TIDMPBLT
RNS Number : 6166G
TOC Property Backed Lendng Tst PLC
30 March 2022
To: RNS
From: TOC Property Backed Lending Trust
plc
LEI: 213800EXPWANYN3NEV68
Date: 30 March 2022
Subject: Annual Financial Report
Chairman's Statement
Highlights
-- Net Asset Value total return of +4.8% (2020: +3.9%).
-- Record annual new loan facilities of GBP13.9m agreed.
-- Implementation of revised dividend strategy.
-- Dividend increase to 4 pence per share (2020 - 3p).
-- Profitable exits of five portfolio projects, further
de-risking the portfolio (2020: 3 exits).
-- Continuation Resolution put before investors and
approved.
-- Portfolio liquidity maintained; funding headroom of GBP11.0m
at the year end.
-- Loan facility with Shawbrook Bank Limited extended to May
2022; renewal in hand.
OBJECTIVE; MANAGERIAL ARRANGEMENTS
The Company seeks to achieve its investment objective through a
diversified portfolio of fixed rate loans predominantly secured
over land and/or property in the UK and managed by its Investment
Adviser, Tier One Capital Ltd ('TOC'). The Investment Adviser's
Report may be found below.
INTRODUCTION
I am pleased to present the Company's results for the year ended
30 November 2021, spanning another testing period both for the
commercial and residential real estate sub-sectors and for the
wider economy.
During the final month of 2020, as our financial year began, the
UK economy expanded by around 1%, marking a reversal of the trend
in which the UK suffered a record annual slump of 9.9% for 2020 as
a whole. These were the worst figures, said the Office for National
Statistics (ONS) since GDP was first measured after the Second
World War. The same ONS report noted that the severest fall in year
2020 came from the construction sector, which contracted by
12.5%.
As 2021 progressed, a strong rebound during the first half of
the year lost its impetus, as media reports put it, "amid shortages
of workers and materials and weaker export volumes after
Brexit".
All of this is before we even mention the onset of Covid-19,
first detected in the UK in January 2020 but probably present
before that and which remains a factor more than two years later.
Notwithstanding the imposition of a third lockdown in January 2021
and the detection of a new Delta variant in April, the Coronavirus
Job Retention Scheme, better known as Furlough, began to wind down
in July 2021. Delta became the dominant variant in the UK for
several months before Omicron, the latest variant at the time of
writing, being first reported in South Africa in November 2021.
This then, was the backdrop against which the Board, working
with the Investment Adviser, opted to maintain increased levels of
liquidity during 2021, requiring a reduction in dividend
distributions from the previous financial years.
The second stage of the process of restructuring and
streamlining the company to match changing conditions came with the
major Strategic Review announced via the London Stock Exchange on
10 March 2021 and approved by shareholders later the same month.
The Company is now well placed to benefit from a repositioning of
the portfolio to lower risk, together with the creation of headroom
to lend to new projects. Further details of the impact of the
Strategic Review are given below.
Increased activity seen in the second half of 2021, together
with additional debt yet to be drawn down on facilities already
written, ensures we are looking forward to growth in higher quality
earnings in the year ahead.
PERFORMANCE; NET ASSET VALUE
The Company's net asset value ('NAV') decreased to 83.88 pence
at the year-end (2020: 83.93 pence). The net asset value total
return for the financial year was +4.8%, including the impact of
dividends received, during what must be regarded as a transitional
year for the trust.
This figure may be placed into context by the total return
figures over the same period of the Association of Investment
Companies' (AIC 's) 'Property-Debt' sector, of which PBLT is a
component member, of +6.2% and of the AIC's 'Debt-Loans' sector of
+10.5% (Source: AIC).
The reduction in NAV is a function of the dividends declared
(GBP942,000 in aggregate) being greater than net profit for the
year (GBP929,000). Profit was impacted by reduced investment
interest received, which fell from GBP2.3m in 2020 to GBP1.6m in
2021 (these figures disregard any impairments). The lower interest
figure resulted from a reduction in the capital deployed by
borrowers during 2021, as discussed in the Investment Adviser's
Report below.
It should be noted that although a number of new loans were
approved during the year, there is naturally a lag between loan
redemptions and the often phased drawdown and deployment of capital
by new borrowers.
STRATEGIC REVIEW
On 29 March 2021 shareholders voted overwhelmingly to support a
refreshed investment policy for the Company, intended to allow for
greater flexibility to allocate capital to sectors that the Board,
as advised by the Investment Adviser, had assessed as potentially
more attractive within existing risk management parameters.
The key changes were to:
-- Reduce restrictions on sector caps imposed by the previous
investment policy, so as to give better access to opportunities in,
for example, small and medium-sized enterprise (SME) housebuilding.
Commercial property opportunities will nevertheless continue to be
examined on merit.
-- Increase the maximum permitted exposure to bridging loans,
selected loan financings and other debt instruments so as to
increase the flexibility available to the Investment Adviser.
-- Maintain an attainable and consistent stream of quarterly
dividends.
-- Reduce operating costs at all levels of the company.
-- Improve liquidity, i.e. the ability to buy and sell shares
easily, by introducing discount control mechanisms such as share
buy-backs and share issues.
-- remove reference to (though not exclude) profit share
agreements in the investment policy agreements in the investment
policy. The evolution of the portfolio towards less risky and lower
Loan-to-Value (LTV) loans is likely to result in fewer situations
where an equity position can reasonably be achieved.
CONTINUATION VOTE
The Company's Articles of Association (the "Articles") provide
that the Directors are required to propose an ordinary resolution
that the Company continue its business as presently constituted
(the "Continuation Resolution") at the fifth Annual General Meeting
(AGM) of the Company and at each third AGM of the Company
thereafter.
The Continuation Resolution was brought forward and approved by
shareholders at the 29 March 2021 General Meeting. As the
Continuation Resolution was proposed early, the Company amended its
Articles of Association accordingly so that the next Continuation
Resolution will be proposed at the annual general meeting to be
held in 2024 and at each third AGM thereafter.
REVENUE AND DIVIDS
As part of the Strategic Review described above the Board and
the Investment Adviser examined the likely dividend capacity of the
Company going forward. This analysis concluded that anticipated
returns from typical development finance portfolio projects of
approximately 5-6% might be achieved, in the current interest rate
environment.
Under this revised policy, the Company expects to pay dividends
at a rate of 1 penny per share per quarter, equivalent to 4 pence
per share per year in aggregate. The Company intends to continue to
distribute at least 85 per cent. of its eligible income or such
other percentage which may be prescribed by HMRC in accordance with
Chapter 4 of Part 24 Corporation Tax Act 2010. Accordingly, to the
extent required, at the end of each financial year, the Board will
consider whether payment of an additional dividend (to be paid
alongside the final fourth quarter dividend for that year) is
appropriate and/or required for the Company to maintain its
investment trust status.
For the financial year to 30 November 2021, revenue decreased to
3.09p per share (2020: 3.81p). In accordance with the Board's
revised dividend policy, as described above, four quarterly interim
dividends have been declared for the year ended 30 November
2021.
The fourth of these interim dividends, representing a final
balancing payment for the year, has been declared and will be paid
on 1 April 2022 to shareholders on the register at the close of
business on 4 March 2022 (ex-dividend date 3 March 2022).
GEARING
Loan facilities during the year consisted of a GBP6.5 million
credit arrangement with Shawbrook Bank Limited of which nil was
drawn down at the year end. The facility provided by Shawbrook Bank
Limited was extended from May 2021 to May 2022 and it is intended
that it will be renewed.
INVESTMENT PORTFOLIO
The Company agreed five new loans during the year, including a
GBP3.8 million, 36 month facility to fund the Horizon Crematorium
project in East Renfrewshire Scotland; a GBP4.5 million, 30-month
facility to finance the construction of 61 residential units at Oak
Meadows, near Teeside Airport and a GBP4.2 million, 42-month loan
to fund some 145 residential units near Bishops Auckland, County
Durham. The investment portfolio is described in greater detail
below.
Five exits, plus a further five partial redemptions are also
highlighted in the Investment Adviser's report, creating liquidity
for potential investment in new opportunities.
During the 2021 financial year, three projects were unable to
meet their interest repayments in full, relating primarily to loans
predating the formation of the trust. These impairments have been
substantially offset during 2021 both by uplifts in loan positions
generated through profit share positions and the lessening of
previous impairment assessments which have transpired to be
over-prudent.
The directors believe the level of impairments will reduce in
financial year 2022 as legacy loans are exited, the loan covenant
ratios of the borrowers improve and as the overall quality of the
project portfolio increases.
