Interim Accounts H1 2024

About this update from Pollen Street Group Limited

[{"type":"text","content":"\n \n                                                                                                                                                                  4 September 2024 \n Pollen Street Group Limited Interim Accounts H1 2024 \n Robust performance and strategic progress with strong AUM growth \n Pollen Street Group Limited (\"Pollen Steet\", together with its subsidiaries, the \"Group\") today issues its Interim Report for the six months ended 30 June 2024. \n In the first half of 2024 we have continued to build on our strong progress during 2023 with our fundraising on track and driving growth in Total Assets under Management (\"AuM\") and ongoing capital deployment increasing our Fee-Paying Assets under Management (\"FP AuM\"). Our balance sheet continues to support third-party AuM growth, with recent commitments to Private Equity Fund V and Credit Fund IV. \n Highlights for H1 2024: Ongoing growth in AuM \n Asset Manager \n ·      Building Fundraising Momentum: Successfully achieved the first close of Credit Fund IV in March 2024, securing investor commitments, including SMAs, of approximately c.£0.6 billion. Private Equity V progressing well with advanced discussions with investors we anticipate meeting our €1 billion target by the year end. \n ·      AUM Growth: Total AUM increased to £4.5 billion as of 30 June 2024 (H1 2023: £3.4 billion), with AUM rising to £4.8 billion as of 31 July 2024 following a further close of Private Equity Fund V together with a co-invest vehicle in July 2024. \n ·      Ongoing Expansion: The Asset Manager continues to thrive, with both Private Equity and Private Credit strategies in active fundraising, capitalizing on robust performance and positioning us for further success. \n Investment Company \n ·      Strong Balance Sheet: Our balance sheet remains robust, reflecting strong performance of our high-quality portfolio with strong levels of risk adjusted income. \n ·      Strong Cash Flow: Generated £15.8 million in income from Net Investment Assets in H1 2024, achieving a 9.7% return. \n ·      Enhanced Financial Flexibility: Prudent management and successful refinancing of term debt have increased financial flexibility while reducing overall funding costs. \n ·      Strategic Portfolio Allocation: The Group reduced its Investment Asset portfolio, lowering the net debt-to-tangible-equity ratio to 28% (31 Dec 2023: 54%), providing the liquidity to make increased commitments to Pollen Street-managed funds. Returns are expected to rise as leverage normalizes as these commitments are drawn. \n Financial Performance \n ·      Operating Profit Growth: The Group's operating profit rose 24% to £24.1 million in H1 2024 (H1 2023: £19.4 million), driven by a 54% increase in the Asset Manager segment's FM EBITDA to £8.0 million and growth in the Investment Company's income on Net Investment Assets to £15.8 million. \n ·      Boosted Shareholder Value : Strategic use of balance sheet capital for share buybacks has enhanced shareholder value with £10.3 million allocated to buybacks in the first half of the year. \n ·      Interim dividend of 26.5 pence per share \n Future Developments \n ·      Strong Growth Outlook: The Group is well-positioned for continued growth in H2 2024 and beyond. \n ·      Increasing Fund Management Income: Fund Management Income is set to grow, with Private Equity Fund V expected to reach its €1 billion target by the end of 2024 and further capital raises in Credit Fund IV in H2 and in 2025 contributing to continued success. \n ·      Investment Company delivering strong, consistent returns: Investment company income robust with positive dynamics in a higher interest rate environment and as fund commitments are drawn. \n ·      On Track Performance: The Group is trading in line with expectations, reinforcing its positive outlook. \n The Interim Accounts can be found on the website https://ir.pollenstreetgroup.com/investors/financial-information/ \n   \n   \n Commenting on the H1 2024 performance, Lindsey McMurray, Chief Executive Officer, said \n \"I am very pleased with our strong first-half performance, driven by impressive growth of our asset management business and good performance from the investment company. Across both our Private Equity and Private Credit strategies, we have made strong progress with fundraising and deployment, positioning us well for market opportunities. As we enter the second half of 2024, we remain confident in our strategic direction and our ability to deliver attractive shareholder value. Our strong financial performance, successful fundraising, and deployment position us for continued growth.\" \n - Lindsey McMurray, CEO \n About Pollen Street Group Limited \n Pollen Street is an alternative asset manager dedicated to investing within the financial and business services sectors across both Private Equity and Private Credit strategies. The business was founded in 2013 and has consistently delivered top tier returns alongside growing AuM.  \n   \n Pollen Street benefits from a complementary set of asset management activities focused on managing third-party AuM (the \"Asset Manager\") together with on-balance sheet investments (the \"Investment Company\"). \n   \n The Asset Manager raises capital from high quality investors and deploys it into its Private Equity and Private Credit strategies. The strong recurring revenues from this business enable delivery of scalable growth. \n   \n The Investment Company invests in the strategies of the group delivering attractive risk adjusted returns and accelerating growth in third-party AuM of the Asset Manager through investing in Pollen Street funds, taking advantage of attractive investment opportunities and aligning interest with our investors to grow AuM. Today the portfolio is largely invested in credit assets with the allocation to Private Equity expect to increase to 30 per cent in the long term. The portfolio consists of both direct investments and investments in funds managed by Pollen Street. \n POLN is listed on the London Stock Exchange (ticker symbol: POLN). Further details are available at www.pollenstreetgroup.com . \n For investors: \n A presentation and Q&A will be held for analysts at 9 AM on 4 September 2024. \n The full presentation is available for on the website https://pollencap.zoom.us/webinar/register/WN_dHGMLEZxR8y7e5LtsZcrmg \n For further information about this announcement please contact: \n Pollen Street - Corporate Development Director \n Shweta Chugh \n +44 (0)20 3965 5081 \n Barclays Bank plc - Joint Broker \n Neal West / Stuart Muress \n +44 (0)20 7623 2323 \n Investec Bank plc - Joint Broker \n Ben Griffiths / Kamalini Hull \n +44 (0)20 7597 4000 \n  FGS Global \n Chris Sibbald / Anna Tabor \n [email protected] \n Link Company Matters Limited - Corporate Secretary \n [email protected] \n   \n \n \n Interim Accounts 2024 \n Pollen Street Group Limited \n For the period ended 30 June 2024 \n   \n \n \n   \n Pollen Street at a Glance \n About the Pollen Street Business \n Pollen Street Group Limited (the \"Company\" and together with its subsidiaries the \"Group\" or \"Pollen Street\") is an alternative asset manager dedicated to investing within the financial and business services sectors across both Private Equity and Private Credit strategies. The business was founded in 2013 and has consistently delivered top tier returns alongside growing assets under management (\"AuM\"). \n Pollen Street benefits from a complementary set of asset management activities focused on managing third-party AuM (the \"Asset Manager\") together with on-balance sheet investments (the \"Investment Company\"). \n The Asset Manager raises capital from top tier investors and deploys it into its Private Equity and Private Credit strategies. The strong recurring revenues from this business enable us to deliver scalable growth. \n The Investment Company invests in the strategies of the Group delivering attractive risk adjusted returns. The portfolio consists of both direct investments and investments in funds managed by Pollen Street predominantly in our credit strategies and a modest exposure to our private equity funds. \n Further information on the Pollen Street business can be found on the Group's website or in the Annual Report and Accounts of Pollen Street Limited as at and for the year ended 31 December 2023, which are also available on the website. \n Background & Basis of Preparation \n Pollen Street Group Limited was established on 24 December 2021, in Guernsey. On 24 January 2024, the Company became the immediate and ultimate parent of Pollen Street Limited (previously Pollen Street plc) by way of a scheme of arrangement pursuant to Part 26 of the UK Companies Act 2006. On 14 February 2024, Pollen Street Limited distributed the entire issued share capital of Pollen Street Capital Holdings Limited to the Company, this is referred to as the \"Distribution\". The Scheme and the Distribution are together referred to as the \"Reorganisation\". The Reorganisation is a capital reorganisation and has been accounted for using the book-value method. This method applies retrospectively, meaning that the interim financial statements are restated as if the Reorganisation had occurred at the beginning of the earliest period presented, i.e. from 1 January 2023. Therefore, the comparatives included in the interim financial statements are those from the Annual Report and Accounts of Pollen Street Limited as at and for the year ended 31 December 2023. Further information on the Reorganisation is provided in Note 1 to the Financial Statements. \n These interim financial statements include all of the information required in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the end of 2023. These interim financial statements have not been audited or reviewed by the Group's auditors. \n Key Figures \n \n \n •      Profit for the period - £23.6 million (H1 2023: £17.5 million) \n •      Assets under management (\"AuM\") [1] - £4.5 billion (31 December 2023: £4.2 billion) \n •      Total income - £54.3 million (H1 2023: £48.7 million) \n •      EBITDA [2] - £23.8 million (H1 2023: £20.6 million) \n •      Average-Fee-Paying AuM - £3.4 billion (H1 2023: £2.5 billion) \n •      Operating profit - £24.1 million (H1 2023: £19.4 million) \n •      Dividend declared - £16.5 million (H1 2023: £15.8 million) \n   \n \n   \n CEO Report \n Lindsey McMurray - Chief Executive Officer \n In the first half of 2024 we have continued to build on our strong progress during 2023 with our fundraising on track and driving growth in Total Assets under Management (\"AuM\") and ongoing capital deployment supporting our Fee-Paying Assets under Management (\"Fee Paying AuM\"). With recent commitments to Private Equity Fund V and Private Credit Fund IV, our balance sheet continues to enable us to build third-party AuM. \n Our AuM increased to £4.5 billion as at 30 June 2024 (31 December 2023: £4.2 billion), and with a further close in July 2024 of Private Equity Fund V together with a co-invest fund brings AuM to £4.8 billion as at 31 July 2024. \n Fundraising and Deployment: Strategic Capital Allocation \n We have had continued success in our fundraising activities with a notable increase in the Private Credit funds, which raised c.