REG - Pollen Street PLC - Pollen Street Half-year Report
18/09/2023 07:00
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RNS Number : 6836M Pollen Street PLC 18 September 2023
18 September 2023
Pollen Street plc Interim Accounts H1 2023
Pollen Street plc ("Pollen Steet" or, together with its subsidiaries, the
"Group") today issues its Interim Accounts for the six months ended 30 June
2023.
Pollen Street confirms final close of Private Credit III, first close of
Private Equity V and the closing of a new continuation vehicle under our
Private Equity strategy. The financial performance for the first half of the
year has been robust driven by strong performance in the investment company as
interest rates have risen in our predominantly floating rate portfolio.
Fundraising activities have not yet fed through to actual performance in the
half year but with strong tailwinds to proforma performance.
Highlights for H1 2023: strong AUM growth and consistent financial results
Asset Manager
· Strong fundraising performance with final close of Private Credit
III in April 2023 bringing total investor commitments including SMAs to £1.1
billion, first close of Private Equity V in July 2023 and launching a new
continuation vehicle to raise £840 million.
· AUM was £3.4 billion as of 30 June 2023, rising to £4.2 billion
of proforma AuM as a result of Private Equity V and the Continuation Vehicle.
Expectation of further AUM increase in H2 as fundraising continues for Private
Equity V.
· Continued growth of the Asset Manager with both the Private
Equity and Private Credit strategies building further on strong underlying
performance.
Investment Company
· Investment company delivered robust performance driven by
increased interest rates and resilient credit performance.
· Strong cash generation from Net Investment Assets for the first
half of 2023 with Income of £15.4 million, up from £13.7 million in H1 of
2022 and a Return on Net Investment Assets of 9.1%.
Financial Performance
· Operating profit has increased to £19.4 million for H1 2023, up
42% from £13.7 million in H1 of 2022, driven by the operating profit of the
Asset Manager.
· The Group declared dividends of £16 million for H1 2023 up from
£14 million for H1 2022, reflecting a quarterly dividend of 16.0p per share
in line with stated targets.
Future Developments
· Enhanced balance sheet strategy by enabling increased exposure to
Pollen Street funds allowing greater alignment and accelerating third-party
AUM.
· The Group remains well positioned to continue to drive long-term
organic growth and close the year in line with expectations and reiterates
medium term guidance.
Shareholder Proposals
· The Company expects to shortly publish a shareholder circular,
inviting shareholders to vote at a General Meeting on 11 October on proposals
previously announced to change its listing category to that of a commercial
company from an investment company and introduce a Guernsey holding company to
simplify the Group structure.
· The purpose of these proposals is to better reflect the Group's
operations as a commercial enterprise, broaden the universe of potential
investors, improve the marketability and liquidity of Pollen Street shares,
and bring the listing classification in line with our quoted peer group.
The Interim Accounts can be found on the website Financial information |
Pollen Street Group
(https://urldefense.com/v3/__https:/ir.pollenstreetgroup.com/investors/financial-information/__;!!KZXpRQ!UtWrZhufSo1eVIIIifRpJ6UHDJCRGpxdg9zCQ1Klw53qMiFuNCzPBT8nokjb42fJaxILuIVs8O3FvO2w0R67CBbFAu0XXLI$)
Commenting on the H1 2023 performance, Lindsey McMurray, Chief Executive
Officer, said:
"I'm pleased with the performance in the first half of the year, driven by the
unique combination of strong growth from our asset management business and
robust performance from the investment company. Across our Private Equity
and Private Credit strategies we maintain our track record of deployment and
performance and we're encouraged to see Proforma AUM grow to £4.2 billion.
We've demonstrated clear progress in delivering our strategy and our business
has shown resilience in the changing macro environment. I'm confident we will
see further progress as we head into the second half of the year and as we
seek to take advantage of our organic growth opportunities."
For investors:
A presentation and Q&A will be held for analysts at 9 AM on 18 September
2023.
Register for the webinar: https://2023resultswebinar.pollenstreetgroup.com
(https://2023resultswebinar.pollenstreetgroup.com)
The full presentation is available for on the website
http://www.pollenstreetgroup.com/shareholders
(http://www.pollenstreetgroup.com/shareholders)
About Pollen Street plc
Pollen Street plc is an alternative asset manager dedicated to investing with
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 top tier investors and deploys it into
its Private Equity and Private Credit strategies. The strong recurring
revenues from this business enable us to deliver scalable growth.
The Investment Company invests in strategies aligned with core strategies of
the group and today the investment portfolio is aligned with the private
credit strategy. The portfolio is a well-diversified pool of primarily senior
credit assets to high quality borrowers generating strong returns together
with capital preservation. 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). Further
details are available at www.pollencap.com (http://www.pollencap.com/) .
For further information about this announcement please contact:
Barclays Bank plc - Joint Broker
Neal West / Stuart Muress / Dion Di Miceli
+44 (0)20 7623 2323
Liberum Capital Limited - Joint Broker
Chris Clarke / Edward Mansfield / Anake Singh
+44 (0)20 3100 2000
FGS Global
Chris Sibbald
Chris.Sibbald@fgsglobal.com
+44 (0)7855955531
Link Company Matters Limited - Corporate Secretary
polncosec@linkgroup.co.uk
Interim Accounts 2023
The Interim Accounts have been submitted in full unedited text to the
Financial Conduct Authority's National Storage Mechanism and are available for
inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) in accordance with
DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules. The Interim Accounts are also 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 2022 but is derived from those
accounts. Statutory accounts for the year ended 31 December 2022 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 498 (2) or (3) of the Companies Act 2006.
The following text are selected extracts from the Interim Accounts.
Pollen Street at a Glance
Pollen Street plc ("Pollen Street" or the "Company") 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 assets under management ("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 top tier investors and deploys it into
its Private Equity and Private Credit strategies. The strong recurring
revenues from this business enable us to deliver scalable growth.
The Investment Company invests in the strategies of the Group delivering
attractive risk adjusted returns. Today the portfolio is a well-diversified
pool of primarily senior asset-backed credit assets generating strong returns
at conservative loan to value ratios ("LTVs"). The portfolio consists of both
direct investments and investments in funds managed by Pollen Street.
We continue to see the benefits of the combination of the Asset Manager and
the Investment Company (the "Combination") whereby the Investment Company will
serve to accelerate growth in third-party AuM of the Asset Manager through
helping to scale existing funds and seed new strategies.
Key Figures(( 1 ))
· Assets under management ("AuM") - £3.4 billion (31 December
2021: £3.4 billion)
· Proforma AuM - £4.2 billion Including Private Equity V and the
Continuation Vehicle
· Operating profit - £19.4 million (Six months ended 30 June 2022:
£13.7 million)
· EBITDA - £20.6 million (Six months ended 30 June 2022: £13.7
million)
· Net Investment Asset Return - 9.1% (Six months ended 30 June
2022: 7.8%)
CEO Report
Lindsey McMurray - Chief Executive Officer
I am pleased to present these Interim Report for the six months to June 2023,
and to demonstrate the clear progress in delivering on the strategy that we
set out when we completed the Combination in September 2022, as well as the
resilience of our business and our strategies in the changed macro
environment. This is evident in our performance for the first half of 2023.
Despite difficult market conditions we have delivered clear progress towards
our ambitions for the year, alongside consistent financial performance.
Performance across both strategies has been strong, maintaining our top tier,
through-cycle track record as we seek to identify and build the next
generation of leaders in financial services.
And with this, our fundraising efforts continue to build success. We completed
the final close of Private Credit III in April 2023. Total investor
commitments into the fund are now £0.4 billion and together with our
separately managed accounts ("SMAs"), we have £1.1bn of commitments to our
Private Credit strategy as at 30 June 2023. Supported by strong origination,
Private Credit III is now close to fully invested and we will be launching
Private Credit IV in the fourth quarter of 2023. We have also completed the
first close of Private Equity V. We are thrilled with the support we have
received from both existing and new investors and expect to build on this
strong first close over the coming months. We remain confident in reaching the
target fund size for Private Equity V. We have also launched a new
continuation fund to raise £0.8 billion under our Private Equity strategy to
enable us to continue to support and grow two of our high performing portfolio
companies.
