TIDMPOLN
RNS Number : 6836M
Pollen Street PLC
18 September 2023
18 September 2023
Pollen Street plc Interim Accounts H1 2023
Pollen Street plc ("Pollen Steet" or, together with its
subsidiaries, the "Group") today issues its Interim Accounts for
the six months ended 30 June 2023.
Pollen Street confirms final close of Private Credit III, first
close of Private Equity V and the closing of a new continuation
vehicle under our Private Equity strategy. The financial
performance for the first half of the year has been robust driven
by strong performance in the investment company as interest rates
have risen in our predominantly floating rate portfolio.
Fundraising activities have not yet fed through to actual
performance in the half year but with strong tailwinds to proforma
performance.
Highlights for H1 2023: strong AUM growth and consistent
financial results
Asset Manager
-- Strong fundraising performance with final close of Private
Credit III in April 2023 bringing total investor commitments
including SMAs to GBP1.1 billion, first close of Private Equity V
in July 2023 and launching a new continuation vehicle to raise
GBP840 million.
-- AUM was GBP3.4 billion as of 30 June 2023, rising to GBP4.2
billion of proforma AuM as a result of Private Equity V and the
Continuation Vehicle. Expectation of further AUM increase in H2 as
fundraising continues for Private Equity V.
-- Continued growth of the Asset Manager with both the Private
Equity and Private Credit strategies building further on strong
underlying performance.
Investment Company
-- Investment company delivered robust performance driven by
increased interest rates and resilient credit performance.
-- Strong cash generation from Net Investment Assets for the
first half of 2023 with Income of GBP15.4 million, up from GBP13.7
million in H1 of 2022 and a Return on Net Investment Assets of
9.1%.
Financial Performance
-- Operating profit has increased to GBP19.4 million for H1
2023, up 42% from GBP13.7 million in H1 of 2022, driven by the
operating profit of the Asset Manager.
-- The Group declared dividends of GBP16 million for H1 2023 up
from GBP14 million for H1 2022, reflecting a quarterly dividend of
16.0p per share in line with stated targets.
Future Developments
-- Enhanced balance sheet strategy by enabling increased
exposure to Pollen Street funds allowing greater alignment and
accelerating third-party AUM.
-- The Group remains well positioned to continue to drive
long-term organic growth and close the year in line with
expectations and reiterates medium term guidance.
Shareholder Proposals
-- The Company expects to shortly publish a shareholder
circular, inviting shareholders to vote at a General Meeting on 11
October on proposals previously announced to change its listing
category to that of a commercial company from an investment company
and introduce a Guernsey holding company to simplify the Group
structure.
-- The purpose of these proposals is to better reflect the
Group's operations as a commercial enterprise, broaden the universe
of potential investors, i mprove the marketability and liquidity of
Pollen Street shares, and bring the listing classification in line
with our quoted peer group.
The Interim Accounts can be found on the website Financial
information | Pollen Street Group
Commenting on the H1 2023 performance, Lindsey McMurray, Chief
Executive Officer, said:
"I'm pleased with the performance in the first half of the year,
driven by the unique combination of strong growth from our asset
management business and robust performance from the investment
company. Across our Private Equity and Private Credit strategies we
maintain our track record of deployment and performance and we're
encouraged to see Proforma AUM grow to GBP4.2 billion. We've
demonstrated clear progress in delivering our strategy and our
business has shown resilience in the changing macro environment.
I'm confident we will see further progress as we head into the
second half of the year and as we seek to take advantage of our
organic growth opportunities."
For investors:
A presentation and Q&A will be held for analysts at 9 AM on
18 September 2023.
Register for the webinar:
https://2023resultswebinar.pollenstreetgroup.com
The full presentation is available for on the website
http://www.pollenstreetgroup.com/shareholders
About Pollen Street plc
Pollen Street plc is an alternative asset manager dedicated to
investing with the financial and business services sectors across
both Private Equity and Private Credit strategies. The business was
founded in 2013 and has consistently delivered top tier returns
alongside growing AuM.
Pollen Street benefits from a complementary set of asset
management activities focused on managing third-party AuM (the
"Asset Manager") together with on-balance sheet investments (the
"Investment Company").
The Asset Manager raises capital from top tier investors and
deploys it into its Private Equity and Private Credit strategies.
The strong recurring revenues from this business enable us to
deliver scalable growth.
The Investment Company invests in strategies aligned with core
strategies of the group and today the investment portfolio is
aligned with the private credit strategy. The portfolio is a
well-diversified pool of primarily senior credit assets to high
quality borrowers generating strong returns together with capital
preservation. The portfolio consists of both direct investments and
investments in funds managed by Pollen Street.
POLN is listed on the London Stock Exchange (ticker symbol:
POLN). Further details are available at www.pollencap.com .
For further information about this announcement please
contact:
Barclays Bank plc - Joint Broker
Neal West / Stuart Muress / Dion Di Miceli
+44 (0)20 7623 2323
Liberum Capital Limited - Joint Broker
Chris Clarke / Edward Mansfield / Anake Singh
+44 (0)20 3100 2000
FGS Global
Chris Sibbald
Chris.Sibbald@fgsglobal.com
+44 (0)7855955531
Link Company Matters Limited - Corporate Secretary
polncosec@linkgroup.co.uk
Interim Accounts 2023
The Interim Accounts have been submitted in full unedited text
to the Financial Conduct Authority's National Storage Mechanism and
are available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism in
accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules. The Interim Accounts
are also available to view and download from the Company's website
https://ir.pollenstreetgroup.com/investors/financial-information/
Neither the contents of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into or forms part of this
announcement.
The information set out below does not constitute the Company's
statutory accounts for the year ended 31 December 2022 but is
derived from those accounts. Statutory accounts for the year ended
31 December 2022 will be delivered to the Registrar of Companies in
due course. The Group's auditors have reported on those accounts:
their report was (i) unqualified, (ii) did not include a reference
to any matters to which the Auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain
a statement under Section 498 (2) or (3) of the Companies Act
2006.
The following text are selected extracts from the Interim
Accounts.
Pollen Street at a Glance
Pollen Street plc ("Pollen Street" or the "Company") is an
alternative asset manager dedicated to investing within the
financial and business services sectors across both Private Equity
and Private Credit strategies. The business was founded in 2013 and
has consistently delivered top tier returns alongside growing
assets under management ("AuM").
Pollen Street benefits from a complementary set of asset
management activities focused on managing third-party AuM (the
"Asset Manager") together with on-balance sheet investments (the
"Investment Company").
The Asset Manager raises capital from top tier investors and
deploys it into its Private Equity and Private Credit strategies.
The strong recurring revenues from this business enable us to
deliver scalable growth.
The Investment Company invests in the strategies of the Group
delivering attractive risk adjusted returns. Today the portfolio is
a well-diversified pool of primarily senior asset-backed credit
assets generating strong returns at conservative loan to value
ratios ("LTVs"). The portfolio consists of both direct investments
and investments in funds managed by Pollen Street.
We continue to see the benefits of the combination of the Asset
Manager and the Investment Company (the "Combination") whereby the
Investment Company will serve to accelerate growth in third-party
AuM of the Asset Manager through helping to scale existing funds
and seed new strategies.
Key Figures ([1])
-- Assets under management ("AuM") - GBP3.4 billion (31 December 2021: GBP3.4 billion)
-- Proforma AuM - GBP4.2 billion Including Private Equity V and the Continuation Vehicle
-- Operating profit - GBP19.4 million (Six months ended 30 June 2022: GBP13.7 million)
-- EBITDA - GBP20.6 million (Six months ended 30 June 2022: GBP13.7 million)
-- Net Investment Asset Return - 9.1% (Six months ended 30 June 2022: 7.8%)
CEO Report
Lindsey McMurray - Chief Executive Officer
I am pleased to present these Interim Report for the six months
to June 2023, and to demonstrate the clear progress in delivering
on the strategy that we set out when we completed the Combination
in September 2022, as well as the resilience of our business and
our strategies in the changed macro environment. This is evident in
our performance for the first half of 2023. Despite difficult
market conditions we have delivered clear progress towards our
ambitions for the year, alongside consistent financial performance.
Performance across both strategies has been strong, maintaining our
top tier, through-cycle track record as we seek to identify and
build the next generation of leaders in financial services.
And with this, our fundraising efforts continue to build
success. We completed the final close of Private Credit III in
April 2023. Total investor commitments into the fund are now GBP0.4
billion and together with our separately managed accounts ("SMAs"),
we have GBP1.1bn of commitments to our Private Credit strategy as
at 30 June 2023. Supported by strong origination, Private Credit
III is now close to fully invested and we will be launching Private
Credit IV in the fourth quarter of 2023. We have also completed the
first close of Private Equity V. We are thrilled with the support
we have received from both existing and new investors and expect to
build on this strong first close over the coming months. We remain
confident in reaching the target fund size for Private Equity V. We
have also launched a new continuation fund to raise GBP0.8 billion
under our Private Equity strategy to enable us to continue to
support and grow two of our high performing portfolio
companies.
