Half-year Report

RNS Number : 3407Z

Ecofin Global Utilities Inf Tst PLC

20 May 2021

 

ECOFIN GLOBAL UTILITIES AND INFRASTRUCTURE TRUST PLC

Interim Financial Results for the six months ended 31 March, 2021

Announcement of Unaudited Results

LEI: 2138005JQTYKU92QOF30

This announcement contains regulated information.

Ecofin Global Utilities and Infrastructure Trust plc (the "Company") is an authorised UK investment trust whose objectives are to achieve a high, secure dividend yield on a portfolio invested primarily in the equities of utility and infrastructure companies in developed countries and long-term growth in the capital value of the portfolio while preserving shareholders' capital in adverse market conditions.

· During the six months ended 31 March, 2021, the Company's net asset value ("NAV") per share increased by 13.5% on a total return basis. The Company's share price increased by 16.1% on a total return basis over the six months

· Two quarterly dividends were paid during the six months totalling 3.30p per share. Based on the price of the Company's shares as at 31 March, 2021, the dividend yield (annualised) was 3.6%

· The Company is continuing to issue new shares at a premium to NAV in response to investor demand. During the half-year, £10.3 million of shares were issued and another £0.4 million of shares have been issued since the end of March

· To ensure that cost ratios keep declining as the Company grows, a tiered management fee has taken effect from 1 April, 2021: 1% per annum of NAV on the first £200 million and 0.75% per annum of NAV thereafter

Financial Highlights

as at 31 March, 2021

Summary	As at or six months to 31 March 2021	As at or year to 30 September 2020
Net assets attributable to shareholders (£'000)	184,319	156,393
NAV per share1	183.31p	164.60p
Share price (mid-market)	181.50p	159.25p
Discount to NAV1	1.0%	3.3%
Revenue return per share	1.82p	4.97p
Dividends paid per share	3.30p	6.55p
Dividend yield1,2	3.6%	4.1%
Gearing on net assets1,3	15.9%	14.8%
Ongoing charges ratio1,4	1.46%	1.48%

1. Please refer to Alternative Performance Measures in the Interim Report.

2. Dividends paid (annualised) as a percentage of share price.

3. Gearing is the Company's borrowings (including the net amounts due from/to brokers) less cash divided by net assets attributable to shareholders.

4. The ongoing charges figure is calculated in accordance with guidance issued by the Association of Investment Companies ("AIC") as the

operating costs (annualised) divided by the average NAV (with income) throughout the period.

Performance for periods to 31 March 2021	6 months %	1 year %	3 years %	Since admission on 26 September 20165 %
NAV per share total return6 A	13.5	30.5	57.8	58.1
Share price total return6 A	16.1	33.4	82.6	98.4
Indices (total returns in £):
S&P Global Infrastructure Index	10.6	22.2	16.8	15.3
MSCI World Utilities Index	2.7	9.7	36.0	33.2
MSCI World Index	12.1	39.1	48.3	69.8
FTSE All-Share Index	18.5	27.1	9.9	20.1
FTSE ASX Utilities Index	6.5	5.9	25.6	-0.5

5. The Company was incorporated on 27 June, 2016 and its investment activities began on 13 September, 2016 when the liquid assets of Ecofin Water & Power Opportunities plc ("EWPO") were transferred to it. The formal inception date for the measurement of the Company's performance is 26 September, 2016, the date its shares were listed on the London Stock Exchange.

6. Total return includes dividends paid and reinvested immediately. Please also refer to the Alternative Performance Measures in the Interim Report.

^A Alternative Performance Measurement ('APM')

Chairman's Statement

Performance

I am delighted that your Company has started the current financial year very well. The Company's net asset value (NAV) per share increased by 11.4% during the half-year to 31 March, 2021 and, including the reinvestment of dividends paid, the total return was 13.5%. The price of the Company's shares increased by 14.0% and the total return on the shares was 16.1%. Over the six months, in sterling terms, the MSCI World Utilities Index and the S&P Global Infrastructure Index recorded total returns of 2.7% and 10.6%, respectively.

Global equity markets and the Company's listed infrastructure sub-sectors were strong but volatile across the period. Utilities and renewables stocks led portfolio gains until there was a sharp upswing in US bond yields in early 2021 as confidence in economic recovery surged. This led to a sector rotation as investors sought shares which had been most negatively impacted by a year of lockdowns: the portfolio's more cyclical transportation services holdings were boosted at the expense of the stock market winners of 2020.

