TIDMPBLT
RNS Number : 4423O
TOC Property Backed Lendng Tst PLC
29 May 2020
To: RNS
From: TOC Property Backed Lending Trust
plc
LEI: 213800EXPWANYN3NEV68
Date: 29 May 2020
Subject: Annual Results
Chairman's Statement
Introduction
I am pleased to report the Company's Report and Financial
Statements for the financial year to 30 November 2019.
I refer below to the unprecedented market and macroeconomic
turmoil that has followed the global COVID-19 outbreak that has
swept the world in the first half of 2020, and to the effects of
the ensuing industrial and domestic "lockdown" which has affected
the Company's portfolio in recent months.
Before turning to such matters, it is worthy of note that since
the financial year end, the TOC Property Backed Lending Trust PLC
has passed the third anniversary of its launch. This occurred on 24
January 2020 and is a significant milestone in the history of any
managed investment fund, not least the first London Stock Exchange
Main Market-Listed investment company to be devised, launched and
managed within yards of the former city walls of Newcastle upon
Tyne.
Objective; Managerial Arrangements
The Company seeks to achieve its investment objective primarily
through a diversified portfolio of fixed rate loans secured over UK
property and land and managed by its Investment Adviser, Tier One
Capital Ltd. Further information can be found in the Investment
Adviser's Report.
Dividend Record Since Inception
Notwithstanding its short life, the Company has generated a
notable record of quarterly dividend distributions to date.
In early 2019, the Board made the decision, in the light of a
slowdown in the property market and wider political uncertainties,
to reduce quarterly distributions that had risen to 1.75 pence per
share by the end of 2018 to 1.5 pence per quarter thereafter.
Despite this move, founding shareholders had received a total of
15 pence per share by the end of the financial year being reported
and a further distribution of 1.5 pence per share, paid in early
January 2020, for the first quarter of the new financial year.
These are valuable investment income returns set against a backdrop
of generally very low savings rates and relatively muted UK
inflation figures.
It is also worthy of note that the Company passed a trading
milestone in the fourth quarter of 2019 with net positive income,
after the deduction of dividend payments, having been generated for
the first time since launch.
There is no escaping the fact, however, that these encouraging
figures have more recently been overshadowed by the increasingly
serious effects of the Coronavirus pandemic, the suspension of
virtually all housebuilding and development work and the decimation
of business cash flows at virtually all levels. Emergency measures
have also been introduced, including the permitted deferment of the
publication of annual reports and accounts by a further two months
from the normal requirement to publish within four months of a
company's financial year end.
With the real estate sector at the heart of the Company's
portfolio at a near standstill, therefore, the dividend outlook
has, at least for the time being, been significantly altered, as
will be described in more detail, below.
Net Asset Value
The Report and Financial Statements for the year ended 30th
November 2019 show the results of a maturing loan portfolio
business. The Company's net asset value ("NAV") per share at the
year-end was 83.8 pence (2018: 94.3 pence). This equates to a net
asset value total return for the financial year of approximately
(5.3)%, taking into account dividends received.
IFRS 9
During the financial year, the Company adopted the principles of
the IFRS 9 accountancy standard in full for the first time, in
which most financial instruments are effectively measured at fair
value, including making provision for future credit losses, even
where it is highly likely that the asset will perform as expected.
Some financial instruments are still measured at amortised
cost.
In adopting the said fair value recognition and measurement
across the portfolio, the Board has adopted a prudent stance in
considering key projects where stresses are evident.
Loan Portfolio
Profit shares. As described in the Investment Adviser's Report,
the Company is pleased to announce three successful profit share
arrangements with regard to the Marley Hill, Springs and Newgate
Street projects, recording gains to the benefit of the investment
trust averaging some GBP46,000 per project. The Marley Hill gain
has been realised following the completion of this project and is
in addition to the GBP104,000 gain announced in the financial
statements for the year ended November 2018. The Springs and
Newgate Street gains are projected from the current trading
position of both projects.
Impairments. Based on valuations performed by external RICS
surveyors, and a thorough assessment of the portfolio, we have
applied impairments to two legacy loans (being loans that were
taken into the trust at its inception) Pendower Hall and West
Auckland.
In the case of Pendower Hall, an initial impairment was made
against the Company's original GBP2m loan of GBP0.2m in November
2018. Subsequently, the potential value of the site either
completed or as a work in progress will be insufficient to repay
the existing amounts lent (partially due to significant delays and
refurbishment costs being substantially higher than original
estimates) and as such the loan was restructured, with a
corresponding impairment recognised.
A restructuring plan was initiated prior to the year end, and
the relevant legal documentation was finalised post year end. This
restructuring plan has been put in place to enable the Company to
take receipt of additional collateral via an equity holding in a
recently formed private start up business. This additional
collateral is over and above the property security.
The Board and Investment Adviser are now working to appraise the
value of this equity and will, informed by the results of this
work, consider the merits of retaining the equity as a non-core
holding or liquidating it, in full or in part, to reduce the
exposure. Until such time as an accurate valuation can be
established, the Board and Investment Adviser believe it
appropriate to impair the loan by a further GBP0.84m to GBP0.96m,
which does not ascribe any value to the equity holding. As such,
the realisation of any return for these shares in due course would
result in profit upside.
The West Auckland loan has previously not performed in line with
expectations and the Board made an impairment of GBP0.14m in
November 2018. Since then, challenges in trading on the first
phases of development have created significant uncertainty
regarding the viability of further stages, and thus of the value of
underlying land associated with those further stages. A full
assessment of this is being conducted, but in the meantime, given
significant trading headwinds, the Board has elected to take a
substantial impairment on this project.
Redemptions. Significant exits during the period were achieved
from the repayment of a mature loan (GBP3.3m), together with a
total of GBP3.6m partial repayments from four projects within the
Company's development and run-off books.
Gearing. The Company continues to benefit from a gearing
facility provided by Shawbrook Bank Limited. In May 2020 we
extended the expiry date of this facility from October 2020 to May
2021. The facility continues to contribute positively to the
Company's weighted average cost of capital.
Related Parties
I am pleased to confirm that since the year end, all Investment
Adviser related parties in the projects have been removed. This is
further evidence of the growing maturity of the Company's loan book
and the achievement of another key milestone outlined at
listing.
Board of Directors
The only change to the Board of Directors during the financial
year was the retirement of Stephen Coe, the outgoing Chairman, on
30 April 2019, with the effect of reducing the size of the Board
from five to four Directors, with a commensurate saving in
annualised costs.
Summary; Outlook
The portfolio at the financial year-end, post-impairments,
totals some GBP25.2 million, spread across 17 different projects.
The proportion of profit shares to which the Company is entitled in
the event of successful investments has increased from seven
projects to nine. It should be noted that the Board takes no
account for any potential capital returns on such projects until
there is strong visibility of a profitable outcome.
While uncertainty was moderated, moving into the New Year, by a
clear-cut UK General Election result in December 2019, followed by
the UK's formalised decision, ratified on 30 January 2020, to
depart the European Union, the economic outlook remains, to put it
mildly, far from certain.
Even before the onset of the global COVID-19 outbreak in late
January 2020, market conditions had become extremely hard to call,
particularly while the UK government remains in the early stages of
protracted negotiations with the European Union.
The consequence of these events, as the crisis and ensuing
lockdown have taken hold, has been a marked reluctance in the
business community (including the developers we support) and
households to make key business or financial transactions.
We note that, along with the share market in general, listed
housebuilders' share prices have fallen sharply in recent weeks.
This implies that the housebuilding sector, including the SME
developers that make up c. 50% of the Company's loan book, will
face serious challenges in 2020.
The Board and Investment Adviser are committed to working with
the developers we support to navigate the impact of this crisis,
both to protect shareholder value and, where it is possible, to
minimise the wider potential impact of the crisis, such as
protecting jobs.
Dividend Prospects
Taking all of the above factors into account and adding in the
cuts in UK base rates totalling 0.6% announced as these accounts
were being prepared, the Board is in the process of reviewing the
prudent level of distributions to be made for the remainder of the
financial year to 30 November 2020.
As part of this process the payment of the 1.5p dividend
scheduled for payment in early April 2020 has been deferred to 1
June 2020. In addition, the level of subsequent dividend payments
has yet to be decided and will be further reviewed over the coming
months.
In the most extreme case, this could involve the dividend
scheduled to be declared in June 2020 being suspended. Such a move
would then require a final adjusting payment for the financial year
to be declared in September 2020, so as to maintain UK investment
trust status, which requires no more than 15% of net income to be
retained as revenue reserves. The Board remains mindful that
dividend income is of critical importance to many investors and the
situation will remain under constant review as the coming months
are played out.
Bricks and Mortar
It would be easy to forget, against what for most investors must
be "once in a lifetime" social and economic conditions, that good
old "bricks and mortar" have been offering comfort to relatively
risk- averse investors for generations. The prospect of an
attractive and broadly predictable flow of dividend income is
another significant and, admittedly with a longer term perspective,
arguably calming plus point.
