Interim Financial Results

RNS Number : 6803N

Ecofin Global Utilities Inf Tst PLC

21 May 2020

 

ECOFIN GLOBAL UTILITIES AND INFRASTRUCTURE TRUST PLC

Interim Financial Results for the six months ended 31 March, 2020

Announcement of Unaudited Results

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, 2020, the Company's net asset value ("NAV") per share decreased by 15.3% on a total return basis (assuming the reinvestment of dividends).  The Company's share price decreased by 8.1% on a total return basis over the six months;

· The performance of the NAV has been affected by the harmful impacts of the Coronavirus. The fundamentals for the majority of essential assets and services businesses operating in the Company's sectors are relatively resilient and the Board shares the Investment Manager's confidence that companies in the portfolio will continue to prosper and provide attractive total returns;

· Two quarterly dividends were paid during the six months totalling 3.25p per share. The quarterly dividend was raised by 3.1% (from 1.60p to 1.65p per share) with effect from the dividend paid on 28 February, 2020. Based on the price of the Company's shares as at 31 March, 2020, the dividend yield (annualised) was 4.6%; and

· The discount to NAV at which the shares traded diminished during the half-year and was 3.2% as at 31 March, 2020. Since then the NAV per share has increased by 6.8% as at 19 May, 2020, the shares have moved to trading at a premium, and in response to demand the Company has issued 1,350,000 new shares.

Financial Highlights

as at 31 March, 2020

Summary	As at or six months to 31 March 2020	As at or year to 30 September 2019	% change
Net assets attributable to shareholders (£'000)	134,358	161,502	-16.8
NAV per share	146.24p	175.79p	-16.8
Share price (mid-market)	141.50p	157.00p	-9.9
Discount to NAV1	3.2%	10.7%
Revenue return per share	1.58p	5.48p
Dividends paid per share	3.25p	6.40p
Dividend yield1,2	4.6%	4.1%
Gearing on net assets1,3	6.9%	6.3%
Ongoing charges ratio1,4	1.48%	1.68%

1. Please refer to Alternative Performance Measures on page 22 of 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 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.

Performance for periods to 31 March 2020	6 months %	1 year %	Since admission on 26 September 20165 %
NAV per share total return6	-15.3	-0.6	21.2
Share price total return6	-8.1	14.5	48.8
Indices (total returns in £):
FTSE All-Share Index	-22.2	-18.7	-5.6
FTSE ASX Utilities Index	5.1	9.9	-6.0
MSCI World Index	-14.8	-5.6	22.1
MSCI World Utilities Index	-12.8	0.6	21.4
S&P Global Infrastructure Index	-26.5	-18.2	-5.6

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 on page 22 of the Interim Report.

Chairman's Statement

Performance

Although EGL's sectors had plenty of positive news in the first five months of the half-year ended 31 March, 2020, global equity markets were subsequently affected by the disruption and hit to global economic growth caused by the devastating impact of the spreading coronavirus ("COVID-19") pandemic. Many global equity indices had reached new historical highs by mid-February but the unravelling of confidence thereafter was dramatic: equity markets fell sharply and became highly volatile, while strong correlations dragged defensive shares down with more cyclical ones. Once the sell-off was underway, the Company's investments in regulated businesses and many diversified integrated utilities provided shelter, while economically sensitive infrastructure services such as roads and airports remained weak. These were impacted by travel restrictions introduced by governments seeking to contain the spread of COVID-19.

EGL's NAV reached successive new highs during the half-year with performance strong on an absolute and relative basis but the melt-down in markets in March took a heavy toll. Over the six months, the Company's NAV per share declined by 16.8%; the total return, assuming the reinvestment of dividends, was -15.3%. The share price decreased by 9.9% over the same period, while the total return on the shares was -8.1%. The MSCI World Utilities Index and the S&P Global Infrastructure Index, the most representative comparable indices, returned -12.8% and

-26.5%, respectively, in sterling.