Your Company continues to build its strong track record: from our launch nearly five years ago to 31 March 2021, NAV and share price total returns have been 10.7% and 16.4% per annum, respectively.

Dividends

The Company announced an increase in the annual dividend rate to 6.6p per share (1.65p per quarter) in December 2019, just before the COVID-19 pandemic began. Your Board is very pleased that the dividend rate has been maintained since then even though the Company's investment income fell during the early stages of the pandemic. Our income is now recovering, and income from investments and net revenue per share during the half-year under review were significantly greater than in the comparable period last year. 

Share issuance

The Company is continuing to issue new shares at a premium to NAV in response to investor demand. During the half-year, 5,535,000 new shares were issued and another 190,000 shares have been issued since the end of March. We will continue to issue shares when possible (when the shares are trading at a premium to NAV) as we believe that this will increase liquidity in the shares, foster participation by new investors and reduce cost ratios.

Investment Manager's fee

To ensure that cost ratios continue to fall as the Company grows, we have agreed a tiered management fee as follows with effect from 1 April, 2021: 1% per annum of the Company's NAV on the first £200 million and 0.75% per annum of NAV thereafter, payable quarterly in arrears.

Company Secretary, Auditor, Depositary

After years of first-rate services provided by BNPP as Company Secretary and EY as Auditor, we have now moved to new suppliers. BNPP no longer provides corporate secretarial services to external clients and EY's contract was due for rotation under the regulations. Following competitive processes, the Company has appointed Maitland as Company Secretary and BDO as Auditor.

Citibank Europe plc ("Citibank"), acting through its UK branch, is the Company's Depositary. As a result of Brexit and consequent regulatory changes, Citibank is transferring its depositary services for UK funds to an entity incorporated and authorised in the UK, Citibank UK Limited. Subject to regulatory approvals, this change in the legal entity acting as Depositary for the Company should occur in the second half of 2021.

Covid-19

With lockdowns persisting during the half-year, the Company's third-party service providers continued to work from home without any disruption to service or impact on quality or communications.

Board

As mentioned in my last Statement, our esteemed colleague Martin Nègre retired from the Board with effect from the AGM held in March. The Board thanks Martin for his invaluable contribution as a Director since the inception of the Company.

Outlook

Between 31 March and 18 May, the reported NAV declined from 183.3p to 182.0p (-0.7%) and the share price from 181.5p to 180.0p (-0.8%). However, on a total return basis which takes into account the most recent dividend, they both increased slightly (NAV +0.2%; share price +0.2%). Equity markets remain volatile while the path to a post-Covid world is being built around vaccines and vast amounts of fiscal stimulus. Bond yields have recovered from their pandemic lows and the Investment Manager's report discusses how this is impacting the portfolio and strategy.

Government policies to reinvigorate economic growth and reduce carbon emissions are driving increasingly ambitious programmes for the energy transition which continue to create attractive investments for your Company. Our investment manager is also seeing increased opportunities in other infrastructure areas.

David Simpson

Chairman

20 May, 2021

Investment Manager's Report

Markets and performance

The Company's NAV increased by 13.5% during the half-year. Even though the portfolio was not immune to market swings, it was a successful period in terms of stock selection with some strong performances by large holdings in each region of the portfolio and with no lagging names causing lasting trouble. Building upon 2020's results which highlighted the portfolio's overall resilience to the pandemic, several names - including Covanta, Exelon, and Engie - announced strategic reviews which we had hoped would emerge, and others - including EDF, National Grid, Veolia and Drax - announced or continued to pursue what we consider to be value-accretive M&A. These were discussed in our monthly updates as they are markers of how quickly a variety of utilities are reshaping their asset portfolios to deliver on decarbonisation and sustainability commitments. More details are provided in the investment summaries for the largest portfolio holdings in the Interim Report.

This was achieved against a background of equity markets continuing their erratic rebound from the early 2020 coronavirus-induced slump. The MSCI World Index rose by 12.1% (total return in sterling terms) as the economic data and outlook improved in line with the roll-out of vaccinations. Copious fiscal stimulus improved sentiment and growth forecasts but have led to concerns about future inflation. As a result, US and other bond yields rose sharply from rock-bottom levels though not enough to undermine the businesses of our sectors or the attractiveness of their yield.

