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Gcp Asset Backed Income Fund Limited

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Gcp Asset Backed Income Fund Limited GCP ASSET BACKED INCOME FUND LIMITED GCP ASSET BACKED INCOME FUND LIMITED Annual report and financial statements for the year ended 31 December 2019 Annual reportyear ended 31 December 2019 and financial statements for the CONTENTS ABOUT THE COMPANY Introduction GCP Asset Backed Income Fund 1 At a glance – 31 December 2019 Highlights for the year Limited is a listed investment 2 Investment objectives and KPIs 3 Portfolio at a glance company which focuses 4 Chairman’s statement predominantly on investments 6 The Company’s growth since IPO in UK asset backed loans. Strategic report 10 Strategic overview The Company seeks to provide shareholders 12 Business model with attractive risk-adjusted returns through 14 Investment Manager’s report 28 Financial review of the year regular, growing distributions and modest capital 30 Sustainability appreciation over the long term. 32 Risk management The Group is currently invested in a diversified Governance portfolio of asset backed loans across the social 40 Board of Directors infrastructure, property, energy and infrastructure, 42 The Investment Manager 44 Board leadership and purpose and asset finance sectors, located predominantly 45 Stakeholders in the UK. 48 Division of responsibilities 52 Composition, succession and evaluation The Company is a closed-ended investment 54 Audit, risk and internal control company incorporated in Jersey. The Company 58 Remuneration has a premium listing on the Official List of the FCA 61 Directors’ report 63 Statement of Directors’ responsibilities with its shares admitted to trading on the Premium Segment of the Main Market of the LSE since Financial statements 23 October 2015. 66 Independent Auditor’s report 70 Statement of comprehensive income At 31 December 2019, its market capitalisation was 71 Statement of financial position £479.1 million. The Company is a constituent of the 72 Statement of changes in equity 73 Statement of cash flows FTSE All-Share Index. 74 Notes to the financial statements Additional information 97 Shareholder information 98 Alternative performance measures 99 Glossary 100 Corporate information Introduction GCP ASSET BACKED INCOME FUND LIMITED Annual report and financial statements 2019 AT A GLANCE – 31 DECEMBER 2019 MARKET CAPITALISATION £m VALUE OF INVESTMENTS £m DIVIDENDS FOR THE YEAR p 479.1 453.9 6.451 397.1 378.4 6.35 328.3 261.8 6.05 2017 2018 2019 2017 2018 2019 2017 2018 2019 ORDINARY SHARE PRICE p NAV PER ORDINARY SHARE p PROFIT FOR THE YEAR £m 108.50 102.33 28.0 104.50 103.50 101.74 21.6 14.0 100.85 2017 2018 2019 2017 2018 2019 2017 2018 2019 HIGHLIGHTS FOR THE YEAR ― Dividends of 6.451 pence per share in ― Profit for the year of £28.0 million, up ― Exposure to a diversified, partially inflation respect of the year, including a special from £21.6 million in the prior year. and/or interest rate-protected portfolio dividend of 0.25 pence, ahead of the target of 45 asset backed loans with a third ― NAV per ordinary share of 102.33 pence of 6.20 pence per share. The dividend was party valuation of £453.4 million at at 31 December 2019 increasing from fully covered by basic EPS of 6.81 pence. 31 December 2019. 101.74 pence in the prior year. ― Total shareholder return2 for the year of ― Loans of £89.4 million advanced against ― Gross proceeds of £63.3 million were 10.2% (31 December 2018: 9.1%) and an 29 projects with a further £40.3 million raised during the year through a placing annualised total shareholder return since secured against five projects, advanced of ordinary shares in June 2019. IPO2 of 8.3%. post year end. 1. Includes a dividend of 1.55 pence per share for the quarter to 31 December 2019, which was paid post year end. 2. Alternative performance measure – refer to page 98 for definitions and calculation methodology. 1 GCP ASSET BACKED INCOME FUND LIMITED Annual report and financial statements 2019 INVESTMENT OBJECTIVES AND KPIs The Company’s purpose as a closed-ended investment company is to meet its investment objective, which is to generate attractive risk‑adjusted returns through regular, growing distributions and modest capital appreciation over the long term. ATTRACTIVE RISK REGULAR, GROWING CAPITAL ADJUSTED RETURNS DISTRIBUTIONS APPRECIATION To provide shareholders with returns To provide shareholders with regular, To achieve modest appreciation in that are attractive with regard to the growing dividend distributions. shareholder value over the long term. level of risk taken. KEY PERFORMANCE INDICATORS The Company has generated an The Company exceeded its dividend The Company’s ordinary shares annualised total shareholder return1 target of 6.20 pence for the year were trading at 108.50 pence since IPO of 8.3%. ended 31 December 2019 and has per share at the year end. The grown its dividend year‑on‑year. Company’s NAV growth continues to be predominantly driven through the excess cash flows the Company generates. 