EcofinGlobal U&I Tst - Annual Financial Report
17/12/2024 07:00
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RNS Number : 3041Q Ecofin Global Utilities Inf Tst PLC 17 December 2024
ECOFIN GLOBAL UTILITIES AND INFRASTRUCTURE TRUST PLC (the "Company")
Annual Results Announcement for the year ended 30 September 2024
LEI: 2138005JQTYKU92QOF30
This announcement contains regulated information.
Ecofin Global Utilities and Infrastructure Trust plc (the "Company") is an
authorised UK investment trust whose objectives are to achieve a high, secure
dividend yield on a portfolio invested primarily in the equities of utility
and infrastructure companies in developed countries and long-term growth in
the capital value of the portfolio while preserving shareholders' capital in
adverse market conditions.
· During the year ended 30 September 2024, the Company's net asset
value ("NAV") per share increased by 25.9% on a total return basis. The
Company's share price increased by 24.8% on a total return basis over the 12
months;
· Four quarterly dividends were paid during the period totalling 8.10p
per share. Due to your board's confidence, with effect from the dividend paid
in February 2025, the quarterly dividend will be increased by 3.7% to 2.125p
per share (8.5p per share per annum);
· From 1 October 2024 a lower management fee came into effect. This
delivers future savings to shareholders and will help to lessen ongoing
charges;
· The Company continues to buy back shares while the share price is
at a significant discount to the NAV. This is accretive to NAV total return;
· Increasing power demand and infrastructure capital expenditure
are driving earnings growth at companies selected for the portfolio while
valuation multiples for these essential assets businesses remain low.
Summary As at or year to As at or year to
30 September 2024 30 September 2023
Net assets attributable to shareholders (£'000) 211,977
243,231
Net asset value ("NAV") per share(1) 221.68p 183.54p
Share price 195.00p 164.00p
Discount to NAV(1) 12.1% (10.6)%
Revenue return per share 7.17p 7.01p
Dividends paid per share 8.10p 7.70p
Dividend yield (1,2) 4.2% 4.7%
Gearing on net assets (1,3) 14.2% 11.2%
Ongoing charges ratio (1,4) 1.39% 1.27%
1. Please refer to Alternative Performance Measures in the annual report.
2. Dividends paid (annualised) as a percentage of share price.
3. Gearing is the Company's borrowings (including the net amounts due from
brokers) less cash divided by net assets attributable to shareholders.
4. The ongoing charges ratio is calculated in accordance with guidance
issued by the Association of Investment Companies ("AIC") as the operating
costs (annualised) divided by the average NAV (with income) throughout the
period.
Performance for periods to 30 September 2024 (total returns in £)
1 year 3 years Since admission(5) Since admission
% % 5 years % % per annum
%
NAV per share (6) 25.9 27.1 52.1 117.7 10.2
Share price (6) 24.8 11.0 51.1 144.4 11.8
Indices (6,7)
S&P Global Infrastructure Index 18.0 28.8 22.8 57.2 5.8
MSCI World Utilities Index 23.7 31.3 26.5 76.1 7.3
MSCI World Index 21.1 32.2 73.3 148.5 12.0
FTSE All-Share Index 13.3 23.4 31.7 59.9 6.0
FTSE ASX Utilities Index 16.6 40.9 71.6 53.4 5.5
5. The Company was incorporated on 27 June, 2016 and its investment
activities began on 13 September, 2016 when the liquid assets of Ecofin Water
& Power Opportunities plc ("EWPO") were transferred to it. The formal
inception date for the measurement of the Company's performance is 26
September 2016, the date its shares were listed on the London Stock Exchange
6. Total return includes dividends paid and reinvested immediately. Please
also refer to the Alternative Performance Measures in the annual report.
7. The S&P Global Infrastructure Index and MSCI World Utilities Index
are the global sector indices deemed the most appropriate for performance
comparison purposes. The Company does not have a formal benchmark index. The
other indices are provided for general interest.
Chairman's Statement
Performance
After a challenging time in 2023, I am delighted to report that your Company's
net asset value (NAV) increased by 25.9%, including the reinvestment of
dividends, over the year to 30 September 2024. This performance exceeded those
of the comparable global sector indices, the S&P Global Infrastructure
Index and MSCI World Utilities Index, as well as general equity benchmarks
such as the FTSE All-Share and MSCI World indices and was achieved despite a
significant headwind from sterling strength. The share price total return was
also strong, at 24.8%. Since inception eight years ago, your Company has
generated NAV and share price total returns of 10.2% and 11.8% per annum
respectively.
Performance was positive across the utility, environmental services and
transportation infrastructure portfolio segments during the year, and
especially strong in the US. Stock selection was beneficial, as reviewed in
the investment manager's report. The portfolio was well positioned for the
recovery in share valuations of utilities and the resurgence in interest in
nuclear power. With heightened market volatility, our investment manager also
found opportunities to manage position sizes profitably. A modest level of
gearing boosted underlying returns.
