EcofinGlobal U&I Tst - Half-year Report
18/05/2023 07:00
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RNS Number : 7817Z Ecofin Global Utilities Inf Tst PLC 18 May 2023
ECOFIN GLOBAL UTILITIES AND INFRASTRUCTURE TRUST PLC
Interim Financial Results for the six months ended 31 March 2023
Announcement of Unaudited Results
LEI: 2138005JQTYKU92QOF30
This announcement contains regulated information.
Ecofin Global Utilities and Infrastructure Trust plc (the "Company" or "EGL")
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 half-year ended 31 March 2023, the Company's net
asset value ("NAV") per share increased by 3.7% on a total return basis. The
Company's share price decreased by 0.6% on a total return basis over the 6
months
• Two quarterly dividends were paid during the period totalling
3.80p per share. With effect from the dividend paid in February 2023, the
quarterly dividend was increased to 1.95p per share (7.8p per share per annum)
• NAV total return has matched the total return of the MSCI World
Index since inception and outpaced it over five years, three years and one
year
Financial Highlights
as at 31 March 2023
Summary As at or six months to As at or year to
31 March 2023 30 September 2022
Net assets attributable to shareholders (£000) 242,560 233,052
Net asset value ("NAV") per share(1) 212.07p 208.14p
Share price (mid-market) 213.00p 218.00p
Premium to NAV(1) 0.4% 4.7%
Revenue return per share 2.02p 6.42p
Dividends paid per share 3.80p 7.20p
Dividend yield(1,2) 3.5% 3.3%
Gearing on net assets(1,3) 11.0% 11.0%
Ongoing charges ratio(1,4) 1.33% 1.35%
1. Please refer to Alternative Performance Measures in the Interim Report.
2. Dividends paid (annualised) as a percentage of share price.
3. Gearing is the Company's borrowings (including the net amounts due from/to
brokers) less cash divided by net assets attributable to shareholders.
4. The ongoing charges figure 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 31 March 2023 6 months 1 year 3 years 5 years Since admission(5) Since admission
(all total return in £) % % % % % % per annum
%
NAV per share(6) 3.7 0.7 61.8 95.6 96.1 10.9
Share price(6) -0.6 -0.7 67.8 129.7 149.6 15.1
Indices(6, 7):
S&P Global Infrastructure Index 3.8 2.0 51.3 44.6 42.8 5.6
MSCI World Utilities Index 0.6 0.6 28.5 59.3 55.9 7.0
MSCI World Index 6.8 -0.6 60.6 71.3 96.1 10.9
FTSE All-Share Index 12.2 2.8 47.7 27.6 39.5 5.2
FTSE ASX Utilities Index 21.0 1.5 47.5 74.9 38.6 5.1
Source: Bloomberg, Ecofin
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
Your Company performed well in a difficult six months during which economic
and market expectations fluctuated. The net asset value (NAV) total return was
3.7% over the six months to 31 March, including the reinvestment of dividends,
and the share price total return was -0.6%. The MSCI World Utilities Index and
the S&P Global Infrastructure Index produced total returns of 0.6% and
3.8% respectively in sterling terms. In comparison, global equities, measured
by the MSCI World Index, returned 6.8%.
The fundamental investment case for our universe of clean energy development
and infrastructure renewal companies continued to strengthen during the
period. The outlook for earnings and growth held up well while there was no
further bad news about windfall tax and government policies. The benefits of a
balanced portfolio showed through: good performance in continental Europe
outweighed dual headwinds of share price weakness in North America and the
strengthening of the pound against the dollar. More details on performance are
to be found in the Investment Manager's report.
Since EGL launched in September 2016, the NAV total return and the share price
total return have averaged 10.9% and 15.1% per annum respectively. NAV total
return has matched the total return of the MSCI World Index since inception
and outpaced it over five years, three years and one year.
Dividends
We announced in December an increase in the quarterly dividend to 1.95p per
share (7.8p per annum) with effect from the dividend paid in February 2023,
helped by the growth in income from the Company's portfolio despite higher
finance costs: your Company has a conservative level of borrowings, the price
of which is tied to market interest rates.
Share price and share issuance
During the half-year, the Company's share price traded on average at a 1.3%
discount to NAV. Market demand pushed the share price to trade at a premium to
NAV sufficiently often for EGL to issue a total of 2,411,000 shares, raising
£5.2 million during the period. Another 1,920,577 shares have been issued
since the end of March. This continues a pattern of new share issuance which
began in April 2020, responding to daily demand and helping to reduce cost
ratios and improve liquidity in the shares.