Portfolio returns by region were remarkably similar, with the notable exception of the U.K. where holdings made gains over the six months, recovering considerable ground after the general election in December 2019 removed nationalisation concerns.

Three years of strong NAV performance - pre COVID-19 - and concerted efforts to raise appreciation of the Company's investment universe amongst a wider audience have had a beneficial effect on the rating of the Company's shares. The discount to NAV at which the shares had traded since the Company's launch diminished during the half-year and the shares have since traded at a premium to NAV. This has enabled the Company to start issuing shares: 1,350,000 have since been issued. The Board believes that a larger capital base will reduce the ratio of expenses to revenue, increase liquidity and encourage participation by new investors.

Dividends

In December 2019, in view of the Company's strong NAV performance since inception and our Investment Manager's confidence that the portfolio's investments would provide steady growth in income, your Board decided to increase the quarterly dividend rate by 3.1% to 1.65p per share per quarter (6.60p per annum) with effect from the payment on 28 February, 2020.

Given the considerable impact of COVID-19 on the global economy and on portfolio investments, our Investment Manager is communicating regularly with the management teams of its portfolio companies and is paying close attention to expected income receipts. The Investment Manager now expects revenue to be approximately 9% lower for the full fiscal year compared to the previous year. This will lead to a short-term deterioration in the dividend cover ratio but, over the medium-term, we expect growth in portfolio income to lead to improving dividend cover. This should enable a resumption of our strategy of increasing dividends.

The Board

Following a detailed selection process, assisted by Trust Associates, the Board concluded its search for a new Director and announced on 17 January, 2020 that Susannah Nicklin will be joining the Board with effect from 9 September, 2020. Susannah is an experienced non-executive director and financial services professional, having been in executive roles in investment banking, equity research and wealth management at Goldman Sachs and Alliance Bernstein in the U.S., Australia and the U.K. She has also worked in the impact sector with Bridges Ventures and the Global Impact Investment Network, and holds the Chartered Financial Analyst qualification.

Outlook

In these very challenging times, the Board is pleased that the Company's portfolio of essential assets and services businesses has proven its defensive capabilities while demonstrating its ability to recover from adversity. From 31 March, 2020 until 19 May,2020, the NAV and share price have increased by 6.8% and 10.3%, respectively (on a total return basis).

As investors come to understand the pace of the structural shift to cleaner and more efficient energy generation and consumption, interest in the Company's investment universe is rising. The companies we invest in are at the forefront of this transition, thereby offering attractive returns, including rising cash generation and progressive dividends, with only moderate economic sensitivity. This, combined with the recovery potential of the more economically sensitive infrastructure companies, gives us confidence that the interruption to the upward path of investment returns will prove temporary.

David Simpson

Chairman

21 May, 2020

Investment Manager's Report

The economy and markets

The epic market dislocations during the last few weeks of the half-year caused by the rapid-fire spread of COVID-19 completely overshadowed the progress in global equity markets and the Company's portfolio before then. Much like the October to March stretch of the previous year, the backdrop for most of the Company's half-year which ended on 31 March included protracted trade friction, a deceleration in economic growth and declining long-term government bond yields. The unfortunate addition this time of the devastating coronavirus and an oil price war between Saudi Arabia and Russia, followed by myriad monetary and fiscal pledges to mitigate some of the more immediate and visible damage, sets this six-month period apart from any other. Government bond yields declined to record low levels across developed markets, and equity markets suffered swift and giant declines; volatility was extreme, and liquidity was poor. The MSCI World Index, which reached new record highs mid-February, declined by 14.8% during the half-year (total return in sterling), very considerably off the lows reached in mid-March.