Investment manager and management fee
As of 1 October 2024, RWC Asset Management LLP ("Redwheel") has acquired the
material business interests of the Company's fund manager, Ecofin, and
retained the investment team. Redwheel is a UK-based specialist investment
manager with c. £18bn in assets under management, including Temple Bar
Investment Trust Plc. We are pleased that the transition has gone smoothly so
far and that the Ecofin team's strategy and investment process remain
unchanged.
From 1 October, a lower management fee also came into effect, as previously
announced. The fee is now 0.9% p.a. on the first £200 million of NAV, 0.75%
above £200 million and up to £400 million, and 0.6% thereafter. This
delivers future savings to shareholders.
Dividends
The revenue return per share increased by 2.3% year-over-year. After two years
of very strong growth, total income from investments decreased slightly
(-0.4%). Sterling's significant strength played a role, as did share buybacks
and stock choices: some of the strongest NAV contributors pay a relatively low
yield. Overall expenses were almost unchanged.
Given our confidence in the long term growth prospects for earnings per share,
we have decided to increase the quarterly dividend by 3.7% to 2.125p per share
(8.50p per annum), with effect from the dividend to be paid in February 2025.
Share price discount and buybacks
A share price discount persisted during the year, as it did for most of the
investment trust sector, despite the strong performance. With the discount
averaging about 12%, we bought back shares to enhance NAV for the benefit of
shareholders. In total, 5.8 million shares were repurchased, equivalent to
£9.8 million, with an additional 1.6 million shares repurchased since the end
of the financial year. Your board takes the view that, having issued new
shares when they were trading at a premium to NAV, it is our duty to buy
shares back when they trade at a material discount.
Annual General Meeting
The Company's AGM will be held on Wednesday 5 March 2025 at 3.00pm at The
Clermont, 101 Buckingham Palace Road, London SW1W 0SJ. You are most welcome to
attend to meet the board and hear a presentation from our portfolio manager,
Jean-Hugues de Lamaze.
Outlook
Since 30 September (to 10 December), the Company's NAV and share price have
decreased by 4.0% and 2.0% respectively. October and November brought upward
pressure on long-bond yields despite reductions in shorter-term interest rates
across the developed economies. This provides a headwind for the share prices
of companies, such as those in our sector, which have significant dividend
yields. Diversification of our portfolio and our flexible mandate will help us
protect the downside and capture new opportunities as they arise.
Companies in the portfolio are reporting strong earnings and good
opportunities for growth while valuations in our universe continue to be
attractive. Electricity demand is rising steadily with a continuing shift
towards decarbonised generation while transport and water infrastructure is
also benefiting from rising demand and the need for capital investment. The
portfolio is positioned to benefit from these long-term trends as electricity
generators diversify their generation fleets, transmission grids are
modernised, and distribution systems adapt to changing customer needs. The
need for investment gives water & waste services and transportation
infrastructure strong pricing power and platforms for growth while also
providing attractive dividend yields.
We believe that the total return prospects for the Company's portfolio are
very encouraging while the broad array of the sub-sectors in which we invest
gives investors excellent portfolio diversification.
David Simpson
Chairman
16 December 2024
Investment manager Report:
Markets and our sectors
Equity markets reacted positively to declining inflation and the cuts in
policy interest rates in many OECD economies in the second half of the
financial year. Longer term bond yields fell between April and September,
helping interest rate sensitive stocks. Elections and changing political
agendas in the UK, France and the US provided political uncertainty while
continuing geopolitical tensions unsettled investor confidence.
This mixed backdrop had much less effect on EGL's portfolio than the strong
earnings momentum and positive long-term updates of the companies we invest
in. Over the 12 months to 30 September, the NAV increased by 25.9%, ahead of
the S&P Global Infrastructure Index (+18.0%) and the MSCI World Utilities
Index (+23.7%). The MSCI World Index increased by 21.1%, mostly achieved in
the first half of EGL's financial year (all total returns in sterling).
US utilities were the stand-out performers during the year (+29.2%) and stock
selection added further value. Utilities in Continental Europe kept up with
broad equity averages and UK holdings were notably strong NAV contributors.
Transportation infrastructure and environmental services returns were positive
but more muted than in the energy sector. The reappearance of US power demand
growth, driven partly by datacentres but also by economic activity, re-shoring
and the switch from fossil fuels in power generation gives a pivotal role to
the transmission & distribution utilities that will hook that power up to
final users as well as to the generators. Consequently, in Europe as well as
the US, earnings results and guidance were strong, often nicely ahead of
market expectations, helping the appreciation of shares which continue to
trade on low valuations.
Performance summary
The second half of the year produced a NAV total return of 15.2%, building on
the first half's 9.0% return. For the full year, performance was broadly
based, with all regions and sub-sectors contributing positively but several
large holdings and one new name were the main drivers. The use of leverage,
which averaged 11% for the year, was beneficial given the positive returns,
while sterling's persistent strength held returns back (approximately -8%).
