REG - Impax Environ Mkts - Half-year Report
03/08/2023 07:00
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RNS Number : 1243I Impax Environmental Markets PLC 03 August 2023
Impax Environmental Markets plc
Half-yearly Financial Report Announcement
For the six months to 30 June 2023
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
As at 30 June 2023 As at 31 December 2022
Net asset value ("NAV") per ordinary share 431.6p 419.5p
Ordinary share price 410.0p 419.5p
Ordinary share price (discount) premium to NAV(1) (5.0%) 0.0%
Net assets £1,292m £1,276m
PERFORMANCE SUMMARY
For the six months ended 30 June 2023
% CHANGE(2,3)
NAV total return per ordinary share(1) 3.4%
Share price total return per ordinary share(1) -1.7%
MSCI ACWI Index 7.8%
FTSE ET100 Index 14.7%
(1 ) These are alternative performance measures
(2 ) Total returns in sterling for the six months
to 30 June 2023
(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 Half-Yearly Report.
Chair's Statement
I took over as Chair in May and want firstly to thank John Scott and Vicky
Hastings for the services that they provided to Impax Environmental Markets
plc ("IEM" or the "Company") and to shareholders over the past ten years, a
period during which the Company has grown from £379 million to £1.3 billion
assets under management and has established itself as one of the leading
companies, if not the leading company, in this sector of the investment trust
market.
Although the wider equity markets have performed well in the first six months
of 2023 (the "Period"), continued challenges and upheavals in the
macroeconomic environment have created a volatile backdrop, generating
headwinds for the small- and mid-cap growth companies in which the Company
invests. Consequently, while the Company's investment thesis remains strong,
and valuations have become increasingly attractive, the Company underperformed
its global equities and environmental comparator indicies - the MSCI All
Country World Index ("MSCI ACWI") and the FTSE Environmental Technology 100
("FTSE ET100"), respectively - during the Period.
Persistently high inflation has led to interest rate rises beyond those
originally priced into markets. This is clouding the outlook for growth,
increasing the risk of a 'hard landing' or recession, and encouraging
investors to reallocate capital from equities into less risky bonds, where
yields have become increasingly attractive. In addition, the failure of
Silicon Valley Bank in the US, followed by the collapse of Credit Suisse in
Europe, stoked fears of another financial crisis. While these fears proved
exaggerated, they have triggered tighter lending standards, which create
another risk to economic growth. These events prompted 'risk off' sentiment in
markets, leading to significant underperformance of small- and mid-cap markets
in the second quarter, contributing to IEM's underperformance over the Period.
Conversely, the sources of positive equity market performance during the
Period have been extremely narrowly focused. Much of the rise in equity
indices was delivered by a small number of US 'mega-cap' technology names to
which IEM is not exposed. However, growing excitement among investors about
the prospects for artificial intelligence has fuelled the meteoric rise of
chipmaker Nvidia, one of these tech names, and does create opportunities for
IEM which are discussed in the Manager's Report.
Wider market challenges obscured continued positive developments in
environmental markets, also discussed in detail below. Policy support has
remained resolute despite a challenging macroeconomic environment, with the US
Inflation Reduction Act and the EU's Green Deal Industrial Plan poised to
drive accelerating growth in the markets in which IEM invests.
It is worth re-stating the investment hypothesis that underpins the Company.
There is a clear need for solutions to pressing environmental challenges, to
promote resource efficiency and for infrastructure that enables basic needs to
be more efficiently and cleanly met. The Board and Manager believe that
investing globally in pureplay companies that provide these solutions across a
diverse range of end-markets will generate investment outperformance. The
current combination of a strong underlying investment hypothesis and a
de-rating of the portfolio compared with wider equity markets creates a
compelling valuation case, which has been instrumental in the gearing
decisions discussed below.
INVESTMENT PERFORMANCE
During the Period, the total return of the NAV per share of the Company was
3.4% and the share price total return was -1.7%. IEM underperformed the MSCI
ACWI, its global comparator index, which generated a total return of 7.8%.
Similarly, IEM underperformed the FTSE ET100, which rose 14.7% over the
Period.
Notwithstanding the disappointing outcome for 2022, the longer term returns
for IEM remain very respectable: three-year annualised performance of the
share price and NAV are 9.8% and 12.4%, respectively, compared to 9.9% for
MSCI ACWI. Over five years, the annualised returns are 10.0% for the share
price and 10.4% for the NAV versus 8.9% for MSCI ACWI.
"I have great confidence in the long-term thesis that sustainability pressures
create opportunities for companies providing environmental solutions."
GEARING
The Board and Manager fundamentally believe that gearing represents an
attractive feature of investment trusts, which can enhance long-term
performance. When originally put in place in 2014, the Board and Manager
agreed a tolerance of up to 10% gearing. As mentioned in the 2022 Annual
Report, the existing £50.3 million facilities, which have been in place for
five years and represent a diminished level of 3.1% net gearing following
IEM's growth, come up for renewal in September 2023. In the absence of share
issuance, previously flagged capacity constraints have eased. Following
extensive discussions, and based in part on a compelling portfolio valuation,
the Board has decided to replace the existing facility with long-term
structural debt. After the Period end the Company announced the placement of
€60 million (~£51.7 million) privately placed notes ("Notes") with a
mixture of maturities and interest rates, and a balance of fixed versus
floating interest rates. These are set out below.
Principal amount Maturity Interest rate
€20m 7 years Floating: 6M EURIBOR +1.35%
€30m 10 years Fixed: 4.48%
€10m 12 years Fixed: 4.63%
In addition to the above, the Board is in advanced discussions with its
existing bank, Scotiabank, for an additional £35m floating rate facility.