Outlook
Since 31 March (to 12 May), the Company's NAV has increased by 1.6% and the
share price by 2.3% (both on a total return basis).
EGL's portfolio companies derive most of their revenues and cash flows from
businesses which benefit from structural growth opportunities including the
move to renewable energy generation and the upgrades of water, waste and
transportation infrastructure. These companies combine reliable growth with
very resilient business models, providing reassurance in the current economic
environment.
Our Investment Manager is confident that portfolio investment income will
continue to grow this year, more than covering the extra costs of EGL's modest
level of borrowings. Your Company is well placed to continue to achieve its
performance objectives.
David Simpson
Chairman
18 May 2023
Investment Manager's Report
Markets and our sectors
After several quarters of declines and with the geopolitical and economic
headlines continuing to be bleak, a strong equity market rally took hold as
this half-year period began. Bond yields were still increasing quickly,
interest rates and inflation were rising almost everywhere and the US dollar
was hitting 20 year peaks but equity markets were, as usual, ahead of events.
Utilities, even though they had performed very well for the previous year,
participated in the recovery rally and so did the more cyclical stocks in the
infrastructure universe. Before long, bond yields started to decline,
inflation forecasts moderated and sterling was recovering. The
much-anticipated recession failed to arrive.
Sterling's strong bounce against the US dollar during the fourth quarter of
2022 (+8.2%) masked the extent of the global equity market rally for UK based
investors: the MSCI World Index increased by almost 10% in local currency
terms but by only 1.1% in sterling terms. The S&P Global Infrastructure
Index's 10.8% gain was trimmed to 2.9% when expressed in sterling terms.
In early 2023, China's much anticipated post-COVID reopening boosted the
outlook for the global economy but also inflation and, thereby, expectations
for central bank rate hikes. However, energy prices started a steep decline in
late December and US natural gas prices returned to levels not seen since
2021. European natural gas prices also fell significantly from 2022 averages,
helped by conservation, but remained much higher than prior year levels.
Lower gas and electricity prices improved the outlook for inflation, economic
activity and corporate profitability, particularly in Europe where the energy
crisis of 2022 presented the biggest threat. This backdrop sustained the rally
for equities, which notably excluded utilities.
March's banking turmoil had little sustained effect on equity markets or bond
yields but attention did turn back to more defensive equities which had been
trailing year-to-date. Global equities rose in March resulting in a 5.7%
advance in sterling terms over the first calendar quarter.
During the half-year, earnings reports were strong for most of EGL's utility,
water and waste management and transportation infrastructure companies,
guidance ranges moved higher in several cases, and companies' growth outlooks
were almost all reaffirmed. Windfall tax uncertainty for power utilities began
to lift across Europe too; by and large, measures that were settled appeared
fair and would not discourage the vast investment in renewables capacity
expansion required.
From a policy perspective, we saw developments in Europe's response to the US
Inflation Reduction Act (IRA) via the Net Zero Industry Act (NZIA). So far,
the NZIA doesn't deliver enough certainty to offer a meaningful counterpunch
to the IRA and persuade corporates to arrive at investment decisions. Details
will come though and it is likely that decisions taken at sovereign state
level will provide more material incentives for large scale investment and
domestic manufacturing. Regarding the longer term project of power market
reform, the drafts suggest evolution not revolution, which somewhat de-risks
potential policy curveballs for utilities and renewables developers in Europe.
Performance summary
Over the 6 months, EGL's NAV increased by 3.7%, in line with the global listed
infrastructure index (+3.8%) and better than the sub-set of global utilities
(+0.6%). Global equities rose by 6.8%. Sterling's strong appreciation against
the US dollar reduced portfolio performance by 5.1 percentage points (and it
impacted the US dollar-heavy global indices by even more).
The dispersion of returns across regions was remarkable: whether looking at
the local sector indices or the portfolio's regional performances,
pan-European stocks provided strongly positive returns whereas US utilities,
sometimes treated like bond proxies, fell, lagging by about 15% over the 6
months. The contribution to NAV was equally lop-sided: The fifteen best
contributors were European and spanned utilities (led by Enel, Endesa, E.ON,
SSE and Engie), environmental services (Veolia) and transportation
infrastructure (Vinci, Ferrovial), while the poorest performers during the
period were North American clean energy specialists (NextEra Energy, Dominion
Energy, NextEra Energy Partners, Constellation, TransAlta Renewables), Chinese
holdings (China Longyuan Power and China Water Affairs) and Drax. Drax gave
back some of its 2022 stock price gains, given uncertainty around UK
government approval of its Carbon Capture and Sequestration project and
declining power prices.
