TIDMPBLT
RNS Number : 6303K
TOC Property Backed Lendng Tst PLC
30 August 2019
TOC PROPERTY BACKED LING TRUST PLC
Half-Yearly Report for the six months to 31 May 2019
CHAIRMAN'S STATEMENT
I am pleased to be writing to you for the first time since I
became Chairman on 30 April 2019 following Stephen Coe's
retirement. Stephen oversaw the progress made throughout the first
27 months of the Company's life, and his wise counsel will be
missed.
NET ASSET VALUE
The net asset value at 31 May 2019 was 93.39 pence per share,
down 1.1% from 94.39 pence at 30 November 2018, giving a net asset
value total return for the six month period of 2.36% when dividends
are taken into account. The portfolio of loans remains focused on
the North East of England and on Scotland, providing a measure of
insulation against the economic vagaries of London and the South
East.
DIVIDS
That said, reduced property transaction volumes and the slowdown
in price increases of which my predecessor spoke in March have
continued, as has the backdrop of political uncertainty. In such
circumstances, a measure of prudence has been adopted, in the form
of a quarter percent reduction in the quarterly dividends from 1.75
pence per share to 1.50 pence per share. As already announced, the
third interim dividend is also expected to be 1.50 pence per share.
The fourth interim dividend, scheduled for December 2019, is
expected to be at least 1.50 pence per share and will be considered
in the light of the circumstances then prevailing.
PORTFOLIO AND GEARING
The portfolio at today's date totals GBP24.9m of value
(equivalent 2018 figure: GBP24.9m) representing 15 projects, of
which the Company has a profit share agreement in seven. While
these arrangements offer sound long-term potential, in terms of
possible capital uplifts in due course, the Board does not account
for any potential profits on such projects until there is
sufficient clarity and visibility as to the projects eventual
outcome visibility and certainty around such profits. No new
unrealised profits have been recognised in the period.
During the period loans of GBP5.6m were repaid. Since the end of
May a further GBP0.5m of loans were repaid, while further
investment of GBP2.6m has been made.
At 31 May 2019, GBP0.7m of the Company's GBP8.5m committed
revolving facility was drawn down. These arrangements expire on 24
October 2019 and negotiations to renew the facility are well
advanced.
The Investment Adviser's report provides further details of the
individual projects.
RELATED PARTIES
Three loans (Pendower Hall, Medburn and Charlton Bonds) to
parties related to the Investment Adviser or its principals
continue to be renewed on a short term basis while the Adviser
arranges alternative financing for them. The sale of property units
in Charlton Bonds remains in progress, with continuing repayments
to the Company, but progress has been slower in relation to
Pendower and Medburn. A further update will be given in due course.
Interest payments are current on all three related party
projects.
CONCLUSION
The Company's pipeline of potential new loans is strong and
indeed growing so as it becomes more widely known and its track
record becomes established this should cause both portfolio
diversity to increase further and allow the very best opportunities
to be taken up.
On a forward-looking basis, the third quarter was extremely
encouraging, with more than GBP6 million of new money agreed at
lending margins that should enhance net asset value returns over
time.
JOHN NEWLANDS, CHAIRMAN
29 AUGUST 2019
INVESTMENT ADVISER'S REVIEW
ABOUT THE ADVISER
Tier One Capital Ltd, as Investment Adviser, provides bespoke
wealth management, investment management and fund management
services to high net worth (HNW) private clients, charities and
institutions.
Tier One Capital Ltd currently has a team of 22 individuals with
offices in London, Lausanne and its head office in Newcastle upon
Tyne.
INVESTMENT ADVISER'S REPORT
REVIEW OF THE 6 MONTHS TO 31 MAY 2019
In its third year of trading the portfolio continued to perform
well, posting a NAV total return of 2.36% and paying its annual
dividend at 1.5p per quarter for the first two quarters of the
year. We continue to be mindful of the ongoing challenges our
borrowers are facing in a climate of rising interest rates, a
weakening housing market and the ever-present shadow of Brexit. Our
hands-on approach and the benefit of staying very close to all of
our portfolio has helped us mitigate this risk to date.
The Company agreed one new facility of GBP300,000 with Glenfarg
Partnership Ltd in April 2019 which has all been drawn down. This
mezzanine loan will assist in the development of 13 retirement
apartments in Perthshire, Scotland. The loan is at a 10% rate, with
security being taken by a second charge over the development,
behind a high street senior lender and a second ranking debenture.
The borrowers have contributed a significant amount of their own
funds and, with an LTV of 34.8%, our facility ensures there is
enough funding to complete the project.
The Company agreed the refinance of The Willows project for a
further three years, with an increase of 0.48% to the interest
rate. The Company also agreed the refinance of Inveniam Home Loans
for a further two years, three months with a higher interest rate
of 10% until additional capital is repaid. There were further
deployments of capital as follows:
Deployments of Capital
Newgate Street GBP650,000
West Auckland GBP628,000
-----------
Springs GBP625,000
-----------
Pendower Hall GBP287,500
-----------
Barley Croft GBP250,000
-----------
The Willows GBP65,000
-----------
Whitefield Farm GBP50,000
-----------
Fernhill GBP30,861
-----------
Marley Hill and GBP25,000
Medburn
-----------
Post half year end, the Company entered into two new facilities
on 16 August 2019. The first was a GBP3.4m facility with Esh
Chilton Moor Ltd, a wholly owned subsidiary of Esh Investments Ltd.