Whilst subject to documentation, this facility, if fully drawn, together with
the Notes, would result in approximately 7% gross gearing and a mix of fixed
and floating interest rate debt. This is considered appropriate and desirable
at current valuation levels and given the uncertain trajectory of interest
rates.
PREMIUM AND DISCOUNT CONTROL
The Company's ordinary shares traded at net asset value ("NAV") on 31 December
2022 and a discount to NAV of 5.0% on 30 June 2023, trading between a premium
of 1.3% and a discount of 6.1% during the Period.
Equity market volatility has seen discounts on investment trusts continue to
widen materially over the first half of 2023. The Board's intention remains
for the Company's share price to trade close to NAV in normal market
conditions and it will continue to exercise its authority to buy back or issue
shares accordingly. A total of 4,835,000 shares were bought back into
treasury during the Period, resulting in 6,291,500 shares being held in
treasury at 30 June 2023.
DIVIDEND
The Company's net revenue return for the Period was £9.1 million, compared
with £7.5 million earned in the same period last year. This increase reflects
continued recovery of dividends post pandemic. There were 304.2 million
ordinary shares in issue at the start of the year, falling to 299.3 million by
the end of the Period, reflecting the 4.8 million shares bought back.
The second interim dividend for the 2022 financial year, of 2.5 pence per
ordinary share, was declared on 1 February 2023 and paid on 10 March 2023. It
remains the Board's intention to pay out substantially all earnings by way of
dividends, the quantum of which is affected both by the level of dividends
received by the Company and by the number of shares in issue at the relevant
record date.
On 28 July 2023, the Board announced a first interim dividend for this
financial year of 1.7 pence per ordinary share, payable on 1 September 2023 to
shareholders who appear on the register at 11 August 2023, with an ex-dividend
date of 10 August 2023.
THE BOARD
At the Company's AGM in May 2023, I was appointed by the Board as the
Company's new Chair, taking over from John Scott. I would like to extend the
Board's thanks to John, who not only had served the Company as Chair for nine
years, but also remained in post beyond his planned retirement, following the
sudden death in 2021 of then Chair‑designate Simon Fraser.
Additionally, I would like to extend the Board's gratitude to Vicky Hastings,
who also retired at the 2023 AGM. She served for ten years and is replaced by
Guy Walker. Guy is the senior independent director at JPMorgan European Growth
& Income plc. He was previously Managing Director of UK & European
Equities at UBS Asset Management and before that had held various roles at
Schroder Investment Management. I look forward to working with Guy and the
rest of the Board.
The Board has initiated a search for an additional director with a
complementary skill set and experience, which would return the Board to five
members.
OUTLOOK
I join the Company at a challenging time for its Manager and, indeed, for all
investors, as we move into a new economic paradigm, characterised by higher
interest rates, continuing conflict in Ukraine and the at least partial
unraveling of globalised supply chains. These factors are injecting
uncertainty into global markets, to the particular disadvantage of riskier
market segments such as growth equity. Nonetheless, I have great confidence in
the long‑term thesis that sustainability pressures create opportunities for
companies providing environmental solutions. I am also confident in the skills
and experience of the Manager in identifying strong companies with attractive
valuations that are well-positioned to generate value from those
opportunities.
Glen Suarez,
Chair
2 August 2023
Manager's Report
The first half of 2023 has presented a difficult market environment in which
to invest in small- and mid-cap companies, despite the overall upward
direction of equity markets. As was the case in 2022, macroeconomic events
have been the predominant driver of stock markets, with inflation, the
interest rate environment and banking upheavals, as flagged in the Chair's
Statement. Over the Period, IEM's NAV underperformed the MSCI ACWI by
4.4% and the FTSE ET100 by 11.3%.
In relation to its performance against the MSCI ACWI, IEM has a core focus on
small- and mid-cap companies, which provide pure and focused exposure to the
environmental markets growth story and are less easily accessible to our
investors. This market cap bias has worked against us in the Period, with ACWI
Small Caps delivering 2.2% and ACWI Mid Caps 1.7%, while MSCI ACWI returned
7.8%.
As a part of this dynamic, the performance of the MSCI ACWI was driven by a
small number of 'mega-cap' technology stocks, notably Apple, Nvidia,
Microsoft, Amazon and Meta (Facebook), which fall outside of our remit and
collectively contributed to a 5% drag to relative performance. Performance of
the FTSE ET100 was also dominated by large-cap names such as Tesla, Tokyo
Electron and Schneider Electric, all of which have market caps many times
larger than our biggest holdings. We continue to believe our market cap bias
will deliver strong performance over time.
Notwithstanding the above, we were encouraged by continued solid earnings
delivery across the portfolio during the Period, driven by strong pricing
power and the easing of the supply chain constraints that were a feature of
2021 and 2022. Our Digital Infrastructure holdings and our
construction-exposed holdings in Buildings Energy Efficiency and Water
Infrastructure also delivered standout performance. Portfolio valuation is
another highlight and both are discussed in our report.
From a broader perspective, we see continued positive momentum around policy.
The substantial investment in climate action promised by the US Government's
Inflation Reduction Act, which unexpectedly passed last year, will begin to
make itself felt in the real economy in the second half of this year. This
will underpin strong growth in renewables, electricity transmission
infrastructure, electric vehicles and associated manufacturing. This has
prompted a significant response from the EU, discussed below.
KEY DEVELOPMENTS AND DRIVERS OF ENVIRONMENTAL MARKETS
Europe's response to the Inflation Reduction Act
The Inflation Reduction Act was not only the largest single government
commitment to climate action - with US$369 billion in subsidies and tax
breaks for green technologies(1) - it is also heavily skewed towards domestic
job creation. Much of its funding is directed either to US consumers, or
US-based manufacturing, and it is encouraging multinationals to reorientate
their clean technology investment plans towards the US market to take
advantage of its provisions.