Last year's clean energy 'winners', propelled by higher power prices and the
structural growth catalysts inherent in the energy transition and the IRA,
suffered harsh profit taking in early 2023. Elevated interest rates were a
source of concern for businesses which 'borrow to grow', as were higher
equipment costs, trade policy issues, permitting delays, and transmission and
interconnection constraints. Falling electricity prices, even though they
remained above pre-2022 levels, will have reduced the sub-sector's appeal too,
even if many companies now have limited exposure to merchant prices.
Conversely, shares such as Enel, E.ON and Veolia, which had performed poorly
in the previous year, recovered very swiftly when interest rates pulled back,
the severe pressures on power retailing were alleviated, and economic growth
prospects in Europe improved.
NextEra Energy's shares and those of its yieldco NextEra Energy Partners were
a drag on the NAV (together -1.4% over 6 months). We believe this is
attributable to the factors mentioned above, compounded by the unexpected
retirement of the CEO of NextEra's Florida utility and an investigation into
its lobbying activities in Florida which rumbles on. This overshadowed good
earnings reports which included NextEra extending its growth outlook to 2026
for EPS (6-8% p.a.) and dividends per share (10% p.a.).
Purchases and sales
We made adjustments in the portfolio, considering the opportunities presented
by volatility and our strategy to increase the portfolio's exposure to
environmental services and transportation infrastructure while reducing power
price sensitivity. In this respect the largest purchases were of China Water
Affairs and ENAV.
China Water Affairs is a large Chinese integrated water operator providing raw
water, tap water, sewage treatment and related services. The company's direct
drinking water business should deliver mid-double digit growth as single-use
plastic bottle regulations become more stringent, and the regulated water
supply business will benefit from structural asset base growth driven by
greater urbanisation and population growth. The stock has yet to perform but
we expect it will, given the low valuation, 5% dividend yield and even higher
dividend per share growth.
ENAV is a long-standing portfolio holding that was promoted into the top 10
during the period. The company is the monopoly supplier of Italian air traffic
control and air navigation services (for civilian aircraft and drones), and
the only air navigation service provider in the world listed on a stock
exchange. Revenues are highly regulated and growing (based on the number of
flights rather than each plane's occupancy), and cash flow generation is
strong.
We also increased the portfolio's holdings in Drax (after profit taking last
year), DTE Energy and National Grid. National Grid's almost fully regulated
business presents an attractive combination of defensiveness, inflation
protection and superior growth as the company invests heavily in electricity
networks. After considerable share price weakness, we also added to AES, China
Suntien Green Energy and Enel.
Holdings in Acciona Energias and Redes Energeticas Nacionais were sold; the
positions had been profitable and we saw better value elsewhere. Another
material source of cash (and profit) was the completion of the nationalisation
of EDF in January.
In the portfolio analysis in the Interim Report, you may notice a new sector
category named 'Environmental services'. This is to better cater for and
illustrate the portfolio's holdings in this area which have grown with the
additions of Veolia and China Water Affairs over the last year (American Water
Works and Essential Utilities have been long-standing holdings).
Income and gearing
Gearing averaged 12% over the half-year (in line with fiscal 2022's average)
and was 11% at 31 March. Our models indicate another solid year for portfolio
investment income growth. We expect the increase in income will be more than
sufficient to cover the significantly higher cost of borrowings.
Strategy
EGL's diversified portfolio of infrastructure equities has performed
satisfactorily through the significant stress tests of the last year. We are
now seeing a welcome stabilisation in interest rates with bond yields
discounting significant reductions in inflation and rates in the next few
years. Gas and power prices are back to pre-crisis levels, providing an
attractive pricing environment for utilities and the potential for good
returns for renewables developers. For the next two years, most generators are
broadly hedged so sensitivity to power prices will be limited. Lower natural
gas prices will translate into lower customer bills, lessening the risk of
clawback from power producers by governments seeking to reduce customer bills.
