FareShare South West

Profit and loss

In a year defined by the global pandemic, the need for us to succeed in our aim to improve the lives of people in the UK was greater than ever.

Our full audited Report and Financial Statements for the year ended 31 December 2020 are available here. Summary financial data is shown below.

Profit and loss for the year ended 31 December 2020
2020 2019
£000 £000
Social investment portfolio*
Interest, fee and dividend income 4,511 4,784
Fair value adjustments on investments:
- Valuation changes and income relating to underlying investments 9,170 (805)
- Management fees and expenses paid to fund managers (6,494) (4,000)
Other valuation changes (17) (17)
7,170 (38)
Treasury portfolio**
Interest income 2,997 3,357
Fair value adjustments on investments 1,682 2,352
4,679 5,709
Staff costs and other expenses*** (8,224) (7,803)
Profit/(loss) on ordinary activities before taxation**** 3,625 (2,132)
Taxation 62 6
Profit/(loss) for the financial year 3,687 (2,126)

*These are the results from our social impact investments which you can read about in the impact section of this report. The increase in revenue this year is the result of upward valuation movements outweighing write-downs across the portfolio. The valuations do not necessarily reflect the long-term view of performance, but instead they look at the current value and risk profile of the investments as required by accounting standards. Partially offsetting these valuation movements are higher management fees incurred by Big Society Capital reflecting the growth and diversity of the social impact portfolio.

** This is the return on funds we hold before they are drawn down into social impact investments. We deploy our treasury portfolio proactively to create social impact alongside our objectives to preserve capital, maintain liquidity and generate returns on investment. The reduction in net income for the year compared to 2019 is due to a lower average treasury balance and market volatility within certain areas of the portfolio.

*** Operating costs have risen in line with expectations, with continuing investment in the resilience and effectiveness of Big Society Capital, as the social impact investment portfolio continues to grow.

**** Big Society Capital’s long-term objective is to generate positive financial returns alongside demonstrable social impact. The company made a profit in 2020, and this will be used to achieve further social impact, by making investments to address social issues aimed at improving lives in the UK. The generation of financial returns will also enable the company’s operational and market building costs to be covered, and move the company towards generating returns for its shareholders. When balanced against losses in previous years the positive returns in 2020 put us on a track towards operating on a sustainable basis, although there are potential future downsides to portfolio performance as government support measures put in place to support the economy during the Covid-19 pandemic are unwound.

Our treasury portfolio

Our treasury portfolio is used to create social impact alongside our objectives to preserve capital, maintain liquidity and generate returns on investment. Since 2016 the largest part of our treasury portfolio has been managed by AXA Investment Management. This is governed by a mandate that permits only investments that have been successfully screened in accordance with a socially responsible investment process, while aiming for capital preservation. During 2020 we increased engagement with AXA to ensure they are delivering responsible investing strategies in line with environmental, social and corporate governance (ESG) best practice.

The remainder of the treasury portfolio is invested in social bond, equity and multi-asset funds.

Total revenue from the treasury portfolio in 2020 was £4.7 million, approximately 20% lower than 2019, which had seen very strong bond and equity market performance. The decrease reflects a lower treasury balance and lower, but still positive, mark-to-market increases on the social bond, equity and multi-asset funds.