One of our best decisions in the year was to add Vistra to the portfolio last
November. Vistra is a diversified US integrated utility operating natural gas,
coal, nuclear and solar generation capacity plus one of the largest battery
storage facilities in the world. Compared to peers, it has low debt ratios and
above average free cash flows, and nearly half its generation capacity in
Texas where we see structurally higher power prices because baseload capacity
is being replaced by renewables. The holding was doubled in February when
Vistra's purchase of Energy Harbour, owner of a 4000 MW nuclear generation
fleet, received regulatory approval, giving Vistra the second largest nuclear
power fleet in the country. This coincided with a sea-change in attitudes to
nuclear energy. Constellation, a pure nuclear owner/operator, has been a
relatively large holding in the portfolio since it was spun out from Exelon
early in 2022. Together, Constellation and Vistra represented c. 7% of the
portfolio during the year, despite some profit taking, and their shares
increased by 116% and 212%, respectively.
Constellation and Vistra are direct beneficiaries of accelerating demand from
energy intensive businesses (including datacentres) for constantly available
decarbonised electricity and the US Production Tax Credit which provides a
floor price for nuclear electricity and supports investing to extend the life
of plants. Datacentres are increasingly connecting directly to nuclear plants
and ready to pay a significant premium over wholesale power prices to secure
their need for baseload power. Constellation and Vistra shares were also
reacting well to strong earnings, cash flow generation and balance sheets,
significantly improving longer term earnings outlooks and returns to
shareholders via share buybacks. Southern Company and Public Service
Enterprise Group, also nuclear plant owners, were notable contributors to
performance too due to solid earnings reports.
After a disappointing stock performance in the previous year, NextEra Energy's
shares rose 37% as quarterly earnings results consistently exceeded market
expectations. This reflected strong customer growth, new additions to its
renewables and storage portfolio and cost controls. Regulated wires-focussed
utilities such as American Electric Power and Edison International also
performed well as bond yields came down, earnings came through and customer
demand growth materialised sooner than expected. Edison International, for
example, expects 35% higher 10-year load growth than just two years ago.
National Grid, SSE and Drax represented the majority of the portfolio's UK
exposure. They are well exposed to the themes of transmission &
distribution and electrification that we are emphasising in the portfolio, and
they were strong performers during the second half of the year. Share price
volatility - around National Grid's equity issuance, for example - provided an
opportunity to manage position sizes and add value. Enel provided a
consistently good performance contribution as it continued to deliver strong
earnings. Its asset disposal program is ahead of plan and at attractive
valuation multiples; the shares also benefited from the decline in Italian
bond yields.
After a poor performance for RWE in the first half, its shares recovered in
the second but still underperformed a strong cohort. Hong Kong listed Chinese
stocks underperformed for most of the year until a hefty stimulus package
ignited an equity market rally in China and Hong Kong in September. This meant
China Suntien Green Energy and China Water Affairs made reasonable
contributions to the NAV for the last 6 months and the full financial year.
Xinyi Energy made a much smaller share price recovery and was the poorest
performer during the year; it is also the portfolio's smallest holding. Stocks
with French exposure (Vinci, Veolia, Engie, Atlas Arteria) were weak toward
year-end given the prospect of a rise in the corporate tax rate as the
government struggled to shore up its finances.
Purchases & sales
In the half-year report to 31 March, we reported purchases to further increase
exposure to energy transmission and distribution (regulated growth), baseload
nuclear power provision (unregulated growth) and transportation and
environmental services (inflation-linked growth), and a reduction in power
price exposure. In the second half of the year, we took profits in US holdings
which had seen sharp share price gains, including Constellation, Vistra,
NextEra Energy, America Electric Power and Edison International, and we exited
a small position in Williams Companies. Purchases were generally of
pan-European names (National Grid, Drax, Vinci) and we added a new name, BKW,
a European provider of energy (hydro, wind & solar and nuclear) and
infrastructure services (building solutions, engineering) and manager of the
Swiss grid. We think BKW should be set to benefit from higher and structurally
more volatile electricity prices, relatively low interest rates in
Switzerland, and solid earnings contributions from the grid business and the
services division which is being restructured.
Income and gearing
After a few years of very strong growth, income from investments declined
slightly year-on-year. Foreign currency weakness reduced foreign dividend
receipts expressed in sterling terms; the US dollar declined by nearly 10% and
the Euro by 4%. Stock choices played a part in reducing income - some
relatively high yielding shares were sold (Williams Companies) or reduced
(Endesa, Engie) and relatively low yielders purchased (Vistra, BKW). The cost
of borrowings fluctuated and, as the accounts show, was higher than the
previous year but our use of gearing was a significantly positive contributor
to overall returns.
Outlook
The valuation of some parts of the stock market may be high but listed
infrastructure is still undervalued by historical standards, relative to broad
market averages and compared with valuations of private infrastructure assets.
We have seen a revaluation for US utilities this year, leading us to take some
profits since the financial year-end, but this uplift mostly reflects strong
earnings rather than a reassessment, which we think is merited, of the growth
opportunities for the sector.
