TIDMHONY
RNS Number : 6707G
Honeycomb Investment Trust PLC
28 July 2021
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28 July 2021
Honeycomb Investment Trust plc
Honeycomb Investment Trust plc (the "Company" or "Honeycomb")
announces that the Investment Manager's monthly factsheet for 30
June 2021 is now available on its website at
http://www.honeycombplc.com .
Net Asset Value per Share
The Company announces that its unaudited Net Asset Value ("NAV")
per share as at 30 June 2021 on a cum-income basis was 1,017.0
pence, based on a NAV of GBP358.6 million, and on an ex-income
basis was 1,017.9 pence, based on a NAV of GBP358.9 million. The
NAVs have been calculated by Apex Fund Services (UK) Ltd.
Honeycomb delivered a NAV return of 0.75% for the month of June,
or 9.1% annualised. This completed a strong first half performance,
with a H1 annualised NAV return of 8.7%.
As highlighted last month, the Company sold its listed bond
portfolio in June realising a small profit with the sales proceeds
slightly exceeding the net book value of the portfolio. This has
driven a reduction in investment assets from GBP614m in May to
GBP594m in June.
The pipeline of deals continues to be strong with a new SME
facility completing in July which has seen the majority of the
proceeds from the bond sale re-invested.
Market Insights: Trends and opportunities in UK SME Finance
With 2020 a challenging year all round, UK SME's have
demonstrated their resilience and ability to adapt as well as their
importance to the UK economy. According to the Bank of England,
SMEs account for 70% of all new jobs since 2010, 61% of private
sector employment and 50% of all turnover generated across the
country.
Data from Oxford Economics suggests that during 2020, SME
appetite for growth finance was at the highest level since 2016,
with online searches for business loans increasing over 5x. This
trend is unsurprising and, as the UK overall embraced an increased
online presence, Business Finance followed suit. Existing trends
that had slowly been gathering momentum, such as the adoption of
digital services; open banking integration; and use of analytics
for onboarding or reporting requirements, were accelerated and
integrated to provide customers with an informed, improved and more
seamless decision-making experience. The pandemic also accelerated
the developments of contactless payments - PWC estimate that cash
machine withdrawals in the UK fell by GBP37bn. Further, the share
of retail sales conducted online was 46% higher in 2020 than in the
previous year.
The COVID-19 pandemic brought existing disruption from
technology and regulations into sharper focus, and non-bank
lenders, having already been at the forefront of many of these
initiatives, were able to move swiftly and effectively to help
provide SME's with access to finance through these times. By 2019,
EY estimated 30% of SME Finance was being supplied by non-bank
lenders, and the British Business Bank also estimated approximately
30% of Asset Finance being accounted for by Non-Bank Lenders.
The ability to assess affordability and credit worthiness
through open banking integration; perform KYC checks and
onboarding; and complete due diligence in a timely manner, are all
critical factors to improve the customer experience. This is one of
the reasons that larger institutions are investing so heavily in
digital lending infrastructure, as they realise the shortfalls in
legacy technology and infrastructure in meeting the demands of new
digital savvy customers. It is clear these are long term structural
shifts that are here to stay.
On the supply side of the equation, it is estimated that
approximately GBP75bn of emergency funding has been provided from
the British Business Bank (BBB). On 23rd March 2020 the Govt
launched the Coronavirus Business Interruption Loan Scheme (CBILS),
with the BBB guaranteeing 80% of each loan, and paying the first
year of interest. Lenders required accreditation from the BBB, and
around two-thirds of the more than 100 accredited CBILS lenders
were alternative brands. The scheme is now closed, being replaced
by the Recovery Loan Scheme ("RLS"). We believe opportunities to
continue to support lending to SME's through government backed
schemes offer compelling risk-adjusted returns for
shareholders.
Through a dedicated and specialist team, Pollen Street has
developed the network and infrastructure to partner with the
strongest players in selected markets within SME finance to support
this sector.
Pollen Street looks to partner with innovative companies with
substantial track records in the SME lending space and strong
underwriting capabilities underpinned by modern technology and
experienced teams. Some examples of lenders which PSC has chosen to
partner with are outlined below.
1. Nucleus was formed in 2011 and has over 9 years of
operational history during which it has originated over GBP1.7bn.
Nucleus gained CBILS accreditation in July-20, and also provides
invoice finance; property backed loans; cash flow finance loans and
merchant cash advances. PSC offer senior secured funding against
SME loans with an 80% government guarantee under the Coronavirus
Business Interruption Loan Scheme.
2. Leading Small Business Lender in UK & Europe - identified
a gap in the lending market, with SMEs' reduced access to
short-term overdraft facilities from banks - since 2011, it has
lent over GBP1bn to >50,000 customers in UK and Germany. Their
proprietary scoring model, overlaid with manual underwriting, has
demonstrated strong ability to price for risk. During 2020 the
business achieved accreditation for the UK CBILs scheme and has
deployed GBP300m+ to support businesses through the Covid pandemic.
PSC have worked in partnership with the lender since 2016, offering
a senior secured facility funding short-term SME receivables.
3. E-commerce MCA Lender - Smaller ticket SME lending has been
growing steadily in the UK since the last Financial Crisis as high
street lenders have slowly withdrawn from this market, with new
alternative finance platforms and challenger banks now serving the
demand (now accounting for up to 50% of outstanding SME lending).
This well backed business offers short-term financing to UK
e-commerce SMEs requiring capital to spend on marketing and
inventory, which is secured on a share of their future revenues.
The business has strong underwriting capabilities - supported by
the latest technology including API integration to rich data
sources, and AI decisioning combined with human oversight.
We believe there is certainly scope for continued growth in this
space and are excited to see the opportunities in the non-bank SME
lending sector continue to evolve in a way that can generate
positive impact for investors, people, partners and wider society.
Alongside our aim to provide consistent, compelling returns for
investors is our commitment to positive impact. Through our
investment and lending philosophy we aim to have a long term
sustainable positive impact for small and medium sized business
owners and the UK economy as a whole.
For further information about this announcement please
contact:
Pollen Street Capital - Investment Manager
Matthew Potter / Julian Dale: +44 (0)20 3728 6750
Liberum Capital Limited - Joint Broker
Chris Clarke / Louis Davies: +44 (0)20 3100 2000
Cenkos Securities plc - Joint Broker
Justin Zawoda-Martin: +44 (0)20 7397 8900
Link Company Matters Limited - Corporate Secretary
hitcosec@linkgroup.co.uk
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