Utilities and infrastructure shares behaved very differently from each other during the half-year, even before risk aversion escalated. The S&P Global Infrastructure Index did much worse than the broad global equity averages and fell by 26.5% over the six months, while the MSCI World Utilities Index declined by 12.8%. This is quite a remarkable dispersion considering the S&P Global Infrastructure Index is 50% comprised of utilities and the two indices share six 'top ten' constituents.

Until equity markets collapsed, the interest rate backdrop was clearly favourable to most of the stocks in our investment universe and the scarcity of reliable and non-cyclical growth in the broader market made these companies particularly attractive given their organic growth and strong pipeline of future projects. The more economically sensitive parts of the universe that the Company invests in, such as waste management, energy infrastructure and transportation services, did not fare well as growth forecasts were scaled back and oil and other commodity prices declined.

Performance

The Company's NAV decreased by 15.2% in March alone and by 15.3% over the half-year (on a total return basis). Sterling was approximately flat against the Euro during the period and 1.1% stronger against the U.S. dollar so currency changes played a minor negative role (pulled the NAV lower by approximately 1.1%); leverage was moderate at about 7-8% throughout the six months, also impacting the NAV by about -1.1%.

There are pockets of the portfolio which are designed mainly for growth and a healthy forward-looking market environment (integrated utilities, infrastructure services, emerging markets) and others which are better equipped for defence and portfolio protection. The portfolio stabilisers are generally the regulated businesses - of companies such as Pennon, NextEra Energy, EDP-Energias de Portugal, REN-Redes Energeticas Nacionais, Algonquin Power & Utilities and American Water Works - and renewables, of which there is significant exposure embedded across the portfolio, and these outperformed as the economic uncertainty and market volatility ramped up.

The U.K. names in the portfolio delivered positive absolute returns over the six months to 31 March, thanks to a relief rally which began in December, 2019 as the risk of nationalisation for the group all but vanished with the conclusion of the U.K. general election. SSE, National Grid and Pennon increased by between 9% and 24% that month and, together with Smart Metering Systems, were the top contributors to NAV during the half-year. The other holdings that delivered positive contributions were all leaders in renewable energies and transmission networks; these included EDP-Energias de Portugal, Neoen in France, NextEra Energy, REN-Redes Energeticas Nacionais (also based in Portugal and a relatively recent addition to the portfolio), Huaneng Renewables (where the minority holders were taken over by the company's Chinese parent) and Pattern Energy, a U.S. renewable developer acquired by a large Canadian pension board in November. Investors are starting to embrace the 'energy transition', the structural shift to cleaner and more efficient generation and consumption of energy, and the companies leading the pack in this respect have been the same ones showing a relative advantage in terms of the performance of their shares.

The half-year also witnessed significant weakness in the shares of companies with commodity or meaningful cyclical exposure. These included Williams Companies (energy infrastructure), Covanta, Engie, EDF and RWE. By February/March, and since then too, this list extended to companies highly exposed to industrial contracts (e.g., environmental service groups such as Suez and Veolia) and to transportation infrastructure (roads and airports), sub-sectors where volumes were or would soon be under pressure and where companies had announced or were deemed to have significant risk of dividend cuts as a result of the pandemic. Political intervention also emerged to suppress dividends in certain sectors and companies, including where the state is a shareholder; as a result, EDF's and Engie's dividends for 2019 (due to be paid in 2020) were cancelled.

As we set out in recent portfolio updates, for these groups mentioned above, we have reduced our base-case assumptions for dividends for this year and in some cases have trimmed or exited positions (Veolia and Suez, most notably). Utilities - especially regulated businesses but also many diversified integrated ones - should not need to alter their dividend policies as cash flow/debt service payments and dividend cover ratios are generally comfortable, but there is enough uncertainty in the business outlook generally for caution. In March we sold Neoenergia in Brazil at a profit as a risk reduction measure and Smart Metering Systems and Neoen after strong share price rallies for each. Williams and Sempra Energy (gas and electric infrastructure) have both reiterated guidance and emphasised their ample liquidity and we have used the profound weakness in their shares to pick up stock.

