Annual Results for the year ended 31 December 2019

RNS Number : 1029F

Gresham House PLC

05 March 2020

Gresham House plc

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

Annual Results for the year ended 31 December 2019

The Board of Gresham House plc, (AIM: GHE), the specialist alternative asset manager is pleased to announce a year of strong organic growth, with Assets Under Management (AUM) increasing by 23% to £2.8 billion, strong operating profitability and a more than doubling of revenues. The Group successfully integrated the FIM (Forestry) and Livingbridge VC (Strategic Equity) acquisitions, capturing annualised synergies of over £1.0 million, alongside execution of its first significant international forestry transaction in Ireland. The Group has a healthy pipeline for further growth, both organic and acquisition, in 2020. The Board is also pleased to announce a 50% increase in the dividend to 4.5p.

FINANCIAL HIGHLIGHTS

	2019	2018	Change
	(£m)	(£m)	(%)
Assets under management	2,797	2,268	+23%
Cash and liquid assets	41.3	32.8	+26%
Total income (revenue)	32.9	14.7	+124%
Adjusted operating profit	10.3	3.0	+237%
Net performance fees and gains on investments	1.5	-	n/a
Operating loss/profit	-0.8	-0.6	-33%
Dividend	4.5	3.0	+50%

·	Organic growth in AUM of 23% (£529 million) including contributions from all divisions across the Group to £2.8 billion (2018: £2.3 billion)
·	Strong revenue and adjusted operating profit growth by 124% to £32.9m (2018: £14.7 million) and by 237% to £10.3m (2018: £3.0 million) respectively
·	Successfully integrated the FIM (Forestry) and Livingbridge VC (Strategic Equity) businesses, capturing annualised synergies of over £1.0 million
·	Dividend increased by 50% to 4.5p (2018: 3.0p)
·	Completed the first battery storage development sale to Gresham House Energy Storage plc (GRID) with a net gain of £1.3 million
·	Executed the Group's first significant international forestry transaction in Ireland on behalf of AXA Investment Managers - Real Assets
·	Five-year business growth strategy 'GH25' to target doubling shareholder value as part of broader strategic and financial Group objectives
·	Acquisition of TradeRisks Limited enhances the Housing platform and adds another Investment Trust vehicle to the product offering

SUSTAINABILITY HIGHLIGHTS

Forestry division planted over 4.1 million trees in UKWAS certified forests in 2019. In the year, approximately 1.5 million tonnes of CO₂ were captured, bringing total carbon storage across the portfolio to over 34 million tonnes

New Energy division operates 195MW of wind farms and solar parks which generate 414,000 MWh per annum, enough power for 111,000 homes and saving 186,000 tonnes of CO₂ emissions per annum

174MW of operational Energy Storage to support the renewable power agenda

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

"Over the past five years, we have been building a dynamic business and I am pleased to see Gresham House deliver another year of strong performance in 2019. We have grown organically, integrated our acquisitions well, embedded our vision for sustainability and continued our momentum to generate long term shareholder value. The 'GH25' strategic framework provides a vision for our clients, shareholders and employees over the next five years.

"We are also pleased to announce the acquisition of TradeRisks Limited (TradeRisks) today, the housing fund management, corporate finance and advisory business. TradeRisks complements our existing housing business and supports our growth plans in this area."

Please click here for CEO Tony Dalwood's review of 2019.

-ends-

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

Gresham House plc

Tony Dalwood, Chief Executive

Kevin Acton, Chief Financial Officer

+44 (0)20 3837 6271

Houston

Alexander Clelland

Kate Hoare

Anushka Mathew

gh@houston.co.uk

+44 (0)20 3701 766 0

Canaccord Genuity Limited - Nominated Adviser and Joint Broker

Bobbie Hilliam

Georgina McCooke

+44 (0)20 7523 8000

Jefferies International Limited - Financial Adviser and Joint Broker

Paul Nicholls

Max Jones

+44 (0)20 7029 8000

About Gresham House

Gresham House plc is a London Stock Exchange quoted specialist alternative asset management group (GHE.LN) that provides funds, direct investments and tailored investment solutions including co-investment. It focuses on five areas of long-term alternative investment within its two divisions of Strategic Equity and Real Assets.

Gresham House manages investments and co-investments through its FCA regulated investment management platform Gresham House Asset Management Limited on behalf of institutions, family offices, charities and endowments and private individuals.

The Group aims to generate superior returns across a range of alternative investment strategies over long-term investment horizons. As a signatory to the UN-supported Principles for Responsible Investment, Gresham House is committed to operating responsibly and sustainably and believes its strategy of taking the long view in delivering sustainable investment solutions will continue to be a growing factor in the strength of its market positioning.

www.greshamhouse.com

Chairman's Statement

It has been five years since the management buy-in led by CEO Tony Dalwood, with an ambition to transform Gresham House into the dynamic specialist asset management business it is today. The quality of the senior management team has been evidenced over this period and we are pleased to celebrate this anniversary with a year that has beaten expectations and achieved milestones, continuing our momentum and growth to generate long-term shareholder value.

Activity in the period

Over the course of 2019, we have seen good performances across our range of products, complemented by the successful integration of our recent acquisitions. As a result, we have seen strong organic growth of over £0.5 billion in AUM to £2.8 billion in 2019, a 23% organic increase in the year (2018: £2.3 billion). This has helped drive profitability with our revised adjusted operating profits increasing to £10.3 million in the year (2018: £3.0 million).

A key 2019 objective was to demonstrate our ability to manage acquisitions with the successful integration of FIM Services Ltd (FIM) and Livingbridge VC LLP, which included adding the two Baronsmead VCTs to our range. This was the first full year to benefit from these acquisitions where annualised cost savings and acquisition synergies of over £1.0 million have been captured.

We have built strong market positions in our areas of expertise such as forestry, VCT management and energy storage. We have managed growth through prudent financial management and an innovative approach to creating investment opportunities for our clients.

This has been evident from the good performance across our funds, for example the 10-year track record of our LF Gresham House UK Micro Cap Fund is exceptional and, on a risk adjusted basis, it is the number two UK-based fund in its sector. The investment performance in our Strategic Public Equity (SPE) listed product, Gresham House Strategic plc (GHS) has been very strong and the SPE strategy now has a track record of outperformance over many years.

In Real Assets, we are particularly pleased with the growth of our two leading sustainable products, the Gresham House Energy Storage Fund plc (LSE:GRID) and British Strategic Investment Fund (BSIF) Strategy which both completed successful fundraisings in 2019. GRID raised a further £107 million in 2019 and continued to acquire utility-scale battery storage projects in this critical area to support renewable energy generation. The BSIF Strategy held a successful fundraise in September 2019 adding £35 million committed capital and £20 million to a separate fund from local authority investors and continues to deploy in sustainable infrastructure and housing projects.

We also established our first foothold outside of the UK with the expansion of our market-leading forestry investment operations into Ireland through working with AXA Investment Managers - Real Assets.

Gresham House has a talented team and the collaboration across the Company deserves to be recognised for its commitment to success. As such it is gratifying to have been awarded accolades from leading industry publications this year, including Funds Europe, Investment Week and Professional Pensions among others, for our expertise in alternative investments. The culture of the Group continues to be strong and dynamic as the opportunities expand.

Sustainability

Sustainability and Environmental, Social and Governance (ESG) concerns are at the forefront of the minds of both Gresham House and our investors. These issues are embedded in the Gresham House proposition, with assets across solar, wind, battery storage and forestry, as well as housing and agritech, among others. We have also published our Sustainable Investment policy in the year and established our Sustainable Investment Committee to embed this throughout the business.

In December, we demonstrated how we use our balance sheet to align ourselves with clients. Our wholly owned subsidiary Gresham House Devco Limited sold its first material battery storage development project to GRID for an initial net gain of approximately £1.3 million and we are in advanced negotiations on other projects. We will continue to use our balance sheet to support growth in product development and investing alongside our clients.

Results

The Group has generated core income of £32.9 million, an increase of 124%, reflecting the organic growth in AUM in the year and the first full year including FIM and Livingbridge VC businesses (2018: £14.7 million). Our revised adjusted operating profit has also improved to £10.3 million in the year (2018: £3.0 million) and we were pleased to receive our first net performance fees and realised gains on investments of £1.5 million in the year. Comprehensive net income includes amortisation of management contracts, movements in contingent consideration payments and other items was £0.8 million loss for the year (2018: £0.6 million loss). This has resulted in adjusted diluted EPS growth of 127%.

The key focus remains on growing the business by investing in high-quality people across fund management, distribution and the critical support functions of compliance, legal, HR and finance.

With a strong balance sheet, net cash, plus liquid assets of £41.3 million (2018: £32.8 million), the Group is well-positioned for further growth through acquisitions and further investment in the Gresham House platform and people.

Dividend

As indicated in the 2019 interim results, the Board has decided to increase the dividend from the maiden dividend of 3.0 pence paid for the year to 31 December 2018. We are delighted to recommend increasing the dividend by 50% to 4.5 pence in 2019. We intend to pursue a progressive dividend policy subject to building sustainable shareholder value over the long-term.

Shareholders

We are proud of our diversified and prestigious shareholder base and welcome each and every one on our long-term journey to become 'an asset to covet'. The Company has come a long way from the £15 million market capitalisation when this management team took charge in 2014.

Board

The development of a Board possessing the necessary skills to support a growth company at our stage remains highly important and we were pleased to have Gareth Davis join as a Non-Executive Director of the Company on 1 October 2019. Gareth is a former Chief Executive of Imperial Brands where he served for 38 years. More recently he has been Chairman of a number of FTSE 100 companies. We welcome the expertise he will bring to the Board as a highly experienced colleague and one with proven experience in brands, international growth and vision.

Outlook

We have made excellent progress against our objectives set in 2014 and we are well-positioned to meet the challenges of the next five years. The management team has an agreed framework over that period, known as 'GH25', and it is an integral part of the Group to work towards these goals. We have established a quality, diversified asset management business and we now look to the next five years to scale up in areas of alternative asset allocation, with key ESG themes throughout, and with further international ambitions.

We were pleased to announce the acquisition of TradeRisks Limited (TradeRisks), the Housing fund management and corporate finance and advisory business, post year end. TradeRisks complements our existing Housing business and provides a further platform for growth, we welcome the TradeRisks team to the Gresham House family.

We note that at the time of writing there are concerns about an economic downturn as a result of coronavirus and its impact on global stock markets. While we monitor this situation closely, our belief in the long-term nature of the asset classes that we operate in remains. We are optimistic about 2020 as we look beyond the achievements of 2019 and we are now focused on delivering our plan for the next five years.

Anthony Townsend

Chairman

5 March 2020

Chief Executive's Report

2019 was a crucial year for Gresham House, as we celebrated five years since the Management Buy-In (MBI) to transform the Company into a leading specialist alternative asset manager.

Our goal has been to deliver shareholder value through capturing the growth in asset allocation to alternative assets, with increased client alignment. We are creating an "asset to covet" for shareholders, clients and our employees, delivering superior investment performance while providing a highly respected level of service.

As we look to the next five years, our ambitions remain clear, and are captured in our 'GH25' mission statement announced within these results, as we importantly aim to double shareholder value again.

We remain committed to a sustainable future through specialist alternative investment. We have integrated investment practices across our strategies that make an active contribution to the sustainability agenda at a global, local and asset level. This is fundamental to our proposition and our clients alongside shareholders continue to benefit from (and demand) a focus on this area of growing interest.

In 2019, we demonstrated our capability in two key strategic areas - organic growth plus acquisition integration. Both factors have been in evidence with the successful integration of FIM Services Ltd (FIM) and Livingbridge VC LLP, alongside growing AUM by over £0.5 billion, with new investors encouraged by our investment performance, specialist investment products and brand recognition.

GH25 - The 5-year Strategy

Our goal is to further develop the business as a leading specialist alternative asset manager, utilising the highly scalable platforms in place and the talented people across the Group.

We aim to double shareholder value¹ over the next five years through the execution of a number of identified objectives. These include doubling AUM and a dedicated focus on delivering clear financial and strategic targets.

Our financial targets aiming to double shareholder value¹:

- Grow AUM to over £6 billion

- Increase operating margins* to greater than 40%

- Maintain target Returns on Invested Capital of 15% or above

Our strategic objectives to support these financial targets are to:

- Become a recognised leader in Sustainable and Governance investment objectives

- Ensure the funds we manage maintain superior returns compared to the market

- Build market share in our niche product areas

- Develop the business internationally, through investment, products and clients

- Further enhance the Gresham House brand to create significant goodwill

1. This is a target, not a profit forecast. There can be no assurance that this target will be met. This target should not be taken as an indication of the Company's expected or actual current or future results.

* Adjusted operating profit

Gresham House has established a number of differentiated asset management platforms, each with the ability to scale alongside existing product, new product development, and international potential. Impact and sustainable asset management requires an element of disruption - to evolve current methods. We believe we have demonstrated this capability through investment platforms such as Gresham House Energy Storage Fund plc (GRID), the British Strategic Investment Fund (BSIF) Strategy and the Baronsmead VCTs.

Critical to the Group's success is delivering a partnership approach with our clients through excellent service and quality investment solutions.

Disciplined use of the balance sheet to make strategic acquisitions that are aligned with our platform and shareholder value creation in line with our track record and future goals remain at the core of our ambitions. Through scaling the business, we anticipate the shareholder benefits of operational gearing and margin expansion, whilst continuing to prioritise investment in our platform and people.

CREATING SHAREHOLDER VALUE

2019 saw the various elements intrinsic to the Gresham House story begin to manifest, namely: value-add through organic growth, balance sheet capital utilisation, product development, investment performance, and acquisitions. These have all contributed to growing shareholder value, building the brand, growing earnings, and generating AUM growth and cash.

Our acquisitions continue to deliver against their 15% return-on-capital-invested targets and we have identified and captured over £1 million of annualised cost synergies from the FIM and Livingbridge transactions. We have also benefited from additional revenue synergies, whereby clients that have joined through acquisitions are now investing in other areas of the business; such as forestry investors now investing in GRID as well as in Gresham House plc - evidence of partnership and alignment.

Operational efficiencies have been achieved across a number of areas, from systems and processes to shared central functions like compliance, finance, marketing and distribution. Examples include the establishment of the divisional management committees in new combined areas, such as FIM and the original Gresham House Forestry businesses operating as a single unit, plus the Livingbridge team now operating as a combined unit with the Strategic Public Equity team within the Strategic Equity division. We are pleased that the teams have continued their momentum after joining Gresham House, embracing the entrepreneurial spirit to grow their business divisions with the support of the Group, be it through the product development process, the provision of seed capital to launch new funds, or simply additional sales and marketing investment.

2019 also saw effective use of the balance sheet to align us with our clients and the funds we manage or advise. We were pleased to announce the first Gresham House Devco Limited transaction, with the sale of the Red Scar battery storage development to GRID in December 2019. This is one of the exclusive portfolio projects being developed by subsidiaries and associates of Gresham House for sale to GRID and is consistent with exceeding our 15% return on balance sheet capital threshold. We are targeting this area to generate additional long-term shareholder value from sustainable investments. The prudent deployment of the balance sheet will continue to contribute to our strategy with a disciplined approach that fully exploits the opportunities available to us.

SUSTAINABILITY

Gresham House has placed sustainability at the heart of its culture and our Environmental, Social and Governance (ESG) framework is structured to encompass all of our investment strategies, as well as our role as an employer and community member.

Whether it is investment in renewable infrastructure such as solar, wind and battery storage, or our commitment to forestry and investment in social housing and sustainable infrastructure, Gresham House is aiming to move these asset classes forward for investors.

Our approach was codified with the establishment of our Sustainable Investment Committee which ensures delivery against a Sustainable Investment Policy that has evolved through our extensive experience in the area. We are also proud signatories of the United Nations Principles of Responsible Investment (UNPRI).

The Management Committee and each investment division input to the evolution of our approach and we believe we can make a strong positive contribution to creating a sustainable future through specialist alternative investment asset classes.

ORGANIC GROWTH IN 2019 AND BEYOND

We are well-positioned to benefit from the increasing demand in alternative investments among investors as well as the wave of demand for sustainable investment products. We have attractive market shares in a number of areas and our approach has been successful, with fundraising being a focus for platform investment.

GRID has now successfully raised the £200 million outlined in its IPO prospectus, demonstrating its appeal to the market as battery storage becomes an essential feature of the UK's critical national infrastructure. Since the year end, GRID has completed an additional equity raise of £31 million, confirming the long-term growth prospects in this area.

We also continue to see good progress in the British Strategic Investment Fund (BSIF) Strategy, which had a further close with new institutional clients in September 2019, bringing committed capital to £200 million. The BSIF Strategy remains an attractive investment proposition with assets in essential sustainable infrastructure and housing classes that have a positive impact, as well as possessing defensive qualities and attractive long-term cash flow characteristics.

We are delighted to have expanded our market-leading forestry operations into Ireland, working with AXA Investment Managers - Real Assets to manage a 4,074 hectare forestry portfolio. This gives the Group the potential to establish a presence in Europe from which to develop a variety of other new opportunities following Britain's exit from the European Union. The Forestry division also continued to acquire forests in the UK on behalf of clients and raised £35 million in the FIM Timberland LP in 2019. Our No.1 position in UK commercial forestry investment management allows our forestry operations to generate data and insights for the benefit of our clients.

The Baronsmead VCTs both undertook top-up fundraisings in January 2019, totalling £25 million to invest in new and existing opportunities across their earlier stage company portfolios. The rapid close of these offers, both within ten days, demonstrates the depth of the appetite for this investment approach. The Baronsmead VCTs were also fundraising in the later part of the year, closing out 2019 with a further £19 million raised, bringing the total raised in 2019 to £44 million, and with more in the pipeline for 2020. Importantly, we are investing in our sales platform and are pleased with our Equity Funds recruitment, which, alongside the very strong performance of our UK Micro Cap and UK Multi Cap Income funds, should continue to support a positive AUM growth outlook.

STRATEGIC EQUITY

Our Strategic Equity division comprises public equity and private equity units, each being highly differentiated within their investment worlds. The Baronsmead VCTs are a long-term brand within the private equity universe. Alongside these, capturing intellectual and investment synergies, are the public equity funds including our top-performing Strategic Public Equity vehicle, Gresham House Strategic plc (GHS), and the LF Gresham House UK Micro Cap Fund and LF Gresham House UK Multi Cap Income Fund.