BOARD OF DIRECTORS
As part of the drive, highlighted in the March 2021 Strategic
Review towards moderating costs, the Remuneration Committee,
chaired by Douglas Noble, completed an assessment of the level of
Directors' fees during the year. This assessment considered a
number of factors, including external peer group analyses,
increased regulatory responsibilities and inflationary trends.
The two conclusions reached were that first, a graduated scale
of remuneration should be introduced, depending upon individual
responsibilities, replacing the former flat fee structure.
Secondly, having benchmarked the Company against its peers, new and
slightly lower remuneration levels should be set. This has resulted
in a reduction in total fees of GBP5,000 per annum, with effect
from 1 December 2021.
The new arrangements will be put before shareholders at the 28
April 2022 AGM. Further details are set out in the Directors'
Remuneration Report in the Annual Report.
There were no changes to the Board of Directors during the year.
In accordance with the UK Corporate Governance Code requirements,
all Directors will stand for re-appointment at the AGM.
CHANGE OF AUDITOR
Following a competitive tender process, again motivated, in the
wake of the Strategic Review, by a desire to control costs, the
Company has appointed MHA MacIntyre Hudson as its auditor. This
appointment will be reaffirmed at the AGM.
OUTLOOK
Over the past year the Company and indeed the economy as a whole
has, putting it mildly, been faced with an uncertain backdrop.
Workforces have either been placed under full lockdown or, at other
times, debilitated by Covid-19 absences and/or working from home
("WFH") governmental diktats.
Most recently, we have witnessed geopolitical risk emerging
across the globe, including wars and sharply rising energy costs.
In addition the financial effects of Covid-19 are likely to be felt
in the form of increased taxes and in changes in fiscal policy and
increases in interest rates and inflation. These factors are likely
to have significant effects on the property sector with the related
Brexit impacts being of lesser significance.
The UK government's furlough schemes, though undoubtedly
successful (if hideously expensive) in averting full scale
recession have also been run down as the year has progressed. In
the background, too, a combination of shipping lanes devoid of
cargo vessels because of Covid-19 issues and post-Brexit
administrative nightmares have led to supply chain blockages - a
particular problem across the building and construction
sectors.
Notwithstanding these headwinds the Company's portfolio has
broadly held its value during the financial year under report and
produced a positive total return for investors when dividends are
factored in. The decision made following the Strategic Review, to
maintain liquidity, i.e. stay partially in cash, while these issues
are played out, has helped in this regard.
The trade-off, in adopting this relatively defensive policy, has
been that the Company has been under-invested for much of the year,
causing revenue receipts to be lower than they would otherwise have
been under a more aggressive lending stance.
Having listed some of the challenges both past and present, we
begin the new financial year with cautious optimism. On the
positive side, the world will learn (or indeed have to learn) to
live with Covid-19. At least recent scientific evidence suggests
the Omicron variant is less lethal than earlier variants, in
addition to which, vaccination levels continue to rise. Supply
chain issues are gradually being dealt with, construction sites are
swinging back into action, road traffic seems if anything to exceed
pre-Covid-19 levels and property buyers have resumed their
searches.
Both interest rates and inflation appear to be on firm upward
trends. For the real estate sector, this could be regarded either
as a threat or as an opportunity, with property prices, lending
rates and input costs all likely to increase.
The Company's robust balance sheet, investment headroom and
nimbleness should place it in a strong position to maximise the
opportunities that lie ahead.
ANNUAL GENERAL MEETING
The Company's AGM will be held at the Grey Street Hotel, 2-12
Grey Street, Newcastle upon Tyne on Thursday 28 April 2022 at 12
noon.
The Board encourages all shareholders to exercise their votes in
respect of the meeting in advance, by completing and returning
their proxy forms. This will ensure that the votes are
registered.
In addition, shareholders are encouraged to raise any questions
in advance of the AGM, via email to cosec@MaitlandGroup.com or by
post to the Company Secretary at the address set out in the Annual
Report. Any questions received will be replied to by the Company
after the AGM.
John Newlands
Chairman
30 March 2022
Investment Adviser's Review
ABOUT THE ADVISER
Tier One Capital Ltd is a Newcastle upon Tyne based wealth
management and property lending specialist providing financial
advice services and bespoke tailored lending to the residential and
commercial property development market.
INVESTMENT ADVISER'S REPORT:
REVIEW OF THE 12 MONTHS TO 30 NOVEMBER 2021
This review covers the fourth full year of performance and fifth
audit review of the Company, since listing in January 2017.
The Company's primary purpose is to provide debt finance to the
property sector. The Company also benefits from a number of equity
positions attained at nil cost in a number of the borrowing
entities which it supports.
Investment Adviser's highlights:
The trading period covered by this report has been historically
unprecedented due to the ongoing impact of the Covid-19 pandemic
which initially decimated certain sectors of the economy, most
notably travel and hospitality, and brought about what appear to be
seismic shifts in how people work and live. A second lockdown was
entered into at the beginning of 2021 and this slowed investment
decisions until the vaccine roll out gained real momentum towards
the end of Q1 2021. The second half of the year was far more
positive with the economic journey to a new normal well underway
driven by a hot property market and a strong uptick in consumer
spending. Interest rate rises, the recovery from the Omicron
variant, high inflation (especially energy prices) and the war in
Ukraine are dampening confidence in quarter one.
Measures introduced by the government, most notably the stamp
duty holiday, together with an increase in household discretionary
cash and a lack of supply saw the residential housing market
accelerate to new highs and forecasts expect these increases to be
consolidated into 2022.
The Company used the year to protect shareholder value,
rebalance the portfolio to more conservative loans and reset the
Company's investment policy to ensure it is fit for purpose as we
enter the years ahead. We are pleased to report the investment
highlights below:
-- NAV Total Return of 3.5%.
-- Continued focus on liquidity, creating fund headroom of GBP11.0m at the year end.
-- Profitable exits of five significant portfolio projects,
bringing the number of exits since inception to twelve.
-- Refreshed investment strategy allowing greater flexibility to
deploy in sectors forecasted to grow.
-- Redeployment of funds across the North East and Scotland,
meaning the Company is now focussed on regions and market economies
to which it is closest.
-- Dividend payments totalling 3p for the first nine months. A
further dividend of 1p was declared in February 2022
Deployment
Despite the ongoing uncertainties faced, we are pleased to
report an active year for new transactions, deployments to existing
projects together with full and partial exits.
The Company agreed five new facilities during the year:
-- Horizon, Scotland - GBP3.8m 36-month facility
-- Bridge St, Scotland - GBP1.05m 27-month facility
-- Finnieston, Scotland - GBP0.32m 12-month facility
-- Oak Meadows, North East England - GBP4.5m 30 month facility
-- Four Lane Ends, North East England - GBP4.2m 42 month facility
During the year a total of GBP8.266m was deployed into ten
projects including the five new projects mentioned above.
Portfolio Exits
There were five exits during, bringing the number of exits in
the portfolio to twelve since inception. The exits were across
GBP9.8m of loans and generated an IRR of 10.9% for the Company.
Partial Redemptions Update
During the year there was GBP4.046m of partial redemptions
across six of the portfolio projects.
Impairments
The Company, in accordance with IFRS 9, recognises the gross
interest receivable on all its loans, and then recognises an
impairment charge when that interest is not paid by the borrower,
and there is not a clear expectation that this can be recovered
subsequently. During the year, there were three projects unable to
meet their interest requirements.
IFRS 9 also requires the Company to consider various credit loss
scenarios and assign a risk weighting to these. This calculation
generates a provision which is taken as a further impairment for
the year. In this period the Company has reduced the provision to
GBP33,000 from the GBP261,000 that was in place at 30 November
2020. This provision is based on look-forward statements to
withstand market-related shocks including those caused by the
ongoing Covid-19 pandemic.
Gearing
In May 2021, the Company refreshed a committed revolving credit
facility with Shawbrook Bank for a further year. Again the key
driver was headroom and liquidity and its renewal for a fourth year
demonstrates the support that the Company has from its lender, and
the growing confidence in future deployment given the current
strength of pipeline.
Profit Share Projects
There are currently six Profit Share projects in the portfolio
(Nov 2020: 10).
Refreshed Investment Strategy
In March 2021 the Company's shareholders voted overwhelmingly to
support a refreshed investment strategy for the Company. The key
changes are as follows:
-- Reposition the Company as a stretch senior lender which has
the benefit of reducing the risk of default.
-- Reduce sector constraints to give the Company greater
flexibility for deployment across residential and commercial.
OUTLOOK
Economic Outlook
Residential
As at 30 November 2021, 59.8% of deployed funds were invested
across 12 projects with a residential focus with a further GBP5.9m
committed to live projects.