Gearing and yield

Gearing remained steady throughout the half-year at approximately 8% of NAV. This was true even through the extreme volatility experienced in February and March and was intentional while the NAV was reaching new highs early this year and thereafter given the heightened uncertainties. The yield on the portfolio declined toward 4% as the NAV climbed to its mid-February highs but it was over 5% when the half-year closed.

Outlook

Uncertainty of some magnitude is likely to linger for an extended amount of time. We cannot predict the course of the economic and business recovery from this health crisis, and degrees of uncertainty and fear may blanket the financial markets for many months yet. It's our task to try to be diligent and disciplined in our analysis in these uncomfortable circumstances, and not to lose focus on the many growth opportunities in the Company's investment universe. The economic backdrop for companies will stabilise at some point and the anxieties embedded in share prices will fade. Our time horizons for cash flow and dividend growth delivery by many companies in the portfolio will need to be extended, but we firmly expect that climate-friendly policies will be prioritised again post the coronavirus crisis and that the decarbonisation themes propelling the investment space will endure. The portfolio invests in essential assets and services and infrastructure critical to livelihoods and economic growth; these cannot be immune from the severe contraction in growth we are experiencing but the regulated nature of many business models provides protection. In the meantime, we are buying stocks in well-run, high quality and under-valued companies - focussing on leaders amongst networks and renewables - knowing that there will be a quarter or two of bad news and a drop in consensus estimates but that these will thrive in the medium to long-term.

Our sectors are behaving as we would expect, showing defensive characteristics when markets are falling and good upside-capture in rallies due to underlying growth drivers.

Tortoise Advisors UK Limited

Investment Manager

21 May, 2020

Condensed Statement of Comprehensive Income

		Six months ended 31 March 2020 (unaudited)			Six months ended 31 March 2019 (unaudited)			Year ended 30 September 2019 (audited)
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments held at fair value through profit or loss		-	(24,779)	(24,779)	-	9,775	9,775	-	30,841	30,841
Currency (losses)/gains		-	(430)	(430)	-	344	344	-	110	110
Income	2	2,322	-	2,322	2,308	-	2,308	7,418	-	7,418
Investment management fee		(359)	(360)	(719)	(401)	(401)	(802)	(786)	(786)	(1,572)
Administration expenses		(377)	-	(377)	(300)	-	(300)	(686)	-	(686)
Research expenses		-	-	-	(51)	(51)	(102)	(51)	(51)	(102)
Net (loss)/return before finance costs and taxation		1,586	(25,569)	(23,983)	1,556	9,667	11,223	5,895	30,114	36,009
Finance costs		(38)	(38)	(76)	(43)	(43)	(86)	(90)	(90)	(180)
Net (loss)/return before taxation		1,548	(25,607)	(24,059)	1,513	9,624	11,137	5,805	30,024	35,829
Taxation	3	(99)	-	(99)	(164)	-	(164)	(769)	-	(769)
Net (loss)/return after taxation		1,449	(25,607)	(24,158)	1,349	9,624	10,973	5,036	30,024	35,060
(Loss)/return per ordinary share (pence)	4	1.58	(27.87)	(26.29)	1.47	10.47	11.94	5.48	32.68	38.16

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, 2020.

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 2020 (unaudited) £'000	As at 31 March 2019 (unaudited) £'000	As at 30 September 2019 (audited) £'000
Non-current assets
Equity securities		143,414	154,531	168,873
Quoted bonds		-	-	2,425
Investments at fair value through profit or loss		143,414	154,531	171,298
Current assets
Debtors and prepayments		886	666	1,072
Cash at bank		-	5,843	8,228
		886	6,509	9,300
Creditors: amounts falling due within one year
Prime brokerage borrowings		(9,265)	(20,045)	(18,362)
Other creditors		(677)	(640)	(734)
		(9,942)	(20,685)	(19,096)
Net current liabilities		(9,056)	(14,176)	(9,796)
Net assets		134,358	140,355	161,502
Share capital and reserves
Called-up share capital	5	919	919	919
Special reserve		118,259	119,049	119,796
Capital reserve	6	15,180	20,387	40,787
Revenue reserve		-	-	-
Total shareholders' funds		134,358	140,355	161,502
NAV per ordinary share (pence)	7	146.24	152.77	175.79