We believe that earnings guidance for utilities is conservative, being based
on normalised power price assumptions but higher interest and capital
expenditure related costs. Earnings per share growth targets are generally in
the region of 6-8% per annum. Transportation infrastructure businesses are
growing and investing to accomplish necessary renewal. This segment of EGL's
essential assets investment universe may be less recession- resistant but
companies have the benefit of inflation-linkage in their contracts and
regulated returns. We expect that the valuations in the listed segment will
continue to be attractive to private equity. In EGL's sectors we can find an
appealing combination of growth and defensiveness, often in the same company.
Our focus on quality of earnings and balance sheet strength is not new but
worth reiterating.
We remain optimistic that the favourable policy support for decarbonisation
and electrification, the relative competitiveness of renewables, and the
ever-rising demand for energy price stability will continue to provide strong
tailwinds for this strategy. Our focus on essential assets and asset-backed
services should continue to do well in most market environments while
undemanding share valuations lend downside protection.
Ecofin Advisors Limited
Investment Manager
18 May 2023
Condensed Statement of Comprehensive Income
Notes Six months ended Year ended
Six months ended
30 September 2022 (audited)
31 March 2023 (unaudited) 31 March 2022 (unaudited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at
fair value through profit or loss - 5,961 5,961 - 25,233 25,233 - 16,129 16,129
Foreign exchange gains/(losses) - 1,397 1,397 - (281) (281) - (3,076) (3,076)
Income 2 3,799 - 3,799 3,408 - 3,408 9,835 - 9,835
Investment management fees (466) (698) (1,164) (534) (534) (1,068) (1,089) (1,089) (2,178)
Administration expenses (464) - (464) (374) - (374) (885) - (885)
Net return before finance 2,869 6,660 9,529 2,500 24,418 26,918 7,861 11,964 19,825
costs and taxation
Finance costs (200) (300) (500) (26) (26) (52) (118) (118) (236)
Net return before taxation 2,669 6,360 9,029 2,474 24,392 26,866 7,743 11,846 19,589
Taxation 3 (392) - (392) (205) - (205) (1,104) - (1,104)
Net return before taxation 2,277 6,360 8,637 2,269 24,392 26,661 6,639 11,846 18,485
Return per ordinary share (pence) 4 2.02 5.63 7.65 2.24 24.13 26.37 6.42 11.46 17.88
The total column of the Condensed 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 six months
ended 31 March 2023.
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 period.
Condensed Statement of Financial Position
As at
As at As at
30 September 2022 (audited)
31 March 2023 31 March 2022 £'000
(unaudited) (unaudited)
Notes £'000
£'000
Non-current assets 268,709 250,226 258,334
Equity securities valued at fair value through profit or loss
Current assets
Debtors and prepayments 2,388 1,132 1,409
2,388 1,132 1.409
Creditors: amounts falling due within one year
Prime brokerage borrowings (24,419) (29,484) (25,613)
Other creditors (4,118) (937) (1,078)
(28,537) (30,421) (26,691)
Net current liabilities (26,149) (29,289) (25,282)
Net assets 242,560 220,937 233,052
Share capital and reserves
Called-up share capital 5 1,143 1,013 1,119
Share premium 45,930 16,763 40,801
Special reserve 114,971 116,459 116,976
Capital reserve 6 80,516 86,702 74,156
Revenue reserve - - -
Total shareholders' 242,560 220,937 233,052
funds
NAV per ordinary share (pence) 7 212.07 217.97 208.14
Condensed Statement of Changes in Equity
Six months ended 31 March 2023 (unaudited)
Share capital Share premium account Special Capital Revenue Total
reserve(1)
reserve
reserve
£'000 £'000
£'000
£'000 £'000 £'000
Balance at 1 October 2022 1,119 40,801 116,976 74,156 - 233,052
Return after taxation - - - 6,360 2,277 8,637
Issue of ordinary shares 24 5,129 - - - 5,153
Dividends paid (see note 8) - - (2,005) - (2,277) (4,282)
Balance at 31 March 2023 1,143 45,930 114,971 80,516 - 242,560
Six months ended 31 March 2022 (unaudited)
Share capital Share premium Special Capital Revenue Total
reserve(1)
reserve
reserve
£'000 account
£'000
£'000 £'000 £'000
£'000
Balance at 1 October 2021 1,007 15,500 117,730 62,310 - 196,547
Return after taxation - - - 24,392 2,269 26,661
Issue of ordinary shares 6 1,263 - - - 1,269
Dividends paid (see note 8) - - (1,271) - (2,269) (3,540)
Balance at 31 March 2022 1,013 16,763 116,459 86,702 - 220,937
Year ended 30 September 2022 (audited)
Share capital Share premium account Special Capital Revenue Total
reserve(1)
reserve
reserve
£'000 £'000
£'000
£'000 £'000 £'000
Balance at 1 October 2021 1,007 15,500 117,730 62,310 - 196,547
Return after taxation - - - 11,846 6,639 18,485
Issue of ordinary shares 112 25,301 - - - 25,413
Dividends paid (see note 8) - - (754) - (6,639) (7,393)
Balance at 30 September 2022 1,119 40,801 116,976 74,156 - 233,052
1. The special reserve may be used, where the board considers it appropriate,
by the Company for the purposes of paying dividends to
shareholders and, in particular, smoothing payments of dividends to
shareholders.
