15 March 2022

Gresham House plc

("Gresham House," "the Group" or "the Company")

Annual Results for the year ended 31 December 2021

65% AUM increase to £6.5bn with strong organic growth

The Board of Gresham House plc, (AIM: GHE), the specialist alternative asset manager, is pleased to announce a year of significant growth, both organically and through acquisitions. Assets under management (AUM) rose 65% to £6.5 billion. Growth in AUM has led to material growth in revenue, operating margin and profit. The Group made strong progress against its GH25 strategic objectives and increased its AUM target in November 2021 to £8.0 billion. The Board is pleased to confirm that following the achievement of adjusted diluted EPS of 49.4p, up 50%, it is recommending a 67% increase in the dividend to 10.0 pence (2020: 6.0 pence).

Financial highlights

·      Substantial AUM growth of 65% to £6.5 billion (2020: £4.0 billion), with organic growth of £1.9 billion (c.50%)

o  Driven by strong fundraising, targeted acquisitions, and investment performance

·      Strong net core income growth of 51% to £61.6 million (2020: £40.8 million)

·      Growth in adjusted operating profit of 67% to £20.2 million (2020: £12.1 million) and 50% increase to adjusted diluted EPS to 49.4 pence (2020: 32.9 pence)

·      Return on Capital Employed increased to 34.1% (2020: 16.0%)

·      Final dividend proposed to increase by 67% to 10.0 pence (2020: 6.0 pence)

·      Strong balance sheet with £40.3 million cash; £20.0 million undrawn RCF; plus £38.0 million investments

Strategic highlights

·      Outstanding fundraising performance, with net inflows of £1.2 billion (2020: £0.4 billion) across all of the Group's strategies, including:

o  £206 million of net inflows in Strategic Equity open-ended and VCT funds

o  £100 million of additional fundraising for Gresham House Energy Storage Fund plc (GRID)

o  £202 million raised for new forestry fund Gresham House Forest Growth & Sustainability LP

o  £150 million BSIF II LP, the Group's second sustainable infrastructure fund

o  £430 million from AXA IM Alts Australian forestry mandate

·      Continued growth and diversification of client base across broadening range of institutional and wholesale investors

o  Driven by product development and targeting of growing channels

·      Targeted acquisitions have enhanced AUM by £625 million and enhanced the Group's potential:

o  International footprint established following completion of Appian Asset Management Limited acquisition, an EU-based AIFM in June 2021

o  Private Equity platform substantially augmented by acquisition of VCT business of Mobeus Equity Partners LLP in October 2021

·      Further established market leadership in sustainability across battery storage, solar, wind, forestry, housing, and sustainable infrastructure

·      Continued investment in talent to facilitate future growth in AUM

·      Leading position in UK forestry in 2021 supports winning of international mandates in Australia and Ireland

·      Well positioned for further growth across all asset classes in 2022 and beyond

GH25 upgrades

·      GH25 five-year strategy target for AUM increased from £6.0 billion to £8.0+ billion

·      EBITDA margin of 32.7% (2020: 29.6%), on track to achieve 40.0% target

·      GH25 ROCE target raised from 15% to '20% over the medium term'

·      Dividend policy established to target three times adjusted operating profits coverage by the end of GH25

Commenting on the results, Tony Dalwood, Chief Executive of Gresham House, said:

"Throughout 2021 we made exceptional progress on the delivery of our GH25 five-year strategy and are reporting outstanding growth in AUM, profitability and revenue. We are focused on private assets which exhibit long-term superior investment returns alongside sustainability characteristics.

"We have demonstrated our ability to grow organically and to add value through acquisitions, providing an exciting future for our Group. Gresham House Ireland and the Mobeus VCT businesses enhance the strategic ambitions and potential for the Group.

"Momentum across the business continues to be buoyed by the structural shift driving fund inflows into alternative asset classes as we continue to diversify our client base. Our ESG-focused strategy and strong investment performance mean we are well placed to capture the rising demand for investments that deliver both financial returns and sustainable, climate-based solutions.

"In light of our excellent 2021 performance, we are well on track to achieve our GH25 objectives and have therefore upgraded our targets in accordance with our ambition and strategic goals. Despite the current macroeconomic environment and geo-political events, we are confident of further growth throughout 2022 as we continue to deliver value to all our stakeholders."

Gresham House is hosting its Annual Results webinar at 09:00am today.
Link: https://greshamhouse.zoom.us/webinar/register/WN_ReTB3jbdTVC_JbWkP2sEaQ

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014

For more information contact: 

About Gresham House

Gresham House is a specialist alternative asset management group, focused on sustainable investments across a range of investment strategies, including forestry, housing, sustainable infrastructure, renewable energy and battery storage, public and private equity.

Our origins stretch back to 1857, while our focus is on the future and the long term. Quoted on the London Stock Exchange (GHE:LN) we actively manage £6.5 billion of assets on behalf of institutions, family offices, charities and endowments, private individuals and their advisers. We act responsibly within a culture of empowerment that encourages individual flair and entrepreneurial thinking.

As a signatory to the UN-supported Principles for Responsible Investment (PRI), our vision is to always make a positive social or environmental impact, while delivering on our commitments to shareholders, employees and investors. www.greshamhouse.com 

Chairman's statement

Introduction

I am pleased to report on a year of exceptionally strong, profitable growth for Gresham House, with substantial increases in assets under management (AUM) and margins complementing both organic and acquisitive progress. The business has adapted and delivered against its targets and made excellent strides against its GH25 ambitions while remaining resilient in the face of the ongoing pandemic and continued uncertainty in the markets. In light of this, we are increasing our GH25 Return on Capital Employed (ROCE) target from 15% to 20% average over the medium term as well as improving our dividend policy to target three times operating profit coverage by the end of GH25.

This resilience and continued growth momentum is a huge testament to our employees' dedication and the excellent performance of the management team, which has contributed to excellent shareholder value creation year after year. The dedication of the senior management team and the capability and integrity with which they lead the business permeates throughout the Group. An internal focus on both financial and strategic metrics has cultivated an ambitious and successful culture and, supported by excellent colleagues, the executive team has sought to establish the Gresham House brand as a symbol of superior investment performance, teamwork and ambition in pursuit of shareholder value creation. Meanwhile, share ownership throughout the organisation has promoted employee belief and alignment with the brand we are building.

