Pollen Street plc Annual Report and Accounts

About this update from Pollen Street Group Limited

[{"type":"text","content":"\n \n \n \n For immediate release \n \n \n \n 23 March 2023 \n \n \n \n   \n \n \n \n \n Pollen Street plc Annual Report and Accounts \n \n \n \n \n   \n \n \n \n Pollen Street plc (\"Pollen Steet\" or, together with its subsidiaries, the \"Group\") today issues its Annual Report and Accounts for the year ended 31 December 2022. \n \n \n It has been a transformative year for the Group, with Pollen Street Capital Holdings Limited and Honeycomb Investment Trust plc combining to form Pollen Street (the \" Combination \").  The Group 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\").  The two complementary business models accelerate growth and unlock value for shareholders by bringing together the combined business models of income resilience and growth to provide a highly attractive proposition to investors. \n \n \n \n Highlights for 2022: delivering in line with targets and well-positioned for growth \n \n \n \n · \n AUM has grown to £3.4 billion supported by an impressive 36 per cent year on year growth in the Credit AUM \n \n \n · \n Financial performance of the Asset Manager is in line with consensus with Fund Management EBTIDA for 2022 closing at £8.5 million, equivalent to a 21 per cent year-on-year growth \n \n \n · \n The Investment Company delivered performance in line with expectations, with Net Investment Assets Return of 8.0 per cent per annum and net income for 2022 of £28.3 million. Against the current macro-economic backdrop, this performance demonstrates the resilience of the strategy \n \n \n · \n The Group has maintained its track record of delivery across both Private Equity and Credit strategies with an early realisation in Private Equity IV and strong consistent performance in credit \n \n \n · \n Sustainability remains a core part of Pollen Streets investment strategy and the Group has been recognised by CFI as Best Responsible Investment Team UK in 2023 for the third year running and also recognised by FT Adviser for its work in DE&I \n \n \n · \n The Group is well-positioned to drive organic long-term growth and is well on track to deliver its objective of £4-5bn AUM in the medium term with good near term visibility on making steps towards that \n \n \n \n Commenting on the 2022 performance, Lindsey McMurray, Chief Executive Officer, said: \n \n \n \n \n \"Pollen Street offers a unique combination of high-quality income resilience together with growth, and I am pleased that our first set of full year results reflects a strong and stable performance. Against a challenging macro-economic backdrop, Pollen Street has shown resilience and consistent delivery to perform well, which has seen our AuM grow to £3.4bn. Our outlook remains strong, and we are well positioned through our core strategies to drive long-term organic growth.\" \n \n \n \n \n Shareholder proposals \n \n \n \n In the circular published in May 2022, the Board announced an intention to put forward a proposal to shareholders for the establishment of B Shares prior to the 2023 AGM. These shares would be 8% preference shares with recourse to the capital and income deriving from a representative proportion of the credit portfolio, with a net asset value of up to £50 million. Given the changed market environment, the Board has consulted with shareholders before progressing with the proposal and based upon that consultation, the Board does not believe sufficient shareholders would support it at this time and as such the Board does not intend to pursue this matter further. \n \n \n The Directors intend to put forward proposals to shareholders, to: \n \n \n · \n insert a Guernsey company as a holding company for the Group; and \n \n \n · \n change the Company's listing classification to be a commercial company, as such the Company will cease to have investment trust status. \n \n \n A General Meeting will be convened to consider the proposals. The Directors believe that new corporate structure will be better reflect the Group's operations as a commercial enterprise and that a classification as a commercial company would broaden the universe of potential investors, improve the marketability and liquidity of Pollen Street's shares and bring the listing classification in line with Pollen Street's quoted peer group. \n \n \n \n Results presentation: \n \n \n \n Pollen Street will host its results presentation at 8:30 AM on 23 March 2023. \n \n \n Register for the webinar: \n \n \n https://2022resultswebinar.pollencap.com/ \n \n \n The full results presentation is available on the Group's website \n \n www.pollenstreetgroup.com \n \n . \n \n \n About Pollen Street plc \n \n \n Pollen Street is an alternative asset manager dedicated to investing with 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 \n Pollen Street benefits from a complementary set of asset management activities focused on managing third-party AuM, referred to as the Asset Manager, and on-balance sheet investments, referred to as the Investment Company. \n \n \n The Investment Company portfolio is well-diversified and focused on senior asset-based direct lending investments. These investments target stable high-income returns together with strong capital preservation. The portfolio consists of both direct investments and investments in funds managed by Pollen Street. \n \n \n POLN is listed on the London Stock Exchange (ticker symbol: POLN). Further details are available at \n   \n \n www.pollencap.com \n \n . \n \n \n For further information about this announcement please contact: \n \n \n FGS Global - Public Relations Adviser \n \n \n Chris Sibbald \n \n \n [email protected] \n \n \n +44 (0)7855955531 \n \n \n   \n \n \n Barclays Bank plc - Joint Broker \n \n \n Neal West / Stuart Muress / Dion Di Miceli \n \n \n +44 (0)20 7623 2323 \n \n \n   \n \n \n Liberum Capital Limited - Joint Broker \n \n \n Chris Clarke / Edward Mansfield \n \n \n +44 (0)20 3100 2000 \n \n \n   \n \n \n Link Company Matters Limited - Corporate Secretary \n \n \n [email protected]  \n \n \n   \n \n \n \n Annual Report and Accounts \n \n \n \n The Annual Report and Accounts have been submitted in full unedited text to the Financial Conduct Authority's National Storage Mechanism and are available for inspection at \n \n https://data.fca.org.uk/#/nsm/nationalstoragemechanism \n \n in accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules. The Annual Report and Accounts are also available to view and download from the Company's website \n \n https://ir.pollenstreetgroup.com/investors/financial-information/ \n \n . Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement. \n \n \n The information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2022 but is derived from those accounts. Statutory accounts for the year ended 31 December 2022 will be delivered to the Registrar of Companies in due course. The Group's auditors have reported on those accounts: their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. \n \n \n The following text are selected extracts from the Annual Report & Accounts. \n \n Pollen Street at a glance \n Pollen Street plc (the \"Company\") 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\"). The business had £3.4 billion in AuM as at 31 December 2022, up 31 per cent per annum over the past two years. \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 Investment Company portfolio is well diversified and focused on senior asset-based direct lending investments. These investments target stable high-income returns together with strong capital preservation. The portfolio consists of both direct investments and investments in funds managed by Pollen Street. \n The Company is an investment trust.  It was formed through an all share combination of Honeycomb Investment Trust plc with Pollen Street Capital Holdings Limited (the \"Combination\"). The Combination occurred on 30 September 2022 and was effected by Honeycomb Investment Trust plc acquiring 100 per cent of the share capital of Pollen Street Capital Holdings Limited with newly issued shares in the Company as the consideration. As such the financial statements only incorporate Pollen Street Capital Holdings Limited from 30 September 2022, the point at which it became a subsidiary of the Company. The combined group was renamed Pollen Street plc and together with its subsidiaries is referred to as the \"Group\" or \"Pollen Street\". \n Key Figures 0F [1] \n \n   \n \n \n · \n Assets under management (\"AuM\") - £3.4 billion (31 December 2021: £3.0 billion) \n \n \n   \n \n \n · \n Growth in Credit AuM1 - 36% (2021: 69%) \n \n \n   \n \n \n · \n Statutory operating profit1 - £27.3 million (2021: £30.3 million) \n \n \n   \n \n \n · \n Proforma operating profit1 - £36.8 million (2021: £37.3 million) \n \n \n   \n \n \n · \n Net Investment Asset Return1 - 8.0% (2021: 8.5%) \n \n \n   \n \n \n · \n Dividends declared1 - £30 million (2021: £28 million) \n \n Chairman's statement \n \n   \n \n \n Robert Sharpe - Chairman \n \n Welcome to the Annual Report and Accounts for Pollen Street, which covers the year ending 31 December 2022. \n A successful year of change \n 2022 was a transformative year for us with Pollen Street Capital Holdings Limited and Honeycomb Investment Trust plc combining to form Pollen Street. \n In February 2022, we announced the proposed Combination to accelerate growth and unlock value for shareholders by bringing together the combined business models of income and growth to provide a highly attractive proposition to investors. \n The Combination was strongly supported by Shareholders and completed on 30 September 2022. \n Over the year, the rationale for the Combination has been reinforced. Pollen Street continues to deliver returns and grow AuM, despite a challenging macro environment, and the investment portfolio has continued to deliver robust, attractive returns demonstrating the resilience of the strategy. \n On the Asset Manager side, the focus for the year has been on growing AuM, specifically under the Credit strategy. Pollen Street plc has increased Credit AuM to £1.6 billion - a 36 per cent increase on prior year - with capital raised in flagship Credit III and separately managed accounts (\"SMAs\"). The Private Equity business was not actively fundraising in 2022 whilst flagship Private Equity IV is being deployed, however good progress has been made towards the launch of flagship Private Equity V in 2023.  \n The Investment Company has continued to perform consistently, in line with its historic track record, with Net Investment Asset Return of 8.0 per cent per annum. \n Pollen Street declared dividends of £30 million for 2022, an increase of £2 million from the prior year (2021: £28 million). This was in line with the Board's dividend targets previously issued. These figures reflect a quarterly dividend of 20.0p per share in respect of the first half of the year prior to the Combination, and 16.0p per share in respect of the second half of the year.  \n We target dividends of £32 million for 2023, and aim to grow dividends progressively, thereafter, reflecting the strong earnings trajectory of the combined business. The Group targets a dividend that is no lower than £33 million in 2024 1F [2] . \n Shareholder proposals \n In the circular published in May 2022, the Board announced an intention to put forward a proposal to shareholders for the establishment of B Shares prior to the 2023 AGM. These shares would be 8% preference shares with recourse to the capital and income deriving from a representative proportion of the credit portfolio, with a net asset value of up to £50 million.  