Condensed Statement of Cash Flows
Six months Six months Year ended
ended ended 30 September
Notes 31 March 2023 31 March 2022 2022
(unaudited) (unaudited) (audited)
£'000
£'000 £'000
Net return before finance costs and taxation 9,529 26,918 19,825
(Decrease)/increase in accrued expenses (29) 87 228
Overseas withholding tax (489) (315) (786)
Deposit interest income (3) (13) (37)
Dividend income (3,796) (3,395) (9,798)
Foreign exchange (1,397) 281 3,076
(gains)/losses
12
Dividends received 3,589 3,309 9,462
Deposit interest received 3 13 37
Interest paid (500) (52) (236)
Gains on investments (5,961) (25,233) (16,129)
Increase/(decrease) in other debtors 1 (5) 1
Net cash flow from operating activities 947 1,595 5,643
Investing activities
Purchases of investments (46,338) (39,921) (76,989)
Sales of investments 44,317 36,181 56,277
Net cash generated from/(used in) investing activities (2,021) (3,740) (20,712)
Financing activities
Movement in prime brokerage borrowings 203 (6,389) (10,260)
Dividends (4,282) (3,540) (7,393)
paid
8
Share issue proceeds 5,153 1,104 25,413
Net cash generated from/(used in) financing activities 1,074 (8,825) 7,760
Decrease in cash - (10,970) (7,309)
Analysis of changes in cash during the period
12
Opening balance - 11,251 11,251
Foreign exchange movement -
(281) (3,942)
Decrease in cash - (10.970) (7,309)
Closing balances - - -
Foreign exchange gains for the period to 31 March 2023 are associated with the
Company's prime brokerage borrowings.
Notes to the Condensed Financial Statements
for the six months ended 31 March 2023
1. Accounting policies
(a) Basis of preparation
The Condensed Financial Statements have been prepared in accordance with
Financial Reporting Standard ("FRS") 104 Interim Financial Reporting and with
the Statement of Recommended Practice 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts' issued in July 2022. The Condensed
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 Condensed Financial Statements have been prepared using the same
accounting policies as the preceding Financial Statements which were prepared
in accordance with Financial Reporting Standard 102.
The financial information contained in this Interim Report does not constitute
statutory accounts as defined in Sections 434-436 of the Companies Act 2006.
The financial information for the periods ended 31 March 2023 and 31 March
2022 has not been audited.
The information for the year ended 30 September 2022 has been extracted from
the latest published audited Financial Statements which have been filed with
the Registrar of Companies. The report of the Auditor on those accounts
contained no qualification or statement under Section 498 of the Companies
Act 2006.
(b) Income
Income from investments, including taxes deducted at source, is included in
revenue by reference to the date on which the investment is quoted
ex-dividend. Special dividends are credited to capital or revenue, according
to the circumstances. The fixed returns on debt securities are recognised on a
time apportionment basis so as to reflect the effective yield on the debt
securities. Interest receivable from cash and short-term deposits is treated
on an accruals basis.
(c) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged to
the revenue account except where they directly relate to the acquisition or
disposal of an investment, in which case they are charged to the capital
account; in addition, expenses are charged to the capital account where a
connection with the maintenance or enhancement of the value of the investments
can be demonstrated. In this respect, since 1 October 2022 the management fee
and overdraft interest have been allocated 60% to the capital account and 40%
to the revenue account (previously 50% to the capital account and 50% to the
revenue account).
(d) Taxation
The charge for taxation is based on the profit for the year to date and takes
into account, if applicable, taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting purposes.
Deferred taxation is provided using the liability method on all timing
differences, calculated at the rate at which it is anticipated the timing
differences will reverse. Deferred tax assets are recognised only when, on the
basis of available evidence, it is more likely than not that there will be
taxable profits in future against which the deferred tax asset can be offset.