EGL's investment universe comprises businesses providing infrastructure and
services essential for economic activity and progress. Serious weather events
make modern, durable infrastructure all the more important, and climate risk
mitigation is fundamentally reliant on infrastructure companies investing to
facilitate the transition to a cleaner world. The world now invests almost
twice as much annually in clean energy as it does in fossil fuels. This growth
is underpinned by strong demand, continued cost reductions, emissions
reduction goals and considerations of energy security. In addition, power
prices are rising in the US and are attractive versus historical levels in
most European markets. Companies developing, owning and operating the
infrastructure behind the energy transition will, we expect, continue to be
areas of profitable opportunity.
The shares of transportation infrastructure and environmental services (water
and waste management) have generally underperformed utilities this year and we
are adding exposure. We believe these businesses have limited competition and
good pricing power, operational performance is strong, and they contribute to
portfolio diversification. Stock valuations in these infrastructure segments
are still low - for example, ENAV, the monopoly provider of air traffic
control services in Italy, and Vinci, a global leader in motorway and airport
concessions, trade at valuations which are cheaper than their historical
averages with strong cash generation supporting above market dividend yields.
EGL's portfolio of companies will, we believe, continue to grow their
earnings, almost irrespective of the economic backdrop, helped by the
proportion of their revenues which is fully contracted or regulated.
RWC Asset Management LLP (Redwheel)
Investment Manager
16 December 2024
Principal and emerging risks associated with the Company
The directors have carried out a robust assessment of the principal and
emerging risks facing the Company, including those which could threaten its
business model, future performance, solvency and liquidity. The specific
financial risks associated with foreign currencies, interest rates, market
prices, liquidity, credit, valuations and the use of derivatives - which may
or may not be material to the Company - are described in note 16 to the
Financial Statements. The board conducts this assessment by reviewing a
detailed risk matrix on a regular basis A full analysis of the directors'
review of internal controls is set out in the corporate governance statement
in the annual report.
The principal risks, incorporating the emerging risks, facing the Company are
summarised below along with, where appropriate, the steps taken by the board
to monitor and mitigate such risks.
Performance and market risk
The performance of the Company depends primarily on the investment strategy,
asset allocation and stock selection decisions taken by the Investment Manager
within the parameters and constraints imposed by the Company's investment
policy. The investment policy guidelines can only be materially changed by
proposing an ordinary resolution at a General Meeting for shareholders'
approval. The Company invests in securities which are listed on recognised
stock exchanges so it is regularly exposed to market risk and the value of the
Company's portfolio can fluctuate, particularly over the short term, in
response to developments in financial markets.
The board has put in place limits on the Company's gearing, portfolio
concentration, and the use of derivatives which it believes to be appropriate
to ensure that the Company's investment portfolio is adequately diversified
and to manage risk. The board meets formally at least four times a year with
the Investment Manager to review the Company's strategy and performance, the
composition of the investment portfolio and the management of risk. The board
examines the sources of investment performance, which are described in
attribution analyses prepared by the Investment Manager for each meeting,
volatility measures, liquidity and currency exposure, and the Company's
gearing. Investment performance could be adversely affected by changes within
the investment management team. The board monitors these through regular
dialogue with the Investment Manager. The Investment Manager takes steps to
reduce the likelihood of such an event by ensuring appropriate succession
planning and the adoption of a team-based approach.
Protracted separation of NAV and share price
Whilst some investors may view the opportunity to purchase a share of the
Company at a discount to its NAV as attractive, the volatility of the price of
a share and the premium/discount adds to the risks associated with an
investment in the Company's shares. The directors review the level of the
premium/discount on a regular basis and will use their ability as granted by
shareholders to address any sustained or significant discount or premium to
NAV, as and when it is appropriate, through the repurchase or issuance of
stock. The repurchase of stock will be subject to, but not limited to, market
conditions and availability of cash resources.
Income risk
The Company is committed to paying its shareholders regular quarterly
dividends and to increasing the level of dividends paid over time. The
dividends that the Company can pay depend on the income it receives on its
investment portfolio, the extent of its distributable reserves and, to a
lesser extent, its level of gearing and accounting policies. Cuts in dividend
rates by portfolio companies, a change in the tax treatment of the dividends
received by the Company, a significant reduction in the Company's level of
gearing or a change to its accounting policies could adversely affect the net
income available to pay dividends.
The board monitors the net revenue forecast, including each component revenue
and expense line item, prepared by the Administrator for quarterly board
meetings. These are discussed in some detail to assess the Investment
Manager's level of confidence in the income growth profile of the portfolio
and to mitigate any risk of revenue shortfall relative to expectations.
The board applied successfully to cancel the Company's share premium account
in November 2016 and the resulting special reserve is available, when the
board considers it appropriate, to augment the net revenue available to pay
dividends to shareholders.