The Company expects to shortly publish a shareholder circular,
inviting shareholders to vote at a General Meeting on 11 October on
proposals previously announced to change its listing category to
that of a commercial company from an investment company and
introduce a Guernsey holding company to simplify the Group
structure. The purpose of these proposals is to better reflect the
Group's operations as a commercial enterprise, broaden the universe
of potential investors, improve the marketability and liquidity of
Pollen Street shares and bring the listing classification in line
with our quoted peer group.
Executing on our potential as Pollen Street plc
Pollen Street offers a unique combination of high quality,
stable income and growth of long-term recurring fee income. The
Group benefits from a complementary and synergistic set of asset
management activities focused on managing third-party assets under
management, referred to as AuM (the "Asset Manager") and on-balance
sheet investments (the "Investment Company") aligned to the
Company's investment strategies. The Asset Manager provides
exposure to high margin, capital light recurring revenue streams.
The Investment Company portfolio generates stable returns through
investments primarily aligned to our strategies.
Our Private Equity and Credit strategies are well-established,
with the core team having worked together for over 17 years. Pollen
Street was founded as a financial and business services specialist
and our deep industry expertise drives our performance. We have a
proven track record of strong returns at low risk, delivering for
our growing blue chip investor base. The Asset Manager business has
continued to build on this strong track record and to execute
against our targets for the year.
Our Private Equity strategy is aligned with the key megatrends
driving change across the industry: digital transformation,
unbundling of financial services, favourable regulation and the
green transition. We aim to work with great management teams to
build the next generation of leaders in their fields. Our thematic
origination identifies a pipeline of fast-growing,
technology-enabled businesses with solid foundations for us to
build customer-centric, data-driven organisations who can become
market leaders. We invest based upon core thematics that are
driving the sector as a whole and we work together with these
businesses to drive technological & digital advancement,
international and product development, buy and build strategies and
ESG initiatives.
Our credit strategy provides asset-based lending facilities
primarily to non-bank lenders, leasing businesses, technology
companies, and/or other companies with diverse portfolios of
financial or hard assets that generate contractual cashflows. This
market serves as a financing mechanism for many fundamental parts
of our society including cars, homes, businesses machinery, credit
card balances and corporate receivables. Within this large and
diverse market Pollen Street is able to be highly selective in its
approach, leveraging the team's extensive experience and track
record to deliver superior returns with controlled risk. Our key
themes include: SME loans; mid-market residential family homes,
government backed receivables and electric vehicle fleet
financings.
Our credit strategy delivers significant credit protection
through both asset security and transaction structuring and is
built to withstand highly stressed scenarios, enabling us to keep
delivering strong and stable performance through cycles. Our
proprietary data systems and comprehensive data collection provide
us with regular and detailed information, and strong transparent
relationships with our borrowers enable us to closely monitor
underlying performance.
We welcomed three new companies to the private equity portfolio,
2 to Private Equity IV, rounding out the portfolio for that fund
and the first investment into Private Equity V: Finsolutia, a
European technology-driven credit and real estate platform; Wide, a
leading innovative technology-led insurance broker in Italy; and
Assessio, a leading talent assessment software platform in the
Nordics and Benelux. We also announced the first exit in Private
Equity IV, Pacific Fund Systems, in just over two years. In Credit
we have originated or repriced five deals over the period. The
continuation vehicle will also lead to the disposal of Aryza for
fund III and Markerstudy for Fund IV
Overall, the Asset Manager business is well-positioned to drive
further growth. Our core strategies are performing well,
demonstrating resilience in the current macro-economic environment
and alongside good momentum in fundraising.
In our Investment Company the portfolio continued its track
record of strong performance throughout the first half of the year
and delivered Net Investment Asset Return of 9.1 per cent. driven
by increasing interest rates on our predominantly floating rate
portfolio.
We continue to see the benefits of t he combination of the Asset
Manager and the Investment Company whereby the Investment Company
will serve to accelerate growth in third-party AuM of the Asset
Manager through helping to scale existing funds and seed new
strategies.. We highlighted at the time of the merger that we
expected to transition the investment company from holding direct
investments in transactions to holding investments in Pollen Street
funds. This transition has started with 15% of the assets held in
funds that Pollen Street manage with a near term expectation that
the allocation will increase through commitments in the recently
closed Continuation fund, PE V and Credit IV. We believe that this
creates strong alignment and synergies whereby the investment
company enjoys the returns generated by these investments while
helping each of the funds reach scale and providing a catalyst for
raising additional third-party capital - in turn driving higher
management fee income. We would expect fund investments to
represent a majority of the investment company assets over
time.
Delivering consistent performance
Pollen Street delivered consistent financial performance in the
first six months of 2023 ("H1 2023"). The Group's operating profit
has increased to GBP19.4 million, up 42 per cent from the operating
profit in H1 2022 of GBP13.7 million.
The main drivers of this increase were the operating profit from
the Asset Manager segment with growth in Fee-Paying AuM in the
Credit strategy of 40 per cent per annum reaching GBP1.4 billion
for the six months ended at 30 June 2023. Fund Management EBITDA
has grown by 41 per cent from H1 2022 of GBP3.7 million to H1 2023
of GBP5.2 million.
Our Investment Asset portfolio continued its track record of
performance throughout the first half of the year and delivered Net
Investment Asset Return of 9.1 per cent. The increase was driven by
increasing interest rates on our predominantly floating rate
portfolio.
We continue to be mindful of the disconnect between the share
price and the fundamental value of the Group. We continue to
discuss this matter with the Board, advisers and shareholders.
However, we are focused on our strategy of delivering substantial
growth in the business to drive further investor interest in Pollen
Street shares.
Committed to driving progress and transparency in ESG
At Pollen Street we are passionate about the work that we do and
the potential for positive impact through that work for investors,
people, portfolio companies and wider society.
Sustainability and long-term thinking are key elements to our
investment strategy. Earlier this year, we released our ESG report
for 2022, reflecting on the progress we have made towards our
targets and sharing more detail of how we work with portfolio
companies to:
-- reach carbon neutrality;
-- set diversity and inclusion targets; and
-- promote the strongest possible governance standards.
Read more in our 2022 ESG Report, which is available on our
website https://www.pollenstreetgroup.com/
Good momentum for the remainder of 2023
With the foundations of a successful first half of the year, we
have delivered in line with market expectations and continue to
drive long-term organic growth. Our key priorities for the second
half of 2023 are:
-- continue to raise Private Equity V building on the first
close of Private Equity V and the Continuation Vehicle;
-- continue to build AuM steadily in Credit;
-- maintain our track record of deployment and performance across our strategies;
-- build cross product relationships with strategic investors;
-- continue our track record of delivery in the Investment Company; and
-- deliver operational leverage through our platform as we continue to grow AuM.
I want to thank our fund investors and shareholders for their
support; our team for all their hard work to achieve this strong
start to the year; and the Board for its guidance. As I look
forward to the rest of 2023, I am confident in our potential for
continued growth and consistent delivery for our investors and
shareholders.
Lindsey McMurray
Chief Executive Officer
15 September 2023
CFO Report
Julian Dale - Chief Financial Officer
I am pleased to present Pollen Street's Interim Report for the
first half of 2023. It has been a successful period with strong
fund raising performance, stability in our financial performance
and progress towards our targets for the year.
There has been a lot of activity over 2023, with the final close
of Private Credit III bringing total investor commitments in this
fund to GBP0.4 billion as at 30 June 2023. Increasingly, investors
have elected to invest with Pollen Street in separately managed
accounts ("SMAs") rather than through the comingled fund. Total
investor commitments across Private Credit III and the credit SMAs
was GBP1.1 billion as at 30 June 2023.
We have also completed the first close of Private Equity V in
early July. The fee rates on this fund are in line with our
historic rates and we have good visibility over additional closes.
First close sets the date from which the Group charges fees for all
investors, including in subsequent closes and so this gives us a
good line of sight to future revenue growth.
Finally, we have also launched a new continuation fund in early
September to raise GBP0.8 billion to acquire two high-performing
companies from our existing funds to enable us to continue to
support and grow them. It will generate approximately GBP5 million
of revenue for the Group following completion, which is expected
towards the end of the year.
Private Equity V together with the continuation fund, brings
proforma AuM to GBP4.2 billion. We are pleased with the strong
support from new and existing investors at this stage of our
fundraise. We expect to build investor commitments over the coming
months and remain confident in delivering total commitments in line
with the target size for Private Equity V.
Income on Net Investment Assets within the Investment Company
was GBP15.4 million (H1 2022: GBP13.7 million). This increase in
income reflects the impact of increased interest rates together
with resilient credit performance. The Tangible NAV per share as at
30 June 2023 was 542p (31 December 2022: 540p), reflecting the
stability of the investment portfolio.
The operating profit for the Group was GBP19.4 million for H1
2023 (H1 2022: GBP13.7 million). This represents a material
increase in operating profit. The main drivers of this were the
operating profit from the Asset Manager segment of GBP5.8 million
(H1 2022: nil) and growth in the operating profit of the Investment
Company reflecting the impact of increasing interest rates together
with resilient credit performance.