GHS's active approach to investing in overlooked and unloved UK small companies continues to prove successful against a background of political, regulatory and economic uncertainty affecting the market. We are well-placed to exploit the investment opportunities available, having an experienced and passionate team in place, which has now been augmented with the hire of Richard Staveley, a specialist small-cap manager with expertise garnered over 20 years in the business.

GHS continues to be a top performing "investment trust" and was cited at number 10 in Ian Cowie's article '21st Century's Top 20 Investment Trusts so far' in January 2020. Net Asset Value (NAV) performance remains strong in volatile market conditions, with a NAV Total Return since inception of 50.5% versus the FTSE Small Cap Total Return of 31.2%.

The UK has been a difficult place for investment over the past year, with geopolitical events alongside multiple expansion in some narrow areas of the equity market. However, the LF Gresham House UK Micro Cap Fund and the LF Gresham House UK Multi Cap Income Fund have continued to generate strong performance under the leadership of Ken Wotton. The 10-year track record for the UK Micro Cap Fund is second to none and it has won a series of industry awards as a result - including Ken being named Fund Manager of the Year 2019 at the Grant Thornton Quoted Company Awards. The UK Multi Cap Income Fund, co-managed by Brendan Gulston, was 1st out of 84 funds in the UK Equity Income sector over two years to 31 December 2019 and remains No.1 in the sector since launch in June 2017. We look forward to its three-year anniversary in June 2020 meaning a wider range of investors will be able to gain exposure to its market-beating performance.

The Baronsmead VCTs continue to attract significant interest and are currently fundraising to invest in a diverse portfolio of primarily UK growth businesses, whether unquoted or traded on AIM, and it is this generalist approach which is proving to be a differentiating factor.

REAL ASSETS

In line with our commitment to sustainability, the Gresham House Forestry division planted over 4.1 million trees in 2019 on behalf of its clients, in UKWAS certified forests. In the year, approximately 1.5 million tonnes of CO₂ were captured, equivalent to the annual emissions of the population of Newcastle. We are also exploring the viability of carbon credits in this area to add to management and acquisition fees earned by the division.

This is complemented by our battery storage activities, providing utility-scale batteries to meet the increasing demand for renewables, a crucial factor in the transition to a zero-carbon economy. This demand was evident in the success of our placings in May, July and October of 2019, totalling c.£107 million, building the potential for further future acquisitions and the recently completed further fundraise of £31 million.

The BSIF Strategy also added £35 million commitments to its infrastructure platform and £20 million for a separate regional mandate, providing innovative diversity within sustainable infrastructure investment. Our ability to work with clients to develop and deliver tailored sub-£50 million projects through this strategy is resonating with Local Government Pension Schemes (LGPS) and is attractive to institutional investors given BSIF Strategy's focus on ESG factors, income yield and asset backing.

In addition to investment in social housing, the BSIF Strategy is now moving into new areas such as vertical farming and waste recycling, reducing the carbon footprint of our food and supporting efforts to maximise the effectiveness of the waste management industry. These platform deals provide great potential for scalability.

PEOPLE AND CULTURE

Our people are integral to all that Gresham House achieves. They are the foundation of our success and we believe by recruiting top talent, aligned with our values of entrepreneurialism and ambition, we are investing in future success for the Company, our clients and shareholders.

We are proud of our investment teams and will continue to invest in them as they create revenue opportunities for the Company. We recognise that this doesn't happen in isolation and we are supported by a highly talented team that enables Gresham House to function effectively - and with a smile!

Our culture of empowerment, encouraging individual flair and entrepreneurial thinking, enables us to design and implement innovative investment solutions capable of building a sustainable future. This is reflected in our success and the industry awards that have validated individual and team performance, as well as that of the Company as a whole.

I am thankful to each and every individual for their commitment, dedication and pride in Gresham House.

OUTLOOK

We have made significant progress in 2019 and demonstrated the strength and scalability of our platform. The integration of FIM and Livingbridge has shown how a disciplined approach to acquisitions and a collaborative approach to incorporating new talent helps us create value and a company where the whole is greater than the sum of its parts.

At the same time, our sustained organic AUM growth is a testament to our capabilities across our product range and client confidence in our performance and dedication to service excellence. Five years of planning and execution came to fruition in 2019 and the creation of the foundation for a long-term future was realised.

However, we are far from finished on our journey. Our mission for the next five years is to build on the platform we have created, delivering 'GH25' and with it doubling shareholder value.

With the opportunities ahead, and assuming a continued benign macroeconomic environment, we are confident that we will be able to grow our business in line with our ambitions, to create shareholder value and add further depth and breadth to our platform.

The valuation of many asset markets remains distorted by global interest rate policy and quantitative easing, which has resulted in the longest economic cycle in modern economic history. Valuation distortions and 'bubbles' are evident, and these dislocations provide opportunities for specialist investors. Gresham House is looking to capture value from such opportunities through our differentiated and specialist asset management capabilities.

Concerns about the impact of coronavirus on global health have crystalised fears of an economic slowdown and we have witnessed stock markets move into correction territory. Notwithstanding this dynamic, it remains our belief that global interest rates will remain lower for longer. As such, the demand for yield and therefore alternative assets will remain a growth area.

The wave of capital flowing into ESG opportunities continues. Our broad range of sustainable investment opportunities, including solar, wind, battery storage and forestry, positions us as a natural home for investors seeking superior returns within an ESG-compliant framework.

We were also pleased to announce the acquisition of TradeRisks Limited (TradeRisks) post year end. TradeRisks is a fund management business and specialist provider of debt structuring and advisory services to the housing and social infrastructure sectors, with strong ESG credentials through its social impact in a structurally important area. We expect the acquisition to be immediately earnings enhancing, increasing our AUM to more than £3.0 billion and driving additional shareholder value creation.

As we move into the next five years of our plan, we are confident that we will continue on our trajectory of growth, delivering shareholder value and sustainable returns to clients and investors. We are a long-term business with a long-term plan based on long-term investment horizons. Our proposition is clear and as we look to build on our progress and successes to date, we are excited to enter the next phase of our growth.

Tony Dalwood

Chief Executive Officer

5 March 2020

Financial Review

The Group has had a strong year and successfully built on its specialist asset management platform to deliver organic growth of 23% in AUM to £2.8 billion (2018: £2.3 billion). This is the first full year of revenues from the FIM and Livingbridge VC businesses and highlights their successful integration into Gresham House. The result has seen total core income increasing by 124% to £32.9 million (2018: £14.7 million) and revised adjusted operating profits increased to £10.3 million from £3.0 million in 2018. The Group has also benefited for the first time from net performance fees and realised gains from development company (DevCo) activity totalling £1.5 million. Total comprehensive net income after the deduction of amortisation and other acquisition related costs remained broadly consistent with last year with a loss of £0.8 million (2018: £0.6 million loss). We are also pleased to announce our intention to pay a dividend of 4.5 pence for the year ended 31 December 2019, building on the Group's maiden dividend of 3.0 pence for the year ended 31 December 2018.

As the Group has evolved, so have the revenue streams around the business with the Group starting to benefit from performance fees and realised gains on its investments. In order to present the performance of the Group more clearly, we have reviewed 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 the asset management services. The adjusted operating profit metric below now highlights the performance of the core asset management business separately from performance fees and realised gains on sale of investments. The performance fees and realised gains on sale of investments are presented alongside the variable compensation costs payable as a result of their generation to show the net impact on the Group.

Share-based payments which relate directly to acquisitions have been excluded as they are effectively an earn out paid to the sellers of businesses rather than an operating expense.

Finally, the implementation of IFRS 16 Leases has reclassified rent from administrative expenses to depreciation and this has reduced administration overheads accordingly. The below reconciliation demonstrates the differences to the previous adjusted operating metric in 2019:

Original adjusted operating profit metric	£9.3m
Less net performance fees	£(0.2)m
Add back acquisition related share-based payment	£0.5m
Add back rent payment under IFRS 16 Leases adjustment	£0.7m
Revised adjusted operating profit metric	£10.3m

Adjusted operating profit

	2019	2018
	£'000	£'000
Income	31,583	14,498
Dividend income from associates	1,323	211
Total core income	32,906	14,709
Administration overheads (excluding amortisation, depreciation, exceptional items and acquisition related share-based payment charges)*	(22,229)	(11,618)
Finance costs	(390)	(42)
Adjusted operating profit	10,287	3,049
Adjusted operating margin	31.3%	20.7%
Performance fees (gross)	1,944	-
Variable compensation attributable to performance fees	(1,744)	-
Performance fees net of costs	200	-

Realised gains on investment	2,369	-
Variable compensation attributable to realised gains	(1,037)	-
Realised gains net of costs	1,332	-
Performance fees and realised gains net of costs	1,532	-

Adjusted operating profit, performance fees and realised gains net of costs	11,819	3,049

Amortisation and depreciation	(8,527)	(2,903)
Exceptional items	(1,063)	(2,001)
Acquisition related share-based payment charges	(593)	(87)
Net losses on investments**	(2,463)	1,067
Tax	(23)	218
Operating loss after tax	(850)	(657)
Profit from discontinued operations	55	11
Total comprehensive net income	(795)	(646)

*The 2018 administration overheads have been restated to deduct acquisition related share-based payments of £87,000.

**Excluding dividend income from associates of £1.3 million (2018: £0.2 million) and realised gains on investments of £2.4 million (2018: £nil).

The adjusted operating profit metric has increased to £10.3 million (2018: £3.0 million) and the adjusted operating margin improved to 31.3% in the year (2018: 20.7%). The key driver of the increase in profitability in the year was the impact of the FIM and Livingbridge businesses on the Group. The implementation of IFRS 16 Leases also decreased administration overheads by £0.7 million, thereby increasing adjusted operating profits by £0.7 million in 2019.

Income

	2019	2018
	£'000	£'000
Asset management income	31,226	13,717
Dividend and investment income	278	47
Other income	79	734
Total income	31,583	14,498
Divided income from associates	1,323	211
Total core income	32,906	14,709

Core income

Total core income has increased by 124% in the year to £32.9 million (2018: £14.7 million), primarily driven by asset management income with 2019 being the first full year of revenues from the FIM and Livingbridge acquisitions that completed in 2018. The strong 23% organic growth in AUM in the year to £2.8 billion (2018: £2.3 billion) has also been a key factor in revenue generation in 2019.

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

The Group benefits from a diverse range of long-term management contracts, which provide a stable view on future revenue streams. This is demonstrated through the weighted average life of management contracts accounting for £0.9 billion in AUM being 16 years in asset classes such as forestry. The spread of products managed by the Group's Real Assets and Strategic Equity division also ensures that the Group is not exposed to one particular market, adding a natural hedge.

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 2019 to £278,000 (2018: £47,000), due to dividends being recognised from Gresham House Energy Storage Fund plc (GRID) of £149,000 (2018: £nil), interest from co-investment holdings in Gresham House Strategic Public Equity Fund LP of £24,000 (2018: £22,000) and a dividend from LMS Capital plc of £25,000 (2018: £nil).

Other income includes directors' fees, where team members sit on the boards of portfolio companies. The main difference compared to the prior year was the recognition of a make-whole fee of £620,000 in 2018, payable by Hazel Capital to the Group as part of an arrangement whereby the British Strategic Investment Fund LP invested in ESS2 Holdco Limited (a battery storage project company), and which became payable when ESS2 Holdco Limited was sold to GRID as a seed asset.

Dividend income from associates relates to dividends recognised in 2019 from Noriker Power Limited (Noriker) and GHS. Noriker paid a dividend in specie of GRID shares and cash of £1.2 million up to Gresham House plc (2018: £nil) and GHS made dividends of £172,000 in the year (2018: £211,000). 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 £22.2 million in the year (2018: £11.6 million). Alongside revenues this is the first full year of costs from both the FIM and Livingbridge teams, which has been the key contributing factor to the increase in administrative overheads.

The Group has taken the conscious decision to invest in the team to be able to grow the business effectively. In the earlier stages of this investment there is an impact on operating margins and the speed at which we achieve our target 40% adjusted operating margins in the medium-term. The benefit of this investment will be recognised when the revenues generated come through increased AUM.

Investment in key team members from fund management and distribution to the critical Group functions of compliance, risk management, legal and HR took place in the year with 20 new team members joining the Group. The Group's full-time equivalent headcount now stands at 94, which has grown from 74 at the end of 2018. People costs have consequently increased to £15.6 million from £8.1 million in the year, alongside variable compensation relating to performance fees and realised gains of £2.8 million (2018: £nil).

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

Total office costs across the Group were £0.7 million (2018: £0.9 million), with the key change being the classification of office rent as depreciation in 2019 as required under IFRS 16 Leases, which has reduced administrative overheads by £0.7 million in the year.

We operate with offices in London, Oxford, Dumfries and Perth and continue to operate a flexible approach to the London office where it is important that we commit to an appropriate size and time frame to accommodate acquisition activity as part of our strategic growth.

The synergies identified in 2018 as part of the acquisitions continue to be developed and we were pleased with over £1.0 million of synergies identified and captured in 2019, the benefit of which will be evident in 2020 and beyond. It is not only acquisitions where we target cost savings, we continue to diligently review all areas of the Group's cost base 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 borrowed £10.0 million under a term loan and revolving credit facility with Santander in November 2018 as part of the Livingbridge VC acquisition. We were pleased that cash generation in the year was strong and the Group was in a position to repay the entire facility early in July 2019. The £390,000 finance cost in 2019 reflects the interest and arrangement fees paid for the term loan and revolving credit facility of £357,000 (2018: £42,000) and IFRS 16 Lease interest of £33,000 (2018: £nil).

Amortisation and depreciation

Amortisation of management contracts, client contacts, the website and client portal accounted for £7.7 million (2018: £2.8 million) as these intangible assets continue to be amortised over their useful lives. The acquisition of FIM and Livingbridge VC in 2018 required the assessment of the fair value of the management contracts within these businesses, which are being amortised over their useful lives, ranging from one to 25 years in the case of some of the FIM management contracts.

Depreciation of £816,000 in the year (2018: £138,000) relates primarily to office leases, motor vehicles used by the Forestry business and IT equipment. The implementation of IFRS 16 Leases now includes classifying office leases as right of use assets on the balance sheet and amortising these over their useful lives, the lease period. This had the impact of increasing deprecation in 2019 by £0.7 million.

Exceptional items

In line with previous years we have classified 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 2019 were £1.1 million compared to £2.0 million in 2018. The impact of restructuring following the FIM and Livingbridge VC acquisitions was seen in 2019, alongside the costs associated with the Aberdeen Standard Investments (ASI) Joint Venture announced in the first half of 2019.

Gains/(losses) on investments

	2019	2018
	£'000	£'000
Share of associates' profits	246	1,718
Gains/(losses) in investments held at fair value	3,048	(271)
Movement in fair value of contingent consideration	(2,065)	(209)
Movement in value of deferred receivable	-	40
Total gains/(losses) on investments	1,229	1,278
Less realised gains on investments	2,369	-
Less dividend income from associates	1,323	211
Net (losses)/gains on investments	(2,463)	1,067

Overall the Group has made gains on its investments and fair value movements in acquisition related contingent consideration totalling £1.2 million in 2019 (2018: £1.3 million).

The share of associate's profits relates to the 23% holding that the Group has in GHS and the Group's 28% holding in Noriker Power Limited (Noriker). The last results announcement from GHS was on 25 November 2019 for the six-month period to 30 September 2019. Under associate accounting, the Group has therefore recognised its share of the profit in the period of £70,000 (2018: £1,643,000), which included dividends received in the year from GHS of £172,000 (2018: £211,000).

The Group's investment in Noriker was acquired for alignment as Noriker develops battery storage projects which are part of the pipeline of projects to be acquired by GRID when operational. The Group's share of Noriker profits in 2019 was £187,000 (2018: £75,000)., which included dividends received in the year from Noriker of £1.1 million (2018: £nil).

The associates have different year ends to that of the Group however no material adjustments are required to the reported numbers.

The gain of £3.0 million from investments held at fair value in the year (2018: £0.3 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 realised gain made on the sale of the Red Scar battery storage project to GRID, which made a realised profit of £2.4 million from the Group's £0.6 million loan and equity investment. This is the first sale of a battery development project and 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 project was £1.3 million for the Group.

The other notable movements in the gains/(losses) in investments held at fair value were:

· GRID - increase in the share price to £1.08 as at 31 December 2019, creating a £291,000 value increase

· Gresham House Forestry Friends and Family Fund LP - the increase in the independent valuation of the forests driving a £207,000 increase

· LF Gresham House UK Smaller Companies Fund - the Group's £500,000 seed investment has increased in value by £133,000 in the year

Fair value movement in contingent consideration and deferred receivable

Both the FIM and Livingbridge VC acquisitions have a contingent payment element which is driven by revenue performance over two to three years. The contingent consideration payment has been fair valued at each reporting period end with the movement in the fair value recognised in the income statement.

The FIM contingent payment is expected to pay out in full, with £4.0 million of cash expected to be paid in mid-2020. The FIM acquisition also included an element that should the combined Forestry business deliver above the sellers business plan that the sellers would benefit from an amount of 33% above this target. The current business plan is expected to deliver an amount which equates to an increase of £1.0 million in the contingent consideration to be paid to the sellers and this has been recognised in the fair value movement.

The Livingbridge VC business is expected to deliver in line with the 2018 revenue performance assumptions and the increase in the fair value of the contingent consideration reflects the unwind of the discount between the period end and settlement in 2021 and 2022.

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 deferred tax liability recognised on the acquisition of the FIM business and the impact of the movement in the fair value of the FIM management contracts.

Discontinued operations

Discontinued operations related to the Group's legacy property portfolio, with the remaining sites at Southern Gateway and Newton-le-Willows being sold during 2017. The small profit of £55,000 in 2019 relates to the return of amounts held in escrow as part of the sale reflects updates as further details on the properties are concluded (2018: £11,000).