Given the changed market environment, the Board has consulted with shareholders before progressing with the proposal and based upon that consultation, the Board does not believe sufficient shareholders would support it and as such the Board does not intend to pursue this matter further. \n However, the Directors intend to put forward proposals to shareholders to insert a Guernsey company as a holding company for the Group and to change the Company's listing classification to be a commercial company.  As such the Company will cease to have investment trust status. A General Meeting will be convened to consider the proposals. The Directors believe that the new corporate structure will better reflect the Group's operations as a commercial enterprise and that a classification as a commercial company would broaden the universe of potential investors, improve the marketability and liquidity of Pollen Street's shares and bring the listing classification in line with Pollen Street's quoted peer group. \n The Board is mindful of the disconnect between the share price and the fundamental value of the Group. The Board continues to discuss this matter with advisers and shareholders. However, the Group remains focused on delivering substantial growth in the business to drive further interest in Pollen Street shares. \n Environmental, Social and Governance (\"ESG\") \n ESG is core to Pollen Street's strategy, purpose and culture, and our ESG framework aligns to the UN Sustainable Development Goals (\"SDGs\"). Over the year progress has been made in embedding a proprietary ESG scoring mechanism. \n The data we collect and proprietary scoring mechanism enables us to: \n \n · measure our impact more consistently; \n \n · track progress against targets; \n \n · create league tables; and \n \n · set a base level for improvement plans for portfolio companies and investments across our strategies. \n A cautious but energised outlook \n We closely monitor the impact of the more challenging macroeconomic environment, however our strategies continue to demonstrate strength and resilience during volatile periods and are well-positioned for the current climate. \n We are continuously building investor relationships and AuM across the Asset Manager in line with our medium-term guidance. The Investment Company assets are well positioned and structured to withstand significant macro stress. Current market dynamics also bring compelling investment opportunities which we approach with care and selectivity. \n Overall, we are pleased with the financial results and we are excited as we move into 2023. Our compelling combination of balance sheet capital and deep asset management expertise positions us to deliver the growth we have promised to the market. \n I would like to thank the management team for their hard work as part of the combined Group and look forward to working with the team going forwards. \n \n Robert Sharpe \n \n \n   \n \n Chairman \n22 March 2023 \n CEO report \n \n Lindsey McMurray - Chief Executive Officer \n \n \n   \n \n \n At Pollen Street we recognise the importance of financial services providing critical infrastructure across the financial ecosystem.   We look to work with businesses that seek to grow by taking share and to build the next generation of leaders across the sector and as stewards of capital we are conscious of our responsibility to invest with care, one of our core values \n \n Since our inception in 2013, we have built an institutional infrastructure for Pollen Street, led by a common purpose and values. We accelerated this in 2022 completing the combination of Honeycomb Investment Trust plc and Pollen Street Capital Holdings Limited to create Pollen Street, a differentiated and purpose-led alternative asset manager. \n \n \n   \n \n \n Unique advantages of the Combination \n \n \n Pollen Street offers a unique combination of high-quality, stable income and growth of long-term recurring fee income. The Group benefits from a complementary and synergistic set of asset management activities focused on managing third-party assets under management, referred to as AuM (the \"Asset Manager\") and on-balance sheet investments (the \"Investment Company\") aligned to the Company's investment strategies. \n \n   \n \n \n The Asset Manager provides exposure to high-margin, capital light recurring revenue streams. The Investment Company portfolio generates stable returns through investment in high-quality, diversified, low-risk, asset-based direct lending debt facilities. \n \n \n   \n \n \n The Combination allows Pollen Street to enable business growth by deploying our Investment Company capital to accelerate the growth in third-party AuM through helping to scale existing funds and seed new strategies. \n \n \n   \n \n \n As a purpose-led asset manager, Pollen Street is committed to delivering sustainable growth and consistent returns for our shareholders and private investors alongside positive impact for our people, portfolio companies and wider society. \n \n \n   \n \n \n Delivering strong performance \n \n \n In our first Annual Report and Accounts as a combined business I am pleased to report that Pollen Street delivered strong performance in 2022. The Group continued its track record of consistent delivery, which is particularly pleasing against a backdrop of increasingly uncertain economic conditions; increasing our AuM to £3.4 billion and maintaining momentum in deployment into new investments. \n \n \n   \n \n \n Despite the more challenging macro environment, returns across all funds managed by the Group, including the Investment Company have been strong and in line with targets for each strategy. \n \n \n   \n \n \n This strong overall performance confirms the rationale for the bringing together of Pollen Street Capital Holdings Limited and Honeycomb Investment Trust plc, as we demonstrate the combination has enhanced the excellent work of our teams. We continue to grow at a steady and sustainable pace with a strong platform for the future. \n \n   \n \n Our Asset Manager business \n \n \n Pollen Street was founded to provide capital to businesses well-positioned to benefit from the huge structural changes in the financial ecosystem. We invest aligned with megatrends that drive structural and technological change across the industry and we have built expertise that enables us to identify and champion businesses that can deliver consistent and sustainable revenue and profit growth. \n \n \n   \n \n \n We work with agile and innovative firms that deliver high quality products and services to their customers and help enable market share gain and positive change. \n \n \n   \n \n \n We support our businesses with The Hub. The Hub is our powerful eco-system; a dedicated team responsible for driving technology development, sales performance and what we believe to be best practice across our portfolio in both Private Equity and Credit. The core principle of our Hub is a culture of continuous improvement. We have a team of experts and advisers who can support our portfolio on digital transformation, cloud-based IT, digital marketing, technology scalability, data-led products and ESG. \n \n \n   \n \n \n A Private Equity strategy building next generation market leaders \n \n \n   \n \n \n In Private Equity, we seek to invest and build the next generation of leaders across the financial eco-system. We work closely with our portfolio companies and their teams to implement our established playbook to accelerate multiple routes to growth... We build on the solid foundations of our portfolio companies to create customer-centric, data-driven organisations that can become market leaders. We have seen strong performance across the Private Equity portfolio, which has proven to be extremely resilient and adaptive to the changing landscape. \n \n \n   \n \n \n Our macro-resilient Credit strategy \n \n \n In Credit, we partner with high-quality non-bank lenders, technology companies, and other mid-market companies with diverse portfolios of cash generative assets, offering something better to their customers. Our credit facilities are typically on a senior asset-secured basis - where we take direct security over the cash flow producing assets together with additional corporate security. We believe this is an underpenetrated non-correlated investment strategy with a huge market opportunity and provides attractive relative value when compared with public or private comparable transactions alongside strong downside protection. \n \n \n   \n \n \n We recognise the challenging macro environment and across our strategies we are seeing the dislocation in the market presenting opportunities... We are deploying a highly selective approach, but moving with conviction where we see good opportunities with attractive characteristics. \n \n   \n \n Fundraising momentum \n \n \n The fundraising market was more challenging over 2022 and into 2023 with many managers reporting that fund raises were either smaller than expected and/or taking longer to complete. \n \n \n   \n \n \n The market has been impacted by the 'denominator effect' where declines in investors' public portfolio valuations have led to lower allocations of new capital to the sector.  With this backdrop, we continue to build and deepen our engagement with long term partners and remain confident that we will continue our momentum in AuM growth. Pollen Street has delivered 36 per cent growth in AuM in the Credit business to £1.6 billion in 2022. In 2023, we expect continued momentum for fundraising in Credit, with the final close of Credit III expected in Q2 2023 and further growth in the SMAs. On our Private Equity side, our core focus in 2022 has been in laying the foundations for a successful launch of flagship Private Equity V. Flagship Private Equity IV is approaching full deployment with 76 per cent of the fund committed to investment as at 31 December 2022. The first close of flagship Private Equity V is expected during 2023.  \n \n \n   \n \n \n Investment Company Stable Delivery \n \n \n The Investment Company has a £588 million portfolio. We have maintained our track record of performance throughout the year and delivered Net Investment Asset Return of 8.0 per cent per annum, demonstrating a consistent and robust performance despite the more challenging macroeconomic backdrop. \n \n \n   \n \n \n We seek to use the Investment Company's balance sheet to seed assets or funds originated under our Asset Manager strategies. We believe that this approach will help to accelerate the launch of new strategies and grow AuM. To date the Investment Company has committed over £50 million across three of our vehicles. We expect this to grow in the future to help accelerate the growth of the Asset Manager. However, we intend to maintain the historic risk profile and the stability of the returns of the Investment Company by limiting the non-credit investments to be no more than 10 per cent of the investment portfolio. \n \n \n A sustainable approach to ESG \n \n \n Pollen Street is committed to maintaining and enhancing our focus on actions that generate positive impact for our investors, people, portfolio companies and wider society, linked to our purpose. \n \n \n   \n \n \n Sustainability is key to our investment strategy and our goals include helping portfolio companies reach carbon neutrality; set diversity and inclusion targets; and promote the strongest possible governance standards. \n \n \n   \n \n \n We are proud that our Responsible Investing approach has been recognised as a leader by Capital Finance International (\"CFI\") for the third year running, and our approach to Diversity, Equity and Inclusion (\"DEI\") has been recognised by awards from FTAdviser. \n \n \n   \n \n \n We also recently signed the Social Mobility Pledge, committing to outreach, access and recruitment. There are currently over 700 organisations signed up across the UK. \n \n   \n \n Alongside continuing to strengthen our ESG programme and foundations, our focus for ESG in 2023 includes the