The statutory results for the six months ended 30 June 2023 are
referred to as "H1 2023"; the six months ended 30 June 2022, "H1
2022" and the 12 months ended 31 December 2022, "FY 2022". In
addition to the statutory results, we also present proforma results
for the Group for H1 2022 that incorporate the earnings from the
Asset Manager as if the Combination had completed prior to the
start of the period, referred to as "Proforma H1 2022". This basis
explains the performance of the combined entity more fully because
it includes a full history of Pollen Street Capital Holdings
Limited and its subsidiaries.
Asset Manager growth
Assets under management are tracked on a total AuM and
fee-paying basis. Total AuM broadly tracks the commitments that
investors have made into funds managed by the Asset Manager,
whereas the Average Fee-Paying AuM tracks the basis on which the
Group earns management fees, with the average calculated from the
opening and closing positions. For Private Equity, the Fee-Paying
AuM is the committed capital in the funds, moving to invested
capital at the point when the subsequent fund holds its first
close. Co-investment vehicles are typically non fee paying.
Fee-Paying AuM for Private Credit is the net invested amount.
The momentum in deployment under the Credit strategy continued
in the first half of 2023, with Average Fee-Paying AUM for the
Credit strategy reaching GBP 1.4 billion for H1 2023 (H1 2022:
GBP1.0 billion). This represents a growth rate of 40 per cent.
Private Equity constituted GBP1.1 billion of the Asset Manager's
Average Fee- Paying AuM over H1 2022 (Proforma H1 2022: GBP1.1
billion) reflecting the stability of the fee basis for this
strategy. Private Equity Average Fee-Paying AuM has stepped up with
the closing of Private Equity V.
Average Fee-Paying AuM H1 2023 Proforma
H1 2022
(GBP billion) (GBP billion)
========================= ==== =============== ===============
Private Equity 1.1 1.1
Credit 1.4 1.0
=============================== =============== ===============
Total AuM 2.5 2.1
=============================== =============== ===============
Total AuM was GBP3.4 billion as at 30 June, increasing to GBP4.2
billion on a proforma basis (31 December 2022: GBP3.4 billion) with
a further step-up in AuM expected in the second half of 2023 as
fund raising for Private Equity V continues.
The Asset Manager segment delivered GBP5.8 million of Operating
Profit over H1 2023. The statutory Operating Profit for the Asset
Manager for H1 2022 was nil given that the Combination completed on
30 September 2022. Statutory comparable financial metrics for the
Asset Manager are not listed in the remainder of this report given
they are nil or not applicable. The Operating Profit for the Asset
Manager on a proforma basis for H1 2022 was GBP4.2 million. The
Group tracks the performance of this segment using Fund Management
EBITDA, which is the Operating Profit less the accounting cost of
the office lease[2], which was a GBP0.6 million charge for H1 2023
(Proforma H1 2022: GBP0.5 million). Fund Management EBITDA has
grown by 41 per cent from GBP3.7 million for Proforma H1 2022 to
GBP5.2 million for H1 2023.
The EBITDA growth is driven by Total Income growing at 23 per
cent to GBP21.7 million for H1 2023 (Proforma H1 2022: GBP17.6
million). Fund Management Income comprises management fees,
performance fees and income from carried interest. Revenue growth
has been driven by increases in the Group's Average Fee-Paying AuM
and income from carried interest.
Fund Management Administration Costs were GBP15.9 million for H1
2023 (Proforma H1 2022: GBP13.4 million). This represents an
increase of 19 per cent, driven predominantly by incremental
headcount growth. This moderate increase reflects a well-invested
cost base, leading to a high drop through from incremental revenue
to profitability. We have continued to invest in headcount in the
Investor Relations team to support capital raising across the Group
and to internalise some capital raising costs. This will increase
the capacity and improve the efficiency of capital raising in the
longer-term with some modest overlap in costs in the shorter-term.
We are also investing in dedicated talent in adjacent strategies to
support growth in the business.
Asset Manager Profitability H1 2023 Proforma
H1 2022
(GBP million) (GBP million)
============================== ================ ================
Total Income 21.7 17.6
Administration Costs (15.9) (13.4)
============================== ================ ================
Operating Profit 5.8 4.2
Depreciation of lease
asset (0.6) (0.5)
============================== ================ ================
Fund Management
EBITDA 5.2 3.7
============================== ================ ================
The Management Fee Rate for H1 2023 was 1.30 per cent. This is
consistent with the performance over H1 2022 on a Proforma Basis
(1.27 per cent). It is also within the range of our medium-term
guidance of 1.25 per cent to 1.5 per cent.
Performance fees and carried interest for H1 2023 were 25 per
cent of Fund Management Income for the period. This is at the upper
end of the long-term guidance range of 15 per cent to 25 per cent
and reflects stable performance fee and carry valuation growth
despite turbulent markets.
The Fund Management EBITDA Margin was 24 per cent for H1 2023
(Proforma H1 2022: 21 per cent). We expect EBITDA margin to
increase as the Group increases its revenue by raising additional
funds such as Private Equity V. We have guided to a Fund Management
EBITDA Margin above 50 per cent in the long-term.
Asset Manager Financial H1 2023 Proforma
Ratios H1 2022
=========================== ======== =========
Management Fee Rate
(% of Average Fee-Paying
AuM) 1.30% 1.27%
=========================== ======== =========
Performance Fee Rate
(% of Fund Management
Income) 25% 23%
=========================== ======== =========
Fund Management EBITDA
Margin
(%of Fund Management
Income) 24% 21%
=========================== ======== =========
Investment Company resilience
The Group's GBP561 million investment portfolio is well
diversified across deals and borrowers and is 97 per cent invested
in Credit Assets originated under our Credit strategy. Our
Investment Asset portfolio maintained its track record of
performance throughout the year and delivered Net Investment Asset
Return of 9.1 per cent per annum. This return is up from 7.8 per
cent per annum in H1 2022 and the highest return delivered by the
Investment Company in recent history. The step-up was driven by
higher returns on new investments as capital is recycled from
investments made and hedged in a different rate environment. The
Group has maintained its high level of deployment with a net
debt-to-tangible-equity ratio of 63 per cent as at 30 June 2023 (31
December 2022: 69 per cent), which is within the target range of 50
per cent to 75 per cent.
The Investment Company performance is consistent with the
historic track record and our guidance previously issued. We
believe that our Investment Asset portfolio strategy, combining
bespoke structuring and built to withstand highly stressed
scenarios with backing by diverse pools of financial and hard
assets, enables us to deliver consistent performance despite the
more challenging macroeconomic backdrop.
Annualised Net Investment Asset Returns since 2018
Note: The chart above shows annualised return, presented on a
semi-annual basis of the Net Investment Asset Returns for H1 2022
and subsequent periods and the NAV Return prior to this.
The income on Net Investment Assets was GBP15.4 million (H1
2022: GBP13.7 million). This increase in income reflects the impact
of increased interest rates together with resilient credit
performance.
Investment Company Segment H1 2023 H1 2022
================================= =============== ===============
Investment Assets GBP561 million GBP583 million
Average Net Investment Assets GBP343 million GBP359 million
GBP15.4 GBP13.7
Income on Net Investment Assets million million
Return on Net Investment Assets 9.1% 7.8%
================================= =============== ===============
This robust performance was driven by strong credit asset return
of 11.2 per cent annualised (H1 2022: 9.0 per cent). The credit
impairment charge for the period was minimal, a release of GBP0.3
million (H1 2022: GBP0.1 million). The low impairment charge,
despite the macroeconomic headwinds, reflects Pollen Street's
underwriting approach where the deals are stress tested to
withstand a materially more adverse macroeconomic environment than
has occurred over 2022.
The Tangible NAV per share as at 30 June 2023 was 542p (31
December 2022: 540p), reflecting the stability of the investment
portfolio.
Profit after tax
The profit before tax for the Group was GBP18.4 million for H1
2023 (H1 2022: GBP13.7 million). This represents a material
increase in profits. The main drivers of increase were the
operating profit from Asset Manager segment of GBP5.8 million (H1
2022: nil; Proforma H1 2022: GBP4.2 million) and growth in the
operating profit of the Investment Company reflecting the impact of
increasing interest rates.
The operating loss of the Central segment was GBP1.8 million.
This relates to start-up losses of the US asset management business
and exceptional costs incurred in the period. The US business
comprises a team of six individuals building our franchise in that
market. The start-up losses are expected to reduce as the US
business increases revenue.
The charge for depreciation and amortisation was GBP1.0 million.
This principally relates to a charge of GBP0.6 million per annum
associated with the amortisation of the intangible assets
representing the value of customer relationships in addition to
depreciation of the Group's fixed assets.
The Investment Company has not incurred corporation tax, because
it is an investment trust. However, the Group incurs corporation
tax in its Asset Manager business, which is not an investment
trust. The effective tax rate for H1 2023 was 16 per cent of
Operating profit of the Asset Manager. This is slightly favourable
compared to the illustrative tax rate described in the capital
markets day presentation.