£0.6 billion within the first half of the year. The first close of Private Credit Fund IV received investor commitments of c.£300 million, of which £70 million was from the Investment Company. This was further supported by the closing of an separately managed account (\"SMA\") , with a UK local Pension Fund of £280 million. Fundraising for Private Credit Fund IV towards our £1 billion target, will continue through 2025. \n Private Equity Fund V progresses well and with advanced discussions with investors we anticipate meeting our €1 billion target by the end of the year. \n Funds raised have been deployed in a number of high-quality investments , positioning us well for continued top-tier performance. \n Private Equity Strategy: Strategic growth investments \n Our Private Equity strategy aligns with industry megatrends: digital transformation, financial services unbundling, high standards of regulation, and the green transition. We partner with top management teams to build next-generation leaders. Our thematic origination identifies fast-growing, technology-enabled businesses with strong foundations. We focus on creating customer-centric, data-driven organisations poised to become market leaders, driving technological advancement, international and product development, buy-and-build strategies, and ESG initiatives. \n Credit Strategy: Controlled risk \n Our credit strategy provides asset-based lending facilities to non-bank lenders, leasing businesses, technology companies, and other firms with diverse portfolios generating contractual cash flows. We leverage our team's extensive experience to selectively invest in SME loans, mid-market residential family homes, government-backed receivables, and electric-vehicle fleet financings, delivering superior returns with controlled risk, significant credit protection, achieved through both asset security and transaction structuring. \n Investment Company: Financial resilience and growth \n Our balance sheet delivers consistently strong performance with investments across our strategies but predominantly focussed on our credit strategy. We made a £70 million commitment to Private Credit Fund IV in March and £22 million to Private Equity Fund V in July, to take the total commitment to £42 million in Private Equity Fund V. In June we refinanced the term debt which extended the maturity to 2028, providing capacity for the balance sheet transition to funds and reducing the overall cost of capital. Further, strategic use of balance sheet capital under our Capital Allocation Framework, with £10.3 million allocated for buybacks in the first half of the year, has driven earnings per share. \n Sector outlook: Continued growth \n Our firm is strategically positioned to capitalise on the growing allocation to Private Equity and Private Credit. The alternative asset management sector is experiencing a growth trajectory, with alternatives generating over half of global AuM revenue but constituting less than a quarter of total AuM [3] . This trend underscores the increasing allocations to high return alternative investments. By 2028, specifically, private equity and private debt are projected to contribute approximately 70% of the total revenue from alternatives, attributed to the high-margin nature of these products. Our expertise and established track record in these areas position us favourably to seize market opportunities and deliver superior value to our clients. \n ESG: Responsible investing for positive impact \n We are committed to investing responsibly, aiming to deliver positive outcomes for our investors, people, industry and society. Sustainability and long-term thinking are key elements to our investment strategy. We are proud of embedding our proprietary ESG scoring system with our Private Credit borrowers with nine ESG ratchets to incentivise achieving ESG goals now implemented across our portfolio. In July, we released our ESG report for 2023, reflecting on the progress we have made towards our targets and sharing more detail of how we work with portfolio companies to: \n •      reach carbon neutrality; \n •      set diversity and inclusion targets; and \n •      promote the strongest possible governance standards. \n Read more in our 2023 ESG Report, which is available on our website: https://www.pollenstreetgroup.com/responsible-investing/esg-reports/ \n We believe ESG is crucial for building more sustainable businesses. Our ESG scoring helps identify risks and opportunities early, enabling informed decisions and investment in fair and transparent businesses that have the foundations to grow sustainably. This strategy allows us to make improvements and capitalise on opportunities, ultimately delivering great returns and building great businesses. \n CFO Appointment \n We were pleased to announce the appointment of Lucy Tilley as our new CFO. Lucy joined the team in June and her extensive experience and financial expertise will be invaluable as we build Pollen Street for the long term. We would also like to extend our gratitude to Julian Dale for his dedicated service and significant contributions to our success to date and wish him well. \n Road Ahead: Sustained value creation \n As we enter the second half of 2024, we remain confident in our strategic direction and our ability to deliver sustained value to clients and shareholders. Our strong financial performance, successful fundraising, and strategic fund deployment position us for continued growth despite the very competitive fundraising environment. \n Strategic Priorities: \n •      Fundraise for Private Credit Fund IV and Private Equity Fund V; \n •      Deploy funds raised in H1 2024 within Private Credit; \n •      Achieve £4.0 billion of Fee-Paying AUM by the end of 2024; and \n •      Evaluate share buybacks within the capital allocation framework. \n   \n I would like to thank our fund investors and shareholders for their support; our team for all their hard work in achieving this strong start to the year; and the Board for its guidance. As I look forward to the rest of 2024, I am confident in our potential for continued growth and consistent delivery for our investors and shareholders. \n Lindsey McMurray Chief Executive Officer \n 3 September 2024 \n \n \n   \n CFO Report \n Lucy Tilley - Chief Financial Officer \n I am pleased to present Pollen Street's Interim Financial Report for the six months ended 30 June 2024. It has been a successful period, with strong growth in our financial performance and good progress towards our 2024 targets. \n We completed the first close of Private Credit Fund IV in March, with further closes expected throughout the second half of the year with the target to raise £1 billion in total commitments. We are pleased with the strong support of existing investors from Private Credit Fund III continuing their investment into Private Credit Fund IV, demonstrating strong support for our strategy from our Limited Partner (\"LP\") base. We also closed a sizeable SMA from a UK public pension plan in February with a subsequent upsize in April. Deployment of the new funds has started well with the business having a large pipeline of attractive new deals, many of which are expected to complete in the second half of the year. \n Private Equity Fund V has been our core focus for fundraising in Private Equity, as we continue to develop new relationships with investors and deepen existing ones, and we expect to complete the fundraising of Private Equity Fund V by year end. \n Total AuM increased to £4.5 billion as at 30 June 2024 (31 December 2023: £4.2 billion). In addition to the activity in the first half of 2024, the July 2024 close of Private Equity Fund V and a co-invest fund brings AuM to £4.8 billion as at 31 July 2024. We are pleased with the strong support from new and existing investors in both Private Equity and Private Credit. We remain confident in delivering total commitments in line with our targets. \n On 24 January 2024, Pollen Street Group Limited (the \"Company\") became the immediate and ultimate parent of Pollen Street Limited (previously Pollen Street plc) by way of a scheme of arrangement pursuant to Part 26 of the UK Companies Act 2006. On 14 February 2024, Pollen Street Limited distributed the entire issued share capital of Pollen Street Capital Holdings Limited to the Company, this is referred to as the \"Distribution\". The Scheme and the Distribution are together referred to as the \"Reorganisation\". The Reorganisation is a capital reorganisation and has been accounted for using the book-value method. This method applies retrospectively, meaning that the interim financial statements are restated as if the Reorganisation had occurred at the beginning of the earliest period presented, i.e. from 1 January 2023. Further information on the Reorganisation is provided in Note 1 to the Financial Statements. \n The operating profit for the Group increased by 24 per cent to £24.1 million for H1 2024 (H1 2023: £19.4 million). The main driver of this material increase was the 45 per cent increase in the operating profit of the Asset Manager segment to £8.4 million (H1 2023: £5.8 million) and a slight increase in operating profit of the Investment Company which was strong performance given the balance sheet rotation to funds. \n The Investment Asset portfolio delivered another period of strong and stable performance with Income on Net Investment Assets of £15.8 million (H1 2023: £15.4 million). In particular the portfolio generated a strong level of cash of £170.3 million (H1 2023: £135.4 million), driven by a high level of realisations demonstrating the quality of the assets especially in the current environment where other credit strategies are typically exhibiting lower liquidity. \n New investments from the Investment Company have been aligned to the fundraising of Pollen Street managed funds with £163 million currently committed to Pollen Street managed funds. These commitments are typically drawn over several years and therefore with the strong cash generation in the period the overall Investment Asset portfolio reduced in size versus the year end and the net debt-to-tangible-equity ratio reduced to 28 per cent (31 December 2023: 54 per cent). \n Asset Manager growth \n Assets under management are tracked on a total AuM and fee-paying basis. Total AuM tracks the commitments that investors have made into funds managed by the Asset Manager, whereas the Average Fee-Paying AuM tracks the basis on which the Group earns management fees, with the average calculated from the opening and closing positions. For Private Equity, the Fee-Paying AuM is the committed capital in the funds, moving to invested capital at the earlier of five years from first close or when the subsequent flagship fund holds its first close. Co-investment vehicles are typically non-fee paying. Fee-Paying AuM for Private Credit is the net invested amount. Total AuM was £4.5 billion as at 30 June 2024 (31 December 2023: £4.2 billion), increasing to £4.8 billion at 31 July 2024 with a further step-up in AuM expected in the second half of 2024 as fund raising for Private Equity Fund V and Private Credit Fund IV continues. \n   \n   \n   \n \n \n \n \n Total AuM \n \n \n H1 202 4 \n (£ billion) \n \n \n 31-Dec-23 \n (£ billion) \n \n \n H1 2023 \n (£ billion) \n \n \n \n \n Private Equity \n \n \n 2.7 \n \n \n 2.6 \n \n \n 1.8 \n \n \n \n \n Credit \n \n \n 1.8 \n \n \n 1.6 \n \n \n 1.6 \n \n \n \n \n Total \n \n \n 4.5 \n \n \n 4.2 \n \n \n 3.4 \n \n \n \n \n   \n \n \n \n \n  Average Fee-Paying AuM \n \n \n H1 202 4 \n (£ billion) \n \n \n H1 2023 \n (£ billion) \n \n \n \n \n Private Equity \n \n \n 2.1 \n \n \n 1.1 \n \n \n \n \n Credit \n \n \n 1.3 \n \n \n 1.4 \n \n \n \n \n Total \n \n \n 3.4 \n \n \n 2.5 \n \n \n \n \n   \n Fundraising has increased Private Equity Average Fee-Paying AUM to £2.1 billion (H1 2023: £1.1 billion), with Average Fee-Paying AUM for the Credit strategy at £1. 