Honeycomb Investment Trust says that, following the initial share issue of GBP100.0 million, there have been two further successful share offerings with total gross proceeds of GBP100.0 million. The net share proceeds of all the share offerings have been deployed, with the latest gross proceeds of GBP50.0 million largely deployed on 13 January 2017 following the financing of the Green Deal Finance Company.
At 31 December 2016, net assets were GBP202.1 million (cum income), with market capitalisation at GBP203.3m. NAV per share (cum income) was 1014.0p, with the share price (at close) 1020.5p, representing a premium of 0.6%. Total NAV per share return was 7.8%. The Board elected to pay dividends on a quarterly basis, and paid the first dividend of 2.11p for Q1 2016 in May 2016. The Q2 2016 dividend increased to 19.66p. The Q3 2016 dividend was 23.13p, rising above the target yield on an annualised basis at 9.3%. The Q4 2016 dividend was 23.50p, providing an annualised dividend of 12.5% undiluted and 9.4% fully diluted following the issue of a further 4.9m shares on 16 December 2016. For the full year, this represented 8.0% of average issued shares.
They have arranged a debt facility of GBP37.5 million with the Royal Bank of Scotland plc and is in the process of securing further facilities. The facility was utilised on a small scale during the year, but was not drawn at the year-end following net receipts from the portfolio investments. It is expected this facility will be drawn in the first half of 2017 in order to fund further investment opportunities.
At the year end they had a total portfolio of GBP162.6 million, with a pipeline of over GBP100 million of further opportunities over which we have strong visibility (within this, in January 2017 the Company provided finance of GBP40m, which included the acquisition of a loan book from, and taking an equity stake of 28.57% in, The Green Deal Finance Company). In Q1 2016, they focused on deploying the initial proceeds, whilst maintain high underwriting standards and say they achieved this more quickly than initially expected by identifying two high quality portfolios. Together, these portfolios comprised over 18,000 loans with strong risk-adjusted returns. The transactions have performed ahead of expectations and as a result the company was able to invest in follow-on transactions with both counter-parties throughout the year.
In Q2 2016, they purchased a portfolio of secured and unsecured consumer loans from GE Money. This represents the largest individual investment the company has made. The portfolio is highly granular and diversified, both regionally across the UK, by asset class and borrower type. At acquisition, the portfolio comprised over 23,000 loans with an average balance of GBP8k and has performed well since acquisition delivering both strong interest yields and low levels of write-offs. Other portfolio purchases in 2016, representing a total investment of GBP45.0 million, have also performed ahead of expectations. Together, the portfolios they have purchased provide a strong underpinning of results in 2016, with a total of GBP114 million investment remaining at the end of the year.
In the second half of the year, they have focused on the organic origination channels. With a backdrop of higher levels of consumer indebtedness and increasing competition in mainstream markets, they have grown their holdings of wholesale facilities. In these facilities, they gain exposure to the underlying credit assets, but with added protection of first loss from the relevant partner. All the borrowers are performing well. The origination partner has seen the successful roll-out of its first three referral partner arrangements with Freedom Finance, Pay4Later and Fly Now Pay Later, all of whom have seen a steady growth of origination volumes during the period. Further referral partners are currently being on-boarded and the profile of returns and risk is in line with expectations with The Green Deal Finance Company being appointed in January 2017. In aggregate, the organic channels had a total investment of GBP49.7 million at the balance sheet date.
To further enhance investor returns, they intend to make selected investments in companies which are aligned with their strategy, such as brokers and originators of loans and strategic providers of data and technology related to consumers and small and medium-sized enterprises. Equity assets as at 31 December 2016 totalled GBP4.7 million, consisting of an 18.3 per cent holding in Freedom Finance (the initial 19.9 per cent shareholding being diluted due to subsequent issuances which occurred in July 2016 following the acquisition of Sensible Home Finance) and a 4.83 per cent equity investment in retail point of sale finance provider Pay4Later. Both businesses are trading well, seeing new partnerships as well as continued investments in technology and management capabilities.
HONY : Honeycomb focusing more on organic origination