The housing market has seen considerable growth over the past 12
months and the outlook amongst analysts for 2022 and beyond
continues to be positive. Savills five year forecast suggests
increases across the UK of 13.1% for the period with the North East
and Scotland forecast to see rises of 17.6% and 15.9%
respectively.
Turning to cost pressures, the past twelve months has seen
considerable price inflation on both materials and labour.
According to ISH Markit/CIPS UK Construction PMI, "construction
activity expanded at the fastest pace since June 1997...severe
shortages of construction products and materials resulted in a
survey record rise in purchasing prices in June". Specifically in
house building construction, the index increased at its fastest
pace since November 2003.
The Builders Merchants Federation and Construction Products
Association have warned that availability issues are expected to
worsen before they improve. The ongoing impact of the Covid-19
pandemic is a significant factor behind the shortages and price
increases. There are other factors including the imbalance between
global demand and supply for timber which is not likely to be
resolved quickly.
The Company's residential exposure is predominantly in the North
East (87.8%). This will continue to be a key focus as this region
continues to offer affordability for house buyers, despite the
recent increase in prices. Projects are appraised using the views
of market experts for sales values and build cost and delivery,
with all assumptions stress tested.
Commercial
As at 30 November 2021, 40.2% of deployed funds were invested
across five projects with a commercial focus.
The new investment strategy allows the Company to be more
selective in the level of exposure to commercial developments. We
believe that a selective approach to the Company's deployment in
the commercial property sector will continue to create shareholder
value. The sectors within the commercial property space that the
Company currently has exposure to are:
-- bereavement (crematorium);
-- strategic land; and
-- shared office space.
Each of the above sub-sectors offer downside protection in the
current uncertain economic times with the latter two also giving
flexibility for the borrowers as and when trends change. We will
continue to identify and support professional, experienced and
reliable management teams who have a clear vision and robust
plan.
Pipeline
There is currently GBP7.9m at various stages of due diligence
across three projects with 100% in the North East.
The quality and experience of each management team that we are
in discussions with will continue to enhance the Company's
portfolio and strengthen its reputation in the market. This should
lead to the creation of shareholder value that is sustainable in
the longer term.
Ian McElroy
Tier One Capital Ltd
30 March 2022
THE INVESTMENT PORTFOLIO AS AT 30 NOVEMBER 2021
Sector % of LTV* Loan Value
Portfolio (Nov 21) (Nov 21)
GBP'000s
Residential 47.5% 73.7% 10,480
=========== ========== ===========
Commercial 31.9% 66.7% 7,043
=========== ========== ===========
Cash 20.6% - 4,545
=========== ========== ===========
General Impairment - - (33)
=========== ========== ===========
Total/Weighted Average 100.0% 70.87% 22,035
=========== ========== ===========
*LTV has been calculated using the carrying value of the loans
as at the balance sheet date
PRINCIPAL AND EMERGING RISKS
The Board of Directors has overall responsibility for risk
management and internal control within the context of achieving the
Company's objectives.
The Directors confirm that they have carried out a robust
assessment of the principal and emerging risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity, as they operated during the
year and up to the approval of the Annual Report.
The Board agrees the strategy of the Company taking into
consideration the Company's risk appetite. With the assistance of
the Investment Adviser, the Board has drawn up a risk matrix, which
identifies the key risks to the Company, as well as emerging risks.
In assessing the risks and how they can be mitigated, the Board has
given particular attention to those risks that might threaten the
viability of the Company. These key risks fall broadly under the
following categories:
-- Investment and strategy risk
The Company's targeted returns are targets only and are based on
estimates and assumptions about a variety of factors including,
without limitation, yield and performance of the Company's
investments, which are inherently subject to significant business,
economic and market uncertainties and contingencies, all of which
are beyond the Company's control and which may adversely affect the
Company's ability to achieve its targeted returns. Accordingly, the
actual rate of return achieved may be materially lower than the
targeted returns, or may result in a partial or total loss, which
could have a material adverse effect on the Company's
profitability, the Net Asset Value and the price of Ordinary
shares.
Borrowers under the loans in which the Company invests may not
fulfil their payment obligations in full, or at all, and/or may
cause, or fail to rectify, other events of default under the
loans.
The Board is responsible for setting the investment strategy to
achieve the targeted returns and for monitoring the performance of
the Investment Adviser and the implementation of the agreed
strategy.
An inappropriate strategy could lead to poor capital performance
and lower than targeted income yields.
This risk is mitigated through regular reviews and updates with
the Investment Adviser, monitoring of the portfolio sectors against
the investment restrictions on a quarterly basis and tracking of
loan to value ratios of the underlying property projects.
-- Market risk
The Company's investment strategy relies in part upon local
credit and real estate market conditions. Adverse conditions may
prevent the Company from making investments that it might otherwise
have made leading to a reduction in yield and an increase in the
default rate. The Board has considered and continues to keep under
review the political, economic and investment risks to the Company
associated with the UK's withdrawal from the EU at the beginning of
2021 and the UK's future relations with the EU. This withdrawal
might lead to a reduced or increased demand for the Company's
shares as a result of investor sentiment which may be reflected in
a widening or narrowing of the discount.
The Company holds 100% of its assets in the United Kingdom.
The impact of the spread of Covid-19 on the residential property
market is monitored continuously.
To mitigate the market risks, the Board receives quarterly
updates from the Investment Adviser containing information on the
local market conditions and trends. This information is reviewed
alongside the sector split of the portfolio to ensure the portfolio
is aligned to meet future challenges.
-- Financial risk
The Company's activities expose it to a variety of financial
risks that include interest rate risk, liquidity risk and credit
risk. Further details on these risks and the way in which they are
mitigated are disclosed in the notes to the financial
statements.
-- Operational risk
The Company has no employees and relies upon the services
provided by third parties. It is primarily dependent on the control
systems of the Investment Adviser and Administrator who
respectively maintain the assets and accounting records.
Failure by any service provider to carry out its obligation in
accordance with the terms of their appointment could have a
detrimental effect on the Company.
To mitigate these risks, the Board reviews the overall
performance of the Investment Adviser and all other third party
service providers on a regular basis and has the ability to
terminate agreements if necessary. The business continuity plans of
key third parties are subject to Board scrutiny.
-- Legal and Regulatory risk
In order to qualify as an investment trust, the Company must
comply with section 1158 of the Corporation Tax Act 2010. The
Company has been approved by HM Revenue & Customs as an
investment trust. The Company is listed on the London Stock
Exchange. Non-compliance with the taxes act or a breach of listing
rules could lead to financial penalties and reputational loss.
These risks are mitigated by the Board's review of quarterly
financial information and the compliance with the relevant
rules.
Management Report and Directors' Responsibility Statement
Management report
Listed companies are required by the DTRs to include a
management report in their Financial Statements. The information is
included in the Strategic Report in the Annual Report (together
with the sections of the Annual Report and Accounts incorporated by
reference) and the Directors' Report in the Annual Report.
Therefore, a separate management report has not been included.
Directors' responsibility statement
The Directors are responsible for preparing the Annual Report
and Financial Statements, in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
UK adopted International Financial Reporting Standards ("UK adopted
IFRS") and with the Companies Act 2006, as applicable to companies
reporting under international accounting standards.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that, taken as a whole, they
are fair, balanced and understandable report and provide the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy and that they
give a true and fair view of the state of affairs of the Company
and of the total return or loss of the Company for that period. In
order to provide these confirmations and in preparing these
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable International Financial Reporting
Standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business and the Directors confirm that they have done
so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006, where
applicable. They are responsible for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The financial statements are published on
www.tocpropertybackedlendingtrust.co.uk which is a website
maintained by the Company's Investment Adviser. The Directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
Under applicable UK law and regulations, the Directors are also
responsible for preparing a Strategic Report, a Directors' Report,
Statement of Corporate Governance and Directors' Remuneration
Report that complies with that law and those regulations.
Directors' confirmation statement
Each of the Directors, whose names and functions appear in the
Annual Report, confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with UK
adopted International Financial Reporting Standards (UK adopted
IFRS) and with the Companies Act 2006, as applicable to companies
reporting under international accounting standards, give a true and
fair view of the assets, liabilities and financial position and
total return or loss of the Company; and
-- The Management Report, referred to herein, which comprises
the Chairman's Statement, the Investment Adviser's Report,
Strategic Report (including risk factors) and note 17 of the
Financial Statements includes a fair review of the development and
performance of the business and position of the Company, together
with the principal risks and uncertainties that it faces.
The Directors consider that the Annual Report and Accounts taken
as a whole, is fair, balanced and understandable and it provides
the information necessary to assess the Company's position and
performance, business model and strategy.