The European Union has come under considerable pressure from its manufacturing
sector and some member states to respond with incentives of its own. In its
response, the European Commission unveiled its Green Deal Industrial Plan in
February. Its goal is to "enhance the competitiveness of Europe's net-zero
industry and support the fast transition to climate neutrality",(2) the
European Commission says. The plan aims to simplify regulation and permitting,
speed up access to public finance, support green technology skills development
and promote global trade in critical raw materials.
The plan does not directly offer new subsidies to support EU-based climate
technologies, but it does loosen the rules around the State Aid that member
state governments can provide to the private sector. In addition, Commission
President Ursula von der Leyen said member states could draw on around €250
billion in the EU's post-pandemic recovery fund to direct towards net-zero
industries.(3)
Compared with the Inflation Reduction Act, the EU policy response is more
complicated, less focused and is subject to several loopholes and gaps; it may
therefore be less potent as a driver of company performance. Nonetheless, it
is incrementally positive for environmental markets. We are particularly
pleased to see efforts to ease permitting for clean energy infrastructure,
which has represented a bottleneck in recent years.
(1 )
https://www.energy.gov/lpo/inflation-reduction-act-2022
(2 )
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_510
(3 )
https://ec.europa.eu/commission/presscorner/detail/en/statement_23_521
China's drive towards technology independence
Increased geopolitical tensions between China and the West are leading to the
reconstitution of global supply chains, including in key environmental
technologies. China has long pursued policies aimed at reducing dependence on
foreign technology and boosting homegrown innovation. This drive for
technological independence and self-sufficiency has intensified in recent
years and is supporting the emergence of China-based champions that are
displacing multinational giants in supplying the domestic market with high-end
clean technologies.
Automation is one sector which benefits from both this drive for technology
independence and a push for higher industrial energy efficiency. Here, we as
Manager have leveraged the experience of our team on the ground in Hong Kong
to make IEM's first investment in a China A-share company. Shenzhen Inovance
(Industrial Energy Efficiency, China) is emerging as one of the top players in
industrial automation and EV components. It produces inverters, servo motors,
industrial robots, EV powertrain components and other products aimed at
optimising energy usage for industrial automation equipment and electric
vehicles.
This is part of a broader trend towards the emergence of companies in the
region that dominate niches in fast‑growing areas of the new economy. Their
focus on technological innovation and leadership provides high barriers to
entry to competitors and can help protect profit margins. We continue to work
closely with our Asian team to identify additional attractive investments.
Emerging opportunities in artificial intelligence
Recent leaps forward in the development of generative artificial intelligence
("AI") have triggered intense debate about the implications of this
technology. The launch in November 2022 of ChatGPT and the release in February
of OpenAI's GPT-4 large language model have drawn attention to the
far-reaching implications of a potentially transformative technology.
There is considerable concern about the impact of AI on jobs, society and
politics, and even the existential threat it could pose to humankind. Its
defenders, on the other hand, argue that it could lead to breakthroughs in
medicine or in technologies to tackle climate change. The reality, in the near
future at least, is likely to be more prosaic, but impactful nonetheless. Some
of the Company's holdings are already deploying AI to help deliver
efficiencies in the pursuit of a more sustainable global economy, or are
exposed to fast-growing parts of the emerging AI ecosystem.
For example, an immediate implication of rising AI adoption is an increase in
the power density of data centres; this makes power management even more
important. Monolithic Power Systems (Digital Infrastructure, US) works closely
with graphic processing unit manufacturers like Nvidia to deliver superior
power management, reduce thermal leaks and enable the deployment of AI from a
hardware perspective.
Downstream, IEM has exposure through our investments in the Digital
Infrastructure sub-sector to software companies that are translating AI to
tangible use-cases in end-markets such as manufacturing, construction,
logistics and agriculture. Digital Infrastructure holdings like PTC (US) and
Altair Engineering (US) enable efficiencies during the product design stage
using generative design, reduce wastage in manufacturing with more automation
and enhanced quality inspection and enable connected operating environments
with applications like predictive maintenance. Descartes (Canada) uses AI to
deliver a more efficient logistics network and optimise fleet route planning,
while Trimble (US) enables efficiencies in construction, using generative
design and better project planning, and in agriculture, through location-based
and data-informed precision agriculture solutions.
ABSOLUTE PERFORMANCE CONTRIBUTORS AND DETRACTORS
Contributors
As noted above, the Digital Infrastructure sector delivered strong performance
from industrial software holdings Altair and PTC, both US, on accelerating
uptake of software across industrial markets and solid growth in 'sticky'
subscription revenues for both companies. In power management chips,
Monolithic Power delivered solid earnings from power management solutions
across a broadening range of industries, in addition to tailwinds from AI.
There are early signs of recovery in US residential construction, driven by
low inventories of new homes, stabilisation of house prices and mortgage
rates, and an end to de-stocking in building material supply chains. Across
IEM, there is 19% aggregate exposure to construction. Driving recovery from
weakness in 2022 were Pentair and Zurn Elkay Water Solutions (both Water
Distribution & Infrastructure, US), wood plastic composite decking company
Azek (Recycled & Recyclable Products, US) and Lennox (Buildings Energy
Efficiency, US). The portfolio is well-diversified across regions and
categories, with exposure to residential and non-residential, and new build
and refurbishing markets. We see significant potential from this segment, as
investors increasingly look to the next construction cycle.
