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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Rm Secured Direct Lending Plc | LSE:RMDL | London | Ordinary Share | GB00BYMTBG55 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 90.00 | 88.00 | 92.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMRMDL TIDMTTM
RNS Number : 4030X
RM Secured Direct Lending PLC
10 August 2018
RM SECURED DIRECT LING PLC
LEGAL ENTITY IDENTIFIER ('LEI'): 213800RBRIYICC2QC958
HALF-YEARLY FINANCIAL REPORT
For the six months ended 30 June 2018
Investment objective
RM Secured Direct Lending plc (the 'Company') aims to generate attractive and regular dividends through investment in secured debt instruments of UK Small and Medium sized Enterprises ('SMEs'), and mid-market corporates and/or individuals including any loan, promissory notes, lease, bond, or preference share (such debt instruments, as further described in the prospectus, being 'Loans') sourced or originated by RM Capital Markets Limited (the 'Investment Manager') with a degree of inflation protection through index-linked returns where appropriate.
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Financial information
Six months ended
30 June 2018
-------------------------------------------------- -------------------------------
Gross Assets (GBP'000)(2) GBP107,600
Net asset value ('NAV') per Ordinary Share
- IFRS calculation (pence) 97.73
NAV per Ordinary Share - adjusted (pence)(1,2) 97.85
Ordinary Share price (pence) 101.50
Ordinary Share price premium to NAV(2) 3.73%
-------------------------------------------------- -------------------------------
NAV per C Share - adjusted (pence)(2,3) 97.68
-------------------------------------------------- -------------------------------
Entitlement per ZDP Share (pence)(3) 100.86
-------------------------------------------------- -------------------------------
Performance summary
% change(4,5)
-------------------------------------------------- -------------------------------
Total return (%) - NAV and dividends(2) +2.98%
Total return (%) - Share price and dividends(2) +3.60%
-------------------------------------------------- -------------------------------
(1) The difference between the adjusted and the IFRS calculated NAV
of 97.73 pence is the time apportioned finance costs of the C Shares
in issue at 30 June 2018.
(2) These are Alternative Performance Measures
('APMs').
(3) Based on the net assets attributable to the relevant share class
as at 30 June 2018.
(4) Total returns for the six months to 30 June 2018, including dividend
reinvested.
(5) Source: Bloomberg
Alternative Performance Measures ('APMs')
The disclosures as indicated in the footnote above are considered to represent the Company's APMs. Definitions of these and other APMs used in this half-year report, together with how these measures have been calculated can be found below.
CHAIRMAN'S STATEMENT
Introduction
On behalf of the Board of Directors (the 'Board'), I am pleased to report on a period of steady performance and continued growth for RM Secured Direct Lending plc (the 'Company') during the first half of 2018. During the period under review from 1 January 2018 to 30 June 2018, the ordinary shares of the Company (the 'Ordinary Shares') generated a net asset value ('NAV') total return of 2.98% (dividends re-invested at NAV) and the Ordinary Share price has traded consistently at a modest premium to NAV.
The Company listed on the premium segment of the main market of the London Stock Exchange on 15 December 2016, issuing 50,300,000 Ordinary Shares at a price of 100 pence per share and since then the Company has grown via a number of capital raises to now having 98,724,581 Ordinary Shares at the date of this report and Gross Assets of GBP107,600,000.
In March 2018, 30,000,000 C Shares were converted into Ordinary Shares. A further capital raise was undertaken, which closed in early April 2018, with the Company issuing 11,329,363 C Shares which subsequently converted into Ordinary Shares on 19 July 2018. At the time of the most recent capital raise, the Company sought to fix in some cost effective, 3 year debt funding and seek additional investors through the issuance of Zero Dividend Preference shares ('ZDPs') in RM ZDP plc, a wholly owned subsidiary of the Company, which was established solely for the purpose of issuing the ZDPs. On 3 April 2018, 10,869,950 ZDPs were issued at 100p. The ZDPs are listed on the standard segment of the Official List of the UK Listing Authority and are admitted to trading to the main market of the London Stock Exchange. This issuance of ZDPs and the use of modest leverage will assist the Company in reaching its distribution target of 6.5 pence per Ordinary Share. The Company and RM ZDP plc collectively form the 'Group'. In order to facilitate this structural gearing and for it to be used for investment purposes, the Company's investment policy required amendment and the amended investment policy was approved by Shareholders at a general meeting of the Company held on 28 March 2018.
The Company was established to allow investors to participate in secured debt transactions. These investments are typically secured over plant, property and equipment or business cash flows and are largely private in nature. The Investment Manager has reviewed a significant number of investment opportunities and I am glad to say has remained very focused on ensuring only those exhibiting the correct risk adjusted returns have been included within the portfolio. After a period of such tremendous growth for the Company, the Investment Manager is optimising the investment portfolio and seeking to maximise risk adjusted returns for investors ahead of seeking additional capital, markets conditions permitting, in the second half of the year.
Portfolio
At the half year end, the Ordinary Share portfolio has grown significantly to 30 debt investments totalling over GBP106 million which represented approximately 98% of the committed capital excluding the undrawn Revolving Credit Facility ('RCF'). There are some key takeaways from the portfolio statistics, the first being that during the six months to June 2018 there has been a steady rise in the number of investments linked to Libor from 39% to 55% of the portfolio, which is in line with the Investment Manager's desire to reduce duration risk within the portfolio, and not to take significant fixed rate exposure at this point of the interest rate cycle. The Investment Manager has positioned the Company's investments so that should interest rates start to move higher, investments linked to Libor will see an uptick in financial return for the Company. Secondly, the Investment Manager has increased the proportion of investments in the senior part of the capital structure, this has risen from 69% to 74%. The rationale for this adjustment reflects the Investment Manager's view around the overall economic environment, and the defensive nature of the Company. Investments in the senior part of the capital structure, on average, have higher recovery rates than that of investments in subordinated, holding company or mezzanine positions. Finally, investments are spread across 15 sectors which provides broad sector diversity and are consistent with the desire to spread risk. Other key statistics are that the average yield on investments is 8.27% and there is one US dollar investment and two euro denominated investments. These currency exposures are largely hedged back into sterling.