On Behalf of the Board
John Newlands, Chairman
30 March 2022
INCOME STATEMENT
Year ending Year ending
30 November 2021 30 November 2020
==================================== ====== =============================== ===============================
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
==================================== ====== ========= ========= ========= ========= ========= =========
REVENUE
Investment interest 2 1,643 - 1,643 2,346 - 2,346
------ --------- --------- --------- --------- --------- ---------
Total revenue 1,643 - 1,643 2,346 - 2,346
------ --------- --------- --------- --------- --------- ---------
Gains/(losses) on investments
held at fair value through profit
of loss 8 (136) 190 54 (325) (127) (452)
------ --------- --------- --------- --------- --------- ---------
Total net income 1,507 190 1,697 2,021 (127) 1,894
------ --------- --------- --------- --------- --------- ---------
Expenditure
Investment adviser fee 3 (68) - (68) (57) - (57)
------ --------- --------- --------- --------- --------- ---------
Impairments on investments held
at amortised cost 4, 9 (139) (69) (208) (194) (43) (237)
------ --------- --------- --------- --------- --------- ---------
Other expenses 4 (467) (24) (491) (513) - (513)
------ --------- --------- --------- --------- --------- ---------
Total expenditure (674) (93) (767) (764) (43) (807)
------ --------- --------- --------- --------- --------- ---------
Profit/(loss) before finance
costs and taxation 833 97 930 1,257 (170) 1,087
------ --------- --------- --------- --------- --------- ---------
Finance costs
Interest payable (1) - (1) (231) - (231)
------ --------- --------- --------- --------- --------- ---------
Profit/(loss) before taxation 832 97 929 1,026 (170) 856
------ --------- --------- --------- --------- --------- ---------
Taxation 5 - - - - - -
------ --------- --------- --------- --------- --------- ---------
Profit/(loss) for the year 832 97 929 1,026 (170) 856
------ --------- --------- --------- --------- --------- ---------
Basic earnings per share 7 3.09p 0.36p 3.45p 3.81p (0.63)p 3.18p
------ --------- --------- --------- --------- --------- ---------
The total column of this statement represents the Company's
Income Statement, prepared in accordance with UK adopted IFRS. The
supplementary revenue return and capital return columns are both
prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement derive from
continuing operations.
There is no other comprehensive income as all income is recorded
in the statement above.
Statement of Financial Position
As at As at
30 November 2021 30 November 2020
===================================== ====== ================== ==================
Notes GBP'000 GBP'000
===================================== ====== ================== ==================
Non-current assets
Investments held at fair value 8 - 3,948
------ ------------------ ------------------
Loans at amortised cost 9 7,929 2,799
------ ------------------ ------------------
7,929 6,747
------ ------------------ ------------------
Current assets
Investments held at fair value 8 7,589 12,861
------ ------------------ ------------------
Loans at amortised cost 9 2,629 3,247
------ ------------------ ------------------
Other receivables and prepayments 10 27 21
------ ------------------ ------------------
Cash and cash equivalents 4,545 1,002
------ ------------------ ------------------
14,790 17,131
------ ------------------ ------------------
Total assets 22,719 23,878
------ ------------------ ------------------
Current liabilities
------ ------------------ ------------------
Loan facility 11 - (1,150)
------ ------------------ ------------------
Other payables and accrued expenses 12 (135) (131)
------ ------------------ ------------------
Total liabilities (135) (1,281)
------ ------------------ ------------------
Net assets 22,584 22,597
------ ------------------ ------------------
Share capital and reserves
------ ------------------ ------------------
Share capital 13 269 269
------ ------------------ ------------------
Share premium 9,094 9,094
------ ------------------ ------------------
Special distributable reserve 13,093 13,497
------ ------------------ ------------------
Capital reserve (166) (263)
------ ------------------ ------------------
Revenue reserve 294 -
------ ------------------ ------------------
Equity shareholders' funds 22,584 22,597
------ ------------------ ------------------
Net asset value per ordinary share 83.88p 83.93p
------ ------------------ ------------------
The notes below form an integral part of the financial
statements.
These financial statements were approved by the Board of
Directors of TOC Property Backed Lending Trust plc (a public
limited company incorporated in England and Wales with company
number 10395804) and authorised for issue on 30 March 2022. They
were signed on its behalf by:
John Newlands
Chairman
Statement of Changes in Equity
Special
For the year ending 30 Share Share distributable Capital Revenue
November 2021 capital premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ========= ========= =============== ========= ========= ========
At beginning of the year 269 9,094 13,497 (263) - 22,597
--------- --------- --------------- --------- --------- --------
Total comprehensive profit
for the year:
--------- --------- --------------- --------- --------- --------
Profit for the year - - - 97 832 929
--------- --------- --------------- --------- --------- --------
Transactions with owners
recognised directly in
equity:
--------- --------- --------------- --------- --------- --------
Dividends paid - - (404) - (538) (942)
============================ ========= ========= =============== ========= ========= ========
At 30 November 2021 269 9,094 13,093 (166) 294 22,584
--------- --------- --------------- --------- --------- --------
Special
For the year ending 30 Share Share distributable Capital Revenue
November 2020 capital premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ========= ========= =============== ========= ========= ========
At beginning of the year 269 9,094 16,455 (2,978) (291) 22,549
--------- --------- --------------- --------- --------- --------
Total comprehensive profit
for the year:
--------- --------- --------------- --------- --------- --------
Profit for the year - - - (170) 1,026 856
--------- --------- --------------- --------- --------- --------
Transfer of realised
loss on loans - - (2,885) 2,885 - -
--------- --------- --------------- --------- --------- --------
Transactions with owners
recognised directly in
equity:
--------- --------- --------------- --------- --------- --------
Dividends paid - - (73) - (735) (808)
============================ ========= ========= =============== ========= ========= ========
At 30 November 2020 269 9,094 13,497 (263) - 22,597
--------- --------- --------------- --------- --------- --------
Cash Flow Statement
Year ending Year ending
30 November 30 November
2021 2020
======================================= ====== ============= =============
Notes GBP'000 GBP'000
======================================= ====== ============= =============
Operating activities
------ ------------- -------------
Profit after taxation 929 856
------ ------------- -------------
Impairments 694 121
------ ------------- -------------
Uplifts (815) (14)
------ ------------- -------------
(Increase)/decrease in loan
interest receivable (126) 14
------ ------------- -------------
(Increase)/decrease in other
receivables (6) 21
------ ------------- -------------
Increase in other payables 4 33
------ ------------- -------------
Interest paid 1 227
------ ------------- -------------
Net cash inflow from operating
activities after taxation 681 1,258
------ ------------- -------------
Investing activities
------ ------------- -------------
Loans given (8,266) (8,455)
------ ------------- -------------
Loans repaid 13,221 11,311
------ ------------- -------------
Net cash inflow from investing
activities 4,955 2,856
------ ------------- -------------
Financing
------ ------------- -------------
Equity dividends paid (942) (808)
------ ------------- -------------
Bank loan drawn down 14 - 3,050
------ ------------- -------------
Repayment of bank loan 14 (1,150) (5,650)
------ ------------- -------------
Interest paid (1) (227)
------ ------------- -------------
Net cash outflow from financing (2,093) (3,635)
------ ------------- -------------
Increase in cash and cash equivalents 3,543 479
------ ------------- -------------
Cash and cash equivalents at
the start of the year 1,002 523
------ ------------- -------------
Cash and cash equivalents at
the end of the year 4,545 1,002
------ ------------- -------------
There are no non-cash changes arising from financial
activities.
Notes to the Financial Statements
1. Accounting Policies
Significant Accounting Policies
(a) Basis of Preparation
The financial statements of TOC Property Backed Lending Trust
plc have been prepared in accordance with UK adopted International
Financial Reporting Standards ("UK adopted IFRS") and with the
Companies Act 2006, as applicable to companies reporting under
international accounting standards. The financial statements were
also prepared in accordance with the Statement of Recommended
Practice ("SORP") for investment trusts issued by the AIC (as
issued in April 2021), where this guidance is consistent with UK
adopted IFRS.
The financial statements have been prepared on a going concern
basis under the historical cost convention, except for certain
investment valuations which are measured at fair value.
The notes and financial statements are presented in pounds
sterling (being the functional currency and presentational currency
for the Company) and are rounded to the nearest thousand except
where otherwise indicated.
GOING CONCERN
The financial statements have been prepared on a going concern
basis. The disclosures on going concern set out in the Directors'
Report within the Annual Report form part of these financial
statements.