Detractors
In natural ingredients, we saw weakness in consumer-facing markets, with
destocking and soft end-market demand. DSM-Firmenich (Sustainable Agriculture,
Switzerland) suffered from low volumes and prices for vitamins for animal and
human nutrition. Croda (Recycled, Recyclable Products & Biomaterials, UK),
was hit by weaker personal care markets and Corbion (Sustainable Agriculture,
Netherlands) faced lower demand for polylactic acid for bioplastics, with a
focus in the industry on lower-cost alternatives. We selectively added to
these holdings during the Period, given attractive valuations and their
compelling long-term substitution stories.
Renewable energy independent power producers faced concerns about the outlook
for returns on new projects, given supply chain inflation (especially for wind
turbines) and rising interest rates. This led to underperformance, especially
of Northland Power (Canada) given its focus on offshore wind with long lead
times and complex supply chains, and of EDP Renovaveis (Portugal). We maintain
confidence in these names, based on contractual structures which allow for
inflation recovery, strong demand for renewable power purchase agreements and
management confidence in achievable returns. We added to both holdings during
the Period.
PERFORMANCE CONTRIBUTION ANALYSIS
6 MONTHS ENDED 6 MONTHS ENDED
30 JUNE 2023 30 JUNE 2023
PERFORMANCE RELATIVE TO MSCI ACWI % PERFORMANCE RELATIVE TO FTSE ET100 %
NAV total return 3.4 NAV total return 3.4
MSCI ACWI total return 7.8 FTSE ET100 total return 14.7
Relative performance (4.4) Relative performance (11.3)
Analysis of relative performance Analysis of relative performance
Portfolio total return 4.1 Portfolio total return 4.1
MSCI ACWI total return 7.8 FTSE ET100 total return 14.7
Portfolio underperformance (3.7) Portfolio outperformance (10.6)
Borrowing: Borrowing:
Gearing effect - Gearing effect -
Finance costs (0.1) Finance costs (0.1)
Management fee (0.4) Management fee (0.4)
Other expenses (0.1) Other expenses (0.1)
Trading costs (0.1) Trading costs (0.1)
Share transactions: Share transactions:
Buy-backs 0.1 Buy-backs (0.1)
Tax (0.1) Tax (0.1)
Total relative NAV performance (4.4) Total relative NAV performance (11.3)
PORTFOLIO POSITIONING, ACTIVITY, VALUATION AND RISK
At the end of the Period, the Company held a well-diversified portfolio of 61
listed companies. Consistent with our year end report, we maintained a balance
of cyclical and defensive holdings, with an emphasis on quality throughout,
with small increases in Asian exposure.
Our activity over the Period focused on two aspects. First, we continued to
look for defensive opportunities. We added Dabur (Recycled, Recyclable
Products and Biomaterials, India) a leading supplier of natural ingredients
into food and personal care markets in India. It produces substitutes for
polluting synthetic and fossil fuel-derived products, with strong market share
in fast growing markets.
Second, we sought out strong cyclical companies at depressed valuations. We
invested in Kingspan (Buildings Energy Efficiency, Ireland) a previous holding
we exited in April 2021 based on expensive valuation. We recognise its
historical controversy in relation to the Grenfell Tower tragedy in the UK in
2017 but have been reassured by the comprehensive remedial action the company
has taken and see a valuation opportunity in the current EU construction
downturn. The company has compelling long-term growth prospects from the
increasing penetration of high-performance insulation materials, together with
recently added opportunities in daylighting, district heating and
roofing/weatherproofing.
During the Period we fully exited Airtac (Industrial Energy Efficiency,
Taiwan) at a profit following strong performance.
The portfolio was valued at 19.6 times next 12-months earnings at the end of
the Period, with a premium of 21% to MSCI ACWI. Absolute valuation is
currently in line with the long-term average and the premium to MSCI ACWI is
now below long-term average levels. We find current valuation levels
attractive, especially against the backdrop of a steadily strengthening
investment hypothesis. Continued earnings delivery will remain key to
delivering long-term outperformance.
Looking forward, we have a strong bench of approved names for investment
across a range of environmental market segments. We particularly see
opportunities for new investments in Asia and in companies exposed to the
circular economy.
OUTLOOK
The macroeconomic picture remains challenging, with residual uncertainty
regarding the trajectory of inflation. There is potential for interest rates
to remain elevated beyond current market expectations, which would create
headwinds for the growth-oriented equities where IEM focuses. However, it is
likely that we are towards the end of the tightening cycle, and there is
considerable potential for an uplift in performance caused by investors
rotating back into growth stocks and into the small- and mid-cap companies in
which IEM invests.
We are also encouraged by continued strong policy support for environmental
markets, even against a challenging macroeconomic backdrop. The long-term
investment case, based on the ongoing and increasingly urgent need to address
environmental challenges, remains firmly intact, with compelling valuations
contributing to our support for putting in place long term borrowings and
increasing the Company's gearing.
Impax Asset Management (AIFM) Limited
2 August 2023
Ten Largest Holdings
As at 30 June 2023 and 31 December 2022
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2.7% PTC - United States www.ptc.com
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d
fo
r
th
e
CO
VI
D
-1
9
cr
is
is
.
3
2.5% LITTELFUSE - United States www.littelfuse.com
of net assets
(2022: 2.1%)
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
.
4
2.4% SPIRAX-SARCO ENGINEERING - United Kingdom www.spiraxsarco.com
of net assets
(2022: 2.5%)
Sp
ir
ax
-S
ar
co
En
gi
ne
er
in
g
is
a
wo
rl
d
le
ad
er
in
th
e
co
nt
ro
l
an
d
ef
fi
ci
en
t
us
e
of
st
ea
m,
el
ec
tr
ic
al
th
er
ma
l
en
er
gy
so
lu
ti
on
s
an
d
pe
ri
st
al
ti
c
pu
mp
in
g
an
d
as
so
ci
at
ed
fl
ui
d
pa
th
te
ch
no
lo
gi
es
.