following areas: \n \n \n · \n Sustainable value creation: Aligning ESG criteria to strategic business drivers to drive engagement and performance. \n \n \n · \n Climate & Net zero: Working across the portfolio to develop net zero commitments and strategies and strengthen processes to better understand the impacts of climate change, in line with the Task Force for Climate related Financial Disclosures (\"TCFD\"). \n \n \n · \n Data & reporting excellence: Using a reporting and scoring framework to rank and compare portfolio investments, and to identify improvements; continue to address evolving regulations on sustainability disclosures. \n \n   \n \n A resilient outlook: opportunities ahead \n \n \n Our business is well positioned to drive long-term organic growth. Our core strategies are performing well and are proving to be resilient to the changed macroeconomic environment over 2022. Our key priorities for 2023 are: \n \n \n · \n continue to build AuM steadily in Credit; \n \n \n · \n first close of flagship Private Equity V; \n \n \n · \n maintaining our track record of deployment and performance across our strategies including stable and resilient returns in the Investment Company; \n \n \n · \n building cross product relationships with strategic investors; and \n \n \n · \n delivering operational leverage through our platform as we continue to growth AuM. \n \n \n   \n \n Looking back over a successful and transformative year, I thank our investors for their support; my colleagues for all their hard work and dedication; and the Board for its guidance. I look forward to the opportunities and growth ahead as we work together to deliver for our investors and shareholders. \n \n Lindsey McMurray \n \nChief Executive Officer \n 22 March 2023 \n Private Equity strategy \n This section gives insight into the strategy for our Private Equity funds. The Group earns fees from managing these funds. \n \n Key highlights of the strategy are: \n \n -  Building next generation leaders for the European financial ecosystem \n -  Strong track record with 3.0x gross returns and zero losses \n -  Sector specialist knowledge and proven operational framework to accelerate revenue and profit growth \n As a financial services specialist, we see significant whitespace in our sector which serves as critical infrastructure to the economy. We operate around megatrends that drive structural and technological change and market share gain for mid-market innovators. \n Our strategy has been in place since 2008 and has been tested through many market cycles. Throughout this period, we have developed a robust and disciplined approach to investing as evidenced by our strong track record of returns over time. We identify companies that can thrive in times of structural changes in the industry by delivering high quality products and services to their customers. This experience has given us valuable skills and a keen understanding of risks and opportunities in the market. Ultimately we believe that change creates opportunity for market share gain and our strategy is built around capitalising on this to build businesses that are next generation leaders. \n Our Pollen Street portfolio is made up of businesses with sustainable growth at their core. This encompasses our drive for both long term sustainable performance and to help the businesses we work with deliver positive impact for their people, stakeholders and wider society. \n \n How it works: clear opportunity set and established playbook \n \n Our investment strategy focuses on a rich opportunity set within five diverse sub-sectors, where we seek to identify the key themes that drive growth: \n \n · \n Payments; \n \n \n · \n Wealth; \n \n \n · \n Insurance; \n \n \n · \n Technology-enabled services; and \n \n \n · \n Lending. \n \n   \n Our thematic origination populates a pipeline of fast-growing, technology-enabled businesses with solid foundations for us to help create customer-centric, data-driven organisations who can become market leaders. Within these thematic investment theses, we seek to drive growth through our established operational framework which his built upon three key pillars: \n \n · \n Technology innovation and digital transformation; \n \n \n · \n Buy, build and consolidation; and \n \n \n · \n Globalisation and product development. \n \n   \n   2022 - Driving growth and change \n 2022 was a successful year for our Private Equity funds, delivering returns and sustainable growth for our investors and stakeholders. The funds had a strong year with continued growth across the portfolio, continued deployment activity in flagship Private Equity IV and strong exits, including Private Equity IV's first investment being realised within two years of Pollen Street sourcing the investment. This was particularly pleasing with challenging equity markets as a backdrop and demonstrates the continued demand for strongly growing businesses; the market leaders that we are helping to create. \n Three new platforms were added to the portfolio in the year. PAIR Finance, the digital collections platform operating from Berlin and focused on the high-growth eCommerce sector was acquired in October, Autopay the payments platform based in Poland was acquired in July and Tandem, the UK bank focused on financing the green transition, was completed in January. 76 per cent of flagship Private Equity IV has been committed to investments.  \n Our core focus for fundraising in 2022 has been in laying the foundations for a successful launch of flagship Private Equity V in 2023. AuM has remained stable at £1.8 billion with new co-investments offsetting our realisations and throughout the year we have continued to develop and deepen our relationships with investors. \n Whilst we are mindful of potential economic challenges, we believe our funds remain well positioned for continued growth.  Our new deal pipeline remains strong and potential for future exits remains attractive. \n \n Key Figures \n \n \n · \n AUM - £1.8 billion \n \n \n · \n Strategy in place for 17 years \n \n \n · \n Realised returns since inception of 3.0x gross \n 2F \n [3] \n , zero loss ratio \n \n   \n \n Michael England \n \nPartner \n 22 March 2023 \n Credit strategy \n This section gives insight into the strategy for our Credit funds. The Group earns fees from managing these funds. \n \n Key highlight \n s of the strategy are \n \n -  Asset-backed, senior secured lending \n -  Attractive returns with strong downside protection \n -  Potential for positive impact financing green transition, regional growth and financial inclusion \n In an uncertain world, our senior secured, asset-based lending has a track record of attractive returns and has demonstrated resilience through various economic cycles. \n Following the global financial crisis, and the subsequent retrenchment of the banks from lending markets, Pollen Street identified opportunities to fill the funding gap in what is a large and growing market with a targeted and considered approach. Our senior secured lending provides capital primarily to non-bank lenders, technology companies and other companies with a diverse portfolio of assets that our debt is secured against providing a highly resilient approach. This asset backing combined with seniority, comprehensive covenants, bespoke structuring negotiated bilaterally by our large and expert team means we are able to generate premium returns versus other public and private debt strategies with strong downside protection. \n We are also passionate about the potential for positive impact through the financing that we provide whether by funding green alternatives for homes and transport, building new mass market homes or driving regional economic growth and levelling up. Our capital facilitates this impact by enabling our borrowers to build and grow their businesses whether building homes, leasing electric vehicles or lending to regional small businesses.  The Environmental, Social and Governance section of the Strategic Report gives more information about how our investments align to the United Nations SDGs. \n \n How it works: structuring for protection \n \n \n Pollen Street's Credit strategy was formed following the global financial crisis. The strategy addresses a growing funding gap but at its core is a highly considered approach built to withstand extreme stresses in the economic environment. \n \n \n Since inception, when making decisions about lending, we do not judge based on current market conditions, rather assessing on the basis of a very stressed macro environment. We calculate the loan amount for each deal allowing for significant deterioration in performance, aiming to ensure no impairments. The stresses we run are broadly equivalent to rating agency stresses to determine investment grade risk exposure and are more severe than the global financial crisis and other prior recessions. \n \n \n The nature of our lending also means that we are protected by the diversification of the underlying assets we lend against. For example, our senior facility to IWOCA, a leading SME lender, is secured on more than 6,500 individual SME loans making repayments monthly; or our senior facility to ONTO, Europe's largest electric car subscription provider, is secured on over 4,500 electric cars and associated monthly customer payments. This diversification means that cashflows are stable with low volatility even in a more uncertain environment where credit defaults are predicted to rise. \n \n \n The terms of our relationship with borrowers are also critical to ensuring resilience. At Pollen Street the comprehensive covenants that we negotiate with our credit partners are integral to our strategy and ensure that we have the right to step in early if there are signs of underperformance. Covenant packages cover not only borrower financial performance but also asset performance and diversification with levels set significantly inside underwriting stress tests. \n \n \n In addition the terms of our facilities mean that we are only lending against performing assets and therefore as any underperformance emerges our facilities automatically de-gear and reduce LTV as borrowers are required to increase their equity subordination to finance those underperforming assets. Added to that automatic de-gearing, we retain senior ranking over both the asset and the cash of the borrower, which means we can control the flow of loans in and out of the business if a critical moment emerged. \n \n \n 2022 - Good performance and growing AuM \n \n Throughout 2022 the Credit business has been focused on both raising capital and building long term investor relationships alongside deploying funds in attractive transactions and ensuring the existing portfolio continues to perform well. AuM increased in the year by 36 per cent to £1.6 billion with flagship Credit III nearing its final close in April 2023 with a good pipeline of new investors in late-stage discussions.  \n The portfolio performed well in the year despite the challenging macro environment with structuring, prudent loan to value ratios (\"LTVs\") and seniority leading to consistent performance whilst the benefit of the higher interest rate environment drives increased deal returns. 