INTEREST INCOME
For financial instruments measured at amortised cost, the
effective interest rate method is used to measure the carrying
value of a financial asset or liability and to allocate associated
interest income or expense over the relevant period. The effective
interest rate is the rate that discounts estimated future cash
payments or receipts over the expected life of the financial
instrument or, when appropriate, a shorter period, to the net
carrying amount of the financial asset or financial liability. In
calculating the effective interest rate, the cash flows are
estimated considering all contractual terms of the financial
instrument but does not consider expected credit losses. The
calculation includes all fees received and paid and costs borne
that are an integral part of the effective interest rate.
On an ongoing basis the Investment Adviser assesses whether
there is evidence that a financial asset is impaired. The basis of
calculating interest income on the three stages of impairment
(detailed below) are as follows:
Stage 1 Interest is calculated on the gross outstanding
principal
Stage 2 Interest is calculated on the gross outstanding
principal
Stage 3 Interest is calculated on the principal amount less
impairment
EXPENSES
Expenses are accounted for on an accruals basis. The Company's
administration fees, finance costs and all other expenses are
charged through the Income Statement and are charged to revenue.
Fees incurred in relation to operational costs of the loan
portfolio, such as legal fees, are charged through the Income
Statement and are charged to capital.
DIVIDS TO SHAREHOLDERS
Interim dividends declared during the year are recognised when
they are paid. Any final dividends declared are recognised when
they are approved by the Shareholders at the Annual general
Meeting.
TAXATION
Taxation on the profit or loss for the period comprises current
and deferred tax. Taxation is recognised in profit or loss except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity, in which case it is
also recognised in other comprehensive income or directly in equity
respectively.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates and laws enacted or substantively
enacted at the reporting date.
Deferred income taxes are calculated using rates and laws that
are enacted or substantivity are expected to apply as or when the
associated temporary differences reverse. Deferred income tax is
provided using the liability method on all temporary differences at
the reporting date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognised only to the extent that
it is probable that taxable profit will be available against which
deductible temporary differences, carried forward tax credits or
tax losses can be utilised. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities. Deferred income is
recognised in profit or loss unless it relates to a transaction
recorded in other comprehensive income or equity, in which case it
is also recognised in other comprehensive income or directly in
equity respectively.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The financial assets and financial liabilities are classified at
inception into the following categories:
Amortised cost:
Financial assets that are held for collection of contractual
cash flows where those cash flows represent SPPI ("solely payment
of principal and interest") and that are not designated at fair
value through profit and loss are measured at amortised cost. The
carrying amount of these assets is adjusted by any expected credit
loss allowance as described in the impairment note below.
The Company's cash and cash equivalents, other receivables and
payables, other payables and accruals, and the company's loan
facility are included within this category.
Fair value through profit and loss:
The Company have a number of borrower facilities in which they
received a minority equity stake or exit fee mechanism in
conjunction with providing those loan facilities. These loans are
recognised at fair value through profit and loss. The fair value of
the contracts is monitored and reviewed quarterly using discounted
cash flow forecasts based on the estimated cash flows that will
flow through from the underlying development project. A sensitivity
analysis is included in note 16.
IMPAIRMENT
At initial recognition, an impairment allowance is required for
expected credit losses (ECL) resulting from possible default events
within the next 12 months. When an event occurs that increases the
credit risk, an allowance is required for ECL for possible defaults
over the term of the financial instrument.
The key inputs into the measurement of ECL are probability of
default (PD), loss given default (LGD), and exposure at default
(EAD). These inputs are then considered and applied against
residential and commercial facilities in the loan book. ECL are
calculated by multiplying the PD by LGD and EAD.
PD has been determined by considering the local market where the
underlying assets are situated, economic indicators including
inflationary pressures on build costs, government policy, and
market sentiment. For residential loans this has been further
broken down into two scenarios; where only sales risk is still
present, and where both construction risk and sales risk still
exist. LGD is the magnitude of the likely loss if there is a
default. The LGD models consider the structure, collateral,
seniority of the claim, and recovery costs of any collateral that
is integral to the financial asset. LTV ratios are a key parameter
in determining LGD. LGD estimates are recalibrated for different
economic scenarios and, for lending collateralised by property, to
reflect possible changes in property prices. EAD represents the
expected exposure in the event of a default. The company derives
the EAD from the current exposure to the borrower. The EAD of a
financial asset is its gross carrying amount at the time of
default. EAD for residential facilities has been further broken
down into two scenarios; where the build is complete, and where
construction is ongoing.
A financial asset is credit-impaired when one or more events
that have occurred have a significant impact on the expected future
cash flows of the financial asset. It includes observable data that
has come to our attention regarding one or more of the following
events:
-- delinquency in contractual payments of principal and
interest;
-- cash flow difficulties experienced by the borrower;
-- initiation of bankruptcy proceedings;
-- the borrower being granted a concession that would otherwise
not be considered;
-- observable data indicating that there is a measurable
decrease in the estimated future cash flows from a portfolio of
assets since the initial recognition of those assets, although the
decrease cannot yet be identified with the individual financial
assets in the portfolio; and
-- a significant decrease in assets values held security.
Impairment of financial assets is recognised on a loan-by-loan
basis in stages:
-- Stage 1: A general impairment covering what may happen within
the next 12 months, based on the adoption of BIS standards as
outlined below.
-- Stage 2: Significant increase in credit risk, where the
borrower is in default, potentially in arrears, where full
repayment is expected and the underlying asset value remains
robust. The ECL calculation recognises the lifetime of the
loan.
-- Stage 3: Credit impaired, where the borrower is in default of
their loan contract, in arrears, full loan repayment is uncertain
and there is a shortfall in underlying asset value. The ECL
calculation recognises likely failure of the borrower.
As at 30 November 2021, there were seventeen loans in the
portfolio. Six of those projects supported included either an
equity stake of 25.1% for the Company or an exit fee mechanism.
Please see note 8 for details on these six projects.
The Board has deemed that five projects (2020: three); are
currently impaired and specific additional provisions have been
made against these facilities in these financial statements.
The other twelve loans have been assessed as not impaired.
The Company's response to IFRS 9 requirements has been based on
the Bank for International Settlements (BIS) Basel Supervisory
Committee liquidity risk tool recommendations.
FAIR VALUE HIERARCHY
Accounting standards recognise a hierarchy of fair value
measurements for financial instruments which gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). The classification of financial
instruments depends on the lowest significant applicable input, as
follows:
-- Level 1 - Unadjusted, fully accessible and current quoted
prices in active markets for identical assets or liabilities.
Examples of such instruments would be investments listed or quoted
on any recognised stock exchange.
-- Level 2 - Quoted prices for similar assets or liabilities, or
other directly or indirectly observable inputs which exist for the
duration of the period of investment. Examples of such instruments
would be forward exchange contracts and certain other derivative
instruments.
-- Level 3 - External inputs are unobservable. Value is the
Directors' best estimate, based on advice from relevant
knowledgeable experts, use of recognized valuation techniques and
on assumptions as to what inputs other market participants would
apply in pricing the same or similar instrument.
All loans are considered Level 3.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in hand and short-term
deposits in banks with an original maturity of three months or less
from inception.
OTHER RECEIVABLES
Other receivables do not carry interest and are short-term in
nature. There were no irrecoverable amounts accounted for at the
year end or the prior period end.
RESERVES
SHARE PREMIUM
The surplus of net proceeds received from the issuance of new
shares over their par value is credited to this account and the
related issue costs are deducted from this account.
CAPITAL RESERVE
The following are accounted for in the capital reserve:
-- Capital charges;
-- Increases and decreases in the fair value of and impairments
of loan capital held at the year end.
As at year end the Capital Reserve comprises only unrealised
gains and losses and so does not contain distributable
reserves.
REVENUE RESERVE
The net profit/(loss) arising in the revenue column of the
Income Statement is added to or deducted from this reserve which is
available for paying dividends.
SPECIAL DISTRIBUTABLE RESERVE
Created from the Court of Session cancellation of the initial
launch share premium account and is available for paying
dividends.
SEGMENTAL REPORTING
The Chief Operating Decision Maker is the Board of Directors.
The Directors are of the opinion that the Company is engaged in a
single segment of business, being the investment of the Company's
capital in financial assets comprising loans. All loan income is
derived from the UK. The Company derived revenue totalling
GBP488,000 (2020: GBP897,000) where the amounts from two (2020:
three) individual borrowers each exceeded 10% or more of the
Company's revenue. The individual amounts were GBP260,000,
GBP228,000, (2020: GBP365,000, GBP286,000, GBP246,000).
USE OF SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of financial statements requires management to
make estimates and assumptions that affect the amounts reported for
assets and liabilities as at the reporting date and the amounts
reported for revenue and expenses during the year. The nature of
the estimation means that actual outcomes could differ from those
estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any future
periods affected.
The key driver to determine whether loans are classified as fair
value through profit or loss or amortised cost is if the facility
has an exit fee or equity stake attached. Where these are present
the loan is classified as fair value through profit or loss.