Condensed Statement of Changes in Equity

	Six months ended 31 March 2020 (unaudited)
	Share capital £'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
	Six months ended 31 March 2019 (unaudited)
	Share capital £'000	Special reserve1 £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 1 October 2018	919	120,640	10,763	-	132,322
Return after taxation	-	-	9,624	1,349	10,973
Dividends paid (see note 8)	-	(1,591)	-	(1,349)	(2,940)
Balance at 31 March 2019	919	119,049	20,387	-	140,355
	Year ended 30 September 2019 (audited)
	Share capital £'000	Special reserve1 £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 1 October 2018	919	120,640	10,763	-	132,322
Return after taxation	-	-	30,024	5,036	35,060
Dividends paid (see note 8)	-	(844)	-	(5,036)	(5,880)
Balance at 30 September 2019	919	119,796	40,787	-	161,502

1. The share premium account was cancelled on 9 November, 2016. The resultant special reserve may be used, where the Board considers it appropriate, by the Company for the purposes of paying dividends to shareholders.

Condensed Statement of Cash Flows

	Six months ended 31 March 2020 (unaudited) £'000	Six months ended 31 March 2019 (unaudited) £'000	Year ended 30 September 2019 (audited) £'000
Net (loss)/return before finance costs and taxation	(23,983)	11,223	36,009
Decrease in accrued expenses	(57)	(129)	(35)
Overseas withholding tax	(102)	(164)	(1,047)
Deposit interest income	(16)	(46)	(101)
Dividend income	(2,278)	(2,262)	(7,268)
Fixed interest income	(28)	-	(49)
Realised losses/(gains) on foreign exchange transactions	430	(344)	(110)
Dividends received	2,057	2,059	6,674
Deposit interest received	16	46	101
Fixed interest income received	49	-	28
Interest paid	(76)	(86)	(180)
Losses/(gains) on investments	24,779	(9,775)	(30,841)
(Increase)/decrease in other debtors	(10)	(2)	11
Net cash flow from operating activities	781	520	3,192
Investing activities
Purchases of investments	(34,418)	(21,398)	(49,999)
Sales of investments	37,922	26,347	59,518
Net cash from investing activities	3,504	4,949	9,519
Financing activities
Movement in prime brokerage borrowings	(9,097)	2,503	820
Equity dividends paid	(2,986)	(2,940)	(5,880)
Net cash used in financing activities	(12,083)	(437)	(5,060)
(Decrease)/increase in cash	(7,798)	5,032	7,651
Analysis of changes in cash during the year
Opening balance	8,228	467	467
Foreign exchange movement	(430)	344	110
(Decrease)/increase in cash as above	(7,798)	5,032	7,651
Closing balances	-	5,843	8,228

Notes to the Condensed Financial Statements

for the six months ended 31 March, 2020

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 impact of COVID-19 on financial markets and the Company's NAV have been taken into account in deciding to prepare the Financial Statements on a going concern basis.  The Investment Manager has provided detailed and regular updates on the portfolio, including the expected income from investments, and on its outlook for the sectors in which the Company invests.  Please refer to the Chairman's Statement and the Investment Manager's Report for further detail. 

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, 2020 and 31 March, 2019 has not been audited.

