TIDMFSF
RNS Number : 0175Z
Foresight Sustain. Forestry Co PLC
11 May 2023
11 May 2023
Foresight Sustainable Forestry Company Plc
31 March 2023 Net Asset Value and Company Update
Foresight Sustainable Forestry Company Plc ("The Company",
"FSF"), an investment company that invests in UK forestry and
afforestation assets, announces that as at 31 March 2023 its
unaudited Net Asset Value ("NAV") was GBP186.6 million (30
September 2022: GBP180.6 million), resulting in a NAV per Ordinary
Share of 108.5 pence, up 3.5 pence from 105.0 pence at 30 September
2022.
H1 2023 Performance Highlights
- NAV has increased to GBP186.6 million (30 September 2022: GBP180.6 million).
- NAV per Ordinary Share has increased to 108.5 pence, a NAV per
share return of 3.3% since 30 September 2022.
- The Company has delivered a total NAV per Ordinary Share return of 10.6% since IPO.
- The key drivers of the uplift are the upwards revaluation of
FSF's properties (+5.1p) and carbon credit recognition (+1.1p),
driven by mark-to-market valuation gains on recently acquired
properties and the completion of planting c.955,000 trees at four
afforestation properties.
- FSF acquired 15 properties in the period, leading to a total
portfolio of 65 individual properties at 31 March 2023.
- Of the total portfolio, 53% are established forestry
properties, 43% are afforestation properties and 4% are mixed
properties (by value).
* The majority of the current timber harvesting
programme remains on hold with the Company opting
instead for biological growth of its timber stock
whilst closely monitoring the timber market.
Summary of NAV key drivers from 30 September 2022 to 31 March
2023:
Item p/share movement
NAV at 30 September 2022 105.0
-----------------
Tax and transaction costs on
acquisitions (0.9)
-----------------
Operational expenditure (1.0)
-----------------
Afforestation & restock costs (0.8)
-----------------
Portfolio revaluation gains 5.1
-----------------
Voluntary carbon credit valuation
gains 1.1
-----------------
NAV at 30 September 2022 108.5
-----------------
Portfolio valuation update
Within the portfolio, from 30 September 2022, the property
revaluation delivered an aggregate gross gain of GBP7.1 million,
representing a weighted average (across the three investment
categories) valuation uplift of 4.0%.
-- Afforestation properties delivered gross gains of GBP5.0
million, representing a 7.4% increase in that category, driven by
mark-to-market gains and recognition of the successful completion
of planting at four properties (details of which can be found
below).
-- Standing forestry properties delivered gross gains of GBP1.6
million, representing a 2.1% increase in that category, largely
driven by mark-to-market uplifts on recently acquired properties.
Valuations for established forest properties have remained
comparatively stable during a period of relatively subdued timber
prices.
-- Mixed afforestation and forestry properties delivered gross
gains of GBP0.5 million, representing a 2.0% increase in that
category. Valuations have remained stable, reflecting the market
for forestry properties and the fact that the afforestation
projects included within these mixed properties are yet to complete
planting.
Valuations were conducted by an independent third-party on a
property-by-property basis in accordance with the Royal Institute
of Chartered Surveyors (RICS) Red Book Fair Value methodology.
Despite the widening economic issues over the last six months, the
investment market for forestry assets has remained robust with the
independent valuer confirming that there were enough comparable
transactions during the period to provide sufficient evidence for
the portfolio's valuation.
The breakdown of the portfolio as at 31 March 2023, including
the progress overview of how the portfolio's afforestation campaign
is progressing, is shown in Appendix A.
Operational Update
By the end of March 2023, FSF successfully completed planting at
Auchensoul, Redding Farm, Upper Bar and Frongoch, with c.955,000
trees planted as expected with no material deviations.
Completion of planting on those properties represents a
significant milestone in the Company's development and is the main
driver of the capital appreciation delivered during the period.
In aggregate, the four newly planted properties are forecast to
produce an estimated 190,500 tonnes of sustainable timber for each
c.35-40-year rotation while also sequestering 126,000 tonnes of
additional CO2. All of the properties are undergoing an independent
validation process to confirm the number of voluntary carbon units
that are accredited to each.
During the period to 31 March 2023, FSF sold 6,384 tonnes of
timber. The Company's strategy is to harvest when it is NAV
accretive to do so. In H1 2023, the Company elected to leave
c.117,0000 tonnes of mature timber 'on-the-stump' and continuing to
add biomass, given slightly softer timber prices. FSF will continue
to monitor timber pricing and bring more substantial volumes to
market when trading conditions are more favourable.
Value ascribed to progress towards creation of carbon
credits
Since the completion of planting at four afforestation schemes
in the period, FSF has recognised an additional GBP1.9 million of
value ascribed to the creation of carbon credits. This estimate
takes into consideration the verifier's 20% buffer to ensure that
the number of units offset or traded is conservative versus the
amount of carbon that will be sequestered. The four properties are
estimated to create c.107,500 voluntary carbon credits (net of the
20% buffer) and are part of a wider afforestation programme that is
expected to see the creation of c.1,000,000 voluntary carbon
credits in total from the current portfolio.