It
s
St
ea
m
Sp
ec
ia
lt
ie
s
an
d
El
ec
tr
ic
Th
er
ma
l
So
lu
ti
on
s
bu
si
ne
ss
es
pr
ov
id
e
pr
od
uc
ts
an
d
ex
pe
rt
is
e
th
at
im
pr
ov
e
pr
od
uc
ti
on
ef
fi
ci
en
cy
an
d
he
lp
cu
st
om
er
s
me
et
th
ei
r
en
vi
ro
nm
en
ta
l
su
st
ai
na
bi
li
ty
ta
rg
et
s.
It
s
di
ve
rs
e
en
d
ma
rk
et
s
an
d
br
oa
d
cu
st
om
er
ba
se
un
de
rp
in
it
s
re
si
li
en
ce
.
50
%
of
Gr
ou
p
re
ve
nu
e
is
de
ri
ve
d
fr
om
de
fe
ns
iv
e,
le
ss
cy
cl
ic
al
,
en
d
ma
rk
et
s
su
ch
as
fo
od
,
ph
ar
ma
ce
ut
ic
al
s
an
d
wa
te
r
&a
mp
;
wa
st
ew
at
er
,
an
d
85
%
of
Gr
ou
p
re
ve
nu
e
is
de
ri
ve
d
fr
om
an
nu
al
ma
in
te
na
nc
e
an
d
op
er
at
in
g
bu
dg
et
s,
ra
th
er
th
an
la
rg
e
pr
oj
ec
ts
fr
om
ca
pe
x
bu
dg
et
s.
5
2.4% NORTHLAND POWER - Canada www.northlandpower.com
of net assets
(2022: 2.3%)
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
.
6
2.4% GRAPHIC PACKAGING - United States www.graphicpkg.com
of net assets
(2022: 2.4%)
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.
7
2.4% CRODA INTERNATIONAL - United Kingdom www.croda.com
of net assets
(2022: 2.3%)
Cr
od
a
In
te
rn
at
io
na
l
is
th
e
ho
ld
in
g
co
mp
an
y
fo
r
a
gr
ou
p
of
co
mp
an
ie
s
th
at
ma
nu
fa
ct
ur
e
a
di
ve
rs
e
ra
ng
e
of
ch
em
ic
al
s
an
d
ch
em
ic
al
pr
od
uc
ts
,
in
cl
ud
in
g
ol
eo
ch
em
ic
al
s
an
d
in
du
st
ri
al
ch
em
ic
al
s.
Cr
od
a
su
pp
li
es
it
s
it
em
s
to
co
mp
an
ie
s
th
at
sp
ec
ia
li
se
in
th
e
pe
rs
on
al
ca
re
,
ph
ar
ma
ce
ut
ic
al
,
pl
as
ti
cs
,
fo
od
pr
oc
es
si
ng
,
nu
tr
it
io
n,
fi
re
pr
ev
en
ti
on
,
en
gi
ne
er
in
g,
an
d
au
to
mo
ti
ve
in
du
st
ri
es
.
8
2.3% BRAMBLES - Australia www.brambles.com
of net assets
(2022: 2.6%)
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.
9
2.3% DARLING INGREDIENTS - United States www.darlingii.com
of net assets
(2022: 2.1%)
Da
rl
in
g
is
a
le
ad
in
g
co
mp
an
y
ex
tr
ac
ti
ng
va
lu
e
ad
de
d
pr
od
uc
ts
fr
om
fo
od
wa
st
e.
Th
e
co
mp
an
y
co
ll
ec
ts
ba
ke
ry
,
ab
at
to
ir
,
co
ok
in
g
oi
l
an
d
ot
he
r
fo
od
wa
st
e
an
d
co
nv
er
ts
it
in
to
an
im
al
fe
ed
,
gl
yc
er
in
e
an
d
ad
va
nc
ed
bi
od
ie
se
l.
Bi
od
ie
se
l
pr
od
uc
ti
on
is
ac
hi
ev
ed
vi
a
it
s
"D
ia
mo
nd
Gr
ee
n
Di
es
el
"
("
DG
D"
)
jo
in
t
ve
nt
ur
e
wi
th
Va
le
ro
,
se
ll
in
g
in
to
th
e
at
tr
ac
ti
ve
Ca
li
fo
rn
ia
n
ma
rk
et
s.
Wi
th
a
do
mi
na
nt
po
si
ti
on
in
th
e
US
an
d
si
gn
if
ic
an
t
ex
pa
ns
io
n
of
DG
D
on
go
in
g,
th
e
co
mp
an
y
is
we
ll
po
si
ti
on
ed
fo
r
gr
ow
th
an
d
st
ro
ng
ca
sh
fl
ow
ge
ne
ra
ti
on
.
10
2.3% EDP RENOVAVEIS - Portugal www.edpr.com
of net assets
(2022: 1.7%)
ED
PR
is
a
re
ne
wa
bl
e
en
er
gy
co
mp
an
y
wh
ic
h
en
ga
ge
s
in
th
e
de
ve
lo
pm
en
t,
co
ns
tr
uc
ti
on
,
an
d
op
er
at
io
n
of
wi
nd
fa
rm
s
an
d
so
la
r
pl
an
ts
.
It
is
a
le
ad
in
g
re
ne
wa
bl
e
en
er
gy
de
ve
lo
pe
r
wi
th
hi
gh
qu
al
it
y
as
se
ts
in
Eu
ro
pe
an
d
th
e
US
an
d
wi
th
a
st
ro
ng
pi
pe
li
ne
in
Eu
ro
pe
an
d
th
e
Am
er
ic
as
.