In the case of the TOC Property Backed Lending Trust PLC, the
first phase of its life is over. The Company continues to
strengthen and evolve, as legacy portfolio holdings are consigned
to the past.
In the background the process of project refreshment has been
under way, with the potential not just to introduce new profit
share arrangements where appropriate but to improve average loan to
value figures and other key metrics.
Annual General Meeting and General Meeting
In order to comply with the Companies Act 2006 requirement to
hold the Annual General Meeting ("AGM") within 6 months of the
Company's financial year end, the AGM is scheduled for 29 May 2020.
The only resolutions being proposed at the AGM are the re-election
of Directors.
As publication of the annual report and accounts for the
financial year ended 30 November 2019 has been delayed owing to the
COVID-19 pandemic a General Meeting ("GM") will be held on 11
August 2020 to receive the annual report and accounts and to seek
approval of the associated resolutions. Full details of the
business to be conducted at the meeting is included in the Notice
of Meeting which can be found in the Annual Report.
In light of the current COVID-19 travel and public gathering
restrictions and social distancing requirements, the GM will be run
as a closed meeting and shareholders will not be able to attend in
person. Shareholders attempting to attend the GM will be refused
entry. However, the Board encourages shareholders to submit their
votes by proxy, rather than attending in person. The Board welcomes
questions from shareholders with regard to the resolutions being
put to the GM or to any other matter relating to the Company. Given
the unique circumstances prevailing this year, it is requested that
any such questions be submitted ahead of the meeting, by email to
info@tieronecapital.co.uk .
John Newlands
Chairman
29 May 2020
Investment Adviser's Review
ABOUT THE ADVISER
Tier One Capital Ltd., is a Newcastle upon Tyne based wealth
management firm, providing wealth management, investment management
and fund management services to personal, charity and corporate
clients.
INVESTMENT ADVISER'S REPORT
REVIEW OF THE 12 MONTHS TO 30 NOVEMBER 2019
In its third year of trading the majority of the portfolio
continued to perform well in difficult trading conditions, posting
a post impairment NAV total return of (5.3%) and maintaining its
annual dividend at 1.5p per quarter for the year. The final quarter
of 2019 also saw the first quarter where profit after tax, before
impairment, was sufficient to service the quarterly dividend which
is a real landmark in the maturity of the loan portfolio. With a
view towards the medium term we continue to increase the number of
profit shares which should benefit the Company in the coming years.
We continue to be mindful of the ongoing challenges our borrowers
are facing in a climate of political uncertainty, a weakening
housing market and the as yet unknown implications of Brexit. The
overall impact of the recent disruption caused by the global
Coronavirus outbreak remains unknown, and we continue to monitor the situation closely.
In recognising the threats driven by those uncertainties, we
have delivered the following structural and behavioural
enhancements in the year:
-- added independence, knowledge and skills to the team. The
Tier One Capital Ltd. Credit Committee now includes Wealth
Management, Corporate Finance, Banking and Legal industry
experience, which allows a range of
views, opinions and challenges to be openly shared. The credit function is working well;
-- recognising professional partnerships are key to ensuring
service resilience, we have refreshed the panel of advisers that
support our property, legal and management due diligence. All new
development facilities
carry an independent quantity surveyor support reporting to the Investment Adviser;
-- continued to improve the underlying quality of the portfolio
by ensuring new lending is to high quality management teams. We are
particularly pleased to be supporting existing borrower, Bede
Homes, alongside Esh Group who are new to the portfolio. Both have
evidenced regular success in the industry over time.
The Company agreed four new facilities during the year:
-- GBP0.3m (GBP0.3m drawn at 30 Nov 2019) to Glenfarg
Partnerships Ltd. A mezzanine only facility with interest paid
quarterly, supporting the senior lender, RBS, in developing 12 high
quality pre-retirement apartments near to Perth, Scotland;
-- GBP3.4m (GBP0.891m drawn at 30 Nov 2019) to Esh Homes Chilton
Moor Ltd, an SPV owned by regional mid corporate construction
group, Esh Group. A development of 34 detached 3 and 4 bed homes in
County Durham, with prices starting from GBP159,000. Strong demand
is seen with 16 of the units reserved off-plan. We are
pleased to be funding this established housebuilder;
-- GBP3.05m (GBP0.5m drawn at 30 Nov 2019) to Bede and Cuthbert
Developments Ltd. A development of 30 detached 3 and 4 bed homes in
Bill Quay, Gateshead, only 4 miles from Newcastle upon Tyne city
centre; and
-- the Company agreed the refinance of The Willows project for a
further three years, with an increase of 0.48% to the interest
rate.
There were further deployments of capital as follows:
Deployments of Capital
Project GBP'000
Springs GBP2,150
---------
Newgate Street GBP1,350
---------
West Auckland GBP728
---------
The Willows GBP390
---------
Pendower Hall GBP287
---------
Whitefield Farm GBP280
---------
Barley Croft, Bedlington GBP250
---------
Marley Hill GBP190
---------
Rare Earth Medburn GBP160
---------
Fernhill GBP73
---------
IHL GBP14
---------
In February 2019 the fourth successful exit within the Company's
loan book occurred with the repayment of Bylaugh Hall. The
GBP3.379m loan, at 8%, was to support the acquisition and
development of a grade two listed building in Norfolk. The facility
predated the formation of the Company and was brought into the
Company on the date of listing. Pleasingly, this represented an IRR of 8.3%.
In December 2019, the fifth successful exit within the loan book
occurred with the repayment of the Marley Hill facility. The
GBP3.605m loan, at 8%, was to support the development of a 20 unit
development near Newcastle upon Tyne. This project has the added
benefit of a successful profit share which has seen us recognise
circa GBP0.142m profit.
In May 2020, the sixth exit within the loan book occurred with
the repayment of the St Hilds project. The GBP2.3m loan, at 8%, was
to support the acquisition of an eight unit, 34 bed student
accommodation in Durham. While not all the capital has been repaid,
the project still generated an IRR of 3.9%.
During the year there were a number of partial redemptions
including:
Partial Redemptions
Project GBP'000
Marley Hill GBP2,520
---------
West Auckland GBP600
---------
IHL GBP414
---------
Charlton's Bonds GBP271
---------
As at 30 November 2018, we reported that three of the projects
had not performed in line with expectations. The decision was made
to recognise capital impairments at that time. The position with
the Barley Croft, Bedlington project has improved, and we are now
in a position to write back GBP0.09m of the impairment previously
taken. With regard to Pendower Hall, the Company has agreed a
restructuring of its loan facility to take receipt of additional
collateral via equity in a private trading business. The Board and
Investment Adviser are now working to appraise the value of this
equity and will, informed by the results of this work, consider the
merits of retaining the equity as a non-core holding or liquidating
it, in full or in part, if possible, to reduce the exposure. Until
such time as an accurate valuation can be established, the Board
and Investment Adviser believe it appropriate to impair the loan by
a further GBP0.842m to GBP0.958m constituting 3.67% of the loan
portfolio. The West Auckland loan has previously not performed in
line with expectations and the Board made an impairment against the
interest of GBP0.139m in November 2018. Since then, due to ongoing
trading difficulties, with sales rates slowing due to challenging
economic conditions, the Board has decided to make a capital
impairment against the GBP2.975m West Auckland loan of GBP1.654m,
being a c.60% impairment to this loan, and representing 6.32% of
the loan portfolio.
In October 2019, the Company refreshed a committed revolving
credit facility with Shawbrook Bank. This facility, agreed in 2018
at GBP8.5m, supported activities within the last financial year. We
took the opportunity to renew at a lower level of GBP6.0m
reflecting our forecast deployment pipeline for the year ahead, and
the maturity profile of the Company's loan book. Post year end, the
decision was made to increase this facility to GBP6.5m and extend
until May 2021 in order to provide a measure of additional
liquidity and flexibility during the Covid 19 driven economic
downturn.
At 30 November 2019, the Company had 17 live facilities, nine of
which are a profit share arrangement for the benefit of the
Company, with the deployment level sitting at GBP25.206m.
DEPLOYMENT
The portfolio continues to be deployed across the following
property sectors: residential 65.9% (30 Nov 2018: 56%), commercial
23.4% (30 Nov 2018: 34%), sale and leaseback 8.6% (30 Nov 2018: 8%)
and cash 2% (30 Nov 2018: 2%).
The current average interest rate being achieved on the combined
loan book is 7.47% (Nov 2018: 8.38%), with the reduction due to the
Barley Croft, Bedlington and West Auckland projects no longer
contributing to the average interest rate being achieved as these
are assessed for impairment. The average loan size has decreased
from GBP1.87m at 30 November 2018 to GBP1.49m at 30 November
2019.
PROFIT SHARE PROJECTS
There are currently nine 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 three of the nine facilities (Nov 2018: 1), The
remaining Profit Share holdings are recognised as nil value, given
where we are in the lifecycle of each project. We monitor and
review this on an ongoing basis.