The following are areas of particular significance to the
Company's financial statements and include the use of estimates or
the application of judgement:
CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING THE COMPANY'S
ACCOUNTING POLICIES - INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR
LOSS:
The Company owns profit share holdings or has exit fees
mechanism in relation to 6 of the borrowers in place as at the year
end. The loans held have been designated at fair value through
profit and loss. The determination of the fair value requires the
use of estimates. A sensitivity analysis is included in note 16.
The key uncertainties are around the timings and amounts of both
drawdown and repayments as these are determined by construction
progress and the timing of sales.
CRITICAL JUDGEMENTS AND ESTIMATES IN APPLYING THE COMPANY'S
ACCOUNTING POLICIES - LOANS AMORTISED COST CLASSIFICATION AND
IMPAIRMENTS:
The Company uses critical judgements to determine whether it
accounts for its loans at either amortised cost using the effective
interest rate method less impairment provisions or at fair value
through profit and loss. The determination of the required
impairment adjustment requires the use of estimates. The key
uncertainties are around the timings and amounts of both drawdown
and repayments as these are determined by construction progress and
the timing of sales. See notes 8 and 9 for further details.
2. REVENUE
30 November 30 November
2021 2020
GBP'000 GBP'000
=============== ============ ============
Interest from
loans 1,643 2,287
------------ ------------
Other income - 59
------------ ------------
Total revenue 1,643 2,346
------------ ------------
3. Investment Adviser's Fees
Investment Adviser
In its role as the Investment Adviser, Tier One Capital Ltd is
entitled to receive from the Company an investment adviser fee
which is calculated and paid quarterly in arrears at an annual rate
of 0.25 per cent. per annum of the prevailing Net Asset Value if
less than GBP100m; or 0.50 per cent. per annum of the prevailing
Net Asset Value if GBP100m or more.
There is no balance accrued for the Investment Adviser for the
period ended 30 November 2021 (year to 30 November 2020:
GBPnil).
There are no performance fees payable.
30 November 30 November
2021 2020
GBP'000 GBP'000
==================== ============ ============
Investment Adviser
fee 68 57
------------ ------------
4. Operating expenses
30 November 2021 30 November 2020
Revenue Capital Revenue Capital
--------- -------- --------- --------
GBP'000 GBP'000 GBP'000 GBP'000
=================================== ========= ======== ========= ========
Legal & professional 28 24 28 -
--------- -------- --------- --------
Directors' fees 90 - 90 -
--------- -------- --------- --------
Audit fees related to the audit
of the financial statements 41 - 79 -
--------- -------- --------- --------
Fund Administration and Company
Secretarial 82 - 79 -
--------- -------- --------- --------
Brokers' fees 30 - 30 -
--------- -------- --------- --------
Marketing fees - - 42 -
--------- -------- --------- --------
Valuation fees - - 9 -
--------- -------- --------- --------
AIFM fee (12) - 15 -
--------- -------- --------- --------
Impairments on loans amortised at
cost * 275 542 194 43
--------- -------- --------- --------
(Uplifts) on loans amortised at
cost* - (473)
--------- -------- --------- --------
Other expenses 208 - 141 -
--------- -------- --------- --------
Total other expenses 742 93 707 43
--------- -------- --------- --------
* Loan impairments consist of impairments to interest on loans
of GBP275,000 and a capital impairment on the loan of GBP542,000.
Loan uplifts consist of a capital uplift on the loans of
GBP473,000.
All expenses are inclusive of VAT where applicable. Further
details on Directors' fees can be found in the Directors'
Remuneration Report within the Annual Report.
5. Taxation
As an investment trust the Company is exempt from corporation
tax on capital gains. The Company's revenue income from loans is
subject to tax, but offset by any interest distribution paid, which
has the effect of reducing the corporation tax. The interest
distribution may be taxable in the hands of the Company's
shareholders.
30 November 30 November
2021 2020
GBP'000 GBP'000
========================================== ============ ============
Current corporation tax at 19% (2020:19%) - -
------------ ------------
Deferred taxation - -
------------ ------------
Tax on profit on ordinary activities - -
------------ ------------
Reconciliation of tax charge
------------ ------------
Profit on ordinary activities before
taxation 929 856
------------ ------------
Taxation at standard corporation tax
rate 19% (2020: 19%) 176 163
------------ ------------
Effects of:
------------ ------------
Income not subject to tax (18) 32
------------ ------------
Interest distributions (153) (195)
------------ ------------
Utilisation of losses not recognised
for deferred tax purposes (5) -
------------ ------------
Tax charge for the year - -
------------ ------------
There is an unrecognised deferred tax asset on losses of
GBP135,727 (2020: GBP141,980) calculated at the relevant deferred
tax rate of 25%.
6. Ordinary dividends
30 November 2021 30 November 2020
Pence Pence per
per GBP'000 share GBP'000
share
------- ---------- ---------- ----------
Interim dividend for the quarter
ended February 1.00 269 1.50 404
------- ---------- ---------- ----------
Interim dividend for the quarter
ended May 1.00 269 - -
------- ---------- ---------- ----------
Total dividends paid during and relating
to the year 538 404
------- ---------- ---------- ----------
Interim dividend for the quarter
ended August 1.00 269 - -
------- ---------- ---------- ----------
Interim dividend for the quarter
ended November 1.00 269 1.50 404
------- ---------- ---------- ----------
Total dividend declared in relation
to the year 1,076 808
------- ---------- ---------- ----------
The Company intends to distribute at least 85% of its
distributable income earned in each financial year by way of
interest distribution. A third interim dividend of 1.00 pence per
share declared on 10 November 2021, payable on 30 December 2021. On
22 February 2022, the Company declared an interim dividend of 1.00
pence per share for the quarter ended 30 November 2021, payable on
1 April 2022.
7. Earnings per share
The revenue, capital and total return per ordinary share is
based on each of the profit after tax and on 26,924,063 ordinary
shares, being the weighted average number of ordinary shares in
issue throughout the year. During the year there were no dilutive
instruments held, therefore the basic and diluted earnings per
share are the same.
8. Investments held at fair value through profit or loss
The Company's investment held at fair value through profit or
loss represents its profit share arrangements whereby the Company
owns 25.1% or has an exit fee mechanism for six companies.
30 November 30 November
2021 2020
GBP'000 GBP'000
========================================= ============ ============
Opening Balance 16,809 14,219
------------ ------------
Loans deployed 904 7,805
------------ ------------
Principal repayments (10,284) (5,516)
------------ ------------
Movements in interest receivable 106 753
------------ ------------
Unrealised gains/(losses) on investments
held at fair value through profit or
loss 54 (452)
------------ ------------
Total investments held at fair value
through profit and loss 7,589 16,809
------------ ------------
Split:
------------ ------------
Non-current assets: Investments held
at fair value through profit and loss
due for repayment after one year - 3,948
------------ ------------
Current assets: Investments held at
fair value through profit and loss due
for repayment under one year 7,589 12,861
------------ ------------
Please refer to note 16 for details of the approach to valuation
and sensitivity analysis.
9. Loans at amortised cost
30 November 30 November
2021 2020
GBP'000 GBP'000
======================================== ============ ============
Opening balance 6,046 11,037
------------ ------------
Loans deployed 7,362 670
------------ ------------
Principal repayments (2,937) (5,795)
------------ ------------
Movements in interest receivable 295 371
------------ ------------
Movement in impairments (208) (237)
------------ ------------
Total loans at amortised cost 10,558 6,046
------------ ------------
Split:
Non-current assets: Loans at amortised
cost due for repayment after one year 7,929 2,799
------------ ------------
Current assets: Loans at amortised
cost due for repayment
under one year 2,629 3,247
------------ ------------
The Company's loans held at amortised cost are accounted for
using the effective interest method. The carrying value of each
loan is determined after taking into consideration any requirement
for impairment provisions during the year, allowances for
impairment losses amounted to GBP208,000 (2020: GBP237,000).
Further details on impairment can be found within the accounting
policies note above.
Movements in allowances for impairment losses in the year
Nominal value
GBP'000
======================================= ==============
at 1 December 2020 3,021
--------------
Provisions for impairment losses 69
--------------
at 30 November 2021 3,090
--------------
Stage 1 provisions at 1 December 2020 261
--------------
Provisions for impairment losses (228)
--------------
Stage 1 provisions at 30 November 2021 33
--------------
Stage 2 provisions at 1 December 2020 -
--------------
Provisions for impairment losses -
--------------
Stage 2 provisions at 30 November 2021 -
--------------
Stage 3 provisions at 1 December 2020 2,760
--------------
Provisions for impairment losses 297
--------------
Stage 3 provisions at 30 November 2021 3,057
--------------
Stage 1, 2, and 3 are referenced in more detail below.