ED
P
ra
nk
s
fo
ur
th
gl
ob
al
ly
in
te
rm
s
of
ow
ne
rs
hi
p
of
re
ne
wa
bl
es
as
se
ts
.
It
is
a
ma
rk
et
le
ad
er
wi
th
an
ex
ce
ll
en
t
op
er
at
in
g
hi
st
or
y
fo
r
ex
is
ti
ng
pl
an
ts
,
an
on
go
in
g
ab
il
it
y
to
re
du
ce
co
st
s,
an
d
ha
s
an
ef
fe
ct
iv
e
as
se
t
ro
ta
ti
on
st
ra
te
gy
th
at
ta
ke
s
ad
va
nt
ag
e
of
de
ma
nd
fo
r
op
er
at
in
g
as
se
ts
.
Top Thirty Portfolio Investments
MARKET % OF
AS AT 30 JUNE 2023 COUNTRY OF MAIN VALUE NET
COMPANY SECTOR LISTING £'000 ASSETS
PTC Digital Infrastructure United States 34,360 2.7
Clean Harbors Resource Efficiency & Waste Management United States 32,450 2.5
Littelfuse Transport Solutions United States 31,970 2.5
Spirax-Sarco Engineering Energy Management & Efficiency United Kingdom 31,517 2.4
Northland Power Alternative Energy Canada 31,389 2.4
Graphic Packaging Resource Efficiency & Waste Management United States 31,195 2.4
Croda International Resource Efficiency & Waste Management United Kingdom 30,469 2.4
Brambles Resource Efficiency & Waste Management Australia 30,326 2.3
Darling Ingredients Resource Efficiency & Waste Management United States 29,453 2.3
EDP Renovaveis Alternative Energy Portugal 29,393 2.3
Top ten holdings 312,522 24.2
Stericycle Resource Efficiency & Waste Management United States 29,315 2.3
Bucher Industries Sustainable Food & Agriculture Switzerland 29,128 2.3
Aalberts Industries Water Infrastructure & Technologies Netherlands 28,903 2.2
DSM-Firmenich Sustainable Food & Agriculture Switzerland 28,538 2.2
Rayonier Sustainable Food & Agriculture United States 27,792 2.2
Pentair Water Infrastructure & Technologies United States 27,220 2.1
Eurofins Scientific Sustainable Food & Agriculture France 27,056 2.1
Advanced Drainage Systems Water Infrastructure & Technologies United States 26,099 2.0
Generac Holdings Energy Management & Efficiency United States 25,713 2.0
Lem Holding Energy Management & Efficiency Switzerland 25,330 2.0
Top twenty holdings 587,616 45.6
Solaregdge Technologies Alternative Energy United States 24,355 1.9
Monolithic Power Systems Digital Infrastructure United States 23,974 1.9
Donaldson Transport Solutions United States 23,727 1.8
Lennox International Energy Management & Efficiency United States 23,384 1.8
Trimble Navigation Digital Infrastructure United States 23,329 1.8
Repligen Resource Efficiency & Waste Management United States 23,303 1.8
Indraprastha Gas Alternative Energy India 23,136 1.8
Altair Engineering Digital Infrastructure United States 22,926 1.8
American Water Works Water Infrastructure & Technologies United States 22,575 1.7
CIA Saneamento Basico Water Infrastructure & Technologies Brazil 22,391 1.7
Top thirty holdings 820,716 63.6
Other quoted holdings 507,398 39.2
Portfolio Total 1,328,114 102.8
Cash 14,627 1.1
Other net liabilities (50,902) (3.9)
Total net assets 1,291,839 100.0
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 Chair's
Statement on pages 2 and 3 and the Manager's Report on pages 4 to 7 of the
Half-yearly Financial Report, provide details of the important events which
have occurred during the six months ended 30 June 2023 ("Period") and their
impact on the financial statements. The statement on related party
transactions and the Directors' Statement of Responsibility (below), the
Chair'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 2023 is discussed
in the Chair's Statement and the Manager's Report.
Details of the largest ten investments held at the Period end are provided on
pages 9 to 10 of the Half-Yearly Report and the structure of the portfolio at
the Period end is analysed on page 8 of the Half-yearly 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 movements and 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 level of discount or
premium at which the Company's shares might trade;
(iv) financing risk - the Company may borrow money for investment
purposes and should investment markets fall in value, any borrowing will
enhance the level of loss. Capacity constraints on the availability of
desirable companies for investment may mean the Company is unable to achieve
the level of gearing wanted. Higher interest rates will increase the cost of
borrowing for the Company and borrowings may not be available of acceptable
types, amounts and/or interest rates;
(v) 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,
unauthorised physical access to buildings could lead to damage or loss of
equipment; and
(vi) operational risk - the management of the investment portfolio and
other key services have been delegated to third party service providers.
Failure by any service provider to carry out its obligations to the Company
could have a material adverse effect on the Company's performance or prevent
the accurate reporting and monitoring of the Company's financial position.
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.
Specifically, the risks posed by global economic conditions including higher
inflation and interest rates, the war in Ukraine and the secondary effects of
the COVID-19 pandemic continue to be monitored by the Board. The Manager and
other key service providers provide periodic reports to the Board on market
impact and operational resilience to these events. The Board is satisfied that
the key service providers have the ability to continue their operations
efficiently in a remote or virtual working environment, whilst safeguarding
their staff.
The Company's Annual Report for the year ended 31 December 2022 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 34 to 38). 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 2022.