H1 2023 Statutory Proforma
H1 2022 H1 2022
(GBP million) (GBP million) (GBP million)
================================ ================ ================ ================
Operating profit of Asset
Manager 5.8 - 3.7
Operating profit of Investment
Company 15.4 13.7 13.7
Operating loss of Central
segment (1.8) - (0.8)
Operating profit of
Group 19.4 13.7 16.6
Depreciation and amortisation (1.0) - (0.2)
================================ ================ ================ ================
Profit before tax 18.4 13.7 16.4
Corporation tax (0.9) - (0.6)
================================ ================ ================ ================
Profit after tax 17.5 13.7 15.8
================================ ================ ================ ================
Leverage
The Group uses leverage in the Investment Company. As at 30 June
2023 the Group had GBP236.2 million of leverage and GBP15.7 million
of cash. This is equivalent to a net debt-to-tangible equity ratio
of 63 per cent (31 December 2022: 69 per cent). It is less than the
borrowing limit set by the Board of 100 per cent and within the
target range of 50 to 75 per cent.
Dividends
Pollen Street declared dividends of GBP16 million for H1 2023,
an increase of GBP2 million from H1 2022 (GBP14 million). This was
in line with the dividend targets previously issued by the Board on
1 March 2022. This reflects a quarterly dividend 16.0p per share
for H1 2023 (H1 2022: 20p per share) and the dividend is fully
covered by the profit after tax of the Group (GBP17.5 million).
The Board's dividend targets published in March 2022 remain in
place. Dividends for 2023 are targeted at GBP32 million with the
Group aiming to grow dividends progressively thereafter, with a
dividend no lower than GBP33 million in 2024. The dividend will be
paid quarterly for 2022 and 2023, and semi-annually from 2024
onwards.
As part of the terms of the Combination, former Pollen Street
Capital Holdings Limited shareholders waived dividends paid to them
in 2022 and 2023 with respect to approximately 50 per cent of the
shares issued to them by the Group. As such, the dividend targets
correspond to a dividend per share of 16p for each quarter for 2023
and at least 25.5p for each half year for 2024.
Outlook
The Group remains in a strong position for growth in 2023 and
beyond. Fund Management Income is expected to step up as Private
Equity V is raised and continued capital deployment under the
Credit strategies. The balance sheet assets have strong downside
protection from credit risk and are positioned to benefit from
rising interest rates.
We remain confident in delivering earnings in line with the
consensus of equity analysts forecasts for 2023 and our financial
guidance for the medium term remains in place. The medium-term is
defined as two to three years from completion of the Combination,
being 30 September 2022.
Financial Guidance
=========================== =========================================
AuM GBP4 to GBP5 billion medium-term
Fee-Paying AuM
=========================== =========================================
Management Fee Rates c.1.25%-1.50% Average Fee-Paying
AuM over the long term
=========================== =========================================
Performance Fees and Carry c.15%-25% of total Fund Management
Income on average over the long term
=========================== =========================================
Fund Management EBITDA Long-term fund management adjusted
Margin EBITDA margin in excess of 50%
=========================== =========================================
Net Investment Income c.8% long-term target return on net
investment assets
=========================== =========================================
Dividend Targeted at GBP32 million in respect
of 2023 and no lower than GBP33 million
in 2024
=========================== =========================================
Julian Dale
Chief Financial Officer
15 September 2023
Investment Company top ten holdings
Country Deal Sector Value Percentage
Type of Holding LTV of Investment
at Year-end Assets
(GBPm)
=== ==================== ============== ============== ================= ============= ====== ===============
Short Term
United Property
1 Beaufort Kingdom Senior Loans 61.9 64% 11.4%
=== ==================== ============== ============== ================= ============= ====== ===============
Short Term
United Property
2 Sancus Kingdom Senior Loans 60.0 64% 11.1%
=== ==================== ============== ============== ================= ============= ====== ===============
Creditfix United Discounted
3 Limited Kingdom Senior Fee Receivables 48.1 46% 8.9%
=== ==================== ============== ============== ================= ============= ====== ===============
Pollen Street Diversified
4 Credit III LP Investment LP Investment Credit 42.9 n/a 7.9%
=== ==================== ============== ============== ================= ============= ====== ===============
Short Term
UK Agricultural United Property
3 Loans Limited Kingdom Senior Loans 37.0 52% 6.8%
=== ==================== ============== ============== ================= ============= ====== ===============
IWOCA Loans United
6 Limited Kingdom Senior SME 31.7 89% 5.8%
=== ==================== ============== ============== ================= ============= ====== ===============
Short Term
Downing Development United Property
7 Loans Kingdom Senior Loans 27.4 67% 5.1%
=== ==================== ============== ============== ================= ============= ====== ===============
United
8 Nucleus Limited Kingdom Senior CBILS SME 21.6 93% 4.0%
=== ==================== ============== ============== ================= ============= ====== ===============
United Secured
9 GE Portfolio Kingdom Secured Consumer 21.4 59% 3.9%
=== ==================== ============== ============== ================= ============= ====== ===============
United Micro Mobility
10 Tier Kingdom Senior Fleet Finance 19.0 57% 3.5%
=== ==================== ============== ============== ================= ============= ====== ===============
Data as at 30 June 2023
Environmental, Social and Governance ("ESG")
Our approach to ESG
At Pollen Street, we have a proud history of thinking, behaving
and investing responsibly. We believe in the potential for positive
impact through the work that we are passionate about. We are
committed to maintaining and enhancing our focus on actions that
generate positive impact for our investors, people, portfolio and
wider society.
In the first half of 2023, Pollen Street continued to make
progress, helping portfolio companies to achieve their
sustainability goals. This has been achieved through the spotlight
on data and scoring, cross-portfolio collaboration, and effective
monitoring and measurement through KPIs and ESG ratchets.
Highlights in the first half of the year include:
-- Continued focus on ESG measurement: This was the second year
of using ESG scores in our proprietary data model. This allows us
to both rank and score our investments across our Credit and
Private Equity portfolios as well as tracking progress against the
previous year. All Private Equity companies improved their scores
compared to the prior year, and we use the scoring to roll out ESG
ratchets with borrowers in Credit.
-- Strengthening approaches to climate risk and working towards
Net Zero: We maintained carbon neutral status for 2022 emissions.
As part of our collaboration with the Initiative Climat
International, we are further challenging ourselves and supporting
the drive to create a common understanding of what net zero really
means, using a decarbonisation roadmap to show the portfolio's
progress against targets. We are also strengthening approaches to
understand and mitigate climate risks as per the Task Force on
Climate-Related Financial Disclosures ("TCFD") framework, including
scenario analysis.
-- Advancing Diversity, Equity and Inclusion ("DEI") as an
industry role model: Findings from our annual DEI survey show
continued improvement in representation across gender, ethnic
minorities and socio-economic background. The survey revealed an
increase of state educated team members from 64 per cent to 66 per
cent. In contrast, for Private Equity as an industry, 70 per cent
of employees are private school educated (source: Sutton Trust).
The percentage of team members from ethnic minorities also
increased from 17 per cent to 23 per cent.
Pollen Street's latest ESG report was published in June
The latest Pollen Street ESG report provides results of our
portfolio ESG scoring and deep dives on our Environmental, Social
and Governance pillars, with highlights of progress against
targets. It also includes examples of ESG impact across the Private
Equity and Credit strategies.
The report also includes spotlights on key themes: caring as a
core value, building better places to work and creating more
sustainable businesses.
Our ESG Strategy
Our ESG strategy is designed to deliver impact for the benefit
of all our stakeholders. We have a clear ambition with initiatives
across each of the Environment, Social and Governance areas. Below
we set out our key objectives, highlights and focus areas under the
Environmental, Social and Governance pillars.
ENVIRONMENT SOCIAL GOVERNANCE
AMBITION
Create a lasting Promote DEI and provide Regulatory best practice
environmental impact finance for through all operational
socially-impactful processes
products & propositions
--------------- -------------------------------- ---------------------------------- -------------------------------
Financial Inclusion
Fund green alternatives -
for sustainable homes loans and other financial
and transport products made available
to a broader audience
Enable SMEs to promote
growth and job creation
in Pollen Street's
markets
Creating opportunities
to reduce inequalities
- promoting diversity,
equity and inclusion
================================== ===============================
Minimise operational
carbon footprint,
supporting carbon
reduction plans and
net zero commitments
==================================
Consider climate ESG transparency
risk as part of investment with clear reporting
and risk management and communications
process
Effective AML & cyber
procedures and governance
Engagement with portfolio
companies on governance,
to identify gaps
and provide support
Responsible lending
- best practice amongst
our credit partners
=============== ================================ ================================== ===============================
RECENT
HIGHLIGHTS Third year of carbon 13 new credit facilities ESG margin ratchet
measurement to broaden social for seven new credit
impact facilities
Developed decarbonisation Strengthened community ESG scores improved
roadmap for Pollen & charity efforts in all PE companies
Street with Future First
and The Felix Project
Maintained carbon
neutral status for DEI initiatives across Delivered initial
2022 emissions firm and portfolio TCFD reporting
- Second year of
10,000 Black Interns
=============== ================================ ================================== ===============================
SHORT-TERM
FOCUS Strengthen carbon Broaden DEI targets Continue to enhance
measurement activities and measures oversight and regulatory
for carbon footprint, governance frameworks
including Scope 3 Collaborate with
emissions community partners Training and education
Formalise net zero to deliver impactful across the firm and
commitments for firm change portfolio
and portfolio
Strengthen supply
Continue to invest chain sustainability
in sustainable finance procedures
propositions
=============== ================================ ================================== ===============================
PRINCIPAL
SDG ALIGNMENT
=============== =====================================================================================================
RECOGNITION
=============== =====================================================================================================
Driving sustainability outcomes:
Commitment to positive ESG outcomes is manifested through direct
and measurable goals. Effective as of 2021, Pollen Street has set a
number of targets at both Group and portfolio level. These
include:
-- Pollen Street maintaining a carbon neutral status for each
year and working with our portfolio companies to be net zero within
five years of investment (for new investments after 2021);
-- Pollen Street is committed to promoting strong governance
throughout the portfolio including the universal inclusion of ESG
matters on all portfolio company board agendas.