With a Biden presidency improving the prospect of the US assuming a leadership role in the global energy transition, major renewables names in the portfolio were extremely strong performers until the end of 2020, benefitting as well from strong ESG-related fund flows. The first quarter of 2021 brought a setback as fund flows switched out of high growth and clean energy 'winners' into cyclical recovery plays. This coincided with an upswing in economic indicators and commodity prices, sparking fears of inflationary pressures and causing a sharp sell-off in bonds, especially in the US. Despite the fundamental support for utilities from structural growth trends as well as stronger commodity and power prices, utilities' shares were sold off indiscriminately but recovered as bond yields plateaued. Although the absolute level of longer term rates is not concerning, as yields are only getting back to pre-pandemic levels, the sector does tend to have an adverse reaction when the speed of change is quick as risk-free rates are an important component of cost of capital assumptions that investors use to discount future growth.

Another ingredient causing some disquiet among renewables is the intensifying competition from oil and gas companies seeking to diversify but the opportunity set keeps increasing. In offshore wind, for instance, the new US administration has committed to expanding offshore wind capacity to 30GW by 2030. This adds to about 200GW of official capacity targets worldwide by 2030, implying a more than eight-fold increase in capacity over the next decade. Stronger energy commodity prices supported power prices during the half-year while the carbon price in Europe reached successive new highs. It was nearly €43/mt by the end of March, some 32% higher than at the beginning of this year and 100% higher than a year ago.

The largest positive contributors to net assets growth over the half-year included Chinese wind operators China Longyuan Power and China Suntien Green Energy, US environmental services company Covanta, Drax and SSE in the UK, and North American clean power specialists Brookfield Renewable and TransAlta Renewables. Together, these contributed approximately 7.5% to the growth in NAV, showing continuing strong representation by our high conviction positions in renewables majors and companies transitioning in that direction. During the pronounced market rotation mid-Q1 which favoured last year's market laggards, mostly cyclicals and value stocks, the portfolio's exposure to energy infrastructure (Williams) and transportation services (ENAV, for example) proved their diversification purpose. Pure regulated names were not particularly weak but they did get left behind in the market rallies.

Sterling rose by approximately 6.5% over the six months against the US dollar and the Euro. This dampened portfolio returns by just over 6.0%.

Purchases & sales

During the half-year, usually due to macro-driven market volatility, we found good opportunities to add to holdings, most notably Iberdrola, Endesa, Dominion, NextEra Energy, NextEra Energy Partners, Edison International, SSE, A2A, Atlas Arteria and Ferrovial. We also established several new positions:

Eversource is an electric, gas and water utility operating in the Northeast of the US. We are particularly interested in the company's joint venture with Orsted to develop a major offshore wind platform in the Northeast. We expect decisive support from the Biden administration and a growth acceleration in the US's nascent offshore wind sector to support the company's medium-term growth trajectory, with significant auctions this year offering the partnership multiple opportunities to prop up their portfolio, which already includes three projects.

China Suntien Green Energy is a developer and operator of wind capacity (4.3GW) and involved in gas transmission and distribution and other renewables. The company is planning to build an LNG terminal in Hebei (where it already supplies 20% of the province's gas demand) which will handle 5mn tonnes of LNG by the end of 2022. The shares were considered to be undervalued and have an attractive yield, and Suntien should be a beneficiary of the switch from coal to gas in a very polluted region.

Veolia has been held previously in the portfolio and was reintroduced when it confirmed it was bidding for its main competitor Suez, having secured Engie's c. 30% stake in Suez. We invested in expectation that the deal would succeed and bring significant synergies for Veolia to extract and therefore substantial growth potential for the combined group. A takeover agreement between the two companies' boards was eventually reached on 12 April, 2021.

In late November, we added to the portfolio's largest UK holdings, SSE and National Grid, following a steep decline in UK equities due to Brexit uncertainties which in our view would leave utilities largely unaffected even in a scenario of a no-deal exit. National Grid was just outside of the 'top ten' by 31 March 2021 after a period of underperformance but its shares reacted well to its announcement in March of an interesting asset swap with a recently established holding in the portfolio, PPL Corporation, and the sale of its UK gas transmission network. This is a major strategic shift to concentrate on electricity and a net-zero carbon future, one which we believe will positively reinforce the company's growth. PPL, with net cash proceeds of over $6bn, has firepower for additional utility and renewables investments to improve its balance sheet, reposition its asset portfolio from coal to renewables, and potentially buyback shares.