PIPELINE
We continue to see strong deal flow, reflective of the lack of
finance options available to developers in the regions. In addition
to the new projects the Company funded, we are currently reviewing
GBP19.3m of potential funding opportunities across 8 projects with
84.2% in the North East and the remainder across Scotland.
OUTLOOK
It's crucial that we acknowledge the outbreak of COVID-19 which
has brought much of the world economy to a halt and the impact that
will have on the operations, financial performance and liquidity of
the Company.
We have a robust pipeline of lending opportunities. However,
there will be a reduction in lending through quarter two and
quarter three of 2020 due both to the uncertainties of the duration
and impact of COVID-19, and the practical challenges in executing
lending decisions.
The Company is committed to working with its borrowers to
navigate the effects of this crisis. The ultimate impact of the
crisis is impossible to predict; however, we anticipate that our
borrowers may have a number of challenges. In particular, the time
to sell properties may increase, property values may fall, there
may be supply chain issues, and this may impact on the ability of
lenders to meet their interest payment obligations on a timely
basis, as well as the ultimate ability to repay the loan. Almost
all construction sites were closed from March 2020 and while most
sites have now re-opened on a limited basis, adhering to social
distancing rules, there is no certainty when sites will become
fully operational again.
Given this, it may be difficult for a time to accurately value
properties, and thus to assess our security value. The focus will
remain on protecting shareholder value by working with the
developers to ensure the best result, depending on the individual
circumstances, for each development we support through our
loans.
Residential
Our view, supported by various sources of market commentary, is
that the following trends are likely:
-- UK house prices are likely to decline sharply and may fall by
as much as 10% this year. With relatively lower cost housing within
the Company's portfolio, then, on average, this equates to around
GBP20k-GBP25k per house sale.
-- market fundamentals are very different to the Global
Financial Crisis though and are expected to recover, fuelled
by:
- government intervention to underpin employment and salaries,
which did not exist in the 2008 crash.
- banks are better capitalised and mortgage availability is not
expected to be disrupted in anything other than the lock-down
period.
- the majority of the Company's portfolio is in the North East
of England, a market much less susceptible to extreme movements.
Regional economics are overweight with Public Sector job roles,
meaning this area is well placed for a swift consumer lead recovery
as majority of people are salaried.
-- nationally, Savill's predict that transaction volumes are
expected to fall from 1.2m sales in 2019 to between 566k (47%) and
745k (62%). Therefore, there is a future tension between the rate
that the site will be built-out, quicker to minimise prelim costs,
with a build-phase that matches the sales rate, which will be less
capital intensive but heavier on cost.
-- Savill's predict a "tick" shaped market recovery, with a
return to full capability in 2022. They are confident that their
pre-COVID-19 price growth predictions of 15% over 5 years remain
valid. They have plotted two market impacts but both year-on-year
recovery rate scenarios break-back to the same 15% answer,
below:
Five year house price growth forecast
2020 2021 2022 2023 2024 Cumulative
2019 forecast 1% 4.5% 3% 3% 3% +15.3%
----- ----- ----- ----- ----- -----------
Scenario
one -5% 5% 8% 4% 14% +15.4%
----- ----- ----- ----- ----- -----------
Scenario
two -10% 4% 12% 6.5% 3% +15.0%
----- ----- ----- ----- ----- -----------
Source: Savills
We will continue to monitor the impact on each project with the
following sensitised approach on the key variables:
Variable Sensitivity
Build costs 5% increase in costs as standard unless prices
are fixed, additional costs for remobilisation
------------------------------------------------
Build phase Standard build process to be increased by 10%
------------------------------------------------
Sales prices Reduce by 5% for remainder of 2020 for units
not yet reserved/exchanged
------------------------------------------------
Sales rates Reduce forecasted rate to 60% of pre-COVID-19
level
------------------------------------------------
Commercial
Our exposure to this sector is primarily in the leisure sector.
At the time of writing, venues remain in complete lockdown, with
the likelihood that social gatherings will be one of the last
activities permitted when restrictions are lifted. Cashflows are
disabled, meaning the prospect of clients servicing interest is
completely reliant on having other, non-trading, sources of income.
Alternative uses are few and far between. Encouragingly venue
bookings are proving to be resilient with postponements preferred
to cancellations. Therefore we are expecting a "v" shaped recovery
once restrictions are lifted and operators are permitted to trade
freely. Current government actions suggest an attempt to encourage
a level of normal life to resume while acknowledging that there
will be a level of managed risk in doing so. Our view is that we
will need to work most closely with our projects in this sector,
taking a medium-term view to ensure full capital repayment.
Sale and Leaseback
Our exposure to this sector is in student accommodation.
Typically student lets are booked up between 12 and 18 months in
advance, meaning cashflows for Academic year 20/21 should be
identifiable.
University tuition has been hit hard, with face-to-face time
brought to an end in March 2020. Some re-invention to on-line
teaching has been seen and it will be important to see how that
develops into a more normalised curriculum after relaxation of
lock-down rules.
Evidence coming back from clients so far:
-- the sector is not over-reacting to COVID-19. Most concern
relates to future in-flows of overseas students.
-- there is no evidence of cancelling letting contracts for
2020/21. At this point, rental incomes remain robust.
-- the government remains fully supportive of Student Finance,
meaning landlords are only under mild pressure to provide rental
relief, but are not doing so.
-- consolidators remain active, but transactions tend to be on
hold due to an inability to understand the impact of COVID-19 on
valuations. Any views on valuation tend to be driven by perception
rather than any real valuation evidence.
While this is an unprecedented time, with the priority being to
ensure all of our stakeholders remain safe and well, we remain
confident that our robust relationship led approach with our
borrowers will give the Company the best opportunity to minimise
disruption to daily operations. The Company's strategy of focusing
on a smaller volume of higher valued loans allows us to stay close
to the borrowers, and to remain in constant contact with them
throughout this period. By ensuring that we maintain our regular
communication with our borrowers, and by working together and
building on the existing relationships we have with them, we are
well placed to navigate through the coming months.
THE INVESTMENT PORTFOLIO AS AT 30 NOVEMBER 2019
Project Sector Maturity Profit Security % of LTV* Loan Loan
Date Share Portfolio (Nov 19) Value Value
(Nov 19) (Nov 18)
GBP'000s GBP'000s
The Willows Commercial May 2022 No Senior 17.2% 74.0% 4,448 4,058
June Yes -
Springs Residential 2020 25.1% Senior 13.8% 70.3% 3,567 1,375
Newgate Yes -
Street Residential Aug 2020 25.1% Senior 11.3% 96.0% 2,905 1,500
Yes -
St Hilds Sale & Leaseback Feb 2020 25.1% Senior 8.6% 99.5% 2,237 2,300
Rare Earth
Medburn Residential Nov 2019 No Senior 7.2% 72.1% 1,865 1,840
June Yes -
Bedlington Residential 2020 25.1% Senior 7.0% 109.7% 1,802 1,462
Exit
Whitefield fee
Farm Residential Jan 2020 taken Senior 4.9% 104.9% 1,280 1,000
West
Auckland Residential Mar 2020 No Senior 4.6% 98.6% 1,182 2,709
IHL Residential Sep 2021 No Subordinate 4.5% 71.8% 1,175 1,575
Pendower
Hall Commercial Mar 2023 No Senior 3.7% 100.9% 958 1,513
Exit
Chilton fee
Moor Residential Aug 2021 taken Senior 3.4% 52.7% 891 -
Charlton's
Bonds Residential/Commercial May 2020 No Senior 2.7% 100.0% 697 967
Fernhill Residential Jul 2020 No Subordinate 2.3% 79.3% 598 525
Gateshead Yes -
Town Hall Commercial Mar 2020 25.1% Senior 2.1% 33.4% 550 550
Yes -
Bill Quay Residential Feb 2022 25.1% Senior 1.9% 85.3% 500 -
Yes -
Marley Hill Residential Jan 2020 25.1% Senior 1.7% 31.1% 438 2,729
Glenfarg Residential Oct 2020 No Subordinate 1.2% 23.5% 300 -
Exits Commercial 3,379
General Impairment (187) -
Cash 2.0% 523 606
------------------------------------------------------------------------- ---------- -------------------- ---------
Total/Weighted Average 100.0% 82.3% 25,729 28,088
------------------------------------------------------------------------- ---------- --------- --------- ---------
Ian McElroy,
Tier One Capital Ltd
29th May 2020
Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which
could have a material effect on the Company's performance.
The Board of Directors has overall responsibility for risk
management and internal control within the context of achieving the
Company's objectives. The Board agrees the strategy of the Company
taking into consideration the Company's risk appetite. The Company
also maintains a risk register to monitor the perceived risks and
their mitigation.
The Board has undertaken an assessment of the principal risks
facing the Company and has carried out a review of the
effectiveness of the internal controls as they operated during the
year and up to the approval date of this Annual Report. The Board
continues to keep the Company's system of risk management and
internal controls under review to ensure these principal risks are
appropriately managed. These principal risks are described below
together with an explanation of how they are mitigated.