Financial position

	2019	2018
	£'000	£'000
Assets
Investments*	21,902	17,795
Deferred receivable - Persimmon	-	1,033
Cash	19,432	13,958
Tangible/realisable assets	41,334	32,786

Intangible assets	58,545	65,911
Other assets	13,560	5,832
Total assets	113,439	104,529

Liabilities
Borrowing	-	9,840
Contingent consideration	10,510	8,447
Other creditors	12,692	7,029
Total Liabilities	23,202	25,316
Net assets	90,237	79,213

*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" (£12,188,000) and "Liabilities of a disposal group classified as held for sale" (£9,718,000) and replaced with the investment exposure in "investments in securities" (£3,678,000) and "investment in associates" (£54,000)

Gresham House Forestry Friends and Family Fund LP - reduced the value by the non-controlling interest amount (£527,000) 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 2019. The tangible/realisable assets supporting this total £41.3 million (2018: £32.8 million), comprise 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:

Investment Portfolio	2019	2018
	£'000	£'000
Investment in associates
Gresham House Strategic plc (GHS)	8,791	8,894
Noriker Power Limited (equity)	341	1,304
DevCo Projects	54	-
	9,186	10,198
Investment in securities
Gresham House Energy Storage Fund plc (GRID)	5,402	3,982
DevCo Projects	3,678	1,290
Gresham House Forestry Fund LP	1,489	1,337
Gresham House Strategic Public Equity LP	844	672
LF Gresham House Smaller Companies Fund	633	-
LMS Capital plc	221	291
Noriker Power Limited (loan)	439	-
Other investments	10	25
	12,716	7,597
Total investments (excluding non-controlling interests)	21,902	17,795

Investments in associates

The Group maintained its holding in GHS in the year at 23%. GHS has performed well in the year and based on its last publicly available results for the six months to 30 September 2019, this has led to an increase in the recognised value as an associate of £70,000 (2018: £1.4 million), which after adjusting for the dividend payment of £172,000 in the year results in a value of £8,791,000.

The Group treats Noriker as an associate and has also provided Noriker with a £439,000 working capital loan, which was repaid shortly after year end. Noriker also made a dividend in specie in the year in GRID shares for £1.1 million, reducing the value within Noriker to £341,000.

Investments in securities

The Group's holding in GRID is now £5.4 million (2018: £5.2 million direct and indirectly held), which is c.2.5% of GRID's shares in issue. The share price of GRID continues to rise and was £1.08 as at 31 December 2019.

IFRS 10 Consolidation requires the consolidation of the Group's investments in battery storage Development Company projects (DevCo Projects) as the Group took a controlling position in these projects in the second half of 2019. 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 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 £3.7 million at the end of 2019 (2018: £1.3 million) 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 2020. The first sale of a DevCo Project, Red Scar, took place at the end of 2019, confirming the DevCo Project concept that the Group can develop utility scale battery storage projects to an operational level.

Gresham House Forestry Fund LP has performed well in the year, with increases in the value of the underlying forests driving an increase in the Group's investment to £1.5 million (2018: £1.3 million), excluding non-controlling interests.

Gresham House Strategic Public Equity LP continued to invest during 2019 and also generated realised and unrealised gains of £177,000 in the year (2018: £182,000).

The other investments demonstrate the Group's ability to co-invest alongside the funds that it manages and provides alignment with clients.

Property and deferred receivable

The final settlement by Persimmon of its remaining £1.0 million payment under the terms of the original sale agreement was received in full on 26 February 2019 and no further amounts are outstanding.

Cash and Borrowing

The cash balance of the Group was £19.4 million (2018: £14.0 million) and reflected operating cash profits generated in the year as well as a number of other items. The issuance of shares in the Company to Aberdeen Standard Investments (ASI) in the year generated £6.5 million, alongside the exercise of Supporter and Shareholder Warrants, which expired at the end of 2019, generated a further £4.9 million in 2019. The sale of the DevCo project, Red Scar, completed on 31 December 2019 and gross cash proceeds of £2.3 million were received in early January 2020.

The Group repaid the entire £9.8 million Santander acquisition facility and revolving credit facility in the year, leaving the Group in a net cash position of £19.4 million (2018: £4.1 million).

As highlighted, the DevCo Projects have borrowed to fund the acquisition of the utility scale batteries, this exposure is netted off against the DevCo Projects. On consolidation, the IFRS statement of financial position includes this borrowing amount of £9.7 million under liabilities of a disposal group classified as held for sale, although this borrowing has no recourse to the Group.

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 2019, the net book value of management contracts and other intangible assets was £34.5 million (2018: £41.8 million), reflecting the amortisation of the management contracts over their useful lives, no contracts were impaired at the year end.

Goodwill resulting from acquisitions is reviewed each year end and there was no indication there any impairment to goodwill should be considered to the book value of £24.1 million (2018: £24.1 million). Further details are included in the notes to the financial statements.

Contingent consideration

The FIM and Livingbridge VC acquisitions are the key drivers of contingent consideration. The fair value of the FIM contingent consideration has increased to £4.7 million at the end of 2019 (2018: £3.4 million). This reflects the unwind of the discount as well as an increase of £1.0 million related to the strong performance of the combined Forestry business as set out at the time of the acquisition.

The Livingbridge VC contingent consideration increased to £5.8 million at 31 December 2019 (2018: £5.1 million). There have been no material changes to the assumptions on the pay out of the contingent consideration, the movement primarily reflects the unwind of the discount to the date of payment.

Going Concern

The Directors carry out a rigorous assessment of all the factors affecting the business in deciding to adopt a going concern basis for the preparation of the accounts. The Directors have reviewed and examined the financial and other processes embedded in the business, in particular the annual budget process. On the basis of such review and the significant liquid assets underpinning the balance sheet relative to the Group's predictable operating cost profile, the Directors consider that the adoption of a going concern basis, covering a period of at least 12 months from the date of this report, is appropriate.

Kevin Acton

Chief Financial Officer

5 March 2020

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER

		2019	2018
Notes
		'000	'000
Income	1
Asset management income		31,226	13,717
Dividend and interest income		278	47
Other operating income		79	734
Performance fees and carried interest		1,944	-
Total income		33,527	14,498
Operating costs
Administrative overheads	3	(34,130)	(14,608)
Net operating loss before exceptional items		(603)	(110)
Finance costs	6	(390)	(42)
Exceptional items	5	(1,063)	(2,001)
Net operating loss after exceptional items		(2,056)	(2,153)
Gains and losses on investments
Share of associates' profits/(losses)	16	246	1,718
Gains and losses on investments held at fair value	11	3,048	(271)
Movement in fair value of contingent consideration		(2,065)	(209)
Movement in value of deferred receivable		-	40
Operating loss before taxation		(827)	(875)
Taxation	8	(23)	218
Operating loss from continuing operations		(850)	(657)
Profit from discontinued operations		55	11
Loss and total comprehensive income		(795)	(646)

Attributable to:
Equity holders of the parent		(850)	(699)
Non-controlling interest		55	53
		(795)	(646)
Basic and diluted loss per ordinary share (pence)	9	(3.2)	(3.9)
Basic adjusted profit per ordinary share (pence)	9	38.9	17.2
Diluted adjusted profit per ordinary share (pence)	9	34.3	15.1

STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER Group 2019
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Equity attributable to equity shareholders	Non-controlling interest	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2018		6,218	57,901	58	15,036	79,213	527	79,740
Adjustments for changes in accounting policy	7	-	-	-	6	6	-	6
Balance at 31 December 2018 after adjustment		6,218	57,901	58	15,042	79,219	527	79,746
Loss and total comprehensive income for the year		-	-	-	(850)	(850)	55	(795)
Contributions by and distributions to owners
Share-based payments	27	8	189	-	642	839	-	839
Issue of shares	25	730	11,152	(58)	-	11,824	-	11,824
Dividends paid	10	-	-	-	(795)	(795)	-	(795)
Total contributions by and distributions to owners		738	11,341	(58)	(153)	11,868	-	11,868
Balance at 31 December 2019		6,956	69,242	-	14,039	90,237	582	90,819



Group 2018
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Equity attributable to equity shareholders	Non-controlling interest	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2017		3,134	9,649	319	15,268	28,370	477	28,847
Loss and total comprehensive income for the year		-	-	-	(699)	(699)	53	(646)
Contributions by and distributions to owners
Transfer of non-controlling interest deficit		-	-	-	3	3	(3)	-
Share-based payments	27	-	-	-	464	464	-	464
Issue of shares	25	3,084	48,252	(261)	-	51,075	-	51,075
Total contributions by and distributions to owners		3,084	48,252	(261)	467	51,542	(3)	51,539
Balance at 31 December 2018		6,218	57,901	58	15,036	79,213	527	79,740

YEAR ENDED 31 DECEMBER Company 2019
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Total equity
		£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2018		6,218	57,901	58	13,394	77,571
Adjustments for changes in accounting policy	7	-	-	-	6	6
Balance at 31 December 2018 after adjustment		6,218	57,901	58	13,400	77,577
Loss and total comprehensive income for the year		-	-	-	(226)	(226)
Contributions by and distributions to owners
Issue of shares	25	738	11,341	(58)	-	12,021
Dividends paid	10	-	-	-	(795)	(795)
Total contributions by and distributions to owners		738	11,341	(58)	(795)	11,226
Balance at 31 December 2019		6,956	69,242	-	12,379	88,577


Company 2018
Notes		Ordinary share capital	Share premium	Share warrant reserve	Retained reserves	Total equity
		£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2017		3,134	9,649	319	15,469	28,571
Loss and total comprehensive income for the year		-	-	-	(2,075)	(2,075)
Contributions by and distributions to owners
Issue of shares	25	3,084	48,252	(261)	-	51,075
Total contributions by and distributions to owners		3,084	48,252	(261)	-	51,075
Balance at 31 December 2018		6,218	57,901	58	13,394	77,571

STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER

			Group		Company
		Notes	2019	2018	2019	2018
Assets			£'000	£'000	£'000	'000
Non-current assets
	Investments - securities	11	9,621	6,834	7,550	4,970
	Tangible fixed assets	12	813	332	610	126
	Investment in subsidiaries	15	-	-	79,872	79,872
	Investment in associates	16	9,186	10,198	65	-
	Intangible assets	13	58,545	65,911	386	197
	Long-term receivables		-	78	-	78
			78,165	83,353	88,483	85,243
Current assets
	Trade receivables	17	5,334	2,628	-	-
	Accrued income and prepaid expenses	18	7,200	2,613	159	26
	Deferred receivable		-	1,033	-	-
	Other current assets	19	1,420	1,471	3,988	1,511
	Deferred tax	22	613	-	276	-
	Cash and cash equivalents		19,432	13,958	1,940	6,148
Non-current assets held for sale
	Assets of a disposal group held for sale	14	12,188	-	-	-
Total current assets and non-current assets held for sale			46,187	21,703	6,363	7,685
Total assets			124,352	105,056	94,846	92,928

Current liabilities
	Trade and other payables	20	15,210	4,085	283	152
	Short-term borrowings	21	-	2,000	5,986	7,365
Liabilities of a disposal group classified as held for sale
	Liabilities of a disposal group classified as held for sale	14	9,718	-	-	-
			24,928	6,085	6,269	7,517
Total assets less current liabilities			99,424	98,971	88,577	85,411

Non-current liabilities
	Deferred taxation	22	2,632	2,944	-	-
	Long-term borrowings	23	-	7,840	-	7,840
	Other creditors	24	5,973	8,447	-	-
			8,605	19,231	-	-
Net assets			90,819	79,740	88,577	77,571

Capital and reserves
	Ordinary share capital	25	6,956	6,218	6,956	6,218
	Share premium	28	69,242	57,901	69,242	57,901
	Share warrant reserve	28	-	58	-	58
	Retained reserves	28	14,039	15,036	12,379	13,394

Equity attributable to equity shareholders			90,237	79,213	88,577	77,571
Non-controlling interest		28	582	527	-	-
Total equity			90,819	79,740	88,577	77,571

Basic net asset value per ordinary share (pence)		29	324.3	318.5	318.3	311.9
Diluted net asset value per ordinary share (pence)		29	288.2	290.1	282.9	284.1
The loss after tax for the Company for the year ended 31 December 2019 was £226,000. The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 5 March 2020. Kevin Acton Chief Financial Officer

GROUP STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER

	Notes	2019	2018
		£'000	£'000
Cash flow from operating activities
Net cash generated from operations	30	9,646	1,251
Corporation tax paid		(178)	(346)
Interest paid on loans		(265)	-
Net cash flow from operating activities		9,203	905

Cash flow from investing activities
Acquisition of FIM Services Limited		-	(10,828)
Deferred consideration paid		-	(1,027)
Investment in associates		(65)	(1,979)
Dividends received from associates		118	211
Purchase of management contracts - Livingbridge VC		-	(23,000)
Purchase of investments		(2,149)	(5,166)
Sale of investments		319	1,260
Sale of investment properties		-	1,985
Deferred proceeds received on sale of investment properties		1,033	2,700
Investment in DevCo Projects		(1,510)	-
Purchase of fixed assets		(269)	(165)
Sale of fixed assets		40	46
Purchase of intangible assets		(302)	(123)
		(2,785)	(36,086)
Cash flow from financing activities
Repayment of loans		(10,000)	-
Receipt of loans (net of fees paid)		-	9,834
Share issue proceeds		6,495	26,727
Share issue costs		(8)	(1,048)
Share warrants exercised		4,859	3,841
Share-based payments settled		(833)	-
Dividends paid		(795)	-
Capital element of lease payments		(662)	-
		(944)	39,354

Increase in cash and cash equivalents		5,474	4,173

Cash and cash equivalents at start of year		13,958	9,785

Cash and cash equivalents at end of year		19,432	13,958

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER

	Notes	2019	2018
		£'000	£'000
Cash flow from operating activities
Net cash generated from/(utilised in) operations	30	118	(1,449)
Interest paid on loans		(255)	-
Net cash flow from operating activities		(137)	(1,449)

Cash flow from investing activities
Purchase of investments		(2,149)	(5,166)
Sale of investments		319	681
Investment in subsidiary		-	(35,807)
Investment in associate		(65)
Purchase of fixed assets		(267)	(53)
Sale of fixed assets		15	-
Purchase of intangible assets		(302)	(67)
		(2,449)	(40,412)
Cash flow from financing activities
Repayment of loans		(10,000)	-
Receipt of loans (net of fees paid)		-	9,834
Net (advances to)/receipts from Group undertakings		(1,588)	2,171
Share issue proceeds		6,495	26,727
Share issue costs		(8)	(1,048)
Share warrants exercised		4,859	3,841
Dividends paid		(795)	-
Capital element of lease payments		(585)	-
		(1,622)	41,525

Decrease in cash and cash equivalents		(4,208)	(336)

Cash and cash equivalents at start of year		6,148	6,484

Cash and cash equivalents at end of year		1,940	6,148

PRINCIPAL ACCOUNTING POLICIES

The Group's principal accounting policies are as follows:

(a) Basis of preparation

Gresham House plc is a public limited company limited by shares incorporated in the United Kingdom under the Companies Act and registered in England. The address of the registered office is 5 New Street Square, London, EC4A 3TW.

The financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements are presented in sterling, which is also the Group's functional currency.

The Group has considerable financial resources and ongoing investment management contracts. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

The following new accounting standards, which were effective for periods beginning 1 January 2019 were adopted during the year:

IFRS 16 Leases - Under IFRS 16 there is no distinction between finance and operating leases, with all leases, subject to options to exclude leases with a duration of less than 12 months and leases of low value assets, included on the Statement of Financial Position by recognition of a right of use asset and a lease liability. This impacts the accounting policy for leases and the new policy is shown in Note 7. On transition the Group decided to use the option not to restate prior periods, but to recognise a lease liability at the date of initial application, based on discounted future cash flows, along with a right of use asset at a carrying amount as if the Standard had been applied since the commencement date of the lease, but discounted at the incremental borrowing rate at the date of initial application. The financial impacts of this are shown in Note 7.

Other new accounting standards applicable for the first time in this reporting period have no material impact on the Group's results.

(b) Basis of consolidation

Subsidiaries

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee; exposure to variable returns from the investee; and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings made up to the year end as if they formed a single entity. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The acquisition method of accounting is used to account for business combinations by the Group. Refer to Note r) iv) for further details on whether the Group controls funds that it also manages.

Associates

Where the Group has significant influence, it has the power over (but not control of) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the Group Statement of Financial Position at cost. Subsequently, associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Group Statement of Comprehensive Income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Where there is an indication of impairment that the investment in an associate has been impaired, the carrying amount of the investment will be tested for impairment in the same way as other non-financial assets.

As permitted by section 408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. Details of the Company's results for the year are set out in note 28, the loss for the year being £226,000 (2018: £2,075,000).

(d) Segment reporting

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board in order to allocate resources to the segments and to assess their performance.

The Group's reportable segments, which are those reported to the Board are Real Assets, Strategic Equity and Central.

(e) Revenue recognition

The fixed consideration element of asset management contracts is measured at the fair value of the consideration received or receivable, is stated net of value added tax and is earned within the United Kingdom. The fixed consideration element of asset management contracts is recognised evenly over the contracted period, as the contracts require the Group to perform an indeterminate number of individual asset management services over the duration of the contract. Performance fees are recognised as revenue only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The potential volatility of performance fee revenue means that it is generally only recognised when the measures on which it is based have finally been determined. Cash payments in relation to fixed and variable revenues earned are generally received shortly after the relevant quarter end.

Other revenue recognition

(i) Dividend and interest income

Income from listed securities is recognised when the right to receive the dividend has been established. Interest receivable is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be reliably measured. Interest income is accrued on a time basis by reference to the principal outstanding.

(ii) Other income

Other income earned by the Group is recognised to the extent that it is probable that the economic benefits will flow to the Group and that revenue can be reliably measured in line with any contractual arrangements in place.

(f) Expenses

All expenses and interest payable are accounted for on an accruals basis.

(g) Tangible fixed assets

Each class of tangible fixed assets is carried at cost less, where applicable, any accumulated depreciation.

The carrying amount of tangible fixed assets is reviewed annually by the Directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets' employment and subsequent disposal.

The depreciable amount of all tangible fixed assets is depreciated on a straight-line basis over their estimated useful lives to the Group commencing from the time the asset is held ready for use, and are depreciated at the following rates:

Office equipment 25%

Motor vehicles 25%

Leasehold property 10%

Right of use assets 20% - 50%

(h) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

(i) Leases

A lease is defined as a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the commencement date of a lease a right of use asset and a lease liability are recognised in the financial statements.

The lease liability is initially measured at the present value of expected future lease payments discounted at the interest rate implicit in the lease or, if that rate cannot be determined, the lessee's incremental borrowing rate. Subsequently the lease liability decreases by the lease payments made, offset by interest on the liability, and may be remeasured to reflect any reassessment of expected payments or to reflect any lease modifications.