The Company now has a total of GBP2.5 million of value ascribed
to carbon credits. The methodology, unit pricing and treatment of
the additional value added at 31 March 2023 has remained consistent
with the audited financial statements as at 30 September 2022.
Pipeline and deployment update
The Company has continued to identify opportunities using its
proprietary direct origination campaign where assets may meet its
afforestation criteria, with the total area under review exceeding
860,000 hectares. As at 31 March 2023, the Company had GBP1.6
million of cash available and a GBP30.0 million of additional
available liquidity in its RCF facility.
FSF's pipeline is listed below and the Company continues to
actively track and transact deals.
Stage of investment Deployment (GBPm) Hectares
Transacting pipeline 2.5 251
------------------ ---------
Near-term pipeline 15.2 1,112
------------------ ---------
Further pipeline 59.7 5,717
------------------ ---------
Total 77.4 7,080
------------------ ---------
Definitions
Transacting Pipeline - Deals in full transaction stages (e.g.
legal documents in progress).
Near-term Pipeline - Opportunities with high likelihood of
conversion (e.g. detailed discussions and/or held under
option).
Further pipeline - Early stage potential opportunities which the
Investment Manager is tracking, screening or in preliminary
discussions on.
Richard Davidson, Chair of Foresight Sustainable Forestry
Company Plc, commented:
"We are pleased to announce yet another NAV uplift as the
Company starts to build momentum in its sustainable investment
mission. Successful afforestation development remains the engine
room of FSF's returns. The completion of our plantation projects at
Auchensoul, Redding Farm, Upper Barr, and Frongoch marks a
significant milestone for us. FSF has now more than doubled the
value of the six completed afforestation schemes in the portfolio
since original acquisition. It has also enabled FSF to generate a
material volume of high-integrity, voluntary carbon credits. We
believe that with the increasing demand for voluntary carbon
credits and 31 further afforestation schemes in development, there
is tremendous potential for the Company, leaving it well-positioned
to deliver further returns for our shareholders."
For further information, please contact:
Foresight Sustainable Forestry Company Plc
Robert Guest
Richard Kelly
fsfc@foresightgroup.eu +44 20 3667 8100
Jefferies International Limited
Tom Yeadon
Will Soutar
Harry Randall +44 20 7029 8000
S EC Newgate
Elisabeth Cowell
fsf@secnewgate.co.uk
About the Company
Foresight Sustainable Forestry Company Plc ("the Company") is an
externally managed investment company investing in a diversified
portfolio of UK forestry and afforestation assets. Targeting a net
total return of more than CPI (5-year average) +5%, the Company
provides investors with the opportunity for real returns and
capital appreciation driven by the prevailing global imbalance
between supply and demand for timber; the inflation-protection
qualities of UK land freeholds; and biological tree growth of 3% to
4% not correlated to financial markets. It also offers outstanding
sustainability and ESG attributes and access to carbon units
related to carbon sequestration from new afforestation planting.
The Company targets value creation as the afforestation projects
successfully achieve development milestones in the process of
converting open ground into established commercial forest and
woodland areas. The Company is seeking to make a direct
contribution in the fight against climate change through forestry
and afforestation carbon sequestration initiatives and to preserve
and proactively enhance natural capital and biodiversity across its
portfolio. It is managed by Foresight Group LLP.
https://fsfc.foresightgroup.eu/
This announcement does not constitute, and may not be construed
as, an offer to sell or an invitation to purchase investments of
any description, or the provision of investment advice by any
party. No information set out in this announcement is intended to
form the basis of any contract of sale, investment decision or any
decision to purchase securities in the Company.
This announcement may include statements that are, or may be
deemed to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "expects", "intends", "may", "will", "targeting" or
"should" or, in each case, their negative or other variations or
comparable terminology. All statements other than statements of
historical facts included in this announcement, including, without
limitation, those regarding the Company's financial position,
strategy, plans, proposed acquisitions and objectives, are
forward-looking statements.
Appendix
A. Portfolio Breakdown
Asset classification Hectares
Development Stage Afforestation Assets
(1) 3,430
---------
Planting Stage Afforestation Assets -
(1)
---------
Establishment Stage Afforestation
Assets (1) 690
---------
Established Forest Assets (1) 5,772
---------
Other Land (2) 1,851
---------
Total 11,743
---------
Definitions
Development Stage Afforestation Assets - Land prior to the
securing of planning permission and grant application.
Planting Stage Afforestation Assets - Planning permission and
grant application completed but initial planting of trees not yet
completed.
Establishment Stage Afforestation Assets - Initial planting of
site completed but trees establishing and stabilising (typically a
3-5 year period).
Established Forests Assets - Trees stabilised and established.
(1) Hectares within woodland creation scheme boundary or managed
forest area boundary.
(2) Hectares not within woodland creation scheme boundary or
managed forest boundary. This Other Land is held as part of the
core Forestry Assets allocation and can accompany both
Afforestation and Established Forest Assets.
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