFRS 5, Non-current Assets Held for Sale and Discontinued
Operations, depreciation and amortisation were not incurred when Pollen Street
Capital Holdings Limited was held for sale. Under the book-value method of
accounting, this is unwound and the prior year comparatives reflect a full
year charge for depreciation (additional £240k) and amortisation (additional
£160k).
4 The prior year comparatives are unaudited for Pollen Street Group Limited.
These numbers have been included as comparatives in accordance with the
book-value method of accounting for capital reorganisations. Refer to the
Capital Reorganisation accounting policy in Note 2 for more details. The prior
year comparatives are based on the audited consolidated financial statements
of Pollen Street Limited as set out in the Pollen Street Limited Annual Report
and Accounts for the year ended 31 December 2023 and the audited Pollen Street
Group Limited financial statements for the year ended 31 December 2023 as set
out in the Pollen Street Group Limited Annual Report and Accounts for the year
ended 31 December 2023.
5 Source: Oxford Economics - IFRS 9 Macroeconomic Scenarios Service: UK
Country Report Q4 2024
6 The 'Gains on Investment Assets held at fair value' includes £0.3 million
(2023: £0.6 million) from unrealised foreign exchange gains and realised
& unrealised derivative gains, which are not included in Note 10.
7 Fund Management EBITDA is calculated by deducting the charge for the lease
asset depreciation from the statutory operating profit of the Asset Manager as
this charge is reported as depreciation of a right-of-use asset and financing
costs under IFRS 16. The Fund Management EBITDA Margin is calculated by
dividing the Fund Management EBITDA by the Fund Management Income.
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