The right of use asset is initially measured at the amount of the initial lease liability plus: any lease payments made on or before the commencement date less incentives received; any incremental costs of obtaining the lease; and, if any, the costs of decommissioning the asset and any restoration work to return the asset to the condition required under the terms of the lease.

Subsequently the right of use asset is valued using the cost model. The asset is amortised on a straight-line basis over the expected term of the lease, adjusted for any remeasurement of the lease liability, and is shown net of the accumulated depreciation and any impairment provisions.

Leases for low value assets and short-term leases are expensed to operating profit on a straight-line basis over the term of the lease.

(j) Investments

In line with IFRS 9: Financial Instruments, financial assets designated as at fair value through profit and loss (FVTPL) at inception are those that are managed and whose performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair value basis to the Group's key management. The equity investments which do not meet the definitions of an associate or subsidiary remain held at fair value through profit and loss.

(i) Assets held for sale

Non-current assets held for sale are measured at the lower of carrying amount and fair value less costs to sell (except where the exemptions of paragraph 5 of IFRS 5 apply) and are classified as such if their carrying amount will be recovered through a sale transaction rather than through continuing use. Investment property that is held for sale is measured at fair value in accordance with paragraph 5 of IFRS 5.

This is the case when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and the sale is considered to be highly probable. A sale is considered to be highly probable if the appropriate level of management is committed to a plan to sell the asset and a further active programme to locate a buyer and complete the plan has been initiated. Further, the asset has to be marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale is expected to qualify for recognition as a completed sale within one year from the date that it is classified as held for sale.

(ii) Securities

Purchases and sales of listed investments are recognised on the trade date, the date on which the Group commit to purchase or sell the investment. All investments are designated upon initial recognition as held at fair value and are measured at subsequent reporting dates at fair value, which is either the market bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Fair values for unquoted investments, or for investments for which there is only an inactive market, are established by taking into account the International Private Equity and Venture Capital Valuation Guidelines.

(iii) Loans and receivables

Unquoted loan stock, loan receivables in development projects and the deferred receivable are all classified at amortised cost under IFRS 9 reflecting their held to collect business model. Unquoted loan stock is classified as loans and receivables in accordance with IFRS 9 if it meets the business model and cash characteristics tests. The business model and cash characteristics tests require the objective of owning the financial asset to collect the contractual cash flows of interest and principal over the life of the asset, rather than selling prior to contractual maturity. The financial assets are held at amortised cost, less any loss allowance, which is measured using the expected credit loss impairment model. This assesses the movements in both the amortised cost relating to the interest income and in respect of loss allowances and these are reflected in the Statement of Comprehensive Income.

(k) Exceptional items

The Group presents as exceptional items on the face of the Consolidated Statement of Comprehensive Income those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year so as to facilitate comparison with prior years and to assess better trends in financial performance.

(l) Intangible assets

(i) Goodwill

Goodwill, representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable assets and liabilities acquired, is capitalised in the Statement of Financial Position. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses.

Goodwill will be reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

(ii) Management contracts and client relationships

Intangible assets, such as management contracts and client relationships acquired as part of a business combination or separately, are capitalised where it is probable that future economic benefits attributable to the assets will flow to the Group and the fair value of the assets can be measured reliably.

They are recorded initially at fair value and then amortised, if appropriate, over their useful lives. The fair value at the date of acquisition is calculated using discounted cash flow methodology and represents the valuation of the net residual income stream arising from the management contracts or distribution agreements in place at the date of acquisition. The management contracts and client relationships are included in the Statement of Financial Position as intangible assets. Intangible assets with a finite life have no residual value and are amortised on a straight-line basis over their expected useful lives as follows:

· Client relationships arising on acquisition - five years

· Management contracts arising on acquisition - one to 25 years depending on the specific management contract details

(iii) Website and client portal

Costs associated with the development of the Group's website and client portal are capitalised in the Statement of Financial Position and are amortised over the estimated useful life of four years.

Amortisation methods, useful lives and residual values will be reviewed at each reporting date and adjusted if appropriate.

At each period end date, reviews are carried out of the carrying amounts of intangible assets to determine whether there is any indication that the assets have suffered an impairment loss. If any such indication exists, the recoverable amount, which is the higher of value in use and fair value less costs to sell, of the asset is estimated in order to determine the extent, if any, of the impairment loss.

If the recoverable amount of an asset or cash-generating unit (CGU) is estimated to be less than its net carrying amount, the net carrying amount of the asset or CGU is reduced to its recoverable amount. Impairment losses are recognised immediately in the Statement of Comprehensive Income. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognised in prior periods may no longer exist or may have decreased. If any such indication exists, the Group estimates the recoverable amount of that asset. In assessing whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased, the Group considers, as a minimum, the following indications:

(a) Whether the asset's market value has increased significantly during the period;

(b) Whether any significant changes with a favourable effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is dedicated; and

(c) Whether market interest rates or other market rates of return on investments have decreased during the period, and those decreases are likely to affect the discount rate used in calculating the asset's value in use and increase the asset's recoverable amount materially.

(m) Financial instruments

Financial assets and financial liabilities are recognised on the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, and the net amount reported in the Consolidated Statement of Financial Position when there is a legally enforceable right to settle on a net basis or realise the asset and liability simultaneously and where the Group intends to net settle.

(i) Trade and other receivables

Receivables are short-term in nature. Trade and other receivables are recognised and carried at the lower of their invoiced value and recoverable amount. Expected credit losses are recognised in respect of each trade receivable and remeasured at each report date based on the expected credit losses at that time. The expected credit losses are estimated using a provision matrix by reference to past default experience and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtor, general economic conditions of the industry and an assessment of both the current as well as the forecast direction of conditions at the reporting date.

(ii) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(iii) Non-current receivables

Deferred receivables are recognised at the discounted value of those receipts.

(iv) Dividends payable

All dividends are recognised in the period in which they are approved by shareholders.

(v) Bank borrowings

All bank loans are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. Interest costs on loans are charged to the Statement of Comprehensive Income as incurred.

(vi) Trade and other payables

Trade payables are not interest-bearing and are stated at their nominal value. Other payables are not interest-bearing and are stated at their nominal value as any discounting of expected cash flows is considered to be immaterial.

(vii) Borrowing costs

Unless capitalised under IAS 23, Borrowing Costs, all borrowing costs are recognised in the Consolidated Statement of Comprehensive Income in the period in which they are incurred. Finance charges, including premiums paid on settlement or redemption and direct issue costs and discounts related to borrowings, are accounted for on an accruals basis and charged to the Consolidated Statement of Comprehensive Income using the effective interest method.

(viii) Contingent consideration

Contingent consideration arises when settlement of all or any part of the cost of a business combination or other acquisition, for example management contract, is deferred. It is stated at fair value at the date of acquisition, which is determined by discounting the amount due to present value at that date.

Estimates are required in respect of the amount of contingent consideration payable on acquisitions, which is determined according to formulae agreed at the time of the business combination, and normally related to the future earnings of the acquired business. The Directors review the amount of contingent consideration likely to become payable at each period end date, the major assumption being the level of future profits of the acquired business. Contingent consideration payable is discounted to its fair value in accordance with applicable International Financial Reporting Standards.

(n) Pensions

Payments to personal pension schemes for employees are charged against profits in the year in which they are incurred.

(o) Share-based payments

The Group issued equity-settled share-based payments to certain Directors and employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

Fair value is measured using a Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.

A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each period end date for cash-settled share-based payments.

(p) Non-controlling interests

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein in accordance with IFRS 10. Non-controlling interests consist of the amount of those interests at the date of the original business combination and for acquisitions post 3 October 2010 following adoption of IAS 27, Consolidated and Separate Financial Statements (Revised 2008), the non-controlling interests' share of changes in equity since the date of the combination.

Prior to the adoption of IAS 27 (Revised 2008) losses attributable to non-controlling interests in excess of the non-controlling interests' share in equity were allocated against the interests of the Group except to the extent that the non-controlling interests have a binding obligation and are able to make an additional investment to cover such losses. When the subsidiary subsequently reports profits, the non-controlling interests do not participate until the Group has recovered all of the losses of the non-controlling interests it previously reported.

(q) Business combinations

The Group recognises business combinations when it considers that it has obtained control over a business, which could be an entity or separate business within an entity (for example acquiring management contracts and hiring the team to service those contracts). The fair value of the assets acquired, and the liabilities assumed from the business combination are assessed at acquisition. The fair value of the consideration paid to the sellers of the business is assessed, with particular reference to the classification of payments to employees that could be considered remuneration rather than consideration for a business.

(r) Critical accounting estimates and judgements

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are those used to determine:

(i) Revenue recognition, performance fees, management fees and fund-raising fees

(ii) Treatment of battery storage development companies

(iii) Accounting for investment in associates - Gresham House Strategic plc (GHS) and Noriker Power Limited (Noriker)

(iv) Consolidation assessment of funds managed and controlled by the Group

(v) Impairment review for Goodwill and Management Contracts from previous acquisitions

(vi) Valuation of contingent consideration

(vii) First time adoption of IFRS 16 Leases

(i) Revenue recognition, performance, management and fundraising fees

The revenue recognition of the Group is driven by asset management fees, which are recognised in line with the investment management or advisory agreements in place with the appropriate funds. These are typically based on the committed capital of Limited Partnership funds, or Net Asset Values (NAV) for listed vehicles managed or advised by the Group. The NAV is typically the last audited or publicly available NAV announced by the Board of these companies and is therefore independently approved.

Limited partnerships and other fund management fees are typically based on committed capital, or an independent valuation where appropriate. Where there is an interim close on a Limited Partnership, the equalisation process for new Limited Partners involves catch-up management fees or priority profit shares back to inception of the fund. In this instance, the period the service relates to is assessed and for past service provision the catch-up management fee is recognised when the new Limited Partner joins the fund.

Performance fees are recognised only when the Group is entitled to receive the performance fee per the management contract. This is on achievement of the hurdle rate and the outcome is known. The performance fee recognised for GHS plc was recognised in the year, relating to the NAV at 31 March 2019 and was paid in the year.

Fundraising fees are recognised as a percentage of funds raised, with fundraising being the key performance obligation. The fundraising relates to new share offers in 2019 by the VCTs managed by the Group.

(ii) Treatment of battery storage development companies

The Group has invested in the development of battery storage projects (DevCo Projects), which are part of the exclusive pipeline to be sold to Gresham House Energy Storage Fund plc (GRID) when operational. The DevCo Projects are held in separate SPVs, which the Group entity DevCo Limited owns between 60-70% of the equity in and the Group has also lent funds for the development of the projects.

There are four key considerations in the accounting treatment of the development companies:

a) Control (IFRS 10) - Devco Limited holds the majority of the equity in the DevCo Projects and has also loaned capital to fund the development of the DevCo Projects. Devco Limited is considered in control of the DevCo Projects and therefore has consolidated them in the Group financial statements.

b) Associates (IAS 28) - One of the DevCo Projects (Biggerbrook) is accounted for as an associate as Devco Limited holds only 24% of the equity and is not in a controlling position.

c) Classification of the assets in each DevCo Project - The SPVs are developing battery storage facilities which are classified as non-current assets under development until these assets become operational. The Group has therefore classified these as non-current assets, akin to tangible fixed assets.

d) Assets held for sale (IFRS 5) and loss of control - the sale of the DevCo Project ("Red Scar") during the period has been treated as a loss of control transaction under IFRS 10 resulting in a gain on sale being presented net in the Statement on Comprehensive Income. At year end, a sale of an additional DevCo Project has been agreed with GRID and is documented, including price and conditions to complete the sale. It is expected that the sale process will complete within a six to 12-month time frame, as such it has been deemed appropriate to treat this DevCo Project as a disposal group held for sale under IFRS 5.

e) Borrowing costs (IAS 23) - the DevCo Projects have interest payments relating to the amounts lent by GRID to fund the acquisition of the battery assets at the project company level. The DevCo Projects have capitalised finance costs per IAS 23 Borrowing Costs as the characteristics of the development of the projects (such as not generating revenues until operational, loans being procured for the sole purpose of developing the projects and the projects taking long time to get ready for intended sale) permit this. The capitalisation rate used was the weighted average of the borrowing costs applicable to all relevant borrowings outstanding during 2019.

(iii) Accounting for investment in associates - Gresham House Strategic plc (GHS) and Noriker Power Limited (Noriker)

GHS is managed by GHAM and the Company also holds 23% of the ordinary share capital as at 31 December 2019. The Directors consider that the Company exercises significant influence over GHS, but not control, through its holding and the investment management agreement in place with GHAM. GHS therefore continues to be classified as an associate.

Noriker is 28% owned by the Group and is not an entity managed by GHAM. There are no specific additional rights that the Group have as investors in Noriker, however with a 28% holding, the Board considers this a position of significant influence and has concluded that Noriker should be treated as an associate.

These are included in the table in the consolidation assessment below for completeness.

(iv) Consolidation assessment of funds managed and controlled by the Group

When assessing whether the Group controls funds that are managed on behalf of third parties, the Group is required to assess whether it has power over these funds; exposure, or rights, to variable returns from its involvement with the fund; and has the ability to use its power over the funds to affect the amount of the Group's returns. This can also be considered when the Group is acting in its capacity as agent or principal. An agent is acting on behalf of third-party investors, whereas a principal is acting for its own benefit.

IFRS 10 provides guidance for considering the assessment of whether fund managers are acting as agent or principal, and therefore whether the Group should consolidate the funds that it manages or not. The key considerations when assessing this are decision making authority of the fund manager, rights held by third parties, remuneration and exposure to returns. The following provides further detail on the Directors' assessment of control over the funds that are managed by Gresham House Asset Management Limited (GHAM), the FCA regulated entity within the Group.

The following table summarises the assessment of whether the Company or its subsidiaries are acting as agent or principal:

Fund	Manager/ Adviser	Removal rights of investors	Remuneration basis	Gresham House holding	Agent/ Principal	Accounting treatment
SPE LP	Yes	Substantive	Market norm	0%	Agent	No consolidation
GHFF LP	Yes	Substantive	Market norm	0%	Agent	No consolidation
GHF FF LP	Yes	No	Market norm	71%	Principal	Consolidate
GHS	Yes	Substantive	Market norm	23%	Agent	Associate
Noriker	No	n/a	n/a	28%	Agent	Associate
GRID	Yes	Substantive	Market norm	2.5%*	Agent	Investment
BSIF	Yes	Substantive	Market norm	0%	Agent	No consolidation
Baronsmead VCTs	Yes	Substantive	Market norm	0%	Agent	No consolidation
Gresham House Renewable Energy VCTs	Yes	Substantive	Market norm	0%	Agent	No consolidation
Micro Cap Fund	Yes	Substantive	Market norm	0%	Agent	No consolidation
Multi Cap Income Fund	Yes	Substantive	Market norm	0%	Agent	No consolidation
Forestry LP Funds	Yes	Substantive	Market norm	0%	Agent	No consolidation
New Energy LP Funds	Yes	Substantive	Market norm	0%	Agent	No consolidation

**The Group holds direct and indirect, via its Noriker stake, a total of 2.5% in GRID (2018: 5.0%).

Gresham House Strategic Public Equity LP (SPE LP) is managed by GHAM, a subsidiary of Gresham House plc. GHAM in its role as investment adviser is exposed to variable returns through its management fee, however the Company is not directly invested in SPE LP. The limited partners of SPE LP have the ability to remove the manager without cause, one year after the final close of SPE LP on obtaining limited partner special consent. The Directors' assessment indicates that GHAM is acting as agent for SPE LP and therefore should not consolidate SPE LP.

Gresham House Forestry Fund LP (GHFF LP) is managed by GHAM. GHAM is exposed to variable returns through its management fee and acquisition fees, as well as the Company's limited partnership interest in Gresham House Forestry Friends and Family LP (GHF FF LP), a vehicle which in turn is a limited partner in GHFF LP.

The limited partners of GHFF LP have the ability to remove the manager without cause, one year after the final close of GHFF LP on obtaining limited partner special consent. There are a number of limited partners that would be required to co-ordinate to remove the manager. The Directors' assessment of this right indicates that the manager is acting as agent for GHFF LP and therefore should not consolidate GHFF LP.

The Directors' assessment of GHF FF LP, however, indicates that it is in a controlling position with a 71% holding and therefore should consolidate this in the Group financial statements.

Gresham House British Strategic Investment Fund (BSIF) Strategy, which comprises the two sub-funds, Gresham House BSI Infrastructure LP and Gresham House BSI Housing LP, is managed by GHAM. The manager is exposed to variable returns through its management fee. Neither the Company, nor any of its subsidiaries are directly invested in the BSIF Strategy and therefore are not exposed to the variable returns as an investor. The limited partners of the BSIF Strategy also have the ability to remove the manager without cause, one year after the final close of the BSIF sub-funds with a special resolution. The Directors' assessment of this right and the fact that the Company is not invested in the BSIF Strategy indicates that the manager is acting as agent for the BSIF Strategy and therefore should not consolidate the BSIF Strategy.

Gresham House Energy Storage Fund plc (GRID) is managed by GHAM and the Company has a direct and indirect investment in GRID totalling 2.5%. The assessment of whether GHAM is acting as agent or principal requires assessing the other entities and individuals that are connected to Gresham House and their investment in GRID. BSIF has a 10% investment in GRID, however the assessment of whether BSIF is controlled by GHAM concluded that GHAM does not control BSIF and therefore should not be included in the proportion of GRID that is under the control of GHAM.

The remaining funds of the Baronsmead VCTs, Gresham House Renewable Energy VCTs, the LF Gresham House UK Micro Cap Fund (Micro Cap Fund) and the LF Gresham House UK Multi Cap Income Fund (Multi Cap Income Fund) are managed by GHAM, however are not invested in by the Group. The Board has therefore concluded that the Group is acting as agent and therefore should not consolidate these funds.

(v) Impairment review for Goodwill and Management Contracts from previous acquisitions

Per IAS 36 Impairment of Assets, the potential impairment of Goodwill and Management Contracts generated by prior acquisitions is reviewed. The WACC rates used for discounting were derived using CAPM model, accounting for different risk profile of acquired contracts. No terminal value was assigned for the review.

