ICG-Longbow Senior Secured UK Property Debt Investments has announced its annual results for the year ended 31 January 2016. In terms of income, the company says that revenue for the year fell slightly to £8.4m (31 January 2015: £9.2m) as the exit and prepayment fees earned in the prior year were not repeated given the unchanged loan portfolio. However, the underlying profit after tax of £6.7m (6.18 pence per share) was in line with the board’s expectations and sufficient to cover the Company’s dividend objective of 6.0p per share per annum. The Company has paid three interim dividends of 1.5 pence per share each during the year and on 26 April 2016 the Board approved a fourth interim dividend of 1.5 pence per share bringing the total dividends declared in respect of the year to 6.0p per share. The retained profits for the year have resulted in a modest increase in NAV from 99.99 pence per share to 100.18 pence per share. The Company’s shares traded in a relatively narrow range of 101 to 106.5 pence per share, which was consistently at a premium to NAV. The portfolio has 2.81 years weighted average unexpired term remaining (1.6 years of which are subject to pre-payment protection).
In terms of portfolio activity, the company says that its portfolio of 11 loans was unchanged in the year but that they saw a material improvement in risk profile. The weighted average portfolio LTV ratio reducing from 60.1% to 52.7%, which the board says tracked the general market uplift in property values. Following the year end, the company says that ‘the Mansion loan’ (£18.1m) was repaid in full and the proceeds, together with exit and prepayment fees, have already been redeployed into a new £22.4 million loan secured on two industrial parks in the North of England. The company says that the new loan aligns to the maturity profile of the existing portfolio and with the reinvestment of prepayment and exit fees will, they believe it will be accretive to the portfolio return and Group as a whole. The new loan increases the portfolio’s weighted average LTV to 57.2% but the managers say that it improves the average income protection to 1.7 years remaining.
In terms of outlook, the company says that the UK economic environment remains stable with steady, if unspectacular, levels of growth coupled with increasing employment. Low levels of new property development have begun to lead to rental growth in most sectors and have driven property values up over the financial year. The company says that its portfolio has benefitted from this effect as evidenced by the most recent property valuations and a consequent fall in weighted average LTV ratios. They say that these conditions bode well for the investment portfolio as a whole in terms of the ability of borrowers to refinance their loans on maturity but that they anticipate that uncertainty surrounding the outcome of the UK’s EU membership referendum will temper these conditions in the short term. However, they say that an exit vote would undoubtedly lead to an extended period of uncertainty which could indirectly affect the Group’s loan portfolio and underlying property values if inward investment and property transaction volumes fall. However, in their view, the underlying property portfolios are generally well diversified and are not materially exposed to international businesses or trade at the tenant level. As such, they would not expect the portfolio to be materially adversely affected by such a vote in terms of revenue generation or capital risk.
ICG-Longbow performs as expected : LBOW