This two year loan at an 8% rate will provide finance to develop 34
three and four bed detached homes in Chilton Moor, County Durham.
The Esh Group are a leading construction group of companies which
operate across the North East of England, Yorkshire and Cumbria.
This facility has the benefit of a profit share via an exit fee of
10%.
The second new facility was a GBP3.05m facility with Bede &
Cuthbert Developments Ltd, the second project we have supported
with this borrowing team. This two year, six month loan at an 8%
rate, will provide finance to develop 30 three and four bed
detached houses in Bill Quay, South Tyneside. This team is expected
to deliver the Marley Hill project and repay all outstanding loans
and interest as well as a level of profit share. We are therefore
pleased to support the second development in a well-established
residential area. This facility also has the benefit of a 25.1%
profit share.
In February 2019 the fourth successful exit of the Company
occurred with the repayment of Bylaugh Hall. The GBP3,379,000 loan,
at 8%, was to support the acquisition and development of a grade
two listed grand hall in Norfolk. The facility pre-dated the
formation of the Company and was brought into the Company on the
date of listing. This represented an IRR of 8.3%.
During the first six months of the year there were a number of
partial redemptions including:
Partial Redemptions
Marley Hill GBP1,731,064
Charlton's Bonds GBP270,680
-------------
Inveniam Home Loans GBP197,395
-------------
Post year end there were further partial redemptions for West
Auckland and Inveniam Home Loans returning GBP400,000 and
GBP138,176 of capital.
As at 30 November 2018, we reported that three of the projects,
Barley Croft, West Auckland and Pendower Hall had not performed in
line with expectations. The decision was made to recognise capital
impairments at that time. While good progress has been made, we are
not amending the impairment at this time and we will revisit this
again when considering the 31 August 2019 NAV.
In October 2018, the Company agreed a committed revolving
facility with Shawbrook Bank. This facility has already allowed the
Company to achieve further growth with GBP0.7m of the facility
being drawn at 31 May 2019 (GBP3m: 30 Nov 2019) and a further
GBP1.55m drawn down post quarter end. The intention is to deploy
this facility over the coming months.
At 31 May 2019, the Company had 15 live facilities, seven of
which are a profit share arrangement for the benefit of the
Company, with the deployment level sitting at GBP24,865,056.
DEPLOYMENT
The portfolio continues to be deployed across residential 62%
(30 Nov 2018: 56%), commercial 26% (30 Nov 2018: 34%), sale and
leaseback 9% (30 Nov 2018: 8%) and cash 3% (30 Nov 2018: 2%).
The current average interest rate being achieved on the combined
loan book is 7.67% (Nov 2018: 8.38%), with the reduction due
largely to the Bedlington project no longer earning interest, and a
short term interest rate reduction on West Auckland to 6% from 8%.
The average loan size has decreased from GBP1.87m at 30 November
2018 to GBP1.66m at 31 May 2019.
PROFIT SHARE PROJECTS
There are currently seven Profit Share projects in the portfolio
(Nov 2018: seven).
Since the listing of the Company we have recognised an uplift in
the equity value of one of the seven facilities (Nov 2018: one),
The rest are recognised as nil, as we consider it prudent either
because projects are at a relatively early stage of their lifecycle
or the projects appear unlikely to result in a profit to the
Company. We shall continue to monitor and review this on an ongoing
basis.
PIPELINE
The Investment Adviser continues to see strong deal flow,
reflective of the lack of finance options available to developers
in the regions. There was GBP26.3m of potential funding
opportunities across 8 projects split as follows:
Regional Allocation
Scotland: 84.52%
North East: 15.48%
Sector Allocation
Commercial: 84.52%
Residential: 15.48%
OUTLOOK
The Investment Adviser continues to see a greater balance of
risk and return by providing loan facilities to high quality and
experienced property development teams in the regions, as opposed
to central London. The current geographical breakdown of the
Company's deployment approach shows approximately 82% (Nov 2018:
74%) of the Company's loans being focused in the North East,
reflecting the Investment Adviser's commitment to providing
facilities based on a relationship led approach. The North East
property market also provides protection against a decline in
London property markets, as traditionally the region does not see
the boom and bust dynamic created by significantly inflated
property prices.
The regional Rightmove house price index for June 2019 shows the
average price for a property in the North East at GBP153,806 which
is an annual increase of 3.2% from last year. Considering the
previous month, however, prices and average time to sell (77 days)
remained flat.
In comparison, the average price for a property in Greater
London now stands at GBP618,880 in June 2019 which is an annual
decrease of 2.0% from the previous year and a decrease of 0.4% from
the previous month. The average time to sell is slightly lower (72
days) compared to May. Dampened demand and Brexit uncertainty made
the number of sales in London fall sharply over the last 5 years.
