GLI Alternative Finance has published its first set of accounts – interims covering the period from incorporation to 31 December 2015. At the end of that period the NAV was 100.9p and dividends of 1.55p had been declared.
The report states that, since inception, the Company has declared dividends of 0.6p, 0.4p, 0.55p and 0.55p per share on 25 November 2015, 24 December 2015, 25 January 2016 and 16 February 2016 respectively. They say the Company is still in the early stages of its life and they expect, as the year progresses, to see an increase in monthly dividend payments and a corresponding increase in yield, gradually approaching our target of 8.0% per annum.
2015 saw the Alternative Finance market continue to grow exponentially with GBP2.8 billion oaned out by UK based platforms in the 12 months to December 2015, compared to GBP1.6 billion in 2014. October was an active month within the Company as the cash was put to work. A number of new loans were purchased across a wide diversification of borrowers; including an automotive repair business, a construction company and also IT Software. Further investment into two wind turbine loans also increased the renewable energy allocation to 13.4%. The stable cash flow characteristics of the wind turbine businesses and a gross yield of approximately 10% with good over-collateralisation made these loans ideal diversifiers within the portfolio.
The task of investing the Company’s cash holding continued during November where further investment was made into Africa via Ovamba. They say these loans, whilst some may perceive as “high risk”, are actually extremely well collateralised. The Investment Manager has also focussed on Solar Energy projects originated in the United States via the Open Energy Group. These loans do require intensive research and due diligence, however with EBITDA / interest cover ratios in some cases exceeding five times and with purchase power agreements often stretching until the end of the expected life span of the plant, they believe these are extremely attractive assets for the Company. By the end of the reporting period, renewable energy projects, including wind turbine loans, accounted for 14.6% of the Company’s portfolio.
The deployment of cash into SME loans continued apace during December with the property sector being the prime beneficiary of the Company’s capital; property exposure rose from 14.2% to 15.9% during the month. Cash was reduced down to 4.4% and, as a result, the gross portfolio yield rose to 9.7%. Higher than expected costs have, however, had the effect of reducing the estimated net yield to 7.9%.
Whilst investing in a relatively illiquid asset class, the Company has successfully participated in secondary market trading of loans. The outright exposure sold has been small as a percentage of the total NAV, the creation of a secondary market is welcomed.
During January 2016, they fully hedged all currency exposure back to Sterling, the Company’s base currency, locking in earlier gains. The Investment Manager’s Investment Committee has since taken a decision to maintain these hedges for the foreseeable future.
Loan impairments within the Company are running at extremely low levels; as at 31 December 2015 loans in default stood at 1.27%. Given the high level of security on these loans, the current estimated recovery rate is 100% and therefore no loss provisioning has been necessary. The Company holds in excess of 230 loans made to SMEs with an average loan duration of two years.
GLAF : GLI Alternative Finance reaffirms 8% yield target