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 2023 were £1,292 million, of
which £1,328 million was in quoted investments and cash totalled £14.6
million. The total expenses (excluding finance costs and taxation) for the six
months ended 30 June 2023 were £5.5 million, while income was £12.6 million.
The Company's current borrowing facilities totalling £50.3 million with
Scotiabank expire on 6 September 2023. As announced on 20 July 2023, the
Company has agreed, and is committed, to issue €60 million (circa £55
million) of privately placed notes, the details of which are set out in the
Chair's Statement. Funding is expected to be 1 September 2023 and will be used
to repay the Scotiabank borrowings.
In addition, as also set out in the Chair's Statement, the Board is in
advanced discussions with Scotiabank for new short term facilities of £35
million.
The Directors have considered the above changes in the borrowing facilities,
including their timings, when considering going concern. The Directors also
considered the impact of higher inflation and interest rates and possible
recession as well as the war in Ukraine on the Company's portfolio of
investments and that any future prolonged and deep market decline would likely
lead to falling values in the Company's investments and/or reduced dividend
receipts. However, as explained above, the Company has more than sufficient
liquidity available to meet its expected future obligations.
Board of Directors
2 August 2023
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.
Glen Suarez
Chair of the Board of Directors
2 August 2023
Condensed Income Statement
Unaudited
SIX MONTHS ENDED 30 JUNE 2023 SIX MONTHS ENDED 30 JUNE 2022
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
NOTES £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments - 41,677 41,677 - (255,299) (255,299)
Net foreign exchange losses - (2,192) (2,192) - (2,355) (2,355)
Income 4 12,569 - 12,569 11,625 - 11,625
Investment management fees (1,197) (3,592) (4,789) (1,379) (4,136) (5,515)
Other expenses (754) - (754) (664) - (664)
Return/(loss) on ordinary activities before finance costs and taxation 10,618 35,893 46,511 9,582 (261,790) (252,208)
Finance costs 5 (385) (1,155) (1,540) (189) (566) (755)
Return/(loss) on ordinary activities before taxation 10,233 34,738 44,971 9,393 (262,356) (252,963)
Taxation 6 (1,142) (295) (1,437) (1,930) 579 (1,351)
Return/(loss) on ordinary activities after taxation 9,091 34,443 43,534 7,463 (261,777) (254,314)
Return/(loss) per ordinary share 7 3.00p 11.36p 14.36p 2.46p (86.29p) (83.83p)
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 accompanying notes form part of these financial statements.
Condensed Balance Sheet
Unaudited
AS AT AS AT
30 JUNE 31 DECEMBER
2023 2022*
NOTES £'000 £'000
Fixed assets
Investments at fair value through profit or loss 3 1,328,114 1,302,605
Current assets
Dividends receivable 2,245 512
Sales awaiting settlement 1,669 -
Taxation recoverable 42 90
Other debtors 53 108
Cash and cash equivalents 14,627 26,327
18,636 27,037
Creditors: amounts falling due within one year
Purchases awaiting settlement (1,271) -
Trade and other payables (2,866) (1,929)
Bank loans and credit facilities 8 (50,310) (51,606)
(54,447) (53,535)
Net current liabilities (35,811) (26,498)
Total assets less current liabilities 1,292,303 1,276,107
Creditors: amounts falling due after more than one year
Capital gains tax provision (464) (169)
Net assets 1,291,839 1,275,938
Capital and reserves: equity
Share capital 9 30,562 30,562
Share premium account 423,098 423,098
Capital redemption reserve 9,877 9,877
Share purchase reserve 121,843 141,872
Capital reserve 691,816 657,373
Revenue reserve 14,643 13,156
Shareholders' funds 1,291,839 1,275,938
Net assets per ordinary share 10 431.57p 419.49p
* Audited
Approved by the Board of Directors and authorised for issue on 2 August 2023.
Impax Environmental Market plc incorporated in England with registered number
4348393.
The accompanying notes form part of these financial statements.
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 2023 NOTE £'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 30,562 423,098 9,877 141,872 657,373 13,156 1,275,938
Dividend paid 11 - - - - - (7,604) (7,604)
Cost of share buybacks 9 - - - (20,029) - - (20,029)
Return for the period - - - - 34,443 9,091 43,534
Closing equity as at 30 June 2023 30,562 423,098 9,877 121,843 691,816 14,643 1,291,839
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
The accompanying notes form part of these financial statements.
Condensed Statement of Cash Flows
Unaudited
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 2023 30 JUNE 2022
NOTES £'000 £'000
Operating activities
Return/(loss) on ordinary activities before finance costs and taxation* 46,511 (252,208)
Less: Tax deducted at source on income from investments (1,142) (1,930)
Foreign exchange non cash flow (gains/losses) (1,296) 2,689
Adjustment for (gains)/losses on investments (41,677) 255,299
Increase in other debtors (1,630) (1,726)
Increase in other creditors 923 425
Net cash flow from operating activities 1,689 2,549
Investing activities
Sale of investments 281,452 116,426
Purchase of investments (265,682) (154,532)
Net cash flow used in investing 15,770 (38,106)
Financing activities
Equity dividends paid (7,604) (4,471)
Payment to revolving credit facility - (87)
Finance costs paid (1,526) (813)
Net proceeds from issue of new shares 9 - 34,918
Net proceeds of shares sold from treasury 9 - 509
Net cost of share buybacks 9 (20,029) (7,093)
Net cash flow from financing (29,159) 22,963
(Decrease)/increase in cash (11,700) (12,594)
Cash and cash equivalents at start of period 26,327 28,319
Cash and cash equivalents at end of period 14,627 15,725
* Cash inflow includes dividend income received during the
Period to 30 June 2023 of £10,467,000 (30 June 2022: £9,921,000).