Environmental, social and governance ("ESG") considerations
ESG considerations and policies have become some of the most critical issues
confronting companies and their shareholders and can have a significant impact
on the business models, sustainability and even viability of individual
companies. These issues are a key area of focus for the board, and the board
maintains a regular oversight of the Investment Manager in this area.
ESG factor analysis is undertaken on all portfolio holdings and prospective
investments by the Investment Manager. In a rapidly changing environment
surrounding sustainability and ESG, the investment team works to determine the
best practices to incorporate into investment criteria and to make reporting
available to the market. As a long-standing specialist in the Company's
sectors, the investment team actively engages with portfolio companies in an
effort to drive continuous improvement in their sustainability practices and
metrics. The board regularly reviews the way ESG considerations are integrated
into the decision-making process by the Investment Manager to mitigate risk at
the stock selection and portfolio levels.
Liquidity risk
Whilst the Company invests principally in highly liquid securities listed on
recognised stock exchanges in developed economies, it also invests to a
limited extent in securities traded in emerging markets and in securities
which are more thinly traded. As the Company is a closed-end investment
company it does not run the risk of having to liquidate investments on
unattractive terms to meet redemptions by investors although it is exposed to
price risk; that is, that it will be unable to liquidate a position in a
thinly traded security at the valuation at which it is carried in the
Company's accounts. It is also exposed to a risk that its prime broker,
Citigroup Global Markets Limited ("Citigroup"), which provides a flexible
borrowing facility, could request that borrowings be repaid with three days'
notice. The board reviews the liquidity profile of the Company's portfolio on
a regular basis. The liquidity analysis regularly shows that, if required, 96%
of the portfolio could be liquidated within five business days assuming trades
to accomplish this accounted for up to 30% of average daily trading volumes.
Cyber security risk
The threat of cyber-attack, in all guises, is regarded as at least as
important as more traditional physical threats to business continuity and
security. The Company's third-party service providers (including Redwheel, BNP
Paribas, Apex (formerly Maitland), Citibank and Computershare) have confirmed
the policies and procedures they have in place and their commitment to alert
the board to any breaches. Redwheel has a regularly tested business continuity
plan and cyber risk is covered within its broad insurance cover.
Operational risks
Disruption to, or failure of, the Investment Manager's dealing system, the
Depositary's or Custodian's records or BNP Paribas' accounting systems may
prevent accurate reporting and monitoring of the Company's financial position.
The risk of fraud or other control failures or weakness within these service
providers could result in losses to the Company.
In common with most other investment trusts, the Company has no executive
directors, executive management or employees. The Company delegates key
operational tasks to third-party service providers which are specialists in
their fields: the management of the investment portfolio to the Investment
Manager, Ecofin Advisors Limited during the financial year and since 1 October
Redwheel; the preparation and maintenance of the financial statements and
maintenance of its records to the Administrator and Company Secretary, BNP
Paribas S.A. and Apex Fund Administration Services (UK) Limited (formerly
Maitland Administration Services Limited), respectively; the worldwide custody
of the assets to Citigroup; and the safekeeping and oversight services to
Citibank UK Limited ("Citibank") as Depositary. The board reviews the
performance of these third-party service providers and their risk control
procedures on a regular basis as well as the terms on which they provide
services to the Company.
Legal, regulatory and compliance risks
To qualify as an investment trust, the Company must comply with Section 1158
of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's
approval are given under Status in annual report. Were the Company to breach
Section 1158, it may lose investment trust status and, consequently, gains
within the Company's portfolio would be subject to capital gains tax. The
Section 1158 qualification criteria are continually monitored by the
Administrator and the results reported to the board regularly. The Company
must also comply with the provisions of the Companies Act 2006 and, since its
shares are listed on the London Stock Exchange, the FCA Listing Rules, Market
Abuse Regulation ('MAR'), Disclosure Guidance and Transparency ('DTRs'), and,
as an investment trust, the Alternative Investment Fund Managers Directive
('AIFMD'). A breach of the Companies Act could result in the Company and/or
directors being fined or the subject of criminal proceedings. Breach of the
FCA Listing Rules or DTRs could result in the Company's shares being suspended
from listing, which in turn would breach Section 1158. The board relies on the
services of its Company Secretary, the Investment Manager and its professional
advisers to ensure compliance with the Companies Act 2006, the FCA Listing
Rules, DTRs, MAR and AIFMD.
The following risks have also been identified as important in our risk
assessment.
Other risks
In the opinion of the directors, an investment in the shares of the Company
entails a greater than average degree of risk, in the context of the
investment trust industry, because the Company employs gearing, as explained
in annual report. In addition to the risks borne by the Company described
above, investors in the shares of the Company are exposed to risks due to the
investment policy (described in annual report) of the Company. These are risks
that cannot be mitigated without changing the investment policy.
Gearing and capital structure
The board has authorised the Investment Manager to utilise gearing, in the
form of borrowings under the Company's prime brokerage facility, although the
gearing is not structural in nature and can be reduced at any time. Whilst the
use of gearing will enhance the NAV per share when the value of the Company's
assets is rising, it has the opposite effect when the underlying asset value
is falling. In the event that the prime brokerage facility were to be
renegotiated or terminated, the Company might not be able to finance its
borrowings on as favourable terms.