10. Receivables
30 November 30 November
2021 2020
GBP'000 GBP'000
================== ============ ============
Prepayments 27 21
================== ============ ============
Total receivables 27 21
------------ ------------
11. loan facility
30 November 30 November
2021 2020
GBP'000 GBP'000
========== ============= ============
Bank loan - 1,150
------------- ------------
On 29 May 2021 the Company entered into a GBP6.5m committed
revolving facility with Shawbrook Bank Limited, expiring on 28 May
2022. No balance was drawn down at the year end. The facility is
secured against a debenture over the assets of the Company.
12. Other Payables
30 November 30 November
2021 2020
GBP'000 GBP'000
===================== ============ ============
Accruals 135 131
------------ ------------
Total other payables 135 131
------------ ------------
13. Share Capital
Nominal value Number of
GBP'000 Ordinary shares
of 1p
======================================== ============== =================
At 30 November 2020 269 26,924,063
-------------- -----------------
Issued and fully paid as at 30 November
2021 269 26,924,063
-------------- -----------------
The ordinary shares are eligible to vote and have the right to
participate in either an interest distribution or participate in a
capital distribution (on a winding up).
14. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING
ACTIVITIES
At 30 November Cash Non-cash At 30 November
2020 flows flows 2021
GBP'000 GBP'000 GBP'000 GBP'000
================================= =============== ========= ========= ===============
Short term borrowings 1,150 (1,150) - -
--------------- --------- --------- ---------------
Total liabilities from financing
activities 1,150 (1,150) - -
--------------- --------- --------- ---------------
At 30 November Cash Non-cash At 30 November
2019 flows flows 2020
GBP'000 GBP'000 GBP'000 GBP'000
================================= =============== ========= ========= ===============
Short term borrowings 3,750 (2,600) - 1,150
--------------- --------- --------- ---------------
Total liabilities from financing
activities 3,750 (2,600) - 1,150
--------------- --------- --------- ---------------
15. Related Parties
Fees payable during the year to the Directors and their
interests in shares of the Company are considered to be related
party transactions and are disclosed within the Directors'
Remuneration Report within the Annual Report. The balance of fees
due to Directors at the year end was GBPnil (30 November 2020:
GBPnil).
The Directors are considered to be related parties. No Director
has an interest in any transactions which are, or were, unusual in
their nature or significant to the nature of the Company.
The Directors of the Company received GBP90,000 fees for their
services during the year to 30 November 2021 (30 November 2020:
GBP90,000). GBPnil was payable at the year end (30 November 2020:
GBPnil).
Ian McElroy is Chief Executive of Tier One Capital Ltd and is a
founding shareholder and director of the firm.
Tier One Capital Ltd, the Investment Adviser of the Company,
received GBP68,000 investment adviser's fee during the year (30
November 2020: GBP57,000) and GBPnil was payable at the year end
(30 November 2020: GBPnil). Tier One Capital Ltd receives up to a
20% margin and arrangement fee for all loans it facilitates.
There are various related party relationships in place with the
borrowers as below:
The following related parties arise due to the opportunity taken
to advance the 25.1% profit share contracts:
-- Gatsby Homes
The Company owns 25.1% of the borrower Gatsby Homes Ltd. The
loan amount outstanding as at 30 November 2021 was GBP468,000 (30
November 2020: GBP1.6m). Transactions in relation to loans repaid
during the year amounted to GBP797,000 (30 November 2020:
GBP474,000). Interest due to be received as at 30 November 2021 was
GBPnil (30 November 2020: GBPnil). Interest received during the
year amounted to GBP136,000 (30 November 2020: GBPnil).
-- Bede and Cuthbert Developments
The Company owns 25.1% of the borrower Bede and Cuthbert
Developments Ltd. The loan amount outstanding as at 30 November
2021 was GBP130,000 (30 November 2020: GBP3.2m). Transactions in
relation to loans (repaid)/made during the year amounted to
(GBP3.2m) (30 November 2020: GBP2.5m). Interest due to be received
as at 30 November 2021 was GBPnil (30 November 2020: GBP36,000).
Interest received during the year amounted to GBP154,000 (30
November 2020: GBP100,000).
-- Thursby Homes (Springs)
The Company owns 25.1% of the borrower Thursby Homes (Springs)
Ltd. The loan amount outstanding as at 30 November 2021 was GBP2.4m
(30 November 2020: GBP3.0m). Transactions in relation to loans
repaid during the year amounted to GBP502,000 (30 November 2020:
GBP580,000). Interest due to be received as at 30 November 2021 was
GBP209,000 (30 November 2020: GBP168,000). Interest received during
the year amounted to GBP261,000 (30 November 2020: GBP365,000).
-- Northumberland
TOC Property Backed Lending Trust plc owns 25.1% of the borrower
Northumberland Ltd. The loan amount outstanding as at 30 November
2021 was GBP1.3m (30 November 2020: GBP2.0m). Transactions in
relation to loans repaid during the year amounted to GBP683,000 (30
November 2020: GBP910,000). Interest due to be received as at 30
November 2021 was GBP10,000 (30 November 2020: GBP27,000). Interest
received during the year amounted to GBP123,000 (30 November 2020:
GBP209,000).
-- Dinosauria
TOC Property Backed Lending Trust plc owns 25.1% of the borrower
Dinosauria Ltd which was disposed of during the year. The loan
amount outstanding as at 30 November 2021 was GBPnil (30 November
2020: GBP550,000). Transactions in relation to loans repaid during
the year amounted to GBP550,000 (30 November 2020: GBPnil).
Interest due to be received as at 30 November 2021 was GBPnil (30
November 2020: GBP18,000). Interest received during the year
amounted to GBP2,000 (30 November 2020: GBP44,000).
-- Coalsnaughton
TOC Property Backed Lending Trust plc owns 25.1% of the borrower
Kudos Partnership. The loan amount outstanding as at 30 November
2021 was GBP2.3m (30 November 2020: GBP1.7m). Transactions in
relation to loans made during the year amounted to GBP404,000 (30
November 2020: GBP1.7m). Interest due to be received as at 30
November 2021 was GBP170,000 (30 November 2020: GBP88,000).
Interest received during the year amounted to GBP228,000 (30
November 2020: GBP194,000).
-- Oswald Street
TOC Property Backed Lending Trust plc owns 25.1% of the
Riverfront Property Limited Partnership. The loan amount
outstanding as at 30 November 2021 was GBP408,000 (30 November
2020: GBP382,000). Transactions in relation to loans made during
the year amounted to GBPnil (30 November 2020: GBP382,000).
Interest due to be received as at 30 November 2021 was GBP5,000 (30
November 2020: GBP5,000). Interest received during the year
amounted to GBP31,000 (30 November 2020: GBP9,000).
16. Financial Instruments
Consistent with its objective, the Company holds a diversified
portfolio of fixed rate loans secured with collateral in the form
of; land or property in the UK, charges held over bank accounts and
personal or corporate guarantees. The benefit of a related profit
share or exit fee mechanism may also be agreed. In addition, the
Company's financial instruments comprise cash and receivables and
payables that arise directly from its operations. The Company does
not have exposure to any derivative instruments.
The Company is exposed to various types of risk that are
associated with financial instruments. The most important types are
credit risk, liquidity risk, interest rate risk and market price
risk. There is no foreign currency risk as all assets and
liabilities of the Company are maintained in pounds sterling.
The Board reviews and agrees policies for managing the Company's
risk exposure. These policies are summarised below:
CREDIT RISK
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company.
In the event of default by a borrower if it is in financial
difficulty or otherwise unable to meet its obligations under the
agreement, the Company will suffer an interest shortfall and
potentially a loss of capital. This potentially will have a
material adverse impact on the financial condition and performance
of the Company and/or the level of dividend cover. The Board
receives regular reports on concentrations of risk and the
performance of the projects underlying the loans, using loan to
value percentages to help monitor the level of risk. The Investment
Adviser monitors such reports in order to anticipate, and minimise
the impact of, default.
There were financial assets which were considered impaired at 30
November 2021, with impairments amounting to GBP208,000 (30
November 2020: GBP237,000). Our maximum exposure to credit risk as
at 30 November 2021 was GBP22,719,000 (30 November 2020:
GBP23,878,000).
All of the Company's cash is placed with financial institutions
with a long-term credit rating of A or better. Bankruptcy or
insolvency of such financial institutions may cause the Company's
ability to access cash placed on deposit to be delayed or limited.
Should the credit quality or the financial position of the banks
currently employed significantly deteriorate, cash holdings would
be moved to another bank.