Due to the Company's status as an investment trust company and the intention
to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of investments.
The tax effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue within the Condensed Statement of
Comprehensive Income on the same basis as the particular item to which it
relates using the Company's effective rate of tax for the year, based on the
marginal basis.
(e) Valuation of investments
For the purposes of preparing the Condensed Financial Statements, the Company
has applied Sections 11 and 12 of FRS 102 in respect of financial instruments.
All investments are measured initially and subsequently at fair value and
transaction costs are expensed immediately. Investment transactions are
accounted for on a trade date basis. The fair value of the financial
instruments in the Condensed Statement of Financial Position is based on their
quoted bid price at the reporting date, without deduction of the estimated
future selling costs. Changes in the fair value of investments held at fair
value through profit or loss and gains and losses on disposal are recognised
in the Condensed Statement of Comprehensive Income as "Gains on investments
held at fair value through profit or loss". Also included within this caption
are transaction costs in relation to the purchase or sale of investments,
including the difference between the purchase price of an investment and its
bid price at the date of purchase.
(f) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known
amounts of cash and that are subject to insignificant risk of change in value.
(g) Borrowings
Short-term borrowings, which comprise of prime brokerage borrowings, are
recognised initially at the fair value of the consideration received, net of
any issue expenses, and subsequently at amortised cost using the effective
interest method. The finance costs, being the difference between the net
proceeds of borrowings and the total amount of payments required to be made in
respect of those borrowings, accrue evenly over the life of the borrowings and
are allocated 40% to revenue and 60% to capital.
(h) Segmental reporting
The directors are of the opinion that the Company is engaged in a single
segment of business activity, being investment business.
Consequently, no business segmental analysis is provided.
(i) Nature and purpose of reserves
Share premium account
The balance classified as share premium includes the premium above nominal
value received by the Company on issuing shares net
of issue costs.
Special reserve
The special reserve arose following court approval in November 2016 to
transfer £123,609,000 from the share premium account. This reserve is
distributable and may be used, where the board considers it appropriate, by
the Company for the purposes of paying dividends to shareholders and, in
particular, augmenting or smoothing payments of dividends to shareholders.
There is no guarantee that the board will in fact make use of this reserve for
the purpose of the payment of dividends to shareholders. The special reserve
can also be used to fund the cost of share buy-backs.
Capital reserve
Gains and losses on disposal of investments and changes in fair values of
investments are transferred to the capital account. Foreign exchange
differences of a capital nature are also transferred to the capital account.
The capital element of the management fee and relevant finance costs are
charged to this account. Any associated tax relief is also credited to this
account.
Revenue reserve
This reserve reflects all income and costs which are recognised in the revenue
column of the Statement of Comprehensive Income.
The Company's special reserve, capital reserve and revenue reserve may be
distributed by way of dividend.
(j) Foreign currency
Monetary assets and liabilities and non-monetary assets held at fair value in
foreign currencies are translated into sterling at the rates of exchange
ruling at the Condensed Statement of Financial Position date. Transactions
involving foreign currencies are converted at the rate ruling on the date of
the transaction. Gains and losses on the translation of foreign currencies are
recognised in the revenue or capital account of the Condensed Statement of
Comprehensive Income depending on the nature of the underlying item.
(k) Dividends payable
Dividends are recognised in the period in which they are paid.
2. Income
Six months ended Six months
ended Year ended
31 March 2023 31 March 2022 30 September
2022
£'000
£'000 £'000
Income from investments (revenue account)
UK dividends 470 332 1,254
Overseas dividends 3,214
2,726 7,966
Stock dividends 112
337 578
3,796 3,395 9,798
Other income (revenue account)
Deposit interest 3 13 37
Total income 3,799 3,408 9,835
During the six months ended 31 March 2022, the Company received no special
dividends (31 March 2022: £nil and 30 September 2022: £416,000).
3. Taxation
The taxation charge for the period, and the comparative periods, represents
withholding tax suffered on overseas dividend income.