Indeed, also in May, transaction volumes have continued their
downward trend in London and the South, indicating some hesitancy
to engage the market. Elsewhere, the number of transactions
remained flat, highlighting again a marked north/south divide as
all northern regions are selling better than those in the southern
part of the UK.
National average asking prices
-------------------------------------------------------------------------------
Month Avg. asking Monthly change Annual change Index
price
------------------ ------------ -------------- -------------- -------------
June 2019 GBP309,348 0.3% 0.0% 239.2
------------------ ------------ -------------- -------------- -------------
May 2019 GBP308,290 0.9% 0.1% 238.3
------------------ ------------ -------------- -------------- -------------
National average asking prices by market sector (excluding Inner
London)
-------------------------------------------------------------------------------
Sector June 2019 May 2019 Monthly change Annual change
------------------ ------------ -------------- -------------- -------------
First-time buyers GBP191,364 GBP191,067 0.2% -0.1%
------------------ ------------ -------------- -------------- -------------
Second-steppers GBP277,757 GBP277,229 0.2% 0.9%
------------------ ------------ -------------- -------------- -------------
Top of the ladder GBP553,680 GBP553,243 0.1% -0.5%
------------------ ------------ -------------- -------------- -------------
We believe that the UK housing market should behave in line with
the broader economy. House prices and transaction volumes are
likely to remain close to current levels over the near term since
Brexit uncertainty will remain a drag on market sentiment and
economic activity. However, healthy labour market conditions and
low interest rates should provide underlying support. We believe
that once Brexit is resolved, housing will again become the main
item on the government's agenda, and we feel that the Company is
well placed to take advantage of this.
The Investment Adviser remains confident of being able to
continue to implement the Company's investment policy, and to
deliver the level of consistent quarterly income that many UK
investors demand.
IAN MCELROY,
TIER ONE CAPITAL LTD
29 AUGUST 2019
THE INVESTMENT PORTFOLIO AS AT 31 MAY 2019
Project Sector Region Maturity Rate Profit Security % NAV LTV Loan Loan
Share Value Value
(May (Nov
19) GBP'000s 18) GBP'000s
Date % (May
19)
%
The Willows* Commercial Essex May 2022 7.48 No Senior 16.16 74.02 4,123 4,058
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
West North
Auckland Residential East Mar 2020 6.00 No Senior 13.07 95.61 3,336 2,709
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Sale & North
St Hilds Leaseback East Feb 2020 8.00 25.1% Senior 9.01 99.82 2,300 2,300
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Newgate North
Street Residential East Aug 2020 8.00 25.1% Senior 8.42 127.00 2,150 1,500
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
North
Springs Residential East May 2020 10.00 25.1% Senior 7.84 80.59 2,000 1,375
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
North
Medburn Residential East Jul 2020 8.00 No Senior 7.31 71.91 1,865 1,840
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Pendower North
Hall Commercial East Aug 2019 10.00 No Senior 7.05 89.03 1,800 1,513
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
North
Bedlington Residential East Dec 2019 0.00 25.1% Senior 6.71 87.48 1,712 1,462
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Inveniam
Home North
Loans** Residential East Sep 2021 10.00 No Subordinate 5.40 68.11 1,378 1,575
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Exit
Whitefield North fee
Farm Residential East Jan 2020 10.00 taken Senior 4.11 113.70 1,050 1,000
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
North
Marley Hill Residential East Jan 2020 8.00 25.1% Senior 4.03 60.47 1,029 2,729
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Charlton's Residential/ North
Bonds Commercial East May 2020 8.00 No Senior 2.73 100.00 697 967
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Senior
North &
Fernhill*** Residential East Jul 2019 10.00 No Subordinate 2.25 76.34 575 525
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Gateshead North
Town Hall Commercial East Jun 2023 8.00 Yes Senior 2.16 84.62 550 550
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Glenfarg Residential Scotland Apr 2020 10.00 No Subordinate 1.18 34.68 300 -
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Bylaugh
Hall Commercial Norfolk Nov 2018 8.00 No Subordinate - - - 3,379
----------------- --------- --------- ----- ------ ----------- ------ ------ ------------- -------------
Cash 2.57 657 606
----- ------ ----------- ------ ------ ------------- -------------
Total /
Weighted
Average 8.40 100.00 87.89 25,522 28,088
----- ------ ----------- ------ ------ ------------- -------------
*Client interest rate changed from 7% to 7.48% on 31 May
2019.