(a) Goodwill Impairment Testing

The potential value of the acquired cash generating units based on discounted cash flow of potential future performance of the acquired contracts was assessed. It has been assumed that the cash generating unit will continue to grow in line with reasonable assumptions based on historic assumptions and the business model. The revenues and costs were modelled using a discounted cash flow model, with the estimated value compared to the goodwill on the Statement of Financial Position and other intangible assets and acquired assets. Where the value estimated less other intangible and tangible assets is greater than the goodwill amount on the Statement of Financial Position, no impairment is recognised. The were no indications of impairment against all goodwill balances of the Group as at 31 December 2019.

(b) Management Contracts Impairment Review

The management contacts were revalued using a discounted cash flow method to assess the remaining value of the contract to the end of its expected life. This assumed with no growth from fund raising and costs assumed appropriate in a no growth business. The valuation was compared to the carrying value of the management contracts at 31 December 2019 and there were no indications of impairment.

(vi) Valuation of contingent consideration

The fair value of contingent consideration payable to the sellers of the FIM and the Livingbridge VC businesses has been estimated with reference to the contractual requirements as at 31 December 2019.

In the case of FIM, an estimate of whether the combined two-year revenue target of £14.0 million has been made and discounted back from the payment date to the reporting date. An additional amount is payable should the two-year combined revenues exceed £18.0 million.

The Livingbridge VC contingent consideration is in two parts. The first being that the VCT boards do not give notice within two years of the acquisition. There are no indications to date that notice will be given, so this has been assumed to be true and the value payable discounted back to 31 December 2019.

The second part being the hurdle to deliver revenues from Livingbridge VC of between £30.9 million and £37.2 million in the three years to 31 December 2021. The fair value has been based on a weighted probability of outcomes over the three-year period and discounted by 15%.

(vii) First time adoption of IFRS 16 Leases

IFRS 16 Leases came into force with effect from 1 January 2019. All leases within the Group have been assessed under IFRS 16 guidance and classified accordingly. The main impact has been the addition of office leases to the Statement of Financial Position as right of use assets, which are then depreciated over their useful lives. The result of the adoption of the standard is that the rent charge for offices is no longer reported with operating expenses but is effectively capitalised and recognised through the depreciation of the lease asset. Per IFRS 16 adoption guidance, the standard has not been applied retrospectively.

Critical accounting judgements include estimating the present value of the obligation to make lease payments and a related right of use asset. This includes applying an appropriate discount rate.

(s) Foreign currency

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the Statement of Financial Position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

NOTES TO THE ACCOUNTS

1 INCOME

	2019	2018
	£'000	£'000
Asset management income
Asset management income	31,226	13,717
	31,226	13,717
Dividend and interest income
Dividend income - Listed UK	166	9
Interest receivable: Banks	52	16
Other	60	22
	278	47
Other operating income
Arrangement fees	13	-
Consultancy fees receivable	5	12
Other income	61	722
	79	734

Performance fees
Performance fees	1,944	-
	1,944	-

Total income	33,527	14,498
Total income comprises
Asset management income	31,226	13,717
Dividends	166	9
Interest	112	38
Other operating income	79	734
Performance fees	1,944	-
	33,527	14,498

Other income in 2018 included a make whole fee received in the year of £620,000, which related to the sale of the battery storage project ESS2 Holdco Limited to GRID. This transaction was completed in the year and the full contingent fee recognised at that date.

2 SEGMENTAL REPORTING

The Board and management team of the Company have organised and reported the performance of the business by Real Assets, Strategic Equity and Central segments. These have evolved as the business has grown to become the specialist asset manager that it is today.

Real Assets includes the Forestry, New Energy and Housing and Infrastructure divisions.

Strategic Equity includes Public Equity and Private Equity divisions.

Central includes the general income created and costs incurred by the central functions of the business that are not directly linked to Real Assets or Strategic Equity.

All activity and revenue are derived from operations within the United Kingdom.

For the year ended 31 December 2019

	Real Assets	Strategic Equity	Central	Consolidated
Core Income	£'000	£'000	£'000	£'000
Asset management income	18,282	12,944	-	31,226
Interest income	41	24	47	112
Dividend income	140	26	-	166
Other operating income	47	14	18	79
Dividend income from associates*	1,151	172	-	1,323
Total core income	19,661	13,180	65	32,906
Segment expenses	(7,918)	(5,972)	(8,339)	(22,229)
Finance costs	-	-	(390)	(390)
Adjusted operating profit/(loss)	11,743	7,208	(8,664)	10,287
Net performance fees	-	200	-	200
Net realised gains on investments	1,332	-	-	1,332
Adjusted operating profit including performance fees and realised gains on investments	13,075	7,408	(8,664)	11,819
Exceptional items				(1,063)
Depreciation and amortisation				(8,484)
Loss on disposal of tangible fixed assets				(43)
Share of associate's profit/(loss)*				(1,077)
Share-based payments relating to acquisitions				(593)
Profits on investments at fair value				679
Movement in fair value of contingent consideration				(2,065)
Loss before taxation from continuing operations				(827)

*Share of associate's profit/(loss) of £1,077,000 excludes dividend income received in the year of £1,323,000.

For the year ended 31 December 2018

	Real Assets	Strategic Equity	Central	Consolidated
Core Income	£'000	£'000	£'000	£'000
Asset management income	11,102	2,615	-	13,717
Interest income	6	22	10	38
Dividend income	9	-	-	9
Other operating income	-	100	634	734
Dividend income from associates*	-	211	-	211
Total core income	11,117	2,948	644	14,709
Segment expenses	(3,504)	(2,587)	(5,527)	(11,618)
Finance costs	-	-	(42)	(42)
Adjusted operating profit/(loss) **	7,613	361	(4,925)	3,049
Exceptional items				(2,001)
Depreciation and amortisation				(2,926)
Profit on disposal of tangible fixed assets				23
Share of associate's profit*				1,507
Share-based payments relating to acquisitions				(87)
Losses on investments at fair value				(271)
Movement in fair value of contingent consideration				(209)
Movement in fair value of deferred receivable				40
Loss before taxation from continuing operations				(875)

*Share of associate's profit of £1,507,000 excludes dividend income received in the year of £211,000.

**Adjusted operating profit/(loss) has been restated per the updated metric. See Note 9 for details.

During the year the Group had one customer accounting for more than 10% of the Group's revenue, totalling £4,610,000 (2018: one customer, totalling £1,575,000).

Other information

31 December 2019

	Real Assets	Strategic Equity	Legacy Property	Central	Consolidated
	£'000	£'000	£'000	£'000	£'000
Segment assets	46,334	64,241	91	13,686	124,352
Segment liabilities	(12,371)	(7,025)	(34)	(14,103)	(33,533)
	33,963	57,216	57	(417)	90,819
Capital expenditure	-	-	-	610	610
Depreciation and amortisation	2,742	4,865	-	920	8,527
Non-cash expenses other than depreciation	312	-	-	1,844	2,156
Goodwill included within segment assets	11,896	12,167	-	-	24,063

31 December 2018

	Real Assets	Strategic Equity	Legacy Property	Central	Consolidated
	£'000	£'000	£'000	£'000	£'000
Segment assets	40,223	49,796	2,174	12,863	105,056
Segment liabilities	(6,908)	(5,313)	(43)	(13,052)	(25,316)
	33,315	44,483	2,131	(189)	79,740
Capital expenditure	78	-	-	54	132
Depreciation and amortisation	1,845	958	-	100	2,903
Non-cash expenses other than depreciation	218	-	-	494	712
Goodwill included within segment assets	11,896	12,167	-	-	24,063

3 OPERATING COSTS


Administrative overheads comprise the following:	2019	2018
	£'000	£'000
Directors' emoluments (excluding benefits in kind and share-based payments)	1,809	942
Auditor's remuneration *	176	140
Amortisation	7,668	2,788
Depreciation	816	138
Loss / (profit) on disposal of assets	43	(23)
Wages and salaries	12,310	5,610
Social security costs	1,986	844
Share-based payments	1,844	464
Other operating costs	7,478	3,705
	34,130	14,608
Staff costs (including Directors' emoluments) were:
Wages, salaries and fees	14,072	6,532
Social security costs	1,986	844
Pension costs	539	297
	16,597	7,673

* A more detailed analysis of auditor's remuneration is as follows:	2019	2018
	£'000	£'000
Audit fees - Company and consolidated financial statements	40	40
Audit fees - audit of the Company's subsidiaries	136	100
Auditor's other fees - relating to acquisitions and included in exceptional items	-	25
	176	165

The Directors consider the auditor was best placed to provide these other services. The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained.

The average number of persons employed by the Group, including the Executive Directors, was 87 (2018: 55). The Company has no employees.

4 DIRECTORS' EMOLUMENTS

The emoluments of the Directors are disclosed in the Remuneration Report in the annual report.

The Directors are considered to be the Group's only key management personnel. Employers' National Insurance Contributions in respect of the Directors for the year were £198,000 (2018: £132,000).

5 Business combinations

a) FIM Services Limited

On 21 May 2018, shareholders approved the acquisition of FIM Services Limited (FIM) at a general meeting. The Group acquired 100% of the issued share capital of FIM, a company registered in England whose principal activity is the management of forestry and other renewable energy assets.

At 31 December 2017, FIM managed 83,000 hectares of forestry and 127MW of renewable energy generating assets in onshore wind farms and ground-mounted solar parks for clients through long-term limited partnerships, LLP structures and managed accounts for high net worth individuals.

The fair value of the identifiable net assets acquired, and the consideration paid under IFRS 3 are as follows:

	Net book value	Adjustments	Fair value
	£'000	£'000		£'000

Tangible fixed assets	165	-		165
Investments	818	(318)		500
Cash	6,024	-		6,024
Trade and other receivables	921	-		921
Trade and other payables	(1,074)	-		(1,074)
Fund and client management contracts	-	18,600		18,600
Deferred tax liability	-	(3,162)		(3,162)
Goodwill	-	8,678		8,678
Total identifiable net assets	6,853	23,798		30,652

Under the terms of the acquisition agreement, the fair value of the consideration paid to the vendors of FIM was:

		£'000
Cash		16,852
Shares - 2,390,244 shares in Gresham House plc valued at 445.0p per share on 21 May 2018		10,637
Total initial consideration		27,489
Contingent consideration		3,163
Total consideration		30,652

The consideration shares were admitted to trading on AIM on 22 May 2018.

Contingent consideration

Contingent consideration totalling £4 million will be payable in cash when the revenues from the combined forestry businesses (FIM and existing Gresham House Forestry) over two years from acquisition are greater than £14 million. For amounts less than this there is a sliding scale which reduces to nil deferred consideration where the combined revenues are less than £13 million.

Current forecasts are that the £14 million hurdle will be achieved and that the additional consideration will be paid in full.

A further contingent consideration is payable should the combined divisions deliver revenues of greater than £18 million over the same two-year period, above which 33% will be payable to the sellers. The estimated fair value of the further contingent consideration is £1 million (2018: £nil), based on actual revenues generated to date and expected earnings in the remaining period to 20 May 2020.

The fair value of the contingent consideration has been estimated at the date of acquisition using forecast details for the combined business and discounting this at 11.0%. This is cash settled and will therefore be recognised as a liability on the balance sheet and the fair value assessed each reporting period. The fair value at the time of acquisition was calculated as £3,163,000.

Revenue and profits of FIM

FIM was acquired on 21 May 2018. The Group recognised the following amounts in respect of FIM for the 32-week period ended 31 December 2018:

	£'000
Revenue	5,284
Profit before tax	3,197

Prior to acquisition by the Group, FIM had a 30 September year end. The results for the most recent audited reporting period prior to acquisition were to 30 September 2017. Had FIM been part of the Group for the entire reporting period the following sums would have been consolidated:

	£'000
Revenue	6,275
Profit before tax	3,295

Goodwill

Goodwill arises due to the excess of the fair value of the consideration payable over the fair value of the net assets acquired. It is mainly attributable to the skills of the team acquired, the synergies expected to be achieved from the acquisition and the business development potential. Goodwill arising on the FIM acquisition is not deductible for tax purposes. Goodwill has been reviewed for impairment, and no impairment has been recognised as at 31 December 2019.

Fair value

The fair value of the management contracts has been estimated using a discounted cash flow model. The estimated cash flows have been valued at a discount of 11.0%. This resulted in fair value of management contracts being recognised totalling £18,600,000 at acquisition. The net book value of the management contracts has been reviewed for impairment and no impairment has been recognised as at 31 December 2019.

b) Livingbridge VC LLP

The Company acquired the fund and investment management business of Livingbridge VC LLP (Livingbridge VC), a leading UK manager of VCT funds and open-ended investment funds, on 30 November 2018. Livingbridge VC was part of the larger Livingbridge LLP private equity asset management business. The acquisition of Livingbridge VC included the novation and acquisition of investment advisory contracts for Baronsmead VCT plc, Baronsmead Second VCT plc, Livingbridge (now LF Gresham House) UK Micro Cap Fund and Livingbridge (now LF Gresham House) UK Multi Cap Income Fund and the hiring of the Livingbridge VC team.

The fair value of the identifiable net assets acquired, and the consideration paid under IFRS 3 are as follows:

	Fair value
		£'000
Management contracts		22,860
Goodwill		12,167
Total identifiable net assets		35,027

Goodwill

Goodwill arises due to the excess of the fair value of the consideration payable over the fair value of the net assets acquired. It is mainly attributable to the skills of the team acquired, the synergies expected to be achieved from the acquisition and the business development potential. Goodwill has been reviewed for impairment, and no impairment has been recognised as at 31 December 2019.

Actual revenue and profits of Livingbridge VC

The actual revenues and profits that have been generated since the acquisition of Livingbridge VC on 30 November 2018 to 31 December 2018 were:

	£'000
Revenues	712
Profit before tax	495

The disclosure of hypothetical revenues and profits of Livingbridge VC for the year ended 31 December 2018 is not considered relevant due to the nature of the transaction. The entire Livingbridge LLP business was not acquired and there will be revenues and expenses not relevant to the business acquired.

Fair value

The fair value of the management contracts has been estimated using a discounted cash flow model. The estimated cash flows have been valued at a discount of 15.0%. This resulted in fair value of management contracts being recognised totalling £22,860,000 at acquisition. The net book value of the management contracts has been reviewed for impairment and no impairment has been recognised as at 31 December 2019.

Exceptional items

	2019	2018
	£'000	£'000
Acquisition costs:
FIM Services Limited	2	770
Livingbridge VC	10	866
Hazel Capital LLP	-	61
Joint Venture establishment	251	-
	263	1,697
Restructuring costs	646	304
Exceptional legal fees	154	-
	1,063	2,001

Acquisition, associated restructuring costs and exceptional legal fees are considered exceptional and not part of the normal course of business activity.

6 FINANCE COSTS

	2019	2018
	£'000	£'000
Interest payable on bank loans	188	35
Finance fees	169	7
Interest payable on leases	33	-
	390	42

See Note 23 for details of borrowings.

7 IFRS 16 Leases

IFRS 16 Leases replaces IAS 17 Leases and is effective for annual periods beginning on or after 1 January 2019. The Group has therefore adopted the standard from 1 January 2019.

The only impact on the Group relates to leases for use of office space at various locations. These were earlier classified as operating leases under IAS 17, with lease rentals charged to operating expenses on a straight-line basis over the lease term. As required by IFRS 16, as a lessee, the Group has recognised a lease liability representing the present value of the obligation to make lease payments, and a related right-of-use (ROU) asset in line with the process explained under the statement of compliance.

The rate implicit in the leases are not evident and so the entities' incremental borrowing rates have been used. The incremental rate referred to by IFRS 16 indicates the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the ROU asset in a similar economic environment. The weighted average incremental borrowing rate used on the date of initial application of the leases is 3.25%.

	As at 31 December 2019	As at 1 January 2019
	£'000	£'000

ROU asset cost	1,344	1,302
ROU asset accumulated depreciation	(896)	(231)
Lease liability	(445)	(1,065)
Retained reserves *	(6)	(6)

	Year ended 31 December 2019
	£'000

Depreciation expense	665
Interest expense	33
Cash outflow related to IFRS 16 leases	691

* representing the net impact of recognising the leases under IFRS 16 as at 1 January 2019 as the Group chose to not restate prior periods as a matter of practical expedience afforded by the standard. The impact on retained reserves was immaterial.

The aggregate lease liability recognised in the statement of financial position at 1 January 2019 and the Group's operating lease commitment at 31 December 2018 can be reconciled as follows:

		£'000

Operating lease commitment at 31 December 2018		915
Effect of discounting those leases at an annual rate of 3.25%		(6)
Leases recognised in the current year		156
		1,065

Please see Note 31 Financial Instruments for the maturity profile of leases.

The Group has elected not to apply IFRS 16 to:

(a) Low value leases for various IT equipment leased across the business. The maximum third-party new item price of any excluded equipment is less than £3,000. The total amount of lease payments for the year ended 31 December 2019 relating to these leases was £15,000; and

(b) An onerous lease that expired in September 2019. The total amount of lease payments for the year ended 31 December 2019 relating to this lease was £33,000.

It is also noted that:

(a) The impact of lease liability and ROU asset on deferred taxes is expected to be immaterial;

(b) There were no material residual value guarantees or contractual dilapidation commitments that impacted the initial recognition value for ROU assets and lease liability;

(d) Lease values do not include any termination penalties as the business intends to use the properties to the end of lease terms.

8 TAXATION

	2019	2018
	£'000	£'000
(a) Analysis of credit in period:
UK Corporation tax at 19% (2018: 19%)	680	-
Underprovision in prior year	268	-
Deferred tax	(925)	(218)
Total tax charge / (credit)	23	(218)

(b) Factors affecting tax credit for period:
Loss on ordinary activities before tax multiplied by standard rate of corporation tax in the UK of 19% (2018: 19%)	(157)	(166)
Tax effect of:
Dividend income not taxable	-	(42)
Amortisation not taxable	945	335
Expenses disallowed	-	388
Other gains and losses not taxable	226	(249)
Utilisation of previously unrecognised tax losses	(1,259)	(484)
Prior year adjustment	268	-
Actual tax charge / (credit)	23	(218)

The Group has unutilised tax losses of approximately £10.3 million (2018: £11.6 million) available against future corporation tax liabilities. A potential deferred taxation asset of £1.5 million (2018: £2.0 million) in respect of some of these losses has not been recognised in these financial statements as it is not considered sufficiently probable that the Group will generate sufficient taxable profits from the same trade to recover these amounts in full. The Company recognised a deferred tax asset of £0.3 million (2018: £nil) in the current year.