Overall, the theme has been to focus the portfolio on non-cyclical sectors and, therefore, the largest exposures are to Health and Social Care representing 16% and Asset Finance representing 14% of the loan portfolio. We expect this level of allocation to continue into the second half of 2018 as pipeline transactions are in the Health and Social Care sector, Social Infrastructure and additional asset finance funding opportunities.
NAV and share price performance
I am pleased to report a steady Ordinary Share price and NAV per Ordinary Share over the six months to June 2018, which is consistent with the aim of the Company to be an alternative income generating investment with lower correlation to the volatility seen in broader equity and bond markets. The Ordinary Shares have traded consistently at a premium to NAV since launch and the Ordinary Shares closed the half year at a 3.7% premium to the underlying NAV.
As at 30 June 2018, the Company had 87,415,374 Ordinary Shares in issue and the closing share price was 101.5 pence per share. The adjusted NAV per Ordinary Share was 97.85 pence.
As at 30 June 2018, the Company had 11,329,363 C Shares in issue and the closing share price was 101.5 pence per share. The net assets attributable per C Share was 97.68 pence.
Dividend
During the period, the Company paid a first interim dividend for the quarter to 31 March 2018 of 1.625p per Ordinary Share and on 7 August 2018, the Directors declared a second interim dividend of 1.625p per Ordinary Share which will be payable on 14 September 2018 to Shareholders on the register at the close of business on 17 August 2018. Therefore, the Company's aggregate dividend in respect of the six month period is 3.25 pence per Ordinary Share. As a consequence of the C Share conversions which have taken place, a small proportion of the second interim dividend will be paid from capital.
Bank facility
The Company still has the use of a GBP10 million RCF with Oak North Bank. This will facilitate the tactical use of borrowings ahead of any known investment redemptions or capital raises. Currently this is undrawn and aside from the initial setup costs, there is no additional cost to maintaining the facility, unless utilised. The Company has a 20% leverage limit and the use of the bank facility combined with the ZDPs will always remain within this limit.
Outlook
During the first half of the year the Board, the Investment Manager, the AIFM and the Broker undertook a considerable amount of work in order to grow the Company's Gross Assets to be in excess of GBP100 million. This is broadly accepted as being the threshold whereby an investment trust is sufficiently large enough to allow most institutions to be able to invest. There have been three successful additional capital raises since launch and it is now our intention to focus on the optimisation of the portfolio ahead of further growth. With this in mind, the Investment Manager is working on closing strategic transactions over the summer period, which will enhance the overall portfolio yield and allow exposure to lower yielding investments to be reduced.
The portfolio is well positioned to benefit from the recent Bank of England decision to increase interest rates by 0.25% to 0.75%. The rise in interest rates will see additional income flow through on the 55% of the portfolio which has GBP floating rate loan exposures and which do not have a Libor floor. The Investment Manager has positioned the portfolio to benefit from any additional uptick in interest rates which still remain, in our view, below sustainable levels for this point in the economic cycle.
An additional benefit of growing the assets of the Company to greater than GBP100 million is that a wider range of potential borrowers is approaching the Investment Manager. From this larger pool it is expected that RM will be in a position to select investments that enhance the positive metrics of the portfolio while also reducing incremental risk. Therefore, the Board would still like to see the Company grow during 2018, subject to market conditions. As such when the existing capital has been optimised the Company will likely be seeking further funding. Any increase in the Company size, given it is non-dilutive, has the additional benefit to all Shareholders of spreading the fixed costs over a larger capital base thus potentially helping to reduce the Company's ongoing charges ratio.
The Board is grateful for the support of Shareholders and is delighted to have such a broad investor base. We would also like to thank RM Funds and the other professional advisors for their hard work and support. The Board believes that engaging with Shareholders is very important and we, along with the Investment Manager are available to meet with Shareholders at any time. Please contact the Company's Broker, N+1 Singer Advisory LLP if you would like to organise a meeting.
Norman Crighton
Chairman
9 August 2018
INVESTMENT MANAGER'S REPORT
Overview
During the period, RM Capital Markets Limited ('RM' or the 'Investment Manager') focused on making additional investments along with the monitoring and review of the existing portfolio. Expedient deployment of capital is paramount given any cash balances are a drag upon returns, however this will not be at the expense of rushing into transactions or a reduction of credit standards. The Company's Broker, N+1 Singer, has also worked hard alongside RM during the first half of the year in arranging investor updates and meetings. Feedback from investors on the progress of the Company has been supportive and positive.
The initial C Shares were issued in October 2017 and converted into Ordinary Shares during March 2018. Thereafter an additional capital raise was made in order to be able to invest in an identified pipeline of transactions. The result of this fourth capital raise was that GBP11.3 million new C Shares and GBP10.9 million ZDPs were issued in early April 2018. This second C Share raise converted into Ordinary Shares during July 2018 having been largely deployed by mid-June 2018. The ZDPs offer cost effective term debt for the Company with a 3.5% Redemption Yield and a maturity profile which matches the first liquidity event for the Company in 2021. The Company still has the ability to draw upon its RCF which will assist with the making of investments ahead of any likely repayments or new capital raises, subject to being within the overall 20% Company leverage limit.