**Client interest rate changed from 8% to 10% on 1 May 2019.
***Client interest rate changed from 8% to 10% on 1 May 2019
STATEMENT OFDIRECTORS' RESPONSIBILITIES
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The risks, and the way in which they are managed, are described
in more detail under the heading 'Principal Risks and
Uncertainties' within the Strategic Report in the Company's Annual
Report and Accounts for the year ended 30 November 2018. The
Company's principal risks and uncertainties have not changed
materially since the date of that report and are not expected to
change materially for the remainder of the Company's financial
year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
INTERIM REPORT
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the European Union and gives a true and fair view of the assets,
liabilities, financial position and profit of the Company;
-- the Chairman's Statement and Investment Adviser's Review
(together constituting the Interim Management Report) include a
fair review of the information required by the Disclosure and
Transparency Rules (DTR) 4.2.7R, being an indication of important
events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements;
-- the Statement of Principal Risks and Uncertainties above is a
fair review of the information required by DTR 4.2.7R; and
-- the Chairman's Statement and Investment Adviser's Review
together with the condensed set of financial statements include a
fair review of the information required by DTR 4.2.8R, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Company
during the period, and any changes in the related party
transactions described in the last Annual Report that could do
so.
On Behalf of the Board
JOHN NEWLANDS, CHAIRMAN
29 AUGUST 2019
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Year ended
30 November
2018
Six months Six months
ended 31 ended 31
May 2019 May 2019
(unaudited) (unaudited) (audited)
Notes Revenue Capital Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------ --------- ------------- --------- ------------- -------------
REVENUE
Investment
interest 1,001 - 1,001 923 2,044
Total revenue 1,001 - 1,001 923 2,044
Unrealised
gain on
investments - - - - 104
Total income 1,001 - 1,001 923 2,148
EXPITURE
Impairments - - - - (746)
Other expenses (324) (30) (354) (239) (550)
Total expenditure (324) (30) (354) (239) (1,296)
Profit before
finance
costs and
taxation 677 (30) 647 684 852
NET FINANCE
COSTS
Interest
payable (41) - (41) - (14)
Profit before
taxation 636 (30) 606 684 838
TAXATION - - - - -
Profit and
total comprehensive
profit for
the period/year 636 (30) 606 684 838
Basic earnings
per share 3 2.36p (0.11)p 2.25p 2.74p 3.27p
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
IFRS. The supplementary revenue return and capital return columns
are both prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations. There is no other comprehensive income as
all income is recorded in the statement above.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30
As at 31 May November
2019 2018
As at 31
May 2018
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------ ------------------ --------------
NON-CURRENT ASSETS
Investments held at fair
value 5 - - 104
Loans at amortised cost 6 8,000 8,703 8,238
8,000 8,703 8,342
CURRENT ASSETS
Loans at amortised cost 6 16,865 15,173 19,140
Other receivables and
prepayments 431 382 473
Cash and cash equivalents 657 963 606
17,953 16,518 20,219
TOTAL ASSETS 25,953 25,221 28,561
CURRENT LIABILITIES
Loan facility (675) - (2,944)
Other payables and accrued
expenses (133) (224) (203)
TOTAL LIABILITIES (808) (224) (3,147)
NET ASSETS 25,145 24,997 25,414
SHARE CAPITAL AND RESERVES
Share capital 7 269 256 269
Share premium 9,094 7,924 9,094
Special distributable
reserve 16,455 16,455 16,455
Revenue reserve (210) 470 29
Capital reserve (463) (108) (433)
EQUITY SHAREHOLDERS'
FUNDS 25,145 24,997 25,414
Net asset value per ordinary
share 8 93.39p 97.57p 94.39p
The notes form an integral part of the financial statements.
The financial statements were approved by the Board of Directors
of TOC Property Backed Lending Trust plc (a public limited company
incorporated in England and Wales with company number 10395804) and
authorised for issue on 29 August 2019.
JOHN NEWLANDS
CHAIRMAN
CONDENSED STATEMENT OF CHANGES IN EQUITY
Special
For the six months ending Share Share distributable Capital Revenue
31 May 2019 capital premium reserve reserve reserve Total
(unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- ------------- -------------- -------- -------- ---------
AT BEGINNING OF THE PERIOD
Total comprehensive income
for the period: 269 9,094 16,455 (433) 29 25,414
Profit for the period
TRANSACTIONS WITH OWNERS
RECOGNISED DIRECTLY IN
EQUITY: - - - (30) 636 606
Dividends paid - - - - (875) (875)
--------------------------------- -------- ------------- -------------- -------- -------- ---------
At 31 May 2019 269 9,094 16,455 (463) (210) 25,145
Special
For the year ending distributable Capital Revenue
30 November 2018 Share capital Share premium reserve reserve reserve Total
(audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
AT BEGINNING OF THE
YEAR
Total comprehensive
income for the period: 227 5,152 16,455 (108) 540 22,266
Profit for the year
TRANSACTIONS WITH
OWNERS RECOGNISED
DIRECTLY IN EQUITY: - - - (325) 1,163 838
Ordinary shares issued 42 4,188 - - - 4,230