9 EARNINGS PER SHARE

(a) Basic and diluted loss per share

	2019	2018
Total net loss attributable to equity holders of the parent (£'000)	(850)		(699)

Weighted average number of ordinary shares in issue during the period	26,479,021		17,742,370

Basic and diluted loss per share attributable to equity holders of the parent (pence)	(3.2)		(3.9)

3,491,093 (2018: 2,434,245) shares were deemed to have been issued at nil consideration as a result of the shareholder and supporter warrants granted and shares which could be issued under the bonus share matching plan and long term incentive plans which, as required under IAS 33, Earnings per Share, have not been recognised as they would reduce the loss per share (see Note 26).

(b) Adjusted earnings per share

Adjusted earnings per share is based on adjusted operating profit, which is stated after charging interest but before depreciation, amortisation, share based payments relating to acquisitions, profits and losses on disposal of tangible fixed assets, net performance fees, net development gains and exceptional items, to provide the non-GAAP measure of the performance as an asset manager. This includes dividend and income received from investments in associates. This metric was revised in 2019 to reflect the activity of the core asset management business separately from performance fees and realised gains on investments. Accordingly, the metric now deducts net performance fees, variable compensation attributable to gains on investments (development projects) and share-based payments relating to acquisitions.

Adjusted profit for calculating adjusted earnings per share:

	2019	2018
	£'000	£'000
Net operating loss after exceptional items	(2,056)	(2,153)
Add back:
Exceptional operatingexpenses	1,063	2,001
Depreciation and amortisation	8,485	2,926
Loss / (profit) on disposal of tangible fixed assets	43	(23)
Dividend income received from associates	1,323	211
Net performance fees	(200)	-
Variable compensation attributable to realised gains on investments	1,037	-
Share-based payments relating to acquisitions	593	87
Adjustedprofitattributable to equity holders of the parent	10,288	3,049
Adjusted profit per share (pence) - basic	38.9	17.2
Adjusted profit per share (pence) - diluted	34.3	15.1

10 DIVIDENDS

The Company paid £795,000 during the year which represents a final dividend for the year ended 31 December 2018. No dividends were paid during the previous year.

Set out below is the total dividend payable in respect of the financial year, which is the basis on which the requirements of Section 1158 Corporation Tax Act 2010 are considered.

	2019	2018
	£'000	£'000
Proposed final dividend for the year ended 31 December 2019 of 4.5p (2018: 3.0p) per share	1,252	795

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

11 INVESTMENTS - SECURITIES

Investments have been classified as follows:

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Non-current assets	9,621	6,834	7,550	4,970
Other debtors due within one year - Investment in development projects (see Note 19)	1,208	1,290	1,208	1,290
	10,829	8,124	8,758	6,260

A further analysis of total investments is as follows:

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Listed securities - on the London Stock Exchange	5,624	4,273	5,624	4,273
Securities dealt in under AIM	531	288	531	288
Securities dealt in under NEX Exchange	10	26	10	26
Unlisted securities	4,664	3,537	2,593	1,673
Closing value at 31 December	10,829	8,124	8,758	6,260

Investments valued at fair value through profit and loss	8,914	6,511	6,843	4,647
Loans and receivables carried at amortised cost	1,915	1,613	1,915	1,613
	10,829	8,124	8,758	6,260

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Opening cost	9,769	4,869	8,020	3,119
Opening net unrealised losses	(1,645)	(1,880)	(1,760)	(1,809)
Opening value	8,124	2,989	6,260	1,310
Movements in the year:
Purchases at cost	3,272	6,981	3,272	6,482
Sales - proceeds	(319)	(1,575)	(319)	(997)
Sales - realised gains and (losses) on sales	(299)	(506)	(299)	(584)
Net unrealised gains and (losses)	978	235	771	49
Transferred on acquisition of subsidiary undertaking	(927)	-	(927)	-
Closing value	10,829	8,124	8,758	6,260

Closing cost	11,496	9,769	9,747	8,020
Closing net unrealised losses	(667)	(1,645)	(989)	(1,760)
Closing value	10,829	8,124	8,758	6,260

11 INVESTMENTS - SECURITIES - continued

Gains and losses on investments held at fair value	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Net realised gains and (losses) on disposal	(299)	(506)	(299)	(584)
Net unrealised gains and (losses)	978	235	771	49
Profit on disposal of subsidiary undertaking	2,369	-	-	-
Net gains/(losses) on investments	3,048	(271)	472	(535)

An analysis of investments is as follows:	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Equity investments	8,914	6,511	6,843	4,647
Unquoted loan stock	1,915	1,613	1,915	1,613
	10,829	8,124	8,758	6,260

Further information on the measurement of fair value can be found in Note 32.

12 TANGIBLE FIXED ASSETS


Group - 2019
	Office equipment	Motor vehicles	Leasehold property	Right of use assets	Total
	£'000	£'000	£'000	£'000	£'000
Cost
As at 1 January	191	297	4	-	492
IFRS 16 restatement	-	-	-	1,302	1,302
Additions	101	166	-	42	309
Disposals during the year	(32)	(174)	-	-	(206)
As at 31 December	260	289	4	1,344	1,897

Depreciation
As at 1 January	56	101	3	-	160
IFRS 16 restatement	-	-	-	231	231
Charge for the year	67	83	1	665	816
Disposals during the year	(27)	(96)	-	-	(123)
As at 31 December	96	88	4	896	1,084

Net book value as at 31 December	164	201	-	448	813


Group - 2018
	Office equipment	Motor vehicles	Leasehold property	Total
	£'000	£'000	£'000	£'000
Cost
As at 1 January	72	221	10	303
Additions	59	73	-	132
Additions through business combinations	60	105	-	165
Disposals during the year	-	(102)	(6)	(108)
As at 31 December	191	297	4	492

Depreciation
As at 1 January	14	91	2	107
Charge for the year	42	95	1	138
Disposals during the year	-	(85)	-	(85)
As at 31 December	56	101	3	160

Net book value as at 31 December	135	196	1	332

12 TANGIBLE FIXED ASSETS - continued

Company
	2019				2018
	Office equipment	Motor Vehicles	Right of use assets	Total	Office equipment
	£'000	£'000		£'000	£'000
Cost
As at 1 January	178	-	-	178	64
IFRS 16 restatement	-	-	991	991	-
Additions	107	284	-	391	114
Disposals during the year	(32)	(49)	-	(81)	-
As at 31 December	253	235	991	1,479	178

Depreciation
As at 1 January	52	-	-	52	13
IFRS 16 restatement	-	-	157	157	-
Charge for the year	64	42	589	695	39
Disposals during the year	(27)	(8)	-	(35)	-
As at 31 December	89	34	746	869	52

Net book value as at 31 December	164	201	245	610	126

13 INTANGIBLE ASSETS

Group

		2019						2018
	Goodwill		Customer relationships	Contracts	Website & client portal	Total	Goodwill		Customer relationships	Contracts	Website & client portal	Total
	£'000		£'000	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000
Cost
As at 1 January	24,063		3,072	43,764	286	71,185	3,218		3,072	2,304	219	8,813
Additions through business combinations	-		-	-	-	-	20,845		-	41,460	-	62,305
Other additions	-		-	-	302	302	-		-	-	67	67
As at 31 December	24,063		3,072	43,764	588	71,487	24,063		3,072	43,764	286	71,185

Amortisation
As at 1 January	-		1,843	3,342	89	5,274	-		1,229	1,236	21	2,486
Charge for the year	-		614	6,941	113	7,668	-		614	2,106	68	2,788
As at 31 December	-		2,457	10,283	202	12,942	-		1,843	3,342	89	5,274

Net book value as at 31 December	24,063		615	33,481	386	58,545	24,063		1,229	40,422	197	65,911

Remaining amortisation period	n/a		1 year	1 - 24 years	1-4 years		n/a		2 years	0.5 - 25 years	1-4 years
The website and client portal expenditure were undertaken by the Company.

The assumptions used to fair value the contracts, including discount rates, growth rates and cash flow models are described in more detail in the critical accounting estimates and judgements section of the accounting policies.

Goodwill has been assessed for each business acquired for impairment as at 31 December 2019. This assessment includes an analysis of the expected cash flows from the specific businesses based on expected fundraising and other growth factors as well as the associated cost of delivering the planned revenues. A discount has been applied to the cash flows to determine an estimate of the fair value of the business, which is used to assess whether goodwill should be impaired.

No reasonably possible change in any of the variables used in the goodwill impairment tests would give rise to an impairment.

14 DISPOSAL GROUP HELD FOR SALE

The Group has invested in the development of battery storage projects (DevCo Projects), which are part of the exclusive pipeline to be sold to Gresham House Energy Storage Fund plc (GRID) when operational. The DevCo Projects are held in separate SPVs, which the Group entity Devco Limited owns between 60-70% of the equity in and the Group has also lent funds for the development of the projects.

The sale of the DevCo Projects has been agreed with GRID and is documented, including price and conditions to complete the sale. It is expected that the sale process will complete within a six to 12-month time frame, as such it has been deemed appropriate to treat the DevCo Projects as assets held for sale under IFRS 5. Specifically, they are classified as a "disposal group" held for sale, whose value will be primarily recovered by sale.

The assets and liabilities of those SPVs which have been consolidated by the Group are:

	Group
	2019	2018
	£'000	£'000
Assets of a disposal group held for sale	12,188	-
Liabilities of a disposal group classified as held for sale	(9,718)	-
	2,470	-

The Group's interest in other DevCo Projects can be summarised as follows:

	Group
	2019	2018
	£'000	£'000
Loans and receivables bought forward	1,290	-
Additions - net of abort costs	2,511	1,290
Transferred on acquisition of subsidiary undertaking *	(2,593)	-
Loans and receivables carried forward	1,208	1,290

* During the year the Group acquired a controlling interest in HC ESS6 Limited and HC ESS7 Limited. Amounts previously recognised as loans and receivables have therefore been eliminated on consolidation of these entities.

The Group's total exposure to DevCo Projects is:

	Group
	2019	2018
	£'000	£'000
Net assets and liabilities of a disposal group held for sale	2,470	-
Loans and receivables	1,208	1,290
	3,678	1,290

During the year the Group acquired and disposed of HC ESS4 Limited, with net proceeds of £2,260,000 due, realising a gain on disposal of £2,369,000.

15 INVESTMENT IN SUBSIDIARIES

	Company
	2019	2018
Subsidiary undertakings	£'000	£'000
At 1 January	79,872	18,265
Additions	-	61,607
At 31 December	79,872	79,872

The subsidiary undertakings of Gresham House plc are as follows:

	Held by Company	Held by other Group companies		Country of incorporation and registered office
	%		%
Acqco Store Limited	-		100	5 New Street Square, London EC4A 3TW, England
Aitchesse Limited	-		100	5 New Street Square, London EC4A 3TW, England
Chartermet Limited	-		95	5 New Street Square, London EC4A 3TW, England
Deacon Commercial Development and Finance Limited	-		100	5 New Street Square, London EC4A 3TW, England
Deacon Knowsley Limited	-		95	5 New Street Square, London EC4A 3TW, England
FIM Energy Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Forest Funds General Partner Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Initial Partner Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Solar Distribution Designated Member 1 Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Solar Distribution Designated Member 2 Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Services Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Timberland General Partner Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Windfarms General Partner 2 Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Windfarms General Partner 3 Limited	-		100	5 New Street Square, London EC4A 3TW, England
FIM Windfarms (SC) General Partner Limited	-		100	15 Atholl Crescent, Edinburgh, EH3 8HA, Scotland
Gresham House Asset Management Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Capital Partners Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Devco Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House EIS Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Energy Storage Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Finance Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Forestry Limited	-		100	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Gresham House Forestry Friends and Family LP	71.4		-	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Gresham House (General Partner) Limited	-		100	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Gresham House GP LLP	-		100	Riverview House, Friarton Road, Perth, PH2 8DF, Scotland
Gresham House Holdings Limited	100		-	5 New Street Square, London EC4A 3TW, England
Gresham House Housing Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Infrastructure Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Investment Management Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Investment Management (Guernsey) Limited	-		100	Dorey Court, Admiral Park, St Peter Port, GY1 2HT, Guernsey
Gresham House Investors Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House New Energy Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House (Nominees) Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Private Capital Solutions Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Private Equity Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Private Wealth Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Real Assets Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Renewable Infrastructure Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Company Secretarial 1 Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Company Secretarial 2 Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Services Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Smaller Companies Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House SPE Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Special Situations Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House Value Limited	-		100	5 New Street Square, London EC4A 3TW, England
Gresham House VCT Limited	-		100	5 New Street Square, London EC4A 3TW, England
HC ESS6 Limited	-		67	Octagon Point, 5 Cheapside, London EC2V 6AA, England
HC ESS7 Limited	-		67	Octagon Point, 5 Cheapside, London EC2V 6AA, England
Knowsley Industrial Property Limited	-		100	5 New Street Square, London EC4A 3TW, England
New Capital Developments Limited	-		95	5 New Street Square, London EC4A 3TW, England
New Capital Holdings Limited	-		95	5 New Street Square, London EC4A 3TW, England
Newton Estate Limited	-		100	5 New Street Square, London EC4A 3TW, England
Security Change Limited	-		100	5 New Street Square, London EC4A 3TW, England
Wolden Estates Limited	-		100	5 New Street Square, London EC4A 3TW, England

16 INVESTMENT IN ASSOCIATES

	Group
	2019	2018
	£'000	£'000
Opening Investment in associates	10,198	6,462
Additions	65	2,229
Share of associates' profit	246	1,718
Dividends received from associates	(1,323)	(211)
Closing investment in associates	9,186	10,198

The above balance consists of the Group's holdings in Gresham House Strategic plc (GHS), Noriker Power Limited (Noriker) and Biggerbrook Limited (Biggerbrook).

The Board believe that Gresham House plc exercises significant influence over GHS, but not control, through its 22.9% equity investment as well as the investment management agreement between GHAM and GHS.

The latest published financial information of GHS was the unaudited interim results for the six months to 30 September 2019. The assets and liabilities at that date are shown below:


	2019	2018
	£'000	£'000
Non-current assets	39,128	32,938
Current assets	5,520	14,034
Current liabilities	(155)	(2,080)
Net assets	44,493	44,892

The GHS consolidated unaudited statement of comprehensive income noted realised and unrealised gains from continuing operations on investments at fair value through profit and loss of £374,000 and revenues of £489,000 for the six months ended 30 September 2019.

The registered office of GHS is 77 Kingsway, London, WC2B 6SR.

The Board believe that Gresham House plc exercises significant influence over Noriker, but not control, through its 28.0% equity investment.

The registered office of Noriker is Railway House, Bruton Way, Gloucester, GL1 1DG.

The Board believe that Gresham House plc exercises significant influence over Biggerbrook, but not control, through its 21.9% equity investment.

The registered office of Biggerbrook is Octagon Point, 5 Cheapside, London, EC2V 6AA.

17 TRADE RECEIVABLES

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Amounts receivable within one year:
Trade receivables	5,334	2,628	-	-
Less allowance for credit losses	-	-	-	-
	5,334	2,628	-	-

As at 31 December 2019, trade receivables of £82,000 (2018: £61,000) were past due but not impaired. The ageing analysis of these trade receivables is as follows:

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
1-3 months	53	26	-	-
3-6 months	10	6	-	-
More than 6 months	19	29	-	-
	82	61	-	-

As at 31 December 2019 there were no provisions against trade receivables (2018: £nil).

The expected credit losses are estimated using a provision matrix by reference to past default experience and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtor, general economic conditions of the industry and an assessment of both the current as well as the forecast direction of conditions at the reporting date. The Group has therefore not recognised a loss allowance because historical experience has indicated that the risk profile of trade receivables is deemed low.

Group balances are not deemed to be impaired and when assessing expected credit losses full recoverability of these balances is expected.

18 ACCRUED INCOME AND PREPAID EXPENSES

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Accrued income	3,860	2,079	-	-
Other debtors	2,582	-	-	-
Prepaid expenses	758	534	159	26
	7,200	2,613	159	26

19 OTHER CURRENT ASSETS

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Amounts owed by Group undertakings	-	-	2,780	221
Loan Receivables - Investment in development projects (see Note 11)	1,208	1,290	1,208	1,290
Corporation tax recoverable	212	181	-	-
	1,420	1,471	3,988	1,511

20 TRADE AND OTHER PAYABLES

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Trade creditors	469	1,212	-	-
IFRS 16 lease creditor	321	-	243	-
Other creditors	1,228	560	23	14
Accruals	7,730	2,313	17	138
Corporation tax payable	801	-	-	-
Contingent consideration (Note 24)	4,661	-	-	-
	15,210	4,085	283	152

21 SHORT-TERM BORROWINGS

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000

Bank loans - within current liabilities (Note 23)	-	2,000	-	2,000
Amounts owed to Group undertakings	-	-	5,986	5,365
	-	2,000	5,986	7,365

22 DEFERRED TAXATION

Under International Accounting Standards (IAS) 12 (Income Taxes) provision is made for the deferred tax liability associated with the recognition of the management contracts recognised as part of the 100% acquisition of FIM. This has been recognised at 17% of the fair value of the management contracts at acquisition and reassessed each year end, with the movement being recognised in the income statement. As at 31 December 2019 the deferred tax liability was £2,632,000 (2018: £2,944,000).

The Group has recognised a deferred tax asset of £613,000 (2018: £nil) in relation to differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. The Company has recognised £276,000 (2018: £nil) in respect of these differences.

23 LONG-TERM BORROWINGS

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Bank loans	-	7,840	-	7,840
	-	7,840	-	7,840

On 8 November 2018, the Company signed a £10.0 million banking facilities agreement with Banco Santander SA (the facilities). The facilities were secured with fixed and floating charges over the Company's assets, with cross guarantees provided by Gresham House Asset Management Limited, Gresham House Holdings Limited, Gresham House Forestry Limited and FIM Services Limited.

The facilities consisted of a £6.0 million three-year term loan along with a £4.0 million three-year revolving credit facility. Both facilities were repaid in full and cancelled on 17 July 2019.

The interest payable on the facilities was LIBOR plus 3.25%.

24 NON-CURRENT LIABILITIES - OTHER CREDITORS

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Contingent consideration	5,849	8,447	-	-
IFRS 16 lease creditor	124	-	-	-
	5,973	8,447	-	-

Contingent consideration

FIM

The contingent consideration payable to the sellers of FIM is based on the combined Forestry division generating revenue of between £13.0 million and £14.0 million over the two years from acquisition on 22 May 2018. No contingent consideration will be payable below £13.0 million, a sliding scale from £13.0 million to £14.0 million to receive from zero to £4.0 million.