The Company expects to shortly publish a shareholder circular, inviting
shareholders to vote at a General Meeting on 11 October on proposals
previously announced to change its listing category to that of a commercial
company from an investment company and introduce a Guernsey holding company to
simplify the Group structure. The purpose of these proposals is to better
reflect the Group's operations as a commercial enterprise, broaden the
universe of potential investors, improve the marketability and liquidity of
Pollen Street shares and bring the listing classification in line with our
quoted peer group.
Executing on our potential as Pollen Street plc
Pollen Street offers a unique combination of high quality, stable income and
growth of long-term recurring fee income. The Group benefits from a
complementary and synergistic set of asset management activities focused on
managing third-party assets under management, referred to as AuM (the "Asset
Manager") and on-balance sheet investments (the "Investment Company") aligned
to the Company's investment strategies. The Asset Manager provides exposure to
high margin, capital light recurring revenue streams. The Investment Company
portfolio generates stable returns through investments primarily aligned to
our strategies.
Our Private Equity and Credit strategies are well-established, with the core
team having worked together for over 17 years. Pollen Street was founded as a
financial and business services specialist and our deep industry expertise
drives our performance. We have a proven track record of strong returns at low
risk, delivering for our growing blue chip investor base. The Asset Manager
business has continued to build on this strong track record and to execute
against our targets for the year.
Our Private Equity strategy is aligned with the key megatrends driving change
across the industry: digital transformation, unbundling of financial services,
favourable regulation and the green transition. We aim to work with great
management teams to build the next generation of leaders in their fields.
Our thematic origination identifies a pipeline of fast-growing,
technology-enabled businesses with solid foundations for us to build
customer-centric, data-driven organisations who can become market leaders. We
invest based upon core thematics that are driving the sector as a whole and we
work together with these businesses to drive technological & digital
advancement, international and product development, buy and build strategies
and ESG initiatives.
Our credit strategy provides asset-based lending facilities primarily to
non-bank lenders, leasing businesses, technology companies, and/or other
companies with diverse portfolios of financial or hard assets that generate
contractual cashflows. This market serves as a financing mechanism for many
fundamental parts of our society including cars, homes, businesses machinery,
credit card balances and corporate receivables. Within this large and diverse
market Pollen Street is able to be highly selective in its approach,
leveraging the team's extensive experience and track record to deliver
superior returns with controlled risk. Our key themes include: SME loans;
mid-market residential family homes, government backed receivables and
electric vehicle fleet financings.
Our credit strategy delivers significant credit protection through both asset
security and transaction structuring and is built to withstand highly stressed
scenarios, enabling us to keep delivering strong and stable performance
through cycles. Our proprietary data systems and comprehensive data collection
provide us with regular and detailed information, and strong transparent
relationships with our borrowers enable us to closely monitor underlying
performance.
We welcomed three new companies to the private equity portfolio, 2 to Private
Equity IV, rounding out the portfolio for that fund and the first investment
into Private Equity V: Finsolutia, a European technology-driven credit and
real estate platform; Wide, a leading innovative technology-led insurance
broker in Italy; and Assessio, a leading talent assessment software platform
in the Nordics and Benelux. We also announced the first exit in Private Equity
IV, Pacific Fund Systems, in just over two years. In Credit we have originated
or repriced five deals over the period. The continuation vehicle will also
lead to the disposal of Aryza for fund III and Markerstudy for Fund IV
Overall, the Asset Manager business is well-positioned to drive further
growth. Our core strategies are performing well, demonstrating resilience in
the current macro-economic environment and alongside good momentum in
fundraising.
In our Investment Company the portfolio continued its track record of strong
performance throughout the first half of the year and delivered Net Investment
Asset Return of 9.1 per cent. driven by increasing interest rates on our
predominantly floating rate portfolio.
We continue to see the benefits of the combination of the Asset Manager and
the Investment Company whereby the Investment Company will serve to accelerate
growth in third-party AuM of the Asset Manager through helping to scale
existing funds and seed new strategies.. We highlighted at the time of the
merger that we expected to transition the investment company from holding
direct investments in transactions to holding investments in Pollen Street
funds. This transition has started with 15% of the assets held in funds that
Pollen Street manage with a near term expectation that the allocation will
increase through commitments in the recently closed Continuation fund, PE V
and Credit IV. We believe that this creates strong alignment and synergies
whereby the investment company enjoys the returns generated by these
investments while helping each of the funds reach scale and providing a
catalyst for raising additional third-party capital - in turn driving higher
management fee income. We would expect fund investments to represent a
majority of the investment company assets over time.
Delivering consistent performance
Pollen Street delivered consistent financial performance in the first six
months of 2023 ("H1 2023"). The Group's operating profit has increased to
£19.4 million, up 42 per cent from the operating profit in H1 2022 of £13.7
million.
The main drivers of this increase were the operating profit from the Asset
Manager segment with growth in Fee-Paying AuM in the Credit strategy of 40 per
cent per annum reaching £1.4 billion for the six months ended at 30 June
2023. Fund Management EBITDA has grown by 41 per cent from H1 2022 of £3.7
million to H1 2023 of £5.2 million.
Our Investment Asset portfolio continued its track record of performance
throughout the first half of the year and delivered Net Investment Asset
Return of 9.1 per cent. The increase was driven by increasing interest rates
on our predominantly floating rate portfolio.
We continue to be mindful of the disconnect between the share price and the
fundamental value of the Group. We continue to discuss this matter with the
Board, advisers and shareholders. However, we are focused on our strategy of
delivering substantial growth in the business to drive further investor
interest in Pollen Street shares.
Committed to driving progress and transparency in ESG
At Pollen Street we are passionate about the work that we do and the potential
for positive impact through that work for investors, people, portfolio
companies and wider society.
Sustainability and long-term thinking are key elements to our investment
strategy. Earlier this year, we released our ESG report for 2022, reflecting
on the progress we have made towards our targets and sharing more detail of
how we work with portfolio companies to:
· reach carbon neutrality;
· set diversity and inclusion targets; and
· promote the strongest possible governance standards.
Read more in our 2022 ESG Report, which is available on our website
https://www.pollenstreetgroup.com/ (https://www.pollenstreetgroup.com/)
Good momentum for the remainder of 2023
With the foundations of a successful first half of the year, we have delivered
in line with market expectations and continue to drive long-term organic
growth. Our key priorities for the second half of 2023 are:
· continue to raise Private Equity V building on the first close of
Private Equity V and the Continuation Vehicle;
· continue to build AuM steadily in Credit;
· maintain our track record of deployment and performance across
our strategies;
· build cross product relationships with strategic investors;
· continue our track record of delivery in the Investment Company;
and
· deliver operational leverage through our platform as we continue
to grow AuM.
I want to thank our fund investors and shareholders for their support; our
team for all their hard work to achieve this strong start to the year; and the
Board for its guidance. As I look forward to the rest of 2023, I am confident
in our potential for continued growth and consistent delivery for our
investors and shareholders.
Lindsey McMurray
Chief Executive Officer
15 September 2023
CFO Report
Julian Dale - Chief Financial Officer
I am pleased to present Pollen Street's Interim Report for the first half of
2023. It has been a successful period with strong fund raising performance,
stability in our financial performance and progress towards our targets for
the year.
There has been a lot of activity over 2023, with the final close of Private
Credit III bringing total investor commitments in this fund to £0.4 billion
as at 30 June 2023. Increasingly, investors have elected to invest with Pollen
Street in separately managed accounts ("SMAs") rather than through the
comingled fund. Total investor commitments across Private Credit III and the
credit SMAs was £1.1 billion as at 30 June 2023.
We have also completed the first close of Private Equity V in early July.
The fee rates on this fund are in line with our historic rates and we have
good visibility over additional closes. First close sets the date from which
the Group charges fees for all investors, including in subsequent closes and
so this gives us a good line of sight to future revenue growth.