Changes in Net Debt Note
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 2023 30 JUNE 2022
£'000 £'000
Net debt at start of period (25,279) (20,794)
(Decrease)/increase in cash and cash equivalents (11,700) (12,594)
Foreign exchange movements 1,296 (2,689)
Repayment of revolving credit facility - 87
Net debt at end of period (35,683) (35,990)
The accompanying 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 July 2022.
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 2022. The
Annual Report and Accounts for the year ended 31 December 2022 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 2022 in this
Half-yearly Financial Report has been extracted from the audited Annual Report
and Accounts for the year ended 31 December 2022. The accounting policies in
this Half-yearly Financial Report are consistent with those applied in the
Annual Report for the year ended 31 December 2022.
Management fees and finance costs are charged 75% to capital in the Condensed
Income Statement.
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 higher inflation and interest rates and possible recession 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 2023 31 DECEMBER 2022
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 1,328,114 - 1,328,114 1,302,605 - - 1,302,605
1,328,114 - 1,328,114 1,302,605 - - 1,302,605
4 INCOME
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 2023 30 JUNE 2022
£'000 £'000
Dividends from UK listed investments 889 961
Dividends from overseas listed investments 11,311 10,648
Bank interest received 369 16
Total Income 12,569 11,625
5 FINANCE COSTS
SIX MONTHS ENDED 30 JUNE 2023 SIX MONTHS ENDED 30 JUNE 2022
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Interest charges 383 1,149 1,532 187 560 747
Direct finance costs 2 6 8 2 6 8
Total 385 1,155 1,540 189 566 755
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 2023 SIX MONTHS ENDED 30 JUNE 2022
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Overseas taxation 1,142 - 1,142 1,930 - 1,930
Increase/(decrease) on capital gains tax provision - 295 295 - (579) (579)
Taxation 1,142 295 1,437 1,930 (579) 1,351
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 2023 30 JUNE 2022
£'000 £'000
Provision brought forward 169 579
Increase/(decrease) in provision in period 295 (579)
Provision carried forward 464 -
7 RETURN PER SHARE
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 2023 30 JUNE 2022
£'000 £'000
Revenue return after taxation (£'000) 9,091 7,463
Capital return after taxation (£'000) 34,443 (261,777)
Total net return after tax (£'000) 43,534 (254,314)
Weighted average number of ordinary shares 303,095,575 303,362,501
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 The Bank of Nova
Scotia, London Branch ("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 loans follows.
30 JUNE 2023 31 DECEMBER 2022
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 15,728 20,000,000 16,531
30,728 31,531
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% 12,185,017 9,582 12,185,017 10,075
50,310 51,606
The maturity profile of the bank loans and revolving credit facility follows:
30 JUNE 31 DECEMBER
2023 2022
PAYABLE LESS THAN ONE YEAR £'000 £'000
Bank loans payable less than one year 30,728 31,531
Revolving credit facility payable less than one year 19,582 20,075
50,310 51,606
9 SHARE CAPITAL
SIX MONTHS ENDED SIX MONTHS ENDED
30 JUNE 2023 30 JUNE 2022
NUMBER £'000 NUMBER £'000
Issued and fully paid shares of 10p each
Brought forward 304,167,039 30,416 298,061,439 29,806
New shares issued in period - - 7,562,100 756
Shares bought back and held in treasury (4,835,000) (484) (1,694,400) (169)
Treasury shares issued in period - - 112,900 11
Carried forward 299,332,039 29,932 304,042,039 30,404
Treasury shares of 10p each
Brought forward 1,456,500 146 - -
Shares bought back and held in treasury 4,835,000 484 1,694,400 169
Issued in year - - (112,900) (11)
Carried forward 6,291,500 630 1,581,500 158
Share capital 305,623,539 30,562 305,623,539 30,562
During the Period, 4,835,000 ordinary shares (2022: 1,694,400) have been
bought back and placed into treasury at a total cost of £20,029,000 after
purchase costs of £83,000.
Since the Period end and up to 31 July 2023, being the latest practical date
before the publication of this Half-yearly Financial Report, a further
2,820,000 ordinary shares have been bought back and placed into treasury at a
total cost of £11,598,000 after purchase costs of £46,000.
10 NET ASSET VALUE PER ORDINARY SHARE
30 JUNE 31 DECEMBER
2023 2022
Net asset value (£'000) £1,291,839 £1,275,938
Ordinary shares in issue (excluding shares held in treasury) 299,332,039 304,167,039
Net assets per ordinary share 431.57p 419.49p
11 DIVIDENDS
(a) Dividends paid in the period
2023 2022
RATE £'000 RATE £'000
Second interim in lieu of final for the previous year 2.50p 7,604 1.50p 4,471
(b) Dividends payable in respect of the period, which is the basis on which
the requirements of s1158-1159 of the Corporation Tax Act 2010 are considered
2023 2022
RATE £'000 RATE £'000
First interim for the current year(1) 1.70p 5,041 1.50P 4,568
1 The first interim dividend payable is based upon 296,512,039 ordinary
shares, which is the number of shares in issue on the 31 July 2023, being the
latest practical date before the publication of this Half-yearly Financial
Report.
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
2023 the fee outstanding to the Manager was £2,397,000 (31 December 2022:
£1,601,000).
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 2022 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.
This Half-yearly Financial Report was approved by the Board on 2 August 2023.
For further information contact:
Impax Asset Management p.french@impaxam.com
Paul French 0203 912 3032
Montfort Communications iem@montfort.london
Gay Collins/Nita Shah/Lesley Wang 07798 626282
Apex Listed Companies Services (UK) Limited 020 3327 9720
Company Secretary
END
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