A further contingent consideration is payable should the combined divisions deliver revenues of greater than £18.0 million over the same two-year period, above which 33% will be payable to the sellers. The estimated fair value of the further contingent consideration is £1.0 million (2018: £nil), based on actual revenues generated to date and expected earnings in the remaining period to 20 May 2020.

As at 31 December 2019 it was estimated that the fair value of the contingent consideration will be £4.7 million after applying a discount of 11% for the time value of money and the inherent risk associated with the forestry management contracts.

Livingbridge VC

The Livingbridge VC contingent consideration has been determined in two parts.

The first being that the VCT Boards do not give notice to GHAM within two years of the acquisition. Should this be the case, then a payment of £5.0 million will be made to the sellers of Livingbridge VC. There are no indications to date that notice will be given, so this has been assumed to be true and the fair value payable discounted back to 31 December 2019 at a rate of 15%. The 15% rate reflects the weighted average cost of capital for the Group, with a risk premium added to reflect the nature of the underlying equity-based management contracts of the Livingbridge VC business.

The second part of the contingent consideration being the hurdle to deliver revenues from the Livingbridge VC business of between £30.9 million and £37.2 million in the three years to 31 December 2021. The maximum amount payable on achieving the £37.2 million hurdle is £2.5 million and the minimum payable is zero if the £30.9 million hurdle is not achieved. The fair value has been based on a weighted probability of outcomes over the three-year period and discounted by 15% as per above.

The fair value of the contingent consideration payable to the Livingbridge VC sellers as at 31 December 2019 was £5.8 million.

25 SHARE CAPITAL

	2019	2018
Share Capital	£'000	£'000

Allotted: Ordinary - 27,824,222 (2018: 24,872,613) fully paid shares of 25p each	6,956	6,218

During the year the Company issued the following new ordinary shares:

· 107,225 shares on 27 March 2019 at a price of 445.33p per share to management and employees under the Company's bonus share matching plan;

· 1,309,598 shares on 30 June 2019 2018 at a price of 496p per share to Aberdeen Standard Investments;

· 31,604 shares on 20 August 2019 at a price of 622.5p per share under the 2018 long term incentive plan; and

· Additionally, 1,503,182 shareholder and supporter warrants were exercised during the year at a price of 323.27p.

26 SHARE WARRANTS

	2019			2018
Group	Shareholder warrants	Supporter warrants	Total warrants		Shareholder warrants	Supporter warrants	LMS warrants	Total warrants
Balance as at 1 January	874,485	769,000	1,643,485		1,071,812	850,000	909,908		2,831,720
Warrants exercised during the year	(734,182)	(769,000)	(1,503,182)		(197,327)	(81,000)	(909,908)		(1,188,235)
Warrants lapsed during the year	(83,940)	-	(83,940)		-	-	-		-
As at 31 December	56,363	-	56,363		874,485	769,000	-		1,643,485

Shareholder warrants

On 1 December 2014, the Company issued 1,073,904 shareholder warrants to existing shareholders as at the close of business on 28 November 2014 on a 1:5 basis, such warrants having been admitted to trading on AIM. Shareholder warrants are freely transferable, are exercisable at any time between 1 January 2015 and 31 December 2019 at an exercise price of 323.27p per ordinary share and are subject to the terms of the shareholder warrant instrument dated 7 October 2014. Shareholder warrants not exercised by 31 December 2019 lapsed.

Supporter warrants

On 1 December 2014, the Company issued 850,000 supporter warrants to the new Directors and certain members of the Investment Committee and Advisory Group at a price of 7.5p per warrant. Supporter warrants have the same entitlements as the shareholder warrants save that (i) they are not freely transferable (such supporter warrants only being transferable to certain family members, trusts or companies connected with the relevant warrant holder) and accordingly not quoted on AIM; (ii) are not exercisable until 1 December 2015; and (iii) are subject to the terms of the supporter warrant instrument dated 7 October 2014. All Supporter warrants were exercised in 2019.

LMS warrants

On 14 October 2016, the Company issued 909,908 LMS warrants to LMS Capital plc (LMS). The LMS warrants entitle LMS to exercise one LMS warrant for one ordinary share in the Company from 14 October 2016 to 30 June 2018 at an exercise price of 323.27 pence per ordinary share. LMS paid a warrant purchase price of 28 pence per LMS warrant, totalling £255,000. The LMS warrants are not transferrable, unless consent of the Board of the Company has been provided and were issued in accordance with the LMS Warrant Instrument dated 14 October 2016.

During the year, 734,182 shareholder warrants and 769,000 supporter warrants were converted into ordinary shares resulting in the issue of 1,503,182 new ordinary shares (2018: 197,327 shareholder warrants, 81,000 supporter warrants and 909,908 LMS warrants). Notice was given by shareholder warrant holders by 31 December 2019 for 56,363 shareholder warrants, of which 56,302 have been exercised, with the remaining 61 shareholder warrants to be exercised shortly. The remaining 83,910 Shareholder warrants lapsed on 31 December 2019.

27 SHARE-BASED PAYMENTS

2016 Long term incentive plan

Following approval from shareholders at the General Meeting of the Company on 20 November 2015, the directors implemented a long term incentive plan (2016 LTIP) to incentivise the management team as well as align their interests with those of shareholders on 28 July 2016 through enhancing shareholder value.

For the purposes of the 2016 LTIP, 'shareholder value' is the difference between the market capitalisation of the Company at the point in time that any assessment is made and the sum of:

(i) The market capitalisation of the Company a) at 1 December 2014 for first awards made to management who joined the Company before 30 September 2015 (old joiners) and b) at the date of award in all other cases (new joiners); and

(ii) The aggregate value (at the subscription price) of all ordinary shares issued thereafter and up to the point in time that any assessment is made, in each case adjusted for dividends and capital returns to shareholders and/or issue of new shares.

The beneficiaries of the 2016 LTIP, will in aggregate be entitled to an amount of up to 20.0% of shareholder value created over the exercise period, subject to performance criteria set out below. Individual participation in the shareholder value created will be determined by the Remuneration Committee.

There will be certain hurdles the Company's share price has to achieve before an award vests.

In the event that the Company achieves an average mid-market closing price equal to compound growth at 7% per annum for a period of 10 consecutive dealing days in the period after 1 December 2016 for first awards to management who joined the Company before 30 September 2015 and from the second anniversary of the date of award in all other cases, 50% of the award will vest.

In the event that the share price of the Company outperforms the FTSE All Share Index in the period after 1 December 2016, and from the second anniversary of the date of the award in all other cases, 50% of the award shall vest.

Each award will require a minimum term of employment of three years and awards will be made to current management and new joiners at the Company's discretion.

IFRS 2: Share-Based Payments sets out the criteria for an equity-settled share-based payment, which has market performance conditions. The 2016 LTIP meets these criteria and should therefore be recognised at award as fair value and amortised over the vesting period of two years. There is no amount payable by the beneficiaries on exercise. The table below details the number of shares issued in the year:


2019	A Shares old joiners	A Shares new joiners	B Shares	C Shares	D Shares	Total LTIP
Balance as at 1 January	908	92	208	104	-	1,312
Issued in the year	-	-	-	-	180	180
Exercised during the year	(38)	(46)	-	-	-	(84)
As at 31 December	870	46	208	104	180	1,408
Exercisable at year end	870	46	208	104	-	1,228
Months to vesting	-	-	-	-	24


2018	A Shares old joiners	A Shares new joiners	B Shares	C Shares	Total LTIP
Balance as at 1 January	908	92	208	-	1,208
Issued in the year	-	-	-	104	104
As at 31 December	908	92	208	104	1,312
Exercisable at year end	908	92	-	-	1,000
Months to vesting	-	-	8	12

84 A Shares were exercised during the year and at the Company's discretion were settled in cash. The difference between the fair value recognised over the vesting period and the fair value at the date of exercise was recognised in retained reserves.

Fair value

The fair value of the award at the date of the award has been determined using an expected returns model, which is based on a number of scenarios and probabilities of the Company's performance for the period when the awards may be exercised. The assumptions in the model have estimated the shareholder value created and applied discounts for liquidity and likelihood of exercise by participants. The weighted average valuation of the Company has been used to calculate the expected shareholder value created and consequently the value of the plan. For the D shares issued during the year the fair value of the plan at award was £100,765 (£559.81 per share), which will be amortised over the two-year vesting period.

2018 Long term incentive plan

The Remuneration Committee considered and implemented a new long term incentive arrangement in 2018 (2018 LTIP). The 2016 LTIP became exercisable during 2018 and as such the Remuneration Committee introduced the 2018 LTIP to align the management team and wider members of the business for the next three years with shareholders.

The 2018 LTIP is a deferred share award, which vests in three years from the date of award subject to management remaining employed by the Company as at the vesting date. There is no staggered vesting period, vesting is at the end date in three years' time.

During the year ended 31 December 2018, 488,174 deferred shares were awarded under the 2018 LTIP to the management team and employees, with a fair value at award of £2.1 million.

During the year ended 31 December 2019, 59,353 ordinary shares were issued under the 2018 LTIP with a fair value at exercise of £0.4 million.

2019 Long term incentive plan

The Remuneration Committee considered and implemented a new long term incentive arrangement in 2019 (2019 LTIP).

Under the 2019 LTIP, 274,728 deferred shares were awarded to the management team, with a fair value at award of £1.5 million. These awards vest in three years from the date of award subject to management remaining employed by the Company as at the vesting date and achievement of performance conditions. There is no staggered vesting period, vesting is at the end date in three years' time.

In the event that the Company achieves an average mid-market closing price equal to compound growth at 7% per annum over the three year period from award, or the growth in Adjusted Earnings Per Share has compound growth of 7% per annum or more, 50% of the award will vest.

In the event that the share price of the Company outperforms the FTSE All Share Index from the third anniversary of the date of the award in all other cases, 50% of the award will vest.

The fair value of the 2019 LTIP was measured as the share price at the date of award. The impact of the volatility in the share price has been deemed to be immaterial.

	2018 LTIP	2019 LTIP	Total
Balance as at 31 December 2017	-	-	-
Issued in the year	488,174	-	488,174
Balance as at 31 December 2018	488,174	-	488,174
Issued in the year	-	274,728	274,728
Exercised in the year	(59,353)	-	(59,353)
Balance as at 31 December 2019	428,821	274,728	703,549
Exercisable at year end	-	-	-

Renewable Energy team long term incentive plan

The Renewable Energy management team, which joined as part of the acquisition of the asset management business of Hazel Capital LLP, has a long term incentive plan in place, which granted the team a total of 1,000 A Shares in Gresham House New Energy Limited on 31 October 2017. The vesting date of the A Shares is 31 December 2020, at which point the holders are entitled to receive either Gresham House plc shares, or cash at the Company's discretion in exchange for their A Shares. Under the guidance in IFRS 2:41, it has been considered that the A Share settlement should be treated as an equity-settled instrument.

The value of the A Shares at vesting is based on a calculation, which is based on the average profits generated by the New Energy division between 31 October 2017 and 31 December 2020.

The fair value of the award has been determined using an expected returns model, which is based on a number of scenarios and probabilities of the New Energy division's performance for the period from 31 October 2017 to 31 December 2020. The assumptions in the model have estimated the average profits over the period and applied discounts for liquidity and control and consequently the value of the A Shares. The fair value of the A Shares at award was £276,000 (£276 per share), which will be amortised over the three-year and two-month vesting period.

Livingbridge VC Long term incentive plan

The Livingbridge VC long term incentive plan is an equity settled incentive scheme. The recipients of the scheme will receive up to £2.5 million in aggregate in Gresham House plc shares based on the three-year period to 31 December 2021. There is a hurdle to deliver revenues from the Livingbridge VC business of between £30.9 million and £37.2 million in the three years to 31 December 2021. The maximum amount payable on achieving the £37.2 million hurdle is £2.5 million and the minimum payable is zero if the £30.9 million hurdle is not achieved.

Bonus share matching plan

The Company introduced in 2016 a share matching plan linked to the discretionary annual bonus scheme to encourage management and employees to invest in the long-term growth of the Company.

Subject to Remuneration Committee approval, management and employees entitled to a bonus may be permitted (but not required) to defer and reinvest up to 100% of their annual bonus into ordinary shares which will be released to them after three years together with any additional matching shares subject to performance criteria set out below. In 2019 the Remuneration Committee approved the reinvestment of up to 50% of annual bonuses into ordinary shares by management and employees (2018: 100%).

In the event that the Company achieves a mid-market closing price equal to 7% per annum compound growth from the date of deferral, the participants will receive 50% of the matching shares benefit. In the event that the Company's share price outperforms the FTSE All Share Index from the date of deferral, the participants will receive 50% of the matching shares.

Shares will be awarded in the ratio one share for each share invested. In the event that this performance condition is not met, the participants will receive only the ordinary shares acquired with the deferred bonus.

The bonus shares to be awarded after the three-year period and subject to performance conditions have been fair valued using a Monte Carlo simulation. The key variables include the risk-free rate of 0.32% and volatility of the Company share price of 16%. The fair value of the matching shares relating to the 2018 bonuses is £50,925 (£0.98 per share) and will be amortised over the three-year vesting period.

Save as you earn (SAYE) scheme

In 2018 the Remuneration Committee approved a SAYE scheme for the benefit of all employees of the Group whereby employees can save up to £500 per month over a three-year period. At the end of the three-year period the employees have an option to purchase Company shares at the agreed exercise price or receive their savings in cash. The exercise price for the 2019 scheme is 373p (2018: 325p). A maximum of 106,266 shares are under option for the 2019 SAYE scheme and a maximum of 68,707 shares are under option for the 2018 SAYE scheme.

28 RESERVES

	2019			2018
	Share premium account	Share warrant reserve	Retained reserves	Share premium account	Share warrant reserve	Retained reserves
Group	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 January	57,901	58	15,036	9,649	319	15,268
Adjustments for changes in accounting policy (note 7)	-	-	6	-	-	-
Loss and total comprehensive income	-	-	(850)	-	-	(699)
Transfer of non-controlling interest deficit	-	-	-	-	-	3
Issue of shares	11,152	(58)	-	48,252	(261)	-
Share-based payments	189	-	642	-	-	464
Dividends paid	-	-	(795)	-	-	-
As at 31 December	69,242	-	14,039	57,901	58	15,036

	2019			2018
	Share premium account	Share warrant reserve	Retained reserves	Share premium account	Share warrant reserve	Retained reserves
Company	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 January	57,901	58	13,394	9,649	319	15,469
Adjustments for changes in accounting policy (note 7)	-	-	6
Loss and total comprehensive income	-	-	(226)	-	-	(2,075)
Issue of shares	11,341	(58)	-	48,252	(261)	-
Dividends paid	-	-	(795)	-	-	-
As at 31 December	69,242	-	12,379	57,901	58	13,394

	2019	2018
Non-controlling interest:	£'000		£'000
Balance as at 1 January	527		477
Interest in trading result for the year	(4)		-
Interest in investments - securities	59		53
Transfer deficit balance	-		(3)
	582		527

The following describes the nature and purpose of each reserve within equity:

Reserve Description and purpose

Share premium account Amount subscribed for share capital in excess of nominal value.

Share warrant reserve Share warrants for which consideration has been received but which are not exercised yet.

Retained earnings All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

29 NET ASSET VALUE PER SHARE

Basic	2019	2018
Equity attributable to holders of the parent (£'000)	90,237	79,213
Number of ordinary shares in issue at the end of the period	27,824,222	24,872,613
Basic net asset value per share (pence)	324.3	318.5

Diluted	2019	2018
Equity attributable to holders of the parent (£'000)	90,237	79,213
Adjusted number of ordinary shares in issue at the end of the period	31,315,093	27,306,858
Diluted net asset value per share (pence)	288.2	290.1

Diluted net asset value per share is based on the number of shares in issue at the year-end together with 3,491,505 shares deemed to have been issued at nil consideration as a result of shareholder and supporter warrants and shares which could be issued under the bonus share matching plan and long term incentive plans.

	£'000
The movement during the year of the assets attributable to ordinary shares were as follows:
Total net assets attributable at 1 January 2019	79,213
Adjustments for changes in accounting policy (note 7)	6
Total recognised losses for the year	(850)
Share-based payments	839
Issue of shares	11,824
Dividends paid	(795)
Total net assets attributable at 31 December 2019	90,237

30 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Net operating loss after exceptional items	(2,056)	(2,153)	(974)	(1,791)
Profit from discontinued operations	55	11	-	-
Movement in fair value of investment property	-	1	-	-
Interest payable	221	35	211	35
Depreciation	816	138	695	32
Loss/(profit) on disposal of tangible fixed assets	43	(23)	36	-
Amortisation	7,668	2,788	113	68
Share-based payments	1,844	464	-	-
	8,591	1,261	81	(1,656)
Decrease/(increase) in long-term receivables	78	(78)	78	(78)
(Increase)/decrease in current assets	(4,638)	(1,227)	(133)	193
Increase in current liabilities	5,615	1,295	92	92
	9,646	1,251	118	(1,449)

31 FINANCIAL INSTRUMENTS

The Group consists of the Company and subsidiary undertakings whose principal activities are asset management and forestry management.

The Group's financial instruments, which are held in accordance with the Group's objectives and policies, comprise:

(i) securities consisting of listed and unlisted equity shares

(ii) a secondary portfolio of listed and unlisted fixed income securities

(iii) cash, liquid resources and short-term debtors and creditors that arise directly from its operational activities

(iv) short-term and long-term borrowings

As at 31 December 2019 the following categories of financial instruments were held by:

Group	2019			2018
	Amortised cost	Assets at fair value through profit or loss		Loans and receivables	Assets at fair value through profit or loss
Financial assets per Statement of Financial Position	£'000		£'000	£'000		£'000
Investments - securities	1,915		8,914	1,613		6,511
Trade and other receivables - current and non-current	5,334		-	2,628		1,033
Accrued income	6,442		-	2,206		-
Cash and cash equivalents	19,432		-	13,958		-
	33,123		8,914	20,405		7,544

	2019		2018
Other financial liabilities		Liabilities at fair value through profit or loss	Other financial liabilities	Liabilities at fair value through profit or loss
Financial liabilities per Statement of Financial Position	£'000	£'000	£'000	£'000
Trade and other payables - short-term *	10,549	4,661	4,085	-
Bank loans - short- and long-term	-	-	9,840	-
Other creditors - long-term	124	5,849	-	8,447
	10,673	10,510	13,925	8,447

* £908,000 (2018: £389,000) of PAYE and VAT payable is included within trade and other payables.