3 billion for H1 2024 (H1 2023: £1.4 billion) with the reduction driven by the Investment Company asset portfolio. We expect Average Fee-Paying AUM for the Credit strategy to increase as the newly raised funds are deployed in H2 2024 and convert into fee-paying AuM .  Combined, this represents a growth rate of 36 per cent in Average Fee-Paying AUM. Since the period end, Private Equity Average Fee-Paying AuM has stepped up with the additional closing of Private Equity Fund V. \n \n \n \n \n Asset Manager Profitability \n \n \n   H1 2024 (£ million) \n \n \n H1 2023 (£ million) \n \n \n \n \n Total Income \n \n \n 26.8 \n \n \n 21.7 \n \n \n \n \n Administration Costs \n \n \n (18.4) \n \n \n (15.9) \n \n \n \n \n Operating Profit \n \n \n 8.4 \n \n \n 5.8 \n \n \n \n \n Depreciation of lease asset \n \n \n (0.4) \n \n \n (0.6) \n \n \n \n \n Fund Management EBITDA \n \n \n 8.0 \n \n \n 5.2 \n \n \n \n \n   \n Fund Management Income comprises management fees, performance fees and income from carried interest. Revenue growth has been driven by increases in the Group's Average Fee-Paying AuM and income from carried interest. Total Income increased by 23 per cent to £26.8 million for H1 2024 (H1 2023: £21.7 million). Fund Management Administration Costs increased at a lower rate of 16 per cent to £18.4 million for H1 2024 (H1 2023: £15.9 million). This moderate increase in costs has been driven predominantly by promotions and pay rises within the team, with a slight increase in headcount. \n In the Asset Manager segment Operating Profit increased by 45 per cent to £8.4 million (H1 2023: £5.8 million). The Group tracks the performance of this segment using Fund Management EBITDA, which is the Operating Profit less the accounting cost of the office lease [4] , which was a £0.4 million charge for H1 2024 (H1 2023: £0.6 million). Fund Management EBITDA has grown by 54 per cent to £8.0 million (H1 2023: £5.2 million), reflecting the inherent operational leverage in the Asset Manager. \n \n \n \n \n Asset Manager Financial Ratios \n \n \n H1 2024 \n \n \n H1 2023 \n \n \n \n \n Management Fee Rate \n (% of Average Fee-Paying AuM) \n \n \n 1.26% \n \n \n 1.30% \n \n \n \n \n Performance Fee Rate \n (% of Fund Management Income) \n \n \n 21% \n \n \n 25% \n \n \n \n \n Fund Management EBITDA Margin \n (% of Fund Management Income) \n \n \n 30% \n \n \n 24% \n \n \n \n \n   \n In general, Private Equity funds charge fees on committed capital. Investors who join these funds after the first investors' admission date are charged catch-up fees, so all investors pay fees from the date of the first close. In general, Private Credit funds charge fees on net invested capital. Capital is generally recycled until the end of the investment period. Management fee rates remain the same for the duration of the funds. We have guided to a long-term management fee rate of between 1.25 per cent and 1.5 per cent. This depends on the revenue mix including the relative size of Private Equity compared to Private Credit. The Management Fee Rate for H1 2024 was 1.26 per cent (H1 2023: 1.30 per cent). \n In addition to management fees, the Group earns performance fees and carried interest. These fees allow the Group to share in the profits of the funds under management subject to meeting certain hurdles. The Group earns 25 per cent of the carried interest in the most recent vintage of all flagship funds and all future funds. For the Private Equity strategy, this includes Private Equity Funds IV and V. Carried interest is generally 20 per cent of the Private Equity fund returns over a hurdle of 8 per cent per annum with full catch-up. For the Private Credit strategy, carry is earned on Private Credit Funds III and IV and certain SMAs. Carried interest for the Private Credit funds is generally 10 per cent of returns with a 5 to 6 per cent hurdle and full catch-up. Performance fees and carried interest for H1 2024 were 21 per cent of Fund Management Income for the period (H1 2023: 25 per cent). This is in the middle of the range of the long-term guidance of 15 per cent to 25 per cent and reflects stable performance fee and carry valuation growth despite turbulent markets. \n The Fund Management EBITDA Margin increased to 30 per cent for H1 2024 (H1 2023: 24 per cent). We expect Fund Management EBITDA margin to continue to grow as the Group increases its revenue by raising additional funds under the Private Equity and Private Credit strategies. We are targeting a Fund Management EBITDA Margin above 50 per cent in the long-term. \n Investment Company performance \n \n \n \n \n Investment Company Segment \n \n \n H1 2024 \n \n \n H1 2023 \n \n \n \n \n Investment Assets \n \n \n £430 million \n \n \n £561 million \n \n \n \n \n Average Net Investment Assets \n \n \n £329 million \n \n \n £343 million \n \n \n \n \n Income on Net Investment Assets \n \n \n £15.8 million \n \n \n £15.4 million \n \n \n \n \n Return on Net Investment Assets \n \n \n 9.7% \n \n \n 9.1% \n \n \n \n \n   \n   \n   \n   \n   \n The Investment Company delivered strong returns in the period with return on net investment assets increasing to 9.7 per cent and Income on Net Investment Assets of £15.8 million. This performance was driven by robust performance in the underlying portfolio with strong levels of risk adjusted income. In particular the portfolio has seen high levels of cash generation in the first half of the year of £170.3 million (H1 2023: £135.4 million) driven by a high level of realisations. This cash generation demonstrates the quality of the portfolio and will facilitate the rotation of the portfolio to focus on investing in Pollen Street managed funds from direct investments. \n As at 30 June 2024, the investment portfolio was £430 million and well diversified across deals and borrowers with the largest investment accounting for 17 per cent of the portfolio. The portfolio is 91 per cent invested in Credit Assets (either in direct deals or through Pollen Street managed funds) and 9 per cent invested in Private Equity Assets (either in direct deals or through Pollen Street managed funds). \n We have made good progress with the rotation of the investment portfolio to support fundraising with £163 million committed to Pollen Street managed funds. These commitments were £67 million drawn as at 30 June 2024 and are expected to continue to draw over the investment period of the funds. The phased drawdown of fund commitments combined with the high cash realisations in the period has led to a reduction in the size of the overall asset portfolio and a corresponding reduction in the debt position of the group to with a reduction in the debt-to-tangible-equity ratio from 59 per cent to 37 per cent. \n We completed a new 4 year £200 million senior debt facility on 10 June 2024 refinancing the previous facility and achieving a lower margin. The benefits of lower interest expense will be realised in H2 2024 and beyond. As at 30 June 2024, this facility was drawn £85.0 million and alongside the asset specific non recourse SPV facilities the total leverage for the Group was £129.8 million (31 December 2023: £210.8 million). In addition the Group had £29.7 million (31 December 2023: £19.7 million) of cash resulting in a strong liquidity position and a net debt-to-tangible equity ratio of 28 per cent (31 December 2023: 54 per cent). \n Profit before tax and tax \n Profit before tax for the Group increased by 26 per cent to £23.2 million for H1 2024 (H1 2023: £18.4 million). The main drivers of this are the increase of £2.6 million in the operating profit from the Asset Manager segment and a slight increase in operating profit of the Investment Company. \n The charge for depreciation and amortisation is £0.9 million (H1 2023: £1.0 million). This relates to a charge of £0.2 million (H1 2023: £0.1 million) associated with the depreciation of the Group's fixed assets, a charge of £0.4 million (H1 2023: £0.6 million) associated with the depreciation of the Group's leased assets, in addition to a charge of £0.3 million (H1 2023: £0.3 million) associated with the amortisation of intangible assets representing the value of customer relationships. \n As a result of the Reorganisation, the Group now incurs corporation tax on all of its activities as the Investment Company is no longer an investment trust. The current tax charge for the period was £1.4 million (H1 2023: £0.7 million), benefitting from unused tax losses arising from previously incurred management expenses in the Investment Company following the Reorganisation. The Group is now also able to recognise a deferred tax asset in respect of the balance of these unused tax losses. The origination of the deferred tax asset in the current period has resulted in an overall deferred tax credit for the period of £1.8 million (H1 2023: £0.2 million charge). The deferred tax asset of £2.8 million as at 30 June 2024 in respect of previously incurred management expenses is expected to reverse out by the year end. \n \n \n \n \n \n H1 2024 (£ million) \n \n \n H1 2023 (£ million) \n \n \n \n \n Operating profit of Asset Manager \n \n \n 8.4 \n \n \n 5.8 \n \n \n \n \n Operating profit of Investment Company \n \n \n 15.8 \n \n \n 15.4 \n \n \n \n \n Operating loss of Central segment \n \n \n (0.1) \n \n \n (1.8) \n \n \n \n \n Operating profit of Group \n \n \n 24.1 \n \n \n 19.4 \n \n \n \n \n Depreciation and amortisation \n \n \n (0.9) \n \n \n (1.0) \n \n \n \n \n Profit before tax \n \n \n 23.2 \n \n \n 18.4 \n \n \n \n \n Corporation tax \n \n \n 0.4 \n \n \n (0.9) \n \n \n \n \n Profit after tax \n \n \n 23.6 \n \n \n 17.5 \n \n \n \n \n   \n Earnings per share and dividend \n Earnings per share (basic and diluted) increased by 36 per cent to 36.9 pence per share (H1 2023: 27.2 pence per share). 2024 is the first year in which Pollen Street will be issuing dividends semi-annually, with the Q4 2023 dividend, paid in March 2024, being the last quarterly dividend. \n The Board is pleased to confirm an interim dividend for the period ending 30 June 2024 of 26.5 pence per share reflecting the Group's guidance that the Group will pay a dividend of no lower than £33 million in respect of 2024 and that the Group will grow dividends progressively thereafter. This represents a cash outlay of £16.5 million. In H1 2023, two quarterly dividends of 16.0 pence per share were declared, representing a cash outlay of £15.8 million. The record date for the interim dividend will be 13 September 2024 and the payment date 11 October 2024. The ex-dividend date will be 12 September 2024. Following the Reorganisation, dividends will be payable half yearly, with the final dividend for the year being paid after approval by Shareholders at the AGM. \n Outlook \n The Group remains in a strong position for growth in H2 2024 and beyond. Fund Management Income is expected to continue to grow with the final close of Private Equity Fund V anticipated to be at its target of €1 billion, and further capital raises in Private Credit Fund IV and their subsequent deployment under the Credit strategies. The balance sheet has strong downside protection from credit risk, with a high-quality portfolio of assets, and has shown robust performance in H1 2024. The Group is trading in line with expectations. \n   \n Lucy Tilley \nChief Financial Officer \n 3 September 2024 \n \n \n   \n Environmental, Social and Governance ( \" ESG \" ) \n Pull out quote: \n \"We are committed to operating and investing responsibly, constantly maintaining and improving our approach to make sure we focus on actions that generate positive impact for our investors, people, portfolio and wider society.