Investment and strategy risk
The Company's targeted returns are targets only and are based on
estimates and assumptions about a variety of factors including,
without limitation, yield and performance of the Company's
investments, which are inherently subject to significant business,
economic and market uncertainties and contingencies, all of which
are beyond the Company's control and which may adversely affect the
Company's ability to achieve its targeted returns. Accordingly, the
actual rate of return achieved may be materially lower than the
targeted returns, or may result in a partial or total loss, which
could have a material adverse effect on the Company's
profitability, the Net Asset Value and the price of Ordinary
Shares.
Borrowers under the loans in which the Company invests may not
fulfil their payment obligations in full, or at all, and/or may
cause, or fail to rectify, other events of default under the
loans.
The Board is responsible for setting the investment strategy to
achieve the targeted returns and for monitoring the performance of
the Investment Adviser and the implementation of the agreed
strategy.
An inappropriate strategy could lead to poor capital performance
and lower than targeted income yields.
This risk is mitigated through regular reviews and updates with
the Investment Adviser, monitoring of the portfolio sectors against
the investment restrictions on a quarterly basis and tracking of
loan to value ratios of the underlying property projects.
Market risk
The Company's investment strategy relies in part upon local
credit and real estate market conditions. Adverse conditions may
prevent the Company from making investments that it might otherwise
have made leading to a reduction in yield and an increase in the
default rate.
The Company holds 100% of its assets in the United Kingdom. The
Board considers there is a risk of a further downturn in the UK
property market while the EU and the UK negotiate their future
relationship. In addition, an unforeseeable global event has
emerged, with the COVID-19 pandemic resulting in turmoil in the
financial markets. Central banks are now engaged to assist, with
recent interest rate cuts by the Bank of England. During the
forthcoming months it will be important to carefully monitor the
impact of the spread of the virus on the residential property
market.
To mitigate the market risks, the Board receives quarterly
updates from the Investment Adviser containing information on the
local market conditions and trends. This information is reviewed
alongside the sector split of the portfolio to ensure the portfolio
is aligned to meet future challenges.
Financial risk
The Company's activities expose it to a variety of financial
risks that include interest rate risk, liquidity risk and credit
risk. Further details on these risks and the way in which they are
mitigated are disclosed in the notes to the financial
statements.
Operational risk
The Company has no employees and relies upon the services
provided by third parties. It is primarily dependent on the control
systems of the Investment Adviser and Administrator who
respectively maintain the assets and accounting records.
Failure by any service provider to carry out its obligation in
accordance with the terms of their appointment could have a
detrimental effect on the Company.
To mitigate these risks, the Board reviews the overall
performance of the Investment Adviser and all other third party
service providers on a regular basis and has the ability to
terminate agreements if necessary. The business continuity plans of
key third parties are subject to Board scrutiny.
Legal and Regulatory risk
In order to qualify as an investment trust, the Company must
comply with section 1158 of the Corporation Tax Act 2010. The
Company has been approved by HM Revenue & Customs as an
investment trust. The Company is listed on the London Stock
Exchange. Non-compliance with the taxes act or a breach of listing
rules could lead to financial penalties and reputational loss.
These risks are mitigated by the Board review of quarterly
financial information and the compliance with the relevant
rules.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Report and
Financial Statements, in accordance with applicable law and
International Financial Reporting Standards ('IFRS') as adopted by
the EU.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
IFRS as adopted by the EU.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they present a fair,
balanced and understandable report and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable International Financial Reporting
Standards, as adopted by the EU, have been followed, subject to any
material departures disclosed and explained in the financial
statements.
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies Act 2006, where
applicable. They are responsible for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable UK law and regulations, the Directors are also
responsible for preparing a Strategic Report and a Directors'
Report that complies with that law and those regulations.
The financial statements are published on
www.tocpropertybackedlendingtrust.co.uk which is a website
maintained by the Company's Investment Adviser. The Directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
The Directors confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable International Financial Reporting Standards as adopted
by the EU, give a true and fair view of the assets, liabilities and
financial position of the Company;
-- in the opinion of the Directors, the Report and Financial
Statements taken as a whole, is fair, balanced and understandable
and it provides the information necessary to assess the Company's
position and performance, business model and strategy.
-- so far as each Director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
-- the Directors have taken all the steps that they ought to
have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditors are
aware of that information.
John Newlands
Chairman
29 May 2020
Statement of Comprehensive Income
Year to 30 November Year to 30 November
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- -------- -------- --------
Revenue
Investment interest 2 2,222 - 2,222 2,044 - 2,044
-------- -------- -------- -------- -------- --------
Total revenue 2,222 - 2,222 2,044 - 2,044
--------------------------------- -------- -------- -------- -------- -------- --------
Unrealised gain on investments 8 - 136 136 - 104 104
--------------------------------- -------- -------- -------- -------- -------- --------
Total income 2,222 136 2,358 2,044 104 2,148
---------------------------------
Expenditure
Investment adviser fee 3 - - - - - -
Impairments 4 (206) (2,651) (2,857) (317) (429) (746)
Other expenses 4 (567) (30) (597) (550) - (550)
--------------------------------- -------- -------- -------- -------- -------- --------
Total expenditure (773) (2,681) (3,454) (867) (429) (1,296)
--------------------------------- -------- -------- -------- -------- -------- --------
Loss before finance costs
and taxation 1,449 (2,545) (1,096) 1,177 (325) 852
Finance costs
Interest payable (86) - (86) (14) - (14)
(Loss)/profit before taxation 1,363 (2,545) (1,182) 1,163 (325) 838
-------- -------- -------- -------- -------- --------
Taxation 5 - - - - - -
(Loss)/profit for the year
and total comprehensive profit
for the year 1,363 (2,545) (1,182) 1,163 (325) 838
--------------------------------- -------- -------- -------- -------- -------- --------
Basic earnings per share 7 5.06p (9.45)p (4.39)p 4.54p (1.27)p 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.
Statement of Financial Position (Audited)
As at As at
30 November
30 November 2019 2019
GBP'000 GBP'000
Non-current assets
Investments held at fair value 8 1,441 104
Loans at amortised cost 9 5,623 8,238
7,064 8,342
Current assets
Investments held at fair value 8 1 2,778 -
Loans at amortised cost 9 5,414 19,140
Other receivables and prepayments 10 618 473
Cash and cash equivalents 523 606
------------------------------------- --- ----------------- ------------
19,333 20,219
------------------------------------- --- ----------------- ------------
Total assets 26,397 28,561
------------------------------------- --- ----------------- ------------
Current liabilities
Loan facility 11 (3,750) (2,944)
Other payables and accrued expenses 12 (98) (203)
Total liabilities (3,848) (3,147)
------------------------------------- --- ----------------- ------------
Net assets 22,549 25,414
------------------------------------- --- ----------------- ------------
Share capital and reserves
Share capital 13 269 269
Share premium 14 9,094 9,094
Special distributable reserve 14 16,455 16,455
Revenue reserve 14 (291) 29
Capital reserve 14 (2,978) (433)
------------------------------------- --- ----------------- ------------
Equity shareholders' funds 22,549 25,414
------------------------------------- --- ----------------- ------------
Net asset value per ordinary share 83.75p 94.39p
------------------------------------- --- ----------------- ------------
Statement of Changes in Equity (Audited)
For the year ending 30 November 2019
Share Share Special Capital Revenue Total
capital premium distributable reserve reserve
reserve
---------------------- -------- -------- -------------- ---------- ---------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------------- ---------- ---------- --------
At beginning of the
year 269 9,094 16,455 (433) 29 25,414
Total comprehensive
loss for the year:
Loss for the year - - - (2,545) 1,363 (1,182)
Transactions with
owners recognised
directly in equity:
Dividends paid - - - - (1,683) (1,683)
At 30 November 2019 269 9,094 16,455 (2,978) (291) 22,549
---------------------- -------- -------- -------------- ---------- ---------- --------
For the year ending 30 November 2018
Share Share Special Capital Revenue Total
capital premium distributable reserve reserve
reserve
------------------------ -------- -------- -------------- ---------- ---------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------- -------- -------------- ---------- ---------- --------
At beginning of the
year 227 5,152 16,455 (108) 540 22,266
Total comprehensive
profit for the year:
Profit for the year - - - (325) 1,163 838
Transactions with
owners recognised
directly in equity:
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
------------------------ -------- -------- -------------- ---------- ---------- --------
Cash Flow Statement (Audited)
For the year ending 30 November 2019
Year ending Year ending
30 November 30 November
2019 2018
Notes GBP'000 GBP'000
Operating activities
Loss after taxation (1,182) 838
Impairments 2,657 746
Uplifts (136) (104)
Increase in other receivables (145) (174)
(Decrease)/increase in other payables (105) 72
Interest paid 86 14
Net cash inflow from operating activities
before interest and after taxation 1,175 1,392
Net cash inflow from operating activities 1,175 1,392
Investing activities
Loans given (7,614) (10,260)
Loans repaid 7,319 3,918
Net cash outflow from investing activities (295) (6,342)
Financing
Issue of ordinary shares 13 - 3,984
Equity dividends paid (1,683) (1,674)
Bank loan drawn down 3,806 2,944
Repayment of bank loan (3,000) -
Interest paid (86) (14)
-------------------------------------------------- ------ ------------- -------------
Net cash (outflow)/inflow from financing (963) 5,240
-------------------------------------------------- ------ ------------- -------------
(Decrease)/increase in cash and cash equivalents (83) 290
Cash and cash equivalents at the start
of the year 606 316
Cash and cash equivalents at the end of
the year 523 606
-------------------------------------------------- ------ ------------- -------------
There are no non-cash changes arising from financing
activities.
