REG - Impax Environ Mkts - Half-year Report
02/08/2022 07:00
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RNS Number : 5141U Impax Environmental Markets PLC 02 August 2022
Impax Environmental Markets plc
Half-yearly Financial Report Announcement
For the six months to 30 June 2022
LEI: 213800RAR6ZDJLZDND86
Investment Objective
The investment objective of Impax Environmental Markets plc (the "Company") is
to enable investors to benefit from growth in the markets for cleaner or more
efficient delivery of basic services of energy, water and waste.
Investments are made predominantly in quoted companies which provide, utilise,
implement or advise upon technology-based systems, products or services in
environmental markets, notably those of alternative energy and energy
efficiency, water treatment and pollution control, and waste technology and
resource management (which includes sustainable food, agriculture and
forestry).
FINANCIAL INFORMATION
Financial Information
At 30 June 2022 At 31 December 2021
Net asset value ("NAV") per Ordinary Share 410.9p 496.4p
Ordinary Share price 400.0p 547.0p
Ordinary Share price (discount) premium to NAV(1) (2.7)% 10.2%
Net assets £1,249.2m £1,480.0m
PERFORMANCE SUMMARY
For the six months ended 30 June 2022
% CHANGE(2,3)
NAV total return per Ordinary Share(1) (17.0)%
Share price total return per Ordinary Share(1) (26.7)%
MSCI ACWI Index (11.0)%
FTSE ET100 Index (20.6)%
(1) These are alternative performance measures.
(2) Total returns in sterling for the six months to 30 June
2022.
(3) Source: Bloomberg and FactSet.
ALTERNATIVE PERFORMANCE MEASURES ("APMs")
The disclosures as indicated in footnote 1 above are considered to represent
the Company's APMs. Definitions of these APMs and other performance measures
used by the Company, together with how these measures have been calculated,
can be found in the Interim Report.
Chairman's Statement
The first part of this year has been challenging for markets in general, and
Impax Environmental Markets (the "Company", or "IEM") has not been spared.
Following three years of strong performance, IEM's share price has fallen in
absolute and relative terms over the first six months of 2022 (the "Period").
War has brought devastation to Ukraine, caused turmoil in commodity markets
and further stoked inflation. Our income has grown, however, and we have
declared a first interim dividend of 1.5 pence per Ordinary Share, an increase
of 15% as compared with that declared in 2021.
Over the six months to the end of June, the Company's share price fell by
26.7%, and the net asset value ("NAV") by 17.0%. This trailed broader equity
markets, with the MSCI All Country World Index ("MSCI ACWI"), its global
comparator, declining by 11.0%. It is some comfort that the Manager, on an NAV
basis, was able to outperform our environmental benchmark, the FTSE
Environmental Technology 100 ("FTSE ET100"), due to judicious stock selection.
Over the Period, although IEM's share price has slipped from a small premium
to a modest discount, the share price has generally remained close to the
Company's NAV, as is discussed further below. It is relevant at this point to
remind shareholders that, notwithstanding the recent headwinds, the Company's
longer term performance remains excellent. For the five years to the end of
the Period, the share price is up 77.8%, with MSCI ACWI up 50%. On an
annualised basis over ten years, MSCI ACWI has returned 11.6% per annum and
the IEM plc share price 16.6%.
The outlook for markets at the start of the Period was already cloudy, even
before the Russian invasion of Ukraine. Inflation was on the rise, driven by
the release of demand pent up by the COVID-19 pandemic and supply chain
constraints. In addition, the prospect of central banks increasing interest
rates was weighing on the small- and mid-cap sectors in which IEM tends to
invest, and equity markets were facing pressure from the end of quantitative
easing programmes. The outbreak of the biggest war in Europe in 75 years
intensified these challenges.
Beyond Ukraine itself, the immediate impact of the conflict has been on energy
markets, as the West seeks to reduce its dependence on Russian fossil fuels.
The resulting rise in energy prices will serve to undermine growth and
stimulate inflation, but it has also added an energy security dimension to the
low-carbon transition. EU policymakers in particular have moved swiftly to cut
the bloc's reliance on Russian energy exports with plans that, while
disruptive in the near-term, are positive from an environmental as well as an
energy security perspective.
The predicament policymakers face is how to plug immediate shortfalls in
energy supply while cleaner alternatives can be brought online. The risk, from
a climate perspective, is that fossil fuels from Russia are simply replaced
with fossil fuels from elsewhere, enabled by investment in infrastructure that
risks locking in hydrocarbon use for decades to come.
Notwithstanding the longer-term imperatives to take action on climate change,
investors' enthusiasm for the sector has cooled in recent months. Part of the
reason is those funds' poor performance, as investors have favoured sectors
such as conventional energy and financials. Another reason is growing concern
in the market about 'greenwashing', where fund managers have been perceived to
have overstated the Environmental, Social and Governance ("ESG") credentials
of their products.
This is a real concern for an emerging sector such as ours. Definitions of ESG
and sustainable finance are fluid. The popularity of the theme over the last
few years has encouraged many to jump onto the bandwagon of ESG. It is a
concern drawing regulatory scrutiny, with the US Securities and Exchange
Commission proposing to follow the EU with rules on ESG fund labelling. We
welcome the increased scrutiny being applied.
We believe that our 20 year record of investing in environmental markets and
our unambiguous focus on companies providing the solutions to sustainability
challenges set us apart from many of the more recent entrants to the space. We
can also point to clear impact against a number of environmental metrics, as
we set out below.
INVESTMENT PERFORMANCE
During the Period, the total return of the NAV per share saw a decline of
17.0% and the share price total return fell by 26.7% as the premium at which
the shares were trading at the end of December unwound. IEM underperformed the
MSCI ACWI, its global comparator index, which fell by 11.0% on a total return
basis. As discussed above, the Company suffered from a rotation by investors
from quality and growth to value stocks. However, our NAV outperformed the
FTSE ET100, its environmental benchmark, which fell by 20.6% due to IEM's
avoidance of the car maker Tesla and other expensive tech names.
GEARING
As of 30 June 2022, the Company's net gearing was 3.8%, above the 1.6% net
gearing as of the end of 2021.
The Manager continues to advise of capacity constraints with our investment
bias towards the smaller end of the market; any increase in our capital by way
of borrowings results in a concomitant reduction in our ability to issue
equity. As discussed below, the Company's shares are now trading close to, but
at a small discount to, NAV which precludes further issuance until such time
as a premium returns. In the absence of share issuance, expanding our
investment capacity via increased gearing remains an option.
PREMIUM AND DISCOUNT CONTROL
The Company's Ordinary Shares traded at a premium to NAV of 10.2% on 31
December 2021 and a discount to NAV of 2.7% on 30 June 2022, having traded in
a range of a 14.1% premium to a 6.6% discount during the Period.
The year began with continued investor demand and the issue of shares at a
premium to meet that demand. In February 2022 the shares moved from trading at
a premium to trading at a discount. Since then, the Board has been using its
authority to purchase its own shares when necessary to prevent a material
discount from emerging. The Board maintains its intention to keep shares
trading close to NAV during normal market conditions. During the Period, 7.6
million new shares were issued, 1.7 million shares were bought back into
treasury with 112,900 shares subsequently reissued in March and 400,000 shares
reissued since the period end at a premium to NAV, with the result that 1.2
million shares remain in treasury.
DIVIDEND
The Company's net revenue return for the Period was £7.5 million, compared
with £5.7 million earned in the same period last year. The increase in net
revenue is attributable to the growing size of the Company and the impact on
portfolio company earnings in the first half of 2021 due to post pandemic
growth.