Share issue costs - (246) - - - (246)
Dividends paid - - - - (1,674) (1,674)
-------------------------- --------------- ------------- -------------- -------- -------- -------
At 30 November 2018 269 9,094 16,455 (433) 29 25,414
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the six months Special
ending 31 May 2018 Share Share distributable Capital Revenue
(unaudited) capital premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------------- -------- -------- -------
AT BEGINNING OF THE
PERIOD
Total comprehensive
income for the period: 227 5,152 16,455 (108) 540 22,266
Profit for the period - - - - 684 684
TRANSACTIONS WITH
OWNERS
RECOGNISED DIRECTLY
IN
EQUITY:
Ordinary shares issued 29 2,896 - - - 2,925
Share issue costs - (124) - - - (124)
Dividends paid - - - - (754) (754)
------------------------- -------- -------- -------------- -------- -------- -------
At 31 May 2018 256 7,924 16,455 (108) 470 24,997
CONDENSED CASH FLOW STATEMENT
Six months Six months Year ending
to 31 May to 31 May 30 November
2019 (unaudited) 2018 (unaudited) 2018 (audited)
Notes GBP'000 GBP'000 GBP'000
--------------------------------- ------ ------------------ ------------------ -----------------
OPERATING ACTIVITIES
Profit after taxation 636 684 838
Impairments - - 746
Unrealised gain on investments - - (104)
Decrease/(increase) in
other receivables 42 (84) (174)
(Decrease)/increase in
other payables (70) 83 72
NET CASH INFLOW FROM
OPERATING ACTIVITIES
BEFORE 608 683 1,378
INTEREST AND AFTER TAXATION
Interest paid 41 14
NET CASH INFLOW FROM
OPERATING ACTIVITIES 649 683 1,392
INVESTING ACTIVITIES
Loans given (3,096) (3,300) (10,260)
Loans repaid 5,713 1,206 3,918
NET CASH INFLOW/(OUTFLOW)
FROM INVESTING ACTIVITIES 2,617 (2,094) (6,342)
FINANCING
Issue of ordinary shares - 2,812 3,984
Equity dividends paid (875) (754) (1,674)
Bank loan drawn down 701 - 2,944
Interest paid (41) - (14)
Repayment of loan (3,000) -
NET CASH (OUTFLOW)/INFLOW
FROM FINANCING (3,215) 2,058 5,240
INCREASE IN CASH AND
CASH
EQUIVALENTS 51 647 290
Cash and cash equivalents
at the start of the period
/ year 606 316 316
CASH AND CASH EQUIVALENTS
AT
THE OF THE PERIOD
/ YEAR 657 963 606
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. INTERIM RESULTS
The condensed financial statements have been prepared in
accordance with International Financial Reporting Standards
('IFRS') and International Accounting Standard 34 'Interim
Financial Reporting' as adopted by the European Union and the
accounting policies set out in the statutory accounts of the
Company for the year ended 30 November 2018. The condensed
financial statements do not include all of the information required
for a complete set of IFRS financial statements and should be read
in conjunction with the financial statements of the Company for the
year ended 30 November 2018, which were prepared under IFRS as
adopted by the European Union. There have been no significant
changes to management judgements and estimates.
The condensed financial statements have been prepared on the
going concern basis. In assessing the going concern basis of
accounting the Directors have had regard to the guidance issued by
the Financial Reporting Council. After making enquiries, and
bearing in mind the nature of the Company's business and assets,
the Directors consider that the Company has adequate resources to
continue in operational existence for the foreseeable future. For
this reason they continue to adopt the going concern basis in
preparing these financial statements.
2. INVESTMENT MANAGER'S AND INVESTMENT ADVISER'S FEES
INVESTMENT MANAGER
The Company has appointed R&H Fund Services (Jersey) Limited
to act as the Company's alternative investment fund manager (AIFM)
for the purposes of AIFMD pursuant to the Investment Management
Agreement and accordingly the AIFM is responsible for providing
discretionary portfolio management and risk management services to
the Company, subject to the overall control and supervision of the
Directors. The AIFM is entitled to receive fees from the Company of
GBP15,000 per annum on total assets up to GBP100 million, or a fee
from the Company of GBP20,000 per annum if total assets are over
GBP100 million. There is a balance of GBP42,288 accrued for the
Investment Manager for the period ended 31 May 2019 (Year to 30
November 2018: GBP18,000).
INVESTMENT ADVISER
The AIFM has appointed Tier One Capital Ltd to act as the
Company's investment adviser pursuant to which the AIFM has
delegated discretionary portfolio management services to the
Investment Adviser, subject to the overall control and supervision
of the Directors.
The Investment Adviser is entitled to receive from the Company
an investment adviser fee which is calculated and paid quarterly in
arrears at an annual rate of 0.25 per cent. per annum of the
prevailing Net Asset Value if less than GBP100m; or 0.50 per cent.
per annum of the prevailing Net Asset Value if GBP100m or more. The
Investment Adviser has agreed (unless otherwise decided by the
Board) to waive its fee until the Net Asset Value is at least GBP50
million.
There are no performance fees payable
3. EARNINGS PER SHARE
The revenue, capital and total return per ordinary share is
based on each of the profit after tax and on 26,924,063 ordinary
shares, being the weighted average number of ordinary shares in
issue throughout the period.
