TIDMEGL
RNS Number : 2598W
Ecofin Global Utilities Inf Tst PLC
21 December 2021
ECOFIN GLOBAL UTILITIES AND INFRASTRUCTURE TRUST PLC (the
"Company")
Annual Results Announcement for the year ended 30 September,
2021
LEI: 2138005JQTYKU92QOF30
This announcement contains regulated information.
Ecofin Global Utilities and Infrastructure Trust plc (the
"Company") is an authorised UK investment trust whose objectives
are to achieve a high, secure dividend yield on a portfolio
invested primarily in the equities of utility and infrastructure
companies in developed countries and long-term growth in the
capital value of the portfolio while preserving shareholders'
capital in adverse market conditions.
Highlights
-- During the year ended 30 September, 2021, the Company's net
asset value ("NAV") per share increased by 22.9% on a total return
basis. The Company's share price increased by 28.9% on a total
return basis over the year
-- Four quarterly dividends (1.65p per share) were paid during
the year totalling 6.60p per share. With effect from the interim
dividend to be paid in February 2022, the quarterly dividend rate
will increase to 1.85p per share (7.4p per share per annum)
-- The Company is continuing to issue new shares at a premium to
NAV in response to investor demand. During the year, GBP10.6
million of shares were issued and another GBP0.7 million of shares
have been issued since the end of September
-- A tiered management fee took effect from 1 April, 2021 to
help ensure that cost ratios continue to decline as the Company
grows
As at or year to As at or year to
Summary 30 September 2021 30 September 2020
------------------------------ ------------------- -------------------
Net assets attributable
to shareholders (GBP'000) 196,547 156,393
Net asset value ("NAV")
per share(1) 195.11p 164.60p
------------------------------ ------------------- -------------------
Share price (mid-market) 198.00p 159.25p
Premium/(discount) to NAV(1) 1.5% (3.3)%
------------------------------ ------------------- -------------------
Revenue return per share 5.98p 4.97p
Dividends paid per share 6.60p 6.55p
Dividend yield (1,2) 3.3% 4.1%
Gearing on net assets (1,3) 12.5% 14.8%
Ongoing charges ratio (1,4) 1.43% 1.48%
------------------------------ ------------------- -------------------
1. Please refer to Alternative Performance Measures in the
Annual Report.
2. Dividends paid (annualised) as a percentage of share
price.
3. Gearing is the Company's borrowings (including the net
amounts due from brokers) less cash divided by net assets
attributable to shareholders.
4. The ongoing charges ratio is calculated in accordance with
guidance issued by the Association of Investment Companies ("AIC")
as the operating costs (annualised) divided by the average NAV
(with income) throughout the period.
1 year 3 years 5 years Since admission(5) Since admission
Performance for periods %
to 30 September 2021 (total
returns in GBP) % % % per annum
------------------------------ ------- -------- -------- ------------------- ----------------
NAV per share (6) 22.9 52.4 73.4 71.2 11.3
Share price (6) 28.9 80.1 105.3 120.2 17.1
------------------------------ ------- -------- -------- ------------------- ----------------
Indices (6,7)
S&P Global Infrastructure
Index 17.1 14.5 23.1 22.1 4.1
MSCI World Utilities Index 3.5 23.3 37.0 34.1 6.0
MSCI World Index 24.1 42.5 88.2 88.0 13.4
FTSE All-Share Index 27.8 9.6 29.8 29.6 5.3
FTSE ASX Utilities Index 16.5 32.7 7.5 8.9 1.7
------------------------------ ------- -------- -------- ------------------- ----------------
Source: Bloomberg, Ecofin
5. The Company was incorporated on 27 June, 2016 and its
investment activities began on 13 September, 2016 when the liquid
assets of Ecofin Water & Power Opportunities plc ("EWPO") were
transferred to it. The formal inception date for the measurement of
the Company's performance is 26 September, 2016, the date its
shares were listed on the London Stock Exchange.
6. Total return includes dividends paid and reinvested
immediately. Please also refer to the Alternative Performance
Measures in the Annual Report.
7. The S&P Global Infrastructure Index and MSCI World
Utilities Index are the global sector indices deemed the most
appropriate for performance comparison purposes. The Company does
not have a formal benchmark index. The other indices are provided
for general interest.
Chairman's Statement
Performance
The end of the last financial year marked EGL's fifth
anniversary and I am delighted to report that your Company's
performance has been strong. The Company's net asset value (NAV)
per share increased by 18.5% during the year to 30 September, 2021
and, including the reinvestment of dividends paid, the total return
was 22.9%. The price of the Company's shares increased by 24.3% and
the total return on the shares was 28.9%. In sterling terms, the
MSCI World Utilities Index and the S&P Global Infrastructure
Index recorded total returns of 3.5% and 17.1%, respectively.
Your Company's five year performance record is testament to the
attractions of its investment universe and to the capabilities of
our specialist investment manager. Our purpose is to provide an
attractive dividend income and long-term capital growth for
shareholders by investing in listed utilities, environmental
services and other economic infrastructure sectors globally. Our
goal is to deliver 6-12% per annum (total return) over time. From
launch on 26 September, 2016 to 30 September, 2021 NAV total return
averaged 11.3% per annum and share price total return averaged
17.1% per annum.
Dividends
The Company last increased its annual dividend rate (to 6.60p
per share) in December 2019, just before the COVID-19 pandemic
began. We are pleased to have maintained that rate even though
investment income fell in the initial months of the pandemic. It
subsequently recovered sharply and, with expenses under tight
control, our revenue return per share increased by 20.3% in the
year to 30 September, 2021.
In view of this progress and expected continuing growth in
investment income we have decided to increase the quarterly
dividend to 1.85p per share (7.4p per annum), effective from the
interim payment at the end of February 2022.
Share issuance
The Company is taking every opportunity to issue new shares (at
a premium to NAV) in response to investor demand. During the
financial year, 5.725 million new shares (worth GBP10.6 million)
were issued and another 355,000 shares have been issued since the
end of September. We want to continue to increase the size of the
Company because we believe that this will boost liquidity in the
shares, thereby fostering participation by new investors; this will
also reduce cost ratios.
Environmental, social and governance evaluation
Our investment manager, Ecofin, carefully considers
environmental, social and governance issues in its investment
process. These standards and risk factors are assessed at every
stage of decision making, as outlined in the Annual Report. Ecofin
uses its regular meetings with companies to challenge management
teams about their adherence to best practices.
Annual general meeting
The Company's annual general meeting will be held on Wednesday,
2 March, 2022 at The Clermont, Charing Cross, Strand, London WC2N
5HX at 2.30pm and will include a presentation from the Investment
Manager.
At the time of writing the situation with respect to COVID-19 is
uncertain. In the event that it is necessary to change the AGM
arrangements the Company will update shareholders through an
announcement to the London Stock Exchange.
The Board strongly encourages all shareholders to exercise their
votes in respect of the meeting in advance by completing and
returning their proxy forms and appoint the Chairman of the meeting
as proxy with voting instructions. This will ensure votes are
registered. In addition shareholders are encouraged to raise any
questions in advance with the Company Secretary via email to
cosec@maitlandgroup.com .
Outlook
Since 30 September (to 14 December), the Company's NAV has
increased by 7.8% and the share price by 0.2% (both on a total
return basis). Economic recovery has been strong this year but
pandemic-related manufacturing and supply chain disruptions are
resulting in inflationary pressures. These risk curtailing GDP
growth and margins for some companies unable to pass through cost
increases. Whether these cost pressures prove transient or
persistent will make a difference for the course of market interest
rates, which are progressively rising from decade lows to levels
closer to long-term inflation expectations. Over the medium term,
inflationary pressures should have a neutral impact on most
infrastructure owners, or even a positive one for companies where
revenues are directly linked to inflation indices.
Your Company is investing in economic infrastructure businesses
with long-term structural growth drivers and opportunities for
sustained profitable development, as described in the investment
manager's report. These companies continue to deliver solid results
and have generally modest equity valuations, which is contributing
to a flurry of M&A activity. There has been a distinct shift in
gear with decarbonisation and environmental protection now top of
mind for policy-makers and corporates, at a time when better
technological solutions are becoming more available and, most
importantly, increasingly cost efficient. The Company's portfolio
companies are the global leaders in delivering these solutions and
stand to benefit from accelerating structural growth as a
result.
In addition to the potential for capital growth, our investment
manager anticipates continuing growth in income from the portfolio
which would enable further dividend increases in future years.
David Simpson
Chairman
20 December, 2021
Investment Manager's Report
Markets and our sectors
Economic optimism and equity markets increased for a large part
of EGL's financial year with vaccine roll-outs, the relaxation of
COVID-19 restrictions and additional central government stimulus
packages. President Biden's inauguration and early priorities,
including around fighting climate change and rebuilding
infrastructure with sustainability prioritised, encouraged
investors too, despite high equity valuations in many areas.
Sector leadership in equity markets changed abruptly as we
entered calendar 2021 and the focus became the normalisation of
activity levels, business operations and earnings, especially in
those sectors which had been most bruised during the height of the
pandemic in 2020. In EGL's investment universe, the more cyclical
transportation infrastructure and waste management stocks were
strong performers. 'Clean and green' equities, in contrast, were
notable underperformers despite the positive tailwind of massive
policy support and an abundance of positive catalysts for long-term
growth. A degree of mean-reversion was perhaps due after the
dramatic outperformance for the clean energy universe - which was
largely unaffected by COVID - in 2020 and the attendant very large
new ESG fund inflows.
Another factor pressuring performance for utilities,
particularly renewables as well as other long duration business
models, has been higher inflation and the increase in market
interest rates. Shares in Enel, Iberdrola, RWE, Brookfield
Renewable and NextEra Energy all reacted to the strength in
commodities and freight prices threatening to squeeze renewables
developer returns in the near term. Notwithstanding these
headwinds, we maintained our conviction as renewables' economic
competitiveness vis-à-vis fossil fuel alternatives continues to
improve. This should allow large renewables developers to exert
pricing power and defend future project returns.