The information for the year ended 30 September, 2019 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, research expenses (until 5 March, 2019) 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 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 that require 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 £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 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

	Six months ended 31 March 2020 £'000	Six months ended 31 March 2019 £'000	Year ended 30 September 2019 £'000
Income from investments (revenue account)
UK dividends	197	238	824
Overseas dividends	1,682	1,758	5,908
Overseas fixed interest	28	-	49
Stock dividends	399	266	536
	2,306	2,262	7,317
Other income (revenue account)
Deposit interest	16	46	101
Total income	2,322	2,308	7,418

During the six months ended 31 March, 2020, the Company received no special dividends (31 March, 2019: nil and 30 September, 2019: £177,000 of which £177,000 was recognised as revenue and is included within the income from investments figure above, and £nil was recognised as capital dividends and is included in the capital column of the Condensed Statement of Comprehensive Income).

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, 2020 is 19% (2019: 19%).

4. Return per ordinary share

	Six months ended 31 March 2020 p	Six months ended 31 March 2019 p	Year ended 30 September 2019 p
Revenue return	1.58	1.47	5.48
Capital (loss)/return	(27.87)	10.47	32.68
Total return	(26.29)	11.94	38.16
The returns per share are based on the following:
	Six months ended 31 March 2020 £'000	Six months ended 31 March 2019 £'000	Year ended 30 September 2019 £'000
Revenue return	1,449	1,349	5,036
Capital (loss)/return	(25,607)	9,624	30,024
Total return	(24,158)	10,973	35,060
Weighted average number of ordinary shares in issue	91,872,247	91,872,247	91,872,247

5. Ordinary share capital

	31 March 2020		31 March 2019		30 September 2019
	Number	£'000	Number	£'000	Number	£'000
Issued and fully paid
Ordinary shares of 1p each	91,872,247	919	91,872,247	919	91,872,247	919

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.

6. Capital reserve

	31 March 2020 £'000	31 March 2019 £'000	30 September 2019 £'000
Opening balance	40,787	10,763	10,763
Movement in investment holding gains	(30,297)	8,198	25,141
Gains on realisation of investments at fair value	5,518	1,577	5,700
Currency (losses)/gains	(430)	344	110
Investment management fees	(360)	(401)	(786)
Finance costs	(38)	(43)	(90)
Research expenses	-	(51)	(51)
Capital dividends received	15,180	20,387	40,787

The capital reserve reflected in the Condensed Statement of Financial Position at 31 March, 2020 includes gains of £4,299,000 (31 March, 2019: gains of £17,652,000 and 30 September, 2019: gain of £34,596,000) which relate to the revaluation of investments held at the reporting date.

7. NAV per ordinary share

	As at 31 March 2020	As at 31 March 2019	As at 30 September 2019
NAV attributable (£'000)	134,358	140,355	161,502
Number of ordinary shares in issue	91,872,247	91,872,247	91,872,247
NAV per share	146.24p	152.77p	175.79p

8. Dividends on ordinary shares

	Six months ended 31 March 2020 £'000	Six months ended 31 March 2019 £'000	Year ended 30 September 2019 £'000
Fourth interim dividend for 2018 of 1.60p (paid on 30 November, 2018)	-	1,470	1,470
First interim dividend for 2019 of 1.60p (paid on 28 February, 2019)	-	1,470	1,470
Second interim dividend for 2019 of 1.60p (paid on 31 May, 2019)	-	-	1,470
Third interim dividend for 2019 of 1.60p (paid on 30 August, 2019)	-	-	1,470
Fourth interim dividend for 2019 of 1.60p (paid on 29 November, 2019)	1,470	-	-
First interim dividend for 2020 of 1.65p (paid on 28 February, 2020)	1,516	-	-
	2,986	2,940	5,880

A second interim dividend for 2020 of 1.65p will be paid on 29 May, 2020 to shareholders on the register on 1 May, 2020. The ex-dividend date was 30 April, 2020.