Company	2019				2018
	Amortised cost	Assets at fair value through profit or loss		Loans and receivables		Assets at fair value through profit or loss
Financial assets per Statement of Financial Position	£'000		£'000		£'000		£'000
Investments - securities	1,915		6,843		1,613		4,647
Accrued income	37		-		104		-
Amounts owed by Group undertakings	2,780		-		221		-
Cash and cash equivalents	1,940		-		6,148		-
	6,672		6,843		8,086		4,647

	2019		2018
Other financial liabilities		Liabilities at fair value through profit or loss	Other financial liabilities	Liabilities at fair value through profit or loss
Financial liabilities per Statement of Financial Position	£'000	£'000	£'000	£'000
Trade and other payables - short-term	40	-	152	-
Trade and other payables - long-term	243	-	-	-
Other loans - short & long-term	5,986	-	5,365	-
Bank loans - short & long-term	-	-	9,840	-
	6,269	-	15,357	-

The carrying value of loans and receivables and other financial liabilities are not materially different to their fair values. The Group's activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The main risks to which the Group is exposed are market price risk, credit risk, interest rate risk and liquidity risk. The nature and extent of the financial instruments outstanding at the Statement of Financial Position date and the risk management policies employed by the Group are summarised below.

Market price risk

Market price risk is the risk that changes in market prices will adversely affect the Group's income due to a decline in the underlying value of assets under management, resulting in lower fees.

The objective of market price risk management is to manage and control market price exposure, while optimising the return on risk. The Group manages strategic equity funds. Forestry asset management fees are not linked directly to market prices.

Market price risk arises from uncertainty about the future prices of financial instruments held within the Group's portfolio. It represents the potential loss that the Group might suffer through holding market positions in the face of market movements. The investments in equity and fixed interest stocks of unquoted companies are not traded and as such the prices are more uncertain than those of more widely traded securities.

Unquoted investments are valued as per accounting policy (j) in these financial statements. Regular reviews of the financial results, combined with close contact with the management of these investments, provides sufficient information to support these valuations.

Credit risk

Credit risk is the risk that the counterparty will fail to discharge an obligation or commitment that it has entered into with the Group.

The Group's maximum exposure to credit risk is:

	2019	2018
	£'000	£'000

Loan stock investments	1,915	1,613
Deferred receivable - short and long-term	-	1,033
Trade and other receivables - short-term	5,334	2,628
Accrued income	6,442	2,206
Cash and cash equivalents	19,431	13,958
	33,122	21,438

The Group has an exposure to credit risk in respect of both loan stock investments and other loans, most of which have no security attached to them, or where they do, such security will rank after any bank debt. The Company's exposure to credit risk is restricted to investments, cash and cash equivalents, other loans, amounts owed by Group undertakings and accrued income totalling £6,795,000 (2018: £8,086,000).

Cash and cash equivalents consist of cash in hand and balances with banks. To reduce the risk of counterparty default the Group deposits its surplus funds in approved high-quality banks.

The following table shows the maturity of the loan stock investments and other loans referred to above:

	2019	2018
Loan stock investments	£'000	£'000
Repayable within: - 1 year	1,648	1,290
1-2 years	267	-
2-3 years	-	267
3-4 years	-	56
4-5 years	-	-
	1,915	1,613

As at 31 December 2019 loan stock investments totalling £858,000 (2018: £810,000) were impaired and provided for.

As at 31 December 2019 other loans totalling £54,000 (2018: £54,000) were impaired and provided for.

There is potentially a risk whereby a counterparty fails to deliver securities which the Company has paid for or pay for securities which the Company has delivered. This risk is considered to be small as where the transaction is in respect of quoted investments the Company uses brokers with a high credit quality and where the transaction is in respect of unquoted investments, these are conducted through solicitors to ensure that payment matches delivery.

Interest rate risk

The Group's fixed and floating interest rate securities, its equity, preference equity investments and loans and net revenue may be affected by interest rate movements. Investments in small businesses are relatively high-risk investments which are sensitive to interest rate fluctuations.

The Group's assets include fixed and floating rate interest instruments as detailed below. The Group is exposed to interest rate movements on its floating rate liabilities.

The interest rate exposure profile of the Group's financial assets and liabilities as at 31 December 2019 and 2018 were:

Group	Non-interest-bearing assets/ liabilities	Fixed rate assets		Floating rate assets		Fixed rate liabilities	Floating rate liabilities		Net total
As at 31 December 2019	£'000	£'000		£'000		£'000		£'000	£'000
Investments - securities	8,914	1,915		-		-		-	10,829
Cash	-	-		19,432		-		-	19,432
Trade and other receivables	5,334	-		-		-		-	5,334
Accrued income	6,442	-		-		-		-	6,442
Creditors
- falling due within 1 year	(10,228)	-		-		(321)		-	(10,549)
- falling due after 1 year	-	-		-		(124)		-	(124)
	10,462	1,915		19,432		(445)		-	31,364
	Non-interest-bearing assets/ liabilities	Fixed rate assets	Floating rate assets		Fixed rate liabilities		Floating rate liabilities			Net total
As at 31 December 2018	£'000	£'000	£'000		£'000			£'000		£'000
Investments - securities	6,511	1,613	-		-			-		8,124
Cash	-	-	13,958		-			-		13,958
Trade and other receivables	2,628	-	-		-			-		2,628
Accrued income	2,206	-	-		-			-		2,206
Creditors
- falling due within 1 year	(4,083)	-	-		(2)			(2,000)		(6,085)
- falling due after 1 year	-	-	-		-			(7,840)		(7,840)
	7,262	1,613	13,958		(2)			(9,840)		12,991

Non-interest-bearing assets comprise the portfolio of ordinary shares, dealing securities and non-interest-bearing loans.

Fixed rate assets comprise fixed rate loans, unsecured loans and loans repayable on demand, with a weighted average interest rate of 12.3% (2018: 13.6%).

Floating rate assets and floating rate liability loans are subject to interest rates which are based on LIBOR and bank base rates.

Fixed rate liabilities include hire purchase contracts and lease creditors.

The Group is not materially exposed to currency risk as its assets and liabilities are substantially denominated in sterling.

The interest rate exposure profile of the Company's financial assets and liabilities as at 31 December 2019 and 2018 were:

Company	Non-interest-bearing assets/ liabilities	Fixed rate assets	Floating rate assets	Fixed rate liabilities	Floating rate liabilities		Net total
As at 31 December 2019	£'000	£'000	£'000	£'000		£'000	£'000
Investments - securities	6,843	1,915	-	-		-	8,758
Cash	-	-	1,940	-		-	1,940
Accrued income	37	-	-	-		-	37
Owed by Group undertakings	2,780	-	-	-		-	2,780
Creditors
- falling due within 1 year	(40)	-	-	(243)		-	(283)
- falling due after 1 year	-	-	-	-		(5,986)	(5,986)
	9,620	1,915	1,940	(243)		(5,986)	7,246

	Non-interest-bearing assets/ liabilities	Fixed rate assets	Floating rate assets	Fixed rate liabilities	Floating rate liabilities		Net total
As at 31 December 2018	£'000	£'000	£'000	£'000		£'000	£'000
Investments - securities	4,647	1,613	-	-		-	6,260
Cash	-	-	6,148	-		-	6,148
Accrued income	104	-	-	-		-	104
Owed by Group undertakings	221	-	-	-		-	221
Creditors
- falling due within 1 year	(152)	-	-	-		(2,000)	(2,152)
- falling due after 1 year	-	-	-	-		(7,840)	(7,840)
	4,820	1,613	6,148	-		(9,840)	2,741

Although the Company holds investments that pay interest, the Board does not consider it appropriate to assess the impact of interest rate changes upon the value of the investment portfolio as interest rate changes are only one factor affecting market price and the impact is likely to be immaterial. The Group no longer has bank borrowings so the sensitivity of interest payable to changes in interest rates is no longer applicable.

Liquidity risk

The investments in equity investments in NEX Exchange traded companies may be difficult to realise at their carrying value, particularly if the investment represents a significant holding in the investee company. Similarly, investments in equity and fixed interest stocks of unquoted companies that the Company holds are only traded infrequently. They are not readily realisable and may not be realised at their carrying value where there are no willing purchasers.

The Group aims to hold sufficient cash to fulfil its requirements with respect to regulatory capital. During the year the Group and its subsidiary entities complied with all regulatory capital requirements.

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the Statement of Financial Position date to the expected maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

As at 31 December 2019	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years
	£'000	£'000	£'000
Leases	323	69	72
Trade payables	469	-	-
Accruals	7,730	-	-
Contingent consideration	5,000	5,000	2,032
Other creditors	2,029	-	-
	15,551	5,069	2,104

As at 31 December 2018	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years
	£'000	£'000	£'000
Bank borrowings	2,421	2,301	6,202
Trade payables	1,212	-	-
Accruals	2,313	-	-
Contingent consideration	-	-	11,032
Other creditors	560	-	-
	6,506	2,301	17,234

Capital risk management

The Group manages its capital to ensure that entities within the Group and the Company will be able to continue to trade in an orderly fashion whilst maintaining sustainable returns to shareholders.

The capital structure of the Group and Company consist of short and long-term borrowings as disclosed in notes 21 and 23, cash and cash equivalents and equity attributable to equity shareholders of the Company comprising issued share capital, share premium, share warrant reserve and retained reserves as disclosed in notes 24 to 27. The Board reviews the capital structure of the Group and the Company on a regular basis to ensure it complies with all regulatory capital requirements. The financial measures that are subject to review include cash flow projections and the ability to meet capital expenditure and other contracted commitments, projected gearing levels and interest covenants, although no absolute targets are set for these.

	Group		Company
	2019 £'000	2018 £'000	2019 £'000	2018 £'000
Debt	-	(9,840)	-	(9,840)
Cash and cash equivalents	19,432	13,958	1,940	6,148
Net assets	90,819	79,740	88,577	77,571
Net cash / (debt)	19,432	4,118	1,940	(3,692)
Net cash / (debt) as a % of net assets	21.4%	5.2%	2.2%	(4.8%)

32 FAIR VALUE MEASUREMENTS

Valuation inputs

IFRS 13 - Fair Value Measurement - requires an entity to classify its financial assets and liabilities held at fair value according to a hierarchy that reflects the significance of observable market inputs. The classification of these assets and liabilities is based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined below.

Quoted market prices - Level 1

Financial instruments, the valuation of which are determined by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm's length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

Valuation technique using observable inputs - Level 2

Financial instruments that have been valued using inputs other than quoted prices as described for level 1 but which are observable for the asset or liability, either directly or indirectly.

Valuation technique using significant unobservable inputs - Level 3

Financial instruments, the valuation of which incorporate significant inputs for the asset or liability that are not based on observable market data (unobservable inputs). Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the input or analytical techniques.

For investments in securities, which includes early-stage private equity investments, the significant unobservable inputs used include cash flow forecasts and discount rates. An increase in the discount rate applied will decrease the fair value of the investment whereas a decrease in the rate will increase the fair value. No reasonable foreseeable changes to significant unobservable inputs will result in a material impact to profit and loss or equity.

The valuation techniques used by the Company for level 3 financial assets can be found in accounting policy (j) (iii) and (iv).

Investment in the unlisted security relates to a single investment in the equity of an unlisted fund. That unlisted fund invests in a large number of forestry assets. The forestry assets are held at fair value in the underlying fund. An independent valuation of the forests within the underlying fund is performed annually by forestry valuation experts by reference to comparable market transactions for each underlying forestry asset that considers factors including location, maturity of the forest and size. There is no reasonable change in the inputs in each of the underlying assets would give rise to a material adjustment to the fair value of the investment.

Further details of the securities portfolio can be found in note 11 of these financial statements.

An analysis of the Group's and Company's assets measured at fair value by hierarchy is set out below.

Group	31 December 2019	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Investments - securities
- Equities	8,914	6,165	2,749
	8,914	6,165	2,749

	31 December 2018	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Investments - securities
- Equities	6,511	4,587	1,924
	6,511	4,587	1,924

Company	31 December 2019	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Investments - securities
- Equities	6,843	6,165	678
	6,843	6,165	678

	31 December 2018	Level 1	Level 3
	£'000	£'000	£'000
Financial assets at fair value through profit and loss:
Investments - securities
- Equities	4,647	4,587	60
	4,647	4,587	60

Set out below is a reconciliation of financial assets measured at fair value based on level 3.

Group 31 December 2019	Investments - securities	Trade and other receivables	Total
	£'000	£'000	£'000
Opening balance	1,924	1,033	2,957
Total gains and (losses):
In Statement of Comprehensive Income	339	-	339
Additions	500	-	500
Disposals	(14)	(1,033)	(1,047)
Closing balance	2,749	-	2,749

Total gains and (losses) for the year included in comprehensive income for assets held at the end of the reporting period	340	-	340

31 December 2018	Property investments	Investments - securities	Trade and other receivables	Total
	£'000	£'000	£'000	£'000
Opening balance	1,986	1,724	3,693	7,403
Total gains and (losses):
In Statement of Comprehensive Income	(1)	(390)	40	(351)
Additions	-	1,500	-	1,500
Disposals	(1,985)	(910)	(2,700)	(5,595)
Closing balance	-	1,924	1,033	2,957

Total gains and (losses) for the year included in comprehensive income for assets held at the end of the reporting period	-	202	40	242

Company: 31 December 2019	Investments - securities	Total
	£'000	£'000
Opening balance	60	60
Total gains and (losses):
In Statement of Comprehensive Income	132	132
Additions	500	500
Disposals	(14)	(14)
Closing balance	678	678

Total gains or losses for the year included in comprehensive income for assets held at the end of the reporting period	132	132

31 December 2018	Investments - securities	Total
	£'000	£'000
Opening balance	45	45
Total gains and (losses):
In Statement of Comprehensive Income	(653)	(653)
Additions	1,000	1,000
Disposals	(332)	(332)
Closing balance	60	60

Total gains or losses for the year included in comprehensive income for assets held at the end of the reporting period	16	16

The only financial liabilities held at fair value relates to the deferred consideration on the acquisition of FIM Services Limited and the acquisition of the fund and investment management businesses of Livingbridge VC LLP amounting to £10,510,000. This is measured using level 3 valuation techniques. There were no such financial liabilities held at fair value within the Company.

Price risk sensitivity

Based on values as at 31 December 2019 a 10% movement in the fair values of 100% of the Group's equity investments would be equivalent to a movement of £891,000 in both profit and net assets.

33 RELATED PARTY TRANSACTIONS

Group

During the year management fees totalling £693,687 (2018: £655,982) and performance fees of £1,944,518 (2018: £nil) were invoiced to Gresham House Strategic plc (GHS), a company in which the Group has a 22.9% interest. At the year-end £75,783 (2018: £64,990) was due from GHS.

During the year management fees totalling £866,627 (2018: £967,358) were invoiced to LMS Capital plc (LMS), a company with a significant shareholding in the Company as disclosed in the Directors' Report. At the year-end £nil (2018: £nil) was due from LMS.

During the year amounts totalling £nil (2018: £51,297) were invoiced to Corylus Capital LLP (Corylus), an entity in which Ben Guest, head of the New Energy strategy, has a material interest. Conversely, the Group was invoiced £85,413 (2018: £287,623) by Corylus for office and other costs. At the year-end £nil (2018: £nil) was due from Corylus. Corylus has provided a loan totalling £3,261,656 (2018: £nil) to HC ESS6 Limited (ESS6). Interest totalling £205,079 (2018: £nil) was charged by Corylus to ESS6.

Company

During the year the Company received loans totalling £2,121,736 from (2018: repaid £2,925,780 to) Security Change Limited. At the year-end £4,684,314 (2018: £2,562,578) was due to Security Change Limited. No interest was charged during the year (2018: £nil).

During the year the Company received £nil (2018: £nil) from Gresham House Finance Limited. At the year-end £221,400 (2018: £221,400) was owed by Gresham House Finance Limited. No interest was charged during the year (2018: £nil).

During the year the Company advanced £30,079 (2018: £nil) to Gresham House (Nominees) Limited. At the year-end £30,079 (2018: £nil) was owed by Gresham House (Nominees) Limited. No interest was charged during the year (2018: £nil).

During the year the Company repaid loans totalling £1,500,561 to (2018: received £10,458,814 from) Gresham House Holdings Limited. At the year-end £1,301,529 (2018: £2,802,090) was due to Gresham House Holdings Limited. No interest was charged during the year (2018: £nil).

During the year the Company advanced £1,039,140 (2018: £nil) to HC ESS6 Limited. Interest totalling £99,388 (2018: £nil) was charged during the year. At the year-end £1,138,529 (2018: £nil) was owed by HC ESS6 Limited.

During the year the Company advanced £1,489,628 (2018: £nil) to HC ESS7 Limited. Interest totalling £207,820 (2018: £nil) was charged during the year. At the year-end £1,697,449 (2018: £nil) was owed by HC ESS7 Limited.

34 POST BALANCE SHEET EVENTS

On 5 March 2020, the Company announced the acquisition of TradeRisks Limited ("TradeRisks") for an initial consideration of £7.0 million, with further consideration of up to £4.0 million payable subject to the achievement of certain performance criteria.

TradeRisks is a fund management business and specialist provider of debt structuring and advisory services to the housing and social infrastructure sectors, with strong ESG credentials through its social impact in a structurally important area.

TradeRisks' wholly owned and separately FCA regulated subsidiary, ReSI Capital Management Limited, is the manager of Residential Secure Income plc (ReSI plc)(LSE: RESI), a closed-ended investment company which seeks to deliver secure income returns to its shareholders by investing in portfolios of shared ownership and specialist residential property. ReSI plc's shares were admitted to trading on the main market of the London Stock Exchange in July 2017, and as at 31 December 2019 had gross AUM of £321 million (including committed acquisitions) and NAV of £184 million.

In the year ended 31 July 2019, TradeRisks' reported audited profit before tax of £2.2 million and gross assets of £9.7 million. When adjusted to reflect IFRS accounting policies, which will be applied post-completion, for the year ended 31 July 2019 TradeRisks generated revenues of £5.6 million and EBIT of £1.8 million.

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.

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