A2A, Italy's largest municipal utility, was added to the portfolio in November following what we considered an unjustified decline in the share price as COVID-19 cases began to resurge in Europe. Our expectation of a significant increase in its growth ambitions was duly met at the company's capital markets day in January 2021, while the business continues to benefit from the ongoing rise in Italian power prices, which are now materially above pre-pandemic levels.

American Electric Power was sold given valuation risks arising from its largely regulated business model in the context of steepening yield curves. Sempra Energy was exited given the stock's premium valuation and relatively unattractive growth profile. FirstEnergy was also exited owing to the uncertainty surrounding the company's involvement in a corruption scandal.

Income and gearing

Income from investments for the 2021 fiscal year, based on the current portfolio, is expected to increase by approximately 15% from last year's level, due to a combination of growth in dividends from the most pandemic-resilient companies and a resumption of shareholder remuneration from the companies that were forced to suspend distributions during the pandemic in 2020. Borrowings were stepped up when weakness in EGL's sectors in February presented buying opportunities and gearing was 16.3% on 31 March, 2021. Gearing averaged 14% during the half-year, a little higher than average.

Strategy

A progressive improvement in economic conditions should prevail in 2021 with an initially super-charged economic recovery settling down to a more maintainable rate. We expect the major trends for EGL's investment universe and the energy transition thematic in place prior to the pandemic to continue apace, as few major activities geared to decarbonisation have slowed or been reoriented due to the health crisis. Moreover, the policy environment is rapidly becoming more supportive; with the US re-joining the Paris Agreement over 70% of global GDP has committed to full decarbonisation. Climate policy ambition around the world, while certainly facilitated by greater public awareness of environmental issues, is largely being driven by the substantial decline in the cost of renewable energy technologies, which now allow for a reduction in end-user electricity tariffs in most countries when replacing fossil fuels with wind and solar.

In the US, the Biden administration is pursuing comprehensive legislation aimed at green infrastructure and climate change initiatives which, with a narrow majority in both chambers, are likely to be passed (in some format). Its single biggest objective is to commit the US to a zero-net-carbon goal by 2050 and to attach meaningful near-term targets and means to achieve that. One of those is 100% decarbonisation of the utility system by 2035 for the following reasons: substantial sums of money spent on renewables projects will not add significantly to customers' bills; many States, legislators and voters like clean energy projects and their positive impact; and the electric grid is destined to be the decarbonisation conduit for almost everything else.

We think the major shift this creates - beyond offering meaningful direct investment incentives - will be to change the mindset of American corporate boards and promote a greater sense of willingness and urgency, regardless of political inclination. The days of companies lobbying actively against decarbonisation initiatives are waning, in favour of adoption and transition. In China, with Xi Xingping having formally announced China's intention to achieve carbon neutrality by 2060, internal activities to decarbonise are accelerating. Together with Europe's and the UK's established leadership in this arena, we can see a more comprehensively global opportunity to address climate policy.

EGL's allocations to more economically cyclical sub-sectors, such as waste management services, airports, and energy and road infrastructure, have tended to move in and out of stock market favour. Nonetheless, they remain important diversifiers in an infrastructure portfolio, providing ballast and exposure to a recovery in industrial activity and transport volumes, as well as longer term opportunity considering the replacement cycle necessary for old infrastructure. While uncertainty continues around the extent and timing of (particularly air) traffic recovery, we are confident that the steady roll-out of effective vaccines will enable a resumption of normal travel trends, both nationally and internationally. We continue to monitor the space closely for additional investment opportunities.