Further details on the exposure to, and management of, credit
risk by the Company is included in both the Investment Advisor's
Report above and the Strategic Report in the Annual Report.
Loans held at amortised cost as at 30 November 2021
Total
GBP'000
Stage 1 9,456
Stage 2 378
Stage 3 724
10,558
Loans held at amortised cost as at 30 November 2020
Total
GBP'000
Stage 1 3,096
Stage 2 657
Stage 3 2,293
6,046
LIQUIDITY RISK
Liquidity risk is the risk that the Company will encounter
difficulties in realising assets or otherwise raising funds to meet
financial commitments. The Company's investments comprise
loans.
Property and property-related assets in which the Company
invests via loans are not traded in an organised public market and
are relatively illiquid assets, requiring individual attention to
sell in an orderly way. As a result, the Company may not be able to
liquidate quickly its investments in these loans at an amount close
to their fair value in order to meet its liquidity
requirements.
The Company's liquidity risk is managed on an ongoing basis by
the Investment Adviser and monitored on a quarterly basis by the
Board. In order to mitigate liquidity risk the Company has a
comprehensive three-year cash flow forecast that aims to have
sufficient cash balances, taking into account projected drawdowns
on the live facilities to meet its obligations for a period of at
least 12 months. At the reporting date, the maturity of the
financial assets and liabilities was:
Financial assets as at 30 November 2021
In two or more
In one year years Total
GBP'000 GBP'000 GBP'000
--------------------------- ----------- -------------- --------
Cash and cash equivalents 4,545 - 4,545
Loans at amortised cost 2,629 7,929 10,558
Investments held at fair
value 7,589 7,589
Total 14,763 7,929 22,692
Financial assets as at 30 November 2020
In two or more
In one year years Total
GBP'000 GBP'000 GBP'000
--------------------------- ----------- -------------- --------
Cash and cash equivalents 1,002 - 1,002
Loans at amortised cost 3,247 2,799 6,046
Investments held at fair
value 12,861 3,948 16,809
Total 17,110 6,747 23,857
Financial liabilities as at 30 November 2021
In two or more
In one year years Total
GBP'000 GBP'000 GBP'000
----------- ----------- -------------- --------
Bank loan - - -
Total - - -
Financial liabilities as at 30 November 2020
In two or more
In one year years Total
GBP'000 GBP'000 GBP'000
------------ ----------- -------------- --------
Bank loan 1,150 - 1,150
Total 1,150 - 1,150
INTEREST RATE RISK
The interest rate profile of the Company was as follows:
as at 30 November 2021
Financial net Variable
assets on which Fixed rate rate financial
no interest Financial net assets Total
is paid Assets GBP'000 GBP'000
GBP'000 GBP'000
================================== ================= ============= ================ ==========
Other receivables and prepayments 27 - - 27
----------------- ------------- ---------------- ----------
Loan Interest receivable 657 - - 657
----------------- ------------- ---------------- ----------
Other payables and accrued
expenses (135) - - (135)
----------------- ------------- ---------------- ----------
Cash and cash equivalents - - 4,545 4,545
----------------- ------------- ---------------- ----------
Loan facility - - - -
----------------- ------------- ---------------- ----------
Investments held at fair
value - 7,191 - 7,191
----------------- ------------- ---------------- ----------
Loans at amortised cost - 10,299 - 10,299
----------------- ------------- ---------------- ----------
Total 549 17,490 4,545 22,584
----------------- ------------- ---------------- ----------
as at 30 November 2020
Financial net Variable
assets on which Fixed rate rate financial
no interest Financial net assets Total
is paid Assets GBP'000 GBP'000
GBP'000 GBP'000
================================== ================= ============= ================ ==========
Other receivables and prepayments 21 - - 21
----------------- ------------- ---------------- ----------
Loan Interest receivable 562 - - 562
----------------- ------------- ---------------- ----------
Other payables and accrued
expenses (131) - - (131)
----------------- ------------- ---------------- ----------
Cash and cash equivalents - - 1,002 1,002
----------------- ------------- ---------------- ----------
Loan facility - - (1,150) (1,150)
----------------- ------------- ---------------- ----------
Investments held at fair
value - 16,381 - 16,381
----------------- ------------- ---------------- ----------
Loans at amortised cost - 5,912 - 5,912
----------------- ------------- ---------------- ----------
Total 452 22,293 (148) 22,597
----------------- ------------- ---------------- ----------
Market Price Risk
The management of market price risk is part of the investment
management process and is typical of an investment company. The
portfolio is managed with an awareness of the effects of adverse
valuation movements through detailed and continuing analysis, with
an objective of maximising overall returns to shareholders.
Investments in property and property-related assets are inherently
difficult to value due to the individual nature of each property.
As a result, valuations are subject to substantial uncertainty.
There is no assurance that the estimates resulting from the
valuation process will reflect the actual sales price even where
such sales occur shortly after the valuation date. Such risk is
minimised through the appointment of external property valuers. The
basis of valuation of the loan portfolio is set out in detail in
the accounting policies. The inputs into the DCF models are the
forecast monthly cashflows including sales values and build costs,
the discount rate which is the inputted interest rate at the time
the facility was entered into adjusted for any movements in the
risk free rate as at current year end, and a 30% discount rate for
the equity element to reflect the higher level of uncertainty. Any
changes in market conditions will directly affect the profit and
loss reported through the Income Statement. Details of the
Company's investment portfolio held at the balance sheet date are
disclosed in the Investment Adviser's Reviewabove. A 10% fall in
the sales value of the residential development projects and a 10%
reduction in asset value of commercial and investment property
assets for those loans held at fair value would have resulted in a
further impairment to the portfolio of GBP387,907 as at 30 November
2021 (30 November 2020: GBP615,246). The calculations are based on
the property valuations at the respective balance sheet date and
are not representative of the year as a whole, nor reflective of
future market conditions.
VALUATION OF FINANCIAL INSTRUMENTS
Accounting standards recognise a hierarchy of fair value
measurements for financial instruments which gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). The classification of financial
instruments depends on the lowest significant applicable input, as
follows:
-- Level 1 - Unadjusted, fully accessible and current quoted
prices in active markets for identical assets or liabilities.
Examples of such instruments would be investments listed or quoted
on any recognised stock exchange.
-- Level 2 - Quoted prices for similar assets or liabilities, or
other directly or indirectly observable inputs which exist for the
duration of the period of investment. Examples of such instruments
would be forward exchange contracts and certain other derivative
instruments.
-- Level 3 - External inputs are unobservable. Value is the
Directors' best estimate, based on advice from relevant
knowledgeable experts, use of recognised valuation techniques and
on assumptions as to what inputs other market participants would
apply in pricing the same or similar instrument.
30 November 2021
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- ---------
Investments held at fair
value - - 7,589 7,589
---------- ---------- --------- ---------
Total - - 7,589 7,589
---------- ---------- --------- ---------
30 November 2020
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- ---------
Investments held at fair
value - - 16,809 16,809
---------- ---------- --------- ---------
Total - - 16,809 16,809
---------- ---------- --------- ---------
17. CAPITAL MANAGEMENT
The Company's capital is represented by the Ordinary Shares,
share premium, capital reserves, revenue reserve and special
distributable reserve. The Company is not subject to any externally
imposed capital requirements.
The capital of the Company is managed in accordance with its
investment policy, in pursuit of its investment objective. Capital
management activities may include the allotment of new shares, the
buy back or re-issuance of shares from treasury, the management of
the Company's discount to net asset value and consideration of the
Company's net gearing level.
On 29 March 2021, changes were implemented to the investment and
dividend policies. Further details can be found within the
Chairman's Statement.
18. Post Balance Sheet Events
On 7 March 2022, a new facility of GBP2.15m was entered into
with Harrow Living Ltd with an initial drawdown of
GBP1,260,000.
For further information regarding the Company (Ticker: PBLT)
(LEI: 213800EXPWANYN3NEV68) please call:
Tier One Capital Ltd (Investment Adviser) +44 (0) 191 222
Ian McElroy/Brendan O'Grady 0099
finnCap Ltd (Financial Adviser and Broker) +44 (0) 207 220
William Marle 0500
Maitland Administration Services Limited
(Secretary) +44 (0) 1245 950317
ENDS
Annual Report and Financial Statements
The Annual Report and Financial Statements will be posted to
shareholders and will shortly be available on the Company's website
( www.tocpropertybackedlendingtrust.co.uk ) or in hard copy format
from the Company's Registered Office.
A copy of the annual report will be submitted to the FCA's
National Storage Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
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END
FR FLFFLVRIIVIF
(END) Dow Jones Newswires
March 30, 2022 07:35 ET (11:35 GMT)
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