We see encouraging signs that market prices for power price
agreements (PPAs) are moving higher to accommodate increased
capital expenditure. In most cases, because project returns are
earned over a 20-30 year useful life, the pricing differential
required to offset the cost increases is modest. For example, a 50%
rise in the price of copper might only require a 3-5% increase in
the price of the next PPA to keep expected project returns
constant. Simultaneously, other factors such as improving
productivity and efficiency of equipment as well as economies of
scale continue to improve the economics of renewable energy.
Yet, the most significant factor in support of greater and
faster investments in renewables is the higher market price for
electricity. This is due to a variety of factors including
recovering - or, in the case of China, even materially increasing -
power demand, rising prices for coal and natural gas, poor hydro
conditions in key regions such as Chile, Brazil and southern China,
poor wind conditions in Western Europe, as well as a significant
increase in the cost of carbon credits in Europe and Canada. This
substantially improves the competitiveness of renewables. With a
full-blown energy crisis underway by EGL's financial year-end,
governments are seeking to accelerate the development of renewables
and reduce the dependence of energy systems on highly volatile
fossil fuels.
Persistently higher fuel commodity prices will increase
substitution and conservation over time, both of which are needed
to achieve climate goals, but in the near-term such dramatically
higher energy prices are increasing the inflationary pressures.
This is not only proving beneficial to power producers, which have
outperformed this year in expectation of expanded margins on the
back of higher realised prices, but should also over time benefit
those regulated utilities operating in real regulatory environments
(i.e., whose regulatory asset values are adjusted higher by
inflation with a lag).
EGL's renewables-focussed utilities holdings started to perform
again more recently and portfolio returns were also helped by the
return of take-over activity in the listed infrastructure space.
Portfolio holdings Covanta (US) and Spark Infrastructure
(Australia) were both bid for within months of each other, an
unsurprising turn of events given their quality businesses and the
deep undervaluation of listed infrastructure compared to private
markets. With cash-rich private equity firms continuing to look for
investment opportunities in listed companies and larger public
groups seeking to unlock hidden value, we expect further deals in
the months and years ahead.
Performance summary
EGL's portfolio returns substantially exceeded those of
comparable global indices during the financial year. Performance
was broadly unaffected by the acute underperformance of utilities
and renewables, thanks to successful stock selection and
geographical diversification. EGL's NAV total return was 22.9%.
While we do not manage the portfolio by reference to any single
index, performance is generally measured against the S&P Global
Infrastructure Index, which comprises utilities and economic
infrastructure (like EGL's portfolio), and the MSCI World Utilities
Index, which returned 17.1% and 3.5%, respectively, during the year
in sterling.
Actively managed leverage was helpful to returns, contributing
+4.7%, but sterling's strength against the US dollar (+4.3%) and
Euro (+5.6%) produced a slightly larger drag on the NAV of
-5.2%.
Leverage provided a small boost to the revenue account too.
Although income from investments held up comparatively well in
2020, it increased 23.7% during 2021 helped by a normalisation of
dividends from certain French holdings which had suspended
shareholder remuneration last year. Also, dividend flows from
portfolio holdings were generally strong, supporting our longer
term expectation of 5-7% per annum growth in income.
The stock picking that allowed EGL to outperform its sectors
included:
The share prices of China Longyuan Power and China Suntien Green
Power increased by 303% and 338%, respectively. China Suntien's
shares have been re-rating to better reflect the value of and
growth prospects for the business as China incrementally pivots to
cleaner electricity generation. It has a sustainable competitive
advantage from a low carbon footprint and lower cost of power
generation relative to rapidly rising power prices in China.
Despite equally strong performance, Longyuan's three main catalysts
remain on the horizon: an A-share listing potentially allowing a
lower cost of capital; asset swaps with its parent such that
Longyuan receives additional renewables projects while shifting its
coal-fired assets to its parent; and a reduction in government
incentives.
Covanta, a US waste-to-energy company, was bid for by EQT
Infrastructure. Ecofin, which held approximately 1.7% of Covanta's
outstanding shares across client portfolios, wrote to the company's
board, which recommended that shareholders support the terms of the
deal, twice to explain why we believed the bid significantly
undervalued Covanta, which stands at the very outset of an earnings
inflection, and to relay our dissatisfaction that the board did not
consult with shareholders during the strategic review. We voted
against the offer, but the resolution passed and the deal will
close before year-end. The holding was a highly positive
contributor to the NAV this year.
At the beginning of the fiscal year, another environmental
share, Veolia, was reintroduced into the portfolio after a
long-awaited bid for its main competitor Suez. The bid succeeded as
expected and the shares rose by approximately 75% from our purchase
level, buoyed by improving fundamentals driven by increased global
economic activity and the increasingly tangible prospect of a 40%
medium-term accretion from the deal.
Spark Infrastructure received what we believe is an attractive
takeover offer at a fair premium, leading the stock to rise over
45% during the fiscal year. The investment fund, which owns a major
proportion of Australia's electricity infrastructure, received a
bid from a consortium including the large private infrastructure
investors KKR and Ontario Teachers' Pension Plan. We await the
details on the vote but are supportive in principle.
Drax and SSE performed very well in a poor year for many
utilities. Drax was just outside the 'top 10' by year-end as we had
increased the position significantly earlier in the year. The
shares performed strongly on the back of rising power prices in the
UK. Our forecasts for the longer term profitability of the biomass
supply business and BECCS (bioenergy with carbon capture and
storage) prospects are materially more optimistic than consensus.
SSE's share price has been underpinned by press reports that
activist investor Elliott is building a stake to push for a
value-unlocking reorganisation of the group. The company's
fundamentals are strong, with renewables generation resources (wind
and hydro) set to expand considerably, coupled with above-average
growth rates in the electricity networks business. This is
sufficient to justify sector-leading returns in the medium
term.
Exelon, a major investor in grid modernisation and power
infrastructure in the US, saw its shares benefit from discussions
surrounding policy support for its nuclear fleet - the largest
source of zero-carbon electrons in the US market - from both State
and Federal legislators. Rising electricity prices are increasingly
positive for Exelon's fundamentals, giving the company the
opportunity to lock in higher prices in the medium-term. The
upcoming separation of the business into two entities - one focused
on generation and one focused on utilities - has also been
supportive to share price performance.
Finally, NextEra Energy continued to contribute positively to
the NAV as the largest position in the portfolio through impeccable
execution, reporting solid quarterly results with management
conveying an optimistic message about the company's growth
prospects, with limited impact from equipment cost inflation.
Outside China, shares in renewables-focussed utilities were
under pressure for much of the year. Enel, Iberdrola, EDF, RWE,
Endesa, Brookfield Renewable and TransAlta Renewables, all
prominent holdings in our portfolio, underperformed. Sector-wide
concerns centred on developer returns in an environment of higher
inflation and interest rates were exacerbated by an array of
idiosyncratic issues. The Spanish government's move in September to
tax 'surplus' profits for utilities for six months hurt the share
prices of Iberdrola, Endesa and Enel beyond that justified by the
likely impact of the temporary measures, only for most of the
impact to be reversed by the beginning of November. The French
government's inconclusiveness on the restructuring of EDF hurt its
share price performance throughout the year, offering only limited
room for performance despite dramatically improved fundamentals.
Elections in Germany, which to a large extent delivered continuity
vis-à-vis the outgoing administration albeit with a notably larger
role to play for the Green Party, detracted from RWE's performance
by raising concerns that a faster closure of the company's coal
plants may negatively impact profitability.
These large European renewables majors have received more
favourable attention in recent months and their shares have started
to recover.
Purchases and sales
As the year progressed, we gradually rebalanced the portfolio
with four guiding principles:
-- Reduce the portfolio's sensitivity to steeper yield curves
and favour business models with inflation pass-throughs (Terna,
Pennon, National Grid);
-- Make room for names with above-average commodity exposure,
and select names where share prices do not yet reflect the full
extent of sharply higher carbon and power prices (Uniper, Drax,
A2A);
-- Partially rebalance the portfolio with additional
transportation infrastructure (mainly toll roads) and environmental
names to increase overall cyclical exposure (Atlantia, Atlas
Arteria, Ferrovial, Veolia);
-- Continue to look for new stock ideas in the US where the
energy transition is less advanced but set to be accelerated by
President Biden's climate policies (Exelon, AEP, Alliant Energy,
AES).
Some holdings were reduced or sold during the year to
accommodate the re-positioning. The largest of these was A2A,
Italy's largest municipal utility, which had been added to the
portfolio in November 2020. Our expectation of a significant
increase in its growth ambitions was duly met at the company's
capital markets day in January 2021 and the business continued to
benefit from the rise in Italian power prices. The shares
appreciated significantly, and the position was sold in June to
lock in profits after the shares reached a level that was
reasonably close to our fundamental valuation.
We lost conviction in Edison International, which continues to
trade at attractive value but not getting the benefit of the doubt
from investors around wildfire risks. Towards the end of the fiscal
year, we reduced the holdings in China Longyuan and China Suntien
Green as a risk management exercise rather than a reflection of a
change in heart for their strong prospects. This proved
particularly well-timed considering the shares' performance over
the subsequent couple of months. We also reduced the holdings in
renewables major Brookfield Renewable and exited Algonquin Power
& Utilities, which have been disappointing stocks of late yet
remain richly valued.
This renewables exposure was replaced through our investment in
Transition, which was listed in Paris in June with a mission to
invest in the energy transition, and the IPO of Acciona Energia, a
100% pure renewable energy company listed on the Spanish exchange
with 11GW of renewables in operation, heading for 20GW by 2025, and
a very attractive valuation.
Income and gearing
In the Interim Report we forecast that income from investments
would increase this year by 15%; the final tally shows +23.7%.
While we anticipated a strong year-over-year increase in cashflows
and dividends for the portfolio constituents given the relatively
low base of 2020, this was boosted by the resumption of payments
from a few companies forced to suspend payments during the
pandemic. The NAV also benefitted from a special dividend of
GBP1.28m from Pennon, funded by the disposal of its waste business,
which was categorised as a 'return of capital' rather than revenue.
Over the coming years we expect the growth in income from
investments in the portfolio to revert to approximately 5-7% per
annum.