The half yearly target of a 3.25 pence dividend has been achieved and for the full current financial year the expectation is 6.5 pence as per the dividend target outlined in the latest prospectus. Despite volatility picking up globally in fixed income and equities the share price performance of the Company over the year has been stable, trading in a narrow range between 101 pence and 103 pence and at a premium of between 2-4% to NAV. This is consistent with the objective to be an alternative income product for investors which has low correlation to traditional equities and fixed income. RM purchased 92,214 Ordinary Shares in the Company during the period which represents half of the management fee earned and is in line with the commitment to investors made at the IPO. This takes the direct investment in the Company to 773,823 Ordinary Shares and including shares owned across the management team to in excess of 1,250,000 Ordinary Shares. The Investment Manager feels this is the best way of demonstrating alignment with the interests of other Shareholders.
Market environment
The global equity markets have been more challenging during the first half of the year, with credit market weakness accelerating during May and June and the year so far has been characterised by an increase in volatility across asset classes. Equities have largely finished the first six months of the year in negative territory, credit indices are wider and UK government bond yields are marginally lower. The main market drivers of this have been the market starting to look forward to the unwinding of quantitative easing, the rise of populism within Europe post Italian elections, Brexit, a flattening US yield curve and concern with regards to the effect of any potential Trump trade war on global growth. Each one of these individually can give RM cause for serious concern given the potential negative impact on the market.
Looking forwards, these factors are unlikely to go away and it would appear that the next six months will bring more of the same with regards to volatility. On the domestic front the ongoing Brexit saga and any political fallout from the process will keep the market nervous and in addition to this, RM sees the same domestic themes continuing into 2019. This means pressure on consumer spending, which feeds into the high street.
Portfolio
RM has constructed a defensive portfolio given our caution around this market environment. It was noted within the annual report for 2017 that the focus for the Investment Manager would be non-cyclical sectors due to long held concerns with regards to the consumer and the high street, given where we are within the economic cycle coupled with technological changes surrounding how people conduct their shopping. Furthermore, it was stated that exposure to Social Infrastructure would increase with a focus on Health and Social Care, given the physical nature of the assets supported by demographics which are largely not affected by the general business cycle or Brexit. RM is pleased to report that exposure within this area has increased to 16% and is likely to grow further when the next pipeline transaction closes. As previously noted, there are well known headwinds affecting this sector as staff costs are increasing and local government budgets come under pressure, however RM can source well-structured transactions with appropriate leverage supported by tangible security and stable cash flows which are attractive investments.
As at the period end, the Ordinary Share portfolio was fully deployed and the C share portfolio was 87% deployed. The average yield on investments of 8.27% is consistent with the general requirement to be in excess of 8%; however, RM will endeavour to increase the yields further over coming months during the optimisation phase. The C Shares converted during July 2018 to give an Ordinary Share class with a market capitalisation of circa GBP100 million. Current gross assets are circa GBP108 million and have the ability to be nearer GBP120 million should the RCF be drawn. The Company focuses on private debt and at the period end 81% of the investments are in private debt securities.
30 June 2018
Ordinary and C shares
----------------------------------- ----------------------
Number of investments 30
Number of sectors 15
Weighted average life (years) 3.86
Net asset value (Ordinary Shares) GBP85,537,000*
Net asset value per Ordinary
Share (cum income) 97.85*
Net asset value (C Shares) GBP11,066,000
Net asset value per C Share
(cum income) 97.68
Committed capital GBP106,800,000
Average yield (on deployed
cash) 8.27%
Senior secured / Junior secured 74% / 26%
Fixed / Floating or index-linked 45% / 55%
Private / Public investments 81% / 19%
*Adjusted basis
Outlook
Despite this febrile market environment there are many reasons to be positive. The first and most important point is that low correlation to equities and fixed income should make the RMDL strategy appealing to investors given the visible and stable returns which have been historically generated and which are projected to continue into the future. Associated with this is that Secured Lending becomes very attractive as investors start seeking downside protection. Secondly, the Investment Manager continues to be able to source attractive deals as other avenues of financing start to dry up, (for borrowers) as risk appetite across the market diminishes.
The Investment Management team have a strong pipeline of opportunities to deploy capital into during the second half of 2018. As described previously the next transaction is likely to be in the Health and Social care sector where a strategic investment has been undergoing due diligence over the past two months and is expected to close early August 2018. In total, there is in excess of GBP40m of near term opportunities being reviewed including Health and Social Care, Asset Finance, Property and Hospitality. Finally, the RM team look forward to meeting with current and future investors during the second half of the year.
RM Capital Markets Limited
9 August 2018
PORTFOLIO
Ten largest holdings
As at 30 June 2018
Valuation Percentage
of
Business Activity Security type GBP'000 Gross Assets
(%)
Asset finance Loan investment 10,000 9.3
Advertising Loan investment 8,458 7.9
Business services Loan investment 6,813 6.3
Healthcare Debt security instrument 6,503 6.0
Automotive parts manufacturing Loan investment 6,385 5.9
Healthcare Loan investment 5,905 5.5
Nurseries Loan investment 5,051 4.7
Student accommodation Loan investment 4,420 4.1
Forecourt operator Loan investment 4,396 4.1
Telecommunications Loan investment 4,195 3.9
--------------------------------- -------------------------- ----------- --------------
Ten largest holdings 62,126 57.7
------------------------------------------------------------- ----------- --------------
Other debt loan investments 12,479 11.6
Other debt security investments 24,561 22.8
------------------------------------------------------------- ----------- --------------
Total holdings 99,166 92.1
------------------------------------------------------------- ----------- --------------
Other assets* 8,451 7.9
------------------------------------------------------------- ----------- --------------
Gross assets 107,617 100.0
------------------------------------------------------------- ----------- --------------
*Based on the Company's consolidated gross assets attributable to all share classes, before deducting the values of the C Shares and ZDP Shares, treated as debt liabilities in accordance with IFRS.