The Company's dividend policy, as approved by shareholders at the May 2022
AGM, is to declare two dividends each year and to pay out substantially all
earnings by way of dividends.
The second interim dividend for the 2021 financial year, of 1.5 pence per
Ordinary Share, was declared on 29 December 2021, for shareholders on the
register on 7 January 2022, with an ex-dividend date of 6 January 2022. The
dividend was paid on 28 January 2022.
On 28 July 2022, the Board announced a first interim dividend for the current
financial year of 1.5 pence per Ordinary Share (2021: 1.3 pence per Ordinary
Share), payable on 26 August 2022 to shareholders who appear on the register
at 5 August 2022, with an ex-dividend date of 4 August 2022.
THE BOARD
Shareholders may recall that my original plan was to retire at the May 2022
AGM, whereupon Simon Fraser was to have taken over from me. Tragically, Simon
died last August, in the light of which at the Company's recent AGM
shareholders approved my continuing to serve as Chairman for a further year.
Recruitment is underway for a Chair designate and for a replacement for
non-executive director Vicky Hastings, who will retire at or before the 2023
AGM depending on the needs of the Board.
OUTLOOK
Uncertainty in global markets - from inflation, rising interest rates,
geopolitical tensions and disrupted commodity markets - is likely to weigh on
the Company's performance in the near-term. Looking further ahead, the
Directors and the Manager are encouraged both by the continuing investment
proposition of environmental solutions and the commitment by policymakers to
environmental challenges and the need for a green recovery. The outlook for
superior, long-term growth remains fully intact for the companies owned by
IEM, which are providing solutions to some of the world's most pressing
environmental challenges.
John Scott,
Chairman
1 August 2022
Manager's Report
Operating in the wider market environment of the first half of 2022 has not
been easy for the Company. Escalating inflation data, aggravated by persistent
supply chain challenges and Russia's war with Ukraine drove expectations of
significant interest rate rises. This in turn led to higher discount rates
being applied to longer dated cash-flows in "growth" and "quality" equities
where IEM is focused, driving a de-rating of these names and an aggressive
rotation into "value" sectors such as conventional energy and financials,
where IEM has no exposure. For illustration, MSCI ACWI Growth and MSCI ACWI
Quality fell 19.9% and 15.9% respectively during the Period, versus. a fall of
2.6% for MSCI ACWI Value. This was the main driver of underperformance of MSCI
ACWI benchmark to the Company's NAV.
Solid performance against the FTSE ET100 principally reflected a conscious
choice not to own several richly valued technology companies in the comparator
index. Similar valuation discipline saw us refrain from investing in any of
the multitude of richly valued and often early‑stage companies that IPO'd
over the last 12 months, which have dramatically underperformed in the current
market environment. We would admit in retrospect that we could have been more
aggressive in reducing expensive growth holdings, even though these remain
conviction holdings for the long term.
The above rotation, together with small and mid-cap underperformance, led to a
material de-rating of the portfolio, despite generally solid earnings
delivery. In general, portfolio holdings have managed supply chain constraints
well and have demonstrated the pricing power that is critical to pass through
ongoing inflationary pressures.
KEY DEVELOPMENTS AND DRIVERS OF ENVIRONMENTAL MARKETS
Russia, Ukraine and an accelerated energy transition
Europe has, over the last few decades, become heavily dependent on energy
imports from Russia. On the eve of Russia's invasion of Ukraine in February,
Russia supplied 41% of the bloc's natural gas, 37% of its imported oil, and
19% of its coal. European reliance on Russian energy imports may have helped
persuade President Putin that the West would be unlikely to take decisive
action in response to an attack on Ukraine.
If so, it is now clear that Putin miscalculated. The Western economic response
has been robust. A major component of that response is a commitment to rapidly
reduce energy imports from Russia. That involves both switching to other
suppliers of oil and gas as well as an acceleration of plans to decarbonise
its economy.
In May, the European Commission unveiled its REPowerEU plan, which sets out
how it proposes to meet these two goals. For example, it increases the 2030
target for renewables to 45% from the current 40%, including via mandating
solar panels on all new buildings and addressing bottlenecks in permitting of
renewable energy projects. It also proposes doubling the rate of heat pump
deployment to reduce gas use, and promoting domestic biomethane and renewable
hydrogen production. It also proposes increasing its binding energy efficiency
target to 13% from 9%.
These measures, which have been approved by the European Parliament and member
state governments, will require additional investment of €210 billion by
2027; this compares with the €100 billion per year that the EU is currently
spending on Russian fossil fuel imports.
The EU's plans are ambitious and have already boosted a number of renewable
energy companies within IEM's portfolio. The response from energy efficiency
stocks was more muted. We believe that the Commission could have gone further
with its energy efficiency goals, and we expect subsequent action in this area
to support that sub-sector.
Shifting our attention to the US energy transition, President Biden's original
US$2.2tn "Build Back Better" bill, which was to include US$555bn of spending
on clean energy, remains in limbo. Discussions are ongoing on a reduced US$1tn
package including US$500bn of spending, much of which would be focussed on
extending renewables tax credits. The outcome of these negotiations remains
uncertain and time is short given an effective deadline of 30 September to
pass the bill.
Addressing the global food crisis
As well as sending energy prices soaring, conflict in Ukraine has also
disrupted global food markets. Russia and Ukraine accounted for 24% of global
wheat exports by value, 57% of sunflower seed oil exports and 14% of corn from
2016 to 2020, according to data from UN Comtrate(1). The war has caused food
price inflation globally and threatens tens of millions with food insecurity,
malnutrition and even famine, the UN has warned(2).
IEM is exposed to sustainable food and agricultural companies that are working
to reduce costs and increase yields with new technologies and approaches. For
example, Darling Ingredients (United States, Recycling and Value-Added Waste
Processing) converts food waste into value-added products, including animal
feed which can replace corn, and Trimble (United States, Sustainable
Agriculture), which produces global positioning software used by farmers to
reduce inputs like fertilizer and increase yields. Natural ingredients company
DSM (Netherlands, Sustainable Agriculture) also has a significant animal feed
business, supplying supplements that improve the uptake of nutrition. One of
the core markets targeted by Corbion (Netherlands, Sustainable Agriculture) is
shelf-life extension for bakery products, helping to reduce food waste.
Climate change is not the only global environmental challenge we face.
Concerns are increasingly being raised about the loss of biodiversity:
environmental groups talk of the "twin crises" of nature and climate. IPBES
(Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem
Services), the leading intergovernmental body that assesses the state of the
natural world, has warned that 1 million of the world's estimated 8 million
plant and animal species are at risk of extinction(3).
As well as an ecological disaster, the loss of biodiversity will have profound
economic impacts. The World Economic Forum has found that around half of
GDP(4) is generated by sectors that depend on the services nature provides,
such as food or other raw materials, purification of water and air, and
cultural or spiritual benefits.
These concerns are triggering a response from policymakers and the business
community. Negotiations are ongoing for a Global Biodiversity Framework under
the Convention on Biological Diversity, a sister treaty to the UN climate
convention. Business coalitions have formed to lobby for policy action on
biodiversity protection, such as Business for Nature, and the Natural Capital
Declaration, aimed at financial institutions. This year, the Taskforce for
Nature-related Financial Disclosure launched its risk management and
disclosure framework to encourage organisations to report and act on
nature-related risks, mirroring an earlier initiative on climate.
We see opportunities for investments that are contributing to solutions and
biodiversity is systematically included in our investment framework as an
environmental problem that needs to be addressed. More broadly, our
investments over the last 20 years have made a significant contribution to
protecting biodiversity. Many of our sustainable food and agriculture holdings
make a direct contribution to reducing the impact of agriculture on nature.
