Performance June 2012

RNS Number : 6836H

Impax Environmental Markets PLC

13 July 2012

 



IMPAX ENVIRONMENTAL MARKETS plc

All information is at 30 June 2012 (unless otherwise stated) and unaudited.

DATA AND PERFORMANCE

Pricing
NAV (pence)	115.76
Share price (pence)	94.13
Premium/(discount) (%)	(18.69)
Data
Total fund size (NAV) ( m)		GBP 328.4
Market capitalisation (m)		GBP 267.1
Management fee (%)		1.0
Established		22nd February 2002
Fund structure		Investment Trust
Number of holdings (excluding unlisted)		77
Exchange		London
Currency		GBP
ISIN Number		GB0031232498
SEDOL		3123249
Reuters RIC code		IMPX.L
Bloomberg code		IEM LN

Performance	IEM Net Asset Value*	MSCI World Global Small Cap**	FTSE ET50**
1 month %	-1.8	+1.7	-1.1
3 months %	-8.9	-4.6	-8.1
YTD %	-0.1	+5.4	-3.8
1 year %	-15.7	-6.3	-25.9
3 year %	+14.5	+61.0	-21.6
5 year %	-9.3	+19.2	-35.8
7 year %	+43.5	+57.3	+13.9

* Performance data incorporates undiluted NAV until exercise of warrants on 25 June 2010

** Total return

TOP TEN HOLDINGS

Company	Holding %	Description	Country
Nibe	3.4	Ground source heat pumps	Sweden
Regal-Beloit	3.3	Electric motors	US
LKQ	2.7	Automotive recycling	US
Clean Harbors	2.6	Hazardous waste treatment	US
Pall	2.5	Filtration	US
Watts Water	2.5	Water control products	US
Clarcor	2.4	Air pollution control	US
Spirax-Sarco	2.4	Steam based energy efficiency	UK
Kingspan	2.3	Insulation products	Ireland
Stericycle	2.3	Medical waste treatment	US
TOTAL	26.4

PORTFOLIO ANALYSIS

Geographical US and Canada 43% Europe 37% Japan 5% Asia ex Japan 12% Australia 2% Cash 1%		Company Size >$2bn 35% $500m-2bn 45% <$500m 15% Private 4% Cash 1%
Sectoral Energy efficiency 31% Alternative energy 14% Environmental support services 5% Waste management 23% Pollution control 7% Water infrastructure 19% Cash 1%		PE Ratios >20x 16% 15-20x 23% <15% 55% Private and other 5% Cash 1% Average 13.6x

IMPAX ENVIRONMENTAL MARKETS plc

MANAGER'S COMMENTARY (Q2 2012)

Equity markets were weak in Q2 as a result of the escalation of the EU sovereign debt crisis and concerns about sustainability of growth in the US and China.  Although defensive holdings outperformed, this was outweighed by underperformance of cyclical holdings with GDP sensitivity or exposure to commodity prices and construction markets.

Performance Review

High quality US defensive companies, such as LKQ (automotive recycling), Stericycle (medical waste treatment) and Ecolab (water treatment equipment), held up well in the market volatility and provided strong contributions to performance. M&A activity continued to drive performance with portfolio holding Tomra (reverse vending machines, Norway) diversifying its business through the purchase of Best. Q1 earnings ended well for the portfolio, with the majority of companies meeting or beating expectations.

The on-going macro uncertainty and market volatility continued to weigh on performance. Sims Metal Management (metal recycling, Australia) and Kingspan (insulation products, Ireland) underperformed due to commodity price and construction market exposures. Renewable stocks such as EDP Renovaveis (renewable IPP, Spain) and China High Speed Transmissions (wind turbine gearboxes, Hong Kong) remained weak as a result of overcapacity and regulation uncertainty.

Positioning and Outlook

Our quarterly environmental subsector outlook is flat across the quarter, with challenging short term fundamentals being balanced by attractive valuations. Certain energy efficiency and waste sub sectors are showing weaker fundamentals due to lower demand from cyclical end markets (in some cases at peak margins), in particular those linked to European end markets. Energy efficiency remains a key positive theme for the portfolio with early signs of recovery in US construction markets positive for buildings energy efficiency companies, although concerns about auto sales and global industrial activity weigh on performance of transport, industrial and power network efficiency companies. Water companies continue to look attractive due to positive, stable end markets. We remain cautious on renewables due to on-going overcapacity, although new sources of demand are appearing for solar and the long awaited consolidation of capacity appears to be gaining pace.

The UN conference on Sustainable Development, 'Rio+20', was held in June. Despite little government-level progress, commitment from the world's 58 largest cities to the reduction of CO₂ emissions by more than 1bn tonnes by 2030 was agreed, as well as 692 individual sustainability commitments, amounting to pledges of $513bn. In Europe, an accord was reached for the new EU Energy Efficiency Directive, with energy distributors mandated to save 1.5% of annual sales volumes, and central governments to refurbish public buildings at a rate of 3% p.a. The directive also confirms the use of energy performance contracts (EPCs), estimated to reach €6bn in value every year. The EU also adopted its WEEE (Waste Electrical and Electronic Equipment) recast, requiring the EU-27 to collect and recycle 45% of WEEE waste by 2016 and 65% by 2019. The UK government agreed to make £1.3bn available every year for buildings energy efficiency program 'The Green Deal', while Scotland announced spending of £2bn over the next decade to improve home fuel efficiency. The German federal and state governments reached agreement on the disputed solar feed-in-tariff cuts of 20-30% and agreed to cap incentives when the total cumulative solar capacity reaches 52GW. The US Appeals Court upheld the EPA greenhouse gas (GHG) rules, thus approving the EPA's interpretation of regulating GHGs under the remit of the Clean Air Act and opening up the opportunity for future GHG rules on the transport and power sectors. In Asia, China announced that water conservation investment will reach 1.8trn Yuan in the 12^th Five Year Plan, focusing on agricultural irrigation and strengthening water reservoirs. China also plans to renovate 92,300km of worn-out water-supply networks by 2015, to avoid the current 6bn metric tons of annual water leakage in urban areas.

Notwithstanding recent material steps to shore up the sovereign debt crisis in Europe, softening macro data and residual risks present a challenging backdrop. However, recent falls have made valuations more attractive.  Given the mixed outlook, we are maintaining a well balanced portfolio of defensive holdings with visibility of earnings on the one hand, and high quality cyclical holdings with construction and commodity price exposure on the other. The portfolio is dominated by companies with proven track records, successful management teams and solid balance sheets, which are exposed to long term secular growth themes.

Impax Asset Management is supportive of the UK Stewardship Code. Our full Stewardship Code statement, ESG and Proxy Voting policies and the quarterly summaries of our proxy voting activities can be viewed on:

http://www.impax.co.uk/en/investor-relations/governance-csr 

30 June 2012

 

END

 

 

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