\" \n Our approach to ESG \n At Pollen Street, we have a proud history of thinking, behaving and investing responsibly. We believe in the potential for positive impact through the work that we are passionate about. We are committed to maintaining and enhancing our focus on actions that generate positive impact for our investors, people, portfolio and wider society. \n In the first half of 2024, Pollen Street has continued to make progress, helping portfolio companies and borrowers to achieve their sustainability goals. This has been achieved through the spotlight on data and scoring, cross-portfolio collaboration, and effective monitoring and measurement through KPIs and ESG ratchets. With the evolving regulatory landscape, we have also been working to strengthen our approach to reporting and climate risk management with a focus on the evolving regulatory environment. \n Highlights in the first half of the year include: \n ·      Delivering measurable change : 2023 was Pollen Street's third year of gathering data in our proprietary data model. This allows us to both rank and score our investments across our Private Equity and Credit portfolios as well as tracking progress against the previous year. We have continued the role of ESG ratchets with our Credit borrowers, and we are pleased to announce that there are now nine ratchets implemented across our portfolio. \n ·      Maintaining carbon neutral and paving the way towards decarbonisation : Pollen Street is pleased to confirm that we have maintained a carbon neutral status for the second consecutive year, meeting the goal we set ourselves in 2020. As part of our collaboration with the Initiative Climate International, we are further challenging ourselves to deliver against our decarbonisation roadmap that shows the portfolio's progress against targets. Currently 100% of our Private Equity portfolio companies are committed to decarbonisation roadmap and 48% achieved carbon neutral status by the end of 2023. \n ·      Advancing DE&I as an industry role model : Pollen Street published the results of its fourth annual internal Diversity, Equity & Inclusion (\"DE&I\") survey in our 2023 annual report. The findings continue to demonstrate continued improvement, an increase of state-educated team members from 66% to 70%. In contrast, for Private Equity as an industry, 70% of employees are private-school educated (source Sutton Trust). \n ·      Sharing best practice : In the year-end report we built out some key themes; putting a spotlight on Progressive as a core value, identifying innovations within portfolio companies, optimising supply chains, and investing in AI and other technology to drive sustainable growth. \n Pollen Street's latest ESG report was published in July \n This report highlights our progress against our ESG targets and impact agenda. It details our carbon and climate roadmap, our approach to diversity, equity, and inclusion, and our efforts to build better, more sustainable businesses through robust corporate governance, operational excellence, and inclusive cultures. The report also showcases examples of impactful actions across Pollen Street and our Private Equity and Credit portfolio, demonstrating how our investments drive positive change. \n https://www.pollenstreetgroup.com/responsible-investing/esg-reports/ \n Our ESG Strategy \n Our ESG strategy is designed to deliver impact for the benefit of all our stakeholders. We have a clear ambition with initiatives across each of the Environment, Social and Governance areas. Below we set out our key objectives, highlights and focus areas under the Environmental, Social and Governance pillars. \n   \n   \n   \n   \n   \n   \n \n \n \n \n \n ENVIRONMENT                   SOCIAL                                                         GOVERNANCE \n \n \n \n \n AMBITION \n \n \n   \n Create a lasting environmental impact \n \n   \n Promote DEI and provide finance for socially-impactful products & propositions \n \n \n   \n Regulatory best practice through all operational processes \n \n \n \n \n \n \n \n   \n Fund green alternatives for sustainable homes and transport \n \n \n inancial Inclusion - \n loans and other financial products made available to a broader audience \n   \n Enable SMEs to promote growth and job creation in Pollen Street's markets \n   \n Creating opportunities to reduce inequalities - promoting diversity, equity and inclusion \n \n   \n G transparency with clear reporting and communications \n   \n Effective AML & cyber procedures and governance \n   \n Engagement with portfolio companies on governance, to identify gaps and provide support \n   \n Responsible lending - best practice amongst our credit partners \n \n \n \n \n \n Minimise operational carbon footprint, supporting carbon reduction plans and net zero commitments \n \n \n \n \n \n Consider climate risk as part of investment and risk management process \n \n \n \n RECENT \n HIGHLIGHTS \n \n \n   \n Fourth year of carbon measurement \n \n   \n Strengthened community & charity efforts with Future First and Human Rights \n Watch \n \n \n   \n ESG margin ratchet now in place for nine credit facilities driving uplift in ESG scores \n \n \n \n \n \n \n  Introduced Private Markets decarbonisation roadmap to map portfolio activities \n   \n \n \n DEI initiatives across firm and portfolio - Second year of 10,000 Black Interns \n \n \n Average score improvement of 17% in PE ESG scores \n \n \n \n \n \n \n \n Maintained carbon neutral status for 2023 emissions \n \n \n   \n   \n \n \n   \n Delivered initial TCFD disclosures, engaged third party to support climate risk framework and roadmap \n \n \n \n \n SHORT-TERM FOCUS \n \n \n   \n Strengthen carbon measurement activities for carbon footprint, including Scope 3 emissions \n Tracking net zero commitments for firm and portfolio \n \n \n   \n Broaden DEI targets and measures \n   \n Collaborate with community partners to deliver impactful change \n \n \n   \n Continue to enhance oversight and regulatory governance frameworks \n   \n Continue to deliver ESG training and education across the firm and portfolio \n \n \n \n \n \n \n \n \n   \n Continue to invest in sustainable finance propositions \n \n \n \n \n \n Continued focus on strengthening supply chain sustainability procedures \n \n \n \n \n   \n Driving sustainability outcomes \n Commitment to positive ESG outcomes is manifested through direct and measurable goals at both Group and portfolio level. These include: \n ·      Pollen Street maintaining a carbon neutral status for each year and working with our portfolio companies to be net zero within five years of investment (for new investments after 2021); and \n ·      Pollen Street is committed to promoting strong governance throughout the portfolio including the universal inclusion of ESG matters on all portfolio company board agendas. \n To strengthen commitments to ESG and sustainability, we have incorporated sustainability linked factors, including an ESG margin ratchet mechanism into our new credit facilities as an incentive to achieve ESG goals. Under this mechanism, Pollen Street provides margin reductions on facilities, subject to the counterparty improving their ESG score and achieving performance targets, such as achieving net zero status, and there is a corresponding margin increase if their scores do not improve or meet agreed thresholds. As of July 2024, we are pleased to announce we have implemented nine live ESG ratchets across our Credit portfolio. \n Looking ahead \n As set out in the ESG report, we continue to strengthen best-practice and collaboration aligned to our ESG framework, with a focus on improving the sustainability performance of our investments, as well as addressing and mitigating risks. Focus areas include improvements to ESG reporting and consistency considering evolving ESG regulatory considerations, Governance structures and strengthening approaches to assess and monitor supply chain sustainability as well as ongoing stewardship and collaboration across the Private Equity and Credit portfolios. \n   \n Alison Collins \n Head of ESG \n 3 September 2024 \n   \n   \n   \n   \n   \n   \n \n \n   \n Risk Management & Principal Risks and Uncertainties \n The Directors do not consider there to have been any material changes to the principal risks and uncertainties since the 2023 Annual Report and Accounts were published and the Directors expect the principal risks and uncertainties not to change over the second half of 2024. \n Details of the Group's approach to risk management is set out within pages 28 to 32 of the 2023 Annual Report and Accounts, which is available in the financial information section of the Group's website. \n The principal risks within the 2023 Annual Report and Accounts include: economic & market conditions, fund raising, management fee rates and other fund terms, on balance sheet investment underperformance, ESG and sustainability performance, talent and retention, and information security and resilience. \n   \n   \n   \n \n \n   \n Statement of Directors ' Responsibilities in Respect of the Financial Statements \n \n \n \n The Directors, being the persons responsible, confirm that to the best of their knowledge: \n a)     the condensed set of Financial Statements contained within the Interim Report have been prepared in accordance with UK-adopted IAS 34 'Interim Financial Reporting' and the Disclosure and Transparency Rules (\"DTR\") sourcebook of the UK's Financial Conduct Authority, and gives a true, fair, balanced and understandable view of the assets, liabilities, financial position and comprehensive income of the Group; \n b)     the Interim Report includes a fair review, as required by Disclosure and Transparency Rule 4.2.7R, of important events that have occurred during the first six months of the financial year, their impact on the condensed set of unaudited Financial Statements, and a description of the principal risks and perceived uncertainties for the remaining six months of the financial year; and \n c)     the Interim Report includes a fair review of the information concerning related parties' transactions as required by Disclosure and Transparency Rule 4.2.8R. \n Signed on behalf of the Board by: \n   \n Robert Sharpe \nChairman \n3 September 2024 \n \n \n \n   \n   \n   \n   \n \n \n   \n Condensed Consolidated Statement of Comprehensive Income \n \n \n \n \n   \n \n \n Notes \n \n \n For the period ended 30 June 2024 \n \n \n For the period ended 30 June 2023 \n \n \n \n \n   \n \n \n   \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Management fee income \n \n \n 6 \n \n \n 18,773 \n \n \n 13,188 \n \n \n \n \n Carried interest and performance fee income \n \n \n 6, 9 \n \n \n 