Finally, we have also launched a new continuation fund in early September to
raise £0.8 billion to acquire two high-performing companies from our existing
funds to enable us to continue to support and grow them. It will generate
approximately £5 million of revenue for the Group following completion, which
is expected towards the end of the year.
Private Equity V together with the continuation fund, brings proforma AuM to
£4.2 billion. We are pleased with the strong support from new and existing
investors at this stage of our fundraise. We expect to build investor
commitments over the coming months and remain confident in delivering total
commitments in line with the target size for Private Equity V.
Income on Net Investment Assets within the Investment Company was £15.4
million (H1 2022: £13.7 million). This increase in income reflects the impact
of increased interest rates together with resilient credit performance. The
Tangible NAV per share as at 30 June 2023 was 542p (31 December 2022: 540p),
reflecting the stability of the investment portfolio.
The operating profit for the Group was £19.4 million for H1 2023 (H1 2022:
£13.7 million). This represents a material increase in operating profit. The
main drivers of this were the operating profit from the Asset Manager segment
of £5.8 million (H1 2022: nil) and growth in the operating profit of the
Investment Company reflecting the impact of increasing interest rates together
with resilient credit performance.
The statutory results for the six months ended 30 June 2023 are referred to as
"H1 2023"; the six months ended 30 June 2022, "H1 2022" and the 12 months
ended 31 December 2022, "FY 2022". In addition to the statutory results, we
also present proforma results for the Group for H1 2022 that incorporate the
earnings from the Asset Manager as if the Combination had completed prior to
the start of the period, referred to as "Proforma H1 2022". This basis
explains the performance of the combined entity more fully because it includes
a full history of Pollen Street Capital Holdings Limited and its subsidiaries.
Asset Manager growth
Assets under management are tracked on a total AuM and fee-paying basis. Total
AuM broadly tracks the commitments that investors have made into funds managed
by the Asset Manager, whereas the Average Fee-Paying AuM tracks the basis on
which the Group earns management fees, with the average calculated from the
opening and closing positions. For Private Equity, the Fee-Paying AuM is the
committed capital in the funds, moving to invested capital at the point when
the subsequent fund holds its first close. Co-investment vehicles are
typically non fee paying. Fee-Paying AuM for Private Credit is the net
invested amount.
The momentum in deployment under the Credit strategy continued in the first
half of 2023, with Average Fee-Paying AUM for the Credit strategy reaching
£1.4 billion for H1 2023 (H1 2022: £1.0 billion). This represents a growth
rate of 40 per cent. Private Equity constituted £1.1 billion of the Asset
Manager's Average Fee- Paying AuM over H1 2022 (Proforma H1 2022: £1.1
billion) reflecting the stability of the fee basis for this strategy. Private
Equity Average Fee-Paying AuM has stepped up with the closing of Private
Equity V.
Average Fee-Paying AuM H1 2023 Proforma H1 2022
(£ billion) (£ billion)
Private Equity 1.1 1.1
Credit 1.4 1.0
Total AuM 2.5 2.1
Total AuM was £3.4 billion as at 30 June, increasing to £4.2 billion on a
proforma basis (31 December 2022: £3.4 billion) with a further step-up in AuM
expected in the second half of 2023 as fund raising for Private Equity V
continues.
The Asset Manager segment delivered £5.8 million of Operating Profit over H1
2023. The statutory Operating Profit for the Asset Manager for H1 2022 was
nil given that the Combination completed on 30 September 2022. Statutory
comparable financial metrics for the Asset Manager are not listed in the
remainder of this report given they are nil or not applicable. The Operating
Profit for the Asset Manager on a proforma basis for H1 2022 was £4.2
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 2 , which was a £0.6 million charge for H1 2023 (Proforma H1
2022: £0.5 million). Fund Management EBITDA has grown by 41 per cent from
£3.7 million for Proforma H1 2022 to £5.2 million for H1 2023.
The EBITDA growth is driven by Total Income growing at 23 per cent to £21.7
million for H1 2023 (Proforma H1 2022: £17.6 million). Fund Management Income
comprises management fees, performance fees and income from carried interest.
Revenue growth has been driven by increases in the Group's Average Fee-Paying
AuM and income from carried interest.
Fund Management Administration Costs were £15.9 million for H1 2023 (Proforma
H1 2022: £13.4 million). This represents an increase of 19 per cent, driven
predominantly by incremental headcount growth. This moderate increase reflects
a well-invested cost base, leading to a high drop through from incremental
revenue to profitability. We have continued to invest in headcount in the
Investor Relations team to support capital raising across the Group and to
internalise some capital raising costs. This will increase the capacity and
improve the efficiency of capital raising in the longer-term with some modest
overlap in costs in the shorter-term. We are also investing in dedicated
talent in adjacent strategies to support growth in the business.
Asset Manager Profitability H1 2023 Proforma H1 2022
(£ million) (£ million)
Total Income 21.7 17.6
Administration Costs (15.9) (13.4)
Operating Profit 5.8 4.2
Depreciation of lease asset (0.6) (0.5)
Fund Management EBITDA 5.2 3.7
The Management Fee Rate for H1 2023 was 1.30 per cent. This is consistent with
the performance over H1 2022 on a Proforma Basis (1.27 per cent). It is also
within the range of our medium-term guidance of 1.25 per cent to 1.5 per cent.
Performance fees and carried interest for H1 2023 were 25 per cent of Fund
Management Income for the period. This is at the upper end of the long-term
guidance range of 15 per cent to 25 per cent and reflects stable performance
fee and carry valuation growth despite turbulent markets.
The Fund Management EBITDA Margin was 24 per cent for H1 2023 (Proforma H1
2022: 21 per cent). We expect EBITDA margin to increase as the Group increases
its revenue by raising additional funds such as Private Equity V. We have
guided to a Fund Management EBITDA Margin above 50 per cent in the long-term.
Asset Manager Financial Ratios H1 2023 Proforma H1 2022
Management Fee Rate 1.30% 1.27%
(% of Average Fee-Paying AuM)
Performance Fee Rate 25% 23%
(% of Fund Management Income)
Fund Management EBITDA Margin 24% 21%
(%of Fund Management Income)
Investment Company resilience
The Group's £561 million investment portfolio is well diversified across
deals and borrowers and is 97 per cent invested in Credit Assets originated
under our Credit strategy. Our Investment Asset portfolio maintained its track
record of performance throughout the year and delivered Net Investment Asset
Return of 9.1 per cent per annum. This return is up from 7.8 per cent per
annum in H1 2022 and the highest return delivered by the Investment Company in
recent history. The step-up was driven by higher returns on new investments as
capital is recycled from investments made and hedged in a different rate
environment. The Group has maintained its high level of deployment with a net
debt-to-tangible-equity ratio of 63 per cent as at 30 June 2023 (31 December
2022: 69 per cent), which is within the target range of 50 per cent to 75 per
cent.
The Investment Company performance is consistent with the historic track
record and our guidance previously issued. We believe that our Investment
Asset portfolio strategy, combining bespoke structuring and built to withstand
highly stressed scenarios with backing by diverse pools of financial and hard
assets, enables us to deliver consistent performance despite the more
challenging macroeconomic backdrop.
Annualised Net Investment Asset Returns since 2018
()
Note: The chart above shows annualised return, presented on a semi-annual
basis of the Net Investment Asset Returns for H1 2022 and subsequent periods
and the NAV Return prior to this.
The income on Net Investment Assets was £15.4 million (H1 2022: £13.7
million). This increase in income reflects the impact of increased interest
rates together with resilient credit performance.
Investment Company Segment H1 2023 H1 2022
Investment Assets £561 million £583 million
Average Net Investment Assets £343 million £359 million
Income on Net Investment Assets £15.4 million £13.7 million
Return on Net Investment Assets 9.1% 7.8%
This robust performance was driven by strong credit asset return of 11.2 per
cent annualised (H1 2022: 9.0 per cent). The credit impairment charge for the
period was minimal, a release of £0.3 million (H1 2022: £0.1 million). The
low impairment charge, despite the macroeconomic headwinds, reflects Pollen
Street's underwriting approach where the deals are stress tested to withstand
a materially more adverse macroeconomic environment than has occurred over
2022.