25 new transactions or upsizes were completed during the year totalling £0.7 billion of commitments with all new deals now incorporating sustainability linked factors including ESG margin ratchets to incentivise our borrowers to improve their impact. \n \n The pipeline of new opportunities continues to be strong as we observe a shift to a less competitive environment on the lending side as banks become less active and public markets are largely closed for new debt issuances. Pollen Street is maintaining a highly selective approach and cautious underwriting but believes it is an attractive time to deploy capital with opportunities to generate higher returns through financing well capitalised borrowers who are leaders in their markets, underpinned by strong performing assets with prudent LTVs. \n \n \n Key Figures \n \n \n · \n AuM - £1.6bn   \n \n \n · \n Deals over the last 6 years - 104 \n \n \n · \n Gross unlevered returns - 11% \n \n   \n \n Matthew Potter \n \nPartner \n 22 March 2023 \n CFO Report \n   \n \n Julian Dale - Chief Financial Officer \n \n Delivering in line with targets \n I am pleased to present Pollen Street's first financial results following completion of the Combination on 30 September 2022. It was a successful year with financial performance in line with guidance issued to the market and with the consensus of equity analysts. \n Over 2022, we have been focused on growing assets under management, referred to as AuM, from organic fundraising under the credit strategy. We raised £0.4 billion of funds into flagship Credit III and SMAs, equivalent to 36 per cent per annum growth. \n Under the Private Equity strategy, AuM was maintained at £1.8 billion with portfolio realisations offset by increases in co-investment capital. The Private Equity business was not actively fundraising in 2022, however good progress has been made towards the launch of flagship Private Equity V. We expect the first close in 2023.  \n Deployment under the Credit strategy has also been strong with Average Fee-Paying AuM across the whole Group increasing by 29 per cent to £2.3 billion as at 31 December 2022 (31 December 2021: £1.8 billion). \n The Combination of Pollen Street Capital Holdings Limited and Honeycomb Investment Trust plc to form Pollen Street plc has been transformative. The Combination unlocks value by enabling us to deploy capital from the Investment Company to accelerate the growth in third-party AuM in the Asset Manager through helping to scale existing funds and seed new strategies. The Combination occurred on 30 September 2022 and was effected by Honeycomb Investment Trust plc acquiring 100 per cent of the share capital of Pollen Street Capital Holdings Limited with newly issued shares in the Company as the consideration. As such the statutory financial statements only incorporate Pollen Street Capital Holdings Limited from 30 September 2022, the point at which it became a subsidiary of the Company. The combined group was renamed Pollen Street plc. Pollen Street has two complementary business segments: the Asset Manager, which encompasses all activities focused on managing third-party AuM, and the Investment Company, which encompasses all on-balance sheet investment activity and the Group's debt facilities. The Asset Manager activities solely reside in Pollen Street Capital Holdings Limited and its subsidiaries. The Investment Company business segment has £588 million of Investment Asset, £2 million of which are held in Pollen Street Capital Holdings Limited and its subsidiaries, the remainder are held within Pollen Street plc, Bud Funding Limited and Sting Funding Limited. \n Earnings from the Asset Manager are incorporated into the Group's statutory consolidated financial statements from 30 September 2022, being the date of completion of the acquisition of Pollen Street Capital Holdings Limited which effect the Combination. This basis (the \"Statutory Basis\") excludes earnings arising in Pollen Street Capital Holdings Limited and its subsidiaries prior to 30 September 2022. In addition to the statutory results, we also present proforma results for the business that incorporate the earnings from the Asset Manager as if the Combination had completed prior to the start of the period. This basis (the \"Proforma Basis\") explains the performance of the newly combined entity more fully because it includes a full history of Pollen Street Capital Holdings Limited and its subsidiaries. It is also aligned to the basis on which equity analysts forecasts are prepared for the combined business. A reconciliation between the two bases is presented  in the Annual Report on page 27. There is no material difference between the Statutory Basis and the Proforma Basis profitability measure for the Investment Company segment. Comparable results under the Proforma Basis have also been shown for 2021 to show the profitability trend of the Asset Manager. \n On the Statutory Basis, the operating profit for the Group was £27.3 million (2021: 30.3 million). As noted above, this measure does not include profits arising in Pollen Street Capital Holdings Limited prior to 30 September 2022, being the date of completion of the Combination. It also includes a charge of £3.4 million of business combination expenses associated with the acquisition of shares in Pollen Street Capital Holdings Limited. \n The profit on a Proforma Basis incorporates the earnings of the Asset Manager for the whole of 2022. On this basis, EBITDA closed the year at £36.8 million (2021: £37.3 million) with earnings well positioned to grow with the Asset Manager. Fund Management EBITDA increased by 21 per cent in 2022 to £8.5 million (2021: £7.0 million) driven by growth in the Fund Management Income. \n \n Net Investment Asset Return from the Investment Company was stable at 8.0 per cent per annum. This corresponds to Net Investment Return of £28.3 million (2021: £30.3 million). The return for 2022 is in line with the historical track record and guidance issued to the market. This performance in the current economic backdrop shows the resilience of the strategy. The investments are senior and asset-secured with modest LTVs, which provides strong downside protection. \n \n \n   \n \n \n \n \n \n \n Proforma Profitability (Incorporating the Asset Manager for full year) \n \n \n \n 2022 \n \n \n £ million \n \n \n \n \n 2021 \n£ million \n \n \n \n \n \n Fund Management EBITDA \n \n \n 8.5 \n \n \n 7.0 \n \n \n \n \n Net Investment Return \n \n \n 28.3 \n \n \n 30.3 \n \n \n \n \n \n EBITDA \n \n \n \n \n 36.8 \n \n \n \n \n 37.3 \n \n \n \n \n \n   \n Asset Manager growth \n Assets under management are tracked on a total AuM and fee-paying basis. Total AuM broadly 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 fee, with the average calculated from the opening and closing positions. \n For Private Equity, the Fee-Paying AuM is the committed capital in the funds, stepping down to invested capital at the point 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. See page 212 of the Annual Report for full definitions. \n Total AuM grew to £3.4 billion as at 31 December 2022, driven by organic fundraising under the Credit strategy. £0.4 billion of funds were raised in the flagship Credit III and SMAs, equivalent to 36 per cent per annum. £0.1 billion of these funds were raised in the fourth quarter, the period over which the statutory accounts are prepared, demonstrating the consistency of the AuM growth over the year.  Under the Private Equity strategy we have been preparing for the launch of flagship Private Equity V in 2023 and not actively fund raising during 2022. AuM for the Private Equity strategy was maintained at £1.8 billion. \n \n \n \n \n \n Assets under management \n \n \n \n \n 31 December 2022 \n \n \n £ billion \n \n \n \n \n 30 September 2022 \n \n \n £ billion \n \n \n \n \n 31 December 2021 \n£ billion \n \n \n \n \n \n Flagship Private Equity IV \n \n \n 0.7 \n \n \n 0.7 \n \n \n 0.7 \n \n \n \n \n Flagship Private Equity III \n \n \n 0.3 \n \n \n 0.3 \n \n \n 0.3 \n \n \n \n \n Satellite and co-investment vehicles \n \n \n 0.8 \n \n \n 0.8 \n \n \n 0.8 \n \n \n \n \n Private Equity \n \n \n 1.8 \n \n \n 1.8 \n \n \n 1.8 \n \n \n \n \n Flagship Credit III \n \n \n 0.4 \n \n \n 0.4 \n \n \n 0.3 \n \n \n \n \n SMAs \n \n \n 0.6 \n \n \n 0.5 \n \n \n 0.3 \n \n \n \n \n Investment Company assets \n \n \n 0.6 \n \n \n 0.6 \n \n \n 0.6 \n \n \n \n \n Credit \n \n \n 1.6 \n \n \n 1.5 \n \n \n 1.2 \n \n \n \n \n \n Total AuM \n \n \n \n \n 3.4 \n \n \n \n \n 3.3 \n \n \n \n \n 3.0 \n \n \n \n \n \n The momentum in deployment under the Credit strategy continued in 2022, with a 29 per cent per annum increase in Average Fee-Paying AuM from 2021 to 2022.  Average Fee-Paying AuM increased to £2.3 billion by the end of 2022, up from £1.8 billion at the end of 2021. Private Equity constituted £1.1 billion of the Asset Manager's Average Fee-Paying AuM over 2022 (2021: £1.0 billion) with Credit making up £1.2 billion (2021: £0.8 billion). \n The Asset Manager earns management fees from managing and advising third-party funds. These fees are long-term contracted revenues that are recurring and stable and driven by the quantum of Fee-Paying AuM. \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. When the next flagship fund holds its first close, the fees are charged on invested capital for earlier funds in the same strategy. \n 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, irrespective of strategy. 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. \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. \n As part of the terms of the Combination, 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 flagship Private Equity IV. 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 flagship Credit III and certain SMAs. Carried interest for the Private Credit funds is generally 10 per cent of returns with a 5 per cent hurdle and full catch-up. \n The Asset Manager segment delivered £2.9 million of Operating Profit on a Statutory Basis over the fourth quarter of 2022 (2021: nil). Annualising the Statutory profitability metrics demonstrates the returns are consistent. The annualised Total Income was £40.6 million.  Fund Management Income has been growing over the year with the growth in Fee-Paying AuM. The annualised Statutory Asset Manager Administration Costs were £28.9 million.  This resulted in an annualised Statutory Operating Profit of £11.7 million. Operating profit excludes depreciation of the right of use asset which was £1.0m on an annualised basis over 2022.  The depreciation is part of Fund Management Administration Costs on a proforma basis. \n \n \n \n \n \n Statutory Basis (Incorporating the Asset Manager from 30 September 2022) \n \n \n \n 2022 \n£ million \n \n \n \n \n 2021 \n£ million \n \n \n \n \n \n Total income \n \n \n 10.2 \n \n \n - \n \n \n \n \n Administration costs \n \n \n (7.3) \n \n \n - \n \n \n \n \n \n Operating profit \n \n \n \n \n 2.9 \n \n \n \n \n - \n \n \n \n \n \n   \n The Management Fee Rate for 2022 was 1.28 per cent. This is within the range of our medium-term guidance of 1.25 per cent to 1.5 per cent. Statutory performance fees and carried interest for the three months ended 31 December 2022 were 24 per cent of Fund Management Income for the quarter. This is at the top end of the long-term guidance range of 15 per cent to 25 per cent and reflects the strength of the underlying investment performance despite the macroeconomic environment. The Fund Management EBITDA Margin was 26 per cent for 2022. We are continuing our journey to raising a long-term EBITDA Margin above 50 per cent. \n   \n \n \n \n \n \n Financial Ratios for the 3 months ended 31 December 2022 \n \n \n \n \n 2022 \n \n \n \n \n \n Management Fee Rate (% of Average Fee-Paying AuM) \n \n \n 1.28% \n \n \n \n \n Performance Fee (% of Fund Management Income) \n \n \n 24% \n \n \n \n \n Fund Management EBITDA Margin (%of Fund Management Income) \n \n \n 26% \n \n \n \n \n   \n On a Proforma Basis, the Asset Manager segment delivered £8.5 million (2021: £7.0 million) of EBITDA over 2022. This was an increase of 21 per cent from 2021. This is consistent with the technical guidance we issued to the market at the half year and in line with analysts' consensus forecasts. \n \n \n \n \n \n Proforma Basis (Incorporating the Asset Manager for full year) \n \n \n \n 2022 \n£ million \n \n \n \n \n 2021 \n£ million \n \n \n \n \n Change \n% \n \n \n \n \n \n Fund Management Income \n \n \n 