Activity in the period

I am delighted to report that we have significantly accelerated our outstanding growth rate in AUM, increasing it 65% over the year. Organic growth included growing demand within the Forestry division resulting in new business AUM growth of over £600 million. As part of this Gresham House saw further international expansion with the completion of an Australian forestry mandate, announced on 9 December 2021, while significant fundraises were achieved across the Group within our British Sustainable Infrastructure Fund II LP, Gresham House Energy Storage Fund plc (GRID), Gresham House Forest Growth & Sustainability LP, and Gresham House Residential Secure Income LP (ReSI LP), as well as in our VCTs and equity funds.

Alongside strong organic growth, we also grew the business further through strategic acquisitions, namely Appian Asset Management Limited in June, as well as the VCT business of Mobeus Equity Partners LLP in October, adding a further £303 million and £369 million respectively in the year.

Given the significant progress made against our five-year strategy, GH25, we revised our AUM target upwards by 33% to £8 billion AUM in November, whilst maintaining the targets of 40% EBITDA margin and 15% ROCE by 2025. As a result of recent strong performance, we continue to track towards or exceed these financial targets with an EBITDA margin of 32.7% (2020: 29.6%) and ROCE¹ of 34.1% for 2021 (2020: 16.0%).

The Board was pleased to note that the 2021 Employee Engagement Survey demonstrated high levels of satisfaction and commitment amongst staff, with a 96% advocacy rate, against an external benchmark of 73%. The survey also showed a staff alignment score of 80%, against an external benchmark of 66%.

1. Return on capital employed defined as adjusted operating profit, plus net performance fees, net realised gains on development activity and fair value movements in investments less fair value movements on contingent consideration, divided by opening net assets, adjusted for shares issued in the year.

Sustainability

We continue with our aim to be a market leader in sustainability, with assets across battery storage, solar, wind and forestry, as well as housing and sustainable infrastructure. Core to this are the sustainability goals we set out as part of our GH25 strategy, first announced in March 2020, aiming to further develop the business as a leading specialist alternative asset manager with sustainability at its heart.

This year we established our Sustainability Committee, chaired by Gareth Davis, as a subcommittee of the Board to provide oversight and accountability for our sustainability-related practices across the business. The Committee met for the first time in August 2021 where a range of sustainability factors were discussed, including how we will advance our management of climate change-related risks and opportunities.

Going forward, we expect there will be an ever-increasing focus on impact and sustainable investments. It is now an important factor for all asset managers and a differentiator for Gresham House in the market.

Financials

I am very proud of the excellent results achieved by the Group this year. Alongside the substantial 65% growth in AUM, we saw net core income increase by 51% to reach £61.6 million (2020: £40.8 million), while adjusted operating profit was £20.2 million, growing by 67% (2020: £12.1 million). Net comprehensive income was up substantially to £12.0 million (2020: £0.8 million) and we also achieved ROCE of 34.1% (2020: 16.0%). Our balance sheet remains strong with £40.3 million of cash, £38.0 million of investments and £20.0 million of undrawn Revolving Credit Facility (RCF), leaving us very well positioned to support our ambitions and continue our exciting growth trajectory in 2022.

Dividend

We intend to increase the dividend for this year to 10.0 pence, an increase of 67% (2020: 6.0 pence). As outlined earlier, and as part of our GH25 strategy, we have reviewed our dividend policy to increase it to target adjusted operating profit coverage of three times by 2025. Shareholders should therefore look towards increasing dividends in the future.

Shareholders

Having raised £42.0 million via a placing alongside our acquisition of the VCT business of Mobeus Equity Partners LLP, we welcomed several new, long-term supportive shareholders to the register. We were delighted with the level of backing and we hope to continue engaging with both our current and new shareholders in the capital markets going forward. The company has evolved substantially from the sub-£15 million market capitalisation at the time the new management team commenced its plans in December 2014. We have benefited from a broadening of our shareholder base and look forward to attracting further new, long-term shareholders to continue the growth of the business.

Board

We were delighted to welcome Sarah Ing as the Audit Committee Chair Designate this year, who will take on full responsibility for the role following the retirement of our current Chair, Richard Chadwick, at the conclusion of the 2022 AGM. Sarah is a chartered accountant, with listed company experience as a Non-Executive Director on XPS Pensions Group plc and CMC Markets plc boards and is already adding value to the Board.

Richard leaves us after many years of exceptional service to Gresham House having seen the business go from a property-based investment company to the alternative asset manager we are today, and his knowledge of the corporate history has proved very valuable. We are extremely grateful for his contribution to this growth throughout his tenure and wish him well in his retirement.

Richard also holds the position of Senior Independent Director on the Board. I am pleased to be able to advise that this role will pass to Gareth Davis after the 2022 AGM.

Annual General Meeting

After two years of COVID-19 restrictions, requiring a virtual meeting, we can now at last revert to holding our Annual General Meetings in person again. The intention is therefore to look forward to welcoming shareholders to our 2022 AGM at Eversheds Sutherland (International) LLP, 100 Wood Street, London, on Thursday 12 May 2022.

Outlook

We have continued to establish ourselves as a significant player in alternative assets and sustainable investing, areas which have shown continued resilience during 2021, and we approach the year ahead with confidence. We have made excellent progress against our GH25 objectives and we have revised these upwards as we grow further. I believe that our product offering, and sustainable investment focus will continue to provide attractive investment characteristics to existing and potential clients seeking returns within a sustainability framework.

With the opportunities ahead we are confident that we will continue our strong growth momentum, in line with our ambitions, to create shareholder value and sustainable returns to clients and investors, and add further depth and breadth to our platform. My thanks go to all those within the Company for their hard work and dedication as well as the support from our clients and shareholders.

Anthony Townsend

Chairman

14 March 2022

Chief Executive's report

Strategic overview

Throughout 2021 we made excellent progress in the delivery of our GH25 five-year strategic plan launched in 2020. As we entered 2021 the UK, and indeed much of the world, was still operating under lockdown conditions. Nevertheless, the entire Gresham House team continued to demonstrate commitment, resilience and resourcefulness in the face of the economic and social challenges that the pandemic has created. We adapted in various ways as a company and continued to drive strong organic growth with progress evident across each of our asset classes. Importantly, investment performance for clients was also something to be proud of.

