GCP Asset Backed Income shareholders earn 9.1% return in 2018 – GCP Asset Backed Income (GABI) had a good 2018 (to December 31) with shareholders earning a total return of 9.1%. The company, which at the end of 2018 had a total loan book of £372.3m, typically lends in the £5m-20m range, an area most mainstream lenders do not tend to operate in. Close to 95% of GABI’s loan book is secured by physical assets
Key takeaways from 2018
- Total shareholder return for the year of 9.1% (prior year: 4.4%) and an annualised total return since IPO of 7.7%
- Profit for the year of £21.6m, up from £14.0m in 2017
- The company paid dividends of 6.35 pence per ordinary share, including a special dividend of 0.25 pence, thereby exceeding its target dividend of 6.1 pence for the year and growing the dividend by 5% year-on-year. In respect of the forthcoming financial year the company is targeting an annual dividend of 6.2 pence
- Aggregate gross proceeds of £64.5m were raised during the year through a pre-emptive issue of C shares in October 2018 and a placing of ordinary shares in December 2018. We note that of the £129m invested in 2018, the bulk came from cash held on the balance sheet at the end of 2017. Cash is rarely held for periods of more than six months
Portfolio at a glance
GABI has a diversified portfolio of 35 asset backed loans with an average life of eight years, of which 46% of the loan book (by asset value) is partially protected from rising inflation and/or interest rates. The company’s loans are secured against assets and cash flows that are predominantly housed and generated in the UK. The main sectors it lends capital to are:
- Asset finance £22.1m, 6% – includes areas such as litigation bridging and financing for margin calls
- Property £155.4m, 41% – includes bridging loans and co-living projects
- Energy and infrastructure £51.1m, 14% – includes recycling plants and data centres
- Social infrastructure £147.5m, 39% – includes care homes, private schools, nurseries and student living facilities
Most of the debt GABI holds is senior (63% of its book in 2018) and in the instances where the company holds senior debt, it typically holds all of that firm’s senior debt.
We further note that GABI expects most of its pipeline loan growth to come from new borrowings. In 2018, existing borrowers accounted for 60% of new loan investments made by the company.
About GABI
GABI (formerly Project Finance Investments: PROJ) aims to generate attractive risk-adjusted returns that are delivered primarily through regular, growing distributions and modest capital appreciation over the long term. It seeks to achieve this by investing in a portfolio that is comprised primarily of UK project finance debt investments. Project finance is primarily focused on the long-term finance of infrastructure and industrial projects. Such projects typically have contracted, predictable medium to long term cash flows and/or physical assets against which financing can be secured.
The investments are typically made in a single purpose, ring fenced company that owns the contract or the asset forming the project, therefore the exposure is to the performance of that contract or asset only. The debt financing is typically secured by all of the project assets, including the revenue-generating contracts. Project lenders are given security on all of these assets and the lenders (or the highest-ranking lender, if there is more than one) are able to assume control of a project if the project company has difficulties complying with the loan terms.
GABI: GCP Asset Backed Income shareholders earn 9.1% return in 2018