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 (losses)/gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:

	Six months ended 31 March 2020 £'000	Six months ended 31 March 2019 £'000	Year ended 30 September 2019 £'000
Purchases	44	19	77
Sales	42	13	34
	86	32	111

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 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
Quoted bonds	b)	-	-	-	-
Total		143,414	-	-	143,414
As at 31 March 2019	Notes	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Financial assets at fair value through profit or loss
Quoted equities	a)	154,531	-	-	154,531
Quoted bonds	b)	-	-	-	-
Total		154,531	-	-	154,531
As at 30 September 2019	Notes	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Financial assets at fair value through profit or loss
Quoted equities	a)	168,873	-	-	168,873
Quoted bonds	b)	-	2,425	-	2,425
Total		168,873	2,425	-	171,298

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.

b) Quoted bonds

The fair value of the Company's investments in bonds has been determined by reference to their quoted bid prices at the reporting date. Bonds included in Fair Value Level 2 are corporate bonds. Investments categorised as Level 2 are not considered to trade in active markets.

11. Related party transactions and transactions with the Investment Manager

Fees payable to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report on pages 28 and 29 of the 2019 Annual Report. The balance of fees due to Directors at the period end was £nil (31 March, 2019: £nil and 30 September, 2019: £nil).

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

The management fee for the six months ended 31 March, 2019 was calculated, on a quarterly basis, at 1.25% per annum of the net assets of the Company up until 5 March, 2019. Thereafter, 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 £719,000 (31 March, 2019: £802,000 and 30 September, 2019: £1,573,000) of investment management fees were earned by the Investment Manager, with a balance of £336,000 (31 March, 2019: £402,000 and 30 September, 2019: £404,000) being payable to Tortoise Advisors UK Limited at the period end.

12. Analysis of changes in net debt

	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	(430)	(7,798)	-
Debt due within one year	(18,362)	-	9,097	(9,265)
	(10,134)	(430)	1,299	(9,265)
	As at 30 September 2018 £'000	Currency difference £'000	Cash flows £'000	As at 31 March 2019 £'000
Cash and short-term deposits	467	344	5,032	5,843
Debt due within one year	(17,542)	-	(2,778)	(20,320)
	(17,075)	344	2,254	(14,477)

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.

13. Subsequent events

Since 31 March, 2020 the Company has issued 1,350,000 ordinary shares for a total consideration of £2,101,500.

Since the period end, the COVID-19 pandemic has led to further market volatility which has affected the NAV of the Company. Please refer to the Chairman's Statement for further details.

Interim Management Report

COVID-19 has introduced an additional risk factor for the Company to manage.  Please refer to the Chairman's Statement and the Investment Manager's Report for further information on the financial impact of COVID-19 on the Company.  The Board is also monitoring carefully the operational performance of the Company's third party service providers.  The other principal 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, 2019. 

The Directors consider that the Chairman's Statement and the Investment Manager's 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, 2020 and satisfy the requirements of Disclosure Guidance and Transparency Rules 4.2.3 to 4.2.11 of the Financial Conduct Authority ("FCA").

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

Directors' Responsibility Statement

The Directors listed on page 23 of 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 have occurred during the six months ended 31 March, 2020 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 21 May, 2020 and the Directors' Responsibility Statement was signed on its behalf by:

David Simpson

Chairman

21 May, 2020

Interim Report 2020

The Company's Interim Report for the six months ended 31 March, 2020 will be posted to shareholders by early June 2020. The Interim Report will be available on the website, www.tortoiseadvisors.co.uk/egl , which is a website maintained by Tortoise Investments LLC, the parent company of the Company's Investment Manager, Tortoise Advisors UK Limited. A copy of the Interim Report for the six months ended 31 March, 2020 has been 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, 2020 comprises non-statutory accounts within the meaning of Sections 434 - 436 of the Companies Act 2006.

For further information, please contact:

Gemma Metson

For and on behalf of

BNP Paribas Secretarial Services Limited

Company Secretary

Tel: [phone]

21 MAY, 2020

 

END

 

 

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