The Scottish National Investment Bank has reported a loss of £3.4m, largely due to the early valuation profile of fund investments where unrealised losses are expected, followed by capital appreciation in later years.
Launched in November 2020, its first full-year accounts also showed that as the bank has built its systems and recruited new staff, administrative costs rose from £2.9m to £9.7m, reflecting “not only the full-year equivalent of costs for the part prior period, but the size of the bank required to deliver its ambitions“.
During the 12 months to 31 March, £129.3m of investment capital was deployed, up from the £22.9m during the four-month period in 2021. Income generation stood at £1.9m, compared to £400,000 during the four months during 2021.
The focus for 2022 has been to build on the foundations laid since launch, with £141.9m invested in 12 businesses and projects across Scotland this year, while a further £327m of backing was leveraged from other private and public sector investors.
The bank also increased its net assets from £31.4m to £165.4m at year end, while more than doubling its team headcount to 61.
Investments have ranged from £1m to £50m across a variety of deal structures - debt, equity and funds - and have recently included backing for Highland Coast Hotels, Lothian Broadband Group and Aberdeen Harbour.
Interim chief executive Sarah Roughead said: “The bank has demonstrated its ability to be a catalyst for private investment into businesses and projects aligned to its missions - and in doing so the bank has established itself as a credible financial institution within Scotland’s finance community.
“As our portfolio and networks grow, we aim to offer deeper insights, working as a conduit between both policy makers and business leaders.
“This, together with continuing to increase awareness of the bank in the wider ecosystem, will be an area of focus for next year.”
The chief executive's statement also noted that the portfolio is performing “in line with expectations“ and there is a “healthy pipeline of opportunities“.
Chairman Willie Watt said: “This has been a year in which investment activity has ramped up and tangible impacts are manifesting themselves with our portfolio.
“The bank is acting as a catalyst to encourage investment in businesses or projects in the private and third sector in which it may otherwise be challenging to obtain funding.”
As a development bank, it is required to take increased risk with investments to prove the commercial viability of new markets and technologies, or to bridge an investment gap where the risk is perceived to be too high for private sector investors.
Watt, who was previously chief executive and chair of Edinburgh-based fund manager Martin Currie, told the BBC that last year's investment total was less than he wanted, and hoped it would get close to the £200m of Scottish government funding allocated for investment this year.
He also stated that recent market turmoil has been unlike anything he has seen in 40 years as an investment manager - and is making it more difficult to get investors to commit, meaning future projects might need more reassurance about risk.
The documents also touched upon the departure of the bank's first chief executive, Eilidh Mactaggart, who resigned "for personal reasons" in January and has not yet been replaced.
It showed that she received a base salary of £235,800 and pension payments of £25,938.
There was also £98,250 for five months’ payment in lieu of notice and eight and a half days’ unused annual leave (£7,709), paid in March. Her total £348,047 package was one of the highest in the public sector.
Interim chief executive Roughead received £231,073 - including her period as chief financial officer - and one month in her stand-in role, for which she is receiving base pay of £205,000.
Elsewhere, the financial report noted that “considerable progress“ was made over the year towards achieving desired Financial Conduct Authority regulatory status to support growth.
“A robust risk management framework and all essential policies and procedures have been developed and refined in the year“, the statement read, adding that and internal IT infrastructure and operating platform was delivered both on time and within budget.
Wholly owned by Scottish ministers on behalf of the people of Scotland, the bank is a publicly-listed company and operationally independent from government.
The government committed to capitalising the bank with £2bn in its first 10 years. Over time, as the bank’s initial investments are repaid, it will reinvest those funds in businesses and projects, aiming to create a perpetual fund to support the Scottish economy in the long term.
It has three legal entities in its structure: the Scottish National Investment Bank plc holding company for the group; Scottish Investments, the company through which all investments are made; and Scottish Investments Services, the operational services company to the group.
The bank is focussed on delivering both commercial returns and mission impacts. Its stated missions are supporting Scotland’s transition to net zero; building communities and promoting equality; and harnessing innovation to enable people to flourish.
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