Gresham House delivered 65% growth in AUM by the year end, rising to £6.5 billion (2020: £4.0 billion). Organic growth represented c.50%, alongside two strategic acquisitions which increased AUM by a further c.15%.

The acquisition of Appian Asset Management, first announced at the end of 2020, completed in June 2021 to establish Gresham House Ireland (GHI). Based in Dublin, GHI is an active asset manager and the acquisition brought c.€350 million of AUM into Gresham House providing a platform for investment outside the UK, with an increasing emphasis on assets with a sustainability focus.

In October, we substantially built out our private equity capability with the acquisition of the VCT business of Mobeus Equity Partners LLP. The four Mobeus VCTs brought a combined AUM of £369 million and a high-quality, experienced team with complementary skills. Following this acquisition, Gresham House has become one of the leading players in the VCT market with combined AUM of £887 million across the Baronsmead and Mobeus brands.

As a result of both organic growth and these key acquisitions, I am delighted to report that our profitability rose 67%, whilst our margin increased to 33%, marking strong progress towards our GH25 target of 40% margin.

Momentum across the business continues to be buoyed by a structural shift in asset allocation by investors, including appetite for our sustainability-focused asset classes which continues to increase. Alternative assets proved robust during a volatile 2020, and in 2021 showed their ability to perform.

The World Economic Forum's Global Risk Report 2021 highlighted that over the next ten years environmental risks are the five most critical long-term threats to the world, with the three most severe risks identified as climate action failure, extreme weather, and biodiversity loss. Many of our funds are seeking to address these crucial areas.

Global sustainable fund assets doubled in just a six-month period to reach $3.9 trillion in September 2021, according to financial services information provider Morningstar. Globally, alternative assets under management are set to continue to grow strongly from $13.32 trillion at the end of 2021 to $23.21 trillion by 2026.

Throughout 2021, demand and allocations to Gresham House managed funds with a sustainable investment focus saw significant growth, and this trend is expected to continue into 2022 and beyond.

Throughout the year our market share in these assets continued to expand. We also grew our client base and welcomed new investors across the spectrum of institutional, family office, high net worth, wholesale and retail investors into our specialist and differentiated products and solutions.

The developments outlined above are driving continued shareholder value creation. Crucially, we have also delivered clear strategic progress driven by our ambitious, sustainability-focused culture and underpinned by rigorous internal processes. We ended the year with market-leading positions in several of our asset classes, notably VCT, forestry, housing and battery storage. We also developed our international profile, through an Australian forestry mandate that completed in December.

GH25

Our GH25 strategy was launched in March 2020 to articulate a five-year ambition with sustainability at the heart of our strategy. Within it we targeted long-term shareholder value by more than doubling AUM to over £6.0 billion, increasing operating margins to 40% and generating a target ROCE of 15% or above.

As a result of a very strong year of growth, we announced in November that we would raise our AUM target by 33% to greater than £8.0 billion.

Following continued expansion of the Group, we are proud to announce that we now intend to establish a dividend policy with a medium-term target of three times adjusted operating profits cover by 2025, to underline the increasing quality and profitability of the business alongside a recognition of the importance of income for some shareholders. Separately, we are also aiming to achieve an increased ROCE target to 20% over the medium term, recognising the importance shareholders place on capital returns.

Strategic objectives

As we move into 2022, Gresham House is firmly establishing itself as a leader in sustainable investment and best practice corporate governance.

We launched our inaugural Sustainable Investment Report in March 2021 and delivered a stewardship report, which received Financial Reporting Council approval. We also embedded our commitment to sustainability at the highest level of the business with the creation of our Board level Sustainability Committee. Within the business we also strive to achieve appropriate Diversity, Equity and Inclusion (DEI) objectives.

Gresham House has a leadership position across our specialist alternative investment activities. In battery storage, the Gresham House Energy Storage Fund plc (GRID) secured £280 million in debt and new funding in 2021 making it the largest fund of its kind in the UK. We are also the largest asset manager of forestry in the UK and continue to develop our international franchise with assets in Australia and Ireland. In Strategic Equity, the acquisition of the Mobeus VCTs business has expanded our VCT platform significantly to position us as a leading player in the sector.

The scale and scope of our business, and the central platform infrastructure we provide to support our investment strategies, have enabled us to deliver superior returns on funds managed, and industry leading growth in a number of our asset classes.

As part of the GH25 strategy we are committed to developing the business internationally and have made notable progress in establishing an overseas foothold during 2021 with the completion of the Appian acquisition to establish Gresham House Ireland and the Australian forestry mandate that was secured in December.

The Gresham House brand has continued to grow and to establish itself in the alternative investment sector during 2021. This has been clearly illustrated by the many awards won across the Group during the year, including winning best Alternatives Investment Management at both the Pensions Age Awards and Sustainable & ESG Investment Awards 2021.

Financial objectives

·      AUM growth - 65% £2.5bn growth in 2021 - organic and acquisitive

·     Operating margins - improved to 33% from 30% - investment in the business - creating a higher quality business, comparable to more mature peers

·      Maintain ROCE of 15% on balance sheet in the medium term - hit 34% in 2021

Strategic objectives

·      Recognised leader in sustainable investment and governance - multiple award wins, launched Sustainable Investment Report, Stewardship Report approved by the FRC, Sustainability Committee established at Gresham House plc Board level, DEI committee and actions being taken

 ·      Superior returns for funds managed

o  Top Quartile - LF Gresham House UK Multi Cap Income Fund ranked second out of 84 funds in the UK Equity Income sector over three years to 31 December 2021 and remains number one in the sector since launch in June 2017.

o  Long-term performance - Forestry as an asset class continues to show very strong performance, with our mature retail forestry funds reporting an average return in excess of 13.6% since inception.

o  Outperforming target returns - GRID achieved a total return of 14.2% since IPO in 2018. BSIF Infrastructure achieved an IRR of 16.2% to 31 December 2021. ReSI plc total return of 27.0% in 2021.