The level of gearing averaged 14% during the year. Borrowings
were stepped up to approximately 16-17% early in 2021 and
maintained until September, when leverage was scaled back following
strong performance. At year-end gearing was 12.6%, although this
measure included a 1.9% quasi-cash position in Transition, as well
as two companies (Covanta and Spark Infrastructure), together 5.9%
of the portfolio, which are subject to take-over offers. The
portfolio yield was 4.2% as at 30 September, 2021.
Outlook
Extreme weather events, environmental disasters and spiking
energy costs this year are more than ever pushing the public's
attention to the increasing impact of climate change on our daily
lives. Regulation and attitudes (including investor and consumer
preferences) point to an increasingly constructive context for
rapid progress towards sustainability targets, but significant
action is both needed and likely.
Even before COP26, there were several favourable policy
developments for infrastructure modernisation and development and
more have been announced since. Xi Jinping reiterated China's
target of carbon neutrality by 2060 and added that China would
increase support for other developing countries in expanding
low-carbon energy and not build new coal-fired power projects
abroad. The EU released its "Fit for 55" plan with specific 2030
targets for renewables across the energy, building, industry and
transport sectors. Japan issued a new draft energy policy with much
higher renewable energy generation targets, particularly focused on
offshore wind. Progress on the US Infrastructure Bill and Budget
Reconciliation was slower than anticipated, but many measures
announced so far would be very supportive of energy transition
end-markets.
These serve as positive catalysts for EGL's sectors, at a time
when government policy, once the main and often only driver of
energy transition investments, is being complemented by increasing
corporate demand for solutions to improve the sustainability of
their business models. Companies are turning to renewables to lock
in their electricity cost base, gaining the double benefit of
long-term cost visibility and reducing or eliminating their carbon
footprint. While the smaller renewables developers may struggle to
tap into this opportunity due to delays and cost increases, the
larger utilities should emerge stronger, with increased demand for
their renewable output and more projects to choose from.
We remain confident that new investment in the renewables
industry will maintain historic levels of returns going forward.
Renewables remain the lowest cost option for new electricity
development almost everywhere, and the speed and scale of
substitution continues to accelerate. Decarbonisation of the grid
with these resources will be a multi-decade undertaking. Supply
constraints forcing price increases for natural gas, coal, oil and
electricity will not derail and instead should accelerate the (not
always smooth) transition underway.
We believe that EGL's portfolio can deliver solid growth in a
variety of economic and market environments. We continue to find
opportunities, with companies in the portfolio and on our
watchlists proving their resilience. The development of their
pipeline of opportunities provides investors with greater
visibility on cash flow growth over the coming years. Valuations in
our sectors still largely reflect historical norms rather than the
substantial growth we envisage given the course of policy and
corporate capital allocation plans, and they became increasingly
attractive during the year as the broader market extended its
rally. We are seeing the impact of well-funded private equity
investors bidding for listed infrastructure companies and expect
corporate activity to continue and even accelerate in the coming
years. With government policy, public opinion and corporate
governance all pushing in the same direction, the underperformance
of renewable energy equities earlier this year should prove to have
been nothing more than a short-term setback.
Ecofin Advisors Limited
Investment Manager
20 December, 2021
Key performance indicators
The Company's Directors meet regularly to review the performance
of the Company and its shares. Key performance indicators ("KPIs")
used to assess the Company's progress and its success in meeting
its objectives are set out below. Please also refer to Alternative
Performance Measures in the Annual Report.
KPIs As at or year ended As at or year ended
30 September 2021 30 September 2020
---------------------------- -------------------- --------------------
Change in:
NAV per share (1) 22.9% -2.6%
Share price (1) 28.9% 5.6%
Premium/(discount) to NAV
at year-end 1.5% (3.3)%
Average premium/(discount)
to NAV during
the year (1.3)% (2.6)%
Revenue return per share 5.98p 4.97p
Dividends paid per share 6.60p 6.55p
Dividend yield 3.3% 4.1%
Dividend cover (2) 90.6% 75.9%
Ongoing charges 1.43% 1.48%
---------------------------- -------------------- --------------------
1. Total return, assuming reinvestment of dividends.
2. The dividend cover is the proportion of the dividends paid to
shareholders which was covered by net revenues.
The performance of the Company's portfolio is not measured
against an equity index benchmark. The Investment Manager's asset
allocation process pays little attention to the country and
regional compositions of the main global utilities index, and the
global listed infrastructure indices which are typically dominated
by utilities. The Directors, therefore, review portfolio
performance against the most comparable global sector indices, the
MSCI World Utilities Index and the S&P Global Infrastructure
Index which serve as reference points, and ratios to understand the
impact of gearing, currencies, sub-sector performance, geographical
allocations and stock selection decisions on the Company's overall
investment performance. Stock selection is measured against
relevant local and regional indices and monitored by the Board. The
Directors also review the level of the share price premium/discount
to NAV and the level and composition of ongoing charges
incurred.
As outlined in the Chairman's Statement, the Directors were
pleased with the overall performance of the Company in the
financial year. The NAV and share price returns exceeded those of
the global sector indices by a considerable margin, dividend cover
increased and the ongoing charges ratio declined.
The net revenue return per share for the financial year was
5.98p, a 20.3% increase from the previous year (please refer to the
Investment Manager's Report for detail). Income increased by 23.7%
year-over-year, expenses charged to the Company's revenue account
increased by 13.7%, and the weighted average number of shares
outstanding rose by 6.9%. The ongoing charges ratio declined to
1.43% (from 1.48% last year).
The ongoing charges ratio is calculated in accordance with AIC
recommended methodology using the charges for the current year and
the average NAV during the year of GBP183,936,000.
Principal and emerging risks associated with the Company
The Directors have carried out a robust assessment of the
principal and emerging risks facing the Company, including those
that would threaten its business model, future performance,
solvency and liquidity. The specific financial risks associated
with foreign currencies, interest rates, market prices, liquidity,
credit, valuations and the use of derivatives - which may or may
not be material to the Company - are described in note 16 to the
Financial Statements. The Board conducts this robust assessment by
reviewing a detailed Risk Matrix on a regular basis. A full
analysis of the Directors' review of internal controls is set out
in the Corporate Governance Statement in the Annual Report.
The principal risks facing the Company are summarised below
along with, where appropriate, the steps taken by the Board to
monitor and mitigate such risks.
COVID-19
The Board continued its diligence on the impact of COVID-19 on
the Company and its service providers. As lockdowns were lifted the
Company's third-party service providers either continued to work
from home or migrated into offices, in both cases without any
disruption to service or impact on quality or communication. The
Board is comfortable that the Company's third-party service
providers' business continuity plans are sufficient to mitigate
ongoing risks posed by COVID-19.
Performance and market risk
The performance of the Company depends primarily on the
investment strategy, asset allocation and stock selection decisions
taken by the Investment Manager within the parameters and
constraints imposed by the Company's investment policy. The
investment policy guidelines can only be materially changed by
proposing an ordinary resolution at a General Meeting for
shareholders' approval. The Company invests in securities which are
listed on recognised stock exchanges so it is regularly exposed to
market risk and the value of the Company's portfolio can fluctuate,
particularly over the short-term, in response to developments in
financial markets. The Board has put in place limits on the
Company's gearing, portfolio concentration, and the use of
derivatives which it believes to be appropriate to ensure that the
Company's investment portfolio is adequately diversified and to
manage risk. The Board meets formally at least four times a year
with the Investment Manager to review the Company's strategy and
performance, the composition of the investment portfolio and the
management of risk. The Board examines the sources of investment
performance, which are described in attribution analyses prepared
by the Investment Manager's Head of Risk for each Meeting,
volatility measures, liquidity and currency exposure, and the
Company's gearing. The Investment Manager's Head of Risk monitors
and helps to manage portfolio risk.
Income risk
The Company is committed to paying its shareholders regular
quarterly dividends and to increasing the level of dividends paid
over time. The dividends that the Company can pay depend on the
income it receives on its investment portfolio, the extent of its
distributable reserves and, to a lesser extent, its level of
gearing and accounting policies. Cuts in dividend rates by
portfolio companies, a change in the tax treatment of the dividends
received by the Company, a significant reduction in the Company's
level of gearing or a change to its accounting policies, under
which 50% of the investment management fee is currently charged to
capital, could adversely affect the net income available to pay
dividends.
The Board monitors the net income forecast, including each
component revenue and expense line item, prepared by the
Administrator for quarterly Board meetings. These are discussed in
some detail to assess the Investment Manager's level of confidence
in the income growth profile of the portfolio and to mitigate any
risk of revenue shortfall relative to expectations.
The Board applied successfully to cancel the Company's share
premium account in November 2016 and the resulting special reserve
is available, when the Board considers it appropriate, to augment
the net income available to pay dividends to shareholders.
Liquidity risk
While the Company invests principally in highly liquid
securities listed on recognised stock exchanges in developed
economies, it also invests to a limited extent in securities traded
in emerging markets and in securities which are more thinly traded.
As the Company is a closed-end investment company it does not run
the risk of having to liquidate investments on unattractive terms
to meet redemptions by investors although it is exposed to price
risk; that is, that it will be unable to liquidate a position in a
thinly traded security at the valuation at which it is carried in
the Company's accounts. It is also exposed to a risk that its prime
broker, Citigroup Global Markets Limited ("Citigroup"), which
provides a flexible borrowing facility, could request that
borrowings be repaid with three days' notice. The Board reviews the
liquidity profile of the Company's portfolio on a regular basis.
The Investment Manager's Head of Risk also keeps the liquidity risk
profile of the Company's portfolio under close review. The
liquidity analysis regularly shows that, if required, 98% of the
portfolio could be liquidated within five business days assuming
trades to accomplish this accounted for up to 30% of average daily
trading volumes.
Operational risks
In common with most other investment trusts, the Company has no
executive directors, no executive management and no employees. The
Company delegates key operational tasks to third-party service
providers which are specialists in their fields: the management of
the Company's investment portfolio to the Investment Manager,
Ecofin Advisors Limited; the preparation and maintenance of the
Company's Financial Statements and maintenance of its records to
the Administrator and Company Secretary, BNP Paribas Securities
Services S.C.A and Maitland Administration Services Limited,
respectively; the worldwide custody of the Company's assets to
Citigroup and the safekeeping and oversight services to Citibank UK
Limited ("Citibank") as Depositary. The Board reviews the
performance of these third-party service providers and their risk
control procedures on a regular basis as well as the terms on which
they provide services to the Company.