To strengthen commitments to ESG and sustainability, we have
incorporated sustainability linked factors, including an ESG margin
ratchet mechanism into our new credit facilities as an incentive to
achieve ESG goals. Under this mechanism, Pollen Street provides
margin reductions on facilities, subject to the counterparty
improving their ESG score and achieving performance targets, such
as achieving net zero status, and there is a corresponding margin
increase if their scores do not improve or meet agreed
thresholds.
Looking ahead
As set out in the ESG report, we continue to strengthen
best-practice and collaboration across our ESG framework, with a
focus on improving the sustainability performance of our
investments, mitigating risks and creating value for our investors
and stakeholders. Focus areas include improvements to the reporting
and scoring mechanism, Governance structures and strengthening
approaches to assess and monitor supply chain sustainability as
well as ongoing stewardship activities across the Private Equity
and Credit portfolios.
Alison Collins
Head of ESG
15 September 2023
Risk Management & Principal Risks and Uncertainties
The Directors do not consider there to have been any material
changes to the principal risks and uncertainties since the 2022
Annual Report and Accounts were published and the Directors expect
the principal risks and uncertainties not to change over the second
half of 2023.
Details of the Group's approach to risk management is set out
within pages 55 to 62 of the 2022 Annual Report and Accounts, which
is available in the financial information section of the Group's
website.
The principal risks within the 2022 Annual Report and Accounts
include: economic & market conditions, fund raising, management
fee rates and other fund terms, recognition of performance fees and
carried interest, on balance sheet investment underperformance, ESG
and sustainability performance, talent and retention, information
security and resilience and reputational risk.
Statement of Directors' Responsibilities in Respect of the
Financial Statements
The Directors, being the persons responsible, confirm that to
the best of their knowledge:
a) the condensed set of Financial Statements contained within
the Interim Report have been prepared in accordance with UK-adopted
IAS 34 'Interim Financial Reporting', as required by the Disclosure
and Transparency Rule 4.2.4R, and gives a true and fair view of the
assets, liabilities and financial position of the Group;
b) the Interim Report includes a fair review, as required by
Disclosure and Transparency Rule 4.2.7R, of important events that
have occurred during the first six months of the financial year,
their impact on the condensed set of unaudited Financial
Statements, and a description of the principal risks and perceived
uncertainties for the remaining six months of the financial year;
and
c) the Interim Report includes a fair review of the information
concerning related parties' transactions as required by Disclosure
and Transparency Rule 4.2.8R.
Signed on behalf of the Board by:
Robert Sharpe
Chairman
15 September 2023
2. Unaudited Financial Statements
Unaudited Consolidated Statement of Comprehensive Income
For the period from For the period from
1 January 2023 to 30 1 January 2022 to 30
June 2023 June 2022
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================= ===== ======== ======== ======== ======== ======== ========
Management fee income 4 13,188 - 13,188 - - -
Carried interest
and performance fee
income 4, 7 3,771 - 3,771 - - -
Interest income on
Credit Assets held
at amortised cost 9 29,089 - 29,089 25,045 - 25,045
Gains on Investment
Assets held at fair
value 6 2,630 - 2,630 1,570 - 1,570
========================= ===== ======== ======== ======== ======== ======== ========
Total income 48,678 - 48,678 26,615 - 26,615
Credit impairment
release 9 289 - 289 128 - 128
Third-party servicing
costs (1,070) - (1,070) (1,134) - (1,134)
Net operating income 47,897 - 47,897 25,609 - 25,609
Administration costs 4 (18,309) - (18,309) (5,417) (78) (5,495)
Finance costs 4 (10,152) - (10,152) (6,369) - (6,369)
========================= ===== ======== ======== ======== ======== ======== ========
Operating profit 19,436 - 19,436 13,823 (78) 13,745
Depreciation (680) - (680) - - -
Amortisation 3 (320) - (320) - - -
Profit before tax 18,436 - 18,436 13,823 (78) 13,745
Tax (977) - (977) - - -
========================= ===== ======== ======== ======== ======== ======== ========
Profit after tax 17,459 - 17,459 13,823 (78) 13,745
========================= ===== ======== ======== ======== ======== ======== ========
Other comprehensive
income
Foreign currency
translation reserve (360) - (360) - - -
Total comprehensive
income 17,099 - 17,099 13,823 (78) 13,745
========================= ===== ======== ======== ======== ======== ======== ========
Earnings per share
(basic and diluted) 10 27.2 - 27.2p 39.3p (0.2)p 39.1p
========================= ===== ======== ======== ======== ======== ======== ========
The total column of this statement represents the statement of
comprehensive income prepared in accordance UK-adopted
International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those
standards. The supplementary revenue return and capital return
columns are both prepared under guidance issued by the Association
of Investment Companies ("AIC"). All items in the above statement
derive from continuing operations.
No operations were discontinued during the period.
The notes form an integral part of the financial statements.
Unaudited Consolidated Statement of Financial Position
Notes 30 June 2023 31 December 2022
GBP'000 GBP'000
================================================================= ===== ============ ================
Non-current assets
Credit Assets at amortised cost 9 481,002 523,877
Investment Assets held at fair value through profit or loss 6 79,807 64,506
Fixed assets 1,388 1,414
Goodwill and intangible assets 3 230,711 231,031
Lease assets 4,231 4,776
Carried interest 7 10,830 7,052
Deferred tax asset 537 -
================================================================= ===== ============ ================
Total non-current assets 808,506 832,656
Current assets
Cash and cash equivalents 16,704 23,303
Receivables 11 11,051 12,870
Derivative assets held at fair value through profit or loss 14 817 -
Total current assets 28,572 36,173
Total assets 837,078 868,829
Current liabilities
Payables 12 14,765 19,221
Lease payables 1,510 1,201
Current tax payable 2,547 2,158
Derivative liabilities held at fair value through profit or loss 14 - 916
Interest-bearing borrowings 8 42,912 60,598
================================================================= ===== ============ ================
Total current liabilities 61,734 84,094
Total assets less current liabilities 775,344 784,735
Non-current liabilities
Lease payables 3,241 4,067
Deferred tax liability - 94
Interest-bearing borrowings 8 193,297 203,035
================================================================= ===== ============ ================
Total non-current liabilities 196,538 207,19 6
================================================================= ===== ============ ================
Net assets 578,806 577 , 539
================================================================= ===== ============ ================
Shareholders' funds
Ordinary share capital 15 689 689
Share premium 299,599 299,599
Revenue reserves 3,990 2,363
Capital reserves (2,361) (2,361)
Other reserves 276,889 277,249
Total shareholders' funds 578,806 577,539
================================================================= ===== ============ ================
Net asset value per share (pence) 17 901. 4p 900.2
================================================================= ===== ============ ================
The notes form an integral part of the financial statements.
Unaudited Consolidated Statement of Changes in Shareholders'
Funds
For the period from 1 January 2023 to 30 June 2023
Foreign
Ordinary Special Currency
Share Share Revenue Capital Distributable Merger Translation Total
Capital Premium Reserves Reserves Reserves Reserves Reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================= ======== ======== ========= ========= ============== ========= ============ ========
Shareholders'
funds as
at
1 January ( 2,361
2023 689 299,599 2,363 ) 51,979 225,270 - 577 ,539
Profit after
taxation - - 17,459 - - - - 17,459
Foreign currency
translation
reserve - - - - - - (360) (360)
Dividends
paid in the
year - - (15,832) - - - - (15,832)
================= ======== ======== ========= ========= ============== ========= ============ ========
Shareholders'
funds as
at
30 June
2023 689 299,599 3,990 (2,361) 51,979 225,270 (360) 578,806
================= ======== ======== ========= ========= ============== ========= ============ ========
For the period from 1 January 2022 to 30 June 2022
Foreign
Ordinary Special Currency
Share Share Revenue Capital Distributable Translation Total
Capital Premium Reserves Reserves Reserves Reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
====================== ======== ======== ========= ========= ============== ============ ==========
Shareholders'
funds as at
1 January 2022 352 299,599 4,790 (2,244) 56,845 - 359,342
====================== ======== ======== ========= ========= ============== ============ ========
Ordinary shares
bought back (5) - - - (4,818) - (4,823)
====================== ======== ======== ========= ========= ============== ============ ========
Profit after taxation - - 13,823 (78) - - 13,745
====================== ======== ======== ========= ========= ============== ============ ========
Dividends paid
in the period - - (14,046) - - - (14,046)
====================== ======== ======== ========= ========= ============== ============ ========
Shareholders'
funds as at
30 June 2022 347 299,599 4,567 (2,322) 52,027 - 354,218
====================== ======== ======== ========= ========= ============== ============ ==========
The Company's capital reserve arising on investments sold and
revenue reserve may be distributed by way of a dividend. The
portion of capital reserve arising on investments held is wholly
non-distributable. There may be factors that restrict the value of
the reserves that can be distributed, and these factors may be
complex to determine. Amounts fully distributable may therefore not
be the total of the revenue reserve and the portion of the capital
reserve arising on investments sold.