·      Leaders in our specialist areas

o  Largest battery storage investment trust in the UK and Europe, GRID.

o  Largest commercial forestry asset manager in the UK and now operating in Australia.

o  Second largest VCT player in the UK: Baronsmead and Mobeus VCTs.

·      Develop the business internationally - Appian acquisition and Australian forestry.

·      Enhance Gresham House brand - now an established asset manager that has become the go-to on our specialist asset classes (e.g. vertical farming alongside battery storage).
 

Employees and clients

People and culture

The Gresham House team has grown steadily in recent years and now totals 185 employees in the core asset management business. This expansion has been driven by our focus on investing in talent, bringing leading expertise into the business across all asset classes and activities.

With share ownership across the business, the ambitions of the business and its staff are closely aligned with those of our clients. Employees own c.10% of shares. We value our employees as our greatest asset and were delighted that our latest staff survey at the end of 2021 showed strong levels of advocacy for the business with 96% of staff happy to recommend Gresham House as a good place to work.

A dynamic, entrepreneurial and meritocratic culture is critical to our ongoing success and the significant new hires into the business, including key investment and distribution professionals, have further enhanced this.

Equally, we are committed to increasing Diversity, Equity and Inclusion (DEI) across the business and we have taken steps to achieve this through our participation in the #100BlackInterns programme, and the establishment of the Group's DEI Committee, which has launched a number of key initiatives.

We will continue to invest in our people, developing career aspirations as we consider this to be fundamental to achieving our growth ambitions for the business.

Clients

During 2021 we further expanded and diversified our client base at both an institutional and wholesale level, and welcomed James Lindsay as Head of Institutional Business, working alongside Heather Fleming and Catriona Buckley. We were pleased that new corporate pension schemes, such as Centrica invested in ReSI LP and that new institutional clients invested in the Gresham House Forest Growth & Sustainability LP. These are important steps as institutional clients begin to understand the returns and sustainability dynamics of investing in forestry. This highlights our ability to be able to increase the coverage of our fund offerings across wider distribution channels, carefully packaging our products into relevant fund structures for a wider range of clients.

We have also developed a number of relationships in the Strategic Equity division to provide access to a wider client base through platforms and wealth manager connections.

Sustainability

We are committed to embedding sustainability throughout the business to underpin the ESG focus of our investment approach.

In 2021 we established the Sustainability Committee as a sub-committee of the Board, chaired by Gareth Davis, to provide leadership for the implementation of this commitment with objectives for every employee across Gresham House.

We are also proud to be publishing our second annual Sustainable Investment Report.

We are focused on investments that both yield tangible and reliable returns for investors in our funds, whilst delivering positive social and environmental gains in areas that include battery storage, forestry and affordable housing.

We have set out a new Corporate Sustainability Strategy, with our ambitions built on three key pillars: Gresham House as a sustainable business and employer; a sustainable corporate citizen; and a sustainable investor.

Sustainable business and employer

Our growth will be influenced by our ability to successfully integrate sustainability authentically into our day-to-day business activities and our investment decisions. A key progressive step for this is our commitment to the Task Force on Climate-related Financial Disclosure (TCFD) reporting to assess our carbon footprint and continuously assess the measures we are taking to reduce it.

Sustainable corporate citizenship

We are fostering a commitment to corporate citizenship across the business through community and charitable initiatives including our support of the British Heart Foundation and Centrepoint. We are also committed to giving all employees two days volunteering leave per year to support employee engagement across the business but also to ensure our colleagues are contributing to wider society through charitable initiatives.

Sustainable investor

Solving some of the world's greatest challenges - climate change, biodiversity loss and social inequality - can be achieved through the creation of new innovative solutions and technology with private market capital investing in real assets. Private markets are widely considered to offer growth opportunities in sustainable investment alongside attractive financial returns. With sustainability as a core element of our investment activities, we are committed to achieving attractive financial returns for our clients whilst delivering sustainability-focused investment solutions and strategies.

We ensure best practice throughout our investment activities through constant assessment and evaluation.

AUM

¹ Includes funds raised, redemptions and distributions.

AUM growth in the year totalled 65%, closing the year out at £6.5 billion (2020: £4.0 billion). This was driven by organic growth of £1.9 billion (c.50% growth) and acquisitions which added a further £0.6 billion.

Net inflows in the year of £1.2 billion (2020: £0.4 billion) represented a great year for fundraising across all of the Group's strategies, ranging from net inflows in the Strategic Equity open-ended funds to consistent fundraising for GRID (£100 million), new forestry funds such as the Gresham House Forest Growth & Sustainability LP (£202 million) and BSIF II LP, our second sustainable infrastructure fund (£150 million).

The underlying funds have continued to perform well with performance driving AUM up by £0.8 billion (2020: £0.4 billion). This was notable in the Forestry strategy, where the independent valuations of the forests managed by the Group continued to rise in value, generating a further £0.5 billion in AUM.

We also added £0.6 billion in AUM through the acquisition of Appian Asset Management Limited (Appian), now Gresham House Ireland, which added £303 million across the Strategic Equity and Real Estate strategies, and £369 million through the acquisition of the Mobeus VCT business in October 2021.

Strategic Equity

In 2021, we significantly increased the scale and scope of the Gresham House VCT business through the acquisition of the Mobeus VCT business, alongside the Baronsmead VCTs, which raised £71 million in new funds. In combination with Baronsmead, the Gresham House VCT platform had AUM of £887 million at the end of December, the second largest manager in the UK. We welcome Trevor Hope, and Clive Austin, joining the Strategic Equity Executive Committee with Tania Hayes, Bevan Duncan and Ken Wotton.

We also delivered a very strong performance in 2021 from our open-ended funds, which nearly doubled in size, with growth driven by our substantially enhanced distribution capabilities.

Performance across all funds was strong. Strategic Equity Capital plc (SEC) delivered 26.6% growth in the year. There was 24.6% growth in the Gresham House UK Micro Cap Fund, and 26.5% growth in the Gresham House UK Smaller Companies Fund. The performance of Gresham House Strategic under our management over the six years delivered a total return of 141%, a substantial outperformance versus the 74% of its benchmark. As a result, our fund managers are widely recognised across the industry for their investment capabilities and our LF Gresham House UK Multi Cap Income Fund won the UK Equity Income category at the Investment Week Fund Manager of the Year Awards 2021.