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in accordance with the UK Listing Authority's Disclosure Guidance and Transparency Rules ('DTR'). The Directors consider that the Chairman's Statement and the Investment Manager's Report in this Half-yearly Report, the following statement on Related party transactions and the Statement of Directors' Responsibility below, together constitute the Interim Management Report for the Company for the six months ended 30 June 2018. The principal risks and uncertainties to the Group are unchanged from those disclosed in the Annual Report and Accounts for the period ended 31 December 2017. The Group's outlook for the remaining six months of the financial year ending 31 December 2018 is discussed in the Chairman's Statement and Investment Manager's Report.
Related party transactions
Details of the amounts paid to the Company's Investment Manager and the Directors during the period are disclosed in notes 5 and 12 to the Financial Statements.
Statement of Directors' Responsibility for the Half-Yearly Report
The Directors confirm to the best of their knowledge that:
-- The condensed set of financial statements contained within the Half-Yearly Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting.
-- The Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's DTR.
Norman Crighton
Chairman of the Board of Directors
9 August 2018
CONDENSED Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2018
Period from 27 October Period from 27 October
Six months ended 2016 to 30 June 2016 to 31 December
30 June 2018 (Unaudited) 2017 (Unaudited) 2017 (Audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on investments - (416) (416) - (376) (376) - (853) (853)
Income 3,788 - 3,788 806 - 806 3,586 - 3,586
Investment management
fee (424) - (424) (139) - (139) (370) - (370)
Other expenses (450) (124) (574) (444) - (444) (777) - (777)
------------------------ --------- --------- -------- -------- -------- -------- -------- -------- --------
Return before finance
costs and taxation 2,914 (540) 2,374 223 (376) (153) 2,439 (853) 1,586
Finance costs (144) (354) (498) (3) - (3) (32) (174) (206)
------------------------ --------- --------- -------- -------- -------- -------- -------- -------- --------
Return on ordinary
activities before
taxation 2,770 (894) 1,876 220 (376) (156) 2,407 (1,027) 1,380
Taxation (3) - (3) - - - (44) 44 -
------------------------ --------- --------- -------- -------- -------- -------- -------- -------- --------
Return on ordinary
activities after
taxation 2,767 (894) 1,873 220 (376) (156) 2,363 (983) 1,380
------------------------ --------- --------- -------- -------- -------- -------- -------- -------- --------
Return per Ordinary
Share (pence) 4.03p (1.30p) 2.73p 0.43p (0.73p) (0.30p) 4.35p (1.81p) 2.54p
------------------------ --------- --------- -------- -------- -------- -------- -------- -------- --------
The total column of this statement is the profit and loss account of the Company.
All the revenue and capital items in the above statement derive from continuing
operations.
'Return on ordinary activities after taxation' is also the 'Total comprehensive
income for the period'.
The notes form an integral part of these financial statements.
CONDENSED Consolidated Statement of Financial Position
As at 30 As at 30 As at 31
June 2018 June 2017 December
(Unaudited) (Unaudited) 2017 (Audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------- ------------- ----------------
Fixed assets
Investments at fair value through profit
or loss 99,166 42,299 76,957
Current assets
Receivables 1,472 352 1,069
Cash and cash equivalents 9,308 15,946 15,441
--------------------------------------------- ------------- ------------- ----------------
10,780 16,298 16,510
Payables: amounts falling due within
one year
Payables (2,376) (2,687) (7,624)
C Shares in issue (11,176) - (29,574)
Net current (liabilities)/assets (2,772) 13,611 (20,688)
--------------------------------------------- ------------- ------------- ----------------
Non-current liabilities
Zero Dividend Preference Shares (10,963) - -
Net assets 85,431 55,910 56,269
--------------------------------------------- ------------- ------------- ----------------
Capital and reserves: equity
Share capital 874 573 573
Share premium 33,700 6,853 6,845
Special reserve 48,502 48,640 48,502
Capital redemption reserve 2,699 - -
Capital reserve (1,877) (376) (983)
Revenue reserve 1,533 220 1,332
Total shareholders' funds 85,431 55,910 56,269
--------------------------------------------- ------------- ------------- ----------------
NAV per share - Ordinary Shares - adjusted
(pence) 97.85p 97.57p 98.59p
--------------------------------------------- ------------- ------------- ----------------
NAV per share - Ordinary Shares - IFRS
calculation (pence) 97.73p 97.57p 98.20p
--------------------------------------------- ------------- ------------- ----------------
The notes form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended to 30 June 2018 (Unaudited)
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- ------------ --------- --------- --------
Balance as at 1 January
2018 573 6,845 48,502 - (983) 1,332 56,269
Return on ordinary
activities - - - - (894) 2,767 1,873
C Share conversion to
Ordinary Shares 301 26,855 - 2,699 - - 29,855
Dividend paid - - - - - (2,566) (2,566)
Balance as at 30 June
2018 874 33,700 48,502 2,699 (1,877) 1,533 85,431
----------------------------- --------- --------- --------- ------------ --------- --------- --------
For the period from incorporation on 27 October 2016 to 30 June 2017
(Unaudited)
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
----------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- ------------ --------- --------- --------
Balance as at beginning
of the period - - - - - - -
Return on ordinary
activities - - - - (376) 220 (156)
Issue of Ordinary Shares 573 56,815 - - - - 57,388
Transfer to Special reserve - (48,755) 48,755 - - - -
Share issue costs - (1,207) - - - - (1,207)
Dividend paid - - (115) - - - (115)
Balance as at 30 June
2017 573 6,853 48,640 - (376) 220 55,910
----------------------------- --------- --------- --------- ------------ --------- --------- --------
For the period from incorporation on 27 October 2016 to 31 December 2017
(Audited)
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
----------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- ------------ --------- --------- --------
Balance as at beginning
of the period - - - - - - -
Return on ordinary
activities - - - - (983) 2,363 1,380
Issue of Ordinary Shares 573 56,815 - - - - 57,388
Share issue costs - (1,215) - - - - (1,215)
Transfer to Special reserve - (48,755) 48,755 - - - -
Special reserve costs - - (24) - - - (24)
Dividend paid - - (229) - - (1,031) (1,260)
Balance as at 31 December
2017 573 6,845 48,502 - (983) 1,332 56,269
----------------------------- --------- --------- --------- ------------ --------- --------- --------
Distributable reserves comprise: the Revenue reserve, realised profits attributable
to Capital reserve and Special reserve.