The notes form an integral part of the financial statements.
Unaudited Consolidated Statement of Cash Flows
For the period from
1 January 2023 1 January 2022
to to
30 June 2023 30 June 2022
Notes GBP'000 GBP'000
================================================================= ===== ============== ==================
Cash flows from operating activities:
Profit after taxation 17,459 13,745
Adjustments for:
(Advances) / repayments of Investments at amortised cost 41,400 41,689
Change in expected credit loss 9 (289) (128)
Purchase of Investments at fair value 6 (24,325) (9,587)
Receipt of Investments at fair value 6 10,009 1,033
Net change in unrealised (gains)/losses 6 (1,527) (1,834)
Finance costs 4 10,152 6,369
Foreign exchange revaluation 2,290 955
Corporation tax (242) -
Change in carried interest (3,778) -
Depreciation of fixed assets 153 -
Depreciation of lease assets 545 -
Amortisation of intangible assets 3 320 -
(Increase) / Decrease in receivables 1,820 5,552
(Decrease) / Increase in payables (5,095) (3,700)
Decrease / (Increase) in derivatives (1,733) 587
Net cash inflow from operating activities 47,159 54,681
Cash flows from investing activities:
Cash acquired from Pollen Street Capital Holdings - -
Purchase of fixed assets (117) -
================================================================= ===== ============== ==================
Net cash (outflow) / inflow from investing activities (117) -
Cash flows from financing activities:
Redemption of shares - (4,820)
Transaction costs for issuance of shares - -
Drawdown of interest-bearing borrowings 8 17,000 -
Repayments of interest-bearing borrowings 8 (45,271) (31,372)
Interest paid on financing activities (9,178) (5,543)
Dividends paid in period 13 (15,832) (14,046)
================================================================= ===== ============== ==================
Net cash (outflow) from financing activities (53,281) (55,781)
Net change in cash and cash equivalents (6,239) (1,100)
Cash and cash equivalents at the beginning of the period 23,303 12,948
Foreign exchange gains and losses (360) -
================================================================= ===== ============== ==================
Cash and cash equivalents at the end of the period 16,704 11,848
================================================================= ===== ============== ==================
The notes form an integral part of the financial statements.
Notes to the Financial Statements
1. General Information
Pollen Street plc (the "Company" and together with its
subsidiaries the "Group") is a closed-ended investment company
incorporated in England and Wales on 2 December 2015 with
registered number 09899024. The registered office is 11-12 Hanover
Square, London, W1S 1JJ, United Kingdom. The Company commenced
operations on 23 December 2015 and carries on business as an
investment trust within the meaning of chapter 4 of Part 24 of the
Corporation Tax Act 2010.
The Group was formed through an all share combination of the
Company with Pollen Street Capital Holdings Limited (the
"Combination"). The Combination occurred on 30 September 2022 and
was effected by the Company acquiring 100 per cent of the share
capital of Pollen Street Capital Holdings Limited with newly issued
shares in the Company as the consideration. As such the financial
statements only incorporate Pollen Street Capital Holdings Limited
from 30 September 2022, the point at which it became a subsidiary
of the Company. The combined group was previously named Honeycomb
Investment Trust plc. It was renamed Pollen Street plc and together
with its subsidiaries is referred to as the "Group" or "Pollen
Street".
2. Principal Accounting Policies
Basis of accounting
The financial statements for the six-month period ended 30 June
2023 have been prepared on the basis of the policies set out in the
2022 Annual Report and Accounts and in accordance with UK adopted
IAS 34 and the Disclosure Guidance and Transparency Rules
sourcebook of the UK's Financial Conduct Authority.
The results for the six months ended 30 June 2023 constitute
non-statutory accounts within the meaning of Section 435 of the
Companies Act 2006 and have not been audited by the Group's
Auditor.
The financial statements need to be read in conjunction with the
Annual Report and Accounts for the year ended 31 December 2022,
which were prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those
standards.
The financial statements have been prepared on a going concern
basis and under the historic cost convention modified by the
revaluation of financial assets held at fair value through profit
and loss as applicable. The Directors consider that the Group has
adequate financial resources to enable it to continue operations
for a period of no less than 12 months from the reporting date.
Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements.
The principal accounting policies adopted by the Group are
consistent with those set out on pages 134 to 151 of the Annual
Report and Accounts for the year ended 31 December 2022. Where
presentational guidance set out in the Statement of Recommended
Practice ("SORP") for investment trusts issued by the Association
of Investment Companies ("AIC") in November 2014 is consistent with
the requirements of IFRS, the Directors have sought to prepare the
financial statements on a basis compliant with the recommendations
of the SORP.
All values are rounded to the nearest thousand pounds unless
otherwise indicated.
Significant Accounting Estimates and Judgements
The preparation of financial statements in accordance with both
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards requires the Group to make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting
period. UK company law and IFRS require the Directors, in preparing
the Group's financial statements, to select suitable accounting
policies, apply them consistently and make judgements and estimates
that are reasonable. The Group's estimates and assumptions are
based on historical experience and expectations of future events
and are reviewed on an ongoing basis. Although these estimates are
based on the Directors' best knowledge of the amount, actual
results may differ ultimately from those estimates.
The estimates of most significance to these financial
statements, are in relation to expected credit losses, Equity Asset
valuation, impairment assessment for goodwill and carried interest.
These have been applied consistently with the methodology detailed
in the Annual Report and Accounts on pages 152 to 156.
The judgements of most significance to the financial statements
are in relation to the consolidation of Group companies,
consolidation of fund investments, and accounting for carried
interest partnerships. These have been applied consistently with
the methodology detailed in the annual report on pages 156 to
157.
Estimates and judgements are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods
affected.
3. Goodwill and intangible assets
The table below shows the goodwill and intangible assets held by
the Group:
Group Goodwill Intangibles Total
GBP'000 GBP'000 GBP'000
================ ======== =========== ========
Cost
Balance as at
1 January 2023 227,191 4,000 231,191
Balance as at
30 June 2023 227,191 4,000 231,191
Amortisation
Balance as at
1 January 2023 - (160) (160)
Amortisation - (320) (320)
================= ======== =========== ========
Balance as at
30 June 2023 - (480) (480)
Net book value
as at 30 June
2023 227,191 3,520 230,711
================= ======== =========== ========
Group Goodwill Intangibles Total
GBP'000 GBP'000 GBP'000
=================== ======== =========== ========
Cost
Balance as at - - -
1 January 2022
Additions 227, 191 4, 000 231,191
Balance as at
31 December 2022 227, 191 4, 000 231,191
Amortisation
Balance as at - - -
1 January 2022
Amortisation - (160) (160)
==================== ======== =========== ========
Balance as at
31 December 2022 - (160) (160)
Net book value
as at 31 December
2022 227,191 3,840 231,031
==================== ======== =========== ========
4. Operating segments
The Group has two operating segments: the Asset Manager segment
and the Investment Company segment.
The Asset Manager segment is the activities of the Group that
provide investment management and investment advisory services to a
range of funds under management within Private Equity and Credit
strategies. The primary revenue streams for the Asset Manager
segment consist of management fees and performance fees or carried
interest. Fund management services are also provided to the
Investment Company segment, however fees from these services are
eliminated from the Group consolidated financial statements. Fund
Management EBITDA in the Strategic Report is equivalent to the
operating profit of the Asset Manager segment adjusted for the
depreciation of the lease asset.
The Investment Company segment holds the Investment Assets of
the Group. The primary revenue stream for this segment is interest
income and fair value gains on the Investment Asset portfolio. The
operating profit of the Investment Company segment is referred to
as the Income on Net Investment Assets in the Strategic Report.