Real Assets

Forestry

Through 2021, Forestry remained a compelling asset class for patient capital and we were pleased to see increasing appetite from UK institutional investors for our forestry funds. During the year, we launched the Gresham House Forest Growth & Sustainability LP. The fund raised £202 million over the year and will invest in forestry that addresses demand for timber and for carbon credits.

We also expanded our international footprint, establishing a foothold in Australia with the acquisition of Green Triangle Forest Products on behalf of AXA IM Alts. Building on this momentum, we intend to launch a dedicated International Forestry Fund in 2022.

New Energy - Battery Storage

Gresham House invests in battery storage via Gresham House Energy Storage Fund plc (GRID), the UK's largest fund investing in utility-scale battery energy storage systems.

During 2021, GRID raised £280 million, incorporating £100 million in an oversubscribed equity raise in July and a £180 million, five-year, debt facility secured in September 2021. GRID is seeing favourable developments in the battery storage market driven by Ofgem and National Grid and is very well funded to address these opportunities. During the year, the Group was able to develop and sell 50MW of operational utility-scale battery storage projects to GRID from the in-house battery storage project development pipeline.

GRID has also signed agreements for the acquisition of a further 425MW of shovel-ready capacity across seven projects during the period, which have, or shall, complete subject to certain conditions being met.  These projects progress our ambitions towards its target of c.1.3GW of operational capacity by H1 2023.

New Energy - Solar and Wind

In New Energy, Gresham House are investing in a range of assets including wind farms and solar parks. Gresham House manages 150MW of wind farms in the UK through Limited Partnership (LP) and unlisted structures and in 2021 acquired the 24MW Inverclyde Wind Farm in Scotland, which has a 15-year Power Purchase Agreement with Tesco.

In Solar, Gresham House is managing 92MW of solar parks - both roof and ground mounted solar assets - across 17 ground mounted sites and four companies owning many roof mounted assets. We also partnered with Anesco on a 200MW ground mounted solar portfolio pipeline.

Sustainable Infrastructure

We were pleased to raise £150 million for our second sustainable infrastructure fund, BSIF II LP, and deployment has been strong under Peter Bachmann and team.

Our investments directly address key sustainability challenges and provide innovative solutions that seek to enable a new, more sustainable, way of living. Areas within which we source investable solutions include: decarbonisation; digital inclusion; health and education; regeneration; resource efficiency; and waste solutions. In addition to funds already deployed, the team has an identified pipeline of £1.6 billion.

As part of our digital inclusion investment strategy, we have invested in three full fibre network providers: Borderlink, which targets the hard-to-reach parts of the Scottish and English Borders; Wildanet, which is focused on the rural areas of Cornwall and Devon; and Telcom, which focuses on apartment blocks and office buildings across the 'Northern Powerhouse' cities and towns.

We have also made notable headway in our resource efficiency investments, in particular in vertical farming with Fischer Farms, which is in the process of developing the world's largest vertical farm in Norfolk. This opens the potential to fund multiple replicas across the UK to meet high supermarket demand for leafy greens with strong sustainability credentials.

Real Estate

Our Real Estate funds (formerly known as Housing) saw strong fund inflows in 2021, with investors attracted to their stable and secure inflation-linked returns, alongside the clear social benefits of affordable housing. We closed a new shared ownership housing fund, ReSI LP led by Ben Fry, with commitments of £120.0 million at the end of 2021, and we have a strong investment pipeline in place for these funds.

Our listed vehicle, Residential Secure Income plc (ReSI plc), which invests in independent retirement living and shared ownership, introduced charters in 2021 for the acquired shared ownership portfolios we own and manage, to ensure we embed best practice across our activities, and we also established a resident welfare team that supports digitally excluded residents.

The UK's shortage of affordable housing is well documented and caused by demographic trends and historic undersupply of new homes and Gresham House's listed and unlisted housing investment vehicles - Gresham House BSI Housing LP, ReSI plc and ReSI LP - address a range of affordable housing problems.

Moving into the current year, ReSI plc completed a £15.0 million equity raise on 3 February 2022, which together with existing capital resources and an ultra-long-term debt facility, will allow the fund to fully finance £39.0 million of accretive shared ownership transactions currently underway.

The Appian Burlington Property Fund, now managed by Gresham House Ireland, won the MSCI European Property Investment Award for the second year running and under the leadership of Patrick Lawless, our business in Ireland is well positioned. We are pleased to see the launch of the Credit Union Income Fund post year end. This fund invests in loans to Approved Housing Bodies (AHBs) to generate a secure and steady income from social housing.

Outlook

We are entering the third year of our GH25 five-year plan with an enhanced investment platform supported by strong performances across all asset classes which has driven the increase in our ROCE target over the medium term to 20% as well as the announcement of our dividend policy to reach three times coverage by 2025. The five-year plan exists to provide a clear framework for shareholder value creation. We are pleased to be successfully executing on that ambition and have plans to capture the increasing growth opportunities.

We approach 2022 with the world facing different challenges than those seen in 2021 as we hopefully move through the COVID-19 pandemic. However, we have to operate in a world coping with the Russian invasion of Ukraine alongside increasing inflationary pressures. The Group does not manage or own any Russian assets and have minimal exposure to assets that are exposed to Russian sanctions and we believe that we do not have any Russian shareholders. These issues will see risk premia rise and have consequent impacts on valuations. It is important to remember that our asset classes and philosophy are long term. With that investment horizon in mind, the growth in demand for our product areas should continue its positive momentum.

We have a dynamic programme of fundraising mapped out for 2022 across all areas of the business, which will be well supported by our strong and diversified distribution channels, spanning institutional, wholesale, retail and high net worth investors and family offices.

We are committed to delivering a sustainable investment framework that will generate returns for both our investors and the wider environment, economy and society and anticipate further growth in investor appetite across new energy, sustainable infrastructure, forestry, real estate, and both public and private equity.