The Tangible NAV per share as at 30 June 2023 was 542p (31 December 2022:
540p), reflecting the stability of the investment portfolio.
Profit after tax
The profit before tax for the Group was £18.4 million for H1 2023 (H1 2022:
£13.7 million). This represents a material increase in profits. The main
drivers of increase were the operating profit from Asset Manager segment of
£5.8 million (H1 2022: nil; Proforma H1 2022: £4.2 million) and growth in
the operating profit of the Investment Company reflecting the impact of
increasing interest rates.
The operating loss of the Central segment was £1.8 million. This relates to
start-up losses of the US asset management business and exceptional costs
incurred in the period. The US business comprises a team of six individuals
building our franchise in that market. The start-up losses are expected to
reduce as the US business increases revenue.
The charge for depreciation and amortisation was £1.0 million. This
principally relates to a charge of £0.6 million per annum associated with the
amortisation of the intangible assets representing the value of customer
relationships in addition to depreciation of the Group's fixed assets.
The Investment Company has not incurred corporation tax, because it is an
investment trust. However, the Group incurs corporation tax in its Asset
Manager business, which is not an investment trust. The effective tax rate for
H1 2023 was 16 per cent of Operating profit of the Asset Manager. This is
slightly favourable compared to the illustrative tax rate described in the
capital markets day presentation.
H1 2023 Statutory H1 2022 Proforma H1 2022
(£ million) (£ million) (£ million)
Operating profit of Asset Manager 5.8 - 3.7
Operating profit of Investment Company 15.4 13.7 13.7
Operating loss of Central segment (1.8) - (0.8)
Operating profit of Group 19.4 13.7 16.6
Depreciation and amortisation (1.0) - (0.2)
Profit before tax 18.4 13.7 16.4
Corporation tax (0.9) - (0.6)
Profit after tax 17.5 13.7 15.8
Leverage
The Group uses leverage in the Investment Company. As at 30 June 2023 the
Group had £236.2 million of leverage and £15.7 million of cash. This is
equivalent to a net debt-to-tangible equity ratio of 63 per cent (31 December
2022: 69 per cent). It is less than the borrowing limit set by the Board of
100 per cent and within the target range of 50 to 75 per cent.
Dividends
Pollen Street declared dividends of £16 million for H1 2023, an increase of
£2 million from H1 2022 (£14 million). This was in line with the dividend
targets previously issued by the Board on 1 March 2022. This reflects a
quarterly dividend 16.0p per share for H1 2023 (H1 2022: 20p per share) and
the dividend is fully covered by the profit after tax of the Group (£17.5
million).
The Board's dividend targets published in March 2022 remain in place.
Dividends for 2023 are targeted at £32 million with the Group aiming to grow
dividends progressively thereafter, with a dividend no lower than £33 million
in 2024. The dividend will be paid quarterly for 2022 and 2023, and
semi-annually from 2024 onwards.
As part of the terms of the Combination, former Pollen Street Capital Holdings
Limited shareholders waived dividends paid to them in 2022 and 2023 with
respect to approximately 50 per cent of the shares issued to them by the
Group. As such, the dividend targets correspond to a dividend per share of 16p
for each quarter for 2023 and at least 25.5p for each half year for 2024.
Outlook
The Group remains in a strong position for growth in 2023 and beyond. Fund
Management Income is expected to step up as Private Equity V is raised and
continued capital deployment under the Credit strategies. The balance sheet
assets have strong downside protection from credit risk and are positioned to
benefit from rising interest rates.
We remain confident in delivering earnings in line with the consensus of
equity analysts forecasts for 2023 and our financial guidance for the medium
term remains in place. The medium-term is defined as two to three years from
completion of the Combination, being 30 September 2022.
Financial Guidance
AuM £4 to £5 billion medium-term Fee-Paying AuM
Management Fee Rates c.1.25%-1.50% Average Fee-Paying AuM over the long term
Performance Fees and Carry c.15%-25% of total Fund Management Income on average over the long term
Fund Management EBITDA Margin Long-term fund management adjusted EBITDA margin in excess of 50%
Net Investment Income c.8% long-term target return on net investment assets
Dividend Targeted at £32 million in respect of 2023 and no lower than £33 million in
2024
Julian Dale
Chief Financial Officer
15 September 2023
Investment Company top ten holdings
Country Deal Type Sector Value of Holding Percentage of Investment Assets
at Year-end (£m)
LTV
1 Beaufort United Kingdom Senior Short Term Property Loans 61.9 64% 11.4%
2 Sancus United Kingdom Senior Short Term Property Loans 60.0 64% 11.1%
3 Creditfix Limited United Kingdom Senior Discounted Fee Receivables 48.1 46% 8.9%
4 Pollen Street Credit III LP Investment LP Investment Diversified Credit 42.9 n/a 7.9%
3 UK Agricultural Loans Limited United Kingdom Senior Short Term Property Loans 37.0 52% 6.8%
6 IWOCA Loans Limited United Kingdom Senior SME 31.7 89% 5.8%
7 Downing Development Loans United Kingdom Senior Short Term Property Loans 27.4 67% 5.1%
8 Nucleus Limited United Kingdom Senior CBILS SME 21.6 93% 4.0%
9 GE Portfolio United Kingdom Secured Secured Consumer 21.4 59% 3.9%
10 Tier United Kingdom Senior Micro Mobility Fleet Finance 19.0 57% 3.5%
Data as at 30 June 2023
Environmental, Social and Governance ("ESG")
Our approach to ESG
At Pollen Street, we have a proud history of thinking, behaving and investing
responsibly. We believe in the potential for positive impact through the work
that we are passionate about. We are committed to maintaining and enhancing
our focus on actions that generate positive impact for our investors, people,
portfolio and wider society.
In the first half of 2023, Pollen Street continued to make progress, helping
portfolio companies to achieve their sustainability goals. This has been
achieved through the spotlight on data and scoring, cross-portfolio
collaboration, and effective monitoring and measurement through KPIs and ESG
ratchets.
Highlights in the first half of the year include:
· Continued focus on ESG measurement: This was the second year of using
ESG scores in our proprietary data model. This allows us to both rank and
score our investments across our Credit and Private Equity portfolios as well
as tracking progress against the previous year. All Private Equity companies
improved their scores compared to the prior year, and we use the scoring to
roll out ESG ratchets with borrowers in Credit.
· Strengthening approaches to climate risk and working towards Net
Zero: We maintained carbon neutral status for 2022 emissions. As part of our
collaboration with the Initiative Climat International, we are further
challenging ourselves and supporting the drive to create a common
understanding of what net zero really means, using a decarbonisation roadmap
to show the portfolio's progress against targets. We are also strengthening
approaches to understand and mitigate climate risks as per the Task Force on
Climate-Related Financial Disclosures ("TCFD") framework, including scenario
analysis.
· Advancing Diversity, Equity and Inclusion ("DEI") as an industry role
model: Findings from our annual DEI survey show continued improvement in
representation across gender, ethnic minorities and socio-economic background.
The survey revealed an increase of state educated team members from 64 per
cent to 66 per cent. In contrast, for Private Equity as an industry, 70 per
cent of employees are private school educated (source: Sutton Trust). The
percentage of team members from ethnic minorities also increased from 17 per
cent to 23 per cent.
Pollen Street's latest ESG report was published in June
The latest Pollen Street ESG report provides results of our portfolio ESG
scoring and deep dives on our Environmental, Social and Governance pillars,
with highlights of progress against targets. It also includes examples of ESG
impact across the Private Equity and Credit strategies.
The report also includes spotlights on key themes: caring as a core value,
building better places to work and creating more sustainable businesses.
Our ESG Strategy
Our ESG strategy is designed to deliver impact for the benefit of all our
stakeholders. We have a clear ambition with initiatives across each of the
Environment, Social and Governance areas. Below we set out our key objectives,
highlights and focus areas under the Environmental, Social and Governance
pillars.