Notes to the Audited Financial Statements
1. ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
The financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union ("EU"). The financial statements were also
prepared in accordance with the Statement of Recommended Practice
("SORP") for investment trusts issued by the AIC (as issued in
October 2019), where this guidance is consistent with IFRS.
The financial statements have been prepared on a going concern
basis under the historical cost convention, except for investment
valuations which are measured at fair value.
The notes and financial statements are presented in pounds
sterling (being the functional currency and presentational currency
for the Company) and are rounded to nearest thousand except where
otherwise indicated.
GOING CONCERN
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, a period not less
than twelve months from the date of this report.
SEGMENTAL REPORTING
The decision maker is the Board of Directors. The Directors are
of the opinion that the Company is engaged in a single segment of
business, being the investment of the Company's capital in
financial assets comprising loans. The Company derived revenue
totalling GBP983k where the amounts from four individual borrowers
each exceeded more than 10% of the Company's revenue. The
individual amounts were GBP305k, GBP254k, GBP222k and GBP202k.
USE OF SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of financial statements requires management to
make estimates and assumptions that affect the amounts reported for
assets and liabilities as at the reporting date and the amounts
reported for revenue and expenses during the year. The nature of
the estimation means that actual outcomes could differ from those
estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any future
periods affected.
The following are areas of particular significance to the
Company's financial statements and include the use of estimates or
the application of judgement:
CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING THE COMPANY'S
ACCOUNTING POLICIES - INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR
LOSS:
The Company owns profit share holdings or has exit fees
mechanism in relation to nine of the borrowers in place as at the
year end. The loans held have been designated at fair value through
profit and loss. The determination of the fair value requires the
use of estimates. A sensitivity analysis is included in note
16.
CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING THE COMPANY'S
ACCOUNTING POLICIES - LOANS AMORTISED COST CLASSIFICATION AND
IMPAIRMENTS:
The Company uses critical judgements to determine whether it
accounts for its loans at either amortised cost using the effective
interest rate method less impairment provisions or at fair value
through profit and loss. The determination of the required
impairment adjustment requires the use of estimates. See the
following notes of IFRS 9 and Impairment for further details.
ACCOUNTING STANDARDS ADOPTED BY THE COMPANY
IFRS 9 - 'Financial Instruments'
The Company adopted IFRS 9 with effect from 1 December 2018.
IFRS 9 replaces IAS 39 'Financial Instruments: Recognition and
Measurement' and introduces new requirements for classification and
measurement, impairment and hedge accounting. The accounting
policies of the company have been updated to comply with the
requirements of IFRS 9 for the purposes of preparing these
financial statements. IFRS 9 is not applicable to items that had
already been derecognised at 1 December 2018, the date of initial
application.
The classification and measurement requirements of IFRS 9 have
been adopted retrospectively as of the date of initial application
on 1 December 2018. However, the company has chosen to take
advantage of the option not to restate comparatives. Therefore, the
30 November 2018 figures are presented and measured under IAS
39.
Key requirements of IFRS 9
Classification and measurement of financial assets will be
driven by the entity's business model for managing the financial
assets and the contractual cash flow characteristic of those
financial assets.
There are three principal classification categories for
financial assets that are debt instruments:
-- amortised cost;
-- fair value through other comprehensive income; and
-- fair value through profit and loss.
Equity investments under IFRS 9 are measured at fair value with
gains and losses recognised in profit and loss unless an
irrevocable election is made to recognise gains or losses in other
comprehensive income.
The Directors consider loan agreements are drawn with the
Primary Purpose of seeking to collect interest and achieving
repayment at the end of the contract. On this basis the company
operates a Hold to Collect business model.
Therefore, the following considerations are taken into
account.
-- The company considers that all loans within its' portfolio fall under the scope of IFRS 9.
-- All loans are documented.
-- That all loans meet the Solely Payments of Principal and
Interest Test (SPPI), unless the company benefits from a
shareholding in the project against which loans are provided.
IFRS 9 also introduces a new expected credit loss impairment
model, as opposed to the incurred credit loss model implemented
under IAS 39. This requires entities to account for expected credit
losses at initial recognition and changes to expected credit losses
at each reporting date to reflect changes in credit risk since
initial recognition.
IMPACT OF ADOPTION OF IFRS 9
Classification and measurement
Loan investments that are held solely for the collection of
contractual cash flows, being interest, fees and payments of
principal and also meet the Solely Payments of Principal and
Interest Test (SPPI) continue to be held at amortised cost upon the
application of IFRS 9.
Where the Company benefits from a shareholding or exit fee in
the project against which loans are provided, these are now held as
fair value through profit and loss upon the application of IFRS 9
as they fail the SPPI test. There are nine loans that are treated
as fair value through profit and loss.
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification of financial liabilities.
Impairment of financial assets
Transition
IFRS 9 replaces the incurred loss model in IAS 39 with a
forward-looking 'expected credit loss' model.
Cash and cash equivalents
Cash and cash equivalents are held at banks with a strong credit
rating and are not subject to any period of notice.
The Company typically maintains a low value of cash and cash
equivalents. There is no impact on values reported in the financial
statements from adopting IFRS 9 in respect of credit losses.
Transition
The following table shows the original measurement categories in
accordance with IAS 39 and the new measurement categories under
IFRS 9 for the Company's financial assets and financial liabilities
as at 1 December 2018. There were no material adjustments to the
carrying value of assets and liabilities as a result of the
transition to IFRS 9 and so no impact on reserves as at 1 December
2018.
Each loan was assessed on an individual basis to determine
whether there is any evidence of impairment. During the year,
allowances for impairment losses amounting to GBP2,857,000 (2018:
GBP746,000), were recognised in the statement of comprehensive
income. The other loans are either close to repayment or
refinancing; with, or close to, having value in the associated
profit shares; or, at an early, ground breaking, stage.
IAS 39 Classification IAS 39 measurement IFRS 9 Classification IFRS 9 measurement
GBP'000 GBP'000
------------------------- ------------------- ---------------------- -------------------
Loans at amortised
costs Loans and receivables 27,378 Amortised cost 16,566
------------------------- ------------------- ---------------------- -------------------
Investments at fair
value through profit Financial assets
or loss at FVTPL 104 FVTPL 10,916
------------------------- ------------------- ---------------------- -------------------
Other receivables
and payables Loans and receivables 473 Amortised cost 473
------------------------- ------------------- ---------------------- -------------------
Cash and cash
equivalents Loans and receivables 606 Amortised cost 606
------------------------- ------------------- ---------------------- -------------------
Loan Facility Loans and receivables (2,944) Amortised cost (2,944)
------------------------- ------------------- ---------------------- -------------------
Other payables and Other financial
accruals liabilities (203) Amortised cost (203)
------------------------- ------------------- ---------------------- -------------------
Net assets 25,414 25,414
------------------- ---------------------- -------------------
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
IFRS 16 - Leases
IFRS 16 introduces a single lessee accounting model and requires
a lessee to recognise assets and liabilities for all leases with a
term of more than 12 months, unless the underlying asset is of low
value. A lessee is required to recognise a right-of-use asset
representing its right to use the underlying leased asset and a
lease liability representing its obligation to make lease payments.
The Company has no leases as lessor or lessee so there will be no
impact to the financial statements once adopted.
INTEREST INCOME
For financial instruments measured at amortised cost, the
effective interest rate method is used to measure the carrying
value of a financial asset or liability and to allocate associated
interest income or expense over the relevant period. The effective
interest rate is the rate that discounts estimated future cash
payments or receipts over the expected life of the financial
instrument or, when appropriate, a shorter period, to the net
carrying amount of the financial asset or financial liability. In
calculating the effective interest rate, the cash flows are
estimated considering all contractual terms of the financial
instrument but does not consider expected credit losses. The
calculation includes all fees received and paid and costs borne
that are an integral part of the effective interest rate.