4. Return per ordinary share
Six months ended Six months ended Year ended
31 March 2023 31 March 2022 30 September 2022
p p p
Revenue return 2.02 2.24 6.42
Capital return 5.63 24.13 11.46
Total return 7.65 26.37 17.88
The returns per share are based on the following:
Six months ended Six months ended Year ended
31 March 2023 31 March 2022 30 September 2022
£'000 £'000 £'000
Revenue return 2,277 2,269 6,639
Capital return 6,360 24,392 11,846
Total return 8,637 26,661 18,485
112,886,269 101,121,775 103,375,349
Weighted average number of ordinary shares in issue
5. Ordinary share capital
31 March 2023 31 March 2022 30 September 2022
Number £'000 Number £'000 Number £'000
Issued and fully paid
Ordinary shares of 1p each 111,968,423 1,119 100,738,423 1,007 100,738,423 1,007
Issue of new ordinary shares 2,411,000 24 625,000 6 11,230,000 112
Ordinary shares of 1p each 114,379,423 1,143 101,363,423 1,013 111,968,423 1,119
The Company was admitted to the Main Market of the London Stock Exchange on 26
September, 2016. The total number of ordinary shares in the Company in issue
immediately following admission was 91,872,247, each with equal voting rights.
During the period, the Company issued 2,411,000 (31 March 2022: 625,000 and 30
September 2022: 11,230,000) ordinary shares with net proceeds of £5,153,000
(31 March 2022: £5,269,000 and 30 September 2022: 25,413,000).
Since 31 March 2023 the Company has issued 1,920,577 ordinary shares for net
proceeds of £4,109,791.
6. Capital reserve
31 March 2023 31 March 2022 30 September
2022
£'000
£'000 £'000
Opening balance 74,156 62,310 62,310
Movement in investment holding gains (1,518) 17,051 3,073
Gains on realisation of investments at fair value 7,479 8,182 13,056
Currency gains/(losses) 1,397 (281) (3,076)
Investment management fees (698) (534) (1,089)
Finance costs (300) (26) (118)
80,516
86,702 74,156
The capital reserve reflected in the Condensed Statement of Financial Position
at 31 March 2023 includes gains of £37,832,000 (31 March 2022: gains of
£53,328,000 and 30 September 2022: gain of £39,349,000) which relate to the
revaluation of investments held at the reporting date.
7. NAV per ordinary share
As at As at As at
31 March 2023 31 March 2022 30 September 2022
Net asset value attributable (£'000) 242,560 220,937 233,052
Number of ordinary shares in issue 114,379,423 101,363,423 111,968,423
NAV per share 212.07p 217.97p 208.14p
8. Dividends on ordinary shares
Six months ended Six months ended Year ended
31 March 2023 31 March 2022 30 September 2022
£'000 £'000 £'000
Fourth interim for 2021 of 1.65p (paid 30 November 2021) - 1,666 1,666
First interim for 2022 of 1.65p (paid 26 February 2022) - 1,874 1,874
Second interim for 2022 of 1.85p (paid 31 May 2022) - - 1,893
Third interim for 2022 of 1.85p (paid 31 August 2022) - - 1,960
Fourth interim dividend for 2022 of 1.85p (paid on 30 November 2022) 2,082 - -
First interim dividend for 2023 of 1.95p (paid on 28 February 2023) 2,200 - -
4,282 3,540 7,393
A second interim dividend for 2023 of 1.95p will be paid on 31 May 2023 to
shareholders on the register on 28 April 2023. The ex-dividend date was 27
April 2023.
9. Transaction costs
During the period expenses were incurred in acquiring or disposing of
investments classified as fair value through profit or loss. These have been
expensed through capital and are included within gains on investments in the
Condensed Statement of Comprehensive Income. The total costs were as follows:
Six months ended Six months ended Year ended
31 March 2023 31 March 2022 30 September 2022
£'000 £'000 £'000
Purchases 104 69 138
Sales 18 13 25
122 82 163
The above transaction costs are calculated in line with AIC's Statement of
Recommended Practice (SORP). The transaction costs in the Company's Key
Information Document are calculated on a different basis and in line with the
EU's Packaged Retail Investment and Insurance-based Products (PRIIPs)
regulations.
10. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy shall have the following levels:
Level 1: unadjusted quoted prices in an active market for identical assets or
liabilities that the entity can access at the measurement date;
Level 2: inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or liability,
either directly or indirectly; and
Level 3: inputs are unobservable (i.e. for which market data is unavailable)
for the asset or liability.