ENVIRONMENT
SOCIAL
GOVERNANCE
AMBITION
Create a lasting environmental impact Promote DEI and provide finance for socially-impactful products & Regulatory best practice through all operational processes
propositions
Financial Inclusion -
Fund green alternatives for sustainable homes and transport loans and other financial products made available to a broader audience ESG transparency with clear reporting and communications
Enable SMEs to promote growth and job creation in Pollen Street's markets Effective AML & cyber procedures and governance
Creating opportunities to reduce inequalities - promoting diversity, equity Engagement with portfolio companies on governance, to identify gaps and
and inclusion provide support
Responsible lending - best practice amongst our credit partners
Minimise operational carbon footprint, supporting carbon reduction plans and
net zero commitments
Consider climate risk as part of investment and risk management process
RECENT
HIGHLIGHTS Third year of carbon measurement 13 new credit facilities to broaden social impact ESG margin ratchet for seven new credit facilities
Developed decarbonisation roadmap for Pollen Street Strengthened community & charity efforts with Future First and The Felix ESG scores improved in all PE companies
Project
Maintained carbon neutral status for 2022 emissions
DEI initiatives across firm and portfolio - Second year of 10,000 Black Delivered initial TCFD reporting
Interns
SHORT-TERM FOCUS
Strengthen carbon measurement activities for carbon footprint, including Scope Broaden DEI targets and measures Continue to enhance oversight and regulatory governance frameworks
3 emissions
Formalise net zero commitments for firm and portfolio
Collaborate with community partners to deliver impactful change Training and education across the firm and portfolio
Strengthen supply chain sustainability procedures
Continue to invest in sustainable finance propositions
PRINCIPAL SDG ALIGNMENT
RECOGNITION
Driving sustainability outcomes:
Commitment to positive ESG outcomes is manifested through direct and
measurable goals. Effective as of 2021, Pollen Street has set a number of
targets at both Group and portfolio level. These include:
· Pollen Street maintaining a carbon neutral status for each year
and working with our portfolio companies to be net zero within five years of
investment (for new investments after 2021);
· Pollen Street is committed to promoting strong governance
throughout the portfolio including the universal inclusion of ESG matters on
all portfolio company board agendas.
To strengthen commitments to ESG and sustainability, we have incorporated
sustainability linked factors, including an ESG margin ratchet mechanism into
our new credit facilities as an incentive to achieve ESG goals. Under this
mechanism, Pollen Street provides margin reductions on facilities, subject to
the counterparty improving their ESG score and achieving performance targets,
such as achieving net zero status, and there is a corresponding margin
increase if their scores do not improve or meet agreed thresholds.
Looking ahead
As set out in the ESG report, we continue to strengthen best-practice and
collaboration across our ESG framework, with a focus on improving the
sustainability performance of our investments, mitigating risks and creating
value for our investors and stakeholders. Focus areas include improvements to
the reporting and scoring mechanism, Governance structures and strengthening
approaches to assess and monitor supply chain sustainability as well as
ongoing stewardship activities across the Private Equity and Credit
portfolios.
Alison Collins
Head of ESG
15 September 2023
Risk Management & Principal Risks and Uncertainties
The Directors do not consider there to have been any material changes to the
principal risks and uncertainties since the 2022 Annual Report and Accounts
were published and the Directors expect the principal risks and uncertainties
not to change over the second half of 2023.
Details of the Group's approach to risk management is set out within pages 55
to 62 of the 2022 Annual Report and Accounts, which is available in the
financial information section of the Group's website.
The principal risks within the 2022 Annual Report and Accounts include:
economic & market conditions, fund raising, management fee rates and other
fund terms, recognition of performance fees and carried interest, on balance
sheet investment underperformance, ESG and sustainability performance, talent
and retention, information security and resilience and reputational risk.
Statement of Directors' Responsibilities in Respect of the Financial
Statements
The Directors, being the persons responsible, confirm that to the best of
their knowledge:
a) the condensed set of Financial Statements contained within the
Interim Report have been prepared in accordance with UK-adopted IAS 34
'Interim Financial Reporting', as required by the Disclosure and Transparency
Rule 4.2.4R, and gives a true and fair view of the assets, liabilities and
financial position of the Group;
b) the Interim Report includes a fair review, as required by
Disclosure and Transparency Rule 4.2.7R, of important events that have
occurred during the first six months of the financial year, their impact on
the condensed set of unaudited Financial Statements, and a description of the
principal risks and perceived uncertainties for the remaining six months of
the financial year; and
c) the Interim Report includes a fair review of the information
concerning related parties' transactions as required by Disclosure and
Transparency Rule 4.2.8R.
Signed on behalf of the Board by:
Robert Sharpe
Chairman
15 September 2023
2. Unaudited Financial Statements
Unaudited Consolidated Statement of Comprehensive Income
For the period from 1 January 2023 to 30 June 2023 For the period from 1 January 2022 to 30 June 2022
Notes Revenue £'000 Capital Total Revenue £'000 Capital Total
£'000
£'000
£'000
£'000
Management fee income 4 13,188 - 13,188 - - -
Carried interest and performance fee income 4, 7 3,771 - 3,771 - - -
Interest income on Credit Assets held at amortised cost 9 29,089 - 29,089 25,045 - 25,045
Gains on Investment Assets held at fair value 6 2,630 - 2,630 1,570 - 1,570
Total income 48,678 - 48,678 26,615 - 26,615
Credit impairment release 9 289 - 289 128 - 128
Third-party servicing costs (1,070) - (1,070) (1,134) - (1,134)
Net operating income 47,897 - 47,897 25,609 - 25,609
Administration costs 4 (18,309) - (18,309) (5,417) (78) (5,495)
Finance costs 4 (10,152) - (10,152) (6,369) - (6,369)
Operating profit 19,436 - 19,436 13,823 (78) 13,745
Depreciation (680) - (680) - - -
Amortisation 3 (320) - (320) - - -
Profit before tax 18,436 - 18,436 13,823 (78) 13,745
Tax (977) - (977) - - -
Profit after tax 17,459 - 17,459 13,823 (78) 13,745
Other comprehensive income
Foreign currency translation reserve (360) - (360) - - -
Total comprehensive income 17,099 - 17,099 13,823 (78) 13,745
Earnings per share 10 27.2 - 27.2p 39.3p (0.2)p 39.1p
(basic and diluted)
The total column of this statement represents the statement of comprehensive
income prepared in accordance UK-adopted International Accounting Standards
and with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards. The supplementary revenue return and capital
return columns are both prepared under guidance issued by the Association of
Investment Companies ("AIC"). All items in the above statement derive from
continuing operations.
No operations were discontinued during the period.
The notes form an integral part of the financial statements.
Unaudited Consolidated Statement of Financial Position
Notes 30 June 2023 31 December 2022
£'000 £'000
Non-current assets
Credit Assets at amortised cost 9 481,002 523,877
Investment Assets held at fair value through profit or loss 6 79,807 64,506
Fixed assets 1,388 1,414
Goodwill and intangible assets 3 230,711 231,031
Lease assets 4,231 4,776
Carried interest 7 10,830 7,052
Deferred tax asset 537 -
Total non-current assets 808,506 832,656
Current assets
Cash and cash equivalents 16,704 23,303
Receivables 11 11,051 12,870
Derivative assets held at fair value through profit or loss 14 817 -
Total current assets 28,572 36,173
Total assets 837,078 868,829
Current liabilities
Payables 12 14,765 19,221
Lease payables 1,510 1,201
Current tax payable 2,547 2,158
Derivative liabilities held at fair value through profit or loss 14 - 916
Interest-bearing borrowings 8 42,912 60,598
Total current liabilities 61,734 84,094
Total assets less current liabilities 775,344 784,735
Non-current liabilities
Lease payables 3,241 4,067
Deferred tax liability - 94
Interest-bearing borrowings 8 193,297 203,035
Total non-current liabilities 196,538 207,196
Net assets 578,806 577,539
Shareholders' funds
Ordinary share capital 15 689 689
Share premium 299,599 299,599
Revenue reserves 3,990 2,363
Capital reserves (2,361) (2,361)
Other reserves 276,889 277,249
Total shareholders' funds 578,806 577,539
Net asset value per share (pence) 17 901.4p 900.2
The notes form an integral part of the financial statements.