Ecofin Advisors Limited

Investment Manager

20 May, 2021

Condensed Statement of Comprehensive Income

		Six months ended 31 March 2021 (unaudited)			Six months ended 31 March 2020 (unaudited)			Year ended 30 September 2020 (audited)
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments held at fair value through profit or loss		-	18,352	18,352	-	(24,779)	(24,779)	-	(7,551)	(7,551)
Currency gains/(losses)		-	1,202	1,202	-	(430)	(430)	-	(280)	(280)
Income	2	2,838	-	2,838	2,322	-	2,322	6,851	-	6,851
Investment management fee		(456)	(456)	(912)	(359)	(360)	(719)	(750)	(750)	(1,500)
Administration expenses		(368)	-	(368)	(377)	-	(377)	(789)	-	(789)
Net return/(loss) before finance costs and taxation		2,014	19,098	21,112	1,586	(25,569)	(23,983)	5,312	(8,581)	(3,269)
Finance costs		(20)	(20)	(40)	(38)	(38)	(76)	(57)	(57)	(114)
Net return/(loss) before taxation		1,994	19,078	21,072	1,548	(25,607)	(24,059)	5,255	(8,638)	(3,383)
Taxation	3	(215)	-	(215)	(99)	-	(99)	(648)	-	(648)
Net return/(loss) after taxation		1,779	19,078	20,857	1,449	(25,607)	(24,158)	4,607	(8,638)	(4,031)
Return/(loss) per ordinary share (pence)	4	1.82	19.56	21.38	1.58	(27.87)	(26.29)	4.97	(9.31)	(4.34)

The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.

The revenue and capital columns are supplementary to this and are published under guidance from the AIC.

All revenue and capital returns in the above statement derive from continuing operations. No operations were acquired or discontinued during the six months ended 31 March, 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 period.

Condensed Statement of Financial Position

	Notes	As at 31 March 2021 (unaudited) £'000	As at 31 March 2020 (unaudited) £'000	As at 30 September 2020 (audited) £'000
Non-current assets
Equity securities		213,431	143,414	179,153
Investments at fair value through profit or loss		213,431	143,414	179,153
Current assets
Debtors and prepayments		1,421	856	2,600
Cash at bank		2,719	-	-
		4,140	856	2,600
Creditors: amounts falling due within one year
Prime brokerage borrowings		(32,023)	(9,265)	(22,757)
Other creditors		(1,229)	(677)	(2,603)
		(33,252)	(9,942)	(25,360)
Net current liabilities		(29,112)	(9,056)	(22,760)
Net assets		184,319	134,358	156,393
Share capital and reserves
Called-up share capital	5	1,005	919	950
Share premium		15,179	-	4,956
Special reserve		116,908	118,259	118,338
Capital reserve	6	51,227	15,180	32,149
Total shareholders' funds		184,319	134,358	156,393
NAV per ordinary share (pence)	7	183.31	146.24	164.60

 

Condensed Statement of Changes in Equity

		Six months ended 31 March 2021 (unaudited)
	Share capital £'000		Share Premium account £'000	Special reserve1 £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 1 October 2020	950		4,956	118,338	32,149	-	156,393
Return after taxation	-		-	-	19,078	1,779	20,857
Issue of ordinary shares	55		10,223	-	-	-	10,278
Dividends paid (see note 8)	-		-	(1,430)	-	(1,779)	(3,209)
Balance at 31 March 2021	1,005		15,179	116,908	51,227	-	184,319
		Six months ended 31 March 2020 (unaudited)
	Share capital £'000		Share Premium account £'000	Special reserve1 £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 1 October 2019	919		-	119,796	40,787	-	161,502
Return after taxation	-		-	-	(25,607)	1,449	(24,158)
Dividends paid (see note 8)	-		-	(1,537)	-	(1,449)	(2,986)
Balance at 31 March 2020	919		-	118,259	15,180	-	134,358
		Year ended 30 September 2020 (audited)
	Share capital £'000		Share Premium account £'000	Special reserve1 £'000	Capital reserve £'000	Revenue reserve £'000	Total £'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	31		4,956	-	-	-	4,987
Dividends paid (see note 8)	-		-	(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.

Condensed Statement of Cash Flows

	Six months ended 31 March 2021 (unaudited) £'000	Six months ended 31 March 2020 (unaudited) £'000	Year ended 30 September 2020 (audited) £'000
Net return/(loss) before finance costs and taxation	21,112	(23,983)	(3,269)
(Decrease)/increase in accrued expenses	(64)	(57)	31
Overseas withholding tax	(94)	(102)	(795)
Deposit interest income	(8)	(16)	(20)
Dividend income	(2,830)	(2,278)	(6,803)
Fixed-interest income	-	(28)	(28)
Realised (gains)/losses on foreign exchange transactions	(1,202)	430	280
Dividends received	2,682	2,057	6,405
Deposit interest received	8	16	20
Fixed-interest income received	-	49	49
Interest paid	(40)	(76)	(114)
(Gains)/losses on investments	(18,352)	24,779	7,551
(Increase)/decrease in other debtors	(15)	(10)	2
Net cash flow from operating activities	1,197	781	3,309
Investing activities
Purchases of investments	(37,719)	(34,418)	(71,379)
Sales of investments	21,704	37,922	56,805
Net cash from investing activities	(16,015)	3,504	(14,574)
Financing activities
Movement in prime brokerage borrowings	10,468	(9,097)	4,299
Equity dividends paid	(3,209)	(2,986)	(6,065)
Share issue proceeds	10,278	-	4,987
Net cash used in financing activities	17,537	(12,083)	3,221
Increase/(decrease) in cash	2,719	(7,798)	(8,044)
Analysis of changes in cash during the year
Opening balance	-	8,228	8,228
Foreign exchange movement	-	(430)	(184)
Increase/(decrease) in cash as above	2,719	(7,798)	(8,044)
Closing balances	2,719	-	-