Six months ended 31 Six months ended Year ended 30
May 2019 31 May 2018 November 2018
Pence Pence
GBP'000 Pence per share GBP'000 per share GBP'000 per share
----------- --------- ------------------ -------- ----------- -------- -----------
Revenue
earnings 636 2.36 684 2.74 1,163 4.54
Capital
earnings (30) (0.11) - - (325) (1.27)
Total
earnings 606 2.25 684 2.74 (838) 3.27
----------- --------- ------------------ -------- ----------- -------- -----------
Average number
of shares in
issue 26,924,063 24,997,360 25,593,773
Earnings for the period to 31 May 2019 should not be taken as a
guide to the results for the year to 30 November 2019.
4. DIVIDS
Six months Six months Year ended
ended ended 30 November
31 May 2019 31 May 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ -------------------
In respect of the prior year:
First interim dividend - - 415
Second interim dividend - - 448
Third interim dividend 471 340 340
--------------------------------- ------------ ------------ -------------------
In respect of the current year:
First interim dividend 404 414 471
Total 875 754 1,674
A second interim dividend for the year ending 30 November 2019,
of 1.50 pence per share, was paid on 4 July 2019 to shareholders on
the register on 14 June 2019.
5. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
The Company's investment held at fair value through profit or
loss represents its profit share arrangements whereby the Company
owns 25.1% of the following companies:
Bede and Cuthbert Developments Ltd
Dinosauria Ltd
Gatsby Homes Ltd
Northumberland Ltd
Northumberland (Whitefield Farm) Ltd
Ryka Developments Ltd
Thursby Homes (Springs) Ltd
The valuation of these interim period and prior period assets
requires critical judgement. The projects remain at a very early
stage and no equity value could currently be expected to be
recovered should they not complete. As the projects move closer to
completion, the Board and Investment Adviser will utilise financial
and market data to judge the fair value of the profit shares.
IFRS 13 requires the Company 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 - Unadjusted, fully accessible and current quoted
prices in active markets for identical assets or liabilities.
-- Level 2 - Quoted prices for similar assets or liabilities, or
other directly or indirectly observable inputs which exist for the
duration of the period of investment.
-- Level 3 - External inputs are unobservable. Value is the
Directors' best estimate, based on advice from relevant
knowledgeable experts, use of recognised valuation techniques and
on assumptions as to what inputs other market participants would
apply in pricing the same or similar instrument.
All investments are considered Level 3. There have been no
movements between levels during the period.
6. LOANS AT AMORTISED COST
31 May 31 May 30 November
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------------------- -------- -------- -----------
Opening balance 27,378 21,678 21,678
Unrealised gain on investments 104 104 104
Loans deployed 3,096 3,300 10,260
Principal repayments (5,713) (1,206) (3,918)
Impairments - - (746)
Total loans at amortised cost 24,865 23,876 27,378
Split:
Non-current assets: Loans due for repayment
after one year 8,000 8,703 8,238
Current assets: Loans due for repayment
under one year 16,865 15,173 19,140
The Company's loans are accounted for using the effective
interest method. The carrying value of each loan is determined
after taking into consideration any requirement for impairment
provisions. As at 31 May 2019 the Board agreed, after consideration
of the economic climate, the loan to value ratios and prior credit
loss experience of the borrowers, that there is no requirement for
impairment. No impairment was required in the prior
year/period.
7. SHARE CAPITAL
Nominal value Number of
GBP'000 Ordinary shares
of 1p
------------------------- ------------- -------------------------
At 30 November 2017 227 22,693,559
Issue 7 December 2017 10 958,257
Issue 2 March 2018 5 617,216
Issue 5 April 2018 14 1,350,000
Issue 18 June 2018 13 1,305,031
Issued and fully paid as
at 30 November 2018 269 26,924,063
Issued and fully paid as
at 31 May 2019 269 26,924,063
The ordinary shares are eligible to vote and have the right to
participate in either an interest distribution or participate in a
capital distribution (on a winding up).
8. NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share is based on net assets of
GBP25,144,488 (31 May 2018: GBP24,997,201; 30 November 2018:
GBP25,413,868) and on 26,924,063 ordinary shares (31 May 2018:
25,619,032; 30 November 2018: 26,924,063), being the number of
ordinary shares in issue at the period/year end.
9. RELATED PARTIES
The Directors are considered to be related parties. No Director
has an interest in any transactions which are, or were, unusual in
their nature or significant to the nature of the Company.
The Directors of the Company received GBP62k fees for their
services during the six months to 31 May 2019 (six months to 31 May
2018: GBP64k; to 30 November 2018: GBP129k). GBPnil was payable at
the period and prior year end.
Ian McElroy is Chief Executive of Tier One Capital Ltd and is a
founding shareholder and director of the firm. Stephen Black is a
founding shareholder of Tier One Capital Ltd and resigned as a
director of the firm on 28 September 2018.
Tier One Capital Ltd received no investment adviser's fee during
the period and prior year and GBPnil was payable at the period and
prior year end. Tier One Capital Ltd receive a 20% margin and
arrangement fee for all loans it facilitates.