10.2% 6.45p 108.50p Total shareholder return1 Dividends in respect Ordinary share price for the year of the year at 31 December 2019 31 December 2018: 9.1% 31 December 2018: 6.35p 31 December 2018: 104.50p 8.2% 41% 6.0% Weighted average annualised yield1 Percentage of portfolio by Premium to ordinary share NAV on investment portfolio value with inflation and/or at 31 December 2019 interest rate protection 31 December 2018: 8.0% 31 December 2018: 2.7% 31 December 2018: 46% Further information on Company performance can be found on page 29. 1. Alternative performance measure – refer to page 98 for definitions and calculation methodology. 2 Introduction GCP ASSET BACKED INCOME FUND LIMITED Annual report and financial statements 2019 PORTFOLIO AT A GLANCE Portfolio of 45 asset backed loans with an average life of six years which are partially inflation and/or interest rate protected. The loans fall within the following sectors and are secured predominantly against assets and cash flows in the UK: PROPERTY £205.0m ASSET FINANCE 15 45% £25.5m 6% 5 45 ASSETS 9 ENERGY AND INFRASTRUCTURE £48.8m 11% 16 SOCIAL INFRASTRUCTURE AREA OF SQUARE CORRESPONDS TO VALUATION OF SECTOR £ 174.1m 1 NUMBER OF LOANS WITHIN SECTOR 38% % PERCENTAGE OF PORTFOLIO BY VALUE SECURED AGAINST SENIOR RANKING SECURITY PHYSICAL ASSETS UK EXPOSURE 61% 94% 85% 3 GCP ASSET BACKED INCOME FUND LIMITED Annual report and financial statements 2019 CHAIRMAN’S STATEMENT The Company exceeded its dividend target for the fourth consecutive year by way of the payment of a fully covered dividend of 6.45 pence. The Company generated a total shareholder return1 of 10.2%. Introduction The valuation of investments increased during The Company’s investment objective is to the year to £453.9 million from £378.4 million generate attractive risk-adjusted returns through at 31 December 2018, with the largest single regular, growing distributions and modest asset exposure reducing to 4.8% of total assets. capital appreciation over the long term. Capital The Company has in place an RCF of £50 million preservation is a fundamental part of this and with RBSI. This is used prior to the issuance a key investment driver of the Board and the of new shares, with funds being substantially Investment Manager. The sustainability of the invested prior to a capital raise to minimise any Company depends on the ability to protect its deployment risk and cash drag. The Board believes capital base whilst delivering stable and attractive the use of the facility optimises the cash position risk‑adjusted returns. I am pleased to report that and is a benefit of the maturity and strong track the Company has once again delivered against record of the Company. these objectives, growing its NAV and exceeding its dividend target for the fourth consecutive year. Post year end, the £10 million short‑term facility was extended to mature in August 2020 in line with The Investment Manager’s focus on assets the existing tranche of the RCF. that are integral to society continues to deliver a strongly performing portfolio for the Group. Investments The portfolio comprises 45 loans, 94% of which During the year, the Group advanced are secured against physical assets offering strong £89.4 million in the form of 29 investments, downside and capital protection. The remainder 19 new and ten follow‑on transactions, improving of loans are secured against contracted cash the diversification and risk profile of the portfolio. Alex Ohlsson flows with robust underlying contractual All new investments were consistent with the Chairman protection in place. Group’s standard investment approach. The Board and Investment Manager remain highly In March 2019, the Group experienced a default on vigilant to the risks of investing in asset backed a loan which was secured against specific assets loans, noting the issues experienced in the sector in ringfenced companies and represented 0.7% of during the year and additionally that the Group had the portfolio at the time of default. The companies to address its first problem loan. The Investment were part of a wider group which experienced Manager has retained its disciplined approach financial difficulties. As a result of these issues, to investing and continually seeks to enhance its the loan was revalued downwards by £0.6 million. investment monitoring and reporting processes The Group has an exclusivity agreement in place across all areas of the Group. The Board believes for the sale of the Project Company and post that these steps will ensure the Company is well period end it exchanged with the buyer on a sale placed to continue to deliver for investors. and purchase agreement. It is anticipated that the sale will complete in Q2 2020 pending regulatory Financing approval from Ofgem.
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