Given the links between climate change and biodiversity, our investments that
help to mitigate greenhouse gas emissions also provide indirect benefits to
biodiversity protection. We will continue to closely follow developments in
anticipation of policy frameworks that will lead to incremental investment
opportunities.
Accelerating M&A activity
Over the last 20 years, mergers and acquisitions ("M&A") activity has been
an important driver of the Company's performance, with large industrial and
financial buyers willing to pay rich valuations to acquire companies with
leading technology and proven business models.
Historically activity came in waves, including the rapid consolidation of
water treatment technologies during the early to mid 2000s and of the waste
management sector in the period prior to the Global Financial Crisis. In
recent years, M&A activity has been more muted; IEM's holdings have tended
to be the acquirers rather than the targets of acquisition.
There are some early signals that this is beginning to change. In May, Switch
(US, Cloud Computing), which operates high-efficiency data centres, was
acquired by a private equity firm in an US$11 billion deal which valued the
company at a 15% premium to its market price. Another private equity deal,
targeting pallet pooling company Brambles (Australia, Waste Technology
Equipment), collapsed in May due to market volatility. Resurgent M&A
activity indicates that industrial and financial buyers also see value and
attractive growth in environmental markets, with this theme expected to
continue going forward.
ABSOLUTE PERFORMANCE CONTRIBUTORS AND DETRACTORS
Contributors
Renewable energy holdings delivered strong performance in the Period,
reflecting an accelerating growth outlook prompted by Russia's invasion of
Ukraine (discussed above). Renewable IPP holdings were a particular highlight,
including Terna Energy (Greece), Ormat Technologies (US) and Northland Power
(Canada) and EDP Renovaveis (Portugal), reflecting their defensive appeal,
strong demand for renewable power generation assets and in select cases,
exposure to high spot power prices.
Companies with positive exposure to commodity price inflation also delivered
strong performance, including Salmar (Norway, Sustainable Aquaculture), as did
companies with a stronger "value" orientation including, Sabesp (Brazil, Water
Utility) and Graphic Packaging (US, Food Safety & Packaging).
Finally, M&A activity, discussed above, made a contribution to
performance, especially via data centre holding Switch (US, Cloud Computing).
Detractors
The rotation discussed above led to material de-rating of expensive "quality
growth" names across a range of environmental markets in the Period, impacting
Nibe (Sweden, Buildings Energy Efficiency), Spirax (UK, Industrial Energy
Efficiency), Generac (US, Power Storage & UPS), and natural ingredients
holdings Croda (UK) and DSM (Netherlands). Opportunities are emerging to add
to these names following their substantial de-rating.
Rising interest rates and an increasing risk of recession led to weak
performance of cyclical markets and in particular holdings with exposure to
construction activity, including Water Infrastructure and Treatment holdings
Aalberts (Netherlands) and Pentair (US), and Herc (US, Resource Circularity
and Efficiency), which provides equipment rental services into construction
markets.
PERFORMANCE CONTRIBUTION ANALYSIS
6 MONTHS ENDED 6 MONTHS ENDED
30-JUN-22 30-JUN-22
PERFORMANCE RELATIVE TO MSCI ACWI % PERFORMANCE RELATIVE TO FTSE ET100 %
NAV total return (17.0) NAV total return (17.0)
MSCI ACWI total return (11.0) FTSE ET100 total return (20.6)
Relative performance (6.0) Relative performance 3.6
Analysis of Relative Performance Analysis of Relative Performance
Portfolio total return (16.0) Portfolio total return (16.0)
MSCI ACWI total return (11.0) FTSE ET100 total return (20.6)
Portfolio underperformance (5.0) Portfolio outperformance 4.6
Borrowing: Borrowing:
Gearing effect (0.4) Gearing effect (0.4)
Finance costs (0.1) Finance costs (0.1)
Management fee (0.4) Management fee (0.4)
Other expenses - Other expenses -
Trading Costs (0.1) Trading Costs (0.1)
Share transactions: Share transactions:
Issues 0.1 Issues 0.1
Buy-backs - Buy-backs -
Tax (0.1) Tax (0.1)
Total (6.0) Total 3.6
PORTFOLIO POSITIONING, VALUATION AND RISK
At the end of the Period, the Company held a well‑diversified portfolio of
60 listed holdings, together with one active unlisted holding representing
just 5 basis points of NAV. Detail of portfolio holdings together with sector
and regional positioning are provided in the Interim report.
New investments were made into Azek (US, Recycled, Recyclable Products &
Biomaterials) and Zurn Water Solutions (US, Water Distribution &
Infrastructure). Azek is a leading player in the US wood-plastic composite
decking market. This material is gaining share against traditional wood
decking, driven by better durability and lower maintenance (and with an
attendant lower environmental footprint). As a strong player in a highly
consolidated market, Azek stands to benefit from this structural growth over
the long term. Zurn provides water infrastructure solutions into highly
regulated residential, non-residential and institutional markets and recently
expanded into water treatment markets via a merger with Elkay Manufacturing
and replaced Xylem (US, Water Distribution & Infrastructure), which was
exited following persistent supply chain and execution issues.
Other exits comprised Beijing Enterprises Water (Hong Kong, Water Utility) and
IPG Photonics (US, Industrial Energy Efficiency), which were sold as part of a
portfolio consolidation process back towards a target of 60 holdings.
Regarding valuation, as discussed above, the portfolio experienced a material
de-rating during the Period, with the prospective twelve months price earnings
ratio falling from 24.6x at the 2021 year-end to 18.0x at the end of the
Period. Valuation is now back in line with the historical long-term average
multiple, offering upside across the portfolio to our base case or intrinsic
target prices. Consensus earnings growth expectations remain above MSCI ACWI
and portfolio companies have mostly delivered on their earnings.
OUTLOOK
In the near term, the macro and equity market outlook will remain fragile and
uncertain until visibility improves in taming inflation, with elevated risks
of a hard landing or recession, further aggravated by potential weaponisation
of gas flow by Russia in the run up to winter in the EU. Against this
challenging backdrop, we take comfort from the quality, balance and
diversification of the portfolio, and from the combination of earnings
delivery with a substantially de-rated valuation which is bringing compelling
opportunities to add to core holdings.
Longer-term, the Managers' conviction in the drivers of environmental markets
remain intact despite the invasion of Ukraine by Russia, higher inflation data
and supply chain disruptions. In recent months these markets have been
bolstered by global policy measures, build-back-greener initiatives, planned
sector adaptation roadmaps, consumer behaviour, fast-moving technological
advances and the ever-growing financial cost of extreme climate events.
European dependence on Russian gas has likewise reawakened energy security
concerns, which should accelerate the net zero transition. We believe this
bodes well for the long‑term growth and performance of IEM.
Impax Asset Management (AIFM) Limited
1 August 2022
(1) https://comtrade.un.org/pb/downloads/2020/VolI2020.pdf
(2) https://news.un.org/en/story/2022/05/1118562
(3) https://ipbes.net/global-assessment
(4)
https://www.weforum.org/press/2020/01/half-of-world-s-gdp-moderately-or-highly-dependent-on-nature-says-new-report/
Ten Largest Holdings
As at 30 June 2022 and 31 December 2021
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cr
is
is
.
3
2.7% BRAMBLES - Australia www.brambles.com
of net assets
(2021: 2.1%)
Br
am
bl
es
is
a
gl
ob
al
su
pp
or
t
se
rv
ic
es
gr
ou
p
wh
ic
h
pr
ov
id
es
pa
ll
et
an
d
pl
as
ti
c
co
nt
ai
ne
r
re
cy
cl
in
g
an
d
po
ol
in
g
se
rv
ic
es
.