37.4 \n \n \n 33.9 \n \n \n +10% \n \n \n \n \n Fund Management Administration Costs \n \n \n (28.9) \n \n \n (26.9) \n \n \n +7% \n \n \n \n \n \n Fund Management EBITDA \n \n \n \n \n 8.5 \n \n \n \n \n 7.0 \n \n \n \n \n +21% \n \n \n \n \n \n   \n Fund Management Income increased by 10 per cent (2022: £37.4 million, 2021: £33.9 million). Fund Management Income comprises management fees, performance fees and income from carried interest. \n Revenue growth has been driven by increases in the Group's Average Fee-Paying AuM and income from carried interest. The growth was offset by catch-up fees received on flagship Private Equity fund IV occurring during 2021 but not 2022. \n The Management Fee Rate for 2022 was 1.27 per cent. This is ahead of the guidance issued for 2022 of 1.25 per cent, and within the range of our medium-term guidance of 1.25 per cent to 1.5 per cent. We expect this to increase in 2023 as Private Equity capital is raised. \n Performance fees and carried interest for 2022 were 23 per cent of Fund Management Income for the period. This is at the top end of the long-term guidance range of 15 per cent to 25 per cent and reflects the strength of the underlying investment performance. \n Fund Management Administration Costs were £28.9 million for 2022 (2021: £26.9 million). The increase of 7 per cent is driven by incremental headcount as well as inflation. This moderate increase reflects a well-invested cost base leading to a high drop through from incremental revenue to profitability. We are investing in headcount in the Investor Relations team to support capital raising across the Group and to internalise some capital raising costs. This will increase the capacity and improve the efficiency of capital raising in the longer term with some modest overlap in costs in the shorter term. We are also investing in dedicated talent in the adjacent strategies that we described in the capital markets day to support growth in those business lines. \n The Fund Management EBITDA increased by 21 per cent in 2022 to £8.5 million (2021: £7.0 million) driven by growth in the Fund Management Income. The Group is well positioned for EBITDA growth in future, given the momentum in AuM growth and operational leverage. \n The Fund Management EBITDA Margin was 23 per cent for 2022. We are continuing our journey to raising a long-term EBITDA Margin above 50 per cent. \n \n \n \n \n \n Financial Ratios for the year ended 2022 \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n \n \n \n \n \n Management Fee Rate (% of Average Fee-Paying AuM) \n \n \n 1.27% \n \n \n 1.73% \n \n \n \n \n Performance Fee (% of Fund Management Income) \n \n \n 23% \n \n \n 10% \n \n \n \n \n Fund Management EBITDA Margin (%) \n \n \n 23% \n \n \n 21% \n \n \n \n \n   \n Investment Company resilience \n The Group's £588 million investment portfolio is well diversified across deals and borrowers and is 97 per cent invested in Credit Assets originated under our credit strategy. Investments are all either senior secured or portfolios of well-seasoned mortgages. The investment portfolio includes a £30 million commitment to flagship Credit III in line with the strategy of deploying the balance sheet to align interests with our investors and drive third-party AuM growth. \n Our Investment Asset portfolio maintained its track record of performance throughout the year and delivered Net Investment Asset Return of 8.0 per cent per annum, demonstrating a consistent and robust performance despite the more challenging macroeconomic backdrop. This is in line with the historic track record and our guidance previously issued. We believe that our Investment Asset portfolio strategy, combining bespoke structuring and built to withstand highly stressed scenarios with backing by diverse pools of financial and hard assets, enables us to deliver consistent performance.The income on Net Investment Assets was £28.3 million (2021: £30.3 million). The income was higher in 2021, reflecting a slightly larger Investment Asset base prior to some share buy-backs in early 2022 and some higher yielding investments in 2021. \n \n \n \n \n \n Investment Asset Segment \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n 3F \n [4] \n \n \n \n \n \n Investment Assets \n \n \n £588 million \n \n \n £615 million \n \n \n \n \n Average Net Investment Assets \n \n \n £355 million \n \n \n £359 million \n \n \n \n \n Income on Net Investment Assets \n \n \n £28.3 million \n \n \n £30.3 million \n \n \n \n \n Return on Net Investment Assets \n \n \n 8.0% \n \n \n 8.5% \n \n \n \n \n   \n This robust performance was driven by strong credit asset return of 9.4 per cent  annualised (2021: 9.5 per cent ). The credit impairment charge for the year was minimal, a release of £0.2 million (2021: £0.8 million). The low impairment charge, despite the macroeconomic headwinds, reflects Pollen Street's underwriting approach where the deals are stress tested to withstand a materially more adverse macroeconomic environment than has occurred over 2022. See the Credit strategy section on page 10 of the Annual Report for further information. Investment Assets reduced slightly in the year (31 December 2022: £588 million; 31 December 2021 £615 million) with the Company redeploying capital from realised deals into new facilities as well as upsizing existing investments. New transactions in the period have included five structured deals including Onto, an electric vehicle subscription service with a commitment of £25 million. There were also two real estate  partnerships, Earlsfort and MM Capital, that target loans between €1 million and €25 million in Ireland. The Investment Asset portfolio comprises 38 investments, with an average balance outstanding of £15 million and an average LTV of 68 per cent. The remainder of the portfolio is made up of the small equity portfolio of 3 per cent. \n The Investment Company is well-positioned for an interest rate rise with more floating rate assets than floating rate liabilities.  As such, we expect yield on the Credit Assets to rise with the increase in interest rates over the period. \n Profit after tax \n The statutory profit after tax was £26.4 million (2021: £30.3 million). The main drivers of this change were the operating profit from the new Asset Manager segment of £2.9 million (2021: nil) and the operating profit of the Investment Company segment closing the year at £28.3 million (2021: £30.3 million), offset by £3.4 million of expenses incurred by Pollen Street plc in acquiring the share capital of Pollen Street Capital Holdings Limited and £0.5 million of costs relating to the start-up losses of the US asset management business, which form part of the operating profit of the Central segment. The US business comprises a team of six individuals building our franchise in that market. The start-up losses are expected to reduce as the US business raises AuM and increases revenue. The charge for depreciation and amortisation was £0.4 million. This principally relates to the computer and office equipment and a charge of £0.7 million per annum effective from completion of the acquisition in the shares in Pollen Street Capital Holdings limited until 2028, associated with the amortisation of the intangible assets representing the value of customer relationships. \n \n \n \n \n \n Statutory Basis (Incorporating the Asset Manager from 30 September 2022) \n \n \n \n 2022 \n(£ million) \n \n \n \n \n 2021 \n(£ million) \n \n \n \n \n \n Operating profit of Asset Manager \n \n \n 2.9 \n \n \n - \n \n \n \n \n Operating profit of Investment Company \n \n \n 28.3 \n \n \n 30.3 \n \n \n \n \n Operating profit of Central segment \n \n \n (3.9) \n \n \n - \n \n \n \n \n \n Operating profit \n of Group \n \n \n \n \n 27.3 \n \n \n \n \n 30.3 \n \n \n \n \n \n Depreciation and amortisation \n \n \n (0.5) \n \n \n - \n \n \n \n \n \n Profit before tax \n \n \n \n \n 26.8 \n \n \n \n \n 30.3 \n \n \n \n \n \n Corporation tax \n \n \n (0.4) \n \n \n - \n \n \n \n \n \n Profit after tax \n \n \n \n \n 26.4 \n \n \n \n \n 30.3 \n \n \n \n \n \n   \n The profit after tax on the Proforma Basis increased to £32.9 million (2021: £31.3 million) with the growth principally coming from the Asset Manager. \n \n \n \n \n \n Proforma Basis (Incorporating the Asset Manager for full year) \n \n \n \n 2022 \n(£ million) \n \n \n \n \n 2021 \n(£ million) \n \n \n \n \n \n \n EBITDA \n \n \n \n \n 36.8 \n \n \n \n \n 37.3 \n \n \n \n \n \n US costs \n \n \n (2.0) \n \n \n (2.1) \n \n \n \n \n Depreciation and amortisation \n \n \n (0.4) \n \n \n (0.4) \n \n \n \n \n \n Profit before tax \n \n \n \n \n 34.4 \n \n \n \n \n 34.8 \n \n \n \n \n \n Corporation tax \n \n \n (1.5) \n \n \n (3.5) \n \n \n \n \n \n Profit after tax \n \n \n \n \n 32.9 \n \n \n \n \n 31.3 \n \n \n \n \n \n   \n The Investment Company has not incurred corporation tax, because it is an investment trust. However, the Group incurs corporation tax in its Asset Manager business, which is not an investment trust. The effective tax rate for 2022 was 14 per cent of Operating profit on a Statutory Basis or 18 per cent of the Fund Management EBITDA on a Proforma Basis 4F [5] . This is slightly favourable compared to the illustrative tax rate described in the capital markets day presentation. \n The following table shows a reconciliation between the profit before tax under the Statutory Basis and the Proforma Basis. \n \n \n \n \n \n Reconciliation of Proforma Basis profit after tax to Statutory Basis profit after tax \n \n \n \n \n 2022 \n(£ million) \n \n \n \n \n 2021 \n(£ million) \n \n \n \n \n \n \n Proforma Basis \n \n \n \n \n 32.9 \n \n \n \n \n 31.3 \n \n \n \n \n \n Profit after tax in Pollen Street Capital Holdings Limited prior to Combination \n \n \n (3.1) \n \n \n (1.0) \n \n \n \n \n Business combination expenses \n \n \n (3.4) \n \n \n - \n \n \n \n \n \n Statutory Basis \n \n \n \n \n 26.4 \n \n \n \n \n 30.3 \n \n \n \n \n \n   \n Leverage \n The Group uses leverage in the Investment Company. The leverage facilities were extended and upsized during 2022 to provide long-term liquidity to the business and a lower blended margin. As at 31 December 2022 the Group had £263.6 million of leverage and £23.3 million of cash. This is equivalent to a net debt-to-tangible equity ratio of 69 per cent. It is less than the borrowing limit set by the Board of 100 per cent and within the target range of 50 to 75 per cent. \n Dividends \n Pollen Street declared dividends of £30 million for 2022, an increase of £2 million from the prior year (2021: £28 million). This was in line with the dividend targets issued by the Board on capital markets day on 1 March 2022. They reflect a quarterly dividend of 20.0p per share for the first half of the year and 16.0p per share for the second half. \n The Board's dividend targets published in March 2022 remain in place. Dividends for 2023 are targeted at £32 million with the Group aiming to grow dividends progressively thereafter, with a dividend no lower than £33 million in 2024 5F [6] . The dividend will be paid quarterly for 2022 and 2023, and semi-annually from 2024 onwards.  \n As part of the terms of the Combination, former Pollen Street Capital Holdings Limited shareholders waived dividends paid to them in 2022 and 2023 with respect to around 50 per cent of the shares issued to them by the Group. As such, the dividend targets correspond to a dividend per share of 16p for each quarter for 2023 and at least 25.5p for each half year for 2024. \n Outlook \n The Group remains in a strong position for growth in 2023. Fund Management Income is expected to step up following the anticipated closing of the flagship Private Equity V in 2023 and continued capital deployment under the credit strategies.  