The net asset value (NAV) total return (i.e. including dividend payments) in 2020 was 3.15%.
The company has paid a dividend of 6.5p for the full year, which is covered 1.1 times by earnings.
The NAV per share ended the year at 93.25p, down from 97.79p a year earlier.
The trust has a diversified portfolio of £122.7mln invested across 35 loans in 14 sectors. Eight new investments totalling £26mln were made during 2020.
“Our gross portfolio yield increased to c.9.3%, from c.8.8% in 2019, and we have continued to deliver on our dividend target of 6.5 pence for the year,” Norman Crighton, the chairman of RM Secured Direct Lending, said.
“Our refreshed investment strategy will focus on increasing our exposure to the social and environmental sectors. Currently comprising c.30% of the portfolio, these sectors hold clear alignment to specific SDGs and will allow RMDL to meet the funding needs of quality businesses who are making a meaningful, positive contribution to society.
“In addition, our partnership with The Good Economy will provide key third-party assurance for ESG and Impact reporting, which will ensure ESG-related criteria remains an integral part of our rigorous investment process. This will allow us to achieve our company purpose of delivering positive impact outcomes linked to Sustainable Development Goals while offering stable, risk-adjusted returns for our investors,” Crighton said.
“We have entered 2021 in a strong position and a high-quality pipeline of secured lending opportunities. The board has every confidence in the long-term future of RMDL and our ability to deliver for our shareholders,” he concluded.
In a separate announcement, RMDL said a new £12mln loan facility has been agreed with Oaknorth Bank. On a pro forma basis, the new facility is expected to add about half a percentage point per annum to the company’s total return, based on the average portfolio yield less funding costs. It will also be neutral in terms of the company’s existing gross borrowings, which currently stands at 11.7% (9.90% on a net basis after taking account of cash balances). This remains significantly within the company maximum borrowing limits of 20% of net asset value at the time of drawdown.
N+1 Singer, the house broker, noted that RM Secured Direct Lending is currently yielding 7.6% and is trading at an 8.5% discount to its NAV. It expectsthe fund’s shares will re-rate in tandem with the recovery of value.
“Management is bullish on the portfolio. Highlighting its resilience and how they expect to recover value on troubled exposures (e.g. Gym Franchises, Hotels etc),” the broker said.
“The portfolio is valued under IFRS13 (mark to market approach). The fund’s NAV reached a low (86.64p) in March with the independent valuation agent taking a cautious view on the prognosis. RM believes that these value reductions are largely temporary in nature and that the write backs will continue to drive performance in 2021,” the broker said.
The shares were up 1.8% at 87p in afternoon trading.
— adds broker comment and updates the share price —