Environmental, Social and Governance ("ESG")
ESG considerations and policies have become some of the most
critical issues confronting companies and their shareholders and
can have a significant impact on the business models,
sustainability and even viability of individual companies. These
sustainability issues are a key area of focus for the Board, and
the Board maintains a regular oversight of the Investment Manager
in this area.
ESG factor analysis is undertaken on all portfolio holdings and
prospective investments by the Investment Manager, Ecofin, a
specialist investor in sustainable infrastructure and the energy
transition. In a rapidly changing environment surrounding
sustainability and ESG, Ecofin works to determine the best
practices to incorporate into investment criteria and to make
reporting available to the market. As a long-standing specialist in
the Company's sectors, Ecofin actively engages with portfolio
companies and investments in an effort to drive continuous
improvement in their sustainability practices and metrics. The
Board regularly reviews the way ESG considerations are integrated
into the decision making process by the Investment Manager to
mitigate risk at the stock selection and portfolio levels.
Relationship with the Investment Manager
Ecofin Advisors Limited ("Ecofin UK") is the Investment Manager,
regulated by the FCA and registered with the SEC. Ecofin UK is
indirectly wholly owned by TortoiseEcofin Investments, LLC,
(previously Tortoise Investments, LLC), a US-based firm which owns
a family of investment management companies (collectively
"TortoiseEcofin") (previously Tortoise). TortoiseEcofin provides
support across a variety of functions and integrated teams across
the firm allow for collaboration and synergies.
Viability statement
The UK Financial Reporting Council ("FRC") maintains the UK's
Corporate Governance Code (the "Code") to promote high quality
corporate governance and reporting. Under the Code, the Directors
are required to state that in their opinion the Company's resources
are adequate for it to continue in business for at least twelve
months from the date of the Financial Statements and, therefore, it
is appropriate that the Financial Statements be prepared on a going
concern basis. This statement appears in the Directors' Report in
the Annual Report.
In accordance with provision 31 of the 2018 Code, the Directors
are also required to assess the prospects for the Company over a
longer period than the twelve months referred to in the going
concern guidance and statement. The Directors have elected to
review the viability of the Company for a five year period up to
the Annual General Meeting ("AGM") of the Company to be held in
2027 principally because they consider that any investment in the
shares of the Company should be made on a medium to long-term
basis.
In assessing the viability of the Company over this five year
period, the Board has performed a robust assessment of controls
over the principal risks. The Board considers, on an ongoing basis,
each of the principal risks noted in the Strategic Report and set
out in note 16 to the Financial Statements. The Board has evaluated
scenarios of possible future circumstances, including a significant
and prolonged fall in equity markets and a material increase in
expenses, and considered the latest assessment of portfolio
liquidity. The Board monitors income and expense projections for
the Company, with most of the expenses being predictable and modest
in comparison with the assets of the Company. A significant
proportion of the Company's expenses are investment management fees
based on the Company's NAV and these would naturally decline if the
market value of the Company's investments were to fall. The Board
also took into consideration the operational resilience of its
service providers during the COVID-19 pandemic.
Based on the above, their assessment of the nature of the
Company, its investment policy and financial resources, and with
careful consideration given to the current market situation, the
Board has concluded that there is a reasonable expectation that the
Company will be able to continue to operate and meet its
liabilities as they fall due over the next five years.
Other risks
In the opinion of the Directors, an investment in the shares of
the Company entails a greater than average degree of risk, in the
context of the investment trust industry, because the Company
employs gearing, as explained on in the Annual Report. In addition
to the risks borne by the Company described above, investors in the
shares of the Company are exposed to risks due to the investment
policy (described in the Annual Report) of the Company. These are
risks that cannot be mitigated without changing the investment
policy, and one risk, the risk that the price of a share might
trade at a substantial discount to its NAV, reflects the demand for
the Company's shares in the secondary market.
Gearing and capital structure
The Board has authorised the Investment Manager to utilise
gearing, in the form of borrowings under the Company's prime
brokerage facility, although the gearing is not structural in
nature and can be reduced at any time. Whilst the use of gearing
will enhance the NAV per share when the value of the Company's
assets is rising, it will have the opposite effect when the
underlying asset value is falling. In the event that the prime
brokerage facility were to be renegotiated or terminated, the
Company might not be able to finance its borrowings on as
favourable terms.
Non-OECD or emerging markets
The Company's policy on diversification, noted in the Annual
Report, permits the Investment Manager to invest up to 10% of its
investments, measured at the time of acquisition, in the securities
of companies incorporated in countries which are not members of the
OECD such as emerging markets, and quoted on stock exchanges in
such countries. Investment in emerging markets may involve a higher
degree of risk and expose the Company to, among other things, less
well developed legal and corporate governance systems, a greater
threat of unilateral government action with respect to regulation
and taxation, and a higher risk of political, social and economic
instability than an investment in developed, OECD markets. These
risks are mitigated through diversification and fundamental
analysis.
Foreign exchange risk
As noted in the investment policy in the Annual Report, the
Company's Financial Statements are prepared in sterling and its
shares are denominated in sterling. Many of the Company's
investments, however, are denominated in currencies other than
sterling and, as a result, the value of the Company's investment
portfolio is exposed to fluctuations in exchange rates. Although
the Company may hedge non-sterling exposure from time to time, it
is not the Company's policy to try to minimise or eliminate foreign
exchange risk as over the long-term this could restrict the
investment returns potentially available to sterling-based
investors in international securities. There is a risk for the NAV,
therefore, if sterling appreciates significantly against foreign
currencies.
Political risk
The Board has considered the political uncertainties prevailing
in the UK while the impact of Brexit evolves and the risks
associated with potential changes to regulations, laws and/or
taxes. The Board continues to believe that the Company's strategy
of investing in an internationally diversified portfolio of
companies is the correct model to achieve its investment
objectives.
Share price premium/discount to NAV
While some investors may view the opportunity to purchase a
share of the Company at a discount to its NAV as attractive, the
volatility of the price of a share and the premium/discount adds to
the risks associated with an investment in the Company's shares.
The Directors review the level of the premium/discount on a regular
basis and will use their ability as granted by shareholders to
address any sustained or significant discount or premium to
NAV, as and when it is appropriate, through the repurchase or
issuance of stock. The repurchase of stock will be subject to, but
not limited to, market conditions and availability of cash
resources.
Environmental, social and governance ("ESG") policy
Your Board believes that analysis of ESG factors is an essential
element of the investment management process and that companies
exhibiting good ESG credentials are more likely to perform well
over the longer-term. The Investment Manager's research process
integrates traditional fundamental analysis and a study of ESG
factors which it believes may affect stock valuations and
shareholder value. Engagement and proxy voting are integral parts
of active management and a case-by-case assessment is made for
decisions relating to all proxies, corporate actions and events
relating to portfolio holdings. We endorse the Investment Manager's
active stewardship approach and are pleased that its parent company
is a signatory of the United Nations-supported Principles for
Responsible Investment ('PRI').
In the power sector, your Company's strategy is to invest
predominantly in companies investing to achieve their own or
government targets for emissions reductions and greener grids and
eventually decarbonisation. The portfolio is oriented, therefore,
toward clean generators and suppliers of electricity, and we fully
expect that it will be at all times cleaner in terms of carbon
emissions (tons of CO2 emitted per megawatt hour of generation)
than the overall power sector (as measured by the MSCI World
Utilities Index). Please see above for further detail about the
Investment Manager's integration of ESG factors in its investment
philosophy and approach and in the Annual Report for an outline of
the Investment Manager's stewardship policy.
The Company is an investment trust with no executive directors
or employees and no operating assets. Apart from the need for
Directors to travel to Board meetings, the Company has no direct
impact on the environment or on the communities in which it carries
on its investment activities.
Modern Slavery Act 2015
The Company does not fall within the scope of the Modern Slavery
Act 2015 and the Directors consider the Company's suppliers, which
are typically professional advisors, to be low risk. Accordingly, a
slavery and human trafficking statement has not been included.
The Board and Composition
The Board comprises four non-executive Directors, three men and
one woman. In accordance with best practice, all Directors stand
for re-election annually. The Board is attentive to the composition
of the Board, its breadth of skills and its diversity. The Board is
committed to ensuring that any vacancies arising are filled by the
most qualified candidates and recognises the value of diversity in
the composition of the Board.
Future prospects
The outlook for the Company is described in the Chairman's
Statement above and the Investment Manager's Report above.
Section 172 Statement
Section 172 of the Companies Act 2006 requires that a Director
must act in the way he/she considers, in good faith, would be most
likely to promote the success of the Company for the benefit of its
members (i.e. shareholders) as a whole and, in doing so, have
regard (amongst other matters) to: the likely consequences of any
decision in the long term; the need to foster the Company's
business relationships with suppliers, customers and others; the
impact of the Company's operations on the community and the
environment; the desirability of the Company maintaining a
reputation for high standards of business conduct; and the need to
act fairly as between members of the Company.
The Board ensures that it promotes the success of the Company by
engaging the Investment Manager and other specialist third-party
suppliers with appropriate performance records, resources and
controls in place to deliver the services that the Company
requires. Their performance is monitored by the Board and its
committees, which have oversight of the Company's operations. The
principal supplier is the Investment Manager, in particular the
investment management team responsible for managing the Company's
assets in order to achieve its stated investment objectives. The
Board maintains a good working relationship with the Investment
Manager, which also provides administrative support and promotes
the Company through its marketing and investor relations efforts.
Whilst strong long-term investment performance is essential, the
Board recognises that for an investment vehicle to be sustainable
over the long term, both it and the Investment Manager must have
regard to ethical and environmental issues that impact society at
large. Environmental, social and governance considerations are
fully integrated in the Investment Manager's investment process;
please see above.
The Directors confirm that they have considered their duty under
Section 172 when making decisions during the financial year under
review. The Directors have considered this duty when making
strategic decisions that impact shareholders, including the
appointment of a new auditor, the dividend policy and the issue of
new shares.