The balance sheet assets have strong downside protection from credit risk and are positioned to benefit from rising interest rates. \n Our financial guidance for the medium term remains in place. The medium term is defined as two to three years from completion of the Combination, being 30 September 2022. \n \n \n \n \n \n   \n \n \n \n \n Financial Guidance \n \n \n \n \n \n AuM \n \n \n £4 to £5 billion medium-term Fee-Paying AuM \n \n \n \n \n Management Fee Rates \n \n \n c.1.25%-1.50% Average Fee-Paying AuM over the long term \n \n \n \n \n Performance Fees and Carry \n \n \n c.15%-25% of total Fund Management Income on average over the long term \n \n \n \n \n Fund Management EBITDA Margin \n \n \n Long-term fund management adjusted EBITDA margin in excess of 50% \n \n \n \n \n Net Investment Income \n \n \n c.8%  long-term target return on net investment assets \n \n \n \n \n Dividend \n \n \n \n Targeted at £32 million in respect of 2023 and no lower than £33 million in 2024 \n \n \n \n \n \n   \n \n \n \n \n Julian Dale \n \nChief Financial Officer \n 22 March 2023 \n Investment Company top ten holdings \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Country \n \n \n \n \n Deal Type \n \n \n \n \n Sector \n \n \n \n \n Value of Holding \nat Year-end (£m) \n \n \n \n \n   \n \n \n LTV \n \n \n \n \n Percentage of Investment Assets \n \n \n \n \n \n \n 1 \n \n \n \n Sancus Loans Limited \n \n \n United Kingdom \n \n \n Senior \n \n \n Short Term Property Loans \n \n \n \n 60.2 \n \n \n \n \n 56% \n \n \n \n 10.5% \n \n \n \n \n \n 2 \n \n \n \n Creditfix Limited \n \n \n United Kingdom \n \n \n Senior \n \n \n Discounted Fee Receivables \n \n \n \n 58.2 \n \n \n \n \n 44% \n \n \n \n 10.2% \n \n \n \n \n \n 3 \n \n \n \n UK Agricultural Loans Limited \n \n \n United Kingdom \n \n \n Senior \n \n \n Short Term Property Loans \n \n \n \n 45.7 \n \n \n \n \n 51% \n \n \n \n 8.0% \n \n \n \n \n \n 4 \n \n \n \n Beaufort \n \n \n United Kingdom \n \n \n Senior \n \n \n Short Term Property Loans \n \n \n \n 45.4 \n \n \n \n \n 67% \n \n \n \n 7.9% \n \n \n \n \n \n 5 \n \n \n \n IWOCA Loans Limited \n \n \n United Kingdom \n \n \n Senior \n \n \n SME \n \n \n \n 31.0 \n \n \n \n \n 89% \n \n \n \n 5.4% \n \n \n \n \n \n 6 \n \n \n \n Downing Development Loans \n \n \n United Kingdom \n \n \n Senior \n \n \n Short Term Property Loans \n \n \n \n 29.8 \n \n \n \n \n 66% \n \n \n \n 5.2% \n \n \n \n \n \n 7 \n \n \n \n Nucleus Limited \n \n \n United Kingdom \n \n \n Senior \n \n \n CBILS SME \n \n \n \n 26.2 \n \n \n \n \n 92% \n \n \n \n 4.6% \n \n \n \n \n \n 8 \n \n \n \n GE Portfolio \n \n \n United Kingdom \n \n \n Secured \n \n \n Secured Consumer \n \n \n \n 23.7 \n \n \n \n \n 66% \n \n \n \n 4.1% \n \n \n \n \n \n 9 \n \n \n \n Duke Royalty \n \n \n United Kingdom \n \n \n Senior \n \n \n SME \n \n \n \n 23.5 \n \n \n \n \n 21% \n \n \n \n 4.1% \n \n \n \n \n \n 10 \n \n \n \n Tier \n \n \n United Kingdom \n \n \n Senior \n \n \n Micro Mobility Fleet Finance \n \n \n \n 20.6 \n \n \n \n \n 64% \n \n \n \n 3.6% \n \n \n \n \n \n Data as at 31 December 2022 \n \n Risk management \n \n The Group has developed a comprehensive risk management framework to ensure that risks are managed within a risk appetite. Effective risk management underpins the successful delivery of our strategy and longer-term sustainability of the business, and offers an integrated approach to the evaluation, control, and monitoring of the risks that the Group faces. The Board acknowledges that risk exists in the pursuit of targeted returns for shareholders, its strategies, and objectives and has implemented a risk management framework that is proportionate to the Group's activities and aligned to its objectives. \n \n \n   \n \n \n The Group's culture is expressed through the record of good conduct of its personnel, the dedicated governance arrangements that it has embedded within all areas of the business, as well as staff that are sensitive to the need to maintain appropriate management and control of the business. The Group has an open, risk-management orientated culture that encourages and facilitates clear communication and challenge where appropriate and the Group's governance framework is designed to safely deliver the agreed business strategy, ensuring its shareholders and clients' best interests are safeguarded and are at the forefront of the Group's business. As well as the adoption of a robust governance structure, the Group demonstrates compliance with its governance requirements by the adoption of a tailored set of systems and controls. The Group has maintained a strong control environment during periods of remote working. \n \n \n   \n \n \n The monitoring and control of risk is a fundamental part of the management process within the Group. The Board oversee the management of the key risks across the organisation, along with capital and liquidity adequacy. \n \n   \n \n The Group's governance structure is by way of Committees, designed to ensure that the Board has adequate oversight and control of the Group's activities. The effectiveness of the governance framework is considered by senior management on an ongoing basis so that any emerging risk matters can be addressed promptly. \n \n   \n \n The Group has established the Risk Committee as a Board-level Committee with responsibility for risk oversight. The Group has also established the Risk and Operation Committee (\"ROC\") as a management level Committee to provide stewardship of the risk framework of the Group, promote the risk awareness culture for all employees, and review the key risk together with the management approach to each risk. \n \n   \n \n The Group has established a risk management function consisting of the risk and compliance teams, headed by the Group's Chief Financial Officer and the Group's General Counsel respectively. \n \n   \n \n The individuals making up the risk management function possess an appropriate knowledge to deliver the level of oversight required to monitor adherence to the Group's stated risk appetite and tolerance limits, along with the skill set required to implement the risk framework and react to changes to the risks affecting the Group and its ability to deliver its business objectives. \n \n \n   \n   \n \n Risk management framework \n \n   \n \n \n The Group's risk management framework includes risk identification, risk appetite, accountability, risk limits, controls, and reporting. These components, when used together, enable effective oversight of risk across the Group. \n \n \n   \n \n \n The Group has established a three lines of defence model for managing risk. The first line of defence are the staff that have primary responsibility for managing a particular risk on a day-to-day basis. First line staff are responsible for understanding and implementing effective internal controls; they should identify, assess, control, and mitigate risks, guiding the development and implementation of internal policies and procedures and ensuring that activities are consistent with goals and objectives. \n \n \n   \n \n \n The second line of defence are the risk and compliance teams. They are responsible for oversight and challenge of the first line's management of risk. The second line provides regular challenge as part of its quality assurance of first line activity and checks that the first line is operating within the Group's defined policies, procedures, and risk appetite and tolerance parameters. A compliance monitoring programme is in place and a risk-based suite of tests are undertaken on a quarterly basis. The programme is tailored to key risks and thematic issues that arise and output is provided to the Risk and Operations Committee, which is the Group's management-level risk Committee, on a regular basis. The second line also regularly reviews and reports on the status of the risks recorded within the Group's risk registers. \n \n \n   \n \n \n The third line of defence is the internal audit function. It is responsible for proving assurance to the Board and senior management that the first and second lines of defence are operating in line with policy and in compliance with the requisite laws and regulations. The internal audit function has been outsourced to a third party thereby ensuring that the function remains truly independent, has access to the latest industry development and has increased flexibility of service. The internal audit programme includes the review of the effectiveness of risk management processes and recommendations to improve the internal control environment. \n \n \n   \n \n Risk environment 2022 \n \n   \n \n \n 2022 remained a year of uncertainty. As the world began to see green shoots of recovery following the Covid-19 pandemic, other geopolitical events such as Russia's unprovoked invasion of Ukraine caused the markets to suffer further instability. Tensions between Russia and the US, the UK and a number of European states have heightened significantly as a result and should the conflict escalate further, geopolitical instability could increase causing additional negative impacts on the global economic environment. The Risk Committee has conducted an assessment across the funds, which concluded that there was no direct exposure to Russia and Ukraine through revenues, suppliers and staff. We continue to work closely with our portfolio companies to assess and respond to the current economic challenges. \n \n \n   \n \n \n 2022 also saw a number of climate-related records broken. The changes in the physical climate system, most notably more intensive extreme events, have adversely affected natural and human systems around the world. This has contributed to a loss and degradation of ecosystems, including tropical coral reefs; reduced water and food security; increased damage to infrastructure; additional mortality and morbidity; human migration and displacement; damaged livelihoods; increased mental health issues; and increased inequality. It is now more evident than ever that a period of great change must occur if we are to avoid the worst predictions. Pollen Street is determined to be part of this change, more information on our ESG approach can be found in the ESG Report on page 30.. \n \n   \n \n Financial instability, macroeconomic deterioration and monetary and fiscal stress also increased during the year. Inflation is becoming an important concern for both experts and the general public and the increase in interest rates in the UK, and globally, has fuelled social tensions and destabilised markets further. We continue to monitor our exposure and make amendments to our strategy where required. \n \n   \n \n Notwithstanding these pressures, we have seen continued positive momentum in the portfolio performance across both business lines during the year, and performance has been underpinned by consistent deployment and a strong asset base. There are, however, a number of potential headwinds which will affect the global economy and consumer and investor confidence, and we continue to monitor performance closely and update our outlook and risk profile accordingly. \n \n   \n Principal risks & uncertainties \n \n The Group's assessment of risk has identified a broad range of risks and uncertainties which it believes could adversely impact the Group. The following key risks have been identified as having the potential to be material. They include emerging risks and have been reviewed by the Risk and Operations Committee and the Risk Committee regularly and recorded on the risk register. \n \n   \n \n \n Economic & Market Conditions \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n Economic and market factors, may affect the Group's investments, track record or ability to raise new capital \n \n \n \n \n Regular investment reviews are undertaken. The Investment Committee focuses on investment strategy, exit processes and refinancing strategies throughout the life of an investment or Credit Asset. \n \n   \n \n Early