Unaudited Consolidated Statement of Changes in Shareholders' Funds
For the period from 1 January 2023 to 30 June 2023
Ordinary Share Revenue Capital Special Merger Reserves Foreign Currency Translation Reserve Total
Share
Premium
Reserves
Reserves
Distributable
£'000
£'000
Equity
Capital
£'000
£'000
£'000
Reserves
£'000
£'000
£'000
Shareholders' funds as at 689 299,599 2,363 (2,361) 51,979 225,270 - 577,539
1 January 2023
Profit after taxation - - 17,459 - - - - 17,459
Foreign currency translation reserve - - - - - - (360) (360)
Dividends paid in the year - - (15,832) - - - - (15,832)
Shareholders' funds as at 689 299,599 3,990 (2,361) 51,979 225,270 (360) 578,806
30 June 2023
For the period from 1 January 2022 to 30 June 2022
Ordinary Share Revenue Capital Special Foreign Currency Translation Reserve Total
Share
Premium
Reserves
Reserves
Distributable
£'000
Equity
Capital
£'000
£'000
£'000
Reserves
£'000
£'000
£'000
Shareholders' funds as at 352 299,599 4,790 (2,244) 56,845 - 359,342
1 January 2022
Ordinary shares bought back (5) - - - (4,818) - (4,823)
Profit after taxation - - 13,823 (78) - - 13,745
Dividends paid in the period - - (14,046) - - - (14,046)
Shareholders' funds as at 347 299,599 4,567 (2,322) 52,027 - 354,218
30 June 2022
The Company's capital reserve arising on investments sold and revenue reserve
may be distributed by way of a dividend. The portion of capital reserve
arising on investments held is wholly non-distributable. There may be factors
that restrict the value of the reserves that can be distributed, and these
factors may be complex to determine. Amounts fully distributable may therefore
not be the total of the revenue reserve and the portion of the capital reserve
arising on investments sold.
The notes form an integral part of the financial statements.
Unaudited Consolidated Statement of Cash Flows
For the period from
Notes 1 January 2023 1 January 2022
to
to
30 June 2023
30 June 2022
£'000
£'000
Cash flows from operating activities:
Profit after taxation 17,459 13,745
Adjustments for:
(Advances) / repayments of Investments at amortised cost 41,400 41,689
Change in expected credit loss 9 (289) (128)
Purchase of Investments at fair value 6 (24,325) (9,587)
Receipt of Investments at fair value 6 10,009 1,033
Net change in unrealised (gains)/losses 6 (1,527) (1,834)
Finance costs 4 10,152 6,369
Foreign exchange revaluation 2,290 955
Corporation tax (242) -
Change in carried interest (3,778) -
Depreciation of fixed assets 153 -
Depreciation of lease assets 545 -
Amortisation of intangible assets 3 320 -
(Increase) / Decrease in receivables 1,820 5,552
(Decrease) / Increase in payables (5,095) (3,700)
Decrease / (Increase) in derivatives (1,733) 587
Net cash inflow from operating activities 47,159 54,681
Cash flows from investing activities:
Cash acquired from Pollen Street Capital Holdings - -
Purchase of fixed assets (117) -
Net cash (outflow) / inflow from investing activities (117) -
Cash flows from financing activities:
Redemption of shares - (4,820)
Transaction costs for issuance of shares - -
Drawdown of interest-bearing borrowings 8 17,000 -
Repayments of interest-bearing borrowings 8 (45,271) (31,372)
Interest paid on financing activities (9,178) (5,543)
Dividends paid in period 13 (15,832) (14,046)
Net cash (outflow) from financing activities (53,281) (55,781)
Net change in cash and cash equivalents (6,239) (1,100)
Cash and cash equivalents at the beginning of the period 23,303 12,948
Foreign exchange gains and losses (360) -
Cash and cash equivalents at the end of the period 16,704 11,848
The notes form an integral part of the financial statements.
Notes to the Financial Statements
1. General Information
Pollen Street plc (the "Company" and together with its subsidiaries the
"Group") is a closed-ended investment company incorporated in England and
Wales on 2 December 2015 with registered number 09899024. The registered
office is 11-12 Hanover Square, London, W1S 1JJ, United Kingdom. The Company
commenced operations on 23 December 2015 and carries on business as an
investment trust within the meaning of chapter 4 of Part 24 of the Corporation
Tax Act 2010.
The Group was formed through an all share combination of the Company with
Pollen Street Capital Holdings Limited (the "Combination"). The Combination
occurred on 30 September 2022 and was effected by the Company acquiring 100
per cent of the share capital of Pollen Street Capital Holdings Limited with
newly issued shares in the Company as the consideration. As such the financial
statements only incorporate Pollen Street Capital Holdings Limited from 30
September 2022, the point at which it became a subsidiary of the Company. The
combined group was previously named Honeycomb Investment Trust plc. It was
renamed Pollen Street plc and together with its subsidiaries is referred to as
the "Group" or "Pollen Street".
2. Principal Accounting Policies
Basis of accounting
The financial statements for the six-month period ended 30 June 2023 have been
prepared on the basis of the policies set out in the 2022 Annual Report and
Accounts and in accordance with UK adopted IAS 34 and the Disclosure Guidance
and Transparency Rules sourcebook of the UK's Financial Conduct Authority.
The results for the six months ended 30 June 2023 constitute non-statutory
accounts within the meaning of Section 435 of the Companies Act 2006 and have
not been audited by the Group's Auditor.
The financial statements need to be read in conjunction with the Annual Report
and Accounts for the year ended 31 December 2022, which were prepared in
accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
The financial statements have been prepared on a going concern basis and under
the historic cost convention modified by the revaluation of financial assets
held at fair value through profit and loss as applicable. The Directors
consider that the Group has adequate financial resources to enable it to
continue operations for a period of no less than 12 months from the reporting
date. Accordingly, the Directors believe that it is appropriate to continue to
adopt the going concern basis in preparing the financial statements.
The principal accounting policies adopted by the Group are consistent with
those set out on pages 134 to 151 of the Annual Report and Accounts for the
year ended 31 December 2022. Where presentational guidance set out in the
Statement of Recommended Practice ("SORP") for investment trusts issued by the
Association of Investment Companies ("AIC") in November 2014 is consistent
with the requirements of IFRS, the Directors have sought to prepare the
financial statements on a basis compliant with the recommendations of the
SORP.
All values are rounded to the nearest thousand pounds unless otherwise
indicated.
Significant Accounting Estimates and Judgements
The preparation of financial statements in accordance with both UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those 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. UK company law and IFRS
require 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 knowledge of the amount, actual results may
differ ultimately from those estimates.
The estimates of most significance to these financial statements, are in
relation to expected credit losses, Equity Asset valuation, impairment
assessment for goodwill and carried interest. These have been applied
consistently with the methodology detailed in the Annual Report and Accounts
on pages 152 to 156.
The judgements of most significance to the financial statements are in
relation to the consolidation of Group companies, consolidation of fund
investments, and accounting for carried interest partnerships. These have been
applied consistently with the methodology detailed in the annual report on
pages 156 to 157.
Estimates and judgements 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.
3. Goodwill and intangible assets
The table below shows the goodwill and intangible assets held by the Group:
Group Goodwill Intangibles Total
£'000 £'000 £'000
Cost
Balance as at 1 January 2023 227,191 4,000 231,191
Balance as at 30 June 2023 227,191 4,000 231,191
Amortisation
Balance as at 1 January 2023 - (160) (160)
Amortisation - (320) (320)
Balance as at 30 June 2023 - (480) (480)
Net book value as at 30 June 2023 227,191 3,520 230,711
Group Goodwill Intangibles Total
£'000 £'000 £'000
Cost
Balance as at 1 January 2022 - - -
Additions 227,191 4,000 231,191
Balance as at 31 December 2022 227,191 4,000 231,191
Amortisation
Balance as at 1 January 2022 - - -
Amortisation - (160) (160)
Balance as at 31 December 2022 - (160) (160)
Net book value as at 31 December 2022 227,191 3,840 231,031
4. Operating segments
The Group has two operating segments: the Asset Manager segment and the
Investment Company segment.