For the period ended 30 June 2023
Group Asset Manager Investment Central Group
Company
GBP'000 GBP'000 GBP'000 GBP'000
=========================== ============= ========== ======= ========
Management fee income 16,176 - (2,988) 13,188
Carried interest and
performance fee income 5,512 - (1,741) 3,771
Interest income on Credit
Assets held at amortised
cost - 29,089 - 29,089
Gains on Investment Assets
held at fair value - 2,630 - 2,630
=========================== ============= ========== ======= ========
Total income 21,688 31,719 (4,729) 48,678
Credit impairment release - 289 - 289
Third-party servicing
costs - (1,070) - (1,070)
=========================== ============= ========== ======= ========
Net operating income 21,688 30,938 (4,729) 47,897
Administration costs (15,795) (5,555) 3,041 (18,309)
Finance costs (127) (10,025) - (10,152)
=========================== ============= ========== ======= ========
O perating profit 5,766 15,358 (1,688) 19,436
Depreciation (680) - - (680)
Amortisation - - (320) (320)
Profit before tax 5,086 15,358 (2,008) 18,436
=========================== ============= ========== ======= ========
For the period ended 30 June 2022
Group Asset Manager Investment Central Group
Company
GBP'000 GBP'000 GBP'000 GBP'000
=========================== ============= ========== ======= =======
Management fee income - - - -
Carried interest and - - - -
performance fee income
Interest income on Credit
Assets held at amortised
cost - 25,045 - 25,045
Gains on Investment Assets
held at fair value - 1,570 - 1,570
=========================== ============= ========== ======= =======
Total income - 26,615 - 26,615
Credit impairment release - 128 - 128
Third-party servicing
costs - (1,134) - (1,134)
=========================== ============= ========== ======= =======
Net operating income - 25,609 - 25,609
Administration costs - (5,495) - (5,495)
Finance costs - (6,369) - (6,369)
=========================== ============= ========== ======= =======
O perating profit - 13,745 - 13,745
Depreciation - - - -
Amortisation - - - -
Profit before tax - 13,745 - 13,745
=========================== ============= ========== ======= =======
5. Employees
The following tables show the average monthly number of
employees and the Directors during the year
For the period ended
Group 30 June 2023 30 June 2022
============================ ============ ============
Average number of staff
============================ ============ ============
Directors 7 4
Professional staff (the
average for the respective
period) 81 -
============================= ============ ============
Total 88 4
============================= ============ ============
The following table shows the total staff costs for the period.
This includes the Group's five Non-Executive Directors of Pollen
Street plc. The total number of employees and directors as at the
reporting date was 88 (30 June 2022: 4).
For the period ended
Group 30 June 2023 30 June 2022
============================= ============ ============
Staff costs GBP'000 GBP'000
============================= ============ ============
Wages and salaries 12,314 283
Social security
costs 1,874 -
Defined contribution pension
cost 86 -
============================== ============ ============
Total 14,274 283
============================== ============ ============
6. Investment Assets at Fair Value Through Profit or Loss
The following table shows the total Investment Assets at fair
value through profit or loss of the Group, which includes both
Equity Assets and Credit Assets.
Group Equity Credit Total Equity Credit Total
Assets Assets Assets Assets
30 30 June 30 June 31 December 31 December 31 December
June 2023 2023 2022 2022 2022
2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ======== ========= ========= ============ ============ ============
Fair value as at
1 January 16,449 48,057 64,506 15,659 33,111 48,770
Additions at cost - 24,325 24,325 790 13,008 13,798
Realisations at cost - (10,009) (10,009) - (1,033) (1,033)
Gains - 2,741 2,741 - 3,762 3,762
Realised gains - (1,214) (1,214) - (1,958) (1,958)
Foreign exchange revaluation - (542) (542) - 1,167 1,167
============================== ======== ========= ========= ============ ============ ============
Fair value as at
30 June 16,449 63,358 79,807 16,449 48,057 64,506
============================== ======== ========= ========= ============ ============ ============
Comprising:
Valued using an earnings
multiple 1,559 10,866 12,425 1,559 10,457 12,016
Valued using a TNAV
multiple 14,890 52,492 67,382 14,890 37,600 52,490
Fair value as at
30 June 16,449 63,358 79,807 16,449 48,057 64,506
============================== ======== ========= ========= ============ ============ ============
7. Carried interest
The following table shows the total value of the carried
interest held by the Group, which includes both the carried
interest at fair value through profit or loss and the carried
interest receivable:
As at
Group 30 June 2023 31 December
2022
===============================
GBP'000 GBP'000
=============================== ============= =================
Carried interest at fair
value 9,791 6,495
Carried interest receivable 1,039 557
=============================== ============= =================
Total value as at 31 December 10,830 7,052
=============================== ============= =================
8. Interest Bearing Borrowings
The table below sets out a breakdown of the Group's
interest-bearing borrowings.
As at
Group 30 June 2023 31 December 2022
GBP'000 GBP'000
======================== ============ ================
Current liabilities
Credit facility 42,548 60,379
Interest and commitment
fees payable 468 415
Prepaid interest
and commitment
fees (104) (196)
Total current
liabilities 42,912 60,598
Non-Current liabilities
Credit facility 193,776 204,234
Prepaid interest
and commitment
fees (479) (1,199)
Total non-current
liabilities 193,297 203,035
======================== ============ ================
Total interest-bearing
borrowings 236,209 263,633
======================== ============ ================
The table below shows the related debt costs incurred by the
Group during the period:
For the period ended
Group 30 June 2023 30 June 2022
GBP'000 GBP'000
======================== ============ ============
Interest and commitment
fees payable 9,234 5,581
Other finance charges 791 788
======================== ============ ============
Total finance
costs 10,025 6,369
======================== ============ ============
The table below shows the movements in interest-bearing
borrowings of the Group:
For the period ended
Group 30 June 2023 31 December 2022
GBP'000 GBP'000
============================== ============== ===================
Opening balance 263,633 267,657
Drawdown of interest-bearing
borrowings 17,000 76,925
Repayments of
interest-bearing
borrowing (45,271) (82,291)
Finance costs 10,025 14,517
Interest paid
on financing activities (9,178) (13,175)
============================== ============== ===================
Closing balance 236,209 263,633
============================== ============== ===================
The tables below analyse the Group's financial liabilities into
relevant maturity groupings.
As at 30 June 2023
More than 5 Total
< 1 year 1 - 5 years years GBP'000
Group GBP'000 GBP'000 GBP'000
======================== ======== =========== =========== ========
Credit facility 42,548 175,725 18,050 236,323
Interest and commitment
fees payable 364 (587) 109 (114)
======================== ======== =========== =========== ========
Total exposure 42,912 175,138 18,159 236,209
======================== ======== =========== =========== ========
As at 30 June 2022
More than 5 Total
< 1 year 1 - 5 years years GBP'000
Group GBP'000 GBP'000 GBP'000
======================== ======== =========== =========== ========
Credit facility 60,327 197,380 7,882 265,589
Interest and commitment
fees payable 271 (2,069) (158) (1,956)
======================== ======== =========== =========== ========
Total exposure 60,598 195,311 7,724 263, 633
======================== ======== =========== =========== ========
9. Credit assets at Amortised Cost
(a) Credit Assets at amortised cost
The disclosure below presents the gross carrying value of
financial instruments to which the impairment requirements in IFRS
9 are applied and the associated allowance for Expected Credit Loss
("ECL") provision. Please see Note 2 for more detail on the
allowance for ECL.
As at 30 June 2023
Group Gross Carrying Allowance Net Carrying Amount
Amount for ECL
GBP'000 GBP'000
GBP'000
============= ============== ========= ===================
Credit Assets at amortised cost
Stage 1 446,715 (1,013) 445,702
Stage 2 23,700 (668) 23,032
Stage 3 19,579 (7,311) 12,268
============= ============== ========= ===================
Total Assets 489,994 (8,992) 481,002
============= ============== ========= ===================
As at 30 June 2023
Group Stage
1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
==================================== ========= ========= ========= ============
As at 1 January 2023 1,013 678 7,590 9,281
Movement from stage 1 to
stage 2 (1) 109 - 108
Movement from stage 1 to
stage 3 - - 106 106
Movement from stage 2 to
stage 1 1 (133) - (132)
Movement from stage 2 to
stage 3 - (76) 170 94
Movement from stage 3 to
stage 1 - - (36) (36)
Movement from stage 3 to
stage 2 - 100 (142) (42)
Decreases due to repayments (6) (5) (196) (207)
Increases due to origination 87 - - 87
Remeasurements due to modelling (81) (5) (181) (267)
==================================== ========= ========= ========= ============
Allowance for ECL as at
30 June 2023 1,013 668 7,311 8,992
==================================== ========= ========= ========= ============
For the period ended 31 December 2022
Group Gross Carrying Allowance Net Carrying Amount
Amount for ECL
GBP'000 GBP'000
GBP'000
============= ============== ========= ===================
Credit Assets at amortised cost
Stage 1 512,030 (1,013) 511,017
Stage 2 6,878 (678) 6,200
Stage 3 14,250 (7,590) 6,660
============= ============== ========= ===================
Total Assets 533,158 (9,281) 523,877
============= ============== ========= ===================
For the period ended 31 December 2022
Group Stage
1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
==================================== ========= ========= ========= ============
As at 1 January 2022 952 946 8,888 10,786
Movement from stage 1 to
stage 2 (2) 197 - 195
Movement from stage 1 to
stage 3 (9) - 359 350
Movement from stage 2 to
stage 1 1 (242) - (241)
Movement from stage 2 to
stage 3 - (171) 314 143
Movement from stage 3 to
stage 1 - - (260) (260)
Movement from stage 3 to
stage 2 - 87 (190) (103)
Decreases due to repayments (167) (69) (419) (655)
Increases due to origination 20 - - 20
Remeasurements due to modelling 281 (6) 71 346
Loans sold (63) (63) (77) (203)
Loans written off - (1) (1,096) (1,097)
==================================== ========= ========= ========= ============
Allowance for ECL as at
31 December 2022 1,013 678 7,590 9,281
==================================== ========= ========= ========= ============
(b) Expected Credit Loss allowance for IFRS 9
Under the IFRS 9 expected credit loss model, impairment
provisions are driven by changes in credit risk of instruments,
with a provision for lifetime expected credit losses recognised
where the risk of default of an instrument has increased
significantly since initial recognition.