involvement of Investment Committee as new investment ideas are identified ensures that the Group can capitalise from downturns in markets in certain conditions. \n \n \n Periods of market volatility may allow the Group to make investments at attractive prices and terms. \n \n \n \n Despite macroeconomic factors seen during 2022, the portfolios remained resilient, and performance remained robust. We continue to monitor performance and act accordingly when required . \n \n \n \n \n \n Key \n \n \n   Risk Description   Risk Management   2022 Summary \n \n \n Fund Raising \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n An inability to secure new fund mandates or raise capital under existing mandates \n \n \n \n \n The Group has a strong and consistent track record of delivering top tier returns. The Group has sector specialism, knowledge of and expertise in the industries that it invests in, and the investment team have an extensive network and investment experience to enable them to identify opportunities attractive to potential investors. \n \n \n The Group maintains open communications with fund advisory boards and investors to ensure any potential issues are detected. \n \n \n \n \n The risk at the end of 2022 was somewhat elevated given recent market volatility. Management remains actively focused on fund raising across the business. \n \n \n The Group is making efforts to broaden its investor base and is targeting new geographies and investors as part of its ongoing fundraising activities. \n \n \n \n \n \n   \n \n \n Management Fee Rates and Other Fund Terms \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n The management fee rates, and other terms that the Group receives to manage new funds could be reduced, affecting the Group's ability to generate revenue \n \n \n \n \n The Board believes that management fee rates generated are supported by the Company's track record and the growing allocations to alternative investment market investments \n \n \n \n \n Pollen Street's management fee revenue is long term and contractual in nature. Its investment performance during 2022 was stable and no change in management fee revenue is anticipated. \n \n \n \n \n \n \n \n   \n \n \n \n \n Recognition of Performance Fees and Carried Interest \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n The risk that carried interest recognised on current or future funds is less than anticipated \n \n \n \n \n The Group forecasts its income, and budgets carefully using the latest information available \n \n \n \n \n Pollen Street recognition of carried interest and performance fees was in line with management's expectations \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n On-Balance Sheet Investment Underperformance \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n The risk of returns of Pollen Street's Investment Company falling below target levels due to poor investment decisions or a deterioration in the macro environment \n \n \n · \n This includes credit risk, market risk (such as interest rate risk, currency risk & price risk), capital management risks and liquidity risk \n \n \n \n \n The Group has a clear track record of delivering investment returns that are resilient to market conditions and in line with published guidance. \n \n \n Investments are monitored closely as part of the Group's ongoing investment monitoring programmes and input is given by all investment Committee members to ensure return objectives are met, and to anticipate and discuss any underperformance. \n \n \n \n \n Our Investment Assets are exposed to credit and market risks. They may be impacted by adverse economic and market conditions, including through higher impairment charges or reduced valuations.  The Group has a diversified, granular portfolio of assets. Loans are subject to stringent underwriting and stress testing. \n \n \n Investment performance remains strong.  \n Further information is set out in more detail in Note 20 \n \n \n \n \n \n   \n \n \n ESG and Sustainability Performance \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n Risks associated with the physical effects of climate change, the risks that arise as economies transition towards greener solutions, and the risk of a regulatory breach associated with SFDR \n 6F \n \n \n \n [7] \n \n \n \n , TCFD \n 7F \n \n \n \n [8] \n \n \n \n , FCA \n 8F \n \n \n \n [9] \n \n \n \n , SEC \n 9F \n \n \n \n [10] \n \n \n \n etc. reporting. \n \n \n · \n Poor or insufficient management of ESG risks or adverse developments impact the Group's reputation as an investor. \n \n \n \n \n The ESG Committee oversees Pollen Street's ESG matters, including ESG related risks. The Risk and Operations Committee as well as the Board Risk Committee has responsibility for oversight of ESG risk matters. \n \n \n ESG is considered as an evolving risk given the nature of the Group's investments. The Group is strengthening its approach to climate-related risk identification and mitigation, including the TCFD framework and disclosing accordingly. \n \n \n The Group has a set of minimum standards to ensure ESG risks are assessed and measured, which are incorporated into initial deal team investment assessments and ongoing portfolio management. This includes reviewing counterparty approach to environmental factors and collecting metrics to identify the environmental impacts of their operations. \n \n \n \n \n Progress has been made over the past year in respect of advancements in data and measurement, socially impactful examples from across the portfolio, becoming carbon neutral and recognition for work on DE&I. \n \n \n Pollen Street believes that the Group has a important role to play in manging ESG risks for society. However, the Group has not identified any material ESG risks related to the financial statements for 2022. \n \n \n \n \n \n \n \n Talent and Retention \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n Failure to attract, retain and develop an inclusive and diverse workforce to ensure the right skills are in the right place at the right time to deliver the Group's strategy, heightened by an ever-increasing competitive job marketplace. \n \n \n · \n Inadequate succession planning for key individuals. \n \n \n \n \n The Group has competitive reward and retention schemes in place for all employees, aligning individual, team and organisational goals, driving value for the Group. For senior management, these include a blend of short and long-term incentives. \n \n \n The Group invests in leadership development. \n \n \n Pollen Street is committed to raising awareness and encouraging diversity amongst the workforce and has established a DEI Working Group. \n \n \n Key persons have been identified and protections are in place. \n \n \n \n \n The business has made a number of key hires in 2022 and has invested in the investment team which possesses a broad skill set covering analytical, technical and strategic capabilities and an operational team which has industry experience across servicing, collections, finance, technology, compliance and risk. \n \n \n   \n \n \n \n \n \n   \n \n \n Information Security & Resilience \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n · \n Risks associated with information security and resilience, including: \n \n \n -  \n Failure to invest and successfully implement, appropriate technology \n \n \n -  \n Financial loss, data loss, business disruption or damage to reputation from failure of IT systems \n \n \n -  \n Data protection & information security \n \n \n -  \n Business continuity, disaster recovery and operational resilience \n \n \n -  \n Financial or reputation losses arising from a cyber attack \n \n \n   \n \n \n \n \n The Group has implemented appropriate security controls against common threats, including cyber-security threats. \n \n \n Awareness of the need for security of the Group's information systems is promoted and encouraged, and the importance of processing personal data in accordance with the Group Data Protection policy is set out. \n \n \n The Group's information security incident response plan is a set of guideline procedures to be followed in the event of an information security attack or breach. The primary aim of any response is to remediate and minimise the impact of the breach as quickly as possible and the plan sets out communication, oversight, and other considerations to be undertaken. \n \n \n \n \n The Group continues to invest in external reviews and cyber penetration testing and all policies and procedures have been refreshed during the year. \n \n \n The technology team has been strengthened and new hires made to cope with the increased demands of the Group. \n \n \n \n \n \n \n \n   \n \n \n \n \n Reputational Risk \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n · \n Risks that could result in damage to Pollen Street's reputation \n \n \n \n \n The Group's reputation in the eyes of our customers, regulators, employees, partners and society is critical to delivering our strategic objectives.  Business is conducted in a transparent and fair manner, minimising actions that could damage the Group's reputation or result in customer detriment of any kind. \n \n \n \n \n The Group has established a best practice risk management framework with a full suite of policies, procedures, compliance testing and senior management oversight in place. \n \n \n The Group engages professional third parties to ensure all activities are performed to a high standard. \n \n \n The Group engages an external PR agency to handle communications. \n \n \n \n \n \n   \n Emerging risk identification \n \n The Group monitors its emerging risks, supporting organisational readiness for external volatility, incorporating input and insight from both a top-down and bottom-up perspective: \n \n \n · \n Top-down: Emerging risks identified by the Risk Committee and the Board, helping to define the overall attitude of the Group to risk. \n \n \n · \n Bottom-up: Emerging risks identified at a business level and escalated where appropriate by the Risk and Operations Committee. \n \n \n   \n \n \n Geopolitical, macro and climate risk have dominated the headlines during 2022 and look set to continue throughout 2023 and beyond. Technology risk also continues to be a challenge for companies, with both the emergence of new technologies whose effects have yet to be understood, and the volatile nature of digital assets, e.g., cryptocurrencies bringing challenges to the markets. The Risk Committee will continue to monitor these risks and respond to the evolving risk landscape. \n \n \n Financial statements \n \n Consolidated Statement of Comprehensive Income \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n For the year ended 31 December 2022 \n \n \n For the year ended 31 December 2021 \n \n \n \n \n \n \n \n \n \n Notes \n \n \n Revenue £'000 \n \n \n Capital \n£'000 \n \n \n Total \n£'000 \n \n \n Revenue £'000 \n \n \n Capital \n£'000 \n \n \n Total \n£'000 \n \n \n \n \n Management fee income \n \n \n 5 \n \n \n 6,212 \n \n \n - \n \n \n 6,212 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Carried interest and performance fee income \n \n \n 8 \n \n \n 1,578 \n \n \n - \n \n \n 1,578 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Interest income on Credit Assets held at amortised cost \n \n \n 5 \n \n \n 51,986 \n \n \n - \n \n \n 51,986 \n \n \n 56,484 \n \n \n - \n \n \n 56,484 \n \n \n \n \n Gains on Investment Assets held at fair value \n \n \n 7 \n \n \n 3,909 \n \n \n - \n \n \n 3,909 \n \n \n 1,874 \n \n \n (1,337) \n \n \n 537 \n \n \n \n \n \n Total income \n \n \n \n \n \n \n \n \n \n 63,685 \n \n \n \n \n - \n \n \n \n \n 63,685 \n \n \n \n \n 58,358 \n \n \n \n \n (1,337) \n \n \n \n \n 57,021 \n \n \n \n \n \n Credit impairment release \n \n \n 10 \n \n \n 206 \n \n \n - \n \n \n 206 \n \n \n 844 \n \n \n - \n \n \n 844 \n \n \n \n \n Third-party servicing costs \n \n \n \n \n \n \n \n (2,511) \n \n \n - \n \n \n (2,511) \n \n \n (2,810) \n \n \n - \n \n \n (2,810) \n \n \n \n \n \n Net operating income \n \n \n \n \n \n \n \n \n \n 61,380 \n \n \n \n \n - \n \n \n \n \n 61,380 \n \n \n \n \n 56,392 \n \n \n \n \n (1,337) \n \n \n \n \n 55,055 \n \n \n \n \n \n Administration costs \n \n \n 5 \n \n \n (19,468) \n \n \n (117) \n \n \n (19,585) \n \n \n (11,720) \n \n \n (158) \n \n \n (11,878) \n \n \n \n \n Finance costs \n \n \n 9 \n \n \n (14,517) \n \n \n \n - \n \n \n \n (14,517) \n \n \n (12,859) \n \n \n \n - \n \n \n \n (12,859) \n \n \n \n \n \n Operating profit \n \n \n \n \n \n \n \n \n \n 27,395 \n \n \n \n \n (117) \n \n \n \n \n 27,278 \n \n \n \n \n 31,813 \n \n \n \n \n (1,495) \n \n \n \n \n 30,318 \n \n \n \n \n \n Depreciation \n \n \n 13, 14 \n \n \n (322) \n \n \n - \n \n \n (322) \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Amortisation \n \n \n 4 \n \n \n (160) \n \n \n - \n \n \n (160) \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n \n Profit before tax \n \n \n \n \n \n \n \n \n \n 26,913 \n \n \n \n \n (117) \n \n \n \n \n 26,796 \n \n \n \n \n 31,813 \n \n \n \n \n (1,495) \n \n \n \n \n 30,318 \n \n \n \n \n \n Tax \n \n \n 11 \n \n \n (435) \n \n \n - \n \n \n (435) \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n \n Profit after tax \n \n \n \n \n \n \n \n \n \n 26,478 \n \n \n \n \n (117) \n \n \n \n \n 26,361 \n \n \n \n \n 31,813 \n \n \n \n \n (1,495) \n \n \n \n \n 30,318 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Earnings per share \n(basic and diluted) \n \n \n 12 \n \n \n 62.4p \n \n \n (0.3)p \n \n \n 62.1p \n \n \n 90.2p \n \n \n (4.2)p \n \n \n 86.0p \n \n \n \n \n   \n The total column of this statement represents the statement of comprehensive income prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The revenue return and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies (\"AIC\"). All items in the above statement derive from continuing operations. \n No operations were discontinued during the year. \n The Company does not have any income or expense that is not included in net profit for the year. Accordingly, the net profit for the year is also the total comprehensive Income for the year, as defined in IAS1 (revised). There is no other comprehensive income for the year. \n The notes on pages 134 to 206 of the Annual Report form an integral part of the financial statements. \n Consolidated Statement of Financial Position \n \n \n \n \n \n \n \n \n \n Notes \n \n \n 31 December 2022 \n £'000 \n \n \n 31 December 2021 £'000 \n \n \n \n \n Non-current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Credit Assets at amortised cost \n \n \n 10 \n \n \n 523,877 \n \n \n 565,994 \n \n \n \n \n Investment Assets held at fair value through profit or loss \n \n \n 7 \n \n \n 64,506 \n \n \n 48,770 \n \n \n \n \n Fixed assets \n \n \n 13 \n \n \n 1,414 \n \n \n - \n \n \n \n \n Goodwill and intangible assets \n \n \n 4 \n \n \n 231,031 \n \n \n - \n \n \n \n \n Lease assets \n \n \n 14 \n \n \n 4,776 \n \n \n - \n \n \n \n \n Carried interest \n \n \n 8 \n \n \n 7,052 \n \n \n - \n \n \n \n \n Total non-current assets \n \n \n \n \n \n \n \n \n 832,656 \n \n \n \n \n 614,764 \n \n \n \n \n \n \n   \n \n Current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash and cash equivalents \n \n \n 22 \n \n \n 23,303 \n \n \n 12,948 \n \n \n   \n \n \n \n \n Receivables \n \n \n 15 \n \n \n 12,870 \n \n \n 6,554 \n \n \n \n \n Total current assets \n \n \n \n \n \n \n \n \n 36,173 \n \n \n \n \n 19,502 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \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 \n \n \n 868,829 \n \n \n \n \n 634,266 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \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 \n \n \n \n \n \n Payables \n \n \n 16 \n \n \n 19,221 \n \n \n 7,159 \n \n \n \n \n Lease payables \n \n \n 14 \n \n \n 1,201 \n \n \n - \n \n \n \n \n Current tax payable \n \n \n 11 \n \n \n 2,158 \n \n \n - \n \n \n \n \n Derivative liabilities held at fair value through profit or loss \n \n \n 18 \n \n \n 916 \n \n \n 108 \n \n \n \n \n Interest-bearing borrowings \n \n \n 9 \n \n \n 60,598 \n \n \n 49,339 \n \n \n \n \n \n Total current liabilities \n \n \n \n \n \n \n \n \n \n 84,094 \n \n \n \n \n 56,606 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \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 \n \n \n 784,735 \n \n \n \n \n 577,660 \n \n \n \n \n \n Non-current liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Lease payables \n \n \n 14 \n \n \n 4,067 \n \n \n - \n \n \n \n \n Deferred tax liability \n \n \n \n \n \n \n \n 94 \n \n \n - \n \n \n \n \n Interest-bearing borrowings \n \n \n 9 \n \n \n 203,035 \n \n \n 218,318 \n \n \n \n \n \n Total non-current liabilities \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n 207,196 \n \n \n \n \n 218,318 \n \n \n \n \n \n Net assets \n \n \n \n \n \n \n \n \n 577,539 \n \n \n \n \n 359,342 \n \n \n \n \n \n Shareholders' funds \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Ordinary share capital \n \n \n 24 \n \n \n 689 \n \n \n 352 \n \n \n \n \n Share premium \n \n \n \n \n \n \n \n 299,599 \n \n \n 299,599 \n \n \n \n \n Revenue reserves \n \n \n \n \n \n \n \n 2,363 \n \n \n 4,790 \n \n \n \n \n Capital reserves \n \n \n \n \n \n \n \n (2,361) \n \n \n (2,244) \n \n \n \n \n Other reserves \n \n \n 25 \n \n \n 277,249 \n \n \n 56,845 \n \n \n \n \n Total shareholders' funds \n \n \n \n \n \n \n \n \n 577,539 \n \n \n \n \n 359,342 \n \n \n \n \n \n Net asset value per share (pence) \n \n \n 27 \n \n \n \n 899.5 \n \n \n \n \n 1,019.1 \n \n \n \n \n \n \n   \n \n \n The notes on pages \n 134 to 206 of the Annual Report \n form an integral part of the financial statements. The financial statements on pages 127 to 133 of the Annual Report were approved by the Board of Directors of Pollen Street plc (a public limited company incorporated in England and Wales with company number 09899024) and authorised for issue on 22 March 2023. They were signed on its behalf by: \n \n \n   \n \n \n Robert Sharpe, Chairman \n \n Company Statement of Financial Position \n \n \n \n \n \n \n \n \n \n Notes \n \n \n 31 December 2022 \n £'000 \n \n \n 31 December 2021 \n £'000 \n \n \n \n \n Non-current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Credit Assets at amortised cost \n \n \n 10 \n \n \n 523,877 \n \n \n 565,994 \n \n \n \n \n Investment Assets held at fair value through profit or loss \n \n \n 7 \n \n \n 62,853 \n \n \n 48,770 \n \n \n \n \n Investments in subsidiaries \n \n \n 19 \n \n \n 239,027 \n \n \n - \n \n \n \n \n Total non-current assets \n \n \n \n \n \n \n \n \n 825,757 \n \n \n \n \n 614,764 \n \n \n \n \n \n Current assets \n \n \n \n \n \n \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n Cash and cash equivalents \n \n \n 22 \n \n \n 18,229 \n \n \n 10,500 \n \n \n   \n \n \n \n \n Receivables \n \n \n 15 \n \n \n 3,831 \n \n \n 6,554 \n \n \n   \n \n \n \n \n Total current assets \n \n \n \n \n \n \n \n \n 22,060 \n \n \n \n \n 17,054 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \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 \n \n \n 847,817 \n \n \n \n \n 631,818 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \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 \n \n \n \n \n \n Payables \n \n \n 16 \n \n \n 5,174 \n \n \n 6,860 \n \n \n \n \n Derivative liabilities held at fair value through profit or loss \n \n \n 18 \n \n \n 916 \n \n \n 108 \n \n \n \n \n Deemed loan \n \n \n 23 \n \n \n 29,227 \n \n \n 4118 \n \n \n \n \n Interest-bearing borrowings \n \n \n 9 \n \n \n 30,141 \n \n \n 15,072 \n \n \n \n \n Total current liabilities \n \n \n \n \n \n \n \n \n 65,458 \n \n \n \n \n 54,158 \n \n \n \n \n \n \n \n \n \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 \n \n \n 782,359 \n \n \n \n \n 577,660 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n Non-current liabilities \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n Deemed loan \n \n \n 23 \n \n \n 63,809 \n \n \n 50,208 \n \n \n \n \n Interest-bearing borrowings \n \n \n 9 \n \n \n 139,226 \n \n \n 168,110 \n \n \n \n \n Total non-current liabilities \n \n \n \n \n \n \n \n \n 203,035 \n \n \n \n \n 218,318 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n Net assets \n \n \n \n \n \n \n \n \n 579,324 \n \n \n \n \n 359,342 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Shareholders' funds \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Ordinary share capital \n \n \n 24 \n \n \n 689 \n \n \n 352 \n \n \n \n \n Share premium \n \n \n \n \n \n \n \n 299,599 \n \n \n 299,599 \n \n \n \n \n Revenue reserves \n \n \n \n \n \n \n \n 4,148 \n \n \n 4,790 \n \n \n \n \n Capital reserves \n \n \n \n \n \n \n \n (2,361) \n \n \n (2,244) \n \n \n \n \n Other reserves \n \n \n 25 \n \n \n 277,249 \n \n \n 56,845 \n \n \n \n \n Total shareholders' funds \n \n \n \n \n \n \n \n \n 579,324 \n \n \n \n \n 359,342 \n \n \n \n \n \n Net asset value per share (pence) \n \n \n 27 \n \n \n \n 902.2 \n \n \n \n \n 1,019.1 \n \n \n \n \n \n   \n \n The notes on the Annual Report form an integral part of the financial statements. \n \n \n Advantage has been taken of the exemption under section 408 of the Companies Act 2006 and accordingly the Company has not presented a Statement of Comprehensive Income for the Company alone. The profit on ordinary activities after taxation of the Company for the year ended 31 December 2022 was £28.1 million (2021: £30.3 million). The financial statements of the Annual Report were approved by the Board of Directors of Pollen Street plc (a public limited company incorporated in England and Wales with company number 09899024) and authorised for issue on 22 March 2023. They were signed on its behalf by: \n \n \n   Robert Sharpe, Chairman \n \n \n \n   \n \n \n Consolidated Statement of Changes in Shareholders' Funds \n For the year ended 31 December 2022 \n \n \n \n \n \n \n \n \n \n Ordinary \nShare \nCapital 10F [11] \n \n \n£'000 \n \n \n Share \nPremium \n£'000 \n \n \n Revenue \nReserves \n£'000 \n \n \n Capital \nReserves \n£'000 \n \n \n Special \nDistributable \nReserves 11 \n£'000 \n \n \n   \n Merger Reserves \n £'000 \n \n \n Total \nEquity \n£'000 \n \n \n \n \n Shareholders' funds at \n1 January 2022 \n \n \n \n 352 \n \n \n \n \n 299,599 \n \n \n \n \n 4,790 \n \n \n \n \n (2,244) \n \n \n \n \n 56,845 \n \n \n \n \n - \n \n \n \n \n 359,342 \n \n \n \n \n \n Ordinary shares issued \n \n \n 295 \n \n \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 235,486 \n \n \n 235,781 \n \n \n \n \n Transaction costs for share issuance \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (10,216) \n \n \n (10,216) \n \n \n \n \n Ordinary shares bought back \n \n \n 42 \n \n \n - \n \n \n - \n \n \n - \n \n \n (4,866) \n \n \n - \n \n \n (4,824) \n \n \n \n \n Profit / (Loss) after taxation \n \n \n - \n \n \n - \n \n \n 26,478 \n \n \n (117) \n \n \n - \n \n \n - \n \n \n 26,361 \n \n \n \n \n Dividends paid in the year \n \n \n - \n \n \n - \n \n \n (28,905) \n \n \n - \n \n \n - \n \n \n - \n \n \n (28,905) \n \n \n \n \n Shareholders' funds at \n31 December 2022 \n \n \n \n 689 \n \n \n \n \n 299,599 \n \n \n \n \n 2,363 \n \n \n \n \n (2,361) \n \n \n \n \n 51,979 \n \n \n \n \n 225,270 \n \n \n \n \n 577,539 \n \n \n \n \n \n   \n For the year ended 31 December 2021 \n \n \n \n \n \n \n \n \n \n Ordinary \nShare \nCapital \n £'000 \n \n \n Share \nPremium \n£'000 \n \n \n Revenue \nReserves \n£'000 \n \n \n Capital \nReserves \n£'000 \n \n \n Special \nDistributable \nReserves \n£'000 \n \n \n   \n Merger Reserves \n £'000 \n \n \n Total \nEquity \n£'000 \n \n \n \n \n Shareholders' funds at \n1 J...

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