3,814 \n \n \n 3,771 \n \n \n \n \n Interest income on Credit Assets held at amortised cost \n \n \n 6 \n \n \n 24,223 \n \n \n 29,089 \n \n \n \n \n Gains on Investment Assets held at fair value \n \n \n 6 \n \n \n 7,530 \n \n \n 2,630 \n \n \n \n \n Total income \n \n \n \n \n \n 54,340 \n \n \n 48,678 \n \n \n \n \n Credit impairment (charge) / release \n \n \n 6, 11 \n \n \n (1,152) \n \n \n 289 \n \n \n \n \n Third-party servicing costs \n \n \n 6 \n \n \n (499) \n \n \n (1,070) \n \n \n \n \n Net operating income \n \n \n \n \n \n 52,689 \n \n \n 47,897 \n \n \n \n \n Administration costs \n \n \n 6 \n \n \n (19,579) \n \n \n (18,309) \n \n \n \n \n Finance costs \n \n \n 6, 10 \n \n \n (9,045) \n \n \n (10,152) \n \n \n \n \n Operating profit \n \n \n \n \n \n 24,065 \n \n \n 19,436 \n \n \n \n \n Depreciation \n \n \n 6 \n \n \n (555) \n \n \n (680) \n \n \n \n \n Amortisation \n \n \n 5, 6 \n \n \n (320) \n \n \n (320) \n \n \n \n \n Profit before tax \n \n \n \n \n \n 23,190 \n \n \n 18,436 \n \n \n \n \n Tax credit / (charge) \n \n \n 12 \n \n \n 381 \n \n \n (977) \n \n \n \n \n Profit after tax \n \n \n \n \n \n 23,571 \n \n \n 17,459 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Other comprehensive income \n \n \n \n \n \n \n \n \n \n \n \n \n \n Foreign currency translation reserve \n \n \n \n \n \n (32) \n \n \n (360) \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Total comprehensive income \n \n \n \n \n \n 23,539 \n \n \n 17,099 \n \n \n \n \n Earnings per share (basic and diluted) \n \n \n 14 \n \n \n 36.9 pence \n \n \n 27.2 pence \n \n \n \n \n No operations were discontinued during the period. \n The notes to the accounts form an integral part of the financial statements. \n   \n \n \n   \n Condensed Consolidated Statement of Financial Position \n \n \n \n \n   \n \n \n   \n \n \n As at 30 June 2024 \n \n \n As at 31 December 2023 \n \n \n \n \n   \n \n \n Notes \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Non-current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n Credit Assets at amortised cost \n \n \n 11 \n \n \n 327,592 \n \n \n 444,490 \n \n \n \n \n Investment Assets held at fair value through profit or loss \n \n \n 8 \n \n \n 102,605 \n \n \n 88,220 \n \n \n \n \n Fixed assets \n \n \n \n \n \n 1,102 \n \n \n 1,277 \n \n \n \n \n Goodwill and intangible assets \n \n \n 5 \n \n \n 230,071 \n \n \n 230,391 \n \n \n \n \n Lease assets \n \n \n 13 \n \n \n 3,395 \n \n \n 3,817 \n \n \n \n \n Carried interest \n \n \n 9 \n \n \n 21,146 \n \n \n 17,332 \n \n \n \n \n Deferred tax asset \n \n \n 12 \n \n \n 2,774 \n \n \n - \n \n \n \n \n Total non-current assets \n \n \n \n \n \n 688,685 \n \n \n 785,527 \n \n \n \n \n   \n Current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash and cash equivalents \n \n \n \n \n \n 29,726 \n \n \n 19,746 \n \n \n \n \n Receivables \n \n \n 15 \n \n \n 25,116 \n \n \n 17,942 \n \n \n \n \n Derivative assets held at fair value through profit or loss \n \n \n 18 \n \n \n 65 \n \n \n - \n \n \n \n \n Total current assets \n \n \n \n \n \n 54,907 \n \n \n 37,688 \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n Total assets \n \n \n \n \n \n 743,592 \n \n \n 823,215 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Current liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n Payables \n \n \n 16 \n \n \n 18,688 \n \n \n 19,149 \n \n \n \n \n Lease payables \n \n \n 13 \n \n \n 1,444 \n \n \n 1,444 \n \n \n \n \n Current tax payable \n \n \n \n \n \n 2,385 \n \n \n 981 \n \n \n \n \n Deferred tax liability \n \n \n 12 \n \n \n 3,615 \n \n \n 2,628 \n \n \n \n \n Derivative liabilities held at fair value through profit or loss \n \n \n 18 \n \n \n - \n \n \n 179 \n \n \n \n \n Interest-bearing borrowings \n \n \n 10 \n \n \n 39,927 \n \n \n 132,738 \n \n \n \n \n Total current liabilities \n \n \n \n \n \n 66,059 \n \n \n 157,119 \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Total assets less current liabilities \n \n \n \n \n \n 677,533 \n \n \n 666,096 \n \n \n \n \n Non-current liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n Lease payables \n \n \n 13 \n \n \n 2,123 \n \n \n  2,708 \n \n \n \n \n Interest-bearing borrowings \n \n \n 10 \n \n \n 89,871 \n \n \n 78,026 \n \n \n \n \n Total non-current liabilities \n   \n \n \n \n \n \n 91,994 \n \n \n 80,734 \n \n \n \n \n Net assets \n \n \n \n \n \n 585,539 \n \n \n 585,362 \n \n \n \n \n Shareholders' funds \n \n \n \n \n \n \n \n \n \n \n \n \n \n Ordinary share capital \n \n \n 19 \n \n \n 627 \n \n \n 642 \n \n \n \n \n Share premium \n \n \n \n \n \n 562,412 \n \n \n - \n \n \n \n \n Retained earnings \n \n \n 20 \n \n \n 22,801 \n \n \n 8,094 \n \n \n \n \n Foreign Currency Translation Reserve \n \n \n 20 \n \n \n (301) \n \n \n (269) \n \n \n \n \n Other reserves \n \n \n \n \n \n - \n \n \n 576,895 \n \n \n \n \n Total shareholders' funds \n \n \n \n \n \n 585,539 \n \n \n 585,362 \n \n \n \n \n The notes to the accounts form an integral part of the financial statements. \n Condensed Consolidated Statement of Changes in Shareholders' Funds \n For the period ended 30 June 2024 \n \n \n \n \n   \n \n \n Ordinary \nShare \nCapital \n \n \n Share \nPremium \n \n \n Retained Earnings \n \n \n Special Distributable Reserve \n \n \n Merger Reserves \n \n \n Foreign Currency Translation Reserve \n \n \n Total \nEquity \n \n \n \n \n   \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Shareholders' funds as at \n1 January 2024 \n \n \n 642 \n \n \n - \n \n \n 8,094 \n \n \n 351,625 \n \n \n 225,270 \n \n \n (269) \n \n \n 585,362 \n \n \n \n \n Reallocation of reserves \n \n \n - \n \n \n 576,895 \n \n \n - \n \n \n (351,625) \n \n \n (225,270) \n \n \n - \n \n \n - \n \n \n \n \n Profit after taxation \n \n \n - \n \n \n - \n \n \n 23,571 \n \n \n - \n \n \n - \n \n \n - \n \n \n 23,571 \n \n \n \n \n Reclassification of transaction costs  \n \n \n - \n \n \n 517 \n \n \n (517) \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Transaction costs in relation to the Scheme \n \n \n - \n \n \n (4,699) \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (4,699) \n \n \n \n \n Dividend paid \n \n \n - \n \n \n - \n \n \n (8,347) \n \n \n - \n \n \n - \n \n \n - \n \n \n (8,347) \n \n \n \n \n Buybacks \n \n \n (15) \n \n \n (10,301) \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (10,316) \n \n \n \n \n Foreign currency translation reserve \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (32) \n \n \n (32) \n \n \n \n \n Shareholders' funds as at \n30 June 2024 \n \n \n 627 \n \n \n 562,412 \n \n \n 22,801 \n \n \n - \n \n \n - \n \n \n (301) \n \n \n 585,539 \n \n \n \n \n For the year ended 31 December 2023 \n \n \n \n \n   \n \n \n Ordinary \nShare \nCapital \n \n \n Share \nPremium \n \n \n Retained Earnings \n \n \n Special Distributable Reserves \n \n \n Merger Reserves \n \n \n Foreign Currency Translation Reserve \n \n \n Total equity \n \n \n \n \n   \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Shareholders' funds as at \n1 January 2023 \n \n \n 689 \n \n \n 299,599 \n \n \n 2 \n \n \n 51,979 \n \n \n 225,270 \n \n \n - \n \n \n 577,539 \n \n \n \n \n Profit after taxation \n \n \n - \n \n \n - \n \n \n 39,940 \n \n \n - \n \n \n - \n \n \n - \n \n \n 39,940 \n \n \n \n \n Foreign currency translation reserve \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (453) \n \n \n (453) \n \n \n \n \n Dividends paid in the year \n \n \n - \n \n \n - \n \n \n (31,664) \n \n \n - \n \n \n - \n \n \n - \n \n \n (31,664) \n \n \n \n \n Cancellation of treasury shares \n \n \n (47) \n \n \n 47 \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n - \n \n \n \n \n Cancellation of share premium reserve \n \n \n - \n \n \n (299,646) \n \n \n - \n \n \n 299,646 \n \n \n \n \n \n \n \n \n - \n \n \n \n \n Reallocation of reserves \n \n \n - \n \n \n - \n \n \n (184) \n \n \n \n \n \n \n \n \n 184 \n \n \n - \n \n \n \n \n Shareholders' funds as at \n31 December 2023 \n \n \n 642 \n \n \n - \n \n \n 8, 094 \n \n \n 351,625 \n \n \n 225,270 \n \n \n (269) \n \n \n 585,362 \n \n \n \n \n \nThe notes to the accounts form an integral part of the financial statements. \n \n \n   \n Condensed Consolidated Statement of Cash Flows \n \n \n \n \n   \n \n \n   \n \n \n For the period ended \n30 June 2024 \n \n \n For the period ended \n30 June 2023 \n \n \n \n \n   \n \n \n Notes \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Cash flows from operating activities: \n \n \n \n \n \n \n \n \n \n \n \n \n \n Profit after taxation \n \n \n \n \n \n 23,571 \n \n \n 17,459 \n \n \n \n \n Adjustments for: \n \n \n \n \n \n \n \n \n \n \n \n \n \n Repayments of Investments at amortised cost \n \n \n \n \n \n 115,748 \n \n \n 41,400 \n \n \n \n \n Charge / (release) in expected credit loss \n \n \n 11 \n \n \n 1,152 \n \n \n (289) \n \n \n \n \n Purchase of Investments at fair value \n \n \n 8 \n \n \n (9,860) \n \n \n (24,325) \n \n \n \n \n Receipt of Investments at fair value \n \n \n 8 \n \n \n 2,702 \n \n \n 10,009 \n \n \n \n \n Net change in unrealised gains \n \n \n 8 \n \n \n (7,501) \n \n \n (1,527) \n \n \n \n \n Finance costs \n \n \n 10 \n \n \n 9,045 \n \n \n 10,152 \n \n \n \n \n Foreign exchange revaluation \n \n \n \n \n \n 224 \n \n \n 2,290 \n \n \n \n \n Corporation tax \n \n \n 12 \n \n \n (381) \n \n \n (242) \n \n \n \n \n Gains in carried interest \n \n \n 9 \n \n \n (3,814) \n \n \n (3,778) \n \n \n \n \n Depreciation of fixed assets \n \n \n \n \n \n 135 \n \n \n 153 \n \n \n \n \n Depreciation of lease assets \n \n \n 13 \n \n \n 422 \n \n \n 545 \n \n \n \n \n Amortisation of intangible assets \n \n \n 5 \n \n \n 320 \n \n \n 320 \n \n \n \n \n (Increase) / decrease in receivables \n \n \n \n \n \n (7,066) \n \n \n 1,820 \n \n \n \n \n Increase / (decrease) in payables \n \n \n \n \n \n (572) \n \n \n (4,443) \n \n \n \n \n Increase / (decrease) in derivatives \n \n \n \n \n \n (244) \n \n \n (1,733) \n \n \n \n \n Net cash inflow from operating activities \n \n \n \n \n \n 123, 881 \n \n \n 47,811 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash flows from investing activities: \n \n \n \n \n \n \n \n \n \n \n \n \n \n Purchase of fixed assets \n \n \n \n \n \n - \n \n \n (117) \n \n \n \n \n Net cash (outflow) / inflow from investing activities \n \n \n \n \n \n - \n \n \n (117) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash flows from financing activities: \n \n \n \n \n \n \n \n \n \n \n \n \n \n Payments of lease liabilities \n \n \n \n \n \n (652) \n \n \n (652) \n \n \n \n \n Redemption of shares \n \n \n \n \n \n (10,301) \n \n \n - \n \n \n \n \n Reorganisation transaction costs \n \n \n \n \n \n (4,589) \n \n \n - \n \n \n \n \n Transaction costs for financing activities \n \n \n 10 \n \n \n (2,500) \n \n \n - \n \n \n \n \n Drawdown of interest-bearing borrowings \n \n \n 10 \n \n \n 97,000 \n \n \n 17,000 \n \n \n \n \n Repayments of interest-bearing borrowings \n \n \n 10 \n \n \n (175,829) \n \n \n (45,271) \n \n \n \n \n Interest paid on financing activities \n \n \n 10 \n \n \n (8,588) \n \n \n (9,178) \n \n \n \n \n Dividends paid in period \n \n \n 17 \n \n \n (8,347) \n \n \n (15,832) \n \n \n \n \n Net cash (outflow) from financing activities \n \n \n \n \n \n (1 13,806) \n \n \n (53,933) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Net change in cash and cash equivalents \n \n \n \n \n \n 10,075 \n \n \n (6,239) \n \n \n \n \n Cash