On an ongoing basis the Investment Adviser assesses whether
there is evidence that a financial asset is impaired. The basis of
calculating interest income on the three stages of impairment
(detailed below) are as follows:
Stage 1 Interest is calculated on the gross outstanding
principal
Stage 2 Interest is calculated on the gross outstanding
principal
Stage 3 Interest is calculated on the principal amount less
impairment
EXPENSES
Expenses are accounted for on an accruals basis. The Company's
administration fees, finance costs and all other expenses are
charged through the Statement of Comprehensive Income and are
charged to revenue. Fees incurred in relation to operational costs
of the loan portfolio, such as legal fees, are charged through the
Statement of Comprehensive Income and are charged to capital.
DIVIDS TO SHAREHOLDERS
Dividends are accounted for in the period in which they are
paid, except for dividends requiring shareholder approval which
will be recognised when approved by shareholders.
TAXATION
Taxation on the profit or loss for the period comprises current
and deferred tax. Taxation is recognised in the Statement of
Comprehensive Income except to the extent that it relates to items
recognised as direct movements in equity, in which case it is also
recognised as a direct movement in equity.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the reporting date.
Deferred income tax is provided using the liability method on
all temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred income tax assets are
recognised only to the extent that it is probable that taxable
profit will be available against which deductible temporary
differences, carried forward tax credits or tax losses can be
utilised. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount
of assets and liabilities. Deferred income tax relating to items
recognised directly in equity is recognised in equity and not in
profit or loss.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The financial assets and financial liabilities are classified at
inception into the following categories:
Amortised cost:
Financial assets that are held for collection of contractual
cash flows where those cash flows represent SPPI and that are not
designated at fair value through profit and loss are measured at
amortised cost. The carrying amount of these assets is adjusted by
any expected credit loss allowance as described in the impairment
note below.
The Company's cash and cash equivalents, other receivables and
payables, other payables and accruals, and the company's loan
facility are included within this category.
Fair value through profit and loss:
The Company have a number of borrower facilities in which they
received a minority equity stake or exit fee mechanism in
conjunction with providing those loan facilities. These loans are
recognised at fair value through profit and loss. The fair value of
the contracts is monitored and reviewed quarterly using discounted
cash flow forecasts based on the estimated cash flows that will
flow through from the underlying development project. A sensitivity
analysis is included in note 16.
IMPAIRMENT
Impairment
Policy effective from 1 December 2018 .
IFRS 9 replaced the "incurred loss" model in IAS 39 with an
"expected credit loss" model in the measurement of impairment loss.
The overall effect of the change from IAS 39 to IFRS 9 is that the
assessment of impairment loss is intended to be more forward
looking under IFRS 9. At initial recognition, an impairment
allowance is required for expected credit losses (ECL) resulting
from possible default events within the next 12 months. When an
event occurs that increases the credit risk, an allowance is
required for ECL for possible defaults over the term of the
financial instrument.
A financial asset is credit-impaired when one or more events
that have occurred have a significant impact on the expected future
cash flows of the financial asset. It includes observable data that
has come to our attention regarding one or more of the following
events:
-- delinquency in contractual payments of principal and interest;
-- cash flow difficulties experienced by the borrower;
-- initiation of bankruptcy proceedings;
-- the borrower being granted a concession that would otherwise not be considered;
-- observable data indicating that there is a measurable
decrease in the estimated future cash flows from a portfolio of
assets since the initial recognition of those assets, although the
decrease cannot yet be identified with the individual financial
assets in the portfolio; and
-- a significant decrease in assets values held security.
Impairment of financial assets is recognised on a loan-by-loan
basis in stages:
-- Stage 1 : A general impairment covering what may happen
within the next 12 months, based on the adoption of BIS standards
as outlined below.
-- Stage 2 : Significant increase in credit risk, where the
borrower is in default, potentially in arrears, where full
repayment is expected and the underlying asset value remains
robust. The ECL calculation recognises the lifetime of the
loan.
-- Stage 3 : Credit impaired, where the borrower is in default
of their loan contract, in arrears, full loan repayment is
uncertain and there is a shortfall in underlying asset value. The
ECL calculation recognises likely failure of the borrower.
As at 30 November 2019, there were seventeen loans in the
portfolio. Nine of those projects supported included either an
equity stake of 25.1% for Company or an exit fee mechanism. Please
see note 8 for details on these nine projects.
The Board has deemed that four loans, Bedlington, Pendower Hall,
St Hilds and West Auckland, are currently impaired and specific
additional provisions have been made against Pendower, St Hilds and
West Auckland facilities in these financial statements.
The other thirteen loans have been assessed as not impaired.
The Company's response to IFRS 9 requirements has been based on
the Bank for International Settlements (BIS) Basel Supervisory
Committee liquidity risk tool recommendations.
Policy effective before 1 December 2018
A financial asset was impaired when the recoverable amount was
estimated to be less than its carrying amount. An impairment loss
was recognised immediately in the Statement of Comprehensive
Income, unless the relevant asset was carried at a revalued amount,
in which case the reversal of the impairment was treated as a
revaluation decrease.
FAIR VALUE HIERARCHY
Accounting standards recognise a hierarchy of fair value
measurements for financial instruments which gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). The classification of financial
instruments depends on the lowest significant applicable input, as
follows:
-- Level 1 - Unadjusted, fully accessible and current quoted
prices in active markets for identical assets or liabilities.
Examples of such instruments would be investments listed or quoted
on any recognised stock exchange.
-- 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. Examples of such instruments
would be forward exchange contracts and certain other derivative
instruments.
-- 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 loans are considered Level 3.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in hand and short-term
deposits in banks with an original maturity of three months or
less.
OTHER RECEIVABLES
Other receivables do not carry interest and are short-term in
nature. They are initially stated at their nominal value and
reduced by appropriate allowances for estimated irrecoverable
amounts, if deemed appropriate. There were no irrecoverable amounts
accounted for at the year end or the prior period end.
RESERVES
SHARE PREMIUM
The surplus of net proceeds received from the issuance of new
shares over their par value is credited to this account and the
related issue costs are deducted from this account.
CAPITAL RESERVE
The following are accounted for in the capital reserve:
-- Capital charges;
-- Increases and decreases in the fair value of and impairments
of loan capital held at the year end.
As at year end the Capital Reserve comprises only unrealised
gains and losses and so does not contain distributable
reserves.
REVENUE RESERVE
The net profit/(loss) arising in the revenue column of the
Statement of Comprehensive Income is added to or deducted from this
reserve which is available for paying dividends.
SPECIAL DISTRIBUTABLE RESERVE
Created from the Court of Session cancellation of the initial
launch share premium account and is available for paying
dividends.
CAPITAL MANAGEMENT
The Company's capital is represented by the Ordinary Shares,
share premium, capital reserves, revenue reserve and special
distributable reserve. The Company is not subject to any externally
imposed capital requirements.
The capital of the Company is managed in accordance with its
investment policy, in pursuit of its investment objective. Capital
management activities may include the allotment of new shares, the
buy back or re-issuance of shares from treasury, the management of
the Company's discount to net asset value and consideration of the
Company's net gearing level.
There have been no changes in the capital management objectives
and policies or the nature of the capital managed during the
year.
2. INCOME
30 November 30 November
2019 2018
GBP'000 GBP'000
Interest
from loans 2,222 2,044
Total income 2,222 2,044
3. INVESTMENT MANAGER'S AND INVESTMENT ADVISER'S FEES
INVESTMENT MANAGER
During the year R&H Fund Services (Jersey) Limited acted 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; however, in the year under review a reduced fee of
GBP5,000 was agreed with the AIFM. There is a balance of GBP5,000
accrued for the Investment Manager for the year to 30 November
2019.
INVESTMENT ADVISER
The AIFM has appointed Tier One Capital Limited 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.
4. Operating expenses
30 November 2019 30 November 2018
Revenue Capital Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --------- -------- --------- --------
Legal & professional 17 30 44 -
Directors' fees 102 - 120 -
Audit fees related to the audit
of the financial statements 85 - 67 -
Fund Administration and Company
Secretarial 82 - 74 -
Brokers' fees 33 - 27 -
Marketing fees 77 - 59 -
Valuation fees (4) - 40 -
AIFM fee (28) - 18 -
Loan impairments 206 2,651 317 429
Other expenses 203 - 101 -
Total other expenses 773 2,681 867 429
--------------------------------- --------- -------- --------- --------
All expenses are inclusive of VAT where applicable.
5. Taxation
As an investment trust the Company is exempt from corporation
tax on capital gains. The Company's revenue income from loans is
subject to tax, but offset by any interest distribution paid, which
has the effect of reducing the corporation tax. The interest
distribution may be taxable in the hands of the Company's
shareholders.