Share capital represents the nominal value of shares that have been issued.
The Share premium includes any premiums received on the issue of share capital.
Any transaction costs associated with the issuing of shares are deducted
from Share premium.
The notes form an integral part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2018
Period from
Six months Period from 27 October
ended 27 October 2016 to 31
30 June 2018 2016 to 30 December 2017
(Unaudited) June 2017 (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------------------------------- -------------- ----------------------- ---------------
Operating activities
Return on ordinary activities
before finance costs and taxation* 2,374 (153) 1,586
Adjustment for losses on investments 416 230 844
Decrease/(increase) in debtors 403 (352) (1,069)
Increase in creditors 88 2,687 691
Net cash flow from operating
activities 3,281 2,412 2,052
--------------------------------------- -------------- ----------------------- ---------------
Investing activities
Proceeds from investments 36,913 8,355 29,676
Purchase of investments (65,375) (50,884) (100,617)
Net cash flow from investing
activities (28,462) (42,529) (70,941)
--------------------------------------- -------------- ----------------------- ---------------
Financing activities
Finance costs paid (234) (3) -
Zero Dividend Preference share
issue proceeds 10,870 - -
Share issue proceeds - 57,388 57,388
Share issue costs - (1,207) (1,215)
C Share issue proceeds 11,329 - 30,000
C Share issue costs (227) - (559)
Other costs charged to capital (124) - -
Transfer to Special reserve
costs - - (24)
Equity dividends paid (2,566) (115) (1,260)
Net cash flow from financing
activities 19,048 56,063 84,330
--------------------------------------- -------------- ----------------------- ---------------
(Decrease)/increase in cash (6,133) 15,946 15,441
Opening balance at beginning
of the period 15,441 - -
-------------------------------------- -------------- ----------------------- ---------------
Balance as at 30 June 2018 9,308 15,946 15,441
--------------------------------------- -------------- ----------------------- ---------------
*Cash inflow from interest on
investment holdings was GBP3,326,000
(31 December 2017: GBP2,713,000).
The notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General information
RM Secured Direct Lending plc (the 'Company') was incorporated in England
and Wales on 27 October 2016 with registered number 10449530, as a closed-ended
investment company. The Company commenced its operations on 15 December
2016. The Company is an investment trust within the meaning of Chapter 4
of Part 24 of the Corporation Tax Act 2010.
During the six months ended 30 June 2018, a wholly owned subsidiary was
established. RM ZDP plc ('ZDP Subsidiary') was incorporated in England and
Wales on 21 February 2018, with registered number 11217952. The financial
statements ('financial statements') include the results of RM Secured Direct
Lending plc and RM ZDP plc. The Company and RM ZDP plc collectively form
the 'Group'.
The Company's investment objective is to generate attractive and regular
dividends through investment in secured debt instruments of UK SMEs and
mid-market corporates and/or individuals including any loan, promissory
notes, lease, bond or preference share sourced or originated by the Investment
Manager with a degree of inflation protection through index-linked returns
where appropriate.
2. Basis of preparation and significant accounting policies
Statement of compliance
The interim financial statements have been prepared in accordance with IAS
34 Interim Financial Reporting and the Disclosure Guidance and Transparency
Rules ('DTRs') of the UK's Financial Conduct Authority. They do not include
all of the information required for full annual financial statements and
should be read in conjunction with the financial statements of the Company
as at and for the period ended 31 December 2017. The financial statements
of the Company as at and for the period ended 31 December 2017 were prepared
in accordance with International Financial Reporting Standards ('IFRS')
as issued by the International Accounting Standards Board ('IASB'). The
financial information for the period from incorporation on 27 October 2016
to 31 December 2017 in these interim financial statements has been extracted
from the audited Annual Report and Accounts for that period.
When presentational guidance set out in the Statement of Recommended Practice
('SORP') for Investment Companies issued by the Association of Investment
Companies ('the AIC') in November 2014 and updated in February 2018 is consistent
with the requirements of 'IFRS', the Directors have sought to prepare the
financial statements on a basis compliant with the recommendations of the
SORP.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements.
The Directors have a reasonable expectation that the Group has adequate
operational resources to continue in operational existence for at least
twelve months from the date of approval of these financial statements.
Accounting policies
The accounting policies used by the Group in preparing these interim financial
statements are the same as those applied by the Company in its financial
statements as at and for the period ended 31 December 2017.
The comparatives for the periods ended 30 June 2017 and 31 December 2017
relate to RM Secured Direct Lending plc as this was the only member of the
Group in those periods.