The Asset Manager segment is the activities of the Group that provide
investment management and investment advisory services to a range of funds
under management within Private Equity and Credit strategies. The primary
revenue streams for the Asset Manager segment consist of management fees and
performance fees or 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 equivalent to 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.
For the period ended 30 June 2023
Group Asset Manager Investment Company Central Group
£'000 £'000 £'000 £'000
Management fee income 16,176 - (2,988) 13,188
Carried interest and performance fee income 5,512 - (1,741) 3,771
Interest income on Credit Assets held at amortised cost - 29,089 - 29,089
Gains on Investment Assets held at fair value - 2,630 - 2,630
Total income 21,688 31,719 (4,729) 48,678
Credit impairment release - 289 - 289
Third-party servicing costs - (1,070) - (1,070)
Net operating income 21,688 30,938 (4,729) 47,897
Administration costs (15,795) (5,555) 3,041 (18,309)
Finance costs (127) (10,025) - (10,152)
Operating profit 5,766 15,358 (1,688) 19,436
Depreciation (680) - - (680)
Amortisation - - (320) (320)
Profit before tax 5,086 15,358 (2,008) 18,436
For the period ended 30 June 2022
Group Asset Manager Investment Company Central Group
£'000 £'000 £'000 £'000
Management fee income - - - -
Carried interest and performance fee income - - - -
Interest income on Credit Assets held at amortised cost - 25,045 - 25,045
Gains on Investment Assets held at fair value - 1,570 - 1,570
Total income - 26,615 - 26,615
Credit impairment release - 128 - 128
Third-party servicing costs - (1,134) - (1,134)
Net operating income - 25,609 - 25,609
Administration costs - (5,495) - (5,495)
Finance costs - (6,369) - (6,369)
Operating profit - 13,745 - 13,745
Depreciation - - - -
Amortisation - - - -
Profit before tax - 13,745 - 13,745
5. Employees
The following tables show the average monthly number of employees and the
Directors during the year
For the period ended
Group 30 June 2023 30 June 2022
Average number of staff
Directors 7 4
Professional staff (the average for the respective period) 81 -
Total 88 4
The following table shows the total staff costs for the period. This includes
the Group's five Non-Executive Directors of Pollen Street plc. The total
number of employees and directors as at the reporting date was 88 (30 June
2022: 4).
For the period ended
Group 30 June 2023 30 June 2022
Staff costs £'000 £'000
Wages and salaries 12,314 283
Social security costs 1,874 -
Defined contribution pension cost 86 -
Total 14,274 283
6. 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.
Group Equity Assets Credit Assets Total Equity Assets Credit Assets Total
30 June 2023 30 June 2023 30 June 2023 31 December 2022 31 December 2022 31 December 2022
£'000 £'000 £'000 £'000 £'000 £'000
Fair value as at 1 January 16,449 48,057 64,506 15,659 33,111 48,770
Additions at cost - 24,325 24,325 790 13,008 13,798
Realisations at cost - (10,009) (10,009) - (1,033) (1,033)
Gains - 2,741 2,741 - 3,762 3,762
Realised gains - (1,214) (1,214) - (1,958) (1,958)
Foreign exchange revaluation - (542) (542) - 1,167 1,167
Fair value as at 30 June 16,449 63,358 79,807 16,449 48,057 64,506
Comprising:
Valued using an earnings multiple 1,559 10,866 12,425 1,559 10,457 12,016
Valued using a TNAV multiple 14,890 52,492 67,382 14,890 37,600 52,490
Fair value as at 30 June 16,449 63,358 79,807 16,449 48,057 64,506
7. Carried interest
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:
As at
Group 30 June 2023 31 December 2022
£'000 £'000
Carried interest at fair value 9,791 6,495
Carried interest receivable 1,039 557
Total value as at 31 December 10,830 7,052
8. Interest Bearing Borrowings
The table below sets out a breakdown of the Group's interest-bearing
borrowings.
As at
Group 30 June 2023 31 December 2022
£'000
£'000
Current liabilities
Credit facility 42,548 60,379
Interest and commitment fees payable 468 415
Prepaid interest and commitment fees (104) (196)
Total current liabilities 42,912 60,598
Non-Current liabilities
Credit facility 193,776 204,234
Prepaid interest and commitment fees (479) (1,199)
Total non-current liabilities 193,297 203,035
Total interest-bearing borrowings 236,209 263,633
The table below shows the related debt costs incurred by the Group during the
period:
For the period ended
Group 30 June 2023 30 June 2022
£'000
£'000
Interest and commitment fees payable 9,234 5,581
Other finance charges 791 788
Total finance costs 10,025 6,369
The table below shows the movements in interest-bearing borrowings of the
Group:
For the period ended
Group 30 June 2023 31 December 2022
£'000
£'000
Opening balance 263,633 267,657
Drawdown of interest-bearing borrowings 17,000 76,925
Repayments of interest-bearing borrowing (45,271) (82,291)
Finance costs 10,025 14,517
Interest paid on financing activities (9,178) (13,175)
Closing balance 236,209 263,633
The tables below analyse the Group's financial liabilities into relevant
maturity groupings.
As at 30 June 2023
Group < 1 year 1 - 5 years More than 5 years Total
£'000
£'000
£'000 £'000
Credit facility 42,548 175,725 18,050 236,323
Interest and commitment fees payable 364 (587) 109 (114)
Total exposure 42,912 175,138 18,159 236,209
As at 30 June 2022
Group < 1 year 1 - 5 years More than 5 years Total
£'000
£'000
£'000 £'000
Credit facility 60,327 197,380 7,882 265,589
Interest and commitment fees payable 271 (2,069) (158) (1,956)
Total exposure 60,598 195,311 7,724 263,633
9. Credit assets at Amortised Cost
(a) Credit Assets at amortised cost
The disclosure below presents the gross carrying value of financial
instruments to which the impairment requirements in IFRS 9 are applied and the
associated allowance for Expected Credit Loss ("ECL") provision. Please see
Note 2 for more detail on the allowance for ECL.