and cash equivalents at the beginning of the period \n \n \n \n \n \n 19,746 \n \n \n 23,303 \n \n \n \n \n Foreign exchange gains and losses \n \n \n \n \n \n (95) \n \n \n (360) \n \n \n \n \n Cash and cash equivalents at the end of the period \n \n \n   \n \n \n 29,726 \n \n \n 16,704 \n \n \n \n \n \nThe notes to the accounts form an integral part of the financial statements. \n \n \n \n Notes to the Financial Statements \n 1. General Information \n Pollen Street Group Limited (previously \"Harry Newco Limited\") was incorporated and registered under the laws of Guernsey and is domiciled in Guernsey with registration number 70165. Pollen Street Group Limited is referred to as the \"Company\" or \"Pollen Street\", and together with its subsidiaries, the 'Group'. The registered office of the Company is: Mont Crevelt House, Bulwer Avenue, St. Sampson, Guernsey, GY2 4LH. The principal place of business of the Company is 11-12 Hanover Square, London, W1S 1JJ. \n The Company was established on 24 December 2021. The Company's purpose was to become the parent company of Pollen Street Limited (\"PSL\"), previously Pollen Street plc, by way of a scheme of arrangement (the \"Scheme\"). The Company's activities until the Scheme came into effect were compliance related. The scheme of arrangement came into effect on 24 January 2024. \n On 24 January 2024, the Company became the immediate and ultimate parent of Pollen Street Limited by way of a scheme of arrangement pursuant to Part 26 of the UK Companies Act 2006. As part of this, the shares of Pollen Street Limited were delisted and cancelled and new shares were issued to the Company so that the Company holds 100 per cent of the issued shares in Pollen Street Limited. New shares in the Company were also issued to the former shareholders of Pollen Street Limited on a one-to-one basis and were admitted to trading on the London Stock Exchange's (\"LSE\") main market for listed securities and to the premium listing segment for commercial companies of the Official List maintained by the Financial Conduct Authority in accordance with Part VI of the Financial Services and Markets Act 2000. \n On 14 February 2024, Pollen Street Limited distributed the entire issued share capital of Pollen Street Capital Holdings Limited (\"PSCHL\") to the Company referred to as the Distribution. The Scheme and the Distribution are together referred to as the \"Reorganisation\". \n The principal activities of the Company are to be the holding company for two 100 per cent owned subsidiaries, and the principal activity of the Group is to act as an alternative asset manager investing within the financial and business services sectors across both Private Equity and Private Credit strategies. \n 2. Principal Accounting Policies \n Basis of preparation \n These condensed consolidated interim financial statements ('interim financial statements') for the six months ended 30 June 2024 have been prepared on the basis of the policies set out in the 2023 annual financial statements. They have also been prepared in accordance with UK-adopted International Accounting Standards, including IAS 34 'Interim Financial Reporting', with the requirements of The Companies (Guernsey) Law, and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority (\"FCA\"). \n The interim financial statements do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Accounting Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the end of 2023. \n The Reorganisation is a capital reorganisation and has been accounted for using the book-value method. This method applies retrospectively, meaning that the interim financial statements are restated as if the Reorganisation had occurred at the beginning of the earliest period presented, i.e. from 1 January 2023. Therefore, the comparatives included in the interim financial statements are those from the Annual Report and Accounts of Pollen Street Limited as at and for the year ended 31 December 2023. \n These interim financial statements have not been audited or reviewed by the Group's auditors. \n Going concern \n The Directors have reviewed the financial projections of the Group, which show that the Group will be able to generate sufficient cash flows in order to meet its liabilities as they fall due within 12 months from the approval of these interim financial statements. These financial projections have been performed for the Group under stressed scenarios, and in all cases the Group is able to meet its liabilities as they fall due. For the Investment Company, the stressed scenarios included halting future Investment Asset originations, late repayments of the largest structured facility and individual exposures experiences ongoing performance at the worst monthly impact experienced throughout 2023 and the first half of 2024. For the Asset Manager, the stressed scenarios included no new funds being raised. \n The Directors consider these scenarios to be the most relevant risks to the Group's operations. Finally, the Directors reviewed financial and non-financial covenants in place for all debt facilities within the subsidiaries of the Group with no breaches anticipated, even in the stressed scenario. The Directors are satisfied that the going concern basis remains appropriate for the preparation of the financial statements. \n The principal accounting policies adopted by the Company are set out below and all values are in pounds. \n \n Accounting policies \n All of the applicable accounting policies are shown below. Following the Reorganisation on 24 January 2024, the Group introduced or updated the following accounting policies: \n Consolidation \n Subsidiaries are investees controlled by the Company. The Company controls an investee if it is exposed to, or has the rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Company reassesses whether it has control if there are changes to one or more elements of control. The Company does not consider itself to be an investment entity for the purposes of IFRS 10, as it does not hold substantially all of its investments at fair value. Consequently, it consolidates its subsidiaries rather than holding at fair value through profit or loss. \n The Group also assessed the consolidation requirements for the carried interest partnerships and certain underlying entities or Pollen Street managed funds (\"funds\") which the Group holds as investments as explained in the investments in associates section. \n In the consolidated financial statements, intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. All entities within the Group have coterminous reporting dates. \n Capital reorganisation \n Capital reorganisations are accounted for using the book-value method. This methodology is used as these transactions do not represent a substantive change in ownership. Instead, they are viewed as a reorganisation of entities within the same group. The Directors consider this method to be the most accurate reflection of the historical financial performance and position of the combining entities following the Reorganisation. \n This method applies retrospectively, meaning that the interim financial statements are restated as if the Reorganisation had occurred at the beginning of the earliest period presented. The assets and liabilities of the combining entities are recognised at their carrying amounts in the interim financial statements. No adjustments are made to reflect fair values or recognise any new assets or liabilities, except where necessary to align accounting policies. \n Any consideration transferred is recognised at its carrying amount. The difference between the consideration transferred and the carrying amount of the net assets acquired is recognised in equity. \n Comparative information is restated to reflect the reorganisation as if it had occurred at the beginning of the earliest period presented. This ensures consistency and comparability of financial information across periods. \n Refer to Note 4 for further details. \n Investments in subsidiaries \n Investments in subsidiaries in the Statement of Financial Position of the Company are recorded at cost less provision for impairments. All transactions between the Company and its subsidiary undertakings are classified as related party transactions for the Company accounts and are eliminated on consolidation. \n Investments in associates \n Associates are entities over which the Group has significant influence, but does not control, generally accompanied by a shareholding of between 20 per cent and 50 per cent of the voting rights. \n Before the acquisition of Pollen Street Limited by the Company, Pollen Street Limited acquired carried interest rights in two Private Equity funds as part of the Combination on 30 September 2022. The rights are in the form of partnership participations in carried interest partnerships. The Group has 25 per cent of the total interests in these partnerships. The Group has in excess of 20 per cent participation and therefore is considered to have significant influence over the partnerships and the partnerships are considered to be an associate. \n The Directors also consider any influence that the Group has in the set up of any new carried interest partnerships in order to assess the power to control them. The Group has between 1 per cent and 25 per cent of the total interests in these partnerships. It was determined that the carried interest partnerships were set up on behalf of the fund investors, and that on balance, the Group does not control the carried interest partnerships. Where the Group has in excess of 20 per cent of LP interest in the carried interest partnership, the Group is considered to have significant influence. It was therefore determined that these carried interest partnerships are also accounted for as associates. \n These carried interest partnerships (including associates and contract assets) are presented in the 'Carried interest' line on the Consolidated Statement of Financial Position; and income from the carried interest partnerships is presented in the 'Carried interest and performance fee income' line on the Consolidated Statement of Comprehensive Income. \n The key judgemental areas for the accounting of carried interest partnerships are set out in Note 3, Significant accounting estimates and judgements. \n For the underlying entities or funds, the Directors consider the nature of the relationships between the Group, the underlying entities or funds and the investors. The Directors also consider any influence that the Group has in the set up of the underlying entities or funds in order to assess the power to control the underlying entities or funds. It was determined that the underlying entities or funds were set up for the investors, and that on balance, the Group does not control the underlying entities or funds. \n The Group also holds more than 20 per cent of interest in certain underlying entities or funds. The Group elects to hold these investments in associates at Fair Value Through Profit or Loss (\"FVTPL\"). This treatment is permitted by IAS 28 Investments in Associates and Joint Ventures, which permits investments held by entities that are venture capital organisations, mutual funds or similar entities to be excluded from its measurement methodology requirements where those investments are designated, upon initial recognition, as at FVTPL and accounted for in accordance with IFRS 9. These underlying