Non-OECD or emerging markets
The Company's policy on diversification, noted in annual report, permits the
Investment Manager to invest up to 10% of its investments, measured at the
time of acquisition, in the securities of companies incorporated in countries
which are not members of the OECD - such as emerging markets - and quoted on
stock exchanges in such countries. Investment in emerging markets may involve
a higher degree of risk and expose the Company to, among other things, less
well developed legal and corporate governance systems, a greater threat of
unilateral government action with respect to regulation and taxation, and a
higher risk of political, social and economic instability than an investment
in developed, OECD markets. These risks are mitigated through diversification
and fundamental analysis.
Foreign exchange risk
As noted in the investment policy in annual report, the Company's Financial
Statements are prepared in sterling, and its shares are denominated in
sterling. Many of the Company's investments, however, are denominated in
currencies other than sterling and, as a result, the value of the Company's
investment portfolio is exposed to fluctuations in exchange rates. Although
the Company may hedge non-sterling exposure from time to time, it is not the
Company's policy to try to minimise or eliminate foreign exchange risk as over
the long term this could restrict the investment returns potentially available
to sterling-based investors in international securities. There is a risk that
the NAV will be depressed, therefore, if sterling appreciates significantly
against foreign currencies.
Political risk
The board has considered the political uncertainties prevailing in the US, in
view of President Trump's re-election, and the rest of the world and the risks
associated with potential changes to regulations, laws and/or taxes. The board
continues to believe that the Company's strategy of investing in an
internationally diversified portfolio of companies is the correct model to
achieve its investment objectives.
David Simpson
Chairman
16 December 2024
Management report and Directors' responsibilities statement
Management report
Listed companies are required by the FCA's Disclosure Guidance and
Transparency Rules (the "Rules") to include a Management Report in their
Financial Statements. This information is included in the Strategic Report in
annual report inclusive (together with the sections of the annual report and
accounts incorporated by reference) and the Directors' Report in the annual
report. Therefore, a separate Management Report has not been included.
Directors' responsibilities statement
The directors are responsible for preparing the Strategic Report, the
Directors' Report and the Financial Statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare Financial Statements for each
financial year. Under that law the directors have elected to prepare the
Financial Statements in accordance with United Kingdom Accounting Standards,
comprising FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland", and applicable law (United Kingdom Generally Accepted
Accounting Practice ("UK GAAP")). Under company law the directors must not
approve the Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of the profit or
loss of the Company for that period.
In preparing those Financial Statements, the directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
Financial Statements; and
· prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The annual report and accounts is published on the Investment Manager's
website www.redwheel.com/uk/en/individual/
(http://www.redwheel.com/uk/en/individual/)
ecofin-global-utilities-and-infrastructure-trust-plc/ and the directors are
responsible for the maintenance and integrity of the corporate and financial
information about the Company included on this website. The work carried out
by the Auditor does not involve consideration of the maintenance and integrity
of this website and, accordingly, the Auditor accepts no responsibility for
any changes that may have occurred to the annual report and accounts since it
was initially presented on the website.
Directors' confirmation statement
The directors listed in the annual report as the persons responsible within
the Company hereby confirm that, to the best of their knowledge:
a) the Financial Statements within the annual report and accounts of which
this statement forms a part have been prepared in accordance with applicable
accounting standards and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
b) the Management Report, which comprises the Chairman's Statement,
Investment Manager's Report, Strategic Report (including risk factors) and
note 16 to the Financial Statements, includes a fair review of the development
and performance of the business and position of the Company, together with the
principal risks and uncertainties that it faces.
Having taken advice from the audit committee, the directors consider that the
annual report and accounts taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy.
The directors have reached these conclusions through a process which is
described in the Report of the Audit Committee in the annual report.
On behalf of the board
David Simpson
Chairman
16 December 2024
Statement of Comprehensive Income
Year ended 30 September 2024 Year ended 30 September 2023
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair value through profit or loss - - (28,012) (28,012)
42,729 42,729
Foreign exchange gains - 1,544 1,544 - 1,774 1,774
Investment income 11,775 - 11,775 11,822 - 11,822
Investment management fees (886) (1,329) (2,215) (904) (1,355) (2,259)
Administrative expenses (858) - (858) (835) - (835)
Net return before finance costs and taxation 10,031 10,083 (27,593) (17,510)
42,944 52,975
Finance costs (507) (458) (686) (1,144)
(760) (1,267)
Net return before taxation 9,524 42,184 51,708 9,625 (28,279) (18,654)
Taxation (1,430) (1,606) - (1,606)
- (1,430)
Net return after taxation 8,094 42,184 50,278 8,019 (28,279) (20,260)
Return per ordinary share (pence) 7.17 7.01 (24.72) (17.71)
37.39 44.56
The total column of the Statement of Comprehensive Income is the profit and
loss account of the Company.