 

Notes to the Condensed Financial Statements

for the six months ended 31 March, 2021

1. Accounting policies

(a) Basis of preparation

The Condensed Financial Statements have been prepared in accordance with Financial Reporting Standard ("FRS") 104 Interim Financial Reporting and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in October 2019. The Condensed Financial Statements are prepared in sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and approval as an investment trust has been granted.

The Condensed Financial Statements have been prepared using the same accounting policies as the preceding Financial Statements which were prepared in accordance with Financial Reporting Standard 102.

The financial information contained in this Interim Report does not constitute statutory accounts as defined in Sections 434-436 of the Companies Act 2006. The financial information for the periods ended 31 March, 2021 and 31 March, 2020 has not been audited.

The information for the year ended 30 September, 2020 has been extracted from the latest published audited Financial Statements which have been filed with the Registrar of Companies. The report of the Auditor on those accounts contained no qualification or statement under Section 498 of the Companies Act 2006.

(b) Income

Income from investments, including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to capital or revenue, according to the circumstances. The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities. Interest receivable from cash and short-term deposits is treated on an accruals basis.

(c) Expenses

All expenses are accounted for on an accruals basis. Expenses are charged to the revenue account except where they directly relate to the acquisition or disposal of an investment, in which case they are charged to the capital account; in addition, expenses are charged to the capital account where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect 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 Condensed Statement of Comprehensive Income on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year, based on the marginal basis.

(e) Valuation of investments

For the purposes of preparing the Condensed Financial Statements, the Company has applied Sections 11 and 12 of FRS 102 in respect of financial instruments. All investments are measured initially and subsequently at fair value and transaction costs are expensed immediately. Investment transactions are accounted for on a trade date basis. The fair value of the financial instruments in the Condensed Statement of Financial Position is based on their quoted bid price at the reporting date, without deduction of the estimated future selling costs. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Condensed Statement of Comprehensive Income as "Gains on investments held at fair value through profit or loss". Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase.

(f) Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risk of change in value.

(g) Borrowings

Short-term borrowings, which comprise of prime brokerage borrowings, are recognised initially at the fair value of the consideration received, net of any issue expenses, and subsequently at amortised cost using the effective interest method. The finance costs, being the difference between the net proceeds of borrowings and the total amount of payments required to be made in respect of those borrowings, accrue evenly over the life of the borrowings and are allocated 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 £123,609,000 from the share premium account. This reserve is distributable and may be used, where the Board considers it appropriate, by the Company for the purposes of paying dividends to shareholders and, in particular, augmenting or smoothing payments of dividends to shareholders. There is no guarantee that the Board will in fact make use of this reserve for the purpose of the payment of dividends to shareholders. The special reserve can also be used to fund the cost of share buy-backs.

 

Capital reserve

Gains and losses on disposal of investments and changes in fair values of investments are transferred to the capital account. Foreign exchange differences of a capital nature are also transferred to the capital account. The capital element of the management fee and relevant finance costs are charged to this account. Any associated tax relief is also credited to this account.

Revenue reserve

This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income.

The Company's special reserve, capital reserve and revenue reserve may be distributed by way of dividend.

(j) Foreign currency

Monetary assets and liabilities and non-monetary assets held at fair value in foreign currencies are translated into sterling at the rates of exchange ruling at the Condensed Statement of Financial Position date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the translation of foreign currencies are recognised in the revenue or capital account of the Condensed Statement of Comprehensive Income depending on the nature of the underlying item.