entities or funds are presented in the 'Investment assets held at fair value through profit or loss' line on the Consolidated Statement of Financial Position. Changes in fair value of these entities or funds are presented in the 'Gains on Investment Assets held at fair value' on the Consolidated Statement of Comprehensive Income. \n Business model assessment \n The Group assesses the objective of the business model in which a financial asset is held at a portfolio level in order to generate cash flows because this best reflects the way the business is managed. That is, whether the Group's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these are applicable, then the financial assets are classified as part of the other business model and measured at FVTPL. \n The assessment includes: \n ·      the stated policies and objectives for the portfolio and the operation of those policies in practice, including whether the strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of assets; \n ·      past experience on how the cash flows for these assets were collected; \n ·      how the performance of the portfolio is evaluated and reported; \n ·      the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and \n ·      the frequency, volume and timing of deployment in prior years, the reasons for such deployment and expectations about future deployment activity. However, information about deployment activity is not considered in isolation, but as part of an overall assessment of how the stated objective for managing the financial assets is achieved and how cashflows are realised. \n Assessment of whether contractual cash flows are solely payments of principal and interest \n For the purposes of this assessment, \"principal\" is defined as the fair value of the financial asset on initial recognition. \"Interest\" is defined as consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a reasonable profit margin. \n In assessing whether the contractual cash flows are solely payments of principal and interest, the contractual terms of the instrument are considered. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment the following features are considered: \n ·      contingent events that would change the amount and timing of cash flows; \n ·      leverage features; \n ·      prepayment and extension terms; \n ·      terms that limit the Group's claim to cash flows from specified assets, e.g. non-recourse asset arrangements; and \n ·      features that modify consideration for the time value of money, e.g. periodic reset of interest rates. \n Classification and measurement \n Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. The Group shall offset financial assets and financial liabilities if it has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis. Financial assets and liabilities are derecognised when the Group settles its obligations relating to the instrument. \n Classification and measurement - Financial assets \n IFRS 9 contains a classification and measurement approach for debt instruments that reflects the business model in which assets are managed and their cash flow characteristics. This is a principle-based approach and applies one classification approach for all types of debt instruments. For debt instruments, two criteria are used to determine how financial assets are classified and measured: \n ·      the entity's business model (i.e. how an entity manages its debt Instruments in order to generate cash flows by collecting contractual cash flows, selling financial assets or both); and \n ·      the contractual cash flow characteristics of the financial asset (i.e. whether the contractual cash flows are solely payments of principal and interest). \n A debt instrument is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: \n (a) it is held within a business model whose objective is to hold assets to collect contractual cash flows; and \n (b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. \n IFRS 9 details the classification and measurement approach for assets measured at fair value through other comprehensive income (\"FVOCI\") if it meets both of the following conditions and is not designated as at FVTPL: \n (a) it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and \n (b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. \n Equity instruments and derivatives are measured at FVTPL, unless they are not held for trading purposes, in which case an irrevocable election can be made on initial recognition to measure them at FVOCI with no subsequent reclassification to profit or loss. This election is made on an investment by investment basis. \n All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. \n All equity positions are measured at FVTPL. Financial assets measured at FVTPL are recognised in the balance sheet at their fair value. Fair value gains and losses together with interest coupons and dividend income are recognised in the Consolidated Statement of Comprehensive Income within Gains on Investment Assets held at fair value in the period in which they occur. The fair values of assets and liabilities traded in active markets are based on current bid and offer prices respectively. If the market is not active the Group establishes a fair value by using valuation techniques. In addition, on initial recognition the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. \n The Group does not hold any FVOCI assets. \n Classification and measurement - Financial liabilities \n Financial liabilities are classified and subsequently measured at amortised cost, except for: \n ·      Financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial liabilities held for trading and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to change in market conditions that give rise to market risk) and partially in profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in the Consolidated Statement of Comprehensive Income. \n ·      Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer. In subsequent years, the Group recognises any expense incurred on the financial liability. \n ·      Financial guarantee contracts and loan commitments. \n Credit Assets at amortised cost \n Loans are initially recognised at a carrying value equivalent to the funds advanced to the borrower plus the cost of acquisition fees and transaction costs. After initial recognition loans are subsequently measured at amortised cost using the effective interest rate method (\"EIRM\") less expected credit losses (see Note 11). \n Expected Credit loss allowance for financial assets measured at amortised cost \n The credit impairment charge or release in the Consolidated Statement of Comprehensive Income represents the change in expected credit losses which are recognised for loans and advances to borrowers, other financial assets held at amortised cost. \n IFRS 9 applies a single impairment model to all financial instruments subject to impairment testing. Impairment losses are recognised on initial recognition, and at each subsequent reporting period, even if the loss has not yet been incurred. In addition to past events and current conditions, reasonable and supportable forecasts affecting collectability are also considered when determining the amount of impairment in accordance with IFRS 9. Under the IFRS 9 expected credit loss model, expected credit losses are recognised at each reporting period, even if no actual loss events have taken place. In addition to past events and current conditions, reasonable and supportable forward-looking information that is available without undue cost or effort is considered in determining impairment, with the model applied to all financial instruments subject to impairment testing. \n At initial recognition, allowance is made for expected credit losses resulting from default events that are possible within the next 12 months (12-month expected credit losses). In the event of a significant increase in credit risk, allowance (or provision) is made for expected credit losses resulting from all possible default events over the expected life of the financial instrument (lifetime expected credit losses). Financial assets where 12-month expected credit losses are recognised are considered to be Stage 1; financial assets which are considered to have experienced a significant increase in credit risk are in Stage 2; and financial assets which have defaulted or are otherwise considered to be credit-impaired are allocated to Stage 3. Stage 2 and Stage 3 are based on lifetime expected credit losses. \n The measurement of expected credit loss (\"ECL\"), is primarily based on the product of the instrument's probability of default (\"PD\"), loss given default (\"LGD\") and exposure at default (\"EAD\"), taking into account the value of any collateral held or other mitigants of loss and including the impact of discounting using the EIR. \n ·      The PD represents the likelihood of a borrower defaulting on its financial obligation, either over the next 12 months (\"12M PD\"), or over the remaining lifetime (\"Lifetime PD\") of the obligation. \n ·      EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months or over the remaining lifetime. For example, for a revolving commitment, the Group includes the current drawn balance plus any further amount that is expected to be drawn up to the current contractual limit by the time of default, should it occur. The EAD is discounted back to the reporting date using the EIR determined at initial recognition. \n ·      LGD represents the Group's expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is expressed as a percentage loss per unit of EAD. LGD is calculated on a 12-month or lifetime basis, where 12-month LGD is the percentage of loss expected to be made if the default occurs in the next 12 months and Lifetime LGD is the percentage of loss expected to be made if the default occurs over the remaining expected lifetime of the loan (\"Lifetime LGD\"). \n The ECL is determined by estimating the PD, LGD and EAD for each individual exposure or collective segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not prepaid or defaulted in an earlier month). This effectively calculates an ECL, which is then discounted back to the reporting date and summed. The discount rate used in the ECL calculation is the original EIR or an approximation thereof. The Lifetime PD is developed by applying a maturity profile to the current 12M PD. The maturity profile looks at how defaults develop on a portfolio from the point of initial recognition throughout the lifetime of the loans. The maturity profile is based on historical observed data and is assumed to be the same across all assets within a portfolio and credit grade band where supported by historical analysis. The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by product type: \n ·      For amortising products and bullet repayment loans, this is based on the contractual repayments owed by the borrower over a 12-month or lifetime basis. This is also adjusted for any expected overpayments made by a borrower. Early repayment/refinance assumptions are also incorporated into the calculation. \n ·      For revolving products, the EAD is predicted by taking current drawn balance and adding a \"credit conversion factor\" which allows for the expected drawdown of the remaining limit by the time of default. These assumptions vary by product type and current limit utilisation band, based on analysis of