The Board regularly monitors the shareholder profile of the
Company; please refer the Annual Report for details of
communication with shareholders. The Board also widely consults
with its investment advisers when considering key decisions.
The key decisions taken by the Directors during the year under
review are set out below.
Strategy
The Chairman's Statement above and the Investment Manager's
Report above include details of the Company's strategy, portfolio
activity and performance during the year under review. This
Strategic Report in the Annual Report also describes the investment
strategy undertaken by the Investment Manager.
These strategic decisions contribute to the long-term success of
the Company and are communicated to investors so they may make
personal investment decisions.
Dividends
In accordance with the Dividend Policy approved by shareholders
and explained in the Annual Report, quarterly dividends were paid
in November 2020 and February, May and August 2021.
Last year, the Board maintained the quarterly dividend rate at
1.65p per share. The Board has carefully considered the dividend
level and, following review of detailed income forecasts, decided
to increase the quarterly rate to 1.85p.
Issue of Shares
Strong NAV performance and concerted efforts to raise
appreciation of the Company's investment universe and strategy
amongst a wider audience have had a beneficial effect on the rating
of the Company's shares. During the year the shares often traded at
a small premium to NAV and this enabled the Company to issue
5,725,000 new shares. The Board keeps the discount/premium
management policy under careful review, in the interest of all
shareholders. Increasing the size of the Company can benefit
liquidity as well as spread costs.
On behalf of the Board
Maitland Administration Services Limited
Company Secretary
20 December, 2021
Management Report and Directors' Responsibilities Statement
Management report
Listed companies are required by the FCA's Disclosure Guidance
and Transparency Rules (the "Rules") to include a management report
in their Financial Statements. This information is included in the
Strategic Report in the Annual Report (together with the sections
of the Annual Report and Accounts incorporated by reference) and
the Directors' Report in the Annual Report Therefore, a separate
management report has not been included.
Directors' responsibilities statement
The Directors are responsible for preparing the Strategic
Report, the Directors' Report and the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have elected to prepare the Financial Statements in accordance with
United Kingdom Accounting Standards, comprising FRS 102 "The
Financial Reporting Standard applicable in the UK and Republic of
Ireland", and applicable law (United Kingdom Generally Accepted
Accounting Practice ("UK GAAP")). Under company law the Directors
must not approve the Financial Statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
In preparing those Financial Statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Annual Report and Accounts is published on the Investment
Manager's website https://ecofininvest.com/egl and the Directors
are responsible for the maintenance and integrity of the corporate
and financial information about the Company included on this
website. The work carried out by the Auditor does not involve
consideration of the maintenance and integrity of this website and,
accordingly, the Auditor accepts no responsibility for any changes
that may have occurred to the Annual Report and Accounts since it
was initially presented on the website.
Directors' confirmation statement
The Directors listed in the Annual Report as the persons
responsible within the Company hereby confirm that, to the best of
their knowledge:
a) the Financial Statements within the Annual Report and
Accounts of which this statement forms a part have been prepared in
accordance with applicable accounting standards and give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company; and
b) the Management Report, which comprises the Chairman's
Statement, Investment Manager's Report, Strategic Report (including
risk factors) and note 16 to the Financial Statements, includes a
fair review of the development and performance of the business and
position of the Company, together with the principal risks and
uncertainties that it faces.
Having taken advice from the Audit Committee, the Directors
consider that the Annual Report and Accounts taken as a whole is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy. The Directors have
reached these conclusions through a process which is described in
the Report of the Audit Committee in the Annual Report.
On behalf of the Board
David Simpson
Chairman
20 December, 2021
Statement of Comprehensive Income
Year ended 30 September Year ended 30 September
2021 2020
------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------ --------- --------- --------- --------- --------- ---------
Gains/(losses) on investments
held at fair value through
profit or loss 9 - 28,742 28,742 - (7,551) (7,551)
Foreign exchange gains/(losses) - 1,115 1,115 - (280) (280)
Investment income 2 8,476 1,281 9,757 6,851 - 6,851
Investment management fees 3 (935) (935) (1,870) (750) (750) (1,500)
Administrative expenses 4 (780) - (780) (789) - (789)
Net return/(loss) before finance
costs and taxation 6,761 30,203 36,964 5,312 (8,581) (3,269)
Finance costs 5 (42) (42) (84) (57) (57) (114)
----------------------------------- ------ --------- --------- --------- --------- --------- ---------
Net return/(loss) before taxation 6,719 30,161 36,880 5,255 (8,638) (3,383)
Taxation 7 (794) - (794) (648) - (648)
----------------------------------- ------ --------- --------- --------- --------- --------- ---------
Net return/(loss) after taxation 5,925 30,161 36,086 4,607 (8,638) (4,031)
----------------------------------- ------ --------- --------- --------- --------- --------- ---------
Return/(loss) per ordinary
share (pence) 8 5.98 30.42 36.40 4.97 (9.31) (4.34)
----------------------------------- ------ --------- --------- --------- --------- --------- ---------
The total column of the Statement of Comprehensive Income is the
profit and loss account of the Company.
The revenue and capital columns are supplementary to this and
are published under guidance from the AIC.
All revenue and capital returns in the above statement derive
from continuing operations. No operations were acquired or
discontinued during the year ended 30 September, 2021.
The Company has no other comprehensive income and therefore the
net return on ordinary activities after taxation is also the total
comprehensive income for the year.
The accompanying notes are an integral part of the Financial
Statements.
Notes:
1. The maintenance and integrity of the Ecofin Global Utilities
and Infrastructure Trust plc web site is the responsibility of the
Directors; the work carried out by the Auditor does not involve
consideration of these matters and, accordingly, the Auditor
accepts no responsibility for any changes that may have occurred to
the financial statements since they were initially presented on the
web site.
2. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Statement of Financial Position
As at As at
30 September 30 September
2021 2020
Notes GBP'000 GBP'000
------------------------------------------- ------ -------------- --------------
Non-current assets
Equity securities 220,916 179,153
Investments at fair value through profit
or loss 9 220,916 179,153
------------------------------------------- ------ -------------- --------------
Current assets
Debtors and prepayments 10 1,103 2,600
Cash at bank 11,251 -
------------------------------------------- ------ -------------- --------------
12,354 2,600
------------------------------------------- ------ -------------- --------------
Creditors: amounts falling due within one
year
Prime brokerage borrowings 16 (35,873) (22,757)
Other creditors 11 (850) (2,603)
------------------------------------------- ------ -------------- --------------
(36,723) (25,360)
------------------------------------------- ------ -------------- --------------
Net current liabilities (24,369) (22,760)
------------------------------------------- ------ -------------- --------------
Net assets 196,547 156,393
------------------------------------------- ------ -------------- --------------
Share capital and reserves
Called-up share capital 12 1,007 950
Share premium account 13 15,500 4,956
Special reserve 117,730 118,338
Capital reserve 14 62,310 32,149
Revenue reserve - -
------------------------------------------- ------ -------------- --------------
Total shareholders' funds 196,547 156,393
------------------------------------------- ------ -------------- --------------
NAV per ordinary share (pence) 15 195.11 164.60
------------------------------------------- ------ -------------- --------------
The Financial Statements were approved by the Board of Directors
and authorised for issue on 20 December, 2021 and were signed on
its behalf by:
Malcolm (Max) King
Director
The accompanying notes are an integral part of the Financial
Statements.
Statement of Changes in Equity
For the year ended 30 September 2021
---------------------------------------------------------------------
Special
Share Share premium reserve Capital Revenue
capital account (1) reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- -------------- --------- --------- --------- ---------
Balance at 1 October 2020 950 4,956 118,338 32,149 - 156,393
Return after taxation - - - 30,161 5,925 36,086
Issue of ordinary shares 12, 13 57 10,544 - - - 10,601
Dividends paid 6 - - (608) - (5,925) (6,533)
--------------------------- --------- --------- -------------- --------- --------- --------- ---------
Balance at 30 September
2021 1,007 15,500 117,730 62,310 - 196,547
--------------------------- --------- --------- -------------- --------- --------- --------- ---------
For the year ended 30 September 2020
---------------------------------------------------------------------
Special
Share Share premium reserve Capital Revenue
capital account (1) reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- --------- -------------- --------- --------- --------- ---------
Balance at 1 October 2019 919 - 119,796 40,787 - 161,502
Return after taxation - - - (8,638) 4,607 (4,031)
Issue of ordinary shares 12, 13 31 4,956 - - 4,987
Dividends paid 6 - - (1,458) - (4,607) (6,065)
--------------------------- -------- --------- -------------- --------- --------- --------- ---------
Balance at 30 September
2020 950 4,956 118,338 32,149 - 156,393
--------------------------- -------- --------- -------------- --------- --------- --------- ---------
1. The special reserve may be used, where the Board considers it
appropriate, by the Company for the purposes of paying dividends to
shareholders and, in particular, smoothing payments of dividends to
shareholders.
The accompanying notes are an integral part of the Financial
Statements.
Statement of Cash Flows
Year ended Year ended
30 September 30 September
2021 2020
Notes GBP'000 GBP'000
--------------------------------------------- ------ -------------- --------------
Net return/(loss) before finance costs
and taxation 36,964 (3,269)
Increase in accrued expenses 85 31
Overseas withholding tax (753) (795)
Deposit interest income (21) (20)
Dividend income (8,455) (6,803)
Fixed interest income - (28)
Realised (gains)/losses on foreign exchange
transactions (1,115) 280
Dividends received 8,277 6,405
Deposit interest received 21 20
Fixed interest received - 49
Interest paid (84) (114)
(Gains)/losses on investments (28,742) 7,551
Decrease in other debtors 2 2
--------------------------------------------- ------ -------------- --------------
Net cash flow from operating activities 6,129 3,309
Investing activities
Purchases of investments (97,893) (71,379)
Sales of investments 84,716 56,805
--------------------------------------------- ------ -------------- --------------
Net cash used in investing activities (13,177) (14,574)
Financing activities
Movement in prime brokerage borrowings 13,985 4,299
Dividends paid 6 (6,533) (6,065)
Share issue proceeds 10,601 4,987
--------------------------------------------- ------ -------------- --------------
Net cash from financing activities 18,053 3,221
--------------------------------------------- ------ -------------- --------------
Increase/(decrease) in cash 11,005 (8,044)
--------------------------------------------- ------ -------------- --------------
Analysis of changes in cash during the
year
Cash and cash equivalents at the start
of year - 8,228
Foreign exchange movement 246 (184)
Increase/(decrease) in cash as above 11,005 (8,044)
--------------------------------------------- ------ -------------- --------------
Cash and cash equivalents at the end of
year 11,251 -
--------------------------------------------- ------ -------------- --------------
The accompanying notes are an integral part of these Financial
Statements.