(k) Dividends payable

Dividends are recognised in the period in which they are paid.

2. Income

	Six months ended 31 March 2021 £'000	Six months ended 31 March 2020 £'000	Year ended 30 September 2020 £'000
Income from investments (revenue account)
UK dividends	339	197	944
Overseas dividends	2,309	1,682	5,410
Overseas fixed interest	-	28	28
Stock dividends	182	399	449
	2,830	2,306	6,831
Other income (revenue account)
Deposit interest	8	16	20
Total income	2,838	2,322	6,851

During the six months ended 31 March, 2021, the Company received no special dividends (31 March, 2020 and 30 September, 2020: £nil).

3. Taxation

The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 30 September, 2021 is 19% (2020: 19%).

4. Return per ordinary share

	Six months ended 31 March 2021 p	Six months ended 31 March 2020 p	Year ended 30 September 2020 p
Revenue return	1.82	1.58	4.97
Capital return/(loss)	19.56	(27.87)	(9.31)
Total return/(loss)	21.38	(26.29)	(4.34)
The returns per share are based on the following:
	Six months ended 31 March 2021 £'000	Six months ended 31 March 2020 £'000	Year ended 30 September 2020 £'000
Revenue return	1,779	1,449	4,607
Capital return/(loss)	19,078	(25,607)	(8,638)
Total return/(loss)	20,857	(24,158)	(4,031)
Weighted average number of ordinary shares in issue	97,538,780	91,872,247	92,774,379

5. Ordinary share capital

	31 March 2021		31 March 2020		30 September 2020
	Number	£'000	Number	£'000	Number	£'000
Issued and fully paid
Ordinary shares of 1p each	95,013,423	950	91,872,247	919	91,872,247	919
Issue of new ordinary shares	5,535,000	55	-	-	3,141,176	31
Ordinary shares of 1p each	100,548,423	1,005	-	-	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 period, the Company issued 5,535,000 (31 March, 2020 nil and 30 September, 2020: 3,141,176) ordinary shares with net proceeds of £10,278,000 (31 March, 2020 £nil and 30 September, 2020: £4,987,000). Since 31 March, 2021 the Company has issued 190,000 ordinary shares for net proceeds of £361,000.

6. Capital reserve

	31 March 2021 £'000	31 March 220 £'000	30 September 2020 £'000
Opening balance	32,149	40,787	40,787
Movement in investment holding gains	16,992	(30,297)	(14,702)
Gains on realisation of investments at fair value	1,360	5,518	7,151
Currency gains/(losses)	1,202	(430)	(280)
Investment management fees	(456)	(360)	(750)
Finance costs	(20)	(38)	(57)
	51,227	16,008	32,149

The capital reserve reflected in the Condensed Statement of Financial Position at 31 March, 2021 includes gains of £36,886,000 (31 March, 2020: gains of £4,299,000 and 30 September, 2020: gain of £19,894,000) which relate to the revaluation of investments held at the reporting date.

7. NAV per ordinary share

	As at 31 March 2021	As at 31 March 2020	As at 30 September 2020
NAV attributable (£'000)	184,319	134,358	156,393
Number of ordinary shares in issue	100,548,423	91,872,247	95,013,423
NAV per share	183.31p	146.24p	164.60p

8. Dividends on ordinary shares

	Six months ended 31 March 2021 £'000	Six months ended 31 March 2020 £'000	Year ended 30 September 2020 £'000
Fourth interim for 2019 of 1.60p (paid on 29 November, 2019)	-	1,470	1,470
First interim for 2020 of 1.65p (paid on 28 February, 2020)	-	1,516	1,516
Second interim for 2020 of 1.65p (paid on 29 May, 2020)	-	-	1,528
Third interim for 2020 of 1.65p (paid on 28 August, 2020)	-	-	1,551
Fourth interim for 2020 of 1.65p (paid on 30 November, 2020)	1,576	-	-
First interim dividend for 2021 of 1.65p (paid on 26 February, 2021)	1,633	-	-
	3,209	2,986	6,065

A second interim dividend for 2021 of 1.65p will be paid on 28 May, 2021 to shareholders on the register on 30 April, 2021. The ex-dividend date was 29 April, 2021.