the Group's recent default data. \n The 12-month and lifetime LGDs are determined based on the factors which impact the recoveries made post default. These vary by product type. \n ·    For secured products, this is primarily based on collateral type and projected collateral values, historical discounts to market/book values due to forced sales, time to repossession and recovery costs observed. \n ·    For unsecured products, LGDs are typically set at product level due to the limited differentiation in recoveries achieved across different borrowers. These LGDs are influenced by collection strategies, including contracted debt sales and price. \n The main difference between Stage 1 and Stage 2 is the respective PD horizon. Stage 1 estimates use a maximum of a 12-month PD, while Stage 2 estimates use a lifetime PD. The main difference between Stage 2 and Stage 3 is that Stage 3 is effectively the point at which there has been a default event. For financial assets in Stage 3, lifetime ECL continues to be recognised but now recognises interest income on a net basis. This means that interest income is calculated based on the gross carrying amount of the financial asset less ECL. Stage 3 estimates continue to leverage existing processes for estimating losses on impaired loans, however, these processes are updated to reflect the requirements of IFRS 9, including the requirement to consider multiple forward-looking scenarios using independent third-party economic information. \n Movements between Stage 1 and Stage 2 are based on whether an instrument's credit risk as at the reporting date has increased significantly relative to the date it was initially recognised. Where the credit risk subsequently improves such that it no longer represents a significant increase in credit risk since origination, the asset is transferred back to Stage 1. \n In assessing whether a borrower has had a significant increase in credit risk, the following indicators are considered: \n ·      Significant change in collateral value (secured facilities only) which is expected to increase the risk of default; \n ·      Actual or expected significant adverse change in operating results of the borrower or performance of collateral; \n ·      Significant adverse changes in business, financial and/or economic conditions in the market in which the borrower operates; \n ·      Actual or expected forbearance or restructuring; \n ·      Significant increase in credit spread, where this information is available; and \n ·      Early signs of cashflow/liquidity problems such as delay in servicing of payables. \n However, as a backstop, unless identified at an earlier stage, the credit risk of financial assets is deemed to have increased significantly when repayments are more than 30 days past due. Movements between Stage 2 and Stage 3 are based on whether financial assets are credit impaired as at the reporting date. IFRS 9 contains a rebuttable presumption that default occurs no later than when a payment is 90 days past due. The Group uses this 90-day backstop for all its assets except for UK second charge mortgages, where the Group has assumed a backstop of 180 days past due as mortgage exposures more than 90 days past due, but less than 180 days, typically show high cure rates and this aligns to the Group's risk management practices. Assets can move in both directions through the stages of the impairment model. \n In assessing whether a borrower is credit-impaired, the following qualitative indicators are considered: \n ·      Whether the borrower is in breach of financial covenants, for example where concessions have been made by the lender relating to the borrower's financial difficulty or there are significant adverse changes in business, financial or economic conditions on which the borrower operates; \n ·      Where the credit risk has increased, the remaining lifetime PD at the reporting date is assessed in comparison to the residual lifetime PD expected at the reporting date when the exposure was first recognised; and \n ·      Any cases of forbearance. \n The criteria above have been applied to all Credit Assets at amortised cost held by the Group and are consistent with the definition of default used for internal credit risk management purposes. The default definition has been applied consistently to model the PD, EAD and LGD throughout the Group's expected credit loss calculations. \n Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. \n Under IFRS 9, when determining whether the credit risk (i.e. the risk of default) on a financial instrument has increased significantly since initial recognition, reasonable and supportable information that is relevant and available without undue cost or effort, including both quantitative and qualitative information and analysis based on historical experience, credit assessment and forward-looking information. \n The measurement of expected credit losses for each stage and the assessment of significant increases in credit risk considers information about past events and current conditions as well as reasonable and supportable forward-looking information. A \"Base case\" view of the future direction of relevant economic variables and a representative range of other possible forecasts scenarios have been developed. The process has involved developing two additional economic scenarios and considering the relative probabilities of each outcome. \n The base case represents a most likely outcome and is aligned with information used for other purposes, such as strategic planning and budgeting. The number of scenarios and their attributes are reassessed at each reporting date. All of the portfolios of the Group use one positive, one optimistic and one downside scenario. These scenario weightings are determined by a combination of statistical analysis and expert judgement, taking account of the range of possible outcomes each chosen scenario is representative of. \n The estimation and application of forward-looking information requires significant judgement. PD, LGD and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances, are modelled and adjusted based on the macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the relevant portfolio. The Group has utilised macroeconomic scenarios prepared and provided by Oxford Economics (\"Oxford\"). Oxford combines two decades of forecast errors with the quantitative assessment of the current risks facing the global and domestic economy to produce robust forward-looking distributions for the economy. Oxford construct three alternative scenarios at specific percentile points in the distribution. In any distribution, the probability of a given discrete scenario is close to zero. Therefore, scenario probabilities represent the probability of that scenario or similar scenarios occurring. In effect, a given scenario represents the average of a broader bucket of similar severity scenarios and the probability reflects the width of that bucket. Given that it is known where the IFRS 9 scenarios sit in the distribution (the percentiles), their probability (the width of the bucket of similar scenarios) depends on how many scenarios are chosen. Scenario probabilities must add up to 100 per cent so the more scenarios chosen, the smaller the section of the distribution, or bucket, each scenario represents and therefore the smaller the probability. This allows the probabilities to be calculated according to whichever subset of scenarios have been chosen for use in the ECL calculation. Oxford updates these scenarios on a quarterly basis to reflect changes to the macroeconomic environment. The Group updates the scenarios during the year if economic conditions change materially. Oxford selects the scenarios to represent a broadly fixed probability within the distribution of potential outcomes. As such the Group has maintained the probability of each scenario at a broadly constant level despite the changing macroeconomic environment. The Base case is given a 40 per cent weighting and the downside and upside a 30 per cent weighting each, which is unchanged from the prior year. \n As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected. The Group considers these forecasts to represent its best estimate of the possible outcomes and has analysed the non-linearities and asymmetries within the Group's different portfolios to establish that the chosen scenarios are appropriately representative of the range of possible scenarios. \n Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any regulatory, legislative or political changes, have also been considered, but no adjustment has been made to the ECL for such factors. This is reviewed and monitored for appropriateness at each reporting date. \n Expected Credit loss allowance for Receivables \n Receivables consist of trade and other debtor balances and prepayments and accrued income. Trade receivables balances are represented by fees receivable for investment fund management and advisory services provided during the year to the Group's customers. The Group's customers are funds that the Group manages or advises. As such, the Group has detailed and up-to-date information on the financial position and outlook of its counterparties. Receivable balances are generally collected on a monthly or quarterly basis and are therefore short-term in nature. The Group applies a simplified approach in calculating ECLs and recognises a loss allowance based on lifetime ECLs at each reporting date. Given the historic rate of recoverability is 100 per cent and the absence of reasons to believe the recoverability pattern will change, management's assessment is that ECL calculated under IFRS 9 would be immaterial at the end of the current and previous reporting period. Management will continue to assess the recoverability at each reporting date for changes in the circumstances surrounding the recoverability of the trade and other receivables, and recognise an expected credit loss allowance when appropriate. \n Write-off policy for financial assets measured at amortised cost \n A loan or advance is normally written off, either partially or in full, against the related allowance when the proceeds from realising any available security have been received or there is no realistic prospect of recovery and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of impairment losses recorded in the income statement. \n Modification of loans \n The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Group assesses whether or not the new terms are substantially different to the original terms. The Group does this by considering, among others, the following factors: \n ·      if the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay; \n ·      whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the risk profile of the loan; \n ·      significant extension of the loan term when the borrower is not in financial difficulty; \n ·      significant change in the interest rate; \n ·      change in the currency the loan is denominated in; and \n ·      insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan. \n If the terms are substantially different, the Group derecognises the original financial asset and recognises a new asset at fair value and recalculates a new EIR for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Group also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally...

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