Pa
ll
et
s,
us
ed
br
oa
dl
y
in
sh
ip
pi
ng
an
d
su
pp
ly
ch
ai
ns
ar
ou
nd
th
e
wo
rl
d,
ar
e
co
ll
ec
te
d,
cl
ea
ne
d,
re
pa
ir
ed
an
d
re
us
ed
by
Br
am
bl
es
,
al
ig
ni
ng
we
ll
wi
th
th
e
co
nc
ep
t
of
a
"c
ir
cu
la
r
ec
on
om
y"
.
Th
e
co
mp
an
y
al
so
en
ab
le
s
pa
ll
et
an
d
co
nt
ai
ne
r
po
ol
in
g,
wh
ic
h
in
cr
ea
se
s
ef
fi
ci
en
cy
an
d
de
cr
ea
se
s
pa
ll
et
wa
st
e.
Wh
en
re
qu
ir
ed
,
Br
am
bl
es
ma
ke
s
ne
w
pa
ll
et
s
fr
om
wo
od
so
ur
ce
d
fr
om
ce
rt
if
ie
d
su
st
ai
na
bl
e
pl
an
ta
ti
on
s.
As
th
e
le
ad
er
in
th
e
in
du
st
ry
,
Br
am
bl
es
'
cl
ie
nt
ba
se
is
st
ab
le
an
d
di
ve
rs
if
ie
d,
wi
th
ma
ny
in
fo
od
an
d
da
il
y
ne
ce
ss
it
ie
s.
4
2.6% PTC INC - United States www.ptc.com
of net assets
(2021: 2.7%)
PT
C
pr
ov
id
es
so
ft
wa
re
so
lu
ti
on
s
th
at
ar
e
de
pl
oy
ed
in
in
du
st
ri
al
de
si
gn
an
d
ma
nu
fa
ct
ur
in
g.
Th
e
co
mp
an
y'
s
so
ft
wa
re
is
us
ed
to
de
si
gn
pr
od
uc
ts
(c
om
pu
te
r
-a
id
ed
de
si
gn
-
CA
D)
,
mo
ni
to
r
ho
w
th
ey
ar
e
be
in
g
ma
nu
fa
ct
ur
ed
an
d
ma
na
ge
th
em
th
ro
ug
ho
ut
th
ei
r
li
fe
ti
me
(p
ro
du
ct
li
fe
cy
cl
e
ma
na
ge
me
nt
-
PL
M)
.
Im
po
rt
an
tl
y,
PT
C'
s
in
du
st
ri
al
co
nn
ec
ti
vi
ty
pl
at
fo
rm
al
lo
ws
cu
st
om
er
s
to
co
nn
ec
t
's
ma
rt
'
de
vi
ce
s
an
d
an
al
ys
e
as
so
ci
at
ed
da
ta
en
ab
li
ng
ap
pl
ic
at
io
ns
li
ke
re
mo
te
mo
ni
to
ri
ng
an
d
pr
ed
ic
ti
ve
ma
in
te
na
nc
e.
Op
er
at
in
g
in
a
ma
rk
et
wi
th
hi
gh
ba
rr
ie
rs
to
en
tr
y
an
d
lo
w
cu
st
om
er
tu
rn
ov
er
,
us
in
g
it
s
es
ta
bl
is
he
d
ma
rk
et
po
si
ti
on
,
PT
C
is
em
er
gi
ng
as
a
le
ad
er
in
in
du
st
ri
al
'I
nt
er
ne
t
of
Th
in
gs
'
an
d
be
ne
fi
tt
in
g
fr
om
hi
gh
re
cu
rr
in
g
re
ve
nu
es
.
5
2.6% AMERICAN WATER WORKS CO INC - United States www.awwa.org
of net assets
(2021: 2.6%)
Am
er
ic
an
Wa
te
r
Wo
rk
s
is
th
e
la
rg
es
t
pu
bl
ic
ly
li
st
ed
US
wa
te
r
ut
il
it
y.
It
pr
ov
id
es
wa
te
r
an
d
wa
te
r-
re
la
te
d
se
rv
ic
es
in
47
st
at
es
an
d
al
so
On
ta
ri
o,
Ca
na
da
.
Th
e
US
wa
te
r
sy
st
em
is
hi
gh
ly
fr
ag
me
nt
ed
wi
th
ov
er
50
,0
00
in
di
vi
du
al
co
mm
un
it
y
wa
te
r
sy
st
em
s.
Cl
os
e
to
10
%
of
th
e
US
po
pu
la
ti
on
is
se
rv
ed
by
wa
te
r
sy
st
em
s
so
sm
al
l
th
at
th
ey
la
ck
ec
on
om
ie
s
of
sc
al
e
an
d
fi
na
nc
ia
l,
ma
na
ge
ri
al
,
an
d
te
ch
ni
ca
l
ab
il
it
y
-
le
ad
in
g
to
wa
te
r
qu
al
it
y
vi
ol
at
io
ns
th
at
la
rg
er
pr
ov
id
er
s
li
ke
Am
er
ic
an
Wa
te
r
Wo
rk
s
ar
e
be
tt
er
po
si
ti
on
ed
to
ad
dr
es
s.
6
2.5% GENERAC HOLDINGS INC - United States www.generac.com
of net assets
(2021: 2.1%)
Ge
ne
ra
c
is
a
le
ad
in
g
su
pp
li
er
of
st
an
db
y
an
d
po
rt
ab
le
ge
ne
ra
to
rs
fo
r
th
e
re
si
de
nt
ia
l,
co
mm
er
ci
al
an
d
in
du
st
ri
al
ma
rk
et
s.
Ex
tr
em
e
cl
im
at
e
ev
en
ts
su
ch
as
hu
rr
ic
an
es
an
d
wi
ld
fi
re
s
in
th
e
US
ar
e
le
ad
in
g
to
mu
lt
i
da
y
bl
ac
k
ou
ts
.
Ge
ne
ra
c'
s
pr
ed
om
in
an
tl
y
ga
s
-p
ow
er
ed
ge
ne
ra
to
rs
pr
ov
id
e
re
li
ab
le
po
we
r
in
th
es
e
si
tu
at
io
ns
.
Th
e
co
mp
an
y
ha
s
a
ci
rc
a
75
%
ma
rk
et
sh
ar
e
of
th
e
US
re
si
de
nt
ia
l
ma
rk
et
,
wi
th
a
st
ro
ng
br
an
d
an
d
we
ll
-e
st
ab
li
sh
ed
di
st
ri
bu
ti
on
ne
tw
or
k
th
at
is
di
ff
ic
ul
t
fo
r
co
mp
et
it
or
s
to
re
pl
ic
at
e.
Th
e
co
mp
an
y
ha
s
re
ce
nt
ly
la
un
ch
ed
en
er
gy
st
or
ag
e
pr
od
uc
ts
th
at
ca
n
st
or
e
po
we
r
fr
om
so
la
r
sy
st
em
s.
Th
is
op
en
s
up
a
ne
w
av
en
ue
of
gr
ow
th
fo
r
th
e
co
mp
an
y.
7
2.4% NORTHLAND POWER INC - Canada www.northlandpower.com
of net assets
(2021: 1.8%)
No
rt
hl
an
d
ow
ns
,
or
ha
s
ec
on
om
ic
in
te
re
st
s
in
,
po
we
r
ge
ne
ra
ti
on
fa
ci
li
ti
es
in
Ca
na
da
,
th
e
Un
it
ed
St
at
es
an
d
Ge
rm
an
y.