Notes to the Financial Statements
For the year ended 30 September, 2021
1. Accounting policies
(a) Basis of preparation
The Financial Statements have been prepared in accordance with
the Companies Act 2006, United Kingdom Generally Accepted
Accounting Practice ("UK GAAP"), including the Financial Reporting
Standard applicable in the U.K. and Republic of Ireland ("FRS 102")
and with the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture Capital
Trusts' issued in October 2020. The Financial Statements are
prepared in Sterling which is the functional currency of the
Company and rounded to the nearest GBP'000. They have also been
prepared on a going concern basis and approval as an investment
trust has been granted by HMRC.
The Company's assets consist substantially of equity shares in
companies listed on recognised stock exchanges and in most
circumstances are realisable within a short timescale. The Board
has set limits for borrowing and regularly reviews actual exposures
and cash flow projections. The Company has prime broker borrowings
to draw upon, and these borrowings are repayable on demand.
Having taken these factors into account as well as the impact of
Covid-19 and having assessed the principal risks and other matters
set out in the Viability Statement in the Annual Report the
Directors believe that, after making enquiries, the Company has
adequate resources to continue in operational existence for the
foreseeable future and has the ability to meet its financial
obligations as they fall due for a period of at least twelve months
from the date of approval of this Report. Accordingly, they
continue to adopt the going concern basis of accounting in
preparing the financial statements.
Further detail is included in the Directors' Report (unaudited)
in the Annual Report.
Significant accounting judgements, estimates and assumptions
The preparation of financial statements requires the use of
certain significant accounting judgements, estimates and
assumptions which requires management to exercise its judgement in
the process of applying the accounting policies and are continually
evaluated. Special dividends are assessed and credited to capital
or revenue according to their circumstances and are considered to
require significant judgement. The Directors do not consider there
to be any significant estimates within the Financial
Statements.
(b) Income
Income from investments, including taxes deducted at source, is
included in revenue by reference to the date on which the
investment is quoted ex-dividend. Special dividends are credited to
capital or revenue, according to the circumstances. The fixed
returns on debt securities are recognised on a time apportionment
basis so as to reflect the effective yield on the debt securities.
Interest receivable from cash and short-term deposits is treated on
an accruals basis.
(c) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged to the revenue account except where they directly
relate to the acquisition or disposal of an investment, in which
case they are charged to the capital account; in addition, expenses
are charged to the capital account where a connection with the
maintenance or enhancement of the value of the investments can be
demonstrated. In this respect the management fee and overdraft
interest have been allocated 50% to the capital account and 50% to
the revenue account.
(d) Taxation
The charge for taxation is based on the profit for the year to
date and takes into account, if applicable, taxation deferred
because of timing differences between the treatment of certain
items for taxation and accounting purposes. Deferred taxation is
provided using the liability method on all timing differences,
calculated at the rate at which it is anticipated the timing
differences will reverse. Deferred tax assets are recognised only
when, on the basis of available evidence, it is more likely than
not that there will be taxable profits in future against which the
deferred tax asset can be offset.
Due to the Company's status as an investment trust company and
the intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Company has not provided
deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue within
the Statement of Comprehensive Income on the same basis as the
particular item to which it relates using the Company's effective
rate of tax for the year, based on the marginal basis.
(e) Valuation of investments
For the purposes of preparing the Financial Statements, the
Company has applied Sections 11 and 12 of FRS 102 in respect of
financial instruments. All investments are measured initially and
subsequently at fair value and transaction costs are expensed
immediately. Investment transactions are accounted for on a trade
date basis. The fair value of the financial instruments in the
Statement of Financial Position is based on their quoted bid price
at the reporting date, without deduction of the estimated future
selling costs.
Changes in the fair value of investments held at fair value
through profit or loss and gains and losses on disposal are
recognised in the Statement of Comprehensive Income as "Gains on
investments held at fair value through profit or loss". Also
included within this caption are transaction costs in relation to
the purchase or sale of investments, including the difference
between the purchase price of an investment and its bid price at
the date of purchase.
(f) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and that are subject
to insignificant risk of change in value.
(g) Borrowings
Short-term borrowings, which comprise of prime brokerage
borrowings, are recognised initially at the fair value of the
consideration received, net of any issue expenses, and subsequently
at amortised cost using the effective interest method. The finance
costs, being the difference between the net proceeds of borrowings
and the total amount of payments required to be made in respect of
those borrowings, accrue evenly over the life of the borrowings and
are allocated 50% to revenue and 50% to capital.
(h) Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business activity, being investment business.
Consequently, no business segmental analysis is provided.
(i) Nature and purpose of reserves
Share premium account
The balance classified as share premium includes the premium
above nominal value received by the Company on issuing shares net
of issue costs.
Special reserve
The special reserve arose following court approval in November
2016 to transfer the GBP123,609,000 from the share premium account.
This reserve is distributable and may be used, where the Board
considers it appropriate, by the Company for the purposes of paying
dividends to shareholders and, in particular, augmenting or
smoothing payments of dividends to shareholders. There is no
guarantee that the Board will in fact make use of this reserve for
the purpose of the payment of dividends to shareholders. The
special reserve can also be used to fund the cost of share
buy-backs.
Capital reserve
Gains and losses on disposal of investments and changes in fair
values of investments are transferred to the capital account.
Foreign exchange differences of a capital nature are also
transferred to the capital account. The capital element of the
management fee and relevant finance costs are charged to this
account. Any associated tax relief is also credited to this
account.
Revenue reserve
This reserve reflects all income and costs which are recognised
in the revenue column of the Statement of Comprehensive Income.
The Company's special reserve, capital reserve and revenue
reserve may be distributed by way of dividend.
(j) Foreign currency
Monetary assets and liabilities and non-monetary assets held at
fair value in foreign currencies are translated into Sterling at
the rates of exchange ruling at the Statement of Financial Position
date. Transactions involving foreign currencies are converted at
the rate ruling on the date of the transaction. Gains and losses on
the translation of foreign currencies are recognised in the revenue
or capital account of the Statement of Comprehensive Income
depending on the nature of the underlying item.
(k) Dividends payable
Dividends are recognised in the period in which they are
paid.
2. Income
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
------------------------------------------- -------------- --------------
Income from investments (revenue account)
UK dividends 1,233 944
Overseas dividends 6,995 5,410
Overseas fixed interest - 28
Stock dividends 227 449
------------------------------------------- -------------- --------------
8,455 6,831
------------------------------------------- -------------- --------------
Other income (revenue account)
Deposit interest 21 20
------------------------------------------- -------------- --------------
Total income 8,476 6,851
------------------------------------------- -------------- --------------
During the year to 30 September, 2021 the Company received
special dividends totalling GBP1,281,000 (30 September, 2020: nil),
all of which was recognised as capital and is included in the
capital column of the Statement of Comprehensive Income.
3. Investment management fee
Year ended 30 September Year ended 30 September
2021 2020
------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- --------- --------- --------- ---------
Investment management fee 935 935 1,870 750 750 1,500
--------------------------- --------- --------- --------- --------- --------- ---------
The Company has an agreement with Ecofin Advisors Limited for
the provision of investment management services.
The management fee for the first half of the year ended 30
September, 2021 was calculated, on a quarterly basis, at 1.00% per
annum of the net assets of the Company. From 1 April, 2021, the
management fee was calculated at 1.00% per annum of the Company's
NAV on the first GBP200million and 0.75% per annum of NAV
thereafter, payable quarterly in arrears. The management fee is
chargeable 50% to revenue and 50% to capital. During the year
GBP1,870,000 (30 September, 2020: GBP1,500,000) of investment
management fees were earned by the Investment Manager, with a
balance of GBP491,000 (30 September, 2020: GBP391,000) being
payable to Ecofin Advisors Limited at the year-end.
4. Administrative expenses
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
---------------------------------------------- -------------- --------------
Administration 262 265
Directors' remuneration(1) 125 113
Auditor's remuneration:
fees payable to the Company's Auditor for
the audit of the Company's annual accounts 38 42
Printing and postage fees 25 27
Directors' liability insurance 6 5
Depositary fees 84 68
Regulatory fees 26 20
Employer's National Insurance contributions 3 14
Registrar's fees 27 55
Legal and advisory fees 166 163
Other expenses 18 17
---------------------------------------------- --------------
780 789
---------------------------------------------- -------------- --------------
1. Full disclosure is given in the Directors' Remuneration
Report in the Annual Report.
All of the expenses above include irrecoverable VAT where
applicable. For the Auditor's remuneration for the statutory audit,
irrecoverable VAT amounted to GBP6,000 (30 September, 2020:
GBP7,000).
Advisory and legal fees include: fees in respect of sponsored
research and other marketing resources, any legal fees and a
substantial accrual for expenses relating to the recovery of excess
taxes withheld on foreign dividends.
5. Finance costs
Year ended 30 September Year ended 30 September
2021 2020
------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- --------- --------- --------- ---------
Prime brokerage borrowings - interest 42 42 84 57 57 114
--------------------------------------- --------- --------- --------- --------- --------- ---------
6. Dividends on ordinary shares
Year ended Year ended
30 September 30 September
2021 2020
GBP'000 GBP'000
------------------------------------------------------ -------------- --------------
Fourth interim for 2019 of 1.60p (paid 29 November,
2019) - 1,470
First interim for 2020 of 1.65p (paid 28 February,
2020) - 1,516
Second interim for 2020 of 1.65p (paid 29 May, 2020) - 1,528
Third interim for 2020 of 1.65p (paid 28 August,
2020) - 1,551
Fourth interim for 2020 of 1.65p (paid 30 November, 1,576 -
2020)
First interim for 2021 of 1.65p (paid 26 February, 1,633 -
2021)
Second interim for 2021 of 1.65p (paid 28 May, 2021) 1,662 -
Third interim for 2021 of 1.65p (paid 31 August, 1,662 -
2021)
------------------------------------------------------ -------------- --------------
6,533 6,065
------------------------------------------------------ -------------- --------------
The proposed fourth interim dividend for 2021 has not been
included as a liability in these Financial Statements as it was not
payable until after the reporting date.
