Honeycomb Investment Trust plc (LSE:HONY) said it achieved a strong net asset value (NAV) return of 8.5% in 2021 with no down months.
The NAV return of 8.5% was an improvement on 2020’s 7.7%. The strong financial performance has continued following the end of the financial year with annualised NAV returns of 8.1% in January 2022
NAV per share at the end of 2021 had risen to 1,019p from 1,013p at the end of 2020, the investment trust said in its full-year results.
Earnings for the year rose to £30.3mln from £20.7mln the previous year, equivalent to 86p per share (2020: 56.5p).
The group ended the year with a net debt to equity percentage of 70.9% per cent (31 December 2020: 59.1%), which is within its stated target of 50% to 75%.
The board is confident the company will continue to deliver attractive investment returns and listed a number of factors that it believes work in the trust’s favour.
“Firstly, market dynamics continue to drive compelling investment opportunities. Non-bank lending is an increasingly critical part of the lending landscape, providing financing to millions, including those that are underserved by high street banks. The company continues to aim to be the finance partner of choice for the non-bank sector. Thanks to deep expertise and relationships, the Investment Manager is able to source most investments internally and negotiate bilaterally,” said Robert Sharpe, the chairman of Honeycomb.
“Second is the strategy employed by the company to address these investment opportunities. The strategy focuses on senior secured, asset-based credit investments, which is a structure that aligns interests between Honeycomb and its borrowers. The strategy has driven stable NAV returns over 2021.
“Finally, positive societal and environmental impact continues to be an important feature of the Honeycomb investment strategy. Lending over the course of 2021 has supported regional economic growth, affordable homes and the transition towards a net-zero emissions economy,” he added.
Last month the company reached an agreement on the terms of a recommended all-share merger with its investment manager, Pollen Street Capital.
READ Honeycomb Investment Trust agrees to merge with Pollen Street Capital
Sharpe observed that the board is keeping a close watch on the company’s share price and will consider reactivating the company's share buyback programme as the board believes that at the current price (850p) the company's shares offer significant value.
The board's policy is to consider conducting share buybacks when the shares trade more than 5% below NAV subject to maintaining the company's gearing target limit.
The investment manager (Pollen Street) said the group has more than £1bn of deals under consideration. Pollen Street continues to focus the portfolio on structured and secured loans, which it believes reduces the risk of underperformance in the portfolio.
“The outlook for the economy remains somewhat uncertain with the potential impact of the various supply shortages, the increasing cost-of-living and consequences of emerging geopolitical events. Despite this, we believe that Honeycomb is well-positioned for the future and we are proud to have delivered strong returns for Honeycomb shareholders over 2021 and indeed since inception in 2015,” Pollen Street said.