It
s
as
se
ts
pr
od
uc
e
el
ec
tr
ic
it
y
fr
om
re
ne
wa
bl
e
en
er
gy
so
ur
ce
s
-
su
ch
as
so
la
r,
wi
nd
an
d
bi
om
as
s
-
an
d
na
tu
ra
l
ga
s.
Th
e
co
mp
an
y
ma
in
ta
in
s
an
ac
ti
ve
de
ve
lo
pm
en
t
an
d
co
ns
tr
uc
ti
on
pr
og
ra
m
fo
r
ad
di
ti
on
al
ne
w
po
we
r
ge
ne
ra
ti
on
op
po
rt
un
it
ie
s
an
d
is
no
w
th
e
fo
ur
th
la
rg
es
t
de
ve
lo
pe
r
of
of
fs
ho
re
wi
nd
gl
ob
al
ly
.
No
rt
hl
an
d
ha
s
a
st
ro
ng
pr
oj
ec
t
de
ve
lo
pm
en
t
tr
ac
k
re
co
rd
as
we
ll
as
a
so
li
d
fu
tu
re
pi
pe
li
ne
,
wh
ic
h
sh
ou
ld
dr
iv
e
gr
ow
th
.
8
2.4% LITTELFUSE INC - United States www.littelfuse.com
of net assets
(2021: 1.8%)
Li
tt
el
fu
se
se
ll
s
fu
se
s,
an
d
ot
he
r
ci
rc
ui
t
pr
ot
ec
ti
on
de
vi
ce
s,
fo
r
us
e
in
th
e
au
to
mo
ti
ve
,
el
ec
tr
on
ic
s
an
d
ge
ne
ra
l
in
du
st
ri
al
ma
rk
et
s.
Th
er
e
is
si
gn
if
ic
an
t
gr
ow
th
in
el
ec
tr
ic
al
ci
rc
ui
ts
ac
ro
ss
th
e
gl
ob
al
ec
on
om
y
-
gr
ea
te
r
pr
ot
ec
ti
on
,
co
nt
ro
l
an
d
se
ns
in
g
wi
th
in
ci
rc
ui
ts
ca
n
en
ha
nc
e
ef
fi
ci
en
cy
.
To
me
et
ne
t
ze
ro
am
bi
ti
on
s
in
th
e
co
mi
ng
th
re
e
de
ca
de
s,
mo
re
an
d
mo
re
pr
od
uc
ts
wi
ll
ha
ve
to
ru
n
of
f
el
ec
tr
ic
it
y
an
d
th
us
th
e
de
ma
nd
fo
r
Li
tt
el
fu
se
's
ci
rc
ui
t
pr
ot
ec
ti
on
,
se
ns
or
an
d
co
nn
ec
to
r
go
od
s
sh
ou
ld
in
cr
ea
se
.
9
2.4% EUROFINS SCIENTIFIC - France www.eurofins.com
of net assets
(2021: 1.8%)
Eu
ro
fi
ns
Sc
ie
nt
if
ic
is
a
li
fe
sc
ie
nc
es
co
mp
an
y
th
at
is
a
wo
rl
d
le
ad
er
in
fo
od
te
st
in
g,
wi
th
re
la
te
d
bu
si
ne
ss
li
ne
s
in
fe
ed
an
d
en
vi
ro
nm
en
ta
l
te
st
in
g,
as
we
ll
as
ag
ro
sc
ie
nc
e
an
d
ph
ar
ma
.
Eu
ro
fi
ns
Sc
ie
nt
if
ic
's
bu
si
ne
ss
mo
de
l
ta
ps
in
to
st
ro
ng
gr
ow
th
in
th
e
de
ma
nd
fo
r
te
st
in
g
gl
ob
al
ly
,
pa
rt
ic
ul
ar
ly
as
re
gu
la
ti
on
s
co
nt
in
ue
to
ti
gh
te
n
to
ad
dr
es
s
cl
im
at
e
ch
an
ge
,
po
ll
ut
io
n
an
d
ev
ol
vi
ng
he
al
th
ca
re
ch
al
le
ng
es
.
Eu
ro
fi
ns
ca
n
de
li
ve
r
in
cr
ea
si
ng
ly
so
ph
is
ti
ca
te
d
an
d
di
ff
er
en
ti
at
ed
so
lu
ti
on
s
to
a
va
ri
et
y
of
en
d
ma
rk
et
s.
Th
is
mi
d
-s
iz
ed
Eu
ro
pe
an
co
mp
an
y
ha
s
a
pr
es
en
ce
in
44
co
un
tr
ie
s
an
d
ha
s
gr
ow
n
si
gn
if
ic
an
tl
y
th
ro
ug
h
ac
qu
is
it
io
ns
,
fo
cu
si
ng
on
lo
ng
te
rm
va
lu
e
cr
ea
ti
on
.
10
2.3% GRAPHIC PACKAGING - United States www.graphicpkg.com
of net assets
(2021: 1.8%)
Gr
ap
hi
c
Pa
ck
ag
in
g
is
a
pr
ov
id
er
of
pa
pe
rb
oa
rd
,
an
d
in
te
gr
at
ed
pa
pe
rb
oa
rd
,
pa
ck
ag
in
g
to
mu
lt
in
at
io
na
l
be
ve
ra
ge
an
d
co
ns
um
er
pr
od
uc
ts
co
mp
an
ie
s.
It
is
in
cr
ea
si
ng
ly
co
nt
ri
bu
ti
ng
to
th
e
di
sp
la
ce
me
nt
of
si
ng
le
‑u
se
pl
as
ti
c
pa
ck
ag
in
g
an
d
ta
bl
ew
ar
e,
vi
a
it
s
fi
br
e
-b
as
ed
pa
ck
ag
in
g
pr
od
uc
ts
.
So
me
of
it
s
pa
ck
ag
in
g
in
pu
ts
ar
e
dr
aw
n
fr
om
ov
er
50
%
re
cy
cl
ed
ma
te
ri
al
.
Gr
ap
hi
c
is
po
is
ed
to
be
ne
fi
t
as
th
e
US
pa
ck
ag
in
g
se
ct
or
co
ns
ol
id
at
es
,
wh
ic
h
is
im
pr
ov
in
g
in
du
st
ry
re
tu
rn
s.
Gr
ap
hi
c
wi
ll
be
ne
fi
t
in
th
e
lo
ng
te
rm
fr
om
tr
en
ds
aw
ay
fr
om
si
ng
e
us
e
pl
as
ti
c
pa
ck
ag
in
g
an
d
to
wa
rd
s
th
e
gr
ea
te
r
us
e
of
re
cy
cl
ab
le
ma
te
ri
al
s.
