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Honeycomb Investment Trust sees strong future for non-bank lending as strategy pays dividends

Published: 04:13 15 Sep 2021 EDT

Honeycomb Investment Trust plc -

Honeycomb Investment Trust plc (LSE:HONY) chairman Robert Sharpe said as mainstream banks increasingly focus on commoditised lending markets, the non-bank lending sector in which it invests is “increasingly critical to support the economy”.

The trust’s portfolio, consisting predominantly of senior lending to non-bank lenders secured on their underlying loan portfolios, had a net asset value of 1,017p at the end of June as the trust delivered an annualised NAV return of 8.7% in the first six months of 2021. This was up from 8.2% a year ago and 7.7% for the whole of last year.

With the shares at 970p at the half-year stage, the discount to NAV had reduced to 4.6% from 26% a year earlier and 7% in December.

Honeycomb said the performance of the underlying credit assets remained consistent throughout the period, with net investment assets increasing to £594mln from £569mln as investment manager Pollen Street Capital was able to access new attractive opportunities.

The portfolio has also seen a shift toward structurally secured assets with greater protection from adverse credit losses, resulting in the charge for expected credit loss provisions being reduced to £0.5mln compared to £6.7mln a year ago.

Having continued to meet its dividend target of 20p per share per quarter, the company has remained in line with its ongoing target dividend yield of 8.0% annualised on the issued share price at its initial public offering.

Gearing increased slightly, with the net debt to equity ratio ending the period at 66.1%, up from 59.1% six months earlier as new assets have been deployed, though borrowings were reduced to £265mln from £274mln.

The investment manager believes opportunities to continue to support lending into SMEs through government-backed schemes will offer compelling returns.

“The Covid-19 pandemic was a test of both the resilience of the strategy and our portfolio management approach as investment manager,” said Pollen Street in the results statement.

“The stability of the NAV performance reflected the prudent approach, discipline and high standards of governance of the investment manager's established business model.

“The strategy for 2021 continues, coupled with an approach that aims to generate a long term sustainable positive impact for investors, partners and wider society.”

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