With improved margins and higher quality AUM, as we move into 2022, we are well positioned to benefit from investors' increasing demands for investment opportunities that address the most pressing issues of our time. The increased globalisation of investment allows our strategic positions in these specialist asset classes to scale substantially from this point. The Board is confident that the Group is on track for further growth in the coming year and beyond and will continue to deliver value for all our stakeholders.

Tony Dalwood

Chief Executive

14 March 2022

Financial review

The Group has continued its momentum in 2021, building on the foundations laid in 2020 and delivering exceptional growth in AUM and profits. We continued to face challenges from the COVID-19 pandemic in 2021; however, we demonstrated the quality of the business and the team, operating in an agile manner to deliver returns for shareholders and clients.

The Group has grown AUM by 65% in the year to 31 December 2021, with a closing AUM of £6.5 billion, up £2.5 billion in the year (2020: £4.0 billion). The AUM growth was driven by strong organic growth of c.50% (£1.9 billion), alongside the acquisitions of the Mobeus VCT business and Appian Asset Management Limited (Appian), the EU-based AIFM, adding a further £0.6 billion in the year. This growth has helped to increase net core income in the year by 51% to £61.6 million (2020: £40.8 million) and deliver an adjusted operating profit of £20.2 million, up 67% in the year (2020: £12.1 million).

The performance of funds managed by the Group has also delivered net performance fees of £1.7 million (2020: £nil) highlighting the team's strong performance for clients in the year.

The Group has continued to use its balance sheet to develop projects and support the growth of the business, with the sale of battery storage projects and other development activity delivering an additional £1.8 million in net gains in the year (2020: £1.0 million).

Total comprehensive net income after the deduction of tax, amortisation and other acquisition-related costs has delivered a profit of £12.0 million (2020: £0.8 million). As a result of the improvement in the Group's profitability and growth in the business, we have reviewed the dividend policy and are looking to target dividend cover of three times by the end of the GH25 strategic plan in 2025. We are therefore pleased to announce our intention to increase the final dividend by 67% to 10.0 pence for the year ended 31 December 2021, building on the Group's 2020 final dividend of 6.0 pence.

We present the performance of the Group using the non-GAAP adjusted operating profit metric. The aim of the adjusted operating profit metric is to show the true performance of the core asset management business through the management fee income and revenues earned, less the administrative overheads associated with delivering asset management services. The adjusted operating profit metric below highlights the performance of the core asset management business separately from performance fees and gains on the sale of development projects. The performance fees and gains on the sale of development projects are presented alongside the variable compensation costs payable as a result of their generation, to show the net impact on the Group.

The adjusted operating profit metric thereby excludes depreciation and amortisation, exceptional items from acquisition costs and restructuring and acquisition-related share-based payments and remuneration, as they are effectively an earn out paid to the sellers of businesses acquired rather than an operating expense.

Adjusted operating profit

*Excluding dividend income from associates of £0.3 million (2020: £0.2 million) and gains on development projects of £2.9 million (2020: £3.5 million).

The adjusted operating profit metric has increased to £20.2 million (2020: £12.1 million) and the adjusted operating margin based on net core income increased to 32.7% (2020: 29.6%) showing the operating model of the business coming through in margin improvement as we target a 40% operating margin as part of the GH25 strategy.

Income

Net core income

Total net core income has increased by 51% in the year to £61.6 million (2020: £40.8 million), driven by the strong c.50% organic growth in AUM in the year to £6.5 billion (2020: £4.0 billion). This increase includes the revenues generated by the acquisition of the Mobeus VCT business from October 2021 and Appian, the EU-based AIFM, from June 2021. We present net core income to reflect the rebates, distribution costs and fundraising fees paid to deliver core income by the Group.

The Group provides high-quality services in actively managed alternative asset classes. Delivery of returns for investors is key and requires our team of asset management specialists to drive investment performance. As such, we operate in higher fee margin specialist areas of asset management.

The Group benefits from a diverse range of long-term management contracts, with c.90% of AUM being in closed-ended funds and structures which provide a stable view on future revenue streams. This is demonstrated through the weighted average life of limited partner management contracts accounting for £2.0 billion in AUM being over 14 years in asset classes such as forestry. The spread of products managed by the Group's Real Assets and Strategic Equity divisions also ensures that the Group is not exposed to any one particular market, providing good diversification. The open-ended funds in the Strategic Equity division had an AUM of £800 million at the end of the year (2020: £269 million), reflecting the addition of the funds managed by Appian of £284 million alongside strong inflows and performance from the open-ended equity funds, which added a further £247 million.

Dividend, interest and other income

We continue to use our balance sheet to invest alongside clients and develop or support products managed by the Group and dividends, interest and other income reflect this. Overall dividend and investment income increased in 2021 to £590,000 (2020: £554,000), primarily due to interest earned on a development project of £279,000, offsetting reduced dividends from Gresham House Energy Storage Fund plc (GRID) as the Group traded out of its holding to recycle capital elsewhere in the business.

Other income of £308,000 (2020: £1,078,000) principally reflects the net operating income earned from a battery storage project while under the Group's ownership, prior to being sold to GRID. Two projects were sold in the prior year, which were revenue generating for a period of time before their sale process completed with GRID.

Dividend income from associates relates to dividends recognised for Gresham House Strategic plc (GHS, now known as Rockwood Realisation plc) of £125,000 in the year (2020: £202,000) and Noriker Power Limited of £160,000 (2020: £nil). These are recognised in the share of associates profit line in the income statement and separated out as part of the adjusted operating profit metric disclosure.

Administrative overheads

Administrative overheads, excluding amortisation, depreciation and exceptional items, were up 43% in the year to £41.1 million (2020: £28.7 million). The increase in cost base includes three months of the Mobeus VCT business' cost totalling £0.6 million and six months of costs for Appian totalling £1.5 million.

The Group continues to focus its efforts on maximising profit growth and increasing shareholder value and as such invested further in the core functions of the business in 2021. Whilst doing this we focused on the operating margin target of 40% and were pleased to note the improvement in operating margin from 29.6% to 32.7% at the end of 2021. We are starting to see the operating leverage come through the business as we grow AUM at a faster rate than the cost base required to service the increased level of AUM and as such remain on track to achieve 40% operating margins over the medium term.