Top Thirty Portfolio Investments
MARKET % OF
AS AT 30 JUNE 2022 COUNTRY OF MAIN VALUE NET
COMPANY SECTOR LISTING £'000 ASSETS
Ormat Technologies Alternative Energy United States 34,939 2.8
Clean Harbors Resource Efficiency & Waste Management United States 33,989 2.7
Brambles Resource Efficiency & Waste Management Australia 33,362 2.7
PTC Digital Infrastructure United States 32,963 2.6
American Water Works Water Infrastructure & Technologies United States 32,035 2.6
Generac Holdings Energy Management & Efficiency United States 31,342 2.5
Northland Power Alternative Energy Canada 30,452 2.4
Littelfuse Transport Solutions United States 29,963 2.4
Eurofins Scientific Sustainable Food & Agriculture France 29,540 2.4
Graphic Packaging Resource Efficiency & Waste Management United States 29,091 2.3
Top ten holdings 317,676 25.4
Airtac International Energy Management & Efficiency Taiwan 28,857 2.3
Croda International Resource Efficiency & Waste Management United Kingdom 28,559 2.3
Bucher Industries Sustainable Food & Agriculture Switzerland 28,023 2.2
Descartes Systems Digital Infrastructure Canada 27,556 2.2
EDP Renovaveis Alternative Energy Portugal 27,217 2.2
Spirax-Sarco Engineering Energy Management & Efficiency United Kingdom 26,181 2.1
Darling Ingredients Resource Efficiency & Waste Management United States 25,932 2.1
Xinyi Solar Holdings Alternative Energy China 25,464 2.0
Trimble Digital Infrastructure United States 25,012 2.0
Pentair Water Infrastructure & Technologies United States 24,650 2.0
Top twenty holdings 585,127 46.8
Koninklijke DSM Sustainable Food & Agriculture Netherlands 24,187 1.9
Indraprastha Gas Alternative Energy India 23,724 1.9
Advantech Energy Management & Efficiency Taiwan 23,534 1.9
Monolithic Power System Digital Infrastructure United States 23,529 1.9
Donaldson Co. Transport Solutions United States 23,313 1.9
Aalberts Water Infrastructure & Technologies Netherlands 23,168 1.9
Solaredge Technologies Alternative Energy United States 22,850 1.8
Salmar Sustainable Food & Agriculture Norway 22,345 1.8
Rayonier Sustainable Food & Agriculture United States 21,886 1.8
Repligen Resource Efficiency & Waste Management United States 21,776 1.7
Top thirty holdings 815,439 65.3
Other quoted holdings 474,890 37.9
Total quoted holdings 1,290,329 103.2
Unquoted holdings -Ensyn Renewable and Alternative Energy United States 647* 0.1
Portfolio Total 1,290,976 103.3
Cash 15,725 1.3
Other net liabilities (57,514) (4.6)
Total net assets 1,249,187 100.0
* Directors' Valuation
All investment is in equity securities unless otherwise stated.
The full portfolio is published each month, quarterly in arrears on the
Company's website www.impaxenvironmantalmarkets.co.uk
Interim Management Report
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Directors consider that the Chairman's
Statement and the Manager's Report, provide details of the important events
which have occurred during the six months ended 30 June 2022 ("Period") and
their impact on the financial statements. The statement on related party
transactions and the Directors' Statement of Responsibility (below), the
Chairman's Statement and the Manager's Report together constitute the Interim
Management Report of the Company for the Period. The outlook for the Company
for the remaining six months of the year ending 31 December 2022 is discussed
in the Chairman's Statement and the Manager's Report.
Details of the largest ten investments held at the Period end are provided
above and the structure of the portfolio at the Period end is analysed in the
Interim Report.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties facing the Company are summarised below:
(i) economic and market risks - price movements of the Company's
investments are highly correlated to market movementsand general economic
conditions. This is even more so for investee companies with small market
capitalisation;
(ii) environmental markets - the Company invests in companies
operating in environmental markets. There is a risk in such markets that
change to governmental support, technology costs or customer demand may have
an adverse effect;
(iii) share price trades at excessive premium or discount to net asset
value - returns to shareholders may be affected by the change in the level of
discount or premium at which the Company's shares might trade; and
(iv) failure or breach of information security (IT) - including
cyber-security and physical security risks - failure of IT or physical
security could potentially lead to breaches of confidentiality, data records
being compromised and the inability to make investment decisions. In addition,
unauthorized physical access to buildings could lead to damage or loss of
equipment.
Emerging risks are considered by the Board at its quarterly meetings and by
the Audit Committee as part of its risk management and internal control
review. Failure to identify emerging risks may cause reactive actions rather
than being proactive and the Company could be forced to change its structure,
objective or strategy and, in worst case, could cause the Company to become
unviable or otherwise fail.
The market and operational risks posed by the war in Ukraine and the secondary
effects of the COVID-19 pandemic, and the ongoing economic impact of these
events continue to be monitored by the Board. The Manager and other key
service providers provide periodic reports to the Board on operational
resilience in light of the pandemic and exposure, if any, to Russia and
Belarus. The Board is satisfied that the key service providers have the
ability to continue their operations efficiently in a remote or virtual
working environment. The Company holds no Russian, Belarusian or Ukrainian
listed or domiciled stocks.
The Company's Annual Report for the year ended 31 December 2021 contains more
detail on the Company's principal risks and uncertainties, including the
Board's ongoing process to identify, and where possible mitigate, emerging
risks (pages 25 to 28). Detail is also provided on other risks that, whilst
not being identified as principal risks after mitigation controls are applied,
are relevant risks to the Company. The Annual Report can be found on the
Company's website at www.impaxenvironmentalmarkets.co.uk.
In the view of the Board the principal risks and uncertainties facing the
business are broadly the same as those in the published annual report and
financial statements for the year ended 31 December 2021 although many are at
a more elevated level.
RELATED PARTY TRANSACTIONS
Details of the investment management arrangements are provided in the Annual
Report. There have been no changes to the related party transactions described
in the Annual Report that could have a material effect on the financial
position or performance of the Company.
GOING CONCERN
This Half-yearly Financial Report has been prepared on a going concern basis.
The Directors consider this the appropriate basis as they have a reasonable
expectation that the Company has adequate resources to continue in operational
existence for at least twelve months from the date of this report. In reaching
this conclusion, the Directors considered the liquidity of the Company's
portfolio of investments, as well as its cash position, income and expense
flows. The Company's net assets as at 30 June 2022 were £1,249.2 million, of
which £1,290.3 million was in quoted investments and cash totalled £15.7
million. The main liability of the Company is its borrowings of £51.7 million
which is covered 25 times by the adjusted assets, well in excess of the level
of cover required by the borrowing covenants of four times. The total expenses
(excluding finance costs and taxation) for the six months ended 30 June 2022
were £6.2 million, while income was £11.6 million.
The Directors have considered the impact of the macroeconomic backdrop, such
as rising inflation, higher interest rates and a possible recession. The war
in Ukraine and the secondary effects of the COVID-19 pandemic have exacerbated
these market-related risks. However, as explained above, the Company has
remained resilient in the current extreme market conditions and has more than
sufficient liquidity available to meet its expected future obligations.
Board of Directors
1 August 2022
Directors' Statement of Responsibility
The Directors confirm to the best of their knowledge that:
• The condensed set of financial statements contained within the
Half-yearly Financial Report has been prepared in accordance with FRS 104
Interim Financial Reporting and gives a true and fair view of the assets,
liabilities, financial position and return of the Company; and
• The interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance and
Transparency Rules.
John Scott
Chairman of the Board of Directors
1 August 2022
Condensed Income Statement
Unaudited
SIX MONTHS ENDED 30 JUNE 2022 SIX MONTHS ENDED 30 JUNE 2021
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
NOTES £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (255,299) (255,299) - 147,848 147,848
Net foreign exchange (losses)/gains - (2,355) (2,355) - 166 166
Income 4 11,625 - 11,625 8,945 - 8,945
Investment management fees (1,379) (4,136) (5,515) (1,121) (3,365) (4,486)
Other expenses (664) - (664) (709) - (709)
Return on ordinary activities before finance 9,582 (261,790) (252,208) 7,115 144,649 151,764
costs and taxation
Finance costs 5 (189) (566) (755) (182) (544) (726)
Return on ordinary activities before taxation 9,393 (262,356) (252,963) 6,933 144,105 151,038
Taxation 6 (1,930) 579 (1,351) (1,276) (107) (1,383)
Return on ordinary activities after taxation 7,463 (261,777) (254,314) 5,657 143,998 149,655
Return per Ordinary Share 7 2.46p (86.29p) (83.83p) 2.04p 52.05p 54.09p
The total column of the Income Statement is the profit and loss account of the
Company.