30 November 30 November
2019 2018
GBP'000 GBP'000
--------------------------------------------- ------------ ------------
Current corporation tax at 19% (2018:
19%) - -
Deferred taxation - -
--------------------------------------------- ------------ ------------
Tax on profit on ordinary activities - -
--------------------------------------------- ------------ ------------
Reconciliation of tax charge
(Loss)/profit on ordinary activities before
taxation (1,182) 838
Taxation at standard corporation tax rate
19% (2018: 19%) - 162
Effects of:
Expenses not deductible for tax purposes - 142
Interest distributions - (304)
---------------------------------------------- ------------ ------------
Tax charge for the year - -
---------------------------------------------- ------------ ------------
6. Ordinary dividends
30 November 30 November
2019 2018
Pence Pence
per share GBP'000 per share GBP'000
------------------------------------------ ----------- -------- ----------- --------
Interim dividend for the quarter ended
28 February 2019 1.50 404 1.75 415
Interim dividend for the quarter ended
31 May 2019 1.50 404 1.75 448
Interim dividend for the quarter ended
31 August 2019 1.50 404 1.75 471
Total dividends paid during and relating
to the year 1,212 1,334
------------------------------------------ ----------- -------- ----------- --------
Interim dividend for the quarter ended
30 November 2019 1.50 404 1.75 471
Total dividend declared in relation
to the year 1,616 1,805
------------------------------------------ ----------- -------- ----------- --------
The Company intends to distribute at least 85% of its
distributable income earned in each financial year by way of
interest distribution. On 15 December 2019, the Company declared an
interim dividend of 1.50 pence per share for the quarter ended 30
November 2019, payable on 3 January 2020. On 21 February 2020 the
Company declared an interim dividend of 1.50 pence per share for
the quarter ended 28 February 2020, payable on 4 April 2020.
7. 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 year. During the year there were no dilutive
instruments held, therefore the basic and diluted earnings per
share are the same.
8. 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% or has an exit fee mechanism for 9 companies.
Loans at fair value through profit
and loss
30 November 2019 30 November
2018
GBP'000 GBP'000
----------------------------------------- ------------------------ ------------
Opening balance 104 -
IFRS 9 transfer to fair value through 10,812 -
profit and loss
Loans deployed 5,611 -
Principle repayments (2,520) -
Uplifts/(impairments) 212 104
Total loans at amortised cost 14,219 104
------------------------------------------ ------------------------ ------------
Split:
Non-current assets: Loans due for
repayment after one year 1,441 104
Current assets: Loans due for repayment 12,778 -
under one year
9. Loans at amortised cost
30 November 30 November
2019 2018
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Opening balance 27,378 21,782
IFRS 9 transfer to fair value through (10,812) -
profit and loss
Loans deployed 1,953 10,260
Principle repayments (4,799) (3,918)
Uplifts/(impairments) (2,683) (746)
Total loans at amortised cost 11,037 27,378
------------------------------------------ ------------ ------------
Split:
Non-current assets: Loans at amortised
cost due for repayment after one year 5,623 8,238
Current assets: Loans at amortised cost
due for repayment
under one year 5,414 19,140
The Company's loans held at amortised cost 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 during the year, allowances for
impairment losses amounted to GBP2,683,000 (2018: GBP746,000).
Movements in allowances for impairment losses in the year
Nominal value
GBP'000
at 1 December 2018 338
Provisions for impairment losses 2,683
----------------------------------- --------------
at 30 November 2019 3,021
----------------------------------- --------------
Stage 1 provisions at 1 December -
2018
Provisions for impairment losses 187
----------------------------------- --------------
Stage 1 provisions at 30 November
2019 187
----------------------------------- --------------
Stage 2 provisions at 1 December
2018 138
Provisions for impairment losses (138)
----------------------------------- --------------
Stage 2 provisions at 30 November -
2019
----------------------------------- --------------
Stage 3 provisions at 1 December
2018 200
Provisions for impairment losses 2,634
----------------------------------- --------------
Stage 3 provisions at 30 November
2019 2,834
----------------------------------- --------------
10. Receivables
30 November 30 November
2019 2018
GBP'000 GBP'000
-------------------------- ------------ ------------
Prepayments 42 8
Loan interest receivable 576 465
Total receivables 618 473
--------------------------- ------------ ------------
11. Loan facility
30 November 30 November
2019 2018
GBP'000 GBP'000
----------- ------------ ------------
Bank loan 3,750 2,944
------------ ------------ ------------
On 22 October 2019 the Company entered into a GBP6.0 million
committed revolving facility with Shawbrook Bank Limited, expiring
on 22 October 2020,. GBP3.8 million was drawn down at the year end.
GBP0.6 million at an interest rate of 4.716% and GBP3.2 million at
an interest rate of 4.698%. The facility is secured against a
debenture over the assets of the Company. Post year end the
facility was increased to GBP6.5m and extended until May 2021 on
similar terms, after which it is anticipated that the Company will
take out a new facility on comparable terms.
12. Other Payables
30 November 30 November
2019 2018
GBP'000 GBP'000
---------------------- ------------ ------------
Accruals 98 203
Total other payables 98 203
----------------------- ------------ ------------
13. Share Capital
Nominal Number of
Value Ordinary shares
GBP'000 of 1p
----------------------------------------- ------------- ---------------------
At 30 November 2018 269 26,924,063
Issued and fully paid as at 30 November
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).
14. Reserves
Special
Share distributable Capital Revenue
premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------------- --------- --------- --------
At 30 November 2018 9,094 16,455 (433) 29 25,145
Loss for the year - - (2,545) 1,363 (1,182)
Dividend paid - - - (1,683) (1,683)
--------------------- --------- --------------- --------- --------- --------
At 30 November 2019 9,094 16,455 (2,978) (291) 22,280
--------------------- --------- --------------- --------- --------- --------
15. 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 GBP102k fees for their
services during the year to 30 November 2019 (30 November 2018:
GBP120k). 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. From
16 March 2020, Stephen Black is no longer involved with Tier One
Capital Ltd.
Tier One Capital Ltd received no Investment Adviser's fee during
the year 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 was paid GBPnil for
financial modelling to the 30 November 2019, (30 November 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 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
30 November 2019 was GBP1.8m (30 November 2018: GBP1.713m).
Transactions in relation to loans made during the year amounted to
GBP0.287m (30 November 2018:GBP0.480m). Interest due to be received
as at 30 November 2019 was GBP0.084m (30 November 2018: GBP0.027m).
Interest received during the year amounted to GBP0.202m (30
November 2018:GBP0.139m).
-- 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 was formerly 100% owned by Stephen Black and his spouse Jill
Black, having previously been owned by Inperpetuity Ltd. The shares
in the company were transferred to an unconnected third party on 4
October 2019. The loan amount outstanding as at 30 November 2019
was GBP1.8m (30 November 2018: GBP1.8m). Transactions in relation
to loans made during the year amounted to GBP0.025m (30 November
2018:GBP0.210m). Interest due to be received as at 30 November 2019
was GBP0.025m (30 November 2018: GBP0.025m). Interest received
during the year amounted to GBP0.151m (30 November
2018:GBP0.141m).
-- Thursby Homes (Charlton's Bonds)
Tier One Capital Ltd sold 25.1% of Thursby Homes Ltd on the 20
March 2019. The loan amount outstanding as at 30 November 2019 was
GBP0.697m (30 November 2018: GBP0.967m). Transactions in relation
to loans repaid during the year amounted to GBP0.271m (30 November
2018: GBP0.975m). Interest due to be received as at 30 November
2019 was GBP0.009m (30 November 2018: GBP0.013m). Interest received
during the year amounted to GBP0.061m (30 November 2018:
GBP0.099m).
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 30
November 2019 was GBP2.3m (30 November 2018: GBP2.3m). Transactions
in relation to loans made during the year amounted to GBPnil (30
November 2018: GBPnil). Interest due to be received as at 30
November 2019 was GBP83k (30 November 2018: GBP31k). Interest
received during the year amounted to GBP184k (30 November
2018:GBP184k).
-- 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 30 November 2019 was GBP1.8m (30 November 2018:
GBP1.9m). Transactions in relation to loans made during the year
amounted to GBP0.3m (30 November 2018:GBP1.1m). Interest due to be
received as at 30 November 2019 was GBPnil (30 November
2018:GBP31k). Interest received during the year amounted to GBPnil
(30 November 2018: GBP100k).
-- 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 30 November 2019
was GBP0.9m (30 November 2018: GBP2.6m). Transactions in relation
to loans (repaid)/made during the year amounted to (GBP1.8m) (30
November 2018: GBP1.6m). Interest due to be received as at 30
November 2019 was GBP16k (30 November 2018: GBP35k). Interest
received during the year amounted to GBP108k (30 November
2018:GBP146k).
-- Thursby Homes (Springs)
The Company owns 25.1% of the borrower Thursby Homes (Springs)
Ltd. The loan amount outstanding as at 30 November 2019 was
GBP3.53m (30 November 2018: GBP1.4m). Transactions in relation to
loans made during the year amounted to GBP2.15m (30 November 2018:
GBP1.4m). Interest due to be received as at 30 November 2019 was
GBP81k (30 November 2018: GBP18k). Interest received during the
year amounted to GBP222k (30 November 2018: GBP54k).
-- Northumberland
The Company owns 25.1% of the borrower Northumberland Ltd. The
loan amount outstanding as at 30 November 2019 was GBP2.85m (30
November 2018: GBP1.5m). Transactions in relation to loans made
during the year amounted to GBP1.35m (30 November 2018: GBP1.5m).