Set out below are the total dividends paid and proposed in
respect of the financial period, which is the basis on which the
requirements of Section 1158-1159 of the Corporation Tax Act 2010
are considered. The revenue available for distribution by way of
dividend for the year was GBP5,925,000 (30 September, 2020:
GBP4,607,000).
Year ended Year ended
30 September 30 September
2021 2019
GBP'000 GBP'000
---------------------------------------------------- -------------- --------------
Three interim dividends of 1.65p each (2020: three
interim dividends of 1.65p each) 4,957 4,595
Fourth interim dividend 1.65p (2020: 1.60p) 1,666 1,579
---------------------------------------------------- -------------- --------------
6,623 6,174
---------------------------------------------------- -------------- --------------
The amount reflected above for the cost of the fourth interim
dividend for 2021 is based on 100,963,423 ordinary shares, being
the number of ordinary shares in issue on the ex-dividend date 28
October, 2021.
7. Taxation
(a) Analysis of charge for the period
Year ended 30 September Year ended 30 September
2021 2020
------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- --------- --------- --------- --------- ---------
Analysis of charge for the period
Overseas tax suffered 1,134 - 1,134 882 - 882
Overseas tax reclaimable (340) - (340) (234) - (234)
----------------------------------- --------- --------- --------- --------- --------- ---------
Total tax charge for the period 794 - 794 648 - 648
----------------------------------- --------- --------- --------- --------- --------- ---------
(b) Factors affecting the tax charge for the period
The tax assessed for the year is higher than the standard rate
of corporation tax rate of 19.00% (2020: 19.00%). The differences
are explained as follows:
Year ended 30 September Year ended 30 September
2021 2020
------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- --------- --------- --------- ---------
Net profit/(loss) on ordinary
activities before taxation 6,719 30,161 36,880 5,255 (8,638) (3,383)
-------------------------------------- --------- --------- --------- --------- --------- ---------
Net return/(loss) multiplied
by the standard rate of corporation
tax of 19.00% (30 September,
2019: 19.00%) 1,277 5,730 7,007 998 (1,641) (643)
Effects of:
Non-taxable UK dividends (234) (243) (477) (204) - (204)
Non-taxable overseas dividends (1,216) - (1,216) (932) - (932)
Tax effect of expensed double
taxation relief (11) - (11) (6) - (6)
Expenses not deductible for
tax purposes - - - 1 - 1
Movement in unutilised expenses 184 186 370 143 153 296
Other capital returns/losses - (5,673) (5,673) - 1,488 1,488
Overseas tax suffered 1,134 - 1,134 882 - 882
Overseas tax reclaimable (340) - (340) (234) - (234)
-------------------------------------- --------- --------- --------- --------- --------- ---------
Total tax charge 794 - 794 648 - 648
-------------------------------------- --------- --------- --------- --------- --------- ---------
(c) Factors that may affect future tax charges
No provision for deferred tax has been made in the accounting
year. The Company has not provided for deferred tax on capital
gains or losses arising on the revaluation or disposal of
investments as it is exempt from tax on these items because of its
status as an investment trust company.
At the year-end, the Company has, for taxation purposes only,
accumulated unrelieved management expenses and loan relationship
deficits of GBP8,835,000 (30 September, 2020: GBP6,888,000). A
deferred tax asset in respect of this has not been recognised and
these expenses will only be utilised if the Company has profits
chargeable to corporation tax in the future. It is considered too
uncertain that the Company will generate such profits and therefore
no deferred tax asset has been recognised.
8. Return per ordinary share
Year ended 30 September Year ended 30 September
2021 2020
-------------------------- --------------------------
GBP'000 p GBP'000 p
------------------------------------- ----------- ------------- ----------- -------------
Returns are based on the following
figures:
Revenue return 5,925 5.98 4,607 4.97
Capital return/(loss) 30,161 30.42 (8,638) (9.31)
------------------------------------- ----------- ------------- ----------- -------------
Total return/(loss) 36,086 36.40 (4,031) (4.34)
------------------------------------- ----------- ------------- ----------- -------------
Weighted average number of ordinary
shares in issue 99,135,779 92,774,379
------------------------------------- ----------- ------------- ----------- -------------
9. Investments
As at As at
30 September 30 September
2021 2020
GBP'000 GBP'000
----------------------------------------------- -------------- --------------
Held at fair value through profit or loss:
Opening book cost 159,259 136,702
Opening investment holding gains 19,894 34,596
----------------------------------------------- -------------- --------------
Opening fair value 179,153 171,298
Analysis of transactions made during the year
Purchases at cost 96,282 73,666
Sales proceeds received (83,261) (58,260)
Gains/(losses) on investments 28,742 (7,551)
----------------------------------------------- -------------- --------------
Closing fair value 220,916 179,153
----------------------------------------------- -------------- --------------
Closing book cost 184,640 159,259
Closing investment gains 32,276 19,894
----------------------------------------------- -------------- --------------
Closing fair value 220,916 179,153
----------------------------------------------- -------------- --------------
The Company received GBP83,261,000 (2020: GBP58,260,000) from
investments sold in the period. The book cost of these investments
when they were purchased was GBP70,902,000 (2020: GBP51,109,000).
These investments have been revalued over time and until they were
sold any unrealised gains/losses were included in the fair value of
the investments.
Transaction costs
During the year expenses were incurred in acquiring or disposing
of investments classified as fair value through profit or loss.
These have been expensed through capital and are included within
losses on investments in the Statement of Comprehensive Income. The
total costs were as follows:
As at As at
30 September 2021 30 September 2020
GBP'000 GBP'000
----------- ------------------- -------------------
Purchases 152 88
Sales 59 32
----------- ------------------- -------------------
211 120
----------- ------------------- -------------------
The above transaction costs are calculated in line with the AIC
SORP. The transaction costs in the Company's Key Information
Document are calculated on a different basis and in line with the
PRIIPs regulations.
10. Other debtors and receivables
As at As at
30 September 2021 30 September 2020
GBP'000 GBP'000
-------------------------- ------------------- -------------------
Amounts due from brokers - 1,455
Prepayments and accrued
income 1,103 1,145
-------------------------- ------------------- -------------------
1,103 2,600
-------------------------- ------------------- -------------------
11. Creditors: amounts falling due within one year
As at As at
30 September 2021 30 September 2020
GBP'000 GBP'000
------------------------ ------------------- -------------------
Amounts due to brokers - 1,838
Other creditors 850 765
------------------------ ------------------- -------------------
850 2,603
------------------------ ------------------- -------------------
12. Ordinary share capital
As at 30 September 2021 As at 30 September 2020
-------------------------- --------------------------
Shares GBP'000 Shares GBP'000
------------------------------ --------------- --------- -------------- ----------
Issued and fully paid
Ordinary shares of 1p each
at 1 October 95,013,423 950 91,872,247 919
Issue of new ordinary shares 5,725,000 57 3,141,176 31
------------------------------ --------------- --------- -------------- ----------
Ordinary shares of 1p each
at 30 September 100,738,423 1,007 95,013,423 950
------------------------------ --------------- --------- -------------- ----------
The Company was admitted to the Main Market of the London Stock
Exchange on 26 September, 2016. The total number of ordinary shares
in the Company in issue immediately following admission was
91,872,247, each with equal voting rights. During the year, the
Company issued 5,725,000 (2020: 3,141,176) ordinary shares with net
proceeds of GBP10,601,000 (2020: GBP4,987,000).
13. Share premium account
As at As at
30 September 30 September
2021 2020
GBP'000 GBP'000
----------------- -------------- --------------
At 1 October 4,956 -
Issue of shares 10,544 4,956
----------------- -------------- --------------
At 30 September 15,500 4,956
----------------- -------------- --------------
14. Capital reserve
As at As at
30 September 2021 30 September
GBP'000 2020
GBP'000
------------------------------------------------ ------------------- --------------
At 30 September 32,149 40,787
Movement in investment holdings gains/(losses) 16,382 (14,702)
Gains on realisation of investments at
fair value 12,360 7,151
Special dividend 1,281 -
Foreign exchange gains/(losses) 1,115 (280)
Investment management fees (935) (750)
Finance costs (42) (57)
------------------------------------------------ ------------------- --------------
At 30 September 62,310 32,149
------------------------------------------------ ------------------- --------------
15. NAV per ordinary share
The NAV attributable to the ordinary shares and the NAV per
ordinary share at the year-end were as follows:
As at As at
30 September 2021 30 September 2020
---------------------------------------- ------------------- -------------------
Net asset value attributable (GBP'000) 196,547 156,393
Number of ordinary shares in issue
(note 12) 100,738,423 95,013,423
Net asset value per share (p) 195.11 164.60
---------------------------------------- ------------------- -------------------
16. Financial instruments and capital disclosures
Risk management policies and procedures
The investment objectives of the Company are to achieve a high,
secure dividend yield on its investment portfolio and to realise
long-term growth in the capital value of the portfolio for the
benefit of shareholders, while taking care to preserve
shareholders' capital.
The Company's financial instruments comprise:
-- equity shares held in accordance with the Company's
investment objective and policies;
-- fixed interest securities, cash and liquid resources as well
as short-term receivables and payables that arise from its
operations; and
-- borrowings in various currencies to finance operations.
The Company may enter into derivative contracts in order to
manage the risks arising from its investment activities. As at the
year-end there were no derivative contracts outstanding (2020:
nil).
The Board sets out its investment policies, including its
policies on gearing and diversification, in the Strategic Report
beginning in the Annual Report The Board and the Company's
Investment Manager consider and review the financial risks inherent
in managing the Company's assets and these are detailed below.