Stephen Black and Ian McElroy are shareholders owning 50% of
Inveniam Corporate Finance Ltd to which the Company paid GBPnil for
financial modelling to the 31 May 2019, (30 November 2018: GBPnil,
31 May 2018: GBP36k). There are various related party relationships
in place with the borrowers as below:
-- Pendower Hall
Stephen Black and Ian McElroy are former directors of Pendower
Hall Ltd having resigned on 15 June 2018. Pendower Hall Ltd is 100%
owned by Inperpetuity Ltd. Inperpetuity Ltd is 100% owned by
Stephen Black and his spouse Jill Black. The loan amount
outstanding as at 31 May 2019 was GBP2.0m (30 November 2018:
GBP1.713m, 31 May 2018: GBP1.2m). Transactions in relation to loans
made during the period amounted to GBP0.475m (30 November 2018:
GBP0.480m, 31 May 2018: GBPNil). Interest due to be received as at
31 May 2019 was GBP0.033m (30 November 2018: GBP0.027m, 31 May
2018: GBP0.021m). Interest received during the period amounted to
GBP0.139m (30 November 2018: GBP0.139m, 31 May 2018:
GBP0.061m).
-- Rare Earth Medburn
Stephen Black and Ian McElroy are former directors of Rare Earth
Medburn Ltd, having resigned on 15 June 2018. Rare Earth Medburn
Ltd is 100% owned by Stephen Black and his spouse Jill Black,
having previously been owned by Inperpetuity Ltd. The loan amount
outstanding as at 31 May 2019 was GBP1.8m (30 November 2018:
GBP1.8m, 31 May 2018: GBP1.6m). Transactions in relation to loans
made during the period amounted to GBP0.025m (30 November 2018:
GBP0.210m, 31 May 2018: GBPNil). Interest due to be received as at
31 May 2019 was GBP0.025m (30 November 2018: GBP0.025m, 31 May
2018: GBP0.022m). Interest received during the period amounted to
GBP0.63m (30 November 2018: GBP0.141m, 31 May 2018: GBP0.065m).
-- Thursby Homes (Charlton Bonds)
Tier One Capital Ltd sold its full shareholding of 25.1% of
Thursby Homes Ltd on the 20 March 2019. The loan amount outstanding
as at 31 May 2019 was GBP0.697m (30 November 2018: GBP0.967m, 31
May 2018: GBP1.2m). Transactions in relation to loans repaid during
the period amounted to GBP0.271m (30 November 2018: GBP0.975m, 31
May 2018: GBP0.8m). Interest due to be received as at 31 May 2019
was GBP0.009m (30 November 2018: GBP0.013m, 31 May 2018:
GBP0.027m). Interest received during the period amounted to
GBP0.033m (30 November 2018: GBP0.099m, 31 May 2018:
GBP0.071m).
The following related parties arise due to the opportunity taken
to advance the 25.1% profit share contracts
-- Ryka Developments
The Company owns 25.1% of the borrower Ryka Developments Ltd.
Stephen Black is a former director of Ryka Developments Ltd, having
resigned on 21 September 2018. The loan amount outstanding as at 31
May 2019 was GBP2.3m (30 November 2018: GBP2.3m, 31 May 2018:
GBP2.3m). Transactions in relation to loans made during the period
amounted to GBPnil (30 November 2018: GBPnil, 31 May 2018: GBPnil).
Interest due to be received as at 31 May 2019 was GBP31k (30
November 2018: GBP31k, 31 May 2018: GBP31k). Interest received
during the period amounted to GBP92k (30 November 2018: GBP184k, 31
May 2018: GBP92k).
-- Gatsby Homes
The Company owns 25.1% of the borrower Gatsby Homes Ltd. T1C
Nominees Ltd is a former director of Gatsby Homes Ltd, having
resigned on 5 October 2018. T1C Nominees Ltd is owned by Stephen
Black and Ian McElroy who are directors. The loan amount
outstanding as at 31 May 2019 was GBP1.7m (30 November 2018:
GBP1.9m, 31 May 2018 GBP1.2m). Transactions in relation to loans
made during the period amounted to GBP0.2m (30 November 2018:
GBP1.1m, 31 May 2018: GBP0.4m). Interest due to be received as at
31 May 2019 was GBP31k (30 November 2018: GBP31k, 31 May 2018:
GBP19). Interest received during the period amounted to GBPnil (30
November 2018: GBP100k, 31 May 2018: GBP41k).
-- Bede and Cuthbert Developments
The Company owns 25.1% of the borrower Bede and Cuthbert
Developments Ltd. Stephen Black and Ian McElroy are former
directors of Bede and Cuthbert Developments Ltd, having resigned on
24 October 2018. The loan amount outstanding as at 31 May 2019 was
GBP1.0m (30 November 2018: GBP2.6m, 31 May 2018: GBP1.9m).
Transactions in relation to loans (repaid)/made during the period
amounted to GBP(1.7m) (30 November 2018: GBP1.6m, 31 May 2018:
GBP0.9m). Interest due to be received as at 31 May 2019 was GBP21k
(30 November 2018: GBP35k, 31 May 2018: GBP26k). Interest received
during the period amounted to GBP78k (30 November 2018: GBP146k, 31
May 2018: GBP43k).