3. INVESTMENT AT FAIR VALUE THROUGH PROFIT OR
LOSS
As at
30 June As at 30 June As at 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
-------------------------------------- --------- -------------- ------------------
Financial assets held:
Debt securities and loan investments 99,166 42,299 76,957
-------------------------------------- --------- -------------- ------------------
99,166 42,299 76,957
-------------------------------------- --------- -------------- ------------------
4. INCOME
Period from Period from 27
27 October October 2016
Six months ended 2016 to 30 to 31 December
30 June 2018 June 2017 2017
GBP'000 GBP'000 GBP'000
------------------------- ----------------- ------------ ----------------
Income from investments
Bond and loan interest 3,382 754 2,834
Bank interest 4 17 20
Arrangement fees 171 - 142
Loan redemption fees 228 - 531
Other income 3 35 59
----------------- ------------ ----------------
Total 3,788 806 3,586
------------------------- ----------------- ------------ ----------------
5. INVESTMENT MANAGEMENT FEE AND OTHER EXPENSES
Period from Period from
Six months 27 October 27 October
ended 2016 to 2016 to
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- ----------- ------------ ----------------
Expenses charged to revenue:
Investment management fees 424 139 370
Other adminstration charges 450 444 777
----------- ------------ ----------------
Total revenue expenses 874 583 1,147
---------------------------------------------------------------- ----------- ------------ ----------------
Expenses charged to capital:
Prospectus issue and capital transaction
costs (124) - -
---------------------------------------------------------------- ----------- ------------ ----------------
Total capital expenses (124) - -
---------------------------------------------------------------- ----------- ------------ ----------------
The Company's Investment Manager is RM Capital Markets Limited. The
Investment Manager is entitled to receive a management fee payable monthly
in arrears and is at a rate of one-twelfth of 0.5% if the Company's
net assets are less than GBP75 million. If the Company's net assets
are in excess of GBP75 million then they are entitled to receive a management
fee one twelfth of 0.875% per calendar month of net assets payable a
month in arrears. The combined net assets of Ordinary Shares, C Shares
and ZDP Shares (if any in issue) are used as the basis of calculating
the management fees.
There is no performance fee payable to the Investment Manager.
6. TAXATION
Six months ended 30 June 2018 Revenue Capital Total
GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- ----------- ------------ ----------------
Analysis of tax charge for the period:
Corporation tax 3 - 3
---------------------------------------------------------------- ----------- ------------ ----------------
Total tax charge 3 - 3
---------------------------------------------------------------- ----------- ------------ ----------------
7. Zero Dividend Preference ('ZDP') Shares
As at
30 June 2018
GBP'000
--------------------------------------------------------- -------------------
Opening balance -
Issue proceeds of ZDP Shares 10,870
Accrued interest during the period 93
--------------------------------------------------------- -------------------
Closing balance 10,963
--------------------------------------------------------- -------------------
RM ZDP plc was incorporated for the sole purpose of issuing the ZDP
Shares. On 3 April 2018, 10,869,950 ZDP shares were issued and admitted
to trading on the standard segment of the Official List of the London
Stock Exchange. RM ZDP plc has made a loan of the gross proceeds raised
from the issue of the ZDP Shares to the Company pursuant to the ZDP
Loan Agreement between the Company and RM ZDP plc. RM ZDP plc's only
material financial obligations are in respect of the ZDP Shares. Its
only material assets are the ZDP Loan and the obligation of the Company,
under the Undertaking between RM ZDP plc and the Company, to put RM
ZDP plc in a position to meet its obligations in respect of the ZDP
Shares and to pay its operating expenses.
The ZDP Shares are recorded as a liability in the consolidated Statement
of Financial Position and are measured at amortised cost. Based on the
share price of the ZDP Shares of 101.5p per ZDP Share at 30 June 2018,
the fair value of the ZDP Shares was GBP11,033,000.
8. SHARE
CAPITAL
As at 31 December
As at 30 June 2018 As at 30 June 2017 2017
------------------------------- ------------------------------- --------------------------
No. of No. of
Shares GBP'000 No. of Shares GBP'000 Shares GBP'000
---------------- --------------- -------------- --------------- -------------- --------------- ---------
Allotted,
issued &
fully paid:
Ordinary Shares
of
1 pence 87,415,374 874 57,300,000 573 57,300,000 573
---------------- --------------- -------------- --------------- -------------- --------------- ---------
C shares of 10
pence 11,329,363 1,133 - - 30,000,000 3,000
---------------- --------------- -------------- --------------- -------------- --------------- ---------
Share movement
The table below sets out the share movement from 1 January 2018
to 30 June 2018.
Shares in
issue at
Opening Share 30 June
balance Shares issued conversions 2018
---------------- --------------- -------------- --------------- --------------
Ordinary Shares 57,300,000 - 30,115,374 87,415,374
---------------- --------------- -------------- --------------- --------------
C Shares 30,000,000 11,329,363 (30,000,000) 11,329,363
---------------- --------------- -------------- --------------- --------------
On 16 March 2018, 30,000,000 C Shares were converted into 30,115,374
new Ordinary Shares of 1p each using the Conversion Ratio as calculated
in accordance with the terms set out in the Company's Articles of Association.
The Conversion Ratio of 1.00384581 Ordinary Shares of 1p each for each
C Share was calculated by reference to the net asset value per share
attributable to the Ordinary Shareholders of the Company and the C Shareholders
as at close of business on 28 February 2018. Based on the Conversion
Ratio, a holder of 1,000 C Shares received 1,003 new Ordinary Shares
upon Conversion.
The Ordinary Shares arising on Conversion rank pari passu with, and
have the same rights as, the Ordinary Shares of the Company already
in issue, including the right to receive dividends.
On 3 April 2018 11,329,363 C Shares were issued and allotted, raising
gross proceeds of GBP11,329,363 pursuant to the Offer for Subscription,
Initial Placing and Initial Intermediaries Offer of C Shares of 10 pence
each at a issue price of 100 pence each. These C Shares converted into
11,309,207 Ordinary Shares following the period end. Therefore there
are 98,724,581 Ordinary Shares in issue at the date of approval of these
interim accounts.
9. RETURN PER ORDINARY
SHARE
Total return per Ordinary Share is based on the gain on ordinary activities
after taxation of GBP1,873,000.