The revenue and capital columns are supplementary to this and are published
under guidance from the AIC.
All revenue and capital returns in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year ended
30 September 2024.
The Company has no other comprehensive income and therefore the net return on
ordinary activities after taxation is also the total comprehensive income for
the year.
Statement of Financial Position
Notes As at As at
30 September 2024 30 September 2023
£'000 £'000
Non-current assets 227,513
Equity securities 276,910
Investments at fair value through profit or loss 276,910 227,513
Current assets 8,432
Debtors and prepayments 1,909 -
Cash at Bank -
1,909 8,432
Creditors: amounts falling due within one year
Prime brokerage borrowings (34,569) (20,002)
Other creditors (1,019) (3,966)
(35,588) (23,968)
Net current liabilities (33,679) (15,536)
Net assets 243,231 211,977
Share capital and reserves
Called-up share capital 1,097 1,154
Share premium account 50,548 50,548
Special reserve 103,525 114,398
Capital reserve 88,061 45,877
Revenue reserve - -
Total shareholders' funds 243,231 211,977
Net asset value per ordinary share (pence) 183.54
221.68
The Financial Statements were approved by the Board of Directors and
authorised for issue on 16 December 2024 and were signed on its behalf by:
David Simpson
Chairman
Statement of Changes in Equity
For the year ended 30 September 2024
Notes Share capital Share premium account Special reserve * Capital reserve* Revenue reserve* Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2023 1,154 50,548 114,398 45,877 - 211,977
Return after taxation - - - 42,184 8,094 50,278
Buyback of ordinary shares (57) - (9,823) - - (9,880)
Dividends paid - - (1,050) - (8,094) (9,144)
Balance at 30 September 2024 1,097 50,548 103,525 88,061 - 243,231
For the year ended 30 September 2023
Notes Share capital Share premium account Special reserve * Capital reserve* Revenue reserve* Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2022 1,119 40,801 116,976 74,156 - 233,052
Return after taxation - - - (28,279) 8,019 (20,260)
Issue of ordinary shares 46 9,747 - - - 9,793
Buyback of ordinary shares (11) - (1,808) - - (1,819)
Dividends paid 3 - - (770) - (8,019) (8,789)
Balance at 30 September 2023 1,154 50,548 114,398 45,877 - 211,977
*These reserves are available for distribution.
Statement of Cash Flows
Notes Year ended Year ended
30 September 2024 30 September 2023
£'000 £'000
Net return before finance costs and taxation 52,975 (17,510)
Decrease in accrued expenses (16) (134)
Overseas withholding tax (1,576) (1,417)
Deposit interest income (16) (4)
Dividend income (11,759) (11,818)
Realised gains on foreign exchange transactions (1,544) (1,774)
Dividends received 11,558 11,307
Deposit interest received 16 4
Interest paid (1,267) (1,055)
(Gains)/losses on investments (42,729) 28,012
Decrease in other debtors - (8)
Net cash flow from operating activities 5,642 5,603
Investing activities
Purchases of investments (75,162) (88,966)
Sales of investments 72,505 88,153
Net cash used in investing activities (2,657) (813)
Financing activities
Movement in prime brokerage borrowings 14,567 (5,611)
Dividends paid (9,144) (8,789)
Share issue proceeds - 9,793
buyback costs (9,880) (1,659)
Net cash outflow from financing activities (4,457) (6,266)
Decrease in cash (1,472) (1,476)
Analysis of changes in cash during the year
Opening balance - -
Foreign exchange movement 1,472 1,476
Decrease in cash (1,472) (1,476)
Closing balance - -
Notes to the Financial Statements
For the year ended 30 September 2024
1. Accounting policies
(a) Basis of preparation
The Financial Statements have been prepared in accordance with the Companies
Act 2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"),
including the Financial Reporting Standard applicable in the U.K. and Republic
of Ireland ("FRS 102") and with the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture Capital
Trusts' issued in July 2022. The Financial Statements are prepared in Sterling
which is the functional currency of the Company and rounded to the nearest
£'000. They have also been prepared on a going concern basis and approval as
an investment trust has been granted by HMRC.
The Company's assets consist substantially of equity shares in companies
listed on recognised stock exchanges and in most circumstances are realisable
within a short timescale. The board has set limits for borrowing and regularly
reviews actual exposures and cash flow projections. The Company has prime
broker borrowings to draw upon, and these borrowings are repayable on demand.
Having taken these factors into account and having assessed the principal
risks and other matters set out in the Viability Statement in the annual
report, the directors believe that, after making enquiries, the Company has
adequate resources to continue in operational existence for the foreseeable
future and has the ability to meet its financial obligations as they fall due
for a period of at least twelve months from the date of approval of this
Report. Accordingly, they continue to adopt the going concern basis of
accounting in preparing the financial statements.
Further detail is included in the Directors' Report (unaudited) in the annual
report.