The following table analyses Group loans by stage:
For the period ended For the
30 June 2023 year ended
31 December
2022
Group
GBP'000 GBP'000
==================================== ========= =================
As at 1 January 2023 9,281 10,786
Charge for period - Stage 1 26 (108)
Charge for period - Stage 2 (58) (23)
Charge for period - Stage 3 (257) (75)
Release for period - total (289) (206)
Loans sold & write-offs - (1,299)
==================================== ========= =================
Allowance for ECL 8,992 9,281
==================================== ========= =================
10. Earnings per share
For the period ended
Group 30 June 2023 30 June 2022
============================ ============ ============
Revenue 27.2p 39.3p
Capital - (0.2)p
============================ ============ ============
Earnings per ordinary share 27.2p 39.1p
============================ ============ ============
The calculation for the six month period ended 30 June 2023 is
based on a revenue returns after tax of GBP17.5 million (six months
to 30 June 2022: GBP13.8 million) and capital returns after tax of
nil (six months to 30 June 2022: (GBP0.1) million) and total
returns after tax of GBP17.5 million (six months to 30 June 2022:
GBP13.7 million) and a weighted average number of ordinary shares
of 64,209,597 for the six months to 30 June 2023 (six months to 30
June 2022: 35,135,634).
11. Receivables
The table below sets out a breakdown of the Group
receivables:
As at
Group 30 June 2023 31 December 2022
GBP'000 GBP'000
=================== ============== ==================
Management fees
and performance
fees 3,577 1, 956
Amounts due from
debtors 1,904 1,659
Prepayments and
other receivables 5,570 9,255
Closing balance 11,051 12,870
=================== ============== ==================
12. Payables
The table below set out a breakdown of the Group payables:
As at
Group 30 June 2023 31 December 2022
GBP'000 GBP'000
=================== ============== ==================
Staff salaries
and bonuses 7,637 12,377
Audit fee accruals 496 863
Deferred income 117 964
Other payables 6,515 5,017
=================== ============== ==================
Total payables 14, 765 19,221
=================== ============== ==================
13. Ordinary dividends
The following table shows the dividends in relation to or paid
during 2023 and 2022.
Dividend Payment Date Amount per Total
Share GBP'000
(pence per
share)
================================ ============== =========== ========
Interim dividend for the period
to 31 December 2021 25 March 2022 20.00p 7,052
================================ ============== =========== ========
Interim dividend for the period
to 31 March 2022 24 June 2022 20.00p 6,990
================================ ============== =========== ========
Interim dividend for the period 30 September
to 30 June 2022 2022 20.00p 6,947
================================ ============== =========== ========
Interim dividend for the period 23 December
to 30 September 2022 2022 16.00p 7,916
================================ ============== =========== ========
Interim dividend for the period
to 31 December 2022 31 March 2023 16.00p 7,916
================================ ============== =========== ========
Interim dividend for the period
to 31 March 2023 30 June 2023 16.00p 7,916
================================ ============== =========== ========
Interim dividend for the period 29 September
to 30 June 2023 2023 16.00p 7,916
================================ ============== =========== ========
The 30 June 2023 interim dividend of 16.00 pence was approved on
30 August 2023 and will be paid on the 29 September 2023 .
The following table show the total dividends in relation to the
period and the total dividends paid in the period.
For the period ended
30 June 2023 30 June 2022
GBP'000 GBP'000
============================== ============ ============
Total dividend paid in period 15,832 14,042
Total dividend in relation
to period 15,832 13,937
============================== ============ ============
Former shareholders of Pollen Street Capital Holdings Limited,
who received ordinary shares as consideration as part of the
Combination, have waived ordinary dividends paid to them in both
2022 and 2023 on approximately 50 per cent of such consideration
shares, pursuant to the terms of the Combination. As a result, the
interim dividends for the period to 30 September 2022, 31 December
2022, 31 March 2023 and the period to 30 June 2023 were or will be
paid on 49,473,264 ordinary shares. Further information is
available in the prospectus dated 26 September 2022, which is
available on the Group's website.
14. Derivatives
The table below presents the notional values of the foreign
exchange forward contracts as at the end of the period for the
Group:
As at
Group USD
EUR USD EUR 31
30 June 30 June 31 December December
2023 2023 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
======================== ======== ======== ============ =========
Opening notional value
as at 1 Jan 46,289 19,724 1,639 8,870
Movement in notional
value 8,671 1,702 44,650 10,854
Closing notional value 54,960 21,426 46,289 19,724
======================== ======== ======== ============ =========
The table below presents the mark to market of the foreign
exchange forward contracts as at the end of the period for the
Group:
As at
Group EUR USD EUR USD
30 June 30 June 31 December 31 December
2023 2023 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
======================== ======== ======== ============ ============
Opening carrying value
as at 01 January (839) (77) 113 (221)
Fair value movement 1,003 730 (952) 144
======================== ======== ======== ============ ============
Closing carrying value 164 653 (839) (77 )
======================== ======== ======== ============ ============
The fair value for the forward contracts is based off the
forward rate curves for the respective currencies.
15. Ordinary Share Capital
The table below details the issued share capital of the
Group.
For the period ended
No. Issued, allotted 30 June 31 December
and fully paid ordinary 2023 2022
shares of GBP0.01
each
========================= ========== ===========
Opening number of
shares 64,209,597 35,259,741
Shares issued during
the year - 29,472,663
Number of shares
bought back - (522,807)
========================= ========== ===========
Closing number
of shares 64,209,597 64,209,597
========================= ========== ===========
The table below shows the movement in shares during the
period:
Shares in issue Shares in issue
at 1 January at
2023 30 June 2023
================ =============== ===============
Ordinary shares 64,209,597 64,209,597
Treasury shares 4,712,985 4,712,985
================ =============== ===============
Shares in issue
Shares in issue Shares issued at
at 1 January during the Buyback of 31 December
2022 year Ordinary Shares 2022
================ =============== ============= ================ ===============
Ordinary shares 35,259,741 29,472,663 (522,807) 64,209,597
Treasury shares 4,190,178 - 522,807 4,712,985
================ =============== ============= ================ ===============
16. Other reserves
At a general meeting of the Company held on 14 December 2015,
special resolutions were passed approving the cancellation of the
amount standing to the credit of the Company's share premium
account as at 23 December 2015. Following the approval of the Court
and the subsequent registration of the Court order with the
Registrar of Companies on 21 March 2016, the reduction became
effective. Accordingly, GBP98.1 million, previously held in the
share premium account, was transferred to the special distributable
reserve in 2015. As at 30 June 2023 the special distributable
reserve balance was GBP52.0 million (30 June 2022: GBP52.0 million,
31 December 2022: GBP52.0 million).
Merger Reserves include the additional reserves accounted for as
part of the acquisition that occurred during 2023. The Merger
Reserve also includes the costs associated with the issuance of
shares.
The Foreign Currency Translation Reserve reflects the foreign
exchange differences arising on translation that are recognised in
the Consolidated Statement of Profit or Loss and Other
Comprehensive Income.
17. Net Asset Value per Ordinary Share
The following table shows the net asset value per ordinary
share:
For the period ended
Group 30 June 2023 31 December 2022
============================= ============= ==================
Net asset value per ordinary
share pence 901.4 900.2p
Net assets attributable
GBP'000 578,806 577,539
============================= ============= ==================
18. Contingent Liabilities and Capital Commitments
As at 30 June 2023 there were no contingent liabilities or
capital commitments for the Group (30 June 2022: nil). The Group
had GBP22.9 million (31 December 2022: GBP88.9 million) of undrawn
committed structured credit facilities and undrawn commitments in
relation to secured real estate loans of GBP84.5 million (31
December 2022: GBP99.1 million).
19. Related Party Transactions
All related party transactions that took place in the six months
ended 30 June 2023 are consistent in nature with the disclosure in
Note 28 of the 2022 Annual Report and Accounts.
20. Ultimate Controlling Party
It is the opinion of the Directors that there is no ultimate
controlling party.
21. Subsequent Events
On 30 August 2023 a dividend of 16.0 pence per ordinary share
was approved for payment on 29 September 2023.
[1] Operating profit does not include profits arising in Pollen
Street Capital Holdings Limited prior to 30 September 2022, being
the date of completion of the Combination.
EBITDA is calculated as the operating profit of the Group's
Investment Company plus the operating profit of the Group's Asset
Manager, according to IFRS reporting standards excluding
exceptional items and start-up losses of the US business, but
including the full cost of the office leases despite these costs
being reported as depreciation of a right-of-use asset and
financing costs under IFRS 16.
[2] The accounting cost of the office lease is defined as the
depreciation of the lease asset
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END
IR GPUAUBUPWGRM
(END) Dow Jones Newswires
September 18, 2023 02:00 ET (06:00 GMT)
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