The supplementary revenue and capital columns are provided for information
purposes in accordance with the Statement of Recommended Practice issued by
the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
Return on ordinary activities after taxation is also the "Total comprehensive
income for the period".
The notes form part of these financial statements.
Condensed Balance Sheet
Unaudited
AS AT AS AT
30 JUNE 31 DECEMBER
2022 2021*
NOTES £'000 £'000
Fixed assets
Investments at fair value through profit or loss 3 1,290,976 1,503,750
Current assets
Dividends receivable 1,962 274
Sales awaiting settlement 3,218 -
Taxation recoverable 32 23
Other debtors 29 -
Cash and cash equivalents 15,725 28,319
20,966 28,616
Creditors: amounts falling due within one year
Purchases awaiting settlement (7,637) -
Trade and other payables (3,403) (3,036)
(11,040) (3,036)
Net current assets 9,926 25,580
Total assets less current liabilities 1,300,902 1,529,330
Creditors: amounts falling due after more than one year
Capital gains tax provision - (579)
Bank loans and revolving credit facility 8 (51,715) (49,113)
Net assets 1,249,187 1,479,638
Capital and reserves: equity
Share capital 9 30,562 29,806
Share premium account 422,481 388,262
Capital redemption reserve 9,877 9,877
Share purchase reserve 141,214 147,855
Capital reserve 633,138 894,915
Revenue reserve 11,915 8,923
Shareholders' funds 1,249,187 1,479,638
Net assets per Ordinary Share 10 410.86p 496.42p
* Audited
Approved by the Board of Directors and authorised for issue on 1 August 2022.
Impax Environmental Market plc incorporated in England and Wales with
registered number 4348393.
The notes form part of these financial statements.
Condensed Statement of Changes in Equity
Unaudited
CAPITAL
SHARE REDEMP- SHARE
SHARE PREMIUM TION PURCHASE CAPITAL REVENUE
SIX MONTHS ENDED CAPITAL ACCOUNT RESERVE RESERVE RESERVE RESERVE TOTAL
30 JUNE 2022 NOTE £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2022 29,806 388,262 9,877 147,855 894,915 8,923 1,479,638
Dividend paid 11 - - - - - (4,471) (4,471)
Net proceeds from issue of new shares 9 756 34,162 - - - - 34,918
Net proceeds of shares sold from treasury 9 - 57 - 452 - - 509
Cost of share buybacks 9 - - - (7,093) - - (7,093)
Return for the period - - - - (261,777) 7,463 (254,314)
Closing equity as at 30 June 2022 30,562 422,481 9,877 141,214 633,138 11,915 1,249,187
CAPITAL
SHARE REDEMP- SHARE
SHARE PREMIUM TION PURCHASE CAPITAL REVENUE
SIX MONTHS ENDED CAPITAL ACCOUNT RESERVE RESERVE RESERVE RESERVE TOTAL
30 JUNE 2021 NOTE £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2021 26,588 239,059 9,877 147,855 663,868 6,033 1,093,280
Dividend paid 11 - - - - - (2,734) (2,734)
Net proceeds from issue of new shares 9 1,809 80,084 - - - - 81,893
Return for the period - - - - 143,998 5,657 149,655
Closing equity as at 30 June 2021 28,397 319,143 9,877 147,855 807,866 8,956 1,322,094
The notes form part of these financial statements.
Condensed Statement of Cash Flows
Unaudited
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 30 JUNE
2022 2021
NOTES £'000 £'000
Operating activities
(Loss)/return on ordinary activities before finance costs and taxation* (252,208) 151,764
Less: Tax deducted at source on income from investments (1,930) (1,325)
Foreign exchange non cash flow losses/(gains) 2,689 (259)
Adjustment for losses/(gains) on investments 255,299 (147,848)
Increase in other debtors (1,726) (1,217)
Increase/(decrease) in other creditors 425 (199)
Net cash flow from operating activities 2,549 916
Investing activities
Sale of investments 116,426 188,510
Purchase of investments (154,532) (266,713)
Net cash flow used in investing (38,106) (78,203)
Financing activities
Equity dividends paid 11 (4,471) (2,734)
Payment to revolving credit facility (87) -
Finance costs paid (813) (730)
Net proceeds from issue of new shares 9 34,918 81,893
Net proceeds of shares sold from treasury 9 509 -
Net cost of share buybacks 9 (7,093) -
Net cash flow from financing 22,963 78,429
(Decrease)/increase in cash (12,594) 1,142
Cash and cash equivalents at start of period 28,319 30,037
Cash and cash equivalents at end of period 15,725 31,179
* Cash inflow includes dividend income received during the
period to 30 June 2022 of £9,921,000 (30 June 2021: £7,640,000).
Changes in Net Debt Note
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 30 JUNE
2022 2021
£'000 £'000
Net debt at start of period (20,794) (18,871)
(Decrease)/increase in cash and cash equivalents (12,594) 1,142
Foreign exchange movements (2,689) 259
Repayment of revolving credit facility 87 -
Net debt at end of period (35,990) (17,470)
The notes form part of these financial statements.
Notes to the Financial Statements
1 ACCOUNTING POLICIES
The Half-yearly Condensed Financial Statements have been prepared in
accordance with FRS 104 Interim Financial Reporting issued by the Financial
Reporting Council ('FRC') and the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts' issued by
the Association of Investment Companies in April 2021.
This Half-yearly Financial Report is unaudited and does not include all of the
information required for a full set of annual financial statements. The
Half-yearly Financial Report should be read in conjunction with the Annual
Report and Accounts of the Company for the year ended 31 December 2021. The
Annual Report and Accounts for the year ended 31 December 2021 were prepared
in accordance with FRS 102 'The Financial Reporting Standard applicable in the
UK and Republic of Ireland' ('FRS 102') and received an unqualified audit
report. The financial information for the year ended 31 December 2021 in this
Half-yearly Financial Report has been extracted from the audited Annual Report
and Accounts for the year ended 31 December 2021. The accounting policies in
this Half-yearly Financial Report are consistent with those applied in the
Annual Report for the year ended 31 December 2021.
2 GOING CONCERN
The Directors have adopted the going concern basis in preparing the accounts.
Details of the Directors' assessment of the going concern status of the
Company, which considered the adequacy of the Company's resources and the
impacts of the COVID-19 pandemic and war in Ukraine, are given in the Interim
Management Report.
3 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Classification of financial instruments
Securities of companies quoted on regulated stock exchanges and the Company's
holdings in unquoted companies have been classified as 'at fair value through
profit or loss' and are initially recognised on the trade date and measured at
fair value in accordance with sections 11 and 12 of FRS 102. Investments are
measured at subsequent reporting dates at fair value by reference to their
market bid prices. Any unquoted investments are measured at fair value, which
is determined by the Directors in accordance with the International Private
Equity and Venture Capital guidelines.
Changes in fair value are included in the Condensed Income Statement as a
capital item.
The classifications and their descriptions are below:
FRS 102 requires classification of financial instruments within the fair value
hierarchy be determined by reference to the source of inputs used to derive
the fair value and the lowest level input that is significant to the fair
value measurement as a whole. The classifications and their descriptions are
below:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Level 2 investments are holdings in companies with no quoted prices. 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.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
The classification of the Company's investments held at fair value is detailed
in the table below:
30 JUNE 2022 31 DECEMBER 2021
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investments at fair value through
profit or loss
- Quoted 1,290,329 - - 1,290,329 1,503,168 - - 1,503,168
- Unquoted - - 647 647 - - 582 582
1,290,329 - 647 1,290,976 1,503,168 - 582 1,503,750
Unquoted investments are valued using relevant financial data available on
those investments and applying International Private Equity and Venture
Capital guidelines. This includes, where appropriate, consideration of price
of recent market transactions, earnings multiples, discounted cash flows, net
assets and liquidity discounts.