-- Thursby Homes (Springs)
The Company owns 25.1% of the borrower Thursby Homes (Springs)
Ltd. The loan amount outstanding as at 31 May 2019 was GBP2.0m (30
November 2018: GBP1.4m, 31 May 2018: GBP1.3m). Transactions in
relation to loans made during the period amounted to GBP0.6m (30
November 2018: GBP1.4m, 31 May 2018: GBP1.3m). Interest due to be
received as at 31 May 2019 was GBP33k (30 November 2018: GBP18k, 31
May 2018: GBPnil). Interest received during the period amounted to
GBP63k (30 November 2018: GBP54k, 31 May 2018: GBPnil).
-- Northumberland
TOC Property Backed Lending Trust plc owns 25.1% of the borrower
Northumberland Ltd. The loan amount outstanding as at 31 May 2019
was GBP2.2m (30 November 2018: GBP1.5m, 31 May 2018: GBPnil).
Transactions in relation to loans made during the period amounted
to GBP0.7m (30 November 2018: GBP1.5m, 31 May 2018: GBPnil).
Interest due to be received as at 31 May 2019 was GBP26k (30
November 2018: GBP30k, 31 May 2018: GBPnil). Interest received
during the period amounted to GBP61k (30 November 2018: GBP41k, 31
May 2018: GBPnil).
-- Dinosauria
TOC Property Backed Lending Trust plc owns 25.1% of the borrower
Dinosauria Ltd. The loan amount outstanding as at 31 May 2019 was
GBP0.6m (30 November 2018: GBP0.6m, 31 May 2018: GBPnil).
Transactions in relation to loans made during the period amounted
to GBPnil (30 November 2018: GBP0.6m, 31 May 2018: GBPnil).
Interest due to be received as at 31 May 2019 was GBP7k (30
November 2018: GBP7k, 31 May 2018: GBPnil). Interest received
during the period amounted to GBP22k (30 November 2018: GBP19k, 31
May 2018: GBPnil).
10. OPERATING SEGMENTS
The Board has considered the requirements of IFRS 8 'Operating
Segments'. The Board is of the view that the Company is engaged in
a single unified business, being the investment of the Company's
capital in financial assets comprising loans and joint venture
equity contracts and in one geographical area, the United Kingdom,
and that therefore the Company has no segments. The Board of
Directors, as a whole, has been identified as constituting the
chief operating decision maker of the Company. The key measure of
performance used by the Board to assess the Company's performance
is the total return on the Company's net asset value. As the total
return on the Company's net asset value is calculated based on the
IFRS net asset value per share as shown at the foot of the
Consolidated Statement of Financial Position, the key performance
measure is that prepared under IFRS. Therefore no reconciliation is
required between the measure of profit or loss used by the Board
and that contained in the financial statements.
11. FAIR VALUE MEASUREMENTS
The fair value measurements for assets and liabilities are
categorised into different levels in the fair value hierarchy based
on the inputs to valuation techniques used. These different levels
have been defined as follows:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the
measurement date.
-- Level 2 - inputs, other than quoted prices included within
Level 1, that are observable for the asset or liability, either
directly or indirectly.
-- Level 3 - unobservable inputs for the asset or liability.
Value is the Directors' best estimate, based on advice from
relevant knowledgeable experts, use of recognised valuation
techniques and on assumptions as to what inputs other market
participants would apply in pricing the same or similar instrument.
All investment properties are included in Level 3.
All investments are considered Level 3. There were no movements
of any assets between levels and no transfers into and out of Level
3 during the six months ending 31 May 2019 and the year to 30
November 2018.
12. POST BALANCE SHEET EVENTS
On 6 June 2019, an interim dividend was declared of 1.5p with an
ex-dividend date of 13 June 2019 and a payment date of 4 July
2019.
On 16 August 2019, a new loan of GBP500k was advanced to Esh
Chilton Moor Ltd in relation to a development of 34 three and four
bed houses in Chilton Moor, County Durham. This is part of a two
year GBP3.4m facility.
On 16 August 2019, a new loan of GBP275k was advanced to Bede
& Cuthbert Developments Ltd in relation to a development of 20
three and four bed houses in Bill Quay, Gateshead. This is part of
a two year, six month GBP3.05m facility.
13. INTERIM REPORT STATEMENT
The Company's auditor, BDO LLP, has not audited or reviewed the
Interim Report to 31 May 2019 pursuant to the Auditing Practices
Board guidance on 'Review of Interim Financial Information'. These
are not full statutory accounts in terms of Section 434 of the
Companies Act 2006 and are unaudited. Statutory accounts for the
year ended 30 November 2018, which received an unqualified audit
report and which did not contain a statement under Section 498 of
the Companies Act 2006, have been lodged with the Registrar of
Companies. No full statutory accounts in respect of any period
after 30 November 2018 have been reported on by the Company's
auditor or delivered to the Registrar of Companies.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BIGDIGXDBGCC
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