2. Income
Year ended Year ended
30 September 2024 30 September 2023
£'000 £'000
Income from investments (revenue account)
UK dividends 1,550 1,715
Overseas dividends 9,933 9,991
Stock dividends 276 112
11,759 11,818
Other income (revenue account)
Deposit interest 16 4
Total income 11,775 11,822
During the year to 30 September 2024 the Company received special dividends
totalling £3,000 (30 September 2023: £83,000), all of which was recognised
as revenue and is included in the revenue column of the Statement of
Comprehensive Income.
3. Dividends on ordinary shares
Year ended Year ended
30 September 2024 30 September 2023
£'000 £'000
Fourth interim for 2022 of 1.85p (paid 30 November 2022) - 2,082
First interim for 2023 of 1.95p (paid 28 February 2023) - 2,200
Second interim for 2023 of 1.95p (paid 31 May 2023) - 2,234
Third interim for 2023 of 1.95p (paid 31 August 2023) - 2,273
Fourth interim for 2023 of 1.95p (paid 30 November 2023) 2,247
First interim for 2024 of 2.05p (paid 29 February 2024) 2,356
Second interim for 2024 of 2.05p (paid 31 May 2024) 2,281
Third interim for 2024 of 2.05p (paid 30 August 2024) 2,260
9,144 8,789
The proposed fourth interim dividend for 2024 has not been included as a
liability in these Financial Statements as it was not payable until after the
reporting date.
Set out below are the total dividends paid and proposed in respect of the
financial period, which is the basis on which the requirements of Section
1158-1159 of the Corporation Tax Act 2010 are considered. The revenue
available for distribution by way of dividend for the year was £8,094,000 (30
September 2023: £8,019,000).
Year ended Year ended
30 September 2024 30 September 2023
£'000 £'000
Three interim dividends of 2.05p each (2023: three interim dividends of 1.95p 6,897 6,707
each)
Proposed fourth interim dividend 2.05p (2023: 1.95p) 2,248 2,247
9145 8,954
The amount reflected above for the cost of the fourth interim dividend for
2024 is based on 109,674,598 ordinary shares, being the number of ordinary
shares in issue on the record date 1 November 2024.
4. Return per ordinary share
Year ended 30 September 2024 Year ended 30 September 2023
£'000 p £'000 p
Returns are based on the following figures:
Revenue return 8,094 7.17 8,019 7.01
Capital return 42,184 37.39 (28,279) (24.72)
Total return 50,278 44.56 (20,260) (17.71)
Weighted average number of ordinary shares in issue 112,827,903 114,418,153
5. NAV per ordinary share
The NAV attributable to the ordinary shares and the NAV per ordinary share at
the year-end were as follows:
As at As at
30 September 2024 30 September 2023
Net asset value attributable (£'000) 243,231 211,977
Number of ordinary shares in issue 109,721,598 115,495,663
Net asset value per share (p) 221.68 183.54
6. Related party transactions and transactions with the Investment Manager
Fees payable during the year to the directors and their interests in shares of
the Company are considered to be related party transactions and are disclosed
within the Directors' Remuneration Report in the annual report. The balance of
fees due to directors at the year-end was £nil (30 September 2023: £nil).
The Company had an agreement with Ecofin Advisors Limited during the year for
the provision of investment management services. Details of fees earned and
balances outstanding at the year-end are disclosed in note 3 to the Financial
Statements in the annual report
The information contained in this Annual Financial Report Announcement has
been prepared in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and as applied in accordance
with the provisions of the Companies Act 2006 (the "Act"). These comprise
standards and interpretations of the International Accounting Standards
("IAS") and Standing Interpretations Committee as approved by the
International Accounting Standards Committee ("IASC") that remain in effect,
to the extent that IFRS have been adopted by the EU. The results for the
year ended 30 September 2024 are audited but do not constitute statutory
accounts as defined in Section 434 of the Act. The statutory accounts have
not yet been delivered to the Registrar of Companies. Full statutory accounts
for the year ended 30 September 2023 included an unqualified audit report and
have been filed with the Registrar of Companies.
The Annual Report and Financial Statements will be posted to shareholders and
will shortly be available on the Investment Manager's website
(www.redwheel.com/uk/en/individual/ecofin-globalutilities-and-infrastructure-trust-plc/
(//www.redwheel.com/uk/en/individual/ecofin-globalutilities-and-infrastructure-trust-plc/)
) or in hard copy format from the Company's Registered Office.
A copy of the Annual Report will be submitted to the FCA's National Storage
Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The Annual Report
will also be available on the Investment Manager's website at
www.redwheel.com/uk/en/individual/ecofin-globalutilities-and-infrastructure-trust-plc/
(http://www.redwheel.com/uk/en/individual/ecofin-globalutilities-and-infrastructure-trust-plc/)
For further information, please contact:
Elspeth Dick, CFA
RWC Asset Management LLP
Telephone: 020 7227 6000
Faith Pengelly
Apex Fund Administration Services (UK) Limited
Company Secretary
01245 950317
16 December 2024
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