At the period end the Company had one active unlisted holding, Ensyn. The
Company's holding in Ensyn has been valued in US dollars based on peer
analysis prepared by the Manager and translated into sterling using the
applicable foreign exchange rate at the Company's period end. The Manager
valued holdings in Ensyn at a price of US$7.50 per share as at 30 June 2022
(31 December 2021: US$7.50 per share).
4 INCOME
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 30 JUNE
2022 2021
£'000 £'000
Dividends from UK listed investments 961 629
Dividends from overseas listed investments 10,648 8,316
Bank interest received 16 -
Total Income 11,625 8,945
5 FINANCE COSTS
SIX MONTHS ENDED 30 JUNE 2022 SIX MONTHS ENDED 30 JUNE 2021
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Interest charges 187 560 747 180 539 719
Direct finance costs 2 6 8 2 5 7
Total 189 566 755 182 544 726
Facility arrangement costs amounting to £72,000 are amortised over the life
of the facility on a straight-line basis.
6 TAXATION
Analysis of charge in the year
SIX MONTHS ENDED 30 JUNE 2022 SIX MONTHS ENDED 30 JUNE 2021
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Overseas taxation 1,930 - 1,930 1,276 - 1,276
(Decrease)/increase on capital gains tax provision - (579) (579) - 107 107
Taxation 1,930 (579) 1,351 1,276 107 1,383
The capital gains tax provision represents an estimate of the amount of tax
provisionally payable by the Company on direct investment in Indian equities.
It is calculated based on the long term or short term nature of the
investments and the unrealised gain thereon at the applicable tax rate at the
period end.
Movements on the capital gains tax provision for the period
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 30 JUNE
2022 2021
Provision brought forward 579 1,092
Capital gains tax paid - (49)
(Decrease)/increase in provision in period (579) 107
Provision carried forward - 1,150
7 RETURN PER SHARE
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 30 JUNE
2022 2021
Revenue return after taxation (£'000) 7,463 5,657
Capital return after taxation (£'000) (261,777) 143,998
Total net return after tax (£'000) (254,314) 149,655
Weighted average number of Ordinary Shares 303,362,501 276,654,235
Net return per Ordinary Share is based on the above totals of revenue and
capital and the weighted average number of Ordinary Shares in issue during
each period.
There is no dilution to return per share as the Company has only Ordinary
Shares in issue.
8 BANK LOANS AND CREDIT FACILITY
On 6 September 2018, the Company entered into five-year fixed rate
multi-currency US$20 million and £15 million loans with Scotiabank Europe
plc ("Scotiabank"). The loans expire on 6 September 2023.
The Company also has a £20 million multi-currency revolving credit facility
("RCF") with Scotiabank which was fully drawn down in two currencies, US$12.5
million and £10 million, throughout the period. The facility expires on
6 September 2023.
A summary of the Company's borrowings follows.
30 JUNE 2022 31 DECEMBER 2021
LOAN LOAN
CURRENCY CURRENCY
INTEREST RATE AMOUNT £'000 AMOUNT £'000
BANK LOANS - FIXED RATE
Sterling 2.910% 15,000,000 15,000 15,000,000 15,000
Non-sterling 4.504% 20,000,000 16,424 20,000,000 14,777
31,424 29,777
RCF - FLOATING RATE
Sterling Six month SOFR+1.7% 10,000,000 10,000 10,000,000 10,000
Non-sterling Six month SONIA+1.7% 12,530,229 10,291 12,637,000 9,336
Total 51,715 49,113
The maturity profile of the bank loans and revolving credit facility follows:
30 JUNE 31 DECEMBER
2022 2021
PAYABLE AFTER MORE THAN ONE YEAR £'000 £'000
Bank loans payable after more than one year 31,424 29,777
Revolving credit facility payable after more than one year 20,291 19,336
51,715 49,113
9 SHARE CAPITAL
SIX MONTHS ENDED SIX MONTHS ENDED
30 JUNE 2022 30 JUNE 2021
NUMBER £'000 NUMBER £'000
Issued and fully paid shares of 10p each
Brought forward 298,061,439 29,806 265,877,138 26,588
New shares issued in period 7,562,100 756 18,093,850 1,809
Shares bought back and held in treasury (1,694,400) (169) - -
Treasury shares issued in period 112,900 11 - -
Carried forward 304,042,039 30,404 283,970,988 28,397
Treasury shares of 10p each
Brought forward - - - -
Shares bought back and held in treasury 1,694,400 169 - -
Issued in year (112,900) (11) - -
Carried forward 1,581,500 158 - -
Share capital 305,623,539 30,562 283,970,988 28,397
The Company received aggregate gross proceeds of £35,126,000 (2021:
£82,426,000) from the issue of new Ordinary Shares and net proceeds of
£34,918,000 (2021: £81,893,000) after issue costs of £208,000 (2021:
£533,000). In addition, 1,694,400 Ordinary Shares (2021: nil) have been
bought back at a cost of £7,093,000 and held in treasury. Of these, 112,900
have subsequently been re-issued for net proceeds of £509,000.
Since the period end, a further 400,000 Ordinary Shares have been re-issued
for net proceeds of £1,132,000.
10 NET ASSET VALUE PER ORDINARY SHARE
30 JUNE 31 DECEMBER
2022 2021
Net asset value (£'000) £1,249,187 1,479,638
Ordinary Shares in issue (excluding shares held in treasury) 304,042,039 298,061,439
Net assets per Ordinary Share 410.86p 496.42p
11 DIVIDENDS
A second interim - in lieu of final - dividend for the year ended 31 December
2021 of 1.5p per Ordinary Share was paid on 28 January 2022 (2020: 1.0p).
On the 28 July 2022 the Board announced a first interim dividend of 1.5p per
Ordinary Share, payable on the 26 August 2022 to shareholders on the register
at the close of business on the 5 August 2022, with an ex-dividend date of 4
August 2022.
12 TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS
The Company's transactions with related parties in the period were with the
Directors. There have been no material transactions between the Company and
its Directors during the half year other than amounts paid to them in respect
of expenses and remuneration for which there are no outstanding amounts
payable at the half year period end.
Fees payable to the Manager are shown in the Income Statement. As at 30 June
2022 the fee outstanding to the Manager was £3,104,000 (31 December 2021:
£2,730,000).
13 STATUS OF THIS REPORT
These financial statements are not the Company's statutory accounts for the
purposes of section 434 of the Companies Act 2006. They are unaudited. The
Half-yearly Financial Report will be made available to the public at the
registered office of the Company. The report will be available in electronic
format on the Manager's website (www.impaxam.com) and the Company's website,
(www.impaxenvironmentalmarkets.co.uk).
The information for the year ended 31 December 2021 has been extracted from
the last published audited financial statements, unless otherwise stated. The
audited financial statement has been delivered to the Registrar of Companies.
BDO LLP reported on those accounts and their report was unqualified, did not
draw attention to any matters by way of emphasis and did not contain a
statement under sections 498(2) or 498(3) of the Companies Act 2006.
The Half-yearly Financial Report was approved by the Board on 1 August 2022.
For further information contact:
Secretary and registered office:
Sanne Fund Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
The Half-yearly financial report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
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