Market price risk
The Company's investment portfolio is subject to fluctuations,
volatility and the vagaries of market prices. The Directors seek to
mitigate this risk by ensuring proper controls exist through the
IMA for maintaining a diversified portfolio of the securities of
utility and other economic infrastructure companies and ensuring
that there are balances within the portfolio by geography,
sub-sector and types of instrument. If the fair value of the
Company's investments at year-end (see portfolio holdings in the
Annual Report) had increased or decreased by 10% then it would have
had an effect on the Group's capital return and equity equal to
GBP22,092,000 (30 September, 2020: GBP17,915,000).
Foreign currency risk
The value of the Company's assets and the total return earned by
the Company's shareholders can be significantly affected by foreign
exchange movements as most of the Company's assets are denominated
in currencies other than Sterling, the currency in which the
Company's accounts are prepared. It is not the Company's policy to
try to minimise or eliminate foreign exchange risk; over the
long-term this could restrict the investment returns potentially
available to Sterling-based investors in international securities.
There is a risk for the NAV and shareholders, therefore, if
Sterling appreciates significantly against foreign currencies. This
risk is partially offset by the Company's borrowings in currencies
other than Sterling.
As at 30 September 2021
-----------------------------------------------------
Net monetary Total currency
Investments assets/(liabilities) exposure
GBP'000 GBP'000 GBP'000
------------------- ------------ ---------------------- ---------------
Australian dollar 14,523 (1,216) 13,307
Canadian dollar 9,980 3,956 13,936
Euro 85,565 (15,114) 70,451
Hong Kong dollar 11,041 7,371 18,412
Philippine peso - 14 14
Sterling 24,255 (2,663) 21,592
Swiss franc - 15 15
US dollar 75,552 (16,732) 58,820
------------------- ------------ ---------------------- ---------------
Total 220,916 (24,369) 196,547
------------------- ------------ ---------------------- ---------------
As at 30 September 2020
-------------------------------------------------------
Net monetary Total currency
Investments assets/(liabilities) exposure
GBP'000 GBP'000 GBP'000
------------------- -------------- ---------------------- ---------------
Australian dollar 12,984 (1,741) 11,243
Canadian dollar 16,225 (1,135) 15,090
Euro 65,887 (8,043) 57,844
Hong Kong dollar 5,539 (653) 4,886
Philippine peso - 14 14
Sterling 20,179 (2,354) 17,825
Swiss franc - 25 25
US dollar 58,339 (8,873) 49,466
------------------- -------------- ---------------------- ---------------
Total 179,153 (22,760) 156,4393
------------------- -------------- ---------------------- ---------------
A 10% rise or decline of Sterling against foreign currency
denominated (i.e. non-Sterling) assets held at the year-end would
have decreased/increased the total return and net asset value by
GBP17,496,000 or 8.9% (30 September, 2020: GBP13,857,000 or 8.9%).
This is considered to be a reasonable illustration based on the
volatility of exchange rates during the year.
Interest rate risk
The Company is only exposed to significant interest rate risk
through its borrowings with Citigroup Global Markets Limited and
through the fair value of investments in fixed interest rate
securities, if any.
Borrowings varied throughout the period as part of a Board
endorsed policy and at year-end amounted to the equivalent of
GBP35,873,000 (30 September, 2020: GBP22,757,000) in a variety of
currencies. All of these borrowings were at floating rates of
interest.
If this level of borrowing was maintained for the year, a 1%
increase/decrease in LIBOR would decrease/increase the revenue
return by GBP123,000 (30 September, 2020 GBP114,000) and
decrease/increase the capital return by GBP123,000 (30 September,
2020: GBP114,000). In the event that the prime brokerage facility
were to be renegotiated or terminated, the Company may not be able
to finance its borrowings on as favourable terms and this risk is
monitored.
The interest rates on prime brokerage borrowings varied by
currency from -0.09% to 0.75% during the year ended 30 September,
2021.
Liquidity risk
The Company's assets mainly comprise readily realisable
securities which can be easily sold to meet funding commitments if
necessary. A liquidity analysis is prepared on at least a quarterly
basis as part of the Investment Manager's report to the Board and
the liquidity profile of all securities is reviewed. The Investment
Manager reviews the liquidity profile of the investments
continuously.
The contractual maturities of the Company's financial
liabilities at 30 September, 2021 based on the earliest date on
which payment can be required was as follows:
As at As at
30 September 2021 30 September 2020
Due within 3 months GBP'000 GBP'000
---------------------------- ------------------- -------------------
Prime brokerage borrowings (35,873) (22,757)
Other creditors (850) (2,603)
---------------------------- ------------------- -------------------
(36,723) (25,360)
---------------------------- ------------------- -------------------
Prime brokerage borrowings are repayable on demand.
Credit risk
Credit risk is mitigated by diversifying the counterparties with
which the Investment Manager conducts investment transactions. The
credit standing of all counterparties is reviewed periodically with
limits set on amounts due from any one broker. The Company's
exposure to its counterparty for forward currency contracts,
Citigroup, at 30 September, 2021 was GBPnil (30 September, 2020:
GBPnil). There were no items past due or impaired.
The maximum exposure to credit risk at 30 September, 2021 and 30
September, 2020 was considered to be the same as the carrying
amount of the financial assets in the Statement of Financial
Position.
17. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
shall have the following levels:
Level 1: unadjusted quoted prices in an active market for
identical assets or liabilities that the entity can access at the
measurement date;
Level 2: inputs other than quoted prices included within Level 1
that are observable (i.e. developed using market data) for the
asset or liability, either directly or indirectly; and
Level 3: inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The financial assets and liabilities measured at fair value in
the Statement of Financial Position are grouped into the fair value
hierarchy at the reporting date as follows:
As at 30 September 2021 Note Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ --------- --------- --------- ---------
Financial assets at fair value
through profit or loss
Quoted equities a) 216,808 4,108 - 220,916
Net fair value 216,808 4,108 - 220,916
---------------------------------------- --------- --------- --------- ---------
Level 1 Level 2 Level 3 Total
As at 30 September 2020 Note GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ --------- --------- --------- ---------
Financial assets at fair value
through profit or loss
Quoted equities a) 179,153 - - 179,153
Net fair value 179,153 - - 179,153
---------------------------------------- --------- --------- --------- ---------
a) Equities and preference shares
The fair value of the Company's investments in equities and
preference shares has been determined by reference to their quoted
bid prices at the reporting date. Equities and preference shares
included in Fair Value Level 1 are actively traded on recognised
stock exchanges. Investments categorised as Level 2 are not
considered to trade in active markets.
18. Analysis of changes in net debt
As at As at
30 September 30 September
2020 Currency differences Cash flows 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------------- --------------------- ----------- --------------
Cash and short-term deposits - 246 11,005 11,251
Debt due within one year (22,757) 869 (13,985) (35,873)
------------------------------ -------------- --------------------- ----------- --------------
(22,757) 1,115 (2,980) (24,622)
------------------------------ -------------- --------------------- ----------- --------------
As at As at
30 September 30 September
2019 Currency differences Cash flows 2020
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------------- --------------------- ----------- --------------
Cash and short-term deposits 8,228 (184) (8,044) -
Debt due within one year (18,362) (96) (4,299) (22,757)
------------------------------ -------------- --------------------- ----------- --------------
(10,134) (280) (12,343) (22,757)
------------------------------ -------------- --------------------- ----------- --------------
A statement reconciling the movement in net funds to the net
cash flow has not been presented as there are no differences from
the above analysis.
19. Related party transactions and transactions with the
Investment Manager
Fees payable during the year to the Directors and their
interests in shares of the Company are considered to be related
party transactions and are disclosed within the Directors'
Remuneration Report in the Annual Report. The balance of fees due
to Directors at the year-end was GBPnil (30 September, 2020:
GBPnil).
The Company has an agreement with Ecofin Advisors Limited for
the provision of investment management services. Details of fees
earned during the year and balances outstanding at the year-end are
disclosed in note 3 above.
20. Capital management policies and procedures
The Company's investment objective is to achieve a high, secure
dividend yield on its portfolio and to realise long-term growth in
the capital value of the portfolio for the benefit of
shareholders.
The capital of the Company consists of debt, comprising prime
brokerage borrowings, and equity, comprising issued capital,
reserves and retained earnings. The Company manages its capital to
ensure that it will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of
the debt and equity balance.
The Board monitors and reviews the broad structure of the
Company's capital on an ongoing basis. This review includes:
-- the planned level of gearing which takes into account the
Investment Manager's views on the market;
-- the level of equity shares in issue; and
-- the extent to which revenue in excess of that which is
required to be distributed should be retained.
The Company is not subject to any externally imposed capital
requirements.
The information contained in this Annual Financial Report
Announcement has been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union ("EU") and as applied in accordance with the provisions of
the Companies Act 2006 (the "Act"). These comprise standards and
interpretations of the International Accounting Standards ("IAS")
and Standing Interpretations Committee as approved by the
International Accounting Standards Committee ("IASC") that remain
in effect, to the extent that IFRS have been adopted by the EU. The
results for the year ended 30 September, 2021 are audited but do
not constitute statutory accounts as defined in Section 434 of the
Act. The statutory accounts have not yet been delivered to the
Registrar of Companies. Full statutory accounts for the year ended
30 September, 2020 included an unqualified audit report and have
been filed with the Registrar of Companies.
The Annual Report and Financial Statements will be posted to shareholders
and will shortly be available on the Investment Manager's website ( www.ecofininvest.com/egl
) or in hard copy format from the Company's Registered Office. A copy of
the Annual Report will be submitted to the FCA's National Storage Mechanism
and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
. The Annual Report will also be available on the Investment Manager's website
at www.ecofininvest.com/egl.
For further information, please contact:
Elspeth Dick, CFA
Ecofin Advisors Limited
Telephone: 020 7451 2929
Faith Pengelly
Maitland Administration Services Limited
Company Secretary
01245 398 950
20 DECEMBER, 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FLFIDFALIFIL
(END) Dow Jones Newswires
December 21, 2021 01:59 ET (06:59 GMT)
Ecofin Global Utilities ... (LSE:EGL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ecofin Global Utilities ... (LSE:EGL)
Historical Stock Chart
From Apr 2023 to Apr 2024