The investment in key team members across the Group in 2021 led to the Group's full-time equivalent headcount standing at 185 at the end of the year, up from 122 at the end of 2020. This included 16 people joining with the Mobeus VCT business,22 with the Appian business and 64 new hires as we focused on the key roles needed to grow the business. People costs have consequently increased in the year to £34.8 million from £23.3 million in 2020, alongside variable compensation relating to performance fees and development gains of £5.1 million (2020: £2.5 million).

The Group has also benefited from improved performance across the divisions, which drives the bonus pools based on a share of the profits with the teams and thereby increases costs.

Total office costs across the Group were £1.6 million (2020: £0.8 million), reflecting the London office move to 80 Cheapside as well as the additional office costs from the acquisition of Appian.

We operate with offices in London, Dublin, Oxford, Dumfries and Perth and continue to operate a hybrid working approach, which provides flexibility to our growth plans and the team alike.

When we acquire businesses, we focus on the synergies that can be delivered as a result of combining complementary businesses. It is not only acquisitions where we target cost savings. We continue to review all areas of the Group's cost base diligently to ensure that we are operating efficiently and in a lean manner. We do, however, ensure that appropriate investment takes place in areas that will support the growth of the business.

Finance costs

The Group increased the size of its revolving credit facility (RCF) with Santander in December 2021 to £20.0 million (2020: £5.0 million facility size). RCF interest and finance fees over the year were £244,000 (2020: £nil) with the remaining £67,000 relating to IFRS 16 lease interest (2020: £25,000).

Amortisation and depreciation

Amortisation of management contracts, customer relationships, the website and IT platform development accounted for £8.5 million (2020: £8.0 million) as these intangible assets continue to be amortised over their useful lives. The increase in the year reflects the acquisition of the Mobeus VCT business in October 2021 and Appian in June 2021. This required the assessment of the fair value of the management contracts and brand acquired within the businesses, which are being amortised over their useful lives and are the main drivers for the increase in the year.

Depreciation of £959,000 in the year (2020: £871,000) relates primarily to office leases, motor vehicles used by the Forestry business and IT equipment.

Exceptional items

We classify exceptional items as those fees and costs which relate to acquisitions and restructuring of the business post acquisition as well as one-off costs. Exceptional items in 2021 were £3.2 million compared to £1.8 million in 2020. These include the acquisition costs associated with the Mobeus VCT business, as well as Appian, which completed in June 2021, alongside restructuring costs. This also includes £1.2 million of DevCo-related acquisition and disposal costs that are required to be expenses in the year under IFRS, rather than capitalised as development activity.

Gains/(losses) on investments

The Group has made gains on its investments and fair value movements in acquisition-related contingent consideration totalling £9.4 million in 2021 (2020: £3.8 million).

The share of associates' profits relates to the 23% holding that the Group has in GHS. The last results announcement from GHS was on 7 December 2021 for the six-month period to 30 September 2021. Under associate accounting, the Group has therefore recognised its share of the profits over GHS's last 12 months' reported profits of £5.8 million (2020: £133,000 profit), which included dividends received in the year of £125,000 (2020: £202,000).

The Group sold its investment in Noriker Power Limited in December 2021 and as such has recognised a profit on disposal of £0.5 million. The gain of £5.8 million from investments held at fair value in the year (2020: £4.6 million) includes realised and unrealised gains and losses on the co-investments that have been made in the funds managed or advised by Gresham House. The key driver of this was the gains recognised on the sale of the Byers Brae and Enderby battery storage projects to GRID, making a gross profit on sale of £2.9 million (2020: £3.5 million gross gain on sale of Thurcroft and Wickham Market battery projects). Both these battery storage development projects sales made a return on investment in excess of the Group's medium-term target of 15%. The net gain after the deduction of variable compensation relating to the projects and costs associated with development activity was £1.8 million for the Group (2020: £1.0 million).

The other notable unrealised value increase in the year was the £0.9 million increase in the value of the Gresham House Forestry Friends and Family Fund LP, based on the independent valuation at the end of the year alongside unrealised valuation increases totalling a further £2.0 million in funds and co-investments managed by the Group.

Fair value movement in contingent consideration

The Livingbridge VC business, TradeRisks, Mobeus VCT business and Appian acquisitions have contingent payment elements which is driven by AUM growth, maintaining management contracts or revenue performance over a three-year period since acquisition. The contingent consideration payments have been fair valued at each reporting period end with the movement in the fair value recognised in the income statement.

The Livingbridge VC business revenue performance to December 2021 has been used to estimate the fair value of the contingent consideration, which reached its maximum pay-out of £2.5 million as a result of delivering revenues in excess of the business plan at the time of acquisition. The increase in the fair value on the balance sheet reflects this and the unwind of the discount between the period end and settlement in 2022.

The TradeRisks deferred consideration is driven by AUM growth assumptions and cost synergies. At the year end these assumptions have been reviewed and the primary driver for the increase in the deferred consideration is the unwinding of the discount applied between the year end and settlement in 2023.

The Appian and Mobeus VCT business contingent considerations have been fair valued as part of the acquisition process, with limited fair value movement noted since acquisition in June and October 2021 respectively.

Tax

The Group continues to utilise the losses available against the current trading activity. The tax charge noted reflects taxable profits within the Group partially offset by the unwinding of the deferred tax liability recognised on the acquisition of the FIM, Livingbridge, TradeRisks, Mobeus VCT and Appian businesses and the impact of the movement in the fair value of the management contracts.

Financial position

*The above presentation of the Group's balance sheet highlights the Group's direct exposure to those vehicles and entities that it has invested in. We have therefore adjusted the IFRS Statement of Financial Position for the following items which are required to be consolidated under IFRS 10 to present the Group on an investment basis:

DevCo Projects - removed the "Assets of a disposal group held for sale" of £17,545,000 (2020: £7,363,000) and "Liabilities of a disposal group classified as held for sale" of £7,499,000 (2020: £2,072,000) and replaced with the investment exposure in "investments in securities" £13,921,000 (2020: £5,842,000).

Gresham House Forestry Friends and Family Fund LP - reduced the value by the non-controlling interest amount of £1,075,000 (2020: £811,000) to show the Group's underlying exposure to this fund.