As at 30 June 2023
Group Gross Carrying Amount Allowance Net Carrying Amount
for ECL
£'000
£'000 £'000
Credit Assets at amortised cost
Stage 1 446,715 (1,013) 445,702
Stage 2 23,700 (668) 23,032
Stage 3 19,579 (7,311) 12,268
Total Assets 489,994 (8,992) 481,002
As at 30 June 2023
Group Stage 1 Stage 2 Stage 3
£'000
£'000
£'000
Total
£'000
As at 1 January 2023 1,013 678 7,590 9,281
Movement from stage 1 to stage 2 (1) 109 - 108
Movement from stage 1 to stage 3 - - 106 106
Movement from stage 2 to stage 1 1 (133) - (132)
Movement from stage 2 to stage 3 - (76) 170 94
Movement from stage 3 to stage 1 - - (36) (36)
Movement from stage 3 to stage 2 - 100 (142) (42)
Decreases due to repayments (6) (5) (196) (207)
Increases due to origination 87 - - 87
Remeasurements due to modelling (81) (5) (181) (267)
Allowance for ECL as at 30 June 2023 1,013 668 7,311 8,992
For the period ended 31 December 2022
Group Gross Carrying Amount Allowance Net Carrying Amount
for ECL
£'000
£'000 £'000
Credit Assets at amortised cost
Stage 1 512,030 (1,013) 511,017
Stage 2 6,878 (678) 6,200
Stage 3 14,250 (7,590) 6,660
Total Assets 533,158 (9,281) 523,877
For the period ended 31 December 2022
Group Stage 1 Stage 2 Stage 3
£'000
£'000
£'000
Total
£'000
As at 1 January 2022 952 946 8,888 10,786
Movement from stage 1 to stage 2 (2) 197 - 195
Movement from stage 1 to stage 3 (9) - 359 350
Movement from stage 2 to stage 1 1 (242) - (241)
Movement from stage 2 to stage 3 - (171) 314 143
Movement from stage 3 to stage 1 - - (260) (260)
Movement from stage 3 to stage 2 - 87 (190) (103)
Decreases due to repayments (167) (69) (419) (655)
Increases due to origination 20 - - 20
Remeasurements due to modelling 281 (6) 71 346
Loans sold (63) (63) (77) (203)
Loans written off - (1) (1,096) (1,097)
Allowance for ECL as at 31 December 2022 1,013 678 7,590 9,281
(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 Group loans by stage:
For the period ended 30 June 2023 For the year ended 31 December 2022
Group £'000 £'000
As at 1 January 2023 9,281 10,786
Charge for period - Stage 1 26 (108)
Charge for period - Stage 2 (58) (23)
Charge for period - Stage 3 (257) (75)
Release for period - total (289) (206)
Loans sold & write-offs - (1,299)
Allowance for ECL 8,992 9,281
10. Earnings per share
For the period ended
Group 30 June 2023 30 June 2022
Revenue 27.2p 39.3p
Capital - (0.2)p
Earnings per ordinary share 27.2p 39.1p
The calculation for the six month period ended 30 June 2023 is based on a
revenue returns after tax of £17.5 million (six months to 30 June 2022:
£13.8 million) and capital returns after tax of nil (six months to 30 June
2022: (£0.1) million) and total returns after tax of £17.5 million (six
months to 30 June 2022: £13.7 million) and a weighted average number of
ordinary shares of 64,209,597 for the six months to 30 June 2023 (six months
to 30 June 2022: 35,135,634).
11. Receivables
The table below sets out a breakdown of the Group receivables:
As at
Group 30 June 2023 31 December 2022
£'000
£'000
Management fees and performance fees 3,577 1,956
Amounts due from debtors 1,904 1,659
Prepayments and other receivables 5,570 9,255
Closing balance 11,051 12,870
12. Payables
The table below set out a breakdown of the Group payables:
As at
Group 30 June 2023 31 December 2022
£'000
£'000
Staff salaries and bonuses 7,637 12,377
Audit fee accruals 496 863
Deferred income 117 964
Other payables 6,515 5,017
Total payables 14,765 19,221
13. Ordinary dividends
The following table shows the dividends in relation to or paid during 2023 and
2022.
Dividend Payment Date Amount per Share Total
£'000
(pence per share)
Interim dividend for the period to 31 December 2021 25 March 2022 20.00p 7,052
Interim dividend for the period to 31 March 2022 24 June 2022 20.00p 6,990
Interim dividend for the period to 30 June 2022 30 September 2022 20.00p 6,947
Interim dividend for the period to 30 September 2022 23 December 2022 16.00p 7,916
Interim dividend for the period to 31 December 2022 31 March 2023 16.00p 7,916
Interim dividend for the period to 31 March 2023 30 June 2023 16.00p 7,916
Interim dividend for the period to 30 June 2023 29 September 2023 16.00p 7,916
The 30 June 2023 interim dividend of 16.00 pence was approved on 30 August
2023 and will be paid on the 29 September 2023.
The following table show the total dividends in relation to the period and the
total dividends paid in the period.
For the period ended
30 June 2023 30 June 2022
£'000 £'000
Total dividend paid in period 15,832 14,042
Total dividend in relation to period 15,832 13,937
Former shareholders of Pollen Street Capital Holdings Limited, who received
ordinary shares as consideration as part of the Combination, have waived
ordinary dividends paid to them in both 2022 and 2023 on approximately 50 per
cent of such consideration shares, pursuant to the terms of the Combination.
As a result, the interim dividends for the period to 30 September 2022, 31
December 2022, 31 March 2023 and the period to 30 June 2023 were or will be
paid on 49,473,264 ordinary shares. Further information is available in the
prospectus dated 26 September 2022, which is available on the Group's website.
14. Derivatives
The table below presents the notional values of the foreign exchange forward
contracts as at the end of the period for the Group:
As at
Group EUR USD EUR USD
30 June 2023
30 June 2023
31 December 2022
31
December 2022
£'000 £'000 £'000 £'000
Opening notional value as at 1 Jan 46,289 19,724 1,639 8,870
Movement in notional value 8,671 1,702 44,650 10,854
Closing notional value 54,960 21,426 46,289 19,724
The table below presents the mark to market of the foreign exchange forward
contracts as at the end of the period for the Group:
As at
Group EUR USD EUR USD
30 June 2023
30 June 2023
31 December 2022
31 December 2022
£'000 £'000 £'000 £'000
Opening carrying value as at 01 January (839) (77) 113 (221)
Fair value movement 1,003 730 (952) 144
Closing carrying value 164 653 (839) (77)
The fair value for the forward contracts is based off the forward rate curves
for the respective currencies.
15. Ordinary Share Capital
The table below details the issued share capital of the Group.
For the period ended
No. Issued, allotted and fully paid ordinary shares of £0.01 each 30 June 2023 31 December 2022
Opening number of shares 64,209,597 35,259,741
Shares issued during the year - 29,472,663
Number of shares bought back - (522,807)
Closing number of shares 64,209,597 64,209,597
The table below shows the movement in shares during the period:
Shares in issue at 1 January 2023 Shares in issue at
30 June 2023
Ordinary shares 64,209,597 64,209,597
Treasury shares 4,712,985 4,712,985
Shares in issue at 1 January 2022 Shares issued during the year Buyback of Shares in issue at
Ordinary Shares
31 December 2022
Ordinary shares 35,259,741 29,472,663 (522,807) 64,209,597
Treasury shares 4,190,178 - 522,807 4,712,985
16. Other reserves
At a general meeting of the Company held on 14 December 2015, special
resolutions were passed approving the cancellation of the amount standing to
the credit of the Company's share premium account as at 23 December 2015.
Following the approval of the Court and the subsequent registration of the
Court order with the Registrar of Companies on 21 March 2016, the reduction
became effective. Accordingly, £98.1 million, previously held in the share
premium account, was transferred to the special distributable reserve in 2015.
As at 30 June 2023 the special distributable reserve balance was £52.0
million (30 June 2022: £52.0 million, 31 December 2022: £52.0 million).
Merger Reserves include the additional reserves accounted for as part of the
acquisition that occurred during 2023. 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.
17. Net Asset Value per Ordinary Share
The following table shows the net asset value per ordinary share:
For the period ended
Group 30 June 2023 31 December 2022
Net asset value per ordinary share pence 901.4 900.2p
Net assets attributable £'000 578,806 577,539
18. Contingent Liabilities and Capital Commitments
As at 30 June 2023 there were no contingent liabilities or capital commitments
for the Group (30 June 2022: nil). The Group had £22.9 million (31 December
2022: £88.9 million) of undrawn committed structured credit facilities and
undrawn commitments in relation to secured real estate loans of £84.5 million
(31 December 2022: £99.1 million).
19. Related Party Transactions
All related party transactions that took place in the six months ended 30 June
2023 are consistent in nature with the disclosure in Note 28 of the 2022
Annual Report and Accounts.
20. Ultimate Controlling Party
It is the opinion of the Directors that there is no ultimate controlling
party.
21. Subsequent Events
On 30 August 2023 a dividend of 16.0 pence per ordinary share was approved for
payment on 29 September 2023.
1 Operating profit does not include profits arising in Pollen Street Capital
Holdings Limited prior to 30 September 2022, being the date of completion of
the Combination.
EBITDA is calculated as the operating profit of the Group's Investment Company
plus the operating profit of the Group's Asset Manager, according to IFRS
reporting standards excluding exceptional items and start-up losses of the US
business, but including the full cost of the office leases despite these costs
being reported as depreciation of a right-of-use asset and financing costs
under IFRS 16.
2 The accounting cost of the office lease is defined as the depreciation of
the lease asset
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