9. Transaction costs

During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:

	Six months ended 31 March 2021 £'000	Six months ended 31 March 2020 £'000	Year ended 30 September 2020 £'000
Purchases	58	44	88
Sales	8	42	32
	66	86	120

10. Fair value hierarchy

FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date;

Level 2: inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly; and

Level 3: inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:

As at 31 March 2021	Notes	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Financial assets at fair value through profit or loss
Quoted equities	a)	213,431	-	-	213,431
Total		213,431	-	-	213,431
As at 31 March 2020	Notes	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Financial assets at fair value through profit or loss
Quoted equities	a)	143,414	-	-	143,414
Total		143,414	-	-	143,414
As at 30 September 2020	Notes	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Financial assets at fair value through profit or loss
Quoted equities	a)	179,153	-	-	179,153
Total		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.

11. Related party transactions and transactions with the Investment Manager

Fees payable to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report on pages 29 and 30 of the 2020 Report and Accounts. The balance of fees due to Directors at the period end was £nil (31 March, 2020: £nil and 30 September, 2020: £nil).

The Company has an agreement with Ecofin Advisors Limited for the provision of investment management services.

Until 31 March 2021, the management fee was calculated, on a quarterly basis, at 1.00% per annum of the net assets of the Company. The management fee is chargeable 50% to revenue and 50% to capital. During the period £912,000 (31 March, 2020: £719,000 and 30 September, 2020: £1,500,000) of investment management fees were earned by the Manager, with a balance of £461,000 (31 March 2020: £336,000 and 30  September, 2020: £391,000) being payable to Ecofin Advisors Limited at the period end.

From 1 April 2021, the management fee agreed is 1% per annum of the Company's NAV on the first £200 million and 0.75% per annum of NAV thereafter, payable quarterly in arrears.

12. Analysis of changes in net debt

	As at 30 September 2020 £'000	Currency differences £'000	Cash flows £'000	As at 31 March 2021 £'000
Cash and short-term deposits	-	-	2,719	2,719
Debt due within one year	(22,757)	1,202	(10,468)	(32,023)
	(22,757)	1,202	(7,749)	(29,304)
	As at 30 September 2019 £'000	Currency differences £'000	Cash flows £'000	As at 31 March 2020 £'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.

Interim Management Report

The principal and emerging risks and uncertainties that could have a material impact on the Company's performance have not changed from those set out on pages 14 to 17 of the Company's Annual Report for the year ended 30 September, 2020.

The Directors consider that the Chairman's Statement and the Investment Manager's Report in the Interim Report, the above disclosure on related party transactions and the Directors' Responsibility Statement below, together constitute the Interim Management Report of the Company for the six months ended 31 March, 2021 and satisfy the requirements of Disclosure Guidance and Transparency Rules 4.2.3 to 4.2.11 of the Financial Conduct Authority.

The Interim Report has not been reviewed or audited by the Company's Auditor.

Directors' Responsibility Statement

The Directors listed in the Interim Report confirm that to the best of their knowledge:

(i) the condensed set of Financial Statements has been prepared in accordance with FRS 104 (Interim Financial Reporting) and give a true and fair review of the assets, liabilities, financial position and profit and loss of the Company as required by Disclosure Guidance and Transparency Rule 4.2.4 R;

(ii) the Interim Management Report includes a fair review, as required by Disclosure Guidance and Transparency Rule 4.2.7 R, of important events that occurred during the six months ended 31 March, 2021 and their impact on the condensed set of Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(iii) the Interim Management Report includes a fair review of the information concerning related party transactions as required by Disclosure Guidance and Transparency Rule 4.2.8 R.

This Interim Report was approved by the Board on 20 May, 2021 and the Directors' Responsibility Statement was signed on its behalf by:

David Simpson

Chairman

20 May, 2021

Interim Report 2021

The Company's Interim Report for the six months ended 31 March, 2021 will be posted to shareholders by early June 2021. The Interim Report will be available on the website www.ecofininvest.com/eglwhich is a website maintained by TortoiseEcofin Investments, LLC, the parent company of the Company's Investment Manager, Ecofin Advisors Limited. A copy of the Interim Report for the six months ended 31 March, 2021 will be submitted to the National Storage Mechanism of the FCA and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The financial information for the period ending 31 March, 2021 comprises non-statutory accounts within the meaning of Sections 434 - 436 of the Companies Act 2006.

For further information, please contact:

Faith Pengelly

For and on behalf of

Maitland Administration Services Limited

Company Secretary

Tel: [phone]

20 MAY, 2021

 

END

 

 

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