Gresham House PLC - Results for the year ended 31 December 2018

Highlights

 

 

2018

2017

Change

 

(£m)

(£m)

(%)

Assets under management

2,268

649

250

Cash and liquid assets1

32.8

24.4

34

Total income

14.5

6.5

125

Operating loss

0.6

3.5

n/a

Adjusted operating profit2

3.0

-0.7

n/a

Dividend

3.0p

nil

n/a

 

§ A strong year for growth in Assets Under Management (AUM) of 250%, including 30% organic growth, with AUM increasing to £2.3 billion (2017: £649 million)

§ Adjusted operating profitability increased to £3.0 million (2017: £0.7 million loss)

§ The acquisitions of FIM Services Limited (FIM) and the investment management business of Livingbridge VC LLP (Livingbridge VC) have been transformative and complement both financially and strategically our alternative asset management platform

§ Annualised synergies of £700k from acquisitions have been identified and are in the process of being captured

§ Balance sheet remains strong with £32.8 million of tangible and realisable assets (2017: £24.4 million) and gross cash of £14.0 million (2017: £9.8 million)

§ Established group relationship with Santander, borrowing £10.0 million

§ Maiden dividend of 3.0p proposed

§ Future visibility for organic growth across all platforms identified

Chairman's statement

As we begin the fifth year of our plan to build a market leading specialist asset management business, I am delighted to report another strong year of organic and acquisitive growth. The Group has deepened its reach into its chosen asset classes, and simultaneously further increased its alternative asset management product platforms to create a high-quality alternative investment manager, which will continue to scale in terms of Assets Under Management (AUM).

Activity in the perio

Alongside the completion of two significant transactions in 2018, the Group has continued to focus on prudent financial management and sustainable long-term growth, working to identify and develop new investment opportunities for clients. As a result, 2018 has been an excellent year for shareholder value creation whether measured by AUM, up 250% to £2.3 billion (2017: £649 million), or profitability, up to an adjusted operating profit of £3.0 million (2017: £0.7 million loss), including organic growth of 30% in AUM. It was also pleasing to see the Company's market capitalisation surpass £100 million during the year, an important milestone as our offering gains increasing relevance to a wider range of investors.

In May we announced the transformative acquisition of FIM Services Limited, (FIM) making the Group the leading commercial forestry asset manager in the UK with almost £1.0 billion of Forestry AUM. The integration plan to combine the FIM and Gresham House Forestry teams has now been largely completed.  Following this, in November we acquired the fund and investment management businesses of Livingbridge VC LLP (Livingbridge VC), increasing AUM by a further £0.5 billion and adding the two Baronsmead VCTs to our range along with two open-ended vehicles with strong track records. Both acquisitions met stringent financial criteria, introduced complementary new expertise to the business, expanded our client offering and broadened our shareholder base.

Before the end of the year, the Group successfully listed the UK's largest battery storage fund on the London Stock Exchange, called Gresham House Energy Storage Fund plc (GRID). The IPO raised £100 million, with £57.2 million immediately deployed in a seed portfolio managed by the Group's New Energy asset management division.

Beyond these exciting developments across the Group's investment strategies, it was also very pleasing to see top decile performance from the Strategic Public Equity team via Gresham House Strategic plc (GHS); and a substantial deployment of committed capital by the British Strategic Investment Fund (BSIF) in a variety of UK infrastructure and housing opportunities.

As part of our continued growth and development we realised the need to refine our Group broking and advisory relationships. Consequently, we were delighted to appoint Canaccord Genuity and Jefferies International after a thorough selection process.Notwithstanding the significant developments during the year, it is important to recognise that our experienced and capable management team has ambitious plans for the business to continue building a sustainable 'asset to covet' - something that employees, shareholders and clients can be proud of.

Results

The activity in the year and growth in AUM has driven income to increase by 125% to £14.5 million (2017: £6.5 million). The AUM growth has not purely been from acquisition, with the team also focusing on delivering organic growth of 30% in AUM including the successful IPO of GRID, additional fundraisings in forestry and renewables plus good investment performances across other vehicles managed by the Group.

Profitability has also benefited as a result of scale and growth, with an adjusted operating profit of £3.0 million being delivered in the year (2017: £0.7 million loss), along with adjusted diluted EPS of 14.7 pence (2017: (5.9) pence). Total comprehensive net income improved to a loss of £0.6 million (2017: £3.5 million loss). The management team continues to operate a cost-focused model, while recognising the need to invest in the critical areas of the business, such as distribution and a high-quality investment team.

Dividend

I indicated in the 2018 interim results, that the Board has considered the Company's long-term dividend policy as an important part of the Company's development. We are therefore particularly delighted to announce the intention to pay a maiden dividend of 3.0 pence.

Shareholders

The broadening of our shareholder base is further testament to the executive management team's strategy, vision, communication and execution to date. In addition to new institutional shareholders, we have welcomed other significant long-term shareholders, including FIM's Richard Crosbie Dawson and Colin Lees Millais and the Livingbridge partners who joined as part of the Livingbridge VC acquisition. I would also like to thank our existing shareholder base, who have loyally continued to support the growth of the Company in the year and have proved to be valuable long-term investors in the Company.

Board

As noted at the time of our interim results, growth companies must have access to the right expertise and experience at Board level in order to provide the necessary governance, capability and support to management teams. The addition of Rachel Beagles to the Board in March 2018 has, together with Simon Stilwell in December 2017, proved invaluable in this regard and they have become highly valued colleagues.

Outlook

We have started 2019 positively with successful fundraising efforts for both the Baronsmead VCTs, which closed within two weeks raising £25 million of new capacity, alongside a number of other fundraising initiatives which have progressed in the early part of the year.

The macro environment's ten year 'bull' cycle is showing clear signs of slowing, with concerns around corporate margins and high valuations, as noted by our management team in recent years. The Group's balance sheet has been managed accordingly and we enter 2019 in a strong position with the support of a new banking relationship with Santander. The continued uncertainties around Brexit do little to help, but with a predominantly UK-faced business we remain cautiously optimistic.

The increasing allocation to alternatives by long-term investors bodes well for the future and it is important that such an investment approach looks through short-term issues. This executive management team has proven its ability to source and execute value enhancing acquisitions in areas of relevance to the Gresham House strategy within alternative asset management alongside organic growth. Additional shareholder value is then created through clear integration and growth plans. We continue to further develop an exciting pipeline of opportunities to grow organically and significantly scale the Group, which gives us real confidence in its long-term prospects and shareholder value creation potential.

Anthony Townsend

Chairman

6 March 2019