Tangible/realisable assets

The above highlights the strong balance sheet position that the Group improved on during 2021. The tangible/realisable assets supporting this total £78.3 million (2020: £45.1 million), comprising investments and cash.

Investments

The Group invests in or alongside the funds that it manages to align itself with clients. The below table provides a summary of the investment portfolio at the end of the year:

Investments in associates

GHS changed its name to Rockwood Realisation plc (Rockwood) and changed its investment strategy in line with results from the extraordinary general meeting held in December 2021. Rockwood has since been in the process of realising its portfolio and returning capital to shareholders, with £2.4 million being returned to the Company in 2021.

The Group maintained its holding in Rockwood in the year at 23%. The last publicly available results for the six months to 30 September 2020 have led to an increase in the recognised value as an associate of £5.8 million (2020: £133,000 decrease), which after adjusting for the dividend payment of £125,000 (2020: £202,000) in the year results in a value of £11,458,000 (2020: £8,456,000).

The Group supported the early investment into Environment Bank Limited, an entity focused on creating habitat land banks to support rewilding in the UK. It is envisaged that the Group's holding will be sold to BSIF II LP when Environment Bank Limited is operational and generating cash flows. This is an example of the Group using its balance sheet to support the growth of assets to be sold into funds managed by the Group, ultimately growing the AUM of the Group.

In December 2021, the Group sold its interest in Noriker realising a gain of £729,000.

Investments in securities

IFRS 10: Consolidation, requires the consolidation of the Group's investments in battery storage Development Company projects (DevCo Projects) as the Group has a controlling position in these projects. The DevCo Projects have borrowed to pay the deposits for the utility-scale batteries and this borrowing is secured at the DevCo Project level on the batteries and there is no recourse to the Group. The disclosure above therefore shows the Group's net exposure to the DevCo Projects, i.e. the equity and loan investment in the vehicles, and nets out the borrowing and utility-scale battery assets as shown in the IFRS Statement of Financial Position assets and liabilities of a disposal group held for sale.

The Group increased its investment in the DevCo Projects in the year, which totalled £13.6 million (2020: £5.8 million) at the end of 2021 and are in the exclusive pipeline for GRID to purchase when they are operational. GRID will go through a detailed independent valuation process when the projects are operational as part of the acquisition process and these projects currently remain on track to be operational in 2022 and 2023. During the year, the Group sold seven projects, Byers Brae and six Statera projects, which delivered a net gain of £1.8 million to the Group.

The Group invested £5.0 million in GRID at the IPO to ensure that it reached £100.0 million in size and GRID has since successfully raised further capital to grow the vehicle. At the end of 2021, the Group realised its direct investment in GRID as it looks to deploy capital for new initiatives around the Group.

Gresham House Forestry Fund LP performed well in the year, with increases in the value of the underlying forests driving an increase in the Group's investment to £2.7 million (2020: £2.1 million), excluding non-controlling interests.

Gresham House Strategic Public Equity LP continued to invest during 2021 and generated realised and unrealised gains of £430,000 (2020: £197,000).

The other investments demonstrate the Group's ability to co-invest alongside the funds that it manages and provides alignment with clients, for example investing £1.0 million into the Gresham House Forest Growth & Sustainability LP as well as committing up to £1.0 million to ReSI LP, the shared ownership housing fund. These are investments where, as general partner, Gresham House uses its balance sheet to align itself with its clients.

Cash and borrowing

The cash balance of the Group was £40.3 million at the end of the year (2020: £21.9 million) and reflected operating cash profits generated in the year as well as a number of significant cash movements such as equity fundraising and capital returned on the sale of investments.

The Company issued new equity with a value of £42.0 million (gross) for cash in September 2021 (£40.5 million net of fees). This equity raise was to fund the acquisition of the Mobeus VCT business as well as provide capital to support the Group's ambitious development activities.

The acquisition of the Mobeus VCT business in October 2021 incurred an initial consideration of £20.0 million in cash, with deferred and contingent consideration to follow in the coming years. The acquisition of Appian in June 2021 required a net payment of £3.1 million (€3.6 million).

The deferred consideration element of the Hazel Capital acquisition completed in the year with a cash payment of £5.3 million under the Hazel LTIP.

Investment and development activity in the year totalled £18.9 million which included commitments to new funds launched by the Group of £1.6 million (such as ReSI LP, and Gresham House Forest Growth & Sustainability LP), capital investments to win new mandates of £3.0 million (SEC) and development projects such as battery storage and other renewable energy projects of £12.3 million.

The Group also benefited from the sale of a number of battery storage projects delivering £3.6 million and the sale of its stake in Noriker of £0.8 million

Finally, to provide flexibility as the Group enters 2022 with a range of opportunities to grow the business, we have increased the size of the RCF with Santander to £20.0 million, with a three-year term. The Group is therefore well positioned with cash and available facilities to take advantage of opportunities as they arise in 2022.

Intangible assets

Intangible assets are primarily made up of the management contracts acquired as part of acquisitions and the goodwill associated with these acquisitions. As at 31 December 2021, the net book value of management contracts and other intangible assets was £46.2 million (2020: £30.3 million), reflecting the amortisation of the management contracts over their useful lives, and the addition of the management contracts, customer relationships and Mobeus brand following the acquisitions of the Mobeus VCT business and Appian. No contracts were impaired at the year end.

Goodwill resulting from acquisitions is reviewed each year end and there was no indication that impairment to goodwill should be considered to the book value of £48.8 million (2020: £29.7 million). Further details are included in the notes to the financial statements.

Contingent consideration

Contingent consideration increased from £6.9 million to £22.7 million in the year, reflecting the acquisition of the Mobeus VCT business and Appian alongside the impact of the time value of money as future contingent consideration amounts become more certain.

Outlook

The balance sheet is well positioned to capture the growth opportunity in front of us with cash of £40.3 million and investments of £38.0 million providing a solid platform. We have laid further foundations in 2021 and look forward to growing the business further in 2022.

Kevin Acton

Chief Financial Officer

14 March 2022

Group statement of comprehensive income

For the year ended 31 DECEMBER

Statements of changes in equity

Year ended 31 DECEMBER

Statements of financial position

As at 31 DECEMBER

Group statement of cashflows

For the year ended 31 DECEMBER