Based on the weighted average of number of 68,614,063 (30 June 2017:
51,608,081; 31 December 2017: 54,349,738) Ordinary Shares in issue for
the six months ended 30 June 2018, the returns per share were as follows:
Six months ended Period ended
30 June 2018 30 June 2017
Revenue Capital Total Revenue Capital Total
--------------------------- --------- --------- ------- --------- -------- --------
Return per Ordinary
Share 4.03p (1.30p) 2.73p 0.43p (0.73p) (0.30p)
--------------------------- --------- --------- ------- --------- -------- --------
Period ended
31 December 2017
Revenue Capital Total
--------------------------- --------- --------- ------- --------- -------- --------
Return per Ordinary
Share 4.35p (1.81p) 2.54p
--------------------------- --------- --------- ------- --------- -------- --------
10. NET ASSET VALUE PER
SHARE
The net asset value per share attributable to the Ordinary Shareholders
at the period end were as follows:
Net Asset Net Asset
Value Net assets Value Net assets
per share attributable per share attributable
30 June 30 June 30 June 30 June
2018 2018 2017 2017
(pence) GBP'000 (pence) GBP'000
---------------------------- ------------ -------------------- ------------- ------------------
Ordinary Share NAV 97.85 85,537 97.57 55,910
IFRS adjustment (Loss
attributable
to C Shares) (0.04) (33) - -
IFRS adjustment (C Share
finance costs) (0.08) (73) - -
Ordinary Share NAV (IFRS
calculation) 97.73 85,431 97.57 55,910
---------------------------- ------------ -------------------- ------------- ------------------
The net asset value per share is based on total Shareholders' funds of
GBP85,537,000 (30 June 2017: GBP55,910,000), and on 87,415,374 (30 June
2017 and 31 December 2017: 57,300,000) Ordinary Shares in issue at the
period end.
Net Asset
Value Net assets
per share available
31 December 31 December
2017 2017
(pence) GBP'000
---------------------------- ------------ -------------------- ------------- ------------------
Ordinary Share NAV 98.59 56,490
Loss attributable to C
Shares (0.09) (47)
IFRS adjustment (C Share
finance costs) (0.30) (174)
Ordinary Share NAV (IFRS
calculation) 98.20 56,269
---------------------------- ------------ -------------------- ------------- ------------------
The IFRS adjustment is in respect of the C Shares finance costs in relation
to the classification of the C Shares as debt in accordance with IFRS
requirements. The impact on the NAV reverses at conversion of the C Shares
into Ordinary Shares.
11. DIVID
The Company's distributable reserves comprise: the Company's Revenue reserve,
realised profits attributable to the Capital reserve and the Special reserve.
On 15 February 2018, the Directors approved the payment of a fourth interim
dividend for the period ended 31 December 2017 at the rate of 2.0 pence
per Ordinary Share. The dividend had a record date of 23 February 2018
and was paid on 23 March 2018.
On 23 May 2018, the Directors approved the payment of an interim dividend
for the quarter to March 2018 at the rate of 1.625 pence per Ordinary Share.
The dividend had a record date of 8 June 2018 and was paid on 29 June 2018.
The dividend was funded from the Company's Revenue reserve.
On 7 August 2018, the Directors approved the payment of an interim dividend
in respect of the quarter to June 2018 at the rate of 1.625 pence per Ordinary
Share. The dividend will have a record date of 17 August 2018 and will
be payable on 14 September 2018. The dividend will be funded from the Company's
Distributable reserves.
12. RELATED PARTY TRANSACTION
Fees payable to the Investment Manager are shown in the Statement of Comprehensive
Income. As at 30 June 2018 the fee outstanding to the Investment Manager
was GBP78,000.
Fees are payable at an annual rate of GBP36,000 to the Chairman, GBP33,000
to the Chairman of the Audit Committee and GBP30,000 to the other Directors.
There were no Directors' fees outstanding as at 30 June 2018.
The Directors had the following shareholdings in the Company, all of which
are beneficially owned.
As at 30
June As at 30 June As at 31 December
2018 2017 2017
Ordinary
Shares Ordinary Shares Ordinary Shares
------------------------------------------ ---------- ----------------------- -------------------------------
Norman Crighton 20,000 20,000 20,000
Guy Heald 20,000 20,000 20,000
Marlene Wood 20,000 20,000 20,000
------------------------------------------ ---------- ----------------------- -------------------------------
In addition to the above holding, Norman Crighton held 10,000 C Shares
at 30 June 2018, which subsequently converted to 9,982 Ordinary Shares
in July 2018.
In April 2018, the Company entered into a ZDP Loan Agreement, between the
RM ZDP plc ('ZDP Subsidiary') (as lender) and the Company (as borrower)
pursuant to which, immediately following Admission, the ZDP Subsidiary
lent the Company the Gross ZDP Placing Proceeds, which has been applied
by the Company towards making investments in accordance with its Investment
Policy and for working capital purposes.
13. CLASSIFICATION OF FINANCIAL INSTRUMENTS
IFRS 13 requires the Group to classify its investments in a fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS 13 establishes a fair value hierarchy that prioritises
the inputs to valuation techniques used to measure fair value. The three
levels of fair value hierarchy under IFRS 13 are as follows:
Level 1
Inputs are quoted prices in active markets for identical assets or liabilities
that the entity can access at the measurement date.
Level 2
Inputs other than quoted market prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3
Inputs are unobservable for the asset or liability.
