Over the year ended 31 January 2017, ICG Longbow’s NAV increased from 100.18 pence per share to 103.80 pence. The main reason for this was a significant increase in revenue to GBP12.33 million (31 January 2016: GBP8.36 million) as exit and prepayment fees were earned on three loan repayments. Earnings per share of 9.62 pence were significantly higher than the annual dividend target of 6.0 pence per share. The shares traded in a range of 99.00 pence (a low reached in the week following the EU referendum) to 106.00 pence, and ended the year at 103.25 pence, a modest discount to NAV.
The Group’s loan portfolio experienced some changes during the year, with the repayment of the Mansion loan (GBP18.07 million) in March 2016, the First Light loan (GBP1.75 million) in July 2016 and the Raees loan (GBP13.25 million) in October 2016. In each case the loan redemptions were accompanied by significant exit and prepayment fees.
The repayments allowed the Group to reinvest proceeds on terms accretive to shareholders, with new loans to Commercial Regional Space and clients of BMO Real Estate Partners. The new loan facilities align with the maturity profile of the existing investment portfolio. The weighted average coupon across the portfolio has reduced from 7.40% to 6.24% as higher returning loans were repaid. However, the overall portfolio IRR, since inception has improved from 8.49% to 8.96% following the reinvestment of fees realised from early repayments. Collectively, the three loan repayments to date have returned a weighted average IRR to shareholders of 12.51%.
Across the portfolio, the weighted average LTV rose from 52.7% to 57.0%, owing to changes in the loan portfolio over the period, while the weighted average interest cover improved from 161% to 235%. The portfolio has approximately 1.85 years weighted average unexpired term remaining, of which a weighted average 0.74 years is subject to income protection.
The Board believes that attractive risk-adjusted investment opportunities remain in the UK real estate debt market and that it would be of benefit to the Group to position itself to capitalise on those opportunities, while also seeking to grow the scale of the business.
LBOW : ICG Longbow looks to future after bumper year for loan repayments