The financial assets and liabilities measured at fair value in the Condensed
Statement of Financial Position are grouped into the fair value hierarchy at
the reporting date as follows:
As at 31 March 2023 Notes Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 246,316 4,393 - 268,709
Total 246,316 4,393 - 268,709
As at 31 March 2022 Notes Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 246,051 4,175 - 250,226
Total 246,051 4,175 - 250,226
As at 30 September 2022 Notes Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 258,334 - - 258,334
Total 258,334 - - 258,334
a) Equities and preference shares
The fair value of the Company's investments in equities and preference shares
has been determined by reference to their quoted bid prices at the reporting
date. Equities and preference shares included in Fair Value Level 1 are
actively traded on recognised stock exchanges. Investments categorised as
Level 2 are not considered to trade in active markets.
11. Related party transactions and transactions with the Investment Manager
Fees payable 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 on pages 30 and 32 of the 2022 Report and
Accounts. The balance of fees due to directors at the period end was £nil (31
March 2022: £nil and 30 September 2022: £nil).
The Company has an agreement with Ecofin Advisors Limited for the provision of
investment management services.
The investment management fee is calculated at 1.00% per annum of the
Company's NAV on the first £200 million and 0.75% per annum of NAV
thereafter, payable quarterly in arrears. The management fee was chargeable
50% to revenue and 50% to capital until 30 September 2022. With effect from 1
October 2022 the management fee is chargeable 40% to revenue and 60% to
capital.
During the period £1,164,000 (31 March 2022: £1,068,000 and 30 September
2022: £2,178,000) of investment management fees were earned by Ecofin
Advisors Limited, with a balance of £580,000 (31 March 2022: £539,000 and 30
September 2022: £562,000) being payable to Ecofin Advisors Limited at the
period end.
12. Analysis of changes in net debt
As at Currency As at
30 September 2022 Differences Cash flows 31 March 2023
£'000 £'000
£'000 £'000
Cash and short term deposits - - - -
Debt due within one year (25,613) 1,397 (203) (24,419)
(25,613) 1,397 (203) (24,419)
As at Currency Cash flows As at
30 September 2021 differences £'000 31 March 2022
£'000 £'000 £'000
Cash and short term deposits 11,251 (281) (10,970) -
Debt due within one year (35,873) - 6,389 (29,484)
(24,622) (281) (4,581) (29,484)
A statement reconciling the movement in net funds to the net cash flow has not
been presented as there are no differences from the above analysis.
Interim Management Report
The principal and emerging risks and uncertainties that could have a material
impact on the Company's performance have not changed from those set out on
pages 16 to 18 of the Company's Annual Report for the year ended 30 September
2022.
The directors consider that the Chairman's Statement and the Investment
Manager's Report set out herein, the above disclosure on related party
transactions and the Directors' Responsibility Statement below, together
constitute the Interim Management Report of the Company for the six months
ended 31 March 2023 and satisfy the requirements of Disclosure Guidance and
Transparency Rules 4.2.3 to 4.2.11 of the Financial Conduct Authority.
The Interim Report has not been reviewed or audited by the Company's Auditor.
Directors' Responsibility Statement
The directors listed in the Interim Report confirm that to the best of their
knowledge:
(i) the condensed set of Financial Statements has been prepared in accordance
with FRS 104 (Interim Financial Reporting) and give
a true and fair review of the assets, liabilities, financial position and
profit and loss of the Company as required by Disclosure Guidance and
Transparency Rule 4.2.4 R;
(ii) the Interim Management Report includes a fair review, as required by
Disclosure Guidance and Transparency Rule 4.2.7 R, of important events that
occurred during the six months ended 31 March 2023 and their impact on the
condensed set of Financial Statements, and a description of the principal
risks and uncertainties for the remaining six months of the financial year;
and
(iii) the Interim Management Report includes a fair review of the information
concerning related party transactions as required by Disclosure Guidance and
Transparency Rule 4.2.8 R.
This Interim Report was approved by the board on 18 May 2023 and the
Directors' Responsibility Statement was signed on its behalf by:
Susannah Nicklin
Director
18 May 2023
Interim Report 2023
The Interim Report will be available on the Investment Manager's website
www.ecofininvest.com/eg (http://www.ecofininvest.com/egl) l
(http://www.ecofininvest.com/egl) . A copy of the Interim Report for the six
months ended 31 March 2023 will be submitted to the National Storage Mechanism
of the FCA and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The financial
information for the period ending 31 March 2023 comprises non-statutory
accounts within the meaning of Sections 434 - 436 of the Companies Act 2006.
For further information, please contact:
Faith Pengelly
For and on behalf of
Maitland Administration Services Limited
Company Secretary
Tel: 01245 950 317
18 May 2023
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