The classification of the Company's investments held at fair value is detailed
in the table below:
30 June 2018 30 June 2017
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- ------------ ---------- -------- ------------- -------- -------- --------
Financial
assets:
Financial assets
- Debt
securities - 18,982 - 18,982 - 21,491 - 21,491
Financial assets
- loan
investments - - 80,184 80,184 - - 20,808 20,808
Total - 18,982 80,184 99,166 - 21,491 20,808 42,299
----------------- --------- ------------ ---------- -------- ------------- -------- -------- --------
Financial
liabilities:
Zero Dividend
Preference
Shares (market
value) - - 11,033 11,033
C Shares in
issue (market
value)* 11,556 - - 11,556 - - - -
Total financial
liabilities 11,556 - 11,033 22,589 - - - -
----------------- --------- ------------ ---------- -------- ------------- -------- -------- --------
31 December 2017
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- ------------ ---------- -------- ------------- -------- -------- --------
Financial
assets:
Financial assets
- Debt
securities - 36,074 - 36,074
Financial assets
- loan
investments - - 40,883 40,883
Total - 36,074 40,883 76,957
----------------- --------- ------------ ---------- -------- ------------- -------- -------- --------
Financial
liabilities:
C Shares in
issue (market
value)* 30,600 - - 30,600
Total financial
liabilities 30,600 - - 30,600
----------------- --------- ------------ ---------- -------- ------------- -------- -------- --------
*These have been recorded in the Statement of Financial Position at amortised
cost. The net assets attributable to the C Shares as at 30 June 2018 was
GBP11,066,000, which is equivalent to 97.68 pence per C Share.
Investments that trade in markets that are not considered to be active
but are valued based on quoted market prices, dealer quotations or alternative
pricing sources supported by observable inputs are classified within Level
2.
Level 3 holdings are valued using a discounted cash flow analysis and benchmarked
discount/interest rates appropriate to the nature of the underlying loan
and the date of valuation.
Interest rates are a significant input into the Level 3 vvaluation methodology.
There have been no movements between levels during the reporting period.
The Company considers factors that may neccessitate the transfers between
levels using the definition of the levels 1, 2 and 3 above.
14. FINANCIAL INSTRUMENTS - RISK PROFILE
The principal risks relating to financial instruments held by the Group
remain the same as disclosed in the Company's last Annual Report and Accounts
for the period ended 31 December 2017.
15. POST BALANCE SHEET EVENTS
There are no other post period end events other than those disclosed in
this report.
16. STATUS OF THIS REPORT
These consolidated financial statements are not the Group's or the Company's
statutory accounts for the purposes of section 434 of the Companies Act
2006. They are unaudited. The Half-yearly financial report will be made
available to the public at the registered office of the Company. The report
will be available in electronic format on the Investment Manager's website
(www.rm-funds.com).
The Half-yearly financial report was approved by the Board on 9 August 2018.
ALTERNATIVE PERFORMANCE MEASURES ('APMs')
Discount The amount, expressed as a percentage, by which the share price is less than the Net Asset Value per Ordinary Share. There is no calculation of discount shown as the Company's Ordinary Shares were trading at a premium of 3.73% at the period end. Gearing A way to magnify income and capital returns, but which can also magnify losses. Gross asset The Group's gross assets comprise the net asset values of the Company's Ordinary and C Shares in addition to the accrued capital entitlement of the ZDP Shares, with the breakdown as follows: As at 30 June 2018 (Unaudited) GBP'000 Per Share (pence) ---------------------------------- ------- -------- ------------------ Ordinary Shares - NAV a 85,500 97.85 C Shares - NAV b 11,100 97.68 RM ZDP plc - Accrued entitlement c 11,000 100.86 ---------------------------------- ------- -------- ------------------ Gross asset a+b+c 107,600 n/a ---------------------------------- ------- -------- ------------------ Ongoing charges A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company. Premium The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per share. As at 30 June 2018 (Unaudited) ---------------------------------------------- --------------- ---------- NAV per Ordinary Share (p) a 97.85 Share price (p) b 101.50 ---------------------------------------------- --------------- ---------- Premium (b÷a)-1 3.7% ---------------------------------------------- --------------- ---------- Total return A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into its Ordinary Shares on the ex-dividend date. Six months ended 30 June 2018 (Unaudited) Share
price NAV
---------------------------------------------- --------------- ---------- -------
Opening at 1 January 2018 (p) a 101.50 98.59
Closing at 30 June 2018 (p) b 101.50 97.85
Dividend adjustment factor c 1.0361 1.0376
Adjusted closing (d = b x c) d 105.16 101.53
---------------------------------------------- --------------- ---------- -------
Total return (d÷a)-1 3.60% 2.98%
---------------------------------------------- --------------- ---------- -------
DIRECTORS, MANAGER AND ADVISERS
DIRECTORS INVESTMENT MANAGER
Norman Crighton (Non-Executive RM Capital Markets Limited
Chairman) 7 Melville Crescent
Guy Heald Edinburgh
Marlene Wood EH3 7JA
BROKER REGISTERED OFFICE*
N+1 Singer Advisory LLP Mermaid House
1 Bartholomew Lane 2 Puddle Dock
London London
EC2N 2AX EC4V 3DB
CUSTODIAN ADMINISTRATOR AND COMPANY SECRETARY
US Bank PraxisIFM Fund Services (UK) Limited
125 Old Broad Street Mermaid House
London 2 Puddle Dock
EC2N 1AR London
EC4V 3DB
AIFM AUDITORS
International Fund Management Ernst & Young LLP
Limited One Atria
Sarnia House 144 Morrison Street
Le Truchot Edinburgh
St Peter Port EH3 8EX
Guernsey Solicitors to the Company
GY1 4NA Gowling WLG (UK) LLP
REGISTRAR 4 More London Riverside
Link Asset Services London
The Registry SE1 2AU
34 Beckenham Road
Beckenham
Kent BR3 4TU
VALUATION AGENT
Mazars LLP
Tower Bridge House
Katherine's Way
London
E1W 1DD
* Registered in England and Wales No. 10449530
For further information contact:
Anthony Lee / Ciara McKillop
PraxisIFM Fund Services (UK) Limited
Tel: 020 7653 9690
The Half-yearly financial report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/NSM
END
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR BRGDIISGBGIC
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August 10, 2018 02:00 ET (06:00 GMT)
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