Interest due to be received as at 30 November 2019 was GBP47k (30
November 2018: GBP30k). Interest received during the year amounted
to GBP166k (30 November 2018: GBP41k).
-- Dinosauria
The Company owns 25.1% of the borrower Dinosauria Ltd. The loan
amount outstanding as at 30 November 2019 was GBP0.6m (30 November
2018: GBP0.6m). Transactions in relation to loans made during the
year amounted to GBPnil (30 November 2018: GBP0.6m). Interest due
to be received as at 30 November 2019 was GBP7k (30 November 2018:
GBP7k). Interest received during the year amounted to GBP44k (30
November 2018: GBP19k).
The total value of loan impairment charge relating to loans to
related parties is GBP0.680m (2018: GBP0.608m 2018).
16. Financial Instruments
Consistent with its objective, the Company holds a diversified
portfolio of fixed rate loans secured with collateral in the form
of; land or property in the UK, charges held over bank accounts and
personal or corporate guarantees. The benefit of a related profit
share or exit fee mechanism may also be agreed. In addition, the
Company's financial instruments comprise cash and receivables and
payables that arise directly from its operations. The Company does
not have exposure to any derivative instruments.
The Company is exposed to various types of risk that are
associated with financial instruments. The most important types are
credit risk, liquidity risk, interest rate risk and market price
risk. There is no foreign currency risk as all assets and
liabilities of the Company are maintained in pounds sterling.
The Board reviews and agrees policies for managing the Company's
risk exposure. These policies are summarised below:
Credit Risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company.
In the event of default by a borrower if it is in financial
difficulty or otherwise unable to meet its obligations under the
agreement, the Company will suffer an interest shortfall and
potentially a loss of capital. This potentially will have a
material adverse impact on the financial condition and performance
of the Company and/or the level of dividend cover. The Board
receives regular reports on concentrations of risk and the
performance of the projects underlying the loans, using loan to
value percentages to help monitor the level of risk. The Investment
Adviser monitors such reports in order to anticipate, and minimise
the impact of, default.
There were financial assets which were considered impaired at 30
November 2019, with impairments amounting to GBP2,857,000 (30
November 2018: GBP746,000).
All of the Company's cash is placed with financial institutions
with a long-term credit rating of A or better. Bankruptcy or
insolvency of such financial institutions may cause the Company's
ability to access cash placed on deposit to be delayed or limited.
Should the credit quality or the financial position of the banks
currently employed significantly deteriorate, cash holdings would
be moved to another bank.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter
difficulties in realising assets or otherwise raising funds to meet
financial commitments. The Company's investments comprise
loans.
Property and property-related assets in which the Company
invests via loans are not traded in an organised public market and
are relatively illiquid assets, requiring individual attention to
sell in an orderly way. As a result, the Company may not be able to
liquidate quickly its investments in these loans at an amount close
to their fair value in order to meet its liquidity
requirements.
The Company's liquidity risk is managed on an ongoing basis by
the Investment Adviser and monitored on a quarterly basis by the
Board. In order to mitigate liquidity risk the Company has a
comprehensive three-year cash flow forecast that aims to have
sufficient cash balances, taking into account projected receipts
for rental income and property sales, to meet its obligations for a
period of at least 12 months. At the reporting date, the maturity
of the financial assets and liabilities was:
Financial assets as at 30 November 2019
In two or Total
In one year more years GBP'000
GBP'000 GBP'000
Cash and cash equivalents 523 - 523
Loans at amortised cost 5,414 5,623 11,037
Investments at fair value 12,778 1,441 14,219
Loan interest receivable 576 - 576
-------------------------- -------------- ------------ ---------
19,291 7,064 26,355
------------------------------------------ ------------ ---------
Financial assets as at 30 November 2018
In two or Total
In one year more years GBP'000
GBP'000 GBP'000
Cash and cash equivalents 606 - 606
Loans at amortised cost 20,640 6,738 27,378
Investments at fair value 104 - 104
Loan interest receivable 464 - 464
-------------------------- -------------- ------------ ---------
21,814 6,738 28,552
------------------------------------------ ------------ ---------
Financial liabilities as at 30 November 2019
In two or Total
In one year more years GBP'000
GBP'000 GBP'000
Bank loan 3,750 - 3,750
--------------- -------- -------------- ----------
3,750 - 3,750
------------------------- -------------- ----------
Financial liabilities as at 30 November 2018
In two or Total
In one year more years GBP'000
GBP'000 GBP'000
Bank loan 2,944 - 2,944
--------------- -------- -------------- ----------
2,944 - 2,944
------------------------- -------------- ----------
Interest Rate Risk
The interest rate profile of the Company was as follows:
as at 30 November 2019
Financial net Fixed rate Variable Total
assets on which Financial rate financial GBP'000
no interest Assets net assets
is paid GBP'000 GBP'000 GBP'000
Other receivables and prepayments 618 - - 618
Other payables and accrued expenses (98) - - (98)
Cash and cash equivalents - - 523 523
Loan facility - - (3,750) (3,750)
Investments held at fair value - 14,219 - 14,219
Loans at amortised cost - 11,037 - 11,037
------------------------------------- ----------------- ----------- ---------------- ---------
Total 520 25,256 (3,227) 22,549
------------------------------------- ----------------- ----------- ---------------- ---------
as at 30 November 2018
Financial net Fixed rate Variable Total
assets on which Financial rate financial GBP'000
no interest Assets net assets
is paid GBP'000 GBP'000 GBP'000
Other receivables and prepayments 473 - - 473
Other payables and accrued expenses (203) - - (203)
Cash and cash equivalents - - 606 606
Loan facility - - (2,944) (2,944)
Investments held at fair value - 104 - 104
Loans at amortised cost - 27,378 - 27,378
------------------------------------- ----------------- ----------- ---------------- ---------
Total 270 27,482 (2,338) 25,414
------------------------------------- ----------------- ----------- ---------------- ---------
Market Price Risk
The management of market price risk is part of the investment
management process and is typical of an investment company. The
portfolio is managed with an awareness of the effects of adverse
valuation movements through detailed and continuing analysis, with
an objective of maximising overall returns to shareholders.
Investments in property and property-related assets are inherently
difficult to value due to the individual nature of each property.
As a result, valuations are subject to substantial uncertainty.
There is no assurance that the estimates resulting from the
valuation process will reflect the actual sales price even where
such sales occur shortly after the valuation date. Such risk is
minimised through the appointment of external property valuers. The
basis of valuation of the loan portfolio is set out in detail in
the accounting policies. Any changes in market conditions will
directly affect the profit and loss reported through the Statement
of Comprehensive Income. Details of the Company's investment
portfolio held at the balance sheet date are disclosed in the
Investment Adviser's Review. A 10% fall in the sales value of the
residential development projects and a 10% reduction in asset value
of commercial and investment property assets for those loans held
at fair value would have resulted in a further impairment to the
portfolio of GBP839,123 as at 30 November 2019. The calculations
are based on the property valuations at the respective balance
sheet date and are not representative of the year as a whole, nor
reflective of future market conditions.
17. Post Balance Sheet Events
-- On 12 December 2019, Marley Hill repaid its loan in full to the amount of GBP0.4m.
-- On 12 December 2019, GBP1.7m was borrowed from Shawbrook
Bank. A further GBP0.6m was borrowed on 18 January 2020, utilising
the remainder of the GBP6m facility.
-- On 3 January 2020, a dividend of 1.50 pence per ordinary share was paid.
-- On 21 February 2020, a dividend of 1.50p was declared with an
xd date of 5 March 2020, record date of 6 March 2020 and a payment
date of 10 April 2020. Payment of this dividend was subsequently
changed to 1 June 2020.
-- On 16 March 2020, Stephen Black disposed of his shares in the
Investment Adviser. This removes the related parties for Pendower
Hall, Medburn, and Inveniam Corporate Finance.
-- On 16 March 2020, the Pendower Hall facility restructure was
finalised, resulting in a waiver of GBP1m loan plus unpaid
interest. This has been disclosed in these financial
statements.
-- In May 2020, the gearing facility with Shawbrook was
increased to GBP6.5m and extended until May 2021.
-- Post year end the COVID-19 virus outbreak occurred. Please
see the Chairman's Statement, Investment Adviser Report and
Strategic Review for an assessment of the potential impact on the
Company. COVID-19 is considered to be a non-adjusting post balance
sheet event and so has not been taking into account in determining
the carrying values of assets and liabilities.
18. Financial Statements
These are not full statutory accounts. The report and financial
statements for the period to 30 November 2019 will be posted to
shareholders and made available on the website
www.tocpropertybackedlendingtrust.co.uk . Copies may also be
obtained from the Company Secretary, Maitland Administration
Services (Scotland) Limited, 20 Forth Street, Edinburgh, EH1
3LH.
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
FR SEWFMUESSELI
(END) Dow Jones Newswires
May 29, 2020 12:53 ET (16:53 GMT)
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